What is up PartnerUp!?
We get a little brotherly with this one! Isaac’s brother Levi is a seasoned entrepreneur who has gone from bootstrapping to raising over $40M in VC and scaling to 200 employees at lightning speed. Along the way, he stumbled into partnerships and an ecosystem-first approach.
We talk through his journey (including he and Isaac’s first “exit”) and get into some speculation about whether and to what extent we’re in a bundling or unbundling phase in tech and why Levi would “Never sell direct” again.
3 Key Takeaways
- Why do partnerships matter? Because customers value them.
Be customer-obsessed and allow customers to show you the way to success.
- Unbundling and Re-Bundling
SaaS happens in cycles of unbundling and re-bundling. Know which cycle you're a part of, and know what's coming.
- Every category and market leader races to the bottom of the tech stack.
Every one of them wants to be at the formation level because that makes them more important. If the tech stack topples, they likely won't.
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Jared Fuller 0:00
All right, what is up, partner up? If you're watching on video, actually, Isaac before I have to mention this, I got on the call with someone today. And he said I always laugh at your dozens of viewers on YouTube comment. So just FYI, there is someone out there that appreciated my commentary on that you would see the destruction after pls behind me. So I'm still setting up my podcast studio. But otherwise, Isaac, holy cow, we're back. Post pls How you feelin man?
Isaac Morehouse 0:41
Good. I still don't quite get the destruction PL X behind you. Like why would there be furniture in your studio after PL Did you steal something from the Airbnb that we hosted the event at? And bring it home?
Jared Fuller 0:52
Oh my gosh, no. So we decided at the household. It was a good time since I was going to be out of the podcast studio all week to move everything out of the garage. So we could resurface the garage and put it in the podcast studio. Oh, my garage is not done yet. So that's a very irrelevant way of opening the show. What a cold open,
Isaac Morehouse 1:10
right? Yeah, that was an episode I'm really looking forward to. Because I always have the most fun when there's people that I already have a rapport with. It's the most laid back. So there's few people that I have better rapport with than my brother, Levi, Morehouse. And leave. I mean, you're a phenomenal, phenomenal entrepreneur. And we're going to get into a lot of that stuff. And kind of kind of how you stumbled into, I guess, the partnership strategy. But I think we should start with this. We should talk about our first exit. You and I started a company together. Oh, wow. We had a big exit in 22,003. I think it was we sold the company for two Nextel car chargers. And somebody literally bought me what they bought the company name, that was the only thing we had that was worth anything. But here's the reason I bring it up Levi, because I realized we should have, we both should have learned Venn in there that partnerships can make or break you. Because if you recall, we this was a company that we didn't stole telecommunications cables, like fiber optic cables and cat five cables for businesses back before everybody was on Wi Fi. And part of the reason that we left the company that we both work for doing that to start our own was because we thought we had a partnership, we had this really successful electrical company. And the owner was like, Hey, we get people asking us to bid on these, you know, telecom cables all the time. And we don't really do that. You guys do that? We'll get we'll feed you all the jobs. So we're like, cool, instantly, we got demand, and then we'll just service them. And like, I don't know, we didn't have anything formalized with them. And they didn't end up sort of feeding us any business. So I ended up doing landscaping for a family member using a telecommunications truck what what should we have learned from that Levi?
Levi Morehouse 3:10
The partnership channel is the way to go you should have we should have found it found more of them and, and run with it. We should have learned a lot of things from that. I will say to the you know the two car chargers Jeremy's laughing at and I can tell he wasn't all that impressed. But I will say as in any good m&a deal, I got double the original offer. So it was originally a single car charger, and I got us both one out. So I did squeeze a lot more out of that than it was originally on the table. No, I would have thought it was that's a great point. Great partnership connectivity there. I just looked it up to the websites live. The name still lives on. I think so where are you serious? There's something it's still there.
Isaac Morehouse 3:50
So you got a good deal on it that got some got some longevity. So So I mean, you you have had this entrepreneurial. I don't know like impulse since for as long as I can remember. I mean, I remember you like getting angry when you were 16 Because you're you're like damaged your car and you had a spreadsheet where you had your net worth worked out and your net worth went down because your car was damaged. And you were real upset about it. I think going negative was why I was really upset. So I would love to know like if I would have told you you know back when you're starting your company, which started as a service company and then became a software company cetera it's, if I would have told you back when you started it that you needed to be thinking about B to B partnerships, you know, b2b software partnerships. Like what would you have said?
Levi Morehouse 4:40
Yeah, would have wouldn't have even crossed my mind. I don't think I'd say you're crazy. I just wouldn't know what you're talking about. It wasn't it wasn't top of mind. It was about scraping and hustling and landing each customer individually approving the merits of what you're doing, you know, customizing tailoring marketing and attracting new customers. One by one. So it would have been a new idea to me not something that I've thought about as much as I should have. And but but again that also something I wouldn't say never or I'd say interesting, like probably worth kind of thinking about. You basically
Isaac Morehouse 5:12
did everything for small businesses initially. Right. So accounting, bookkeeping, financial reporting, that was kind of the end it was like, all hands on, just you to start with and you built a team. Like just just can you walk through just give like a transition? I know Jared doesn't like these. He doesn't like chronologies. I actually love chronological stories.
