SPEAKER_02 0:02

Good morning. On today's podcast episode, we have uh Raymond Fitzpatrick from Provincial in Freddie, New Brunswick. He is he has built a really cool product to help startup founders get a handle on their finances to better understand how much runway they have and to better manage their finances. So we're super excited to be talking to Ray this morning and learn about his journey, the company, and his take on the industry. Good morning, Ray. Hey Ray? Hey, how you doing? Fantastic. So tell me, how did you get into this? Like what's the what's the origin story? Um when I was preparing for the podcast episode, it was it was your first year, entrepreneur. So how did all get started?

SPEAKER_00 1:10

Yeah, for sure. So um I'm a chartered accountant, I'm a CPA, and when I got out of university, I spent my formative years working for very large organizations in New Brunswick. Uh so I would have spent time working in the finance and FPA departments for McCain Foods. I then transitioned and started working with Irving Oil. Uh so I got to see firsthand, again in my formative years, uh, you know, how accountants and finance folks could really work hand in hand with business operators to help them make more informed decisions. So I went from working from those large organizations in New Brunswick to some of the smallest. So I transitioned to a firm called NBIF. Uh it's a pre-seed venture capital fund, uh kind of the provincial arm for venture capital in New Brunswick, um, making really early investments into startup companies. So I spent about 10 years working as the director of investments uh for NBIF, uh involved in a few hundred financings. Uh, by the time I left, we had a portfolio of 75 startups. And when I started working with NBIF, I realized very quickly that there wasn't a whole lot of financial rigor or intelligence with these early stage companies. And really, when I looked a little bit deeper, it was because all the founders that I backed, none of them ever came from a finance background. They always came from engineering or computer sciences or life sciences, basically every walk of life other than finance. So being the guy that was constantly asking them for things like budgets and forecasts and tell me about your burn rate in runway and your LTV to CAC. Um, I try to find help for these entrepreneurs. So I started my search uh for help with the big accounting firms, KPMG, Deloitte, E and Y, and they weren't a real great fit. So those firms are expensive and sometimes out of reach for really early stage companies. More and more, though, it was really because you know, just because you're an accountant doesn't mean you're set up to advise a startup. So when I transitioned from Irving Oil to startups, I still remember talking to my boss and being like, What do you mean we're gonna invest in a company? And if nothing happens in 24 months, you're gonna be dead. Like, what is runway? Like this seemed ludicrous to me. I came from like French fries and gas stations where there's no burn rates or runways. So uh didn't find a whole lot of help there. Um, so really what we envisioned was you know, could we make something that's so simple to use? Yeah, that even a non-finance founder could build their first budget, build their first forecast, understand the main drivers of their business so they make better informed decisions. Can we make it easier for them to do board reporting and investor reporting? That's really the whole idea behind Profitual is you know, we kind of want to be the Canva for finance. Um, you know, all the tools that we saw out there were built for like folks like me, you know, CPAs, folks like you that understand know where to go, know what we're looking for, know how to do it. Um, so you know, as an accountant, I can use Canva. I am no graphic designer, but I can work my way around making a pitch deck or a presentation, and that's really what we're striving to be is something that's just so easy to use that it makes finance more accessible.

SPEAKER_02 4:27

And Ray, my understanding of Proficial is that it's not intended to replace or substitute your financial accounting package. Like let's say it's your QuickBooks. Uh, to the contrary, you guys integrate with QuickBooks and you write uh you run a nightly bad job that pushes information in and out.

SPEAKER_00 4:47

Exactly. Yeah, we partner with different um accounting providers, QuickBooks Zero. Uh we work hand in hand with bookkeeping firms. If we don't have good accounting, good bookkeeping, we can't provide a good analysis. Yeah, so yeah, we're we're in addition to not in replacement of.

SPEAKER_02 5:04

Okay. And so tell me a little bit more about you. Who is Ray Fitzpatrick?

SPEAKER_00 5:13

Um, yeah, I mean, um, you know, maybe it's a little tried, but you know, serial entrepreneur. Uh, I have three different companies. Okay. Only one tech, uh, so full-time uh two. Yeah, so I do have a bookkeeping firm uh called Quantified Accounting. Uh so that was again kind of born out of the we were finding it really hard to get good bookkeeping. So we ended up starting that firm. Uh, and then on a little bit more of the fun side, uh, outside of finance and tech, uh, I own a distillery uh with a friend. Uh so we have uh little distillery based in Fredericton, New Brunswick called Devil's Keep. Uh, we do vodka gin and Canadian whiskey. Uh, fun little side hobby, you know, does about 250k a year in sales and uh all the free whiskey you can drink. So that one's a little bit different. Uh, you know, you make something with your hands. Um, so it's that that's a fun one. So all that to say, you know, I spent a lot of time with uh businesses, thinking about businesses, how do you start them, how do you grow them, you know, how do you make sure you're making the right decisions?

SPEAKER_02 6:17

So how do you stay focused? You have three businesses, like are you actively involved in three? Do you like I know that the in provincia we have a co-founder the co-founder and CEO? Um, and and then what's the unlock in in all three businesses being successful?

