How Can Alternative Funding Types Help Equity Grow in Value

Hosted by Jason Atkins
President & Co-founder, Cake Equity
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In this podcast episode, Jason interviews the founders of Tractor Ventures, Matt Allen and Jodie Imam. Tractor Ventures is a company that offers alternative funding options for startups.

They discuss the challenges faced by startups in accessing capital and the limitations of traditional venture capital and borrowing options. Tractor aims to provide a different path for founders to unlock their possibilities and grow their businesses without selling large portions of their equity or taking on personal risk.


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Jason Atkins: Hi, everyone. Welcome to today's Startup Equity Matters, a podcast about how to create value from startup equity. We're going to unpack stories from capital raising, employee equity, ownership culture, exits, and stuff like that. Today's topic is a super interesting one. We haven't covered this one yet. I'm calling it "How can alternative funding types help grow your equity value?" We will talk a bit about raising equity capital, but there's lots of ways to fund your startup, and it's important that we dig into the different types and help you understand how to fund your company in the best way to get the best outcome. I'm very excited about today's guests. It wouldn't go so far as to say they are the legends of the ecosystem. Sure, they're not going to like me saying that, but they are recent award winners as well. They are just real awesome people and really care about startup space and helping entrepreneurs and innovators succeed. Today, we have Matt and Jodie from Tractor. Tractor is a close Cake partner, and I really love working with these guys. Welcome, Jodie and Matt. Thanks for having us.

Jodie Imam: We don't usually do this together. It's usually one or the other.

Matt Allen: We have a co-CEO, co-founders stereo. I don't know. We just say the same thing.

Jason Atkins: I'm going to be judging you both, keeping score. No, it's awesome. It's really cool. You've both got different experiences, come at it from a different place. Really excited for today's topic. I could do the intro, but I won't do it any justice. L et's chat a bit about Tractor--the vision and mission for Tractor first. Love to hear that.

Matt Allen: All right, I'll do it. Fine. Tractor was born out of a problem to solve, which I think all best companies are. The problem to solve was over the time of all my investing into technology and being in the technology industry my entire career. It became clear to me that not every single company should--it's not easy to get capital into growing tech companies if they're not compatible with venture, and the banking system really does understand how a growing tech company behaves. Also, a lot of these companies have the ability to put a dollar into their machine and have more than a dollar fallout, and it was becoming really clear to me when I was working at AWS, which is what I was doing prior to Tractor. When I used to go get access to a whole bunch of people using the cloud and watching their growth through the metrics that used to get Amazon to go out and meet people and founders that are growing these amazing businesses who are bootstrapped that might have been angel-backed or venture-backed. But the question I always had to them was: "Could you use more capital to grow this business? Yes. Are you going to do venture? No, that's not for us. Can you borrow any money? No, that's also not for us." People could borrow if they had a house, but putting all your risk inside your business and borrowing at your house is probably not the smartest way to do it. Jodie, myself, and April started Tractor  on the 1st of December 2020. We celebrated our third birthday last Friday. It's the 4th of December today, so that was the day Jodie joined us, and then we had our first AFR article on the 10th of December. Then we went on holidays for a month, came back, and really kicked it off. T he mission there is to help founders unlock their possibilities, and I'd also seen plenty of founders that had sold lots of their businesses to other shareholders and had gotten themselves into a spot where t hey were no longer able of doing it. It was a really tricky spot for founders. That's why we started Tractor and what we're here to do.

Jodie Imam: The reason we're called Tractor is because we really like the analogy with rockets, and rockets are exciting. S ome of them land on the moon, and that's the VC model. W e talk about this a lot, and it's great for those companies that go on that ride , but they're also very expensive. A lot of them blow up along the way. W e've also seen that over our time in the ecosystem. Just being able to provide a different path and attract a pace , I found a lead pace and we just thought t hat it has a nice little ring to it.

Jason Atkins: Yeah, I think it's wonderful. Obviously, I've spent a lot of my last six or seven years raising capital, doing all this stuff, mostly for Cake, of course, but also with other companies -- mentoring and advising  hundreds of startups. J ust to add a little bit to this point,  there's lots of different types of startup. I feel like sometimes, people think " Oh, I do venture or I'm no good." I don't want it to be like that. I don't think it should be like that. For example: ventures, a very specific type of funding. I bet sometimes you could be on the venture path and then you could come off the venture path, and that doesn't mean you've necessarily done anything massively wrong. There's lots of reasons why that can occur, and it could literally just be a timing thing like h aving the venture taps turned off this year. Okay, cool. I still got a good company. T here are just so many variables. W hat I love about what you're doing is you helping educate the industry; and not only educate, but provide  another funding type that helps us as an industry have more opportunity and understand  how to fund and grow your company. So, it's awesome.

