Podcast | Building a Procurement Startup After a 25-Year Industry Tenure

Chapter 1: Intro
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welcome and thank you for tuning in my name is Stefan and today I’m chatting with Andrew lilik founder and CEO at focal point an atlantas startup
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revolutionize in procurement for Enterprise companies after 25 years in procurement industry Anders decided to leave his job in 20120 to start this
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Venture on his own pain points since then he was able to win over a lot of interesting clients and build a great MVP Janus as we discuss his story
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challenges of building the product as well as his plans for the future as always if you find the story insightful please consider subscribing and sharing
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it with your peers without further Ado let’s get into
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it okay so perhaps you could introduce yourself and mention who you are and what do you do some some sort of like an
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elevator pitch yeah so my name is Andrew zic I’m a CEO of focal point I founded
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the company three years ago give or take and and we are a procurement Tech startup cool cool and where are you connecting
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from connecting from Atlanta Georgia so yeah just outside of of Buckhead right now so it’s about I don’t know 93° and
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hot as usual oh yeah I’m in Florida so it’s it’s even worse in here and we’re getting a hurricane soon so we’re about to have some fun I’m sure um so perhaps
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you could start with with sort of describe it a bit about how did you start in career what did you do before founding the company what was your background yeah so as I said earlier
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focal point is a procurement solution startup and before starting focal point I spent 25 years as a procurement
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practitioner so I was the head of procurement or chief procurement officer for some very large Global and complex organizations like companies you may
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know about Fanny May Webster Bank Citizens Bank uh QB insurance so essentially the idea was that taking all
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the experience that I had uh in in procurement and applied that to to the business which really is is kind of unique right so as I was doing Tech
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starts we’re going to get into that there were a lot of good Founders but they didn’t necessarily have the background in the discipline in which
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they were building a product for which is interesting to me there were a bunch of answers looking for for a question to answer which is kind of
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funny it is it is and it’s I I keep seeing this trend that a lot of really successful startups especially in early stages uh the tendency is that the
Chapter 2: Get a job and learn your craft before launching a startup
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founder has spent at least least a couple of years in the industry that they’re trying to build a product in so they really know people they really know people they they know who to talk to and
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so they kind of know the problem even before they start researching anything so they’re really not starting blind but before before we even get into the details of what you do with your with
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the at the company perhaps you could describe very quickly what is proc procurement because I’m sure that there will be a lot of people listening to this who were not sure about the nuances
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of this profession yeah so so procurement is really the the art of acquir iring goods and services to run a
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company right so at the end of the day like you need people you know to run a company capital and then third parties
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right so at the end of the day as we are building our company we are dependent on Amazon web services and other hosting providers to run our business we’re
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dependent on third-party software solution and Security Solutions to run our business and as are all other companies in the world so if you think
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about an insurance company for instance they buy a lot of Consulting Services items processing sometimes the Outsource
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underwriting or claims handling or even adjustment of a claim right so there’s lots of parts and pieces that to the
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customer seems like they are indeed the insurance company you’re dealing with but in real terms it probably is not for
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a lot of cases where somebody has the business card of the insurance company you’re dealing with but they are actually a third party so the joke I
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like to say is like Jake from State Farm is probably not act Jake from State Farm and please don’t sue me if that is the
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case but the whole idea idea is really like all companies these days are you know using third parties to get their
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the work done right and procurement kind of looks at everything from acquiring those goods and services to then
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managing the providers and that’s becoming more and more complicated right because now you have to make sure that the companies you do business with are
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financially stable that they have ethical business practices that they don’t hire slave labor and that’s real
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thing make sure that they don’t pollute and and all these other things that are secondary to price and delivering the service you want to make sure that these
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are companies that you want to associate with right and then you have to get into managing the infrastructure to support those or companies meaning are they
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collecting data are they part of a critical business process that you man you know offer to your customers and then you know secondarily are are you
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sort of managing that provider appropriately paying them appropriately you know so that at the end of the a day you maximize the value of your dollar
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spent and you know for example a few companies I worked for have spend in the T of billions of dollars on goods and services per year and if you think about
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spending tens of billions of dollars or something on a recurring basis it is very importantly you maximize that investment rather than looking at it as a
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transaction wow um I think a lot of people don’t realize myself included by the way that um we’re used to sort of
Chapter 3: The value of procurement for enterprise
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when you start a small business or really if you were just to Consumer yourself um your process processes to use a certain service a certain vendor
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is very simple because those smaller companies they just they just know that they would have to be using or providing services to to people to singular
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entities right or very small companies but as we grow this process is exponentially more complicated and there
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is the whole industry and a whole bunch of Specialists like yourself I’m assuming who need to manage the whole process but that being said so youve
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spent 25 years in this industry um and what made you so by the way if you don’t mind me asking what is your age at the
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moment how old are you I’m 48 years old wow so you’ve you’ve spent 25 years and you were a how long have you been
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running the startup for a couple of years now right yeah almost three yeah okay so so 4546 and what made you first of all how
