Tech Brew Ride Home - (Portfolio Profile) MRGN, With Yoni Rubin

Episode Date: April 9, 2022

MRGN.ai is all about intelligent budgeting for small businesses. Founder Yoni Rubin joins me to discuss the realities of founding a SaaS company in 2022, and much more. Another great company joining the Ride Home Fund portfolio! Learn more about your ad choices. Visit megaphone.fm/adchoices

On April 4th, 2023, around 2 in the morning, a man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16. Yoni Rubin, thanks for coming on the TechMeme Ride Home to talk about a Ride Home Fund investment that we're obviously super excited about, which is Margin. So let's kick it off by just giving me, not the elevator pitch, but give me a couple

minutes high level of what Margin does. Absolutely. Thank you, Brian and Ride Home Fund for having us on the podcast. So obviously my name is Yoni Rubin. I'm the CEO of Margin. We are an FPNA platform for small to medium businesses. We don't love to use the term SPNA because those small businesses don't know what that means. Can you even tell the audience what SPN means? FP&A being financial planning and analysis. Absolutely. Very corporate term that SMBs don't understand. So there are several first generation solutions out there. And we can

consider ourselves to be the second generation. And basically what they do is they help you with a turnkey solution to get your budget model up and running. While we do that as well, we also give you all sorts of value ads in terms of being able to look into the future of it. So of course, we don't purport to look into the future, but we have the ability to allow our users to simulate

just a breadth of scenarios that might impact their cash flow. And then the next generation, of this we see is we're developing an insight engine so that we can actually tell users through our platform when their KPI's are straying from the norm. So we incepted just about two plus years ago. We are just in the tail end, on the tail end of our beta launch, which we kicked off about two and a half months ago and went fantastically. So far, just to highlight on that is that we haven't really announced our existence and people are coming in unsolicitedly through search engines and referrals and fun stuff like that.

Same thing for partners. We of course opened our round of funding not long ago, which is going terrific as well. And that's the high level view. So this is not to make it too simple that you could replace like a CTO with this sort of thing. But in essence, a SMB could use this tool to do beyond just spreadsheeting to do more.

more high-level forecasting and things like that, that a CTO, that's their job, essentially. CFO, but yes. CFOs, yeah, exactly, but more so, SMBs being brick and mortar, early-stage SaaS companies, professional services and consulting firms, a lot of them are budgeting on the back of a napkin or in spreadsheets, and they're hiring their fractional CFOs to build out those spreadsheets for them and then maintain them over time. And so they need that finance acumen as well as the Excel acumen, and most of them don't have it. So the current solutions give them that and of course we do as well but the other solutions basically remain static on their on their computers granted in the cloud so they basically move their budget models

from desktop local to the cloud but don't give them enormous amounts of value and so they sit in the background they don't do a lot for the business whereas margin is actually proactively letting users know hey you know maybe it's time to back fill a role because you don't have enough quota enough revenue accounted for in your quota to meet your next year's targets or hey taxes are coming up maybe you can use this accounting firm to file your taxes all sorts of insights also on the KPI side in terms of benchmarking against industry data and saying hey your gross margin is thinner than other companies in your space and therefore this is what you can do to fix that so all sorts of

things about being able to see a few steps ahead so you can mitigate risks Let's back up a bit and tell me a bit about your entrepreneurial story. I know this is not your first rodeo. So just tell me a little bit about what you've done before Margin and then we'll get into how the idea for Margin came about. You got it. And I can segue directly into that second portion, but pause me at any time. So I've spent about 15 years now being a startup CEO.

I was a military commander. I spent half my life in Israel, half my life in the States, most recently relocated to New York from Tel Aviv about maybe seven or eight years ago. I spent 14 years in Florida previous to that. And then I basically dove in into the tech scene in Tel Aviv, which everybody knows is pretty rampant and huge. I had a great time there. I served as chief of staff and an MNA analysis role with a company that we had just taken public. ended up uplifting to the New York Stock Exchange, and they have since uplisted in the NASDAQ since my departure. From there, I was poached away for a relocation role and ran business operations for Thirsty here in New York. Before I got swept away by PipeStream, where I ran business operations as well, spent about six years there. I've raised about $250 million for a variety of businesses and handled all communications between investment banks, SEC, everything to do with public and private markets, but public and private placements as well. And so I've,

