Verivend's CEO and Co-Founder Rodney Reisdorf was interviewed by Stas Balanevsky and featured on the Founder’s Dinner podcast. Rodney talked with Stas about his entrepreneurial journey and how to simplify and secure capital transactions in various asset classes.
A few of the topics covered & lessons learned:
Rodney's Founder Journey & The Verivend Origin Story
Verivend: The Problem We Solve & $1B Milestone
Lessons Learned: 1.) Know your ICP Inside & Out: Focusing on a specific market segment first before expanding can lead to growth and success. 2.) Strive to Catch Lightning in a Bottle: You can't be everywhere at once. 3.) Be Your First Customer: Use your own product. Live your product. 4.) Learn to Say 'No': Entrepreneurs should say no to opportunities that do not align with the business's core mission. 5.) Always Be Raising: Constantly raising capital is crucial for business growth and building trust with potential investors. 6.) TAM Leads to TAM: Focus on one addressable market to unlock others.
Highlights from the full interview: Rodney's Founder Journey Stas: Start us off with your entrepreneurial journey. Like, who are you? Where have you been? Where you headed? Give me the story of Rodney. Rodney: I'm the CEO and co founder of a company here in Buffalo called Verivend and the way that I like to describe us in a nutshell is we're 'Venmo for private capital'.
I'm born and raised in Buffalo, went to college here, and throughout my career, I've had the fortunate opportunity to be part of several early stage high growth startups, really before there was even a startup ecosystem here in Buffalo.
And through those experience, I've been able to help build and shape some of these startups into very successful companies from the higher education industry to insure tech. And now with Verivend, the common theme in all of these early stage company experiences for me is they were all focused on disrupting legacy industries with cutting edge technology. And that's exactly what we're doing and why we're doing it here at Verivend to change how private capital moves. Stas: So when were you infected with the entrepreneurial bug? Rodney: So it was pretty much right out of grad school. I got my undergraduate degree in computer science. I went right on to get my MBA, both at Canisius, because frankly, I had no idea what I wanted to do when I grew up.
I got the entrepreneurial bug when I started at a higher ed tech company here in Buffalo called Liquid Matrix back in the early to mid 2000s and it was admissions and alumni software. I stayed there for several years, saw it get acquired and turn into a bigger company, which was great but I always found myself wanting to go back to that early stage. And then fortunately, I got introduced to another company here called Liaison, which was a health tech, insure tech company back in the early 2010s.
That company followed the same pattern, there was an acquisition and over a period of about a decade we went from a very small company to a very large company. It was a great outcome but I found myself wanting that early stage again.
My co-founders and I got together about five years ago and formed Verivend. Our initial premise was that B2B payments are broken and there needs to be a modern, easy solution to facilitate payments. But again, the thinking was solve legacy verticals with cutting edge technology.
Verivend: The Problem We Solve
Stas: That's so awesome. And so like on point, I was lucky enough to be an early investor in an amazing company that there have been documents flying back and forth lately, and a check has come in, which is always amazing when you're an early stage investor and there's friction for sure.
Rodney: There's a lot of friction. What we're doing is we're solving real problems for private investment transactions and really trying to eliminate not only the friction, but all the wasted time and the manual repetitive tasks. And all of the security risks of checks and wire transfers. The status quo of everybody exchanging sensitive bank account information, Hey, here's my bank account send me a wire here. Oh, let me get your bank account so I can send you a distribution there. It's 2024 and people should no longer be okay with the status quo and all of the friction and all of the security risks of exchanging sensitive bank account information. When you send out your routing number and your account number, you're like, well, here you go.
And there's just so many opportunities to have that info intercepted or compromised. The one fact that I always like to mention is the average amount that's taken from an investor per compromise or per capital cost scam is $809, 000 which is just an incredible amount. And it's no surprise that cyber criminals are continuing to target the private markets and private market transactions because the dollar volume that's going through and the information that's being exchanged is just so large.
Stas: It's funny when you hear about a side of a market that was unknown to you, it's just like walking through another door and then you're in another world again. And, having done a bit of research on Verivend, I'm thinking, why did this company that I'm invested in not use your technology? I mean, the answer is it didn't exist before the investment,
Rodney: Exactly, And we get that question all the time of why, why now, why doesn't this exist? And it's pretty simple, no one has really challenged the status quo.
"No one else is focused on bringing a Venmo or PayPal grade type of solution, that we've all come to know and expect in our personal lives, to private market transactions."
Verivend: $1B in Transactions Milestone
Stas: Amazing. So where are you headed? Rodney: So where we're headed, we're just crossed the 1 billion mark in total transaction volume, which was a great milestone for us to achieve. It's a great mark of the fact that we are solving important problems, people believe in our solution, and that we really deliver value to those customers. And those customers are any asset manager or investment sponsor in really any asset class.
