Ep. #1154 - What is Payment Facilitation as a Service?

Matt Watson  00:00

And we’re back for another episode of the Startup Hustle. This is your host today, Matt Watson, very excited to be joined today with Mr. Caleb Avery, who is the CEO and founder of Tilled. We’re gonna learn all about payment facilitation as a service today. I know that sounds like really weird and probably boring as hell. But it’s going to be an interesting conversation, I promise, we’re gonna learn about how to make money from taking other people’s money. I don’t know, maybe that’s not the right way to describe it. But I’m having a feeling Caleb’s going to correct me in a second. But I do want to remind you that today’s episode of Startup Hustle is powered by FullScale.io. Hiring software developers is difficult, Full Scale can help you build a software team quickly and affordably and has the platform to help you manage that team. Visit full scale.io to learn more. Caleb, welcome to the show, man.

Caleb Avery  00:47

Yeah, appreciate you having me on today and excited to talk more about helping people make money from collecting other other people’s money. I think, I think that’s how you put it. But excited to talk about it.

Matt Watson  00:56

Is that is that? Is that the right definition?

Caleb Avery  00:59

I would say those are not the words that I would use. But the general idea is that we help software companies monetize the payments that are flowing through their platform. So when they’re helping the end customers collect payments, they’re generating money on every dollar process through the platform.

Matt Watson  01:16

So let me provide an example. So we own a company called GigaBook that does online scheduling, and let’s say our customer is a yoga studio or whatever, and they charge $50 for their classes or whatever, we could use a software like yours. And then we could make you know, 1% of that $50 or something like that. Right? Like that’s kind of the general idea behind it. Right?

Caleb Avery  01:39

Absolutely. I mean, we work with vertical software companies, and essentially every conceivable vertical, you know, that you can imagine scheduling software, being a great example where, you know, for me, the the experience was really starting to consult for a lot of the software companies that typically were using Stripe or Braintree because it was easy, seven lines of code, you’ve got Stripe implemented, you know, within your, your payments software. And the problem for those software companies is yes, it’s easy. Yes, it’s frictionless, but you’re also leaving a lot of money on the table. And so, you know, in that example of the the $50, you know, payment will Hey, you know, maybe leaving, you know, whatever it is 50 cents, you know, on the on the table, isn’t that exciting, but what if that software company’s pressing $100 million a year in payments collectively, across hundreds of locations, all of a sudden, then you’re talking about, you know, potentially a million dollars in revenue, you know, that you’re leaving on the table. And I think that’s you know, where Tilled comes in is really offering, you know, the software companies at scale, that ability to create what can be a very sizeable revenue stream for their business, potentially doubling the revenue that these companies are making on each one of their customers.

Matt Watson  02:57

So I have that exact scenario with the 100 million dollars, and maybe we’re gonna figure it out during this episode, how you’re gonna make me like, a million dollars year off of that I’m excited. But before we get to that part of the conversation, how in the world did you get into this?

Caleb Avery  03:12

Yeah, so I started out in the payment space at 19 years old, going door to door selling payment processing services to small business owners. And so originally, you know, started out doing door to door over time scale that that business, and then I started consulting for software companies, and most of the software businesses that I was consulting with, were doing anywhere from 100 million to over a billion dollars of annual processing volume. And for me, the really eye opening experience was starting to consult for these larger, larger organizations 500 million 700 million a billion dollars in payments volume, and most of them really had marginally more knowledge of payments than your average merchant. And that was a pretty, pretty eye opening experience for me. And after a couple of years of doing that work, I realized that there really wasn’t a great alternative option outside of stripe or Braintree, especially from a technology perspective, available to the software companies. And so most of them are starting to work with the legacy gateways like NMI or authorize.net. And the traditional, you know, ISO payment acquires and they were accepting a really subpar experience. I mean, for your software company, you know, do you want to email out a PDF application, you know, to your customers and wait a week, you know, to get them on boarded and then give them a reporting console that looks like it was built in 1997? The answer is no. You know, that’s not the experience, you know, that you want. So that’s why so many companies a second Wait a second. Authorize dotnet was super high tech 20 years ago when I started using it. It looks about the same I mean, it’s it’s a fantastic

Matt Watson  04:53

it’s because I used it then. Yeah. Yeah, things changed. lot and it’s a big, it’s a big difference where like, so my old companies were a SASS company, and people pay us no big deal. We used authorize, net dotnet and whatever, we collected our money, but that’s not really the scenario that you’re you’re really built for, right? The scenario you’re built for is, you know, I have a scheduling system and I have 1000 customers use my scheduling system. So then that’s 1000 accounts, that’s like, that would be like 1000, authorized dotnet accounts to set up, it’s not one, it’s like a lot of them. Right. And that’s why I needed a totally different solution. Is that is that part of what made stripe what was so the big deal about stripe? Was it that sort of use case for them too?

