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Enrico Palmerino is the CEO and Founder of Botkeeper, a platform that provides accountants with an automated bookkeeping practice using human-assisted machine learning and Artificial Intelligence. In this episode, Enrico and Stuart share their thoughts on the development of the accounting industry and how tech firms enable it to evolve. Learn what it takes to build a successful tech firm, the importance of choosing the right investment partner, and how watching sports can help you close a deal.
Join Stuart McLeod as he interviews the world's top accounting leaders to understand their story, how they operate, their goals, mission, and top advice to help you run your accounting firm.
Stuart McLeod 00:00:06.026 [music] Hi, I'm Stuart McLeod, CEO and co-founder of Karbon. Welcome to the Accounting Leaders Podcast, the show where I go behind the scenes with the world's top accounting leaders. Today, I'm joined by Enrico Palmerino, the founder and CEO of Botkeeper, a platform that provides accountants with an automated bookkeeping practice using human-assisted machine learning and artificial intelligence. Enrico has been recognized as one of the top 100 most influential people in accounting, Top 30 most inspiring business leaders, and 2020 Golden Bridge Entrepreneur of the Year. Early in his career, he was also ranked second amongst Bloomberg's top 25 entrepreneurs under 25 in recognition of his co-founding of ThinkLite, which he grew from his dorm room at college to 8.5 million of run rate before graduating college and successfully exiting that venture. It's my pleasure to welcome to the Accounting Leaders Podcast Enrico Palmerino. Enrico Palmerino, welcome to the Accounting Leaders Podcast.
Enrico Palmerino 00:01:16.850 Thanks, Stuart. Great to see you. Appreciate you having me on.
Stuart McLeod 00:01:20.067 Our pleasure. Nice. Wonderful to see you, too. Cool. What's been going on? You started the year well?
Enrico Palmerino 00:01:25.567 Yeah. Yeah. It's been good. We nine and a half [Xed?] our January of last year, so.
Stuart McLeod 00:01:31.588 Oh, there you go.
Enrico Palmerino 00:01:32.732 It looks like we'll double our February. So yeah. So heading down a double path, for sure, at least.
Stuart McLeod 00:01:40.101 Yep. Yep. Yep.
Enrico Palmerino 00:01:41.170 Feeling good about it, man. We've been signing 20-something, 30-something firms a month, so.
Stuart McLeod 00:01:47.800 Tell me. When you sign up a firm, what's the onboarding sort of look like? How do you assess a good fit? And what's sort of the output? What's the outcome for the firm?
Enrico Palmerino 00:01:59.189 So good fit is usually assessed and disqualified out of the sales process. We go through the marketing qualified and sales qualified process. And we're looking for firms who are running on QPO or zero, who have at least 10 clients or more, ideally 50 clients total that are for bookkeeping. And then who tend to want to focus on value add versus just core processing. Because for us to be a real value add to your firm, you're offloading the processing and you're getting in compliance and you're getting into value add and strategic. So if that's not what you want to do, then we're always going to kind of be competing with your passion [inaudible].
Stuart McLeod 00:02:42.972 Yeah. If you want to just be doing the books. [laughter]
Enrico Palmerino 00:02:46.171 Yes. And then final is just make sure that your pricing makes sense. Because we run across-- it tends to be smaller firms, sole practitioners, who they're building like 50 or 100 bucks a month. And for them, any dollars matter. But the reality is, those price points don't let you make any more than like 30, 40 grand a year kind of thing. Those economics are not going to work. And you're going to have to drastically raise pricing, not only if you want to really grow your practice, but if you want to be able to give yourself-- we're not expensive, $39 per entity per month to do all the books. So you don't have to have your prices crazy [crosstalk].
Stuart McLeod 00:03:31.496 Millions of dollars. Yeah. Yeah.
Enrico Palmerino 00:03:34.007 Yeah. You want to be charging at least a few hundred bucks a month for bookkeeping, regardless of the size of the business. So those tend to be the fit criteria. And then what we look for is, from an efficiency or performance standpoint, we're at least giving you a 30% cost reduction. Arguably, we're trying to get you to a point where one of your accountants is doing the work of two or three. So the payback, the ROI, is really high. And then you've just got speed. In this market, whether it's the demand far outstrips the supply, if you would just take on the demand as fast as it's coming at you, that gives you a massive leg up on the growth perspective. And we give you that. We allow you to literally just stamp out clients. You sign a new client? Cool. Drop them into the onboarding tool, and it onboards, grabs a bunch of info. You fill in the gaps. And then the next thing you know, the company's books are being done. But all in, we tell firms, assume whatever batch you sign up for initially, 10,20, 30, 50, 60 entities, that that's going to be a 60-to-90-day process to get you trained on the platform, to get you and your team kind of up and running, to do some change management because your team was doing all the core processing, and now we're doing a good chunk of that, figuring out where you slot in and move your people. And then after that, it's just add entities at your whim. And we've got firms that add 15, 20, maybe even 30 a month, depending on how big they are, what their growth rate is. And that's like nothing. It's just clicks.
