Grain Financial Technology Revenue, Valuation & Funding (2024)

[00:00] Guys, call my next banker. He's raised $19,000,000 hoping to help folks mitigate hedging rates. For example, if you're selling a hotel bed in California to a Mexican travel agent, you need to sell it to Mexican residents in pesos. He'll help you hedge that risk. This risk can be significant with the euro changing, for example, the past two weeks, 8% against the dollar. It's a massive market. His hope is to get this product live in the next [00:22] six months and process, you know, call it a billion dollars of hedging volume next year, of which he'll make 20 to 30 bps on. So call it 2 to $3,000,000 in revenue. Already has a team in place of 20 people looking to scale now with this new money. Hey, folks. My guest today is Aharon Navon. As a former head of Barclays, CEEMEA FX trading platform, the cofounder of Israel's largest FX hedging nonbank, Aaron brings over twenty [00:44] years of FX and risk management exposure to his current company, which is an embedded cross currency solution called grainfinance.co. Aaron, you ready to take us to the top? [00:57] >> Yes. [00:58] Dumb all this down for our non finance people. What does that mean in a simple sentence? [01:00] >> What? Hedging for SMEs? [01:02] What what you do? Why people pay you? [01:07] >> That that's I'm not sure. They this we'll find out in the future. But, basically, I have over twenty years of experience providing hedging solutions to a lot of companies, small, bigs, private individuals, high net worth. So I think, you know, we acquired some experience, and that's what maybe I'm what I paid for. [01:27] This is Aaron, sorry. You you gotta dumb that down. Right? So hedging risk right now. Right? So there's there's two currencies. People wanna do business together. Explain to us specifically what hedging risk is. Why why do people hedge that risk on currency? [01:38] >> In a very simple manner, when you have an importer, for example, that is buying some some type of an inventory, for example, an importer from The US that is buying, for example, inventory, which is wine, okay, from euro. So he's a dollar based. He's selling his wines in dollars, but he's paying for his, you know, wines in euro. So the exposure between the euro and the dollar is affecting him. So if he's buying it in euro, [02:08] >> for example, and, you know, he is actually purchasing it, the euro is going, you know, increasing versus the dollar, then he can lose a lot of money basically by paying more. So what we're doing here is we're providing him with a hedge that he can fix his euro dollar rate at the, let's say, the inception of his of his order. And that's that that that way he knows how much he paid in dollars, okay, for something [02:33] >> that he will be receiving in two months time. Okay? And then he knows, you know, what will be the price for his end clients in The US that will pay for these ones. [02:52] Mhmm. [02:54] >> Then the actual profit, it will be the the amount he paid for the specific wine, and and the the basically, the price that he sold the wine at at at dollars as well. So it's dollar versus dollar and not dollar versus euro. [02:59] How big of a risk can this be? If I'm a wine owner today I run a liquor shop in California, and I spent a million dollars to buy wine from Europe, you know, today, but I'm not gonna get it until four months from now, how much could that value increase or decrease after I've already put up the million USD? [03:14] >> Yeah. You know, lately, it's actually it's very volatile. So we can say that over the past even two weeks, the euro increased versus the dollar by 8%. So for example, a million dollar of inventory, you could have lost $80,000 or €80,000 just by waiting, you know, for two weeks to pay for the actual the actual wines. So that's a lot of money for how much you would have sell sold those wines, you know, in The US, [03:42] >> but I'm not sure that his profit margin is eight or 10%, so he can even end up losing his business. [03:49] So that's that's your sales pitch, right? So you're selling to me now, guy in that runs the wine shop in California, you're saying, Nathan, careful, there's an $80,000 risk here, pay me x to get rid of that risk. Right? How do you work your pricing? [04:02] >> Well, basically, I'm a liquidity provider, so I have liquidities from, you know, a lot of banks, a lot of non banks, and that's my business. So I can buy the hedge very cheaply. So for four months time, you know, I can buy the euro dollar hedge or the euro dollar forward as we call it in, you know, in our business at a very good price, and that price I'm transferring, passing to, [04:26] >> obviously, to the wine to the wine buyer. Okay? And I'm just making a small margin on that. [04:34] 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 connect [04:57] 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 gonna [05:21] 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 is [05:43] not 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 [06:09] 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, but [06:31] 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 into [06:57] the interview. What margin do you reverse engineer for? [07:01] >> It's basically 20, 30 basis points, you know, above my cost of of hedging, which is actually very, very competitive. I mean, if you will try to do that, for example, versus, I mean, with this local bank, he would pay probably end up paying by 5% for the specific million dollars of euro dollar hedge. [07:21] Yep. So 4% to a bank, point two to point 3% for you. So what does that what does that mean for me as the as the guy buying the wine from Europe? What am I gonna pay you to hedge this risk? [07:30] >> So you're just gonna pay me, okay, a million dollar in four months time, and I will deliver you the euro so you can pay your your supplier in Europe. Okay? [07:40] Oh, I see. [07:41] >> That's that's the business we're doing. [07:43] Got it. So you're not making money, you're not making money then for me, you're making money on the other side? [07:49] >> I'm making money from the spread. So let's say I bought the hedge. Okay. If euro dollar now is 1.04, okay, that's my cost. So I will sell it to you at 1.0420. [08:01] I'm not so give me that 1.04, what? A dollar 40, a 140 per a 104%? [08:06] >> A euro dollar is 1.04 now. So for €1, okay, it's $1.04. So for a million euro of an order, okay, you have to pay me $1,040,000. That's my cost. So for me to earn slightly on, because that's my cost, okay, so I will quote you one point o four two, which is this 20 basis point that I was mentioning earlier. [08:30] I see. [08:32] >> Yeah. And that 20 basis point is basically $2,000. Okay? On a million euro [08:39] >> dollar, which is close to nothing. [08:41] So you're making effectively point two to point 3% on effectively the money flowing through your system. Right? Your GMV if you were a marketplace. [08:50] >> Exactly. [08:51] I see. Alright. Let's get more of your backstory here now that we understand sort of the model. And by the way, are are wine buyers in The US buying from Europe your number one customer? [09:00] >> Sorry? No. No. No. They're from different areas. [09:06] Well, who who what is the like, your top three don't name the customers, customers, but but the the top top three three groups that you serve, what are they? [09:12] >> Actually, now what we're serving, we are more of an embedded finance, so we're providing hedging to travel platforms in the travel industry. Okay? So for example, a bed bank that is selling hotel beds, okay, to local agents, so we will provide hedging solution like our engine, provide him prices that he can quote his local agent in his in their local currency. So for example, if you have an hotel bed in The US that he has a [09:40] >> Mexican agent that is selling rooms to Mexicans, okay, which is a little bit complicated, but we can give him the hedge so he can quote the hotel bed price in Mexican peso for his Mexican agent. And the Mexican agent can pass through the Mexican peso price to his local client. [10:01] So are you making a flat fee from the hotel bed owner in The US or the Mexican agent or no? [10:06] >> So we're still gonna make the same spread that I mentioned earlier. [10:10] No. I know that. But is there a flat fee on top just to use the embedded finance tech stack? [10:15] >> It it it varies between currency pairs and the tenor of the hedge. So a hedge, for for example, for one month and a hedge for one year is slightly different. [10:24] Sorry. What I'm asking is a lot of these embedded finance products will make money on a spread like what you do, but they also then have like traditional SaaS revenue or recurring fee for the hotel that operate in The US. [10:33] >> No fees. [10:34] You have no flat fees? No. Okay. Very cool. Alright. Give us a history here. When did you launch the business? What year? [10:44] >> About a year ago. [10:46] Okay. So fairly new. Okay. Got it. 2021. And was your first customer someone running a hotel bed in The US, or how did you get your first customer? [10:55] >> Obviously, look, we've raised mean, we are well funded. Okay? And we are about a team of between 15 to 20 employees currently, we have head of marketing, head of biz dev, head of CTO, [11:12] >> CPO, everything. [11:14] >> And our new customers are actually we have two big hotel beds. Okay? One of them is coming from Israel, and one of them is actually coming from Singapore and Japan. [11:24] Okay. But are you pre revenue today, then you're not live with them yet? [11:27] >> Yes. Pre revenue. But [11:29] Okay. Got it. Yeah. [11:29] >> Let's