FULL POTENTIAL SAAS

We believe that SaaS vendors, particularly vertical and SMB, that provide a “system of record” are seeing massive increases in TAM, competitive moats, and economic opportunity. By extending and leveraging their workflow, data, and account ownership, SaaS vendors are delighting end customers while creating platform and networks.

With opportunity comes competition, both from within one’s category (e.g. application area) or from adjacent categories within one’s vertical (e.g. industry). As boards and management teams wake up to the opportunity, they realize that the race is on to capture the full potential of their vertical.

This post is a framework to help leaders of SaaS companies think through the strategic choices and hopefully increase the odds of reaching their full potential.Strategy is implemented by focused alignment of execution, talent, M&A, organizational structure, functional excellence, and financial and governance/board frameworks. I hope to write about these supporting pieces over time, but I wanted to start with strategy first.

Finally, I think it’s important to acknowledge that very few companies have reached “full potential,” and this framework is inherently aspirational. However, “most entrepreneurs aren’t building a house, they are putting bricks in the foundation of a skyscraper” (Naval Ravikant). Aspiration is important, so hopefully this is an articulation of what is possible.

Special thanks to my co-authors John Burke, Katja Gagen, and Payam Vadi from TCV as well as Tim Barash, Kevin Burke, Henrique Dubugras, Mike Ford, Marc Fredman, Noah Glass, Andrew Low Ah Kee, Ara Mahdessian, David McJannet, Aman Narang, Sankar Narayan, Githesh Ramamurthy, Jason Randall, Bob Solomon, Connor Theilmann, Dan Wernikoff, and Dai Williams for great insight and support in creating this framework to date. We’ve also learned a ton from working with great management teams in the TCV portfolio[1] as well as across a broad network of friends.

Lead the Category

This phase of the SaaS strategy is well understood so I won’t spend much time on it. A SaaS company aspires to:

  1. build a great product (and service)
  2. over time, build an efficient and repeatable go-to-market model (marketing -> sales -> onboarding)
  3. and then “add capital” and execution to press its advantage against sluggish incumbents or poorly capitalized competitors

This is the playbook that Omniture and our portfolio company ExactTarget pioneered a decade ago. Despite massive capital inflows into SaaS and deteriorating economics, this model generally still works today.

On the product side, scale in data + AI can create increasing differentiation. For example, when you start to have more data than anyone else, you can flip your product from being reactive to proactive — having the product tell users where to look and how to optimize the system. Both Xero and Shopify have done this well.

Five other things to think about in this early phase that don’t get enough attention:

  • Scalable onboarding: Onboarding friction can be unaccounted drivers of CAC and churn. A great onboarding process builds the trust and confidence that are the foundations of virality/word of mouth, future cross- as well as third party channel strategies. Carefully measure funnel metrics and be attentive to new customer NPS. Automate early as “throwing bodies at it” can create process debt that will be difficult to unwind later.
  • Expansion: Expansion drives net revenue retention and most of the strategies we are about to discuss. With all sales processes, it’s a lot easier to learn, iterate, and optimize with fewer bodies and less complexity.
  • UI and Architecture: Like onboarding, these can be long-lead time fixes that compound as your business scales and gets more complex. A specific call out is to plan for an API strategy. It can facilitate future partner strategies and increase the value and stickiness of your offering.
  • Pricing structure/strategy: You will constantly revisit tactics, but it’s important to have some sense of how your pricing structure might change over time.
  • Foundations for global, including a work culture that can support distributed executives and operations, and good product feedback loops that incorporate non-home market needs.

Hyperscale Locations, Feed the Beast

A lot of ink has been spilled on forward investing in sales and marketing, and arguably it’s part of a/the “lead the category” strategy. But, it’s worth a call out as it’s important you don’t take your eye off the ball too early. So much of winning and future monetization is getting location market share. When the wind is at your back, go get it done! Market structures have a nasty habit of shifting, future secular tailwinds may abate, or competitors may leapfrog your product or your go-to-market model. If your churn and sales economics are sound, keep “feeding the beast!”

One particularly powerful unlock is Channel. There are verticals and categories, where influencers in a channel are kingmakers and can help you engage with segments that are otherwise difficult or uneconomical to reach.  Furthermore, Channel partners’ engagement and contributions can enrich your products and increase overall customer value. A great example is in tax software, where Xero’s wooing of accountants proved to be an effective source of customers and a formidable competitive moat (thereby disrupting the incumbent provider). Xero went as far as offering free practice management tools to help accountants run and grow their business on Xero.

Win the Control Points: Own Your Vertical

This is where management teams are faced with a paradox of choice: “Where should we go next? How should we spend the next incremental dollar? On increasing ARPU, acquiring incremental locations, or expanding into new verticals, geos or segments?” At this juncture, it is my belief that you should focus on winning the control points. In vertical SaaS, there are typically one or two control points, “systems of record.” Usually one control point in the front office (e.g. Point of Sale, CRM, e-commerce) – “that drives sales, that grows the business, that serves as the cash register.” And one control point in the back office (e.g. general ledger) – “where everything else reconciles to.” Hopefully, you provide one of the systems of record, so go build or acquire the other system(s) of record and secure the high ground! 

