recently Recorded (and soon to be published) episode of podcast found, an entrepreneur told my co-hosts and me that he views a broad swath of venture capitalists as money managers, focused more on short-term profits and returns than long-term revolutionary technology.
Whether you agree or not, it’s hard to ignore the fact that the growth of multipliers and software businesses in Silicon Valley has changed the way we think about startup timelines.
“under pressure [Index] What prompted us to work a little harder and be a little more precise in our instrumentation to prove that longer-term trajectories would achieve certain milestones that would work for everyone. , Jessica McKellar
Pilot, a bookkeeping software service that has raised more than $160 million since inception, is not necessarily a stranger to the short-term desires of investors. Index Ventures partner Mark Goldberg, who led the Series A and Series B rounds for the startup, will be the first to tell you that there was some initial disagreement between the board and founders about how the company should operate.
Clearly, this was not enough to stop him or the index from doubling the business.
We talked about all this and more on Nerdshala Live.
Goldberg said, ‘It was quite scary. “In my stomach, I thought, ‘Wow, we better get over this.'”
A few things applied for Goldberg to continue investing in the pilot. The first was that it was a real category-building opportunity, in that bookkeeping was a $100 billion industry that was largely fragmented.
The second was customer love for the product.
“We started hearing clients constantly tell us from within the index portfolio that they hate bookkeeping and back office functions, and now they don’t even have to think about it. ‘It’s a pilot,’” he said. Whatever the team, they’re doing some magic so that I can turn my mind to the part of the business I didn’t enjoy doing.”
Third was the team’s conviction and dedication to empathize with and understand their customers.
He recalled a time when the team had no more than 10 people, most of whom were engineers, when he went to the office on weekends. They were all wearing green hats, doing bookkeeping work for their clients.
“They weren’t doing it because they needed customer support, but because they really wanted to empathize with customers for the product they were building,” Goldberg said. “It’s that kind of sweat equity and market recognition that told me, if it keeps growing, there’s really no limit to what this business can become.”
While that kind of dedication to understanding the user was tempting, it was not without its cost.
“Pilot is a technology company wrapped in this lovely human layer of high-touch support for its customers, which is a little counter-intuitive in Silicon Valley, where most companies don’t want humans in the loop,” Goldberg said. “That’s what I know and understand, and our view was that this type of tech-enabled service model could be very valuable, but we wanted to make sure they could create a financial profile that had the gross margin that a software could have.” Represents the company.”
In its simplest form, Jessica McKellar and her co-founders felt very strongly that they wanted to focus solely on the customer and provide great customer service from the very beginning. In a business where you are assembling all of the customers’ financial information with you, this can be costly.