Podcast Summary
Overcoming Challenges in Early B2B Fintech: A Founder's Perspective: Focus on solving unique customer pain points, don't let fear of competition hinder growth, and build a solid foundation for your business.
For early B2B Fintech founders, acquiring the first set of customers and building trust are common challenges. Dmitry Gadimov, co-founder and CEO of Modern Treasury, shared his experience of founding the payment operations platform in 2018. Modern Treasury was born out of pain points at Lending Home, where Dmitry managed the investing side of a marketplace. The underlying technology involved a website for investors to create accounts, fund them, and build a portfolio, along with financial money movement aspects, which required managing a large number of payments. The lack of Fintech infrastructure at the time made it challenging to connect to banks and build financial connections. Dmitry advises not to overthink competition and instead focus on solving the unique pain points of your customers. The process of developing new features is similar to birdwatching, where you need patience and focus to identify and address the needs of your market. Most new businesses fail not by homicide but by suicide, meaning, don't let fear of competition hold you back. Instead, focus on building a solid foundation and delivering value to your customers.
Bridging the gap between tech and finance teams: Modern Treasury offers an API and dashboard-based product that connects technology and finance teams, providing equal access to financial information and streamlining operations.
The founders of Modern Treasury identified a common pain point among companies, particularly infrastructure firms, where there was a need for better connectivity between technology and finance teams to manage financial transactions effectively. The solution they proposed was an API and dashboard-based product that would bridge this gap, allowing both teams equal access to crucial financial information. The MVP of Modern Treasury consisted of three key components: an API for initiating and reconciling payments, a dashboard for finance teams to monitor transactions, and an integration to the bank. By focusing on these features and starting with support for ACH and wire transfers, Modern Treasury aimed to provide a comprehensive solution for companies seeking to streamline their financial operations.
Building trust with potential customers in finance industry: Focusing on smaller companies with fewer resources led to successful onboarding and building trust in the finance industry
When building a financial technology solution, establishing trust and addressing the concerns of potential customers, especially those in the finance industry, is crucial. The founders of the company identified this challenge early on and focused on working with startups and the banks that served them. Building an MVP took around 10-12 weeks, but finding the right customer and going live took an additional 5 months. The approach to finding customers was multi-faceted, involving outreach to larger companies with no success, and then shifting focus to smaller companies with fewer resources and less established finance teams. This strategy allowed for a more successful onboarding process.
Understanding the Complexity of a Customer's Business: Startups with complex products require deep understanding and trust in a solution provider. Initial customer research should be broad and focused on learning as much as possible.
Our first customer's decision to use our solution was based on the complexity of their product and their trust in us. They were a small healthcare benefits startup that required a sophisticated money movement system due to the nature of their business. We initially focused on seed series startups and reached out to companies with curiosity about how they were solving similar problems. Our customer research continued even after building the MVP, helping us understand the landscape and complexity of the problem across different types of companies. We didn't distinguish conversations with different people during this stage, but our approach was to keep it broad and learn as much as possible.
Defining roles and responsibilities for a founding team: Clearly defining roles and responsibilities within a founding team can improve decision-making, build trust with early customers, and demonstrate long-term commitment to the business.
Clearly defining roles and responsibilities within a founding team can significantly improve decision-making and build trust with early customers. By creating a spreadsheet of all the tasks that needed to be handled and assigning primary and secondary responsibilities, the team was able to streamline decision-making and ensure that one person was always the go-to person for specific topics. Additionally, having a personal relationship with early customers and demonstrating a long-term commitment to the business were crucial in building trust and securing their first payments. It's important to remember that trust is not only built on technical competence but also on the ability to deliver consistently over time. As a founder, it's essential to address the question of longevity and show that you have a solid plan and the resources to see the business through.
Building trust with early customers in a startup: Founders should demonstrate commitment, avoid frequent pivots, develop personal relationships, signal seriousness through growth, and educate potential customers to build trust and confidence in a startup.