SPEAKER_00 6:40

I think it's like good, it is good business partners. So um, you know, I have two business partners in the accounting firm. I have one business partner um with the distillery, and in each one of those cases, there's a head, you know. So provincial, that's my main job. When I wake up in the morning, I'm worried and thinking about provincial. Uh at Devil's Keep, it's one of our business owners, that's what his responsibility is at quantified accounting. We have one of the three partners, that's his full time. So I think it's important to have someone who is making the decisions and control. And then, as for like a business partner perspective, if you're not in control, it's how do you support to the best of your ability? Um, so actually, after this call, I'm gonna go pick up some sugar for cop from Costco for the distillery. So just little things like that. You just kind of you know, you do a podcast, you pick up some sugar. I gotta go do a webinar at two o'clock on how to build a financial forecast. Uh, and I guess that's just kind of the world that I've been living for a while, and I'm quite uh quite comfortable in.

SPEAKER_02 7:41

Um, that's awesome. That's awesome. That's super interesting. How did you go about finding identifying your your partners? Were they bodies that you've known, passion? Um, how do you know that they're the right fit?

SPEAKER_00 7:56

Yeah, I mean, it's probably that that's one of the hardest things, I think, in business. Um, and I think of a lot of the advice that goes into startup founders to like just find a co-founder. I think that's really dangerous. Um, I think you need to find the right co-founders. And I mean, I don't know if I'm the best at it, but uh at the end of the day, every time that I've done it, it's been with individuals I worked with in the past. So I got to see their work habits, how we interact with each other. You know, um, you know, the distillery was more of a passion type project. Uh interesting enough, we wanted to start a brewery, uh, but there's a ton of breweries in Frederic and I think it's the the most per capita in anywhere in Canada. So we shifted uh into hard uh spirits. I I know I've never drank whiskey before. Uh I never distilled before. Uh we ended up buying commercial equipment. Uh so that one was more of like a like a little fun thing that got going. And luckily it's been around for about nine years now. Uh yeah, picking the business partners, that's tough. Like I wouldn't rush into it. And I know I've worked with uh each one of mine for multiple years uh before we decided to get into business together.

SPEAKER_02 9:03

And uh when a conflict arises, how do you guys go about selling how do you show to these continued chemistry that like you guys continue to stay aligned as co-founders?

SPEAKER_00 9:15

Yeah, I mean sometimes I mean it doesn't work. So I mean with Profitual, I started with a co-founder, and him and I didn't see you know eye to eye on issues, and he's no longer with the company. Um so like that one didn't work out so well. Um, but you know, you end up finding a way and different mechanisms, you know, investing schedules, negotiation back and forth to to come to a conclusion that works out. Um, I'd say the distillery, it's funny, me and my buddy, uh, we have the most friction. Uh oh, yeah. It's uh you know, he thinks we should go higher volume and lower price, and I think we should be lower volume and higher price. And uh we've been having that argument for nine years now. So it's uh I think it's mutual respect and understanding, uh, and really just working things out. I find using the numbers helps a lot. So, you know, if we're having a conversation around price, work the numbers out. How do we make more money? What makes more logical sense? And if you're able to bring things back to the numbers, then it becomes less emotional.

SPEAKER_02 10:16

So it sounds like you bring the science part and he brings the art part and somewhere you guys meet somewhere in the middle.

SPEAKER_00 10:24

That it's he gets excited about oh, Jesus, whiskey's got these vanilla flavors and this and that. I'm like, I can't taste that, I have no idea. Um, but I'm like, hey, like, are our merchants better on the bottled products or the canned products? Like that's kind of where I makes sense, makes sense.

SPEAKER_02 10:41

What's um what how many skews do you guys have for on the distillery site?

SPEAKER_00 10:47

Yeah, so we have uh three canned products, uh a lemonade, a peach, and a gin and tonic. Okay. Um, so we have those like the ready to drinks. Yep. Uh then we have uh vodka gin and whiskey. Uh we also have a barrel-aged uh uh gin that sometimes is in season and we put out. Uh, but yeah, we're about uh seven like full-time skews. Nice, nice, nice, nice. And so is this the fun part of the business? Like like the distillery? It's easier, it's funny. It's uh you know, every business has its like easier and harder parts. So like I find from a business perspective, you know, if you look at something like a distillery, uh, you know, it doesn't matter what you make, someone's gonna buy it. Yep. Like if I make a lemonade and it's way too sweet for Ray, it may be fantastic, fantastic for Maxim, or vice versa. So like as far as recipe development goes, it's like, you know, what does it taste like? It's well, it's gonna work for somebody. Then it becomes a little bit about marketing, what's on the can, things like that. But at the end of the day, you make it, which is a pretty simple process. You know, if you can bake, you can distill. And then what we do is we drop it off to Endy Liquor, that's our uh you know, province-wide organization, and they distribute it, they put it on the shelves, it sells. You know, there's a lot of days I spend maybe an hour a week at the distillery. Yeah, so it's much easier from that side. Now, if you look at it from a financial forecasting side, that business is a lot harder to forecast than something like Profitual. Profitual, we know we have salaries, makes up 80% of our costs, we have a little bit of other stuff, you know, we know what our revenue targets are. We're not bound by any sort of physical constraints, like you know, what are our production capacities? But then you look at the distillery, and you know, you have to buy like a shipping container or bottles. So you have this big cash outflow, and then you're starting to bring it back. You have equipment that's amortizing, you have FX rates and delivery times, and it's just from a planning perspective for a very simple business, really hard to forecast. So they all kind of have their pros and cons, um, you know, along the way.