say, September, January, we will start generating revenues. [11:34] Kimmy, that was kinda funny. Right? I asked about your first customer, and your answer was we've raised a lot of funding. I'm like, okay. He must be he must be pre revenue because I like revenue, obviously, more than customers. But, obviously [11:46] >> Of course. [11:48] Mean, I guess, the the question the question I would ask you is you have quite a track record in this space, right, looking at your background. Why do you need a bunch of money [11:51] to launch this? Why sell all that equity early on? [11:55] >> Look, it's basically it's very expensive, yeah, to build such a platform. I'm saying tech. Okay? Because I have businesses today that they're doing it in more of a manual way. But to do it, you know, on a scale and and very technological, it's very expensive. [12:14] Yep. How many engineers make up the 20 today? [12:18] >> Almost half of them. [12:20] 10. Okay. Wow. Okay. And and I guess how much did you raise? [12:26] >> $19,000,000. [12:28] 19 or 90? [12:29] >> 19. [12:30] 19. Okay. [12:31] >> I wish I wish 90, but 19. [12:34] You'd have no equity left if you raise raise that amount. Alright. So you raised $19,000,000, and that was the first money in? [12:43] >> Yes. [12:44] Okay. Well, would be a very large pre seed round. It was really like a it's more like a probably a large seed round is how you would call that. Right? [12:51] >> Exactly. It's a it's a seed round. Basically, the the money, I mean, we got the money from, you know, very good funds that they really believe in the team because [13:00] That's all just to be clear, that's all equity. That none of that is a small, like, debt fund or warehouse facility [13:06] >> All that funds equity. Okay. Yeah. [13:08] And most folks these days are selling between 15-20% equity in seed rounds. Did you sell about the same amount? [13:15] >> Sort of. Approximately. [13:18] Okay. Higher or lower? [13:20] >> A little bit higher. [13:22] Okay. A little bit more. So this was very dilutive for you. Were this was this a very strategic partner? [13:26] >> Not not very diluted. You know, I don't see it like that. [13:29] Well, you sold more than 20% of the company. I would say that's very dilutive. [13:33] >> I know. But we also raise a lot of money as well. And we wanna build something that is very robust, that will be, you know, a real legacy. So for me, let's say, if I look in ten years down the line, and I'll have even 2%, but from a $30,000,000,000 business, I'll be okay with that. I don't care about the [13:53] It's a big risk though, Aaron. Right? I mean, how many how many companies that started ten years ago are worth $30,000,000,000 today? You're you're taking a you're taking a massive swing and it's a big risk, but it's much harder to accomplish than going and building a $10,000,000 bootstrap company that profits 5,000,000 a year. [14:06] >> But I see risk differently, actually. You know, for me, once, you know, we've raised the money and we have employees, so I need to secure them and I need to secure the company. So the more money I have, you know, it's the less risk I think for the company. [14:19] No. I would argue it's significantly more risk the more money you raise. Significantly more risk. You have to grow faster, everyone burns more, you lose your creativity because everyone wants to throw money at problems. I would argue it's way riskier to raise a lot of money. [14:31] >> So I with you on that. I disagree with you on that. And, you know, we are very patient. I'm not in a rush, you know, to jump on any solution or to to try and and get every client. You know, I'm I have enough experience, you know, to do the right thing, and that's why I raised a lot of money from this specific business that they know that we would do the right thing, okay, in order [14:57] >> to be here for a long time. [14:59] Mhmm. Mhmm. [15:00] >> Yeah. It's a matter, you know, I'm not like, let's say if I was twenty years ago, maybe, you know, would try this, would try that. I know exactly where I'm heading to. Obviously, we're making some mistakes. Now we'll make some mistakes in the future, but we have enough, you know, knowledge and experience to to take this company, okay, to higher levels. [15:20] Yeah. Well, listen. I I'm I'm not rooting against you, obviously. [15:22] I hope you have a [15:23] big success, but I don't I want my audience to understand. If you put a 100 founders in a room, right, first off, only 2% of them are gonna be able to raise at all. Right? You're one of them. Right? So two out of the 100 raise. Right? And and, I mean, that you One out of a 100 investments that VC fund makes returns the fund becomes worth 30,000,000,000. Right? So you're looking at, like, point two out [15:45] of a room of a 100 founders, right, actually go and do what you just articulated versus