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Google PodcastsKevin Frechette of Fairmarkit joins Nick to discuss The $8.3T Opportunity in Procurement, How to Sell to the Fortune 500, Building a Bottoms Up Culture, and Mastering Cold Emails. In this episode we cover:
- What Fairmarkit Does & How Procurement Operates
- Tips for Founders Writing Cold Emails
- Fairmarkit’s Emphasis on a Bottoms-Up Culture
- The Vision that led firms like Insight Partners & GGV to Invest in Fairmarkit
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The host of The Full Ratchet is Nick Moran, General Partner of New Stack Ventures, a venture capital firm committed to investing in the exceptions.
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Kevin Frechette joins us today from Boston. Kevin is founder of Fairmarkit, a New Stack portfolio company offering an intelligent sourcing platform empowering organizations to more efficiently purchase goods and services. Fairmarkit has raised substantial venture capital with a Series A from Insight in 2019, and a Series B from GGV and Insight in late 2020. Kevin it is a sincere pleasure to finally have you on the show.
Nick thrilled to get the invitation. I’ve been listening and I’ve been waiting for the call.
I know. Sorry. It’s taking so long to finally get you on you guys are superstars and, you know, didn’t want to take away from from all the great stuff you have going on at the business.
It’s a great spin.
So Kevin, you know, give us a sense for your background. You know, what was your professional career before the launch Fairmarkit?
Yeah, I was in college, and working finance at a company EMC working back office doing like asset tagging and depreciation, which was riveting for a summer realized that probably so went over to the sales side that was working at EMC helping to sell like large data center solutions, really good experience in terms of building out business cases, understanding how to align different technology to business value, and to kind of put it all together and selling to the C suite, did that on the inside for awhile, went down to Texas, I lived in Austin for a while and worked with EMC had a ball down there played a lot of golf swam in the pool a lot. Like it was awesome. But I knew I needed to come back to Boston, I need to toughen up a little bit, came back to Boston work for a venture backed company up here, the virtualization management space. So that’s where I got a really good flavor of like what it looks like to be part of a KPI driven organization. One that’s heavily metrics, learn a ton from that experience and found my co founder Tarek. That’s where we met. So a lot of great experiences. And I took a lot from each of those that we then brought to Fairmarkit. And as we’ve been building we’ve been pulling from those different experiences.
Yeah, so you guys have the super team of co founders here with with Kevin, Tarek, and Victor. Talk to us about you know, the series of events that led to to you guys joining forces and in launching this business.
Tarek, I met first I worked with Tarek for a couple years in the last company, we both had kind of similar ideas, different verticals in different spaces, were the kind of the original idea that I had was I saw it while I was at EMC is that companies paid different prices for the exact same technology. And it blew my mind that there wasn’t more price transparency, because they’re like a couple $100,000 solutions or more. I thought like why you have in the b2c world. You have Zillow glass door, when you make big decisions, you can see what other people paid for the same whatever you’re looking to buy. But in the enterprise space in the b2b world is complete black hole. And I thought about starting it was back like 22, 23, that I realized I couldn’t not get paid for a year because I was like living paycheck to paycheck. It was fun, but paycheck to paycheck. That’s what I said, Let’s get one more job, kind of get another position under my belt. And then target the same like a similar idea. He saw it in the free shipping space where it’s just like the Wild West, there was no transparency, there’s no standards. So when we got together on the last company, we said, You know what, in the enterprise IT space specifically for b2b purchasing, there’s a huge opportunity. There’s billions of dollars to spend, why don’t we go after this space. So that’s where we both kind of took the leap of faith together. And then we realized about a month in neither of us were technical. So we need to find a technical co founder. So we went out, we interviewed about 20 CTOs. And then we found Victor, who were just like, by chance we happen to meet him ended up being a great fit from a culture perspective, a vision, everything. So it really just the hit perfectly.
And you know, your proposed solution, did that evolve in the early stages? You know, was it always going after this enterprise spend? Or was it a work in progress as you kind of met with customers and work through it?
We had two mentalities. One is we wanted to see if we could validate the problem that we were solving, which we did hear from a lot of enterprises that they did have a challenge when it came to transparency for IT software specifically. But what we kind of kept in mind during all of our conversations in the first two or three months is we’re not sure. Like, we don’t know if this is the perfect idea that’s going to hit so we just stayed open and curious. So every time we had a conversation, we’d spend about half the conversation. There was like a shark tank pitch. We didn’t do the sales like process right at all. But we spent half the time pitching what we’re thinking about, and the other half of the time was just asking questions about what the team was working on, like, what challenges they had, what whitespace they have and how they operate. And the original idea of like a lack of transparency that did hold up for what we’re solving today, but it evolved massively in terms of where we applied that thesis. It’s kind of gets the point we are today.
Perfect. So give us the one liner on Fairmarkit.
Yeah, we’re a machine learning based sourcing platform that helps enterprises automate the way they buy goods and services.
And how’s this different then other procurement solutions?