Levi Morehouse 5:32
Yeah, so I'll give the quick chronology, the chronological story, and Jared can like tune out for a minute. But you know, to your point, like entrepreneur, Jared left the screen, so he's, he's not going to be bored by this. Just kidding. No, I'm kind of the entrepreneur by heart, as you mentioned, didn't know what I wanted to do kind of had that heard that it check out the HDR image that I think a lot of people have. And somewhere in high school like that just kind of clicked in and not sure why. But I just knew I wanted to build something, do something, I had no idea what I wanted to do. So I went to school, the local college to get a business degree to kind of figure out business, I figured I should know business, if I want to build a business. Had an accounting class, I had to take thinking I was going to hate it. And I found out then in there that I'm a total nerd. And I actually loved the class. And it really resonated enjoyed accounting, got an internship and account and a big accounting firm and accounting firm in the area worked there for two years after school after getting hired. The entrepreneurial itch wasn't going away. I actually loved accounting, I loved the firm, it was competitive, aggressive, all those things, but it wasn't scratching the itch. So I quit the firm and went and worked at and started three different small businesses, one of which was novias, that Isaac reference that we sold for an amazing two car chargers. But in those experiences, I learned a couple things. One was that those businesses were not going to get as big and as impactful as I wanted, I really wanted to put that dent in the universe, I wanted something that could be built at a nationwide scale and just have massive impact. And secondly, I learned that as a small business owner in a local small business, you spend an inordinate amount of your time on the back office on your accounting on your payroll on your financial reporting. You either spend too much time on it, where you should be hiring people selling, delivering a product or service, or you don't spend the time on it, and you're exposed to compliance risk and getting off track with the IRS. And I saw all those problems at those businesses I was in. And the light bulb moment kind of went off when I said wow, it's kind of like I don't know if it's evolved, or one of those guys says the things that you do for fun that are a hobby, when you find out other people don't find those things are fun is like when you're kind of on to something magical. In the time I realized most people don't actually enjoy modeling their business at night and putting it into a spreadsheet and running graphs and analytics. I was like, well, they only don't like it. They hate it. And they wish they had it. And so the light bulb went off. And I said why don't why isn't my business to be the back office for small business and let you do that stuff. Outsource in the cloud remote paperless. Today, that stuff sounds like nothing. Back in 2008. That was kind of cutting edge. Most people were doing these things on their computer locally printing stuff out printing checks, a bookkeeper might come to the office and like literally come in and share files on your computer where you couldn't use it while they had it for a week doing some updates. So it's very clunky. So we're kind of a cloud based back office service business to your point, it was just me. It started in the back of a pole barn, electrical contractors office where I rented an office with a folding chair for like about $100 a month, it and got it running essentially over time, really built it into more things which we can talk about or not, but to the point I think you are getting at Isaac is initially I would do anything and that being the back office for small business meant everything. So we did the accounting, financial reporting taxes, you know, the stuff that that made a lot of sense. And we did a lot of stuff that doesn't make a lot of sense. We would like add somebody to their cell phone contract and then call like it was Nextel at the time and like argue about the bill, because the business owner didn't like how much they paid for cell phones or whatever. So it kind of really did a lot a little bit of everything, everything in anything people wanted.
Jared Fuller 9:27
Levi, did you realize the degree to which you are inherently a partner function like so basically, you are interoperating with these various you know providers and small business services be a technology hardware software, whatever. You're you're in this inherently intermediate state where you need to have a relationship with both the client and vendor. But I've been in the beginning you didn't view the vendor for your client the same way that you view that vendor. Now you're just like, I got to deal with this person. It's an expense or a thing.
Levi Morehouse 9:55
Yeah, no, that is such a good point. Jared and I hadn't even thought about coming into this discussion. But I think is actually a really interesting point. So the cloud for small business was pretty new in 2008. You know, there were some pretty good cloud technologies for individuals and even for enterprise. But the small business space hadn't really been impacted much.
Jared Fuller 10:13
Was QuickBooks Online, even a product into those made no, right?
Levi Morehouse 10:17
It was, but it's horrible. You couldn't use it. It was good. I started, I tried and I couldn't. So I use desktop. And I had to put it in the cloud, like hosted on some awful remote desktop. And I was I actually found a way to hack it using Dropbox, which was brand new at the time. And I could sync a backup file of QuickBooks. And then between two of my employees like we could if we weren't in it at the same time.
Jared Fuller 10:37
Well with Dropbox in 2008 910. Yeah, it
Levi Morehouse 10:41
was early, early Dropbox. Google Drive like Google workspace now. But it was Google Apps at the time was like brand new. So I was kind of cutting edge on that stuff. And one of the first things I did when I started this was I said, I want to be cloud paperless remote, which again, was kind of revolutionary, but I had to build that tech stack out of a bunch of existing software. And at the time, none of them had thought about partnerships at all. They all sold to individual customers only like into it. When they did I did finally go to QuickBooks Online, probably 2010 2011. And I had so many accounts on my login, they'd never seen it. They'd never in their life, seen it. They're like you have like, what are you doing over here? Is this legal? They had no part. They had no accounting channel, they had no partnership channel, they had no way to sell in bulk through a person. And I was essentially bringing them accounts, I was boarding, I was moving people from desktop to QuickBooks Online and mass, we began the biggest use user of QuickBooks Online in the world, we may still be today,
Isaac Morehouse 11:41
though, to this day, you know, I'll occasionally get a stray piece of mail from way back when like people will send stuff to the ROM for Praxis from the Praxis original address and it will be addressed to satirise as like the account owner and then Praxis as like care of practice something like that, because like you got it was your QuickBooks account. There was no there was no like managing for other people. None of that stuff. Yeah, I remember I remember all that crazy stuff. Because I, you know, we were one of your clients. And this would have been a couple years later 2013 when we got started. But yeah, even even then, there was a lot of stuff that you were basically just piecing together. And like my life as a client was great. It was super easy. I didn't have to rebuy any, but I can imagine the ops on the back end the stack that you had cobbled together.
