On this show, one investor has earned a reputation for asking the tough questions. Michael Hyatt.
But today’s founder reveals a different side to Michael. Less of the human lie detector. More of the happy Canadian, buried deep inside. Maybe it’s because she’s from Canada too. Or perhaps it’s because this business has so much going for it that even Michael can’t find a bone to pick.
What could possibly be going on that has Michael Hyatt swinging from the chandelier?
From Gimlet, this is The Pitch. I’m Josh Muccio
Today’s investors are:
I’m Phil Nadel
Phil’s companies have sold for hundreds of millions of dollars. Now he manages Forefront Venture Partners, one of the largest syndicates on AngelList.
I’m Michael Hyatt
Michael built and sold two software companies for over $500 million dollars and now he invests for himself.
I’m Sarah Downey
Sarah’s a partner at Accomplice where they’ve invested $600 million in over 200 startups so far, one example, a company called Draftkings.
I’m Charles Hudson
Charles started Precursor Ventures where he’s invested $20 million in over 100 startups to date.
The Pitch for Virtual Gurus will begin in just a moment.
Alright, here we go.
Bobbie: Hi. I'm Bobbie.
Sarah: Hello. I'm Sarah.
Michael: Hey, I'm Michael.
Bobbie: Michael, nice to meet you. Canada, hm?
Michael: Canada. That's right.
Michael: Where all the nice people live.
Phil: Yeah right.
Bobbie: Well, hello. I'm Bobbie, the founder and CEO of Virtual Gurus.
Bobbie: A few years ago I worked in oil and gas just like everybody else in Alberta. And then a few years ago I got laid off just like everybody in Alberta. So when 50,000 administrators were running around town trying to find work, my chances of finding work were very slim. And the bank of mom was getting super super low. So I started looking online and I came across an article that read the gig economy. And I was thinking, holy shit, I could probably do that.
There are dozens of marketplaces for people who want to do office work in the gig economy: zirtual, upwork, fiverr. Heck, there are even ones literally called freelancer dot com and people per hour.
Bobbie: So I looked online started really doing my profiles And next thing you know I had to actually start bidding as low as $2 an hour just to get a simple task. And I was thinking, this is, this is crap. How am I actually going to make a living off of this?
That’s when Bobbie decided to solve the problem herself. She figured it would be better if she built a marketplace where quality virtual assistants could get work for a guaranteed rate.
Bobbie: We leverage human assistants via an AI bot and an algorithm. You could actually look for, I want administration, I want sales, social media, general admin. And so then you come in and the algorithm actually matches that person that best suits you.
Bobbie: So all of our virtual assistants are North American and we have over 160 active working ones with 6,000 in our database that have already been pre-vetted. And we've launched two and a half years ago and our current annual recurring revenue is 1.3 million.
Michael: Wow. Good for you
Michael: And what do you take of the 1.3?
Bobbie: So right now we're at a almost, we're almost break even.
Bobbie: Yeah. So I'm here raising 300,000 to top off my 1.35 million raise.
Sarah: So is Zirtual like a competitor to you guys?
Bobbie: Similar to Zirtual. Little bit different is that Zirtual provides general admin. We're kind of going that step and beyond. We're more exec admin.
Sarah: I see.
Bobbie: So we realized that one of the disconnects was somebody wants to come in kind of have a remote team. So with us they can build a remote team. So they can say, I want a bookkeeper, I want a realtor assistant and then I want a social, and social media marketing person. And they build the team and that team all runs underneath one subscription model.
Charles: You mentioned vetting and qualification. Like what do you look for? Or what do you screen for on that, on the service um provider side?
Bobbie: Um so we, we vet for a few things. We do an interview process, with our people in the office. So we start getting on the call with them. We do do their check on their, their ah backgrounds. Um and then we give them a test task now and we push them through the system. If they can't actually get through our project system, get through the timer, get all of that, we know that they need to go through coaching.
Michael: But how do you vet that many people? You know, I invested in a company called ideal.com and they literally have AI that sits in front that actually goes through 15,000 resumes.
Bobbie: That's the goal. That is the goal.
Michael: Like actually vets, you need almost AI to get to your AI.
Bobbie: Yep. And that is 100% the goal. So…
Phil: It sounds like you're doing it very manually now. You're talking to them on the phone...
