Spend Management and the Wave of Change in Fintech with Thejo Kote: An EOFire Classic from 2021

0:01Boom! Shake the room, Fire Nation. JLD here and welcome to Entrepreneurs on Fire, the only daily show interviewing the world's top entrepreneurs seven days a week. Today, we're pulling a classic episode from the archives and we'll be breaking down spend management in the wave of change in fintech. To drop these value bombs, I brought Thijo Koti and EO Fire Studios. Thijo is the co-founder and CEO of Airbase, the leading spend management platform for small and mid-sized companies. And today we're talking about identifying problems that you are passionate about working on, even if nobody is paying you and how to be in a position where you are objectively building a good business where you don't need anybody else to fund you and oh so much more.

0:41And a big thank you for sponsoring today's episode goes to Thijo and our sponsors. Over 41 ,000 businesses have future-approved their business with NetSuite by Oracle, the number one cloud ERP, bringing accounting, financial management, inventory, and HR into one platform. Download the CFO's guide to AI and machine learning for free at netsuite.com slash fire. Faye Joe, say what's up to Fire Nation and share something that you believe about becoming successful that most people disagree with. Well, John, that's a tough one. First of all, thank you for having me. And it's good to be on your podcast.

1:23And one of the things that maybe most people associate with success is money, right? And at least from my perspective, I've never pursued money. First of all, I don't want to go so far as to say that I'm very successful, but what of a little success I've had. I think I've always focused on just doing the things that I find very interesting and I'm passionate about and the money is taking care of itself. So that's what I continue to do. put myself in situations where I wake up in the morning and I'm really driven about doing the things that I've kind of signed up to do. And yeah, that's worked well for me.

2:06And money is something that I've never had to think about, but it's kind of taking care of itself. And I love that mentality. I mean, there are a lot of ways to make money, Fire Nation. Why not have the way that you make money being by doing something that you love? Now, I think you have a fascinating journey, Tejo. So let's start with your backstory and then catch us up to where you are now today. Right now in the United States, in the San Francisco Bay Area. But I got here from India. I grew up there in Southern India. I've been in the US for about, say, coming up 11, 12 years now. But I spent most of my life in India before I moved here.

2:51one to go to grad school and and two to kind of pursue my long-term ambition of being an entrepreneur and a founder and you know as somebody who aspired to create technology companies i wanted to come out here to silicon valley and uh you know i've got to live my dream which has been amazing but i grew up in a small town in southern india and you know had a very middle class kind of upbringing. I'm an engineer by training, studied electrical engineering, which is kind of what a lot of kids growing up in India kind of pushed down that path. I'd go become a doctor or go become an engineer. And, you know, I was a lot more interested in engineering anyway, and went down that path.

3:34And when I finally was coming out of undergrad, I was forced to think about what actually, what am I going to do with my life? Right? And what do I want to do? And And my first job out of college was at this massive, you know, IT services company called Infosys. And, you know, I figured out pretty quickly that that would not be the life for me. And I could see two years from now, I'm going to be that person, four years from now, that person, six years from now, that person. I didn't want to be any of those people. And so that really got me thinking about what I wanted to do. And long story short, you know, the path to entrepreneurship seemed exciting.

4:13And I was always a big believer in the impact that technology can have on the world. And, you know, I decided that I should be at the place where the ecosystem would give me the best shot at succeeding in that effort. And as an Indian, of course, I couldn't just get on the plane and then come to the U.S. It's not that easy or simple. And so coming in here as a student was easier. There was anyway a good idea because there were lots of gaps in my skills that I wanted to fill. And so I ended up here and started my first business soon after I finished my grad school in 2011. That business was called Automatic.

4:54It was a connected car platform. Long story short, we kind of built that business over six years, sold it to SiriusXM, the satellite radio company, in 2017. And soon after I started the current business that I'm building called Airbase. but happy to dig into that if you think it's interesting. Well, that is interesting. And that's kind of where I do want to move into next because we love talking about light bulb moments. Like when that light just turns on about an idea, about a concept, and then you do what it takes to breathe life into that idea. So where did the idea for Airbase come from? Walk us through that light bulb moment and then into the actual creation of that idea.