Levi Morehouse 12:31
Yeah, it was crazy. I mean, to the credit of all of these platforms into it has a phenomenal partner channel now through accountants and you know, other tech businesses as well. But portals in reporting and pricing and rev shares, and they'll the whole thing. It's amazing, but it was nothing. Same with gusto. I was like one of the very first accountants when they had one state open and help them, you know, same thing there. And they now they then went to an accountant portal, which was really nice. And then a few years later, they did a an entire partnership team that has an advisory council and you know, it's they've done it like phenomenally well. And it's I think it's a huge driver of growth for them. bill.com was the same Expensify was the same. So a lot of these guys that are now huge into the partnership channels, we're not at all at the time, like didn't even know how to accommodate the same email address being on two accounts, let alone, you know, 230,000 as we would get to down the road.
Isaac Morehouse 13:29
So you're in this position where you need to deliver solutions to your customers. How did you because I think it'd be really interesting to some of the people listening who work in partnerships with these companies. How did you What was your decision making process for choosing which tech you wanted to work with? Like, why did you choose QuickBooks? Why did you choose gussto? Why do you what what factored into that calculus what was what was going through your head when you're looking at and comparing these because there's, there's some lock in right? Once you start using them with your clients, the change costs are high. Your reputation with your clients is kind of on the line a little bit that these tools that you're building your services on, and eventually your products as well. You're kind of tied up with them. I would love you to walk through the factors involved in picking the different tack that you wanted to build your company around and the ecosystems you wanted to play in. Yeah, so
Levi Morehouse 14:21
it was a again, early especially it was a massive, massive decision and didn't know anything I hadn't had an experience and now if I do it, it's much more internet. I understand the industry. There's a lot there's a lot out there. But back then it was that it was kind of your all in one solution. So I'm a huge believer in this bundling and unbundling cycles. And I was starting this business in a massive unbundling cycle where the way you want it to go was unbundled integrated. I didn't know that. So there was some options that were all one thing. You could have bought a package that had payroll accounting, payables, all this stuff in one package. It tended not to. So I didn't go with it because of some of the criteria that I'll give you. But it had to be cloud based, truly cloud based back in 2008, there was a lot of stuff that was cloud. But it was really desktop software sitting on a server somewhere that you could access through like a, you know, a web connect of some sort of remote desktop. That to me was not cloud, I wanted true cloud software. I wanted it to talk to each other, it needed to be automated, I needed not to be doing double entry with a payable system and an accounting system, a payroll system and whatnot. And then again, at the time, you know, I wasn't charging nearly enough, and pricing mattered all the time. And in most cases, I was absorbing the software cost. And then you know, charging something beyond so really needed it also to be subscription pricing, I couldn't pay, you know, a giant annual license fee, I had to pay monthly subscription pricing that could ratchet up based on usage or based on the level of something so I could start very cost effectively, and then grow into something more expensive as I went. Once I got scale that things changed the economics, we had, you know, some leverage, we were a great partner for these guys. So we could work things out that, you know, really helped our customers, and we're great for that for the platform partner as well. But early on, that was kind of a decision.
Jared Fuller 16:20
It's It's amazing the businesses that get crit created because of the lack of a lack of attention to the very things that you said, were important to you. Like, if you look at, to me the story of the Xero ecosystem, which I'm sure you're at least tangentially familiar with because of you know, QuickBooks
Levi Morehouse 16:37
that was in the that was in the mix when I chose QuickBooks Online. So that was that was absolutely.
Jared Fuller 16:41
And if you look at the difference between the two businesses, I think, objectively, the only major difference is that Xero went all in on agencies as their primary customer, right? Early. And that resulted in probably one of the greatest channels of the past 20 years being emergent in SaaS, at least I mean, HubSpot and Xero, I put his my like my one two punch in terms of like, agency channel, right, and the what, what Xero fundamentally did is they helped accountants build recurring revenue. That was their objective. Like, that's really what they did. And I noticed that because I started seeing accounting firms that were Xero accounting firms get acquired by other Xero accounting firms. And I'm like, This doesn't happen. No one buys accounting for no one rolls up accounting firms, because their, their cash flow restarts every year, right? You get paid once, and then it's over. And then it's like, oh, shoot, whatever happened to that client, but instead of turning into a recurring service, and then ironically, having access to their books, you can kind of more accurately predict the business like, well, 30% of these clients are definitely leaving because I, I've managed their books, like, they're definitely but they're not gonna be around in a year. So like, You created this predictability. And that's very much the same story with HubSpot. But Isaac, I think you wanted to hop in there.
Isaac Morehouse 17:53
I want to get to the moment where you sort of figured out, okay, we've got to productize somehow, I've got to, I've got to go from a service business to, you know, what, what did you identify as the layer that was missing in this existing stack, okay, you can set up for your clients, you know, QuickBooks, and you can set up gussto. And you can set up all these things. What was missing from the stack that made you say there's a, there's an actual software, there's a product play here?