Bobbie: Manually, talking on the phone, they fill out a separate form. And from there, they go through the Virtual Gurus Academy where they do have to pay for courses um from $30 to $90 a course. Now they don't all go through. We kind of speed track...
Michael: Walk us through those courses. What am I doing in that course?
Bobbie: How to work as a virtual assistant for, like virtual assistant freelancing courses, so...
Michael: Like an online...
Bobbie: Yeah. All online stuff. So it's essentially like a Lynda.com but for...
Michael: How long does it take me to do that course?
Bobbie: Well there's 60 courses in there. So you could do one, two, five...
Michael: You developed all of them?
Bobbie: Yes we did. Because even some of our competitors have actually been sending people to do or go through our academy. Um so we've had actually Zirtual send a few.
Michael: What's the most common request you have?
Bobbie: Right now is, kinda surprisingly, real estate assistants, ah medical legal assistants and IT.
Michael: So someone in like like the real estate world wants someone to help them open up and lock up...
Bobbie: Their listings, call, pre-vet their people, set appointments for them...
Michael: But what do people get paid for that job?
Bobbie: So we charge the client 35 an hour, and then we pay the VA anywhere from 18 - 22 an hour.
Phil: Generally speaking, how are you, how are you marketing?
Bobbie: Yeah, so that's the thing, we're not marketing right now. It's just been word of mouth by all the articles that have gone out about me being an indigenous person, um, and being a woman-led tech company in Calgary, in Canada. People are like, did you hear about this company?
Phil: It's just word of mouth?
Bobbie: Yeah. A little bit of marketing. A little bit, a lot of online presence, though. Like, an online presence, social media, we're all over, if you go, I hate to say it, but you go to Google and type in Bobbie Racette, it's pages and pages. Um... So all of that and like Forbes did a thing on us and that stuff really gone and gave us a big oomph, right. We are spending about 2500 on a light ad spend. I'm scared to crank up the taps, because we can't hardly keep up right now.
Bobbie is saying that she has way more companies, demanding VA’s, than she has VA’s to supply them with. While this is a great problem to have. That doesn’t mean that an easy solve.
It’s simple to keep quality high, when it’s just a few customers. It’s considerably harder once you crank up the taps. Which is a scary thought to both Bobbie, and the investors.
That’s coming up, after the break.
Welcome back. Bobbie Racette is starting to gain momentum in her pitch for Virtual Gurus. And one investor seems particularly struck by her, Michael Hyatt.
Michael: Well, I, I think it's just so impressive that, I know a lot of people may not know this, but Alberta has been hit incredibly hard with the downturn in oil and gas. And it's, it's extremely impressive what you've done. I mean, coming out of trying to find a job at 2 bucks an hour and you couldn't get a, get a job so you built your own business. This is classically a, a great entrepreneur move ... So good on you. I'm very impressed with what you've built so far.
Bobbie: Thank you. We're pretty much bootstrapped, right.
Bobbie: So I've only done a small raise of 200,000 in 2016 before I launched. So right now, we've been fully bootstrapped.
Michael: And what do you, how much, you want to raise 1.2 million, you said?
Bobbie: 1.35 million.
Michael: Okay. At what valuation?
Bobbie: Ah, you're gonna laugh at this. Canadian, you might not. But you might. Um, our valuation's at 3 million.
Sarah: Good deal.
Yeah it’s a pretty good deal. A company this size out in silicon valley could easily go for 2 to 3 times that. And check out this cherry on top, her newest product, was actually funded by the canadian government. An app on Slack, called ask betty.
Bobbie: Ask Betty was fully funded by IRAP, which is in, it's kind of like a government funding for tech. And so that's all good and ready to go.
Michael: Do you have any other funding non-dilutive coming in? Any other stuff from the government?
Bobbie: So we're looking... So IRAP has got us. Western Diversification, we're on the first mailing list to get that once they release it.
Bobbie: Um and so they want to match the million for a million.
Not only has Bobbie’s story -- quite literally -- wowed Michael. But her valuation is starting to sound like a steal ... because of that tasty government money. When investors put their money in, they get their very own slice of the company pie. But when government money comes in, at least in this case, they got zero slices of this virtually delicious pie.
