Transcript: Secret Weapon Behind Small Businesses Success | Hello Alice Co-founder Elizabeth Gore

Host: Hello everyone, welcome to another episode of Startup Project. My guest today is Elizabeth, co-founder and President of Hello Alice, a platform empowering small business owners with grants, loans, resources, tools and connections.

They recently closed their Series C venture with evaluation of $130 million. Investors included Buck Weed, Mastercard, Backstage Capital and others.

Hello Alice is a financial technology that provides access to credit, loans, grants, and business planning services to 1.5 million small business owners across the country.

We'll talk about the origins of the company, the mission, how the business of Hello Alice is doing, and also their recent legal battle and more interesting things.

To continue to listen to more amazing conversations with entrepreneurs, founders and operators, subscribe to Startup Project on Spotify, Apple, YouTube or wherever you listen to podcast. I don't forget to leave a review.

It helps Startup Project reach reach to more entrepreneurs and future founders. With that, Elizabeth, welcome to the show.

Guest: Thank you. I'm so happy to be with you.

Host: So to set the stage for the audience, let's talk a little bit about your early career and background before Hello Alice. Like what was your background? What did you do before starting Hello Alice?

Guest: Yeah, so I am, I'm from South Texas originally, now I live in Northern California. My original background is in agriculture. It was in animal science. Grew up on a cattle ranch, but jumped squarely into the world of humanitarian work.

So I was with the United States Peace Corps overseas and then I worked for 10 years supporting the United Nations or the UN Foundation and loved that work and was very passionate about equity and ensuring that everyone in our globe had the same access to healthcare and technology and but I got really, really obsessed and focused on small business.

You know, you'd probably call it micro business where I was working whether on the continent of Africa or Latin America.

And I was just very passionate that if someone could start and own their own business, they had the ability to find their children to go to school or buy the health care they needed or really live a more democratized life.

And so when I focused back on the United States, I was really surprised how hard it was to start and grow a business here. And I had the great privilege to move to the private sector to work with Dell Technologies.

Michael Dell is such an incredible leader and I was very passionate about the work we did there ensuring that hardware in a sense and technology got in the hands of small business owners in 30 some odd countries.

But there was more, you know, there was more to do. So I met Carolyn Rods, my co-founder and we came up with this idea of using data to ensure small business owners in the United States got equitable access to capital.

So jump forward here we are, you know, a decade later, Hello Alice serves a million and a half small business owners and we're just thrilled to be a part of that journey.

Host: So what are the products or services that Hello Alice offers to the SMBs today?

Guest: Well, our number one focus as small businesses is their financial health.

We have the small business health score, which any business owner can go to hellos.com, put in a certain amount of data and we can help you assess the financial fitness of your business and we score it between zero to 100.

But then we work with you over months to improve that score. So we'll be sending you emails, products, ideas, guides to improve your your business planning, your cash flow, how you're using debt, how you're gaining customers.

We also, you know, I would say behind financial fitness, our secondary objective is access to capital. So we provide, we've just hit $50 million in grants that we've distributed to small business owners.

We have a a a finance center with 92 equitable lenders on it, so where you can apply for loans. We have both secured and unsecured credit, which is really important to the small business community.

So those are kind of the primary areas and then um, we are definitely a kind of a cult community. We uh work very hard to make sure small business owners can connect with each other. So we have the largest Black owned business center.

We have a a huge population of military connected small business owners. And so that I would say is the beating heart of what we do.

Host: So if I look at, I mean, you have this amazing vision of, you know, making credit or making um, access to funding equitable. But if I look at Hello Alice as a core business, like how does Hello Alice itself makes money? Is it the lending part of the business or is it the services part of the business? Like how should I think about Hello Alice as a business itself?

Guest: Yeah, so we at Hello Alice, um, our business health engine, which is essentially our core software, that we use directly with small business owners.

We have an enterprise SAS product that we sell to banks, to large Fintech, to enterprise business services. So we help them increase engagement and transactions with small business owners.

