Special Episode—Unpacking Mercury's $300M Series C with Guest Host, Hiten Shah

To get to the scale, we've got to like, you needed an insane growth rate, right? Like, to grow, to grow Anything above like 10% a month is just really hard.

Hi everyone. Welcome to Founders in Arms with me, Imad Akan, co founder and CEO of Mercury.

And I'm Raj Suri, co founder of Lima and Tribe. And today we are welcoming back Hitin Shah of many startups now working at Dropbox, having sold his company there. Welcome back, Hitin.

Thanks for having me. I'm really excited for this one.

Yeah, so today we're going to be covering the news of the week. It seems like the biggest news in startup land actually. Apart from maybe some new AI models. Who cares about those, right?

Gimli dropped apart from that. Yeah.

Imad. And Mercury's big round, $300 million led by Sequoia Series C valuation of, what was it? 3.6 billion?

3.5 billion?

Yeah, 3.5. Oh, sorry, I gave you a little bit extra there and it got a lot of coverage. Imad, your press team did a good job, looks like.

Yeah, it was fun. We were actually a little worried because a ton of stuff had leaked like a month ago.

Tech press is getting better at getting access to this VC data, but it seemed like us actually telling the story and we announced some new stuff as well. Well, we added a couple of board members actually. The, the ex CEO of Fannie Mae who ran the SVB Bridge bank briefly joined as a board member. So that was exciting and we announced that as well. But yeah, really, really fun day yesterday. And you know, we also emailed the customers and we also did this thing where we're basically like, we're spending like 50k and paying for like people's like coffees and teas for the week as a celebration.

That was an interesting thing. I'd never seen that before.

Honestly. I only just found out about it after someone tweeted about it. I was like, they were like, oh, Mercury just paid for my coffee as part of the series here. I was like, are we doing that? And I was like, are we doing that? Someone was like, yeah, we're doing that. I was like, okay, that's sick.

That's the sign of a well run company.

So I know I, you know, you.

Can raise all the money you want, but that, that's what got me.

I'm like, oh, he didn't know that dope stuff was happening at his company and he found out when everyone else did. Yeah, I like that. Yeah, I love it when that happens. That like the right Thing happens and like I had no involvement in it.

Super cool.

That's a cool idea. I've never heard of anyone doing that before.

Like, so we have this like actually ongoing thing where we randomly. We do pay for people's coffee and tea. So this is like a long running program for a year plus and normally the budget for it is like pretty small. We just do it infrequently and it's just like a fun thing to do. I know we had this idea like several years ago, but this week we're running like a much more kind of. I see inflated version of it. But we've always had this like tea theme at Mercury, like since the start. Like our top customers, we'll send them tea.

There you go.

He's having some tea.

So it's just like a thing that's like developed over years which. Yeah.

Actually have you ever tried Pu erh tea?

No. What's that?

That's what I'm drinking.

Chinese tea.

It's fermented tea. Fermented green tea.

Oh, is this the like.

I swear by it. Yeah.

I love it. Is it caffeinated?

Yes, it is caffeinated.

That maybe it should try Part of the point.

Yeah, yeah, it is part of the point. I normally just do like these basic British black teas like PG Tips with milk. Half the people in the UK have I think milk and sugar or straight. Like you got to have milk and sugar.

This one is better straight. But it tastes a little bit like dirt because it's fermented.

Yeah.

I had a question and I haven't watched any of the interviews. It's kind of intentional. So I don't know what was asked or if you clarified this, but my understanding is the 300 million wasn't all equity and there was some debt related thing or something like that. Am I, am I right or wrong? There's some anecdotes I just want to make sure we talk about. What is that 300 million actually mean?

Yeah, 300 million is a combination of primary and secondary. Firstly primary we just did a fairly significant chunk to do employee tender offer. Basically make it possible for kind of early employees. They have to all work at Mercury to sell some shares. We have a separate deadline. That's like 100 million. But yeah, I think that's always cheating when people throw, throw in the debt in the equity raise.

Just calling it out to make sure that you know, you know what it, what it is, which is an equity round and all of the 300. Was that because I think that's like a fact I would eject just to.

Make sure so and Imad, you've been profitable, he says for 10 quarters. And so like given that, I mean what was the impetus behind the raise at all? I mean you're doing so well anyways.

Yeah, yeah, the biggest factor is like we hire a lot of people, right? We're going to go from like, I think we started the year at like 7:80 and we're going to end it at like a thousand ish. And when we hire people we, you know, part of the comp is equity and we try to give people like fairly generous equity options but people are just stuck on this 2021 valuation that we did which was a 1.6 billion valuation. And you know like we can say oh we're worth so much more and like look at all of these metrics. But yeah, rightfully so. People are already skeptical of 2021 valuations and then if we're like we're worth a lot more than that. It's like, you know, people just are like yeah, they don't take us seriously. So that was the biggest factor. And actually you know, for a startup at our scale, when you're hiring so many people, you know we do about 4 ish percent in stock based comp dilution basically. I mean all companies, tech companies do it. So that's pretty significant. And if, you know, if we can have a higher valuation.

That makes a big difference to people weirdly. And I think this is a little contradictory, like you would think employees would want to join companies with the lowest valuation possible because then they have the biggest upside possible. But the reality is like your big evaluations do attract more talent as well. People go like oh wow, this company's made it, it's a high growth company. These kind of outside factors like do influence people's choices. So I think it'll also make it like a little easier for us to hire going forward. That was actually the biggest driver like talent and things associated with that. I would also say it's not that high a dilution for us. Like it's way less than 10% dilution. So you know, and we do get 200 plus million which is, you know, although we do have a big balance sheet, it's always nice to have more money in terms of acquisitions. You know, crazy stuff happens every year or so in the macro world and geopolitics and all of this. So having having a bigger kind of watch as for whatever happens is also useful.

