SPEAKER_00: it's been a wild ride actually and and in a good way and in a tough way i you know i have a lot

SPEAKER_01: of respect for every founder because it is tough but uh we were very focused that we wanted to build a big company we wanted to do it right so it was a lot of listening to the market i actually always prioritize go to market and product personally and i'm glad i did that because that helped us to find that product market fit the thing that's shifted from 2021 is we used to buy software for everything and and now i think companies divide software into nice to have and must have and if you're a software founder you have to make sure you're a must-have product otherwise

SPEAKER_02: i don't know change your product change your go-to-market and this is the thing about startups

SPEAKER_01: you go slow and then you see the scale and it surprises you when that happens too because you know enough people have found out about you enough word of mouth has happened and and so you

SPEAKER_06: know this is kind of you know the startup life this week in startups is brought to you by assembly ai get maximum value from voice data with assembly ai build powerful products and features for your end users on the industry's leading speech to text models get 100 free hours to start building at assemblyai.com twist vanta compliance and security shouldn't be a deal breaker for startups to win new business vanta makes it easy for companies to get a sock to report fast twist listeners can get a thousand dollars off for a limited time at vanta.com twist and runway looking to up level your financial planning runway is the modern and intuitive way to model plan and align your business for everyone on your team sign up at runway.com twist to get your first three months free hey everybody welcome back to

SPEAKER_13: this week in startups my name is alex i am one of your co-hosts over on x you can find me i am slash alex today we have a really really exciting show because we have a guest on that's going to help elucidate a key theme that we've been talking about which is distribution dire straits aka the lack of liquidity in and around the startup and venture capital world now you've heard us talk about it quite a lot but i want to show you a chart that details just how poor exits have been from the world of startups as you can see there was an enormous wave of startup activity in the exit markets back in 2020 2021 then it fell off the side of a cliff and is yet to recover now this year is a little bit better than last year but we're still far far far below what we saw before so when a company does get sold in the current market it does rise this matter of our attention and recently two deals have been announced that i have been very curious about one this week sayera announced that it's going to buy trail security for 162 million dollars and then last week hubspot announced that it's going to purchase hash flow a startup that had raised 10 figures while private and that i have covered several times throughout its life so please welcome to the show ceo and co-founder it's sarika garg sarika hey how are you hey alex great to see you again great to see you again before we get into

SPEAKER_17: anything serious i have to ask where did you get that blazer um you know i think it's probably nordstrom's

SPEAKER_13: or something i don't remember i'm obsessed with the color and i want one for myself i'm not gonna lie um so thank you for coming on i'm gonna annoy you with questions about this deal because my goal is

SPEAKER_19: to help other founders understand you know the market today how deals get done and i know it's still in closing so we can't get into the nitty-gritty of the finances but i do think this is the right

SPEAKER_13: moment to have this conversation but first about you you have 20 years in b2b sas you worked at sap sap ariba trade shift and then you left all of that behind in 2021 to found cash flow so just to start what was the genesis idea or problem that you went out to found cash flow to solve left my last job at

SPEAKER_23: trade shift cold turkey and i said i'm going to take a break for the year and i'm going to just let

SPEAKER_01: the ideas come and figure out what happens and at that point i happened to go and buy a tesla and was blown away by the tesla car buying experience and if none of you have done it you could literally buy the car in four minutes you can configure what you want pick the color pick the tires and then you can actually buy it right there and then and my past experience had been so terrible you know where you had to go to the dealer and you had to negotiate and all that i was like oh my god if a car buying experience can shift why can our b2b buying experience not shift in the same way and so that

SPEAKER_02: was the genesis and the idea of kind of the idea of uh cash flow was born at that point and uh happy to tell you more about how this translates into what happens in b2b today yeah okay because when i think

SPEAKER_13: about buying a car it makes me want to drill into my head with a screwdriver because i don't want to

SPEAKER_19: negotiate i don't want to go in i hate the back and forth if you have a thing i want it so to me thematically this makes a lot of sense but explain to me how that applies in b2b sas because i know

SPEAKER_27: sales guys i know sales teams it's a lot of talking a lot of contracts a lot of negotiations how do you

SPEAKER_00: simplify that yes so you know in 20 years of building b2b software and selling my co-founders

SPEAKER_01: equally 20 years b2b software buying and selling we saw that the software buying and selling experience was totally broken and uh what i mean by that is even after your customer says yes i love your product send me a quote send me a proposal that's when actually the nightmare for the salesperson starts because now they have to struggle to even put a code together uh they then have to go email back and forth pdfs they can't track what's happening on the uh on the customer side this is why the best sales people will ask you for for your text for your phone number because then they can text you right right and and what what the result of this is a lot of time wasted and a lot of deals slipping from one quarter to the other which is very important to customers and this is a seller experience because now you've put everything in paper the billing experience is actually even worse right so uh so now the the person who's doing the billing has to take a contract open it up and figure out what were all the nuances that were negotiated and how do i build this all of this can be handled or was handled manually for many years but with the shifts and changes that have happened in the last five years this has actually become a major problem because no longer do you sell a deal and then forget about it for five years like you don't do one bill what you do really is you get a foot in the door and then you try to sell or upsell cross sell every quarter or you do consumption based billing all of these are ways to actually grow the wallet share and when you do grow the wallet share you have to think about the entire experience of quotation to billing to uh to the to the whole

