William Leonard
Hey ladies and gentlemen, welcome back to the Atlanta Startup Podcast. I am William Leonard, your host and investor here at Valor Ventures, a leading seed-stage venture capital firm in Atlanta, Georgia. And this afternoon, I’m really excited to sit down with Prem Bhatia, co-founder of Cooleaf. Prem, thanks for joining me today, man. How are you?
Prem Bhatia
Thanks, man. Appreciate it. Yeah. Good to be here.
William Leonard
Before we dive in, I wanted to say, congrats to you and the team on being named to the Inc. 5000 list of the fastest-growing companies in the country. How does that feel for you?
Prem Bhatia
Yeah, it’s awesome. It’s a big validation for our business, for sure. I think we’ve gone through ups and downs for sure in our business, and it’s nice to see external validation of the tough work that we put in and the grit of the team. Super thrilled.
William Leonard
Certainly. How long has Cooleaf been around? I guess you can touch on that. Can you give our listeners a high-level intro to the business?
Prem Bhatia
It’s interesting. Cooleaf itself has been around for quite a while, but we like to say we’ve been three different companies essentially since we started. When we initially started, we were something totally different than where we are today. As a B2B SaaS platform, really where we got into B2B SaaS and really developed our technology even further to a point where we’ve considered ourselves and our technology mature enough. We made that pivot into B2B SaaS, around the 2017-2016 timeframe. Before that, we were doing some things in B2C. We were doing some interesting experiments around group team building and events that just taught us a lot but wasn’t the end all be all in terms of where the business was going. As we made that evolution, launched out B2B SaaS around that 2016-2017 timeframe. To give your listeners a background on what we do we are focused on creating extraordinary experiences. For the majority of what we do today is focused on the employee experience, we’re doing more and more with other types of experience plays like customer experience and product experience, but 90 plus percent of what we do today is really focusing on the employee experience. That’s really where we’ve made a lot of our progress. What we try to do is, as companies think about this movement to hybrid and remote workplaces, you are probably familiar with the idea that we’ve got 60 to as high as 90% of employees thinking about leaving their job in the next 12 months depending on the statistic you’re looking at. What we essentially do is we provide a way for employers to create an employee experience that’s focused on really crafting together a masterful experience that ensures that you’re listening to your employees, you’re engaging them in the behaviors that matter, you’re recognizing and rewarding those behaviors, and that you have a data set and analytics to be able to guide your engagement efforts and your employee experience efforts further through insights and AI-driven analytics. That’s really what we do in a nutshell.
William Leonard
I think this is a very hyper-relevant space to be in right now, given the remote work, and where this workforce is going to be situated over the decade. What’s your background frame? How did you come to start this company? What were some of the key issues that you saw at the onset of starting a business a few years ago?
Prem Bhatia
It’s interesting. When we initially started the business, and as we were getting our initial momentum ramped up where we were working with players that were what I’d say at the leading edge of being top workplaces interested in their culture, understanding best places to work, and understanding that culture was a huge differentiator. As times went on, as we’re in the pandemic and post-pandemic now and in the midst of this, what we’ll call great resignation and this movement to hybrid and remote workforces with the challenges that go with that, that’s certainly been a big tailwind for our business in terms of accelerating some of that progress over to remote work, and that those organizations that might not have been thinking about these topics and challenges are now starting to think about these challenges quite aggressively. Let’s change the conversation for us quite a bit. In terms of when we started, our entire thesis from the beginning has been that employers should fundamentally care for their employees because it’s the right thing to do, and we’re rooted in empathy. In terms of what we do and rooted in this idea that we treat people like humans and there’s just quite a bit still to be done in the world of business to help leaders with that. Just a fairly basic concept of understanding people, making sure that you’re pulsing and listening to them, making sure that you’re engaging and recognizing and rewarding them for their achievements. Those are fairly basic concepts. But what we found is that the market timing for us was maybe slightly early but as we’ve evolved, and as the world has changed, caught up to us where we are today.
William Leonard
That’s a pretty interesting point you just mentioned there at the tail end of that. How do you think about market timing as a founder? Is there such a thing as being too early to space but is that really the underpinning of your first few pivots as a company?
