Productfy Revenue, Valuation & Funding (2023)

[00:00] Hey folks, my guest today is Duy Vo. He started productfy with the thesis that financial services is moving to the edge where the user experience is. He's a product leader having spent much of his career at FinTechs and Insurtechs and is deeply passionate about financial services because he believes that the sector is both huge, massive opportunity, and a tremendous moral obligation to do societal good. And it's largely failed our most vulnerable populations. He believes the democratization [00:23] of financial products and is committed to changing the way financial products are built for good. Duy, you ready to take us to top? [00:30] >> Yes, sir. Really appreciate the opportunity to be here, Nathan. [00:33] You bet. Okay, so tell us about the product. Describe your customer. Who are you selling to? [00:37] >> Yeah, so maybe I can give a little bit of a context before that about the fundamental problem that we're trying to solve for. It's that right now financial services is a zero sum game. I take money from you, I lend it to your neighbor, I make as much money as I can in between, that's how I earn my living. What we fundamentally have to ask ourselves is that if we wanted to engender a kinder, more compassionate, [01:01] >> more empathetic, more socially just financial ecosystem, there has to be a change in how people view financial services. So we realized that we needed to create a marketplace for companies who aren't into banking, who aren't into financial services to better serve their end users. Imagine the power of a university that can offer a secure checking, a secure credit card, checking, savings account to its student. They'll them build credit. [01:27] So, you would just be clear, I'd love to talk about this through your customers. Is that one of your early customers or university? [01:34] >> No, no, no. Our early customers are all fintechs at this point. They basically have integrated with our APIs. But what we wanna do is we wanna expand beyond the world of fintechs and move into clients that are not solely financial services. [01:52] Okay. So I guess just let's talk about where you are first, then we can go talk about sort of where you're going. So can you maybe name a customer that's paying you today and sort of explain how they're using you? [02:01] >> Yeah. So [02:04] >> actually, Nathan, I actually, I need to double check with our commercial teams on like where we can name clients yet. I'm not sure if we can name specific clients, but I'm happy to talk about use cases if that Yeah. [02:19] Only talk about what you can talk about. I mean, everyone under NDA? Or mean, sometimes obviously you have case studies and things. Is there a real customer you can name? [02:27] >> Yeah. I mean, again, I want to make sure I align with our commercial team on what our broader messaging is. We just historically haven't named specific clients on these calls, and we just talk about use cases that we try to solve for them. [02:39] Okay, cool. Yeah, it's way more effective to talk about an actual customer using it than sort of general high level use cases, which is why I'm digging there. So if you can't talk about a specific customer, that's fine. We can talk about more of the backstory. [02:50] >> Yeah, mean, we like, I can tell one of our customers, they're creating a card that's optimized for people who travel a lot, right? Creating the right travel experience. And so they're using us, they're basically using our card rails, launching first with debit card, and then eventually in Q1 they're going be launching with a secured credit card and eventually unsecured credit card. So right now they're live transacting in our system. We offer wires, deposit accounts, ACH, and [03:20] >> debit cards. [03:22] Okay, got it. Very interesting. And so, what does a customer like that pay you to use the technology? [03:27] >> Yeah. So, we try to be very, very startup friendly. So, we're talking very, very minimal program management fees in the hundreds of dollars until you go live and into the low thousands per month. And then we charge on ACH, on KYC, [03:44] >> on wires, and then we split the interchange on revenue. We split the interchange rev share. [03:51] Okay. So again, usually like all this, you know, fintech, you know, there's like generally 300 bps up for grabs, really anytime money moves hands and everyone sort of approaches it a different way. Right? So when you say you make money on ACH, you explain to me how that might work. [04:03] >> Yeah. So so on ACH, we we charge a flat fee. [04:06] Okay. Of how much? [04:08] >> It it varies by volume. [04:10] Oh, I see. Okay. If I'm just getting started with you, if someone listening right now wants to sign up for your platform, what are they gonna pay you on ACH? [04:14] >> Just starting. I think it's like 10¢ per ACH. [04:17] Oh, interesting. Okay. So super small. And then obviously, scales down with volume. Which one of these is your is your most used tool, by way? ACH, KYC, Wires, and Airchange? [04:26] >> So, [04:29] >> think when you say most used, right? Like, I wanna make sure that we're talking about the same thing. Because if you think about it, you cannot open a card until you do KYC. Right? So technically, KYC is the gateway to everything. [04:44] So nothing is possible without KYC. [04:46] >> But [04:46] obviously So how do you make money there since that's the first step? [04:50] >> Right. So, you