The following interview is a conversation we had with Klas Bäck, CEO & Co-Founder of Pagos, on our podcast Category Visionaries. You can view the full episode here: $44 Million Raised to Power the Future of Payments Operations
Brett
Hey everyone. And welcome back to Category Visionaries. Today we’re speaking with Klas Bäck, CEO and Co-Founder of Pagos, a payments operations platform that’s raised 44 million in funding. Klas, how are you?
Klas Bäck
I’m great, thanks for having me.
Brett
No problem. Super excited to have you. So let’s go back. So you’re flying in an airplane. The year is 1998. You’re moving from Sweden to the United States. What’s going on inside your head as you’re taking that flight?
Klas Bäck
Oh man, that’s a rough one. Showing age right off out of the gates. Well, I mean, to be honest, what was top of mind was people live like this. It’s sunshine, it’s warm weather, it’s January. How do I possibly find a way to stay? And that’s what ended up happening. And the vehicle for me to end up staying was entrepreneurships and specifically E commerce and payments. And I’ve been in that space ever since.
Brett
So you’re an OG of the payments space. You’ve been in it for a long time. How have you seen the payments world evolve over the last two and a half decades?
Klas Bäck
There’s many ways of slicing that, of course. I think the biggest difference I think is there’s a lot of companies out there now. They’re building software around payments for many different purposes. It could be providing vertical SaaS company with whatever product I’m having and payments is built into that, or I’m building an Uber experience and payments actually disappear and that’s actually why people are using it. Or so those are two examples. The third example I would say if you go back 10, 15 years in time, payments was often afterthought of corporate banking. So you were signing up five year contract with JP Morgan or Chase, as they may have been called at that point. And payments come with that deal on the banking and a junior finance person would manage it. I think over the last five, ten years.
Klas Bäck
In particular, companies like Braintree, where I used to work in stripe and moreover to payments is something that product and engineering Leadership either are key stakeholders or decision makers. And that’s a pretty big shift from where it was maybe even just 10 years ago.
Brett
During your time at Braintree, were you interacting with Brian Johnson ever?
Klas Bäck
I did, I did. I came in when he left. A friend of mine, Bill Reddy, became the CEO. He built a new leadership team and I joined as part of that. And during that period, Brian was around and making sure everything kind of got set off on the new course without him. He kind of built the core foundation, but then it was time for him to move on to new things and he has a lot of new things since then. Some of that is out there.
Brett
So are you following any of the crazy stuff he’s doing now?
Klas Bäck
I am following some his thoughts. I’m probably not ambitious enough to hack my body. I think exercising it well makes you feel that’s good enough for me. But it seems like some people are much more hardcore in trying to really change their own body and what comes with eating and exercising and all the things so good for some and maybe too much for others depending on how they look on things. So.
Brett
Yeah, totally agree. Now let’s talk about what you’re doing today. So at a high level, what does the company do?
Klas Bäck
So I would start actually, why do we exist? So I would say there’s not a single company out there that are selling or billing online that are not finding it challenging to optimize their own payments infrastructure with that. I mean their infrastructure and their vendors infrastructure. What does that mean? That means that they are leaving money at the table. So they are not selling as much as they could, they are running at a higher cost than they should. And accepting payments online is actually very expensive, typically one of the most expensive line items on the P and L. And often people do a lot of things manually. So me and my Co-Founder, we set out to help companies actually do better when it comes to payments performance.
Klas Bäck
So we built the payments data company where we help people with analytics, visualization, baseline what their metrics are, track them over time and then give them tools to help them better execute to take advantage of that they could actually do better with what they have today. Selling more reduced costs, do more things more effectively.
Brett
Being that you’re a payments guy, I have to imagine that there’s like a long list of problems that you could have gone out to try to solve in the payments world. What was it about this problem that made you say, yes, that’s it, that’s the one I’m going to go and solve?
