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WorldRemit’s Catherine Wines: ‘We’re trying to make money transfer as easy as sending texts’

Catherine Wines has seen how technology has impacted the remittance business. When she co-founded WorldRemit in 2010, she envisioned doing to remittance what the online travel agencies had done to their industry. Fast forward a few years and her firm, WorldRemit is one of the fastest growing tech companies in the U.K. and from a valuation perspective, is progressing toward unicorn status.

On the podcast this week, we talk about what prompted her to take on such a large, stodgy industry and why it’s been so hard to move money internationally. We discuss her view on the role of cash in our economy and WorldRemit’s international growth plans.

Catherine Wines is our guest today on the Tearsheet Podcast.

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Below are highlights from the episode, edited for clarity.

Why get into remittance?
I used to work in another company doing remittance, but the old fashioned way. People would need to go to a shop to send money. When I left my previous company, I met Ismail Ahmed through a common friend. He had this idea of bringing remittance into the 21st century by bringing the industry online.

We’ve often made the comparison to travel agents. Years ago, when you wanted to book a flight, you used to go to a travel agent in a physical location. It was the same with money remittance. Now, you wouldn’t think of booking a flight by going to a shop. You do it online. That’s what we wanted to do with moving money: make it a lot more convenient and a lot cheaper. By doing this, we knew we would compete with the large incumbents like Western Union and Moneygram.

Why has it been so hard to move money internationally?
You have to establish quite a large network. In order for us to be able to send money and have a customer receive it almost instantaneously, you need to have a lot of partners in the recipient’s country like in Africa, the Philippines, or Africa. Building that network takes a long time and is quite costly.On the send side, in order to be able to send money, you need to get a license, and that can be quite expensive and time consuming. For example, in the U.S., you have to apply for a license in each and every state. We started in 2014 and now, we have licenses in 48 of 50 states.

Where are the banks in the remittance business?
Banks have never really gone into remittance because of the need to build these partnerships. Banks couldn’t provide the service that their customers wanted. Our products is very much for economic migrants, working overseas and sending money home. They need to send smaller sums of money pretty quickly. Banks just couldn’t compete because they work on Swift, which is quite slow and expensive.

Where do you see growth in the business coming from?
Sending money is about a $500 billion market. A large amount is still sent informally, like people carrying cash with them. There’s a big push to move that to more formal channels, like us, making it more convenient and cheaper. We started seven years ago in Europe, and now we’ve expanded to 50 send countries going to about 140 destinations.

We’re still a relatively small competitor compared to Western Union, so we’re trying to grow our business in existing markets while we expand to new ones.

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Raise’s George Bousis: ‘Gift cards really simplify the ways retailers service customers’

When George Bousis started working in his family’s grocery business, his fascination with technology led him to examine what it was that kept his customers coming back. That focus on technology, loyalty, and retention, eventually propelled George to found Raise, a marketplace for gift cards.

Bousis joins us on the podcast this week to discuss how his experience working in retail influenced his understanding of the pain points for both small and large retailers and his direction as a fintech founder. We talk about what’s driving demand for gift cards and the competitive dynamics of both supply and demand in that market. Lastly, Bousis unpacks some of the freshest trends in global e-commerce and payments and how his vision for Raise extends far beyond gift cards.

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Below are highlights, edited for clarity, from the episode.

How did your background in a family grocery business influence Raise?
I grew up a professional gamer when e-sports was not cool. I played a game called Counter Strike and I was part of a few professional teams. That was my first interaction with technology and products. That influenced what I did my family’s grocery business, which is a tough business. It was my first opportunity to interact with our customers and figure out what kept them coming back. Was it the quality, pricing, or service?

My passion was around technology, customer loyalty, and retention. I was doing some research in the gift card space and realized it was one of the best offerings in the market. We could sell pre-paid value to a customer who would need to come back to make a purchase. We could drive promotions and offers through this mechanism that already worked with our software. There’s so much friction in the marketplace for retailers — we are stuck managing coupons, discounts, rewards, and loyalty points. It wasn’t until I really researched the gift card space that I realized the full opportunity to simplify acquisition, loyalty, and spend using gift cards as payments.

What’s driving consumer demand in gift cards?
The simplification of the overall process. The best example in the marketplace is probably Starbucks. Just five or six years ago, there wasn’t a Starbucks reward program and card. Today, it represents 40 percent of all the company’s transactions and growing. Not only does the card reduce friction in the experience but it allows Starbucks to interact directly with its customers using payments. For a consumer, there’s no need to manage dozens of apps and programs — there’s one specific offering that helps me to come back and value their currency.

What about growth on the supply side? How are merchants adopting new gift card technology?
Today, we’re partnered with over 400 retailers across the U.S. They’re using Raise to drive acquisition, loyalty and spend, but they also see gift cards as a way to offer credits for their brand and to keep it top of mind for their customers. When you think of all the ways a merchant can continue to interact with a customer with push notifications, spend, location and frequency of visits — there are so many ways they’re using our platform today.

How about the move to mobile and away from physical gift cards?
When we first started, the business was wildly physical, which was inefficient and full of friction. Customers had to wait days to receive a gift card they purchased. In the beginning, our customers skewed to more savvy mobile and web users. These guys have the “saver” and “planner” mentality. They would plan to go shopping over the weekend and would purchase gift cards at a discount to save money at the stores.

What’s changed over the years is that we’re becoming a mobile first company. Our customers are now using Raise as a payment mechanism. They using us to pay anywhere and everywhere they’re going because their money is always worth more. If I can buy something for less, why wouldn’t I use Raise first? Upwards of 95 percent of our transactions today are digital. These customers are in the store, buying a card and shopping right there and then. Different brands are able to sway customers into trying new things and enter new stores. We’ve helped our customers save over $140 million to date.

