Scott Orn, CFA
Scott Orn, CFA
Posted on: 05/18/2017
Jeron Paul of Capshare - Podcast Summary
Jeron Paul of Capshare stops by to talk about Cap Table Management for Startups. Capshare is the leading software provider for Cap Table Management. It allows startups to escape unreliable excel reports and bring their Cap Table into the cloud.
Jeron Paul of Capshare - Podcast Transcript
| Scott Orn: | Welcome to Founders and Friends with Scott Orn at Kruze Consulting. And before we get to an awesome podcast, with Jeron Paul of Capshare, I have a couple of reminders; first of all, this podcast is brought to you by Kruze Consulting, the best startup accounting firm in the world, I would say. We have 160 clients, we do monthly accounting, we do taxes, we help with payroll, we help with expenses, we do everything a startup needs, and again we’ve been doing it for a while, we have 160 clients and so if someone you know is a startup founder, or just a little overwhelmed at their startup and needs a little help, tell them to give us a call. Additionally, this podcast is brought to you by Expensify, it’s our favorite tool for expense management, we put every client on Expensify, and basically what it does is it allows you to upload all your receits, keep track of everything, and most importantly, document your receits and your reimbursements, the IRS really cares that startups document all that stuff and they can trace it all, so very important tool, Vanessa was actually quoted in the New York Times talking about it, and we’re a huge fan of Expensify, so please check it out, there is a cool little link on our page, kruzeconsulting.com and you can get it at 20% discount. That’s about it. Oh, one other thing, I just wanted to call your attention to the new Kruze Consulting tax prep calculator. Basically it answers a question how much does it cost to get up a startup tax return, we actually have a handy little calculator there, Vanessa built it, and we basically can tell you exactly what it is going to cost, for you startup tax return, right that minute, so if you are shopping around, trying to figure how much it is going to cost for your startup’s taxes, check out the tax calculator at kruzeconsulting.com. Alright, now on to an awesome podcast with Jeron. Welcome to Founders & Friends podcast with Scott Orn at Kruze Consulting, and my very special guest is Jeron Paul from Capshare. Welcome Jeron. |
| Jeron Paul: | Hey how are you doing, it’s good to be here. |
| Scott Orn: | I’m doing great, it’s a beautiful day in San Francisco, and thank you for- you did come out just to record the podcast? |
| Jeron Paul: | That’s true, we can say that though anyway. |
| Scott Orn: | So audience knows now that Jeron is based in Utah, came out to record the Founders and Friends podcast, which is quite an honor, thank you. Can you tell the audience kind of a little bit about yourself and a little bit about Capshare? |
| Jeron Paul: | Sure. I will start a little bit about the founder story. I’ve been doing stuff kind of touching private companies for a long time, I guess Capshare was really spun out of 409A valuation firm that I had stated previously and sold. So yeah, I started and sold the company several years back, I want to say like eight years ago was when I stated it, and then, I had previously worked in venture capital as well, it was called Signal Peak Ventures, it’s one of the larger venture capital firms based out in the kind of mount west area, so we did invest in Utah, Denver, kind of Colorado area, and then Arizona a little bit, there was actually kind of a little bit of a tech cub in Utah. |
| Scott Orn: | I know, there is a big tech cub, and actually I have a friend named Gavin, from business school who is an early stage investor there. |
| Jeron Paul: | Gavin Christensen? |
| Scott Orn: | Yeah. |
| Jeron Paul: | He is actually an investor in Capshare. |
| Scott Orn: | Oh, sweet. Tell him I said hello, he is a good dude. |
| Jeron Paul: | He is a good dude, yeah, he is a great guy. |
| Scott Orn: | And there is a ton of good companies in Utah. I am seeing a lot of companies do their second headquarters, or second location, from bay Area to Utah. |
| Jeron Paul: | Yeah, I think cost advantage, highly trained and very skilled workforce there, but still, significant kind of housing price advantage and some other benefits and I mean, if you are an outdoorsy person, kind of an awesome place to live too. |
| Scott Orn: | Totally. And we were joking before we turned on the mics on, very good basketball team in Utah. And they’ll meet our very good basketball team in the Bay Area soon, so I’m excited about that. |
| Jeron Paul: | Maybe just slight odds in your favor. [laugh] |
| Scott Orn: | But, okay, so based in Utah and you already have a 409A firm, and then you saw the need for Capshare? |
| Jeron Paul: | Yes, and actually I had kind of seen it, probably Signal Peak Ventures, maybe even more, as a VC I just kind of, I was a SAAS VC so to kind of study that space, and we would see every time I wanted to get a cap table, I’d ask the entrepreneurs, and some entrepreneurs were amazing, I don’t know that being good at giving your VCs what they want from an administrator perspective correlates at all with like your likelihood of success because some of the ones that we could never get a cap table from, were some of our best investors, |
