Productfy Revenue, Valuation & Funding (2023)

hey folks my guest today is yuibo he started product five with the thesis that financial services is among the fastest is moving to the edge where the user experiences he's a product leader having spent much of his career at fintech and in suretex and is deeply passionate about financial services because he believes that the sector is both huge mass opportunity and a tremendous moral obligation to do societal good and it's largely failed our most vulnerable populations he believes the democratization of financial products and is committed to changing the way financial products are built for good you are you ready to take us to the top yes sir really appreciate the opportunity to be here nathan you bet okay so tell us about the product describe your customer who are you selling to yeah so um maybe i can give a little bit of a context before uh before that about the fundamental problem that we're trying to solve for is 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 more empathetic more socially just financial ecosystem there has to be a change in how people view financial services so we realized that 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 a student help them build credit so just to be clear is i'd love to talk about this through your customers is that one of your early customers or university no no our early customers are all fintechs at this point um we they basically have integrated with our apis but what we want to do is we want to expand beyond the world of fintechs and move into um and move into uh uh clients that are not uh solely financial services okay so so i guess just let's talk about where we are first then we can go talk about where you're going so so can you maybe name a customer that's paying you today and sort of explain how they're using you yeah so um uh actually uh nathan i actually i i need to double check um with 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 yeah only talk about what you can talk about i mean is is everyone under nda or i mean sometimes obviously you have case studies and things is there a real customer you can name yeah i mean we um again i i want to make sure i align with our commercial team on on what our our broader messaging is we we just historically have a named specific clients um on these calls and we just talk about use cases that we try to solve for them okay cool yeah it's 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 back story yeah i mean we you know we like i can tell one of our customers they they're creating um a card that's optimized for 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 um launching first with debit card and then eventually um in q1 they're going to be launching with a secure credit card and eventually unsecured credit card so right now they're live transacting our system we offer wires deposit accounts ach and um and uh and uh debit cards okay got it very interesting and so what does a customer like that pay your prompt to use the technology yeah so um we we try to be very very startup friendly so um we're talking very very minimal um program management fees in the hundreds of dollars until you go live and it's the low thousands and then uh per month and then we charge um on ach on kyc um on wires and then we we we split the the interchange on revenue uh we we split the interchange rev share okay so again usually like all this you know fintech you know there's like generally 300 bips 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 yeah so so an ach we charge a flat fee okay of how much um it it varies by volume 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 going to pay you on ach they're starting i think it's like 10 cents per stage oh interesting okay so super small and then obviously scales down with volume um which one of these is your is your most used tool by the way ach kyc wires interchange so um uh i i think when you say most use right like i want to make sure that that we're talking about the same thing because if you think about it um you cannot open a card until you do kyc right so technically kyc is the gateway to everything yeah so nothing is possible without kyc but obviously so how do you make money how do you make money there since that's the first step right so you know we we you know we we offer um you know we have a bsml department that does checks but then we have the full suite of automation around kba questionnaires um and around uh uh document verification so um every time you use one of those tools um you know we we charge you a small fee flat fee one time flat fee one time yes like like a dollar or under a dollar um it depends on it depends on where in the water flow you end up right if if you right off the bat we you know you know we have very clear indication if we know who you are then then you you don't have to go down further step but if like hey you know maybe maybe um you know 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 assume the cheapest one so let's say i'm a really easy customer my information's out there you can find me you don't need needing to do extra steps yeah i i think i think our our big our first level kyc is i think something like 60 70 cents or something like that oh super super convenient okay got it cool all right great and then obviously you get into wires and interchange and what we're talking like 10 20 bips there yeah so wires flat fees as well um no no interchangeable wires like we try to be really really friendly with um with uh with with startups okay got it so flat i mean you're talking like under a dollar per wire um i don't remember that number off the top okay okay do you make a d are any of these structures as a percent or is it all flat fee um so uh interchange off of card spend is is bips everything else is structured as a as a flat fee okay so what were you able to carve out for yourself i'm always interested folks trying to carve out of the there's only 300 bits up for grabs right so what'd you carve out i think i think that depends on the use case commercial is very different than than personal and credit is very different than that so i think what we look at is we look at a per customer usage and and then