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Edison Partners’ Chris Sugden: ‘With growth equity, dogs are already eating the dog food’

As part of an ongoing series, we talk to professional investors in the fintech space to get a feel for what’s on their radar screen.

This week’s guest on the Tearsheet podcast is Chris Sugden, managing partner at Edison Partners, a Princeton NJ growth equity firm that invests in companies generating revenues of $5 to $20 million. After 31 years in the business, Edison is on its eighth fund. Chris leads the firm’s activity in fintech and was previously an entrepreneur in the billing and payment space.

Sugden joins us today on the Tearsheet podcast to discuss the role growth equity plays in the fintech ecosystem. We get the lowdown on his firm’s portfolio which includes investments like early forex leader Gain Capital, vertical payments player PHX, and personal finance manager MoneyLion. Lastly, we talk about where Sugden and Edison are looking to make fintech investments in the future.

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Finding a unique fintech proposition
At the growth equity stage, we’re thinking about the dogs eating the dog food. There’s a live product and we don’t need to make a lot of guesses about adoption. We do need to make guesses about execution and market size and whether this is a product or a company.

We think we’ve carved out something that’s unique in fintech. Growth equity is finally a thing, as it’s become an asset class over the past three or four years. Back in 2006, we called what we do “expansion capital”, but that was a bit confusing. All capital is for expansion. As we define it, growth equity is really a revenue filter — we look to invest in companies with revenue run rates between $5 million and $20 million. We also look for companies that haven’t raised a whole lot of money before we come in.

How does growth equity play out in fintech?
We find ourselves searching for areas where you can gain traction without a tremendous amounts of money. In many cases, that means avoiding spaces that get hyped up, like mobile payments. We’ve looked at a lot of mobile payment deals, but because of their platform nature and the fact that dual-sided marketplaces need liquidity to transact, they require a fair amount of capital. So, these deals tend to be trickier for us to find entrepreneurs who don’t need a lot of outside capital to get their revenue run rates going and growing.

So, in fintech, you’ll see us doing more enterprise-like deals targeting banks, brokerage, and wealth management, as opposed to consumer-type applications.

What startups need to understand about funding
The biggest lesson I’ve learned as an entrepreneur is that money can solve scale but doesn’t solve hard problems or create innovation. The pitch where an entrepreneur claims that if he had a little money, he could make a lot more revenue — well, that’s not really true at the smaller end. One of the biggest tests is what the money is going to be used for. Does the entrepreneur really understand the business model and the revenue levers? When I sit with an entrepreneur, if I don’t understand from them customer acquisition costs, lifetime value and gross margin and contribution margin, it tells you a lot about how the CEO will think about using capital.

 

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MassMutual Ventures’ Doug Russell: We want to become more innovative as a firm

We’re continuing on our series of interviewing top corporate venture capitalists in the finance industry to get their perspectives on where things are headed by looking at where they’re investing.

Today’s guest on the Tearsheet Podcast is Doug Russell, managing director of MassMutual Ventures, which began in July 2014 as a VC arm for the insurance giant. We talk about his experience as an operator before moving into a corporate investor role and how that influences his investment practice.

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Below are highlights, edited for clarity, from the episode.

Why should an insurance company create a venture arm?
“The decision to start the fund arose from management’s focus on ways we could become more innovative as a firm, recognizing all the changes that are happening outside our business with respect to technology and customer expectation.

I had been in the seat as head of strategy and M&A and was fortunate to be asked to lead this effort. A year into investing, we realized that there was a tremendous amount of activity and really interesting deal flow, so I transitioned to move into the fund full time.”

Is there a value in having a lot of operational experience as an investor in insurance?
“In making a decision to bring on two partners to our fund, we identified two people with significant venture investing experience. With that came good reputations and history working with companies and other investors. Together with my background on the operational side, we felt we were building a very formidable team that would be viewed favorably in the entrepreneurial and investing worlds.”

How does venture investing fit into MassMutual’s objectives?
“Our $100 million fund has one limited partner, MassMutual’s general investment account. Our primary mandate is to generate returns in the top quartile of 2014 vintage funds. Our secondary approach is to generate strategic insights into the MassMutual ecosystem. We meet a number of companies as part of our work and even companies that don’t fit our investment criteria can get introduced into the MassMutual ecosystem.

We’re a large U.S.-based insurance company with an insurance, retirement, and asset management businesses. We have operating, distribution, technology, and cybersecurity teams. Our parallel mandate is to provide strategic insights through introductions and a quarterly discussion around the trends we’re seeing in the market.

Lastly, where it makes sense, we also enter into commercial relationships with our portfolio companies. About a third of our investments have entered into partnerships with us, but the primary mandate is still to drive investment returns.”

Give an example of a portfolio company.
“Check out Tuition.io. Think of it as a business that provides a 401(k)-like benefit for student debt repayment. It’s a match on student debt repayment by an employer. One of the great challenges in today’s market is attracting and retaining talent. The outstanding student debt has gone from a few hundred million dollars 10 few years ago to over a trillion dollars today. The average student has around $35,000 in debt. So, when you join a company that uses Tuition.io, it would have a benefit to student debt paydown match at a certain level over a few years.

We also invested in CyberGRX. It’s like an S&P rating of a company’s cyber risk. SMBs may not have the ability to assess the cyber risk of potential partners and this technology plays into the growing investment trend in defensive cyber capabilities.

We invested in PolicyGenius a couple of years ago. It’s a digital distribution business that can engage with customers in different ways and provide streamlined solutions across the insurance spectrum, beginning with term life insurance products. This is an example of an investment in a company that theoretically could compete with MassMutual but we see the potential of putting our products on their platform in the future.”