Village_Global_Podcast_Recall_Sessions_He_Built_the_Software_That

0:00Our anchor was that we had a point of sale, but we wanted to help them launch delivery through the gig economy by having an Uber, Dora-Dash, et cetera, integration, because that had never been done in the vertical before. Laundry is two-way logistics from customer to merchant and then merchant to customer. So the only way to get into delivery is to buy a van, hire a driver, et cetera. And the gig economy had never made it here. And there is no sophisticated vendor bringing that kind of integration. My guest today is Alec Czakowski, co-founder and CEO of Sense.

0:36SENSE is the operating system for one of the most overlooked corners of American small business, the laundry industry. It powers more than 4,500 operators, processes over a billion dollars in payments a year, sits inside one in six laundry mats in the country, and helps move nearly 58 tons of laundry every single day. Last month, SENSE closed 140 million dollar series C, the largest software investment ever made in the vertical. SENSE customers are in the embodiment of the entrepreneurial spirit.

1:06For most of them, a laundromat is their first business. Immigrant families, veterans, and working-class owners who've taken a real financial risk to chase the American dream. Alex understands this world instinctively. He's been an entrepreneur since high school, started his first business with bar mitzvah money, dropped out a Chapman to build a payments platform for universities, and sold it at 23. Then he went looking for industries the software world had passed over. Laundromats fit the bill.

1:34He found that starting one is easy, but scaling is hard, so we built Sense to change that. Let's get into it. I'm super grateful for you doing this. Congrats on your recent series C.

1:45huge milestone, not a lot of vertical sales companies and particularly founders get this milestone. So first congrats to you and your end the sense team. I appreciate that. It's great seeing you. I wish we could do this in person, but excited to chat and appreciate all the kind words. I know you've been telling a lot about the sense story over the years in different sort of ways. But when I when I looked at a lot of the conversations, my goal today is to kind of go from the very beginning and really dig in and talk about that.

2:13early beginning of not only building the company, selling to your initial customers and the journey because it's hard building any company selling to small businesses, let alone what it takes to go do it in a market that is probably as nuanced as the laundromat ecosystem and dry cleaning ecosystem. So, you know, I'd love to just start with maybe the very, very beginning.

2:40I know that when you started, since maybe you can talk about what like to take me to the time period when you're like, hey, I want to really want to, this is the company I want to found. Like, was it natural to you to say, I want to start the laundromat business? I know you got connected to some folks that were in the category. But what was the aha moment to be like, wow, I'm going to go build a new type of, you know, category defining company in this, in this space.

3:08Yeah, I mean, I can't say it was, it's funny. There are so many terms that I've learned to use now. I probably wouldn't have ever described category defining. I didn't even think, I called it vertical SAS back in the day. I don't know if that was a thing, maybe it was. I didn't think of it in that way. I think, you know, most businesses that I've been a part of and seen really scale are ones that experience some kind of pain in your life directly or notice a pain that others have. And I kind of had it both ways. I saw a pain that when I was interested in buying laundromats is just purely from an investment standpoint. I saw the pain of operating one of these businesses and collecting quarters and basically buying yourself a job every single store that you have and kind of hard to.

3:51have a normal job in normal life while investing in these amazing kind of SMBs. On the flip side, I spent my apartment in San Francisco cost an arm and a leg. It still took me 60 quarters to do my laundry. So on one side, I was like, this is insane that this is still the payment method when I go to a parking meter or I do anything else pretty much in my life and I don't have to deal with coins. But something that is something that people have to do at every end of the economic spectrum. The methods of payments, the experience that we have in paying or getting the service of laundry, and then running the businesses, we're just feeling so archaic. So I think it was both...

4:27As an operator, it was crazy what I thought I would have to do in order to run the business. And as a consumer and a user, it was crazy that if I'm a quarter short, there's no laundry getting done for me in my apartment building. And I think both of those things may be just excited that there's a fun problem to solve. And I can tell you that. Did you have a co-founder in the beginning? Or was it like, hey, you had this idea, and then you're like, how do I convince someone else to work on this with me?

4:52Yeah, I tried to do in sense everything the opposite of how I did my first business. My first business, I was a solo founder till a year before we sold it where I met, became my CTO and felt just as much as a founder than anything else. And then, you know, very early on with this business, I went to all the smart people and people I liked working with and said, you want to jam on this? I met, you know, some.

5:15A lot of early people, but my brother-in-law and co-founder, Gilly, we would just jam on product usage. He's our chief product officer and we just jam on ideas and what he had sold his business a year before I sold mine and we would talk about our respective businesses. And once I wanted to really do this, I wanted to do it with partners. And I know that not only would it de-risk our execution, but it would be a hell of a lot more fun along the way to be jamming with friends and people you enjoy working with and want to win together. So yeah, I think co-founder just...

5:44I would never do another business as a solo founder. Was Gilly like, oh, this is amazing? Or was there some convincing to do to kind of get him on board? Other than the fact that I mean, I think you guys are close and you know, you all know each other. Yeah, I think like we always are looking. I think the people that I love working with we're finding excuses to work together. I think that this industry on the surface to most is sleepy, unsexy, not interesting. Oh, the time is not big enough. Oh, the buyers are not sophisticated enough to embrace all that. It doesn't take long. I think Gilley from a product perspective really understood the mechanisms he built, a company called Ivy, which is serving interior designers.

6:23service professionals and he understood the vertical SaaS play and how it is replicable in a bunch of different verticals. And he came at it from the software side and I was initially more interested actually on the hardware front because that was the initial idea and he brought a lot of the software focus that we ended up having. And so I think that it was a mix. I think he saw this as like, oh my God, this is an amazing opportunity and nobody's working in it. We even took PTO to go to the clean show. He went to the clean show before our business even started to just see what's out there and really embrace it from the jump. And what year was that when you guys officially, I don't know if it's incorporated or kind of decided to go all in?

