The Anatomy of a Startup Acquisition with Cacheflow's Sarika Garg | E2028

It's been a wild ride actually, and in a good way and in a tough way. You know, I have a lot of respect for every founder because it is tough. But we were very focused that we wanted to build a big company, we wanted to do it right. So it was a lot of listening to the market. I actually always prioritized go to market and product personally. And I'm glad I did that because that helped us to find that product market fit. The thing that's shifted from 2021 is we used to buy software for everything and now I think companies divide software into nice to have and must have. And if you're a software founder, you have to make sure you're a must have product. Otherwise, I don't know, change your product, change your go to market. And this is the thing about startups, you go slow and then you see the scale and it surprises you when that happens too, because enough people have found out about you, enough word of mouth has happened and so this is kind of the start of life. This week in Startups is brought to you by assembly AI. Get maximum value from voice data with assembly AI. Build powerful products and features for your end users on the industry's leading speech to text models. Get 100 free hours to start building@AssemblyAI.com Twist Vanta compliance and security shouldn't be a deal breaker for startups to win new business. Vanta makes it easy for companies to get a SoC2 report fast. Twist listeners can get a thousand dollars off for a limited time@vanta.com twist and Runway looking to uplevel your financial planning? Runway is the modern and intuitive way to model, plan and align your business for everyone on your team. Sign up@Runway.com twist to get your first three months free.

Hey everybody. Welcome back to this week in Startups. My name is Alex, I am one of your co hosts over on X. You can find me. I am Slash Alex. Today we have a really, really exciting show because we have a guest on that's going to help elucidate a key theme that we've been talking about which is distribution. Dire Straits AKA the lack of liquidity in and around the startup and venture capital world. Now you've heard us talk about it quite a lot, but I want to show you a chart that details just how poor exits have been from the world of startups. As you can see, there was an enormous wave of startup activity in the exit markets back in 2020, 2021, then it fell off the side of a cliff and has yet to recover. Now, this year is a little bit better than last year, but we're still far, far, far below what we saw before. So when a company does get sold in the current market, it does rise to this matter of our attention. And recently two deals have been announced that I have been very curious about. One this week, Sierra announced that it's going to buy trail security for $162 million. And then last week, HubSpot announced that it's going to purchase Cashflow, a startup that had raised 10 figures while private and that I have covered several times throughout its life. So please welcome to the show CEO and co founder, It's Sarika Garg. Sarika, hey, how are you?

Hey, Alex. Great to see you again.

Great to see you again. Before we get into anything serious, I have to ask, where did you get that blazer?

You know, I think it's probably Nordstrom's or something. I don't remember.

I'm obsessed with the color and I want one for myself. I'm not going to lie. So, Simka, thank you for coming on. I'm going to annoy you with questions about this deal because my goal is to help other founders understand, you know, the market today, how deals get done. And I know it's still in closing, so we can't get into the nitty gritty of the finances. But I do think this is the right moment to have this conversation. But first, about you. You have 20 years in B2B SaaS, you worked at SAP, SAP, Ariba Tradeshift, and then you left all of that behind in 2021 to found cashflow. So just to start, what was the genesis idea or problem that you went out to found cash flow to solve?

Left my last job at trade chef cold turkey. And I said, I'm going to take a break for the year and I'm going to just let the ideas come and figure out what happens. And at that point, I happened to go and buy a Tesla and was blown away by the Tesla car buying experience. And if none of you have done it, you could literally buy the car in four minutes and you can configure what you want, pick the color, pick the tires, and then you can actually buy it right there and then. And my past experience had been so terrible, you know, where you had to go to the dealer and you had to negotiate and all that. I was like, oh my God, if a car buying experience can shift, why can our B2B buying experience not shift in the same way? And so that was the genesis and the idea of kind of the idea of cash flow was born at that point. And happy to tell you more about how this translates into what happens in B2B today.

Yeah, because when I think about buying a car, it makes me want to drill into my head with a screwdriver because I don't want to negotiate, I don't want to go in, I hate the back and forth. If you have a thing, I want it. So to me, thematically, this makes a lot of sense. But explain to me how that applies in B2B SaaS. Because I know sales guys, I know sales teams, a lot of talking, it's a lot of contracts, a lot of negotiations. How do you simplify that?

Yes. So you know, in 20 years of building B2B software and selling, my co founder is equally 20 years B2B software buying and selling. We saw that the software buying and selling experience was totally broken. And what I mean by that is even after your customer says yes, I love your product, send me a quote, send me a proposal. That's when actually the nightmare for the salesperson starts. Because now they have to struggle to even put a coat together. They then have to go email back and forth PDFs. They can't track what's happening on the customer side. This is why the best salespeople will ask you for your text, for your phone number, because then they can text you. Right?

Right.

