Kirk Simpson's Journey From Near Bankruptcy to a $400M Exit - The Startup CEO Show - Mark MacLeod

May 1, 2024 - Marina

Kirk Simpson’s Journey From Near Bankruptcy to a $400M Exit – The Startup CEO Show

In this first episode of episode of The Startup CEO Show, we dive deep into the dynamic world of startups, revealing the secrets behind some of the biggest successes in the startup world. 

Kirk Simpson shares his journey which ended in selling Wave Accounting for $400M. It’s not just inspiring but also packed with valuable lessons for anyone looking to make their mark in the business world.

Dive into the Episode’s Transcript for Expert Insights:

Mark MacLeod:
For this inaugural episode, I had the great pleasure of sitting down with Kirk Simpson. I’ve known Kirk for over 13 years. He built his prior company, Wave Accounting, to a 400 million dollar exit.


We unpacked all the lessons from that, the decision to sell key moments. We talked about great things like how to establish healthy boundaries and lots of other great topics. I really hope you enjoy this conversation as much as I did. Let’s get to the episode.

Mark MacLeod:

So, a real pleasure to have you here with me today, Kirk. As we were discussing before we got started, this is actually my first recording of the StartupCEO show, which makes me think of Reid Hoffman’s quote. For those who don’t know, Reid Hoffman is a co-founder and CEO of LinkedIn, his partner, Greylock Ventures. Basically knows what he’s talking about.

Mark MacLeod:
And his advice to founders is like, if you look back on your first product and you’re not embarrassed, you released it too late. And so hopefully when I look back on this first podcast episode, I’m not embarrassed. The good news is I ask CEOs questions for a living, and that’s kind of basically what I’m going to be doing here.

Kirk Simpson:
I’m wondering if you’re basically implying that your first guest, you’re going to be embarrassed about the first guest. So I’m not sure if it’s going to be fun to be the first one or not.

Mark MacLeod:
No, more myself. Thank you for clarifying. No more 100% me as a perfectionist.

And let’s face it, the first Tim Ferriss show probably wasn’t as good as the latest. So there’s that.

Yeah. So you and I have known each other for a long time. We first met back when I was at Real Ventures, and I was probably the only CPA who was a VC in Canada and therefore particularly sympathetic to the Wave Accounting pitch.


And I’d love to start by just digging into your experience. We could probably spend a day unpacking that, let alone an hour. But the whole purpose of this podcast really is to give CEOs at any stage kind of just real actionable insights, real talk, the stuff that they’re dying to hear and never do hear, and realize every startup is different.

Everyone’s context is different, but hopefully, there are some kind of nevertheless actionable insights and little takeaways. And so I’m really hoping we can get into that. First of all, Wave was like, I think a twelve-year journey, start to finish. Looking back, what were the highs and lows and key moments for you?

Kirk Simpson:
Yeah, well, first of all, thanks for having me.

Secondly, we started the business in 2009. My co-founder, James Lochrie, and I got serious about it in early 2010.

I would say looking back on the journey, I mean, it’s one thing to be in the middle of it, it’s another thing to have a little bit of time and some hindsight on looking back on it. And I think what I’m so grateful for is that we basically experienced kind of every part of the startup journey, except for unfortunately ringing the bell.

What I mean by that is 2010, a very different time, as you well know, in the Canadian tech scene and the Canadian venture capital scene. And so what stood out for me in the early time was just the amount of pitches that we had to do with some good investors and some really terrible investors. I’ve got some great terrible investor stories because back then, with angel syndicates and this kind of stuff that was big in the Toronto market, just a lot of very, there wasn’t a lot of experience around high growth tech startups in Canada.


And so it was a real grind getting that first cash influx into the business. And then it really accelerated quite quickly from there. Our model of giving away the software for free had tons of downside later on.

But at the beginning, an incredible marketing machine that would blow away VCs’ expectations of onboarding small business customers. And so we had a hard time raising the first round. But then by the time we got to the A round in fall of 2010. We had a lot of interest in the company and we brought on Dev Dut Ulurker from CRV, and he had a massive impact on the company. 2011, 2012, we were really riding a rocket ship, and then all of a sudden we kind of realized we had a very crummy business and needed to make some significant improvements to the product.