5:39My lesson around ideation and identifying problems largely has been that experience matters, right? And experience is really helpful. And a lot of aspiring entrepreneurs tend to fret over the fact that, hey, how do I come up with ideas? And that won't happen by just sitting in the room, right? And you have to go out and do things. And there is also a lot of good data that shows that most businesses are created by people in their late 30s and 40s, successful businesses are created by people in their late 30s and 40s. We, of course, always hear about these prodigies and examples of the Mark Zuckerbergs and the Bill Gates who were like billionaires in their early 20s or whatever.

6:24But those are outliers, right? And it is usually life experience and learning about pain points and how things are done today and the status quo that leads to ideas about how things can be done better. And then that's kind of the more common path, right? And Abase was similar, right? And what Abase does, just very briefly for context is we are a spend management platform. we essentially help small and mid-market businesses manage how they spend money. It's a very basic problem. Every business spends money, but today they have lots of silos. They have a corporate card system. They are receiving invoices, which they process in a bill payment system.

7:05Employees are claiming reimbursements, and they're using a reimbursement system. And so they have to cobble together a lot of these different tools. And we kind of make that a much better experience by saying, hey, bring it all into one platform, one pane of glass, and makes it a much, much better experience. And the way I learned about that problem was by living it, right? And when I was building my previous business, it wasn't really a finance and accounting tool. It was a very different business. We were building a hardware device. We were connecting cars to the internet and all that kind of stuff.

7:33But as part of the process of building that business, I didn't know anything about finance or accounting. And I'm an engineer by training, but I had to learn because I was kind of the CEO. And there were lots of kind of dependencies on how we built up inventory, cash flow management, that kind of stuff. It was important that we didn't screw up there. And so I made the effort to learn. And the more I learned, the more apparent it became to me that, oh, this is just broken, like the way we do it. And why is it so broken? I didn't really have the time to dig deep into it. Back then, I was building a totally different company.

8:07But it went into my ideas, notebook of things to research and look into when I had the time. And that's kind of another thing that as a quick sidebar can help, right? Because as you're going through experiences on a day-to-day basis, sometimes you just have to observe. You just have to keep your eyes open, you know, ears open to opportunities and pain points as they come. And those might always be some of them might be business ideas that you can go and solve, right? So that's something that happened. And then and finally, when I sold that business to Sirius XM in 2017, I was obviously not going to retire or whatever.

8:43And I was looking into opportunities that I could kind of go in to start another business. This is the one that I kept going back to. I spent a lot of time talking to dozens of accountants and CFOs and folks like that. And I had a thesis about what the pain was, how it could be solved, why now was the good time to solve it. And in that exercise of speaking to potential customers who live the pain every day made me a lot smarter about that process. And ultimately, I was convinced that, hey, I can spend another 10, 12 years building another business here. And that's how I made that commitment. Now, one thing that you must have gone through while you were kind of going through the process of turning Airbase into what it is today is product market fit.

9:29Because that can really be the most challenging part of creating a successful business. So talk about figuring out your product market fit and how you kind of created this product market fit formula. Great question and one I've stumbled with in the past and not paid enough attention to doing that in a systematic, methodical way and had to kind of deal with the pain downstream. And I'd like to think I went about doing it in a better way with Airbase. and airbase is a b2b business right and so these things can differ slightly if you're trying to build a b2b product versus a b2c product we are sending to consumers directly so you know what i'm going to say now in terms of the approach i took with airbase applies a little bit more to you know b2b businesses but in my case you know in the very early days yes i had a hypothesis about what the pain is and one big lesson i had learned from my previous business was that you know the the tendency of a product person engineer is to come up with an idea and then jump in to start building it right and uh that is almost always a bad idea right and and what is the better approach is to have a lot of conversations with the potential customer to as deeply as possible understand the pain point, like all of the different, you know, variants of it and aspects of the larger problem you're trying to solve.

