Mike Whitmire of FloQast joins Nick to discuss Building and Scaling in Unsexy Spaces, The Next Generation of AI-Based Accounting, Backchanneling your Investors, and If the AI Hype Cycle is Bad for Venture. In this episode we cover:
- FloQast’s Product and Market Positioning
- Organizational North Star and Customer Persona
- Attracting Talent and Fundraising Struggles
- AI Integration and Future of Accounting
- Impact of AI on Venture Funding
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0:18
Mike Whitmire joins us today from LA. He’s the CEO and Founder of FloQast, a growth-stage venture-backed company revolutionizing the accounting software industry. FloQast has raised over $300M in total and recently closed their $100M Series E round from ICONIQ in April. Prior to FloQast, he was a Senior Accountant at Cornerstone OnDemand, specializing in financial reporting and the close management processes. Mike, welcome to the show!
0:45
Thanks for
0:46
having me on. Nick. Really appreciate it. Appreciate the introduction.
0:49
Yes, it’s a pleasure, sir. So tell us a bit about your background prior to flocast.
0:53
Yeah. So as you mentioned, senior accountant, but really nice. I was a practitioner for about eight years in accounting, so I started my career at Ernst and Young doing financial statement audits, and that’s that’s a really common career path for accountants. We graduate, oftentimes we get fed into the Big Four audit firms. You go there, you have to work there for a couple years to get the required hours to get your CPA license. You audit companies, which is basically investigating their books and trying to find things they did incorrectly or did fraudulently. That’s your goal as an auditor, but you learn a lot from that side of the table. And generally, get burned out. I got burned out after about four years, I decided to leave. And I really love the tech space, software companies. I’ve always wanted to be an entrepreneur, and so I really wanted to learn about the IPO from behind the scenes in an accounting department. So was pretty selective about where I wanted to go, looking for a pre IPO company in Los Angeles at the time, not a very common thing, not a whole lot of those. So took my time, but got really lucky and found a company by the name of Cornerstone on demand. And when I interviewed with the CFO there, he told me that they were planning on going public in 12 to 18 months, and they were basically in shambles and needed help getting everything sorted out and getting ready to go public. And it was a monumental task, really, really challenging. I was only the fifth person hired into the accounting department, and if you’re outside of the accounting world, you might not realize just how absurd that is, that we only had five people to gear up to go public a year out. But that was the that was the fact of the matter. It’s five people, no processes in place. We’d never gone through an audit. We hadn’t done financial reporting in any meaningful way, and so we had a ton of work to do. I mean, like we were on QuickBooks. Not many companies go public on QuickBooks, so we had to migrate systems, get an auditor in place, drop the s1 go through that whole process, and then ultimately you go public. Sarbanes Oxley compliance kicks in. I got to be a part of that process. Quote got to be. Then we scaled up, and we had really great international expansion. And ultimately the team got to about 60 people in the organization, and we really started to have challenges around collaboration, just really baseline collaboration and accounting. Accounting is really interesting because it’s, it’s a team sport, believe it or not, we’re all working together to try to produce financial statements at the end of the day. That’s our job is to, is to get financial statements out the door and get it done on time. But it’s a team of a lot of individuals doing their own little work that culminates in the financial statements. And so it’s really important for controllers and chief accounting officers to have that visibility into where the team stands when the books are going to be closed and when they’re going to be able to issue the financial statements. And there’s really just none of that visibility available. And at the time, when I was at Cornerstone, specifically, I was pretty focused on the revenue accounting side of it, and so as the guy booking the journal entries for revenue, I was in Salesforce a lot, and we had a status update meeting one time where there were about 30 of us in this boardroom, and what would happen is our CFO would pop his head out of his office, and our controller’s name was Karen, he’d go Karen, when are the books going to be closed? That would then result in us being in a meeting for about an hour where everyone just went around the table and talked about their status with the clothes and when they were going to be done with their done with their their