On this special segment of The Full Ratchet, the following Investors are featured:
- Mike Whitmire
- David Garcia
- Bradley Tusk
Each investor highlights a situation where they decided not to invest, why they passed, and how it played out.
The host of The Full Ratchet is Nick Moran of New Stack Ventures, a venture capital firm committed to investing in founders outside of the Bay Area.
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You can learn more about New Stack Ventures by visiting our LinkedIn and Twitter.
Transcribed with AI:
0:19
Welcome back to TFR on today’s special segment, we ask guests to discuss their anti portfolio, a startup investment that they passed on. Here’s the segment called Why I passed
0:35
on. Today’s special segment, we have Mike Whitmire of flowcast. Mike, can you tell us about a critical opportunity or decision that you chose not to pursue, was it the right call, and why did you pass on the opportunity? Yeah,
0:47
so we have so as I, as I discussed earlier, we’ve built our we built our solution for corporate accounting departments. We sell into larger businesses, and it’s used internally. We had in 2015 so our first year of selling, you know, we’re, we’re outbound marketing. We’re trying to get people to look at flow cast. There’s no inbound to be there’s there’s no inbound. It’s all us, brute forcing stuff. Then this segment of the market that is called cast firms, so client accounting services, they start reaching out to us, and we’re like, what’s what’s going on here? This is interesting, because what they do is it’s a firm that will go out there and close the books for a lot of small businesses, so sort of mom and pop shops, like a good example, one of our clients, they close the books for all true value locations. So this is one off stores. So any given company is not all that complicated, and you have one bookkeeper doing the work for any one location. But when you sum it all up, if you’re running the cast firm, all of a sudden you’re closing the books for 1000s and 1000s of companies, and it is a pain point at that level. And so we had to make a really tough decision. You know, do we lean into this or not? My team was really pushing for, let’s, let’s start selling into cas. And I had to very firmly take a stance of, no, we can’t. We can’t do that because we have big ambitions here. I want to build a public company. I get that that’s easy revenue right now, but the TAM within the cast world is like $100 million you cannot. You simply cannot build a public company based on the size of that market. I get that they’re coming to us. I totally understand that there’s a reason they have to come to us. That’s because no other software company has been able to start up in this space, because you cannot raise money on that Tam. And so it’s a really interesting dynamic where we’re able to solve their pain point, maybe not perfectly at the time, but we were good enough to where they were wanting to come to us. And my overall thesis was, it’s expensive to build software. No one had done it for that market, because you can’t raise money on a tam that’s $100 million I’m sure, as an event, you know, you won’t be too impressed if someone threw up a tam slide that was 100 million bucks where, you know, we’re looking at like $20 billion is what we’re going after. So what we did was we said we looked at our roadmap and we thought about the challenges that cast firms face and the challenges that our larger accounts were going to face, because we wanted to scale up market and go up market with them. And the fortunate position we were in was, I’d say, about 80% of our roadmap overlapped with what cast firms were going to need and with what our enterprise accounts were going to need. And so we just kept building our product. We kept doing our thing with the bigger accounts, and with that, we were able to satisfy the needs of the cast firms more. We put a little bit of money into go to market with them, but still remain focused on our core market. And I really like the approach there. So what we decided to do was go for the big cast firms, really level up and go after the larger firms out there, try to support their needs. That’s a market where you can get good dollars. It’s worth it to support them at the price points that we’re getting, and then we can start fielding some product requests from them, because I’d be happy to a be happy to accommodate a market that’s a little bit, little bit bigger and paying us some more money. And so I think we struck a nice balance. We focus on our core, our core market, and we’ve been able to go up market and global and all that good stuff. But now we’re at a point where CAS with minimal go to market effort and not a ton of product investment. You know, that accounts for five, 6% of our recurring revenue today, and it’s actually some of our largest accounts are cast accounts, oddly enough,
4:07
Wow, that’s great.
4:14
On today’s special segment, we have David Garcia of digit, David, talk to us about a critical opportunity or decision you chose not to pursue. Was it the right call, and why did you pass on the opportunity?
4:26
Yeah, when deciding whether I should quit my job at IBM or start a company, I was at the same time applying to or starting to apply to investment banks in Mexico City, and I decided to stop applying and then just go all the way into starting tech company. I think it’s hard to know that if it was with certainty, if it was the right call, because I only know the path that I actually took, but I would bet it was the right call as I ended up here, and I’m very happy with where we are today. You.
5:00
On today’s special segment, we have Bradley tusk of Tusk ventures. Bradley, can you tell us a story about a startup that you passed on? Yeah, there’s, there’s
5:08
a lot of them, but I remember Beyond Meat being one of them, and it was dumb for me to do for viewers. One, you know, it did really well when it went public. But two, there are so many interesting regulatory fights around you know what constitutes meat, what doesn’t and what could they be called? So the US cattlemen Association launched this big campaign to force plant based foods, plant based meats, all these other things to be called something other than meat or burgers or whatever it is like, they wanted almond milk to be called nut juice, right? Like, who’s buying nut juice other than maybe, like, a triple X store or something, you know? So, like, that regulatory fight would have been fascinating to work on. It would have been so fun, and we would have made money on that one. So there. I mean, there’s a lot we passed there, but that’s one more. I’ve always kicked myself.
6:02
You that
6:05
will conclude this installment of investor stories. If you’re enjoying the program and would like to see it continue, take a moment and leave a five star review in iTunes. Okay, that will wrap things up for today until next time over, prepare, Choose carefully and invest confidently. Thanks for joining me.