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did you identify this problem and what made you think that you should really start your own Venture at such age obviously this is the time when people
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tend to become more conservative and you did the opposite which is something to look up to well maybe maybe not we’ll
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find out in a few years right but um at the end of the day like the problem that I I identified was having lived with the
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procurement technology that exists today or in the Legacy world where the transaction processing stuff is done really really well so you can store
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contracts you can cut purchase orders you can pay invo voices you can manage you know relatively easily transactional
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stuff but if you think about all the other stuff I mentioned at the beginning so as you are you know let’s say we’re Outsourcing human resources or some
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other function right you need to number one figure out who are the players in the you know out there that can meet your requirements what are your
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requirements who are the stakeholders you need to involve internally how are you going to validate the questions how are you going to validate the answers
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and how are you going to manage that process from beginning to end including diverse suppliers including ESG including information security and risk
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including it requirements including legal requirements all of that stuff today is largely done manually poorly
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and in spreadsheets so while the transaction processing is certainly automated the
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Strategic stuff is not and there are Point solutions that deal with most of these smaller issues but as a
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procurement practitioner it requires you to log into a whole slew of different systems to manage those little parts and pieces but as also as an executive
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managing in some cases hundreds of procurement people having visibility about what they are all working on where
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in the process that thing sits and you know who isn’t participating basically becomes out of
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sight for executives right so at some point in time like for instance you know the CFO calls you and say hey I’m
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meeting with the partner of my favorite uh you know consulting firm next Tuesday
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what’s going on with this consulting firm right now that’s like a fiery Hoops type exercise where yes you can know what the contracts are you can know what
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the payments are because that stuff is there but then you have to reach out to all your dealmakers to say hey are we doing anything with this provider right now are they in line for bids are they
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in lined for contract renewals you know as you can imagine if you have a global team that can be kind of hairy right to get your arms around that stuff
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certainly so there were lots of these things from a management compliance process compliance perspective that I
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struggled with as a chief procurement officer um and that was really the impetus of the of the solution like there has to be a better way of doing
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this and I set off to to build it right and why I started it at such an you know matour age I guess uh I I I’ve been
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exposed to a lot of startups in the past and to me it didn’t always seem like it was that
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difficult from a knowledge perspective to do it you kind of had the hoods butut to do it and and yeah and some knowledge
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in the industry and I figured like I can do that right and really you know it came and I’m going to give a shout out
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to the first co-founder of the of the company which is really my wife and she is much younger than I am and she’s also
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has a good job and so for me the whole whole idea is I could give up my really well-paying you know job because she
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could carry the load in terms of managing the day-to-day expenses and so on I think and having that that spouse or that partner with you along the way
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is crucially important right because not only do they have to you know have the capabilities of supporting you but they also have to be willing to support you
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and those you have to have both right at least in my circumstance they’ll start to understand you and and understand to the point where they’re not going to be
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that last small cut that tells you not to do something when something goes wrong which it certainly will eventually sure absolutely so so for me
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like you know we had been married for maybe four months when I said hey I got this idea what you think and and you
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know it was just before the pandemic also and it was super interesting and she was like you know what go for it if you don’t do it now you never will and I
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think you know it’s a great idea and that’s kind of how you know number one the the challenges were discovered I sort of thought a lot about it and then
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ultimately you know getting my partner on board with it and and that was you know kind of the start of at all but so apart from obviously your wife wife
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you’re you’re a single founder in the company so you don’t have any other partners outside of your family right uh at the beginning no I see okay and so
Chapter 4: The beginning of Focal Point, validating the idea
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what was your so if we were to put this into the calendar so when was the time when you started thinking about this concept I mean I understand that you
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were probably imagining for a while but what what was the first influx point where you thought that okay this might be something real and what was the time
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between then and when you decided to take the leap of faith and really sort of say bye to your existing employer and
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start this deeper well I mean the interesting part here is um I was severed from one of my jobs
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basically I I received a fairly decent severance package I had I had an offer like you know move to another country
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and oper there or or you know take a sance package I like you know what I’m too old I don’t want to move I just got married I don’t want to do this so I
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took the sance package and that’s you know I found a spent some time you know finding myself and thinking about things and percolating so this was probably
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back in January of 2020 and what I started off with is is I I started off talking to other
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entrepreneurs people have been there and done that and they talked about building an MVP or building a WI frame you know figuring out what the thing will look
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like and what it’s going to do and I did you know a couple of things like I I created a PowerPoint Deck with sort of
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like what an MVP could be what a mediumsized product would be and then what longterm would be and then I
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started creating a wireframe a clickable wireframe to show prospects investors you know other people in the business
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like okay what if I did this what would it look like and and the fascinating part for for me was uh I got a lot of
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interest from other people in procurement like I’ve been in this business for a very long time so I know a lot of people and people are very will to help out so I by walking this
