He built Uber for parking & exited. Then raised $100M+. Here's his formula for finding product-market fit. | Shmulik Fishman, Founder of Argyle

His first startup was a cool idea: Uber for Valet Parking. Investors loved it. But the unit economics didn't work out. So he had to pivot. He ended up selling it, but decided to do things differently the second time around.

“It’s the boring stuff that makes money. Sometimes the sexy, interesting things are really great ideas, fun to use, but aren’t money makers. They aren’t durable businesses.”

With Argyle, he didn't start with a cool idea. He replaced a product customers already paid for. His pitch went from "Wouldn't it be cool if?" to "I'll do what they do but twice as well and for half the cost".

"Find a better mouse trap. Build a product that's just a better version of a product that already exists. It's a lot easier to sell."

Why you should listen:
- How to work with design partners to build the first version of your product
- How to use those partners to get credibility and make your first enterprise sale
- Keeping your sales teams small and staying close to the customer for as long as possible

Timestamps:
(00:00:00) Intro
(00:01:04) The Origins of Argyle
(00:04:03) The Aha Moment
(00:15:06) When to Charge for the Product
(00:19:31)Landing the  First Customer
(00:21:38) Staying Close to Customers
(00:25:16) From Seed to Series A
(00:32:06) Delivering clear ROI
(00:35:58) Finding Product Market Fit
(00:36:38) One Piece of Advice

Transcript

Shmulik: 0:00

Put yourself in the mind of your client. He has to pitch it to his boss as well, and the pitch is so much easier internally when you can say I've tried this new product. It's better than the current product we're using today. Here's the price points. Here's how it works. I've done it a hundred times. I can show you it. I like it. All of a sudden, you've made the pitch so much easier for your buyer.

Pablo: 0:25

Welcome to the Product Market Fit Show, brought to you by Mistral, a seed stage firm based in Canada. I'm Pablo. I'm a founder turned VC. My goal is to help early-stage founders like you find product-market fit. Shmulik, welcome to the show.

Shmulik: 0:42

Thank you for having me. I'm excited to have this conversation.

Pablo: 0:45

You've been working on Argyle now for a few years. You're a multi-time founder. You'd started a different company before that and sold it. I don't want to go too deep into that story. I'm sure it'll have to do with the origin story of Argyle, so let's start there. How did you come up with Argyle in the first place?

Shmulik: 1:03

Yeah, this is one amazing accident to trace the origins of Argyle or to go back to 2014 in that moment where there was Uber for everything. I was living in San Francisco at the time, and you could click a button and get cookies delivered or get your groceries delivered. The one button that you couldn't click yet was get your car picked up and returned to you. With a co-founder, we set out to build Uber for parking, and it was a smashing success from a product standpoint. Everybody wants that valet experience. We were quite lucky. We raised about $50 million over the course of several years, but the business was very much from a unit economic standpoint not profitable. I think we had that insight early on, and we pivoted the business to an enterprise motion where we were selling software to large corporations.

Pablo: 2:00

I'm curious. What was the model? What was that valet model? That was just like I leave somewhere. I just click a button. Somebody picks it up, parks for me, gives it back. Was that the idea?

Shmulik: 2:08

You have it, you have it. I know, it sounds fantastic when you hear it. The issue with it will for always be that you need a human on every other block in a city, and you need parking spots everywhere in a city. It's just the talk about fixed cost, and so the more cars that you park, the more money you spend until you theoretically get to someplace where the numbers cross. We got the closest in Seattle, if you must know. There was a lot of density, which was the gain there.

Pablo: 2:39

It's funny how these models – I think back 2014. That's when I started my company GymTrack, which was about tracking workouts in the gym, and it's also one of those it sounds awesome when you hear. Doesn't make that much sense when you try and make it happen. All these things get funded then. I guess, now what gets funded is anything with AI, whether it makes sense or not, but there's these eras, right? Back then, it was these marketplaces or quantified self. If you said that, there was money for you.