We came close to selling the business to zero in 2013. I think that fell apart right at the very last minute and that was really hard to recover from. So we just experienced a ton of the ups and downs all throughout the journey, including being ten days from bankruptcy in 2015. So it really was a lot of really high highs and a lot of really low lows, and that’s kind of the best way to describe the journey we had.

Mark MacLeod:
Wild. Yeah. Thanks for sharing that. Fascinating, on zero. So much I’d love to unpack there. As a guy who sold a lot of companies for a living, it’s such an emotional journey. And part of my role as an investment banker was to be the rock.


The founder is going to go through the highs and lows. Picture the Ferrari they’re going to buy or the cottage they’re going to build or whatever. And then, yeah, it’s really hard to. VCs often have a blocking right and often have a veto on a sale. And I remember CEOs would often ask me like, hey, do they use it? And of course, my experience was the best ones don’t, because if you block someone from a sale, they’re just not going to be motivated. How did you find the motivation after you were so close to the finish line there to keep going?

Kirk Simpson:
It was a really tough situation, and I haven’t talked much about this story. We were right close to the finish line, including them asking me to move my family and I to San Francisco and negotiating all the different elements of that. That’s how far along it was.

And to be honest, the business at that time, we knew, required a lot of effort and figuring out to take it to the next level. And so it wasn’t the exit that we were hoping for, but it was good. And by that point, we had raised a lot less capital than we did by the time we ultimately sold it. And so it was a decent outcome. I remember getting the news right at the end that the board had blocked it, and I couldn’t understand how that could happen.


Given that the CEO the CFO and the COO were all on the side, it was still a founder CEO. The rationale for the deal made sense. You’ll remember back then, Zero was really floundering in North America. It seemed like a really great opportunity to sort of turbocharge that and take a run at things. Anyway, I got the news and I happened to be with my family at my parents’ cottage, and probably the one time in the entire journey where I will remember being almost catatonic, sitting in a rocking chair in my parents’ cottage’s living room. Just really unsure how I was going to find the energy to sort of recover from that and how James was going to find the same thing and how we were going know, look the team in the eyes, and profess to have the confidence required to take the business to the next level when we were willing to sell it two minutes before. So, as you have felt with many founders many times before, I think it’s so easy to tell a founder, make sure you don’t fall in love with the deal, make sure that you continue to run the business so that if it falls apart, that you can be ready to take it and keep running with it and all those kinds of things. But the reality is we’re emotional beings.

Kirk Simpson:
So much of this is energy, motivation, positivity, the ability to see the next hurdle you want to jump over, all of those kinds of things. And when that suffers, it’s really hard. I think at the end of the day, we just needed to sort of pick ourselves up, dust ourselves off, sort of feel sorry for each other and ourselves for a couple of days, and then realize you just got to keep going. There’s really no other choice.

Mark MacLeod:
Had you broadly shared the deal internally?

Kirk Simpson:
No.

Mark MacLeod:
Presumably your leadership team.

Kirk Simpson:
Exactly.

Mark MacLeod:
That’s a big deal.

Kirk Simpson:
Yeah. It was tough.

Mark MacLeod:
Yeah. When I look back on Wave and my first exposure to it, which was your seed round, my hesitation at the time was free. Yeah.

Kirk Simpson:
Why, Mark? Why? 🙂

Mark MacLeod:
I’m way too conservative. But free sells and the biggest challenge in SMB is customer acquisition cost, right. It’s a relatively infinite playground. It’s mathematically impossible to run out of TAM, really. It’s just, how do you reach them?

But when I think back to that time, I think you were, like, way ahead of the curve and really innovating in terms of, well, an offering that VCs were ready for, right. It feels like your company was more like a consumer company, so I’m wondering if it was like I think you referenced.


Yeah. In the seed. It was difficult to raise. Was that a lot of headwinds? And did you think of yourself? CRB is very strong in consumer. Did they bring kind of consumer instincts to you. How did that all play out?

Kirk Simpson:
Yeah, it’s interesting. I think a couple of things come to mind as you talk about it.

Number one, I remember talking at one point to Alan Lau, the co-founder of Wattpad at one of the CEO groups that we had. And he was talking about the fact that when you’re trying to raise money, especially in the sort of later rounds of call it ABCD, whatever, rather than the seed round, those venture capitalists are seeing so many different companies. The question is, how do you stand out?

