Helloooooo TWIF readers. For those of you who weren’t able to attend this year’s annual Fintech Formal. Let me just tell you. You. Missed. Out. The fintech community in New York (and beyond, for that matter) is special. People are hungry. People are collaborative. People are ready to build. I’d say that the topic du jour of fintech investing over the past two years has largely fallen into two main camps - the evolving fintech infrastructure landscape led by businesses like Plaid, Unit, Alloy, Marqeta, etc. and vertical SaaS businesses that have been influenced by the likes of Toast, Procore, and Veeva, but want to use the aforementioned fintech infrastructure as a means for monetization. Reflecting in the moment, and with all of you, I think it’s a perfect example of both where and how innovation occurs. It feels almost too simplistic to say but, innovation is a product of the periphery. My personal operating belief is that innovation, more often than not, occurs from the outermost edges of industries and spreads inward. As entrepreneurs see a certain model work in one category, they apply it to the next, and we’re seeing that in real time as Silicon Valley style teams are built to attack categories as broad and diffuse as real estate, dentistry, lawn-care, and more. Fintech is just another category where this is occurring, and in all likelihood will continue to occur.
So with all of that in mind, today we’re talking with Richard Kane, CEO and founder of Vergo. Vergo, as Rich tells it, is “a financial platform for businesses in the construction industry to run their finances,” Rich wants to ensure that the construction industry, a ~$2T market in the US, is is armed to the teeth with software that helps their businesses save time, reduces complexity, and creates more efficient money movement in a highly capital-consumptive industry. I am super excited to share this article with all of you, and Rich has a phenomenal founding story so let’s dive right in.
We know each other pretty well, but for people who don't know Vergo, could you give a little insight into who you are and how you came to start a fintech in the construction industry?
Definitely, so yeah I’m Rich Kane, I’m originally from England, as you can probably tell from the accent (or maybe not if you’re reading this). I started working at JP Morgan straight out of college. I joined the trading floor selling credit derivatives, and it was the most exciting job of my life until this one. I got my dream job right out of college. But then I realized, while I was working for a giant company that had a massive global footprint, that I was just itching to go and work in one of the other locations. So I put my hand up and I got to move to Argentina and help them build out their Credit middle office.
There were thirty or forty people there when I joined the group, and one and a half thousand people in the space of eighteen months by the time I left. We were just building processes, hiring people, managing people. You know these brand-new things that hadn't been done before (in that region), and I just loved it. I was completely addicted to that kind of zero-to-one experience, inside the comfort of a large bank like JP Morgan. Realized the headquarters for my group in South America, in Brazil actually, so I went to Brazil to become a technology operations manager.
So, credit derivatives to technology operations manager, how different was the first job to the second job?
Yeah, the first job was basically me booking trades for traders working long hours. It was OTC (Over the Counter), so anyone could book a trade at like ten or eleven at night, and it was very much like me, just like sitting there in isolation, looking at trades, making sure it cleared reconciliation. It was very much a book runner-type role, and I was facing off to sales, and facing off to trading and basically learning all about the product. This is high intensity; high stress and it was me on my own as an individual contributor. The next role I did was a management role. I had to basically teach other people to do the kind of processes that I was doing, and it was going from being the expert in one thing to try and create other experts. It was definitely challenging, but something that I just loved doing. I think my North Star was just like, if I can learn how to do it myself and write it down and get them on the same page, then someone can hopefully do it better than me one day, and I can oversee different functions.
Do you apply that today? With Vergo?
Definitely. I definitely like to learn how to do it myself first. Don’t know if that's scalable, I’ll probably find out sooner or later. But I definitely enjoy in the early days of anything, to make sure that I understand the process myself, and then get the other person to have some ownership with me and get set up, and then it's like I'm confident that the process is running, and I can kind of take a step back and give them the authority to run it and improve it however they want.
Right. Okay. So, coming back to where we broke up the story, you are in Brazil as a Technology Operations Manager, pick back up there and then let us know, what is Vergo today?
