Mercury CEO Immad Akhund on Building a Full-Stack Financial Platform

Immad Akhund of Mercury - Podcast Transcript

Scott:	Welcome to Founders & Friends podcast with Scott Orn of Kruze Consulting. And today, my very special guest is Immad Akhund of Mercury. Welcome, Immad.
Immad:	Hey, Orn. Excited to be here.
Scott:	Yeah. It’s been three or four years since we recorded last. I think you were-
Immad:	Yeah. I was actually thinking probably five years.
Scott:	Five years. Maybe it’s five actually.
Immad:	We launched about five and a half years ago.
Scott:	It could be five. You were 10 people, I think, or 12 people. It’s amazing where you guys have come from. Maybe just refresh everyone, what is Mercury, how you had the idea, all that stuff?
Immad:	Yeah. Mercury provides banking, credit card, and other financial software to businesses, mostly focused on startups and eCommerce companies. Back when we started, five and a half years ago, we did just banking and we’ve expanded over time. About two and a bit years ago, we added credit card. We have a corporate credit card and all of the features that come alongside that, which we’ve been building up since we launched it, like virtual cards, controls. And this year, we launched all the financial work pieces. So, this is actually my fourth company. So, I really wanted something where you build the basic thing and then you can build interesting things on top of it. And you could do that for 10, 15, 20 years. I really didn’t want a company where you build a thing and then you’re done and you just have to spend the rest of the time selling it and adding operations and all that kind of stuff. So, the idea with Mercury was always that a bank account is this really interesting insertion point. Every single business needs it, it has all your money there, and there’s just so many other things you can build on top of it, like bill pay and invoicing and they should all be deeply integrated into the bank account.
Scott:	Well, also when you started, the bank websites or logins were just horrendous and not just-
Immad:	Sure. I don’t think they’re that much better.
Scott:	Yeah, you’re right, you’re right. But people now have an option with you guys. It was pretty ugly. People don’t know this, but accountants have their own separate logins a lot of time and we have certain needs that we need and that wasn’t addressed either, and you guys are making a lot of progress there, which is really cool. But yeah, there was a screen, it was one of those, an opportunity in plain sight that someone needed to capitalize on and I’m really happy for you. For those that don’t know, before the SVB crisis, we track our market share. We have 800 clients, and so you guys had 12% market share before SVB. You and I have talked about this a bunch, but before SVB crash, 12%, you guys are up to like 36%, 37% now amongst the Kruze client base, which is a really good proxy for startups in general. So that’s amazing. That’s a year and a half, you guys have tripled your market share. Does it feel like that? Did you age dog years the last year and a half? How are you feeling?
Immad:	Yeah, every year my career, it’s been a journey, let’s just say because we launched in 2019, obviously. To launch here is always crazy, and we grew really fast and we had nine people when we launched. But most of the time you launch something and no one cares, which is what I expected. I thought we’d launch something, no one would care. And then I’d spend two years trying to get distribution and all that.
Scott:	It’s like the Airbnb where they launched four times, that kind of thing.
Immad:	Exactly. But we launched it. There was an avalanche of customers and a real product need straight away. So, we were just scrambling to keep up and actually hire some customer service people and do all the obvious things you need to. And then 2020 happened, which is COVID and that was crazy. And we collapsed for a month or two and then we grew really, really fast in eCommerce and obviously 2021 was a bubble and then ‘22 was this crash and then 2023 was SVB. I don’t think there’s been any years since we’ve launched, which is I would say relaxing. And actually, we grew fairly consistently. All things added up to us growing fairly consistently. We’ve been profitable for two years, so we were profitable even before this SVB situation. And we’re now 750 people. So, it’s been a real journey and I don’t know if it feels like any crazier in the last year and a half. Obviously, there was this very intense time period around the SVB failure where we just had a lot of customers and we were both dealing with it from a product perspective but also really trying to rise to the occasion and all that.
Scott:	Yeah, that’s going to be so rewarding, the rise to the occasion part of it. I know even for us internally that people don’t really know this, but for our ops team, it was certifiably insane and we were working with your ops team during that time. I told you when we were catching up recently, Jason, I think he’s your COO, he has done a phenomenal job for us a couple of different times helping us get clients onto Mercury or helping us with other stuff. And the sexy part of startups is building the product or things like that. But you’re really tested operationally when you go through a crisis or that was an opportunity too. And you guys came through that really, really strong. I think people needed another bank, but I think the way you demonstrated how special the company is and that you could handle it and that you are customer-centric, that’s why you’ve continued to grow so much and the products and the service lines, that’s really helpful too.