And what the result of this is? A lot of time wasted and a lot of deals slipping from one quarter to the other, which is very important to customers. And this is a seller experience because now you've put everything in paper. The billing experience is actually even worse. Right. So now the person who was doing the billing has to take a contract, open it up and figure out what were all the nuances that were negotiated and how do I bill this. All of this can be handled or was handled manually for many years, but with the shifts and changes that have happened in the last five years, this has actually become a major problem. Because no longer do you sell a deal and then forget about it for five years. Like you don't do one bill. What you do really is you get a foot in the door and then you try to sell or upsell, cross sell every quarter or you do consumption based billing. All of these are ways to actually grow the wallet share. And when you do grow the wallet share, you have to think about the entire experience of quotation to billing, to, to the, to the whole collecting of the payment. Right, right.

And this is why cashflow was in The CPQ space, the configure price quote space, subscription management, billing and one or two other products. So the idea was we went from pen and paper. DocuSign helped at least bring some of commerce into the digital era. But when it comes to buying software for your company, we probably needed something else that wasn't just a half done, you know, digital transformation. And then Sarika, one more thing is that the number of SaaS products that companies buy has exploded. I think you said in a different interview that it's something like 130 different pieces of software for the average mid market company. So I presume that people were just getting absolutely buried in the paperwork and perhaps buying less software than they might have if it was easier.

Absolutely. People getting buried, every department not being able to do their job without software, but wasting a lot of time. So what that meant is even on the buyer side there's people who are just trying to figure out how to buy software. And so it's just kind of a little insane and actually needs to be simplified on both side, the seller and the buyer. So when we thought about this, the Tesla analogy is really good. But maybe another analogy is Uber where you think about the driver as well as the person who wants a cab. So you think about both these experiences and simplify them significantly.

Well, I hope it's better than the Uber passenger experience because Uber loves to tell me to like cross the street, turn around twice. The driver's not going that way. I kid, I love and use Uber. So you founded the company in, according to my notes, early 2021. But I wanted to double check that with you.

That's right. And Alex, you covered us November 2021 is when we launched and so it's been only a few short years.

Yeah, well that great segue because I was going to say the first time we Talked about this, September 21st, you just raised $6 million. PitchBook, everybody. I didn't run this past her, but PitchBook says $26 million post money valuation. And at that time GGV's Glenn Solomon led the round. There's also Pellium Ventures and then the Nathri Futures Fund. GGV Sarika is now Notable Capital. So if people are confused by that, that's that. But talk to me just a little bit about that first seed round. How far along were you, were you generating revenue yet or were you still putting for kind of first code to page?

We were putting the first code to page and really thankful. And you know, I had heard things like if you're a female founder, there's a 2% chance that you will get funded. I did not have that experience. It was a wonderful experience where, you know, because I think we knew what we were talking about. We had experienced this problem. And so Glenn was Glenn Pelion Ventures, Nature Futures one. They all got behind us and they've stayed behind us and been great advisors for us throughout the last three years.

And then roughly 15 months ish later, you raised what you then called a seed plus round. That was 10 million. Pitchbook says it a 60 million post. And at that point, I know Glenn Solomon joined your board and you also added Crystal Huang as a board observer. Where was the company at the point of your Seed plus round in terms of commercialization?

So we had built the first version of the product. We had design customers. We built the product with design customers. They were live and we were just beginning to sell it in the market. And that's when we met Crystal and she said, I love what you're doing. I've studied this market. There is a shift that's coming. And so I'd like to do a round. So we did an early round and. And that was fantastic to get it on. Yeah.

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Okay, so then that was the last time you and I formally sat down and talked about the company, I believe, which means that I'm now nearly, you know, a year, year and a half behind. So I want you to tell me about the progress of the company, how it was going out and getting customers. What was your normal customer profile? I'm just really curious about last year and this year's in market performance.

So it's been a wild ride actually, and in a good way and in a tough way. You know, I have a lot of respect for every founder because it is tough. But we were very focused that we wanted to build a big company, we wanted to do it right. So it was a lot of listening to the market and adjusting our go to market. So there are three things maybe that were really important. One is we wanted to make sure there was a huge, huge market. And for that we had to like really understand where is this market, how is it shifting, is it changing? And we got validation for that, especially with AI or you know, kind of what I described of every company wanting to get a foot in the door, that shift we saw. The second was a team. And so I already had this wonderful co founder who was ex Salesforce, had built three companies before and we built a team around us. We built a team of 30 and all of them were either ex Salesforce billing background or relevant background. But really the ambition to build something reimagined and the last was building a great product. Right. And to me that's actually the important thing. And this is a point, I think in the last two years we've iterated on getting the product to a point where our users are, you know, which is sales. Users say, oh, this is so easy. I've never experienced such an easy code building experience. And you know, I was having coffee with one of our customers, Rishi Barga from dscope just this week and he said, my customers are calling me and saying, what is that buying experience you have? Like, can I get that? And so you start seeing that flywheel of word of mouth helping you to grow. And that's what we were the most excited about. Right.

