ChargeAfter Revenue, Valuation & Funding (2024)

[00:00] Hey, folks. My guest today is Meidad Sharon. He's the CEO and founder of the award winning retail finance SaaS network platform, ChargeAfter, the first global network to provide a complete solution to point of sale financing from multiple lenders. Over fifteen years of experience he has over fifteen years of experience scaling global payments and SaaS businesses with a people and customer first approach. Meidad, you ready to take us to the top? [00:20] >> Sure. Sure. [00:21] All right. Fifteen years, man. You're an OG. What was the first SaaS company you were working on? [00:27] >> I actually started in mobile space in the time that mobile was developing all the value added services and starting to have the internet on, moved from there to the payment space and from the payment space, this was a natural development in the BNPL and point of sale financing space. [00:46] So just describe for people that are not familiar with buy now pay later, maybe they've never heard of like Affirm or these sorts of businesses, what is buy now pay later? [00:54] >> Yeah, so buy now pay later is basically the ability to split a payment to purchase to several payments, typically between four to six, but there are many other types of buy now pay later that allows the consumer to split the payments of the purchase to up to three years in many cases. This is a very developed, very growing trend where consumers can instead of paying now, they can pay later and split their purchase. It's a new [01:27] >> form of credit, would say. [01:29] So most folks listening guys, if you have bought maybe a Tesla or a Purple mattress. You may have saw pay with Affirm under the checkout page or something like that. This is the space you're playing in. So, Meidad, will consumers buying that mattress with a Tesla ever know about you or are you working behind the scenes with Tesla directly or with the mattress provider directly? [01:49] >> So we are working behind the scenes. Our platform and network is enabling the merchants to have their solution. Usually we are allowing the merchants to white label it, we are working with Lenovo as an example. If you go to Lenovo website, you will see Lenovo financing. It is powered by ChargeAfter and we are allowing them to offer this to their consumers. [02:10] You saw you said Lenovo, the computer company, Computer gaming PCs? [02:14] >> Exactly. [02:15] Yeah. So I so I see this actually right now. Lenovo financing, if you guys just Google it, there's basically a big prequalification button. You're basically enabling Lenovo to take this in house, not have to rely on Affirm or one of these other tools that do it. [02:28] >> We enable Lenovo to have this in house in the sense that they are utilizing our platform to connect to multiple players like Affirm. Okay? That would enable their consumers to have much better coverage than having only one player. The pain point that ChargeAfter is solving is that there are many BNPL lenders out there, each one of those lenders is focusing on a specific financial product, it can be pay in four, it can be long term installments, [03:01] >> it can be revolving line of credit or even a leasing product, but each one is different and each consumer would prefer a different product. Each lender is also focusing on specific credit segment, it might be prime, near prime or subprime, which means that they will approve only 30% of the consumers or in other words decline 70% of the consumers and each lender is focusing on specific geography. But the merchants from their side, they are looking to [03:28] >> have a solution that would cover all their consumers and they want to have this flexibility and the consumer from their side, they are looking first to be approved, right? [03:40] >> The consumer experience of being declined in 70% of the cases is not positive. So first they are looking to be approved and second, they don't want necessarily to have only one option, they want the option that has the best fit for them that they can choose from. And by having multiple lenders on ChargeAfter platform and network, we are enabling the merchants to have full coverage, best conversion rates, best approval rates and the consumer, we are almost [04:06] >> bidding on their behalf between the different lenders. Because Affirm as an example, they're a great lender or really they're a great company, but they have a very specific product to a very specific [04:18] >> credit box in The US, right? They don't cover other countries, they don't cover near prime or subprime, they don't cover revolving line of credit. [04:28] Understood. Oh, what's going on there YouTube? Good to see you guys. Now imagine this, you love watching these interviews with SaaS founders, but imagine if we took all of the valuation data out from over 2,807 interviews I've done manually. Saves you a lot of time. Well, we've done this. We've built