Caleb Avery  05:42

Yeah, when you look at when you look at that be to b2b sales. So in for us, we’re selling to you as the software company, who has to then go sell to, you know, that, that in merchant, it really comes down to creating that that frictionless experience for you to go Convert, you know, that end customer on to, you know, the payment platform, and I think that’s what stripe got, right? Initially. And so, you know, if you if you kind of wind back the clock, you know, whatever, 1213 years, you know, pre stripe, you know, you’re going and you’re creating an authorized net account, you’re sending them a PDF, you know, merchant application, it’s this really friction filled process to onboard, you know, each one of those downstream customers, I think it’s one of the reasons why, you know, if you look back, you know, 13 years ago, there, there weren’t a lot of vertical software applications, you know, for small business owners, that wasn’t the primary way that SMBs were getting access to, you know, payment acceptance for their business. Whereas, you know, over the last, you know, five to seven years, especially, you’ve seen this massive rise in SAS, in general, but vertical software, you know, more specifically, and Stripe was able to really come in and offer, you know, this turnkey solution for vertical software companies that wanted to add that embedded payment experience for their clients. And it really can be a value add part, you know, the equation where for that scheduling software, I mean, is the solution even really complete if you can’t collect the payment, you know, from the customer. And I think for a lot of software, solutions, embedded payments has become such a necessary part of the equation that they really emphasize very heavily on the technology and the merchant experience, until it’s really one of the first solutions that’s come to market, and allows you to have that modern, easy to implement technology to have a great and frictionless merchant experience, but also to add the third very important element of payment monetization. So you can create that recurring revenue stream and, you know, now your business can add, you know, an extra million dollars a year in revenue, instead of giving that away to stripe.

Matt Watson  07:57

Well, and I love that, and I love that. You know, there’s companies I’ve heard before, there are companies that like their entire revenue model is predicated on this, right? It’s like, they almost give their software software away from free and they they make money off of these these transaction fees. And, and that could very well be somebody like square and, you know, Shopify, Shopify, or like, things like that, right, like they make a huge part of their revenue is just on these little fees that are almost hidden fees, which could monetize the entire thing. And, you know, I think the problem that you guys are trying to solve is making that available for the little guys, right? Like maybe Shopify figured out how to do that. And that’s their business model. But being able to give that same capability to smaller companies, small and mid market companies is probably, you know, the heart of what you do.

Caleb Avery  08:47

And it’s certainly at the core of it, especially the original thesis behind Tilled. So for me, when I was doing some of this consulting work, one of the clients is doing about a billion dollars a year in volume, and they really thought that they wanted to go become a registered payfac themselves. And so, you know, when you look at Stripe Square, Braintree, PayPal, all of these guys are register payment facilitators and to your point, you know, when you’re the scale of toast or service Titan, you know, you can afford to go become a registered pay fac and build all this out, you know, internally because you’re doing $40 billion a year yeah, you know, in payments volume, but for, you know, the average software business doing 2050 100 500 million a year, you know, in payments volume, it’s really not practical for you to go become a registered payfac, at least, you know, as the world exists today. And so the original thesis behind Tilled before we ever wrote a line of code before it was ever called Tilled before we came up with payfac-as-a-service. The original hypothesis was what would have to be true for a vertical software business to leverage the benefits of the payfac model, but launch in one week. And so that was the original thought behind Tilled was if we could get that time to market down until one week, we could open up the possibilities for essentially every software company out there to be able to integrate and monetize the payments flowing through their platform.

Matt Watson  09:02

So every time I hear the word payment, the first thing I think of is fraud. So that that has to be like the biggest thorn in your side, right? Like, it’s not the biggest thorn in everyone’s side in the payment space.