Pragmatically, a system of record is the last software package a customer will “turn off” in a tough economic time.

I also like to think about the concept of “gravity”:

  • Workflow gravity – the system that all other systems integrate to – it’swhere the most users spend the most time. Not all workflows deliver the same value; in my experience the system of record workflow tends to deliver the most value.
  • Data gravity – the system that creates and holds the most critical information and is the hardest to migrate. That data can be critical to a client for a wide range of applications, from understanding their customers (e.g. CRM) to managing risk (e.g. compliance). Data also can be critical in two-level situations, such as loan underwriting (e.g. a bank underwriting a merchant’s risk via POS data) or supplier information management (e.g. a client managing risk by validating supplier capabilities and quality). Data depth and scope also create gravity where AI technologies can be highly productive.
  • Account gravity – the user/sponsor of the system is the highest-ranking individual in the customer organization; it’s the system that requires the biggest financial outlay, etc.

Winning the other system of record is not easy. By definition, a system of record is hard to displace and unless the market is greenfield pen and paper, competition can be challenging. You may be able to do it organically with product innovation, but M&A can be the more desirable path if “integration debt” is manageable. If M&A is not possible, a slow winnowing of your competitor may be the only approach available to you.

If you own multiple systems of record in a vertical, the benefits are enormous:

  • Customer delight: automation from integrated workflows and potentially unified data and data models allow efficiencies and offerings unavailable before
  • “SaaS as a Platform and SaaS as Network” opportunities
  • Stronger account ownership to capture incremental spend and drive more efficient growth
  • A new level of durability and stickiness

A good example is Veeva. The company started in 2007 with the launch of a CRM and a sales automation platform for pharma sales reps (e.g. record their activity, keep track of the doctors they meet with or drop off samples for, etc.). After becoming the dominant player in that category, Veeva saw an opportunity to move backward into research and development for their life science customers (developing new drugs, conducting clinical trials and bringing those drugs to market). In 2011 Veeva launched Vault, a suite of applications that first centered on the core content management needs for clinical trials, regulatory submissions, and quality documentation. The company then expanded to include a series of core data applications that help manage clinical trials, quality processes, safety processes, etc. Veeva is expected to finish 2019 with $1.1B in revenue (26% YoY Growth) and 37% EBIT margins. Vault represented 51% of total revenue and grew 38% YoY. Analysts also estimate Vault meaningfully expanded Veeva’s addressable market. 

Another recent example might be front office player Shopify’s $450M acquisition of 6 River Systems to move into back office fulfillment and warehouse management. Some financial analysts estimate that merchants spend up to ~10-15% of their GMV on logistics which could potentially provide multiples of Shopify’s current take rate.

Expand Headroom

With category leadership comes high market share and potentially high saturation. Long-term growth is driven by location growth, as there’s generally a finite share of wallet you can access. It’s important to invest in the S-curves of geos, segments, and adjacent verticals that can unlock new location TAM. This can take a couple of tries before you’re successful, so start this during your growth phase when there’s less pressure on maximizing profitability.

Extend Through the Value Chain

This stage of growth can be transformative. By leveraging the strengths of your core customers, you can expand into a new market with a new set of customers. Typical patterns include moving from front office software to extend to your customer’s customers, or from back office software and extending to suppliers. These can be riskier bets, but success can pay out big here:

  • Increased TAM
  • Workflow that spans multiple parties and creates increased customer value and vendor stickiness
  • Two-level network effects

Supplier

Extension seems to work best by “following the money” and leveraging purchasing power. TCV portfolio company Ariba articulated the “golden rule”— He with the gold rules! By using their leadership in procurement software at large corporate buyers, Ariba extended to build a robust suppliers software business for merchants that serviced those corporate buyers. More recently, Avetta has followed a similar path in the supplier information space by building a strong two-level network effect. We believe corporate clients want to be on Avetta because it has the largest network of suppliers, and suppliers want to be on Avetta because it has the most corporate clients. Avetta’s advantage gets stronger as it scales. Moreover, Avetta has an opportunity to help suppliers do more than just manage compliance information. As a result, Avetta sees growth in helping suppliers grow and operate their business.  

CCC is on the third generation of this approach. They started by serving large auto insurance carriers and then extended into autobody repair shops that serve the carriers. CCC is now in the process of expanding to parts suppliers. By getting all the key constituents on its software platform, CCC is able to leverage AI and automation to massively reduce friction and provide a great customer experience across all steps of the auto insurance process.

Employee

The employee opportunity is similar to the supplier opportunity in terms of “following the money.” Companies can use integrated payroll or time & attendance offerings to establish a relationship with the employee. Employees are also consumers who represent significant B2C opportunities such as consumer lending, insurance, etc. There are big dollars here, but perhaps less opportunity to build significant network effects.

