Today’s conversation is with Jessica McKellar, co-founder and CTO of Pilot, which is the largest accounting firm for startups. She’s been working on Pilot for the last 6 years with her two co-founders, Waseem Daher and Jeff Arnold. But what makes this founding trio super unique is that they’ve stuck together in not just one, but three different startups.
As repeat founders, the Pilot team has learned a ton from their first two ventures, K Splice and Zulip, and both netted some positive outcomes. But as Jessica will share today, there were mistakes the team made along the way that prevented both products from becoming an outsized success.
So she unpacks what they did differently with Pilot — particularly when it came to picking an acute problem and a huge market to tackle. Jessica also shares the tedious process for building the early version of the product, which included looking over Waseem and Jeff’s shoulders as they manually did the bookkeeping for early customers, while she wrote code alongside them.
Even going back to the earliest days, Pilot had some really strong product-market fit signals, with customers agreeing to pull out their credit card and pay for the product right away when it was just an idea on paper and eventually pulling the Pilot team into expanding their product suite. Make no mistake about it — being a founder is incredibly difficult — but choosing the right problem to tackle can drastically smooth the path ahead of you.
Todd: So today I'm joined by Jessica McKeller, the founder and CTO O of Pilot, a bookkeeping platform for startups and small businesses. Pilot was founded in 2017 and is now the largest accounting firm for startups in the us. They hit unicorn status in 2021 and have an incredible set of investors, Sequoia Stripe Index, and a long list of great folks.
And Jessica is a three time founder and has started all three companies with the same two co-founders, Jeff Arnold and Waseem Daher. And I had the opportunity to work with Jessica, Jeff, and Waseem at Dropbox. So I'm super excited to dig into Pilot's founding story today. Jessica, welcome to the show.
Jessica: Thank you so much for having me.
Todd: So you've now started three companies together with Jeff and Waseem, uh, K Splice, which I know you sold to Oracle and Zulip, which you sold to Dropbox. That's how we met. Um, tell me about your co-founders, how you met them and why you seem to love starting companies together so much.
Jessica: Yeah, well, we, uh, and you know, I've known them for longer than I've known my husband. Uh, so, uh, some of the longest relationships that I've had in my life are with Jeff and Wasim. so we were all computer nerds at m i t. We met in MIT's computer club called sippy, the Student Information Processing Board, which is a callback to when, uh, there was like a timeshare computer system that you had to, to, to reserve time on.
Um, and this was the club that helped allocate that time. Uh, but yeah, so the, the nerdiest of the computer nerds hung out at the computer club, and that's where we met.
Todd: And so obviously there's a really deep relationship and sense of trust with Jeff and Waseem, but I, I imagine things have changed over the years. You know, it's been years and years, three companies. What keeps you the three of you together as being great co-founders?
Jessica: Yeah. Well, you said trust, and I think that's so, so important. Um, you know, sincerely amongst the, the three of us, Just having 100% trust and, and belief in faith in each of us doing what is right for the business and just having our shit together in our respective areas of ownership within the company.
I mean, I think it's a, a rare thing to experience. Uh, so certainly I would never let go of it. Right? I think that statistically I wouldn't find it again if I were to try to start another company with other people. You know, how did we get to that point? I think like any relationship, and keep in mind, you know, coming outta school we're, we're like, what, 22?
I mean, we're like dumb asses coming out of m i t. But uh, you know, I'm now 35. We've all matured as human beings, as well as business owners, as well as startup founders, as well as managers and leaders. And like any relationship, yeah, I mean there are ups and downs. I mean, it probably took hone and I would say this to his, I have said this before, so I think Jeff would agree, it probably took Jeff and me a solid like seven years to really get along.
Um, but I think, I think why did we start working together? I think it's because we thought we were the most effective potential co-founders that we knew. And why did we stay together? Because we knew. That we were so effective as a group. I mean, being founders is not about being best friends. I think it's, it can be helpful to, I mean, you need to get along with the people that you're working with.
You're spending how eight to 10 to 12 or however many hours a day with them. but it's about are you able to deliver results as, as business owners together. And so I think we deliver results consistently together. And we wanna be successful. and we're values aligned. We're values aligned about what kind of company we wanna build, the kind of company culture that we wanna build.
So if you have the alignment and it's effective, I mean, that's so precious. We would never let go of that.
Todd: Yeah, I, you know, I wanna dig into this cuz I think you said some interesting things there. So values aligned is one thing, and it sounds to me like motivation aligned too. are there other things about it? are the three of you good at three different things and then some things you're all good at?
Or like what, what are the real components here of what's making this work? Because I'm, I think other founders or future founders are kind of interested in what makes these dynamics work.
Jessica: Yeah, the diversification has been interesting. So we're all m i t trained computer scientists, so that's, that's, uh, a lot of duplication and background. So how, how did we end up covering the responsibilities of a founding team or of an executive team? And so first, I think the fact that we all come from this technical background has been helpful for us, for the types of products and services that we're building because we, have this shared understanding about how to approach building software about, how quickly can you build a product, these things that you know, from having done, done it before yourselves in the weeds.
That, that that's a, that that's a, a foundation that we're aligned on. And then I think by our personalities, we, we pretty early on started to kinda separate into our areas of expertise that, that, that have become very durable for us. and when you meet me, Jeff, and Waseem, it's so obvious from our personalities how the, we ended up this way Waseem is a people person.
You know, he likes talking to people. He likes selling stuff. You know, he, he gravitated towards the sales side, towards the go-to-market side at the, at the beginning, I mean, in the case splice days, like 10 years ago. And, and really, I mean, he was the first salesperson at KSplice and he, that's, that's stuck ever since through every company.
He's really been on the go-to-market side. Uh, Jeff reads corporate tax law for fun. He, uh, you know, he has the honor of having pointed out an error in the YC safe agreement. He's maybe the only bugger report they've ever received for all I know. Uh, so that's, that's where his head is. And, and so he, he is great at those nitty gritty details of running a business safely, uh, a fundraising and, and also a lot of really incisive kind of strategic thinking, but that, that he brings that.