Caleb Avery  10:24

It’s certainly something that that is top of mind for us. And for me, you know, I started this at this point four and a half years ago, as a solo founder. And for me, one of the original questions that that I had to one of the original hurdles that I had to get through was convincing our first banking partners and our first acquiring partners to agree to this model of payfac-as-a-service where they had no contractual relationship, they’ve never spoken to the software company have no relationship, you know, to the merchants. And that took me about 11 months to figure out, you know, how to put all the pieces together and get the messaging, right, to convince, you know, these very, you know, slow moving legacy institutions, that there was a new way and a new path, you know, forward. And for us, the way that I was able to get them comfortable with it was thinking about as a multistage underwriting process, where we start by actually underwriting and vetting the software platform itself. And so you know, for your scheduling software, what types of merchants? What types of industries, are you targeting? What’s the average ticket? What’s the high ticket? What’s the average monthly processing volume per merchant? is an online? Is it card present? Is there ACH processing, if you have a history of processing payments with stripe, show us your your chargeback rates, show us the you know, the history that can get us comfortable, you know, with this business, and that was the first line of defense because the goal with the actual merchant onboarding processes that were auto approving these clients, so three minutes automated process, to get, you know, all of your sub merchants on boarded onto the platform. And so we have to go through this initial vetting process, you know, with the software companies, and that kind of multi-step underwriting process was really the key to getting, you know, our initial banking and acquiring partners comfortable with the new model.

Matt Watson  12:15

Well, a good example of this is, so I have a blog that’s on substack. And it’s blog.visionarycto.com. And I have paid subscribers, right. But to be to get the payments, I had to set up like, I think it was a Stripe account. And so to your point, like, there, there are these platforms like that, and substack is a good example of one. There’s a lot of examples of them. And it’s like you have to vet somebody like substack and say, Okay, do you know, do we really see that as a good business? But that would be very different. If you’re like, Okay, we have substack on one hand, and you’re like, hey, we have OnlyFans on the other one, which is very similar, like people pay $5 a month to view this content or whatever, right? And so then you have said, Okay, we want to do this kind of business, or this kind of business and in the fraud and all the stuff that goes with it. And so, those are two very different different equations. Right. And so, the, but ultimately, did you guys have to guarantee guaranteed part of that, or the fraud? Or like, how did how did you have to overcome some of that?

Caleb Avery  13:16

Yeah, certainly. So I think one of the, one of the friction points when when you look at the the payback model is historically, you know, the software company a toast or service Titan, you know, that’s going and becoming the registered payback themselves as taking on all of the liability for all of the transactions. Yeah, essentially, fraud and chargebacks that happen on, you know, all the downstream, you know, merchant accounts that they’re creating, and, you know, for earlier stage, software companies that don’t have a full time underwriting and risk monitoring team, would they even be comfortable taking on the risk? And the general answer was no. And so for us it until, you know, we knew very early on that we were going to have to take on, you know, a lot of that liability, in order to be able to get our customers to sign up and come on to till because the the whole premise was, you’re going to be up and running in a week, you’re not hiring a team, you’re not taking on, you know, liability. And so that inherently creates additional risk, you know, for us, but we have approach that with a combination of hiring experienced personnel that have experience in the space, but you know, equally importantly technology. And so we have implemented a variety of both in house proprietary tooling, as well as third party tooling that allow us to not only upfront you know, that the ISVs and the merchants coming onto the platform and run all the automated KYC KY be bank verifications, like an example this week is that we just rolled out plaid within our Merchant onboarding process. And so a merchant onboarding on to tilde can instantly verify their bank details by logging into, you know, their bank account using plaid these are just the types of examples of ways that you know, we continue to take friction out of the merchant onboarding process. because you have to verify the bank details, the options available are something like plaid, or you’re collecting, you know, voided checks or bank letters. Obviously, plaid is going to be a lot less friction, then, you know, hey, do you have a bank letter, you know, signed by your bank that you can upload, you know, into this application process, or fax or email, you know, that over to us. And so constantly trying to find ways to, you know, add new technology elements to streamline that boring experience, but also reduce, you know, some of the fraud and reduce some of the risks that we’re taking on in the process?

Matt Watson  15:34

Well, still, in the early days of this, you had to take on all the risk, like, do you have some, some sleepless nights of like, if we pick the wrong vendor, and they get all these chargebacks? Like, we’re on the hook for this or like was, was there some sleepless nights and all of that, too?

