Enrico Palmerino, "Botkeeper: Offload the Bookkeeping"

AI is coming for the pesky chores of bookkeeping. Enrico Palmerino, founder of VC-backed Botkeeper, relates how machine learning is helping accountants and their clients. Compelling founder with a great story.

Highlights:

  • Sal Daher Introduces Enrico Palmerino

  • What Botkeeper Does

  • Why Efficient Bookkeeping Matters

  • What Sets Botkeeper Apart

  • Growing Clientele

  • “We're venture backed. We've raised a total of about 90 million to date. We just closed our C round...”

  • The AI Revolution

  • The Statistics of Bookkeeping

  • Challenges and How They're Dealt With

  • Adapting to New Technologies

  • Enrico Palmerino Had a Lot of Entrepreneurship in His Family

  • Advice for Starting a Startup

  • Evolving with Your Environment

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Transcript of, “Botkeeper: Offload the Bookkeeping”

Guest: Enrico Palmerino

Sal Daher Introduces Enrico Palmerino

Sal Daher: I'm really proud to say that the Angel Invest Boston Podcast is sponsored by Purdue University Entrepreneurship and Peter Fasse, patent attorney at Fish &Richardson. Purdue is exceptional in its support of its faculty of its top-five engineering school in helping them get their technology from the lab out to the market, out to industry, out to the clinic. Peter Fasse is also a great support to entrepreneurs. He is a patent attorney specializing in micropolitics and has been tremendously helpful to some of the startups which I'm involved, including a startup that came out of Purdue, Samran Technologies. I'm proud to have these two sponsors for my podcast.

Welcome to Angel Invest Boston, conversations of Boston's most interesting founders and angels. I'm Sal Daher, an angel investor who is very curious to figure out how to build new companies that are changing our world. Today we're very privileged to have fascinating founder. His name is Enrico Palmerino. Say hi, Enrico.

Enrico Palmerino: Hey, everyone. Sal, thanks for having me on.

Sal Daher: Enrico is the founder of a company that's very interesting to me. It's called Botkeeper. It helps create stress-free bookkeeping. Enrico, go ahead and tell us exactly what Botkeeper does and what problem you're solving and for whom.

What Botkeeper Does

Enrico Palmerino: Botkeeper is a bookkeeping operating system for accounting firms. Think of it as an automation platform for the firm and its accountants to support their clients. What it does is it provides an accounting firm one single place to go log in, see all of their clients, manage the entire bookkeeping workflow. In doing so, it's bringing all the data related to bookkeeping into a central place, which allows us the ability to run machine learning and AI against that dataset and automate away a lot of the routine, mundane, basic bookkeeping processes. The categorization, classification, reconciliation, bill pay, journal entries, et cetera, that skilled accountants have to do.

It's really not leveraging their skill and unfortunately ends up taking a majority of their time away from supporting the relationship with the client and from doing the complicated work which challenges them mentally, which is proven to be one of the things that makes work most enjoyable. It's why you stay at a place because you like what you do and you feel like you're learning and growing, not doing something really basic repetitively.

Sal Daher: So much of which I've been doing with my businesses, my apartment buildings and my investment partnerships.

Enrico Palmerino: I can only imagine.

Sal Daher: Give me the founding story of Botkeeper. How did Botkeeper come about?

Enrico Palmerino: Botkeeper came about, I'd say, through a pain point I first learned with my first venture. I started a lighting company in college. I'm a quant major by background, so we wrote some algorithms to automate how you do lighting analysis and design. In a matter of hours, we could do what was taking other people weeks and months. The company grew really fast, so storybook success, dorm room to 8.5 million in revenue, 60 employees before I graduated, got acquired. The biggest challenge and headache that we had was our bookkeeping keeping up. Mind you, that business was like the perfect storm of every accounting complexity and challenge under the sun, plus rapid growth.