we try to figure out like what what makes sense because we want to ultimately help our clients be successful so a lot of that is looking around their use cases um uh and figuring out like you know you know the bits you make when you go to a restaurant it's very different than the bits you make when you're shopping at a grocery store right um the you know there are certain requirements if you're going to do a uh you know a signature bin versus a non-signature bin so there you know and then obviously commercial and personnel are two very different bin types um secure versus debits or two very different dim types so it really really does depend on on our clients um uh uh like use cases okay i want to get off of pricing capture more of your stories or product vision your backstory here um 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 um i mean in in terms of in terms of like flat fees or in terms of like because obviously occurring monthly right so that like what they pay us also if they're doing more ach volumes they're going to pay us more i understand that more kyc's i understand that that's what i'm asking so you would then have to do the calculation your head what is the average customer how many new kycs are they processing every month or how much interchange bips am i earning from like what's a sum it all up together it's like a sweet spot sort of one to 5k per month per customer um yeah i think i think it's probably safe to say one to 5k is probably the right the right number yeah and do you want to stay and sort of limit and you know do like high volume of customers but low rpu or do you anticipate moving like upstream and only working with people doing a million kycs per month what we actually want want to move more towards is is to enable organizations that don't have engineering teams that don't have compliance team 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 to to to make more on the transactional um fees rather than on like program fees because a lot of these clients aren't set up to know how to run these programs so we're going to set up to to basically um uh set them up to be almost zero cost for them to get up and running and really just make money as they scale uh because we're the program management uh of uh uh and and we basically run the entire program and we're targeting non-fintechs and so it's a different business model that but you're starting within it's kind of weird right you're starting with fintechs but you're telling me you're targeting non-fintechs well we're starting with fintechs because because because that's what we started out building this api right you look at like in what year what year this year you just launched in 2020 one uh we we we launched our our products um that that has taken off in 2021 when did you write your first line of code for the business uh 2018. okay got it how did you fund yourself for the past two years um we raised two hundred and eighty thousand dollars of precede fund and we were just doing like small projects uh getting paid for certain integrations and just trying to get by in the first two years and the hustle is real right hustle is real okay so first customer though on board of this year uh first customer on board with the platform that is currently scaling on board it this year we we had a private version of the platform that that that you know we were just getting like trying to get mvp out to get to get some revenue in but i see this year we release a brand new platform and that's what the with the entire cohort of clients are launching on i see and what's the co-work size today how many customers on the platform um i'm not sure that we're releasing that information publicly yeah okay we're talking like a hand i'm talking like five or like 500. uh it's it's more than five but it's it's not it's not in the hundreds got 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 yeah it's it's somewhere between five and a hundred okay okay fair fair um uh got it fair all right so talk to me more about sort of backstory here did you come from embedded finance or somewhere what got you into this yeah i just spent a lot of time financial services um 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 my passion and that's why we really wanted you about why though you e why were you scared did something happen to you where you're like wow this is totally this is pure injustice i need to fix this um i mean for me you know first generation immigrant i was homeless in high school um didn't know how to access financial services um yeah i mean i think i think that's probably like my experience well i mean that would do it right you experienced it firsthand so that makes complete sense to me um tell me more about the team today how many folks uh we we right now we're at 30 but you know we're already adding two more in january and what is the mix how many of those folks are engineers uh so product engineering uh collectively is 17 people 17. okay cool and i mean so what does emotion look like do you have to hire like inbound sales folks to onboard some of these financial institutions fintechs so so financial institutions are different financial systems are handled by our bank partnerships and financial operations team uh the onboarding of our clients is handled by our servicing team and then the actual commercial team is the is like the you know is what you would expect from a sales organization so three like different areas of responsibility i see i see okay cool and then um talk to me a little bit more about uh but you've chosen i think to raise capital to keep touring full on the fuel on the fire what happened after the 280k seed um we raise our seed round uh 2.35 back in 2.3 yeah 2.35 back in back in uh what is it august of 2020 and then we did a 16 million dollar series a back in april of this year and we're going to be out fundraising um uh sometime next year for a series b most folks obviously when they're doing that series a you know in this today's market it's kind of crazy but it's selling between 10 and 20 of the business were you serving that standard range or do you do something crazy um i would say you know that ranges into ballpark yeah okay cool why like you know some