How Waveapps CEO Kirk Simpson grew Waveapps to $25.2M revenue and 20K customers in 2018.

hello everyone my guest today is Kirk Simpson he's a serial entrepreneur and co-founder and CEO at a company called wave which he's led to nearly 3.5 million small businesses registered with a hundred million in funding raised from investors around the world he believes in giving back to the tech community as a mentor and an angel investor Kirk are you ready to take us to the top all right let's go all right very good so FinTech is obviously hot there's a lot of companies kind of pushing that 80 to 100 million dollar a our our range Expensify comes to mind you know I said then I got the venom folks on which is doing top down you know ERP solution related things you're in the space too but it sounds like going after SM bees tell me what you do and how you make money yeah so first of all we actually we don't love the SMB title because in some ways if you look at the US Census that's anywhere from businesses with one employee to 500 we think there's massive differences in how those businesses operate we like to call we're going after SB small businesses zero to ten employees under two million dollars of revenue most people aren't aware about ninety five percent of all businesses in North America are in this size and we're aiming to give them better financial management tools we give away our invoicing and accounting software oh I don't know hundred percent for free and then we monetize by putting payments payroll lending offers etc in the application and get those deeply embedded into what the small business owners to do it and you're owning all of these were I think I mean look I look at coming to like cabbage they do one of those things and I have five billion in loans outstanding do you integrate with him or you compete directly with them in different spaces so we've done the partnership route you know our payments business for instance was built on top of stripe we get to a point of scale and quite frankly our users want us to deeply integrate it and so most of this stuff over time we've been building ourselves and again the goal there is no small business owner wants to be doing this stuff they're not passionate about accounting or invoicing or payments or all that kind of stuff they're passionate about their business and so how do we make it super simple and integrated for them to onboard in to payments and payroll and other things we feel like we've got to we've got to control more and more of that experience for them and so for the most part to your question we're building it ourselves interesting all right give me give me some averages here like average Custer would you say they pay you per month I know you have probably 10,000 cohorts for an average sorry you broke up with me broke up on me for a little bit so average of what Nathan yeah the question was on average what are one of these SMB is paying you per month I said I know you probably have 10,000 cohorts but on average what would you say yeah so up in the 70 to 100 dollar range in customers for all of their transaction processing etc that's okay so I mean that's a fairly competitive price for a small business jump in and do all that yeah yep give me more the back for here put this on a timeline when did you launch we watched right around the beginning of 2011 so we've been in market for a little while and you know feel like the product etc is getting to a place you know one of the mistakes that I made I'm pretty open and honest about areas where we've done well and where we've made mistakes one of the mistakes that I made early on was we went too broad with the platform too quickly and over the last few years we've sort of said to ourselves let's go through every single one of the those verticals to make them you know be super competitive in terms of the product offering that we had it have in the market we're getting to that place now but as you mentioned at the opening I mean one of the most amazing things about the model that we built is we're signing up almost 80,000 small businesses and month on our platform and so the distribution is oftentimes the hardest thing for software companies going after this market we've really cracked that code and now obviously our goal is to get more and more of them to use us to drive more and more of their activity through us and to get them to to paint services over time yeah now Kirk when you when you throw out those numbers in the in the SB space I can't help but think of my friend Gail right when you look at Constant Contact and she was never respected in the public markets in terms of app you know that the product we were you know sorry the price to earnings ratio because she would add that amount but she would churn about 50 thousand right of these customers so walk me through your turn today and how you manage that yeah so we're a private company I'm not going to give you all the inside scoop but but overall I would 100% agree with that and I would say the difference for us is that you know churning out of an email software program is a lot different than churning out of an accounting and payroll and payments and invoicing software and so we really see industry low churn rates once we get them into that active State they will stick for a long time we got as you mentioned before we got a lot of cohorts and we've looked at them over time churn rates are not necessarily the issue it's driving more and more of that adoption because as I mentioned before small businesses aren't passionate about doing accounting they're oftentimes sitting on the sidelines with Excel and shoeboxes and all that kind of stuff how do we get them to to buy into this how do we make it easier and easier for them to on work and most importantly Nathan how do we begin to deliver them insights so that they're not failing most small business owners fail because of cash flow problems mm-hmm and that's because they're very unsophisticated and how they run their business they're running it off of their bank balance month if so it must be successful we need to be delivering them better insights so that they can be better business owners so Kirk tell me I mean you have a huge car to work with big sample size and a lot analysis when you look it let's just say gross logo churn per month and maybe not talk about yourself but talk about the industry as a whole what do you think is a good number to be below when when you look at the epididymis --is I would say look at companies like public companies like ADP in payroll or paychecks or others you basically get to a place of the boat I think they would say 80 to 82 percent retention on an annual basis yep in small business you're gonna have to your point before you're gonna have 10 to 15% that are gonna naturally go out of business and so we call that kind of uncontrollable churn when we survey these guys they're like listen there was nothing I could do it wasn't your fault wasn't your software etc I just I went out of business yeah I succumb to 80 80 percent you know retention would say come up to maybe two percent grow slow go turn per month and they were saying that's probably healthy target for this kind of space I would agree on a monthly basis correct am i dealing with kind of a five year life right yep and how are you so are you better than that are you below two can we say you're below 2% yeah we're seeing that we're below 2% that's great congratulations that's not easy what do you know you've got to get a new user to do in the first day or two to make them like exponentially increase their lifetime value yeah I mean things like connect your bank account so you're importing your transactions send out a couple of invoices except a couple of electronic payments those kinds of things those are huge signals of success long term and I imagine because of this price point you can't afford to put too much touch on this thing with an inside sales team so you've got to build trust quickly so they connect our bank account in a no-touch way how do you do that in a UI yeah I mean you've you've hit the nail on the head like we're we're closing in on 200 people in the company we all have a single sales rep that works here not an inside sales rep non notice I'd say and a model wouldn't work at the price point it 100% wouldn't work and so you know listen you've got to have good product and designers good product people and designers obviously and most importantly you've got to be ruthless in terms of your testing cadence right constant optimizations of all of these screens and funnels and you know to your point when you talk about something like payroll onboarding you know ADP as an example they'd have you know a whole suite of whole sales reps and implementers that are walking small business owners through setting them up we're trying not to do that so we're zero-touch through the onboarding now payroll onboarding is hard and so you know you got to be really iterative and you got a look at interview a lot of customers watch them on board to see where the friction is and just be ruthless about removing it everywhere so launched in 2011 testing rigorously no-touch $70 price Bob times for all these things walk me through the kind of success you've had how many customers are you now serving today so hundreds and hundreds of thousands of small business owners are using the platform to run their business and tens and tens and tens of thousands are you know paying us every month and I won't go much deeper than that and...