So our customers span private equity, venture capital and real estate investments. We've even got some hedge funds on our platform. We're also looking at the private credit, private debt market.
The common denominator across all of these asset classes is the pain, effort, friction and the lack of security of how capital transactions are being raised and deployed. The goal is to really be the financial infrastructure and connective tissue between investment sponsors who are raising and employing capital and their investors.
"Nobody starts a fund or an investment syndicate to do all of the manual, repetitive, error prone tasks."
If you've got two funds that investors can invest in and one is asking for checks and sending out wiring instructions and one is using Veirvend. It's the reason that Amazon makes things so easy to buy, right? You swipe and you bought it. So it's our same methodology at Verivend; make it a very frictionless, seamless process for investors, because if investors can invest easily, then they're going to continue to do that and they're going to continue to re up.
Lessons Learned and The Verivend Origin Story
Stas: So i'm sure you'll agree as an entrepreneur that you don't learn a single thing by winning. The goal here is to create a library of all of the stuff that we as entrepreneurs have messed up and learned from. You can't describe what skinning your knee feels like until you actually do it. But by compiling all the stories and all the misery and all of the missteps and, all of the learnings, maybe we can shorten the window of misery, help entrepreneurs in the famous trough of despair. I'd love to hear a story of where you were like, yep, this is the move, and then you realized that was not the move.
Rodney: There's no shortage of missteps that put you on the path to success. The story that I always like to share is the founding story. The story of how we learned to focus, define our core value prop in the market and focus on our ideal customer profile (ICP).
As I mentioned, the initial genesis of Verivend was B2B payments and that businesses needed a simple and secure solution that brought those same Venmo like benefits that we've all come to enjoy in our personal lives to business. So in the early stages of Verivend, we had this laid out:
B2B payments are broken. We were going to be a modern cloud based software that facilitated B2B payment transactions. Let's make B2B payment transactions transparent, efficient, secure for all parties involved.
The part that was completely unclear was the who. When we originally launched in market we were focusing on pretty much any legacy vertical that had historically been challenged with payments, that included everything from logistics companies to waste management companies, industrial companies, manufacturing companies. We even saw some organic expansion into law firms and doctor's offices. And we felt like, yeah, this is working! We're solving the issues with AP AR. We were solving the right problems for payments by focusing on making them transparent, secure, and efficient. But it just never felt right. It didn't feel right because the only common denominator of these business verticals was AP AR modernization and there wasn't any other commonality across them. "We were making minimal progress in a whole bunch of different directions, which really isn't progress when you think about it. We felt like we were getting pulled in all these different directions because what a logistics company needs beyond just AP AR is completely different than what a law firm needs and what a doctor's office needs."
So we just felt like we were spinning in a circle here. How we corrected that was a couple of different ways. "There was both objective and subjective things that led us to finding the path." And like I mentioned, the subjective side of it was something just didn't feel right. My co-founder and I would sit there and we'd be like, "man, what's missing?" 1.) Know your ICP Inside & Out
We really couldn't put our finger on it. And then I'll never forget this, we were having a board meeting and one of our board members asked the question, Hey guys, how are things going? And we' said, "Oh, it's great. We're doing payments for these industries and these industries."
And he's like, "Oh, that's great guys. But talk to me about your ICP. Who is your ideal customer profile?" We answered , "It's anybody that needs to move money. It's a trucking company. It's a logistics company. It's the manufacturing, it's the doctor's office. And he said, that is not an ICP. You really need to focus on who the ideal customer profile is.
We realized that we were focusing on too many things at once and that lack of focus and lack of defining and narrowing in on ICP was the challenge we were facing. This was our misstep.
Stas: So, yes, it is, shotgun instead of rifle, but in an entrepreneurs' head, I believe it feels like a rational hedge. I'm going to catch lightning in a bottle because I'm looking at 17 different verticals. And giving one seventeenth of my attention to each of them, right? Which is usually one tenth of your attention to ten of the seventeen, and then it's a nightmare.
But they feel like they're hedged. Get me over the hurdle of I need to be in seven different verticals because what if one of them hits? Versus what you did. Which is to go drop the shotgun, grab the rifle. Rodney: Yeah, exactly. And it's really going from the broad based approach to the very focused approach.
2.) Strive s to Catch Lightning in a Bottle
"I like what you said about trying to catch lightning in a bottle in 17 different areas. As a founder, you can't be in 17 different areas at once. Lightning might be striking in a number of those 17 different areas but if it strikes and you're not there with the bottle, then you miss it."
