The financial crisis of 2008 came as a resounding shock for countless companies, including many in the financial industry itself. But not for AxiomSL, a leading provider of cloud-enabled software for governance, risk, and compliance (GRC) regulatory reporting solutions to the financial services industry.
AxiomSL was founded by Alex Tsigutkin and Vladimir Etkin in 1991. As data management experts they had seen disorganized, unintegrated GRC processes even in highly regarded financial firms. “Everywhere I went, it was the same. The data was all over the place, in different systems and different departments,” explains Tsigutkin, CEO of AxiomSL. “We saw a real need to bring all of this enterprise data together at a granular level.” Large financial institutions soon began adopting AxiomSL’s software to assemble data they used for assessing risks and reporting financial results to investors and regulators.
Then the repeal of the Glass-Steagall Banking Act in 1999 freed financial institutions to diversify into a wide range of new activities, and GRC processes took a back seat comparatively. The new priority was financial innovation and growth, to extend the United States’ position of prominence in global finance. “For years, the government and regulators didn’t put that much pressure on financial institutions,” Tsigutkin points out. “That changed completely after the 2008 financial crisis, and that’s when AxiomSL really took off.”
By this time, the company’s software data management platform and related algorithms organized operating data to align with the latest requirements of various regulatory authorities in multiple countries globally. These category-leading capabilities spurred AxiomSL’s sales growth into double-digit territory. International business began climbing too. “We were growing like wheat in the fields,” says Tsigutkin, a native of Ukraine.
But growth also brought some challenges. AxiomSL had always given its customers attentive support, especially when they were new to automating GRC processes. With rapid growth, that level of care was becoming harder to sustain; a successful strategy for landing and expanding clients was reaching its limits. “It’s very difficult to do everything on your own, especially dealing with a large and growing client base at the same time,” Tsigutkin says. “I felt this was a great opportunity to put some expert disciplines together. When I got advice on how to do that, it was to bring top notch growth equity into the mix.”
So Tsigutkin invited growth-stage investors to present their ideas for AxiomSL, including TCV, a firm he knew well from regular interactions in the past. With around $2 billion already invested in fintech, TCV understood that AxiomSL’s business could grow even faster for three interrelated reasons: an explosion of data in the financial world, proliferating regulations around the globe, and sharply higher consequences for financial companies that mismanaged them. With tighter financial discipline, more proactive sales efforts and scaling up systems and processes, AxiomSL believed it could become not just a category leader but the global standard for risk management and regulatory infrastructure solutions for the financial services industry.
“As we talked with private equity firms, TCV was distinctive in a number of aspects,” recalls Etkin, the company’s CTO. “They had proven success with fintech and GRC companies, so their long-term vision for AxiomSL and their approach to collaborative business-building really stood out.”
TCV invested in AxiomSL in June of 2017, and the new partnership moved fast. “TCV knows how to focus on what’s key for scaling a company, not just growing in the same way,” Tsigutkin explains. For example, TCV pinpointed the need for industrializing sales, sales leadership as well as more robust processes for planning and budgeting. “They also helped us understand how to use equity to attract and reward people,” Etkin notes, which enabled the company to recruit multiple new executives with significant experience scaling similar organizations.
“TCV saw in AxiomSL a category leading industry-specific software business with next generation technology, a highly satisfied client base, a mission-critical use case, – and most importantly, product-centric co-founders and partners in Alex and Vlad who had deep subject matter expertise and a strong growth orientation.” recalled Nari Ansari, TCV general partner and former board director at AxiomSL.
The collaborative approach between AxiomSL management and TCV helped AxiomSL accelerate growth, increasing software revenue over 150% in three years. Its ControllerView® intelligent data management and analytics platform could provide thousands of reports across dozens of jurisdictions and more than 100 regulatory agencies. From 60 employees during the financial crisis, the company had grown to nearly 900 globally. According to Tsigutkin, “having such a strong team really helped us to build a world-class organization.”
Consistent with TCV’s longstanding investment thesis for governance risk and compliance solutions, change and complexity can provide for significant opportunities for leading software vendors. Indeed, AxiomSL’s positioning for its offering set has been as a “Platform for Change” given the constantly evolving regulatory environment for financial services market participants. As the business entered 2020, that change orientation would become even more paramount.
“As COVID-19 started in early 2020, the world changed quickly, and the swiftness of market happenings was adding increased complexity for banks and regulators alike. During this period, AxiomSL’s value proposition in understanding and managing risk continued to demonstrate its importance and the business saw sustained momentum throughout 2020,” remarked Amol Helekar, a TCV principal.
