Stacey Abrams: How to harness risk

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We went to Katsabue, Alaska. And we're fly fishing, we're doing she fishing. in a catch and release area in Kata B. It was cold.

It was beautiful. I'm in the water, I'm casting fast. and reeling it even faster. That's Stacey Abrams. You probably know her as a leading voice in American politics.

But the story she's telling is a window into our parallel life as an entrepreneur. In two thousand six, Stacey and her friend Laugson co founded a small venture called Insomnia Consulting. Now they found themselves north of the Arctic Circle. Trying to win a new client. That would be the Alaska Native Corporation, or Nana.

Representing local indigenous communities. Our guides are members of the Indiepat tribe that own the Nana Corporation. And so we're out there And one of the gentlemen came up to me and he was going to gently correct my casting and I said, No, no I know what I'm doing. My dad is an avid fisherman, so I know how to fish. But her guide pointed out the obvious flaw in her argument.

He said, Well, you're not catching any fish. I'm like, I don't want to catch the fish. It's cold in this water and I just want to give it a requisite amount of time and then get out. But out of graciousness, because I am southern I caught three she fish, I demonstrated my prowess with the rod and the reel, I released the fish, and I got out of the water. I'm back on the boat, I'm reading the book I want to read, and Lara is still in the water.

and she is catch and releasing and her she fish count is, you know, rising by the moment. And they lean over and they said, She's really good. Is she gonna stay out there all day? I'm like Lara's gonna stay out there until you tell her to stop. Despite the frigid temperatures.

Stacey's co-founder was determined to be the queen of the shefish. I think that was one of those moments where In the cold of Alaska, I saw encapsulated who we are. I want to get the mission done and Lara is relentless. We refer to ourselves as yes and but.

She is yes. And I think it'll But This fishing tale could be a modern fable of entrepreneurship. On the one hand, Laura.

Relentless pursuit of a goal and a willingness to stay in the icy river, no matter what. On the other hand. Stacy, who said get the job done fast. and get the heck back on the boat. When we tell the stories of successful founders, we often elevate

That first way. We say Be competitive. Tenacious. The last one in the water.

But look closer. Stace's approach is not just viable. But ruthlessly efficient. She knew her goal was to win the client. Not catch the most fish.

So she marshaled the resources where they mattered most. Both approaches are valid. And both Stacey and Laura. Would go on to become scale leaders. As yes.

And But Each would have a different challenge in front of them. That's why I believe There's a place in entrepreneurship.

For both yes and but. If They work in harmony. You gotta have incredible talent at every position. There are fires burning when you're going out. Can you believe it? Such an idiot. And then you go back to this is totally gonna be amazing.

There are so many easy ways. I have no idea what to do. Sorry, we made a mistake. But you have to time it right. Oops. Working out of a three bedroom apartment. We haven't made it. Just how you do it. This is masters of scale. I'm Reed Hoffman. Co founder of LinkedIn.

Partner Greylock. And your host. And I believe. There's a place in entrepreneurship. For both.

Yes. And But Yeah. They work in harmony.

When I interview guests for the show, I always end with a series of questions we call The lightning round. There's something between. A personality quiz. And a party game.

What's something that's in your pocket? Beside your phone. A soil thermometer. My pocket. My car key. I live on an island so I don't have any pockets, I just have a swimming costume on all day long.

One of the delights of asking these questions is hearing how different the answers can be. And how different founders can be too. Take some of the different ways our guests have answered. One very simple question. Open office or closed office? Closed.

Open office. What am I working on? A little bit of both. I actually don't like an office. Open always. We're open door people. We have an open office, but I'm starting to rethink. I am craving to be Back in an open office.

Whether or not you want your office store to close. Doesn't actually say. that much about the kind of entrepreneur you'll be. But we can't help assigning meaning to it anyway. We do the same thing.

When we talk about an entrepreneur's appetite for risk. Some people naturally gravitate. Toward entrepreneurship because they can't imagine doing anything else. They know early on. That they want to be their own boss and scale their own ideas.

