Bob Butler
Hi, everyone, welcome to PayFAQ: the Embedded Payments podcast brought to you by Payrix. I’m your host, Bob Butler. And today I’m going to be talking with Scott Wayman, the founder and CEO for Kangarootime. We’re going to be talking about the value of integrating payments into their software. Hey, Scott, how are you and welcome to the show.
Scott Wayman
Bob, I’m fantastic. It’s good to be here.
Bob Butler
If you don’t mind, can you tell our audience a little bit about yourself your experience and Kangarootime?
Scott Wayman
Yeah, so I’m a native Texan, grew up in Texas and somehow made it to Kansas for college. Then really grew up in my adult life in California, started in corporate America in 1997 after college, and then took the crazy step and became an entrepreneur. Started that in 2011. And here we are two companies later, I founded Kangarootime in 2015. And the origin story of Kangarootime is kind of crazy. I was a graduate of college, had moved back to Texas after starting my career in California and had a couple of family tragedies, my father passed away. And then my mother was diagnosed with ALS. So in 2001, I took custody of my youngest brother and put him into childcare. And that started my journey understanding this really dynamic business of early education and childcare.
Bob Butler
So Kangarootime is a childcare software. So can you tell me a little bit more about that? And also, tell me how did Kangarootime end up in Buffalo, New York of all places?
Scott Wayman
Yeah, when you drive by a childcare center, you see all this cute branding, all this maternal imagery, doodlebugs, ladybugs, you know, hugs, kisses. But inside that building, there’s typically a really dynamic business. So you have the problem of enrollment, you have the problem of a revenue cycle. You have management of families, you have management of utilization and classrooms. These businesses are very complex. So what Kangarootime does is we build software that automates the business of childcare. So we automate all their billing, invoicing, all the encoding of all monies coming in, we build them an HRIS, we help them handle their employees, we also build a platform for their teachers in the classroom. So the rich multi-media narrative of the child’s day, we help the teacher record, and we prompt them and nudge them to change diapers and administer feedings. And then the third thing we do is we give the parents this hardwired experience into the child’s day. So they can see in real time, what’s going on with their child. When the child went down for a nap, do I need to leave work right now and go pick my child up? Or should I let them sleep for another 30 minutes, you know, maybe their nap time was a little bit delayed. So, we do those things for these centers. And going into the business, we were a bit like everybody else knowing that they needed automation, but didn’t realize how much they needed us.
Bob Butler
Scott, you started the company in New York. Buffalo of all places. How do you go from Texas to California to Texas to Buffalo?
Scott Wayman
Okay, so, actually no, I started the business in Long Beach, California where my family is, where my wife grew up. She’s a third generation here from Long Beach. In fact, when I asked my father-in-law for her hand in marriage, he said, Yeah, this is great. We love you. And you can live anywhere in the world as long as it’s Long Beach. So naturally, I moved my business across country to Buffalo, New York. No. So in 2017, we started to run out of capital. Our story out there in the venture capital world wasn’t one that was turning a lot of heads. We weren’t growing super fast. We had this vision to build this great big product, and it wasn’t producing the unit economics that investors love. There’s this really interesting contest in Buffalo, New York called 43 North. 43 North is an economic development play. And it stood up by the state of New York to stimulate the economy in Western New York. So, it’s this contest they award $5 million every year. Startups from all over the world enter. They go through multiple rounds of pitching via zoom. And then in the finale, there’s a shark tank like ceremony and competition that goes on. We went to New York in October of 2017. There were 20 companies vying for eight spots, eight investments. We got through the semifinals, I pitched, I nailed it, went back to my hotel room and thought, I hadn’t even looked at my two minute pitch, practiced it 150 times. And again, you know, the drama, there are cameras everywhere, they kind of treat it like a reality TV show, there was a lot of stress. They called me on my hotel phone, said, “hey, you made the finals, you’ve got a pitch in 30 minutes”. There was a convoy that came over to my hotel, they rushed us over to the venue. It’s called Shea’s Auditorium in downtown Buffalo. I entered the stage to 4000 screaming people, and a panel of celebrity judges. I hit my first slide to pitch and it was the wrong slide deck. The production is under such a time crunch. I looked over to the AV person on side stage and I said, “hey, guys, we’ve got the wrong pitch deck”. And the Master of Ceremonies just yelled at me. “Just go with it!” So in that moment, I pitched my five minute pitch in two minutes. It’s on YouTube. It’s funny, but I think I nailed it. I made lemonade out of a ton of lemons onstage, and it started our journey. So, Buffalo for us has meant this place of safety and encouragement, Kangarootime, we feel like we’re celebrities in our ecosystem. They’ve been super supportive of us. More than anything, the number one insight that we’ve had about being in Buffalo is we are capital efficient there. And hiring engineers in Buffalo is very different from a cost perspective than hiring engineers in San Francisco and the long tail answer to our journey. And I think the most intrinsic thing that’s come out of it is, we owe this stewardship to our customers to provide a product at a very reasonable price. And doing it and Buffalo has unlocked that.
