We meet again, Startupon subscribers! I hope you enjoyed my last post, 3 Questions to Answer Before Diving into Startups. Thus far, it has been Startupon’s most widely viewed post with over 750+ unique views. The majority of our growth has come from subscribers sharing content with their friends. Feel free to keep the trend going.
This week, we’ll examine two hot companies, Modern Treasury and Figma. While very different, they are each aiming to become the system of record for their given spaces.
Before diving in, I wanted to share an interesting article from Kyle Harrison, Principal at Index Ventures. As talked about in last week’s article, financial gain and/or stability is an area of consideration anyone should take into account before diving into startups. If you’re optimizing for a potential payout, company valuation matters a lot. In his post, Kyle writes,
“But as an employee you need to know what you're getting yourself into. Any company whose valuation is already $5B+ is unlikely to be a place where a typical employee will make life-changing money. That doesn't mean you can't have a phenomenal experience and learn a lot. But when you're considering a valuation and your own equity you need to be realistic about it.“
Kyle is right. You probably won’t make $1M dollars in equity working for a company that has already reached a large valuation. Make sure you do your homework and know what you’re optimizing for.
With Startupon, my goal is to share attractive startup companies for people looking to break into tech. That means showcasing companies that I think can increase their valuation through strong growth, not inflated revenue multiples. We started with growth-stage and will begin sprinkling in earlier-stage companies soon.
As always, the list of companies we’ve already talked about can be found here. If you have any feedback or questions, please reply to this email or DM me on twitter @danielchesley
Fintech Finds: Modern Treasury
Company Snapshot:
Founded: 2018
Employees: 100
Funding: $133M
Valuation: $2B
Stage: Series C
Locations: San Francisco
Company Overview
Modern Treasury is a payment operations platform built to simplify and modernize business payments.
So why should you care?
Today, Modern Treasury provides companies with a single API into banks to send wires, ACH, and real-time payments while automatically reconciling payments and providing continuous accounting. The company’s goal is to build a workflow tool that leverages the data flowing through its APIs to become the payment operating system for banks, fintechs, and independent companies alike.
In a nutshell, managing payments is a massive headache for any company doing significant revenue. Before Modern Treasury, companies had to hire teams of payment operations professionals to initiate payments, set up approval processes, track and attribute sent and received funds, resolve payment failures and returns, reconcile transactions to bank statements, and book payments to the general ledger.
Modern Treasury’s initial value proposition is to automate workflows, accelerate payment processing, and streamline payment efficiencies. The company’s product suite includes a payments dashboard, virtual accounts hub for payment reconciliation, and a ledger to track transactions and balances. Additionally, the company supports the following use cases:
Market Opportunity
Payments is a massive market that touches every company. Whether you’re a small roofing company in Idaho, or the largest steel manufacturer in Europe, sending, receiving, and reconciling payments certainly affects your day-to-day business operations.
Many of these payments, especially those between companies, take one to three days to clear, and finance teams can spend hours tracking them from initiation and approvals to accounting and reporting. Generally, B2B payments break out into the following “rails”:
Headaches aside, the underlying global payments volume is huge. In 2020, there were 26.8B ACH payments for a total value of $62T. While in the same year, there were 184M Wire payments for a total value of $840T. CHIPS, the largest private sector USD clearing system in the world clears and settles $1.8T in domestic and international payments per day.
As a comparison, credit cards handle ~$4 trillion in annual volume with only ~20% being B2B transactions.
Why I like the company
The Modern Treasury team is building a horizontal software platform for what might be the most widely used legacy tech stack in the United States. If you looked up “legacy technology” in a dictionary, the definition could read, “American payments tech stack”.
It’s important to note that Modern Treasury IS NOT (yet) building a new payment rail. Instead, the company is seeking to become the system of record for payment operations.
From a strategic view, Modern Treasury’s goal of becoming the control-center for payment operations could cast a wide moat. In the same way that Salesforce is the de facto sales operations platform, Modern Treasury could become the best-in-class payment operations platform with malleable APIs, user facing dashboards, plug-ins and integrations, and more. In this future state, best-in-class fintech products will have no choice but to integrate with Modern Treasury instead of trying to replace it. Integrating with Modern Treasury would be win-win for both parties similar to how complementary platforms integrate with Salesforce to accelerate their own growth and usability. Integration is a strategic growth play, broadening the reach of the third party’s product while increasing Modern Treasury’s value as the payment operations platform.