Stuart McLeod 00:05:12.684 Yep. Yep. Enrico, stepping back a bit, I mean, the idea for Botkeeper came out of a firm that you were running. Is that the genesis story? Perhaps walk us through that a bit.
Enrico Palmerino 00:05:25.327 Yeah. So the genesis story? I even said it goes back to-- I'd started a business in college that grew fast. And we had accounting challenges. And while there was a nice exit, it was still one of those that was like the thorn that I was going to go solve. I think most entrepreneurs, you solve the problem you had at your last venture.
Stuart McLeod 00:05:46.095 Scratch the itch. Yep.
Enrico Palmerino 00:05:47.687 Yeah. And then that got me into the accounting space and [COT?] accounting, I teamed up with a husband and wife and grew a [COT?] accounting practice with them. And then just realized that what was hampering our growth-- and we were growing fast. We'd gone in three years from 7 million in revenue to 4 and a half, or something like that. And it was all pure [caz?]. But we had clients signed. I think our backlog, if you signed today, you could get started in three months. It was kind of how the backlog was. And you can only do that-- three months was the cutoff. We probably had enough business to sign four or five, six months out. But just after three months, your problem is now, so you're not going to wait. And it just came down to a human [inaudible]. We were trying to thread this needle of onboarding specialists and stuff like that to onboard and deploy clients. But depending on the volume and the workload, and then managing the margins of the firm around that. And then even just finding talent, we had an incredibly talented team, and it just got exponentially more difficult to find that caliber talent as a few short years went on. And then just the more I talked to the industry, it was just very obvious that everyone was having this. The war on talent had begun five, six, eight years, seven years ago. It's gotten exponentially worse. So you had that. You had all the stats start coming out about enrollment rates down and stuff in the accounting industry. So that meant it wasn't going to get better anytime soon. Then you had partner ages. People were raising the age of partners, which is not a good sign.
Enrico Palmerino 00:07:26.674 And then you just had the app stack get totally blown out. You went from a half dozen to a dozen apps, total, that people were using to hundreds or thousands of apps in the app marketplace, and an app for everything. And that just meant that typical accountant that was doing the work now had to system switched between a half dozen to a dozen apps for each client. They had to do that across 20 clients. And that's a shitty experience to the client and the accountant. And then here's the aha moment. What if you could consolidate all those apps into one single operating platform, where all the feature functionality was fully integrated? Not only would you gain efficiency, but you'd have a better experience. But more importantly, you'd aggregate all the data from that client into one place. And if you could take that data and run machine learning models against it, you could probably automate away a lot of the basic blocking and tackling, and allow the diminishing pool of talent to focus on the more complicated, and stop mimicking a bot. And so that was the aha that came to be about six years ago. And here we are.
Stuart McLeod 00:08:34.878 And it's held true today. We were actually joking the other night. I reckon we're all mad, I think. But from a VC perspective, compare the accounting industry, which I think is actually, in terms of seats, is diminishing each day by day. Right? I reckon the number of people retiring is outweighing the number of people coming out of college in America, university in other countries. And I'm sure there's some stats that are going to prove me right. I'm sure of it. But the firm growth really is just a musical chairs business. Right? Great talent will often migrate out of larger firms and start their own firms. But I'm sure the number of people graduating at a university is less than the number of people retiring and going and playing golf in Miami.
Enrico Palmerino 00:09:34.107 Yeah. I mean, I think I saw something like the average age of an accountant was 55, which statistically, that means in the next 15 years, 75% will be retired. And I don't think there's anywhere near that number of accountants entering the industry.
Stuart McLeod 00:09:45.836 No. No. Compared to starting a SaaS business for developers, right, for engineers. There's like 10,000 new engineers every day. [laughter]
Enrico Palmerino 00:09:57.306 Yeah. Exactly. No, there are definitely markets that are growing. But the funny thing is, the seats are diminishing, but the number of new businesses, it's growing exponentially. And so the demand for financial services is growing. So you just got this widening supply-demand gap. And it's like, what's going to give and when?
Stuart McLeod 00:10:19.685 Yep. Yep. And also, I'm being a bit facetious around the turn in the industry, but I genuinely believe that businesses like yours and ours, we do it for the right reasons. We're authentic about the way we go about it. We're respectful of the industry, and genuinely want to help. Right? Because we had the hypothesis, not dissimilar to yours, seven, eight years ago, that the industry is underserved by the vendors, the Thompsons, the CCHes of the world. And I think that still holds true today. Right?
Enrico Palmerino 00:10:59.335 Yeah. No, I totally agree. You just look at the product and stuff of some of those big firms. It was built on the [crosstalk].