Analytical mind and in some ways like a conservativeness about how to make sure that we're running the business safely. That's really important. And then I've always stayed on the product side, uh, and on the, on the service delivery side, like staying close to customers. I mean, all three of us are very close to customers, and that's really important.
nobody should be closer to the customer experience than founders. you wanna bring other people along to be as obsessed as you, but you should never delegate that responsibility to anybody
Todd: so let's talk about KSplice and Zulip a little. I, yeah. I wanted to get to Pilot, but let's talk about those first. What do you think worked well about those businesses and, and what was kind of the journey or the, the hunt for product market fit, like for each of those?
Jessica: Yeah, so case splice, like I said, the seed case splice. It's the late two thousands, uh, I should say by the way. So, so, uh, I was a technical advisor for the, the HBO Show Silicon Valley, and there are a bunch of anecdotes in that show that come from the case splice era A and the case splice experience was such a good formative, I think, first company experience for us because it was so scrappy, so gross, like this is okay.
KSplice. So first off, took no external funding KSplice started as. Jeff's master's thesis was a, he had a, he had, he had developed an experimental technology for reboot list kernel updates on Linux. So imagine that you are a hosting company or a super computing cluster, and you have a lot of computers and uptime is really important, but you also want your computers be safe.
Uh, you, you want to be applying security updates timely. What do you do? Because normally that requires downtime, okay? We have this kind of magical deep tech that allows you to apply these kernel updates without rebooting, uh, coming out of school. Uh, winning the m i t a hundred K startup competition. Got some initial funding, uh, to try to turn this into an actual service that we could sell, like turn into a real business.
Uh, but otherwise, totally bootstrapped like took note. No venture funding. Um, a bunch of people lived in the house that we worked out of, like dubiously zoned. We had to hide when the landlord was coming. Um, there was like a serious mouse problem. Uh, so disgusting. Um, but I mean, boy, do you appreciate a dollar?
Obviously when it's your dollar, I mean, didn't pay ourselves. Uh, you know, all, all of the usual stuff that you can imagine there. So, but when every dollar is your dollar, it's like, okay, well should I hire this person? It's like, well, what am I gonna get for it? Like, what's our runway? You know, how, how, how, what do we need to accomplish before we run out of the very limited money we have?
And you know the answer when, when that's your situation. It's like you gotta get customers who pay you as quickly as possible. So the, the urgency and the scrappiness and the, Hey, you gotta make it work with a small team and prove it out and start making money with a small team and you don't have the luxury of hiring more engineers, more salespeople, a marketing person, what have
Todd: Mm-hmm.
Jessica: I thought that, I think that that, that instilled very good appreciation for revenue and a good work ethic in us. And I think we have carried that with us through the rest of our companies. And it's actually ended up having an impact on pilot because one of the things that was true about case flight, we certainly couldn't afford a back office team.
So how did we get our bookkeeping done? We did it ourselves. We like literally got a copy of QuickBooks for Dummies. And at the time, QuickBooks Desktop, QuickBooks Online didn't exist and like tried to do it ourselves. We even wrote some software to try to do it and like auto close the books ourselves.
Um, so that experience of like, Hey, we've gotta take care of our finances. How are we gonna get it done? Who do we trust? Who can we afford? I mean, we experience that viscerally in back at KSplice.
Todd: Wow. Okay. So some origins then of the, the later pilot idea came all the way back then. So what, what about Zulip? Was that a similar, uh, kind of journey for you or different Uh,
Jessica: Yeah. So Zulip, like Tulip with a z uh, sort of like Slack before Slack existed and obviously you've heard about Slack and you haven't heard about Zola. So a timing is everything. B execution polish not overfitting on. You know, really sophisticated technical users. There are a bunch of lessons that we learned from trying to build Zulu.
Uh, but that is a company that, uh, you know, it literally kind of a year and a day after the case splice acquisition by Oracle, we ended up back in one of our living rooms thinking about what other problem business problems were, did we experience, did our friends experience that we thought were worth solving and how to communicate, uh, you know, kind of business communication, real-time chat.
Uh, group chat was the thing that we, we landed on. And I think one of our takeaways from Zulip but so, so the thing about Zulip was that there were some companies that passionately, passionately, passionately use Zulip, like, you know, eight to 10 hours a day average for. The company per person using the product deeply, integrating it into their workflows.
And that was so exciting to see. And then it was too hard and complicated for everybody else.
Todd: Hmm.
Jessica: And I think what we learned from that is like, hey, be really careful about overfitting to your experience. You need to make sure that you're selling something that is going to resonate with the intended audience.
Like you. You, you can't, it's hard to build a business around selling a chat product only to like the hyper sophisticated tech users. You can, but you have to fund the business and build the business and market the business in a very specific way if that's what you're gonna do. If your goal is to be like a big business at a solving business group chat for a broad segment of the market, you need to make sure that you're actually building that.
And so like how do you, how do you validate that what you're building actually resonates with a broad enough base? In a passionate way, we learned that the, it's always the hard way at Zulip because we, we probably didn't do that successfully. And so what we ended up doing is getting acquired by Dropbox.
Uh, Dropbox was excited to integrate some of the lessons that we had learned about business group chat into its product strategy.
Todd: And so you mentioned, uh, with KSplice it was like year and a day, you know, lasted at Oracle. Then it's like, we're gonna do our next thing.
Jessica: Which, to me, fair, Oracle treated us very well. Like the, like, that was great, but we knew that we wanted to get back in the saddle. Like we, we had more that we wanted to do and prove to ourselves.
Todd: And did you know that again at Dropbox? Like, did you know that that was gonna be, you know, a temporary stint and that you guys were gonna find it, found another company together?
