Eugene Danilkis has raised close to $175M to reengineer how financial and banking services are designed and delivered. His venture, Mambu has successfully raised funding from top-tier investors like Bessemer Venture Partners, Tiger Global Management, Runa Capital, and Arena Holdings.
In this episode, you will learn:
- The keys to surviving lean times to get through to the flush times in your business
- How fundraising changes as you progress through funding rounds
- How big the banking services space is
For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.
Moreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here).
Remember to unlock for free the pitch deck template that is being used by founders around the world to raise millions below.
About Eugene Danilkis:
Eugene Danilkis is the Co-Founder and CEO of Mambu, the core engine powering digital-first banking and lending.
Eugene Danilkis put his degree in Computer Science to use at the start of his career, working as a software engineer on control software for the international space station. He built on the technical expertise he gained with a degree in HumanComputer Interactions, a multidiscipline qualification focused on the confluence of business, technology, design, and psychology. Inspired by his work for core banking software providers and lending institutions servicing hard-to-reach markets, he co-founded Mambu in 2011 to bring the business models and technology benefits of SaaS to financial services.
Connect with Eugene Danilkis:
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FULL TRANSCRIPTION OF THE INTERVIEW:
Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. I’m super excited about the guest that we have today – a guest that has been there, has done it, has been everywhere around the world. His journey is really remarkable, and I think the story that he has to share with us today is going to be super inspiring for me, for you as you’re watching and listening. I can’t wait, and I don’t want to make you guys wait any longer, so without further ado, let’s welcome our guest today. Eugene Danilkis, welcome to the show.
Eugene Danilkis: Thanks very much for having me. It’s a pleasure to be here.
Alejandro: Originally born in Ukraine, but the time in Ukraine for you and for the family didn’t last long. Tell us, how was life growing up?
Eugene Danilkis: I was born in Ukraine. It still was part of the Soviet Union, and my parents decided to leave when I was about seven years old. We were learning English, and I had no idea why we were starting to learn English because I was still learning to speak basic Russian. Then, we decided that we were leaving. We took a train out and lived in Italy for six months before flying over to Canada. I ended up moving to Canada, and then I understood why I was learning English because now I was surrounded by a bunch of kids and trying to keep up with them in terms of picking up a new language. I grew up and spent most of my early days growing up in Vancouver.
Alejandro: Let’s talk about Vancouver. How was that because you went there at what age? You were about seven years old, or how old were you?
Eugene Danilkis: Yeah. I was seven years old when I moved there.
Alejandro: Was it like a big culture shock for you and for the family?
Eugene Danilkis: Yeah, the language and the culture were quite difficult. Life is always difficult as a kid, of course, but I think especially when you’re trying to pick up a language; you have this really strong accent; you don’t understand what all the other kids are saying or what the teachers are saying. I think that made everything more challenging, of course, but it also motivated me to learn quickly. I was trying to pick up the language as much as I could and was highly motivated. Also, it made me more motivated to learn, I would say – kind of self-motivated because I saw the benefit of learning things and learning things quickly just to fit in and be able to survive, really.
Alejandro: Would you say that for you, seeing your parents, as well, going through the change and building a new life there in Canada perhaps inspired you in the direction of being an entrepreneur and being okay with dealing with uncertainty. Was that something that shaped that entrepreneurial bug a little bit for you?
Eugene Danilkis: I think so. I think it made me more willing to take some risks. I know the big risks that my parents took in moving over and how challenging it was for them. Even as an entrepreneur, we talked about taking risks as an entrepreneur, but even then, I know that the risks I was taking were really nothing on the downside, and the worst case of me failing as an entrepreneur were still going to be trivial compared to the risks that my parents were taking. I think that always gave me a bit of a different perspective on risk because I knew what really-difficult was like, and I knew that pretty much given the almost luxury that I had of growing up in Canada, that my worst case was not going to be anywhere as challenging as my parents’ situation. So, I think that gave me a lot of perspective on that.
Alejandro: A lot of people that are originally from Ukraine – that technical side, that engineering mindset, why is that the case?
