Taming Payment Chaos: How Ledge is Empowering Finance Teams

Welcome back to CFO Weekly, where we're talking with financial leaders about how to build efficiency in their teams, create time for strategy, and ultimately get results with your host, Megan Meese. Let's jump right in.

Megan - 00:00:18: Today my guest is Tal Kirchenbaum. Tal is the CEO and Co-founder of the automated finance operations platform Ledge. Prior to founding Ledge in 2022, he held leadership roles at payments giant Melio and in the Corporate Development and M&A team at Facebook. Tal also held roles at Boston Consulting Group (BCG) and Intel Capital. He holds a Bachelor's Degree in Accounting and Economics from Tel Aviv University and an MBA with a specialization in finance from the University of Chicago Booth School of Business. Tal, thank you very much for joining me on today's episode of CFO Weekly.

Tal - 00:01:10: Thanks for having me, Megan.

Megan - 00:01:12: Yeah, I'm excited to learn about you and your product Ledge, which helps companies to tame payment chaos. And in a world where chaos seems to be everywhere at the moment, it's always a good idea to eliminate it where we can. We've got a lot to cover today. So let's get started first. And as always, let's start with you and your story as to how it is you got to where you are right now.

Tal - 00:01:36: Absolutely. So again, thanks for having me. I started out my career in a very unconventional, I'd say typical path as an Israeli I spent some time serving with the Israeli Defense Forces, then into undergrad where they focus on accounting, and there spent some time in venture capital with Intel's corporate venture capital arm, Intel Capital, essentially covering all the different sectors that intel invests in. This was between 2010 and 2012. Then moved to the US for a few years, first for business school, then did some consulting with the Boston Consulting Group, moved out to California and joined Facebook and was part of Facebook's Corp Development, or M&A team where I led M&A deals Facebook and some of its other assets. Instagram, WhatsApp, Ocular, and Messenger before moving back to Israel to do some more investment banking. Essentially some and advisory work. And then eventually joined a B2B payments company called Melio, which really helps small businesses either pay or get paid, which was a fantastic experience. And that's where also much deeper exposure to the field of finance operations. And that's where the idea of Ledge came to be. And about a year ago left Melio and founded Ledge with two Co-founders, Asaf Kotzer and Ariel Weiss, and have been building the company ever since.

Megan - 00:03:07: Wow, that's an impressive career so far. So let's talk about what motivated you to start Ledge. What did you feel the world was missing?

Tal - 00:03:20: Absolutely. As I mentioned, I spent some time with Melio, a B2B payments company that as a B2B payments company moves quite a significant volume of payment between Payors and Payees. And as such, has to deal with this very complex and fragmented infrastructure between the different banks that it uses, the different payment providers that it uses and its ERPs invoicing solutions, and so on. And Melio had to find a way to deal with this type of a complexity, essentially finding a way to match different transactions and payments to one another, take care of various types of payment errors that are a common reality of payments, as well as simply find a way to efficiently gain control of all this payment. That is something I was familiar with from Familial. Melio, being a fintech company, was able to actually develop its own proprietary in-house solution for that. But over my time at Melio, was speaking to many other companies, mostly B2B companies, but not just, who also suffered from the exact same challenges of essentially having to find a sophisticated and efficient way to manage their pretty complex infrastructure as it relates to their core payments, their core finances. And the interesting thing about the vast majority of companies that I spoke with was that they are not fintech companies and they in fact lack the same type of fintech expertise, especially as it relates to payments to pay tech. And so in those companies, the burden falls not on engineering teams, but rather on finance teams who have to find a way to deal with this overwhelming volume of payments and transactions that they're seeing in their companies. And have to find a way to sort out that mess and ensure that a company's books are up to date, that the company isn't experiencing any type of losses, and that the company has an efficient way of just taking care of its most basic daily tasks and functions, such as reconciling payments in the company's bank accounts with whatever it's seeing in its ERP solution.

Megan - 00:05:47: So I'm just curious, is there a specific client that Ledge is better for than others? Specific industry, a specific size company? Is there anything that makes a company a better user for Ledge or not?

