Partnering With Mura

mura.co

Mura provides you with a dedicated Chief of Staff to streamline your back office operations, managing repetitive tasks like scheduling, payroll, and bookkeeping. We free your time so you can focus on your business’ growth.

mura.co

Background

Empowering SMB’s to do business has proven a successful strategy to invest behind. Shopify (SHOP: $100B market cap), Block (SQ: $50B market cap) and Toast (TOST: $13B market cap) have led the charge capturing millions of SME locations and in turn their transactional volumes through point-of-sale and eCommerce tools.

These companies attached their product’s value proposition to secular tailwinds. For Shopify, eCommerce penetration of total retail sales breached 5% in 2010, the time of their Series A. Not only did this open up a $200B and growing market, but it pulled SMB retailers into actively looking for tools to enable them to sell online. These SMB’s were already using Yelp and Yodle as online marketing channels when Shopify launched their self-serve digital retail store solution. There was no need to hire a field sales team to push their product, with 90% of customer acquisition at the time of Series A coming from word-of-mouth and referrals from web design firms.

Source: Back to the Trend Line? - Benedict Evans

Despite the enormous value generated by these companies, estimates suggest that 30-40% of US SMB’s remain un-digitized, running on pen and paper and Excel. This represents between $2.9-$3.9T of economic activity. When I sat on the board of Booksy, a VMS for barber shops that crossed $80M of ARR in nine years, our internal estimates was that 75-80% of merchants were still using pen and paper to manage their shops in the US. Booksy had penetrated 5% of the global merchant base at the time, implying a $1.6B revenue opportunity.

What keeps these businesses from moving over to Square, Shopify or any other purpose-built SMB software? The answer lies in the lack of secular tailwinds like eCommerce penetration for Shopify, smartphone and mobile payments adoption for Block (Square), and cloud computing that made seamless multi-location store management possible for Toast. These tailwinds, while pulling a huge chunk of SMB activity online, are simply not as relevant for services businesses as they are for commerce and retail ones.

The Founder

When I first met Ryan Smith in 2019 he was three years into a journey that would eventually lead to LeafLink capturing 50% share of the $16B wholesale cannabis market. This is an industry dominated by fragmented and tech-resistant SMB’s in a highly regulated space. When we reconnected in September 2023 through Levante LP Karan Wadhera, it was clear that one of Ryan’s greatest strengths is his ability to identify roadblocks to SMB tech adoption and find creative ways to unlock them. At LeafLink for example, the team raised debt to fund the expansion and refitting of warehouses to enable them to store and ship cannabis products.

However, this approach was capital intensive: LeafLink raised $480M in equity and debt from Thrive, Founders Fund and others. It also required a large team that took Ryan’s attention and time away from what he loves: zero-to-one product building and customer problem solving. Lastly, over 50% of active customers didn’t engage with the software tools LeafLink had built for them.

A New Approach To An Old Problem

After Levante led the pre-seed of Scotch in the liquor store space, I started thinking about other industries with high revenue per establishment but low tech penetration as a result of distribution challenges. I dug through the NAIC code database and started researching a number of industries, stumbling across one in particular that took me by surprise.

Commercial cleaning companies are an almost too-good-to-be-true vertical market. With ~65,000 establishments in the US and over 65% employing less than five people, the market is extremely fragmented and setup for a high-market share player with the right GTM strategy. ~$95B of annual transactions driven by billing through owner’s personal credit cards presents a clear embedded fintech opportunity. Leading SMB software solutions like Square and Shopify are nonexistent here because eCommerce isn’t relevant to them and they don’t require a point-of-sale to conduct transactions.

Traditional seat-based pricing software companies like Swept have struggled to get any traction. Why? Because commercial services is labor intensive, with a low willingness-to-pay for software that they don’t want to use. Traditional software doesn’t help these companies increase margins, it just adds to their cost base.

“The bigger win on something like janitorial is just going to be operational cost. How can software reduce operational cost? How can we efficiently complete these projects as quickly and as well as possible…that’s the win there…that means scheduling and routing. That’s the big win for janitorial.”

• Former Strategic Enterprise Sales Executive at ServiceTitan

Ryan and I were thinking through ideas that would suit his zero-to-one skills with SMB’s and would attract little competition. I sent Ryan an article called “Dark Software” by Matt Brown of Matrix Partners, who argues that the next generation of vertical companies will come to market faster with broader functionality from the start. His thesis is centered around integrating with existing point solutions for most core workflows and focusing on distribution.

Source: Dark Software - Matt Brown, Matrix Partners

Ryan spent time with Matt Matros, an ex-operator who is acquiring cleaning service businesses through his new holdCo NCC. Matt highlighted that scheduling, billing, payroll, accounting and other non-customer facing activities took up a large amount of both time and operational overhead. He also confirmed that building and selling seat-based SaaS platform to these service business owners isn’t realistic. They don’t need or want to be sitting at their desk using a tool to manage their back-office. If Ryan wanted to enable back-office workflows with AI, then the seat-based model would also both cannibalize itself and inherently limit the product’s ability to gather data from usage.

Source: NCC’s deck highlighting Mura as one of the key value drivers behind its strategy

We got to work sketching out what a product in the space would look like using Matt’s “Dark Software” concept as a framework. We knew that scheduling, invoicing and billing, payroll and accounting didn’t need to be built from scratch. We could integrate and offer that entire suite from day one. But how would we sell it to cleaning companies that don’t care about software? And how would we price it?

Selling Labor, Not Software

Enter the AI-enabled Chief of Staff role. Instead of selling SaaS directly we sell “virtualized labor”, a single offshore Chief of Staff that we hire, powered by Mura’s software. This Chief of Staff takes on all the administrative back-office functions that a services company would have previously hired three-to-four FTE’s to do. Given this is repetitive and predominantly text-based work, our thesis is that as we map out these workflows we can automate them using LLMs and increase the throughput of each Chief of Staff. This would enable Mura to both price as a percentage of the labor that’s replaced, increasing ACVs up to 40x compared to seat-based pricing, and enable Mura to encourage the usage necessary to gather non-public data to train its models.

Mura’s wedge into scheduling workflows position it to takeover high-value downstream work

While Ryan flew to pilot customer’s offices to sit and take over their scheduling himself, I got started on mapping our unit economics. As we learned more from customers, the beauty of the model became clear: by substituting high-cost-per-hour human tasks with specialized, software-empowered agents, customers are willing to pay a percentage of the labor they’re replacing: a much higher ACV than traditional SaaS and an immediate ROI.

Founder Ryan (in the blue Patagonia jumper) working at one of Mura’s first customer’s offices

The Deal

Although there are multiple questions, unknowns and risks still at play, Ryan and I felt after six months that we’d landed on something so exciting that it was keeping us up at night. The initial product idea is an uneven, irregular mishmash of integrations, offshore work and manual hole-filling. However, when customers are flying a team of one to their offices, signing $40k contracts with no live product and asking the founder to get started by literally hiring him to take over their back-office operations, that ugliness looks like the start of something beautiful.