00:40:19 · Jack Zhang
[00:40:19] S0: As in the business? Mhmm. The... We pivoted twice. Right? So the first idea we had is we we need to figure out how do we connect to the interbank market, but, you know, as a start up, that is very hard to connect to the interbank market on the FX side. On the payment side, need to get licenses. Right? So I was an engineer in the investment bank. Right? Why would a regulator give me a license? So I had to write a pitch letter to the commission of ASIC, which is the regulator in Australia, to pitch, you know, innovation in Australia that that for some reason, he actually read it and give give me that chance. So we... One of the two lawsuits they granted this... That year, you know, the ACID commission... Commissioner specially approved it, which is amazing as a regulator. I kind of remember that, you know, forever, and that is not how most regulator works. But we had the chance to do that, you know? We got a license as a small team of of less than 10 people, but one person does legal compliance and risk and everything. And, you know, we we got a license, and we started building the product, and we we need to figure out how to do FX at a interbank rate. And the the way we thought about is doing peer to peer. Right? If you have transaction happen from Australia to The US and you have the other way around, then you can net it off and then give you, like, a fair market value. But then we we build the algorithm, and we did a simulation. It just... We need, like, billions and billions of volume to do even, you know, a fraction of the netting. And then people need to wait for too long for, you know, the the the two sides of the transaction to be netted, and we just thought it's not gonna work. And I cold called one day Macquarie Bank at 07:45 a. M. The guy pick up the phone is a guy actually doing an overnight shift to cover, you know, the other hours in investment bank, and I pitched the idea that we raised this, you know, at that time, we raised $3,000,000, sold him the dream of of building one of the largest FX and money movement platform in the world, and he believed in it. He convinced his management to... Allowed us to have a fixed connectivity... Well, actually, fixed as a kind of protocol in FX trading into the into the Macquarie front office that allow us to connect to the interbank market.
00:43:02 · Joubin Mirzadegan, Jack Zhang
[00:43:02] S1: And this is like the biggest bank in Australia? [00:43:04] S0: Yeah. The biggest investment bank in Australia. It's very rare. Because in the investment bank, when you trade on the interbank market, the minimum ticket size is, you know, like tens of millions, and sometimes you trade in a billions per ticket. Right? And, you know, we convinced the Macquarie Bank guys to change the the API to allow us to trade a minimum of $50,000 ticket. And it's amazing, like, how that can all happen. The guy who was doing overnight shift in a in a bank now is the head of FX distribution in in Macquarie Bank. So I kinda helped his career as well. [00:43:41] S1: That's amazing. [00:43:41] S0: And we become the largest customer of Macquarie Bank. [00:43:45] S1: That's amazing. On FX desk.
00:43:45 · Joubin Mirzadegan, Jack Zhang
[00:43:45] S1: That's amazing. On FX desk. [00:43:47] S0: How long into the business was that? This was the first year. So after the p two p idea failed, and we basically cold called Macquarie Bank, tried to connect to interbank market and pivot the business to SMB invoicing type of business, so that you can send invoice and... Or bills to pay overseas, right, or getting paid. Mhmm. And targeting SMB didn't quite work because we're running out of money, and SMB acquisition is very costly, and we couldn't raise more money with that idea. And we pivoted pivoted again to API sort of business that allow larger businesses to move money around the world, and that is the the... Basically, third idea, and that succeeded. By end of by early twenty seventeen, we started on that building that API, and then we signed up two very large customers who... And also end up being... One of them being investor, which is Mastercard, And we also signed up Shein, which is one of the largest ecommerce company in the world now. And we're able to ride with these these customers. Well, Mastercard promised, like, a billion dollar, but end up delivered almost nothing, and that's a different story, but but, you know, we had some very large customers that took off in between 2017 and 2018. So the the business is growing over a 100 x in 2018 from a transaction volume point of view. [00:45:13] S1: Before that, when you were pivoting, was Lucy freaking out? She's like, what have I done?