SPEAKER_19: uh collecting of the payment right and this is why cash flow was in the cpq space the configure price

SPEAKER_12: quote space subscription management billing and one or two other products so the idea was we went from pen and paper docu sign helped at least bring some of commerce into the digital era but when it comes to buying software for your company we probably needed something else that wasn't just a half done you know digital transformation and then sarika one more thing is that the number of sas products that companies buy has exploded i think you said in a different interview that it's something like 130 different pieces of software for the average uh mid-market company so i presume that

SPEAKER_13: people were just getting absolutely buried in the paperwork and perhaps buying less software than they

SPEAKER_01: might have if it was easier absolutely people getting buried uh every department not being able to do their job without software but wasting a lot of time so what that meant is even on the buyer side there's people who are just trying to figure out how to buy software and so it's it's just kind of a little insane and actually needs to be simplified on both sides the seller and the buyer so so when we thought about this you know the tesla analogy is really good but maybe another analogy is uber where you think about the the driver as well as the person uh who wants a cab right so you think

SPEAKER_36: about both these experiences and simplify them uh significantly well i hope it's better than the uber

SPEAKER_19: passenger experience because uber loves to tell me to like cross the street turn around twice the

SPEAKER_13: driver's not going that way i kid i love and use uber so you founded the company in according to

SPEAKER_00: my notes early 2021 but i wanted to double check that with you that's right and alex you covered us

SPEAKER_41: november 2021 is when we launched and so it's been only a few short years yeah well that great segue

SPEAKER_12: because i was going to say the first time we talked about this september 21 you just raised six million dollars uh pitch book everybody i didn't uh run this past her but pitch book says

SPEAKER_19: 26 million dollar post money valuation and at that time uh ggv's glenn solomon led the round there's also pelion ventures and then the nathree futures fund ggv sarika is now notable capital so if people

SPEAKER_13: are confused by that that's that but talk to me just a little bit about that first seed round how far along were you were you generating revenue yet or were you still putting for kind of first code to

SPEAKER_44: page we were putting the first code to page and uh really thankful and uh you know i had

SPEAKER_01: heard things like if you're a female founder there's a two percent chance that you will get funded i did not have that experience it was a wonderful experience where uh you know because i think we knew what we were talking about we had experienced this problem and so glenn uh was glenn paleon ventures

SPEAKER_07: nature futures one they all got behind us and they've stayed behind us and been great advisors for us

SPEAKER_12: throughout uh the last three years and then uh roughly 15 months ish later you raised what you then called a seed plus round that was 10 million pitch book says at a 60 million dollar post and at

SPEAKER_13: that point um i know glenn solomon joined your board and you also added crystal huang as a board observer where was the company at the point of your seed plus round in terms of commercialization so we uh had

SPEAKER_23: uh built the first version of the product we had designed customers we built the product with the

SPEAKER_01: design customers they were live and we were just beginning to uh sell it in the market and that's when we met crystal and she said i love what you're doing i've studied this market there is a shift that's

SPEAKER_02: coming and so i'd like to do a round so we did an early round and and that was fantastic to get her on

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SPEAKER_12: slash twist today okay so then that was the last time you and i formally sat down and talked about the company i believe which means that i'm now nearly you know a year year and a half behind so i want you to tell me about the progress of the company how it was going out and getting customers

SPEAKER_13: what was your normal customer profile i'm just really curious about last year and this year's

SPEAKER_00: in market performance so uh it's been a wild ride actually and and in a good way and in a tough way i you know i have a lot of respect for every founder because it is tough but uh we were

SPEAKER_01: very focused that we wanted to build a big company we wanted to do it right so it was a lot of listening to the market and adjusting our our go-to market so there are three things maybe that were really important one is we wanted to make sure there was a huge huge market and for that we had to like really understand uh where is this market uh how is it shifting is it changing and and we got validation for that with especially with ai or you know kind of what i described of every company wanting to get a foot in the door that that shift we saw the second was a team and so i already had this wonderful co-founder who was ex-salesforce had built three companies before and we built a team around us we built a team of 30 and all of them were either x salesforce you know billing background or relevant background but really the ambition to build something reimagined and and the last was building a great product right and to me that's actually the the important thing and this is a point i think in the last two years we've iterated on getting the product to a point where our users are you know which is sales users say oh this is so easy i've never experienced such an easy code building experience and um you know i was having coffee with one of our customers rishi barga from dscope uh just this week and he said my customers are calling me and saying what is that buying experience you have like can i get that and so you start seeing that flywheel of word of mouth uh letting you helping you to grow and

SPEAKER_12: that's what we were the most excited about right and when did that moment come i was going to ask you

SPEAKER_60: did you think you found product market fit before the deal with hubspot came to be but i feel like you

SPEAKER_00: almost just answered my question for me yeah so i think we we believe we found product market fit like

SPEAKER_01: three quarters ago when we started seeing this repeatability by us not like you know not me not calling out my friends but actually just repeatability in the market where customers were coming to us either by word of mouth or by our linkedin uh ads that we did and and so so that that was the point

