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With Scott Orn

A Startup Podcast by Kruze Consulting

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Scott Orn

Scott Orn, CFA

Evan Meagher of Logikcull discusses how to scale finance and sales together in fast growth SaaS startups

Posted on: 04/23/2019

Evan Meagher

Evan Meagher

VP of Finance - Logikcull

Evan Meagher of Logikcull - Podcast Summary

Evan Meagher of Logikcull discusses how to scale finance and sales scale together in fast growth SaaS startups. Evan dives into how finance and accounting can support the growth of a sales team, and when SaaS companies should make infrastructure investments.

Evan Meagher of Logikcull - Podcast Transcript

Scott: Thanks for joining us on Founders and Friends podcast by Kruze Consulting. Before we get to a great podcast with Evan, here’s a quick shout-out to Brex, our credit card of choice for start-ups. It’s easy to use, easy to provision, easy to integrate into QuickBooks. They have great rewards and there’s no personal guarantee by the founder, which is humongous. Check out Brex, B-R-E-X, dot com. Type is Kruze, K-R-U-Z-E when you go through the sign-up flow, and you’ll get a discount. Thanks. Welcome to Founders and Friends podcast with Scott Orn at Kruze Consulting, and today my very special guest is Evan [Mower] of Logikcull. Did I say it right?
Evan: The Logikcull, yes. [Maher], not quite, but you’re getting there. [crosstalk] You still have Jim [Mauer] the baseball player in mind.
Scott: Bill Maher.
Evan: Bill Maher, you got it.
Scott: Evan Maher.
Evan: Yeah. There you go.
Scott: He spells his name weird for how you say it. I can’t help it.
Evan: That’s right.
Scott: By the way, this is our third annual podcast here.
Evan: That’s right.
Scott: Welcome. You were just actually going crazy and then I was like, hey I got to turn the mic on and record you. He’s very enthusiastic guests, folks.
Evan: It’s true. Well, what I was gonna do is say, “How about that? The first- the debut of the new Founders and Friends jingle.” Which is actually technically a lie because we haven’t recorded it yet but I know-
Scott: Oh, I was gonna say-
Evan: it takes six to eight weeks for you to get it so we’re gonna record it.
Scott: I haven’t heard the … So, for-
Evan: [crosstalk]-
Scott: background last year when we recorded this podcast, Evan said that he was gonna do a new jingle for me and I’m supposed to pay him in tequila and Jack Daniels or something like that.
Evan: That’s right, yeah.
Scott: Which I’m happy to do.
Evan: Okay and booze.
Scott: That’s like paying kind in the finance world.
Evan: Exactly.
Scott: Instead of stock you’re getting booze.
Evan: Yeah.
Scott: But what’s the update on the jingle? [crosstalk]-
Evan: I’ve written it.
Scott: Okay.
Evan: I’ve written it and I don’t want to tease it now but hopefully by the time this goes live on your website we’ll have it recorded, and you’ll have a new fancy Kruze Consulting jingle.
Scott: That’s very exciting. I’ve told Vanessa about it. She’s like, “let’s hear this thing.”
Evan: Yeah.
Scott: Okay, when do you think you’ll record?
Evan: Probably in the next six weeks.
Scott: Okay, oh, six weeks. All right.
Evan: Yeah, so it’ll be ready. It should be ready.
Scott: Okay, okay.
Evan: Yeah.
Scott: Then I’ll hold this podcast for a little while.
Evan: All right.
Scott: Well and we’re gonna talk about some good stuff, so I want to get out there. Okay, you are what? Give [inaudible] your background.
Evan: Yeah, let’s see, I’m the VP of finance at Logikcull. Logikcull’s about 100 people. We do e-discovery software we’ve talked about it on the podcast before. We basically whenever you want to … If you’re in a lawsuit people have to- part of the legal system in America and a lot of other legal systems is called discovery, and that’s just basically establishing the facts of the case. In order to do that you need to have effectively a meeting of the minds, and an exchange of documents ‘cause it’s not fair for one side to have all the documents, and the other side to have none. So, you basically file a request, and you say, “all right, I want- I’m suing Kruze Consulting, I want every email, every document, every internal communication related to the lease at 333 [inaudible] Street, or whatever.” And then basically-
Scott: That’s usually where you find the good stuff. [crosstalk] You find the smoking gun email or whatever it is.
Evan: Yeah, absolutely, so basically-
Scott: Has Colin Kaepernick hired you?
Evan: No, but do you remember Scott Pruitt?
Scott: Vaguely.
Evan: Just flamboyantly corrupt head of the EPA.
Scott: Oh, yeah, yeah, yeah.
Evan: Well he got eighty-sixed, and we didn’t do anything. But one of our customers, Sierra Club used Logikcull software-
Scott: No!
Evan: to sift through millions and millions of emails and then just expose through- it was actually through a Freedom of Information Act request; which people also use our software for. In this case, the Sierra Club to expose his various misdeeds.
Scott: Oh my God, that’s amazing.
Evan: And there were 10s of millions of emails. So yeah.
Scott: So keyword this, keyword that.
Evan: Exactly fuzzy logic, proximity searches.
Scott: That’s awesome.
Evan: I mean, I kind of always joke with CEO who is a really an inspiring leader, he’s the best CEO I’ve ever worked with, but he’s a product guy, right? That’s what gets his motor running, right? I’m just not a product guy, I never will be. I stay in my lane. What I get excited about is a high return on invested capital, defensive business model-
Scott: Running things efficiently.
