$15 Trillion Locked in Client Invoices - Get Paid Faster

Speaker A: There's $15 trillion sitting in US accounts payable right now, not in bad debt, in perfectly healthy companies waiting 45, 60, even 90 days to get paid while their own bills are due in 30. My guest today spent years funding startups and telling founders how to grow. Then she became one and discovered the advice she'd been giving was wrong. This is Julia Delane. Julie is the CEO and co founder of Czech. She built a $10 million venture fund and ran one of Europe's top university incubators at the Stockholm School of Economics, and is now a founder herself in New York. Raising from angels only deliberately. No VC. Julia, welcome to the Predictable B2B Success Podcast. I wonder if you could take us, uh, into the moment you heard the phrase, I'm tired of acting as a bank for my clients for the third time in two weeks. Where were you? Who said it? And, um, what did it feel like when it clicked?

Speaker B: First of all, thank you so much for having me, and I think that's a brilliant question because it was a, uh, aha moment for us. We'd been in. We were still at our previous jobs, and we were working just 50% to start up this company while we were still employed, having some. Some extra cash in the bank. Bank for ourselves. And we were interviewing a lot of service businesses, mostly business owners, trying to understand how they were working with their cash flow, how they were working with invoices and getting paid. And this was something that came up three times, and it was. I think it was because we were talking about how they were always in this crunch and trying to understand why is that happening? And in the end, they were just uh, everything in the air, and they were like, I'm just so tired. I'm acting as a bank. I am loaning money to my clients, and I can't get that to stop. And that's when we realize, okay, there is something here that we actually can solve. It's just about getting it out there.

Speaker A: I wonder if you could tell us who that third person was and what you did differently after that conversation than after the first two.

Speaker B: Yeah, I can't remember exactly who the last one was, but it was definitely a service business. We were talking to a lot of creative agencies at the time, and even now, most of our clients are creative agents agencies. And at least one of the conversations that we did have was with a branding agency that was doing our brand. And they had this problem of having net 30 towards all their clients, but they did a lot of printing work for their clients, and that printer had net 15. So they were always sitting with 15, uh, days on, um, like, full amounts from the printer that they were just forwarding or invoicing their clients. And that was, like, a huge problem that they sat with. So even, like, our own branding agency had this problem, and they loved working with us because they were like, okay, we, I would want a solution to this. So I hope you're building this, and I want to create the brand around that.

Speaker A: What did you do differently in that third, after the third conversation than you did in the first two?

Speaker B: Hearing something two times is, of course, we started working on, okay, what can we actually do with this? And is there anything that we can solve around it? And the third time, it was just like, okay, we need to find more people like this who have this problem, and just put whatever the MVP that we had at the time, which was very sparse, we just needed to put that in the hands of them and see how they would react to us doing that. And I think it gave us more confidence in actually going out and testing. Even though this prototype had barely any bones, but we could test it out without the payment processing, without all of the things that we have today, but still having people actually accelerate money.

Speaker A: Brilliant. Could you give us a specific scenario? Perhaps a company you worked with where the business was fundamentally healthy, the product was working, customers loved it, and cash flow still nearly killed it. What happened and what did the founder miss?

Speaker B: So, actually, one of our biggest clients today is one of our, uh, best case studies. They've been around for a really long time. They're really successful, they have a very profitable business, but they have have long payment terms, and some of their clients are always paying them late. So their founder was at one point asking one of his neighbors in the coworking space if he could borrow 10k to pay their salaries because he was still missing an, uh, invoice that he was supposed to use the money for to pay the salaries. So he had this crazy situation to some extent, perhaps seeing it as an outsider, but it's such a common occurrence that you're sitting there and many founders put their own savings in, or they do things differently to help solve these problems. But it's weird in the sense that if, uh, you look at the profit and loss statement, you'll see that this company's doing well, it has good margins, but because they're waiting 30, 60, sometimes even 90 days to get paid, they're not getting that money in early enough to actually pay the costs that they have either that are related to that project or that it's related to just having the salaries go out every two weeks or every month.

Speaker A: Um, so was that the point where the founder realized that he had a cash flow issue that was literally killing him and did he think at that point whether the situation was recoverable?

Speaker B: I think that most founders in service businesses know that cash flow is the biggest obstacle or biggest challenge that they have to surpass. And it's not something that you get over, it's something that you manage or cope with even. But I would say that I actually meet a lot of business, uh, owners who don't think that it's a big enough problem for them to actually get to. And I think that even this founder, uh, this borrowing money from the co working neighbor was many years ago and still he hadn't solved it. So we're still trying to figure out why that is, if that's because they actually don't see that there is a solution to this or if it's something else.

Speaker A: You used to tell founders, revenue equals traction equals proof. Now you're running your own company and you've told investors that you're deliberately not making revenue to prove a, ah, different hypothesis. What did you get wrong as a VC and why did it take becoming a founder to see it?

