- Just Go Grind
- Posts
- The Steady Climb of René Lacerte
The Steady Climb of René Lacerte
Building Bill.com Into a $11 Billion Industry-Leading Company
Justin Gordon
June 25, 2023
Hey there my friend, Justin here, and welcome to a free edition of Just Go Grind, a newsletter for the ambitious. Thank you to the 584 of you who joined since the last edition, and to all 14,633 subscribers! To receive all editions of the newsletter and join the Just Go Grind Founder Community, upgrade below:
Quick Updates
I’m hosting a coffee meetup in SF on June 30th at Neon! Shoutout to Teddy for the hookup with a free space, coffee, and tea. There are almost 30 founders, investors, and operators signed up so far. RSVP here.
Once again, I’m opening up my calendar for 15-minute 1 on 1 serendipity calls. I’d love to get to know more about you and what you’re working on. If the slots fill up, please reply to this email and let me know you’d like to have one and I’ll open up more.
This newsletter is changing and I wrote about that this past week. Free subscribers will still get complete access to 1-2 editions per month, while paid subscribers will get access to every edition as well as the Just Go Grind Slack community. Next week’s edition will only be for paid subscribers. I’ve also extended the upgrade deadline to get the 25% discount to the end of the day today.
Sponsored by: PartnerHero
Why do smart brands like Miro, Udemy, and Heygo outsource their customer support? Because they know the secret to delivering an amazing, scalable customer experience is working with PartnerHero.
As a founder, you should always be thinking about how to extend your runway, especially right now. Outsourcing your customer support not only saves you money, but it also gives you maximum flexibility.
PartnerHero has flexible options that are designed for the needs of startups. You can ramp your customer support team up or down depending on your needs, whether that’s seasonality, volume spikes around product launches, or scaling back while you pivot. There’s a reason so many smart founders trust PartnerHero with their CX. Talk to our solutions team to learn what we can do for you.
René Lacerte
René Lacerte is an under-the-radar CEO who founded Bill.com in 2006 and built it into a public company valued at more than $11 billion.
In a 2021 interview with Jason Lemkin, Founder of SaaStr and a user of René’s product, Jason said, “I don’t know what we pay, but whatever it is, we don’t pay enough,“ and I think that perfectly illustrates how well René has solved a problem for SMBs.
But, this wasn’t René’s first company.
He climbed out of the lowest point in his career, at another company he previously founded, to build BILL into the incredible success it is today.
How’d he do it?
Let’s get to it.
Early Days
René was born in Virginia but was raised in Winter Haven, Florida where his parents were running their own business.
He’s a 4th generation entrepreneur, with his great-grandfather operating a general store and his parents starting around half a dozen businesses between them.
Entrepreneurship has been in René’s blood from the very beginning.
Even the night he was born, his mom, who was a keypunch operator at the time (Oh how technology has evolved), was busy working at the time because he came two weeks early.
Dinners with his family growing up always involved talk about business, from product innovation to people management to the importance of cash flow.
René got what he calls his “Dinner table MBA” through those discussions.
These discussions would also later shape how he’d run his own company, just as the lessons he learned from the musical side of his dad would:
Dad taught me so many things. At the core of dad was that he just never gave up. My dad was born with a disability, he had four fingers on his left hand and two on his right, and nobody taught him to play the piano, so he taught himself. And there are all sorts of examples like that where, he was a fabulous musician, he was playing trumpet when he was a kid, and he moved to piano.
When you care about something it is worth fighting for. And you don’t listen to the detractors, you just kind of focus on what you know you’re capable of and you just do it. So, that’s probably the most important lesson that I’ve learned.
The dinner table discussions also gave René the desire to eventually build something of his own:
You see that the ebb and the flow is worth it because you end up building something that is lasting.
But René didn’t start his own company right away.
After getting a B.A. in economics and M.S. in industrial engineering at Stanford, he worked for PwC as an auditor for 3 years after a partner at the firm said he should go into accounting because it is the language of business.
