“The Best Technology Does Not Equate to Big Sales”
Interview with Capbase Co-Founder and CEO Greg Miaskiewicz
One of the first lessons all founders learn is that it takes more than a good product to build a company. For example, there are a lot of confusing legal documents that startups need to get off the ground. Fortunately, Capbase is around to help founders who can’t afford a high-priced lawyer with the legal side of starting a company.
Capbase CEO and co-founder Greg Miaskiewicz joined Roland Siebelink on this week’s episode of the Silicon Valley Momentum Podcast. Greg shared how he discovered the need for a service like Capbase, as well as important lessons for all founders.
- Why a service like Capbase can delay the need for a startup to hire a lawyer.
- How Greg learned the hard way that having the best technology doesn’t always equal sales.
- Why having a distribution secret is just as important as having a great product.
- How Capbase has been able to build trust among its target group.
- The most important milestones in the lifecycle of a startup.
- Why the ability to test hypotheses can make or break a startup.
Roland Siebelink: Hello and welcome to the Silicon Valley Momentum Podcast. My name is Roland Siebelink and I’m a coach and ally for scale-up founders. Today, we have with us on the podcast, Greg Miaskiewicz, who is the CEO and co-founder of Capbase. Hello, Greg
Greg Miaskiewicz: Hey, Roland. Thanks for having me.
Roland Siebelink: Absolutely. It’s an honor to have you. Capbase, tell us about what you do and who do you target and what difference do you make for those customers in the world?
Greg Miaskiewicz: We try to simplify the process of starting up and running a company, specifically Delaware C-corporations, which is the preferred entity type and jurisdiction for any venture-backed startup. You can use our software to do things like incorporate your company and buy your founders’ shares, set up an employee stock option plan, and hire employees and give them equity, or raise money from investors using convertible notes. And what’s different from our software is we connect the dots. If you were to use alternative options, you would be often using multiple point solutions.
It’s like hiring someone and giving them stock options. Use a lawyer to draft your offer letter with the equity language, you put it into DocuSign or HelloSign, sign the contract, you do this for four contracts. You have to put the contract into some document storage solutions, so it doesn’t get lost by the time due diligence rolls around. You have to manually update the cap table and you manually have to update the payroll.
What Capbase does differently is founders can customize and generate standard legal agreements in our product. We always visualize what’s going to happen to the cap table before you sell equity to investors or give a grant to an employee. For example, how does the option grant compare to other employees option grants. Then you issue the contracts for signing in our system? We do the e-signatures.
We also connect into the company bank account and the investor or shareholder bank accounts, so we process the payments from investors or employees for options. And then as soon as the payment goes through, contracts are signed, we automatically update the company’s records. Specifically, the stock ledger or cap table is automatically updated because we have all the data from the original contracts.
And then the company’s document room is updated with all of the executed legal agreements, which are categorized and searchable for future review when the company goes through to due diligence, when they’re trying to raise money down the road or trying to sell the company in an M&A transaction.
Roland Siebelink: I just wonder what brought you to actually founding Capbase. I think this is your second startup, you mentioned in the pre-interview. What was the vision that led you to target this specific field and maybe the passion underneath there.
Greg Miaskiewicz: I’ve started a company before. I’ve also been an employee of early-stage companies, pre-IPO companies, growth-stage companies. I’ve also been an advisor. I’ve also done a small amount of angel investing. I’ve seen these sorts of problems around getting started for entrepreneurs crop up more and more. Especially as remote work becomes a reality for most people and remote hiring. Compliance is also an ever-growing challenge. Imagine, in the old days. You have founders who were in San Francisco, They register a company as a Delaware C corporation. They have an office, find a coworking space, work out of there until they outgrow it.
Then they rent or lease offices. They’re only really hiring full-time employees in one state. They don’t have to get insurance in other States. They don’t have to register their corporation to do business in other states. They don’t have to register for unemployment and payroll tax deductions, or do any of these other administrative, compliance things.
