Very True by Verissimo

Alex (00:00)
Amazing. so let's fast forward through the next the next steps to get to the current spot.

Nick (00:07)
Sure. We're gonna skip LA. I went back to work for a a lift driver at an on-demand dry cleaning and laundry startup called Washio. and we'll I lived in the Snapchat house with four of the first twenty employees from Snapchat. And that would the whole couple years yeah, was was a

Alex (00:20)
Should have joined Snapchat.

Nick (00:22)
blur. learned a lot. learned a lot

Alex (00:25)
Great parties.

Nick (00:26)
of what's that? Yeah, we did it was great. It was a great time. but ultimately I knew I was gonna meet my wife in

New York, also key insight, data driven. TAM is important. And I I I knew I I was gonna marry a lawyer, and there are lawyers in Chicago and New York, and I thought I'd like the New York ones better. So I moved to New York and I got a job at a company called Parabus. and Parabus is famous not because of what Parabus did, but because of what happened after Parabus. So that company was there for about 18 months. We sold to Capital One.

And it became one of the kind of two core underpinnings of Capital One shopping. I would argue the less important one versus Wikibu, which is the the browser extension, which if you use Capital One shopping, it's very similar to Honey, where you can track prices, which is where the Parabus side came in, and then you get kind of discounts and there's affiliate revenue on the back end. It's a great business for Capital One today. but it's more famous because the co-founders of Parabus who came out of

YC, Eric, and Kareem started Ramp. and we learned a lot at Parabus, which I think was very helpful in their starting of ramp. And perhaps Candid, my current company, and I'll happy to tell the story and origins there. but perhaps our claim to fame is we are we were the first ramp customer. so when it's all said and done, if if we do nothing else, we will be known as the first ramp customer.

So the story of Candid, in 2017, a couple buddies of mine came to me and said, Hey, we have this business that we're really interested in starting. And it's gonna have local, it's gonna be regulated, there's a consumer marketing angle to it, and it's gonna be complex. And I said, great, that sounds wheelhouse for me.

Coming out of my lift experience and Washio to some extent, understanding, as Alex, you you have said, around how do you launch markets and open new cities. and then again, like with a something with a strong consumer bent. it was an orthodontics business. We were gonna compete in the direct-to-consumer ortho category. At the time, there was one other player in the space, which is Smile Direct Club, who was growing incredibly quickly. And I went in with a high level of

Was it naativity? just not knowing.

Alex (02:39)
Naivete.

Nick (02:41)
Yes, that that's the word that I'm going for.

Mission critical for building new companies. If you want to do something really bold and audacious, it's best to have no idea what that thing is. Not if you if you want to build a small company, you really have to know the segment well.

But if you want to build a big company, it's better to know absolutely nothing because if you know the limitations of it, you're probably less likely to come up with a solution that gets to the massive market. and specifically, I knew nothing about dentistry and nothing about orthodontics, though my co-founder was an ortho, and we brought a lot of people around the table very quickly who really understood the space. ultimately that business was flawed in a couple really critical ways.

we ended up getting it from zero to a hundred million run rate in four years. we had seven hundred employees forty plus

Alex (03:28)
No big deal. No big deal.

Nick (03:30)
well

We'll we'll get to why it was no big deal. forty forty plus retail location.

Alex (03:34)
It was a big deal. That's not like that's not trivial.

I think that's a big problem we have with like AI stuff right now. It's like, yeah, just I got the a hundred million in four years. Like now why did why did it take you four years? You should have been able to do it in two years. Like, let's just give give credit where credit's due. Like that's hard.