Shmulik: 3:05

Yeah. Since we're going down the tangent, I also think another thing that gets funded is product that investors like to use themselves. Every investor would love their car picked up in front of their office and dropped off in front of a restaurant in the evening, and we had that. We had a product that our investors wanted to use. It was so easy to pitch the product, and that's what really got us going. It's just the underlying business model is something I really have become much more focused on as I've grown as a founder, and sometimes and I think you're going to hear with Argyle, it's the boring stuff that makes money. Sometimes the sexy, interesting things are really great ideas, fun to use but aren't money makers, aren't durable businesses, and I think that's what we had.

Pablo: 3:56

That's right. They get you like we won demo day. You know what I mean?

Shmulik: 3:58

That's right.

Pablo: 3:58

They get you that, but they don't necessarily get you what you really want, which is an outcome.

Shmulik: 4:03

We had an aha moment in that business in 2016 about where – we were like, hey, we don't want to keep spending money. What is the business inside of this business that is real, that people would use, that has positive unit economics? What that was was software, being able to give fleet management software to large fleet managers like Avis, like Enterprise rental car. That was a real company. We pivoted the business. I'm fast forwarding a little bit, but I ended up in the later years, around 2018, spending an enormous amount of time at airports because that's how the fleet manager model works. You stick a lot of cars in an airport. They hub and spoke model out to the city. I became super interested in not the cars at the airport but the people driving them around, and getting somebody to actually work for four weeks or five weeks to drive vehicles around from the airport to the city is hard work. They're very fickle workers.

Pablo: 5:08

This is what? This is like fleet – this is like Hertz or Avis, like fleet management? The cars end downtown, but they need to be by the airport.

Shmulik: 5:14

You have it.

Pablo: 5:14

Just a human to go drive it, okay.

Shmulik: 5:17

I didn't know it at the time, but the problem that Avis, or Hertz, or Enterprise has is actually very similar to the problem that Chipotle, or Target, or Best Buy, or Walmart have. It's high volume hiring with people that don't last that long, and so you're constantly having to rehire and rehire your staff. The best way to do that is with software where you don't have to individually interview them. There's ways to take data to understand what's the likelihood that they'll show up for work? The gimmick that we had or the trick that we had with Avis was can we get one of these applicants to log into their Uber account or their Lyft account, and we would be able to surface to Avis, hey, Shmulik has driven a thousand miles, has driven on Uber for six months, has a 4.5 rating? This is somebody that is going to be willing to drive cars for you. That was the very early stages of what I would now consider pre-employment screening services. I know, a really wonky long term.

Pablo: 6:20

This was at Argyle, or this was still at KAR Global, your last startup?

Shmulik: 6:23

I had Lester Adam. I was fooling around with a lot of different concepts. This was one of them. I was lucky enough to meet my co-founder, Audrius, who's now Argyle's CTO, and we had the luxury of time. We got to play around with ideas, and this was one we were super excited about. We knew contacts at Avis.

Pablo: 6:46

Was this after the exit? You have some, let's say, good stuff in the bank account happening. You got some time. You have the energy to go at it again.

Shmulik: 6:52

Yes. I know that this is talking about the journey. I do consider ourselves lucky to have an exit that did give us some cash where we had the space and the time to think things through, which I don't think I had when starting the fleet management company. Space and time is a really helpful thing. It's always good to think about it before you start building. That's what we had there.t

Pablo: 7:41

It's almost the reason why. Going back to earlier point, I think, as a first-time founder, there's the hype that attracts you to how do I tell a story that gets me money, and there's the need that's like how do I get some money in the door? I remember we were obsessed with just how do we – because revenue was so far away for us, the only way to get money was fundraising. We were obsessed with fundraising for the first couple of years. It's a little backwards, but you understand where it comes from having gone through it.

