Built to Last: CEO Tom Villante on 15 years of YapStone

Tom, you have just completed your 15th year with YapStone. How does it feel to have co-founded this company and why do you think you have been successful?

Tom: There is a statistic that I often reference when I think about what we’ve built here at YapStone – that the odds of starting a company that achieves $100 million or more in revenue is 3.5 in 10,000. It makes me very proud to know that what we’ve accomplished is very unique.

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We started the company in 1999 – a very different time for the payments industry. The electronic payment industry didn’t really exist and companies like Braintree or Square had not yet been founded. At that time, our goal was really to build a scalable business to create solutions for our partners.

I think we’ve been successful so far because we built a payments platform that is customized to the business requirements of the large markets we serve, like apartment and vacation rentals. And because our platform can process complex, high-ticket transactions, we have also built a strong and diverse customer base across multiple verticals. And then when you add the talented team and our efforts to provide the best customer service possible – well, I think that is how we found success.

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Do you remember the day, 15 years ago, that you conceptualized YapStone? Did you ever think you’d be running a $100M company?

It may sound like an odd place to dream up a business plan, but I was playing poker with friends. Someone at the table mentioned they were at a flea market over the weekend and wanted to buy a motorcycle, but couldn’t because there was no online payment provider that could facilitate a transaction with such a high dollar amount. This got us thinking about the opportunity to build a payments platform that could process higher ticket transactions. I wanted to build a business that we could scale – and that had somewhat fixed costs, with unlimited revenue – and all the pieces came together.

I never thought I’d be running a big company, mainly because my experience was as a private equity investor. But Warren Buffet has a theory that I believe in as well – that it is always good to be involved in the operations side of a business, because it makes you a better investor – and that being a good investor makes you a better operator. The two go hand-in-hand. Also, I have an amazing management team that leads various areas, so it all feels very seamless.

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YapStone has experienced double-digit growth and continues to work with an impressive list of customers. Are there any particular steps you took at the outset that positioned YapStone well for such long-term success?

We knew from the beginning that our business model addressed a critical need in the market, but we were very careful from the outset about making sure our business was well-positioned for long-term growth. We built our business the “old-fashioned” way and didn’t get a lot of capital up front so we really had to be profitable in order to survive.

We have always been very commerce-oriented. We’ve always understood the basic economics of online payments – companies make money based on the two factors: 1) the size of the ticket, and 2) the recurring nature of the transaction. So, we focused on a product and the markets accordingly. I think that both our customers and our investors have responded well to our business because they see the value we are creating.

A lot of people say fear is their number one driver. Is this true for you – or is simply the possibility of building a successful, profitable company?

It’s definitely both. I had some early failures and some early successes and I realized that you learn a lot more from your failures. I have certain things that steer me in my approach to business that will never go away. For example, I get uncomfortable when I feel the company is starting to act like a “big company”. Our goal is to remain nimble and bring products to market quickly, while also ensuring that we stay well structured as an organization and adhere to certain risk procedures and security that are essential when processing billions in payments.

As CEO of the company, do you have a set of principles that you stick to?

The first is to stay focused on the big picture. I have to remind myself, as hard as it is sometimes, to come up for air and ask “Are we coming up with a product people want? Is this something that will make their lives easier?” It’s really important to take yourself out of the day-to-day rigmarole and ask “Why are we here? What value are we providing? How can we get better?”

The next is that we must remain dedicated to customer service. We are in the payments business and working with people’s money. This is serious business and we have to have a strong customer service focus, both on the consumer and merchant sides. We have

30% of our workforce involved in customer service – over 80 people. I truly believe that our combination of really great products and technology, plus the customer service element we provide, really separate us.

How have you personally grown during your tenure at YapStone?

 I think I’ve learned how hard it is to build and run a company. When you sit solely on the investor side, you don’t have anywhere near the appreciation for what’s involved – and it’s all encompassing. I’ve learned to appreciate what each individual person does. Sometimes I sit with our teams and observe the various tools and technology they are using. And I find myself overwhelmed by how good people are at their jobs and how fast and smart they work.

I think I’ve also become more patient over the years as well – and have realized that you can’t have your way all the time – and that the world won’t end either when you have a disappointment. It’s taking a longer-term view and approach to everything.

What is the single biggest mistake or failure you’ve made at YapStone – or one that you’ve learned from?

We’ve never been concerned with growth for growth’s sake and we’ve always made a conscious effort to focus on profitable growth. With hindsight being 20/20, I probably would have grown our team a bit more aggressively five years ago. We’ve done a really nice job in the last two years building out a world-class team capable of supporting the world’s largest online and mobile marketplace and vertical markets.

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It seems like a lot of startups are seeing rapid growth – are they growing too quickly? What advice can you provide to budding entrepreneurs?

You have to do a bit of everything when you are building a startup – and get your hands dirty in every part of the business. For us, it was important in the first year at YapStone to get out as fast as possible with a good product. Our intention at the outset was not to build the business quickly and then sell it, so we’ve worked very hard to develop a profitable business. We knew from an early stage that the demand was there from a revenue side. For new businesses that aren’t getting that validation, they must quickly adapt.

My advice to entrepreneurs is that you have to build your business to be able to last. It is so much easier to form a company now, and there is a tremendous amount of funding for these startups. It comes down to which companies can really deliver consistent growth in revenue and profits. To build a company to sell is a very risky proposition. The WhatsApps of the world (sold to Facebook for $19B, with no significant revenue and 55 employees) get all the press and viral online attention, but are the rare exceptions. You have to build a company that can be monetized and is built to last. So much has to go right.

What have YapStone’s biggest milestones been over the past 15 years?

I think our single biggest milestone is that we’ve been able to replicate our success in the apartment vertical and expand into other verticals like vacation rentals, storage and non-profit payments. To me, this proves that there is really something valuable about our strategy in creating technology solutions that involve payments and also providing solutions around things like integrations with a customer’s existing software, reporting and customer data.

Looking back, a couple of other major milestones included securing our first big apartment REIT contract, which is still an existing customer after 13 years, securing our partnership with HomeAway in 2010, and raising $50M in funding in 2011 from Accel Partners and Meritech.

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Where do you see the industry going and what will YapStone’s role be?

Paper checks will continue to decline and online and mobile payments will be everywhere – literally when you can pay for absolutely anything electronically. Mobile is huge and we are investing heavily in the mobile experience. Our challenge is to stay focused on what we’re good at, while moving into new growth areas.

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