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Featured 401(k) Startup Client: Seneca Systems

At Human Interest, we have the opportunity to work with several amazing companies across industries and geographies. We’re incredibly proud of serving employers and employees at companies doing innovative, inspirational things and Seneca Systems is one of them.

There are three sections of this interview with CEO Chris Maddox:

  1. What is Seneca Systems?: An overview of the company, their flagship product, and their customers.
  2. The Seneca Systems Team and Culture: How team values manifest in company decisions.
  3. 401(k) Due Diligence: How Seneca Systems decided on Human Interest for their 401(k).

Introductory information

What is Seneca Systems?

Margarette: Hi, Chris! So you’re the “CEO/Founder” of Seneca Systems. Is that the title that you’d like to use for the interview?

Chris: CEO. I don’t think founders are special people. I mean, they should be as fire-able as anybody else.

Margarette: I understand what you mean -- I think this is going to be a great conversation. Thanks for taking the time to talk with me today. Can you walk me through what Seneca Systems does and why it exists?

Chris: We partner with a lot of major cities across the U.S. (Chicago, Oakland, Miami, Boston, etc.), and we work directly with local government elected officials. They’re called different things like chief of staff, alderman, commissioner, city manager -- it depends on the city. They’re essentially the CEO or COO of a city.

In government, the function is not to create or spend money. It’s to provide constituent services. Constituent satisfaction is the ultimate “dollars and cents” of what local government comes down to. The two main questions that cities have to work on every day are: “How do we engage people when it comes to the issues they care about?” and “Operationally, when people come to us with problems, how do we solve them most effectively?”

We created Romulus to help answer both of these questions. We help local governments keep track of the constituent requests and concerns in a modern way. People will come to us because they want to ensure that they’re providing a high level of service to their constituents. We offer a solution for their day-to-day operational tasks and show them analytics about what people actually care about so that they can identify the most common pain points and identify an impactful solution that can help as many constituents as possible.

Margarette: What’s the system they’re currently using? Telephone logs? Some command-line data entry system?

Chris: Yes, in general, almost everybody that we’ve worked with has previously used Excel, and post-it notes is another very popular option.

Margarette: Oh no. I say this because I’m just imagining hundreds or thousands of detailed requests, all being tracked on post-it notes....

Chris: Well, I guess it makes sense. You have to make do with the tools that you have -- it’s one of the unique things about humans. But it’s a nightmare from a tracking perspective. It usually is a lot of cells in an Excel spreadsheet and the teams try to manage all of the requests this way.

Margarette: How did you tap into a notoriously slow “industry” like local governments?

Chris: Large cities have a particularly great network effect. We generally start out in a given city with cold outreach unless we know somebody who knows somebody And then from there, once we get our first department, the referrals begin. People who work in government tend to be risk averse, but that’s actually a positive thing in terms of referrals because it means that they want to be doing what other people are doing. So that first sale is very difficult, but subsequent sales and referrals are actually much easier and happen much more quickly.

While they don’t want to be the first person to try something new, they do want to be first to be second. This kind of thinking helps us since we front-loaded all the difficult work by getting large key cities on board. Now, when we talk to other people, we say, “Okay, you’re Long Beach, but we already have Chicago and Oakland and Boston, etc.”

Margarette: How do you make sure the referrals happen even once you do get that first point of contact? Because that’s not always guaranteed, especially when there’s bureaucracy to deal with.

Chris: Even though we’re very young, one of the things that our customers really love is that they’ve never experienced a company that constantly builds the things they are asking for so quickly. This is the main advantage of partnering with their team, and it creates a uniquely positive experience for the city.

Here’s Chicago as an example: Chicago has 50 wards cut into 50 different ward districts, and each one has an alderman. Once we got our first alderman on board, they were our first customer in ward 1 and from there it grew 100% month over month for a long time just based on referrals. Ward 1 still demos our product to other wards. We’ll also go over there often and talk to them about the product and ask for feedback. And that means a lot to them.

Margarette: You guys do this very intentionally. I read on your blog about the “F Yes Experience” and how this motivates how you compensate salespeople. Making sure that you create excellent experiences for your early customers is a great, very thoughtful way to grow.

Chris: We have turned down potential customers. These are people who want to use the product, but we told them that they can’t because we didn’t think that we were prepared for them. This is considered very strange and investors still kind of give me a weird look when I say that, but I think it’s important.

For example, we talk to people at the county level. Counties have the same problem that cities do. They also handle a lot of individual requests but the distinction is that theirs are generally not operational issues. They’re not receiving requests like, “Can you fill this pothole?” like the cities do. They’re generally dealing with very policy-based issues: “I want to talk about these particular regulations”, “I want to have a meeting about the zoning department’s policy on landscape easement”. While our product CAN do that, with city elected officials that tends to be maybe 10 to 15% of what people call in about. Our initial product wasn’t a great fit for counties, which we realized through a lot of conversations.

I really worry because I don’t like misleading people, and I don’t want to bring them on board and sell them solely on a vision as opposed to a real product. If this means turning people down in the short term, they respect that more than being led on.

The Seneca Systems Team and Culture

Margarette: Okay, shifting gears to internal operation at Seneca Systems! What’s important to you from a hiring and retention standpoint?

Chris: My cofounder Nick and I put a lot of thought into the way our business is structured. He and I were both (in past lives) philosophers, so we spend a lot of time thinking about those things. I think, generally, we attract the right people. That’s one of the advantages of being in our space. Local government is not a sexy place to be. I can tell you all the reasons why I am super passionate about it, but if you don’t care about it then it’s just never going to click, and I am never going to convince you it’s fun working with the government.

We’re lucky in that, similar to Gusto, where I used to work back when it was called ZenPayroll, nobody would be interested unless they truly cared about small businesses or payroll. That is, until we raised money and then at that point it all went out the window and we got all these people who want to join the rocketship and all that nonsense.

