Thought Leaders in Financial Technology: Expensify CEO David Barrett (Part 6)

Sramana Mitra: From a strategic planning point of view, you have to look at where you are, where your market is, where the competition is, and figure out the priorities and market drivers. It’s true that everything works and everything doesn’t; but you have to make choices and decisions, and those other factors drive decision making.

David Barrett: If you are advising a brand new entrepreneur, what would you suggest? You can’t start an ecosystem from day one. You said that around the $100 million mark is where an ecosystem starts to make friends. 

Sramana Mitra: Yes, unless you manage to do a viral platform. For example, there’s a company called Able which is an AI platform. It’s a company formed by a repeat entrepreneur who was the CEO of BeyondCore that sold to Salesforce.

Able is an AI platform that he formed after that. He is doing it as a platform company which, unless you are a sophisticated entrepreneur, is not recommended. It’s not recommended for a first-time entrepreneur with no traffic or no experience because platform companies tend to be more expensive to build.

There’s another one called Machinify. These are AI platform companies and they are built as an AI platform company. Machinify is following a strategy of going into different apps and verticals. These are entrepreneurs who are already platforms and they are sophisticated. These guys are going to want to do an ecosystem strategy sooner rather than later. 

David Barrett: If you are doing Shopify, for example, then your entire business is predicated on being able to build an ecosystem versus if you are a direct product like DocuSign or Expensify.

Sramana Mitra: Shopify didn’t start as an ecosystem. There were five or six e-commerce platforms that were going neck to neck. Shopify pulled out. They were well-priced and they did a good job on the viral strategy and customer acquisition.

They pulled out further because they were able to get low churn, and it’s squarely because of the ecosystem strategy. The churn is very important for a company that is trying to acquire customers. 

David Barrett: This is one thing that we haven’t talked about here – about what kind of business you want internally. One thing that’s nice about a business that sells directly to the customers is that it’s so much more fun. Most of the challenges we’ve had have been in trying to deal with partners or investors.

There’s something to be said about the simplicity of making a great product, selling it to customers, and having fun while doing it. To your point, the best business model if you can pull it off is a viral business model because it has unlimited growth, perfect economics, and it requires a small core team. 

Sramana Mitra: There is no question about that. If you have a viral business model that sells itself directly to consumers, it’s one of the best business models. Those are the kind of companies that VCs salivate over, but it’s difficult to find one. 

David Barrett: If I were advising a new entrepreneur, I would say that there is so little certainty in life. Banking your future happiness on someone else’s decision is a hard slog. Participating in someone else’s ecosystem to try to get people to your ecosystem is depending on so many people outside of your control. It’s not going to be fun. I would encourage anyone that if you have an idea for a viral business model, then go for it. 

Sramana Mitra: How many viral business models are out there? There’s a minuscule number of viral business models, so you would sit there and wait and nothing will happen. You may as well pack up. That’s not a very entrepreneurial thing to do.

Entrepreneurs are trying to build businesses at different scales. There are people building a $1 million business and they’re happy with that as far as I’m concerned. I respect those people as much as I respect people like you who are trying to build viral business models and scaling.

What I mind is you trying to extrapolate your experience and trying to tell people what to do, but that it has a low probability of success that, in the end, most people are going to fail at. 

David Barrett: Yes, that’s true that I am advising people to aim for the best things in life. It’s like saying that it would be great to be surrounded by awesome people that you love to work with, having customers that are bought into your brand, customers so bought in that they are evangelizing the people around you.

You have a profitable business model, so when things like a global pandemic hit, you haven’t let anyone go. We didn’t cut salaries and still keep on hiring. 

Sramana Mitra: Amazon keeps on growing. How many Amazons are out there?

David Barrett: I agree. I wouldn’t discourage people. 

Sramana Mitra: I’m not discouraging people. If they have that, then that’s great. Frankly if someone has a viral business model, they don’t need to be discouraged, they will see it. 

David Barrett: Virtually every business fails anyway. Nothing works reliably, but if you are going to fail, might as well fail while trying to do something fun.

Sramana Mitra: I beg to differ on that kind of negative point because we are working with thousands of entrepreneurs and they are each succeeding at their levels. Some are failing absolutely.

I beg to differ with this point of view that everything has to be a billion-dollar company and has to scale really fast. There is dignity in having a livelihood, meeting customer needs, and who cares if it’s only valued by a small set of customers. 

David Barrett: I think that’s a great point. I hope I’m not misrepresenting myself to suggest that the only businesses that matter are those that take over the world. I would say the business that matters is satisfying to the employees that make it a great place to work and one that keeps growing and satisfying their needs.

That can happen on a bigger or smaller scale. I would just say it’s way more fun having a world under your control than one where you depend upon the actions of others. 

Sramana Mitra: You always rely on the actions of others. 

David Barrett: True. You can’t escape that forever. I would much rather depend on the actions of my customers than the actions of my partners or my platform. 

This segment is part 6 in the series : Thought Leaders in Financial Technology: Expensify CEO David Barrett
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