Levi Morehouse 18:20
Yeah, so there's a couple of things. And it kind of goes back to that same theme I had when I had three small kind of local businesses that I had been working and whatnot, was that the impact opportunity was just massive. And as a pure service, purely leveraging third party technology and integrating it and wrapping it with a managed service around it was going to become limiting in terms of the number of people we'd have to hire. So we grew consistently, we hit the inc 5000, we always doubled every year was always our goal. But really, I could see that was coming to an end. Like if I'm just gonna purely be a service business, the 100% growth is gonna start becoming 50 and 30. A great solid, but I'm like, I think there's a bigger opportunity. There's, you know, 28 million small business owners, and we're serving couple 100 of them. And like, it's just desperately needed to provide something like this. And I wanted to really give it a go. So then I said, What is missing? How do you get there? And each of these unbundled pieces did their part really, really well. And they had a lot of automation, they had a phenomenal interface and very easy to use. Small Business Owner is still overloaded with using it, right? Integrating it right, wiring it together, there was still manual components, when some automation would break or some connectivity didn't exist, you had to do some pieces. So we've done enough of this to realize there was kind of two reasons to go this route. One was the automation of the accounting itself. We realized if we standardize processes, you can not only get more efficient with your people, but you can develop automation bots that do a lot of what those people do. So what your bookkeeper does in your software, you can automate a lot of that. So that was a reason to invest in it. Technology of our own, that didn't really exist around this small business ecosystem that wasn't big enough for RPA wasn't, you know, using Oracle or SAP and, you know, hundreds of people doing the same thing every day that you could put RPA in. So we had to develop some automation for small business. And the second piece was on the reporting side, we really felt that small business owners aren't, or they fly blind, the best case they see how they're doing against themselves historically. And we wanted to let them see how they're doing against their peers in real time. So if you owned you know, we ended up focusing a lot on franchise restaurants franchisees, if you own a Jimmy John's, and you wanted to see how's my store doing? It's nice to know, how am I doing versus last year, or last month? But it's really cool when you say, How am I doing versus 400 of my peers last month that ended three days ago, oh, my gosh, this expense is too high, I've got to bring that down or sales is down for everybody. So I shouldn't feel personally bad about that. Like, that was information that we had started to say this is a huge need. We were spending ungodly amounts of hours putting it into spreadsheets, combining the data PDF. And you know, we did everything scrappy bootstrapping. So I said if we could automate that build a portal, build an interface that lets that small business owner, have benchmarks, financials, forecasts, all kinds of other things, that would be cool. So automating a lot of the people work and benchmarking the financials.
Isaac Morehouse 21:23
You were so super early with that, with that insight, because this kind of falls into what now I think it's like, second party data, right, which is a there's strong network effects around it, first of all, and it's a it's like a really, it's like this really interesting, new, I mean, it's not necessarily new, but starting to see it be used a new way. So obviously, with the crossbeams in the reveals in the partner techspace, it's a you know what, let two different companies compare notes and see this type of data. That's the overlap data. Here's what we have in common. And let's look at this. But here with benchmarking, it's something similar. It's like, Hey, if you join our network, you make the network more valuable. And you get the value of everybody that's already in the network. So really strong network effects. And there's something so it taps into this human, like everyone wants to know how they're doing compared to everyone else, right? Whether that's good or bad, sometimes it's bad. But it taps into that in a way databox is doing this right now. Incredibly wonder lead startup of the year, by the way, working like, that's right, partner, lead partner lead startup for the year databox. And this is one of the reasons right, this is one of the reasons because when you're using databox, you're not just getting the standalone utility of being able to see all your marketing metrics. But you get to, hey, I'm willing to share mine, in exchange for seeing everybody else's, and then you get to see where do you fit, and then you get to as a CMO, you get to go to your board. And when they're like How come our numbers aren't better you can be like, compared to all of our peers, we're in the 90th percentile on social reach and engagement. So our content investment paid off, right? Otherwise, they don't really know how to look at that. And so I remember when you were kind of developing this, and if I recall, I could be remembering wrong, but it started as once you figured out that franchise owners were a better market for you because they have multiple units. So you're onboard them once. And it's basically the same for all five of their Jimmy John's, let's say, I remember you starting to realize they want to know location by location, they want to compare just to their own locations. How come? How come this one bar is spending way more on liquor on Tuesday nights than everybody else? Maybe one of our bartenders is stealing, right? Like literally stuff like that. And then you have this insight, wait a minute, we're building a network, we can let them compare to each other. I just, I think that was very early. I think that was a very powerful insight that you were onto.
Levi Morehouse 23:46
Yeah, no, absolutely. It's powerful and compelling. And, and most importantly, like our mission was to empower small business entrepreneurs. And that was a way to do that differentiated that they truly couldn't get from their traditional bookkeeper or anywhere else, literally. So it was really cool, really cool tool. Very, very powerful.
Jared Fuller 24:03
Did you did you know how how important that was like, at the time you're like, benchmarking, this is interesting. Did you realize there was a cumulative network effect that the interest compounds over time, you're like, This is just a cool feature. And there's no trick answer here. It's just like, sometimes you don't realize the genius of the thing that you do to get you to from point A to point B, and it's like, actually, the genius of point A to point B was actually to point you know, acts like there's actually a lot more to get out of that in the long tail than there is in the short term. So it might have been beneficial to you to sell it. Hey, benchmarking, and it's like actually, it only gets more valuable the more users this is a long term play. How do you think you approached your first time experiencing some compound interest in your business as a network effect? What was your reaction to that then versus looking back on it? Like should I had a tiger by the tail or like oh, no, I played my cards right?
