It’s hard to believe PandoDaily is a mere eight months old. It’s growing fast, but I am reminded we’re still a start-up as I watch Sarah and our General Manager Oni Rovatti trying to not only create a great product on a daily basis, but also handle all the accounting, the payroll, and employee benefits on their own. To just find a healthcare provider for our small staff out of the gate was a pain. Having to do all the research on that alone was time consuming, taking away from building the product.
In comes BackOps. You could look at it as a Back-Office-as-a-Service company, an automated system that acts as a company’s finance, accounting, and human resources department all-in-one, and in the cloud. BackOps crowdsources the service aspect. Each customer gets a platoon of stay-at-home moms who are screened and qualified to manage the books and even deal with rogue employees.
It’s a model that’s worked for serial entrepreneur Konstantin Othmer who built Speechpad, a transcription service that crowdsources “Midwest moms” to do the work. In an interview from when I was at Forbes, Othmer told me, “If I took 100 of our Web workers versus 100 business executives, who would you trust to do a better job, get the work done, to be more thankful? I would take the web workers.”
BackOps has 25 moms on the payroll who are on call to serve small business needs. The company charges per employee with a small fee per transaction, starting at $750 per month. Employees are incentivized to get the job done correctly and quickly, since they don’t charge by-the-hour.
Kristen Goldstein got the idea for the company a little more than two years ago. At the time she was a CFO for her husband’s firm Loyalty Lab, which sold to Tibco. She really wanted to be the CFO for multiple companies. So, she had a choice: She could either join an accounting firm like Frank Rimerman, which allows you to rent a CFO, or she could start her own company. Originally she thought to have a services business, and it morphed into a product business.
BackOps’ platform completely automates the back-office, integrating Intuit’s Quickbooks software with 13 other applications on the back-end to create an all-in-one solution for small- to mid-sized businesses. It even integrates sales tracking software such as Salesforce to make the process of transferring the numbers seamless.
Goldstein bootstrapped BackOps from the beginning, and, along with her all female executive team, has managed to acquire nearly 50 customers, becoming profitable within two years. She did so well that her husband Mark decided to join the team and work with her to scale it. That meant going after some institutional backing to attract top developers.
So the husband and wife team hit Sand Hill Road late this summer, though it didn’t take much pounding of the pavement. Mark is a nine-time serial entrepreneur with deep experience in the fintech, SaaS, and ecommerce worlds. All he had to do was pick up the phone and call some of the folks he’s worked with before, including Mark Pincus, CEO of publicly traded gaming company Zynga. Also, founder of Angelist Naval Ravikant, CEO of Tibco Vivek Ranadive, Splunk founder Michael Baum, Shopzilla’s Farhad Mohit, and others.
And they all invested in the $1 million dollar round.
“I just wish I had a chance to take a look before the round closed,” said David Auerbach, when I emailed him asking his thoughts on BackOps. He’s a an angel and advisor to companies such as Concept.io, Verbling, and RefleXion Medical, as well as a co-founder of two companies, IMPAC Medical Systems and CareCore.
But Auerbach shouldn’t worry. Mark says the team plans to raise a lot more as they continue to scale.
Auerbach believes this company is filling a real gap in this space. “Although less sexy than a social media startup (in some investor’s eyes), these types of solutions are a needed addition to the SMB space,” said Auerbach.
It’s not that companies don’t have options when it comes to the back-office. They could hire internal teams, but as a company grows, they need to change. And it’s tough to find candidates who are qualified to grow with a company and can continue to help it scale. Another option is to hire consultants that charge by the hour. But startups are under scrutiny by their Boards of Directors to watch each penny, so every second could be under scrutiny.
Some startups use Salesforce’s CRM system, which has applications to manage the books and human resources right out of the box. Others may use Netsuite Small Business, which starts at $99, or solutions from soon-to-go-public Workday. But they still need someone on staff to manage the process. That’s why many Silicon Valley startups actually choose to outsource finance and human resources to separate companies, which is not a bad idea, especially for the complete beginner.
Even that can be tough.
“It’s just so much easier for companies if their back-office was all under one roof,” says Elias Dayeh, Director of Business Operations for Axcient, which makes a cloud platform that eliminates data loss and downtime for businesses. Dayeh’s career was built on business automation. Before Axcient, he worked at Motorola Mobile, which was acquired by Google, where he was responsible for the integration of third party apps into phones.
He’s fascinated by what BackOps has built, not simply the all-in-one cloud solution, but its business model, offering a team of stay-at-home moms, as they call them, who provide live help for companies 24/7. Each person, who must be a US resident, works just 20 to 25 hours per week on shifts to ensure someone is available at all times in case of emergency. The team can change as the company grows to make sure the most qualified individuals are on-call.
“What’s really of value with BackOps,” he says, “is the people. Especially for small businesses, because you don’t know all of the rules for taxes and accounting or even how to write an HR policy.”
Yes, it’s great to have a person on-hand at all times, to handle everything HR and finance related. But it still worries me that BackOps charges per transaction at a certain point beyond what they call a “very high threshold.” Startups can be fairly needy starting from scratch, and fees can add up. Executives claim the fees are minimal and remain less than what a consultant would charge. They wouldn’t disclose specific numbers, though, saying it varies depending on the situation.
“We pretty much guarantee that fees are a third of the price of hiring (and licensing the software) internally,” says Mark Goldstein.
The BackOps platform isn’t for every company, though. It’s focusing on earlier stage companies through Series C who have up to $50 million in funding, dealing mainly with tech companies, ecommerce sites, and retail shops. It’s not geared toward law firms or hot dog stands, rather the 6 million companies which have anywhere between five and 100 employees.
“If they have any more than that they can probably rationalize, for whatever reason, having their own internal team,” explains Mark Goldstein.
The biggest opposition BackOps has faced so far, while knocking on doors for customers, is from small companies that use a family member to do the books, or from serial entrepreneurs. They tend to have someone who has already “done it before and is still available to do it again.”