Jodie Imam: I think that's because  early on, that's all there was. If you're a startup, you need to grow. 10 years ago,  you might have had VC,  there weren't many, a little bit of angel, and there wasn't much else. N ow, we're fortunate enough that the ecosystem has grown so much that options like ours can exist.

Jason Atkins: Totally. I don't want to b ash VC  either. They play a particular role , but we need angels, family offices, and I guess we'll get into the specific type of funding and exactly what we're calling it these days as we learn in a minute and whatnot. But  I think we need these types of companies. We need to solve these problems. It helps society and the economy in so many ways, so it's awesome to see the industry maturing. L et's dig into a little bit what the funding is and what type of companies should be looking to add this into their funding, backpack, or whatever. What do we call it? W hat are we adding into the shed?

Jodie Imam: It's funny because when we started, we were very much educating on this type of funding which we launched calling it revenue-based finance. It's sort of morphed into alternative capital now because we've got some plans for some equity style funds, different to venture next year and the product itself --it's a debt product. It's effectively a business loan unsecured that founders can tap into for a specific type of view. W e're talking about this as a new product on the market, so it's a new type of funding. But now, we're very much talking about all the types of funding and how you use different types for different things and activities in the business and at different times, so our funding is best used for the quicker ROI --things like hiring a salesperson that's going to bring in some new revenue or feeding that marketing machine, as Matt mentioned earlier. It's those kind of -- you can see there's some revenue just out here. If you just fed it with some more cash, you could get it in sooner and grow faster, and you're not diluting at the same time. S o typically, companies are doing at least $50,000 in revenue a month before we become useful. T hen we can lend them between $100,000 and $1 million, and we can keep doing that. So it's not a one-off opportunity. T he first loan will often lead to others.

Jason Atkins: Yeah, I love that. From my experience, we have been doing equity funding so far and  we've looked at revenue -based funding a couple of times, and I'm pretty sure we'll definitely  do it. The value proposition looks awesome. We haven't quite got the timing  right yet, but t he way you describe it is awesome. Because it --just say for argument's sake --you're doing 50 K  MRR, and there's like a rough range, I suppose, on how much you can get in revenue-based finance. But just say --for argument's sake --three times,  you're getting $150,000. So sometimes, you're like, oh, it's not enough. I need to raise a million dollars. I feel like that's the wrong way to think about it. You have to think about it. What is this iterative thing that I can do with this funding that drives my revenue up? So you might do 150, but then you can do 300, and then you can do 500, because your ARR is increasing, and you're not using your equity, so you're not diluting, and you're really turning that trajectory of the company north. That's how I think about it these days. Does that sound about right?

Matt Allen: Yeah, absolutely. The size of the loan is relative to your monthly revenue, and once we've originated that loan to you and you start paying it back, all our loans are principal interest. Some people would do some interest -only periods, but ultimately you want to think of it as a fairly standard loan over one to three years, depending on what suits you and what our credit and risk teams say. But ultimately, as Jodie mentioned, you want to use our money to do the things you already do better or faster, as opposed to inventing something new that may or may not work down the line. So  we often sit next to venture, we lend to venture-backed companies who have a job for this money to do. Y ou always want to  come to us going, I've got a job for it to do, and I know that there'll be a little bit of a dip and then a rise in revenue. S o every month, when  your payments are coming back and your principal amounts going down, but your revenues going up, to be able to top that back up to where it was, or even potentially further than it was, if you're accelerating quicker, that's a thing that we can do pretty much overnight. T he beautiful part about what we do is when a customer comes to us, they apply online, they connect up their accounting platforms like Xero, we have access to that data which we use to do a credit and risk assessment, which we'll also be able to do that again and again and again. So far, the average deal size is around $300,000. Most customers borrow 1.4 times from us, so they've taken that money, put it to work, some time has gone by, they went, "Yep, we'll top that back up again." We can keep using that channel which has been really useful for them. We've had several customers that have taken this money which has bought them enough time to be able to negotiate an equity deal which is really interesting. I think the other really important factor to consider here is speed. Having raised a lot of money for your cap table, Jace, that it's slow. And you mentioned a minute ago, I need a million bucks. So if we unpack that statement a little bit and put a hat on here, what you're actually saying is it's really  slow to raise equity, so I better raise a million bucks because I can't go do it again really quickly.

Jason Atkins: I don't want to have to do this again anytime soon because I want to be sane.