Eugene Danilkis: It’s a big part of the education there. It’s a really big focus on that. It’s a huge discipline. My dad was continuously proud of his engineering background, his strength in math. He was always pushing me and encouraging me to be strong in those disciplines because they’re always considered really important disciplines for everybody who is growing up, I think, in the Soviet Union. I think that just gets passed along, so it falls out all these engineering, computer science, mathematics. Those elements were really important. When you grow up in that, you pass it on to your kids, and it becomes an important part of education. You end up thriving in that. I was always really good in math. I was good in computer science. I don’t think I was particularly smarter. I think it was just because my parents were encouraging me and supporting me in that and helping me go above and beyond. That also gave me a level of confidence because I could see, “I’m really good at this.” But I was good at it because I had the support of others who saw the importance in that.
Alejandro: Got it. In your case, that definitely got you into computer science. You went to college there in Canada. Essentially, all of a sudden, you see yourself writing software that is going to be used in space. So, how cool is that?
Eugene Danilkis: Yeah, that was really cool. I was, obviously, a big science fiction fan, reading a lot of Isaac Asimov, watching Star Trek and that kind of stuff, as multiple people do in computer science. Then I finished my studies, and I applied for a couple of jobs. One was a database job at a supermarket chain, which I didn’t get. The other one was working for a company that does software development for satellites and for NASA through the Canadian Space Agency. That was the job I did get. I was really happy that the other one rejected me because otherwise, it would be an alternative universe where I’m working in a supermarket focusing on databases. Thankfully, I didn’t get that job.
Alejandro: Yeah. Why did you decide to go and do your Master’s? What was that trigger for you?
Eugene Danilkis: I think it was a matter of passion. I was so passionate about my first job and my first project, the one where I got to work on software that was up in space, and then I went into kind of maintenance. I just didn’t see any other projects that excited me as much as that, so I was almost kind of spoiled with that. I wanted to relight that spark, in a sense, so I thought that maybe a little bit of a fresh start of doing a Master’s would be an opportunity to do so. But I think there was a second part, which was the fact that I wanted to do the Master’s in the U.S., in Carnegie Mellon in Pittsburgh. It was a bit of that start of the entrepreneurial journey of venturing out on my own, in a sense. I grew up in Vancouver. I went to school there. My parents were always nearby. Moving to the U.S. was a really big thing for me. “I’m going to be on my own. I’m going to start from scratch in a way. I’m going to build up a new circle to see where my career takes me from there.” So, I think it was a bit of that entrepreneurial, I want to try to build something from scratch for myself combined with hopefully finding something that I was really passionate about as well.
Alejandro: That was the beginning of a lot of moving because, after that, it was Portugal. Then it was Germany, Amsterdam, and you name it. Obviously, the Master’s was what catapulted you to end up in Portugal doing certain projects. Eventually, this is what got you into incubating the idea of your baby, of your company. What was that process like, and what were you doing, first and foremost, in Portugal? Then, how did the idea of bringing this company to life come about?
Eugene Danilkis: The way that it worked over there was, I started the Master’s in Carnegie Mellon, in Pittsburg. And there was an opportunity to go spend a part of the program in Portugal because they were effectively taking the curriculum and copying it over to Portugal. Again, the excitement of going somewhere new and exploring a new land, living in a beautiful country; I couldn’t say no to that, so I took the opportunity, of course. In some sense, it was a bit lucky because the program was set up that we were focusing half our time on like a capstone project. Our corporate sponsor for a capstone project was in the banking software space. Already, at this time, my potential co-founder and I were looking for something that we could take as an entrepreneurial venture because we had that kind of itch. Then, once we started to get into this project and started to understand the world of finance, the world of banking, and understand the role of technology in that, we got really excited about that. We saw a great opportunity on the technology side. We saw the opportunity of the impact, and it felt like one of those things that is a mega trend and a mega wave that we had a chance to ride on. So, as we got into it, we said, “This is something that we can get really excited about that we want to try to build effectively.”
Alejandro: Very cool. What was the triggering point that pushed you guys over the edge and where you got okay, and we’ve really got to do this, and Mambu is going to become a reality?
