How Mercury Hit $500M ARR—then raised $300M from Sequoia at $3.5B. | Immad Akhund, CEO & Founder of Mercury

When did you get to like a million in ARR, for example?

I mean, very quickly, maybe 4 and a half months, we were at a million ARR. Uh, and then it took about 3 weeks to go from like starting the raise to getting a term sheet for the Series A.

How much did you raise?

Uh, $20 million at $100 million valuation from CRB. Just when you have users and like, you know, you have to worry about things breaking and like fixing bugs and et cetera, it's just, Like it's, it becomes hard to do new things. Like it's better in some ways to just like, if you know what you have to build, it's better to just not have any users. And like, you know, if the database goes down, who cares? Like if you, you could just like go build the thing with no users and it's like actually much easier. If as soon as you have users, it's just slower to iterate. It's just, that's product market fit. Product market fit.

Product market fit.

I call that the product market fit question. Product market fit.

Product market fit.

Product market fit. Product market fit. I mean, the name of the show is Product Market Fit.

Do you think the product Product Market Fit show has product market fit? Because if you do, then there's something you just have to do. You have to take out your phone, you have to leave the show 5 stars. It lets us reach more founders and it lets us get better guests. Thank you. All right, Imad, welcome to the show, man.

Thanks for having me.

Dude, so you guys, I mean, you built a massive, massive startup, just raised, uh, $300 million, right, from, uh, from Sequoia earlier this year. And maybe more, at least for me, even more importantly, half a billion in revenue. profitable, which is, uh, not normal in startup land. So congratulations.

Thank you. Still feel like there's a lot to do, but it's a good start.

That's the way you want to feel, man. Day one stuff. So yeah, man, I mean, I'm really curious to hear how you started Mercury in the first place, where the idea came from and how you executed against it. But maybe we can start, you had to start up before this, right? Like what was that company?

So I've actually had 3 before this, but the last one was for 8 years. So it was the bulk of my pre-Mercury entrepreneurial time. It was called HazeApp. Actually had like 4 full pivots, always in the kind of game developer ecosystem space. The eventual thing we did that did work and we ended up selling it for $45 million was a developer tool around ad advertising. So if you're an app developer and you wanted to show 5, 6 different ad networks, it was super annoying to plug them in one by one and optimize them. So we would You know, package them all up. You just make one call, show video ad, and we would take care of the rest of it for you and give you like nice dashboards around it.

And this was in gaming or these ads were like everywhere, any mobile?

So any app developer could use it, but it was most popular among like indie games. You know, basically on iOS and Android, we were used by kind of top 3 or 4, 3 or 4 of the top 10 games in the last kind of couple of years before and after the acquisition, we were like the main main software that those developers used for, uh, kind of the space is called ad mediation. Uh, and that was actually the first time I really experienced product market fit. Like, you know, I'd been doing startups since 2006 and we didn't launch that 4th pivot, uh, until I guess this was like 2014 that we launched it. So it goes to show you like you can, you can raise money and do a lot and think you're making progress, but like not achieve product market fit. And it's a very, different feeling when you do achieve product market fit.

What were the other 2 startups?

So I did one in London. It was kind of like a Yelp for London, very small scale. That was like 7 months. And then I did another one, uh, as my first Y Combinator company in 2007. It was a developer tool for kind of logging into websites, like made it easy to pull in Google and Facebook Connect and things like that.

And what happened to that one?

Uh, the first one didn't go anywhere. We kind of just shut it down. Uh, The second one, we had lots of users, but, you know, no real, uh, way to monetize. Uh, and we ended up doing a talent acquisition and, but I didn't go work at the acquirer. I just started this, uh, third company.

So how much time did you spend across those first 2 companies?

So those were quick. It was, you know, 7 months for the first one, almost 2 years for the second one, 8 years for the third one. And then I guess I've been doing Mercury for another 8 years.

Did you ever think like, especially after those first 2, which weren't really successes, Did you just like go get a job or were you always just like, I'm just going to keep building until I get a hit?

So I did have a job before all of that for one year. And, you know, I hated it. Uh, like I just didn't, I can't, I just found it, you know, maybe there's like a better company I could have worked for, but I really felt like a cog in the wheel. Like I didn't feel like I had agency. I didn't feel like I could talk to customers. I was an engineer. And then doing my first company, which went nowhere, was a complete disaster in any any external metric you could think of, but it was so fun just building something and feeling like I could wake up in the morning, have an idea, talk to customers, go try to build it. Like it just was so like, I just find that so exhilarating. The fact that I can just be alive doing that is like good enough for me. Like I don't, you know, if I could raise enough money to survive and do it and obviously we've subsequently been successful, but there was no point in that journey where I was like, oh, I wish I just had a job because I was just like, I really enjoy the journey for the sake of it, which I think is the only way you can do it for like as long as I have.

And then walk me through, like it's one of the things about coming up with like company after company, the part that I find like really hard, honestly, just coming up with like solid ideas, like things that are actually worth spending time on. How do How did that change? Like your first one, at least for me, like my first company was just, I don't know, you just kind of like, I want to start something and then you kind of find something around you. Like that's the thing I'm going to do and you do it. Like maybe that was your Yelp in London. I'm not sure, but how did that evolve over time?

