Learn What VCs Actually Want, From a Founder Who's Raised $1B with Sasha Orloff, Puzzle

0:00Isabelle Johannesen: Urgent, you are broke. SOS. Everything is always going so well for everybody on Twitter. And the reality is it is not going well for almost anybody ever. There's always problems. Always. Always. It's just a matter of how severe the problems are and how you react to them. Investors really like founders who have a good relationship with reality. No investor thinks that your business is perfect and they don't expect it to be perfect. The number one reason why investors pass on a business they want is they're not following the basic minimum of compliance. That was Sasha Orloff, founder and CEO of Puzzle and Startup Battlefield alumni.

0:41Isabelle Johannesen: After building multiple fintech companies that have collectively raised more than a billion dollars, Sasha learned firsthand how difficult it is for founders to stay on top of their finances while building a fast-growing company. Those experiences ultimately led him to build Puzzle, an AI-native accounting platform designed to give founders a real-time view of their business and make fundraising a whole lot less painful. In this episode, we break down which metrics founders should always have on hand and why understanding the financial reality of your business is one of the biggest competitive advantages you can have.

1:15Isabelle Johannesen: I'm Isabel Johannesson and you're listening to Build Mode. And this season, we're taking a look inside the fundraise. Hi, Sasha. Hi. How's it going? It's going great. Thanks for having me. Yeah, no, we're very happy to have you here. I guess your office is pretty much down the street from our studio, so easy peasy. Pretty close. One of the benefits of being in San Francisco. Absolutely. So we were just chatting about the fact that this season of Build Mode is all about fundraising, and you have raised an awful lot of money in your career through multiple different companies and have probably seen every case and every scenario.

1:47Isabelle Johannesen: But there's a particular part I want to start with that we have not talked about this season yet. And that is really the due diligence part of the process. And it's something that I think founders, you know, focus on the hype and who they're getting their money from. But the how is what I really want to dig into first. So you have a really interesting sort of origin story for Puzzle based on past experiences with fundraising. Let's just start there. How did you end up starting Puzzle? As all founder journeys, it's always fun and unpredictable. but when you've been doing it for long enough, you get to hit all sorts of weird fun stories that I'm excited to talk about.

2:22The fun headline number always is the companies that I founded have gone on to raise over a billion dollars, and that number always gets people somewhat excited. It means you've sort of built something that people want. And so my first company was part of YC, and that set off the trajectory of FunNest. We were, at the time, one of the fastest companies to grow to$100 million of revenue. and through that we learned a lot of lessons about fundraising do's and don'ts but one of the fun things was the companies went on to grow quite quickly and what we ended up doing was kind of effectively creating a holding company with a bunch of different companies that we ended up needing to spin out and or sell and sort of set them on their own path during that time i sort of took a year off and well didn't take off i took some time off and was thinking about what to do next.

3:13And part of the founder journey sometimes is you realize you're unemployable by anybody else along the way. And so as I explored my own Ica guy, I realized I had to start another company. And that was kind of my only path. And what I did was I was thinking about ideas that I thought could be good business ideas. And I had a fortuitous meeting with Hemant, who now runs General Catalyst, who was running at the time. And what he sort of said was like a value is, what was one of your biggest frustrations in scaling, blend up, and mission lane? And it always was having a good understanding of the reality of my business.

3:54And at the time he said, you know, I just came from Stripe where I'm on the board. And one of the biggest complaints that we were hearing at Stripe was businesses and founders love Stripe. There isn't an accounting software that works natively to that modern stack. And they had invested in Ramp and Gusto. And we were seeing the emergence of Mercury and Brex and Gusto and Rippling and Ramp and all these really exciting modern tools. And they all were integrating this 38-year-old piece of software. It was also one of my biggest frustrations in scaling the other companies was, why am I going to see a summary of my financial truth from two months ago compared to three months ago?

4:38I'm trying to figure out what's going on now and what are the decisions we're doing now. Anyway, all of that came together to accounting software was the next big opportunity. that was a frustration of mine, was helpful for other startups and founders who cared about really, really wanting to build something ambitious and wanting to understand the truth of their business. Wow.