Prem Bhatia
When we first started, we were a B2C company actually. We were focused on the health and wellness space. We’ve done some stuff around things like people registering for classes on our platform. There’s a whole lot of different things that we’re doing around health and wellness, primarily in the B2C space. We’re competitive when we first started around that same space. But what we learned and I think what the challenge for founders, especially in regions like Atlanta, where obviously, things have changed a ton since that time since when we were first starting out funding was obviously not easily something that you could find, and it wasn’t something that you could really scale a business around when you’re making a small number of dollars per transaction, and you need to scale that business that requires a ton of funding. When we went through that process of just iterating our platform and our approach realize that monetization was the key early on. From the get-go, we’ve been relatively lightly funded as a business, but have been able to make more and more momentum, build a team out, start really seeing some serious growth now over the last few years. But I think in the beginning, it’s just right now, things have changed so much since we did that, right? I think there are folks that are out there that can probably learn everything they want to from online resources. Twitter’s huge for this, right? But really learn how to monetize from day one, and I think B2B SaaS has changed so much. There’s so much going on with SaaS and transactional and credit card SaaS, it’s much easier, but not easy, don’t get me wrong. Easier for founders now to get started, and to get that initial momentum moving, than it certainly was five-6 years ago.
William Leonard
I think a key factor that is at the university, the college level, a lot of schools now are offering entrepreneurship programs. You can’t really teach entrepreneurship, so to say, but you can teach the foundations of business and some of the core principles of building a company. I think that’s also been a huge point of access there as well. As you think about where you leaned on advice from maybe other founders as you were continuing to build Cooleaf at the early days, is there any unique points of advice that you could provide to some of our founders who were building at the early stage, and maybe they’re similar to Cooleaf, and that their business model right now is maybe B2C or B2B, but they’re realizing that they’re not getting traction in certain areas, and should they pivot? How do you think about pivoting? If traction is maybe not what you anticipated at the onset of selling?
Prem Bhatia
It’s funny, right? You think about how the availability of capital has changed things quite a bit. But what it hasn’t changed is that it’s still really difficult, right? For founders who might even be able to secure some pre-seed or early seed funding, it’s still really difficult for them to get that initial momentum rolling. But I would say what’s interesting about the people that talk about product-market fit, you think it’s some magical thing that happens. Not that at all. Iin our experience, and I think in the experience of many founders that we talked to, it’s very iterative and you find it, you can lose it, you can tighten it up, you can figure out ways to tighten that product-market fit as you go. But I’d say, if you are a founder that has started, and you’re serious, you’re committed to doing something that is going to be your own and you’re going to be the co-founder of this or the founder of this and you’re determined to do that you’re gonna find a way. I know that sounds like maybe that’s not as useful, but I think that what we found is, there are folks that that are out there that are finding ways to get things done. And they’re finding ways to monetize things, whether that means services, whether that means complementary industry partnerships that they can find. I think the world is vast right now in terms of the opportunities that are out there. Now, it’s really easy to start a business, right? But the minus of that is very hard to build a business, right? You can start, but to build, and to get that initial momentum has become an issue incrementally, or I’d say exponentially more difficult because you’ve got so many other SaaS companies out there, that are doing the same thing. From my standpoint, being authentic and your approach to what you’re doing, and not doing it for the sake of making millions and millions of dollars, is great and fine, right? That’s awesome. But those folks that are in that for not purpose-driven or not mission-driven, they’re gonna run out of gas, quite honestly. We’ve seen that and I’m sure you guys have seen that as well, right? Folks that are in there for the right reasons, and you’ve got to be in it for the right reasons. You can’t be a founder and do this and expect it to be like “Hey, I was working corporate, and this is great. I’m going to go and start my own thing.” It just doesn’t work like that. It’s going to be really tough going for a number of years and if you’re mentally prepared for that, you’re going to be much better off.
William Leonard
I think that’s excellent advice. Thinking about the mental preparation side of things is something a lot of people may not be prepared for as much as they should. Because building a startup is not easy, right? I mean, as many times as you get told no, as many times as you have to iterate on a product and just continue to persist through a lot of the hurdles that come with the everyday building. I think that’s a great advice frame. I think you mentioned earlier that Cooleaf is a pretty capital-light business in terms of funding that has been injected into the business and I wanted to get your perspective on that how were you able to build this company to scale without taking on a lot of VC? Are there any unique insights that you can share around that?