it into the beautiful interface inside of Founderpath. Check this out. I'll show you how you can access this in a second. But you log in, you [04:53] connect your Stripe account, you see your valuation real time. You can see what it changed over the past eighty eight days and even set goals for valuation this year. Now the secret evaluation is there's many different ways to value a SaaS business. So the reason you're gonna see three or four different valuations inside of your Founderpath dashboard, this is all free by the way, is because depending on who's doing the buying of your SaaS company, you're [05:17] gonna get a different valuation. A VC is gonna pay a different valuation, Private equity firm is different. If you're gonna do a minority sale, that's different. And if you sell the whole business, that's a different valuation. You can see all those when I hover over here. Right? So the teal is what a VC would pay. Yellow is what private equity and red is if you sold the whole thing outright. Now what's cool about this is this [05:39] is not built off random data. Again, you guys hear these interviews on YouTube. All these datas are built from real time valuation data points founder share with us on the show. So traction 1,200,000 seed round 3.7 raise. They sold 22% of their business. Go in here and filter by the event. Maybe you only wanna see companies that have sold the whole business. Well, here are a bunch that have been acquired the valuation and the multiple. Maybe [06:05] you're going out right now and you're raising your seed round. We'll go in here and look at all this recent seed deals that went down, what they raised, what valuation they raised at, and what percent that they sold. There's never been a larger dataset of SaaS valuations than what you can get now inside of Founderpath. And we're thrilled to bring it to you. All right. We're gonna go back to the YouTube video here in a second. [06:27] But if you wanna check this tool out, if you wanna jump in and sign up, you can check it out for free to get your valuation at this link, this link, founderpath.com/products/valuations. Or if you go to founderpath.com and hover over products, click on get your valuation here, and go ahead and sign up to give it a whirl. Again, all that valuation data live right inside the platform. I hope to see you there. Alright. Let's jump back [06:53] into the interview. And so flush the marketplace out for me. How many merchants like Lenovo have installed ChargeAfter on their website? [07:01] >> So we have many, many merchants, thousands of merchants that installed ChargeAfter millions of consumers use ChargeAfter so far. We have an amazing investors, Visa invested in ChargeAfter, Synchrony Bank invested in ChargeAfter, Citibank, BBVA. [07:16] Sorry, just before getting to your funding history, because I wanna touch on that. Just I wanna understand the merchant side too. So when you say thousands, you're talking between like a 3,000 Lenovos have you installed? [07:25] >> Yeah, Lenovo is a client for example. [07:28] Okay, but my point is it's somewhere between like 1,000 and 3,000, when you say thousands, that's what you mean. [07:32] >> We are a private company, so we're not sharing the exact number of merchants that we have, but we have wide distribution of ChargeAfter across many merchants in many territories. [07:45] Understood. And then on the flip side of the marketplace, how many lenders like Affirm are on the platform and does Affirm have to opt in or do you automatically add them? Don't need relationship with them? [07:54] >> No. So each lender that is on the platform has a relationship with ChargeAfter. We have close to 40 lenders already on the platform, which will go probably to 80 by the end of the year. So we have dozens of lenders on the platform. [08:09] Yep. And then I guess when we talk about your growth, which is gonna tie into your funding story here, I imagine one of the things you measure is just GMV, right? How many loans done monthly, is that accurate? That's a key metric for you? [08:22] >> Yeah, certainly. [08:23] And so are you talking like last month, are we talking tens of millions or hundreds of millions or just maybe a million per month? Can you give me a range of what your GMV is monthly? [08:32] >> Yeah, so again we are a private company, we aren't revealing those types of data to the public, but we are certainly processing very big volumes in hundreds of millions. [08:45] Hundreds of millions per month? [08:48] >> Again, we cannot share this type of stuff. [08:51] Well, Meidad, you just shared the number. So I now need to qualify it so my audience doesn't get confused. You said hundreds of millions. Is that lifetime? [08:58] >> No. It's not the lifetime, but but let let's focus on other stuff because we don't feel comfortable to mention specific numbers on a on a podcast. We are [09:07] Meidad, sorry. Just to be clear, you mentioned the number. You