So the same way we're doing it directly with Hello, Alice, we offer that to enterprise and that's been the largest amount of value of our business.

Host: Got it. Uh and talk to a little bit about, you know, those early days and how you acquired the early first set of small business customers.

Guest: Oh man. One at a time. One at a time. You know, Caroline and I launched it was just the two of us and uh we actually moved in together and we both had two kids each.

It was it was a time of um no sleep and a lot of hard work and we just worked really hard to show up anywhere small business owners were. but as we also really dug in early to partnership.

So we partnered, I mean, I feel like day one with Chambers of Commerce, with different nonprofits supporting small business owners, um, with demographic based organizations like veterans groups and we offered Hello Alice to them for their members.

And that was a big early growth opportunity for us.

And then with our enterprise contracts, you know, that was a big funnel related to joint marketing to small business, whether that originally was with Dell, which we did a lot with them in the early days, Salesforce, eBay is an OG customer of ours to where we were jointly offering services uh to small business owners.

I would say our our rocket ship growth though really started at the beginning of COVID. We um worked really quickly. We have unbelievable engineers in our company to create the COVID-19 Business Center on Hello Alice.

We were helping folks apply for PPP and EDL, we were helping them um learn how close their business. We were helping them, you know, unfortunately, apply for bankruptcy if they needed to. Uh we had a mental health center that we popped up.

And so we were, we had like 200,000 folks at a time using our COVID-19 business center and that that really was um, I would say an explosive level of growth.

And then after that, the referrals have just been so strong over the years, one business owner telling the next about Hello Alice. So we never really done paid marketing. It's really been, you know, word of mouth.

So we're real proud of that reputation.

Host: So today when SMBs, you know, come to Hello Alice, what is the main thing that they're looking for like, you know, that they want to to get solved?

Guest: Yeah, generally, the number one reason they're coming to us is because they they are looking either for funding or to better manage their funding.

So those are the two, you know, it's it's really about either access to capital or managing capital is their number one reason. And and that is every industry, every location, every demographic. That's generally what everyone's looking to do.

Host: I know you mentioned like 50 million grants, um I'm assuming they are not loans.

Guest: No. Grants, we do have a loan center, but grants are non-dilutive capital. And so you know, some of them you can think of as philanthropic, some of them are with uh partners that are helping improve business.

So like Door Dash does grant programs for food services and restaurants to be able to do delivery with them, for example. So those are generally $5 to $10,000. Sometimes they'll go up to 50,000 if it's a more high growth focus.

Uh but those are awesome non-dilutive capital. And I always tell people, uh that's that's one of the ways actually, Hello Alice, we were able, we applied for a lot of grants in the beginning.

And so whether it's Hello Alice's grants or, you know, folks looking for government grants, state, local, fed, you know, it's a great way to grow your business.

Host: Yeah, I think, I mean, one of the ways I tell startup founders to refine their pitch uh is to go and pitch for grants and if you're able to successfully generate a lot of grants as you're improving your pitch, that's a good way to like a win-win situation.

Guest: Yeah, absolutely. And you know, you just said a way to improve your pitch. Some people will get frustrated because they'll do a lot of applications, right? And it's the same thing with pitch contests and so on.

But man, every time you're going to get great feedback, right? You're going to improve your business case that the pattern questions that you get are you know, are things you should really pay attention to.

So I think it's a great process, especially in the early days.

Host: So I mean, I I I feel like Hello Alice, you know, while you're running Hello Alice, you get to have this unique vantage point of view of what's happening in small business.

Guest: Yes.

Host: So what are the trends that are happening? I mean, we have seen COVID, you know, which has been, you know, really affected the small business community across the country.

What was the post-COVID scenario like or what are the new types of businesses that are popping up in the small business areas?

Uh what I I'm guessing you would also probably see some ups and downs in terms of geography where like these business are popping up. Give us some insights on like what trends you're seeing from your vantage point.

Guest: Well, I think the most exciting thing right now is that there is just reemergence of growth in small business. So we have five times the amount of small businesses launching right now than are in than US history, which is super exciting.

