20VC Why Salesforce, SAP and Concur Will Die Scaling 3x and Raising at a $9.2BN Valuation in COVID How OpenAI is Changing the Travel Industry Forever Never Before Revealed Margins on Travel and Expense Management with Ariel Cohen, CoFounder & CEO

Summary Notes


In a dynamic conversation, Ariel Cohen, co-founder and CEO of Navan (formerly Trip Actions), discusses the future of business software with a focus on user-centric design. He emphasizes the importance of continuous innovation and adaptability, especially in the face of technological advancements like AI. Cohen candidly criticizes established companies like Salesforce and Amex for their lack of innovation, predicting their eventual irrelevance if they fail to evolve. He also highlights Navan's strategic moves, such as integrating OpenAI into their services and offering a travel management super app, which has attracted investments from renowned firms like Andreessen Horowitz. Cohen's vision for Navan is to lead by example, demonstrating that modern businesses can achieve high efficiency and user satisfaction by embracing AI and machine learning.

Summary Notes

Innovation and Company Relevance

  • Ariel Cohen believes that companies like Amex and Salesforce are no longer innovating and predicts their demise within five years due to irrelevance.
  • Innovation is crucial for companies to stay relevant and attract talented individuals who can drive further innovation.
  • Without continuous innovation, companies risk becoming obsolete and may face failure.

"In five years from now, nobody is going to use concurrent Amex, nobody is going to use Salesforce. These companies have lost the way around innovation."

Ariel Cohen is making a bold prediction about the future of major companies like Amex and Salesforce, suggesting that their lack of innovation will lead to their decline and eventual irrelevance in the market.

The Success Story of Navan

  • Navan, formerly known as Trip Actions, has been rebranded and is recognized as a leading travel management super app.
  • Ariel Cohen, co-founder and CEO of Navan, has successfully raised over $2 billion for the company from prominent investors.
  • Prior to Navan, Ariel co-founded StreamOnce, which was acquired by Jive Software, showcasing his history of entrepreneurship and successful ventures.

"Just yesterday they announced their rebrand from Trip actions to Navan and Wow, what a show this was."

This quote highlights the recent rebranding of Trip Actions to Navan, emphasizing the significant impact and success the company has achieved in the travel management industry.

Contracting in Modern Business

  • Ironclad is presented as a leading contract lifecycle management platform, designed to streamline and simplify the contracting process for modern businesses.
  • The platform is praised for its flexibility and powerful AI and workflow capabilities, processing over a billion contracts.
  • Ironclad's clients include L'Oreal, Staples, Mastercard, and other innovators, indicating its widespread adoption and effectiveness.

"It's 2023. We need contracts to keep pace with the speed of modern business, and that's where ironclad comes in."

The quote emphasizes the necessity for contracts to evolve alongside the fast-paced nature of contemporary business, highlighting Ironclad as a solution that meets the modern demands of contract management.

Harvard Management Company's Investment Philosophy

  • Harvard Management Company (HMC) has managed Harvard University's endowment for nearly 50 years, with a focus on long-term investment strategies.
  • HMC is known for being one of the first institutional investors in venture capital, indicating their innovative approach to investment.
  • The company seeks to partner with both new and established fund managers, providing resources and insights to help them succeed.

"Harvard Management Company is constantly seeking out the next generation of great investors and entrepreneurs."

This quote outlines HMC's commitment to identifying and supporting upcoming talent in the investment and entrepreneurial space, demonstrating their forward-thinking investment philosophy.

Personal Learning Preferences and Education Advice

  • Ariel Cohen describes himself as a self-motivated learner who engages deeply with subjects that interest him, leading to either exceptional or failing grades.
  • He advises his children not to rush into college at 18, suggesting travel and exploration to better understand their interests and the evolving landscape of AI and machine learning.
  • Ariel's personal learning style and advice reflect a non-traditional approach to education and career planning, emphasizing passion and relevance over formal education.

"I can only learn stuff that really interests me. The reality is that I think that most of the things that you learn at school and universities are just not interesting."

Ariel Cohen expresses his selective learning style, where he excels in subjects that captivate him but struggles with those that do not, challenging the traditional educational curriculum's relevance to individual interests.