part of the job. One One day, I just snapped. I’m sitting in this room, and I’m like, we wasted 30 hours of close time just sitting here, 30 people times an hour, 30 hours, we could have been closed that much faster. And then I started thinking, you know, why? VPs of sales they have they have sales force, and it helps them stay on track and get visibility into where their teams stand, and if they’re going to hit their number or not, why is there not something similar for accounting? You have a bunch of individuals, they’re getting their work done. We might not be hitting a revenue target, but we are trying to hit a deadline. And I would argue with the SEC deadlines are fairly non negotiable at that point, so pretty important thing that we should be marching to as an organization. And so that was the, you know, big epiphany, if had the big pain point around collaboration as a former auditor, I don’t want to get too nerdy on this front, but there’s this whole reconciliation process that’s a massive pain and very manual. And so that was sort of the other side of the equation that we wanted to help out with. And then a bit, a bit of the inspiration from Salesforce. Course, and just decided, hey, here’s the opportunity. I’m going to quit my job and started working on on flocas full time. So that was right at the end of 2012 was when I made that decision. And then, yeah, we started working on the product from
5:10
there. So is it project management in collaboration tools, then, or is it closer to Salesforce and, like, account management of some sort? Well,
5:19
in the you know, Salesforce, at its core is a collaboration tool and one for transparency and tracking your workflows and creating opportunities and doing all that good stuff. Flocast is very similar. There’s collaboration signing off on different checklist items within the world of accounting documentation, which is just writing down everything you’ve done and proving that you’ve done this work is very important, because all of that feeds into the audit at the end of the year. So just having all that documentation in one application and having visibility across the team and ensuring that work is getting done. So yeah, collaboration, project management. But one of the things about accounting is we do the same work, month over month, quarter over quarter, year over year. So it’s about the recurring nature of the checklist, making sure the team is getting that work done and getting it getting it done on time. And then the other aspect is really from an efficiency perspective. So oftentimes you don’t have visibility into who, where the bottlenecks within my processes, who on my team is overworked, who’s underworked, what’s going on, and we’re able to provide those insights on the back end. And it really helps optimize your team. And one of the really interesting learnings through that whole process is oftentimes, the reason things can be slow is because your best employees have the most work put on their plate. There’s been, there’s been a fascinating learning going
6:37
through something done, give it to somebody who’s busy. So that that is a
6:41
very true, that’s a saying. It’s a very accurate thing. But there’s some break point at which the employee gets burned out and they leave. And so it is, it is helpful to have that visibility into okay, this, our load balancing is not great here. Our all star has, you know, they’re doing 40% of the work, or whatever, just making up numbers, but they’ll say they’re doing 40% of the work. Let’s reallocate that to the rest of the team, see if they can take it on. And right there, generally you’re able to save on some save on some burnout, save on turnover. And it’s this is, this is heavily discussed in CFO and accounting circles, but I don’t know how broadly it’s known. There is a massive talent crisis on the accounting side right now. You know, there’s year over year, the number of accountants available to do this work is actually declining, and there’s just fewer people majoring in the profession. People are leaving the profession, people are retiring, and we’re not filling the ranks fast enough. And so losing talent today is a really big challenge. If someone quits, it’s really hard to go find someone to replace them. And you just extrapolate that out into the future, and the talent gap in 10 years is something where I look at how big this talent gap is going to be, and there’s the only way we’re going to plug it is through software. But in the meantime, as an employer, you have to do everything in your power to keep good people at your company.
7:54
And so, you know, one thing I’ve noticed with accounting software in the past is, you know, challenges when you’re collaborating cross organization, you know, so is your tool just within one organization? Or can, if you’re hiring out, you know, Deloitte or en y or something, are they also collaborating on the platform as well?
