From Humble Roots to Raising over $2.5B in funding With Kabbage Co-Founder Kathryn Petralia

Rui: If you’re looking for stories, strategies, and actionable advice on how entrepreneurial careers start, you’re in the right place. I’m your host, Rui, and this is the Startup Journey Podcast, the show where every week I sit down with different entrepreneurs, experts, and thought leaders to dig deep into what it takes to get a startup off the ground.

Today, I’m joined by Altar co founder Paolo to sit down with a very special guest, Kathryn Petrović, named by Forbes as one of the top 100 most powerful women in the world in Kathryn is the co founder and CEO of Cabbage, a fintech offering services to SMEs that was acquired by American Express last year.

Kathryn, thank you so much for being with us today. How are you?

Kathryn: I’m doing great. Thank you for having me.

Rui: Perfect. So, I mean, raising 2. 5 billion, getting acquired by American Express. Well, some would call it a successful business, right? So I would like to jump straight at it and start by asking, how did the idea for Cabbage came up?

Kathryn: My co founder, Rob, actually had the idea for Cabbage. Everybody presumes it’s going to be a story about, Oh, we were running a small business and we couldn’t get financing, so we started this company, but it really had nothing to do with that. It was all about the technology. eBay had recently launched an API that allowed third parties to get seller and transaction Folks selling on eBay.

And he thought, wow, I wonder if you could use that data to underwrite a loan to a small business. So they called me up. I’ve been in FinTech for a long time, even though it wasn’t called that then. And I said, well, that’s pretty cool. I love using technology to solve interesting problems and to do new things.

And so that’s how Cabbage was born. And, you know, we started out just making loans to eBay sellers. If you had a pulse. and an eBay account, then we’d give you 500 bucks, pretty much. That’s how that worked. I have to say, a lot of them didn’t pay us back, but we figured out who would pay us back over the years and then built out the platform to serve, to provide lots of other cashflow management solutions to small businesses.

And then there’s a pandemic and, and then we sold American Express. So that’s the short story.

Rui: So quite interesting. There’s, there’s a roadmap in there for sure. Right. Starting with the eBay accounts. Then up to the moment where you are today, I’m sure there were a lot of hurdles in the way because looking at the company now, it looks like it was straight up, but I’m sure that was not exactly the case.

Let me start by asking again, when was the moment you decided to go 100 percent in? Because your co founder called you, right? He had this idea and was it, were you in love with the idea? Right from the get go, did you jump straight in or was that a process there?

Kathryn: You know, it’s not just about the idea. I did think the idea was interesting.

I was actually at another startup that I had not founded, but was, you know, their early days and for something about the idea just seemed like the right thing to do. And also my co founder, Rob, he seemed like a great person to start a company with, and, you know, we laughed a lot and, you know, had a lot of fun and cared about the same things.

And, you know, it’s interesting. You don’t. You don’t just quit your job and then all of a sudden you spend 100 percent of your time on this new business. Like, you’re kind of working on it, you might be working on some other things, you’re not sure what you’re going to do. And then one day you wake up and you’re like, oh, I guess I do this full time because I do this all the time now.

So it’s sort of this gradual process.

Rui: Perfect. Yeah, that, that I can, I can relate to. And how did you meet your co founder, Kathryn?

Kathryn: We actually met in 2005. Um, his company was doing intellectual property discovery work with, with customers and I was his customer. So we’re actually in a couple of patents together from 2005 from that work that we did together.

And that’s how we met.

Rui: Perfect. Let’s talk a bit about the, the road to product market fit. Can you share some of the key moments from the journey between the moment where you had that first version of the product to the moment that let’s say you raised your first meaningful round?

Kathryn: We, it’s product market fit is a really funny story for Cabbage.

I always say that we’re in the world’s second oldest profession. We never had to convince anyone that they needed money. All small businesses need access to capital. When you’re selling money, it’s a really easy sell. The question is, can you sell money to the people who. Are going to return it to you one day.

And so for us, it’s funny. We, there’s a story about that too. We had an angel investor early on who said, why are you guys building this technology platform? Why don’t you just call up a bunch of businesses and see if they want money. We’re like, we’re not trying to prove that people need money. We’re trying to prove that we can build a system that can automate it for people who don’t normally have access to these types of.