Shmulik: 8:11

A hundred percent. I think that, also, that desire to get the first client, to send the first invoice, to get the first $100,000 of revenue, those are great desires, and you want to be as efficient as possible at achieving them. You also don't want to take shortcuts, and that's that dividing line of you want to make sure that you're onto the right concept that's in a really big market, that has the right unit economics. You have to guide yourself and be able to listen to yourself and to the market as you're exploring those things.

Pablo: 8:15

Going back to the main storyline, I guess my question is you have this idea of using existing data, alternative data, let's say, about who these drivers are through Lyft and Uber. Avis and Hertz and Enterprise, what were they even doing at the time to interview? What was the before and after?

Shmulik: 8:29

It's actually a very frequent story, but people go into an office with their resume and their driver's license and two referrals. You have to call them up on the phone, and there's this huge phone bank to verify their employment. I think that the elephant in the room with Argyle is this other business that you might've heard of before called Equifax, huge credit bureau, and Equifax has a huge business line that does pre-employment screening for this exact reason. It's a huge problem set across every single vertical where you need to hire a lot of people at McDonald's, or Target, or wherever, and you need a service that can verify their previous employment. It just so happens that a lot of this is still done, frankly, manually, but that was the case at Avis as well.

Pablo: 9:15

Okay. You show up with this idea. You have some relationships. What's Step 1? Do you MVP it? Where do you go from there?

Shmulik: 9:22

I'm happy to report the very first version of the Argyle service was a website that an Uber driver just logged into, and they took a screenshot of this fake resume we would build. It would generate from their Uber profile data, but it would just put a certificate on a page. It would have their name and the star rating, and they would take a screenshot of it. It would have the Argyle logo at the bottom, and they would show this screenshot to an Avis clerk on the other side. Because they knew me and they knew what Argyle was, there was a way for them to be like, oh, I know what this screenshot is, but it was a very retro first experience. We were just trying to figure out could we shorten the cycle times? Could we get down to a day, to one connection to get hired for the job? It was the early winnings.

Pablo: 10:12

This is a bit in the weeds, but I think it's important. How did you get in – you went to Avis and you told them about the service. How did you get in front of the drivers for them to even go into this place and get the certificate? Did Avis tell them to do it, or did you market directly?

Shmulik: 10:25

Super low tech again. Super low tech again, which is when Avis sends out a job posting – and it still happens today. On Craigslist, on Jobvite, there's all these requirements for what the job is: print out your resume, come with two references, and so they just added another thing. Get a resume from this website. I believe our first website was actually applicationprecompletion.com, a super long URL. We just added it in as text. Again, it's something that completely doesn't scale, but we're trying to get the first 500, 1,000 people to try it. What we've done over time, we're mapping the origin story and where Argyle is, is everybody that needs income and employment data needs different pieces of it. A big part of the service that we've come to realize is real important is that everybody can build their own resume now and figure out what they want to put on the resume or on the verification report.

Pablo: 11:17

Are you charging Avis at this point, or what are you trying to get out of this first pilot?

Shmulik: 11:21

Yeah, there's billing or invoicing set up at that time, so that was not in place. This is a company – it's still the culture of the company today, but we're really building backwards because we're not industry veterans. I don't come from an income verification background. I have no experience in credit bureaus. I've never worked in any of these businesses, and so we've been so client led from the very beginning. We've just been getting feedback from each one of our clients. The first client that paid us was a business called Level Goals, which I – is still around. They're a small dollar lender, and Level Goals only was interested in doing lending to gig workers. We had already built the first integrations into Uber and Lyft for the Avis use case, but they just wanted to use those same data points but to issue a small dollar loan for $100. I believe they gave us $1 per verification. That was the first paying client, and that is a much bigger business just for the industry, for income verification. That's also become a major business for us as well.

Pablo: 12:35

How much time went through from the first pilot with Avis until you signed that first paying customer?

Shmulik: 12:40

It took a while. The first year of Argyle, I believe, until the late part of 2019 – Argyle was found in 2018. Until the late part of 2019, we had no paying customers. We were just building, and I think we got our first couple of customers in late '19, including Level Goals.

