Ahmad Ibrahim is the co-founder and CEO of neo.tax, a firm that develops tax filing and automation software to help businesses apply for R&D tax credits. Ahmad's professional background includes studies in economics and philosophy, work as a product manager at Intuit, and building two startups in the space of tax tech.
We talk about how studying philosophy can benefit a founder's career and the lessons acquired from Ibrahim's first startup venture, Unleash. We also talk about how developing an accounting software product within the limits of Intuit influenced Ibrahim's decision to launch another startup endeavor in that field.
Ibrahim discusses his "lightbulb moment," which inspired him to create neo.tax, and talks about the difficulties of developing tax automation software, his co-founders and their roles, and the future of legal and accounting services.
Greg: I know you, much like me, also studied philosophy. Tell me how you went from studying philosophy to working in tech.
Ibrahim: Actually, you and I should collaborate on writing some blog post or something about why philosophy I think equips you really well to be a founder. It's terrible at getting you your first job, but once you're later in your career, you'd be surprised how few people know how to think. So, it equips you to know how to think, which is advantageous specifically when running a company, but largely across all things that you do in life. My first job was structured finance at Merrill Lynch. Philosophy probably didn't help me get that job.
It probably helped me quit the job earlier than I should have, because I was asking all the right questions. But it's been super advantageous now when you're thinking through markets and what the future may look like and stress testing assumptions and what's objectionable about your idea versus what isn't. So, it's been super helpful now, but like I said, it didn't help me get my first job.
G: I think philosophy, liberal arts and humanities teach you how to think about things from different lenses of intelligibility. You understand that there's always different ways of approaching a problem and breaking it down logically or even emotionally or metaphorically and that these are all different ways of representing the same idea. You're trained to think through them and most people are not trained to think through things at the meta level.
I: Right. Yeah, I think it's interesting. It also permits you to understand how your customer... If you can map out your customer's persona or the system of assumptions and frameworks that your customer is using, then even if you don't hold those same assumptions or that same system, you can understand how you can design a system that would be agreeable with the system and the framework that your customer's using or the background or perspective that your customer's bringing or your employee or anyone. So, it lets you take a step back and understand how other people's systems will interact with whatever it is that you built.
G: Tell us about your first startup. What'd you learn from it? This is before neo.tax. You worked on Unleashed, correct?
I: Right, right. Yeah, it was a lot of fun. It wasn't my idea. It was a friend of mine, a mentor of mine actually, someone I looked up to. He was like, "Hey, three out of four small businesses fail within the first five years. They're all pretty terrible reasons to fail and they're avoidable reasons if these small businesses had a CFO, but of course none of them can afford a CFO. So, let's figure out the 80/20 of what a CFO does and throw it into an app." One of the things I learned is that what I'm working on now is very similar in trajectory to what I was working on then. I didn't pick that startup idea. So, to some degree, a friend of mine wanted to start a startup. I jumped in with him.
A decade later, I'm still working in the same field, which tells you how little agency you really have about picking what it is that you're working on. But it was interesting. Let's assume it's like Greg's ice cream shop. We'd pull in a bunch of data from your QuickBooks or your Xero, whatever accounting software you're using, and we try to tell you, "Hey, Greg. Your ice cream shop as compared to other ice cream shops in similar geographies with similar revenue ranges and numbers of employees, your margin is better, but your growth is slower, but your cash is more." We try to give recommendations about, "Well, you can take some of this cash and invest it in marketing and you'd grow faster for example."
You can play around with different decisions. You can turn up and down the levers of hiring or firing someone, opening a new location, getting a new ice cream truck, and you can see the impact to your business over time. Pretty cool product as the principal person responsible for product, I'll say that, but it didn't work mainly because that data in their QuickBooks was never up to date. I don't know if you know this, but most small businesses will never do any of that accounting bookkeeping stuff until a year after the year's over when they have to file their taxes.
