On this episode Of Scaling Up, March Capital managing partner, Jamie Montgomery and Forbes futurist Rich Karlgaard talk to Bill.com’s founder and CEO, René Lacerte. Bill.com is a fast-growing cloud software company that sells automated payment services for small and medium sized businesses. When we interviewed Lacerte, BILL was worth $8 billion in market cap; today it is $9.12 billion. We talked about fast growth leadership, mentorship secrets, and how Lacerte’s father was a pianist for the late Gram Parsons, even though Lacerte’s father was missing four fingers.
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The following transcript has been edited for clarity and length.
Rich Karlgaard: René, what was your original mission, how was it progressed, and the fundamental question – why is what you do important to your customers?
René Lacerte: We think of ourselves as champions for small and medium-sized businesses to help them automate the financial processes that around paying and getting paid. If you think about payables and receivables, people do not expect this number to be true but it is. Ninety percent of businesses still rely on paper to manage their processes and make their payments. If paper is a primary form of making the payment, it ends up being fairly inefficient, error-prone, and lots of challenges. It ends up being a mess. For us, I wanted to focus on solving that mess. I wanted to take care of that pain point and really make a difference for a small and mid-sized businesses. There are six million employers in the U.S. – that is the target market. We have 98,000 businesses today that are on our platform. They use us to interact with two and a half million network members that are getting paid on a run-rate basis over $100 billion a year. We have a fair bit of scale across the platform. The opportunity for us is to go from just under two percent and mark it to something bigger. That gets us excited every day. It is a great spot to be in. Fourteen years of hard work actually ends up being worth something someday.
Jamie Montgomery: As part of your personal story, René Lacerte Lacerte, how did your “Dinner Table MBA” while growing up influence your leadership of Bill.com?
Lacerte: One of the most important things parents can do for young kids is read to them. The next thing is to have dinner with them a lot. My parents, we had dinner every night and we talked. Since my mom and dad were involved in the same business, they always had stuff to talk about.
Growing up, my parents never hesitated to talk about their days at the family business. I got to learn about management. The huge challenge that every business has is how do you manage and grow the people and the culture, and how do you hire effectively and manage the teams to get it done what needs to get done. I got to learn about customers and selling. I got to see passion, and some of the most exciting times at the dinner table was when Dad was coming up with a new product offering.
In the late seventies, he came up with remote payroll. Today, we would call that internet payroll. In the late seventies, the first thing he did was he got payroll data entered on cassette tapes, right? I remember him coming up with that and later getting suited up to go tour the Intel chip factory in Santa Clara County. I took that as like, “Okay, I want to do something that I am passionate about. I want to feel really excited about solving the problems in the world that I know or saw.” Lots of weekends, I would go in and I would stuff dunning letters, invoices into envelopes for customers that owed money. I would help him organize the AP file. I would do stuff like that just because I want to be with Dad. It was not every weekend but probably a couple times a year. It is like, “Hey, I got to go in. Anybody want to come?” I would go in. I would get a chance to learn and just obviously be with dad.
I learned on the cash conversation, it was all about stretching out the payables and pull in the receivables. If you think about the pandemic right now, that is what every business in America is doing. Every business is stretching out their payables and pulling in their receivables, and they are doing it with gut instinct. What we do at Bill.com is we give you a platform that makes it a lot easier to do.
JM: Well, let us expand on that a little bit further. Was there a formative experience that influenced the type of culture you are building at Bill.com, and how would you describe the culture?
Lacerte: Every family has a set of values and yet families typically do not post those values on the wall. Because I’ve started two companies, and because I went to a boarding school where the values were in stained glass, I did put our family values on the wall. When the kids were ten and eight, we did an exercise where I asked the kids what are our values. That allowed us to really have something on the wall.
The formative experience for me, I believe, when I am fourteen years old to go to a boarding school. All of a sudden in the stained glass in the chapel are the words “Temperantia, Fiducia, Constantia.” Simplicity of Life, Self-Reliance, and Directness of Purpose. That was over thirty-six years ago. I still remember those words, and I think about those words on a daily basis. I would say the experience was, values matter. If you do not put it down and do not manage to it, it ends up being something that manages you. I have spent a lot of time thinking about what are the values? How do I make that happen across the company?