Pablo: 12:58

What was hard about it? What are you building? From the outside looking in, you're like, okay, we've got this resume builder thing. It's got the main KPIs on it. I feel like somebody should pay for that.

Shmulik: 13:05

What is novel about Argyle, what we had to build literally from scratch is connectivity into payroll processors. Some history or some stats to make it interesting, the IRS says that there's about 6,000 registered payroll service providers, which is a really wonky term, but basically, it just means there's 6,000 entities that are allowed to submit payroll on another company's behalf. That's a super fragmented market, and in order to provide income verification, Argyle needs to connect into every one of those platforms. For any business of value to use a verification service, you need to have most of that connectivity built out. The initial wedge and, again, totally on accident just because there was this huge correlation between people that worked for Avis and gig workers, we had this natural wedge at the beginning where we were building out connectivity just into gig platforms so Lyft and Uber and Instacart and DoorDash, Lugg. At the time, Postmates was still around, and that is tough to do if you're doing it all by yourself in the very beginning. You're having to build microservices into third-party applications that you are not under the control of, and so you need to build into their spec.

Pablo: 14:33

How did you think about when to charge? I'm on this question because I think the lean startup methodology would tell you, as soon as you deliver a unit of value, try and figure out what it's worth, especially, as a first-time founder, what you're going in with or what you're hammered with, if you go to an incubator accelerator, all those sort of things. You didn't do that, and you didn't do that with the experience you had in your previous company. It was deliberate. Curious if you could just dive a bit more into how you thought about it back then and where you were trying to get to in that first year before you started charging.

Shmulik: 15:05

I'm a big advocate for having a pilot customer that you're giving the product away for or the feature away for free for a period of time. They're helping to design the first version of it with you, and we still do this today when we release new product. The first couple of people that use the new feature, we give it to them for free for a little bit because we want them to see value in it and for it to be part of – when it becomes part of a general release, then you should start to charge for it. I think it's important to get people using your product and to be able to get feedback on your product, even if it's negative, and then put the pricing part on it. That's been a big part of my strategy, and I think it works at different levels of scale as well.

Pablo: 15:52

It's funny; you talk about design partners. I was actually just watching the review of the AI Pin and also the Rabbit one or whatever, and that was the comment. These products are over MVPing, like the humane pin. It's just coming out half-baked. It's worse with the hardware, obviously. You come out half-baked with all these promises of features in the future. You've just taken the MVP thing too far, right? I think what you're saying is, especially I think with enterprise, the design partner helps you get to figure out what the real MVP is that you can really charge for.

Shmulik: 16:26

Yes.

Pablo: 16:27

The risk is you're building something that actually is never a top priority, never going to become a top priority. You're getting stringed along. What signals are you looking out for to make sure that there's something real here? When you decide to charge for it, the money will be there.

Shmulik: 16:42

To use your AI Pin as an analogy, I like building tools that are just a better mousetrap instead of something that is actually new, and I think the AI Pin is like that's a net new product, which makes it even harder to extract value out of or to price around. Everything that Argyle builds, even in the early days, is just a better, faster, cheaper, more automated version of something that a business is already paying for. Every lender already pays for income verification services and to know income by year. We're just giving you the next generation of it. I think it's easier to price around that because there's already a reference of value with a client, but they're already spending on it. They're not allocating new spend, or having to get a new PO, or get a new approval. I like to say that every business spends on income verification services already. You can go to your P&L. We do this as part of our sales cycle. How much money do you spend on this today? We're going to cut your cost. That’s a very different way of communicating with a client, with a prospect than trying to convince them that they need a widget that they're not buying today. We just have a better widget.

Pablo: 17:52

I think that makes a lot of sense, and it's an important distinction if you're selling B2C or B2B. I think B2B is clearer, and there's already budget allocated and being spent on something. It's not budget risk, it's not demand risk they need to solve for, which is really what an MVP does. It's actually more product and value. Are you actually going to be that much better than that other thing? That just takes time.

