Recall Sessions: Itai Damti on Embedded Finance and the Art of Getting Your First Customer

21:44Somrat Niyogi:It required some buzz in the ecosystem where people would actually know what's being offered. And on the heels of Synapse, the company that I mentioned and some of the early disappointment of some of their customers, we could get a better NPS to travel across the ecosystem. I should mention that Benepass is a YC company and their work with Unity is actually what got us a lot of the early excitement in the YC community that later propelled us to more scale.

22:13Itai Damti:And in that first, you know, you raise a series A, you know, Benipass, you know, first customer. Did you how did you approach the sequencing? I mean, there's a lot to make sure this first customer is successful. Were you like, OK, let's just go land a bunch more? Or how did you kind of think about the sequencing and how aggressive you wanted to be in that early go to market, especially for an embedded company where just because they build it doesn't mean it's all going to work out and it's going to be perfect. I mean, as you know, I'm curious, like, did Venipass, like, just turn it on for everybody?

22:47Itai Damti:Or do they have this sort of careful, you know, rollout strategy that was like, you know, kind of gated in some shape or form? Like, how do they go about it? And what was your advice in that context?

22:55Somrat Niyogi:So they were a baby company back then, right? The product that they built with Unit was an expansion into health savings accounts, but it wasn't even the main thing that they enabled. They were benefits companies that they allow people to spend on behalf of the employer. They needed us for something specific that was quite adjacent, and over time they expanded with us. I think as a founder, and this is advice for other founders, you should try to work with as many customers as possible in parallel, as long as you don't feel that it compromises your long-term success. I'll give you an extreme example.

23:34Somrat Niyogi:Shopify is a company that can let you and me and 50 other companies sign up in parallel to open a store. They don't need to form an opinion about whether Shamrat's store succeeds or my store succeeds. If 5 % or 10 % or 50 % of the stores succeed, they end up serving successful stores. This is an extreme easy example because with Unit, you have onboarding resources, you have bank capacity, you have oversight and compliance that you need to enforce. So I would say I always thought about Unit as a system of bottlenecks. Every company is a system of bottlenecks. You want to make sure as a founder that you remove as many bottlenecks as possible so that your machine can create really high output.

24:16Somrat Niyogi:we did not have a good reason to stagger or to slow down onboarding of other customers at the time. Today, we have products that are a lot more hands-on, right? The opportunity cost in under-investing in a large customer today of a specific type of unit might actually be quite large. So we're trying to be thoughtful about it. But when your entire business is Legos, you want to allow as many people as possible to buy the Legos and create their own Lego creation and go to market with it.

24:46Itai Damti:You had to sort of, I mean, maybe it was just the strategy of, you know, spending a year in kind of stealth and building as many Legos as possible. But, I mean, there are some customers that are way more demanding and may need new types of Legos versus other customers that are happy with the Lego pieces that you offer. Like, obviously, I mean, I appreciate what you're saying about, hey, try to have as many customers conversations. But it's also just like, how did you go about prioritizing kind of like, you know, Benipass startup, you know, YC ecosystem? Maybe there's other sort of YC ecosystems, sort of opportunities.

25:26Itai Damti:But like, did you just kind of take as much as opportunity as you can? And then we're like, hey, let's just push the R &D team to go build as many Lego pieces as possible. Like, how did you guys think about that? Or were there certain types of customers you just said no to?

25:39Somrat Niyogi:Definitely, we say no to some customers. As an extreme example, we never touched consumer credit, right? So if a company came to us and said, we want to launch a credit card for consumers, we would immediately turn down the business. I think about the question you just asked as one of the timeless questions in startup and product management, which is I'm facing a large market. My product is lacking by definition. How do I say yes to the right opportunities and how do I allow them to thoughtfully shape my roadmap as opposed to letting them destroy my product and force me into something that I don't want to be older that might not be useful to others?

26:21Somrat Niyogi:I'll say two things. One is the job of great infrastructure product teams is to identify actual useful Legos that would not force you to build a new type of solution every time. Right. So as an example, I mean, I'm going to give you a simple product example. When we calculate interest, we allow companies to specify if they want to pay 2 % interest or 1 % interest on the account. And that allows them to take the Lego and configure it. But we don't have to build for company A and company B. They can just take the Lego and configure it to do what's useful to them. So designing the right building blocks and designing them in a way that's actually reusable and broadly applicable is the job of great infrastructure builders.

27:10Somrat Niyogi:So I don't have a timeless set of answers, but I think everyone needs to think about it when they're building something that could be applicable to many companies. And the second thing is we also have a system that might be useful to people. We call it the green, yellow, red coloring of features. So if I'm selling to you, let's say that I'm serving Benipass and Shomrat comes to me from a certain enterprise, maybe Gasto, and tells me what they need. Some of the things you're going to say are going to be things that I have. That's the green bucket. Take the Lego and run with it. We don't need to do anything new.