Bob Butler
I mean, that is fascinating. Scott, what a great story. Everybody check out YouTube, Scott Wayman, Kangarootime. Let’s just jump into payment. You know, can we talk a little bit about how they’re integrated into the Kangarootime ecosystem? And do you have any use cases you can walk us through?
Scott Wayman
So, payments are the lifeblood of any business, right? It’s so important, Bob. So, I’ll give you a use case. We were working with a customer locally in Buffalo. And she called right in the middle of her implementation and said, I can’t do this. I’m too stressed out, there’s too much going on. I’m done. She cancelled her implementation, because it was gonna require a few hours. So, she was local, I got in the car immediately. And I drove over to enter her office and see her crying at her desk. And I just kind of went awkwardly and said, “Hey, what is going on? And can I help? I’d love to hit sit here and made sure that we support you, I’ll do anything. I’ll eat a jar of mayonnaise, I don’t care. I just I want you to get back on track because I really believe we can help you”. And it was serendipitous, because she pointed over at the corner of the desk closest to me. And there was a stack of 300 checks and fields. You know her face is like dripping with tears. And she’s like, I want to have a life. It’s Friday. It’s three o’clock. And I’ve got eight hours of encoding checks. And it was so hard for me not to do the, “well I told you so when you signed up with Kangarootime, you signed up as a merchant through the Payrix portal, it took you one minute, it was nothing. And you were ready to just kind of like leave this life. This stack of checks. This eight hours on a Friday night.” And not only that, Bob, not only does that use case ring true for all of our customers by optimizing their revenue cycles and just anonymizing the concept of accepting payments. What it also does is it circumvents revenue cycle latency. Most of our customers really stress out about taking all those checks on a Friday and then having to write that check on Monday for payroll. So we can kind of like clean all that up with our platform with embedded payments, with automation, and just kind of changed their worlds.
Bob Butler
You know, it sounds like one of the most important things. I would imagine a lot of your customers are small or midsize businesses that are really managing that cashflow tightly, on a week to week, month to month kind of basis.
Scott Wayman
Yes, so you’re looking at operations or businesses that do anywhere from $80,000 to $300,000 a month, and payments and tuition payments in the US average, about $1,000 per month. So, for those of you that are listening, that have their children in childcare, we love you, you know, we love you. And we understand that this is a time in your life where you’re making an investment in your child’s well being, you’re helping the center’s support, building the body, the soul, and the mind of your child. They’re working very hard to express quality. But again, I think Bob, the message there as we look at these businesses is kind of like the small SMB archetypes. And really, they’re powerful institutions.
Bob Butler
Absolutely. So Scott, bring it back to Payrix for a second, what led your decision to move to Payrix? And what specifically did we offer that maybe others didn’t? And what was attractive for Kangarootime for you when you made that choice?
Scott Wayman
Yeah, Bob, one of the things we found about payments providers or finding an ISO partner was that there was a lot of hair in every offering. You know, there was usually a massive deficiency, be it on the support side, always on the technology side. We require a lot from our payments partners in regard to technology. Our ethos is about customer success. When we started to gain steam, we decided, yes, we want to be the best software company in the world in our domain. But more than that, who cares about the software, we want to be the best customer service provider. We could see it, we could see how maternal our customers were, the love that they gave to their craft, the love that they gave to the families that they served. And there was this kind of ambient expectation, this kind of halo of kindness around the interactions we had with them. And we owed it to them. What we saw when we worked with other ISO partners or payment partners, was just not even close to the same commitment to customer success and customer happiness and doing those crazy out price things to serve a customer and fight for NPS and that commitment to the thesis around, hey, if we work hard, not only will it this put a great feeling or sentiment around our brand, we can kind of change our world, we can change the world we exist in. And we felt aligned with Payrix on a couple of fronts. First of all, Payrix was the first PayFac® to fly to Buffalo and come see us and really invest in the relationship and tell us that what we were doing was important and valid. Second, once we saw the demo, and we saw how advanced the technology was, how easy some of the things we were doing with manual process could become, the onboarding, Bob, just being able to onboard a new customer in about 10 minutes instead of three days, that changed our customer acquisition model. I’ve told your team time and time again, we consolidated our sales cycle from about 90 days to about eight days. And a big part of that was the latency between getting a customer approved with KYC. And all the elements of getting them through the merchant onboarding process. And the ability for us to control that and make it very truncated and convenient. So, it was a myriad of things. And I think what, for those of you looking for a PayFac® partner, if you really cherish that concept of customer success and technology and a great experience for your customer, you can’t beat the Payrix offering.