Jessica: Yeah, I think so. Um, I, I lasted the longest of the three of us at Dropbox. I
Todd: I remember, I
Jessica: had like a solid tour there. Actually. It was pretty difficult extracting myself from, I was, I was actually employed by both Dropbox and Pilot at the same time for a while. Uh, Jeff and Waseem ended up leaving a little bit earlier.
Uh, I think we did know that we wanted to kind of a, a last, a last go around and, and why, like to accomplish what I, I think that's worth being honest about. I think, and Jeff, and might have slightly different answers for me on this, but I think, you know, speaking for myself, number one, we wanted to have the experience of building a company to a.
A later stage than KSplice and Zulip had gotten to, like, we wanted the experience of, I mean ideally the path to, to a public company. Um, and then also, you know, for the financial upside, like we wanna build a company that is wildly successful, that is transformative financially. And I think that's worth saying out loud because building a company is a lot of work.
There are many, much easier professions that one could have than being a startup founder. And I think in some cases people truly have a product or service that they so passionately believe needs to exist in the world that they're doing it for the benefit of humanity almost. But I think most people are are doing, I mean, you probably are doing it cause you think you're gonna get a lot of money if it's successful.
And yeah, that's a part of it because it's way, it's so much work. It's so much work. I'm definitely not gonna do this again. This is definitely my last company and pilot's definitely gonna be successful. So glad for
Todd: Love that. Okay.
Jessica: I don't think I have another startup in me.
Todd: Yeah. Yeah, I hear you. Okay, so I, let's get into the kind of early days of Pilot and it struck me that some of the kind of observations you had way back in the day at KSplice around the, the market opportunity, the problem you're solving, but also it seems like you did things a little differently.
Like with KSplice, you had the technology and you're like, who can we sell this to? And with, with Zulip you had the product and you're like, who wants this? And I, I feel like with Pilot, from what I know about the story, you, you did it quite differently. We, we, in terms of like how you came up with the idea and validated the idea.
Will you talk about that?
Jessica: Yeah. So I. Again, back on a couch thinking about what, what problems we wanted to solve and frankly, what business problems we wanted to solve. We are, we're just, we're not consumer people. Uh, so what, what business problem do we wanna solve? And we knew what business problems we had had, but how do we learn about where the pain is most acute for startups, for small businesses?
And, you know, we did this straightforward thing that you would do if you wanna answer that question, which is you go talk to a lot of startup founders and small business owners and ask what are your biggest pain points? And so we did that. We literally, I mean, we surveyed finance and accounting teams, legal teams, HR teams in a bunch of SMBs, like early stage startups, mid-market companies, and assembled themes.
And those themes happened to drive with what our
Todd: How did you do that, by the way, Jessica? Did you like call him up on the phone? Did you send email surveys? What's the, what's the actual method here?
Jessica: Oh yeah. This is like, oh, who are our friends at? You know, we have friends all over the place, like go out. Hey, can you do me a favor? Can I like talk to you for 30 minutes about your challenges being in accounting at Dropbox? Yeah.
Todd: it. Got it. Okay.
Jessica: Um, so yes, sit someone down, buy 'em coffee and get the deep qualitative feedback on this.
And the theme, like the clear, the overwhelming loudest theme in this was in fact that getting your finance and accounting taken care of was seemingly as unsolved a problem somehow in 20 16, 20 17 as it had been back in 2009 when we were at Case Splice and trying to do it ourselves. Uh, so we, you know, that seemed like a thread that was worth pulling on.
So we started pulling on it.
Todd: What level of kind of validation or like, you know, things that you needed to hear from people got you there? Like were you, were you still considering other ideas besides accounting and bookkeeping? And what, what made this the winning idea? I.
Jessica: I think it was the winning idea because A, it was the loudest thing. And I remember having a document that I, I think it had two or three kind of final candidates in it. Uh, why,
Todd: remember what the others were?
Jessica: Uh, there was something about HR software. I don't, I don't remember the details, but, but, but the, but why, why bookkeeping first?
So first loudest theme, second enormous market. Uh, third, like the ASPs that we thought we could command if we're really solving the problem end to end. So not selling bookkeeping or accounting software, but being your bookkeeping solution. You know, what does the market pay for bookkeeping today?
And it's like hundreds to thousands of dollars per month. If we can try, like, if we can capture that, you know, the higher the as p in general, the more choice you have about how you're gonna build the company, right? You have more marketing dollars to sp like you have more choices about your go-to-market strategy if you have higher ASPs.
So, so like this idea that we could capture the hundreds of thousands of dollars per month for a subscription service solving bookkeeping end-to-end. That's really attractive, like cat like versus let's say HR software. How much can you get a company to pay for HR software? It's probably at like a much smaller percentage of their total spend.
Um, and then, you know, who are the incumbents? Well, who does bookkeeping? You know, bookkeeping is done by a long tail of mostly local, small, local providers. So we don't have, uh, like, you know, one or two huge incumbents that are gonna make our lives really difficult. We're competing against these, you know, kind of small outfits that have widely varying quality.
There's a lot of latent dissatisfaction in the market with, with the existing solutions. Um, it's i in a world where more and more of your, uh, systems like your, your bank accounts, your credit cards, your payroll system, your expense reporting system, How you're invoicing, all of that stuff is all moving online.
We can benefit from this trend towards digitization and it's also harder for legacy bookkeeping firms to keep up. If you are a company that, you know, sells something online as a subscription service via Stripe and you have 5,000 stripe invoices every month and you care about getting the service periods right, it's actually hard to solve that problem if you're not writing software to, to, to, to book those entries, right?
Like, we can do things that nobody else can do because we're able to write software to accomplish parts of the bookkeeping process. So for all of these reasons, like the rising tide of digitization of your financial systems, the high ASPs, the the market, not having big scary incumbents that we're gonna make our lives hard.
It's not a regulated industry for all of these reasons, it just, it seemed like it really had teeth. So what is the next step? Like at some point you just have to call it and you say, okay, we're gonna try it. And what does it mean to try it? Well, it means you're gonna try to get someone to pay you, right?
