Twin Brothers Building a FinTech Venture: Stephen Roche and Gabino Roche, CoFounders of Saphyre (Part 4)

Gabino Roche: We also got ideas. There was some nomenclature we would encounter along the way. We had to come up with intelligent ways without the client knowing what we were trying to do. They had to see words the way they understood them. We had to create a smart way of mapping that data. That is what we did, but we didn’t have a working product.

We officially started in May 2017. It wasn’t until the end of September that we had a product that we could get tested. It was not ready for production; it was just for testing. I knew I was going to run out of my brother’s money at this point.

I had been journaling every week. I spend three to four hours writing a weekly update. There was no one to tell other than me and my brother. I felt a great weight on my shoulders to take money from anybody, but I had friends and family who believed in me. I never asked a favor in my career until Saphyre. My chiropractor and ENT heard about what I was doing and they were interested. I didn’t want to take money until I was certain.

This journal that I talked about is mental weightlifting. When I say I want to tell a story about success, I would look at who I met, what I did, and how I designed the product. What do I want to tell you next week or a few weeks from now? I quickly identify the gaps in order to fulfill that story. It makes you proactive and you start thinking of ways that connect in your mind.

I feel very passionate and strong about this because I feel a lot of people think they have it in their head, especially if you haven’t gone through the exercise of writing the notes and trying to produce this yourself. I feel more at peace about the direction I’m taking the company. It also helps me build confidence in my investors. When I start sending this out to family, they would think, “I’m missing out on this.” It created a story.

Sramana Mitra: And progress.

Stephen Roche: He also included all the bad stuff. In normal investor updates, they wouldn’t hear such stuff until a quarter or half a year. If they saw bad news, it would be another six months before they hear another piece of good news to get them to feel better. When they see it weekly, they see the micro-losses and the bigger wins.

Sramana Mitra: What’s happening on the customer side as you were doing all this?

Gabino Roche: Here’s the dirty secret. In finance, we love the partners that work with us. I worked in a consortium that was a startup too. I know a lot of the financial institutions spend hundreds of millions on their internal technology and it doesn’t even perform the same as some of this other fintech, but they would love nothing more than to invite other banks and financial institutions to invest in an entity and make it breakeven.

Even though you can get funding, when they do the funding, they expect a discount. But the discount doesn’t pay the bills. One of the things you’ll notice in Saphyre is, we didn’t do a Series A until January of this year. That’s five years. We built this business on $5.5 million over five years before we had our $18.7 million Series A round.

Sramana Mitra: The $5.5 million was all revenue?

Gabino Roche: That was friends and family.

Sramana Mitra: You have very rich friends and family.

Stephen Roche: That was over time.

Gabino Roche: And you’re talking about 70 people. They would build their networks. Believe it or not, doctors were very interested in this. I could talk more about that a little bit later. I also shared equity. When I paid the valuation in 2017, everyone thought my valuation was a little high. I can’t really talk about that publicly here. I did promise the investors who went in 2017 with me to not dilute them.

I guaranteed the percentage of what they invested till Series A. It showed an honor system. If there was any dilution, it would happen to Gabino first before it would happen to them. As we were making progress, I had opportunities. Stephen and I met with 200 institutions that wanted to invest. Many didn’t want to invest in us for the record. The subset that was interested wanted to kick out the friends and family from being part of the Series A round. I would not allow it.

We had an offer to be bought by a bank. They said, “You’ll be millionaires, but we’ll give your friends and family 6% interest to walk away.” We said no. We almost went bankrupt six times. We were very much anxious to collect money, but I cared about the strings attached and whether we would have influence. When we did Series A, HCAP Partners was ensuring that we stay profitable. Even though you invest in our business, you need to pay a subscription price that helps support the business. Maybe we work out a deal with you, but you’re still paying a price.

This segment is part 4 in the series : Twin Brothers Building a FinTech Venture: Stephen Roche and Gabino Roche, CoFounders of Saphyre
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