If you look at the procurement world today, it’s owned by a couple of the legacy players. And it’s really built from the foundation up to be very hands on very manual, a lot of buttons to push a lot of processes, which makes sense because like the procurement wasn’t digitalized back in the 80s. And then the 80s, 90s, early 2000s, a digitalized and they said, Okay, let’s have process to make sure we have control over what’s going on. But what happened was it kind of over rotated to too much process too much control from a procurement perspective having to get involved. So when you look at a large company day, see that people are not spending their time efficiently in terms of how they bind, there’s a bunch of red tape. So like, realistically, you have to allocate your people, somewhere, a lot of procurement teams and even companies, they focus on the biggest spend on organization, they say, okay, as long as we can handle the top 10% of our transactions that equal a lot of our spend, then we’re in good shape. But what’s happened is that it’s left this massive opportunity of everything else a company buys. So it might be at a bigger organization, we work with companies like British Petroleum, British Telecom, ServiceNow, Snowflake, whatever it is, once it falls under a certain line from dollar perspective, it falls into this space called tailspend that’s kind of forgotten about, because you can’t put people on it because it’s inefficient. And if you don’t put people on it, you’re usually overpaying you have long lead times you’re not optimizing for a like diversity, a sustainability perspective. So what we said is, instead of going out to try to rebuild an existing procurement solution, because we did take a step back and said, not just in it, but overall businesses, they spent $8.3 trillion a year and it’s done in this old, clunky software, why don’t we kind of flip it on its head and say, if we can apply machine learning and AI, and we can automate what people are doing to get the better business outcomes, then we can handle this space that was previously forgotten about, which is the tail spend, get in with these big companies, and over time, show them how they can keep automating their back office starting with procurement.
So what does that mean automating with AI? And how does this technology work? You know, how do you bring a solution and a product to these customers that, you know, helps them purchase more effectively and at better prices?
Yeah, so give you the example of British Petroleum. So we have a case study with them as well, for not just them, but for pretty much any company out there. When you want to buy something at a big enterprise, you have an end user that wants or a business user that wants to buy something could be a good or service you put into a procurement system could be SAP, it could be Oracle’s whatever it is. Now if it’s over a certain dollar size procurement gets their hands on it, they have looked at it, they say, Okay, well, what is this? What’s the price, who should be going to, and you’re doing right by the business for making sure it’s the best value purchase, because it’s a big transaction, maybe over a million dollars. But at these big companies, once it gets under a million dollars, or under $500, there’s hundreds of 1000s of transactions, or 10s, of 1000s of transactions. So what most companies do is you just don’t look at them. You say, all right, like it’s 50k, it’s 100k is 200k. I’m just gonna trust the end user, which isn’t a bad strategy, because you have to put some trust in your business. But at the same time, you’re typically leaving about 11% on the table. from a cost perspective, you’re not driving to diversity, sustainable suppliers, you’re not getting data to see what’s happening. So the example of BP, they actually did put people on it, and they had huge backlogs, the average time to buy something was about 40 days. So what we did is we came in, we said, okay, allow us to integrate with your current systems. So let us integrate with your, for them, it’s SAP Arriba. Let us pull in all these purchases you’re doing and then use machine learning and AI to let technology decide what is someone trying to buy. And then let technology decide who are the best suppliers that can supply this based off of all of our customers data, and BP’s data, and then actually automate sourcing them and competitively bidding them against each other to drive to the best price, the best value, the best lead time, and then actually automate pushing it back into the system. So you can start to slowly remove humans from this equation and put them on the strategic initiatives. So for us think of us as like an AI buyer that helps companies really source out at scale. And then we’re talking like hundreds of 1000s of transactions.
And does this allow you to do benchmarking for organizations, you know, if you’re looking at organizations of a certain size and a certain sector, you can see their spend on a certain category, and then normalize that, you know, across businesses that it’s anonymized. But but help, you know, prospective customers see and current customers see, here’s what you’re spending on x versus what the industry is.
So we’re actually gonna get there. Right now, we’re not doing that, because we want to just help people get to that best value purchase. And it could be best price if that’s what they value. But to do that, if we just show them what other people pay, that doesn’t get them to it, then an action has to be taken on top of that by a human. So for us, it’s all about automation, automation, automation. So if we bring in the right suppliers that typically bid the most competitively, then we can actually get them to that price and that best value purchase in the fastest period of time, which then supports the business. I will say we do get a lot of really good benchmarking data to see how different categories fluctuate from a price perspective. We get really good benchmark data to see how companies are performing in terms of supplier diversity, inclusion, supplier sustainability, inclusion cycle time. So there’s a lot of really cool metadata we’re capturing. That’s kind of a data asset that we have that we’ll be expanding out over time. But right now, it’s just how do we just automate more of this process for both the buy side and the supply side?
How challenging was it to get the supply side in the early days?
I mean, that’s the I think you probably asked the question during our seed, it was like that, is it the chicken or the egg with your marketplace, because we’re kind of building a SaaS solution for the enterprise space to automate. And we’re also a FinTech company. So marketplace, we didn’t have that challenge early on, because we work with large enterprises. So we essentially get their demand. So when they want to buy something, it comes to Fairmarkit. And then it goes out to spire suppliers know that this purchase being made for XYZ, large company, whatever the name of the company is, so for us, we’re able to pull them in, that has been a challenge. But what we did realize about a year ago, is that we need to treat suppliers, just the same as the buyers, they’re both customers. So like a big push for Fairmarkit recently has been, how do we bring more innovation, more tech, more automation to the supply side, because if you take a step back, and you say, alright, if their procurement industry has been broken for last 20 or 30 years, and super archaic, the supply sides had to engage with those broken kind of older technologies, it’s understandably super outdated as well. So like for us, now we’re thinking, we need to make sure we’re innovating for both sides. So when we get to that future state, we can have full automation for both and be viewed as a value driver for both sides of the marketplace.