know, we offer, you know, we have a BSAML department that does checks, but then we have the full suite of automation around KBA questionnaires and around document verification. So, every time you use one of those tools, you know, we charge you a small fee. [05:10] Flat fee, one time. [05:11] >> Flat fee, one time. Yes. A dollar [05:13] or under a dollar? [05:15] >> It depends on where in the water flow you end up, right? If you right off the bat, we have very clear indication if we know who you are, you don't have to go down further steps. But if like, hey, maybe [05:30] >> there's not sufficient information here, we have to go pull additional data, we have to have you upload your driver license, then that's additional steps in the waterfall. [05:39] Assume the cheapest one. So let's say I'm a really easy customer. My information is out there, you can find me, you don't need me to do extra steps. [05:45] >> Yeah. I think our first level KYC is I think something like 60 to 70 cents or something like that. [05:52] Oh, super convenient. Okay. Got it. [05:54] >> Cool. Cool. [05:54] Cool. Alright. Great. And then obviously you get into wires and interchange and what is that? We're talking like ten, twenty bps there? [05:59] >> Yeah. So wires, flat fees as well. No, no, no interchange on wires. Like we try to be really, really friendly with startups. [06:08] Okay. Got it. So flat, meaning you're talking like under a dollar per wire? [06:12] >> I don't remember that number off the top. Okay. [06:15] Okay. Do you make are any of these structured as a percent or is it all flat fee? [06:20] >> So interchange off of card spend is BPS. Everything else is structured as a flat fee. [06:26] Okay. What were you able to carve out for yourself? I'm always interested folks trying to carve out of the there's only 300 BPS up for grabs. Right? So what'd you carve out? [06:33] >> I think that depends on the use case. Commercial is very different than personal, and credit is very different than debit. I think what we look at is we look at a per customer usage, and then we try to figure out what makes sense because we want to ultimately help our clients be successful. So a lot of that is looking around their use cases and figuring out the bips you make when you go to a restaurant is [06:57] >> very different than the bips you make when you're shopping at a grocery store. There are certain requirements if you're going to do a signature bin versus a non signature bin. And then, obviously, and personal are two very different bin types. Secure versus debit are two very different BIN types. So, it really, really does depend on our clients'use cases. [07:20] Okay. I want to get off of pricing and capture more of your story, sort of product vision, your back backstory here. So let's just take an average here, right? The average customer looking at all the product lines that you offer them are going to pay you what? Like a thousand bucks per month once they're onboarded? [07:33] >> I mean, terms of flat fees or in terms of like, because obviously [07:37] Recurring monthly. [07:39] >> Right. So that, like what they pay us also, if they're doing more ACH volumes, they're gonna pay us more. [07:44] I understand that. More KYC's, I understand that. That's what I'm asking. So you would then have to do the calculation in your head. What is the average customer? How many new KYC's are they processing every month? Or how much interchange BPS am I earning from it? Like, what's sum it all up together? It's like a sweet spot sort of one to five ks per month per customer? [07:59] >> Yeah. I think it's probably safe to say one to five ks is probably the right number. Yeah. [08:05] And do you wanna stay and sort of limit and, you know, do like high volume of customers but low ARPU? Or do you anticipate moving upstream and only working with people doing a million KYC's per month? [08:15] >> What we actually want to move more towards is to enable organizations that don't have engineering teams, that don't have compliance teams, that don't have servicing teams, to be able to launch a financial product. And so that's the model that we are now exploring going into Q1 of next year. Because fundamentally, we're going to take on a lot more program management responsibilities, right? We're going to make more on the transactional fees rather than on program fees because [08:44] >> a lot of these clients aren't set up to know how to run these programs. So we're going to set up to basically set them up to be almost zero cost for them to get up and running, and really just make money as they scale. Because we're the program management and we actually run the entire program. We're targeting non fintechs. And so, it's a different business model that [09:06] But you're starting with fin it's kinda weird, right? You're starting with fintechs, but you're telling me you're targeting non fintechs. [09:12] >> Well, we're starting with fintechs because that's what we started out building as APIs. Right? If you look at like [09:18] In what year? What year? [09:20] >> This year. [09:21] You just launched in 2021? [09:23] >> We we we we launched our our products. That that has taken off in 2021. [09:27] When did you write your first line of code for the business? [09:30] >> 2018. [09:32] Okay. Got it. How did you fund yourself for the past two years? [09:35] >> We raised $280,000 of pre seed fund, and we were just doing small projects, getting paid for certain integrations, and