Shmulik: 18:14

Put yourself in the mind of your client. He has to pitch it to his boss as well, and the pitch is so much easier internally when you can say I've tried this new product. It's better than the current product we're using today. Here's the price points. Here’s how it works. I've done it a hundred times. I can show you it. I like it. All of a sudden, you've made the pitch so much easier for your buyer or for your client.

Pablo: 18:41

I think that's what – that's another thing I've heard as many times going through these interviews is – in your case, you're a repeat founder, a little bit different, but it's not that different in the sense that, as a startup, you have no credibility. I think sometimes founders forget that. You have no credibility. The larger enterprise you're selling into, the less credibility you have.

Shmulik: 18:56

Correct.

Pablo: 18:57

Unique ways to establish that and, having worked with someone for months as a design partner, definitely can check that box.

Shmulik: 19:03

A hundred percent. Use that lack of credibility, if you can, to your advantage. You're going to be allowed to give out product that's more MVP, to get feedback in a way that the big behemoth in your space can't do, so there's a way to have some asymmetry there.

Pablo: 19:21

Walk me through this first paying customer. It actually wasn't in the same vertical. It's a different vertical, a lending use case. How did you find them? Why did you find them, all the story around them?

Shmulik: 19:31

So many of our clients have found us via Google search. SEO optimization I'm a huge fan of, but Level found us through the internet. If you're trying to verify income for gig workers, there's a lot of search like verify Uber, gig worker income. You can run search queries against that or ads against that, and that's how they came to us. Equifax doesn't verify gig worker income, so there's this cool whitespace that we completely fell into on accident where, our gig integrations, you just could not get that data through a credit bureau. There was something cool that was just happening there organically.

Pablo: 20:14

Were you optimizing for those keywords before you even had a customer in the space, or did they find you a different way and then you realized that was that was a whitespace?

Shmulik: 20:22

Yeah, gig income verification, those are great keywords. They still work today. If you type that in, Argyle comes up.

Pablo: 20:31

How did you turn that one customer into a dozen customers? All inbound or did you start going outbound as well?

Shmulik: 20:36

Yeah. We built out a very small sales team. I also think that, the first 100 clients that we got, I was heavily involved in that. I really do encourage founders stay involved in sales and customer success for longer than it feels comfortable. I still do a lot of it today because I think that hearing from the customer about their pain points, why they're buying your service, what about your service doesn't work, you need that to keep building, and so a lot of the early sales were me. We kept on iterating on the SEO strategy. We found lookalike clients. It just also happens to be that, in this industry, lending, it's a massive space, massive space, and you can start to go out to the largest lenders that leverage Equifax service or a credit bureau service. You can start calling on them and say, hey, I have some results to show you with other clients. Would you like to use this service? It's having these outsized results. That’s how we started – that's how we kept on iterating.

Pablo: 21:37

You mentioned staying as close to your customers as possible, especially on the sales and customer service side. I couldn't agree more. I actually think that's one of the most common mistakes is hiring this VP sales a little too quickly because you want somebody who's a pro, who's going create a great sales organization, and all these sort of things. In fact, there's this company I saw not too long ago. They bootstrapped to two million in revenue, nine people, effectively break even, raised a few million dollars, and the first thing was VP sales, beef of the team, blah, blah, blah. A year later, they're still doing two million in revenue, right? It just completely flatlined because it was too early. This is maybe a bit too specific, but just to give some – maybe make this point more tangible, do you remember some of the things, anything that you would've learned back then because you were so close to these customers, because you stayed close on sales or on customer success? Some of the things that customers might have told you or you might have gleaned from sales calls that actually – because they're subtleties, right? They're small tweaks that sometimes are the difference between something that sells and something that has too much friction.