Consumer

The consumer/demand opportunity is the white whale. We believe that SaaS companies tend to capture ~ 50-100bps of GMV for software subscription, whereas online demand channels can take 15-20% of GMV in categories such as hotels and restaurants. In addition to the massive revenue opportunity, Consumer also represents a strategic flank worth monitoring carefully. Online marketplaces have large competing salesforces that engage with your merchant customers and have strategic interests encroach on the software layer to try to control supply.  Booking.com bought Buuteeq and Hotel Ninjas to vertically integrate into hotel supply. Uber is rapidly expanding its driver offering to over-draft protection, a debit card, and likely lending over time to manage driver churn. This is another example of increasing marketplace + SaaS convergence.

That said, success stories of extending SaaS to Consumer are rare. Few SaaS companies have consumer product DNA, the funds, or the skills to build a consumer brand. While a SaaS provider can have a high market share of merchants in a vertical, it’s rare that it has the supply ubiquity that an online marketplace would require. Eventbrite is one of the few companies that has landed as a software tool for creators, built liquidity, and created a marketplace.

Some derivative Consumer monetization models include:

  • Consumer pay: FareHarbor approaches tour and activity operators with a free to merchant, consumer pay model: “We’ll build your website and booking engine for free, with no work on your part; you just pay us for payment processing and the customer will pay us a booking fee.”  
  • Channel management: SiteMinder offers channel management to help hotels manage existing channels in real time. SiteMinder has extended that value proposition to “Demand Plus,” an offering that helps hotels easily expand into new channels to scale demand.
  • Existing customers: While 15-20% marketplace take rates may be sensible for new customer acquisition/discovery, companies such as Olo are looking to move existing customers to lower cost channels through their dispatch offering while taking a much lower percentage of GMV.
  • Customer Co-opt: By seeing consumer data pass through their systems, some SaaS vendors are building consumer profile databases that they might monetize over time. In the recruiting market, we’ve seen players leverage job distribution tools to build a candidate database. Shopify similarly has built a large shopper profile database across all their merchants. While Shopify hasn’t monetized directly, the uplift in conversion rate is likely significant. This model is the most capital efficient but can create conflicts with the vendor’s core merchant customers.

The biggest benefit of extending through the value chain is that it gives you a beachhead and a right to win in a new vertical to start the “full potential” growth cycle again. As you do this, it’s important to reconsider your end market and focus. When Ariba transitioned from procurement software to supply network, they started to represent a front office “system of record” for their suppliers. In doing so, Ariba was both a large enterprise “procurement company” and an SMB “supplier enablement company.” The question was: “Which priority should dominate?” When extension leads to conflicts, there are no easy answers. As such, it is important to acknowledge that this growth strategy is ever-evolving.

Deepen Functionality/ Monetization

Deepen Functionality/Monetization doesn’t literally mean waiting to pursue this step until all other strategies have been completed. It’s more a reflection of priorities. Acquire as many customers as you can, win the control points, and you will likely have many of these profit pools locked up to pursue in the future.

In winning the key control points, for the same reason a single system of record has a lot of “gravity,” you now have an even stronger opportunity to turn your product into a channel. This enables entry into adjacencies with data, workflow, and account ownership advantages for you as well as for the end customer. The most extreme example is the “platform/ecosystem” play, where you monetize third party vendors that want access to the channel your product has become (e.g. Salesforce, Intuit, Shopify). However, most commonly a SaaS vendor will pursue additional monetization with in-house or white-labeled products.

Another key consideration in prioritizing adjacent function/monetization is consistency with your core go-to-market channel and proximity to key decision makers. Go-to-market will determine the financial leverage of the cross-sell and often the overall success. The core advantage of SMB software here is that often the decision-making is relatively consistent and concentrated across software purchases.

Every vertical is different, but there are some common functionality/monetization patterns emerging. Each of these patterns deserves its own write-up, but for the sake of brevity here are some highlights:

  • “Integrated payments -> integrated banking”: The attachment of payments to SaaS has been well covered. That trend is expanding to the attachment of integrated banking. I had an opportunity to interview two of the smartest people in the business, Tim Barash and Jackie Reses. Square is out front here with broad based merchant and consumer plays. To understand the magnitude of the opportunity, Square’s Subscription & Services (most of which are financial services) are expected to reach $1.3B in 2020. This represents 23% of 2020 total GAAP revenue and 47% of 2020 Total Gross Profit (incremental gross profit is ~90%). Brex is earlier in its progression, but we’re excited to see how the company leverages its initial corporate card and expense management offerings to extend into broader financial services.

  •  “Follow the workflow”: At times SaaS companies have actually observed customers at work or mapped out the physical sites to understand all the areas their workflow touches as areas of expansion.
  • “TAM shark”: HashiCorp CEO David McJannet describes expansion as “TAM Shark,” constantly circling the biggest, fastest growing (most change/opportunity) markets. He requires product managers to report on market size and growth of all adjacent categories to make sure they are focused on the biggest opportunities. Generally, over a 2-3 year period companies have one, maybe two opportunities to build distinct add-on businesses. Make sure you’re picking the biggest markets and therefore the biggest payoffs.