10:56And then what I ended up doing with Airbase was I didn't jump into writing, you know, code. I kind of fought that impulse and started building a solution. I actually, you know, sketched out the workflows and the actual product that would solve that pain point. I worked with a designer to create kind of high fidelity mockups of what that solution would be i took it back to a lot of those early people i'd spoken to and say hey we talked about the problem we agreed that these were kind of areas that need a much better solution here is how i plan to solve it if i gave you this product tomorrow and i walked them through you know that that solution would you buy it and you know and i did not move forward with actually starting to build the product until i had at least a dozen people who were like yeah if you give this to me tomorrow I want to start using it when can I do that right and and so obviously you know if you're a finance and accounting person you're not super technical enough to know that hey I'm looking at a high fidelity mock-up and the it's not even a real product and things like that and so that was helpful you know in some ways and they assume that hey this is you know fairly short process to go deliver an actual product but so even before I wrote that first line of code I had you know a whole set of customers who were ready to use the product, right?

12:10So I had essentially pre-sold the solution. So the confidence in the fact that I'm going down the right path was much higher, right? So what tends to happen if you just go ahead and start building without actually having that confidence is, there's also this sunk cost problem, right? And you have already committed to something and it's very expensive to commit things to actually, you know, a living, breathing product and the psychology of founders and entrepreneurs does not allow you to backtrack or just throw away the thing that you build. And even if you are willing to do that, it's super expensive.

12:47You've spent a lot of time, energy, money. So all of that can be avoided if you only start building once you have a lot more confidence about what the right thing to build is. And then you iterate. You very rapidly iterate. You have a small group of customers and you listen to them. you engage with them, and you be very responsive in terms of how you iterate on what that product should be doing. And that's kind of the short version of what the first, say, 18 months of Airbase was, right? And ultimately, of course, we're now at that point where we feel confident about the fact that we have product market fit and we are solving a real pain point in a large market.

13:28I love how you broke that down. And Fire Nation, I hope you're realizing the power of having that product market fit formula really dialed in. And we have so many more value bombs coming up when we get back from thanking our sponsors. It would be really nice if we could predict what the future holds for our business. Talk about saving a lot of time and frustration, but predictions are just that, predictions. Rates will rise or fall, inflation's up or down. Can someone please invent a crystal ball Until we can actually see into the future, over 41 ,000 businesses have future-proofed their business with NetSuite by Oracle, the number one cloud ERP bringing accounting, financial management, inventory, and HR into one fluid platform.

14:10NetSuite gives you one source of truth so you can have the visibility and control you need to make quick decisions. And with real-time insights and forecasting, you can see into the future with actionable data. If our businesses needed this type of software, I'd use NetSuite in a heartbeat because whether your company is earning millions or even hundreds of millions, NetSuite helps you respond to immediate challenges and seize your biggest opportunities. Speaking of opportunity, download the CFO's guide to AI and machine learning at netsuite.com slash fire. The guide is free to you at netsuite.com slash fire.

14:42netsuite.com slash fire. We're back and listen, We all face challenges in Business Fire Nation. So, Tejo, I want to know some of the challenges that you faced early on. How did you tackle them? What were the solutions? The journey with Airbase has been a lot smoother, right? So, what might be a little bit more relevant is some of the challenges that I faced when I was a first-time founder and CEO. And in the grand scheme of things, things worked out at the end, but it was a much more up and down a journey and and you know i was a first time founder maybe a more inexperienced ceo and so the things i could have definitely done better and both of the businesses that i've built have been venture funded and you know they've been vc-backed companies and there are you know very specific lessons that you can take away um you know when you are building vc-backed businesses But the number one lesson that I've taken away from my experience, which is kind of value number one at Airbase, if you look at our company values, is to control our own destiny.

15:50Right. And and that's not something that I was very good about doing when I was building my previous company. And, you know, for example, every round of funding that I raised, we desperately needed the money. And, you know, while there was always the bravado of saying, look, we're an awesome business and you should fund us and all that, when you were speaking to investors, I knew deep inside that, you know, we really, really needed the money. And that's never a good place to be in, right? So when you don't control your own destiny, when you have not put yourself in a position where you don't need somebody else to come and fund your business, then, you know, you don't have negotiating leverage, right?