Caleb Avery  15:49

I think every startup founder can attest that there are always sleepless nights at every stage.

Matt Watson  15:56

From dude, I’m right there. I’m there right now.

Caleb Avery  15:58

Yeah. And there’s, there’s a lot of days where you’re making these decisions, and they’re bet the company decisions. And yeah, the reality of just the DNA, you know, of folks like ourselves that are crazy enough, you know, to be entrepreneurs were generally more, you know, risk prone individuals, where it’s like, Look, these are the risks that you have to take to achieve, you know, anything meaningful, you know, in life. And so, absolutely, there were sleepless nights. Absolutely. There were risks, you know, taken in early days, and there’s always those kind of bet the company, you know, moments and we’re still standing four and a half years later, which I think, you know, is a testament to judgment and a little bit of luck along the way.

Matt Watson  16:44

Yeah, just a little. So, you know, your point, every startup has, has, you know, a lot of stress and all those moments in it, but it’s even harder, where it’s like, for what you’re talking about, it’s almost, it’s also out of your control, right? Like, hey, we decided to do business with this scheduling platform. And all of a sudden, we’re on the hook for fraud and all these things if they if they do something stupid, so that that’s like a whole nother whole nother level. But I’m, I just started a new company. And I think we signed up our first paying customer today.

Caleb Avery  17:12

Congratulations!

Matt Watson  17:13

I got a lot of shit that has to be done really fast. I may have some sleepless nights because I have too much work to do. Like, it’s, it’s maybe insane soon, but yeah, it’s fun time.

Caleb Avery  17:25

It really is. And I feel like you know, for me, you know, I’ve started a couple a couple of companies during my career. And the reality is, is as much stress as there is in the early days, there’s also a lot of fun, it’s a very different experience in the early days, where you get to wear multiple hats are making a lot of the decisions yourself, and you’re really directly involved in every aspect, you know, the business day to day, whereas, you know, as you scale up the business to the level that, you know, till this today that the day to day looks very different, you know, for me as a CEO versus you know, I can serve kind of early days when you’re in that founder, you know, mindset, it’s a very different mindset, it’s very different day to day than when you really transitioned.

Matt Watson  18:08

How many employees you have today.

Caleb Avery  18:11

Little over 50 on the team today spread out all across the country,

Matt Watson  18:15

you’ve got just enough that they become a giant pain in the neck.

Caleb Avery  18:20

Luckily, we’ve got a phenomenal team and a great leadership team, you know, around me, but it’s, it’s a lot of fun,

Matt Watson  18:27

you get you get to the size, where it just no matter what you got that many employees, you just gonna have crazy problems that just happen. It’s just the fun, have fun of having employees. So

Caleb Avery  18:37

it creates different challenges. And I feel like, you know, for me, one of the things that I’ve really, you know, been working hard to level up is my communication. You know, it’s one thing if you got three employees, you know, you can get it directly, you know, to all three people and there’s not a lot of room for for miscommunication. When you get up to 50 people, especially in a distributed, you know, environment, you really have to focus on, you know, clear communication, and creating the opportunity to, you know, effectively communicate out those messages and give people the opportunities to ask questions as well.

Matt Watson  19:10

Well, I do want remind everybody that finding expert software developers doesn’t have to be difficult, especially when you visit full scale.io where you can build a software team quickly and affordably. Use the Full Scale platform to define your needs and see what developers are available to do it. See what developers are available today to join your team. Visit full scale.io to learn more. So tell me your your company fully remote or you guys are based in Boulder.

Caleb Avery  19:35

So we are based in Boulder, Colorado, we do have an office I’m calling in from the podcast studio here in the in the Boulder office. We’ve actually got a lot of folks probably got, I don’t know 12 or 13 people in the office today, but on any given day, I might be alone or there might be two or three people in the office. And so we are primarily a remote first organization even for those of us that live you know locally here In Colorado, and I think the the reality is a lot of that’s a byproduct of when the business started. So, you know, as I mentioned earlier, four and a half years old, but when COVID happened, we were only three employees. And so the reality is, you know, the vast majority of the team, you know, was hired after COVID. And so I don’t feel like initially, the plan was this, you know, remote organization. But as we started making the the first couple of hires, you know, back in 2020, there wasn’t as much of a reason to kind of force ourselves and constrain ourselves to hire, you know, locally within the, the boulder area. And so we fairly quickly pivoted to just, hey, let’s find the best possible people to fill every role in the organization. And so, you know, fast forward, you know, a year later, you know, we were, I don’t know, a couple dozen people, you know, on the team, and we were distributed. And now I’ve continued to scale, you know, the organization remotely, but COVID was definitely a major factor in that decision making process.

