599: They Rejected Her Idea, She Turned it into a BILLION Dollar Business | Suneera Madhani (Best of Foundr)

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0:39Just head to omnisend.com forward slash founder without the E to get started. All right, now let's jump back into the show. Imagine taking your business idea to your employer and then being laughed out of the room and then turning it into a billion dollar fintech. That's exactly what today's guest did. I'm joined by Sunira Madani, co-founder of Stacks, the first subscription-based credit card processor that's now processed tens of billions in payments. She's also a three-time founder, Fortune 40 Under 40 honoree, and the voice behind CEO School, where she's built a community of over 300 ,000 women in business.

1:17And in this conversation, you're going to learn how she went from pitching payments out of the trunk of her Volkswagen to raising over$500 million in capital, the scrappy tactics that got her her first 5 million in transactions and her first customers within six months, and why saying no to a$17 million buyout was the best decision that changed everything. Hear the stories, learn the proven methods, and accelerate your growth and future through entrepreneurship. Welcome to the Founder Podcast with Nathan Chan.

1:53All right. So the first question that I ask everyone that comes on is, how did you get your job, aka how did you find yourself doing the work you're doing today? I guess the way that I found my job, when you say find your job, I don't think any CEO says they found their job. I was in the payment card industry. So my background was in credit card processing. I was in the industry. I saw a problem. long story short I decided to go find a solution myself and so I was in the industry when I got started but I had no idea that I was going to go build a company on my own and then now have a giant fintech that we do today so I happened to be in the industry that I was in yeah and can you take us back to the early stages like you know did you have much exposure to entrepreneurship in the beginning?

2:48You know what? I actually did. I have a really interesting story because I come from an immigrant family. My parents immigrated here from Karachi, Pakistan. So I'm in the U.S. currently, and my parents immigrated here when they were in their early teens, met in Chicago, got married. I was born in Chicago and grew up in Dallas. But what makes kind of my story and Our family story really interesting is I've come from this line of entrepreneurs out of necessity. Because my parents were immigrants, entrepreneurship was something that it was a necessity. It wasn't something that was sexy or cool as it is today.

3:29They just weren't educated. In order for them to have their American dream, they had to start a business. I came from a line of small businesses. My parents literally had every small business you can think of. And so my brother and I actually went to 10 different schools in 12 years of our schooling where we moved around so much in this pursuit of my parents' American dream. And honestly, their American dream was just to make sure that my brother and I had an education and that we didn't have to become entrepreneurs, that we could have a steady job at a 401k. And then here we are now as entrepreneurs.

4:07And so it's funny how that story kind of unfolded. But yes, I grew up around the most incredible, hardworking entrepreneurs and kind of saw firsthand what it took to build a business, what it took for businesses to fail, the hardship, the good, the bad, the ugly, and everything in between. But all of that credit goes to my parents. Yeah. Wow. What an amazing story. So you co-founded Stacks with your brother. Can you Can you talk to us about when you had that aha moment for Stacks? Yes, I started the company in 2014 and honestly, Nathan, I didn't even know that I could go build a million dollar business, let alone a billion dollar business.

4:48I came from the payment card industry. I was working, you know, selling terminals, which are like credit card processing machines that are the trunk of my Volkswagen Beetle. So I started like ground up. This is in field sales. It doesn't even exist anymore. and I, you know, I serve small businesses. And from that, I had this, I guess, aha moment in 2012 when I was stuck in a, in a snowstorm in Texas. And yes, Texas does have snowstorms. So I was stuck visiting my, my family and, uh, I got, you know, I got stuck because of the weather and I was rerouting my then subscription boxes back in Orlando.

5:31And I was so obsessed with everything subscription. And this was pre-subscription economy. Now it is today. So I was like rerouting, you know, my dog's bark box and birch box and whatever else, because I wanted to be home to make sure I received and opened this amazing package. And that's kind of when that aha moment happened, that light bulb went off. And I was like, holy shit why isn't there a flat subscription and payments this like has to exist and that's kind of when i started digging into this subscription side of the credit card industry which didn't exist and that's kind of where the or like the origin story of now stacks then fat merchant which was the original name of the company was started and we were the first subscription-based credit card processor to come to market that had flat fee unlimited credit card processing just like all of these amazing softwares like Spotify and Netflix.

