No-Code Startup Tools, JustWorks S1 Snapshot, Pinwheel Series B, & CP3’s longevity
Stretch Four Insights Volume 12
Wendy Byrd: I’m not losing.
How do we not lose?
Marty Byrd: The only way anyone ever not loses anything. We need large numbers of money and then we need to buy all the people.
Happy weekend. Or happy Ozarks weekend for all the fans out there.
2022 is off to a quick start and lots of things are happening.
While I am not an investor market type of writer, I, like many, am feeling the frothy stock market, and dwindling crypto market. This week I had a conversation with another founder who is going out for a Series B in the next few weeks and he did not sound the most excited considering his timeline and the current state of the market. The next three months are going to be quite interesting, to say the least as inflation and rising interest rates will affect the overall economy and market across the board.
On the brighter side this week, I will highlight:
A recent tweetstorm on building startups with no-code tools
Some insights from the JustWorks S-1
Pinwheel’s Series B fundraising announcement
CP3 and the Phoenix Suns’ separation
If you’re new here:
Check out last week’s Volume 11 on the metaverse
My first long-form piece and most popular edition thus far on how I got scammed in my first foray into Web3.
My long-form piece on new startup Column Tax.
With that said, let's get into it. And if you want to hear more or spread the word, subscribe and tell your friends!
Let’s dive in.
Are no-code tools the best way to build your startup?
“I need Marty’s software, I know how to run the system, I just don’t know how to build the system.” Ruth Langmore, Ozarks Season 4, Episode 1
You need engineering to build startups, but what if you’re not an engineer? Clearly, you can launch a startup without learning how to code yourself, but are no-code tools meant to completely replace engineering in early-stage startups?
While I do think no-code tools can be helpful to get started with a new startup or technology project, as a two-time founder, these tools can also be a trap. Quite honestly, I think these tools are great for building after you already have engineering in place.
There are an abundance of no-code tools that allow you to do amazing things, (i.e. this newsletter goes out on Substack and I would not be able to do it if had to write a line of code) but building your entire startup on no-code tools is setting yourself up for failure or at the least disappointment. Why do I say this? The best technology companies all prioritize engineering early on. Even if building a product with a few lines of code is all you can do it helps to understand the types of technical challenges and problems you can solve for your customer.
But if you insist on building with no-code tools or just want to experiment with some cool tools these were the ones listed. I have not been using many no-code tools lately, but I am definitely going to explore using some of these new tools this year within ModernTax and on some side projects. More specifically, I am interested in using no-code tools to test early validation experiments like “Will people sign up for my app idea?” or “Do people even search for and click on links for certain keywords that I might use?”.
Here is the list of no-code tools linked in the tweetstorm. Let me know if any of you use a particular no-code tool you use in your everyday work or business?
While we use Gusto at ModernTax, I am always intrigued by new payroll companies and JustWorks is one that has emerged in the past five years. Recently, JustWorks presented their S-1 and I skimmed through it and found some intriguing numbers.
One fact that stood out in this S1, and that has stood out in others I have read, is how the team calculates their total addressable market or TAM. The TAM defines how much money a company can make if it owned the entire market. JustWorks estimates that their total market is worth $39.3 billion which shows just how massive the payroll and benefits market is in the U.S. alone.
How JustWorks arrives at nearly $40 billion in addressable market size takes into consideration there are approximately 40 million American employees working at companies with less than 100 total employees.
They then use a number called their “annualized average contribution profit per employee per month (PEPM)” which they calculate to be $113 per month per employee. Lastly, they use U.S. Bureau of Labor Statistics (BLS) data and estimate that they can target 74% of the total 40 million employees. This is a big number and with JustWorks generating $982.7 million in 2021 they have about 2.5% of the market share.
JustWorks clearly has room to grow and also shows why there are thousands of payroll providers and I have a reason to believe they will not be the last to hit the public market in the coming years. By taking a look at the private market you can see at least another 3 IPOs in the next 2-5 years.
I plan to talk more about this space in the future newsletters as it touches parts of the ModernTax business and it is fairly interesting to see companies taking all types of different attempts to create new payroll experiences.
Pinwheel’s Series B and our path towards a fairer financial future
Speaking of payroll, a sister portfolio company of some of our investors at ModernTax raised a $50 million Series B this week. Reiterating above, payroll has become a hot space within the venture capital and now public markets.
Pinwheel is taking a different approach than say a JustWorks. They are not building a payroll service that small businesses can buy. They are building a connectivity layer of technology to connect all the payroll services to other financial apps to help consumers qualify for credit and switch deposit accounts.
Pinwheel is the self-proclaimed leader in the emerging payroll connectivity space and they are now the first to reach the Series B round of funding. This is an important milestone as the space has gotten convoluted in the past 24 months.
I expect to see the other competitors like Argyle, Atomic, and Citadel announce fundraises this year as well as some consolidation as well.
One thing I learned from Kurt Lin, the founder/CEO, is he was focused on going after big contracts early on. When I spoke with him last year he was going after a contract with Square to help facilitate direct deposit switches for Cash App.
I think this pays off in this space and I am excited to watch Pinwheel expand the market.
🏀 NBA League Pass Team:
Phoenix Suns
We are now over halfway through the NBA season, and the Suns have separated themselves as a clear favorite to win it all. They were my top team on league pass this week and have run off five straight wins, all of which came on the road.
Off-topic, but one of my personal reasons for experimenting with a plant-based diet this year was inspired by Chris Paul. He is the backbone of this team and for a guy that will be 37 in May, he is the gift that keeps on giving. He has been outspoken about his diet changes in the past five years and credits it as one of the key factors that have allowed him to continue playing at such a high level in his late thirties. Not to mention, he’s a borderline first-team all-NBA player in his 18th season. Devin Booker has also picked it up and is playing at a very high level.
My only bad take on the Suns is with their ownership. Robert Sarver is notoriously cheap and supposedly has made some misogynistic and racist comments in the past. This time he has outdone himself by not paying DeAndre Ayton the maximum salary or picking up the option on second-year lottery pick, Jaden Smith.
As of 2020, Sarver is the third “poorest” professional sports franchise owner in the U.S. but it just seems weird to see a guy with such a good team that can be good for a long time not pay some of the younger pieces to keep the core intact for the next five years.
In the short team, I see the Suns making another deep run into the playoffs and potentially winning a title this year.
What's Next?
ModernTax
This week we signed our first new contract for January at ModernTax!
This opportunity has great growth potential for us. So we are actively hiring for two primary roles and will plan to keep expanding.
I have a big month in February so this week will include mainly hiring interviews and prepping for our Series A fundraising which will need to kick off a bit earlier than I planned.
Chief Architect: This role is someone that is #1 technical, but also understands how to architect solutions in a way that developers can easily use the products. At ModernTax, our goal is to make consumer tax flow like running water through financial products like mortgages, insurance, and credit. To make this happen, we need someone who can architect our product to fit various use cases with one end-point.
Principal Engineer: Here we are looking for someone with front-end and back-end skills to ship features while maintaining a high standard for security. We believe, tax information is vital to most financial decisions, but because of the highly private data set it is we need to have clear security definitions and protocols with how users share their data and how our business customers access it for only specific purposes.
Stretch Four
Stretch Four
This week I will finalize my next long-form essay on an emerging startup which I will announce soon and I am starting an audio version with a very special first guest : ).
Lastly, if you found this newsletter interesting and know someone else who would, please forward it to them or tell them to subscribe here. It would make my day if you do!
Back to the trenches (and football). Here’s to hoping the 49ers get upset in Green Bay.
Best,
Matt