Guillaume Pousaz (Checkout) at the 2022 Global Investment Forum

Thank you very much for having me. Happy to be here with you today. I think any entrepreneur, it always starts with curiosity and interest or passion. It's very hard to say I'm going to start a company in a subject I'm not interested in. From childhood I was very keen on computers at a very young age, so I spent a lot of time with computers. By spending this time, you also see the power of the internet, you see Moore's Law, computing power increasing for a decreasing price, you see the internet going faster every year, and you start thinking that the world around you is going to be changing and the way people interact with devices is going to be changing. Our first phones were like Nokia 3320, the brick and plastic. I had the curiosity for the internet, I spent a lot of my childhood on it. And then when you start a company, the problem of payments was one that was interesting. It's a nearly infinite market; the latest numbers even now in 2022 is that e-commerce is only 12 percent of total transactions globally. At the time when we started this business, it was the iPhone 4, Facebook or Gmail was barely launching. So we thought to ourselves there are interesting, complex problems to solve, and it's a topic I have interest in essentially.

I think every founder is very different and we all have our own journey. What's for sure is I believe that the historical Silicon Valley model of grow really fast and Blitz scaling does not apply to everyone. Maybe in consumer spaces it does make sense to go really fast. It's funny, I had that discussion with Reid Hoffman directly, saying I disagree with your model, you might have written a very successful book. In B2B, the best product wins quite often. You know who our customers are, we have 1,700 customers, we process for Facebook, Buy Dance, Klarna. The ones we don't have are Amazon, Google, Microsoft. What matters is these are educated buyers who are going to choose you on the product. In B2B also, you don't, in our space specifically, when we applied to the FSA which is now the FCA in the UK, we had four employees and they gave us a license because we had a good application. We received the license from Visa Mastercard in 2013. The FSA was in December 2012. At that point we started receiving term sheets; we just decided we didn't want to take the money. One of the things I deeply believe in is that you don't need big teams to ultimately run successful companies. Of course over time it's going to come, but in the early days, Mark Zuckerberg has a famous quote: five good engineers are better than a hundred average ones. Pavel Durov from Telegram has 50 engineers for an application used by 700 million users globally. So we decided to have a very concentrated team of people who actually chose the complex problems as a challenge. I often say that the best engineers are not driven by money. The ones who choose you for money leave you for money. But they are actually, when you say to somebody we're going to crack this problem, which now we have Stripe and Adyen as main competitors, but at the time Stripe was nowhere to be found and Adyen was emerging. It was the same problem: we're going after offering global acceptance to the world's largest companies and doing it well in an intermediate way. It's an exciting topic for many good engineers, so let me put it this way.

We were running very lean in a very frugal way. I believe in the Swiss approach of being very disciplined and methodical. I often joke with my investors, I'm a very Swiss guy, so I'm square and organized. You write a plan, you execute the plan. There are really two models. Even if we go back to these competitors, Adyen is one of the most efficient companies globally in public markets, running at a 40% growth rate year on year and a 60% EBITDA margin, so it's a rule of 100. They raised a total of like $200 million through their lifetime. We took a different approach. Stripe took a different approach. I think we indexed probably a bit in the middle, but we delayed as much as possible our fundraising because we wanted to have, if we go through the history, in 2012 we had the license from FSA, in 2013 we had the Visa Mastercard license. Then we decided not to take the investor money though it was on the table because we said to ourselves, if we use a third-party platform to connect to Visa Mastercard, we're going to be dependent on somebody else to bring innovation to the market. So what was originally a one-year plan turned into a three-year plan, a bit of a traverse, it was longer to build than we had anticipated. In 2016 we relaunched in the UK and we signed back-to-back Revolut and TransferWise, which were obviously emerging and growing really fast. As fintech was basically trying to challenge the banks in the UK, it seemed an easy way to go and work with Barclaycard, so there was a perfect alignment of the stars for us. In 2018 we won Netflix fair play in front of Stripe and all the others. This is where we decided, hey, this business is now 300 people at that point, that was $10 million EBITDA, it's time to go and take external capital to help us build a bigger business. I had never been the CEO of a 300-person company, and now we have, I said 1,600-1,700 before, it's 2,200 and we hire 100 people a month. We don't talk too much about the headcount because it's a vanity metric, and certainly in this ecosystem it would sound like a wrong argument to make. But yeah, you need, I have amazing investors who have been very good to me and have helped me become a better CEO.

