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This week I talk with Isaac Oates of Justworks. Isaac’s journey from Amazon to Etsy to starting Justworks is fascinating and I think you’ll love it. Enjoy!

Josh Pigford: All right, hey Isaac, thanks for joining me.

Isaac Oates: Yeah, thanks, of course, thanks Josh, I’m excited to be here.

Josh Pigford: So I would love to get your back story. I kind of have a little bit of a fascination with people’s origin stories, I guess. I’d love to hear what you were like as a kid, pre JustWorks, pre really any kind of entrepreneurship stuff, you growing up, what were you like?

Isaac Oates: Yeah, so I was a pretty quiet kid. I grew up with just my Mom, so it was just she and I and we moved around a lot when I was younger and then I got into computers in this really major way when my mom had this job at the public library, she worked there on the Saturdays, and so instead of having a babysitter I would just sit in the library all day and they had this Apple 2 in the corner, and they had this binder with floppy disks and it had games like Where in the World is Carmen San Diego type stuff, and it also had this thing that teaches you BASIC, and so i started using it and I learned BASIC and I would say basically from that point on the rest of my childhood was about programming and being on computers and stuff like that.

But in general I would say I was pretty quiet.

Josh Pigford: Do you feel like being on the computers early on, what was it about the programming that really piqued your interest?

Isaac Oates: I don’t know, it was probably a way to have control in some way. I think the thing that was so amazing about writing a computer program is that you can just tell this machine what to do and it will exactly do the thing that you typed in, if you do it right.

And I don’t know, I just really liked that.

Josh Pigford: So I guess, do you consider yourself an engineer first, and then the entrepreneurship stuff came as a necessity or did you also have this business acumen about you early on?

Isaac Oates: Yeah, I think anyone who knows me would be hard pressed to describe me as someone with business acumen. But I definitely would consider myself an engineer first, although it’s kind of faded, and these days it’s more a way to think about things, and obviously it’s really specific skill set, but I didn’t really do a ton of entreprenary stuff although I did write this program. My mom later worked in a public library, or not a public library, a high school library and I wrote this program that would let them control access to the computer.

This was just when the internet was coming out so they had a couple of web browsers in the library but you had to sign a permission slip if you were a kid. You couldn’t just go online. So I wrote this program and sold it to the high school district that controlled access, so I kind of dabbled but it wasn’t until much later that I really started doing stuff.

Josh Pigford: Yeah, yeah. What were you like as a kid in school? Were you a good student interested in school or not your thing?

Isaac Oates: I was a pretty good student. I definitely liked, I think I liked Science the most. Math was actually kind of challenging, and then reading, writing not so much. I wasn’t on any sports or anything like that, but yeah.

Josh Pigford: Did you go to college anywhere?

Isaac Oates: I did. I went to the University of Illinois, Urbana-Champaign, this funny thing happened, I went to this high school for my sophomore through senior year and it was in the vocational school district but it was a magnet school for kids that were into technology. It was called high technology high school, and it had just opened and I applied to the University of Illinois and didn’t get in and then it turned out that they’d looked at my application and decided that I went to a vocational school. And so they were like, you should not go here because you went to a vocational school. And my guidance counselor actually worked it out.

But I went there for computer science, because it was the best CS school that I got into.

Josh Pigford: And do you feel like that was useful for you? The computer science degree?

Isaac Oates: Yeah, at the time, I was a pretty decent programmer by the time I was going into college. I’d worked on something called a BBS, which is sort of like a …

Josh Pigford: Yeah, I know what that is.

Isaac Oates: So I wrote BBS software when I was in high school so I was already pretty good but I think what I got out of college on the CS side was the ability to really understand these different algorithms and data structures and how to use them, and the other thing is I learned how a computer actually worked. So it was like, you sort of went all the way down to how do you take transistors and turn that into a computer, and not that I’m sitting around and doing that all day, but I think knowing that gave me a confidence that was really valuable.