Summary

If the typical SaaS playbook is “Lead the Category” and “Hyperscale Locations,” clearly the full potential for vertical SaaS players is dramatically larger than conventional SaaS wisdom would suggest. We’re excited to work with — and hopefully invest in —the frontier players as they explore the “Full Potential of SaaS.”  

If you found this useful, let me know, and we’ll continue to publish and explore the topic. I look forward to hearing your adds, edits, and challenges.

Caveats

  • There’s a tension between aggregating as big a profit pool as quickly as possible vs. “winning the market.”
  • This framework is characterized as a sequential strategy. In reality, most companies are pursuing multiple steps concurrently, and the sequence is more a reflection of prioritization.
  • Time horizon: this approach is a long-term strategy to winning, which may often be at odds with short-term maximization of valuation multiple and financial performance.
  • This approach is informed by a U.S./western/mature approach. In emerging/more greenfield markets, less focus and value chain expansion earlier in company development may make sense.

The views and opinions expressed are those of the authors and do not necessarily reflect those of TCMI, Inc. or its affiliates (“TCV”). TCV has not verified the accuracy of any statements by the authors and disclaims any responsibility therefor. This blog post is not an offer to sell or the solicitation of an offer to purchase an interest in any private fund managed or sponsored by TCV or any of the securities of any company discussed. The TCV portfolio companies identified above are not necessarily representative of all TCV investments, and no assumption should be made that the investments identified were or will be profitable. For a complete list of TCV investments, please visit www.tcv.com/all-companies/. For additional important disclaimers regarding this document, please see “Informational Purposes Only” in the Terms of Use for TCV’s website, available at http://www.tcv.com/terms-of-use/.

[1] See TCV’s SMB and Vertical SaaS investments at the end of the document.


Making the Mundane Sexy: How Intuit Turned SMB Bookkeeping and DIY taxes into Massive Business Lines

Dan Wernikoff rose to become an EVP at Intuit and general manager of its small business unit and consumer tax group. In both cases he scaled the business-within-a-business from small groups of early adopters to huge hordes of happy SMBs and consumers, by relentlessly measuring early indicators, leveraging core strengths, and focusing on long-term growth goals.

In this conversation with TCV General Partner Tim McAdam, he shares:

  • Lessons about how selling into SMB markets differs from enterprise
  • The best metrics for tracking success, and
  • Why empathy and understanding matter more than slick ads and sales techniques.

He also explains how to infuse human expertise into SaaS models in a way that fits the SMB/consumer mindset.

For these insights and more, settle back and press play.

***

Dan Wernikoff is a former Venture Partner at TCV.

The views and opinions expressed are those of the speakers and do not necessarily reflect those of TCMI, Inc. or its affiliates (“TCV”). TCV has not verified the accuracy of any statements by the speakers and disclaims any responsibility therefor. This blog post is not an offer to sell or the solicitation of an offer to purchase an interest in any private fund managed or sponsored by TCV or any of the securities of any company discussed. The TCV portfolio companies identified above, if any, are not necessarily representative of all TCV investments, and no assumption should be made that the investments identified were or will be profitable. For a complete list of TCV investments, please visit www.tcv.com/all-companies/. For additional important disclaimers regarding this document, please see “Informational Purposes Only” in the Terms of Use for TCV’s website, available at http://www.tcv.com/terms-of-use/.


Nubank raises USD 400 million in a new investment round led by TCV

  • The funding marks the largest investment round raised to date by Nubank 
  • Since the last funding in 2018, the firm’s customer base has more than doubled, reaching over 12 million people in Brazil
  • Nubank’s product portfolio has evolved, now including personal loans, a digital account with debit function for consumers and SMEs in addition to existing credit cards and its Rewards program
  • The company started its international expansion this year, in Mexico and Argentina
  • Nubank continues to pursue and hire talent for its four offices worldwide 

São Paulo, 26 July 2019 — Nubank, the leader in financial technology in Latin America, today announced it has raised $ 400 million in its Series F investment round. The round was led by TCV, one of the largest growth equity firms based in the U.S., and marks TCV’s first significant investment in Latin America. Existing investors Tencent, DST Global, Sequoia Capital, Dragoneer, Ribbit Capital, and Thrive Capital also participated in the round. The transaction is subject to customary closing conditions.

With this new round, Nubank has raised $820 million in seven investment rounds.

Nubank, currently Brazil’s sixth-largest financial institution by number of clients, started its international expansion in May of this year. The company has opened offices in Mexico and Argentina and is preparing to start operations and serve customers in both countries over the coming months.

The firm also expanded its product portfolio beyond its original app-controlled credit card and Rewards products, now including a personal loan product and digital savings accounts for consumers, as well as small and medium-sized businesses and microentrepreneurs.

“We remain firm in our mission to fight complexity and give back to people the control of their finances. Even though the technological change has been transformational for most industries across the globe, most banked consumers continue to pay absurd interest rates and fees to receive very poor financial services in return. Additionally, over two billion people still do not have access to basic financial services. With this new investment by TCV and our existing investors, we expect to contribute to meaningfully change this situation by accelerating our growth in Brazil and supporting the launch of our new Latin American markets,” says David Vélez, founder and CEO of Nubank.

