As a freshman at Syracuse University, Chris Sluty knew his buddy and fellow Syracuse accounting major, Michael Whitmire, would start his own business one day.
“I remember telling Mike, ‘Let me know when you start something, and I’ll be there,’” Sluty recalled.
And Sluty was right.
After they graduated from Syracuse in 2006, Whitmire went home to Los Angeles and joined the financial audit group at Ernst & Young, while Sluty went to work in audit for Rothstein Kass in New Jersey. But it wasn’t until 2012, while Whitmire was working as a senior accountant for Los Angeles software company Cornerstone OnDemand and saw firsthand the problems with the close management process, that the idea for FloQast was born.
“It took over two years of living the problem before I realized that this was an issue and thought, ‘Is there not a better way to do this?’” Whitmire said.
Whitmire left Cornerstone at the end of 2012 to get the ball rolling on a SaaS company that would eventually become FloQast. He pitched his idea to an investment fund and startup accelerator called Amplify and found a business co-founder in former MySpace software engineer Cullen Zandstra (now FloQast’s chief technology officer). They built the product, landed their first customer, and joined the Amplify accelerator program in July 2013.
That year, Sluty had transferred from Rothstein Kass’s New Jersey headquarters to an office in Los Angeles and was living with Whitmire.
“Mike and Cullen were pretty much talking to every accountant they knew just to validate the idea. So that’s when I got introduced to everything,” said Sluty, who is the chief operating officer at FloQast. “When they joined Amplify, I quit my job in audit and got on board.”
Nearly five years later, FloQast close management software is being used by hundreds of accounting and finance teams, including those at GrubHub, Twilio, Ancestry.com, Zillow, Nutanix, and the Golden State Warriors.
Download this whitepaper from FloQast to understand how close management software can improve your team’s efficiency while reducing the inevitable stress associated with the close.
During a recent interview with Whitmire and Sluty, we talked about how the seeds for FloQast were sown, sharing the market with other close management software providers, and why accountants make great entrepreneurs, among other things. Some of their responses have been edited for length and clarity:
Going Concern: Was there a single event or experience that drove you to want to fix the close management process?
Michael Whitmire: It was a culmination of a lot of things. I’ve always been pretty entrepreneurial and knew I wanted to start a company, but I didn’t expect it to be in the accounting space.
When I was at Cornerstone, they had acquired a really small company in New Zealand and they gave me a project to audit the entire company. When I went back in time to do the audit, they were such a young company that I was auditing their first transaction. From there, as you’re auditing and you’re putting their financials together, you get to see almost every transaction that’s occurring. So I got a really good sense of how the business grew: when they hired, how they spent their money, how they operated things, like when they closed their first customer and how much they were paid. I got all of this insight into how you go from zero to $3 million of recurring revenue.
At the end of the project, I was transitioning the work over for the close to some other team members and they had all these questions for me, like, “How’d you do this? How’d you do that? Where’d you save this?” And I said I did it the exact same way we’d do Cornerstone’s close. Everything is saved under the same methodology, and I used similar reconciliation templates. I didn’t understand why they couldn’t figure it out. I just assumed they understood how I operated. That’s when it dawned on me that it was because there wasn’t a good piece of software to help them understand how I closed the books and how things were organized. I realized there was a problem around the month-end close and that people needed to be able to collaborate better and standardize things. I then had the irrational confidence to jump ship and try to make this work.
GC: Was it just the knowledge you gained from working at Cornerstone that helped you know what components needed to be included in the FloQast product?
Whitmire: On a foundational level, it’s very much inspired by audit software. Instead of having work papers, we have reconciliations. And then the way we get organized is via a standardized folder structure. I knew the baseline for the product was that we needed to give companies a good way to document their checklist, to organize that checklist and do it in line with all of their documentation, meaning their reconciliations and underlying documents, and then give them a way to collaborate via review notes and other communication tools. That was the foundation for me; that’s what we should build and take to market. Then we started to add other things in later as we progressed as a company and got feedback from the market. So it started very simple, and from there we let companies tell us what to do. Fortunately, a lot of it lined up with what we were thinking internally anyway, so it was good validation, and we built the product on that feedback.
GC: When you were starting FloQast, what was it about the close management solutions that were on the market at that time that left you unsatisfied or didn’t meet your needs? Why did you think you could improve on what was being offered?
Whitmire: I couldn’t find a competitor for a long period of time. So I’m working on this thing probably for three or four months, and I’ve Googled everything in my accounting brain that made sense to try to find some solution that’s doing this, but I couldn’t come across anything. I was speaking with someone from Cornerstone and they said, “Oh, so this is like BlackLine?” And I said, “What’s BlackLine?” So I started to look into it. On the one hand, I was concerned there was a competitor there; on the other hand, when you think about it, having a competitor there in a sense validates the market. But the fact that I’m an accountant who should be using a solution like that and I’ve never heard of these people, despite aggressively digging through Google to try and find something, suggests there’s a big opportunity here.
From an innovation and tech perspective, it’s always good to have competition, but quite frankly, that’s not our driving factor for innovating. We’re not trying to match what they’re doing; we’re not trying to copy their solutions. We have our own motivation and drive to be innovative.
It also has helped us from an investment perspective. When BlackLine went public, and they showed that there’s an opportunity to build a multimillion-dollar company in this space, it became a very, very good thing for us from a fundraising standpoint.