Levi Morehouse 24:51
Yeah. So So online into it a part of the story that's really really I think, interesting. So when I when I realized that I need to do something bigger i the service business Thanks tapped out, I had a bookkeeping company. And I'm like, the way I need I need I need. It's really sexy. Believe me, people are begging to invest in this thing. It's a really, really sexy business. But I'm like I need to raise from venture capitalists at software multiples, to make this thing makes sense. And so I spent almost a year in embarrassing myself in front of people. But one of the things I found in that journey was Fred Wilson used to post every single day his AVC blog, and I consume, I'm a rabid consumer of all these things that I think are, whatever, I've been educated so much from these kinds of people, so I appreciate him. But one of his posts, talked about what they invest in. And I knew nothing about VC. I didn't know the term VC I grew up in southwest Michigan, like VC was not a thing that existed. He didn't know anybody that did it. Never heard of the space. But I read this line, I think he had 10 different attributes of the company that would be investable by Vc. And one of them was a network effect, which I had no idea what it was. So I looked into it and it's like Facebook has a network effect. You know, every friend that goes on to the system makes the system that much stronger in you want to tell your friends because then your systems stronger and and I could solve a lot of good I had MRR had recurring revenue I had, I had done a lot of things that that checked off the boxes, I don't remember the rest of the time the network effect is what stands out. But the network I'm like, how do you get a network effect and bookkeeping, like this is a service that is done. It's very fragmented service. And that benchmarking was to solve that. So I could more effectively actually raise money for a bookkeeping business, I had to make it into an investable, institutional capital VC investable business. And it had to have that angle that happened to overlay with a couple of really smart, educated, awesome entrepreneur customers ahead, that were kind of begging for cool new things. 95% of my customers in small business never would have thought of it. But the 5% were like, pushing to make their business better. And they're like, how do I stack up? Like, how do I compare to other people, you work with other guys? Like, how am I doing against them? And they were so it was the combination of saying I needed the network effect. And so kind of pairing those together. I did. By the time I built it, Jared, I had it in mind that this is why I can get a VC to put 10s of millions of dollars into a bookkeeping company, it was because it did have something unique, a way to lock in value, a way to build value over time by the network growing and whatnot. It proved not to be as good of a network effect as Facebook, but it's pretty damn good.
Jared Fuller 27:37
Right? Right. It's there's there's value, that's a creative over time and defensibility that over time, you know, enhances resiliency, that I think a lot of SAS founders, or even partnerships, people like they're not exposed to these systems level first principles as much. Whenever you're working, you know, a reseller deal or an agency thing or an individual integration, it's like, look, these fundamental principles were true. Back then, and they're still true today. Right? We're talking early 2010s. Here, we're not talking, you know, 2019, you know, and a lot has changed in the past decade. So I think it's a really interesting insight that you picked up on it then. And it's more true now today than it's ever been, right? Like, network effects is one of the only four death defensible mechanisms last left at all SAS. So
Isaac Morehouse 28:21
as you you know, you transition you raise venture capital, you get the product going where you've got, you know, a much more scalable thing. When did you kind of come upon the realization that your best distribution mechanism, your best way to get to serve these small businesses was not to sell to them directly, but to go through people that they're already working with? And tell me about like that discovery process, because I remember kind of watching that happen in real time. And me. I'm like a marketing branding consumer facing sort of guy. I remember finding that like, sort of sad, like, Oh, you're not you're not trying to talk to small business owners anymore. It's way more fun to try to talk to them. Now you're talking to a network of like, accountants or something that they're working with, like that indirect route. How did you stumble into that? And what did you learn along the way?
Levi Morehouse 29:15
Yeah, no, that's a great question. So kind of on two fronts, we went down that path. The first was just purely what I call leverage distribution where I just want a channel to sell I want to get either pushed upon a big group of customers all at once or I want to get introduced in a positive way to a big group of customers to gain to gain traction. And even before we had the product fully built out. We were serving a lot of people in these niches so we hadn't niche expertise and you know, so within these franchise brands, but we learned that the franchisor was an amazing partner, that they are looking for great solutions to provide to their franchisees and if you can prove use it to prove it's usually hard like they have us. It's not just hey, If you're here, and you'll pay me something, I'm going to introduce you to everybody. It's like, they're very stringent about allowing anyone to go market to or sell to or be promoted to their franchisees. So usually at the grind of getting your first couple, and then if they would come with you and say, These guys are amazing, then you can really get that buy in. But going through the franchisor to the franchisees was a 10x. Again, it took us from a little small business to something that could truly hit the hockey stick like like crazy. So that was phase one. And that to me was just purely a distribution channel using leverage distribution to get to more customers at once. Get that flywheel going. The second was a combination of leverage distribution and technology. And that is where we actually went to we said, we realized after being in the market for a long time, like a lot of small business owners have a horrible accounting experience, it's like one of the things they hate the most about their business, almost largely disappointed with what they're getting service wise. So like, picking up, you know, it's like, getting, you know, shooting fish in a barrel to go get people to sign up for an accounting service, that standard automated, available all the time, just like basic things like that. With that said, we did run into some of the best business owners actually already had an amazing accountant. Like there are really good accountants out there. Unfortunately, the vast majority of businesses aren't served by them. But the ones that are, that's an amazing relationship. And I learned like I don't want to break up that relationship. They've got a trusted professional that's been with them as they built an awesome business. But I also don't want to lose that customer. I don't want them to lose out on having the benchmarks we just talked about, I don't want that awesome accountant that's a highly trained professional to spend their time doing mundane data entry that I built automation to do. So I said, What if we made the accountants, the accounting firms a distribution channel? What if they were a part of our partner network. And in that case, we could stand up technology, we could private label the platform as their firm, and allow them to take advantage of our automation of our front end platform and all of those kinds of things. And then they could still be that amazing professional working with their clients, but with a whole better tool set kind of at their disposal.
