#10 Everlance

June 6, 2017

Alex Marlantes pitches his expense tracker and automatic mileage log app to investors. Then Sheel Mohnot and Michelle Tandler with Trinity Ventures decide whether or not they will invest in today’s startup, Everlance.

Show transcript

Episode transcript

On today’s show, a startup that’s changing the way we track our business expenses for the better.

Welcome to The Pitch. I’m your host Josh Muccio. So if you’re one of those people who have to keep track of your expenses for work, maybe you own your own business, or you get paid via 1099 instead of a W-2. Well, you probably keep track of your business expenses by collecting receipts in a shoebox or a folder. This is just inefficient and error-prone. And as someone who personally hates paper, I’m not a fan of the shoebox approach. So our founder today is pitching his app that tracks expenses and automatically logs vehicle mileage using GPS.

Alex Marlantes: We want to help millions of people with all the stuff an employer normally provides.

Alex, who you just heard, will be pitching live to two investors today. My co-founder Sheel Mohnot with 500 Startups. And we’re honored to have Michelle Tandler with Trinity Ventures as our guest investor today. In the first half of our show, our investors will ask the founder a series of questions to get a feel for whether or not they’d like to invest. Later on, the founder leaves the room and investors Sheel and Michelle will give their verdict on the startup. Let’s hear the pitch from Alex.

Alex: All right. Thanks for having me. I’m from Everlance, and Everlance makes it easy for independent workers to record their expenses and revenue. If you’re self-employed, you need to record your expenses for tax purposes. And the problem that most people have is they do this using a shoebox of receipts and a paper mileage log. Our app allows you to do that in a super easy way using technology. So we use GPS to automatically record people’s miles. And our audience tends to be people that need their car a lot for work. It’s everyone from a Lyft driver to a freelance architect. Mileage is really interesting, we think, because it’s such a valuable source of deductions. Every 10,000 miles you drive is worth up to $5,400 as a tax write-off. And we help people capture some of those miles that they might have forgotten to record.

Sheel Mohnot: Um.

This is Sheel Mohnot, my co-founder, and investor at 500 Startups.

Sheel: How many people are using this thing?

Alex: Quite a few. We’re pretty excited about the progress. We launched on iOS this time last year, so the product is officially one year old. And it kind of launched to crickets. But in December we got featured by Apple as one of their best new apps. Which was a totally lucky break and we started to move out from the on-demand economy of Lyft and Uber to a wide spectrum of folks. And so that’s how we found this bigger audience of 55 million folks that are self-employed or independent contractors. And now we have 100,000 registered accounts.

Sheel: And 55 million self-employed – that’s in the US?

Alex: That is. And I think the real number, to be fair, is a lot lower than that. Because a lot of those folks are classified, but really they approximate a W-2 employee and they’re not in their car a lot. So we see our TAM with mileage tracking as 20 million, but we’re building a suite of products to help people out in much bigger ways. So we think eventually it could expand even past that 55.

Sheel: Cool. So I downloaded the app and played with it and it’s really slick. So kudos on that.

Alex: Thanks.

Michelle Tandler: All right. Well, first of all I should mention –

Michelle Tandler, investor at Trinity Ventures. A 30-year-old firm that’s on their 12th fund with over a billion dollars under management.

Michelle: We were actually investors in MileIQ, which sold to Microsoft recently. We were very excited about that investment. We loved the team, loved the product, saw the need. For those of you who don’t know, MileIQ is a mileage tracking app. Had a great outcome to Microsoft. And we’ve been actually actively tracking the 1099 infrastructure space for over a year now. Maybe almost two. We’ve seen this massive surge in the 1099 economy. And for those of you listening who aren’t familiar with 1099, what it refers to is the tax form you fill out if you’re an independent contractor, as opposed to a W-2 if you’re a full-time employee. So we’ve actually looked at a bunch of companies in this space. I think it kind of got started because we were looking a lot at the on-demand economy. I think summer 2014, Uber for everything, and all of a sudden you have this massive workforce exploding. And what was interesting though in looking at the space is, yes, there are lot of people who are Uber drivers, Lyft drivers, deliverers for Postmates, DoorDash, etc. But what we also saw is there’s just a massive economy even further than that. So you have people that work from home. The economy is rapidly changing because of so much of the mobile technology and being able to work more remotely and have flexibility. So we’ve been really interested in the infrastructure side of things because we have seen this pain point, especially around taxes. It’s really, really hard to understand your withholding, and expenses, and know all the laws and rules. You don’t have a team helping you there. So I’d love to learn more about Everlance. I think it sounds really interesting.

