SaaS Interviews with CEOs, Startups, Founders
985 How Expensify Hit $60m+ Magic on Bottom Up Business Model
05 Apr 2018
Chapter 1: How did David Barrett start his journey in programming?
This is the Top Entrepreneurs Podcast, where founders share how they started their companies and got filthy rich or crash and burn. Each episode features revenue numbers, customer counts, and other insider information that creates business news headlines. We went from a couple hundred thousand dollars to 2.7 million. I had no money when I started the company.
It was $160 million, which is the size of many IPOs. We're a bit strapped. We have like 22,000 customers. With over 5 million downloads in a very short amount of time, major outlets like Inc. are calling us the fastest growing business show on iTunes. I'm your host, Nathan Latka, and here's today's episode. Hello, everybody. My guest today is David Barrett.
He started programming at the early age of six and has been aspiring to become an expense report magnet ever since. I don't know if I believe him, by the way, on that. We'll check. We'll check that in a second. He attended the University of Michigan, where he worked in the virtual reality lab before moving to Texas to write 3D graphics engines for the video game industry.
Next, he moved to California to join Travis in building a peer-to-peer file transfer technology called Red Swoosh. That's obviously Travis from Uber. And that company was acquired by Akamai in 2007. In 2008, he left that company to start Expensify and has since been relieving the world's frustrations one expense report at a time. David, are you ready to take us to the top? I'm ready.
So you just, you popped out of the womb and you said, give me the P&L, mom. Let me see the balance sheet. Let's do expense reporting, baby.
That's right. I just got into it for the chicks, you know. It's obviously where it's at.
Tell us about the company. What do you do and how do you make money?
So Expensify is pretty straightforward. It's a mobile app for business travelers. You take a picture of your receipts. We read all the information off the receipt automatically, so there's no typing involved. And then we'll submit it to your company for reimbursement. And so we get you paid the very next day for the Starbucks purchase you made today.
Okay, that makes good sense. And tell us the origin story here. When did you launch the company and what turned you on to it?
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Chapter 2: What inspired David to launch Expensify?
How many did you say, David? About 45,000.
Oh, that's amazing. Yeah, I mean, you were just on four months ago. You were at 42,000. So, yeah, I mean, you're growing quick.
Yeah, and so this year especially has been crazy. It's been actually just crazy keeping on top of it this year. But yeah, so it's been great.
And then before we get more of the origin story and kind of where you see this space going, I want to talk about Matt and the TSheets deal as well and just fintech in general, especially some data related to this space.
Chapter 3: How does Expensify's business model work?
Can we put a general bracket on your thing? So, I mean, you guys are somewhere between the call it 60 and $100 million ARR range. Is that fair?
Yeah, we're still under 100. That's right.
Yeah. I mean, are you, and the reason I'm asking this is just for the significance in terms of when people start thinking about IPO and other sources of capital. I mean, do you think you'll break 100 in 2018 or do you think it's more 2019?
Yeah, it's probably not 2018.
Okay, got it. Interesting. So let's talk about the space. And guys, by the way, I'm not going to focus a ton on David's backstory because you can get that in the other interviews. He launched the thing in 2008. They were at 120 people about three months ago. Are you still at about that size, David?
Yeah, actually, that number is maybe a little bit off. It's more like maybe 110 right now. I think that probably gave you the bad number before.
That's okay. No worries. So let's talk about the space. So a lot of people, I mean, especially when you start hearing people go, man, I should do an Expensify concept on blockchain, right? Where's your head in terms of just fintech in general on blockchain?
Wow, that's interesting. So I guess I would say, I think right now is a really hard time to start a company because any company that just involves like the internet and mobile and things like that, it's like, it's been done. It's been done like 10 years ago. And so I think we're seeing like this whole series A crunch.
It's because so many of the earliest age funds in the past few years are doing terribly because again, all these kind of me too wannabes basically have come around.
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Chapter 4: What is the significance of word-of-mouth for Expensify's growth?
That means we only get paid when you get active. But the only way that you get active is that you've gone through your whole setup process and gotten your company on board. So we have a whole team standing by that will help you get on board. And we've got different types of teams for different parts of the organization, different accounting packages and so forth.
But I would say that, so it's not no touch, but there's no commission sales. And the lack of commission is what distorts everything.
CRMs might be the tool that I fight with the most. I just haven't found one that I really liked. I don't know if you guys are the same way, but they're just so tricky. And a while ago, I had a guy named John Lee on my show. He's the CEO of ProsperWorks. And he told me they just passed 40,000 customers and 24 million in annual revenue. So they're doing about $286,000 in revenue per employee.
And I said, wow, why is this working? And I said, you know what? I'm going to try it. So I went to prosperworks.com forward slash love your CRM signed up and it immediately became clear why it worked. Those of you that love growth hacking, you should go to that link just to see how they do the onboarding. That's prosperworks.com forward slash love your CRM. In short, it's like magic.
You know, I'm not the guy that, you know, finishes the sales call and then takes the time to actually put data into the CRM. They have this magical way of just doing it. And it's a beautiful thing. So every morning when I wake up, I just go, okay, what leads are ProsperWorks telling me to reach out to because they're most likely to close and it works so well.
And you guys know, I love money and I love only focusing on the leads that are going to close. So I encourage you to try ProsperWorks or sponsoring the show. Check them out at prosperworks.com forward slash love your CRM folks. That's again, prosperworks.com forward slash love your CRM. So can you give us a sense also of growth?
So like last year at this time, you know, what were you at if you're comfortable sharing? And then obviously we can back into growth rate.
Sure. So like, so last year we were under a hundred percent, but I would say what's nice about, what's been really interesting is we're going through this kind of like the second S curve. So when I say S curve, everyone thinks it's like, you start slow, you grow fast and then you kind of like,
slow off into the distance sort of thing and so slowly die slowly yeah slowly die at scale i guess or something like that and um uh but one thing we're finding is very unusual about our business model and so um in the past couple of years we spend a lot of time making the product easier for smaller business like everyone thinks about the enterprise and how great the enterprise is enterprise sucks man it's just like it's super slow sales cycles the margins are terrible it's super competitive it's whatever the real opportunity is mid-market and below and so we've been reorienting the company around sort of mid-market companies and snb
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Chapter 5: How has Expensify evolved since its launch?
Are these fiction, nonfiction?
Actually, all these books are my wife's books. She's an opera singer, and so everything down here is classical music. Everything up there is more history. And so I'm more of a digital person. I'm not much of a book person.
I love that. All right, David, let's wrap up here with the famous five. Number one, if you have one, what's your favorite business book?
I guess I would have to say The Innovator's Dilemma.
Number two, is there a CEO you're following or studying right now? It'd have to be Elon Musk. Who wouldn't? I know. That's right. Number three, besides your own, is there a favorite online tool you have?
Uh, it's basic.
I'm just going to go Google Docs. Okay, number, I was going to say, you don't have to go basic. You can if you want, but Google Docs. Number four, how many hours of sleep do you get every night?
Eight.
Okay, and what's your situation? Married or single? Obviously, you mentioned your wife and one kid. Do you have any more kids?
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