This transcript has been condensed and edited for readability and clarity.
Seema Amble: Would love to kick off with you sharing a little bit about the Marqeta founding story.
Jason Gardner: Yeah, an interesting path over 13 years. So, I co-founded another payments company called PropertyBridge, which allowed you to pay rent electronically. We sold that at the end of 2007 and I stayed on with MoneyGram International who acquired the company until the end of 2009. And I wanted to do another payments company, but I didn’t know what I wanted to do.
And I had gone out to dinner with my friend in San Francisco, and he literally pulled out a bunch of Groupon coupons out of his pocket. And he says, it’s so silly that I get to carry around these pieces of paper. You’re a payment nerd. Why don’t you put them on a card?
And it was like, I froze and I knew that’s exactly what I wanted to do was go solve that problem. And I think when you’re as an entrepreneur, like you want to go solve a problem and it’s a lot of fun using technology to go and do that. So I knew nothing about building a card product. And went out and spoke to a lot of folks and they said, well, you have to build what’s called an issuing processing system and what you’re trying to accomplish, put a bunch of cards on a single card, sort of like one card to rule them all has been done and it’s always failed. So there’s no way that you’re going to be able to do it because there’s a bunch of other people that have done it before. And that really drove me to go solve that problem, something that had never been done before. So, we started the company, it was about January 15th of 2010. That’s when I got the Marqeta URL and, kind of the rest of this history from there. But there’s a lot of different steps and pivots along the way to get to where we are today.
Seema: You’ve got about three phases in the business model. And I’m curious how you thought about MVP and what to start off offering customers.
Jason: In the very early days the original idea was let’s go solve, you know, the ability for you to put a bunch of Groupon coupons on a card.
So what we found through lots of discussions was that every terminal, whether online or offline, whether you swipe a card, insert a card, tap a phone. And we found that every transaction was globally unique amongst the millions and millions of transactions that happen every day. So what we started to go build as an MVP is how do we figure out where you are based on a card swipe, and then have a sort of a purse among many purses on a card, millions of them, and then we can authorize and move the funds out of that specific purse based on a card swipe, which happens within milliseconds.
So that was the original MVP that we had to go and build to solve that problem.
Seema: And that’s quite a lot to build. In Fintech often you can’t start with just a few lines of code and then launch it into the ether. How long did that take for you to get the MVP? And when did you sort of think, okay, this is good enough to actually put into customers hands?
Jason: It took us about 15 months. Cause I remember when we signed the program manager agreement with Discover, this was early 2011, and then we closed our Series A on June 2nd of 2011. We had raised, I believe, 5. 2 million was our Series A. And at the time we thought we were absolute rock stars. And then we started sort of testing. So we started our own product called the Marqeta card. And that was basically to prove that we could put a bunch of Groupons on a card, and then authorize and then move money based on those transactions.
So that was really the first step.
Seema: Would love to talk about finding those initial customers who you tested with. How you thought about the first few customers?
Jason: So, to your point, there are kind of 3, I would say, well, 2 real pivots, but 3 iterations of Marqeta. First was the Marqeta card. And so our customers were people that wanted to pay in advance for their groceries or pay in advance for their lunches or dinners. And that was moderately successful.
I’m more of an infrastructure person. I don’t know really how to build pretty things. I know how to edit them, but I don’t know how to build something specifically for a consumer. So we didn’t have product market fit for that. I wasn’t necessarily enjoying myself. I didn’t see the company as this consumer brand long term.
So the first move was we got a call from Facebook. And Facebook wanted to build what was called the Facebook card. A hundred friends want to send a hundred different gift cards to you on your birthday and it needs to live on one card. And I was like, wow, you know, this is, this is actually what we built, the ability to have many different gift cards or purses living on a single card.
And they said, Hey, we are talking to all of these companies in the payment space and they’re all mentioning you. And we were tiny. We were like 18 people at the time. And he said, we’re going to run a test to see if this is going to work.
So they loaded money into specific merchants. We didn’t know which merchants they were. We had like maybe 10 on our platform and they put 2 or 3, but they didn’t tell us which ones they were loading money on. We could see it happening, but they weren’t telling us in advance. And they went and tested it and it worked.