Nick (03:48)
The team the team

the team crushed it. The team did an amazing job building building that business to that scale. We would have gotten to a hundred in three years though, if if if COVID hadn't happened in the middle. but

We overlooked two critical things. And so now being in healthcare and being in the medical device space, this is something that I have a much deeper appreciation for. And so going back to my comment of knowing nothing, if you know nothing and you're going into healthcare, you better learn really quickly. And what we figured out was one, the business model was entirely flawed and a direct to consumer. And you've seen that play out over the last five, seven years is pretty much all the direct to consumer companies, whether

in the mattress space or in linens or anywhere else, food delivery, all of that stuff has washed out, right? It's just it the the business model of arbitraging consumer marketing spend for high value expensive products is that don't have a recurring feature to them is really, really tough.

Him's and hers survived, Roe has survived mostly because of GLP ones. Those businesses ended up surviving, but they had a consumer subscription component, so they had reoccurring revenue. For Canada, it was a one-shot purchase. So that side made the unit economics really challenging. And secondly, we were moving teeth, right? We were our orthodontists, who were the ones who are treating the patients, were making clinical decisions, and were actually helping patients straighten their teeth. And that is

care that needs to be provided mostly diagnosed and treated with an in-person component. And while we tried to do things with the best possible clinical lens, we were far and away the most clinically sophisticated and involved company in the space, you still end up with a medical procedure that requires in-person intervention. And while Candid went from zero to a hundred in four years, right? Went zero to one

to 11 to 54 and then to a hundred plus and run rate. We eschewed the unit economic questions and we believed that we would grow through them, which is very rare. usually you got to get your unit economics and in in line before you grow the business. And secondly, we had the clinical challenges.

Alex (05:58)
So what I'll push on there a little bit is you were talking about one-time purchase versus recurring purchase. first I'll make a delineation between recurring and re-occurring. recurring meaning that there's a contractual obligation, and re-occurring means it's just the nature of the product. and

There's again even a delineation you can make in reoccurring, which is like people will continue to buy something at some cadence versus like there's a normal cadence, let's say. that's more predictable. I watched a lot of companies make the mistake when they had a re-occurring product of saying, Well, the LTV is gonna be this. Right. And you can delude yourself a lot.

When you think you're going to keep getting repeat purchases, even though there's no contractual obligation, and therefore make a lot of mistakes on like blowing out the CAC and things like that. we invested in Casper at NEA in the Series A, and it was just like, look, it's just cut and dry. Like the first transaction can be the only transaction, and it is prosperable. There's something simple and elegant about that.

That frankly, I think, is harder to screw up, right? Where it's like, this costs $2,500. that's the price. It costs us $700 to deliver it. That gives us $1,800 of margin to play with. We need to cover our fixed costs. So we can spend a thousand bucks on CAC for that customer. And if we measure that properly, yeah, that can go up to $1,100. We want to keep that down. We need to continue to optimize it. But like, shouldn't that

Just work?

Nick (07:25)
Okay, fundamentally, there's an assumption there, which is that you're going to be able to keep your incremental cost of acquisition at your baseline cost of customer acquisition. And that's where these businesses run into big time problems, is that next customer that they might be great businesses at $10 or $20 million in revenue, but they're not necessarily great businesses at $100 million because the nth customer is much harder to find than the

twenty first customer. So when you're trying to

Alex (07:53)
So you could argue that's

that's the SAM question, right? The sellable addressable market question. And I I always draw this CAC curve, which is that like when you start, CAC should be zero because people should be looking for what you're selling. Then as soon as you actually start an active go-to-market motion, your CAC shoots up because you're figuring it out and it's just very inefficient. Then you optimize and it starts the CAC starts to come down over time. But then you hit kind of like a trough.

And when you start approaching your TAM or Sam, that catch starts to increase again to the point where that marginal customer becomes unprofitable. And it's hard to know, like on the ground in the data, when you hit that point, because like the average, even inside cohorts, looks really messy. It's hard to know. Like we can talk about it, but like, okay, we got this person and they were a huge hassle to acquire. We had to hit them with 500 ads versus this person, their friend just told them about it and they're like,

a tech forward person with a simple problem that's willing to try this, who has disposable income,

Nick (08:51)
You break

Alex (08:52)
whatever.