Evan: … [crosstalk] yeah, exactly, profitability, cash flow statements that flow cash, blah, blah, blah. But basically, he had this joke, man, there’s so much complexity, [inaudible] incredibly technical product, which makes it a challenge you need all these downstream effects. Well, you need to hire salespeople who are fairly technical, right? Maybe even have legal backgrounds. But basically, it does three things. My CEO just makes fun of it, he’s like look, he’s like Evan, “dude, the software does three things, you upload, you search and you download and that’s it.” And it’s like, all right, even I can understand that.
Scott: Well, hopefully, he’s not doing the sales too.
Evan: He’s actually a great sale, he’s a really good salesman.
Scott: He probably is, yeah.
Evan: That’s actually one of the challenges that companies, I think all over SaaS is the non-founder selling. Do you know?
Scott: That is actually something we should talk about ‘cause-
Evan: Let’s do it.
Scott: … Vanessa is, I always kind of say at parties that we’re successful because not only is Vanessa a brilliant accountant, but she’s actually really good at sales, and I’m pretty good at sales too. So that’s actually- we’re good at articulating our value prop is really what it comes down to, but how do you do that transition? Does he fly in for the big ones and then you have a team or how does it work?
Evan: Yeah, on big ones, and I don’t think this has been publicly announced yet so I won’t announce the name of the company but one of the- I’ll just say top 10 largest companies in the world just hired Logikcull.
Scott: Wow.
Evan: Yeah, a big one, a company we all know. You don’t pitch that to your third-year aid, you’re like, “hey go close, you know, the biggest company in the world or whatever.” You know, the CEO’s still gonna be involved. But I mean, you know what? Larry Ellson still gets involved in some big sales calls and that’s fine, but in order to scale, Andy’s the best CEO I’ve worked with. And this is sounding like I’m kissing up but I am just in a good mood ‘cause the holidays and so, yeah, I mean, the point is, Andy’s great but he doesn’t scale. You know, and you’re great, and Vanessa’s great but you guys don’t scale.
Scott: Yeah, I know, I know.
Evan: So there’s this guy who did this- he’s a VP of sales. Hold on, or head of sales, CRO type, give me one sec. He does a really-
Scott: Did he write like a blueprint or the book on it kind of thing
Evan: Yeah!
Scott: I’d like to read that book, that would be really good.
Evan: I think I have this right, hold on, yeah. Peter Kazanjy. Yeah, that’s him. We went to a- he has a leadership team actually, went to this like Xero to 100 kind of scaling conference like how do you scale, how do you scale? He just had some really- he knows Andy, he wouldn’t recognize me from a hole in the wall. He would like- the [inaudible] mums buzz marketing here-
Scott: Does he have a book?
Evan: Yeah and I just gotta find-
Scott: I’ll check it out, I’ll check it out. We’ll put it in the meeting notes.
Evan: Sounds good. It’s K A Z A N J Y and he just super bright, and he’s a founder.
Scott: That’s probably something that’s a big one for us next year because we’re- the amount of volume we’re getting on imbalances. It makes your head explode.
Evan: Yeah.
Scott: Which is awesome-
Evan: That’s great.
Scott: but we need to figure that out because it’s driving both of us crazy
Evan: Yeah, he has this chart of like where are you in the sales process and the first like- it’s there’s like nine or 12 steps or something. He’s like, “okay, has someone paid you money?” like obviously, you guys would pass that.
Scott: Yeah.
Evan: But then it’s like getting- and I’m getting these orders wrong because I’m not a sales guy, I’m a finance guy. But I nerd out on this kind of stuff, like how do you make a company grow?
Scott: Yeah.
Evan: Do you have unit economics that makes sense, are you paying $2 to get $1 revenue? Or are you paying like 50 cents to $1 revenue? Then, do you have a repeatable sales process that allows you like- nobody’s a commodity in this world, salespeople aren’t commodities. You need- like if every McDonald’s in the world tried to use their own recipe for Big Mac-
Scott: Yeah, yeah, yeah, yeah.
Evan: that company wouldn’t be what it is, right? You’ve got to your guys and gals a repeatable playbook that works.
Scott: We’re very good at that, on our internal service offering like the monthly accounting, the taxes, everything is super repeatable. My brilliant wife knows how to do that, but sales are kind of like a- we’re kind of doing it because it’s the best- you’re a good athlete so you can shoot a basketball and hit a baseball, we’re kind of doing it that way right now.
Evan: Yeah makes sense.
Scott: So higher- yeah okay. So I’m going to check out that book.
Evan: Yeah, check it out. He’s pretty smart and a lot of stuff is I think posted online and you can read through it but highly recommend it.
Scott: So you guys have had- it sounds like you’ve had a pretty good year?
Evan: We did, we basically doubled.
Scott: That’s awesome.
Evan: You got to see if you can do something like that next year and just keep growing. It’s been a rollercoaster ride, and I got to be honest, we still have a ton of problems, like any start-up. You heard me talking about our Salesforce instance last year, those problems still aren’t fixed. We had to effectively do a turnaround in the OPS organization and bring in some new people and make some changes. That really was painful for the entire finance team because Salesforce is what we use for, paying our people, tracking revenue to report to the board and building our customers. Those are the only stakeholders that matter.
Scott: Yeah, [crosstalk] it was messed up.
Evan: Your shareholders-
Scott: Well let me make you feel better, we’ve been paying for Salesforce for a year and still can’t quite get it working correctly. It’s mostly user error on our part, so you’re not alone my friend.
Evan: Actually, I keep joking and think in January, we’re finally going to cut over from Xero, which is terrible but sorry I shouldn’t -
Scott: That’s right, I forgot that you were even using Xero. Yeah, I was embarrassed when you told me you’re using Xero.
Evan: Oh my God, well I’m embarrassed and I’ve been paying for NetSuite for 16 months, I’d love to use it someday it looks delightful.
Scott: (laughs)
Evan: Because this data [crosstalk] from Salesforce is so garbage, I got to pipe it through this connector call Sligo, and they seem pretty good but I don’t know it’s-
Scott: Have you started in NetSuite implementation yet?