He talked about the fact, and we all agreed it really takes one slide where you want them to sort of perk up right at the beginning of the meeting and go, wait a second, what did I just see? Because I don’t usually see it. And so you’ve got my attention.

For us, very early on, we were signing up probably at the time that we pitched CRV, we’re signing up 500 small businesses a day and essentially for zero-dollar CAC. And by the time we were raising our B, that was like 1200 a day. And I think it peaked at about 2300 a day when we started doing some SEM, et cetera.


And so I think for founders who embrace the VC model and believe that their business needs venture capital, and obviously, you and I both know probably too many people think that their model is VC-backable or even would want to take that approach. But if you do, because you feel like you’ve got a model that takes capital to get to scale, to work, et cetera, there’s no better way than having something that sort of pops them up and go, yeah, we could change the dynamics in this space by taking a different approach to customer acquisition. And that’s really what we tried to do.

Mark MacLeod:
Yeah, you think about it, they pass on so many, right? So you just have to grab their attention.

When I was advising companies on late-stage fundraisers, the way I distinguished early stage from late stage was like the early stage investment decision is ultimately a leap of faith, especially at the seed. The seed is just a bet on you and James.

In the case of Wave. A, there’s some evidence. The thing that distinguishes B and the rest of the Alphabet from C to A is there’s no more leaps of faith. You’ve figured out the recipe, you know where to go to get customers, how long they stick around, how much are worth, therefore how much you can pay for them. The whole pitch is basically, I figured out the recipe. I can make ten sausages if you give me your money, I can make 100 and each one tastes the same.


And by the way, I’ve got the leadership team in place to deploy the capital to get to 100 really great-tasting sausages. And then the other thing I would suggest is ideally, maybe not in 2012, but more recently, seed and A-rounds tend to happen pretty quickly.

There’s a lot of FOMO momentum, but with B’s and above those investors, they want to kind of have a triple, at least on every deal. And so the more time they have to track you, if you walk in and be like, hey, I’m Kirk, I’m from Wave. Here’s what I’m planning to do next quarter. Three months later, you come in. Yeah, that thing I said I was going to do, I did it. By the way, this is what we’re doing next quarter.


And then you tell that you crush that, and then by the time you do that, you’re like top of the pile. Couple that with your suggestion of just like that, wow, attention slide. And I feel you’ve got a very successful fundraiser on your hands.

Kirk Simpson:
Yeah. I think the one place that is a little bit different than what you described, I think, of what we experienced at Wave, which was with our B even, and I think you and I would both agree, as you mentioned, 2012 very different than now or even a couple of years ago where with our B, I would say we sold still on the promise of what this huge community could bring. So we hadn’t figured out monetization, but we had really figured out distribution. And the view was that when you had this many small businesses on the platform, when you had this much data, when you had this much right to get in their important flows through their financial data, that there was a way to monetize. But it took us a long time to figure that out.

Mark MacLeod:
Well, I would argue you figured out the toughest thing, which is distribution.

Kirk Simpson:
Yeah, I would say the thing that it led to and the challenge that I referenced before about free was there were two challenges. The one is the obvious, which is you ultimately have to find a path to monetization. And we weren’t even the typical sort of freemium of giving part of it away and then charging for the rest. We were really free. And so something we got lucky on was fintech really became a thing right at the right time for us. And we were at the early stages of that, which one could never sort of dismiss. Just the idea of timing and luck and that kind of stuff, and fintech coming around and being a thing and us being at the forefront of that was really, really helpful timing. So the one is monetization is obviously challenging with something that’s free.


But the second, which was much more nuanced and I would say a much bigger fight over a longer period of time, was the idea of churn and usage and product signal. And for us, that was really, really difficult. I mean, you know, this working within small businesses and back office tools is that small business owners hate doing it, put it off, all of those kinds of things.

And so we had a double whammy of we were in a space where small business owners didn’t really want to be in there on an ongoing basis for the accounting side of it as well as it was free. So there was no signal that they had churned by removing their credit card or not paying anymore. And so it was really, really difficult to get the right product signals to understand which part of the funnel wasn’t working. Those kinds of things became much more difficult than I think they needed to be. And I would say that held us back a lot.