Klas Bäck
Yeah, I know it’s a good question in many ways. So I spent a decade with Brain to pre acquisition, post acquisition and PayPal actually who both brain to bought Venmo and then PayPal. Both Braintree and Venmo. But they did a good job of keeping the team together, at least on the leadership side. So for about six years post acquisition, probably some sort of record, but point being, pretty much every one of our customers had the same problem. So they had a lot of challenge around data. They were doing things that they could easily do better. So there were a few work streams that led to me, my Co-Founder started thinking about that. The most obvious one to illustrate was two things. One, I think the payment industry operates in quite opaque world.
Klas Bäck
Everything is complicated and people say a lot of things that they don’t sell and back up with back. And then the other one was that almost all companies operate without data or they’re not making decisions based on data. Even extremely large companies that are maybe selling billions of worth of products on any given year, they will not accept not being data driven for anything else. Except when it comes to payments, there is often the data is incomplete that is too old, that is not correct. So the core kind of reason when we say, hey, someone got to fix this was actually I had a team at the end of my paper period where we basically saying, you have multiple vendors, PayPal or Braintree is one of them.
Klas Bäck
We spend more time optimizing our infrastructure so that we should be able to prove that we do a better job than your other vendors. And when we do, you should give us more of your business. We could not have that conversation with a single one of our largest customers without months of comparing data. What are you looking at? That data doesn’t look real. Are you sure that’s your right data? It was just so painful and so time consuming that me and my Co-Founder started talking about, hey, someone should fix that. And then that advanced over months to yeah, maybe we should fix that.
Klas Bäck
And then we had just one day where we looked at each other and like I guess we are actually doing it now because somehow we had already passed into a world where were building and doing and we hadn’t really made a decision until after the fact.
Brett
Almost like it’s easier to make decisions if you don’t realize you’re making a decision at that time. That makes it a lot easier.
Klas Bäck
Yeah, that’s probably too. It’s like, oh, well, I guess we already committed so I guess we better keep on doing it then since we already Committed.
Brett
So yep, yeah, makes a lot of sense. What about the market category? So when we look at the market category, is it payment operations or what is it?
Klas Bäck
No, that’s a good question. On the one hand, I guess payments touches everything. Like that is how you get paid. That’s how you can pay your own vendors or employees or make a lot of margins so that your investors are staying happy. But in terms of where does payments sit, I think you find quite a few different groups. As I said before, it could be in finance for traditional reasons, or it could actually be owned by product. Who owns the, let’s say the e-commerce platform or the billing platform, as the case may be. It could be sitting on an engineering sort of. It really depends. So we find two groups in the market, companies that actually have a payments team because they realize that’s really important for their overall performance.
Klas Bäck
So then someone in the organization have some sort of title tied to payments. That could be payments of fraud, it could be payment operations, it can be owning the billing platform, whatever it could be. And then the other group, you have people where no one really owns it, they may own it by proxy. Like, well, I guess the e commerce platform is mine. So I care about the performance of that platform. We want to run the platform as cost efficiently as we can. The former is a lot easier for us to engage with than the second one for obvious reasons.
Klas Bäck
And then because so many different teams touch the payments information or data anywhere from if you take a traditional e-commerce site through checkout to going through all the steps that the transaction actually happened with your vendors, to customer support, to shipping and delivering, if that’s your business model, whatever it may be. Sometimes all these different teams aren’t as early to pre coordinator amongst themselves and we have to bring them together and say, hey, we can help you be more effective together across all your different teams with better payments data. And better payments data is worth paying attention to because you can sell more reduced costs and optimize how much time you spend on running whatever it is you’re doing as a company.
Brett
And then are you capturing demand for other categories then? Or are you capturing a demand of people who are going to Google to say, I need a payment operations platform? Like, where does that demand coming from?
Klas Bäck
Yeah, that’s a good point. So I think for us it’s a pretty new thing. I think over the last five, ten years in particular, companies infrastructure is getting a lot more complicated. There’s a lot of reason for that. As I said, companies are building, let’s say an Uber first experience where payments disappear. That’s really hard technically. Or they’re building a vertical SaaS, companies or marketplace. And actually all the things that needs to go into that is super complicated compared to let’s say a website selling physical goods. 24. So those are drivers and they also have people moving into the cloud. They go global more quicker or they have both shipping product and subscription. So just more complexity. And as part of that, they just need more help managing more effectively. And that’s where we often come in and how it’s important if we look.