27:48Somrat Niyogi:The second bucket is going to be stuff that you say that you need. For example, I want the product to allow me to set limits for different kinds of people. And then we go, oh, that's something we had planned for six or nine months from now. But because Stromrad says it's important, maybe we bring it forward and we make it basically more imminent in the product. So I'm not destroying my product. I'm not twisting my product. I'm just bringing forward something that I thought might happen in nine months. And then there's stuff that is really not a fit. And companies would make a mistake choosing to implement it.

28:24Somrat Niyogi:For example, if you came to me and said, I want to build a crazy benefits, like a new types of benefit solution. And I don't have the tech resources. Can you build it for me at Unit? Our answer is going to be no. I don't see how it serves us now. I don't see how it serves us in a year. and you are too alone in needing it, that it would make a good idea for Unix to build it natively into the platform. So I encourage people to bucket features and understand what people are asking them to do.

28:51Itai Damti:So, I mean, I can imagine at this time, you know, I know when we were chatting about this, you have this sort of concept of, not like everybody's thinking about building embedded fintech products. Like maybe the opportunity is large in terms of the number of platforms that could build, you know, FinTech products as adjacent solutions to drive LTV and so forth. But like, you know, how did you go about saying you need something now? Like, you know, I know you talked about this concept of deciders and explorers. Like, can you elaborate on how you prioritized who really needed something? Because I'm sure you could go to a lot of platforms and said, hey, there's an opportunity for you to go build sort of FinTech solutions for your customers.

29:39Itai Damti:but, you know, you know, as you know, they're all busy and so forth. Like, how did you go about deciding or more importantly, how did you create demand in the market? And was it all push, push, push, or did it kind of ever shift from push to pull? Because a lot of, when I talk to other embedded fintech founders, it's hard out there, right? You know, it's like, you know, in some ways all embedded fintech companies are kind of competing for some sort of mindshare, which I do want to get to, because I know you have this sort of perspective on embedded everything, which we'll talk about next?

30:07Somrat Niyogi:Look, it could be true to embedded businesses, but I think it's true to any new market. You just have to accept that if you're building something that doesn't exist yet, the market is going to be at times very educated. In the case of 1 % of people who want to buy what you have, at times it's going to be somewhat educated, maybe people that are exploring what you have to offer. And then there's a large swath of the market that's uneducated. We call them unaware. So when we think about the buyers out there, you know, in year one, two, three, any year at the unit, we think about those deciders who know that they want something that the unit can solve and they're likely going to come to us or we can find them.

30:49Somrat Niyogi:Then you have the explorers. You know, if the deciders are 1%, the explorers are like 9 % of the market. Together, they add up to 10. But, you know, the explorers is a large group of people Let's say, you know, can I get an ROI analysis return on investment that would help me quantify the opportunity in fintech? I would like to compare it to an AI investment that my CEO really wants me to invest in. So they are exploring. They want to understand the cost and the benefit. And they will be gravitating. They will be turning into deciders if they feel that it's a good idea. And then you have 90 % that we call unawares.

31:26And you have to be patient and plant the seeds.

31:29Somrat Niyogi:But by definition, 90 % of the market when units started was in an unaware situation. Our approach was always we need to really excel when we face a decider, right? We can't waste sales and we can't lose when there's a cohort of companies that are actually making buying decisions. We have to shine.

31:50Itai Damti:Well, how do you know? I mean, first of all, I love the word decider because in some ways there's some clarity on an outcome. But let's be honest, folks are saying they're deciding and then they punt another quarter or they punt another two quarters. How do you assess whether there's really a decider? If this account is really a decider type of an account?

32:13Somrat Niyogi:I think it's pretty timeless in sales that you face those dynamics and you think you face someone who is ready to make a decision and then they're kicking the can, there are two things, right? One is be patient because you're building relationships and you are participating in learning and teaching that will eventually get you the business. Hopefully it doesn't kill your company. The demand gets further and further. But if it doesn't, you are earning relationships and you're earning learning. The second thing I would say is that, and this is a big mistake we made at Unit, is that we took the kicking the can as a sign that they're not ready, but our product could have actually been way better and way easier to choose.

32:55Somrat Niyogi:And that motivated us to create another set of implementation options that allow companies to plug and play and to test demand more quickly. So in other words, when you hear not now once, okay, when you hear not now 50 times, you have to ask yourself, is my product at the shape that allows people to actually say yes? Or does it always seem like too much investment and too speculative? And then, you know, we need to do something about the product that solves for that.

