Turning Credit Card Payment Processing Fees into Revenue - with Caleb Avery, Founder and CEO Tilled

**Ray Rike** (0:00)
Hello, I'm Ray Reich, founder and CEO of RevOpSquared and your host of the Metrics That Measure Up podcast. We talked to a wide variety of B2B, SaaS and Cloud thought leaders, executives, investors, and people just like you to discuss the metrics and benchmarks they use to make metrics informed decisions. Now on to today's show.
Welcome to today's episode of the Metrics that Measure Up podcast. Today, we are joined by Caleb Avery, the founder and CEO of Tilled. We'll be covering three main topic areas with Caleb today. First, some of the challenges and opportunities of B2B credit card payments, the benefits of being a payment facilitator or payback, and the unexpected obstacles of being a first-time founder and CEO. Caleb, please take a moment to give a brief overview of your journey to becoming a guest on the Metrics That Measure Up podcast.

**Caleb Avery** (1:09)
Well, thanks so much for having me on the show today. My background, I started in the payment space at 19 years old, going door-to-door, selling payment processing services to small business owners.
For me, over time, working with all these business owners scaling up that first company, I then started getting brought in on consulting engagements for software companies. Most of those software businesses were vertical software companies, so think like a dental practice management software, golf course management solution, or a donation management platform for non-profits, and most of those software companies were working with folks like Stripe or Chase WePay, and they were really frustrated with the payment experience that they were getting from those companies, specifically the idea that they weren't able to generate revenue from all of the payments flowing through their platform. And so, after seeing the same problem over and over again about four and a half years ago, decided that I was crazy enough to go start my own business and started what became Tilled and what we call PayFac as a service to try to address that problem.

**Ray Rike** (2:13)
Well, that's interesting. So at 19, you were selling payment processing services basically, and now you founded the company to turn what I always thought as a cost center into a revenue center. But I may be getting ahead of myself. So let's just step back. So there had to be a catalytic moment where you were sitting around talking to friends or business colleagues and like, there is a business opportunity for that. Can you tell me what that catalytic moment was?

**Caleb Avery** (2:41)
Yeah. So for me, one of the consulting engagements that I had was working with a software business doing over a billion dollars a year in credit card processing volume and they had this idea that they wanted to go become a PayFac or a payment facilitator. And the reality was I started to engage in the dialogue with this particular client. They had absolutely no idea what it meant to be a PayFac. And as we started to go through the process and I started to reach out to other companies that existed in the space that were trying to solve this problem, even for the other companies that existed in the space, they were taking what was traditionally a two-year multi-million dollar process. And you can imagine most software companies not being excited about a two-year multi-million dollar process. And these competitors were turning that into a six-month, couple hundred thousand dollar process. And yes, that's less than two years and millions of dollars, but it's still six months. It's still hundreds of thousands of dollars. You're still hiring a team. You're still taking liability. And so for me, the catalyst, if you will, was not a single kind of overnight conversation. It was really a period of almost a year where I was going out to validate this hypothesis. And the hypothesis for me was, what would have to be true for a vertical software company to leverage the benefits of the PayFact model, but launch in one week? And for me, it took me about a year of going out and talking to potential customers, banks, acquirers, and really understanding the landscape to convince myself that this crazy idea of launching a company and take advantage of the benefits of the PayFact model in one week was actually possible. And once I was convinced that it was possible, I was all in, and the rest is history.

**Ray Rike** (4:29)
So two things. So number one, there is a two-year multimillion dollar process that I love, and it's acquiring a new customer and watching him create revenue. That's the one I do love. But going back, let's start at the beginning. Payment Facilitator, short-term name, PayFac. Can you please explain to the audience what a payment facilitator is?