Not only are they comfortable taking risks, They see it as a perk. But there are many entrepreneurs who don't fit this description. They may never have envisioned themselves founding a company. But at some point they saw a need.

And starting your own business was a pragmatic means of answering it. to them. The risks may seem more like A necessary evil. This alternate perspective doesn't hurt this second type of founder.

In fact, it can be an asset. If they can harness the risk aversion. Instead of being ruled by it. I wanted to talk to Stacey Abrams about this because as an entrepreneur. And scale leader.

both in and outside of politics. Harnessing risk. Has been one key. To her success. As a social entrepreneur.

Stacey founded and scaled. Not one. But two voting rights organizations. The New Georgia project? And fair fight action.

She also founded the Census Mobilization Effort. Fair count. And the Southern Economic Advancement Project. In the political arena. Stacey Abrams is a master.

of taking calculated risks. Embracing scale challenges. And going for yes. When every pundit is predicting no.

As a two thousand eighteen democratic nominee for governor of Georgia, She won more votes in her state. than any other democrat in history. Which is why this year. She's gunning for a rematch.

But Stacy's had an entire parallel career. Outside of the political arena. And no. I'm not talking about our stint. Moonlighting as the romance novelist.

Selina Montgomery. If you haven't heard that story. Please look it up. She also co-founded Three businesses with Laura Hodgson.

The master she fisher that we heard about earlier in the show. And they've just written a new book about their experiences. Called Level up. Often the books that you read about entrepreneurship or small business ownership

tell you the great stories. It's usually the Rags the Rich story or the innovation story. Sometimes it's a passing account of the failures on the way to glory. And we really wanted to linger in the failure. We'll get to that tantalizing cliffhanger of failure. In just a few minutes.

Stay to yourself can tell you that the entrepreneurial path was not one she had planned for. I describe myself as a reluctant entrepreneur. Here to four I was very, very, very fond of paychecks. I liked the fact that someone else was responsible for

Making certain that I had Yeah, my mortgage met. But in two thousand and six, I decided to run for office. Stacy had been Deputy City Attorney for the City of Atlanta.

Now. She'd be running for state legislature. A full time commitment that's technically A part time position. If she won.

Her salary would be less than eighteen thousand dollars a year. I knew I needed to focus on running for office. But I also needed to pay my mortgage. And so I was encouraged to start a consulting firm to work on one of the last big projects I was doing. at the city. That was the Atlanta belt line, this twenty plus mile green space transportation hub.

And I've been the lawyer who architected a lot of the infrastructure. The nonprofit organization overseeing the belt line. Wanted Stacey to keep consulting on that infrastructure. So they said, Well, if you'll do that, we'll pay you. Mike.

Oh, really? And so they said, Yeah, do you have a company? And I made sure I had one. And that became my first client. Stacey called her brand new consulting firm.

Sage works. She was officially an entrepreneur. Over time I added a couple of additional clients. I helped bring the Atlanta dream. To Georgia.

The Atlanta Dream A women's professional basketball team Part of the WNBA and got to get into a fight with David Stern, which gave me street cred with my brothers. As a lawyer.

Stacey was positioned. To apply her unique skill set to entrepreneurship. Even. If she hadn't intended to land there. I think the most important lesson I learned in my first four's

One was the importance of record keeping. Which sounds pedestrian. And as a tax attorney. it's ingrained in me that that's what you do. But when you're a small business owner Your first responsibility as an entrepreneur is to know

What you owe No who owes you and know what you've done. That attention to detail and accountability. What serves Stacey well, not just that Sage works.

But in government. Remember that race for state legislature? She won. That was two thousand and six.

The year Stacy would also meet her business partner, Laura Hudson. It was at a program called Leadership Atlanta. Right away, they saw they had different approaches. Different personalities. And one more difference that might surprise you.

One of the things that's kinda delightful about your story is Laura's a Republican. politically we are different. She was appointed by then Republican governor Sonny Purdue to serve on a board. She and I had different politics. But similar values.

