Making It with Jon Davids – Episode 179: "I Built The First Fintech Company Ever. Here's How." | Brian Hamilton
Release Date: March 21, 2025
Host: Jon Davids
Guest: Brian Hamilton, Chairman of LiveSwitch and Founder of Sageworks
Introduction
In Episode 179 of "Making It with Jon Davids," host Jon Davids engages in an in-depth conversation with Brian Hamilton, an accomplished entrepreneur and investor. Brian shares his journey from founding the first fintech company in America, Sageworks, to leading LiveSwitch, a video communication platform. The discussion delves into the intricacies of building a business from the ground up, the challenges of entrepreneurship, and the importance of mindset and integrity in achieving success.
Founding Sageworks: The Birth of Fintech
Brian Hamilton recounts the inception of Sageworks, pioneering the fintech landscape in America.
Key Points:
- Early Inspiration: While teaching a financial statements course at Duke University in 1992, Brian noticed the lack of tools to help business owners understand their financial data.
- Meeting Sarah Torville: A conversation with Sarah, a database developer, led to the collaboration that would become Sageworks.
- Developing an Expert System: Sageworks created an early AI-driven expert system to translate complex financial numbers into plain language, making financial analysis accessible.
Notable Quote:
“We developed an expert system to convert financial numbers into words. Because of the volume of data, there’s a lot of data, you know, we couldn’t just do floppy disks in the day. This is 1998, and I’m pretty sure we were the first company to execute a financial program over the Internet.”
— Brian Hamilton [02:00]
Building the Product: Profit Sense
Brian explains the technical and strategic efforts involved in creating Sageworks’ flagship product, Profit Sense.
Key Points:
- Algorithm Complexity: The system combined multiple algorithms to provide comprehensive financial insights.
- User-Friendly Reports: Profit Sense generated clear, actionable reports tailored to various business types and needs.
- Patent and Legacy: The unique approach was patented, and the system remains in use worldwide under the original algorithms.
Notable Quote:
“It was really truly early AI, and it was based upon a lot of algorithms. Not just one formula at a time, but combining all these formulas together.”
— Brian Hamilton [05:16]
Initial Growth and Challenges
Sageworks experienced rapid growth but also faced significant challenges as the business scaled.
Key Points:
- First Major Contract: Securing a licensing deal with Citibank was a pivotal moment, validating the product’s value.
- Expansion to Other Giants: Contracts with Intuit and Wells Fargo followed, but aligning the product with these companies’ core needs proved difficult.
- Pivoting Strategy: Realizing that large banks didn’t fully leverage the financial analysis capabilities, Brian and his team pivoted focus to small accounting firms, which became the core customer base.
Notable Quote:
“Citibank is a bank, and they loan money... their core business, no matter what they say, is not doing financial analysis. And that's another eureka moment.”
— Brian Hamilton [12:11]
Lessons in Entrepreneurship: Honesty and Self-Awareness
The conversation shifts to the critical mindset required for successful entrepreneurship.
Key Points:
- Listening to the Inner Voice: Brian emphasizes the importance of being honest with oneself about the viability of business directions.
- Pivoting Based on Data: Successful entrepreneurs must be willing to pivot and adapt based on customer feedback and market data.
- Authenticity in Business Practices: Maintaining integrity and transparency fosters long-term success and credibility.
Notable Quote:
“If you cannot quickly integrate data and pivot, you can't usually survive as an entrepreneur.”
— Brian Hamilton [14:40]
Inmates to Entrepreneurs: Empowering Through Business
Brian shares his passion project, Inmates to Entrepreneurs, aimed at helping former inmates start their own businesses.
Key Points:
- Origins: Inspired by interactions with inmates during prison ministry work, Brian recognized the challenges faced by former inmates in securing employment.
- Program Structure: The initiative teaches basic business skills, enabling individuals to start small service-based businesses with minimal initial investment.
- Impact: The program has successfully guided approximately one million individuals across multiple states and countries, providing meaningful employment and reducing recidivism.
Notable Quote:
“Instead of getting a job, let's help these people start small service-based businesses for under 500 bucks.”
— Brian Hamilton [31:00]
Transition to LiveSwitch: Embracing Video Communication
After decades in fintech, Brian transitioned to the video communication sector with LiveSwitch.
