How Flexee Reached 20 Employers and 10,000 Employees with a Fintech Plus SaaS Salary-on-Demand Model (Interview with CEO Andrzej Nowak)

Introduction to Flexee and Andrzej Nowak

Nathan Latka

00:00Folks. My guest today is Andrzej Nowak. He's building a tool called flexee.eu. If you wanna follow along, it's salary on demand. He's got a lot of experience in finance and banking, including a master's degree before he jumped into and now founded Flexee. So we're jumping to it today. Andrzej, you ready to take us to the top?

Andrzej Nowak

00:17>> Hello. Thanks. Thanks, Nathan. Nice to meet you. Hi, guys.

What Salary on Demand Means

Nathan Latka

00:20You bet. So what does what does salary on demand mean?

Andrzej Nowak

00:24>> On demand mean it's a service provided by the third party, which is Flexee, to enterprises, to employer. Together with Flexee, we provide a service to his employees. And by by our app, employees can pay out their salaries when they want, when they need it. Yes?

Fintech and Lending Model Explained

Nathan Latka

00:48You a fintech platform? Are you lending money to employees so they get their money earlier?

Andrzej Nowak

00:52>> Yeah. That's correct. So it's a connection of fintech with a lending platform because Flexee is providing financing to employees. And at the end of the month, in easy way, we deduct whole payouts from the salaries of the employees together with makes sense.

Employer and Employee Count on the Platform

Nathan Latka

01:09Very popular space. How many employers are on your platform today? How many use it?

Andrzej Nowak

01:14>> You know, we are quite young. we just closed the seed round. Today, we have more than 20 employer who to to those employers, provide an up to about more than 10,000 employees today. Yes? But the pipeline is very, very growing. Right now, we have discussions with bigger employers. And in the end of this year, probably, we'll provide up to more than 100,000 of users.

Nathan Latka

01:41Okay. So 20 employers today, and those employers employ over 10,000 employees.

Andrzej Nowak

01:47>> Yeah. Yeah.

Seed Round Size and Structure

Nathan Latka

01:48And you closed a seed today or or recently. How much was the seed for?

Andrzej Nowak

01:52>> We closed the seed round in an amount of €2,800,000. Yeah. So it's more or less $3,000,000.

Nathan Latka

01:58Mhmm. Now you come from this world, so you understand, you know, equity and a cap table and managing dilution. Why do you need money to launch a business like this?

Andrzej Nowak

02:08>> You know, we need money because we provide those salaries. So we provide the liquidity. So we are searching all the time, the money to provide the liquidity to employees. Yes.

Nathan Latka

02:19So Oh, you're lending you're lending out your equity?

Andrzej Nowak

02:22>> Yeah. By by our equity, but more more or less, we are using the debt. Yeah? So, normally, we finance our business by debt and the equity. Yeah? Equity, we are using to finance our scaling, yeah, sales, and so on, and that we are using as our liquidity to provide the salaries to our employees. So it's always been debt?

Debt vs Equity Breakdown in the Seed Round

Nathan Latka

02:43How much debt did you raise?

Andrzej Nowak

02:45>> In this seed round, debt was in the amount of €2,000,000.

Nathan Latka

02:49Okay.

Andrzej Nowak

02:50>> And equity was €800,000.

Nathan Latka

02:54Okay. Okay. Got it. So 2.5 of that. Okay. Got it. That makes more sense. So let's call it 2,200,000 US is debt and then 800 k is is the actual equity going on your balance sheet. So I guess of that

Pre-Seed Round and Company Origins

Andrzej Nowak

03:08>> Because before seed round, we had a pre seed round and it was only equity and it was another $1,000,000 then.

Nathan Latka

03:16When was that?

Andrzej Nowak

03:17>> It was one and a half year ago when we start to build a whole business.

Nathan Latka

03:22So that was in 2021?

Andrzej Nowak

03:24>> At the end of twenty twenty.

Nathan Latka

03:27Oh, 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 connect

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04:36not built off random data. Again, you guys hear these interviews on YouTube. All these datas are built from real time valuation data points founders 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 you're

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Cost of Debt and Warrant-Free Structure

Nathan Latka

05:50the interview. Okay. 2020. Interesting. So and then what money were you lending back then? Did it was it your personal money or where'd you get the debt from?

