The following interview is a conversation we had with Daniel Grunstein, CEO of Crowded, on our podcast Category Visionaries. You can view the full episode here: $6.4 Million Raised to Transform Nonprofit Financial Management
Daniel Grunstein
Thanks for having me, Brett.
Brett
Not a problem. Super excited for this conversation. Let’s go ahead and just kick off with a quick summary of who you are and a bit more about your background.
Daniel Grunstein
Yes, I’m a bit of a weird global citizen. I was born in Sweden, raised in Australia, spent many years in Israel, and recently moved over to the US to build the company. So really been everywhere, essentially. Background in banking and finance, the big four and some smaller ones as well, which is quite unique in sort of the startup space. But I guess in my situation came from off the fintech wedge within those organizations and really noticed this problem mainly from my own life, being involved in some of these organizations at different stages, in high school, in college and afterwards of large multi chapter nonprofits, not being able to handle finances at any level, chapter nationally, whatever it might being a bit of a mess. And so got building, really. That was sort of the story that got me here.
Brett
And as you went through the early part of your career, I see you were at Frost and Sullivan, then you were at JPMorgan Chase working as analyst, as you were in these roles. In the back of your head, did you have the idea that someday I’m going to leave this career behind and go out and start my own company? Or where did that idea to be an entrepreneur really come from? And when did it begin?
Daniel Grunstein
The beginning? I didn’t know. Like, I did think I would just be salaried and sort of like work at some of these big companies and gained a lot of experience and a lot of valuable lessons in doing that. And then I guess it was in COVID, I just had this bug. You know, a lot of these big firms, like with the uncertainty, budgets were slashed and things like that. And, you know, sometimes you weren’t able to start new things or innovative things. It was really about keeping the lights on, and that killed me. And then I sort of went through a process personally, of, like, realizing, why did that kill me? Maybe just, like, I always need to be doing something new and innovative and exciting. Otherwise, it just doesn’t work for me personally.
Daniel Grunstein
And, you know, they always call these jobs the big banks, like golden handcuffs. So it’s not easy to leave. But once I narrowed in on this idea that I was really passionate about and I knew there was a really good market and use case, then it was pretty easy to write that resignation.
Brett
Email, you know, what Founder would you say has inspired you the most?
Daniel Grunstein
Okay, so I wouldn’t say inspire is the word, but I would definitely say, like, astonished by, is Elon Musk just the ability for someone, like, running one company is. So. I love it every day, but it’s not easy. And, like, I just not understand how this one individual runs so many businesses simultaneously and runs them well. And so I’m always completely flabbergasted by him and just, like, cannot understand his secret. I’ve read his biography, followed him. I just still do not get how he does it.
Brett
Yeah, I think every Founder has to look at Elon Musk and just say, wonder, like, how is that possible to get it all done? What’s your day in perspective? I think I have a bad day. Then I think about, okay, what’s Elon Musk’s day look like? And probably, like, three minutes of his day is, like, equal to all the stress that I’ve had in my lifetime, which is pretty crazy to think about.
Daniel Grunstein
Yeah, 100%. I don’t think I’ll ever understand, to be honest.
Brett
And you mentioned Elon Musk’s book there. I just read that. It’s a fascinating read, and it was really cool to see behind the scenes of Elon Musk outside of that book. What books have had a major impact on shaping you, not just as a Founder, but really as a human and as a person.
Daniel Grunstein
Trey. So I read one, like, a few years when I was sort of getting to the entrepreneurship path. And in the early stage, you don’t have product manager and marketing manager initially, you have to sort of quickly learn different verticals. And I read one called the mum test, which is a product management book. Essentially, the premise of the book is, like, about how to get good feedback from customers and actually work out what you need to build and obviously not waste as much money. And the idea is, well, the reason they call it the mom test is basically that like, you take a kid to a store and he says, mommy, I want this. Mommy, I want that. Mommy, I want this. But, like, do you need that? Are you actually going to use that? Are you just going to throw it away?
Daniel Grunstein
Or do you just want it because someone else has it? And it really gave me a good perspective on building product. I think I at times, forgot about the lessons from the book, and at times I applied them. And when I applied them, I felt that I made much better decisions as a Founder, taking things slow, not throwing a lot of money, and being very calculated with the investment you’re making in a new product, rather than committing to, like, a whole new pivot. So there was a lot of. I’d say that really helped me.