And when did that moment come? I was going to ask you, did you think you found product market fit before the deal with HubSpot came to be? But I feel like you almost just answered my question for me.

Yeah. So I think we believe we found product market fit like three quarters ago when we Started seeing this repeatability by us. Not like, you know, not me not calling out my friends, but actually just repeatability in the market where customers were coming to us either by word of mouth or by our LinkedIn ads that we did. And so that was the point at which we said if we see this repeatability 3/4 in a goal, we go scale. And that's exactly the point at which HubSpot inbounded to us.

Okay, and we'll get to that in just a second. But I want to go back to what you said about you calling up your friends because I think people don't understand that when you have no customers or you have a very nascent product, you have to kind of jumpstart it by hand in a way. And so can you just tell us about, you know, as a founder, you know, how much did you lean on your personal network to get some early deals, contracts, customers started?

We definitely leaned on our friends. We called up everybody we could. We asked our investors to help us and that really was important. And one of the reasons was we are handling revenue for a company that's a pretty mission critical product we were building. And so not anybody will just like give you money unless they actually have trust built in. And so who do you have trust with? You have trust with your friends that you won't like lose their money. And then over time you build that trust from references and, and you know, by just being in the market long enough.

Right, okay, that makes good sense to me. But I mean, I think people don't understand how being a founder is not flying from conference to conference, giving talks on stage, but it's mostly hitting the phones cold, calling and making magic happen by. By brute force, frankly.

Yeah, frankly I went underground for two years. I think people did not see me because all I was doing was trying to sell and build.

Well, it ended up working out. But let's go back to that three quarter period when you felt like your product market fit, things were going well. How fast was the company growing during that three quarter period and was the growth rate accelerating?

It was growing very, very fast. We grew about 350% year over year. And then every quarter, I don't know the exact numbers, but really 100% quarter over quarter. So it was growing fast. Right. And there was a lot of excitement in the market for what we were doing. Partly it was, you know, we had started by selling to really small companies. Like think of like 20 people companies. And what we found was a 20 people company doesn't necessarily have Such a major problem in CPQ and billing, it's when you get to 50, 100, 200 employee, employee size, that's when the problem becomes, like, massive, and you need a solution for it.

Is that just because the sheer number of deals, both buying and selling, gets to be so large that the paperwork becomes too voluminous to be handled by hand?

Yes. And also your sales team increases. So when you go from having just one salesperson to three to five to 10, to 20, suddenly now you need boundaries to give to your salespeople so they. They're not, you know, doing whatever they want to do, but they're staying within the bounds. And then you're giving this sort of very thoughtful experience to your customer, which is repetitive in nature.

So you're growing 250%, 100% a quarter. Exactly the type of thing that venture capitalists absolutely love to back. But HubSpot shows up and they kind of reach out and want to start talking to you. At that point in time, were you already thinking about raising the next round or did the company still have enough cash in the bank that you didn't have to make a decision to raise or sell?

So we had just started the process of saying, now let's go raise around because let's scale. And. And that's. That's exactly. It was. The timing was almost perfect. That's. That's when we started talking to HubSpot. And initially we were actually reluctant to talk to them for that reason. And. And so I can tell you a little bit of what I. What I'm allowed here.

Yeah, please.

Initially, yeah, initially we were reluctant to talk to them because we're like, hey, we want to build an independent company. Our goal has been to go ipo. But the more we talked to them, the more we realized their. Their vision was very aligned to us. Their ambition of what they want to do in this space is very aligned to us. And of course, their distribution. I mean, 300,000 customers, who can argue with that? And yes, and so that was. And also I should, I'll be amiss to say culture. I mean, I fell in love with the culture of HubSpot and was very aligned to how we had been trying to build the company in a very thoughtful way.

And the CEO of HubSpot rose from inside the ranks that I think she took over the reins back in 2021, if memory serves correct.

I believe the co founder and CEO had a snowball mobile accident where he brought her up. He actually asked her to step up, and she's been fantastic. So Yamini Rangan, I did not know her so well, so I met her during this conversation and it really. And I wrote about this in my blog. It felt like, oh my God, we knew each other for so long because she had a very similar vision to what she wanted to do in this space.

But when I think about HubSpot, though, HubSpot to me is, I mean, a public company. I've met both the original founders. People say nice things about it. To me, it has a kind of an S and P focus to some degree. But you mentioned earlier that, you know, you found that it's at the 50 to 100 person company size that cash flow made more sense. So is there any tension between you guys seemingly going slightly upmarket and then the HubSpot customer base?

