A Serial Entrepreneur’s Journey into FinTech: Felix Rodriguez, Founder and CEO of finally (Part 5)

Sramana Mitra: Did you raise the seed round through your own network or through a startup network?

Felix Rodriguez: We had a process to raise funding, and they certainly made introductions. But I had taken matters into my own hands. I was inviting investors to Demo Day. I sent out a cold email to Pat Matthews, the founder of Active Capital. He ended up leading our round.

He was on a plane when he saw the message. He sent it to his main guy who responded to me right away. We got on a call for over an hour, I went through the business with him. At the end, he told me that Pat’s going to like this and asked me to get on a call with him the next day, a Sunday. Of course, I got into the call. I spent 2-3 hours with Pat on a Zoom walking him through everything. I asked him to come to Demo Day.

He said, “I don’t want to go to any Fing Demo Day. Let’s just get a deal done.” He was very VC like, “I’m not going there to compete with everyone. I like it. I like you. How do we do a deal? Instead of Demo Day, I’ll fly in from San Antonio to San Francisco the day before Demo Day and we could meet in person and hash things out.”

The timing was perfect. He came down to San Francisco, met me and my co-founders, and we definitely hit it off. He’s a former founder himself, and he had sold to a big company. Now he had a fund. He got what we were doing and decided to lead our seed round.

Of course, 500 Fintech and a bunch of other investors also participated. The round got maybe three times larger than what we were looking for. But it was a great outcome for us to get that raise.

Sramana Mitra: How much did you raise?

Felix Rodriguez: Initially we were looking to raise $800K, but we raised $2.6 million.

Sramana Mitra: Did you then have to stick around in San Francisco and do this business or did you choose to move to Florida?

Felix Rodriguez: The plan was always to come back to Florida. I have my kids. There’s no way we could do this stuff without my mother-in-law who stayed back with our two kids.

Sramana Mitra: Okay.

Felix Rodriguez: We were clear with the investors that we were coming back. Pat liked it. He said, “Well, you’re building in Florida. That’s really interesting. It’s not like an San Francisco or a New York company.”

Sramana Mitra: So, this back-office thesis based on an AI model, tell me how you built the product. Because as you said, in 2019, there is no LLM. There is no real AI platform on which you can piggyback. You have to almost build the entire stack yourself. So what happens?

Felix Rodriguez: For the first version of our AI, we ended up using a Jupyter notebook to build our own infrastructure with TensorFlow and AWS. We were using all the output of what our bookkeepers would do to use that as a data set to build a model. After building that model, we could run inference and ask it questions related to more transactions.

Sramana Mitra: Walk me through a use case of what a bookkeeper would do that AI automated for you.

Felix Rodriguez: You can imagine a million times a day, a bookkeeper, a business owner, an accountant, or a CFO might see a transaction on a statement that says McDonald’s. So the fact that it happens so often is a perfect example of how AI could do something that humans would find tedious and repetitive. It can be better than this. You’re already starting with a data rich problem.

The unique thing for us was we built a team of AI data trainers, bookkeepers that in essence built this own proprietary data set for us. Taking all this unstructured data and labeling it as it relates to accounting is still a manual process. You still need humans in the loop to do that.

Sramana Mitra: So the main AI-driven automation is in categorizing and labeling the accounting data. So, the transactions get labeled and categorized into accounting categories, and that’s the main AI automation.

Felix Rodriguez: Yes, absolutely and there’re a few levels. If you fast forward to today, we have our own business checking account, our own card, we can literally automate from the swipe to GL because our cards are our ways of spending our payments. Infrastructure is software and it’s tied to our A.I. So that makes it even better.

Sramana Mitra: So, but that comes later, right? This is not the time that you’re describing. You just raise money from 500 startups and your investor in San Antonio, etc. This is not when you’re doing a credit card. You’re just doing the accounting automation. Yes?

Felix Rodriguez: Yes, but it’s all happening very quickly because just a few months after closing the seed round, we already had our first offer from a credit partner to provide the credit facility to power our charge card.

Sramana Mitra: And what led to that credit offer? Were you approaching credit partners or were they finding you? What was the genesis of that?

Felix Rodriguez: Going back to when we were in the accelerator, we always knew it was only a matter of time before we built a bunch of these apps. Naturally, we wanted to start with a corporate credit card and a business checking account. We were working on those things while we were in the accelerator.

It just happened that a couple of months after closing the seed round, we got the first offer from a bank that wanted a partner. We also found a network. You have to either talk to Visa or MasterCard, figure out which one you want to partner with and see if they’ll do a deal with you. We had gotten that deal. But a few months later, COVID happened. Then, we didn’t see how we would be raising a Series A in the middle of a pandemic.

Sramana Mitra: You weren’t far enough along to be able to do that?

Felix Rodriguez: I think we would have done it and I’ll tell you why. In the FinTech business, you need two types of funding. You need credit funding if you’re a lender, and you need equity for everything else. We’d already some equity and a deal on the table, a term sheet for a pool of credit already and a network and a card and software that we were building.

All we needed to do was to get a Series A at that point, but I and our board members thought, “How could we go launch a credit product in the middle of a pandemic? It’s just started. We don’t know what’s happening.” So, we decided to put the brakes on it.

Luckily, we realized that everybody now needed more help with their books because they wanted to apply for PPP loans. All of a sudden, people cared more about how their business was doing. Bookkeeping became very important at that time. That was the time when we grew the customer base. A year and a half later, it was fairly easy to tell the story to investors. We had this many customers and they’re spending a half a billion dollars a year. They can put everything on finally. Finally, they can get everything in one place.

I started from I know I’m going to need venture capital, but I know I’m also going to need credit capital. We already had one term sheet and I started talking to other investors. We ended up getting three or four term sheets for the credit capital. By the time I had that, the process went pretty quickly. In less than a month’s time, I was able to generate interest from several VCs.

This segment is part 5 in the series : A Serial Entrepreneur's Journey into FinTech: Felix Rodriguez, Founder and CEO of finally
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