Josh Pigford: It’s kind of interesting, so I majored, I ultimately graduated with a graphic design degree but I was one of those kids that changed majors a dozen times and I was actually a computer science major for maybe a month or so, and the very first class was binary code stuff and I just remember wanting to smash my face against the wall. It just, I mean, I could program but programming for me was like, it was a tool and it wasn’t, I didn’t necessarily enjoy it. It was like a means to an end, so computer science for me was, and it also felt very antiquated, which I don’t know, a lot of times that can be university educations anyway because they’re kind of lag, do you feel like yours was up to date with technology at the time or also kind of lagging?

Isaac Oates: You know, it was maybe a little bit behind, but the irony is I don’t think they’ve even changed it and now it’s 15 years later.

But I think a lot of the principals are really not changing, so it’s like, you know, there’s different tools and languages and stuff like that, but even when we interview engineers here at JustWorks, a lot of times we’re looking for a fundamental understanding of how the systems that you’re working on work.

Josh Pigford: Yep.

So went to college, graduated?

Isaac Oates: I did.

Josh Pigford: Okay, so after that, what was the next step for you? I know that you ended up at a few larger companies, but I’m curious what was right out of college for you?

Isaac Oates: Yeah, so there was a little bit of stuff going on in parallel. I was also in ROTC when I was in college, so I’d enlisted in the National Guard right before I graduated high school and then all through college I was in this officer training program and so when I graduated college, I started working at Amazon straight out of school but then I was also basically took the first six months off to go do more military training and stuff like that.

Yeah, my first real job was with Amazon and I was a software engineer on this team called third party payments, or 3PP, which was this really cool transaction processing system that basically moved money between buyers and sellers on their marketplace platform.

Josh Pigford: Got ya, so what was, I mean, jumping right into Amazon right after college, what do you think positioned you to get a job at a company the size of Amazon?

Isaac Oates: Like, why did I get hired?

Josh Pigford: Right, if you didn’t necessarily have a ton of … or maybe you did have a bunch of experience, were you doing other stuff during college, building yourself up or …

Isaac Oates: I mean, I’d always been working, so again, since, at that point I had been programming for 10 years. The way I got the job was there was another guy that I was in undergrad with and he had interned at Amazon the summer before and we were studying for some class together and he was like, you should give me your resume and I’m going to send it in and maybe something will happen. And then, of course, this is the Fall of 2001 and so 9–11 goes down, all the … everybody stops hiring except for Amazon, which is how I ended up there basically.

I think the way I got the job was that I had good fundamentals, which is a big part of what they looked for, but also just real experience. They also, there was a work ethic that Amazon looks for which was probably not a shocker if you have ever read the New York Times at this point.

Josh Pigford: Yep.

Isaac Oates: But there is a work ethic and I think that I had that work ethic, actually I think a lot of kids that go to school in the Midwest in particular have that, and so Amazon loves people like that.

Josh Pigford: Gotcha, so you’re at Amazon for a couple of years and then where?

Isaac Oates: So what happened, a kind of amazing thing happened, basically I was there for about three years, and then I left to go to business school. I had decided that I wanted to become a product manager, and at the time the only way to become a product manager at Amazon, and maybe it’s still like this, I don’t know, was to have an MBA, and so I decided that I should have an MBA.

So I applied and I went to Cornell to their business program and then ended up going back to Amazon for about two years after school, not because I had some grand plan to come back to Amazon, but because a weird co-fluence of things happened, and all of a sudden I was like, yeah, I should work there again.

So basically, yeah, I went to school I went back to Amazon and then I left at the end of 2008 to co-found a start up.

Josh Pigford: Okay, cool, so that’s, you’ve been working for other companies up until this point and did you get the bug to start something, or just the right opportunity came up or …

Isaac Oates: I had been thinking about it for a long time, but honestly the thing that was really scary to me about starting a company was raising money. I didn’t really know a lot about it, I just knew that that was a big part of it, and the thought of having to stand in front of people and convince them to give me money was, I couldn’t even really picture it and I didn’t know a lot about it but it was enough to keep me away.

