EP60 – From Startups to Exits

Dave: Hey everyone, Dave here with another episode of the Philly Tech Connect podcast. Today I’m speaking with Jake Stein, co-founder and CEO of Common Paper. Previously, he was the co-founder of RJ Metrics, which was acquired by Magento and then Adobe, and also Stitch, which was acquired by Talend. Before RJ Metrics, Jake worked in venture capital and started a landscaping business in high school. He was also the 44th ranked table tennis player under 21 in Jersey, achievements of which he’s equally proud. Jake, how are you doing?

Jake: I’m great, how are you, Dave?

Dave: I’m doing well, yeah. Table tennis, that’s an interesting one. Give us the quick and dirty on that.

Jake: It’s the best sport, objectively. My buddy Ian and I in high school decided that we liked table tennis and we didn’t have an opportunity to play, so we started a club so that basically we could raise money and get a table. We just played every day for years, and I got okay and started playing in tournaments. I was good for a normal person, but in legit tournaments, I got destroyed often, once by a fifth grader and another time by a woman who was like 40 years older than me. So, it’s a sport where skill matters a lot. Can you tell me a little bit about the difference between the 44th ranked person and the fourth-ranked person?

Jake: It’s much more about ball control, reflexes for sure. I remember like I played on my college team, or a club team, it wasn’t a varsity thing, but there were a couple of people there where my specialty was serving. That’s the thing I’m best at, and the top two or three guys on our team, I would watch them very closely. I know in principle exactly what they’re doing and I could still not return their serve. It’s like the thing that I am best at, when I’m really totally dialed in, they could just make it do things that I can’t respond to, combined with just being good natural athletes and hand-eye coordination. All that stuff is crazy.

Dave: Sounds super interesting, definitely a world I didn’t know much about. So somewhere along the line, table tennis naturally leads into venture capital, as one would expect. Where did you get the VC bug?

Jake: When I was in college, I wasn’t sure what I wanted to do. I attended a bunch of talks and one time I was doing my homework and I took a break to read this website called Slashdot. I was reading articles about new hardware and computer companies, and I was just like, “Wow, this is really interesting.” I’m taking a break from my normal work to learn about this. Wouldn’t it be amazing if my actual main work, my job, was to learn about this stuff? I thought, what is the job that involves learning about new technology companies? VC seemed like the closest thing to that. There was exactly one venture capital firm that recruited at my college for people straight out of school, so I applied there, tried hard, got an interview, an internship, and eventually went to work there full-time.

Dave: Very cool. It’s not uncommon in my limited experience that people who have a background in VC often go on to start their own businesses. Maybe that was the plan all along, maybe it’s just from the exposure to the ecosystem. It’s well-documented that starting and growing a successful business is fairly challenging. Do you feel that the exposure to VC and seeing companies and seeing their journey and maybe the mistakes they made along the way helped prepare you to be a founder?

Jake: For sure. It made me more interested in it just because for two years I spent all day every day trying to, and sometimes successfully, talking to founders of companies. My biggest learning from that was I’m a lot more excited about their job than my job, and I wanted to be on the other end of those phone calls. Even for the people whose companies weren’t setting the world on fire, there was just like the struggle was really interesting. There are struggles in every job, but I was really into their struggle. So partially just on an interest front, and then I think it was also really useful just to talk to a bunch of people and learn what was working, like what the different kinds of sales models, marketing models, different industries, just like getting a lot of data so that I could sort of inform my own opinion about what circumstances, what strategies and tactics made sense. And also, in that job, I met my original co-founder from a prior business, from RJ Metrics, this guy Bob Moore, who’s also in Philly and now successfully started another company called Crossbeam. So it was useful on that front of just meeting my eventual co-founder too.

Dave: Very cool. I definitely want to talk about Common Paper, but just to bridge the gap in another way, as someone who’s founded multiple companies, RJ Metric, Stitch, and had them kind of go to acquisition, what was the appropriate time in between starting companies? Did you dive right into each of them after you got out, or did you feel like you needed a six-month break before you were ready? How did you stagger that?