Mark MacLeod:
Yeah. So hard. And with free, with that amount of inbound funnel, separating the signal from the noise would have been difficult, right? If you’re an enterprise SaaS company and you sell the Fortune 500, well, you got a TAM of 500, your actual customer counts a lot more. There’s no noise, versus having 2300 new customers sign up every week.

Kirk Simpson:
Yeah, I would say every day.

Mark MacLeod:
Sorry. Every day. Exactly. Every day.

Kirk Simpson:
Yeah. I would say that this really makes your point is that we got really good at the upper funnel optimization because we had so much traffic to play with and test against. And those first steps of onboarding, I mean, we could really, really sort of nail those initial touch-points to try and maximize conversion. And then down funnel from that, it became so much more difficult. And so we ended up spending a lot of time up funnel, which has value. But I would just say, I will always look back on my time at Wave with some level of regret that we didn’t take the oxygen out of the space like I think we could have if we had executed better on the product.

Mark MacLeod:
Interesting. You know, when you told me about Zero wanting to buy you, it made me think about Intuit buying Mint. And at the time, intuit’s largest line of business was the personal accounting thing, right. Which they subsequently sold.

Kirk Simpson:
Quicken.

Mark MacLeod:
Yeah, yeah, Quicken, thank you. And I think Mint actually didn’t really work as a standalone business, but it was threatening to their single largest line of business. So is that the kind of impact you were looking for really, it’s just like, to really threaten the Zeroes and Intuit.

Kirk Simpson:
Yeah, I mean, I think we did threaten Xero. I think there was a small time. I mean, I was with Brad Smith, who was the CEO of Intuit at the time, and he gave us a huge compliment, which was that he felt like we, at that particular time, had the best UI and UX in the space. And I think the model threatened them a lot. But I think what we were able to do with it for a variety of different reasons, in terms of amount of funding, talent level in Canada at that particular time. But none of this is an excuse. I mean, at the end of the day, Shopify has overcome all of these things. And so, ultimately, that’s why I have regret, is because the buck stops with me.


And I think we had an opportunity. The outcome was great, the journey was incredible, all of those kinds of things. I think we did a lot of things for a lot of small business owners, but I just think the potential of what we could have delivered for small business owners, at the end of the day, we could have done more.

Mark MacLeod:
Interesting. Well, you’re being hard on yourself because you delivered a pretty serious outcome, and you served a lot of customers. But I think that’s also right out of central casting for an entrepreneur to be hard on themselves. So I get it.

Kirk Simpson:
Yeah. I think all of us are in this to try and do something big, and have an impact, right?

Mark MacLeod:
Yeah, 100%. So I’d love to stay on you. Let’s shine the microscope on you for a second. If you have, like, a therapy couch, you could lie on it or something, but you look at the biggest outcomes in venture world. They tend to be founder-led, start to finish. So 100% correlation between your performance and the outcome of the company. Looking back, what did you do to make sure you grew faster than the company? Like mentors, like Peter Cerescia, who’s a very important figure in your life, and we’ll talk about that. There was him, but were there other things? What, what did you turn to to make sure you grew faster than the business?

Kirk Simpson:
Probably the biggest unlock for me. I mean, you mentioned it all the way along. We worked with some amazing people, and I’ve had incredible mentors along the journey of my life, which I’ve been lucky about, and relied on some of them through the journey.

I would say one of the biggest unlocks for me was when Ashira joined the company in 2015 and through the work that she did and the introduction to actually, her father’s firm. That did a lot of exec coaching and training. I think the biggest unlock for me was her helping me lean into my strengths and stop worrying as much as I was about my areas of weakness. That’s number one. And number two was I felt a lot of guilt in the early days when I knew in my gut that we needed to make a change in the people in the organization at different levels.


And I had to come to a lot more peace around listening to my intuition, having direct conversations, and then, where necessary, making a change. And I think those two things were the biggest unlocks for me and led to, quite frankly, everything else that was related to my own growth.