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PowerPoint deck around and this wireframe around I was actually able to get two customers pre-product development wow um so I had two
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Enterprise customers who I won’t Name by name but you’ve known them a lot of you you guys have used them in the past I guarantee you but they said look yeah we
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have this problem too we have large Global organizations and if you build it we will try it and if we like it we will buy it and I had lots of people saying
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that but I two people two companies willing to put that in writing which was the most interesting part for me so I I kind of thought about IDE and Market fit
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like yeah it’s kind of there right um and and that what happened in in March of 2020 where I actually had to go out
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and create my my incorporation because you know they’re not going to write a contract with me me they you know of course they’re large companies they
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don’t business with individuals to sell product right so I had to incorporate and to go through all that nonsense and that happened on March 18th of wow so
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essentially around two to three months between the point where you decided to start at the point where you actually got their first commitment which is what
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in fact I’ve listened to this book called The Mom test recently uh which speaks about the fact how you’re supposed to conduct these interviews
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with possible potential clients and how you’re supposed to upgrade that relationship to the next step which is get a commitment either in introduction
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or somebody’s going to pay you or letter of intent something like that and it’s just to be honest unre unrealistically
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amazing it sounds that way that you were able to get it so quickly but obviously I understand why because you had this large experience in the industry but so
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to put some numbers to into perspective so you’ve had these two companies who were willing to try but how many did you have to talk to beforehand before these
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two were found honestly I didn’t keep track right so now that I have Salesforce and sales law
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I tracktion like I can tell you precisely who we talk to in order to get a meeting but uh you know back then you
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know I started with my network of maybe 50 people and then okay you kind of start like do you know anyone else who might be interested who’s more willing
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to deal with startups like you know and I I must have talked to at least 100 companies C people that in in leadership
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of procurement before you know I got got the first two and then I I stopped I’m like I all right I I I you know
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literally sitting right here in my basement and all right two is enough and these are both Enterprises with global
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scale so like that’s probably enough right and to be clear these are not these are not 50 bucks a month tickets right these are very significant
Chapter 5: A few words on pricing
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commitment so if you were to get this kind of a client that’s a very very large chunk of cash that you’d receive if you were to get to sell the software to them right yeah initially obviously
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as you’re trying to be in logo acquisition mode we charg it in the tens of thousands of dollars per year not hundreds of thousands as we do now but
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it was the whole idea of of number one drisking it for them both from a process and from a commitment perspective right
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so I said look try the pilot if you don’t like it or if I can’t impress you’re not on the hook for it right but
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of course they’re not going to expose a solution to their in some cases 50 or 100 employees unless they think there’s
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something there and number two if they really like it and then I say well it’s a million bucks they’re going to say well that’s crazy right so they needed
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to put a price on it that front that they were be able to sort of consume so we were very conservative as we started down this journey but yeah it’s it’s not
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at 50 bucks a month yeah okay so so you’ve mentioned that right now you know clearly what the numbers are in terms of conversion I was
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just curious to hear again obviously I know this is a lot of a lot of the stuff is still secretive but like what is the magnitude of companies you have to speak
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with at the moment in order to converse convert somebody to even try the product yeah it’s an interesting question right so we have a bdr team at
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the moment we have three bdrs two onshore and one offshore and we we do about I’m going to say I’m going to say
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a few hundred touch points every month about 30 about 30 agree to an initial
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meeting and then a subset of them convert into the funnel and a subset of them convert into sort of qualification
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and so on right so you selling to Enterprises and and conservative companies it takes a long time right so
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our sales cycle is somewhere between 6 to 9 to 12 months so but at the same time if if they convert it’s a very long-term
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commitment so it’s really worth it I think in the long run correct so the whole idea like so the these contract are normally three years we have some
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that do five years and they prepay annually in advance so from a balance sheet perspective it it’s super helpful
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right because let’s you know let’s assume you sign a $250,000 annual contract it’s you get you get that quar million right up front right plus
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whatever implementation cost so it helps the balance sheet but also it helps the the initial investment of
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integration setting it up and configuration is is significant so with these long term green you make sure you recover those costs on the long end of
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of the scale right by the way that being said are you guys uh trying to deploy this on premises of the organizations you serve or is it more like a Cloud
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solution that is universal for all of them and you just have different tenants uh so we have we basically it’s a multi-tenant SAS Solutions we have a
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single instance single instance running in multiple data centers yada yada right like today all everything’s distributed
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but yeah we have one product one instance that serve all of our customers this is awesome and that the reason I’ve asked this is because I’m assuming that
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these large clients they usually are very careful about data storage and really who gets access to what so I was curious if if there if this is like a
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big Pino for you in terms of how do you deploy the solutions to them well isn’t it isn’t right so the way that we’ve
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architected a solution everything’s encrypted five ways from Tuesday uh we have a sock do certification working on
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our ISO certification as well so coming from Big Business and coming from procurement where I kind of know the proctological examination that you’re
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going to undertake in order to get into these companies you know we kind of set ourselves up that way even though we are relatively small we have big company
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infrastructure that support security secondarily secondarily like we can do a lot of configuration and we also have a
