In this episode of 20 minutes VC, host Harry Stebbings interviews Nathan Wenzel, the pragmatic and sustainably-minded founder and CEO of Simple Legal—a startup that has secured a $10 million Series A funding led by Emergence Capital. Wenzel shares his journey from consulting to founding Simple Legal, emphasizing a slow and steady growth approach that contrasts with the typical VC-driven, rapid-scale model. Despite initially facing VC rejections, Wenzel's persistence and focus on building a solid business led to multiple term sheets and a successful funding round. He discusses the importance of knowing when to accelerate growth and the balance between maintaining low burn rates and aiming for profitability. Wenzel's experience through market corrections has shaped his cautious yet optimistic outlook on startup growth and capital raising.
"So in the hot seat today, I'm thrilled to welcome Nathan Wenzel, founder and CEO at Simple Legal, the startup that helps legal operations, reduce legal spend and improve operational efficiency."
This quote introduces Nathan Wenzel and provides a brief overview of his company, Simple Legal, and its mission to help legal operations.
"Saw that the data was all the same, saw that the software was just universally not great, and then set out in 2013 to launch Simple Legal, the software company."
Nathan explains the realization that led to the founding of Simple Legal, noting the uniformity of data and the poor quality of existing software in legal departments.
"For the first 18 months, we built software. It was just the two of us. We paid ourselves very little. So that was not a fun period of time."
Nathan describes the early days of building Simple Legal, highlighting the financial and personal challenges of developing a software company from the ground up.
"We knew we had something and we knew we just needed to get to the right product market fit."
Nathan emphasizes the importance of achieving product-market fit and reaching key milestones before pursuing aggressive growth strategies.
"WePay helps online platforms increase revenue through integrated payments processing... Pipedrive is the sales CRM and pipeline management software to use."
Harry provides information about WePay and Pipedrive, explaining their benefits and how they are used by the 20 Minute VC team.
"I'm now thrilled to introduce Nathan Wenzel, founder and CEO at Simple Legal."
Harry concludes the introduction by welcoming Nathan to the show and signaling the start of their conversation.
"I think in SaaS, especially in enterprise SaaS, it's probably okay to start that way." This quote emphasizes that a cautious growth strategy can be beneficial for enterprise SaaS companies during their inception phase.
"The idea of move fast and break things really doesn't work if you need to be socks compliant and if you're asking your customers to trust you with their financials." This quote highlights the incompatibility of aggressive growth strategies with industries that require regulatory compliance and trust, such as financial services.
"And so that slow and steady is probably the right approach and then those." This quote suggests that a measured approach to growth is advisable for businesses in sensitive sectors where trust is paramount.
"Anything that's more like an app that you can just start using, I think your best bet there is to just move as fast as you can and get as many people as you can using the product." This quote suggests that for app-based or consumer-facing products, a rapid growth strategy is ideal to quickly gain users and feedback for improvement.
"So I think rather than the sort of rate of growth, it's more about are you improving it?" This quote suggests that the key indicator of healthy growth is continuous improvement, not just the growth rate.
"As long as you're accelerating, no matter how small, then I think, you know, the growth will come, because with SaaS, especially if your churn, our gross churn was near zero." This quote indicates that in SaaS, as long as there is some acceleration and low churn, growth is likely to follow.
"Well, they all said no, so that was pretty easy." This quote reflects the general VC attitude towards slow growth strategies, which is often unfavorable.
"I literally had in the first iterations of the slide deck, that we would just slowly add customers one by one and occasionally get large customers, and then we would start to grow." This quote reveals the founders' initial pitch to VCs, which emphasized a gradual customer acquisition strategy.
"And I think this idea today that VC money is just always around the corner. And if you need more money, you just go and ask for it. It's a dangerous assumption to make." This quote warns against the assumption that VC funding will always be readily available, which may not hold true in market downturns.
"But we always keep an eye on what it would take to become profitable. And we know where that number is." This quote stresses the importance of being aware of the path to profitability, even when spending is increased post-funding.
"Well, I think that depends on the stubbornness of the founder." This quote implies that the anticipation of a market correction may be influenced by the founder's perspective and experiences.
"I think there's just natural cycle to it and that people operate on greed or fear. And when you see the stock market run up, when you see the valuation in the private markets run up, it's going to revert to the mean."