Immad:	I’ve always seen Mercury is a product, as not just the website and that. I think it is really customer support. Even today, it’s all in-house and the risk and the compliance team and all of these, the actual surface area of customer’s experience is way beyond just the website and the app. And we’ve always felt like we need to… That’s where your reputation is made. Your reputation isn’t made just because it’s a really flashy, easy to use app, it’s made when there’s a problem and you have to deal with it and the customer’s under stress.
Scott:	I totally agree. And also, when you’re dealing with something as personal as people’s money, and if you think about it, every founder that’s keeping cash with you, they’re a fiduciary, their VCs are fiduciaries for them. There’s just a lot on the line. And so, the way you guys operate in your communication style and how you interact with the customer, it’s really impressive.
Immad:	And it’s also the product also has to be great. So, part of what we did during the SVB crisis, we grew Mercury’s FDIC Insurance. We went from 1 million to 5 million in FDIC insurance and we worked with our partner banks to sweep that money to more banks. But that gave people a lot more assurance because we had this situation with SVB where everyone was relying on FDIC and FDIC only goes up to 250K. And now because of that 5 million, the vast majority of Mercury customers are fully insured in terms of deposits. And we also have U.S. government T-Bill, mutual fund access through Mercury Treasury. But I think it’s a combination. You can’t just be like, “Oh, we said the right things.” But the product didn’t also work and provide the assurance required.
Scott:	Yep. And I remember when you guys were increasing that in real time during the crisis, that was really impressive. And then on the cash management, we’re finding a lot of clients are using Mercury cash management. It seems to be a winning product. Maybe we can just go rapid fire quickly through some of the new stuff you guys have released just so I want people who are thinking about changing banks or they’re getting funded right now and they’re going to deposit the first 2 million bucks into a bank just to know what you guys offer. So cash management, the FDIC-
Immad:	I think it’ll be good to actually go through. If I go through the sequence of what we launched and when, then that would actually probably also be roughly what people care about the most because we tried to-
Scott:	Yeah, perfect.
Immad:	So, obviously, there was the bank account, which we’ve always tried to make a fully operational bank account that you can run your business on. So that’s like wires, international wires, checks, all of those things. And then the other piece, which is actually very complicated, we have a product team just doing that now is user management. So, we have so many different rules and approvals and I think when we first opened, we probably just had a bookkeeper account. Now there’s four types of accounts and you can have an account that cannot access the other accounts, but you can access one account. You can have an account that can do approvals but can’t submit payments. So, it’s a pretty multifactored level of permissioning.
Scott:	There’s something I love on that, just super nerdy accountant. You guys will email us when one of our clients sets up the account with the wrong permissions and is too permissive and that would open up the opportunity for fraud. So, I love getting that even though it’s a little scary because someone set up the account wrong on the client end, that me helps me sleep at night. It’s actually really nice.
Immad:	It is. You told me about that feature when we went on a walk, I was like [inaudible 00:09:27].
Scott:	Yeah, I know. It’s crazy, right? It helps.
Immad:	That’s funny. Yeah. So, banking user management. And then I guess a year after we launched 2020-ish, we launched Mercury Treasury. So, the idea there is it’s all integrated. You can have some money in your operational accounts and you can move, if you have 10 million, you can put 2 million of money that you need to use for the next two months, three months into your operational accounts. And the rest of it can go to Mercury Treasury. Most customers use the U.S. Government T-bill fund, which is [inaudible 00:10:01] now, either the Vanguard one and we have a JP Morgan one. And that’s fairly good in terms of your money is in a safe place in U.S. Government T-bills and you’re getting yield from it, which is obviously interest rates are still at 4.5% ish. So that can be pretty significant for people.And then as I said, two years ago, we launched credit cards and that was… Especially now, it’s a fairly complete corporate credit card solution. So, you can invite people, you can set up policies around receipt collection. And actually, another thing, so we talked about user management as a layer across everything. The other thing is accounting integrations obviously ties with you. So, we have a QuickBooks, Xero, and NetSuite integration. And for all of these different things, you can set it up so there’s a card transaction, the user can categorize it, and then there’s a method of pushing those categories through to your accounting solution. And we also do the same thing for bill pay and send money and all of our other features. So, one of the nice things about using banking to do all of your payments is that’s where your money is anyway, so you don’t have to tie it from one thing to the bank account, then tie it to your accounting system, it’s all one transaction that’s already categorized in [inaudible 00:11:26].
