20Growth: How Transferwise Acquired Their First 5M Customers: The Two Types of Content All Companies Must Create, How to Crush Competition With Performance Marketing, What Growth Hacks Worked and Did Not with Nilan Peiris, CPO @ Wise

23:43Very big. Unfortunately, as a public audience, I don't even share the specifics, but it's very big. And the bit I'll share back is, we look for payback generally within 12 to 24 months. So you look at the costs, how much will it cost? And then you can work backwards to what that is. Does that frustrate you being a public company? Because you have less flexibility on extended paybacks. Because public markets are essentially saying, Hey, I mean, there are short term voting machine in many respects. Not a long -term way in machine. Yeah, yeah, yeah. You know, you get back to that. And so, respectfully, they don't always give you the luxury of 24 to 36 months for a more outlandish bet that could pay back.

24:19They want the much more tangible short term. Is that for shading for you? No, I think... So we haven't changed into a republic. And a really good example of a very long -term bet that is weighed in the public market very visibly is our investment in price. We've dropped price quite a lot this year so far. So say we drop price by 10%. There's not 10 % of marginal customers hitting our product that will then switch to wise at that point in time. Does that make sense? So you drop price by 3%, it's not like magically. There's a 3 % who weren't gonna use wise and now are gonna use wise. So incrementally we got more revenue.

24:57So this is much more long -term bet, kind of like Amazon's that you keep chipping away at driving down your cost and your price and eventually the market will switch to you. And so people looking for us, investors looking for us to kind of like optimize the company for maximizing growth in the next three months, like this doesn't make any sense. Maximizing growth in six months doesn't make any sense. But maximizing growth over a five year horizon or three to five year horizon where this makes a lot of sense. So the public markets, yep, they're there and people will invest in the stock. People will look at the short -term results and make their own judgments about it.

25:33But there's enough investors out there that buy into our longer term vision on price, which means we can keep doing this. On the challenging side, though, there will always be noise from people that don't buy into your strategy. But as long as you can find people that buy into your stock, you're fine. Do you worry with the outcome scenario plan like estimating upside? The challenge is, some of the biggest outcomes come from toys or come from non -obvious ideas that started off as side projects. You know, one of the engineers kind of tinkering about it. And actually, it wasn't a big ambitious play.

26:04It was kind of something that someone just kind of tried and wore it took off. Yes, this is true. This has happened. So we encourage this. So a fun bit we haven't got to is how we run. So historically, we ran in autonomous independent teams. When I joined about 10 or 10 years ago, every quarter we'd get together and every team would talk about their plan. They'd get feedback from everyone around, including customer support to Christo and Tava, and then they'd adjust their plans, and then they'd execute, and then they'd share about how they did. And this kind of made logical sense. We had teams around each of the big problems you need to solve to get to low -cost instant transfers.

26:45We had a team on driving down the cost of KYC and customer, a team on making easier to onboard, a team on making the pay -ins of the pay -outs really cheap and quick. So just to be understanding is vertical as teams are by product or by function? They're cross -functional teams with everything you need in order to move those KPO. Gosh you, so they're independent companies. Yeah, but with a matrix structure where all the engineers report up to CTO, or the product manages up to me and designers up to the VPA design, etc. And they're all fighting for resources? No, if a team's doing well and is able to invest, they can ask for more resources and able to take off.

27:19Was that a good structure? That works and it works up to a point. Now we have teams into squads and squads into tribes and these guys and ladies hold the teams accountable in very much the same way. The strategy still does come bottom up. Does that make sense? Because the teams are still incentivized to do this but the accountability is there around their local leaders who make sure that it's working. I don't understand the transition from these independent autonomous units to squads and teams and tribes. Yeah, let's step it through. So a good way of explaining this is like, we, as I shared at the beginning, every quarter they would stand up and talk through their plans.

27:57This works fine when it's six teams. When it got to 30 or 40, it stopped working. So we started grouping those teams into units, call them squads. And then you kind of hired somebody to run the squad and tell them, you're accountable for the outcomes of the squad. And so that same structure that we were running when we were start up is kind of happening within the squad. Does that make better sense? Totally does. Where does that break down? So we went from squads to tribes. It keeps lathering up. So it works. It even works when you're public. Because when I stand up and talk through our product strategy, I've kind of like a whole engine that synthesizes all of these up and helps me talk through the market.

