Matan Bar on Starting a $Billion Company, Making Hard Calls & Pitching Melio to G.W. Bush | Invested

I'm super excited to welcome Matan Bar, the CEO and co-founder of Melio, to the Invested Podcast. I know Matan for a fairly long while, and Melio actually started when we were commuting about two blocks by foot one to each other, when he was at the PayPal offices and I was at the Olive office on 32 Rothschild. And I said to myself for many, many months on end, I got to be in business with Matan Bar when he finally does his company. So Matan, welcome.

Give us your brief background.

What was it called?

We'll come back to that. But what did The Gifts Project do?

It's amazing how when we look back at these things, they seem so trivial, but at the time these things are hard, or our perspective on them completely changes. So you started The Gifts Project right after the great financial crisis of 2008. Why did you think you could raise money as a 24-year-old and 25-year-old and make anything successful at all?

First, do you agree with his assessment that ideas change but people don't?

So the bottom line is if you want to raise angel money, go volunteer.

Absolutely. Well, it's a fact. For us, it's just a fact. If we didn't contribute to the community, if we weren't people that care about the surroundings and where they live and making where they live better, then yeah, I think it would have been harder.

So when a 21 or 22-year-old student comes to you and says, 'What's the best thing I can do for my career?' what do you tell them?

You talked about shared values and you talked about not thinking too highly of yourself, but what are your core values?

Interestingly, I was at this conference called Hill and Valley in Washington, I guess it's now a month ago, put on by my friend Jacob Helberg, who's also a podcast guest here. One of my big takeaways is that in America, patriotism is coming back into vogue in the tech industry. For a while, there was this kind of almost anti-Americanism in Silicon Valley, which I never experienced in Israel. This has always been kind of 'we're in this for a cause greater than ourselves,' particularly the success of the economy in Israel. But I think this is actually catching on in the United States now as well.

If I can ask you one question which I'm sure is top of mind for many in Israel. I think Israeli entrepreneurs are... what's the slogan? 'Israeli tech continues to deliver' or 'Israeli tech delivers.' I'm very curious just from all your portfolio companies and just having your perspective in general on what are the biggest reasons to continue and be optimistic about Israel and the tech ecosystem during these days, because many I think need to hear this, including myself.

I need to ask you a question. What does the name Melio mean?

Did you know the word meliorism before you started Melio?

So it's like how you can make the world better by paying your bills? But it's not. It's really about how you can make the world better. That's Bill.com. How you can make the world better by keeping small business in business.

So what does Melio do?

Why did you choose this area of small business?

You had an encounter with former President George W. Bush. Yes, describe the scene because it relates directly to this.

You just walked up to him or you were saying online?

In the five minutes that you spoke to him about it, what did you tell him and convey to him and learn from him about small business?

What I find fascinating about the conversation is that you walk into board meetings as an investor and everyone wants to show you their conversion metrics, their marketing efficiency, and yet here storytelling, 'keeping small business in business,' not just attracts a big crowd and galvanizes the company, but gets the attention of the former president of the United States. How do you think about this balance between cold performance marketing or measured marketing versus storytelling?

Part of it is that when I went to college, I actually wanted to get a business degree in undergrad or at least a business minor, but they wouldn't accept me because I refused to take the prerequisite of accounting. So I think part of it might be I just didn't understand what accounts payable was, so I needed something simpler for myself. I'm a believer that the storytelling drives everything. Being able to explain what is the actual user value in an easy way is critical. When I did ask you to come to my house, I think that's where the line came from, right? 'Keeping small business in business' came out of that meeting in the yard. That was the moment. You came up with it, we tweaked it together, and then it stayed for five years, hopefully for 50.

And let you kind of think bigger almost than accounts payable solutions.

But I actually want to go from this high-level storytelling to the early days of the business where we didn't exactly have a working product, but we had a working back room, right? You hired a bookkeeper in New York. You want to tell everyone about this, about how you imitated before you automated?

So then you scale up, you do this partnership with Intuit, and then most recently you've done a huge partnership with FIS. FIS, for those who don't know, is basically the digital infrastructure for most banks in the United States. Is that a fair description of what FIS is?