Eugene Danilkis: The big step that enabled it was actually for me, which was the decision to go do the Master’s. That was the tougher one because that was the decision of, I’m quitting my job. I’m giving away all of my furniture. I’m leaving my friends. I’m leaving my salary, etc., and I’m taking two suitcases and going to the U.S. That’s the look of I’m going to go start a new adventure. From there, instead of, I’m going to go get a job somewhere using my Master’s degree, of, I’m actually going to go try to see if I can create a business out of this. That was the easier step at that point because I’m there with two suitcases. I know that my fallback is I can find some great jobs out of this. I have a good degree, and a good education, and everything, so I don’t see too much of a downside in some sense. It felt like an adventure and something to explore. In the worst case, I waste some of my time, but I think I’ve learned so much anyway. So it felt like all upside, basically, in some sense. It was likely a bit naïve, but it was also made easier by the fact that I’ve already abandoned my safe job, I had already left my apartment, and everything else. I made the decision to, “You know what? Let’s go pursue this venture. Let’s see if we can make it happen. Let’s see if we can build a business. That made it a relatively easy move at that point.
Alejandro: What were some of the early days like of Mambu?
Eugene Danilkis: The first year was figuring out a little bit of what we wanted to build. We had the concept in our heads. Then we started to get into the nitty-gritty of building and deciding what the technology would look like, thinking about what the possible markets would be, and we were fully in it, but we also needed to pay the bills. We needed to pay rent, so I spent half that year also doing some consultancy work, some software development. The big thing for that year was, “Can we raise some funds? Can someone else believe in this for us to make a real business out of it because we can only take it so far with just the two of us?” So, we started to build the product. We built the first prototype. At the end of that year, we got some angel investors to support us. That was the big Wow moment because it all became very real because if we couldn’t make it happen, then I’d have to find some nails. But at that point, we have some money. We have an angel investor that believes in us. We have a prototype. We know that we can launch a product and MVP within the next six to nine months. Now, this is becoming a real business. We’re going to be hiring people and everything. That was the first year. It was kind of exploratory, in some sense, that first year. At the end of that year, it became very real, basically.
Alejandro: Got it. It, obviously, took a little bit of time because you guys were bootstrapping this and doing some consulting jobs at the beginning in order to pay the bills. In this case, just so the people that are listening get a good sense of what ended up in Mambu and the business model. What is the business model of Mambu, so our listeners get it?
Eugene Danilkis: It’s a Software as a Service platform for banking. The best way to think of it if you’re not from the space is, it’s a little bit like what Salesforce is to CRM as Mambu is to the financial services space. So, we’re effectively the back-office system where banks, lenders, fintech’s, and others use our platform to design and service how their products work. If you think about designing a loan for a small business, how the loan should behave, what are going to be their payment terms, keeping track of those transactions, interest, accounting, all the other backend parts of how financial products behave provided in the Software as a Service way. Then enabling our customers to use the whole entire ecosystem of fintech and build great customer experiences and build great products and technology on top of it is fundamentally our proposition.
Alejandro: Got it. What was that process like juggling – juggling the consulting jobs with pushing the business forward? Was that painful?
Eugene Danilkis: No, not really. For the first year, it was okay because there were pretty much no expectations except our own. We didn’t have customers. We didn’t have investors. It was just a matter of how much time can we dedicate or how little time can we dedicate to another project so that we can spend all of our time building Mambu. So, it wasn’t that challenging because we were able to make enough money out of that and then get some angel investment pretty early on. We were able to focus on Mambu relatively quickly. I would say within that first year and make it our full-time focus and attention.
Alejandro: You guys launched in 2011, but things took a turning point in 2015. What happened there?