said hundreds of millions. So I wanna now make sure I understand it clearly. When you say hundreds of millions, over is that all time to date or that's not monthly? Or you don't wanna say? [09:20] >> It's not it's not all times. It's not all times. It's it's the current volume that the current run rate that we have. [09:27] Okay. There you go. Perfect. So you're taking last month's GMV times 12. [09:31] >> Let's keep it That's the run rate. [09:33] Yeah. Yeah. We'll move on. We'll move on. But that helps me qualify. Right? And by the way, this is how everyone calculates GMV run rate. Last month times 12. So this is very standard stuff. Talk to me about growth though, right? So when did you launch the company? What year? [09:46] >> So we launched ChargeAfter in 2017. We started with one merchant and one lender and we grew it from there. [09:56] Are you able to share who that first both those first ones were? [10:02] >> Both of them were in The US, we started from The US, US is where we have the most activity even now and the merchant was in the electronic space and the lender was a typical point of sale financing lender. [10:18] Is great. [10:19] >> It wasn't available back then, was point of sale financing, which is quite the same, but still. [10:24] Well, I mean, you made a strategic decision at some point not to compete directly with Affirm. You said, you know what, I don't want to take that risk on the balance sheet, maybe I'll just be the marketplace in the middle. I mean, that's a very important decision you made. Why did you make that decision? [10:36] >> Yeah, it's a great point. I think that what I saw in the market, I'm coming from the payment space. In the payment space, if you think about it, there are tens of thousands of issuing banks which are very similar to the lenders in the BNPL space. [10:50] >> But then there is the networks Visa and MasterCard that are connecting all those separated issuers into one comprehensive network, which is allowing each merchant not to choose whether they want to work with this issuer or the other, but to work with all of them. And this is the vision of ChargeAfter we are building the visa of BNPL, the leading network and platform for the BNPL space. So I saw that there are so many lenders in [11:16] >> the market, there will be more, each one of them focusing on a very specific area. We wanted to give the full solution to the merchants, to banks that are using our solution to get into the market. And we wanted to be this network that is connecting all the ecosystem. [11:32] And how we haven't talked about how you make money here, right? So what model have you built for yourself? [11:39] >> Yeah, so we a [11:42] >> network solution very similar to how Visa and Mastercard are making money, we are making as well. So we are getting a fee from the lenders that are working with us and from the merchants that are working with us. [11:56] Okay, got it. And are both of those on a percent basis? For example, would a company like Lenovo just pay you a flat SaaS fee or are both of them paying you like a percent of deals done? [12:07] >> Yeah, it's a great question again on we are not getting into the specific business model, let's keep it as a fee. This is an ongoing fee that they pay as part of the transactions. [12:20] Well, mean, sorry. I'm gonna dig here though because this is a critical question. There's a lot of folks in this space that are trying to figure out, do we charge a flat fee here, SaaS fee, tied to a percent of GMV or deals closed? Then there are some that are on the total opposite side, which is no flat fee at all, free to use. You only pay ChargeAfter if we bring you deals, right? And we [12:38] help you close deals and it's a percent of GMV. Are you picking one side or the other? Or are you more of a blended model? [12:44] >> A blended model. [12:45] Okay. Fair enough. We'll leave it at that. Let's fast forward a bit. So first customers in 2017, we've talked about how many folks you're working with now today on both sides of the marketplace. Tell me more about the funding history. Why did you it sounds like you've raised. Why did you decide to raise capital? [12:59] >> Yeah, it's a great question. I think that we see a very big market demand to what we do. From all sides, have more and more lenders that want to join the platform, we have more merchants that are using the platform, we have more distributors and payment players that are understanding that BNPL is here to stay, they want to add these banks that adding this to their offering and they are coming to us basically, so we can [13:28] >> provide them with the technology and connectivity. And so with so much demand, we needed more capital to accelerate our growth. This was the main reason for the last raise. We started thinking that we will do a smaller raise and we had so much investors that wanted to invest that we decided to increase the raise to the size of the