SPEAKER_02 12:53

Yeah, I know it's interesting. I mean, probably in in some ways, it's probably easier that you guys are not in beer that you're in spirits because shelf life is very different from a beer to uh to a distilled product.

SPEAKER_00 13:07

Exactly. We can't make too much and have too much saved up, other than you know, the cost of making it. So, yeah, not having any sort of spoilagery is really nice.

SPEAKER_02 13:17

I mean, I I have a company that's in a similar space. Um we have a wine importing agency, we have a wine media company, and so the one thing the one thing that New Brunswick does, the NBLC does really nice is that they they have this special corner that's focused on New Brunswick products, yeah, which is great to promote. I still think that the the markup rates in New Brunswick are ridiculous, um compared to any other province. I think it's at around 80% sitting compared to like 36 to 40 in Alberta. I mean, we're not gonna talk about uh BC with their 106% markup um for anything that's known BC product, but yes, uh okay. So and and on the fun side, married kids, uh kind of like what is uh yeah, yeah.

SPEAKER_00 14:06

No, married. Um, actually, my wife and I we've uh we adopted uh two kids. Um we've had them since they're uh three and four, and they're nine and ten now. Um I have an interesting COVID story of uh week before COVID shot, uh COVID shut everything down. We ended up bringing two little fellas into our house, uh, which you know, um when you work with social relevant, they're like might be a week, it might be six months, and then all of a sudden the world shut down and it was like you know, isolate. It's like isolate, we just moved two strangers in. So we uh we ended up hunkering down with them, and uh we adopted them uh uh uh fully outright a few years ago. Um yeah, now they've been with us ever since uh since COVID. So yeah, we had a we had a unique uh COVID situation.

SPEAKER_02 14:54

Yeah, yeah. And and are they siblings?

SPEAKER_00 14:57

Yes, they are, yeah.

SPEAKER_02 14:58

Oh amazing, amazing.

SPEAKER_00 15:00

Yeah, what a story. Um, yeah, it uh COVID was uh interesting for a lot of reasons for us. It was definitely life-changing.

SPEAKER_02 15:10

What's uh I would a lot of people have uh regrets around COVID, but like what's the funniest part about COVID for you? Like what like if you're thinking about a happy memory from COVID, what is it?

SPEAKER_00 15:24

I think it was interesting just how resilient everything was. I mean, like, like for us, we got really nervous. Uh, if you look at the distillery, we're like, oh gosh, what happens in a global pandemic? But it was like a second Christmas, like Christmas time's when we sell the most, and then I just skyrocketed. And it's like, well, that's a happy coincidence.

SPEAKER_01 15:42

Yeah.

SPEAKER_00 15:42

Uh, but yeah, it uh yeah, I found it resilient. I found I was I was still at MBIF uh the precinct venture capital fund at the time, and you know, we got together like almost like War Room, like how do we make sure our companies aren't too vulnerable? And you know, we had some of the best exits in the history of NBIF, you know, around that time. So, you know, even in like bad times, you know, there's tons of opportunity, and I I found that really remarkable. Um, you know, I I got used to skip the dishes, I never really did that before. So ordering food was uh uh you know, to your door was something that was due, uh, but got in too and really liked it. And uh obviously the kids, um, so like for us, like that was uh the the almost the exact week that they moved in with us, so uh we we didn't have any kids before. Um I never babysat anybody before, so that was kind of trial by fire, uh having a three and a four-year-old right away. Well, you figure it out.

SPEAKER_02 16:41

I when I uh when we decided we're gonna become parents, I went and took positive parenting classes. We went to like different classes, what to expect, what do you expect. You read all these books, and we had all these principles that we had decided we're going to apply. It's just pure survival, like yeah, just figuring it out. Thank a lot of my in-laws for helping out because I don't know how we would have done it without him.

SPEAKER_00 17:11

Oh, we're the exact same. My parents like live 10 minutes up the uh up the street from us, her parents live like five minutes away. If it wasn't for a family network, and frankly, that goes into business too. Like, I was just in Toronto for three days, and like you know, my wife and like our parents going to different hockey games and dance recitals and stuff like that. Like, uh, without our parents, I don't yeah, we uh I probably wouldn't have three businesses, it'd be a lot harder.

SPEAKER_02 17:37

That's a poor thing. It's the same goal she takes a village to raise uh a child, so it's the same thing with the company. You need to have your board, you need to have your kitchen cabinet of advisors that they're helping out in with with the business. So shifting gears into Proficial, you said you wanted to simplify things, you wanted to make it easy for founders to to succeed, not to fail. Um, at what point uh the conviction became so strong that that that you had to start working on this idea and made a decision to leave NBAF to just focus full-time on Proficial?

