William Leonard
Hey everyone. Thanks for tuning in to the Atlanta Startup Podcast. Sebastian Builes found inspiration for building his startup from his mother’s experiences as a small business owner, where she often dealt with customer churn. Now he’s built Arcum, which is leveraging AI to help clients strengthen merchant relationships with their already existing data. We’ll dive into why he’s initially targeting payment processors and merchant acquirers. Then we’ll transition a conversation to the monthly founder meetups that he hosts at Atlanta Tech Village, and why building a community in a blossoming Startup Hub, like Atlanta, is so critical to the city’s growth. Sebastian, welcome to the podcast, man.
Sebastian Builes
Hey, Will. Thanks for having me man.
William Leonard
Awesome. I’m excited about this dialogue and to learn more about your background and what you’re working on in Arcum. I think you should definitely just kick it off and tell us more about Arcum and we can dive into the Sebastian story a bit.
Sebastian Builes
Absolutely. Arcum is trying to change the way customer relationships are managed. Companies have the retention departments for the most part and these departments tend to be very reactive. What I mean by that is normally approaching clients once the client has called to cancel or to leave, or sometimes you may come across a situation where the company makes it impossible for you to unsubscribe or to cancel your subscription. These are all forms of retention, they just simply happen to be reactive retention strategies, what we call them internally. When we try to provide an alternative to that for companies to proactively engage their customers, know exactly who will be leaving, and why they will be leaving so they can ultimately fix or mitigate those problems that arose in the beginning to damage that relationship between customer and company. At that point, building or rebuilding a relationship that was initially damaged as a result of a bad experience.
William Leonard
That’s fascinating. You’re working at the point of merchant relationships, trying to enhance retention for customers in this segment, and we’re gonna dive into more of who is your ideal customer in a few seconds, but I want to give our audience some context on your background as a founder, as a person, and as an entrepreneur. What’s your story and what ultimately led you to do the crazy thing and build up?
Sebastian Builes
You got to be a little bit of a psychopath to start a startup company specifically, but man, the journey takes me back to when I was a little kid. I happened to be born in Miami, mom moved back to Colombia very early on. That’s Colombia, South America, by the way. Moved very early on and I lived there until I was about 11. Obviously growing up in Colombia, it’s tough. See, my mom pretty much have the same job for over 25 years, and her job was actually, funny enough, in the relationship management space. Her job was to ensure that our customers were happy and they didn’t leave. I very vividly remember some days when she would be in a bad mood. I would ask what was going on, a big company just left, and she couldn’t do anything about it. Little did I know that almost 15 years later, I would be kind of hammering head on this particular problem which I actually found extremely fascinating. Shortly after grad school, I actually got a job at a consulting firm where we’re working with 80-90% of the newspapers across the US and helping them mitigate subscriber churn. It’s one of the things that we’re doing. I always thought it was a very interesting thing that we could actually predict when customers, specifically in the newspaper space, subscribers are going to be switching or leaving their companies for their newspapers. This was all leveraging data at the time. This is almost six years back and people always like to make fun of the newspaper industry. It’s like dinosaurs. Nah, man, these guys are 10 years ahead, even the payments industry where I ended up going. I ended up working for one of the largest acquires in the US or payments processors. And from there, one of my jobs was, “Hey, here’s a list of the customers that left.” The CEO always wanted to kind of throw a shoe at my face every time I give them that list over and he said, “Man, there’s nothing actionable about this.” Based on my previous experience, I realized actually payments data is a lot better than newspaper data ever would be. The quality of the information. It’s very detailed. We have transactional level information about customers in the case of payments processors, these are merchants. And we know exactly where they’re located, how much they pay in credit card fees, and an array of different variables or fields that could be used for modeling specifically retention or churn patterns before they occurred. That’s kind of how Arcum was pretty much born from that point on.
William Leonard
Your mother worked in the world of business and the churn that she saw in her customers ultimately led you years later, to build this startup and Arcum. That’s so fascinating.
Sebastian Builes
Kind of like Jobs says, “You can only connect the dots looking backwards.” For a year and a half, I told her what I’m doing. Parents never know what the hell their kids are doing. She was like, “What are you doing?” And I was like, “Remember that time that you would come home, bummed out because you lost the client? Well, we’re actually working to pretty much provide people like you with better tools in order to mitigate this problem.” It’s kind of full circle and pretty fascinating to think that something that was almost like would come back to haunt me 15 years later.
William Leonard
I think a full-circle moment is definitely how you would characterize the beginning of this idea. As you think about the customers that you’re serving at Arcum, what’s the ideal customer type that you all are really looking to help proactively strengthen relationships right now?