Matt Allen: Exactly right. To save your mental state, what you do is you raise a lot of equity because it's slow and painful, and the funnel's got a very wide top and a very narrow bottom, and you sure don't want to be doing that again immediately once you've raised the first lot. W ith that, you want to think a bit differently. You want to go, cool, I want to know how much I can get. I want to know how fast I can get it. I want to take the right amount for me to use now, knowing that I can top it up down the line. Because when you borrow, you're committing to returning that principal plus the interest over a period of time, say a couple of years. U ltimately, you are still making a hypothesis on what that money is going to do for your business. So, if you take a smaller amount and put it to work and watch what happens and then get more, your confidence levels goes up, your revenue goes up. If you are a startup that is valued on ARR multiple, then your valuation is going up at the same time while your cap table is staying still because we don't take any equity at all. W e need our money returned to us over whatever period of time we've negotiated this loan. I think it's important to know that whenever you take OPM, other people's money, you're making a little bit of a deal with the devil. You just need to know what their expectations are. Ours are pretty clear. If you're selling shares to someone, their expectation is they're going to get depending on where you are in your business, 100x, 10x, 3x their money back over the time that you've had their money and grown your business. That's what their expectations are. The actual cost of selling equity is quite high when things go well. Obviously, you don't need to service it like you need to service our loan, but you also own less of the business. All these things compete with each other at any point in time, and there'll be a certain point in time where as a founder, where you've got the revenue flowing, you've got the mechanics in place, and hopefully you've got some metrics in place where you know how to grow your business by sort of putting some money to work, where you're like, I don't want to sell shares right now.

Jason Atkins: I love it. So much there, so much gold. Going back to something Jodie said, and we've talked about this a bit on panels before Jodie, where you've got to have a kind of finance strategy. It's like raising equity. How am I going to fund my business? W hat are the grants going to do? W hat's your R&D refund? W hat are your grants going to do? When should we be doing  equity funding? Where and when should you be doing alternative funding? W hat are you going to use the money for? H ow much effort is that going to take? How distracting is it? One cool thing about what you said there, Matt, was ...these things used to be really well -aligned with that iterative kind of test - learn -invest way that we kind of really want these businesses to run. It's not like raise a huge amount , peg it all up against the wall, and hope that it works. I don't mean that disrespectfully, but I feel like it can be a bit more like that when you get a huge amount of money. S o, at least with this way, you've got more discipline. Y ou're making a very clear plan for the use of the funds, you're utilizing the funds, you're getting the feedback, and you're iterating and growing it, which is a great mindset for people to have for any type of funding, really.

Matt Allen: Well, it's for any type of business. I think the challenge I've seen many-a-time, having invested plenty of equity capital in business across the time is that you can run a pretty inefficient business when you've got a lot of capital in the bank and growth is the metric. Crazy growth is the metric that people are looking for. You've got to remember that. Whether you like it or not, when you're on that venture growth path, their business model works best when you can sell shares at a greater price than they bought them at some time in the next 12 to 18 months. T hat keeps going until it stops, whether it's stopped successfully because you've sold the company, you've listed the company, or it stops unsuccessfully because that well of capital is dried out. I think capital efficiency is something that over the last decade or so, not everybody has thought about, and especially in the frothy years of 2020, 2021, people really weren't thinking about. But ultimately, a business needs to earn more money than it spends. A s we found out this year in 2022, 2023, that relying on the capital markets to continue to fund you when your business spends more money than it earns is risky. And that course correcting from a hyper-growth company, hyper growth -hyper spend company to a considered growth company that may not be spending as much money. Ironically, it makes it even harder to raise money because the thing you promised before is no longer true. T he questions and things like can you grow? I don't know yet. So I think, if you can get your company to a state where you have part of it, and it's generally not all of it, that can take a dollar and return two or return X where X is greater than one. T hat's a  really good way of thinking about your business where you don't want to borrow money to hire 10 more devs to build a second product. It's going to take a year that may or may not generate money. You probably want to do the things that's already working really well, better or faster.

Jason Atkins: I already took a note and bolded it, put a dollar in and have more than $1 fall out. I'll be going back and double -checking that mentality at another business that I am closely aligned to. Not that we don't think like that at all, but I think it's a cool little reminder. All right, brilliant. T hanks for digging into that for us all. That's really interesting. And thanks so much for bringing Tractor to life, for the education you do, and helping lead the industry forward, b acking so many companies. L et's do a little bit of stats. You've got a lot of companies in the portfolio now, right? You've shipped quite a bit of capital and you want  10X at least from what I've been seeing online.

Jodie Imam: We talk about it a lot.

Jodie Imam: We're at about 160 customers now, founders that were backed over $60 million out the door. O ur goal is to get that to a billion dollars of funds under management, and that would be with debt and equity , so it's pretty aggressive goals, but we're definitely seeing that there's a real need for this type of funding in the mix for tech companies.

Jason Atkins: Exciting. Amazing. Imagine how many more businesses would be in pain without that capital, so we are really happy with that. That's cool. L et's move on to a couple of other awesome things that we have for today. Next up, I wanted to chat about... I've got double CEOs here, so this is a bit more challenging than normal, but also potentially a bit more awesome. What are the big three things that you're focused on besides Christmas and summer? Do you have summer in Victoria? We have great summer in Queensland. Let's get that in there while I can.