Scott:	I hear a lot of things about your bill pay actually, people really like your bill pay. That’s popular.
Immad:	We launched that this year and it’s quite cool. You can drag a PDF and we OCR it and when you click on each field, it zooms in to say, “Hey, is this the right thing?” Or you can forward an email and we will scan the PDF and then you can set up a payment, you can set up an approval flow. If it’s less than 50K, then this person can approve it. If it’s more than 50K, then these two people need to approve it. That kind of thing. Again, fully integrated into your bank account, so you don’t have to wait an extra two days before the bill gets sent whenever it’s set up to get sent and you can schedule it and all of that kind of stuff.And then we also launched invoicing this year, that’s a little more recent, I think September. And the invoicing feature, that tends to be for little smaller companies, it’s very capable. You can basically create a PDF with line items and there’s the email, you can accept credit card through Stripe and we could soon have ACH. One cool thing we do with the invoice thing is we actually create a unique account number for every invoice. So, when you send the invoice, if someone pays, you actually can track, “Oh, they actually paid this specific invoice because you have the account number on it.”
Scott:	Oh, that’s so nice. Oh my god, I didn’t know that. For those that don’t know, a lot of times as an accountant, you’ll get maybe there’s five $20,000 invoices and you get-
Immad:	Yes, exactly. You don’t know which one is which.
Scott:	Yeah. And it’s called matching the payment to the invoice or closing out the invoice.
Immad:	And sometimes the person’s name is different from the person you thought it was or the company name is different. And you’re like, “Who the hell sent me this 20K?”
Scott:	That’s really cool. Good for you, man. That’s awesome. That’s great.
Immad:	Yeah. And the other benefit is actually when you send an invoice out and there’s an account number on it, in theory, if there’s money in that account, the person could pull the money and either write a check or-
Scott:	Oh, I didn’t think about that. That’s a good point too.
Immad:	So account numbers are a weird thing in America. It’s like you have to give them out to everyone, but it’s actually a security one. So, because it’s a newly generated account number, it’s got no money in there, so it can only receive money. So that’s a very safe thing to give out. And there’s some other cool stuff in the invoicing feature. So, you can attach your logo together and customize the invoice and all that kind of stuff. And then earlier this year, we actually also launched personal banking, so that’s still in waitlist. I was trying to get you to use it, but I-
Scott:	Know, I actually I forgot. I need to do that. Yeah, that’s a really cool-
Immad:	It’s basically my primary bank account now. It’s really cool because it has all the user management things in it. My wife’s in there. We can improve each other’s statements. I had my personal assistant and I gave her a card so that she could pay for things and there’s approval.
Scott:	That’s cool too. And that’s a feature that people probably having… de-risking yourself that way too, letting your personal assistant or someone, maybe you have a personal accountant who’s handling your bookkeeping or something like that. That’s actually really nice to be able to say. That’s cool.
Immad:	Weirdly, actually in the last few years, business financial services got really advanced, but the consumer ones are still fairly simple, but there’s no reason that you can’t. Even the PDF, the bill pay thing, drag a PDF in OCR is there and now you can make a payment all through your personal bank account. All of these features that we built for business make sense for personal as well, and it’s super useful to add them all.
Scott:	It’s also strengthens Mercury. We talked about this, but people do like having their banking in one spot, that was old First Republic’s major, major hook and it was effective. So, you guys doing that is actually really smart. I think people are really going to like that.
Immad:	And then the last one, which we launched about a week ago, two weeks ago was employee reimbursements. So, for some companies, they’re comfortable giving corporate a credit card to all their employees. Mercury does that, but for many, and even for Mercury, sometimes people use their own card or they have to do a payment or something like that and then they have to be reimbursed. Again, there’s some dedicated services you can use for that, but it’s just so easy if it’s all part of your bank account. So, you can be like, “Hey, as an employee you give them a card, they can also get reimbursements or you can make them so they can only get reimbursements so they don’t have any account access.”