He’d then spend a year working at his parent’s payroll company in Florida and join Intuit in 1994, helping them launch their payroll product.
This experience would lead to René starting his first company.
PayCycle
While working for Intuit, René had a great idea:
Put Quickbooks, Intuit’s accounting software, on the internet.
At the time, the only way to install the software was with a CD (Look it up, kids), but René thought there was a better way.
The only problem?
Intuit wasn’t… into it.
So, in 1999, at 32 years old, René decided to start a company, PayCycle, to do just that, providing online payroll for SMBs.
Working with his co-founder, Martin Gates, they bootstrapped PayCycle for about a year, then announced a $1.3 million round on September 27, 2000, from private investors.
When the time came to raise money from venture capitalists in the fall of 2000, they found themselves in a peculiar position.
The dot-com bubble had just burst and venture capitalists were cautious at best.
However, after talking with around 95 VCs, René was able to land an investor, David Hornik of August Capital, for an $8 million round of funding.
Over the next 5 years, PayCycle would go on to work with tens of thousands of businesses, grow to a team of more than 100, and become one of the top places to work in the bay area.
But it wasn’t all rosy for René.
In 2004, growth had slowed, they weren’t getting to a consensus on decisions, and so they worked with a consultant for 6 months to figure out the leadership roles at the company.
When René was called in for an unscheduled board meeting his wife, who is a venture capitalist, knew it wasn’t good.
At the meeting, the board asked him to step down as CEO, but René, heeding the warning from his wife, came prepared with all the ways he had failed as a leader and what he could do to improve.
The board wasn’t expecting this.
They talked about it for 30 minutes but still decided that it’d be best for René to step down from his role.
Later on, René would describe this as the lowest point in his career.
But he owned his mistakes:
You have to own your mistakes, you have to own when you lose, and you have to move on.
So he moved into the CFO role for about 18 months, hired and trained the new CEO, and started thinking about the things he’d do differently with his next company.
One of his realizations was that the buck stops with the CEO. There needs to be one decision-maker. No more consensus decision-making.
The other was that he needed to be more willing to have hard conversations. There wasn’t much employee transition at PayCycle, he really never asked someone to leave in the 7 years he was there, and he admits this was a mistake on his part.
In 2006, he left PayCycle but stayed on the board.
It was time to start a new company.
And this time, he’d do things differently.
Starting BILL
Frustrations René experienced while running PayCycle led him to start what would become BILL.
In an interview he did in December 2014, he talked about this:
I was unhappy, I was angry, I was kind of frustrated that all this paper stuff came to my desk and yet, I didn’t have all the answers I needed to make decisions.
So, when you’re making a payment decision, this goes back to what dad and grand dad thought, which was to stretch out the payables, and to pull on receivables, you need information, you need context, you need a lot of content to actually make a decision.
What does the contract say? When did I pay them last? What do my employees say? Does my marketing head believe this is a good expense or not? Maybe I want to ask them why they did this, because I might want to learn what’s going on in the business. All those questions require collaboration.
And so, I just was kind of fixating on the fact that none of the tools that I had either built or looked at competitively at Intuit, allowed me to actually do what I needed to do. It didn’t allow me to collaborate with the people, which would be the employees, the customers, the vendors, the accountants. It didn’t allow me to collaborate with the documents. Everything from a source document all the way up to the clear check image. It didn’t allow me to collaborate with my accounting system or my banking system, so I can have secure disaster-proof, so to speak, backup office capabilities.
I didn’t have any of that functionality out there, so I started thinking about it, it’s like, “You know, this cloud thing is pretty collaborative. I bet you I can kind of think about how I can actually make the transaction go from payables to receivables and back, without having to do any data entry on either side.”
So that’s kind of how I started thinking about it, and realized there was an opportunity to give people the right access at the right time with the right information using the cloud, which will allow for all that mundane paperwork that people have to disappear.
Initially, the company was called Cashview.
Fitting.
But when the opportunity came up to buy a four-letter domain name, René couldn’t pass it up.