Then I did what I think most entrepreneurs do, is that your next ventures is to solve the problems you had at first. I got into cloud accounting to be the outsource bookkeeping firm to startups and SMBs and solve that problem with process, and people, and tech enablement. We grew that practice quite well over the next few years, but just kept running into this glass ceiling of growth. The clients were there. The demand for accounting services was there. Fundamentally, new business formation is growing exponentially, so there's more and more businesses in need of bookkeeping. 76% of them now outsource their bookkeeping to a firm.

The biggest struggle we had was the human capital side. We had great people, but we couldn't find more great people as fast as we needed to keep up with the demand. The other part was system switching. There's an app for everything, like in your iPhone. In the accounting world, there's a half a dozen to a dozen apps that an accountant has to interface with to do the books for one client. Think about doing that now for 20 clients, or a dozen. It's a nightmare and it's all siloed and a lot of manual duplicate data entry and a lot of opportunity for human error.

Just not a fundamentally way for you to see one clear and concise picture for your financials as a business but for our an accounting firm to do your books one place to run and operate the bookkeeping for your clients. Botkeeper was the solution to that. The goal of botkeeper was billed as one unified operating system that had all the features and functions embedded but integrated. From the transaction to the communication associated with that transaction to the documentation on it to a task workflow to an approval process, tie it all out, and then use AI to do their various aspects of the processing and deposit into the general ledger of your choice.

QuickBooks and Xero are the two that we support today, hopefully soon Intact. If you could do that, you made it much more enjoyable. You made it more efficient just in having everything in one place, but you drastically made it more efficient and less time consuming by having the AI aspect which meant you get out of doing the mundane, you could combat the resource shortage. You could get more out of your current people and allow them to be more human and stop mimicking a machine.

Why Efficient Bookkeeping Matters

Sal Daher: Now, you mentioned QuickBooks and the other platform, are you a layer on top of them or are you replacing it?

Enrico Palmerino: We are a layer on top. If you think about the way bookkeeping is traditionally done, accounting will go into banks and credit cards and point of sale systems and other places that the data arrives from to start. They act as like the intermediary workflow. They're going to take that data and transpose it, they're going to categorize it and classify encode it, they're going to put it in an Excel sheets to manage depreciation schedules or loan schedules, and then enter it into QuickBooks. We replace that intermediary processing layer. The accountant now interfaces with our layer, but our layer is a smart layer and it's doing a lot of the work for them and allowing them one central place to see and manage everything.

Sal Daher: Very good. This is interesting. A layer on top of existing accounting software. I own apartment buildings and I used to use, believe it or not, and it was extremely painful. QuickBooks, it was just like putting a square peg in a round hole, it's not built for that. There was a lot of manual stuff and keeping track of stuff in our banks. We could never really know exactly when a tenant had paid, we'd have to complete the books for the month, figure out who was late. The tenants that we have, many of them live paycheck to paycheck. If they didn't live paycheck to paycheck, they'd own houses.

You have to be on top of them if they're late because what happens is, there's usually a car repair or something else. You need to be almost like a social worker on top of them. It's like 96% of tenants are okay, pay on time, but those 4% have the problem. They take up all your time and you have to be on top of them, and you have to find out. That 4% is not always the same 4%. They migrate, move around because things happen in people's lives, unexpected events. The typical one is, you break your leg and you're not working or your car breaks down or something. That didn't exist. We switched to Buildium and Buildium allowed us to know immediately, who's late, who's not right away.

Enrico Palmerino: Boston based.

Sal Daher: Boston based, collect the payments electronically. We don't have to do any more entries to receive payments before we actually have to look for the payments in the bank account, tie them to the tenant. Sometimes the tenant would forget to put the code in and that was a nightmare. Buildium has really, really helped us, but at the same time, Buildium leaves a lot to be desired. It could be designed so much better. It could be so much more helpful than it is right now, but it is a massive time saver for me. I'm grateful, but if I could catch the ear of the people building on it, I would give them an earful how they could do things better.

Enrico Palmerino: I'll give you one thing on on the Buildium front. The reason Buildium works in rentals and it would be hard for it to work in business bookkeeping, is in rentals you own the home that the person is living in. You get to dictate how they pay you, what system they use to pay you, the date, the fact that they use a credit card or they pay via a bank wire that it's going to be auto debited.