I feel like it gets easier to do ideas and think of ideas and be in that mind frame. You know, when I, when I started doing a company, like I was like, oh my God, the world is full of ideas. Right. I remember before I started my first company, like, you know, it was not, It was not obvious how you came up with ideas, what ideas existed, but I feel like when you're doing a business, like you just see problems everywhere. Like obviously a lot of ideas, especially in Silicon Valley, are like B2B ideas, right? So if you're running a business, you're just like, there's so many problems in running a business that you just see ideas everywhere. Like if you're an engineer, you see developer tool ideas everywhere. If you're like trying to like, I don't know, back then, especially like this is 2006 when I started with starting my company, you know, everything was broken, right? Like, I mean, a lot of the things we take for granted today in terms of running a business are like, didn't exist in 2006. So, you know, and that's like partly how I had the idea for Mercury, but yeah, there was no payroll, right? Like you had to use some really weird old school thing. There was no Stripe. I used like this super messed up thing called Authorize.net that was like impossible. There was no Slack. We used to do everything over Skype and it was like, just coordinating groups on Skype is just ridiculous. So anyway, everything sucked. So like, I felt the whole world was like full of ideas. I'm sure it's different now that like I have a lot of, now that Mercury is like more mature, I have a lot of ideas for Mercury. I don't actually have that many ideas outside Mercury for like, I mean, I invest a lot, so I see a lot of ideas and that kind of spurs new ideas, but I don't have like that many like, oh, I'll go do this other business idea. Like I feel like my idea scope is smaller now that I Uh, now that I'm like doing Mercury and it's scaled and there's so many ideas around that, but I'm sure if I was like an AI founder right now or thinking of like ideas in AI, there's probably like a similar feeling of like there being infinite ideas. But yeah, it was like that in 2006, '07, '08, and '09 especially. I feel like there's so many ideas around web and social and mobile that were like so new and like, yeah, it felt like there was a lot available.

What was the original idea for that last startup? Because you mentioned you ultimately pivoted like 4 times until you ended up in the thing with Product Market Fit.

Our first idea, this is like end of 2008, was a Flash. I know, you know, everyone played these casual games on Flash. It was like a web-based platform for casual games. So it was a Flash games distribution network. That was the idea. And it was actually like somewhat successful at like getting a lot of distribution. We had like, I don't know what it was at peak, probably like 60,000 websites that had this like widget in them that was like allowed you to play Flash games. all over the internet. Lots of random websites had kind of this embedded Flash gaming thing that we built.

And what was the problem with it? Just monetization?

Just mobile killed it. I mean, no one wanted to play casual games on the web. Like 2008 and '09, it kind of worked, but 2010, the shift to mobile was very extreme and very quick. So like it was basically done by then.

And so when you sold the business, you said $45 million end of In 2016, is that right?

Yeah, start of 2016.

And then did you go work at the acquirer or were you kind of like hands-off right after?

No, I was there for a year and then I moved on, had a, you know, 5, I was going to do like a 1-year sabbatical, but I basically started working on Mercury as soon as I moved on. I mean, you know, for the first 5 months it was more research phase, so it wasn't like full-time, but Yeah, I have a hard time just sitting still.

So let's go deep on that. Like when does the initial idea for what became Mercury come to you? How does it come to you?

There was this like idea that I used to call, I don't know what the official name was, but I used to call like consumerization of enterprise where a lot of the tools used as entrepreneur, there was this feeling in 2009-ish that like entrepreneur tools are always kind of feel and look crappy. Like they'll be hard to use, the products won't be good, et cetera. But consumer tools were like, you know, much higher quality and like people enjoyed them and they were easy to use, et cetera. But there was this, yeah, then there was a lot of ideas came out, which were just like taking consumer-grade product and design and applying it to—

Just like the Slack, like the Slack-like kind of thing.

The Slack, Stripe, Gusto, et cetera. So And so, you know, every, I mean, not everyone, but like people like me who thought about ideas a lot had lists of saying like, oh yeah, here's all the business tools that I use and like, they're going to be, there's going to be a better version of them. So, you know, I distinctly remember I had like payroll as one of those things. And then, you know, I had, I knew the Gusto founders before they started Gusto. And that was like one of the ideas I was like payroll. sucks, someone should make something better. And yeah, they came along and did that. So.

And they're doing quite well. So that was a good idea.

But to be clear, you know, I was busy doing that company. So it wasn't like I had a list of these like ideas that I was going to go implement. It was much more like, oh, it's obvious these things will be done. And it's like a pool of like things that you think about. It's like, oh, here's some ideas that people do. Uh, so yeah, and at that point, Not done any fintech, not done any banking. It wasn't something I considered as like something that I might do. It was just on my list.

The banking was specifically or payroll?

Yeah, banking was one of the things on the list. And eventually around 2013, I met this other kind of fintech company that was in YC that was issuing debit cards to seniors. And then at that point I was like, oh wow, like you can do this. You know, before then the idea of actually like going and building something where There'd been this one company called Simple, which is a kind of consumer neobank. But apart from that, it wasn't like, yeah, there wasn't like a thing that you could do to actually like issue cards and like—

Because the whole banking as a service, when did that kind of take off and start to make it easy?

I mean, around when we launched. So we launched in 2019. Yeah, I would say 2018 was like the first year was Yeah. Like the idea of banking as a service has been around for a while, but like probably 2017, '18, probably '18 was like the first year where there was like a few of these services that you could actually get live with and you didn't have to go. Because before then, what used to happen is you'd have to go find a bank and you'd say, hey, will you work with us? And the bank A, most of them are like, what the hell are you talking about? And the small numbers that do work with fintechs, like they don't know how to build technology. So it's all, it's pretty, you know, especially when you're a seed stage startup with like 4 engineers, it's super hard to think about like, how do I go integrate with a bank backend? And then they also don't, you know, they're not, you need to have a compliance and other framework that like a bank expects, which, you know, at this stage Mercury has all of that, but. When you're a small seed-funded company, you just don't have like enough staff to like support it. So banking as a service made it possible to kind of get live as a seed stage company. So that was a big enabler.

But in 2013, when you see this company that's issuing debit cards, that's why it's so much of a wow kind of moment because it's just not something you see every day.

And they actually did the hard work. There was no banking as a service. I think they went and integrated directly with the sponsor bank. Yeah. So I was really impressed. And at that point I was like, okay, you know, if they can do it, maybe I could do it someday. And again, it was like, you know, it's weird. Like Mercury has been an idea that like really stewed in my mind for years and years. So it was like every other business I did, it was like brainstorm ideas, go do this one that's at the top of the list. Whereas this one was very much like, I felt the pain point as an entrepreneur and it kind of stewed in my head as like, you know, and I always assumed someone else would do it. Like, because I was busy with my company.