Brett
At the competitive landscape, maybe we know, put this on a map. What does the competitive landscape look like? Who are those big competitors that you’re up against?
Klas Bäck
Yeah, so because of it is kind of a new category. So something that’s evolving at least for part of the market. I think you can divide the market in three categories. So some are extremely well funded or have a lot of resources. So they have maybe built something in house that’s actually been the easiest group because they know what they want and we can show pretty quickly that we can do it better. The other category is they aren’t necessarily aware or they aren’t as deep into it as they should. So a little bit nudging, you can show them, hey, we can actually help you do this a lot easier or do a lot more with less resources.
Klas Bäck
And then the third category, which is the biggest part of the market, payments, is a weird combination of a little bit of finance, lots of technology and very complicated domain knowledge that makes it hard for people to understand. Like, surely it can’t be that complicated. It’s like, no, actually it’s very complicated and it’s hard to do well. If you start looking at your own performance, you would realize that. So the latter part is kind of part of our sort of next decade challenge. How do you help people?
Klas Bäck
Not just the people who know what they want and it’s build versus buy, but how do you help the people do more than they thought they should do and then Long term, how do you help everyone actually do this without necessarily having a bunch of people that are spend 10 years or longer in the industry and therefore realize they need to take some of these things on. And if they do, they can be heroes internally because they can show how much better the company can do financially, selling or cost cutting as the case may be.
Brett
What about the evolution of the marketing strategy? So what did that early marketing strategy look like and then once it evolved to what’s it look like today?
Klas Bäck
Yeah, I guess in the beginning we, me and my Co-Founder, we have a little bit of an advantage I guess since it’s a continuation of the world we lived in for quite a while. So in the beginning it’s a little bit of a brute force like okay, who should we go after? So in our case we focus on what we think of as enterprise companies selling and billing online. So for that most cases that means 50 or 100 million in annual sales and above. So a little bit of a brute force like I literally went through every single person that I was connected with on LinkedIn who are a good fit. What should I tell them and why should they care?
Klas Bäck
And then basically started pinging people with a lot of messages and maybe because we’ve been around for a while, there was a fair amount of people that took the first call and then you got to show them and then you can iterate over time and get better. So that was sort of like a step one brute force and we had help because we played in that space before and then over time I think you trying to expand it and do a lot of different things and see what works really well. I think a bunch of different startups in my past, I think one, it’s not a surprise because you kind of know it, but it’s been much more in their face than maybe I would have realized.
Klas Bäck
There is so much more noise out there in the last couple of years than there ever has been. So no matter what you do, nothing is as easy. Maybe like, you know, there are less journalists around. So they don’t write about small companies, they don’t write about big companies. There are a lot of people that are reaching out. Whether it’s cold calling or sending million AI generated cold emails or pinging people at LinkedIn or there are many people who want to present on conferences, there are many people who are doing webinars. We had an idea of what were doing is relatively narrow space. So actually buying Google AdWords would work really well because few people would look for it. But the ones who did would actually have a high intent. But that actually didn’t really worked out.
Klas Bäck
Even with expert help, it was pretty complicated to manage and really see, like if we spend $1, do we get anything back? I guess Google doesn’t really care about smaller customer that way. So we try a lot of things and then, okay, over time, what’s working and then we’re trying to focus on that. So one of the things that I’ve been working is building a community around in a way, there is a community out there, we tap into it and then we try to be a node of the people that are working with us or are thinking about working with us. So as an example, we have hosted quite a few dinners in different locations around the US where okay, we’re going to have a dinner in New York City, LA or whatever, come and have a good time.