| butScott Orn: | Totally, they just, they don’t care and they are not going to respond to you, they just don’t care. |
| Jeron Paul: | Yeah, totally, they are so busy, right. Maybe inversely correlates, but yeah, so we were constantly asking for cap tables, and what we would get, the typical response was, okay, out law firm has that, and then we would talk to a law firm and they would say, yeah, well give us a couple of weeks because the company has a bunch of the information that we need, like they have granted several stock options we think, we don’t know… No one knew, and so it would be this kind of two week process of rounding up all the data, then the law firm or the company, usually the company actually by that time would be like well we want a copy of our cap table too, and so they would get the copy of the cap table then they would forward it to us in Excel. |
| Scott Orn: | And no one was sure if that was the right one. |
| Jeron Paul: | No one was sure, and generally for a VC’s purposes, at that time, a cap table could be kind of plus or minus, within 5%, it wasn’t the end of the world if it wasn’t like an exit, but it just begged the question of like why on Earth are we still facing this problem, at that time at around 2010ish, and even a little bit later, and no one’s kind of centralized this as a SAAS plan, so that was really the genesis of Capshare. |
| Scott Orn: | That’s amazing. And so you sold a 409A valuation company, and then just- |
| Jeron Paul: | Spun this out, we had been working on this- so one of the things about starting a 409A valuation firm that is pretty awesome, with regards to then starting a cap table management company is, I mean, we were doing, honestly, we did over 2000 valuations, everyone you have to model out their cap table, you have to model out the liquidation preferences, you have to model out how they work with each other, it’s kind of complicated math- |
| Scott Orn: | Sure, because of the preferences and things like that. |
| Jeron Paul: | Yeah, which again made me kind of think again, like this is a great place for some software, because crunching those numbers can be done on the fly, so Capshare really stated with a big emphasis on scenario planning tools and the ability to model new rounds of funding, and to understand how all that would actually impact an entrepreneur’s returns, and- |
| Scott Orn: | Can you talk about that a little bit more. Because I think there is so many subtle needs, but like, what are the some of the things that come into play and how could that affect and entrepreneur? |
| Jeron Paul: | Absolutely. There is so many things that came into play, but at the end of the day, the basic concept is, and we actually have blogged a little bit about this in the past, we call it accounting ownership versus economic ownership, your accounting ownership what you actually own as a percentage of shares in the company, especially for entrepreneurs, does not equal- big equal with a big slash sign through it, what you are actually going to get paid in every case, and so if you just kind of wrap your head around that concept even for beginning entrepreneurs, it’s like wait, I own 20% of the company, doesn’t that mean if we sell for 10 million, I get 2 million bucks- not always true, right, there is these things called preferences, which I am sure your readership or listenership- |
| Scott Orn: | Explain it real fast. |
| Jeron Paul: | Okay, like preferences are just investors have basically a right to get a certain amount of money out before common shareholders typically participate in any proceeds in a sale. And so, what that means is that they will often, under a certain exit value, the ownership that you have as a percentage of shares will not necessarily match and what you actually get paid will be less than what you actually own as a kind of the accounting ownership figure. |
| Scott Orn: | I always think of it is like, venture capital investment is actually a loan, unless you have a really nice exit, because, they kind of look to get the money back first, out of all the proceeds, that is the preference part, so if a venture capital gives you five million, if the exit is not big enough, they will say I’ll just take my five million back. And then the entrepreneur gets, and the other common get whatever is left over. |
| Jeron Paul: | Yes, you know, it’s a great way to think about it Scott, honestly, because I do think a lot of entrepreneurs don’t think that way, and then they get a little shocked or little surprised. I mean it’s not a loan in the sense that if you have a loan that money would come out even first, even before your investors got their money, but for all intents and purposes I love that you’ve brought that up, because it is like that, and for certain low exit values, it will feel that way. And so you need to make sure you understand that. |
| Scott Orn: | And probably that scenario modelling you’re doing is like, ok they’ve already taken five million and they want to take another ten, what does that do, how big does the exit have to be for the entrepreneur actually getting money out of this; it’s got to certainly be bigger than ten million or fifteen million. And maybe it’s got to be bigger than like fifty million depending on terms and things like that. |
| Jeron Paul: | That’s right. |
| Scott Orn: | So you guys do all that stuff? |