Nick (08:52)
when you break it down and you look at those cohorts and you have an a large enough sample size, you can say, okay, 35% of those customers came from, you know, long tail Google search, for example. And the the cost per click was, you know, $3.21. Well, what do we know about capitalism? If you're doing something and you're making money, somebody else is gonna come in and try to play in that space. And you know what? They're gonna start buying ads.

And what do we know about Google? Well, Google is a capitalist company and they are going to charge the most they possibly can. So instead of paying three dollars and twenty-one cents for that click, eventually that click is gonna go up to six dollars and forty-two cents. So it's gonna go up.

Alex (09:33)
You could argue Google

is the most capitalist company of all time.

Nick (09:36)
It yes, and it's going to double, right? Which means if you hold everything else constant, that your 35% of customers that you're getting from Google, the cost is going to go up by 2x if you hold everything constant. But you know what? It's not going to be held constant because instead of having one competitor, you're going to have seven competitors. And that when somebody goes and searches on that, 25% of those people aren't going to convert because they're going to be in a consideration cycle.

And so not only is your acquisition cost gonna double on the cost per click, but it's also gonna go up by an incremental 25%, because 25% of those customers who would have converted previously are gonna go to your competitors. And this is the vicious cycle in the consumer acquisition side, which can be overcome. It can be overcome by product diversification, where instead of selling just one product, let's say you were selling TVs.

And now not only do you sell TVs, but you also now sell radios and you sell satellite dishes and you sell cell phones. And it now that means that your basket size goes up, or people can find you the same ad spend that you're spending can help people buy more products. So instead of buying,

Alex (10:43)
Yeah. Cross sell.

Nick (10:46)
yeah, they buy one, they buy one and a half. So this is this is the math that exists in these con why these consumer businesses are so hard, is that the profits have almost all accrued.

just you end up like hitting an asymptote. Yeah, yeah, it goes to Amazon. It

Alex (10:57)
To Amazon. cruise to Amazon, like

Nick (11:02)
goes to where you're purchasing the ads, right? So the incremental profit dollars go to go to advertising, which means it goes to Amazon today. It's a huge advertising partner and Facebook or Meta and Google is where these most of these DTC companies ended up basically having an arbitrage business where they would get, you know, 30, 40%.

And then that would deteriorate on the incremental CAC, where eventually it went negative. That's what happened to Candid. And then if you had a consumer subscription business, if you were a HIMS and a hers, you could power through that until you had a net new product where the LTV and the cross-sell allowed you to then increase your gross, you know, annual gross profit per customer and improve your retention. And that's why some businesses made it through, but like all birds did not.

Alex (11:47)
And I I actually just I just recorded a solo podcast before this where I've been talking about the AI business model and the beauty of the subscription model, whether it's SaaS or it's a physical product, doesn't really matter. Is it's an accumulation function. And accumulation functions, it growth cures all. Growth hides all initially, so it's easy to miss it, and then it cures all. But there's something I want to hark back to, which we didn't hit on before, which was if I re if I remember correctly, at one point, the lift

marketing budget was all flowing through your personal credit card.

Nick (12:16)
That is true.

Alex (12:19)
the reason I bring that up is when I think about this concept of performance marketing, and like 15, 20 years ago, performance marketing was new. Like I worked on the Facebook IPO and we were explaining to investors like, the difference between Google, which was expressed intent, and Facebook was like implied intent or inferred intent, and this machine,

You were actually early in this, this performance marketing optimization. And it felt like again, this is my memory of it, but I'm more interested in yours. So I'll go very fast, which was brand marketing, like TV ads, like billboards, magazine spreads, whatever, like that was owned by Allstate and Toyota and Nike. And like you just can't compete. And they just have such massive budgets and global reach that like small companies.