Like the, the, the, the true proof point is can you get someone to pay you? And so, you know, we start out, we have, we have no engineers, we have no software, we have no bookkeepers. We just have me, Jeff, and Waseem. So what do we do? We go to some of our startup founder friends and say, Hey, how do you get your books done?
Oh, that's a pain point for you. Great. Uh, would you pay us a hundred dollars a month to take care of your bookkeeping? And if they say no, like, probe on Y. And if they say yes, say Great. Please provide your ach h details and we will commence with being your bookkeeper. And then Jeff and Waseem started doing the books manually and I look over their shoulder and start writing software to do that work in software.
Todd: Wow. And what, so what was the reaction to that, that you were getting? Were they like, hell yes. I, I need this? Were they like, wait, what, what, what makes you guys qualified to do this? Was there any of that?
Jessica: well, I, so I think the, the problem for the average founders is like, who, who am I supposed to trust to do my books? It's not like there's some clear best in class provider that all of your other startup founder friends are using that you, you know, kind of web of trust are gonna go sign up with. It's totally fragmented.
And so how do, like what are you, what are you gonna do? You're gonna go on Yelp and uh, find the best bookkeeper. Like, no one's gonna do that. It's, it, it's hard to find, it's a trust-based decision and it's hard to get feedback from people you trust on what bookkeeper to use because it's so fragmented.
So it's like, Hey, I don't know. It was Waseem, and Jeff and Jessica are smart people. I like know, like, there seem like reasonable people. They have experience running companies that have been successful. It's not worse than signing up with a random bookkeeper who I have no context on. Sure. Yeah. Let's have you do it.
You'll at least care. You'll care enough to try to make sure my books are correct. Right. Cuz you're trying to build a company. I think that was the reaction. It's like, Hey, if I can, if I can stop thinking about this, because Waseem, who's a reasonable human being who I trust's gonna do the books for me?
Sure.
Todd: And so the three of you are doing the books by hand, and then you're also sort of. You know, watching over over shoulders and figuring out how do we, how do we engineer this? How do we automate this? When did you, like, when did the software start getting written?
Jessica: I mean, immediately it's, it literally like, okay, Jeff and Waseem are. You know, what does it mean to do the books? It's like you're importing transactions into QuickBooks, you are reconciling, you're categorizing, you're dealing with bills, you're dealing with invoices. There's a review process. Like how do you validate that to yourself and to the customer?
That the books are correct? Okay, well, let's get really familiar with the QuickBooks APIs and figure out what's possible. What are the sy you know, start figuring out what are the systems that we would need to build? you know, step one is like, produce a checklist.
Can you articulate what needs to happen in a checklist? Because if you can do that, you can translate that checklist into, you can, you know, piece by piece, you can translate that checklist into software. And yeah, you've gotta build these big systems, but you, you start getting the shape of what is the process flow, what are the checklist steps, what are the systems that need to be built?
And then you just crank on it.
Todd: So how many customers did you take on at once while you were doing this? Like, could you handle 10 or 20 of these folks, or was it less?
Jessica: Yeah, no, I think, yeah, dozens. Uh, we used to track all of our customers on a whiteboard. Uh, now we have like really sophisticated internal, uh, you know, coordination software, uh, to make sure that we're delivering on all of our commitments on time. But, uh, yeah, it's like on a whiteboard. This one's assigned to a seam.
This one's assigned to Jeff. This one's due on the 10th. This one's due on the 12th. I mean, we're the founders, right? It's like, oh, we're running behind. Great work. Later tell you, catch up
Todd: So how, how long was this period where you would sort of consider it like, you know, the design partner phase or the, the pilot phase? The pilot, no pun intended, but the, um,
Jessica: pilot phase for pilot. Uh, I mean, I think it was short in that, I mean, this is again, the, the goal is to. Get revenue. And not just because that's ultimately how the business is going to find itself, but because it proves that you are selling the right thing, that you're pricing it correctly. Uh, so I, you know, I, I think very early we spun up a website and like let people try to pay us, uh,
Todd: at this point, you're charging a hu, you're charging a hu a hundred dollars a month, right. Is that, which is, I assume not the a s p you were sort of striving for initially. So when did that, when did that sort of kick in that you could charge, you know, what you wanted? Yeah.
Jessica: Uh, so I think we started taking on more complex customers and, uh, wait, I think we found that we needed to charge more to have the margins that we want. Uh, and, and, you know, pilot has strong margins, but that, you know, margin is, is an important part of how we assess the health of the business and the growth of the business because it, it is not pure assess.
It's not shrink wrap software. We're, we're delivering a, a service, uh, on a monthly basis. Uh, so we we're very attentive to margins. But yeah, you know, starting to take on larger customers. A what can we charge for the value being delivered, and b, what do we need to charge to have reasonable margins like now and or in the future, right?
Because we can project out, you know, if it's circus, 20 17, 20 18, we can project out that we're going to see a bunch of lift through software.
And yeah, I mean, I think we, we actually have a, a pretty tidy heuristic for this, which is if you, if you look out in the market, we, we know that most businesses, whether or not they're using pilot, most businesses spend between a half a percent and a percent of their total spend on finance and accounting. And if you know that, that, I mean, that gives you, that's, that's, you can build a pricing and packaging model around that,
Todd: So during this period, Jessica, 20 17, 20 18, are there one or two moments that kind of stick out to you as like, Hey, I think we're, I think we're hitting product market fit, like confidence inspiring moments or like where it really, where you start to convince yourself like, this is looking like product market fit.
Jessica: I, I mean, I think one of the experiences was I, of course, we, we used the software that we were building to close pilot's own books, and I think we would have moments like, you know, it's like the, the, the software would catch something, uh, and we, you know, it's like, oh, a double payment for something. And we'd be like, no, how th this wouldn't have happened.
