TraceHQ | Finance at the Foundation

Hi, everyone. I'm Sarah Gua, general partner at Greylock. You're listening to Grey Matter, where we share stories from company builders and business leaders. In today's episode, I sit down with Mike Gonzalez, founder and CEO of Trace, the first service desk for Finance. Welcome, Mike.

Thank you for having me, Sarah. Excited to be here.

Congrats on getting launched. Please tell our listeners a little bit about you and your company.

Thank you. Thank you so much. I'm the CEO and founder of Trace. Trace is the first service desk for finance teams. We build workflows and analytics that help finance teams collaborate with the business around things like purchasing, hiring, and analyzing the performance of their budgets. Trace is a bit like JIRA for finance teams and how we help people with the workflows that they need to execute. Similar to Jira, Jira will help you tell you how your project is going to perform in the future, how long it's going to take to get things done. Trace uses the information in its smart workflows to tell you how those decisions will impact your financials into the future.

This was really a company idea that was born out of your own experiences, Mike. So what was the problem you were trying to solve when you and Martine and Matt came up with this?

We're finance building for Finance. So I've spent my career building FP&A systems at companies like Facebook and GE, and then I transitioned to more of an operator role and became VP of Finance at Zenefits. Through. Through Hyper Growth, we grew from 500 employees to 1800 employees. I also had to leave some tough restructurings and terminate over a thousand employees. And through all that experience, I think we learned a few key insights that are kind of driving our product strategy. The first is like, as an FPA organization, you spend all this time building financial plans, and then as soon as you say, okay, this plan is done, it just sits there and collects dust. And then all this work happens. People in the business go do their things. They're managing their projects, they're hiring, they're running marketing campaigns, and the finance team just waits for everything to get added up in the accounting system. And then you compare how those two things. Like, you know, you compare your plan against what actually happened, and then you try to make sense of the difference. And I think what I've learned in my experience is that what really matters is finance helping collaborate with the business and working with your business partners to help them execute. And I think what the role of finance is going to be is to help people make fast, informed decisions. To collaborate with people as they execute and then to really understand like the real time impact that those decisions are making on the business. One way to think about this is imagine creating a project in Asana and then imagine not using Asana again until the project was over. And then somebody sends you a slide saying here's how you did, you know, and that's actually the current state of how finance is today.

That seems less than ideal.

It's not a great experience, you know, and me sitting in the VP of Finance seat, like having to collaborate with our CRO and our VP of Marketing and our cto. I realized that there has to be a better way for us to collaborate with the business to make them successful, to empower them to do what they need to do. And so we call this category Finance Service Management. And service is very big part of the name of the category that we aspire to build. And we think it's most analogous to IT Service Management, which has built wonderful companies, ServiceNow and Atlassian. And it was really, those companies were built around a pretty simple concept of a ticket. You need anything from it, you submit a ticket. That doesn't really exist with finance. You need something from finance. It's like, where do you go? So you go to Trace and you'll submit a request in Trace and we'll facilitate all the services that finance needs to provide to the business.

It's really a new concept for financial teams because as you said, I don't think the idea of a service desk is obvious for finance yet. What are some examples of services that business should expect from finance? Like what should you be potentially offering to your business partners between planning and that slide at the end?

That's a great question. I think it really comes down to a few core things that the business needs to do. And so people in a business have a budget, they pretty much purchase things, they hire people and they manage projects. Those are kind of the fundamental building blocks of any operating plan. And so Trace helps with those kind of core workflows. If we start with one, the purchase workflow, for example, it's a pretty complex workflow and it's actually probably one of the more challenging workflows in the business because there's so many people that have skin in the game. And so if I'm a director of marketing, say, and I want to buy a piece of software, I might need to go to FP and A to make sure I get budget approval. I need to make sure that my CMO is aware that I'm making this Purchase. If it's a software vendor that has access to sensitive information, my security team has to get involved. There's a contract. So legal gets involved, need to pay this person, accounting gets involved. So a lot of different information, a lot of different stakeholders. And so Trace will coordinate all that activity and give the requester, the person who needs to buy one stop shop, one single place that they need to go to to execute those things. And then we bring all those different people together so that they can have efficient, smooth process and just get work done.

