The Fastest Horse in the Race
When Jamin over at Clouded Judgment took a look at the latest quarterly results of all the public SaaS companies, one company’s revenue growth stood out as far above the rest:
That is quite a remarkable feat. In an industry filled with fast growers like Snowflake, SentinelOne, and Datadog, a backend fintech company came out on top.
So, we have to take a look at Bill.com:
- What is its story?
- How does it grow?
- What lessons can we take away?
Hop in as we give Bill.com the product growth treatment.
Phase 1 – Origins
Like every tech story it seems, this one starts with a Stanford grad. Following in the bookkeeping and entrepreneurial footsteps of his grandparents, René Lacerte’s first assignment out of Stanford was at the accounting firm PWC as an auditor. He then worked at his parent’s payroll company.
In 2004, he joined Intuit. He did well at the company. Five years later, in 1999, QuickBooks was the product driving Intuit, and selling it on CD-ROM was big business. René practically grabbed everyone he could find by the shirt to say that they should put the software on the internet. But no one listened.
So, in the same year Marc Benioff started Salesforce.com, René started PayCycle, to do just that. The timing was good in the historical scheme of things, but painful for the entrepreneur at the time. The dot-com bubble burst in 2000, and the fall of 2000 was when René was looking for venture capital funding.
Of all the venture capitalists to help, perhaps it is no surprise that Give and Take star – literally, the opening vignette in Adam Grant’s mega-bestselling book – David Hornik of August Capital was the one to give. Despite the bubble bursting, PayCycle landed a $8M funding round.
PayCycle was on a trajectory to become a Salesforce.com level company, until a series of rocky months leading up to the end of 2004. By mid-November, the only thing playing on the radio was talk of flip flopping. John Kerry had lost the election to George Bush. Predominantly liberal Silicon Valley was on edge.
With that context, René was speeding down Sand Hill road to a board meeting. His job was on the line, so he wanted to arrive early. René had steered the company to over $13M ARR, but growth had slowed. An on-edge Valley was not going to cut him any slack. “Give me one more chance,” was the message René delivered.
But it was a different era. VCs regularly replaced founder CEOs in the early 2000s. A16Z had not happened to reverse the course of the VC industry to become founder-friendly. Even Give and Take star David Hornik, like the rest of the board, did not agree with René’s message. René was made to step down.
Lesson 1: Hardening Forges Entrepreneurial Diamonds
Bill.com was born out of the crucible of the board’s firing of René. Like many entrepreneurs before him – Reed Hastings with Pure Software, Elon Musk with Paypal – the lessons from the failure would only make René stronger.
Being free of PayCycle, he got to work hatching the idea for his next company. With his background as an auditor, and family history in the business, René went back to another accounting function: this time, payments instead of payroll.
By 2006, René had raised a seed round. In 2007, he paid $200K for the domain name Bill.com. At the DEMO conference, he won the “Demo God” Award.
By 2008, the Bill.com product was released to general availability. The pitch was that it was a time-saver for small business owners. Instead of having to open the mail, check invoices, manage on time payments and recordkeeping, Bill.com took paper billing online. To this day, that basic product lives on as the core digitization of accounts payable and receivable:
The product was a winner, but the market was tough. Overworked business owners were too busy to take sales calls, and the account sizes were likely too small to justify those calls in the first place. So comes the second lesson from Bill.com’s growth story:
Lesson 2: Partnerships Can Drive SMB Acquisition at Scale
René had the genius idea to partner with small and medium-sized business accountants. These were typical small businesses themselves, with a dozen or hundred clients. But they would prove enough. In fact, this single channel would be the most important to drive Bill.com’s early success.
Of course, the Venture Capitalists pressured René to step on the gas and build an outbound sales motion. But he did not. As Tom Blaisdell, who invested in the 2006 Bill.com seed round said:
Many of René’s early investors were sometimes frustrated by the ‘slow’ progress in the early years
Instead, René worked to improve the product. In 2009, the company built integrations with QuickBooks and Sage Intact. This helped it clear the basic hurdle most SMBs had, “do you integrate with my existing stack?” It also released the Bill.com Payments Network. This would help the company control costs and optimize payments, so it could be an end-to-end solution with that third step:
The end-to-end solution strategy worked. By 2010, Bill.com had 1,000 customers. But, stepping back, René had spent the first four years of Bill.com’s life selling to accountants. This supreme patience also manifested in René’s approach to the enterprise segment, which would drive Bill.com’s next leg of growth:
Phase 2 – Growth Mode
Lesson 3: Play the Long Game to win Enterprises
Blaisdell, again, has the inside track as an investor on how René operated:
He’d look at JPMorgan and say, ‘We’re going to have this first meeting, and we’re probably about three to five years away from this having a big impact on our business
It is rare to see an entrepreneur, of an early stage company who lost his last job five years in, work on deals that are three to five years out. But René is such an entrepreneur. Year after year, he would visit the big banks and technology companies with his partnership and sales ideas.
