Show Notes

Most tech startups tend to endure a long and strange journey on their way to finding product-market-fit and significant traction. But things have been a little more complex and confusing for Kountable, a startup in the FinTech space. Kountable has had multiple iterations and got its start in a corner of the world that few tech startups venture into. However, Kountable has found success along the way and is on track to reaching its vision.

Kountable co-founder and CEO Chris Hale joined startup coach Roland Siebelink on this week’s episode of the Midstage Startup Momentum Podcast. He shared details of Kountable’s journey and multiple iterations, as well as some of the key learnings he’s had as a founder:

• How Kountable has taken a different approach to traditional underwriting.
• Why it can sometimes be better not to focus too much on the value proposition.
• The best ways to build brand integrity and amplify trust with customers.
• The ways Kountable has been able to accelerate the enterprise sales cycle.
• What Kountable did when its working capital dropped to 0 in one day.
• How Kountable has been able to engineer fun with a remote team.

Transcript

Roland Siebelink:Hello and welcome to the Midstage Startup Momentum Podcast. My name is Roland Siebelink, and I'm a coach and ally for lots of fast-growing startups in the whole world. Today, we're not going that far out into the world because I have with me a guest from nearby Mill Valley, California. It is Chris Hale, the CEO and founder of Kountable. Hello, Chris. Thank you for joining.

Christopher Hale:Hello. Thank you for having me.

Roland Siebelink:Of course. We've been looking to get you on the podcast for a while now, so I'm glad we could finally find a slot that works for both of us. Chris, first question, as always, is a bit of the elevator pitch. What does Kountable do? Who do you serve? And what do you deliver as an improvement to the world?

Christopher Hale:Thank you. The simple version of accountable is we're a B2B marketplace, but we've got a very specific focus. We've built our B2B marketplace around sophisticated go-to-market for global health companies like OEMs, like Abbott and Becton-Dickinson, energy companies like Schlumberger and Toyota, LG and technology companies like Cisco and others. And I bring those up because they sell fairly sophisticated hardware, highly finished goods through channels. There's not a real B2B marketplace model focused on the sophisticated channel sales process, specifically around international trade. We learned that from - our first set of customers were actually in Kigali,Rwanda. Believe it or not, we went out to East Africa. The very first set of customers that came on the platform were distributors and resellers for all of these major brands. And they had effectively no technological infrastructure to work with. And we just thought that was amazing, where they were running these mission-critical supply chains for these countries, running these mission-critical channel sales programs for these brands, and they were doing it with analog tools, with regular Gmail, with spreadsheets, with shoe boxes, and manilla envelopes. We said this is a lot of volume, a lot of opportunity, and frankly, really important work that should be getting done more efficiently.

Roland Siebelink:Then when you see the shoe boxes and the paper clip, you immediately, as an entrepreneur, see an industry ripe for disruption, I'm sure. How long did it take you to land into that pretty precise definition of your customer group? I think you said people who produce sophisticated hardware and sell it through channels. I understand there's a big global dimension there as well. Was that a long cycle that you went through before you stumbled upon that group that you have a big value proposition for?

Christopher Hale:It was. That came through traditional cohort analysis when we were looking at who our most successful, most active, highest repeat customers were in the database and the dataset. We set out to help entrepreneurs globally. We knew that plugging entrepreneurs into traditional capital markets and global trade flows was a great opportunity. And then the data just showed us who we should focus on and we did. Ever since then, that's been what's defined us in the landscape of B2B marketplaces is that unique focus. Our average basket size - if you wanna use that word - is $150,000, which is very different than the hundreds or low thousands of most marketplace models.

Roland Siebelink:Awesome. Very cool. Can you delve a little bit back into the founding history of Kountable? What was the story? Did you have specific expertise to feel attracted to this area? How did it all get started?

Christopher Hale:The original idea was born when I was in asset management. I spent a number of years in the asset management industry, and ended up migrating into what are called multi-family offices and single-family offices. These are asset management businesses that serve traditionally the ultra high net worth clients with $50 million or more. And in that role, I got very intimate with how asset management technology was expanding to capture all of the unique assets that those types of high net worth investors owned. And one of those assets I got really interested in was trade finance. After the financial crisis in 2008, a lot of banks that were traditionally involved in trade finance had backed off as more of a focus on things like anti-money-laundering and know-your-customer have come up, they've backed off. It's really become this huge market opportunity. And it's an incredibly attractive asset class because it's very short duration, it's intensely information-rich, so if you can digitize that information, you can know a lot. And it's traditionally asset backed where you have something you're buying that's moving from point A to point B that you can track. All of that got me enamored with it. And then I realized that by building this technology platform, we could actually focus on sectors that we're doing good in the world. We have had this sustainability focus. And those two things coming together where you had technology around a unique asset class and then sustainable investment opportunities were a big focus of mine in the asset management industry and led us to this. I just told that story for a long time and got lucky to find some core team members and a great co-founder who has expertise in entrepreneurship and had been coaching entrepreneurs globally for 25 years. And we came together, and the story about Rwanda was because she had been coaching some of the top entrepreneurs in the region for six years, we had a really well-built first seed cohort, where we went and said, "Hey, what do you guys think of this?" And in the first weekend, we got $10 million in orders, and we actually didn't have capital or a platform. We just had an order form. We've been chasing that demand ever since. Like I've mentioned, it's a sophisticated, complicated business, but with a huge global opportunity, so we've been trying to build it thoughtfully.

