A Product Market Fit Show | Startup Podcast for Founders
00:21:12 · Pablo Srugo
[00:21:12] S1: Because you don't have at that point, I mean, you're, you have like, you know, you were a founder, you've got pedigree for sure, but it's not like super clear, easy. I mean, I'm curious to hear actually how you raise. It's not like, plus 22 is a funny time, man. 22 is, was not, uh, you're remembering correctly. Not a great time, man. Second half of 22 is deadly. No, it was horrible by the way.
00:21:32 · Jonathan Awad, Pablo Srugo
[00:21:32] S0: Yeah. By my estimation, because I was still, I was at a company that raised at 150X in early 2022, right before it left. Right. So right before the boat left. And then by my estimation, about a month later, because they closed in April, my take and sales, you can feel it. Okay. I'll explain how you can feel it. In May of 2022, everything dropped, everything dropped. And the way you could really feel it in sales, particularly in, in my seat was people before in like 2021 and, and like 2020, 2021, early 2022, they were buying like crazy. They were making things fast. Every meeting, the follow-ups were easy. The decision-making, all the decision-makers joined. They're excited. They're eager. I know the summer was coming, but then all of us, I mean, I did a lot summer of 21. I did a ton of sales in summer of 21. And then all of a sudden, summer of 2022, people were really slow to respond. Everything, it was like, oh, cuts, cuts, cuts, employees being fired. Sales are dropping, volumes dropping. You really felt the difference. I totally felt the difference. And I write a, I never publicize it, but if someone wants to find it, I write a sub stack on sales. And I wrote a lot about that time of like 2022, 2023 and what it felt like and how you have to overcome it because it's, and especially the one I wrote recently, it's like, now we're in SaaS-pocalypse. There's way too much SaaS at this point. And that's confusing, but 2022 is really tough. We ended up raising in 2023. Essentially like the TLDR was, [00:23:00] S1: Tim and I,
00:23:00 · Pablo Srugo, Jonathan Awad
[00:23:00] S1: Tim and I, [00:23:00] S0: we just hung out a bunch and we just jammed. And then we called a bunch of my friends and prospects and customers and managing director at a very large credit card company, a partner, executive director at a big bank. And then just like the list goes on. We talked to probably like 70, 80 of just my friends, my past deals. And I was like, Hey, what do you need? Just help me out. And there's this common thread of, well, here's this extremely difficult thing that I don't think you can do. But if you did, I'm down. And that was a fraud consortium. And a fraud consortium is very simple. You go to a hundred of the top lenders, payments companies, banks, whatever. You get all of their list of fraud, which they could share if they felt like it, because it doesn't have to be PII. It doesn't have to be actually personally identifiable information. And basically like their, like imagine scale AI, you go and get their labeled data across all of them that they never would share with each other. You go and label a bunch of businesses is what the idea was versus people or attributes. And then each one could benefit from that because what's currently happening in financial services and lending and payments, especially now with the fraud grown rampant with agents, is you go and onboard somewhere, some bank, some lender, go to Brex. Brex shuts you down because like, oh, this is a fraud. And then you just go to ramp. [00:24:13] S1: Right. Brex doesn't tell them.
00:24:13 · Pablo Srugo, Jonathan Awad
[00:24:13] S1: Right. Brex doesn't tell them. [00:24:14] S0: Yeah. And Brex doesn't report it to the, no offense to Brex, they're not, they're not reporting to the government. And if the government, even if when they do get a report, it's called like a SARS, a suspicious activity report. There was 5 million SARS filed last year. Guess how many percent wise were enforced of the 5 million? Just pick a percent. 20%. I mean, [00:24:32] S1: I would hope, just because you're saying he's getting low. Okay. 4% were enforced. So 20 would have been really high.
00:24:38 · Jonathan Awad
[00:24:38] S0: And so in a very simple way, they're like, hey, here's some impossible thing. Go do it. I was like, Tim, I do have a little bit network. We probably could put together a consortium. If I give you labeled data, would this be really interesting? He's like, you give me labeled proprietary data. We'll build the best risk modeling, the best machine learning algorithm in the market. You just have to go do this impossible thing. And I was like, all right, cool. Sounds good. So we put together a deck. We incorporated a company. Shout out to Tim's wife, Vivian. She used that BCG at the time, and she helped make the deck, quite frankly. I was a lizard, and I'm not bad at making decks, but BCG knows how to make a good deck. And she did 90% of this deck. Thank you, Vivian. I'll give you a shout out. I always do give her a shout out. And then Zoe Newman, shout out Zoe, at Capital on Tap, was the first person to really tell me, like, hey, for our consortium, you should look into this. Go do it. Capital on Tap's this, like, $5 billion credit card company out of London and also a huge presence in New York. And then we came together, took this idea, and then I went to a bunch of my friends and investors, and I was like, hey, I'm going to raise. And then I got some advice of, like, plan out your meetings and, like, a process. I would say in terms of fundraising for any founders that listen to this, there's a few ways to fundraise. This is my take. The really ideal way is not what we did. Okay? It's not what we did. The really ideal way, and I used to give this advice to a founder yesterday. The really ideal way is to have a bunch of friends who are investors who you'd want to work with and then do something excellent. Do something incredible and be somebody important in the industry. Obviously, that'd be amazing. Next up from that, go work at somewhere incredible. Do something amazing at that company. Have a lot of really good references at this incredible company and have a lot of amazing friends that are great VCs. Who want to back whatever you do. That is not what we did. Okay? That's not what we did at all. Going down the ladder.
00:26:24 · Pablo Srugo, Jonathan Awad
[00:26:24] S1: Yeah, going down the ladder. And then, [00:26:26] S0: okay. And then after that, YC, shout out YC. Amazing. Definitely, I recommend doing that. And then, it's what we did, which is not the bottom. There is the bottom. I don't want to get into the bottom because it's mildly offensive. And that's what we did, which is basically get introduced to tons of investors for the first time and plan out all the meetings like a month in advance, like a month in advance, and then segment them out. Week, Week, Week, Week, and that's what we did. What I didn't know, which is why the story is crazy, is it was one week, you know, week one, week two, week three, a month in advance, right? Week one, SVB crashed. Oh, God. That's why the story's crazy because I didn't realize that and I was like, oh, we got this. 75 funds, tier ones, tier twos, tier threes. I've never raised before, so like, you know, like, we got a lot of experience here now. We got this. SVB crashed on the Thursday of week one year. [00:27:17] S1: Oh, my God. [00:27:19] S0: Shout out to our investors. I'll never forget, Anamitra, A4 Capital. The conviction that this man had to be like, my money's in SVB in First Republic, but I'm still in. Crazy. You don't want to leave your rap. Crazy. Plus, you're in fintech. Like, this stuff is like adjacent. [00:27:34] S1: It's like, hey, is anyone, [00:27:35] S0: any bank going to buy anything? [00:27:37] S1: Like, all the FIs are going to be frozen? [00:27:38] S0: What's going on? [00:27:39] S1: And also, all the VC's money is in SVB.