And it's a top investor sequoia too, you know.

Oh yeah, 100%.

So that it's a good partner. One of the good, you know, one of the few, I would say great investors in the.

We did it, we did an analysis a while ago and like the percentage of portfolio companies that use Mercury is way, way higher if that VC is an investor. So like for in recent Horowitz and CRV it's like above 50% because they were like our seed and series A investors. Which is weird because I don't think those VCs do that much to encourage mercury among their customers. But there's some sort of thing that happens where if you invested in Mercury it's much, much higher chance that like your portfolio company uses Mercury. So I think having we actually both got Sequoia in this round and also Spark, So having like two more kind of top tier VCs as investors is definitely hopefully going to directly help there.

I wanted to give a statement that I try to give founders a lot when they're raising that you reminded me of, which is basically this idea that there's massive incentive alignment when the investors can get you customers. And I'm not saying you're doing that deliberately, but it just reminded me that when you can find that alignment, it's like they bring you customers, your revenue goes up, the valuation of the company goes up. As long as it's all real and it's on actual value in the company, I think that there's a massive win, win, win.

I'm 100% aligned with that. I mean we had 60 seed stage investors because I was like, I want to get. And I deliberately targeted people with they have like 100 plus portfolio companies. So like we had SV Angels and Liquid 2 and all these people because I was like, I want to get as many of their portfolio companies as possible.

Especially when you're in a business like yours. Right. Like, I think one of the most impressive things about your business to me is that you have such a massive market and are attacking it from a like the ground.

Right?

Startups are the ground. There's a high volume of startups. I know SMBs as well, but startups is just a good starting point considering all the things that are happening in the ecosystem and have happened. I'm sure you've, you know, not deliberately taken advantage of some of the pitfalls of the baking system, but definitely are attacking it. I mean, I would just say that I don't think any of this would be possible if you actually didn't care about doing a great job for your customers. So to me, when I look at, in your specific case and this business, especially as I use the product or talk to people that use the product, no one can say anything bad about the product. That's like very rare. And I have to give you that I care about product probably more than I care about anything else when it comes to business. And, like, I can't find anyone saying anything critical enough about the product where, like, it would dissuade someone from using it. And then on top of that, dealing with low mps, crazy fragmented industry and ones where everyone has a complaint about their bank. Right.

Well, as a CEO, I deal with a lot of people complaining about Mercury. I wish there was absolutely zero problems. But one of my thesis is that.

If it's a bug, you fix it straight away. It's not on the backlog. It's like you get it done kind of thing. And actually the scope of things you consider bugs should be pretty broad. If it's, you know, if the button says something incorrect and it's confusing, that's a bug. It's not like a badly done feature. I think that actually helps keep like a much higher kind of quality standard when you have those standards for yourself.

See, these are the topics I care about.

But we should talk about fundraising funding in your lessons, right?

We got two people who don't believe in VC fundraising. Well, it's a difficult audience.

Say, I don't believe in it. I believe in it for the right businesses and you're on to the right business to do it for.

So just, I, I would say, like, I have a bunch of like, philosophical differences in the way I fundraise that are probably like, pretty different from like most people. Like, number one, I do it very relatively unfrequent, infrequently. Like we did one in 2017, one 2019, one 21, and then one now. So we, you know, for the scale the company's at, we've only done like four real fundraisers. So I think if you do it infrequently, like, you're diluting yourself less, you're wasting less time and you're just making more progress between the rounds as well. Like, I don't, I don't. I mean, I kind of vaguely get it, but I think it's generally a bad idea for these companies that raise every like six to nine months. Like, I don't think that's like a great move. So part of that is, like, we tend to over raise a little bit. I mean, it's helped that Mercury has always been a hot ish company, but every time I've gone to raise, this whole idea that VCs try to sell you is like, only raise for one and a half years and have this plan to justify this raise. It's actually all kind of bs. I think it's much better to.

The valuation is evaluation, which is based on progress and market dynamics. It's not based on how much you should be raising. So you try to maximize the valuation and then you raise a big chunk and don't spend it. Like we don't, you know, when we, when we raised, we raised 120 million in 2021, I was like, I don't know how I'm going to spend this. Right. Like, like we made money as a company and we've always had like, pretty good uni economics. So it was very much like, hey, it's 2021, like, it's time to do a, you know, reasonable fundraise that because this market is not going to exist forever. And yeah, we've grown into the valuation, of course, but, but it wasn't like, you know, we deliberately overraised so that we had that extended capital. And then lastly, I only try to raise when it's not when I need it, it's when things are sufficiently de risked that I think I could. And the market is in a good position and I think I can get a good round down. So, yeah, I think all the points we've raised, we either haven't needed the money or we had another several years of Runway and it just makes the whole thing way less stressful. In my previous companies, there was just so many times where I was like, always close to the wire and running out of money and like, just like stressing out about it. Whereas a Mercury, I mean, we're like seven or eight years in. Like, there's never been a point where we've been at all stressed about running out of money, which has been like, obviously there's some privilege here. So, like, you know, it's not always achievable, but it has been like partly a deliberate plan.

Yeah. A parallel that I think about. So I sold my company when we had 18 months of Runway. Yeah. And the parallel I think about is like, can you grow into your valuation? When should you raise based on being able to grow into the valuation? And the milestone should be more about the company, not about the fundraising and company as in customer validation. But the one question I had for you, which I always like to ask in this scenario, because you're A multi time founder, how conscious were you of those gaps in. Not gaps, but other people would perceive those gaps in the fundraising. So how conscious were you when you raised the first round? As to that being your approach? Or is that something you kind of evolved into as you realized what business you were in or some other factor?

Sorry, what do you mean by gaps?

Like things that you're saying basically you had a non standard fundraising process. Many would say it's gaps, right? Like six, nine months. That's a little aggressive. I think most people are like within a year or 18 months of the last round. You should raise the next round, right?