Platforms and products and what was really interesting is we didn’t know how big the problem was and we didn’t know how important it was We didn’t realize how few small businesses are being served in the u. s. There are 30 million small businesses 90 of them have fewer than 20 employees 80 have fewer than 10 we’ve always served that long tail but banks have a hard time serving them because they just don’t have a a tool to do it.

It’s expensive. It’s costing the same amount of money to make a 5 million loan as a 50, 000 loan. So why wouldn’t they just focus on the 50, the 5 million loans? That’s how they’ve looked at it. It’s not because banks are bad. It’s not because they don’t care about small businesses. They just didn’t have the tools to do it.

So that’s what we wound up building. And we all know how important small businesses are to local economies.

Rui: Yeah, absolutely. Absolutely. Cool. So changing gears a bit, just because there’s, there’s to your point. Yeah. Absolutely. Money is really important for every business in the world, right? Especially when we’re talking about and because we speak mostly with entrepreneurs starting a business It’s it’s really a critical moment and there are some common misconceptions there So can you share some of the most important lessons you learn on how to deal with investors meaning raising money?

Since you got that beautiful figure of 2. 5 billion and you went through the whole series

Paolo: We covered a

Kathryn: good part of the alphabet, a lot of letters in the alphabet. I think we, we raised through series app that, that was, um, the first, the first investment we received, actually, we got into this little local event called Venture Atlanta.

We’re based in Atlanta. We got some, they were kind of some scary investors who were a little bit anxious, but didn’t know who they were, but they gave us a term sheet and we’re like, well, okay. But we use that to get to another term sheet that, you know, we were more excited about and wound up going back to another investor that we had met with previously for our seed round and had turned us down.

And we said, well, here we are, we’ve got 50 customers on the platform. The system works. And he was like, I’m in. And what he wanted to know was not, I mean, yes, it is a bit of a product market fit question, but it’s, can you do it? Can you actually get people to sign up? Can you approve them? Can you build a system that can do the thing you said it could do?

And it turned out we could. And so that’s what led to the very first investment. And then, you know, they came pretty quick after that because, you know, the rounds are smaller, you’re scaling up, you’re spending money. And so we were really fortunate to have some great investors who knew FinTech. And, you know, what they said every time was, you know, they are investing in the concept and the opportunity, but they’re also investing in the team team is really important.

We always said that they wanted to join the party because, as I mentioned earlier, you know, we always had a good time together, and we thought it was, you know, fun to do the work, and I think that was contagious.

Rui: Yeah, 100%. There I have a bunch of follow ups already because you mentioned a couple of interesting things.

I will start by asking that angel investor that refused you the first time. What did you have then? What did you present to him that made him refuse? Because there is a point to be made here around investors looking for traction and your ability to execute much more than just a good idea. So what did you have on that first engagement?

Kathryn: Basically, we pretty much had a napkin, like we just had an idea and we’re like, this is it. What do you think about this idea? And so that’s a reason a lot of people, you know, said, no, we wound up just you know, over time, just cajoling and coercing lots of people. I think a lot of people invested in our seed round because they were just exhausted by us asking them for money.

They’re like, fine, fine. Here’s some money. So, um, it’s really hard to raise money on an app.

Rui: Perfect. And the persistence there obviously plays a big role as well. We talk about this often because we work mostly with entrepreneurs and the common misconception is that you can go to an investor with a brilliant idea and they will immediately understand.

Obviously, it’s not the case, um, moreover today, right? With the no code and local platforms where you get 1000 pitches per day. So even for an investor, it’s, it’s really hard to separate the wheat from the shaft for them, or what’s the, the biggest turnover and the quickest one. And we often talk about these concepts of Also for the entrepreneur, him or her being able to measure user action and not intent, because even if he does a survey, even if he shows a waiting list of 70, 000 people saying that you’re interested in a product and then actually going there and buying the product are that two very different things.

And investors obviously will use this to understand if a team is able to execute. And that’s where they’re going to put the money. So thank you. So, Paul, I don’t know if you have any questions related to, to, to investing still.