6:27And quickly we were coined as the Netflix of credit card processing. And here we are, you know, almost 25 billion in payments later. Yeah. It's crazy. You've had such an incredible success story. I want to delve a little deeper though, because I know that you actually brought this idea to your then employer, Yeah. Correct. Correct. I had no desire. So as I mentioned to you earlier, so I grew up in a household of entrepreneurs and entrepreneurship. I mean, we, you know, my parents had small businesses. I had to work in small businesses every weekend after school. I mean, from, you know, franchise, you know, fast food restaurants to pizza shops to, you know, even a marketing company.

7:14Like my parents literally had every single style business you can you can think of, real estate, all of it. And we worked in every single one of these small businesses as a family. So we all had our roles and responsibility. And it wasn't this like, child labor kind of work, it was just a family run business. And so because I kind of had that background, I didn't even for one second think that I was going to go start this company. And it wasn't a small business, right? Where do you go find Mr. Visa, right? So I'm 25 years old, I'm working for a credit card company, I was like, I think this is going to be amazing.

7:46all I wanted to do was to bring this idea to life. And instead of going home on that trip back to Orlando, I ended up routing my ticket to Houston where my headquarters was for the company that I worked for. And I ended up securing the meeting with a C-suite. And I was like, I'm going to pitch this idea. I worked on this presentation for a week. I binge watched, I think season one and two of Shark Tank. And so if any of the sharks I ever get to meet soon, hopefully, you know, that is, that's a huge part of my story. And I ended up, you know, watching like the first season of Shark Tank. And I'm like, okay, this is how I'm going to pitch this.

8:22This is how this is going to work. And all I wanted was to see this successful in my own company and hopefully just have a part in that success of whatever that could look like. And just like lead this division and change the way that the credit card industry was. I ended up going to Houston and the idea was just laughed out of a room and, you know, it wasn't taken seriously. I mean, why would we want to disrupt this industry that was done this way for so long? And, oh, we want to create technology and invest in analytics and try data from transactions. Like, why would we want to do that? We could just chart everybody whatever we want.

9:00And so it was shut down. So you had this idea, you just shut down. What happened next? So I was disappointed, right? I was not just disappointed. I was frustrated. I was disappointed. I remember getting back on this flight home and I get home and by coincidence, it was family dinner. It was Sunday night and my brother actually happened to be home from San Francisco. He was working for another startup. Everyone's around the dinner table and I'm explaining what had took place. And this idea that I have for, you know, to, to revolutionize this industry, I'm like, we've, somebody's got to do this.

9:41And my family looks to me, Nathan, and they're like, why not you? And that was the first time that it even occurred to me. Why not me? Right? Why not go give this a shot. And my first response was, how am I going to go find Mr. Visa? That was literally, I think, the first thing I said to my family. And I was like, I don't know how to start a software company. I've never built technology before. I know marketing. I went to school for finance and marketing. And my parents looked at me and they said, I mean, what's the worst that's going to happen, right? Give yourself six months and give it a go.

10:21And so that was kind of how the story of, you know, my entrepreneurship journey began. I ended up quitting that job, moving into my parents' house, right? Investing the very little savings that I had, ended up taking a small round from friends and family and starting this venture. And in six months we had done over five million in payments our first year and so that was kind of the start of of this company and um there's a lot that happened in the last 10 years and becoming a unicorn but that's how i got started yeah and we we will get there i uh we trust me we will get there we have to we have to get into this um but what did the first six months look like like that's that's pretty impressive to process five million of payments like what the first version of the platform look like?

