Paystack’s Y Combinator Application
Paystack's entire Y Combinator Application complete with commentary and backstory
Hello, my name is Shola Akinlade, and I'm CEO of <a href="http://paystack.com" target="_blank" rel="noreferrer noopener">Paystack</a>, a payments company that helps African merchants accept payments from anyone, anywhere in the world. On 11th November 2015, Paystack became the first Nigerian company to be invited to join the <a href="http://www.ycombinator.com/">Y Combinator Accelerator program</a>. The experience quite literally changed my life, opening doors and making it possible for my tiny team and I to have a shot at making payments in Nigeria a little better. The deadline for applications to the Y Combinator Winter 2018 funding cycle is 8 pm PT on October 3rd. I'd like to encourage you and your team to consider applying to YC. When I try to get some of my friends to apply, many respond with something along the lines of "We have so little." Too many promising African teams fail to shoot their shot because they see where famous YC companies like Dropbox and Airbnb are now, and they forget that those companies also started from 0. I'm sharing Paystack's YC application to show just how green you can be and still make it. To be honest, it's hard not to cringe while reading over our application, almost exactly two years after I pressed 'Submit,' but with luck, you'll come away realizing that if this dreamer can do it, you and your awesome team have a shot :) You'll find commentary interspersed throughout the application, providing context and background, and if you have any follow-up questions, you can find me on Twitter at <a href="https://twitter.com/shollsman">@shollsman</a>. <a href="https://www.ycombinator.com/apply/">Apply to Y Combinator here</a>.
Paystack’s YC Application
Company url, if any:
We launched with paystack.co, and it was about a year later that I was able to buy the .com domain from the previous owner. You know the freaky thing? The domain used to belong to a different Y Combinator company called PayStack, from the Summer 2011 YC batch! Many thanks to former PayStack CEO Sam Vafee for agreeing to sell us the domain! 🙌🏿
If you have an online demo, what’s the url?
(Please don’t password protect it; just use an obscure url.)
Gingerbox, Jekalo, and DIYLaw were some of our earliest customers. The way DIYLaw came on board was that I went to them to register the company, and they mentioned that they actually needed something like Paystack. That's how Paystack grew in the early days - purely by word of mouth.
Describe your company in 50 characters or less.
APIs and tools to enable merchants accept payments in African Markets
What is your company going to make?
Software and services needed for merchants in Africa to accept online payments from local and international customers. We provide a full stack APIs and we’ll securely collect, encrypt, transmit and store customer card information in a highly protected vault and offer continuous anti-fraud and charge back protection services.
To make these happen we’ve partnered with Access Bank (the third Largest Bank in Nigeria) and we’ve built a PCI Compliant payments infrastructure and APIs.
It's interesting to see how consistent our vision has remained. The only difference is that Paystack now works just as well for non-technical business owners as it does for developers. We power all scales of businesses, including some of Nigeria's best known brands such as Domino's Pizza, Taxify, Abia State University, Iroko TV, God is Good Motors (GIGM), Hotels.ng, and BusinessDay. Additionally, our active banking relationships now include Zenith Bank, GT Bank, FCMB, Wema Bank / ALAT, Fidelity Bank, Diamond Bank, UBA, First Bank, and Heritage Bank.
Which category best applies to your company?
Is this application in response to a YC RFS?
Where do you live now, and where would the company be based after YC?
(List as City A, Country A / City B, Country B.)
Email address we should contact you at:
Hacker News username: sholls Name: Shola Akinlade Email: [REDACTED] Profile updated: yes
I applied to YC as a solo founder. Tip: don't do this 😀 Later down this page I'll talk about where my co-founder Ezra came into the picture.
Please enter the url of a 1 minute unlisted (not private) YouTube video introducing the founders. (Follow the Video Guidelines.)
View the Paystack application video here:
It's impossible for me to watch this video and not cringe a little 🙈 The first of many, many, many pitches!
Please tell us about an interesting project, preferably outside of class or work, that two or more of you created together. Include urls if possible.
How long have the founders known one another and how did you meet? Have any of the founders not met in person?
How far along are you?
Private Beta. We are piloting with a dozen merchants and we have hundreds of merchants on our waiting list.
If you’ve already started working on it, how long have you been working and how many lines of code (if applicable) have you written?
Since Nov, 2014
Which of the following best describes your progress?
How many users do you have?
12 Pilot merchants and up to 400 on the waiting list
Do you have revenue?
How much revenue?
Yup, this was literally everything we had made when we applied! Note that $1,000 of this came from a single transaction 😀 I like to point this out when speaking to founders who have overblown assumptions about how much traction they need to have before applying to YC.
What is your monthly growth rate?
(in users or revenue or both)
We are currently growing our waiting list at 10x, and transaction volume at 15x.
If you’ve applied PREVIOUSLY with the same idea, how much progress have you made since the last time you applied? Anything change?
By the last application, it was just a prototype, now we’re already running live transactions and we’ve released additional libraries.