Stuart McLeod 00:11:07.106 Blech. [laughter]
Enrico Palmerino 00:11:10.787 But everyone still uses it. [crosstalk].
Stuart McLeod 00:11:11.947 I know. You have to. You have to. But it's a right world. We're finishing off practice management. You'll be able to build an invoice in AR soon. It's okay. [laughter]
Enrico Palmerino 00:11:23.181 Yeah. There you go.
Stuart McLeod 00:11:25.585 You've raised a fair bit of money for Botkeeper. What's your VC experience been like? And your investors supportive? And how is that whole process for you?
Enrico Palmerino 00:11:38.426 Yeah. We've definitely been fortunate. We've raised about 90 million to date. So I think when I started a company, the idea of raising a couple million was just like, "Oh, my God. Can you imagine, if we raise a couple of million bucks, what we could do?" It's been great. So every round we've done has tended to be a highly competitive round, with less than 60. I think the longest was because a cap call was missed, so that it was 65 days to extend it a week, to get the cap call done by the lead firm. But 60 days or less raise timeline, let's say four to eight [week?] term sheets kind of on every round. And I say that just because what that meant was going into every round, we got to really pick the right partner. And I think for all of our rounds, the partner that we chose did not have the highest valuation. Which just tells you that you're trading the right partner over a higher valuation, which I think, I wish more firms, more founders, realized kind of how important that is. A little higher valuation doesn't actually move the deal at the end of the day. But we've got an incredible board, very supportive, great experiences. Our seed investor was Ignition Partners. One of the partners there, Nick Sturiale, was on the board of Bill.com. So we've gotten to kind of benefit from the, "You guys look a lot like this," and some insights and advice along the way. And then having Greycroft and Google, and both provided different perspectives. It was Reach for talent with Greycroft, and broader advice and help. And then very technical talent. We got free engineering resources from Google, which is great. So technically, Botkeepers [could?] develop by Google. There's that clause we signed somewhere. But [inaudible].
Stuart McLeod 00:13:31.352 There you go. We'll get that plug in. [laughter] Not that [they need?] us. I think they're doing all right by themselves.
Enrico Palmerino 00:13:37.746 I think they're doing just fine. [laughter] Yeah. And then [points NA2?], I mean, the quant background that they had, the ability to start to tee up banking relations and stuff with us as we start to look at how we can use our data to assist the firms and clients in various ways. And then most recently with Tom Golisano from Paychex. It's funny the timing of it. In the world that we are, Pilot raises this $100 million round led by Jeff Bezos. And the theory is Bezos is going to build and change the industry, disrupt it, kind of take it over. And they put money into Pilot, which has really elevated themselves to be the AI firm of the future, the biggest competitor to the industry at large. And then we raised around-- I can't say that we planned this to happen. But then our round ended up getting taken down by Tom, who founded Paychex. And Paychex was very much like, "We're going to support the accounting community, do a lot of business, and grow through the accounting channel." It was just funny. These two individuals kind of took down our rounds respectively, very different, very aligned with, I think, our business promise. But it's been great. Great feedback, very supportive team. The accounting industry is just a long slog. I think I saw somewhere that I want to say it was 14 years it took Bill.com to get to 60-something million in AR? And then three years later they were at 280 or something like that? Right? You've seen it, I'm sure.
Stuart McLeod 00:15:19.491 Oh, yeah. I'm still waiting to see it. We're doing all right. But legal is not that dissimilar. I mean, these professional services, call it traditional professional services industries, just take, by their very nature. And the great people that service them and operate within them have been operating businesses perfectly fine on paper, and with their skills that they were trained to do, for the last 100 years. Who are we to come in and tell them how to do their business? Right? It makes sense. I hope most of us go into it with eyes wide open. Right? I know you reasonably well, and I don't think either of us is arrogant enough to think that it can happen overnight. But as I said before, I think we do come, genuinely, from a place of respect and understanding. And at least in our team, I think we counted it one day. There's over 100 years of accounting software experience in our company. And that was five years ago. So I do think that we come from a genuine place and a respectful place, and I hope that comes across in our content and our marketing and our product. And like you say, we're not here to disrupt the industry. We're here to help the industry disrupt itself, and move on, and be better, and get some time back, and all of that.
Enrico Palmerino 00:16:58.052 Yeah. I like to think it is as at least our vision was to enable the industry. Not disrupt it. Because disruption usually means you throw it into a little bit of chaos, and there's a winner and a loser.
Stuart McLeod 00:17:10.739 Yeah. Yeah. [crosstalk] game.
Enrico Palmerino 00:17:13.613 Yeah. I think both of us have definitely taken the very much enablement approach, where we're supporting accountants through the next rung of evolution. But it's also like, why does it take the accounting industry so long to adopt? Think about it. What's probably the most devastating aspect of your business if you were to screw it up and get it wrong? All business decisions stem from some aspect of your financials. And we're going to be a little bit more cautious when touching a company's financial processing, so.