Well, that's the weird thing, right? I'm just thinking out loud here. You'd think in the world of fast-moving tech, like if you have an idea for something that you identify as broken and you just sit on it, like somebody else should do it. You know what I mean? Like somebody else must be thinking that too and doing it. And yet, you know, 4 years, 5 years later, whatever it is, you still, you launched Mercury.

Yeah. I mean, banking is scary for people, right? Like if the, you know, even in 2017 when I was kind of raising money for this, lots of people were like, hey, why don't you just do a software company? And like, yeah, the path to do it is harder, like to do a, I would say to do a fintech company in general, especially one that has like any sort of payments, like money movement, it's probably 3 times harder than a software company. Like a software company, you can probably launch it 3 months. A payment slash banking company will take you like at least 9 months to launch something, probably more than that. And there's the software piece, like, and even the software piece is a superset, like you have to build All the kind of user-facing software, but then you need controls and compliance and risk software on top of it. And then there's the backend integration with these legacy kind of payment rails, which is actually very complicated. And then there's all the compliance and legal and partnership work that you have to do. It's much more complicated. So I do kind of understand why even if other— and actually I found quite a few people who'd had this idea, but just not followed through with it as well.

Yeah.

It wasn't like a, like this wasn't like a, like super secretive idea. It was like, yes, we should. It was, it was much more like who, who had the will to follow through with it. Uh, I'd also say, you know, as I said, we would just came into the world where banking as a service was a thing. So that was, uh, I would say an enabling technology. I think 2 years earlier, if I'd started in 2015 instead of 2017, I think I would have done it, but it would have been a lot harder. Uh, Whereas 2017 was a time where it became a little easier. And then, you know, by 2020, 2021, everyone was trying to do a neobank and it would have been, you know, if we hadn't started into, if we hadn't launched in 2019 and built up like a little bit of a lead, it would have been probably like an overly competitive space by 2020, 2021.

So you have this little, like, you have this little idea, a little seed, you see some things in 2013, it kind of just sits there. Anything else happen through kind of that period?

No, I mean, I was really focused on my other startup, you know, like when you're running a business, you're not like—

You don't have much time for anything else.

Yeah. The only thing that happened that was like somewhat related to this idea is I just started collecting people. I was like, oh yeah. Like every time I met a fintech entrepreneur or fintech investor or someone in banking, I'd like, you know, I'd make a mental note or a physical note where I'd be like, okay, you know, if I ever did this idea, this person would be like really smart and useful to help me with that. So I had this collection of mostly entrepreneurs that I'd built up that when I finally did go do this idea, I was like, hey, remember you met me in XYZ event and now I'm doing this thing. And everyone's like, especially in Silicon Valley, very generous with their time when you've got a connection, especially if you're doing something new. But that was, I would say, the only other progress that I made.

How big of a deal was that, by the way, being in Silicon Valley instead of, you were in London, as I already said earlier?

It's hard to like, you know, do a comparative. I mean, A, the US market for banking is freaking huge, right? It's like probably 20, 25 times bigger than the US. It's like $2 trillion in revenue per year. Yeah, the ideas are just bigger in the US in general, but especially when it comes to kind of fintech and banking. And like everyone's just so ambitious there that like you kind of are forced to think of like big ideas, but, uh, but yeah, there's definitely like an element of like building the network. And I, you know, I'm sure there's people, especially in fintech, actually there is like some pretty good companies that are fintech companies in London. So, but yeah, just being around here and having a network of people and being able to tap into that was definitely useful.

Okay. So that happens, you sell your business, you're in the acquirer. Are you right away thinking about this is the next thing you're going to do or what, what happens during that year while you're working there? But as you say, you started to do some research.

I didn't do too much in the year that I was actually working there. Um, I actually was trying to explore whether I wanted to be a VC. So I did, I did like something like 25 investments in my year and mostly decided I didn't want to be a VC, but, uh, yeah, it's hard to—

Why not? Why not? You're just not, not close enough to the thing or what, what did you learn from it?

You know, I found it like a little depressing being a VC. Like I feel like the best, you know, when I first started investing, I was like, wow, I'll be so helpful to entrepreneurs. And like, you know, I have all this experience and I can help them, et cetera. And then I soon found out that like the best entrepreneurs just didn't need me, right? Like I had a, I made this investment in this company called Rappi, which is a DoorDash for LATAM. It's done really well.

Nice.

But honestly, I invested and they never talked to me again. And, you know, I mean, I guess I was like, okay, that's fine. And they were like, you know, not quite a unicorn, but like, yeah, they were, they were like already very successful within a year. So I was like, okay, you know, my best investments never talked to me. And are successful regardless of me. So I'm just like this weird, like, you know, I don't want to do something just because I make money doing it or like I want to do something because like I make an impact to the world. And at least when it came to like seed stage investing and maybe it's different at like later stages, but it didn't feel like my impact would be like transformational. It was like mostly, you know, if you're a good company with a good founder, you're probably going to raise money. from someone else, if not me, uh, and you'll probably be successful regardless of any investor input.

I think, I think it's true, by the way. Like, I, I, you know, many VCs like kind of talk about the value add, and I'm not saying that there's no value add, there's some, but I think VCs first and foremost, I mean, it's a capital allocator. Like, you're really, your, your number one kind of value to the world is deciding who should, who, where is this money best allocated for the highest potential you know, output risk adjusted. And then the rest is kind of the extra 5, 10%. But like, if you don't do that right, nothing else matters. And if you do that right, the rest takes care of itself, kind of as you're saying.

I mean, there are some things like Y Combinator that like are truly transformational. Like they, you know, they make an investment when other people are not, or like they come up with a model that's different. And I'm sure there's other examples of that, of like people that either very early or very transformational in Series A, but like, you know, at like at least the basic model that I would have done, which was like seed stage investing, I didn't think like was going to be like my, me being, me doing it would not have changed the trajectory of that many companies. So, so I found that like pretty depressing and I was, you know, as I said earlier, I love being an entrepreneur. So I was like, okay, you know, let me just go do that.