I come into startups, basically, and I tell them something very, very, I think very satisfying to them. I say, hey, first of all, my job is to make things more efficient for you and easier for you. So you don't have to worry about where you're getting your next laptop,

whether your emails are working, whether your cap tables in order, your budgets, and order, so on and so forth. And the way that I go about doing that, is that I balance corporate culture, or I should say corporate bureaucracy with startup culture. Everybody wants to go into the office if we were going into offices these days in their flip-flops

and shorts in the startup world, but they also are aware that scalability is dependent on process and repetition. And so I get usually a very, very good feedback in terms of that approach, and that's where I've spent most of my career. And so I'll pause there before I segue right at the margin. Well, I was going to, you know, I'm going to say that it seems kind of obvious to go A to B, to see that you would have, you know, gotten a sense that this is a tool that, you know, businesses might be crying out for. Is that right? That is. And I was the one crying out for it. So about four or five years ago, my CEO came to me and said, hey, basically run this exercise so we can figure out what a massive burn rate reduction might look like. And he wanted me to do it

within 24 hours, which was not feasible at the time. And so I went out and I looked for a solution, a SaaS-based solution, which unfortunately wasn't really there. And then the stars aligned about two plus years ago. And so that's also what gave us the focus of the simulation aspect, the insights, it's, hey, we don't have an expensive CFO on staff. And so who's going to give us these insights? I don't want to have to turn to a fractional FFO that maybe not necessarily has their

loyalty or the company's best interest in their heart. And so that was the idea, but also saving hundreds of hours around lifting up a model, a budget in general. By the way, whether for venture capital due diligence purposes, but also for bank loans, also for just simply managing your business day to day, as we mostly should be doing with our financial models. And so, yeah, the stars aligned. We had built out the MVP, and the MVP ended up being fantastic, even though we actually built it out overseas. They did a fantastic job. We brought engineering in-house. We socialized investors the entire time. I don't sleep because of that. And I love the idea of constantly

being in touch with the ecosystem, not just the investor side, but I'm always in touch with founders and we're just always bouncing ideas off of each other. And so that's what we spent about eight to nine months doing during the MVP production process. Like I said, we brought engineering in-house We launched on January 10th. And the weird thing to me, and I know this is, you know, I tend to be a very pragmatic person. I'm an operations person. I'm Israeli, so I'm going to give it to you as it is without sugar coding. We started seeing traction before we had even launched.

We started seeing interest. We started from all over the place. We had set out to launch only to about 10 to 15 beta users, and we found ourselves with 115. We've gotten recommendations and referrals. from VCs, from friends and family, of course, but also unsolicitedly through search engines, just people looking for this type of product. And where we kind of, the light bulb went off was when we were doing our research for the platform, we pulled, we would basically all divide and conquer and hit a bunch of different

online virtual networking events because it was COVID. And usually they would have between 50 to 100 participants. And we would get about 5 to 10% regularly on every single call. about conversion rates usually being at the 1 to 2 percent. We're talking 5 to 10 percent saying, Yoni, we needed you yesterday and we needed this desperately. And then I say to them, okay, fantastic, join the beta program and I'll grandfather you in for life. And they say, Yoni, these other guys that don't bring much value to my business are charging me 100 bucks a month. You're charging 20 bucks a month. I will pay you happily to 20 bucks a month. And so that helped us shape our

ideal customer profile, our go-to market strategy, and so on. Yeah, I was going to ask about, at least at this stage, I mean, obviously down the road, who's the ideal customer for this product is every SMB or whatever. But right now, for this stage, you know, sort of still in beta, sort of launching to the world. Who are you thinking of as the ideal sort of user of this? Is it a smaller startup? And, you know, obviously there's thousands of those in the audience listening right now. Right. So I heard a saying one time. It was something along the lines of, we're not trying to boil the ocean. And so we are not trying to boil the ocean. We are not trying to take over every SMB in the world at this particular day. Of course, that's not

probably feasible. And so we're hyper-focused on the onset. First, we are targeting. And this is interesting because we saw transition within our ICP due to COVID specifically. And it was a positive of one. So we started off pre-COVID when we were conceptualizing this whole thing, saying, we want to focus in on the Northeast because we have boots on the ground. And so we were thinking millennial founders wanting to remain remote and be remote, collaborate in the cloud, of course, in the Northeast with under a million in revenue and 120 in headcount. And the one thing that's changed there is the remote aspect of it. So geographically, even though we have boots on the ground in the Northeast, we've been seeing unsolicited interest from all over the country.

