This morning Finix, a software-as-a-service (SaaS) startup selling payments tech to other businesses, announced that it has raised a $35 million Series B. Sequoia led the round, which also saw participation from new investors Activant Capital and Inspired Capital.

Finix did not disclose a new valuation as part of its round, and declined to share any growth metrics regarding its business. Instead, it offered a TAM figure and noted the number of countries in which it currently operates.

The company’s latest round is a doubling of its Series A, a $17.5 million round from July of 2019 led by Bain Capital Ventures; Insight Venture Partners, Aspect Ventures and Visa also took part in that round. Adding to the list, Homebrew invested in the company during its infancy. (Update: Acrew Capital as well.)

Finix has now raised more than $55 million to date, according to the company, inclusive of an October, 2017-era seed investment.

The round

In an interview, Finix’s Richie Serna told TechCrunch that his company put together its latest round “to scale up the organization,” boosting its product and engineering muscles while also pursuing further international payment support. According to Serna, Finix’s larger clients have asked the company to expand international support, as having “international reach is a really key component for any business.”

Internationalization in the payments space requires many hands, a need that Finix intends to meet by doubling its staff by the end of the year. The company had around 60 staff at year’s end, Serna previously told TechCrunch.

Notably Finix, despite being a player in the payments space, doesn’t think of itself as a payments company. Instead, according to its CEO, Finix self-describes “as a payment infrastructure company.”

That difference is reflected in how the company charges for its service. Instead of charging similarly to, say, Stripe, which takes 2.9% and $0.30 “per successful card charge,” Finix charges its customers a regular software fee, along with a sliding fee depending on the number of payments they process.

Not taking a percentage cut of transactions opens up interesting revenue opportunities for Finix customers. Serna detailed how bringing payment tech via Finix can help some companies grow top line, something that’s quite interesting for other SaaS players:

Historically the distribution of payments has been fairly fragmented and almost bolted on. So there’s a number of software companies like MindBody and Toast, who, historically would just have sort of a revenue share with one of their payment processors. So if you signed up for someone like a MindBody as a yoga studio, you would then go and set up a partnership with FirstData or WorldPay to start accepting payments on that platform. In that model, someone like a MindBody would make a few basis points on every single transaction. By bringing their payments back in-house, and offering a more comprehensive, all in one solution, they can actually take more revenue.

Startups can expand revenue by owning their own payments tech — sometimes substantially. Serna told TechCrunch that Lightspeed said during their IPO process that “they were actually doubling their overall take rate by becoming a payment company.”

How does that work?

The yoga example that Serna mentioned is easy to unpack by way of analogy. Doing so will help us better understand why Finix expects SaaS companies, to pick an example, to bring payment tech “in-house.”

Imagine you own a company called, say WeaveBasket, and that it sells SaaS software to underwater basket weaving instructional studios, helping them manage client booking and the like. You can charge only so much for company’s your software, presenting you with a revenue ceiling; after all, the average underwater basket weaving studio can only generate so much margin with which to pay costs. But if you set up WeaveBasket to help underwater basket weaving studios to also accept payments for classes through your software, you can generate lots more revenue for your SaaS company — WeaveBasket generates revenue from regular software fees, and by taking a cut of its customers’ customer payment flow.

“Vertical SaaS companies are looking at how they can directly embed and bake these payments capabilities into their platform,” Serna told TechCrunch.

All this fits back into the round; Finix is a bet that providing payment technology on a SaaS basis will attract legion uptake by companies of all sorts. As a deck that Finix’s Serna showed TechCrunch a few weeks ago stated, “software companies are becoming payments companies,” and his company wants to be the engine behind that change.

The bet

The payments world is stuffed full of players at different points of the transaction stack, including processors, banks, card networks and payment facilitators like Lightspeed and Stripe. It’s a complex set of relationships. Serna agrees, calling the industry “a blackbox to basically everybody” in a 2019 interview.

Creating simplicity through software is something that has generally done well in the technology world in recent years. Twilio took telephony and boiled it down into APIs. Plaid did the same thing with consumer finance. Finix, it seems, wants to let anyone who takes lots of payments to be able to reduce their relationship load, control costs and perhaps drive more revenue.

The startup now has the capital with which to bring its vision more fully to life, but domestically and abroad. Let’s see how far Finix can get on its new check — and its willingness to take a small risk and share a bit more concerning its business performance in the future.