They'll file an extension in April and then October rolls around and they're like, "Shit, October 15th is in three days. I need to do all of last year's book so I can pay my taxes." So we'd ask businesses, "Hey, Greg. Can you update your QuickBooks?" Greg would say, "Absolutely not. It's the worst part of running my business. I'm sure as hell not going to do it." Are you ready for a customer verbatim? I'm sure as hell not going to do it just to use your cute little app, which was very endearing, felt warm and fuzzy. Yeah, so it didn't work for that reason principally.
G: What would you have done differently? What could you have done to avoid building the wrong thing in terms of product discovery or research process or some hypothesis testing?
I: Yeah, it's interesting. I don't think that idea would've lasted three weeks with the rigor that you learn after a few failures, where you're like, "I need to test this idea with customers, I need to get it in front of them." I think you'd very quickly just figure out, "What are all the failure points? Is this a good idea?" Oh there was another problem too, which was in the 3 or 4% of cases where it actually did work, [00:06:00] business would be like, "I guess this is cool." It wasn't this is 10X better than anything else that I have in my life.
I'd have to convince them as to why they needed this. Anytime you're convincing your customer why they have a problem that they're not even aware they have, you're doomed. You know that from the beginning. I was like, "You must persevere." Instead of how do we shift, it was brute force our way through it. These aren't that sophisticated of challenges. These are things that wouldn't have withstood even a few weeks of customer research or customer surveys.
G: You ended up working in a similar space still in the accounting finance world. How did you end up getting the idea for neo.tax and what were some of the tests you did to validate that it was a good idea in the beginning?
I: Yeah. So, actually, I went to Intuit first for a little while and I was building software for accountants. Actually, I got to build something zero to one at a big company, which is rare but also fun. It was called QuickBooks Accountant. It's exactly what it sounds like. I remember we'd show it to accountants. We'd be at their accounting firms showing them features or product. Many of these tech companies uses the word delightful perhaps a little too often. So, we're at this accounting firm, this engineering manager on my team. It's like, "Hey, Mr. Accountant, would you say that this feature that we're showing you is delightful?" We got laughed out of the room. The accountant was like, "You're never going to make it delightful. At best, you'll make it less painful."
The light bulb moment or whatever was like, "No one enjoys doing this shit." You think accountants love this and they eat this up. No, they don't. Nobody does. This whole thing just needs to go away. The inspiration was kind of, "Well, it's lots of rules and lots of numbers." I don't know if you know anything about computers. Those are a computer's best friend. Meanwhile, you have humans with all the respect to all accountants out there, that's not how our brains are, right? We suck at it. Computers are supremely advantaged over our feeble human brains for doing this computational work. So, there are these principles that are just a layup for why computers should do this and humans should not.
Humans frankly would then be freed up to do all this higher value work on top of that, once this computational minutia was taken care of. That was the big swing idea. Still unvalidated at the time, no customer research but just unvalidated, but you did know massive customer pain. What I thought was elegant about it was there wasn't an opportunity to make it 5 or 10% better. There was an opportunity to take this most painful part of running a business and making it disappear, so you can make it infinitely better than the terrible miserable experience than it is today. So, everything else became rounding errors. Okay, let's do some customer research to figure out exactly how we deliver this, what it looks like, how we talk about it.
But in he grand scheme of those broad brush strokes, in my view at least being so overwhelmingly clear and obvious that it just this obvious eventuality needed to happen. This isn't that visionary or crazy of a future. If you close your eyes and think about what even next year looks like, let alone a decade from now, cars are driving themselves in the street. Computers are probably okay crunching some numbers. So, given how some of these really big obvious chunks were pending out, it was like, "Okay, this is an obvious no brainer. I just have to go do this. I'll figure out the details exactly what it looks like, where you start, where you end, what the customer segment." All of these became execution details because it was just so glaringly obvious that computers needed to do your taxes.
G: So, you are not an accountant, did you find a co-founder who is an accountant or a CPA or has domain expertise?