Prem Bhatia
I wish I could say that “Oh yeah, we’ve got some really good insights on it.” But honestly, the choice was made for us a little bit. Because, as I said, there was not a ton of capital available. To give folks an insight, we’ve raised a few rounds of capital. We’ve certainly taken on a little bit more over the last year and a half or so. That’s definitely helped us to scale up the team even further. But I think really, the idea here is that if you’re trying to go out and raise money for the concept, right? That’s not going to work and honestly, even early traction right now probably isn’t enough. There are just too many SaaS companies and startups right now for that to make a difference in terms of the ability to fundraise. There are certainly a lot more capital sources available, I’d say, for founders that are out there and are looking at just to VC. I think that’s great. I think there’s venture money out there for sure. But consider other capital sources. Consider things like revenue-based financing, consider things as Angels, and obviously, like seed funds that are out there now that it’s like proliferated. There’s a ton more capital sources out there to even get a small amount of capital and to get your foot off the ground. But the more that you can prove out without having capital, the better off you’re going to be and obviously, the biggest example of that is MailChimp, right? Which we know is like the prototype poster child for bootstrappers. The interesting thing to note about MailChimp is, are you willing to give 20 years of your life for something? Are you willing to start in a services environment? Because at the end of the day, when you look back at what MailChimp did it was really subsidizing the product through services and agency work. There’s absolutely nothing wrong with starting with some services models that can help subsidize product growth and product development can inform that really well, right?
William Leonard
Certainly. I think a lot of the companies that I see and speak with certainly do have that initial start as a business with a services model, or some type of consulting or professional services is really their core revenue driver for a year or two, while they’re building out product growth, getting feedback from beta users and customers, and then they’ll switch and there’s a point in the business where revenue is like 60/40 split in terms of SaaS and services, and then that inflection point hits and then it just becomes a straight SaaS business. We’ve seen that a few times and I think it’s interesting. And also to your point of just the differences in the capital that was in the market, back when you started versus now is certainly true when you think about the role of accelerators, and how they are really helping to contribute to a lot of growth for early-stage companies, especially here in this region. I know you’ve worked with some accelerators in the past, but can you talk about the value of accelerators that you’ve worked with, and some experience that you can share as well?
Prem Bhatia
It was many years ago, but probably like five-plus years, but me and another guy who’s a founder of a tech company here, he helped me to bring Founder Institute, which is a tech accelerator, but a different tech accelerator. The focus was bringing folks who were in Corporate that were looking to jump out and do their own thing. That’s the niche of Founder Institute, but I don’t know where that’s ended up. I think that obviously, we weren’t able to continue that, as directors of that and someone else and taking that over. I think they may still be operating in Atlanta, but I’m not 100% Sure. It’s based out of the Palo Alto area. I think the second was more of bringing in the mentors, bringing in the folks, and recruiting people to actually join the class and make some great relationships, honestly, that I’m still in touch with some of the folks from there. The second was really our company’s participation in 500 Startups, which is now I think they just changed her name to 500 Global. The idea for 500 Global like, they’re one of the premiere tech accelerators in the Bay Area. The acceptance rate was pretty low. I think when we got in the acceptance rate was something the south of 2% or something. We had companies in our batch that were from places like Brazil and Europe. We’ve got some friends that we made and we were still in touch with a lot of those folks, great founders, many of them obviously, some of them are still at it, some of them moved on to other things. I think it was a great experience. The thing that I would caution folks about just generally with tech accelerators is a fairly sizable chunk of equity. Be really sure that that’s something you want to do on your cap table, you have to be very cognizant of your cap table, and to be fully transparent, the idea of going through a program like that and giving up 5-7 percent of the equity in the company, may not seem like a lot, and it seems like a great opportunity to think so from for many founders. But I would weigh that carefully against the idea of what that will become, that will become something you’re going to deal with if you do end up raising subsequent rounds which most companies do. It is not cheap, and it does come with some prices. I would say, all in all, I think they’re still great. They’re a great fit for many founders, be really careful with the types of accelerators that you’re going to be after. If you’re going to go with the big three, that’s a good bet. I think anything outside of that you probably want to look at really carefully before making a commitment there. I’ve coached a bunch of founders and I’ve been looking at opportunities around that. Some of them I’ve coached to say, “Yeah, that’s a great opportunity for you.” Some of them I’ve coached to say. “Probably think twice about that.”