We still apply the values. They've been there since the beginning. What's funny is that you see companies like Amazon which has 15 operating principles. I'm a big believer that if the formula is too complex, the employees don't remember. It's very important to simplify something to the minimum. We have the values and the operating principles, then we have the mission. The values are external and the mission is external; the operating principles are internal. One of our operating principles is what we call Extreme Clarity. You have to be able to explain something to somebody and there should be zero questions after it. Because when you have 2,200 employees across 21 offices, if you don't have extreme clarity, things get lost, you have friction, and then you lose efficiency. The values are very simple. It's something I've always believed in since the early days: you aspire to build big things, you execute perfectly—this is Excel—and you unite people behind your decision. All the best leaders and CEOs have managed to regroup people behind them, and the more people you have behind you, the bigger you can dream and aspire. So there is a flywheel effect, and that's a formula we believe in since the early days. If you ask me today if I knew I would have a 2,200-employee company, I would certainly tell you I didn't think it was even possible at the time. Obviously we had big dreams and everything kind of sunshine comes one after the other, but the reality is that today we still believe we're at chapter zero. We're going to be able to do a lot more. We have a very strong balance sheet, we're a very profitable business. As I said before, only 12% of transactions are online at this point, so it's just a matter of executing well, believing in your values, believing in the quality of the company you're building, and staying focused.

I think all fintechs eventually end up being multi-products, the ones that are successful. We're not doing anything different than the banks. The moment you have multiple revenue touch points with a customer, you can start subsidizing the margin from one revenue touch point to another, and essentially you can then become, if you have a competitor that annoys you in one part of the business, you can really subsidize massively and essentially create a moat and better retention with that customer. We started as moving money inside the businesses. Then we realized there was a lot of money in moving money outside of businesses. We do hundreds of millions of payouts at this point. And now there is everything that has to do with treasury, what we call the CFO suite. We don't do lending today, but we do advanced settlements, so we would basically make working capital available to merchants faster than we receive it from Visa Mastercard. So there's just a lot of opportunities in how to run efficiently a business. We're not a bank; we are an EMI in most countries, which is an electronic money institution, which gives us access to payment methods direct, at least under PSD2 here in Europe. We are in control of our merchants' revenue. I see the dollars of Netflix before they go into Netflix's bank account. Just to give an idea of the scale, we have 600 million cards in our database, in our vault. I can guarantee that 90% of people in this room have touched us in one way or another, because we work with most of the biggest companies, whether it's a food delivery company like Uber Eats, they are our customers.

Yeah, we say it's enable merchants and their community businesses to thrive in the digital economy. I always flipped on the merchants because we come from a merchant background. Now it's a lot more about businesses in general. The word that's really important is 'enabling.' There are companies that want to be very visible, they want to have the consumer relationship. We're much happier to be a bit in the background and be an enabler of others, because it's a perfect alignment in the equation of value: if they are successful, we are successful. This works really well for us. I'm not saying we will never be a consumer-facing brand, because as I said, there are plenty of other revenue products and fintech that you can build, but right now it makes a lot of sense for us to just be behind the scenes and process transactions at scale with the right level of unit economics.

There's another term we use a lot internally: in any transaction that you do, in any relationship with an employee or a colleague, when you do a transaction of any sort, there's going to be a transfer of service against something, and it's very important that the value transferred is equal on both sides, that there is not a side getting less than the other. When we looked at our fundraising, we obviously had a strategy on how we approached the fundraising, because I'm transferring shares in exchange for dollars we didn't need and we actually never spent. It's pure balance sheet money, and we wanted help in terms of building a big business. The way we approached it: first, I wanted an operator, and I ended up taking Insight Partners, a very large firm in New York. They did 65 IPOs, they've scaled software companies, and software and fintech is very close. We have a consumption model, it's a similar model. We took DSD Global because they had amazing relationships in Silicon Valley and they helped me win some merchants we were aspiring to win. We took Ribbit Capital, which is a fintech focused fund. If you believe in a multi-product strategy, you want somebody who truly understands fintech. Then we took GIC because we wanted help in Asia as we were expanding there. That was the equation of value at that point in time. On the Series B and Series C, we wanted people who were more on the crossover side. Then we decided to build a coalition of some of the best hedge fund managers, which today are probably suffering a little bit when you read the press: Tiger, Dragonair, Altimeter, Greenoaks. Also, Philipp would be unhappy if I don't mention him, but like, Infinite is a good example. The person who has given me a lot of personal time and helped me think on how to build a big business, because he's been very close to founders who have built very large companies that compound revenues across decades. Then the last round was like, I changed my whole management team. They all have IPO or public market experience. Celine, the CFO, comes from T. Rowe Price, she was CFO and CEO of T. Rowe Price. We have a COO who came from Facebook, my CTO was the CTO of Twilio, a US-listed company. What they all said is that when you go closer to an IPO or an offering, you want very much stability in your share price and you want shareholders who will stay with you for a very long period of time. That's where in our Series D the focus changed entirely from crossovers like hedge funds that have a more trading mentality, and we took $200 million from Capital Group, then GIC again, QIA, Franklin Templeton, people who are very long term. These investors, the moment you become a public company, information becomes completely standardized, so they are very happy to build a relationship with founding teams in private markets where they can better underwrite your decision making. We're happy to be able to build that relationship with them now and essentially have shareholders who will be long-time shareholders in public markets.