To keep showing.

So how conscious were you? Is all I'm asking about that because like you pointed out, it's non standard. Most people don't do it like that.

I don't think VC's care. Like I don't. Like they care about like what's your scale, what's your growth rate? Like what are the margins? Like they care about like the actual things and like obviously how good product and customers like whether you raise after three years or two years. I don't think they actually care about that. I think the reason that it's sometimes seen as like a gap or failure is because it like maybe shows some weakness or something like that. But if you're coming in with like a strong company with like strong metrics, like VCs are not like, wow, you haven't raced for three years, we're not touching this.

So you just busted one myth. So love it.

It's great.

Yeah, I know. I really don't think anyone cares about that one. But I do think growth rate is really important. I mean, I think like sometimes founders underestimate how important growth rate is. Like a vc, you know, I mean also like actually it's, I look at like every, you know, back in the last seven years, right? To get to the scale we've got to like you needed an insane growth rate, right? Like to grow, to grow Anything above like 10% a month is just really hard. And to do that for like 24 months or something is like almost impossible. But that's like kind of the numbers you need to go from like, you know, if you're starting at 100k and you want to end up in revenue and you want to end up at like 10 million in revenue, that's not going to happen at 5% growth. That needs an insane compounding growth rate. So VCs are very sensitive to that. And I think as a founder you have to be very Sensitive to it. If you want to reach this kind of huge scale, it's very hard to kind of limp your way to that scale. You need to have a pretty insane growth rate. So VCs are very sensitive to that. I think that is by far the biggest factors. And people, I think, often underestimate it. I think VCs sometimes overestimate it. You know, with these AI companies, they're like, oh, my God, they just grew from like, 1 to 10 million in, like, three months. Look at this insane growth rate. But, like, you know, sometimes that's not, like, sustainable necessarily, but it is like, yeah, the whole ecosystem is built on growth rates.

I'm going to ask it almost the same thing I did before, which is how conscious were you of that when you started the business and how did you think about it in the early days, this growth rate thing, if you did? Um, mainly because I think, like, you're sharing something that is often just completely misunderstood as to why the investors want that growth rate and what they're doing in their heads when they see those numbers or don't see those numbers.

I was conscious in the sense that, like, I think it's. I think sometimes founders don't do this. It's like, I think you should just open up a spreadsheet and just go, like, every month, like, what am I going to do? And what does it take to do it right? Like, and we did that. Like, every round I've ever done, like, I've gone and written something and, like, okay, I'm going to try to get this many customers in month one and month two, and, like, what does it look like in month 10? And, like, what are my assumptions on, like, deposits and spend and revenue and, like, sales costs and all of these things. And if you map that out, you know, often it looks kind of insane to, like, to keep that exponential going, but it makes it, like, very tangible. You have to say, okay, you know, I have to go get, like, whatever, 50 customers this month. Otherwise, like, I'm. I'm behind. And I, you know, I tend to do this before the fundraise, and then I do it again after the fundraise. And, you know, for me, like, a fundraise by itself is, like, it's not, like, a relaxing, congratulatory time for me. It's. I mean, actually, yesterday was pretty fun on, like, Twitter and just having fun, like, talking about it. But in general, it's, like, a pretty stressful moment because it's like, now you're, like, committed to, like, you know, you made all these promises, right?

Yeah.

And you've got a plan and you got to execute on that plan. Yeah. And it's a difficult plan normally. So yeah, I do this like upfront thing and then I normally even I mean we don't have to do it anymore since we're profitable. But before we're profitable, I used to like map it all the way out and say, okay, you know, this is the point where I'm going to raise. And like even that's two years away or something like that. I map that out and I'm like, okay, this is the revenue I need to hit, this is the growth rate I need to hit. This is how I'm going to get. I mean it's definitely tricky when you have nothing, right? Like when you haven't launched, you're making a ton of assumptions, right. I mean even now we just launched like Mercury Personal last year and all of our assumptions are wrong. Right. It's like the amount of money in those accounts is like 3x bigger than we expected. And yeah, it's very hard to predict real behavior. But you do your best job and then hopefully you underestimate. But it also helps you set like realize like, oh actually like, you know, I'm behind on something. Like if you're a sales driven kind of company, you know, you have to say, okay, I need to go hire like 5 salespeople to like hit these objectives. If you're like, you know, whatever, however, whatever are the levers of your business, it like makes it very real when you have that like mapped out.

Yeah, I think it's a really important discipline, it's a really important like operational discipline to like have numbers against everything you do. And I've seen great operators do that really well. But, and, and I, you know, Imad, as an early investor your thing, I saw your updates every month, right. And I was really impressed actually by how well you structured your updates, like how quantitative they were. Like you had a lot of charts, a lot of graphs. It made, it made me very confident that you knew your business inside out and that you were instrumenting your business.

Right.

And then you, you know, it's a mark of a really well run company when they have like very detailed charts. You do it. I think also Matteo, who you introduced me to from Emmy also does this. Right. And you know, they, you know, but many founders don't. Oh, I would say most found, I would even say myself. I'm not like that. You know, I'm not as good as you guys.