Paolo: No, I have one question not related from the seed, but then when, when scaling up straight question.

From series A onwards, it’s just about the numbers and the economics that you bring, or there’s something really that investors pay attention to in order to give you money.

Kathryn: I think of course they want to see that the numbers are moving up. I mean, no pro forma, no P& L ever looks like this. The way you think it’s, you say it’s going to, you’re always behind, always, always, always.

It’s just, it’s, they’re, they’re not expecting you to hit all the numbers necessarily, but they do want to see growth. And I think that’s important, but they also look at the market. Like who else is out in the market? What are they doing? How are they doing? You know, what are the connection points between this business and the other businesses?

And we were fortunate to be sort of growing up at the same time as a lot of other FinTechs who were serving small businesses, whether you think about a company like bill. com or like Coupa or Square. PayPal, of course, was doing really well and doing a lot in the space. And I think they could see that, that those, that was our cohort, that, that was, those were the teams against which, against which we were playing.

Rui: Thank you very much. So changing gears again, who did you have with you in the early days? So what was the team composition besides you and Rob?

Kathryn: So we had a third co founder whose background was technology startups, but also was great on the money business. And then our first hire, remember we. We really had a hard time hiring someone in technology, somebody to build our stuff because we were all non technical.

We all were comfortable with technology. We knew how to identify technology solutions that could solve business problems, but we didn’t know how to write code, how to architect a system, what platform should we use, all that kind of stuff. So we hired this It’s unbelievably bright, super insane dude who built the whole thing by himself in six months.

It was crazy time. Um, and we kept thinking, wow, this is taking so long. What is taking you so long? And in retrospect, we’re thinking, man, how did you do that by yourself so fast? And we, I remember, I guess we hired him in late 2009. And we had our first demo ready, I would say, by late spring of 2010, and we did a demo, we went to this conference called Finivate, and it was only a couple years old at the time that we went to it, and I always enjoyed this conference because I liked learning about new technologies, but what was terrifying for us is we were doing a live demo.

Who does a live demo? Dumb people do live demos, but we did a live demo. And so like, I’m in the back before we’re going on and I’m like testing it over and over and over again, just to make sure that it’s going to work. Perfect moment

Paolo: for the system not to work. It

Kathryn: worked though. It worked on stage. And what was funny is we were right behind somebody named Aaron Patzer, who had founded a company called Mint that was later acquired by Intuit.

And he was like, at that moment in time, the godfather of FinTech. And we’re like, Oh my God, we’re going on right after this guy. And we’re doing a live demo and it’s going to suck. Suck And anyway, and it worked and it was cool, you know, and we never did a live demo again after that. But anyway, it was, um, it was a great experience, you know, to get through that.

And it was great that Mike build that himself. We also hired a super young kid, um, who was pretty much fresh outta school who could do just about anything and wound up, um, being a critical part of our data science and database engineering teams. We needed somebody to help us on the finance side, somebody who was a financial operations person.

So we had that person early days and we wound up hiring another engineer. That was it for a while. And then, you know, then after the series, they were like, well, we got to start hiring people. And so, so we did. And that was, you know, uh, that growth was pretty rapid and, you know, in startups, there’s a lot of turnover because you bring people on, you know, for that moment in time.

And then sometimes. The people don’t want to be in the next moment in time or sometimes they’re not ready for the next moment in time and you have to bring in another person. So there’s a lot of change. I would say I’ve spent most of my time over the last 12 years, even including now at American Express, dealing with people, managing people, you know, finding the right people, getting people in the right place to be successful, you know, resolving disputes, making sure everybody has what they need.

I think people are your business and they’re really, it’s a really important part of running it.

Rui: There’s, there’s the soundbite I’m going to use for the teaser here that I already have it. That’s, it’s all about the people in the end. I agree 100%. I have a bunch of followups to deconstruct here. So the first starting, I’m interested in knowing about Mike, because as you can imagine us being a product and software house, working mostly with entrepreneurs, we actually are this tech partner to a lot of people starting now.

So how was it that you found Mike? So what was that like? Where was he? How was the connection made? Because this is a valuable lesson for anyone in the ecosystem. We actually advocate that if you can find a technical co founder or a CTO from the get go, you should. Because it’s really hard for non technical people to make the bridge with the technology part.