If you have already participated or committed to participate in an incubator, “accelerator” or “pre-accelerator” program, please tell us about it.
Why did you pick this idea to work on? Do you have domain expertise in this area? How do you know people need what you’re making?
When i founded my first startup in 2010, we needed a way to accept payments online, there was no solution locally, we had to work around using Avangate BV and creating accounts in the UK. 5 years later, there’s still no easy way.
I spent the entire 2014 implementing payments and disbursement solutions for Banks and i realized that most of the infrastructure needed to build a full stack payments API already existed, and it just needed someone to do the hardwork of putting it all together and doing all that is necessary. I finished the engagement in Nov. 2014 and immediately created Paystack.
The demand for Paystack is amazing, we haven’t done any PR or Marketing and we’re growing our waiting list at 10x monthly, just from word of mouth. I’ve personally spoken to over 150 merchants and everyone is excited and waiting. Our pilot merchants need it so much that they started using it without a settlement system, so they did not mind leaving their money with us for over 6 weeks.
What’s new about what you’re making? What substitutes do people resort to because it doesn’t exist yet (or they don’t know about it)?
What’s new? In Nigeria.. there’s still no way to accept recurring payments or one click payments. The incumbents are big co’s owned by banks and are not interested in innovating.
Substitutes, creating US or UK companies so they can use UK or US payment processors and then find ways to send the money back.
In hindsight, the quip about big companies not being "interested in innovating," was a little harsh. Two years later, I have a ton of respect and admiration for the impossible problems that the large payments companies had to solve to make it possible for Paystack to exist today. In too many ways to list, the current generation of fintech companies stand on the shoulders of giants.
Who are your competitors, and who might become competitors? Who do you fear most?
We have 3 types of competitors: (1) Local Financial Institutions (2) Global Payment cos and (3) Local non-Financial Institutions
Local FI’s are not able to progress because they mostly buy white label solutions. No incremental progress or problem-solving.
Global companies like Stripe and Braintree are competitors but it will be difficult for them to meet the needs of the African Merchants. It’s easy for them to offer Bitcoin or Apple Pay integration but what about Verve Cards (a pan African card scheme), or Mobile Money or other local card schemes?
Local Non FI’s are the real competition, but we believe that as long as we focus on solving the merchant’s needs we will continue to grow our business.
What do you understand about your business that other companies in it just don’t get?
Well, we’re firstly developers, then business owners, and merchants so we can feel the pain from a developer and merchant perspective. every other person right now seems to be more interested in their vested interests.
To this day I'm fiercely proud of the fact that Paystack continues to be an intensely product-led company. Everyone on the team has some sort of side hustle (which means we feel our customers' pain firsthand) and we're all makers (which means we don't rest until stuff just works). By the way, if you're looking to purchase fine Italian wines, small chops for your event, tailoring services, or luxury packaging, there're multiple members of the Paystack team who can hook you up for a good price. I'm not joking even one bit. Seriously, holla: <a href="mailto:[email protected]">[email protected]</a>
How do or will you make money? How much could you make?
(We realize you can’t know precisely, but give your best estimate.)
Transaction fees. 1.9% + 50cents
These days, most payment gateways in Nigeria charge roughly the same rate of 1.5%
How will you get users? If your idea is the type that faces a chicken-and-egg problem in the sense that it won’t be attractive to users till it has a lot of users (e.g. a marketplace, a dating site, an ad network), how will you overcome that?
We’re already getting users by word of mouth. We’re active in the local developer community, we’ll reach out to merchants directly, and we’ll signup merchants via integration with existing services (Shopify, eventbrite, woocommerce) Our banking partner has also asked that we onboard thousands of Merchants that are their customers.
Have you incorporated, or formed any legal entity (like an LLC) yet?
What kind of entity and in what state or country was the entity formed?
(e.g. Delaware C Corp)
Trading entity created in Lagos, Nigeria
Please describe the breakdown of the equity ownership in percentages among the founders, employees and any other stockholders.
Shola — 80% Employee Pool — 10% Advisory Pool — 10>#/p###
Our cap table looks different today, but this is what it looked like then.
List any investments your company has received. Include the name of the investor, the amount invested, the premoney valuation / valuation cap, and the type of security sold (convertible notes, safes or stock).
None, still funded by founder
Please provide any other relevant information about the structure or formation of the company.
Are any of the founders covered by noncompetes or intellectual property agreements that overlap with your project? If so, please explain.
Was any of your code written by someone who is not one of your founders? If so, describe how can you legally use it.
(Open source is ok of course.)
Android library written by a contractor, but we have contracts already
Is there anything else we should know about your company?
(Pending lawsuits, cofounders who have left, etc.)
If you had any other ideas you considered applying with, please list them. One may be something we’ve been waiting for. Often when we fund people it’s to do something they list here and not in the main application.
Please tell us something surprising or amusing that one of you has discovered.