And That's a distinction that people often dismiss is impossible. And what she and I found is that on many of the issues that mattered most to us Our values and our approach.

were aligned. What Stacey and Laura found themselves most aligned on. Was the desire to bring unique infrastructure projects to life. So they formed. Insomnia consulting.

A nod. To their working hours. As co founders One of their greatest strengths. Was their most obvious differences.

Lara came from the real estate development world. I came from the city of Atlanta, which meant I'd gotten a very hard and fast course in public works. And understood And granular detail how governments made decisions about infrastructure.

She understood the private sector's conversation. We together could bring people from various points of political view together, and while they would never have taken my call. or may not have gone to her meeting. when we came together, we were able to land them as clients.

This is a classic benefit to co founders bringing different skill sets and networks to the table. As well as Complimentary approaches. Or as Stacey told us earlier. We refer to ourselves as yes and but

She is yes. And I think it'll But This shorthand isn't meant to oversimplify their personalities. As a politician.

Stacey is one of the most yes oriented people I've ever known. As business partners, however, it worked well. For one of them to always be looking ahead to new opportunities. And one. To always have an eye on the essential risks.

And actually. Let's take a moment with this idea of essential risks. It's something I spoke with my producers about. And it's the key to understanding why stretching all of your risk taking muscles. is important.

There's this nuance about how you take risk as an entrepreneur that's really important. Some like say, Okay, I'll take a little risk and then I try to take as little risk as possible. That's generally a mistake. What you wanna do is you wanna say, well, okay, which risks are intrinsic To this entrepreneurial path.

And then I will take those risk and manage them really ferociously. But I'll take that entire risk. Like, is there a product market fit for this product? Or does this MVP get me enough that I can really test whether or not this is gonna work or not? Or can I outpace this competition or can I get the right talent in order to do this? And then you try to align behind those risks. And then take those risks. And then there's the other thing which is

You don't want to take every risk. You want to take Just the essential risks. that gets you to creating something new, something important, something valuable. The good news is You can learn.

How to better separate the essential risks. From the extraneous ones. And that's where having both yes and but. On your team comes into play.

If you're a company of gung-ho risk takers. Every opportunity. It's gonna look dazzling. And you may end up chasing bad bets. If your team is ultra cautious.

and risk averse. Every new idea will seem like a disaster. Waiting to strike. It's like the old adage.

If you're holding a hammer. Everything looks like a nail. You need your partners to be holding different tools than you are. Fact that Stacy was in government. and Laura was in the private sector meant they had different tools and different nuanced outlooks.

Laura brought the Let's Go Now. The corporate world. And Stacy. Brought a regulator's eye. assessing risk.

but when it came to their next big venture. There are essential risk management tools in particular. Would be put to the test. Insomnia was our infrastructure company and it was going well. Then there was a slight Collapse in the economy.

That Took out infrastructure and real estate first. But for us it also happened to coincide with A conversation we'd had when I was running for office. Laura had her son Connor

And she was trying to make a bottle for him while we're sitting at lunch. Laura had formula powder at the Ready. But she needed water to mix it. Which was more complicated than it might seem at first. There's the shape of most screw top baby bottles.

With a small neck. That invite spills. Then There's the quality of the water itself. Where in the real risk lies.

She had to send the waiter to go and guarantee that she had clean water. She said I wish Dasani Made of baby water. And we all kind of went back to the conversation about the campaign, but later on I we started talking and I said, Well, what do you think? And she said, Well, I've been really thinking about this and I wanna try it. This was the yes moment.

So many entrepreneurs will recognize And both. Stacey and Laura claimed it. They founded Nourish. A brand new baby water company that would sell purified water.

Sold in wide neck bottles. For mixing formula on the go. Neither of us had ever been involved in manufacturing. She was married to someone from Coca Cola. I have consumed Coca Cola products. I have consumed water and I was a baby, but that was my exposure to the necessities of baby bottles. It was a new construct. We had never seen anything like what we were putting together.