So that really goes beyond finance. Even though finance might be primarily responsible for something like approval of a purchase, there's a, as you said, there's a lot of stakeholders there. And like that service is already being delivered. It just might be not thought of as a service.

Exactly right. And so of course, like this work is getting done, as you say, but there ends up being a lot of silos, you know. And so in a lot of businesses, when we've researched, what we found was like that requester that wants to buy something, you know, they go ping FP and a, you know, they go, they go reach out to their manager, they create a JIRA ticket with security, they go to another system to get the contract done. And so it's a really bad experience for them. It's really slow and efficient for everybody involved.

Right, right. So you very recently launched the product, you raised a relatively large seed financing which we were happy to be a part of. Can you talk a little bit about your co founders and just the journey of the company to date.

Really fortunate to have incredible co founders. Our first co founder is our cto, Martin Destanyol. Martin is a serial entrepreneur. He sold his last company to Box and then led product and engineering teams there. So very rare that he was responsible for both product and engineering. Martin is a designer, he's an architect who does back end, he does front, front end. Incredibly, incredibly talented guy. And he's also just a really good leader. When I met Martin, I talked to him about some of the problems that I experienced and he experienced it from the other side. You know, he had budget responsibility at Box. And so when I told him about some of these problems, he was like, literally some of the finance tools that I had to use were my least favorite tools that I had to use in the business. Like it was not a great experience. Like, this is a problem that I would love to go solve. And our other co founder is our VP of sales and he's also my brother. So, so really proud and fortunate to have a true family business. Matt joined me at Zenefits. He ended up taking our payroll product to market, built a small team, helped us kind of grow that product from nothing to product market fit and over a million in revenue. And then Matt went to another early stage company after Matt. He was VP of sales at Vector. Took that company from the very early stages to product market fit and go to market fit and scale helped him do a big financing. And so this is the third time that he's taken a product to market and finding go to market fit. And so very, very fortunate and proud to be working with my brother.

How long have you guys been working on the product? Why raise such a large seed?

Well, we've been working on the product for a couple years now and I think it takes a long time to build high quality scalable software for the segment that we want to build for. And you can't move fast and break things when you're building software that touches finance systems and finance data. So we've been really thoughtful about things like security and being SOC2 compliant, our data model and how we handle permissions, the scalability of our workflows. And so you know, we've been really investing in developing a very high quality product.

So Trace is already working with some customers. Can you talk about who the product is for, like scale type of company, who the buyer is?

Our sweet spot is growth stage businesses up through early enterprise. And some of our customers that we work with are like five trend out in Oakland, a 500 person business growing fast. Lattice, a 250 person employee employee company also growing pretty fast. We just closed our first enterprise deal with a 1400 person fintech. They're going to be over 2000 employees at the end of the year. So the ideal point that we want to get a VP of Finance or head of FP&A is when they start to have, you know, they start to understand that they need to provide these services to their business partners and really start to deliver a portfolio of offerings to their budget owners. So we want to capture them at that point and then grow with them over time.

And for your early customers, what should they expect? What impact are you having on them?

We have a variety of impact. Well, I would start with just being able to provide scalable infrastructure. We're able to get a ton of done in terms of productivity and efficiency gains, but also the absolute time it takes somebody to submit a request and to get that request reproved and to be able to go execute. You know, since we help with spend Management, we're also able to drive savings. And so once you get started with trace, you have 100% visibility into all of your spending. You know your key contracts, you know your material contracts, you know when things are going to renew, you're getting notifications. So then you can make sure that you're sourcing the right things, you're negotiating the right things and you're driving like that hard dollar value of savings. And then there's like some newfound benefits of using trace. You know, we're solving the workflow problems and these are things that businesses need to solve. But the way that we use that data to give finance teams the committed forecast where they have visibility into how these requests and decisions are going to impact into the future. This is something finance teams haven't had in the past. They've been in the dark. And so this will drive a ton of efficiency for FP&A FP&A people want to be strategic business partners, they want to be future forward looking partners. They don't want to be spending a lot of time trying to forecast how this one piece of software is going to impact them in the future. Tracing gives them the answers to the test. You know, they can just feed that data right back into the model. It's a new source of data to provide to FP&A practitioners that have made them more accurate and more fast with creating plans.

Obviously you didn't have a solution like TRACE at Zenefits, right. And so what was it like trying to get to a committed spend number or you know, offer projections to your business partners when you were there?