Evan: We started it but then we had to clean up the sales floor, so anyway yeah I’d love to use NetSuite. It really looks like great software.
Scott: You’re using [crosstalk]- let’s just say if you ever decide to leave Logikcull and you’re in a job interview, leave off the Xero.
Evan: Oh yeah no, no. I mean-
Scott: They were on it before you got it, yeah, yeah.
Evan: [crosstalk]
Scott: That was not your decision, let’s the record show.
Evan: Absolutely, and actually-
Scott: God bless Xero. I own stock in the company-
Evan: Do you really?
Scott: yeah, yeah, it’s good- this is gonna make you cringe, it’s a good software for five people companies.
Evan: No I was just going to say, if you own a hair salon, that’s great.
Scott: Yeah.
Evan: But our business is way more complex.
Scott: Yeah, yeah [inaudible].
Evan: I felt bad trashing Xero but-
Scott: It’s okay, good people at Xero, they’re nice, and we like them. It’s just not a- I wouldn’t run a company your size.
Evan: It’s not an enterprise solution for a company that’s trying to reach a hundred million in three years.
Scott: Yeah, yeah.
Evan: So yeah, I know how it is. So anyway, that has all been really tough this year and it remains tough. We finally brought in a Director of Operations, knock knock wood she’ll help us solve a lot of these problems, fingers crossed. Overall, what is it? Is it ‘Fiddler on the Roof’ it was a very good year? It was! It was very good here and the biggest part of that is honestly my team. It’s the best team ever- ever had.
Scott: That’s awesome.
Evan: They’re just great.
Scott: I can see how when you say that you’re very relaxed, and you’re happy and I can see your body language just [crosstalk] it’s cool. I feel the same way, we got a great team too, it’s fun, that’s awesome, and we got to do a little work with you to which is really cool. I did get a- and I always love is the one that those phone calls, playing with my daughter and pick a doodle like at three o’clock in the afternoon, I babysit her once a week. And you called and you’re like, “I need something right this minute.” That’s always good- I always feel like a good friend when I answer those.
Evan: I was really apologetic about it, but I will buzz market Kruze Consulting. I’ve been on the podcast for three years but we never worked together until this year. They’ve been great, and affordably priced, and they have helped us out with multiple things. So, boom, there’s your blog.
Scott: I’m going to send over a video crew and get a good one [inaudible] Thank you, thank you. No, it’s awesome. We have a great tax team, Vanessa and Stephen are awesome and Loraine’s awesome and it’s awesome at work. Okay, we’ve got a couple of topics keyed up.
Evan: Let’s go.
Scott: Potential recession, the stock market is telling us there’s going to be a recession.
Evan: Yeah.
Scott: I think my portfolio is down like 20%, it’s been pretty painful. It’s been- it’s a lot of personal information but we were looking to buy a house so it’s kind of good that the markets going down. I think the amount of stuff in San Francisco’s trading below asked quite a bit now, which is awesome, but our portfolio has been hurt too. So how do you think about a recession and how do you think about it- kind of just how you do business and then for Logikcull itself, is it good bad, are you excited, not excited?
Evan: Yeah. So many- there’s a lot of different sides to that cube I think technically there’d be six. (laughs) So I would say, I think a lot of different ways, ironically the first time I was on the podcast was when I was with [inaudible] and I was a robot advisor. We talked about modern portfolio theory and how markets are efficient, you can’t time the market. You try to time the market, you either catch a falling knife or you could miss a bunch of games. So I don’t advise trying to time the market, that’s it. I’ve been a big macroeconomic bear for basically two years, just because- I’ve been around Silicon Valley long enough, I’ve seen this movie. And the caring coal mine, there’s a bunch of them but occupancy rate on commercial real estate, there are all sorts of indicators. I’ve seen- I graduated in 2001, when [inaudible] was just a radioactive crater of a job market and then I graduated with my [inaudible] in 2009 radioactive crater of a job market, so. I think about maybe going and- if I want to stay in this finance game and be a CFO maybe I’ll do a Masters of Accountancy. But if I do that like buckle up, because that’s going to be- every time I graduate with a degree the recession gets deeper.
Scott: Don’t do it, just buy [inaudible] [crosstalk] Are you 2009? I thought you were in 2007.
Evan: 2009.
Scott: Okay, so I did. I graduated in 99, my timing is slightly better than yours. 99 I got some boom and then went to business school in 05, graduated 07, so I still got a little bit of hot market at the post.
Evan: So we overlapped for one year.
Scott: Yeah, yeah.
Evan: I didn’t realize that.
Scott: Yeah, but it feels like the markets down quite a bit, so it feels like it’s telegraphing like, hey things aren’t as good as they’ve been and how are you as the VP of finance of a company prepare for that and then how does Logikcull fit in for your customers? It feels like you could actually make some hay, right?
Evan: Yeah so, it’s a lot of different angles there. So number one is, I’ve been- like I said I’ve seen this movie before but I’ve never seen it- like sustainable runs that can’t go on forever. They don’t, that’s just how- things that kind of go on forever will not. So I’ve seen this kind of sustainable run that can’t last forever, but I’ve never seen it with this many negative catalysts. They’re blooming out their constitutional crisis, all sorts of foreign entanglements. What seems like without getting political, some fairly rash decision making with respective global geopolitics. So yeah, I’ve been bearish for a while now.
Scott: And we’ve been running a deficit for a long time already.
Evan: Exactly, yeah. So-
Scott: And we’re pissing off the country that buys all of our treasuries.
Evan: Yes, exactly. This is-
Scott: It’s China.