Brett
I read that book a couple of years ago, but I need to go back to it. It’s so simple and so easy and, yeah, such an easy read compared to some of these other books that are kind of like a college textbook. So I’ll definitely circle back to that one.
Daniel Grunstein
Yeah, yeah, it’s super easy. And anyone can understand it because we’ve all been kids and asking for our mothers for toys.
Brett
I love it. Let’s switch gears now. Let’s dive a little bit deeper into everything that you’re building there at Crowded. So take us back to the early days. What was it about this problem that made you say, yep, that’s it. I’m going to go build a company to solve this?
Daniel Grunstein
So I’d say that it was a double edged sword if I say the one thing that made me dive into it was the fact that no one else was doing it. But then the one thing that made me apprehensive was that no one else was doing it in the sense that I had searched many times something where I could collect payments, bank them, disperse them, build budgets on different cards, and, like, handle all the nonprofit compliance headaches of reporting and tax exemption and all that. And I never found it. And then I just assumed that it would get built, especially, like, the 2000 2001 era, where there was a lot of capital in for, like, vertical SaaS and that sort of stuff, and it never got built. And then I was like, hey, it’s not getting built, so maybe I’ll give this a go.
Daniel Grunstein
So I’d say that was, like, the initial stage. And then, I guess where I feel sure was, where do I start? It’s a massive, like, it’s a market with a lot of sub verticals and sub verticals and sub verticals, and you can’t really start with nonprofits in general. It’s like saying, I’m starting with businesses or people. And so that’s when my Co-Founder, he’d had a lot of experience in the market, in different organizations, universities, scouting organizations, fraternities, alumni associations, things like that. And we started in the college space, which is a lot of fun and made me feel young again. So, yeah, I guess that’s the early days.
Brett
How did you make the decision to focus on the college space? And the reason I ask is a lot of founders struggle with that in the early days. There are so many different directions you can go, and it seems like you can kind of sell to anyone, or you potentially could try to sell to anyone and market to anyone. So what was that process internally when you narrowed it down to say, okay, colleges is where it’s at?
Daniel Grunstein
So I guess I had, like, a set of criteria of what I developed over time. Wasn’t like, from a textbook or anything, but, like, of what I wanted to go to market, or as they called, like the beachhead market, the first place you land on the boat to be. And the first thing I was wanted easy access. Like, I didn’t want to have to go through lots of bells and whistles and everything to get to the decision maker and only to find it’s the wrong decision maker and they’ve been sacked, and there’s a new one. Like, there are big banks or big corporates. The cool thing with college groups is the treasure changes every year. I’ve got this guy. He’s new, he’s excited.
Daniel Grunstein
I can speak to her or him in September or January whenever they start their term, and they’re willing to give me some time. In the early days, we used to do things like endorse them on LinkedIn or offer them an unpaid internship, which was really just giving us product feedback. And they love that because obviously college students want experience. And I guess, I don’t know, I just remained a kid. I can speak the language a lot. It was really easy to get them to use products that were half baked than to tell me what works and what doesn’t, because they find that cool and exciting, whereas, like, users that are adults would just find that annoying.
Daniel Grunstein
So, yeah, when I had that criteria, and then I guess I didn’t really know much about how that was structured in terms of, like, the actual people in charge of these organizations and things like that. And my Co-Founder, like, mapped that out for me. But at the end of the day, the user was what got us and why went after them.
Brett
What were those early days like? And how long did it take until you really started to feel like there was a viable product and a viable business here? Was that something that you felt like month one or did it take a year or two before you really started to see that this idea had legs?
Daniel Grunstein
Yeah, it definitely wasn’t month one. And if I remember, it’s deak university in Michigan. So if they’re listening to this call, then this is funny. But our first client actually, when we got them on the system, the database wasn’t actually registering the payments. So what I would do is I would get them on a call and I would literally go in and they would write, my dues for this semester is a grand, two grand, whatever it is. And I would actually write it on a piece of paper and then enter it in the database after. So they were just entering random numbers that weren’t being recorded. So like that’s literally how we started. But the cool thing was that they liked it. They’re willing to give it a go, even though a lot of it was manual and everything.
Daniel Grunstein
Did that a lot at the beginning, like build things using like no code solutions and things like that. So we just sort of said, once we get usage on this, then like, okay, we have something and it’s worth building. And so I think that like until when we had validation of those sort of very simple builds, were like, okay, there could be something here. But I don’t think we really realized there was something here until we really started to work with larger organizations. So the universities themselves and large nonprofit institutions and things like that, and large associations, because at the end of the day, that’s where the long term of the business is. You do have to work top down. That only really came, if I’m honest, in the past sort of like twelve months, even a bit less.