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separate database for each of our customers there’s no shared databases so each database has their own instance that that is done
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uh it’s the same database essentially right from a topology perspective but they separately so there’s a lot of of
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physical and logical uh security safety in in the in the solution we get pent tested on a regular basis like we have a
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lot of insurances that we’re doing the right thing as we do right we have to like we’re selling to large insurance companies large Banks large healthc care
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companies and large Pharma companies right so there’s there’s a lot of due diligence that is required to get on boarded right they they take security
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very seriously as as they should of course yeah okay so getting back to the point where you started building that mvp so you got these two commitments on
Chapter 6: Building the MVP
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board but I’m assuming that each of them had and I’m assuming most of the corporations they have some nuances that you would have to adapt to each of them
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separately how did you determine what is that scope that you need to implement as a core that would be invariant of all of the clients because I’m assuming that
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again you have to juggle a lot lot of different bows with different companies and tailor a lot of stuff to them so which tends to be
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expensive sure I can I can yes of course that is indeed the case but the thing that we ran into is is I sold them on my
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vision of how things should be run oh okay okay that helps and they bought into that so as we were doing
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designs and as we were doing process mapping they were like yeah that that makes sense that makes sense right that that that really helped us uh but these
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aren’t fortunate 100 companies that we’re running into now um and and really you know from a building of the Prototype perspective right I kind of
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went off the clickable wireframe and and hired uh I hired a company to basically do a staff
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augmentation deal where I got a turnkey product team where they basically I had a front-end designer I had a front-end
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developer a back-end developer and a PM and we set up Sprints and we managed that from beginning to end now these
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guys were located in Eastern Europe actually Ukraine and it cost me a whole whopping $8,000 a
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month uh funded out of my checking account and uh yeah so we we I sat here every day I met with them for like 3 4
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see things come together cool and how much time did it take for you to that mvp so I started doing my own testing of
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the solution probably in October right wow so half a year more than half a year
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yeah because and mhm because we’re dealing with large data sets we’re dealing with large customers we’re
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dealing with a lot of complexity so again I probably didn’t do what I was supposed to do is just build something in a few months and just get it out uh
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we took took about six Mons case though if you were doing this for like B2B small companies kind of makes sense but if you’re dealing with such big corporations you really only have like
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one shot so I think it kind of makes sense the way you approached it so okay so you’ve built so now it’s October November so when did you actually launch
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it to your first customer what was it like so we went through about two months of back and forth I said oh this this doesn’t look good like we need to do
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this better we need to do that better so two more months before we sort of said all right now we can expose it to our clients and and really at that point you
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know I I’ve been talking to my clients quite a bit so we had set up two separate instances for them we had loaded a lot of the users we had loaded a lot of their processes already so we
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had sort of like we’ve done a lot of pre-configuration and pre- testing ahead of time we kind of turned it over to the uh to our customers and say hey we think
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we’re ready but you need to tell us um they tested for about 3 weeks and then both of the customers launched into production in
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December um wow and you know both of them converted in q121
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so one converted in January January 7th actually uh day after the Insurrection so to speak and then the other one in
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March um and one signed a year-to-year agreement and one signed a three-year agreement and we were off to
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races it is hard to believe that it was such a smooth launch I mean obviously kudos to you for everything but uh you
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never see startups so smoothly launch essentially it’s been a year since you let you’ve left your existing employer a
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year of of leap of faith and you got yourself two clients and a working product that was I’m assuming was it sufficient to launch for other companies
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or did you have to do a lot of work additionally on top of that well you know the funny thing is it takes a long time to find the next customer right
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because at this point sure you not you don’t have a development partner you’re actually selling an arms slank transaction right so we continued on development so I mean it’s funny I’m
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sitting in my you know literally sitting here still and it’s just me like I’m the only person in the company everyone else is a contractor mhm um and I got two
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Enterprise customers doing Global uh work right so I’m literally tech support I’m literally product guy I’m literally marketing guy and I’m sitting here
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mining Apollo contacts and using Apollo to to do my Outreach and cadences and so on and I get a tons I get tons of
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meetings right uh and and I send out emails like you know kind of tongue and cheek right hey Excel is not a management tool like that one was
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actually very popular it got a good open rates for that and I ended up continuing to develop the product I’d raised some
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money so I raised you know about $700,000 based on that initial uh work
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so some friends and family some tech stars and some uh from a VC uh prec VC
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and so brought the CTO continued to develop the product brought in uh my own shop
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and in I’m going to say Yeah in January February I started talking to a very very large Las Vegas based entertainment
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company they have about I mean if you’ve been to Las Vegas I guarantee you you have stayed at one of their hotels right
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and uh I started talking to them and they were like this is awesome we have 80 people in procurement you know we need to centralize and normalize you
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know this is great and it took us 14 months but in but in December of 21 I closed the next
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customer and this was huge for us cuz this was you know a sixf fig ACV um but essentially between between
Chapter 7: How Anders used cold email to get new clients
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your launch and January 7th of 2021 it took you almost a year to get your Third customer correct and so to abstract