We used the combination. It was like, you know, it was duct tape and glue. If you wanted a contractor, it's like, submit this Google form. If you want a piece of software, submit this Google form. And then we're getting all this data in a sheet and we can do approvals and we can kind of check those boxes. But at Zenefits, you know, when we did the restructuring, that's when the rubber really hit the road, you know. And I work with our board to say roughly top down, here's what I think the business should look like. And they said, this is right, you got three weeks, go get it done. And so in an exercise like that, you're trying to understand all of your commitments, you know, what have we already committed to, what can we get out of, where can we cut? And when you have financial parameters, it's, you know, you know that every single dollar of non payroll spend means you're potentially saving somebody's job solving within those constraints. And so we were digging through, you know, literally every single piece of spend. We ended up saving millions of dollars, which translated to saving dozens of jobs. Our team felt really, really good about that. One of our major investors brought in a bankruptcy expert whose job it was was to come dig through our financials and figure out what we could save. He didn't find a single dollar that my team hadn't found. So we were super proud about that. But it just goes back to systematically tracking this information and knowing what is my committed spend, where can I cut, what can I save, what's coming up for renewal, where is there some fluff? And just making sure that if you operate with discipline, that there is no flux and that you're always optimizing for the financial health of the business and all stakeholders. It's not just your investors. Your employees have a ton of skin in the game. The people that you go to work with every single day have a ton of skin in the game. So how can you make sure as a finance organization that you are thinking about all those people during every single financial decision and allowing those people to take care of each other by making sure that they're making good, sound financial decisions for the business?

Yeah, it's an incredible story and I think that experience sounds like it's clearly left like a deep impression on you. It's always struck me how early in a company's life, my own role as a board member. A company establishes financial discipline and agility and not right. Hopefully the rubber doesn't meet the road for these high growth companies during restructurings, but as companies begin to think about being public companies and presenting their financials to the world and talking about profitability, not just growth, then you know, the rubber meets the road for everybody at some point. Right. One of the things that I've seen is that companies can take entirely different attitudes towards spend early. And even as an FPA leader, like totally focused on enabling growth, like having the workflows and processes that will allow your company to scale in a healthy way is like relevant all the time. I mean, Covid is probably a good example of that. Right. A lot of companies took a very hard look, including in our own portfolio, at what their spend looks like in March of last year. And it was, I think, probably pretty tough to do that for companies operating on duct tape and glue and Google, of course.

Yeah, I couldn't agree with you more. I think when you start to think about getting IPO ready, which a lot of businesses do, even two to three years before they start going public. You realize that from a compliance and controls perspective, you need the workflows, you need the approvals, and you need the data to support making sure that every financial decision has its checks and balances. But when people don't invest in these processes and really this operating discipline from the beginning, it gets really tough to change behavior at scale. So that's why we encourage businesses, especially early finance leaders who are kind of the first time doing the job. We're going to invest in this CFOs that are like, you know what, it's early for us. But I'm going to instill this discipline in my organization because once I get down the road, it is just so tough to come back from that. And so the challenge is being able to instill this discipline and drive these processes and good operations. Because the incumbent tool sets are so heavy, they bog people down. They're like such a pain to implement. And that's why, you know, Trace wants to make it really easy. You know, it's like super easy to, to get set up. You know, we already have predefined workflows where if you're not even sure how this should work in your business, you know, Trace can just give you kind of best in class, world class operations right out of the box. And that is scalable infrastructure that people can carry with them, the IPO and beyond. I think Covid, you know, there was probably a four week stretch where everybody felt that pain, a black swan event, you know, like, I need to cut 20%, do I need to cut 30%? How do I do that? And I think it's a scary feeling to be in as a finance executive, the finance leader, not knowing how to quickly answer those questions and solve those problems. And you know, that's the experience that I went through, the restructuring. And I think we want to give everybody that visibility so they never feel like, you know, some of those black swan outlier events are going to put them in a spot that they don't have immediate control over and that they can't handle with ease. And I hope that there are no more, you know, black swan events or negative things that occur for any business. But that's just the reality of business. And so people need to be prepared and to be thinking about those things.

