Invest Like the Best with Patrick O'Shaughnessy
· Karim Atiyeh
[00:00:00] S1: Oof. There was a period of time, I think it was a couple weeks, where we were getting angry letters and cease and desist from multiple retailers. And we're getting these letters from notorious law firms that we had heard of. And we're a team of 12, 13 engineers fresh out of college, trying to google the name of the person sending us a letter or the name of their firm. Oh my God, this is a multi-thousand people law firm that represents the largest corporations. And my hunch was to send them an "I'm sorry" response. And I'm like, okay, we can't really do this. What do we have to do here? And the way we responded to it is just trying to explain in very logical terms what we were doing and why it was good for consumers and why they should care, which was really funny. But one of those crazy experiences was we get a letter from Amazon around how we were supposedly compromising the security of the accounts of their users. And I thought it was really funny at the time because a lot of the product that we had built was one, on AWS, and two, with the help of a lot of AWS architects in order to make sure that it was built as well as possible and as secure as possible for the users. So our response was great. We'd be happy to get on a call with your team that is helping us build this in the most secure way possible. And we got on a call with, I think it was either Andy Jassy or someone very senior on his team at the time when he was running AWS, to just go through our architecture and how we were building this. It seemed to me on the call that they were actually very excited about what we were building. I was like, this is really cool. We like this. And we ended the call with this understanding that AWS was actually really happy with us and that our problem was with Amazon Retail. It ended up getting resolved. But just as a really tiny company being attacked by the legal teams of really massive companies feels really, really scary at the time, but in a way, also validating.
· Patrick O'Shaughnessy, Karim Atiyeh
[00:00:00] S0: Is that helpful to be scared early because then you just get less scared each subsequent time that there's something major breaking? Does it just not phase you anymore? [00:00:00] S1: If you solve really scary small problems, the reward is scary bigger problems, and it never stops. [00:00:00] S0: There's this line. People talk about product-market fit as a stage. It seems like a more interesting stage is when is the first time that someone tries to kill you, like the story you just described. Do you agree with that? [00:00:00] S1: Oh, for sure. [00:00:00] S0: If you're analyzing a company, almost better to invest right after someone's trying to kill them and they survive? [00:00:00] S1: Oh, 100%. If you're doing anything that's correct or right, people are going to try to kill you multiple times. [00:00:00] S0: What's the key to not being killed?
· Patrick O'Shaughnessy, Karim Atiyeh
[00:00:00] S0: What's the key to not being killed? [00:00:00] S1: Perseverance. There are a lot of nuances there, but tell me. I think it's just to never give up. To some extent, I never see the possibility of us being killed as an option, to be honest with you. I'm constantly looking for the multiple ways that we can withstand a challenge and how we survive. And I see the risk when that happens as us endlessly talking about the options and not maybe taking enough action. So I try to get into gear really quickly so that we could just start acting on the ways that we will survive and not get killed. So when a challenge happens, I tend to look through all the ways that we succeed and maximize the chances that we do. And I think the companies that don't do that well tend to die because they spend a lot of time thinking and talking and not enough time doing, as opposed to because they don't see the options, frankly. [00:00:00] S0: What did you learn at the end of Paribus story? So you sold the business to Capital One. Why did you sell it? Lessons learned in selling a business. You made good money doing it.
· Karim Atiyeh
[00:00:00] S1: Yeah, I guess we should go back to that. The Paribus story was very instrumental in us wanting to start Ramp, to be honest, because at the time that we sold Paribus, we weren't really looking to sell the business. We were looking for partners that would help us grow. And we thought about it in that way. It was like, well, we know Paribus is really great. It drives a lot of value to people who have shopped online in very predictable ways. And we're looking for partners who could help us figure out who shopped online recently so that we can get in front of them, make a compelling pitch, and hopefully convert them into users. And who better for that than the credit card companies? They know exactly who made a purchase at Amazon or Walmart or Jet.com at the time. Recently, we got to meet the team at Capital One and really enjoyed working with them. They're a lot more tech-savvy than most of the other banks, and that's the reputation they have, which is great. And we were in partnership conversations with them. Frankly, they were interested in building differentiations for the card product because, I mean, at the time, and frankly to this day, a lot of the consumer card products are different versions of the same product, just marketed differently. So they were interested in differentiating through product and partnerships and were interested in figuring out who had recently purchased something at Amazon or Walmart. So we're in partnership conversations with Capital One, and around the same time, we're getting a lot of these legal challenges. It's clear that we needed more firepower, whether in the form of partnerships or in the form of capital, just to withstand the storm. And quickly, those partnership conversations with Capital One turn into acquisition conversations. We get really interested because our visions were clearly very aligned with the Capital One team. They wanted to give us the capital to support the funding to essentially turn the antagonistic relationships with the retailers into more friendly relationships. And they had a lot of great relationships with those retailers. So that was very interesting. But the most interesting part about those acquisition conversations is we got to learn a lot more about the credit card industry, how it worked, where the revenue came from.
· Karim Atiyeh
And it was fascinating to see that product that you essentially, the card business, they essentially put in the hand of customers. There's no contract that anyone needs to sign. It's the more they use it, the more revenue you make. And you can just focus on making the product as good as possible so that they use it as much as possible. And it was refreshing. I was like, great, you just put this card in the hands of a person and the more useful it is to them, the more they use it and the more revenue you make. So we started understanding that fascinating business model and it felt very powerful to, at Capital One, combine that card with the Paribus offering. So it just felt like a great natural fit. Two years into our journey, so after spending about two years at Capital One and growing the Paribus product, which is now called Capital One Shopping and includes some other features that I think are very valuable, we started thinking, what's next for us? Both Eric and I were clearly not done with our entrepreneurial journey. We wanted a bigger challenge. And a lot of the idea for Ramp early on was, what if we built something like Paribus for businesses? Specifically, what if we built technology to help businesses save as much money as possible? And that later turned into how can we build technology that helps businesses save as much time and money as possible? Because businesses, as we both tend to waste a lot more time than they do money, and those are generally interchangeable. So we set out to build Ramp. And just like it was the case for Paribus, really, the card early on was a way to know what businesses were spending time and money on. If you know what tools they use and how much money they're spending on them, you get a sense of how the business functions, what kind of business they are, and you eventually get a sense of where they are wasting both time and money, and how you can help them save as much of it as possible. And this is still true to this day about Ramp. I'd say the biggest difference is the scope of our ambition has gotten a lot bigger.
· Karim Atiyeh, Patrick O'Shaughnessy
We're not only helping businesses with the money and time they spend on, let's say, card purchases, but it's really all the spend that is happening across their business and all the workflow associated with it, starting with procurement, which you could describe as the workflows that dictate how a business makes decisions on what to buy and how to buy it, how to negotiate for it, et cetera, all the way to accounting for those transactions and reporting on it. So the scope of our ambition has gone from the mode of transaction, the card, to all the workflows happening before, all the workflows happening after, and all the time wasted as that is happening. [00:00:00] S0: So if I go back to day one of Ramp and this notion that you need a way to know what's being spent, where and how and why, by whom, talk us through the very first version of the product. A dumb investor at the time might have said, what the hell do we need another credit card for? Lots of business credit cards. And Amex had a great brand. [00:00:00] S1: Yeah, exactly. [00:00:00] S0: Just to pick one. There are more than just Amex, but people loved Amex. It had a pretty sterling brand. Amex for business was a huge business. Why do I need another card? So bring us into the room of you're talking about what literally to take as the first step and who to send it to and why. And just the first couple days are always so interesting. Who you raised money from, how you figured that out. The deep detail is so fascinating.