Brett
Whats the best way to describe the product today? Is it digital banking for nonprofits or how do you think about it? Because I understand it does a bit more than just banking.
Daniel Grunstein
Yeah, so essentially we take banking and we make it like a completely tailored experience to the end user and their application or use case. So it doesn’t look like any other digital bank. Otherwise they would just use those digital banks. They’re great. Whats really unique is a the collocation of financial services. So the ability to send out payment requests to different people that can pay by card and whatever, have those funds come into one account and then budget within one system. Typically a business will have like something to collect payments, say like you know, if they’re e commerce, it will be shopify. If there are any other business under there, use stripe or what have you, they’ll push that into a digital bank account, provided more often than not by brick and mortar.
Daniel Grunstein
And then they’ll even have like an expense management system like concur or divi or something like that, or brexit. And these organizations, a time poor and cost poor, they’re really cash poor, so they don’t really have the resources or understanding or even the need to manage three systems. So I guess that’s how it looks. But then where the real competitive advantage comes in is the handling of compliance. So you’re having these organizations which, yes, at the top, have someone in finance and someone in administration, but the other day, they have thousands of chapters across the country where it’s, you know, moms, dads, students, whoever it might be, volunteering.
Daniel Grunstein
And they don’t necessarily have the legal or financial knowledge to know which nonprofit tax filing they have to do, which state they have to pay franchise tax in, how they do that, how they get their tax exempt status with the IR’s and maintain it. And the consequences of not doing those things are massive. They get billed and they can get sent to bill by the IR’s. The organization and all its great efforts can be shut down overnight. So it’s that sort of embedded compliance that we offer that really sets us, makes it different and makes it unique for the user.
Brett
This show is brought to you by Front Lines Media podcast production studio that helps B2B founders launch, manage, and grow their own podcast. Now, if you’re a Founder, you may be thinking, I don’t have time to host a podcast. I’ve got a company to build. Well, that’s exactly what we built our service to do. You show up and host, and we handle literally everything else. To set up a call to discuss launching your own podcast, visit frontlines.io podcast. Now back today’s episode. How would you describe your marketing philosophy?
Daniel Grunstein
So it’s really product led in a sense that we really push the product at both levels. So even when we’re pitching enterprises, we’re not there to tell them that necessarily there is no other way of doing this or that. There is every other way of doing this is dramatically more expensive or what have you, but this is the most time efficient and the most compliant way of doing things, and this is the best user experience. So I guess we do that in terms of marketing. We tend to get those smaller chapters by acquiring them digitally. Quite low touch, self service sign ups. And then we’re more outbound, focused with the larger enterprise clients like universities and big foundations and things like that.
Brett
What’s the competitive landscape look like today, and how do you think about that competitive landscape?
Daniel Grunstein
We have a blessing and a curse that we have lots of different competitors in lots of different ways. You have several products that we offer, and you have basically a lot of competitors in each vertical. And sometimes you even have competitors who are doing one product for one sub vertical, for example. You’ll have platforms that only do payment processing for greek life. Super niche, super targeted. But that’s why they’re quite strong in that segment. And you have the same in many other segments, payments for summer camps, things like that. But then you also have the big banks who I guess are the legacy competition, but they’re very hard to get away from, even for we don’t really hold large deposits and offer investment accounts or things like that. Money market or things like that. It’s daily money movement and money in, money out.
Daniel Grunstein
But still, people, even with that portion of their operations, are not wary, but it’s something new for them to move that away from the big bank. So there’s a bit of sort of like education that needs to be done there. And then you do have a bit of competition from the peer to peer payment apps like Venmo and Whatnot. But it’s quite easy to win just because Venmo started to crack down on compliance with nonprofit organizations. Collecting on Venmo, like, collect over $600, they send you a 1099. So, like, there’s not really any meaningful size nonprofit that collects less than $600. So it’s competition, but it’s quite easy to address the pitfall and move on.
Brett
Are you just focused on the US market today?
Daniel Grunstein
Yeah, we may look in several years to look at Western Europe and the UK. Canada also is a strong case. But Canada isn’t at the level of sophistication that the UK, western Europe and the United States are in terms of open banking and banking as a service, if they get there’s definitely a massive market need there.
