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(Kristen Anderson, Founder & CEO at Catch)
Catch is a personal benefits platform that “is redesigning benefits to put people at the center of their own financial stability and security.” Catch handles tax withholding, long-term investment savings, and more for freelancers, contractors, and other workers without access to employer benefits.
To date, Catch has raised over $8.1M in funding from leading investors such as Y Combinator (W19), Nyca Partners, recent The Takeoff interview guest Jeff Morris Jr., Ground Up Ventures, Kindred Ventures, and Khosla Ventures, among others. The company is headquartered in Boston, MA.
Prior to founding Catch, Kristen was Director of Product and Operations at FutureFuel.io. She holds a B.S. and B.A. from Pepperdine University and a Master’s degree in International Business at Hult International Business School.
The interview took place via a call between Kristen and Michael Spiro (Founder at The Takeoff) in early May.
You can find Kristen on Twitter @CatchKristen
We hope you enjoy today’s Edition.
(Estimated read time = 15 minutes)
Michael: To start, what exactly is Catch, and how did you come about founding the company?
Kristen: Catch is a personal, portable benefits platform. For people who don't get benefits from an employer such as freelancers, contractors, and gig workers, they need one place to be able to set up and manage things like tax withholding, retirement, health insurance, and all of those other products that keep them financially stable and healthy.
My journey with Catch is actually a little bit non-traditional. I think people often think of starting a company as being two people who live in a garage in Silicon Valley and sit in a tiny little space until they make something amazing. Our story is a little bit more reflective of what you see when you're talking about products that are not just software, but that involve financial services and other regulated products.
My co-founder is a former engineer and designer who had been a freelancer and was living this problem of how difficult it was to get all of this stuff taken care of. He built a prototype of something that he wanted to exist. He said, "I want one place, and I want it to be beautiful and easy to use. I want it to take care of all these things for me so that I don't have to think about this anymore."
He brought me in because my background was in FinTech. Actually connecting the dots behind the UI to say, "Okay, well, how does that happen? How does money get from this account to that account? What does it mean to be a registered investment advisor? How do you get licensed for health insurance?” is a really important piece of actually getting this done. I think we've seen a lot of other companies take the approach of just building UI and saying, here is an article, or here is some content that you can read. Our big differentiator is that we actually do the stuff that you need to be done.
If you are an independent worker and need some money set aside for retirement, we are not just going to write an article about how you should have money set aside for retirement, we are actually going to move money from each one of your paychecks and put it in a retirement investment account for you.
Michael: Awesome, and really amazing story on the origins of Catch. I'm wondering, what exactly has the growth looked like so far? Where do you see the company in five or ten years?
Kristen: One of the interesting challenges in getting started was that we served so many different types of people. It wasn’t just the software engineer working from a coffee shop. We serve hairstylists and photographers and delivery drivers with DoorDash. We represent all these different types of people, and they all have very different perceptions and brand preferences, all those sorts of things.
Building a product that serves all of them has been a really interesting way to get started. Our growth has really been all about learning where our early traction is. So, who are the people who just get it right out the gate? The people who are like, "Oh, I see what you are trying to do here and that resonates with me." And then, who are the people that we can serve in the longer-term, once we have built out stability.
The segments that Catch has seen the most growth in so far are what I like to call the “right-brain” independent workers. Typically, individuals who are very creative. I don't know if it's because they hate finance more than most people, but folks who are writers and designers and really craft driven people, photographers, videographers, all of those sorts of folks, just don't want to have to think about this stuff. They are like, “I create art, I make art, I make beautiful things. I really don't ever want to think about taxes.”
That's where we've seen the most traction early on. Learning about those folks has been one of the most fun parts of growth so far, especially as someone who is a bit more left-brained, herself.
In terms of where we are in the next five or ten years, I think there is a really interesting transition that is sort of brought to a head by the current crisis, which is to say that the fact that our country, combined, benefits unemployment is really antiquated. We knew that when we started Catch; that was part of the premise. The reason why people get health insurance from an employer is because of a line in the tax code that was created after World War One and incentivized during World War Two when there was a wage cap because all of the soldiers were going overseas, and they didn't want companies raising salaries. So, companies started paying for health insurance.
The system is super outdated, and we need to find new ways to deliver these products. We believe that we are in the middle of a massive transition of how these products are delivered. And, rather than being delivered through a company and an HR department, these products can be delivered directly to consumers in a much more efficient way.