Sal Daher: All the payments or ACH or cash.

Enrico Palmerino: Correct. It's the same amount every single month. Then you might do that, but you're in total control. With a business that's dealing with vendors and clients and everything, you can't dictate one system for them to use to pay one form of payment, and your dealing with a ton of different transactions that could be coded in a variety of different facets and effectively the problem gets exponentially more complicated and much harder to standardize. That's the greatest challenge that's facing small business bookkeeping. Every company is a snowflake.

Sal Daher: Multi-family business narrows down the things that have to be accounted for, have to be incorporated into your platform enough so that it is significantly less complex than just a regular, any kind of regular business.

Enrico Palmerino: You also lose a lot of the control because, in your case, you either rent from me and you live here or you don't and get out. If you want to live here, you're going to live and pay the way I want you to pay or you're not going to live here. With business, you don't quite have that luxury because the most cost effective vendor or the best technology for the thing that you're doing or the client, you're at the whim of their terms because the power is shift is constantly bearing on both sides of the table.

What Sets Botkeeper Apart

Sal Daher: It's not quite as one-sided as you believe. Tenants pay on a whole range of times during the month. They don't always pay on the first when the rent comes due, maybe 70% do. Some of them pay a little later and there's a whole system of keeping track of that. Anything human, things don't go according to the expectations that are on paper, but it works. Another company that comes to mind is pilot.com. How do you see them in your competitive matrix?

Enrico Palmerino: Very different. The real estate analogy, I compare them to residential real estate and that's the commercial real estate. We are both in the accounting space, but our thesis of how we solve this bookkeeping dilemma is fundamentally different. Pilot wants to be the AI firm of the future. They want to hire the accountant internally. They want to provide all the full accounting stack of services, the bookkeeping, the CFO, tax R&D credits, et cetera. Botkeeper wants to build the platform. What Pilot built is technology to make their people more efficient. Botkeeper's built a platform that we license to everyone else's people to make them more efficient.

Sal Daher: To make your accounting more efficient.

Enrico Palmerino: We don't want to be your accounting firm. We want to license our software to the 160,000 accounting firms that are out there making every one of them more efficient and have the same AI advantage, basically democratizing AI for all.

Sal Daher: I should reach out to Rich and Les, my two accountants.

Enrico Palmerino: Yes.

Sal Daher: One is a solo practitioner, the other one is a partner in a multi-professional firm and just have them take a look.

Enrico Palmerino: Please do.

Sal Daher: They have various systems. I can't say any of them are-- these are still early days.

Enrico Palmerino: That's not abnormal. Typical accounting software has a 12-year life expectancy at a firm. What that basically says is that firms don't frequently change or update the systems they use. That's the biggest headwind that we face is change, but the tailwind that we're getting right now is the talent shortage has become so stark and grave that you have to, the catalyst is there and there's no other choice. You can't support the clients that you have without adopting efficient technology. If you want to grow, that's the only way to do it because you can't hire the people needed to keep up with growth.

Growing Clientele

Sal Daher: Are you comfortable discussing how many clients you're serving now?

Enrico Palmerino: Yes. We have 250-something firms that now are supported on the platform and roughly 7,000 businesses, I think it should be 107,000 businesses.

Sal Daher: You have quite a big training set?

Enrico Palmerino: Very big training set. Yes. That's one of the benefits of our model by supporting the firm being one to many. These firms might have 10, 50, 100, 10,000. One of our firms has got 10,000-plus bookkeeping clients. As they continue to roll out the botkeeper software on their client base, more data coming into our system, the AI gets smarter.

Sal Daher: If one of those 250 firms that are your clients has 10,000 bookkeeping clients, are they all in your platform? You'd have more than 7,000.

