CIBC Innovation Banking Podcast

EP7_CIBCInnovation_Katherine_V1.mp3

Katherine [00:00:02] You need to have tech startups succeed. We need to have them IPO or we need to have them exit so that we can foster new ideas and get all those individuals that worked at Coconut starting their own business. And I think that's how you foster an ecosystem. 

Michael [00:00:21] Hello, I'm Michael Hainsworth. The CIBC Innovation Banking podcast explores the world of startups, growth stage companies and late stage companies that have made a big splash in their industries around the world. We talk to the entrepreneurs who have made their mark thanks to a fearless passion for what they do. And through the lessons they've learned, we learned how to be better at running our own businesses, engaging our own clients and exploring new ways of thinking about the innovation economy. Coconut Software aims to deliver a better banking experience. In 2011, farm girl turned founder Katherine Regnier decided it was time to take a small scheduling program she wrote for a massage therapist friend to the next level. Being three months pregnant wasn't a deterrent. It was a drive. Since then, she's led the company through venture capital funding, strategic partnerships and the rapid growth that makes it the envy of its industry. What did she see that others didn't? Why stay in Saskatoon when so many other companies moved to Silicon Valley North? And what does post-COVID life look like for a company that stepped up to help its customers during the worst health crisis in 100 years? We began our conversation back at the beginning, willing to risk it all with a baby on the way, Regnier jumped from an entrepreneurial plane without a parachute, only to sew it on the way down with a five thousand dollar loan from a credit union. So right out of the gate, you quit your day job three months pregnant to focus on building Coconut. What was that like jumping from an airplane without a parachute and sewing it on the way down? 

Katherine [00:02:02] At the time, as I went and you know, you talk to your peers in your family about making this decision, and there was those that were very supportive and those that said, why don't you just wait till you're on mat leave? And I really thought to myself, what happened if tomorrow was the last day of my life, what would I regret? And I would regret not taking a chance on myself. And so that's where the decision became a lot more easier to make. 

Michael [00:02:29] So you're saying that it was easier for you to make the call to just go ahead with this because you didn't know what tomorrow brings? That sort of sounds like a philosophy for life. 

Katherine [00:02:39] It's actually how to make a lot of decisions in my life. It's my decision making criteria. What would happen if tomorrow was the last day? How would I feel about this? And then usually you just get such a sense of prioritization and clarity of what's important to you when you can put yourself in that type of scenario. 

Michael [00:02:57] Now, the idea for Coconut itself came out of trouble booking an appointment for a massage? 

Katherine [00:03:02] That's absolutely correct. I even remember her name. Her name is Kristen. And obviously, a lot of people who are really good at their craft don't necessarily have the resources to have someone being able to take appointments. And I was traveling frequently and I remember I was booking a flight to Boston and I was like, that is way more complicated than it is to book my massage therapist down the hall. And I said, Kristen, if I was to make this software, would you buy it? And she said, absolutely. 

Michael [00:03:28] So that's how it all came to be. But at the end of the day, this was not your skill set. As I understand, you grew up working on a farm, right? 

Katherine [00:03:38] That is absolutely correct, Michael. You might not see the thread, but the work ethic of working on a farm, I think has been absolutely pivotal in being able to have a startup because it's an absolute marathon. And working on a farm. I mean, that's what you do. That's your pride and joy. I think you need that in order to persevere through the ups and downs of a startup. 

Michael [00:04:00] Tell me about persevering through those ups and downs. You know, when you hit the downs, how do you get yourself back up? 

Katherine [00:04:06] It wasn't really an option for me, I think when you have it down, you just have to acknowledge it, accept it, and by morning you need to figure out the action plan. So I think for me, it's like acknowledging, yes, this was absolutely horrendous to OK, it is what it is. Have those feelings, let them out. And then within like I said, you go to sleep, you wake up the next day, the new day. That doesn't matter. It's always about looking forward and learning from whatever happened the day before. 

Michael [00:04:36] So as you say, you're based out of Saskatoon. This is where you built this company. It's not exactly known as a tech hub in Canada. You do have an office in Toronto. I know. Why not just move to the big smoke? 