That's where we hope to see Catch, really as that technology interface that builds financial infrastructure for individuals and families.
Michael: I really love your vision for the company. I didn’t realize when that aspect of health insurance was actually implemented — that’s super interesting.
I know that Catch participated in Y Combinator last year. Can you discuss a little bit about the experience of going through YC and how YC has helped Catch up until this point?
Kristen: We went through Y Combinator in Winter 2019, just over a year ago. We applied really last minute. It's one of those crazy stories. We did some consulting early in our startup’s history so that we could bootstrap the revenue. We were waiting on an invoice for $400,000, or something like that, and the company was dragging their feet and then the holidays hit.
It was Christmas, and everyone at this big company basically disappeared. We were going to run out of money, and so, in late December of 2018, my co-founder and I were like, we expect to get this money, but if we don't get it in the next week or two, we want to make sure that we can give our team enough notice so that they can get a bit of severance, look for other jobs, and stuff like that. Even though we still expected to get the money.
We were not in great circumstances, and we decided really last minute to apply for Y Combinator. The deadline to apply was in October, and here we were in late December. We decided to send in an application, thinking, what's the worst that can happen? We got an email back on December 23, just before Christmas, that said they were going to fly us out for an interview on January 2. We spent the next week, which was Christmas and New Year's, trying to figure out what we were going to do.
We flew out on New Year's Eve and spent New Year's Day in San Francisco, completely at a loss of what we could do to improve our chances. After you interview with YC, they call you if you get accepted and email you if you don't get accepted.
And so, after our interview, we were sitting at a wine bar, basically saying, you can't expect to get into these sorts of things, the acceptance rate is lower than Harvard, let's just assume that this hasn't happened. Then, we got a phone call and found out that we were accepted. The program started the very next day.
We flew back to Boston two days later, after the kickoff, packed up, and moved to San Francisco for a few months to go through the program. I think it was a great decision for our business because it really positioned us well to, one, build a network — Y Combinator has an unparalleled network; there is just no better group that is connected to all the right people, for startups — and, two, really put a sense of urgency on our fundraise.
The concept of raising millions of dollars is completely abstract when you're a first-time founder. You think it sounds great, but how do you actually do it? VCs will always take meetings, so you get all these meetings and think you are doing something right. But, if you don't have a way to drive urgency, those meetings can often turn into nothing. VCs will keep meeting with you, but you won’t actually get anywhere.
Being part of Y Combinator really drove that urgency because they have Demo Day. Anybody who wants to fund a company going through Y Combinator will get a better deal if they can fund that company before Demo Day. So, it really drives urgency.
We closed our round, I think, three days before Demo Day, and we didn't even end up pitching at Demo Day.
Michael: Yeah, I've heard a lot of stories about companies, especially the ones that have a lot of interest from investors, closing their rounds before Demo Day. That’s an awesome story about how Catch actually got into YC after applying so late.
Why Boston for the company headquarters? What are some of the benefits of the startup and tech ecosystem in Boston?
Kristen: The number one reason is that we live here. My co-founder is from the area. I grew up on the west coast and moved all over the place, but I finished grad school in London and Shanghai and then moved to Boston in 2011. I've been here for a long time. Boston is my home.
I think there is a lot of importance in building in a place where you have a network. San Francisco is great and there are a ton of advantages to being out there, but I think we have found that, especially in the early stages, the network is really important. Your first hires are typically colleagues that you have worked with at previous companies, or your friends. We have two people on the team who I worked with at previous companies.
If we had decided to build in California, we wouldn't have necessarily had that network. And so, while people talk about the network of investors, and that's really important, I think your network of early employees is far more important. Being able to build with people that you trust, because early-stage startups are difficult and confusing and there is a lot of ambiguity and a lot of stuff goes wrong, is really important.
Having an early team that you can really trust is way more important than having access to an investor, especially now that all the investors are taking all their calls on Zoom, anyway. There is really not too much of an advantage to being out in San Francisco.
Michael: I'm sure in terms of hiring young talent in the future, being near Harvard, MIT, BC, BU, and all of the other great schools in the Boston area is super helpful, too. I actually went to a FinTech conference at MIT last year, and I remember there being so many students from Boston area schools who were interested in the space. I'm sure all of those benefits exist as well.