Tal - 00:06:03: Absolutely. So, we tend to work with companies who are either tech companies or rely pretty heavily on tech. What we're mostly interested in is that they have a relevant set of providers that they work with and that's thinking about major or some regional banks, think about payment providers, ERP solutions, billing solutions, and so on. And the other key factor is really that they're dealing with a certain scale in terms of their activity, their business. Thinking about companies that have thousands of payments as part of their core business that they deal with on a monthly basis or more than that. Some of the companies that we work with have hundreds of thousands or millions of payments a month that they have to somehow process and manage. And that can be incredibly challenging for finance teams, given the volume of payments. And this is something, by the way, that we're seeing across a pretty broad range of sectors and industries, marketplaces platforms, SaaS companies, and so on.

Megan - 00:07:14: And Ledge just announced a new product offering. So can you tell us a little bit about that?

Tal - 00:07:21: Absolutely. So today we're essentially coming out of a private beta with what we're calling a multi-bank treasury management solution, one that helps companies better manage a diverse banking infrastructure. So if a company works with more than a single bank, or if a company has more than a single bank account, oftentimes it could be quite challenging for a company to effectively and efficiently manage its cash positions across those different accounts, those different banks, and so on. And so what we essentially do at Ledge is we integrate with a company's banks, we pull in all that information into our platform, into our product, and we help companies with three key things. The first is really just getting a better visibility into their cash position, so showing them how much money they actually have across different bank accounts, across different banks as well, in different currencies, of course, and so on. The second is essentially providing them with various types of alerts that we're able to do because we continuously monitor a company's bank account. And so we're able to provide alerts if the certain account goes above certain accounts balance goes above a certain threshold, or maybe below, or perhaps if we're seeing any type of unusual activity or an outgoing transaction which seems kind of too high and the company would like to be notified about that. And really the third thing that we do is enable a company to manage those different accounts in a better, more efficient way by facilitating and automating money movement and funds transfer between those different accounts. Think of this as rebalancing a company's bank accounts, but on Autopilot...

Megan - 00:09:13: And we were talking about this before we started recording, but finance is really evolving to be more forward-looking than previously, where they were just focused on historical results. So can you talk to us a little bit about how, first of all, Ledge helps companies become more, I guess, forward-looking or thinking, and how you kind of incorporate forward-looking into your own finance teams?

Tal - 00:09:46: Absolutely. So Ledge was really founded with the premise of helping finance teams automate their day-to-day activities, the ones that are a reality of business and something that they have to do, but that isn't necessarily the best use of their time. The first thing that we focused on was really payment and bank reconciliation, which of course is the process of trying to reconcile or map payments between a few different sources, such as the company's internal database or books, and any type of external databases, such as company's bank account, or perhaps it's balanced with a payment services provider such as Stripe or PayPal. And that process, when it's done for a very high volume of payments, such as tens of thousands or hundreds of thousands of payments a month is a challenge that gets unbelievably overwhelming for companies and ends up taking up a significant effort on behalf of the team. And what we know from our experience and what we know from working with companies is that what oftentimes happens is that finance teams will actually have dedicated people on the team who will be focused solely on that. We know of quite a few companies that have teams of dozens, plural of people who are focused solely on payment reconciliation. And that is really something that is able to be automated on a pretty massive scale. And that's of course, the key focus for what we do. That is our bread and butter reconciliation automation. That was the first thing that we launched as the first product. And once you are able to automate those types of day-to-day, pretty manual, mundane tasks, you're actually able to free up the finance teams to also focus on more strategic, higher value types of activities. Things such as thinking about FP&A, making sure that you're tracking towards your budget, thinking about various types of strategic finance elements such as inorganic growth, and so on.

Megan - 00:12:09: I know as accountants we're often worried about automation and what it's going to do to our jobs. But as you said, I think it really just takes away the mundane tasks that nobody really wants to do to begin with and frees us up to do bigger and better.

Tal - 00:12:28: Absolutely. That for us is a key part of what we're doing. It is a key part of our mission is really to help finance teams spend their time in a much more efficient way and free up their time where there are higher strategic tasks. So that for us is a big part of our mission. Absolutely.