Roland Siebelink:Awesome. Can you describe a little bit the journey of the customer or user toward Kountable? How do they find it? What's their first experience on the platform? And what's the aha moment that you try to drive them to?

Christopher Hale:Sure. That's a great question. There's really three ways a client can engage with us. The platform is open and any business can sign up through the open platform. A lot of our clients today are coming through referrals from some of the anchor tenants. Either the large buyers are referring their suppliers en masse or the large enterprise sellers are referring their distributors and resellers en masse. And when they come in, it's fairly traditional onboarding in that they're building both a user and a business profile. And then they can invite their coworkers into the profile. Then they can also add specialties on those coworkers that come with specific features based on their role. Similar to an accounting software or a tiny little ERP system. The unique thing that comes next is we focus on their trade network. Who are they selling to? Who are they buying from? What experience do they have in that area? And then what are things like their order to cash cycle look like and their cash conversion and average order size and repeat customers. It's that traction that we look at much more than a traditional underwriting process, which is looking at three years of audited financial history and balance sheet, and those kinds of things. And it's because we've seen that unlock over and over again, where when you focus on the opportunity in front of the entrepreneur and their ability to fulfill it, you have a unique value proposition that that we can bring to bear. And back to the asset class, this becomes a really attractive investment opportunity for institutional investors because they're getting behind these businesses and they can deploy capital into these highly digitized and transparent supply chain transactions.

Roland Siebelink:Okay, very good. Would you say that Kountable is an example of the big FinTech disruption in replacing traditional risk adjustment mechanisms with data and intelligence on that data?

Christopher Hale:Yes. And the way that we're built - much like some of the other fintechs that have seen traction out there - when you're structurally not a traditional bank, when you're structurally not taking in client deposits, when you're built to actually focus on the problem and innovate around the problem, then you can do things differently than banks can do. That doesn't mean we don't like banks or are competing with banks. We actually love working side by side with them because we each have our role and we can hand the client relationship back and forth to each other and really develop the small business effectively.

Roland Siebelink:I love to hear that it's not always super competitive or disruptive in that sense. Can you talk to me a little bit, Chris, about the go-to- market? How did you find those anchor tenants? How do you approach them? What does your sales cycle look like? I'm always asking this question because so many of our listeners are just reaching that point of product-market-fit and are starting to get very worried about how do I build my go-to-market to make my business grow very fast.

Christopher Hale:We learned this the hard way. It took some people, investors, advisors shaking us and saying, "Pay attention to what's happening inside of the data of your platform and then figure out how you can amplify what's already taking place." We were so focused on the value proposition and so focused on the impact that sometimes we were taking the harder path. There are these hurdles around size and scale and user numbers that are more important to get to than exact perfect fit. And what I mean by that is we kept on seeing organizations like the United Nations come into the platform. And someone - quite obviously it seems in hindsight; we didn't know what we were doing - he's like, "Why don't you go approach the United Nations and understand the programs that they have so you can actually invert what was your go-to-market, which was bottoms up, into a top down go-to-market." What that's led to is a very nice cycle where we get a critical mass of users that have a pattern - either a type of product, a type of company sector - then we go after that sector. Then that gives us a new cohort of users that changes the pattern. And that back and forth cycle is critically important. It takes patience and it takes discipline because you want to chase the shiny object. To be honest, we have quite often and are guilty of that. But I think we've settled into this pattern and understand that this sales cycle does take time, but it does have real network effects if you focus on them.

Roland Siebelink:How in your sector would you balance the need for sales people, feet on the ground, business development versus more the marketing, air cover area? How does that balance in your sector?

Christopher Hale:This is a big point of conversation for us this quarter and these last couple days, partly because we're raising some capital right now. And so, we've been talking about use of proceeds and what is our hiring plan, those sorts of things, so this has come up. I talked about the types of businesses we work with, being large brands that build high-quality equipment or high-quality goods and having relatively large tickets. And so, for us, trust is really, really important. Integrity of the brand is really, really important. When we think about that allocation of capital across those different areas that you described, one of the core factors is how does this amplify trust? We're not one of those companies that's going to spend a fortune on direct digital marketing and expect 10,000 people to sign up and have this massive funnel. Our hypothesis - we're not done with it - is to invest more in thought leadership, content marketing, brand awareness, so that when we do get the at-bat with the high-quality head of sales for a specific region they know about us, they've heard about us, they've seen the brand, they know who else we work with. Those kinds of things really accelerate the enterprise sales cycle. And also, frankly, bring gravity to the small business person who's becoming a member of the platform on their own.