“We are proud of our shareholders and their continued support of our business. Since our early days, we have had the privilege of drawing from the experience of some of the most successful technology investors in the world, and this round led by TCV further strengthens our capital base”, continues Vélez. “TCV has supported some of the most remarkable disruptors of our time, including Netflix, Spotify, and Zillow, with capital, strategic guidance, and industry expertise, and we look forward to partnering with them as we grow the business.” 

“TCV has a long history of backing founder-run businesses that leverage technology to provide magical experiences to consumers,” says Woody Marshall, General Partner at TCV. “David Vélez and his team have built an impressive business at Nubank. We have been impressed by their market position, product-centric DNA and unrelenting focus on the consumer experience. We look forward to supporting their expansion into new markets and providing additional services to their consumers.” 

New products and internationalization

Nubank started offering debit and cash withdrawal functions to its digital savings account (“NuConta”) customers in late 2018, consolidating its digital account as a complete alternative to meet the basic financial needs of all Brazilians. Today, more than 8 million Brazilians are already customers of NuConta.

After completing the process to obtain its license as a financial institution, the company launched in early 2019 a personal loan product, which is now available to over 500,000 customers. Nubank reached 100% of the 5,570 Brazilian municipalities within 5 years of activity, a milestone in a country where only 60% of cities have bank branches.

In the second quarter of this year, the company also began its international expansion, announcing operations in Mexico and, less than two months later, in Argentina. The two countries will receive technology and innovation hubs to develop solutions focused on local financial problems.

In six years of existence, Nubank reached the mark of more than 12 million customers, becoming Brazil’s sixth-largest financial institution in number of customers, and the largest digital bank in the world. Recently, the company entered the corporate market with the announcement of a new digital account for SMEs, a market with more than 20 million companies in Brazil.

Search for talent

Nubank today has more than 1,700 employees in Brazil, Germany, Argentina, and Mexico. The company expects to significantly grow its employee base over the next few years. 

“We are always looking for the best talent in the world. We build strong and diverse teams with professionals from different cultures to jointly challenge the status quo and reduce complexity. We are a technology company by nature and, therefore, we want the best software engineers as part of our global team,” says Vélez.

Media contacts: 

Nubank

Rodrigo Barbosa

rodrigo.barbosa@nubank.com.br

+55 11 984 603 476

TCV

Katja Gagen

kgagen@tcv.com

+1 415 690 6689

About Nubank

Nubank is a leading financial technology company in Latin America. Its first product, launched in 2014, is a no-fee credit card that is fully managed by a mobile app. Almost 30 million people have requested the product since launch, and the company has passed the 12 million customer mark. In 2017, Nubank launched its proprietary loyalty rewards program (“Nubank Rewards”), as well as a digital account (“NuConta”) that is already used by 8 million people. This year, the company began testing its personal loan product and took its first steps in international expansion, opening offices in Mexico and Argentina. To date, Nubank has raised around US$ 820 million in seven equity investment rounds from TCV, Sequoia Capital, Kaszek Ventures, Tiger Global Management, QED, Founders Fund, DST Global, Redpoint Ventures, Ribbit Capital, Dragoneer Investment Group, Thrive Capital and Tencent. Recently, Nubank was elected as the most innovative company in Latin America and ranked no. 36 on Fast Company’s 50 Most Innovative Companies ranking.

About TCV

Founded in 1995, TCV provides capital to growth-stage private and public companies in the technology industry. Since its inception, TCV has invested over $11 billion in leading technology companies, including more than $1.5 billion in fintech, and has helped guide CEOs through more than 120 IPOs and strategic acquisitions. TCV’s investments include Airbnb, AxiomSL, Dollar Shave Club, ExactTarget, Expedia, Facebook, LinkedIn, Netflix, OSIsoft, Payoneer, RELEX Solutions, Rent the Runway, Splunk, Spotify, Toast, WorldRemit, Xero, and Zillow. TCV is headquartered in Menlo Park, California, with offices in New York and London. For more information about TCV, including a complete list of TCV investments, visit https://www.tcv.com/.


WorldRemit Raises $175m in Series D Funding

LONDON–(BUSINESS WIRE)–Leading mobile payments company WorldRemit has entered into a definitive agreement to raise $175 million in a Series D funding round led by returning investors, TCV, Accel and Leapfrog Investments.

Founded in 2010, WorldRemit is a global leader in smartphone and online payments – providing a convenient, low-cost alternative to expensive brick-and-mortar agents.

WorldRemit handles a growing share of the $700 billion remittances sent each year by expatriates and migrant workers to their home countries. Today, the company serves almost 4 million customers transferring money from 50 “send” countries to 150 “receive” countries.

Breon Corcoran, Chief Executive Officer of WorldRemit, said: “For more than eight years our core purpose has been and continues to be to help migrants send money to their families, friends and communities. Our customers play a key role in the economies where they work and their remittances are important to their home countries.”