Enrico Palmerino: Correct. They're not yet. If you think about it, the way that we sell our software is we land and expand. We sell you initial license for maybe it's 10 of your clients and you put those first 10 on and then you add another five and another five and another 20 and another 100. You just keep rolling out. We've only, when you think about rollout time, we launched this in mid 2019. I think we got our first 10 firms on that year. We grew to 50 by the end of 2020 to 200, by the end of 2021 and 250, 260 at this point.

Sal Daher: Phenomenal. How are you funded?

Enrico Palmerino: We're venture backed. We've raised a total of about 90 million to date. We just closed our C round in September-October of last year, that was led by Grand Oaks, which is Tom Golisano's fund. That was a fun strategic round for us. Tom Golisano, if you don't know, is the founder and CEO of Paychex. He just recently stepped down from being chairman of the board. Having a guy like that on our board, and who invested, the analogies between Paychex and Botkeeper are super similar. How we went to market, selling through the accounting channel.

Sal Daher: Yes, I was a user. Not in my current companies, but in my prior companies, I used to use Paychex. In my current company, we use Guusto. Compared to ADP, Paychex was awesome. The next step Guusto was just so much cheaper, so much easier to do anything. Less human interference, that's the evolution. I imagine Tom was probably out of Paychex by the time we were shutting down, because these companies, they tend to ossify. They figure out a business model and they ossify.

Enrico Palmerino: Yes, I think he recently stepped down from being chairman on the board, not too long after he joined our board.

Sal Daher: Okay. Believe me, compared to ADP, Paychex for us was a big improvement.

Enrico Palmerino: It all depends on what you're looking for. I mean, they all specialize in different facets. Certain platforms are better for, say, an accounting firm to manage and administer their payroll across a hundred companies. Other platforms are really great at the SMB to do very simple and basic low cost. Others are designed to do call it like higher touch, more complicated payroll. It really depends on the use case. They all have a place in the market.

Sal Daher: Yes, Paychex was doing pretty complicated. It was a business that was trading and there were bonuses and all that stuff. Guusto was just hourly employees, different story. Very interesting. I understand in the last year, you've 3x'd your business. You're on a fast growth trajectory?

Enrico Palmerino: Yes, we're expecting to double again this year.

Sal Daher: Oh, wow. In five years, what kind of a company are you going to be? Are you going to be an independent company? Are you thinking that you're going to be acquired by someone in the space? It would seem to me like Intuit would be looking at you. It's intuitive, but Intuit would be looking at you very closely because you're creating value on their platform.

The AI Revolution

Enrico Palmerino: We have a number of companies that are looking at us pretty closely through various aspects of the accounting workflow. There's big tax software companies that look at this as the first step of the tax workflow. There's large accounting firms out there that look at it as a way to enter new markets. Then then there's accounting software, that look at this as a value added solution to their platform or a different market opportunity. Right now, the way we look at it is, we think that probably the greatest value for Botkeeper that it can create to the market is probably through a public offering.

The accounting market is just so massive and we're just scratching the surface. If there's 160,000 accounting firms out there, let's say there're 60,000 that are a good fit for bookkeeper. We've only got 250 on the platform today and we're just starting. Those 250 haven't even fully expanded. That's just the US market. That's not even talking about entering any new countries or anything along those lines. To me, we really want to own and dominate the US market, lead the revolution of AI and the accounting sector, really enable these firms because it's life changing for the firm.

They make more profit than they've ever made before, it's easier to manage the practice than it's ever been before, they can take vacation, or they can not work a 60-plus hour workweek for the first time while also growing. You're having happier accountants as a result. If we can create that kind of impact at scale, to me, I think, just kind of give you some stats on where we're at and why I think the public offering is possibly the right path. I think Avalara, for instance, is a large public company, very successful.

Where today have like couple of hundred firms that are Avalara firms on the platform. I think Sage Intacct has 300 and something firms. We'll be knocking on the door surpassing 500-plus firms by the end of the year. From a statistical relative, we're not going to be as big as those companies yet, but we've done something and gained traction in a space that's really hard to gain traction in. Accountants are typically slow adopters. We've generated enough value that they're adopting it faster than they have other technologies in the past.