Jodie Imam: I would actually disagree. You have a great winter and a pretty hot summer, like a bit almost unbearable summer.

Jason Atkins: It's too hot. The weekend was close. I was talking to Kim this morning and he was like, I don't have air con and I just could not live. It 's been ridiculous here the last week and you're right, it's too hot. It's a cross we have to bear. But yeah, what's going on in you guys? What's the big few things that you're really, really focused on at the moment? I think it's cool for people to hear how CEOs think and what they're into.

Matt Allen: I might take that one. I'm lucky to have a co-CEO of Jodes and a COO with April, which means the things that we get to focus on a daily basis really is  we get to stick to our knitting, and I've got this thing that I've told my team from the beginning is that I genuinely think everyone's only good at one or two things and you get like diminishing returns rapidly after that. So I'm lucky enough to have kind of one job, which is to make sure we don't run out of money, which is for a finance company, a full-time job, as it turns out. I don't have to worry too much about some of the other parts of the business because we have, besides an awesome team, I also have two co-founders that are very much across that. So I'm luckily, pretty well -built to raise capital and as a startup ourselves, we have raised money onto our balance sheet via equity, and we're backed by some of the best family offices and high net worth individuals across Australia and New Zealand, which is pretty exciting to have a cap table full of people that believe in this and help our portfolio companies. Then we're a lender, so we actually have wholesale lending. I now know more about structured debt warehouses than most people in startup land, which was something, well, funnily enough, about three years ago, I had no idea. I'm like, I'll just go get some money and lend it to people. And now, as it turns out, we've built a fairly sophisticated back end, both from a software perspective and a legal perspective to be able to lend out money that we borrow from wholesale lenders, and then lend it back out to our customers. That basically takes up my entire life.

Jason Atkins: I feel like you've been quite innovative and finance is an industry that, I may be wrong, doesn't seem like it wants to innovate itself very much, and so it creates a bit of opportunity. What are some of the innovations that you feel like you've brought through that are helping Tractor succeed?

Matt Allen: Ultimately, our loans are non-asset backed cash flow loans. T he innovation that we've built is a credit -and -risk engine that we built from scratch that pulls all the data in from our customers , analyzes it, and comes up with what we believe to be a an amount of money we can lend them, assuming they're good enough to lend to, which we still unfortunately have to say no to a lot of people because their businesses aren't in a state that we can lend to. But we've built a process that does that consistently for everybody. So everybody who applies to Trac, they're going through the same process. We pull the data out of their accounting and billing platforms and we run it through algorithms, and it helps our credit and risk team look at these businesses, assess them consistently, and then be able to figure out whether we can lend to them. I t turns out that in Australia, the banks pretty much suck at unsecured lending. If you've got a house, a car , a jet ski, or a dog, that you're willing to put as collateral, they'll probably give you some money eventually, maybe. W hat we've done is we've taken that process, which has been a relatively quick iterative process over the last three years, and got it down to 24 hours and we'll get it down to instant pretty soon as we build it into our software. So, Tractor itself is actually a software company that happens to lend money for two reasons: one, we need the data to drive the software and the revenue helps us pay the bills and pay for the team. Therefore, we're in the same state of which as we grow our lending book, the revenue grows with it. We're heading towards cash flow positive ourselves very, very shortly, which is exciting. But  the innovation really comes from the ability to understand a non-tangible asset. Most of these businesses we lend to --there are some hardware companies, but most of them have on their balance sheet, they've got some money, some revenue, and some laptops and some IP, and that's about it. Which means if things go wrong, there's not a lot to grab a hold of a lot of the time , and that makes banks nervous. E ven APRA, which is the regulator for banks, have told them to pull further away from creating products like this, so there is an opportunity for us to keep doing the things we do and use our engine to not only assess customers on the way in, but monitor them on the way through, which does two things. If they're going well, it allows us to work with them to make sure that they get access to as much capital as they need. If things are going poorly, get ahead of that. We've got a whole team dedicated to leaning in, helping them understand their business and potentially course-correct and trade through hard times.

Jason Atkins: I absolutely love it. It is a real problem. I've worked in finance for a long time, and I've seen how hard it is. Banks just almost seem totally unable to lend on anything other than a home with a full mortgage. And even still, that's getting harder. I t's a huge issue for the economy and innovators and business people everywhere. So amazing. I presume as this, I guess, credit tool that you've built gets better and better. Hopefully, it can get used  in as many ways as possible to help  business people everywhere. Not to put you up for too much, but it looks like it's got a bit of potential. Jodie, I might throw to you. Seeing as Matt said, you got one or two things--big things to focus on. Do you want to share what you're loving doing, and where you're bringing your superpowers out at Tractor?