28:34Where are we going? What are the big levers of growth and wise? Like I talked you through at the beginning, we have a money transfer business. We have an account business. We have an enterprise business and can explain what our strategy is in each of these areas. But they will come bottom up rather than me saying, I think our strategy next should be should be this. You mentioned the different business units and there's quite a few and you mentioned like like 30 moving from 60 to like 30. But how do you think about effective product marketing when you have so many different ones? It's so easy when it's like, hey, fast and quick done.

29:04But when it's 30 and you have like multi currency accounts and cards and partnership members, how do you do it? Yeah, it's not easy and I wouldn't say we've done it particularly well, still working in progress, but the answer is you devolve it as much as possible. Great example is wise platform, where we're taking wise our infrastructure out and we're selling it to banks. So most of the near banks in the world use wise, Mercury, Brex, Ramp, Bluevine, Monzo, in 26 they all offer wise they're in customers to move money internationally. Google Wallet is powered by wise, Stripe users, platforms users too, probably more more excitingly, some of the largest banks in the world are starting to use wise.

29:45It's done very well in Apex, some of the largest bank in Indonesia, second largest in Japan, third largest in South Korea. So you run it as a separate business, really? Within wise, and so to get to your product marketing question, this team and this squad within wise has to do its own marketing. So we run, I kick started it, wise connect, enterprise conference, we run it in London, in Singapore and in San Francisco. and we've gone from a standing start to doing that in like I think we're now in our second year of running it three times. And this time around in London, we managed to fill a room with 200 bankers from tier one banks in Europe.

30:20So we do have a centralized marketing function, but really it's devolving and embedding marketing within those teams. How do you prevent brand confusion when you have successful product marketing in one category when it's like, hey, you've sold so well in terms of product marketing for simple and cheap. And then the bankers like really? Yeah, we're going to use wise or going further like our consumer marketing can feel like it's is fashion banks Like how do we how do we tailor that yeah, so we've We do have a very strong brand marketing team that puts the architecture in place around all of this and things through What is the wise brand what is the platform brand etc?

30:55And then from a creative strategy everyone everyone understands that we're gonna end up becoming an API business that wise in In a five to ten year period, the majority of our customers won't be using our apps. They'll be in banks. And therefore, we need to evolve our marketing strategy. We can't be having stuff here that makes it harder for that to happen. Do you need a brand if you're going to be an API business in ten years? We absolutely need a brand. If you're going to be an API, it's just a different kind of brand as a B2B. You don't need a consumer brand, you need a B2B brand. So there's a very fun part around how the consumer business and the B2B business work with each other.

31:29No bank would ever integrate wise, would ever use our infrastructure if our consumer business didn't exist. Our consumer business sets the expectations in the market of it's gonna be cheap. It's gonna be easy to use. Our consumer business has taken something like between 10 to 20 % of some of the major banks in the UK's volume. I remember when we interviewed Terry Angelos from MOST card when he was running the M &A team and he said to me, You never wonder why these massive card transaction machines sponsor football tournaments and it's because Consumer trust is everything and so when you go into a store in Columbia and you see visa or master card as a consumer you see it on the side of the burnabout and you're like, ah Trust, no, I know that brand and that is the power of brand for us and for visa So we stumbled on this earlier why so obviously anyone out there studying a Fintech business When you talk to your customers and find out why they aren't using you because they don't trust you And the first thing anyone will tell you is, are the way to build trust is brand marketing.

32:30And it's really hard actually to build trust because your, like my dad was used to using his bank and you can go into a bank, you can touch a bank, you can feel a bank. And suddenly you see an ad on the internet that says cheap money tries to earn you gonna click it and you trust it. You have to spend a ton of money on marketing to get somebody to trust you with their money. And the pivot we made was realizing that it's much easier to get people to trust their friends. They already trust their friends. And if you focus on giving them a great service, then that covers the trusting for us. How does that change your strategy then?

