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How a botched tuition payment led to a next-generation financial startup

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You might think you can pay for anything with a credit card. But when Eliot Buchanan tried to pay for his tuition with one—which was already hard enough to get, given he was from Canada and had no credit score—the university didn't accept it. It seemed like such a glaring oversight: why wouldn't a university want to take his money?

Like many startup origin stories, this unexpected problem Buchanan ran into morphed into an idea that is now a nearly seven-year-old startup with hundreds of employees. Paying for products and services with a credit card is something we might all take for granted. But there are still many institutions that will only accept direct payment from a bank, otherwise called payment by invoice. Plastiq helps people pay via credit card, even in places where cards are not accepted; it works as an intermediary that transforms a credit card payment into an invoice payment.

"I thought, why is this the case—is it just me that wanted to do this? Credit cards have been around 60 years, around 10% of the world's GDP runs through them. It's a pretty successful instrument, and yet I can't pay for something as important and simple as my tuition."

Buchanan describes how Plastiq's monetization strategy breaks down the traditional credit card fee structure. Merchants pay a fee (called interchange) to accept a credit card, which is usually somewhere between 2.5% to 3%. Plastiq charges a fee at the front of the transaction for the customer to convert that credit card payment to an ACH, check, or wire transaction. The  payment then goes through like any normal one. This opens up payment volume for card issuers from merchants that wouldn’t otherwise take a credit card. It also gives the customer access to the convenience, rewards, and cash flow offered by their existing credit card.

The idea seemed like an obvious one, so Buchanan started his search to fill the gaps in his skillset. In college Buchanan kept a spreadsheet that he called a list of "interesting people I need to meet." Most entrepreneurs will tell you that starting a company by yourself is a terrible idea (and also that starting a company is a terrible idea altogether). He found his co-founder Dan Choi, who excelled in development and was able to create tools in hours that would have costed Buchanan thousands of dollars . 

"At the time, all decisions were made just yelling across the room - we lived together in the same apartment for nearly six years," he said. "The speed and the cadence that we had, that I tell the team about now, was unprecedented. We were just on the same page. It was very clear where I would be valuable and very clear he knew where he would be valuable, and we were just constantly in sync. It was probably the most important success driver of Plastiq and we’d never be here without that."

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Buchanan also kept track of plenty of executives and operators that he thought were entirely out of his league on that Google Sheet. What surprised him, though, was that these important names on his Google Sheet kept taking meetings with him. What felt like imposter syndrome to him was actually just part of their job: they're supposed to keep an eye on anything new and upcoming, like Plastiq.

"Had I known that I would have pushed even harder to like get more meetings," he said. "I thought it would be hard to get those meetings, and I was probably more nervous in those conversations than I should have been. It was just very different than what I would have expected."

To be fair, some meetings were more complex than others. One of the earliest was with the CEO and chairman of MasterCard, Ajay Banga—and he only had a Visa card on him for a demo. He soon learned that it was always worthwhile to ask for a meeting because you never know who might say yes. Buchanan also said he quickly turned the meeting around by convincing Banga to use his card instead.

Thinking on your feet is a pretty common trend in Buchanan's origin story. There was the time he took a customer service call in the middle of an urgent hospital visit to remove his appendix. Or the time he had to dodge a near-catastrophic customer experience with one of Plastiq's early payments providers that shut off the business after the 1st payment. Or when he had to convince his parents to offer their home as collateral for a barely-proven business. You could say the timing was right, and there was some luck. But there was also an enormous amount of legwork making all that possible in the first place.

Buchanan still remembers the name of his first customer off the top of his head—and another near-miss that came with them. The stakes are now dramatically higher when you're moving many billions of dollars of others’ money from point A to point B, and it requires a combination of agility and carefully-thought-out plans. Raising money on the east coast wasn't a simple task, either. Plastiq, based in Boston, had to deal with a long series of "no"s from investors looking for hard evidence that the products were working. Out in Silicon Valley, investors will often take a bet on the team and the idea.

Eventually, Ryan Moore of Accomplice—a successful early stage fund in Boston—took an early bet on Buchanan and the rest of the team. Eventually, they ended up moving out to the Bay Area for all the reasons you might expect for a technology startup: talent, resources, and of course, more money. But that also came with the challenges of uprooting an entire company and juggling a whole array of different cliques and cultures. Getting everyone on the same page is one of a startup's biggest challenges, and these days Buchanan tries to be as transparent as possible with the team.

"You can often oversell, and you can get good at that," he said. "Some of the hires who were probably the weakest fits have been actually really strong individuals and great people. But they were the weakest fit for at least for that time frame. Now, I can't tell you how incredibly skeptical of Plastiq some of the best hires we've made in the last few years were."

Like many successful startups, Plastiq's first launch was disappointing. “I’m not sure anything really worked on Day 1,” he said. Then, like many successful startups, Plastiq started doubling down on specific use cases. It's a strategy that works because it allows you to first figure out why it works in the first place and then try to generalize it to a more significant problem altogether. This kind of money transfer service was definitely going to work—it just needed to get off the ground.

Buchanan emphasizes what he likes to call "macro-optimism." Startups are roller coasters with many highs and lows. But it's important not to fixate on the near-term highs, which might deceive you and throw you off track. And it's also important to not fixate on the short-term lows—one screw-up doesn't mean your company's story has come to an end. Much of his time is now spent trying to improve relationships with vendors who manage nearly the entire payments ecosystem and helping them understand the volume Plastiq unlocks.

Of course, he stresses out about people, on finding the right fit at the right time, and knowing how to help them grow at Plastiq. One of his first hires, originally in CS and now moving into the product organization, worked at a coffee shop at the time. Plastiq kicks employees out of the office at the five-year mark for a little more than a month and a check for $5,000 to go somewhere fun. But he knows the best people may only be there for a short time.

"Hopefully, Plastiq is a thread on their journey, but it doesn't have to be their entire journey. For some, it will be. For the rest, we celebrate what they are going on to do."

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