September 25, 2019

Enough Sales Calls Already! (#73, Vetd)

by The Pitch

For businesses, the process of buying software is brutal. Founder Andrew Hoagland launched his company to make it a breeze. In fact, he says that his startup Vetd has made it so easy that he can’t keep up with the demand he’s created … without the $2m he’s here to raise. Luckily for him, the investors get the problem. But he’ll have to convince them that his solution is the right one. 


Today’s investors are Phil Nadel, Jillian Manus, Sarah Downey, Michael Hyatt and Charles Hudson.

Transcript

Everybody hates going to the DMV. But you just have to suck it up and go, because, there’s no other way to get your driver’s license renewed. 

But what if someone told you: I'll go to the DMV for you. Wait in the lines, fill out the papers, listen to the terrible waiting room music.

Well, apparently, shopping for enterprise software is worse than a bad DMV trip. Startups and small businesses need software to do all the boring but important stuff — bookkeeping, managing payroll, tracking order fulfillment -- But the process for buying all that software is more soul-sucking than a trip to the DMV.

That’s why today’s founder Andrew Hoagland started Vetd. He says he can get companies all the software they need, without the soul-sucking headache. He just needs $2mm from the investors to do it.

From Gimlet, this is The Pitch. I’m Josh Muccio. 

Today’s investors are:

I’m Phil Nadel

Phil built companies that sold for hundreds of millions of dollars. Now he manages Forefront Venture Partners, one of the largest syndicates on AngelList.

I’m Jillian Manus

Jillian is a partner at Structure Capital, where they’ve invested $98 million in high-profile startups like Uber.

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 Michael Hyatt

Michael built and sold two software companies for over $500 million dollars and now he invests for himself.

I’m Charles Hudson

Charles started Precursor Ventures, where he’s invested $45 million in over 100 startups to date.


Alright, on with THE PITCH.


Andrew: Perfect. So hello everyone. My name is Andrew Hoagland and I’m the cofounder and CEO of Vetd.  Now the B2B market has never been more complex. There are now over 35,000 SAAS products in the market alone. And it’s an $83 billion industry. The vendors and the sales teams purposely don’t give out the pricing information. They gate it because they want to draw you into their sales process, get you on one or more calls and control the sales process from start to finish.  Now I know this problem intimately because I helped create it. My background is B2B sales Kind of the bad guy of the story 

Enterprise software companies -- or vendors as Andrew calls them -- play a game called “hide the pricetag” because they know it'll be hard to get over the sticker-shock of how much it costs to use their software. But if they can get you on the phone. They get you into their dark and mysterious *sales process* ... a never ending labyrinth of phone calls, success metrics, and obscenely long presentations. This is such a pain that Andrew has hundreds of companies that are pounding on his door, crying to try out his better way.

Andrew: So we’ve had a lot of overwhelming demand recently. We’ve got a really big backlog of buyers trying to get on our platform. And we’re looking to raise $2 million to scale and meet those demands. And I look forward to questions 

Michael:  can you give us a real example of what you’re doing? 

Andrew: Sure. So one of our users recently needed to buy a new retail operations system.  they're like, all right, we need it to inventory management, we're on Shopify, we have multiple warehouses, we need to be able to do order fulfilment and returns.  So what we say is, great. We already have this database of all these vendors. They have all the top vendors curated for them without having to do anything. They get it down to their final maybe one or two options, usually one. And then they say, great, now I'm ready to spend time with this vendor

Sarah: Can't you, is it... Can you just be like, hey. It's like going to the used car lot and you be like, you know what, I have this amount of money, you're going to give me a car. Like, I refuse to talk to anybody. And like I've done this. And I hate the talking to people aspect of all this.

Andrew: You're an ideal user.

Sarah: Yeah. Thanks. But can't you like, can't you just skip it?

Andrew: I wish the answer to that question was yes. And if it was yes, I wouldn't be standing here 

Michael: And how are you paid? 

Andrew: So we actually only monetize the vendor side  Vendors pay a subscription to us, they're on our platform and as many deals as we could possibly drive them, they have a set...

Michael: But if they don't pay you, they don't get on your platform and you don't recommend them. 

Andrew: That's not true. We want to make sure the buyers always win. So the most important thing is the buyers have access to the platform and the best options  

Michael: So how much do I pay to come on to your platform?