Sheel: Question for you, Michelle. So you guys invested in MileIQ. It had an exit. Typically, you wouldn’t invest in a competitor when you’re in a company, but now that you’ve had an exit are you free to invest in something that’s a direct competitor?

Michelle: I think so. It’s no longer a portfolio company. So we are looking, actually. We’ve seen a bunch of companies that overlap with things we’ve invested in in the past, and I think it actually puts us in a really strong position. We understand the business models. I personally was not involved with that investment. One of our GPs was. But we’re definitely looking at a lot of stuff in this space.

Sheel: So Alex, where do you think you go from here? So you have a free product but there is a premium tier?

Alex: Yeah, as of ten days ago, so we’re excited about that. But just to go back to your point. Both my parents are freelancers. So my father’s a writer. My mum’s a yoga teacher. So I think growing up I always had that appreciation that people love, especially if you’re a creative professional, you just love to work on your own, and most of those jobs are in that area. But it is a total friction to keep up with taxes. And we really think of it as a stack of services that would normally be provided by an employer that you’re missing if you’re 1099 or self-employed. So taxes are certainly one of those things. An employer would typically withhold your taxes for you. But you can imagine that there’s a bunch of other things you could help them out with, too. Like health insurance, tax advantage retirement plans, things like that. So we’re really excited by expense tracking, one because we think it solves a huge pain point and there’s a lot of frequency of use. So if you want to help someone with taxes or health insurance, how do you get in front of them in a meaningful way with the right cadence? Well, expense tracking is a weekly problem, if not a daily problem. And then secondly, expense tracking gives you this really rich source of data. And we know, what do you do for work, how much money do you make, if you’re using the app for tax management, what do you spend your money on. And so we’re hoping that in the future we can build on to that and add these additional value-added services on top of that value prop of expense tracking.

Michelle: I’m signing up right now. I have to choose a password.

Sheel: Do people use it more on Android or iOS?

Alex: Well, Android is three weeks old. So I’d say iOS.

Michelle: Well, you have some fantastic reviews on the app store. Amazing. I think you have 929 4.5 stars.

Sheel: That’s a lot of reviews.

Michelle: People are saying it’s an absolute steal at this zero dollar price point.

Sheel: Well, now that you have premium tier, maybe they’ll pay. What do you charge?

Alex: It’s going to be $5 a month if you pay annually.

Sheel: Okay. Cool. Pretty cheap. You haven’t done any paid acquisition yet. So you got an app store feature, and then there’s some word of mouth. What else has there been?

Alex: App store search. That’s an acquisition channel that I think we totally even know about.

Sheel: Is it people searching for mileage tracking?

Alex: There’s a variety of keywords. But, receipts. One of the things we do in addition to mileage tracking is all of their transactional expenses. And so that’s kind of where we hope to build on. Kind of where MileIQ started. And for a lot of folks, mileage is just one piece of it. It’s not a comprehensive complete solution. And so if you wanted to, if you took a client out to coffee, and you’re at Starbucks and you want to add that in to your financial life or financial picture, we help them do that. So you might be searching for receipts, mileage tracking, 1099, mileage log. There’s a variety of things. And what’s recently changed is for Apple’s keyword algorithm, they started to weight retention. So they have an optimal size around retention, and so if you can build a really strong app with five star reviews, and in the early days we were one of the only apps with five out of five stars, now we’re dropping unfortunately, and have retention and a few other metrics will start to filter you up to the top which can help.

Michelle: So then right now, when you talk to your users are most of them already aware that apps like this exist, and they come in and they’re looking for a new app? They don’t like the old one? Or do you find that the majority of your new users had no idea that something like this was even possible?

Alex: I think that’s such a great question. And we’re trying to focus on some of the retention data now and say, hey who signed up for this, who continued to use it? And that’s actually one of the biggest switching points. Which is have you built this habit beforehand? And so if you were someone like my parents who kept that shoebox of receipts and paper mileage log, and you probably at one point said, hey there’s a computer in my pocket, my iPhone, why doesn’t this do this for me? Right? And then you probably thought to go search in the app store for mileage log or mileage tracker. And you’ve already experienced a lot of frustration and pain and when you see a solution that does it well, it’s a no brainer, you’re going to continue to use it. But there’s a whole huge new migration of labor that used to be W-2, and now they’re like, hey, I really want to be self-employed. Finally, I can pursue my passion of being a photographer, a musician, or do a little bit of Uber, a little bit of Lyft on the side, maybe I’ll sell something on Etsy. But, I hear I’m supposed to keep track of all my expenses. This is a total pain. So I think there’s kind of two modes. One is someone who already knows what the problem is and they’re just looking for a better way of solving it and they think an app is that. Versus someone who is brand new to it, and they’re kind of looking for an education that comes along with it. Hey, what can I write off? How does this work?