The other thing is I think you'll see a level of um what we wouldn't Texas to say savviness, but resilience.

So small businesses that had to close whether it was for COVID or the amount of natural disasters we've had the last few years, generally reopen with a level of understanding on cash flow, diversification, calculated risk.

You're just going to see um, you know, almost war torn small business owners that come in just smarter and just with a lot more knowledge.

The other thing we're seeing is the amount of spend on software is up with small business owners, which is super exciting.

So that means the level of efficiencies, the use of data, not having to subcontract for stuff because they can build it themselves. I think that is a super exciting trend in small business that software use.

And then finally, I I love the demographic change. I mean, you're seeing so many women, people of color, US veterans, immigrants launching businesses more than ever before. I think that's very exciting.

I think that just to position of my worry is capital is so expensive right now.

And so that is not matching up with the opportunity and so small business owners are going to have to launch with less capital, a little bit slower to make that first hire and I think, you know, there is a way to responsibly use a little bit more operational credit in this environment.

So I I think that's going to get better, but right now it's still pretty darn expensive to access capital.

So I think you're going to, you know, I really hope the momentum in small business ultimately in the next couple years will will or the capital will catch up with that momentum.

Host: I mean, you mentioned, you know, technology, buying technology has been, you know, in upward trend. What are like one or two categories like or like repeated softwares that small businesses are buying?

Guest: Well, there's there's three that come to mind immediately. One is cyber.

I mean, um, small business owners were one of the largest populations to be attacked on cyber attacks and I think a lot of folks think I'm small, this isn't going to happen.

And now there's this level of understanding that you have to invest early in cyber. The second and it sounds silly but is accounting software.

I mean, accounting software has gotten so good on everything to save you time like bill pay, assessing your costs, tracking your P&L. I think that's getting better and better. And then um, you know, CRMs for small business are also getting stronger.

It used to be if you're a Salesforce client, you're a big company, right? You've got a lot of employees, big sales. You know, CRMs are getting better for small business so you're tracking from day one your customer access.

So I'd say those are the three that from from what I would say a longevity standpoint. Short term are, you know, how to build your website, how to build a storefront, your branding.

You know, we're seeing a lot more small business owners do that themselves, which is cost savings, takes more time, but I think that's another area that's interesting.

Host: Are there any like interesting trends in terms of like how small businesses are approaching their customer acquisition that you might have seen?

Guest: Yeah, I mean, we're we're digging in right now to the evolution of social media, um, and and actually not just marketing but but um purchasing on social. I mean, that's just getting better by the week.

So if you look at um, you know, the the business solutions on TikTok, the business solutions on Instagram, your ability to purchase in app even if you're a small it for a small business.

I think that evolution is really powerful powerful to meet your customer where they are. I think that's a super interesting evolution. I will say though, email is still king.

I mean, a lot of people discount email, but your email list, your ability to do newsletters to potential or current employee or excuse me, customers. that is not a dying art and that is that's an an important area to keep focused on in addition to your social.

Host: What future because you recently raised, you know, CDC, uh, I mean, any funding round comes with its own set of like vision or targets that you want to try to accomplish, right? What does the future look like next couple of years? What are you planning to do with Hello Alice that you're excited about in the next couple of years?

Guest: Well, um, we're we're super pumped about helping our small business owners utilize AI in their own business. It's getting so much cheaper, so much more accessible.

So we're rolling out a lot of tools to help small business owners utilize AI in their business. That's that's a really strong focus of our Chief Product Officer, Kelsey Ruger.

We're continuing to get smarter and smarter about offering operational credit. We just think this market right now that's super important. And then the business health score is just booming.

I mean, we're, we have hundreds of thousands of folks using it. We're going to keep perfecting it to help people prepare to apply for capital in their own business. So those are core areas.

Um, I'm pretty excited that we'll probably hit 2 million users next year. I think that's in my wildest dreams. I don't think we would have ever reached that.