33:28Itai Damti:What did you all end up doing to sort of make it easier? And how did you validate that it actually kind of worked and market?

33:37Somrat Niyogi:Okay, so there's this idea in business that a lot of early markets have this shape that the people who buy first are the most enthusiastic and early adopting by nature, right? So when the iPhone came out, the people in your life that got the iPhone first were people who were the most gadget loving. And that's the nature of new markets and new inventions. As you go deeper into the mass market, there are more groups of people like pragmatists, conservatives, and eventually the people who are the latest to the party. I think what we've realized, and this is a very, very important part in our journey, is that the Benepasses and a lot of the early companies, the early 100 companies we sold to, were actually companies that had the resources, that had the motivation, and that felt comfortable building with the Legos.

34:33Somrat Niyogi:But what it takes to sell into the mass market is a very different product motion and go-to-market motion. If you don't get the product insight, no amount of go-to-market would help. So when you asked me, how do you pitch to people that they should buy embedded finance? I will tell you, you have to have something that actually makes it easier for them to engage and say yes. Not all of them, but at least a reasonable amount of them. So the first thing we did was, you know, we looked at the product that we had that was more building block based, you know, API based. and we kind of, I call this sold people airplanes and taught them how to fly the airplanes and how to make a good fintech program embedded in their product.

35:17Somrat Niyogi:We took a very different approach with the pragmatists, the people who work at the next 500 companies. We told them, you know, you might want to fly the airplane one day, but we actually have an airline that we can operate for you. And that airline can be something that you choose to put passengers on and you can just sell the tickets. So you can send people into an embedded finance area in your product, but Unit builds and Unit manages this experience down to the customer support and the limits and the fraud. And that's a very different way to present the product because it allows them to think more in plug and play.

35:57Somrat Niyogi:We also launched Capital, which allows them to offer capital without offering banking and without offering any money movement straight up to people's Chase accounts and Wells Fargo accounts. And that's really helped us, I think, think about the next set of buyers.

36:14Itai Damti:The question I have, so one, makes sense. You're selling to kind of smaller companies. I'm not saying small in terms of their reach. But, you know, I can only imagine and is that some of these customers of yours are not pushing their fintech solutions. And how did you think about that? Because in some ways, the business of an infrastructure solution is kind of a little bit kind of tied to how well do your customers sell their own products and how their own growth. And I can imagine, you know, now you raise a series A, you know, there's probably some increasing pressure to say, what are your numbers?

37:01Itai Damti:Grow, grow, grow, grow. But you don't have complete control over the end outcome. I mean, maybe there was some sort of rocket ships there and then, you know, right place, right time. But, you know, how do you control that sort of outcome for you yourselves?

37:15Somrat Niyogi:Well, this is the classic double activation problem, right? that exists in embedded finance or in any embedded product, which is it's not only selling to someone, it's encouraging them to sell and drive adoption among their customers, which is a very hard problem. And I think for any embedded founder out there, I would say that this is something that can kill your company. If you don't consider the capital implication of this journey, if you underestimate how hard and how slow it would be to get adoption and get volume, you might actually overspend. So I spoke to a lot of people who are building embedded solutions in the last three years.

37:54Somrat Niyogi:And this is my first advice to them. Think seriously about the capital equation and don't think that you can be, you know, a company that always raises the next round at growth. Even if you bring logos, you have to drive activation within the customer base of those customers that you signed. So that remains an important problem for us. Historically, we've seen companies that are, you know, I call this the people who bought the airplane and fly high, the people who bought the airplane and never took off or those that took off and then landed. We've seen companies grappling with the adoption question.

38:31Somrat Niyogi:For some of them, it's very easy. For some of them, it's harder. We've seen patterns, and I can talk about them.

38:36Itai Damti:Yeah, like what, I mean, because a lot of embedded founders, you know, any infrastructure solution has a sort of double activation kind of challenge. Like, is there any kind of sort of rules of thumb you would probably share with others to say, hey, you know, if I were because they go back to the decider narrative, right? Going, hey, how do we know that they're not just going to build it? They're actually going to like care about this, the end execution and the performance of the products that they build, right? You can have the best solution. Doesn't mean they're going to adopt it.

39:08Somrat Niyogi:My first advice is leave a lot of margin for error. Don't kill your company assuming that every logo you sign is going to materialize fully. That's just not going to happen. The patterns, try to identify the patterns that indicate that someone is about to be more or less successful. I'll give an example. Companies that use UNIT as mission-critical money infrastructure, like Benepass that I mentioned, they're much more likely to use you because they're integrating the money, the accounts into the onboarding flow of employees. Right. So when employees get the benefits from their employers, the account opening is kind of weird into the onboarding flow at Benepass.