the other 100 founders in that room, if they go build I mean, it's way easier to build a 5, $10,000,000 revenue company and profit 2, $3,000,000 a year. Right? I would say it's way less risky But that that to build that kind of company. [15:59] >> No, no, I agree with you on that, but I see differently in that matter that if I'll raise just $5,000,000, you know, I think I would put my company in a very high risk that it could go bankrupt, you know, in a year time because we're not gonna have enough funding for the next the next one. And you might [16:15] Or not or you don't get enough customers. Right? That's what makes the company go bankrupt is you can't you don't get you don't have customers willing to pay. Right? I mean [16:23] >> yeah. [16:23] I'm I'm sorry. Sorry. I'm not saying you. I'm saying Yeah. In general, in the market, you do it. It's not like you have two customers lined up. I'm saying, generally speaking, the risk is you raise too much money for an idea that you then build, spend a bunch of money on, and then people don't end up buying it. That's real that's like crap. That's a bad situation. [16:39] >> Yeah. But but the the beauty with us, yeah, that we do have this experience and track record. Yeah. I have my own opinion that is actually generating, you know, very nice revenues. Even Israel, we are obviously the the the nonbank. They're doing, you know, the most business with the small, medium businesses. So the the VCs that invested in us, they can see the track record. Okay. [17:01] What what what what is your track record? What were you doing before this? [17:06] >> I I was basically head of the trading trading of in Deutsche Bank and Barclays. Barclays, used to run CEEMEA, which is Central Eastern Europe and Eastern Africa in FX and rates. And six years ago, I found a company in that specific area as well, providing hedging for small medium businesses in Israel. [17:28] Oh, so they're so ham? [17:30] >> So and in that specific company, I have already 1,500 companies that are doing business with me. So, you you know, we know what we do. [17:38] It's a you're talking about Horizon. Right? [17:41] >> Another Horizon, it's called Ultra Shacham Financial Services. Horizon is the crypto [17:48] Oh, it's the that's the crypto specific arm. [17:51] >> I have two companies. Yeah. One is the Ultra Shacham Financial Services, which provide hedging for small medium businesses. [17:58] And there's 20 people there's 20 people full time at that company according to [18:01] >> There there are more employees, actually. This is the company that is only the Israeli based companies servicing all Israeli clients. Okay? And this is a very profitable business. Mhmm. And this is that that company was a bootstrap. No funding raising at all. And the core company, which is grain that, you know, we've raised the 19,000,000 dollars, this is for international. So, basically, to to conquer the whole world, US, Europe and Asia, to provide a [18:30] >> hedging solution on a scale on a technological level. [18:35] Is this financial services arm, though, serving only Israeli clients included in the cap table of the combined [18:42] >> they're separate companies. Separate companies. Yes. [18:44] How did you get investors in Grain comfortable with this massive side project you have that's still operating today with a lot of employees and bootstrap? [18:52] >> Well, over there, I have you know, it's seems like you're asking Elon Musk how does he he can run SpaceX, Tesla. [18:57] Well, no offense, but I'm not Elon Musk. You're not you're not you're not Elon Musk. Right? I'm not Elon Musk. [19:03] >> No. I'm not I'm not worth $200,000,000,000, but obviously I can run few businesses. And over there, by the way, I'm I'm only serving as a director, I was founder of that company, okay? I hardly spend any time there. There is a CEO, [19:19] >> CMO, everything there. The the the company is running by itself. I'm just on the board. Once a month, we have a board a board meeting and that's where I'm giving my sort of my my my experience and knowledge to help them go further in that respect. [19:36] Well, you've already cut your teeth bootstrapping. You're taking a very different approach on this one to go conquer the world. We're certainly rooting for you. We'll see what happens. What's your goal next year? How much volume do you wanna process? [19:46] >> I think we're gonna be up to a billion dollars of the hedging through this specific vertical, which called the travel industry. [19:56] Over what period of time? Next twelve months? [19:59] >> In 2023, which you can say over the next twelve months, you know, we're at the end of the [20:04] But I mean so I mean, look, this is gonna be sort of a strange question, but isn't that too slow? There I mean, the reason I said is if you're only making two 20 bps on a billion