Jared Fuller 32:10
Levi, how long have your Isaac's relationship? Have you just been ahead of Isaac on everything?
Isaac Morehouse 32:16
Levi Morehouse 32:19
pretty much always now, baseball, he surpassed me at about nine when I was like 11. And that was even way off and beyond. In a million things. He's way beyond No, I've
Jared Fuller 32:30
just I had to. It's really remarkable that like you independently experienced a partner transformation of your business. And like, you know, unbeknownst to you the lexicon that Isaac Morehouse would create laser later on, right partner pilled. Like, at that stage, you were basically partner pilled whether or not you associated yourself with like other industry professionals in the partnerships, profession. I mean, I think that's an amazing inflection point. And then, you know, looking at the future, now you think very differently about that conversation that we opened the combo with, right? Isaac, I didn't mean to stab you too hard there. Just be playing. I said you'd be the one making fun of me today.
Isaac Morehouse 33:06
No, no, this is this is 100% true that I mean, we bring on my older brother, we know I've got to take some some shit at some point. But no, I mean, Levi has been and it's actually been great for me, because he's been anywhere from one to five years ahead of me in everything that he's done, like starting a company going through, you know, having kids, whatever. And so I get to, I get to kind of watch him go through. And then when it's my turn, I'm like, help me. You have to watch me take all the arrows. I know that you are thinking strategically. And it's not like you just accidentally stumbled into this. I don't want to miss characterize, but there's an element of it reminds me of what we were talking to Andrew ganz Deki, where he like, suddenly realized that he had all this demand from these agencies who were going and using his technology to sell to their clients. And he was like, Oh, that's a better strategy, they can go sell it to 10 or 20 people at once instead of one at a time. And you kind of having this realization with accounting firms, but I love what you said that I love what you said that like, there's a lot of firms that are aren't doing very good job and so small businesses aren't getting great service. Those firms you're perfectly comfortable, basically replacing them because they're not creating enough value for their for their customers. And by doing this you forced the whole industry to level up right like but when you identify the ones that are doing a great job that you recognized, I would rather work with them and fight against them don't want them to see me as a threat. So how can I make them see me as an asset? How can I make their lives easier and let them realize they don't have to be afraid of software replacing their job their services, but that we can make their job better and help them make more money and that's that like positive some ecosystem thinking that we hear all about with the best in the space that Salesforce and every every dollar we sell, we want our partners to make $9 or whatever, right? Like I just I love that recognition that hey, this isn't fair. Everybody, I'm perfectly fine putting the crappy ones out of business and replacing them with software. If they're not doing anything, but those who are crushing it, I want to help them level up and they'll help us level up.
Levi Morehouse 35:10
It actually, I mean, I, I love that framing and I don't disagree with it. But I've really and it's cheesy, it's super cheesy, but it's just the way I am like, I truly have that business to empower small business entrepreneurs. And almost everything I focus on is about that I love entrepreneurship I love and they needed to get the best solution I actually would love. I love going toe to toe and beating the best firms at sales because I love competing and I like beating people and I like trying to win. And those are the best firms to compete against. But I learned in doing that you were taking away a relationship that actually was better for that entrepreneur. So while it is a smart business move in partnership, it's also like the mission of the board was not being served by ripping away business from a good provider. And so you know, whichever angle you're looking at it from it made a lot of sense,
Isaac Morehouse 35:59
Jared, this reminds me of pls last week in souvenir shots session shout out to SR and at bind. He was like why do partnerships matter? Why do they exist? For one reason, and one reason only, because customers value them were at the end of the day, all we care about is serving the customer. And if and when customers like partnerships, then we should be interested in partnerships, we shouldn't be interested in just for the hell of it, right. And so to your point, Levi, you're like, I just want to empower small businesses. And for some of them, it means replacing their accounting firm with software. For some of them, it means supplementing their accounting firm their services with software, and it's at the end of the day, it's that the end customer is always the one driving it. But when that end customer values those relationships, don't try to destroy them try to work with them, right to make it better.
Jared Fuller 36:48
That's a that's the clippable one. For the startup founder that hasn't really quite got it like I don't understand these partnerships. I don't you know, is this complicated? are we competing with ourselves? That's the moment right there to take from this conversation and go look, this is very simple. That's a great way to frame that. Hindsight, so like this, the story of secularists. And looking back on it today, and like these various inflection points, that brings us to somewhat modern day. And Isaac, I know you wanted to unpack this a little bit. So like having gone through this transition of like service to product to partner so to speak, right, you're still obviously servicing customers directly. And that your story, et cetera, is ended on if we want to dive into that, and Isaac and kind of like what you're working on, maybe we should talk about that transition. And like how you're thinking about the market today being an entrepreneur today is and how interoperability partnerships, these other principles, network effects, compound interest, these other things that you don't find in your SAS one on one playbook, but might actually should be in your SAS one on one playbook. Isaac,
Isaac Morehouse 37:54
yeah, maybe I could frame this up, maybe I have this very interesting way to go about it. So you spent, what 2008 to 2022, or whatever. It is a long time you spent like 13 years, going through and doing things trial and error kind of learning things. The hard way, more or less. Now, from the vantage point you're at now after everything you've been through and learned. What's the easy mode look like? What's the easy button? What's everything you've accumulated? Okay? I'm going to start a FinTech company now, what's it going to look like? What's what's going to be my How am I going to go through early product development? How who's going to be involved in that? What insights am I going to build that with? What am I How am I going to think about go to market and distribution? Right? Like, I would just love to hear your accumulated wisdom? What's the easy button version of everything you went through? In your previous company?