Matt Watson  21:02

So you mentioned before, you are a solo founder. So, I’d love to learn a little more about that. And obviously, you’re, you know, three or four years into this now, and what what is, what is it like to be a solo founder, especially back then, starting out, like how this had to be way, way harder as a solo founder. I was a solo founder before, and I feel like it’s so much harder.

Caleb Avery  21:23

Yeah, I definitely have a special level of empathy for any solo founders out there. The The reality is, it can definitely be, you know, a lonely journey. You know, in the early days, you don’t have the sounding board, it’s really just you relying on yourself and your, you know, judgment and decision making capacity in the early days. I think, for me, the reason why I went, you know, the route that I did, I knew there were some pretty severe, both technical and regulatory hurdles, that we needed to get over, to even see if the business was viable. And so for me, you know, I had a young kid at the time, we had a second on the way. And so I didn’t want to be pouring a ton of money into a business before I knew if it was really a viable, viable opportunity. And for me, it took longer than I would have anticipated to clear some of those initial hurdles, which I think is a pretty common, you know, experience for folks, you know, in the early days, but it’s about 11 months, before I ended up bringing on our first full time hire, in details, we started to clear some of those early hurdles. And I really was convinced that the the opportunity and the business, you know, have legs and this is something that I just felt compelled to, to kind of willed into existence and bring to life.

Matt Watson  22:44

Well, and so I’m curious, you’re not a software developer, right? Like that, that part’s not about your is not your trade. Right?

Caleb Avery  22:52

Correct.

Matt Watson  22:52

So how did you how did you deal with that part of it early on of like, hey, we have figured out how to integrate with all these different credit card networking’s banking, processing all this stuff? Like, obviously, there’s a lot of shit to figure out there. So how did you navigate that part of it early on?

Caleb Avery  23:08

Yeah, so initially, we started by bringing in third party developers to help, you know, write the the early MVP version, you know, of the solution and validate that this was, you know, technically possible. And, you know, candidly, that, that wasn’t a phenomenal experience. I think part of that is probably the fact that I was a non technical, you know, founder, and one of the things that that I learned through that process was you really have to be maniacal about the product management side of, you know, the requirements and really clearly defining the expectations with the developers because largely, they built you know, what was asked of them, we just weren’t asking them to build, you know, the things. And, you know, probably, I don’t know it 18 months or so, into the, into the journey we ended up bringing on VP of engineering, that became our CTO, and he started building out the team. And I think that was really the turning point. For us, were really started to understand the importance of Product Management in that engineering lifecycle. And I really took full ownership of the product side of the business in the early days, and once we had the kind of product and engineering minds, you know, more balanced until that was really when the the product started to take shape.

Matt Watson  24:37

Well, and that’s why we wanted to dig into this I think there’s a lot of people out there like yourself, that you know, great business ideas, entrepreneurs, but they’re not technical and and, you know, you said it, you’re like you relied on some third party developers to help you build this thing. But it sounds like you were still missing the kind of lead developer architect right, that knew how to like build the software. It’s like it’s pretty easy to find developers, they tell them what to do, and they can do it. But there’s still got to be somebody that understands the product vision, not just the product vision, part of it, like in the company vision, but the technical vision of like, how do we actually build software? Like, how do we actually like, architect this thing, right? You are missing that component. And it sounds like it took it, you kind of limped through that for 18 months, until you hired somebody that was able to bring that?

Caleb Avery  25:24

Yeah, we made more progress in probably six months than we did in 18 months. And we had the right, you know, team in place. And I think for me, you know, that’s been, you know, one of the things that I that I’ve learned, just time and time again, that having the right people around, you really is just critical, you know, to the success, you know, of what you’re building, it’s all well and good to, you know, be a solo founder and have, you know, a great idea. But it’s pretty hard to bring, you know, a business like Tilled to life, you know, by yourself, you have to have just an incredible group of people around you that believe in the mission, the vision for where you’re heading, and then have the capacity to execute on that vision. And, you know, I’ve been fortunate to surround myself with some incredible people that are excited about what we’re building, and it’s really helped, you know, bring Tilled to life.