So after that I became a technology program manager, which meant I was no longer managing people, I was managing a program which was ripping old technology out of the systems and implementing the new ones which the rest of the world had in New York, in London, et cetera. So coming full circle, I moved to New York after that role to join the investment banking strategy group with a specialization in technology. By this point I had picked up some chops in tech, in program management and the like, the good stuff. And I basically fell into the deep end, I got to work with ex-McKinsey partners as my managers, and they were basically 80/20 thinking you know? Pure consultancy. The “I don’t care about the 20% I care about the 80%. Let's make this the most optimal program possible. Here's a big strategy project. We need to make more revenue in Canada. How do we do it?”, and the heads of businesses would come to us and kind of make us implement a strategy. Anyway, did that for a few years. Absolutely loved it, got another skill set which was kind of like strategy, high level thinking, and problem solving capacity.
But at this point, I was doing a number of different startups and hustles, which kind of became my passion. And now obviously my profession. The first hustle I did on the side was basically an interior design studio. The problem started when my wife and I were trying to buy furniture for our apartment and we couldn't find anything that fit. So essentially, I started building furniture for our apartment. I rented a workshop and then I started making furniture for other people who had the same problem, and I spun it into an online website. From there, I started building a relationship with startup founders who said, “Hey, I have a problem buying furniture for my startup– desks, chairs… What do I do?”
So I turned that business into essentially a marketplace for founders to connect with interior designers, and then I started running all these projects myself.
Before long I was running three or four hundred thousand dollar sized projects, buying the furniture, and getting red eyes to San Francisco to organize the project, to coordinate for my interior designers that I’d hired, deal with the vendors and just manage the finances of it all. And it was very chaotic. Very chaotic as a finance guy, who’s during the day used to using spreadsheets and technology and solutions; I didn't really understand how I could actually like, you know, scale that business. I kind of hit a limit and I was like, even if I quit my job tomorrow and had all the money in the world I would have to hire an army of project managers to really scale this. So I kind of just thought, “I have to build software for this business to grow.”
And being on the inside of the interior design process, I’m leading the witness here because I know the answer, but did that help you start Vergo?
So learning how these small businesses and business owners in and around the construction industry manage projects, manage their finances, invoice clients, receive money, and buy materials; it definitely gave me unique insight into how archaic this giant industry is. COVID came and wiped that business out. By that point I was addicted to the startup life and I was like, “I don't want to work for a big corporation anymore. My wife was like eight months pregnant and I was like “I have to make a choice. I can't have a baby, a startup, and JP Morgan. I have to choose my two favorites. So, the baby stays and startup life stays.”
And yeah basically the original idea for Vergo was a vertical finance solution for the interior design community. But I quickly realized that the opportunity was much bigger, and that there were many other businesses that have the same or similar characteristics on a project finance basis. So with that in mind, I started to go out and raise money for it.
Where do you think you started to see and build the skill set that gave you the confidence to go start a fintech business if that makes sense? And I ask that because I think you have a really interesting background, and one that is valuable for people to understand as they think about starting their own businesses.
I would say as someone foreign that's not part of the VC ecosystem, I really had no idea how it works. I mean, even in England it's not like it’s huge or anything right? And LatAm is much more family office driven. So when I came to New York I started realizing, you know - people are given money to go work on really cool ideas and projects.
There was this one company at the time called Burrow, which was a sofa company, and that kind of gave me a lot of inspiration. It was kind of like, “Hey you know what? These guys managed to go and raise some money to build a sofa. A sofa that’s modular, that has a USB connector. Maybe my dreams can actually become a reality one day too.” That’s when I really started building a relationship with other founders, and was an amazing part of that interior design business. My clients were founders, so I was learning from them and building that confidence in myself that said, “Yeah these people are no smarter than me, they’re no more hard-working than me. They have very similar skill sets and backgrounds to me… You know, I should actually have a good chance of doing this.”
Let’s talk about the fintech ecosystem a little bit. Vertical credit cards are a space that is very hot for VCs. Construction as an industry is a space that’s very hot for VCs as well, just given the overall amount of payment volume. It's also competitive. What do you think about that? Was that something that you thought about at the beginning of starting Vergo? Or is that something you spend more cycles on today?