Levi Morehouse 38:47
Yeah, no, that's awesome. That's awesome. I think a ton about it, because the entrepreneurial itch wasn't solved with a 13 and a half year, you know, session, it's still there. So I'm very much cognizant of how I would go about taking those lessons learned and applying them forward to to build something else. So I think there's a handful of, I guess, just ideas that I think would make that a lot easier, not not a huge structure to the, to the, to the discussion. But first and foremost, I would start with leverage distribution and not finish with it. I wouldn't start from the ground up selling individual customers, I would find a need and I would find a channel partner, a partner of some sort, that that's a creative to their business to go that route. And I think that's just I think it's better for the customer. I think it's far easier way to grow and scale. So I would do that from the get beyond that.
Isaac Morehouse 39:49
Do you think that's a is that a tech integration? Like, is it is it a tech partner where you're building an integration on top of someone's platform? Or is it more of a channel sales just attribution agency partner or is it either? Is it both? Curious how you think about that?
Levi Morehouse 40:03
Yes, I think that can be both. I think that can be both one of the the second point I would have is that I think integrations are great, but I think we're moving to a more of an embedded future, to where instead of, hey, these two solutions talk nicely. I think there's a huge opportunity. It's the same unbundling and remodeling in 2008, through 2016. It was like a unbundling of all these solutions for businesses for business software, at least, that's all I focused on on the boring guy, mostly around accounting, and finance, and we're really boring guy. But all of these things are being unbundled and done really, really, really well. And one off solutions, I feel like from 2020, you know, forward, this re bundling is going to happen. And if I'm starting a company, I'm creating something in that bundle that doesn't exist today. And I want to deliver it by way of a platform that does exist that is providing huge value. We're seeing embedded payments, we're seeing embedded payroll, you know, it's here, it's not brand new, but I think a lot of embedded solutions are going to deliver business in a box, if you will, to businesses in certain verticals and certain niches that will just be massively valuable to those entrepreneurs, those business owners, those operators.
Jared Fuller 41:17
It's interesting, I would, I don't want to debate the topic, but I almost feel like we're at this stage where the cycles of bundling and unbundling are concurrent let me give you a perfect example that's really weird. Let's take a social let's take a social network AKA a community right let's take a popular podcast they're basically unbundling the community features from like a Facebook in real time right so it's like you have like I don't know the all in podcast right which you know, popular when we we popped off this episode before we hit the record button commenting on Levi and his sweater game much like Chamath Palihapitiya. But I'm more a Freeburg. Guy. But anyway. Yeah, exactly. Exactly. Oh, the bookkeepers, science guy who would have thought. But if if I think about that, it's like you have that thing. And then all of a sudden, like have the all in community. Then you have the all in Summit and you have this. You have this network of people that live in the comments. They they wait religiously for every Friday for an episode to come out. And they wait Saturday on YouTube, like where the heck is this episode at. And it's like, you could argue that that's an unbundling happening in real time from like media that will be read bundled elsewhere later on. So like, I think the cycles are now to where it's indistinguishable between bundling and unbundling. And as a result, partnering and interoperating and innovating and like being able to create value, both of those ways seem more important now than ever. But I think that's more of like a, I think the cycles are just in compressed where they happen concurrently. Now, it's both Isaac, you want to you gotta you gotta point.
Levi Morehouse 42:58
You guys are so polite. I'm learning this thing like by now I just keep interrupting but the finger, you know, the raise of fingers and good. He's got a delay.
Jared Fuller 43:05
So that's why he asked
Isaac Morehouse 43:06
you. Yeah, we had to add that because there's a slight delay on my audio. It's a funny Levi hearing, because I don't think you and I have actually explicitly talked about and things we talked about over the years about these bundling, and unbundling theories. But we both have basically come to the exact same conclusion. So I just I just had to look it up because I was missing. Remember, want to make sure I wasn't Miss remembering partner hacker weekend on March 19 was titled The RE bundling. And I wrote about orienting to the age of re bundling. And I walked through what you just said that the SAS revolution was about unbundling, instead of these giant one size fits all solutions. You have this totally unbundled all these point solutions in this stack, and you get to customize your stack and all this stuff is great. But now it's like the infox ellipse, as I call it, right? There's like too much information, too many choices, too many things. And we're coming into this re bundling thing. And what I said in there was Jared maybe kind of ties together what you were saying. And we leave out of saying that the new bundle isn't built around businesses as much as communities and ecosystems. And so the buyers are looking to communities, influencers, networks, ecosystems, they're looking for someplace to trust, so they don't have to make so many individual decisions. Thinking about the tech stack. I don't want to have to make a decision about every single item in that tech stack. But I don't necessarily want to go back to the days where I buy an annual license for a gigantic massive solution that does everything for me. And so there's something in there that's like, I already trust these three companies. And then I'm willing to trust whoever they trust. Now I trust I let's say you know, whatever it is stripe, I trust them to do payments or I trust gusto to do my, you know, basic payroll stuff. I don't want them to also I don't trust them to be just as good at building something utterly unrelated to payroll in terms of product, but I do trust them to pick who's best at building that and embed it into their platform? Right. So it's like, it's like a version of like re bundling. But each of the component parts are coming from people with domain expertise. And I think phase one of this is Zapier. Phase one is, here's an easy piece of duct tape, that helps you start to turn individual solutions into a unified bundle. And I think we're moving from the Zapier to something much more tightly integrated, but still separate that the like, we just had a session about this embedded iPass, right as a solution for building your integrations. Instead of just doing Zapier, you're like, you know, hey, you can actually do an embedded thing. It's still someone else's software, but it's living inside your software. And so it's I don't know, it's like, it's like a new version of bundling. That's, that's kind of all over the place. But I just thought it was crazy to say that I'm like, I'm pretty sure I wrote about this.
