Back in February, Financial Venture Studio hosted an exclusive event for startups, venture investors, and other fintech stakeholders, and we were joined by some special guests who shared their views on where things are headed in fintech.
While it’s edited for length (and it’s still long!), a fireside chat held between Felicis Ventures partner Victoria Treyger with CEOs Cathrine Andersen (co-founder and CEO of Roger.ai) and Ennie Lim (co-founder and CEO of HoneyBee) really stuck with us as one of the day’s highlights. Earlier this month, both Cathrine and Ennie were named to the Inc. magazine Female Founders 100 as Money Movers. It seems like a great time to share this chat with you.
Victoria Treyger: I was really blown away when I had the chance to meet both of you to learn about the personal stories and the passions behind your businesses. So introduce yourself and tell us a little bit about why you started the business, the use cases and a little bit about the customer that you’re serving.
Cathrine Andersen/Roger AI: Our company is called Roger.ai, and what we have embarked on is reinventing accounting as we know it. That might sound a little bit daunting, but really what we do is we break it down into a ton of automation processes that we make happen before you reconcile everything into your accounting system. We’re not a QuickBooks or a Xero competitor. We are more a “pre-accounting tool” that allows accountants and small businesses to get real time insights from their financial data, because we automate all the processes along the way for them. We’re starting with accounts payable and bill pay, because it’s a very kind of critical business process that every single company in the world has to deal with, and we’re automating that completely.
Ennie Lim/HoneyBee: I’m co-founder and CEO of HoneyBee. HoneyBee is the result of a personal financial struggle — I went through a divorce, and after the divorce I had a huge financial setback, which negatively impacted my credit score and I had to look for personal loan options to try to cover my expenses. Long story short, I couldn’t afford to live in the Bay Area anymore, so I moved back home into my old bedroom in Montreal. It was a humbling experience, but it helped me understand this fundamental problem in the US that millions of Americans are going through every day.
HoneyBee provides a holistic financial solution for the workplace by partnering with mid-market employers to provide the tool that the employees need to become financially healthy again. Last year, we rolled out an “extra week’s pay” option to provide a financial safety net for employees. This year, we’re rolling out one-on-one financial counseling for employees as well.
VT: Cathrine, when you started Roger.ai, I think initially it was more of a consumer solution, but you found that your customers were actually small businesses…?
CA: Yes! 80% of all the transactions that came through Roger initially were from small businesses — people adding bills on behalf of their shop or their plumbing business. And then what we saw a little after that was, “OK. They are onboarding their accountants because their accountants need to get access to the invoices and they need to reconcile this into their accounting system.” So that’s how we kind of got started on this path of really automating accounts payable and bill pay, and now tackling accounting automation in general.
VT: I’m sure everybody asks you this, so let’s just get it out of the way. How are you actually different than Bill.com in terms of the AI and all of these amazing consumer elements to the product that you built in?
CA: Bill.com is, I think, over 10 years old. They are part of what you would call the “cloud-accounting” era. So pretty much all accountants, everyone has moved to the cloud and is using tools like QuickBooks, Xero, Bill.com to make their lives easier. What we are really doing at Roger is we’re taking the industry toward what we call “augmented accounting” — where we make sure that accountants, bookkeepers, small business owners have to spend virtually no time on all these tasks that can be automated, that shouldn’t be done by humans manually, like data entry, like entering a bill into your accounting system twice, and then also entering your online banking system to make the payment and then route it to 10 different people to approve; it shouldn’t be manual.
VT: Ennie, tell us about selling into HR. It’s a segment that is in some ways forgotten. The HR professional is not always included in all the key meetings and then, in other ways, it’s one where you have everyone trying to sell them benefits and hiring products, so it’s a hard one to break into. How you were able to break through in selling to HR?
EL: One of our top value proposition for employers is that we’re easy to implement and we’re also outside of payroll integration. Being outside of payroll integration has really allowed us to tap into a large market of over 275,000 employers in the US. These employers don’t have the resources and technology to do payroll integration, so they’re all looking for easy solutions and benefits to implement. And so last year when I was going through the sales process, we realized what you just touched on — that HR often feels underappreciated..
VT: Say a little bit more about the community and how you’ve become involved in the world of HR. They really don’t think about you as a vendor; they think about you as part of the HR community which is really, really hard to do.
EL: I sit on the governing board of one of the largest HR associations in the nation and they share firsthand the struggles they’re going through. They want to feel relevant when they’re going to executive meetings. So at HoneyBee we make a point to provide them with data to bring to their executive suites on how they’re making a difference in the workplace, and we do it by sharing authentic stories. When people hear why the HoneyBee benefit is important to employees, they’re glad they provide this benefit.
VT: That extra one week of pay…it’s very, very meaningful in terms of impact on people’s lives.
EL: Yes it is! HR is always faced with people asking to borrow against their 401K, or asking for loans in-house. And when an employee starts asking for money from their employer, you know they’re already desperate. They’ve already reached out to everybody they know, and they feel ashamed about it. HoneyBee is an easy turnkey solution that employers can make available at any time.