Now, in the pandemic, what we are doing, all employees have a mug which have the values across the top and then on the back, we have our fiscal year goals for the company. Every employee is getting that this week. You have to do things to make sure it is present for employees. It has to be part of the interviewing process. All these things come together and say, “Hey look, the most important thing I do is set a culture that brings great people into work, to do the best work of their lives.” That is the most important thing I can do.
RK: Last year, Eric Schmidt, Jonathan Rosenberg, and Alan Eagle wrote a book called the Trillion Dollar Coach: The Leadership Playbook of Silicon Valley’s Bill Campbell. You had an opportunity to work for Bill in the 1990s and delve that into it. What coaching lessons did you learn from Bill that you apply at Bill.com today? How important is having a coach? How important has that been to you throughout your career?
Lacerte: Yes, working with Bill was great. It was fun. It was just an amazing experience to learn from him every day. Bill was very focused on making sure that there is a culture that really brought people together, that was collaborative. The way he did that is he was a great listener. He was great at assimilating different opinions from all across the company and then using that to be able to kind of drive some consensus across the company and make decisions.
Bill Campbell showed me how important it was to focus on building a culture, to focus on listening, to hearing different perspectives at different levels of the organization. It just adds a level of data point. When I was twenty eight years old at Intuit, and because I had to know something about payments, Bill invited me to the board meeting. I was meeting with some of the greats of Silicon Valley. John Doerr, Burt McMurtry. Some of these amazing people that had led and done things all across the valley, invested in technologies. Bill was comfortable having different levels of opinion knowing that, “You know, I might not say everything right but I had some content there that would be valuable. It would be helpful for the board to be able to hear that.” I think that gives you an example of Bill’s ethos around. Everybody has something they contribute, and everybody needs to be able to have a voice.
RK: You still appreciate the power of coaching and teachers. You are an advocate for having a coach throughout your career. That was another legacy of working with Bill Campbell. Describe why you think having a coach, even despite all your success today, remains important for you.
Lacerte: It is something that I did not appreciate enough in the first company. PayCycle was successful, but I did not have a coach the first nine years after startup.
I have had at least one coach, if not two coaches, for all of Bill.com’s history. The importance is that the coach ends up being a private relationship where you can share all your fears, all your hopes and aspirations, and they can keep you grounded. They can remind you that the fears are real, you need to acknowledge them. They can remind you that the hopes are real, and you need to work your butt off to go get it.
It is a gift of voice to be able to tell somebody, “Hey, this is the way I see it.” Their only interest is from you to be successful. I think a lot of times in an employment relationship, an organization relationship, everybody second guesses whether everybody has each other’s interests at heart. That coach does help because you know they have that and then you are tapping into their vast experience. That is so valuable for me as a leader because I am everyday I need to learn something new and be able to do the job because I have not been here before and that is okay. That is something that is exciting.
JM: You went public in December 2019 and did a secondary about six months later, and you had a market cap of eight billion recently. 2020 has been a very interesting year for technology companies, especially cloud-based companies. How should we view Bill.com compared to other payment companies and how it rose the fintech area? How should we think about the size of the market, the size of its company, the growth from here?
Lacerte: This is a massive market. It is 98,000 customers today, six million users in the US. We equate that to, given the run rate and on the revenue we have from a customer today, over $9 billion in the US. We extend it to $30 billion across the globe when you look at small and mid-sized businesses across the globe. It is all because businesses need help with the back office. Everybody’s focus is on kind of that last few feet of the transaction. Nobody makes a decision about how to pay and collect without having a process around that. That is what I learned from my dad — there is always a process to understand how people pay. We think that this market is a very, very large market with lots of opportunities to continue to have more services.
When you look at part of the success and growth of the national profile of the company, it is not just that we have subscription revenue. We also have transaction revenue. Customers pay us monthly to use our platform to have seats, but they also pay us for each transaction. Well, then we also have transactions at variable-based pricing that allow us to actually get a percentage of the overall total payment volume going through. All of that creates more and more opportunity for us. The combination of software and payments is the perfect Reese’s Peanut Butter Cup. That is something that we focus on – building the best capabilities to support business and really help them with their processes every day.
RK: Can Bill.com continue scaling at the rate you are scaling? Can you do that? Parenthetically, Jamie and I just interviewed ServiceNow founder, Fred Luddy. One of the things that ServiceNow has done is really scale from a few good apps into a true platform company.