11:11How much did you raise from friends and family to get an MVP going? And even, you know, processing payments, that's kind of scary. Like this is company's money. Like you got to get that right. And in six months, that's actually pretty quick. So can you talk us through some of that? Yeah. So I would say the first thing that I did, which I encourage a lot of founders to do is to, you know, leverage and white label solutions that are already there to get an MVP off the ground. And I didn't know at the time that it was called an MVP that I was, you know, doing, like, I didn't know like the terms white label.

11:46Like I didn't, I didn't know startup lingo or, you know, founder lingo, but I happened to do some of the things in a, in a way that I, that I, that I think I did it. Not, I think I did it in the right way. And one of the first things that I did was if I had six months, I did raise it. It was very little. It was like sub$50 ,000 of startup capital that I had taken from my now husband. So, uh, and my brother, so my brother ended up, um, investing his, his savings as well. And, um, it was, it was about a$50 ,000 check. And it was because honestly, immediately that we put the money in the account in order for us to register with Visa MasterCard and go through some of the compliances.

12:27Like that was half of the money, like immediately gone. So I had no startup capital. And so it's actually by not having capital, it actually forced me to think, how am I going to do this differently in comparison to the industry? So the way that, and this is not that long ago, so 2000, 2014, so 2013 is when this idea came to place in 2014 is when I got the company registered and like kind of our first clients going. But in 2014, it's not that long ago in payment. That's about a decade ago. However, most of the industry at that time was going to market by the FI channels and the banking channels.

13:09You got your, your processing through your, you know, through chase or through bank of America or through like your physical locations of banks. And I had just, I mean, you know, I love digital marketing and that was my background in school. I did finance and I did marketing. And I, uh, and I was also one of the agents that was like the feet on the street. I could not afford to hire people. And so how could I make my dollars go further where I built a website? And then I started doing blogs and SEO and I invested, you know, the first$500 in Google and PPC and I, you know, the phone rang. And what was really cool about that model is that you could have share of space so quickly online when there wasn't, there weren't processing companies.

13:52There There weren't fintechs. Fintech didn't even, like the word fintech didn't even exist. They weren't, they didn't have a space in the digital space yet. So we were able to get such quick share of space digitally and be a lot larger than having, like we didn't have branches. We didn't have, you know, partnerships with institutions or feet on the street or lots of employees that can go, you know, sell our solutions. And so we took it was almost because of the scrappiness that we were able to, you know, become the one of the first players to come to market to really own the digital space in acquisition and customer acquisition online for payments.

14:34So that's kind of how we were able to make our dollars go further. And we would invest a dollar and we would get ten dollars back like we would, you know, our phones would be ringing for customers with this model. And another thing that I did was to go white label, as I had mentioned earlier. So I didn't have a technology background. I didn't know where to go build a software, but I knew enough of what we needed. So we partnered with one of the banking institutions to use one of their white label solutions to go bring this to market to at least go test out the hypothesis that people would want to have a subscription style model versus a percentage style model.

15:14So I would say the first about 250 customers that year came through that until we knew, okay, we need to go invest further. We had enough proof of concept to then go raise capital to go build out software. Yeah. Wow. Crazy. That's a great story because I think oftentimes founders, when they raise money, they want to build custom. You know, they've got a short development timeline. They don't have proof of concept. I really respect the creativity and that lesson around this idea when you don't have that much money, you've got to be forced to be creative. Like, you know, even for us with Founder and our online education platform, you know, we just use WordPress and we just use a few different plugins, right?

16:05And we, you know, you have a substantial platform with a lot of users and it can work. Absolutely. I think it's so, I agree with you. I think it's, especially in the early stages, I've seen so many companies not get started or not, you know, not be able to actually iterate with their customers. And so I think that was the biggest benefit in not owning this, like not investing so many dollars in building out the platform. We were able to build our platform with our customers. And honestly, the platform as it is today would not have happened if we hadn't gone to that route, because what we learned very quickly when we went online is that we were also attracting a different style of customer.

