How Suneera Madhani’s Rejected Pitch Led to a Unicorn Startup- Foundr

3 days ago

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On a clear and comfortably warm afternoon in Orlando, Florida, Suneera Madhani and her team floated to a restaurant across from their downtown office. It was St. Patrick’s Day, and gleeful patrons filled the green-hued bar, but Madhani had something to celebrate besides the holiday.

Her business, Stax (formerly Fattmerchant), had just received a term sheet for $17 million. Just four years prior, in 2014, Madhani started the all-in-one payment platform using $50,000 in startup capital from friends and family. Madhani never thought that she, a woman with immigrant parents and minimal startup connections, could build a million-dollar business.

“It’s a very exciting time for a founder any time you receive anything tangible on paper,” Madhani says.

The next day, she brought the offer to her board and started pursuing the diligence process with the investor.

“Long story short, my gut was not clicking,” Madhani says.

But the board kept pushing to proceed until the investors adjusted their bid. When Madhani saw the offer, she was shocked.

“I said, ‘There’s no way I’m going to f***ing accept this.’”

Madhani’s intuition proved correct. Today, Stax has more than 300 employees and $100 million-plus in recurring software revenue, oversees $23 billion in payments, and was recognized by Forbes as one of the most innovative fintech companies.

Madhani knew Stax was worth more. Much more. We’re talking billions, not millions.

Family Dinner

Before boardrooms and valuations, Madhani worked for a credit card company selling transaction machines out of the trunk of her Volkswagen Beetle.

Her parents immigrated to the United States from Pakistan, met in Chicago, married, then moved their young family to Dallas, Texas. It was through her family that Madhani learned the highs and lows of entrepreneurship.

“I come from this line of entrepreneurship out of necessity,” Madhani says. “In order for them to have their American dream, they had to start a business.”

Her family’s businesses ranged from fast food chains to a marketing agency, and Madhani spent her childhood helping after school and on weekends. Ironically, her parents’ vision of the American dream was to give Madhani and her brother an education—not to become entrepreneurs.

“I saw firsthand what it took to build a business, what it took for businesses to fail, the hardship, the good, the bad, the ugly, and everything in between,” Madhani says. “But all of that credit goes to my parents.”

“I saw firsthand what it took to build a business, what it took for businesses to fail, the hardship, the good, the bad, the ugly, and everything in between.”

But credit isn’t just for her parents’ actions but for what they said at a fateful dinner that changed Madhani’s life.

Suneera Madhani foundr magazine cover — Suneera Madhani on the cover of Foundr Magazine issue 120.

‘Why Not You?’

In 2012, a rare snowstorm hit Texas while Madhani was visiting her parents in Dallas. Because she was stuck thousands of miles from her home in Orlando, she had her subscription boxes rerouted. She was obsessed with the early-adopter subscriptions like Birchbox and BarkBox in a time she describes as the “pre-subscription economy.”

“[Then] that light bulb went off, and I was like, ‘Holy s***, why isn’t there a flat subscription in payments?’”

Instead of going home on that trip, she ended up routing her ticket to Houston, the headquarters of the credit card company she worked for. She secured a meeting with the C-suite and worked on the presentation for a week while binging the first two seasons of Shark Tank to perfect her pitch.

“All I wanted was to see this success in my own company,” Madhani says. “[But] they laughed me out of the boardroom.”

Distraught and frustrated, Madhani returned to Dallas just in time for Friday’s family dinner. She explained the frustration of the meeting and why the idea of a subscription payment platform could work.

“My family looked at me and said, ‘Why not you?’” Madhani says.

“My family looked at me and said, ‘Why not you?’”

It was the first time Madhani realized she could do it herself, but she immediately blurted out excuses—no development experience, no investors, no industry connections.

“My parents said, ‘What’s the worst that could happen? Give yourself six months and give it a go,’” Madhani says.

She quit her job and moved into her parents’ house. With $50,000 of startup capital raised from personal savings, friends, family, and her now-husband, she quickly spent half of the funding on compliance with credit card companies like Visa and Mastercard. She didn’t have leftover capital to hire employees or contract out work, so she leaned into what made her unique.