Unless we were using pilot, right? Like the, like the information that we were getting from the books, we wouldn't be getting that information. We don't, we didn't think if it were being done, the, the, the normal, the traditional way. And so I think just the dog fooding of the product internally was very affirming of the route that we were going.
You know, oftentimes sitting around being like, I have no idea how, I mean, even today we sit around being like, I don't understand how bookkeeping is done outside of pilot Bookkeeping is actually hard. It's very hard for human beings to reliably execute on complex accounting processes. And we're often just sitting around amazed that people even try to do it outside of pilot.
It, it's just too error prone. So I think the internal dog fooding was, was definitely important. I mean, what other kind of customer moments? I, I mean I, the other thing is just customers kept coming back to us saying, can you do more for me? Like you do my books, can you also do my taxes? Initially, it's like, no, we can't.
It's like, uh, maybe we need to, can we, let's try, let's look into doing that as well, right? Because, uh, it, and this is the other thing that's really attractive about bookkeeping as an entry point to the back office, there is a bunch of really natural expansion outta bookkeeping cuz Yeah.
It, so first it's, it's attractive to the cu the customer to have all of this under one roof. Who's doing your books? Who's doing your taxes? Who's your strategic advisor or fractional CFO F who's handling your r and d tax credits? Yeah, for sure. If you can get that all done under one roof and you don't have to deal with and coordinate amongst multiple vendors, awesome.
Do that. And then it actually produces a higher quality product because, We have the information about the company from all sides, right? If we're your bookkeeper and your tax preparer, if the tax preparer has a question, they can just go ask the bookkeeper. And we like, and we have a deep understanding of how pilot does bookkeeping to make that exchange really efficient to avoid mistakes, things like that.
So I think there's, there's sort of synergy on the product. It's a better customer experience. Um, and so yeah, getting that poll of, Hey, can you do X for me? Can you do y for me? Suggested that, yeah, we were actually providing a customer experience that was so valuable that, that people wanted to not just pay us for bookkeeping, but actually to expand the engagement with us.
Todd: Yeah, that's a great signal. So I, I want to come back to this idea, Jessica, cuz we, we covered it quickly of this very fundamental decision that you were not just gonna be a software provider providing some point solution. Instead you were going to be an end-to-end service provider that really solved the full problem for the customer.
And that I think it probably was an incredibly pivotal choice for you. Um, how did you, did you always know that that was gonna be the approach? Did you ever consider doing it the other way or sort of what went into that decision?
Jessica: I think we always knew that that would be the approach for two reasons. One is from our own experience, from the experience talking with business owners, founders, nobody was saying, Hey, I want more accounting software. People were saying, I want to give this problem to someone else and have peace of mind that it is being solved.
So, so the feedback was we want the end-to-end ownership, and then also it goes back to the ASPs. You know, QuickBooks online, it's like 35 bucks a month, 50 bucks a month, depends on what plan you're on. A hundred bucks a month. Pilot owning the problem end to end, you know, are, you know, it's like the plans that they start at 4 99 and people pay us five figures sometimes for bookkeeping.
You know, bigger companies that have more complex needs. So we'd much prefer the larger A s P. It's also kind of more fun. Like I'd rather solve, you know, I don't know. I enjoy seeing the end-to-end impact that we have on businesses. You know, we get feedback like, Hey, honestly, I don't think that we would've raised this round if you pilot had not been there with us.
You know, Hey, I'm a first time founder, and honestly, I've always been really intimidated. By the accounting. And because of that, I really was leaning out of it. But with pilot there as a partner, I feel like I have a much better understanding of my business. I'm not afraid of it anymore. And now I'm actually excited to lean into this side of thing.
Hearing stories like that, we get invited to holiday parties. People tell us when they have kids. Uh oh. My favorite one. So we, and it's funny because we actually saw this happening in the books and then the customer also told us, uh, we had a customer that they generated their first dollar of revenue and then they like bought a frame for it and they framed it.
And it was funny cause we actually saw, we could like see the, in the transaction that like, we saw them make like, like buy the stuff to frame the dollar. Uh, but they told us and they sent us a picture of them holding this frame dollar. Like that's a level of
it's a more human. Thing than I would've guessed before we started the
Todd: Mm-hmm.
Jessica: And I like that. I, I like being plugged in with people.
Todd: And I, I think it comes back to the fact that you had validated this so thoroughly, like loudest problem, you know, high value problem in terms of the a s p big market. I, to me, these are sort of like multi-time founder moves, you know, things that you had sort of like hard one lessons from before that now you went and, and really did the work to make good picks, right?
To make a good, a good pick of the market, A good pick on this, you know, solve the problem end to end like very, I think it's mature picking by multi-time founders.
Jessica: No, thanks. I mean, I think that the, the, the number one thing I would highlight there is, you know, if your plan is to try to build an enduring company, one that can be independent for a long time, one that can go public, you need to tackle a market that's large enough A lot of other things you can change after you've started.
You can't change the size of the market. And so we were very intentional about we and we, we had tackled smaller markets before the market. The market for, uh, businesses who care abouts kernel updates on Linux is a great market and not huge. Like case splice was always going to end up being acquired.
It's just to niche a product to live on its own in independently, right? Like we've done that before. We knew starting Pilot that we wanted to tackle a really big market, something that could really have legs indefinitely.
Todd: Okay, so 20 17, 20 18. Maybe we're getting to 2019 now. Um, did Pilot do a launch, like a V1 launch or was it always sort of just get more customers, get more customers?
Jessica: Yeah. What are launches really for? Launches are our, our opportunities to rally, oh, sorry. This is not, um, let, I'll start talking about pilot. Uh, this is, I'm sure not universally true, but when I think about launches, they're mostly about organizing yourself internally, you know, like kind of rallying the team around a new feature, a new product, a new sales motion, new marketing collateral, getting the team excited, uh, and, and, and getting it out the door.