Katherine [00:04:48] We were asked that constantly when we were fundraising money, Michael, and we were doing close to a million dollars of revenue from Saskatoon and we were working with some of the largest companies in the US and I was able just to say, no, we can do it from here. I think family has always been a priority for me. And I didn't really feel like uprooting my family and moving them across the world was the right decision at this time, especially as a mom working 18 hours a day. If anything, I needed my family more now than ever. 

Michael [00:05:22] So as you build this company in Saskatoon out of 800 applicants in the Google accelerator program for women, you were among those selected in 2020. Well, what does that mean to you? 

Katherine [00:05:33] I think that was just so cool. What was really fascinating about that and a lot of times in accelerators you have like your top 20 percent of companies that really shine. In this accelerator, Michael, every single woman was just a powerhouse. It was unreal to mindshare with those folks and understand their backgrounds and where they came from and the companies they were building. Google did such an amazing job with this accelerator. I was blown away. 

Michael [00:06:01] So what has it brought for you? What has it done for you? 

Katherine [00:06:06] It's opened up a lot of doors in regards to networking. So when there's folks within Google that I want to speak with, I actually have someone I can reach out to, to help me navigate the organization. A big part, actually, that helped our business was we were really trying to get reserved with Google in Canada. It's the ability for our platform to be used right through Google, so voice activated or what not. And we had that in the US and Canada. And this opportunity allowed us to put some pressure on it and say, OK, we're part of this accelerator program, we need your help. You need to open up the doors here for this piece of technology Google offers. And I think this actually helped us get that done. 

Michael [00:06:46] It's been written that you are passionate about growing Canada's startup ecosystem, but what does it need to grow the participation of women? 

Katherine [00:06:53] I think there's two parts to this. One is and I'll talk about that in Saskatchewan, is we need to have tech startups succeed. We need to have them IPO or we need to have them exist so that we can foster new ideas and get all those individuals that worked at Coconut starting their own business. And I think that's how you foster an ecosystem. And I feel a lot of pressure to be successful in Saskatchewan so that we can actually start to see that and a lot of other tech companies in Sask are doing that as well. So I think that's first and foremost is you need to have some time frames to have just more than one or two companies. In regards to women, I mean, a farm girl from Saskatchewan living in Saskatoon and hopefully having a very successful company at the end of the day, I hope just inspires other women to do this as well. I think a lot of times we get the pressure of picking your career or your family. And I hope I've demonstrated that you can do both and be very successful at both. And you also don't have to be a programmer, I think that's the other thing, too. I absolutely knew nothing about software and development of software, and I think I've been able to find a way to stitch together, you know, with a loan of five thousand dollars. So hopefully that is inspiring and everybody knows that it's possible. 

Michael [00:08:12] Tell me about that thinking outside the box component to your business, because it would have been assumed that you would have been a software developer when you came up with this idea, but you had an idea, you didn't have a toolset that built the idea. How did it all come to be that you had something that no one else was thinking of? 

Katherine [00:08:32] You know, I think it's just when you any entrepreneur or anyone who has something, an idea comes usually from a pain point. And I had a pain point and I just knew it could be better. And I just never gave up on the idea. It took me over three years to find the right solution to get this off the ground. I went through partnerships that went bad. I went through a firm that wanted to own the IP and then I had to get my money back and I lost all that time. So it took a really long time not having that toolkit. But I think the idea is being really smart and understanding what you don't have and then protecting that piece. So when I did find the right company, it was "I own the IP". I knew I wanted to own my own company. Just being really clear about those boundaries. When you're working with somebody else, what is the exit plan? I needed an exit plan before I even started with them because I knew at the end of the day I wanted to have this company. 

Michael [00:09:27] The first major client for Coconut was Telus, and that helped drive the company in its early days, but what lessons were learned. Six months into the relationship, Telus wanted to part ways. It helped drive Regnier harder. She retained the client and turned her attention to the United States with a land and expand approach to growth while maintaining her headquarters in Saskatoon. I asked Regnier what she saw in FinTech that others didn't at the time. I wanted to sort of change gears here a little bit. What did you see Coconut Software doing in FinTech that others weren't doing at the time? 