| Jeron Paul: | We do all that stuff. |
| Scott Orn: | Oh my gosh, I didn’t know that. |
| Jeron Paul: | Yeah, and it’s really cool because as you issue shares on the platform, or as you just track your equity as you’re kind of using the system, that’s all going on in the background, so it’s part of the save process, when you save a security or a new issue answer, you send some shares off to someone, on the background all that math just being done for you, so the next time you bring up the screen that shows you your waterfall analysis, it’ll just kind of show you exactly what you’re looking for. |
| Scott Orn: | That waterfall analysis is so valuable, because there’s so many people who just don’t even know what they’re going to get of that, and we were talking before I went on the mic, I used to work at Lighthouse capital, we were a warrant holder, and so a lot of times, we were like a very, we would be an early stage warrant holder and like the company would take like three or four rounds of funding after we had done something with them, and so now ten years later, we see a company get acquired and we’re like wow, I wonder what’s going to- we have no idea if we’re going to make money or not, you know; but being able to see its waterfall charts, and especially if you’re an entrepreneur and you’re slaving away every day, working your ass off, you want to know kind of where you stand. |
| Jeron Paul: | Absolutely. That’s right. |
| Scott Orn: | So, how does it work, like do people, they sign up for- maybe walk them through the flow, because I intuitively kind of understand, but I think it would be helpful. |
| Jeron Paul: | Yeah, we kind of have two big onboarding paths, maybe a few more than that, but there’s kind of two primary use cases, I guess you can say; One is a kind of driving a compliance issue, so a lot of times people will need to get a 409A valuation, we partnered with firms that are independent, which means we don’t have a financial interest in them other than the relationship that we’re working on at that time to kind of introduce them. Often, there’ll be some kind of a compliance need, it’ll say hey we need a 409A valuation, or something like that, that will be an impetus to kind of come and see what we offer at Capshare. Or, frankly the second one, which is probably the more frequent of the two for us anyway, and I know for some of our competitors it might be a little different, but which is hey we just are so sick of Excel, or name your other- again, I won’t cast any stones at any competitors, but sometimes it is a competitive product where they’re just kind of like, the product that they’re currently using which is very frequently Excel to manage their stock, is just driving them crazy. |
| Scott Orn: | Yeah. And so they’re looking for something. By the way, people get a 409A valuation to price their common stock options? Just so people know, like if you work at a start up, and you’re signing up and they say you’re going to a ten thousand options, whatever that means, right, what actually happens on the background is management kind of once a year, or once every fundraising, will get a valuation called 409A valuation, and they will price out what the common stock option price, the fair market value of that is. |
| Jeron Paul: | That’s right. |
| Scott Orn: | And as long as the company issues the option at that price, there’s no kind of accounting compensation charges, or any weird kind of math, and the IRS is happy, so that’s why companies do this. You get the 409A, so they can issue options and then of course they need to track options, and that’s why they use Capshare. |
| Jeron Paul: | That’s right, yeah. So we kind of just facilitate the both pieces of that, both the hey I’m issuing stock options, and they’re kind of like hand in hand, just like you mentioned, as soon as you’re issuing stock options, you’re going to get some kind of a question about, well, what should this right price be, and then the answer is unfortunately for entrepreneurs, and I have tons of sympathy here, I mean honestly, the answer is you need to go through some crazy arcane exercise to set these, set the value of these options, and we can make fun of it, and I think we rightly should in a lot of ways, but on the other end, I guess on the other side of that coin, it’s a compliance problem, and when you’re dealing with the IRS you honestly just don’t- in my opinion, you just don’t want to mess around. And so, you’ve got to find a way to reliably and I guess defensively set that strike price. Even though if you ask me as like a just even a level headed and person and trying to be as intellectually honest as I can, to be honest with you, no one knows what the value of an early stage company is, you can kind of come up with a very, very broad range in which you might be able to sign some interval between like zero and fifty million or some massive range, but you know, that’s not good enough for the IRS you actually have to come up with a point estimate value of the company at the point in time that you’re issuing stock. And I could bore you with like tons of history of why the IRS did this, and why it probably wasn’t even, it was a very unintended consequence that it kind of hurt startups, but at the end of the day, again, my personal philosophy around this is if you’re going to do it, do it right, there are enough options out there that are so crazy and expensive, in which I think were the least expensive option, which is a great thing to tout, although again we’ve partnered with firms that are amazing in this space that do an incredibly good job. |