You know, upmarket is a relative term. When I was at SAP, market was Fortune 500. When we talk about upmarket in terms of cash flow, it is still very much in the M in SMB, which is where HubSpot thrives. And, and HubSpot actually handles customers from two employees to 2,000 employees. So we have, well, we're like the perfect fit. In fact, 50% of our customers are HubSpot customers and they are the ones who probably loved us the most. So it made a lot of sense here.

That, that's a question that I was going to ask because if HubSpot managed to reach out to your company when you were just starting the fundraising process, it means that their corp dev team is either the luckiest group of people known to man or, or they had some sort of line on the company. And so I'm curious, actually, if it was your shared customers that might have pinged their radar about cash flow and made them interested in you. I'm always curious about what was the first, the first conversation inside of a larger company before they bought a smaller company? What was that, that spark moment, if that makes sense.

You know, as most things in life, it was, it was not really planned or thoughtful or anything like that. It was actually a VC I was talking to introduced me to the corp dev person and I said, okay, why not? I know they have a fund to, you know, would like to talk to them. So it was a, it was not a very, you know, well thought like it was not something we were strategizing or anything like that. Right.

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So tell me about the round you you were thinking about raising. I presume this would have been a Series A.

That would have been a Series A. Correct.

And just for the founders out there, you had raised 16 before. Were you shooting for probably a $20 million Series A?

Yeah, I think anywhere from 10 to 15 is okay.

So smaller than I was thinking.

Yeah, yeah. And just because we wanted enough to get to B, we had already done a lot of work, so we just wanted enough to make that push to B and then go from there.

And then because a lot of people ask us about the Series A bottleneck or crunch or whatever it was, what were you going to prep for that roadshow, going out, talking to all the VCs, what were you going to highlight? What were you going to stress? And were there any weaknesses in the business that you were thinking about how to communicate to the venture classes?

So, you know, I think it was a combination of telling our story of why this is special and why this is very huge. And then secondly, the numbers. Right. And when you're going for Series A, it definitely is. Your numbers count. And, you know, this is actually one of the things we definitely thought a lot about. So what were our weaknesses? And we were like, every AI company is getting funded right now. Are we even an AI company? And we are AI enabled. A large part of the sales job is difficult today because all the conversations that happen between a buyer and seller are trapped in transcripts and emails. And we were leveraging that to bring that into cash flow to sort of generate these proposals right from the start for the seller. But we are still not an AI first company. We are an AI enabled company. And so that was one of the things we struggled with. Like how do we position ourselves in this AI crazy world that we are in right now?

Well, I think what you do is what everyone else does and if you are an AI enabled startup, just scratch out the enabled and you are an AI startup, problem solved. That's just branding, Sonic. Even I know that. No, but I absolutely hear you. I mean, I think there is a pretty big division in the venture capital market today for AI first startups, if you will, to your point and then kind of everyone else. But it sounds like you were pretty confident that you could raise the A if you hadn't gone the HubSpot route.

We would have definitely raised because we also had great investors who were right behind us. So we have no doubt we would have raised. But we were definitely looking at a market that's shifting very fast where here there's this wonderful company that's giving us a platform to scale our vision. And so it made sense in many ways.

Let's talk about how the deal with HubSpot came to be. So their corp dev reaches out to you. You're initially a little bit hesitant. How did they roll out the red carpet and woo you and your co founder into selling instead of raising?

I think they just talked to us like human beings and like it was a very friendly conversation and we met and talked and they explained how they were thinking of things. We showed them what we were doing and it was, it felt very easy, the whole thing.

How soon in this process did it go from we think you're lovely, oh my gosh, what a great idea to and here's the amount of money we are willing to give you for this. Like, is that the same day or is that like meeting three that that comes up?

It was actually a process of two to three months where we just got to know each other and it was just one of those conversations that over time happened.

I see.

So yeah, so it was not a one week process, it was actually a longer process, but more like, hey, maybe we can be partners, maybe we might acquire, we might build. Those are some of the things they were thinking about.

Oh, so it was a pretty broad conversation to start and then it kind of narrowed over time to the deal. Okay, well, I mean I, I, I get them wanting to buy you now because if you did go out and raise an A And then worked for another two years and grew the business a lot. By the time you're ready for your B your, the company's value would have been much higher. So, you know, from your perspective, start. The company wanted to go public. How hard was it to say yes to an exit that was much earlier than you had planned throughout the life of the business.

You know, these things are always bittersweet, right? You, you always start with a big dream. But having said that, I am thrilled and I know my co founder is thrilled and the entire team is thrilled because we see this not as closing doors, but we see this as having a bigger platform to take the same vision we have and to get there faster, actually. Right. So, so there's, there's definitely a lot of excitement here. And, and I can't. The HubSpot team is totally amazing.

There's more, but once you take on venture capital, you have friends in the car with you. You're not just driving alone. Were your backers as enthusiastic about selling now versus staying later? Because if they bought in in the seed round, they were mentally prepared for a 1012 year journey to an IPO.