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you’ve mentioned it sounds like you’ve been using cold email as your primary sales tactic at the time right oh absolutely yeah cold email yeah really
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and so so this is actually very interesting because I’ve been trying to use cold email for an out the product I’m building as well so I can ask you a
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clear clear question there so what were your conversion so it sounds like you’ve sent you’ve tried a couple of different top tactics to attract people to open
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those emails but what were your numbers so you’ve sent it to overall hypothetically how many people did you send your emails to and what were your
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open rates what were your um reply rates things like that I mean I sent thousands of emails right because I went into Apollo I searched
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for heads of procurement Ste procurement officer head of like gotcha you know Executives I I scraped their information
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and from Apollo and then I bounced it up against zero bounds to make sure that the emails wouldn’t come back and and
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block you right and then you know you I I put sequences in place and I ran you know basically four-step sequences that
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would bomb out if I didn’t get a response but my open rates were in the 20% Which is not terrible but not great
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and I had a 2 or 3% response rate right but again it’s coming from hey I used to be in your job I had this problem I bet
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you do to would love to talk to you about it right I’m building this really cool thing and I’m looking for early adopter right and again selling to
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Enterprises and early adopters that’s not usually the same thing but at least I got a lot of I got a lot of meetings I got a lot of interest
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um and it was a lot of cool discussions right because now I’m on the other side of the fins right I used to be the buyer now I’m the seller which was a surreal experience but a lot of fun at the same
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time you know what I really like about what you’re saying is that everything you did is realistic so a lot of times you hear these stories where startups
Chapter 8: The beauty of Anders’es story
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are really selling to Enterprises and in fact I had a couple of these conversations on the podcast that uh a couple of weeks ago and a lot of times
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these Enterprise sales they sound very dreamlike it’s really hard to approach it you need to know people inside and so on and so forth in your situation you’ve
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used or existing tools that are available to everybody you did do a lot of it was a very deep dive for you of course I understand that but you still
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got your response it’s still very possible if you have this idea or product to get your customer through these scalable uh reasonably priced
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tools that are affordable for any founder right it’s not like you had some Secrets up your sleeve but that being said so so in 2021 you’ve been raising
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funding and you’ve mentioned that you’ve been part of Tech Stars what was your experience there and what did you why did you come there and uh what were your
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outcomes and what do you think was the biggest sort of takeaway from that experience so I joined Tech
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Stars because I wanted to become part of the Atlanta ecosystem right so at this point I had a company with customers but
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we were a you know completely unknown entity right so um I I ended up talking to the head of
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um Tech Stars here in Atlanta his name is David Payne and he was like Andrew how do how come I not didn’t know about you because I know everybody in Atlanta
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I’m like well I’m sorry dude like I’ve been building a product like I don’t Network very well uh and you know I’m busy and he ended up convincing me that
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Tech Stars would be a good idea for us and I actually had offers to go to several Tech Stars programs uh at that
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time based on early early traction and I ended up choosing in Atlanta cuz we’re an Atlanta based company um we want to
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build our roots in Atlanta and and even though as it turns out Atlanta is not really be to be focused from a Tech Stars perspective I ended up choosing uh
30:39
to come to Atlanta and I did it for a couple of reasons Tech St for a couple reasons like I wanted to surround myself with other Founders that were trying to
30:48
solve cool problems and and getting help along the way I wanted to network within the ecosystem I wasn’t really thinking about
30:56
fundraising at that moment moment uh a lot of companies go to Tech Stars to get fund to fund raise I didn’t use Tech
31:02
Stars to fund raise at all um in my circumstance for Tech Stars um I have to
31:09
say it was a lot of work uh to basically present uh on the stage uh you know the tech star stage on upon
31:18
graduation I did I was the only bdb SAS company into cohort so a lot of companies were there like B Toc uh a lot
31:26
of uh comp three companies focused around servicing Airbnb type activity so weren you know from a cohort perspective
31:34
it probably wasn’t slam buunk fit for us but all in all I would say you know really cool companies uh really cool
31:42
people and I got a lot out of it but probably not as you would expect right and we also saw I saw some folks that
31:49
expected Tech Stars to do the work for them and that’s not going to be the case at all right you’re a Founder you’re responsible for your own company you have to make sure that it happens for
31:57
you um regardless like no one’s going to come with it you no no one’s going to just say okay I’ll do this for you right you have to do it
32:06
yourself so what were the biggest resources that you were offered and which of them were the most useful for yourself oh was it only the networking
32:14
for the most part or was there anything else well that’s yeah networking was a big part of it but also understanding
32:21
metrics understanding making incremental changes don’t wait for Perfection which I’ve doing quite a bit of waiting for
32:28
Perfection so just get out there get started you know scale scale scale um the thing that I wished I listened to
32:36
more was always be fundraising right always make sure that your balance sheet can can can facilitate growth um you
32:44
know so so good good ideas from people have been there and done that and I think that’s you pick that up by osmosis of being around people and Atlanta has a
32:53
very rich uh startup startup um ecosystem uh got it it was really cool to be there actually okay so you’ve
Chapter 9: Why Focal Point stopped working with an agency and built their own tech team
33:02
mentioned that somewhere sometime in the middle of 2021 you’ve decided to stop working with an agency in Ukraine and
33:09
pivot to really hire your own CTO and your own team so could you perhaps elaborate a bit on the motivation behind
33:17
that decision and how did you get to the point where you were actually actually able to find a good
33:25
CTO yeah you know those are very interesting questions right so understanding that we needed to get
33:33
sock 2 certified which means we have to control the development life cycle we have to be able to do pen testing inversion testing there’s a lot of rigor
33:42
that goes into that and it’s very hard for me or anyone for that matter to manage a set of folks that don’t work
33:50
for you uh managing releases and those kinds of things unless of course you hire a tier one consulting firm that has socks
33:59
sock certification own but we were not in financial position to do that obviously right so what I ended up doing
34:07
was figuring out who was going to be my CTO that was kind of like my first thing cuz I I I don’t know how to build a Dev
34:14
shop so I needed to find somebody who could and I ended up talking to a lot of folks in and around Atlanta that basically said yes I’m interested in
34:22
building a startup but you know before we sort of walk down the aisle together you sort of have to have the discussion like we’re pretty much
34:31
self-funded we we our Revenue cannot support you know a large large salary if any salary at all so understand what you
34:39