4:57Isabelle Johannesen: So you've had your hand in all the fintech pots. And really, I've seen the industry grow in many different focus areas, right, from all the different companies you've built. Why, I'm curious, and why startups and what challenges has it presented themselves from having startups be your customer base? Well, I think in any time, we just assumed. Paul Graham has a really interesting essay that always stuck with me called Slept Blindness. And it's about these problems that exist right in front of you that you don't realize are so painful until somebody kind of awakens you to the frustration. And one of the benefits of just having been in the Valley was I was one of the first customers of Gusto and Brex and RAM and Rippling and Mercury.

5:45And we were one of Stripe's largest customers in the early days. And so the first thing we had to overcome was getting all of them to build APIs for accounting, because there wasn't a concept of real-time accounting before. That just wasn't a thing. Having a good understanding of your financial health meant hiring a lot of people and hiring a lot of engineers and dedicating to just understand the health of your business, which was crazy. So that was the first major hurdle we had to overcome. And then they did. Before we'd even incorporated a company, they said, yeah, this makes sense. I see and believe in this future.

6:17And then we need to fundraise, which is the fun story I think we'll talk probably a lot more about. And then we had to go build the hard stuff. And we started with startups. And the really exciting thing about building with and for startups is they tend to use modern tools That makes it easy. These modern tools finally had APIs. That made it easy to get the data. Their accounting is pretty messy or non-existent in the early days because startups are kind of an underserved market. And I was a founder who had scaled a bunch of companies. So I could sort of say, hey, give me this thing. I'm going to build this thing for you.

6:54And so I had a decent sized network to get my first sort of wedge of customers.

6:58Isabelle Johannesen: Yeah. Well, we will get into the fun stuff in a second. But I am curious, as these startups, your customers scale, is there a point at which they sort of outgrow a puzzle or maybe they need a software that's for a larger company. Yeah, so the good thing about building with startups is they tend to care and want to build something really ambitious and they use a modern stack. So from that point, it's a great opportunity to start with. It's an underserved market. The bad news about startups as a wedge is they're kind of a volatile customer base. We go out of business. quite frequently. We scale quite fast sometimes, especially now in some of these AI tools.

7:40You can go from zero to a hundred million of revenue in a couple of months. That's crazy. We were dealing with just the ability to accept customer payments with Stripe globally was like a crazy absurd thing just a couple of years ago. And so companies do outgrow Puzzle. They start with us. They can start with literally the data incorporate and it can scale. We'd say typically at around$10 million of revenue. It's not that the fact that there's a revenue limit, it's the fact that when you get to a business that size, you tend to split it up into multiple different entities to protect IP and assets.

8:16And so that complexity really needs a more professional ERP type solution. And so that's where we work really well with other great, amazing startups that work really well for that segment, like a real or Campfire, for example.

8:31Isabelle Johannesen: So let's go back to talking about some of these, you know, fun steps in the startup journey. I can understand clearly how, you know, the accounting software on the day-to-day is very needed to understand the health of your business, but there comes a point that other people will also be interested in your financial health, the investors. So what kind of things should founders be thinking about before even starting their fundraising journey regarding their financials? What I like to sort of tell founders that are doing venture-backed startups and want to grow is investors really like founders who have a good relationship with reality.

9:05And accounting is the reality of your business. And so you can have charts and graphs that look good. That's what's happening, what's changing. But to build an enduring business, which I think is a lot of the dreams of most founders and business owners along the way, You have to understand where your business is doing well and where it's not. And so accounting is the language of business, and it's the true accurate sense of financial health. If you can see it in real time, you can make decisions in real time. And one of the other sort of myths that you read in the press is everything is always going so well for everybody on Twitter.

9:43And the reality is it is not going well for almost anybody ever. There's always problems. Always. Always. It's just a matter of how severe the problems are and how you react to them. And so if you read Twitter and you read the fundraising announcements, things sound magical. But that's not the reality in companies. And investors know that. And so it's not that you should go fundraise and talk to investors when you're being evaluated and be like, everything is great. There's just no chance that everything is perfect. Pipeline is converting perfectly. Tech is perfect. Like sales pipeline is happening and growing at the rate that you want to.

10:22Sometimes it's growing faster than you want to. That creates other strain on other parts of the business, whether it's success or support or maybe churn. It's okay. It's about understanding where the biggest leverage you have in your time and the best founders know how to allocate the resources of their business. And the resources are the time of the people, now maybe the agents, and the money that you have in your bank account. And so the ability to understand where the highest leverage is gives you an unfair advantage against people who are looking in the rearview mirror months behind.