And so she and I gave ourselves the task of figuring out what this can look like. Did that feel like kind of jumping off a cliff? It was less sundance and more romancing the stone when you're kinda sliding down the cliff as opposed to just jumping into the abyss. But it was certainly a departure. This is a delightful new twist.

On our usual cliff jumping metaphor. Especially If you happen to be afraid of heights. But whether you're going down in a self built airplane. Or by running down the rock face.

There's a reason. We talk about entrepreneurship. in this high altitude way. To me. Jumping off a cliff.

Is the best way to capture the Oh God moment. you feel when you launch a new company in emotion. No matter how intelligently you've assessed your risks. There's always a moment of vertigo.

When you look down. And see how far you could fall. To ignore that feeling. is to ignore the reality. of starting a business.

But to succumb to that feeling. is to undercut your best asset. In those first moments. You're gathering velocity. What

benefited us and me I I'll speak for myself for a moment. Is the intellectual curiosity. I didn't know how it worked and I wanted to know and Laura and I have that shared curiosity. that desire to understand how things come together. She's actually an engineer by training.

I'm just nosy. And so It was how do you do this? And we investigated. We went to visit plants and we read books. And so yes, there's a knot in the pit of your stomach, but there was also the opportunity to learn about a whole new industry.

That could transform How people live their lives. This is a brilliant shift in mindset. That I want to underscore here.

Especially For any listeners who Like Stacey. Identify as Reluctant entrepreneurs.

Stacey and Laura. took their fears and channeled them into curiosity. about to become a manufacturer and you know nothing about manufacturing? Ask questions. Lear the process.

It's a shift. From I don't know how any of this works to I wonder. How this works.

Rather. than running away from the unknown. Curiosity. Encourages you. To run toward it.

One place Stacy and Laura turn to for answers. Was their respective networks. Laura and I inventoried ourselves. We thought through who do we know who can help us with things. And Who will do it for free?

Or for de minimis amounts or for the promise of something in the future. Lara had a group of people that she knew who could help us think through the manufacturing and the sourcing. I had friends who could do the art and the design and so we each would pull from our pool of allies

and we were able to build a prototype. Among those allies was Spanks found her. and previous masters of scale guests. Sarah Blakely. Sarah and Laura have known each other for a long time.

Part of what was helpful in building the company was that you had someone who was certainly further ahead in the process than we were. but remembered enough of it that she could give us really good advice. You too can get good advice in Sarah's own episode.

How to find your big idea. It's in our show feed. One way. That Sarah Council the brand new nourish team. was in choosing which retailers to approach first.

Which meant Getting into the mind of the consumer. When will they most need your product. And where?

Will they be most likely to encounter it in the store? This had to be a convenience product. But We had to explain where the inconvenience was. We are not what you need when you're sitting at home with your can of infomil and easy access.

We are what you need when you're lost in the airport and your flights been canceled and your baby does not care. Yes. When that paint point was so high that our price point was not too much. And that made it a lot easier to pitch to boutiques. We're able to go into airports.

We were in hospitals, we were in places of high inconvenience. Where the necessity of our product suddenly becomes evident. Notice how Stacy and Laura Zoomed in on the product market fit.

They understood. where their customers might feel most vulnerable. To the unexpected. Places of high risk. And high time pressure.

Like airports. This boutique strategy also helped nourish, mitigate risks. To their own supply chain. When you start By partnering with small sellers.

Instead of a major grocery chain. You learn quickly. Whether the product is a fit. Without a massive capital expense. Because one of the biggest risk factors you'll be mitigating.

Is cost. As it turns out. Even in the Coca-Cola capital of the world. Making bottles of baby water. Isn't cheap.

Our product required Hand assembly because it was a nipple. or a sippy cup top. And our bottle was designed to be held by little kids, so it was a different shape. to build the equipment to do it automatically.

We had to buy more equipment. And it costs money to build mold. It costs money Two Specialize. We did not have money.

early and nourish his life cycle. Stacey and Laura needed to fundraise. So once again. They inventoried their social and professional networks. Who do they know?