Brett
If you jump to another country, are you basically starting from scratch because the regulations are so different?
Daniel Grunstein
We are not starting from scratch in terms of the front end and the user experience, but we do have to probably call use a different bank service API and obviously have a relationship with a local partner bank. So there is a lot of work there.
Brett
If we look at the tam, how big is the Tam? Like, how many nonprofits are there in the US? Roughly speaking, yeah.
Daniel Grunstein
So people will be shocked to hear this, but like 6.5% of US GDP is nonprofit. It’s like $1 trillion in the US. You just have so many things that you may not even think about. But are nonprofits. A lot of country clubs are nonprofits. No one thinks through it like that because people get nonprofits. Oh, it’s a charity. It’s about doing good. And golf clubs, sports organizations, universities, professional societies, things like this we don’t even think about. But are all non profits. And I guess in general, also the US, a very community based society. 64 million Americans are paying members of a membership based organization. It might be a church, it might be a sports team, might be what have you. And I’ve looked at the data in other countries, it doesn’t exist anywhere else.
Daniel Grunstein
So I guess it’s not just about the size of the market in terms of number of people, but also there’s a cultural element in the United States where people really get involved in these organizations. Volunteering is definitely part of the national psyche and things like that, and involvement and community involvement. So that’s what makes a lot bigger than what it might be. To the untrained eye.
Brett
What percentage of nonprofits that are in your target market do you think have any idea who you are? Like, what’s the level of brand awareness that you’re at today?
Daniel Grunstein
I mean, I’d love to say it wrong, but it’s not true. We’re very focused on in our segments where we have a decent footprint. So we’re much stronger, for example, in the college space than we are in the k through twelve space. I’d say in the college space. Like, yeah, maybe ten to 15% would definitely have heard of us. Maybe about 1% would be using us, or a bit less than that. Even. So, there’s a lot of room to grow, and there’s other smaller markets where we’ve just had a lot of quick wins, like summer camps, where I would say, yeah, well over 50% know who we are. But it’s a smaller market.
Brett
If we look at the plan for the coming year, what are you going to be doing to drive more brand awareness with your target market?
Daniel Grunstein
Yeah. So I think we did a lot of experimentation last year. We went to literally every conference that existed in the US, which burnt a lot of cash, but loads a lot of lessons. So there’s a lot of event based marketing in this market. These organizations all have annual gala and it’s a big deal for them. It’s almost like if you’re not there. You got to go and support them and be part of their mission, what’s important to them. So we have this year decided to focus on three big conferences and make a splash there. We’re also looking at new banking partner relationships and new products, international transfers. There’s a lot of nonprofits that struggle with that. They have activities or support causes abroad or even bring in staff from abroad. They need to pay. So that’s a product we’re building.
Daniel Grunstein
And then also we’ve started to do customizable account structures for large organizations, particularly universities. So the ability for them to have the head office having sort of a parent count and then sub accounts that have like a clear internal reporting structure, and they can sort of like build that hierarchy themselves rather than us. Every time we get a new client, have to fit in with a different university policy or a different foundation policy because they’re all different. So those are the big things, I think, on go to market and product for this year in terms of like fundraising and stuff, looking at like a series a mid this year, and, you know, obviously to grow the team and to take things to the next level.
Brett
From a marketing perspective, have you ever had any ideas that you just thought were going to be very successful and they turned out to not be successful?
Daniel Grunstein
Oh, yeah. You don’t know where to start there.
Brett
Whats the biggest marketing fail, would you say so far?
Daniel Grunstein
I mean, its happened a couple of times to us, and theyre not big in terms of financial penalty, but its a lot of emotional back as it goes into it. You see online a lot of these sort of lead lists and associations and organizations that claim they can get you in and, you know, they charge you $501,000 and you do it because you’re like, if it fails, it’s $1,000, and if you don’t do it, you know, if it fails, $1,000, and if you don’t do it, you’ll kick yourself. And we did that a lot. And there’s a lot of people out there sort of like, I wouldn’t say it’s a scam, but maybe they can’t deliver the value that they claim they can deliver.