Speaker B: I think this is such an interesting question that I think about this all the time as a founder. How there were a lot of advice that I gave as an investor that were end up being completely wrong and I would probably take a lot of it back. I think that as, as an investor you see a lot of different companies and you try to generalize a lot because that's your, that's your job. You're trying to see what patterns can I recognize to understand who's going to be a winner and who might not be. And all of pattern recognition ends up being very generalized advice when it comes back to the founders. And for us there's been so many aspects of our business that are, is very different from perhaps the generalized view of what to do. We have um, a very difficult product to sell because we now in the beginning we are educating people a lot about how to manage their cash flow. As I mentioned, many people might not even understand that or see that there are solutions in the market. But also our specific novel approach to this is quite new. So we still have to, there's so much that we need to educate about that um, revenue might not be what we are focusing on right now, but we can look at other types of traction in the way that you mentioned. And I think that in the way that investors look at businesses, as a founder now, I take all the advice that I get with a grain of salt and trying to understand, okay, but this is the perspectives and this is the mindset that person is coming from when they are saying that to me. But probably in the end I know the most about my business and I just need to adopt things that I can grab that are super valuable because I still truly believe that investors have a really valuable perspective. And I'm missing some of that now, like understanding sort of the competitive landscape and seeing a lot of the different small startups popping up in your space that I'm not seeing at all. So that's one of the first questions that I would ask investors when I meet them. What else are you seeing in this market? What's happening? Because they usually see that much earlier than we founders see it.

Speaker A: Is there a, uh, version of the advice that you gave that was right at that time but stopped being right as the market changed, or was it always wrong?

Speaker B: There's so much advice that I gave that probably changed a lot when AI came in through the door and blew us all away. I left my investing job almost exactly when these small AI startups were popping up and becoming a thing. And uh, the whole landscape of everything has changed after that. I think Go to Market has changed, the types of businesses that survive has changed. Something that has not changed and that I still truly believe is very important for founders to consider is that AI or not, what you're building has to solve a problem for a customer that has that problem and it's big enough for them to look for a solution and the solution has to provide enough value for them to pay for it. And now I think that we have seen a lot of AI startups where the idea is very novel, but it's perhaps not really solving a problem or is solving a very small part of a problem. And it's not going to be big enough to actually be these billion dollar companies that the VCs want to see at least. And I think that has also made the market shift and perhaps opened up new possibilities for people to run smaller companies. They don't have to scale with venture capital as much, they don't have to build as big, they don't have to build teams as big, which is also quite cool, I think. And so there's, I think there's a lot that changed on that side of the advice that I gave.

Speaker A: So when you were, um, evaluating startups from the VC side, what did you believe a healthy relationship between a startup and its investors look like? And now that you're reporting, you're the one reporting to investors. What's the version of that relationship you wished existed but doesn't?

Speaker B: Oh, wow. I think that before I thought that it's a lot about. I was teaching a lot of our founders in the programs to grab more leverage and, uh, really try to be on the same level as investors in the way that many founders come into an investor meeting and think that it feels like they're begging for money and the investor has all the leverage because they are the ones sitting on the cash and they can decide to give it to you or not. But I truly believe that as an investor, you wouldn't be able to do your job if you weren't also willing to talk to these founders and be able to invest in these founders that do really well. So it's a privilege for them to sit with you if you believe that you'll be successful. Right. So flipping that script, I think is. Was very important. And we were really trying to teach founders to do that. I think that it's much harder than I try to teach people to do. I think it's so much about your mindset and so much about believing in yourself and having that confidence, which for me goes up and down depending on what day it is. And I truly would like investor relationships to be like that, uh, to feel like you're always on the same playing field. I would say we've been very lucky with our investors. We only have angels on our cap table, as you mentioned. And to some extent, they're very different from venture capitalists because they're doing this with their own money. They're doing it mostly because they think it's fun. And they understand to a much greater extent, I feel, what you are going through as a founder. And so I'm very. I would say we've been very lucky with the investors that we've had, um, until now. And then we'll see as we grow if we take on more venture capital. But. But for now, it's been very good.

Speaker A: And is there now that you're reporting to investors, is there perhaps an aspect to the relationship that you wished existed before, but doesn't quite as yet?

Speaker B: Not really. I would say that this humanizing of people in the aspect of being on the same playing field is very important, and it's more about looking at founders not as a tool to make more money, in the same way that a stock is a tool to make more Money if you're trading and that's your job. But actually understanding that founders go through ups and downs and they need support and they need the uh, intros to potential customers, other investors and treating that relationship as that instead of treating it as a very transactional relationship.

Speaker A: Is there something that you would do differently now as a board member, having been on the operator side?

Speaker B: I do. I have changed a lot of how I work as a board member. And definitely it's been so interesting to see how my role previously has been more about what am I seeing in the market, what are other companies doing? Very surface level understanding of market insights and perhaps go to market insights and how many people are doing generalized stuff. While now I'm much more into the details with the CEO. Usually I would talk about pricing, I would talk about sales strategy. Much more from what are we seeing, what are we doing? What has actually helped me, what is my sales coach telling me and what can I help you with, which I definitely couldn't do before. So I feel like I'm a much better board member in that sense. But for companies that do need someone who has this understanding of the general market, I'm probably not that person anymore. And so it's probably good to bring someone else in to complement that if that's what they need. Okay.

Speaker A: More of an awareness of your strengths and more empathy as well, having been through this journey. Interesting.