I feel like, actually, like, sometimes founders don't understand the point of investor updates. Like, they think it's for the investors, which I think is, like, actually missing the point. Like, to me, the biggest value, number one, was like, you know, back then, I used to do every two months. Just, like, every two months, just, like, stepping back from my business and saying, like, here's all the things I said I was gonna do. Did I do them? Here's all the things that we said we were, you know, like, what is going wrong? Like, what are the metrics? Like, what really matters? So, like, just stepping back and doing that every two months. Like, there was no, you know, when you're a small company and you don't have a board, there's not. There's no real forcing function to, like, force you to think long term. So I found it valuable for that. And then, number two, I shared it. Shared it with the whole team. So it was like, yeah, and it's not something that I just wrote for myself. Like, I was like, hey, this is going out to all of my investors. Like, this is what you're going to be held accountable to. And it was like, you know, here's the 10 things we want to do in the next two months. Right? Like, this was, like, very, very specific. And people were signing up for that, but they were also seeing, like, what. What was the most important thing to the company? And then lastly, I did send it to the investors, and it was. I think it is nice for people to see it because then, like, yeah, I think people underestimate, like, how much relationships and that kind of, like, information matters when, like, things are not going well. Like, every now and then, like, I have, like, a investor I invested, a company I invested in that's like, hey, we need more money. I'm like, I invested, like, two years ago. I have no idea what you've done. You've never sent me an investor update. I'm like, I'm like, okay, you need money, but, like, you're like, a stranger to me because you've never kept me up to date versus, like, another company that's, like, you know, maybe struggled, but I've seen, like, what they've tried to do and what their thinking has been during that struggle. And I. You know, sometimes I'm really impressed by entrepreneurs that have, like, completely failed, right? Like, I'm like, I'm left with going like, wow, they, like, tried everything. Like, they just hit a brick wall. And, you know, they power through the brick wall, but it still didn't work out. And that's like so impressive. So. So yeah, I think, I don't know why more everyone doesn't do great investor updates. Like I really think people like under leverage that as a tool for a seed stage company. I mean obviously when you're like series B and plus you've got a board and it's a different situation, I would.

Just recommend that you kind of, you know, I think your investor updates are probably best in class. I mean from all the companies I've seen, you might want to open source some of them, redacting some numbers because I think it could actually help.

I do share them quite often with people, so maybe I should just try to open source it a little.

As you say, we actually sent investor updates three months before we raised any money and we believed in the same thing you did, which is like the, the team should see the same updates pretty much exactly the same. We actually even made our all hands a quick review of the updates. So we kind of scheduled things like that.

I think you gave away the two secrets to venture capital as a founder though and I just want to double.

Click on both of them.

So one is the way I referred to this is a startup is a race to actuals in a spreadsheet and you basically just kind of prove that point with your whole journey and how you were describing it as like, hey, we don't know what's going on but we're going to go mock it up and figure out like how to get that. And you also gave a good example of like how to work backward from something. So if 10% is the growth rate that you're aiming for, if you don't do what you did, you're probably not going to get there. Someone has to do it and it's better if you're doing it early on. And I think the second secret is what you just talked about that like you know, we sent an investor update every month on the first Monday of the month, even if it was a holiday at 8am Pacific and they got it and there was just a process from like Thursday or Friday all the way to Monday to just get that done well with the intention of informing everyone about the business.

That became a religion. And then you just got better at it. Just like everything else, you get better at it as you do it too. But between those two things, you can successfully at least do everything that you should be doing as a founder that I consider requirements if you're taking venture capital. That's why I think you gave away the secrets and there's no secret. There's except that most people just don't do the rigor around both of those things. But I think they're very interconnected and related.

I have a question about market, right? So when I'm investing in like public companies, like in tech, in order to maybe smaller scale, I'm looking at the market and how much room they have to grow.

Right?

And that's like a big thesis of mine is like good founders, you know, you want that in the tech company, of course, you know, good product, you want that, you know, you tick all these boxes. But room to grow is actually a really important thing. Right. And how do you think about your room to grow from here? Like based on your current penetration and how big the market is?

Yeah, I mean we are in like a almost infinite market. Like banks in the U.S. make 2 trillion. So. And I don't think of ourselves like yeah, 2 trillion in revenue. And I don't think of ourselves in like a particular box. I mean we obviously expanding both our customer segments. So we do startups, e commerce and professional services. We're starting the personal banking as well and then we're also expanding the product base. So you know, last year we did like invoicing and bill pay and reimbursements. We've got some other stuff coming up. Our credit card is like two and a half years old and it's growing like super fast. So.

I think the important thing for like earlier founders is like what's your landing market? Right. Like I think like you need to be in a space where you have that expanding market as well. And like obviously banking is like especially like we don't do like some niche of banking. We just give you an operational bank account for your business. So it's like a pretty broad product. But there was like a landing, right? Like we were like, hey, we're gonna first nail early stage startups. And actually it's like relatively rare that like early stage startups by itself is like a billion dollar market. Right. Like for most companies, if you're like I'm gonna go nail early stage startups for X, I don't know what's like a good X example, like a developer tool that like helps you manage your database or something. I don't know, like most companies when they go after early stage startups, it's just not that big a market. But in banking, you know that was like SVB was like 16 billion when like I initiated a seed round. But you know, there were 40 billion at peak, so already a Pretty big market just for early stage startups. So I think, I think it is important to have like your initial landing market to be big enough that you can hit a critical mass, enough that you can have a chance to go after like the next thing, like whether that's.

Yeah. And you can achieve that growth rate. Right, because like growth rate is dependent on market size.

Yeah. Sometimes I like talk to a company and they're like, you know, we're going to go do Y later, but like we're going to start at X and X is like this, you know, you do the math with them and you're like, okay, let's discount that, etc. And like it turns out like it's like a $10 million like revenue opportunity. And I'm like, all right, so like a lot of things have to go, right? And then you get $10 million and then you can do your other thing. And it's just like, I'm like, I don't think this like makes sense. And so actually fintech companies are also like often bad because they'll, they'll come up, come up with their first wedge as something that's like just massively underwater, like the unit economics don't make sense. They're, they're like selling like, you know, they're selling $100 and it's costing them like $105 to sell it kind of thing. I also think that doesn't work. I think that first market actually has to be a pretty nice, healthy market and then once you win that.

That gives you the right to go try to win something else.

Yeah, that should be a sustaining market by itself. You could have a successful company just in that market.