Eugene Danilkis: Yeah. We got to our first product pretty quickly, I’d say. It was probably about a year or so from when we first laid down the first line of code to when we had our first customer live by the product and platform, which is not so trivial because it’s a banking product. It’s relatively sophisticated. It’s a mission-critical system, so even though that capabilities are pretty small, it was still quite a bit of an MVP build. But we were a really small team. My co-founders and I were focusing on building the product, the technology, doing everything with our customers. We had a small team of engineers supporting us, but it was very, very hands-on the first years. Our customers were finding us mostly organically. We didn’t have much going on in the way of sales and marketing. They were finding us online, through word-of-mouth. What happened was, a lot of our customers, at that time, tended to be smaller organizations. They tended to be in emerging markets. There were some nonprofits and like finance organizations, which were great as early customers and adaptors, and we felt like we’re making a really strong and positive impact and developing the product quite a bit during that time. But, at the same time, it didn’t have the kind of commercial traction that we thought would be able to make to create a sustainable business. Never mind, execute the vision for the product that we had. There were so many things that we wanted to build, but we didn’t have the funds to do so. There was also quite a bit to support in terms of just the cost of running the business. It was great to see the rapid adoption by a lot of small organizations. That was exciting and stimulating, and we had positive feedback. It was always encouraging to keep going as a product person. We always had great feedback and great ideas, but it was always a bit of a challenge on the commercial side of it. They loved the product. They loved what we were doing, but is this enough to make a real, meaningful business out of it. That started to change around 2014, 2015.
Alejandro: From 2011, when you launched, up until 2015, you were in the desert. You were considering early acquisitions. You were not happy with where you were at that point, so what would you say kept you going?
Eugene Danilkis: I think it was the customers in some sense because we kept getting positive feedback from customers. Even if they didn’t have the ability to pay, we always had more and more customers contacting us. They were happy with the product and technology. It always felt like there was enough momentum behind that, and we could always see more and more things that we could do. I think that was the part that kept us going even though commercially, it was a challenge in the first few years. We could just feel like we’re on the right track. We just need to survive and get through long enough to really break through because the feedback is there. There’s more and more positive feedback. Everything’s pointing in the direction that we’re right. The question is, how long will it take? We talked about the turning point being around 2014, ’15, but back then, what if it was another five years? What if this year would have been the turning point? Could we have survived and gone through another five years of the challenge of the first five years? It was a bit of that kind of endurance test, but we somehow could feel like the trends in the market and the customer feedback were encouraging us as our fanbase effectively too to keep going.
Alejandro: Yeah, because I think when you’re in the desert and experiencing those types of challenges, I think it also impacts the culture to a certain degree. How did you guys manage to keep it together?
Eugene Danilkis: I think we, as a team, just loved working together, as well. If you like the people that you’re working with, and you’re supportive of each other, then it makes the journey durable and enjoyable in a sense because you’re going through the same challenges together; you’re forming close commodores, you’re figuring out things as a team, and I think that element is a fact that we liked each other, we liked getting on together, we liked spending time together outside of the office. That really helped because we felt like we didn’t want to let each other down. We were there to support each other, and I think that helped a lot in those days. It wasn’t just for the close founding team, as well. There were about four months or so where we, as the founders, had to stop taking salaries altogether for about six months or so, and then we asked pretty much the whole company to take a 50% or so salary cut for quite a while as we were closing a bridge fund fundraising round. There was almost no hesitation from everyone in the company. I think there were probably about 25 people or so to sign up for that. Nobody quit. Everyone said it was perfectly fine to take the cut for a while even though they didn’t know if they would ever see the money at the end of it or if we would survive. I think not letting each other down and that camaraderie as a team also really encouraged us and motivated us during those early years.
Alejandro: Also, how much capital have you guys raised to date, Eugene?
Eugene Danilkis: To date, we’ve raised over $150 million euros.
Alejandro: Over $150 million euros. How has the fundraising journey been? I’m sure that it has gotten a little bit easier, especially after 2015, but how has that progression been and also the expectations that you’ve come across as you were going out there and doing the roadshow?