11:00Isabelle Johannesen: Okay. And so, but let's talk specifically about the due diligence process. Like what numbers are investors actually looking at and where might there be some discrepancies between what a founder thinks the reality of their business is and what the investors are then going to uncover? it's a good question and it changes over time, not surprising. And so the good news is capital is to some degree divided up by the stages of the business and the messiness of the business and what are the different types of financial metrics that you need. So in the early days in seed or pre-seed, whatever we call it today or tomorrow, you just kind of have to have a compelling vision and a team.

11:39but can I actually just think of a problem that could be an interesting idea to build that future big business? And so you don't really need almost any metrics at that time. The stage where you start to turn into institutional money, which is where it gets exciting and fun and challenging and stressful, will evolve too. And so it first starts with, did you build a thing? And then it's, does anybody pay you for that thing? And that would be revenue. And then as you get revenue and you have money, you also have a runway. And so you want to know when you're going to run out of money because it's really hard to focus on building the best product for your customers if you're always stressed that you're about to go out of business.

12:22And so you really want to have a good, healthy understanding and you don't want to wait to the last minute because investors know that. And when investors know that you're about to run out of money, they have a lot more leverage. We don't have a lot of leverage as startup founders. We have FOMO and we have growing our revenue really fast. and then it starts to get complex as you get into maybe series a and series b i want to know not just is my revenue growing i want to know is the quality of the revenue growing meaning is it enduring are you going to be able to have that revenue repeat over time can you expand it and then you're going to want to know what is the margin because you can grow your business really fast but if your margin is bad you're just expediting your way to bankruptcy and so that's where things like sales efficiency, if you're in a B2B business or L2B2CAC, if you're in a consumer business or gross margin, if you're any business in the world, always matters.

13:15So I'll tell a story. In the early days of Puzzle, we met this incredible founder and he was really excited that his business was generating a 20 % margin. Every time we sell something, we make 20 % off the top. And I said, oh, you're about to go out of business really fast. And he's like, no way. What are you talking about? I was like, all right, let's take a look at your business health. We'll pull up your puzzle dashboard and let's go through this and let's kind of forecast out what you're burning against what you're making and how those things trend. You need to get your margin up closer to 70 % to 80 % to build a sustaining business.

13:49He was like, oh my God, you're right. And then they unfortunately went out of business and he started a new one and he's better. We learn as founders the second time around. And then as you get bigger, you want to know, are you ever going to be able to get to cash flow positive. Can you self-sustain? Are you always going to be subsidizing your business? And if you are a business like, say, an Uber, investors are willing to subsidize because it's kind of a winner-take-all market and you can get a lot of capital for a kind of winner-take-all markets. That's not how a lot of businesses operate. And so you have to always balance your ambition with the reality of the capital markets.

14:27Isabelle Johannesen: Okay, so it sounds like there's a lot of case-by-case basis in this world, and I'm sure the investors know that when they go into it. But as Puzzle, do you guys offer that kind of consulting to a lot of your customers? So what we do differently than I would say maybe your parents' accounting software is we actually built a data platform and a workflow and an agentic layer and then your general ledger, which is the thing that generates your financial statements. Now, your financial statements, your profit and loss or income statement, depending on what coast you are, is how you talk about them, and your balance sheet tell you the health of your business.

15:08And those are universal across every business, across every industry. We give you those because you need them for the IRS and for fundraising or to raise a debt line from a bank. We also created a bunch of extra things that are very helpful to understanding the business. So you have different kind of templates and you can see the trends that matter most to you. And we created a new kind of puzzle financial statement we call the cash activity report. and it's how we naturally and intuitively, I think, think about the business. There's money that comes in and there's money that comes out. And you can drill down and organize this down to the individual transaction layer.

15:45And if you use a modern tool like a ramp or a Brex or a row, you actually see the person on what potential card or invoice reimbursement spent the money on the thing that comes up into your money out and divide it up into your investment. It's just an intuitive way to understand your business. I open it up almost daily. it's the thing I reference most. It's technically not accounting. It is not a generally accepted accounting principle, profit and loss statement, and a balance sheet. But it uses the same data in a format that just makes intuitive sense about how I think we all think about it. Money coming in, money coming out.