Daniel Grunstein
Sometimes it is a genuine scam, and it’s very easy when you’re so hungry and trying to move so fast to fall for those things and to buy in and be optimistic. But I would actually say to founders, like out there, and this might be a bit of a controversial opinion, I don’t necessarily regret doing those things. It’s a bit annoying when it happens, but you have to spray and pray to a certain extent. And there’s been other things that we’ve done, partnerships and sponsorships, where they’ve turned out incredibly. But I think you got to be a bit open minded. I think, like there’s a lot of entrepreneurs out there who are a bit wary and pessimistic and it’s not without reason. I completely understand them. But you got to be a bit of an optimistic and it’d be crazy and take those risks.
Daniel Grunstein
But yeah, it is tough to see it fail all the time.
Brett
Today, what do you think’s been the most pivotal decision that you’ve made?
Daniel Grunstein
Well, there’s several, but they’re all related to one thing, which is people. So bringing on our CTO really changed our product team. We have an amazing head of design, recently came on board everything related. People can really change a company. So can money, so can customers. But I guess that can come and go and so can people. But when you get the right people, they stick with you. And so I’d say, like, good highs, big ones, and if I’m honest, also the bad highs are the worst, most impactful, to the detriment of the company decisions that we’ve made.
Brett
What do you think your employees and team sees in the company, and what do you think excites them and makes them feel okay with taking the risk? Because startups do come with the risk. So what are they seeing?
Daniel Grunstein
I think they see a team that’s like very driven. We’re all on the same page. I hear a lot of horror stories about sort of startups that have a lot of infighting and bad cultures. We don’t have that, we just don’t. Everyone really gets along and everyone’s on the same page and working together. And I think that people like that and there is definitely risk involved, but it’s a lot easier to be involved in a venture that’s high risk. Car award when you enjoy your work day in, day out and enjoy your teammates and genuinely friends and things like that. So I think that’s increasingly very important to people, I think, in finding work, and we have set that culture.
Brett
As I mentioned there in the intro, you’ve raised over 6 million to date. What have you learned about fundraising throughout this journey?
Daniel Grunstein
Wow, it’s very tempting to. And I did this, like, I have an idea, I’m going to market, I’m going to go raise money. I guess it was a sign of the times also when I was raising the first round. But like, it is better to take things a bit slower, try and see what capital you can get from angels, family and friends, things like that, and definitely prove concept more. And I think that’s something that everyone should do and avoid VC’s for as long as possible. And I learned that a bit of the hard way. And then I would also say to really bringing on strategic investors early can be amazing and it can be just another investor.
Daniel Grunstein
So I would really encourage people to like if you’re going to bring on a strategic, make sure they’re not just getting a good deal, but you’re getting a good deal too in terms of the partnerships and the leads they can offer you and things like that. And also just don’t be afraid of it. The worst they can say is no.
Brett
From a go to market perspective, lets imagine I come to you and I say, hey, Im going to start a nonprofit technology company or Im going to start a tech company that sells to nonprofits. What would be the number one piece of advice that you’d give me?
Daniel Grunstein
Be patient. They move slow. Be patient.
Brett
Final question for you. Lets zoom out three to five years into the future. Whats the big picture vision here that you’re building?
Daniel Grunstein
Look, I think that the product is not far away from it, from being this end to end management platform for nonprofit treasurers and administrators. And I think that we’re well on the way to being that. I think that in three to five years, it’s unclear to me still if this is exit play or if we want to just continue riding the business the moment. We’re really enjoying it. But we obviously know that there’s a lot of large players in the market in terms of providing software and financial services. These types of organizations who the product in the long term may find a good home with one of those organizations and one of those companies. So don’t rule it out. But I think we just are very focused on growth at the moment and giving the best possible experience the customer.
Brett
Amazing. I love the vision and I’ve really loved this conversation. You can consider me a fan. I really love what you guys are building and the approach that you’re taking. We are up on time, so we’re going to have to wrap here. Before we do, if there’s any founders that are listening in that just want to follow along with your journey, where should they go?
Daniel Grunstein
Definitely our website. Follow me on LinkedIn or feel free to dm me. I don’t buy.
Brett
Awesome. Daniel, thanks so much for taking the time. Really appreciate it.
Daniel Grunstein
Thanks, Brett.
Brett
Keep in touch. This episode of Category Visionaries is brought to you by Front Lines Media, Silicon Valley’s leading podcast production studio. If you’re a B2B Founder looking for help launching and growing your own podcast, visit frontlines.io podcast. And for the latest episode, search for Category Visionaries on your podcast platform of choice. Thanks for listening, and we’ll catch you on the next episode.
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