just trying to get by in the first two years. [09:45] The hustle is real, right? Hustle is real. Okay. First customer, though, onboarded this year? [09:52] >> First customer onboarded with the platform that is currently scaling onboarded this year. We had a prior version of the platform that, you know, we were just trying to get MVP out to get some revenue in. [10:04] But [10:05] >> this year, we released a brand new platform, and that's what the with the entire cohort of clients are launching on. [10:11] I see. And and what's the cohort size today? How many customers are on the platform? [10:15] >> I'm not sure that we're releasing that information publicly yet. [10:20] Okay. We're talking like a hand I'm talking like five or like 500? [10:23] >> It's it's more than five. But it's it's not it's not in the hundreds. [10:28] Got it. It's a handful of enterprise accounts that you're onboarding meticulously, slowly, and making sure you get the product fit right. So you're talking like five to twenty, thirty, something like that. [10:36] >> Yeah. It's somewhere between five and a 100. [10:39] Okay. Okay. Fair. Got [10:43] it. Fair. Alright. So talk to me more about sort of backstory here. Did you come from embedded finance or somewhere? What got you into this? [10:49] >> Yeah, I just spent a lot of time in financial services. You know, really love it. Really wanted to think of a way to build financial services in a way that is kind of more compassionate. That's kind of been my passion. And that's why I really wanted [11:02] to be But why though, Duy? Why? Were you scarred? Did something happen to you where you're like, Wow, this is totally this is pure injustice. I need to fix this. [11:09] >> I mean, for me, you know, first generation immigrant. I was homeless in high school, didn't know how to access financial services. Yeah, I mean, I that's probably my experience. [11:20] Well, mean, that would do it, right? You experienced it firsthand, so that makes complete sense to me. Me more about the team today. How many folks? [11:30] >> Right now, we're at 30, but, you know, we're already adding two more in January. [11:35] And what is the mix? How many of those folks are engineers? [11:39] >> So, engineering collectively is 17 people. [11:43] 17. Okay, cool. And I mean, so what does the motion look like? Do you have to hire inbound sales folks to onboard some of these financial institutions, fintechs? [11:50] >> So, financial institutions are different. Financial institutions are handled by our bank partnerships and financial operations team. The onboarding of our clients is handled by our servicing team. And then the actual commercial team is [12:04] >> what you would expect from a sales organization. So, three different areas of responsibility. [12:09] I see. I see. Okay, cool. And then talk to me a little bit more about, but you've chosen, I think, raise capital and keep pouring fuel in the fire. What happened after the 280,000 seed? [12:19] >> We raised our seed round 2.35 back in And [12:23] August '20 [12:31] >> then we did a $16,000,000 Series A back in April of this year. And then we're going to be out fundraising [12:40] >> sometime next year for a Series B. [12:42] Most folks, obviously, when they're doing that Series A, you know, in today's market, it's kind of crazy, but it's selling between 10 to 20% of the business. Were you serving that standard range or do you do something crazy? [12:53] >> I would say, you know, that range is in the ballpark. Yeah. [12:56] Okay, cool. Why, like, you know, some founders who maybe have done Razee in the past and it scarred them might say, you know what? I'm only raising a 60,000,000 series A if 80% of it is secondary for early employees or, you know, do some sort of crazy stuff. Did you have any of those historical experiences where you've changed like the model and you've thought differently about how to raise? [13:16] >> No, don't. I mean, I don't think we did anything crazy. Don't think we did anything crazy. [13:22] No, no, I'm asking you. I don't know. That's why I'm asking. [13:25] >> Oh, I I thought what we did was pretty standard. Yeah, I mean, you know, we made sure that we took care of our employees. [13:35] >> But, yeah, I mean, the dilution is probably, you know, in line with some of the numbers that you said before. [13:40] Mhmm. And then most pre seed rounds these days, I mean, sometimes, know, did you do a price run or you do it, say, on the 2.3? [13:47] >> That that was a price round. [13:48] Oh, you did decide? Why did you decide to price it? Did you have a seed round before that on a safe? [13:53] >> We we had a pre seed round on a kiss note, not a safe. Okay. Then, we did the price round on seed of the 2.35. [14:02] And the [14:02] >> reason why we did it is there was this person that we really, really wanted to work with. He's our board member today, Dave Matter. And his firm had a, I guess, a standard way of doing business. For Seed, they do price rounds and that's just the way we and we really wanted to work with him. [14:22] Sounds like Sunny and the crew at Point72, right? [14:25] >> Yeah. Sunny is one of the people there, but Sunny wasn't the person who was our board member or working. [14:33] No, that makes sense. Okay, cool. And then, so again, somewhere between five and sort of a 100 customers say like, look, if we look at like 40 or 50 customers at a 1,000 ARPU, I mean, you guys are somewhere around $50,000 a month right now in