When You Grow Too Fast

From Gimlet, this is The Pitch. I’m Josh Muccio.

A little over a year ago, we had a founder on the show, Xiao Wang. Who said his startup, Boundless, was going to help immigrants… with all the confusing paperwork they need to get legal status. It’s a subject that Xiao is close to, being an immigrant himself. And it’s something he believed could be a huge business.

Well, since Xiao's pitch, the stakes around immigration have only gotten higher. So we wanted to see how Boundless is faring in this new world.

Today we’re going to play you a lightly edited version of Xiao’s original pitch. And then, in the second half of the show, we’ll talk to him about where Boundless is today.

Xiao: Good morning. I'm Xiao.

Michael: Hey. Michael.

Daniel: Hey. Daniel.

In the pitch room today is founder Xiao Wang. He’s here asking for $3 million for his startup, Boundless. Which is tackling a pretty hot-button topic, immigration. 

Not only is the issue politically charged, the immigration process is notoriously complicated. Something Xiao knows all too well — because he’s been through it. But wanting to solve a problem is one thing — building a solid business around solving that problem is something entirely different.  

Here’s who he needs to convince: 

I’m Daniel Gulati 

Daniel is a serial entrepreneur turned VC with Comcast Ventures,

I’m Jillian Manus

Jillian is a partner at Structure Capital and an angel investor on the side.

I’m Phil Nadel

Phil is managing partner of Forefront Venture Partners with over two decades of investment experience.

I’m Michael Hyatt and I invest my own money.

Michael built and sold two Canadian companies, and now he invests for himself.

All right, let’s see how Xiao does…

Xiao:  All right. Good morning everyone. My name is Xiao Wang and I'm the co-founder and CEO of Boundless. In 1989, I came over to this country with my parents from China. And when we first came over, we spent almost five months of rent money on an immigration lawyer because the stakes were so high and we had no idea if we were doing it right. In the 30 years since I went through this journey, the only thing that's changed in this industry are that legal fees have gone up, and there are 10 times as many immigration lawyers in this country. And about a year and a half ago, I started asking a question of why?

Once Xiao began to dig into this question of why, he found the problem was even more complex than he could imagine. He spoke to hundreds of families with difficult immigration stories that echoed his own experiences. And then he interviewed hundreds of immigration lawyers and policy experts. He realized this process was one bogged down with convoluted legal code, opaque decision making, and endless bureaucracy. And that’s when he decided, he had to do something.

Xiao: And so I felt so compelled that I had to create Boundless to be the first trusted and positive brand in an industry that hasn't changed in generations. So I'm looking for $3 million and the right partners who want to dramatically improve the lives of millions of families accelerating our growth trajectory, and actually winning an industry.

Daniel: That's great. Can you maybe give us a sense of the actual product? The solution?

Xiao: Yeah. So what we do is, we are the first trusted partner for people, as I said, for people through the entire process So on our application, through our website, they can get all their information, upload all their appropriate documents, in an exceptionally short amount of time. Afterwards, they actually have an independent lawyer who reviews this information.

All right, so the way Boundless works is instead of meeting with an immigration lawyer and then manually filling out all these forms, a would-be immigrant logs into the Boundless website, fills out the immigration application, and the system takes it from there - automatically populating all these government forms, and then an independent lawyer looks it all over, and that package gets submitted to the powers that be.

In short, it’s like TurboTax for immigration.

Xiao: Our first product is marriage green cards. So you are a U.S. citizen or green card holder, and you fall in love with someone who's not, and you either want to bring them to the country or keep them in the country. And so we complete the G-11-45, the I-45, I8-64, I8-130, I7-65 and I1-31. 

So if you actually know what all those forms are, you’re probably an immigration lawyer. But if you’re like the rest of us, you have no clue. And that’s the point of Boundless. It streamlines immigration applications and allows clients to complete in 3-6 weeks, a process that normally takes 3-6 months.

In this case, Xiao is showing investors how Boundless helps simplify marriage green card applications.

Phil: You said this is your first product? Is this the only product so far?

Xiao: This is the only product so far.

Daniel: How do the categories kind of play out? Like marriage green card, what is that as a percent of the market?