33:02No, not really to what we learned was like, we do have all the usual things you'd expect us to invest in from a product marketing perspective to tell customers this product is safe. However, when we're a 70 % word of mouth business, I'm under no illusion that most of the work on getting people to trust our product is from our customers telling their friends it's safe from my mind to another. So like, you know, I had Val Schwarz, who was the first head of growth at Ravallute on the show. And he was really interesting. He was like, we changed product strategy to really focus on group payments because fundamentally social pressure drives adoption.

33:36And actually, if you have nine people playing football and there's 11 in the team, I'll say, fuck, say it now, Lan, get a Ravallute card so we can actually pay for the pitch together. And it changed product strategy by realising that friends drive adoption. That's very smart. I thought it was quite a good one. Yeah, it's very, very smart. Lots of the neo banks when you look at Monzo, you look at Chime, they find that a hack that really drives adoption. Think Chime would get paid a day early, because of the quirks of the US payment system, you can get paid a day early if you switch to using Chime, people switched to using Chime.

34:08And then similar to this kind of type of social pressure and some of the features Revolute built out in the early days definitely helped drive their adoption. What hack you did, what best? Just sharing with people how much they've actually saved, just for me the single biggest. The other part I didn't share. So within the 70 % that's word of mouth about say 20 to 30 is refer a friend and the rest is pure word of mouth. And the refer a friend, we've tried everything under the side. So we've tried sending chocolate like you prefer someone to wise you get money like I get money you get money we both get money we've played with different amounts of money.

34:41From an economic psychology perspective does the amount of money that you offer as an incentive drive a correlatory return. So what happens is it drives users, but it doesn't drive what I call customers. So customer, if you define as a profitable user, like it's very easy to drive users, right? Because if you give it incentive like that, but when you look at the growth of the back of these, like giving it a very heavy incentive, you'll see something that looks like a hunkistic. If you look at revenue or like profit, it'll look much, much more tame, right? And then when you try to understand the marginal cost of the extra incentive, it generally will fall off.

35:14How do you think about knowing the CAC budget that you have? Because like, LTV is varying, and I think actually for banks today, it's becoming increasingly challenging before banks and Fintech products share incredible stickiness, and your LTVs were long. Now, I think you have this increasing transience between different services. Most Monza users are also revenue users. They're also probably a traditional bank user as well from the teenagers they kind of have. And so the LTVs are more variable, which changes your CAC budget. How do you think about that? I think the best points marked is that I've worked with over the last 10 to 15 years.

35:49They know this. In businesses I've built previously and some of the people say that buildbooking .com was Orlando, some of the only rocket guys. It was always around when you're advertising, say you're advertising on SEM, on search engine marketing, and you get better and better at breaking down into smaller and smaller groups your campaigns. For that campaign, you understand really well the cost and for that campaign, you understand really well the LTV. And every campaign you run will have a different LTV and you need to kind of aggregate up campaigns to a level that you can get a decent read on the LTV.

36:27And the other way I think it's at the end of the day what you're doing is making it bet. So I'm going to spend 50 pounds on acquiring on my CAG because I think I'm going to earn 50 pounds back in a year. And the other way for marketing teams. So when I've spent that 50 pounds, I am now in the rate for it, in acquiring the customer, and I'm hoping it's gonna track back to this. And the discipline of tracking how much are we down from all the bets that we've spent, and what's our floor in terms of how much you're prepared to spend and how much you're prepared to lose, because you're not in control of whether these users are gonna keep coming back and using your product.

37:05There's hundreds of other variables in there, and that's the fastest way in which businesses go faster, when they spend a bunch of money acquiring customers that turn up, but the LTV doesn't turn up in the way that you expect it. When we got it wrong, and what did you learn from that? Probably the best example of this was how we became profitable. So we became profitable about 45 years ago, and every year we would go raise money prior to this point. And every year, we probably know this from your portfolio. Every year when we raise money, we told ourselves, this is the last time we're going to raise money.

37:34We do it always last. Yeah, we do it. We do a little business plan that said, and we're gonna be profitable in like 12 to 24 months. And then every year we get to this point like 24 months later. And we've come up with all these really good ideas that we should invest in. Engineering ideas that could be marketing ideas and we'd come up with these ideas we thought they could work. And then every year we need to go raise again. And then we got to this point where it was about 45 years ago and winter was beginning to set in. And we could raise, but we decided it would actually be far better to become masters of our own destiny and become profitable.