16:29And you're always going to be in a very difficult spot. And so the number one kind of lesson I took away from that experience was to say, look, always kind of be in a position where you are objectively building a good business, where you don't need anybody else to come and fund you and be very disciplined about that process, be very thoughtful and deliberate about what you need to do to put yourself in that position. And if you do that, the money will take care of itself and the funding will take care of itself and all of that will happen. But you really should be in this position where you don't need the money.

17:06It's very true, especially in venture funded companies that, you know, if you really need the money, investors don't really want to give it to you and they really want to give it to the businesses. They don't really need their money. Right. They would have done well and they're growing quickly and they have fantastic product market fit and a demand for the solution in a large market. and those kinds of things. And that's kind of the kinds of lessons I took away that I'm trying to apply and do better with Abase. Fire Nation, challenges will come, challenges will go. It's how you face them and how you learn from others, like Thayjo, when he shares how he faced some of those, they're going to help you on your journey.

17:46And one thing that we talked about a little bit in the intro before we brought you on, Thayjo, was spend management. So can you talk about what the heck spend management is and why companies need it? Especially if you're a smaller business, it is a challenge to manage how you spend money, right? And every business spends money. It is a very basic foundational thing that a business has to do. But if you think about the process of how businesses go about doing that today for the most part, And we at Airbase focus, you know, say from we think of it as idea to IPO is kind of the journey. Right. And especially that phase when you're just getting going all the way to, say, a few thousand employees.

18:33And that's typically the scale where the market is especially underserved when companies are trying to manage the money they spend. How are they doing it? Because money is being spent. You have a corporate card system and you might be spending money on that. and your vendors are sending you invoices that you have to process and pay and you know and and employees might be claiming the reimbursements and you have a dedicated work flow system for that and as you're scaling at the business dozens of employees say hundreds of employees all of this becomes very complicated you know from a finance and accounting perspective for every single persona in the business when you're requesting spend when you're approving spend and it's a huge pain for everybody when you have four five six different systems to deal with when money is being spent and workflows are happening and and and you know that's just a broken way of doing things and i lived this problem when i was um you know building airbase and airbase you know when i was building automatic my previous company sorry and airbase essentially solves that issue and we basically say look why do you need to have that many systems and it's a much longer a conversation about why the market ended up that way, why you have so many categories of tools, and we don't have the time to kind of get into why that happened that way.

19:50But the reality is that you can solve it in a better way now, given how financial infrastructure has improved and some of those things. Airbase essentially brings all of those different systems and processes into one cohesive experience and platform, right? And how do you kind of bring the entire experience of how businesses spend money, all of the workflows associated with it, all of the payment methods around cards and ACH and check and all of that stuff into a single platform. That essentially is what we call spend management, right? And you're spending money as a company. How do we holistically help you manage it in one place?

20:26And that's what spend management is. Fintech is a very exciting place right now. So share a little bit about the future of fintech from your perspective, especially with this rise of automation and spend management that we just went through? When I make, for example, angel investments and things like that, and when founders are maybe stupid enough to ask me for advice, the thing I always tell them is, buzzwords are all fine for marketing and for maybe recruiting and some of those things. But as a founder and an entrepreneur, you shouldn't ever fall prey to that yourself. And at some level, I feel like fintech has become this buzzword where people kind of miss the forest for the trees and they miss the substance at the end of the day, right?

21:10For example, yes, Airbase is a fintech company in the sense that we handle large amounts of money. We are seeing billions of dollars of money flowing through our platform on an annual basis as we manage payments for all of our customers and things like that. But at the end of the day, I see that as a means to an end, right? Our customers don't wake up every morning and get excited by payments, right? Because it's a thing that they have to do. They need money to move from their bank account into a vendor's bank account. And we kind of have to take care of it for them. And so we do it, right? And we didn't set out to be a fintech company.

21:51We set out to deeply understand how businesses spend money, what workflows happen. And along that journey as I was thinking about it from first principles, it made sense to embed payments and the fintech element into the business. And so I did it. And so we became a fintech business in pursuit of the solution to the problem that I had identified. And I didn't set out to create a fintech company in the first place. So that's kind of the important distinction. And so that's how I tend to think about even the future of fintech, right? And I don't, again, look at, for example, hey, cryptocurrencies are like really hot and popular now.

