“Just give me the chance to show that this idea can work,” says Rob Frohwein, co-founder of Atlanta-based financial company Kabbage, as he reflects on the company’s early days. Ten years ago, Rob and his co-founders Marc Gorlin and Kathryn Petralia were hustling to raise a Series A round for their early stage start-up. Today, Kabbage has raised nearly $500 million.
On June 26, Endeavor Atlanta hosted Rob Frohwein at its latest quarterly Scale-Up Breakfast, a closed-door interview where founders and CEOs of scaling companies can hear firsthand from top local entrepreneurs. During the conversation, Rob Frohwein was candid about what it took to build Kabbage over the past decade of his career. He spoke about the process of acquiring Kabbage’s first customers and lessons learned during his first time raising capital. He spoke on his fierce dedication to metrics and growth, and authenticity baked into Kabbage’s company culture. Rob ended the conversation with advice for communicating with your board, his views on company exists and words of wisdom to all entrepreneurs scaling a company.
Kabbage and eBay
Many of Kabbage’s first customers were eBay users. Rob recalled the “eBay: On Location” event, which is where Kabbage acquired many early adopters. “We went down to the event and we walked into this room of people who sold products on eBay. There was a cash bar and we would go up to these small business owners and say, “Hey, can we buy you a beer and talk to you about your business?” They thought we were literally taking them out for a steak dinner. I mean nobody had ever treated them like they were an actual business.”
Rob’s informal relationship with eBay became more formal in May 2011. eBay agreed to put a blurb about Kabbage in one of its newsletters to eBay sellers. Rob still remembers the time, “At 8:37 p.m. on a Thursday evening this newsletter goes out. I used to get an email every time an account came in. I got one at 8:37 p.m., 8:39 p.m., two at 8:41 p.m. and I remember saying, “$*%! it's happening!” I told my wife and kids and called the Kabbage team. We all went to the office. We basically stayed the night and just watched the accounts come in.”
“Nobody wants to be the first sucker in a deal”
Raising capital wasn't an easy feat for Kabbage. Rob estimates they spoke with over one hundred venture firms. Rob’s advice, “Talk to everyone who is willing to talk with you and realize that you’re always raising money - for years. Even when you're done raising a round, start talking to investors again to position yourself for the next round.”
Rob’s views on company growth and metrics
After raising a round, it’s a founders job to guarantee the money invested in the company ensures growth. In order to ensure consistent growth and customer acquisition, Rob believes in excelling at all channels, not just one or two. “I think people look for a silver bullet in terms of (customer) acquisition. You've got to always be willing to try a new way. You've got to assume that channels are going to deteriorate and you have to also assume that competition is going to come in.”
Rob is relentless when it comes to studying the metrics of his business. He’s hyper-aware of how Kabbage’s metrics affect the overall company and has even been able to identify when the company site is down just by reviewing the metrics. “I know if the site is not working right. I'll say, “We haven't put out a loan in 47 seconds and it's normally 38 seconds, what's going on with the system?” That's the addiction that you need to have with your business.” Rob is particularly aware of one metric: CAC to LTV. Rob says, “CAC to LTV is an important concept to me. You've got to make sure you understand these metrics and determine a ratio that will enable scale and profit. This can also help you figure out early if the business idea you have is viable.”
“I set very high goals and we almost never hit them”
Not only is Rob relentless in studying the metrics of his business, but he’s also relentless in goal-setting. Rob says, “I set very high goals and we almost never hit them. I don't really know if that's a good thing or not, because it can be frustrating to some. I would say I prefer to shoot for the moon and stars above, and if you get close, you've done pretty well.”
“We take our sh*t seriously but we don't take ourselves seriously”
Kabbage has six core values: Care Deeply, Inspire Innovation, Win, Stay Connected, Unconditional Commitment, and Create Holy Sh*t Moments. Rob believes Kabbage’s company values were created before they were ever written down on paper.
Rob says, “We built a culture and I'm not sure that we even knew that we were building a culture. One day we went, “Hey, this is a pretty cool place to work.” Kathryn, Marc and I wanted to have a culture where we got excited to go into work every morning.”
He advised, “As soon as you start thinking that your company is about you and not about the company and the people, that’s a real problem. Rob mentioned that culture is actually a lot easier than people think. “It's about not being a jackass. It's about actually caring about people.”
Many start-ups have built a culture around employee perks like arcade games, beer, ping-pong tables, and company provided lunch. However, as many early-stage companies are figuring out, perks don’t equal company culture. Rob described a time when a Kabbage visitor identified Kabbage’s perks as culture.
“Somebody came in a few years ago and said to me, “I noticed you have a pool table, ping pong table, arcade games, your company provides employee lunch, and you've got beer. You really need that.” He literally said to me, “For the young people out there. That's the culture,” and I go, “That's not culture.”
“We wanted to create an authentic culture. We wanted to be the same person at work that we were at home. That's what we've created. At Kabbage, you can hear laughter, you can hear people get upset, you can hear crying and sometimes expletives. It's just people being themselves and when you do that, people form real bonds. When you form a real bond you might actually want to grab a beer, or play a game of pool, or use an arcade game and hang out. All of these things [arcade games, etc] are outgrowths of culture, they're not culture themselves and I think that's really important. I would recommend that you create an authentic culture because the stress of feeling like you're somebody at work and you're a different person at home is too much. You really want your folks to feel like they can be who they are when they're at work.”
“I feel like my job is to make sure my board members can sleep well at night”
As early-stage companies begin to scale, communication with the board becomes a high priority. Rob advised to maintain a positive and supportive relationship with board members. “I believe in communication with the board. Surprises are the number one problem that you will ever have running a company. I feel like my job is to make sure my board members can sleep well at night and the way they can sleep well at night is if they know that I have my finger on the pulse of the company. I will notice when things are not going the way they should go and I am probably in the best position to be able to figure out how to fix them.”
If you could put any piece of advice to entrepreneurs on a billboard, what would it be?
Rob advises, “You owe it to your company and you owe it to your employees to do everything you possibly can to make the company successful. I really think it's super important not to be executing on the company because it brings you some personal gratification or some ego boost from doing it. You've got to do it because of the absolute passion and love you have for growing that business. Every decision you make has to be a decision that is based on the best interest of the business and not your own personal best interest. If you do that you're going to create a business where people really care about the business too. That's going to be the culture of the company. People are going to realize there's a bigger purpose, a bigger mission. I think the reality is it's a huge, huge effort and grind, and you have to do it for the right reasons.”
The Endeavor Atlanta team and founders in attendance learned a ton from our conversation with Rob. We’d love to learn your favorite takeaways from the conversation in the comments below.