I think freeing yourself up from that feeling of, who am I to make this judgment when I’ve made tons of mistakes along the way, and being okay with the fact that I’m going to try and be honest, be real, be authentic, be sensitive, but not overly so. Make sure that I’m being candid in all of the conversations so that we know exactly where we stand and what we need to do in order to get to where we need to go. But then, if that doesn’t happen, being okay with just making a change, and, man, I had a hard time with that, and I still don’t naturally find it super easy. But it was the biggest unlock by far. Everything about this journey, as you well know, is about the people you surround yourself with, the talent in the company, their own feeling of empowerment and inspiration, and those kinds of things. And if you’re not constantly just driving for continued improvement across the company, it’s just not going to happen.

Mark MacLeod:
Yeah, 100%. The most successful founder that you and I know is Tobi from Shopify. And his mantra from the earliest days is, how do I get 1% better every day? Which sounds like a cheesy saying in a poster, because for most companies, they don’t operationalize it. But he did. He would go home and replay his day every day and be like, oh, I don’t like how I behaved in this meeting. We took the wrong decision. He would course correct either that evening or the very next day. He’d go through an explicit learning and improvement loop.

Kirk Simpson:
I’ve been reflecting on something related to what I’ve seen from Shopify. So at the beginning of this year, let’s say, as an example, they made a big announcement around wiping people’s calendars and this kind of stuff, or this new calendar plugin that they have that talks about how much the meeting is costing, et cetera.

I’ve been reflecting on that because I stayed at Wave for three years after the acquisition. And, you know, for the people, for Jeff and the folks at H&R Block, for my own sanity and feeling of authenticity, I really tried to give those three years the best that I could. But obviously, near the end, your mind is just starting to wander and you’re thinking about other things, and you can’t help but see the finish line. And it’s difficult. And it’s difficult when you’re wired and have acted in a certain way that at least I think I did for ten or eleven years of, like, peddle to the floor and we gotta go go go.


What I found during that time, and I could be delusional, but I’m pretty sure, is that as I took my foot off the gas, everything kind of slowed a little bit, or decisions took longer, or there were more meetings to decide something, or blah, blah, blah. And so I’ve been reflecting on the Toby example and the meeting killing the calendar invites as an example of they are still in that mode all this time later and all this success later of, like, we are not going to let that slippery slope slide into the company of the foot not being on the gas. And I have so much respect for that. And I think that’s why founder-led companies do better than not, because that foot on the gas is so important.

Mark MacLeod:
I spent a brief time there as their first CFO on a part-time basis, and I came in CPA Virgo. I see the world as black and white. They asked me to come in because I had best practices, I had experience. But Toby was viscerally anti-best practice. You had to prove to him on a first principles basis why something should be done. He questioned everything, and I think that’s part of that observation that you just made. It’s not just, well, here’s what Harvard Business review says to do for a company with 10,000 people, every decision is arrived at using first principles and therefore stands on its own merit, you know. Question everything

Kirk Simpson:
And kudos for no one sort of understands what it’s like for him in that role and others like him, to keep your foot on the gas for as long as they have, and just to keep that standard really, really high all the time.

Mark MacLeod:
Yeah, 100%. Yeah. It’d be so easy to just chill out. He’s a billionaire. Maybe I’ll get an island next to Richard Branson’s and I’ll just chill out. Who could fault him, right? I’ll bet he works harder than he’s ever worked.

Kirk Simpson:
I bet that’s true.

Mark MacLeod:
Going back to your retro on yourself, you brought up two really important concepts. One is this notion of superpower and the other is the importance of making the hard decisions. When I onboard new CEOs for coaching, I have a little form that they fill out where they rate different aspects of their personal life and their business from very unsatisfied to very satisfied. But I ask them explicitly, what is your superpower?

I also ask what their kryptonite is. But I ask about the superpower because first of all, in a utopian world, every person in a company would be doing the thing that they’re uniquely capable of, where they’re in flow. It doesn’t feel like work. I think that’s hard to do as a company grows. But at the very least, the company should be designed around the superpowers of the CEO.


And then management teams should be built around said superpowers, right? So you’ve got Kryptonite in one area. You’ve got a right hand for whom that is their superpower. So I really love that you had that insight. I’m going to come back to that in a second and ask you if you’re thinking about that for your new company. But let’s park that for the moment. And then on the hard decisions, I’ve had lots of people go over the years, always, in retrospect, too late and always realized afterwards that nobody wants to do a bad job, right? We’re all what Peter Drucker calls knowledge workers, right?