And initially, we are targeting only the U.S. and maybe a little bit outside within North America. But eventually, we don't have any geo-related restriction. So we can flip the switch, no currency symbols, no zip codes, area code, things like that. We can be applicable to the whole world. So initially, as I mentioned, that's our ICP. As we grow, and this was shaped by the research we did in the, and I guess the feedback we got from our our beta users in a sign-up saying 50% of them were SaaS, so that addresses our current ICP, 25% pro-services, and 25% in amalgam of different kinds of small businesses. Interestingly, obviously your typical brick-and-mortar mom-and-pop shops, but also

dental offices, a vodka brand, just all sorts of businesses. And so we're not trying to tackle them all at once, but from a marketing and go-to-market perspective, we're progressively getting there. Well, all right. Let's try to tackle it this way. Let's imagine that I am either a small SaaS startup or I am this dental office. You can pick those or anything out of a hat. What's my use case? Give me, paint me a picture of a hypothetical scenario of how margin could transform the operations of your business. You got it. Okay. So when a founder of, be it a pizza shop, a hardware store, a SaaS company, an investment firm, doesn't matter what, get started. Initially, they want to get an idea of their finances and their cash flow for the next, let's call it year, three years, or five years.

And that's, by the way, if they're aware of the fact that they need that, hopefully they are. And we find that we all know nine out of 10 early stage upstarts, whether in software or not, barely survive their first two years, if at all. Turns out 82% are failing, excuse me, due to financial or cash flow related problems. We all know the founders that are saying, well, we couldn't raise money. It's not that you couldn't raise money. It's that you weren't balancing your books. You weren't reconciling.

You weren't building a model. You weren't peddling or selling a product that people actually wanted in the market. There's a variety of reasons that ultimately affect your cash flow. And 82% of them are failing because of those. And so we want to get that education into the market. And we understand that brick and mortar, of course, will be the slowest to get there. And that's why we identified SaaS, low-hanging fruit, early adopters. But you could take any one of those.

one of those personas and say, all right, we need a financial model first to run our business, but also to raise money of some kind. Whether I'm a pizza shop owner and I go to the bank for a loan for a traditional loan or I'm a VC back company or an aspirational VC back company, I'm going to build a budget model on pretty much day one. Next up, I'm going to hopefully manage my business to that model. Now, yeah, everything is pretty fluid for the first few months of a startup. And so I might not look at it then, but once things start to stabilize and formalize within the business, we're going to be meeting every week, right? Management teams will meet. Teams as a whole will meet. We'll have our town hall meetings, whatever they might be. And we're going to discuss our budget

adherence. And so myself as a current founder and previous operator as a biz office professional, I was in my financial model every single day. And we were not the maturest of businesses. So every day I'd go in there, and then every month I would reconcile. So literally manually, I would go into our books, pull the reports, and manually copy and paste actuals into my financial model. Now, some people might be asking, why don't you just do it all in QuickBooks or all in fresh books or whatever? They do not have forecasting capabilities.

They have a budgeting module that basically serves as a spreadsheet in the cloud. That's it. So you're not getting much value out of that, other than, static numbers. So I'm pulling in, copying and pasting all my numbers every single month. That's, you know, probably about two hours worth of work, depending on how many accounts I have in my COA. And then I like to formalize things with Q4 fiscal planning. And so we're diving very deep into our financial model at that point. So think about it in terms of if you're really detailed, you're looking at your model every day. If you have MBRs,

monthly business reviews, at least once a month and reconciling. QBR's on a quarterly basis and fiscal planning on an annual basis. Now, of course, this is more applicable to be more sophisticated businesses. So the less sophisticated businesses being your brick and mortar shops, we believe in two years time, they will have already gone through their digital transformation. We're all used to seeing immigrant founders with their first generation children helping them with the register in the hardware store and make the pizzas and stuff like that. And we're thinking within a couple of years time, either that child is going to be at that register or the father or mother will already be educated along the lines of the stripes of the world, the squares

of the world, so on and so forth, and obviously quickbooks online. So that is the core use case. Then someone scratches their head when they're looking at their spreadsheet-based model and they say to themselves, all right, what do I get out of this? All right, so someone told me how to calculate gross margin, but I don't know what that means. What does net income and how does my cash, my bank balance play into this? And so we give them, margin is going to give them the ability through that use case to basically model out the different KPIs. We're going to give them obviously a turnkey dashboard and full reporting. Everything is spun up for them in a matter of minutes, so on and so forth.

