Solo Founder to Funded FinTech Startup Scaling Rapidly: Torpago CEO Brent Jackson (Part 3)

Sramana Mitra: Did you need equity financing or were you doing it completely on the basis of that seed round and these lending facilities?

Brent Jackson: In between, we did do another seed round for $2.4 million in equity fund.

Sramana Mitra: This was from a VC?

Brent Jackson: It was led by a seed fund called Operate. The rest was angels and one other fund, Clear Haven Capital Management.

Sramana Mitra: Between two lending facilities?

Brent Jackson: Yes, this was at the tail-end of the first. As we were getting the second one in place, we closed this round.

Sramana Mitra: Basically you have proven your model at this point. Great! What denomination of loans are people asking for?

Brent Jackson: We have a wide range. The average loan is $35,000. Our average credit card limit is about $35,000.

Sramana Mitra: In the American Express and Capital One ballpark.

Brent Jackson: Yes, we do have some customers who go into the six figures.

Sramana Mitra: What is your business model?

Brent Jackson: It’s predominantly interchange revenue. Anytime somebody swipes a card, there’s a 3% fee that the merchant accepting the card has to pay to Visa and issuing banks. We get a split of that. We’re generating revenue every time the card is swiped.

Sramana Mitra: Is your card a Visa card?

Brent Jackson: Yes, we are on the Visa network.

Sramana Mitra: That’s the only fee you’re getting?

Brent Jackson: Yes, we wanted to reduce a lot of the barriers to entry, so we don’t do any license fees or signup fees.

Sramana Mitra: What level have you gotten to in terms of revenues?

Brent Jackson: We’re rapidly approaching $3 million.

Sramana Mitra: I see. How do you evaluate TAM?

Brent Jackson: The market is massive. Every business spends money. It’s a good thing and a bad thing. Everybody could be a customer. There are millions of small businesses. In the early days, we focused on certain verticals like manufacturing, real estate, and construction. The TAM is massive.

Sramana Mitra: One of the pushbacks, if you were pitching me, is that 35 million is not creditworthy. There is a much smaller segment of this that would qualify for a loan that would not end up in bad debt.

Brent Jackson: I would agree with that. There is a much smaller segment.

Sramana Mitra: There are millions of customers, but it’s not 35 million.

Brent Jackson: What we’re doing in the early days is finding success with the creditworthy ones and then iterating on our software. The long-term goal is to have a solution for everybody. So, we are working on different features that are not credit-driven like business checking accounts, debit cards, prepaid cards. So making sure we have solutions for all.

Sramana Mitra: What’s the heuristics for approving credit?

Brent Jackson: We don’t publish strong criteria at the moment. Where we differ from the main credit card companies is that we underwrite solely based on the business. There is no personal guarantee of the business owner. Our data points are business banking data. Data points that we’re looking at are time in business. We’d like to see at least one year in business, at least, $250,000 in annual revenues, and a minimum of $15,000 cash balance. We look at trade payments.

Sramana Mitra: I think I understand your business. Good Luck! Thank you for your time.

This segment is part 3 in the series : Solo Founder to Funded FinTech Startup Scaling Rapidly: Torpago CEO Brent Jackson
1 2 3