Yeah, I definitely think that the strategic finance leaders I work with in our own portfolio, I do believe, like, hey, new stock market highs, plenty of capital, like light at the end of the tunnel with the vaccines, hopefully. But the idea that any one of the businesses that we work in needs to be more agile and more resilient for whatever the next event is good or good IPOs and such, bad global pandemic or the next thing. I feel like that has really changed people's attitudes about what they need to know and how they need to operate their business with agility. So tell us a little bit about where the product is today.

Yeah, absolutely. So we started with the purchase workflow, and it's because that was one of the more kind of complex workflows in the business where we saw a lot of opportunity to make an impact. So that's our most mature product. So as I mentioned, we're also introducing workflows for things like hiring requests. And when you think about it, you know, the reality for the businesses that we're Talking about here, 60 to 70% of their spending is on headcount and workforce planning. And in my experience, it's like a lot of spreadsheets. HR has a spreadsheet, recruiting as a spreadsheet, finance is a spreadsheet. Like, it's just a mass of collaboration. And so I think there's a lot of good that we can do to help in terms of workforce planning. And then when you start bringing all these things together, okay, we have the purchases, we have the hiring. When I think about a purchase, like, if I'm buying Zoom, I'm buying a Zoom license for maybe everybody in the business or everybody in these departments. So when you bring together hiring and purchasing together, there's so much synergy there because so much of the purchasing is headcount driven. And so there's just a lot of cool things that we can do there to be more predictive and more automated around purchasing. Since we're also going to have this workforce planning kind of data in our system. And then we're going to continue to invest around in things like, you know, making it easier for people to give us this information and then maximizing the use of that data. The old world of, like, it's just a waste, a waste of this great data that we're collecting. And so what we say at Trace is like, if we're going to collect this information, it's not just for approvals and like, you know, AP automation, like, we're going to give you the committed forecast and we're going to give you levels of analytics that, you know, that you haven't been able to get before. And so an example of that is, you know, Trace helps you come up with your forecast and your plan. You know, we handle the workflow that connects the dots for everything that needs to get approved all the way through like the record and the transaction that happens in your ERP system. And so when you're able to go from plan to, you know, a record in the transaction, you can tie back that, you know, that initial request. So much of the reconciliation that people waste time on is trying to make sense of these different points along that chain. And so the way that that takes effect in the product is I'm an FPA person and I'm doing a classic budget versus actual analysis. And then I start trying to drill in into like the variance that I'm seeing and comparing those two numbers. When I start drilling in into like a typical system, I come to a dead end. And so in Trace, you go from 50,000 foot VBA all the way down to the lowest level purchase. And I can see the contract, I can see who requested it, who approved it, when is this thing going to renew. And so being able to give that information to a person as they do analysis is a superpower for finance teams.

I am just as an investor, very interested in things that have value to the end user. Right. And both from a DNA perspective of you and Martin, having worked in consumer and more prosumer companies like Box, I have never as an individual gotten value out of an approval work workflow. Right. I'm like, okay, like somebody in finance needs this. But the idea that, you know, that's actually super valuable data and it's going to come back to the business somehow and users understand like why it's useful to have that data beyond just compliance and then actually that it's going to be a much nicer product to use as an end user versus some of these traditional, you know, ERP related systems. Like, I also think that there's a broader ambition with Trace in terms of just the customers. It's not as if companies and financial leaders, they reject financial discipline because they don't want to be disciplined. Silicon Valley and fast growing tech companies all over the world now they kind of delay, you know, financial discipline because the tools are terrible. I think the rethinking of just like how quickly and easily can we get people onboarded to a process that's actually easier for them or better for the business that employees will accept. I thought that was a refreshingly different take on financial software.

Absolutely. I mean the days of waiting three to six months to actually get value from a system, I mean, I think those days are hopefully behind us. And I also completely agree with like the idea that there needs to be value to the end user, like you can't just have them give you this information. And the analogy that we like to like, you know, use is like Salesforce. It's like salespeople really don't like entering data in Salesforce. But you know, like the managers and the, you know, the leaders in sales, they get all this valuable insights. The old school finance technology is like just having people enter data into the system and not getting all like those benefits from it. And so I think TRACE is trying to complete that model. It's like, let's collect that information, let's make this a lot more valuable for all these kind of different stakeholders. And then you kind of get that feedback loop where there's an incentive to enter good information, the system. And then we continue to get smarter, we continue to have those kind of feedback loops. We're delivering value to budget owners and decision makers and hiring managers, the people who have responsibility.

