15. Building something new
— 4 min read
Here’s one update: I am increasingly saddened to learn that San Francisco weather is this consistently cold in spring and summer.
Probably the bigger update: I’ve just joined a new San Francisco-based startup called Middesk to help build out operations.
Checkr was an amazing opportunity for me. While I’d had a few years of consulting and tech experience, I knew little operationally about startups, about what it takes to build something new like Checkr. I knew, theoretically, how being a young tech company is hard, and how the odds are stacked against you, and how fires strike and burn at any time, but there’s nothing like the actual pressure and grind of the day-to-day struggle for you to really get it. It’s awesome. I’m beyond grateful for Kyle Mack (Checkr’s first sales hire and a 4-year superstar) for taking a chance on me.
I’m lucky to have learned from an incredible team at Checkr. From founders Daniel and Jonathan, to the executives, to the old guard crew who’s been through it all, to incoming folks, everyone consistently impressed and challenged me to grow. If you’re considering a role there, I cannot stress enough how incredible of a culture, let alone fast-growing of a rocket-ship, you’d be joining. If you’re curious about working there, I’d be thrilled to chat.
A newer opportunity
Checkr gave me a great glimpse into what it takes to scale something; to start pouring fuel on a fire that’s burning, to take a thing that works and make it work bigger and faster.
a16z’s Martin Casado distinguishes enterprise startup stages as “team”, “product”, “repeatable sale”, and “unit economics” (which feels more realistic than financing round stages like seed, A, etc.). While I was enjoying figuring out how a product maps to new markets, and nailing down that repeatable sale, I was dying for the challenge of those team and product stages. What’s the messy process of figuring out how the thing works?
The idea of founding a company and seeing those early days has always been exciting to me. I got a tiny taste at Checkr, working with an awesome group to figure out why and how identity verification on the platform should work (a v1 of which recently shipped!). But it left me wanting more.
So when Kyle and Kurt teamed up to found Middesk, I was immediately intrigued.
In sum, Middesk is building a foundational layer of the future of B2B transactions. If I put my VC hat on and look at the company’s market, product, and team, the Middesk opportunity was too special to pass up:
a. Market: How deep is the customer need? Can the product drive material reduction in cost or risk, or help generate additional revenue for customers?
Marc Andreessen once said a big market trumps everything. It might be a bit hyperbolic, but there’s certainly a lot of truth to it.
Let’s look at the issue of B2B payments write-offs. This study by Deloitte estimates that in 2014, the total size of U.S. B2B payments was $16.5 trillion and was growing at a CAGR of 5.8% to an estimated $23.1 trillion in 2020. Another study by credit insurance firm Atradius finds that 2.5% of B2B receivables was written off as bad debt in 2018, the main reason being firms going bankrupt or out of business. Assuming that rate stays steady through 2020, we’re looking at an annual write of bad debt write-offs amounting $58 billion. When you layer in that regulators routinely settle multi-billion dollar financial sanctions cases for non-compliance, the costs of not knowing your customers and partners add up quickly.
Firms are laser-focused on limiting those losses; a range of B2B businesses, including fintech startups, financial services firms, and SaaS providers, often staff large operations teams to conduct business verifications. Even the HR tech companies I’ve studied before have increasing needs to understand who they onboard and whether they’re a risky customer, especially when they bring on large volumes of small- and medium-sized businesses or even sole proprietorships. Automating and augmenting these knowledge processes enables teams to focus on higher-value activities while also accelerating customer time-to-revenue.
b. Product: Do I know this need? Have I or someone I know felt pain in addressing this issue with existing solutions? Can the product deliver a 10x improvement?
I’ve seen the need first-hand at Checkr, where each new customer must be verified and credentialed before using the background check product, a time-consuming and often manual process. This is not only for complying with legal background screening industry requirements, but also for better understanding any potential commercial risk. On top of that, numerous Checkr customers and prospects — fast-growing marketplaces, broad platforms — would regularly ask me about business verification products to block or remove bad actors and better suss out commercial risk.
When asking how these issues are solved for today, the responses are disheartening: manual lookup processes, staffing up large teams, conducting business document collection one-by-one. The list goes on. Existing products on the market serve up stale, inaccurate data; there’s little by way of actual intelligence on a firm; and there is almost no intuitive SaaS platform for easy use, and APIs are almost non-existent. The scope for improvement is massive.
c. Team: Do I believe in the founders? Do they have an exciting, broad vision, and can they execute on the day-to-day grind to achieve it?
This one was easy.
I remember being excited to work at Checkr, and just as excited to work with Kyle: he had been there from the beginning, helped figure it out, and had accumulated a wealth of knowledge not just about background checks but also building a company. Same with Kurt: a super experienced and thoughtful engineering manager who was excited to work on hard problems and got others excited about them, too. I know they’re both intent on changing fundamentally how business risk is assessed, and having seen up close how both of them work, I know they’re more than cut out for the journey.
Drop me a line at email@example.com if you want to learn more. We’re hiring curious, driven people who are excited about reshaping the way businesses work together.