Here’s how he got it:
Little bit lucky. The CTO, Eric, had a friend, Marc Benioff, from Salesforce, and Marc Benioff owned the url. And so, Marc had stayed connected to Eric and, after about year of working here had kind of asked Eric a little bit more about what we are doing.
When he heard what we were doing he was like, “You know, I’ve got a url that might be appropriate”. And so we talked, and we talked about the business and, as a friend he did us a favor and sold it to us.
He reportedly ended up paying $200,000 for the domain name.
After funding the company on his own for about the first year, everyone who put money into PayCycle also ended up putting money into BILL.
René had maintained good relationships along the way with all the board members from PayCycle and he was very direct about the things he’d do differently this time around as a leader.
It just goes to show the value of playing the long game and building strong relationships.
And, one of the things René did differently this time was that he hired a coach. He was serious about improving and didn’t just talk about it, he put it into action.
Starting a new company also gave René a chance to build the culture from scratch, with five things, in particular, he thinks make a great team:
Passion
Dedication (To each other and their customers)
Humility
Authenticity (Really important, because when people are authentic, they’re at their best)
Fun
In September 2006, René officially started BILL, but he wouldn’t fully launch the platform until January 2008.
He was working on the prototype during that time, building out a lot of the structure of the platform, making sure it worked and could scale, and he had some good advice about this for other founders:
You can do the prototype fairly easily, and no technology, in fact. Our original prototype was, I would walk down to the businesses that we signed up, I would actually take their bills for them, I would scan them, I would actually then attach that to email, en route for other people to approve.
I would then take care of printing the checks or moving the money electronically. I would do all that stuff manually so that we could learn what we needed to build out in the system with the engineers.
So, it didn’t actually take much money to get an alpha version out. But it did take, it does take time to build payment company. That’s not easy work, to manage and build payment companies.
After the platform was built, René knew he had something after he showed it to his dad in March 2008 and he reacted with a four-letter expletive and “I can’t believe you came up with this.”
He was very impressed by what René had built, at a time when he had maybe 3 customers on the platform.
Sadly, in September 2008, René’s dad passed away from lung cancer.
René would continue to use the lessons he learned from his dad to build BILL, tapping into the network he had built throughout his career to get the first few customers.
He had gotten to know a lot of accountants through PayCycle and a number of them ended up using the platform.
And from day one, they built the platform to help all SMBs, so the accountants would end up being a massive part of their customer acquisition strategy.
After the accountants, they’d eventually get the banks on board, but this took quite some time.
It wasn’t until they had about 10,000 customers that they landed their first bank partnership.
The pitch to banks for René was simple: Let’s talk about how many business customers are choosing your applications today and compare that to consumer adoption with BILL.
Customers were clearly choosing what René and the team had built at BILL.
Yes, the platform itself was great, but over time they’d also become known for having amazing customer support, something René had learned the importance of growing up surrounded by entrepreneurs.
When it came to customer support, he looks at this as an opportunity to learn:
All too often, people think of customer support as a cost center and they don’t think of it as a learning center.
And, while they had phone call support at PayCycle, René opted for chat support at Bill.com.
Why?
For two reasons:
They’re able to document the questions customers are asking
Customers have a history they’re able to view
Managers can also review these chats so they can improve, and further increase the learning cycle.
However, at this point in our story, just like with his last company, René had to go through another difficult macro environment - the financial crisis.
Financial Crisis & Early Growth
In the fall of 2008, Sequoia put out their “RIP Good Times” spiral of death deck, warning that winter was coming.
Around this time, René had to make a difficult decision.
He had enough cash to last the company through around March or April of 2009 but knew it was going to be challenging to raise capital.
So he decided to lay off 40% of his team, going from 26 to 15 employees.
It was the right move.
He wasn’t able to raise money again until September 2009 and his runway would’ve come up short months before he was able to raise.
Side note, that same year, PayCycle sold to Intuit for $170 million, with René still an active board member at the time.