Xiao: So there are 400,000 marriage green card applications a year. We charge a $500 fee for our service. So that means, this is a $200 million market, which is interesting, but not huge. And the reason why I love this market to start, is because of three, three primary factors. One is there's no artificial cap or delay. This is the fastest uhh this is the fastest process. So on average, it takes seven to 13 months. I'm really excited because last week we had two people actually get their green cards already. So we can actually show success much quicker.

Phil: And how many have you had? How many customers have you had on this product so far?

Xiao: So we've had a little over 150, since we launched in September. So we've been growing 50% month over month in terms of number of customers.

Jillian: At a $500 fee?

Xiao: At $500.

Michael: Can you stop for a second and talk about the actual math and the business here? Talk to us about this $500. What's the gross margin here? How does this scale to be a really big business? I mean, the numbers you've put forward so far don't seem to indicate that this is an investable big business. It's great what you're doing, but I'm trying to find a reason to invest.

Xiao: Yeah, so… right now, what we're on track to be able to do is to get our customer acquisition cost down to about $125. And then the legal review, it's going to be under one hour, and we're paying our outside counsel $40-50 an hour.

Jillian: So but what is it now? What is your cost of acquisition right now? 

Phil: And the numbers as of now, in other words. Not what you're aiming for.

Xiao: So as of now, so out of $500, our customer acquisition cost is a little over $400.

Jillian: $400 dollars?

And that’s only marketing costs, that’s before paying lawyers or salaries or any overhead.

Michael: At $500, you're not even close to making any kind of profit on an individual basis, right? So you might be charging 500 and it's costing you 700 right now. 800?

Xiao: Yeah, I would say that it's, that's about right. 

Jillian: Why 500 then? Why not at least cover your basic costs? Because it would cost so much more for any of these applicants to hire a lawyer. I mean, 500 an hour. So I think that perhaps you're not pricing it as…

Phil: Let's hear. How did you come up with the $500 price point?

Xiao: So when I first started, before I built the product, I created a separate company that was just pitching the set of value props, and the set of services at different price points. And the $500 point was where it was the highest price that I was setting with the level of interest that we have. But I want to maybe take a step back here and talk about this not as a business model unit economics story for today, as opposed to where I want to go.

Xiao: I'm trying to build the world's largest data set of immigrants that no one else has. And to do that, we're focused on like how do we acquire customers? And how do we delight the shit out of them? And then after that, then is when we can start bringing in all of these other products, because they already trust us and they already come to us on a regular basis for information.

Phil: Did you say delight the shit out of them?

Xiao: Yeah.

Phil: Okay. Just checking.

Michael: Have you increased the price ever?

Xiao: From $500? We have not yet. So we haven't done any experiments on the price side. But I wanna say this is what is exciting about. We do the first green card right now. In two years, they have to go from a conditional to a permanent green card. Which is another transaction. And then a year after that, they can do naturalization, which is another transaction. There's no reason they would go to anyone else for their future applications because they have to start from scratch again.

Xiao’s pushing the investors to look beyond today’s numbers, past high costs and low profits, to where he’s focused: the future. One with return customers, data plays, and new products. But the key word here is ‘future,’ and it’s not clear how he plans to get from here to there.

Daniel: What's the thesis around the raise? Like why raise now? And kind of why dilute yourself more?

Xiao: The the is, you know why I think it's a very timely moment in this industry, where if the net goal is that I'm going to be the brand in immigration, right, so I want to own the entire space. And I want at every community potluck, piano recital, like wherever people are, and immigrants gather in very tight-knit communities, and they always talk about immigration, I always want Boundless to be in that conversation. And to get there, this moment right now where people are green card holders, are being deported, and being rescinded, and the administration is expanding the definition of who no longer qualifies for a green card or can lose their green card, there's a huge amount of anxiety and uptick. Naturalization applications are up 30%. People really want to move forward in this process. There are 9 million people who are eligible to naturalize and don't. And when they did a nationwide survey they found that over 60% was because they had no information about how to naturalize. And that's like exactly what we do.

It’s decision time.

Has Xiao convinced investors to set aside their concerns about his numbers and focus instead on his larger vision?

Michael’s up first. 

