A Product Market Fit Show | Startup Podcast for Founders
00:00:00 · Cosmin Nicolaescu, Pablo Srugo
[00:00:00] S0: The reason why you're here from a financial perspective should be the equity, not the cash. Otherwise, don't join an early stage company. It's not worth it. If you don't think that early stage company will 10 x, 50 x, a 100 x, whatever, like, something very, very substantial, you should not be at an early stage company. Go work a big company, you'll have a much better quality of life. It's very easy to demo stuff in AI. I can build a demo in the next few hours on almost anything and it will only impress people, but to actually build a product that can do it at scale and reliability necessary for production and accuracy, especially in such a regulated industry, is exceptionally, exceptionally hard. Everybody at Accrual has the same salary. That's wild. [00:00:36] S1: I dude, I've never heard of that before. That's crazy. [00:00:40] S0: That's product market fit. Product market fit. Product market fit. I called it the product market fit question. Product market fit. [00:00:47] S1: Product market fit. [00:00:48] S0: Product market fit. Product market fit. I mean, the name of the show is product market fit. [00:00:53] S1: Do you think the product market fit show has product market fit? Because if you do, then there's something you just have to do. You to pick up your phone. You have to leave the show five stars. It lets us reach more founders, and it lets us get better guests. Thank you. Coz, welcome to the show, man. [00:01:08] S0: Thanks for having me, Pablo.
00:01:08 · Cosmin Nicolaescu, Pablo Srugo
[00:01:08] S0: Thanks for having me, Pablo. [00:01:09] S1: Excited to have you, dude. You just raised a massive series a, $75,000,000 series a, dude. The series a is those get bigger and bigger, man. It used to be it was like $5,000,000 an a. [00:01:17] S0: Nowadays, it's actually, I I guess, small if it's not hundreds of millions. [00:01:22] S1: It's all relative. Right? Because like, I had a founder tell me, yeah, I went to I got to 10,000,000 ARR, but it took me like three years, I think he said. It's like so slow. I'm like, like, come on, man. [00:01:30] S0: Nowadays, it's like if your first month is not 10,000,000 and a 100,000,000 in a year, you're you're way behind. [00:01:35] S1: It is. I mean, it's great when you have it and like when you're not at the top one percentile, you're like, oh my god. Like, what am I even doing with my life? [00:01:42] S0: Yes. I think the fundraising story is very split now between the types of businesses and founders and everybody else. [00:01:49] S1: We'll get to all of that. But let's start, you know, where where we always start, and then we'll deconstruct. Obviously, talk about what you're doing and how you got there and all that. But to start with the thing that matters most to to this show, right, the product market fit moment, tell me for you, like, when did you feel like you'd found true product market fit?
00:02:05 · Cosmin Nicolaescu
[00:02:05] S0: I would say so we started the company in October 24, and we had a lot of ideas and a lot of hypotheses of what we can build, but we had no idea how much of it is real, what technology can actually do in this space, and how deep you can go, and how much mode you can actually build as a business versus just solving some low hanging fruit and and then being done. I would say the last fall was supposedly about a year in, is when it felt like, okay, this actually works and clicks and all the moving pieces. Because prior to accrual, most solutions that I saw in the accounting space were very point solutions, where, like, you're taking some type of documents and extracting them or taking a client portal and showing it to your customers or or whatnot. So very, very niche things, which don't really challenge product market fit. It's not, you're not creating a category, you're not doing something unique, you're just hopefully doing something incrementally better. Accruals was started with the idea of building a platform for these accounting firms, which means you have to have a lot of these kind of components and and parts of the workflow that all click together, and you have to make sure that, like, AI actually can land things because it's very easy to demo stuff in AI. I can build a demo in the next few hours on almost anything and it will only impress people. But to actually build a product that can do it at scale and reliability necessary for production and accuracy, especially in such a regulated industry, is exceptionally, exceptionally hard. And so for us, last October is when we did our first set of returns, where we basically took very complex documents from firms like Armandino, Creative Planning, some of the largest, most complex individuals in The United States. We ran them through the entire system. We had people actually using the platform and the product, not just calling things through APIs and and processing them and interacting with the platform, understanding how the agent worked, what it did, and the amount of savings that people saw in terms of impact was just staggering. And a month before, we had no idea if it actually could work at that level. It was much more kind of piecemeal and and isolated that we we did it. So that was, I think, the first time I was like, okay.
00:04:15 · Cosmin Nicolaescu, Pablo Srugo
I think we have something here that actually could work and scale and that put us into this tax season and and it's all from there. [00:04:22] S1: And would you say, like, for I mean, there's a lot of people who have a product that some people use and even a product that some people get value from, but they don't necessarily get to, like, product market fit. Right? Like, TruePul, hair on fire solution, you know, whatever. Like, what about what was happening then felt like real product market fit to you?
00:04:41 · Cosmin Nicolaescu
[00:04:41] S0: I think the signal that we look for is the the same signal we we had early on at Stripe from folks that were using us, which is what's the excitement level with the customers? Because there's a lot of times where people are like, yeah, this sounds great, but, like, quite skeptical. Then they're kind of like, oh wow, there's something there. I think that's the next level where like, you're solving a problem, this is quite plausible, happy to continue exploring. Now we're at a stage where, and this kind of started happening in the fall where not only do they have the level of excitement and it materializes with kind of commercials, because I think that's the kind of rule that that we learned early in our careers, which is, it's one thing for people to get excited about a demo and trying something out, but until people pay for it, you don't know the true value. And once people are like willing to commit to complex large contracts, that's when you clearly have something, otherwise people wouldn't do that. But the biggest kind of reward that I think we see in terms of personal satisfaction and validation of product market fit is when people are like, can you also do x? So now your clients are pulling you in to their business to help solve more problems. That I think is the highest level they can say, which is like, you've not only solved this problem and I'm willing to work with you and and roll out your product, but also I'm now, like, eager to get you help to help me to solve other similar problems across my business. And that purely comes from, like, internal confidence that that people have otherwise. Obviously, they they would never do that.
00:06:12 · Pablo Srugo
[00:06:12] S1: How do you tease that apart from because I I agree there's something interesting in what you said. You know, there's that failure mode, which we talk a lot about about, like, one more feature. Right? Well, customer will come to you and say, if only you if you build this, then I'll buy. What you're saying is similar but different. How would you tease those two things apart?