Shmulik: 22:50

I think a lot of why I start – I still stay so close to clients is they know more about income verification than I do, and so my clients have been educating me on this space and how Equifax does it, how we're different, what type of data they need, how they want it organized, how they want it calculated. It's great to get all of that education from your clients because you're hearing their challenges. You're, able to get from them what they wish was different, and then you can just go build against it. I find myself really being a product manager masquerading as a CEO. Just from a product manager's mindset, it's great to hear the client's problem so you can build the solution, and the closer you can get to the problem, the better. You don't want to be disintermediated from that conversation. I think that's the reason why we've kept our sales team really lean. Even today, Argyle does not have a VP of sales. We have this GM strategy where there's a general manager for each one of our key verticals but all in the purpose of keeping ourselves as close as possible to the client.

Pablo: 23:58

One of the best ways I heard this explained to me was it's really a learning flywheel, right? If you think about, if you have an AE and then a VP sales and then you, you have to hope that message goes through that entire chain before it gets to you and then makes its way to product versus if you're the one that's touching all these things. At the beginning, speed and adaptability is what it's all about. That's really putting yourself there makes that flywheel so much tighter and everything move so much faster.

Shmulik: 24:29

I think this is a podcast for tech founders. You're a tech company, right? You're not a sales company. The thing that Argyle does better than anybody else is build technology for income verification. That's what most of our team is focused on all day. You can have a lean team that is go-to-market and still be really successful. That's not the key differentiator. The key differentiator is the product, the technology that you're building.

Pablo: 24:54

Totally. Walk me through maybe just on the fundraising side because things started happening pretty quick. Bain led your seed. It was two and a half million or so. Then, a year later, $20 million Series A, which is a pretty big Series A, especially just a year after a pretty normal size seed. Walk me through that story. How did you connect with them, and why did they decide to make such a big investment?

Shmulik: 25:16

Yeah. I guess we're going to make some news public, or we're going to give some inside takes. Ajay at Bain reached out to me on LinkedIn. Ajay, if you're listening to this, I still – I believe it was you that reached out to me personally. Yeah. It was a cold email on LinkedIn where Ajay said that he had heard that we were building something really interesting, and he wanted to come and meet me in person. He came to our two-person WeWork that was kitty-corner to the bathroom, so you had to look at everybody going in and out of the bathroom every day as you sat in your cubicle. He came to the office and he sat down. He really dug into the business, and he liked it. I think there's a lot of similarities between what Argyle does for payroll and what some other people like Plaid or Finicity have done for banking. There were some corollaries and an investment thesis around it that really worked. The learning there for me is just be really open to every conversation. Any investor could be the investor for your first round, and some people get picky about who they want to respond to or what order to get investors in. Just talk to everybody. Don't be scared about sending your deck. I certainly wasn't. I think that's the reason Ajay found out about me because somebody forwarded a deck that I had sent to somebody, to somebody, to somebody, then to him, right? It was because I was super open with sharing and wasn't trying to guard the material, and so I think that's how it worked.

Pablo: 26:43

It’s one thing to do two and a half million dollars or so. I think that's they believe in you. They believe in the thesis. Got it. What happens in that year that leads them to do $20 million check? That's a big size check. They must have seen some serious traction or something that led them to really lean in.

Shmulik: 27:00

Two things. I think, between the seed and the A, we were able to form a real business plan around the company we were building. During the seed round, we had one or two clients. We had this Level Goals. We had this primitive product. I wasn't able to articulate yet the industry we were in. When we had reached the A, I had done a lot of market analysis on what is Equifax, and Equifax is going to do something like $2.7 billion this year in income verification services. How big is the income verification services market? Apparently, it's $11 billion a year market. It's a huge market. Because we were able to articulate the market we're in, the business plan we have for that market, and yes, some really good traction and growth and a very sticky product – once you start using Argyle, you just keep using it. Those are the set of metrics we needed to get a real investment check. I think it also – the other part of the Argyle business and it's still true today but it's very true in those days, this is an expensive company to build. Building and maintaining payroll integrations to thousands of registered payroll service providers is not cheap. It's infrastructure, and you have to have the infrastructure working at very high up times. That was part of the investment thesis. Let's invest. Let's build real infrastructure that does income verification. A promise that, if people build it – if we build it, people will come, and that has been – that has panned out for us. It did take me articulating to Bain, to the market that there's a huge business there, that this is not just a fun and games company.