Andrew: As a buyer? Nothing.

Michael: No, no. As a seller, as a vendor. 

Andrew: So our subscription model will be anywhere from 12 to 25,000 annually.  just based on size of the company right. We have to remain this impartial third party, so by having a very transparent vendor pricing system, we don't have to worry about anyone thinking, oh, are the big vendors paying you more? This is exactly how much they're paying us. This is why they're paying us. And it's all transparent and visible.

Phil: But they do have to worry about vendors paying versus those that don't pay.

Andrew: Right. But the beauty...

Phil: There's still that distinction.

Andrew: Totally. Totally. But the beauty of this system is now that we have the numbers and the leverage, this is one of the reasons this had never been solved before, is you never really had the leverage. If we came out and we're like, we have five buyers, no one is going to change their process. We now have at least 900 ready to go and that number is growing rapidly.

Michael: Right.

Andrew:  And now the part I'm really excited to get about is what we're calling kind of the community aspect, which is why we have this big backlog.

Phil: Yeah  Why is there a backlog? Why can’t you get them on your platform right away?

Andrew:  So when we started we would go one to one. We’d get a buyer,  We’ve learned how to get buyers in large groups, as opposed to one off.  they would come on to our platform, we’d onboard them. So over the last three weeks, we started to reach out to some VCs both in and out of our network and say hey, we want to come to you and bring you a community version of Vetd, it'll be free for you, it'll be free for all of your buyers.  And the response from VCs has been incredible. Over the last three weeks, we have eight VCs on board, representing over 900 portfolio companies. 

Phil: When you bring in a community, are you offering them discounts as well?

Andrew:  That is one of the value props to the communities. We're saying, hey, most VCs or communities - it doesn't have to be a VC - do not have a dedicated resource to thinking about this.  They maybe have an Excel sheet We are saying, we'll have an entire sales arm whose sole focus is on making we have vetted vendors with aggressive discounts for your community. And the bigger we grow that sales team, the higher that number becomes. In the end it's the entire market. 

Sarah: How many of those portfolio companies, like have they actually rolled it out to those companies?

Andrew: Well, so that's why I'm standing here. We can't keep up with the demand  that we've now created. But with $2 million we can. Cos we'll have a self-serve product. It will be that we can onboard them as soon as they login.

Michael: How long will that take to build?

Andrew: I do not like to give out estimates, but we are planning...

Michael: You're very much a sales guy, but like a little less sales guy. Like start giving us the facts.

Andrew: We think if we get the money in the near future, two to three months after the money is in the bank we'll be able to roll out consistently and onboard in large batches 

When we come back, Michael goes old school. 

Welcome back. Founder Andrew Hoagland says he already has 900 companies, waiting to sign on to Vetd.

But with so many startups all looking for software in the same place, to our investors that looks like a bidding war just waiting to happen. And Michael has seen that movie before.

Michael: This reminds me of Commerce One way back in the days, like in the 90s. You might remember these. Where you would actually launch these bidding platforms and it would actually bid down vendors and stuff. Eventually  a lot of us vendors and stuff in the software world said, we're not even going to participate in this. We're not going to be in this bidding process. There was a kind of a revolt How do you get around that? 

Andrew: So we don't do it that way. We don't try to create bidding wars, per se. We try to say, all right, put forth your pricing model, put forth your transparency. The vendors gonna then engage in a conversation with you. And then it's just like...

Michael: And you guys step to the side then?

Andrew: Yes.

Michael: Okay. Oh yeah, that sounds a little better.

Andrew: So then we step out of the way 

Phil: So now in a sense you're going to the vendors and also saying, hey, in addition to a subscription fee I need a discount from you?

Andrew: Exactly. 

Phil:  But to Michael's point, doesn't that create that kind of competition among vendors for who's going to provide the biggest discount...

Andrew: Sure.

Charles: That already exists. We have 150 companies in our portfolio and every time Amazon changes the AWS discount, we go to Google and Google changes the AWS discount. They want the business. 

Phil: Yeah. No. I was just thinking about whether the vendors want, will want to participate in this marketplace if it's a competitive, a race to the bottom in terms of pricing.