Speaker B: Definitely. Yeah.

Speaker A: You've said something that I'd like to unpack here. Big companies don't pay slowly because they have slow processes. They pay slowly because they have no financial incentive to change. That's a fundamentally different problem than most people will think. What does solving it actually require?

Speaker B: Yeah, that's a, uh, big question. And um, the question that we're trying to answer with Jack, I think I truly believe that when we started this, we were facing a lot of, uh, we were talking to a lot of business owners who really thought that what they weren't experiencing was the cost of doing business. These companies are really large entities. They require me to upload this thing into their system and I'm not going to get paid on the net terms that I offer. I'm going to get paid whenever they run their processes. But this, uh, dynamic discounting part is a very well known concept among large enterprises. It's integrated into SAP, one of the largest ERP systems in the world, in the way that you actually can incentivize these organizations to pay sooner, but you need that financial lever to do it. And so dynamic discounting is essentially If I discount my invoice 2% to get it paid now instead of in 60 days, will you accept that or not? And this is already built into these huge systems. It's just that many small businesses have never tried this. They don't understand how it works usually. And it's really difficult to guess what percentages move the needle.

Speaker A: Coming to that realization, I would think has dramatically changed your product. What version of check did you scrap when you understood the real problem?

Speaker B: I think that we found out that about this dynamic discounting concept quite early on. So a lot of what we built from the early stages included that as well. I would say that as we've developed the business and we've gotten more clients on board, we've also seen that, for example, it is difficult to understand what, what percentage I should set. And perhaps it's, it shouldn't be up to the agency setting the discount, but we should actually help them understand and perhaps even offer them the exact rate at uh, what we believe the company will accept it or where the market will clear. I think that there are other things that we're building into the platform where our grand vision is to move all of this $15 trillion sitting in AP and actually move it to these agencies or small businesses are and get them paid faster. And so how can we do that? And I think before we really believed that we needed to get people familiar with the early payment discount, dynamic discounting concept and have them use, uh, it themselves. But now we see that perhaps that's too complicated for an agency owner who just wants money in sooner. And we can just move, we can just use these concepts on the back backend and actually get their clients to pay sooner without them having to understand how it works.

Speaker A: Uh, I like what you're saying because as I understand it, you're not selling better invoicing software. You're selling a new behavior. The idea that a vendor should literally price their own cash. I think you've described it as, it has the time, uh, value of money applied to invoicing, something enterprises have always understood, um, and small businesses haven't. How do you teach a market to do something it's never done before?

Speaker B: If you would ask me three years ago when I was investor, I would say you don't. And I think as a founder, it becomes a bit more gray in the sense that if you want to build something really big and really novel and experiment with something that hasn't been done before, of course you have to introduce something new to the market. Otherwise you are only Doing what everyone else has already been doing. But I think that there is ways. There are ways that you can work that into your product without having to educate people too much. And at this point, we're small. Our clients are happily educated by us, and we happily sit down with our clients because they're few enough for us to be able to put that time in. And it helps us learn a lot about how they think about their money and what's valuable to them and how they think about their margins and what kind of discounts they might be willing to give up for that money to come in sooner. And that, I think, is not sustainable in the long term when we can't sit down with every client. And that, I think, is the way that we're trying to tweak the product to actually make sure that the agencies, the small businesses, they of course, can understand if this. If they want to, but it's not a requirement to actually accelerate cash. And that's, in the end, like, that's our North Star metric. It's like, how much cash, how we accelerated from the client side to the vendor side.

Speaker A: Sorry, I think I may have missed it. But early on, um, when you started out, what was the education process like? Were people willing to give you their attention or not?

Speaker B: I think that's funny, because what we did do when we were starting to reach out to people that we knew and business owners that were close, uh, to us in the beginning, that we could get honest feedback from, and we would always say, do you want to talk about how you're getting paid and how fast money is coming in from your clients? And everyone said, yes, I want to talk about that, because I have that problem, but it really depends on what you're doing for me to solve it. And it's one of those things that, like, it can be something that is annoying, and it's something that you're coping with, but it's not something that you necessarily are taking action to, changing. And as a business owner myself, I didn't do that because I didn't think the alternatives were that good. I think there's a lot of in, uh, getting debt or invoice financing or factoring. There's a lot of, like, loan sharks in this area in the US it's quite pricey to sell an invoice and get paid, and you don't really know how that will affect your relationship with your client. And a lot of people that we talked about were just scared of all these solutions that were in the market and were really Perceptive to having this win win situation where the client gets a discount on the invoice and you get the money faster. And so the concept is like too good to be true to some extent in that it's a really good compromise. But it's also a lot of variations in the type of client. Are they. Do they have an understanding themselves about dynamic discounting? Are they willing to accept it? Do they have better cash flow or do they also have poor cash flow? And this variation, these variations also create more like unreliability in the concept. And it's more about. It's not always accelerating payments, but it's a way to try to accelerate payments. And what we want to do is make sure that the ones who want to get paid faster, they're always going to get paid faster. And that's also like part of the tweaking the product to make it really, really valuable for the ones who need it.

Speaker A: Uh, I'd like to just get a little bit more granular so we can wrap our minds around what you're saying, because I think it's quite valuable. What's the most common misunderstanding in the first sales conversations that you often have?