On a consumer basis, just couldn't get there. And performance marketing came along and it allowed companies to run much, much smaller budgets and be hyper, hyper targeted on exactly who they wanted to get to and nobody else, which massively reduces waste when you can't deliver or aren't even relevant to everybody. So the whole wave of consumer startups was enabled by the performance marketing tools that Facebook and Google created. And

You were the first person that I knew that was figuring them out and optimizing around them. But it felt like at a certain point, like you said, it's just supply and demand, it's capitalism. And when the idea itself is known, anyone can else can just come copy it and margins will just collapse to zero. It's the same thing that like goes on with Spotify, where Spotify will never be that profitable because the record distribution companies will always charge them enough.

So that they can stay alive, but that they're never that profitable. And that that's obviously like a colluding kind of mechanic in that business. But that's also just a natural market dynamic when you can sell stuff and everyone's talking to the same people, it just goes to the highest bidder and whoever can manage their margins better. So if we go back to that world consumer marketing was not.

What we see it as now. it's just a very different world now. We're now, again, now this is all obvious, but 15 years ago it wasn't.

Nick (14:24)
We were much more math and what the kind of the concept of growth. Nobody was a there was no growth people in 2005. Growth as a concept in the early 2010s became a predominant you needed a growth person at your company. And I

Alex (14:42)
growth hacker

or just someone who thought about it creatively and analytically, not just who came up with good ad spreads. I remember putting, I remember

Nick (14:47)
Exactly. And I rem I I

Alex (14:49)
you put a lift ad on like Muni buses in SF because it was just like you could be riding this bus or you could be in a lift.

Nick (14:55)
I had a a seminal conversation with the Udemy team. And if you recall, early days Udemy was, I mean, just an absolute all-star team. Dinesh, Archie. Archie's now VP of product at Shopify. and Goggin, who had came actually came to work at Lyft for a short period of time. And then he has gone on to start a couple of companies. And they were incredibly talented and they put up all of the math.

On a whiteboard. And they just explained the entire thing to me. Drew all the curves, showed what it looks like. Here's what you know, this concept of LTV and CAC and RPU and your cost per click and your conversion rate optimizations and your website optimization. But at that time, you could put up a right-hand side ad on Facebook and have a 3% click-through rate and acquire new customers for $10 for pretty much anything because.

Very few people were advertising and it was novel. And I think that was one of the key learnings that I had at the time, which is that in marketing and in it I wanna I don't even want to say in marketing because I think it's in growth. I think I I now that I'm in a totally different business.

Alex (16:02)
Yeah, th now everything's called GTM,

right? Like now it's like sales, marketing,

Nick (16:05)
Yeah.

Alex (16:06)
whatever, it's all just GTM now.

Nick (16:08)
And but marketing today for a B2B medical device business, which is what I do today, there is so much more of the like breakthrough, savvy marketing concepts and less growth. In growth, growth is arbitrage. It's if you just like being a high frequency trader, you gotta get good at figuring out where the ARB is, and eventually the ARB goes away. And usually the best arbitrage opportunities exist in novel platforms. The folks who right now are getting ahead on

their AEO and on really optimizing their, you know, Chat GPT and Claude to when someone searches for a certain type of business, they're always showing up at the top, or they're early buying ads in those places, or they figured out how to get Gemini to serve them again in their local area because of what they've done, how to optimize. Those things are brilliant and will work for some period of time. And then they will go away.

Because the models change, the market changes, and you just you always have to think about what is the next trade. You're only as good as your next trade. And that's what growth was. And ultimately, with a business like I'll take a business like Lyft and Uber, the trade was arbitraging Craigslist to get as many.

Folks who are looking for gig work or jobs as possible onto the Lyft and Uber platforms before that arbitrage closed. It's the same way that Airbnb built. People used to list Airbnb. They used to list their Airbnb equivalents, their rentals on Craigslist, all around the country. And Airbnb went and got every possible listing that they could onto Airbnb, and that's how they built their initial supply.