So really beyond that spreadsheet sitting on their laptop in some sort of like seven folders deep and never being opened, we're going to be giving them proactive notifications. Hey, it's time to reconcile. Hey, we'll pull your numbers automatically through QuickBooks or through zero. Hey, this is wrong with your KPI. Maybe you need to hire this person, so on and so forth. If I'm one of the many startups listening to this right now, maybe a SaaS startup, and boy, this sounds great. Like we're still so early, right, that, you know, you said that like people are coming in for the beta or whatever.

So like if someone listening right now says, this sounds great, I want to sign up and try this out. Are we still at the point where our listeners, because this is super early, you can get in, start messing around with it and offer feedback. Are you still iterating the product? This is an MVP and you're still developing the product, right? 100%. We're going to be iterating for years, right? We're going to be constantly building on top of this.

We have a roadmap that takes us out right now for two years. But today, an early stage SaaS startup can absolutely log in, self-serve, no barriers, whatsoever no credit card nothing create an account log in about five minutes time if they have let's say a 10 head 10 person head count they'll be on board themselves in about five minutes and in a few weeks time we'll have our quick books and and all our SMB accounting system integrations in place to pull their historical their chart of account which is actually going to shorten onboarding to about a minute once they're in they have a fully fledged model and what we're iterating on is the different KPIs that we're going to show them over time. At first, we don't want to show them

too complicated, like things that might be too complicated. Super oversimplistic. Over time, we're adding more. We're building onto our robust simulation library, of course. We are, you can already basically delegate tasks within the system, much like Expensify, run them through an approval process, all in the cloud. No more attaching spreadsheets, sending, you know, sharing Google sheets, having to look at at sell by sell by sell by sell. Instead, margin is going to highlight specific things. And you can hit approve, reject, and that'll save you about 500 hours for a mid-sized company at this point. And so absolutely iterating constantly, we have plans for five years down the line that we're

not going to share at the moment. We have plans for three years down the line in terms of our insight engine, like I mentioned. So we're looking to be ultimately that, and I hate to use is cliche, but the CFO in the pocket of a small business that either can't afford a CFO or an ERP like NetSuite, SAP, Anna Plan, you know, Anna Plan just got acquired for $11 billion a week and a half ago. And we love to watch them do that. Mosaic rate $25 million last week or about a week and a half ago. So this space is heating up tremendously and we are loving everything we're seeing about it. And again, I want to underline that, you know, listeners right now, Mutant Podcast Army, because we're still early in Margin's life, get in right now and dog food it

and, you know, get in touch and say, hey, I'm part of the Mutant Podcast Army. I love this, but I could use this or whatever. Like, this is a chance to help build a tool that could totally transform your business. And we want to hear from you, right? Like, we are, we want to hear from you. We want to build on your feedback. We are, we are not a product team that doesn't listen to its customers or its investors. Product-led growth 100%. Well, and that's the point here is that it's still so early and everyone listening right now, you're still insiders in terms of where this product is going to go. How big is the team right now? The team is 10 right now. We've got a couple of lead engineers, both back in and front end.

We've got a couple of interns on marketing and business-related things. We've got our chief product officer handling our ux ui and we actually have interestingly um so like i mentioned my background is in business operations i'm the one who takes that financial model and implements it and i know finance hopefully like the back of my hand like i should but we brought on a career cfo um who's not a cfo to us but more so a product manager he looks at the platform at our designs at the calculations he says this is how quickbooks does it this is how pilot does it this is how zero does it um and we should maybe format ourselves similarly to be more familiar to our end users. So we find ourselves to be very well equipped right now in terms of our team.

We have marketing competencies, sales competencies, everything we can possibly imagine. And thankfully, to people like Brian and TechMeme Ride Home, and every amazing, and I'm not exaggerating, I'm not just saying this for this audience, amazing human being that we have met throughout this process that has given us feedback that we couldn't have ever conceived of on our own. We thank everybody, really. This product really has come together from the vision of a couple of us in a small fries type of way to something that is legitimate in the market that people are finding value in and that we can see grow into a multi-billion dollar valuation over the near term.