Speaker B: Wow. I would say that the product that we're selling today is very much like a super small part of the vision that we have. And I think that our grand vision shines through a lot while, because it's like where we want to go, what we want to build towards. While I don't think it always matters to the clients, I think that most people just want to get paid faster and they don't care how it happens. And so I think we, we. I alluded to this before, but in the beginning we sold very much the concept of dynamic discounting and early payment discounts. And now we much more sell the concept of getting paid faster. And that has really shifted in the way that we speak about the simplest way to explain the product. While we have this grand vision of accelerating payments through early payment discounts. And we can actually move all of this money in the market and we don't need banks, we don't need lenders, hopefully in the future. And that's our big mission. But I think that at this point we've needed to narrow down, okay, what is it that we actually solve for today? And how can we prove that? Going back to the investor question, how can we prove that necessarily not by revenue, but actually by accelerating this money, which is what we track, which is what we believe is traction for us, because that in the end is the Value prop for the client, it's getting paid faster.

Speaker A: Absolutely. I'd like to go back to something we talked about a little bit earlier. You talked about dynamic discounting as something enterprises have been doing for decades that small businesses have never heard of. Uh, the SAP acquired a company called Tau in 2022 for about a billion and a half dollars to do this at enterprise scale. Why has this tool never made it downstream to smaller businesses?

Speaker B: Yeah, that's what we're asking too. There's another company called C2FO. They also do this m more from the client side. They have companies like Amazon and Walmart who sign up to design these early pay per views where essentially they upload all of their vendor invoices and vendors can come in and request money to be paid sooner. But a lot of the vendors that I talk to, who are vendors to these big companies, they don't even know that this exists. And I can see from the C2FO side that it's probably difficult to come to a vendor that has no relationship to C2FO and say, oh, do you want to? Do you want your money faster? And they're like, who are you? And so it's that every time it's coming from the client's side, it's always difficult because people are scared of random money coming from somewhere. While this is why we built everything into the invoicing platform, because we don't want anything to feel like it's coming from the side. We don't want the clients to think that they're paying us. Uh, we want them to think that they're still paying their vendor, but we just reroute payments in the background. And a lot of this is coming from all of these conversations that we've had where there's a lot of aspects to these service businesses, uh, in how they want to get paid and how they have negotiations with their clients and how they feel that they don't have leverage enough sometimes and how they have to, uh, adjust to these processes that these companies have. Where I think that small businesses, going back to your question, perhaps haven't even understood that they actually have more leverage than they do, um, and are able to use these concepts for themselves. But I think the TALLY acquisition was a great way to also make sure that once you actually ask the vendor, create these invoices and you put these discounts in, it's very easy for these big corporates on SAP to actually accept them and accelerate cash. And it's not about their slow processes.

Speaker A: More than one factor at play there. Most founders treat cash flow as a finance function. How much money is in the bank? You're framing it differently. It's not about what you have, it's about what you could do with it if you had it. What does it look like when a CEO actually treats cash flow as a growth strategy rather than an accounting problem?

Speaker B: Yeah, I would say that most of our clients are Those kind of CEOs, those founders who are looking at their business and they want to grow and they understand that they need money to invest in something, to take on a new project or invest in hiring more people or getting more freelancers on board that they would have to pay sooner than they get money in through the bank. And they're seeing cash as a way to actually accelerate this. So imagine just the difference between a bootstrapped startup versus a startup that has venture capital funding. The venture capital funded company doesn't have to wait for its revenue to come in to be able to hire more people, but they hire more people with this venture capital funding. Right. Um, and in the same way, these bootstrapped companies are very similar to the service businesses in the way that they have to wait for the revenue to come in before they can make these investments. And I would say that the difference between someone who understands this is very clear. I would go into a call with someone and I would ask them how long it takes for them to get paid and if that's a problem. And someone who's on, um, it's the cost of doing business side would say, yes, it's annoying. Yes, I chase clients and it takes a long time, but the money comes in eventually. What should I do? It's the cost of doing business versus the ones who are like, I have these ambitions, I want to grow, I want to hire more people, but I'm seeing that I'm super profitable at the end of the year if I look at my financials. But I don't see that money in the bank. I was talking to someone just recently who was like, yeah, we have $500 currently in our bank account and it's a big business. And so it's weird how that sort of, you don't really see that from the outside. And I don't think that many founders see, understand that before they start a business that it's so important in how to actually survive and understanding your cash flow.

Speaker A: Could you describe a, uh, founder who got this right? What do they do operationally that most founders don't?

Speaker B: Yeah, a lot of things. They're very Proactive. They think about how many days, not only what their net terms are towards their clients, but actually what their net terms are to their own vendors and try to negotiate on both sides. So trying to extend their payment terms with their vendors and trying to of course shorten the net terms with their clients. I've heard a lot of really successful founders who don't budge on due upon receipt. Um, if I send an invoice, I expect you to pay it immediately because I've already delivered my services, so why should I wait 30 days? And perhaps that's very strong position to have, but I honestly don't see any difference in the way that the companies work that say I don't have any leverage and I always require dupunge seat. I just, I would say that it's more about a mindset question and about a feeling of can I want. I do. I want to push this client to these harsh payment terms and risk losing the client because of that, or am I going to roll with what they say? And of course there are a thousand situations where you're working towards governments or huge, huge companies that refuse to budge. But I think it's very important as a founder and I would say that the founders that I see are very successful, they are of course already bringing this in as a part of the negotiation process with their clients.