founders who maybe haven't raised vc in the past and it scarred them might say you know what i'm only raising a 60 million series a if 80 of it is secondary for early employees or you know do some sort of crazy stuff do you have any of those historical experiences where you've changed like the model and you've thought differently about how to raise um no i don't i mean i i don't think we did anything crazy i don't think we did anything crazy no no i'm asking you i don't know that's why i'm asking oh i yeah i mean i i i thought what we did was pretty standard um yeah i mean we you know we we made sure that we took care of our employees um but yeah i mean the the dilution is probably you know in line with with some of the numbers that you said before and then most like pre-seat rounds these days i mean sometimes did you do a price run or you do the safe on the 2.3 uh that was a price map oh you did just why did you decide to price it did you have a seat around before that on a safe uh we we had a precede round uh on a kiss note not a safe okay um then then we did a uh then we did the price round on the seed of the 2.35 and the reason why the reason why we did it is um there was this person that we really really wanted to work with um he's our board member today dave matter uh and his firm had a i guess a standard way of doing business and and for seed they they do price rounds and that's that's just the way and we really wanted to work with him he was like sunny in the crew at 0.72 right yeah yes sunny is one of the people there but you know we sonny um uh what was it the person who who's our board member or work yeah yeah i know that makes sense okay cool and then so so again somewhere between five and 100 customers say like you know look if we look at like 40 or 50 customers at a thousand dollar rpm i mean you guys are somewhere around 50 000 bucks a month right now in revenue um we're definitely definitely not releasing any revenue numbers um out there and so that's uh yeah that's definitely not something i'm comfortable discussing what what can you discuss so you can help my audience understand what multiples look like today you just raised you know 16 million series a right what revenue should my listeners be hitting before they think about their series a i i think you know i'm hesitant to to um to encourage anyone to abstract from our experience simply because you know like like fast infrastructure versus you know you know like i mean there's new ones there's new ones everywhere there's new ones yeah yeah i mean that's why we that's why we asked for data points yeah yeah it's it's a little bit more difficult for me to share some of those uh from data especially you know if um yeah i i just i just think that's of like sensitive data that i that i'm not sure that we're comfortable sharing at this point yeah i mean look what we can do is i mean you said between five and a hundred right so assuming your minimum five customers at a thousand bucks a month minimum you're doing more than five grand a month in revenue i think you're doing much more than that but we can conserve conservatively that's what you're choosing to show i i could say we're definitely doing more than 5k a month in revenue yeah cool can you share anything more in terms of like what year you broke a million dollar run rate um again i'm just i'm just a little bit nervous about like you know um sharing information that uh that you know i just haven't fully thought through like what what what has already been shared on like the tech crunch articles and things like that it's just um i'm just not sure what we're ready to share at this point yeah that's totally fine um 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 yeah i think i think um i think a lot of it is is you know we we've seen you know multiples of growth um you know month over month so it's hard to say because next year we're going to be releasing uh secure credit card in q1 and an unsecured credit in queue in q3 um we're just gonna we're just gonna like just even if nothing else changes like just the going back to like the bips like the fundamental ways the bibs are gonna be calculated can be fundamentally different which is gonna be a huge huge um change in the revenue alone even if like we we added no new clients or anything like that so it makes it really really difficult at this point um this is part of the series b exercise that we're going to go through and we're going to 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 as we ramp up to get ready to do our series b is to kind of come up with these kind of projections well what was the big sales pitch in the series a again i mean mostly series a and depending on whatever two three million revenue 40x multiples you've got to have some of these bets in those decks what were the bets in the series a deck yeah so uh what what what we're able to focus on is is the early traction that we have the usage numbers that we had um and which numbers though what what what numbers um the number of uh of of uh of accounts that were linked on our uh on our uh on our site the achs that were that were executed on it and then the the uh and then the the beginning of the roadmap that uh around around card issuance which we launched back in in uh july was was uh was was the launch of our debit card program so so those things allowed us to to to get a series a can you share any of those three numbers so maybe not connected accounts maybe ach volume to the platform um i don't know if we shared the ach volume um but i think the number we shared was between um on the techcrunch article was i think between january and august i think it was like 150 000 uh production users got added to our system um and then i think that was that i think that was the number that we shared on techcrunch article yeah but again people i don't listen people listen this episode and go man that was a big waste of time i could have read a techcrunch article so 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 otherwise we wouldn't do the interview yeah i'm just i'm hesitant to to like i understand that is there anything is there anything you can share that you haven't already shared as my question i understand