Well, without giving away, like, you know, strategic goals and things like that, Like, what do you see the next 12 months looking like? What are your, not strategic goals, but goals, like what your aspirations for what margin would look like a year from now today? Absolutely. Okay. So a year from now, every small business will know of margin. A lot of them will not be budgeting at the time or budgeting on the back of a napkin. The good thing is, though, that we are purposely offering a freemium plan for that very reason.

And we want to be that not just, we're not looking at just finance right now. We're not, I would hope to say that we're long-sighted in terms of that. We don't want to be just another tool in the toolbox. We want to be what drives the business. When I'm financial, when I'm modeling in my financial model, that model is what drives my business when it's in a spreadsheet. And so a SaaS platform can do it in such a much more, not just efficient way, but high touchpoint way. You know, automating, programmatizing, notifications, insights, and things like that, shortening the time to simulate a variety of scenarios.

And so that's the vision for 12 months. Now, 12 months is nothing in our world. We're hoping to raise our seed round in Q1 of 2023. We're going to launch publicly in the next two months, right, in the summer, when we hope people have some time to really focus on something like this. About maybe six to 12 months later, we're going to be releasing a new pricing scheme. We are going, here's the big piece of the next 12 months, I guess. Number one is just continuously build on our simulation library, and that's what we need your

feedback for. Let us know what scenarios you're in that are not accounted for in margin. We want them in there. So feel free to reach out to me. Number two is to get our Insight Engine MVP out the door. So we're not going to get to a fully fledged insight engine with machine learning in the next 12 months, but at least an MVP of that. Like I mentioned, our fundraise. And then we're off to the races. I mean, we're off to the races now, but we see things picking up tremendously in the next six

to eight months. Well, you kind of already stepped on my final question, which is basically, you know, asks from the mutant podcast army, but obviously go to mrgn.com.a.i. sign up. It's free to to mess around with. And like you said, the more you can dog food for them, the more that they can make the product better. Like literally, this is a stage where if this is a tool that sounds amazing to you, help them make it more amazing than you could even imagine because they're looking for these sorts of use cases that they don't know about yet, right?

But beyond that, like, if someone's interested in, you know, keeping in touch for investing, for later rounds, for hires, for whatever. Just tell me whatever you want as an ask for the mutant podcast army to know about. Absolutely. So first and foremost, we want to hear feedback. We want to hear negative feedback about the existing platform. We want to hear feature requests. Interestingly, we've gotten an insanely disproportionate amount of feature request of bug reports. One bug report in the last two months, 30 feature requests. And so we're seeing people saying we want more of this, like more and more and more. So I want more of that from you guys. I want to build up that roadmap as robustly as we possibly can. That's number one.

Number two, right now when you go to our site, if you want to play around, it's a super easy self-serve. Please log in, create your account, play around the platform. Very important to note, though, that in about a month's time, we're going to be shutting down the completely streamlined free version, and we're going to be moving to our paywall free version. where, of course, you can tinker with the freemium plan, but if you get in before that happens, we will grandfather you in so you don't have to worry about that restriction. So go ahead, sign up today as quickly as possible. I can be reached at yoni at margin.a.i.

We have live chat on the website. We have a knowledge base, of course, where you can open tickets with us. We'll respond within, I don't know, an hour, if that. And then next, we've got our fundraising round. So we're raising a $1 million precede, $1 million. $500,000 has already been committed. Thanks to Brian for putting the first check in and getting the ball rolling. We have data power ventures as well, thanks to David Yakubovic and others who are coming in.

And so we've got a lot in the pipeline right now, tremendous amount. I'm more than ecstatic and happy to speak to anyone at any hour of the day. I don't sleep. So a 4 a.m. call would be fun for me, and that's that. So any angels or maybe early stage institutional pre-seed, pre-rev, but traction to speak of. Harvard Business Angels is looking at us right now, which is amazing. We have a call later on. I know when this airs, but we have a call later on today with TechStars.

Thank you to TechStars for being big supporters of us, ours, throughout this journey. And we can't complain. So appreciate you having us on, Brian. TechStars has been very friendly to a lot of. A lot of our investments recently. Listen, so let me reiterate, although you should see it in the friggin' title of the show. It's margin. It's mrgn.aI. Please get in touch with Yoni about any questions.

Get in touch with me. I'll put you in touch with them. Yoni, thanks for coming on and telling us about this company that I couldn't be more excited about. Absolutely. Thanks for having me, Brian.