Got it, you know, I was gonna save this talking point for later. But now it’s pretty good time for it. Your business is part SaaS, part marketplace, at times, it can be difficult for startups that have you know, these either to business types or ways of monetizing to raise money, because you got ARR on one side, you got run rates, you know, you got a different set of metrics you gotta manage. Do you have any advice or perspective, you know, for founders that are running these these types of businesses and, and how that plays into positioning for future funding?
Yeah, I mean, I think it’s different at different stages of your company. And then the fundraiser as well, where early on, we are still very much and you could argue is still very much do look a lot like an enterprise SAS company. From like an IRR perspective, we do have consumption based tiers, so you can start to look towards that model. But we haven’t really started to monetize the true marketplace, like the FinTech side of the business. So for us early on, it was showing the potential opportunity in the future, the idea of handling payments, and being a marketplace in the enterprise space is not unique. There’s plenty of companies out there that handle payments. The idea that’s unique though, is you want to capture the demand and kind of really be able to get as much of that as possible, the demand being the spend, because as you get the demand, and as you get the suppliers coming to you flipping on the payments, become a marketplace, that’s just like a second act, that’s probably a more profitable act on the first one. So when we were raising money back in the season series A, that was the future roadmap, but it was heavily focused on let’s get in, let’s land with the customers. Let’s make sure we get the base, let’s provide valuable sides. And then we’ll flip the switch. We’re now we’re at the stage where we are starting to make investments in that area. So for if you’re talking about like the fundraise story, and like when we have a future raise, it’s more about we’re ready to go. So now we’ve done this, we’ve proven it, we’ve validated it, we’ve done our research, now let’s let’s get the right team in place, get the right customers on board the right suppliers on board to do that second act, which is a super exciting one in itself, but one that we want to do very logically. So we didn’t jump too fast to the second act before we captured kind of our base and our foundation.
Got it. I suspect that the transaction exists at the supplier currently.
So right now it’s like in the enterprise space, old fashioned Pio invoice receipt and delivery, you’ll see some people are still faxed and things in it’s nothing like the like the b2c world, like in the enterprise space. There’s file cabinets, and there’s a lot of them. So for us, once again, it’s the whole concept of building from the ground up using automation, ML and AI, it kind of lends itself to showing people okay, we can start to automate different things. And then working backwards from business value for if you’re a company or a customer, like a buyer. You’re thinking, Alright, I do hundreds of thousands of transactions, how can I consolidate them? And then if you’re a supplier thinking I’ve net 90, net 120, with these big companies, how come I can’t get paid earlier? So you start to really kind of understand, Okay, what’s the value on both sides. But once again, that works if you’re already providing value to both sides of the marketplace, and they want to do business with you. So that’s still our number one focus being viewed as a value driver for both the supply side and the buy side.
There’s so many problems and so many pain points in procurement. I mean, I’ve felt that myself, I used to be in corporate America, it’s been been some time but I went through it, you know, like why the heck has it taken so long for for startups and tech companies to you know, address this massive market?
I mean, the number one reason well, I guess there’s two main reasons I can think about one is more why more companies haven’t come in and one is more Why Why hasn’t procurement changed? Why companies haven’t come in is probably the reason that new stack invested in us like four years to go, it’s because it’s not an overly sexy space. Like if you’re thinking about like enterprise procurement, like that’s not where like you’re jumping out of bed unless you really get into it, you understand just how big of a problem it is and how much value you can provide. But most people aren’t coming out of B school if they get procurement. Although I will say you mean like me a lot more people that are getting degrees in supply chain procurement, which is cool to see the trends kicking up, which I think has been a big piece of the last two years with COVID. With supply chain continuity with the market fluctuation, like it actually is becoming a much hotter space. So I think that’s one side, the other side is on the company. For like large enterprises, the change cost to move off of old tech is just so high. It’s from a political perspective, from a cost perspective, you get locked in with big enterprise solutions that are not saying like I want to keep innovating in this space, they’re building end to end solutions. So because it’s kind of like the plumbing of a business, like you kind of put up with the plumbing, even if it doesn’t work great, cuz you’re not going to rip out the plumbing. That’s probably in like your normal in your house. Like you’re not thinking like I’m going to rip up the plumbing because this is a little off. But if you can show people the path of you don’t need to rip out the plumbing and day one, let us start with this one area, which for us is tail spend. Let us show you how you can get it better, and then a little bit better. And then over time, yeah, you know what, you might just naturally organically rip out that plumbing. But over three to five years, as you proven how much additional value you can drive, if you do swap it out. So that’s our approach that’s like the Trojan horse mentality that we have to hold space.
I remember in corporate America, how challenging it was to change people’s minds, innovating and pushing the boundaries and you know, replacing software and other products that were installed. Right, because there’s there’s some career risk in that people keep their heads down and keep marching forward. It’s not their fault. But if you propose something new, and there’s some pain around it, then some career risk in that.