(The answer need not be related to your project.)
What convinced you to apply to Y Combinator?
"Convinced" is putting this lightly. My friend <a href="https://medium.com/@oothenigerian">Oo</a> literally sent an email, without my knowledge, to multiple YC partners, insisting that they check out Paystack. I remember opening my email, realizing what I had been copied on, and screaming to myself something like "Oh my God Oo, what have you done?!" Luckily, <a href="https://twitter.com/mwseibel/with_replies">Michael Siebel</a> (who would go on to become YC CEO), replied and kindly asked me to send over some more information. To this day, I don't think I've ever put more thought into a reply! 😂
How did you hear about Y Combinator?
been on hacker news since 2007
Shortly after I sent the application, I received a reply asking for further information.
Thanks for applying! A few questions for you.
1) Can you tell us more about the online consumer payments market in Nigeria and the other markets you’re looking at? What % of consumers pay with credit cards, verve money, etc.?
Last year, in Nigeria, about $43B was processed in Card transactions. But only about $0.4B were online transactions. So about 1% of cards were used online (up from 0.2% in 2006). However, E-commerce is experiencing enormous growth (from about US$ 35 million in 2012 to over US$ 550 million as of October 2014).
The general summary of the consumer payments market is that it’s growing fast due to increased mobile penetration and E-commerce adoption. Same can be said of Kenya (transaction volume doubled between 2010 to 2014) and South Africa (from $31B in 2009 to $57B in 2013). To put things in perspective, online payments is growing in Africa at about 26–30% annually compared to 9–16% in North America Below are a few stats to answer the last part of the question
- Credit/Debit Split: 3% Credit Card, 97% Debit Cards.
- Card Scheme Split: Mastercard/Visa (30%), Verve (65%), Others (5%)
I got many of these numbers from KPMG's <a href="https://assets.kpmg.com/content/dam/kpmg/za/pdf/2016/09/Payment-Developments-in-Africa-2015.pdf">Payment Developments in Africa Volume 1 2015 Report</a>. Fun fact: I would later go on to hire one of the people who worked on this report.
2) Can you tell use more about the experience using Stripe and Braintree in Nigeria? What do they and do they not support? Are there issues unique to your markets?
Firstly, Stripe and Braintree do not support Nigeria (or any other African country yet). A few merchants use them, but they need to register their companies in US or UK and then find a way to get the money back to Nigeria.
The unique issues to our markets are
- Lots of middle men. The payment ecosystem in US is the Issuer (customer’s bank) , Acquirer ( Merchant’s Bank) and the Payment Gateway (Stripe), in Nigeria it’s the Issuer (customer’s Bank), Issuer Processor (third party service provider for the Customer’s bank), Acquirer (Merchant’s Bank), Acquirer’s Processor (Third Party service provider for the acquirer), Switch (central clearing system), Payment Gateway (Paystack)
- Fragmented Payment Methods.. Local Card Schemes (Verve, Genesis), International Card Schemes (Mastercard, Visa), Bank Accounts (like ACH), Mobile Money Wallets.
- Overregulation — The Countries Regulator has put in different rules like 2-factor Authentication, Transaction Limits, e.t.c
Small correction: Most US banks also use third party service providers for issuer processing and acquirer processing.
3) Who else is working on your team?
I’ve worked with 4 top advisors to make Paystack happen.
- Seun and I were classmates at University. He helps with the paperwork required for executing the banking partnerships and regulatory obligations.
- Oo runs callbase.co, he’s spent a lot of time helping with the product design and overall vision.
- Abis is a financial / Risk management consultant.
In a follow-up, YC forced the question of a co-founder, asking which of my advisors I would ask to join the team full time. After much thought I told them that Ezra Olubi would be my co-founder. Please note: I hadn't asked <a href="https://twitter.com/0x">Ezra</a> yet 😂 Luckily, he said yes 😀
4) Can you send us a graph of monthly transaction volume since you launched?
We have not launched yet, we’ve been piloting with a few merchants for 7 weeks. Here’s a graph of the live transactions we’ve done so far.
Man, I look at this graph and I can't stop laughing 😂 It's almost comical, but it was what we had - a whopping 22 transactions in our first month, and 318 transactions in our second. Today, we do many multiples of this in minutes. It's good to look back and see where you've come from.
Apply to Y Combinator
So that was Paystack's YC application. I hope this was illuminating, or at the very least, entertaining :) If you'd like to hear more about how other African founders got into YC, 9 of them will sharing their stories at the <a href="https://www.eventbrite.com/e/y-combinator-lagos-meetup-tickets-37145958562">Y Combinator Lagos Meetup</a>, which will take place at noon, on Saturday September 23rd, at the Paystack office in Ikeja GRA, Lagos. I hope to meet you there. Once more, the deadline for the applying to YC is 8 pm PT on October 3rd. <a href="https://www.ycombinator.com/apply/">Apply to Y Combinator</a>.