Eugene Danilkis: In the very beginning, the fundraising was basically finding an angel investor or early companies that believed in us as a team and believed in the larger market trends. It was pretty much just a bet on, that’s where they think the market is going to go, and the belief in us as a team to be able to execute and figure things along the way. It really wasn’t much more than that. Of course, we prepared lots of business plans and projections. But looking back, it was just simply a bet on those two things. It’s good that we were able to get the confidence of the early investors because all we were betting on was us and the potential of the market. Then, once we started to get the initial customer traction and feedback, then it started to change. Then, it was really a question of how big of a market are you addressing and how exciting is it? In the early years, when there were just lending companies, we kept talking about the bigger market opportunity banking, etc., and we believed that it would still change, but all we had as customers and proof points was a much smaller market of a certain type of lenders. So, the challenge was: you have enough proof points, and there are enough happy customers, but now it’s investors betting on the fact that the market is much bigger than the market that we’ve so far managed to serve effectively. I think that was pretty common with a bigger and bigger market over time as we started to work with different types of organizations, more products that started to evolve, but that was the continued story up until the most recent fundraising as becoming now a question of how quickly can you capture the market because everyone that sees what the really big market opportunities are, they can see how banks are thinking about Cloud and how it’s become so strategically important now becomes a matter of now we really see what the size of the prize is and how far along you are on track. The question becomes, now, a question of execution and focus and prioritization to capture the biggest part of that prize as possible.
Alejandro: As you were progressing and raising more money and growing the business, I’m sure that your role, as well as the co-founder and CEO, has transformed and evolved and also progressed. How has it been going through all these different phases within the lifecycle and the journey of the business for you as the CEO of the company? How has that changed?
Eugene Danilkis: Yeah, it changes drastically every single year. If I was looking back and giving some advice to my former self, I would probably ask myself to like, as I start a year, to write down my own job profile and discuss that with my co-founders or with my board or someone else. Like, what is my job for this year? I think that’s a really beneficial exercise to do, which I never did. And you carry some assumptions about it because you grow into it year by year. But I think because the nature of the role changes so much, and the nature of the team and the company, it’s actually a worthwhile exercise, and I think it would have helped me to be clearer on what I should focus on and get that kind of alignment between myself and the board, and myself to get my own confidence. Like, “These are the three or four most important things I need to focus on. The rest of it, I need to manage, of course, because there’s still business as usual and stuff comes up. This is what I really need to focus on, and I think if I did that in the past, especially in the early years when things changed so much, that probably would have given me, myself, a bit more clarity because I felt like every year, I was both figuring out the business, but also figuring out myself by doing a good job, and that’s hard to say because I need to define what my job is to know if I’m doing a good job in that first.
Alejandro: There are probably a lot of people that are watching and listening and wondering, for example, board, dynamics, and things like that. In your case and to what you were saying on alignment with the board, what does it look like when there’s full alignment between the management team and the board of directors of the company?
Eugene Danilkis: For us, up until now, my relationship with the board has been very much an advisory nature in the sense of it’s almost a sparring partner to myself. I feel like I have multiple advisors that I come to, and it’s very much up to me to present what are the topics online, what are the challenges, what are our plans, gather feedback for that – some of it was constructive feedback, some of it more of a sounding board. So I think my relationship has been very much with the board of working with them as an advisory board, actually for the most part. I think what’s been beneficial has been actually laying out the really key objectives for the board for the year, and for myself, actually, like I said before, to be able to clearly say: this is what I want us to achieve as a business for the next couple of years and to achieve that, these are the most important things for this year that we should be focusing on, which also means there are a few other things that we might not be focusing on so importantly. Some of those are almost implicit startups because, for instance, a lot of startups don’t focus on profitability. That’s kind of, obviously, kind of implicit, and everyone takes it for granted, but it’s actually very beneficial that you make a lot of those implicit things explicit, as in growth is our #1 priority. Well, what does that mean? Does that mean growth at any cost or maybe not completely? Maybe there’s a certain threshold where you’re not comfortable spending that amount of cash to achieve that amount of growth. I think that defining a lot of those things for the board also makes it a lot easier, in some sense, to see or to execute because you know what to focus on and what not to focus on. But it also allows you to work as advisors along that journey.
Alejandro: Imagine, Eugene, that you go to sleep tonight, and you wake up in a world where the mission of Mambu is fully realized. What does that world look like?