Michael: So I like you. I think you're very smart. You've done a lot of very smart things. You're passionate. You're thoughtful. So in that bucket, I check that off. In the market, it's super interesting. I mean, this is a big, big issue. I guess my, when I step back and I look at this, I don't think your business is actually that investible right now. I wanted you to come here today, at the stage you're at, and the amount you're asking for, is to say, listen, this is what we worked out, this is how much money, this is how we're going to get to a bigger bottom line. I was expecting you to really lay out ancillary services and actually lay out some more math to your business. You haven't come here and said, I'm bringing something to the table that's awesome and new. I like the idea that you're going to play with data; that's smart. But I really haven't seen anything that sets you apart. So for those reasons, I'm passing. But I wish you the best.

Xiao: Thank you.

Michael is out. Here’s Daniel.

Daniel: So I think, you know, as I step back, you seem like a really thoughtful founder, sort of the exact type of founder that we like to back. You're kind of innovating, in what I consider to be, what obviously I think is a pretty broken industry. But one that's really big. So I would like to invest. But overall, I think you're a tier-one founder, operating in a pretty interesting space, with the opportunity to build a really big business. So I would love to back you.

Phil: I couldn't agree more with everything Daniel said. In fact, I just think your approach to this is very smart, very well thought out. You're right in that this is a relationship business, and I see, normally I focus on KPIs today. But I see huge opportunities for lifetime LTV in this, both through additional immigration services and wraparound services and other things that you can do with the data. It's a data play. And there's a lot of value there. And it's a data play, but it's also a relationship play right? The relationships that you're building with these folks can lead to a lot. I really have a great feeling about you. And I just like your approach. And I'd like to invest.

Xiao: Sounds great. Really appreciate it.

With both Daniel and Phil in! The last up is Jillian.

Jillian: I put this in the category of one of this country's dumbest problems. You know, immigration. It's kind of a shameful, it's a shame on you, that we have a country that was built on immigrants, and the intellectual capacity, the emotional capacity to invest everything that they have in this country to build it to where it is today, to one of the greatest countries. So on a high level, I'm very excited about this in terms of your mission. In terms of you, you can't get a more crackerjack umm founder. With your background, with your intent, with your self awareness, umm, I love this. And for all the reasons. And umm I deeply respect you. Umm I do want to come in and I want to help you get this done And I would be honored, actually, to invest in a company that would create an easier path to fortify the foundations of this country, with immigrants not without immigrants. 

Xiao: I'd be honored to go down this path with you.

Jillian: Fantastic.

Daniel: Awesome. Thanks for coming in.

Phil: Great job.

Jillian: Thank you so very much.

Xiao leaves the room having reeled in 3 out of 4 investors on a business that’s yet to be proven, but feels like it could be a big opportunity.

Back in the pitch room, the investors debrief and things get a little testy.

Phil: Wow. Impressive guy.

Jillian: If you take apart a founder, and you take apart a product, at the very early stages, he checks every single box and then some. 

Daniel: I also think it's just an ugly market. 

Jillian: It is.

Daniel: And it's just a really, it's just a nasty space.

Phil: Cumbersome and confusing.

Michael: You know what, I listen to you guys, you guys are all very smart. I listen to it, and listen maybe it's because I'm coming a different perspective. But listen, here.

Jillian: Maybe it's because you're Canadian and you don't have that knee jerk reaction we have.

Michael: No, I get it. No, I understand the politics of it and I understand. But maybe I looked a little more unemotionally. I'm not caught up in the moment of the passion of the immigration. I mean, you know I'm an immigrant. I get it. But look, let me tell you, I want someone to come on in here and understand how to build a big company, how to build big revenue and understand it. I don't necessarily agree with this idea that here's a bunch of a million bucks, I know in the Valley we do this a lot, here's a whole bunch of money, and you know, you're a great guy, you're going to go figure it out.

Jillian: No, that's really under.

Michael: Hold on, let me finish. So… so I don't back companies based on this idea that you're going to get a lot of money and then hopefully because you're a good guy you're going to figure it out.

Jillian: Nor do we!

Michael: Well, kind of.

Jillian: Not at all!