Who would want to invest. That's when they noticed a growing distance between Yes. And but One of the challenges that we had

That Lara had access to people who could invest in the company. I didn't know that I did. Lara went to Georgia Tech, she went to Harvard Business School And there's a comfort in having conversations about money. I had not come from that space, and I had not been in a position to ever ask someone to invest in something that was.

Outside of my brain power. This is a necessary leap. All entrepreneurs must make. But as Stacey points out, it's not equally vertigo inducing. For everyone.

And as someone who'd been in politics who'd raised a fair sum of money for my first race I was very comfortable with political fundraising. What I did not know was how to raise money for business. The people who gave me money for politics

did not believe that I understood what I was doing in business. And that's a very different way of having to see yourself. the shift to having to ask for investors. versus being able to do it yourself.

That is probably the most terrifying part of it. It's not the product and the learning. It's just anyone else willing to invest in what I think I see. Yep. Let's dig into that a little bit because I completely agree. I think for a lot of entrepreneurs who come from disadvantaged

communities, there is a humility that we think is what's driving us, and it's less humility and more fear. We're afraid we can't do it and you can't ask an investor when you don't trust yourself enough to believe that it's worth it.

This is absolutely true. And it's a problem that needs to be worked on from both sides. Yes. Entrepreneurs of all backgrounds must learn to fundraise. with confidence and ease.

But It is incumbent on investors to break free from their own limited networks. We know that a disproportionate amount of startup investment goes to male founders and white founders. And we know. That everyone approaches the cliff's edge of fundraising.

With different baggage. Thanks to societal biases, система racism, and lack of access. to inherited wealth. So those on the investor side. Need to apply a broader mindset to assessing risks.

Yes. As investors. We're always trying to get. The best ROI. But

We also need to recalibrate our heuristics around what good founders look and act like. We have to take a leap ourselves. And rewrite. Our entrepreneurial fables. We're also told there's one way to pitch.

There's one way to get money. And if that's not native to who you are, it doesn't match what you need. We are often pushed out of the conversation. And so one thing that I learned to do. was to be

novel in how I thought of my ask. I wasn't going to be able to do it the way Lara did. But what did I know how to do and how could I frame it as a way to ask for investment. And you have to shape it in your image.

Earlier. Stacey talked about redirecting fear. into curiosity about the unknown. Here. She did something similar.

She started looking. at how to pitch creatively. and reshape the work to our own style. I really leaned heavily on honesty. Which was this could not work and you could lose this money.

but you will never doubt that I worked really hard to try to make you money. Stacey and Laura were working together and learning from each other. They're differing styles making their company stronger. But they would soon learn. That even when

Yes and but work together. Sometimes The answer is no. When you've built substantial wealth through your business, it's often tied up in a single equity position. The upside is real, but so is the risk, and knowing when to act isn't always obvious.

Creative planning works with business owners to build a strategy around concentrated equity. When to diversify, how to manage tax risk, and how to protect what you've spent years building. Creative planning where wealth works together. Learn more at creative plating dot com slash masters of scale. Oh

Humans will never be more intelligent than AI. There's gonna be two types of companies. Those were great at AI and those that went out of business because they weren't. How do we build a future? That is human centered. I'm Rana El Kalyubi.

On my podcast Pioneers of AI, we answer that question and so many more. As an AI scientist, entrepreneur, and investor, I know what it takes to build AI that works for everyone. Every week, I sit down with the pioneers shaping our future. And we take you behind the scenes of the AI that's transforming our lives. Find pioneers of AI wherever you tune in. Hey there, it's Jill Slassenger. I'm launching a new show. It's called Money Moves, and your money is going to move. We're gonna help you make better financial decisions. We're gonna call out the BS you're finding all over social media. We're gonna give you actionable guidance to make your financial life clearer, less stressful. We're gonna answer your financial questions and take the mystery out of your financial life.