you're hesitant um i think you know we're i can talk about like the the release of of our of our flagship product in in in uh in january which is something that we we generally haven't talked about yet well i get that i mean that's a mark 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 k production users added between january and august is a great real data point can you share what that number was between august and today i think i think the i think though let me think about this i'm trying to give i'm trying to give you a sense of of of numbers or scale um without without like giving out specific numbers that we haven't fully vetted yet i think i think it's probably safe to say that our debit card transaction volume um grew by i think somewhere between two and a half to four x between october and november and we're probably going to 3x that uh from from you know november to december i think that's probably like that's a number that we haven't released anywhere else um and it it it talks to kind of the reason why we're really excited about cards now i mean you're good at what you do because going from a dollar in october to three dollars in november is 3x growth right so those numbers are useless without understanding what the base was in october yeah yeah no i understand that i understand that it's just we're i mean these are the numbers we can share today um but when did you launch the debit card um we launched it in in july 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 you threw that three x to three dollars and okay fair enough by the way look you know i can predict you're not going to comment on this but we get so many data points on series a companies i mean hundreds right 30 200 interviews done most series a companies today are generating somewhere between 100 120 000 bucks in revenue per employee and you shared 30 team members so we can kind of back into like two to three million dollar run rate obviously you can't comment on that but my audience knows how to do that math and they can sort of think about it that way um tease the product before we wrap up because then you want to talk about it the january launch talk a bit about that product before you go into the famous five yep so um what we're looking for uh is to enable any organization without an engineering team without a compliance team without a servicing team to launch a financial pro a credit union-like experience in less than a week that's that's that's kind of what our goal is for 2022. so in 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 uh ddas debit cards ach and wires in less than a week and then we can add on secure credit card unsecured credit card uh secure credit card q1 unsecured credit card in q3 and then unsecured lending um at the end of the year all right quinn uh huey are you you haven't mentioned team are you sole founder yes i am oh very cool so that that sometimes is hard for vcs to get comfortable with how did you de-risk that for them um i you know i've been lucky to work with some really amazing people um okay come on you eat got to be specific here so most mo i know sunny does this uh i i'm fairly certain your series a folks cm would have done this as well do they take a big chunk of the shares you've already invested and put you back on investing schedule in that term sheet where you only invested 30 percent and now the rest is on a four-year schedule yeah i think i think you know let's just say that i'm very much aligned with the long-term success of this company and and and the investors know that that i'm i'm i'm there for a long run and i'm incentivized to be there with the company for the long run okay so you're not gonna be specific there uh got it uh we'll move on and finish up with the famous five number one favorite business book um uh it's not specifically a business book but it's algorithms to live by which is um which is something that i use in my everyday life including how i think about business number two is there a ceo you're following or studying um no i not not not any one specific ceo number three what's your favorite online tool for building the business um probably probably angel list number four how many hours i sleep to get every night oof uh weeknights somewhere between five to six weekends i usually get like you know nine hours a day okay and what's your situation we married single kiddos uh married uh one baby girl one girl could very quiet how old are you uh i am uh geez this question should be easy to answer i am 38. okay um and take us home here something you wish you when you were 20. um that uh quote persistence of is omnipotent is by calvin coolidge it's this whole quote about like the power of persistence guys there you have a product that was homeless in high school was had a really hard time entering the financial system and now he's solving that with product phi helping to bring power back to folks that maybe were disenfranchised from the current financial system he's got between 500 customers already on the platform moving towards helping non-fintech companies do things like launch a credit union under a week they have raised 16 million bucks series a sold caught pretty standard between 10 and 20 percent of the business 30 folks on the team today's books huge scale heavy engineering with 17 there ue thanks for taking us to the top thank you so much nathan and hope you have one for us a week one more thing before you go we have a brand new show every thursday at 1 pm central it's called shark tank for sas 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 1 pm central additionally remember these recorded founder interviews go live we release them here on youtube every day at 2 p.m 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 sas world whether it's an acquisition a big fundraise a big sale a big profitability statement or something 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 sas 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 for that at nathan lacka dot com forward slash slack in the meantime i'm hanging out with you here on youtube i'll be in the comments for the next 30 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 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