16:18And so I think those are the things that help make it easy to understand what's going well and what's not going well. And then you can talk to your financials through our chat. You can do it. And there's a bunch of templates to help you understand and interpret it. Or you You can just ask in your own natural language what you want. It's the fun of AI.

16:33Isabelle Johannesen: So fun. Yeah, so fun. No, it sounds like a very useful tool. So you've mentioned a lot of other financial tools and platforms and neobanks. How do you view partnerships in this industry? I mean, I'm guessing a lot of your customers have a stack of tools that they use, and you're a part of that. How have you approached partnerships? Part of it is what I think is best for the customer, and part of it is what do I think is best for a go-to-market? And in this case, those two things overlap. And so I believe, and I always wanted as a founder to use the best tools in the market to help me grow my business.

17:06And that naturally is not the strategy of QuickBooks, which their strategy very publicly is done for you. They want to own everything, their bank account, their spending, their billing, their invoicing, their payroll. They compete with all the best in class tools. And so we believe that the partnership strategy is not only good for our customers, it's also good for distribution and growth and events and doing sort of things together that make both of our products better than you could do on a 30-year-old API.

17:41Isabelle Johannesen: I remember in my MBA, we learned about creative accounting and what not to do. And I'm curious if you have any sort of examples of things founders tend to get wrong and things they tend to misunderstand or misrepresent or whatever it may be intentionally or not. That puzzle helps them get straight on or that they, you know, that you've just heard from founder stories you've worked with. So I think in the early stages, one of the complaints we got from a lot of early stage investors were brilliant founders who weren't familiar with accounting or weren't familiar with finance and would go off and build and then come to them about a month or two before and be like, I'm going to run out of money.

18:21Can you give me more? I'm like, well, maybe let's take a look. Show me your financials. I'm like, oh, I don't really have that. I just look at my bank account balance. I don't have any cash. Not a great way. to ask for money. And why is it not a great way? Because it's the same company. It's the same time for us founders. You're just giving away more to the investors for no other reason other than you haven't paid attention. So the first thing we did was right when you log in, we ingest all of your data. We structure it into a way that in just two and a half minutes, you can see your cash, your burn, and your runway in a pretty good estimate without needing to do anything.

18:58And then And we alert and remind you in your email, hey, here's your cash and here's your burn. Here's your runway. Here are the things that changed. If anything doesn't look right, like log in, you can go fix it.

19:07Isabelle Johannesen: Urgent. You are broke. Yeah. SOS. And part of that is we want to help founders build enduring businesses. That is what gets me excited. There's a great business opportunity for Puzzle, but the thing that gets me personally excited is the ability to take the passion of entrepreneurs and help them increase their chances of success of building an enduring company. And so part of that is sometimes like being the bad guy, being like, you are running out of money soon. You need to figure something out. Your margin isn't looking good for your future. You should play around with that. And sometimes you can do something about it and sometimes you can't, but at least having an understanding of your truth helps you make better decisions versus having to make decisions based upon your gut.

19:54Now, you can still go with your gut and you can go in whatever you want. We have to sometimes warp reality as founders to create the future that we want. But at least have that as one of your tools in your tool belt when you're going to make decisions.

20:09Isabelle Johannesen: Yeah, well, speaking of going with your gut, I mean, I wanted to ask, I think a lot of founders, if they're having issues with their financials, maybe hire a CFO or a new CFO, whatever it may be, the other people's side. but you built a product for this. So I'm curious where for you it kind of differed when you should have where the human comes in and where the platform comes in. So there's our recommendation of what we think is best for startups to increase your chance of success. And then there's the reality of cash and priorities and time. So I get that. So let me start with what I think is the best run.

20:43Now, in the early days, what we recommend is just set up your puzzle account. Even if you don't use it and you don't log in, you don't do anything, it will at least structure everything into a pretty reasonably good draft. So by that time it comes where you need to fundraise or you're going to sell, you increase your chances of not only closing that deal, but having a higher valuation. And the reason for that is the number one reason why investors pass on a business they want is they're not following the basic minimum of compliance. And what that does is it creeps into the mindset of the investor.

21:16If you're not doing the things required by law, What else are you not doing? And what else are you not telling me? Or what else are you hiding? And you just don't want that to creep in at all. It's also the number one reason why M &A, why Mergers and Acquisitions, fall apart. There isn't financials in order. And if there aren't financials in order, it's hard to understand what the right valuation is. And you see these fall apart or get traded for a lower valuation. We work so hard as founders to build something. It's the same company. It's just this piece of paper and this order of your numbers in the right way helps you maximize your ability to get the highest valuation.