After that year, raising capital would be much easier, not just because of the macro environment, but because of what René had built.
As René said in an interview with SaaStr:
You can’t force a crossing of the digital divide overnight.
It took time to get customers across and they did so by making it as easy as possible for them.
They allowed companies to start with a fax or an actual check, but they incentivized them to pay electronically.
The cost of any paper transactions was $1.49 while electronic ones were $0.49.
They also made it easy for those accountants or anyone else on the platform to invite people to pay or get paid on it.
By around late 2009 or early 2010, René recalls Bill.com getting their first 1,000 customers and then strategizing more at that point about what’s next, the allocation of resources, partnerships, and sales.
A few years later, by 2014, the cost of the platform ranged from $29/month to $79/month plus transaction fees, which customers were happy to pay because they were saving time, getting paid 2-3 times faster, and also saving money by using Bill.com.
At this point, René had also integrated Bill.com with a number of accounting systems, building a tool that worked alongside them:
The accounting systems that we primarily work with would be Intuit, Quickbooks, Quickbooks Align, Intacct, NetSuite, Xero, we do have customers using us with Mas 90, Great Plains. I don’t think we have anybody with Oracle or SAP, it does tend to be much, much larger companies, kind of Fortune 2000, and in the United States there are 6 million businesses with employees, 6 million employers, and that kind of tends to be our focus. And they tend to use these first five that I’ve mentioned.
So, our belief is that the accounting software is a tremendous tool that gives you the data and the ledger and the reporting that you need about how to look at and analyze your business. But when it comes to actually understanding your payables and receivables, they don’t have the process work flow that we have.
So, we are a tool that works side by side with the accounting system. And so we have partnerships and integrations with each of those applications, and our customers typically will sync the data from the accounting software into Bill.com, in the initial day or whatever, and they will take over all the list items to customers, to vendors, chartered accounts, the expense categories, all that stuff will come over.
And then from there, once they put the documents in, they can categorize it in Bill.com and then we just sync back and forth. If they add a vendor it goes over to Quickbooks, if they add a customer it goes over… All that stuff just automatically gets integrated and synced in a seamless fashion, so the customer doesn’t have to worry about their books being accurate. So, accountancy, here’s one of the things accountancy loves, is that they can actually have their clients involved in Bill.com, but not necessarily involved in the accounting software, which is where they can kind of make mistakes.
All of this work, years of building relationships, forging partnerships, and creating a platform that could scale, would pay off in a big way.
Growth
René would say it took 10 years before they had meaningful revenue at BILL, which would put us around 2016 in this journey.
Well, certainly by 2017 things were humming along quite nicely, with $40 billion a year moving through the platform.
And their sweet spot for customers by this time?
Businesses with as little as a few hundred thousand in revenue up to about $50 million.
They’d have 2 million users on the platform by this point, with a percentage of those being paying customers.
The built-in virality that the platform has, with accountants bringing their clients on the platform and banks also bringing their customers on the platform, fueled their growth.
There’s a great a16z article by Seema Amble that describes how the design of René’s product created that virality:
Product design drives growth. If someone sends an invoice via Bill.com, the recipient is forced to also create a Bill.com account to make a payment online, rather than go through the cumbersome process of mailing physical check. Similarly, customers can invite payees to create an account to receive payment. Thus, customers themselves drive sign-ups and help bootstrap the network.
This method—forced account creation to drive acquisition—is the same tactic taken by enterprise companies like Zoom and Dropbox. It’s preferable to referral credits because it doesn’t require any additional effort on the existing customer’s part (like, say, sending invites) and it incentivizes an immediate business need (faster payment). This acquisition strategy also allows Bill.com to collect valuable customer information.
Remember though, this took time to get going, and René had an uncommon amount of patience:
After accountants, Lacerte targeted banks. “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,’’ recalls Blaisdell. “What entrepreneur has that kind of patience?”