Let's talk a little bit more broadly beyond TRACE now. When talking to your peers and other finance leaders, like what do you see changing? How do you see the role of the CFO or the head of fp.

And a changing, I think it goes back to finance, I think is increasingly having more and more influence throughout the organization. And I think they're having more scope and more responsibility and more is falling on them. And so I think it's not just about the numbers anymore. I think there's an expectation that CFOs and their teams are providing more operational and strategic impact and helping people with those day to day operational decisions. And so the days of finance teams just building models and then just closing the books, I mean, I think that those days are behind us. And I think what future finance leaders need to do is they need to get ingrained in the business and help people with those operational problems. And that starts with like understanding the data and that starts with helping them make decisions. And really they need to have a seat at the table. You know, and I used to tell my FP and a team, one of the best signs of success is like, you know, when your business partner wants you in there weekly, you know, and if, and if you have a seat at the table and they're like, actually I want my FNA business partner, you know, to join my weekly meeting with my leadership team because they have an opinion and they're helping us make better decisions. That's a great place to be. And I think finance teams are going to increasingly find ways to do business partner collaboration and I think one of our mutual friend who is an SVP of FP and A at a big $30 billion company, you know, we were talking about technology and like finance transformation. He's like, no, our finance transformation goal is better business partnerships. You know, he's like, that is actually our only goal. And it's of course enabled with technology and you need technology to solve some of these problems, but it's really a people problem, it's an organizational problem and finding ways to work better together.

I was talking to Gautam Gupta, who's a friend to both of us and used to be the CFO at Opendoor and leading finance at Uber. And then I was talking to the former CFO at Instacart yesterday. There's a increasing set of businesses that I'm personally very interested in where the product and the financial decisions for the business are deeply intertwined because you're managing margin very actively with a new business model. And I'm not saying that's every business. Even if we go beyond Silicon Valley tech companies, the number of companies that are trying to transform themselves and suddenly are doing E commerce as well as their real world business or have more complex blended business models, I think there are an increasing set of companies where the finance partnership with the business is intensifying. Like feels very real to me. And those are super interesting businesses.

Absolutely. Going back to Gautam and his experience at Uber, Uber started building their own financial software. They ran their erp, one of the most sophisticated players out there, one of the biggest, most advanced technologies out there. And yet there were still gaps in how they can get closer to their businesses, how they can get closer to their markets and how they can get more real time information to make better decisions. So they said, you know what, we're just going to go start building and solving these problems ourselves. And my time at Facebook a lot of the same thing. Facebook ran on Mega erp, the biggest financial software player in the world. And my manager, Anil Wilson has since gone on to build a 2000 person enterprise engineering team. And they're building all sorts of great technology inside of Facebook, but specifically for finance. I think they identified problems in getting finance closer to decision making, getting more real time information. And they started building a lot of their own custom tools. Some of the mental models that we have at Trace and how we think about solving these problems comes from that understanding. And we're fortunate to be bringing some of those people who have built those solutions inside of Facebook to join our team now, which is exciting. That We've seen that happen and that we can now introduce some of this into the world with our product.

I've heard you and Martin talk about real time finance before and even more broadly than the sort of business models that we were just talking about, like the Instacart and Ubers of the world. If you just think about companies that are increasingly online, like I'm sure even Zenefix, any software business, any advertising business like Facebook, they have real time visibility into what's happening in the product and all that has financial impact. Right. You could see a better decision loop happening with the right tools and reporting or compliance tools built for quarterly and annual reporting and compliance needs are unlikely to sort of get us there.

One of my favorite quotes is from Elliot. He's the head of finance at Ironclad and he has like a tweet that I absolutely love talking about how the future finance tools need to be more real time. And he said that the current finance toolkit is like a coach who can't make any adjustments in game and has to wait for the game to be played before he can make any changes, which I think is a really, really good analogy. And I think what Trace allows people to do is to make adjustments in game.

Yeah. Awesome. Let's finish up by talking a little bit personally. So I'm sorry to surprise you with these questions, but that's how we get the real stuff. What's been hardest in your journey so far as a founder?