16:51Our customers weren't the restaurants or retailers or what you think of for customers. People really recognize Square as like a processor in America. But there were technology solutions like Square and Stripe that were emerging in the marketplace. But there wasn't anybody that was able to do what we saw the need was for specific verticals. So we were attracting customers in the healthcare space. We were attracting customers in the professional services space and the services industries that needed both card presence solutions. So they had in-person payments and online payments. So our next thesis was formed that there needed to be an omni-channel platform, that there needed to be one hub in payments and that it wasn't just about the transparency and billing.

17:38It was also about that customers were going to pay in a multitude of ways and that businesses needed to accept payments through all of the different channels that, that, uh, we're going to become omni-channel. And so we took a bet on that thesis and built our technology to be a payments hub, right? So whether a customer needed e-commerce, whether they needed to integrate into QuickBooks or they needed an online shopping cart, an in-person terminal or mobile, we then knew that we didn't have to have the solutions at that time. We were just integrating with the world leading software to build into a singular hub.

18:14So when you were scaling, can you talk us through the challenges that you faced over this past 10 year period and the increasing demands of the business? How did you keep up? Wine. I don't know. No sleep. I don't I don't even know how we're still standing today as like we're 10 years into this business. And I think now people are, you know, learning about the company and know who we are. And it's like people forget like the it's like 10 years to get to where we are today. And it was a lot of true blood, sweat and tears and a million moments that I could tell you that. I didn't know I could go build a million dollar business, let alone a billion dollar business.

18:59And a lot of it was grit and hustle and hard work and resiliency and just being able to fight through all of the no's and all of the rejection and just making it one day at a time. So I would say that, you know, the last 10 years, if I were to sum it up, just it was it was hard work. Like that is how I would sum up the last 10 years of building this business. But I wouldn't trade it for anything else, you know, in the world. I mean, it has been, it's been the, the journey has been just if as hard as it's been, it's also been the most rewarding thing that I've also been able to do. And it continues to surprise me.

19:45It's like this never ending, like growth that comes from reaching this next milestone. And it's not about the chase because in the initial days when I started the company, it was about the chase, right? It was like, what's the milestone and this next milestone? And I think as you start to grow a company, there's like the team milestones, there's the revenue milestones, there's the funding milestones, there's all these milestones and everybody tells you what is success, right? So success is defined by what you know success to be. And so initially that is how kind of my first initial part of the journey if I were to look back of what I was chasing.

20:30And now I would say there was like a shift in the last three years in after you start achieving some of these milestones, it actually stops becoming about those milestones. It's really about, it's the, you realize that it's really about the journey. And it sounds as cliche as it does. I mean, And people still ask why I'm still here, right? We've had, you know, I've gone through multiple different rounds of private equity, been able to have a lot of success for myself, for my team, for our investors and everything else. And it's like, I just love the journey that I'm on. And every day I get to show up for something different, for a job that was harder than the one I had yesterday.

21:13And who gets an opportunity to build something at this level and then continue to go? And so I'm still, I think like, that's the, that's the, it's the journey that I'm, I'm here for. And I've realized that it's not about the milestone anymore. Like, especially after this last like unicorn announcement. I mean, what next, right? People are like, what's next? And I'm like, there's nothing next to chase. Like, I don't think it's about what's next. It's about, you know, what's possible. Like what, what's, it's not about what's next. It's about, it's about how do I take this platform and show other women, honestly, that they too can do it too.

21:51And you also had a buyout offer for 17 and a half million in 2017. What made you decline that? My gut. It was the, so something about me that I feel like is one of my, now I realize it's one of my biggest strengths. I used to think of it as one of my weaknesses. I'm very empathetic. You know, I'm a mother, I'm a woman. I feel like I lean on my, my three minds is what I call it. So I've got my, you know, like my, my analytical mind, I've got my heart and I've got my gut and you kind of need, I make, I need all three to make the decisions. And when one's not feeling right, I have to tell it to trust that.

22:36And it took me a long time to, to trust myself in that decision-making. In 2017, you're referencing a time where we had just raised our series A funding. So we had our seed funding. We had gotten a pre-seed and then our seed round. Um, I think our, our value there was, I think it was$7 million. And we had, you know, we were heavily discounted. I mean, we're out of Orlando. There's no venture, there was no venture capital in Orlando. I mean, less than 1 % of minorities raised capital, less than 3 % of women ever raised capital. And so, and this is, you know, this is 2000. No, I said 2017. Yeah.

