A Product Market Fit Show | Startup Podcast for Founders
00:21:03 · Pablo Srugo, Hermann Frank
[00:21:03] S0: So that's your first kind of customer, and then you dive deeper into this... Was that was that even a market? Like the smart... Was kids smart wash? Was there several companies that face the same issue? [00:21:13] S1: Yeah. There's there's quite a range of companies, and like, I think today it's like a mid eight digit like ARR volume for us. So it's it's not a it's not a tiny market. They compound, they grow at like a 150% NRR. So like it's a... Yeah. It's good business. It's not the business that will grow build a $100,000,000,000 company, but it was the perfect niche. Right? Like in Westy or also Told. Like you need to find the one group that, like, needs a product more where you can specialize, and that was it. And that allows us to build a much more resilient, scalable platform that is ready for smartphone use cases. Right? Where you are powering the primary smartphone subscription of an individual that, like, if there's anything wrong with that subscription for a second, you're you're kinda screwed. And the other case, like, you had a lot more leeway. It was way more forgiving.
00:22:04 · Pablo Srugo, Hermann Frank
[00:22:04] S0: But it's also... While it is more forgiving, it's also the perfect example of what you kinda mentioned there, which is this this smaller niche market, but that has a very sharp pain point. I mean, you're dealing with 30 to 40% returns, your business is not working fundamentally. You'll do anything to... You'll try anything, frankly, to solve that, which is different a little bit than kinda where you're gonna move to, and we're not gonna talk about that now. But, you know, you're... You become an enabler. You're right. You're like, hey, I'm a fintech. You wanna have a new revenue stream. You plug gigs in and and you kind of sell this this mobile service, and the market is much bigger. But at least at first, I don't know if the pain is as sharp as this smartwatch thing, which which you needed because probably your product at that point was not at the same level in terms of production and in terms of, you know, feature rich and whatever. So it was, like, good enough for them, maybe not good enough for everybody else, but really got you going. [00:22:51] S1: Yes. It good point. [00:22:52] S0: You love this show. You don't wanna miss the next episode. Why would you? So hit that follow button. Trust me. It's in your own best interest. What's the next step at... Like, then you're kind of end of twenty one, you launch. Is this now the time when you go out and then you've got some traction? So I assume you got in kinda raised some funding?
00:22:52 · Pablo Srugo, Hermann Frank
[00:22:52] S0: You love this show. You don't wanna miss the next episode. Why would you? So hit that follow button. Trust me. It's in your own best interest. What's the next step at... Like, then you're kind of end of twenty one, you launch. Is this now the time when you go out and then you've got some traction? So I assume you got in kinda raised some funding? [00:23:06] S1: Yeah. We grew to like a million ARR. Right? Like, this is pre AI, million ARR in three months, like, which was like quite amazing growth. So we raised a serious AI on top of that. And like that basically buys us the ability to like build the platform we actually set out to build. So we keep scaling with kids smart watches, and then we start graduating to like feature phones, and then smartphones, and just like powering a range of device customers. [00:23:34] S0: Still on top of the aggregator, or now you're going direct? [00:23:36] S1: That was still on top of the aggregator. Like, it took us actually quite a while, like, to get the first deal done and to migrate. But we kind of improved the aggregator connection meanwhile. Like, we had like very first smartphone use cases on on the aggregator still. The economics were just terrible. And like, you didn't have like full feature set, but it was pretty pretty decent in terms of like the the SIM card functionality. The aggregator's feature set was like not not not very versatile.
00:23:36 · Hermann Frank, Pablo Srugo
[00:23:36] S1: That was still on top of the aggregator. Like, it took us actually quite a while, like, to get the first deal done and to migrate. But we kind of improved the aggregator connection meanwhile. Like, we had like very first smartphone use cases on on the aggregator still. The economics were just terrible. And like, you didn't have like full feature set, but it was pretty pretty decent in terms of like the the SIM card functionality. The aggregator's feature set was like not not not very versatile. [00:24:02] S0: And tell me a little bit about the the the types of customers, like once you moved off of smartwatch customers, what was the next kind of batch of customers? What was their use case? [00:24:11] S1: So that's where we started going after... Once we were quite mature with the with the smart... Like, device customers, is where we started targeting Fintechs. So we launched NewBank First. That was a very first Fintech customer. [00:24:26] S0: Tell me a little bit more about the idea. Like, I think about, you know, my bank, which now I do have one of one of these neo banks. But before I had a traditional bank, like, I'm not buying, you know, my mobile plant from them. You know, here we have called Simple, you know, and in The US have a bunch of others, like, in Europe different. But like, what's the thinking from the business level of we're gonna get into mobile plants?
00:24:43 · Hermann Frank
[00:24:43] S1: Yes. So fintechs, most of... Like, in developed markets, they're successful because they've been able to build a user experience that is much better than the traditional bank's user experience. They attract a certain type of clientele, mostly, you know, like it's it's a generational kind of cut, right, like millennials, Gen Z would much rather prefer to bank on an app that like allows us to do things in a couple clicks, and like really cares about customer experience. And that's kind of a great pre filter for the target group. The other way they're a great fit, they already have KYC, these are like the most regulated industries, is telecom and finance. They are your payment methods. So you can build the most simple way to activate a subscription. Psychologically, they're very similar, like they're both kind of wallet products. So you don't leave your house without your wallet, without your phone. So they're kind of a great, like, psychological collect from a consumer psychology standpoint fit. And then there is a few drivers that make it attractive to them, and like why it ultimately will become mainstream. One, they're maturing. Like the market is maturing. Like they've grown a lot, but like now you see kind of maturing growth curves. So they're looking for ways to gain primacy, to gain loyalty, and to gain additional revenue streams. And ideally to create kind of a a portfolio effect, right, like an ecosystem that benefits their customers maximally. And that is a great addition to that type of ecosystem. The mobile subscription is the first thing you pay even if you don't have money. Like, people pay their mobile bill before they pay rent. It's 12 transactions per year that you have. It's a service that you use every second of every every day, basically. And then there is another component. Carriers never wanted to finance phones. They've become reluctant financiers of phones thirty years ago, because that was the only way to sell you a subscription. They don't want that business. They wanna get rid of it. Banks on the other end, they want incremental business lines with their customers. So they want that additional loan. They want that additional touch point with their customer. So ultimately, they were not able to do it because they they couldn't sell a subscription alongside with the phone. Now for the first time, they can do both.
00:27:03 · Hermann Frank, Pablo Srugo
They can sell you the phone and the subscription in a bundle. They can add other loyalty mechanisms from their ecosystem. For Cash App, for example, you get Cash App Green for free if you're a subscriber. Like with Revolut in The UK, you can pay with Rev points, you can pay your phone bill with Rev points now. So these make it unique. So structurally, a bank will be much better positioned to serve your telecom needs than a carrier actually can. Because they have other things to offer you, and because for them, this is a compounding portfolio product versus a singular touch point. [00:27:38] S0: That makes a lot of sense. And do you find the offering is any different? Like, for example, I'm thinking in terms of my... You know, the credit card that I have from Wealthsimple has no foreign exchange, you know, fees or whatever. So it becomes a more global credit card, which I think is a pretty common offering for these guys. Are you seeing the same things in plans where it's like you can use it from anywhere in the world, or is that... Or are the the terms of the plans pretty similar to what you would get from AT and T, T Mobile directly?