So that two sides of that. It’s like that’s what I call like a lagger where it’s like someone that is technology lagard. Someone that fears change doesn’t like change, they’ll be the last to adopt. And like, yeah, you could argue that there’s some like, it’s a little bit directly out putting yourself out there. But like the technology leaders, those are like the the change agents, the people that they see the opportunity, like they want to go attack it, and they want to attack it for two reasons, one for the company, because they see opportunities to move the company forward, to have their project be a competitive advantage. But then also they see it as an advantage for themselves. Because if you’re able to execute on very difficult projects, bringing new techniques, innovative solutions, then you can advance your career very quickly, either internally at your company, or we’ve seen a lot of people getting poached to different roles, because they have successfully pulled off digital, like roadmap projects. Yeah, it is tough, though, you got to find the right people, because some organizations, if you don’t find the right person, they’re gonna keep doing what they’ve been doing for 100 years.
Right? Yeah. Talk more about the customers, not just customers, but decision makers within these organizations. You know, how did your early interactions go with prospects and early customers? You know, back in the seed days a Fairmarkit? And in how did you go about refining your ICP?
Early days a Fairmarkit probably like most companies, or maybe not, hopefully not, hopefully, people have a better ICP in the beginning, we would just call everyone. So across the board, like the first like six months legitimately, just like everyone you could think of at an account that you want to work with, just because we didn’t know exactly like where the message would hit. And we also thought, like every conversation we have is an opportunity to learn. So you can undo that message it did it not what was their push back, then obviously, the enterprise sale you want to go tops down. So you want to start with the executive and go down, but you don’t always have that opportunity. So in the very early days, it was figuring out where the message hit the most. And then who wants to go down the journey with us. And I think like this is probably not unique to fair market at all, is you got to find those initial like innovators that they know it’s not built, or they know it’s built. And it’s like the like one, or whatever it is, but they see the vision, they see the value and they want to be part of it. So we were able to find we were like very lucky to be fortunate to find four or five people that said, I love where this is going I want to be part of this journey. And like transparently, not all those companies are fit and not today. But what we did is we learn what is it fit what isn’t a fit. So it allowed us to refine to get the model down better start to work towards product market market fit, which were so far away at that point. It also allows you to to raise some capital to show Hey, there’s something here. But like in our seed stage, we’re working with you. It wasn’t like we have everything figured out. We didn’t have all the processes down. Like we had some customers with more or less usage. But we knew there was something there because of how excited and how much business value can measure that the companies were getting. And that led us down the track to say Alright, let’s keep digging in and just keep refining, which is what we’ve done over the last four years.
I remember one of the customers was like a transit authority and other one was DTC company and what I had asked you a question early, you know, you have five customers, I think you had five at the time. You know, how did you get these customers and the expectation is always own network or you know, from the past business or, you know, friend to Tarek? And the answer was cold call for all five. And I was blown away that you had cold called your way in to five customers, you know, with a nascent business is pretty telling.
It’s not dead, right? We have learned that and we’ve evolved, are you still gonna have the outbound engine 100%. That’s never going away. But how do you balance it with like the whole customer lifecycle with making sure you’re going after the right accounts at the top of the funnel for the ICP, nurturing them correctly. So now it’s like the whole journey from identifying them all the way to having them be evangelists, and to be a customer like reference testimonial with you. But early days, like we got feedback from another founder, where it’s like, very early days, it’s a battle of attrition, just stay alive, like those, like for the seed, and just pick up the phone and go, we’re like, you can sit there and like dwell on all like the admin work. And I like that, like, just go pick up the phone and just go talk to people. Because if you’re sitting, you’re just trying to like brainstorm everything internally, you’re just not going to learn. And that’s the most important thing. I’d argue that was the most important thing for us.
Yeah. I mean, that’s why I started the show many years ago, it was like, Oh, I’m learning so much more by talking to this founder this VC than like, reading all the blogs and everything else. Any other insights from that ICP journey about what was a fit versus what wasn’t a fit?
Yeah, man, I think it changes every year, where, for us, like, specifically, it was more understanding like, alright, what persona are we trying to sell to? And then what can we find similar characteristics to them? What industries and what verticals? Are we selling to? And then now we’re even taking a step further saying, Okay, we understand the high level, like, industries, we know the size of account, we know the persona, but then even a step further, how are they actually set up today from a procurement perspective? How was the culture today? In terms of like, do they have a culture that embraces change embraces, like fail fast experiment? Or is it more of a legacy? Like you need 99% of the information to make a decision? Versus Okay, we have 80%. That’s enough. And then like you see ranges. So what we really tried to do in the last two years is to find like, really what is a successful customer? And can we identify it early, and then just tripled down on that, like that segment of customers, and it’ll change over time. Because as our messaging change, as our products change, just as we mature as a company, like that all kind of expands out. But we’ve made some big bets on like being hyperfocus, to signing up and working with customers that we know are just going to be huge champions for Fairmarkit, because that’s, like, I love the concept I saw recently in the Harvard Business Review article, but it was earned revenue. So the idea of earn revenue is it’s your traditional net. So upsells, from customers who earn revenue is also customer references. So if you get recommended to refer to another customer that goes into your earn revenue category, so obviously, it’s a lower cost, higher conversion. But like for us, it’s how do we get as much earned revenue as possible? Because when you start to hit scale, now you see the public companies like like Snowflake, they have, 160, 170%, net Daedong, that 140% net, like, that’s how you maintain over 100% year over year growth. At scale, it’s having that earn versus just the inbound, outbound. So we’re really trying to put a bigger focus on that.