Evan: a dangerous game. So now that said I mean, the Siegfried model would be like, “well that proves Evan Maher’s been a bear for like three years.” He missed if you were in cash the whole time and frankly because we were hoping to buy a house. We really were like 75% cash. You missed out on all the gates, that’s it.
Scott: That’s kind of the- for me I’ve been fully invested for a while so it’s run out. So, I know I’ve lost a lot of my own tail, but you just can’t time the stuff. [crosstalk] what are you going to do?
Evan: So, so- but from a company perspective there are a couple of things, there’s a great saying that, “fortunes are built during down terms, and harvested during up terms.”
Scott: Yeah.
Evan: And so I- and the other thing is our software and one of the good things about this business, there are plenty of bad things do because it’s really complex and everything else. It’s that it’s mission critical, right? People need this, and certain fields increase during down terms, like bankruptcy obviously. Some really disappear, securitization or whatever, but in terms of that company litigation, that’s still going to happen.
Scott: Yeah, maybe more because there’s going to be a lot of angry people.
Evan: Yeah so, so- and then sometimes the superfluous litigation, that kind of disappears.
Scott: Yeah.
Evan: Overall, I don’t think- we’re not a high level of cyclicality, we don’t have a high-level exposure to the business cycle if anything we might be countercyclical.
Scott: You’re also like a company I would think that can either- that either makes people more efficient, like lawyers more efficient-
Evan: Exactly.
Scott: or take some of the legal costs out of it, right?
Evan: Absolutely.
Scott: There’s are pretty clear ROI for what you guys do, right?
Evan: Absolutely, I pressure- one of our big customers talks about, a big law firm that will remain nameless but AMLOCK 10 was really salty when they used our- she was GC at a big fortune 500 company. They said, “okay to go through all these documents is going to take us eight weeks, it’ll be about half a million in billable’s.” She was like, “oh I’m just going to throw it into Logikcull.” Then, of course, the guy got all like, “why can’t, you know I can’t, I’m taking on risks here.” and it’s like no no as the billable’s walked out the door. (laughs) So yeah it actually could be a good thing for the top line. The bigger thing and we were talking about this, and by the way-
Scott: Just for the digression, are there people who are just logical pros who are professional service companies that just love you guys? Because I was actually- as you’re saying that, it’s exactly like us, the QuickBooks, bill.com, the Expensify, BREX. All these things have gotten so much better. So we are the masters of that stuff and we’re actually incredibly so much- we’re such a better deal than people who have kind of the giant internal team. But as you’re saying that, I’m like there must be people who are riding the logical wave, who are just kicking ass like the Kruze Consulting’s of the world out there, that are riding your wave.
Evan: Yeah, there are vendors that basically- and this was also interesting because you got to handle it right. This is good, I’m just going to pretext this like, “this means I get to use my favorite nerdy economics jokes.” So it’s coming, and brace yourself. But there are a couple of things, for number one, when people subscribe they can- we do both subscription and usage-based billing, right? And it’s really kind of do you want the commitment in exchange for effectively bulk discount. Well, that can get hairy if you have a vendor, a professional services vendor who just as E-discovery, and they’re going to use a Logikcull, internally. But if they sign up for a huge subscription and then they undercut you-
Scott: Oh in the market, yeah.
Evan: yeah, so channel strategy is important.
Scott: That’s interesting you guys- we make our software vendors very successful, and they make us successful. They don’t really undercut us there’s no undercutting, right? At least right now, maybe that’ll happen- maybe they’ll be some machine learning, that’s amazing or something like that but yeah.
Evan: Yeah-
Scott: So they can undercut you, I never thought about that.
Evan: Well it’s potential, and it’s happened once or twice, and you just have to go in there with eyes wide open and then the other thing about having resellers are, and here it comes. What’s the- you’ve heard of double marginalization? What it basically uses the macroeconomic concept that if you have a- basically two up- if you have a middleman with pricing power so basically the- you have a monopolist at the top and the monopolist in the middle. You have this problem of double marginalization because both companies are trying to optimize their own setting marginal cost equal to marginal revenue, right? So, to optimize profits, and what that does is creates deadweight loss. Where across both quantity and volume are not optimized across so-
Scott: Interesting.
Evan: it’s an argument for vertical integration, but the joke is, “what’s the only thing worse than a monopolist?”
Scott: What?
Evan: Two monopolists.
Scott: (laughs) ‘Cause there’s deadweight loss.
Evan: So bad.
Scott: That’s a bad joke.
Evan: Such a terrible- but I love it, so anyway. So yeah that’s a [inaudible] so there are people who would be kind of right.
Scott: Got it, so you guys- but there is a pretty big ROI improvement in your, yeah. That’s pretty awesome.
Evan: Yeah absolutely. So anyway, getting back to a downturn, and the bigger thing and I’m always hesitant to say this because you were joking on the elevator like you know you don’t want to say this and sound like the evil John Hodgeman basically. You know, evil billionaire or like (laughs)
Scott: It sucks right, a recession sucks for everybody.
Evan: Recession’s bad, I don’t want to see- people’s lives get affected, but the fact is you could not have a more insanely hot job market than San Francisco in November of 2018. So, the fact is that good people become available, and that’s again one of the reasons that- again I’m not rooting for their session I’m not so singularly self-interested that’s like (laughs) screw everybody else, recessions are great for me. But I do know that people become available and you can get good people and that’s-
Scott: It’s part of the consolidation phase of recession, the companies that don’t make it have great people working there too. They just couldn’t make it and then they join your firm and that’s awesome. Hopefully, they’ll do the same for us and it’ll make us stronger if that happens. I think it’s going to be at least cooling off a little bit would be good. It’s been pretty hot.
Evan: Just rationalization yeah. So yeah, that’s kind of my take.
Scott: Nice. Are there any- do you have new products because of the recession or do you just emphasize different things or do you- is it just because, I guess you have this channel out there, is there any new approaches? Or are you just like, hey, we’re not a single call, this is going to be great for us.