But now if you want to actually hire someone in the US and give them benefits in another state, you either have to use a partner employer organization, which is costly, or deal with this administrative compliance complexity. What I was realizing is that most founders also don’t have access to lawyers from top-tier law firms. It’s not like you can call up Orrick and be like, “Hey, I want a lawyer.” That’s not how it works. You have to get an intro to a partner at Orrick and then you meet with them and you pitch them on your idea because they’re only going to take you as a client if they think you have statistically way above average odds of going past Series A. Because otherwise you’re a loss leading client.
Roland Siebelink: What Capbase offers, as I understand it, on top of some of that standard documentation and standard processes, you will also then guide people through the different steps they need to take to make sure everything’s complete.
Greg Miaskiewicz: Yes. We have put those compliance controls in place. If you are doing something that requires a state registration form to be filed or something requires board consent, we do that digitally.
Roland Siebelink: Okay. That’s awesome. In a way, do you compete with law firms or are you complementary? How do you see that?
Greg Miaskiewicz: We’re trying to defer the time until you need a lawyer for as long as possible, at least until you’re first negotiating your first priced round.
I wanted to speak to a broader trend within startups and law. The reason that documents have become standardized is because it’s a market effect. The market demands low friction. The market demands standardization because that’s what VCs want and what is easiest for VCs to get capital cleanly in and out of those companies.
Roland Siebelink: In the pre-interview you said part of the challenge of a company is just building something, but then the much bigger challenge is how do you find the customers? Can you talk a little bit through what you’ve learned also in your previous company and what you’re now learning about how to actually find those founders, that target group, to convince them to sign up for Capbase?
Greg Miaskiewicz: Just for context, the first company I built, we built bot detection software. Something like Captcha except it was passive and the user did not know they were being tested. I can tell you a series of funny stories of how we developed that technology. Basically, we bought lots of botnet traffic and then just profiled it to come up with client-side heuristics that we could use to identify in real time, almost instantly, if the user was a real human or not.
We had the best technology out there. Most of the other technology out there was just correlating patterns of network traffic. These IP addresses visited these websites and the supporter or something like that. We did paid head-to-head tests. Some of our customers, one of the biggest applications of this technology is verifying if your paid ads were being shown to bots, so you could claw back the money from when ads were shown to bots from that network.
We had paid conversion tests. Basically, it was a multivariate test. You take us against all of the competing bot detection, ad fraud detection vendors in the space and see who has the highest lift on spend. We, in many cases, had two or three X the lift-on-spend of our competitors. The only competitor that was close was White Ops, which stole our thunder because they had a similar methodology and the founders were way more reputable in the security world. And we were nobody’s. I just knew a lot of people in the ad-tech world. In all the head-to-head tests, we even came out a few percent better always in lift on spend than White Ops. We had the best or tied for the best product on the market. Did that get us sales?
Roland Siebelink: Should’ve made you a winner, right? That’s what you thought, I guess.
Greg Miaskiewicz: Yes. But that is not what happened. What we realized is that, say we tried to do these trials with an ad-buying platform or DSP [demand side platform] and ad tech. The DSP would not necessarily use the vendor that gives them the best ROI. They would go with the vendor that the agencies used. Imagine the customer support headaches they would get if the people who control the purse strings of the ad spend say that this 5% of traffic is a bot, the DSP is using a completely different vendor that doesn’t agree with them and is a no-name newb in the marketplace. We didn’t have any famous ad-tech or security people behind the company. It was just two Eastern European guys.
Roland Siebelink: Very hard. Right? The product itself was not actually the differentiating factor for your success. That’s what you’re saying.
Greg Miaskiewicz: Right. And what we learned, and it was really disheartening - we talked to VCs, and as part of talking to VCs, they have you talk to the people they know who might be customers, potential customers, or founders they’ve invested in who might help them vet the investment. I think someone from First Round Capital sent me to Eric Wheeler from 33Across and I walked them through the tests we had done. I walked them through where we were at. And he’s like, “Look, I don’t care if your technology’s better. Honestly, most people in ad tech buy Vaporware. It doesn’t really matter. You know who calls the shots – it’s the agencies. You know how the agencies make decisions, they make decisions based on relationships. When it was agencies at a smaller scale, you could get by with taking them out for a steak dinner. But since you had all this consolidation in the ad agency world, just big ad agency holding companies like GroupM, now they’re big whales. Now you can’t just take them out to a steak dinner in Manhattan. You got to throw a party for them at the Cannes film festival with a yacht. Otherwise, you’re not going to impress them enough for them to actually buy your service.”