Stuart McLeod 00:17:40.919 And it's the same as the banks. Oh, this country and its checks just drives me nuts. Right? Before I arrived here, we hadn't written a check since I was at primary school.
Enrico Palmerino 00:17:52.361 You don't like to write checks? It's so much fun. You get to sign your name.
Stuart McLeod 00:17:56.829 Practice your signature.
Enrico Palmerino 00:17:58.760 Yeah. If you didn't work on that when you were in high school, and were like, "I'm going to use this one day to sign."
Stuart McLeod 00:18:04.464 No. No. Only just because of my short-lived sporting career, I thought I'd be signing autographs. Not for checks. [laughter] I realized pretty early on that was unlikely, as well. My cricketing abilities were not that flash. But when we got here, it was just so frustrating. But the diversity of banks here, there's thousands and thousands and thousands of them, as opposed to most Commonwealth countries, where there's three or four. And they've got your money. You can push them as much as you like--
Enrico Palmerino 00:18:44.087 And your data.
Stuart McLeod 00:18:44.769 And your data. Yeah. Well, hopefully, they're not flogging it. But you can push them as much as you like for technology change, and they've actually got quite good, really, over the last couple of years. But 10 years ago, they were a long way behind. I think there's been a significant increase in the uptake of technology in the banking sector and the Plaids of the world, even though they tried to sell the Visa for 10 gazillion dollars, they sell to somebody else for 20 gazillion a bit later on when the Feds allow them to. And great companies like that have moved the industry along. And hopefully Botkeeper and Karbon and some others can help the accounting industry in similar ways.
Enrico Palmerino 00:19:27.484 Yeah. I totally agree. I think the banking thing is going to be an ongoing problem. Just because with so many different banks, and with so many of them in the Stone Ages from a technology perspective, the one thing I keep hearing from accountants, they hate fetching or getting statements, and then relying on a business owner to remember, or take the time, to go download and upload it is usually not that great. But you saw Xero. Xero's discovery of what was it? HubDoc's fetching functionality. Because they just said, basically, they threw in the towel. And like, "We're not going to do this anymore. We can't afford to keep building for this where it's just always changing. 2FA and everything just make it impossible.
Stuart McLeod 00:20:07.563 No. It's too hard.
Enrico Palmerino 00:20:09.181 Yeah. And it's a bank thing. You can't build around it. You need the banks, I think, to either want to participate, or you just slim down the banks. It could be interesting if banking decisions end up getting driven or dictated by accounting functions.
Stuart McLeod 00:20:24.910 Yeah. [crosstalk].
Enrico Palmerino 00:20:26.252 Accounting firms are like, "You can work with these four banks or five banks, and that's it. Or you can't work with me."
Stuart McLeod 00:20:32.822 [laughter] Yeah. So Wells is out. I'm not close enough to have a well-regarded opinion, but I'll have one anyway. The UK and Europe of fintech has really taken off the last couple of years, some of the startup banks, the Sterlings of the world. And there's one that got in trouble for their culture not that long ago. I can't remember. Not that I would advocate that. Australia is a little bit slow, generally, but their banking system is nowhere near as bad as the US. But I think there are countries and regions that are really pushing the envelope for fintech. And eventually, so there's [Millier Payments?] and there's quite a few trying in the US. But it's hard. There's a regulatory system and a regulatory structure that makes this stuff difficult.
Enrico Palmerino 00:21:22.518 Yeah. The neobanks are having a pretty big go at it, which it will be interesting to see how that ends up, ultimately, playing out. Is there an army of neobanks like there's an army of different crypto coins?
Stuart McLeod 00:21:34.832 Yeah. Yeah. God. [inaudible] going.
Enrico Palmerino 00:21:38.193 Who do you go with? Yeah. Who's going to be here in five years? Right?
Stuart McLeod 00:21:44.711 Well, I mean, there's consolidation. And you alluded to it before with Pilot and yourselves attracting a lot of money, and Canopy, closer to us, God love them, they raised some more money. And our own announcement not that long ago. There is money coming into some very non-sexy aspects of industry, which I don't know whether you want to read that as like the barrel, you can see the bottom of the barrel from here? Or that the money is actually finding its way to the industrious parts of the economy. Right? Rather than the sort of sexy YC type things that just put some AI and ML and some crypto on a deck, and raise your 60 million. Right? It's pretty easy. [laughter]
Enrico Palmerino 00:22:38.016 Can't find any more good deals. Let's see. Let's invest in [inaudible] bank.
Stuart McLeod 00:22:42.746 [laughter] That's right. Let's go and invest in these companies that are actually moving the needle. Right?
Enrico Palmerino 00:22:47.613 Yeah. Bench took down a big round not long ago.
Stuart McLeod 00:22:50.528 Oh, did they?