Paolo: Especially with just an idea or a very small product at the beginning that is not able to convince a good shot in technology.

Kathryn: I think we’re really lucky because I had worked with a woman who had been an amazing recruiter at a company where I worked previously, and her focus was on hiring engineers.

And so she had gone off on her own, was doing her own consulting work, and we hired her to help us. first people and that was really, really, really important. And she’s the one who brought us a slate of candidates and we talked to them all. And I liked the one that was a little different, you know, somebody who was quirky and I thought would sort of fit into the, you know, hectic and frenetic environment that is a startup.

Rui: That tells the whole story. Thank you for that. So actually having that person serving as somewhat of a headhunter and then doing the recruiting based on a somewhat of a match, a personality match, which I agree 100 percent at the start, it has to be otherwise. There will be just too much trouble to handle if, and if you already have those blockers on, on personality, it’s going to be even worse.

Perfect. Then we had a lot of

Kathryn: arguments about it though. I mean, not a lot. We, we, the founders, we argued a fair amount about like, is this the right guy? Should we get somebody else? But frankly, we’re just all operating from a position of ignorance. So we’re just rolling the dice.

Rui: Yeah. Which makes sense.

It’s, we will never as entrepreneurs, we will never have all the information. So it’s all about having as much as possible so we can make educated guesses. And then it’s learning by doing. Yeah. Cool. So you mentioned that after series A, then you started recruiting. So I’m assuming that for the first part, you were actually dealing with, you were doing a bit of everything, right?

And then after Series A, when you got some, some money, you started growing the team. How was this transition? Because it’s really easy to lose culture. It’s really easy to create an environment that is vastly different from, from the one you start with. Any, any pointers there for, for anyone going through the same situation?

Kathryn: Something that we did then, and we still do now, and we were doing even when we had 600 employees, is we interviewed every candidate ourselves. At first it was, are you going to be good at your job? Cause we had to figure that out, which we weren’t necessarily good at early on. And then it really became more of, are you going to be a good fit for us?

And for us, if it was, we wanted people who were self aware and people who were themselves all the time, who could felt like, who could feel like they were themselves all the time. We were always ourselves. We didn’t have like work selves and home selves that were silly and quirky and, you know, and emotional and all the things that people are.

We were that way at work. We wanted people who could. feel comfortable being that way too. And I think that interview process really helped and we could, we got really good at identifying people who, you know, might not be a good fit because maybe they, you know, again, weren’t comfortable dealing with lots of different kinds of people.

Maybe they weren’t as self aware. Maybe they didn’t know what their, their faults were. So we got this really quirky, List of interview questions that we always ask everybody. My, one of my favorite ones is what’s the one word you’d like on your tombstone. It tells you a lot about how people either see themselves or want to see themselves.

Absolutely.

Paolo: Absolutely. I have a question regarding recruiting, Kathryn, which is, did you follow any specific framework to hire? Did you have any specific framework or do you have any practical suggestions for founders really going through that process of being a bit lost in the cloud when, when recruiting specifically for the first people?

Kathryn: I think you have to find someone who can help you, someone who’s a, you know, what we call people ops, but some folks call it HR, you know, somebody who can help you design the framework for the organization that you meet need and then, you know, constantly restructure. We’re really fortunate that the woman I mentioned to help us find our first head of technology.

She joined us later on. I was with us for many, many years and built out our whole. You know people systems and so that was really important I think you need to have a strong partner who can help you find people It is really great to go through linkedin and we found a lot of people going through linkedin looking for particular skills But you also need someone who can sell the company for you And a lot of times you want to come in and be the backup salesperson Because especially when you’re a startup, you’re convincing people.

Yeah. You want to come do this crazy thing. I promise you do. And, you know, you want to have a couple of different voices that people hear and, you know, people who can speak the language in our case, we’re hiring a lot of engineers who can speak the language of engineers and. So I think that partnership was super, super critical to getting where we, where we are or were.

Paolo: Yeah, I mean, yeah. And I imagine if you hire the right people, the first three, four right people, and then they speak about the company, as you said, they sell the company. So they will convince fellows to join and you will have, let’s say, a viral effect to have. Very highly effective people in your company.