Klas Bäck
But it’s not really about meeting us. It’s actually meeting your peers and talking to them is actually valuable for another professional contact that you can draw for the future. And that’s been quite good. And the same thing about we are fortunate because what we’re doing there are a couple of really big conferences that have a lot of activities. So tapping into what they are doing, whether it’s, you know, conferences in person or running different themes that they want to have webinars on and just really making sure that we are established in sort of the network. Still a small part of the total market, but it’s a great start for us to get our toes wet, learn, do better, iterate and then expand over time.
Brett
I talked to more and more founders and marketing teams that are doing those dinners. What a Founder was just telling me earlier today, they used to spend, you know, all this money doing big conferences. They’ve scaled that all back. Now they’re just doing a lot of different dinners all over the country. I think it was all over the world actually. They’re just, yeah, they’ve doubled down on that. They’re seeing it work. What have you learned from doing these dinners? And like what’s the ideal number?
Brett
That’s the thing that I hear like debated of like how many people have a 10? How many people are too many people?
Klas Bäck
No, that’s A great question. I think it can be really good at 4 to 6, but then obviously it becomes a little bit more random. So you probably end up somewhere 10 to 20. But there is a flip side of that because in a perfect scenario if you can rotate people around during the dinner, it’s even better. So personally I prefer where you get forced. It’s sometimes not that great experience like okay, time for you to move over there. I was like, but I really like who I’m sitting next to. But it is good for spreading it or even better depending on the context where it’s going to be a little bit more free flowing. The food is over here you go and grab it and then you can mix up over time. But I would say somewhere between 6 and 20.
Klas Bäck
In reality probably 10 to 12 is probably ideal. But it depends if you make it a little bit more networking, you probably can have a bigger crowd coming as well. It probably also depends on the topic and the type of people that you know. I also been, in some cases we haven’t done as much, but sometimes it’s very much hit and miss. But I know some trying to curate, let’s say they have a table with 20 and they try to actually have a conversation. I think if you do that really short and specific, it can work. If it’s long, people are like, oh, can I get out of here? It’s too much talk or there’s too much spread on the interest group. So the conversation like, okay, that is too wide. I don’t really care about this. How can I go home?
Brett
Makes a lot of sense. Now we’re depressingly already almost through 2024, so we’re what, less than two months left as you think ahead to 2025, what are your top priorities? What’s top of mind?
Klas Bäck
Yeah, so for us, I guess we’ve been fortunate. We have a lot of early adopters. So in a way we’ve been kind of forced to build out at least some sort of pilot version of some of the things that was more long term. Beth so we have a lot of things where we built one version, 1, 2, 3. But we say, hey, for many more companies to be able to try it, we need to add features. So it’s kind of a year of rounding out the platform. We still have some additional interesting things that some of our early adopter customers would like us to build a bed for. So we want to do that in 2025. It’s a little bit of a stretch goal for us, but it is a lot of Money for our customers.
Klas Bäck
So we’re trying to find a way like, hey, how can we get this off the ground if we do something? We had an example where, okay, we want to automate this. It should be in the online app that we have. But we can start if you let us send you a file of data once a week and then they became a daily file and then they became a streaming file as an example. Otherwise it would have been too big of a lift in the short term, but it was valuable for them, so were lucky enough to do it. So that was two and then the third one. There are a lot of work that we can do on from a go to market perspective that could be both around tools for how do we get more leads, how do we convert them better?
Klas Bäck
Maybe we should build a different type of demo. Maybe we should record a bunch of specific videos and you can send them snippets. Or maybe we should build a sandbox and people can play around with a unique ways that are specifically tied to their use cases that they’re thinking about. Or can we make onboarding easier? Or can we change the documentation? Or is it just, hey, maybe we should just have a sort of a town hall every Friday. Hey, call in if you have questions and we’ll help you operate some of our services more efficiently. So just working on efficiency from a go to market and from that, I mean actually getting first companies into taking care of existing customers and make it easy for them to expand and do more and more of the services that we offer.
Brett
On the topic of go to market, if you reflect on the entire journey, what’s been the most important decision you’ve made to date and how would you make that decision? You know, take us behind the scenes of that most important go to market decision.