I think the early days may have been the hardest. When I decided to leave Zenefits, I was going to work with one of our best VPs of engineering. And it was like a week before we decided to quit, I found out he decided to go work with his former co founder and they went through YC together. They had a successful exit and so it made total sense. They were also both interested in something in the real estate space. And so I had a big decision to make. I could have gone on the path of being a VP of finance, and now I'm seeing some of those companies that are like five, $10 billion company. Like, well, maybe I should have done that. But no, absolutely not. Like, I was kind of set on my path to be an entrepreneur and really to build tools to solve problems for finance teams. So I stuck with it. And I spent over three months trying to find my next technical co founder. I finally found somebody. We had really good rapport. We worked together for about six weeks. And then he ran into some immigration issues. He had to go back to India. It was the time when they were really tightening down on those things. And so then I was back to the drawing board trying to figure out what I was going to do next. I taught myself how to design in sketch. Along the way was doing that for a couple of years. So I started to design the initial Trace product and I just decided to be a solopreneur at that point. I didn't want to go back to the drawing board on finding another technical co founder. So I hired an engineer and we started to build. And at this point, I'm like almost a year into it and I was at Facebook late post. IPO and benefits wasn't exactly the outcome that I was looking for. So it's like I had a nest egg, but not a big nest egg. So I was at the point where I was paying for an engineer, where I actually had to borrow money from my brother, our co founder. And so he wrote me a big check to keep me. Thank God for the little brother who's the VP of sales.

Crushing his sales number it is.

He put the team on his back. And so that was a low for me, for sure. You know, I think to be at that point and to have to kind of grind and persist through that and, you know, I think everything happens for a reason. You know, I got to a point with like, the product that I was building where we felt comfortable saying, okay, we got, you know, product is almost ready. We have customers. Like, I need to go prove I can recruit. And so then I started talking to people again. And then I met Martin through that exercise. And that's kind of like really where the kind of the story begins for Trace is that meeting with Martin and kind of where our relationship started. But the time before that was definitely, definitely very, very rough.

Third time is the charm. Quick takes. Is there a book you've read in the last year that you recommend?

I am reading right now for the second time, Working Backwards, the book about Amazon. And so I'm a big believer in that philosophy as well. And so the working backwards concept is when you're thinking about some investment or some initiative, start with that end goal in mind, like what's our dream press release? What's our dream article? And then just work backwards from there. So I love that and I love just a lot of their operating principles. Principles, how they think about things. Financial discipline. It's big.

Yeah, I guess Amazon's probably the best example of financial discipline. Can be a huge competitive advantage for a company that aggressively grows.

Absolutely.

Okay, so there's that shout out to Matt for saving your behind. Any other shout outs to someone who's been a hero in the past year?

Personally, just have to give a shout out to my family. Come from a very tight knit family and it's been really, really tough this past year not being able to see my parents. And I saw them for the first time most recently. It was like 15 months since I saw them. And so a lot of my motivation and my drive and my ability to persist comes down to wanting to take care of them and to provide like a better opportunity for, you know, for all of our family. So that's my driving force. They're the, they're the ones that keep me going when I'm working nights and weekends. I'm thinking about them. So I will always have to just give a shout out when I have an opportunity to them.

What about just, you know, persisting through the pandemic, trying to lead a team? Is there a habit you've picked up, good or bad, anything you're doing to stay sane?

I am a creature of habit and I think discipline is like the biggest key to my success. So I stick a very kind of disciplined routine, wake up, try to do the same thing every single day. The gym is like my sanctuary. You know, I wake up 5am, go to the gym, and that's just kind of like my peaceful spot. So not having a gym was like a major bummer during, during the pandemic, but found ways to kind of stick through it and do home workouts. I ended up having like a, a mini gym by the end of it. Just collecting, you know, whatever I could find to build my gym. So I think discipline and having a good routine is kind of what I would, what I would recommend.

Yeah. Mike, pleasure to be with you on the podcast. Thanks so much and congrats on the launch.

Thank you so much, Sarah. It was a pleasure. Take care.

That concludes this episode of Gray Matter. You can subscribe to our podcast on soundcloud.com greylock partners or wherever you get your podcasts. You can also find new episodes and blogs on our website, greylock.com you can also follow us on Twitter reylockvc. I'm Heather Mack and thanks for listening.