I’d come up with an idea and I called a friend of mine. This was right at the end of the time I’m at Amazon. I called my friend Greg that we went to high school together and I was like, “Hey Greg, I have an idea do you want to work on it?”

And Greg was like, “Wow, that’s cool but I’m actually working with my friend Jason on this other thing, maybe you should meet Jason.”

So I flew down to Austin, and met with Jason and Greg for this, I don’t know a three day weekend or something. It was basically a three day interview. And worked on the idea, and it was an Ad tech platform called Adtuitive. At the end of the weekend they were like, do you want to come on as a co-founder, and I was like yeah, yeah I do.

And it was really terrifying in some ways but really exciting. And I think what was particularly great about this is that my friend Jason had no problem standing up in front of a prospective investor and asking for money, and so it was the thing that was holding me back wasn’t holding me back in this case and gave me a really awesome chance to learn.

Josh Pigford: So what happened after Adtuitive.

Isaac Oates: So I was Adtuitive about a year and change. We were acquired by Etsy, right at the end of 2009 and then I spent three years at Etsy and at the end of 2012 I left to start JustWorks.

Josh Pigford: So what was the experience like with the acquisition?

Isaac Oates: It was tough, honestly. We, you know, it’s like we’re having this conversation with the BD director at Etsy, and at first it’s like, we’re going to use your platform and then later they’re like I think maybe we should just buy your company, and this is exciting but also we started not to know what we were going to get into, also it was this really long negotiation, it probably took four or five months to negotiate the deal.

Josh Pigford: Yep.

Isaac Oates: And then what happened was we were acquired and a couple of days later there’s this huge management change, new CEO, new, most of the management team leaves, and so everything we thought we were getting into was basically wrong.

Josh Pigford: Wow.

Isaac Oates: And you know what it’s like, you’re already there so whatever.

Josh Pigford: Sure.

Isaac Oates: So it was a pretty, it was tough, the company was going through this turmoil. We’d gone from a place where we were controlling our destiny, sort of like the really boat blowing around to just being in a company where we were running it anymore. And I think actually I learned a lot about perseverance and actually just sticking it out because I would say, certainly in the first year or so, most days I wasn’t having a great time but I stayed anyway, which has worked out but was painful.

Josh Pigford: Yeah, so you were there for a few years?

Isaac Oates: Yeah, Dave, I was there for 3 years. It got a lot better after the first year or so. I actually launched their payments platform called Direct Checkout, which was real cool.

Josh Pigford: So while you’re at Etsy, I assume at this point is when you start stewing on the idea for JustWorks.

Isaac Oates: Yeah.

You know, so it’s funny, I really wanted to start another company. I felt like with Adtuitive on one hand, it was a huge win getting acquired and the company we were going to is succeeding and our stuff was built in and everything, but at the same time our company was never more than 7 or 10 people, and I don’t know, I just wanted to do something bigger.

So I had been thinking about that, and then I was also the guy at Adtuitive that had set up our payroll and benefits and insurance and all that stuff, and it was a huge pain and basically I was just like, okay, I think I know a pain point, and because I’ve done all this payment stuff, I think I know how to fix it.

Josh Pigford: So this point you’re getting JustWorks off the ground, did you go into that with co-founders or start that all by yourself, or how did you get that actually off the ground.

Isaac Oates: Yeah, so I had a co-founder, and so there was the two of us and basically we raised money really quickly from some investors that, so Index was a firm that was invested in Etsy so I got to know them, and from representing on the board and stuff like that, so when I left Etsy they were just like, hey we should talk.

So the first money in the company was actually very, very easy to raise because we had these pre-existing relationships, and basically I hired a couple engineers within a few weeks and we started building this payroll system and I think within about 90 days we had, we were live and processing.

Josh Pigford: Yeah, yeah, yeah.

I guess, why start, obviously yes, there’s a big pain point with payroll. What was it specifically that you felt like you could do differently that other companies were not? When you think about the ADP’s for instance.

