959 - One Man's Journey Of Breaking Into Silicon Valley From Ohio w/ Andrew Rea (Taxwire)

Mat Sherman (00:01.216)
All right, we're recording. Today we are live with Andrew Ray, who is the co-founder, CEO of Taxwire. Andrew, welcome to the show. How you doing?

Andrew Rea (00:12.27)
Good to see you, man. Thank you for having me. This will be fun.

Mat Sherman (00:15.086)
Yeah, excited to have you on. feel like, me if I'm wrong, but I feel like we first like met or got connected just in like the pre or during early COVID years on Twitter. We just like, everyone was online in tech, at least in the moment who was in tech. And what a mishmash, right? What a crazy time.

Andrew Rea (00:26.264)
Yeah, yeah.

Andrew Rea (00:33.966)
I still miss it sometimes because it just, I don't know. Maybe it was where it was out of my career at the time too, but that felt like such a pure moment in time, at least at first. I mean, don't know about like as time went on, but like 2020 especially, maybe some of 2021, it was just this pure time where we were all locked up. We were all like trying to, for many of us that actually, like speaking for myself, that ended up being a, almost a great moment of reinvention because geographic barriers became much less prevalent for at least for that moment in time of where you could just get into almost

any room if you were doing interesting things on the internet. And so yeah, it was like pure, it was like a lot of like things were happening. Everybody was on the, it was like, if you love the internet, like that was like actually kind of like a great time to be alive, even though generally it was a hard time in the world. And yeah, like I don't remember exactly what it was, but I remember, I think we were like, started like following you on Twitter. Gosh, this is, it might've been like right before, but it was like, definitely I remember like during early, early 2020, you were just like, you were doing, you were doing everything. You were like, you had hot takes.

You're in the podcast. were like you were like you were out there and you were hustling and it was a great thing to see

Mat Sherman (01:40.173)
It was that there was a period where I was post failure of my company Pup Loft that was backed by Jason Calacanis and that ended because of a co-founder issue which like was unfortunate because it wasn't like

like I wasn't it was unfinished business. I still wanted to like do more things. I feel like after that I was literally doing everything the podcast newsletter tweeting a lot, you know, bunch of bunch of stuff. I was very high, you know, clubhouse like all day every day pretty much. then and then I kind of ended up on on Seed Scout. But anyways, it's good to get to have you live on the pod. think you're you haven't been on before. Right. This is your first time. Right.

Andrew Rea (02:14.84)
First time, first time.

Mat Sherman (02:15.822)
Cool. So let's dive into just to start, what are you working on? What is, what's the tax wire? What's your company? And we'll kind of dive into different areas of that, but just give us a high level for now.

Andrew Rea (02:28.75)
Cool, yeah. I am one of the co-founders and the CEO of Taxfire.com. help with, we basically help software companies like B2B SaaS, AI, econ brands, and then a lot of like accounting firms with sales tax compliance. So think if you have had the fortunate problem of all of a sudden going from a business with like very little revenue to all of a sudden a lot of revenue very quickly and you sell it a bunch of states or countries, all of those places have different laws and regulations and different tax rates for based on where your actual customer is and it gets quite complicated.

figure out where you're supposed to be collecting taxes and you have to like actually register and then like integrate something to calculate those rates and wherever you're billing people you have to file tax returns it's quite annoying and and i dealt with this in a pretty big way at a previous company and so we make it very easy to deal with all of the like actual initial compliance stuff of like getting registered in the states fixing a mess if you have a mess and then like we we integrate wherever you bill customers and and uh they do all the the fun compliance stuff very easily and hopefully take it off your plate so we we probably

So yeah, I'd have to double click on any of that stuff, but we've been at it for 20, I've been at it for almost, for like 20 months, I think. But we've only been a real business, I'd say for like 14 months is when we really kind of coalesced and like my co-founder came in, we signed our first customers, raised money, did the thing. So it's a fairly young company.

A dozen customers, still early stage, trying to figure it out, but yeah, it's been fun. Taxes are extremely boring to most people, but also very stressful. But the enjoying thing, believe it or not, they are interesting in their own way, but the most rewarding part is you take an anxiety off someone else's plate, which is, actually think, the most rewarding part of building in this space.

Mat Sherman (04:12.622)
think one of the top five, maybe top 10 definitely, maybe top five worst feelings I've ever had in business in my life is like 2017. I have an LLC. I like made a bunch of money. It was a successful year. You know, I made, I don't know, 40,000 or something, whatever it was.

And at the end of the year, I'm like, great, like how did this tax, how does this, how did taxes work? And then someone told me it's a pass through and I have to pay, what was it? Eight to $12,000 in taxes and I had nothing saved up. And this is obviously, think this is different from that, but just like taxes in general, massive, massive stressor for I think any founder that isn't an expert in it. So it's great that you exist. I think I just have a clarifying question and like maybe this will be

Embarrassing for me, maybe all three us have been doing it wrong the whole time. like up until, mean today, like if I wanted to start something and everything I've ever done for Thinking City, Seed Scout, PopLoft, et cetera, I just make a Stripe link and people just are my customer and they pay me and that's all I've actually done. I actually haven't done anything with sales tax. Have I been doing it wrong the last, like my whole life? Or like walk me through what should I be doing or, yeah, like tell me, walk me through, because I think a lot of people are in that bucket.

