Recession-Proof - a podcast by Ramp

Speaker 1:
You are listening to FinOps Today, a podcast from Ramp where the world's most innovative finance leaders share what's on their agenda. Here's your host Ramp's own head of finance in capital markets, Alex Song.

Alex Song:
Hi, welcome to FinOps Today. On this week's episode, we are joined by Scott Orn who is the chief operating officer of Kruze Consulting. It's really great to have you here.

Scott Orn:
Thank you Alex. It's my pleasure. And we are huge fans of Ramp so I'm actually really excited to tell the world why. This is going to be really cool.

Alex Song:
Awesome. Awesome. Well, during the course of our episode, we're going to learn a lot more about who you are, what your company does, and also the world of financial operations, which is something that we're all very, very keen on, but really great to have you here. And also, we'll know that this is really the first series of podcasts that we here at Ramp are recording and we know that you yourself have quite a body of work. So do you want to talk a little bit about that first?

Scott Orn:
Yeah. I love podcasts. I've been doing them since 2016 and I think it's great you're doing it. And you can check out mine at, you can just type in to iTunes or whatever is Kruze Consulting. It's on Spotify, iTunes, Apple Kruze Consulting, or do Founders and Friends Podcast, and it's just a labor of love, I think, as this will be for you. But also it's really fun to just talk to interesting people. And I love it because we always pull out three or four nuggets for the Kruze client base to just listen to. So I think the Ramp client base is really going to benefit from the podcast you're doing Alex.

Alex Song:
That's awesome. So we've definitely checked it out before. Hopefully, our listeners will take a look as well, but let's go back. I mean, let's go back to you. I mean, I would love for you to tell us a little bit about your own background, where you started, how you became COO of Kruze and just your personal journey to the world of financial operations and clients?

Scott Orn:
Yeah. Well, my background is totally intertwined with Kruze so I'll kind of do a combo there. So I came out of college and did three years at Hambrecht & Quist doing M&A. H&Q was bought by JP Morgan halfway through. So H&Q took Genentech public and Apple public and Netscape public. And that was kind of like culturally and client based was the right investment bank for me. So I learned a ton. I started in 1999, caught the whole crazy last couple years of.com. It may have aged me like 10 years, I don't know. I think that's when I started losing all my hair that's for sure.

Scott Orn:
And then I went to a venture lending fund called Lighthouse Capital. This is in 2002 and Lighthouse did debt plus equity in startups. And I love working with entrepreneurs. My mom was an entrepreneur, my wife, Vanessa Kruze, you might recognize that name, is an entrepreneur. And so I've just always done startup oriented stuff my whole career. I worked at Lighthouse for nine years. I did an MBA at Kellogg in between those years, but I was a partner. I did a hundred million worth of deals. So Angie's List, Upwork, Impossible Foods, Serena & Lily, FreshBooks, Zipline, just tons of companies.

Scott Orn:
But I kind of got the itch, probably the similar itch you got Alex, we have similar backgrounds and I wanted to help build something. And so I was watching Vanessa Kruze, who was my girlfriend at the time build Kruze Consulting. She had been a Deloitte tax CPA and then the controller of a startup that went from five to 20 million of revenue two and a half years. So she lived the startup growth curve that got bought. She started Kruze and all of a sudden before I knew it, she had like 60 clients by herself. It turns out that combination of tax plus operational accounting is very unique. I've never actually met someone in the Valley who has that combo the way Vanessa does. And so that's the foundation of Kruze.

Scott Orn:
She was also very good at finding and picking systems and that's part of our relationship with Ramp, right? We recognize what you're doing at Ramp. She found Gusto when they were called ZenPayroll and a five person company. She found Bill.com when they were tiny. Expensify when they were tiny and started putting all of her clients on it. And that's really kind of was the wedge she used to get Kruze Consulting launched and into the market. And so I joined her seven years ago as the third person. So a COO was, I guess I got to pick my title at that point. But now at Kruze we are 135 people. We're just hitting like 650 venture bank clients any day now, clients to raise five and a half billion dollars.