There are many businesses, in fact, that were built by, including the TaskRabbit's another great example of one, that were built in San Francisco early days on arbitrage and Craigslist. Eventually that arbitrage went away. And again, in whether it's a novel ad concept, whether it's a a hack that you can figure out on email, whether it's you know old school dialing for dollars, the only thing that still exists that you can always do where the arbitrage really doesn't

go away is direct mail. And the price of direct mail keeps going up. And and you know, the US government should probably keep taking that up for advertising dollars to squeeze as many of those arbitrage dollars as possible. But that's the one thing where the price the the price doesn't it's not a supply and demand thing. It's just this is the price to send a piece of mail. And that's why Yeah.

Alex (18:28)
I I see it in my mailbox every day.

Nick (18:32)
And that's why businesses like Capital One have just, you know, spent, I mean, billions of dollars on direct mail over the

past couple of decades because it j it's just been consistent and it works. It's the one place where I've found that the arbitrage is still is still open and available after many decades.

Alex (18:49)
yeah, it's so interesting. Like

I

guess if you are working in GoToMarket now.

Like what's your job? I don't know if you're like if if you see someone on LinkedIn and their thing is like go to market at this venture backed startup that builds a let's say a digital product, like what do they do all day? What are they supposed to be doing? What do you like?

Nick (19:09)
Most folks in go to market today either you're actually directly selling, right? You're out there directly selling, or you're banging your head against the wall trying to get a bunch of novel AI tools to work to help you hack your, you know, your growth. Right. Like that that's kind of like it's the people who are actually doing the selling, but it's a bunch

Alex (19:24)
Yeah. I don't know. I feel like the salespeople

still say they're like an AE. Like they're just like, I'm a killer. I'm coin operated. Like I close deals.

Nick (19:33)
There's a lot, I mean, we've got 30 AEs at Candid today and they are out there in the field driving around helping our customers succeed. And yeah, I mean, they we want them to make as much money as possible because they're perfectly perfect alignment with their customers.

I think that a lot of the companies that where I'm an investor, an advisor that I've seen that have sales reps, same thing. They're pounding the phones, they're hit they're hitting emails, they're talking to people, you know, all day, they're figuring out how to close deals. I don't think that that has changed that much. I think the way that you get leads into your pipeline has changed a little bit, but it's still a human to human sales experience on the on the business side, on the B to B side.

Consumer, maybe it's changed a little bit. But I think the folks who work in growth or the folks who are working marketing today you know, up to their eyeballs in new AI tools, trying to figure out how to make them work. Most of their time is probably wasted and it's not all that successful. But a handful of them have figured out some crazy breakthrough. And those breakthroughs are yielding, you know, a hundred times the results that they would have been five years ago.

Alex (20:39)
So

let's jump back to candid and the you know the 90 seconds on what candid has become.

Nick (20:47)
Yeah. So Candid is the fastest growing clear liner company in the US. today sell our product to general dentists. And we have a small ortho product called Olive, which is designed for orthodontists. So we have different products for different

What we consider our end customers, which are dentists and orthodontists. They have very different use cases and needs. Most of our dentists are doing very, very few cases every year before they start working with us. And then we provide a robust solution that helps them diagnose, treat, and manage cases much more effectively, which allows them to treat their patients better from an orthodontic perspective. orthodontics matters both for kids and adults because it's the foundation of your mouth. It's

where your teeth hit in your mouth is gonna create the wear patterns and ultimately lead to whether you're gonna have a healthy mouth or and a healthy bite, or you're gonna end up needing, you know, root canals and crowns and bridges and tooth replacement and implants. So we we sit at that kind of true foundation layer. And we have built, you know, I believe and I think the market

is showing that we've built the best product for the general dentist to again diagnose and treat their patients.

it.

Alex (22:06)
So with Candid Now, like you're delivering an orthodontic solution with dentists and orthodontists as partners. Do you feel like in the context of what we talked about before, that's just a more sustainable arbitrage? Because the CAC of the end customer, you're basically B2B to C, right? So like the end CAC becomes very, very low. But and then you have like a one-time CAC to acquire the dentist.