Lacerte: For us, scaling is first gaining the trust and the confidence of SMBs. The opportunity to serve them is vast. I am a champion of SMBs. I believe. This is just a very personal for me. I grew up in a family of entrepRené Lacerte Lacerteurs. My parents had six businesses. My grandparents had more than that. My dad’s cousins had successful businesses. Lots of businesses. I have seen the passion of seeing the work. I have seen the energy and sacrifice. For me, it is first, respect for that. So I think about developing a platform that actually makes a difference in their lives every day. So you have to win trust with your customers, but also your, partners. The top three banks in this country use us for their commercial customers. JPMorgan Chase, Bank of America, and Wells Fargo. We have lots of partnerships with the accounting firms, 80of the top 100. We have Intuit as a strong partner of ours. Having the trust of your customers and your partners means you can offer more services to them.
When I think about the services that I want to offer, it is the processes that need automating. We are a service. People give us transactions. They use our platform so they can execute a transaction that we then have to fulfill. Every day we have people that are looking at every transaction around fraud, around risk, around payment timing, managing all the exceptions. These are all things that our customers do not have to do anymore. There are lots of services that need to be automated.
Every business that starts actually thinks this is the gift they have to give back to the world. Every person is giving their gift back. Every person has a choice about how they give their gift back. When you are fortunate that you can give something that you really, really enjoy, then that is really powerful. A teacher can change the world, and that is a huge platform and that is their gift. For me, my gift is how do I automate processes so businesses can get back to their own gifts? That is the passion I have and the energy. I do not see it ending for a long time.
JM: René,, fundamentally, how is Bill.com different from its competitors, and specifically, since you had mentioned the role of AI. How will AI continue to improve what you do?
Lacerte: The first thing is we have a very spoken vision around small and mid-sized businesses, being a champion for that. That is different than what we see other people do. We have a platform that is built end-to-end to manage all their processes. That could be the paper, the documents. There is no more filing cabinet needed if you are on Bill.com. Sticky notes you leave around the office, that is not needed anymore. It is the checks, that is not needed anymore. All the annoying exceptions that come back from payment timing, all that goes away. Having one platform that does all of that, that was purpose-built for the small and mid-sized business, that is our biggest differentiator. That is what we think allows us to go and get the partnerships that we have.
We are able to use the data and use AI to understand, is this an invoice? What is the vendor’s name? What is the vendor’s address? What is the amount? What is the due date? Who should approve this invoice based on prior interactions with this vendor? What is the timing that we might want to make on the payment? We are able to use AI to do most of that, and we will do all of that over time so that a customer does not have to think about a bill. They can take a picture as soon as it comes in and be done, and we will make sure it is paid. We will remind them and they will pay it when they want to pay. But they would not have to worry that they lost it. I think that is the power of the AI
JM: Throughout the history of Bill.com, you’ve had to scale up in your leadership role and hire people from critical functions and then hire people to sit between you in those functions. Let’s talk about the challenges you have scaling yourself as a leader and letting go of certain things and concentrating on new roles.
Lacerte: One of the great parts of life is to grow. One of the joys is to pick a challenge that you do not understand and just friggin’ learn how to get through. It is not easy and you have to be up for the hard work. That is why you need coaches. We talked about that. It is why you have mentors. One of the best mentors of my life is my dad. He is no longer with us, but I learned so much about it. I learned about passion, to do something that you care and love. I learned about grit and perseverance.
I look at my dad and, just anecdotally, his courage and tenacity and perseverance and grit. He was born with six fingers – four in his left hand and two in his right. As a young kid, his mom got him piano lessons. He got through “Twinkle Twinkle Little Star” and the teacher said, “I cannot teach him anything else. There is nothing that on the piano that is only for six fingers.” He was six or seven. My grandmother did the right thing at the time, and said, “Let us pick up another instrument.” My dad played trumpet. But when he was about to be sixteen, he went to his parents and he said, “Mom, Dad, I really want to play piano. Can you give me a piano?” They got him a piano and they said, “How do you going to learn it?” He said, “I will figure it out.” He spent one summer, sixteen years old doing nothing but playing the piano. His fingers bled. If I could play the music for you, you would be moved to tears.
That is the feeling I have right now. And right now, this is because you won’t learn that if you want something you can make it friggin’ happen. You just have to be focused. You have to be dedicated. You have to have the passion to energy.