Scott Orn:
And that's my story. I love it. I really feel like I found my niche. I really enjoyed the investing, but helping companies day in and day out really kind of works for my personality. We've had so many amazing companies come through Kruze. And I hope this will be the last job I ever have.

Alex Song:
That's great. And tell us about the work. Where does it begin? Where does it end? 135 professionals, what's everyone doing?

Scott Orn:
Yeah. We have kind of three product lines, I'd say. The first we call monthly accounting. Some people call that bookkeeping, but basically it means doing the income statement, balance sheet, cash flow, all the supporting documentation, like rev rec and things like that. And we do that every month for all of our clients. And so they get a really nice financial package that they can share with their investors, look and see what their burn rate is, how much cash they have left, track all their key metrics. So that's kind of the first thing.

Scott Orn:
The second thing is taxes. So we do all of the taxes in-house. Right now we have like 13 or 14 person tax team. That includes federal and state income tax returns, state franchise tax filings, R&D tax credits, employee retention tax credits, anything that kind of comes up on the tax side, we do it for you. And then the third thing is what we call consulting. But it's typically like a financial model and budget actuals or tax compliance like IRS payroll tax notifications, or state registrations, whatever comes up on the consulting side. And I mean, you work with startups all day long and you know they're like, it's really kind of, as they grow, lots of things come up. And so we're there.

Scott Orn:
The cool thing about us is we have so much experience answering those questions, solving those problems. That it's pretty formulaic for the clients. They just ask the question and I it's like, "Oh, we were expecting you to need that pretty soon. Why don't we take care of that for you?" So those are the three things we do. The bulk of the company is based on the accounting side, just because that's so much work. And thank you Ramp for automating portions of that for us. You make us a lot more streamlined and get rid of the boring work for us in a lot of ways, but that's where the bulk of people are. And then we have a tax team and an FP&A team. So that's us.

Alex Song:
What about your customers? What are you able to tell us about them? Where are they located? What did they look like? And kind of the large to small, what's the distribution like?

Scott Orn:
Yeah. Well, in our business doing the outsource, the accounting and tax, you typically kind of skew early stage because at a certain point like maybe Series C, the company will still bringing all their finance in-house, even late Series B. They'll hire a VP of finance, start hiring controller, accounting staff. So most of our companies come to us as that two or three person company, maybe raised a million bucks, PowerPoint working on an idea. And then it's really gratifying to see them grow over time and get big. So you might have heard of Calm the meditation app. We're actually still doing their accounting, but they started working with us about five years ago. You might have heard of Oxide Computer, which is a really cool new company in the service base that's growing like crazy.

Scott Orn:
I mean, our client breadth is insane. Fleetsmith was acquired by Apple last year. We had another company called Alydia that was acquired by Merck last year. These are big acquisitions. The fun thing for me is I remember when those founders called us before they were famous, before they had a hundred person team and raised a hundred million dollars of capital. I remember they were like a two person company saying like, "Hey, can you take care of all my accounting and taxes for us?" And so it's really rewarding. You just see them grow and you see them change as people, almost always for the better. They get more organized and they're more focused and they're more mature and they've taken a few punches.

Scott Orn:
You know having help build Ramp, it's not just like a straight line up until the right fantasy land. Everything goes perfect. Doing a startup is very hard and it's very humbling. And so I personally, I love working with those companies and I love seeing them go off and be successful and get bought or eventually do an IPO. But I also just love being part of the journey for the founders and the early employees too and just seeing how they go through life. And whenever they call and say, "Hey, we're bringing this in-house." I actually like, we call it going off to college, it's totally cool. And oftentimes we're the ones telling them to bring it in-house because things are getting a little too crazy

Alex Song:
That really resonates with me. Trust me, it was not a straight line from certainly my first year and even today. Building out the finance function is no easy task.

Scott Orn:
Yeah, for sure.

Alex Song:
So financial operations, building out a finance team, I mean, you see that, right? You see that happening in real life. You see that happening amongst all of the companies that you work with, but let's not get there yet. Let's actually focus on Kruze Consulting internally. You guys obviously have to do your own accounting, your own bookkeeping, file your own taxes. Now, I assume just given how much expertise you have in-house, all of your financial operations, all of your kind of offices of the CFO suite, you do that all internally, I assume?