Megan - 00:12:48: And talk to me about the last three years. I've read that the pandemic sped up or sped up digitization by at least a decade. So did the pandemic period of time, did you guys have to change direction at all? Have you invested in things you might not have otherwise? How have the last couple of years affected your path?

Tal - 00:13:14: Absolutely, I think what's been most apparent about the past, call it three years, right, since COVID-19 1st started affecting our lives is we've seen this real proliferation of both payment methods and this complete exposure in terms of digital payment and how they've become an even more integral part of the business. And we've seen that across the board. You'll see that the increase in the use of digital payment methods over the use of analog payment methods, mostly cash, and checks, is just tremendous over these past three years. And you've seen really this shift be supported by many fintech companies. And this is across what we call the CFO tech stack. You'll see this in accounts payable, and accounts receivables, and you'll see this with enabling capabilities as well, such as finance operations, which is what we do. And so for us, really, the effects of COVID have simply accelerated this shift and accelerated the need for these types of solutions. And once you also see that increase in digital payments and you see more and more companies start to accept more and more digital payments, that now they have an increased need to find a way to manage and handle that really high volume of payments. And the interesting about that increase in volume is that it doesn't quite scale in direct correlation to your team. So once you're seeing an increase in your payments, you might think, oh well, I'll just continue adding additional resources to my team. But the reality of it is it doesn't always scale linearly. And from our experience, the more complexity that is added to a company's stock by, let's say, adding another bank account or adding another solution or another type of payment provider, then the complexity that finances teams have to deal with grows exponentially, because you have to now match transactions. If you think about reconciliation instead of against two other sources, you now need to do it against four other resources. And that real resources rather. And that really increases that complexity in an exponential way. And this is something that we continuously have heard from teams that we work with and have experienced ourselves as well.

Megan - 00:15:54: And I'm curious, does this sit on top of an ERP? Is it separate from an ERP? How exactly does someone go about putting this tool in their stack?

Tal - 00:16:06: Yeah, absolutely. So Ledge specifically is a tool built specifically for finance teams, which is to say it doesn't require any involvement on behalf of a company's engineering team or on behalf of their IT team. Rather, it is a team that finances it is a tool rather excuse me, finance teams are actually able to use and implement and configure on their own. So essentially it plugs in and connects with a company's existing guarantee solution with their existing bank providers and payment providers and so on to in a way help the company manage those separate providers. But what we constantly like to refer to is it essentially turns a company's existing infrastructure from individual components, so it turns them from individual musicians into a band and really helps the team manage those providers as one unified staff in an automated way.

Megan - 00:17:11: Wow, that's amazing. It's always nice when finance can kind of implement its own tools without having to rely on IT.

Tal - 00:17:18: Absolutely. That for us was one of the key realizations that we had when we set out on this journey, which was the finance function is such a critical, important one. But unfortunately, finance teams don't always get the love and attention that they should be getting from other parts of the company, especially thinking R&D teams. Engineering time is scarce. It's a very valuable resource. And for us, one of the biggest obstacles that we had to overcome was thinking about how can we provide this type of platform and service without relying heavily or at all on those types of resources.

Megan - 00:17:58: And I want to switch gears here and talk about the current market, but you recently had a discussion with other industry experts at Fintech Week in Tel Aviv about innovation in a bear market. So can you just share your thoughts on that start?

Tal - 00:18:15: Yeah, absolutely. For us, where we met the bear market, I think the most extreme way was when we set out to raise our seed funding, which was in December of 2022 last year. And this was when fear of recession was very much present and it affected the Tech ecosystem in a pretty major way. There was very little Venture Capital activity at the time and especially compared to the two years that preceded that. And for us, that meant that focus was more critical than ever. So focusing on customers, solving their biggest, most pressing pain points, on operating efficiently, but also from a fundraising perspective, it meant that we had to focus on finding the right partners for this journey. And for us, that partner ended up being Jonathan Golden, who led her seed round, and's one of the partners at NEA, New Enterprise Associates, a venture fund based out of San Francisco. And Jonathan specifically, before joining NEA, spent a few years with Airbnb and was their head of product for payments at Airbnb. And as such, he's someone who was intimately familiar with that exact same problem that we've set out to solve. Is, how do we help companies, especially tech companies, solve the complexity that can be caused by having a high volume of payments, by operating at scale, and by having to do so with a pretty complex and fragmented infrastructure? From a banking payments perspective?