SPEAKER_00 18:15

Yeah, I mean it was just I guess being confronted with it every day, you know, and like seeing the anxiety that it gave founders when like our quarterly investor reporting came due. And it's like they wanted to, you know, provide us with the best information possible. They didn't know how it was stressful, they weren't spending time on sales, they're spending time on reporting. We didn't want that, yeah. Um, and then you know, we'd have companies that would report and be like, hey, we have like 10 months of runway, and then a couple of weeks later you get a phone call. We only have six weeks of runway, and we're gonna go bankrupt. Okay, scramble. So it's just there's there's constant friction points like that that we're experiencing that it was like, all right, we need to do something about this. Um, I was actually quite nervous to make the jump. Um, you know, it was we did it a little over three years now, uh, three years ago now, you know, at MBIF, we had our kids. Um, you know, my wife was staying home with the kids, and it was like this was something I wanted to do, but I was nervous about it. Um, so I actually went to a mentor of mine that I worked with at Irving Oil, and he was working for a different job. I went to lunch with him, and I was telling him about it, and I was just like, I really want to do it, but I'm like nervous. And he's like, Ray, you're an accountant. Like, what's the worst that's gonna happen? You're gonna try it. If it doesn't work out, you're gonna get another job. Like, worst case scenario, it might not be a job you love, but you know, you could do it for a little bit, pay the bills, find something else. And he's like, You're gonna have so much more regret if you don't just jump into it and give it a go. So that was really what I needed. So I left that lunch and I started driving, and I had my wife on the phone in my truck, and I was driving back to MBIF. I went into the parking lot and I talked to her for another like 20-30 minutes, and she's like, Do it if you want to. And I walked right in and I said, All right, I need to have a meeting with my boss. And I was like, Look, I like I gotta leave, I gotta do this. And he him, he always used to joke with me, my boss and after I was coin operated. You put money in, I work like very motivated by money. And uh, he looked at me and he was like, Look, he's like, Is it money? Like, you know, could we like pay you more to stay? And I said, You know what? For the first time in my career, it is I gotta go do this. Like, I think it could be big, I think it could help out a lot of folks. You know, the fact like the thing that I always had back in my mind was like, how many you know, good companies didn't get started because they didn't understand their finances, they didn't put projections in front of an investor or a bank that made sense and they just never got going. And that's really what I wanted to solve.

SPEAKER_02 20:52

Understood. And um, how did you get your first index client?

SPEAKER_00 20:58

How did we get our first client? Yeah, yeah. Um, well, we uh we started Proficial with the goal to work with startups uh to start. So we want to our whole overall goal is hopefully we have to work with all sorts of SMEs uh because we see the problem, you know, as much as in construction as you do a massage therapy clinic, you know, no investor reporting, but you still need to know the main drivers of your business and if you're gonna run out of cash. Uh so we started working with startups, and you know, that was the great part about coming from 10 years at NBIF, you know, spending 10 years meeting other venture capitalists, working with startups, investing in a lot of them, not investing in a lot of them. Uh, but as we started building this out, you know, had people to call right away. Yes. And say, hey, would you take a chance on us? And the wonderful thing about working with startup companies is they're so willing to give feedback and stick with you. Yep. Like, you know, they're just like, hey, I did this, I don't think this worked the way I was supposed to. Can You look at it. Yeah. Oh my gosh, that didn't work the way it was supposed to. All right, guys, let's go fix this. Let's go do that. Um, you know, and I don't think your average SMU would be willing to do that, you know. Provide, you know, we had people on New Year's Eve providing product feedback. Hey, I'd really like it if it could do this.

SPEAKER_02 22:17

Okay.

SPEAKER_00 22:18

Okay, your lawyer is going to do that. So there were great uh customer base for us, especially like great customer base now. It was fantastic in the early days, just willing to take a chance and understand that this is an evolution and kind of build with us, yeah. Um, as opposed to just being like, oh no, it doesn't work, I'm gonna cancel. Um, so yeah, we we did very unscalable things of calling up founders and ask them to take a shot with us.

SPEAKER_02 22:43

Amazing. So walk me through kind of the the growth curve. Um, you started a company three years ago. I and so how many clients did you get in month one or year one or month one, month six, month twelve? Kind of like what's been the the growth trajectory of the business? Because I believe now you're at 600 plus customers.