Scott Orn:
We do, but I have to say, this is an interesting point here. There's an old saying that the cobbler has the ugly shoes, meaning you always prioritize your clients ahead of your own systems. And so we were totally guilty of that probably our first five or six years. Vanessa and I used to do all the accounting and finance and tax compliance and all kind of stuff. And then we got big enough where for us, it became an amazing luxury to actually hire a CFO and controller internally. And by the way, having done that, things are so much smoother, so much better. It's really, really nice. And again, I get the same kind of reports that our clients get. I get those reports from our team internally.

Scott Orn:
So I actually feel very blessed to have that and not be having to get QuickBooks up to dates at 11:00 PM at night or trying to file tax returns or 1099s a couple days before the deadline for Kruze because I prioritize us last. So that's really us. We've professionalized our internal finance team too, which I really encourage, effectively when a company comes and works with us as a client, that's what we're doing. We're professionalizing their entire finance and accounting function. And they get the benefit of all these process that we develop for all these other companies. But it is a luxury to do that on your own and I'm very grateful we're doing that now.

Alex Song:
That's great. And I'm curious, you have your internal finance function you've built out over the years. Do they also do client work? You're just pulling in from the main workforce or you have something that's dedicated full time, live and breathe internal work?

Scott Orn:
Yeah. One of our acting CFO does do some FP&A stuff for clients just because frankly, it's not a big enough job yet to do it all the time. But that said like, I would say, I hope this doesn't come across as snotty or something like that, but we're professionals at this. So we're very efficient, right? If the rest of the internal team wasn't speaking the language of the control and the CFO, and also with Vanessa and I there with all this institutional knowledge, it would probably be a little bit different. So we're kind of lucky in that respect, but it is becoming a very big job. So I think probably in the near future, it'll be a full-time job.

Alex Song:
Got it. Well, I mean, you guys are in a very unique situation, right? You see the high level, you see the vantage point, you see hundreds and hundreds of customers and kind of how they do things. You guide them and then internally you're also building this team. I actually wanted to switch gears a little bit and talk about that, right? And I think a lot of our listeners are probably super interested to hear about this as well, which is just pattern recognition, right? Over the course of time as you've been advising these clients of yours, who's doing a good job, right? Who's not doing a good job? What are some best practices, pitfalls, and maybe let's focus on a couple of key areas, right? Maybe we can just focus on financial operations, bookkeeping, maybe the audit, taxes, right? Probably some things that are very top of mind right now for a lot of folks given that it's the new year.

Scott Orn:
Yeah. Well, it's a great question. And I would say the single most important thing that a founder can do correctly is to be organized. So that allows them to make decisions quickly and confidently and also convey that confidence to the board. If you think about it, founder has many constituents, has the employees, has the investors, has the customers and so you're juggling, right? There's three different constituencies that you're trying to keep happy and even happier. And so by being organized, you actually get rid of all the clutter in your head, in your day, and you can make clear decisions. Because as a startup founder, you're going to make a lot of decisions and some of them are going to be incorrect, but you want to give your kind of the best shot on goal, the best chance you have.

Scott Orn:
And so in our world being organized means using good systems and having everything as automated as possible and having good service providers, so that's part of where Ramp comes in actually. You guys help us automate the expense management side of the equation for our clients. So if you think about the accountant that's helping this founder to be organized and make clear decisions, needs to get all the expenses in, they need to get all the revenue recognition in. They need to have a very clear picture that they can present the founder. The founders then in information intake mode, right? Maybe like we were talking about before turning the microphones on how the NASDAQ is going down every day right now. We're recording this in late two January, the fundraising market is going to change dramatically in the coming months.

Scott Orn:
And it used to be like, if you had a pulse and had a good idea, you were getting a term sheet. Well, that's probably going to change a little bit. It's not going to be like the dark days, but investors are going to want to see your financial model. They're going to want to know your good steward of capital. They want to know what your hiring plan is. All these things that you have to explain to investors and frankly, your team, you need to have that information handy and be organized.