Totally get it. Thank you.

Kathryn: We were also really lucky that we were based in Atlanta, which was definitely a fintech hub for payments, but there weren’t a lot of startups. And so we have this like very unique quirky environment where people could come and be themselves and wear shorts if they wanted to, or flip flops or no shoes.

We brought in food, there was beer. That’s not culture. That’s just being in an environment that makes you comfortable. Culture is the people who come into the organization. It’s what they bring to it. And so I think people sometimes confuse that. Like I, Speaking of fintech, you know, banks will get this innovation hub.

They’ll build this like little area that has a pool table in it and a fridge with six beers in it. And they’re like, Oh, we have culture. It’s startup culture, but they don’t because they don’t have you in the people.

Rui: Absolutely. Uh, yeah. And, and to, to Paula’s point is the difference between having an employee, which is perfectly fine or an ambassador, right?

Someone that can actually augment the, the, the company. So perfect. Kathryn, this is empirically proven as the best question in the show. The question that people like the most. How was the day in the life back then? So how was your day right at the start? How many hours a day, days a week were you working and how was your focus split?

Kathryn: I mean, you work all the days. And all the hours, you know, we had my husband, I’ve been married for 29 years. We had, um, at the time, I guess we started cabbage. We had an eight year old and he also came to the office. Like when we work on the weekends, he’d come into the office and hang out. And, you know, so would my co founders kids.

And I think it became a place that was, you know, where family was welcome, not just for us, but for everybody. And I think that made it easier. And it was fun. Cause we had like Nerf guns. Ping pong and stuff that they could do, but you know, you just, you just work whenever you need to work and it, you know, and it ebbs and flows.

And, you know, a lot of the work, it doesn’t seem like work is talking about your company. It’s on the road, raising money. It’s at conferences. It’s speaking at events, it’s doing media, all of the conversations that you have about your company are important work. Rob always said, you know, it’s our job to get out and talk about Cabbage as much as we can to as many people who will listen.

And that’s what we did. And I think that was a really, really important part of the traction that we ultimately gained.

Rui: Makes perfect sense. And this is an eternal debate, right? About work life balance. And if you should work the 80 hours per week, 40, or whatever it is to be balanced, then I’m hearing more and more and believing more and more into this merging with your personal life as well, right?

Because if you have your kids in there, if you’re, if that’s actually what gives you pleasure to do. My father once told me that I should find something that I really like to do and then I wouldn’t work for one day in my life. Because it would just be things that I like. So I, I, I completely agree with the vision

Kathryn: and make crazy decisions, do crazy things.

Like my husband, I decided six years ago when to have another kid. So we have a four year old who’s almost five now. Um, nobody would, everybody was like, Oh my gosh, what are you thinking? You have this company and it’s growing and you’re busy and you’re, you know, I was like, Nope, we’re having a baby. So had a baby.

I’ll tell you what, it’s really boring to be eight months pregnant in Vegas.

Rui: I can imagine. I can only imagine. If you’re going to wait for the perfect moment to have kids, you won’t ever have kids. So you have more, you give more, you have less, you give less. And now let’s look for key lessons on specific things.

So one key lesson you learn on product building, cabbage.

Kathryn: And this is an interesting topic for us in particular. I think as long as you have founders at a company, product is weird. It’s hard because, and especially if you only have one product and we only had one product for quite some time. So that was our line of credit product that I would say was that mostly what we did for, you know, six months.

six or seven years. And when you only have one product, product is led by the founders. And so when you hire people to come in, you hire product people. A lot of times, especially if you get them from a big company, they’re used to owning like P& L. They’re used to owning the whole vision for the whole product.

And I think that creates a lot of conflicts. You have to be really aware of what you want to give up. Or what you don’t want to give up when you bring in somebody to run product for you. And we’ve hired many, many lovely people into product. And it took us a long time to find the right balance. And it also changed once we added other products, a multi product organization operates very different than a single product organization.

And so you do need, you know, a different structure to support that. And we kind of. Had to figure that out too. We didn’t do it right the first time. So, um, we probably aren’t doing it right now, but whatever you try as hard as you can to, to make it work. But the key thing is you always have to remember if you’re a founder that you probably care about it more than almost anybody.