Which means there's more pie left, for Bobbie and her investors. You don’t have to be a guru to see how this, sweetens the deal for the five investors in the room.
But there are some things that are still worrying to investors, namely the competition. Here's Phil..
Phil: I know there are other virtual assistant companies and I know that there are lots of free, freelance networks, and and marketplaces. And it seems like you're competing with both of those. And I just, you know, I'm not really getting that there's a true differentiation here and I wanted to understand that.
Bobbie: Definitely. Um we pre-vet the VAs so then we match them based on the algorithm. And our algorithm matching is out at 95% success rate. With that, the number one thing that actually helps us is they love that our VAs are onshore. Um, a lot of the majority of the companies out there are offshore. Or they're, and I'm saying this in the nicest way, they're not the most quality VAs. So we have a lot of oil and gas workers that have been laid off, we have a lot of single stay at home moms who can't afford to go back to work. And so we have a lot of people that have years of admin experience.
Phil: So when I compare you to other virtual assistant companies or to Upwork or whatever, you're higher quality? And that's what's setting you apart?
Bobbie: Yep. I would say definitely that's one of the them for sure.
Michael: What's your biggest challenge right now?
Bobbie: Biggest challenge right now would have to be with dealing with the demand. Um, so we're kind of struggling with keeping up with the amount of inbound sales. So right now we're getting around two to 400 inbound requests.
Michael: From companies who need somebody right away.
Bobbie: Yeah. So I only have seven office staff right now ah that are actually the full operations of the whole company. Um so the first thing I want to do is I need to hire a COO. Cos I am currently COO, CTO, CEO, all of it, right. Secondly is I really want to be able to put some more money into the academy.
Sarah: When you said you're CEO, CTO, COO, I want to dig into that. Because if you're doing all those things, that is really impressive. At the same time, you need to definitely offload some of that. But so are you like, are you technical? Like, did you build some of the platform? Or...
Bobbie: No, I'm more of the visionary behind ah the...
Sarah: Got it.
Bobbie: So I'm really, really good at delegating and managing um...
Sarah: That's a good, that's a skill. It's a great skill for someone who builds a virtual assistant company, too.
Bobbie: Yeah. Yeah.
Michael: Okay, so I love when a business can't keep up with demand on sales. So how many more people do we have to add in Calgary, which is not that expensive right now, to your company to pick up that slack?
Bobbie: Um when I close this round, I want to bring on ten. Obviously, I'll do it in staggered, but I want to have the COO first.
Michael: An operating executive.
Bobbie: Yeah. Because to be honest I'm, I want to keep remaining being the face of the business. And I want to keep being the visionary behind it. Um...
Michael: Yep. Smart.
Bobbie: And a COO can help us with that operations, because I'm always traveling, our people are always wanting me out there. I'm getting requests to speak at a lot of stuff and I really just want to remain being the face because that's helped our growth.
Sarah: That's very self-aware and smart to say that. And I think we see a lot of CEOs...
Michael: Yeah. I agree with Sarah.
Sarah: that are like, I have to do everything. And they have this like ego that won't let them give up those things that frankly they aren't the best use of their time. I think you're a great evangelist and it's very smart to, to carve out time for you to continue to do that.
Bobbie: Thank you.
Michael: So those seven, eight people you're going to hire, what are they going to be doing to pick up the slack? You have a lot of inbound coming in, you can't get to them. That's what you're saying. But how does hiring more people get to them?
Bobbie: Well, then we can just bring in more that we can manage on the internal side. We do what we call a strategy call with them because we want to feel heard. One of the main issues that we ran into is they didn't feel heard and their VAs weren't listening. So we do a strategy call in the office with them.
Michael: Sorry, with the clients?
Bobbie: With the clients, yeah.
Michael: But is it a physical matching between um company over here in California needs that dialer and mom here, as you said, in Alberta, you, how did you find this mom here when you get 15,000 or 17,000... Like, are we just ignoring so many thousands of resumes because we can't get to them? Do we need it to build AI over here?
Bobbie: We need to. And, and I mean, I'm the first to say, like I mean with the fact that we've been bootstrapped for with only 200,000, I had to kind of pick and choose which were my main things to build...
Michael: But if you could add AI here that could peel through those 17,000 resumes and tell you these would be great, would that be good?