Speaker A: You raised your round from angels only. A deliberate choice not to take venture capital for a fintech company. Walk us through the reasoning. At what point did you decide that angels were the right source and what pressure did that create downstream?

Speaker B: Yeah, I, having been on the VC side, I've seen the great things that the venture capital firms provide for startups. But I also seen a lot of the downsides and I think that influenced us a lot when we were deciding how to fund the business. I think that there's great value in what venture capital firms bring, but at a point where you know exactly what to do with that money. And not to say that we didn't know how we would spend our angel money, but we didn't know exactly what that money would lead to. We were bringing it in, bring it in. When we were, we barely had a product. We had a prototype that we had shown to a lot of potential clients. We had five people slash businesses that said that they would start using this well once we launched it. And they were all, all of them were very similar in the type of size business that they did so we could convince our investors that we had something here. We just didn't launch. We hadn't launched yet, so we couldn't onboard them. And so we needed 18 to 24 months of experimentation and trying to understand what can we actually do. And we were very, we're very frugal with our money. We've now we have a uh, 24 month Runway on this capital that we raised. We just hired one person and our, we see that the bottleneck is not building faster, it's essentially understanding the clients faster. And that's we're already heads down into all of these potential clients calls, sitting down with our current clients and understanding what is it that we actually have to build for them to, to realize quickly that this is something that they need. And I would say for us it would make sense to bring in venture capital firms when we know that, okay, we're putting this much money, slash effort, slash time into onboarding these many clients and they're giving us this much money. And that relationship should be at least $1 in from $1 spent, $3 gained. Because that's the VC math that creates this exponential growth that you need for them to be able to make an exit before their window closes, which is usually within about seven years. And with angels, they're usually much more flexible, um, on when they can get this money back. Also because they don't own around 10% that a VC usually owns, maybe they own 1% or less than that. It's easier for them to sell their stake earlier. So you have much more flexibility with these angels. And I would say if I would recommend someone who doesn't know that $1 out means $3 in, if they don't know that they can do that or they don't know that there's opportunity to grow in the way that they would invest money and predictably get it back. I would say angels are a great way to keep experimenting and perhaps also just raise a few rounds and then become profitable and build a business that doesn't have to be a billion dollar business.

Speaker A: What did you tell Angels that you couldn't have told VCs? Is the story you pitch different depending upon the source of capital?

Speaker B: Uh, no. Okay. I wouldn't say so. I would say we very much pitched ourselves our ability to execute and how we prove that by showing backwards. But also what we want for the mission in the future and how we believe that this proof is enough to show you that we can get here. And I think that in the end that's what any investor is really trying to understand.

Speaker A: So you've said that you should only raise VC if you know that $1 will generate at least $3 in short term return. Most founders never frame a raise that way. They think about survival and milestone chasing, not necessarily return on capital deployed. Where does that threshold come from and how do you actually calculate it before you raise?

Speaker B: Yeah, that's a good question. I would say that many founders don't think about this because this is how we've learned that you should fundraise. Uh, we know that your money should last you 18 to 24 months, but we don't talk so much about why that is. And I would say that if you look very harshly on what are the companies doing that are able to raise each 18 month or sometimes even sooner, they have these milestones that they're reaching and in turn hypothesis that they're proving in order to justify investing more money into something. And I think until you have these proof points then getting more money in to keep experimenting is really dangerous. And I would rather have a super lean team and I would rather see other founders having a super lean team until they figure those things out. And the ratio of this one to three is coming from um, the idea that if you invest $1 into marketing and you acquire a customer for $1, that customer should pay you $3 to not just be growing linearly upwards. Happy, that's a great trajectory as well. But actually having this exponential growth that VCs want to see to be able to invest in the company,

Speaker A: what happens to a company that raises without knowing that number? Is there a pattern that you kept seeing from the VC side that made you land on the $3 as the $3 return as a floor?

Speaker B: Yeah, I think that what happens to those companies are usually that they have to raise a, ah, bridge round or they have to raise capital without having to prove, having proved something more. And if you look at it from uh, an investor's perspective, if you're raising money again and you haven't proved something more in their eyes, your valuation shouldn't be higher because the company's worth the same, because you've proved the same amount of hypothesis or you don't have any new insights. And those new insights can feel a lot for you. You've pivoted, you've tried new things. But if you're not getting to that next step that they want to see, then the valuation is going to be at the same place and worst case it's going to be lower because they're going to say you've spent so much money, you should have something more. And this reflects on how you are executing, um, in this company. And I think just having that, we call it a down round or a flat round is very dangerous because then the next round, uh, is going to be really hard to raise unless you double what expectations investors had. And investors, they invest in 25 companies per fund and they expect maybe two or three to be successful. If they already feel like you're one of the other 22 companies, they might also just think, oh, I'm not going to put any more time on this. I'm expecting this company to not do well anymore. And so I'm not going to, I'm not going to make more intros. I'm not going to. If someone calls me about investing in this company, I might say I'm not, I don't believe in them anymore. I've already written them down. And all of this investor sentiment is going to affect a company very quickly. And so I saw these this tremendous amount of times. It's really hard to raise because you're out of money versus raising because you found out new things, prove a new hypothesis and come further in traction, regardless of that being revenue or understanding more, having more insights about your business and selling more. And in the end, investors are so much driven by these sentiments and the view of how a company looks and looked and expectations on the founders, unfortunately. But that's how it is.