Innovation and Agility at Scale

  • Ariel Cohen discusses the importance of making bold decisions and being willing to reinvent aspects of a company to maintain innovation.
  • He shares how Navan has continuously evolved, including shifting resources during COVID-19 from travel to expense management, despite some team members' resistance.
  • Cohen emphasizes the need for courage to make changes and the acceptance of potential team turnover as a consequence of driving the right decisions for the company's future.

"You keep this innovation. If you have the courage, first of all, to look at the mirror and come and say, okay, what we had done up until now was relevant back then with our understanding and the technology back then, but maybe it's time to kill it and change it."

Ariel Cohen stresses the significance of self-reflection and the bravery required to discontinue outdated practices in favor of innovation, which is key to a company's ability to adapt and thrive.

Decision-Making in Product Development

  • Ariel Cohen discusses the challenge of differentiating between pursuing a new product and avoiding distractions that could derail focus.
  • He emphasizes the natural human resistance to change and the importance of making tough decisions that may involve redesigns or shifts in priorities, even if they are last-minute or unpopular.
  • Cohen believes in the importance of not letting fear prevent a company from making necessary changes, even if it means losing team members who are resistant to those changes.

"I think people by default are afraid of change and they will do whatever it takes to not make a change."

This quote from Ariel Cohen highlights the inherent fear of change that exists even within innovative companies and underscores the importance of overcoming this fear to make decisions that are in the best interest of the company's future.## Lean Startup Principles in Decision-Making

  • Ariel Cohen discusses the application of lean startup methodology to project evaluation.
  • Emphasis on starting with a hypothesis and measuring its validity through metrics.
  • Importance of being honest with oneself about the success or failure of a project.
  • The concept of pivoting versus killing a project based on evidence and strategic importance.

"First of all, I think that I will bring it back to maybe the lean startups kind of concepts. I think what I really like in this concept is that you start something with a hypothesis and you start to measure it. And your entire purpose is not to develop the product, but to actually examine your hypothesis."

This quote explains the lean startup approach of beginning with a hypothesis and using data to validate it, focusing on learning rather than just product development.

Determining Project Duration and Strategic Importance

  • Discussion on the appropriate duration to test a hypothesis before making a decision.
  • Balancing the need for sufficient data with the risk of prolonging a failing project.
  • Using company strategy to guide decisions on whether to pivot or double down on a project.
  • Example of Navan Rewards program and the decision to pivot and improve despite initial lack of use.

"Too long based on how important it is for your strategy, if it is fundamental for your strategy. You define your strategy as a company and you are saying this thing."

This quote highlights the importance of aligning project duration and commitment with the company's overall strategy and the significance of the project within that strategy.

Responding to Crisis: COVID-19 Impact

  • Ariel Cohen recounts the immediate impact of COVID-19 on business revenue.
  • The necessity to quickly reassess the company's viability and strategic beliefs.
  • Decision-making process during a crisis, including layoffs and cost-cutting, while doubling down on innovation and market strategy.

"March 2020, we lost all of our revenue. Obvious to me that we lost product market fit overnight."

This quote captures the critical moment when the pandemic erased the company's revenue, prompting a reassessment of the product-market fit.

Raising Funds Amidst a Pandemic

  • Strategies for expanding the business and raising funds during COVID-19.
  • Leveraging the situation for change management and convincing clients to sign up.
  • The challenge of selling a travel product during a time when travel was halted.
  • Successful pitch to investors based on the belief that travel would eventually return.

"But think about it. If you convince them it was not, how to convince, the travel will come back. What's better than to do change management from this antiquated concurrent GBT, American Express GBT, nobody likes it."

This quote illustrates the strategy of using the pandemic as an opportunity for change management, convincing potential clients to transition to their product during a downtime in travel.

Valuation and Future Growth

  • Discussion on company valuation and the potential for future growth.
  • Justifying a high valuation based on the addressable market and the inefficiencies of current market solutions.
  • The belief that capturing the entire market for business travel and expense could justify the valuation.

"People are spending $1 trillion on travel a year. Most of this is not managed."

This quote provides context for the potential market size and the opportunity for disruption, which underpins the company's valuation and future growth prospects.

Transitioning to a Super App

  • The decision to change the company name to reflect a broader vision.
  • Challenges associated with evolving from a point solution to a super app.
  • The importance of creating a user-centric product that simplifies recurring tasks and utilizes data effectively.

"First of all, it's to bring it all together, right? Think about it from a design perspective."