7:04Well, I mean I always recommend the founders always have a C Corp going and hold some board meetings from a QSBS standpoint So I always have something going years before I got something going now, and I'm hopefully won't start at five years or more But just just a good strategy to have from a tax perspective I think look we were interested in the industry from an investor standpoint to buy laundromats. And so I was looking at that in 2019 or so. And I think we really took it seriously in 2020 when I went full time. And so I was like kind of 2020 is when it really started to accelerate and pick up. And this is a real thing that we're going to do. And at the end of 2020 is when I ended up going full time and we raised our seed round with Bessemer soon after. Did you actually buy a laundromat? I didn't.

7:50And the reason that I didn't, I had an LOI out for one and was excited for another two that I was looking at. And I spoke to one of the largest industry lenders who had seen a lot of vendors in the space come and go or stay. And their feedback to me was, I think in many small businesses, but in particularly ours.

8:07An operator doesn't, you know, they're very protective and worried about their data. And if they felt like I had any other incentive to want to power their business other than purely being their partner from a, from a software and hardware perspective, they would not look at us fondly. I think they, and I still today have operators that want me to write letters signing contracts that say I'll never buy a store because they're worried is since powers all this data, I'm going to open a store next to my best customer and hurt them. And I think like it's crazy.

8:37One, we'd never do that because nobody would buy our software. And two, we're building software, building hardware, not trying to run retail businesses. If we know what we're good at and we want to help others be good at the other things and powered from that perspective. But I still get that today and I'm glad we never did. We hired operators as employees. Every sense employee has to run the counter of one of our customers in their first 45 days of employment. Otherwise, it's grants for termination. You can expense all the laundry.

9:06that you send out, laundry or dry cleaning, if you're a sense employee, and you have to interview operators every quarter as an employee here. So we make it a point where you got to know what it means to be an operator, an employee, and a customer in the laundry vertical to succeed here. I don't think there's somebody on the planet, maybe very few, that have been the more laundromats and done more laundry at laundromats than me and our team. And we take a lot of pride in that. That's amazing. I want to talk about just the...

9:32the path to getting your first customers back in 2020. I guess, I don't know if you were, if you already pre-sold to some, some operators or you raise money and then kind of build something and then sell. Can you walk me through that specific period of time? A lot of vertical SaaS, vertical oriented founders are listening, but they may not know the actual story of what happened in the very beginning. Yeah. Most investors would say, awesome idea.

10:00Go prove that you can sell I had one investor in particular that was really engaged and excited And he said you need to prove to me that you personally can sell this to ten people Otherwise I'm not in and the good part of that was he didn't end up investing because we got a hell of a lot more Interests from a bunch of other groups because we had done that effort But it was an important thing because I kind of avoided the hard part, which is door-to-door selling. In the beginning on our pre-seed round, that was anchored by the fact that we had this idea for converting a coin operated laundry equipment to pay by card and pay by phone. And we hadn't built the hardware device because that was going to be a lot of money, time and effort. So we went out, pounded the payment and sent cold emails to operators that we knew were coin only and presented our idea to them and got them to sign. I think we had

10:49About $300,000 of LOIs signed that we were able to take to our pre-seed investors and they could call those operators and get the same feedback we were, which is if you build something, if you can build me a hardware device that works and is reliable, you'll be really successful. And I would love to buy that from you. And so that was kind of what helped us in the beginning is LOIs because our product was going to take R&D. I can't vibe code hardware even today, right?

11:15That was critical and that helped us raise our pre seed round to rate our actual seed round We needed real customers using an actual product to kind of prove the product market fit and while we were building out the hardware we launched our point of sale and That was when we heard you need to prove this out more than you have today. We signed one big customer who ended up investing early on and helped us use their stores kind of an R&D lab for ourselves. And that was a 40 locations, but it didn't really count because one customer and they were invested and some people thought, hey, prove this out more and more and more. And not just the ones around you, can you sign one in?

11:52somewhere else. So we signed one in kind of the suburbs of Chicago. And we signed a bunch in San Francisco and a couple in other areas. And so it started to prove out that there is product market fit here. And I did that through LinkedIn messages, which are very few because not many on LinkedIn. And then emails, a lot of emails on their websites, on their help forms. And what our anchor was that we had a point of sale, but we wanted to help them launch delivery through the gig economy.

12:21by having an Uber, Dora-Nash, etc. integration because that had never been done in the vertical before. Laundry is two-way logistics from customer to merchant and then merchant to customer. So the only way to get into delivery is to buy a van, hire a driver, etc. And the gig economy had never made it here and there is no sophisticated vendor bringing that kind of integration. And that was, we didn't even have that.

12:41integration done yet. But that's what I led with. And I knew somebody would see that and say, holy shit, that is different than what any other person in our industry is selling me. So that would get them on the phone, then I could demo them our product, let them know that this other thing is still being built. But that was my wedge in the email was like, trying to identify somebody who is not doing delivery today.

13:03but has a nice website and a good looking store. It's clearly they're investing in their operation. They would do this, but they haven't because of the CapEx, most likely. And that did turn out to be the case. It took a year for us to kind of launch the integration that we originally tried to sell them. But that got us through the door. And once we had a decent flywheel that we felt like we could close when I could get them on the phone, then our first head of sales, Kevin, who's now our senior...

13:28Director of Rev Ops, he was the first hire we made to build pipeline. Like I'd say every early stage founder should be the best storyteller, the best pitcher and the best salesman, but you'll actually be the worst account executive because you're not managing pipeline. You're not thinking about funnels. You're not thinking about, you know, nurture re-engagement. You're just not, you're just trying to make phone calls and move on because you're balancing a lot of stuff. So once we felt like there was product market fit, a senior sales leader and was how many customers did you when did you make that was a is there a certain number or like I think locations we had about 80 again half of that being one customer so it was it was enough where we weren't at 100 but we were we were close to it not all of them were live but they were they were sold on like a some kind of Panda doc ask agreement or a word doc that I would send out but I think around 80 locations or

14:2420 unique operators 30 unique operators depends on the art food depends on a couple different things But you know founders need to be doing the the initial sales But to do all the other things depending on your your founding team depending on a lot of other elements You need to be able to get leverage out of your position to do other things And so you need to make sure you've established you have to establish the product market fit nobody else can do that And you need to be able to feel confident that you put butts in seats you start to hire leaders that you're not making them do the You're not making them discover if your idea is good. You're not trying to bring that all the way to the research. You're like, hey, I got to have proven this out to some degree to have some repeatability. I'm surprised that the LinkedIn kind of strategy worked. I thought these operators would be out and about. And are they on LinkedIn? Did that work?