Like, we are the product that the company hires and we know when we’re not crushing know. So it’s actually humanitarian. It’s compassionate. It’s compassionate for the person, it’s compassionate for all the other stakeholders. Right? For the other employees. Often you let go of a department leader as an example. People in that department knew it and they’re like, finally you took action, right?

Kirk Simpson:
Yeah, I think you’re right in terms of it is the compassionate thing, provided you’ve done the work ahead of time to be as candid and as clear about the why, the what, the how, all of those kinds of things. And I think part of my issue was that I was skating around that versus having those conversations and being as honest and candid as I needed to be, such that they had the opportunity, if they so chose, and if their skills lined up with it, to be able to do the job that was now better defined.

I think that’s part of the journey too, is I have a tendency to let it fester and to feel it in my gut, but not express it as clearly as I need to. And so that’s the road and the journey that I’ve been on is trying to be better about that, such that we both can be honest about where things are at what the path forward is. And then ultimately, if not that, it never comes as a surprise. And it’s probably within the compassionate place that you’re saying where it’s like you’ve got a ton of skills. They just don’t line up with what we need right now. Go put them to use such that you feel better about it.


I think I will say one last thing on this, which is I have seen people come into Wave and key’s not old enough yet for it to have happened here where when they left, they weren’t as strong as when they came in. And that always bothered me because we had that impact on them and we needed to do better about either playing to their strengths or not leaving them in an uncertain place for a period of time. That visual with me is the worst possible thing. And so I think that really helped cement that I needed to be better at expressing those things such that those people never were in that limbo where they felt uncertain.

Mark MacLeod:
Yeah, I love that you said that. I mean, I think they own a fair amount of agency in that issue. It’s not just on you. But maybe again, I come back to Shopify here. Shopify created a coaching culture, right? Initially started with this guy was coaching Toby, then he started coaching some of the leaders. Then they brought him in-house and they created a coaching function. And so I think eventually everyone at a certain level and up got access to that. So there was some system in place to help people grow.


That’s just one example. So I like that. I’d love to switch gears and maybe talk about boundaries for a moment. Right. You’ve just celebrated your 20-year anniversary. You have three children. How did you navigate being a husband, a father, a son, a brother, if you have siblings, like a friend? How did you navigate all of those hats? Or did you, or was it just everything was deferred and it was all about Wave?

Kirk Simpson:
Yeah, it’s a really good question. I think one of the reasons why I’ve been married for 20 years is because my wife was amazing at sort of reminding me what was important and that it was unacceptable not to be present in a way that wasn’t condescending or challenging or that kind of stuff, but just in a loving way of like, listen, you’re never going to get this time back with the kids at this age. Or with your friends or any of that kind of stuff.

So I would just say for me, I think there were periods, right. And I think we got to be okay with those ups and downs. Like when we were in heavy fundraising mode or 2015, we’re about to run out of money or that kind of stuff. It’s all hands on deck. And my feeling was, I’m going to go down with the ship if it goes down, but I’m going to do absolutely everything possible to keep it afloat.


But that lasts for a period of time. And then when you come out of that and things stabilize, thankfully, you make sure that you’ve got a great team around you. Then you leave at 03:00pm if you need to go see a basketball game or go do this or go do that. I think it’s just really important, and I do think that, and I’ve talked to many founders about this, because I’ve seen both sides of this from other people I know, is that you got to be on the same page with your partner. And I know a lot about my wife. She knows a lot about me, and I know what drives her happiness, and she knows that for me, this drives my happiness. Like, this is my happy spot, and this is what I need to do to be at my best, is be in these high-pressure, amazing situations. And we have to embrace that about our partners.


Right. And sort of understand what makes them tick. If we’re trying to take that away, that’s not going to work either. So I just think it’s a balance. And then one last thing about this is, because generally, Wave was skewed a little bit older, because James and I were both older and had kids, and we tried to involve families and spouses came to all of our holiday parties until we got to a certain size. We would have events where kids would come into the office and that kind of stuff. I think it’s really important to my kids kind of felt a little bit of the journey. We’d go into the office on Saturdays because there was, like an arcade there and they could see the office.


And I think you got to bring these two worlds together. They’re not separate. It’s who we are.