Sebastian Builes
Our goal to customers is primarily payments processors or what you call merchant acquirers. These guys, in short, have one job, and that is to get credit card processing inside businesses. Atlanta actually happens to be the credit card processing hub of the US. In fact, roughly around 70% of all payments or transactions come through Atlanta, the reason for that is the high concentration of large payments companies you see here. You have companies like Global Payments. First Data was just a 400. An array of these companies pretty much set up a hub in here and because of that, I feel that in terms of specifically the type of portfolio we focus on, we don’t really look at much of e-commerce transactions, because at the end of the day, the majority of transactions today are still brick and mortar, what we call card Present Transactions, meaning that the customer is actually swiping a credit card in a particular terminal or POS. And these guys can have customers from 5000 merchants all the way to 100,000 merchants. In the case of Chase Payments, which is sort of the behemoth or Chase Merchant Services as called today has over a million merchants. You can imagine how hard it is to really have that one-on-one relationship with every single one of your customers when you have tens of thousands or even hundreds of thousands of clients. Any given month that you encounter problems, whether they’re POS going out or we’re not working on a particular day, call it a Saturday. Now, you have probably seen that cash-only sign on the door. These are all product problems that actually when you look at the data on specifically transactional level data, you’re really able to know when these businesses had order gaps for example, or when their product or POS machine was not working in a specific day or time or place which really allows you to make very accurate predictions about these churn behaviors that occur roughly before there actually will end up leaving or switching to another processor.
William Leonard
You talk about payment processors and merchant acquirers being your core customer right now and you said, you are in the perfect place in Atlanta. Most of the payments in the country are transacted here. They call Atlanta, I think, transaction alley. There is so much opportunity here in this space and I love your approach to thinking about the ideal customer and thinking about the industry today and how these relationships are managed, what is the current state of how these relationships are being maintained and managed? Why is this innovation truly needed in space today?
Sebastian Builes
Absolutely. I don’t think this is only limited to payments. I just happen to come from a payments background. My co-founder, interestingly enough, was my old colleague when we were solving or mitigating churn for the newspaper industry, and we couldn’t be more different. He’s actually very introverted and very conservative. And on my first day, I remember him, like, “You want to grab some lunch?” And I said, “Sure thing.” And that was probably the most awkward lunch I ever had. It was like an hour of silence for the most part and I’m just chewing on my food. It’s like, “Oh, man, what did I get myself into?” But actually, interestingly enough, fast forward, I ended up going into payments and he ended up going into payments as well. When I’m pitching this to him, he’s just sitting there nodding. I’m like, dude, do you see it? He’s like, “I actually work with payments companies right now and this makes perfect sense.” So it was always kind of interesting to see that we’ve had a very unique experience up to this point to solve this particular problem. Having worked with one of the largest payment processors in the industry, the way retention is managed is very simple. You have a CRM, as most businesses do. But at the end of the day, you’re contacting merchants who a) what do you call stop processing payments. In other words, you see a couple of months of consecutive no transaction going on in businesses. And that’s when they go and call. But again, by that point, the merchant’s probably gone and already gone to another processor. My favorite here is when the merchant is actually calling to cancel. These payment companies want to give them discounts when it comes to perks, new tools, and new POS machines, and again, too late. The merchant has made his decision to leave and it’s probably been in a situation where someone tries to change your mind that you decided something inside. It’s very hard at that particular point in time. But what if–and this was always the question–what if we could identify a customer at risk of leaving before the customer even thought about it himself. In other words, before that decision to leave a business subscription or service, was actually present. What we came to find out is that as humans, we’re creatures of habits, and whether we want to believe it or not, a lot of our habits are behaviors that we have subconsciously developed time over time. It’s because of that element that we’re actually able to leverage data, run it through an AI algorithm with a 90% accuracy, you can tell us whether someone will be sleeping or staying, which is actually very powerful, if you think about it, because competing power right now, it’s very cheap. We can get the fastest CPUs. AWS very cheap. This is something that really wasn’t possible even 10 years ago which is kind of the fascinating aspect of it. It’s like you know who’s going to leave and why they’re going to leave, then you can actually work towards solving those problems before they get out of hand. Which is sort of the ultimate solution for every business. I want to know when my clients are leaving, I don’t know why they’re leaving, that’s sort of where we’re changing the way retention is managed, and by no means that we plan to stay in the payments industry. This is a methodology that we developed and refined over the last couple of years by pure experimentation. I think that we arrived at a point where we can essentially, as long as there’s recurring revenue or recurring data, we can pretty much apply this methodology to absolutely any industry.