| Scott Orn: | And I think you and I, Kruze Consulting and Capshare share a partner, and that’s how we actually met, and it’s Trent from Greener Equity, I love them, they do a fantastic job, and we do the same thing. But I think, what I tell people, the reason what they’re really buying with the 409A is literally a piece of paper they can show the IRS to say that they did this ethically, they did this the right way, they did it through an accredited firm. And that’s all you’re really doing, and no one should ever rely on these numbers to like sell their company, or value it, it’s just purely like a compliance issue. |
| Jeron Paul: | I’m really glad you brought that up, because I mean, we see that too, especially for the younger entrepreneurs by younger I mean maybe just kind of less experienced entrepreneurs; a lot of times they will say hey, is this going to affect our venture round price and is this going to affect like, what if someone came in and offered to buy us tomorrow and you just valued our company at two million bucks and we think it’s worth ten, you know like- so if the answer is like no, and no, right, it’s this will not affect your value for a venture capital list, or for potential acquirer. Most of the time everybody understands that the 409A exercise is an external firms best gas at picking some point estimate which is incredibly difficult to do among a very large range of potential options. |
| Scott Orn: | And it’s also designed to be conservative, because anytime you’re dealing with anything with taxes and the IRS and things like that, you want to have a very conservative number so that they feel comfortable. |
| Jeron Paul: | That’s absolutely right. |
| Scott Orn: | When we were talking, I’ve been fascinated by the development of your market, because we were talking before I turned on the mic, that like ten years ago when I was at Lighthouse, lawyers would just always dominate the cap table, no one could touch cap table but a lawyer. (Read Kruze Consulting’s reviews of cap table management software for startups here.) But now, it feels like the market has loosened up quite a bit, and Capshare is out there like taking tons of market share- how did you pitch this to lawyers, how did you get them to like you, what happened there? |
| Jeron Paul: | Yeah, and thanks for your question so you’re so kind, I mean we’re not the only competitor out there making a difference, but I think we’re a big one. |
| Scott Orn: | You’re doing really well. |
| Jeron Paul: | Thank you. We’ve certainly drown our client base enormously over the past couple of years. It is crazy, it’s got to be, because I mean rewind three years ago, and the conversation with law firms and even with companies was every time we talk to them, it was I do the cynic sell, like why would I need you, and I mean that was a very, very common, very common, I would say that was kind of half the time or more the response. Now it’s kind of like, yeah everybody is doing this, you know let’s just jump on, and so I think it’s a bit more of a hey what’s going to be the right fit for us in terms of a vendor that works here, what’s the right price point, how much can I afford you know, some of the earliest stage companies even I will still say, hey if you can do it in Excel that’s great, now one thing I would highlight on the Capshare platform and maybe I’ll talk about this a little bit later but Capshare is a freemium product. |
| Scott Orn: | Yeah, I love that. That must have been a conscious strategy, right? |
| Jeron Paul: | Conscious strategy, very much. Because, under twenty shareholders are free and our idea is we get you on and absolutely, I’m just going to own it right now, we absolutely want you get hooked, and you love it and that you don’t want to leave. Take the good news for you and I think something that might give you a little bit of comfort is getting your data out of Capshare, kind of take the old sales force monitor from like a decade ago or eight years ago you know, your data is your data, so you can export it with a click of a button, we actually offer a monthly pricing option, we don’t even lock you in for a year unless you want to get a slight discount to do that, which means you can leave, I mean you can literally pay Capshare you know, twenty bucks, a hundred bucks, whatever your monthly fee is a couple hundred bucks, and then leave the next month; if we’re not doing our jobs then we’re not winning your business consistently, and we found our turn rates to be honestly market leading, so we don’t have any issues there. |
| Scott Orn: | Is that just because like the software is so good, it serves so good, or what is kind of your secret sauce? |
| Jeron Paul: | Of course, I mean it’s because we’re amazing. [laugh] |
| Scott Orn: | You’re the most handsome CEO and the most charming. |