Charles: No. But they have to. Like, I mean, I guess it's sort of like nobody ever wants to offer discounts unless they have to. But in most of these categories, the customer has, I mean, we all invest in SAAS companies. Name a SAAS category that has one vendor. There isn't one, right? So in all these categories there are many, many, many vendors. Some of whose products are awfully similar.

Michael: Sounds like you should hire Charles.

Charles: Look I'll be honest. I should probably just be honest. We're talking, we've been talking to them about using Vetd for our platform because  I'd say a third of our Slack channel messages are - we're looking at Lever or Greenhouse. What should we use? What did you pay? How did you get a discount? We're looking at Mailchimp versus XYZ thing. What are the pros and cons? And so for us... We have another company in our portfolio, Stackshare, that focuses on the sort of tech...

Michael: You started to use them? Vetd.

Charles: We haven't rolled it out yet. We are part of that 900 backlog. And it's just because...

Jillian: Are you funding them too?

Charles: We have not made an investment decision. We have a company in our portfolio, Stackshare, that does the tech stack piece.  I haven't sorted out in my mind whether we can have two of them in the same portfolio. 

Sarah: We actually have one that's... So it's called Venture App and it started off trying to do this but more on the services side. So legal, accountants, etc  So I'm sitting here having the same...

Phil: Yeah. I am too. We're investors in IT Central Station. 

The investors are pretty tangled up in this space already. They’re rattling off the names of companies they’re invested in … and they all all could be competitors to Vetd. Which sounds bad for Andrew. But it also shows that all of the investors care deeply about solving this problem.

And Charles has an axe to grind with one particular software review site…

Charles: I'm basically interested in taking down G2 Crowd. So I don't know whether I can do that with one bullet or two bullets. I just - and no offence to the G2 Crowd people - I just think…  I don't think that's the way we should buy software today. 

Michael: How is that? What do they do?

Charles: It's like a... Think about it like Yelp for software except the nature and how some of those reviews are generated is um...

Jillian: So unethical 

Andrew:  every week I get an email from G2 Crowd paying me to write reviews. I haven't.

Jillian: Really?

Andrew: Every single week.

Jillian: See. Unethical.

Sarah: That is crazy.

Andrew: I can open my inbox and show you every single week on the dime, Starbucks gift cards, Amazon gift cards.

Charles: 50 bucks 

Phil: So who do you see as your closest competitors?

Andrew: Today, it would have to be the G2 Crowds, the Capterras, all of the review sites, things like that 

Charles: We are. That's the challenge for me. We're in Team Pay* on Stack Share.  But I think what you're doing is different. And so I'll just cut to the chase. Like, I'm going to be out for right now. But we're going to roll this out and I'm going to learn a lot and I'm going to talk to Jonas and Andrew at StackShare and TeamPay*. And if the three of you are comfortable, this to me is a no brainer for Precursor. But I need to clear all of those. So  in the interest of where I am today, that's where I am 

So Charles WANTS to invest, but he has to make sure he doesn't have a conflict. Here’s Michael.

Michael: How much money are you raising?

Andrew: So we are raising $2 million. 

Michael: At what valuation? 

Andrew: We haven't set the terms yet.

Jillian: What was it, tell us about the prior funding.

Andrew: Yes. So to date we've raised about $400,000 via friends and family/angel. And then we got some pre-seed money from a firm called Village Global out in San Francisco.

Jillian: At what valuation?

Andrew: So right around a 6 million. 

Michael: So are you raising now...

Jillian: 2 million.

Michael: And I'm just looking at you, between 10 and 20 million. Is that in your head?

Andrew:  I'm going to let the lead investor set those terms because we want to have a partner here.

Michael: That's a good sales answer, but what do you want? I mean, you have five investors here today. What, so what do I just say, ah, I'm interested, call me… . 

Andrew: So it's definitely going to be an increase on our 6 million before. So I can say that comfortably. 

Jillian: What are the revenues?

Andrew:  Right now we've made low revenue in the less than 10,000 annually. But the beauty of it is now that we have these communities on board, now we have the leverage 

Michael: So just to... Are you ready to cut a deal on valuation here today? Or not?

Andrew: If anybody wants to be our lead investor, absolutely 

Michael: What's a lead investor for you? 