SPEAKER_00 23:04

Yeah, we uh started off slow. Uh I still have the first uh invoice we ever sent to a client printed off uh behind my desk. Um, so we started, but we we raised our angel round with no clients and a pitch pitch deck in a dream. Uh we were able to raise 145,000 from Angels. Uh that still remains my most favorite fundraising round we ever did. Was it the three apps or was it pure angels? Uh both. Yeah. Yeah. So we uh it's funny. I thought it's a funny kind of tangent, but um, you know, looking to raise a little bit of money, I was still at MBIF. I hadn't quit yet. And uh it was like, all right, like we need to get going. And I ended up calling up an investor who I knew and said, Look, I still work at MBIF. Um, I can't in good conscience go and talk to a bunch of angel investors or investors because I'm not in it full time and I'm still at MBIF. I was like, I'm putting money into the company. We have some family putting money into the company. Do you know anybody? Here's the paycheck, here's the idea. He said, give me 48 hours. So then uh on a Sunday, I drove about an hour away, hour and a bit, uh, to a town called Woodstock, and I met with the uh investor, and we met at the uh uh it was a restaurant called Murray's inside an Irving Oil gas station. Yeah, and went there, sat down for breakfast, and he slid across about a hundred thousand dollars worth of checks from Angel and uh five different angels. 48 hours later. That's awesome. 48 hours later, one I still haven't met in person yet. Him and I could walk by on the sidewalk and want to know each other. Um, so yeah, that was that was my most favorite uh round, but it's when we had no customers. Uh it was it was good, it uh it was exciting. And again, that just gave more juice to kind of like I need to do this full time, I need to leave my job and jump in. Um, but yeah, we started with one customer. We did consulting to start. Okay. Um, so kind of it had dual purpose for us. Uh, one cash is nice, helps you burn right low, pay the bills. The second piece was it really helped us with product development. Um, so kind of have uh you know that old adage, no plan, uh, last uh first contact with the enemy. Yeah, you know, and the enemy for us is real data, like you can theoreticize about this all you want, but everyone does accounting a little differently. Everyone has their income statement that looks a little different. Some people have inventory, some don't. So there's all of these things that go into it. So the more customers we could work with on a consulting basis and get a hold of their real data helped inform our product and our roadmap. So we would basically say, look, we will promise you the outcome you're looking for. You need a financial forecast, you will get it. And a lot of times what we do is we build it in Excel, we would try to replicate that in our platform, find out where it broke. The client would still get the Excel, we'd work out the bugs in our platform, and then we'd show them after be like, hey, by the way, we have this platform, here's your financial forecast in it. How would you like access to this? This is all the additional benefits you'll get from it. Fantastic. So we did that for a few years. So, like our growth was slower. Um, you know, we got up to I think about 35k in monthly revenue in year two. Okay. Um, a lot of it was consulting. Um, so we we made that kind of switch to let's do less consulting in year three and let's focus more on the platform. Yeah, uh, but even last summer, like sometimes we were getting like two signups a month. It was really slow. And then about Q4 of last year, you know, it was going from two signups to two signups to 17 to 23 to January was our highest month yet. We had 48 new signups. Uh, you know, February at like 27. I think we're at 23, 24 for this month right now. So that's starting to kind of build up our client base. So we're up over 600 users on the platform now, um, and getting such more like you know, feedback from them and getting those insights and having them act like pure software subscriptions as opposed to a customer that's like working with us because I have a personal relationship with them. Yeah, yeah, yeah. I love seeing the signups and I have no idea where they came from. Like, that's just the happiest moment of my days.

SPEAKER_02 27:27

So, what was the inflection point? Like, what what moved you from like two signups a month to like 17 signups a month? Like, like what was the unlock? Like, like from our audience, he's is Caleb founders, so kind of like why did we hit we start hitting the hockey uh stick trajectory?

SPEAKER_00 27:47

Yeah, for us it was confidence in the product, okay? Like we were kind of working it through, finding the issues, fixing the issues. And when it was like, you know, a list as long as your arm of issues, you didn't have all that much confidence, you're still building it out. Then all of a sudden you're getting like you know, less than a hand's worth of issues. Now, okay, you're starting to feel good. Now it's more like a thumb bugs and things that pop up. Yeah, for us, there was confidence in the product, and that we've been through enough iterations of it with different customers, QuickBooks and Zero, and everything in between that we felt like we had something robust. So I love doing these types of webinars or you know, podcasts. Uh, but when I would jump on the first couple years, I would talk about finance like theoretically. Like, you know, this is how you have like a finance mindset, or these are some things to consider. But at the end of those, I would never say, Hey, by the way, we have an awesome tool you should be using. Now I end every webinar with like sign up today, we're gonna make your life easier. Here's code, here's a dip, like you know, like let's get you in here because I feel like if I can get you in there, you're gonna like it and you're gonna stick around. Yeah, so for us, that was in like um, you know, Q4 last year, September. We started actually spending a little bit of money in marketing where we didn't really spend money in marketing before. It was all just personal relationships and cold outreach. To all right, now we have something that we know is more scalable. We can bring on 48 new users in a month and feel confident they're gonna have a good experience.

SPEAKER_02 29:17

So that was really it for us. That's amazing. So confidence in a product, um, moving from founder-led sales to to product-led sales, content marketing. Sounds like it was a key component of what you did in terms of well and continuing to do, building out this pipeline by by doing webinars or sessions or podcasts or whatever it might be, getting in front of the eyes and ears of founders. Exactly. Yeah. What what what else what else would has been a key unlock for you?