Jake: RJ to Stitch, there was effectively zero time in between them because Stitch actually started as the second product at RJ Metric. So when we sold the original RJ Metrics business, as part of that deal, we spun out this second product that was like 1% of our revenue into its own company. We already had a handful of customers for that, and we had a team, so there was no break in between. That wasn’t because I thought that was optimal; that was just what we had to do. For Stitch to Common Paper, really Talend to Common Paper because Talend is the company that bought Stitch and I spent some time in Talend after they bought us, I took a little over four and a half months off in between those. During that time, my wife quit her job, and the two of us together with our dog went on a road trip around the United States. I purposefully took an online photography class, bought a fancy pants camera just to learn something that I knew nothing about. I started doing some research about Common Paper; it was an idea in the back of my mind. I talked to some people that I thought I could learn from, and I spent some time on it. Eventually, towards the tail end of that road trip, we were in Moab, Utah, which is one of the most beautiful places in the world next to national parks and nature, and all this stuff. I was doing enough customer development calls for Common Paper that I rented a desk at a co-working facility there. So instead of doing all the amazing things you could do in Moab, I was just all day on Zooms, and my wife was like, “Hey, I think you may have failed out of our sabbatical, and it looks like you want to start working again. We’ve been on the road for many months. I’m ready to stop too. Why don’t we head back to Philly?” So that’s what we did. For me, four and a half months was the right length of time. It was nice also just to observe what I was drawn to. But I’m sure different people in different situations. I was also super fortunate that we could take a couple of months off, which I realize was not an option for me at every point in my career.

Dave: For sure. To each their own, but that feels like a very organic way to approach it and to also know that you were kind of and are committed to Common Paper, that it was attractive enough to draw you away from this beautiful destination that you were hanging out with. So Common Paper, what is it? Why should it exist? What are you guys up to over there?

Jake: It comes out of some frustration that I’ve had, and what I’ve learned is really widespread around B2B companies and primarily software companies dealing with contracts with their customers. I experienced that at RJ, Stitch, and Talend. I subsequently talked to hundreds of people who experienced the same thing where the beginning of a relationship between a vendor and a customer ought to be a pretty happy time. The customer has self-identified they have a problem, they believe in the vendor’s solution, and they want to give the vendor money for that solution. Then what happens way too often is that they get in a fight over whose contract to use, then they negotiate with emailed Word docs and redlines, and it takes forever, it’s expensive, and it’s confusing. Then eventually, you get the deal signed, and then you actually have to do all the things that you promised to do. That’s pretty easy when you have two customers or five customers, but if you’re fortunate enough to have hundreds or thousands of customers, it’s really challenging to keep track of all the rights you have, all the obligations your customers have, and vice versa. Just like are you even doing things as straightforward as billing correctly for the fees and the contracts? My experience was all like data companies, and there are a lot of questions about our business that we could answer easily, but when we wanted to know, okay, we’re going to redo our homepage, who do we have logo approval for? Like who in the contract does it say yes, you can use my logo on your website? It took us a week and a half to answer that question because the necessary data for that was spread across hundreds and hundreds of PDFs all in these different Dropbox folders. So the problem we’re trying to solve at Common Paper is, can we make the process of entering into contracts better, more efficient for both sides, and can we give people access to the data that’s in their contracts? And the very big picture vision is that contracts are actually interfaces between companies. They contain data and they prescribe actions, and because of historical reasons, we’re modeling these contracts as digital representations of pieces of paper because that’s what contracts used to be, but the much better model for an interface is an API, an application programming interface. That’s how we today build interfaces between systems and companies, and so we are trying to turn contracts into APIs. One way we do that is through standardization. We create these common templates that tens of thousands of companies use as the base for their contracts, and we also make software for managing those contracts at the level of structured data. I’ll pause there because I know that was a lot.

Dave: No, for sure. I think that makes a lot of sense because what you’re taking is sort of this decentralized way contracts exist in all different formats and trying to create maybe like a centralized hub that somebody could maybe query into and just understand what their obligations from are. Are you finding there’s a particular industry where this is more pressing than others? I mean, you mentioned kind of like B2B, but…

Jake: Our focus area is really B2B software companies, primarily based in the United States, and primarily those who have at least a decent chunk of their deals where the customer is paying between $1,000 and $200,000 a year. So that’s like the center of the bullseye for us, and we’ve primarily focused on getting companies when they’re very early, so ideally when they’re bringing on board their first customer or design partner or signing their first LoI or NDA. We now have lots of different companies that use the agreements, some very large, some very small, people from all different walks of life, and some people who started small and have grown with us. But that’s like when we think about who we hope the next one that tries us out, that’s the profile.

