Rapyd is a embedded finance platform that has gone global from day 1. The company is expanding rapidly.
Joining me on the podcast is co-founder and CEO Arik Shtilman, who shares exactly how quickly the firm has been growing and the news that the company has closed a $300 million investment round with its eye on an eventual IPO.
Our company was founded in 2016. It was supposed to be something else. So we were three guys coming from a cloud computing startup that we sold. And by accident, we stumbled into payments — we weren’t fintech or payments people. We wanted to build a consumer facing wallet platform that would compete with PayPal. And with no knowledge in fintech or payments, we started to try and build something out.
And then we stumbled into every single problem that exists on planet earth that is related to building a payment or fintech solution for consumers. Because suddenly, you need to get regulated, you need to build a lot of infrastructure for moving money in, money out, doing compliance. KYC. And, you know, seven months into this venture, we suddenly figure out that we’re spending 90% of our time building infrastructure that probably all the other companies that are in this business already built in the past.
It was surprising for us to figure out that in fintech, there are no infrastructure providers. Every company is rebuilding the same thing from scratch again and again. So we thought it would be a good idea to pivot our original idea of consumer payments into a type of an AWS for fintech, basically an infrastructure that other companies can come and build their own consumer facing products on top of.
Today, we’re probably the number one company in this space, providing a global infrastructure for collecting money, dispersing money, storing money in custody, and issuing cards in more than 105 countries across the globe.
Going global from the start
Our intention from day one was to go global. And this is also one of the main reasons why not even a single venture capitalist in Israel was willing to invest in us. Every single fund we approached told us that the idea is too complicated, too big and impossible to achieve. And we should think about doing something on a smaller scale — maybe start in one country, and then figure out what we want to do. And we thought that was wrong. We were right actually.
Today, we are able to collect payments in more than 1000 different payment methods across the globe. From cash points in Bolivia to bank transfers in Indonesia, to cards in New York, there are 1000s of ways that consumers pay today. And we’re able to connect these capabilities and offer them through our API.
In the same way we’re able to disburse money in more than 100 countries across the globe, from local bank transfers to local cash points, to pushing money to local wallets like Aplipa, WeChat, wherever, whatever it is we’re doing. And we’re able to issue Visa and MasterCard cards on top of our platform in 35 different countries from Mexico Brazil, Singapore, the UK, European Union.
We process $5 billion plus on a yearly basis in 2020, more than quadrupling the number from the previous year. Our revenue run rate is above $100 million. So it’s a very fast paced company.
This investment round basically shows to the market our interest in going public. And when you raise $300 million and you have more than $100 million more in your bank account, it means you have almost half a billion dollars in your bank account. It means that this is a long term company. We’re going to do M&A, and we’re going to continue and grow organically. The goal is to take this company public, probably two years from now, maybe a little bit later. We could have gone public already because the market is super hot and we have been approached by every single investment banker. It will take another couple of years, but definitely we’ll be in the 10s of billions of dollars when we go public.
Those Israeli investors who passed on us early on. They wish they joined us on this round. We didn’t allow them.
Funding growth and ramping marketing
There are two uses for the funds First of all, something like 40% of the money is going to go to M&A. We did a very successful M&A in the beginning of 2020. And we want to replicate it in 2021-2022 with some larger scale M&A. The rest is going to go into expanding our infrastructure, by adding probably three more R&D resources into the company and a lot of marketing because COVID basically changed our marketing and sales model.
Before COVID, we mainly focused on enterprise sales, which means basically salespeople who knock on the doors of companies and convince them to go and buy Rapyd. But at the end of the day, COVID changed this because there is no real face to face interaction anymore. The model has changed to mainly online acquisition of merchants with online marketing and self service onboarding. This is a model that we like very much because you put money into a marketing machine that generates clients very quickly and TPV and revenue. So a lot of money is going to go into online marketing.
We operate in three different regions: Europe, APAC, and the Americas. In every single one of these regions, we look for a different type of acquisition. And the acquisition in 2020 was a combination of a tactical acquisition — we wanted to become an acquirer of Visa and MasterCard directly. So we were looking for a company that that is an acquirer, and we found the company in the European Union, but we actually got two for the price of one because we bought a mature company that also had significant client base. And so in Europe, it’s mainly buying more client base and we can switch from old technology to become much more efficient in the way that we process the payments, and much more profitable and expand the business. That’s the mainly the upside of the acquisition.
In Latin America, the acquisition target is mainly Brazilian companies. We are looking to double down into Brazil. We believe in the Brazilian market that we have a very fast-paced growing operations there, but we want to become a very big player there. And we understand that there are only two ways to do it: either buy a significant asset there that already has significant number of people on the ground in operations or to wait five years and we will build it out. As Israelis, we are not very patient, as you can understand. So we prefer to buy it and just move on.
In Asia Pacific, it’s going to be more of buying a tactical asset of regulatory licenses. Because the amount of time that it takes basically to get licensed for payments or remittance or any type of other regulatory license that you might need in some countries in Asia Pacific, we figured out that buying the licenses for all these services is going to be a much smarter play for us.
There are a lot of new products that we’re thinking about offering. We are going to go into things like logistics as a service, basically expanding the payment experience that we offer to our merchants to also doing the fulfillment and the shipping for some partnerships. We’re going to go into the working capital loan space because some of the merchants that we have are looking for cash advance for their business. And you know, there are a lot of other elements of open banking to the European Union that we’ll probably launch initiatives.
The first stage of these new products like merchant cash advance is definitely going to be through partners that have expertise. We’re more looking into building a type of a marketplace of plugins that other companies can come in on top of our platform and basically offer these capabilities.
What keeps you up at night?
Mainly recruitment and the lack of ability to travel. Recruitment of employees is a very big challenge, especially when you need to scale up very quickly. We’ve been working from our office, at least in the Israeli office. The US office has been closed, but the Singaporean office has been open also. But you know, because of the fact that our management team is global, the lack of travel is really becoming a pain for us. Because the communication over Zoom over specific hours of the day is very complicated for us. For the first three, four months, it was okay. In the current stage, it’s already becoming much more painful. But I hope that will very soon be resolved.
I think that the recruitment element is probably the biggest challenge that we’re going to stumble into, because when you need to recruit 100 engineers, in six to eight months, in a market like Israel, it’s almost Mission Impossible. And this is really going to pick up.
Growing awareness of embedded finance
Financial infrastructure is very valuable today. When we started to talk about fintech as a service and infrastructure, everybody thought we were crazy. Suddenly, now you see, like mushrooms after the rain, banking as a service providers. It became a very hot space. And it’s much easier to recruit people and to explain to potential clients or potential employees what we do.
Biggest goals for 2021
It’s two things. First of all, we want to at least triple our revenue in TPV, which is a super aggressive thing, but we’re 100% focused on that. And being able to onboard clients as best as possible and convert that into TPV and revenue. The second thing is to be able to recruit the people that we want. These are the two things that we’re really focused on in 2021.