Evan: You know, that’s actually interesting. I think in one of our customer segments there may be, which is to say the government side of this is probably not affected. The nonprofit, probably not that affected, that much in the small and middle market of small law firms, that’s where- and actually that’s not true. Probably, even in the enterprise side of like big fortune 500 corporations, it’s during downturns when they have more pressure on legal spend and that’s a little bit of a tailwind.
Scott: yeah that’s what-
Evan: Because we’re making people more efficient. So, in that market less so on probably government nonprofit, yes. I think that there will be a little bit of a tailwind.
Scott: In this shifter marketing, [crosstalk] that’s exciting.
Evan: That’s Rob to Robbie, he’s our head of marketing so-
Scott: Yeah, you’re not the-
Evan: He’s got that on lock.
Scott: He knows what he’s doing. Okay, second topic, growing up as a company. I thought that this was great because this is some weird- before we turned on the mics we’re talking about comp structures and [inaudible] structures. We both are living it, and we’re living at this time last year too. How do you think about your- what are the things that are growing up as a company?
Evan: We live in a world of constraints, right? So, there’s all these things that when you’re a startup and you’re just trying to make it, from day one, you’re just trying to survive, you’re not ready to thrive right? Now fortunately the company was already had been around for a while when I joined, but still had that very scrappy, like we’re not gonna be penny wise and kind of foolish but I negotiate literally every contract. I just kind of enjoy it, but, what’s interesting to me is the tension of your growing up as a company and you now have- when we closed a big round in January. So that was great and [inaudible] came on board and they’re great to work with. Now you have resources where corners that you cut previously, and I’m not talking ethical corners, I’m just saying you know, we’re not going to pay for this because moneys scarce. There’re some corners where you have to- you need to stop cutting, and you’re just like, “all right we’re settling with one of the largest companies in the world, we can afford to do X, or they’re going to- it’ll be table stakes to do Y.”
Scott: Or it’s a negative signal if we don’t do something.
Evan: Exactly, stock too. Stock too is expensive, and we did it. And that was a huge unlock for a lot of enterprise companies that now - previously we’re not going to be comfortable buying Logikcull, but but now are. So that’s an example. So, what’s interesting to me is the tension between that of- okay, the rules have changed slightly, but you also need to preserve that scrappiness. So, it’s like how do you- and that’s a cultural thing. So, I’ve probably told this story, I don’t think I’ve told it on this podcast, but if you look at total cost of an employee in San Francisco, fully loaded with their laptop and all the tools they use. It’s almost $200 an hour, that’s how much it costs to employee these people, and they’re worth it right? I’m not just complaining that people are expensive, but when we moved into our old office, we’ve since move, which is great. You’ve seen the penthouse up on Post Street right by Union Square, it was great right? The company who had moved out had this water subscription, did I tell you this story?
Scott: No, no, no, no, no.
Evan: So I tell this one pride, because it’s not about the money, sometimes it’s about the culture. So, there was this- they had this water subscription, and it was like $55 a month for fresh water, and I told in front of everybody. I told the office manager, I was like, “do you want to do it- do you want to keep it?” And we found out do people want fresh water? Yeah it sounds like they do. And I was like okay, “tell him we’ll do it for $50 a month, no more.”
Scott: Five dollar [inaudible]
Evan: Look, just the amount of time it took to have that conversation was not worth saving five dollars a month, but the bigger thing is people hear that story and they’re like, “wow.” So, I’m not trying to break my own [crosstalk]
Scott: You make a good point though about all the stuff like people- I also think all of our jobs are getting more software enabled. That requires all these software subscriptions, we spend an enormous amount of money on software every year. And it’s the ZOOM, the Slack, the Google, you know all these things, it just really adds up, it’s crazy.
Evan: Actually that’s actually another related thing, we finally hit this tipping point with one vendor that you’ve heard of, they’re building a very large tower in San Francisco. But we kind of found out another thing about growing up was when you’re like a two million, three million dollars are year company right? You’re just like, “man I just got to get the tools I need to employ them.” After you get to a certain scale, and maybe were there, I would argue we are- you really- we’re at a point where they have so much, they’re so deeply entwined, like wrapped in our tech stack.
Scott: That you can’t get them out.
Evan: That you can’t get them out but as a result-
Scott: They know that.
Evan: they know that and look we all work in SaaS, we know the name of the game, I’m gonna make my product as sticky as possible by making the switching costs so high. But as a result, I can’t really buy anything from them anymore. I can’t because they have me over a barrel, they kind of-
Scott: I’ve heard this story about them quite a bit.
Evan: and that’s going to happen, but what’s interesting is someone- another business leader in marketing or sales or ops or whatever, would be like “well I want to use their tool.” And it’s like, “guys I need you to like think more long term because like, this is the kind of thing that we would put as a risk factor in an s one, if we ever lucky enough to go public so like you just start, you need to start having more strategic long-term thinking, instead of like, but I won’t use this tool.”
Scott: We have the very cheap subscription with them, we have the get addicted to the crack subscription.
Evan: Yeah exactly!
Scott: You guys have the paying for the crack.
Evan: Yeah exactly, exactly. So, we’ve got a very expensive habit there. But yeah, unfortunately like you need to think long term-
Scott: Like long term, maybe think about your employee expenses, if you got- are you guys do anything remote like what’s your-?
Evan: Yeah, art and engineering teams 100% remote.
Scott: We talked about that a little bit. So what’s the- what are the pros and cons on that-
Evan: Honestly.
Scott: ‘cause you guys have a pretty big engineering team right?
Evan: Yeah, yeah. It tripled in 2018.
Scott: Wow.