raise that we had eventually. [13:52] So let's start from the first capital you brought in. What year was that and what was the round size? [13:58] >> Yeah. So we we started in 2017 with the seed funding from Pico Partners, VC based in Israel and The US. The second round was led [14:08] by And how much was the seed? [14:10] >> 1.5. [14:11] 1.5. Okay. And and by the way, I just don't know. Back in 2017 in Israel, were you seeing the standard terms you've seen seed rounds in The States? You know, you're you're raising at a five or 10 cap, something like that on a convertible note? [14:23] >> Excuse me? [14:24] Were you seeing back in 2017 sort of standard seed terms in Israel like we see here in The US? So a standard seed deal in The US would be a million to 2,000,000 on a 5,000,000 to $10,000,000 cap. Were you sort of seeing that same deal back then? [14:40] >> It was similar to The US without getting to the specific terms. [14:44] Okay, cool. Okay, what happened after the seed? [14:47] >> And then we had our A round led by Propel backed up by BBVA, Synchrony joined, Plug and Play joined. [14:57] What year? [14:58] >> In 2019. Okay. [14:59] Then we had the last [15:02] And what was the size there? [15:07] >> I think that it was 8,500,000. [15:10] 8.5. You have to think about it, dilution is a real thing when you do these raises. I thought you know these numbers off the top of your head, [15:18] >> we had few investors coming and yeah, it was a very intense last year in terms of capital raise. So the former rounds are a bit vague at this point. [15:29] I see. Fair enough. Fair enough. All right. What happened after the Series A? [15:33] >> We had Visa join, you know, kind of in between the rounds then we had this round. [15:40] And so again, audience doesn't know what this one is. So what tell us what you just raised. [15:44] >> Sure. Sure. So in the recent round, we raised 44,000,000 and we added to our existing investor group which is really great, the investor group that we had before was composed of Visa, no need to present Visa any further. Synchrony Bank that is one of the leading banks in buy now pay later in The US, [16:07] >> BBVA that is one of the largest banking group worldwide, and in the recent round we added Citibank, again no need to present Citibank, one of the largest banks in the world, we had Bradesco. [16:23] Meidad, why was it important for you to get all these banks on board? Does it enable you to increase your margin profile at all? [16:28] >> Well, we think that what we are building here is a technological solution, but also an ecosystem. And we view ourselves as an industry platform and as such, as many players in the industry that are investing in ChargeAfter, we view it as a better thing. If you think about who are the investors of Visa, they are the banks, right? If you think about who are the investor of Expedia on the travel space, they are airlines. So we [16:54] >> have a similar strategy where we think that as many as more banks investing in ChargeAfter, we are building the ecosystem, we are getting partners and we have a better base to implement our vision. [17:09] I know. I guess what I'm trying to go deeper on is like, let's say that you help a consumer spend a dollar at Lenovo using Affirm. Of that dollar, right, Lenovo and Affirm are gonna pay you some whatever percent, cents, whatever. Then obviously Visa also takes whatever 300 bps, right? Citi takes 300 bps, whoever the card is takes 300 bps. Do you have the ability to expand your margin larger than 3% of that dollar by bringing [17:36] some of these banks on board? [17:38] >> No, it's not connected to that. And by the way, you're working with us in Lenovo or elsewhere, but it's more about the ability to add more players that are believing in ChargeAfter vision and in ChargeAfter marketplace and usually they don't only invest, they also participate in the marketplace. So it's not about increasing the margin. When we are working with when a lender is involved in a specific transaction, it's only this lender, right? It's not [18:07] >> also Visa and also Citibank. [18:11] Oh, so Visa could be another version of Affirm. That Visa could be the lender in the platform like Affirm. [18:16] >> Actually, they are. We are enabling Visa installments. A product of Visa that is enabling the consumer to split his payments over multiple installments from three months to eighteen months using existing cards. [18:31] I see, that's smart. And then Meidad, look, I don't know a ton about all of your competitors, you're going know more here. So my question to you is, if your competitors that own a marketplace like this are processing a dollar of like GMV like this, how much are they probably making on that dollar from both sides of the marketplace? Is it 5¢, 2¢, a cent? [18:49] >> It is very similar to the margins that Visa and Mastercard are having in the world. [18:54] 3¢, 2¢, 3¢. [18:57] >> It's more complicated