8:15
So there accounting is really interesting. There are all kinds of use cases and different ways that people get the job done. And yeah, I want to, I want to be clear, we’re not a we’re not a GL or an ERP. We don’t replace a NetSuite or an oracle or SAP or something like that. It’s more on the project management collaboration side. So the areas where you’d be working across the organization is when accounting needs information to do their job. So my personal example, it was when I was at Cornerstone, being the revenue guy. Every month, I had to bother our customer success team to understand what percentage of each of their implementations had been completed by that point, because that’s how we recognize revenue within the company. So really important for us, I would argue for our CFO, our CEO, really important to understand what their revenue was going to be for the quarter as we headed into an earnings call. But if you’re if you’re the head of customer success, this is such a secondary part of your job. Your job is to keep customers happy, get them deployed and make sure they renew, not provide this annoying kid from the accounting department with a bunch of data every month. That takes me a long time to get together, so we do have to collaborate. It’s generally not the most fun exercise, because, again, it’s not the core part of that person’s job, or just sort of this extra thing they have to do. So here’s some tools that help with that area. And it’s really about automating the request of that information and having those those requests go out on an automated basis, having it sent back to floquest and then all documented and saved inside of one place, then on the other side, when you talk about Ernst and Young Deloitte, so on and so forth, there are a couple of use cases around that. So the first is, oftentimes, some companies hire them to supplement some of the staff accounting work that’s being done, you know, augment the work of the staff accountant and the senior accountant. In that case, they would just get a license to flowcast. They’d be part of the team. They’d be working. Working with them and collaborating through the application. Then the other use cases with auditors, if they’re auditing you a lot of the documentation you need for your audit lives inside of flocast, there are very different opinions on whether our clients want to give the auditors access to flocast or not. There are two there are two very polarizing trains of thought within with auditors. Many accountants believe just give them the least amount of information possible. The more you give them, the more questions they ask you, and the more time gets wasted. And so it’s just, hey, I don’t want to give them anything. The other school of thought is, give them everything, let them go in and look at all this data and do the job on their own. So there’s, there’s two different schools of thought there. It’s sort of a topic where you have your belief it is what it is, and so we’re able to accommodate either, either use case there. And what we do is we just offer free, free licenses for auditors to log in. We want to encourage some of that behavior. I’m a believer in transparency. I think it’s easiest to just give the auditors access to everything. But again, not everyone, not everyone thinks about it that way. So not everyone’s collaborating with
10:58
their auditors. So how would you describe your organ organizational, North Star, Mike,
11:04
our so our mission, it’s, it’s really broad. We want to elevate accounting. And I think this is a really big it’s, it’s bigger than just software. I think software plays a really big role in where the industry is going. But there’s, like I mentioned, this talent gap issue is really big. Accounting is what? What really bums me out about accounting is the stereotype that’s been created out in the world, and a lot of the times it is, it is because we have to do this mundane, rote work, which is not actually what you study in accounting. When you take an accounting course, it’s not about number crunching or bean counting or anything like that. Accounting is really it’s a language. It’s the Language of Business. It’s more like a puzzle and a formula, and it’s it’s really getting to work through these challenges. And when you’re studying it, when I studied it, at least like I decided to major in it for a reason, I enjoyed the textbook version of it. Thinking through the problems and solving all these problems was a fun challenge. And then when the books tie out, there’s this little dopamine hit that comes with that as well. You feel good. Job well done. And everything’s tied out. But then when you get in the real world, it’s not like that. You’re just going through Excel spreadsheets doing really boring work that’s tedious, and it’s not at all what you studied. And so our goal is to turn accounting into where you’re actually doing the job that you’ve majored in, and allow people to elevate get out of that role of a preparer of really rote work technology should be doing, most of that elevate them to a reviewer of this type of work that’s being done, and allow them to use the stuff they learned in college for actually doing accounting and being really good and being impactful for it. So it’s to forever elevate accounting. We think that’s a couple of different angles that go into that there’s a cultural aspect which, believe it or not, we’re trying to help out on that front. We try to get more people into the more people into the field at large, and then use our software to take the boring work out of the equation. So it’s a more interesting job.
12:48
Is there a certain type of ICP or customer persona that’s embraced this philosophy that you just shared in, you know, have been kind of your your Lighthouse customers early on in the journey? Yeah.