21:49Isabelle Johannesen: Yeah, I mean, that sounds very frustrating. But you have actually been in that exact situation and almost lost a term sheet because of a situation like that, right? Do you want to talk about that for a second? Yeah, well, if we think about the evolution of a startup, I'd say set it up and just let it run. It gets to a pretty good spot without needing too much between software and AI and APIs these days. What I found in the scaling of my last companies was the ability to afford a world-class CFO and a world-class controller, sort of the pinnacle of accounting, is very expensive. And most startups can't afford it.

22:23And so the arc of the growth is kind of set it up and let it kind of run. When you're starting to get to a place where you need institutional money or you are really starting to generate revenue, typically that reflection point is the 100 ,000 to a million. It makes sense to hire an accountant or a bookkeeper. There's a lot of great ones in the Valley that work with startups and specifically designed and comfortable working with startups. And then I would say generally after you get to about a million, you start to want a full-time or a dedicated, and about 10 million, you want an in-house accountant and finance person because at that point, projections and future-looking things, we call accounting to this moment and be it before, and finance from this moment and going forward.

23:09And you want to have that partner that is just talking to you about money. They're not biased by anything other than the understanding of money. And so I think as we typically see as sort of the arc, and what I think about Puzzle is we bring that capability down to almost any accountant. You can hire a general accountant and get a pretty world-class finance team with Puzzle, and I think that really helps. You get through diligence when you're fundraising, get through an M &A, and go in with confidence. Because a lot of pitching to venture capitalists is about confidence and comfort in being able to talk by the language of business, which is how they think.

23:54Isabelle Johannesen: Yeah, yeah. And going back to diligence, I mean, do you think that most founders, when they go into that process, they assume that everything is in order? Or do they genuinely not know sometimes what they're going to ask about? I guess for a first-time founder, What do you think is the most common misconception about that process? Your last question. I did almost have a term sheet fall apart because I didn't have my data room in order. And as you get bigger and bigger stages, these things are important. Because if you don't, it just kind of looks like you're hiding something. And when you lose a term sheet, it is devastating.

24:33It is exhausting to fundraise. And when you're fundraising, you're also not outselling. And so you have this dual stress and frustration that your business probably doesn't perform, especially in other days as well, when you're not there. And you've got to spend this time frustrating. And there's this really awkward power dynamic. And so having access to your data, we publish all of the data rooms by stage over time. Financials are the most important, as are your revenue contracts and your people contracts and your cap table. Those are the things that are generally in compliance. Your resources are your people and your money.

25:08And so you really want to have a good understanding about what has been history and what is the plan of the future of your main resources. Because what an investor is doing is you're taking a bet that your company is going to be more valuable in the future by giving you money to hire people, in many cases, as a software business, or to buy inventory, or now to buy AA credits and inference costs. But they're giving you money to grow the quality of your business. and if you can't kind of comfortably speak about the trade-offs and the options again it doesn't have to be perfect you just want to have an answer and you want to have it versed and uh and so even just the best way is just ask ai prepare me for my board meeting um prepare me for a fundraising pitch prepare me for a debt investment what is the stage of the company and what are they going to ask for and that i think is one of the best uses of ai today at least for founders yeah i mean yeah

26:02Isabelle Johannesen: Yeah, preparing for any type of pitch or meeting. Absolutely. On that note, though, what are some financial stats that you think a founder should be able to just have cold in their back pocket if somebody asks and you're doing a quick pitch? Anything that really is top of mind if they're pitching to an investor? Well, the best predictor of future value is the growth and quality of revenue. So that's always the most important metric. And from there, once you can speak comfortably about revenue and quality of revenue, which is just a vague term for, do we believe that the revenue in the past is going to continue into the future and do your customers pay more over time or pay the same over time or pay less over time because the quality revenue is is will this what's the likelihood this will continue into the future um that is the thing that you want to get down cold after that then over time as you transition from the market is proving that they like what you built uh to can this build a sustainable business then we started talking about efficiency efficiency is just a big word again for if I spend money on marketing or on sales, do I get less than that money back?