Andrew:  So the partner in terms of our lead investor is a) going to help set up one of our first communities. That's our ideal scenario is this lead investor comes on, they're like, look, I have x amount of portfolio companies, I'm going to help you design and iterate on this community aspect. And b) we're going to lead your round. These are going to be the terms of the deal. We'll help you negotiate with the follow on investors 

Michael: Okay so... I'm really interested. But I need to spend a bit more time in this. So I'm in. I don't know if I'm, I don't know what I'm in for, so I don't have any...

Andrew: That's a good sales answer.

Michael: I don't have a portfolio, I don't have a... Well, I'm acting like you in this pitch. So I actually don't know because I don't know who your lead is. It's actually not a good sales answer because I don't know what your valuation is unless you want to give it, do you want to do that right now?

Andrew: No.

Michael: So there you go.  I'm an enterprise software guy. I get this problem. I really like this.   I'll be in for anything from 50 to 100 to 200,000. I don't know. I also, after the show, I'll give you a handful of VCs who I think could lead it.  And so yeah. I like everything about this pitch so far.

Andrew: Thank you. I appreciate that.

Phil: So I too like it. I have a, I guess... Here's my approach. I need to  introduce you to our portfolio companies And then when I understand what the valuation is, when I understand the terms, and see the feedback from my portfolio companies, I think then I'd be willing to invest.  so I need to get past those couple of hurdles, and hopefully I'll be in.

Andrew: Sounds wonderful. Thank you.

Sarah: I think I'm sort of with Charles where I have one company that has some scar tissue around it in this area, and then another that may be a conflict. So I feel good about our exposure in this space with that. So I'm out for that reason. 

Andrew:  Thank you.

Jillian: Um I'm with everyone, to tell you the truth. I would like to introduce this to our portfolio companies  I just need to have a little bit more time to better understand this. So I’m out right now.

Andrew: Thank you. Appreciate it. Awesome.

Sarah: Thank you.

Michael: You did well. Well congrats. And thanks for coming in.

Andrew walks out of the room with an emphatic yes from Michael and some interest from Phil. And as he left the room, I stepped in to hear more.

Michael: I really understand enterprise sales.

Jillian: You do.

Michael: And if what he’s saying works, this is great. He is a quintessential AAA sales guy.

Jillian: Great.

Michael: And I liked him. But ah... What did you think? 

Michael: Do you think this business is a winner?

Charles: Totally. Because I think none of the vendors, I think most businesses like this, the vendors don’t want to sell this way but the buyer totally wants to buy this way 

Michael: If these guys get any traction, the valuation is going to be at 40 or 50 million. I’m telling you. I know these enterprise companies. They’re going to go bananas. If he gets a million in revenue, this is going to be 20x, 30x. 

Josh: And that's a good thing for you in this room?

Michael: I think it's a winner chicken dinner at that number 

Phil: I mean, just to play devil’s advocate. You know there’s no revenue to speak of now  So we’re all betting on the fact that he’s going to be able to get vendors to subscribe because he’s got all these buyers - which I think is a reasonable bet. But that’s what we’re betting on  you know, it’s not a slam dunk.

Michael: But this is what venture... Nothing ever is. Even, you know, I’m sure Facebook wasn’t when you first…  This is venture investing. It’s enterprise sales. Big fat margins, recurring revenue. It’s solving a big problem. It’s juicy as fuck. 

Josh: It's interesting to me, though ,almost all he has is a list of customers and I'm going to solve a problem for them. But you guys are all into it.

Michael: I believe this guy's going to solve it.

Jillian: Well that's why we have to see the proof.

Michael: I'm betting on this horse by the way. This is the horse. This guy is going to sell himself right the way through 

Josh: But you gave him trouble for being so salesy.

Michael: Because, because I wanted to tell him, look, I got it. So answer my question. He’s so good at it, he can’t stop himself. This guy could go to Starbucks and he’ll start selling Starbucks something as he’s trying to buy his coffee. He can’t stop. This animal is just that’s what he does 

Them are some pretty high marks from Michael Hyatt. I don’t think I’ve heard him that excited about a startup. And it turns out that he was just getting started.

That’s when we come back.

Welcome back. I caught up with Andrew a few months after he pitched the investors in the room. He told me straight away, that Charles checked with his portfolio companies, the ones that might be competitors to Vetd, and they determined that he wouldn’t be able to invest. 

