October 26, 2022

Lessons from Flywire’s journey to multibillion–dollar valuation

Lars Albright
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Lessons from Flywire’s journey to multibillion–dollar valuationLessons from Flywire’s journey to multibillion–dollar valuation
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Editor's note: 

CEO Mike Massaro shares 5 key lessons on the path to unicorn status

If you know fintech, you’re likely familiar with Mike Massaro, CEO of Flywire, a global payments enablement and software company that supports the education, healthcare, travel, and B2B industries. Flywire went public in 2021 and after the first day of trading, it was a multibillion–dollar company. 

Whenever there is a notable outcome for a business, whether it be an acquisition or IPO, the story always seems clear, and from the outside, these kinds of multibillion–dollar success cases seem like fairy tales. But, however incredible the achievement, the road to success is rarely a straight line from point A to point B. It wasn’t for Flywire or for Mike, it wasn’t for me at SessionM and Quattro Wireless, and it isn’t for 99.9% of CEOs. Behind any CEO story, there’s a journey with twists, turns, and challenges to work through. This is why I always love asking, “what was the real deal behind the deal?” 

Over the years, Mike and I have had many candid conversations about the ups and downs of the start-up journey and the particular challenges of being the CEO of a growth company. I have always been impressed by Mike’s drive, appetite to learn, his business acumen, and the integrity that he brings to everything he does. This is why I was so excited to sit down with Mike and get his honest and enlightening thoughts about his early, unexpected career path, his incredible journey at Flywire, and the five major lessons he learned along the way.

1. The journey to CEO can start from unexpected places

Though Mike got his undergraduate degree in information systems and finance from Babson College’s business program, he never expected to get into tech or startups. He’d planned to become a management consultant, not too far from following in his father’s footsteps as a partner at a Big Five accounting firm. Mike interned at PwC as a college student, even taking on consulting work for them in his senior year. When he got a full-time job offer, he accepted. 

Then, he got lunch with some friends who had just started working for a startup called edocs, which made e-billing software based in Natick, Massachusetts. They asked Mike if he’d consider working for them. A few days later, they sent him an offer. Mike remembers thinking, “Am I going to risk it on a startup or do I stick with consulting at PricewaterhouseCoopers?” 

This was the late 1990s, amid the dot-com bust. Mike felt some hesitation. It was his accountant father who helped convince him. Mike recalls his father saying, “You’re not going to go hungry, so you might as well go risk it.” So he decided to roll the dice on the tech world.

From my own experience, entrepreneurs always need to take that leap of faith at some point in their career. I remember the internal debate I had when I left a coveted private equity job early in my career so that I could jump in and start my first business. Ditching security for the unknown can be nerve-racking. You need your own conviction, but you also need support for your decisions from family, mentors, and peers. Before making the plunge into entrepreneurship, get advice from people who can provide perspective around the level of risk and help tease out what you’re really looking for.

2. If you see something that can be done better, take initiative — do it! 

One of the great things about early stage companies is that you can make an impact at any level. Mike kicked off his career at edocs doing entry-level software implementation and front-end web work. But — in classic startup fashion — he and his colleagues soon tackled another initiative that changed the trajectory of his career. “A bunch of us didn’t like how the product worked,” Mike says. “We decided it really stunk to demo. So we created a better demo after hours.” 

That project got on the CEO’s radar. Suddenly, Mike was one of the only people who understood how the new and improved demo worked. As a result, he got pulled into sales meetings. This transitioned into sales engineering work and then, eventually, a position in edoc’s new London office where he worked as that office’s first sales engineer and got to travel throughout Europe.

Accountability is one of the most important attributes for anyone at a startup — we believed so strongly in it at SessionM that it was one of our core values as a business. Being proactive and making a difference can be powerful. In a bigger company, it can be easier to hide and pass the responsibility to someone else, or to even ignore the problem altogether. “That's both the opportunity with a small company and also almost the obligation of being a great employee at a growth company,” Mike says. “If you can do something better, go do it.”

It’s also invaluable for career growth. As Mike puts it, working at a growth company is like dog years — an enormous amount of experience in a relatively short period of time. Mike almost went back to school while at edocs, but he ultimately felt the on-the-job experience was the best training he could get and decided not to pursue an MBA. 