Even if you have amazing people, you’re, and your voice is louder and they’re going to listen to you, whether you want it. to whether you want it to be that way or not.

Rui: That actually leads me to a follow up. So when you were transitioning from the moment where it was you, Mike, Rob, the kid that ended up doing data science for you, and then moving on to that phase where after Series A you started to scale, how was it to actually forfeit control on many things in the company, right?

Because you need to start delegating and empowering people to do these things. Was it hard at all or were you completely okay with delegating because you trusted the people there?

Paolo: What’s your take? And what’s your thought also on that, the taking and retaining ownership or delegating? Especially at the beginning, when you have not many people, but also you’re not alone, that you need to start, as you said, you need to start speaking a lot about the company and you don’t have time to do the actual things yourself.

Kathryn: You know, early days, you’re right, it is very different and you have to do everything and you need, because you need to know exactly what’s going on. There’s only, you know, five or ten of you or whatever it is, you really need to understand what’s happening. And as the company grows, it is a, It’s important that you delegate and one thing that I tell people all the time, especially now I interview people every day and I always say, listen, I’m not trying to figure out if you’re good at your job.

I’ve never done your job before. I’m never going to do your job. Most of the people who work for us do a job. I don’t add. So you have to make sure that you trust the leaders of those people to do their jobs, that they’re really good and that they’ve done that job before. And I think our, our leadership team is so incredible, so strong.

Um, and, and. I guess the example of that I’ll give you is heading into the pandemic, we let go half of our staff because we were serving small businesses. We weren’t sure what was going to happen next. It was a terrible experience for everybody. And the people who stayed went on virtually to build a system that provided more PPP loans to small businesses than any other state.

Any bank in the country, except for bank of America. So we’re the second largest PPP loan. And the PPP is the paycheck protection program that was launched as a, you know, aid to small businesses in the early days of pandemic and this team like work their faces off and I mean, I spent weekends talking to customers on the phone, I was processing loans just like everybody else, but it was, it was this amazing experience that we all just pitched in and it was our leaders.

Who you know passed that on to their teams and I think you have to trust your leaders Your leaders have to be able to get their hands dirty They can’t just be people who you know Sid and opine and read powerpoints and their people can’t just be people who make powerpoints They have to be people who do things and that was a really hard challenge to us over the years Is bringing in people who were experienced but also knew how to do it Do stuff.

They knew how to do the work and people who are at large companies, um, and have been for a long time will often say, Oh, I’m so excited about the startup. I can’t wait. I really want to get in there and do stuff. And most of the time we found they didn’t know how to do stuff because they had done it a long time ago, but they kind of forgot.

And so that’s that. And I think, you know, we had this amazing balance of leaders who knew how to do things and they also did things. And they cared about the people and the customers.

Rui: Yeah, absolutely. I can relate with that a lot. And what’s the most important?

Paolo: People, customers, product?

Kathryn: Uh, it’s a great question.

You know, you have to do the right thing for the customers, but you can’t do it without the right people. And the right people are going to build the right product if they care about customers. I don’t think you can say, I don’t think, I don’t think it’s mutually exclusive. It’s not a zero sum game.

They’re all important part of the ecosystem and the flywheel.

Rui: That’s the equation, right? That’s, that’s absolutely the equation. Cool. Perfect. So, and that, that leads to the second question regarding these key lessons, which is marketing, right? So early stage, finding early adopters, what was that like?

Kathryn: Well, as you know, it’s like handing out candy to children.

You’re giving money and time to businesses who nobody cares about. We would go to these eBay on location events where eBay sellers would go to learn from experts how to be better eBay businesses. And we would like throw parties and be at a bar and buy people drinks. And if we bought somebody a beer, you would have thought we bought them a Tesla.

They were just so excited that somebody was excited about them. And that we cared about them and thought that they were legitimate business. And I think that’s, that was a really important process for us, you know, learning how to talk to and understand and serve these customers because they were underserved.

