In a recent (and soon-to-be-released) episode of the Found podcast, an entrepreneur informed my co-host and me that he views venture capitalists as money managers who are more concerned with short-term earnings and returns than long-term revolutionary technologies. Whether you agree or not, it is difficult to deny that Silicon Valley’s multipliers and the expansion of software firms have altered how we think about a startup’s timetable.
“The pressure from [Index] pushed us to work a little harder and be a little more exact in our instrumentation in order to demonstrate that the long-term trajectory will meet specific milestones that would benefit everyone.”
Pilot, an accounting software company that has received more than $160 million since its start, is no stranger to investors’ short-term goals. Mark Goldberg of Index Ventures, who managed the startup’s Series A and B rounds, would be the first to admit that the board and the founders had some early differences about how the firm should function. Clearly, it was not enough to keep him and Index from going all-in on the venture.
Goldberg described the experience as “very horrifying.” ‘Wow, we better do this right,’ I thought in my stomach. Goldberg’s decision to maintain investing in Pilot based on a number of factors. The first was that it represented a genuine category-creation opportunity, as accounting was a $100 billion business with a lot of fragmentation.
The customer’s enthusiasm for the goods was the second factor. “We began to receive proactive calls from clients inside the Index portfolio expressing their dissatisfaction with bookkeeping and back office duties, which they no longer have to worry about.” “Whoever this Pilot crew is, they’re doing some sorcery so I can simply switch my head off to the portion of the company I didn’t love doing,” they stated.
“We began to receive proactive calls from clients inside the Index portfolio expressing that they loathed conducting bookkeeping and back office activities and that they no longer needed to.”
“Whoever this Pilot crew is, they’re performing some sorcery so I can simply switch my head off to the portion of the company I don’t love doing,” they added.
The third factor was the team’s commitment to empathizing with and understanding its clients. When he visited the workplace on a weekend, the team consisted of little more than ten people, the most of whom were engineers. They were all wearing green visors and conducting accounting for their clients.
“They weren’t doing it for customer service,” Goldberg explained, “but because they truly wanted to sympathize with the customers for the product they were producing.” “That’s the kind of sweat equity and market awareness that convinced me there’s no limit to what this firm may become if it keeps growing.” While that kind of commitment to knowing the customer was appealing, it came at a price. “Pilot is a software firm wrapped in this gorgeous human layer of high-touch assistance for its clients,” Goldberg explained.
“This is a bit counter-intuitive in Silicon Valley, where most companies don’t want humans in the loop.” “That’s what I know and understand, and we thought this type of tech-enabled service model might be extremely beneficial, but we needed to make sure they could build a financial profile with gross margins that were comparable to that of a software firm.”
In its most basic form, Jessica McKellar and her co-founders were certain that they intended to focus entirely on the consumer and provide excellent customer service from the start. In a firm where clients are onboarded by consuming the totality of their information,