The question of “should I get an MBA?” often comes up for entrepreneurs. There are multiple longer answers to this question, but if your current job experience is giving you the career growth you’re looking for, you should focus on that path. If you are looking to take a step back from a day-to-day job, broaden your horizons, learn new skills, and get exposure to a new group of talented people, an MBA can be a great path. Bottom line: there is no one-size-fits-all here; it really depends on your personal situation. 

Eventually, edocs was acquired by Siebel in 2004 and Oracle acquired Siebel the following year. After all these transitions, the edocs COO left to become CEO at the mobile software company called CiQ and by 2006, Mike went to work with that exec. Mike began that role tackling all things related to go to market: Branding, marketing, sales, demos, acting as technical lead on early accounts, and more. “I did a lot of the technical stuff in setting up a go to market at the beginning and then ended up owning some of the strategic accounts,” he says. “That was a great set of experiences.” He worked there for CIQ for over six years, pushing himself and gaining invaluable skills on the job. 

3. Near-death moments — not every trajectory is the same

Enter Flywire. Mike joined the international payment company in 2012, when it was post–Series A and still known as peerTransfer. The company had about 40 employees and a sole founder  — and looking back it was clear there was a lot more uncertainty about the business than Mike expected.

Entrepreneurs learn quickly that things won’t go perfectly with most new companies. At times, you need to be honest about what you’re seeing and decide to move away from a business. Also, having good investors that will help you identify things you may not be seeing is absolutely critical. At other times, you just have to work through it. While some companies avoid this, most early stage start-ups have some form of what I call, “crawling through glass” periods, where it is painful but you have to keep moving to get to the other side. This is where the perseverance and grit of the team is truly tested, and strangely, can often be the times when the team is most effective and dialed into the mission at hand. 

In Flywire’s case, they were focused on education payment systems. There was value in the product, but the go-to-market was disjointed. “We’re seeing the product get deployed with some usage, but the utilization was low and the payment network wasn’t built out,” Mike says. “So we were losing money on the majority of the payments processed.”

Worse, the company was running out of runway and Series B wasn’t coming together as they had hoped. By spring 2013, they had to scrape together a $2 million bridge loan, but as Mike says “We were facing a reality of just having four or five months to figure it out”.

Around this time, Mike was asked to join Flywire’s board as there was as the company was evaluating whether they would be able to raise future capital, sell the business or shut it down.

The cap table was also a challenge. “Employees 2 and 3, the people who helped build the company, had a 20th of the equity that I had,” Mike says. For example, employees 2–5 had accepted very modest salaries and if they sold the business for $25 million, these early employees would only make approximately $50,000 from their equity — Mike, meanwhile, would have made $400k. “That shouldn't happen,” Mike says. “As a board member, I started to see stuff that was going to be hard to figure out.”

A lot of founders try to flex valuation — the problem is when they get stingy or create cap tables that don’t make sense. Early stage founders shouldn’t fixate only on what they have to the exclusion of their team. “The cap table issues — focusing on valuation and protection of dilution — really gets people turned around,” Mike says. Providing fair equity to employees can transform people’s lives and get them engaged in the company. And, at the end of the day, when the whole team performs at their max, the company will do better, which will result in the board giving leaders and the rest of the team more shares. Mike knew that, if he had the opportunity, he’d want to improve their equity philosophy.

The turning point came when an education company offered to buy Flywire for $25 million. “We almost got all the way down to selling the company,” Mike says. A master agreement was being negotiated, employee compensation had been reached and the press release had been drafted. 

And then something remarkable happened.

4. Say yes to opportunities

Mike’s story demonstrates that you should always take the meeting. Amid plans to sell the business, investors at F-Prime Capital reached out. They’d heard that the company had been trying to raise a Series B. Could they get a meeting?

Ultimately, after such a prolonged Series B fundraise, we felt like it was too late and tried to just politely decline the meeting. As Mike remembers it, “F-Prime just said, ‘Hey, give us a couple hours. We’ve heard good things about the team and the business.’” So the team gave them what they asked for — and, after the meeting, the investors fired up a term sheet. One that was quite compelling compared to the acquisition offer.

Significant money was suddenly on the table but the company had to figure out if it wanted to close the funding round or pursue the closing of the acquisition offer. Ultimately, the Board decided that the fundraising offer was the better deal for shareholders and that was the path that was pursued. As part of the new investment, the founder decided to step away from the business and Mike was offered the CEO position.

