Richie! So excited to do this interview with you. To set the stage, tell us a little bit about who you are, what it's been like building Finix, and your journey so far.
Hey Dez, likewise. My name is Richie Serna, I’m the CEO and co-founder of Finix. Finix is an acquirer processor that works with tech-enabled merchants, marketplaces and software platforms to embed payments, which creates a better product experience, and ultimately adds a new revenue stream to their business. I've been in the payments space now for about 10 years; I got my start in the payments world at a startup by the name of Balanced. Balanced was actually the first payments API ever designed specifically for marketplaces, predating Stripe’s Connect product. We ended up selling that business to Stripe back in 2015. Shortly after that, I started Finix.
Amazing. And one question I think that we should address head on is, you're directly competing with Stripe. They're one of the largest privately-owned startups out there today. They're one of the stalking horses of the IPO window. They’re incredibly well capitalized, and have a who’s who of investors, so my question is - how do you think about competing with the juggernaut that is Stripe? And then how do you think about competition generally and instilling a sense of urgency across your organization?
We have never shied away from that competition. But one of the things I always tell our team is: we're not building for the sake of competition, we're building for our customers. Our very first company value is: Customer First. And that's how we approach every single decision we make, because what's going to make or break the business is our customers. They're the ones who keep us up at night. We've always been in this business to build an incredible product experience for them. That said, we love competition. Competition is great for innovation, and it's great for the ecosystem. We don’t just compete — we consistently win. If Stripe didn't think that we were legitimate competition, we’d still be a Sequoia-backed company*.
I've always thought about competition in two dimensions, intrapersonal and interpersonal. There’s competing against ourselves and there’s competing against others out in the market. The way I frame it to the team is: Think of it as two types of bike riders. There are people who want to race bikes and see if they can beat the person next to them. Then there's the type of person who wants to race to see how fast they can push themselves. Both of those forms of competition are incredibly healthy, and beneficial. That's something we try to instill in our team, and something we look for in talent– people who like to push themselves and push their teammates. It’s something that's really special about our team and culture.
* Finix and Sequoia parted ways following Finix’s Series B. Sequoia, also an investor in Stripe, purportedly reversed its investment in Finix due to a conflict of interest.
Do you think that Finix as an org leans one way or the other, toward more intra or more interpersonal competition?
We have a healthy mix of both.
I always remind the team that startups are a team sport. There's no way anyone could build a payment company alone, right? Payments are the perfect intersection of back-end, front-end, product design, compliance, legal and a host of other things. And you have to be incredibly good at all of those things, which requires a unique team dynamic. I mentioned earlier that our first company value is customer first. In practice, that means our decision making process is to first do what’s right for the customer, then Finix, then their department, their team, and then themself. When you combine personal ambition and customer-first focus, you have people who are pushing for their own personal growth, but also people who are pushing to build a better product than the competition.
As a leader, how do you think about tying your cultural values to your incentives? You know keeping in mind the Buffet/Munger idea of, “Hey, if you show me the incentive, I'll show someone's behavior.” When you think about that kind of stack rank of prioritization you just described, how do you think about the incentives within your structure and within your organization as well?
We've always been pretty honest with people that you can likely find a larger cash salary elsewhere. However, if you're looking for a long-term investment, it's in the equity value we’re building. This transparency orients the entire company around long-term investments. It takes a specific type of person who can think in terms of long-term horizons. We tell everyone: “We're not building for the next year, we're building for the next 10 years. We're making decisions that are going to benefit your equity and your upside.” For people who are attracted to that concept–and there's a lot of people who come to Silicon Valley because they want to build something that's going to be huge – they want to build something that doesn't just realize value at the IPO, but continues to grow. That cultural value self-selects people in or out. If you're optimizing for upfront and immediate cash, this is not going to be the place for you. And I think we've been pretty good about recognizing that it's okay to be polarizing, that it’s okay to draw the line in the sand of who you are and who you're not, of what you value and what you devalue.
What's your end ambition for Finix? You mentioned you guys are building for kind of not the next year, but the next 10 years. Where do you see that going?
Our mission is to build a global operating system for fintech. A big part of this mission hinges on how we view the macro world, and our belief that vertical SaaS companies are the banks of the future. In a not-too-distant future, you're going to have restaurants, retailers, and merchants who stop going to the Chases and the Wells Fargos of the world, and instead go to the SaaS platforms that power the day-to-day operations of their businesses for all of their commercial banking products, including payments. We see ourselves powering these vertical SaaS companies.
In terms of ambition, taking the company public is just one milestone. Being a core piece of the global economic infrastructure that's processing trillions of dollars around the entire world is the most exciting ambition for us. That's what really gets us going. It’s incredibly exciting to be able to travel the country today meeting with our partners and know that a huge portion of the money movement is going through our system.
There’s been quite a bit of news recently about Finix becoming a processor. Could you explain why this is such an important milestone and what it means for Finix and your customers?