15:16Yeah, I mean, some of them are, I'd say it's more rare, but again, some of them are, they're not full-time laundromat owners. So they're doing other things. So it was, I'd say really the most effective phone calls, yes, but a lot of operators don't want to deal with their phones. The form on websites of the small businesses, because those are largely being routed to the owner.

15:36not an employee. Phone call could be routed to the in-store employee, but the email largely and the contact form on their website largely went to them. And were you just doing like a website and just like filling out forms? Is that what you were doing? Oh, yeah. I do laundromats near me and then click on their website. They had to have like a reasonably good enough website where I would feel like they would be interested in something new. And yeah, I mean, it wasn't an amazing hit rate, but it was probably 10, 15%.

16:02I'd get a response. And it worked. I mean, New York, New Jersey, just because, you know, that's where you guys are based, where it sounds. I was actually living in. You're in Chicago. I was living in San Francisco at the time. So first, so first we did that. Then we then we built a website and started to do some baseline SEO and I did get some inbound on a type form. So type form was our first like lead form. And I did get some inbound. And that's when, because a lot of our in the beginning of our business, we were 80 percent inbound.

16:32because people are looking for a solution. I think that's where investors got it wrong in the beginning. Oh, you're in a nascent SMB market. They're not sophisticated. It's like any business owner wants to make their business better, or they want to achieve their goals faster. And their goal could be, I don't want to work in my business. I want to golf and hang out with my friends. It could be that. It could also, I want to own multiple locations. They're looking and they're interested in different things. And so we would get a ton of inbound and the outbound worked for a large, part of it. We've had a pretty efficient sales motion in the history of the company for the most part. Tell me about how you were thinking about pricing the product in the early days, whether it's the LOI. What advice do you have for founders as they're pricing their vertical solutions? The advice I always give is you're doing better than you think you are because I see companies all the time the biggest public companies that are changing their price seemingly.

17:27Very frequently. And there's huge pricing strategy. The job is never done. I actually think we're kind of behind on pricing strategy. We started with $2.99 a month and you got everything. I think margin edge. I've seen a couple companies do that. It's pretty rare. And the idea was like, I don't want to spend time thinking about what should be in which tier. I didn't want to think about gating anything. We just wanted to deploy product as fast as possible. And some operators would pay a little bit more for the features that because they weren't using some features and some operators are getting way more value because they're using all of them. We wanted to incentivize usage of every single part of our product and not like you're making a buying decision to grow your business and make it better. You should be making like our initial idea was you make one buying decision from there. It's usage optionality digitization. That was really effective to target a particular kind of operator who is willing to invest. It eliminated a lot of the down market customers because our competitors while not sophisticated were 80 bucks a month. So we were

18:23for nearly four times the cost. And in some cases had less features applicable because we're just a newer business. And so, you know, we wanted to maintain price integrity, but this all in one solution for all in one pricing on a per location basis made our sale just faster and more transparent. And so today we have tiered pricing and we're doing a pricing exercise actually, you know, now, now we can get into tiered pricing and different, you know, packaging concepts because we have a more sophisticated go-to-market motion. We have a broader product line that's proven and durable with ROI analysis and case studies and all of that. In the beginning, we just want to be like, all you got to do is pay this one thing and we work for you. And you can have everything you can possibly want. It made our sales motion faster and it was a more targeted ICP because of the price point. So I think that getting too cute on pricing can be hard in the beginning. Yeah, so yours is like keep it simple.

19:19How did you land on this $2.99? I mean, was this, hey, this talk to your first 20 customers and see what they're willing to spend or was there a different sort of exercise? I mean, honestly, it's kind of a though the dart kind of thing. I wish it was more sophisticated. We looked at our competitors and there's one competitor that was more than that or around that, maybe one or two. But it really just felt like that's a good number. That like makes sense on value.

19:47I think we're delivering a lot of value at that price. And it looked right in our P&L. It looked right on our Poo. It looked right on a lot of areas. And we looked at Toast. We looked at all these companies. But we did some research. But honestly, it wasn't as sophisticated as maybe some people might think. And you said you got to about eight locations, 20 kind of customers. And you said, OK, now we're ready to hire. Tell me about how you thought about what was the right higher at that time. What did you look for? Was there something about a profile of someone that really stood out that said, this is the type of sales hire we need for our company for the products we're selling? Interestingly enough, Kevin was the first hire we ever had that wasn't a warm connection.

20:41Our now SAP of engineering was the CTO of our last company. Our head of hardware was a mutual friend. My co-founder is my brother-in-law. At the time, director of ops now, senior director of product ops and senior director of experience were all worked with Gilead Housen and Ivy.

21:00You know, we had a connection, our head director of marketing, I went to college with him. You know, we had some level of connection. Kevin was the only one we didn't have. And that's larger because one, I didn't have a network of go-to-market leaders. Kevin had the background in SMB, you know, kind of high transactional sales motion, as well as more relationship-driven from Angie's List and Home Advisor, and then another company that he was at based in Denver.

21:27He had a temperament where he understood how to build a sales motion. I mean, he was hiring and firing 40 or 50 reps a week or a month at Home Advisor. He was such a revolving door, but he knew how to build tenure and relationships with people. So we knew that six months after we hired him, he was able to bring on a lot of people that he had worked with in the past. Good leaders can recruit and bring on talent and are easy to reference check from that standpoint. We just wanted somebody that was willing to roll up their sleeves.

21:55I describe Kevin as if you have an unsolvable problem, but tell him that there's a solution. He actually ends up finding a solution to the unsolvable problems and is just willing to really act like an owner and do the hard work and do the hard stuff early. But at the same time, it was just a gut thing. I think early hires are just like your gut. Do you connect with them on a personal level? Do you believe in them? Do they believe in you? You're making an equal bet.