get into right and I to can I have two candidates who both said I want to do this but they basically got cold feet
34:47
when they said when I said look you can’t have a day job and do this at the same time like you have to be in it has to be Equity based and then when we hit
34:55
our targets we can pay ourselves right I wasn’t paying myself still mhm and it was very frustrating for me cuz they both walked away I like sorry I can’t do
35:02
this too risky right which I appreciate I just wish they told me that to begin with but the whole idea was uh once we
35:10
got into it they walked away and I decided to sort of change my my thinking a little bit to say look I want to find
35:18
somebody who is not onshore based so I decided to start looking for somebody who was collocated with the development
35:26
team I already had which was in Ukraine and I found my co-founder my later on co-founder
35:34
Max and I said look here’s the situation you know you get some Equity right you have a Dev shop already that sooner or
35:42
later either you will get take those people out and hire your own and we will pay them out of the money that I have
35:49
raised but until we h a certain number like we can’t pay ourselves right and Max said absolutely and it’s funny like
35:57
as soon as I hired Max to come on it was like kind of like the lights came on cuz now he he was he was there he had visibility about releases and testing
36:05
and all that kind of stuff and he said look you know here are some things you can do incrementally to make it better you know and get better visibility better results and so on so that that
36:13
was great and you know very very quickly thereafter he started putting in his own guys and we could sort of get off of the
36:21
the agency and have our own folks um and you know we seeed around last year and
36:28
all of a sudden number one we could pay ourselves and and uh in at least incrementally you know take some money
36:35
out of the company uh to pay ourselves but also put in you know a bigger more robust development team better processes better
36:44
systems yeah right so it was a very well it was it sounds like it was a very smooth process but a couple of questions related to that so first of all um
Chapter 10: Finding a CTO
36:53
you’ve mentioned that you were able to find a co-founder sorry a CTO that would be able to get paid at the same time you
37:00
are based on certain metrics so what is the framework of logic that you’ve applied to I guess make that um a
37:08
streamline process because sometimes this is I think where a lot of startups fail where there is not enough system or Clarity between the managers of the
37:17
company or Founders about when do we get rewarded so what was the framework for you and how did you sort of find that agreement with with your CTO with Max
37:26
now was basically look I will not get paid unless you get paid right I will pay myself last okay okay that that was that was
37:34
really it right so for me like I I didn’t need to get paid like my deal with my wife was when I can pay the
37:41
mortgage then I will but other than that like you know she was she was going to pay for everything else right so wow okay we got to a point where we said
37:49
when we have either reached this Revenue line or this funding line then we can start paying ourselves right and
37:57
you know it was very smooth like we we like you said we raised a bunch of money and then all of a sudden we can pay ourselves um and did you expect did you
38:04
expect Max to to sort of only work in focal point or was it okay for him to have some side side gigs to support
38:12
himself no I mean it was okay for him him to have side gigs and support himself right because okay it was a you
38:19
know I’m not I’m not kidding myself right number one he lives seven time zones away um I I couldn’t possibly know
38:26
if you did or didn’t but you know as long as you know the work got done then I was okay with that and I think very
38:34
quickly he he transitioned to everything here right so the deal I said is look as soon as I start paying you like you this needs to be your like your only job of
38:43
course all right got it and and what was the framework of thinking you’ve applied to actually determine what is the share you want to you want to give to your
38:50
early stage employees I’m assuming it’s not just CTO you probably give shares to to other folks at your agent uh at your company yeah I mean I listen to a lot of people
38:59
that have been there and done that but what I will say is from an equity perspective as it comes to my employees I’m probably more generous than most
39:06
right I want everybody to be successful when I are certain companies who sell for billions of dollars and their early stage employees get nothing to me that
39:14
it’s not how I want to operate anyway right I’m sure it’s fine but you know it’s not an environment that I I I I want to be in so at the end of the day everybody who works for the company
39:22
today are our shareholders right which is kind of cool it is and um but really what it comes down
39:31
to is is at the beginning I talked to other Founders and then sooner sooner after that I started uh subscribing to
39:40
ca and CA will tell you right so based on metrics out there here’s what startup salary should be and what Equity should
39:47
be investing periods and everything else so I kind of look at CA as a as a as a guide poost and then I maybe I give them a little bit more that’s interesting
39:56
okay okay so what does your team look like at the moment so you’ve mentioned that you’re solo at the moment in the United States and you have a lot of folks that are overseas helping you out
40:05
what does that team look like at the moment right so once we braced our seed round uh we really started kicking into high gears a couple of things happened
40:13
right after like as we were raising our seed round the war broke out in Ukraine yeah and uh we were very very fortunate
40:22
that my CTO was able to leave and bring his family with him and come to United States so you know we supported him through the
40:29
journey through Europe and then waiting for his uh application for his Visa that we sponsored and then we brought him
40:36
here so he’s he’s now in Atlanta with us uh we have a sales team like I said we have bdr three bdrs and two sales people
40:44
here in Atlanta and then we have uh two onboarding people and two marketing people ining including myself so we have
40:52
a team of 10 onshore and about 20 uh offshore Developers SL testers and so on so total total compliment about 30 to 35
Chapter 11: On delegation and hiring the right people
41:01
people on any given day okay and so now back to your personal mindset I’m curious to hear I’ve recently started to
41:09
listen to this book it’s called buy back your time but by Den Martell and it he’s offering some interesting mindset about how you’re supposed to take stuff off of
41:18
your plate as a Founder since you’re probably juggling a lot of bows and really delegate all some of it to people in your team um so I’m curious to hear
41:27
how are you handling all of that pressure of having to sell to these very complicated companies to still keep building that product and not trying to
41:36
introduce too much fature creep and so many other things how do you delegate and how do you manage your time uh poorly across the board I say
41:45
right I mean it’s it’s I work a lot and the cool thing is it’s a lot of fun it’s a lot of fun I I enjoy all of it right
41:54
um with the exception of of maybe some more my mundane stuff but I hire people that know what the hell they’re doing
42:02
right meaning my onboarding person used to work for me in the past and large global companies she knows procurement
42:09
inside out and backward I don’t have to worry about that you know she’s got it it’s great the sales people I hired have
42:17
all worked in procurement sales before they know what they’re doing uh and product features and
42:24
functionalities we come up with jointly to say all right here’s our road map here’s what we need to develop and sometimes it’s you know develop for this
42:31
customer or this Prospect sometimes developed for this partner but at the end of the day like we do things fairly jointly and we do that for a lot of
42:40
reasons right number one everyone knows what the hell is going on everybody knows what the futur fature product set going to look like today and 3 months
42:47
around 6 months from now so that’s conscious right um what I found myself doing is is I find myself letting out
42:55
the line a little bit and pulling back letting out the line of Li and pulling back so until I see something running smoothly uh I tend to be a control
43:03
Enthusiast in that kind of space right cuz at the end of the day like it is my baby and I I am kind of emotionally
43:10
attached to it but I have to allow people to do their job without being a uh you know really just all up in their
43:18
business right because I’m hiring these people to do their jobs I’m paying them good money uh they all have Equity right so we all have a vested interest in
43:25
being successful so that is is kind of the dynamic I’m working with right I’m not saying I’m there yet it might take
43:32
some time but at the end of the day like you know I have to I have to let people do their jobs of course if you were to I