Chris Sluty: We compete in the same space, but we have different customers, and different customers have different needs. We’re focused more on the mid-market and clients with the real problem of getting organized, collaborating as a team, and getting something in place so they’re ready to grow, and less focused on dealing with millions of transactions in these high-volume, enterprise businesses. So we really need to focus on the mid-market where our product aligns the best with our customers.
GC: As first-time entrepreneurs, what expectations did you have when you launched FloQast? Have some, many, or all of those expectations become reality?
Whitmire: As far as I’m concerned, we are so far living up to the expectations I’ve had to date, but we have a lot of work to do to meet my further expectations and ambitions. I want to build a public company—I saw it happen at Cornerstone and thought we could do it, too. That’s my goal, and every step along the way that we’ve seen is something I visualized back in the day, and we’re executing on it.
Sluty: When we first started FloQast, I worked more on the customer side of things. We started getting these big companies, these brand names, wanting to watch demos and see the product, and them sending me what their process was and how it would fit into FloQast. It really opened my mind about how pervasive the problem was and how old school everybody closing the books was, not just your smaller companies here in the San Fernando Valley. So when we signed up Ancestry.com, that was when it hit me, like, wow, this could really take off.
GC: What makes accountants perfect for starting a business? What are the advantages and disadvantages accountants have over a traditional tech entrepreneur, like someone with an engineering background or similar discipline?
Whitmire: I got a lot of pushback from the VC [venture capital] community. Their general take is that a founder is either going to be a sales-type person or a technical person. So me being an accountant was viewed as a positive to the extent that it was going to help the product, but everything other than that—fundraising, sales, go to market—was viewed as a negative. I wholeheartedly disagree with that. The reality is that as an auditor and an accountant, by virtue of understanding the numbers and all the transactions and everything that’s going on, we have a very good sense of how businesses are run, how they operate, and you’re going to take some of that information and plug it into your own company. You’ve got to have a very analytical mindset so you’re much better suited for things like financial planning and forecasting, and understanding your cash and your numbers, which sets you up for being successful.
A lot of SaaS startups just look at top-line growth numbers; we’re much more pragmatic as accountants. We look a lot at efficiency numbers and unit economics, as well as top-line growth information, so we’re a lot more tuned in to how the business is operating, which means we’re able to grow more efficiently, we’re able to do it with less fundraising, and do it in more of an intelligent manner. All you need to be able to do is then bring some sales skills into the fold and you’ll be a great entrepreneur.
GC: As accountants, how do you complement each other as the founders of a business? Why do you make a good team?
Whitmire: We’re a perfect contrast. I’m a type-A nut job who wants everything to be done yesterday, and Chris is the nice influence that keeps us on the right track and helps us with the good, effective strategic decision-making. My third co-founder, Cullen, fits more into my camp. We’re both very fiery personalities, we want stuff to get done quickly, and we want it done the right way, and then Chris sits in the middle as a great mediator. We’re very collaborative in our decision-making. There’s never really a decision that’s just made by one of us.
Sluty: We work really well. Without Mike pushing the vision and driving us to things I never thought we could do, we wouldn’t be here today. I think I can tell Mike when we need to slow it down and refocus a little bit, and he can push me to think bigger than I ever thought we could do. It just comes with a lot of trust. I have no problem telling Mike “no,” and he’ll actually listen to me. And it works both ways. We talk through things, make decisions, and get after it.
GC: Do you think there are currently opportunities for accountants to start businesses that solve other problems experienced by accounting firms or within accounting departments?
Whitmire: I think any accountant is going to be best suited to find a problem within private—moving out of audit and going into the corporate accounting world. I think that’s where you’ll be able to identify issues a little closer. For example, if I hadn’t left Ernst & Young, I never would’ve thought about the close and how big of a problem it is and really understood why it’s a problem. You have to live the pain point to understand it, so that’s why I think going out into private is a great way to do it. And there are a host of problems in private accounting. Accountants just have to go do it and seize the opportunity to make it happen.
Sluty: Like Mike said, there’s a lot of opportunity out there, especially if you work in a specific vertical. You probably know problems that we have no clue about. So if you know the pain points, there’s always a better way of doing things.
GC: What can we expect from FloQast in 2018?
Whitmire: To continue to deliver products that are 100% focused on making accountants’ lives easier. A big part of our investment this year is going toward product. I’m really excited about the product additions we have, making the current product that we have even better, and experimenting with a few new product lines. We’re in experiment mode, so I don’t want to speak to any specifics, but long story short, it’s going to be a really exciting product year for us.
GC: Is anything going to roll out in the immediate future?
Whitmire: Just today [Feb. 21] we launched Perm Files, a very nitty-gritty, specific thing in accounting. You have to be an accountant to really understand the issues around that: how you organize, maintain, and sign off on the perm documents. But it’s one of those things that makes a ton of sense being inside close management software, and our clients are going to love it.
GC: Is there anything else you both would like to add in closing?
Sluty: The only other thing I wanted to get across is, this is very hard. You’re not going to get a lot of respect from the VC world. You watch movies about startups or watch Silicon Valley and it’s fun and they make it seem like everything is great. But the biggest thing with us is going through every day not getting too high and not getting too low. If you’ve got that kind of work ethic and have a good attitude, you’ll go a long way.
Whitmire: It doesn’t get easier. That’s the amazing part—it gets harder, and just the ups and downs on a daily basis are insane. I’ll go home and my wife will say, “How was your day?” and I’ll say, “Well, this happened to me was horrible, and this happened to me was amazing.” That seems to be a standard day at work.