Scott Orn:
The founders that we see have trouble are the ones that don't prioritize that sometimes because it's kind of scary and it's hard and it's different than maybe their expertise. And so they come to us with big cleanup projects or they work with not a great accounting firm and that accounting firm just kind of doesn't know what they're doing and the poor founder didn't know. It's kind of like going to a doctor who's not a great doctor. You think you're doing the right thing, but you're actually not getting the best advice. And so those are the people that we see have problems.

Scott Orn:
The good ones are quick learners. Again, most founders are first time founders. They've never done this before. So they're coming in and they need to recognize that something feels wrong. If you're a founder and you have that little voice in the back of your head, then that's when you need to take action and just get a second opinion on something, whether it's your financials, whether it's your hiring processes, whether it's your product direction, whatever it is, seek out some experts. That's the big thing for us. And I think the cool thing for us and probably why I'm on this podcast is that Ramp is actually really helping us.

Scott Orn:
I think I told you before we turned the mics on, but it's so difficult with some of the legacy credit card companies. And sometimes people want to use them because of points or whatever, but those systems are old. They're not built with a startup in mind. They're not built with a startup accounting firm in mind. We have to access 600 different clients, right? In those legacy client portals and legacy integrations with key software systems and the fact that the support is horrible. Those are all things that get in our way that make it difficult for us to help the founders have the best information and make the best decisions. Does that make sense?

Alex Song:
Totally. Yeah. Being organized. I mean internally, right? Even when I onboard new folks and when we try to do cross-functional work, I think documentation, rigor, overcommunicate, right? And especially in this world, right? Of all distributed work and everyone is at home and you're not siting next to each other. I think that even makes it even more important, right?

Scott Orn:
Oh yeah.

Alex Song:
Yeah. I think that the natural inclination is, as someone who runs finance now, I'm always just like, "Let's jam on this. Let's put it in writing. Let's be very, very rigorous about documentation." Just keeping things straight.

Scott Orn:
Building a process and then documentation, yes. I love that. That's really why I talked about Vanessa's key skills of tax and bookkeeping and things like that. But really actually she's a documentation and process improvement perfectionist, and that's really the backbone of Kruze is all that. There's all stuff that the client will never see. And I'm sure whether people at Ramp are building Ramp's product or people like you are helping run Ramp organization, it's stuff that the counting firms and the startups that rely on you don't see, but it's really what makes the trains run on time, I think. Probably if you would ask me the biggest skill I value or that I learned to value coming from the M&A and venture capital world into operations, I would say it's documentation and process improvement. That is the magical elixir that makes a startup work and get big and be successful.

Alex Song:
Yeah. One of the things that becomes ever more important too, certainly to our customers and I feel like you might be seeing some of this as well is markets are high, right? Or were, since before December, but markets are high and people are very sensitive to public market readiness, right? And a lot of folks definitely come to us and they say, "Hey, I'm hearing about this thing it's called SOX Compliance." I'm like, "Yeah, you have public traded securities. There are things that you have to do correctly. There are things you need to have in place, financial controls, et cetera." That's an aspect that we hear more and more, right? As our customers mature and now stuff like that is much more top of mind.

Scott Orn:
It's totally is. And I think sometimes founders don't know that they can get that at a very early stage working with a good accounting firm. Of course, the Kruze, we're a CPA firm so we pay attention to documentation being due diligence ready. We're regulated. We're not like a fly by night kind of place. But even if you don't work with us, working with a really good strong provider, a professional group, you get that at early stage and it really sets the foundation for your future. So again, I value that a lot. If you think about just doing things correctly all the time, you go into your first audit, you go into your first kind of, maybe your Series B is going to have a lot of scrutiny.

Scott Orn:
Series A are still getting done pretty, it's a lot on concept, a lot on traction and things like that. Series B is where the investors start asking some really tough questions. Series C certainly, they're going to ask tough questions and be very metrics focused. And so having all this stuff set up, it's like, when you build a house, if you have a strong foundation, everything is so much easier and it's actually cheaper and less stressful. I think before we turned the mics on, I was telling you how we put our clients on Ramp when they first come to us. We don't wait like a year and be like, "Hey, are you sick of that Amex yet? Are you sick of that Chase stuff breaking all the time?" No. We're like, "Hey, we are a systems expert and we believe you guys should be using Ramp. Can you please implement that now. We will implement it for you." Right?