This quote addresses the complexity of integrating various services into a cohesive super app experience, emphasizing the need for thoughtful design and user experience.## Machine Learning Algorithm Implementation

  • Ariel Cohen discusses the implementation of a machine learning algorithm six years ago that predicts and facilitates travel bookings.
  • The algorithm offers a seamless booking experience, aiming to be the best all-in-one travel expense and payment solution.
  • Emphasis on creating a unified app that provides a valuable experience to users, not just a collection of disconnected features.

"Our machine learning algorithm, which we've implemented six years ago, knows that. So why not just asking you rebook the trip, the trip that you are always doing, just book it."

The quote explains the proactive approach of their machine learning algorithm in facilitating regular travel bookings, emphasizing the ease and automation in the user experience.

Industry Innovation and Competition

  • Ariel Cohen reflects on the past innovations by companies like SAP and Concur in the '90s and how they treated workflow and approvals.
  • He suggests these companies have become outdated and unable to innovate or attract talent necessary for innovation.
  • Cohen predicts the decline of these companies due to their inability to adapt to new innovations.

"These companies have lost the way around innovation. They don't know anymore how to innovate."

This quote highlights Cohen's view that companies like SAP and Concur have become stagnant and are no longer leading in innovation within the industry.

The Evolution of Software Companies

  • Ariel Cohen discusses the evolution of software companies from the '90s to the present, citing Salesforce, ServiceNow, and Workday as innovators in their time.
  • He criticizes Salesforce for becoming similar to SAP, despite initially positioning itself as a radical alternative.
  • Cohen suggests that companies need to embrace software solutions that are powered by AI and are user-friendly to remain relevant.

"Now people want software like OpenAI, like Slack, like Navan."

The quote emphasizes the demand for modern, AI-driven software solutions that enhance user experience and efficiency.

Growth Strategies and Market Dynamics

  • Ariel Cohen questions the sustainability of growth through mergers and acquisitions (M&A) and sales channels.
  • He shares his experience at HP and how the strategy of acquiring companies and pushing them through existing channels is not a long-term solution.
  • Cohen believes that genuine innovation and technological breakthroughs are the key to a company's survival and growth.

"I think they do grow through M&A. That's the only power that they have."

This quote criticizes the reliance on M&A for growth, suggesting it lacks the innovation needed for long-term success.

  • Ariel Cohen expresses Navan's commitment to independence and innovation, turning down acquisition offers to continue developing their unique software solutions.
  • He mentions the inability of larger companies to retain innovative teams post-acquisition, using Salesforce's acquisition of Slack as an example.

"We are not for sale and there is a reason for that."

The quote conveys Navan's dedication to their vision and mission, prioritizing innovation over potential acquisition offers.

Avoiding Pitfalls and Sustaining Innovation

  • Ariel Cohen shares his concerns about becoming complacent like other older companies and emphasizes the importance of continuous innovation.
  • He praises companies like Microsoft for their ability to reinvent themselves and remain relevant.
  • The goal is to innovate in a way that creates value for customers and users.

"I hope that we will be able to pull this off to continue to innovate, even in our ten years anniversary and our 20th anniversary and so on."

This quote reflects Cohen's ambition for Navan to maintain a culture of innovation well into the future.

Integration of OpenAI into Navan

  • Ariel Cohen details the integration of OpenAI into Navan's chatbot, which now handles a significant portion of support interactions.
  • The bot improves operational efficiency by automating tasks like flight changes, hotel refunds, and expense itemization.
  • Cohen anticipates that the bot will handle the majority of contact center interactions, allowing human agents to focus on complex issues.

"We decided to kill what we have to use the infrastructure. The bot is the bot, the UI is the UI."

The quote explains the decision to adopt OpenAI's technology, even if it meant replacing their existing systems, to improve the bot's capabilities.

OpenAI's Effectiveness

  • Ariel Cohen attributes OpenAI's effectiveness to its extensive data set and ability to understand context, surpassing previous AI technologies.
  • He provides examples of how OpenAI's technology demonstrates a more intuitive understanding of user requests.

"They infused it with so much data that now magic happens."

This quote describes the transformative impact of OpenAI's large data set on the performance of AI technologies.

Financial Performance and Efficiency

  • Ariel Cohen boasts about Navan's high gross margins, which are uncommon in service-oriented businesses.
  • He credits these margins to the efficiency brought about by their technology and innovation.
  • Cohen implies that businesses that embrace innovation will prosper, while those that do not will fade away.