So it’s expansion, revenue plus referral based revenue.
Yeah, it’s, uh, I hadn’t heard it. And the first time I heard it was like two months ago, and I just jumped on it, I love it.
It’s so much better. Like, I’ve been a huge fan for years of NPS and CSAT and all that. But it’s way better.
If you can turn that into a revenue metric. That’s the argument is that you can now tie revenue and dollars and cents to it, as opposed to just the NPS, which is great, and you should have it. But this is like, alright, are they actually doing it? Like, are they following through with what they said they’re gonna do if they had the 8, 9, 10?
Love it, love it. While we’re talking to customers, you know, what have you learned about how to build an enterprise business proposal?
So this is something that I was able to draw on a lot of my experience previously, for any, like founders watching the show, and the people that are looking to build their initial business cases, especially if it’s an enterprise level, couple, like main themes. One is that it needs to be cobuilt. People think, oh, we need to build, it needs to be perfect. It doesn’t matter how shiny it looks, or how nice to numbers look, if the other side of the table doesn’t agree to it, and they’re not fully bought in, because they’re gonna get challenged when you’re not in the room. So if they don’t put their name behind it, then it’s just like a bunch of papers, bunch of slides. So I say this, the first thing is like code, build it with your customers and prospects. Other big one, that when we have new reps come in, that we talked about, like coach them up on, it is absolutely not about features and functions. It’s not about what the technology actually does. It’s working backwards from the business goals. It’s what’s important to the business, and what’s important to your champion, what’s important to the end users that are gonna be using it and then working backwards from that and be able to actually measure it, because if you can’t measure it, then how are you able to track is it successful or not? And then I’d say the final one is make sure that it shows especially when you’re early on what the future opportunity could be in the future value could be Because, and now a lot people are bullish on their technology. year one, year two, it’s still early days. So the idea that you can showcase this is the value, the ROI, the payback that you can expect in the first call a year, two years. But as we keep evolving as a company and growing, this is the big picture impact we can have maybe at global scale, as we hit these different areas, it starts to paint the picture of okay, this actually is not going to be this like small project. For us, this is going to be a digital project. And it also gets them already going down the path of your roadmap, because you want those early customers to be on the roadmap with you to be expecting what’s next. And it can evolve and could change, but like they should be pulling you on it. Let’s say you have five customers, 10 customers, if they’re all pulling on a roadmap that you’ve already started to outline, then it really starts to justify and help you co build what what’s next for your company.
Interesting. So with the near term metrics that most of these companies are looking for, they’re looking for, like, you know, driving down time to decision making on purchases, as well as driving down cost on purchases?
I’ll answer that question with a little context as well. Different people are going to look at your proposal differently. So if you’re the CFO, you’re looking at the overall cost sins. So for us, we saved about 11% On average, okay, how much spend coming through the platform or for saving 11%? Then that starts to become interesting. Now, they also look at the headcount reduction or be able to defer future headcount. Because most people, they don’t want to keep adding staff, especially in today’s age. And once they how do you bring in different technology to augment people. So if you can start to show how you can augment people based off the improved efficiencies, but then you might have, you might have a CEO that just made a commitment out to the street saying that they’re gonna increase their supplier diversity spend by 5%, year over year? Why don’t we track that and show that and then you might talk to a a VP digitalization, that’s all about improving the user experience. And that’s impacted by the turnaround time and the cycle time of how long it takes to buy. So if you put that down for 40 days to five days, it’s a better end user experience. And you kind of triangulate and make sure that hit the proposal hits multiple people, It just strengthens why you should do that project.
Got it. More champions in the business could be sustainability as well, I’m sure awesome. And then, you know, Kevin, have had the good fortune of spending some time in your offices, we have a number of investments in Boston, it’s been quite a market for us. But I’ve noticed how your company has a very distinct culture. It’s high energy, high communication, lots of positivity. Talk to us about how you define this culture, and talk about the impact of your core values on your growth.
Yeah, one of our board members said to me, like four years ago, culture eats strategy for breakfast. And I definitely overused that line a little bit, but I just love it, where you need to have the strategy. But if you don’t have the right culture, you can’t bring in the right people, you can’t retain the right people, which makes the strategy just like irrelevant altogether. The way that we view it is our core values of the foundation for the culture, it’s how we make decisions, it’s how we have hard conversations, but the culture is going to evolve over time. So like our core values, we start every company meeting with our core values, everyone knows them, we have four of them be super positive, being a plus player, be fair, be team customer, and they evolve over time, too, we used to have seven, then we went down to three, then we added ticket to a four and so like it’s constant, like course correction and evolution. But the the mentality that we we have with everyone is we’re now like a midsize company, but we’re a growing company, we’re not like a public established entity, things are gonna break things are gonna fail, it’s going to be hard, it’s going to be challenging, like we’re gonna have to work through tough situations. That’s what we signed up for. There’s a million jobs out there that are gonna have less volatility than working at Fairmarkit. But it also provides an opportunity for people. So the mentality is if we all have a default position of like, be super positive, and we’re all a plus players. And we’re being fair about how we make decisions and we care about our customers, then we can go and attack anything. And then the culture side, I think it’s is lead by example. That’s like what I try to do, like absolutely every single day. But it’s so critical that as you keep scaling every member of your team that you bring in, they add to the culture, where I used to think like, Oh, we got to protect it. Like we have to hold on to our culture, we can have a change. And then someone sent me an article from the things that VP of people on Carta, about how you need to expand and grow your culture, because you’re bringing in new people, diverse mindsets, viewpoints experiences, so you mature and you’re growing as a company, it always should be growing and changing. It’s not like let’s hold on to it. But if you keep it growing based off your core values, that’s how you maintain that that consistency that the workplace that you really want to foster. So that’s our mentality towards it.