I think as this core operating system, we can have a big lasting impact and this is just the beginning.

Sal Daher: I imagine after 250 accounting firms, you've seen most of the problems that are going to exist. You've seen most of the types of companies out there. Your machine learning has been pretty tuned already. As you add new customers, you're not having to retool your way of doing business. I imagine you could grow very profitably very fast.

Enrico Palmerino: Yes, and the confidence intervals get smarter and smarter. You're just giving it more pattern recognition across more companies or your roughly 7,000 businesses contract. We've seen probably every industry under the sun and have multiple of them, but you go from multiple to hundreds of each, the number of transactions that are being processed.

There's still a lot of room to go. I think our AI models still have a lot of growth, but we have achieved levels of efficiency and of accuracy that would be very difficult to do prior to this point without that many companies on it.

Sal Daher: Do you feel comfortable disclosing the level of accuracy of a typical entry?

The Statistics of Bookkeeping

Enrico Palmerino: Typical bookkeeper is going to be processing somewhere between 90 and 95% accuracy.

Sal Daher: Right. I would be processing at 85% accuracy. Maybe lower. In the morning 85, in the afternoon 70.

Enrico Palmerino: That's actually the stat. A typical person doing any sort of accounting entry is north of 85 but not terribly so, but in accounting think of someone who's really skilled and knows what they're doing.

Sal Daher: Well, yes, they're so much better. They have a sense for when there's an error and there's a mistake. They know where it is.

Enrico Palmerino: Correct.

Sal Daher: Their brains are attuned to this stuff. It's amazing.

Enrico Palmerino: Most of the error, though, why aren't they at 100? It's because they're trying to process and do the books for a dozen companies all within a 30-day time as fast as they can get the data in quick, so most of the mistakes is a short sight or a fat finger or they miss something. It tends to be something simple that you're like which is the cool thing is AI can pick up on that. We do a multimodal approach.

Sal Daher: You're taking 90, 95 to where?

Enrico Palmerino: 99.97.

Sal Daher: Whoa. [chuckles] Oh, man, I'd be content with just 99%. I don't need the extra .97, but wow, that is something.

Enrico Palmerino: Which I tell people, though, it doesn't mean that we don't make mistakes. That .03 across millions of transactions, decamillions or hundreds of millions of transactions, it's a good number, but the mistake that we make is it's either we don't know the thing so we show that we didn't know what to do with this transaction or it's something very minor. It's not going to alter the P&L for the most part, it's like the machine thought it was a sales expense and you would prefer it to be in marketing.

Sal Daher: Right. Subtle things. By the way, where are you guys located?

Enrico Palmerino: We're based in Boston. We just moved offices to 33 Arch Street.

Sal Daher: 33 Arch Street. Wow. I was in downtown Boston for 25 years.

Enrico Palmerino: Excellent.

Challenges and How They're Dealt With

Sal Daher: The one question I did want to ask. What's the big bottleneck for your growth right now? What is it that's keeping you from getting to where you want to be?

Enrico Palmerino: Probably simplicity of deploying companies onto the platform. The reality is, we ask all the questions you need to ask. If you're going to take over the books for a company, you need to be given some data about context outside of just what's in the books, and unfortunately, with accounting firms being overextended, in terms of time, anytime incremental on their plate.

I relate this to, right now, let's say you're working a 60-hour workweek, and you're like, "I need to hire someone to help me out and take work off my plate." You make that hire, work doesn't come off your plate. Instead, you go from 60 hours to 80 hours, because you got to train them to take it off and then when they do, you drop down to maybe 40 again or something.

We're not nine months of training, we're call a few minutes per company, but adds up and you got to train your firm on our platform too so there's that time, but it's one of those things where call it three months of training and deployment all in a part-time basis. If we could figure out a way, we didn't have to do anything. We could get that data or the Intel or the context. We're trying to, just how do we make it easier for you to deploy it.

Adapting to New Technologies

Sal Daher: Its deployment, the onboarding is the biggest friction?

