I built a billion dollar company in 18 months

Key Concepts

• Billion-dollar company in 18 months
• Velocity as a company design principle
• Interchange business model in financial services
• Reverse engineering companies
• Importance of integrity and relationships in business
• Manufactured housing as a potential business opportunity
• History of credit cards and consumer finance
• Balancing rapid growth with long-term sustainability
• The role of emotional regulation and team building in leadership

Building a Billion-Dollar Company in 18 Months

Eric Lyman, co-founder of Ramp, discusses the company's ambitious goal of reaching a billion-dollar valuation within 18 months of incorporation. This goal was set intentionally to drive extreme velocity and capitalize on market opportunities.

• Initial Goal: To build a billion-dollar company in 18 months.
• Timeline: Incorporated in March 2019, launched publicly in February 2020, reached a billion-dollar valuation in 2021 (less than two years after incorporation).
• Revenue at Valuation: Approaching $100 million in annual revenue by the end of 2021, with an $8.1 billion valuation.
• Time to $100 Million Run Rate: Approximately 15-17 months from the first million in revenue.

Ramp's Business Model: Interchange

Eric explains Ramp's business model, which revolves around interchange fees in the financial services sector.

• Interchange: A transaction-based model where a small percentage of each card swipe goes to various parties involved in moving the money.
• Parties Involved: Merchant, merchant processor (e.g., Stripe, Square), merchant bank, Visa/Mastercard, and the issuer (e.g., Ramp, Chase, Capital One).
• Issuer's Role: The issuer takes on credit risk and operational costs, traditionally keeping most of the interchange.
• Historical Context: Interchange rates were historically high (5-6%) in the early 1900s with department store-based banking.

Rapid Growth and Scaling Challenges

The conversation touches on the challenges of scaling a company at an unprecedented rate.

• Employee Growth: Reached 100-200 employees within 18 months, now over 1100.
• Hiring Pace: Requires onboarding a significant number of employees per month (e.g., 10 people a month initially, now 40-50 in a two-week period).
• Importance of Software: Highlights the need for robust software and tools to manage complexity and scale efficiently. Examples include Ramp (expense management), Rippling (HR and payroll), and HubSpot (CRM).

Velocity as a Core Principle

Eric emphasizes the importance of velocity and speed in Ramp's strategy, contrasting it with the slower pace of traditional financial institutions.

• Counting the Days: Ramp tracks its age in days (e.g., 2310 days old, or 6 years).
• Early Goals: Setting aggressive goals, such as network approval within 45 days and funding first transactions within 70 days.
• Growth Targets: Aiming for 10% weekly growth initially, acknowledging that 20% monthly growth can lead to burnout.
• Focus: Prioritizing extreme focus on one or two key functions to optimize.

Reverse Engineering and Idea Generation

Eric discusses his approach to identifying business opportunities, which involves reverse engineering successful companies and identifying gaps in the market.

• Learning from Brad Jacobs: Credits Brad Jacobs (founder of multiple publicly traded companies) for teaching him the reverse engineering approach.
• Framework for Spotting Opportunities: Researching different ideas, identifying market gaps, and reverse engineering companies.

Alternative Business Ideas Before Ramp

Eric shares some of the business ideas he considered before settling on Ramp.

• Manufactured Housing: Exploring the potential of manufactured homes, inspired by efficient housing in Japan. Ultimately decided against it due to zoning and regulatory challenges.
• Crypto Ventures: Briefly considered various crypto-related ventures.
• Partnership and Co-brand Business: Explored the co-brand credit card business, aiming to create a modern card for businesses and creators.

History of Credit Cards

Eric delves into the history of credit cards, tracing their origins to early 20th-century banking practices.

• Bank of Italy (Bank of America): Founded by AP Gianini, initially serving grocers, immigrants, and farmers.
• Franchise Banking: Setting up branches in various cities to provide loans to small businesses and the emerging middle class.
• Department Store Loans: Banks taking over loan services previously offered by department stores.
• BankAmericard: Bank of America mailing credit cards to everyone in Fremont, CA, leading to widespread adoption and the rise of the modern credit card.

Balancing Growth and Longevity

The conversation explores the tension between rapid growth and building a company that lasts for decades.

• Compounding Growth: Emphasizing the importance of consistent 30% growth over 30 years.
• Market Opportunity: Noting that Ramp still has significant market share to capture (1.5% of the corporate and small business card market in the US).
• Avoiding Selling at the Bottom: Learning from historical examples of families who maintained wealth by avoiding selling during recessions.

Personal Reflections and Leadership

Eric shares personal insights on emotional regulation, leadership, and building a strong team.

• Emotional Stability: Acknowledging the rarity of emotional stability in individuals with rapid success.
• Resetting and Focusing: Emphasizing the ability to reset after setbacks and focus on making the most of the remaining time.
• Learning from Family: Drawing lessons from his brother's mood swings and his parents' approach to conflict resolution.
• Importance of Team Building: Surrounding himself with operationally strong individuals to compensate for his weaknesses.
• Emotional Regulation: Recognizing the importance of emotional regulation and impulse control in decision-making.

Conclusion

The discussion with Eric Lyman provides a detailed look into the strategies and mindset behind building a rapidly growing company like Ramp. Key takeaways include the importance of setting ambitious goals, focusing on velocity, understanding the underlying business model, and building a strong team to overcome personal limitations. Eric's emphasis on emotional regulation and long-term sustainability offers valuable insights for aspiring entrepreneurs and leaders.