We hit profitability this year, which is a big, you know, as a founder, it's actually you sleep a little better at night having that. So there's a lot of good stuff coming down the line.

Host: Hello Alice was in the news, you know, because of a lawsuit and you recently won that. Can you give a little bit of background what was the lawsuit about and uh, you know, uh, what was it been to go through that journey?

Guest: Yeah, so we were sued, um, you know, as I said, we do about $50 million in grants. One of those programs was for Black owned businesses with commercial vehicle companies. We did it in partnership with Progressive Insurance.

So we were sued for uh reverse discrimination because it was for Black owned businesses by a white mail trucking company.

And I think there was a lack of understanding there that we also provide grants for some of the most white mail veterans all the way to non-demographic grants.

And so um, it was just it was a pretty frivolous case, but it definitely took a lot of time and money to get through it. And you know, I give anyone advice that you need to be prepared for the unknown running a business.

You know, things can hit you at a left field and you have to be ready for that. You have to have money set aside for things like this.

You have to have a great leadership team because your time is gold, so it was it was a mess, but we're glad to be on the other side of it.

Host: Amazing. You talked a little bit about AI. Um how are you seeing AI being used by other small businesses? I mean not just your business. I mean talk to me both sides, both small business but also in your own firm, like are are you using it for productivity or just not just using it in the product that you launched, but are you using internally in your company?

Guest: Yeah, we've um just because we've we're an engineering forward company, we've we've dug into ML and AI for years. It's been the foundation of our growth.

So when you come on to Hello Alice, we're giving you advice based on your stage of growth, your physical location, your industry and 60 other data points because what your coffee shop in Oklahoma needs is very different than what, you know, a t-shirt manufacturer in New Jersey needs.

So it's really important to use data to do that. I would say ability for AI to crunch that data faster is what's super exciting right now, right? It's speeding everything up. It's allowing us to get more personalization, which is super exciting.

So our team's been hyper focused on the evolution of this for years.

What we are hoping for the small business owner is, you know, if anyone uses chat GPT or any those types of programs, think about how fast you can write a business plan, how fast you can write a marketing plan, your ability to turn out job descriptions.

Um, you know, I think it is a knowledge is power, time is power and it's giving that to the small business owner particularly because it's financially accessible right now.

Host: How do you see the regulatory environment for small business now?

Do you think there should be improvements or because I mean, I don't want to get into politics, but there has been certain deregulation at least on a perspective basis during the last administration and what's the reality ground situation like?

Is it harder to start a new business right now or is it easier? Just in terms of uh, you know, as someone who's first time starting a new business, how does the regulatory environment look like right now?

Guest: Yeah. Um, well the the most important thing that I get frustrated with when any policy makers is the delineation between corporate and small business.

I mean it's like two different worlds, two different languages, two two different geographies.

I mean, what the small business enter needs and is focused on, how they're regulated, how they're taxed, their employment laws and rules should be very different than a larger even medium enterprise to be honest.

What I want to see is policies, regulation, deregualization, taxation that is very focused on Main Street and understands the P&L difference, the hiring differences, the access to services, the cost of goods sold.

So that seems simple but it it surprises me when I'm talking to the Senate or House Small Business Committees or to the administrations when they lump all that together and you know, it's just not.

So, so that's just one thing that's always I'm always preaching. I think that the most important thing to focus on right now in policy is is what are the tax incentives tax tax credits for small business, very, very important.

And then, you know, the cost of goods sold and inflation is just really hurting small businesses right now. If you think about you're you going to the grocery store and how much it costs right now.

Think about a bakery, you know, think about a restaurant, think about any CPG packaging, that's pretty tough right now. And then the third area I would say that we just really need to think about is is again the cost of capital.

So, you know, I would like to see loans and credit be separated for small business and really have a different understanding of if I positive cash flow, you know, I should I think from an open banking statement have much better rates than someone who doesn't, you know, so it's those are all the things I think about a lot and I think our small business centers are thinking finally, I'll just remind everyone how local is so policies really dominate small business.

