Bootstrapping a FinTech Startup by Piggybacking with Services: Quavo Co-Founder David Chmielewski (Part 4)

Sramana Mitra: You knew the specs of what needed to be built. That kind of domain knowledge is invaluable.

David Chmielewski: Right. We knew what we wanted to build. We already built it. Our flagship product is a dispute system. At BoA, I had already built three of them. We didn’t have a single line of code, but I knew what we had done and I knew how to make it better. I know First Tech saw that. We were all confident that we could do this.

Sramana Mitra: My next question is about the contract negotiation. If you are planning to productize this, you have to get buy-in from First Tech to get their permission to do that.

David Chmielewski: That’s definitely important. This was true for any of our financial services clients. If we could, we would work it into the agreement that we would retain the IP for what we built. There were some configuration points that we wouldn’t own but, for our software, we would retain that. First Tech, being entrepreneur-friendly, had no problem with that. Most of our clients never had a problem with it, but it needed to be in there. We needed to make sure that’s clear.

Sramana Mitra: Later on, it’s not much of an issue because you’re selling the product. In the first case where you don’t have a product, you’re basically selling the concept and you’re asking people to pay for building that product. That’s a services project. You have to structure that services project with IP retention rights. That’s a very crucial IP contract negotiation.

David Chmielewski: That’s true. We gave First Tech a sweetheart deal. They had a license to use our software in perpetuity.

Sramana Mitra: How much did they pay you?

David Chmielewski: I’m not sure. It was a very good deal for them.

Sramana Mitra: Was it a good deal for you? Did you get cash?

David Chmielewski: Yes. If we had built First Tech from a pure hourly standpoint, it would have been far too expensive. They paid us a flat rate. At the end of the day, we had to put however many hours into it. It was a fixed price. That gave them the confidence that they wouldn’t be underwater on this thing as far as the budget is concerned. It gave us enough money to put our work into it and make sure that we’re at least making a little bit of money.

Every employee that we brought in got a paycheck from day one. We didn’t really promise anything other than paychecks. We certainly gave some shares out to the original folks as well, mostly in lieu of bonuses. It was enough for both organizations to have some protection. First Tech wanted us to be around, so they wanted to pay us something. While our other services agreements were hourly, this was not.

Sramana Mitra: Now you’ve got a product. What year are we in now?

David Chmielewski: Probably about 2017. We signed around March and went live in June or July. It took about three months to build.

Sramana Mitra: You’ve got your product and they’ve got their software. Now you can go out and sell this to other people. Talk about how you did that. Talk about how you got your next customers.

David Chmielewski: That’s also a good story. First Tech is a leader and edgier than some other credit unions. Word spreads. Some of the other credit unions saw what we were doing. We had our partner Pega who helped us sell as well. We started going to other potential clients and selling. We were successful.

One thing I would say that we were not as successful as we would like is we sold some of these other clients on having their own applications. First Tech was even along those lines a little bit. Make sure you have a product and you have an opinion. Don’t give in to somebody who thinks they want something really custom. We built a lot of custom things into our software at the behest of some of these clients because we needed to pay our bills. We’re just now getting to the point where we’re unraveling some of that stuff.

This segment is part 4 in the series : Bootstrapping a FinTech Startup by Piggybacking with Services: Quavo Co-Founder David Chmielewski
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