Lashes mostly don't like, cause you to have a bunch of new money. Like they don't, those, they don't cause you to have a bunch of new customers. A bunch, you know, that you, you, you usually, you see like a bump in website traffic. You see a spike in signups briefly. But the way that you stay on the revenue growth curve that you wanna be on, it's not through launches, it's through whatever your go-to market flywheel is.
For, for pilot, it's like deliver a service. People love, they love it so much that they stay with us and they also tell their friends who then become pilot customers. Like that is the go to market flywheel. And that's how our revenue grows, launches our, you know, opportunities for some press moments that are useful as like part of the social proof of pilot.
It's useful for getting the team excited, uh, but they don't really move the needle on your metrics. So like, did Pilot launch, uh, you know, I don't, I don't actually remember when we, you know, we, we like got the name pilot, which is its own saga, uh, pilot.com and you know, we, so we had like, we, we did like, put up a website at one point, you know, we, at some point we moved from, you know, like, click here if you're interested to just like having pricing on the website and the ability to like start the sales process.
There were moments, oh, you know, we like launched C F O services. We launched tax, we launched r and d tax credits. But that was mostly, we had done it all of the work internally to be able to do those things. And at some point you need to put it on the website and so like, yeah, sure. Try to get some press around it.
Yeah, of course. But it, it's not, it's so, it's just, it's so not important in the grand scheme of things,
Todd: Small sidetrack question pilot.com was, I imagine that was an expensive domain and hard, it sounds like, hard to get. Did you, why did
Jessica: cheap. Yeah.
Todd: why? Why did you do that? Why was that important?
Jessica: So first picking company names is like one of the bottom 10 experiences of running companies. It's awful. All good names are taken. All na, all good names are expensive. Like the way that you solve this problem, presumably the way that we do it, at least I assume, basically everybody does, is you like, lock yourselves in a room.
And you don't let yourselves come out until by like the war of attrition. On your sanity, you pick the least bad option from a set of of names and like the names. It's like the domain, like the.com has to be available. It should be spell and pronounceable probably. There can't be like IP issues. The domain has to be purchasable, like someone's gotta be willing to sell it to you, blah, blah, blah.
Like it takes forever. It's awful. pilot.com. How do we get pilot.com? Okay, well, we knew that we wanted because of what we do, we sell accounting services. It's kind of a serious thing, right? Like we need to come off as professional and with it, and we've got your back. So we're not gonna have like the joy of booking.com.
Like we're not gonna have a punny name, we're not gonna have a made up word name. What projects confidence and competency. So probably like a real English word. Okay, let's find some real English words that are available to purchase that are pronounceable, that are scalable, that don't have IP issues. And you produce a list and then you send off some domain brokers to try to secure them and then you pay a lot of money.
Uh, but you know, you do it because you believe it's worth it. You believe that, you know, pilot is gonna be around for a long time. This is a brand that's worth investing in. It is worth the upfront cost to be able to build a brand that's gonna last for decades around this idea. Um, yeah, so that's, that's how and why we bought pilot.com.
Also, I will take credit for the name. There was a short list. Pilot was on it. There were some other other ones. Some are bad than others. I think swan.com was on the list. cast.com, I think mountain.com, I think sesame.com had some IP issues. But Pilot was on my
Todd: I think it's a great name. It's the best out of those choices for sure.
Okay, so let's, you know, we sort of covered the early days. Let's get into kind of expansion of the company. And it strikes me that a few years in, you expanded in, in two ways. One was not just startups, but larger enterprises. And then another form of expansion was product expansion and sort of suite of services.
So if we talk through each of those, so the, the expanding the audience to different size companies, you know, in different verticals or whatever, what was the, what was the thinking around that or the, you know, the validation of that?
Jessica: So some of this is structural. So
again, given the market size, given the the goal of the company, which is to be the financial back office for a broad range of small businesses and startups, you know, at some point we've gotta break out of startups. startups are a very, very, very small percentage of the economy.
Okay, so if you're, if you're building a business that's trying to solve accounting, you've capitalized the business in a particular way. Like we've done these fundraising rounds and this is all with the goal of building a company that's going to be independent for a long time and eventually go public.
You like, you need to be on a particular revenue growth curve. You need to be able to get revenue to a certain, you know, you need to be able to get to billions of dollars a year in revenue. So if, if that's the strategy that you've set out upon, you know that at some point you're gonna need to move out of startups.
And so it's a question of when, when do we have the, the expertise? When do we have the go to market and r and d leadership? When do we have the new verticals playbook to, to start experimenting with expanding into new verticals? Um, so it was inevitable that we would do this question of when, how, where first, right?
Um, and I think similar actually to the product expansion. Where do you go first? For us, it's, well, who's wanting to use pilot? Like, who's knocking at our door that we're turning away? Right. So, you know, we see a lot of e-commerce companies knocking on our doors, CG and R companies. We see a lot of professional services firms knocking on our doors.
Okay. What we are already saying out in the market is resonating with them, without us even really trying to, let's learn operationally about these types of businesses. What is the delta from startups to these types of businesses that we need to adapt to on the product side, on the service delivery side.
And then, you know, once we feel really confident that we can deliver a high quality experience, Let's, you know, communicate that to the go-to-market side so we can open the floodgates from a marketing perspective, from a sales perspective. So, so yeah, in terms of expanding into new verticals, it's like who's coming to us that's early proof that we maybe have a really strong right to win with a little bit of elbow grease and some new verticals, and then do that work and go after it.
And then for diversifying the product line, as we talked about earlier, you know, pilot is a better experience when we do all of your financial back office because we can handle the coordination. We, you know, what we know from doing your books, from doing your ap, from doing your ar, from doing your taxes can feed into.
What your, you know, fractional C F O from pilot needs to know to be an effective strategist with you. Um, and, and again, customers were asking us for this, Hey, can you be my fractional C F O? Can you do my taxes? So I think being very customer led on this has served us very well. I mean, I think it's, it's certainly that's, it's more efficient than, you know, kind of trying to build the sales led growth.