27:05Do I get the same amount or do I get more back? And if I get more back, how long does that take? And so metrics such as sales, OTE to, or AR to OTE, in this case, CAC to LTV, CAC payback, just words for, I put money out the door, how fast will I get it back? Those are great. And so knowing the efficiency of your investment in marketing or sales to getting that money back is the next thing. And then the last part is after all is said and done with all of your expenses, is there any money left over? Now, the good news is if you don't know anything about accounting, this is exactly how an income statement is structured.

27:47Start with revenue, and then it's margin, and then it's operating costs, and then it's your sort of different versions of profitability. And so the worst case is if you just have accounting or you set up your puzzle in two and a half minutes, you can just kind of look down from top to bottom. Start at the top, get really comfortable, and then ease your way down till you get to the very bottom. You know, it's structured that way for a reason.

28:10Isabelle Johannesen: Yeah. I want to pivot a little bit to talk a bit about sort of investors and relationships in general. You have raised a billion dollars over your founder life. And most recently with Puzzle, you closed a Series B. Is that right? We closed a big Series A. Big Series A. So I guess the like 50 million of capital raised over a single term sheet over kind of three conscious. That's how we structured it with general capitalists because they knew this was going to require a lot of infrastructure to make agents work. Now, we didn't know what the word agent was going to be at the time, but with sort of this ability to have judgment and automation exist in the future.

28:53In accounting, it's much more like an MRI machine than it is a slot machine. And so you don't want the same input to give you different outputs in accounting because you have to generate the exact same financial statement to the IRS and your investors every month. Actually, one of the few things where as founders, we have personal liability. We can be personally sued. And if you make false statements to investors or to the IRS, we can get sued and fired or both. So you don't really want to kind of do that. And so having these things in order makes sense because that's going to be the overwhelming majority of the conversation with your investors and your board members.

29:29And as you go from I'm raising a million to I'm raising 25 million to I'm raising 50 million to I'm raising 100 million to I'm raising 250 million, those conversations get down into every line item. And so these are really important. But we knew we need to build the infrastructure that could make agents deterministic. instead of probabilistic. And that was just going to require some more upfront capital than traditional maybe agent or AI company.

29:54Isabelle Johannesen: I mean, that sounds very stressful to have that personal liability. I mean, that sounds like one of the scarier things from a personal front of being a founder. But I mean, for example, when you have your near lost term sheet situation, does that start triggering some of those other entities and investigative agencies that might come and ask some questions? Well, if you... So I never misrepresented financial. We said a term because we weren't organized as well. And by the time it took us to get organized, they had already sort of moved on. So there's always this fundraising momentum and you're in like the hype cycle and it gets exciting and you have all these investors around and they're all waiting.

30:31Who's going to be the first term sheet? Who's going to be the first term sheet? And the longer that process takes, the less likely you're going to get a term sheet. And so the ability to have things organized just allow you to respond quicker and shorten the time horizon. So we almost lost the term sheet because accounting is not something that you can just whip up and it works. It actually is the same amount of work, whether you do it a little bit every day, a little bit every week, a little bit every month, or you just wait till last minute. So if you're going to wait till last minute to get that term sheet and they say, oh, do you have your financial statements?

31:01It's going to take you a couple of weeks to months, depending on the collective business, to put that together. That's just a fact. And so if you can spin it around like that, well, you look competent, you look professional, and you're ready for capital. And if you don't, which was a mistake that I made, In other days, it just looks like you're disorganized. And that lowers the confidence that if somebody's going to drop 5, 10, 15, 100, 250 million dollars on your lap, are you going to be a good steward of that capital? Or are you just going to be like, I don't know, it's probably somewhere. I don't know.

31:33So it's important.

31:34Isabelle Johannesen: Absolutely. And I'm sure there are other founders who've made that mistake, right? A lot. Especially before Puzzle existed, right? Which is why I'm glad you've built Puzzle. I wonder if you have any, you know, if that's a story that you've heard before as well and that inspired you to build Puzzle. I can imagine that must happen more often than most of us would think. Yeah, I spent about five months by the time I sort of decided that Puzzle was going to be the thing I wanted to do. And I felt that passion for trying to put the next 5, 10, 20 years of my life into this. I then went and spoke to people and I said, how much do you actually care?