He just sized me up on the video call, wearing a hoodie and he’s like, “And you don’t strike me as the kind of guy who owns his own yacht or has yacht money yet. I don’t think your business is going to go well.”
Roland Siebelink: Well, let’s say that was a learning opportunity.
Greg Miaskiewicz: And we couldn’t beat them, so we joined them. We sold to one of our competitors, Integral Ad Science.
Roland Siebelink: What did you really learn from that, I think is that you have to think through the entire go-to market upfront and have a supreme advantage there as well.
Greg Miaskiewicz: Go-to market as something where I think investors used to invest in technology, and then they’ve got burned by investing in technology that was supposed to be amazing. And now it’s almost the standard for writing a persuasive deck [to include] what is your distribution secret. What are you doing that your competitors aren’t doing or would take huge lift for them to do that allows you to get distribution?
Roland Siebelink: Moving a little bit back to Capbase. Without sharing any secrets, of course, in the open, what are some things you can talk about in terms of how you’re looking at Capbase as not just a product but also the distribution. How are you seeing that go to the founders and what are you doing to make that most efficient?
Greg Miaskiewicz: We’ve been writing a lot of useful content covering things that founders need to know. There are things our customers asked us. There are things that I had questions about when I first got started. There are questions other founders I talked to had before they built a company. I asked a lot of founders in my network what they wish they had known. That informed a lot of the content that we write.
How we get customers is we don’t pay to acquire customers. We get customers’ trust often over a very long sales cycle. Customers reading, blog articles, listening to episodes of our podcast where we interview successful founders about how they build their companies. We build trust before they even think about incorporating a company. That’s an interesting angle because we’re effectively becoming an educational media company to develop our own lead gen.
The biggest challenge is finding people who can write about the subjects really well. You’ll find a lot of misleading, incorrect information. For example, say you’re hiring a W2 employee in New Jersey, and you tried to find the information about what state registrations you need to do. You will not find accurate information summarized anywhere. Most of the information at the top of Google is a registered agent and government filing services that will tell you - they’ll straight up lie to get business. Their entry for New York registered agent and corporate filings - you don’t actually need a registered agent in New York. The Secretary of State will just forward mail for out of state corporations to their home headquarters. But they’ll all lie to you and just tell you that you do because they want to upcharge you on their service.
Roland Siebelink: Right. I do think a problem with the Internet is that the large majority of content these days is written by people who have a vested interest in selling you their services That’s something that not many people realize, I think.
Greg Miaskiewicz: Yeah, and we wanted to take a different approach. Also, I guess the other thing is you have really wide-reach high-domain rank content farms. Investopedia has a lot of generic definitions and explanations of things, but those finance terms might mean something very, very nuanced and different in the world of venture finance.
It’s hard to find this information in one place. That’s what we’re trying to compile. And whenever possible, we get quotes from some of our investors who are also founders about some of these subjects. And then we introduce our own stories or anecdotes from my co-founder and I from when we built our previous companies. We try to keep it real and build trust by giving better, more accurate and comprehensive information told from the voice of a founder, someone like the reader.
Roland Siebelink: Very good. And you already mentioned that this basically turns you, to some degree, into a media company. To get the content that actually produces you the business. And in the pre-interview, Greg, you said that, as a startup, you really have a choice between either building that media company or building a community if you want to have efficient lead generation. Can you talk to us a little bit more about that?
Greg Miaskiewicz: You don’t necessarily have to build your own community, but you do have to find where the community of your customers or users lives on the Internet. In the case of startups, we have no reason to advertise on Facebook or build a media presence on Facebook because VCs and startup founders are mostly on Twitter and secondary on LinkedIn.
Now I’m advising a company that has developed interesting speaker technology. They haven’t actually done more than sell prototypes. They’re getting ready for a big launch. In the meantime, they have found the community of people who may be interested in their speakers. All the audio-files, speaker communities, all the people who are doing outdoor festivals and audio engineers. They’ve made collectively between all the members of the team, something like a hundred thousand posts across all of these forums and they have not at any point in time tried to sell anything. They’re just the number one trusted source of information about various aspects of speaker technology on every forum.