Initially, Mike said no. It felt too soon. He was still in his early 30s. “Nope, too close to the sun,” he recalled thinking. “I don't want it, go hire someone that's been a CEO before.”

Ultimately, though, the chairman and several other leaders convinced him. They saw his promise and ambition, and they knew he wanted to be a CEO someday. He had 12 million bucks, two years of runway, and a board that trusted him — why not take the job? Once again, Mike had to make a leap of faith. He took over in December 2013 as they announced the new funding and ultimately soon after re-branded the company to Flywire.

Which brings us to another point of advice: Take the opportunity, even if it feels too soon. With Flywire’s Series B, they got the founder some cash. But they also fixed the CapTable, significantly increasing  everyone’s equity in the company and created a structure so that team members could take some money off the table. “There’s a lot of creativity that can happen there,” Mike says. 

Of course, taking the reins as CEO wasn’t easy. Just 10 days into his new job, there was a significant dispute with a payment partner that Mike had to help resolve. What’s more, there were a lot of competing priorities inside the company and strategic direction had to be made clear under new leadership. Should they double down on the core product, continue to pursue new products, expand internationally? Ultimately, with a team of just 40 people, every new project segmented the team’s limited time. When Mike took over, he decided they would focus on their one core product, which would go under one market in the U.S. “There were no other products, we were gonna live or die on this hill and be the best at this one thing,” Mike said. “And then maybe at some point in the future, we would get a chance to bring other products to market and go after other industries, geographies.” With that in mind, they improved their product, launched new features, improved the onboarding flow for clients and enhanced their payment network.

Companies are often pushed to hit milestones and then raise more capital. The pitfall is when those companies get ahead of themselves, rather than focusing on what they’re good at and improving their product. In Mike’s case, sticking to his plan worked. Fifteen months after he took over, Flywire hit their first three months of profitability. They quickly closed a Series C round. The company soon went from $500k of revenue to nearly $5 million, 11, 25, 50, and so on. It was off to the races from there.

5. Make sure you have experience on your side

Mike is first to note that he did not do this alone, it was a huge team effort that led to the success that Flywire has seen since these early challenging years.  He had experience on his side. His own, yes, but, even more critically, that of his independent chairman. Today, Mike advises CEOs that they should never be their own chairman unless they already have years of experience. Running board dynamics while also dealing with being a first-time CEO can be overwhelming. “Having that experienced chairman for you as a first-time CEO is instrumental and will really get you going in the right direction,” he says. 

For Mike, that person was Phillip Riese, who had been president of the card division at American Express and a 20+ year financial services veteran. Not only had Phillip been on the board of Flywire, but he was also on the board of Remitly, Monzo Bank Limited, and others. “He was this statesman of all this knowledge,” Mike says. “He was always on speed dial for me and a critical component of the success that we have seen at Flywire.”

Mike would ask about how to deal with specific issues, how to prioritize things, and how to scale what was a very fast-growing company. “The most critical part was having a true operator who had seen 99% of this before,” Mike says. 

Phillip was also emboldened in the way that first-time CEO Mike couldn’t be. At one particular board meeting, Phillip communicated the desire to start a regular Board Dinner as well as ensure the company held at least one international Board Meeting / year, both of which became staples for the Flywire Board Members to better understand the business and get to know each other more personally. “I could’ve never done that,” Mike says. “That’s the engagement you would love to have as a CEO and yet with investors being so busy it is often impractical…but by Phillip as Chairman heavily suggesting it, and he just cut to the chase on his expectations on Board commitment.”

Mike also learned that networking happens in stages and that the learning never stops. First-time CEOs often ask about how to develop their skills and improve their jobs. One thing that often comes up is whether they should get coaches or join specific working groups. For Mike, some of that experience came informally. “It sounds silly, but even CEO networking trips were massively useful,” he said. “I remember sitting around a fire pit and going deep into fundraising or asking more experienced CEOs how they accomplished certain things or laid out their management meetings, etc.” 

The main takeaway here? Always be curious when you can learn from people who have some relevant domain experience, even seemingly small bits of advice or thoughts can improve your own thinking and problem solving. 

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