So, you know, if I have a few minutes in the day to understand policy as a small business center, I'm going to look at my county and state policies before I look at Feds because that's where the rubber hits the road on tax, sales tax, permitting, hiring rules, my access to healthcare.

So local is is really dominant when it comes to policy for small business.

Host: I think one interesting trend that I've noticed is um the because you're operating at this intersection of sort of equity, bringing equity to people who didn't have equity before and it was combined to a three-letter term called DEI. And I think we have seen a lot of negative against the whole DEI as a movement. What are your thoughts on that?

Guest: You know, as a capitalist, I like any programs that are going to ensure that we're hiring the best people, that we're getting money into the hands of job creators.

And I think what has been missed here is that systems have just not caught up to the growing population of small business owners. So, you know, the the by percentage, the most entrepreneurial group in the country right now are black women.

If you look at just pure numbers, Hispanic small business owners are opening at rates that eclipse their their white counterparts.

If we are not getting capital fast enough, whether it's because individuals have lack of credit history, they have lack of access. To me, we are losing out on our economy, we're losing out on job creation.

That's why I like some of these programs is because we're really ensuring that we're looking at the fastest growing populations and getting money into their hands.

So, you can call it anything you want, but you know, if not, I don't think we're true capitalist. We are not really looking at some of the fastest growing job creators in this country.

Host: Because you see so many interesting types of business. Are there like unique businesses that you encountered? Like you would have never thought of and it just like really thriving. Are there any examples like that?

Guest: This is one of my favorite questions because there are some that you'll be like, oh yeah, that's innovative and then you're you're there are others that are like, why didn't I think of that?

So, on the on the innovative side, I'm I'm really think um small business health access is really interesting. I mean, there's a lot of local solutions for elder care, private doctors,ers doctors.

Uh I mean there's just a lot going on in health in the small business space that I think are becoming quite innovative. On the why didn't I think of that? I mean, this is so funny, but there there are things like pet waste.

Like these there's these trucks all over Texas right now where people will come by and scoop your dog's poop at your house.

And you charge them whatever, you never see them and it's one of the, you know, there are things that are just core home services that seem like why didn't I think of that that are just keep evolving that I love as well. So, I don't know.

Small business owners every day just shock me and I I love their ingenuity and problem solving and I just love it.

Host: I think we're almost at the end of our conversation. I I like to ask all my guests certain, you know, questions at the end. So one of the questions I ask is, what are you consuming right now? What are the sources of information that you base your consumption on and that helps you think better? Um what are what are some of the things that you're consuming?

Guest: Um, I would say my three top reads are the New York Times. Uh I love Ink Magazine. And then um Yahoo Finance. I I love the way Yahoo Finance breaks down information. Those are those are my my top three.

Host: And who are the mentors who have your career?

Guest: Oh my goodness, so many. Uh my co-founder is probably my biggest mentor, Carolyn Rods. My grandmother was my my greatest source of wisdom until she passed. Um, I've been lucky to work with people from Michael Dell to Ted Turner who I have a lot of respect for. I'm in YPO, Young Presidents Organization, so my peers I learn the most from. So those are my people.

Host: And what do you know about being a founder that you wish you knew when you were starting off?

Guest: Oh Lord Jesus. You know, I I would tell myself to worry less because it doesn't help. I mean, it's good to be prepared and thoughtful, but worrying just is exhausting and I I don't think it helps. Um, I would say you never you never have enough cash on hand uh is definitely a big one. And then I would say to myself, you are right to have a co-founder.

Host: Um, and finally, what is the advice for someone who's uh starting uh a new small business?

Guest: To do it. You know, you'd be surprised the amount of people that think about it, think about it, think about it, have a business plan and then they just never make that leap and you know, no matter what the situation, I always tell people, make the leap and then you can figure it out.

Host: Thanks Elizabeth. Thanks for coming on the show. Thank you for being candid and honest and this was a great conversation.

Guest: All right.

Host: And I think listeners will also find it really useful.

Guest: All right. Appreciate it. Thanks.

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