William Leonard
I think that’s super helpful, be mindful of the smaller percentages of equity but be cognizant that it also really adds up at the back half, or you’re building especially as you raise successive rounds of capital. I think that’s great advice, Prem. Shifting back to Cooleaf for a little bit, can you touch on the state of innovation in this performance incentive solution space that you all are building in? Specifically, can you contextualize it to the remote environment that we’re in now? Well, it’s more so hybrid environment, I’ll say, some companies are certainly going back to the office. But are there any areas of opportunity for founders or investors in this space to capitalize on right now?
Prem Bhatia
Absolutely. It’s a vast space, right? The idea of even the space that we play in some estimates, depending on the market definition that you’re using, we do some work in what we’ll call Employee Recognition Rewards but we also do quite a bit of work on performance incentives. Somewhere north of 45 billion on the last market sizing that we’ve seen. Some would even say, it’s even larger than that. It’s a massive market. I think the idea that there are multiple players in this market if you think about how we play, there’s that Employee Recognition Reward. Quite interesting that we believe there’s still quite a bit of room for innovation in that space. There are multiple players that are out there that have been around, in some cases 60-70 years plus in this space, and they followed a nontech type model, and then they’ve layered and bolted on tech on top of there. The innovation has been somewhat limited in terms of a lot of large organizations and enterprise organizations still work with some companies that are like that, and they’re looking for more innovative ways to engage their employees. We’ve been able to go out and really meet with some great customers that are looking for better, more mobile-friendly ways to engage employees on the programs that they’re investing in to be able to do recognition rewards in a more seamless way and to be able to integrate those capabilities and those performance incentives into SaaS platform. The idea of being able to incentivize a sales team based on certain metrics of achievement in a CRM, we do that work. We also integrate into Zendesk, for example, for customer support type metrics. We also do integrations until LMS platforms like Litmos, and Lessonly. We are able to take the idea that recognition, reward, and incentive should be real-time, meaningful, and should be frequent. We’ve been able to apply technology against that, to really be able to say when the way people work is changing, and the idea that they’re on SaaS platforms day and night, in addition to the fact that there’s qualitative recognition that’s happening. We’ve been able to consolidate that onto one solid platform. I think there are numerous opportunities for founders that are looking at the space and saying there’s something interesting here, we certainly don’t think about like, some competitors are a little bit more directly competitive, but we also look at a lot of complementary and industry friends in the space that we work with. I’d encourage folks to look at the space and say, “What’s a good play?” Is that something that you’re interested in doing you’re passionate about? For sure, I would encourage you fully.
William Leonard
That’s right. I think there’s a lot of opportunity for an entry point. This is a huge market here. Certainly, you all have really achieved scale. I’m excited that there’s a growing emphasis on this space, especially as employee engagement in this hybrid world becomes top of mind for a lot of enterprises and in Fortune 100 and 1000s, as well. Really appreciate your insight here, Prem, as you shared a lot about choosing the right accelerator, thinking about the business model at the early stage, how to think about potentially pivoting your company to really see the traction necessary to be labeled venture scale. I’m excited that a lot of our listeners were able to hear this conversation. I think there’s gonna be a lot of value extracted out of your insights. Appreciate you joining me here this afternoon, Prem. I look forward to seeing you all on the Inc 5000 list again.
Prem Bhatia
Awesome. Well, thanks, William. Appreciate you having me on and I look forward to staying in touch with you guys.
William Leonard
Cheers, take care.
Lisa
Thank you for listening to the Atlanta Startup Podcast. You know, we’re not just a podcast, we’re a community, and we’d love to see you at one of our digital or physical events, go to valor.VC and sign up for an event that makes sense for you. We have events for founders and the investors who back them. Another event you might enjoy is Startup Runway. The Startup Runway Foundation is a Valor organization that provides $10,000 grants to founders who are women or people of color building next-generation software products. Applications are free and we’d love to hear from you at startuprunway.org. And as always, thank you so much to the organizations that make this podcast possible. Not only Valor Ventures, but also Write2Market, a tech marketing and PR agency in Atlanta, Georgia, and the Startup Runway Foundation and Atlanta Tech Park Valley’s headquarters, and also headquarters for over 100 local entrepreneurs, building global businesses. See you next week. Please bookmark the podcast and join us.