Matt Watson  26:17

So going back, you know, from the very beginning of this, do you wish you had a co founder?

Caleb Avery  26:25

Absolutely, no, no, no hesitation on that. One. I think if there’s, there’s one thing that I could change, it would be, you know, bringing somebody on, in the early days, I think we’d be a lot further along, you know, in four and a half years. But the reality is, I don’t regret the journey, you know, you learn these things along the way. And, you know, we’re, we’re right where we need to be, you know, today to capitalize on on this opportunity. But if I build another business, I certainly, you know, hope that I’m able to find, you know, that, that kind of yin to my Yang, that can be that co founder to really scale the business. Right, right out of the gates.

Matt Watson  27:05

Well, you mentioned, you know, hiring, that VP of engineering was a really key hire to you. And what’s interesting about companies is as companies grow, there become other opportunities, where not really opportunities, but like moments in time, where there’s some other key hire that comes super critical, right? Like you get to this point, now you’re like, Well, we really need a some of their like, VP of Operations, or VP of sales, or bizdev, or whatever. And, and do you do? Have you went through some of those moments as well, where it’s like, become other things all of a sudden, like a huge issue, like we need somebody that can figure out, figure this shit out and go do it?

Caleb Avery  27:38

Yeah, absolutely. I think there, there’s definitely been multiple cases, you know, have that over the last four and a half years, I think in the early days, when I look at, you know, some of the initial key, you know, whether it’s director VP, you know, hires that we’ve made, it was largely offloading things from my plate. And so in the early days, when you’re the founder of the business, you’re doing sales, you’re doing marketing, I’m doing products, and so you HR or finance, like, all of these things are happening amongst, you know, one or two or three, you know, people but as the organization starts to scale, I think the initial big decision is kind of the order to make those hires in. So a VP of engineering, you know, for us was, I think, higher number four. And so getting that order, right, where you’re bringing in, you know, the the VP of Engineering and then the VP of marketing, and then you know, the Director of Sales and figuring out that order, I think is important. But I also think there’s a there’s a timing element as well, where you have to really look at you know, hey, what what am I you know, is the founder, you know, uniquely good at what should I be doing at this stage, you know, the business and what is tilde the business best serve by bringing in a subject matter expert, that can really focus on whatever that key, you know, aspect of the business sales, marketing, engineering, customer success, you know, HR, finance, you name it, and making those decisions at the right point in time, I think can can often be difficult for founders because you’re, you’re oftentimes giving up things that you enjoy doing, yeah, you might even be good at it. And so if you enjoy it, and you’re good at it, actually delegating and giving up control, you know, that function can can be difficult, but it is a prerequisite to scaling the organization to give up the control to delegate the authority and find you know, smarter people that can scale up those functions much better than you know, 1/10 of my energy, find somebody that can put 100% of their energy you know, towards that function day in and day out.

Matt Watson  29:45

Well, first of all, if I was you the first thing I would have hired somebody and delegated it about what had been the freaking compliance in the fraud. You go figure out this this crap, like I don’t want to deal with this. But I’m gonna guess you had been sleepless nights trying to figure that crap out that had to be the worst of

Caleb Avery  30:03

it was definitely one of the harder parts in the early days was really going through that conversation. But it felt like something that that I needed to do. And the reality was, it was an iterative process. So go have a conversation with a bank, go have a conversation with, you know, an acquirer or processor and just get the feedback from them. Like, Hey, I hear what you’re saying, but I have concerns about you know, XY and Z. Okay, back to the drawing board. Let me figure out, you know, the pieces of the puzzle, rearrange and change the story go back. Okay, well, how would you feel if here’s how, you know, we structured it? Well, this, this little piece is still off. And I think for me, I felt more comfortable in the early days working through that iterative process myself, than then delegating that, at least at that very early, early stage.

Matt Watson  30:52

Okay, you’re ready to get into my 100 million dollar problem?

Caleb Avery  30:55

Let’s do it.

Matt Watson  30:56

Okay, so I work for a digital marketing agency. And so we have hundreds of customers, and they spend $100 million a year on advertising on Google and stuff. So I’m trying to figure out how do I make my percentage of that? Along the way, right? They’re paying Google and you know, I get their credit card numbers, and I gotta log into Google or whatever. So how do I get my cut, I’m trying to figure out like, like, a million dollars to make a million dollars in this podcast, if we can figure this out.