22:22You're giving them equity of a company with basically no value and they're leaving a job with stability and growth trajectory to get early and basically make a psychotic decision in doing that.

22:37you have to feel right in your gut in the early days. Again, in this world of AI and huge amounts of capital to very early, very young founders or just very early stage businesses, I'm sure a lot of venture capital firms and other folks are helping you, helping founders be like remarkably strategic or try to find somebody with an amazing LinkedIn.

22:55But the more amazing the LinkedIn, the more I want to double click on, is this a person that I can actually connect with and have a beer and feel confident when shit's bad and not be looking over my shoulder that people just want to be at the sexy cool companies. So Gut was the large driver of, I just believed in Kevin. I felt like he understood what we were trying to do, understood SMB motion and I'd rather make a bet and get it wrong than try to overanalyze it. And I know you talked about this in the past, but You made this decision to hire CS relatively early. If I recall, you actually hired CS before sales. Is that correct? We hired CS right after sales. It was maybe the higher or two after sales. What was the thinking behind it? It was just like, hey, we just need to make sure the adoption, because of this all-in-one kind of positioning, was all about we need to make sure that they're getting value here. Yeah, I think that.

23:52Our competitors were not sophisticated, but we had them. And so if we're going to convince somebody to go to a product with less features, which is what we had, in an earlier company with theoretically more risk, the one thing we would do unequivocally was deliver a better service and deliver better customer care and deliver better support and direct support and hands-on support and customer success. Interestingly enough, I did not believe early on that customer success should be in the go-to market.

24:20function. I did not want a transaction based and economic based relationship with care and the customer early on because I didn't want them to feel like when they're getting all their customer success manager, they're going to feel like they're going to be upsold. And that was the beauty of an all in one pricing. And so all in one pricing enabled us to have CS that was largely a support and care driven organization, not a product demo and expansion.

24:46because we were just early and have a lot of stuff for them to expand to and everything they had was in product. So we really focused on an ops driven CS function with Sivan who is now our senior director of product operations. She ran operations and what was the CS team underneath that in the ops because it wasn't supposed to be revenue generating. And early on we weren't...

25:11thinking about sophisticated comp plans and, you know, retention metrics and all that. We were just like, build a great product and kill yourself for the customer. The rest we'll figure out over time. But, you know, especially I see on a lot of podcasts and a lot of interviews with different founders and a lot of the angel investors, advisors I have, you realize that the more time I spent with other companies, the more I realized ours is unique. And the more we tried to be like toast, like Olo like job or like, like slice, like.

25:40Whatever the more we realize like man, we're breaking trying to be other companies. It really like this stuff is just way simpler. If you build a great product, you price it in a way where you're where the cost is less than the value that it generates. And you have amazing support and customer success. It can be a no brainer to a lot of the customers. And over time, you just need to have that same thing that scales. I mean, I meet I meet like founders all the time that are always coming to me and saying, hey, I'm starting this, you know, I want to build a product or a service targeting a specific industry. And I say, oh, you know, I kind of give the advice that you share, which is, hey, you got to go pound the pavement, find your first 20 customers, and you got to do yourself. And, you know, they come to me and they say it's hard, you know, it's hard to get these SMBs attention. What do you, what, what would you say to those founders that are listening that are.

26:35You know in in the zone right now and just like struggling they get one or two and they're like How do I get the next 18? What do you think they need to do? Other than just like grind their way through it. I mean look something should be hard the hard thing should eventually feel get easier I think you want to do the hard things first, so you understand the journey is full of pain and sacrifice and a dark tunnel until you can see the light to a certain extent. But I'd say, one, there's an interesting metric that over the last 30 years, the survival rate of businesses has not increased.

27:15on a cohorted basis. It's because whatever advice me or a much larger company, a much larger CEO, our experience is going to just be different because we are different people. Our strategies are ways of the way that I think is different than the way somebody else thinks. And people have built way more successful companies than since.

27:32in a completely different way. And so you have to figure out what is innate to you in the sales motion. For me, I love to get very deep in the industry, understand every nook and cranny about it, and go into operators asking a ton of questions and just trying to build a relationship as much as possible and just spending an enormous amount of time with them. Other folks want to build a team and be very technical. You know, it can be... I can't say there's one right answer. Other than, if you can't do the hard things well, then...

28:01and you don't deserve to do the easy things. And I think in our business, we do the easy things quite poorly. We have barely no product marketing. We have no in-product upsell. There's a lot of things that a lot of younger, smaller companies do way better than we do, because that was their focus, because candidly, that's the easy shit. The hard thing is, can you build like a durable go-to-market motion in a vertical where you either have a ton of competition or barely any?

28:28both actually have their own unique challenges. My other component is who wants, if your customers want your business less than you want your business is a tough position to be in. So a lot of people want to start vertical SaaS companies and they care less about the impact they can have on their operators because they're saying, I know this is a pain point of theirs. Well, if you can't sell it to them in a way where they want it more and they, I had a customer in a podcast say that Sense was, they felt like divine intervention.

28:57Because they've been praying for a business that would do now. Maybe that's a little bit absurd I'm not saying that everybody has to have that but like if you can't get that kind of reaction from customers even early on You got to think deeply about what is the value prop and what is your product market fit? Even in the earliest days the the thing that I I as I've gotten to know you over the years like I Know that trade shows Are kind of huge in your industry and generally just events and being out there because it's hard to get in front of these buyers, you know, that, you know, a lot of these technology oriented founders are like, ah, you know, I'm looking for scalable ways to acquire, you know, doing the, you know, send 30,000 emails and so forth. Like what?

29:41Did was that a conscious decision to be like hey I kind of like we got to be where they're at and because it's not normal You know for a lot of early-stage companies to invest in event-based marketing as a strategy to acquire customers But maybe you can talk about that as a strategy that you kind of explored and how you are doing it today Yeah, I think SMB is definitely Could be different than enterprise or other other motion But we knew when I was in person selling 99% close rate All of our, whenever we had somebody go in person to an operator, we pretty much didn't lose. I mean, it's just unbelievable. And so we tried to build a field sales motion. Toast has a huge field sales motion. We learned a ton from them, realized super hard to scale, really, really, really costly. And there's opportunity costs that you have when a rep is driving around places when they're versus sitting at a computer and doing demos. And so...