32:11And I would say some VCs in the name of founder-friendly require accounting. And some VCs in the name of founder-friendly don't require accounting because it feels like a burden and they don't want to scare off the best founders. But what we found repeatedly is the ones who have a good grasp of the reality of their business increase their chances of building an enduring company and going on to raise. And so we're seeing a trend more and more to VCs, understanding that being founder-friendly is setting them up for success, even if it feels like a slightly awkward conversation. But in the early days, it didn't exist.

32:47There wasn't a choice. QuickBooks has been around for 30 years. It's one of the most successful software companies of all time, 80 % to 85 % gross margins for 30 years. That's unheard of. But the association of accounting was it's not really a valuable thing. It's a future problem. to future IRS problem, to future fundraising problems, to future compliance problem. And so I don't really care. And then when you show them, hey, I can show you your financial today and tomorrow. And when you set up and design it, you don't have to do much work. It's one of those moments where you're like, why didn't this exist before?

33:21And so that has been what we're seeing over the last couple of years. And we're growing to 1 ,000, 5 ,000, 10 ,000, on our way to hopefully that next milestone over the course of this year, early next year. And we're getting good feedback.

33:39Isabelle Johannesen: That's fantastic. Let's talk a little bit about where Puzzle is going. So with a lot of this growth, I know you guys just released a flashy new AI feature. What are you cooking up over there? So what we ended up building, which we didn't sort of realize at the time, was the infrastructure where agents can run deterministically, meaning you can have the same thing happen again and again and again, but with different inputs as the months change. And that's really important for accounting, as we talked about before, is you want to have the same result. Because if I say, oh, here's my 2024 financial statements, and then I run it through and it gives me a different number next time, well, like, that's not good.

34:15You can get to. All right. So when we first started, we ended up building the infrastructure that agents can run on deterministically. And that's really exciting right now. And it's hard to think the agent vernacular is just a couple months old. But it's so powerful in accounting. And so we launched the AI Close product last week, and we've been in back-to-back weekends and evenings deployments with accounting firms all over the country. And the main reason is, just like automation, if you have governed automation that's set up the right way, it will go do really good work. Think about it, if you had a driverless car and it was pointed at a wall, that's not good.

34:56You're going autonomously right into a wall. And so we don't believe autonomous accounting is the right approach, but you have a professional come set it up. They design your chart of accounts, your policies. They come train the system. Well, it can run on their behalf. And so we think about it as the most accurate books you have at AI speed. And that's very different than, say, a QuickBooks, in which case they're helping you design to just do quick and whatever. But accounting for us means something as business owners. And so Acura Books, as quickly as possible, is a new product. You basically design your agents.

35:32You describe in natural language your business, your revenue model, how you like to structure your books, how to handle all the edge cases. Every company is unique and nuanced. And the best we had for 30 years was an if-then statement. And now we can describe it, use an LLM to generate a deterministic agent, and they can just run your books in your way, in your design custom for your business. That was just not possible before without a bunch of humans doing it. And so what I think this brings is a professional grade of accounting and scalability from day zero of every company. And it's been really exciting because accountants are more valuable.

36:12The finance teams, 100 % of all CFOs used to be accountants. And it started devolving because the software was so bad that the financial truth of your business was never a real-time thing. And so now that you have it, your relationship with your accountant should be one of the most important relationships. Take the relationship with your doctor. It doesn't matter until it's the most important thing around when something goes wrong. If you don't have that person who is an expert in your financial health, understanding your business, on a day-to-day basis, it might not be that big of a deal. But when you need it, there's nothing more important in your company.

36:48And this is something that I'm super excited to be able to say, you were a big enterprise multinational company and you could have this because you could hire 20 people. And now we can bring this to every single business in the country starting from the day they incorporate.

37:03Isabelle Johannesen: Well, very cool. That's fine. I'm excited. Well, congrats on your new launch. I mean, that's very exciting. Speaking of important relationships, I wanted to go back to talking about your big Series A round, because I'm curious, General Catalyst, did they come on in three separate rounds, or was it kind of all in one? No, we incubated it right around the corner in South Park in their offices. We designed it. We sort of validated it. We validated it with a lot of their portfolio company. And so we had the money to put together the prototype. The prototype worked. We had about a billion dollars of transactions come in within two to three months of launching it.

37:40And that gave them confidence to put in the next round of funding, which we did with a couple other investors and a network of 250 CFOs and operators from most of the fintech companies that we know and use and love today. And from there, we started onboarding and seeing that growth. And then we started seeing accounting firms want to use it. And that's when we sort of initiated that next round of funding because we had shown that the professionals who never in the history of their career have switched off of QuickBooks are not only switching off of QuickBooks, they're paying us a premium because they can deliver a better product to us as startups.