Michelle: So what percentage of your users right now are Uber and Lyft drivers?

Alex: It’s less than a quarter.

Michelle: All right. Interesting. And then is there any group that has a higher percentage than a quarter?

Alex: It’s really all over the map. I think that’s actually one of our challenges, and something that we’re trying to do a much better job of. I don’t think we’ve done nearly enough customer interviews. Especially these 30-minute deep dives. I think it’s a marketing challenge too. Because are we an app for wedding photographers? Are we an app for architects? Are we an app for… Some physicians use us because now they’re self-employed and they want to contract out to hospitals. You know, it’s really just all over the map. And how they would use the app, or the language that you would use to reach them or to explain things to them could be very different than someone who’s using it to do DoorDash.

Michelle: Right. In terms of what we’ve seen in this market, that’s the tricky part. So from a tax perspective, 1099ers are all classified as the same. They’re very different types of consumer or customer. And someone who delivers for Postmates is going to have a different looking profile and life and web-behavior than someone who is a lawyer in the mid-west or something like that. So reaching these people, we find, is extremely difficult. And a lot of 1099ers don’t use LinkedIn, don’t necessarily have on their Facebook profile what they do. It’s very hard to target people. So I’d be curious to know how you’re thinking about customer acquisition, and have you thought about partnerships, things like that.

Alex: Yeah, we certainly have. I think partnerships would be exciting. It’s an opportunity to go B to B to C. But around the user acquisition thing, I think that’s where we’re trying to get creative. And I think that’s where we think we need to develop some special sauce. So we’re not saying too much right now. But I think one thing that’s challenging is pay channels have gotten saturated and very expensive. And so all the CPMs on Facebook and things like that, even if you have a really compelling message, high click-through rates, your CPIs are pretty expensive.

Sheel: What do you think it can pay? Do you have any idea?

Alex: We’ll see. So I think one thing we’d be really excited to learn is is there a world in which we can get a very quick payback period with this subscription product? And that way we can go meet a capital provider, like a venture capital person, and say look, we pay $5 for an install and 10% of these people pay $60 within 30 days for an annual subscription. And so within 30 days we can get another user and then reinvest that cash flow and grow the business. And by the way we have all this embedded optionality with the things that we can provide them in the future. We’re not losing money. We’re not hoping and praying for the lifetime value. It’s dramatic, and it’s right there.

Michelle: I’d be curious to know, how are you thinking about fundraising? And where are you guys at right now and how are you thinking about the next year to 18 months?

Alex: Yeah. So our big growth season is January through April. Because it’s a little bit like a gym membership. Folks are like, hey, I want to get on top of it, I should have been doing this, and then it’s also tax season. And so we want to add a few members to the team ahead of that, and also have a reserve budget just to see if we can grow quickly now that we do have a paid product. So I think before January is what we’re looking at. Look, we want to help millions of people with all the stuff an employer normally provides. But now we’re like, hey, what are the answers? Can we find the answers to these people’s questions before we meet with them? And so things like customer acquisition costs, lifetime value, market sizing. And so we’re trying to be really thoughtful and diligent and get all the answers to those questions before we even get in the room.

When we come back, the founder leaves the room, and investors Sheel and Michelle decide whether or not they’ll pursue investment in Everlance.

[sponsors]

Welcome back to The Pitch with Everlance. Let’s head into the studio. Alex just left the room and only the investors remain. Here’s Sheel and Michelle.

Sheel: Wow, so I didn’t realize you guys were investors in MileIQ. I totally should have done my homework. That’s pretty interesting.

Michelle: Is that helpful or not?

Sheel: It’s totally helpful. It’s cool. It would have been terrible if you were currently investors in MileIQ and active on the board or something. But now it’s awesome.

Michelle: Well, it’s funny because when you start typing the word ‘mile’ into the app store, the first thing that comes up is MileIQ. Then ‘mileage tracker’. So let’s see. We click ‘mileage tracker’ and… Hmm… We’ve got Mile Tracker, then MileIQ, then Mile Catcher, then Mileage Logbook, Mile Bug, and then Everlance.

Sheel: Yeah, that’s fine. But so those things, Apple is actively working on, as he said, shifting their SEO. And I do believe that they’re working towards a model where the best apps will be higher featured using data like retention. So his app looks really slick, I mean, you saw it. And the reviews are really good. So I think over time it will get better at the app store SEO. He’s got 100,000 users, that’s pretty good. Or 100,000 downloads, I guess. What are your thoughts over all?