And what, what do you go after like at that point? And when you leave and your kind of sabbatical gets interrupted?

Yeah, initially I had like a list, you know, this was just the top idea I had. I had like a few other ideas. So mostly I was like, okay, you know, this idea I've had for years and years, let me just go research it. And mostly I was trying to like falsify the idea. I was like, okay, you know, I probably, my initial thing was like, it's probably just a bad idea to do this. Let me, let me go figure out why it's bad. But the more I researched it, the more I was like, okay, you know, it's, It's hard, but it's like a deterministic hard. Like, you know, it's like a fixed cost hard. Like I just have to do the thing. I have to go get a bank sponsor. I have to go, you know, hire someone that understands compliance and risk and I have to go build this stuff. But like, it was all like a, it was understandable, hard. And like, I felt I could go do it and like learn the skills to do it.

And the original idea, by the way, just specifically was what, a bank for startups or what was the kind of the first premise of the idea?

Yeah, I mean, it's pretty much what we launched, like an operational bank account that would be your primary bank account when you're running a startup, mostly targeting early stage founders initially. I was just saying, that's basically what we launched. So, you know, the idea has been like, I would say even from 2013 has been like fairly consistent. It wasn't like, you know, some people pivot around in terms of idea space, but it was very much like, this is what I wanted to do. And then like, it was just to, you know, explore other things. within the space, but I was like, okay, I still felt good about it. And a lot of the time, I don't know, maybe I just do this, but you know, you have this idea that's like your gut instinct. It's like, ah, I wish someone did this. And then you, you spend the rest of the time building like an intellectual framework to support why it's a good thing to do. It's like, yes, the market size is big. And like, this is how it would distribute to the users. And like, this is how, what the unit economics will look like. So a lot of the stuff I did afterwards was to like persuade myself to actually just go do the idea that, that I like had the strong instinct for.

Well, and I think, I think that is part of the formula. Like sometimes people downplay the passion, gut feeling side of it, but I mean, you do, you're going to take punches to the face no matter what you do. And so like, if you don't, you know, if you believe highly at a deep level of the thing you're going to do, it helps you get through the, like the, the values you're going to have for sure.

Yeah. One thing that was different for me with this idea is I was really building it for myself, which, you know, previous things like, you know, I've never been a game developer. Like I just like playing games. So I thought it would be fun, but for this idea, I was very much like, hey, if, you know, I want this tool, I want to use it and I really want it to exist. And I think that did help fuel the, this kind of side of it, the passion and like the empathy and the product understanding.

When you did that research, 'cause I think this is a key part of this business, like you said, it's not a, it's a semi-obvious problem, let's say. It's the sort of thing that a lot of people would've been frustrated by and it was more, nobody was doing it, nobody did it, finding the right time to do it. What did you go after when you're trying to falsify it? Like in those few months, like what were the sort of things you were doing to falsify it? What were the sort of things that you wanted to really check in and understand?

Yeah, I mean, you know, I didn't do any, product or customer work because I was like, you know, I know how to build this product. And I, you know, I felt most people would believe that I know how to build this product. And I also felt I knew how to get the customer. And I felt most people would be willing to believe that I could get a customer for this. So I really wanted to, both to myself and to, I guess, investors eventually, I wanted to be able to like prove the bit that I didn't know, right? Like how, you know, when I started that process, there was no, There was no reasonable way I could sit in front of an investor and say, yeah, you know, of course I know how to go build this product, right? Like, uh, but I wanted to go, okay, you know, what is the actual path to building this? And, you know, I explored like becoming a, getting a bank charter versus working with a sponsor bank and how did those work? And, uh, I talked to a lot of fintech lawyers and financial services lawyers. That was probably like the bulk of the research was just talking to people and understanding What are the rules? How do people do this? And actually lawyers are pretty useful. A, they're smart, they know the law, but B, they actually also know people. They know companies that have done this or tried to do this and who have they partnered with. If you think about it, a lawyer is often working on contracts. So they actually understand if a business tried to do this, who did they partner with? which are banks that are easier to work with and harder to work with. So actually I found lawyers to be extremely useful and they mostly actually work for free. If you, you know, if you don't take too much of their time, if you're like 30 minutes here, 30 minutes there and do that with like 10 lawyers, you can get like a lot of, a lot of cumulative time and learning in like a pretty short time period. So I did that. Uh, and then when I had a framework for what I wanted to do, like, you know, sponsor bank model and all that stuff, I started talking to sponsor banks and And like basically, you know, the deliverables or the items that I had before, you know, I did a fundraise was, you know, I had some, I worked with a designer and I had like some rough initial designs of like what it might look like. And I had like 3 either sponsor banks or bass players. I think actually at that time, all 3 were actual direct bank deals, but I had 3 kind of term sheets of like, You know, I just went to these like sponsor bank people and I was like, hey, if I was to do a deal with you, what would it look like? And I got a term sheet and then I went to VCs and I was like, look, I have 3 term sheets from sponsor banks. But yeah, which I did, but like, it wasn't like they were ready to, I mean, I did end up doing one deal with one of them. So—

Was that hard, by the way? Getting those term sheets, just working your way through these sponsor banks?

I mean, getting the template term sheet was not hard. Because I mean, you know, all these people have partnership people and like, you know, whether you work with lawyers or other fintech entrepreneurs, like you can normally get to the partnership people at these places. So getting like an actual like test term sheet, not that hard. Getting the final sponsor bank deal, it took a lot of work, but you know, I don't know. I don't, it wasn't hard. Like, I guess for me, like hard things are things that I just can't achieve. So if I've achieved something, it's no longer hard.

It's easy by definition.