Michael: That's what you need?
Charles: I've had a virtual assistant. I've had three virtual assistants in the last ten years. And the ones that have worked have worked for exactly the reasons that you've outlined which are that you make sure the client has reasonable expectations and knows how to work with a VA, and you pick high quality people. The challenge I have though is I've never been able to figure how do you use technology to make this better. like I just don't know how these kinds of businesses, even when they're successful, become the kinds of ones where technology gives you a ton of leverage. So this is probably one of the hardest passes I've had to do, cos I like everything about what you said. I like you, your energy. And I think you have the right insights. This is just a business where I struggle to see how technology can give you the kind of leverage I want.
Phil: I think that's a really um good point. Um because it sounded like from what you're pitching that a lot of the process is manual. And which is great, like, spending time with the client on the phone to understand their needs, I mean, that's, that's what you want as a client, right. And that's what Charles was alluding to you. That's perfectly in line. But it's time consuming. It's manual. And hard to scale while bringing costs down. My only concern here is is product differentiation. I mean, that's my main thing. I get what you're saying about higher quality being your differentiator. But I guess I have some scar tissue because I was an early investor in Zirtual. And it didn't do well. but that's my big concern. And you know, as I said, you're sort of bumping up against not only VAs but, but freelance networks too, because by providing specialized VAs, then the other option is I can just go get one online from an Upwork or that kind of thing. So, that's, that's where I'm struggling with this. So I think for me, I'm going to have to pass.
Bobbie: Appreciate that.
Charles and Phil are out. Because Bobbie’s success so far is based on the human touch. And they just don’t see how tech is going to scale all those personal phone calls. I wonder though, what Michael’s thinking.
Michael: Listen, ah, I would like to invest. Ah, I think this is one of the most humble smart and best pitches I've seen in a long time on this show. The valuation's reasonable. I love what you're doing. Everything says that you have a huge supply of clients. Um But I'd be in for 25 to 50,000.
Bobbie: That's, that's great. Absolutely
Sarah: Yeah. I think... Oh, this is... I'm, I'm having like such... I'm, I'm just where you guys are with like I think um if there's a spectrum, on one side you have like the Zirtuals and the Upworks. And actually maybe a couple of years ago I was doing a search for a virtual executive assistant, and I was like, who the hell is going to solve this problem. Because these are not it. There isn't that specialty and that quality level. But then I think on the other side you've got like your Amazon mechanical Turks, and kind of like these task-based things that are chipping away. And in the center is you. I think you can bring in tech. I just don't know if it will necessarily make it better in this situation. It's such a good price, and you are such a **** ing rock star.
Bobbie: Thank you.
Michael: Sarah, if she had a cat, you would be in.
Sarah: Do you have a cat?
Bobbie: Yeah. I totally have a cat. That's why Betty is named...
Michael: Tell her about your cat. Tell her about your cats. I'm serious.
Charles: Michael's working for you already.
Sarah: Well, I mean, look, look. You've got cats and tattoos.
Sarah: I, I, all right, I'm in.
Bobbie: Ah yes.
Sarah: I'm in for 25k as an angel.
Sarah: I'd also love to talk to and understand, you know, some of the people on the platform who are working as VAs and understand their experience. But like ****. You're just, you're just the total package.
Michael: This is a winner chicken dinner. I'm so, I'm pumped about this one. Wow. Fantastic. Thank you for coming in today.
Bobbie: That's awesome. No, I appreciate that.
Michael: My favorite pitch. Bobbie, thank you for coming in.
Bobbie: Awesome. It was wonderful guys.
From unemployed assistant to raising $50K from Michael Hyatt and Sarah Downey! Bobbie is riding high on her trip south of the border. And Michael is lovin’ it.
But it’s not just Bobbie and the business that he loves.
Michael: Guys, um...
Sarah: That is a really great story.
Michael: Guys this is... I just want to tell you what you just saw. What you just saw is from a just a math point of view, the lowest valuation with the most protective capital with the most funding with the most non-dilutive funding with the most support. This woman here has gonna, has already gotten ten times to a hundred times the social media of anybody else because of what she's pulled off in the worst economy. Um, she's an Indigenous Canadian who is going to get a hundred times the push, and she deserves it. This is a story that we cannot mimic anywhere else.