30:34we didn't have the money or the resources or the market to really effectively because our operators are not in the business a lot of the time to go door to door to launch mats and really win from that perspective. You could do that in dental offices. You could do that maybe in the office or not physically there.

30:50They're just physically not there. And the attendant is not always sophisticated enough. Some of them are unattended. But other, they're not, you know, English is the second language. They're not sure if they should actually give you the owner's information. And so we realize, okay, we can't really do, we can't pound the pavement in that way scalably. I can do it personally, but it's not something that scales in every market. So the events became big for us. Now in laundry, it's not like money 2020 and then there's dream for it. It's not the same. You have the clean show that happens once every other year.

31:19And it happened, we launched in 2021 as a company. And then the first clean show is in 2022. And we had raised our series A and we decided we are gonna have the sickest booth at this show. And we are gonna sponsor every tote. It is gonna be the sense show sponsored by clean, not the clean show with us as a sponsor. And I mean, it was unbelievable.

31:40the reception because what I think SMB's love is the in-person connection and they like to be wowed. They like to feel like something is cool and that they're in the presence of the group. Was that a scary investment? Was that like a scary investment? Because I can imagine, you know, for most series A, you know, you just raise series A. It's probably a fairly costly effort, but you were like, let's go all in. I mean, there was probably...

32:04Some ego in it of being like I want sense to be the thing here. So it was less scary I also just think we had we had I mean our sales motion was ripping and we just felt like we knew the payback what it would take and we hit it in the first day So I think that I think that the early momentum gave us a remarkable amount of confidence But I also think that there was just some naive we can do anything to make it happen where I didn't even really think about it. I mean, I kind of was stopping at the urinal cakes to sponsor, but like everything else, I was pretty bullish on getting returns from it. You would do it. I mean, it was everywhere, but we also knew this is...

32:49This doesn't happen every year. Right. So we got a like really nail. We just had one in in 2024 in Orlando and we have the best booth. It is. We actually had a speaking series with a with a podium and stage that was jammed. I mean, I bring 30 people and there's no bandwidth. Nobody has bandwidth. We're having people drinking honey in the back because their voices are gone. And it's it's high in a rush. But again, it's because we know the in person motion works. And the other side should tell a lot of at least in SMBs, like distributors in your market are critical. We sell tens of millions of dollars through distributors of all of our hardware. We don't sell hardware directly, we only sell it through distributors. Is that a regulatory thing or is that just, is that a strategy that you guys are executing? It's generally, you can't buy a laundry machine, commercial laundry machine from a manufacturer, you have to buy it through a distributor. So if they're already selling the, you know,

33:43the steel, they're already selling the machines might as well also have them sell the hardware that needs to be drilled into them. And so we went from zero distributor shows in 2023 to 67 in three months of people there with booths and banners and all of our products there in a three month period in 2024 and 2025 was even more and we had And then we had the clean show and so I'd say like the the in-person events even if there's 10 people there at a holiday in in Iowa or There's the clean show with 10,000 plus people in Orlando Those are the best ways that we can do field sales Because at least it's a sponsored event. It's bringing people there You know founders are scared about that spend, you know, how do you how do you talk to a founder that's like man? I

34:36I feel like I need to be there, but I don't know whether I'm ready. How do you know when you're ready? I mean, is this just back to gut? I unfortunately operate on the GD scale, as one of our investors says. I am way more on the G scale than the D being data. I am way more on the gut scale and I'm working on the other as much as possible. I think that the sales motion was...

35:04Was ripping for sure the momentum. I mean you feel the momentum I think I think the most important thing is just being intellectually honest of where you are and And and if you don't after you have an investor You don't need to sell them like it's the whole thing is you let's be as honest as humanly possible because we're having this baby We're doing this thing together So I think early on now what I did in my last company when we had no money is I'd go to Best Buy buy computers, return them after the conference. I wouldn't hire any setup people. I'd bring everything in two suitcases, set up myself because the unions charge a fortune for any kind of setup. And I did it as cheap as you possibly can. Or I'd go and just wear a shirt and get flyers and not actually have a booth and a table. And the first clean show before we were even full time on the business, we were just learning and understanding what people were doing. Now, in different markets, they're more competitive and things can be more expensive. And I think that

35:56we were lucky where our booth was like, we spent a lot of money on it, but in context of a normal conference, it wasn't insane, but in relativity to the other vendors at the show, we had a pretty dominant size and experience on that. But we just knew like this past one, we've almost just have to do it because of the size that we are in the industry, because it's also the best form of brand marketing.

36:25I, uh, I established the channel that, you know, the distributor strategy that you guys sort of doubled down on, um, which, which is, I guess, necessary in the context of how hardware was distributed in, in your category. Was there a lot of competition? I mean, imagine at least some channels that I've explored with in other markets, like people are, you know, they have their friends and they're like, Hey, you know, you might be a superior solution. How did you, how did you approach that?

36:55in in in tactics yeah i think this goes back to you know this is where investors missed it uh completely early on with us is investors don't didn't take the time to learn about the different mechanisms of how we can sell in this space they put you in a box and they say well our portfolio company over here sold like this and they're doing really well so you should do that and frankly I'm not definitely not blaming investors. This is our idea. But our just hand-to-hand combat on sales, we didn't spend time understanding how important the distributors were in this market. If I found that out earlier, we actually might have gone faster, further, easier if we spent time understanding the actual vertical and not being obsessed with our own ability to sell. Now, the discomfort with distributors is they control your destiny.

37:43Right? So what we've kind of threaded the needle on is we have our direct sales motion for our software products that distributors have never sold. We then train distributors to also sell those products and they get their commissions if they sell those products. Software products or the hardware? The software hardware we've always sold through distributors. We sold like in the very beginning directly just because no distributor would pick up our hardware because it was brand new. But then we really sold through distributors. I think we could have done and actually today if we bring a deal.