Michael: And so I kind of expected at the next 3 million bucks, because he's raised 3.5, he'd come in here with a bit more - this is just me. I would have liked him to come in here, and a little more structure on how he's going to grow this business to be a big revenue business. I'm old school. I like things called revenue. I like things called gross margins. I like a way to a bottom line. It's going to take some time. Call me crazy.

Jillian: No, no wait. We understand that. But this is, actually the follow up on this is that we drill down into the business, and the unit economics. We actually drill down into the projections and there is a lot more conversation.

Michael: Yeah, and I'm not sure what you can drill down on, because what he came in here with is he doesn't have anything to drill down on.

Jillian: I disagree.

Phil: But to your point.

Daniel: I think you're saying he's not there yet. Which I agree. But I think he did lay out that exact path.

Jillian: If he was there yet he wouldn't need our 3 million.

Michael: Well, I will listen to the epilogue and the rest of this podcast.

Phil: And Michael, normally I'm in your boat when it comes to. Normally, I want to see the metrics today. Today. And where are you going with it.

Michael: No, I didn't want to see the metrics today. I get that he's early. I wanted him to tell me, hey, this is the waterfall. And he's just like spinning.

Daniel: But I thought that was the whole presentation.

Michael: I get, you know, in America, we're getting caught up in the immigration thing, getting caught up with passion, but I'm not getting caught up in that emotion. What I'm getting caught up in is that I want to know.

Jillian: He did! But he did! That was the whole presentation.

Michael: Listen. And this is a service business. This is not a SAAS company.

Daniel: Today. You're investing in.

Michael: Did you hear AI? Did you hear blockchain? Did you hear things that are going to make this more efficient?

Daniel: No. Because I think he's got, he's solving a real problem.

Michael: He's going to be a service company that's technology enabled.

Daniel: And he's got a clear path to expanded LTV. 

Michael: I think this is a great service business.

Daniel: Today. Today. It's a shitty service business today.

Michael: I think it has potential to be a good service business. But I don't see anything stunning about it.

Phil: Let’s take a break. Agree to disagree.

Jillian: Agree to disagree.

Yes, let’s all take a break. 

When we come back, a year has passed. And we find out how Boundless is doing in today’s heated immigration climate.

[BREAK]

Welcome back to the show!

Not long after he pitched our investors, Xiao closed his $3 million round. Despite the fact that Daniel and Jillian bailed. Daniel wanted a bigger chunk of the company than Xiao could offer. And the valuation ended up being too high for Jillian. But Phil, he invested almost $350K.

In the meantime, Boundless was getting a few more customers. Xiao told producer Heather Rogers that, at that point, they were flying by the seat of their pants.

Xiao: We had this idea we really haven't even you know yet fully fleshed it out yet. And because our like quantity was so low, we were all just watching as people went through our website. Right. You could tell everything that they did. And we're just sort of like almost like cheering them on as they like continue to the point where we were actively fixing bugs as they're going through it. And you're like oh like they'll be on chat and something isn’t working and be like just, just refresh the page. And then you know at that point like the, the fix had gone out. 

Those wild early days eventually led to some pretty wild growth.

Xiao: We have dramatically increased our number of customers to the point where we are now five to six times larger than we were in the span of a year.

Heather: That's a lot.

Xiao: Yeah, so it's incredibly exciting and rewarding when you see things start to work and then pick up momentum to the point where we have hundreds of thousands of people coming through.

Some of that growth came because early customers had gotten their green cards so they started referring their friends and family. Which opened the floodgates and brought in a bunch of new customers, which caught Boundless off guard. They were still operating with a skeleton crew and then...

Xiao: When the spike happened we weren't able to respond to it quickly enough and there were some customers that ended up waiting a little, like longer than we would have liked to be able to complete their application accurately.

Heather: How did you realize that was happening?

Xiao: Yeah it's really hard. umm I, I got. I got some of the most difficult emails and phone calls of my career. So we had a customer that had an important business meeting outside of the country.

To get to his meeting, the man told Boundless that he needed his green card by a specific date. But that request fell through the cracks.

Xiao: And all of a sudden he called me and we said that look I had this critical thing for my career and because of your process I may not be able to make it. 

And it was one of those like sort of gut sinking moments where you're like oh wow like, like this person just like all of our customers, trusted their, something that's that's critical to their life, into our hands.  We could potentially have a huge negative impact in their life. And that was really painful. 