Scott Orn:
And that forever. They're never going to have to worry about their expense management system, at least until they're like a 200 person company or so something very large that they will have specialists in-house who can make the right decisions and things like that and evaluate everything. But that's just a very simple example of the way we approach you or other software tool vendors that we partner with that it just makes sense. It's just easy. It actually will de-stress you, if you make the right decisions early on.

Alex Song:
Interesting. That's a good segue into maybe audit, right? You obviously support a lot of your customers through that. Any key takeaways, any horror stories, and any observations between a Big Four audit versus one of the lesser known regional firms?

Scott Orn:
Yeah. We actually typically recommend the regional firms just because our clients, the first audit they go through is usually Series C unless they have a big foreign investor. Typically, the foreign investors will want kind of peace of mind or it's part of their charter to actually make an investment because they're publicly traded companies too, things like that. I do see some Series A or Series B companies getting an audit, almost always exclusively to make those foreign investors comfortable. Otherwise, it's typically like a series C. The board will usually, they have an audit provision in their investor rights agreement, but they'll usually waive that every for a while, but that doesn't mean they don't want good... For us, we are a CPA firm. So we do a lot of compilation letters for the board saying like, "Hey, we're a CPA firm. We've helped put these financials together, yada, yada, yada." To provide them comfort.

Scott Orn:
You get in trouble when someone's uncle is running QuickBooks or one of the co-founders is running QuickBooks. And that's fine at the very early stage, but that doesn't have a lot of controls. It doesn't have a lot of multi-level review or scrutiny. And so as you start progressing as a finance and accounting organization, you're eventually going to get an audit. We have a tax CPA, we're a tax CPA firm, not an audit firm. So we don't do attestations. We actually, again refer out to pretty much the regional firms, just because the price point, they're very professional, they're very good. We have a reoccurring relationship with them. They know we do good work so they can kind of price it a little bit more at attractively than just kind of a stranger coming in.

Scott Orn:
They know that they've, for lack of a better word, the company has been eating their vegetables and taking their vitamins on the way to that audit and so it's not going to be just a terrible situation for the auditor. If you really think about the auditor they want to get in, do their sampling, do their interviews, make sure everything is kosher and then sign off and get onto the next audit, right? They don't want those huge bog down processes where there's a ton of cleanup and things like that. And so the problems we see are typically, I don't think we've ever had a problem with an audit. The problems we see are when someone is coming to us, usually because they tried to get an audit. The auditors are like, "Hey, your bookkeeping is not up to standards. Go get it fixed." And so they'll come to Kruze.

Scott Orn:
And the interesting thing about our approach in the industry is we have perfect information. I can see exactly who is doing the accounting, what they're charging, and the quality of work they're doing. So we kind of have our usual suspects. We know, "Oh, that's who you're working with. Yeah, it kind of makes sense that things aren't kind of up to grade or up to the auditor's expectations." And so oftentimes we do a lot of cleanup projects like that to get it ready for an audit when it's coming in from another accounting firm. But the big things are just having all those controls in place. Having very clear financial records. We definitely recommend QuickBooks. Most of our clients are on QuickBooks although NetSuite is kind of the later stage version of... A lot of our companies graduate to NetSuite.

Scott Orn:
But picking a good accounting system, using a great expense management partner like yourself, having a very clear revenue recognition policy, your accountant should put that in place for you. Those are all things that just make the audit go smooth. The other thing is using a cap table management software tool, is actually very helpful too, because another area that they're going to really audit and test is all the capital contributions, what investors own, that kind of stuff. So that's another place that software can be your friend and actually make it a lot easier for you.