So one distinction I would make is that we’re not a credit card. Vergo is a financial platform for businesses in the construction industry to run their finances. The differentiator between us and let’s say, Ramp, is that we have a checking account, we have invoicing, we have all of the expense management tools. A lot of how we guide our product and development is thinking about, “What are the jobs to be done? What does a finance manager do? What does a construction company do? What does a business owner in this industry do?” They send invoices, they spend large amounts of money with vendors, they have to reconcile back to that invoice they originally quoted and budgeted for. They need to get paid by their customers. One of the biggest pain points in this industry is getting paid on time, you know, having access to that money as soon as possible, and reducing all the inefficiencies with all this money moving around. That looks and feels very different for example, to a CFO of a large technology company. The CFO of a big tech company is thinking, “How much should we spend on software this month?”
So when we looked at the jobs to be done, it was actually very different from the Ramps and the Brex’s of the world. That’s why we sided with improving the flow of funds, which means a checking account would be a strategic move to start with and invoicing would be critical as well. If we can own invoicing, and we can own the checking account, we basically own the flow of funds, and the icing on the cake is the credit card, which is what we’re launching soon.
Right. Let me restate my question – how do you think about competing with other construction-focused fintechs? With the Toolboxes or Miters of the world?
I think it’s go-to-market. I don't know what the strategy is, but most of our competitors have all gone to market with a charge card as their first product. We've gone to market with a checking account, invoicing, credit cards, and then the software expense management kind of wraps that all together. When you look at Amex or Capital One, or any sort of business-focused credit card - they're actually really extremely competitive products. If you’re a startup competing with those brands, there has to be some differentiator to your products, and for us it really is that you run your finances through us, run your project finances through us, we speed the funds flow up, we save you time and we save you money at the end of the day.
Can you expand on how you save your client’s time?
So today they're invoicing in one software, they're getting money deposited into a checking account in a bank, they’re using credit cards like Amex, they might be using some software like Quickbooks to track their expenses. The fragmentation of all these different tools and services has inefficiencies on a daily basis. When I was running my interior design studio, I had to reconcile $300K worth of spend. It was an absolute nightmare, and I was living and breathing in CSV file. I was downloading from my bank statement, and my credit cards trying to merge those things together in a sub-optimal UX. So for us, at Vergo, we obsess over how quickly you can find that information. How quickly can I invoice my customer? That’s a really important way of getting paid earlier and saving money, and it means that you don’t necessarily have to hire that extra finance manager or accountant, because of how tools help you automate your processes.
Switching tracks here. Where would you rather have an edge: Capital, distribution, or talent?
I'll definitely say talent. Yeah, I think talent unlocks all of the other ones. We hired an amazing Head of Risk who helped me to raise our line of credit. It wouldn’t have been possible without them on my team.
Talent just gives you so much leverage to kind of get to your vision and milestones quicker. I don’t think you can build a successful company without it.
Let’s zoom out 10 years. What is the future of fintech, and the future of financial platforms like Vergo?
Yeah, so I think going back to jobs to be done – I think the finance manager, the CFO they are this rapidly-evolving decision maker that will look very differently in the next 10 years. Basically, right now you have this 50 or 60 year old CFO of a construction company, in the future that could be a 35, 40 year old who is used to technology. That’s a totally different persona. So I think naturally we’re going to see massive disruption in any financial platform or any finance product that someone runs a business on.
I personally think that the largest industries will shake out with something like what Vergo is doing for construction. There will be a winner in healthcare, there will be a winner in the service industry. And then I think all of these vertical winners will have to figure out complementary services and integrations. Like I would never want to compete with a Gusto, for example, but having a direct integration with them is going to be incredibly valuable.
Love it, love it, love. Okay, Rich. Last question. Who are some founders that you look up to? And why?
That’s a great question. I’m a huge fan of marketplace founders. I think that building fintech is hard, but building a marketplace to me is like 10x difficulty level. So Brian Chesky, as an example – just the stories of him building Airbnb are amazing. I previously built my interior design marketplace, so I know firsthand how hard it is to get the supply side, and then the demand side and build tools for them. So yeah, I think Brian Chesky is my favorite.
Rich – it was a pleasure having you on.
Dez, thank you my man. We’ll see you around.