of GMV, it's only $2,000,000 of revenue. You just raised $20,000,000. Isn't that too slow of growth for a company that just raised $20,000,000? [20:19] >> No. Because it's very exponential because in 2024 [20:22] Well, you're going you're going from zero, by the way. Right? Though, of course, it's exponential. [20:26] >> No. I'm saying exponential. Then in 2024, yeah, we would have probably between 5 to $7,000,000,000 of hedging, and then it's going in exponential way. So 2024, 2025 probably we're gonna be like 15,000,000,000. So that that's gonna be the sort of the the scale. [20:47] Yeah. Mean, what even at 15,000,000,000 at 20 bps, that's assuming you hit that with ambitious goals, that's $30,000,000, I think. I mean, that's obviously on par with what VCs wanna see. What's the total amount? If you get this whole market, what's the total amount of of processing you think you can power? [21:02] Hedging. [21:03] >> It's trillions of dollars. You know? How much money is moving now, currently, every day. In the hedging market, trillions of dollar a day. [21:13] Yeah. But are you talking about just about hotel hedging and travel hedging or something like that? [21:16] >> Not We we're starting with the hotel vertical. We're gonna go into account payable solutions, so to a lot of those platforms. Logistics. We have few verticals. We're starting with the the the travel vertical. [21:31] Yep. Yep. Well, hey, we're [21:33] >> That's why we are very ambitious in that respect, you know. We can see ourselves as the Goldman Sachs of the small medium businesses worldwide. That that's the ambition. Okay? That's where we we are aiming for. [21:46] Yeah. Look, I I mean, it's a lot of money to going from, you know, you if you launch in 2021, you know, you're basically saying it's gonna take you two and a half years to do $2,000,000 of revenue. Right? Because that's what a billion dollars of GMV would be at 20 bps. Right? It'd be 2,000,000 by the end of next year, And then you're off to the races. So we'll see what happens. We're rooting for you. [22:04] We're out of time though for today, so let's wrap up with the famous five. Number one, what's your favorite business book? [22:11] >> Actually, I don't have a favorite business book. I'm I'm more into physics, and I can tell you what is my favorite book in in physics, but not in business. [22:18] Go ahead. Physics. [22:19] >> It's the only the only business book that, you know, I can really relate to is the Warren Buffett book, which was the Warren Buffett way, which I read twenty years ago. [22:28] Yeah. That's a good one. Number two, is there a CEO you're following or studying? [22:33] >> Read lately [22:36] >> Stephen Schwarzman from Blackstone, which I wasn't really impressed actually, but that was the latest one I read. [22:43] Number three, what's your favorite online tool for building grain? [22:47] >> Sorry? [22:48] Favorite online tool? [22:51] >> Favorite online tool? [22:55] >> Don't have any more specific. [22:57] Number four, how many hours of sleep do you get every night? [23:01] >> Seven to eight hours. [23:02] That's good. [23:03] And situation, married, single, kids? [23:06] >> Divorced, but I have a partner now. [23:08] Fair enough. Any kids? [23:10] >> Yeah. Two kids. [23:11] Two kids. Okay. Oh, great. And how how old are you? [23:15] >> I'm 49. [23:17] 49. [23:18] Last question. Something you wish you knew when you were 20 years old. [23:27] >> No. Not really. You know? I like I like every every I I say every age or every decade. I like to leave that decade. You know? I like to make my own mistakes, learn from them, live experience, and and, you know, take it from there. [23:41] Guys, call my next banker. He's raised $19,000,000, hoping to help folks mitigate hedging rates. For example, if you're selling a hotel bed in California to a Mexican travel agent, you need to sell it to Mexican residents in pesos, he'll help you hedge that risk. This risk can be significant with the euro changing, for example, the past two weeks, 8% against the dollar. It's a massive market. His hope is to get this product live in the next [24:04] six months and process, you know, call it a billion dollars of hedging volume next year, of which he'll make 20 to 30 bps on. So call it 2 to $3,000,000 in revenue. Already has a team in place of 20 people looking to scale now with this new money. Aaron, thanks for taking us to the top. [24:18] >> Thank you very much. [24:21] 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 [24:46] 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 [25:08] 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 [25:30] 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 [25:49] got to push them away. Click the thumbs up below to counter them and know that I appreciate your guys'support. All right. I'll be in the comments. See you.