Pablo: 28:45

Do you think that would've been possible for you to do as a first-time founder? I think there's one thing with, hey, I've got two million ARR, five million ARR. Here's an ARR multiple, and you raise an A. It's another thing to say I'm actually over here on ARR, but I want a round that's this big because I'm going to build all the staff and then it'll come. There's a different level of risk that the investor's taking. Do you think that's more suited for a proven founder like you then, or do you think it still would've been feasible as a first-time founder?

Shmulik: 29:14

I think TAM is super important and being able to articulate what is your TAM? How are you tracking against that TAM, or what is your SAM? You need to be able to say those with conviction, and you need to be able to say that your revenue is tied to them and have a good thesis around it. I think that matters more than what your ARR is in the aggregate, or if you're a first-time, or a second-time, or third-time founder, can you articulate the business you have and the industry you're building it for? Can you articulate a plan where you can be 50%, 40% of that market? That's what investors want. They want to know that you're going to be become the winner in a space, and they're going to invest and give you dollars based on that analysis because it's the analysis they're doing when they write the investment memo. You're doing the hard work for them. I think that has a lot more about are you one million or three million, first-time or second-time?

Pablo: 30:13

I love that answer. It’s a perfect segue to my second question, which was what was your story? What was your plan? You’re basically saying, Equifax, they do $2 billion in revenue. We can take some of that. At this point, you're doing gig worker stuff, which is this little ignored niche. What's your plan to take the rest, the kind of core market?

Shmulik: 30:31

What the analysis included is there's Equifax, which is this huge player in this space, but Equifax itself is still a small part of the overall industry. It's an $11 billion market. Equifax is less than three billion of it. What is the rest of this market? The fun answer is that the majority of income verification services happen manually, so our largest competitor is paper, is phone banks, is emails, is scanners. That was such a crucial part of the analysis that to win in this market we – yes, do we need to win against Equifax? Yes, but to win this market is really to replace paper. That’s just such a great concept that your competitor is that legacy analog methodology.

Pablo: 31:19

Just to be clear, these are companies using paper, or this is – who's using paper? How does that generate 8 billion in revenue?

Shmulik: 31:26

Yeah. It's the cost of all the staffing agencies that pick up phones, that send out emails, but it's also a lot of servicing companies. There's a great partner we have today. There's also part of this analysis called Ocrolus, and the only thing that Ocrolus does is scan PDFs and give you the OCR data of them, right? It's a huge business because there's so much paper out there. There's all these sort of businesses that are just providing incomes verification for paper-based models, and that's what the $8 billion is.

Pablo: 31:58

That was -- your story was, listen, if we can just tie into all the payroll, we'll have all the data, and then we can just automate the whole thing. No need to call. No need to email. It'll all be verified.

Shmulik: 32:06

Just a great formula is find a better mousetrap. Build a product that's just a better version of a product that already exists. First, it's a lot easier to sell. There's a bunch of people that already buy the product. It's a lot easier to invest in because it's just like here is the higher margin version of something that's already out there, and that's the formula we were using.

Pablo: 32:28

That's actually a question for me which is, when you're selling to these companies, whether the lenders or whoever they are, are you selling an ROI story, or are you selling just a replacement story? Hey, today you're paying X thousand dollars a month for verification. Pay me half of that. I'll do the same thing. Is that more the pitch?

Shmulik: 32:45

It's both, but we lead with the latter, which is we're a way to reduce costs. We're a more automated solution. You're going to need less staff. I know some people are worried about saying that out loud. Argyle means you have to have less personnel internally or externally. There's less manual review. You're going to just spend less on verification services.