43:41
and understand this is a pretty tough question to answer accurately so it’s really a bpark thing if you were to uh
43:48
build a pie chart of what are the uh what are the percentages of your day that you spend to certain activities for
43:55
example I don’t know 10% to sales 50% to Dev whatever what are those components of your pie chart of how you invest your
44:03
time I mean product quite a bit of quite quite a bit of product quite a bit on sales and and reaching out we spent a
44:11
lot of time on uh customer governance right so we want to make sure that we stay close to our customers to make sure that we know what’s going on with them
44:19
to make sure they’re happy and that also that we mine information from them in terms of what feature functionalities do they want
44:27
number one to meet their demands number two to be stickier number three maybe to come up with a new product I spend a lot of time now in marketing to make sure
44:34
that we’re messaging correctly making sure that we’re speaking the language we’re supposed to do uh managing the team is very important but also managing
44:42
investors right so those are kind of the components I deal with the most um luckily like we’ve never had an
44:50
outage luckily we’ve never had you know a big fire drill luckily our c customers are largely self-sufficient so we don’t
44:57
get we don’t have to have a big Services team to manage incoming right so we’ve been lucky so far I think that might
45:05
come to change as we continue to scale like right now we’re in process of signing a customer who will have 40,000 users on the system now I expect we
45:14
probably will get some incoming from that you know so you know so I think ultimately once you get to that that point it’ll become more important and
45:23
things will change but I think I kind of set my time up in chunks and what I found is that you manage your
45:31
calendar by color coding things right so I have color a color for sales a color for a customer a color for personal a
45:38
color for investors like you kind of manage that right so sometimes my board is completely based on uh on investors
45:47
sometimes it’s all about sales and it just really depends on on what their priorities are at any point in time because it changes so
Chapter 12: Managing investor relationships
45:54
quickly you’ve mentioned that some of your time goes towards managing investors what does that mean and I know this may sound as as a silly question
46:01
but it sounds interesting well I mean at the end of the day you know they are they have
46:09
given me a lot of money and we want to make sure that they understand what’s going on how we’re spending their money what results we’re getting from it but
46:16
also to make sure that as I need help these guys have a lot of contact they have a lot of vested interest in our success to make sure hey guys I need
46:25
help with this is who do you know what can you guys do for me um capital is an interesting thing right it’s it’s it’s more than just Capital like these people
46:34
are part of the management team they’re sitting on the cap table they have you know some some of them have major shareholder status I meaning like they
46:41
need to to say yes to me for me to do something so managing that relationship is very important I think when when you
46:48
when you have someone on your cap table like you have to treat him as part of the team I’m I’m curious to to to learn from
46:55
from you when you I’m assuming at the time where you ra where you were raising you had some options right I was Cur I’m
47:02
curious to hear how do you what is the again what is the framework or your mind to pick investor to identify if they’re
47:11
the right fit for you what are the characteristics that you looking for in order to make sure that the person you’re sort of going down the aisle
47:18
towards like you said earlier uh is the right person is it more like whatever you get just be happy and to whatever they’re
47:26
going to tell you to do so I I can only tell you what I was going through right so for me the idea was to be realistic
47:34
right so you have some Founders certainly when I started that that would raise $10 million on an idea with a
47:40
valuation of $150 million bucks to me that was stupid right because at the end of the day like if the valuation of
47:48
having an IDE is 150 million like how are you going to scale into that to raise you next round and next round so right I didn’t so much care about
47:56
valuation which sounds strange right like because I care more about finding the right person right is this a person
48:03
that I can call up and say hey uh I I need some help or hey I need some more capital or you know making sure that you
48:11
know if you’ve seen the the sir Silicon Valley right you want to make sure that you get the person that’s going to help you and not hurt you at the end of the day right so it’s about building that
48:19
trust like I don’t have a board yet but I’m treating them as such to some extent right certain investors anyway so for me like once I found the right investor
48:27
like like this is the investor I want to use the funny part is I you know I I got one term sheet all of a sudden like three or four more came
48:35
in right and some with higher valuation some with lower valuation some with a little crazy right because you know at
48:44
the end of the day like people are Lemmings they don’t want to lose out and I end like once I picked somebody I didn’t I didn’t negotiate with that
48:51
person again weird coming from a procurement guy I’m like no this is the term sheet this is the investor these are the terms they set I’m perfectly
48:59
happy with this let’s move on I see it it reminds me of the conversation I’ve had a couple of weeks with Alex Rand from Velux because he he I’ve asked him
49:08
the same questions about Investors and uh he gave me some interesting numbers I wanted to sort of see where does that
49:14
sort of tie into your picture um how many investors how many how many different companies did you have to
49:22
reach out to in order to get your first investor how tough was that process for you my very first investor was
49:29
excruciating because you know I’d never done it before right so I probably reached out to over a 100 VCS before I
49:39
49:47
like your you know acvs are too low we think that you know this is not going to work and I’m sitting there like it late at night at this point and and I and I’m
49:57
50:05
tar pounded out of me he’s like this is great can we talk again next week and I’m like well
50:13
okay um and like I took another beating for the next week and they were like well we’re thinking you know we’re thinking you know half a million dollars
50:21
at this valuation on the safe note with this amount of discount oh Okay and like from from from from the
50:29
first discussion to to cash in the bank it was like 5 weeks wow that’s fast it was straight
50:36
down the middle as a white combinator safe like you know like nothing fancy nothing nothing crazy right so the
50:44
paperwork itself was really fast they the great investors I talked to them very very often still and they followed on with every investment that that has
50:52
come in since so they’re great guys it’s just the experience was kind of weird like after getting the door slammed in your face like 99 times then go from
51:01
first discussion to check in 5 weeks kind of like a surreal experience um I mean consider that to be like a learning experience you kind of have to learn how
51:09
to talk to them in order to get them to be impressed and also like you it’s like they wouldn’t be asking you all those questions that they weren’t interested
51:16
so it’s kind of like y it’s it’s the opposite you would you would be like well guys I’m talking to you about this cool idea and you shouldn’t be asking questions cuz it’s all amazing you
51:24
should understand but otherwise like they would they just wouldn’t commit if they wouldn’t anyways I I just think that it’s a very funny experience
51:32
because you got you got to learn first in order to land somebody reasonable um and it’s so I hear a lot so these
51:39
numbers you’ve mentioned they are very common people are saying that at least 90 to 100 investor you need to talk to to get at least one and then as you get
51:48
the first one you get the lead everything else tends to be much simpler because people like you said they have the fomo quite a lot of time
51:56
yep yep what is your vision for for focal point where do you see the company in 5 to 10 years where are you guys moving I don’t have a crystal ball right
52:05
but at the end of the day like we are leading with product so we as you can see like two-thirds of my companies all
52:12
in product development and I think that will continue to be the case for some time because this is such a target-rich
52:19
environment um for us so we’re developing new features and functionalities all the time and we’re building modules and so on so basically basically my goal is to build something
52:28
that provides a tremendous amount of value for large companies to to manage their suppliers their risk and their stakeholders better and right now we’re
52:37