Onto the next question, I know that Catch created a really awesome COVID-19 Resource Center that has guidance and tools to help individuals during these difficult times. To the extent that you are able to share, how has COVID impacted the business, and how have you been able to combat some of those threats? (Check out Catch’s COVID-19 Resource Center, here)
Kristen: It is really important to listen to your customers and not try to be so opportunistic that you end up damaging your long-term relationships. Just one small example is, we have engagement email campaigns. After you sign up for Catch, if you haven't set up certain benefits that are recommended for you, you will get an email from us saying to set up X, Y, or Z.
We turned all of those off for the last month. We did this because it's a little bit tone-deaf right now to be pushing your product when folks aren't earning income. Our belief is that the long-term relationships with people who trust us, the people who don't feel like we're just selfishly trying to improve our own metrics at their expense, goes a long way.
Another thing that we've done is that we launched an emergency savings product; the ability to set aside money for an emergency. Even though we are currently in the midst of the emergency, there is still a much broader awareness on the importance of having those funds. We are seeing pretty massive adoption of that product, where people are basically realizing that things are bad right now but also where they feel the importance of having money set aside. So, people are setting aside money in their emergency savings at much higher rates than you might expect.
The other thing that is important about our product is that there are portions of it that are a little bit recession-proof, or I should say unemployment-proof, because the health insurance that we sell is through the ACA, through Obamacare, basically. We offer all the plans that are available on healthcare.gov.
With ~26 million unemployed people, the number of people who have just lost health insurance is in the millions. We now have a product that is able to serve those people. There is a piece of our business that is actually doing better right now because we serve a market that is reflective of what happens when people lose their jobs. It's kind of an interesting place where we are really glad that we can help those people, but it also feels a little bit strange to be benefiting from people losing their jobs.
Michael: Do you have any advice for a student or young professional who may be interested in starting a company?
Kristen: I was a math major, and I have never been an engineer. I am not a computer science major; I have never coded — I took one class in Python. The first piece of advice that is really important, while you're still in school, is to make sure you are building technical literacy.
You don't have to be an engineer, you can absolutely be a founder without being an engineer, but it is really critical not to dismiss the importance of technical literacy and understanding the pieces of how software works. You should be completely proficient in API's, knowing what a database is, and understanding the difference between front-end and back-end code and just the basics of how engineering works, even just conceptually.
You don't have to code it all, but just knowing conceptually how those things fit together is a really important step to being able to function as a founder in tech. You can't really get away from that, even if you're more of the sales founder or the CEO-type founder. You still have to have that basic understanding of software and technology.
The second piece of advice I would give is: spend more time listening and trying to solve problems than telling people what it is you are going to do. Early on, your solutions are not vetted until you are hearing from customers. You need to ask people what their problems are. What is it that you are trying to solve?
Especially if you have an idea in your head, validate that idea by listening to people and really trying to dive into what the problem is, rather than just jumping straight to a solution that doesn't necessarily solve something.
The last piece of advice I'd give in getting started is: get started. Don't wait. Don't wait for permission. Don't wait for external validation. Definitely do not say, "Well, if I get into YC, then I'll start this company." Start the company and then prove to YC that you have something.
I think a lot of times there is a little bit of hesitation or reluctance, usually because of fear because you don't know what is going to happen. The only thing you can do is to start. It is far better to have a “failure” on your resume early in your career, because the learnings that you'll take from those things will make you a much better founder later on, than to be too afraid or too hesitant to start something.
Michael: I really love all the advice there. The technical literacy aspect, for me personally, resonates super well. I have a purely business background. I've taken one or two computer science courses, similar to what you said you did, but I think really trying to get as much proficiency in the space as possible has been really helpful for me. It's nice to see that from your perspective, too. I'm sure there is still a ways to go for me and for other students there.
Kristen: The other thing is, you want to be able to speak to engineers. You need to be able to respect engineers and have them respect your expertise. And, the best way to do that is to understand what it is they do and to speak the same language.
Michael: Definitely. A lot of startups don't actually post formal job or internship openings and applications online. So, what are some of the best ways for students to get involved with startups while in school, through summer internships, or maybe part-time jobs throughout the year?
Kristen: YC has something called Work at a Startup. Work at a Startup is a really cool way to look through which YC companies have postings up. Work at a Startup is a great resource to see what startups are hiring.