Evan: And it’s hopefully going to double again, yeah so, we’re really investing, that’s what the whole point of the round was, to really reinvent the product and do some really cool stuff. So honestly, it is the vast majority- there’s certain roles that doesn’t make sense, right? But the engineering side, we’ve got engineers in like towns you’ve never heard of in Canada and they’re great. It is less expensive than paying someone in San Francisco, because it’s really expensive to live here. And it gets you access to just this whole universe of people that you’d never be able to hire [crosstalk]
Scott: And they’re excited about working at your company.
Evan: Oh yeah! “are you kidding me, I get to work at a cool San Francisco startup.” We fly ‘em out once a quarter. They don’t have to, because if you’ve got kids you don’t want to be traveling all the time but it’s great. There’s one downside, I would say, with us it has been a uniformly positive experience with the one downside of it just puts a higher premium on, not having a- was it a type 1R, was like a false positive. If you make a bad hire-
Scott: It’s harder to figure it out?
Evan: It’s harder to find it and you need to- it’s harder to monitor them because they’re not there every day. Especially for certain roles were like, if you’re a remote salesperson, it’s all there in black and white, you’re selling or you’re not.
Scott: Our sales in black and white too because of the billing and all that kind of stuff.
Evan: Yeah but what about an info security engineer? Well did we have an incident or not? I mean it’s like you know- so it just means- and by the way we still hire people to do that role remotely but like it puts pressure on your recruiting team to really get. Because if you make a bad hire-
Scott: It’s so hard too because I think recruiting- it’s like if you can shoot 75%, you’re doing pretty damn good.
Evan: I would say so.
Scott: Like you’re gonna make mistakes, and I also find sometimes people tell themselves a story when they’re interviewing, and then once they have the job that story, they’re not allowed to tell themselves that story anymore because they’re living in reality. We had something like that recently, we hired someone and it didn’t work out, almost from day one, even though the person was like perfectly qualified and very passionate it just- they needed a different narrative in their life. So that happens, if that happens once out of every four times you’re probably doing a pretty good job [inaudible]
Evan: One of four is- yeah, I wouldn’t want it to be any higher than that. We’ve been 100% on the finance team.
Scott: That’s awesome.
Evan: Again I’m not trying to pat myself on the back, it’s a small team. It’s growing a lot actually right now so I know that we’re going to have to be disciplined. I already have an FPA guy, Mr. Andrew Dop, very excited. He was our summer intern, and he’s still working with us as a consultant he’s in the Bahamas right now or something. But anyway, I’m just buzz marketing Andrew Dop, he’s joining in May, and we’re also hiring on the staff accountant side, a compensation specialist. The teams growing and I don’t want to do 75%, I really want to get 100.
Scott: No one does.
Evan: But yeah, no I agree with you.
Scott: So what trade-offs, are you willing to pay up more salary to- is it like buying insurance or is it more about the interview process or how do you- because we are a lot of people so I have my own theories. How do you hit a higher percentage than that?
Evan: Yeah, I think- well I think a couple things, I’m a numbers guy so if you remember from your stats class you’re either- you can optimize for reducing type 1R’s which are false positives I think I have that right. OR type 2R’s which is false negatives, like not hiring someone that would have met the bar. And in my experience at Seigfried, we moved- we really moved slowly in an attempt to avoid false positives, but as a result I think the cost of having the role not be filled added up. By the way [inaudible] was still like across limiting, it was okay. Whereas-
Scott: This won’t make sense for your internal group hiring but it’ll probably makes sense for engineering hires. We’ve now flipped from having- always kind of being tight like fully utilized to now being at least one kind of person to ramping that’s not utilized at all times. Because it’s a tiny buffer, it’s actually kind of expensive for consulting for them to do that, but it’s worth it in the stress.
Evan: I agree.
Scott: And the disruption when someone does leave- this is like a policy Vanessa and I have been doing now and it makes things a hell of a lot easier when you’ve already got someone trained that you can just plug in, and there’s no missing a beat. It’s really nice.
Evan: Yeah, I mean our CEO Andy says, “we got to be disciplined.” and again my job is to instill discipline, financial discipline across companies, literally that is- the buck stops on my desk. So when someone comes in and says, “I need to hire three people.” I’m like, “all right, make your case.” Because Andy always says “okay, hire when it hurts, not before.” But you can take that to a pathological extreme that self-destructive where it’s like, only hire when it’s excruciating like no, no, no, then your people are going to leave. So, it’s a balancing act. I think it’s definitely for me, one thing I’ve adopted from Jackson Holland is a guy who came over actually from Siegfried to Logikcull like a year in a day after, after I left. (laughs) He’s great, a good friend of mine we [inaudible]together, we play hockey together. And actually, won the championship this past season, just want to throw that out there. He brought this with him, I’m not necessarily a huge fan of some of the things Goldman Sachs does but he said when he worked at Goldman Sachs, when we hired him at Siegfried. And he was like, “yeah I really like this policy of, even the most junior analyst, it’s a unanimous hiring process you need to talk like seven or nine or eleven people, and even the most junior person hasn’t veto.”
Scott: We do that too.
Evan: That’s what we do now.
Scott: We have- there’s been times where someone who maybe has less experience interviewing might have- and then I’ll sit down and talk to them and try to figure out if it’s a real issue or not. But then that can actually be really constructive because they understand coming forward, but yeah you don’t want to hire people that there’s a lot of misgivings coming in, no matter how good you think they’re gonna be.
Evan: Totally agree, I’ve adopted that on the finance team. I think we might- I would advocate for it across the company, different managers run their teams’ different ways but if there was like a candidate that five of us were A plus, thumbs up on and then one person was like eh. Then, I would definitely want to get a clearer picture but ultimately, I’m not gonna put the thumb on the scale and overrule. I was like no, no, the only reason-
Scott: You have to listen to people.