And I just I fell in love with that whole process of providing infrastructure to Facebook. So it worked successfully, but it didn’t get to where they wanted to be, which was at the time, I think, 1 to 2% of the gift card market in a year, which, in a payments world, to get people to adopt something that fast is very difficult. That was the sort of the second phase of what we were doing. And that’s where we ultimately decided that we shut down the kind of direct to consumer business and just focused on infrastructure.
And that’s when things got really, really interesting for the company.
Seema: You’ve obviously been in the payment space for a long time. How did you think about, who do I want to target for that product given where we are now.
Jason: That third phase was a bit like magic. So that’s where we found product market fit and product market fit is not binary, it’s more of like the stars align and you’re just like, Oh my God. Now I know what I want to do for the next 20 years is build this product as I can see how people light up when I’m talking about the value that I’m providing as a product and solving like real problems for them. And that’s how we knew what we wanted to go and do. We were deep payment nerds. So we were selling a payments technology to companies that didn’t necessarily know payments.
What they knew was they had a problem to go and solve. So we really had to figure out how to operationalize the business, help them become compliant. And when we started talking to the food delivery companies like DoorDash and Postmates and then Uber Eats and eBay had our product. That’s when we started to really see the value that we were providing and specifically.
I knew that we had something here when we were in the Postmates office in San Francisco. We were talking to Sean Place, who was the co founder and CTO, and it turned out that they were just giving gift cards to these drivers, but they had no way to authorize the right transaction at the right time for the right amount. And they were seeing lots of fraud. So we created a technology called JIT or just in time, which allows them to essentially authorize their own transactions.
So we send the transaction to them, they check as the driver on shift or in the right location using Google’s map API. And then they can authorize a transaction and the fraud went from a lot, down to virtually zero.
Seema: It’s a great use case, that just in time. Did you know that, or did you sort of stumble upon it or did you end up co building saying, okay, I know these guys need a card, we’ll figure out that just in time product with this customer.
Jason: So we co built in the sense that as we began working with them in the early days, they needed more data. They needed it to happen faster. They needed to have better control over the card products themselves. So how do they do an API call to turn off a card? If a driver was doing something that they shouldn’t be doing.
So the co building was more of feature and function in regards to the things that they needed. And of course, like we wanted to listen to what they had to say, because we obviously saw these businesses growing.
And it’s a unique position to be in because we’re helping them build their business. And what a great position to be in where you’re working with your customer and seeing their business grow. And you’re either supporting their card business or you are their card business.
So that symbiotic relationship is just really, really tight.
Seema: Did you say no to certain customers and say, Hey, wait, or did you kind of keep them warm in some way?
Jason: We said no, we said wait. Uh, and we kept them warm. Some went to other technology providers. They eventually came back to us, because we couldn’t keep up with the demand. We just found, and the team was like getting crushed. Like we were working seven days a week, 12 to 14 hours a day.
We became just really stressed around the business. And we just couldn’t keep the high quality that we wanted to keep and then be able to build the business at the same time. And we were doing great in revenue. We doubled revenue every year since 2015.
And we thought we were doing really well. So we decided that, you know, some customers were just going to say no to because we don’t want to fail them. And more importantly, we don’t want to fail our existing customers. Instacart and DoorDash are still our customers today. Uber Eats and Uber still our customers today.
That proves not only our customer service and our technology, but the strength of those relationships that we’ve maintained over time. And we felt that we couldn’t fail them and fail these new customers coming in at the same time.
Seema: Yeah, you don’t want to have churn, you want to build up a really good reputation in the market. And then that’s a obviously really important beacon to pull in more customers in the category and uses case studies even in other categories I can imagine as well.
Jason: I always felt like if we’re going to be a really good technology provider, we need to become virtually welded to our customers. We’re so tightly intertwined with them. Like we become like an appendage or an organ, like we need to be supporting their business in a way. Where they can’t go to somebody else because we’re so good at what we do.
They wouldn’t think about leaving us and going with another technology provider. And that, I believe, is still in the culture today. Like when someone calls, pick up the phone, someone texts, return the text. When someone emails and you email them and do it as soon as you possibly can. But if they text you like five minutes to an hour, respond.
And I’ve always found when you’re working in a business like this, where you’re either supporting the core business or you are the core business. Those response times are really, really important to building a trusting relationship. Yeah. And so, you know, when you say welded to the customer, is it mostly around just being super responsive or, you know, you, we also talked about like responding to their, you know, their product and either the, you know, responding to the pull you’re getting anything else that you did to really feel like you were quote unquote welded to the customer user products.