Katherine [00:10:06] So it's really interesting, Michael, we actually started in the SMB space, so that massage therapist, that's what we were really focusing on. We then got our first step into enterprise when Telus became our client and we did really well in the telco space. And then we started to look at the retail space. And what we found was that the buyer necessarily wasn't ready to. You know, they weren't there yet, they weren't there was saying, "I'm going to book into this store to have this service." This was a change of retail saying we're going to now offer services and the consumer wasn't there yet. So when I took a step back and said, OK, when does a consumer know that they need an appointment, where does Coconut matter? And it was so obvious that it was FinTech because people care about their money. They care about their retirement, they care about their future. They care about their kids. And so it just became a very I remember having the conversation actually with our CFO at the time. And I was like, I think we should just go after financial services. He's like, oh, my God, yes. It was so obvious. This is where we needed to go. Now, the thing was, I would say that banks are just starting to go through digital transformation. So we still have a lot of the early adopters. I think what happened through the times of COVID is that now all businesses understand how important digital engagement is and that they need to offer these to connect with their customers. 

Michael [00:11:28] Has COVID had a significant impact on your business development? 

Katherine [00:11:34] Michael when COVID came, I think we were in the same boat as so many folks, which was, this is unknown, what do we do? And I didn't go into denial CEO, I went into survival CEO and we cut our budget significantly in the millions, but we kept our targets the same. And we did it. 

Michael [00:11:56] How do you cut a budget by millions yet maintain your targets? 

Katherine [00:12:00] I just thought we could do it. I don't know. I just thought, what the heck? What's the worst thing? We don't hit our targets. Now, with that being said, I have to give it to our team at Coconut because they put their heart and soul in making that happen. And even though there wasn't a I think there was a human cost to that, that people just worked and worked. So we have to make sure we balance that as well. We were also fortunate, I think, that the industry we picked being financial services is that they had to hustle because people are losing their jobs. People need to talk to somebody. They don't want to be on wait. They need to do this either virtually or not. We had to help catch some of these institutions through oh, my goodness, our advisers don't even have laptops that if they do, they don't even have cameras. So we really tried to be a partner in saying, OK, this is what we can do to help to mainstream them, make that streamlined, that member experience to be a lot better than waiting on hold or waiting in line for hours. 

Michael [00:12:59] So you're based out of Saskatoon, you have an office in Toronto, and most tech startups start in their own backyard to test out the product to ensure that there's a need and an addressable market. But you're concentrating right out of the gate on the United States. Tell me about that strategy. 

Katherine [00:13:16] If you look at your customer base, the United States is so much bigger than Canada. Right. And so it just makes sense that that's where we need to go now. We did really great in our backyard. Don't get me wrong, I think it was 2017 or 2018, we really did focus on Canada. And once we had that figured out, we did go into the US market. And I think the opportunity is it's just a lot greater. 

Michael [00:13:41] So then how do you break into these markets? 

Katherine [00:13:44] Oh, you have to have some luck. Michael, you know, we were really fortunate that one of our largest customers when we were five or six people was Jackson Hewitt. Then we ended up landing Capital One. And so these are some of the early adopters in their arena. And I think that's the biggest thing, is finding those customers that land you trust and credibility and you really focus on that partnership with them. Because when I can say, oh, we work with Capital One, there's this sense of, oh, they know what they're doing. Capital One just won't work with anybody. And so I think that gives your company the credibility and trust that is needed. 

Michael [00:14:21] How do you extend that beyond that initial relationship? 

Katherine [00:14:25] We are so focused. One of the things we say is that we're about people, passion and performance. And I think it's strategically put in in those ways. We focus a lot. We get a lot of feedback of how we treat our customers like partners. And it sounds cliche, but I also want to know the people we're working with, they're humans. How many kids do you have? What's your favourite beverage? Where do you like to vacation? And really building those relationships because at the end of the day, our job is to make them look like rock stars and we need to understand what obstacles they're working through, whether that be personally or professionally and what do we need to do to support that and the culture at Coconut is so unique and so exceptional on supporting each other and our customers. It's nothing like I've seen before and I've heard from other executives that have joined our company. They're just kind of taken aback at how collaborative we are. 

Michael [00:15:18] Regnier credits her farm life upbringing for her perspective on startup life, after all, how can you take yourself too seriously when you spend your youth shoveling cow poop? It's given her the ability to take that outside the box thinking to new levels. She's been described as light hearted, not super serious, yet committed to her passions far from the bare knuckles fighter I thought entrepreneurs had to be. You talk about culture, let's talk a little bit more about that, you have been described as lighthearted, not super serious, but committed to your passions. I thought entrepreneurs all had to be bare knuckle fighters with a no holds barred approach. 