38:06We became profitable in about six to nine months, and there was only one cost we changed together, which was our marketing spend. And I think I've shared this publicly before, and this is about four years ago, we halved our marketing spend. We dropped 10 % on customers and 1 % on revenue. And when you're in a business that's going, grow, grow, grow, grow, grow, grow, and then you turn around and you tell the marketing team and you work through the detail of it, we now need to get to profitability. this type of trick is hiding in there. And I've learned now, after I did that once, this kind of inefficiency will build up all the time you're marketing.

38:41So about two or three years later, we kind of ran the same grill without a need to do it. So we're going to have the marketing spend. Tell me how much we're going to drop revenue. And we barely drop revenue. But may the product make the point? Why ever will they're increasing it? Exactly. But the point is it always generates a bit more revenue. So you can see that there's a point at which it becomes less and less and less efficient. And unless you go back and do this, you kind of miss this massive opportunity to be deciding in there. But for the 1 % is it worth it? Obviously not, but it doesn't start off with the 1 % it starts off with the increase by 5 % and you get like 10 and this is the and it's suddenly at the end of it.

39:14The next incurrent is giant incurrent isn't generating that much. Well, I've been the biggest hiring mistakes you've made. I measure how many times do I say yes and it ends up not working out or how many times do I say no? So generally I rarely am hiring into my reports. I'll do a final round for a leader into one of my teams So I'll say no, but I'll always tell my team you could ignore my know But this is what I expect that person to have done in six months time If that doesn't work out you'll need to let them go and sometimes they say yeah this person can totally do that and I Proved wrong so I'm both accounts.

39:51I get it wrong about 20 to 30 % of the time and this is after 10 years of trying and having talked to others and watched others on this, I've learned that interviews aren't a substitute for the real thing and you just have to hire quickly, try and support people as much as you can, and just sometimes you just won't work out. Do you know what I love to do? I love to find a way to get them in beforehand, even for a day. Just in a day I can figure out, especially on content, it's a really quick feedback loop, if you're a good video editor. I know how you work. I can work. But yeah, back to my interview questions, I love your feedback on this.

40:24So the The two ones I ask are obviously a product one of, taught me through an example of where you've been hands on in building something. And then I always explain, when I say hands on, I mean you ended up having to code it, you had to design it, you had to write the copy. But it is that, like where do you go the extra mile? And which extra mile do you choose to go? And then it's quite quickly you find the people who've never done that, right? And always work through someone and also just don't sweat the details. So that's at all levels, we ask this question, even if you're coming in as effectively a VP of your product for one of my some areas.

40:56And then the second one is everyone has a reason for leaving where they are. And they're reasonably open about it. And they're joining wise or wherever because they think that reason doesn't exist in the place they're going to. So I try to get this out of them and the way I get that usually is by saying, taught me through what really frustrates you about where you are. And then you kind of get into why does that really frustrate you? And then it'll always come down to the same things like my boss isn't behaving rationally and they aren't optimizing for revenue, they're optimizing for X or they're being too short term or this or there's some toxic XYZ in there that I can't and then the question is like well why couldn't you fix this?

41:35What was the hard barrier that hit you hit that meant? Because if you're joking, why is you're going to find these types of things? You need to be able to walk through them. So why couldn't you fix this? And in that you find two things. One is whether they're able to kind of self -reflect and say actually understand And why the CEO of the founder was behaving that way? And if I was in that role, I would have done that. And that's usually a big tick. Or sometimes they're like, don't don't get it. But ultimately through this conversation, they're really talking about their limit because they hit their limit somewhere.

42:05And you can kind of then evaluate, well, they run into that every day, every week, every month or every year. Why isn't there for would it work? How quickly do you know when you've made about higher? Oh, I don't know the answer this question hurry. So I constantly impressed with people's ability to learn and develop and I've learned not to trust my judgment on this. Does that make sense as well? People that I say no to, they've done amazingly amazingly well and I learn from every day. When you reflect on those, what did you get wrong about that person's estimation? I think at the end of the day we have our own preconceived ideas of how we solve problems, like you can be very opinionated on how I solve problems and there are many other ways of which they can be solved.