SPEAKER_02: at which we said if we see this repeatability three quarters in a go we go scale yeah and that's exactly the point at which uh hubspot inbounded to us okay and we'll get to that in just a second but i

SPEAKER_13: want to go back to what you said about you calling up your friends because um i think people don't understand that when you have no customers or you have a very nascent product you have to kind of

SPEAKER_19: jump start it by hand in a way and so can you just tell us about you know as a founder you know

SPEAKER_66: how much did you lean on your personal network to get some early deals contracts customers started

SPEAKER_01: we definitely leaned on our friends we called up everybody we could we asked our investors to help us and that really was important and one of the reasons was we are handling revenue for a company that's a pretty uh um mission critical a product we were building and so not anybody will just like

SPEAKER_02: give you money unless they actually have trust built in and so who do you have trust with you have trust with your friends that you won't like lose their money and then over time you build that

SPEAKER_01: trust from uh references and uh and you know by just being in the market long enough right okay that

SPEAKER_12: makes good sense to me but i mean i think people don't understand how uh being a founder is not flying from conference to conference giving talks on stage but it's mostly hitting the phones cold calling and making magic happen by by brute force frankly yeah frankly i went underground for two

SPEAKER_23: years i think people did not see me because all i was doing was trying to sell and build well it ended

SPEAKER_13: up working out but let's go back to that three quarter period when you felt your product market fit

SPEAKER_55: things were going well how fast was the company growing during that three quarter period and and was

SPEAKER_23: the growth rate uh accelerating it was growing very very fast we grew about uh 350 year over year and

SPEAKER_01: then every quarter uh i don't know the exact numbers but really 100 uh quarter over quarter so it was it was growing fast right and there was a lot of excitement uh in the market for what we're doing partly it was you know we had started by selling to really small companies like think of like 20 people companies and and what we found was a 20 people company doesn't necessarily have such a major problem in cpqn billing it's when you get to 50 100 200 employee uh employee size that's when the problem

SPEAKER_02: becomes like massive and you need a solution for it is that just because the sheer number of deals both

SPEAKER_19: buying and selling gets to be so large that the the paperwork becomes too voluminous to be handled

SPEAKER_01: by hand yes and also your sales team increases so when when you go from having just one salesperson to three to five to ten to twenty suddenly now you need boundaries to give to your sales people so they they're not you know doing whatever they want to do but they're staying within the bounds and then

SPEAKER_75: you're giving this sort of very thoughtful experience to your customer which is repetitive in nature

SPEAKER_12: so you're growing 250 100 a quarter exactly the type of thing that venture capitalists absolutely

SPEAKER_19: loved back but hubspot shows up and they kind of reach out and want to start talking to you at that

SPEAKER_13: point in time were you already thinking about raising the next round or did the company still have enough cash in the bank that you didn't have to make a decision to raise or sell so we had just started the

SPEAKER_01: process of saying now let's go raise around because uh let's scale and uh and that's that's exactly it it was the timing was almost perfect that's that's when uh we started talking to hubspot and initially we were actually reluctant to talk to them for that reason and uh and and so i can tell you a little bit

SPEAKER_00: uh of what i what i'm allowed to share here yeah initially yeah initially we were reluctant to talk to them because we were like hey we want to build an independent company our goal has been to go ipo

SPEAKER_01: but the more we talked to them the more we realized their uh their vision was very aligned to us the ambition of what they want to do in this space is very aligned to us and of course the distribution

SPEAKER_02: i mean 300 000 customers who can argue with that and uh and yes and so that that uh was and and also

SPEAKER_01: i should i'll be amiss to say culture i mean i fell in love with the culture of hubspot and was very aligned to how we had been trying to build the company in a very thoughtful way and uh the ceo of

SPEAKER_93: hubspot um rose from inside the ranks that i think she took over the reins back in 2021 if memory serves

SPEAKER_01: correct uh i believe the co-founder and ceo had a snowball mobile accident where he brought her up he brought he actually um asked her to step up and she's been fantastic so uh yamini rangan uh i i did not know her so well so i met her during this uh this conversation and it really and i wrote about this in my blog it felt like oh my god we knew each other for so long because she had a very similar

SPEAKER_13: vision to what she wanted to do in this space but when i think about hubspot though hubspot to me is i mean a public company i've met both the original founders people say nice things about it to me it has kind of an smb focus to some degree but you mentioned earlier that you know you found that it's at the 50 to 100 company size that cash flow made more sense so is there any tension

SPEAKER_12: between you guys seemingly going slightly upmarket and then the hubspot customer base you know up

SPEAKER_00: market is a relative term when i was at sat upmarket was fortune 500 when we talk about upmarket in

SPEAKER_23: terms of cash flow it is still very much in the m in smb which is where hubspot thrice and um and

SPEAKER_01: hubspot actually handles customers from two employees to 2 000 employees so we're well we're like the perfect fit in fact 50 of our customers are hubspot customers and they're the ones who probably loved

SPEAKER_35: us the most so it made very a lot of sense here that that's a question that i was going to ask

SPEAKER_13: because if hubspot managed to reach out to your company when you were just starting the fundraising process it means that their corp dev team is either the luckiest group of people known to man or they had some sort of line on the company and so i'm curious actually if it was your shared customers that might have pinged their radar about cash flow and made them interested in you i'm always curious about what was the first yeah the first conversation instead of a larger company before they bought a smaller company what was that that spark moment if that makes sense you know uh as most things in