Evan: you got to listen to people, and the only reason my team has come through this year in one piece is because we like working here. If I like- managing is incredibly hard and at the end of the day it’s not actually that complex, it’s hard but it’s not complicated right? And so-
Scott: It takes a lot of energy, I think is what-
Evan: Oh, absolutely but bench pressing isn’t very complex, it’s just hard. So my job is basically don’t screw up the good vibe.
Scott: You’re such a good guest, we’ve already been recording for 35 minutes, just FYI. [crosstalk] So let’s- this will be kind of the last segment.
Evan: Sure.
Scott: I’m springing this on too.
Evan: Oh wow, all right.
Scott: What are three of your New Year’s resolutions, business-wise or personal. But what do you- because I’ve been thinking about this a lot. Vanessa is really good at goal setting and I’m trying to get better at it, like what do- what are the three things you’re looking for?
Evan: Yeah let’s see, good call-
Scott: And this is- I’ll buy you a little bit of time because I’m springing this on you. One of mine is a personal one which is, I’m 41 years old and have a kid and I want to be around for this kid for a long time so I’m making a bigger effort to work out every day and eat better and things like that. That’s a simple one, it’s not a business-oriented one but hopefully it will give me more energy.
Evan: No absolutely.
Scott: What are the things on your plate?
Evan: One is actually related, but it’s not nearly so noble motivation is yours. I’m turning 40 in May, I’m sorry in June but at the end of May we are- when I turned 30 about 10 years ago. We rented this really hilarious place in Acapulco it was called, - it was built by Gloria Gaynor, disco queen. So, there were two websites, one was like www.viarochetta.com and that was just all the pictures of the house. But because Gloria Gaynor is, ‘I will survive’ she’s kind of iconic in the gay community. They had a separate website, that was called www.acapulcogayhotel.com
Scott: Wow.
Evan: and it was the exact same pictures of the servers and everything. It’s just- they were wearing very different and a lot less clothing.
Scott: Interesting.
Evan: A lot more banana hammocks,
Scott: Is it like a week thing or something, like they do a week? Week on?
Evan: Yeah, so we’re going back, we’re actually going to go to Puerto Vallarta because the house changed hands. I want to go to the same Gloria Gaynor house but it’s not available but anyway. Going to go down with a bunch of friends, just do that but I gotta get in shape. I can’t be like-
Scott: Get the beach bod.
Evan: I’ve been carrying a little bit extra weight, just ‘cause we’ve been working so hard, so that’s number one. Number two, I would really like to see us as you said mature as a company, and build that repeatable sales process. We’re still in the midst of that and if we really- the thing about trying to double every year is that every year you have to do everything you’ve ever accomplished but in only 12 months, like that’s really hard. So, in order to do that I would like to see us and we’ve got a bunch of great salespeople high integrity, smart hardworking. And- well you’ve got five of them, or six of them or seven of them, but what if we had 17 and 27 and 37. Can you maintain that high level of integrity, quality, hustle, drive, intelligence, honestly, all that, but at scale. That’s something I-
Scott: That’s the big- I mean doubling looks good on a PowerPoint but it’s really hard, hard, hard, hard, hard.
Evan: Yeah, it’s literally everything you’ve ever accomplished to date-
Scott: I know.
Evan: And then just do it again in 12 months.
Scott: I know, we basically doubled this year and it’s been-
Evan: It’s crazy.
Scott: it’s a lot, yeah. [crosstalk]
Evan: Let’s see, third thing-
Scott: Third one, play music more?
Evan: Yeah, we’re playing-
Scott: Record a jingle.
Evan: [inaudible] record the jingle, we’re playing FDR of the western [inaudible]. Want to give my plug, we’re playing FDR, that’s ferment, drink, repeat, in January, 26th.
Scott: That’s awesome.
Evan: Send y’all an invite. No, I said professionally, I want part of this growing up as a company, I think is part of me frankly growing up as a manager and by that I mean like I’m not super immature as manager, but rather- I’ve always had that kind of pathological almost pathological like don’t spend the money don’t spend the money. And after a certain point you just need to stop cutting the corners, and in my case that’s another bias not just because I like you know companies that don’t burn a lot of money. I like having money in the bank that we can feel comfortable about but the other is that in my career I’ve worked with a small number, medium number of executives who are fiefdom builders. They measure their value by the number of people reporting to them and I just- I’ve always found that really repulsive, honestly.
Scott: You can’t do in the finance world either, in a finance organization.
Evan: That’s being a me-
Scott: That’s really messes things up.
Evan: Yeah, that’s been a me guy, not a we guy. I’ve always been so turned off by that, that in the past I’ve over-indexed to trying to do it too lean. I’m trying to be a good steward of capital yes trying but at the end of the day I realized, to my detriment was really something I’m working on as an executive is, I was worrying more about whether I would be appeared- as whether I would be perceived as a power-hungry fiefdom builder who only cares about his own power, rather than doing what was right for the company. So, I need to kind of get over myself and be like, no, in order to do this properly in order to pay people the right amount, bill people the right amount, our customers the right amount, and report accurate revenue to the board. Again, the only stakeholders that matter, right? If I need more people than I just- I can’t have that Catholic guilt, or worry about how I’m going to be perceived.
Scott: It’s also not fair to your team.
Evan: It’s not fair to my team, it’s not fair to the company, it’s not fair to the customers not fair to the board. So that doesn’t mean you go hog wild and hire the whole universe, still got to hire when it hurts. That’s something I’m working on.
Scott: Yeah, I love it. So, beach body.
Evan: Yeah (laughs) yeah.
Scott: Grow up as a company,
Evan: [inaudible]
Scott: Put the foundation in for scaling, all that kind of stuff and give yourself permission to invest correctly.