Roland Siebelink: And this is really an illustration of how to find that 10 X advantage or the dirty little secret in a sense in your distribution strategy. We have building or participating strongly in the community. We have becoming more like a media company, building trust through content.
I wanted to come back a little bit to your experience as a founder, we talked about building the products, about the go to market and figuring that out. What do you think are the biggest challenges that founders have to overcome to - let’s pin it down a little bit - to move from that initial product market launch to a successfully growing company.
Greg Miaskiewicz: Well, there’s a few different things or different milestones that you can think about. And in many companies, the first thousand sales will in some way, shape, or form involve the founders. The first 50 partnerships will in some way, shape or form involve the founders, usually a CEO. At the point where you have one person who can repeatedly achieve one of these things that is not the founder is an important milestone. And then when you have multiple people who can achieve those things on a team, that’s the next milestone. Then the third milestone is when you can hire someone who trains and manages a team of people who can achieve that.
Roland Siebelink: That’s such a clear visualization of the growth of a business. All-in skills transfer and in being able to take your distance more and more from the day-to-day work as a founder.
Greg Miaskiewicz: Yeah. It’s challenging to do. I’m not looking forward to hiring our first sales person when I have to do that. I can train people to do the onboarding and customer support. But when we are dealing with enterprise sales and have an outbound sales team doing cold calls, l I don’t even know where to begin with making that hire.
Roland Siebelink: I hear you. That’s a big challenge and indeed, a big milestone if you can get that done. In terms of your personal development as a founder, if you could concentrate everything you’ve learned over the years, and just one thing you would convey to people coming behind you, new founders that are currently in the early stages of their startup, what would be the most important point to convey to them?
Greg Miaskiewicz: Most of what you think will happen or think is true is not correct and will bear out to be false. The only way you will succeed is if you make highly testable, smart experiments to verify what you know and also to understand what you don’t know. You should expect that you will discover a lot of things you didn’t expect. Then you should let the data and the knowledge you acquire guide you.
I’ll give a very good example of this. I started out at that bot detection company. All of our original ideas for how to develop that technology worked, even in our isolated test environment. But once we went live, clients had so many false positives that we had to completely redevelop our technology. This is the first beta trials, non-paying, just getting some data flowing through the system.
We realized there were technical limitations, in some cases, where our code was being inserted, such that we couldn’t even get some of the data reliably 40% of the time. There were all kinds of issues like this and we had to completely rethink what we did. And the only thing that saved us was our ability to test hypotheses and validate them. We had a clean source of human traffic and normal unaltered browsers that never had any malware and no automation framework running inside them. We could profile them in a sandbox. And then we could buy bot traffic.
All of our original hypotheses failed. And the only thing that allowed us to actually come back with anything useful and not just fold the company entirely was the ability to test hypotheses. And you often will not have all of the answers upfront. You will have very few of the answers. You will know 10% of what you need to know to actually fully execute on your idea. What stops good founders is - people who have good ideas for technology, what stops them from growing is they get hung up on one piece of failure or one obstacle or they invest too much effort into doing something without verifying or eliminating some of the known unknowns before deciding on a course of action.
Roland Siebelink: The real link to the advice, fall in love with the problem, not with the solution. To always dig deeper. Okay. Well, we’ve been talking for a long time, Greg. This has been an amazing interview and I’ve learned so much from this. Really appreciate it.
If founders want to know more about Capbase, maybe sign up with you, where should they go and what should they look for on your website?
Greg Miaskiewicz: Just go to capbase.com. If you have any questions about our product, you can email me at email@example.com, and also, we have an Intercom chat that is not really staffed by a robot. Most of the time your queries will be answered by me or my co-founder or one of our senior team members.
Roland Siebelink: Okay. Excellent. Just capbase.com and start chatting with Greg or the co-founder. That’s awesome. Greg Miaskiewicz, CEO and co-founder of Capbase. Thank you so much for joining the Silicon Valley Momentum Podcast.
Greg Miaskiewicz: Thanks for having me, Roland.
Roland Siebelink talks all things tech startup and bring you interviews with tech cofounders across the world.