And then it they that starts that churns and burns, right? Like that just keeps repeating itself. Like you get a profit every time one of their existing or new patients uses candid, right?

Nick (22:39)
Yeah. So let's walk it, let's walk through it with math and then we'll compare the direct to consumer versus the B2B side of Canon Pro. So direct to consumer, we sold the product for $2,000. It cost us about $800 to make that product. So there were $1,200, there's $1,200 in acquisition cost plus covering GNA. And at the end, we were probably acquiring customers for $1,500. So you do the math.

Negative 300, not very good, right out of the gate, right? There wasn't even the like from an incremental customer standpoint, there wasn't even profit to be had by the end because all of those profits were again accruing to Google, Facebook, out of home TV, right? That's where all the the money was going. In the product today, right? We sell the product, and I'm gonna make some numbers up, but we we sell the product today, let's say to our customer for $1,500.

Our customer sells to the patient, right? So they diagnose and prescribe. Maybe there's insurance, maybe there's some financing, HSA, FSA. But let's say they sell that product for $5,000. So our customer has $3,500 in margin to play with, right? And they have to that that patient is coming in, you know, over and over again. And so there's cost every time the patient comes in. And we try to minimize that cost for the doctor to make the product as efficient as possible.

And then our product cost, let's say, costs exactly the same for the purpose of the calculation. So instead of losing 300, the cost is 800. We're making 700 every time we sell. And let's say every marginal time that we sell. But to your we have to recoup the dentist half.

Alex (24:09)
Every marginal every marginal time, right? But you have to recoup the the dentist CAG. Like you do have AEs that you have to pay.

Nick (24:18)
Yep. And so right now our you know, gross profit.

five year gross profit LTV to acquisition cost ratio is between four and six, right? So we have a four to six X gross gross profit to CAC. And then, but because it's a reoccurring business, our dentists stay use the product at very, very high rates. So our dentists today.

Are, you know, the cohort that's been on now for almost five years since we made the pivot from direct to consumer to B2B is continuing to diagnose and prescribe patients at at very high rates. And the beauty of this is it's it's almost like a SaaS business, but it's not locked in contractual. We have to continue to deliver incrementally more and more value to our customers to make sure that they stay on our platform and don't go somewhere else. And what we've

What happens is you obviously you pay that that CAC back. And in fact, CAC has gone down every year. And to the point of sellable addressable market, we have, you know, just in the US, we have a a couple thousand customers today. We could probably 50x the size of our business across the US and Canada before we hit the kind of top of our sellable addressable market, you know, and then have to go outside the US. So unlike

The DTC business where every incremental customer, we had to go on Facebook or Google or somewhere to go find that customer. Today, our dentists have 2,000, 3,000, 4,000 patients each. And as long as we do our job of coaching and helping support the dentist on how to diagnose and prescribe, those dentists feel more and more clinically confident to diagnose and treat their patients. Our business succeeds because they're getting a couple hundred new patients every year anyway, just as part of their business, like always refilling the funnel.

So yes, we have to acquire the dentist and then service and support that dentist and provide really high quality care. And we only win when our customer, the dentist, wins, right? So it's a it's a three-way triangle between the dentist, the patient, and candid. And the patient wins because they're getting a better, healthy oral foundation, they're looking better, they're feeling better. The

dentist wins for their business, and we win obviously for our business as well. So it's fully aligned.

Alex (26:31)
And and a big part of that is like you already have a dentist, right? Like you're not going to a new provider, whether that's a you know, a startup or a an orthodontist office. Like there's a lot of leverage in that.

Like a yeah, tremendous amount of just customer trust leverage there to be able to do that. and I think that's a big part of that's like the crux of it, right? It's like we're talking about the SAM, right? Like how much does it cost to convince someone to do this? Someone who's already saying, Hey, you have this cavity, let me fill it, saying, Hey, you know your teeth, you keep getting cavities because your teeth aren't aligned.