Enrico Palmerino 00:22:51.572 Yeah. I want to say Bench did like a $65 million round or something like that last year.
Stuart McLeod 00:22:57.623 They've been plugging away for a while, and doing a really good job in terms of holding up. So let's have a look. Series C in June of last year. 60 million US. Good on them. And you translate it to Canadian, it looks even more. That's what we did for our Aussie announcement. But they've been at it for quite some time. Yeah. Since 2012, they raised the seed round.
Enrico Palmerino 00:23:26.757 But if you look at what they do on their site, they now have either their own bank, or they partner with the banks. They said, "Use our bank and it's this price. Use a preferred bank and it's that price. Or don't use one of our banks, and it's this much more, or we can't work with you."
Stuart McLeod 00:23:46.284 Yeah. That makes complete sense. Right? Because then they get to run the data from start to finish. And they understand each part and they don't have to put in any extra effort.
Enrico Palmerino 00:23:57.473 Yeah. [inaudible] payroll. They're consolidating a bunch of these data challenge problems, which I think is great. I think it's where the industry is heading.
Stuart McLeod 00:24:09.133 And Canada, generally. I mean, I've had Chad Davis on this podcast recently. Canada has been, I would say, further ahead, or further up the curve, technology adoption-wise than the US. I think maybe, if you want to give it the benefit of the doubt, the tax arrangements, and the complexities in the regulatory environment are less than in every other country, apart from the US. But the LiveCAs, the Benches, these types of Canadian companies have been around for a while now, and pushed adoption of cloud accounting, and educated the market, and adopted these fixed fees, and putting together different tech stacks over the years that have really helped the customer base, helped the client base off the traditional firms.
Enrico Palmerino 00:25:04.672 Yep. Yeah. I think Ryan Lazanis sold his cloud accounting practice five years ago or something like that, which just puts in perspective how long they've been at the cloud accounting game. I think Canada, I had also seen somewhere where Canada got rid of their penny. Which there's going back and forth on the US whether we should get rid of the penny, because it costs us more than it's worth. There's an argument for another day.
Stuart McLeod 00:25:31.141 Australia got rid of its-- I was alive. I'd have to Wikipedia. And I won't cheat. But Australia got rid of it's one cent and its two cent. I reckon I was in, I want to say late 80s, early 90s, something like that. I guess that's the equivalent. Right? We've still got our 10 cent and our 20 cent, I think. Well, I haven't been back in three years, of course, so I wouldn't know.
Enrico Palmerino 00:25:53.771 Yeah. We're holding on strong. [crosstalk].
Stuart McLeod 00:25:56.001 Still grasping at straws. I know you're based in Boston at the moment. Are you Boston born and bred?
Enrico Palmerino 00:26:07.748 Not downtown. I grew up out in central western Mass in West Brookfield. It's near kind of Sturbridge, Southbridge area, two hours outside of the city on a good day, hopefully no traffic. A lot more if there is traffic. But yeah. I remember going to Boston was a big field trip or a special thing. It was kind of [inaudible] day. Yeah. Might as well have been going to a different state or a different country. But now I live right outside, in Brookline, Chestnut Hill. So less than five miles.
Stuart McLeod 00:26:42.237 And do your remember your-- well, to ask a Bostonian are they into sports is like asking a Christian if they're into God. Right? So do you remember your first Celtics experience? Was that a big thing?
Enrico Palmerino 00:26:56.947 I'm trying to remember my first Celtics experience. I remember my first Patriots game. I remember my first Red Sox game. I think I remember. I might have gone with a friend of mine to the Celtics.
Stuart McLeod 00:27:10.409 What about Patriots? How was that? Was it freezing cold?
Enrico Palmerino 00:27:14.169 Yeah. It was good. I want to say the first game, it was so cold. And we tailgated and wrapped, took a tent and saran-wrapped around it.
Stuart McLeod 00:27:28.057 [laughter] Just to avoid [crosstalk].
Enrico Palmerino 00:27:28.464 And then kind of cut a little place through it. You could--
Stuart McLeod 00:27:31.779 Put your head through.
Enrico Palmerino 00:27:32.977 Yeah. Get in there and warm up. Yeah. It's funny. I like being in Boston. Obviously, we have great teams. But just having been in the startup game for long enough now, I feel like that consumes 110% of my time. So I'm always at a shortage of Delta loss. I enjoy going to games and stuff, but I don't keep up with anything on my TV, what have you. I just don't. But yeah, I'm just saying I don't really have the time to follow sports. I love going to a game. But almost more so for the social aspect of it. Whoever I'm going, it's a good background, and fun to kind of watch. But yeah, just never really gotten crazy into sports.