Klas Bäck
That is a good question. I think at the end of the day you just got to go for it. Like, hey, not everything is perfect. It is a startup, it is understood and ideally you get everything right, but sometimes you don’t. And then how you fix it and how you manage it matters a lot. You know, I think it’s hard to get around that. That is the key issue. So just go and do it and then quickly iterate and do it better and stay in close contact with the people that take a little bit of risk by believing you early. Of course sometimes they’re doing that because they see a great upside for themselves and their companies.
Klas Bäck
But staying close with communication, making sure everyone understand where we are and what’s going on, being transparent, if something happened that shouldn’t have happened and make sure that put in processes and procedures to try to make sure that never happen again. So some of these steps are hard to do, but you really just got to do it. And then over time, the more you do it, the better off you’re going to be. Better story, you have, the better answers you have, the more data that you have. So just lean in and say yes and step into the void and. And you become better over time. So I know that’s not very specific, but for me it’s like it’s better to do it than overthink it. Right.
Klas Bäck
And I think sometimes people just sitting in their own company and like, hey, thinking about all these scenarios without going out and talking to people and then you may be way off versus what people are actually looking at or you think you have the idea, but there’s something else that really resonates us.
Brett
And one of our core values is action solves everything, which isn’t necessarily true, but it feels true.
Klas Bäck
That is very true. And we actually have those core principle when we’re trying to recruit as well. I think people who jump in and actually take action, you have a group of four or five people and you’re brainstorming, seeing they actually jump in, okay, I’m taking this down or I take this action. I think you need those people in startup and environment. And I think another good compliment is if you’re not curious. It’s really hard to do well in startups. Like if you don’t ask questions, you may not actually capture what’s happening or what people are doing. So you get left behind. They’d be happy to answer your questions and help you. But if you’re not curious and trying to understand, you know, what is going on and why is it you often may completely misunderstand. Could be internal, it could be external.
Klas Bäck
If you don’t ask the customers the hard questions, you may think they want something, but they actually want something completely different and you don’t understand each other. It’s not. Curiosity is great.
Brett
We’re aligned. We have a very similar core value there as well. Pretty aligned. Now, final question for you. Let’s zoom out three to five years into the future. What’s the big picture of vision look like here?
Klas Bäck
So in a way you can break that down many ways. If I do the simple answer. Our core focus is on companies that are selling and billing online and we are fortunate there are many of those. There’s probably in the core segment, maybe 100,000 of it in the US and we want to build a global company from day one because that’s the world we lived in and we do have already. We haven’t chased them, but we have customers in Latin America and Europe and Asia Pacific. So we want to build a product that all enterprise companies building and selling online are actually using. Hopefully more and more people will realize that on their own, so they come to us.
Klas Bäck
But otherwise we’re going to keep building tools and infrastructure to make it easy for them to identify that this is a need and then actually being able to execute it. So for us, it’s really, how many more companies can we bring into the fold? And out of those who are already working with us, how can we help them do more? You had two KPIs that you were saying was important for the company, but you really should have seven because that’s what your peers are having. So also helping them to educate them to think about it from a broader perspective and therefore make them better from an organizational perspective, which ties back to, hey, we did help you grow your revenue, we did help you reduce your costs, we did help you operate more efficiently and finding things that you can do better.
Brett
Amazing. I love the vision. I really love this conversation. We’re up on time here. I want to get you out of here on time as promised. Before we wrap up, if there’s any founders that are listening in that want to follow along with you, where should we send them?
Klas Bäck
I think this is what, ping me on LinkedIn or that’s probably the easiest. I’m responsive to requests. Or ping me and tell me why we want to chat and I’ll respond.
Brett
Amazing. Thanks so much for taking the time. I appreciate it.
Klas Bäck
Yep, likewise. Always good to be here.
Brett
Talk soon. This episode of Category Visionaries is brought to you by Front Lines Media, Silicon Valley’s leading podcast production studio. If you’re a B2B Founder looking for help launching and growing your own podcast, visit frontlines.io Podcast and for the latest episode, search for Category Visionaries on your podcast platform of choice. Thanks for listening and we’ll catch you on the next episode.
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