22:33What can we do with crypto? Like that's a, you know, you have a hammer and now everything looks like a nail situation, right? So, you know, maybe there are crypto use cases in solving B2B payments, but you have to identify the pain for which crypto could be the right solution to solve that problem, then great, you go do that, but not the other way around, right? And so everything related to fintech and related areas, that's the lens through which I tend to look at. But in general, infrastructure is getting a lot better. It's so much more easier for startups and companies to plug into the banking ecosystem and kind of the in general legacy money movement systems that were hard to be a part of and plug into for startups.

23:20That's all happening. There's a lot of obviously innovation and changes happening in the crypto field. And so it's a bright kind of future from that perspective. A lot of foundationally new businesses that approach age-old problems in new ways are going to get created. And that's very exciting. Hey, Joe, it is exciting. And this world that we're living in is a very exciting world. So with everything that you just shared, what's the one takeaway that you really want to make sure our listeners get from our entire conversation? How can we connect with you and Airbase and any call to action that you might have for us?

24:00And then we'll say goodbye. Let me answer that last question first. You can find me on LinkedIn. That's the easiest way. You know, Seijo Kote, look for me and feel free to connect with me. I'm also on Twitter at Seijo, my first name. You know, that's the handle. And you can find us on the web at abase.com, right? A-I-R-B-A-S-E, the way you would spell it. And if you're a, you know, kind of a founder of a business that spends money you might find our solution useful so that's that but in terms of you know the takeaway you know i would just say if you are listening to this because your motivation is that you want to be a founder someday yourself an entrepreneur yourself you know the one thing that i would recommend is to really identify a problem that you are passionate about that you would work on even if nobody paid you because that makes it a lot easier right the journey in my experience of being a founder and an entrepreneur is is it's challenging it's tough you got to get up every morning and get and then get punched in the face all day long and that tends to happen for long periods of time and you really have to enjoy the work that you do for it to be worth it right otherwise you know you're going to give up very quickly and move on and and truly enjoying the work that you do makes a lot of things much, much easier.

25:29And truly believing in the change that you want to bring about really, really helps. And so that would be my recommendation. It makes a lot of other things easier. And trying to be a founder for its own sake or an entrepreneur for its own sake tends to make the journey a lot harder. And that's been my key lesson along my own journey. And I hope that helps if you're thinking about that. And one more time, if Fire Nation wants to connect with you and find out a little bit more about what you have going on, what's your call to action? LinkedIn, Tejo Cote, search for me, easy to find me. On Twitter, my handle is at Tejo, my first name.

26:06And so those would be the easy ways to find me and connect. And as far as Airbase, the company is concerned, airbase.com, easy to find us online. Fire Nation, you're the average. of the five people you spend the most time with. You've been hanging out with TK and JLD today, so keep up the heat and head over to eofire.com and type Thayjo in the search bar and his show notes page will pop right up. And I just want to say, Thayjo, thank you for sharing your truth, your knowledge, your value with Fire Nation today. For that, we salute you and we'll catch you on the flip side. John, thank you so much for having me.

26:43It's been fun and all the best to everyone on their own journeys. Hey, Fire Nation. Today's value bomb content was brought to you by Thajo and Fire Nation. Over the last decade, I've interviewed more than 3 ,000 of the world's most successful entrepreneurs and created a revolutionary 17-step roadmap to your financial freedom and fulfillment. I put it all into my first traditionally published book, The Common Path to Uncommon Success, personally endorsed by Seth Godin and Gary Vaynerchuk, the common path to uncommon success is the step-by-step guidance that you need to achieve the lifestyle of your dreams.

27:20Visit UncommonSuccessBook.com to order your copy today, and I'll catch you there, or I'll catch you on the flip side. Over 41 ,000 businesses have future-proved their business with NetSuite by Oracle, the number one cloud ERP, bringing accounting, financial management, inventory, and HR into one platform. Download the CFO's guide to AI and machine learning for free at netsuite.com slash fire.