Why don't we just fix that problem and then they'll have to stop drilling in your mouth, which is painful and expensive? And they go, That sounds good. And I'm not gonna look silly by having braces on? Like

Nick (27:11)
If I think about the I'm gonna give three businesses where I I love the business model and very similar to Candid because the consumer surplus is extremely high. You only win when your customer is winning. And those businesses are Toast, Shopify, and Ramp. Today, and yes, Ramp has Ramp Plus, but most of their business, you do not pay.

For the expense management software. And you only use that product when somebody actually swipes their card and they're using it. So it is not a recurring business outside of the Ramp Plus model. It is a recurring business. Every time somebody swipes their card, and there is a small lock-in, right? Maybe you're paying $1,000 a month for the platform, but there's so much consumer surplus and value for the finance team in using Ramp that it's one of the reasons it's growing so quickly.

It's it's there's so much consumer surplus in going from expensive and concur to the ramp platform, there's no reason not to make you know those that the switch over.

Alex (28:13)
So that's obvious now with ramp at scale and everything. I missed the ramp seed and it hurts me every day. You were like, hey, Eric and Kareem were starting a new company, I'm investing. Do you want to invest? And I I was like, corporate cards, like that's not an interesting business. Like credit cards, low margin, undifferentiated. And again, you can correct me or add on whatever you want, but my view on like a lot of that fintech stuff was

Like you're talking about with Lyft, it was like we deliver this this much better, Like it's it's cheaper and it's faster, better experience. So people are like, I'm gonna use it. it's a thing you can try. It's a thing you can gradually bring in. And I think that that matters. Whereas if you say, hey, Salesforce, like you we're now your CRM, everything goes in. This is how it works. It's a trial, but like you gotta go all in, or you're not really gonna get anything out of it.

With ramp, especially and with some of the other fintechs, I remember be like NeoBanks and like all these other things. I'm just like, the bank is only a good business at like a massive scale. Like credit card is only a good business as part of a bank or at massive scale. Like, why is this gonna work? And what I missed and what I understood later was that look at my wallet. My wallet has seven credit cards in it. Like it's not hard to get a person to

Just sign up for another credit card, whether that's a business or a consumer, or sign up for another bank account, frankly. It's just, it's really an easy thing that if you're like, hey, there'll be some benefit to doing this, people will do it. And then you're in. And it's up to you to take that beach head that you have in their wallet and make it as valuable as possible for them so that you choose that credit card first. And then you ultimately start only choosing that credit card, which is kind of the difference between I would say corporate and

Consumer credit cards. But then you can jam everything you want into that experience for that customer and start doing all these add-ons and everything else, which is, I think, very different than a lot of enterprise, like your standard enterprise stuff where it's like, I'm gonna be better,

Nick (30:06)
It's super different.

Alex (30:08)
faster, stronger, and do everything for you. Like

Nick (30:10)
But

yeah, think about the again, viewers Sam word, the consumer surplus that you're getting from a ramp experience. And I wanna go to Shopify next, because that's even more pronounced in terms of the consumer surplus.

Alex (30:18)
But but what I'll

I just wanna add one other thing on ramp that's so interesting is

If you look at procurement software, right? Like classic procurement software. Concur, like procurement platforms. And it's like, my, you know, my dad's a CFO, and it's like you have

Nick (30:30)
Hoopa? Hoopa?

Alex (30:33)
a Coupa shirt, like.

There's a whole bunch of these procurement platforms. And it's like you get one and it does you, everything runs through it. It's gotta be comprehensive. It's gotta do everything. And ramp is like adjacent to that. So it's like, why would you use this versus American Express? And it's like, well, you can use both. And it's like, okay, fine, I'll use both. And then all of a sudden you realize, like, wait, this is like, there's a ton of other stuff packed into here. So it's just

It's just a very different dynamic. And again, now it feels a little bit more obvious. I'm giving myself a little bit of I don't know, whatever solace. It wasn't so obvious. And and by the way, the takeaway as an investor was, and I I to this day, which is like I had met Eric and Kareem, I remember in the office, and being like, Okay, yeah, these guys are are pretty freaking smart. This was like January of 2016.