Rui: Absolutely. So it’s all about empathy, right? You actually cared for them and you actually shown interest in their problems and, and finding a way to solve them. And it. work your way. You have no idea how many founders we speak with and we see every day that actually they believe in their ideas so much that they forget to actually see if the market has the problem or if this would, if their idea would solve it.

And it’s, you can have the best team in the world. You can have the best product in the world. If the problem is not there, if people don’t, aren’t incentivized to solving the problem, it simply won’t work. So. Love that. Perfect. So now you already talked about, the next question was about key lessons learned on people and on hiring, but I believe you shared enough there.

I don’t know if you want to add anything, anything that comes to mind other than what you already said.

Kathryn: The only thing I’ll say is when we told people, you know, you have to, people want a career path. They want to know what their next step is going to be, no matter how much they love startups, no matter how much time they’ve spent in an unstructured environment, people want to have a path.

And so it’s kind of hard to get people a path at a startup. What we told folks was, you know, every six months you’re getting a promotion, whether you want it or not. Because the business is growing and scaling. And so your work is getting harder. Um, we pushed really hard against hiring people, you know, and building fiefdoms.

We pushed really hard against titles. We had a very flat organization and had no titles. You either did a thing or you were the head of it. And that was important because we didn’t want the hierarchy, you know, that came along with it. And everybody, you know, felt like they were equally as valuable, whether they were on the phone talking to customers, whether they were, you know, supporting the technology that our employees were using, whether they were writing code or whether they were CFO, it didn’t matter.

Everybody felt like they were the same. And I think that was really important.

Rui: So who was responsible for that? For the decisions around that career path at the start. Did this happen after you onboarded someone managing HR or was this work of the founders?

Kathryn: Yeah, no, that was, it was really, um, Amy who led people ops for us.

She was the one who sort of identified the need and would talk to people and listen to people and helped us constantly change it because, you know, you’re always changing what the path is depending on what the business needs. And you go into a new line of business and suddenly you need somebody doing something else.

And, and we all the time, we’re like, okay, who do we have internally who can do this job? So we had a lot of people move from, you know, entry level customer facing roles into other roles. I mean, every part of the company had somebody who came in at an entry level role. And that was really important for us to grow people.

And I think the fact that they saw that gave them more comfort that there was a path for them. And the, the, our, our head of technology, David, man, he’s amazing. And he has been with us for a long time, I think nine years, and he joined us as an engineer. And then he became an engineering lead, and then he was managing all the engineers, and then he was the CTO.

Um, it was a long path for him, but everybody sees people who have done that, and it tells them that it’s possible for them.

Rui: Perfect. Yeah, it creates the, the, it’s, the, there’s a clear, uh, vision. Yeah, there’s a

Paolo: clear path that people can follow and can relate themselves.

Rui: Perfect. So actually, uh, earlier in the conversation, you talked about having high turnover, right?

And the, the efforts required there to manage that, that problem. in startups. So it’s easier from the first engagement where you’re just, it’s just you as the non technical founder, onboarding a technical resource up to whatever you are in the company. There are moments where you clearly see there’s a mismatch, right?

That you onboarded someone that doesn’t really fit. How to manage those misalignment. So do you do it directly? Do you have your lead that you empower your leaders to do? So what are the dynamics there?

Kathryn: It depends. You know, I let many people go over the years. The idea is you want to do it quickly and you want to do it gently because it’s, you know, it’s people’s lives.

It’s their career. They’ve got families and mortgages and, you know, things like that. So you want to make sure that people are taken care of financially and that they have an opportunity in time to find their next job. thing, and I think you have to be respectful about it. So I think, you know, it depended on the manager.

Some people were comfortable doing it. Some weren’t. I offered many, many times to, you know, let people go. And sometimes they took me up on it and sometimes they did it themselves. But I think the most important thing was acting rapidly because the longer you wait, when someone’s not an obvious fit, the more discontent you create internally and you lose productivity and you lose the confidence of your team that you don’t understand what’s really happening in your company.

Rui: That works, right? And with most, most things, actually, because if you have the information, act on it quick, right? Because time is of the essence as well.

Paolo: Yeah, Kathryn, I have a question on this. I mean, obviously, the mantra that you read about in startup books is hire slow and fire fast. So make sure that you’re making the right hiring and make sure that people that actually don’t contribute to your vision, they go away fast.

