A Product Market Fit Show | Startup Podcast for Founders
00:24:20 · Cosmin Nicolaescu
[00:24:20] S0: I don't get special pleasure from one versus the other. And so for us, the main thing was impact. Anything that we do has to have very high impact because for me it's like learning and impact are the two things in my life that have motivated me the most. Whenever I've been bored, I kind of spiral out and then don't do well and lose focus. And if what I'm doing doesn't have impact, that it's kind of like why am I like being a founder, working at an early stage company even as an employee is just like so much work that if you're not having the impact, like, why are you doing this? And so everything that we kind of shortlisted was industry wide impact, transformational, And not only that, but the transformation of that industry should result in something better for a much wider group of people. So for us, the motivation for accounting was seeing what Stripe and then subsequently for me, Brex operated at when finance and accounting became very strategic. I'd stripe became very strategic when Will Gabriel became CFO. At Brex, it was from the beginning. One of our first hires was the our CFO. Both cases, very business oriented. Finance and accounting was in the room for most important decisions, and that results in generally better decisions. Same thing on individuals, like every wealthy American that you know has a family office, has accountants that help them make better decisions and optimize for the long run. And so how can we actually bring that to every business so accounting is not just a back office kind of function that just ticks some boxes? How do we help every individual have better financial planning and financial decisions and education from their accountant, and more people being able to have access to that because it's such a small percentage of of folks that have the ability to do that. And so that was kind of the the motivation of why we wanna go in this industry in terms of impact, and how will that impact actually benefit society more broadly.
00:26:11 · Pablo Srugo, Cosmin Nicolaescu
[00:26:11] S1: And how do you get there? Like, I'm curious. Like, you guys sitting around and you're kind of listing big industries and saying, well, that one's already kinda solved or, you know, Harvey's already going after legal, so no. Or are you talking to accountants? You know what I mean? Like, what's the process? [00:26:24] S0: Yeah. So we started with a list of what do we not want to do. What is it that we're just not particularly passionate? So to give you a couple examples, neither of us are especially fanatic about crypto. It's not to say we're bearish on crypto, but to be successful in crypto, you're being a fanatic about crypto. My buddy, Zach, he was head of product at Brex, became founder at Bridge, now at Stripe. [00:26:44] S1: Yeah. He was on he was on the show, by the way. Like, crazy story, man. Yeah.
00:26:47 · Cosmin Nicolaescu
[00:26:47] S0: Like, he was just obsessed about that. Right. Every person I know who does what crypto believes that is the future very, very deeply and wants to make it happen. So I was like, okay, we're not super passionate about that. We shouldn't do anything that foundational labs are doing. Like, we're not research people, we're very much like kind of applied AI people and product people. And if we're going to do AI model related stuff, we should just go work at OpenAI Anthropic. Like, they have smart people, they have funding, we know the founders at both places. Like, what are we gonna do better than them? Next level was like things that are adjacent to the models that the model companies will likely end up doing, even if it takes them slightly longer, like probably not a good business decision, even if it's technically interesting and you can do that. And then finally, consumer products. My entire career, both for me and Sid, we've worked on of B2B software, consumer growth looks very different. I think there's people who are exceptional that I don't think I am, and so maybe I can learn it, but I should probably lean in on things that we're good at. The things that we're very good at are gnarly problems with complex workflows, lots of movie pieces that all are intertwined and have to click well together, super high reliability, super high accuracy, super high security. Those are the things that we've spent most of our time and get a lot of energy from. Even within Stripe, like we spend a lot of time with the finance and accounting teams building the ledgers and figuring out how to close our books more efficiently, we got energy from that. Not everybody at Stripe did, the other people were interested about other parts of the product, and that's great, different people gravitate towards different things. And so once we had, here's what we don't wanna do and here's the rough shape of what we generally maybe have an edge on, let's look at where we can apply that. We looked at a wide variety of professional services. We looked at software, hardware, security, developer tools, HR tools, very, very broad. And so from there, you start looking at positives and negatives. So you mentioned Harvey with legal. That wasn't the reason why we didn't go deeper on the legal field.