in the process of developing at least three different modules that will help them do that so I see us spending probably the next year of self- building
52:47
52:55
mean Heaven only knows it’s uh it’s a target-rich environment like I said so I can see ourselves growing to you know if
53:03
we hit our numbers next year race another proper series a round scale and grow the team make it Global more Global
53:10
in terms of how we sell how we approach the market um and just continue to grow in scale from there we’re having a lot of fun doing it especially because it’s
53:17
so well received by our customers this reminds me your story reminds me a bit about uh the story of
Chapter 13: Why Anders and FocalPoint are destined for success (I hope)
53:26
my parents um and I’ll explain what I mean by this uh I was my mother was 41 when I was born so pretty pretty late in
53:34
in in the time when usually people have kids and everybody would be actually sometimes people would be saying that oh when she would would be walking with me
53:43
uh somewhere in the yard or whatever people would be saying oh wow uh like Stefan your your your grandmother looks so beautiful I was like no this is my
53:50
mother what are you talking about so sounds weird why I’m saying this but um the the reason I’m so happy about the way I got my parents was
53:59
because they would know everything so they would whenever I had any problems they would steer me in the right directions and they would always have
54:07
the right advice for me and I wouldn’t be here I’m from Ukraine myself as I’ve mentioned to you earlier and I wouldn’t be here in the United States I wouldn’t be doing my PhD I wouldn’t be talking to
54:15
you if not for their advice and their wisdom and for all of the investment they’ve made into me and I really don’t think that people understand how
54:24
valuable is sometimes and I see a lot of commonalities of course I’m not saying you’re old by the way but I’m saying that um a lot of commonalities in your
54:31
story is because of your experience because of how mature you are and it’s not just about the value of to the
54:39
investors I it’s not just the value to um to your to your clients it’s the value to your employees because your
54:48
mindset that You’ just Expos to me it’s a very mature a very kind and very thoughtful approach that you know you
54:55
don’t see very often you don’t see very often people saying that you care about people being from your own industry you don’t care about uh you don’t really see
55:02
very often when people say that I I’m willing to give them more Equity just because everybody needs to enjoy the story and have lots of fun you don’t see
55:10
Founders who are helping their CTO get out of the country with War people do the opposite they just fire them and look for other Founders or other CTO and
55:18
so it’s just a very um again like I’m saying it’s that mindset that makes you very unique and your story very interesting because uh a lot of times
55:27
people think and I’m myself included by the way I’m 27 at the moment and I’m having this fomo that look I I still don’t have that billion dollar idea in
55:35
my head even though I’m searching um and I was thinking maybe after I do PhD after I graduate maybe I’ll need to look
55:42
for a job go to some company because I don’t have a startup to work on but your story makes me think that it’s the opposite it’s that you do have to invest
55:50
into your career learn from the from the bright Minds from the from the elephants of the industry whatever in order to later create the Innovation that
55:57
actually helps people because you have that background and that’s just beautiful to listen to and and to see um I’m curious to so that was sort of like
56:06
a side point but I just wanted to share that but what do you think about the value of uh llms and really AI to your
56:15
industry are you guys planning to adopt any of that stuff into your product and if yes what is what do you think that would play as an impact to your clients
56:24
so I think I think there are many things that you can do using Ai and and machine learning to to automate mundane tasks
56:33
you know do I believe that procurement will be run by chat GTP one day no I don’t you don’t think so right I think it’s to complicated it’s probably not a
56:42
good idea but there are things so for example find you know so you know you have a supplier here that their stock symbol is X can you find me there 10 top
56:51
competitors the strengths and weaknesses where they’re based and so on and so forth yeah you can use AI to do that all day long and I think that’s fantastic
56:59
and those are the types of things that that we’re planning on and are in the process of implementing ourselves to say look just push the button and you get
57:06
the answer right and I think that’s the stuff that you can do but I think ultimately procurement in complex organizations are so dependent on people
57:16
looking at stuff and so right here’s the right decision to make because it’s more of an art than a science because you’re dealing with people right at the end of
57:23
the day procurement doesn’t own the stuff they’re buying someone else someone else is right so if you’re buying marketing Services marketing cares deeply about what’s going on there
57:31
they don’t care what the cost is let’s be honest they care about getting this whis bang thing that’s going to help them sell the next thing right and that’s okay that’s their job and and so
57:39
the whole idea is since you’re dealing with people on on the risk management side on legal and the client side and all the other stuff like you know having
57:48
a having a robot selling your hair’s your hair supplier and I go you for that’s the worst nightmare of of our customers right so so I think we still
57:55
need a lot of automation I think that’s where Ai and ml can come in and I think that’s where that’s where things are going uh at the moment and I think you
58:03
know that is how I see it happening now there are people that do disagree with me right this ISS oh you know everything’s going to be done by computer and I was like okay I mean I’ve
58:11
heard that before right you know people always say that but it’s it’s the devil isn’t the in the details so yep yeah
58:20
unfortunately that’s true a lot of the things you’ve mentioned today they seem very obvious when you when you talk
58:26
about them I’m curious to hear how do you learn all of that of of course again 25 years of in the industry kind of help but are you what is your learning
58:35
strategy at the moment um do you read any books do you have any Founders or entrepreneurs or really anybody who you look up to you know I I spent a lot of
58:44
time talking to people right so I talk to other Founders I talk to investors I talk to Chief procurement officers right
58:52
cuz at the end of the day like I don’t consider myself a startup CEO like I’m a procurement guy that happens to sell software mhm you know and I
59:01
think you know having my finger on the PO about what’s going on in all these different buckets is a great idea right so what I’m finding myself learning the
59:09
most about right now is really just building and scaling an infrastructure the whole idea of being able to get a
59:15
new server set up on demand if if if your usage spikes right that to me is really cool I’m learning a lot about
59:23
that and Max my CTO is teaching me a lot about that well I don’t understand most of it I understand the concept right to say all right if all of a sudden you
59:30
know activity spikes in Asia like we can set up a set up an endpoint there and just have fun all the traffic and off we go that’s really cool but also it helps
59:39
me sell to large Enterprises who demand that kind of stuff right um in terms of of books like I find myself reading the
59:49
same stuff over and over again Cotter um you know back to my NBA days where we talk about managing change and those
59:56
kinds of things uh and also I learn about founder lged sales uh which is kind of cool as well um so I’m I’m I’m
1:00:05
sort of a bit in every Camp I would say okay all right I see look this has been a very insightful conversation I’m
1:00:13
uh I’m very motivated but by everything you’ve mentioned to be honest still sounds very unrealistic how how smooth that Journey has been to you and it’s
1:00:22
really meant as a compliment not anything opposite to it um and I think again like I mentioned to you before what you’ve described it sounds
1:00:31
like it it it’s motivating for a lot of reasons for me selfishly but mostly because you were you used all of that
1:00:39
experience all that baggage of stuff that you’ve learned over the years to build something that really matters and perhaps that’s why the launch has been so smooth because you knew exactly what
1:00:48
you need to build you need you didn’t really experiment much and it’s really motivating so uh thank you thank you so much for taking the time today I’m not
1:00:56
1:01:03
Insight and I really hope we could connect uh maybe in a year maybe in two whenever you will have a moment and compare that Delta between now and when
1:01:12
you serve your company to your uh some of the biggest Fortune 500 companies in the world in the United States I
1:01:20
appreciate the uh being on the show Stefan and always keep in touch I enjoy that lot thank you thank
1:01:32
you