Isaac Oates: Yeah, so there are all these solutions out there and the thing about a market like ours, which is employer solutions is that they are essentially mandated by law. In theory, you can kind of do it yourself, but practically speaking that’s never going to happen. And so I think because of the structure of the market, there are a lot of companies that have built products and it’s all about sales, it’s all about distribution, and the product is this afterthought, and when I would pitch investors initially, I was like, “I think there’s a chance to have a really great product that people like and it works well and it’s easy and all the stuff that you would expect out of a normal product.”

And everybody was like, “well nobody cares about that. It just matters if you can sell it or not.”

It turned out the product really does matter, that all of the existing incumbents have not invested in their, it just wasn’t a priority when they built their stuff.

Josh Pigford: Sure. So you felt like having a product focus was a big selling point, I assume your previous role maybe as a product manager at Amazon, do you feel like that played into your belief that the product as the base was a big deal, or do you feel like you’ve always viewed things that way from right out of school?

Isaac Oates: I mean, I think both at Amazon and at Etsy, these are product led organizations. So the conversation is about the products and about how it’s going to be used, so everything I think about in terms of building stuff comes from that perspective, so I think it’s just ingrained in me.

Josh Pigford: What’s the, when you’ve got the ADP’s, or I’m going to assume, like, TriNet is the same kind of space that you guys …

Isaac Oates: Right.

Josh Pigford: Are in, so I mean, for you guys when it comes to talking to potential customers you look at like, even if you just put a screen shot of JustWorks next to anything that ADP, or TriNet does, at that point it seems like a really easy selling point, but do you think, what’s the hold up that people have that keeps them coming back to things like ADP or TriNet.

Isaac Oates: Yeah, I mean, I would say, so one of the defining characteristics of solutions like this is a really high switching cost.

Josh Pigford: Yep.

Isaac Oates: So if you’re starting from zero, and you’re just like, I’m going to evaluate my options as they are today, JustWorks will win, hands down every time or nine out of ten times, because you’re just judging it based on what you’re paying for and what you’re getting.

The challenge of course is that most businesses are not starting from zero, they already exist, and there’s a huge perceived switching cost in going from one solution to another. So if you’re like, well I have ADP, it’s working okay, and I see that JustWorks would be great, but it’s only twice as great, then you may not seriously consider switching.

So with the effect that it has on the business is we have high acquisition costs and a long sales cycle, but then once a customer comes on, they last for a long time.

So that’s really more like what the competitive dynamic looks like.

Josh Pigford: So then how do you reduce the switching costs?

Isaac Oates: Well we try to get businesses when they start, so that’s one thing, because then you’re basically just, there’s not a switching cost. I think in the long term, that’ll be a really important thing, and then the other way that we try to, I guess there are two things, one is we’ve worked really hard on the software to make it easy to switch, so it’s easy to get in there, it’s easy to put in your data, it’s easy to pick the health care plans, the whole thing is as friendly as it could be. Then we have a phenomenal sales team that is really oriented towards helping their customers or prospects, and so in many ways, they just act as this shepard through the process, and they’re there to help a business owner through the transition because it’s like everybody in their company gets paid, many of them are on health insurance, many of them have concerns.

So I don’t know, those are the things we do.

Josh Pigford: Yeah, yeah, so you mentioned earlier that a lot of the kind of stuff that you guys deal with is on some level kind of government mandated. So what’s that, to me, seems to be the most eye gauging things to deal with. Anything around government regulation.

So I guess, what’s the most frustrating part for you guys just building the product in such a way that it makes it look really easy for the end user like me, so that they don’t have to deal with all that regulation? What’s the really tough problem that you guys have to solve on a daily basis?

Isaac Oates: Yeah, so I would say there’s what we thought was going to be tough, and then there’s what is actually tough. So the mechanics of doing things like filing and remitting taxes and all of the stuff, because of the way our business is structured and because of our economies of scale, we basically file taxes once, for everybody, together.