SPEAKER_01: life it was it was not really planned or thoughtful or anything like that it was actually a vc i was talking to introduced me to the corp dev person and i said okay why not i know they have a fun to you know would like to talk to them so it was a it was not a very uh you know well thought like it

SPEAKER_23: was not something we were strategizing or anything like that right founders do you want to sell to

SPEAKER_106: bigger customers i know you do you got to get that acv trending up and you want to push your churn down right sounds good but to sell to those big buyers you need to clear all of these compliance checks you know that that means you got to have things like sock to sort it out what sock to it's a standard and ensures that companies keep their customer data safe and if you aren't sock 2 compliant you can kiss those big deals goodbye you're not going to land the lighthouse customers you're not going to be able to operate at the highest end of the market but vanta makes it really easy for you to get and renew your sock 2 compliance on average vanta customers are compliant in just two to four weeks can take months without vanta and they automate compliance for gdpr hipaa and more so you can sell to bigger customers in whatever markup your startup is going after vanta is going to save you hundreds of hours of work and up to 85 on compliance costs stop slowing your sales team down and use vanta get a thousand dollars off at vanta.com twist that's vanta.com twist for one thousand dollars off your sock

SPEAKER_12: too so tell me about the round you you were thinking about raising i presume this would have been a series a that would have been a series a correct and um just for the founders out there you would raise 16 before were you shooting for probably a 20 million dollar series a yeah i think anywhere from 10 to

SPEAKER_01: 15 is smaller than i was thinking yeah yeah and and just because we we wanted enough to get to be

SPEAKER_116: we had already done a lot of work so we just wanted enough to make that push to be and then go

SPEAKER_13: from there and then uh because a lot of people ask us about the series a bottleneck or crunch or whatever it was what were you going to prep for that road show going out talking to all the vcs what were you going to highlight what were you going to stress and were there any weaknesses in the business

SPEAKER_12: that you were thinking about how to communicate to the venture classes so you know i think it was

SPEAKER_01: a combination of telling our story of of why uh this is special and why this is very huge and then secondly the numbers right and when you're going for series a it definitely is your numbers count and uh you know that this is actually one of the things we definitely thought a lot about so what were our weaknesses and we were like every ai company is getting funded right now are we even

SPEAKER_02: an ai company and we are ai enabled a large part of the sales job is difficult today because the the

SPEAKER_01: um all the conversations that happen between a buyer and seller are trapped in transcripts and emails and we were leveraging that to bring that into cash flow to sort of generate these proposals right from the start for the seller but we are still not a ai first company we are an ai enabled company and so that was one of the things we struggled with like how do we position ourselves in this ai crazy world that we are in right now well i think what you do is what everyone else does and

SPEAKER_13: if you are an ai enabled startup just scratch out the enable then you are an ai startup problem solved that's just branding okay even i know that no but i absolutely i absolutely hear you i mean i think there is a pretty big division in the venture capital market today for ai first startups if you will to your point and then kind of everyone else but it sounds like you were pretty confident that you

SPEAKER_34: could raise the a if you hadn't gone the hubspot route we would have definitely uh raised because

SPEAKER_01: we also had great investors who were right behind us so we have no doubt we would have raised but we were definitely looking at a market that's shifting very fast where here there's this wonderful

SPEAKER_02: company that's giving us a platform uh to scale our vision and so so it made sense in many ways

SPEAKER_126: let's talk about um how the deal with hubspot came to be so their corp dev reaches out to you

SPEAKER_12: you're initially a little bit hesitant how did they roll out the red carpet and woo you and your co-founder into selling instead of raising i think they just talked to us like human beings and

SPEAKER_23: like it was a very friendly conversation and we met uh and talked and they explained how they

SPEAKER_02: were thinking of things we showed them what we were doing and it was it felt very easy the whole

SPEAKER_13: thing how soon in this process did it go from we think you're lovely oh my gosh what a great idea to and here's the amount of money we are willing to give you for this like is that the same day or

SPEAKER_01: is that like meeting three that that comes up it was actually a process of two to three months where we just got to know each other and uh and it was just one of those conversations that over time happened so yeah so it was it was not it was not a one week process it was it was actually a longer process but but more like hey maybe we can be partners maybe we can um we might acquire we

SPEAKER_02: might build you know those are some of the things they were thinking about oh so it was a pretty pretty

SPEAKER_19: broad conversation to start and then it kind of narrowed over time to the deal okay well i mean i i i get

SPEAKER_13: them wanting to buy you now because if you did go out and raise an a and then worked for another two years and grew the business a lot by the time you're ready for your b your the company's value would have been much higher so you know from your perspective started the company wanted to go public how hard

SPEAKER_19: was it to say yes to an exit that was much earlier than you had planned throughout the life of the

SPEAKER_88: business um you know these things are always bittersweet right you you always start with a big dream

SPEAKER_23: uh but having said that i am thrilled and i know my co-founder is thrilled and the entire team is

SPEAKER_01: thrilled because we see this not as closing doors but we see this as an having a bigger platform to take the same vision we have and to get there faster actually right so so there's there's definitely a lot