What has been the biggest area of growth would you say in the culture?
For me, it’s like it comes back to hiring a plus people. And what we’ve seen is our culture, we started as like the three founders, whereas Tarek, Victor, and myself and we are heavily driving all of it, and then you have to early on, and we still are like very much involved like helping out. But you bring in different A plus players that have incredibly high ceilings and you let them shine you let them grow and you let them kind of step into their own and it does it like it changes the culture but in a good way, where you now have multiple people that are responsible, and the multiple people that feel like this is our culture. And then you have that they communicate down to their managers correctly, then to their their individual contributors correctly. It’s very much now like each individual person believes this is our company, our culture. So it started as very much a top down of like, this is this is how we operate. This is how we make decisions to now it feels a lot more of like a bottoms up where like everyone wants to, everyone wants to make sure that we’re maintaining it. And we’re doing right by our culture. So it’s a little more holistic than just three people saying, these are our core values, and this is our culture.
Got it. Got it. Love it. Yeah, I didn’t mention this to you. But about a year ago, a close contact in the industry reached out and said, as his friend, quote unquote, friend was considering a job with Fairmarkit, and what thoughts did I have on it? And what would make for a good culture fit? And I said, Wow, well, if you’re really customer focused, really team focused lots of momentum. And you know, you’re high energy, and you really want to drive results, you know, this person is going to thrive in the role. And I didn’t know all your cultural principles, you know that closely. But he wrote back and said, actually, it’s my wife, and she’s all in, she’s super excited to hear that. So I don’t know the name of the individual. But I was, I was excited to hear that somebody was so excited about this philosophy and this culture that you guys built.
I actually talked to that same person. And she said, You gave her the feedback to run and hide. I have no idea who you’re talking about. But thank you for the good backdoor reference on us. It’s great. It’s great.
Awesome. Let’s talk a little bit about the venture side, Kevin. So you know, what was your process for picking partners you had you had choices, I remember you call me talking through some of these, these options, you went with Insight for the series A, GGV and Insight for the Series B, great to tier one VCs, but when you had a choice, talk to us about how you went with the partners that you did.
It’s incredibly hard. To be honest, I feel like this, I didn’t realize how hard it was going to be as you meet different teams that you really liked that you think, hey, this could potentially be a really good business partner. When I’m thinking about the criteria, the number one criteria that I have, is to start like just good people, good partner. Because otherwise, I got early on as you can work with anyone. But if you work with crappy people, it’s gonna suck. And it’s just like, it’s not going to be fun. So it’s like finding good people that believe in you believe in the company, and that want to grow this into a massive business. And that you know, which give you honest and truthful feedback throughout the whole process. Like that’s the number one it’s like, from from a values perspective, does this team and this person aligned with Fairmarkit? Hey, kind of how we’re growing. But then I think on the other side of it, every stage has been different. Every fundraising has been different in terms of what we’re actually looking for. We’re in the seat, it’s problem solvers. It’s like your team. It’s like, alright, we’re willing to roll up our sleeves, like, let’s just figure out like, where do you need help. And there are certain areas that like New Stack, like, I need help in this area, and we dig in together, and you bring your team and help out. So like, that’s what we’re looking for. Because it’s really like at that point, it’s a part of your team, your 10 person team, you bring in a couple of like, like, super level VCs. And now like, our team’s expanded by those people, the A, it’s more like business advice. It’s more help with benchmarking, like, what does it look like to grow up and mature as a company a little bit, knowing it’s gonna be a lot of experimenting, but just like, how can we get business value across all of our different departments which Insite has a great program for that, in terms of be able to help with marketing with sales, with finance with with everything. So that was huge for us to be round, what we were optimizing for, is we knew we had to build out a leadership team. So we wanted to make sure that we could bring in a VC that had a lot of credibility, to help to build out that leadership team, because a lot of like tier one leaders, they’re looking for who is your backer, because that’s the way they look to de risk it. And then also in the B, we we really started to think about, like, alright, we’re not thinking about survival of getting to the next round. It’s how do you build a 20 billion $50 billion company and start thinking about the long term? Which GGV, that’s their entire mentality, it’s go along. So it’s all about how are we planning for the 10, That 20 billion 50 billion? It’s not saying what’s our metrics in this specific month, which is important. And we do track that every month. But it’s more are we making the right long term decisions? And I will say like, the final thing is, we have just like for anyone listening out there that like is an investor, which I know a lot of people are in this on this podcast. We’ve in every race, we’ve been able to convince people that had hesitations to say, Okay, I’m actually in after maybe three or four conversations where they say a word that we’re now excited, and like, here’s a term sheet. But that being said, We’ve never gone with any of those. So the people that we’ve always gone with have been the people that from the first call, they got it. They believed in us they believed in the market didn’t mean that they’re saying here’s a term sheet right away, but you could feel like right off the bat that they were leaning in, they saw the big picture opportunity how big the space was, and that’s like as a founder and as like a co founder. That to me is the biggest one because it’s okay they get it and they believe so, like for the people that we have If times get rocky, like, I know that they believe in the big picture, so I know that we’re all on the same page. And I feel like that’s something that it goes a long way with deciding who to pick to partner with.