Enrico Palmerino: Change. It's just an industry that normally is slow to change or adopt. They want to check all the references. They need to hear it 10 times, and even then, we're fundamentally-- there's a little bit of fear that AI is going to replace me and we have to assure you that it's going to replace this piece of the equation that you do, but it can never replace you.

Sal Daher: Oh, I so want the AI to replace the stuff I was doing.

Enrico Palmerino: [laughs] Those are the things it's combating change and norms that just making it easier to roll out. If we were going to make it take no time, you could click two buttons and deploy 1,000 of your clients, done.

Sal Daher: Yes, that's going to be AGI. [chuckles] You have an AGI that does the automatic onboarding. Does it all. Anyway, at that point, what are we going to be doing? I don't know. Anyway, let's get back to that dorm room in college, or perhaps even before that. You started a company in college, where did the entrepreneurship streak show up? Was someone else in your family an entrepreneur?

Enrico Palmerino: My dad was running and managing a supermarket. My grandfather had started it. I always liked it. Like a local supermarket.

Sal Daher: Family business?

Enrico Palmerino: It was a family business. He was kind of like a local celebrity. He did a lot of good. Everyone loved him and the family and the business because it was very charitable and employed a lot of people. There was like this, "Wow."

Sal Daher: This is whereabouts?

Enrico Palmerino: This is in Stourbridge.

Sal Daher: Stourbridge?

Enrico Palmerino: In a supermarket called Big Bunny Market.

Sal Daher: Big Bunny Market? I'll think of that next time I'm in Stourbridge.

Enrico Palmerino: Yes.

Sal Daher: That's Stourbridge, visiting Stourbridge Village.

Enrico Palmerino: Southbridge, but yes, Stourbridge area is what most people call it.

Sal Daher: Stourbridge area. Yes, that is awesome

Enrico Palmerino: I saw that my grandfather on my mom's side had an agriculture business, he was doing basically doing seed and fertilizer. He had a whole distribution business. I got to see the two stark contrast, my dad go to work six days a week and crazy hours and stuff running this business. My grandfather was the one-man show business and not that he had a partner, but he had crazy flexibility. It was like the big business that all consumes you and then the small business that you totally control. I was hoping that one day I'd be able to find that happy balance.

Sal Daher: Yes. The lifestyle business so-called.

Enrico Palmerino: Yes, to a degree. How do you do something really big and impactful, but have the freedom flexibility? I found the answer to it, it's just you hire really great people. Like Della who happens to be on the call with us as well.

Sal Daher: Thank you, Della, for putting Enrico and me together, it was your initiative, Della works for Botkeeper. She's the marketing person at Botkeeper. I turn away a lot of interviews because I'm trying to focus on life science, but I had connected with Enrico before. I couldn't pass it up. Slater Victoroff and so forth. He's in the AI space. For me, these are people that I know, and I'm not going to turn that down. Cold approaches, I'm not really taking, I want to focus just on the life sciences, which is where I see the biggest opportunity.

Enrico, you may not be aware of this, but this explosion, this sort of Cambrian explosion that happened circa 2010, in the software industry, where all of a sudden, there were all these things that were being built, that made it so much easier to start companies in the software space, like software libraries, and APIs things as mundane as the law firms incorporating you. Saying, "Will get paid out of the series A money." that kind of stuff. Well, all of that, 12 years later, is happening in the life sciences.

There's democratization, it doesn't take $20 million to start a very interesting life science companies. My particular focus are these life science companies that are going to be funded with less than five or $6 million. Angel funding, because the big VCs are not interested anymore. The big VCs are creating their own founding entities. I am just buckling down in this phase, how do I figure out ways to support these types of companies, and I'm on the board of one such company, and I'm invested in a bunch of them. I'm hoping to just be boning up on the space because specialization pays off in terms of the stage. I think this is going to be the next big wave that we have with software companies, in the 2010s with these life science companies in the 2020s. It's going to be a great boon to humanity. There are all kinds of things that are going to be better.