When the pandemic hit, AxiomSL as an organization had to adapt as quickly as its customers. “Being with TCV during this period was absolutely a blessing,” Tsigutkin recalls. “First they helped us to stay calm and provided very sound advice about our talent strategy and the welfare of our valued Axiom team members. Then they helped us focus on execution and growth. Moving more into digital marketing, for example, really enabled us to keep growing in 2020. TCV also supported us as we increased our investment in cloud offerings which became even more important in a distributed COVID world for our bank clients.”
AxiomSL’s hyper-growth during the TCV partnership resulted in consistent market share gains. Along with the company’s strong profitability, blue chip client list and technology leadership, these attributes brought interest from outside parties, particularly private equity firms. As Rick Kimball, TCV founding general partner and former AxiomSL board director remarked, “Alex, Vlad, and the team transformed the organization during our partnership while deftly executing a growth agenda that expanded the business on multiple dimensions.”
In the fall of 2020, TCV worked collaboratively with Alex, Vlad, and the AxiomSL management team to assess this external investment interest and prepare the business to explore various alternatives. Ultimately this brought an offer from private equity firm Thoma Bravo to acquire a majority stake in the company. The new investment closed in December of 2020 in one of the largest GRC transactions of its kind, and Tsigutkin took a moment to reflect, “Our growth is due in no small part to the contributions of TCV, who has been a critical partner for AxiomSL for the past three years as we grew the franchise at a record pace.”
TORONTO, Oct. 14, 2020 /CNW/ – Wealthsimple, the company behind Canada’s leading digital investing and stock trading platforms, today announced it has raised CAD $114 million on a valuation of CAD $1.4 billion. The investment was led by TCV, one of the largest growth equity investors focused on technology, alongside Greylock, Meritech, Two Sigma Ventures and existing investor Allianz X. Concurrent with the funding, David Yuan, General Partner at TCV, will join Wealthsimple’s Board of Directors.
Founded in 2014, Wealthsimple has evolved the financial services industry in Canada by bringing smart, simple and affordable financial products and services to market; today over 1.5 million Canadians use Wealthsimple products. The company is known for its client-centric approach to financial products, which include automated investing, commission-free stock and crypto trading, a savings account, and a tax filing software. Wealthsimple will use the new capital to expand its market position, build out its product suite, and grow its team in Canada.
“Our growth over the past six years shows how ready Canadians, and especially younger Canadians, are for a new model of financial services designed around their needs. But too many people still don’t have access to great financial products or are paying too much for them,” said Mike Katchen, co-founder and CEO of Wealthsimple. “There’s still so much room to grow, and to have investors of this caliber join us is an incredible vote of confidence in both our mission and our ability to deliver on it.”
“We have been watching Wealthsimple’s rise in the Canadian market and love the way the company is bringing simplicity, humanity, and delight to personal finance,” said David Yuan, General Partner, TCV. “TCV is focused on businesses that have the potential to transform industries, and we are thrilled to work with Mike and the Wealthsimple team to build a leader in financial services and an important consumer platform.”
TCV invests in tech-focused companies with an ambition to become market leaders. The growth equity firm has backed over 350 technology companies, including Airbnb, Klarna, Netflix, Nubank, Peloton, Revolut, Spotify, and Zillow. Greylock, a longstanding venture capital firm that focuses on enterprise and consumer software, has invested in companies including LinkedIn and Airbnb, and has partnered with over 180 companies through IPO, while Meritech has partnered with 200 companies globally including Salesforce and Snowflake. The investment also marks the first time that Meritech has invested in the Canadian market.
About Wealthsimple Wealthsimple is a financial company on a mission to help everyone achieve financial freedom by providing products and advice that are accessible and affordable. Using smart technology, Wealthsimple takes financial services that are often confusing, opaque and expensive and makes them simple, transparent, and low-cost. The company was founded by a team of financial experts and technology entrepreneurs, and is headquartered in Toronto, Canada. To learn more, visit www.wealthsimple.com.
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 $14 billion in leading technology companies, including more than $2 billion in fintech, and has helped guide CEOs through more than 120 IPOs and strategic acquisitions. 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/.