38:11If we get a deal for a hardware customer that we could sign, once they're ready to buy, we loop into their distributor. So we even cultivate the leads and then pass it on to somebody who's done nothing for that lead and for that deal and pay them anyway. Because it's just worth it to build the relationships with those distributors, but we do ensure that they don't control our kind of universal destiny on a go-to-market perspective, but we invest heavily in it. We pay more to distributors.

38:39uh on on commissions than any other company in our in our size in our space excuse me we have uh distributor programs of diamond platinum and gold with different incentives and now we're training them to also sell a lot of our software products but again it's i'm not saying that a distributor motion is the key to everything and i'm not saying that direct sales is weak in fact the both together present something really unique but but overall i don't know every every business uh and every market and what's important where But there are channels that existed before all of us vertical SaaS people where operators were buying things from right there weren't always companies with big sophisticated Salesforce driven Account executive go-to-market motions and so leaning on that also gets you better buy-in from the industry overall How did you get your fur? I mean you made this comment around you know people didn't know who we were in our hardware and like did you have to get to a certain

39:35Kind of a scale before the first distributor kind of said all right I'm willing to to start putting you in our in our you know sales sheet We have we have an atypical way of doing this you know our acquisition of launcher works was huge in that. I mean, when we bought Longerworks and we wanted to go to a distributor show that they hadn't been to from a distributor that was selling a ton of Longerworks products, one of a company in the space, they wouldn't let sense team members there, just the Longerworks team members. They didn't know Longerworks had seven people in it and none of them had been to a trade show, but they were worried. And I think this is, you know, transcends industry in the S&B market.

40:15You know, distributors and operators are worried about big tech screwing them over, either being unreliable, cutting them out of deals, taking their data and doing things that are of the benefit to the software company and the venture capital investor and not beneficial to the S&B or the distributor. And I think that that sense as the only company that has raised venture capital is the only company that wasn't either family owned or started by an operator just had that perception. And I think that we did not lean enough into the commitment to the current industry principles. The way we view our business is we want to help operators digitize their business, create optionality in their operational workflows, and then earn the right to innovate. And it's the same with all the relationships we have. We want to help distributors.

41:09Engage actually pay them more and then find ways to innovate together I think software companies are so desperate to innovate their SMB market and be innovators and revolutionize whatever the hell I mean it used to be the cover of our deck was revolutionizing laundry It's like I don't even want to use the our word too much because in these industries were fine before we existed We have to earn the right to drive innovation through partners that are supporting the vertical Um, I guess what you're saying is that, you know, the, the laundry works kind of acquisition kind of immediately built trust into the distributor kind of ecosystem. I guess if you didn't do that, it would have been a whole different challenge. I think we would have gotten there for sure. But I think laundry works is the best hardware product in the space. The family owned business. They did one thing. They built this one hardware device for 10 years. That's all they made.

42:02They didn't really care about software. They didn't care about payments. They just made really great hardware. And it was a family-owned business whose legacy and everything was built on building things that work. And I think that the distributors in the space loved the family-owned story. They loved the close connection to the owners. And they loved that they were selling something that just worked. It's not the sexiest. It's not the most feature rich. But it is the one that works the absolute best.

42:30and distributors don't want a bunch of service calls and all that. But they had six to 10 years of working with LauncherWorks. They had one to two of working with us. So part of it is this is a relationship driven industry as many SMBs are. And you got to have time and you got to be out there and spending time with these distributors to really build that relationship and trust. And the first six months of owning LauncherWorks, we didn't make any announcement about the deal.

42:56And all we did was sit with distributors and have office hours and let them know who Sense was, what our intentions, what our goals were, be as transparent as possible, and further our commitment to them. Longer works went to zero trade shows. We went to 67. Wow. Just to support the distributors. Was there a distributor relationship that kind of went wrong and that over the years that you're like, man, probably could have done something differently?

43:22I think two of them, one was going wrong and turned really great. One was the one that didn't invite Sense to a show but invited Longerworks. Now Sense and Longerworks, they're one of our biggest distributors because they just didn't trust. They trusted one thing, they didn't trust the other. So we're like, we're not even dealing with this. And it just was about spending time. There's another distributor that Sense had sold products to their customers directly. And I don't think we really spent time breaking bread and spending face time with people.

43:52I think we were just, things were moving so quickly, we were raising capital, buying companies, trying to scale the software side and we didn't slow down to appreciate the relationships and dynamics and impact of some of our move quickly and break shit attitude. The thing with distributors and so many SMBs is they just want the FaceTime. Slow down.

44:12Be honest communicate. They don't care if you have bugs in your product They care if they have bugs and you didn't tell them about it or when they call you and have bugs you say, okay I'll fix it tomorrow and it doesn't get fixed for a week or a month Like they are the most patient with good communication They are the least patient if they feel like they're they're shouting into the ether and so that's I think most of the customer issues or most of the distributor issues that we've had is our poor communication or assumptions on a level of either understanding or appreciation of like a macro situation. I want to switch gears. You know, we were talking about go to market early days, getting customers. We talked about hardware and then the acquisition and laundry works. You know, I know that when we talk to all the listeners that are building vertical software platforms, you know, everything is AI these days. You've had an interesting sort of fundraising journey.

45:09I can imagine a lot of learnings along the years. When you think about the last five years of being out there telling your story, what has been the biggest learnings around finding the right partners for you?

45:31How did you deal with questions like, oh, Tam's too small kind of thing? Like, did you just say fuck it? Like, you know, I'm not going to spend time with you. Were you trying to convince investors around what it was? Like, how did you approach all of those conversations over the years? Yeah, two pieces of advice I got from Kent.

45:47at Bessemer early on was one, if you feel like I would be, I'd look at an email response, I'd write to an investor for four hours. I'd be so nervous to respond that one thing or say that one thing or ask that one thing or something like that, because I thought it would kill a deal. And Ken told me, if something feels super, super, super fragile, it was probably not meant to be for the beginning.

46:09And I think there's a lot of truth to that. I think we're afraid to just have direct conversation authentically, honestly. A lot of my negotiating strategy today is just like radical, radical relatability and transparency. It's like, here's exactly what I'm thinking. This is why I like this idea. This is why I don't like that idea. Like what would you do if you were in my shoes? Or why are you thinking the way you are? Like let me help back into the solution. And so I think that...