Pablo: 33:04

One thing that I find is hard is when you go in and you say you're going to save X hours, right? Do you make that a dollar value? How do you get as hard as possible on the clarity of the savings?

Shmulik: 33:15

Again, with Equifax, they have a rack sheet, and we've, in a non-sophisticated way, given pretty big discounts against the Equifax rack sheet. We can just articulate savings against your Equifax bill. Another thing that we would do in the early days and we still do it today is we would ask our clients share with us. What are you spending on verification services every year? You spend it already. The reason why we're asking is because we want to reduce your cost, right? Tell us what you're spending. We want to give you a proposal that's cheaper, and it's also a great way to get market intelligence on what price points are, what people – what businesses are spending on this product.

Pablo: 33:52

Those are the two things and you're selling B2B is, one, find a way to kind of get credibility, which is this idea of, obviously, if you're from the space, from the industry, but otherwise, design partners, getting things for free and just being able to get the product to a certain level. The second piece is proving out clear ROI, whether you're adding revenue to them to – or you're affecting KPI of that department or reducing costs, but the harder the better, right? The softer, oh, it's efficiency. Oh, it's time saving. It's four hours a week, whatever. It's just hard to rise to the top of the list and get the adoption you’d need.

Shmulik: 34:23

People like analysis that has dollars and cents in it. There's no reason to get more fancy.

Pablo: 34:28

Let me finish off on these two questions. You raised a Series A. You start building out all these APIs. When do you have a sense that the – it's still a bit of an idea? I mean, obviously, you have customers. You have some revenue, but it's a bit of a thesis. I'm going to invest in all this infrastructure, and revenue will come out the other side. When do you start to get the feeling, okay, know what? This is actually working. My idea that I had on paper is becoming reality.

Shmulik: 34:58

Once SoFi and LendingClub and Checkr and Newrez and Fannie Mae – once we started to get these sort of logos just piloting with us – and the reason why we are where today is because of these investments with clients we made several years ago. It takes 12 months, sometimes 24 months for a client to really use us for their main verification flow, but once these enterprise names start to use our service and give us positive feedback, it was happening in the 2021, ‘22 timeframe. That's when I was like, okay, we have a real business here. It's still subscale. In many ways, Argyle is subscale today if you're comparing us to Equifax, but I think, once those logos started to use us, it wasn't a – the game got much more serious.

Pablo: 35:53

Would you say that's when you felt like you had true product market fit?

Shmulik: 35:57

The product market fit I felt pretty early, even in the gig space, because it just was such an addictive product. Even with Level Goals, you just – they just wanted to use it for every loan they transacted with. I didn't realize how big the business was until we exited the gig space or until we went to all types of income. A good way to know product-market fit is if you have a lot of clients that are addicted to using your product and keep using it day after day, and that we had.

Pablo: 36:28

Perfect. Then the final question we like to end on is, if you could go back, whether at the beginning of this startup or the beginning of your first startup, with one piece of advice, what might that be?

Shmulik: 36:38

Gosh. I don't know if it's advice. I wish that we did – even as much planning as we did, we've rebuilt Argyle several times. I think we're on API v3, and a lot of that is because we were just – we were so interested in just tinkering, building, getting feedback, building again. I do think that that has – at several junction points has slowed us down. We've had to convince clients to pivot over to the new version of our API because we rebuilt it from scratch because we realized it was wrong, and some of that is just we could have been more strategic about the product or the infrastructure we were building and be more thoughtful about it. I encourage people to – it's great to build an MVP. When you build the real version of it, be super thoughtful. It's okay if it takes a little longer than you want it to. It will pay dividends later.

Pablo: 37:27

We'll stop it there, Shmulik. It was a pleasure speaking with you. Thank you for jumping on the show.

Shmulik: 37:32

I enjoyed it.

Pablo: 37:34

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