In the world of construction, design, and architecture, keeping track of finances can be a complex task. With a range of expenses to manage, clients to bill, and vendors to pay, the process can quickly become messy and disorganized. Enter Vergo, a financial platform that aims to streamline the process and help businesses in these industries manage their day-to-day finances. We sat down with Rich Kane, the founder of Vergo to discuss the platform's origins, the challenges they faced, and the future of the company. Watch the full interview here.
Welcome! Tell us a little bit more about Vergo
Vergo is a financial platform for businesses in the construction, design, and architecture industries. My background in finance includes working for about ten years in various roles, such as trading, operations, strategy, and technology. I had the opportunity to travel and live in different countries like London, Argentina, Brazil, and finally settled in New York in 2017. However, I always had the desire to start my own business.
During my time at JPMorgan, I had a few side hustles, and eventually, I decided to quit the corporate world and pursue my own venture. I started a small furniture business after my wife and I moved into a new apartment in the East Village and we had difficulties finding suitable furniture that would fit. I began by making furniture for our own space, but eventually rented a workshop in Brooklyn and turned the venture into a website. Later on, I pivoted the business into an interior design studio catering exclusively to startup founders, which gained significant traction with hundreds of thousands of dollars in projects.
The biggest challenge I faced during that time was managing finances, such as tracking expenses, paying vendors, and receiving payments from clients. As a finance professional, I was frustrated with the lack of a system to manage all these aspects. Accounting systems and project management software were available, but there was no solution that addressed the day-to-day finances of businesses.
This led to the creation of Vergo, a platform similar to Brex and Ramp, designed for the specific needs of businesses in the construction, design, and architecture sectors. Vergo offers a checking account, a credit card, expense management software, and bill pay services, aiming to own every dollar that moves within these businesses.
I reached out to the Forum team in early 2021 with this concept, and they provided the initial $100,000 investment, which was a game changer. Raising money is challenging, but obtaining that first check can make all the difference.
How did you go from “There MUST be a better way” to then launching your product? What made you take the leap?
Being an entrepreneur is something you can't really escape from. It's all-consuming. If you're up at 2:00 in the morning working on a side project every day for several months, it's clear that you're not meant for a big corporate job. I was searching for an opportunity that would be significant and warrant my time, as well as the time of investors, and potentially have a substantial outcome. A lot of this process involved business model construction.
We conducted extensive research on what the business could look like if it became quite large. Of course, we considered the addressable market size, and it's evident that construction is a massive industry with significant potential. The challenge was constructing a business model around that. We set an ambitious goal: to become the bank for the construction industry. This goal is difficult to achieve because it relies on many factors going right.
Some challenges include finding a bank partner to work with and sponsor us, launching a credit card, and building all the necessary software. Fintech is incredibly complex because it involves simultaneously building software, working with partner banks, and setting up a processing system. These elements all need to go right, which is both good and bad. It makes it harder to get started, but it also provides a compelling story for investors when raising money. There's a genuine reason for raising funds, as the potential upside is astronomical, and the money is required to reach the next major milestone.
Our team at Forum recognized this early on. They understood that we needed actual funding to build the business, and there was a valid use case and business case for it. They believed we were the right team to make it happen.
What did your MVP look like and how has that adapted to what the product looks like today?
The MVP for our project was essentially my personal experiences running the business myself. I had a founder story where I had done this before, and I knew people in the industry who were doing it as well. When I built the interior design studio, I developed software to automate some of the processes, which became version zero of our product.
To de-risk the project for investors, we started with a simple landing page, explaining what we were building and offering a waitlist for interested users. During the Summer of Forum Ventures, we focused on building a large waitlist to prove demand, which involved cold calling, running ads, and talking to people at places like Home Depot.
This strategy seemed to excite our team and investors, as we used our time wisely to prove there was demand for our product. We could have spent that time building expense tracking software, but demonstrating demand was more important. After raising our first major round of funding at the end of 2021, we entered build mode.