Exactly. How did you choose?

Choose what?

The market.

Which invested. Oh, market.

Uh, you know, it's a combination of things. Like I would say the biggest one and everything else is almost like a post hoc justification. The biggest one is like, I really, really wanted this. Like I was running my company and it was just so painful to do banking. Like, I hate calling people and like we literally had, you know, in that company we used to do payouts to like publishers. It was the way it monetized was an ad network. So we used to do like 300 payouts and like, you know, some. We had like three people who'd log into this banking interface, spend like three days like making one payout at a time. It was just ridiculous. Like, and like, you know, I asked like, you know, someone fairly senior there. I was like, hey, why can't we just get an API. And they were like, what's an API? This, you know, it was like that kind of thing. So I think that was like my big thing. I was like, okay, like this thing needs to exist, I would use it. And that was initial. But like obviously I needed to have like all the post hoc parts of it. It was like, you know A, I thought there was a big trend in fintech and this is happening in Europe where there was more and more companies that were doing neo banking and doing it successfully. So I didn't see why you can do it in the US and then B, when you look at that top down market size, I like things that are measured as a percentage of GDP and there's not that many of them. It's like finance, healthcare, education, military.

Transportation and like two other things or something. So those kind of markets are like huge and like particularly exciting. But it definitely came from this like initial like pain point for as a, as a customer I read a stat.

That like you have about 200,000 customers today, but the market is tens of millions, including like every small business in America. But like no, that's a huge, I mean you're less than 2% penetrated, you know, in the market. So there's a lot of room to grow. Do you anticipate that like, you know, a restaurant operator, you know, in Kansas City or something is going to be using Mercury one day?

You know, I think it's, especially when you look at these like huge markets, I think it's like important to go one by one rather than going like, you know, go to restaurant and actually probably a lot of restaurants do use Mercury but you know, we don't deal with cash right now. Um, yeah, I guess that's going away in a lot of restaurants, but there's still a lot of cash happening at restaurants. So that's a factor we haven't, you know, in the startup space. For example, we built a lot of tools that are very startup centric. So we have like a safe thing where you can like send someone a safe. It generates an account number that's just for that safe so that when someone pays off the safe we can mark it as like investment made. Right. And similarly with E Commerce we've done a. Yeah, we have a credit line of credit product that's like just for E commerce. So rather than like trying to do everyone straight away and like being like just mediocre for everyone, I really want to go like market by market. So the three we're really focused on is professional service, E commerce and startups and I mean, all three of them are huge. So, yeah, restaurants maybe eventually. And yeah, I do want to get to a pretty broad set of businesses, but even those three, like, I think we could be happy servicing them and we would grow very fast if we do, if we nail those three for the next, like three to four years.

Maybe let's switch to product. You know, this is hitting his favorite area, but we'd love to hear ima from you. Like, what are you most proud of in the product so far? Like, when you're like looking back at what you've done so far, what, what features are you most proud of having built?

Yeah, that's a good question.

You know, often it's like the little things that like actually make me happy. Especially like when I'm using it as a customer. I have like one, two, like I have like seven entities on Mercury. So I'm like a superpower user. Yeah, like, you can create a virtual cart so easily. It's like I literally every single time, like I use Mercury Personal and every single time I sign up for anything now and I'm like, I don't want to go through like figuring out how to cancel with this random service. And like nowadays more and more services require like a subscription just to get the thing. So I'm just like, okay, let me just create a card and like do this. And like, it takes like two, three clicks. It's just so easy to do that. That's the other things, like searching.

You create cards for every subscription, right?

Virtual card, basically. I mean, like, if I really, I don't know, I'm going to keep it forever. I won't create it. I won't necessarily create a new card for it. But if, if it's at all, like, questionable with, I'm going to keep it for the rest of. I'm not going to create a new car for it. And that saved me like a ton of time. Like, it's like, you know, I'm like, random service, like, how am I going to cancel it? I don't even have to think about that anymore. And yeah, just being able to search through transactions is super nice. Like, you know, I'm like, what did I, like, have I paid this person? Like, you know, I think that's like some of the basic stuff. The other thing that's really nice is the newish features. Like being able to just like actually use this for personal as well, but business as well. Like being able to just drag in that PDF and it just like scans it all Saves it for the future. That's just been like so nice to like make, make like those bill payments, like super simple. So probably those three features I'm like, I use a lot personally and I'm proud of. But yeah, in general, just like, you know, having, having a product that's like, you know, it's actually quite a complicated product. I think that's the thing about Mercury that's like kind of deceptive. Like it's simple to do things, but it's like a very complicated product. Like we have like, yeah, five different user permissions and then you can also have a custom user permission that has like 15 different toggles because like, you know, when it comes to banking, people are not like, oh yeah, it doesn't matter. You know, it doesn't matter that like I can't set this kind of permission. They're like, hey, I can't use you unless I, I have a, my finance team has like a.

You know, accounts receivable manager. And for that person, they only need these three permissions and I do not want to give them any other permissions. I'm like, oh, that's pretty specific, but it kind of makes sense. So you have to have a lot of power user features, but you kind of have to hide that complexity behind intuitive interfaces and it's actually kind of tricky to do that. So I'm proud that we've added all of that complexity over time, but not made it kind of like a weird product to use.

Yeah, I mean, it's one of the most successful user experiences for a fintech product that I've seen. And I think, you know, it's funny, like you didn't mention a big feature. You mentioned, like when he asked you, you didn't mention a big feature. You mentioned the little nice, not even nice to haves, but the, the, the types of things that I would expect.

A true product person to mention, which is like, hey, these little things were so annoying, not just for me, but for everyone. And we fixed those.