Like, Hey, can we staff out like an outbound sales team that tries to make the sales happen? Hey, if they're coming to us, great.
Todd: Well, I mean, this is an incredible position to be in where you are literally getting pulled by your customer's, upmarket. You're getting pulled into new verticals, you're getting pulled into new products. Like that's something a lot of companies would probably, that are probably very envious of. Is that all just because again, like coming back to the really good choice of, of what to build and what problem to go after.
Like how do other companies experience these luxuries?
Jessica: Yeah. Well, okay, so what, what do we do? We sell a bunch of services that scaffold off of an activity that is effectively, legally required for all businesses. You have to do your taxes and you, generally speaking, need books to do your taxes. That's a problem that literally every business has. It's not a nice to have, it's a must have, and because of that, it's an enormous market.
Yes. This all goes back to market size a and the, the nice to have, uh, must-have spectrum too, you know? Yeah. If you can be selling something that's a must have, that's very resilient to a broad range of market conditions, you know? Okay. It's 2023 Covid. The current kind of weird tech recession environment where capital's all locked up.
Um, hey, you know, being a must have has made us much more resilient to these changes in the market than if we were a nice to have. So yeah, IM incredibly blessed part. It's part of why we pursue this. Yeah.
Todd: The follow-up question there is, okay, so you knew you had to expand both in terms of customer base and product suite. Like when, when, when were you like, Hey, now is the right time to run one of these experiments? What? Like, because, because the core business is working, right, and so that's the question that I, that I think founders often ask is like, when do I try sort of my next, my next new thing?
Jessica: Yeah. So the first answer to this is we're very protective of that go-to-market flywheel. That's about. The brand and the reputation we have that we can only earn by actually doing a good job. Like we need to be delighting our customers consistently. And we, so first and foremost, we need to not jeopardize that.
So what, what can we do safely? Do we have the right instrumentation? The right feedback loops, the right expertise on the team. First things first. North Star don't ever jeopardize CSAT against that backdrop. Uh, just being honest about this, the revenue curve is like a brutal curve. If you're gonna actually, you know, if you're gonna be on like the triple, triple, triple, double, double that, you know, you're like on the path you, you're trying, you know, your goal is to be on like the best in class path towards being a public company.
You know, it's like every six months you're like, oh shit, we need, like, what's our next additional revenue stream? Right? And so I, I think there's again, the, the natural interplay between, hey, we're setting these aggressive growth goals for ourselves and what are our customers asking us to do? And so it's not like we're like, oh, hey.
I mean, if you just think about, you're not like, oh, hey, we think we could make a bunch of money doing this other thing. Should we do it? Yes. No, of course you can say yes. You're like desperate to be hitting your revenue numbers every quarter because the curve is brutal.
Todd: Okay. So, you know, the revenue curve and sort of the, the venture path, you know, you had mentioned, um, funding briefly. W will you talk about Jessica just like the w uh, you know, maybe your seed round, your, A round, your B round kind of when you did those and what, what the reason to do each of them was.
Jessica: Yes. Let me see. It's, it is embarrassingly, I have to like kind of page this back in because, and here's, here's the truth. Fundraising, super important, something to celebrate, exciting for the team. Important for like managing like the company and as part of the company narrative in managing morale.
Fundraising is not the same as revenue. So there's some amount of, like, we do the fundraising cuz you have to do it, but it's, it's, it doesn't occupy as big a percentage of our brains as you might think, uh, when did we do it? Well, we, you always wanna fundraise when you don't need money, because if you need money then you have no, you have very limited leverage over the terms.
Um, in general, it's better to have money than not. So if someone wants to give you money on good terms, I don't think it's ever failed at like a reasonable firm wants to give you money on good terms. It's usually a good idea to take it better to have money in the bank and not as proven. Very true. During Covid and then now, like in this current climate, I mean, what exactly did we raise?
Ah, gosh, I don't remember. You know, it's like you hit a set of rev, you hit a set of metrics, milestones that make it kind of, of appropriate to be, Talking about the next phase of the business and what the next phase of the business needs, like what capital do we need to hit the next round of milestones.
I mean, that's really what's happening fully. If you like totally zoom out and abstract this, right? You raise a seed round to have the money to hit the milestones to raise the A, and then you raise the A and you size the A and you time the A to have the runway that you need to hit the milestones for the B and so on, on the path towards being profitable to then be in control of your destiny.
I mean that that is like fully abstractly what's going on, right? So I don't remember what exactly the criteria were for, you know, it's like the A, you need to have like real traction. You need to start showing good margin trajectory. For the B you like definitely need to be showing strong unit economics for the C You like need to be proving that you can repeatably become a category leader in different verticals.
It's kind of the standard milestones I think for a SaaS style business that we followed.
Todd: Do you have any advice for other founders in in particular, given where we are in the funding climate, you know, very different and much more challenging than 18 months ago. Do you have any advice or things that you share with founders about how to approach fundraising in today's environment?
Jessica: I mean, the thing that caught up to a lot of businesses, and I understand why, I understand why this happens and I, I have empathy for people who got squeezed by this, but I. You've gotta be on top of your burn multiple. Like there are a bunch of standard metrics that you need to track.
And there's a good reason why VCs pay attention to this and why public markets care about this. For public companies, you, you need to like live within your means reasonably, um, as a startup, even, even early. So I think like be well informed about what that means. Like what, what, what are the appropriate burn guardrails for your business and what does that mean about your headcount plan and what does that mean about what you can accomplish in the next six to 12 months?
Right? Like if you, if you feel like you are super clear on the details on that, go talk. I mean, why don't come, come to pilot, we'll connect you with a pilot C F O and we'll get this crystal clear. Like you need to have a crystal clear operating model. and like very clear alignment amongst the executive team on where all of these financial metrics need to be.
so I guess coming back to pilot, you know, you've expanded so far in terms of customer base and, and product suite. How do you think about where you are now in, in 2023, how far you've come and, and kind of what is next for pilot?