Andrew Rea (05:24.174)
Probably not your whole life. Probably not your whole life. Yeah, so I'll kind of like, yeah, yeah, totally. Yeah, and I think honestly, especially since much of this audience I'm guessing is startup founders, startup folks, often this is not a pre-product market fit problem. This is very much a post-product market fit problem. Even if you're supposed to be doing something about it pre-PMF, you probably shouldn't. Just don't do anything. So to kind of...

take a step back, this was really not a problem for anything but the biggest companies in the world 20 years ago. Like pre the internet, this is like Walmart's problem because Walmart sells stuff everywhere in every state in America, every country around the world even to some degree. And so like they're worried about like I have to collect and file sales tax every single month across thousands of products all across the US all across the world. But your average small business they're like that they're not doing anything because they maybe sell stuff in like one singular physical place.

The internet happens and you had like 20 years where the laws were written such that in the US and every state is a little bit different in the US for these tax laws, but they're written in a way such that if I am based in New York City, which is where I'm based and I sell a product to someone in Texas, I do not have to collect taxes from that customer in Texas because I am based in New York. And so I only have to worry about doing things in New York because that is where we are physically based as a company. And a few years ago, there was a Supreme Court ruling that blew up those laws. And so now if you're an e-commerce brand, software company, whatever, you are supposed put like

according to the Supreme Court in this case, you were supposed to be collecting these taxes. And so fast forward to today, almost every state and now increasingly most international countries have laws that dictate that if you cross like a certain threshold, it's usually like a hundred thousand or two hundred thousand something like that in sales in a given jurisdiction over like a 12 month period or something. Now you're supposed to start like registering and collecting and filing taxes here. now realistically, like what happens is most people in the early days, even if they're supposed to be collecting taxes, they're just they're not worried about it.

just like business someone wants to pay me sweet strike payment link go like this is awesome and they they they kind of move out or like Shopify or whatever it is they just like start the business and it starts running and so what typically happens is then one day you're like

Andrew Rea (07:34.21)
you're at like a million, five million, 10 million in revenue. Maybe you've got a real finance person finally, or your accounting firm is like, hey, are we collecting sales tax? Or maybe you're like a customer asks you like, like a say you're in B2B SaaS and you just sent that payment link and they're like, hey, are you not charging me sales tax for this? Like, and it's, and then you're like, am I supposed to be? And then you, you go, you go, you go start realizing, shit, I'm supposed to be collecting sales tax in a bunch of these places. I've not been doing that. I don't even, and then you're like, you're hearing about this like economic nexus threshold. And you're like, what does that?

Then you're just like, I don't know what to do. I'm scared. And then at that point, people either kick the can down the road even further because they're terrified of it or they end up like coming to someone like us, they go to their accounting firm, whatever. But like basically you hit this point where you can't ignore it anymore or even worse, the state comes to you and now you have to like figure out what you're supposed to do and then potentially clean up like a historical situation in a way that doesn't cost you a bunch of money. That's that's that point in time is often where we plug in and we'll come in and like, hey, we can like help you figure this out. If there are like back taxes to file, we'll do it.

We'll file these like these like these complicated penalty waivers You don't need to worry about it that'll like save you money on like any any penalties from the state We'll get you right well like and then we'll integrate in stripe and actually make sure you're calculating the right rate on on that payment link or Whatever it is you're doing so but it's so it does for a smaller company like maybe if you're a founder and you don't have a finance team and you've got a couple million revenue like we do sell to some folks like that, but a lot of the folks were selling to

It's more than just them. They've got a real business. They've got a team around them. They're not just like solo running and gunning it. Or we don't even talk to them. We just sell to their accounting firm and their accounting firm tells them to use us. It usually ends up being one of those two things.

Mat Sherman (09:12.814)
That makes a lot of sense. You mentioned that this was, you knew that this kind of was a problem based on a prior company and I don't know if, I don't know what that company was, but I do want to dive into a little bit of your background. think when we first chatted, not on the podcast, but I think just our first intro call like three years ago or four years ago, one thing that I kind of noticed about you is like I feel like you've navigated like breaking into tech.

Like pretty flawlessly, like I actually think you did it right in a world where there's not like a playbook where it's just like, hey, like here is, if you want to break into tech, here's exactly what you do on a billboard, you know, the moment you want to break in. It's actually quite hard to know how to do it. So can we just kind of talk through maybe a little bit of your background, your story, you know, what did you do before TaxWire? And then I have a few meta questions around that, but walk me through, what did you do before this? And maybe how'd you start there?

Andrew Rea (10:05.964)
Yeah, totally. Totally, yeah. I...

I'll go way back and try to bridge it really fast because like the real starting point is usually informative. I grew up in a small ass town in Ohio, like an hour outside of Cincinnati. My mom's an immigrant and my dad like just kind of like grew up working in like grocery stores and stuff like he like he he's a small church pastor and works like two or three blue collar jobs to make money work. That was like how I grew up. We were like we were always kind of tatering between just like flat out poor like barely making it like, you know, like lights going out, stuff like that.

marks you know you name it like probably done a good good bit of it.

to like, you know, like maybe barely feeling like we might be able to make like the middle class. And so that's kind of how I grew up. Like my parents, super hardworking, but like didn't go to college, just trying to like good, good, hardworking people. And I think my, and also too, like growing up in the Rust Belt, I grew up in this part of the country that was like already kind of depressed. I joke now with friends that it's like JD Vance vibes, just cause people know who that is and kind of like, it gives them a little bit more of a picture of how someone like me might've grown up. And there's not a lot of economic opportunity.

