How Pilot Index convinced Ventures to think long-term about margins – TechCrunch - Gadgets Price
Wed. Dec 8th, 2021
How Pilot Index convinced Ventures to think long-term about margins – TechCrunch

on a recently On this (and soon to be published) episode of the Found podcast, an entrepreneur told my co-host and I that he sees a broad swath of the venture capitalists as money managers, more focused on short-term profits and returns than long-term revolutionary technology.

Agree or not, it’s hard to ignore the fact that the multipliers in Silicon Valley and the growth of software companies have changed the way we think about a startup timeline.

“The pressure of [Index] made us work a little harder and be a little more precise in our instrumentation to be able to prove that the long-term trajectory would reach certain milestones that would work for everyone.” Jessica McKellar

Pilot, an accounting software service that has raised more than $160 million since its inception, isn’t necessarily a stranger to investors’ short-term desires. Index Ventures partner Mark Goldberg, who led the Series A and Series B rounds for the startup, would be the first to tell you that the board and founders initially disagreed about how the company should operate.

Obviously it wasn’t enough to stop him or Index from doubling sales.

We covered this and more on TechCrunch Live.

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“It was pretty terrifying,” Goldberg said. “In my gut I thought, ‘Wow, we better get this right.'”

A few things fell into place for Goldberg to want to continue investing in Pilot. The first was that it was a real opportunity to create categories, as accounting was a $100 billion industry that was largely fragmented.

The second was the customer’s love for the product.

“We heard customers proactively calling us from the Index portfolio saying they hated accounting and back office functions and now they don’t have to think about it. They said things like, ‘Whoever this Pilot team is, they’re doing some wizardry so I can shut my brain off from the part of the business I didn’t enjoy doing.’”

The third was the team’s belief and commitment to empathize and understand their customers.

He recalled an early time when the team consisted of no more than 10 people, most of them engineers, when he visited the office on a weekend. They all wore green visors and did the accounting for their clients.

“They didn’t do it because they needed it for customer support, but because they really wanted to empathize with the customers for the product they were building,” Goldberg says. “That’s the kind of sweat equity and market recognition that told me if this continues to grow, there’s really no ceiling on what this company could become.”

While that kind of dedication to understanding the user was attractive, it was not without a cost.

Counterintuitive Beliefs

“Pilot is a tech company shrouded in this nice human layer of high-touch support for its customers, which is a bit counterintuitive in Silicon Valley, where most companies don’t want people in the loop,” Goldberg says. “That’s what I know and understand, and we felt that this kind of technology-enabled service model could be very valuable, but we wanted to make sure they could create a financial profile with gross margins that matched that of a software company.” .”

In its simplest form, Jessica McKellar and her co-founders felt very strongly that they wanted to focus on the customer from the start and provide great customer service. In a business where you onboard customers by including all of their financial records, that can be costly.

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