In 2016, he struck a partnership with his old employer, Intuit, to integrate Bill.com into its QuickBooks software. The next year, he finally landed a deal with JPMorgan to have their bankers begin recommending Bill.com to their business customers and has since inked deals with PNC, Bank of America and Wells Fargo.
Around this time, the average customer is paying about $100/month, with a 10-13 month payback period so BILL’s CAC is around $1,000 to $1,300.
René is leading a team of 225, mostly based in Palo Alto.
The next year, in 2018, they launched international payments and did $65 million in revenue, setting them up for a round of funding in April 2019 that valued Bill.com at more than $1 billion.
And they were just getting started.
IPO
After being valued at about $1 billion in early 2019, Bill.com went public in December 2019 at a price of $22 a share, valuing the company at $1.6 billion.
The stock got a bump of more than 60% on the first day of trading and ended up being the 2nd best bay area tech IPO of 2019.
In a SaaStr interview, René reflected on their inflection point soon after launching international payments and going public a year later:
That was a turning point when we realized we could kind of have a much different understanding and use case with our customers because the platform was doing the job.
The stickiness of workflow, document management, security, compliance, all that stuff that you don’t have to worry about as a customer, that was sticky enough that we realized we could start selling other things and that’s really what happened since the IPO.
We started that at the time of the IPO, and that’s kind of the growth that’s really driven the transaction revenue growing at the rate that it has been.
BILL was started in 2006, didn’t launch international payments till 2018, and payments overall didn’t take off till after the IPO when they not only had international payments but also virtual card payments. Why?
A couple of reasons.
First, they had to build out the end-to-end platform. There was a lot of infrastructure they had to put in place.
Second, the regulatory and compliance aspect is daunting and takes time. Hell, René even said that around their Series D or E round of funding, one of their investors said they might not actually have all the regulatory stuff figured out.
They had to build all of this out on top of being able to handle fraud risk before they could really get things rolling.
But once they did?
Off to the races.
Pandemic Growth
Two months after the IPO, Bill.com was valued at $4 billion. By that time, they had built out a network of 4,000 accounting firms, driving 45% of BILL’s revenue, and solidifying their partner-driven distribution model.
And René was running the show, as one of his investors recalled:
Steady Eddie . . . He is not a flamboyant person. He is a very thorough thinker. He does not exaggerate. He hits his numbers . . . his company meetings are very different from some of the young-buck startups that hang out on Fridays with a beer in their hand just to look cool.
By September 2020, BILL had more than 100,000 companies making payments on their platform and, combining software subscriptions and transaction fees, they were making an average of $1,500 in revenue a year from each of them.
By November 2020, BILL had hired 100 employees since the start of COVID.
In an interview that month, René mentioned how his team is 35% white males and 45% female, and just how important it is to intentionally build a diverse team:
I just feel that it’s so important to have diversity in thinking and that’s why I do it and I love the diversity that our team has, I love the energy that it brings, and it’s something that I think can really make a difference in building success in a company.
By the end of 2020, BILL was valued at $10 billion, up from the $1.6 billion valuation at the time of the IPO and the shares had gone from $22 a share to $126 a share.
A Forbes article at this time showcased just how good of a return this netted early investors:
The fast growth—and the market’s anticipation of more—has produced stunning returns for some of Bill.com’s early investors. DCM has already pocketed $680 million and still holds $240 million in stock—all from a $25 million investment. August Capital’s $25 million bet turned into nearly a $700 million return. “It’s the best investment I ever made,” David Hornik says.
Soon after this time period, BILL went on a spending spree.
Spending Spree
In June of 2021, BILL completes the acquisition of Divvy, a leading spend management platform, for about $2.5 billion.
René mentioned how they’re always asking BILL customers what they need, spend management customers loved Divvy, and the move made sense to enhance the platform and fuel growth:
When we went public, one of the reasons was to have the currency to be able to add on to the platform to serve more customers with better products and so this does both, allows us to have better products and tools on top of our platform that we’ve already built, but also allows us to reach customers that maybe weren’t interested in us before for whatever reason.