Enrico Palmerino: AI and cloud computing is changing the game for them.

Advice for Starting a Startup

Sal Daher: Yes, this is very exciting times. Very, very exciting. Great. We talked about how you came about being an entrepreneur. I'd like to open up the forum to just hear your parting thoughts. What would you like to communicate to our audience of founders, angel investors, and people who are thinking of starting companies?

Enrico Palmerino: Yes, I'd say, I'm closest to AI right now. I think AI is the next great revolution. It's going to, frankly, make the Industrial Revolution look like child's play from a sales, from a GDP production standpoint, and just the amount of efficiency that's going to be gained and the new businesses that will be able to be formed. There's no better time now than just to start a company, alternative and creative financing methods. Don't forget those. You don't have to start going out and raising capital from DCS. I bootstrapped my, this is my 14th company now, most failed, a few succeeded, but the early ones were all bootstrapped on credit cards and call it personal debt to get to where-- and factoring is an amazing tool as you're getting off the ground, but the Boston Network is a great network. Reach out to your friends, connect to people that you know that could help make the intros, open the door, give advice, more, I'd say like most, all of us are willing to do it.

I get advice from a number of other Boston founders, you just have to ask, and I give advice to a ton of people who reach out to me. I think we all want to see each other succeed. Don't forget you don't have to go out and raise venture angel capital to get a company started. You can do alternative methods, credit cards, personal loans. I did all of them for my-

Sal Daher: Oh, wow.

Enrico Palmerino: -first businesses. It holds you really accountable once your credit or debt on the line.

Sal Daher: Real bootstrapping.

Enrico Palmerino: Yes. You're going to be very cautious, and I think like first time it's like a really good lesson for first-time founders to think about how they spend and make decisions that way, because otherwise, if you get a good amount of capital out of the gate, you think money can solve the problems versus using ingenuity to solve them or finding other creative approaches. Then lastly, reach out to the Boston Network. We all like to see other Boston companies succeed. I get advice from other Boston founders frequently.

I give it to other founders and there's VCs in the Boston Network too that you can just-- They'll take a meeting with you and they'll give you feedback on the company. They'll even make introductions. I owe a lot of the success and credit to Botkeeper to the help that I got from the advisors and mentors, and the people I reach out to. Today the success is all thanks to the 400 or so people that work at Botkeeper now that are moving the mountains that are it's not a me thing anymore. It's way bigger than me, and we're trying to lead the AI revolution in accounting.

Evolving with Your Environment

Sal Daher: Phenomenal. This is so well said. Enrico, what you're saying here is very, very profound. I was listening to an interview today with this writer, her name is Virginia Postrel. She wrote a book about fabric and the most striking thing about that book is that before the industrial revolution, the amount of thread necessary to make a pair of blue jeans took 150 hours, the most efficient producer.

These are our spinners in India. It would take, and they were mostly women, spinning 150 hours to make the thread for one pair of jeans, but that's just spinning. There are other aspects of it, maybe it was 200 hours. If you say like a 15 minimum wage, let's say it's 150 hours, so we're talking about 150,000. It's like $2,200 for a pair of jeans. The improvement in productivity has brought it to the point where blue jeans don't cost $2,200, they cost 25 bucks or less.

Who is it that had the $2,200? These are kings, they didn't cut a cloth. They used to sew it together and so forth. An interesting point in that conversation was that she was talking about the Luddites. These were the people who were weavers and those weavers, the initially when this explosion in the improving the production of thread came in, those weavers were killing it. They were making so much money because all of a sudden the thread was cheaper and they were able to capture this enormous, enormous surplus from the reduction of the cost.

They could sell a whole lot more cloth and they were producing a whole lot more, and they had several decades where the weavers were making a lot of money because the spinners had begotten very productive. Then the power looms came in and the weavers were like the hand weavers, those were the Luddites who were breaking the weavers and ended up being transported to Australia or whatever. It was the time of the weavers to suffer.