William Leonard
With 90% accuracy, that is such a great baseline to make decisions off of as a corporation and as a business owner. That’s incredibly fascinating. And, as you said, payments is the space where you all are breaking into the market and creating this wedge. That’s a great area and segment of the market to break into, thinking about 2022, we’re in May now and thinking about the rest of the year, what gets you excited relative to growth and new products around Arcum?
Sebastian Builes
This is where I think we’re only scratching the surface. For the first two years, we always only work with aggregated data. That means we saw a particular merchant for over one month. Recently, we were able to actually see transactional level data, and that is literally information by the minute, by the second, of when that transaction occurred. It was at that point where we realize that, hey, it’s not so much about the tools that we’re developing, but it’s also the access to the information that we get to see. Being that a third of our GDP is consumption data. This is ultimately what we’re seeing. Consumption patterns across industries, what industries are growing, which ones are slowing down, and how are consumer behaviors changing over time. I think that, to maybe use an analogy here, we want to ultimately build something like the KAYAK of payments or the Palantir of payments. In other words, a skin layer on top of all these infrastructures that are set up here in Atlanta, and all this data that is pretty much just considered a waste product for the most part, and really leverage it to not only provide better tools or solutions for payments companies but also to consumers and merchants. Imagine that a merchant can all of sudden leverage his payments processor to become their data analytics or their data science provider, something that they could never afford. If you’re a mom-and-pop shop here in Ponce City Market, all of a sudden, you have access to a data science team that it’s at your disposal to help you make better business decisions. I think, ultimately, this is where we’ll start heading down where we’ll use our clients and ultimately, our partners and distribution channels to essentially provide analytics to absolutely all the 15 million card-accepting merchants that are out there in the US.
William Leonard
That’s the point I was gonna get at next is kind of the trickle-down effect. This is going to have on the consumer eventually. I really, really love that approach here. I want to transition the conversation a bit. You are from Miami, you lived in Colombia, and then you went to Florida State, as well. And then you moved here to Atlanta, you worked at EVO, and now you’re at this point of entrepreneurship and your life. You’re known around the city as a community builder, right? You’re hosting events at ATV. One, tell us more about the events at ATV, and then two, taking that answer a bit broader, how important and why is it so important to have community events and committed a startup community in a city like Atlanta that is just burgeoning at the seams with startup activity?
Sebastian Builes
First of all, well, you gave me way too much credit. To be honest, entrepreneurship is probably one of the loneliest and toughest journeys. It’s so hard. You really can’t go back to your old friends and tell them about where you’re going through because eventually, they just get sick of hearing it. A significant other, you don’t want to bother them with the problems that you’re going through. At the end of the day, it’s pretty unfair to do that as well, because it’s its troubles, challenges, and obstacles that only you as a founder can go through and other founders as well. This is sort of where I realized a) I don’t have any founder friends, and b) I’ve been living in Atlanta for the past four years, and all the deep connections that I made, essentially moved out of here. I started working here out of ATV surrounded by founders and I realized, there is really no forum for all of us to get together, talk, discuss our problems, discuss what we’ve been doing, or share our experiences. This is kind of where maybe back in December, we decided to host the first founders’ meetup here on the roof. It was only myself and six other founders but it was so intimate, it was so raw, and it was so vulnerable. Every single person in there was not trying to put on a facade and it was themselves, their startups, and what they were going through; difficulties and the wins. Shortly after, we did this very low-key. A couple of months later, we literally had 40-50 founders. We’re doing crowdfunding through Wefunder, we got them to sponsor the trains and the food. You want to get founders together with free food and free drinks and that was one way to really facilitate a lot of the space. At the same time, the conversations that emerge from their relationships and at the end of the day made the journey when you’re building alongside other soldiers with a similar mission. Every founder you talk to wants to change the world. And there are founders who finished raising their Series A all the way to the inception. The spillover of knowledge occurs from having just a group of individuals with some sort of mindset together in the same room. It’s very powerful. In Atlanta, you have a big startup scene, but it’s also very siloed and segregated. You’re from ATDC, you only see ATDC founders. You’re from ATV, you only see ATV founders. You work at TechStars, you only see TechStars founders. There was really no way or no platform that brought every single founder across the city together and that’s what we hope to create as well.
William Leonard
I love the mission and the vision, right? You mentioned the knowledge transfer that happens from the spectrum of founders, as you said, from Series A or Series B all the way down to the idea stage. There’s something that can be extracted for everyone in these meetups in these conversations. How often are they happening and what’s the best way for a founder who’s listening right now to attend one of the meetups?