We established a partner bank relationship and built our first product, a checking account with basic expense management features and a mobile app. Following the Y Combinator mantra, we aimed to launch quickly. This MVP revealed interesting insights about the fintech industry and customer expectations, such as the desire for features like Face ID.
From there, we listened to our customers and honed in on our ideal customer profile. We discovered strong pull from various segments of the market, from large to small businesses. We realized that focusing on larger businesses would be more profitable, leading to the decision to launch a credit card product and a web dashboard for users who work on computers rather than mobile devices.
Our approach involved building the most basic product possible, gauging market interest, and then pursuing the most promising direction from a business perspective. Many entrepreneurs make the mistake of assuming they know their ideal customer and their needs, but we chose to launch an imperfect product quickly and learn from market feedback. While this strategy has worked in our favor, it's still a challenging process as we continue to learn and grow.
How has your role as a founder and CEO changed from those very early days to now after raising your Seed round?
Prior to receiving the first check from Forum, I funded everything myself. I paid for salaries and used all of my savings to cover expenses. Once I received that first check, I realized I was no longer just a small business owner. I now had investors, and I needed to make them happy. Communication became a significant factor; it was no longer possible to work in isolation without engaging with others.
A crucial aspect was having regular check-ins with investors, communicating the mission, and explaining how things were changing. Keeping them up to date with the reasons behind certain changes and the supporting data was essential. We initiated board meetings, but in hindsight, I would encourage founders to begin these meetings earlier in their journey. It provides a sense of pressure and awareness, as investors are the ones sponsoring the business, ideas, and vision. They understand the capital market and can provide valuable feedback on potential obstacles in raising funds.
While investors won't help define a product roadmap, it's still important to know their perspectives. Since that first check, my role has evolved to include more management responsibilities. Although I'm still heavily involved in product development, I now manage a team of around 12 or 13 people. My focus is on finding accountable individuals to oversee each aspect that contributes to our success, such as lead generation, sales, and technology. My role has shifted to more of an oversight position, ensuring that essential tasks are completed as needed.
What keeps you motivated through some of the challenging times?
We are at our core, product people. We absolutely love product launches. Every time there's a feature or significant product milestone, the whole company becomes extremely motivated and excited. For instance, we recently launched our credit card, and seeing the first transaction, repayment, and check deposit put in were all thrilling experiences. Witnessing customers use Vergo on a daily basis and retaining them without much need for customer support is truly satisfying.
Of course, there have been countless challenging times, especially with the economy not performing well and increased pressure on fundraising. However, what keeps us going is our phenomenal team of product builders.
At the end of the day, what matters most is solving a problem and having customers willing to try our solution. We understand that there are other features our customers need, and those are on the roadmap. The demand for our product is there, but it takes time to deliver exactly what our customers need. This is what keeps us motivated and excited.
We constantly envision a day when we walk into a store like Home Depot and see someone using a Vergo card. The idea of revolutionizing this industry is incredibly exciting for us.
What advice would you give to fellow early stage founders?
Ultimately, success in raising money for your startup comes down to a few key factors. While product-market fit and customer traction are crucial, understanding how to present and pitch your business effectively is just as important. This is particularly true when it comes to developing a solid business model.
As someone with a financial background, I found it easier to communicate with investors and present information in a way that resonates with them. For those without this experience, it's essential to either learn these skills or bring on a co-founder or advisor with the necessary expertise.
It's important to recognize that the startup world is all about pursuing big ideas and delivering significant returns. Investors aren't looking for small businesses that become profitable after a seed round; they want to see enormous potential for growth.
With this in mind, it's essential to develop a strong business model and become skilled at presenting it to potential investors. This process can also reveal potential weaknesses in your plan, prompting you to consider alternative approaches. Remember that your business model will likely evolve over time, as external factors such as interest rates or market conditions change.
In summary, early-stage founders should be highly aware of the game they're in and focus on developing and presenting a compelling business model. This will not only make fundraising easier but also provide valuable insights into the viability and potential of your startup.
Watch the full interview here