Jodie Imam: I guess my focus is more on building the team and our culture, sort of our growth marketing engines, our ecosystem contributions, kind of all of that piece. I think next year, the focus is just on really sharpening what we've been doing. As I said, we started off just talking very broadly about what we're doing, and then we've got more specific about the type of capital and where it fits. I think next year, the focus will be just on really getting our engine really sleek and knowing exactly, rather than being so broad. W e might tour around a bit less and just focus on specific areas.

Jason Atkins: I feel you. A bit similar to Cake. I think your brand is extremely well known, and  your events have been awesome. Obviously, you work closely with Gaz, making a ton of noise all around everywhere.

Jodie Imam: Just quietening him down  just a touch.

Jason Atkins: Wrangle him a bit. Cool. No, look, great to get those insights, so thanks for sharing. Matt, we might move a bit over and dig into a little bit about your  experience in the industry. I think I first met you... I don't know exactly, but we had coffee in Melbourne one day and I was like, Cake was just starting. I think you already had a pretty good brand as a high quality angel investor. This is probably five years ago, and you've just gone ballistic since then from what I can see.  Tell us a bit about your investing journey mainly. I don't know how far back you want to go, but it'd be awesome to hear a little bit about the journey overall and then dig into some of the lessons that you've learned and lessons that we can share mainly on the founder and the team side of things.

Matt Allen: April and I have put our first angel check in, I think, 2012 or 2013. I t's over a decade ago now, so it feels like a long time ago, and it obviously has been. W e got started because I just decided one day that being a founder is hard. Being an investor seems way easier than being a founder.

Jason Atkins: Well, you got five or eight years until you can be proven wrong with investing.

Matt Allen: Well, it's a longer feedback loop. There's no doubt about that. I guess being an ex-software developer for most of my career allowed me access to a few deals that my friends, who were starting startups, that we're probably a little allergic to going off and speaking to other typical investors who came and spoke to me. T he early days, t he first three checks were Pin Payments, Practice Ignition and Buildkite, which have been three fairly chunky businesses in the Australian ecosystem.

Jason Atkins: Pin Payments, that's the one to become up?

Matt Allen: Dom Pym was a founder of Pin, along with Grant Bissett, and Grant was a mate of mine out of Perth. So they sold that--we sold it and we exited out of that a couple of years ago. Practice Ignition was actually the last thing that I coded as a software developer, and then took the money that Guy paid me and put it back in as an investment, which has done well. Then Buildkite.

Jason Atkins: He's a Cake investor. Good on you, Guy.

Matt Allen: Guy's also a shareholder in Tractor, and it was interesting. Of those 50 or more startups that I invested in, we started Tractor, obviously. We raised our first round for Tractor before we launched in the middle of 2020, in the middle of COVID, from my lounge room at my standing desk that didn't actually go down. I just stood there for for years.

Jodie Imam: It was like a desk with a box on it or something.

Matt Allen: Yeah, and this weird fisheye lens that made it look like I was in a spaceship.

Jason Atkins: I've got a bolter box that has my monitor on top of it.

Matt Allen: It's been really interesting. Those equity positions have all gone on, but not all of them. The vast majority of them are still in play. It allowed me to do a couple of things. It allowed me to become an LP in some funds. I did some work with Blackbird as a scout down in Melbourne before they had any opportunity down here, before there was any start, before Nick and the team had moved down here.

Jason Atkins: Really? That's cool. Did you get in the first Blackbird fund?

Matt Allen: I did not get in the first Blackbird fund. M aybe the third one and the fourth one. T hen  it also allowed me to get my job at Amazon on the startup scene, which is really good. But I guess, maybe, as a tidbit of advice from the investing staff, when it comes to angels, I speak to a few of these angel groups and everyone's trying to learn how to do it. It's kind of like my other rule about being good at one or two things. I was good at --I was a software guy, so I understood some complex problems where when you're pitching to angel investors, quite often, you have to go from first principles because you're talking to somebody that doesn't understand the problem. So if you can go and find somebody who understands, has an affinity with the problem you're solving and some capital to deploy, then you're more likely to have a more efficient conversation.

Jason Atkins: That's what I always say. It's all just get in the right room first and then everything changes.

Matt Allen: Then earning trust over time. I was never a big check. There were tiny checks, but there w ere lots of them. They got a bit bigger after a little while when I had a few exits along the way and took some money off the table and then calm back down again. I don't do very much at all anymore. Tractor gets the vast majority of my attention, and  I'm grateful to have a lot of those investors and founders that I invested in come back and be a shareholder of Tractor, of which there's a lot of them.