Caleb Avery  31:26

Everybody, everybody would like to have me as a guest on their on their podcast, if I could figure out every single host gets, you know, an extra million dollars, yes, in revenue. So in this example, you’re saying that your customers for the digital marketing agency are giving you their credit card numbers, but then you’re into Google, you’re inputting their credit card number into Google, I am sorry to say, I’m not sure that there is the opportunity here for you guys to make, you know, the million dollars there. So Google Google’s processing, that let’s dig in a little deeper. So Google is processing the credit card payments for you guys in this example.

Matt Watson  32:14

And well, I think the credit card processing fee, I think the solution to this is, I would have to Ach, my customers, and then I use, like my own virtual card are something that I give Google. And then I could make the 1% off of that, or something like

Caleb Avery  32:29

that, that that would be more, you know, on the on the issuing side with you getting the credit card rewards for making the payments, which is still a potential opportunity, you know, for you guys. And so there is still an opportunity for you guys to potentially, you know, make some money on that, from the credit card rewards, but not not quite the same way. You know, that still, you know, helps our software clients, unfortunately.

Matt Watson  32:54

Well, there might be a next big idea for you is trying to figure out how how to help digital marketing agencies do that. So

Caleb Avery  33:03

now you got my brain turning.

Matt Watson  33:05

Yeah. Yeah. So what what other kinds of, you know, ideas? Do you guys have like product wise, what do you what do you guys work on?

Caleb Avery  33:12

Yeah. So for us it Tilled. Our mission has always been to empower software companies to monetize the payments flowing through their platform. And initially, we were doing that directly with with software companies, they were coming inbound, largely organic, to tilde based on seeing us on LinkedIn, hearing me on podcasts, you know, whatever methods they’re coming in. More recently, we’ve been getting a lot of interest from ISOs, agents, payments, consultants, folks from, you know, their traditional payments landscape that wants to refer, you know, software companies to tell them and so over the last year or so that’s been a major part of the business. But going forward, we’re starting to see a lot of interest from the larger direct acquirer is coming to us saying, hey, is there an opportunity for you guys to actually white label the entire tilt solution and go sell that, you know, through, you know, their distribution channels, we actually had one of the one of the acquirers in our office, you know, earlier today, but for them, you know, they’re coming at this where the traditional, you know, door to door sales model that I started my payments career and is largely, the growth is slowing. And increasingly, this vertical software opportunity is becoming the fastest growing segment within the payments ecosystem. And so for us, with the ISV, at the center of our universe, we’re really focusing on, you know, the, the distribution model, and there’s some pretty key, you know, products, you know, build out requirements for us to basically create that next level of the white label until the solution so it’s not just a white label of our consoles. It’s a full white label of our API. And that that was a really interesting you know, Have a whiteboard conversation with our CTO saying like, hey, like, what would it take to go a layer up and white label kind of the tilde portion? You know, of the the products. But, you know, fortunately, we had back to your point about architecture, you know, we had had some of these conversations, you know, whatever, three plus years ago, you know, when Matt joined, say, Hey, I think there could overtime be this opportunity, you know, to expand the offering in this way, let’s make sure that, you know, we’re always thinking about white label as a first class citizen, you know, within the tilde architecture. And so I had challenged the team, probably about four months ago, I said, Hey, I’ve got a big demo, you know, coming up, what would it take to have, you know, let’s have in staging, I’m not saying in the production environment, what would it take in the staging environment, to have a demo of the entire tilde platform white labeled, you know, for this large requirement? Well, how much time do we have, and I’m like, well, the demos next Thursday, and they’re like, we’re gonna do it, and they were able to, they’re able to go get it done, which was a pretty, pretty incredible, you know, feat for them, that it all came back to us, you know, making some of those, you know, functional, you know, architectural decisions in the early days, that enabled us to make, you know, these these quick pivots and open up these opportunities in the business.

Matt Watson  36:13

So when, when people use debit cards through this type of processing, do the vendors still able to get the fees or that there’s no fees on the debit cards?