Stuart McLeod 00:28:14.497 Yeah. Yeah. Reboot. Yeah. I've only ever sort of seen Foxboro Stadium with Al Michaels and-- although I think I got the hint after the Super Bowl they're retiring. The only other decent commentator is Tony Roma. But I've only seen all of that on tele, and I don't really want to go to Foxboro Stadium and sit out in the cold. Show me a box down in Santa Clara and I'll watch an NFL game, I reckon.
Enrico Palmerino 00:28:46.206 Did I tell you, so when we raised our seed round, it was in, I think, November of '17. And there was this hot spree. And my investor, we decided, hey, he's a huge Patriots fan. At the time, he lived in Seattle. So he was crazy Brady fan. And so he flew out. And we said, "All right. Let's sign the term sheet. Let's go to a Patriots game." My family happened to also be going there, too. So he got to meet my family and tailgate. And I signed my turn sheet on his back at the coin toss of the Patriots game in Foxboro Stadium. It was just kind of, "We don't know how this is going to turn out. So let's see, I'll call it a coin toss, and hope for the best."
Stuart McLeod 00:29:26.723 There you go. Slightly corny, but a bit of fun too.
Enrico Palmerino 00:29:31.093 Yeah. It was fun.
Stuart McLeod 00:29:33.012 Yeah. Yeah. Yeah. And I guess if that was his thing, then you're a green founder doing the right thing. I get that. That's cool.
Enrico Palmerino 00:29:42.680 It was funny because the people behind us are like, "What are you guys doing?" I'm signing my name on his back. He's signing his on mine. Like, "I just signed a $4.5 million term sheet."
Stuart McLeod 00:29:53.115 Yeah. You can buy three hot dogs at the stadium for--
Enrico Palmerino 00:29:56.259 Yeah. Anyone want a beer?
Stuart McLeod 00:29:58.613 Yeah. That's right. I just spent most of the seed round on three hot dogs and two warm beers. [laughter] What's next for you guys? You're looking great. You look like you're enjoying the journey, and onwards and upwards, I assume. But I shouldn't put words in your mouth.
Enrico Palmerino 00:30:20.784 Yeah, things are going well. I think for us, at this growth rate, we should have 500, 600 firms probably on the platform by the end of the year. That starts to get the tipping point. I know you guys have-- you're at the point where that's a critical mass of, hey, you're relevant in the industry. Which I think would be good. Maybe 11, 12 thousand businesses. And where I think I'm most excited about this year is we're launching the Botkeeper operating system. So that's going to go live day after tax season. So April 16th.
Stuart McLeod 00:30:58.207 Tell us more about that.
Enrico Palmerino 00:30:59.920 Yeah. So that I'm super excited about. I think that's going to be a game changer for us. It's just we've taken the integrations between the different future functionality to the next level. And we brought the AI to the forefront. So now instead of the AI kind of being behind the curtain and doing stuff and you just get the result, now you're actually doing a lot more interaction with the AI. And you're seeing what it selected, and why it selected, and what its weighted probability was, and what was it based on, what was the historic categorizations or classifications for this. And it's just starting to tie it all together. So that instead of necessarily relying on our team to be the one that's interfacing with the AI, it can be your team using it as a standalone pure software product. So I think those changes are going to be good.
Enrico Palmerino 00:31:46.198 I think some of the stuff that we're doing that is going to tie in banks-- we've gotten much better integrations with banks. So less breaking from that perspective, which is going to be good. More stability there. Greater functionality on the dashboard side. Tying in journal entries and schedules. Just really taking what was previously automated to the next level, and allowing the user to dictate and kind of finesse. Do they want to set parameters around how far back the AI looks? Or at what data sets it should look? Or what should be statistically relevant versus irrelevant? And to do all of that and have all the-- because we've got a lot of functionality, to really do it right, it's kind of been this thing that's been in the works for the last year and a half or two years. We've been waiting to publish. Because we couldn't really update one feature at a time when we were doing a platform overhaul.
Stuart McLeod 00:32:45.323 Oh, right. Yeah. It's a little bit more a big bang now, is it?
Enrico Palmerino 00:32:49.027 Yeah. And it was one of those [crosstalk] updates.
Stuart McLeod 00:32:52.277 [crosstalk].
Enrico Palmerino 00:32:54.253 Yeah. To do it right, we needed to really just reimagine the platform as a whole. And we're glad that we did because the firms that are in the new version, in [Boston?], are loving it. I'm just, now I'm like, "Let's get it out to the rest of the firms." So that'll be exciting.
Stuart McLeod 00:33:14.345 Yep. So how many staff now? And mostly around you in Boston? What's your kind of geographical strategy?
Enrico Palmerino 00:33:21.470 So we're right now split between US and Philippines. I want to say it's 100 to 175 each place. I think we're a total of 350 or so. And I want to say maybe 40 States. So we're pretty geographically dispersed here.
Stuart McLeod 00:33:38.504 Oh, yeah? [crosstalk] pretty dispersed here.