My choice, I didn't know many people that went to college. Most of my peers growing up didn't go to college. And so even college was like this, like, how do I even do that? Let alone, like, I didn't know what tech was. I didn't know what, like, software engineering was, like venture capital. Like all of these, I didn't even know what the Ivy League schools were. I didn't realize there was a difference between some of the goes to Harvard and Stanford and some of the goes to a local community college. There's a really big difference between those two things. I knew none of that. And so I started working when I was like 14 or 15, pretty much worked 80 plus hours

Andrew Rea (11:42.952)
a week until college. I was able to pay my way through school that way, but I went to this like shit school in Florida and like by the time I really started getting into the like, okay, I want to have a real career. I really don't want to be poor. I'm interested in doing something entrepreneurial someday. It was like to me it was like, okay, Wall Street seems cool. And then like tech this time I started learning about tech because actually I was interested in Wall Street and I was reading the Wall Street Journal and I started hearing about these like tech companies were raising all this venture capital and so like it was really just like a lot of like learning on the internet at first and then I

started up starting a company which is kind of like a very different rabbit hole when I was 20 with some people that were more experienced than me. It was really more of a small business than it was like a real venture-backed company. It was in the Midwest. We raised a little bit of angel money. Long story short, it wasn't successful. We like sold it, like just didn't lose people's money. And then I worked at a venture fund in the Midwest. And so I had kind of like broken my way sort of into tech. By the time I was like 20 to 20, this is like 20 to 22-ish. was like that, this like period of my life.

But it was like at end of the day where I was at is I had like, you know, gone to a shitty school. I did not come for money. I didn't know people. I didn't really have much of a network. I had worked on this like small business thing that like at the time actually when I was like trying to break into tech, it still hadn't sold. So we hadn't like even gotten an outcome out of it. And I was like, I'd like kind of made my way. I was in Columbus at that point, Columbus, Ohio. And I had made my way into like some kind of a tech ecosystem, but it was clear like there's just a lot less capital, a lot less founders. People were less in

even the investors that were there, kind of pushed you to play small ball. And it was just, was a very clear difference between the people I would meet that were from the coasts or on the coasts and where I was at. And I realized at that point, it's like, okay, if I want to have a serious career in tech, in my opinion, the best thing I could do is to try to get to the coast or get to one of these companies on the coast. Problem with that was like, I'm again, like shit college, not really a network outside of this like really small tier three tech ecosystem.

And it's like, so how do I do this? And so fortunately, as we alluded to earlier, maybe not fortunately, but fortunately for my career, COVID happened to put everything on the internet. And before that happened, I was in the middle of like trying to figure out how do I get out of Ohio and kind of onto one of the coasts.

Andrew Rea (13:54.926)
And fortunately, like a lot of everything went to Twitter. So I was on Twitter. I got on Twitter and started like building a little bit of a network there. That led to kind of seeing what on deck was doing at that point in time. And this is like 2020. They were like just coming out. They'd raised the seed round. They were doing a program for founders, which led to doing a bunch of other stuff later. But I DMed Eric Torenberg on Twitter and I forget exactly the reason initially, but they were hiring for some role. was still like a really small company.

And they actually rejected me the first time, I just kind of hung around the hoop and kept bugging them. And so then they hired for another role later. And then I'm fortunate that they hired me to come in and do like op stuff and like launch online communities essentially. And this is in a time where that company ended up becoming very hot for about a year or two, like raised a ton of money, like scaled really fast. And I was fortunate to be a part of that company during that period. I got to do a few different things there. That's how I spent even more time with you through that. Cause one of the things I did there is I ran their angel investor community.

And so we, I think some of the folks in that community invested in Seed Scout. And so I got fortunate to just meet a lot of really incredible people. I basically got a shot at this company. That company did well. So I finally had a stamp of some kind on my resume. I started building my network and I just worked really hard in the company and really hard at building my network kind of through the work for the company. And I moved, I spent some time in San Francisco. I ultimately moved to New York. And it was really like, it was the moment that set my career up.

to like at least kind of be in the room and to have a shot. I like really everything else that I've done since then, you can kind of tie back to I think that moment of getting that shot and then just making the most of it from there. Yeah, like I kind of can go whatever direction from there, but really I think everything was like started in that moment. just like getting, luckily someone finally gave me a shot and I just did my best to make the most of it from there.

Mat Sherman (15:45.967)
I have a tough question. It's tough because I've been thinking about this question for years and I can't come up with an answer. Maybe you have one. For a while, and you know this, a lot of the point of before SeedSky I had Forward Thinking City, which is like Silicon Valley in the sky, right? And then it was SeedSky. And the whole point was to help outsiders break in. And I think for a while I had a thought on you can do this from anywhere. You can do the venture capital, you can build a tech startup.

Andrew Rea (15:47.522)
you

Mat Sherman (16:15.896)
from anywhere and I think as of now, mean for people listening, know I mentioned on previous episodes, but Seed Scout doesn't really exist anymore which is kind of sad but it didn't work out. I think one of the reasons is is today, I don't know if you can actually like do it without going to the coast if you don't already have like an edge or a network objectively allowing you to raise. I just don't know if it's possible.

Which is kind of like sad to say, like I think I may like finally have gotten there. Do you would you agree? Would you disagree like? Can you do this stuff without moving to like New York or San Francisco?

Andrew Rea (16:56.654)
I think you can. I think it is so, so, so, so, so much harder if you try to do it that way. There's a spectrum here. Where I was at originally, starting off in the Midwest, initially nowhere, and then in a tertiary ecosystem and not at all part of the coast. And coming from that background, the best I think I could have done if I just stayed there...