Awesome, you know, for the founders that are earlier, Kevin, you know, reason that initial preseed round is often the toughest, any tips or suggestions for the founders out there that are trying to close that first round and want to take the sort of the venture capital journey?
Stay positive, and just like, get out there? Like, it’s difficult to create urgency like you can do it. So you should try to figure out what’s the inflection point for the raise? What’s the story? What’s the timing, create a sense of urgency, like, that’s all important that never goes away. But like early days, you’re wearing your heart on your sleeve, like, you’re just going out there, like you’re you’re selling your dream, like your execution path, I’d say the biggest feedback that I give to people is, you don’t need to try to fool people that you have it all figured out. And actually, we got feedback that like, that’s actually a huge negative, if you try to go in with product market fit, refined ICP products, perfect, we have the right team across the board. Because you don’t you can at that point, and if you do, like kudos to you. But if you go in understand, okay, these are the five things that we know we need to be successful, we feel really good about one and a half of them. And then from the seed to the A, we’re gonna get to three, or the by the time we get to the scene, the growth stage will have five, but that’s going to be three years down the road. And I think people respect that because they know that like, it takes time to build a business, and you need to learn a ton. So I think just like being realistic about that, I think goes a long way.
You know, I gotta give you guys credit, you guys can write a cold email like no other. When you first reached out to me, I don’t know if you remember this, but it was Tarek, your co founder. And he reached out. And in his initial message, he not only mentioned that he was a listener of the show, he mentioned something about the show and how much he liked it. He also mentioned he went to Indiana, which is where I went for undergrad. And he was a college athlete, which I was a college athlete as well. And in retrospect, not only did he make it a really personalized, nice message, he’s like I’m in Chicago, I’d love to meet when I’m in Chicago, you know, it’d be great to sit down. What he found three points, you know, of commonality that I really care about. Right? He complimented the show, he talked about my alma mater. And he mentioned he was a college athlete, which is, you know, something I take pride in. And, you know, I gotta give you a lot of credit. Do you have any advice or tips on on cold emails and outbound sales? Because I know you guys have had some success there.
Yeah, I mean, it’s two points. That one is making sure that like, who’s reaching out to you, and before even got like, to the personal aspects, because he knew that from an alignment perspective of what we’re trying to raise our stage, that new stack was a strong fit. So first, he identified okay, like, this is the target that we should be going after? And then once you identify that, who’s the person we should be talking to? And then how can I make this relevant to them? So the exact same on the sales side, where you identify what’s the company? Who is the person, what’s relevant to them, what do they care about? Because he kind of like, the more personal the better. So I think like that, that would just be the feedback is just like, take the time, especially, there are different strategies, you might have marketing go more of like spray across the board, sales might be more focused from a fundraising perspective, like it has to be focused, and it has to be very direct, has to be concise, because you get a ton of emails, I’m sure, I think just the more personal the better. Like if people aren’t getting the generic emails all the time, I will say, I’ve seen a lot of success with founder intros to different companies. So I think like a cold outreach is great. And you should always be doing them. But then also, like, if you find a portfolio company, say for new stack, like I’ve done it with you, where there’s other companies that I know that are looking for their seed, or their a, whatever it is, and they come to me, they explain why they want to work with you, they explained why it’s a good fit. And they ask them, I’ll provide the intro, which then I can do because we are the relationship. So I think like whether you do it that way or the cold outreach, sometimes you don’t have that option. Just making it personal makes all the difference.
100%. You made the introduction to a company called BTR in Boston, probably a year and a half ago right. We ended up leading their their pre seed round co-led it with LRV. And now they’ve closed the Series A with Insight, they just publicized that, you know, the same backer you had for your Series A.
I intro’d them to Insight. So that’s how it works. So and you still have to earn it, but it’s used any channel available to you. And as long as people know that, like you’re being sincere, like you’re doing your homework and research not going to waste someone’s time. People love connecting.
How about, you know, any quick tips or tactics on the actual engagement, you know, with the prospect maybe in the context of the VC, right, you get on a call with a VC? The expectation is you’re doing a lot of pitching, right a lot of talking you know, how do you handle that engagement so that you’re you stay curious, you listen and you sort of build rapport with the the venture capitalist?