Building trust with early customers in a startup, especially in infrastructure, requires conviction and consistency. Founders need to demonstrate their commitment to the product and the long-term vision, avoiding frequent pivots and notifications that might raise doubts. Developing personal relationships and signaling seriousness through growth and new features can help build trust. This approach can also be seen as marketing to existing customers, signaling legitimacy and stability. Additionally, founders should focus on creating a category and educating potential customers about the problem they're solving, as payment operations was not yet a well-defined software category when the speaker's company started. Overall, the key is to build trust and confidence through personal relationships, consistency, and education.
Approaches to Automating Payment Processes: Design products for both manual and automated payment processes, offering manual intervention when necessary and providing APIs and UIs for automation. Clarify industry terms to differentiate and establish leadership.
Every company approaches the problem of automating payment processes differently, depending on their industry, size, and founders' backgrounds. Some companies prioritize engineering solutions and automation from the start, while others prefer manual methods. It's essential to consider both approaches when designing a product to ensure it caters to both automation-focused and manual-focused businesses. Product design should allow for manual intervention when necessary and provide APIs and UIs for automation. Additionally, defining industry terms like "payment operations" or "money movement" helps clarify the emerging category and establish a company's leadership role. Rachel Pike, the first employee at the company, played a significant role in defining how they talked about their product category to differentiate themselves in the market.
Identifying and defining a unique problem in the payment operations space: Building a strong marketing presence and involving everyone in the company in selling can help attract customers and validate the need for a solution, even before bringing on a dedicated sales team.
Focusing on a specific, real problem and building a strong marketing presence can help attract customers and validate the need for a solution, even before bringing on a dedicated sales team. The speakers discussed their experience of identifying and defining a unique problem in the payment operations space, and how they generated inbound leads through content marketing and bank referrals. They emphasized that everyone in the company was involved in selling and engaging with potential customers, allowing them to validate the problem and refine the product before fully committing to a sales strategy. This approach allowed them to ensure the product was a good fit for the market and build a strong foundation for the company.
Importance of payments experts and prioritizing feature requests: Stay informed, prioritize, and adapt to build a successful payments company. Focus on small, incremental changes to build something useful for a large number of people.
Building a successful payments company involves continuous learning and prioritization. The speakers discussed the importance of having a team of payments experts (the "payments nerds") who can stay up-to-date with industry regulations and trends. Prioritizing feature requests was also highlighted as crucial for scaling a business. Using the analogy of discovering new bird species, the speakers explained that in the beginning, feature requests may seem random and all over the place, but as you talk to more customers and do product discovery, you discover that many requests are for small, incremental changes. It's important to focus on these requests to build something useful for a large number of people. When working with larger companies, the way trust is built and quantified is different, and companies have more defined ways of understanding and measuring it. Therefore, it's essential to adapt and answer these questions in a way that aligns with their scale and understanding of their business. Overall, the key takeaway is that staying informed, prioritizing, and adapting to the needs of your customers are essential for building a successful payments company.
Focus on customers and product development: Understand customer use cases, prioritize product development over business model, and deliver a valuable product to customers while being responsive to their feedback.
Focusing on building a great product for customers and delivering value to them is crucial for a company's success, rather than obsessing over competition. The speaker emphasizes the importance of understanding customer use cases and stories, as well as being aware of new ideas and improvements. He also mentions that companies often fail due to internal mistakes, so founders should prioritize avoiding these mistakes. For early-stage founders, the speaker advises spending more time on product development and less on business model and pricing in the initial stages, as they may not fully understand how their product will be used. Ultimately, the key to success is delivering a valuable product to customers and being responsive to their feedback.
Focus on building a product people love before monetization: Early stage companies should prioritize creating a product that resonates with users over charging for it. Once a strong foundation is built, monetization strategies can be explored.
For early stage companies, it's crucial to build a product that people love before focusing on monetization. Dimitry Dratvin, a partner at Andreessen Horowitz, emphasized this point during a podcast episode of "My First 16." He explained that while charging for a product is important, it's even more critical to understand the value your product brings to customers. If you don't charge anything, you won't discover the true willingness to pay, which can be problematic. However, Dimitry emphasized that the primary focus should be on creating a product that resonates with users. Once you have that foundation, you can then explore monetization strategies. In summary, building a product that people love should be the top priority for early stage companies, and monetization can follow.