I you know eventually after years and years and years of plowing my way Maybe I raised from like one of the local VC funds It's like shitty terms shitty investors that might replace me if shit does not go amazing at all Like and then maybe if we have enough success maybe someday I'm like one of those few that makes it and I don't know like someday raises like a growth round from like a Growth fund because like they'll invest in anything if the numbers are amazing. It doesn't matter where you're based at that point Like and like so I think I could have maybe done something successful, but I probably would have had to bootstrap more

I would have been much more resource constrained. I'd have been much more limited in who I can recruit I would have had a very hard time Maybe an impossible time raising from the coasts and so if like that limited to me to local investors I would have just had a lot worse options worse terms like where everything is on hard mode The middle there's like and then the extreme is like go to the coast be there like be all be all in build your network there like an event like race from those people do that thing and just like say like fuck it I'm just gonna I'm gonna like do whatever it takes to get there

And then there's like some in-betweens and in-between might be like I I'm really I'm like, okay, I want to stay in Ohio or like Picker City, but I want to I'm gonna like get really good at Twitter and I'm gonna like be on Twitter I'm gonna like have a podcast or something and I'm gonna build my network this way Maybe I even go for like a week or two trip to SF for New York like a few times a year and like I'm gonna keep the benefits of being here But I'm gonna like intentionally build the network online and maybe some from some in-person trips in that place I think that's probably the healthiest middle ground and then like

Maybe like one last one that I've seen some people do is like I'm just gonna do it for like two or three years I'm gonna go live there. I'm gonna go be there I'm gonna build a network and I'll come back later and then I can kind of like do have the best of both So I think there are some shades in between that you could kind of make work But what I'm getting to is it is playing on hard mode to not be in one of the hubs

Andrew Rea (19:05.774)
And if you're purely optimizing for just like the maximum odds of success there is with Beyond a Shadow of a Now just go just go to the hub like don't like just go do it If that if that is your number one thing that you're optimizing for everything is gonna be easier and like I'm not I'm not saying that the world is fair that it is that way I don't I actually I don't think that's fair, but it's just like the prep my pragmatic take is it is

going to be immensely easier if you do that than if you try to stay in Columbus like I was and hope that you can build it. And Columbus, it could be a lot worse. Columbus had something. You could be there some cities where literally there's probably not a single startup. So yeah, think it's a much better bet for your career if you're optimizing for success to be in San Francisco or some equivalent, like in New York or even like in Austin.

Mat Sherman (19:51.407)
Yeah, I feel like just like three years ago, I probably would have like a visceral like, that's not true, like X, Y, but no, I completely agree. You know, like, it's like, I just think you need to see it. I think you need to like be in the industry long enough to understand why that's the case. And then when you see it, it's like, okay.

You know, and then you can kind of decide what you want to do about it. Like you don't have to build a venture-backed company to be in tech, right? You can, you know, there's a million other ways, but some people just like want to be the founder. I think a lot of people start there. And it just, you know, I think it does make a lot of sense to, you know, go to the coast or do one of the strategies you mentioned. I want to go back to your story and essentially go to the point like when you decided you wanted to start a company.

Andrew Rea (20:15.278)
Totally.

Mat Sherman (20:36.973)
Or when you actually started a company when you started tax wire like was it like kind of a thing where you quit your job You raised some money you started building. Did you raise money while you had a job? But you just like walk me through literally like where were you at the time and then I mean I know but just for the audience where were you at the time and like how would you make that transition over?

Andrew Rea (20:48.258)
Yeah, totally.

Andrew Rea (20:52.78)
No, yeah, I'm- I'll be-

I'll be like super transparent here and stuff too because it's like audience I think is like again startup folks and so I and I think it's always was annoying to me because you you're always getting As a as an outsider and in still ways, I feel like an outsider quite often still Definitely not as much as I did. It's like you hear these manufactured stories that are just like not really fully the truth And so it's even me I'm like guilty of it too It's like when I'm talking to a CFO of like a bigger bigger company and where it's like I'm not gonna go into all of the details of like my my past study that I mean I wouldn't lie about it I've asked about it, but it's like there is a

little bit of myth building that goes on and so I'll kind of color both the myth and the not myth part so

The myth version of Taxwire slash My Story is like I actually do share a good bit about like how I actually did get started. But then when I talk about starting this company, I talk about how was head of growth at a startup called, originally called Party Round Literal Capital. We built like, know, fundraising, banking, payroll software. Got acquired by Roe, which is another company in that space. Raised a bunch of money from A16Z. And we're really known for having this like very beloved brand by startup founders, which all of which is true.

But also, what I don't mention is that I quit right before that acquisition happened. Because it was like, for varying reasons that we could get into if you want, I still have that team there. But it was like an aquire. It wasn't an amazing outcome anyway. And then I quit without really knowing what I was going to do next, except for I had this, it was like, OK, I think I want to start a thing, though. But I was like, so all in on that company that I had no idea what. And so again, the myth version is from that point, my friend Hunter.

Andrew Rea (22:21.844)
Asks me to like, you know come help them out with finance and op stuff at his company and I help out for a few months while they close their series a We have a huge sales tax issue and like and I go into that and all of this is true and I had that huge issue at that company And he jokingly says we'll be your first customer if you start a competitor to like so we compete with a couple really big companies in the space that in my opinion suck Avalara being the most notable of them. I was a customer. He's like go go build an avalera killer we'd be your first customer and and and like and there is some true to that narrative but

What is also true is that like

I was literally as he was at it. So I quit my job. I didn't have income. didn't know what I was gonna do. I was like I had like I had like 18 months of personal runway to just like fuck around and figure it out of like just cash that I'd saved But I was trying I was trying to like okay. I like I can't just like fuck around forever I don't have like infinite cashier and this is like my life savings basically that I'm living on and so I'm in that place I'm trying to figure it out I was like testing I probably tested like a dozen startup ideas that I'd like had written down over the years and even a couple of them were kind of sort of working, but I just kept like

finding something about it that I didn't personally like, like I didn't see myself doing this. And then I took the thing with my friend's company, cause he's like, I'll pay, we'll pay you like, like something. So you're not just burning cash and you can just like help out. And then we actually, I actually did have the problem there, but even still, like it literally, it took him like two months of telling me to take this seriously is like, this is actually not a bad idea to do this. I was like, no, no sales tax is dumb. That's not a good idea. Like who, like, so it was actually, it was not as like,

I was destined to do this or even like this was just so obviously a big opportunity to me as I, I, you sometimes make it out to me. There was a good four or five months of me like not having an income, not like trying to figure out what I wanted to do, like considering a lot of ideas, kind of feeling trapped in the idea maze until I really started to take this seriously. And even then, even as I like fleshed out the idea for Talks Wire and began to see that it could be a really big idea, some people I really admire told me.