I don't know, man. Like, I, like, you know, it's pretty soon after we did the, our seed round, uh, I went to this conference Money 2020, which is like the biggest fintech conference. Uh, and I basically got the full list, um, of attendance and I scraped some stuff and I found like the 60, uh, people who were going that had, uh, that were like from a bank. And I emailed all 60 of them. So I had this like super intense time at Money 2020 where I just had like I think we ended up arranging about 30 meetings. So I had 30 meetings with banks at this conference and I just raised $5 million. So I was like, oh yeah. And then I just did these meetings one after the other after the other. And I met a ton of the sponsor banks right there because most people, when they go to a conference, they want to meet people, right? That's the whole point of them being there. And especially if they're partnership people from banks. And then I just raised like $6 million so that I had like some social proof to say like, hey, we're looking for a sponsor bank. And so that introduced me to the whole ecosystem pretty deeply. And then, yeah, then it was a case of just kind of selling them on it, getting a deal and negotiating it and all that kind of stuff.

What was the, you mentioned raise $5, $6 million kind of a seed. What, like, I mean, on the one hand, you had a track record, you're kind of, you know, repeat proven founder. Was it easy to raise that?

Yes. The, The few things that made it easier is actually like when I started investing, I was working with a lot of investors. So like we were sharing deals and all that stuff. And actually weirdly, that one year of like investing made my investor network grow a lot, a lot more than like being an entrepreneur had. So that made it easier just because I knew so many more investors and like, you know, when you've done some deals together, like they, Yeah, they know roughly how you think and you know how they think. And that definitely helped build my network there. And then another thing I did pretty early on, and this was actually not even in the course of like trying to raise money, but Andreessen Horowitz had a fintech investor and I was trying to understand the space and he actually knows banking pretty well. They'd actually invested in a bank called Cross River Bank before They invested in Mercury Seed round. So I'd just been like talking to him and I really didn't expect, you know, at this stage I had nothing. Like, as I said, I hadn't written any code. It was very much just a crazy idea.

And it was just you?

And well, I had got, by the time I was doing the final pitch, I had like 2 co-founders. But I'd just been talking to him like every few months before that, just to like learn what he knew and then like, you know, get introductions to people, et cetera. So basically like 4 days into kind of starting to fundraise, I was just giving him an update and I really was not planning to raise from them because I was like, hey, you know, at that point, you know, mostly these Series A funds did Series As. They didn't do that many seeds. So yeah, I had a meeting with them on Thursday and then literally at the end of the meeting, he was like, hey, why don't you come in for a full partners meeting on Tuesday? And I was like, what are you talking about? Like, it's just like, I wasn't even pitching you. I was just like giving you an update. So it was very well. And then at that point, I felt like an idiot because I was like, you know, you don't go talk to one VC. You try to talk to like you know, 15 VCs. This is like basic Silicon Valley knowledge. Whenever you're like pitching a VC, you talk to 15 of them, but I was really not trying to pitch a VC. I was trying to just have a conversation. So then I tried to send a bunch of emails to arrange meetings with other VCs, but basically like we met on the Tuesday, they gave me a term sheet on the Tuesday. So it was done.

This is the classic, you know, ask for advice, get money sort of thing.

Yeah, very much. But I mean, they moved quickly and I appreciated that. And like, they really, uh, you know, who knows whether I would have got any other VC, but like, uh, they really did believe in, in the model, uh, and us doing something crazy, uh, when like really there was literally no code written. So, uh, I'm impressed that they had that. They had the kind of the faith to like bet so early on something like that.

Give me a bit more context in terms of what the space looked like back then, like the neobank space. Uh, and just all that, all that kind of that world. I mean, today, like you said, there's just so, there's, there's so many other players, right? Um, but what was it like then?

So let's see, back then, uh, most of the action was in Europe. Uh, so there was like, uh, Monzo, N26, Tide, Qonto. Those are the main ones. I don't think Revolut was around. Maybe Revolut had started, but they were much more in the, yeah, Wise and Revolut were international. kind of money movements rather than banking. So most of the action was in Europe. And actually a lot of the people I talked to when I was doing the research were in Europe. And in the US, there was Chime and Aspiration. I want to say those were probably the only 2 around, but they were much smaller. I don't, I think maybe Chime was a unicorn, but only just. And it was, it was very much like, you know, it was still a question mark on like what, whether this was a real category in the US at that time.

And Tron was focused on who as an ICP?

Uh, they were, and I would say they still are focused on kind of underbanked consumers, like people who don't have bank accounts and they're, uh, well, they're like, yeah, uh, subprime kind of consumers.

Okay. So the idea of owning kind of startups and early stage companies from a banking perspective in the US was white space. Like nobody was kind of going after that.

Yeah. There was one company that tried a little bit called Seed, uh, that was doing kind of SMB banking, but at that point that kind of faltered. Uh, but yeah, nothing at scale for sure.

So you raise this money, you get the sponsor bank, what's next?

You know, basically spent something like a year to like go build everything. It's quite a complicated product. And then you, as I said earlier, you also have to do all the, all the backend things and, you know, to do a bank account that's really going to replace all your, all your operational usage. It can't have missing features, right? So, and I had a pretty high bar. I was like, it needs checks, it needs debit cards, it needs wires, it needs ACH, it needs international wires. And like actually any one of those payments type is like normally a full startup, like just to issue debit cards and do all of that is like a lot of work by itself. But like, I was like, I have to do all 5 of these. So that was a high bar, both in and out, right? Like money moving in and out.

You love this show. You don't want to miss the next episode. Why would you? So hit that follow button. Trust me, it's in your own best interest. And how did you decide, like, that's an important decision on its own. Like, how did you decide that? Was that gut feeling or how much of that was kind of speaking to potential customers?