Michelle: So, I agree. The app looks great, beautiful design. And I’ve looked at quite a lot of these. The thing that’s the big question is exactly what he’s talking about when he talks about that CAC to LTV ratio, looking for some special sauce. To me what that says is they haven’t really figured it out yet. And that’s okay. They’re early, they’re getting started, they’re building product and a community and they want to get people using the app, they want to get product market fit, right? But ultimately at the end of the day, these companies are tricky. People do churn. There’s a lot of apps out there. Not necessarily a lot of barriers to entry on creating something new. Once you get people in and they’re using it –

Sheel: Once they’re using it they’re not going to churn.

Michelle: Yeah. And you have their receipts. If they really build it into their workflow and it becomes the primary way they’re tracking expenses, then they can be quite sticky. But willingness to pay here is going to be low. I mean, people are just finicky in general. This is pretty consumer. I’d be really curious to see what kind of conversations he has in terms of partnerships, can he get people to pay, what percentage are going to that premium tier, what the churn is like. Those metrics will ultimately be really important.

Sheel: I agree with that. I do think I’m not as… So look, he’s charging $60 per premium customer. I think the business isn’t going to be there. The business for me is going to be in all these other ancillary products. So maybe the business sustains itself on that, but actually grows revenue substantially by offering other products.

Michelle: I completely agree.

Sheel: There’s so many things that 1099ers need as we know. Maybe it’s something where like he can build out a schedule for you. Like, you’re driving for Instacar at this time, and Uber at this time, here’s what you should be doing optimally. And I think there’s so many ways that he can build this into a more robust product and/or just partner with others. And I’m pretty compelled by that.

Michelle: I will say, I’ve looked at a lot of companies that are attacking various parts of the 1099er problem. The thing that I would be looking for in terms of an investment is being the central platform, the center of the workflow. And a lot of companies have tried, and there has been a lot of roadkill here.

Sheel: Absolutely.

Michelle: There have been a couple of companies that we were tracking and they went out of business. But if you can be the place where as a contractor you go to figure out where to get your health insurance, and do your taxes, and your expenses, and maybe figure out where your next job is going to be, and if you wanted to add on different services, like a schedule, can you create a labor marketplace, can you figure out where you should be working at what hours, things like that. That would be really powerful. I think in order to do that you have to build a serious brand. And you need to start getting that word of mouth adoption, you need to have people telling their friends “this is helped me so much with my work”. And getting people excited to be on your platform and then maybe partnering with some of the other piecemeal solutions. It could be extremely powerful.

Sheel: Totally. The thing is, I don’t think this is going to be that. Because this is a subset of 1099 workers. This is those who are driving. So your home bookkeeper or whatever is probably not going to use this product. So I don’t know if this is that central resource for 1099 workers. But I do think it’s value add and there are enough mobile 1099 workers that this could be a great business, as you guys know from MileIQ.

Michelle: Yeah. There’s a lot of them. It’ll be interesting to see what their next features are that they launch. I’d love to see their product road map. I mean, it looks like they’ve nailed the mileage tracking, but that’s just one little piece of the puzzle, as you said. And I’d want to know what’s next and maybe see some signs of adoption from some of their next products.

Sheel: Yeah. Absolutely. I’m excited to actually dig in. He’s right, that January through April timeframe is crucial. I’d love to help them on customer acquisition during that timeframe. Anyway. Cool. So overall you’re interested? You’re going to stay in touch? Track it?

Michelle: I would say this is definitely one I would track. Pun intended. I’m very curious to see what they do between now and January. I wish I knew more about where their funding was at, and what they’re thinking about there. It sounds to me, my guess is that they’re going to be looking to do a seed, sometime Q4. So I can think of a few seed investors that might be interested. It might be worth setting him up in a meeting with our partner Karan who did the investment in MileIQ.

Sheel: Cool. Thanks a lot.

Michelle: Thank you.

Here’s something to think about. If what Alex said is really true, if paid acquisition channels like Facebook which I always thought of as cheap targeted traffic is now becoming prohibitively expensive, then where should scrappy startups go to find a new wave of users? If you have thoughts on this or a story about something that’s working for you, find us on Twitter or Facebook @thepitchfm. Let’s talk about it. We might even include some of your ideas in the next episode of this show.

That’s all for today’s episode. Thank you for listening.

We’re taking next week off to record season two, so no new episode next week. But I will be broadcasting some behind the scenes stuff from the studio using Facebook Live. So you can follow me on Facebook @joshmuccio to get access to that.

To join our weekly newsletter and get behind-the-scenes stuff that we don’t share on the podcast, go to thepitch.fm and subscribe by email. We’ll be back with a new episode in two weeks. I’ll see you then.

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