I, I thought even the, the, the safe thing in the bank account, separate bank, you know, numbers and all that. And you folks being able to verify like one of the most impressive things I know I tweeted a little bit about this and didn't get to share more, but, and didn't need to. But is this idea that you're, you folks have somehow internally, I'm assuming this created an organization that cares so much to fix the little things and those little things are actually what add up. But the irony is the big Thing you've done of just making banking easier is how I'd describe it, is really what supports your ability to do all those other things. So if you didn't get the foundational thing right, you wouldn't be able to do all those small things. And I just find that fascinating that your answer was the little stuff, not the bigger stuff. And there's no right or wrong answer to that question. But it also means you're using your.

Product all the time. Right? Nothing better than that feeling for building.

Not for yourself, but essentially being a user of the product. So that I'm sure that helps with the system. And I'm assuming most people at Mercury, if not everyone, is also a user of the product, especially now with the personal. So that's a super cool. Like, I've always found that hack, so to speak, to be really valuable where.

You can use it.

I know a lot of people pay lip service to that concept, but I think you're kind of embodying it in a bunch of meta ways that I think is really helpful for product development.

Yeah, I think dog fooding is essential. I also think another thing, I mean, I think you have to kind of decide, like, what is your differentiator as a company? And if you think, like, the product experience is a differentiator as a company, which, like, I think it should be for a lot of software companies, but definitely it's for Mercury. I think people underestimate how important design is. Like, you know, and I did this as well. Like, I'm an engineer and I used to think of design as like, okay, you know, you're like, you write the spec, you have the idea, and, like, you give it to them and they'll give you, like, some pixels and, like, you'll then do the work. Like, you know, I used to think, like, having the idea and the engineering was the most important thing, and the design was just like a little thing you did in between. But at Mercury, you know, we were lucky to hire, like, as our first employee, like, an amazing designer. And she really, like, reset my whole expectation of, like, what design is. And it really does a bulk of the heavy lifting when it comes to all of this stuff. It's like, hey, you know, how does all of this fit together? It's not just like the one screen, it's like all the screens. And then it's also just like.

Relitigating. Like, is it even the right thing to be doing in the right way? And, like, do customers actually care about it in this way? And, like, our Designers lead a ton of our customer interviews.

We deliberately have this thing where we try to give very light product specs because we want design to do almost all of the thinking. The product spec is just like make X kind of work or fix X and the design is where actually most of it's thought out. And then we make the design step a collaborative thing so we have other designers help. I mean obviously if it's very trivial, it's trivial. But we have designers collaborate on designs and then we also have engineers and PMs also work with the designers. So it's like actually like I think the most important step in like a product process. And I've, I've spoken to lots of people that like have like pretty big companies with like no designers on this stuff. And I'm like, how can you make a good product in that position?

I think it's a really profound thing. I'm not sure if you've talked about that publicly yet, but that I find the same thing and like, you know, companies really need a design first approach, especially your company which is, you know, it's started off as a B2B company, but it's almost like a consumer level design, consumer level polish on it. Right.

I think that's, you need that in like a lot of B2B companies now because like the decisions are being made by like the people using it. It's no longer like some CIO somewhere making a decision and they don't care about the design. I think even to like if you're selling like maybe if you are selling to like some hundred thousand person enterprise, like it's still like the top down CIO kind of thing. But I think for like mid market companies it's like people who are going to use the product that are making those decisions and they want to use great products.

I mean even the CIO needs great products. We've sold to CIOs, they need great products and they know it when they see it. I mean.

At our business we spent a lot of time making sure that the engineering team could build the user experience we needed to build. And they spent a lot of time making sure that those things mapped out super well. So we had things that no product even today still has for those CIOs and those IT and security teams. And I think like the way you describe it, like it reminds me of something from back in the day that I really try to embody on the teams is actually from Eric Reese from Lean Startup. And I know you're super familiar but like he would, he would recommend dividing the team up into problem team and solution team. What it sounded like when you started talking about your specs was like, they seem very problem centric and customer centric. And then the product design and then also the folks getting roped in are more on the solution team. So what we've done is like when we generally structure teams is will have a problem team, solution team, not necessarily explicit, but the way the work is being divided is based on that. That way what happens is if you come up with a solution, you can go back to the problem side, problem team and be like, did it solve the problem? Can you verify that based on what you know about the problem? Things like that are kind of, I think, counterintuitive for a lot of folks. But what ends up happening is you can't have so in someone's head the problem and the solution at the same time. To effectively evaluate both of those things is what I've sort of come to the conclusion of.

Don't you want like customers to tell you if you've solved the problem rather than.

And that's where the problem team's signals are coming from. That's kind of the idea of that concept.

The problem team represents the customer.

Exactly. And they stay on the problem side. They don't go into the solution side until the solution exists that they can evaluate against the problems.

Yeah. And in a small company, sometimes the CEO or someone leading the product team can represent that as well. Like, you know, it was like the unbiased customer is like evaluating the product against that.

It's just super hard to be that honest unless you're actually very conscious of, am I talking about the solution or am I talking about the problem? And so just finding a mental way to divide it up or whatever processes you need, I think is really critical to ensure that you're honest about what you're solving for and why and for whom. I think that's where over time, especially at 700, 800,000, whatever, you'll hit 2,000. Obviously at some point you start seeing a lot of that erode. And so even just you speaking of it the way you are and even talking about the minutiae of the product.

Gives me more confidence that even as it scales, hey, this, this stuff will.

Be preserved of how you operate. Because in certain markets, and I think this was your point too, like you need to do that. If you don't do that, you're not actually providing the right service to the customer. If you're not making everything usable, even Though it's complicated because it's really easy to just slap all those features on what the customer wants and then make permissions a mess. And now you've got a banking software with a permissions mess.

Oof.

Right?

