TLDR: Back the maniacs. How Benjamin went from $0 to $7m raised in an unforgiving and tortuous fundraising environment, and from $0 to nearly $2m in monthly revenue.
Last week we kicked off a new series, Stories of Inception.
The goal was to move from the math of inception stage venture into the real world examples of what it takes to navigate the hidden years before an accelerator or seed fund will back you.
We kicked it off with one of my very first investments at Antler, and the story of how Valley pivoted toward founder market fit and drove 30% MoM growth and a 10X valuation.
Today, more of the same.
Back the maniacs.
I alluded to it last week, but of all the maniacs, this is one of the best examples.
Meet Erno Tauriainen, the founder of Benjamin.
Picture the hulk, but less green.
An ex-athlete out of Finland, the size of an offensive lineman.
A career entrepreneur and multi-time founder.
The focus, confidence, and demeanor of an elite athlete, with the competitive spirit and mental resilience of one too.
Like Zayd’s story last week, one interview call, and you just know that this man is not messing around when it comes to his life’s work.
He is on a mission to realize his potential.
It’s infectious, and yet, at the same time, can feel impossible to back at the idea stage because his personal goals are literally unbelievable.
When you talk to him, you sort of want to respond “ya ok buddy, I’ll believe it when I see it.”
But that’s exactly what he’s done.
Erno is the epitome of “well done is better than well said.”
We’ll get to execution, but let’s start with first impressions.
Of course with everything above, meeting Erno over Zoom, it was an immediate offer.
You want to fly from Finland to NYC, live in a tiny crappy bedroom deep in Brooklyn with no A/C and a bed too small for even a normal-sized human? You’ll have to leave your family for a bit, and we’ll work like crazy for two months, but it’ll be the most productive two months of your life. What do you say?
Crazy proposition, but he was in.
I remember the very first day in the office, one of our first conversations was about his previous company and his current team.
Last time around, he had a less-than-ideal cap table and let some divisive investors amass greater control than they should have had.
He also had a “co-founder” in this new company with a 40% stake and very little to show in the way of commitment and execution.
We kicked off our relationship with one piece of advice that I think he already knew:
You need to own your cap table, and remain in control of your company. Investors and teammates who don’t contribute to the bar you’ve set for yourself and the business are not welcome.
The next day, the “co-founder” was gone.
This became a core memory for me in underwriting Erno.
Most founders waffle on decisions like this. They justify the other person’s involvement, they negotiate with themselves, and let emotions creep in.
Not Erno, he’s a stoic.
System over subsystem.
That person was his technical counterpart though, so my natural next question was ok, how are you going to build this?
Erno had already re-enlisted his former engineering team from a previous venture.
Two for two.
Not only did he act unemotionally, but he acted quickly, and had the relationships—the people who admired his leadership—that were lining up at a chance to work with him again.
And that quickly became apparent in his Antler cohort too.
There was another founder in the cohort, working on an entirely different business, Nouh AlKhafif, a leader in his own right with multiple promotions in the intensely results-driven culture at Amazon, who quickly recognized Erno’s talents and his speed of execution. While at Amazon, Nouh not only saved the business $250 million as the Head of Operational Excellence within Amazon Advertising, but launched 13 Amazon Robotics Sites with ~50,000 employees.
When exceptional people are drawn to someone, it’s worth paying attention.
This happens with about 20% of our founders in an average cohort, so it wasn’t a surprise, but when it does happen we pay attention because it takes a lot for truly ambitious and exceptional people to decouple from their own ideas and products and decide to work together.
Cofounder matches are often binary in that it’s electric early and burns out quickly, or that the sum of the parts is far greater as a whole, and the competitive edge compounds exponentially.
In this case, it felt like Erno just consistently and continually added these kinds of people around him.
Like Jaakko Hyttinen for example, who came on to help with product management and marketing in the earliest moments of inception. Since then, he’s proven to be an absolute weapon not only shipping incredible evolutions of the brand and product experience, but he is the man behind Benjamin adding over 250,000 new users per month.
Yes, you read that number correctly. 250,000 new users, per month. Jaakko is a beast.
The entire team is, and it starts with Erno and the level of excellence he demands of himself. When you work with founders in person at inception, you learn things you wouldn’t otherwise learn:
You learn of the sacrifices they make like leaving their family in Finland to chase their life’s potential.
You learn about the life experiences that have enabled them to develop emotional fortitude and mental resilience.
You learn about the hours they work.
You learn about the quality of their decision making.
You learn about the importance they place on culture.
And of course, the list goes on.
In just six weeks, Erno’s progress was simply absurd.