23:232015, I would say a year and a half after. And we ended up doing our seed round and then quickly thereafter, you know, we got some traction and And a strategic payments company reached out and said, hey, you guys have this great technology. We'd love to talk about an acquisition opportunity. And so, of course, like any other, I get so excited. It's like the first time, like I'm like, oh, my God, like somebody wants us. Like this is so exciting. I feel so validated, right? You feel so good. And I get a term sheet. I'll never forget the day that I got the term sheet because it was also St. Patrick's Day.

23:59and then we went out that day like our office was like in like in the heart of downtown and we like celebrated as a team it was like this whole thing like we have an actual term sheet in our hands that says 17 million dollars and I'm doing all the like back of the napkin math and I'm like oh my god I'm about to be a millionaire if I accept this offer so you you go through all of these things like it's a very exciting time for a founder the first time you ever received anything tangible in paper. And I get excited. And we had just finished off of this, like we had just brought non-investors. We have our like only one or two board meetings that we had had.

24:38And so the next morning I, you know, make sure I let our investors know we call a board meeting. They're like, oh, we should pursue this opportunity with a strategic. And we go down the path and long story short, my gut was not clicking. The people on the other side, they just, it just wasn't the right fit value-wise, culture-wise. And I was like, I have to roll. It wasn't this like, you know, and then also you don't know what you don't know, right? It's not, it's not actually$17 million in cash also for the company. You have equity, you have stock, you know, the investors get paid and you as a founder, honestly, you're always the last person to get paid.

25:14Like that is, that is like the first thing that I feel like I want to teach every entrepreneur is I did not know enough in the early stages on, on, you know, I didn't have a lot of resources on how to negotiate term sheets and all of that. But long story short, it didn't feel right. And we go through diligence and every step of our diligence process, like red flags, red flags, and our board kept pushing us to keep going through this process. And until the kind of like the last, you know, last phases of diligence, they, they retraded the offer at 12 and a half million. And there, the reasons why they retraded it were, you know, it was almost like they knew they had us.

26:02And it was because I was negotiating against myself. It was probably one of the biggest lessons that I learned in capital raising was that you don't ever, if you're negotiating with one party, you're negotiating with yourself. And so you want to have multiple parties at the table, which has been one of the biggest lessons that I've learned in my life. So they, they give us, they give us a retraded term sheet and I'm like, there's no way I'm going to fucking accept this. And so I declined the offer and I say, thanks, but no thanks. And we're out. And so I call the board meeting the next morning and I tell the board that I have declined the offer.

26:35And we all meet in our office in Orlando. This is pre-pandemic. And it was a shit show of a board meeting. They thought we were, you know, Sal and I were immature and that we should not have like, you know, we should have consulted and that 12 million could have been a fair offer or we could have countered back. And I'm like, you guys just invested in this business, right? What has changed in the last six weeks that you're ready to take this minimal offer, like just incrementally more than what you've invested in. And so we started this relationship extremely rocky with our board, but we declined the offer that we had on the table and we continued to power through.

27:18And there was a point in the company where we had absolutely no money left in the bank and needed to go out for our next fundraise and ended up getting that next fundraise term sheet for$50 million there shortly right after. And then the following rounds, I'm skipping the year after or the two years after, ended up doing a private equity deal and they ended up buying out our first initial investors that wanted us to sell for the$12 million. We exited those investors at 18 times their capital. Yeah, what a great story. Thank you for sharing so you talk about lessons around fundraising i'd love to tap into that a little more talk us through like some of the levers that uh that you've used and and you know lessons and experiences you could share with our audience yeah i would say like the biggest lesson is to have the right advisory team around you right and so i think you don't know what you don't know and i think as a first-time founder i mean i always say i didn't go to ceo school so i didn't know you know, until everything I've learned has had to have like has been through experience.