With Scott Orn

A Startup Podcast by Kruze Consulting

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Scott Orn

Scott Orn, CFA

David Barrett of Expensify

Posted on: 08/19/2016

David Barrett

David Barrett

CEO - Expensify

David Barrett of Expensify - Podcast Summary

David Barrett is the Founder & CEO of Expensify, the world’s best expense management software. The Company’s motto is Expensive Reports That Don’t Suck. Expensify is backed by Redpoint & Openview Partners and the Company is growing rapidly. David talks about his original idea for Expensify, his previous startup experience building a company with Uber’s Travis Kalanick and some of Expensify’s unique approaches to hiring and team building.

David Barrett of Expensify - Podcast Transcript

Scott Orn: Welcome to the Founders and Friends Podcast with Scott Orn at Kruze Consulting. This week’s episode is David Barrett of Expensify. David co-founded and is the CEO of Expensify, the maker of expense reports that don’t suck. It’s a great company. Great technology. We use it like crazy at Kruze Consulting and tell all of our clients to use it. David just gave us a tremendous interview here. He’s so thoughtful. Talked about how he’s built Expensify. Talked about his past experiences before Expensify. Really enjoyed this one. I think you’re going to get a lot out of this. Hope you enjoy. Welcome to Founders and Friends with David Barrett from Expensify. We really appreciate your time. It’s quite an honor. We’re at ExpensiCon in Maui. Thank you for putting on an incredible conference and thanks for having us.
David Barrett: No problem. It’s been a lot of fun.
Scott Orn: Yeah. So you gave an amazing presentation yesterday which we actually just learned. You told us that it was actually livestreamed. I don’t think you knew either.
David Barrett: Yes. Yes. Somehow my team declined to notify me that the private internet conversation that we were having is been broadcast to hundreds of people around the world. So that’s cool.
Scott Orn: And the best is, the feature at the end it was like, hey, we’re going to keep this between us in the room here.
David Barrett: Yes. Hey, but that’s fine. So it’s just between us and the rest of the world.
Scott Orn: You told a great kind of Expensify origin story yesterday. Do you mind just telling the audience that?
David Barrett: Sure. Well I mean origin stories are tricky because it’s unclear where you start. Like my background is I’m a computer programmer. I’ve been programming since I was six. I started with computer graphics, 3D graphics engine throughout middle and high school and worked in the University of Michigan Virtual Reality Lab. Then I went to the game industry writing 3D graphics engines. Got into peer-to-peer software, voiceover IP, screen sharing, video conferencing and my last startup was a company called Red Swoosh. Travis Kalanick started the company. He hired me. I hired everyone else. We built this peer-to-peer content distribution network. We were acquired by Akamai in April 2007 and then I started Expensify and then Travis started Uber.
Scott Orn: That’s two amazing paths right there. You said something in the talk yesterday where you’re like, we actually started with prepaid virtual cards. Maybe just explain that a little bit because I thought for all the entrepreneurs listening to this, you don’t have to nail the idea out of the chute. You kind of iterated.
David Barrett: Oh yeah. Well I think that … I mean the challenge with good ideas is that they always seem terrible. It’s almost by necessity because if the good idea actually was that good, it would’ve been done already and so the better the idea, really the worst it needs to sound because that’s what keeps everyone else away. And so I don’t know. I think that … that’s not to say all bad ideas are good. Most of them actually truly are bad. But the best ideas really sound horrible. And the upshot of all of this means that you can’t start off freaking out too much about the particular idea. It’s a journey. You need to just start the journey. More important than it being a great idea, it’s something that excites you because especially for the first years. I don’t know. I actually don’t know if it ever ends but like it’s so much work and there’s so much struggle along the way and that you have to … you can’t be motivated exclusively by this concept of this distant exit. Like that’s just too far away. You need to just enjoy the day-to-day and that just requires continuous inspiration.
Scott Orn: Yeah. And then you did like this virtual credit card and then you were kind of attaching expense reports to it and all of a sudden, everyone was like, those virtual expense reports sound like an amazing idea.
David Barrett: Yeah. Yeah. Because the only reason we did expense reports was because it was the most boring thing I could think of and I needed the permission of the banks to launch the prepaid debit card. And they were just tripped out by my idea. And so I think the space of my Trojan horse to launch this financial product and then I realized the Trojan horse was much better than everything else I was doing and so yeah.So I think it’s about just getting started on something. Getting excited about it and then being really honest about what’s working and what isn’t and being willing to adjust the plan as you go.
Scott Orn: And you had another amazing point in the talk where you talked about how you never anticipated or maybe you did anticipate a little bit but people were telling you you’ll never ever going to get a high fidelity picture of a receipt and you’re like … maybe talk about that just a little bit.
David Barrett: That goes back to like all the bad ideas or all the good ideas sound bad and maybe they even were bad for a while but then they become good. In this particular case, we started 2007 or 2008 rather. I’m talking about mobile receipt capture and the phones were terrible at the time. And they all had this awful awful cameras. Remember doing MMS and things like this? They’re just awful.
Scott Orn: Anything to get that to you guys but yeah not working.