Alex Song:
That makes sense. One thing I'm actually curious about, in your years in the industry, generally I think we've seen a pretty nice adoption curve over the years, more technologies, right? More folks like Carta, right? That manage the balance sheet and the equity. Hopefully, the technology over the years has improved. Have you seen audits become more efficient and cheaper over time? And to compress in both the weight of work and the length, have you seen that as a trend?

Scott Orn:
Yeah. For the regional firms we're seeing kind of 20, $25,000. I'm sure many of the people listening to this are cringing because that's the number I see and maybe that's not all regional firms or all companies and it's maybe a certain style. And again, when they're pricing out an audit for companies that we're working with, they kind of know that we've done everything and have all the schedules and everything that it's very easy to tie everything back, but that's generally what I see pricing wise. I don't know if it's come down, but I think it's kind of stayed in the same zone.

Scott Orn:
The one other tip I can give startups and we've seen a couple interestingly Big Four firms, which generally do a very good job, we've seen some scope creep. Our mantra is always to define the scope, the price it's going to cost to do the work, and then get the client to approve that. We've definitely seen a couple rogue auditors who, especially I saw this a lot when COVID hit. And I think a lot of auditors, not the audit firms, but the people inside the firms who may have been concerned about their jobs or things like that, just running up huge bills on companies without clearly defined and approved scopes.

Scott Orn:
So that's something to, if your auditor is telling you, you need to do something, first of all, confer with your accountant, make sure that's legit, and then get them to write everything down and make sure you're approving exactly what it's going to cost. I mean, you see this in times of recession and notoriously with law firms who generally speaking are doing a great job right now and are very talent constrained because there's so many financing happen, but if things slow down, you kind of see people stretching out their billable hours and things like that. So if you're getting an audit and you're getting either some cleanup work or special services from them, get it written down, approve that scope, and make sure you've checked with someone who's knowledgeable to make sure it's legit.

Alex Song:
Yeah. It's super interesting. I think COVID obviously changed many, many things about our industry and how folks operate. It's actually a good segue. So here's a question I have for you. And I'm just curious if maybe the Ramp experience is reflected among kind of what you've seen out in the wild, but as another consequence of COVID, folks are being much more open about hiring remotely, having a more distributed workforce. Ramp itself is headquartered in New York and historically we've had most people based in New York, but that's no longer the case, right?

Alex Song:
We have folks in, I think upwards of 20 states, we have folks across country borders and I think we have employees in maybe eight or nine different countries in fact. What we've seen over the last year and a half, two years or so, payroll. Huge pain point making the right filings, withholding the right taxes, benefits, et cetera. And of all things, I think that was probably actually the biggest COVID pain point that we saw. Is that something that you've seen and how have you guys addressed it or helped your customers address that?

Scott Orn:
Totally. And we saw the same migration that you saw and we even experienced that in Kruze where we had a San Francisco office and two weeks into COVID everyone except for Vanessa and I had moved out of California, right? It was crazy. And so we saw this with our clients. And so payroll and capturing, not just running payroll, running payroll is not that hard if you use a good provider and we have three or four key providers that we you work with and the similar relationship we have with Ramp, but what you're really talking about is state tax nexus. And are you registered in that state? Are you registered to run payroll in that state? Which states are your employees in? And always having a handle on that is actually a really big deal. So that's actually something we handle at Kruze.

Scott Orn:
The alternative to us handling it is working with a PEO which is a professional employer organization, it's like TriNet, just worse. Rippling has a PEO, Sequoia One. And those firms basically abstract the working relationship that employees have into, the employees are actually working for the PEO and not the company directly. And so by doing that, they can take care of all those state tax compliance issues. Of course, it's kind of a Cadillac service, it's more expensive. So some companies like that. Some companies want to stay, which is regular payroll and benefits from the payroll provider and that's where we step in. So we are doing a tremendous amount of state payroll tax registrations and just doing business registrations in a state.