Scott:	Yeah, that’s cool too. That’s really nice.
Immad:	Yeah. So that’s already had thousands of reimbursements.
Scott:	You guys have built the full ocean carrier, it’s pretty amazing and you’ve done it. I didn’t think about your initial vision of how do we build something that is a big idea, but it’s modular, but that’s exactly what you’ve done. It’s pretty cool. Every year, there’s something new that you guys are building out and rolling out to folks.
Immad:	Yeah, yeah, I’m excited. There’s still so much to do though. I think that’s-
Scott:	That’s one thing I was going to ask you because we were talking before we hit record, we all both like to hear lessons or inspirational stuff or there might be some founders listening to this who are in a really tough spot right now and they need a little TLC and a little motivation. How do you wake up every day still fired up? It’s been five or six years. What gets you out of bed every day?
Immad:	Yeah, I think it’s just important to spend at least some time. There’s a grind to it. Being an entrepreneur, that’s just a grind. You just have to do the things that you have to do and often those things are just bad, sometimes outright painful, but at least boring often. That’s just a given. There’s going to be a grind. There’s a grind to everything whether you’re an entrepreneur or anything else. But I think it’s important is try to reserve some percentage of your time to do things that you actually enjoy, that you’ll have fun doing. And for me, that’s spending some time on product and ideas and then talking to customers. But yeah, I get excited about those things.I guess I want to try to get to minimum 20% of my time on those things. I would say I’m probably often less than that, but as long as I’m doing a little bit of that every week, that energizes me and I think if I was only doing the thing that were just a grind, I would probably be way more ground down. And then the second thing I would say is just having great people that you can really rely on. You talked about Jason, who’s my co-founder. I have another co-founder, Max. Many of our early employees still work at Mercury and having a set of people that you build cross with, that you can rely on and it doesn’t all have to be you, I think makes a big difference.
Scott:	Yeah. I found that when you talk about the customers being energizing, that’s the same thing for me. And this is going to sound crazy, but even when we have someone who’s a little bit angry or pissed off or whatever, I actually love talking to them because there’s either I’m going to figure out a nugget that we are not doing correctly that we need to improve or there’s some misunderstanding or something like that. And it feels so good to clear up the misunderstanding.
Immad:	One of my favorite things is trying to get someone who’s like, “I hate Mercury. What the hell.” Try to flip them into advocates for Mercury and you have to have so much patience to get there, but most of the time when people are angry, you did something wrong, I guess sometimes it’s their fault. But I would say most of the time, it’s your fault.
Scott:	And also if you just own up to it, that’s the secret to life, owning up to your mistakes. And people are actually, especially entrepreneurs, because they’re all like us. They’ve built something or they’re building something and they actually know how hard it is behind the scenes and so they’re actually willing to forgive once you admit what you’ve done wrong.
Immad:	And I really love serving entrepreneurs for that reason.
Scott:	Yeah, me too.
Immad:	I think you get really good feedback. They’re passionate people, they have fun ideas. It’s a great group to be in service to.
Scott:	Yeah. And I want to be careful of your time, but one more question, just talking about people. Aside from the founding team or maybe the first couple people, is there a hire or a function that you hired for that you’re like, “Oh my god, that was a step function improvement in the company.”
Immad:	I’m going to say this answer, and that’s going to sound like I’m saying this because you told me to say this, but really actually hiring our first VP of finance was a real game changer and in a way that I didn’t expect because I’m pretty good at spreadsheets and we were using an external bookkeeper accountant and I thought it was all fine and I really didn’t know what else a finance person does. I was like, “I got the spreadsheets, it’s fine.” But when we did hire our VP of finance, I was like, “Wow, preparing all the board material, helping planning for next year.” There’s just so much that that he took off my plate and also just really upleveled the company’s thinking in those spaces that is way beyond getting the books done.
Scott:	Totally.
Immad:	And I wish I’d done it earlier. We actually didn’t hire really anyone significant in finance until we were about 200 people.
Scott:	Yeah, I think I talked to him or maybe there was her that was reporting to him, something like that early on.
Immad:	Yeah, Christine probably talked to you.
