How Paystand Is Building a B2B Payment Network on Nearly 4x Year-Over-Year Growth (Interview with Jeremy Almond)

Introduction and Background

Nathan Latka

00:01Hello, everyone. My guest today is Jeremy Almond. He spent the last fifteen years in the tech industry as a serial entrepreneur, startup adviser, and occasional investor. He's helped dozens of b to b companies drive adoption of digital commerce and is still an active board member at a number of fintech companies. He started his career in technology as an engineer at nanotech startup Digital Instruments, which was acquired by Veeco. Jeremy holds a BS in computer engineering from

00:22the University of California and in a master's in business from the University of Massachusetts. Alright, Jeremy, are you ready to take us to the top?

Jeremy Almond

00:29Hey. How are doing, Nathan?

Nathan Latka

00:30I am doing well. Have to ask first because, you know, in my log cabin when I was growing up, right next to the entry door, we had one of these old crank phones on our wall, and I'd love to mess with it and hear the ding. You have a collection hanging on the wall behind you. What's the significance?

Jeremy Almond

00:43You know, I'm actually... I'm I'm sitting at one of our investors' offices, and so I think they they built one of the first mobile payment apps, this little company called PayPal. And so one of the first money movements ever was beamed over the phone. It was a very famous investment. And so I think they memorialized that with these old phones around their office.

How Much Paystand Has Raised

Nathan Latka

01:04That's pretty cool. So I wanna ask what the company does in a second, but you said you're at your investor's office. How much have you raised to date?

Jeremy Almond

01:10I've raised about 12,000,000 to date, more or less.

What Paystand Does

Nathan Latka

01:12Okay. And then break down the company for us. What do guys do? How do you make money?

Jeremy Almond

01:16Yeah. So so PayStand is a b to b payment network. So simple way to think of us is what Venmo does between consumers, making payments digital. We do for commercial companies. So we help b to b companies actually get their money faster, cheaper, in a more automated way.

How Paystand Differs from Bill.com

Nathan Latka

01:30Jeremy, can I think bill dot com here?

Jeremy Almond

01:33Yeah. I think so. So bill.com is really about automation, and what we are is actually changing the payment network. So so most of the money movement itself is is basically using technology before the Internet. Most of the technology is sort of built in the seventies. We actually own our own payment network. We use something called the blockchain, which is sort of a really new way to think about financial services in general. So

Real Customer Example: Insurance Industry

Nathan Latka

01:56Okay. So at the risk of getting too technical here, walk me through how a company to another company might actually might actually use this. Can you give a real example, name the customers, etcetera?

Jeremy Almond

02:07Yeah. So classic example would be an insurance company. So we work with a lot of what we call unsexy industries, where there's paper checks in the process. So we have insurance clients, for example, that are normally billing their billing folks like you to to take their claims payments or whatever, their their monthly payments. Normally, it's manual process. You're paying by paper check. The critical thing for insurance is if you don't pay it on time, you

02:33you don't have coverage. So it's really, really important for the insurance companies to get their money faster, cheaper, and automated. Insurance company has two bad choices today. They either can use paper checks, which means they have to wait, they have to collect, takes them a long time, and then if they don't get the money on time, basically, you lose your insurance coverage for their business, or they run and they take credit card payments. So, you know,

02:53you named off one of the credit card companies. Problem with the credit card payment is is basically it costs 3% for you to receive. All credit card companies cost cost this in... This way. So if you're... Let's say, we work with mid... Midsize companies. So if you're a 50 or a $100,000,000 company, just to receive your money might cost you a million dollars, which is, you know, absolutely insanity for effectively moving ones and zeros back and

03:19forth between banks. So what we do is help them move their money automatically, digitally, and without fees. And so that's a that's a big, big deal. So

Nathan Latka

03:27So I forget which chain it was. Maybe it was Walmart just announced they weren't taking, I think, Visa credit cards anymore because of how aggressive they are. Are they about to announce that they have fallen in love with Jeremy Almond and PayStand is replacing Visa?

Jeremy Almond

03:39Yeah. I mean, so I... Honestly, the the retail the retailers hate credit card fees, but I think they've got a bigger challenge, which is, you know, we as consumers, we we use credit cards all the time. You know, I've got a cup of coffee here. I swiped my credit card to to do it. But it's different in the commercial case. So in our commercial case, right, these are companies that you've worked with for, you know, a

04:01decade. You have contract terms that salespeople have argued about for for years that say, I'm gonna pay on net 30 terms, which means I'm... When I get an invoice, I'm gonna pay thirty days later. So there's very, very clear sort of terms that dictate how you get paid. And so really what PayStand's focused on is making sure that process can be automated, and those don't really need to go through credit cards because, know, at the end

04:23of the day, I know this company. I've got terms associated to it. So so the credit card model just doesn't work there.