46:35So that was one piece and the other piece that Kent told me early is if somebody continues to question you on Tam, they just don't get it. And that's okay. Not everybody needs to get it. Every company has missed good ones and invested on them bad ones. So nobody's gonna get it all the way right, but you just gotta move on. I think if you feel like you have to sell them soup at the time where they should be the most excited to participate, You know you get that feeling I mean there's so many investors that passed on us that I would go convince Sell put all this information together and that would actually build my own excitement that I feel like they're digging in in reality I should have known they just didn't get it to begin with and they're asking because they they're interested in getting it but all the investors that actually participated Spent the time to understand they didn't say hey, I don't understand your tam. Can you give me a bunch of information? They spent time talking to customers

47:31They spent time doing their own research. They asked me more questions to help deepen their conviction. And I think that's the different. I didn't appreciate that buying sign from an investor early on. I thought any follow-up question they had was a fixable one or a solvable one. In reality, every investor that invested spent the most amount of time with me. Yeah. Love it. Love it. The one of the things that you mentioned is this, you know, using toast as a kind of, you know, people knew toast and it was sort of an anchor.

47:58obviously Kent's being, you know, one of the investors in toasts. Like you made this comment of like, don't try to be the toast of X. I know I see a lot of founders try to find kind of relative comparison points to just use as a, as a way to sort of make sense of how you fit in. Do you think that's the, do you think that's a good thing? I mean, now that you reflect back on some of the storytelling you've done with investors and pitching lots of folks.

48:27I think it's helpful. If somebody came up to me at a bar and said, hey, what do you do? I'd be like, toast for laundromats. It's an easy way to build or relate ability on what you're doing. The way our comparison story evolved to the investor is it helped that we had all the founders or C-levels of these companies on the cap table. But it's like, we're like toast. We're like Olo. We're like Slice. We're like Jobber. We're like X. But we're not them.

48:58We just take the bits and pieces that we have the greatest conviction in and how they operate and we apply them to our business. There's an element of like, oh, those focus of APIs and rails and slices kind of mission for local and obsession for local and aggregating local data to kind of champion the importance of local toasts point of sale thesis and overall hardware and product thesis. And, you know, there's all these kind of elements of these businesses that we love, but we are just not singularly one of them.

49:27We have a completely different go-to-market motion than Toast does. There's some similar elements, but very different. But we tried to model it completely off of Toast. And we couldn't be more different than Olo because it's all enterprise deals. So there's an element of it that matters. And also in the orgs, product rolled up to the COO at Olo. It doesn't here. And so the product vision and strategy is completely different.

49:54There are so many things that make all of these businesses remarkably different if you actually pull back the curtain and look at them top to bottom. And also like, you know, I tell other founders like, do you want to raise $900 million? Because that's what took toast.

50:09That's what it took Toast to get to where they are. And now they have to go beyond restaurants and other verticals and go public. And like, if that's not truly your goal and your story in your market, then you have to operate it differently. So I think it's valuable to make the connection. But I would actually say, we're like this business for this reason. And here's how we're different. Because you can't be Toast. There hasn't been another Toast. And Toast isn't Square or Micros or Touch Bistro or any of these other point of sale companies. Similar. Some similarities for sure.

50:39as does Sense have similarities to all these companies. And when we started to think like that, it changed our perception of M&A versus organic growth in some cases. It changed our perception in our poo and attachment rate. It changed our perception of how our business should grow and how we should forecast. So that's just how we think about it. How are you thinking about AI in all the ways you think about Sense, whether it's the customer value proposition, how you're thinking about how AI can create a more efficient sense organization. Tell me about how AI fits your strategy today and what you're excited about in the next 12, 24 months. Yeah. Separating it from internal, the way we're leveraging it internally is just as much as humanly possible. We went from 15% employee adoption of AI to 80% in two months, month and hour. We are just pushing it as much as possible internally in so many ways.

51:35If I talk about from the customer side, I talked about this in Stripe Sessions. It's basically, until AI can help my operator golf more, they don't care. And the operators don't care if it's AI or a ton of people in the offshore. They just want to spend less time having to work in their business. And so AI can be a great flywheel for that.

52:01So we launched a phone system was the first product we launched of an AI native infrastructure We didn't even call it an AI phone system We called it a contact center powered by humans and enabled by AI or whatever that the nomenclature was because we actually had Hired people in the Dominican Republic to pick up the phone on behalf of our operators And from a routing perspective operators could choose that and pay this or they could have AI be the first layer and then have that be routed to either our support team that we that we spun up or to their phone because we didn't think that operators were ready and frankly that AI wasn't ready. If AI works 90 percent of the time, it doesn't work enough. It needs to be perfect for an operator to not want to churn for them to get the full value of it. And so our real view on the value of AI is from an agentic perspective. I think we're going to get chat fatigue and having to go into an AI product to ask it to do something is work.

52:56So it isn't really that valuable. I mean, the difference of asking AI to tell me about my revenue on certain days when I can go to my dashboard and do something very, very similar. It's very cool because we're watching something happen in a way we have, very novel. But the real value in our view of AI is you don't ask and it does. That's where operators really get value. And so we're building marketing agents. We're building accounts receivable agents for commercial laundry billing. We're building all of these agents.

53:23to be able to take the action on behalf of an operator. And I think until that happens, it's not like this amazing crazy thing. And I know I should be saying that because everybody wants to hear it, but I think investors want us to say it more than our operators do. And again, everything that we do in our business, and I think everybody should do is build for your customer. If it's not valuable for your customer, don't jam it down their throat. Wait till it has the value and make it happen. And I think until true agentic is is possible, it's cool, and we use it and our AI phone system is awesome and is the highest attachment rate product we have of an upsell standpoint, so it is really powerful. But again, why? Because it's taking action on behalf of an operator. Instead of them picking up the phone, the AI does it, transcribes it and answers the questions, contextualize with all the data.