Doesn't it feel like a lifetime? I feel like I've been working on pilot since I was born. Um, I mean, what's next for pilot? So first, I don't know that this is surprising, but it's, it's the reflection that I have. When you ask this question in good way, the founders like, I am still so, Plugged in to the company.
Like I am so close to customers. I am on customer calls every week. I'm on sales calls every week. you know, when we get the occasional escalation, I am in there like helping draft language or helping, like make sure we finesse the situation. Well. I still do bookkeeping sometimes. I'm actually a pretty good bookkeeper.
I, that's like, been a, actually it's a, doing books that are clean is actually very enjoyable. Um, it's very satisfying. Uh, I don't think, I would've guessed seven years ago that I would still literally be doing bookkeeping sometimes. But I think that it's very good that we're so, and all three of us, Jeff s and I are also plugged in and I don't think that's gonna stop anytime soon because you.
First, it's like lead by example. I mean, we want everybody to be really obsessed with the customer experience. So what does that look like? There's no, there's no shortcut. You have to spend a bunch of time with customers,
and I just, I don't think that it's delegatable for a long time. I'm sure at some point it is like, is Satya Nadela doing? I don't, you know, at some point, like, you do delegate the stuff, but we're nowhere near that point. And so I think that the, the journey will continue to have us staying very, very close to customers.
And then what are we doing? It's like on the path towards building a profitable company. What's next for that? And he's like, Hey, gotta stay on that revenue curve. you know, keep climbing upwards slowly on those margins. I mean the North Star is happy customers, the North Star is csat. And honestly, you grind it out and if you know, it's just like, it's kind of a math problem.
Like you know what, you know what, you know, a r r you roughly end up having, by the time you should be going public, right? You like, you know what your metrics need to look like, you know what your margin should look like. You know, you have the financial discipline. So I think, you know, the next five years are like continuing to build out the rigor internally, hustle, busting our asses to stay on that revenue curve.
And first and foremost, delighting customers.
Todd: Awesome. so wanted to get to some closing questions and, and many of these are kind of like words of advice for, for founders who are listening or future founders, what are some of the most common mistakes that you see other founders make when they first start building products?
Jessica: Yeah, it's uh, uh, I think, and we made this mistake ourselves, even arguably at Pilot, and I think did, did with the previous companies, the way that you price your product or service has such an impact on the business. I mean, everything from, again, like how much money you can spend to acquire customers to, you know, how you can staff the team.
I think paying it like under investing in the thinking about pricing and packaging is a really common mistake and it can be very painful to try to retrofit. Uh, so make sure that you have clarity on that. Uh, so that, I mean, that's one mistake. Um, um, I What are other common mistakes that founders make? I mean, you know, again, it's like, uh, a common mistake is you build something that you think is like, cool. It's a cool feature, it's a cool product, but you can't actually get people to pay you for it. Like, validate that people are willing to pay you for it as quickly as you can.
Todd: So is there anything about how you think about scaling products that you think of as kind of contrarian or unconventional?
Jessica: Yeah, you tell me if this is contrarian. I mean, I, I, I go back to, I, I think that founders need to be closer to the customer than anybody else. And that, that inherently, I think means being like opinionated and therefore kind of up in the business of the product development process for a long time. But who, you know, who's gonna care more, have more skin in the game about getting it right, about carry, you know, uh, every single customer interaction.
For our business matters, like every unhappy customer can tank the brand. Every happy customer can be a referral. I, I think staying obsessively close to the customer, the comms, the polish on the product, I, I actually think that that is really important and I, I, it is not in conflict. You know, you wanna hire great product leaders, There are lots of things to delegate to these talented business leaders. They're gonna have a bunch of really clear ownership and accountability in a bunch of ways. I do not think you can delegate being close to the customer though. And, and I, again, I mean that in a, in a, at a pretty obsessive way. Like still doing bookkeeping, still drafting customer comms occasionally.
Not like on the critical path in a way that, that, that is un unscalable. But I, I think staying, staying obsessively plugged in even seven years in. Yeah.
Todd: Yeah, I think it's not contrarian to say, oh, you have to be customer focused. But I think the level at which you do it, and probably the three of you do this better than than many, many other founders is, is just the level of detail, the level of customer obsession. It's one thing to say, and that's not contrarian, but it's actually kind of contrarian to do it at that level I would think.
Jessica: Well, and it, to me it's cuz they're a trade offs, right? It's, it's like, Hey, if I think that something needs to happen in the product, we need to do it. It doesn't, you know, it's like you, you sometimes can't like, let the machine produce the user research to validate the thing. Sometimes it's like, Hey, I just know the customer so well that I know we need to do this thing.
And the hard part is like, how do you ensure that, there's a high, you know, there, there's a, a sense of. Ownership and autonomy and accountability for the product team while also having these strong opinions that need to be factored into the process like that. That's the hard part.
Todd: Okay. Last one. Um, Jessica, who are the most memorable people or mentors that you've had in your career, and what did they teach you?
Jessica: I don't know if this is a cop bad answer, but I I, I think that my co-founders, Jeff and Wasim, have had a tremendous impact on me, not just as a founder and a business owner, but as a human being. And I think that the, the growth that I have experienced just being tested by a bunch of different. Challenges running three companies, going through two acquisitions, it like, it's definitely maybe a better person at home.
It's like a better partner to my husband. I think it prepared me tremendously for having a kid. I now have a 10 month old and so I'm just deeply grateful for that. Like being able to, to kind of be in the crucible of this, the startup experience for so long with these two people who I've known for so long and who I have such deep trust and respect for has just had a tremendous impact on my life.
And so I think that if I have the opportunity to shout that out, I would do that here.
Todd: I think the degree of respect that you all have for each other and, and the affection I think that you all have for each other. Um, it, it seems like one of the things that has really, you know, made these businesses successful and has kept you going for so long. So I think that's a great note to end on, Jessica, and thanks for being here.
It was awesome.
Jessica: Thank you.