Enrico Palmerino 00:33:41.265 We've always been very virtual, even out of get go. The first five people were in five different states [crosstalk], something like that. Maybe it was the first 10 people were in five different states. And we've got a couple countries. I want to say maybe we're four, six countries at this point. Just to find the best people. Our thing is the best people can live anywhere. And if we find the best people that are the right fit for our culture, we'll bring them on. And the Philippines has been a great addition to our culture. So we've liked working with them over there, and incorporating our office over there and stuff, and just maintaining a high level of security. But yeah. I think my guess is, over time, we'll probably have more countries, more states. Maybe we'll get to all 50. Just as the virtual world--
Stuart McLeod 00:34:25.792 Yeah. Just contribute to their sales tax revenue. [laughter]
Enrico Palmerino 00:34:29.943 Yeah. I think what you'll see is our headcount stays more relatively flat over the years, or grows by a smaller and smaller percentage. Just because we're seeing the AI start to take much higher percentages of the processing. And I want to say, for perspective, we four and a half [Xed?] the number of firms on our platform last year. But headcount grew 30%, something like that. Right? So you just play that trend out a few more times, and it just kind of looks like a flat line.
Stuart McLeod 00:35:08.134 Yeah. Yeah. Profitability is on the rise in there somewhere.
Enrico Palmerino 00:35:12.436 Yeah. And gross margins are climbing, and burn decreasing. All the things that VCs want to see. Grow faster, higher AR, higher margin, less burn.
Stuart McLeod 00:35:26.201 Yeah. That's right. That's right. [laughter]
Enrico Palmerino 00:35:29.834 Do it. Okay. Yeah, no problem.
Stuart McLeod 00:35:33.046 Yeah. That's no worries, man.
Enrico Palmerino 00:35:35.066 Easy as that.
Stuart McLeod 00:35:37.175 No, no. It is important to have investors that are understanding and appreciate the journey, that's for sure.
Enrico Palmerino 00:35:45.792 Yeah. Most of our investors, I mean, they're looking at this as a 10-year journey. And you see it in their portfolio.
Stuart McLeod 00:35:51.765 You got it in you for to stick out that?
Enrico Palmerino 00:35:54.177 Yeah. I mean, the cool thing is, I think one of the benefits of Botkeeper is that, in order to build the platform for accounting firms, we have to start by building software directly for SMBs. Because we had to first go build a business model that would get us a bunch of SMB sign ups, get all the data, get the front line experience of workflows and what's going on, to then build the platform, to then start selling to accounting firms. Then get the feedback and the iterations to adopt it. The first three years were growing the direct client base, acquiring enough data, and building that first iteration of our platform. We launched the platform, I want to say it was like mid-2019, and had kind of our first 10 firms sign on. And that was exciting. It was this was the vision. We got it out there. And it's like, "10 firms. This is awesome." By 2020, we had 50. And then I think we had 220 or something like that by the end of '21. But this new platform has only been out now for approximately three years, call it. So it still feels new and different.
Stuart McLeod 00:37:02.337 Yeah. Yeah. Shiny.
Enrico Palmerino 00:37:03.202 You can see how excited I am about-- well, so the accounting platform has only been out for three years. And in two months, we'll be launching [Boss?], which is really where I think I finally get to see the vision, this vision I've been talking about, really come to life. So we've had these things where I still feel like it's so new and fun, that I'm not tired of it in the slightest. I think I'm amped up to see this new platform coming out.
Stuart McLeod 00:37:31.863 That's very exciting. We love working with you and with Botkeeper as partners. And can't wait to see what is next on the horizon. And it is fun working with people with vision for the industry, and genuinely want to make a difference. And we appreciate you guys very, very much.
Enrico Palmerino 00:37:55.405 Thank you, sir. The accounting industry at large, I think, is just a ton of fun to work with. It's so communal. It's so supportive. They'll challenge you, but they're challenging in a way to make you better. But you don't see that in other industries. You don't see people willing to take the time, try something, give you the feedback, help out along the way. I just saw, for the first time, one of our firms shot me an email. It was like, "Hey, in the new version of your platform, I noticed you don't have a way for me to do this." And this is Scott Soucy at Kaufman Rossin. And they're a good-sized firm down in Florida. And I'm like, "Do what? What are you using Botkeeper for?" And I said, "Would you mind if-- could you show me? Can we schedule a quick call if I pull up your screen?" And he pulls up his screen. They've literally turned the Botkeeper platform into their internet. And they've got all of their-- they've got all these links, different applications. And they've got embedded widgets set up in it. And they've got their company page there, and news. Everything there. And it was a proud moment, where they were using it in a way I'd never imagined, but it makes total sense. And I would relate it to eBay, when people started selling cars on eBay, you no one expected eBay to be an auto dealer. That kind of stuff is super cool. And that they're willing to be like, "Oh, here's how to do it," and give a bunch of advice. So Scott has been awesome. And others in the industry are great. Dixie, I think, is going to be joining our advisory board. Kane is joining our advisory board. And we're starting to get some great people surrounding the company with some really great people that have got great ideas and vision for the industry as a whole, to just constantly give us feedback, and tell us how we can do better. Which is phenomenal.