to that, you're referring to the total cost that involves in the Visa world, right? It will include the cost of the issuer, the cost of Visa and the cost of the acquiring bank or the gateway, But in general, our model is similar. We are doing the same thing that Visa did in the payment space in the BNPL point of sale financing space. [19:18] Well, I'm not talking about you, I'm curious about just the overall market. So you're saying your competitors when they do this, look, there's complications here, I don't want go deep on all these complications, but it's somewhere between 3 and 5 cents per dollar of GMV, something like that. [19:30] >> Again, I don't think that this is the right place to relate to margins. I think that we have similar margins to our competitors have similar margins to us and it's similar business model and it's not different than what is happening in the payment space. [19:48] Yeah, Meidad, sorry, the whole show is about educating founders, right? So we are not familiar with your space, that's why it's called the top entrepreneurs, right? So we're trying to learn the business model. So in this space, what is the margin you're seeing there? Again, think it's three to 5%. I mean, tell me if that's wrong. [20:01] >> No, it's certainly not three to 5%, right? If [20:04] it's less or more? [20:05] >> It's much less, right? [20:07] Oh, wow, okay. [20:08] >> If you look on the payment space, right, when a merchant is typically paying in The US somewhere between 1.6% to 3% on a credit card transaction, This cost would include the issuing cost, the cost of the card from the issuer, it would include the network costs, Visa or Mastercard and then it would include the margin of the distributor, the acquiring bank, the gateway, right? All those three players in the ecosystem would benefit out of this total [20:40] >> cost. In our case, in our industry it is very similar, right? Instead of the issuers we have the lenders, instead of the acquirers, the distributors might be the same companies and then we are the network in the middle. [20:55] Got it, got it. That's very helpful. Okay, so that's lower than I would have thought, my audience probably would thought, so under 3%, not a lot of margin to work with here, you need a lot of volume. [21:02] >> Exactly. [21:03] Yeah. And you gave us a run rate earlier, right? Don't like that you gave it, but you gave us a run rate early, right? So, 8,300,000 per month. And if you're taking less than 3% there, people can sort of back into obviously what that looks like from a run rate perspective, 250,000 a monthly recurring revenue back to you guys as you scale. [21:20] >> I didn't say $8,300,000 I said hundreds of millions and again, I'm not relating not to revenues and not to volumes in this call. Want to be very clear, are a private company and we are not [21:33] much Meidad, you keep saying that, but then you give the number, you say hundreds of millions. So you are giving a number and I'm trying to make sure my audience understands that number. [21:41] >> So I'm giving I'm sorry, right? I don't want to be rude or something, but on a podcast, I usually speak about the market trends, the value proposition of ChargeAfter, certainly not on the specifics of how much we make, how many merchants we have. In the places that I do want to mention like the lenders I'm mentioning, in the other places like merchants and volumes and margins, I don't want to be specific. So I just want [22:09] >> to be very clear, happy to discuss this with investors which we are doing and with clients but not on a podcast. [22:17] Yeah, mean look, a lot of folks are not, if someone doesn't hit and dive deep on the business model, you end up with WeWork's of the world that raised way too much money, that brag about valuations and how much they raise, and they end up bankrupt three years later. So I'm asking these questions to try and understand, is there real business here or is it basically flooded with VC dollars? You're losing money and whoever loses money [22:35] the longest maybe wins a network in the long run. It sounds like that's not the case with you, but that's why I asked these questions. We'll move on from that though for for now. I think we have a good sense. You guys are growing growing nicely. Tell me more about your team today. Right? So how many folks are full timer on the team? [22:49] >> Yeah. So we have 120 employees currently, and we are growing very fast. [22:53] And did you I know you have Israeli roots. Did you keep your engineering team over there, or how many engineers total? [22:59] >> Yeah. We have we have offices in Israel and in The US, and our engineering is in Israel mostly. [23:06] And and what I imagine heavy engineering, right? About how many engineers on the team? [23:10] >> Heavy engineering. Yeah. [23:11] Yeah. What's next product wise, and where can you see the space going? Right now you're in marketplace. What's step