13:00
Well, we’ve, you know, as you would expect, technology companies are going to be the most open to adopting new solutions. And so when we, when we started selling our software in 2015 hyper focused on Bay Area. You know, tech hubs, really early stage companies, basically companies that looked like Cornerstone when I joined. So a few people getting ready to go public need to get their processes documented before they scale. And over time, we’ve expanded. We’ve gone across more industries, and we have about 3000 customers these days. So it’s there’s not any one industry where I’d say, you know, we’ve really specialized in outside of tech. But what I found time and time again is it’s about the buyer, the actual person that you’re selling to, and are they open to innovation and technology? And I found that’s really just dependent on the person. So I’m not going to say manufacturing is more or less open to technology than a tech company is. Some tech companies have people who have done it the way they’ve done it for 20 years. They don’t want to change it is what it is. Other tech companies want to adopt something tomorrow and are ready for change. We’ve seen the same thing in the retail industry, real estate, manufacturing, biotech, what have you. It’s the same it’s really about the human being that you’re selling to at the company,
14:09
very good. And when we’re speaking about human beings, clearly you had to attract, you know, strong leaders as you were growing this business. You know, how did you do that with a business that, you know, has these stereotypes that you mentioned before, you know, it’s kind of like, oh, accounting is boring. It’s, you know, a bunch of bean counters. It’s sort of the antithesis of hype in the Bay Area. No, you’re, you know, you’re probably hitting your stride when, like, crypto was hot and stuff, and so, you know, how do you attract really great talent? You know, it was,
14:41
it was really hard. And I’ll actually extend that into fundraising as well. It’s not the coolest idea to be pitching to VCs, particularly as early form, you know, collaboration, all this kind of stuff. But when we moved into more of the automation world, and we’re really doing a ton of work, and really when we started to show traction with revenue growth and the metrics started to speak for themselves. Was, fundraising became a piece of cake. On the recruiting side, you’re right early on, not a sexy space. You know, people are coming out of different areas within software, and they have their domains. They don’t necessarily want to try new things. So it’s really about leaning on the network, going through people. I knew we had brought on some great board members who were able to put us in touch with really good candidates, and it’s just selling, man, you got to you got to get people on board. You got to get them excited. I think I do a decent job at that. Again, people fired up about the opportunity. And one of the cool things is I always get the question of, well, I don’t know anything about accounting. How much do I need to know about accounting? And we hire accountants all over flocast Like we hire accountants into sales customer success. We even have accounts on the engineering side. Product Management is full of accounts. It’s everywhere. So I say it’s not about we don’t hire leaders for accounting knowledge. We hire them to lead and be great at whatever they specialize in. We got you on the accounting side. The gap will be plugged. You’ll have more than enough accounting knowledge around here. So it’s really about your ability to execute in whatever your domain is, whether domain is, whether that’s marketing, sales, product, whatever it is. That’s what we’re hiring you for. At the executive level, you got all the support in the world underneath you.
16:10
Mike, you mentioned pitching VCs. You know, what have been your top considerations when pitching investors? And how have you uniquely positioned? Kind of the vision for your company?
16:20
Well, I would say, depends on the round, the the seed round, and the Series A round, it was, it felt basically like begging for money. And yeah, you learn, you learn a lot of hard lessons along the along the road there, so that that got tricky. And then for our series B round, that was one where we had, we had been doing really well. We’re growing really quickly. Clearly, the product was striking a chord, and we were able to start upselling and drive ACVs up, and investors were just catching wind of how we were doing. And then all of a sudden, we were getting inbound interest in, you know, leading the flowcast round. And that was where we got introduced to insight. Insight ventures. At that point, they were just spinning up their kind of earlier stage fund where it was really growth, growth focused investments, not as much of the later stage stuff they want to get into companies that forecast size, and we were just shy of 3 million of recurring revenue at that point. You know, about 40 employees, about 3 million of recurring revenue, and pretty early for insight to cut a check at that time. But they become more more common in that space, and with that, it was just getting to know them. They loved the business, and it was really about us making sure they were the right people that we wanted to partner with. And the series B was the turning point for that. That being the case, we’ve been really fortunate. We’ve had options with raising money, and it’s about us finding the right partner that we want to work with. And you know, I don’t always optimize for price with rounds of funding. I do think the board members around the table are really important. Are they good humans that you want to work with? And so that’s been our thought through, through Series B, C, D and E.
17:47
And what about the earliest stages? You mentioned that were there areas where you, you know, really excelled that kind of helped you attract that seed capital in the early days?
