Invest Like the Best with Patrick O'Shaughnessy
· 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.
· Patrick O'Shaughnessy, Karim Atiyeh
[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. [00:00:00] S1: I agree with you. They still have a really good brand, but at the time that's all they had. They have a good brand and yeah, you could log in and check your statement, but that's about it. Funnily enough, our pitch in the early days before we had officially launched, as we were looking for design partners and people to give us feedback on the product, it wasn't, this is amazing and going to change your life. It was, this is not worse than Amex and you might as well give it a try. So it was, it's a card, it works, it does all the things the Amex card or any other business card will do. And because we have built maybe direct trust with you, you better trust that we will make it better for you over time. [00:00:00] S0: What a pitch.
· Karim Atiyeh
[00:00:00] S1: It was a terrible pitch, but we went and essentially sold this to, yeah, friends and family, people who trusted us not because of the product we had built, but just because of their belief in our capability to improve the product over time. So these were people that we had gone through Y Combinator with in 2015 with Paribus. These were my brother who was also starting his company. A lot of our friends who were entrepreneurs in New York and in the startup ecosystem in New York, those were our early customers. They were partners more than they were customers, frankly. They were design partners. The first differentiation we really built, and we pulled from some of the skill set we had acquired at Paribus, was a very robust integration with your email. You make card transactions, a lot of the receipts go to your email. How do we tie these two things together as effectively as possible? And we are really, really good at parsing emails while preserving the privacy of your business emails. We built some tech that would identify the emails that are very likely to be receipts, extracting those, identifying purchases and tying them to your card transaction. And that step alone actually saves a lot of time from the workflow of submitting expenses. You look at your statement, it's, oh man, where's the receipt for that thing? And we got very, very good at mapping receipts in your inbox to the transaction. The next step is we got very good at essentially transforming the merchant acceptor identifier into a human-readable text. You often look at these credit card statements, what is that? It makes no sense. What is McDX? It's, oh, that's McDonald's identifier. Okay, good. Why don't we just call that thing McDonald's? So we built the tech to clean up the merchant names. We built the tech to map the receipts in your inbox to receipts in your statement. And then we just kept improving the product one step at a time and taking it further and further and further. But that was the very first version of Ramp. It just really good mapping of receipts. In terms of how we thought about investors, Eric and I did not really want to raise at the beginning. Part of the reason we wanted to start Ramp as well was it's one of those things that we could do because we had the right to do.
· Karim Atiyeh
Because we were second-time founders, we had some capital set aside and building a business like Ramp required capital because you need to fund the receivables of your customers. We're like, great, we have more capital than we did as first-time founders. We have more credibility. We don't really need investors. The first investor that we got connected with was because around that time I was playing Fortnite with my brother and some of his friends. And turns out that there were a lot of other founders and people in the startup ecosystem that we were playing with. And one of them was Delian Asparouhov at Founders Fund. He was pretty sure on some sort of garden leave because he had left Khosla with Keith Rabois and was about to join Founders Fund. And I was still at Capital One, still thinking about Ramp, exactly how it was going to look like, and when we were going to leave Capital One to start the company. And I remember telling Delian, I was like, oh, I think we had put in our notice. I remember telling Delian, I think I'm going to stop playing Fortnite. I need to start getting serious because Eric and I are starting another company. And he got very curious and he tells me that he and Keith had just started, I think at Founders Fund, and they were essentially looking to fund an idea just like this one. And I think he tells me something along, oh, I'm going to be in San Francisco next week. Why don't you come and pitch us on Ramp? I then call Eric, he's like, what do you think? Should we do this? We don't really need the investment. And both got really excited, particularly because Keith himself was a legendary investor and had had a legendary run and was particularly knowledgeable about that space. He had helped start Square, was early at PayPal. He was uniquely positioned to understand exactly what we were trying to do. And we felt he would be the perfect investor for our kind of business. We were interested to talk to him more for the advice than the money, which is, I guess, the best way to meet investors.