From a team perspective, the co-founders Dimitri Dadiomov (CEO), Sam Aarons (CTO), Matt Marcus (CPO), cut their teeth building a payment operations product for Lending Home’s mortgage marketplace. With deep fintech expertise, the team poached talent from companies like JP Morgan, Salesforce, Morgan Stanley, Newfront Insurance, Segment and more.
Lastly, the company is growing like a weed. As of October 2021, it was reported that Modern Treasury customers reconcile over $2 billion per month using the platform, representing 20x growth year over year. This is also up from $1B in March 2021 and $100M per month in fall 2020.
Modern Treasury’s Hiring Corner
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Software Spotlight: Figma
Company Snapshot:
Founded: 2016
Employees: 500+
Funding: $330M
Valuation: $10B
Stage: Series E
Locations: San Francisco
Company Overview
Figma is a design platform for teams who build products together.
So why should you care?
For any human-facing software application, designers work in parallel with product managers and engineers to create the screens, mockups, and prototypes that will go on to become the application’s user interface. Figma is not just another design software, it is *the go-to design platform for product builders*.
Before Figma, designers and engineers had to work across disparate design systems just to prototype their ideas. Previously, design mockups and wireframes would be shared through various cloud storage files and many back and forth emails. Instead, Figma took a browser-led approach where atop Figma’s core design capabilities there is a set of collaboration features that allows multiple designers to edit a file at the same time and exchange comments via a built-in comment system.
This all might sound rudimentary, but its network effects are transformative! Figma has helped non-designers more easily collaborate with design teams and helped give designers a seat at the table for product and broader business decisions.
Today, the best run product organizations are non-siloed, cross-functional teams that integrate design, engineering, and business goals into their product strategy. This type of collaboration would be very hard without Figma.
Market Opportunity
Figma’s exact market opportunity is hard to pin down. Still, analyzing market dynamics and total addressable market is important in identifying how large a company could be. Many companies’ market opportunities are constrained based on the potential user base of a product as well as existing competition within their category. Figma, is an anomaly in the sense that it has already built the premier design solution and expanded the product's reach to both designers and non-designers, thereby increasing the potential user-base of the product.
Instead of estimating TAM through average contract values and potential users, see the chart below to understand how quickly Figma is growing within the design community.
Similarly, we could look at the preeminent design software company, Adobe. Adobe’s market cap hovers around ~$250B, but their product design tools trail that of Figma’s. In 2019, to catch up to contemporary design platforms, Adobe launched Adobe XD - a direct competitor to Figma. Even though Adobe has many other product offerings that generate more in annual revenue, the powerhouse technology company had to launch a product to compete with a challenger out of fear of losing market share.
Another way to rationalize Figma’s market opportunity is to think about the long-term growth in digital products. If you believe that there is going to be more application development over the next 5, 10, or 20 years, then Figma’s market opportunity could expand with every additional digital product being built each year.
Still, It would be foolish to attribute Adobe’s market cap or the growth of digital products directly to Figma’s market opportunity, but given Figma’s initial growth, customer obsession, and impact on the competitive landscape, Figma still has room to run.
Why I like the company
Figma’s bottoms-up, product-led growth strategy enabled the product to permeate throughout companies of all sizes. With more than 4M users, Figma has earned its stripes as the design platform. Using the product-led growth philosophies of free and non-gated access for its core functionality and frictionless self-service onboarding, Figma created a product that led to immense user satisfaction. With this, Figma was able to successfully transform its early adopters into evangelists.
Somehow, it still feels like they’re still just scratching the surface. The big opportunity for Figma is to create a system of record for product builders tied to ephemeral communication and data. By syncing Figma’s native design capabilities with external data sources, designers could have a powerful prototyping platform on their hands. With every additional plug in and integration, Figma becomes more of a platform and less of a one-off design product.
Lastly, the company has found a way to create a product that users love and one that businesses will pay for. Figma expects annual recurring revenue to more than double this year from $75 million in 2020 to $150M in 2021.
Figma’s Hiring Corner
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