SPEAKER_00 29:49

I think for us, it's you know, we find the market to be oversaturated and like AI, AI, AI, and it's like promises to do everything, and like you know, there's tons of benefits, yeah, you know, and it's and it's phenomenal the day and age that we're in. But you know, when people kind of pull back the covers, it's like, well, okay, it did like really cool, but it didn't do everything. Yeah. Um, so like, you know, I was working with a client and he took a forecast that we created for him, put it through Cloud Cowork, you know, asked them to add a couple years to the forecast to see what it would look like. And then him and I went over it. And so we're going over it, and you know, I was like, okay, cool, like high level, like this is what you're thinking for growth. That's kind of a nice story, okay? And I was like, what happened to the gross mergins? Like, we have like 80%, let's just drug it to 60. He's like, I don't know. He goes, Ray, where did this net revenue retention number come from? And I go, I don't know. He's like, Whew, this wouldn't be good if an investor got a hold of this and we can't speak to it. And I'm like, Yeah, probably not. He's like, All right, can you take this, put it back into like take the high-level essence of this, build it out in profitual for us, and then we can actually speak to all the numbers. I'm like, yeah, no, that's a reasonable way to go about them. So I think a couple of things. One, it's you know, we really believe in education to go along with it. We believe that a really awesome financial forecast that the owners don't understand is still useless. Like it doesn't serve the purpose of knowing the main drivers of your business, where are your strengths, where are your weaknesses. Like, that's a point of this exercise. It's not just to have it done because you're never really done with this. It's you know, a continual evolution of understanding your business and what's working and what's not. So, you know, we really try to do education plus finance, and we don't try to be an AI easy button. Yep. So that's what we really kind of relay to our clients is a level of, you know, we're gonna help you understand, we are going to support. This isn't uh, you know, our platform's gonna read your brain and know that you're thinking of hiring somebody, and then you know, we're gonna automatically have that in your financial forecast. Like it's just that's not what we do, that's not what we're about. Um, and I think that really resonates with the clients that we're working with. Um, it's kind of like a nice bridge in between. We're making it easier, we're making it more efficient. Yeah, we have AI to pull, you know, uh receipts from QuickBooks to say, yeah, you spent more on marketing, and hey, it was made up of like these ad agencies. You know, that makes the whole thing more efficient, but it's not doing all the work for you, and you need to be involved with this process and you need to understand your numbers. You don't need to be a CPA, yeah, but you need to understand the main drivers of your business.

SPEAKER_02 32:32

So, I mean, what what's really cool from from what I can see and what I can hear from you is that you've really embedded some of the best practices in terms of the forward deployment engineering model. You guys are embedded within the clients, you guys are the customer success function. You're intimately familiar with the clients and the clients' problems, and you're working working through those problems with them. Um I mean, can you ask for anything better than this in terms of uh understanding the customer's problems and building to their needs rather than building to what you think is their need?

SPEAKER_00 33:07

Yeah, and like that, I think that's the reason why when we do educational sessions or webinars, we connect so well with the user base as well. Like, you know, we just closed, you know, an additional half a million in financing three weeks ago. Nice. And it's like, all right, and they're like, Well, how'd you do it? Who'd you talk to? What'd you do first? Like, you know, was it angel investors? Was it institutional? Was it fun? No, it's it was the most soul-sucking experience of my life. And they're like, Yeah, this does suck. And like, yeah, it does. And so you could really empathize with your client base because you're living it alongside what they're doing as well. Um, so I find that um really great. And again, everything from like we're going after non-diluted funding, they're going after non-diluted funding. Like, it just there's a lot of things that we're doing very similar. A lot of times, our customer support calls, we talk about a lot of things that are finance adjacent. Yeah, but it's not like, hey, Ray, I don't know how to use a platform. They're like, no, no, no, I've built a three forecast, I'm fine. Can you tell me about what due diligence was like when you're going through an investment round? What metrics are they looking for? Um, you know, product-led growth, what are you trying to get for signups? So we end up end up having a lot of those conversations, which I think are like finance adjacent, not core to our platform. Um again, hopefully provides, you know, whether it's education support, advice to our client base as well. Understood.

SPEAKER_02 34:33

Um, I mean, it sounds like you're uh maniacally obsessed with your clients and their and their success, and hence why I'm assuming then that your uh churn rate is really low. This the cut the retention is really high based on kind of what you're describing.

SPEAKER_00 34:51

Well, it's interesting. Like I kind of sang the praises of having startups um as early customers because all the benefits, uh, you know, one of the downsides, and again, I live this as well, is you don't have a lot of money. So, you know, as far as um, you know, customer satisfaction in like working through the platform, very high. Yeah, um, you know, a lot of startups, just by the nature of them, you know, we've been around for three years, we've been very privileged to be around for three years. A lot of startups don't make it that long. Um, so that's kind of been one of the things with our user base. It is a continual um, you know, signups in turn uh that go along with it.

SPEAKER_02 35:32

But from your pricing page, I mean the the plants are really affordable.