The Flat-Fee SaaS Business Model

Nathan Latka

04:29How do you make money if you're not taking a percentage?

Jeremy Almond

04:32Yeah. So so we kind of think of us as like the Netflix of the industry, which is we've we've... We're trying to move the industry from a transactional model, sort of this blockbuster go in and rent something, to a fixed cost SaaS model. And so we charge a monthly subscription amount for for a customer and it's sort of all you can eat.

Nathan Latka

04:51And what would you say? I'm sure you have loads of different cohorts, but on average what's the customer paying you per month?

Jeremy Almond

04:56Yeah, so on average our customers pay us about $1,500 a month. They go up much higher and there's a few that's a little lower than that.

Nathan Latka

05:04And if I pay you that, what am I getting? Is it you can process up to a 100,000,000 of transaction volume per month before you have to go to the next level?

Jeremy Almond

05:12Yeah. I mean, so so normally the cohorts can be, you know, let's say a million to $10,000,000 is sort of a certain size company, 10,000,000 to to 50,000,000 is a certain size company. So generally, the cost for us is just around support. So, you know, a company that's got 5,000 employees is a little bit more support for us than a company that's, I don't know, five employees.

Nathan Latka

05:31And put this all on a timeline for me. When did you launch the company?

Jeremy Almond

05:352014. So we've been out about four years now. Really, really early days, especially when you look at blockchain. We think we're sort of ending to it at a very long game on on trying to change how commercial banking is done.

Nathan Latka

05:46And how many folks... How many of these commercial entities are using you today in terms of, you know, how many customers you're at?

Jeremy Almond

05:51Yeah. So so we have about 50,000 businesses on our payment network. You know, if you put that into scale, there's $18,000,000,000,000 in commercial payments in The US alone still done in paper checks, so we've got a really long way to go. But, you know, I think we're we're we're one of the fastest growing companies that are using blockchain in a real meaningful way, and so I think that's that's important. And, you know, we're we're doing material

06:12volume at this point. So early days, but it's going okay.

Nathan Latka

06:15What's material volume? I mean, are are we talking 10,000,000,000 a month, 1,000,000,000 a month? What's material in your perspective?

Jeremy Almond

06:21So so at this point, we're doing tens of million a day. Right?

Nathan Latka

06:21Okay.

Jeremy Almond

06:21And so, you know, so it's it's pretty decent. Right?

Nathan Latka

06:28Okay. And then if I take... My math is gonna be wrong here, you're gonna have to correct me. If I take those 50,000 customers times that average price point, you just said a 1,500 per month, that puts you at... You guys are making 75,000,000 a month. You would be taking out to a steak dinner and we're doing this... Be doing this interview in a penthouse if that was the case. So where where are my numbers wrong?

Jeremy Almond

06:45Yeah. So so we have sort of two sides of the network. We have a receivable side and the payable side. So you... Again, you can think about, like, Venmo. You have two people on both sides. So we we basically charge for the receivable side of the product because effectively, you know, you as a CFO care about speeding up your time to cash, getting your money quicker and at lower cost. Most of the b two b payment

07:07industry actually charges for the other side, which is the payable side. We think that that's actually less important. Our sort of point of view is that's a vitamin problem. Meaning, you know, it's nice for for for your AP to to not write a paper check, but that's not super, super critical for the boardroom level. And so we effectively charge a very, very different amount on the payable side than we do on the receivable side.

Nathan Latka

07:29I see. So that 50,000 number included both sides?

Jeremy Almond

07:32Both sides. Yeah. Exactly.

Nathan Latka

07:34On the receive... Break that down for me. The receiver side, how many are you working with?

Jeremy Almond

07:38So so we don't publish those numbers, but the the receivable side, you know, you can think of it... It's an asymmetric network. Right? Most receivable companies, right, like they have at least a 100 customers generally, so so you can kinda think about how the, you know, the ratios will play out.

Nathan Latka

07:54Yeah. I'm just trying to get a general sense if we're talking like your high touch of a 100 a 100 enterprise customers or if you're talking maybe more mid market, maybe you have 10,000 folks on that side. Would you say you're more high touch or...

