Founder Fridays: Why vertical SaaS is the future with Justin Meretab, Layer & Atulya Pathak, Notion

find community with other founders like

I came from a big tech background and

the worlds of big tech for startups can

be very separate and if you are coming

from big tech and making the jump to

start your own company there's a chance

that you don't really have an existing

startup network and you don't know a lot

of other founders or people that are in

the startup early stage company space

and so a piece of advice would be to

really invest in building that community

Welcome to Founder Fridays where we sit

down with builders who've been in the

trenches to talk shop product design and

the real lessons that no one puts on a

slide deck. I'm Atoopathic and I lead

our revenue transformation team here at

Notion. Our aim is to improve and

automate our revenue uh processes along

with our the cash process. Uh today I'm

joined by Justin Meritab, co-founder and

CEO of Layer Financial. Layer provides

embedded accounting software and

bookkeeping services to software

platforms that serve small and

medium-sized businesses. This enables

small business owners to manage their

accounting right within their point of

sale or other software they use to run

their business day-to-day. Um Justin,

I'm so excited to chat with you. Uh

thank you for joining us today.

>> Oh yeah, thanks so much for having me.

>> Let's get right into it. Um love to

learn about Layer. Um before Layer, uh I

did see that you spent a few years at

Square. uh what were some of the

problems in SMB accounting software that

you saw that weren't being solved?

>> Yeah, absolutely. So throughout my time

at Square, I worked on what became our

banking products, tools that helped our

customers manage their money after they

had collected a payment using Square.

And so learned a lot about how small

businesses manage their cash flow and

where things were working well and

better tools were coming out like better

banking products or better lending

products. And then also saw where there

were a bunch of gaps and just these

consistent pain points that kept coming

up throughout my time there. And

accounting was one of the biggest ones

where we would talk to customers and

they would come to us saying, "Hey, I

love Square. Like, love your suite of

products. Love that you make it easy to

accept a payment. Uh, could I just do my

accounting and bookkeeping here?" Also,

like they expressed frustration with the

tools they were using, often QuickBooks

or other legacy accounting software.

They shared how frustrated they were

with a bookkeeper if they were paying

someone to manage the process for them

and shared how they didn't really feel

like they were getting value for this.

So that kept coming up over and over

again and and realized there was an

opportunity here. Um and accounting was

was an area where there was still pretty

significant customer pain points

>> and there's it's it's constantly a pain

point no matter what size of business

you are. So I definitely feel that pain.

Uh so I guess just through that

experience you realize that hey there

really is a market opportunity here. Uh

can you talk to me maybe about the the

early days and just getting started? Um

how did your co-ound how did you meet

your co-founder? How did you just come

up with this idea and building it uh

yourselves versus trying to find someone

uh that you can join and and

>> Yeah, absolutely. So saw this need at

Square where customers were asking us to

do this. Uh and then I started talking

to other companies that are like Square

that serve small businesses in various

different industries. And as I was

having conversations with builders at

those companies, I realized they were

hearing the exact same customer pain

points that we were at Square. Like they

just they would love one central place

and to not have to use QuickBooks or

other external tools anymore. But then

the other pain point I heard from the

platforms was they'd love to offer this

functionality, but it would be too hard

for them to build internally. Like

accounting is a huge build. It's very

complicated, requires domain expertise.

um providing bookkeeping services is

another level of complexity on top of

that and I realized that this dynamic

there was the demand from the end

customers and the complexity to build

that there was an opportunity to build a

platform company and so we could

basically build uh Stripe for accounting

where a platform that would enable these

different small business software

platforms to offer accounting and

bookkeeping themselves without needing

to build it internally and they could

just get a white label product

experience experience that they embed

within their product and offer, but

without dealing with all the underlying

complexity. If you're a small business

software platform, you want to focus on

the unique needs of your industry. You

don't want to focus on reinventing the

wheel or dealing with things that aren't

your core competency like learning like

how to build a general ledger and

complex accounting functionality. And

and we see this with other types of

software, whether it's like payroll or

embedded banking. there's providers that

these companies can use to drop in a

complete product experience and and not

need to build it themselves.

>> That makes a lot of sense. And then as

you're as you've been building and and

seeing this journey, are there are the

things that you've you've found that

were interesting and that you've sort of

incorporated into incorporated into the

product itself?