Jason Atkins: Let's dig into one thing. I think you'd be really good at helping founder. M ost of my goal is helping founders be amazing. I think you're kind of the same. O f course, the team and everybody as well because it's a community. Let's talk about how founders can do a lot with very little capital,  and how they can get some really good quality early investors , angel investors normally, that can help them just get that first maybe six months or year done. How should we tackle it? H ow should founders tackle, say a pre-seed round in your opinion? W ho should they be talking to? How much should they raise? What sort of milestones should they be hitting? How would you see it? H ow would you tackle that? What's the best thing you can give? Because for me, it's like raise as little at the moment, it's raise as little as possible, do as much as you possibly can with it, get as far a nd just hit as many milestones as you possibly can. Y ou don't really have a choice at the moment anyway because there's so little capital around. How can we founders get that done in the best way?

Matt Allen: It's not easy. I don't think it was ever easy, but it certainly feels even less easy now. D eclaring my slight biases, I'm involved in two pre-seed funds, which is Black Nova and Side Stage. There are people who will happily write checks into companies that barely exist --would be the best way to describe them, products that are not certainly out there in people's hands yet. But it was kind of --being an ex-software guy myself , it's easy to start proving things sooner rather than later , and I think as much, as it's fun to put a deck together and talk about all the things that you need to put in a deck, some sort of evidence that you can actually execute is generally what most Australian investors need. I know you might have more luck on an idea and a whim elsewhere, but I genuinely believe that there's almost no excuse to show that you can solve a customer problem, even if it's super manual. W e still use spreadsheets at Tractor, and we're three years in and got $60 million and hundreds and hundreds of deals. So you don't have to build a bunch of stuff to prove that it's going to solve scale problems when really trying to prove that you've got a customer problem to solve. I think that I'm narrowing the focus. P eople think that early investors want to see that there's this huge market, but what they actually want to see is that there's a super narrow market who absolutely will strangle you if you turned your thing off. I think that works across the board. The fewer people that you appeal to, the easier I'm going to be able to find them,  the punchier conversation you can have, and that's both on the customer and the investor side, right? They're almost the same tactic, which is reduce the surface area of the problem down so you can really sort of wrap around it and talk to it tightly, and then hopefully show some sort of evidence that it's not just an idea.

Jason Atkins: I totally agree, 100%. I see so many because I do early stage investing as well through p umping ventures, mentoring, a dvising. A lot of accelerators and so many startups will try. They'll have three different customers that they're working with, and they'll be three different segments. T hey'll just be a mess, and it won't be tight. They're trying to show market size and all that sort of thing. F or me, I totally agree, the smaller you can be, the more focused you can be definitely having one customer showing that customer love . And one thing that we could agree on as well here is you need to try and find the right investors. I think sometimes the wrong investor or an investor that isn't interested will give you the wrong feedback, and it'd be like, the market size isn't big enough, or they'll just tell you some other feedback and it'll cause you to be really broad again. Y ou'll be a big mess. You do need to sometimes broaden. Y ou do need to sometimes do some experiments to find out who your exact customer is going to be. I'm not saying don't experiment, but finding a customer, showing that they love what you do, and that they're using the thing, even if it's manual, and that they're paying you every month, and that they're not going away, better investors will appreciate that more. T hat's what founders should be optimizing for. T hen if you get that right, that could take you through your first couple of years before you need to do the next thing, and your life is so much better in that situation because you have less meetings, you have less noise, you have less mess. I remember when Cake finally decided to do startups, which most people thought was absolutely crazy because they have no money, and we paid a huge price for that because our ARPA was like 30 bucks a month,  but we took off. The company just absolutely took off in almost every way once we did that. I guess that's a long way of saying I agree , aside from my experience.

Matt Allen: Just all those investors--three types of investors: really smart money, dumb money, and annoying money. The challenge is it's really hard to pull them apart at the beginning and figure out which ones are which, but  I've heard so many founders say they've been called up by one of their investors saying, can I have my money back now? And it's like, no, you can't. I think it's tempting to take money from people who don't know stuff because it's inversely correlated. The less you know, the more excited you get, so that's a bit of a balance sometimes. Like someone's excited to give you money and they don't know a lot. And if they don't know a lot about what the journey they're about to go on, they're the ones that end up getting up in your face quite often.

Jodie Imam: I'm also doubling down on that--trying to prove a customer problem. The best source of funding early on is customer revenue every single time, so that should be always the focus before even looking for angels.

Jason Atkins: Especially if you can get the right type of revenue. So metimes, you have to have a service-based revenue, and I think if you can get it, get it, but just realize you'd be  kicking the can down the road to some degree. I think it's still important. Y ou might be taking some non-scalable revenue in the short term , but you're learning. Solve the problem while you're learning, but you might have to shift your business model at some point along the way. Just be aware that a bit of pain can be coming, but sometimes, it's a necessary evil, and it actually helps you survive while you're doing the learning.