You know, this is a very short time to exit. You know, most companies are in this for 10 years, maybe 15. And so our investors were extremely supportive and interesting and it actually surprised me. They were, they were, you know, whether that's Glenn or Crystal or Pelion Ventures, Chad, they were all in it. They helped us think through it, they helped us make the right decisions and really thankful for them. And they still are, by the way. Right.

I'm trying to figure out why they would be so. Well, VCs need some exits. Everyone needs to show some DPI instead of just TVPI. But I mean, I don't know. I think I would struggle to let one of my fast growing investments that looked like it had tons of breakout momentum to exit this early because, I don't know, I'm greedy, I think. Sarika, I feel like you had like, like a heater. And so to me, it's always almost surprising that founders who are like ready to go the distance end up taking an earlier exit. But I guess with culture, with product, with goals and with a pile of money, it adds up to enough to get you to change your direction. Okay, that helps.

Yeah. And I think. All right, I do think, first of all, this is a question for the investors, but I definitely think they were very focused on doing the right thing for cash flow. The team, the vision, and, and that's, that's how they approached It. Right.

Okay.

Well, I mean, that's literally being founder friendly when the rubber meets the road, so points to them for that. Now, one thing that comes up a lot when I talk to other founders or their VCs, when they think about the market for M and A or even going public to some degree, is there's an overhang of regulatory risk. There's been more strident antitrust activity. People love to blame Lina Condor over the FTC for crushing the exit market. But yet here is the exact type of deal that I think people want to see more of. And so I'm curious, did antitrust concerns ever come up in the build up to the deal or the deal's agreement with HubSpot?

So I can't speak for the HubSpot side of things. You know, we are a smaller startup. I think the antitrust conversations happen for much, much larger deals, as far as I understand. So that was never a concern for me personally.

Well, then it sounds like people, if you do want to sell your company, you can, as long as it's not the size of figma. Seems like some people are blaming Lina Khan for their own. You know, maybe the blame is not always landing on the exact right place. That's what I'm thinking.

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Let's talk about the Nathan Features Fund. So back when you raised one of your early rounds, I wrote at the time that you had emphasized the importance of having a diverse cap table, and you had said that there's a very slim percentage of US Venture partners that are South Asian women, and so you wanted to get them some allocation in the deal to help change that. So I'm curious, did the early exit kind of fulfill your goals of basically cutting the Nathan Futures Fund into the cash flow journey?

Yes, 100%. And, you know, I've been talking to Maithili, who is the CEO of the Native Futures Fund, and she's very excited. This is a. This is a great exit for. For all the women, the 400 women who are invested in that fund, for sure.

400 women. That's. How much do they know?

Actually, let me correct myself, I think it might be 125 or something like that still.

And then I don't know if you can actually share this because it's not your concern, but do we know how much capital is in that collection? That 125 people, have they committed to it or is it more like an angel network?

They've committed to it. I don't know the exact fund size.

Okay. That's a really cool way to put together a fund, I think. I think it's cool to see. And then did they participate in the seed plus round as well?

They did not, no.

Okay, so they were in the first round.

Yes.

Still, though, that's fast. I mean, no one else is getting exit, so three and a half years is about as fast as you might be able to possibly hope for. I dig that. And then I guess, you know, for founders who are going through the sale process, is there anything that you've learned in the kind of like once you've agreed on the transaction and now you're going through all the closing stuff, anything there you can break out as a lesson for other founders who might find themselves in the same spot?

I think the only thing I can say is we didn't try to posture. We didn't try to do anything unnatural. We tried to be who we are. We were very transparent. I think they were too, as well. And that was the way it worked. And it's been good to stay that way. We've gone through this entire thing with very open communications and. And I, I'm excited to do that versus, like feeling like we are being, you know, it's, it's in any way uncomfortable. Right, sure.

And then on the preparation side, you know, when companies are, are gearing up to go public, they intend to hire a cfo, begin to kind of create internal gap financials and really lock down their financial life. Earlier stage startups definitely a little bit more loosey goosey on the accounting side because they're small. How prepped was cash flow to share P and L statements and kind of like all the traditional accounting documents. Did you guys have that stuff already prepared or did you have to catch up when you had to start the negotiations?

We had everything prepared and partly because we know we were going to go through fundraising, we actually have a part time CFO who we started working with in Jan and he's been fantastic. So we are actually almost like series C prepared I would say with all the statements. We have budgets, we have, we had a, we had a three or five year plan actually. So, so we were quite prepared in, you know, when this came up, like it wasn't in any way a rush.

Would you recommend that other pre series A companies take a similar approach to their accounting and their bookkeeping as you guys did?

So my big learning was get your part time CFO early. Just getting a bookkeeper to start with. They will always mess up your books. So when our part time CFO came in, it was very easy. I didn't spend time on it, he did. My time is better spent on sales, on product building and the team and hiring. So it wasn't as if I was spending my time. I would not recommend doing that at the stage, but get somebody who you can trust.