"Our gross margins today are 75%. By the end of the year, probably it will get to 80%."

The quote highlights the financial success of Navan and suggests that their business model is highly profitable due to their innovative approach.## AI's Impact on Business

  • AI is revolutionizing business operations and becoming a core part of companies' strategies.
  • Companies that fail to adopt AI may not survive in the long term due to the competitive disadvantage.

AI is eating the world and eating software, and companies that will not join the party, will not be around.

This quote emphasizes the idea that AI is becoming an essential component in the business world, and companies that do not incorporate AI into their business models risk obsolescence.

The Importance of Operational Infrastructure

  • The "moat" of a business is not solely based on technology but also on the operational infrastructure that supports global customer service.
  • The ability to adapt and integrate new technologies into existing infrastructure is crucial for maintaining a competitive edge.

I think the moat that we've created is actually not around that technology, the moat is all of the infrastructure here that allows us to go globally, to service our customers globally, to provide one Tne report for all of the companies that are using us.

The quote explains that the competitive advantage of a business lies in its global operational capabilities and not just in the technology it uses.

Leveraging Gross Margins for Growth

  • Gross margins can be strategically used to increase market reach and customer acquisition.
  • Introducing a new cost structure and loyalty programs are ways to reinvest margins for business growth.

So I think if you are basically talking, should I use my gross margins to reach more people? The answer is yes.

This quote indicates that the speaker believes in using the company's financial advantage to expand its customer base and market presence.

Customer Experience and Loyalty

  • Providing a superior product and service can significantly enhance customer loyalty and retention.
  • Loyalty schemes are designed to reward customers for their continued business and for making cost-effective decisions for their companies.

We have very loyal customers and install base, but I want them to feel great that they didn't compromise if they booked through their corporate recommended solution or enforced solution.

The quote highlights the importance of making customers feel valued and ensuring they do not feel compromised by using the company's services.

Understanding Retained Customers

  • Retained customers are those who consistently choose the company's services and align with the company's budget goals.
  • The company actively tracks customer behavior and engagement to understand retention and address any issues that may cause customers to look elsewhere.

We actually know if you booked outside. So we know if you booked outside, if you know that you're getting 100% what we are calling inside attainment of the company's budget, we know that we are retaining the employees and the customers time and again.

This quote explains how the company measures customer retention by monitoring whether bookings are made through their service or externally.

Attainment Rates Across Market Segments

  • Attainment rates vary by market segment, with higher-end markets achieving closer to 100% attainment.
  • The company's attainment rates are significantly higher than industry standards, indicating a strong customer base.

I think that it goes by a segment more of the higher end of the market, what we are calling named enterprise and even mid market will get 100% attainment.

The quote suggests that the company's success in retaining customers is particularly strong in the higher end of the market.

Personal Reflections on Success and Fatherhood

  • Personal success is defined by making one's children proud.
  • Being a great father is a top priority, even while managing a company.

I would say making my kids proud. That's the most important thing for me, that they will be proud of me.

This quote reflects the speaker's personal values, where family pride is considered a measure of success.

Missed Opportunities and Lessons Learned

  • In hindsight, investing more aggressively during COVID could have led to greater market share.
  • Past hiring mistakes have led to valuable lessons in company culture and recruitment.

I think that had I known how things around travel will happen after Covid, I would have invested even more and be more aggressive on gaining more share during COVID.

The quote indicates regret over not capitalizing on the market opportunities presented during the COVID pandemic.

Hiring Philosophy and Market Predictions

  • Embracing hiring mistakes and correcting them quickly is key to a successful recruitment strategy.
  • Predictions for the future of travel suggest that traditional companies may not survive while tech-driven companies will thrive.

Hiring? First of all, embrace the fact that you're going to make mistakes and just do the correction fast.

The quote emphasizes the importance of being adaptable and responsive in the hiring process to maintain a strong team.

Venture and Future Efficiency

  • The venture ecosystem can be frustrating due to its echo chamber nature, suggesting a need for broader perspectives.
  • AI is expected to increase efficiency and intelligence in the future, much like calculators did for mathematics.

I think there is something powerful here, which is the echo kind of chamber, but it's also what kind of creates a lot of frustration.

This quote critiques the insularity of the venture capital community and suggests the potential for improvement by considering diverse viewpoints.

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