Megan - 00:19:59: And I'm curious to know, how do you guys stay focused on the future and innovation at times when it seems like the present is so chaotic?

Tal - 00:20:14: It's unbelievably chaotic, that's for sure. I think that for us, it goes back to that focus, right? Especially as an early-stage startup company, you really need to focus on your customers, focus on their needs. You need to be very open to that. You need to constantly be in touch with them and measure that on a very frequent basis. You need to be agile as well. And for us, we spoke briefly about the new product that we brought out of private beta today. The multi-bank treasury management solution that we have is actually something that we've had on our product roadmap for quite some time, but we actually chose to accelerate a roadmap as it relates to that product, given everything that's been going on over the past few weeks in the banking ecosystem. Thinking about SCB, going into Stewardship, thinking about HSBC, Credit Suisse, thinking about Signature Bank, FRB, and a few other banks that are now being put under pressure and that has really led to many different tech companies, ourselves by the way, including to put an increased focus on a multi-bank strategy. So essentially opening up and starting to operate with additional banks and diversifying the risk that can be caused by having only a single bank that you work with. So that is really something that's starting to happen in the market over the past few weeks. We of course noticed that, and had to deal with that ourselves, but also we're very much attuned to what we heard from our customers that we work with who said, well, we're now rushing to open up additional bank accounts, but that creates some additional complexity for us. We're having a harder time simply having control and the same amount of visibility that we had before into our bank accounts. And that's why we had to find a way or we wanted to find a way to address that need, to address that pain point that we heard. And so we simply chose to accelerate our product roadmap as it relates to that specific area and we were able to launch this new product in a very short time frame, but again, being very much attuned to what we're seeing and hearing from our customers because of these pretty unstable macro conditions.

Megan - 00:22:47: So we'll talk more about the state of banking in just a minute. But I'm curious to know how you balance the necessary risks associated with being a startup, with putting or starting to put controls into place.

Tal - 00:23:03: Yeah, I think it's always that trade-off. Right. It's a fine line that you're trying to walk. Essentially you need to constantly stay innovative and constantly address the needs of your customers and be pretty much focused on that. And you need to do that in a way that still maintains the stability of your business. Right. And so for us, it's this constant movement forward together with us checking how we're doing. So thinking about our own resources, our own capabilities, our own roadmap, and our own strategic plan and constantly check our refined and perhaps tweaked direction sometimes with our ability to execute. That's something that we constantly do. So whether that means re-evaluating our hiring needs and our broader strategic plan on a much shorter basis and more frequently than we did before. And that for us has really been what we've been using over the power and doing over the past few months.

Megan - 00:24:15: And it's front page news, but there's currently an issue of insolvency regarding the Silicon Valley Bank and you commented on this in an issue of the Fintech Times. You mentioned that the situation presents both first and second-order implications. So can you talk to us about what you mean by first and second order?

Tal - 00:24:39: Sure. I think in terms of first-order implications, there are direct customers affected by this. If we think about SVB as an example, Silicon Valley Bank, you've got the Silicon Valley Bank customers that are both depositors. And that's really any type of company. Of course, not just fintech companies. And then you also have fintech who use SVB or more advanced types of products and services, such as using SVB as a way to connect into the payment ecosystem. So essentially using SVB's payment rails to initiate ACH, and RTP wire transfers, really. And companies of both types, both the general depositors as well as the Fintechs, were affected by that. And they really had to find a way of trying to augment that provider that's now been put into stewardship by going to other banks. For the general depositors, the general SVB customers, this was something that I'm sure wasn't a pleasant thing to do, but it was something they had to do, and it wasn't too difficult. I think that for Fintech companies, very specifically, was a bit more challenging to find other banks that could partner with them to provide the same types of capabilities that actually was able to provide. And there are other banks that support those banks, JPMorgan Chase, the Evolve Bank, and a few others as well. But it was just a bit more of an involved process. That's really the first-order implications. In terms of second-order implications, there are a few. But the first thing that jumps to mind is really customers who use fintech providers for such things as payroll accounts payable, and accounts receivable automation. And to the extent that those fintech companies' payroll or AR/AP automation providers relied on SVB for connecting it to the payments ecosystem, which many did, because SVB offered a great service there, a great product there. Then I think those companies are probably now facing various challenges in terms of their ability to continue operating. It's a question of can their existing payroll provider continue actually making payroll in a given month. And that's something that we're pressing in the first week after the SVB runoff steel chip.