00:45:13 · Joubin Mirzadegan, Jack Zhang
[00:45:13] S1: Before that, when you were pivoting, was Lucy freaking out? She's like, what have I done? [00:45:21] S0: No. He was... At that time, he was... She was a CFO. Right? She's leading finance, and, you know, we raise... You know, when we when we try to pivot... When we, you know, try to pivot to the to the API idea, we already raised from, you know, Sequoia and and Mastercard and a few other famous VCs. Yeah. And that is... You know, obviously, that the brand kinda helped. The VC's brand helped, and we're able to build a better team, and and then we have the money to pivot to this APR first business. That's how the business took off. And then within, like, two years, by end of twenty eighteen, we got a, you know, $1,200,000,000 offer from Stripe to BIOS. Right? So that is a pretty insane two years' time. [00:46:08] S1: Damn. How big was the company when that offer happened, people wise? [00:46:14] S0: I'd say a 160, 170 people. [00:46:17] S1: So you grew from five to a 170 in two years? Yep. It's fast. That's fast. Yeah. [00:46:24] S0: Half my engineers, and [00:46:28] S1: and we [00:46:28] S0: made a lot of mistake in recruitment. Like what? We hired a bunch of people from Citibank, from, you know, big banks and [00:46:36] S1: Fancy pedigrees. [00:46:37] S0: Yeah. And they told us, you know, this is how it's supposed to work, and and, you know, they've they've been building swift systems and, you know, what you're doing is wrong, and you need to do this and that. And, yeah, we we pay a lot of price for that. [00:46:53] S1: Like what? [00:46:55] S0: Like, I
00:46:55 · Jack Zhang, Joubin Mirzadegan
[00:46:55] S0: Like, I [00:46:56] S1: mean still got an offer, a pretty good offer, 1,200,000,000. [00:46:59] S0: Yeah. But that that that is probably considered the the team and the future of the company. At that time, in 2018, we only did $2,600,000 in revenue. But Forward, we probably did $10,000,000 in revenue. [00:47:11] S1: The next year. [00:47:12] S0: Yeah. So they paid, like, you know, more than... On the... You know, it's 800,000,000 on the cap table and 450 to me and my co founder. So... And it's 80 times forward revenue, which is, you know, better than most AI multiple right now. [00:47:30] S1: Obviously, you said no. Sorry. And I actually like ask you a personal question? Mhmm. Because I this morning, but like right before I walked in here, I had a decision on a candidate. This just reminded me of it. Right now it's me and basically basically, like, 16 engineers. One person in g and a, one person in design. Basically, all... My two co founders and all engineers. And the company it's called Roadrunner has like, it's got quite a lot of demand, but I also know all of the customer base. [00:48:07] S0: It's
00:48:08 · Joubin Mirzadegan
[00:48:08] S1: definitely, I am becoming the bottleneck on everything non engineering related. And we've starved this plant for long enough where I need to go like build the company around the product. Let's put it that way, which is probably what you felt like after you started hiring all these, you know, bankers from Citi. And I have resisted hiring anybody from this industry because I think the industry is like old and sucky. So like, why would I hire? Why would I hire those people? And there's been a guy that's been trying to get a meeting with me for six months, basically since the company started. He knows somebody inside of, he knows somebody well inside of Roadrunner and he comes from sales, but he just... He's he's like, I'll I'll be the janitor. I don't care. Like, inside sales, cold calling, like, he has AE offers at real tech companies. He's like, I don't want those. I want to be a roadrunner. And the thing that I've been like struggling with, it's not the first hire that I should make in this function. It's just not. There's like several other priorities in this function. I need like a finance person, like probably someone on marketing. There's like several other roles in sales that I should hire for first, a bunch on engineering, some platform engineering, some QA engineering, some infra. We have like an agent team that we need to build all these things. Right? He's never, he's never done a POC before. Like the sales that he comes from is like green tech sales. Anyway, I could go on. Eventually I was like, nothing makes sense about the timing of this, him. If somebody like, if my board looked at it, they'd be like, what are you? This seems weird. And I just couldn't help, but have this overwhelming feeling that despite nothing making sense, like how can this guy fail? I just can't see him failing. And what's the worst that happens. He sets, he creates too much customer demand. And so it puts more product pressure on us, puts more engineering pressure on us, puts more pressure on us to hire. So anyway, I call him right before I walked in here and I said like let's, let's do it. And he was about to call me to back out because he was like, obviously the timing is not right. And I'm like, yes, the timing is not right. That's true. But like the timing's never right.