Andrzej Nowak

05:59>> The debt the money came from two business angels, local private investors who believed in my in my idea. Yeah. They invest their money. Of course, I also invest my money. And on and based on this money we've built, whole technology team, we possess

Nathan Latka

06:17You know, Andrzej, I'm talking about the I'm talking about the debt. So before the current debt you just raised, what debt were you lending out to create liquidity in your marketplace?

Andrzej Nowak

06:25>> On our market. It was, you know, on before we we get the seed round, we provide that in an amount of $500,000 then. Yeah? And we found a problem. One problem is that we speed up very fast, and then we need to close seed round in a fast way, you know, to provide debt or liquidity to our clients. Yes. Because we showed this product. We are the first one who are providing it in our country. We

06:56>> are based in Poland. And, you know, we are, right now, invest a lot of marketing in salary on demand to inform employer that there is a Flexee who can help their employees. Yes? And right now, they are know it about the service. And, you know, there is a huge demand, so that's why we need to close in a fast and new way.

Nathan Latka

07:16Yeah. Andrzej, my audience, I think, totally understands this. Right? An employee doesn't have to wait on their paycheck in Poland anymore. They can get it ahead of time. My question to you is though, you can't do this unless you raise a lot of debt yourself so you confront that money. So the the of the 2,500,000 debt you just raised, what's your cost of capital on that? Usually, it's around 10 to 12%.

Andrzej Nowak

07:37>> It's it's the same. It's the same cost. And

Nathan Latka

07:40did you have to give up warrants?

Andrzej Nowak

07:43>> Sorry?

Nathan Latka

07:44Did you have to give warrants to the debt provider?

Andrzej Nowak

07:46>> Oh, no. No. Okay. I'm so happy that I found the debt without any warrants.

07:54>> But normally, markets, they are you know, they want to have a warrant, but I have a I I knew the investors. I found the investor who was able to provide it without a warrant.

Pricing: 2.9% Fee vs $8 Subscription

Nathan Latka

08:08Yeah. So let's use a case study here just so everyone can understand. Let's say I am working for a company in Poland. I'm based in Warsaw. My salary is let's make the math easy. It's $10,000 a oh, let's do a thousand dollars a month. So I don't wanna wait for that a thousand dollars to the end of the month. So you're at the beginning of the month, I can take that a thousand dollars from you?

Andrzej Nowak

08:28>> No. Normally, if your employer decide in such a way, you can. But normally, the procedure is different. On the first day, you will see you will see the amount that you earned for the first day. Yeah? So it will be if you earn in the month $1,000, one after one day, you will be able to pay it out, I don't know, $50 $50. Yes? So every day, your limit increase by an amount, and you will see

08:57>> 1,000 your $1,000 in the end of the month.

Nathan Latka

09:01So, Andrzej, how much does the employee pay?

Andrzej Nowak

09:04>> So employee then will start from the provision 2.9% for the payout. If the employee pay pays the fee, there is also a subscription based model where employer can pay a monthly subscription for each employee, and the subscription fee is more or less $8 per month. And based on the subscription, employee do not pay anything.

Nathan Latka

09:31Okay. So if the if the employer has a thousand employees, that employer could pay you $8,000 per month so that the employees don't have to pay a 2.9% fee.

Andrzej Nowak

09:41>> Yeah. Correct.

Nathan Latka

09:42If the employer says, you know what? We don't wanna front that expense. They can use your tool, but then the employee pays you know, if I get a thousand dollars a month from Flexee, $29 of that is gonna come I'm gonna pay your $29

IRR on the Debt Fund

Andrzej Nowak

09:54>> is gonna go to you.

Nathan Latka

09:55Yeah. Correct.

Andrzej Nowak

09:56>> That's how it's worked.

Nathan Latka

09:58I see. So your ability to put the capital out, get it back, make 2.9%, and then put the money back out allows you to effectively compound your IRR on your debt fund over a year. What do you believe you can drive your IRR up to?

Andrzej Nowak

10:12>> The minimum IRR will be if we earn 2.9%. So the minimum margin, the yearly rate will be about 40%. And this is our yearly rate minimum yearly rate that we want to earn.

