Fresh off the raising of a $3m Seed round, founder and CEO Andrzej Nowak recently sat down with the GetLatka team to discuss the success of his salary on-demand company Flexee, which launched in Poland on September 1, 2020.
Nowak leveraged his master’s degree and background in finance and banking to recognize a need in the marketplace—to allow employees to take salaries out before payday—starting in his home country of Poland with Flexee. In this interview with Nathan Latka, the founder revealed the metrics behind his combination Fintech and SaaS business model, the one key that makes his debt cost of capital affordable, and how close Flexee is to a $1m Run Rate.
- Team 12, with 3 engineers
- 20 employer customers, serving 10,000 employees
- 40% IRR
Employees take salaries out as needed and pay 2.9% with Flexee
As explained by CEO and Founder Nowak, employers who sign up for Flexee, a third-party service that offers financing to employees, can easily withdraw their salaries as they need it ahead of their payday. Once an employer signs up for the service, they choose who pays for it. When employees pay, Flexee charges them 2.9% on the money they withdraw. Employers pay a SaaS fee of $8 per month per employee if they choose to fund the early payday funding for employees. Under the Flexee plan, employees can only withdraw the funds they have earned but haven’t received yet.
20 employers serving 10,000 employees
To date, months before Flexee’s second anniversary, CEO Nowak shared that the company currently counts 20 employers as clients, reaching 10,000 employees. Nowak expects the number of employees reached to ten-fold to 100,000 by the end of the year.
Focused on 20m Polish employees, with eyes on Europe
As Latka queried Nowak about how he planned on scaling from reaching 10,000 to 100,000 employees, the CEO pointed out that Poland alone has 20m employees. After blanketing Poland, Founder Nowak plans to expand, as he proclaimed, “I want Flexee to do on-demand in the European markets, becoming the biggest salary on demand company in the region in two to three years.”
Targeting a move from 50/50 to 70/30
Founder Nowak explained that Flexee’s current revenue comes from roughly 70% fintech-style provision fees and 30% SaaS subscription fees. Together with his investors, CEO Nowak is targeting a 50/50 mix between employee-paid and employer-paid services.
Local software development house provides additional engineering support
Nowak shared that Flexee relies on Poland-based software development house N7 Mobile for additional support as needed when their engineering demands exceed internal capabilities. He noted that currently, as an example, N7 Mobile is helping Flexee get connected to payroll systems.
$3m Seed Round provides debt liquidity and equity
According to Founder Nowak, Flexee closed a $3m Seed round on April 30, 2022. As Latka queried the CEO regarding the use and deployment of the money, Nowak explained that Flexee earmarked a portion of the funds for debt liquidity and another portion for equity. “We are using $2.2m debt liquidity to fund the salaries on demand and $800,000 equity to support our scaling and sales efforts,” Founder Nowak clarified with specificity.
$1m Preseed Round at the end of 2020
At the end of 2020, Flexee received a $1m Preseed Round funding. CEO Nowak revealed that those funds came from a mix of sources, including a pair of business angels, private investors, and also from the founder himself. Before that, Flexee tapped into $500,000 in debt capital to help fund the salary on demand employee payments. “We found the problem in the marketplace. We were the first one in Poland. We needed more money fast,” explained Nowak, who added, “There’s a huge demand now.”
10-12% debt cost of capital
Without revealing exact details, Founder Nowak verified Latka’s estimates that the debt cost of capital was running the company 10-12%. The key to making the financing work, according to Nowak, is that the capital comes with no warrants. “I knew investors who could provide the capital without warrants,” he revealed. He added that their financing is flexible, meaning they only pay for what they use. “It’s like a credit line,” noted Nowak.
Closing in on $1m Run Rate: Fintech GMV or SaaS Subscription?
As Flexee closes in on a $1m Run Rate, Latka again queried Nowak on whether he considers the company a Fintech or Saas. “We’re both Fintech and SaaS, and our investors like the mix,” Founder Nowak explained, reiterating again that the company aspires to hit a 50/50 model of revenue sources.
SaaS model delivers $24,000 MRR
According to Latka’s calculations, if 30% of the employers are currently paying via a subscription model, Flexee is serving roughly 3,000 of the 10,000 employees at $8 per seat per month, or $24,000 MRR. Founder Nowak confirmed that Latka’s calculations were in the ballpark.
IRR minimum margin of 40%
Latka and CEO Nowak discussed the IRR minimum margin of 40% and how Flexee could keep that going. Nowak confirmed that their ability to earn means paying the money back fast enough that the money can be redeployed each month. However, as he previously stated, the flexibility of their investors is critical to their success. The founder added, “We always have to have a strong pipeline, new clients, and lots of marketing to employees to let them know how easy it is to use our services.”
Fast Five with Nathan Latka
Flexee founder and CEO Andrzej Nowak shared that the last book he read was a biography of Elon Musk. Unsurprisingly, Elon Musk is the CEO he most closely follows. A local Polish payment provider is the tool he uses the most to help build Flexee. Andrzej only gets a short 4 hours of sleep per night, which Nathan pointed out is not enough. Andrzej is 36 years old, single with no kids. Andrzej has no regrets about his career trajectory so far, citing nothing specifically that he wishes he had known at 20.