Okay, is there anything else that you did on the preparation side that made the sale either possible or easier? Just again for other founders who might be listening in about how they might.

Sell their business, you know, we are relatively organized because maybe because Brian and I have done this for so long. So you know, the books were clean, the decks were there, you know, everything was organized quite well. So you know, and we put in the right tools right from the beginning. Right. So that was some, maybe an investment we did where we said let's actually have things as organized as we can have right from the beginning and that actually paid off.

Tell me more about the tools you mentioned. I'm curious what falls into that bucket for a seed stage startup.

So you know, when I say tools, you know, just very simple things like have Google folders and have things organized. We use ClickUp for, you know, managing even our code and Bugs. We have Zendesk for tickets, basically organized in terms of having some tools for every function. Our HubSpot is very clean, which is what we use for marketing and sales. So those are the things that actually helped us, like just say, oh, let's just pull a report and we're done.

So essentially the lessons here are be organized, get the appropriate help you need early, and be prepared for opportunity to arrive because you actually don't know when someone's corp dev department will reach out. So it's better to have all of your ducks in a row. I mean, that seems like pretty obvious advice, but I'm curious what percentage of founders, you know, in the chaos of building a company. I'm not trying to be unkind here, but I wonder how many don't have those things sorted out to the degree that cash flow did and if that's harming their ability to exit early. I mean, I think the answer to that is probably yes, but I'm not sure about the. The ratio, if that makes sense.

Yeah, so. So, you know, Alex, being a founder is, is one of the toughest jobs in the sense you have to prioritize your time. So. So, you know, carefully. And, and so I think every founder has to make the choice of what does the company need. And I do think it's a very like, personal choice based on your company, where you are, the market and so on. I actually always prioritized go to market and product personally. And I'm glad I did that because that helped us to find that product market fit, helped us to actually hiring as well. Maybe. You know, I personally spend a lot of time trying to find the right people. I still think that was the right prioritization. And it doesn't take a lot to be organized. If you do it early, if you try to do it afterwards, it's messy.

Right.

We have the concept of technical debt that we're all familiar with, that we all understand. I wonder if we should have a similar one for organizational debt. All of your documents are a mess. You have weird accounting or whatever it is, but I feel like we spend so much time thinking about how clean code is, but much less on how efficient internal operations are. You guys got a lot done with 30 people. I bet you you would have had to have 50 if you were less organized internally to get the same amount of work done.

Yeah, well, you know, this is what SaaS software is solving for all the time. Let's get the inefficiencies out of the system.

All right, now, one last question. About HubSpot and then I want to talk about the market. I was going back through the release from HubSpot and I believe you guys are going to be joining the Commerce Hub portion of HubSpot. And I'm not going to lie, I was actually not familiar with that. So Sadika, can you just tell people what part of HubSpot you're going to plug into?

So HubSpot is organized into hubs. They have something called the Commerce Hub, which they went to market with in 2023. It has payments and some billing capabilities and we are going to plug in and integrate with the Commerce Hub. So basically cpq, billing, payments all goes together hand in hand. Right. And that's what we're going to build together.

And then that'll, I presume, is a smaller part of the company given that it's 2023. And then they'll roll that out to their existing customer base. Hence your point earlier about reach and the ability to hit more customers more quickly. Okay. Huh. How many of the 300,000 HubSpot customers do you think are going to be cashflow customers in like two years or using cashflow technology?

I should say we hope a lot of them. And of course as founders we are very aggressive and we want to have all of them is the goal.

All right, well, we're going to have you back on in 12 months to see how this is going and I'm going to hold you to that. And it better be about 299,000 that have made the jump when we get there. Okay. So the other thing I want to talk to you about is the market itself because your company working in B2B software sales, I presume had reasonable insight into the state of things. And what I've seen from a lot of companies is compressing net dollar retention rates, slower growth rates, a lot more cash efficiency, but definitely a different era of, of software growth. And I'm curious from building cash flow, if you've seen changes in buyer behavior and then if so, where are we today in terms of buyer sentiment? For, for SAS, 130 products per company already sounds like a lot.

The thing that's shifted from 2021 is we used to buy software for everything and now I think companies divide software into nice to have and must have. And if you're a software founder, you have to make sure you're a must have product. Otherwise, I don't know, change your product change or go to market. And honestly that's sort of what we found out Right. When you're selling to a 20 people company, CPQ is a nice to have product. If you sell to 100 people company, they have a massive problem that you're, that they absolutely need you to solve. That I think is a shift that's happened that people are buying, must have products only and, and there's a lot of scrutiny. Right. So we definitely geared ourselves to value, sell and make sure. We always assume that the CFO is going to be involved, that the head of sales is going to be involved, Rev Ops is going to be involved. So we actually crafted the deals with that in mind. Right. And that really led to us finding that repeatability. And this is probably true in some form for every SaaS company right now.