17:56
There it was. I mean, honestly, there was some dumb luck that that went into it. We joined a startup accelerator in Los Angeles and La it’s mostly consumer companies, you know, pool tech, that’s being built things like that. I come in wearing a suit. I think I’m the only guy who’s ever worn a suit to pitch the startup accelerator there. I I found out later, after we got in the program and I saw other people come in to pitch the firm. I was like, Man, I must have looked like such a nerd coming in in a suit. But I also think they appreciate how seriously I was. I was taking it. And their their thesis was very simple. We love SaaS. We think there should be more SaaS in LA we think you have a great background. We think this is a pain point. So here’s your money that it was like that. That was about it. And so we went 50 grand. We went and started building our first product. We put the prototype out there, and then we started going out to raise our seed round, and we amplified the startup accelerator here in Los Angeles. They do a great job of connecting you with investors, angel investors, really early stage funds. So I can’t thank them enough for all the work that they did to help us get there. All that said, I heard no about 100 times from all these various parties. And a lot of it is just, it’s not, not cool. What you do? I don’t really get it. I don’t know. You don’t want to go, go do some other stuff. Then we got really fortunate. And literally, the last investor in the Rolodex at amplify was this fund called Toba capital. And we were, we were connected with. He was a partner at the time. He’s no longer with the fund, but his name’s Rob minehardt. He’s still an independent board member of ours, one of my main mentor. Love the guy to death. He’s been amazing to work with. So he, he we met. He liked me personally. So I had, I had that angle going on and but he was also a founder and a business guy who had scaled an organization and ultimately sold it to Dell. So he understood the challenges of financial reporting and the month end close, because at his companies, they were not good at it. And so he was always frustrated with, what are the financial statements going to get there? Why is my accounting department such a mess all this kind of stuff? So he intrinsically got it because he experienced it that I think. He liked the energy, the entrepreneurial spirit, the background of actually having done the job before, and was willing to take a bet on us. So he introduced us to the head of the fund. His name is Vinnie Smith. He’s also a founder. He built a company called Quest Software, which he ultimately sold to Dell. And I remember sitting down with him absurd story. I show up at his house in Orange County, once again, I’m wearing a suit because I want to, I want to raise some money, and I show up, and it’s him and another one of the partners, and they’re wearing shorts and a T shirt. I, you know, I knock on the door. They open the door. What’s up, dude? Hey man, welcome in. Great to see you. And, you know, we got some sandwiches. You want to grab a sandwich? Let’s talk about this stuff. And so, like, all right, we grab a sandwich, and I just, I pitch for literally five minutes. I just explained what we do and the challenges we solve and the benefits we offer. And he goes, how much? How much? What do you charge? I was like, tell me more about your team, size, all this kind of stuff. And he tells me, I go, probably, like, 25 grand. He goes, here, so you tell me, for 25 grand, I could have my financial statements on time. Like, yeah, that’s what I’m telling you, he goes, Okay, how much do you want? One 1.5 million. He just, and I’m like, we were raising, we were only raising 500,000 at the time, and we had a couple 100 grand committed on the round. And so he just, he got the vision, he completely blew up the size of the round. We ended up closing a total of 1.3 with that. And we were off to the races from there, building the software, taking it to market, getting our first customers on. And then I went to the Series A round, and it was a lot of the same, a whole lot of no’s for for an extended period of time. And then ultimately, I think, our last, our last intro on the Rolodex, we also were able to close, close that fund, which was Polaris partners at the time. Yeah, no, it’s been a couple, a couple buzzer beaters in the very early, early days of lookouts.
21:43
I mean, it looks from the outside, looking in, it looks like you’ve got, you know, some, some hitters on the cap table. You got iconic and meritech and Norwest and insight. Do you have any tips or advice for entrepreneurs, you know, whether it comes to selecting certain traits in their investors, or nurturing relationships. I mean, you know, sometimes you just have to take capital if it’s the only offer you get, but if you do have the benefit of choice, then, you know, these are important decisions, yeah,
22:13
and, I mean, we’re the first two rounds of funding. I also want to be clear, we got really lucky, because they happen to be the last ones, but we also enjoy working with them. So that was just we were very fortunate on that front. The partner we got out of Polaris is a guy named Gary swart, who CEO, founder before he ran a company called Upwork, or, sorry, oDesk, which he merged with Elance, and that ultimately became Upwork, and then they went from there. So Gary’s been on our board. And one of the reasons I really like Gary is I was an accountant. Didn’t have a ton of sales experience. Gary was a sales person by trade. That was his background. He was a sales guy, sold a bunch of big deals and then became CEO. And so when you’re looking for the mix, I would also say, find people who have a background that complements you really well. There’s no need for us to bring in another accountant on our board like I got it. I don’t