Follow and listen to Money Moves with Jill Schlesinger wherever you get your podcast. We're back. With Stacey Abrams. If you're enjoying this episode and want to share it with friends. Send them to master scale dot com

Slash Stacey Abrams. That's Stacey. with an E. Y. And if you want to hear this complete conversation, become a member at masterscale dot com slash membership.

There. Stacey and I talk about the fascinating scale story of the new Georgia project. And We bond over the delights of being a trekkie. You won't want to miss it.

When we left off. Stacey and her co founder, Laura Hodgson. We're working to scale nourish. They're baby water company. They had managed to leverage their complimentary skill sets.

To get their bottles into boutique and specialty stores. Then came an opportunity. To scale up. nourishes ambitions. The holy grail if you are a

consumer product is to be in a major grocery store. And so Whole Foods invited us to do a test. Oh my gosh. I remember the day the actual order came in. I checked my email and oh my gosh, the order's here. It's it's real. That's Laura. We thought it was time to get her take on the story. And if you didn't already know which co founder was Yes.

And which was But It wouldn't take long to figure it out. I'm ashamed to say I was by myself and I was jumping around. You know, nobody's in the room and I'm standing on the chair and I'm jumping up and down and oh my gosh, I've got to call Stacey. I called her and she was like, Okay, time out. Now let's step back. What are we gonna do first? This dynamic.

Was typical of how Stacey and Laura interacted. Especially at inflection points for the company. The first couple of times when Stacey and I were working together and something would happen, I would be like on cloud nine, jumping around, all excited, ready to go. And she would say, Well, wait a minute. But how are we gonna do this? My initial reaction was like deflation, right? Like Do you not see how excited we are? You're not jumping with me. You're supposed to be jumping with me. But then you quickly realize, oh thank God she's doing that, because otherwise I'll be jumping around the room celebrating when we need to be getting stuff done.

With a whole foods product test. Both founders saw the enticing possibility of radical scale. For Laura. That meant doubling down on the opportunity ahead. For Stacy it meant working even harder to plan.

It was a healthy push and pull that made sure they could scale up capacity. Without jeopardizing the product. Or the relationship. With existing suppliers and customers. after Stacy brought me back down to earth, we called our filler and said, Great news, we got this order. Of course he knew we'd been working on it and it was coming, but when we finally had it, I just remember him saying, We don't have the equipment to run it that fast, so I'll have to put more people on the line.

And you know, it was one of those things where It was a but that could have been like, Oh my gosh, then we can't do this. But I feel like Stacey and I had done a really good job with our partners of establishing this sort of culture and mindset. around problems will come up. They're never deal breakers if you don't let them be.

In a more traditional master scale story format, this would be the point at which the entrepreneurs jump off the cliff. Assemble their flying machine on the way down. And pull out of a nose dive. Just in time. But

That's not what happened to Nourish. The challenge we ran into was that they needed A lot of product. and we did not have the capacity to deliver. Earlier in the show.

Stacey told us that Nourish's bottles required hand assembly because bottles was what made their product unique. And the only way. to meet the whole food order would be to automate that process. At great cost. It costs money to build mold. It costs money.

specialize. On top of that we had suppliers who had been Incredibly kind to us, very generous, but They were also waiting to get paid by their vendors when so many people were in that posture. The pressure.

starts to squeeze. And Whole Foods is a great company. But they do what every major company does and they pay when they're ready. You are not their top priority. You're the minnow. You are not the whale. And so as the minnow

All you can do is call the line. And call. accounts receivable and say please pay me. What Stacey's talking about is the common payment arrangement known as Net thirty.

the buyer expects you to deliver the product within a certain amount of time and then they intend to pay you Thirty days after receipt. Nourish had plenty of demand. But the more baby water they sold. The more their costs kept rising.

Because their largest invoice remained unpaid. The question was Could we sell enough to scale? And to meet demand.

And could we make enough money? to bridge us until we got there. And the second question was the one that really did us in. Stacey and Laura applied for bridge loans to try and mitigate the problem. We went to banks, we went to credit unions, we tried factoring and that's when

a company basically makes you alone against your inventory. But the global economy had not yet recovered from the financial crisis. Banks had lost their appetite for risk. And the entire industry had gone from yes to To butt.

