Mar 9, 2019 · 23m · top-founders
1323 How FinTech Company Wave Is Deploying $100m in Capital, $25m+ in ARR
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of The Top Entrepreneurs Podcast, host Nathan Latka interviews Wave Co-founder and CEO Kirk Simpson to explore how the fintech company scales its zero-touch freemium platform to over 80,000 monthly signups and $50 million in ARR with sub-2 percent churn.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Nathan holds 36.4% of the talking time here. How this is scored →
Nathan as informed peer 6.0 Guest teaching 3.7 Guest disagreement 2.2 Nathan pushing back 4.2
speaking balance: gold is Nathan, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 9:57 Simpson sets hard limits on data disclosure
Simpson refuses to give precise paying customer numbers, using repetitive vagueness ('tens and tens') and explicitly declaring he will not go deeper.
Hardest push from Nathan ▶ 20:22 Latka halts interview to call out tool inconsistencyLatka forcefully stops Simpson's answer to question how Drift fits into a strictly zero-touch customer acquisition model at Wave's massive traffic volume.
Biggest teaching moment ▶ 12:35 Simpson explains gross margin LTV and fully loaded CACSimpson explains why conventional SaaS LTV calculations are misleading for fintech companies that pass interchange fees to card networks, detailing net gross margin LTV.
Nathan holds their own ▶ 5:24 Latka benchmarks small business churn via Constant ContactLatka demonstrates deep domain familiarity by bringing up Constant Contact's historical public market valuation penalties caused by micro-business customer churn.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Nathan as informed peer | Guest teaching | Guest disagreement | Nathan pushing back | Why |
|---|---|---|---|---|---|---|
| Targeting Micro-Businesses and Embedded Monetization | 6 | 4 | 2 | 3 | Latka opens by contrasting Wave against enterprise and alternative lending models like Cabbage and Vena. Simpson gently reframes the SMB categorization down to small businesses under 10 employees and explains embedded monetization. | |
| Benchmarking Churn and Critical Onboarding Activation Signals | 7 | 3 | 1 | 4 | Latka cites Constant Contact's public market struggles with churn and converts annual retention benchmarks into monthly gross logo churn. Simpson agrees with the ADP benchmark math and distinguishes controllable from uncontrollable churn. | |
| Zero-Touch Go-to-Market Model and Customer Scale | 5 | 2 | 4 | 5 | Latka probes into paying user figures, leading Simpson to hedge with vague wording and explicitly decline to provide exact numbers. Latka quickly boxes him into a bracket between ten thousand and one hundred thousand paying customers. | |
| Freemium Conversion Tails and Organic Acquisition Dynamics | 6 | 6 | 2 | 4 | Latka challenges how low churn can create artificially inflated LTV figures. Simpson educates the audience on evaluating gross margin LTV due to interchange fees alongside fully loaded CAC. | |
| Strategic Advice on Prioritizing Organic Channels Over Paid Ads | 7 | 2 | 2 | 3 | Latka synthesizes Simpson's earlier figures to extrapolate Wave's run rate at approximately 42 million dollars ARR and probes deployment of capital. Simpson explains why founders should master organic channels before touching paid ads. | |
| The Famous Five Rapid-Fire Questions | 5 | 5 | 2 | 6 | When Simpson mentions Drift as his favorite tool, Latka immediately interrupts to challenge the inconsistency of a chat tool with Wave's zero-touch model. Simpson clarifies that they pushed Drift to act as an automated self-serve bot. |
Statements from this episode (17)
Kirk Simpson: 95% of North American businesses have under 10 employees
“About 95% of all businesses in North America are in this size.”
Wave offers free core software to monetize through embedded fintech
“We give away our invoicing and accounting software, 100% for free. And then we monetize by putting payments, payroll lending offers, et cetera, in the application and get those deeply embedded into what the small business owners are doing.”
Kirk Simpson: Wave shifted from Stripe to in-house infrastructure as it scaled
“Our payments business, for instance, was built on top of Stripe. We get to a point of scale and quite frankly, our users want us to deeply integrate it. And so most of this stuff over time, we've been building ourselves.”
Wave's paying customers average $70 to $100 per month
“So up in the 70 to a hundred dollar range on our paying customers for all of their transaction processing, et cetera.”
10% to 15% of SMB churn is uncontrollable business failure
“In small business, you're going to have, to your point before, you're going to have 10 to 15% that are going to naturally go out of business.”
Bank connections and invoicing are key early SaaS retention signals
“I mean, things like connect your bank account. So you're importing your transactions send out a couple of invoices, accept a couple of electronic payments, those kinds of things. Those are huge signals of success long-term.”
Wave has nearly 200 employees and zero sales reps
“We're closing in on 200 people in the company. We don't have a single sales rep that works here. Not an inside sales rep, not an outside sales rep.”
Wave freemium users sometimes take 24 months to convert to paid
“And you know, the interesting thing that we see Nathan is that we'll get some people to be paying in the first month. And then we'll have others who are using the free platform for 24 months, and on the 25th month, convert into pay.”
Fintech LTV must use gross margin, not gross payment volume
“Essentially in our business, because we're paying out to Visa and MasterCard and Amex on our payments revenue,
It's important to not look at the gross revenue, but instead to the net, right?
And to like take lifetime times by your net revenue to get a true vie…”
Marketing teams neglect organic acquisition once paid channels are introduced
“Once you allow your marketing team to start using paid marketing as a channel, you will watch them spend all of their time optimizing that paid channel. And almost no time optimizing on organic.”
Wave acquires roughly 70,000 of its 80,000 monthly signups organically
“Of the 80,000, as I've said, you know, about 70,000 are coming in organically.”
Wave is growing revenue close to 100% year-over-year
“We're growing at a healthy, healthy clip. We're not quite a hundred, but we're close.”