Megan - 00:27:24: Do you have any thoughts on what alternatives those companies might have?

Tal - 00:27:29: Absolutely. I think, as I said before, I think quite a few other banks also provide the same types of services. JPMorgan Chase is one, Evolve bank is another, and there are others. And the payment ecosystem today is in a place where you've got quite a few players who provide similar services and you're able to augment a provider. One does find itself in a difficult position, such as what happened with SVB. And I think it's always good to have those redundancies in place, and some of the more mature fintech companies already have those things in place. But we've also heard of other companies. I think one example would be Rippling, which is a payroll provider who actually came out publicly during this crisis and said, we use SVB as a way to connect into the payment rails into the payment ecosystem. And when SVB went into stewardship, rippling had to find another partner bank. If I'm not mistaken, it was JPMorgan that they ended up partnering with to ensure that they're able to continue serving their customers. Rippling was able to continue serving its customers and actually making payroll for them.

Megan - 00:28:47: And what advice would you give listeners who are currently considering starting to automate their payment ecosystem? Where do you start with something like that?

Tal - 00:29:01: Absolutely. So there are really different types of solutions like that. You can think about trying to automate vendor payments, generally speaking, and that's various types of vendor payment solutions. And they really range depending on company size. For smaller businesses, we can use a solution like Camilion, where I spent a few years. Larger companies can use a solution like AvidXchange to really help finance teams with automating those processes. On the spend management side, helping employees have a more efficient way of really transacting and doing various types of business-related expenses and getting reimbursed for that. Then you have various types of expense management solutions such as Mesh Payments, Brex, and Ramp, which all provide really fantastic products, some of them without charging a fee to their customers. And I think that as finance teams look to create those redundancies in their stack by adding additional banks, perhaps, or adding additional payment providers such as Stripe, PayPal, iDeal, and maybe some of the various buys now pay later solutions. Into their stack. The key thing that I would focus on is really finding a way to create that redundancy, to build that redundancy, but doing so in a way that doesn't increase complexity for your team, in a way that's going to be unsustainable and unmanageable.

Megan - 00:30:39: And I'm just curious to know what your vision is for Ledge's future.

Tal - 00:30:45: So Ledge, thanks to the fact that it is integrated with a company's essentially entire banking payments and data infrastructure, is really in a unique position where it's able to offer and really support finance teams with many of the most common tasks that they have to do as part of their business, as part of their job, really. And that is really the future for Ledge is really serving as a main command center, if you will, or an operating system that helps them to automate and support them in most of their activities.

Megan- 00:31:38: And lastly, as a finance leader and an entrepreneur, what is it that keeps you motivated?

Tal - 00:31:46: For me personally, I think for my Co-founders, for the broader team here as well, for us, it's really about how can we help someone else do something. In our case, starting with reconciliations, but then moving on to managing a company's finances and managing a company's payments in a more efficient, confident, independent way, how can we do those things? How can we really help finance teams in our case, do their jobs in a better way, in a way that they frankly should be doing? Given where technology is, I think we operate in a pretty interesting space, and finance people specifically have been looked over in many ways, and technology has made life much, much better across different parts of businesses and has somewhat looked over the finance function. And we're seeing over the past few years how that's being addressed as well, and how technology is finally catching up to that as well. And we're seeing the space of the CFO office be disrupted, and we're seeing just a fantastic amount of innovation in that space. And that's something that we're incredibly excited to be a part of.

Megan - 00:33:14: Tal, thank you very much for being my guest today.

Tal - 00:33:17: Thank you so much. Megan enjoyed this conversation. Thanks for having me.

Megan - 00:33:20: Yeah, I really enjoyed speaking with you and I appreciate you taking the time to be here with us today. And I wish you and Ledge all the best and to all of our listeners, please tune in next week, and until then, take care.

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