David Barrett: Exactly. And so and everyone’s just like, David, this is a terrible idea. The image quality’s not nearly good enough. No accountant is going to accept this blurry mess in front of it. And they were right. And then suddenly the iPhone got an auto-focus camera and so like this business model that simply wouldn’t have worked, suddenly becomes genius.
Scott Orn: That’s amazing. And then you also talked about how you spread in the App Store like no one had really built this kind of app. Maybe talk about that a little bit too.
David Barrett: Yeah because who would build a receipt scanning app when the cameras can’t do it. And it was only because we had no intention of actually following through with it that we actually became known for receipt scanning at the time when it was impossible because we weren’t going to build it anyway because we just wanted to get some notoriety such that we could pivot and do something else. So yeah. So we just focused on you know, this mobile receipt capture image and that inspired people and then the technology sort of finally caught up with the vision and everything lined up. And then the App Store was this brand new thing and for the first time, you had the ability to acquire individual employees of companies all over the world at zero marginal cost because normally suddenly consumer products is very very expensive but this suddenly like just drops your biggest expense down to zero and it just changes the entire business model.
Scott Orn: Also in that talk where you said maybe someone on the frontlines, rank and file employee starts using Expensify and the next thing you know, they fill out their expense report using Expensify and then it goes up to an Executive or someone who’s managing them. That was … I was like, oh that’s so smart. I hadn’t even thought of that.
David Barrett: It’s so smart in retrospect. But it’s not like we saw it coming or anything. It was just that first I mean there’s so many good things about expense management as an industry. First it’s like everyone just despises it so much. Like you might not like the size of your paycheck. You don’t really care where it comes from. As long as it’s deposited automatically, it’s like whatever. But you really really grapple with and hate your expense reporting. So that’s one thing. And then second, it’s highly mobile like you can make anything mobile if you want to but there’s really no reason to have like mobile payroll. I mean that just doesn’t make any sense. But like mobile expense tracking like it has to be. And so therefore it’s a super pain point for the individual. Super mobile. And right at the time when the App Store’s opened up and auto-focus cameras come along and then it’s like okay, so that’s cool but even that by itself wouldn’t be enough and then we realized that expense reporting is highly viral inside of a company because every time you submit an expense report, you put us in touch with someone more important than you. Like your boss, the Finance Department and things like this. And so there’s like this combination of things. Many of us shouldn’t even exist or couldn’t have possibly interpreted at that time. And so that’s why I think it’s like don’t do this ton of research. Don’t try to like you know, play it safe. Not to say you can’t play it safe. I think the safest way is just to jump in and start going. Keep your cost very low and make sure that you have the longevity to find something that’s great. Don’t freak out about it not being great from the get-go.
Scott Orn: That’s an amazing advice. You also told a great story about you’d been on a trip when you’re working at Akamai and you did something very insightful. Like you actually experienced the problem. Do you mind telling that story?
David Barrett: Sure. Yeah. I was trying to think …
Scott Orn: This is a great story.
David Barrett: My last expense report I did before Expensify and it was basically … so my company, we take our whole company oversees for a month every year and we’ve done this basically every year and this is Red Swoosh and Expensify as well. And so we’ve just been acquired by Akamai and we took the whole company to India for a month. And so everyone … so Akamai used Oracle iExpense and everyone was just like, dreading using this product and so therefore the dread was so potent that I offered to buy everyone’s receipts for like 80 cents in the dollar thinking I was just going to make bank because this is great return. It’s going to be so easy. And then I got back from this trip with this enormous pile of not just my own receipts but like the entire team’s receipts.
Scott Orn: How many thousands of dollars is that? Like $50,000? That would be crazy.
David Barrett: It was just crazy. It was just so much money. And then realized okay, I sit down and do this expense report at iExpense and it was just the most painful thing in the world. I spent like a month on this one report. Basically fulltime. And the next thing I did, I just gave up on a bunch of the receipts because I had no idea what they were because they’re like scrolled in this handwriting and things like this. This is the stupidest idea ever. But yeah. So that was my last experience with an expense report before Expensify.
Scott Orn: That’s awesome. Maybe you just fast-forward a little bit, when you started getting traction like how did you assemble your team? What were some of the you know, you probably have all these people you worked with like how did you take your first five or first ten?