Caleb Avery  36:23

There’s the opportunity or revenue on essentially every payment, you know, flowing through a platform, whether it’s credit, debit, ACH, I think. Let’s take a specific use case where you’ve got a golf course, management platform selling to, you know, golf courses, and so they’re allowing you to reserve your tee time, you know, online, Hey, it’s 100 bucks, to reserve that tee time, whether the end user pays by a credit or a debit card, there’s still $100, you know, being collected. And for the golf course management platform, when they’re setting the pricing to that golf course, some of them set it as a flat rate price, which is more common with folks like Stripe, so 2.9% and 30 cents to that golf course, regardless of what type of card is processed. And in that example, if you’re using a debit card, that’s actually substantially more profitable, okay, for the software companies. So, you know, the golf course is paying 2.9% and 30 cents, and it may only cost, let’s say, I don’t know, 10 basis points and 28 cents or something to process, you know that that debit card, there’s a lot of margin on the table, there’s a couple dollars and margin, you know, the table, so a couple percent, you know, to be made on that debit card transaction, more, we’re seeing folks implementing interchange plus pricing. And so in that interchange plus model, you know, you’re giving the merchant interchange plus, let’s say, 40 basis points, regardless of whether it’s a credit or a debit card. And so in that example, regardless of whether it’s a credit card or debit card, you’re still making, you know, 40 basis points on a on a given transaction. But yeah, a debit card plus flat rate pricing is kind of the holy grail for margin. least, at least in my world.

Matt Watson  38:20

So how do you guys do business in Europe? Or is it just North America?

Caleb Avery  38:25

So today, we are live in the US and Canada. And that includes, you know, in person online, Ach, EFT, we do all sorts of payment acceptance methods. In the US and Canada, we definitely have aspirations to continue to grow the business internationally. Certainly, in a lot of the conversations that we’re having with the larger public require, some of these folks are active in 150 countries. And so, you know, and they’re coming to us, they’re saying, Hey, can we use you guys, you know, at least the technology layer untilled in every geography, you know, that we operate in. So there’s certainly additional complexity, you know, that comes with with operating internationally, but a lot of it is the licensing and compliance requirements. And so if we’re operating in more of a, you know, technology or gateway layer, it does reduce some of the scope for us to be able to go operate internationally where a lot of the folks that are there are looking to partner with us already have the licenses already have the compliance teams already have that in place, what they’re missing is the API, the console, is that software company functionality, which a lot of that there’s there’s certainly commonality in different geographies.

Matt Watson  39:38

Okay. That’s awesome. Yeah. Well, when I look up online, like the interchange fees in Europe are pretty dramatically less than the US right, because I fell in that would affect the your business in some ways, too.

Caleb Avery  39:51

Yeah, I think, you know, practically speaking, the interchange costs are really not a factor in our margin. So we’re We’re not actually making money on the interchange itself. Those are really the pass through costs, you know, to the the banks, the acquirers, the card brands, involved, but certainly certainly lower margin for those folks. Over in Europe, a lot of the kept interchange, you know, that exists, but there’s still opportunity to monetize payments, you know, for software companies over there.

Matt Watson  40:21

Absolutely. Well, if you need to hire software engineers, testers or leaders Full Scale can help we have the people in the platform to help you build and manage a team of experts. When you visit full scale.io. All you need to do is answer a few questions on our platform matchup with our fully vetted, highly experienced team of software engineers. At Full Scale, we specialize in building a long term team that works only for you learn more when you visit full scale.io. Well, thank you so much for being on the show today. And, you know, as we end the show, I always love to ask if you have any final words of wisdom for other entrepreneurs out there, besides finding a co founder?

Caleb Avery  40:59

Yeah, finding a co-founder is definitely, you know, up there in terms of my advice. I think, you know, the second bit of advice would really be to focus on the culture. You know, the organization that you’re creating, I think for too many entrepreneurs, they wait too long to really put direct emphasis on the culture of the business. I think you have to think about, you know, culture as early on in the business as you can because it can pay tremendous dividends if you can get that piece of the business right early on.

Matt Watson  41:33

Awesome. That’s great advice. Well, this is Caleb Avery with Tilled. And thank you so much, so much for being on the show today. And that was awesome. Thank you so much.

Caleb Avery  41:45

Yeah, Matt, really, really appreciate the opportunity to share my story. And if anybody wants to learn more, certainly you can check us out at@till.com I’m always also very active on LinkedIn. So follow me Caleb Avery on LinkedIn, but thank you for the opportunity.

Matt Watson  41:58

Awesome. Thank you.