Jeremy Almond

08:06We're we're we're we're we're we're we're we're we're we're

Growth Rate Year Over Year

Jeremy Almond

08:17customers

Nathan Latka

08:17Yep. Fair enough. On the upside. And then what do you what... You know, you're we're only four years in, but it sounds like you're growing in a meaningful way. What are you growing at right now year over year?

Jeremy Almond

08:27Yeah. So right now year over year, we're growing... The first couple years we grew five x. This last year we grew at nearly four x, and this year we'll probably grow at three and a half x.

Nathan Latka

08:36Okay.

08:37So just to be clear, from 2016 to 2017, and you're talking about transaction volume or actually your revenue four x?

Jeremy Almond

08:44Both. Transaction volume is probably a little higher. So it's transaction volume, I think we grew five x last year. So

Nathan Latka

08:49And you're aiming for... Sorry. You said three or four x this year?

Jeremy Almond

08:52Yeah. That's right.

Where Growth Is Coming From

Nathan Latka

08:53Three x this year. Very good. And where's most of the growth coming from? More more volume through current customers or building the network, getting new people in the network altogether?

Jeremy Almond

09:01It's mostly new... Net new right now. You know, I think one of the things we certainly will grow as the company gets more mature is is, you know, so how how do we continue to grow the base internally? You know, one one of the the the good things about payments in general is it's a very, very sticky system. You know, the the vast majority of the... Of businesses in America still are using paper checks, which was

09:21built in the Middle Ages. So so so something from, you know, 1,200 AD hasn't changed, which means once we get in there and we we move over to digital, it's it's a very, very sticky product. So... But but right now, we're really focused on growing the network. We're really not as focused on growing internally the sort of business lines. We will do that eventually, but not now.

ARR Milestone and Timeline

Nathan Latka

09:41Jeremy, I won't push any harder on this after this question, I promise. When do you think you'll pass, call it, 5,000,000 in ARR in terms of a run rate?

Jeremy Almond

09:48We're not far off from doing that.

Nathan Latka

09:50Do think it'll be this year?

Jeremy Almond

09:53We're not very far off now.

09:54So

Nathan Latka

09:54Okay. That's good. That's great. Walk me through...

Jeremy Almond

09:57Could be this year, whatever.

Unit Economics and Banking Infrastructure

Nathan Latka

09:58Good. Walk me through walk me through some of the the the kind of economics around building a marketplace like this. So what is it costing you to onboard one of these new customers typically?

Jeremy Almond

10:09Yeah. We do have... So the economics, we we, you know, we we still have to... So we federate with 18,000 banks. So, you know, not everything is like this pure blockchain world yet. We think that's eventually where it goes. But because that... Because we have to federate with banks, we have to actually set up accounts, and so that has costs associated to it. And so that... That's a lot of our costs, so sort of the banking

10:32costs of the underlying infrastructure to support

10:36whether it's, you know, settling back into your bank or whether it's sort of dealing with the legacy banking infrastructure. I think one of the things we we do there is we meet the customer where they're at. So we don't require, you know, all 50,000 customers to move over to an entirely digital method day one. And and our our point of view on that is is it's it's sort of like Netflix. Right? You know, these days, you

10:59and I... We we binge watch Netflix, right, on Saturday watching watching stranger stranger things things or whatever. It's all digital. It's all HD directly to our our living room. You know? But when Netflix started, there were still a lot of DVDs. So what did they they start doing? They shipped, you know, red envelopes everywhere just to to get people into the behavior of, hey. Don't go into Blockbuster. Instead, move to this model that's gonna be a

11:21different pricing model, an all you can eat model. Right? And we're gonna move you over to this digital thing over time. And so we're sort of in that process right now. People still, you know, very heavily reliant on commercial banks. And so a lot of our cost is is sort of using the legacy infrastructure to move people over to the digital

Nathan Latka

11:21incentivize those banks?

11:39Is there a kickback per person they sign up or or no, it's not that straightforward?

Jeremy Almond

11:44Yeah. So we we don't sell... It's interesting. We don't sell to the banks. We certainly partner with them. We had a big announcement about a partnership a couple weeks ago with Silicon Valley Bank and First Data, but we generally look at the banks as partners, not as sort of economic drivers for us. So so... And the thing that with banks is... This might have been different five years ago, but the banks know where they're good at

12:07and and what they're not good at. And the reality is they're not software companies, and companies like us are not banks. Right? And so, you know, I think we're we're kinda learning who's who's the right lanes to stay in, which is we can create great enabling software for a digital age, and, you know, a bank can do all of the things that they're good at, which is around regular... Regulatory licensing compliance, sort of trust risk models,

Churn and Retention

Jeremy Almond

12:29those sorts of things.