38:16And so now we have a network of hundreds of accounting firms for when those startup founders who are setting it up are ready. You can always invite your own. You can find your own. You can DIY. Now we have a whole network of professional accountants and CPAs, bookkeepers and tax advisors on the platform. And you basically press a button and you have one set up for your industry, your price point, your trajectory going forward to set you up for success.

38:40Isabelle Johannesen: Wow, that sounds like a very exciting time and a lot of growth that happened pretty quickly. And that was around the same time that you did Startup Battlefield as well. This is a true statement. Let's talk about that for a second. I can't let you get out of here before talking about Startup Battlefield. Love Startup Battlefield. So fun. Good. I'm glad. So you did Battlefield in 2022, which was before my time. But tell me about your experience in Startup Battlefield. It was the first time that we ever talked publicly about what we were building. So we sort of had a small community of founders that were using us and we were getting really good feedback.

39:16And it was something that didn't exist. And so we were like, all right, I think it's time to start share with the world. And what is a better platform for startups than TechCrunch Battlefield? Like insane, huge, overwhelming, exciting experience along the way. But also, even though I've started founders, I mean, I've started a couple companies. I've spoken on stage. I've done interviews and podcasts. It just still beats the first time you're introducing your new company to the world. And you're not just doing it in a tweet. You're doing it on one of the biggest stages in the startup world. And it was so fun and exciting.

39:55Isabelle Johannesen: Gosh, I can only imagine how nerve wracking that must be because immediately after that, then you start kind of fielding the responses. Right. And I mean, did you did you get interest after you announced it for the first time? Oh, I mean, the power of TechCrunch is and the power of AWS and GCP is spin up those back end because you just get this influx of attention. I don't think there's anything that matches it. And so that was really fun. And that was, I think, the transition that helped set up our Series A. That's awesome. Love to hear it. And you guys have been growing ever since. And sounds like there's a lot of really exciting developments on the horizon.

40:34Isabelle Johannesen: And I'm very glad to hear how you are helping some of these emerging founders make sure that they are protecting themselves as individuals, as we've learned today, and also their businesses, of course. To wrap up, I'm wondering if you have any sort of advice, if you could, I mean, you founded a lot of companies and raised a lot of money. You have seen, again, all angles of this. If you can give early stage founders today a piece of advice or maybe two that you think are absolutely critical to building a long living company and not, you know, hopefully falling into too many pitfalls, what would you say?

41:06The two things that I've taken with me in my experience is how you show up for your team is really important. And as founders, we can have the best day and the worst day in the same day. And just know when things might be going bad that something good is coming around the corner. And if things are going well, just be prepared for when that yin and yang balance each other out. And so stay strong. Stay optimistic. It can get tough, but power through it and build your network of support. I think that's really important. The next is no investor thinks that your business is perfect. And they don't expect it to be perfect.

41:48And so you don't have to go in. You should go in with ambition and go in with confidence. But you don't have to go in and think everything is perfect. That's not the way that you raise capital. In fact, it's probably an anti-pattern to raising capital successfully from the best investors is you just want to have a sense of what's going well, what did you think about that went better or worse than expected, and what are you doing about it? The ability to have a healthy grasp on reality and react and allocate and be able to create the future that we all want is an important part of company building.

42:24And so don't be afraid of the mess.

42:28Isabelle Johannesen: I love that. I think that's a great message to end on because there's a lot of pressure on founders these days. So if we can ease a little bit of that and it's okay to be imperfect and you're working on it and focus on the action rather than the result necessarily. Thank you so much for joining us, Sasha. It's been a pleasure catching up with you and hearing about what you've been up to in the last couple of years, especially since Battlefield. And congrats on all of your success so far. Well, thanks. Thanks for having me. Good to catch up. Build Mode is a TechCrunch podcast. Each episode is produced and edited by Maggie Nye and hosted by me, Isabel Johanesson.

43:00Isabelle Johannesen: Our art and design is also by Maggie Nye. A big thanks to Morgan Little, who leads our audience development, the Foundry and Cheddar video teams, and most of all, to you, the builders, and everyone else in the wider startup community. We'll see you back here next time.