Andrew Rea (24:13.588)
this is either either that this was a bad idea for some xyz reason or that like hey this is a good idea but like do really want to do taxes with your career and so like i had these people i respected you know giving me mixed advice so that was hard again i still don't have really have income because like i then i went right back to being all in on this thing so had like little to no income for most of 2023 and then eventually i like i had a co-founder that came in that it was like i had recruited in it wasn't the right fit so i had to like end that and then i i

fortunately convinced another friend who is now my co-founder, Steven, who we worked together at OnDeck. I got him to leave his job and then he came in. And then, but still we didn't, I didn't have income. We were still very much figuring out what we were going to do. And then like fall of 2023, we like went and raised money and I'm to talk about what that process was like. And we're fortunate to like raise. And by that point, we kind of, it kind of came together end of 23, we raised a good bit of money and that have been kind of off to the races since then. But 2023 was like, honestly, for much of that year, as I like left that job, like I had,

options to do other things, but I didn't do them. And I've got like my parents who don't understand what I do in the first place being like, you made an order of magnitude more money than we ever thought anyone in our family would make. And you're like gonna like, like fucking like leave that to go start a company. So like they didn't get it. I felt like a bit of an idiot because I'm like, man, like I you spend when you're in the idea maze, you spend like eight, like eight, nine months constantly being like, I'm, I'm, I'm a founder of like, I don't know yet. And it's like,

And even if you know what yet, it's like you don't have any customers and you're not fully sure how you're gonna build the product and it's like and if you're like non-technical like me you don't have a technical co-founder for like the initial part and it's like and it's just it's like a lot of like uncertainty getting punched in the face and then even then for us like it did kind of work out I like friends who went through that for like years like I felt like going through that for like six to eight months was awful I have friends who went through that for like two years before

landing somewhere positive. So I would say that's probably the longer version than what you wanted, but I was intentional about I wanted to start a company. I was kind of fortunate to stumble into something that I like actually felt like a really interesting opportunity that did kind of draw a little bit on some of the things I'd done previously. But and then but even yeah, like like several months of just like things that I fucked up and like like looking back like just almost really, really fucked up had I like not like that original co-founder, for instance, if I just kind of let that ride, I think this whole thing would have imploded.

Andrew Rea (26:35.528)
So there's just there was a lot of like uncertainty I didn't raise maybe I should have I know people that did that I did not raise money beforehand I could have saved myself maybe some like life savings because I probably burned through like I live a pretty lean life and I burned through like tens and tens of thousands of dollars of like my own my own money just getting this thing off the ground so

Mat Sherman (26:57.251)
I appreciate you sharing all of that. That's honestly so realistic. I don't have a similar, it's like I have the same story, but I think every founder that starts a company has a version of that where it's like the early days, that kind of like very unclear, the idea amazed. It's really not. And that's why a lot of people don't make it even just past that phase. And I feel like simply getting past that phase of...

Andrew Rea (27:13.838)
It's not pretty.

Mat Sherman (27:22.862)
What the hell am I doing and no one believes in me and I'm not making money and should I just get a job? You just like if you can get past that I mean that's like when staffing on the hardest part But it is the first hard part of building a company. So I get that I do want to do one of the last things I want to touch on Before we're close to time is fundraising like you're someone who Like you start off as like an outset. We all start off in outsiders. You have every single person in tech starts off as an outsider

you've made your way in based on decisions that you made, know, again, quite, quite, you know, cause party round was also like very hot too, for a period of time, like on deck, very hot, party round, capital, very hot for a period of time. That's like two for two. That's like, I mean, not necessarily two for two on just like massive economic win, but two for two on social capital win, right? So like, and you converted that into a company. So how did you fundraise for this knowing that you kind of, least did you perceive it was a two for two in that way? And if so, how'd you fundraise knowing that that was your track record?

Andrew Rea (28:09.858)
Yup, yup.

Andrew Rea (28:18.914)
Yeah, yeah. I viewed it as like, don't have a resume or a network based on where I went to school, where I worked so far, how I, the people I know, how I...

So I actually did intentionally I looked for come I tried to get a company is where I felt the people there were really smart connected Regardless of what would happen. We're going to do interesting things Because I did I wanted to learn but also like I knew it's like that that network will be viable and then I wanted a stamp on my resume that at least like wouldn't be some random startup that no one's ever heard of if it doesn't work as I felt even in the failure case they were gonna be notable failures and so that that they like notable investors all that stuff so that that that like picking things like that was was pretty and then even

I'd say with Party Round, specifically Jordy is one of the most charismatic recruiters, fundraisers, just people I've ever been around. And I lacked a little bit of, especially then, I still was kind building my own confidence and so I wanted to be around someone like that.

And so I did those things intentionally. I would say it didn't feel like it was gonna convert. I wasn't sure if it was gonna convert, to be honest. I had a lot of anxiety about like, would people just forgive me the moment I left? And to some degree they do. But I think what I also did in parallel with that is I worked really hard and earned a good reputation at both of those companies. I wasn't a slacker. And then I worked...