So even though, if you were that team and you were listening to this, then you’re like, yes it’s painful. We’re just doing it once with large numbers. And our app basically does everything, so it calculates all the taxes and stuff like that, like new hire reporting, whatever, so the employer doesn’t really have to worry about it.

I think what is really challenging is there are some things that we cannot do in software. Knowing how to classify your employees, for example, should they be subject to the FLSA or should they be exempts? We don’t know, and so we do everything we can to help business owners understand what a law like that is, how it applies, how to think about it, worksheets, the whole nine yards, but your customers, they still have to be engaged enough to bother thinking about it.

That’s really been the hardest thing to solve is helping business owners understand everything that they need to understand because we are unable to do it for them but in a pleasant and useful way.

Josh Pigford: Yeah, yeah, is it a useful way to spend your time to, I don’t know about lobbying for government change but I mean, being involved in that conversation as much as you can? Or is it just a, we’ll deal with whatever comes our way?

Isaac Oates: Yeah, I mean, this is one of those things where I think our growth has an impact, so certainly in the early days we just took what came our way and that was what it was, but the nice thing is you’re small and you’re agile so you can deal with it.

I think as we grow we’ll be able to increasingly become part of the conversation around all these different things, and for us it really is about how do we help businesses be more successful and how do we help them be better employers so that they can have happier and healthier people in their company.

Any opportunity we see to help people be better employers, or to help businesses be better employers, we’re going to do that regulatory or otherwise.

Josh Pigford: Gotcha, so what for you guys has been a key part of success for you guys up to this point?

Isaac Oates: Yeah. I think probably the biggest thing is that our customers one way or another, they understand why we are here, and that our goal really is to help them and to protect them and to ensure that they succeed.

In the early days it was hard to know how this kind of bled out, but I think it bleeds out in our marketing, in our advertising. It bleeds out through every single person that you talk to on our team, whether they’re on sales or support or whatever.

And I think that that really changes the dynamic. I think a lot of our competitors the way it feels is that the competitor is trying to monetize their customers as much as possible, and our view is we create a lot of value and want to capture some, but we also want to leave some on the table, that’s why we’re here. I think people know it and I think that that is a really big part of why we’ve been able to be successful.

Josh Pigford: Can you tell me about the day that you realized, “Hey I think we’re onto something?”

Isaac Oates: Yeah, well, I think I always thought we were on to something because there were companies that already did this, but I just believed we could be better.

There’s definitely the day I thought we weren’t going to go out of business, anymore, which was like a year, and a half after we started. I came in one morning, it was like the Spring of 2015, that was like, two years later, and I was like, “Oh, I think we’re good. I think it’s more likely we’re going to succeed than go bankrupt.” That was a good day.

Josh Pigford: So were you, did you spend the previous time this is not going to work?

Isaac Oates: I wouldn’t say I thought it wasn’t going to work, but I was pretty anxious that it might not work, and I think it’s really challenging because as a founder everybody wants to see how confident you are that you’re going to succeed.

I never didn’t believe for a second that the product we were building wasn’t the right thing, or that there wasn’t a need in the market, but making the entire business work was a lot more complicated and so I think while we were figuring that out, there were definitely a lot of days where I was like, “I don’t know if this is going to work out or not.”

I was really glad that it did, obviously.

Josh Pigford: Sure. So, there’s two big emotions that you just covered there. There’s the optimism of where you have always thought that you were onto something, the idea itself was great, but then the anxiety of thinking for whatever reason things might not work out.

How do you balance those two, so you don’t just go crazy.

Isaac Oates: That is an amazing question.

I don’t know. I probably went crazy a little bit. I feel like everybody goes crazy a little.

Josh Pigford: Yep.

Isaac Oates: I think the best thing that I had in the end is a set of really amazing mentors that I’ve worked with so I sort of cultivated these relationships unknowingly from the work that I’d done at Etsy and even before that. And there were just a lot of people out there who knew me and had known me for a while and they were just like, I really want Isaac to succeed, and whatever it is that he’s doing I want it to work out, and those people were around and they were the ones that I could talk to and be like, it’s not going well, or whatever, and know that that was the place to talk about it. And I think in many ways that probably is what kept me sane.