Jodie Imam: That's right. We've funded a lot of businesses who have done just that, and they use our funding in the middle of making that transition.

Jason Atkins: I remember when we had to give up 30K monthly revenue to go back to 30 bucks one month. T hat was one of the hardest things I've ever had to do, but it was all part of the journey, so I wish everybody well if they have to do that one. Awesome insights. Thank you both. L et's talk a bit about building real value through equity at Tractor now because you must be generating some unbelievable value. I don't know exactly, of course, and we don't have to share any numbers here, but wow, like going from zero to getting 60 million out there. I'm sure you're doing like a ton in annual revenue now and growing fast, and that's amazing value creation for everybody involved. C ongratulations on that! How do you see that from a strategy? We always say,  you've got to have the right culture and the right strategy first to be able to build wealth and build the right team, and have them really be bought into the journey and  create an ownership culture. How do you guys see your ownership culture at Tractor and how do you look to try and develop that?

Matt Allen: It's been three years. We started off with what we call a founding team. It was Jodie , April, and I. But there were a lso Kirsten, Lance, and Darcy on that journey with us. So everybody who works at Tractor as a shareholder; everybody gets ESOP. W e've done things a bit differently there. Instead of putting out the ESOP on time, usually there's a one-year cliff and a three-year vest to get to sort of four years, and all that shares that you got issued on the day you started are yours after that. We actually put them on some financial milestones, which we thought was interesting. It sort of aligned everybody to have vesting happen at the same time, depending on where you joined in the company, they're kind of rolling forward, which was great and novel and exciting. With one caveat, we put the numbers way too  small.

Jodie Imam: Well, we thought they were massive.

Matt Allen: We thought they were massive at the time. That's a good problem to have. It is. Well, it is a good problem to have and it's just like, oh, we didn't expect to be here this quickly and we were, which has been great for those employees there. We also did the right thing, like put 10-year investing exercise terms on them so they don't have to sort of pony up for any capital anytime soon , even if they're not with the company anymore. We talk about three buckets of short-term incentive, medium-term incentive, and long-term incentive. We have the long-term incentive being the ESOP plan, which everybody goes on that journey, including our shareholders, and the intent is Tractor is a valuable beast in the future. The short-term incentive is everyone's salaries, and we do a four-day week, so everyone gets paid the same amount and does four days, and we take Fridays off, so that's exciting. T he medium-term one is we have a revenue share. We have a revenue share model with our entire team, where we take a portion of revenue and slice it against FTE headcount and allocate that at the end of the financial year. That's pushing everybody to drive revenue there and get that medium-term incentive to get it done right. We like to innovate on all these kinds of things. I'm very much of the generosity mindset that everybody needs to come along for the journey, and I wouldn't expect people to push hard in those four days unless there was some upside in it, above and beyond the thing that you get at any old job.

Jason Atkins: That's what I was going to dig into a little bit there. I t sounds like you've got this  pretty cool situation, right? You've got a fast growing company, it's four days a week, we've got rev share, we've got equity, and you're really kicking a ton of goals. How could you help others design their businesses to capture some of these great outcomes. Any tips?

Jodie Imam: I think the thing for us, too, is we knew this going in that we've all been to this rodeo before, like a few times, so we've got that advantage of that. It's quite a senior team. Oftentimes, we lean on all the mistakes we've made to make these decisions, so I think if you're starting out for the first time yourself, it's trying to get at least an advisory board or some of that grey hair amongst you just so that you can avoid some of those potholes that we've fallen into ourselves.

Jason Atkins: That was part of the pitch to each other as well as founders. T hen any of those guns that you brought in, you're like, hey, we think we're going to go from one to 10 pretty quick here. Let's all get in, and if we smash it, then we all win. We 're ticking boxes galore. That was kind of a big part of making it work. Yeah.

Matt Allen: I remember that when we went to a four-day work week, which was not too long into the whole thing, we thought we'd run an experiment, but it's just stuck. I remember Jodie was working really intensely and Jodie was the breadwinner and her partner at the time was sort of looking after kids and running the household. She said to me, " We're not getting time for ourselves." And I remember when I was a consultant, I'm like, "Well, how about I just take a day off?" A nd you allocate your time to the business first, and then your family second, and then probably your partner third, and then maybe yourself at the end of it, which just happens in startup land. W e thought that if we got to carve out a day and we're in the lucky position where we don't run a highly available platform or anything like that. Having been a CTO, I've carried a laptop my whole life and been on call. I don't do that anymore. What do they call it?

Jason Atkins: Five nines, Matt. Matt with his four platforms and they all need five nines or whatever.