Like that was really important to us. Like I have my, my wallet and phone are full of our customers cards and I use them and I give them feedback on their products. Um, understand like who was your counterpart over there and that’s your business partner. Your job is to make them successful and how you make them successful.
Is responding and listening and, you know, if they need something, give them, you know, are potentially we’re going to deliver it in this quarter or we’re not going to deliver that or we’re going to deliver that maybe sometime next year, but things are going to change. Like don’t stress them out, make sure that they have everything they need to be successful.
And that’s the sign of a good business partner. Don’t make it just a transaction. If you want to make it just a transaction, then this is probably not the company you should be working for.
Seema: I’d love to transition a little bit into pricing and how you thought about that in the early days, because that’s a question that comes up a ton.
Jason: So the payment card industry has been around for a long time, and there’s already methods in regards to how, which is interesting is companies come to us to make money like we pay them in the very early days.
We didn’t do that because we, we were a new product. Like we didn’t know exactly how to go sell it. It wasn’t like a DoorDash or someone else was going to a bank and said, you know, I’m Instacart. I do grocery delivery. I mean, typically I remember when we got Instacart up and running, we talked to our bank.
And their response was literally, why would somebody want their groceries delivered? Like, it wasn’t, it wasn’t anything about like the cart or what they’re trying to accomplish. It was like, what a crazy business model. You California people are out of your minds. So in the early days, like they were, we weren’t sharing their revenue because we didn’t know what the business model would look like.
And then eventually, when we are really understanding of how do we create this symbiotic relationship based on how the current card market worked, we decided let’s start paying our customer based on volume, they deliver more volume to us, they make more money, and obviously that is a very high gross margin for them because they’re basically no infrastructure that they need to pay for.
It’s us. We get a portion of that, we split it, but this became, you know, a pretty great revenue stream for that. And in the early days, we didn’t know that sort of ignorance was bliss in regards to our revenue goals, but we found that within the card market that we needed to begin sharing back. And then that happened actually pretty fast.
And then obviously today, our customers, we pay that based on the volume of how many transactions are flowing through our system. And then we pay them based on that volume.
Seema: In the early days, were you thinking about the unit economics and what this might look like in the future? Or were you just saying, let’s get this product in folks hands, we know this works and let’s go from there?
Jason: I’m a product person at heart. And I care more about the product and the product market fit. I didn’t focus on the revenue in the beginning at all. Like it was important and we kind of knew what the moneymaking machine would look like, but I always felt that like, we need to build a great product and we need to have users that adopt that product.
We need to respond to them. And once we have that strong product market fit and we understand what the story is going to look like and the value of providing. Let’s figure out how to monetize that value. And that’s what we did. So we didn’t, we didn’t know what the unit economics would look like.
Obviously we had forecasts and the things that we were looking to get done, but the product became paramount to everything that we’re doing. I feel like if we decided in the very early days, like, let’s just build a product that go make money, we would have made terrible, terrible decisions. But if you’re looking to build a great product and have product market fit and then have revenue follow that based on the value you’re selling, um, that’s where we got it.
So we didn’t. We began to sort of 2017 was really kind of understand what we wanted to do in regards to revenue, and we still essentially have that same revenue model today. Uh, some things have changed, but, but demonstrably that’s the revenue you see, the revenue model you see today was the same one as back then.
Seema: The other area I wanted to touch on next was around team. You touched on this initial go-to-market team that you had, how you thought about sort of staffing up an initial go-to-market team?
Jason: Well, the core team was the original executive team. We had different roles and responsibilities in regards to talking with a customer and working with the customer. So, in the early days, you really can’t hand that off to an employee. They don’t have the incentive like you have when you’re building a business.
I mean, it’s really feast or famine. So, you want to go out and you want a customer, potential customer to see like the fire coming out of your eyeballs. Like, Marqeta is a fait accompli, like the train has left the station and You can join us and help. We can help you scale your business, or you can go with an inferior solution.
And that is going to, you know, not be great for your business. And eventually you were coming back to us. We didn’t sell in an obnoxious way, but we sold as if this was the solution, the be all end all solution for their business.