Then, in September of that year, they acquired Invoice2go, a leading mobile-first accounts receivable (AR) software provider, for $625 million.
By this point, BILL has 121,000 customers, way more than public SaaS companies typically have.
And their gross margins are growing:
Within five years we had gross margins that were probably north of 50 and so now our gross margins are close to 75 to 80, somewhere in that range.
They’re almost evenly split between payments and software revenue at this point and their average customer value is about $2,000 per year.
How are they finding them?
With a three-prong approach:
Direct through digital marketing and word of mouth
Accountants, accounting professionals, and bookkeepers
Strategic partners like banks
And René wasn’t done shopping yet.
In November 2022, BILL acquired Finmark, a financial planning software company for startups, for an undisclosed amount.
All of this leads us to today, in June of 2023.
René and Bill.com Today
What a journey it’s been for René, starting BILL in 2006 after being forced to step down at PayCycle and growing it into a company valued at $11 billion.
He went through the financial crisis right after launching, more recently has had to weather the tech stock crash of 2022, and yet he still has BILL positioned to succeed for years to come.
BILL has such a sticky product, with a clear network effect, and a number of key partnerships.
They’ve grown to become a leading company in the industry with thousands of employees.
It’s remarkable what René and the team have built.
When it comes to René, what I’m also impressed by is how he’s also made it a focus to take care of his health and encourages others to do so as well.
I don’t know what his current habits are, but in a 2017 interview, he mentioned how reading the book Younger Next Year influenced him, and at this point, he was playing ultimate frisbee every week, had healthy snacks available at the office, and was consistently running.
Another time he mentioned having a Peloton and constantly trying to beat his personal goals. And finally, in an older interview, he talked about running 35-40 miles per week back in 2014 with no headphones, just nature, as a form of meditation for him.
Take care of your health, so you can take care of everything else.
It’ll be fun to see where René can take BILL from here.
René’s Wisdom
In each edition of the Just Go Grind newsletter, I like to include a few more quotes at the end from my research into the founder who is featured, sharing their wisdom.
Well, the first thing is that it’s always harder than you thought or think. It’s always harder, and so just back to the first question you asked me, which is you got to pursue it. If you believe in what you’re doing, you have to keep doing it, you can’t let somebody else tell you: “No, it’s not right.”
On trusting your gut when hiring:
All the hires that have ended up being amazing hires I got butterflies when I was talking with them. I got so excited, like, “Oh my god it’d be so fun to work with this person.”
On the importance of your network:
You cannot underestimate the value of the network that you have. Do not be afraid to tap into it and ask, people can always say no. And, kind of an add-on to that is focus on developing board of advisors or board of directors or something that you have to be accountable for.
Everybody always thinks… being your own boss must be great. I am not my own boss. I work for the people above me, I work for people below me. I’m the guy in the middle that has people all around me that I need to work with, and they’re all telling me what to do.
And now, I get to set the course, but I’m listening to all of them and I’m trying to make sure they’re all satisfied and, if you don’t have that accountability, then it’s actually very easy to say “Well, you know, I said I was going to get this product research done by next month”. Three months go by and you haven’t done it. But if you have a board, and you have a board meeting in six weeks, where you have to report on the product research, guess what? You’ll get the product research done by six weeks amount. So, I would recommend that.
What did you think of today's newsletter? |
Thanks for reading! If you found this valuable, please consider subscribing and sharing it with a friend 😊
And if you enjoyed this profile, take a look at the most recent ones or the first 10 founders I wrote about:
Sam Altman of OpenAI
Melanie Perkins of Canva
Tope Awotona of Calendly
Ooshma Garg of Gobble
Ryan Petersen of Flexport
Iman Abuzeid of Incredible Health
Tony Xu of DoorDash
Christina Cacioppo of Vanta
Patrick Collison of Stripe
Rachel Romer Carlson of Guild Education
Finally, if you’re interested in sponsoring this newsletter, and getting your product or service in front of thousands of founders, you can learn more here.
Join the conversation