Nathan Latka

12:29What does your churn look like?

Jeremy Almond

12:32Yeah. So that's one of the things I think we're really proud of is, you know, from a net basis, we have negative churn. And

Nathan Latka

12:32You're talk...

12:38Just to be clear, you're talking,

12:40you have net negative revenue churn annually?

Jeremy Almond

12:42Yeah. Correct. So... And I and I... And again, I think that's because if you... Once once you get people in the payment network that's entirely digital, you're not moving back to paper check. Right? And so, you know, I think we have a very defensible business, which, you know, we feel very blessed about, and, you know, we're continuing to make the product more mature over time.

Team Size and Office Locations

Nathan Latka

12:59What's your team size today, Jeremy?

Jeremy Almond

13:02We're still small, 30 people. We're trying to, you know, like every... Everybody in the valley, I think, grow as fast as we can.

13:07So

Nathan Latka

13:07You said 30 or one three?

Jeremy Almond

13:1230. So... Yeah. So very lean team.

Nathan Latka

13:14Yeah. Sorry. Jeremy, I I can't... Three zero or one three?

Jeremy Almond

13:1830.

Nathan Latka

13:19Three zero. Great. And is everyone based... Where's everybody based?

Jeremy Almond

13:22Yeah. Most everyone is based in our California office, which is in Scotts Valley, which is great. It's not far from San Francisco, and it's also very close to the beach, which is, you know, sort of great mix. And then we have a small office that's growing pretty quickly in Guadalajara. So that office, you know, we opened up at the beginning of this year. And then we have a very, very small office in Canada, which is basically

13:43a fulfillment center. Does that make

Nathan Latka

13:43Very good.

Famous Five

Nathan Latka

13:45Let's wrap up here with the famous five. Number one, what's your favorite business book?

Jeremy Almond

13:49Famous business book. Founders at Work, probably.

Nathan Latka

13:52Number two, is there a CEO you're following or studying right now?

Jeremy Almond

13:56Oh, I would say that's... I mean, you know, you you have to follow Benioff, right, in the in the b to b world.

Nathan Latka

14:04Yep.

14:05Number three, what's your favorite online tool for building your business?

Jeremy Almond

14:08Right now, I'd say we're big HubSpot fans.

Nathan Latka

14:11Number four. How many hours of sleep are you getting every night?

Jeremy Almond

14:15Probably four to six.

Nathan Latka

14:16Okay. So not bad. And what's your situation? Married, single, kids?

Jeremy Almond

14:20Married. Very, very happily married and excited to be going on a vacation with the love of my life in a week.

Nathan Latka

14:25And no kids?

Jeremy Almond

14:26No kids.

Nathan Latka

14:27Alright. And how old are you, Jeremy?

Jeremy Almond

14:29I am... Let's see. How old am I? I believe I'm 36.

Nathan Latka

14:3236. Alright. Last question.

Jeremy Almond

14:34I think so.

Nathan Latka

14:34What what do wish your 20 year old self knew?

Jeremy Almond

14:37I don't know. My 20 year old self was very happy and my 30 year old self is even more happy. So, you know, I think life is just a... Is is... It's a blessing, and I feel grateful for kind of the journey.

Nathan Latka

14:49Guys, life is a blessing. Enjoy the journey. Again, back in 2014, launched paystand, a b to b version of a of a... I think like a b to b version of, like, a Venmo or something like that. Paystand is growing fast, $12,000,000 raised. They went... They grew about four x year over year from 2016 to 2017, aiming to grow about three x or four x this year from 2017 to 2018. Their customers pay them, call it, on average

15:111,500 per month. Their... You know, the innovation is they're not charging on a percentage of revenue through platform model or percentage of receivables receivables through the model. It really is a flat fee. So hoping to hit that $5,000,000 ARR mark here in the next quarter, 0.5, or three quarters or so. Healthy economics, net negative revenue churn annually with our team of 30 based between California, Guadalajara, and Canada. Jeremy, thanks for taking us to the top.

Jeremy Almond

15:34Awesome. Thanks, Nathan. Appreciate the time.