Seema: The next thing I wanted to touch on was feedback you learned through these initial set of customers and let’s say in food delivery, and then how you translated that into scaling up, and acquiring your additional verticals into other sets of customers. How did you sort of think about transitioning from food delivery into the subsequent verticals?
Jason: I think it was the first Money20/ 20 we’re in Europe. We’re sitting down with Klarna and they’re talking about onboarding merchants. So a lot of times in the early days of on-demand delivery, it took a lot of work for the merchant to go integrate together. So we need to figure out a way to sort of help the on-demand delivery companies onboard merchants much, much faster.
And how we did that was, it’s a card that’s already linking to the point of sale device. This goes back to sort of the original plan with, you know, Groupon’s on a card. So we knew the merchant, we could send them the data and then they can authorize or decline those transactions.
So that’s where we were like, Oh, this is actually another great use case. And let’s just go focus on on-demand delivery companies. And we are now the, you know, the probably the largest provider of card technology solutions to buy now pay later (BNPL) companies around the world.
So that was really the second one that probably ran into was just capacity. Like we saw Instacart and Uber Eats and Postmates and DoorDash, just their businesses were scaling so fast. And we were constantly trying to keep up to capacity. And then we’re like, Oh, wow. We’re going to add another vertical one.
We did that. And then we began to land a bunch of other customers, like Affirm.
Seema: So how did you pick BNPL as vertical number 2?
Jason: I think that it was the magic. It was just being in, I think it was in Copenhagen at the time as where the Money20/20 first started. It was talking to their CTO and team at the time.
And understanding, you know, what were the problems that they were facing and then like, just having sort of that vision match at a table and saying, I know how to do this for you. And let me, let me sort of lay this out of what I’m thinking in regards to how we go and accomplish this. And just to watch them light up.
Seema: I don’t know if this was intentional, but the food delivery was taking off as you were working with them. And then BNPL, I’d imagine you right around that time was starting to take off as well. So you kind of caught that, that tailwind for both of you to grow together. And I don’t know if that was premeditated, but it certainly worked out well.
Jason: I mean, I think we would all like to think it was premeditated. We were just really lucky at picking the right verticals at the right time. And then even, Square at the time, now Block and their cash app, they wanted to go build a card to help individuals who were sent money to move that money off.
Our opportunity to work with Square was amazing. And we thought, I don’t know if this is going to be a big product or not. And they didn’t even think at the time it was going to be a big product. And then obviously that completely blew away all of our predictions in regards to how Cash App would go and build.
And now it’s one of the largest debit programs in the world. So we’re both lucky in regards to finding the right partners and the right verticals. But I also think we’re very skilled at building the right technology and products and harnessing the power of what these businesses want to go build and fulfilling their vision around delivering this technology.
Seema: Would love to hear any advice that you have for early stage founders, either things you’ve learned or something you would guide your earlier self around.
Jason: I think it’s a several things. I think number one is you’re not special, like whatever you’re dealing with is not unique. There has been thousands of other entrepreneurs, both technology companies and small businesses that have run into exactly what you’ve run into. So, you know, dial a friend, you can reach out to me. You can reach out to others who have been through this at like different types of scale and different types of problems.
Everybody has dealt with it. You’re going to get lots of different advice. You’ve got to choose what’s, what’s the best path for you. Number 2 is focus on your product. Like product market fit is primary. Without product market fit, you have nothing. So in the early days is like really focus on your customers.
And if you can find one customer that really wants to work with you and really wants to buy you, treat them like gold, like make them family. And deliver and respond to make sure that they become a referenceable customer as you go build your business. And number 3 is, is just really hire the right people at the right time.
There were times that we scaled up in areas that we didn’t really need at the time. It was a strategy of hope. We hope that this becomes something that you really need because you can kind of see it. And we made poor investment decisions in those areas. Number 4 is, when you’re raising money, find people who understand your business.
And even if they say no to you now, still accept the no. And it’s great. Like I love them. No. Okay. No, but why? And they would share why and you just stay in touch with them, send them an email once a month. Say this is the success that we’re finding because eventually they’re going to invest in your business.
I can go on more and more, but I think those are kind of the 4 primary of going in and building a business successfully.
a16z partner Seema Amble interviews founders and CEOs of fintech companies about how they acquired their initial customers and the hard lessons they learned along the way. The series explores how B2B fintech founders should think about targeting their first set of customers and how to engender trust in a new startup.