Speaker A: So check isn't a marketplace. Vendors bring their own clients into a liquidity pool. Could you walk me through how that actually works in practice and how you got the first vendors to bring their clients in? What made them trust you enough to do that?

Speaker B: Yeah, so edit score to vendors. Check is just an invoicing platform. They bring in their clients important from wherever they have them right now, and then they start invoicing them and the clients go through the payment processing on our site and they pay their vendors. So it's very simple from a client, uh, and a vendor perspective. But what we do on the back end is that we use these early payment discounts to incentivize the client's side to pay early. So regardless of a vendor setting a discount or not, we can still set discounts to their clients and we incentivize their clients to pay us sooner. And then we create this liquidity pool that essentially we can distribute to the vendors when they need more money. It's not really, um, marketplace in that it's not two sites that have to come together and decide one party here and one party here. But it's more that we control the market. So we usually uh, compare it to a stock exchange, but it's one kind of stock on the market, which is in our case, short term capital. So it's like trading there is supply of short term capital and there's demand for short term capital. And by looking at the demand and the supply and matching it, we can find this price at uh, where the market clears, which is then, um, the rate, the discount rate, if you will, at where this money moves faster. And so for us that sort of means that this price will change depending on how much supply and demand it is in the market, which we believe is much better than just having a static rate coming from your credit facility or your factoring company, where most of that rate is the margin of that lenders. And we're trying to be a more friendly option to that.

Speaker A: What was the hardest moment in getting the first vendors live? Did you have to prove something before they'd make that first move?

Speaker B: I would say that most of our vendors took a big leap in trusting us even from the beginning. Some of them brought on their most difficult clients first. So they onboarded some of their clients that were paying really late. And they saw that we have a lot of different aspects on the platform that allows payments to clear faster. Not only the early payment discounts and the liquidity pool, but we also push recurring payments. We make it easier to pay with digital payments versus check. You can incentivize something, someone to pay with credit card versus paper check, for example, so you can track payments better. There are a bunch of these aspects that even from the get go, these vendors got a lot of value from the platform and they were seeing that even the late payers were actually paying sooner. And so that's when they would onboard more of their clients. So now it's been a way for us to also help people understand the value of the platform in getting them to onboard these really tough clients. And then we proved to them that we actually make a difference. And then they see that, okay, there's value in bringing all of our clients over.

Speaker A: Uh, you've relocated from Stockholm to New York. What is the most surprising thing you've discovered about building a business in the US As a Swede? Something that perhaps Swedish ways of thinking or design thinking didn't quite prepare you for.

Speaker B: Yeah, I would say that Sweden is currently exporting a lot of cool companies. We've had Spotify since way back Klarna, ipod here in New York actually. But now Lovable is coming out and really taking the world with storm. Um, Ligora is another Legal AI company doing really well from Stockholm. And I think that a lot of the mindset when we moved was that US is a great market, it's a big market, it has so much potential and it's less fragmented than Europe. And there's a lot that you could do in the US but you don't have to be in the US you can be in Europe and still do really well in the US And I think that's partly true. But when we moved here, I would say that I saw the benefits of being in the US being 10 times better than what we know to be the benefits from Europe. Not only is it a big market and a lot of potential, but people are also very open, optimistic about new solutions. I feel like every person that I talk to who has a problem is, I will pay you to solve it. Then it's not always a match in how they think about solving it or perhaps how well the solution is solving their problem. But if there is a creative solution to something, people are really open to hearing about it. And I think that's been incredible for us. Not only are we on, um, client calls talking to people about how, how this new solution that we're still trying to educate people about is exciting and they get really excited. But just meeting other founders, meeting investors in, at events in the city who are just very optimistic in a way that I feel like in Sweden I was so held back by the, the mindset that something can go wrong. Let's try to prevent that versus here much more being what can go right and how do we expand that, how do we really push that? Uh, and I think that clicked for us very early because we were applying to this accelerator that we didn't get into. But one of their questions was like, what can go right? And me and my co founder looked at each other and we were like, there is not a single person in Sweden who would have asked this question because they don't ask what can go right, they ask what can go wrong. And of course, it's much more exciting to hear what can go right for an investor because they're investing in this potential, this 0.1% potential that you become a billion dollar business. Not that what you are doing to prevent what can go wrong is successful, because that's not going to get you there.

Speaker A: M. Is there, uh, a business norm in the US you think Europe does better and vice versa?