Eugene Danilkis: Whew! Good question. I think quite a few different things. We know when we set out to build Mambu, we were in a world where there were both 2.5 billion people that had access to banking products and banking services. We saw that as an exciting market, but, in general, we thought the whole generation of how people experience financial products and financial services are going to be drastically different over the next couple of decades. It’s going to be, obviously, much more digital. It’s going to be much more personalized. It’s going to be much more seamless and easier to experience, and a world where I don’t think our vision is ever completely realized because we want to be fundamentally enabling our customers to create better banking products and services, and that will always change because what is better banking today will be different in five years and different in ten years. I want to make sure that our customers are still seeing us in ten years or 20 years, even when we have billions of end customers serviced through our customers on the platform, and our customers are still feeling like we’re a partner that helps them rapidly evolve with whatever is actually changing out in the world because the only thing that we know in all of the technology trends is that the pace of change is accelerating, and I think only right now are financial service companies starting to feel that, and we want to make sure they’re able to keep up with that pace of change.
Alejandro: I love it. So, you were alluding to this earlier that if you could have a chat with your younger self, because typically, one of the questions that I always ask is, what would you tell yourself if you could go back in time. So, you actually answered that, which is great. So, expanding a little bit more into that, and if you had the opportunity of having a chat with your younger self, maybe that Eugene that was thinking about starting the business, you were alluding to it that you would give yourself a little more guidance and to showcase what needs to be done because every year is changing. So if you had that opportunity of telling yourself what you would have done from seed to Series A, and then from Series A to Series B, and Series B and beyond, what would you tell yourself in order to be effective as the co-founder and CEO of Mambu?
Eugene Danilkis: I think I would say just to be a bit more honest with myself in terms of what we’re trying to achieve. That seed to Series A, especially in our space where we’re building an enterprise vertical, mission-critical software platform, we presented ourselves to customers and to investors as a – I won’t say a finished product, but a complete product. I think it would have been more beneficial if we went into it in the early years and said to the market and to our investors, “For the next three years, we’re going to co-build our platform and all with our customers. We’re not going to let them build it for us, but they’re not going to define the features and everything. We’re going to still stick to our product vision and our SaaS principles, but we’re going to go find customers that are forward-thinking, that want to co-develop with us. Yes, they’ll pay us some amount of money for that service, but we’re not focusing on revenue growth. We’re focusing on the customers that believe in the vision that will help us co-develop the platform. That’s what we ended up doing the first three years. We did that sort of implicitly, and as a result, we were focused on the revenue growth and other factors. But those, in retrospect, weren’t really important. It really didn’t matter if we were growing 200% or 400% or 75% year on year for the first three years. All that mattered was how strong of a product and platform we were building and how closely aligned was it to our target customer segments and personas? Maybe we sort of fell into – I don’t know if it was a trap or just the nature of feeling like we need to show revenue growth, we need to show velocity to investors and all of that, but actually, if we were honest about what we needed to achieve, we probably would have faced it differently. Maybe we would have found different investors or maybe the same investors. Maybe we would have found different customers. I think that would have been more honest of what our real objectives during that midterm would have been, and then we might have them changed a little bit of our approach as well. And that comes back to, as I said, defining a little bit of what is the strategy, but what are the key objectives within that time? And I didn’t really define that. In the beginning, I thought we’re the CEO, we’re building a startup, we have to show revenue growth. All these startups in Fintech or TechCrunch and everywhere else talking about their 200%, 300% AR growth year on year, we need to be a company like that. It’s almost kind of been the default path. If I stepped back a little bit and asked what’s actually the right thing for us strategically? It probably wouldn’t have been that. It would have been a slightly different path, but I didn’t know that at the time.
Alejandro: Got it. Very, very profound, Eugene. For the people that are listening, what is the best way for them to reach out and say hi?
Eugene Danilkis: The best way to reach out to me is, find me on LinkedIn under Eugene Danilkis and send me a message on there.
Alejandro: Amazing. Well, Eugene, thank you so much for being on the DealMakers show today.
Eugene Danilkis: It’s a pleasure. Great questions. Thanks for the chance.
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