Josh Pigford: Yep.

I feel like there’s a pretty common thread among most successful founders is having some sort of small group to vent to, almost like it needs to be somebody outside of the company, right?

Not necessarily a co-founder but just people you can just vent to and they can give you perspective.

Isaac Oates: Yeah, I think one of the things that’s been so interesting about being a founder and a CEO vs. an employee is if you’d asked me this before I started the company then I’d be like, of course you’d want to talk to people in the company because they know the most about what’s happening, and what I found, and I think this is increasingly true, is that people outside the company have a much broader perspective and I think in particular, it’s really hard to troubleshoot how things are going in the company with the people in the company, because then the company is just people.

So having people outside of the company that you can talk to is so important.

Josh Pigford: I mean, I almost find, or I do find, by talking to my wife about this stuff can be pretty therapeutic. I mean, she has basically zero ties to any of this, but it’s because building a company is people, she is able to offer this perspective of well maybe that person thought this, or maybe this person would prefer that because it’s still just people at the end of the day, and the business problem itself is almost irrelevant when it comes to building the company.

Isaac Oates: Yeah. I mean, the thing that has been so interesting to discover is that yeah, the business itself is really secondary to the company. The company has a business, but as a CEO I feel like I’m in the business of building and running a company, and then the company has the business. Which is just a different way than I think a lot of people think about it.

Josh Pigford: Yeah, no, I agree.

Is there, when, talking about when you did feel like you showed up and it’s like, okay, JustWorks is going to be fine, but was there this maybe a singular inflection point where growth itself actually changed or picked up? Like you guys did something that really changed something or has it always been just sort of slow and steady wins the race.

Isaac Oates: No, I would say our growth increased substantially in the Fall of 2014 and the reason for that is that we hired a sales team in the Summer of 2014. So for the first year and a half we had been building the product and we had some, we weren’t really doing any major inbound marketing, but we were just kind of there, and people would sign up sometimes. We were growing very slowly.

Then we hired our head of sales and our first few sales people, and started calling and picking up the phone and all of those things, and that made all the difference. And I think there are a lot of things we’ve done since then that are just sort of steadily increased the growth rate, but that’s really the biggest thing.

Josh Pigford: So is that lots of outbound sales or both outbound and inbound.

Isaac Oates: Yeah, I mean, it’s a mix.

So I mean, referrals are a really important part of building a business like this. I think given what we do, having credibility with our customers is critically important and so referrals are huge. So a lot of our inbound comes from referrals.

But we do a ton of outbound. I mean, people are, this is not the kind of product that people are thinking about switching most of the time for the reasons that we talked about and so you need to be able to cultivate a relationship with the people over time, so that when they do want to switch, you’re there.

Josh Pigford: So what’s the next, I don’t know, year, look like for JustWorks?

Isaac Oates: Yeah, we are doing a lot of hiring. We are going to grow, well basically across the entire company by about 60–70% in terms of head count.

You know, I think we have, we’re about 190 employees today, so I think that we have a really solid foundation and I’ve been spending a lot of time over the past few months making sure that we have a phenomenal plan going into next year and all of that kind of stuff. Basically we’re just scaling what we do.

What we’ve realized is we really like what we do, and we’re really good at it, and we want to do more of what we do, but stick to our netting a little bit, so everything we do is sort of focused on that.

Josh Pigford: So it’s less about expanding and doing more stuff, and more like let’s keep expanding and doing the same thing, but with more people.

Isaac Oates: Yeah, and better.

Josh Pigford: Better, right.

Isaac Oates: You know.

Josh Pigford: Cool, well Isaac, it was great talking to you, man. I appreciate you taking the time to chat. It was good talking to you.

Isaac Oates: Yeah, thanks so much.