I just built a lot of relationships and helped a lot of people with no expectations of anything in return throughout both of those companies. And so I did have an investor network. I had a network of some investors, but I could probably get introduced. Even it was like a mediocre intro to most people in the Valley, like a degree or two away. And so when it did come time to fundraise, we were fortunate that I basically was able to get every boss, every founder of every company I've been at, all the party around on deck, everybody invested. And so a lot of people that have been involved before just threw in an angel check until like an RUP or

Andrew Rea (30:01.434)
something so that I had a lot of super connectors I don't like I like a list I ran it like a process it was not run like I hope someone gives me money it was like we had a list we had a process we had introductory people I had signal to like all of these people that have worked with me before we're investing I had learned enough about the game that I knew I was like maybe I still fail but I'm gonna run all the things I control well and and I guess fortunately I would say that to answer your question it did work out that way like we were able to it was a tough time in the market the market was not amazing

And we were like first-time founders that were not didn't originally have a background in the space that we were in but ultimately I think it just came down to we were legible enough We I had learned enough of but from other people of what I was doing to like run a fundraising process and we were able to get the intro as we needed and And then when those people referenced us it was like, I like I remember I loved the shit you did it, know capital or whatever It's like or they like reference me to somebody I worked with before and that reference was stellar and so it's like we were able to like kind of play the game and that way so it did it

did convert. It's not the same as being like a second time founder or something and it's like I had a term sheet before I like did anything like we still had to go run a process and like tons and tons and tons of people told us no. But I think I think the actual battle is just like can you look credible and be referenced well when you get in front of people and then can you actually just get in front of people and that that is like half the battle and then yeah you have to know how to like pitch and get like run a process and stuff but that's all actually like easily learnable.

The actual hard thing is just like collecting the social capital. So it did it we raised we ultimately were lucky It got pretty over subscribed we raised from people we we've liked we got to choose to some extent at the end But I also know like literally two years before that I could not have done that like two three years ago before that moment in time

I would have been lucky to raise like a couple hundred grand from like shitty angels in the Midwest. So it was like very much like I guess like maybe if I'm a listener to this and I am an outsider the pro of this is that with like a lot of hard work time and compounding and just like one or two lucky breaks a lot you'd be surprised how far you could get. The con of this is that like I definitely like I had to do a lot of stuff before even this company to get a chance to do that and so it's just like how it's a long game you got to have some luck.

Andrew Rea (32:08.862)
And yeah, I don't know like I don't really know like how else I could have done it besides like I guess like the only other option if you want to the only real speed run I think on all of this is just get into yc because if you get into yc they kind of like help you speed run everything Otherwise, you kind of just have to play the long game work hard Get get some wins on your resume build some relationships and and then you could go do what like like I think at this point you could definitely do the same thing you and like 2019 might have had a much harder time like your 2018 like I'm sure like you did raise money that but it was like much harder than it probably would be if you

started a new company today.

Mat Sherman (32:41.517)
yeah, well it's ironic because Seed Scout, like, it is kind of funny in hindsight. I wanted to help outsiders become insiders and raise capital, but I myself didn't really know what I was doing. But then through, like, through doing Seed Scout, raising about 450,000, helping companies raise tens of millions, I now know exactly how this works. So if I did decide I wanted to start an adventure-backed company, which I don't know if I do actually, like I think that...

I've seen a lot and I might start one in the future, but I also may not. don't know. Like it is pros and cons, right? But if I did decide to raise money for something in the future, I think I'd be able to be much more successful than I was in 2020, that's for sure. Yeah. Yeah. One quick thing I want to touch on and then we'll call it a day is you said something that is obvious to you. It's obvious to me. I think it's really not obvious to like most people.

Andrew Rea (33:19.692)
Yeah, yeah, yeah, and there definitely are pros and cons.

Mat Sherman (33:36.142)
You said the hardest part of fundraising is not the pitching and the process, but it's like acquiring the social capital, you know, and like getting into rooms and getting access. Can you just explain why? Like, I mean, it's just for people that maybe aren't there, you know?

Andrew Rea (33:47.244)
Yeah. Yeah, I actually think I'll try to, but I think the easiest way because again, like how you actually build it is really like hard to prescribe because everybody's journey is going to be the same, but the anecdotes are more helpful than me giving you a playbook. Cause I think my playbook, like the exact heuristic wouldn't work for everyone. I, so on deck.

I worked at on deck. got the chance to build relationships with hundreds of like angel investors, but also in like, but a lot of the people on deck angels at the time went on to start funds. were some of the like emerging manager cohort of that era. So I met a bunch of emerging managers and like super angels in that period of time. So like a lot of, a lot of relationships right there. Obviously on deck and capital both had amazing cap tables themselves. And so I met a bunch of people that way. I kind of like did the run and gun, do some SBB deals that way too, to like just try to be around things and learn. And then a bunch of my friends were founders. And so I kind of seen what they did.

and like just kind of learned by osmosis of being around them. So that's like maybe some of that's like a lot of the learning of like how the game works. So like I got into the rooms, I built relationships, and I learned how the game works. So translating that into like the actual like things. So when we went to raise for Taxfire, the first money that actually came in was, I had a bunch of people that were like, when you're ready to raise, I'll be in or whatever. It's like, I had those kind of like on call, but we actually got preempted a little bit, sort of. We had a weird pre-seed raise.

a friend of mine that I met.