Dave: When you think about approaching small companies, I imagine some of them maybe aren’t always aware they have the problem yet because they haven’t scaled to a point where they’ve seen the chaos of what you described at some of your previous companies. Does that make the dialogue more difficult or do people have good intuition as to where things are heading or maybe they have experience with past companies, they know what to expect?

Jake: That’s a really astute question. You’re right that some of the problems I described are not on your radar until you have a lot of traction. We think about a sequence of problems and how do we meet people where they are because they care about the problem they have today. They may intellectually understand that they’re going to have other problems later, but they’re not focused on solving them. The entry point we try to get is when someone says like they get a verbal yes from their first customer and that customer is like, “Cool, sounds good, send me your contract.” At that point, I know a lot of founders think, “Oh crap, I need to get a contract.” And I ideally want something that’s good, that’s not going to make me look like I don’t know what I’m doing, and that is appropriate for the deal and the business I’m doing. I need to take whatever the off-the-shelf thing is and customize it the right way because my product does X and not Y because this is either paid or unpaid or they’re going to pay me monthly or they’re going to pay me annually, or whatever. So we want that in that moment, the person has urgently a problem because this is one of the things that’s standing between them and closing their first customer or a handful of customers. And then you’re exactly right that later they have the problem of how do I get paid, and then after that, they have the problem of, hey, I start hiring a couple of people, how do I enable them to do contracts, mostly self-served but within guardrails? And then later on, they have the problem of, well, now I have hundreds of contracts, I need to understand what’s in them. So it’s different problems, and you can start with the tiny bit of our solution and sort of grow over time as your problem set grows because you’re hopefully successful.

Dave: Very cool. Is it on your radar sort of more like service-based companies? I mean, as someone who runs an agency, I guess I think of contracts as more the norm. I had a software company in the past, and maybe because it was an enterprise software, I’m just not exposed to the level of what you’re talking about, but I always felt like it was sufficient just to have a terms of service, and we were kind of good to go. So I’m actually a little bit surprised software turned out to be the target market that you guys are looking at.

Jake: Yeah, and so sometimes for some deals, it tends to be lower price point things where you can just post your online terms of service and have people agree to that, and we have a generator to help people create those terms of service. So if that’s all you need, great, you can use those for that. What often happens is, and this is how our business works, where you can just sign up for the product, you can sign up actually for free and use our product. And then once you start to need more stuff, you may convert to a paid thing and start at like 25 bucks a month, 50 bucks a month, 100 bucks a month, depending on what you need. And that’s all under our standard terms of service, and it’s click-through. And then if you’re a bigger customer and you’re paying us more and there are maybe some custom things in your deal, then often you need a one-to-one contract that is more like custom negotiated terms. Maybe they just say like, “We find the terms of your standard too unacceptable. We need a higher liability cap,” or “Whatever your standard thing is, we need to change that.” And that’s when you have a one-to-one agreement. We have a lot of people who use like to for the masses, and then one-to-one contracts for the smaller number of higher value deals. The other part of your question, for professional services, so we do have a professional services agreement that has a statement of work associated with it. That is like, we actually got asked for that a lot by our software customers because they are like, sometimes they have services exactly, and then also sometimes they are the customer where they are working with agencies and whatnot. And so we now have some pure play services agency firms that use us just for the PSA, and that’s a lot of how we’ve grown over time has been like we start with a really narrow niche, those people have some adjacent needs, and we help them out, and then when we add those things for their adjacency, that opens up a new market. So when we started, actually, we were just cloud software, just hosted, and then some of our cloud customers were like, “Hey, we actually sometimes sell our product as an on-prem version. We really need a separate contract for those on-prem deals.” And so we created that, and now we have pure play on-prem companies. That’s all they do. So that’s how we think about expanding our addressable market over time.

Dave: Fascinating stuff, making the world of contracts interesting. Jake, appreciate your time today. For people that want to learn more about you, Common Paper, how should they do so?

Jake: We’re just commonpaper.com. The social network I spend the most time on is probably LinkedIn, so you can find me there. I’m just Jake Stein. But yeah, appreciate it, this was fun.

Dave: Thank you.