He built a team, cleaned up his cap table, built a product, got his waitlist to tens of thousands, developed systems to gain insights from these users, raised capital, and showed up to IC with complete clarity on vision and steps to execute against the market he had spent decades operating in. Here’s a slide from the first pitch deck:
The team amassed that waitlist in just six weeks.
Like our story of Valley, Benjamin was also a different business at day zero.
Erno came in with the idea to build a new banking product for small merchants, leveraging a complete set of banking rails to reduce fees and increase loyalty.
Think about Starbucks—consumers direct deposit cash in their app, removing much of the transaction fees, and in turn Starbucks gets to leverage that cash as a bank of customer funds, they avoid the 2.7% credit card processing fees, and they use points and gamification in their app to drive loyalty.
The question Benjamin was originally trying to answer was why can’t every merchant accept and leverage their customer cash in that way?
Well, unfortunately in order to build a bank you need to either build your own rails or use a Banking as a Service (BaaS) provider like Unit, and to unlock the production keys to a BaaS product, you need to raise a few millions dollars, and to raise a few million dollars during VC winter, you needed to be post-inception.
Like I said, Erno is a stoic.
System over subsystem.
He’s out here to build a massive company, and the job to be done is always to figure out how to optimize for that path rather than stay emotionally attached to a set of features and ideas.
To that end, and without additional funding, we needed another path forward. Instead of building the banking system, Erno’s founder market fit kicked in, and he found another way. Cash-back.
By leveraging card-linked offers to enable consumers to pick up loose change from affiliate offers on money they were already spending, Benjamin could aggregate users and spending data as a wedge to building toward the banking vision.
Here’s my own Benjamin account, and the “loose change” I’ve picked up, without doing anything but linking my credit card:
Pausing there, you can forget the original business idea and you can already see why this is the kind of person and team who you want to back at inception, but let’s go deeper into execution, because it doesn’t get any easier.
The pivot.
I have been writing for years that big advertising and social media are broken.
Just think about your experiences on Google and Facebook Meta.
They make their money on advertising revenue, and because that has become a de facto way to acquire customers, the prices you pay as a consumer have risen to include customer acquisition cost (CAC).
That means when you buy a $100 pair of pants because someone cool is wearing them on Instagram, $20 is going to Facebook, $20 is being added to the cost of your pants to buffer the advertising risk, and of the $60 and 60% that remains, about 50% is operating costs and 10% is profit.
So let me ask you—why can’t the merchant reach you directly, and your pants be $60 or 40% cheaper? Or maybe they’re $80 and not only do you save money, but the brand is also more profitable.
Why do we need Meta and Google to tell us what to buy?
We don’t.
And those business models have deteriorated their own core user experience.
When’s the last time you wrote on someone’s Facebook wall? Even Instagram posts are on the decline with the majority of DAU’s driven by stories & messaging.
Remember what I said last week about “customer of the customer” technology?
Take LinkedIn for example. The primary business is Talent Solutions. Great recruiters finding great people for perfect jobs.
This works beautifully because the member data is being used to develop technology that helps those same members find better jobs, make more money, and live the lives they want to live.
The customer of their customer is aligned on the value that’s created by having a LinkedIn profile, rather than your data being sold to advertise products back to you with inflated prices.
Said differently, in Meta’s case, users don’t benefit from the advertising, in LinkedIn’s case, they do.
Meta’s underlying advertising business is at odds with core product, but they continue to win because of their scale and dominance over societal dopamine.
So when we build new companies, we want the value exchange to be aligned across not just customers but customers of the customer. When mutual value is created, all stakeholders have a material interest in the company’s success.
Let’s take it a step further on advertising and inspect Amazon’s Advertising Cost of Sales (ACoS) model.
For context, Amazon makes about $47B from ad revenue each year. One of the most underrated and beautiful functions of their platform for sellers, is the ability to measure ad spend relative to sales, or ACoS.
Because Amazon owns the inventory of advertising space, advertising platform, seller platform, and checkout rails, it has a full view on the impact Amazon advertising has on the total revenue generated.
What is otherwise a nightmare for advertisers, navigating first-touch, last-touch, and multi-touch attribution models and a myriad of adtech, becomes crystal clear to an Amazon seller.
If the Amazon seller spends $10 on Amazon ads to generate $100 in revenue, and their cost of goods is $50, they are making $40 for every $10 they spent—a 4X ROI.
I know this because I previously started a multi-million dollar business that used Amazon aggressively to acquire customers.
And as a seller, I could very clearly see my ACoS, and manage my advertising budgets and efficacy with a great deal of confidence. Once we hit a winning formula, it made sense to spend infinitely because the money printing machine is made clear by the full visibility on attribution.
Back to Benjamin and this advertising problem.