Roland Siebelink:I wanna move a little bit to your traction so far. Many startups don't wanna share all their numbers, but what can you share with us in terms of how successful Kountable has been so far?

Christopher Hale:We're very open about the journey we've been on. I'll happily share with the listeners that we had to basically start this company twice, which was very interesting. In the first iteration, we were much more of a pure FinTech, where we were originating trade finance assets on behalf of investors and didn't have a lot of the connectivity and the network and the customer base that I talked about so far. And we grew quite fast, where we went from $600,000 in sales to $6 million to $18 million year over year. And that was just like the Silicon Valley metrics they want you to hit. We had a working capital partner that had some difficulty, and our working capital went to zero in a day. At that time, we had 91 transactions in flight with an average basket size of $150,000 all over the world. And our working capital went to zero. And so, we had to focus for a while on landing all those planes, metaphorically, and getting the goods delivered where they needed to go. In that period, we said, "What can we focus on as we fix this problem?" It was, again, back to the basics of what did the data tell us, who were the customers with whom we had traction, and what did they value? And so, we spent about 18 months building, and our revenue went to zero.

Roland Siebelink:That was a high-risk move. You didn't have an alternative, I guess.

Christopher Hale:We didn't really have a choice, and the lesson learned for us was diversification of customer base matters earlier than you think. You think that's a later stage problem.

Roland Siebelink:Which is why you didn't just say healthcare or automotive or capital goods in the beginning, right?

Christopher Hale:That's right. Then we restarted the engine and we did about $3 million in sales last year. And we booked $6 million in sales in Q1 of this year, and are working on rebuilding that working capital stack to fill all of our orders.

Roland Siebelink:Now that you're in this second iteration of the business and taking a conscious approach to your growth, how big is your vision? How big do you see Kountable become 10 years down the road?

Christopher Hale:The market opportunity is enormous. We love what we do. We love who we serve. We love the changes it makes in our user's lives. We have the energy and the joy of the work to grow the company really large. I think there's maybe some opportunity for acquisition in the near term, given what's happened in the supply chain and channel sales and global markets that maybe would've been a little further down the tracks than it is now. It's something we wanna balance. The company is very mission-driven. Everyone here that's been through a journey like we've been through is very mission driven. I say that because if the right partner came along that was aligned from a mission perspective and wanted to acquire the company, in order to help us scale it, then we'd be very enthusiastic for that as well. We think the platform itself and the impact we make has the potential to be very large, whether it's done autonomously or in concert with a bigger company.

Roland Siebelink:You're right. It's a time to be considering acquisitions or being acquired because this is the time for consolidation. That's absolutely right. Obviously, that has some bearings on your financing strategy as well. I think you mentioned that in the past, you had been backed by a committed family office. How has your financing strategy changed over the years?

Christopher Hale:In version one, we caught a tiger by the tail, and like I mentioned, we're just trying to keep up with the demand. The additional components of the investor participation weren't as high a priority. What I mean by that is just go get the money so we can keep up with the demand and scale. We just spent many years - like many people in the startup world - learning about all the things we didn't know we didn't know. We've been moving things from that bucket into, "Okay, now we know we don't know them. How do we solve this?" And so, we've been very much more focused on finding investors that have either marketplace expertise, supply chain expertise. Some of our newest investors ran trade finance for global trade banks. They speak the language of bankers way better than we used to. It's really that double component of additional capital and then leveraging the expertise of seasoned professionals has been the new focus.

Roland Siebelink:Even smarter money, in a sense, that's not just the money, also the expertise that comes in.

Christopher Hale:Yeah. And the family that backed us was amazing and very smart, but we were similar. Our knowledge was very similar. And now we seek investors that maybe don't know much about what we know but know a ton about these other areas around international fulfillment and distribution centers and those kinds of things that none of us have ever done professionally until we start Kountable.

Roland Siebelink:Yes, absolutely. Chris, many founders also like to do some informal mentoring of founders that are a few years behind them in their journey. I don't know if you have steady relationships going on there, but if you do meet other founders, what is some of the typical advice you share with them regardless of the specifics of their business?