Speaker B: Oh, yeah. I miss a lot of things from Europe too. I would say that in Sweden we're very direct and we, I would say that if I was being sold to and I didn't like the product or didn't fit my way of doing business, I would very much say so up front here. I feel like it's much more, oh, it's interesting. Send me some materials and I get back to you. That's like the US way of saying I'm not interested and thank you for this call but it's been very pleasant but I won't buy from you. And that was like a mindset shift I needed to really adapt to because I was like, everyone's saying it's so interesting but it's very different to understand who's actually converting. Well now I'm very much okay. If they're saying it's interesting and asking me to send them materials, I will just make sure I will put them out of my call. Uh, them closed lost in my CRM. So I really like that about European culture, that we're very direct. But there's so much that I love about the US too. I think that this friendliness and openness and the non directness to some extent also allows for much more optimism, um, and creative solutions. And I, to a much larger extent I get intros to other potential clients from um, clients that weren't in, that weren't going to buy anyway. But they're like, this is super interesting but I'd love to introduce you to some of my friends who run agencies who always complain about payment terms. And that happens much more often here than it does back in Sweden, I would say, interesting.

Speaker A: Here's a risk I'd like you to address. If a vendor starts offering early payment discounts, is there a danger of training clients to always expect one? Where does the strategy backfire and how do you design around that?

Speaker B: Yeah, I would say that the way that early payment discounts are designed right now and the way that these companies set up these big programs or they put it into their contracts that we will always have net 60 terms. But if we decide to pay you within 10 days, we're going to remove 2% of the invoice. That's a very classic contracted part of a negotiation. While if you actually have a software that can help you do it per invoice, you can say it's 3% one month, it's 1% one month for this certain client that always pays on time, you don't have to give in because obviously why would you remove some of your margin if you have a reliable client anyway? And all of these uh, things that come into play by Making it very flexible is helping with that because there's also so many businesses that have seasonality aspects. I think that a lot of businesses now in August, September might want their cash to come in sooner because they probably didn't have that much cash coming in July or June because of summertimes. So these kind of aspects, I think is much better to use dynamic discounting for like per invoice. Then, of course, the aspects of early payment discounts that don't work is that you can set a 1% discount, but the client might not think that it's enough for them to pay sooner. So you might not get that money in sooner. Someone might even think that 3% is too low. I've heard of companies that only accept 10%, which is a lot. And especially if you're running a service business, it could be almost all of your margins. And so it's very unreliable in that sense. It's not guaranteed to get you money faster, which is also why we are trying to design the product to essentially help with that problem.

Speaker A: So in incorporating this into your regular invoicing strategy, you're not creating the expectation of requiring additional discounts, if I'm hearing you correctly.

Speaker B: Yes, exactly. So, like doing it on an invoice. To invoice.

Speaker A: Okay. You've said that your goal is to build the world's largest financial network, moving money through invoice payments. What's the proof point you need to hit in order in the next, say, 12 months that tells you check is genuinely on that path?

Speaker B: Yeah, that's a really good question. I would say that's exactly what we're aligning on now to make sure that we're set up to actually raise venture capital within the next 12 months. And it's very much about making sure that we have clients, we have vendors on the platform, small businesses, agencies, businesses that look quite similar to each other who have this problem of getting paid sooner. They want to accelerate cash. They're willing to take a cut on the discount, they're willing to take a cut on the invoice to actually get paid sooner. In the same way that they would pay a fee for selling the invoice or for taking this money from a credit line, for example, and they're willing to do that through us. They trust us enough to do that. They're setting these discounts or they are accepting offers that we give them at these kinds of rates that we believe is going to be the future marketplace rates, and then that the clients on the other side are interested in actually Paying sooner. And they are paying and taking this discount as a financial incentive to actually pay sooner. And it's. For us, it's very much about proving these two sides or these two hypotheses. You have vendors who are interested in getting paid sooner and they're willing to take a fee off, pay a fee for that to happen. And there are clients on the platform who are willing to pay sooner for this discount that they are offered. And, and then in the middle, we don't really need that to be a one to one relationship, but we want to see both sides so that we can do the matching in between. And then I think that for us specifically, we don't need to prove that we can do the matching yet because there are a lot of companies that do this already. They use a lot of data to assess risk and there's been a lot of companies building in this space. So I also think that's to, to our point previously, what hypothesis do we need to prove? Usually it's the novel hypothesis. The ones that haven't been proved by the market yet that you actually need to show for. Yeah.

Speaker A: To prove the hypothesis. Are there particular numbers that you're looking to hit?

Speaker B: Not really. And the more we talk to investors actually don't. They aren't interested in the scale of it, but that there are enough companies on the vendor side that are similar enough so that we can see that there's patterns in how they behave and the problems that they have and that we can solve that for them. And then of course, seeing having some kind of hypothesis of like where the next industry would be that we could come into and cover more ground. And it's not just agencies, but actually other potential industries. I think that's also part of it. But that's going back to what investors want to see. They want to see this huge potential. And part of that is showing them that the market is big enough for you to also encompass all of these. Perhaps we won't move $15 trillion, but of course we want to get as close to that as possible.

Speaker A: And if that brief point doesn't materialize, uh, what does the pivot look like? What does the pivot look like?