Yeah, there’s something that we did early on which will different What we do now, we’re early on, we would get in, we had the mentality where we just want to ask a bunch of questions to start. Because a couple things. One is we want to learn, like, is this a good fit? Because we have no idea outside of the research we can do online? Is this a team we want to work with? How do they make decisions? What’s their process? How fast is their process, so just like any like sales call, like you want the discovery, so you want to understand and learn as much as you can, because then even when you go to do your pitch, it’s tailored actually. And obviously, you want to stay true to your message, but it’s tailored to maybe what that person or what that team cares about. So that’s one side is like, that’s if you’re just doing it mid fundraise. What we’ve really adopt the strategy of which I’m sure most companies do, is just in between rounds, having those touch points, even if they’re for 10 minutes with teams that you potentially want to work with down the road or that you want to be involved in the next fundraise. Because even if it’s just sharing a quick tidbit, asking some questions, listen to their feedback on the market, again, them to help you with upcoming hires or executive intros that prospects, like there’s a lot of back and forth you can do for like maybe the year leading up to it, that’s a pretty good indicator to show, how will they be to work with if you decide to partner with them, and they decide to partner with you. So that’s something that that we do now is we just we meet with a select group of teams that we feel like, hey, like this could be really interesting partnership, let someone steal a little bit of like a pilot with each other, because they get to stay up to speed on the business, which they want. And then they can also show up differentiated value, which is what we want to see. So that’s what we’ve done recently.
Yeah, I recall, just say really quickly, I recall from our engagement, and that would talk in person and had a couple calls. And by the time I met with you, we were at kind of that stage where we want to make an offer. But I’m like, you know, I gotta meet the CEO and see if this is really something to be excited about. And I found myself within about 10 minutes of the call, you had flip the script on me. And I was selling new stacks so hard. I’m getting into this business. And I hung up the phone, I said, wow, how did that just happen? Like, you really were asking me a lot of questions on like, why you should take investment from USAC. And I remember getting animated and talking about everything we were building and how excited we are. And you know how we’re going to become the de facto brand between the coasts and it was a it really got me charged up. But it made me really respect you guys, because you had your choice. And you can think about, you know, partners you wanted on board. And it was just cool experience.
And shameless plug for New Stack, where like it has come true. Like everything that we’ve talked about. X rays are talking about mentorship programs, like all that across the board. So I want to do wanna give a shout out to your team, because like, that was what, like three and a half, four years ago, and we still have a great relationship today, you’re still helping the business.
Appreciate that, Kevin. Yeah, and you know, just finishing up here, can you share with the audience, you know where you’re at today with Fairmarkit and kind of what the vision is here.
The whole mentality of view we have is looking to disrupt just how companies buy and sell in the enterprise space. So for us, the whole view is in a future state five years out, it’s a great end user experience for anyone at a business. Everything in the middle is automated in terms of how you buy, how you transact how the suppliers been. And it’s a great supplier experience. So we’re working towards more of like that frictionless e commerce, but in the enterprise b2b space, we are we’re taking the Trojan horse approach, which is going after the tailspend space today. And then over time going up and out to handle more of what people are doing today and to augment it. And then from a customer perspective, like we’re going after large, mid to large enterprises we’re working with, like in the last month, we’ve signed up two Fortune 25 companies. So we’re getting in with these bigger organizations and showing them how they can do it differently, how they can use tech to automate it. And we’re going to continue to build out that customer base, but really expand up and out with our existing base.
And Kevin, what is success to you?
Three different sides. One is the team’s success. It’s already giving people the ability to throttle their careers. And can they look back down the road and say, I helped to build that. And I have the bill Fairmarkit. And it doesn’t matter if you’re on prem or not, you know who Fairmarkit is, from a customer perspective that we’re getting, we’re providing them a competitive advantage by bringing in Fairmarkit providing so much value, and then a market perspective. It’s like successfully proving that the beat enterprise b2b space can be as agile and as user friendly as like the b2c and that you can really bring a new technology to disrupt and if we’re able to flip that mindset which we will be that success, because that means that we’ve kind of turned the way that people thought about the enterprise world and made it just a lot more enjoyable than what it is today, which is like red tape red tape red tape.
Kevin, if we can feature anyone here on the show, who do you think we should interview and what topic would you like to hear them speak about?
I’m gonna say I’m a Frank’s Slootman fan. Datadomain, Servicenow, Snowflake, wartime CEO mentality, just how it’s always a call to action. I just read a book amp it up, which is a great book. That person I really look up to as a as a leader.
Kevin, do you have any tools or hacks that are a secret weapon?
It’s just for me, make sure to do right by people and do the right thing. And people that goes a long way with people if you’re just honest and transparent with them.
Kevin, what do you know you need to get better at?
I know I need to keep growing, and need to do a lot better jobs still at delegating, and then doing a trust, but verify where I still, I still like to get into the business, and I always will. But as a leader, I know that I need to always make sure we’re enabling our leaders to lead. And to do that is to give him the ability to run to take risks, and once again, to kind of step up in their careers. So that’s something that I’m personally working on right now is just giving people the opportunity to run and being there like not thinking about it from like a top down. But from a bottoms up, like I’m here to support everyone, like where’s my time best utilized to support the business and our people.
And finally, Kevin, what’s the best way for listeners to connect with you and follow along with Fairmarkit?
LinkedIn is great. Feel free to shoot me an email Kevin@fairmarkit.com.
Well, Kevin, you know, sincere pleasure to do this. Thanks for coming on the show. Hi to Tarek and Victor, and congratulations on your second child, which is, uh, I think the due date is in a week and a half. And it’s amazing that you’re doing this with me today, you know, with such a big event coming up.
10 days out. We are thrilled. We’re fired up.
Awesome. Well, congrats, Kevin. Appreciate it, man.
Thanks, Nick.
Transcribed by https://otter.ai