It’s helpful to start with what it means to be a processor, because most companies who process payments today are not processors. Very simply, a processor is a company that connects directly to the major card networks.
The key here is that only a true “payment processor” maintains a direct integration to the proprietary card network systems. Only a select few companies are allowed to connect into these systems. It requires tens of millions of dollars in R&D, high upfront integration fees, costly insurance policies, minimum card volume thresholds, numerous compliance certifications, and more. Most payment providers are built on top of one or more of these processors and therefore only as good as the underlying processor’s infrastructure they are built on top of.
A lot of people don’t realize that today, 80% of the market is controlled by the top four processors– all of which were built in the 90s before mass adoption of the internet. And the reality is that their technology is starting to fail due to outages, disjointed integrations, poor customer support and a host of other issues. The market needs more competition and options, including a reliable modern payment processor to build embedded payments on.
As a processor, Finix is able to remove third-party dependencies and provide a better payments experience for our customers in five main ways: 1) Higher availability, 2) Richer and more transparent data, 3) Faster product velocity, 4) Support for new industries and international markets, and 5) Dramatically faster time to market for payment facilitators.
Incredible. That's incredible. So we dove right into the business side of things, but do you mind sharing some of your personal story?
I like to joke that my life has been a series of happy accidents. I was a management consultant for my first two and a half years out of college, then I tried unsuccessfully to break into the private equity and hedge fund world. The more I interviewed and the more final round offers I got rejected from, the more I realized that the industry wasn't meant for me. In that process I was reading tons of tech blogs– this was around the time Facebook was going public and Pinterest was becoming a thing– and I recognized that there’d probably never been a time in human history where someone under the age of 30 with a laptop could go off and start a multi-billion dollar company that had a huge impact on the world or a particular industry. That was incredibly exciting, so I decided then to get into the startup world. I worked on a number of ideas, but I kept getting stuck at a certain point when I couldn't build the prototype. So I realized I had to learn engineering myself if I wanted to get something off the ground.
I ended up moving to San Francisco in 2013, living in a hacker house with bunk beds. It was a hostel for engineers and startup founders. While I was living in that hacker house, I met the Balanced team who’d built the first payments API for marketplaces and platforms. Balanced was only 10-15 people in a small office in SoMa, made up of some of the best engineers around, and I told them “I will work for food.” They gave me a giant, hunking laptop that had the loudest fan of all time and they put me in charge of managing developer integrations, which meant I was teaching people how to integrate into our APIs in iOS, C#, Python and Ruby, simultaneously learning every programming language. There’s no better training ground in payments and engineering than working in support engineering, because that's where you learn how things break and how things work in great detail because you have to explain it to other people. I ended up getting a full-time job at Balanced as an engineer and worked there for about two and a half years. Shortly after that, we got acquired by Stripe. That’s when I went off and started Finix.
Yeah. And what did that kind of experience to the early days of building Balanced, not necessarily teach you as an engineer, but teach you as a founder, as a future founder in the fintech space?
Working at Balanced was probably the best education I've ever received. I've always optimized for learning, and one of the most difficult things is trying to figure out how to materialize an idea into something real. When you go to a 10-person startup that’s trying to reinvent the world of payments, which is incredibly esoteric, very domain-specific, and hasn’t been innovated upon in a few decades, you have to get really creative and learn how to run through walls. You have to understand the jargon and the intricacies of how these poorly documented systems work. It’s a masterclass in reverse-engineering complex problems.
One contention I have is that so much of company building, succeeding in a career, and even relationships, comes down to communication. Clear, concise, and consistent communication. Do you have any anecdotes where clear and crisp communication yielded the outcome you wanted?
The hardest part about communication is when you assume information is being shared, but realize you still need to repeat something ad nauseam. This gets even harder as your company scales. I’ve talked to the team about how we overscaled from our Series A to Series B in terms of organizational structure— we admittedly got too top heavy. If you think about the communication hierarchy of having VPs, then directors, then managers, then individual contributors, that's four layers through which the broken game of telephone can happen. And if you're scaling fast from your Series A to your Series B, most of those people are new. They're new to the organization, they're new to the industry, they're new to your unique nomenclature. It is very easy for people to get really confused really quickly. Revisiting your org structures and operating cadences really helped us better communicate and in turn perform better.
That's a really interesting perspective. It got me thinking about the velocity of your organization. Do you think about velocity in the context of your organization structure?
Someone shared that Elon Musk used to think about organizations in terms of vectors. Every vector has direction and it has magnitude. If you have two vectors going in different directions, they actually create drag. Your job as the CEO is to make sure that all those vectors align because when you align them, it amplifies the magnitude that they have. They can go faster, they can go farther, they have more strength.
So, one thing that you talked about very early on is actually a thesis that we have here at FirstMark. We believe the future of financial services will be distributed via software. As someone enabling that future, could you unpack that idea a bit more?