“Our mission is to help them transfer money as securely and speedily as possible while reducing the cost to our customers. We will grow our business through differentiation on speed, service, security and value.”

“The leadership team is grateful to our investors for their continued commitment to the business. The new money will help us to further develop the offering and we will launch a solution for small and medium-sized businesses.”

The Series D funding round comes at a pivotal stage in the company’s growth. In 2018, the USA became WorldRemit’s largest send market, following the company becoming one of the first UK financial service firms to secure licenses in all 50 states.

WorldRemit will use this new investment to further drive global growth and diversify the company’s product offering for both money transfer senders and recipients. The company is also set to launch a new money transfer solution targeting small and medium-sized business owners who trade internationally, especially in emerging markets. The transaction is subject to customary closing conditions, including FCA approval.

TCV General Partner John Doran said: “Over the past eight years, Ismail and his founding team have built a fantastic business that offers customers a compelling solution and value proposition. Since passing the reins to Breon and the new management team last year, the business has continued to build on this platform and accelerated. We believe the opportunity and proposition is larger than ever.”

“In 2018, mobile and online payments to emerging markets reached a record high of $528 billion and we expect this number to increase. As WorldRemit handles a growing share of this market, we look forward to continue working with the company to scale its digital platform and expand its service to reach many new customers across the globe.”

Accel’s Harry Nelis said: “Having first partnered with the WorldRemit team in 2014, I have seen the company grow from a London-founded startup to a global business pioneering the future of the remittance market and making international mobile payments more accessible and affordable for millions of individuals and businesses. This investment and CEO Breon Corcoran’s experience leading consumer service-oriented, global digital businesses will help fuel the next phase of global growth. We are excited to deepen our relationship with the team and help them fulfil the company’s vast potential.”

###

About WorldRemit

WorldRemit has disrupted an industry previously dominated by offline legacy players by taking international money transfers online – making them safer, faster and lower-cost. We currently send from 50 to 150 countries and operate in 6,500 money transfer corridors worldwide.

On the sending side WorldRemit is 100% digital (cashless), increasing convenience and enhancing security. For those receiving money, the company offers a wide range of options including bank deposit, cash collection, mobile airtime top-up and mobile money.

Backed by Accel, TCV and Leapfrog – early investors in Facebook, Netflix and Slack – WorldRemit’s headquarters are in London, UK with a global presence including offices in the United States, Canada, South Africa, Japan, Singapore, the Philippines, Australia and New Zealand.

About Accel

Accel is a leading venture capital firm that partners with exceptional founders with unique insights, from inception through all phases of private company growth. Atlassian, Algolia, Avito, Celonis, Cloudera, Crowdstrike, Deliveroo, DJI, Dropbox, Etsy, Facebook, Flipkart, Funding Circle, Kayak, Kry, QlikTech, Rovio, Slack, Spotify, Supercell, UIPath and WorldRemit are among the companies the firm has backed over the past 35+ years. The firm seeks to understand entrepreneurs as individuals, appreciate their originality and play to their strengths. Because greatness doesn’t have a stereotype. For more, visit www.accel.com, www.facebook.com/accel or www.twitter.com/accel.

About TCV

Founded in 1995, TCV provides capital to growth-stage private and public companies in the technology industry. Since inception, TCV has invested over $11 billion in leading technology companies and has helped guide CEOs through more than 120 IPOs and strategic acquisitions. TCV has invested over $1 billion in Europe. TCV’s investments include Airbnb, Altiris, AxiomSL, Believe, Dollar Shave Club, EmbanetCompass, EtQ, ExactTarget, Expedia, Facebook, Fandango, GoDaddy, HomeAway, LinkedIn, Netflix, OSIsoft, RELEX Solutions, Rent the Runway, Sitecore, Splunk, Sportradar, Spotify, TourRadar, Varsity Tutors, WorldRemit and Zillow. TCV is headquartered in Menlo Park, California, with offices in New York and London. For more information about TCV, including a complete list of TCV investments, visit https://www.tcv.com/.

Media contact: kgagen@tcv.com

About LeapFrog Investments

LeapFrog invests in extraordinary businesses in Africa and Asia. We partner with their leaders to achieve leaps of growth, profitability and impact. LeapFrog companies now operate across 33 markets reaching over 167 million people with financial services and healthcare. 135.9 million are low-income consumers often accessing insurance, savings, pensions, credit and healthcare for the first time. LeapFrog companies provide jobs and livelihoods to almost 124,000 people. These companies have grown on average by 39.2 per cent per annum since LeapFrog’s investment. LeapFrog was recently named by Fortune as one of the top five companies changing the world, the first private equity firm ever to be listed. www.leapfroginvest.com@leapfroginvest

Contacts

For more information:
WorldRemit
Jo Bancroft
media@worldremit.com


Banking Evolution & Revolution—Fireside Chat with Jacqueline (Jackie) Reses, Head of Square Capital, and David Yuan, GP at TCV

We believe that many SMB and vertical SaaS companies are starting to exhibit platform characteristics.  Some of these companies are beginning to build consumer and supplier networks that are expanding the SaaS model dramatically. 