Bob Butler
Well, thank you for that Scott. And you know the story around the way that you view the customers is very much in line with the way that we view our customers. But even more inspiring because of the business that you serve, which are the childcare facilities and people that are really passionate about that. So again, super inspiring. Want to jump over to the return on investment standpoint, ROI. Are there any KPIs or success metrics that you’re able to share? Anything about how having payments embedded within the current solution at Kangarootime, how has that helped you as a company?
Scott Wayman
Yeah, I mentioned the first, probably the most pivotal one, which is the speed to onboarding. So, the merchant portal design and the automation that sits behind onboarding and validating each of our customers to receive payments is great. We are super KPI oriented, we actually have objective and key result infrastructure built into everything. So we have OKRs in every department, we look at them on Mondays and Fridays, our Payrix dashboard, or our payments dashboard and our GMV progress, we track that by the day. So, there is just no room for any sort of latency when it comes to evaluating our internal performance. We understand what we’re processing, card types, we understand, you know, zip codes, we’re starting to get more and more data on for our customers and looking at kind of the health of our business, knowing when a customer or when a parent goes from an ACH payment to a credit card, and then they jump to another credit card, we’re able to see that kind of payer mix and some of the transitional payments behavior and understand whether or not maybe a family might be distressed, and communicate that to the center to say, you might be looking at a disenrollment here in a few months. So, there are some really interesting machine learning opportunities, and just looking at payment patterns that Payrix allows us to view and unlock which we had never had that ability before.
Bob Butler
I mean, that’s fascinating. And again, I think the most successful software’s that are in vertically focused software’s are going to be doing this machine learning and absolutely helping their customers manage their business, it sounds like you guys are well on your way there.
Scott Wayman
Yeah, we’re really fascinated with the amount of data that just the payments gateway can provide for you. It also gives us insight as to the capital needs of our customers, so the centers. So we have sort of an interesting view of their future needs of capital. And then again, back to the revenue cycle, really understanding the ebbs and flows, the latency. One of the most recent models we’ve run is on seasonality. You know, schools K-12 have very seasonal predictive trends and patterns. But coming off of COVID, and being able to see where our average customer was, an average amount of monthly GMV versus January of 2020 and creating a trendline. That looked like the Nike swoosh right? In March, it just dropped to the bottom, and then there was a slow ascension, upward and to the right. Today, it’s interesting, being able to tell that digital story to our customers. Nationally, we’re at 87%. There are a couple of indicators here, but payments tell the entire story.
Bob Butler
Absolutely. So a lot of our listeners to this podcast, and believe it or not, we have a lot. A lot of them are new to embedded payments, payment facilitation. Can you share any insights, best practices or gotchas that that audience might want to know?
Scott Wayman
Yeah, so I think visibility and understanding the capabilities of your partner is integral to standing up the best technology offering for your customers. I think understanding everything from the workflow out is super important. So that experience, a couple of elements that we had to really consider: latency. Our customers just cannot live with a four day hold, you know, a four day hold. Really understanding that and going into every negotiation and Payrix being very upfront about speed to bank, was super important. Also understanding your buy rate and what it does for your business. The MCC for childcare is really safe and unique. And we think we understand where we can lever contracts with our payment partners, and having the right payment partner that has the right approach and understands volume and has the right thesis around how they structure contracts is also super important.
Bob Butler
Well, Scott, this has been great, you know, any final thoughts you’d like to leave with the audience that we have here?
Scott Wayman
Yeah, I would. So one thing I’ve learned in my seven years at Kangarootime, and then prior to that, and my eight years at my prior startup where we did embedded payments, there’s always this sentiment that has rang true and each organization has really stood behind. So when it comes to revenue cycle, when it comes to payments, when it comes to the weight of a parent that’s accidentally maybe overpaid something, the amount of attention that you pay to that is 10 times what you should pay to a bug in the software. When it comes to handling people’s money, when it comes to handling their well-being, maybe the fact that they might overdraft an account, your support ethos, it has to be that of just the highest conscientiousness. So when you do embedded payments, you enter this area of support that’s otherworldly. So you need to be on your game, you need to think we are going to be this appose of our space. We are going to support customers and any payments issue, anything we can help a customer with. It takes top priority.
Bob Butler
Well, that’s been great. And again, Scott, your story is so inspiring. I really want to thank you for being on the show. I know we’re both big believers in sharing knowledge and experience. So again, thank you for joining us today.
Scott Wayman
Great to be here, Bob. Thank you.
Bob Butler
We want to be a trusted resource for software providers like Kangarootime, who are out there trying to make sense of embedded payments and PayFac® and to help get them educated on what they need to make the business decisions their customers and their investors will thank them for.
Thank you for joining us today on the PayFAQ Embedded Payments podcast brought to you by Payrix. For more information about embedded payments, subscribe to our show at Payrix.com/podcast.