In a hurry. It was soon very clear. When nourish. scored their biggest contract. They had essentially

Grown. Out of business. They'd scramble down the cliff face. and lost their footing. The minute we took on this

Challenge of scale, we were dead. But it took a long time for us to finally be laid to rest. Laura was Nurse's CO. When all this went down.

As much as we saw the writing on the wall, there was that little piece of hope. that somebody was gonna show up the next day that was gonna have an opportunity that would turn nourish around, right? Like you never wanna Say I'm giving up because what if the next day the solution was there. And so I just kept digging my heels in, like, no, we can't give up. We can't give up. Lauren Stacey.

Bring up an important point. When you've trained yourself to keep the business going, no matter what. Letting it go. Can feel like a betrayal. But there's a reason why in Silicon Valley

We always say Fail fast. Because it's better. To crash and burn. than to languish.

In fact. I'd say when you're assessing your risks. You actually want to take on the ones that are most central to killing you as early as possible. If you're worrying about peripheral risks. without addressing the essential ones.

It's like worrying about what meal to cook. before you even know what ingredients you have. What you don't want. is to pour all your resources into a business. That has a fundamental flaw at the center.

If you fail fast, you have a better chance of failing. Before you've exhausted all of your resources. Including The precious investment of your time. You'll want that time back.

When you start on your next venture. And as it happens. Stacy and Laura's next venture was already bubbling up to the surface. It was this moment of Grief.

But because of our intellectual curiosity, because of our competitiveness Because of our drive, we decided to turn our grief into A new company. That new company Called

Now account. Would be a pivot. to the fintech space. Pivot makes it sound like a nice clean move like you do on a basketball court. It was a very long, slow pivot, with me really not cooperating, to be honest. I felt like I was quitting on nourish.

And I'm not a quitter. But the move from baby water. To small business financing. was more linear than it might seem. When we were growing nourish and we found ourselves waiting to get paid.

We initially thought we had made a mistake, right? We had misnegotiated something, but in talking to our suppliers, we realized because they told us that every business has this problem. And when you think about the fact that millions of small businesses around this country are waiting 30 plus days to get paid on goods and services they've already delivered. What you realize is small businesses lend more than they ever borrow. Because that invoice that they sent that says net thirty That's essentially a free loan.

In failing the scale nourish. They had hit upon a major gap in the market. If every business has this problem Why not be the ones to fix it? the story of how our second business faltered.

Is both a story about how we got better. But it's also a story about where so many businesses languish, and that's a conversation we need to have. Because it also exposes systemic challenges that are important to me as someone who's in politics. It's important to Laura as someone who currently runs the business we started together day to day.

But to create a company. That could address this need. They need to team up with someone who knew the business lending space. Backward and forward. So they hit upon

John Hayes. Our business partner, John Hayes. was one of the people who had been trying to solve this problem because he worked at one of the companies we talked to about financing. And he was one of the people had to tell us we weren't gonna get the money. But he came to us later and said.

Let's think about how we solve this. We had stayed in touch with John because we were a client. And then a few months later, we get this call from John and he says, You know, can we have lunch? Similar to how Nourish had gotten started. Stacey, Laura and John did some of their best musings in restaurants.

And it was the restaurant payment model. That inspired their new business model. You go to a restaurant They put a bill in front of you. You give them a credit card.

Your bill gets paid. Restaurant doesn't say you can pay net 30. They want net 30 seconds, they want their money now. And as consumers, we're very good with doing that. In B to B, that's not the case. And Together we created this idea that

There's a consumer credit card that solved this problem for business to customer relations, so B to C. Now account is a payment accelerator that allows small businesses to get paid immediately when they deliver their good or service to a business or government customer in a way that feels like taking a credit card. Essentially.

Now account buys unpaid invoices. From small businesses once an order has been fulfilled. Not for pennies on the dollar. The way a collection agency might. But for the full amount.