What if you could take the scale of Meta & Google, develop the alignment between user value like LinkedIn, and add in the full attribution of Amazon’s ad business?
Game-changing.
In Benjamin’s case, you give users direct access to cash by simply linking your card, like the image above.
You leverage that data for relevant advertising, and you split the savings in advertising efficiency between the user and the merchant. In other words, you advertise direct to the consumer, like Amazon does, and you gain the visibility on spending through the credit card data.
Users want to buy things, but they also want need to save money.
Merchants want need to provide better prices to customers and spend less on advertising.
With those two stakeholders aligned, you need to develop a platform that continues to increase relevance, provides merchants a publishing platform, and eventually allows for payment rails to unlock full visibility on attribution.
Let’s use an example to bring it to life.
Your credit card data says you shop at Target, and your location data says you live close to Wal-Mart
As a publisher, Wal-Mart pushes a cash-based advertisement or a “Money Moment” to the relevant user. Something like “Come to Wal-Mart today and earn $5 in your Benjamin account.”
The user checks-in at Wal-Mart and earns $5 instantly
While at Wal-Mart, the user gets deals, discounts, and cash-back on purchases they make
They checkout using their Benjamin account
Wal-Mart sees that they spent $5 on acquisition + X dollars on cash back and discounts, and they compare that to the total checkout to learn what their ACoS was
ROI on ad spend becomes fully transparent — a money printing machine, like Amazon ACoS when you get the formula right
The result of this is a physical world version of Amazon’s advertising business, leaving Wal-Mart more profitable than traditional advertising, and winning a happier customer who spends less than they ever have on the things they need.
Now more than ever, with inflation where it is, wage growth not keeping up, and interest rates that stifle corporate growth, both merchants and consumers are in desperate need of more efficient acquisition channels that drive growth of the bottom line while producing better spending experiences for their customers.
Hopefully that makes it more clear, but as you know from my writing, a good idea is never enough, it always comes down to execution.
Fundraising is hard.
I already mentioned the need to have $2-3m in the bank to unlock the BaaS keys.
Try raising that with a pre-revenue banking or cash-back business in the depths of VC winter.
Close to impossible.
To make matters worse, it’s commonplace for VC’s to react to early consumer businesses, and cash-back specifically, with some standard rejections like:
“Dear Founder, we think you’re great and we think what you’re building has incredible potential. In our experience, these businesses tend to scale very fast if they work, and since we don’t see that data yet, we would love to stay in touch for when that happens and be the ones to back you at that time.”
It’s not the VC’s fault, and they’re ultimately not wrong, but many early stage investors are forced to be sheep by default when they don’t have asymmetric information on founder execution. Investing in this stuff at this stage is risky.
But on the founder’s side, what do you do?
You need to break the cold start of building and getting traction in order to unlock funding.
Fortunately, there’s an asymmetry on founder execution that I had, and I knew Erno would be a fundraising machine no matter how hard the task.
As proof, he held over 400 meetings with investors over the 12 months that followed our investment resulting in stacking 30+ SAFE’s for $2m in total.
Everyone you ask says don’t do that.
“The cap table will be too crazy, what a headache, blah blah blah.”
But if you know Erno, you know he’s an independent thinker, and given the alternative of not raising, he chose the path that would drive progress for the business.
As we all know, startups don’t die, they fade away with a lack of momentum, and multi-time founders like Erno know this better than anyone.
Startups without momentum develop entropy, and entropy leads to failure.
That’s why you always have to look for the maniacs, the ones who work with a mindset that “failure is not an option.”
A year in, and $40K in monthly revenue from cash back, many millions in tracked spending, and growing users by the thousands each month, Erno eventually found investor founder fit with Play Ventures and F4, closing on one of the largest seed rounds in Antler history.
And, as part of that round they consolidated all of those messy SAFE’s into a clean cap table with a consistent valuation which just goes to prove that focus, momentum, and creativity are paramount, while complexity is usually perceived rather than cemented.
Since the seed round just nine months ago, Benjamin has grown from that $40K milestone to being on the precipice of $2m in monthly revenue!
While amazing, none of this is truly surprising when you look back at the story, and you begin to understand the type of animal who is at the helm of the business.
It’s no wonder the culture of execution and high ambition has been replicated in the new hires, that the caliber of the executive team has grown to include decades of experience and previous IPO’s—the Benjamin founding team simply wouldn’t settle for anything less than world-class.
The original Benjamin maniacs, from left to right: Erno, Nouh, Jaakko
As I said last week, it’s not always clear at inception what the business will be or if it will work, but if you invest the time and work closely with the founders, it’s often very clear who the outlier operators are. At inception stage, this is the center of the bullseye.
See you Monday.