Jared Fuller 45:54
No, it's a really good point. And then just like maybe my fifth and final comment on this to kind of, like, bring us home. It's, um, it's interesting, this phenomena, how every single category and market leader races to the bottom of the stack. What do I mean by that? Right? If you're Apple, you started as a software company, you build hardware, right? If you're in, let's say, the finance stack, you want to get down to, you know, like the, the, let's say, the processing level, you want to get to the banking level, right? If you're at the banking level, you want to get to the company formation level. That's why like Stripe is such a solid, amazing company, because they did exactly that. Right. And in a lot of ways, they were an index fund on E commerce, as you know, as an index. So like, that's why there were so much money into people through so much stuff. It's like, I can't pick ecommerce, but I know they're gonna win. Why are they going to win? They're gonna win because they're committed to being a solution that disappears in the background and works with everyone. Right? They're not at the front end trying to be like me, me, me, by my stuff. Here's my ad. Here's my Have you ever seen an ad for stripe? Hell? No, you haven't. But then guess what every single company that's getting formed today is using what stripe Atlas. They didn't start with stripe Atlas. But they went down the stack closest to those formation and key company events. And I think that that like that should all for all of us entrepreneurs or partner people looking at this next decade really challenged us to think differently about what it means to be in this future that might be partner LED is like the smartest businesses in the world. They're going down the stack as fast as they can. And they're trying to be interoperated with everything. And the smartest entrepreneurs that you know, have been fascinated like you service to SAS native to whatever they're thinking about building their businesses this way. Levi Morehouse, everybody. I don't know. The world that we're coming into is a very different world.
Isaac Morehouse 47:41
Can you tease what's next? Yeah. So
Levi Morehouse 47:44
I think what's next is in that vein, it's this embedded Business in a Box is is this idea that I think is huge. And I'm with you, Jared and the unbundling and re bundling is probably concurrently. I'm a simpleton. And my Brandon has to go with like simple models. And we're in this phase now, but it's not that clean. And sectors industry is even in the same ones like it's definitely a first cycle of just always bundling and unbundling happening all the time. I do think there's a back office solutions. If a business owner or a business can get more done in one place, that's all done really, really well. It's a it's a, it's a time that that's coming into into vogue a little bit. So that's kind of where where I'm gonna be focused is providing technology in a solution in an embedded manner through platforms that are already providing amazing solutions, but they want to bring more into their existing ecosystem. I think there's a lot of opportunities there. And I'm very excited about pursuing some opportunities in that in that space in the next couple of years here. Love it.
Jared Fuller 48:46
Amazing. I can't wait to award Levi Morehouse the partner lead startup of the Year award. The Coming next couple years
Levi Morehouse 48:52
2023 Maybe 24. We'll see. Let's I want to be on the list, man. Hey,
Isaac Morehouse 48:59
Jerry has a good track record of making bold claims about what's going to happen in the near future and then coming through on those. So you never know. Hey,
Levi Morehouse 49:06
I'll take it. I'll take it.
Jared Fuller 49:08
I make very few predictions. But they're big. They're bold. Sometimes they come through the cap table one didn't come through much this year. I say but what if you could fit that into the next predictions episode? What was that? What? Just partners finding their way into the cap table? I think that's more a function of the economy. trashing completely everything being on pause right now. But the reality is, is that equity for employees, investors, like everything's gonna get more expensive for startup entrepreneurs, like they're gonna control us to the cap table in the future. It's just very clear to me that that has to be true. Valuations are less which means you control less of the cap table period, full stop. There's too many solutions. You control us with the cap table. And as everyone gets addicted to this partnering, you know, pill. Well guess what? Partnering is more expensive. And then if you have two companies, you can partner with one where it's like, I'm gonna dedicate six years of my life to you and like help HubSpot become a $50 billion company. You should probably have some equity. It's a very simple concept and I think in order for that to happen there's a lot of regulatory red tape so it's probably a function of web three where that'll be that'll happen but that one didn't quite come through this year
Levi Morehouse 50:14
so what we should build that that's a saps platform that needs to happen it sounds like oh yeah, were you contract with Karna for partner equity sharing
Jared Fuller 50:22
call call Levi. That's that was my that was my original idea was to build something in that space before partner hacker but we'll cut that out the episode The partner well about that.
Levi Morehouse 50:32
Good ideas need to free riders man the best people execution is I've got a million but
Jared Fuller 50:38
right now we're just focused on the content being this product and I want to thank you Isaac, for bringing a great product to the market. The conversation with your brother man is an awesome combo I learned a ton I really enjoyed it.
Levi Morehouse 50:49
If you're not paying for the product. You are the product I just learned from here that I am the product today, which is all good. This is fun guy. Well, I
Isaac Morehouse 50:56
guess we shouldn't have charged you for this appearance. Then you wouldn't feel like the frog. I wouldn't have felt this. It wasn't explicitly called out.
Jared Fuller 51:04
All right, peace out. Partner up. We'll see y'all next time.