Well, no, I think it's absolutely right. People were talking about everyone trying to essentially downsize their overall SaaS footprint. The thing that's hard to tell from where I'm sitting is how much of that was talk versus how much of that was real. And I'm always struggling to figure out if slowing software growth is predicated more on existing customers decreasing their commits or just a struggle to kind of land new accounts. So from the cash flow customer base, what did you guys see in terms of shifts in buying behavior? Has it been people trying to like buy less or just fewer new accounts at the customers who use cash flow?

We definitely saw people who are buying who were using like old technology, old CPU, 15, 20 year old CPQ technology coming to us and saying give us something modern because it's actually cheaper, faster, easier, all of those. So we saw that sort of replacement cycle happening. And of course companies who were growing who were saying, hey, we need tools to become more efficient. So I think it's a combination. I definitely think CFOs did go through and say, hey, let's actually see if we can find better products which are less expensive. And I think one of the things that I definitely see, you know, if I look at the more older products in the space, the legacy products, the one thing that they come with is not only just a higher price tag, it's just higher consulting dollars. So they're usually toolboxes which you need to then hire contractors to, to configure it for you. And that was a large part of why customers would come to us is they're like, oh, you guys are no code. It's basically a configuration and we can go and in fact we can make changes and guess what, I'm going to change my pricing every quarter. So now I can do that. On cash flow versus having to do a $80,000 project to just change my pricing.

What?

Yes. Oh. Oh, yes. It's pretty insane what it takes to change pricing in one of the legacy products in our space.

So I used to work at Crunchbase. I got to sit into a bunch of cool stuff there. I got be in some of the pricing and packaging meeting. So I've seen how one company, once in the SaaS base thought about that. So very limited experience, but I have been in the room a single time. $80,000 to change pricing. I mean, we were just doing the intellectual work of deciding what to do. We didn't have to get someone's permission. Why would it cost 80k? I'm blown away by that.

Number one is deciding what to do. So what I'm quoting to you is a company that was 800 in employees where it actually took them $80,000 in consulting hours to put in that pricing. So I'm not counting, actually all the meetings you were in where you were trying to decide what's the best pricing model.

Right.

This is actually the implementation of that best pricing model into your system.

That feels like you're being held hostage to run your own business. Would you like to change our pricing? No. Please. $80,000. I mean, what the hell? Now, Honestly, Sadaka, I was very impressed at how fast your company was growing, but now that I've learned about the competition, why Weren't you growing 700% a year?

Yes. You know, and this is the thing about startups. You go slow and then you see the scale and it surprises you when that happens too, because, you know, enough people have found out about you, enough word of mouth has happened. And so, you know, this is kind of, you know, the start of life, right?

Yeah, yeah, yeah, yeah. And then one last question about the market. I know we've talked about, you know, must need to have, nice to have and all that. Were your customers at Cash Flow seeing, you know, shorter quote to sales, close times, or any other kind of like metrics that impact SaaS performance, were those getting better across your customer base or were they getting worse? As we think about the overall health of selling SaaS more generally, we saw.

It actually, you know, our sales cycles did lengthen slightly in, in the last three quarters, but in general we saw it being quite steady. Honestly, the code to cash, of course with our product, we could increase it slightly. The thing that surprised me that customers were excited about when they would implement Cash Flow is they couldn't see what was happening on the other side. So they could try when Customers were looking at the code and that actually helped them to get decisions made faster. So I know you're asking me the general question. I think everybody saw a slight decrease because more people got involved on the other side. And that's why maybe our software became more important because you could see who was on the other side and who was looking and you could nudge and answer questions and so on. Right.

So it was not only a better organizational structure, it was also a demystification, if you will, of the other side of it. This makes so much sense to me. I mean, I'm sure you saw that the big case with Realtors and how their market got kind of opened up. And to me, it just seems like the more information people have, the more clear things are. Everyone can make better decisions, everything can go faster. It just eliminates friction and wasted time. And that's a promise of technology. Isn't that what we're supposed to be getting out of this?

It's the way of the world. It's going to happen. Right? Regardless of whether we are here or not, this will. This is bound to happen. Right.

And then I have one last question for you, and this is slightly a bratty question, but how long are you going to stay at HubSpot before you break off and become a full time angel investor?

I hope to stay there for a very long time. Like I said, the vision is very aligned. Love the team, love Yamini, love everybody there. So let's talk in a few years in my notes.

I had this question way earlier on, but I'm going to throw it in now just because you reminded me of it. Cashflow in Office Remote Hybrid what was your approach to building?

We started during COVID so we were totally remote. My co founder lives in North Carolina. I live in Silicon Valley. So we started a remote company and we said, let's go find the best talent wherever they are. And that really worked for us. And we have people in different states in Canada, but we've tried to keep it within the US time zone and that's been very successful for us.