Like, that's a problem. And it's very tempting, right, because you do all the planning. You're like, hey, we have these other five things to do after this is done. Like, let's do the quickest thing, get this done. Like, you know, who even cares who looks at the permissions screen anyway? And then you just like, do that, like, make that kind of decision like 10 times over. And like, the product's like, basically unusable. Yeah.

One of my favorite parts of the product. I mean, I use the product very heavily, as Imad knows. I've given him a lot of feedback and his team a lot of feedback on, like, the product. And, you know, one thing I love about it though, it really, you know, helps me out is that how easy transfers are. And, you know, I think that's a killer app for Mercury. It's super easy to transfer internationally or transfer domestically. I still get complaints from other people about this. I'm like, just use Mercury, you know, like, you know, there is like, it's so easy to do international wire transfers. It's so easy to even transfer sending money. Yeah, yeah, yeah.

When you call it transfers, like, at least in Mercury, we think about it as like, between entities you own rather than between, like, external things.

But yes, yeah, same to external folks. But yeah, sending money is really easy on Mercury. It's just remarkably easier than any other bank that I've seen. And like, there's no, like, you know, like, setting up a recipient is so easy. Like, asking them to set up their own stuff is great. You know, I think that's like, you just put in their email address and they fill out their own profiles. Like, you know, these are real innovations that actually save, I think, business owners lots of time.

And even getting notifications about, like, money being sent and received. You know, I find like, a lot of people don't do that well. And it's really comforting to know, like, when money's kind of like, I don't have to open my bank account, I just got an email about it or like a push notification and I know it's done. So I think there's just a lot of things that add up. You know, for me, I mean, the.

Funny thing in banking, and I don't know if this exists in other industries, is that is the bar was like, really freaking low.

It's like, I'm like, I'm thinking of like, oh, what's the advanced stuff here? And you're like, wow, I was able to send money and like, yeah, I got an email about it and I was like, yeah, that's true. I mean, that is, that is like the bar was not like, you know, we're not talking about rocket science. Like, this was like, we built a product that like reached a reasonable standard.

That makes me want to bring it back to fundraising because apparently we're supposed to talk about your fundraise, right? And so I have a question.

If.

If you're willing to answer. I don't think it's that hard of a question. Don't worry. Besides growth rate, what did the investors care about?

Yeah, you know the thing that I'm always surprised because it's like you would think it only matters at like seed and maybe a. But like it always matters is like, what is. I mean, this sounds like kind of wishy washy, but like, what is the vision and the market and the trends around that? I'm always like, okay, now it's just like Mercury's so big. It's just like, here's the spreadsheet, go invest kind of thing. But it's really not like that because it's still the rough way someone described it to me at growth investing is they're looking for either 3x within 3 years or 5x within 5 years. That was the high level metric they're looking for. So it's not, you know, at seed stage, looking for 100x in 12 years, which is like more of a lottery. Whereas like 3x in 3 years is actually like easier to underwrite. But it's still like, you know, at the scale we had, we made 500 million last year. So like 3x is like 1.5 billion, right? Like, it still requires a ton of like unknowns to be figured out. And like.

Part of that is still like, okay, how big is that market, right? How big is your vision? Like, how much? What is your path towards it? What are like the secular trends that are going to drive it? Like, it's like the same stuff you do at seed stage, right? Like you go like, this is the market, right? Like I'm like saying $2 trillion or whatever and then you're like, you know, this is the trend, like, fintech is disrupting banking. Like I've said that every single fundraise and like I still will probably say every single fundraiser and actually like, if you look at the best public companies, they're still saying the same things, right? Like it's like Even Microsoft at 3 trillion, like he's like, you know, Satch is out there saying like, we're going to like, you know, AI is going to create like 5% GDP growth and like we're going to be the drivers of that. Like it's like the same thing, right? Like it's like this crazy kind of vision and like that's what people are really betting on at every stage. So I think it's like easy to undervalue that as your company scales. But I think it's like super important still. Growth rate, vision. Uh, I think the other thing that is pretty different gross growth rounds is like you need like a pretty strong data room, right? Like we spent basically all of December like making sure like, you know, we had the accounts in order, we had like all the retention stats, we had like everything in place. Because, you know, ideally you just have this packet and you send it to people and then they can say like, hey, you know, I'm in. Maybe I have one follow up question kind of thing. Whereas, like, if you don't have like a good thing, then they'll ask you like 10 questions and then everyone will ask you 10 different questions and it will take forever.

Yeah, yeah. What else is important in a fundraiser? So good data room, you know, underwriting 3x in three years.

Yeah, I think the data room is like really important and like having a good finance team that can like, you know, I was thankfully I didn't have to do too much of that. Like they just kind of ran the process and like had all the good data in there. But yeah, that's like critical. I would say like even at series A, you should like my rough like timeline for fundraisers is like, yeah, spend one to two weeks doing the data room and the deck. And yeah, that gets like a little longer as your company scales and you have like multitude. But I think especially seed series A, series B, you can probably do it like in that time, right? And then spend one week practicing the pitch. Like go to friendlies, go to your founder friends, etc. And just say it over and over, like at least 10 times, I would say.