SPEAKER_00 35:36

Yeah, we're at like 50, you know, we started like 50 up to 80 dollars a month. Um, you know, but we get a lot of benefit, or our clients get a lot more recurring benefit from us when they have actual accounting. So, like yes, they have employees, they have revenue, they have a QuickBooks account, things are changing. There's that real early stage where you're thinking about a business and you might get it off the ground, you're looking at your forecast, you're adjusting it a little, but until you make that leap, you know, there could be months in between where you don't tweak anything. Yeah, so I find like if it's really early stage customers, sometimes you know they go away, they use it for a bit and then it might sit stagnant. But once you start having actual accounting data, that's where we can provide you know real good value. I'd say even on a weekly basis, um, you know, with the reports that we generate. Um, you know, we try to be really proactive with our platform. Like, hey, like let's not wait for month end to happen. You know, if we notice a new bill came in or the bank balance dropped, let's alert the founders right away. Um, so we we we find our users get a lot more benefit once they've you know raised a little bit of money or have a board of directors. Now they're getting the full benefits of us.

SPEAKER_02 36:47

What's um what are the next set of milestones that you're pursuing for provincial?

SPEAKER_00 36:53

Yeah, I mean, from a revenue perspective, we want to get to a million in ARR. Um, so we're a little over 300 right now. Um we want to get up to that million dollar mark. I think at that million-dollar mark, the the world's kind of our oyster on what we do at that point. You know, do we go raise more money? You know, we'd probably be profitable, so like we don't have to. Like, what is our goal at that point? Um, but I also think at that you know, dollar amount, it we could be interesting, you know, probably with a couple thousand users. You know, we could be interesting as a potential target uh larger accounting platform. So yeah, a million ARR is the number one goal for us over the next couple of years, you know, growing that customer base, making sure the customers are as satisfied in two years as they are now. Um, and then yeah, we're really gonna phase two will be we're gonna take our blinders off and say, hey, what's available to us at that point? Uh, and then make an another strategic business decision at that point.

SPEAKER_02 37:53

Understood. You you you just mentioned that you raised another half a million dollars. What were your reflections on it? What worked, what didn't work, how do you approach it differently? What advice do you have for other founders that they're on the fundraising trail?

SPEAKER_00 38:10

Yeah, I mean, it's hard. Like, that's just going like I talk a lot about market dynamics, and sometimes the market dynamics are in your favor, sometimes they're not. You know, the market dynamics on fundraising has always been that it's hard. So, like going into it and you know, hoping that you have one or two meetings and everything's just you know, you're gonna get a check, everything's gonna be great, you know, is naive. And if you go in with that mindset, you're gonna be disappointed and you're gonna be frustrated and upset. So understand it's hard. It usually has taken me about six months from start to finish to close any financing round we've ever done. And it's a lot of follow-up, it's a lot of conversations, it's a process you put in place. It's tough. But I mean, we're in Canada. So one of the things I kind of suggest to all the founders we work with, and like you mentioned, I'm like obsessed with their success uh almost as much as our own, is that like build a snowball, like just get things going. Like everyone comes to investors with a pitch deck and a dream. How do you have something more? You know, revenue is fantastic, it's it's great, but if you can't get revenue, can you get letters of intent? You know, I was an investor, and maybe like two percent of all companies that would come to us, you know, from the start would have revenue or letters of intent. So having that puts you in the top two percent of all companies, really. Oh, yeah. So it's like, you know, everyone says they're great, everyone says they're not their idea is not unique. How do you show you went a little bit further? You've talked to a customer, you got them to sign something. How do you go talk to the non-diluted funding agencies? You know, so you're talking to investors, you're talking to non-diluted funding agencies, you're talking to customers, and it's trying to get someone to say they believe in you in one way or another, however, it is they do it. It could be cutting a check as an investor, it could be signing a letter of intent, or it could be paying you, but get someone to validate you. Um, I kind of joke it's it's a gutless industry. Like when I was an investor, you're always kind of waiting for someone else to validate the idea. You don't want to look like a fool. Yeah, but okay, if this non-dilutive funding provider, like iRAP, they're willing to fund you, maybe this product is a little novel and unique. Or if you're able to get an angel investor check, maybe iRAP says, well, okay, if this business professional thinks that this is a good idea and we can help fund it, maybe that's a reason for them to jump in. Yes. So I have no good advice on where to start first. My suggestion is to start everywhere and just see who will say yes. Maybe it's a non-diluted funding provider, maybe it's the angel, maybe it's the DC, maybe it's your customer. But get someone to sign something or provide a piece of paper, and now you're starting to build that snowball. And once you get one, you start getting the others, and the thing starts growing. Um it wasn't our last round of financing, but the one before that we raised a million dollars. I went to market looking for one and a half million and couldn't get anything.

unknown 41:16

Okay.

SPEAKER_00 41:17

So around and around and around we went. You know, we had really good revenue traction, couldn't get it done. We ended up saying, okay, look, we can run pretty lean. You know, we don't have to cut all of our consulting revenue, which was our plan. What would that look like to have this like intermediary plan? So we went back to market for $500,000 investment race. Well, we were able to start getting some commitments at that lower end. You know, some people don't want to put in a $25,000 check on a $1.5 million round, but they're willing to do it on something that's more obtainable, like $500,000. Yeah, we got a $200,000 investment from someone. Well, that's 40% of this new little round that we're getting, and we start building and building and building. We oversubscribed that up to a million. So we ended up right in between kind of our two goal for us. So my other advice is always like start small. Yeah, like price it correctly, they can take on a bit more money. Yeah, but you start smaller, you can start showing a lot more traction with smaller checks. And at least in my experience, going after a smaller check, whether it be from an angel or a really early precede fund, is a lot easier than when you start moving up the chain uh and start getting roped into the due diligence of those larger investment firms. So, all about building a snowball, just get some traction, show you're doing something more than just a pitch deck in a dream.