I think while I was at on deck and became much closer with while I was at capital he and I become close he had He had his like dropout from like really good school that did super well It is like a great person raised like a pretty big pre-seed for his company And then the one of the investors from that round he was like he was apparently talking me up to them because he was like dude You really got to meet these people. I think they're really great I think you'll really hit it off with them and I was like, I'm not raising yet But like I'll meet them this just because you've talked them up so much This is August of 20 August or September, maybe September of

Andrew Rea (35:40.064)
2023 and like the guy it was a very this is like a one-off most people don't work this way, but he did like we did really hit it off and he was basically like

Want to invest I don't care what you're building. I don't care that you don't even have your co-founder fully lined out yet Like I just want to invest so that was the first 600k He literally like within a week of meeting me or two weeks of meeting me like Invested 600k at a great price for especially for like us having essentially nothing And then we kind of brought in a bunch of like the early angels around there And we're actually gonna call it do a really small pre-seed there and like do a seed later

And then what ended up happening is we realized as like I did get the co-founder right, we kind of got some early momentum. was like, actually, no, this is like now it's October. like, actually, two things happened. A founder that I really admired. So again, that first investor, like most of the people that invested at that point were like all people I had like, so that fund was a pure or mentor. You cannot like, nothing, I could not recreate that at all if I wanted to. It was just, was like a thing that happened by circumstance, I guess.

the angels that came in around that time, founders of companies that worked at before, one of them was a guy at On Deck Angels who had dealt with the problem we were solving really viscerally. And so when I just caught up with him to get advice, he was like, I'd love to invest in your company, just 25,000, sound great. There were like two or three people like that where I didn't even like, I was just blown away that it even happened, I didn't fully plan it. And then as we like, and so then October comes and we're like, actually we need more money than we think to really do this right. And then at the same time, a founder friend is being like, dude,

The easiest time to raise money is when you technically don't need to raise money and have momentum. just like kind of like you got like preempted a little bit just like

Andrew Rea (37:14.926)
go raise more. And so we're like, okay, we're actually going to raise 1.5 and turn around this out. we like did do we turn around, got our shit together as fast as we could and started running a real process to run the rest of the round out. And that was really hard because we got rejected a lot and we were like cold starting it it was coming towards Thanksgiving. But then eventually we got momentum and like all of those intros are like so a dozen or so of those of those angels were introducing me to other people in like their networks and being like, like Andrew's like one of the best people. It's like it would be people like, like my boss at on deck was like a very well connected angel investor.

He me to like a dozen people. Another friend of mine who was like a small angel from like this place I met like that I just gotten to know him since capital actually. I met him right as we were as I was joining capital. We become really good friends. He knew a lot of investors because his agency worked all they did was work with VCs and so he introduced me to a bunch of people. There were like there were a couple other founders I knew that they introduced me to their cap tables like one one guy I met at a coffee shop that I met through a guy I used to work with it on deck. He and I got coffee in New York. He knew my problem really well. He used to be a VC was a founder now. He's like I'm going to

you to my entire cap table and about literally he introduced me to like 30 people and so it's like so some of this was like I was literally like figuring out who do I know that knows this person please enter me that was probably like 30 40 percent of it and the rest of it would just be like people like that that were like I will like send me your list I will introduce you to everybody I know on that list plus five other people you weren't even aware of and so it's like literally stuff like that where it's like with without those relationships I don't even really know like how you would do this

or how I would have done it that way at least. And so really everyone we met was kind of like that, where it was just like we got introduced by some node in the network. And so it's like, if you're where I was at in 2019, and you know two funds in Columbus that kind of suck too, and like five angel investors who are also not gonna invest in anything less than like 500K in ARR, and they're gonna wanna do it at a $3 million valuation, it's like.

Mat Sherman (39:04.814)
you

Andrew Rea (39:07.434)
It's like what do even like and also to like you think people are you you think it's hard raising as a young founder in Silicon Valley try raising as a young founder in Columbus, Ohio like like you're gonna get laughed out of the room and so It's just it's it's like so different. I don't even and then if I was like, okay cool I'm gonna go to the coast. Well, who do I know on the coast? Who's gonna introduce me to anybody on the coast? I don't know. I don't know like like I I don't know I don't even know how I would go about getting those introductions like I could cold email people but no one's gonna respond to my cold email so it's like

I know that's not like a playbook, it is literally like I it's just like the fact that like that It's like the fact that I'm so that guy that introduced me to his whole cap table. He's like I know this space really well This is a big problem. Also this founders dope his story is really cool. He's really close with my buddy over here You should totally meet him and then I get on the phone with that investor We have a great first call and then he everybody he's mutually connected with on B and all the signals coming back or like Andrew's dope give him money This is like what what one person said I I can't create that except for the fact that I had just worked

really hard and gotten lucky that some people took chances on me and were willing to go to bat for me. I didn't tell those people to do that for the most part. The most I did was just ask for introductions. so I think it sounds like the introductions are hard, but I guess to clarify one last thing about that, it's like the fact is these investors are getting so much stuff that they're just pattern matching machines. Most VCs are just pattern matching machines. If they don't know your school, if they don't know where you've worked at, if they're not getting, even if they did,

they don't know someone that's introducing you, you're just, they get so much inbound, it's just, gonna get filtered out immediately by like 90 % of people, maybe more. And so having some signal to your resume and having like warm introductions gets them to take you seriously. Like when I like 90, I didn't send a single cold email to get this round done. Every single person was like a blurb I would send someone and then they would write their own like little sentence as to why they think highly of me and they should talk to me.