We recently brought the pioneers of these new SaaS models together and were fortunate to have Jackie Reses share her thoughts on the emerging lending opportunity for SaaS. Witty, wise, and incredibly insightful, Jackie is a total superwoman. In addition to running Square Capital, Jackie serves on the board of the San Francisco Federal Reserve Bank and is a former board member of Alibaba. She also worked in private equity for 20 years.

Dave: Great to talk to you, Jackie! Is it true you started your career on the dark side, as an investor?

Jackie: Yes, I worked in private equity for 20 years. I just kept going forward. I had a mid-life crisis without the crisis, as I like to call it. I ran parts of a large private equity firm, but I much prefer being on the operating side. I still invest and that’s my fun side project. But I love working at Square. It’s a really fun place to be.

Dave: Square is certainly on a tear. Maybe we could start and just talk a little bit about that. Very few companies reach your scale, and then accelerate. But that’s what you’ve done at Square.

Jackie: Yeah, it’s exciting. We have driven strong revenue growth at scale since we went public.  It’s interesting to think back to when Square was starting with payments and building on that. That really was the catalyst for what we should build in an ecosystem in a very different way. Since then, we have built ancillary products around payments like point of sale, loyalty, employee engagement, lending, and payroll around an ecosystem.

Dave: You mentioned that every one of your products is an onboarding product. You don’t think of “land and then expand,” it’s all onboarding, it’s all “land”?

Jackie: Like lending we consider it to be a product that will onboard into Square. We have two parts of our lending business. One is the business lending, and that’s something we launched with Square sellers, and we extended it outside of Square in the United States.

And then we also have an Installments product which has been incredible. Installments is a consumer lending product that can have a customer pay for large purchases with installments, which provides the buyer with payment flexibility.

That said, I think about Square Capital first. My job is to grow Square Capital. That should stand on its own. The product itself has to be remarkable.

When we launch a new Square Capital product, we launch it because I think about all inbound customers into Square for lending and then create a cycle throughout our ecosystem to evolve as they learn about other products.

Dave: You talked about Square and the multiple product lines and high rate of self-onboarding. How core is self-serve to Square?

Jackie: It’s the way we start on every product. They have to be self-serve, elegant and fast as a means to make them remarkable. Driving your thought process around self-serve forces you to create simplicity and ease of use. 

Dave: You’ve described several different businesses that have arguably very different DNA. SMB, point of sale, consumer cash, credit, etc. How does that work in the same organization?

Jackie: I think lending is the one that everyone has the hardest time with. If anyone thinks that payments are regulated, lending is like 10x that.

Managing risk and the dynamics of a high-growth company are very different disciplines. I think that’s probably the hardest thing I deal with as an executive at Square. The dynamics of credit risk can really hurt sellers, and they can hurt us, and they can hurt our ecosystem of investors.

And so top line growth on a lending business is not the goal. I think you have to have a very different level of responsibility and a discipline that is almost the inverse to payments, where topline revenue growth can be the goal.  

You need to remain focused on what’s good for the end merchant. There are some lenders out there that have a goal of maximizing loan size. I think that’s irresponsible. We try to maximize a loan that helps sellers grow. That’s a very different mindset. We are also very fortunate that we don’t have channel or customer acquisition costs which helps us take a pretty responsible approach.

Dave:  Right. There is a real trade-off between growth, risk, and merchant health. How do you measure your success, what are the metrics you report on?

Jackie: It’s originations and different views of defaults. We could double our loans if we wanted to tomorrow. Yet, you double it at the loss of small businesses who can’t afford the debt that you’re giving up. The one limitation of credit is that there is a natural debt capacity of what these companies can afford based on their cash flows. And you’ve got to make sure you’re really good at how to predict that and then manage it so you’re not putting companies at risk.

Dave: Let’s talk about the risk side. Companies in an earlier phase want to learn. They want to train their algorithms. So in some ways having defaults is actually a data point to trigger. How do you get through that initial learning period?

Jackie: We do the same thing. Although I have to say that many refer to models which really aren’t machine learning models – the data set is too small to be driven off of machine learning. 

It’s hard to train models when you have a really narrow data set. Many lenders use basic heuristics to limit who they lend to.  That is not a machine learning model – its addition and subtraction in a ton of excel. 

Loan losses also can be instructive for model training, so you need to be willing to invest in your weakest credits in order to learn.  If you look at the public fintech lending companies, very few of them have actually been successful at long term customer acquisition and default profiling. It’s a hard, capital intense business and takes years to do. We think of lending as a platform to help our sellers grow.  The regulatory environment and the amount of capital required to do this is just really high.

Dave: What about payments data?

Jackie: The payments data is super useful but you have the fidelity of moment to moment transactional changes.  Matching risk, credit, behavioral and bank data together with payments is very powerful!

Additionally, for model training, its instructive to look at why sellers de-activate off of our system. Insights around business failure and fraud can also be a helpful part of the equation. 