revenue? [14:44] >> We're definitely not releasing any revenue numbers out there. And so that's, yeah, that's probably not something that I'm comfortable discussing. [14:52] What can you discuss so you can help my audience understand what multiples look like today? You just raised, you know, 16,000,000 Series A, right? What revenue should my listeners be hitting before they think about their Series A? [15:01] >> I think, you know, I'm hesitant to to encourage anyone to abstract from our experience simply because, you know, like like, fast infrastructure versus, you know, you know, like [15:15] Totally. I knew there's nuance there's nuance every there's nuance everywhere. [15:18] >> Yeah. Mean, that's That's [15:18] we that's why we ask for data points. [15:20] >> Yeah. Yeah. It's it's it's a little bit more difficult for me to share some of those for updates, especially, you know, if yeah. I I just I just think that's of, sensitive data that I that I'm I'm not sure that we're comfortable sharing at this point. [15:31] Yeah. I mean, look, what we can do is mean, you said between five and a 100, right? So assuming your minimum five customers at a thousand bucks a month minimum, you're doing more than $5k a month in revenue. I think you're doing much more than that, but we can serve conservatively, that's what you're choosing to show. [15:41] >> I could say we're definitely doing quite a five ks a month in revenue. [15:45] Cool. Can you share anything more in terms of like what year you broke a million dollar run rate? [15:52] >> Again, I'm just a little bit nervous about like, you know, sharing information that I just haven't fully thought through like what has already been shared on like the TechCrunch articles and things like that. I'm just not sure what we're ready to share at this point. [16:08] Yeah, that's totally fine. What is the revenue goal for the end of next year? So you're not sharing current numbers, you're sharing sort of where you want to be at the end of next year. [16:16] >> Yeah, I think a lot of it is, you know, we've seen, multiples of growth month over month. So, it's hard to say because next year we're going to be releasing secured credit cards in Q1 and then unsecured credit in Q3. We're just just going going to like even if nothing else changes, like just going back to the bips, the fundamental ways the bips are going to be calculated are going be fundamentally different, which is going to [16:47] >> be a huge, huge change in the revenue alone even if we added no new clients or anything like that. So, it makes it really, really difficult at this point. This is part of the Series B exercise that we're going to go through and we're going to kind of project out these things, but that's the exercise we're going through in the next, you know, one or two months as we ramp up to get ready to go to [17:08] >> Series B, is to kind of come up with these kinds of projections. [17:11] Well, what was the big sales pitch in the Series A? Again, I mean, mostly Series A, depending on whatever, $2 to $3,000,000 revenue, 40x multiples, you've got to have some of these bets in those decks. What were the bets in the Series A deck? [17:22] >> Yeah. So, what we're able to focus on is the early traction that we have, the usage numbers that we had, and the [17:31] client Which usage numbers though? What numbers? [17:34] >> The number of [17:37] >> accounts that were linked on [17:40] >> our site, the ACHs that executed on it, and then the beginning of the roadmap around card issuance, which we launched back in July, the launch of our debit card program. So, those things allowed us to get a Series A. [18:00] Can you share any of those three numbers? So, maybe not connected accounts, maybe ACH volume to the platform? [18:05] >> I don't know if we shared the ACH volume, but I think the number we shared was between on the TechCrunch article was, I think, between January and August, I think it was like 150,000 production users got added to our system. And then, I think that was the number that we shared on the TechCrunch article. [18:28] Yeah, but again, people, I don't want to listen, people listen to this episode and go, Man, that was a big waste of time. I could have read in a TechCrunch article. I don't want you to just cite things you've already said. Is there anything you can share that you haven't already shared? [18:37] >> Otherwise, we [18:37] wouldn't do the interview. [18:39] >> Yeah, I'm just, I'm hesitant [18:42] I understand that. Is there anything you can share that you haven't already shared is my question. I understand you're hesitant. [18:49] >> I think, you know, I can talk about the release of our flagship product [18:56] >> January, which is something that we generally haven't talked about yet. [18:59] Well, I get that. Mean, that's a marketing pitch for a product, though. I'm trying to understand your ability to execute, right? So 150,000, you know, 150 ks production users added between January and August is a great real data point. Can you share what that number was between August and today? [19:12] >> I think the let me think about this. I'm trying to give you a sense of numbers or scale [19:23] >> without giving out specific numbers that we haven't fully vetted yet. I think it's probably safe to say that our debit card transaction volume [19:36] >> grew by, I think, [19:41] >> somewhere between 2.5x to 4x between October and November, and we're probably going to 3x that from [19:51] >> November