In this interview, we talk speed of execution with George Karibian, a serial founder with multiple appearances on fast-track lists, and find out why he thinks it makes sense to pay a recruitment firm £100k without making a hire through them.
You’ve founded several businesses in the past, what did you take from that experience?
If we go back to 2000 when I first became an entrepreneur, I launched a company because I could see the internet was growing very quickly. In that first business, I focused primarily on customer acquisition cost (CAC).
The internet is a revolution as for the first time you had long tail geographical reach which was transformative. I started the business and very quickly learned that, as a B2B business, from taking the first order to a second order I lost fifty per cent of my customers forever. Even if I worked really hard and got to a 10th order the probability of getting the next order was still only eighty per cent. So I learned that I needed something called recurring revenue.
My next business was a telecoms business which had 100,000 customers. We had recurring revenues. The problem was that you also need lifetime value. If the customers aren’t worth much – and that’s a function of churn and unit economics and so on – then it’s not a good business.
You’ve mentioned lifetime value and CAC. Are those the most important things for a business?
Today if we look at any business it’s basically buying lifetime value with CAC. It’s as simple as that. The thing is if you only have a 3x lifetime to CAC relationship then you don’t have a business. You need to pivot. If you have a 10x or more CAC to lifetime, then you have a business where you should be running as fast as possible because it’s very forgiving. You can make a lot of mistakes – PaymentSense is one of those businesses.
For any company with high growth potential, there is a lot at stake. Is there a specific method you use which has enabled you to remain streamlined throughout high growth?
It’s really important that tech serves the business and not the other way around. Agile methodology helps a lot, being product-driven helps a lot – it brings technology and people closer together. They become intertwined.
In 2009, when we launched the business, five of us locked ourselves up in a room in Boston for about five days and we whiteboarded the entire architecture to our software platform. We called it The Mothership (because we’re all Led Zeppelin fans). By 2014, it was creaking, and it was totally built on a top-down waterfall – we were involved in every detail. So, we said we’ve got to change the way we’re working.
We brought in a consultant who was an agile evangelist. We hired full-time agile evangelists as well. We made it a huge transformation in the business. At the time we had 30 developers and 27 of them couldn’t hack it. They left. They were used to working in a waterfall. We hired a new CTO and built it back up to 100 plus, and it was the best decision we ever made. The company had to learn to live and breathe agile.
Other big players in the industry, such as Worldpay, have been around since as early as 1989. How do you compete with these companies?
We compete with a number of incumbents who have bigger brands and deeper pockets. They could stop trying and inertia will just carry them forward. The only trump card we have against them is speed. In fact, one executive of the big competitors once said, ‘This is a great business – I get out of bed every morning, and I grow 6% from the movement of cash to cards alone without growing market share.’
So, speed is the only trump card we have. We have to play it or we die. And the only way to exercise speed, that we found, is with great people and technology. And that sounds easy, but bringing the two together is very difficult.
Young, fast-growing start-ups can be very attractive career opportunities for young professionals. What are the growth opportunities in your business?
What people don’t often realise is that the biggest risk they have is joining us, because six months ago it was a very different business, and six months before that it was different again. And so being relevant and growing with, and as fast, as the company is actually the biggest risk to any career.
In the beginning, when you only have 10 people in the business, things are easier. Often you’ve hired younger people without so many battle scars and they are bright. You come into work and you tell them we’re going one way and we’re going to change the world. Then six months later you realise you need to be going another way. And you come in and you say ‘guys, we’re not going that way, we’re going this way’, and they all shift and follow.
The type of people you have and the size of the company you are makes this possible. You lose some of that with scale.
You said earlier that hiring great people has been one of the key factors in PaymentSense’s success. What is your approach to hiring in the current talent market?
Most people wouldn’t settle for an eight or less in choosing the ideal partner. So why shouldn’t we apply the same standard to people that we hire?
We have a concept of 2xers and 10xers – there are some roles where being brilliant means you are two times as good as someone that is merely competent, and there are some roles where being brilliant means you are ten times as good.
It’s important that you know which roles are which and that you go to any lengths to get 10xers in the second category.
My partner and I spend 100% of our time on two things – strategy and hiring. That’s it – it’s where are we going, and how do we find the people who are going to help us get there? The typical attributes we look for are extreme competence with humility. When humility comes with extreme competence at the same time, it’s incredible.
We’ve had situations for two very senior positions where we looked internally for good people that we really liked. We put them in the pool and hired one of the top headhunting agencies and said, ‘we have some good candidates, but we want you to find people to put them up against, and we’ll pay you regardless of who we hire’. And we did the same with our internal team of recruiters who were feeding the same funnel. In the end, in both cases, we ended up hiring the person that we brought to them. We paid £100k each time in recruiting fees and we were happy to do that. It’s worth spending the money to be sure you have hired the right person.
Where do you see the company 5 years from now?
Our goal is to change the way payments are done within the next couple of years. And it starts with a platform. We spent the last two years building a platform – hugely agile – hugely decentralised.
We’re in an area where, because of behaviour change, a startup can’t come in and do what we’re doing. You need new customers. It could take 2 years, it could take 10 years for payments to change. Startups are out there – they’re fast, but they can’t play the game. The big incumbents have the captive customers, but they don’t have the speed. And so, it leaves very few businesses like Stripe and PaymentSense to go after this incredible prize – but we have to be fast!
George is an Ethiopian-born serial entrepreneur with an MBA from Wharton. Since 2000 he has co-founded five disruptive start-ups in the Fintech and SME space. His relationship with Wharton continues through his membership of the Penn Wharton Entrepreneurship Advisory Board, where he helps students with entrepreneurial aspirations achieve their ambitions.
His current business, PaymentSense, is a merchant services startup that enables small businesses to process card payments over the counter or on the go. It was a winner of the National Business Awards in 2015, has been featured on the Sunday Times Tech Track 100 several times, and since being founded in 2008, has reached €10bn in annual sales and 70,000 customers. It is now recognised as one of the most innovative start-ups to watch in the Fintech and SME space.