Katherine [00:16:00] I sometimes wonder if I need to be more that way, but I think it shows in our results and our people and our employee retention that that's not always necessary. That doesn't mean that there's not accountability. And I think sometimes people get that confused. Don't assume kindness for weakness. And so even though I'm very light hearted and very kind and very compassionate, I also have boundaries and there's accountability and there's goals and there's targets. And you are expected to do it. That doesn't mean we can't have fun while winning, but there is expectations. 

Michael [00:16:32] Well, then tell me about that. You know, if we're not going to confuse your lightheartedness with weakness, where does the strength come from? 

Katherine [00:16:40] The strength comes from being extremely clear on what's expected of each person in the company, what's expected of the department, but the board is extremely clear on what it is we're set up to accomplish. And really having a solid plan of this is how we're going to do it. And when we're looking at executives, that's exactly it. Can you deliver? And I think that that's key. And you might be, you could be very serious and direct. And there's the strength. But I think at the end of the day, people want to work for people that understand them and are empathetic with them. And I think if you're like, hey, you need to go because your kid's sick and we say, OK, that's no problem. I absolutely know that on Thursday night, if I need them, they're going to be available. I think it's just treating your staff like adults. And they'll give you a lot more in return. 

Michael [00:17:31] Your philosophy seems to extend to certain office hires, including the director of greeting. 

Katherine [00:17:38] Yes, yes, so it is a very important part of our culture. He always makes a big impact and for those listening, Cota is our CTO's German Shepherd and he does come to the Saskatoon office regularly, pre-COVID he was every day. He actually grew up in our office, I would say. 

Michael [00:17:58] So you had some options when you launched a startup. You could have gone with foosball tables, but instead you went with pooches in the office. 

Katherine [00:18:05] That's right. That's right. 

Michael [00:18:07] So after the pandemic, what does 2021 hold for Coconut? After everything you've managed to accomplish, all the goals you've managed to meet, despite the cutbacks in spending that you had allocated, what does 2021 look like? 

Katherine [00:18:25] 2021, I would break up into a few pillars, one is definitely our people and culture. So one of the things we're examining is what can we do to create work life balance? So we're looking at things like the unlimited vacation, the four day workweek. How is it that we can give more time back to people to enjoy their life? That's first and foremost. So taking care of them. Second part is we're going to be most likely doing another raise. We're going to be raising more funds to really put fuel on the fire of our company. We have a plan, Michael, and that's why we're calling it 33 in three. So that's getting to 33 million in three years. And we think we can do it. We have a good plan for it. And it's really focusing on the financial services market in the US and just continuing to build and develop those relationships. 

Michael [00:19:15] Tell me about that work and culture component to things. There's so much speculation about what the working world will look like in 2021 once we've got the COVID scenario in the rearview mirror, the four day workweek, really? You think that's really going to happen? 

Katherine [00:19:34] I am very confident that's what we're going to be doing at Coconut. We've looked at the unlimited vacation. What happens is people don't take it. But if we do a four day workweek, then people do get that extra time to be with their family. I mean, I believe that, again, people are adults. They're going to get done what they need to get done. And I remember being at jobs where it was Monday to Friday, and you're sitting there on Facebook at four o'clock because you're just waiting for the time to be done like that is not that is not a great way to work. I think if you had four days to get things done, you would get it done in that time. 

Michael [00:20:12] This sounds more like that out of the box kind of thinking that we're trying to talk about here. Where does this come from for you? The idea that you could have just gone down the typical path, you could have just taken all of the lessons that any MBA program would teach and just applied them. You're not doing any of that. 

Katherine [00:20:35] I don't know what it is, I think it's just a part of who I am just to question things and say I always know it can be better. And so what does that mean? 

Michael [00:20:46] Katherine, this has been fascinating. Thank you so much for your time and insight today. 

Katherine [00:20:50] Thank you, Michael. This is one of the best interviews I've been a part of, so thank you. 

Michael [00:20:55] Whatever post-COVID life has in store for Regnier and Coconut Software, the founder expects to continue to work out of Saskatoon, expand as she lands in new markets and keep the director of greeting and her other employees well stocked with treats, literal and otherwise, by encouraging risk taking to help drive the company in new directions. Michael Hainsworth, thanks for listening.