Speaker B: Sorry. Oh, I'm enough of an entrepreneur to not have that Plan B. It will work. Uh, that's my mindset. I would say that right now I think that we have enough money to get to some kind of understanding of how we need to move money in the market. But we're so close to our clients, so we hear all the time what we need to do to be better. And it's just a matter of um, it's just a matter of implementing that. So I'm not as worried that it won't work. It's more about being able to show it before we actually need to go out and race.

Speaker A: And if you could change one thing about how the startup ecosystem teaches founders to think about cash flow, one belief, perhaps one piece of conversational wisdom you'd replace, what is it? And what would you put in its place?

Speaker B: I would probably go back to what we were talking about, uh, in how founders usually see that cash is a way to survive. And it's a way to think about your, these milestones as more of like how much money am I spending for uh, the next 18 months versus what am I achieving, what goals am I going to hit, what hypothesis am I going to prove and where am I going to be traction wise to actually be able to race another round. I would wish that we thought more about this and talk more about that and perhaps then as an answer to the latter part of your question, the way that we would, what we would switch that out with is more talking about not just are you raising a pre seed or a seed, but what are you actually proving, what's the next proof point that you need to show or where you need to be, which is so different for different companies. Which is why it's so important to understand like how, what's my business and perhaps as I do, because I'm a part of this investor network since before, but talking to investors all the time, trying to understand how they think and how their market behaves currently and what they are looking at investing in. Because that also changes all the time. And to some extent as a founder, you need to understand the climate of investments, if you are looking for investments and understanding what is happening in the market. Because especially over the last few, three, four years, everything has changed so dramatically depending on what's been going on. It's a part of a CEO's job. I think these days if you want

Speaker A: to raise capital, there's common advice. Charge something, even a dollar to prove willingness to pay, you've moved away from that. Is that advice wrong or right for the wrong stage?

Speaker B: Could you repeat the question?

Speaker A: There's a common advice, charge something, even a dollar to prove willingness to pay. You've moved away from that. So is that advice wrong or right for the wrong stage?

Speaker B: I think it's probably wrong for the right stage. Is that what you're saying? Yeah. Okay. Uh, I think that it's definitely. It definitely depends on what stage you're at and if you're able to understand what that dollar creates or what comes back. If you invest that dollar for a service business, it can be quite easy. If I hire two more producers in my company, I can take on a bigger project that requires four people, and we're only two people right now, so. And that means that I can take on bigger projects, bigger sums, I make more money, I become more profitable. But that probably also means that I get. I need longer payment terms or I need to understand my cash flow better. So it's more about understanding what happens and stage less about. Are you precede. Are you bootstrapped? Are you serious?

Speaker A: A.

Speaker B: But rather, what. At, uh, what point do you know that there's investment opportunity in your business? That if you are able to fund it, you actually get a lot more back and it's just about accelerating that.

Speaker A: Sound advice. I, uh, believe you named your company after a horse. What does, uh, check the horse represent to you about how you want to build this company?

Speaker B: Yeah, that's a good question. I've been a horseback rider for a long time and started very young, and so just realizing that we could name our company after this horse at my stable was very funny. But for me, horseback riding has always taught me. It's always in my mind and influenced me a lot. In the way that you think about falling off the horse, because if you've ever been through horseback riding, people will yell at you to get back up on the horse. And even as a small kid, or even if you got hurt, as long as you weren't really hurt, you someone would put you on the horse again just for you to sit there for a few minutes and then take you off if you were too scared to ride. But this thing about whatever you do when you fall, you have to make yourself unafraid to get back up again, because that's the most important part. You have to go at it again. And it's not this. The fear shouldn't stop you from continuing. And I think that's affected me so much in my life. Just being able to have grit enough to go through hard moments and believe that you can always get back up on the horse. And fear is not something to be afraid of.

Speaker A: For a founder who's listening right now and thinking, I probably have a cash flow problem, I haven't admitted yet, what's the one thing you'd tell them to do this week and where can they find you? And, um, check.

Speaker B: Yeah, I would say, look at all of your payment terms both to your vendors and to your clients. Can you go to some of your clients and tell them new standard operating procedures we are doing due upon receipt or net 15 and start the negotiations again? Can you push vendors to be paid later? Perhaps you're paying your friendly freelancers on the net 10? Can you push them to net 30? I know it's not fun, but just to give you m more room because that's usually what you have to play around with. And then of course there are tons of different options out there. We've already mentioned a few. But cheque is also of course a solution for any service business or any bootstrap business or startup that is low on cash to accelerate your invoices and get them paid sooner even if your clients aren't willing to do and you can find us at. Ah, checkpay. Co. You can Find me on LinkedIn. My name is Julia Dellen. Please write me a note about listening to the podcast and I'll happily chat with you.

Speaker A: No worries, we'll include links to that in the show. Notes Julia, this has been very insightful. Thank you so much for doing this.

Speaker B: Thank you so much for having me. It was a pleasure.

Speaker A: If you enjoyed this episode of the Predictable B2B Success podcast, I would love your support. Head on over to the Apple Podcasts app and give us a rating. And as always, you can catch every episode of the predictable B2B success podcast on Apple Podcasts, Spotify, or wherever you get your podcasts. Thanks for tuning in.