Heather: What did you say to him on the call?

Xiao: So you I mean I started with apologizing after I understood the situation. We found an immigration lawyer and worked overnight the entire night to put together a petition a specific petition for his instance that he could then hand deliver to the consulate the next morning, in the way that we could give him the chance at least of making it through this process.

Heather: And what happened for him?

Xiao: So I'm happy to report that he was able to get both the travel permit in time for his meeting. And then also successfully received his green card earlier this year.

At the root of the problem here was that Boundless just didn’t have enough employees to deal with demand. Xiao and the other co-founders started working nights and weekends to pick up the slack.

And then when they finally hired enough people. In January of 2019, Boundless introduced its second product. To help people with green cards take the next step and become naturalized citizens. 

Xiao: There are nine million people who could naturalize but don't. And so the idea is that if we can make it clear what they need to do and walk them through and make them feel confident that they'll go through. We can both address this large proportion of people who are going to naturalize but also also be able to to to increase the percentage of people who naturalize.

All right, so that brings us to today. Boundless is growing like gangbusters. They’ve logged 2,000 customers in the last year. And, according to Xiao, everyone who’s gone through Boundless has gotten their green card. So the thing Xiao built is apparently working.

All of that sounds really good. But there’s an elephant in the room… Last we heard, the investors worried that Xiao wasn’t charging enough to make a profit. He told us that he did end up raising his prices though, from $500 to $750. So we wondered, if that was enough to make the business profitable.

Heather: Are your profit margins higher?

Xiao: Yeah. I mean if you wanna be blunt.

Heather: OK. Let’s be blunt.

Xiao:  I can be blunt and say look we are we are not. We are losing money per customer and that's OK. And because we are, we believe that if they have a great experience that they will come back to us for future immigration needs. This is not a one-shot deal. And if they felt like they had an incredibly positive experience with us then they’ll continue to come back to us for more services and more products down the line.

Heather:  Uh-huh. Basically you’re spending more to provide the service than maybe some people would think you should. But what you’re saying is that there’s a big upfront investment but that it’ll pay off over time.

Xiao: That’s correct.

And the thing is, at this point, there’s no shortage of immigrants who need help. There are tighter controls on who can come into the country and a lot of really ugly rhetoric. 

Heather: A lot has changed since you came on the show with immigration politics and policy in the United States. Has that changed things for you and for Boundless?

Xiao: Definitely. I think it's amped up the urgency. Like the overall dynamic in immigration hasn't been this bad for, for decades. The government now has far more leeway to both request more evidence from families who are applying for immigration as well as deny applications that are incomplete or missing documents. And so for our families they are understandably more fearful of what is going to happen with their process and with the  future of their lives in this country. And for us, we're in the situation right now where the importance of getting these applications done you know completely and accurately in the right way the first time has never been higher.

The stakes drive Xiao to grow Boundless as fast as he can. So he’s kept fundraising. In April of 2019, he raised a new round, their series A.

Heather: How much did you raise in your Series A?

Xiao: We raised a little under $8 million.

Heather: How do you feel about that?

Xiao: Whenever you raise money as an entrepreneur you get a flood of sort of congratulatory emails. And they always obviously feel good on end. But on the other side it just really means that like there's just more work to do. But what the money gives us is a chance to do it. It basically allows us the ability to take bigger risks and do bigger projects to help even more people.

So far, Boundless is one of the rising stars from our show. Raising a total of 11 million bucks from investors is no small task. And I think investors are betting on him because he cares so deeply about immigration and immigrants. There are plenty of passionate founders who say, “We’re making the world a better place!” But in this case, it might actually be true.

Now they just need to turn a profit. 

Our show is hosted by me, Josh Muccio. Produced by Heather Rogers, Kareem Maddox and Molly Donahue. We are edited by Blythe Terrell and Sara Sarasohn. With additional help on this episode from Devon Taylor.

Theme music by The Muse Maker. Original compositions from Breakmaster Cylinder, Bobby Lord and The Muse Maker. We are mixed by Enoch Kim. 

Lisa Muccio planned the recording of this pitch.

And here’s a quick reminder, no offer to invest is being made to or solicited from the listening audience on today’s show.

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