I mean, I was just like, why? I didn't speak to anyone. I was just like, from a personal perspective, I'm not going to, what would we learn if we launched when and didn't have one of these crucial things? All we'd learn is that everyone would say, I need, you need that, you know, there was, in my opinion, there was nothing to learn. without having everything. And then the secondly, first impressions do matter and having something that was like obviously missing obvious features that like a bunch of people would show up for and then leave frustrated would like be, in my opinion, a bad impression. I've also found that if you don't build the thing upfront, it's often actually hard to build it after you launch. This is like pretty contrarian, but just when you have users and like, yeah, you have to worry about things breaking and like fixing bugs, et cetera. It's just like, it becomes hard to do new things. Like it's better in some ways to just like, if you know what you have to build, it's better to just not have any users. And like, you know, if the database goes down, who cares? Like if you, you can just like go build the thing with no users and it's like actually much easier. If, as soon as you have users, it's just slower to iterate. It's just, I mean, obviously you want users eventually to give you signal and learn from them, but Like if you know you just need a set of features, then I don't think there's any point in launching before that set of features.

I guess that makes sense. Like when you're building, you know, there's kind of, you're building a brand new thing that doesn't exist, like say it's Airbnb or Uber, one of these classic things, or you're building a 10x version, right? There you gotta say, I don't really know how people are gonna stay in people's houses and this and that, whatever. But if you're like, I'm gonna build a 10x version of, these are the banks, this is what happens today, I'm gonna do 10x better. You do kind of know like, Clearly these are the things that after 100 years of banking people need, let's just do it much better.

Yeah, I mean, there was definitely some things missing, but like the obvious stuff wasn't missing. And yeah, that's the thing. Like if I need to be 10x better, I have to have all the actual things and then I can try to build something 10x better. You can't be like missing something major and like say, oh, but I'm 10x better, right? That doesn't make any sense. So we had a high bar and then we ended up actually doing 2 sponsor bank deals, like one with a sponsor bank and one with a BaaS provider. So that slowed us down just because the You know, the first one made all these promises to us that they didn't deliver on. Uh, so that took us an extra 6 months as well. Uh, so it took us about a year and a half to, to go from like—

So that wasn't for redundancy. That was just like one didn't work out the way you expected.

So you had to— Yeah, one didn't work out and, you know, it was pretty complicated integration, but we had to shut it down completely and do one from scratch. Uh, but obviously we'd, we'd learned something from the first one, but it was still frustrating. Uh, so it took us a year and a half from like Fundraise to launch.

And how many people were you through that time?

Mostly 8 people. We quite quickly hired 8 people, mostly engineers. So, you know, from the 8 people, 6, including me, were engineering and then 1 design and 1 kind of product. And then, but at launch we had 1 extra engineer. So we were 9.

You kept it, you kept it pretty lean, like with $5, $6 million. I mean, you could have, you could have gone for a bigger team if you wanted.

Yeah, I talked to one fintech entrepreneur where like, you know, he had like a real war story around how it took him like 3 years to get something live. And, you know, so in back of my mind, I was like, okay, it might take 3 years to launch this thing. And then if it took 3 years and then you want to launch it and have like some, make some progress. So it might take 3 and a half years to raise money again. So that was my, like, I went in with like, what's the worst case scenario? And like, I wanted to have enough money and keep the team lean enough to like be able to get to the worst case scenario. I've also found that more than probably around like the number 16, things slow down quite a bit. Like you need, but like 8 people in a room, like you don't really need management. It's like everyone knows what everyone's doing. Everyone's doing, you know, everyone's kind of aligned. If you have to change something tomorrow, everyone kind of knows all the reasons you're changing it. And by the time you change it, everyone's like, yeah, let's go change it kind of thing. Yeah, as soon as you get above a certain number of people, like maybe 12, 13, 14, 16 for sure, but maybe even earlier, it just becomes harder to change things. There's always someone that has some problem and you have to get them on board when there's alignment issues and you have to do management. It's just so much simpler when there's a Smaller team and everyone's like on the same page.

Overhead communication alignment, like they're all costs, they're all drags to just like getting things done. And yeah, like when you're a small team of people, everybody understands everything that's going on. All the context is there. You just don't need to like disseminate information, right?

5 of the initial 8 people had worked with me for 5 years at my previous company. So we all knew how to work together and we were all like new That everyone was working pretty good.

And how did you have the product? Like, how do you structure the launch? Is it like a zero-to-one launch? You have like this design partner phase, beta phase. How do you kind of set that up?

Yeah. So we had like 30 or so customers that were just kind of playing with it, but it didn't really work. Like, uh, like there was lots of these missing features, but we just needed like some, some people actually testing it and like issuing cards and all that kind of stuff. Uh, really like You know, it was only like 1 or 2 weeks before we actually finally launched that, like everything worked. And then we were like, okay, let's go. Let's launch. I didn't think it would be a big deal. Like my, you know, my, my normal views and my previous experience of launching things is like you launch and then the work starts, right? Like you—

It's like anticlimactic, you think.

Yeah. That's, you launch like a few people care, but no one really cares. And then you start like figuring out like how to, how to sell it and like what's missing and all that kind of stuff. But in this case, we launched and it just like blew up and it, you know, it was like, yeah, like people really resonated with the idea. Uh, and not like the whole world, but like, you know, you don't need the whole world at day zero, but the, there was like at least 1 or 2% of entrepreneurs that were just like, I, you know, oh my God, this was such a pain. Like, I can't believe this is solving it. And we just like, that 1 or 2% was like a really, uh, really large fuel for growth and we grew kind of. 30 to 40% a month for the first 12 months.

And that was just like— How do you get that initial cohort? Like, I mean, at the end of the day, there's referrals and word of mouth that happen after, but like, you know, just to get any sort of excitement at launch, you need to do something.

Honestly, it was mostly on Twitter. I had a bit of a Twitter following at the time, which I'd like deliberately cultivated for a few years. And then we had 60 investors in our seed round. So I deliberately, We had Andreessen Horowitz as a lead. And then as soon as they kind of committed, which was relatively early, I deliberately went and like hunted people that had like a large portfolio of companies that they had invested in, or they had like a big kind of social media following, or they were like kind of helpful fintech entrepreneurs, that kind of thing. So I had 60 of them and that was really helpful. Like there was definitely At that point it was still called Twitter, but them tweeting about it and like giving, because so much of Mercury is about trust, right? Like you have to trust this startup to like hold your money. And yeah, when someone that everyone recognizes, like Andreessen Horowitz or whatever, says like, hey, we invested in this thing, we believe that, you know, we believe in Imad and what he's building, et cetera. Like that gives a lot of confidence to people to say, oh, let me try this out. So most of the first kind of, so 2 to 3 weeks were really like driven by kind of that investor base kicking it off and like providing that kind of initial ignition to the distribution.