we’re good. We don’t need help with the product. We do need help learning how to sell stuff. And so find people who are complimentary and can provide, provide value. I really like operators, former operators. They have great insight into what you’re what you’re actually doing on a day to day basis. I found, I found that to be a big disconnect, and it’s, it’s something you can’t really avoid in later stage rounds. But for as long as you can try to find an operator, and somebody who’s been in your shoes for an a professional investor, they don’t understand the little things like, Oh, I have this HR nuance, Nuance going on, and this person’s mad at this person, and that’ll be the cultural issue. And they don’t understand the ramifications of every little decision that you have gone on. So operators get that a lot more. But then as you get as you move up in the world, you start working with professional VCs. Relationships become really important. The Series B with Insight was they have a connection with Toba capital, with our first investor. So that was sort of where they got the Intel behind it. If I’m being totally transparent, I was actually very resistant to meeting with insight, because at the time, they had the private equity reputation, yeah. And so I literally said no the first couple of times, and then they finally convinced me that, no, no, we’re doing this venture thing. It’s not about private equity, it’s about growth. We realized that we just missed out on a ton of big opportunities, and we want to get in those, and we think there’s a ton of upside. So it’s a new team, it’s a new fund, it’s a, it’s a, it’s a longer term hold, and that’s our that’s our vision for all this. So I met with ended up really liking the team, and we took the money from them, and they, you know, offered us. We took 25 million bucks from them, ran a little bit of a process. There were a couple of other firms that I liked in there as well, but ultimately, Insight was the right partner for us, and they have been incredible to work with. They’ve been really supportive with strategic decisions I’ve wanted to make. They’ve been really supportive with additional fundraising. You know, they participate in every round. They’re at the table to lead rounds, if that’s something we want to do, but we like to bring in new investors around the cap table. So I cannot, I want to insights affirm, but I’m going to speak specifically to the partners we work with, which is Devon perrick, Rachel Geller over there. They’ve been awesome. So if you have an opportunity. To work with them and take money from them. I would highly recommend it. And then the Series C was, that was Sean Jacobson at Norwest, and Sean and I had known each other at Cornerstone, so I was, I was a guy booking journal entries. He was the head of business development over there, and so we kind of crossed paths, but he had a much cooler job than I did at the time. And then he moved into the venture world, and we got to know each other a little bit better. And again, he had, he wasn’t a CEO, but being inside of a company and helping run things, he had really good perspective on it. So I liked that background, and then just liked him as a person, and he was really supportive of me. So Norwest was kind of the no brainer at that point. I’d say the series D was really interesting. That was we raised in 2021 when I think if you had a pulse, you could raise 100 million bucks. That’s about all it took at that point. And so we had term sheets from about 15 different venture funds. Put a lot of time into getting to know the partners more, and then I did a lot of back channel references on VCs. Also, I think that’s an important and underappreciated thing that founders can do. So you’re making a big it’s a big commitment. It’s kind of like it’s not getting married, but, you know, you’re starting to start a relationship that’s going to last for a long time. And so I like to call up some of the CEOs they’ve worked with in the past. One of the questions I really like asking VCs is, you know, tell it, tell me about your biggest win. Let’s talk about that. And they, they start bragging. They tell you about the biggest win and how much money they made and how much money they made and all this good stuff, and then, okay, tell me about your worst investment and how did that work out. And you can generally tell a lot about a partner on how they treat their worst investment and how they think about that there’s very frequently the stories I’ve heard, at least is that if you’re a company that then starts struggling, you’re going to not get as much attention from the partners. They’re not going to be supportive of your next round of your next round of funding, and it begins a little bit of a death spiral. So that was a big focus of mine, is like, hey, if things go sideways for us, like, let’s say we hit a rough patch, what is this going to look like? How are you going to support us? That was something I really focused on with them, and that was where ultimately maritec won the won the deal. George Bischoff at maritec is incredible, great guy to work with, and His stories were great around some of the companies where it had been maybe an average outcome or mediocre. He’s had home runs along the way, but it was great to hear about kind of those, those stories, and then you just validate that with the founders. Give them a call, chat through stuff. You know, if they enjoyed working with the VC, they’re more than happy to carve out some time to chat more about it. If they weren’t happy about it, they might not get back to you. That’s that speaks volumes as well. So, yeah, I can’t, I can’t stress back channel references enough. I think that’s really important.
27:26
Good advice. Talk to us about how AI is incorporated into, sort of, your strategy as well as your product offering. Yeah.