00:28:49 · Cosmin Nicolaescu
It was actually much simpler than that, which is we end up having much more enjoyment spending time with accountants than with lawyers. I keep hearing from people all over that like, there's far fewer accountants in this country that we need. I've never heard one person say we don't have enough lawyers in this country. Nothing against them in any needs, I think they're doing amazing work and very critical, but if I have to choose between the two, that was a very clear tiebreaker for us. When we looked at hardware versus software, very interesting to work on hardware, especially nowadays, everybody's basically like, oh, software has been solved, work on hardware, we would have learned a ton. We realized that the things that we're, again, very good at are the software parts of the hardware, even then it's very different type of hardware, software you have to write for hardware. And so would it be interesting for us to learn? Like, yes. But is that the winning team? Like, if I go to clients or investors and got, hey, bet on us because of our backgrounds in payments and help us figure out how to build rockets. Would I probably be like, I don't know. Do you guys have someone who's knows anything about building rockets kind of thing? And so then it goes back to like leaning in on on the things like you should have some experience because one thing that is different for us is we're kind of like experienced founders in terms of like, we're not just out of school and just becoming founders. Like, Patrick and John and Pedro and McKay at Brooks, like, we're like that. Like, dropped out of school, started companies, unbelievable. You're kind of that shape old founder, which is like naive, but incredibly optimistic and just get stuff done, or you have founders who have worked at other companies, are much more pragmatic, and then you kind of bring that experience to make up for the lack of like naivety. Like, there's something very magical about like, I have no idea because I'm a 20 year old, and I'm just gonna go through the wall. And then if I'm right, it works out, but having that confidence is is something magical. And over time, you kinda lose it because you're, like, much more pragmatic and practical. It's like, well, I've seen this game many times, and more often than not, it fails.
00:30:51 · Pablo Srugo, Cosmin Nicolaescu
[00:30:51] S1: We have tens of thousands of people who have followed the show. Are you one of those people? You wanna be a part of the group. You wanna be a part of those tens of thousands of followers. So hit the follow button. I think that's right. I also think it matters how you're coming up with going back to the original question, like, how you're coming up with the idea in the first place. Take Zuck as the crazy example, the super outlier one. Like, he didn't set out to build Facebook. He's just, like, doing stuff, you know, that happens. Boom. And we come, oh my god. Okay. I'm gonna dive into this, and he happens to be, like, a maniac and just crazy execution, so he does it. Right? But if you're gonna go so top down, like the way you're doing it, you know, it pays to have that that background, that experience, and think about team market fit and these sort of things because, you know, that it's just it's a different ballgame. It's a different ballgame altogether. [00:31:34] S0: If you're much more pragmatic and much more systemic, then you have to to kind of bring that across the across the stack. I think that's absolutely right. [00:31:41] S1: And so how do you go from so that that's actually super helpful to understand how you land into this space of accounting. How do you go from the space to the idea? Do you then do, like, classic customer discovery? Like, how do you figure out what this first product is gonna be?
00:31:55 · Cosmin Nicolaescu
[00:31:55] S0: The lesson that we learned early at Stripe was the best way to build stuff, and ironically, the easiest is find a customer that's willing to trust you with a hard problem, and if you solve that problem, they'll give you more problems. It's as simple as that. And it sounds very, very simple. Obviously, there's a lot of work into that, but if you're able to do that, you can repeat that motion over and over and over again and build a very, very successful business. And so we went, talked to accountants, looked at what they do, shadowed a bunch of them, talked to owners, we understood kind of the broader picture issues that they have with the workforce and everything. But in terms of like which space to start off with was very much driven by a lot of customers and these large firms asking us about it. So our first two customers were H and R Block and Armenino. And very fortunate to be able to work with those kind of tier of companies. Armandino, top 20 accounting firm, some of the wealthiest individuals in the world, and and a bunch of tech businesses that that work with them. H and R Block, huge amount of volume. Basically, about 20% of Americans do their taxes on H and R Block, to give you a sense. Very different shape. Like, the the complexity, the domain complexity for H and R Block, very different. Like, the people that do their taxes, generally much simpler use cases than like the wealthy, alternate high net worth individuals or Manino. But huge amount of scale, huge amount of regulatory complexity as a public company, very complex change management, very high security bar required. So very good forcing function to build a very strong foundation in this space that without that, we just cannot land that customer. And then Armadino, very high complex domain for the type of returns that they do and the kind of companies that that work with them naturally. And the common thread between both of them is they both serve individuals, very different ends of the spectrum in terms of complexity. And in the cases of these top accounting firms, for them, individuals tend to have a wide range of this complexity to the point that there's many individuals that they have to serve that they wouldn't unless they would the only way to kind of get a broader business.