And actually that was mainly word of mouth or was there other like go-to-market you used in those first few months?

First 5, 6 months was all word of mouth. The only other significant thing that happens after that is we did a partnership with Stripe Atlas. So we became one of the, so after you incorporate, you need a bank account and we became, along with SVB, we were like the second partner that they recommended. I think honestly those two, oh, I was also, you know, I did some work with Y Combinator just because I've done Y Combinator a few times. So, you know, it was mostly just selling to the company. There wasn't like an official partnership at the time, but that was also like initially. Um, part of the distribution strategy.

By the way, just a lot of it was organic and word of mouth. You did YC twice, right?

Yes. In '07 and '09.

What was the reason to do it the second time?

Just curious. I mean, I love YC. It's like, uh, kind of wanted to do it for Mercury as well. It didn't work out, but, uh, yeah, I mean, they gave me money quickly. I knew Paul Graham. Uh, it was a, why not? It wasn't a difficult decision. Uh, it wasn't like, you know, after my First YC company, it's not like I knew a ton of investors and I could raise money easily anyway. So it was even that $30,000 that they gave us when, you know, it was at that point, it was very much just a, just an idea was like a nice kickstart to kind of doing it.

So back to, back to this launch, one of the questions I have is, you know, the idea is it's a better bank. It's a 10x better bank for startups, but what specifically resonated the most? Like what were the biggest annoyances of traditional banks for startups at that point? That you were doing so much better that people were like, I love Mercury because—

Yeah. Yeah. Well, to be clear, we're not a bank. We're a fintech company that works with sponsored banks. But there's a bunch of things that are just like, in my opinion, so obvious, but so annoying that like people are so used to how bad banks are that they just don't realize how annoying they are until they see like something else. So I mean, take online signup, right? Like, I mean, it's obvious, but yeah, that was like, and it continues to be a big differentiator. Like if you want to go sign up to Chase, go to their website, you cannot sign up. You have to go walk to a Chase branch and, you know, either prearrange an appointment or like you have to sit there for 2 hours. We did this actually when we started Mercury, we signed up for like 8 different banks just to like see what the experience was like. It's all bad. Like there is literally not one experience that's good.

It was all in person, all the other banks?

Yeah. I mean, the only alternative was SVB was not in person at the time, but it took 3 weeks of like doing online forms and waiting. And so it was, yeah. And Mercury, you can get a bank account online same day most of the time. So just that experience of like just signing up is so painful. And then just basic things, like if you want to do a wire, like Trying to do a wire with a, you know, A, the first time you sign up, they don't enable your account for a wire. You have to go back there to enable your account for a wire. And then even when they do, it's like, yeah, you have to like, you know, you have to call them and then they have to call you and then they have to call maybe someone else. It's just so ridiculous, like how these basic experiences are so painful.

You'd think there'd be, you'd think that'd be for compliance reasons. Like you'd think there'd be no way for them to get around it versus just poor UX, poor design.

I mean, there's definitely some compliance things and, but even the compliance stuff, right? Like, okay, you need to ask some questions. Like, why isn't it in the product? Like there should be, you know, and we have, we have lots of escalation in the product. Like we're like, hey, you're a crypto company. Now you have to answer these other 5 questions and it's all in the product. Like it's not just because it's compliance and there's like more to do. It doesn't mean it involves like humans calling you. Like you can make a product that like is built around that. A lot of the reasons that why is are like that is because banks don't have like true TOTP authentication, right? They don't like when you, I mean, nowadays I guess they mostly have SMS kind of verification, but that's very easy to steal someone's phone number and like now you can like access their bank account. So, but because the security level is not like up to like modern standards, then they have to have some other out-of-band way of like trying to verify a wire, but If you just do things at like a high enough standard of security, then you don't need to. And we've, you know, we, I'm sure there's been some issue, but almost no issues around like someone unauthorized sending a wire on your behalf.

And were you getting mainly people who were just opening up, like starting a new startup and starting fresh, or were you getting people shutting down like a Chase account or whatever it was and moving to Mercury, like in those, in that first 6 months, first year?

The first initial like few weeks, a lot of it was just like, people just being like, oh my God, I'm going to switch to this kind of thing. But they were all like, I would say very early in their journey. It's definitely much harder to get someone to switch when they've got a long-term embedded banking experience. Nowadays, about 75% of our customers are within, with probably their first bank account, they're within 6 months of incorporating. And that is like one of, you know, in my early pitch of like why early stage startups made sense is I was like, hey, there's always new startups. So there's always this kind of new new cohort of companies that we can get and then we can scale with them as they grow. And that's mostly how it's played out.

Well, also because like it feels like most of the costs of the annoyances of a bank, I mean, like a lot of them are at the beginning, like setting it up, you know, initiating like a wire process. Once you've got it all set, it's probably still very full friction, but it, you know, the kind of, you've done a lot of the work already, right? So like the upside is—

You've done a lot of the work and there's also, You're just a lot more locked in. Like it's, there's also like annoying switching costs. Uh, it's still pretty bad. I mean, you still have to like deal with it and then, yeah, they have lots of like annoying fees that you don't expect. So it's not a great experience afterwards, but yeah, definitely the switching costs versus the, uh, the pain of the experience versus like, you know, people don't know what Mercury will really be like until they use it. So they don't necessarily, uh, know what's, you know, what's better.

So you mentioned last startup, like it took many years, like 4 pivots to find, like finally feel what true product market fit was. With Mercury, did you feel true product market fit right away at launch?