two? [23:17] >> No. I think that we are very clear about our North Star and our vision. We have you know and I'm speaking out about the bigger picture. If you look on the credit market, the credit market was dominated by credit cards for many years. We believe that the ability of consumers to get the credit that they need at the point of sale point of need, is BNPL, is going to be the future of credit. Within this market [23:44] >> we are the one connecting the markets, right? We are creating the connectivity, are not the lenders but we are the ones connecting the industry, creating what we call the third wave of credit. So we are very clear on our vision and we just continue to do that. We are adding more and more lenders all the time, we are adding more merchants, we are being connected to all the leading payment players and basically enabling them to use [24:11] >> our rails that we have created and by that offering BNPL to their merchants and consumers, we see ourselves as the rails and the connectivity layer of the industry. [24:23] Alright. On that note, Meidad, let's wrap up with the famous five. Number one, favorite book? [24:29] >> Favorite book? [24:31] Book. [24:34] >> Grow to Defend. Grow to Defend. [24:37] Number two, is there a CEO you're following or studying? [24:42] >> I'm following many CEOs. [24:45] Number three, what's your favorite online tool for building ChargeAfter? [24:50] >> So I'm a great admirer of Salesforce. I think it's a very good tool. [24:54] Number four, how many hours of sleep do get every night? [24:58] >> Four or five. I'm not a big That's not a lot. [25:01] That can't be healthy. [25:05] >> I'm sleeping No. [25:06] Seriously, that's not healthy. Five you can survive on five hours a night? [25:10] >> Yeah. Yeah. [25:11] Wow. I mean, that's that's [25:14] it's imp I I when a CEO comes on the show and says that amount of sleep, either usually they're bragging because they want to sound good to VCs that they never sleep, which is not healthy, or they're just superhuman and they actually just don't need sleep. It sounds like you just don't need sleep. [25:28] >> I do need sleep, but five hours is enough for me. [25:31] Awesome. And what's your situation? Married, single, kids? [25:34] >> No. I'm I'm I'm married happily with three great daughters. [25:38] Oh, that's amazing. And how old are you? [25:40] >> I'm I'm 50. [25:42] Take us home. Last question. Something you wish you knew when you were 20. [25:48] >> I wish I knew that fintech will be such a big thing when I was 20. [25:53] Guys launched in 2017, he's sitting at the center of the buy now pay later world, specifically building a marketplace connecting thousands of merchants like Lenovo to over 40 lenders like Affirm or the banks directly like Visa. Building nicely, he says, quote, processing hundreds of millions dollars of run rate GMV, which is exciting, nice growth. Just closed a $44,000,000 series b earlier this year. We'll see what happens next. Meidad, thanks for taking us [26:21] to the top. [26:22] >> Thank you. [26:25] One more thing before you go. We have a brand new show every Thursday at 1PM Central. It's called Shark Tank for SaaS. We call it deal or bust. One founder comes on, three hungry buyers, they try and do a deal live and the founder shares back end dashboards, their expenses, their revenue, ARPU CAC, LTV, you name it, they share it and the buyers try and make a deal live. It is fun to watch every Thursday, 1PM [26:50] Central. Additionally, remember these recorded Founder interviews go live. We release them here on YouTube every day at 2PM Central. To make sure you don't miss any of that, make sure you click the subscribe button below here on YouTube, the big red button, and then click the little bell notification to make sure you get notifications when we do go live. I wouldn't want you to miss breaking news in the SaaS world, whether it's an acquisition, a big [27:12] fundraise, a big sale, a big profitability statement or something else. I don't want you to miss it. Additionally, if you wanna take this conversation deeper and further, we have by far the largest private Slack community for B2B SaaS founders. You want to get in there. We've probably talked about your tool if you're running a company or your firm if you're investing. You can go in there and quickly search and see what people are saying. Sign up [27:34] for that at nathanlatka.com/slack. In the meantime, I'm hanging out with you here on YouTube. I'll be in the comments for the next thirty minutes. Feel free to let me know what you thought about this episode and if you enjoyed it, click the thumbs up. We get a lot of haters that are mad at how aggressive I am on these shows, but I do it so that we can all learn. We have to counter those people. We [27:53] got to push them away. Click the thumbs up below to counter them and know that I appreciate your guys'support. Alright, I'll be in the comments. See you.