SPEAKER_92: of excitement here and uh and i can't the hubspot team is totally amazing there's more but once you

SPEAKER_19: take on venture capital you have friends in the car with you you're not just driving alone were your

SPEAKER_12: backers as enthusiastic about selling now versus staying later because if they bought in in the seed round they were mentally prepared for a 10 12 year journey to an ipo uh you know this is a very

SPEAKER_54: short time uh to exit uh you know most companies are in this for 10 years maybe 15 and so uh our

SPEAKER_23: investors were extremely supportive and interested and it actually surprised me they they were they were

SPEAKER_01: uh you know whether that's glenn or crystal or uh pelion ventures chad they were all in it they helped us think through it they helped us make the right decisions and really thankful for them

SPEAKER_19: um and they still are by the way right i'm trying to figure out why they would be so well vcs need some exits everyone needs to show some some you know dpi instead of just tvpi but i mean i don't know i think i would i would struggle to let one of my fast growing investments that looked like it had

SPEAKER_13: tons of breakout momentum to exit this early because i don't know i'm i'm greedy i think sarika like i feel like you had like like a heater and so to me it's always almost surprising that founders who

SPEAKER_12: are like ready to go the the distance end up taking an earlier exit but i guess with culture with product with goals and with a pile of money it adds up to enough to get you to change your direction okay

SPEAKER_23: that helps yeah and i think i i do think first of all this is a question for the investors but i

SPEAKER_01: definitely think they were very focused on doing the right thing for cash flow the team the division and and that's that's how they approached it right okay well i mean that's literally being founder

SPEAKER_13: friendly when the rubber meets the road so points to them for that now one thing that comes up a lot

SPEAKER_12: when i talk to other founders or their vcs when they think about the market for m a or even going public to some degree is there's an overhang of regulatory risk um there's been more strident antitrust activity people love to blame uh lena khan over the ftc for crushing the exit market but yet here is the exact type of deal that i think people want to see more of and so i'm curious did antitrust concerns ever come up in the build up to the deal or the deals agreement with hubspot so i can't speak

SPEAKER_23: for the hubspot side of things uh you know we are a smaller startup i i think the antitrust

SPEAKER_140: conversations happen for much much larger deals as far as i understand so that was never a concern

SPEAKER_13: for me personally well then it sounds like people if you do want to sell your company you can as long

SPEAKER_134: as it's not the size of figma hmm seems like some people are blaming lena khan for their own you know maybe the blame is not always landing on the exact right place that's what i'm thinking

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SPEAKER_13: about the uh native features fund so back when you raised one of your early rounds i wrote at the time

SPEAKER_19: that you had emphasized the importance of having a diverse cap table um and uh you had said that there's a very slim percentage of u.s venture partners that are south asian women and so you wanted to get them some allocation in the deal to help change that so i'm curious did the early exit kind of fulfill your goals of uh basically cutting the nathree futures fund into the cash flow journey yes 100

SPEAKER_48: and uh you know i've been talking to mightily who is the ceo of uh the native futures fund and she's

SPEAKER_23: very excited this is a this is a great exit for for all the women the 400 women who are invested in

SPEAKER_116: that fund for sure 400 women that's how much do i think actually let me correct myself i think it might

SPEAKER_13: be 125 or something like that still uh and then i don't know if you can actually share this because it's not it's not your concern but like do we know how much capital is in that that collection that 125 people like if they committed to it or is it more like uh an angel network they've committed to it

SPEAKER_45: uh i don't know the exact fund size okay that's a really cool way to put together a fund i think i

SPEAKER_13: think it's it's it's it's cool to see and then did they participate in the seed plus round as well they did not no okay so they were in the first round yes still though that's fast i mean no one else is getting exits so three and a half years is about as fast as you might be able to possibly hope for i dig that and then i i guess you know for founders who are going through the sale process is there anything that you've learned in the kind of like once you've agreed on the transaction and now

SPEAKER_20: you're going through all the closing stuff anything there you can break out as a lesson for other founders who might find themselves in the same spot i think the only thing i can say is we

SPEAKER_01: didn't try to posture we didn't try to do anything unnatural we tried to be who we are we we were very transparent i think they were too as well and and that uh was the way it worked and it's it's been

SPEAKER_02: good to stay that way we we've gone through this entire thing with very open communications and uh and

SPEAKER_01: i i'm excited to do that versus like feeling like we're being you know it's it's in any way uh uncomfortable

SPEAKER_19: right sure and then on the preparation side you know when companies are gearing up to go public they intend to hire a cfo begin to kind of create internal gap financials and really lock down their

SPEAKER_13: financial life earlier stage startups definitely a little bit more loosey-goosey on the accounting side because they're small uh how prepped was cash flow to share pnl statements and kind of like

SPEAKER_19: all the traditional accounting documents did you guys have that stuff already prepared or did you have to

SPEAKER_142: catch up when you had to start the negotiations we had everything prepared and partly because we

SPEAKER_01: know we were going to go through fundraising we actually have a part-time cfo who we started working with in jan and he's been fantastic so we we're actually almost like series c prepared i would say with all the statements we have budgets we have we had a we had a three or five year plan actually