27:35
So we, we started rolling out AI features, kind of within the application, I think, along the lines of what a lot of software companies have been doing, there’s some pretty low hanging fruit and easy use cases where AI can can do some of the work, in particular around llms, reviewing transaction level data within accounting, helping provide insights into what’s going on, kind of at the deeper levels within the transactions. But we actually think, and what we’re working on is just a it’s a full AI driven platform to automate accounting. We think this is really important because it’ll help plug the talent gap that we talked about earlier in the in the in the talk like the talent gap is a very big issue, and technology needs to help solve it. And what our platform is doing is we’re actually enabling accountants to level up and not be the ones preparing this work anymore. They’re the ones reviewing the work that’s being done by by our AI engine. And that’s important, because accounting is nuanced. Accounting changes. There’s kind of a perception that accounting is just a bunch of rules, and you apply the rules to this stuff, and it should be fine. What’s so hard about this? The reality is, if you if you sat in our shoes and you dug beneath the hood, you’d realize that it’s incredibly complicated, because every company is a little bit different. You have different systems, you have different structures for different things, you have different software that you’re using for it, and it just becomes very unique. And so you need something like a platform to help you automate your specific workflows within your organization. And that’s what we’re building, is a solution that allows accountants to automate their own work. And so we really think the future of accounting is it’s not well in a way in Excel anymore. It’s certainly not bean counting or number crunching or anything like that. We really think prompt engineering is where accounting is going. And the ability to work with llms to automate your own work is the future of this. And then really, like, like I said, elevate yourself from a preparer of this work into a reviewer of what, what AI is doing. And with that, you get to focus on the cool stuff that you learned about in accounting. It’s more about guidance and how the pieces fit together and making sure we’re doing things properly and optimizing, not just, you know, not just treading water and trying to get through the day.
29:37
You time this perfectly, Mike with your launch, what, 10 years ago, and now the boom of AI right now. Yeah, perfect.
29:45
Last 10 years, it has been crazy to watch how much things have developed in the last 10 years. And we do. We are big believers in llms by thinking it from a different from a different lens than a lot of people are thinking about it with accounting. Yeah.
29:58
So Mike, US startups from C. Have significantly more venture funding in q2 of 24 than they did in the prior quarter and also last year in q2 according to data from PitchBook, but the number of startups receiving such funding was significantly lower reflecting how small a small number of these giant AI deals are kind of skewing the data and dragging it. Do you think we see this trend persist? You know, more dollars chasing fewer startups.
30:27
I think my in my conversations with the VCs, there are a ton of AI companies popping up, and I think there’s a bit of a wait and see approach to which ones are actually going to last, because, and we’ve seen this internally, a lot of the startups are, they’re really features within platforms. And so you’ll buy something, you’ll use it for six months, and then one of the platforms we use rolls out that feature. And so it’s like, we don’t need that anymore, and you just kind of cancel the contract. And I think a lot of VCs got burned by other technology, namely a lot of the cryptocurrency stuff, and so they’re kind of coming off of that feeling a little stung, not wanting to buy into the hype cycle too much, particularly at the application layer, and waiting to see how things shake out. And I mean, I’m hopeful that, you know, we’re the ones that are automating a lot of this, and AI is being applied, and we’re one of those platforms that has all of this. But I think VCs are waiting for that before they go into the application layer and start placing bets on smaller, smaller startups where you get that volume of investments back, I would expect for the next couple of quarters at least, that it’s going to still be that concentrated, kind of like the rich get richer and you have you can do, do more with all the money that you’re able to take down in about six months, a lot of the contracts that the application type companies had signed In the last year or so, will be coming up for renewal. So VCs will get more comfortable around are you going to have a 60% retention rate or 120% retention rate? And then we can have a conversation about valuations and whether it’s a long term business, and how to think about it. So in the conversations I’ve had with VCs, that’s where their heads at with it. And if I’m one of them, that makes a ton of sense. That’s how I’d be doing it also, well, for
32:02
the sake of funds like ours and startup pre seed startups like flocast that aren’t in the most hypey areas, you know, I hope that those dollars do get democratized a bit more. I mean, do you think this AI funding boom is is good or bad for venture? There’s
32:18
certainly going to be some winners. I think they’re going to be a whole lot of losers along the way. And a lot of lot of capital will have been wasted through this, through this process. But I also think some incredible businesses are going to be born out of it. And so very much like venture has been historically, you’re placing bets, they’re going to be some 100x returns. They’re going to be a whole bunch of losses along the way. But I do, I do think given the amount of money that’s being deployed, it’s going to be a more acute version of what we’ve seen prior, prior bubbles, boom, bust, cycles, whatever. That’s
32:46
fair. Mike, if we could feature anyone here on the show, who do you think we should interview and what topic would you like to hear them speak about? That’s
32:53
a very good question. Very good question. I’ll go with I’ll just give you a label. I would I recommend you get, get my board member, Rob minehard, on here. He’s a very inspirational CEO. I’ve learned a lot from him about leadership and management over the years. I think he’s someone that could be helpful for anyone. And on that note, if you can find a mentor, like a genuine mentor, who’s helpful through this and really cares about your success, I would highly recommend that for any founders, it’s a key part of why we’re here today.