to December. I think that's probably like that's a number that we haven't released anywhere else. And it talks to kind of the reason why we're really excited about cards. [20:01] Now, I mean, you're good at what you're due because going from $1 in October to $3 in November is 3x growth. Right? Those numbers are useless without understanding what the base was in October. [20:11] >> Yeah. Yeah. No. I I understand that. I understand that. It's just we're I mean, these are the numbers we can share today. We just [20:19] When did you launch the debit card? [20:21] >> We launched it in in July. [20:24] Okay. So it's fair to say there was some base built up. It's not like you were starting at a dollar in October and grew that 3 x to $3 in. Yeah. Okay. Fair fair enough. By the way, look, you know, I can predict you're not gonna comment on this, but we get so many data points on series A companies. I mean, right? 3,200 interviews done. Most series A companies today are generating somewhere between a 100,000, $120,000 [20:46] in revenue per employee, and you shared 30 team members. So we can kind of back into like 2 to $3,000,000 run rate. Obviously, can't comment on that, but my audience knows how to do that math and they can sort of think about it that way. Tease the product before we wrap up, because I know you wanna talk about it, the January launch. Talk a bit about that product before we go into the famous five. [21:03] >> Yep. So, what we're looking for is to enable any organisation without an engineering team, without a compliance team, without a servicing team, to launch a financial credit union like experience in less than a week. That's kind of what our goal is for 2022. So, 2021, in January, we're going to enable any organization without an engineering team, without a service team, without a commercial, without a compliance team, to launch a financial product with direct deposits, DDAs, debit [21:32] >> cards, ACH and wires in less than a week. And then, can add on secured credit card, unsecured credit card, secured credit card in Q1, unsecured credit card in Q3, and then unsecured lending at the end of the year. [21:45] Alright, Quinn. Duy, you haven't mentioned team. Are you sole founder? [21:50] >> Yes, I am. [21:51] Ah, very cool. So that sometimes is hard for VCs to get comfortable with. How did you de risk that for them? [22:00] >> I've been lucky to work with some really amazing people. [22:03] Okay. Come on, Duy. Gotta be specific here. So most I know Sunny does this. I'm fairly certain you're Series A folks, Centimeters would have done this as well. Do they take a big chunk of the shares you've already invested and put you back on a vesting schedule in that term sheet where you only invested 30% and now the rest is on a four year schedule? [22:19] >> Yeah, I think, you know, let's just say that I'm very much aligned with the long term success of this company and the investors know that I'm there for the long run and I'm incentivized to be there with the company for the long run. [22:32] Okay. So you're not going to be specific there. Got it. We'll move on and finish up with the famous five. Number one, favorite business book. [22:41] >> It's not specifically a business book, but it's algorithms to live by, which is which is something that I use in my day, everyday life, including how I think about business. [22:48] Number two, is there a CEO you're following or studying? [22:54] >> No, not any one specific CEO. [22:57] Number three, what's your favorite online tool for building the business? [23:02] >> Probably AngelList. [23:04] Number four. How many hours of sleep do you get every night? [23:07] >> Oof. Weeknights, somewhere between five to six. Weekends, I usually get like, you know, nine hours a day. [23:16] Okay. And what's your situation, Duy? Married, single, kiddos? [23:20] >> Married, one baby girl. [23:23] One girl. Okay. Very cool. And how old are you? [23:25] >> I am geez, this question should be easy to answer. I am 38. [23:30] Okay. And take us home here. Something you wish knew when you were 20. [23:38] >> That quote, persistence is omnipotent. It's by Calvin Coolidge. It's this whole quote about like the power of persistence. [23:44] Guys, there you have it, productfy. He was homeless in high school, had a really hard time entering the financial system, and now he's solving that with productfy, helping to bring power back to folks that maybe were disenfranchised from the current financial system. He's got between five and a 100 customers already on the platform, moving towards helping non FinTech companies do things like launch a credit union in under a week. They have raised $16,000,000. Series A sold, [24:06] call it, pretty standard between 1028% of the business. 30 folks on the team today has looked to continue to scale heavy engineering with 17 there. Duy, thanks for taking us to the top. [24:14] >> Thank you so much, Nathan, and hope you have a wonderful rest of your week. [24:19] 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 [24:44] 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 [25:07] fundraise, a big sale, a big profitability statement or else. I don't want you to miss it. Additionally, if you want to 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 [25:28] 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, I do it so that we can all learn. We have to counter those people. We got [25:48] 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.