| Jeron Paul: | Thank you, yeah, that’s it, exactly. I send a picture with every new client to get a picture of me. But I think honestly, I do attribute a lot of it to the fact that the equity data is kind of sticky, so I mean once you’ve gotten a lot of this stuff modeled, you just kind of don’t want to go do it again on a different system, and so it’s kind of a pain that way. And so it is a lot that, I do think our product is is great and is getting better all the time, and I did want to answer one other question just going back to the, before we leave that little strand untied there, in terms of the market changing, I just wanted to finish that out and say you know, I think that law firms early on as well were much more guarded around this data, and I think some of it was, I think some of it was very good and some of it was probably just an over abundance of caution, and some of it maybe was less good. The over abundance of caution was kind of hey, you know everything we do as an early stage layer generally ends up affecting the cap table, so if you’re out running your own cap table or managing your own cap table, then it’s entirely likely that you’re going to do something that we’re not aware of, that actually could jack up your cap table and really mess up your cap table and maybe even your legal agreements. And so, that’s the piece that we’re very like sympathetic to at Capshare, we get it, we want to partner with law firms, work with them as much as the company wants to and/or we can. But on the other hand, I think there was also a general reticence or just a general I guess reluctance maybe a better word to you kind of jump in to some new technology that wasn’t proven and tested. And I think that that now, three years later, that whole resistance is completely gone, I would met with five law firms over the last couple of days or even more, and every single one of them is like yep, we’re seeing this all the time we are really interested and would love to talk to you and include you on the list of options. So I think on the reluctant side, another thing about Capshare that I would highlight is we are very flexible system, it’s super easy to get onboarded with us, it’s like a three day process for us is a hundred bucks, and you know, we guarantee that you will be on boarded within five , no more than five days, which is awesome. |
| Scott Orn: | Are you guys having to input a lot of data like because people upload like their shareholder agreements, right, and then you have to read that and get it in correctly and everything? |
| Jeron Paul: | Yes, but we got that down to a total, it’s like a model t factor in there and we got that down to a science- |
| Scott Orn: | Do you like optically read the agreement? |
| Jeron Paul: | We have to optically read your amended and restated certificate of incorporation, until that’s like structured data, which it’s not. |
| Scott Orn: | So you really read it. I meant like optical recognition, software? But a human being actually read it? |
| Jeron Paul: | Yeah, a human reads it, we built a bulk upload tool that makes the pace with transitioning off of Excel like super seamless, that’s why we can do it so fast. So really the only major human interaction where a human actually has to take unstructured data and put in a structure data is generally that amended in restated certificate of incorporation. But we also like that, I think all of us are in equal measure scared out of our minds about artificial intelligence and also you know, super excited about it. I mean we’re a software company, so we want to automate as much as we can, that’s kind of what we’re paid to do. But at the same time, I still feel like that human review moment right now at Capshare is actually really really important. |
| Scott Orn: | Yeah, that’s why I ask so many questions, it needs to be right. |
| Jeron Paul: | Yes, it needs to be right, people are relying on it. |
| Scott Orn: | Yes, especially the waterfall stuff. And, just on your point about the lawyers and adoption it’s kind of what we, the reason why Kruze Consulting is so successful is Vanessa realized the automation was actually our friend about five years ago, right, and seeing Gusto, seeing Expensify, running payroll and expense reports are two things that old school accounts used to do all time, and I remember her coming home being like this Gusto company is unbelievable, they have autopilot, you don’t even have to run the payroll, it just runs automatically and expensify does so much automatically as well. And I think and less kind of aware professionals, whether our lawyer, account, they avoid adopting a new technology; it actually makes your work so much more rewarding, because you do the higher level stuff, it’s so much more interesting for everyone, including like the staff accounts, and it makes your practice grow a lot faster. So I’m sure the first lawyers, you can probably remember the first few that really adopted Capshare, you probably saw them growing their practice faster, it’s got to be nice, right. |
| Jeron Paul: | Yes, it’s so nice. Capshare, is so interesting, and lawyers are so interesting because the equity is unique in the sense that there are so many corner cases, I mean it’s very easy just like many things there is definitely an 80- 20 rule, but how to say this- I guess maybe it isn’t 80- 20 in equity, it feels maybe sometimes like it’s more like 65- 35, like there are a lot of different edge cases, you know, this person wants to start out as an LLc and convert to a c corp, or for this person is a c corp but they have you know participating preferred with two ex liquidation preference. |