33:20
Mike, what book, article or video would you recommend to listeners? I,
33:23
I hate to admit it, I’m not much of like a I don’t read many books. I’m all about blogs and reading just a ton of content around SaaS and all this kind of stuff. So I’m a big fan of Sastre. Just in starting the company, this, our go to market engine was completely founded on Predictable Revenue. So that is, that’s a book. I really love Predictable Revenue. We’ve just completely stole that playbook and have deployed that one really aggressively. So all the resources for SaaStr and predictable revenue are two that I would really focus on for if you’re starting a SaaS company, great in great Intel. So much of this company has been built on those, those two sources. Love
33:56
it. Love it. Great recommendation. Mike, do you have any habits, tactics or behaviors that are a force multiplier? I
34:02
think, well, it’s thinking about as your as your company changes. What are the things that you can do that are most impactful? You know, what are, what are the biggest multiplier effects of your time and as the CEO that that changes as you, as you, as the company progresses. So, for example, early on, it was really impactful for me to go to every demo, be on site with every account, be involved in setups, and do all that. As we as we grow and expand, we have a bunch of people who can do that work, one of our key initiatives now is really working with partners to implement flowcast. And I found some of the best use of my time is to go out and meet with all the partners. There’s a big multiplier effect with that. So I can get on a plane. Just yesterday, I got back last night from this exact thing, went out to Chicago, pitched a big group of partners. And you know, if I can go out there and get 100 people fired up to go over for floqast and implement flocast, that’s a lot more impactful than me going down the street and helping close one deal. So where is the best use of your. Time is how you become the multiplier effect for the business. So thinking about that is, I guess, the foundation for the multiplier of the multiplier effect. I don’t know weird answer, but I think you get what
35:10
I’m saying. Yeah, we’re talking exponents instead of multiples, which I like. And then finally, here, Mike, what is the best way for listeners to to connect with you and follow along with flocast? So
35:19
I’m on I’m on I’m on LinkedIn. If you want to connect, feel free just Mike Whitmire. And then we also, we do a lot of unique content out there. I’m a big believer in content, and I also believe accountants don’t love reading or watching too much nerdy accounting content, so we try to do some entertaining stuff. I would recommend you check out our YouTube page around flocast Studios. We actually produced a whole web series, you know, it’s inspired by the office in Silicon Valley about accounting. So you can get a bit of a behind the scenes look of what accounting is actually like from people who have done it before. And that’s something where we want to be creative. Put something out there we thought accounts would enjoy and watch. So we have a follow us on LinkedIn. Check out our YouTube pages. We put all we put out all kinds of stuff. So, yep, go for it. Okay?
36:01
He is Mike Whitmire, and the company is flocast. Mike, thanks so much for joining us today. I really admire all that you’ve done as an investor that actively invests in a lot of SaaS, in a lot of industries that are not super sexy. You know, I think this is great, and I really appreciate all you’ve done. So congratulations, sir, awesome. Thank you. I
36:19
appreciate that. And thank you for having me on, taking us off. I appreciate the time Absolutely.
36:29
All right, that’ll wrap up today’s interview. If you enjoyed the episode or a previous one, let the guest know about it. Share your thoughts on social or shoot them an email. Let them know what particularly resonated with you? I can’t tell you how much I appreciate that some of the smartest folks in venture are willing to take the time and share their insights with us. If you feel the same, a compliment goes a long way. Okay, that’s a wrap for today. Until next time, remember to over prepare, choose carefully and invest confidently. Thanks so much for listening.