So that leaves Phil, who listed a lot of conditions before he’d be able to cut Andrew a check, and Michael Hyatt. And Michael seemed to be all about it. 

Andrew: He grabbed me right after the pitch and pulled me into a room, and we started to catch up because he was obviously so passionate about the idea. And it fit so well with what he is an expert in. The way he described it is, "Look, I'm always an investor and I will therefore invest in businesses I don't understand to an intimate level. And I will write a check, and I will hope that that company turns into something huge one day.

Josh: Yeah.

Andrew: But the companies that I really feel like I have an expertise in, I want to be much more involved."  He was texting me the whole trip back. He's calling and texting, and emailing with updates. Making intros, trying to like work work as a partner and not just as a check, so from… 

Josh: Wow.

Andrew: ... all those different pieces, it's been a really exciting relationship so far. 

Josh: That's awesome  What does that feel like? Is that surprising to you to have someone in your corner like that?

Andrew: Yes, it is definitely surprising  If there's nothing else you've learned from the startup world, it's like when an opportunity like this runs around, you run with it. You don't worry about the outcome, you just take it and say, "Great. We're going to leverage this as much as we can because he obviously knows what he's doing."  

And then...about a month ago, with his bromance with Michael in full swing, Andrew started to get pretty far with some other investors who wanted to lead his round. There were even some offers on the table. Term sheets as they call them. 

But then Andrew got invited to Indianapolis. To spend a week there with another VC ... They had something called a startup studio. Where their team of full-time employees could get hands on with Andrew’s business. Helping with marketing, recruiting, development … stuff like that.

But if andrew worked with them, he couldn’t raise any money from other investors for the next 3-6 months. 

Josh: It's a very monogamous relationship.

Andrew: Yes it is.

Josh: For a little while.

Andrew: Yes. So it's fun, but that also is why, when we're talking to Michael  his answer was not, "Hey, if you go this route, I'm out. See you later." His answer was, "Well, when can I invest and how do I stay involved?" So...

Josh: He's like, "Yeah, you can see this person for six to nine months as long as you come back to me at the end."

Andrew: Kind of, yeah. We'll still see him on the side 

Andrew was in this very unique position, he had told the venture capitalists who were going to lead his round, that he needed to pump the brakes for a few weeks.

But after Andrew’s time in Indy was up, he would have to choose between the startup studio and the vc’s. Because he couldn’t have both.

Andrew: But it's a big decision either way.

Josh: That's not a normal position for a lot of founders to find themselves in,  Umm, that's awesome to be able to have those choices though. I mean, what's that like? 

Andrew:  If this was a scenario where we were running out of money  I would not. I'd be pulling my hair out, I would be losing sleep. We'd be all or nothing in this week, and there would be so many reasons why it would just be an overwhelming amount of stress.

Josh: Right.

Andrew: We aren't in that situation, and because we're not in that situation, we get to come in with a full head of steam and say, "What is the best thing we can do? How can we get the most out of this relationship, and if we move forward, what does it mean?" And for those reasons it's much easier to come to the table and say, "We're ready, let's do this. Let's see what we can come up with." 

Josh:  So you're saying you're not in dire straits yet.

Andrew: Yeah, exactly. 

After spending his week in Indianapolis, Andrew figured out that the startup studio wouldn’t be as helpful as he hoped they would be. So Andrew packed up his bags, and headed back home. Where he picked things back up with the other VC’s who wanted to lead his round. But things may have cooled off a bit, Andrew’s now says they’re waiting to finalize a lead investor until they have more customers off the waitlist, and on to the list of actual users. . He’s made some progress already, Charles’s portfolio companies just joined Vetd and so did Phil’s. So we’ll just have to wait and see if Andrew can secure the bag. But one thing’s for sure, whenever he does, Michael Hyatt will be there.

Josh:  Michael is waiting around for you. He's  your forever soulmate.

Andrew:  He should be our forever soulmate, and it's either going to happen sooner or it's going to happen later. But we're going to make sure he's involved because he's been fantastic. 

That’s all for today’s episode. Thank you so much for listening. We’ll be back with a new pitch, next week. See you then.

Our show is hosted by me, Josh Muccio. Produced by Heather Rogers and Kareem Maddox. We are edited by Sara Sarasohn and Blythe Terrell.

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Lisa Muccio planned the recording of this pitch.

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