>> Yeah, absolutely. I think the one of the

most surprising things uh consistently

is just the power of verticalization and

tailoring the product to the unique

needs of each industry. And so we work

with software platforms for coffee shops

and software platforms for medical spas

and tons of other industries. And the

core of accounting is all the same, but

there's unique industry nuances in terms

of the type of expenses that those

businesses have or how they think about

the revenue flowing in and what are they

invoicing their customers or do they use

a point of sale. And there's a huge

opportunity we realize to tweak

accounting to serve those industry

specific nuances. Whereas traditional

accounting software, it's horizontal.

It's one sizefits-all. And so you can

actually give customers a better

experience when you're giving them

accounting, software, and bookkeeping

that is designed for their industry.

>> I'd love to learn a little bit about uh

the company's growth and and the funding

that that you've uh that you've raised

already. Um I I know you've raised a 2.3

million seed round in the past and and

I'm just wondering how did that initial

preede money and that that initial

raise, how did that start the journey or

how did that that kick you kick off the

journey and um I guess how was the what

was the investor story at that point?

really the coming into the preede raise,

we we had already seen strong demand

here and we had actually already signed

our first platform customer and had a

strong pipeline of additional platforms

that was really proving out the fact

that okay these these small business

software platforms these vertical SAS

platforms they want to offer accounting

and bookkeeping there is a demand for

this and if you can build this product

folks will use it and then coming out of

the preede raise the focus really

shifted to great we've proven that

there's that initial market demand. Can

we go build a product that actually

fully fills those needs and ultimately

allows these vertical SAS platforms to

launch their own accounting products

that replace the legacy solutions that

their small business customers are

using. And fortunately, uh the way

things have gone, we've proven that out

as well and have been able to move over

many SMBs from legacy tools into these

more embedded verticalized accounting

experiences.

>> And earlier this year, uh you raised 6.6

6 million through uh or it was the seed

round led by emergence capital. Um

congratulations on that raise. Uh I

guess what what clicked with them and

and how did you approach that whole

process? Yeah, we I think what clicked

was kind of coming out of the preede and

what we wanted to accomplish coming out

of that like can we build a robust

accounting platform that actually has

the functionality of a QuickBooks and

that a small business owner could move

from using a legacy tool like a

QuickBooks or zero and instead use layer

through one of our partners and we made

a ton of progress there. We've really

built out uh a sizable chunk of that

functionality and many businesses across

different industries are now able to

migrate wholesale off of other

accounting tools onto layer through our

partners and get the exact same

experience and an even simpler

experience that serves all of their

needs. And so I think that ability to um

coupled with the fact that we've just

continued to see more demand from these

different SMB software platforms,

vertical SAS, like horizontal point of

sales systems, neo banks, I think got

got the folks at Emergence excited about

uh what we were seeing in the market.

>> That's awesome. Uh and how are you

deploying that capital um now that

you've that that you've gone through the

raise? Uh I guess the next step is how

do how do you spend that in the

>> Yeah. So investing in engineering there

is a lot we want to build to just

continue expanding our accounting

platform, our core accounting feature

set that allows us to serve new

industries that have additional

accounting functionality needs and

workflows. And whether that is things

like uh inventory management for

retailers or e-commerce businesses or

project accounting for field services in

the trades, there's additional on top of

our core accounting platform which is

works well for many business owners.

There's additional features that will

let us target additional new industries.

Um another key area of investment is

related to our bookkeeping service. So

we provide a full bookkeeping service on

top of our accounting software augmented

by AI that will actually do the books

for a small business owner end to end.

So not just replacing a tool like

QuickBooks but ultimately replacing the

work that would be done by their

bookkeeper and doing it faster and more

efficiently. And so our other key area

of engineering investment is that that

functionality and that service allowing

us to make it even better, more

automated, faster, more accurate for the

end small business owner,

>> I guess. How and and you mentioned AI.

Uh how did AI just change your story? I

think when when LA was founded, AI was

sort of in its infancy. It's still still

being used, but not not to the level

that it's being used today. um how did

that shape the the product growth uh

from from when you founded it?