| Scott Orn: | It’s the VC terms, the different [23:47 indiscernible] prefer or like the preferences it needs that really do throw a lot of curve ball, that’s why I was a surprised, I didn’t know you guys are modeling everything, like I think it’s fantastic that you can do that, that must be a very sophisticated system because there are so many corner cases. And then you introduce venture debt, and the preference is that way, and it gets really crazy. |
| Jeron Paul: | Yeah, and then, like then you do something like a stock split or heaven forbid like anti delusion provision kicks in, I mean, it gets really hairy. |
| Scott Orn: | Do you guys have the anti dilusion stuff automated too? |
| Jeron Paul: | We do, but it’s not a hundred percent automated, so the way our anti dilution stuff works is- the way anti dilution works- this is kind of, let’s geek out for just a second, I mean anti dilution is weird, what it basically does is it adjusts, so every preferred class has a ratio which you can convert to common; generally speaking, again there’s an 80- 20 around this, because I’m sure there are preferred classes that don’t have this floating out there somewhere, but most of them that you’re going to be raising around, you are raising around from kind of a general VC, they’re going to put in some conversion rate on their preferred, that allows it to at its election like in an IPO, say hey you know, my one share of preferred is worth one share of common. When you go through a dilutive financing, those ratios change; and the preferred generally which has anti delusion protection that that ratio will increase for them. So it will be like hey, what used to be a one to one ratio, now I’m getting three to one, so it crushes common, which means it really hurts you as CEO or entrepreneur that founded your company, so keep that in mind. |
| Scott Orn: | The VCs do that because if you do a down round, that’s when anti dilution usually kicks in, and it’s basically saying like, hey I’m paying a certain price, you know maybe it’s a fifty million dollar valuation whatever it is, if you’re going to do another round later that’s below that price, I want my capital protected, I don’t want to take any of the pain. And so entrepreneurs are signing up for this and in markets like now where things are pretty much up into the right all valuations are going up, it’s totally fine, but when we have a recession, the stuff really kicks in, and it’s very very painful. |
| Jeron Paul: | It’s very painful, and I guess just tying that back out to the calculations, you know I mean again, that’s probably fairly boring stuff. |
| Scott Orn: | The audience that listens to this is pretty nerdy. |
| Jeron Paul: | If they are nerdy then great, because I like this and one of the crazy things that happens is, so some of these, there’s a couple of different kinds of what are called ratchets, which if you think about a ratchet wrench or a little leverage of a ratchet wrench, you know think about that that refers to the ratio of preferred to come and so as you ratchet that ratio up and you know, the preferred is getting more and more shares of common which in an anti dilutive sense or in a dilutive financing they will get more and more shares of common, for that diluted financing, and so that dilutes common even more; so what happens though is, and this is crazy, and I can go into more detail later, but the basic idea is there are some financing rounds where there is not enough, they can’t issue enough stock to make themselves whole. |
| Scott Orn: | It’s a circular reference. |
| Jeron Paul: | Yeah, it’s circular and there’s literally not enough, it’s a mathematical impossibility. And so, for those reasons, those tend to just devolve into a bit of a negotiated experience, where it’s like hey we kind of capped out and giving ourselves twenty shares to one or something, I mean, heaven forbid any of your listeners or entrepreneurs end up in this situation, it stinks, but yeah, it can cap out and that’s one of the reasons why we don’t have like a push button around a dilutive financing, because it involves some circular reasoning, it often isn’t negotiated thing anyway between the entrepreneurs and the investors, and because its negotiated, that means it can’t be automated on our side, but we do make it crazy easy in the sense that we just adjust the conversion ratios to whatever is ended, whatever you end up agreeing on and then Capshare does the rest. |
| Scott Orn: | Yeah, that’s awesome. You created a really awesome product; how important do you think of the freemium model is to you, like I just think that’s like, it’s so smart, because you know there’s all these people out there who I want to just test it out, and I always have been trying to think like how does Kruze Consulting do something like on a freemium and we’ve never been able to figure it out, because so much of our stuff is service. But like, you must see like this huge massive influx of customers, just trying it out, just seeing it’s like a free trial, it’s amazing. |
| Jeron Paul: | Yeah, well thank you so much, it was very kind of you to say. You know, we kind of have this a similar mindset, I will offer a pretty big word of warning around freemium, you know I mean it’s a [28:29 indiscernible] kind of ratio thing. |
| Scott Orn: | You need to have a high enough conversion rate basically. |