Sebastian Builes
Honestly, we try to at least once a month. Realize that it’s actually kind of like a full-time job to get ready for these things. We try to limit them to once a month just to make sure that we have a consistent cadence around meeting up. But to ensure that, hey, a month is a long time to come across new challenges or new solutions. Hopefully, that’s enough time to essentially have a lesson to learn that you can ultimately share with others because that’s the whole idea. I think the most valuable lessons I learned through my journey didn’t come from professors, it didn’t come from even business leaders, it came from founders and entrepreneurs who have been there in the trenches. I kind of remember getting started and not even knowing what a convertible note was or a cap table or a valuation cap or a discount and a valuation cap. These terms seem so abstract and so obscure, but only after talking to founders enough times while they’re raising that I realized that oh, man, this is actually not that hard. Anyone who wants to join us specifically here in Atlanta hit me up on Twitter: @SebsBuiles. I’m pretty much around ATV most of the time. People make fun, we send the bat signal over, and people just kind of show up. But we’re trying to formalize it a bit more so that we can ensure that if founders want to come, I don’t care where you are you can always join us and be part of the conversation.
William Leonard
I love it. Sebastian, as these founder meetups have happened and you’ve shared experiences with other founders, you’ve had some opportunity to reflect on your journey as a founder, thus far. I’m curious to get your thoughts and insights on what is for you has been the most challenging and also the most rewarding part of building a startup thus far?
Sebastian Builes
Most challenging? Will, everything, man. Everything about this thing is hard. I think that’s what makes it fascinating. You become versed in investments, you become versed in building a team, recruiting, biz dev, and even developing software development. I’m more of a data analyst and data scientist myself. I never really coded software before. But after you talk to enough software engineers, you start seeing, okay, these are the tools. This is the framework, this is how you build a startup or a product from a software development perspective. And then you speak to attorneys, learn about corporate bylaws, and why VCs prefer a Delaware C Corp versus a Georgia LLC? And these are things that men in no job, will you ever learn all of these what you call business school knowledge distilled into a couple of years or a couple of months or whatever it may be. And at the same time, probably this is my favorite thing about being a founder, is just how open the community is to help you out and how much you’re forced to just talk to people. I don’t think we would have met had not been a founder because another founder buddy said, “Hey, dude, Will is in Atlanta.” “Cool.” “You should connect with him.” And from there, it’s like, “Okay, definitely.” And from there, so many relationships that I built, I’m 30 years old, and sometimes you think you can’t make new friends at this age. The friends that I made are my friends for life. And it’s like, that’s so not true, man. Some people that you meet, it’s almost like you’re destined to meet, and you make this connection that all of a sudden, you realize, “Hey, I called to ask you a question.” Now, we’re friends. And all of a sudden, we’re sort of on this life mission together and sharing different experiences. I think that’s what makes this journey so unique that in the position that you’re in, you’re almost forced to build relationships. I think that’s kind of what our entire business is about, strengthening and rebuilding relationships that at one point were damaged because of a bad experience, or this is slightly different in the sense that we’re not rebuilding. We’re actually building from the ground up in terms of meeting new people and you never know where these relationships will take you.
William Leonard
That’s the thing, man. This entire industry and ecosystem are built on building relationships. That’s one of the most important things to do and it’s easy to do but as an introvert myself, it’s not hard to build relationships with great people here in Atlanta. I can tell you that. Everybody here is so welcoming from the founders to the ecosystem players to the investor. I love you what’s happening here in the city and how you’re contributing to bringing more cohesion to the founder relationships and equally the investor relationships as well. This was certainly a fantastic conversation, Sebastian. For a payment processor who may be listening right now to the conversation, what’s the best way for them to get in touch with you regarding the services and software at Arcum?
Sebastian Builes
Absolutely. Shoot us an email at sebastian@arcumpartners.com. I’m pretty active on Twitter, occasionally. Probably LinkedIn as well. I like to think we’re pretty accessible for the most part. If you can’t find me online, pop into ATV. We’re usually here. It’s sort of funny at this point. I was very skeptical about the community near and coming into ATV, and then I couldn’t be happier that this is sort of the place where I stumbled upon it. By the way, I would have never thought that you’re an introvert but it’s the fact that everyone is just so open to helping and I think that’s what’s most fascinating about building in Atlanta. It’s makeup for minorities, we have some of the biggest businesses and a concentration of Fortune 500 companies here. And a lot of scrappy startups, too who are working with Fortune 500 companies, which make this a very unique place in contrast to anywhere else. I couldn’t be happier to set roots out here. I’m gonna be sticking around for a long time. Anything I can help out for the community. Make sure that we can build better. I’m here for that.
William Leonard
I love it, man. Sebastian, this was a great conversation. Thanks for joining me and looking forward to seeing you around Atlanta sometime soon again, man.
Sebastian Builes
Hey, absolutely, Will. Thank you so much for having me, man. Had a great time.
Lisa
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