Luckily, we’re at the stage where people only find us because we’re engaged with local governments, and also for being one of the only startups in this space.

Margarette: How do employee benefits decisions get made? What factors do you take into consideration?

Chris: As a company, we're incredibly people focused. Our employee handbook is open source and has some perks not normal for a startup of our size:

  • Minimum vacation time (we require employees to take at least 15 days of paid vacation)
  • Donation matching up to $500/year
  • Transparent compensation and equity on all job offers
  • 401(k)

Our approach to everything, including employee benefits, is “let’s do the right thing”. Even if something seems expensive, we’ll figure out the finances, which should not be hard to do assuming we’re generally doing well as a business.

I care a lot about finances, and I find them very fascinating, but I’m not a stingy person by any stretch of the imagination, especially when it comes something as important as your employees. The best investment you can ever make is in your employees. That’s the whole purpose of a business. I don’t know what a company is without employees. It’s just a shell company.

There are benefits that some startups provide that I think, we generally, will not. For example, dinner. I don’t think we’ll ever provide dinner because I think it’s actually pretty messed up. A lot of companies provide dinner so you will stay late, for dinner and beyond. Even speaking selfishly as a CEO who cares about worker output, I don’t think people are better at their jobs if all they do is work. I think they’re actually worse. You have worse perspective. Work can become too much of your life to the point where you’re willing to take unnecessary risks because your work is such a large part of who you are.

You read a lot about the failure of Enron -- when you see these people doing these shady things, you’re like, “Why the hell would they do this?” And then you realize how much Enron meant to them as a person, how much they identified with that company, and so I think for us, that’s something we’d never encourage.

Generally, as long as a benefit or perk doesn’t create the wrong incentives for our employees, then it’s less about the costs and more about whether the we’re effectively communicating that we value them, which I don’t think is through a Maserati.

Margarette: Also, do you even want the kind of employee for whom a Maserati or free dinner is a dealbreaker? If they said, “I’m not going to take the job if you don’t have that”...

Chris: Right. If they think that the best way we as a company can achieve our goals is spending hundreds of thousands of dollars on buying people cars, then we’re probably not aligned.

401(k) Due Diligence

Margarette: Why did you guys start looking into 401(k)s?

Chris: People were asking about it, but I didn’t even think it was even possible. I knew that we weren’t large enough to merit a conversation with someone big like Fidelity, but it was something that some of our employees had asked us about and I said yes, we can find a way to do it. It seemed like a good thing for us to support as a company.

Margarette: What advice do you have for other small companies who are looking into their 401(k) options?

Chris: Two things:

  1. 401(k)s are typically only available to big companies. However, I think SMBs can now attract better talent and support the long term goals of their younger employees, given that more affordable companies like Human Interest exist.
  2. 401(k)s are better than cash because they solve every employee's general need (long term financial investment) with a solution tailored to them (diversified, managed investment). Retirement accounts are a great habit to get into, and the laws of compound interest mean starting early is a huge win.

Margarette: Why did you choose Human Interest?

Chris: I assumed that there would be 401(k) pricing models where employers could offload all of the costs of the 401(k) onto employees. This is not what I wanted to do, and Human Interest’s pricing model seemed much more fair.

Just from a personal investment standpoint, I believe that the purpose of a 401(k) is long-term investment, and the best long-term investment strategies you can have are the lowest fees as possible and investing in a well diversified set of ETFs. One of my main goals was to make it really easy and affordable for our employees.

It should be extraordinarily low cost for the employees because they shouldn’t be trying to play the market or gamble with this money. If they want to do that, that’s fine, but that’s not a 401(k). I understood that Human Interest was relatively young so at that point it was more, “Do I trust these people to grow in the right direction and are their incentives the same as my incentives as a CEO wanting to buy a 401(k) product for my employees?” And the answer was yes.

Margarette: How much time do you now spend thinking about 401(k)s on a weekly or monthly basis?

Chris: Zero. That’s exactly what mattered a lot to me. As the CEO of a very small company, I have so many responsibilities and random things that pull my energy away. Reducing those as much as possible is important to me. I actually just streamlined my wardrobe, if you can believe it, so that I don’t have to think about what I wear. I decided, “Okay, I’m going to go Uniqlo and get some stuff so I grab any pair of jeans and a tshirt every day, because I just don’t want to think about this.”

We’re not special or unique in any sense of the imagination when it comes to payroll and our 401(k) needs. We don’t do anything that any other small company doesn’t do, so I just wanted a simple 401(k) solution that I wouldn’t have to monitor all the time. If it doesn’t feel like my involvement is really adding any value, then it’s just subtracting from my life. So I’m glad you guys just handle everything.

Margarette: If Captain 401 didn’t exist, what would you guys be using right now?

Chris: I have no idea. We probably wouldn’t have a 401(k). That would actually be my guess, that it wouldn’t be economical for us to do it. I think it probably wouldn’t be worth the time and energy and funds to pay to have to manage it, at this stage without somebody who just manages HR and knows about this stuff.

I think you guys do a good job. Our employees feel comfortable just talking to your team about how the 401(k) stuff works, and there are some people who worked in finance previously and they might have some weird questions, but I think even for them, just knowing that there are people on the other side who care about their experience is important. We’re a mission-driven company, and it matters to us that all the companies or partners that we’ve worked with care about the space that they’re in a lot, which is maybe stupid and limiting and a first world desire, but it is something our employees care about.

Margarette: We do indeed care a lot about 401(k)s and access to financial literacy, so I’m glad that’s something your employees look for in a vendor. Thank you for your time, Chris!

More client profiles from Human Interest: Featured Nonprofit 401(k) Client: ProUnitas