Nathan Latka

10:29Yeah. So, your ability to earn that is directly correlated to your ability to get the money back out fast enough. Because if you have 2,500,000 of debt that's not out and you're paying 10%, then it eats your margin very quickly. So what gives you the confidence you can deploy and keep $2,500,000 deployed every month?

Andrzej Nowak

10:46>> You know, it's there is a few points. First point is flexibility financing from our investors. So we need liquidity that with it if we do not need it, we do not pay it. Yeah. So once.

Nathan Latka

11:02So you don't have the 2,500,000 in the bank. You'll draw it down as you need it.

Andrzej Nowak

11:06>> Yeah. As we need it. Yeah. That that that's the agreement that we have. Like like in bank, like a credit line. Yeah? And, of course, most important is to always have a strong pipeline, big clients, always invest in marketing to employees to, you know,

11:27>> to somehow saying to them, here's Flexee, use it, send off the mounts, you have money, pay it out, and so on and so on. Yeah. So we also spent a lot of marketing directly to employees to use our app.

Nathan Latka

11:41So of the current 20 employers that are on your platform today, how many seats are they paying for? How many employees are they paying a subscription fee for?

Andrzej Nowak

11:51>> Today, more than 70% of employer pass the fee to employees, and the 30% are paying subscription.

Subscription vs Transaction Revenue Split

Nathan Latka

12:01So you mentioned there's about 10,000 employees on a platform. 30% would be about 3,000. Right?

Andrzej Nowak

12:07>> Yeah.

Nathan Latka

12:07So three can take 3,000 times $8 a month. You're doing about $24,000 a month in subscription fees from employers?

Andrzej Nowak

12:15>> I cannot say no and cannot say yes. You know what?

Nathan Latka

12:19Well, is the math correct? I'm just multiplying numbers you already gave me. Is the math right?

Andrzej Nowak

12:23>> From the subscription. Yeah.

Nathan Latka

12:25Yeah. Okay. Got it. I mean, you're you're doing more than that because you have people paying 2.9%. I'm just talking just on subscriptions. Yeah. Yeah. Interesting. Okay. So so, I mean, how do you go from 10,000 employees to a million employees? I mean, that's really how this thing really takes off. And and and also when you go out and raise a seed round, you can choose to tell a story that is a business model that is

Path to One Million Employees and European Expansion

Nathan Latka

12:47percent of GMV, fintech versus SaaS. And you can sort of choose what's hot in the market to get a higher valuation. Right? So how how do you tell that story?

Andrzej Nowak

12:58>> To yeah. I say, as you said, it's a mix of the subscription based model and SaaS platform. Like, there is a boom on financing commerce. So it's something like between years. So this is something that our investor likes, and it was important in our evaluation on the seed round. How we gonna acquire 1,000,000 clients? You know, we would like to provide salary on demand in Europe because the trend from salary on demand on Europe is starting

13:28>> to grow since two years it started. Yeah? So we are the first player on Poland. Poland is a huge market, having 20,000,000 employees. Yeah? And we would like to get out from Poland to two European markets. And on those three markets, we would like to be the biggest player in coming two two, three years. So to having 1,000,000 employees, it's it's even reachable on one market, on Poland. Yep? Yep. 1,000,000 from 20 employees.

Nathan Latka

13:58And, Andrzej, when you look at your total business today and you look at all your revenue from last month, is it about a fifty fifty split between 2.9% versus the flat subscription fee revenue?

Andrzej Nowak

14:09>> This is our aim, that it will be split half by half in What is it? In their

Nathan Latka

14:15What is it, though, today?

Andrzej Nowak

14:17>> Today is more from the provision. So from the subscription than the so more than from the revenue from the provision are higher than the subscription. It's because more users are use are paying provision.

Nathan Latka

14:34Is it, like, an 80% is provision versus 20% subscription?

Andrzej Nowak

14:38>> 70 to 30. Seventy five, twenty five.

Nathan Latka

14:42Interesting. 70%, 2.9% fee, and then the rest is the subscription. So if subscription, again, is $24,000 a month, we can then multiply that times three total I mean, you you broke a million dollar run rate recently then.

Andrzej Nowak

14:54>> Yep.

Nathan Latka

14:55Or you're flirting with it right now? You're very close.

Andrzej Nowak

14:57>> Very close. Yeah.