Then like in that week, arrange all the intros, start talking to investors. You know, first set of investors you want to talk to are like slightly friendlier or ones that, you know, you're maybe not that excited about because you're still practicing basically, but you're practicing life. And then the second week of pitching and the third week of pitching, that's when you put your, like, you know, people that you really want to convert. We did about 24 ish VCS in that poor process. You know, at seed stage, you might do like more like 50 or something like that. But if you do that all in like two, three weeks, you're almost certainly going to get a deal done if you're fundable. Obviously if you're not fundable, then maybe you won't get it done. But you need that kind of really short timeline and intensity even at growth stage. I think the actual other thing that's key to that, I think it's like, actually important all the way through. People disagree with me is like, I try to build like these VC relationships all the time. Like, I'm in San Francisco, every six to nine months, I go meet like five VCs. It's not that hard. Like, it takes isn't. I mean, nowadays it's all on zoom mostly, but even if you take coffee, that's like five hours every six to nine months. It's no big deal. So, like, I was actually looking it up just before this Sonia, who's our lead at Sequoia, I met her first in October 2021, and I was not fundraising at all in October 2021. And I think I met her or other people at Sequoia, like, at least two or three times since October 2021. So by the time, like, you're fundraising, they've met you two or three times. So they're much more likely to just say, okay, you know, let's invest. Whereas, like, if this is the first time they've ever met you, like, you know, is someone going to give you like $100 million after meeting you for like two weeks? It's just going to take them longer to just get to like a bar of like, you know, does Imad do what he says? And, like, is, is this someone I want to spend like 10 years of my life getting to know more? Right. That's like the bar to VCs. Investing is actually quite high. Like, I don't think people understand, like, you know, Alex Rampel, who led our seed round in 2017, like, he's basically met me like once every one and a half months since 2017. Like, that's a. That's a high bar of like, getting, spending time with someone. So. So, yeah, VCs are not going to just like, jump on you the first time they meet you, in my opinion.

Just going Back to the VCs point, though, like, but you don't talk numbers with them, right when you meet them. It's like relationship building.

Yeah, it's very, I mean like maybe super high level numbers, but it's not like you want to like veer away from like this is a pitch, right? So whenever, like they'll ask you questions, they're trying to make it a pitch, you just talk high level. You're just like, hey, I'm, you know, they'll be like, yeah, yeah, what's your growth rate? You'll be like, oh yeah, we're growing really fast. Like we're hitting our objectives, you know. And like, you know, and then I try to flip the questions on VCs. I'm like, oh yeah, you know, what do you think is a good growth rate right now in the market for like these types of companies? And like, and like VCs kind of get it. Like you've said you set it up as like, hey, let's just do a catch up. And like, you know, they'll, they'll push it. But I think actually VCs are like pretty good about like understanding that like if you're not saying something, there's a reason for it. And they actually tend to not be overly pushy in my experience.

So yeah, you just talk high level, but you build a real relationship. I think sometimes people think of VC as super transactional. It's like, oh, I just want money from you. But I'm like, hey, what have you been up to last weekend? It's not in a fake way, but just treat them like a normal human. And you're meeting them every six to nine months. Just get to know them.

Yeah, makes sense. I know we're running out of time here.

I think. One last question I had for you, Emad. I've gotten to see this whole journey from start to end now.

When you were just starting just a few employees and now you have, as you said, almost a thousand people.

How do you think you have matured in this journey? You were a founder before, you've sold a company, you're a second time founder. What are the biggest changes in you personally that Mercury has sort of wrought?

It's really hard to look at yourself.

Now is the time.

I think I need probably more hindsight to answer that question. Well, I think one thing, I mean it's definitely been a process that's made me a little more confident in my own decisions. There's this whole thing around like founder mode and stuff like that. Like.

I feel like I already went through that. Process to some extent. I mean, you go through it actually like your whole life as an entrepreneur where like, you know, people tell you stuff and then you're like, oh yeah, this is the best management technique or this is whatever, like these are the best like execs to hire and you do them and then you're like, wow, this was just like a bad idea. And then you hear enough like smart sounding people give you like bad ideas that you do and then you're like, okay, I should just probably. I mean, honestly, some of them are good ideas. They're just not your the idea for you. Right. I think once you go through that process enough, eventually you're like, okay, you just need to know what is things you need to listen to, but mostly listen to yourself at the end of the day. That's definitely something that I've had to relearn over and over and probably I'll have to relearn again and again, but once you learn it enough times, you become a little more confident in it. So yeah, a while ago I had this like one year at Mercury where I just like did not enjoy it at all. It was like, you know, I was doing the things I was supposed to do and hiring and like not really involved in the product and not really involved in like, you know, these kind of more decisions that like I actually liked making. I was just really doing the things that I thought I was supposed to be doing. At the end of the year I was like, wow, like, you know, I'm not going to be able to do this forever if I, if I don't like what I'm doing. So then the next day I was like, okay, I need to be much more deliberate about what I choose to do and not just do and deliberately do things that I enjoy doing. Which I think has been like, is better for Mercury anyway. Because if I enjoy doing it, I'm probably better at it than not. Which is, I think a lot of what finder mode is about. It's like, I think there's a manager mode which is like, do the things that you're supposed to be doing. And I think to some extent finder mode is like, you know, picking the zone of genius that you're actually good at and like actually like being willing to do it even if it like seems unscalable. And it's like really in the details.

Is your zone of genius a product?

Like, what is your product talking to customers? Like, you know, I'm a reluctantly good salesperson now as well. So like a combination of product customers is it used to be programming. But like, I. Like, every time I try to touch code now, it's just like I'm like, what the hell is all of this? Like, it's been too long.

AI does it all anyways now, so.

You don't have to worry about it. Yeah. Yeah, maybe I'll be back to. I'll be back to coding in no time with AI just like, you know, I'll send it over the problem and it'll give me the solution.

Yep. I think we have to wrap Hiten. Any last words?

No. This is awesome. And I think there's tons of lessons in here and lots of things that people are going to get a lot of value from. I just appreciate the discussion and how real you are. A lot.

A lot of people will.

I don't know, you're. You're one of. One of the most genuine and real founders that. That are around, in my opinion. I'm not saying that because you're successful now. I'm saying that because that's just your vibe and it shows in the product. You know, like, these things are a product of our opinions, you know, at.

The end of the day. So I appreciate your opinion and thanks for sharing more about it today. Well, I think it's much more interesting if we can all be real with each other, but I appreciate you coming on. On the pod. Hit it. And acting as a host. And I guess we'll be back next week.

Always fun with you guys.

We'll be back next week. Thanks, everyone.