Why did he have such perseverance where others do not? Because, as René recommends to others, “always think as big as you can.” René kept thinking big, till the day he was integrated with the biggest banks.
Meanwhile, he would keep improving the products, so they could eventually not say no. This started in 2011. Like Rene saw the internet early, he saw mobile early. Bill.com optimized its mobile platform.
Then in 2012, the team added another key integration: Oracle Netsuite. In 2013, the company acquired a money transmitter license. In 2014, the product integrated with Bank of America. All the improvements paid off, and Bill.com hit 10,000 customers. The product had 10x’d in just 4 years after finding product market fit.
2015 would be another product development year, with Bill.com launching its Accountant Resource Center and iOS native mobile app. That is now one of its most important surface areas:
Finally, in 2016, his old employer, Intuit, fell to the pressure of René’s relentlessness. QuickBooks integrated with Bill.com. This was a huge coup. Suddenly, Bill.com was in front of the exact audience he needed to crack, partnered with the market leading product. The drumbeat of new customers represented a change in the direction of Bill.com’s growth curve.
René then cemented the enterprise motion the following year when he led a deal with JPMorgan. Then, one of the most prominent banks in the world was instructing its bankers to recommend Bill.com to its business customers. Deals with PNC, Bank of America, and Wells Fargo naturally followed. This cemented the four channel approach in Bill.com’s go to market motion:
But before we jump away from 2016, there is one other important thing to note from Bill.com’s product strategy:
Lesson 4: Build a Customer-Driven Prospecting Mechanism
In 2016, the company also introduced the network user tier. This was an important and noteworthy feature often missed in analysis of the company. It established a free network member tier to its product:
This membership has you create a Bill.com to manage and pay invoices via ACH freely. But importantly, it is also something Bill.com requires you to create to accept payment from others using Bill.com In this way, Bill.com was able to build a growth mechanism from its customers’ usage. Customers would pay using Bill.com, and that would fill Bill.com’s top of funnel with prospects to try and convert to its paid products.
It is the SaaS version of a referrals channel. Like PayPal used a peer to peer payment mechanism to grow, Bill.com used a merchant to merchant mechanism to grow.
Phase 3 – Success
In 2018, Bill.com had 100,000 customers. It had 10x’d customer count again, this time in five years. This helped Bill.com cross the Unicorn mark in early 2019. By the end of the year, Bill.com was a public company.
Opening Bill.com’s financials up to the world led to the next revelation. It was a product rocket:
Lesson 5: Manage Budgets to Spend More on Product than Sales & Marketing
For the financial year 2019, Bill.com had spent $1,128M on product development, more than the $922M it spent on sales and marketing.
Bill.com showed restraint. It did not just spend prodigiously on sales and marketing, like recent market debutant Rent the Runway, which has since crashed. This is staying fundamentally in line with the philosophy of being a “product-led growth” (PLG) SaaS company.
That product development budget was instead used to launch partnerships with Mastercard & Comdata, integrate with American Express, build an Intelligent Virtual Assistant, and implement cross-border payments. Each of these features drove additional product growth.
Importantly, they all also ladder up to Bill.com’s larger purpose, product vision, and product values:
This successful shipping of product features to be a product rocket would form the backbone for Bill.com’s next act.
Lesson 6: Black Swans are Opportunities for Those who are Ready
Shortly after Bill.com went public, news began coming out of China of a mysterious virus. Over the coming weeks and months, the world would learn about Covid-19, and go into global lockdowns.
Those lockdowns completely changed the growth trajectory for Bill.com. And Bill.com was ready. It did not suffer massive outages. Because of the hardened product infrastructure the company had invested in, it could handle the increases in volume. Its robust tech stack and scalable architecture proved wise spending:
This is not just talk. As YML notes:
Since the beginning, René had a vision of how robust the Bill.com platform could one day be. Because of this, the early days of product development focused on building a foundation and database design that had the capacity for everything they eventually wanted to build
Rene purposefully built a company that could scale when needed. As a result, it was Bill.com, of perhaps any company in the world, who was most ready for thr Covid-19 spike in usage. Additionally, its cross border payments enhanced the power of its referral mechanism. So, as electronic payments blossomed during the lockdowns, so too did Bill.com.
In fact, It went from a company that was growing at 30-50% to a company that was growing in the rarefied group of >50%. That is a crazy jump, and it has rightly propelled the company to a massive rise in its stock price since IPO:
Now, as I touched on in the intro, Bill.com is the fastest growing SaaS company in the world. Its 90% next twelve month revenue growth makes it #1 in a crowded field where the median is growing at 42%.
Takeaways
From the Bill.com story, we have encountered the classic product growth playbook. If you want to build a product rocket 🚀, it is hard to find a better company to study:
To learn more on how to build these product growth levers, and learn lessons from other company’s stories, subscribe to the newsletter. We will be breaking them down.
