How This Mogul Sold A Company For $480 Million, Then Built A $2.2 Billion Dollar One Right After


Sep 12, 2016 @ 06:04 AM 137,586 views The Little Black Book of Billionaire Secrets

How This Mogul Sold A Company For $480 Million, Then Built A $2.2 Billion Dollar One Right After

Laura K. Inamedinova ,  

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Only a few entrepreneurs have built a business and sold it for a nine-digit figure. Globally, there is a small group of people that have ever built multi-billion dollar businesses during their life time. Creating a $2.2 billion company in less than one year is iconic.

Michael Gastauer

Michael Gastauer

Michael Gastauer is the entrepreneur who did it. The Founder and CEO of Digital Banking Group WB21 is a one of a kind FinTech entrepreneur that has achieved this unique growth. His banking group WB21 has grown faster than any other FinTech company in history. With more than 900,000 customers and a monthly payment processing of over $1.2 Billion, WB21 is the largest digital bank that has been established during the recent FinTech age. It took Michael less than ten months to get there and his business growth is far from the peak.

To understand how entrepreneurs create billion dollar businesses this fast , I spoke to him in an interview:

Inamedinova: Thanks for joining me today. First of all, could you tell me how you came up with the idea to found a digital bank?

Gastauer: I have been in the banking and payment industry for more than 15 years. I have worked with Banks in almost every part of the world. One of the biggest hurdles for a customer in banking is opening a bank account if you are not living in the same country as your bank. When you send or receive payments internationally, things can get expensive and complicated.

Experiencing these pain points in banking, I realised that a digital solution that would allow customers from any country to open a bank account in minutes and use the full garment of retail banking without unnecessary restrictions would solve a huge problem.

Inamedinova: This sounds like a perfect solution for millions of customers, how did you fund the company and this kind of growth?

Gastauer: I had the fortunate situation that I didn´t need any third-party funding for growing the business. In 2008 I sold my last company, one of the first payment service providers in Europe and Asia for $480 Million USD to a Malaysian Banking Group. To finance the growth of WB21, I invested over $22 Million USD of my own funds.

Inamedinova: This is a quite an impressive amount. Most startup companies would try to find a Venture Capital Investor for that kind of funding. Did you ever think about getting third-party investors onboard?

Gastauer: We had a few requests from Venture Capital firms that were interested to invest, however, I saw some disadvantages to sell shares of the company before we reached a certain valuation. Most founders get diluted when they bring a VC Investor on board, especially at an early stage. The VC usually takes a board seat and wants to be involved when making decisions.  If you want to grow a business fast you have to be able to make fast decisions.

Inamedinova: This makes a lot of sense. How did you get to a $2.2 billion valuation that fast?

Gastauer: We launched in December 2015. Ten months later WB21 had reached key metrics that outperform most of the other billion dollar companies in the FinTech industry. The difference is most "FinTech Unicorns" need several years to get to the point we are at today. To reach the current metrics to be valued at over $1 Billion, we only needed ten months. The valuation of a company at our stage is mostly based on its key metrics and the future growth potential.

We are working with one of the leading FinTech Investment firms that are advising us on a private placement deal. Doing the benchmarking and analysis to research the valuation for WB21, they came to a valuation of $2.2 billion USD.

Inamedinova: If you look at the Fintech industry in a wider sense you would find companies like Klarna, Mozido, or Adyen that all have $2 billion-plus valuations. What makes WB21 different?

Gastauer: There is no other company that has the exact same business model as WB21. A big different is that it took most of these companies several years to get to a monthly payment volume of about $1 billion. WB21 passed the $1 billion monthly payment level ten months after launch.

The biggest difference between our business model and other Fintech companies are two things:

1. We address the global cross-border payments market that has an annual volume of $22 trillion. Most FinTech companies are focused on much smaller markets such as remittance which is a $800 billion market. When your product solves a problem for a market of that size, your growth rate is way more extreme. The cross-border payments market is mostly dominated by international banks.

2. Most startup companies don´t have the experience and resources to serve customers on a global market scale. Hence, the usual rollout strategy is to get market shares in a smaller local market and gradually expand into other countries. Depending how fast you can scale your business, this might take several years before you reach a global presence.

When I founded WB21, I knew the key to success would be to find a solution that would allow us to serve customers on a global scale with minimum resources. Being in banking, our biggest problem to solve was how to do KYC on customers for account opening, without having any manual work involved. To solve that problem, we developed a fully automated, compliant KYC solution that has unlimited scalability and works for customers in 200 countries. The invention of this technology set us apart from any other existing banking solution. It allowed us to offer real-time, online account opening to clients in 180 countries from day one.

Having the experience from my last business, how to build and operate an organisation on three different continents, it was obvious that the goal for WB21 was to be fully globally established within the first 12 months. In less than nine months, we set up the office in San Francisco, Switzerland, London, Hong Kong, Singapore and India.

Inamedinova: Michael, what advice could you give an entrepreneur if he or she wants to build a billion dollar business?

Gastauer: Obviously there is no exact solution for doing this, however, what I have learned is that the following criteria are important:

  1. Try to create a product that has unlimited scalability and solves a huge problem in a global market.
  2. Find a smart solution to address this market and grow your business as fast as you can.
  3. Focus on revenue and growth over everything else.
  4. Most importantly; enjoy what you do. If you don´t have the right motivation you won´t have success. Money is not the motivation, solving a problem that millions of people have is the right goal. This is what all global business models like Uber, AirBnB or Facebook have in common. The rest is execution and building the team for it.

Inamedinova: Owning the majority of this company makes you a multi Billionaire. What is your advice for founders to get there?

Gastauer: The most important advice I could give is to be cautious with taking investors’ money. Most StartUps see it as the best thing that can happen if they get a huge funding round. The downside with funding, especially in  the early days of a startup, is that the founder gets diluted. The plan when setting up a company should never be to depend on investor money. It should always be the focus of an entrepreneur to have a product that produces revenue as soon as possible. In most cases, you need capital to grow your business, however, it should be wisely spent. Raising minimum capital and growing your business from revenue will help you keep a larger share package until the company is big enough to raise larger amounts without getting heavily diluted.

Inamedinova: A $2.2 billion valuation is already impressive. Most business owners would be happy to ever reach that. What are your goals for WB21 in the next few years?   

Gastauer: Given that we only launched ten months ago, I believe we haven`t even seen one tenth of our growth potential. The business model of being a global company from day one, and serving customers in 180 countries allows us to grow into a  digital Bank with 50-100 Million customers within the next few years. The plan is to wait until we reach a $20 Billion plus valuation and then go public.

Inamedinova: When do you think could this happen?

Gastauer: Given the current growth rate, we could see this happening by 2020.

Inamedinova: Michael, this is a truly unique and impressive approach of building a business. Thank you for your time and sharing these insights with us.

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