Evan: Yeah you know, intelligently.
Scott: Those are good, those are really good three- I’m going to think about. I like number two, and three a lot, we’re probably in the same boat. I call it like being-
Evan: How about you, what else?
Scott: I would say- that’s a good question. I feel like we chopped a lot of wood this year like we really built the foundation for a while, and next year I want to smell the roses a little bit more. A lot of the investments- we’ve been able to hire really great people who know can kind of run a group or run a function. So, I want to let them do what they do and give them a year of just kicking ass. So that’s one- I call it like letting the horses run or something like that. Then, I think there’s some cool things we’re excited about- it’s easy to get- one thing I’ve learned at this job is it’s easy to get seduced by the next cool thing.
Evan: Oh yeah!
Scott: While you still haven’t really completed or taken to scale [inaudible] but there’s a couple ancillary like venture that fetch, which I’m doing one venture debt negotiation right now and working on something else. It’s so easy for us to add value for these companies.
Evan: Right.
Scott: They just- we just know the whole freaking game and we know exactly what the data should look like and what the term should look like. So, scaling that is- will be kind of my big one.
Evan: You know I should introduce you to Austin Dean at Spinta Capital, he’s a good- do you know him?
Scott: No.
Evan: I feel like-
Scott: Name sounds kind of familiar.
Evan: We have friends in common, he’s at the hill house group with me, he’s president [inaudible] I’m buzz marketing Spinta Capital Austin, you owe me. He’s a good golfer too. Anyway, yeah you should talk to him, he’d be good there. Do you want to spend- I know we’re running time but do you want to spend 90 seconds talking Wayfair?
Scott: Real quick, yeah. We’re at the-
Evan: [inaudible]
Scott: We’re 42-minute mark. [crosstalk] this is the true believers listening.
Evan: The diehards.
Scott: Okay, Wayfair is the sales tax lawsuit that was between the Wayfair and me think North Dakota-
Evan: South Dakota.
Scott: South Dakota, and the Supreme Court. There’s a huge blog post on it on our website. And what is happening is, everyone has to start thinking about sales next- or not, it’s kind of beyond Nexus. It’s like everyone has to think about sales tax in all these states, it’s going to happen, you’re going to have to pay sales tax above a certain threshold in given states.
Evan: But the problem is that every threshold is different. So realistically, we’re a small startup, right? I can’t be monitoring, whether I’ve hit 72 transactions and 250,000 in New Jersey, or- while also saying like, “okay, did I get 144 transactions and a million dollars in Oregon.” No, no, that’s bananas. So this is my short gripe of, look, I’m not one of these and Rand objective is like things taxation is theft right, I’m not Paul Ryan.
Scott: We’ve got over here, [inaudible]
Evan: I am fine with regulatory bodies taxing authorities. Levying taxes, I mean that’s fine, that’s the reason we have streets, that’s okay. But I don’t have a time machine dude. So, you need to tell me-
Scott: It’s not going to be retroactive.
Evan: I know but you have to tell me at the time of the transaction if I need to collect sales tax.
Scott: Oh yeah, yeah.
Evan: And in January, I don’t know if I’m going to hit 113 transactions in Wisconsin, you know?
Scott: I think that’ll be solved. I’m not too worried about that [crosstalk] I get it where-
Evan: As someone with a legal background I just- bad law is bad law.
Scott: They’re not going to- well I think if I were to take the law’s side of this, it’s- this is how to tax the sausage gets made a little bit there’s a breakthrough tech. Because what’s been happening is the state’s want the sales tax revenue-
Evan: Of course.
Scott: and how are they going to get it. So now they can get at it, there’s going to be thresholds that most companies are not going to have to worry about, that are startups at least.
Evan: Probably.
Scott: But you guys probably are tripping some of them.
Evan: We already hit two.
Scott: So you got to do it, but I think they’re going to give you- they’re going to be reasonable. It’s not going to be-
Evan: I would think so, I mean even- if you add it all up, even the taxes all the taxes and penalties probably like you double it. It’s probably is- but I’m not advocating that people do this but like if you double it. And that takes three-four years. Well, that’s basically 18%, per year, right? So that’s way less than my company’s capital.
Scott: It’s going to be- they’re gonna be- they’re figuring it out still. So, I’m not stressed.
Evan: I’m salty about it, just because- just write the laws better.
Scott: I’ll tell you what, I’ve been buying Avular stock basically every chance I get so-
Evan: That was the Avular full employment act.
Scott: So, yes, I’ve been buying that stock a lot. So, I would recommend that that’s our tax software partner that we put almost every company on that needs it for this kind of thing. So it’s really- did we tell you to use it or do you use it-
Evan: No we use it more anyway.
Scott: They should be sponsoring this podcast.
Evan: They absolutely should. [crosstalk]
Scott: All right, Evan Maher,
Evan: You got it, yes!
Scott: Boom! Pretty soon we’ll have a new jingle from Evan for the podcast.
Evan: Hopefully on this podcast.
Scott: Hopefully this, I kind of want to post this one sooner, because it’s a good podcast.
Evan: Oh okay, [inaudible]
Scott: Thank you for coming by appreciating it.
Evan: All right, thank you.
Scott: All right buddy, thank you. Hope you enjoyed that podcast with Evan, he is a fantastic guest. We had a lot of laughs, and before we hang up here shout out to BREX our credit card sponsor. They are great for startups it’s easy to use, easy to provision. They have a really nice interface with QuickBooks. They have great rewards and there’s no personal guarantee by the founder, that is a really- kind of misunderstood, overlooked thing. So that’s really big, check out BREX at b r ex .com and type in Kruze, K r u z e when you go through the signup file and you will get some discounts, rewards. Hope you enjoy BREX credit cards, and we’ll see you back next time at Founders and Friends

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