Key Points:
- Motivation for Change: Feeling disconnected from his mission while serving large financial institutions, Brian sought a more impactful and engaging venture.
- LiveSwitch Overview: LiveSwitch focuses on video and platform communication, enabling small businesses to utilize video for various applications such as estimates and work documentation.
- Vision: Brian aims to make LiveSwitch a ubiquitous tool for small businesses worldwide, enhancing their efficiency and competitiveness.
Notable Quote:
“I think the potential to bring people together through the whole world through video technology is so great. There's so many things we can do.”
— Brian Hamilton [28:16]
Views on Venture Capital and Maintaining Control
A significant portion of the discussion addresses the pitfalls of venture capital and the importance of maintaining control over one’s business.
Key Points:
- Equity as Debt: Brian argues that equity financing should not be seen as a free resource, as it comes with obligations and loss of control.
- Autonomy Over Growth: Maintaining ownership allows entrepreneurs to steer their businesses according to their vision without external interference.
- Critique of VC Influence: Venture capitalists often prioritize their interests, which can conflict with the entrepreneur’s mission and operational style.
Notable Quote:
“Equity is debt. Stop thinking of equity as a free lunch.”
— Brian Hamilton [41:28]
Essential Business Metrics for Success
Brian highlights the critical financial metrics that entrepreneurs should monitor to ensure business health.
Key Points:
- Sales Growth: Continuous increase in sales indicates market acceptance and business expansion.
- Gross Margin: The difference between sales and direct costs should be healthy to cover expenses and generate profit.
- Net Profit Margin: Positive net margins reflect overall profitability after accounting for all expenses.
- Cash Management: Maintaining sufficient cash reserves is crucial for operational stability and managing unforeseen expenses.
Notable Quote:
“If you've got sales going up and your net margins good, your gross margin is good, and you got cash in your bank, you're in good shape.”
— Brian Hamilton [46:25]
Future Outlook and Final Insights
Brian concludes with his vision for LiveSwitch and broader insights into entrepreneurship.
Key Points:
- Strategic Goals for LiveSwitch: Focus on developing user-friendly video applications to empower small businesses globally.
- Sustainability Over Exit: Brian prioritizes sustainable growth and mission fulfillment over quick exits through acquisitions.
- Entrepreneurial Impact: Emphasizing that small businesses, though individually small, collectively drive significant societal progress and innovation.
Notable Quote:
“Our goal is to get our platform to every small business in the world to help them compete.”
— Brian Hamilton [40:30]
Conclusion
Brian Hamilton’s journey from founding the first fintech company to leading a video communication platform underscores the dynamic nature of entrepreneurship. His experiences highlight the importance of adaptability, integrity, and a relentless focus on mission-driven goals. For aspiring entrepreneurs, Brian’s insights offer valuable lessons on building resilient businesses that not only thrive financially but also make meaningful contributions to society.
Notable Quotes with Timestamps:
- Brian Hamilton [02:00]: “We developed an expert system to convert financial numbers into words... the first company to execute a financial program over the Internet.”
- Brian Hamilton [05:16]: “It was really truly early AI, and it was based upon a lot of algorithms...”
- Brian Hamilton [12:11]: “Citibank is a bank, and they loan money... their core business, no matter what they say, is not doing financial analysis.”
- Brian Hamilton [14:40]: “If you cannot quickly integrate data and pivot, you can't usually survive as an entrepreneur.”
- Brian Hamilton [31:00]: “Instead of getting a job, let's help these people start small service-based businesses for under 500 bucks.”
- Brian Hamilton [28:16]: “I think the potential to bring people together through the whole world through video technology is so great.”
- Brian Hamilton [41:28]: “Equity is debt. Stop thinking of equity as a free lunch.”
- Brian Hamilton [46:25]: “If you've got sales going up and your net margins good, your gross margin is good, and you got cash in your bank, you're in good shape.”
- Brian Hamilton [40:30]: “Our goal is to get our platform to every small business in the world to help them compete.”
This comprehensive summary captures the essence of Brian Hamilton’s entrepreneurial journey, the strategic decisions behind Sageworks and LiveSwitch, and the invaluable lessons shared with aspiring business owners. By focusing on authenticity, adaptability, and mission-driven growth, Brian exemplifies the traits that drive successful entrepreneurship.