Mark MacLeod:
Yeah, I love that. Well, culture starts from the top, right? So you made that a cultural norm. So I really love it. Maybe I’ll come back to the exit because it’s such an important moment. And, you know, there was one exit that nearly happened in maybe more defensive circumstances with Zero. Maybe just tell us, I guess, a little bit about how you arrived at a decision to sell to H&R Block.

Kirk Simpson:
Yeah. So I think all kudos to the board and to my co-founder, James, because they were kind enough, and you referenced this earlier, like, I think it’s smart also for boards and VCs to do this. They basically said to me, it’s your decision. If you want to keep going, let’s keep going. We were in the middle of a successful fundraise, not one that was maybe as easy as I was hoping for, but a successful fundraise. And then this offer came in. And so we did have options, as you know, and would have created for your clients and really counseled your founders to do, like, there’s nothing like having options in order to make the price go higher or the terms be better.


And so in our case, the successful fundraise led to dynamics that pushed the deal to go faster and with better terms and all of those kinds of things. So that’s a real thing. We felt it. It was powerful as a force that could help drive to a decision. Ultimately, Mark, so much of this is just your gut feeling, right? Like, I think there were pros and cons on both sides, but it had been a long ten years or nine at the time. As we discussed, lots of ups and downs. The business felt good, but not great. The team of Jeff and Tony at H&R Block were amazing to work with, so it felt like it was a good cultural fit.


They wanted to leave us alone and have us continue to grow, which was an amazing opportunity. The price seemed fair. And so to me, I just kind of looked at it and thought that this feels like the best outcome right now.

Mark MacLeod:
It’s not a thing you can A/B test, right?

Kirk Simpson:
No, it’s really hard, and I will tell you. So we had just gone, as we were going into that fundraise, we had gone through a process where we had built a sort of vision platform for the company to see about what we thought was possible over the next five years in the business. And I had presented that to the executive team to get them hopefully inspired about what I thought was possible. They really pushed me to share it with the entire company. I was kind of like, oh, I don’t know, it seems a little bit kind of out there. And they were like, no, everybody should see this. I showed it to the entire company. They felt really, really jazzed about it in a way that honestly surprised me.


And then I don’t know how many months later, I remember calling the town hall to announce that the sale had happened, and I was walking down. So I have the pleasure of living ten blocks from the office. And so the H&R Block was going to announce it before the market opened at 8:30 or something like that. So we had to call everybody in for 08:00 to tell them before the market announcement went out. I remember walking down Logan Avenue at 7:30 in the morning and I don’t think I’ve ever been more scared, more nervous, more feeling of inauthenticity that I was going to go tell the company that I had decided to sell the company right after sort of inspiring them, hopefully, with this vision. And I was amazed by the reaction of the team. Everybody was super excited about it, et cetera. But that’s the kind of journey it is when you’re going through this, right? You want to think, oh, I climbed to the top of the mountain.


We did it together, we got there. It’s a great outcome for everybody, et cetera. But it’s filled with a lot more anxiety and concern and drama than that.

Mark MacLeod:
Yeah, for sure. What a moment. Jeez. I’ll bet, actually. So optionality is huge. Puts you in offense, not defense. But I’ll actually bet that that five-year vision exercise was actually really important in the sale because 100% of the value for the buyer is created post-closing, whereas, for the seller, it’s all pre.

Kirk Simpson:
Yeah, you’re right.

Mark MacLeod:
And so being able to actually clearly articulate and be genuinely excited about all of this future potential, I actually think is so important to getting the buyer over the finish line.

Kirk Simpson:
You know, it’s interesting. I really, honestly had never sort of put that one in one together. But I think it’s absolutely right. I mean, we were in that space where they could pick up on feeling excited about what’s coming and what’s possible and that kind of stuff. And you’re 100% right.

Mark MacLeod:
Well, maybe let’s switch gears as we kind of start to wind down. So you’ve gone from a really big exit, to be honest. We hear about giant exits, but they’re actually statistically far rarer than most people believe. You sold Wave for 400 million US, and now you’re right back to the beginning, maybe. Tell us, how did that happen? Origin story. Is it easier the second time around? Is it, like, weird because you’re used to having staff and resources, what’s that journey like?