One of the best illustrations of this concept in the market today is Toast. Toast provides software to restaurants, allowing them to take and organize reservations, accept orders, and ultimately, accept payments. Prior to Toast, restaurants had one software provider that helped them manage the restaurant, but their financial ecosystem was entirely separate and manual. At the end of each day, they still had to aggregate all of their bills, tally up the amounts, and do manual reconciliations. Imagine doing that day after day, and year after year. Toast has completely flipped that on its head, and is pushing even further into financial services. They lead with payments, but they have ambitions of growing banking and lending components, all delivered through software. There’s never going to be a Toast bank branch that restaurants walk into. It’s all digitally based, like the rest of their business management.
So let’s say I’m an early stage vertical SaaS founder. Maybe seed or Series A. I’ve got my core software up and running, ARR is growing month over month. I’m pumped. My investors come to me and say. “Hey Dez, it’s probably a good time for you to layer in payments.”
And I think this is a critical question, but why would I go layer in payments via Finix versus layering in payments via Stripe?
The difference between Stripe and Finix is similar to the difference between iOS and Android. iOS, as we know, is very much a closed garden. It's this proprietary system created to be able to charge users a premium for their products. Stripe is similar; they offer one set of devices, one risk model, and one distribution model. Finix is more like Android in that we give our customers more configurability and control along with better economics. For example, we offer a far broader suite of hardware devices. We understand that the form factor and price point of devices matter. The device that works for the restaurant isn’t going to work for the plumber.
Yes, so if we simplified the comparison between you and Stripe to the idea of building better, faster, cheaper products and your contention is that Finix is better and cheaper. Do you also believe you enable your end customer to operate faster?
That’s a good way to capture it. The distinctions also show up in who each party is building for. For Finix, we're delighting the developer, but we're really building for that back office persona who's focused on how they can make a profitable business out of their payments.
So as we think about vertical SaaS as a market, we’ve got clear leaders like Procore, like Toast, like MindBody and DealerTrack as well. For the most part, those businesses have focused their fintech monetization on payments.
When you think about Finix, is payments where you’re planting your flag? Are you only going to be payments infrastructure, or do you also get excited about lending infrastructure and banking infrastructure? Helps us understand how you see the world.
Our vision is to build the global operating system for fintech. We say fintech and not payments because we think of payments as our first charter. People want to have one set of APIs to consume payments, lending, issuing, and Banking-as-a-Service. They don't want to have 10 different integrations to be able to support them; that would create a huge developer and compliance burden as well as excess operational overhead. We want to be the single solution for the industry.
Richie, I think we hit all the big high level questions so I want to start wrapping up and get to some of the final questions. The first question for you is actually about the Cap Table Coalition. Could you tell us about that initiative? Why is it so important to you and your work?
The Cap Table Coalition is an organization we started to create more opportunities for diverse venture capital angel investors. It’s not much of a secret that the VC community is an incredibly homogenous group that’s difficult to break into.
Typically, if you are a VC or interested in venture capital and you want to get a job at a firm, you have to build a track record or you have to go to a certain set of schools to be able to break in. The top deals usually end up going to the top 15 or 20 VC firms, and those end up being the deals that create the most generational wealth and value in the industry. Our approach to diversifying VC access was to create The Cap Table Coalition, with the mission of getting founders to commit 10% of their fundraise to investors of color. This helps underrepresented investors build a track record that they can carry with them for the rest of their career. It’s a springboard for people and it can demonstrate how people can do well, while doing good.
Love it. Next question. In three words or less, can you describe the culture at Finix?
Passionate, selfless nerds.
I think we have a really incredible team. I know everybody always says that they have the best team, but I mean, I genuinely believe that we have one of the best cultures and teams in the world. It's an incredible mix of hardworking, passionate, good-hearted individuals who put the team and the customers before themselves.
And so, the last question is a question I ask in every one of these interviews because it's something that I feel very strongly about. I think our country would be much better off if some of our best and brightest people didn't stay in fields like consulting or banking or hedge funds, et cetera, and decided, just like you did, to build their own company. And what I always like to do is make sure that people get to hear first hand from people like you, that they can hear relevant, direct anecdotes from.
So, my last question for you is: What advice would you give to any founders who are looking to build in fintech?
Spend two or three years at a Series A or Series B startup. I think a lot of folks go into the industry without any sort of understanding of the language, the players, the infrastructure, and it can be very difficult to navigate. Young startups offer an incredible way for people to get in at the ground floor and really understand what it means to take a vision and turn it into reality. My other advice for founders in fintech is to anticipate up front that starting a company is going to take three to five times as long as you thought it was going to take. So, be patient. Don’t get me wrong, having that sense of urgency is absolutely critical, but expect everything to take longer than you expect.
Richie, it’s been an absolute pleasure man. Thanks so much for taking the time.
Absolutely Dez, keep doing what you do and thanks for having me.
