In the inaugural 2020 Founder Friday episode of the 20 Minute VC, host Harry Stebbings interviews Kurt Rathman, the driven CEO and founder of Scale Factor, a startup revolutionizing bookkeeping through automation. Rathman, a born entrepreneur and former KPMG auditor, shares his journey from an 18-year-old grappling with real-time inventory for his high school business to raising over $105 million from top-tier investors, including Bessemer, CO2, and Canaan Partners. Rathman and Stebbings discuss the importance of founder obsession, the art of extracting value from investors, and the challenges of scaling culture and recruiting top talent outside traditional tech hubs. Rathman emphasizes the CEO's role in proactive fundraising and team building, advocating for face-to-face interactions and quick, scrappy problem-solving to maintain a vibrant company culture and effectively manage growth.
"My word. I'm so excited for our first founder Friday episode of 2020 here on the 20 minutes vc."
This quote expresses Harry Stebbings' enthusiasm for the new year of podcast episodes and sets the stage for introducing the guest.
"To date, Kurt has raised over $105,000,000 in funding with scale factor from the likes of Byron Dieter at Bessemer, CO2, Canaan Partners, Stripes Group and Firebrand, just to name a few."
This quote highlights the significant funding raised by Kurt Rathmann for his company, ScaleFactor, and names some of the investors involved.
"I do also want to say a huge thank you to Byron at Bessemer, Michael Gilroy, Thomas Lafonte, and John Fine for providing some fantastic questions suggestions today."
Harry Stebbings expresses gratitude to individuals who contributed questions for the interview, enhancing the discussion's value.
"I'm a born and raised entrepreneur. It's very early on that I realized that I thought this way, I was interacting on some avenue to create value."
Kurt Rathmann explains his innate entrepreneurial spirit and his early realization of his unique approach to creating value.
"The problem that we're solving at scale factor really started when I was 18 years old and I had a company in high school."
This quote traces the origins of the problem ScaleFactor aims to solve back to Rathmann's teenage years, highlighting the long-standing nature of his commitment to finding a solution.
"I ultimately think you have to be an expert, and you can become an expert really fast."
Kurt Rathmann emphasizes the importance of expertise in the founder's journey, suggesting that it can be quickly acquired or built upon from previous experiences.
"It took three years to do that before we were operating for three years before I ever took any type of venture money."
This quote reveals the careful and considered approach Rathmann took before accepting venture capital, indicating a focus on solidifying the company's foundation first.
"Our B and C rounds were preempted. That allowed us to make the decisions possible to expand our time frame and the problem that we were solving."
Kurt explains how preemptive funding rounds enabled the company to plan for a longer-term strategy, which was necessary for the complex problems they were addressing.
"Between throttling these elements of growing and running a VC backed startup, this is not a normal game."
Kurt describes the unique challenges of managing resources in a startup environment where funding can significantly affect the pace and direction of growth.
"The biggest value add is the experience and the pattern matching. From seeing this before, I have a philosophy and a thought, and there's many other folks that have taken a stab at this."
Kurt identifies the experience and insights gained from investors who have seen similar business scenarios as the most significant value beyond the financial investment.
"It's spending time together. And then these things come out and organically start to come out."
Kurt emphasizes the importance of spending time with investors to naturally develop a collaborative relationship that facilitates value extraction.
"It's my job to make sure that the board and that the investors are continually working for the company."
Kurt conveys the proactive approach he takes to ensure investors are actively contributing to the company's success.
"It's a constant learning journey, and it's a constant reevaluation of where we're at today and where we're heading."
Kurt speaks to the evolving nature of board management and the importance of proactive leadership in that space.
"Energy physically hits you when you walk into the room and the building at Scalefatter, and you end up just wanting more of it."
This quote, although incomplete, suggests that the company's culture and energy are infectious and leave a lasting impression on visitors.
"I believe that when you walk into the building, we've got to do a number of things to make it a safe place for you to be the most creative and ultimately do the best work of your entire life and your career."
The quote highlights the importance of making the workplace a conducive environment for creativity and productivity, focusing on sensory and interpersonal elements.
"But one of the things that we've done since the very beginning of scale factor, maybe a couple of months in, is really celebrate our wins as a team."
This quote explains that celebrating wins has been a foundational practice at ScaleFactor, aimed at fostering team spirit and recognition of achievements.
"And I try to approach the problem that way instead of bring a lot of emotion to the problem, because that's where things start to go off the rails with performance management and ultimately your ability to dust somebody off versus just leave them on the floor."
The quote conveys the strategy of using factual, data-driven conversations to manage performance effectively while also caring for team members' well-being.
"And so as you scale and you do all these things, you have to steer it, but it takes on a life of its own, and it comes back to us."
This quote emphasizes that while company culture naturally evolves, it is important to guide it and react quickly to maintain it during periods of growth.
"You can uproot anybody from whatever location if you're willing to put in that work right?"
The quote suggests that with enough effort and the right approach, it is possible to attract and recruit top talent from any location, countering the belief that only tech hubs can secure the best employees.
"You got to get on a plane. You got to be willing to get on a plane for almost everything."
This quote emphasizes the importance of personal effort and commitment in the recruitment process, suggesting that CEOs should be proactive in meeting talent and investors in person.
"You got to be face to face with people. You got to look eyeballs to eyeballs, you got to shake their hand."
This quote highlights the significance of physical presence in forming meaningful business relationships, which cannot be replicated by virtual means.
"The entire landscape is changing. You're seeing where maybe ten years ago, investors would not want to invest out of their jurisdiction... I think the world's changed."
This quote reflects the shift in investment practices, where geographical barriers are becoming less significant due to advancements in communication technology.
"Would you have me in person? Because if you'd have me in person, I would gladly be there in person."
This quote demonstrates a preference for in-person engagement over virtual meetings, emphasizing the belief that physical presence leads to stronger relationships.
"My biggest strength is just connecting with people... The biggest weakness is... I can spend a lot of time creating the connection."
This quote reveals the speaker's self-perceived strength in building relationships but also acknowledges the downside of potentially neglecting other responsibilities due to time spent on these connections.
"It's becoming less and less now, but in 2014, when skill, it was the space that we're pioneering... you've got to figure out a way to turn that and kind of throw that log of disbelief onto the fire and let it keep powering you."
This quote illustrates the initial skepticism faced when pioneering a new industry space and the determination required to convert disbelief into motivation.
"We want to become a de facto solution that you run your small business on, and we want to start to feel like we're making an impact on the entire small business ecosystem."
This quote outlines Scale Factor's ambitious goals to be a leading platform for small businesses and to influence the market as a whole.
"The first investor is a close friend of mine... He saw early on that he would invest in this person that would do everything it took to make a return on that investment."
This quote underscores the significance of personal relationships and trust in securing early investment, particularly from individuals who know the entrepreneur well.