SPEAKER_00: so so we were quite prepared in you know when this came up like it wasn't in any way a rush would you

SPEAKER_19: recommend that other pre-series a companies take a similar approach to their accounting and their

SPEAKER_01: bookkeeping as you guys did um so my big learning was get your part-time cfo early okay uh just getting a bookkeeper to start with they will always mess up your books so uh so when our part-time cfo came in he it was very easy i didn't spend time on it he did my time is better spent on sales on product building and the team and hiring right so uh so it wasn't as if i was spending my time i don't i would not recommend doing that right at the at the stage uh but get somebody who you can trust okay is there

SPEAKER_117: anything else that you did on the preparation side that made the sale either possible or easier

SPEAKER_126: just again for other founders who might be listening in about how they might sell their business

SPEAKER_00: you know we are relatively organized because uh maybe because brian and i have done this for so

SPEAKER_02: long uh so you know the books were clean the decks were there uh you know everything was organized quite well uh so you know and we put in the right tools right from the beginning right so that was some maybe an investment we did where we said let's actually have things as organized as we can have uh right from the beginning so and that actually paid off tell me more about the the tools you

SPEAKER_13: mentioned i'm curious what falls into that bucket for a a seed stage startup so you know when i say

SPEAKER_01: tools you know just very simple things like have google folders and have things organized uh we use click up for uh for you know managing even our you know code and bugs we have zendesk for tickets basically organized in terms of having some tools for every function our hubspot is very clean which

SPEAKER_116: is what we use for marketing and sales so those are the things that actually helped us like just say oh

SPEAKER_69: let's just pull a report and we're done so essentially the lessons here are be organized get the

SPEAKER_19: appropriate help you need early and be prepared for opportunity to arrive because you actually don't

SPEAKER_12: know when someone's corp dev department will reach out so it's better to have all of your ducks in a row i mean that that seems like pretty obvious advice but i'm curious what percentage of founders you know in the chaos of building a company i'm not trying to be unkind here but i wonder how many

SPEAKER_13: don't have those things sorted out to the degree that cash flow did and if that's harming their ability to exit early i mean i think the answer to that's probably yes but i'm not sure about the

SPEAKER_00: the ratio if that makes sense yeah so so you know alex being a founder is is one of the toughest

SPEAKER_01: jobs in the sense you have to prioritize your time so so uh uh you know carefully and and so i think every founder has to make the choice of what does the company need and i i do think it's a very like personal choice based on your company where you are the market and so on uh i actually always prioritize um go to market and product personally and i'm glad i did that because that helped us to find that product market fit uh helped us to uh actually hiring as well maybe you know i personally spend a lot of time trying to find the right people i i still think that that was the right prioritization and uh it doesn't take a lot to be organized if you do it early it's it's if you try to do it afterwards

SPEAKER_12: it's it's messy right you know we have the concept of technical debt that we're all familiar with that we all understand i wonder if we should have a similar one for like organizational debt like all of your documents rms you have weird accounting or whatever it is but i feel like we spend so much time thinking about how clean code is but much less on how efficient internal operations are you guys

SPEAKER_13: got a lot done with 30 people i bet you you would have had to have 50 if you were less organized internally to get the same amount of work done yeah well you know this is what uh sas software is

SPEAKER_88: solving for all the time let's get the inefficiencies out of the system all right now uh one last

SPEAKER_13: question about hubspot and then i want to talk about the market um i was going back through the

SPEAKER_12: release from hubspot and i believe you guys are going to be joining the commerce hub portion of hubspot and i'm not going to lie i was actually not familiar with that so sadaka can you just tell

SPEAKER_13: people what part of hubspot you're going to plug into so hubspot is organized into hubs they have

SPEAKER_01: something called the commerce hub which they went to market with in 2023 it has payments and uh some billing capabilities and we are going to plug in and integrate with the commerce hub so the you know basically cpq billing payments all goes together hand in hand right and and that's what we're going

SPEAKER_19: to build together and then that'll i presume is a smaller part of the company given that it's 2023

SPEAKER_13: and then they'll roll that out to the existing customer base hence your point earlier about uh reach and the ability to hit more customers more quickly okay huh how many of the 300 000 hubspot customers do you think are going to be cash flow customers in like two years or using cash flow technology i

SPEAKER_00: should say we hope a lot of them and uh and of course as founders we are very aggressive and we want to have all of them is the goal oh we're going to have you back on in 12 months to see how

SPEAKER_190: this is going and i'm going to hold you to that and it better be about 299 000 that have made the

SPEAKER_13: jump when we get there okay so the other thing i want to talk to you about is uh the market itself

SPEAKER_19: because your company working in b2b software sales i presume had reasonable insight into the state of things and what i've seen from a lot of companies is you know compressing net dollar retention rates

SPEAKER_13: slower growth rates a lot more cash efficiency but definitely a different era of of software

SPEAKER_19: growth and i'm curious from building cash flow if you've seen changes in buyer behavior

SPEAKER_126: and then if so where are we today in terms of buyer sentiment for for sass 130 products per company

SPEAKER_01: already sounds like a lot the thing that's shifted from 2021 is we used to buy software for everything and and now i think companies divide software into nice to have and must have and if you're a software founder you have to make sure you're a must-have product otherwise i don't know change your product change your go-to-market and and honestly that's sort of what we found out right when you're selling to a 20 people company a cpq is a nice to have product but if you sell to a hundred people company