But in reality. especially in the early days. I’m speaking about the early days. This is a bit, uh, tricky because you need people fast, actually. So, and you’re growing, so you cannot be as slow as possible. You can not make as the thorough analysis as you would like, maybe. And the firing is always a trouble.

I mean, if you have 10 people or 20 people or you’re firing one or two people, you’re actually firing the 10 percent of the workers, which is, which is a lot. And even in terms of morale and everything can, can impact the company, what’s your take in there and what’s your experience? Is this really true like that we need to be as slow as possible and we need to fire as fast as possible.

Or you have a different perspective.

Kathryn: You know, my perspective is because I’m a, I’m a buyer, not a shopper. I do not like to take a ton of time to make a decision. I think you, you waste a lot of time when you are deliberating over something, just make a decision and then unmake it. If it’s a problem, I, I’m much, I’d much rather do the fast hire fast fire.

Now, slow hiring is from a growth perspective. I like, I mean, don’t hire someone to absolutely need them, but once you need someone do it fast because it just takes so much time. It’s like raising money. It’s such a distraction from running your business. Hiring people is the same way. I had lots of candidates.

I’ll just, just, just find somebody. Most people are probably going to be okay if they have a background, you know, that supports the job that you need.

Rui: Awesome. Awesome. Thank you. So Kathryn, a couple of questions more. We are actually right around the hour time. So tell me one resource that was invaluable to your success.

This could be a book, a podcast, a mentor, whatever.

Kathryn: Oh man. You know, there was someone who I guess you would say was a mentor. You know, I, I started doing, you know, technology work in the mid nineties. So it was right at the beginning of, of dot com times. And a family friend, um, was the former CEO of a really large credit reporting agency.

And he had a lot of great things to say, um, that I listened to back then. He was the one who actually got me into this business, frankly. But, you know, he always. leaned really hard on his leadership team and he always, you know, wanted them to make decisions. I mean, I would say that people on my teams have been my biggest support.

Whenever I have a question or a problem, I love to talk with them about it, even if it doesn’t, you know, involve them at all. So walking around, talking to people, that’s really, really, really important. And the other thing that I remember Jeff said one time was, don’t be a bastard over a nickel. Like, it’s just not that important to either save a nickel and you know, it’s much more important to move quickly.

So I think that was really important and it’s, and it has allowed us, I think it empowered us to, to move quickly because we’re not always haggling over nickels.

Rui: Yeah. There’s a balance in there, right? What’s the bleeding neck to make sure that the company still operates, but knowing how to pick your battles and sometimes it’s not that important, right?

And you can use that to empower someone or actually to build a better communication flow or whatever the goal is. Love it. Kathryn, that wraps up the interview. Thank you so much for taking the time to be with us today. I don’t know if you have any closing thoughts, anything you’d like to say to an entrepreneur avidly looking for insights and knowledge on how to navigate this weird, lonely path.

So if you want to say, give us any kind of closing thoughts, this would be the time.

Kathryn: I think what I would say is to trust yourself. You know, you can read lots of books. I haven’t, you can talk to lots of people. I have. Um, but I think it’s really important to trust yourself. You have, every business is different.

Just like every child is different. You, people who have 10 children will say, I parent every one of them differently because they’re different. They’re all different humans and your business is the same way. It’s unique like a snowflake. And so you can’t necessarily apply what worked somewhere else to your business.

And you have to be willing to fail and you have to be willing to ask questions. Even if you think they’re dumb, just ask them because that’s the only way you’re going to get the answer.

Rui: Awesome. That’s perfect. Kathryn, thank you so much. I really hope that we have the chance in the future to, to, to see you here in Portugal.

If that doesn’t happen anywhere soon, maybe we can speak also on different, uh, we can have different conversations soon as well about this entrepreneurial journey, let’s call it. Until then. so much. so much. very much. Bye. I hope you found this conversation as useful as I certainly have. We picked up. Many valuable lessons from, from Kathryn and I look forward to see what she does next and who we can come up, how we can bring next for our next conversation.

Thank you for listening. I’ll see you again in the next edition of the startup journey podcast.