Dave: You mentioned just how different being a lender is than the rest of Square and orientation around growth, versus risk management. How did you actually set it up so that it was able to perform this task culturally? Did you wall it off?

Jackie Reses: I thought about it every day. To be honest I think we’re very unique and lucky at Square because the way we are owned and run is with a long-term orientation, which most public companies are not.

Being focused on the long term, you can set up the ethos of what you need it to be. Because it’s the right answer for that kind of business long term. But we talk about it every day because it’s really easy to lend money, and it’s really hard to get it back.

And then the compliance is huge. I have everything documented in a way that’s profoundly non-tech. And that’s in a product that’s highly automated. We practically have a lean lending team. And then I have to have all these policies and reviews and committees. It’s the only product at Square that has a board committee.

We’re growing fast, but you got to be really strict about it and stand up if you see issues.

Dave: Let’s switch gears a little bit. I’d love to take advantage of your experience with Alibaba. The dynamics in China seem totally different.

Jackie: Totally different. QR code based, facial recognition based, sound based.

Dave: Do you think there’s a future state in China where you do have to worry about some sort of disaggregation or actually consolidation of the payment infrastructure?

Jackie: The dynamics in China are really different because there was an escrow system that existed 10 years ago in China because there were no logistics, and there was no trust. If you were going to order a package in China, you never knew whether you were going to get it, how you were going to get it, because neither system existed around credit and shipping. They just didn’t exist. And so the idea of an escrow system was the genesis of how Alipay got started. It really became a predominant payment rail. And it did so in an environment where it matched its sister company which controls 60 percent of the eCommerce in China. So those dynamics are really different than the dynamics that exist in the United States today, where the proliferation of credit options is extraordinary. In the U.S., there is no logistics issue with the way we think about freight and the multiple players. You can trust that if you send a package by FedEx it will actually show up.

All these dynamics of eCommerce that we take for granted in the United States are really the reason why there’s such a tight band of competition in China. I think WeChat is interesting. WeChat evolved after QQ started. Tencent built an unbelievable business and their second version of it has just been extraordinary because it’s become like a full utility app for everyone in China.

So now you have these two non-bank players in China competing with one another. Neither have really been able to get into the United States. I don’t know whether you noticed, but you’ll start to see Alipay showing up at a register. Go ask how many transactions have actually happened at that counter. There’s the notion of these Chinese tourists that are coming here but they use UnionPay.

That said, there’s not a lot of demand for it at this point in the United States. I think they’ll have a better time in Southeast Asia where they’re more connected and Japan, because they’ve got the Softbank connectivity that still owns a huge portion of Alibaba and Alipay. I just think it will be much harder in the United States.

David Yuan: Well Jackie, that was incredible! Thanks so much for taking the time to share your views.

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The statements, views, and opinions expressed are those of the speakers and do not necessarily reflect those of TCMI, Inc. or its affiliates (“TCV”). TCV has not verified the accuracy of any statements by the speakers and disclaims any responsibility therefor. This interview is not an offer to sell or the solicitation of an offer to purchase an interest in any private fund managed or sponsored by TCV or any of the securities of any company discussed. The TCV portfolio companies identified, if any, are not necessarily representative of all TCV investments and no assumption should be made that the investments identified were or will be profitable. For a complete list of TCV investments, please visit www.tcv.com/all-companies. For additional important disclaimers, please see “Informational Purposes Only” in the Terms of Use for TCV’s website, available at http://www.tcv.com/terms-of-use/.


TCV Promotes Nari Ansari to General Partner

We are delighted to announce the promotion of Nari Ansari to General Partner.

Nari joined TCV in 2006 and has played an integral role in the firm’s B2B investing practices and our collective efforts to accelerate growth at our portfolio companies. Since our inception in 1995, we have been committed to helping entrepreneurs become market leaders, and Nari’s deep understanding of technology, his connections with category leaders, and his ability to uncover exceptional opportunities and partner with talented management teams reflect the value the TCV team strives to bring to CEOs.

Nari Ansari

Nari focuses on investments in the software, fintech, healthcare IT, and tech/data-enabled services sectors. He currently serves on the board of directors at HireVue, OneSource Virtual, and Watermark and also works closely with Avalara (NYSE: AVLR), AxiomSLPayoneer, and Varsity Tutors. Prior investments include EmbanetCompass (acquired by Pearson) and Merkle (acquired by Dentsu). Before TCV, Nari was with McKinsey & Company in the San Francisco office, where he focused on assisting clients in the software, storage, and semiconductor sectors. Nari received his M.S. and B.S. in Management Science & Engineering (MS&E) from Stanford University’s School of Engineering.

We are delighted to acknowledge Nari’s outstanding contributions to the firm to date and we look forward to his continued success at TCV for many years to come. Congratulations to Nari on his promotion.

The General Partners of TCV

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The companies identified above are not necessarily representative of all TCV investments and no assumption should be made that the investments identified were or will be profitable. For a complete list of TCV investments, please visit http://www.tcv.com/portfolio-list/. For additional important disclaimers regarding this post, please see “Informational Purposes Only” in the Terms of Use for TCV’s website.