>> Yeah, a lot of accounting and

bookkeeping workflows require

interpreting unstructured data and

you're a small business owner. You have

many different data inputs that come

together to give you the picture of your

finances. And fundamentally what

accounting does is it's about unifying

all those different pieces of financial

activity. whether that's your bank

accounts, your loans, you bought a truck

for the business and cleaning up that

data, unifying it so you can turn that

into a P&L and AI makes that dealing

with that unstructured data much easier

and organizing it. So whether that is

digitizing documents and turning that

into structured data that can be

reflected in the finances maybe OCRing a

loan document or categorizing bank

transactions more accurately and with

the nuance of different industry

verticals. Uh AI automates a lot of

that. Um, and then I think there's

continue to be exciting opportunities

going forward in AI to do things like uh

summarize data and small business

owners, they often want to understand

they they want the uh the core takeaways

from their data and insight summarized

that they can act on versus need to do

needing to do a bunch of investigation

themselves and diving into a bunch of

reporting and tables. That's pretty

incredible because I mean these are

folks that are so skilled in a certain

area they they don't necessarily know

how to glean on some of the things that

hey where where can I drive growth in my

business where uh where is where am I

losing money uh what should I change so

that's pretty incredible um is there uh

and I know you you the AI AI powered

software that uh that layer has is built

as being three times faster 40 times

more accurate. How do those gains really

show up in terms of the day-to-day?

Yeah, a lot of the improvements come

first from the fact that we are embedded

within these SMB software companies. And

a lot of these SMB software platforms

see a lot of the business's data,

usually the revenue data. So if it's a

point of sales system for, let's say, a

restaurant that's checking out

customers, they see all of those revenue

sales for the small business coming

through. Or if it's an invoicing

platform for a plumbing that plumbers

use, they'll see all of those types of

businesses revenue. And so historically

accounting software was totally separate

from these systems. So in order to do

the accounting, you had to get all that

revenue data from these systems into the

accounting software and that was through

a manual export or maybe there's an API

integration, but it doesn't work that

well. And that's where you lost a lot of

the accuracy of the accounting because

those horizontal accounting tools,

they're not built to take in the

industry specific revenue data. And when

you if you use certain products within

these end platforms, maybe the

accounting software doesn't know how to

interpret that. And so if you start

offering gift cards that doesn't flow

into your accounting and and those are

that's where you get breakage on these

edge cases when you embed directly into

those platforms the point of sales

systems the invoicing platforms the CRM

um we're directly connected to that data

and so we can build a really tight

integration with the revenue data and

make sure that every single way that the

business accepts revenue is reflected

perfectly in the accounting and it just

works out of the box for that industry.

What are some of the challenges that

you've seen in in taking that in? So,

I'm sure there's there's with different

industries that you're working with,

there's things that you've never seen

before. Uh, how how are you trying to

parse through all of that and try to

figure out what the right way to uh to

incorporate that into the software is?

>> It's been a key piece of how we

thought think about designing our

platform and really an area where we've

put a lot of product focus. It's like

how do you design an API that works well

for pulling in revenue data from all of

these different industries? And we spent

a lot of time thinking about what are

those common what is the common surface

area that whether you're working with a

platform for plumbers or truck drivers

or retailers like how do we model that

through an API that's easy for those

platforms to integrate with. And we

think we've landed in a very good place.

And and that's really a core competency

and muscle we've had to build of

regardless of what industry one of our

partner software platforms is is coming

to us from, we give them an easy API

integration experience that works for

all the unique ways that they collect

revenue data. And then the other thing

is over time we've just started to see

some patterns. You know, there's service

heavy businesses that are very invoicing

focused or restaurants and retailers

that center around the point of sale. um

others that are more appointment booking

like hair salons and uh barber shops and

so we also see common patterns and and

that helps us uh you know design our

product as well.

>> We're we're all learning AI and the best

way to use it. Um how how is the

training uh for for these SMBs who may

not be in front of a computer every day

uh or working in the same way that that

we are? um h how are they picking this

up and do you provide any training tools

for

>> Yeah, we're really using AI behind the

scenes and so we

want to provide clear product

experiences, easy to understand product

experience for our customers that don't

require them to understand the latest

ways to interact with AI and feel

intuitive. So, a lot of times on the

accounting software side, we've really

designed it to be as simple as possible

to work like tools they might have used

in the past like a QuickBooks. Um, and

also just be intuitive and require the

minimum number of interactions to do

something, whether that is confirming

what category you spent to, you know,

for a marketing expense or a or paying

your employees. Um, and then on the

bookkeeping side, we really it's it's

humanlike interface. So it's all we

interact with the customers the way that

a typical bookkeeper would through uh

textbased communication through live

calls uh and easy to understand to-do

lists. So it doesn't really require any

change of behavior on the end user the

small business owner that's using us

through one of our customer platforms

doesn't really require any uh new

understanding or knowledge. they can use

the software in a familiar way uh that

that uh is similar to any tools or

services they've used any accounting

tools or services they've used in the

past.

>> So I'd love to uh just learn a little

bit more about layer the company. Um

what do you what tools do you use on a

day-to-day basis?