I feel that you've got a much greater chance of being able to catch lightning in a bottle if you're standing in the same place with that same bottle and waiting for the lightning to strike. The hardest thing for a founder to do is to say no, right? Because you don't know which one of those paths is going to lead you to success. It was incredibly hard for us to do. I think every entrepreneur needs to find out and figure out what their focus is.
For us, we actually created our own aha moment. When we raised our seed round about two and a half years ago, we had all of our sub docs signed. Our law firm says, "okay, you've got all your subscription agreements signed for your investment. How do you want to take in the funds? We can send out our escrow wiring instruction. You can share your bank account instruction." And I said, "hold on a second. We've got this great payments platform that is focused on traditional AR and AP, but in my mind, it really wasn't all too different."
So I said, "Let me try something. Let me go to my investors and see if they would be open to funding their investment right on our own platform." And of course, all of them said, yes, of course, we'd be more than happy to fund our investment into the platform that we're investing in. It created this amazing aha moment for us!
We got a lot of positive feedback from our investors that really validated this use case for our tech. Our investors were asking how they could use Verivend for their other deals because they were sick and tired of the pain and the friction of doing capital raising and distributions. At that time, we still weren't ready to just fully commit so we added private capital as the 18th bottle that we were trying to catch lightning in. However, over the course of about a quarter we saw this 80, 20 rule start to develop where 80 percent of the revenue that we were now generating and the transaction volume that we were seeing on the platform was coming from this small 20 percent segment of investment transactions.
I said before it is subjective and objective in terms of trying to read the tea leaves. The subjective feeling of just 'something doesn't feel right' then objective evidence. Realising that it was a great experience for our investors really let us do the strategic decision to say, you know what? Nobody else in the market is challenging how private capital transactions are happening. And we saw it for ourselves how great it was. Our investors loved it. "This seems like all of the right cues for us to say, we're going to push everything else to the side and we're going to go from shotgun to rifle and only focus on the private markets and be that Venmo for private capital."
3.) Be your First Customer
Stas: That's amazing. So, you were your first client? Rodney: Yeah, exactly. You hear stories like this sometimes and it is so cool because that really takes the fear out of it. You experience it first hand. Then you start to get some proof. At that point, it makes it so easy to burn the boats. I would say there was absolutely still a lot of fear, a lot of unknowns still, honestly, some hesitancy.
Do we really just carve off all of the other verticals and go all in to being that Venmo for private capital? It was hard because we had B2B customers that were getting real value out of our platform that we had to wind down and off-board. It was incredibly hard, when you have paying customers getting value out of the platform saying, "Is there anything we can do to stay? We love this platform."
Take a page out of our book and collect funds from investors for your next round on Verivend!
But we knew if we kept them on, we would just be dragging them along with us, and it wasn't fair to us, but also it wasn't fair to them because as we changed our focus to private capital, we didn't want to dilute their experience that they were having with Verivend. So we just had to have those difficult conversations with our customers.
We were really no longer lost or just going in circles, trying to figure out who we were and who we are were to the market. We were able to operate much more efficiently, get rid of a lot of dead weight in the product and be a lot more nimble.
Like we said before, the hardest thing for an entrepreneur to do is say no, because you never know which yes is going to get you the lightning in a bottle. 4.) Learn to Say 'No'
Stas: So to the people listening, put down the shotgun, grab the rifle and commit, right? The famous Oracle of Omaha, he says, "Successful people say no all the time. Right?
Rodney: Yeah, exactly. You're never going to define who you are by saying yes to everything. I would say the main lesson or one of the main lessons I've learned on the journey with Verivend is don't be afraid to say no. And don't be afraid to say no too soon because you're going to be delaying the inevitable by defining who you don't want to be. That's going to help you define who you do want to be and who you are.
5.) Always Be Raising (ABR)
Stas: That's phenomenal. So about the business and where you're headed right now, are you actively raising right now? Because I'm sure a lot of people that hear this are going to think, I think I want into that.
Rodney: Yeah, I'm always actively raising, whether I'm actively raising or I'm closing around, we actually are just wrapping up. There really is no replacement to the soft skills and the relationship part of what it's like to raise money as a founder. I'm always actively raising whether I'm actually doing that or I'm actively raising just by building those relationships and telling the story so that the next time we do raise a round, there's always that foundation of trust between myself and potential supporters and investors. 6.) TAM Leads to TAM
And one thing to add, one of our advisors always preaches that TAM always leads to TAM. Where if you focus on one addressable market it's going to unlock others. And we've already seen that happening with Verivend. Again, I would say to other entrepreneurs confronting the same challenges with focus, you're not saying no forever. You're just saying no for right now.
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