I: I have two co-founders and the joke we have and it tells you how we're thinking about building the company is we have a Stanford PhD machine learning who's automating the brain of my second co-founder, a former IRS agent. I'm like this Intuit PM wrapping the whole thing in product and it gives you a sense for how we're going about building the company and building our products. So, you think, "Oh, my God. How did you get this Stanford PhD?" He's exceptional but the much harder person to bring on board was Steven, our former IRS agent. I met with dozens of accountants. The way your brain needs to operate, you need to absolutely master a domain to be able to automate it.
You need to see the matrix and there was no matrix symbolism in the whole neo thing, but if you think about it... Well, so you need to see the matrix in terms of the tax code and see through everything and where it's connected, where it's not connected, the patterns, et cetera. So, Steven is like, "I've never seen anything like it in my life, 100X accountant, not even just a 10X." He's able to see both sides, the IRS side and the CPA side. He's able to connect the dots and just a pure magician. I talked to dozens of accountants and it was either they lacked the breadth and the depth to be able to connect the dots in this particular way but also weren't forward thinking enough to see the writing on the wall that this was going to be automated.
In Steven's terms, if you can't beat them, join them. Or third, this is the lowest EQ of the bunch where they were so intimidated by the prospect and it manifested in this isn't automatable. After the second or third time I heard, I just knew to be like, "Hey, you're probably right. Sorry for wasting your time. Cheers."
G: What's something that you wish you'd known when you first started out as an entrepreneur that you know now after one failed startup and one startup that's growing and successful?
Massive asterisk there. I think this isn't that crazy. I hate that this is going to be something that you hear VCs say all the time, because more often than not, they're unfortunately wrong about most things is that it's entirely about people. We're a company of 15 people. The company is entirely constituted of human beings, of people. There isn't anything else. It's just a bunch of humans together working on something together. That uncompromisingly should be your focus, who the people are, values alignment, all these other alignments around are really important. Life is too short to spend it with assholes.
A lot of people have taken this recently, but if you think about it, 90+% of your waking hours, 90+% of your cognitive capacity goes into your startup, into your work, into whatever it is that your day job is. It might as well be around great people that you enjoy. Tax is boring. We're having the time of our lives because everyone is dope. You know what I mean? And then what's interesting is right now we are most attractive to candidates who care substantially about people and culture. Those candidates only care about people and culture, because unfortunately, they've been burnt somewhere else where there wasn't a fit or there wasn't alignment.
So, now they've realized the value of that, but yeah, anyways, I think as cheesy as it is, that's the only thing that makes anything worthwhile. I'll end on this. Our cultural value is we have a bunch and we distilled them down to one. It's our customers get the best possible experience when we are at our best, when the team is at their best. So, you start to understand that your team being at their best or not is the principle lever that you have to manipulate the outcome of your customers getting the best possible experience. If that's the case, then you focus all your energy on making your people operating at their absolute best. It seems like this is strictly a means to an end. So, the means is the people.
The end is the customers get a great customer experience, but actually, that's so that you can build this valuable company so that it can just go back to a bunch of great people working together in this really aligned positive way. That is the end. It's a little circular, but it's like a means to an end and end at the same time.
G: That really hit home for me. The first time I actually met our employees in this past summer, we had a retreat of all the European employees. I was like, "Wow, I hired some really nice people and they're really cool. I want to hang out with them again. I'm going to miss them when I'm gone or leaving our retreat."
I: We had a candidate come on site for an interview and we were all having lunch and she was just quiet the whole time. She didn't say anything. And then afterwards she said, "I just listened to you guys talk and everyone likes each other. I don't think I've seen that before." It's just so sad. You spend all this time with these people. You should like them. It's so sad. It's so sad how rare that is. I didn't realize how rare it was, but you're right. It's like such a blessing to have people that you work with that you enjoy being around, enjoy working with.
G: Thanks for joining us on the show, Ibrahim, and thanks for the words of wisdom.
I: My pleasure. Thanks again.