For their trouble. They charge up predictable. Three percent fee. Their goal is to take the most devastating risk factors out of the equation for the small business own. And in fact

Stacey and Laura. Intentionally sought out businesses. That traditional lenders Considered too risky. We were very intentional.

About building A model that could withstand Not the easy clients. But the difficult ones. Of course.

There's some inherent uncertainty. When you take over an unpaid invoice. But now count Didn't just forge ahead over the cliff willy nilly. They wanted.

Some top notch insurance. So they sought it out in their partnerships. One of my contributions in the early stages was that I read laws for fun. I am nerdy in ways that really defy description. And so I was reading

The Small Business Act in twenty ten that was the omnibus solution to the collapse of the business economy for small businesses. There was a you know very short paragraph on alternative credit initiatives. I'm like, wait, that's us. And so we actually Came into being

In part because we were partners with the Federal Government. And the state government. They wanted to find additional ways to move capital to small businesses, and we became one of those ways. The other piece of it was that we evolved our financing model with our size. So

when we finally brought in an equity partner. we were able to do so in a way that didn't diminish our ability to meet the goals of our company because As you know, some investors come in to help you grow.

and some investors come in to help you sell. And we need it to grow. Stacy and Laura. Built now account. to withstand the risk of financing small businesses.

But they still had to convince those small businesses that now count wasn't a risky bet. Small business owners, entrepreneurs, we don't trust miracles because it sounds too good to be true. That this problem that has plagued small businesses For millennia. Can suddenly be solved.

So we had to figure out how do you navigate that. How do we sell the idea? Stacey and Laura solve this problem by asking What might have put themselves at ease when they were at Nourish and looking for capital. The answer?

Get validated by partners small businesses already trust. That was something else we'd learned both with Nourish and with Insomnia. If you want people to trust you Bring people they already trust. And so we had really, really strong relationships with credit unions because

When you think about the banking industry, credit unions and community banks are the two that really have the closest relationships. with small business owners. And that was how we built our first customers because we had folks Who knew that we weren't a scam. And

While you have to always be Cautious. You don't always have to be suspicious. In two thousand sixteen. Stacey left day to day operations at now account.

to devote herself full time to public service. That would include scaling the other organization she'd founded a couple of years earlier. The New Georgia project. And Master of Scale members can hear that founding story in her complete interview. Meanwhile

Laura Stayed on as CO. Where she remains today. Now is at our own inflection point. We started serving small businesses in and around Georgia, but because we work with businesses that sell to companies like Coca-Cola and others, we now have customers all over the United States and they sell all over the world. Two thousand twenty one. Now account closed around of series A funding.

And was able to expand their platform from Georgia to the national stage. I have become very much like the 1960s telephone operator. When someone says I need X, my first reaction is, Oh, well, what you need is something one of our other clients provides. Why don't I just connect you? Now account discovered, they have the means to connect business customers to each other. So this year they'll be launching the Now Network. A B to B networking platform.

That allows them to be the nineteen sixties switchboard operators. At scale. And as co founder of Now. Stacey is still deeply invested in its primary mission. One of our metrics for success is how many

jobs do we help create and how many jobs do we save? When A business can't afford to make payroll because they're waiting on a check. when a business has to decline an opportunity because they can't afford to wait for the purchase order to come through.

That's someone's job. And one of the things that we are proudest of are the thousands of jobs. We've helped to create or save. since the start of this company. As Stacey and Laura point out in their book.

Level up. Half of all small businesses. fail within the first five years. They're risk aversion. Doesn't come from cowardice.

It comes from reality. So many business owners. Have no safety net. They believe. With good reason.

They only have one shot. And the cliff jump. Then if their business fails They think they're not Cut out.

For entrepreneurship. So many of them. Leave the game. But there are multiple ways to come back from failure. Multiple ways to scramble down the cliff.

And every founder. should have access to them. I'm Reed Hoffman. Thank you for listening. Hey listeners, Bob here. If you listen to Rapid Response on Masters of Scale, you may be missing half the show.

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