SPEAKER_02: they have a massive problem that you're that they absolutely need you to solve that's i think is a

SPEAKER_01: shift that's happened that people are buying must-have products uh only and uh and and there's a lot of

SPEAKER_02: scrutiny right so we definitely geared ourselves to value sell and make sure we we always assumed that the cfo is going to be involved that the head of sales is going to be involved revops is going to be involved so we actually uh crafted the deals with that in mind right and and and that really led to

SPEAKER_01: us finding that repeatability and this is probably true in some form for every every sass company right

SPEAKER_12: now well no i think it's absolutely right people were talking about everyone trying to essentially downsize their overall sass footprint the thing that's a hard to tell from where i'm sitting is how much of that was talk versus how much of that was real and i'm always struggling to figure out if slowing software growth is predicated more on existing customers decreasing their commits or just a struggle to kind of land new accounts so from the cash flow customer base what did you guys see in terms of shifts in buying behavior has it been people trying to like like buy less or just fewer

SPEAKER_13: new accounts at the customers who use cash flow we definitely saw people who were buying who were

SPEAKER_01: using like old technology old cpq 15 20 year old cpq technology coming to us and saying give us something modern because it's actually uh it's actually cheaper faster easier all of those so we saw that sort of

SPEAKER_02: replacement cycle happening uh and and of course uh companies who were growing who were saying hey we need tools to become more efficient so i think it's a combination i i definitely think cfos did go through and say hey let's actually see if we can uh find better products which are less expensive and i think one of the things that i definitely see uh you know if i look at the the more older products in the space uh

SPEAKER_01: uh the legacy products uh the one thing that they come with is not only just a higher price tag it's just higher consulting dollars so you they're usually toolboxes which you need to then hire contractors

SPEAKER_02: to to configure it for you and that was a large part of why customers would come to us as they're like oh you guys are no code uh it's it's basically a configuration and we can go and in fact we can make changes and guess what i'm going to change my pricing every quarter so now i can do that on cash flow versus having to do a eighty thousand dollar project to just change my pricing what uh

SPEAKER_17: yes oh oh yes it's it's pretty insane what it takes to change uh pricing in one of the legacy

SPEAKER_13: uh products in our space so i used to work at crunchbase i got to sit into a bunch of cool stuff there i got to be in some of the pricing and packaging meetings so i've seen how one company once

SPEAKER_19: in the sas space thought about that so very limited experience but i have been in the room a single time eighty thousand dollars to change pricing i mean we were just doing the intellectual work of

SPEAKER_13: deciding what to do we didn't have to get someone's permission why would it cost 80k i'm blown away by that

SPEAKER_01: number one is deciding what to do so where what i'm quoting to you is a company that was 800 in employees where it actually took them eighty thousand dollars in consulting hours uh to put in that pricing so i'm not counting actually all the meetings you were in where you were trying to decide what's the best pricing model right this is actually the implementation of that best pricing model into your system that feels like you need help hostage to run your own business we'd like to

SPEAKER_13: change our pricing no please eighty thousand dollars i mean what the hell now honestly sadika i was very impressed at how fast your company was growing but now that i've learned about the competition why

SPEAKER_01: weren't you growing 700 a year yes it's you know and this is the thing about startups you go slow and then you see the scale and it surprises you when that happens too because you know enough people have found out about you uh enough word of mouth has happened and uh and and so you know this is kind

SPEAKER_12: of you know the startup life right yeah yeah yeah um and then one last question about the market i know we've talked about you know must need to have uh nice to have and all that were your customers at cash

SPEAKER_13: flow seeing you know shorter quote to sales close times or any other kind of like metrics that impact sas performance were those getting better across your customer base or were they getting worse as we

SPEAKER_85: think about the overall health of selling sas more generally we saw it actually you know our sales cycles

SPEAKER_01: did lengthen slightly in in the last three quarters but in general we saw it being quite steady honestly the code to cash of course with our product we could you know increase it slightly the the thing that it would surprise me that customers were excited about uh when they would implement cash flow is they couldn't see what was happening on the other side so they could

SPEAKER_02: when customers were looking at the code and that that actually helped them to get decisions

SPEAKER_01: made faster so i know you're talking uh you're asking me the general question uh i i think everybody saw a slight uh decrease because more people got involved on the other side and that's why maybe our software became more important because you could see who was on the other side and who was

SPEAKER_02: looking and you could uh you know nudge and uh answer questions and so on right so it was not

SPEAKER_13: only a better organizational structure it was also a demystification if you will uh yes of the other

SPEAKER_19: side of it it just makes so much sense to me i mean i'm sure you saw that um the big case with realtors and how their market got kind of opened up and to me it just seems like the more information people have

SPEAKER_12: the more clear things are everyone can make better decisions everything can go faster it just eliminates friction and wasted time and that's a promise of technology isn't that what we're supposed to be

SPEAKER_72: getting out of this stuff it's it's the way of the world it's going to happen right regardless of whether we're here or not this will this is bound to happen right and then i have i have one last

