A Product Market Fit Show | Startup Podcast for Founders
00:00:00 · Andrew Butt, Pablo Srugo
[00:00:00] S0: They might have had, say, a million products that they wanted to load into our system, and then they might have had, say, 200 users and we put everything in. Then all these users logged on to then start setting up all their agreements and the whole system just crashed. I remember on a Friday, there's the top people yelling down the phone saying, "This has to be fixed by Monday because we've got all these people allocated to pull this on and this is a disaster." My technical guys were saying, "This is going to take about six weeks to fix." [00:00:30] S1: Welcome to the Product Market Fit Show, brought to you by Mistral, a seed stage firm based in Canada. I'm Pablo. I'm a founder turned VC. My goal is to help early-stage founders like you find product market fit. Andrew, welcome to the show. [00:00:48] S0: Pablo, great to be here.
00:00:48 · Andrew Butt, Pablo Srugo
[00:00:48] S0: Pablo, great to be here. [00:00:49] S1: I'm really excited to hear about your journey at Enable. I'm looking here on Crunchbase; anybody can see this stuff but since March, 2020, you've really been on the venture train. Every year, you're raising 17, then 45, then 94, then 120 million. Every single year it's a bigger round which is like – from the outside looking in, everything looks like perfection. Everything looks like it's going exactly as you planned it but it took a while even just to get – I'm sure that's not reality <laugh> so it took a while to get there. You started, from what I can see, in around 2016 and you were running another business before that. Maybe just to start, if you could set some context into what things were like when you started Enable, how you even started enable in the first place?
00:01:31 · Andrew Butt, Pablo Srugo
[00:01:31] S0: Absolutely. No, I'm very happy to. I've always wanted to run my own company. My father was an accountant, like a CPA, in the UK and he advised small businesses, and so I always wanted to start my own business. My passion in life was technology and building applications. As a kid in the nineties, late '90s, I was building web applications and websites and all that stuff. I started my first business as a teenager in the nineties and really, that was just services, just helping people out, helping small businesses, building bespoke custom software for them. That grew and then I met my cofounder who really helped me to build that business and we've got to maybe 100 engineers over the course of quite a few years. It was profitable and literally selling hours to build software. That was the core business. Some of our customers were businesses that were asking us to write software for them but others were actually software companies or people that had software ideas and they wanted to outsource the engineering to us rather than do it themselves. We were building other people's products for them and seeing how successful some of those became and really wanted to build our own product, rather than just building products for other people. We wanted to build our own product. I'll pause for a minute but that was the backdrop to what we then built in Enable. [00:03:00] S1: To be clear, you were building – what sort of – I mean, was it websites, was it full-on products? What was the main sort of things that you were doing?
00:03:00 · Pablo Srugo, Andrew Butt
[00:03:00] S1: To be clear, you were building – what sort of – I mean, was it websites, was it full-on products? What was the main sort of things that you were doing? [00:03:08] S0: I would call it web applications which, of course, these days we wouldn't bother with because everything's web but back then, early 2000s and so on then, a lot of software was still client server. It was web applications and it was data management and process management for a whole range of different things. One of our big customers that we actually ended up investing in and built and sold to private equity eventually was all about health and safety and property management and compliance and that type of thing. We were building software platforms that would manage information and data. [00:03:41] S1: You mentioned you wanted to build your own product and I see this often people have a services business and services, the challenge – you tell me but what I hear is you're always after that next customer, you're always after that next project. Having a product where it could be more recurring, more predictable, many people are after that. Were you constantly working on different product ideas through that journey? [00:04:04] S0: Yeah, we were. In the early days we were building websites. Then we actually developed a content management system. This was, again, very early before content management really existed. [00:04:16] S1: What year was this?
00:04:16 · Pablo Srugo, Andrew Butt
[00:04:16] S1: What year was this? [00:04:17] S0: Oh, like 2001 or something like that, 2002 so going back a long time. That was an example of a product. Then we built something which was like a web-based database in those early years as well and several things but we didn't really focus on any particular one because we were driven by customer revenue and customer payments and so we'd have to just build the next thing, whatever the next customer wanted us to build. [00:04:42] S1: Where would you say the story of Enable really begins? [00:04:45] S0: I think what we found is, from those very early years, so as early as 2001, 2002, one of the common requirements that came up where people would come to us and ask us to build software, was to actually manage rebates. My cofounder was running a large distribution company in the UK so he was very well connected with other distributors, manufacturers, buying groups, lots of people in the supply chain. They all had these different forms of rebates and we came to understand this was a huge part of their profitability. We were building, again, custom software which would meet their particular requirements and we did this for quite a few years. I'd say by around, say, 2010 or something like that, it was clear that there was a real need in the market for a rebate management product because we just kept building them on a bespoke basis. [00:05:39] S1: By the way, let's just go layman's terms here, like grade 3 level. Walk me through the world of rebates which is a bit esoteric, not something the average person thinks about much.
00:05:39 · Pablo Srugo, Andrew Butt
[00:05:39] S1: By the way, let's just go layman's terms here, like grade 3 level. Walk me through the world of rebates which is a bit esoteric, not something the average person thinks about much. [00:05:49] S0: Sure. Absolutely. If you imagine how the supply chain works, 80% of global trade goes from a manufacturer through middle parties like distributors, buying groups, retailers, contractors and then eventually to the end customer. That's 80% of trade. There's very, very little that goes direct from a manufacturer to an end customer. Apple and Tesla might be two examples but virtually everything else goes through the supply chain. There are trading agreements between those supply chain partners so a manufacturer will have agreements with distributors, distributors have agreements with retailers and so on. Those agreements have lots of goals and objectives. It says, we want to sell this many products, certain value, certain volume to certain end customers and all sorts of other conditions. Then when those goals are met, the manufacturer will actually pay money to the distributor and the distributor will pay money to the retailer. It's like a pay for performance. It's just like in a software company, you pay the sales team a commission. Rebates are just like sales commissions, really, in the supply chain and they're all about driving behavior.