From humble beginnings to one of CEE’s largest Series B rounds - Payhawk co-founder tells their story

[UPDATE: This post was published in November 2021. Payhawk raised a new round of $100m at $1bn valuation in March 2022]

We at Earlybird Digital East are excited to announce our participation in the $112m Series B round of Payhawk, the all-in-one platform for company spend, only seven months after their $20m Series A in April 2021. Led by Greenoaks and with strong participation from us, this was the second-largest Series B round raised by a B2B company in CEE, after UiPath’s round back in 2018. Feeling lucky for having both companies in our portfolio and observing them first-hand.

After leading their Seed round in early 2020, we are proud to be one of the earliest supporters of Payhawk, and thrilled to see our investment thesis continuing to materialize (which you can have a glimpse of here). It’s a privilege to partner with another stellar team from the region on their expedition to lead a global software vertical.

We sat down with Hristo Borisov, Payhawk’s co-founder and CEO, to discuss the company’s journey so far.

1) Hristo, let’s start from the beginning. Tell us about your career prior to founding Payhawk and how you met with your co-founders.

I started my career as a software engineer in Telerik, which was one of the fastest-growing companies in Bulgaria. I spent a total of 11 years at Telerik and had the opportunity to be part of one of the biggest tech exits in the CEE region in 2014 for $263.5M. After spending a few years as an engineer, I became one of the first Product Managers in the company, and had the chance to develop a lot of breakthrough products in the cloud and mobile space targeting enterprise companies. This is where I met Boyko Karadzhov who became my co-founder and our CTO at Payhawk. He was the most brilliant engineer I have ever worked with, and gave me the superpowers to dream big when thinking about our next gig. I also met Konstantin Djengozov who joined us a little bit later as a co-founder and CFO, who was literally coding in Excel :)

2) There were already a few well-funded competitors in Europe when you started, that were founded 2–3 years earlier and had already raised +$20–30m at the time. Was this ever a concern to you?

These were the direct competitors only, but if you also looked at other companies targeting the space at the time, their total funding was close to $400m, whereas we collectively formed the company with just $18,000, which was enough for a shared space in a co-working office, proper computers, and A LOT of $100 Amazon gift cards to give out to CFOs to convince them to speak to us.

We knew these companies had been around for three years. But we considered this kind of competitor’s funding only as a strong validation for an emerging market which, despite large rounds, was still very much underserved and underpenetrated. I spent a month trying to literally sell their products to more than 40 CFOs across the globe and figure out the shortcomings in their value proposition. As a strong product nerd, I was trying to picture where these companies would end up in two or three years from a product and value proposition perspective. Our goal was to leapfrog them by predicting where they would end up, and build that in six months. A lot of people were very skeptical when we mentioned the scope of our MVP: “So you want to do what these four other companies are doing in a single solution?”. We got our working product on the market after just four months of hard-core engineering. And we never stopped moving faster and faster than anybody else in the space.

We continue to deliver a product that is loved by customers, and we’re doing it incredibly efficiently, despite having a very modest engineering team of 14 people while all of our competitors have more than 100 engineers. Our goal is to continue to hire the top 1% of the talent in Bulgaria and become the best employer, and simply out-work and out-develop everybody else out there.

3) We know that the software adoption in finance teams has traditionally lagged. Why do you think it is changing now?

There are obviously macro trends such as increasing IT budgets, a tech-savvy generation taking the lead in business decisions, and new developments such as Open Banking and paperless trend but, to be honest, the main reason nothing’s really picked up until now is that there wasn’t a product that solves enough of a CFO’s problems.

During our initial validation, we learned that a lot of the customers of these early players used multiple products alongside their solutions to build their finance stack. But a lot of these systems were not working together, which created a challenge for the finance team. And the picture got worse the more territories and countries a business operated in. Even if you are a small business that is distributed and operates in just two or three countries, the complexity becomes so high that you can find yourself dealing with administrative work all day instead of focusing on growing your business.

This is exactly what we are looking to address at Payhawk, offering them an all-in-one spend management solution that works globally, and solves all of these problems by combining all spend including credit cards, bill payments, employee reimbursements, payroll, OCR for invoices, and great integrations to their ERP systems.

4) What were the inflection points in your journey so far that you think had a very significant effect on where you are today?

Closing our Seed round was the biggest inflection point for us. It was such a hard thing to do. I got rejected many times — some of them rejecting more than once. Most people couldn’t believe that we wanted to raise a $2m seed round out of Bulgaria. And I don’t blame these VCs. They did not believe that we could compete with all these companies that, in the meantime, had raised another $150m.

But it only takes one Tier-1 VC to have the confidence to invest, make an unpopular decision because they believe in the team we are, our strong work ethics, and the market fundamentals. And among such VCs that had the conviction, I believe we got the right match with you - Digital East Fund.

Another inflection point was closing ATU in Germany as a customer. This was our first true enterprise deal that helped us completely tailor our product for companies of that size, giving us the confidence to push harder in that market segment.

5) Once again congrats on the recent $112m Series B, a super-fast milestone that was unheard of in CEE. It’s also the second-largest series B ever raised by a B2B software company in CEE, after UiPath. What would be your advice for founders regarding fundraising?

My advice would be to get your fundamentals right from the start. Make sure you have great co-founders that complement your skillset, that you agree who is in the driving seat and who does what. Make sure your unit economics are working, that your strategy is strong, and that the market and the problem you are solving are big enough for your ambition. Even if your traction is still early, great investors will be able to pick the fundamentals and make a strong bet on you. And if they don’t, they are not the right inventors for you. Continue to work hard and don’t give up.

6) Looking back, is there anything you know now that you wish you’d known then? What would you tell yourself from two years ago if you had the chance, or to founders that are starting now?

I would tell myself that venture money isn’t just about its face value. It really matters who you get your funding from. I should have done a lot more research about the VCs I was meeting, and only focused on the six or seven investors it was worth getting a check from. I also think we should have spent a lot more money on hiring more sales leaders earlier on — waiting to get the channel right and figuring out how to generate all the pipelines takes time and as a product-oriented team you can learn a lot from them. And once you crack it, then you cannot hire fast enough — and it’s much better to have your leaders already on board.

Read more about the recent round here.

Learn more on Payhawk or follow them on Twitter

Written by Mehmet Atici and Oguzhan Ozer