Yeah, so I think our goal is to serve every small business in America, and not just market to them, but serve them. I think there's a very strong story inside Melio, which is that banks are here to stay. There might be a few neo-banks in fintech, you have all these startups starting a new bank. We believe in them, a few of them will be successful, but they will not replace the financial institutions in America. Bank of America, Wells Fargo, Citibank, US Bank, Citizens Bank, Chase, they are here to stay. That's an important story that we tell ourselves. We also tell ourselves that banks are very successful selling financial services to small businesses and consumers, and it will continue to be that way for the next 50 years because consumers and small businesses trust the bank. Do you know that Chase keeps opening branches in America? You think, generative AI, how is it possible that banks are still opening branches in America? Because people want to see their money. You go to your doctor when you don't feel well, you go to your bank when you need help with your money. It's as simple as that. Because we believe that banks are here to stay, and that consumers and small businesses trust the bank not just with holding their money, but trust the bank in terms of getting advice, getting a loan, helping my business thrive. The bank in America has a central part in the community. You go to the bank, you know the people in the bank, especially when you're a small business. You get a loan because the person in the bank knows you and knows your family and knows that you're a good person. That's how real small business works in America. With all that fancy introduction that I just gave, we believe that banks are the best way to enable money movement products. They've succeeded with Zelle in the past in the consumer space, where Zelle today is bigger than Venmo, Square Cash, and PayPal together. We are doing the Zelle for B2B with banks. It's not our only channel, but it's the channel we believe in more than many other channels. What we will do is embed our product, our accounts payable solution, our accounts receivable solution, into a thousand banks in America over the next three years. Wow. And that's only made possible through a partnership with FIS, because FIS is already providing this software to thousands of banks in America. The reason that they picked us and not a competitor is twofold. One is, and apologies for the trivial statement, but it's all about the people. We just like Yossi already told you all those years ago. That's true. We admire the CEO of FIS, and we really get along with his executive team. That's the basics. We're going to have a partnership for hopefully many years, and these guys are here to stay. Personal relationship number one, number two, number three, number four, and number five, that's personal relationship. Number six is we actually have a very good product that is better than our competitors. In a very cold way, if there's a comparison table between us and our competitors, we have capabilities that are very important to FIS that our competitors just didn't have. I won't get into all the details now, but if they are interested, they can go to your website. Exactly, www.meliopayments.com. So I assume you have a comparison of features on the site somewhere. We have it, I need to check with our marketing team that it's updated. But by the time this is live, it will be updated. Nobody cares because the story is to keep small business in business. Who cares about the features? But there are real strategic advantages. We've built an incredible technology. I'm obviously biased being the CEO of the company, but we've built an infrastructure that is like no other in the US today. I'm sure our competitors will catch up, but today we have a superior technology, and that was a big part of it.

So I remember getting a call from you and hearing your children in the background. I think you were in Greece on vacation, and you said Frank called and I think I need to go to New Jersey or something like that. You left your family on vacation. Was that hard?

Is it hard to take a vacation?

I hear you. So Melio has kind of grown explosively since day one, it's been up and to the right. But over time, for efficiency's sake, you've had to lay off some people. How did you deal with that?

You played competitive sports, right?

Did that teach you something about this? Give us the top three.

I thought you were going to say someone who's not a team player.

Melio was actually started by three co-founders: you, Elan, and Ziv. Somewhere along the way, maybe a year or two ago, Ziv left. Tell us that story.

It was reported in the press that Bill.com almost acquired Melio. Want to talk about that?

You have no regrets that these acquisitions didn't happen?

You mentioned the cap table. Melio grew up at the tail end of the zero interest rate era. Valuations in 2020, 2021 just go up, and you raised a super high round that in retrospect, given the reset of the stock market, looks like a high price. How do you think about that? You raised a high price and the market's resetting.

I used to think that private company valuations was just a two-person market, what the buyer's willing to pay and what the seller's willing to accept. I understand there's a third player, which is the multiplier fairy, what pixie dust they sprinkle. But don't you worry a little bit? If your price is here and then people say Melio did a down round, or you go public at a lower price, the narrative changes and people say it's not a successful company anymore because the price is down.

I want to ask two detailed questions before we wrap up, and then finish with one. How are you using AI at Melio? Is AI making Melio more efficient or what are you doing with it?

How's it making you much more efficient? What are some of the bigger plans you have for it, the generative AI, the LLMs?

Who loses from that? Is it junior audit people just coming out of college?

Everybody is excited about generative AI. I don't think you can have a conversation in tech where 10 seconds pass and you don't mention generative AI. Are you already seeing companies utilizing this technology in Israel at scale? I hear there is criticism that Israel is not where it needs to be in terms of the investment in generative AI, in terms of the number of companies. Is it true, and are you seeing good examples already?

When Melio first started, you made a very conscious effort to hire as many women as men at the beginning, and it was reflected in the leadership team as well. Why?

For the last question, as your venture capitalist and board member, I'd like to ask you how I've hurt you.

All right, thank you for providing the warning to all the other entrepreneurs out there. I appreciate that. These are real stories. It happened more than once. Matan, thank you for coming on. If you want to learn more about Matan Bar, you can follow him on Twitter at Matan Bar, M-A-T-A-N B-A-R, and also Melio, which is at Melio Payments, M-E-L-I-O P-A-Y-M-E-N-T-S. Melio will make you happy and keep your business in business, as the name suggests. Thank you, Matan.