A Product Market Fit Show | Startup Podcast for Founders
00:29:14 · Shmulik Fishman, Pablo Srugo
[00:29:14] S0: I think TAM is super important and being able to articulate what is your TAM? How are you tracking against that TAM, or what is your SAM? You need to be able to say those with conviction, and you need to be able to say that your revenue is tied to them and have a good thesis around it. I think that matters more than what your ARR is in the aggregate, or if you're a first-time, or a second-time, or third-time founder, can you articulate the business you have and the industry you're building it for? Can you articulate a plan where you can be 50%, 40% of that market? That's what investors want. They want to know that you're going to be become the winner in a space, and they're going to invest and give you dollars based on that analysis because it's the analysis they're doing when they write the investment memo. You're doing the hard work for them. I think that has a lot more about are you one million or three million, first-time or second-time? [00:30:13] S1: I love that answer. It’s a perfect segue to my second question, which was what was your story? What was your plan? You’re basically saying, Equifax, they do $2 billion in revenue. We can take some of that. At this point, you're doing gig worker stuff, which is this little ignored niche. What's your plan to take the rest, the kind of core market?
00:30:13 · Pablo Srugo, Shmulik Fishman
[00:30:13] S1: I love that answer. It’s a perfect segue to my second question, which was what was your story? What was your plan? You’re basically saying, Equifax, they do $2 billion in revenue. We can take some of that. At this point, you're doing gig worker stuff, which is this little ignored niche. What's your plan to take the rest, the kind of core market? [00:30:31] S0: What the analysis included is there's Equifax, which is this huge player in this space, but Equifax itself is still a small part of the overall industry. It's an $11 billion market. Equifax is less than three billion of it. What is the rest of this market? The fun answer is that the majority of income verification services happen manually, so our largest competitor is paper, is phone banks, is emails, is scanners. That was such a crucial part of the analysis that to win in this market we – yes, do we need to win against Equifax? Yes, but to win this market is really to replace paper. That’s just such a great concept that your competitor is that legacy analog methodology. [00:31:19] S1: Just to be clear, these are companies using paper, or this is – who's using paper? How does that generate 8 billion in revenue?
00:31:19 · Pablo Srugo, Shmulik Fishman
[00:31:19] S1: Just to be clear, these are companies using paper, or this is – who's using paper? How does that generate 8 billion in revenue? [00:31:26] S0: Yeah. It's the cost of all the staffing agencies that pick up phones, that send out emails, but it's also a lot of servicing companies. There's a great partner we have today. There's also part of this analysis called Ocrolus, and the only thing that Ocrolus does is scan PDFs and give you the OCR data of them, right? It's a huge business because there's so much paper out there. There's all these sort of businesses that are just providing incomes verification for paper-based models, and that's what the $8 billion is. [00:31:58] S1: That was -- your story was, listen, if we can just tie into all the payroll, we'll have all the data, and then we can just automate the whole thing. No need to call. No need to email. It'll all be verified. [00:32:06] S0: Just a great formula is find a better mousetrap. Build a product that's just a better version of a product that already exists. First, it's a lot easier to sell. There's a bunch of people that already buy the product. It's a lot easier to invest in because it's just like here is the higher margin version of something that's already out there, and that's the formula we were using.
00:32:06 · Shmulik Fishman, Pablo Srugo
[00:32:06] S0: Just a great formula is find a better mousetrap. Build a product that's just a better version of a product that already exists. First, it's a lot easier to sell. There's a bunch of people that already buy the product. It's a lot easier to invest in because it's just like here is the higher margin version of something that's already out there, and that's the formula we were using. [00:32:28] S1: That's actually a question for me which is, when you're selling to these companies, whether the lenders or whoever they are, are you selling an ROI story, or are you selling just a replacement story? Hey, today you're paying X thousand dollars a month for verification. Pay me half of that. I'll do the same thing. Is that more the pitch? [00:32:45] S0: It's both, but we lead with the latter, which is we're a way to reduce costs. We're a more automated solution. You're going to need less staff. I know some people are worried about saying that out loud. Argyle means you have to have less personnel internally or externally. There's less manual review. You're going to just spend less on verification services. [00:33:04] S1: One thing that I find is hard is when you go in and you say you're going to save X hours, right? Do you make that a dollar value? How do you get as hard as possible on the clarity of the savings?
00:33:04 · Pablo Srugo, Shmulik Fishman
[00:33:04] S1: One thing that I find is hard is when you go in and you say you're going to save X hours, right? Do you make that a dollar value? How do you get as hard as possible on the clarity of the savings? [00:33:15] S0: Again, with Equifax, they have a rack sheet, and we've, in a non-sophisticated way, given pretty big discounts against the Equifax rack sheet. We can just articulate savings against your Equifax bill. Another thing that we would do in the early days and we still do it today is we would ask our clients share with us. What are you spending on verification services every year? You spend it already. The reason why we're asking is because we want to reduce your cost, right? Tell us what you're spending. We want to give you a proposal that's cheaper, and it's also a great way to get market intelligence on what price points are, what people – what businesses are spending on this product. [00:33:52] S1: Those are the two things and you're selling B2B is, one, find a way to kind of get credibility, which is this idea of, obviously, if you're from the space, from the industry, but otherwise, design partners, getting things for free and just being able to get the product to a certain level. The second piece is proving out clear ROI, whether you're adding revenue to them to – or you're affecting KPI of that department or reducing costs, but the harder the better, right? The softer, oh, it's efficiency. Oh, it's time saving. It's four hours a week, whatever. It's just hard to rise to the top of the list and get the adoption you’d need.
00:33:52 · Pablo Srugo, Shmulik Fishman
[00:33:52] S1: Those are the two things and you're selling B2B is, one, find a way to kind of get credibility, which is this idea of, obviously, if you're from the space, from the industry, but otherwise, design partners, getting things for free and just being able to get the product to a certain level. The second piece is proving out clear ROI, whether you're adding revenue to them to – or you're affecting KPI of that department or reducing costs, but the harder the better, right? The softer, oh, it's efficiency. Oh, it's time saving. It's four hours a week, whatever. It's just hard to rise to the top of the list and get the adoption you’d need. [00:34:23] S0: People like analysis that has dollars and cents in it. There's no reason to get more fancy. [00:34:28] S1: Let me finish off on these two questions. You raised a Series A. You start building out all these APIs. When do you have a sense that the – it's still a bit of an idea? I mean, obviously, you have customers. You have some revenue, but it's a bit of a thesis. I'm going to invest in all this infrastructure, and revenue will come out the other side. When do you start to get the feeling, okay, know what? This is actually working. My idea that I had on paper is becoming reality.