This quote emphasizes the cyclical nature of markets, driven by human emotions, and the inevitability of a return to average valuations after periods of significant growth or decline.
"You look for the wins in the customers that you have. You focus on internal items, you focus on your company, you focus on your customers, on your product."
The quote suggests that during uncertain economic times, a leader should maintain morale by celebrating small victories and maintaining a strong internal focus on the company's core operations.
"We had raised a $2 million seed round at the end of 2015... And then as we approached the end of 2016, we thought, all right, well, the growth has been there. It's time to raise the A round."
This quote outlines the timeline and thought process behind moving from a seed round to an A round of funding, highlighting the importance of demonstrated growth as a precursor to seeking further investment.
"We started pitching, actually, at the Saster annual conference at the beginning of February. And then a month later, we had three term sheets all come in within a day and a half of each other."
The quote describes the successful outcome of a focused and strategic approach to VC engagement, resulting in multiple term sheets in a short period.
"Santi in particular had run a business... And so that was a big part of what we were interested in. Plus, he's seen these kinds of businesses before."
The quote highlights the importance of the lead investor's operational experience and familiarity with the company's business type as critical factors in the selection process.
"We didn't need to raise money. Had we chosen not to raise money, we would have been profitable by the beginning of the third quarter."
This quote underscores the advantageous position of a company that is not desperate for funds, allowing for better negotiating terms and the option to delay fundraising if necessary.
"It's hard to second guess yourself, looking back... And so it's hard to really think about what you would do differently because you would lose the journey of how you got there."
The quote conveys the difficulty of critiquing past actions in fundraising when those actions were part of a unique and serendipitous journey that led to the company's current position.
"And he just laughed at me and said, man, I'm in this for so much more than just the money at this point."
The quote reflects the investor's perspective that the value of the investment goes beyond monetary returns, indicating a deeper personal commitment.
"So I say a short statement and then you give me your immediate thoughts in 60 seconds. I'm very strict."
Harry Stebbings explains the rules of the quick-fire segment, highlighting the need for concise and quick responses.
"To be only the paranoid survive. Andy Grove I think that book changed how I viewed startups, and it basically gave me the reason for why startups can win over these large players that should just dominate them from the beginning."
Nathan explains the impact of the book on his understanding of startups' potential to succeed against established corporations.
"Have you read a high output management?"
Harry suggests another book for Nathan, indicating it's a noteworthy read for those interested in startup management.
"I think a lot of it is just, especially in the startup world, is building that successful business is the key. And I think everyone says that, but no one does it."
Nathan expresses his contrarian belief that there's a gap between the rhetoric of prioritizing business success and the actual actions taken by people in the startup industry.
"I was 35 at the time and I was not the oldest. So I think the idea that YC is really just for 22 year olds is kind of a myth."
Nathan shares his unexpected realization that YC is not just for very young entrepreneurs, as there is a broader age range among participants.
"Well, there's definitely the Saster blog. I've spoken to Jason and told him I needed to sweep the office for bugs because it seemed like everything he wrote was just spot on, aimed right at us."
Nathan appreciates the SaaStr blog for its targeted and pertinent content that seems to directly address his business challenges.
"You know, I disagree with that one. I think the manager's job is really to find how their team can be successful."
Nathan challenges the quick hiring and firing approach, advocating for a more thoughtful process that ensures team members have a chance to succeed.
"Sure. I mean, we hired two account execs very early on as we started hiring people. And so that one, we definitely moved faster on."
Nathan provides examples of positions where he applied a faster hiring process, indicating that certain job roles can accommodate quicker decision-making based on clear performance metrics.
"I think it's all about growth. I mean, we've got the products set. We have our core two components of our product that really lay the foundation for companies to operate their legal departments."
Nathan outlines his vision for Simple Legal, emphasizing growth and scaling up based on their established product offerings and customer base.
"Absolutely. Nathan and I cannot wait to see the future that lies ahead. As I said, I heard so many great things from Leo and from Jason. So clearly the love is mutual."
Harry Stebbings shares his excitement for Nathan's future endeavors and acknowledges the positive impressions shared by others in the industry.
"And if you'd like to see more from us, then you can follow Nathan on Twitter at nwenzel. Nwenzel. Or you can follow me on Snapchat at htebbings with two B's."
Harry Stebbings invites listeners to engage with them on social media for further interaction and content suggestions.