A Product Market Fit Show | Startup Podcast for Founders
00:30:51 · Pablo Srugo, Cosmin Nicolaescu
[00:30:51] S1: We have tens of thousands of people who have followed the show. Are you one of those people? You wanna be a part of the group. You wanna be a part of those tens of thousands of followers. So hit the follow button. I think that's right. I also think it matters how you're coming up with going back to the original question, like, how you're coming up with the idea in the first place. Take Zuck as the crazy example, the super outlier one. Like, he didn't set out to build Facebook. He's just, like, doing stuff, you know, that happens. Boom. And we come, oh my god. Okay. I'm gonna dive into this, and he happens to be, like, a maniac and just crazy execution, so he does it. Right? But if you're gonna go so top down, like the way you're doing it, you know, it pays to have that that background, that experience, and think about team market fit and these sort of things because, you know, that it's just it's a different ballgame. It's a different ballgame altogether. [00:31:34] S0: If you're much more pragmatic and much more systemic, then you have to to kind of bring that across the across the stack. I think that's absolutely right. [00:31:41] S1: And so how do you go from so that that's actually super helpful to understand how you land into this space of accounting. How do you go from the space to the idea? Do you then do, like, classic customer discovery? Like, how do you figure out what this first product is gonna be?
00:31:55 · Cosmin Nicolaescu
[00:31:55] S0: The lesson that we learned early at Stripe was the best way to build stuff, and ironically, the easiest is find a customer that's willing to trust you with a hard problem, and if you solve that problem, they'll give you more problems. It's as simple as that. And it sounds very, very simple. Obviously, there's a lot of work into that, but if you're able to do that, you can repeat that motion over and over and over again and build a very, very successful business. And so we went, talked to accountants, looked at what they do, shadowed a bunch of them, talked to owners, we understood kind of the broader picture issues that they have with the workforce and everything. But in terms of like which space to start off with was very much driven by a lot of customers and these large firms asking us about it. So our first two customers were H and R Block and Armenino. And very fortunate to be able to work with those kind of tier of companies. Armandino, top 20 accounting firm, some of the wealthiest individuals in the world, and and a bunch of tech businesses that that work with them. H and R Block, huge amount of volume. Basically, about 20% of Americans do their taxes on H and R Block, to give you a sense. Very different shape. Like, the the complexity, the domain complexity for H and R Block, very different. Like, the people that do their taxes, generally much simpler use cases than like the wealthy, alternate high net worth individuals or Manino. But huge amount of scale, huge amount of regulatory complexity as a public company, very complex change management, very high security bar required. So very good forcing function to build a very strong foundation in this space that without that, we just cannot land that customer. And then Armadino, very high complex domain for the type of returns that they do and the kind of companies that that work with them naturally. And the common thread between both of them is they both serve individuals, very different ends of the spectrum in terms of complexity. And in the cases of these top accounting firms, for them, individuals tend to have a wide range of this complexity to the point that there's many individuals that they have to serve that they wouldn't unless they would the only way to kind of get a broader business.
00:33:54 · Cosmin Nicolaescu
So I will do your returns for your business, but now I have to do the returns not just for you, but your family and your friends and your employees and so on and so forth. Do I make a lot of money doing it for like your employees that might have a simple return? No, but I have to in order to get the more complex higher engagement fee return. And so accounting firms, the the largest ones, always look for opportunities to to kind of improve both performance and efficiency of these, as well as the client experience to make it faster and better for them to not spend as much time on that. And obviously, H and R Block, that's all they they they basically do. That was the first product, and it was very much one that allowed us to build the foundational blocks. We were not strongly opinionated on which one, like if we would have gotten pulled into doing tax returns for businesses, we would have done tax returns for businesses and that's kind of what we're doing now. Any of them would have allowed us to build a lot of these foundational blocks and that was most important, like can we find the right customers and design partners with the right ingredients for us to build these blocks that we can stack over time?
00:34:57 · Pablo Srugo
[00:34:57] S1: So to move to the deep tactical segments here, and one of them is selling to enterprise and specifically converting from pilot to full customer. You have a 100% pilot to production conversion rate. And maybe that ties into this because that was gonna be my next question. Anyways, like, H and R Block, Arminino, for those to be your first few customers, obviously, you're drawing on your background and your credibility as someone who is a CTO of a very well known company at Brex and so on. But it's a huge leap still for them to be like, yeah. Sure. Let's let's work together. How like, how do you get into the room? How do you structure that and bring it down to a pilot that you can clearly deliver on with these resources that you have? Like, tell me all that, and ultimately, leads into this getting pilot to production conversion.
00:35:40 · Cosmin Nicolaescu
[00:35:40] S0: I would say the first thing that Sid and I felt very strongly about is being truthful to our customers. I think this is true in any industry, but especially in accounting. We've seen so much vaporware and so much promise and under delivering on those promises that erodes so much trust. And so from the beginning, we're like, we're going to be very transparent about what we do, what we don't do, what we will do, what we won't do. Ideally, we find people that are willing to work together versus be surprised. Because we've seen that over and over again where like you tell customers to do it, they get excited, and then you'll have to deliver on that. And if you can't, you're in a really bad place. Just starting with that attitude brings a lot of credibility. I do think our backgrounds probably helped in the beginning with the when we had nothing else, and compounded with this, it helped. The second thing is iterating extremely quickly. Like Sid and I, when we're it was just the two of us building, we would basically iterate on hourly to daily basis. Like we met with you today, by Monday we would show you some stuff, by Wednesday, Tuesday, Thursday, every day there's progress being made and and you get to see something that you're just not used to. And so people see that and they're able to project it forward and be like, well, if every couple of days this is the kind of progress these folks make, If I go a month from now, they will be so much further ahead. Here's what we'll do, we move quickly, we've done the thing, now let's go to the next thing, rinse and repeat over and over and over again, builds that credibility to kind of take that leap of faith. And the last thing I would say is, because we're both engineers, we're extremely structured in our thinking. It's just how our brains operate. And so we take the same approach to running pilots. We're like, okay, we're gonna run-in this way with these people, we're gonna set this up, here's the here's the different phases. Yeah.
00:37:29 · Pablo Srugo
[00:37:29] S1: Can you walk me through an example of that? Because I think that's where where the rubber meets the road. Like, how how do you boil down to something? How do you structure it and make it so so that it's clear, it's winnable, it's quick?