My grandmother tells me the summer my dad learned piano, many nights his fingers were bleeding. Callouses formed over and over again because he wanted to play. By the way, if you’re a rockabilly guy, you know, he played with Gram Parsons, who was you know, a legend in that era. My dad introduced Parsons to my parents. Jimmy Stafford. Lobo. My dad learned to play piano and he wanted to just do it so badly that he found a way to do it and he used the pedal to extend the left hand chords. So you throw in the right hand with more melody. I know it’s just, it’s beautiful to listen to that. I learned from him that you have to you have to accept the challenges.
My dad still lives in my imagination as a challenge and responsibility of being a leader in a company. The responsibility is not the need to be the person you are today. Responsibility and accountability is to be the person the company needs for you to be six months, from now two years from now, five years, and that’s a growth journey. I am not the same CEO that I was 20 years ago. I start and I accepted that responsibility and there are days I go home. I feel like I’m racking my head against the wall that I get back up. I ride my thoughts while I’m in my run and I figure it out.
That personal growth, for all of us, it’s the most powerful thing about being a leader. It’s most important thing any individual can do is continue to work on being a better person. If you want to make the world a better place start looking at yourself.
JM: When you realize that a particular team member who is so important or critical to your growth is no longer the right person for that next phase, how do you handle that? What lessons or guidance, what you share with others who face these challenges well?
Lacerte: I was the CEO and co-founder at PayCycle. For six years, we really made no management changes. We just added people and it got to the point where it wasn’t working. The board was concerned about it, you know, so we had a conversation. They asked me to step down because they thought I couldn’t be CEO, and they were right, and I accepted that. When I started my first company, maybe eighteen months in, there was an employee who was struggling. I reached out to our general counsel and said, “Hey, what’s your advice?” And Mike said, “René, do you know what VCs say is the best time to fire the CEO.” I said “No, what?” He’s like, “The first time they think of it.” And it brought back because I had stepped down from you PayCycle. It brought back that if I don’t take responsibility for the actions of the management team, then who will? The board, right? I think leader have to be be honest in understanding what you can coach and what you can’t coach. Then be honest and direct with the person that you’re managing because that that you owe it to them as well.
RK: How do you deal with the Covid-related stresses in Bill.com’s workforce? Bill.com is a utility for customers. It has to work all of the time.
Lacerte: The last six months have been challenging for everybody and it’s not just Covid. It was also the fires in the Bay Area, and then the social justice issues we’re seeing across the country. What’s really hard about managing all of this is that everybody is removed. We’re fortunate we’re a technology company so we can all work remotely. We have a lot more town halls. We’ve had lots of important conversations that need to happen and you have to find connection points. You have to admit you don’t know all the answers.
RK: On the topic of social justice, what is Bill.com’s strategy for bringing in and recognizing and providing more career paths for people who have been unrepresented in technology?
Lacerte: It really all comes back to my own experience growing up. I grew up in the South and in Florida and saw crosses burning on I-4. Between Tampa and Orlando. Coming up from boarding school one night, and a cross burning. And I started thinking, why do so many drivers have Confederate flag on their bumper sticker? Most of my friends, their moms and dads were born in Pennsylvania. They all fought for the Yankees. Not Dixie. It didn’t make sense to me. Right? I didn’t understand it but when I saw the crosses burning, it kind of crystallized for me.
We employed a woman named Mary and she helped our family. Mom and Dad were working on the business, so Mary did whatever was needed. Well, after twenty years she decided to retire and my parents took her out for her to lunch, nicest restaurant in our small town. And this restaurant made amazing coconut cream pie. A huge pie. My dad was thinking, “I might like to have a bite.” So he said, “Hey Mary, do you mind if I have a bite.” And there were no other silver ware on the table and she’s like, “With my spoon?” “Yeah.” She started crying. Somebody shared a spoon with her and she started crying. It’s just not right people feel that way. And so what I’ve been focused on is the bumper sticker that I remember as a kid is, Think Globally, Act Locally. The most important thing I can do is build an environment that lets people be who they are, that brings in the best people no matter their color, their gender, their sexuality. You cannot oppress people. You have to let people be their best because that’s when they shine.
We do have great diversity in our company. I know it sounds silly to say, but we have only 40 percent white males on the senior leadership team. That to me is the good sign. Now I have to work on the board and get more diversity on the board. That’s a commitment. I’ve a member of Founders for Change and that started before all of this and I think there’s more that we can do about how we bring young people in. We have to commit to making progress every day. You can’t say it’s going to go away. Wishful thinking is never something that I found works for me.
JM: Good things happen to good companies, René. Thank you.
Lacerte: Well, thank you Jamie and Rich.