So essentially from the Pacific coast to the east coast, up and down, but not too far. North, east and west. I know my compass. I took orienteering and Boy Scouts. I'm not stupid. Can you tell that I have Friday brain? It's been a. It's been a hell of a week. Well, Sadaka, thank you so much for coming on. I really appreciate it. Congrats on the sale. I will be looking at every single SEC filing from HubSpot. Just in case one of them gives me any information on the total value. But congratulations, and we'll have you back on the show in a bit to see how it's going.

Thank you so much.

Okay. I host every six months or so a workshop called Angel University. And this is where I teach people how to become professional angel investors. And the next time I'm teaching the course is on November 6th, and I teach it with my pal Mike Savino. He's a partner here at Launch, one of my best friends. And it's based on my book. But everything I've learned since then, obviously, you know, I've invested in over 400 startups and if you've met me for more than five minutes, you know that Uber, Robinhood, Comm are amongst the ones that I've hit that have gone super nova. In fact, Uber is considered the greatest investment over the last decade or two in Silicon Valley. Robinhood, you know, doing fantastic as well, and calm. Not yet public, but another great company. In this course, I teach you the fundamentals, my personal philosophy. And then I compare and contrast it to what other people say. And the most important thing is how do you source and decide which companies to invest in and then how to evaluate those companies. I have a criteria. I have 13 reasons to invest in a company and about 30 reasons to not invest in them. We call those pink or red flags. Pink flag. And it's something you can clean up. Maybe the cap table is a little messy. You know, red flag could be, you know, a patent lawsuit that you don't think they could ever get out from under. And when we talk about those criteria for when you're picking a company, we'll also go into adding value as an investor in startup and then portfolio construction scenarios like how many investments do you need to have a chance at hitting an outlier? If you haven't read the power law, you don't know what the power law is. The Pareto principle. Go ahead and look it up. We talk about securing pro rata, Very important, getting investor updates, what information rights are, and just so much more. We had 1200 individuals join us for this workshop last year. We did four of them, so 300 people at each. Many of these accredited investors have also joined my angel investing syndicate, which is the syndicate.com and you get to see our deal flow. The workshop is open to all investors, whether you're retail or accredited. And all the proceeds of this go to charity. You can see a full list of the donations we've given at Angel University Charity. You can Sign up at Angel University. So whether you're an accredited investor or non accredited, or you're just interested in learning, visit Angel University to learn more and register again. The next class is November 6th. I'm going to be moving to twice a year for this because my schedule is very busy. So if you don't get in on November 6th, you're going to have to wait six months, clear your schedule. Unless it's something really important for you, your family. You can take a couple hours and learn about how I make decisions and our team make decisions on which of these early startups to invest in. And it's not like investing in public companies where you can see how many subscribers Netflix has or you know, how many Uber rides were taken or how many doordash deliveries occurred last quarter versus a year ago. No, this is a whole different set of criteria when you're dealing with a company in years one or two or even in year zero. So I hope you come. It's for a good cause. Again, Angel University slash charity. See where all the proceeds go. I'm very proud of the work we've done, Mike and I and the team over the last, I don't know, six or seven years of doing this. We've inspired people to find this new career. People say it's changed their lives and they love being an angel investor. A lot of times it's young people who sold their company or it's young people who are professionals making a little bit of money. They're making 200 grand or 300 grand working at Google or something and they, they just want to learn how to do this. And then all of a sudden they, it becomes a path to becoming a venture capitalist. Because think about that. If you have no venture capital experience and then you go apply to venture capitalist. And then I apply and I've made 15 angel investments and two of them have done well. And the founders speak highly of me. Who's the venture capitalist going to hire? The person who took the initiative to make 15 bets or the person who just wants to be given a chance? Right. You're going to pick the person with more real world experience. And then, you know, a lot of people who are retired in post money, they're 50, 60, 70 years old and they're sitting there at home on a mountain of cash and they want to do something fun. We know it's a lot of fun to hang out with people who want to change the world. They're called entrepreneurs and they're lunatics in the best sense of the word they have crazy dreams, crazy ideas and when you're an investor an angel investor you get to spend time with them but you don't have to drag yourself to an office you don't have to put in 60 hours a week you can put in five hours a week you put in 50 hours a week or anything in between Being an angel investor you make your own schedule you meet the most interesting people in the world sometimes you hit a big winner sometimes you lose and that makes it just so exciting and so I think it's a better pursuit than going to Vegas and playing blackjack or betting on sports I love the idea of betting on startups because you get all these non financial rewards that come with it which is you get to see where the world's headed you get to see and you get to hang out with inspiring people and see their plans to change the world it's just an awesome fun career and pursuit hobby however you want to look at it. I hope you come Angel University.