Scott Orn:
The payroll providers, once you give them the account numbers and everything, they're actually very, very good at handling the state payroll tax filings. The big ones that we work with and that's probably why, it's not probably, it is why we work with them. They've automated a lot of that stuff. They're filing electronically the IRS and the states. And they do an excellent job. That's actually, one of the reasons Vanessa loved Gusto in the early days was they handled that. People don't know this, but the old school way of filing your payroll taxes every quarter was have your accountant fill out literally pieces of paper and then mail it in to the state in the IRS. Gusto is one of the firms that actually did that, started doing that electronically and handling it for customers and accountants. And then of course all the other providers have followed suit and do that very, very well. So the key thing is just keeping an eye on where your employees are, knowing where they are, and having someone do those registration and get everything set up.

Scott Orn:
There's another aspect to this working remotely that we've experienced too and we see with our client base, which is international contractors and international payroll. And there's been a really cool, kind of new trend with Deel, Remote, Globalization Partners. They're basically doing what, it's not exactly the same legal structure, but it's very similar to what TriNet, Justworks, those in Rippling, what those folks do in the US, but they do it for the companies internationally. And so you can hire, Alex say, there's an engineer you really want to hire in Argentina. You can actually put them on payroll through one of those services.

Alex Song:
How did know that by the way?

Scott Orn:
Yeah. You've got your eye on a couple engineer.

Alex Song:
We have folks in south America.

Scott Orn:
Yeah. Exactly, right?

Alex Song:
Yeah.

Scott Orn:
And a lot of those folks tend to be contractors, but this virtualization of the employment relationship internationally is allowing people to be on the payroll and it totally works. We have some crazy stats where it's just growing so fast. We can see in our client base, it's growing really, really fast. And the providers are doing a good job. You see it with the valuations that they're raising money at and the velocity. So those are three, Deel, Remote, Globalization Partners, three great firms that Kruze works with. And it's kind of, you're able to hire the best people now, not just nationally, but globally. I don't even think we fully, as a culture or tech culture or startup culture internalize the benefit of that yet. It's going to be over the next three to four years it plays out, but it's going to be a really powerful trend.

Alex Song:
Yeah, absolutely. I think COVID is probably an accelerant, right?

Scott Orn:
No. Totally.

Alex Song:
Of already existing macro trend that it's going to play out for quite some time. Any observations overall on pain points? What are guys really struggling with out there? What are ways to alleviate some of that? What are things that technology can potentially automate a way or not?

Scott Orn:
Yeah. Every time I think this I know I'm wrong, but I feel like with the emergence of Ramp in the expense management space and the emergence of the PEOs and the international PEOs, rev rec has gone a lot better. Stripe has their own rev rec technology now. And you're seeing like SaaSOptics and Charge being [inaudible 00:33:23]. The whole kind of accounting stack is getting a lot easier to deal with if you're a systems first accounting firm, like we are. So those are the big buckets. And it's kind of interesting, there's a couple vendors in each category now tackling these. And so I look back on when I joined Vanessa seven years ago at Kruze, even QuickBooks Online, wasn't very good. Xero had scared them so dramatically that they were investing a lot of resources in QuickBooks Online, but that's what made them really take that seriously. And so we've come such a long way that I think all the areas are pretty much covered.

Scott Orn:
Now, of course there's some amazing entrepreneur out there. Well, the one area I think that, as I'm thinking about this real time, probably crypto accounting is the area that still needs development. And you can share what Ramp is working on internally, but I think it is an expense management area. And if you kind of think about crypto accounting, everything it's still a ledger like the bank ledger, right? But it's just not through banks. It's just a different ledger. So all the accounting that a firm like us does using QuickBooks or NetSuite, there's no great ledger for the crypto to ledgers out there and so I think that's the opportunity right now.

Scott Orn:
We're very fortunate to work with a couple software providers that are working on that as we speak. And we probably have 20 crypto clients right now, which isn't a ton for us, but it's enough to kind of get the experience we need before we totally blow it out. But that's probably the area that I think needs more development. I do see VC dollars going into that pretty, pretty quickly. So I think it's going to get solved and who knows, maybe Ramp, maybe you've got to ultra double, top secret initiative that you're working on to make it even better.

Alex Song:
That is a good call out. Quite frankly, that's a good call out. I know you recently did a podcast on that, right? On crypto accounting. For our listeners out there, we announced a few weeks ago that we've a small allocation of the stable points on our balance sheet associated with that particular allocation. We had to figure out some of the accounting implications, right?

