A Product Market Fit Show | Startup Podcast for Founders
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?
00:28:02 · Hermann Frank
[00:28:02] S1: So most of our customers offer, like, highly competitive to like high value phone plans. Like for example, the plans we have with Revolut in The UK. It's arguably the best phone plan in The UK. You have unlimited data in The UK on the best network there. You have very generous allowance of roaming data in The EU, which The UK typically doesn't have anymore since they exited. And you have a quite generous allowance of roaming as well with the messaging pass. And that all comes pre bundled in a highly affordable price. And that's something we were able to structure because we control both the roaming setup, we control the local setup, and Revolut is then able to plug in their ecosystem to give it more advantages. Like, there's a VPN included and other other features as well. In The US, Cash App has like one of the most attractive plans in in The US. Like, it's the first it's the very first truly unlimited plan in The US, and it's a plan that also has roaming allowances. And that's something you can every one of our customers can decide to package anywhere they want, depending on what they're trying to do and what they're trying to achieve for the phone plan.
00:29:23 · Pablo Srugo
[00:29:23] S0: Amazing. Well, I hope Wealthsimple brings it to Canada. But let's jump to the kinda second part here, the final part where we go deep and tactical in a couple areas. The first one actually, think is a good segue here, is building and crafting a narrative, a vision that helps you get customers on board. Right? Give big partnerships, especially with enterprise. And it helps you get VCs and investors on board, which for something like this... I mean, there's some companies where it's like, oh, I just bootstrap, you know, whatever at some point. You get big enough and and PE comes in or big VCs come in, and you can just get yourself there. But there's other companies where you're gonna need to raise real capital just to kinda get going. I think this is a bit more of the latter. Know, anyways, you can correct me if I'm wrong. But tell me a little bit about how you went out and crafted the story, crafted the vision, especially as you're you're... As you're fundraising. I'm thinking of the seed round, right, which is in '21, or the series a in '22. Like, especially when things were early and not clearly visible. How did you think about the storytelling aspect of it all?
00:30:18 · Hermann Frank
[00:30:18] S1: Yeah. So we were aware or quite early on that what we wanna build is built on, like, a fifteen plus year trajectory. Like, you don't go out and build it in six months, and then like you just put more money into it to scale sales. So we needed to sequence what we wanna build because it would be otherwise impossible to do. And to... Like, the very first product we built was the API, and then the next step for us was to very heavily go on after distribution. So like once we had the product, we knew, like, it's basically a land grab moment in the industry to onboard the largest consumer and enterprise platforms in the world to just seize distribution into tech for telecom. And that gives us like a very healthy surface. Like we have over a billion people now on the other end of our customers. It doesn't mean we have a billion lines. It doesn't even mean we're actively visible to a billion people. But we have integrations into platforms that have it. That allows us to now go and start selling into these user bases way more aggressively. That in turn buys us more volume on the networks, allows us to build integrate more networks, scale into new countries, and kind of create this flywheel of distribution means more volume, more volume means better pricing, more integrations, and we can we can scale with our customers throughout the globe. So that is a multi year sequence that we needed to create in order to to build a platform that is... That has this type of complexity.