This is one of the things that happens is that there's this lead and lag and so forth. I think that ultimately the industrial revolution created massive benefits for the entire population, but there will be local dislocations. I think that it's going to be the same thing. Our life is going to be better and better and better, things going to work better, and we don't even notice it because of the AI that's embedded in all these things.

Enrico Palmerino: The local dislocations, it's all about how you approach it. It could be temporary or it could permanent. It's like with anything, you are in control. Do you embrace the change and learn the new skillset and the new trade, and it might take you some time to do it, or do you fight it? I can tell you right now, I'm pretty sure there isn't a single person out there that knows a Luddite these days, and that's because they've gone with the wind.

Sal Daher: Yes, the Luddites were not ideal logs, where their bread was buttered, all of a sudden they had this booming business, they had decades of unbelievable business and all of a sudden the business evaporated, and they were mad, they were really mad and they wanted to break those power looms.

Enrico Palmerino: It doesn't happen overnight, that's the thing, they saw it coming, it's like Kodak saw digital coming, it's like people have been talking about AI coming for those past decades.

Sal Daher: They can't-

Enrico Palmerino: See change?

Sal Daher: -yes, the innovator's dilemma.

Enrico Palmerino: Do you become skilled at running the machine that's producing and now become immensely more profitable in the next chapter?

Sal Daher: Absolutely.

Enrico Palmerino: Or do you stick with what you're doing right now and get replaced?

Sal Daher: Yes, absolutely true. Companies have a much harder time than human beings, individually, I think human beings are more adaptable, individually, companies are tied to their old way of doing business. Somehow they think that, oh, that horseless buggy, that thing is going away, we're buggy whip manufacturer, we're going to be really good at buggy whipping, making buggy whips, forget the horseless carriage, so I think a lesson for us is we have to be retooling ourselves all the time. For someone so young, you're extremely wise, I'm very impressed.

Enrico Palmerino: Thank you. I appreciate that.

Sal Daher: I'm very impressed. If there's any other thoughts that you want to share?

Enrico Palmerino: No, I'd just say, don't forget companies are made of people, so as long as the people are ingratiated and constantly reminded by the company to continuously improve and change and adapt new things, they should be just as good as the people that make them up.

Sal Daher: In the space that you're in, the most important thing is to be able to attract brilliant people, because if you're someone who's really, really good at what you do, you have a lot of choices as to where to work. A company like Botkeeper has to offer an environment that is very gratifying, as we said, just a place where you feel that you're really making a difference and it's a good positive environment in which to work, and that's how you're going to get the talent.

It's no longer the old days where the employee went to the employer, hat in hand, sir, it's like something out of Dickens, "Oh, please, can you give me a job?" No, it's the opposite, the other way around, it's like the company is saying, "Talented employee, we really need you, we bend over backwards for you." The whole power equation has changed.

Enrico Palmerino: Most proud of the people that we got here at Botkeeper, I call it the Botkeeper gravity, because the more talented people that we've attracted, the stronger that gravity grows with density, and we attract more and more, and I just look at the people that are here now, and I can't believe it. Yes, it all comes down to the people you have, so if you track great people, everything else gets easy.

Sal Daher: That is awesome, Enrico Palmerino, founder of BotKeeper, I am really, really grateful that you made time to be on the Angel Invest Boston podcast.

Enrico Palmerino: Thank you, Sal.

Sal Daher: Della, thanks a lot for making this possible, you're tremendous.

Enrico Palmerino: She is. I can second that.

Sal Daher: Yes, coming to us from Michigan, I'm just curious, I wonder if there's-- I'm going to talk to my accountants about if they run across Botkeeper because this is-

Enrico Palmerino: Thank you. That'd be awesome. I really appreciate that.

Sal Daher: Tremendous.

Enrico Palmerino: Thank you so much, Sal.

Sal Daher: Thanks a lot.

[music]

Sal Daher: I'm glad you were able to join us. Our engineer is Raul Rosa, our theme was composed by John McKusick, our graphic design is by Katherine Woodman-Maynard, our host is coached by Grace Daher.