Matt Allen: Every  time you went to the movies, your bloody phone would ping. Anyway, the point being is that we wanted to build a business that ran on a cadence that allowed us to put four days worth of big work in and then take a day off because we don't lend to people that are desperate for our money. We're not a payday lender. We're lending people who are putting it to very specific use, and if an email comes in on a Friday, we'll deal with it on a Monday. T he team's set up to do that. I just think it's one of those things that's hard to come back from. I think most of our people in our team do, and if they ever have to go to work in five days, they're going to be pretty sad.

Jason Atkins: Yeah, I was going to say, if I ever need a job, I'm probably unhirable in the true sense these days anyway. But if I ever need a job, I'm coming your way. And everybody out there, if you're an amazing human, just keep an eye out for rolls going.

Jodie Imam: I think at that time, there was also just all these reports and companies trialing this productivity effect and it is a hundred percent more productive by far than if we did a five-day week.

Jason Atkins: Yeah, I'm sure Elon and J Cal would be upset at us, but I'm a big fan, too. I'm glad to see you guys succeeding with it, and congratulations! W e normally finish on--at Cake, we call it creative, healthy lifestyle. W e know we've got a lot to achieve at Cake, but we know our team. W hen it comes to our success,  you can create incredibly powerful teams while also really putting the humans first. W e see our health as a critical pillar in that, and I can tell you're massively connected to this type of thing as well. We've already touched on some of the techniques, so maybe we've covered it. But anything to add  around particularly health, people's health and mental health in relation to active success or things that you've seen in the startup industry as a whole?

Jodie Imam: Yeah, I think there's a mental health pandemic at the moment. We try to talk about it quite a bit and I guess we lead with vulnerability, too. W e'll often talk about our own mental struggles and we'll share what's going on in our lives, and that creates safety and a space for people to be able to share. W e're all human and the more that we can talk about these struggles, the more I think it just helps so much because it's not just one or two of us. Every single one of us struggles with stuff. It's the human condition. So the more we can talk about it, recognize it, create space for it, then the healthier we are.

Jason Atkins: Oh, so cool. I've been on so many panels, and so many times I've been like just talking about how just crazy gnarly being a founder has been and that  brutalized me in so many ways.  I think it's super important that we share and just help normalize it and help each other out. I t's a super lonely thing to do, and I don't mean that in like--it is lonely and it is bloody hard and we need to support each other and we need to talk about it. Then it's totally manageable. It is totally manageable. We just don't want to see people doing it on their own and not having support and just feeling like it's not touchable.

Matt Allen: Yeah, a couple of things. Personally, I just definitely got like morning routines, gym, and meditation. But Jodes and I have done a walk together almost every single week for three years, so it's like co-founder time out of the office, which covers a broad range of all the things. Jodes and April also spend time together once a week, out of the office, and go for lunch. I think the challenge is you've got your co-founders and you end up inevitably talking about work all the time, but a break of scenario, it's also fun --you're walking next to each other and you're not just at each other. Y ou can bring up topics that kind of need that little dance to bring it up and talk about them. W e look forward to our walks every week when we're not traveling, which has been a fair bit, but ultimately, it's a couple of hours, Jodes?

Jodie Imam: And in nature, too. The natural de-stressor. We get a lot of creativity out of those conversations.

Jason Atkins: Thanks for sharing. We're very similar at Cake. We talk constantly about spending time in nature. If I'm not talking to Kim for any length of time, we always seem to be having a barney, but it's just because we're not catching up. You're just not getting that human connection. You need human connection. If you're not getting it, your mind is like such a little trickster. You gotta switch that trickster off, as it just wants to mess you up. It's crazy.

Matt Allen: Comes up with some crazy stories, I can tell you that.

Jason Atkins: It just makes shit up all the time. You've got to like, no buddy, just take a breather. S o just connect with each other and connect in nature. That's so, so important. Y ou'll also find, too, whenever you have any darkest day, just go back and say, am I doing the things that I know empower me? Am I going to the gym first? Am I meditating first? If you're not doing those things, you can't bring your best self to your work, your business, your startup, your family, or any of your relationships. A lways remember that as well, so good call out. Look, unfortunately, I'm going to wrap it right on time. Respect everybody's calendars. I think we've done a wonderful job. Two of my favorite people in the industry. So grateful to spend a bit of time with you today, learn a bit more and share some of our lessons and insights with everybody. We hope you've enjoyed it. I certainly have. I get warm and fuzzy when I'm hanging out with great people. Y ou managed to do that for me a couple of times today, so I'm very grateful. Thanks, everyone, for listening.

Jodie Imam: Thanks, Jason.

Matt Allen: Thanks for having us, Jason. Thanks for your support for Tractor throughout the last couple of years as well. It's been really, really meaningful.

Jason Atkins: Yeah. Absolutely love it. Thanks for your support as well. Onwards and upwards.

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