And and then you telling me they were starting this new thing out of Capital One and telling me a corporate cars. I was like, meh. Always hear it from the founder. Like the dumber it sounds and the more the impressive the founder is, that's the most interesting stuff always. So the the question I'll always ask someone when they're like, hey, do you want to meet this company? I'm like, okay, that sounds weird. That's a plus. Right? Like, I don't want something that sounds obvious. That sounds, that's that's a plus. I don't really get it.

That's also a plus that you by the way, founders and investors share this. Like the naivete is really important. and and then you just hear it from the horse's mouth. Like you gotta just like get that the juice. Cause they had all this back then. I just I didn't hear it because I was an idiot.

Nick (31:59)
Right. But let's let's di just like to dig in for a moment on why that business is is really successful. And and again, I want to just like harp on this concept of consumer surplus is a corporate card is fundamentally a commodity. There are hundreds of corporate card options out there. So your reaction as an investor to say, they're starting a corporate card company, yeah, like I get it.

Right. Like I get the idea that that is totally a commodity. So then you just have to look under the hood and what is the value, what is the relative value of the corporate card that Ramp was providing versus the corporate card that everybody else was providing. And by the way, Brex at the time, which was which happened before Ramp, right? To the same kind of like sidecar, Uber Lyft narrative, like being first doesn't always mean you're successful, was doing really well because

understood kind of what was happening, the same like same overall go-to-market concept. And Ramp out-executed them on creating more value for the customer and being better at go-to-market. Like those are the two things. They better product development with more automation that created more value for the end consumer, combined with a superior go-to-market motion. And

When you do those two things well, and then you can get your cost of capital over time to be lower, that creates a virtuous cycle. And when you look at the most successful companies that are out there, I look at like a Harvey and Lagora today as great examples. You know, I I'm a I'm an investor and involved with a company that is in the litigation space. So it's a more niche specific around Harvey and Lagora. It is a superior product on the litigation front in every possible way.

Compared to those products. But those guys have low.

Alex (33:41)
Nick's wife is a litigator.

Nick (33:42)
My wife is a litigator. they had lower cost of capital, and they have you know, better, frankly, just like better go to market and earlier. They're early, you know, they started earlier. So more developed, faster go to market, right? And that ends up being really important in terms of defensibility. But ramp, because ramp in its early in its inception, its first 20,000, 30,000 customers.

It wasn't charging. There's no charging. It was only giving money back.

It really was a consumer surplus. And again, like

Alex (34:08)
Yeah. Was it yeah, was it

Nick (34:11)
Shopify is a great example. It costs like $25 to have a Shopify store. The value you get as a merchant of having a Shopify store is in the tens or hundreds of thousands or millions of dollars. And Shopify

Alex (34:24)
I'm gonna

Nick (34:25)
is creating more value for you over time. Why would you ever switch off of a Shopify?

Alex (34:29)
I'm gonna plug my own Substack piece that I wrote about a month ago called Design the Wave, Don't Just Write It, where I talk about all the different pricing models that you can run. And I really talk about Shopify because I think they have just incredible alignment when it comes to recurring revenue and re-occurring revenue, and how it's actually more of an appliance with a a success-based. It's not just usage-based, it's success-based.

which are which are different things.

Nick (34:57)
Well

Alex (34:58)
Okay, so this has been super, super interesting. I think the background around marketing, marketplaces, business models, pricing, a lot of just understanding the context of how things were, how things became the way they are, and career trajectories. Like we covered a lot today, super interesting stuff. I think if you're running a business, if you're investing in a business, if you're starting your career,

This all super valuable and you should just take everything that Nick said and very little of what I said and run with it.