| Jeron Paul: | Yeah, you got to have a high enough conversion rate, so to be honest with you, I think we’re still experimenting with that, I mean I don’t see us changing our model at all, so don’t worry about that, but I do think you know you got to dial it in, and it’s not a sure win, so any SAAS company that’s listening to me, and wants to email me, I would actually happily share some data, I am think about a post around this, happily share some data to help you out, but definitely not a sure win, right, I mean like it really depends on a number of different factors, I mean we have over ten thousand companies on Capshare, I could share that piece of data, I won’t share how many they are paying but it’s a very significant number, as well, very high. But I will say that of those ten thousand companies, a very large percentage as well are probably not going to convert to paid, and so it’s important to keep that in mind. |
| Scott Orn: | How do you deal with like the customer support on that, like does it overwhelm your team or is it email only? |
| Jeron Paul: | And that’s a great, that is exactly one of the things I will talk to about. We’re also very bootstrapped open organization, I mean unlike a lot of our competitors, we’re cash flow positive, which is huge. |
| Scott Orn: | Amazing, good for you. |
| Jeron Paul: | Yeah, thank you. And it’s not an easy thing to do in SAAS, especially in a competitive environment, so we’re quite proud of that. Part of that has been making some choices around how we are going to support folks, I think we do a really good job of it, but you definitely have to make some hard trade-offs, I mean you can’t do everything, be everything to everybody, so we’ve had to make some trade-off conversations. |
| Scott Orn: | I can empathize, because it happens all of time actually, people call us and they are like I need to answer my tax question for me. And we’re like well, thank you, nice to meet you, but you’re not actually a client, sorry. And they’re like no, no, no, you need to, and there’s a slight entitlement for people, and I assume if they are using the services even a little bit stronger, but you just have to be very polite and navigated, and you know let them find their own answers I think sometimes. |
| Jeron Paul: | So true, I was meeting with a lawyer yesterday, and he totally cracked me up, he said you know, we offer the highest value product at the lowest price, and in the fastest time, but we can only do two of those at any given time, so you pick two of the three, and I was like you know, that’s a pretty interesting statement for just business in general, I mean you got like speed, price and kind of quality, and generally speaking, you know, you can’t do all three of those things to the max, right, so you’ve got to pick kind of two of those, and you can potentially with different packages at different times, you can offer two of the three, but we found that too, like Capshare given the landscape we compete in, and some other things we’ve tried to stay like laser focused on what we think we can do well. |
| Scott Orn: | But you know, the beauty of what you’re doing, I think this applies us too, is like you just get stronger every year, you get a lot stronger and you see different pain points and you can start addressing those pain points and I’m really excited, it’s been awesome to meet you, because I’ve heard about you so much, and I’ve heard about the company so much, but it’s also just you kind of share the same values we share, which is really cool. |
| Jeron Paul: | Thanks Scott. It’s been awesome to meet you too. |
| Scott Orn: | Do you want to, just to kind of wrap up, do you want to just maybe let people know where they can find Capshare, how they kind of you know engage you guys, and all that jazz? |
| Jeron Paul: | Sure, yeah, you bet. So you can find us www.capshare.com, obviously you can chat in with us, we use intercom, we love it, so we generally have like sub one minute response times if you want to chat; you can call us, there’s a contact information on the site as well if you prefer that. But yeah and I mean, one thing again we believe in that kind of SAAS mantra, you can also try before you buy if you want to, and you know give us a call. We have plenty of customers that kind of chat in with some arcane question about equity don’t actually convert to a customer and then a couple months later come back. |
| Scott Orn: | Yeah, we see that all the time. But I also think the try before you buy is awesome, we always say that one of our biggest challenges is people don’t know what good accounting looks like, so then when we show it to them, they’re like holy cow, that’s what want. But I think cap table management is the same way, it’s like people are used to these like kind of shitty Excel sheets, and maybe the numbers are right and maybe they’re not, and no one really knows and you’ll find out when it’s super important and you’re doing around and so having in the cloud and using you guys makes so much sense. So, I’m really glad that you’re letting people kind of experience what life can be on the cap table management, and I’m sure most of them want to pay, and so it works out for both of you guys. |
| Jeron Paul: | Yeah, it’s great. Cool, thank you so much. |
| Scott Orn: | Alright Jeron, thank you so much. Take care, bye. |