>> Yeah, we use a variety of things. So we

are definitely a very Slackheavy

company. We have shared Slack connect

channels with many of our partners and

have quick back and forth communication

to support them as they grow their

accounting and bookkeeping businesses.

Um, we also, you know, it's a lot of

live communication as well. So, we're in

Google Meet very often. We use notion as

well to collaborate with our customer

platforms. So the first step to using

layer is to align on this shared

integration and how our customer is

going to integrate with our APIs to pass

all their revenue data in and launch

this accounting product. And so notion

documents allow us to jointly

collaborate with our partners through a

shared canvas talking about integration

specs, talking about product

experiences, uh shared timelines. we'll

use, you know, table based timelines and

that's been incredibly helpful to just

have those shared sources of truth. Um,

the other thing uh is notion was our

first uh career page and the core of how

we brought on early candidates into

layer uh and really allowed us to to

build the early team and uh build a

presence publicly that that got early

candidates excited about what we were

building as well as the roles that we

were hiring for at the time.

So we're we're almost at the end. I

wanted to ask is there any advice that

you have for for founders as they're as

they're starting their journey or uh

they're they're discovering their

journeys. One piece of advice uh that

was given to me is to really find

community with other founders. I came

from a big tech background and the

worlds of big tech for startups can be

very separate. And if you are coming

from big tech and making the jump to

start your own company, there's a chance

that you don't really have an existing

startup network and you don't know a lot

of other founders or people that are in

the startup early stage company space.

And so a piece of advice would be to

really invest in building that

community. Go to events uh leverage your

network to try to get connected with

second degree friends and friends who

are building in that space because

advice from fellow founders is so

incredibly helpful. uh a lot of folks

have encountered similar problems and

challenges to what you've seen and the

world is so small that there's a bunch

of serendipitous connections whether

that's early employees or uh partnership

opportunities that uh building that

network over time is is incredibly

valuable.

>> If you had to start again today, is

there anything that you would do

differently? I think we would really

talk to even more customers as soon as

possible and always be having

conversations with as many end customers

as early on as possible even before we

had any type of product to sell. And we

did some of this uh but I think it was a

it's an ongoing muscle and you can

really never have too much customer

insight and and feedback and it's just

always uh good to work that in to your

day-to-day and it allows I think it

would allowed us to see patterns in the

market understand customer needs even

faster than than we did from our early

research. and just not hesitating to uh

just because you haven't built your

product yet doesn't mean you can't go

out and uh you know start having

customer conversations immediately.

>> What is uh what's one lesson that's

that's shaped how you build and how you

lead uh this company? One piece of

advice I got years ago was this idea of

always asking yourself, are you working

in the machine or on the machine? And

this idea being, are you executing and

being reactive to what is coming to you

and just navigating that as it as it

comes up, whether that's like responding

to emails or people pinging you on Slack

or whatever your calendar has for you

that day. I think it's easy to fall in

the pattern of going through the motions

and letting those channels and uh

dictate how you spend your time and

basically you have to create um your own

cadences for stepping back and looking

working on the machine holistically and

think how are you spending your time?

How do you structure your day and the

way that you work to accomplish uh what

you want to accomplish long term can

sometimes be even more important than

just executing work well. And I think

the best founders and operators in

general are really good at always

stepping back and uh reconfiguring how

they spend their time, intentionally

designing uh how they like their days to

make sure that they are always uh uh

accomplishing those longer term goals

and uh not losing the forest for the

trees.

>> Well, Justin, it was so great chatting

with you today. Um I just as speaking

through there was I there were so many

takeaways but three that that really

stood out to me were uh just

understanding where there's a market or

what what the market needs uh just

really learning and you learned that

through your experience at Square what

was missing and you you really attacked

that. So it's incredible to see that. Um

also talk to customers. There's uh you

can build whatever you need to but if

you don't understand what your customers

need, you're really not going to be able

to to fit their needs and really to grow

the business. And then also uh I mean

this one is is is huge. Uh community. Uh

you're you're never alone. There's so

many people that are experiencing so

many things that uh that you that you're

experiencing and they they probably have

great advice for you. There could be

some lessons that that can be learned

and things that uh that you can talk

about and you can share your experiences

as well. Um was there anything else that

that you wanted to to add or anything

else that you would like to say?

>> No, I think you summed it up well.

>> Awesome. Uh well that was so much fun.

Uh really appreciate all the time you

took. Uh, I really wish you the best of

luck and look forward to seeing uh,

Later Financial all over the place on

all the billboards here.

>> Thanks so much, Atilia. Really

appreciate it.