David Barrett: Oh it’s so hard. Hiring is just the hardest thing in the world. And so actually I would say the most important thing when starting is don’t tell anyone because when you start the ideas again, they sound awful. And so if you’re like, hey I got this idea what do you think? It’s like the only answer is that sounds terrible. But itdoesn’t mean anything because it’s like basically like if you ask someone for like their two seconds of thought on your idea like why would you even expect them to have anything meaningful to say? And so all you do by talking prematurely about your idea is just raise the stakes and now it’s like rather than just failing silently and quietly, now it’s like you’re on a pedestal here. First, we didn’t tell anyone or rather I didn’t tell anyone except for Michelle, my wife about Expensify for the first year. And the very first person I told was basically the person I wanted to hire as my co-founder, Witold Stankiewicz and he was basically my first hire at the previous company.And because I knew that the most important conversation I don’t know in the history of the company but probably, was basically getting him on board. Because I didn’t really have a ton to options in terms of like really great people to work with and I knew I was like, it had to be him. I didn’t really have a …
Scott Orn: You guys already worked together too so you knew there’s a lot less risk there. You could do it together.
David Barrett: Yeah and we both have money from our acquisition and so it’s like everything lined up and so I knew I had to make this work. And so I actually didn’t talk to him about it at all until I’d already built a prototype and basically gotten approval of the banks, switch to expense reporting, had all the approvals of the networks and everything and also have been accepted to launch at TechCrunch50 in a couple of months. And so I had all that basically totally silently. So when I came to him, it wasn’t with this ambiguous idea or even the sting that was clear but like it’s unclear having traction. It was already moving. It was basically like I need help launching at TechCrunch50. After that, I don’t know what happens. Can you just help me for this?
Scott Orn: Did that create the adrenaline timeline for him that kind of sucked him in a little bit?
David Barrett: I think so and you have to do that. Because again, it’s like good people have so many options and you can’t be locking them out for too long. I just need your help with this one project for a few months and then let’s see what happens. And then once we got into there, then the reception was just so strong and everything was going so well. Then we were able to just like, okay. Cool. Let’s do this longterm sort of thing. And so that’s hire number one. Hires number two and three were also the two people who had worked at Red Swoosh as well. And so I was basically like…my previous team. And so that’s how the first four people came. After that, we started … our sort of networks ran out. And so then we just, trying to think actually where we found the next people. It’s tough. There’s like really no good answer. Even now. Like we spend so much time in hiring and we hire so few people because it’s like it’s easy to hire if you don’t care who you hire but if you care, it just limits the choices down so far. And so we haven’t found a perfect process for that.
Scott Orn: I want to compliment you though because the team, kind of the second level of the team right below the senior executives like you is so strong like they’re all young and hungry and like Matt Donaldson who’s like our main contact guy is a superstar.
David Barrett: Matt is the best.
Scott Orn: Yeah. He’s amazing. I think I met like five other kind of versions of him that are just like seemed super go-getters and they’re good communicators. You’re doing something right. Whatever you’re doing, your hiring process is working.
David Barrett: Good. I think the number one thing is patience. It’s making sure that you resist the temptation just to accept someone just because they can do the work. Because I mean if your only threshold is like are they going to add incremental value? I think that’s too low because it’s like every person you add, adds at best a linear increase in productivity but they add an exponential increase in overhead because it…everyone. And so therefore at some points, every hire you add actually reduces total productivity because they bring more of a burden than they do in actual productivity. And the only way to fight that curve is to make sure that first you have the fewest people possible, be as lean as possible such that you’re resisting an exponential growth and then everyone has the highest linear contribution. And so yes. I think it’s about making sure it’s not good enough that this person can just do the work or they do the work and they’re cool but rather these are people that we actually want to hang with in the beach. We’re going to work hard with. We’re going to trust their good intuitive judgement.
Scott Orn: And one of the things you guys do is you take the whole team abroad for a month. Are you a traveller at heart? Or what’s kind of … is there a fun part of that? The ROI part of that? What’s the thinking?
David Barrett: There are so many interesting ramifications to it. So yes. In background, I’ve been traveling a bunch. A lot of our team is basically like very accomplished world travellers as well and totally different experience. Indeed I would say, the best experiences when traveling happen after you’re bored. It basically happens after you’ve been on a place too long. Long enough that that’s like it’s just lost all its novelty. And now it’s just like, I’m just there. And so that’s why we pick a month because it’s long enough to be a little bit too long.If you’re on vacation for a month, actually it gets kind of old. Especially if you’re a real sort of a proactive overachiever. And so we choose a nice long period and then we choose basically a country that’s relatively inexpensive. So you can live like a king and then we choose a pretty small town such that you can actually learn it really fast. And so therefore the whole team will show up, we show up in this one small town and you pretty much see everything in the first week and then by week two, you’re like I’ve really seen everything. I’ve become a regular at a few places. And then like weeks three and four, it get really interesting because then you’re just living in this place on the other side of the world and it’s such a great experience and it’s hard for anyone who has a job to have