Kirk Simpson:
Yeah, I’ll try and take those one by one and keep them brief. But I would say, first of all, when I left Wave, we were 375 people. We’re now at Key in a nine, and I’m just absolutely loving it so much of the world in those 375 waivers, time period of call it 2022 at the time is vision setting and making sure everyone’s aligned. And we were going through the tail end of COVID and remote and a very different talent market than today. And so just for a lot of reasons, getting back into this size and being able to work with a key handful of people and alignment is much faster and quicker. Iteration is much faster and quicker. All of those kinds of things has just been really rewarding and energizing. That said, I think the negative of it is being back at the pre-market fit stage, and I kind of forgot what that was like.


I mean, we always kind of knew what we were building at Wave and were pretty committed. And James had a really rock-solid view of what he wanted to create, et cetera. And so being back at the inspired by decentralized identity and what it can create, but not sure how to get that product to market has been humbling because as you know, you think, oh, well, this is a good idea. And then you test it out with a bunch of users and you’re like, they’re not really all that inspired by that. So the iterations that we’ve gone through over the last year have been ups and downs.

That said, I was just saying to my wife today, like, we’re on the cusp of launching a new product. When this podcast drops, we’ll be out in market and people can see it. And right now it’s just everybody is working really hard to bring this thing to life across engineering and product and design and marketing and social and all these different channels.


And it’s just like so fun to be at that stage and feel that excitement and that energy. And before you launch, it’s always fun because you think, oh, this thing’s going to be great and we haven’t been punched in the face yet.

Mark MacLeod:
Nothing but possibility.

Kirk Simpson:
Exactly. So it’s been fun.

Mark MacLeod:
Amazing. Well, you’re a brave soul. Not everyone could do that. Yeah. And as I thought about it, based on the very little that I knew about it, it feels like there’s so many directions you could go, which is good and bad.

Kirk Simpson:
Exactly right. And a big kind of chicken and egg problem, right. You need the customers to adopt in order to get the third-party products and services to use you to unlock value faster. But without those third-party products and services, you don’t necessarily have the customers. And so people in this space, in decentralized identity in general, have really struggled over the last five to seven years. The idea that, and as you described it, what you can see it doing is right there in front of all of us. It’s a question of how you bring it to market.

Kirk Simpson:
We think we’ve got a good idea now and we hope we’re right.

Mark MacLeod:
Well, I can’t wait to see how it all unfolds. Feel like it’ll be another multi-year journey.

Kirk Simpson:
Oh, no, that’s not what I was planning for.

Mark MacLeod:
Well, good things just take time.

Kirk Simpson:
You’re absolutely right. They do.

Mark MacLeod:
That’s how it works, you know. It’s not every day that know the Instagram sale for a billion dollars when you’re actually probably a similar headcount to you. Now that just doesn’t happen all that much.

Kirk Simpson:
One can hope though, right?

Mark MacLeod:
Right.

Kirk Simpson:
Mark, don’t crush my dream.

Mark MacLeod:
Sorry, sorry. You’re absolutely right. Well, Kirk, this has been a true pleasure. You’re one of the good guys. And so I’m super thrilled, actually, that the first show I got to record was with you. Thank you so much for making the time.

Kirk Simpson:
I really appreciate it, Mark, it’s always a pleasure. And yeah, going back to those days, I remember meeting you from real and pitching you and thinking, oh my god, Mark McLeod’s going to listen to my pitch and this is going to be so exciting. And you gave really great feedback and all of those kinds of things. And so to be here, whatever, 13-14 years later is kind of karma. And that’s awesome.

Mark MacLeod:
I love it. Well, it’s funny. So you brought up Wattpad. You and Wattpad are in my anti-portfolio. Misses that turned out to be really big exits. So lesson learned. I guess that’s why they call it venture. It’s not obvious.

Kirk Simpson:
That’s true.

Mark MacLeod:
And both of them, I would say A I had the concern about free, but I’m just not a consumer guy. Well, thank you again for making the time, Kirk.

Kirk Simpson:
There were many days, Mark, where I would have really liked a $10-a-month SaaS service. So you and me both.

Mark MacLeod:
It’s meat and potatoes. Just keeps coming in.

Kirk Simpson:
Exactly.

Mark MacLeod:
Yeah, I love it. Thank you so much, Kirk.

Kirk Simpson:
Been a pleasure. Thank you.

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