The thing that you can do to make yourself valuable to an early-stage startup is demonstrating that you understand what that company's priorities are. One of the things that can be a challenge, especially when I get emails for summer internships and things like that, is that people come at me with what their value is — I'm a business major, and I can do X, Y, and Z.
That's fine, but I think the thing that really sticks out is when someone comes through and says, your company is doing X, and I understand that and it sounds like you might be thinking about Y and I can help accomplish that in these ways. That makes it much easier for someone at a company to say, maybe we could use help in this area, or that area. One example of this would be saying, here is a list of companies that I pulled together that I think you could partner with. I would love to help you because I know that partnerships and getting folks on your platform who are 1099s is going to be really important.
Now, all of a sudden, you are speaking in the language of what is important to my company and what we need. You are demonstrating that you are the person who can get to that solution, rather than just saying, here is a list of my skills, tell me if it's a fit. That's a fine approach, especially for bigger businesses because they have an entire process around how they hire and what they're looking for and they have all these systems that they run your resume through, but when you are at a start-up, you are looking for someone who can solve problems.
And so, the first step is saying, I recognize the problems that your company might be facing, and I think that I can help you solve them. I think it's sort of flipping the approach in terms of how you're looking for who you want to work with. Pursue companies that you actually want to work with, because if you're not willing to do that amount of work, chances are you don't really want to work at that company.
If you're just like, I just want to send off my resume and it's up to you, you probably don’t really want to work at that company. It's much more meaningful to put in the time and effort and say, this is clearly a place that I want to be. That’s also way more meaningful in the early days of a company.
Michael: Really interesting perspectives there. I recently interviewed Ryan Choi, who runs Y Combinator’s Work at a Startup, for The Takeoff, and he had a few similar perspectives on how students can get involved with startups. Super funny on that front. What are some of your favorite startup- and tech-related books and podcasts?
Kristen: There is a book by the founder of DuckDuckGo, Gabriel Weinberg, called Traction. To be honest, it is a little bit dry, it's not the most exciting read, but it is a really scientific approach to how you build growth. A lot of times founders are so focused on product, and product is really important, my background is in product and it is incredibly important to have a good product, but sometimes founders forget about go-to-market and forget about the importance of where they are going to get their customer, what they are going to talk to them about, and what a scalable way of getting customers is. So, Traction is definitely a book that I would recommend.
In terms of podcasts, what's interesting is that I often feel most informed when I am listening to podcasts that aren't explicitly about tech. Being a well-rounded person is really important. I know that's not as easy of a one-liner as This Week in Startups with Jason.
Sure, you can listen to those, but being well versed in what is going on in the world, what is going on in politics, and what is going on in science is super helpful. One of my favorite weekly podcasts is The Economist.
It is written in the UK, it's not even in the US, but their approach to thinking through, logically about what the economic system and prophecies are has given me that sort of lense when I think about problems in my own business. The Economist has been really helpful, even though it is not about tech.
Michael: The last question is related to physical and mental health, which is a space I've really gotten interested in recently. I'm wondering, how do you stay physically and mentally fit while running a business? Do you have a workout route? Do you meditate, or do anything else like that?
Kristen: It is obviously a lot easier when you are not trapped at home. I ran a marathon about a year ago. I run, but not as much as I'd like. Running is really helpful for me, especially long runs. I was never a distance runner when I was younger, but I think when there is so much going on in your mind, the ability to have a consistent physical task that you can do for an extended period of time gets you fit physically and mentally.
There is an element of being able to think through problems when you have nothing else in front of you other than 45 more minutes of running. Any activity that makes you happy is good. For me, distance running has been a nice addition to that.
On the mental health side, I meditate; not necessarily every day, but I certainly meditate if I feel anxiety popping up, or if I feel that my mind isn't clear — if there are too many things popping up at once. I use Headspace. I love Headspace. I think it's an awesome product. There are different pieces: there is an anxiety-based one, there is a productivity-based one, and there are a bunch of different types that you can center around.
Headspace also has bedtime meditations, and after doing one of those meditations, I have no trouble falling asleep. A lot of founders find that their minds are racing at the end of the day, and I think it's important to make sure you are getting quality sleep so that that is not an issue later on.
** Please note that our interviews may be edited for length, content, and clarity **
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