Sarah: That's just such an entrepreneur.
Michael: And I love the fact there's competition.
Phil: Kick ass.
Michael: And she is helping 17,000 people that have no jobs, that have to stay at home. I can't tell you bad it is. This is... I love everything about it.
Alright so Michael loves it… But Charles, wasn’t having it. Both he and Phil had concerns that this company was going to have a tough time scaling up.
Charles: I think it's going to be a one to two x multiple on... Because I think it's going to look like a services business for its entirety. And it's going to look like a really profitable one. But those are one to two x multiple businesses.
Josh: So that's why you didn't invest? Or because you don't see the tech?
Charles: Without tech, you can't get out of that trap.
Michael: I think they’ll build the tech.
Josh: But Michael things that they do have tech.
Charles: I don't think she will.
Phil: No, they don't.
Charles: I don't think she can build tech and maintain the same quality of experience. As someone, and maybe I know too much...
Charles: ... because I've gone through...
Josh: She's forever tethered to the manual process of interviewing each virtual assistant.
Charles: I think I've, I've had, maybe I know... Sometimes you can, you can have too much experience as a customer with a product. And I have used four different VAs. The more automated the experience, the shittier the service was for me as a customer. The happiest I've been is I have a VA, I have the VA has a manager, I talk to her manager once a quarter who checks in and says, hey, how's everything. You could do it with a form. Yeah, a form's not the same thing as actually talking to another human about the performance of the person who's supporting you. And so this feels like one of those businesses I think it's done... Like McKinsey is not a tech, McKinsey uses tech. But McKinsey sells labor by the hour.
Phil: It's a service company.
Charles: Yeah. It's a service company.
Michael: So, so, so, so let's talk about your one to two x. Let's say I get out at 2x, which is very reasonable. Right. This revenue is going to get to 20 million. I'm getting in at two and a half. Think about it. It's one of the best VC returns you'd' have.
Sarah: Yeah. I, I completely agree. It's like, it's not a venture scale profile.
Charles: Yeah. But it's a good business.
Sarah: But it’s a great angel investment.
Phil: Very good business. Yeah. <<music starts>>
Phil: Can we sing the Canadian national anthem?
Michael: We can. We should.
Phil: Oh Canada...
Sarah: I only know that because of South Park.
Phil: I only know it because of hockey games. [laughter]
After the break, Sarah and Michael take the next step, but Bobbie says one little thing ... that could throw off the whole deal.
Welcome back. When Bobbie left the room with $50K in investment from Sarah Downey and Michael Hyatt she was feeling pretty good. And then, a few days later, after she arrived home in Alberta, the three of them jumped on a call.
Bobby: Michael Hyatt, he's, uh, he's right off the bat, well, what about this? What about this? What about this? And, um, I had to be quick thinking and on top of my toes and really, really be able to come up with the rebuttals of what can we do. I'll be honest, I felt like it didn't go well. I ended the call thinking for sure they are not in
Josh: So let's talk about Sarah. So she sent you an email a day or two after the call. And she called out one moment in particular. She says ahh one moment on the call sums it all up for me. Saying a $50 million outcome would be amazing. And Sarah was like, you know, you saying that a $50 million outcome would be amazing, is not what I want to hear as an investor. the deal profiles I like, and know best are $1 billion plus outcomes.
Bobby: Yeah, she ended up backing out the next day.
Josh: Do you think what they were saying was like, it felt like you didn't want to grow to be a really, really huge company. Like that wasn't in your plan for the company.
Bobby: No, no. And, and it was funny though, because after we got off the call, my corporate strategist was on the call with us and he had said that that's probably what it came off as. Um, and yeah. Yeah. So I was like, ah, man, you know, rookie CEO, mistake number 20 billion. Um, but, but, uh, yeah, no, no. My, I want to take this like, honestly as far as we could possibly go. And um, I just, I try to be humble and I try not to over promise because I've learned my lesson in the past from over promising and I don't want to come off as one of those startups who, uh, you know, uh, inexperienced founder who I, I could say we could do this and you know, we can't kind of a thing.
