A Serial Entrepreneur’s Journey into FinTech: Felix Rodriguez, Founder and CEO of finally (Part 6)

Sramana Mitra: When you raised the credit capital, you got four term sheets from the credit capital side. How many customers or SMBs were on your platform?

Felix Rodriguez: A little over 500.

Sramana Mitra: And what was the total amount of transactions that you were seeing on that?

Felix Rodriguez: Half a billion a year in transactions.

Sramana Mitra: So that was good evidence for the credit partners to want to be interested.

Felix Rodriguez: Absolutely. The cool thing about doing bookkeeping is that you get to map out how you can help your clients because you have visibility into where they spend and what vendors they use. Are they overpaying for stuff? Where do they have credit? It gives you a different perspective.

Sramana Mitra: What are the terms of the credit capital? So, they lend you money at a certain percentage and the customers pay a certain percentage and the delta is your revenue or margin. Can you talk more about the business model of this relationship?

Felix Rodriguez: Yes, on the capital cost side of things, there’s an interest rate that you pay for that capital when you utilize it. Then on the other side of that, how you generate revenue is through interchange or swipe fees every time someone makes a purchase or swipes a card.

There are two disconnected processes. You get the revenue you generated from your sponsor bank and the Visa or MasterCard networks. The fees you pay your investors or your debt provider is a separate expense line. So that’d be the coupon.

Sramana Mitra: When you bring this idea or this business, now at this point, it’s a business to your investors. You’re about to raise venture capital. What kind of revenue are you going out to raise this round with?

Felix Rodriguez: I’ve to be honest with you. I never went out with a set target for the credit. I had a sense on the equity side.

Sramana Mitra: I’m just asking you about the equity side now.

Felix Rodriguez: It was driven by the credit. The credit funds were $10M, $50M, or $100M. These numbers are much larger quantum than what you could expect to raise for a series A. We ended up raising a $95M series A, and that was a combination of $12M in equity and another $85M in credit capital.

Sramana Mitra: You wouldn’t call $95M a Series A. The credit capital and equity capital are separate.

Felix Rodriguez: No, everybody does that – Ramp, Rex, Divi, us. I think FinTechs are just different. You have to give a credit for everything because without the credit capital, you really don’t have a FinTech. Going through raising debt for a credit thing involves the same amount of diligence, if not even more than raising venture capital. It’s actually harder.

Sramana Mitra: But they’re not on the cap table in the same way.

Felix Rodriguez: Maybe not, but sometimes they have some kind of shares in the company, too. I don’t I don’t know what times are like now, but when we were having those discussions, those type of investors also want to be on the cap table.

Sramana Mitra: All right. So, the equity side is looking at what kind of credit you’re bringing in, but also what is the revenue model and what is the revenue of the business? What was your revenue level with 500 customers?

Felix Rodriguez: It was several million in ARR.

Sramana Mitra: It’s not ARR, right? You said it’s a transaction fee based business model. So how is it ARR?

Felix Rodriguez: Remember our first product? That’s a monthly subscription product.

Sramana Mitra: Monthly subscription, back-office products. So that remains the ARR model. On top of that, you have another revenue model, which is the transaction model. Great.

Felix Rodriguez: W have these two revenue levers now, and we’ve raised it on the on the whole opportunity, right? We’re building an all-in-one suite platform. We like to think of it as a finance automation platform with several ways of generating revenue from customers.

Sramana Mitra: When does the Series A close?

Felix Rodriguez: We closed it in February, but we announced it in March 2022.

Sramana Mitra: So, the pandemic is starting to ease a little bit, and you have a Series A, you have both credit side and your equity side covered. What happens next?

Felix Rodriguez: Now, we’ve to build a card. I tell all my SaaS friends that FinTech is so much harder, because in SaaS, you can go do whatever you want. But in FinTech, when there’s a sponsor bank and a network, you’re subject to a lot of compliance and red tape.

So, it takes us about a year to launch our card.

Sramana Mitra: And where is your team? Are you doing the technology team out of Florida?

Felix Rodriguez: You know, through Covid, we may do like everyone else. A good chunk of us were in Florida, but we were pretty much in a bunch of different places.

Sramana Mitra: Has the remote model continued?

Felix Rodriguez: For the most part. We do have a bunch of offices now and people kind of want to be together. So it’s a bit different now than during Covid.

Sramana Mitra: How about your key engineers? Obviously, for the kind of platform you’re building, there is serious engineering involved. Where are those people? They are kind of remote?

Felix Rodriguez: I would say it’s a combination. They’re mostly in a central office. Our VP of engineering was the first one that wanted to go back to the office. We have several locations. We have Florida, Boston, and some folks in Latin America.

Sramana Mitra: Where is your VP of Engineering?

Felix Rodriguez: He’s in Boston, Massachusetts.

Sramana Mitra: Is it possible to build a really serious technology team in Florida, or do you have to look elsewhere?

Felix Rodriguez: You’ve to bring people in for the technology. The harder part is finding the FinTech expertise in Florida or places outside New York. I would say the FinTech talent is harder than the engineering talent.

Sramana Mitra: Okay.

Felix Rodriguez: We’re very fortunate to be in the state that we’re in. A lot of people want to come here. We have a location in Miami and a location in Boca Raton, South Florida.

Sramana Mitra: 2023 is when you actually get the credit card ready.

Felix Rodriguez: Yes. At the end of 2023.

Sramana Mitra: So it’s just starting to be in the markets.

Felix Rodriguez: Yes.

This segment is part 6 in the series : A Serial Entrepreneur's Journey into FinTech: Felix Rodriguez, Founder and CEO of finally
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