39:52Somrat Niyogi:It's kind of invisible to the employee. And when we act as a critical piece of infrastructure as opposed to a nice-to-have, that always indicates that the account might be more committed and easier to retain and grow. Another pattern is companies that have money flow going through them. So Wix is a good example. They help hundreds of thousands of businesses process payments and sell services and goods online. and they pay out to a Chase account or a City account, but they have the ability to create a built-in money hub within weeks quite easily. They need to construct the experience and they need to reroute payments so that they go into this money hub.

40:35Somrat Niyogi:So we look for signs of either us being critical infrastructure that enables something important in the business, or if it's adjacent, we look for conditions for success. And of course, you care that the leadership at the company you're selling into cares and commits. And so that's kind of the selection and pattern recognition. I can do it.

41:00Itai Damti:Did you ever did you ever sell to sort of companies that. You kind of knew, like, would you would you ever say, hey, I don't think you really need us or like, hey, I don't really think this is the right time for what it sounds like. Like, did you ever say no to folks and or did you ever close someone knowing I don't really know where this is going to go, but we're doing it for some other reason?

41:22Somrat Niyogi:We say no to folks for a lot of reasons, right? One could be a commercial reason where we don't see legs. It could be a consumer. Neobank in 2026 would never excite us. So we allow them to find other solutions in the market. We have signed companies knowing that there is some speculation about whether they can be successful. And they wanted to take the swing and we committed to helping them. And we've seen a lot of people entering it with the best intentions and never taking off or taking off and then deciding that it's not for them. We've seen companies operating embedded finance in scale and then saying, you know what, we are paying out to hourly workers.

42:04Somrat Niyogi:We don't actually feel that this is better than Venmo. Even though it's at some level of scale, we are deciding to withdraw from this space. I think what's most important is actually the product. I think if you design your product to make it simpler to launch and simpler to succeed with minimal brain damage, that's the key to scaling and sustaining. And there's going to be a bunch of shots that don't hit the goal. And that's fine. That's part of building infrastructure.

42:33Itai Damti:Well, Atai, coming to this conversation, there were actually a lot of things I wanted to chat about. We were talking about pricing. We're talking about packaging. We're talking about different types of people you can sell to, you know, the technical buyer and so forth. It feels like we need more time to go even further because I think this is an area that a lot of founders are kind of struggling with. I did want to kind of leave with some questions I have for you around like, if you went back in time, right, say, you know, 2019, 2020, and you had to go to do some certain things differently, you know, founders starting companies right now, maybe building fintech solutions, maybe infrastructure solutions, or just building an AI SaaS company?

43:18Itai Damti:What would you do differently based off of your learnings now that you're kind of six, seven years in? Obviously, as a founder, you've sort of 20 plus years in.

43:28Somrat Niyogi:Be mindful of the chasm. The gap I mentioned between your early adopters and the mass market is a place where many, many companies die or just become niche businesses that never scale. And you need to face some signs that there is a different type of buyer on the horizon starting 2023, but we haven't taken full action until late 2024. So I would say that be very mindful of how your first 5 % of your customers are going to be very, very different from the next 95%. We have acted on the product and go-to-market motions that require, that we need to act on to capture the mass market, but we could have done it sooner.

44:13Somrat Niyogi:And I think the same is true to AI businesses today where there's probably a bunch of tech-savvy people that will pick up your product. But if you sell to restaurants, for example, the tech-savvy restaurant owner's pool is relatively small. And there's going to be a point in time where you need to lean into more old-school techniques like salespeople and mail offers to restaurants and food traffic. And that's something that I would encourage people not to avoid. Embrace the messier problems that would help you unlock more. I give the example of Amazon logistics, right? If Amazon didn't crack logistics, it would not have been the company that it is today.

44:56Somrat Niyogi:But embrace something that looks messy, because if it's going to help you become the company that you want to be, that's something you should take seriously.

45:05Itai Damti:Well, I absolutely love that. I feel we probably could spend another hour and we probably should find more time because I do think there's a lot more to talk about here. But I do appreciate you taking time. I know you're a busy person and you have hundreds of customers to serve. And a lot of founders want to learn based off the experiences. So thank you for sharing some insights. And we're gonna have to do this again because you and I didn't cover all the topics that we thought we would cover today.

45:33Somrat Niyogi:Thanks for inviting me. Glad to share.

45:38Itai Damti:Hey, this is Ben Kasnoka, co-founder of Village Global. Thanks so much for tuning in to the Village Global podcast

45:43Somrat Niyogi:where we go deep on all the biggest topics in tech. If you enjoyed this conversation, please subscribe to our YouTube channel. You can check us out on Spotify, Apple, wherever you get your podcasts. We'd love to see you for the next one.