And like, so like, I'm never coming in as like, hey, please look at my company. I'm coming in as like, hey, this person's dope. I worked with them or like, I know them through this or the thing they're working on is a really big problem. Or it's like, this is, you told me you were like interested in the tax base. You should meet this founder. It's like all stuff like that. That is so different than like getting, than the hundreds of cold emails that an investor is getting every single day. And it may not be fair that the world works this way, but that is basically how startup fundraising, especially at early stage in Silicon Valley works. And so if you're able to be one of those people coming through that

Andrew Rea (41:30.114)
that like door, your already, your odds of them even taking a meeting with you are like an order of magnitude higher, like versus like if I'm cold emailing them, I'm lucky if like I send a thousand cold emails, I'm lucky if like I get like five to 10 meetings. And those meetings are also like the worst, they're like the most, I almost didn't take this meeting on my calendar meetings of the day versus like, and then two, half of this is momentum. And I know I'm like going way longer than you probably wanted to, but like half of this is momentum. So it's like by the time

Like I was also nervous as fuck during this process. was so, cause like no one in my family is like, the money in our bank account from all this fundraising is like more money than I ever thought I'd see in my life. I let alone like imagine in like doing it as a company. And so it's like, this whole thing was very foreign to me, even though I had been in the industry and I'll say it like felt weird. I was very nervous, but like the thing that, you know, it helps the nerves, you know, it helps you get better at pitching, you know, it helps you other people feel like shit. Like this founder is like a force of nature is the fact that like,

I'm talking to like a dozen people a day, so I don't have time to be nervous beyond a certain point. I get a lot of reps. And like everywhere they ping, it's like, hey, what do you think? You were talking about the tax base. I just like, you're already talking to Andrew and Taxwire. And it's like, and then they start hearing that. Next thing you know, they're like, and then when I'm talking to them, it's like, yeah, it's like, they're like, have you met? And it's like, yeah, I talked to them yesterday or I'm talking to them tomorrow. It's like, word gets out that like, this thing is like moving. And then, it's like all the momentum starts to be in your favor too, cause you're like doing this all really quickly, which is part of what makes it work.

versus if you're just like desperately trying to cling to like the one or two meetings you can get, you have no leverage. You're like, they're not taking you that seriously. They probably string you along. And so I don't know. It's just like so many of the dynamics that make a venture fundraise at early stage are driven by these social capital dynamics. And if you don't have social capital of your own to draw on and you don't know how the game is played and you're not able to just like effectively play it, it's really, really hard. And so like the reason why I mentioned the thing about YC before,

Is I spent years building myself into the kind of person that could make a go at doing that. Whereas YC, if you get in there, well one, most of them already are like the kind of people that could do this probably anyway or like went to like a good school or something. But that aside, even if you're a total outsider, if you get into YC, you are now a YC backed founder. YC will put you in front of like every fucking fund in Silicon Valley is looking at YC demo day. Like all the, like they come to you. They want to talk to you. They're gonna, you're gonna get introductions to whoever you want. Everyone's gonna take you seriously. It's like, doesn't matter if you went to Harvard or not.

Andrew Rea (43:53.644)
You're a YC company. Now you're automatically taken seriously. And so it's just like, and like YC, the partners are going to give you a crash course on exactly how to play the game so that you like, don't like walk in there like an idiot. And so that you like, know, position yourself for the most success. And it's like, all of this is just boils down to like social capital and can you hack it? And so I don't know. I wish I had like a better point to that, but it's like, I wish someone had just made it that crystal clear to me when I was like 20.

And nobody did, not really. It took me years of beating my head against the wall to even figure out how it works, let alone get shots. So I guess my message to all of you is if you want to do this, I hope you're really successful and figure this out. But just when you see someone even like me that's being, oh, we raised all this money, it's like, well, yeah. But I also spent years getting to that point. And it's like, I couldn't have done this when I was 20. I don't know. I guess if you're trying to fund raise right now and you don't have a network and you are one of these outsiders,

I don't know don't be it's it's probably not an indication of just you as a human that you can't get meetings it's more of an indication of just like the Fundamental advantages or disadvantages that you do or don't have in the game that is being played It's not cuz you're a shit human It's just like your card suck and so you either find a way to get better cards or You know you make the best of what you you do have but like generally I actually think it's like if you don't like the card you're dealt a thing nobody tells you in this life you can just go get fucking better cards and so like it's like I think a lot of times just go get better cards and you'll have better out

chances of winning. So long rant, way more than I planned on giving. I hope that's helpful to somebody.

Mat Sherman (45:25.166)
I I feel like that, I don't know how long that was, but that was like the most golden alpha, I think, that has ever been shared on the podcast in like 965 episodes. So that was awesome. Mainly because it's just, no one talks about that like that. Like that is how it works. That is the game. That is it. You just distilled it in like seven minutes, however long your rant was. That was incredible. So thank you for sharing. Before we end it.

Where can someone learn more about you? Do you have a Twitter? Do you have LinkedIn? What's your website? Yeah, how can people connect? Yeah.

Andrew Rea (45:53.602)
Yeah, yeah, yeah. One, thank you for having me. I think like one thing I've always admired about you, Matt, is that you just like, you've, actually do think like you're, like what Seed Scout was trying to do, everyone told you it wouldn't work. And I think a lot of people thought that way, but I always thought like, I always thought that that was a hard idea to make work too.

But I think you are the person I think of as like, literally have used you as an example after you shut down. like, cause I met someone recently working on a similar idea. was like, if he couldn't figure it out, if he didn't get it to like work at enough scale, you're not going to cause he got further than I thought anybody ever would at that idea. So it's like, and I think you've, you've done a lot of good for people in the ecosystem and you're just a good dude and you like hustle hard. And so I've always really admired and appreciated and respected you. So thank you for having me. I would say if anybody's interested, if like you're dealing with sales tax stuff, selfishly plug, like we, hopefully we can be, helpful.

or just like hit me up on I'm on Twitter at Andrew Ray LinkedIn I have a sub stack I don't write on it that much but when I do it tends to be real shit yeah I'm at those places I try to answer my DMs and I don't know it's just like if nothing else I'll like try to try to be noble shit with you and yeah thank you for having me sir

Mat Sherman (46:59.427)
Yeah, thanks for coming on.