SPEAKER_02 42:42

Yeah. How do you keep the the cap table free and clear uh of any kind of encumbrances? What uh what terms um people should like founders should be on the lookout for?

SPEAKER_00 42:55

Yeah, I mean, and I it's kind of interesting coming from my background as a venture capitalist, I find I'm less dilution sensitive than a lot of my you know founder peers. Um I believe in trying to maximize my time to money, and by that I mean if I can get the money into provincial quicker to get back to building, to get back to growing, I value that more than an extra half a million or a million dollars in valuation. So for me, I try there's hundreds of reasons why someone may not invest in your startup. Don't make valuation one of them. Yeah, you can control valuation. And so for me, it was always all right, how do I value this? That it's a non conversation piece. Now if I using a million dollars, I put the valuation at four million. No one ever questions the 20% dilution. So if I can do that and make sure that's not an issue or an issue, I can build that snowball quicker.

SPEAKER_01 43:59

So

SPEAKER_00 44:00

For me, it was all about pricing it right. Um, for me, it was all about how to get the money in quicker. And, you know, I know safes are really popular, especially in the states when you're starting out. Yes. I find at least a lot of the angel investors I deal with, if you're not in the startup world, and most of my angel investors are not, that's just a confusing document that they're not getting. I I know it's supposed to be as simple, it's right in the name, but you know, wait a minute, how much do I own? Yeah, and you can't answer that. And then they're like, uh, I don't know. So for me, it was always priced rounds. Yeah, they know what they own, I know what I own. Uh, I I would actually value the company less if I could keep it with common stock. Like, you know what? If my valuation is four million with prefs, you know, I would do it at three and a half million in common. I I think there's just something beautiful about not having a bunch of liquidation preferences stack up, a bunch of additional rights for other investors just because they came in later. Uh, I really drug ours out to raise on common stock as long as absolutely possible because I just find it simple. So for me, it was um, you know, people look at just the valuation as if it's like a point of pride. I don't feel that. I actually feel the way that we price perfectly leaves more options on the table. We don't need to sell for a billion dollars to make our investors an amazing, yeah. You know, we can sell for 25 million and it would be an amazing return for our investors. So um, I think that optionality is key, at least for me for a business owner, because you never know where things are gonna go, you never know where the market's gonna go. Uh, so I like to leave as many options on the table as possible. What is your take on warrants? I found them useless, but um I I love them in theory. I asked for them uh when I was an investor. I thought I started to get a little cute. I was reading a little bit too much of uh you know Brad Feld's book there on uh be smarter than uh your venture capitalist. Uh so I got a little cute with it. Uh in practice, I never found that any of the startups I had the warrants in, it was so obvious that their valuation had grown that it made sense to exercise the warrants. Yeah. What I found is most of the founders, when I had the warrants, they assumed that we were just going to exercise them as investors. So it actually set the opposite expectation with them, where the founders, you know, like you know, I'll put a hundred grand in, I'll take a hundred grand worth of warrants. They close the first hundred grand and they're like, Well, when do I get my second hundred grand? It's like, well, no, like that's not the point. Is ideally you go raise more money at a higher valuation and then I get the deal. Yeah, and they're like, Oh, like, no, I don't really like that. So uh again, like just thinking of the individuals that you're dealing with. Like, I thought it was really cool from a finance perspective and from an investor perspective. If the people you're interacting with don't fully understand them or the purpose or you know the goals of them, uh, I haven't found them very valuable. So maybe once you start getting up in that series, uh, you know, post-Series A, series B stage, it makes a lot more sense. The only one that wins is the lawyers because they got a few extra bucks by making these work.

SPEAKER_02 47:19

Yeah, makes sense. I know we're coming close to to time. Any anything, any kind of final words of wisdom? Uh, what can people do to to learn more about the product? Where do they follow you? Um, just give us your CTA.

SPEAKER_00 47:36

Yeah, yeah. So um uh pretty active on LinkedIn, uh pretty active on uh educational webinars that I end up hosting at least one a month, sometimes two. Um, you know, got one. I already did one this month, I got another one coming up uh today. Uh so uh try to be quite active on that. Uh always up for a chat. Um, you know, if you're interested in Perfitual, uh if you're a founder building out uh you know a new product, or if you're a company operating now uh and have investors or boards to report to, uh, you can even try us for free for 30 days. So no credit card required, jump on, sign in. Any questions, like let me know. Like we're still nice and small enough now that we're able to personally field those uh and provide a pretty good white glove experience. Um, so uh yeah, if anyone has any interest, uh by all means uh check us out both our on our website, preventual.ai, uh, and then uh give me an ad on LinkedIn. Amazing. Thank you, Ray that was fantastic.

SPEAKER_02 48:37

Awesome, thanks, Maxim.