For further information: Wealthsimple Sarah Pattillo, firstname.lastname@example.org, 416-567-7844
Revolut raises $500
million in Series D funding, valuing the business at $5.5 billion, making Revolut
one of the highest valued fintech companies in the world
The round was led by
US-based investor TCV, with a number of existing investors also participating
in the round
Revolut will use the
capital to further strengthen product development in existing markets, roll-out
banking operations in Europe and increase daily engagement
LONDON, 25 February 2020 — Revolut, the global financial platform with over 10 million customers worldwide, has today raised an additional $500 million in Series D funding, taking the total amount raised by the company to $836 million.
funding round was led by US-based growth capital firm TCV, with a number of
existing investors also participating. The latest funding round values the
business at $5.5 billion, making Revolut one of the highest valued fintech
companies in the world.
capital was secured on the back of high customer demand and engagement and a
strong financial performance last year. In 2019, Revolut increased customer
growth by 169%, the number of daily active customers by 380%, and saw financial
revenues in 2018 grow by 354%.
capital will be focused on the customer experience and used to strengthen
Revolut’s core retail and business offering in existing markets, with a
particular focus on product development that will help accelerate daily usage
of accounts. Future plans include lending services for retail and business
customers, extending high interest savings accounts beyond the UK, further
improving customer service and rolling out banking operations across
also focus on further developing its Premium and Metal subscription accounts,
which have proven to be a successful revenue stream for the business, growing
by 154% last year. Revolut’s Premium and Metal accounts include a variety of
benefits for customers, such as unlimited foreign exchange, airport lounge
access, commission-free stock trading and travel insurance.
continue to invest in expanding its workforce across multiple locations. The
company now employs over 2,000 people, and last year made a number of senior
appointments across the business in order to scale up its governance. Last
year, Revolut appointed Martin Gilbert, the former Co-Chief Executive of
Standard Life Aberdeen, as Chairman of the Board. Caroline Britton, a former
Audit Partner at Deloitte, and Bruce Wallace, the former Chief Operations
Officer at Silicon Valley Bank, were both appointed as Non-Executive
on the new investment, Nik Storonsky, Founder & CEO at Revolut said: “We’re
on a mission to build a global financial platform – a single app where our
customers can manage all of their daily finances, and this investment
demonstrates investor confidence in our business model. Going forward, our
focus is on rolling-out banking operations in Europe, increasing the number of
people who use Revolut as their daily account, and striving towards
profitability. TCV has a long history of backing founders who are changing
their industries on a global scale, so we are excited to partner with them as
we prepare for the next stage of our journey.”
on the investment, John Doran, General Partner at TCV said: “We are delighted
to partner with Nik, Vlad and the entire Revolut team. Using a modern
technology stack and with a relentless focus on delighting customers, Revolut
has built a truly exceptional customer experience that is exceeding anything
that existing banks can offer. We look forward to supporting the team on their
journey to build Revolut into one of the biggest financial services companies
in the world.”
on the investment, John Glen MP, the UK Economic Secretary and City Minister
said: “It is clear that the UK fintech sector continues to thrive, and
Revolut’s announcement, which comes on the back of record-breaking fintech
venture capital investment in 2019, is a clear indicator of our strength as a
place for fintech business as we leave the EU.”
— END —
here to transform the way money works. As an innovative, new kind of
financial platform, it gives people the power to spend, invest and transfer
money without the sky-high fees charged by the big banks.
launching in 2015 in the UK, Revolut has expanded significantly beyond its
origins as an FX product, adding new features all the time, including
Commission-Free Stock Trading, Cryptocurrencies, Business Accounts and
in London, with 2,000 people in 23 offices, Revolut is now one of the biggest
Fintech communities in the world, with over 10 million customers globally.
Since launch, Revolut has processed over 1bn transactions worth over $130bn.
Revolut Press Contact Chad West, Director, Global Communications email@example.com l +447860651737
1995, TCV provides capital to growth-stage private and public companies in the
technology industry. Since its inception, TCV has invested over $13 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.
investments include Airbnb, AxiomSL, Dollar Shave Club, ExactTarget, Expedia,
Facebook, LinkedIn, Netflix, Nubank, Payoneer, Splunk, Spotify, Toast,
WorldRemit, Xero, and Zillow. In Europe, TCV has invested $2 billion in
companies including Believe Digital, Brillen.de,
Perfecto, FlixMobility, RELEX Solutions, RMS, Sportradar, The Pracuj Group, and
WorldRemit. 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/.
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.
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.
of the SaaS strategy is well understood so I won’t spend much time on it. A
SaaS company aspires to:
build a great product (and service)
over time, build an efficient and repeatable
go-to-market model (marketing -> sales -> onboarding)
and then “add capital” and execution
to press its advantage against sluggish incumbents or poorly capitalized
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
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
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!”
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
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!
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”:
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.
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.
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.
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
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.
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
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
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:
Workflow that spans multiple parties and
creates increased customer value and vendor stickiness
Two-level network effects
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.
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
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.
derivative Consumer monetization
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.
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.
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
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
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
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
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.
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.
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
 See TCV’s SMB and Vertical SaaS investments at the end of the document.
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
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
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
“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.”
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
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.
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.
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.
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,
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.”
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.
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.
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/.
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
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
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
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
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
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
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
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
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
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
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?
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
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.
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?
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
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