Scott Orn:
It's hard.

Alex Song:
What is the level two, level three asset? Do we mark to market? Hold to maturity? Is it trading securities? What do we even do with this stuff, right? So that's actually a good call out. I actually do think that probably is a pain point for a lot of folks out there right now that problem probably will continue to grow.

Scott Orn:
Yeah. The energy around crypto is very strong. It reminds me the early days of SaaS and so there's going to be some amazing companies built there. And I know a lot of VC friends of mine, that's basically what they focus on now. It's like that's the white space, but with every white space comes opportunity. And I know for us, it'll actually be a relief for us once we have an iron tight process and product to work through because we just want to do a really good job. And if we have a tool like that, it's going to make a really big difference for us.

Alex Song:
I guess one last question for you, 2022 aside from crypto accounting, 2022, anything you're looking forward to any major trends you're looking forward to or anticipating?

Scott Orn:
Yeah. Well, this isn't going to make me very popular, but I am watching, I mean, I have a banking background and a venture capital background and so I'm watching what's happening with the NASDAQ where at the time of recording, it's going on like 300 points every day. And I don't want to be the boy who cried wolf or scare people, but I think we're coming off of, I've seen a couple very frothy times in my career 1999, 2007 was crazy. Last year, last 18 months, the start of ecosystems really benefit from some of the capital flowing into venture capital funds, which is all time records.

Scott Orn:
The VC funds playing at the late stage are just writing humongous checks. They're basically kind of investing in companies that would've gone public in prior eras, but those companies are staying private longer. So there's a lot of checks being written there. And then the NASDAQ with tech revenue multiples going above and beyond the normal kind of 10 to 20 X zone. Historically, if you were a great tech company, you would traded like 10, if things got really frothy, 20 X revenue, that's a lot if you think about it. I mean, we were routinely seeing a hundred X revenue multiples over the last six to nine months and they were with Kruze clients. So I was very happy for them. That's amazing. You're getting a great valuation on your company, but you got to be careful because you have to plan for when there's a few bumps in the road.

Scott Orn:
And if the NASDAQ continues to correct, venture capital is still going to be there. There's tons of capital arrays. They are still going to invest in startups. They're going to very active. It's a very exciting time as we've talked about. It's just the valuations are going to change and you don't want to get stuck with a valuation that's so high that you can't raise another round of capital. So just be smart about it. Be smart with the way you spend your money. Keep an eye on the market.

Scott Orn:
Don't manage your company on a day to day or week to week or even month to month basis based on what the market's doing, because otherwise you'll whip off the whole company and you won't probably invest in things you need to invest in. But just check the rear view mirror every once in a while, if you're a startup founder and you're driving, just check what the NASSDAQ is doing. And if things aren't kind of getting a little bit better in the next two months or so, then start thinking about how do I extend my runway? Do I do venture debt? Do I invest a little bit less in what I'm doing? Just be smart about it. That's my best advice for folks.

Alex Song:
That makes sense. Some circumspect thoughts, right? About valuations and fundraising going to 2022. So we'll see what happens. Look, Scott, it's been really, really good telling you. I think you are absolutely in a very unique position, right? To talk about finance operations, bookkeeping, all of the concerns that a lot of entrepreneurs have both obviously as an entrepreneur yourself, but also in the nature of your work. It's been really, really great to have you on the podcast.

Scott Orn:
Thank you Alex. I really appreciate it. I just want to give quick shout out to all the engineers at Ramp who are making the product so much better for us. We're your customer too. We really appreciate what you're doing and special shout out to the customer support organization. We really appreciate. We have a hot problem. We really appreciate you hopping on chat and answering our questions for us. You make us look good to the clients and thank you for that. Thank you for everyone at Ramp for all you do.

Alex Song:
Absolutely. Thank you so much.

Speaker 1:
Thanks for listening to this episode. If you enjoyed it, please rate and review us on Apple Podcasts, Spotify, or wherever you listen to your favorite shows. It really helps to spread the word. Until next time, this is FinOps Today from Ramp.