SPEAKER_12: question for you and this is slightly a bratty question but how long are you going to stay at hubspot before you break off and become a full-time angel investor i hope to stay there for a very long

SPEAKER_88: time like i said the the vision is uh is very aligned uh love the team love yamini love the love

SPEAKER_07: everybody there so you know let's talk in in a few years in my notes i had this question way earlier

SPEAKER_134: on but i'm gonna throw it in now just because you reminded me of it um cash flow in office remote

SPEAKER_00: hybrid what was your approach to building we started during covet so we were totally remote uh my co-founder lives in north carolina i live in silicon valley so we started a remote company and we said let's go find

SPEAKER_01: the best talent wherever they are and that really worked for us uh and we have people in different

SPEAKER_116: states in canada but we've tried to keep it within the u.s time zone and that's been very successful

SPEAKER_229: for us ah so essentially from the pacific coast to the east coast up and down but not too far north

SPEAKER_19: east and west i know my compass i took orienteering in boy scouts i'm not stupid can you tell that i have

SPEAKER_12: friday brain it's been a it's been a hell of a week um well sarika thank you so much for coming on i really appreciate it congrats on the sale i will be looking at every single scc filing from hubspot just in case one of them gives me any information on the total value um but congratulations and uh

SPEAKER_24: we'll have you back on the show in a bit to see how it's going thank you so much

SPEAKER_106: okay i host every six months or so a workshop called angel university and this is where i teach people how to become professional angel investors and the next time i'm teaching the course is on november 6th and i teach it with my pal mike savina who's a partner here at launch one of my best friends and it's based on my book but everything i've learned since then obviously you know i've invested in over 400 startups and if you've met me for more than five minutes you know that uber robin hood com are amongst the ones that i've hit that have gone super nova in fact uh uber is considered the the greatest investment over the last decade or two in silicon valley robin hood doing fantastic as well and com not yet public but another great company in this course i i teach you the the fundamentals my personal philosophy and then i compare and contrast it to what other people say and the the most important thing is how do you source and decide which companies to invest in and then how to evaluate those companies i have a criteria i have 13 reasons to invest in a company and about 30 reasons to not invest and then we call those pink or red flags pink flag and it's something you can clean up maybe the cap table's a little messy you know red flag could be you know a patent lawsuit that you don't think they could ever get out from under and when we talk about those criteria for when you're picking a company we'll also go into adding value as an investor in startup and then portfolio construction scenarios like how many investments do you need to have a chance at hitting an outlier if you haven't read the power law you don't know what the power law is the prado principle go ahead and look it up we talk about securing prorata very important getting investor updates what information rights are and just so much more we had 1200 individuals join us for this workshop last year we did four of them so 300 people at each many of these accredited investors have also joined my angel investing syndicate which is the syndicate.com and you get to see our deal flow the workshop is open to all investors whether you're retail or accredited and all the proceeds of this go to charity you can see a full list of the donations we've given at angel.university charity you can sign up at angel.university so whether you're an accredited investor or non-accredited or you're just interested in learning visit angel.university to learn more and register again the next class is november 6th i'm going to be moving to twice a year for this because my schedule is very busy so if you don't get in on november 6th you're going to have to wait six months clear your schedule unless it's something really important for your family you can take a couple hours and learn about how i make decisions and our team make decisions on which of these early startups to invest in it's it's not like investing in public companies where you can see how many subscribers netflix has or you know how many uber rides were taken or how many doordash deliveries occurred last quarter versus a year ago no this is a whole different set of criteria when you're dealing with a company in years one or two or even in year zero so i hope you come it's for a good cause again angel.university charity to see where all the the proceeds go i'm very proud of the work we've done mike and i and the team over the last i don't know six or seven years of doing this we've inspired people to find this new career people say it's changed their lives and they love being an angel investor a lot of times it's young people who sold their company or it's young people who are professionals making a little bit of money they're making 200 grand or 300 grand working at google or something and they just want to learn how to do this and then all of a sudden it becomes a path to becoming a venture capitalist because think about that if you have no venture capital experience and then you go apply to be a venture capitalist and then i apply and i've made 15 angel

SPEAKER_236: investments and two of them have done well and the founders speak highly of me who's the venture capital is going to hire the person who took the initiative to make 15 bets or the person who just wants uh to be given a chance right you're going to pick the person with more real world experience and then you know a lot of people who are retired and post money they're 50 60 70 years old and

SPEAKER_106: they're sitting there at home on a mountain of cash and they want to do something fun we know it's

SPEAKER_236: a lot of fun to hang out with people who want to change the world they're called entrepreneurs and they're lunatics in the best sense of the word they have crazy dreams crazy ideas and when you're an investor an angel investor you get to spend time with them but you don't have to drag yourself to an office you don't have to put in 60 hours a week you can put in five hours a week you put in 50 hours a week or anything in between uh being an angel investor you make your own schedule you meet the most interesting people in the world sometimes you hit a big winner sometimes you'll lose and that makes it just so exciting and so i think it's a better pursuit than going to vegas and playing black jack or betting on sports i love the idea of betting on startups because you get all these non-financial rewards that come with it which is you get to see where the world's headed you get to see and you get to hang out with inspiring people and see their plans to change the world it's just an awesome fun career and pursuit hobby however you want to look at it i hope you come angel.university