Josh: Now Michael Hyatt on the other hand after that call, actually I think just a couple of days ago, uh, he made you an offer
Bobby: Um, yeah, So I was really surprised to hear from him and I was sorely expecting that it was going to be a no and why? Um, and he wrote a point for points of the, the pain points of what he thinks that we need to focus on. Um, and then he said he would like to come in as an advisor and uh, for 25,000, um on this round.
Josh: So he went through in an email and described all the things you didn't like about your business and then offered to invest?
Bobby: Yeah. <<laughter>>
Josh: Why did he think that? That seems odd.
Bobby: Yeah, it's odd. But I think he just, he really liked who I was and how I was and how I approached this and how I bootstrapped it to over 1.3 million in recurring revenue. And I think he sees the, there's a lot of potential in that. I'm very coachable, um, because I did offer him a board seat and, uh, he's, he's coming back at an advisor seat, which I think is actually better,
Josh: You offered him a board seat and then he came back and said, I want an advisory seat on the board? What does that mean exactly, what's the difference?
Bobby: He's a busy guy. Uh, I'm pretty sure he's on a lot of boards and I'm pretty sure that he is wanted on a lot of boards. So he came back to be a possible advisor. Um, I, I gladly accept that because I know that for a fact I can learn a lot from him. so yeah, I'm accepting his offer. So he's, he's already got the terms and he's in and we've closed the round.
Josh: And you closed. How much money?
Bobby: A 1.2 million.
Josh: Well, that's great. Yeah. Awesome.
Bobby: Yeah. So we're, we're oversubscribed, but it's a good, uh, it's a good amount and we're ready to literally hit this year running. Um, we're ready to rock and Michael's in. And we're already implementing some of the stuff that he's suggested.
And then ... just when we thought the deal was done and the papers signed, we heard from Bobbie. The papers were not signed, so we jumped on a call.
Bobbie: After we agreed, and we counted him in on the pose and we were going for the pose, he drops this advisor agreement. And so my counsel read it over and they were like, "Don't sign this."
According to Bobbie, Michael's lawyer asked her to draft up a resolution on the side. And that resolution, would need signatures from all of Bobbie’s previous investors, right away.
Bobbie: so they could sign it before we close the deal. So we don't have to worry about the new shareholders. And I was like, "I can't go into a new agreement with all these shareholders giving me money and already start off in a dishonest way." So when I read that email and my lawyers and my corporate strategist, he took it to the board and we just decided that it probably isn't the best idea.
Bobbie: Yes, yes. And it was like this big legal document that my lawyers essentially picked apart, like there's so much wrong with it. And to be honest, if he was coming in at 200 or 250 or something like that, then I would obviously have, I would have totally educated and thought, "Okay, you know what, this is probably good because he's coming in as a higher investor" But 25,000 it just, I don't think that it would have been worth it.
Josh: You don't need the money, like here's other people are willing to give you money without as many hoops that you have to jump through.
Bobbie: Yeah. And so I followed my counsel's advice and it's like, don't, don't move forward with him. I wanted him and I wanted his caliber, for sure.
Josh: Yep. All right. Do you think you’ll ever... Have you ever confronted Michael and said, "What's the deal with this lawyer? He's killing this deal?"
Bobbie: No, I figured that I will wait until everything was fully closed and he wants to go for coffee in April. So I'm going to go for coffee or breakfast. And that's totally because he deserves to know why I fully pulled out.
Josh: What do you take away from this whole experience?
Bobbie: You know, this whole year has been such a humbling experience for me. Trying to understanding and knowing how our investors tick. Every single one of them tick totally differently. Umm it's like a game of chess with them and now that I know how to do it, I can honestly say that I'll probably be able to close my second round super easy. This one took a little bit longer than you know, but I'm a rookie at it.
Josh: You can go forward next time. Just a little bit. A little bit wiser.
Bobbie: Totally. Totally. I learned a lot from it.
The Pitch is hosted by me, Josh Muccio. Produced by Kareem Maddox and Heather Rogers. We are edited by Sara Sarasohn.
Theme music by The Muse Maker. Original compositions from Breakmaster Cylinder, SoWylie and The Muse Maker. We are mixed by Enoch Kim.
Lisa Muccio coordinated the recording of this pitch.
As a reminder, no offer to invest is being made to or solicited from the listening audience on today’s show.
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