VT: Shifting gears here, let’s talk about customer acquisition. Cathrine, what have you found is the key to acquiring them cost-effectively and what have you done there from launch?
CA: We haven’t actually officially launched it, but, yeah, we have done a lot of things on the customer acquisition side, so I would say it’s notoriously difficult and expensive to acquire small business customers, especially in the financial technology industry. What we really were lucky enough to find very quickly was this brilliant channel of selling through accounting firms and bookkeepers, and getting them really excited about how much money they can save when they implement Roger across their entire client base. That allows us to sell into one accounting firm and then onboard one, two, then 10, then 100 clients because they see, “Okay wow, this is very valuable for two of our small business clients. Why don’t we just implement this with everyone?” So the acquisition there is much easier.
VT: Ennie, for HR, there are many, many businesses that sell into HR and they get off the ground okay, and then they hit about 10 million in revenue and then they stop and really plateau. Talk to us a little bit about your vision so that you get past that 10 million mark in building HoneyBee.
EL: The value proposition’s really important. Having an easy to implement product in the workplace is really key. Also, what we’re looking at is mid-market employers, 50 to 1,000 employees. That market is wide open right now because these are employers that are looking for solutions to implement quickly — and they count for over 60% of the nation’s workforce today. So there’s more than enough mid-market employers out there to go after, especially in what we call “high virality industries.” Non-profits, food production, logistics, manufacturing. One example would be a non-profit like Goodwill — we would present at Goodwill Orange County, and the following week we’d have tons of requests from Goodwill from all over the country.
VT: Cathrine, how about you? Vision for the next couple of years, launch? Where do you see your…company three years from now?
CA: I think we’re definitely going to be in a really good position to be one of the few next gen companies in this space that can truly reinvent how we think about accounting. Right now, accounting kinda sucks. Small business owners definitely don’t like to spend their nights opening QuickBooks and reconciling their expenses. So I think we’re really going to be able to pick apart all these pieces that go into managing your small business accounting process and automate each step. We’re starting with accounts payable and the entire expense side, but then move into other areas like accounts receivable. One thing that we are in a unique position to tackle is fraud detection. So if you look, all the data that we have, we have all our clients’ or all of our customers’ invoice data and expenses. We have all that data, so what we’re going to be able to do is build these fraud protection algorithms that really will help prevent accounts payable fraud in real time and not after the business has just lost $200,000.
VT: Accounts payable fraud. Is that usually embezzlement from employees?
CA: It can be. It’s embezzlement from employees or it can be more creative than that. We’re in a unique position to solve that problem for our customers and we’re already starting to do it. We had one example already where we were able to actually prevent a $250,000 case, a fraud, and figured out which employee in question had committed it and…stopped future events from happening. Part of what we’re doing is real-time audits on all of our customers’ Roger accounts monitoring them for fraud. It’s early days on that front, but I think that’s going to be huge.
VT: Tell us about becoming founders and CEOs. What brought you to this point?
EL: I started out as a co-founder leading our sales effort, and always focused on positive leadership. I just became CEO a month ago — the smoothness of that transition is a big testament to my co-founder Benny, who was CEO before me. I’ve known Benny since our university days — he was working in fintech for a really long time before this, and his family used to own restaurants in Montreal where they would often provide loans to their employees. So Benny was very familiar with dealing with cash flow issues at the employer level, and when I hit rock bottom after my divorce, I was all too familiar with cash flow problems as an individual.
Benny, Max [third co-founder] and I all have tremendous respect for each other, because we share a common mission to build something better than what exists today.
VT: Fantastic story. Cathrine, this is your second company, right? Tell us a little bit about doing this the second time around, what’s easier and then what are the hardest parts that remain, even though you’re doing it the second time?
CA: Yeah. A ton of things remain very hard… But as for the things that have become a little bit easier, I think one is that when my co-founder Christian and I started our first company, we were 23 and 25 years old, and we didn’t have a network, it was from scratch. So that definitely is easier the second time around. You already know great people, you know who to turn to for advice to get the company off the ground. I think also personally for me, one of the major things has been being able to take it a little more easy in the beginning — not easy as in “not working many hours” — but it’s different. In the first company we were financially vulnerable, we had no money, we had a ton of debt. And that can really put a huge strain on your creative thought process.
In our first company we were maniacally trying to get sign-ups because we thought that it was a measure of success, whereas with Roger, we knew that’s not going to get us anywhere — we know it’s better to build a product that is loved and that has 10 people retained than to just get a 1,000 sign-ups. And then the hard parts are will always remain the same, building a product that reaches product-market fit. You have to go through a ton of twists and turns. We made several 90-degree turns on the path to getting our first 1,000 customers in Roger. That never gets easy!
Congratulations to Ennie and Cathrine on their Inc. honor. (As investors in both companies we can say that their startups are the real winners to have them leading the way forward!) Learn more about their companies at MeetHoneyBee.com and Roger.ai. The whole Female Founders 100 list is over at Inc.com. Special thanks to our friend Victoria Treyger for being part of the event!