54:12which is the key to all things. That's every product we have is designed to try to absorb as much data as possible because that's what enables contextual AI and agentic AI to really be powerful. So I don't know if that answers your question, but... Love it. Love it. I know we're running out of time here if a lot of founders are starting vertical AI companies, which feels like the new rebranded vertical SaaS. If you had one piece of go-to-market advice for their first you know, three, six months, what would it be and what would you advise those folks?

54:48I would advise, don't use AI, BDRs or SDRs or CS or support. Like if you can't do that early on and you're trying to farm that out to gain efficiencies there, that's where you learn the most about your customers. You build the deepest relationships, you get the highest retention and you should not be looking for remarkable efficiency gains and you go to market motion early on because that's your learning. We knew so much about the laundromat business because I talked to more goddamn laundromat owners and helped them more with things that weren't working then Anybody using AI would be able to do and somebody saying well, you know AI will parse all of that data and deliver it to us It's like no it won't not in the way where you hear the tone from the operator in their frustration or excitement It is like that's not where you cut the corners in my view so and even in our business like You know we love Spotify

55:38But people still buy records because we love and I think in a world of AI, we're going to want more analog and in-person experiences as much as possible. And I think small business owners are the last to be a really happy that when they call the customer service line of a company, they just invested $40,000 in or $5,000 in and moved from a system that was working to a new system. And they have to talk to an agent because the company's not going to make time for them. You know, until you're a $40 billion company like toast, like.

56:07Maybe maybe earlier than that but like don't skimp or sacrifice on support or CS and even the sales motion like that's where you learn That's where you gain. It's where you build the trust and I see a lot of people trying to like get the eat take the easy way out of Getting saying getting fuck you on a phone call that you're trying to sell them like we're gonna yell that by a customer or something like that on the phone I just think Just like that's that's the most important learning you have in the first Call even four years. Love it. Love it. Get in front of your customers. Don't automate everything. And face to face is still, it means a lot, especially in the early days. So absolutely love it. Alex, I really appreciate you taking time and sharing your story and tons of learnings here. I'm gonna have some rapid fire questions to end this chat today. And just go from your gut. So toast or square? Toast. Service Titan or Procore? Service Titan.

57:07Lovable or cursor? Lovable. Wait, why? Lovable or cursor? I mean, I don't do a lot with cursor, but I like being able to, I mean, we use clock code. So I don't need cursor. But I mean, the lovable, I just like, maybe lovable or replete, and maybe I'm using replete more than lovable at this point. But let's say bootstrapping is that brave or stupid?

57:31Uh, it depends in what market and for how long and in what context, but even if it's stupid, it's really brave. You, uh, you've been building this company through COVID. I think is that, is FF. I recall starting COVID, you know, now that you're, you know, five years, six years in office hybrid or remote for early stage. Oh, I mean, I would say in person.

57:54not even hybrid, but we have to live in a hybrid environment. So I'd say hybrid and if in state or in city, if you hire people outside, remote works, but definitely hybrid, get people in person as much as possible. Hire fast or hire slow? Hire slow. Tell me more. We're behind hiring now. I've never been able to hire at the frequency, at the quality. We have a probably higher revenue per head count than most companies.

58:23outside of Anthropic. And part of that is we generally, it happens, definitely happens, but we rarely miss on our hires. I probably was 50% under headcount in our hiring plan in Q1. We're trying to do it faster, but we won't ever...

58:42sacrifice speed for quality in our headcount. It's the greatest. People are the main de-risk to execution. And the reverse of that is like fire fast or fire slow. Notify fast, pip fast, give visibility into the reason that they're failing. We've had people fail and it wasn't because of their calibers because they're in the wrong position in the company. So identify the reason they're failing and then cut them quickly if you've given the notice and given them an opportunity. Generally, We hire? Well, and if somebody's not succeeding, we first say, is it something that we're doing as a company? Are they in the wrong position? Are they matching our guiding principles? If they aren't or they're really, you know, there's usually a reason and rarely should anybody be, I don't think anybody's ever been fired here, surprised. So maybe pit fast and then fire fast. Is there a founder in this world right now that you're admiring right now? I would say Chase Gilbert,

59:42at Built Technologies is one of the best founders I've ever met on his view of people. So much of my view on hiring and our guiding principles has come from him. And they've built an amazing business with an unbelievable team in a difficult market and has weathered a lot of storms and has some of the best investors and best people, best alumni. And I think threads the needle between an exceptionally tactical day to day mind while being a visionary and a high level five, 10-year strategic plan. And not many people like that. Sam Pillar, a jobber, another excellent case. I mean, probably more I admire than I don't. But those two are pretty exceptional. I think I know you asked this question, but I'll ask anyway. AI agents, is it hyper real? Valuations, unsure. And liquidity for people investing in these businesses, also unsure. But Agenthic AI is freaking real.

1:00:39when applied in the right way for good value, it is 100%, 100% real. And having, you know, you can plead the fifth on this one, vertical SaaS multiples right now, too high, too low or about right? I mean, we just raised, so I'd say about right, the price that we got. It depends. Like, are you, we have 99% customer retention, you know, we're growing really, really well. Like, you know, that should achieve a different multiple than a 10 or 15% grower or something with a lot of churn. What is the ARPUGRA? I think vertical SaaS now, people are drilling way more into the metrics that matter and the unit economics than they were before. And so I think they're probably about right. I feel pretty good, maybe on the low end, maybe on the high end, but I think they're about right. Well, hey, Alex, I appreciate all the time today.

1:01:32Congrats to you. Congrats to the SENS team. Congrats to the hard work building an amazing company. And I know you're just getting started. So congrats and excited to continue to watch the SENS movie. Awesome. All right. Well, thank you so much for having me. Always love chatting with you. And hopefully we get to see each other soon. All right. Thanks, Alex. Appreciate it. Hey, this is Ben Keznoka, co-founder of Village Global. Thanks so much for tuning into the Village Global podcast, where we go deep on all of the biggest topics in tech. If you enjoyed this conversation, please subscribe to our YouTube channel. You can check us out on Spotify, Apple, wherever you get your podcasts. We'd love to see you for the next one.