Scott:	And we talked about it. The other thing that people don’t realize about hiring that full-time person is that maybe you, the founder, are not bottlenecked, but other people who report to you are getting bottlenecked because they can’t get anything through. And so that VP of finance, if they’re strong, can actually-
Immad:	I think actually the case with us was the too many things were getting through.
Scott:	Yeah, yeah, exactly. Right? Maybe it was a little too loose. Yeah, that’s another problem. But sometimes the founder is the last to know kind of thing where meanwhile everyone else is like, “Oh my gosh, I wish they just make the hire.” That’s really good. Any other one little pearl of wisdom before I let you go here? Anything else that you’re like, “Oh my gosh, this is the other thing we should have done?”
Immad:	One thing that I don’t know what the lesson here is, but I was always worried about believing that we had product market fit. It took me basically one and a half years and because I was always thinking, I was like, “Hey, next month this is going to run out and then we need to figure out product market fit.” And I had this thing for a long time because I was just a lot of times, I was just really paranoid, but that meant I was just refusing to invest in hiring people before it was really painful. And I think it slowed us down for the first two years because then COVID happened and I was like, “Okay, well, I was right. The world is falling apart.” So yeah, I did slow. Yeah, I guess in hindsight it’s all good. We figured it out. But yeah, I guess at some point, maybe six months into growing fast, you should probably eventually have product market side, and if you do, and try to invest ahead of it rather than behind it.
Scott:	Believe in yourself a little earlier if it’s working. One other little quickly, I’ll let you go, but you mentioned you guys are profitable, been profitable for over two years. Because sometimes you guys have a very strong business, so the revenues there. How do you decide? Was it just like a happy coincidence, “Hey, we’re actually just profitable, this just happened.” Or was there a drive to profitability and then you’re hiring based on, “Okay, we want to stay profitable.” How do you think about that balance?
Immad:	I guess as an abstract point, I don’t understand why software companies are not profitable more. It’s always worried me a little bit, but the whole point of these software startups is that you’ve got free additional unit costs.
Scott:	Free marginal costs.
Immad:	Obviously it’s slightly different for item based companies, but software companies, they really should be profitable. And when I look at companies I’ve invested in and they’re making a ton of revenue and not profitable, I’m just like, “Hey, why aren’t you thinking about that?” I think the biggest reason software companies don’t become profitable is because it costs them so much money to acquire users. And for Mercury, partly I guess happy coincidence, partly planned is we just grew a lot from organic growth.So even today, 50% of our users, we don’t pay anything to acquire and then even only about 25% of our users do we pay a lot to acquire. So, 75% are not free, but very cheap and that just gives you so much latitude. If you’re not spending a lot on that, then you’re mostly just spending on engineering and things like that. And ideally, you don’t grow your fixed labor costs as fast as you actually grow. So, if you grow 2X, we’re not growing engineering by 2X in a year. If you construct it so your acquisition costs are cheap enough, everything flows from that in my opinion. And it’s not possible in every business. I think maybe if you’re in enterprise sales or something like that, your acquisition costs are just really high. But I do really believe that startups should try to build it so they’re not spending to acquire every single user.
Scott:	Yeah. I also think just to put it in a very simple way is if you’re doing a really good job for people, you can get those free referrals. So, in a way, investing in your product, investing in the service, investing in the experience or customer support just has these orders of magnitude payoffs for you. We see it for us too. I think we spend like 4,000 bucks a month on Google Ads, something like that, right? It’s all referral and you guys are the same way and you guys got that real-
Immad:	Yeah, it’s very aligned with delivering a great experience, which is what you should be doing.
Scott:	Yeah, right? That’s a better way of saying. A 100% exactly.
Immad:	Yeah.
Scott:	That’s awesome. All right, man. Well, I’ll let you go, but this is amazing. Congratulations. I’m really happy for you, really happy for the team and keep on chugging, man. It is exciting where you guys are going and you’re making our life a lot better at Kruze, our clients’ life a lot better. We appreciate everything you’re doing at Mercury.
Immad:	Yeah. Really good reconnecting, Scott.
Scott:	You too, buddy.
Immad:	Looking forward to this episode. Talk soon.
Scott:	Awesome. All right buddy, take care.

Mercury CEO Immad Akhund on Building a Full-Stack Financial Platform

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