Christopher Hale:One of the big ones - and I don't wanna sound cavalier when I say this, but we've talked about our journey - is don't die. Just figure it out. Just fight to see another day. The business of startups is very binary. Day by day, week by week, and bank account by bank account, it goes from very dire to very flush and back again quickly. There's a lot of tactical things that can be done about managing burn and runway and team and culture and all those kinds of things. But that simple two word advice, it's don't die. And all those other things are strategies to achieve that. And then the one that honestly it took us a long time to learn was figure out how to build a business that you have fun working in. Cause you're gonna do it all the time. It's not really an option. Granted, there's work-life balance and there's all those kinds of things and putting your phone away and all that stuff, which we try to do and and focus on and have free days and all those kinds of things. But at the end of the day, this is your passion. You love this. Otherwise, you wouldn't be doing something like this. And if that's what you've committed to, you might as well figure out how to engineer some fun into the business, whether it's with the customers you have or the business model or the purpose of the organization, or the way you run it. Make it deliberate. I've failed at that a couple times over. And when I do, I notice. I notice intensely, and it's dangerous, so it's become a priority.

Roland Siebelink:Very, very interesting learning. Can you give us in the last minute one or two examples of how you've engineered fun into the business?

Christopher Hale:Sure. We've been talking, anytime you talk to a startup, you get the current version, and the current version sounds like that's what you've been doing all along. Of course that's not really the truth; it's lots of iterating. And because we've been doing a lot with things like sustainability and impact, we've found ourselves in tons of bureaucratic situations, where we're working with these huge organizations with massive balance sheets that can change the game for Kountable. But at the end of the day, it's just a brutal slog. One of the changes we've made is to say, "Who are the commercial companies that already serve these big organizations that can say yes tomorrow and have a really commercial fast-moving mindset and are already collecting money from them and can share some of that money with us and talk the language of execution." And just that little shift from this parent organization - and it's not a criticism; they're huge global organizations that are bureaucratic - to the commercial companies that serve them has made it way more fun because we can talk about making money, we can talk about making a difference in the same sentence without any confusion. That's one that I think is super important. Because we've been a global organization all along, we've been very digital first, right? Zoom, Slack, G suite, all of that has been part of our DNA. And we were doing that because of the time zones and working with the international team and so on and so forth. But we were all here. We were all within a couple miles of each other either in the city or in Marin or the peninsula. And then the pandemic came and everyone scattered with the wind and moved to different parts of the world or the country or spent six months with their family. And it worked right. It worked the same. One of the things that we've been trying to focus on is how do you balance the new normal of work, which for us works quite well because we were already that way with those culture-building opportunities where you get everyone together and, and have a little bit of fun. Whether it's team-building retreats, those kinds of things. And when we've done them, they've been great. Given everything we've been through, we haven't had a tremendous budget for it. But when we've done them, they've been great. And my point in bringing that up is it's also deliberate. You have to pick a time on the calendar. You have to pick the people. You have to make it happen. And then you have to commit to delivering the emotional return that you wanna deliver to the team so that they go back to their respective corners of the world and carry that energy with them. And that's a journey for us. We have a lot of work to do there, but that's something that we're focused on.

Roland Siebelink:Yeah, absolutely. A key part in building a successful remote organization that I hear from many, many clients as well. That's awesome, Chris. Thank you for expanding on that a little bit. As a last question, for those listening to this podcast who are interested in Kountable, where can they go to learn more? What should they download? And what do you need help with?

Christopher Hale:Awesome. Thank you. We really have three simple channels of engagement. One is, anyone who's a small business person out there in the United States or otherwise, the platform's open. You can come in and join it and learn about everything that we offer. And we welcome you to; we're excited to expand the US opportunity over the next couple years. And number two is, we understand the economic impact we have on our community. And we've always had this concept of having a cooperative model. One of my old teammates - I spent a little time at Kiva before I launched Kountable as a volunteer - he works at an organization called Wefunder. And so, we launched a Wefunder campaign that's open today, where you can go to wefunder.com and search for Kountable and actually become an owner for as little as $100. And we did that because of the cooperative nature of the platform, where we have all kinds of organizations helping SMBs scale to become bigger businesses to better serve these enterprise customers that are making a difference. And you can learn a ton about the Kountable platform. Those are the two big means of engagement. Any enterprise listeners out there that are figuring out how to adapt to this new normal, are you digital enough? How do you engage your channel partners? What does your digital transformation strategy look like for your SMB suppliers? You can contact us Kountable.com

Roland Siebelink:That's awesome. Thank you so much, Chris Hale, the CEO and founder of Kountable. It's been a pleasure talking to you today, and I wish Kountable the best of luck in getting so close to its $120 billion vision.

Christopher Hale:Thank you, Roland. It's been my pleasure. It's been a great time.

Roland Siebelink:Absolutely. And for the listeners, new episodes coming down the pipe every week. Keep tuning in.

Roland Siebelink talks all things tech startup and bring you interviews with tech cofounders across the world.