Team Size and Engineering Setup

Nathan Latka

14:59Very cool. Alright. Talk to me a little bit about the team. How many folks are full time?

Andrzej Nowak

15:03>> Full time employees today are 12 people.

Nathan Latka

15:07Mhmm. Okay. And how many engineers?

Andrzej Nowak

15:10>> There are three engineers, and we also have our flagship software house who are supporting us if it's needed.

Nathan Latka

15:19Who do you use for soft your software house?

Andrzej Nowak

15:21>> We are we are outsourcing if it's needed. When you have higher demand, like, for example, right now, we are connecting to payroll systems, a local payroll system because the local payroll system, there now we have higher demand for the Andrzej, who is it?

Nathan Latka

15:38Which software house do you use?

Andrzej Nowak

15:40>> Their name is N7 Mobile.

Nathan Latka

15:43N7 Mobile.

Andrzej Nowak

15:46>> N and like my surname. Yeah. N seven.

Nathan Latka

15:50Oh. Oh. Oh. Just I see. Yeah. I see. And are they based in Poland?

Andrzej Nowak

15:55>> Yeah. They are based in Poland.

Nathan Latka

15:57And you you're happy with them? People are always looking for good software development firms to use?

Andrzej Nowak

16:01>> Yeah. They are very good. Yeah. I'm happy with them.

Nathan Latka

16:04Very Let's wrap up here with the famous five. Number one, last book that you read.

Andrzej Nowak

16:10>> Last book. Oh, good question. I work a lot, so I didn't read a book since weeks. Last book was the biography of Elon Musk.

16:22>> Yep.

Nathan Latka

16:23Number two, is there a CEO you're following or studying? Sorry? Is there a CEO you're following or studying?

Andrzej Nowak

16:31>> Is there a CEO that I'm following?

Nathan Latka

16:33Or studying. Correct.

Andrzej Nowak

16:35>> Yeah. Once once again, Elon Musk.

Nathan Latka

16:39Number three. What's your favorite online tool for building Flexee?

Andrzej Nowak

16:44>> The favorite tool to build Flexee?

16:50>> Good question. Favorite

Nathan Latka

16:52tool to build use, Andrzej.

Andrzej Nowak

16:53>> Something a tool you use a lot.

16:56>> Yeah. A tool that I'm using a lot. A local payment provider who is a part of Dotpay. It's like a PayPal, a local PayPal.

Famous Five Rapid Fire Questions

Nathan Latka

17:08Okay. Number four. How many hours of sleep do you get every night?

Andrzej Nowak

17:11>> One sorry. I didn't understand.

Nathan Latka

17:13How many hours of sleep?

Andrzej Nowak

17:16>> Four hour.

Nathan Latka

17:17Four that's not enough sleep.

Andrzej Nowak

17:21>> That's enough. Come on.

17:23>> It's a start up.

Nathan Latka

17:24Yeah. Four hour.

Andrzej Nowak

17:25>> That's not Alright.

Nathan Latka

17:26And what's your situation? Married, single, kids?

Andrzej Nowak

17:29>> Single.

Nathan Latka

17:30Okay. No kids?

Andrzej Nowak

17:31>> No kids.

Nathan Latka

17:32Alright. And how old are you?

Andrzej Nowak

17:34>> 36.

Nathan Latka

17:35Last question. Something you wish you knew when you were 20.

Andrzej Nowak

17:40>> Something I knew when I was 20. I

17:45>> don't know if there is something like that. I like my career. Yeah.

Nathan Latka

17:49Alright, guys. There you have it. Flexee dot e u is helping companies based in Poland give their employees their money, their salary earlier. Either the employers pay an $8 per month fee for every employee that makes up 30% of the revenue today, about $24,000 a month in revenue, or the employees pay 2.9% to whatever they pull. He believes, Andrzej believes he can generate around a 40% IRR on his debt fund using this model. It's a beautiful

18:13mix of obviously FinTech plus SaaS with a hyper focus in the, again, Polish market right now, 20 employers on the platform servicing 10,000 employees. Just raised another $2,500,000 in debt to lend out and $800,000 in equity in their seed round. We'll see what happens next. Andrzej, thanks for taking us to the top.

Andrzej Nowak

18:30>> Thank you. It was a pleasure.

Nathan Latka

18:33One 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

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