42:44And all I really care about is probably being solved, right? And the outcome of happening, I don't really care how it happens. Sometimes the ways in which people work, I would look at a girl, never do it that way. And therefore I think you're going to fail, but sometimes they succeed and you learn something. We're going to do a quick fire, okay? So I'm going to say a short statement, you're going to give me your immediate thoughts. Okay, go for it. So what's the most common expensive, deadly mistake you see founders making? Marketing. So thinking that you can just grow your startup by doing some magic on Facebook.

43:15I'm so with you all thinking that hiring someone for growth is a suddenly fine product market fit. What's the most dangerous myth floating around specifically about startup growth do you think? Marketing. So I think it's the same thing around this that there is some magical playbook. The bit I keep telling founders is every minute you put into product market fit or understanding what it's gonna take to make a great product has such a huge return versus I'm gonna find somebody who's gonna solve the Facebook algorithm. Like, this is really what you should be spending your time on for the first three years.

43:47I think it's also like there's so much focus on that channel diversification. It is so hard to get a channel working efficiently. I'm a kit -boddner at HubSpot said, you know, it takes one channel working well to get 50 million there or two to get to 100. And I think a lot of times I meet kind of really focused on diversification before they've hit any meaning for record. It's like, fuck, if you get it working, double down. How does growth change in a world of AI? How does growth and product change in a world of AI? For me it was, it is, how does it make payments faster? How does it make payments cheaper?

44:15So for us, it's kind of obvious, like we have big operational teams. We already use LLMs to augment those teams. Some places LLMs automate 100 % some of those tasks with regards to content, like you've seen what people can do with content with these wonderful tools. We're obviously experimenting with them as well. What growth tactics stayed the same? I still think there's this role for creativity. So you can run two ad campaigns. You can run them with the same growth tactics, but same channels, same CPAs, same targeting. But one has a creative that is like got incredible cut through, incredibly talkable, incredibly viral, one doesn't.

44:57And this is not formulaic yet. And there's still this opportunity for creativity that will always always have an outside return. What have you changed your mind on in the last 12 months? I think I'm beginning to believe the hype behind LLMs in places now and seeing them being practically useful at scale. Where are you seeing them practically useful at scale that you didn't maybe believe before? So you obviously pair around with them, you kind of can find the edges of where they start hallucinating and they're less useful and you can have to engineer like hell to get them there. Where I found that useful for these when they're augmenting a person and they're still somebody driving a little bit, but you can kind of see how it gets the point that that person will also not be needed in a while as well.

45:38And the LEMs and AI in general, I think we're all getting it wrong in terms of where that will end up. Tell me, final one, what's the most recent product or growth strategy not including open AI that you've been most impressed by? New bank and JP Morgan have two different reasons. So New Bank, very similar playbook to us, customer -led business, incredibly high word of mouth, incredibly high MPS, Lope, when you open their analysts to invest the presentations, it's how they brought down prices, how they made the payments faster, etc. But when I look at their culture, it's really, really strong and we have a lot to learn from them, obviously ahead of us in terms of scale, great business.

46:14And the other end of scale is JP Morgan. I mean, there have been large banks offering cross -border services for years, and biggest city HSBC, Barclays, something certain that West, JP Morgan. JP Morgan have a pretty good infrastructure. They built it out really well. They continue to innovate at scale and at the size they're at. And Jamie Diamond went pretty hard after payments. Payments are growing to be a material part of their business. And that is a real differentiator for them when they in their corporate banking and they bank banks when they bank banks as well. So still very impressed and inspired by JP Morgan.

46:50I love that. And I'm also pleased with those suggestions. I haven't had either of them before on the show. So that's a good one. Thank you so much for putting up with my prime questions. You've been fantastic. No worries. Thanks for having me. It was so much fun having me land in the studio there. If you want to see the full episode of Course You Can on YouTube by searching for 20VC, that's 2 -0VC on YouTube. I always loved to see your thoughts and comments there. But before we leave you today, let me tell you about Canva. Many founders I've talked to touch on this idea of if you want to go fast, go alone, want to go far, then go together.

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