that experience. And so it’s a great perk and a way to create that experience. But even that, the perk is really not the benefit and I would say the real benefit is it takes everyone out of their normal flow and it puts them to a different much more flexible mindset where it’s like, now when they grapple with things like, I don’t have reliable power. I don’t have the internet. How does it change my workflow? Am I too dependent upon my desk and like sitting in this particular place in the first place? And it causes everyone to rethink their processes and realize, actually I didn’t really need that stuff in the first place. So it’s really slowing me down. And so I think that it’s about creating this very different mental environment. Getting people sort of to rethink all the processes and to just try and think bigger and then next I would say if you keep digging layer after layer of the benefits I would say, is that it creates the time to have conversations that you just wouldn’t have in the office. It’s like we’re on this train, in the middle of a jungle and we don’t have any power or internet and all we have are a couple of bottles of whisky and you start having really interesting conversations that you just wouldn’t have normally. But I would say, even all of that, the best possible feature is that it’s tough. It’s tough and it’s uncomfortable environment. We pick places that are hot. They’re dirty. We don’t know the language. We don’t know the culture.And a lot of traveling sucks. It’s really not fun. And it makes people sort of anxious and it brings problems to the surface. Problems that you could actually sort of let simmer for a long time in the office are hard to let simmer in this sort of environment. And so it makes problems that you should be dealing with but you might not know about [inaudible 00:16:16] to the surface and then get taken care of.
Scott Orn: That’s a really cool observation.
David Barrett: After every single offshore which is what we call them. I would say a couple of people who either get quit or fired. And it’s good because major part of hiring is firing. Making sure that yes you want to bring the right people onto the team but you also want to make sure that the people there are still right for the team. Maybe they were great a while ago but maybe they’re no longer great. There’s so many benefits I can go on and on about.
Scott Orn: Those are like twenty amazing words of wisdom there. The other thing is, your team has like a real bond. Like you see it. Like I turned to Vanessa like within an hour of being here and I was like, these people really like each other. They really have a tight bond. It’s really true. So that’s amazing.
David Barrett: Yeah. I mean I think it’s a lot of things. We invest a tremendous amount of time and money into our team because we recognize it’s our most powerful asset.
Scott Orn: So I want to be very respectful of your time. So maybe just kind of one more question. One of the things that I really loved about the presentation yesterday was how you guys are going towards all the data you’ve aggregated and you’re introducing some new features and you’re bringing artificial intelligence to Expensify. Do you want to talk about that a little bit?
David Barrett: Sure. Sure. So I would say that … so as I described earlier, I initially had no interest in expense reports. It’s not like this is the thing that when I was a child really clamouring for. And I didn’t get into it for the chicks either. And so I’d say we sort of fell into this space and the more we got into it, the more we realized that this is such an incredible space and it has so much powerful data and there’s so many interesting things we can do. But it’s clear that the products are where we need to go is to make Expensify disappear.It should just be something that you just, every time you think of us, we’ve done something wrong. It means that we didn’t anticipate your needs well enough. We didn’t capture that receipt automatically. Whatever it is. So from a product perspective, we’re aiming to be used as infrequently as necessary and for you to leave as fast as possible. That’s a very unusual product design because our best case scenario is that you forget that we exist.
Scott Orn: But it’s kind of like Google. Google was powerful because they send the traffic away from Google. That’s what made them so strong.
David Barrett: Yeah exactly and so I think that just like Google, I think that we recognize that the value of what we do is not the workflow. Though that is valuable. The real value is all the data that we accumulate because they construct an incredibly accurate picture of your past preferences. And within a variation of the business travel, it means that we know all their future needs as well. And so being able to connect the dots and provide a highly personalized travel experience that is steeped in this milieu of data, not just yours but your coworkers and the entire industries. I think that we have a huge range of applications that can be built on top of expense management as a platform even while expense management as a product just completely disappears in the background.
Scott Orn: Yeah. That’s really cool. Well thank you so much for your time. We’re huge fans of Expensify at Kruze Consulting to all of our companies who use it. Do you want to just maybe give the audience … everyone knows who you guys are but maybe tell them how to get a hold of Expensify if they’re interested in using the product?
David Barrett: It’s very easy. So, search for Expensify in the App Store. My email address is Email me with any questions you have and I’ll make sure they get taken care of.
Scott Orn: That’s the Jeff Bezos School of Email there. That’s awesome.
David Barrett: Okay. I didn’t know.
Scott Orn: Yeah you can email Bezos and he’ll …
David Barrett: Really?
Scott Orn: Yeah. You’re doing the same thing. Cool.
David Barrett: Okay.
Scott Orn: Awesome. Thank you so much for your time David. Really appreciate it.
David Barrett: Thank you.

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