After David Barrett sold his first startup, he wanted to give back to people in need in his community. He decided to make a prepaid debit card he could give to homeless people or anyone else in need. When someone used the card, the charges would go to Barrettâs personal credit card.
Banks and investors hated the idea.
Thatâs when Barrett decided to, by his own admission, make the idea a little more âboring.â Instead of prepaid debit cards for homeless people, he pivoted to making prepaid debit cards for employees. Suddenly, investors came out of the woodwork. But as potential customers continually asked him if this prepaid card would also automatically file expenses, Barrett decided to make his invention one level more âboring.â The result? The expense management platform, Expensify.
In a recent interview for the #CIBCInnovationEconomy podcast series, Barrett explained why he ignored experts to build his company for profit, not venture capital growth.
âIf you model after startups hemorrhaging cash, shocker, youâre going to hemorrhage cash, too.â
– David Barrett
When Barrett settled on building an expense management software, numerous experts told him to follow the well-worn enterprise SaaS pathway: build a strong sales force to target Fortune 500 companies. Of course, to get there he would need to raise tens of millions in venture capital. Barrett ignored all the experts and instead built Expensify to focus on bootstrapped profitability.
âThe problem with experts is they can only be an expert in the past,â Barrett says on the podcast. âNobody can be an expert in the future.â
Instead of focusing his efforts on Fortune 500 companies, Barrett started talking to small businesses and individual business travellers. Then, in a move that he says confounded enterprise SaaS experts, Barrett focused all his marketing on individuals, not the procurement division. According to Barrett, this allowed Expensify to build virality within an organization and keep expenses low, reaching profitability much sooner than his VC-backed competitors.
âExpense management is viral, but only inside the company,â said Barrett. âEvery time you submit an expense, you are sending it to someone more important than you.â
The individual path worked, and Expensify began to grow quickly – and profitably. Barrett recalls that investors at the time told him his business model was âcute,â but couldnât scale much more than it already had. Even when Expensify reached significant revenue milestones, those âexpertsâ kept telling him that heâd reached a ceiling. While not surprised that people would tout the well-worn path, Barrett says he was shocked that Expensifyâs success wasnât considered legitimate because he didnât follow traditional advice.
âMaybe at some point, people have to start listening to the companies that are making it work in practice and accept that itâs possible,â Barrett says. âThat all the best practices we have around how to sell maybe arenât the only story.â
Despite Expensifyâs revenue growth and profitability, Barrett says on the podcast that everyone still seems to want the Silicon Valley route, seeing it as the only way forward because of how VC-backed companies heralded it as the ârightâ way to build a startup.
âIf you model after startups hemorrhaging cash, shocker, youâre going to hemorrhage cash, too,â says Barrett.
Barrett says that owning his company and building for profit also allowed him to control Expensifyâs destiny. That control has allowed Barrett to show leadership in different ways; during the run-up to the US presidential election, Barrett sent an email to every Expensify customer – about 10 million people – urging them to vote for Joe Biden.
To hear David Barrett share more about Expensifyâs journey, check out the full podcast conversation below or subscribe to the #CIBCInnovationEconomy podcast.