I would say I was like very skeptical because I was like, oh, it's just a launch and everyone's excited. Like, let's know. But yeah, in hindsight, we definitely had like instant product market fit and it kind of grew very fast. I had a lot of reservations on like leaning in too much on that. Like I don't want to go hire too much or like do too much just because I thought like it was going well. I wanted to be like 100% sure. Uh, but yeah, I would say we had like instant product market fit.

How much app, like how fast did you grow that year? Like when did you get to like a million in ARR, for example?

I mean, very quickly. I don't want to like misquote. Uh, so let me try to think for a second. I want to say like maybe 4 and a half months we were at a million ARR. It's kind of a good question. I should really know that.

It's a classic PMF Show question, but not necessarily something you think about when you're, you know, half a billionaire.

At this, at this stage, I'm not like going like, when did we get to? But it's a good question. You know, to be fair, it's not ARR for us, right? It's—

Well, that was going to be my question. What is the model? Like, where's that revenue come from initially?

The way we make money is, well, the 2 main ways is number one, people use our debit card or credit card and we make money on the interchange. So every time you swipe, there's a fee and as the issuer, you get like a pretty big chunk of the fee. And then number 2, we Yeah, if you have money in your operational checking account or savings account, we get a percentage of the interest rate from our bank partners.

But originally you didn't have credit cards, right? At launch, or did you?

We had debit cards and actually I wasn't, yeah, I wasn't expecting it, but it was actually a big, big driver to revenue, even from day zero. So yeah, lots of people do use debit cards initially and then they eventually migrate to credit cards. And then we ended up launching a credit card in 2022.

In those first years, this is a question I have whenever a company just kind of hits. What was, because from the outside looking in, sometimes that feels like, wow, that was so easy. You know what I mean? Like, so basically you had an idea, you built the thing, you launched the thing, it worked. Like that's the story. My question is like, what, what was the hard part of Mercury besides just the infrastructure? I know setting it up was like not easy as you said, but it was kind of like, known things you had to solve and you solved them, but what would you say was like the hardest part of building Mercury in that first period, those first couple of years?

I mean, there was definitely like a time pre-launch where, you know, it took us such a long time, a year and a half, at least it felt really long, no users. And there was this time where I went and like talked to a bunch of customers or like potential customers and like didn't seem like people were that excited about it. They were like, oh yeah, this sounds kind of cool. Yeah, but it wasn't like, I remember just going like, wow, like, are we doing the right thing? Right. Because we were just in a hole for like a really long time, just building. And there was like very little external validation to say like we were doing the right thing. So that was probably like the hardest initial time. And there's definitely like moments of like panic, right? Like when COVID happened, like it's like March 2020.

Yeah.

Interest rates go to zero, uh, which, you know, from our perspective, like that was like at that point, like 60% of our revenue went to zero basically. So obviously interest rates went to zero and I was like, you know, the whole economy is shutting down. Like, is anyone going to do startups? Right? Like, I don't know if you remember 2020, like there was definitely a moment in time where it felt like this was the, you know, this was like a pause in the whole world and like startups weren't going to be any different from that. you know, it really was like an existential moment, but like 2 months later we were back, you know, it was like 2 months later we're like, you know, our revenue like blew up and like all this stuff happened. And I was like, I was like, okay, it was fine in the end.

In that zero rate environment, your revenue goes up, I guess, mainly because of the interchange then?

Yeah, interchange. Like we basically like e-commerce completely blew up and then with that like debit card usage blew up. So I found the answer.

Nice.

April 2019 is when we launched and we were at $1 million in annualized revenue in September 2019.

Okay. So 6 months or 5, 6 months.

1, 2, 3, 4, 5, 5 months.

Yeah.

That's pretty quick.

Nice. Well done. And then when did you, when did you, so you raised your seed, built for a year and a half, launched. When did you raise your And how big was it?

So we actually raised the, we started raising the A 3 weeks after we launched, basically like the launch, like really did well on Twitter. And I had like a ton of VCs like hit me up saying like, oh yeah, this is great. Like I was like, okay, you know, like after things calmed down a little bit, which for some reason I thought was 3 weeks later, I was like, okay, let me just go raise a round. And then it took about 3 weeks to go from like starting the raise to getting a term sheet for the Series A. How much did you raise? Uh, $20 million at $100 million valuation from CRB.

Got it. And, uh, okay. So let's, um, let's stop it there. Let me just ask the last couple of questions we end on. And we've actually already touched on one and the other one I kind of touched on, which is, you know, but you had a bit of a, anyways, when did you feel like you had true product market fit? You said that when you launched, In hindsight, you did have true product market fit, but it didn't feel that way. Like, when did you going through it be like, you know what? Yeah, we have real product market fit.

I didn't truly, truly believe it until after that COVID blip. Uh, cause like, you know, COVID hit us and like we lost half our revenue. And then literally 2 months later, we were back or higher than our previous revenue level. And at that point I was like, you know, if a global pandemic can't stop us, we're probably pretty good at this point. Yeah, that was like the switch in my mind at least.

Awesome. And then the last question is, uh, if you, you know, like you've been through many startups yourself, you invested in a lot. If you have like one piece of advice for early stage founders, uh, what, what would that be?

Um, yeah, I think one thing that I didn't do, but at my previous companies, but I did at Mercury that was like very useful is we wrote down kind of our cultural attributes and what we really cared about in terms of Mercury culture, like basically a few months in when there was only 4 people. And that was super useful because that initial kind of, you know, the next 8 people we hired or whatever, we knew what we were looking for. We were like, these are the personality types we care about. This is the type of culture we want to build. And it's, you know, if we were at 20 people and then we tried to write the culture, then Like it's hard to have a cohesive culture when you haven't tried to build a cohesive culture. So even now at almost 1,000 people, like that early investment in like doing, thinking about culture actively and like trying to hire against it has like played fruit in a way that's like, it's like this underlying kind of like reason that Mercury's successful is that we have like the strong culture and we hire people against it. That is like easy to miss if you don't like pay attention to it.

Awesome. Well, Imad, thanks for sharing your story, man. It's been great.

Yeah, it's good chatting.

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