No, we're actually executing the plan. I'm a big believer, I said I'm very Swiss, we had a plan that we believe delivers the best returns, the best ROI on our time and the right sequencing to build a business. What's for sure is that it's safe to my HR team to be very aggressive in the FAANG or MANGA because all these employees are in the red at this point in time and they have very good employees. It's very simple: when you get RSUs and your stock is tanking, these people become very much easier to recruit. Same thing with Series B and Series C companies where you sometimes have very good talent. All the good tech companies use Radford, which is the benchmark for knowing where salaries are in tech companies. My employees, unfortunately for me, that's the state of the market until last year where all the engineers and product people increased by 5-7% every six months just to stay in band. Band is like do you want to pay 50th percentile of Radford, 75th, or 90th where the FANGs or MANGAs are. So what we do know is that there are a lot of Series B and Series C companies today that are now outside of band because they're not increasing salaries while they go through rationalization. Yes, we need to be very aggressive, but we're not going to hire more people than we had planned. We're going to add about a thousand people this year. The reality is that we have better opportunities than the people we can coach, because some people who would not have changed a job last year this time are going to be thinking in terms of do I want to take risk with my career? All these RSUs are being wiped out, it's time to think about what my future is.

Yeah, I think it's the natural path for a company like ours. Adyen did it very successfully with all the success that we know. We operate as a public company internally. We have a quarterly earnings score with our investors. A good public company is a company who has predictability. And it's not only revenue and cost; it's going to be like hey, I have this product launches for the next three years, am I actually hitting my product launches? Do I have all the right marketing collateral, the sales enablement tools? Do I have the right productivity metrics into my sales team? The more you can build that predictability, the more your time into public markets will be easier because you'll be exactly on point with what you actually have talked to the analysts and the people that cover you in research. It's obvious that our main peer has went down by 40% in the last six months. This is something that for people like you, investors care about entry point, exit point, obviously the multiple because it has a huge impact on your IRR. I care about compounding net revenues and the margin at which I'm doing that. Our perspective is that we obviously need to create a good return for shareholders. We raised three years ago for the first time, nobody is asking us to return capital today, but I have a moral duty to my people to actually at some point give them a liquidity event. The WeWork story before was actually very impressive, and I think all the big founders care for their team. So you build a very competitive, high standards, high performance environment, but the people who work really hard for you, you have to reward them properly.

I'm not the one who's doing it personally. One of my mentors is from 3G Capital, and I really like him because he is 80 years old and has seen bad credit cycles, so he knows what we're going into. It's very important to have mentors who push you to start thinking differently. If you only speak to tech guys, all they've seen is the biggest bull market in the last 14 years, so they'd be indexing on the wrong things. I often joke with him, how did you stay so smart? He said by staying close to young entrepreneurs. The brain is a muscle, I deeply believe in that. The investment practice is, we understand technology, we have a lot of asymmetrical information just in the sense of understanding where the market is. I've been doing internet things from the age of 12 to now, it's a sector I still have a lot of interest as a whole. And what I say to Guillaume, the other partner in the firm that he runs out of London, is that the smartest entrepreneurs that you see, I want to speak to six every month, to have three hours of calls that we actually are able to get into the round and not be able to get into their rounds. I care how do I stay relevant as a CEO? By staying smart. People care about what we call the rate of innovation. People choose payment companies for three things: price to quality or price to performance, your rate of innovation, and your service. The rate of innovation will depend on how well you underwrite the secular trends and changes the world is going through. The last thing I want to be is the guy in an ivory tower who starts to think he knows better than others. So go and speak to smart founders who are like geeks in Paris trying to build something, and they will give you their view of the world, which is very often very relevant. We always play these 30 minutes the same way: you ask me questions for 15 minutes and I ask you questions for 15 minutes. I have no investment power in the VC firm, the other partner runs it, he's on the IC, not me.