Stuart McLeod 00:39:49.718 Yeah. No, I think it's a great feeling, isn't it, when you sort of have that momentum, and great people are wanting to be involved, and genuinely care about your company, and what you can do for the industry, and what you can do for them. But also what they can do for you. The accounting industry is a very supportive one, and one that probably the main difference that I've noticed over the years is, they're near-- it's not inability, but almost refusal to see each other as competitors. Right? All right. Cool. Well, thank you so much for all of that. Happy to sit here and talk shit all day. It's actually quite enjoyable, isn't it?
Enrico Palmerino 00:40:34.324 It is. It's a lot of fun.
Stuart McLeod 00:40:35.562 If this is all we had to do in our job, it'd be easy.
Enrico Palmerino 00:40:38.321 Yeah. Yeah. I'm just going to run a podcast. It's my second career.
Stuart McLeod 00:40:42.175 That's it. That's it. I don't have a very good radio voice. I'll have to deepen up a bit, get a vocal cord taken out or put in or whatever they do. [laughter]
Enrico Palmerino 00:40:54.799 That, or just become a smoker. Right? Pack a day or something like that.
Stuart McLeod 00:40:56.941 Yeah. Yeah. Pack a day. That'll fix it.
Enrico Palmerino 00:41:01.185 I'm not advocating that, [to be fair?].
Stuart McLeod 00:41:02.645 No. No. We shouldn't do that. And then--
Enrico Palmerino 00:41:04.408 Children don't smoke.
Stuart McLeod 00:41:06.091 No. It's not the cool thing to do anymore, is it? The holidays this year, you got some plans to take a break?
Enrico Palmerino 00:41:14.738 I kind of did some of that at the end of last year. So I went to the Bahamas for a couple of weeks. I got COVID while I was there, so I was detained.
Stuart McLeod 00:41:23.410 Got that out of the way. Yeah.
Enrico Palmerino 00:41:25.621 Yeah. Start the year off fresh. And then again, I did a VC CEO kind of ski trip last weekend in Utah, Snowbird, which was awesome.
Stuart McLeod 00:41:37.634 Oh, nice. Yeah.
Enrico Palmerino 00:41:39.172 And then this week, my wife and I are just getting away and going to get some adulting time together, which will be nice. We're just going to a hotel on the Cape. And after that, no plans. Maybe a ski trip or two, get the kids on skis. And then just keep cranking.
Stuart McLeod 00:41:55.156 Sounds good.
Enrico Palmerino 00:41:55.842 And I got to grow into our valuation.
Stuart McLeod 00:41:59.328 Yeah. No pressure. No pressure. Well, if you ever want to come out west and get some skiing before the end of the year, more than welcome. Love to have you.
Enrico Palmerino 00:42:08.780 Yeah [crosstalk].
Stuart McLeod 00:42:09.468 Maybe there's a couple of things that we got ongoing out east, so who knows? I'll let you know if I'm in there and around [and about?].
Enrico Palmerino 00:42:17.983 Yeah. Please do. Are you doing any trips?
Stuart McLeod 00:42:20.382 Yeah. We're going to spend four or five weeks in Europe. I think the family has sort of been, like everybody, has been bottled up for two years. So my wife is definitely keen to get some worldly culture in, away from our mountain tourist town.
Enrico Palmerino 00:42:36.991 I like it.
Stuart McLeod 00:42:38.084 And I don't blame her one bit. So I'm going to work from the London office for a couple of weeks over summer, and we're going to get some time in Corsica, of all places. So that should be fun.
Enrico Palmerino 00:42:48.717 That's great, man. Enjoy.
Stuart McLeod 00:42:50.556 Yeah, we will. We will. Enrico, thank you so much. Wonderful to see you.
Enrico Palmerino 00:42:54.929 [crosstalk]. Likewise.
Stuart McLeod 00:42:57.279 If I don't see you beforehand, let's make sure we get together in conference season around June.
Enrico Palmerino 00:43:03.689 Sounds great, sir. Looking forward to it. Have a great rest of your day, man. Cheers.
Stuart McLeod 00:43:08.441 You too. Cheers. [music] Thanks for listening to this episode. If you found this discussion interesting, fun, you'll find lots more to help you run a successful accounting firm at Karbon Magazine. There are more than 1,000 free resources there, including guides, articles, templates, webinars, and more. Just head to karbonhq.com/resources. I'd also love it if you could leave us a five-star review wherever you listened to this podcast. Let us know you liked this session. We'll be able to keep bringing you more guests for you to learn from and get inspired by. Thanks for joining, and see you on the next episode of the Accounting Leaders Podcast.