“By not having capital, it actually forced me to think, ‘How am I going to do this differently in comparison to the industry?’”

In 2014, most credit card companies went to market through physical banking channels. Using her background in digital marketing, Madhani built a website, started writing blogs for SEO, and invested $500 in Google Ad Words.

“I encourage founders to leverage any white-label solutions that are already there to get an MVP off the ground,” Madhani says. For example, she partnered with a banking institution to white label a transaction software to test the hypothesis of a subscription-style model versus a percentage-style model.

“I encourage founders to leverage any white-label solutions that are already there to get an MVP off the ground.”

“We took a bet on that thesis and built our technology to be a payments hub,” Madhani says. “We were able to build our platform with our customers.”

She discovered that instead of attracting customers like small business restaurants, they were reaching healthcare and professional services that needed an omnichannel platform for in-person and online payments.

“That was the thesis that brought us where we are today,” Madhani says.

Stax became the first subscription-based credit card processor to come to market with flat fees and unlimited credit card usage. Quickly, they were considered the Netflix of credit card processing. Within six months of her parents’ suggested timeline, she processed more than $5 million in payments.

The 3 Minds

The biggest lesson Madhani learned in her career happened when she met with her board following the first term sheet offer.

“It was a s***show of a board meeting,” Madhani says. The investors had reduced their initial $17 million offer to $12 million. “If you’re negotiating with one party, you’re negotiating with yourself.”

But the board still wanted to take the deal.

“I said, ‘You guys just invested in this business. What has changed in the last six weeks that you’re ready to take this minimal offer just incrementally more than you invested in?’”

Madhani didn’t back down. She relied on what she describes as her “three minds”—analytical, heart, and gut.

“I need all three to make the decisions, and when one isn’t feeling right, I have to trust that,” Madhani says.

Shortly following the rejection of the bid, she received another term sheet for $50 million. It was a private equity deal that bought out their initial investors—the boardroom naysayers—and exited them 18 times their investment.

“Your intuition is the most powerful tool you have, [so] use it and don’t discount it and listen to it,” Madhani says.

“Your intuition is the most powerful tool you have, [so] use it and don’t discount it and listen to it.”

To date, Stax has raised $500 million in capital and is growing triple digits year-over-year. In March of 2022, Stax officially became a unicorn startup with a valuation of more than $1 billion.

CEO School

Madhani has been named to Fortune’s prestigious 40 Under 40 list, a recipient of EY’s Entrepreneur of the Year award, and featured in Forbes, Bloomberg, and Fortune, Inc.

“People forget that it took 10 years to get where we are today, and it was a lot of blood, sweat, and tears,” Madhani says. “As hard as it’s been, it’s also been the most rewarding thing I’ve been able to do.”

“People forget that it took 10 years to get where we are today, and it was a lot of blood, sweat, and tears.”

Everything Madhani has learned in business is through experience, like her saying “no” to her board for a lowball buyout. At that moment, she learned to focus on execution and not the shiny object.

“I was distracted from the business,” Madhani says, “when I should have been focused on building the business in front of me.”

Madhani shared these lessons on panels and at conferences, but it was in 2020 that she shared them widely with women like her.

After having her children, Madhani felt isolated in a business executive culture that didn’t support a working mom. Harvard Business Review reported that less than three percent of women receive startup funding. For minority women, that number is even smaller.

“I’ve never had a seat at the table, so I’ve had to build my own,” Madhani says.

When Instagram released its Stories platform, Madhani started openly sharing her lifestyle as a CEO, like dropping off kids to school on the way to pitch meetings and doing an Instagram Live Q&A session every Wednesday night called Wine Down Wednesdays.

She started to build a community of other female founders. Then, during the early days of the Covid-19 pandemic, her DMs became overwhelmed with the number of questions and concerns from women leading businesses. So Madhani started a podcast called CEO School, where she interviews business leaders, CEOs, and female founders about their experiences and lessons.

“I want to make an impact and make a dent in that statistic,” Madhani says.

“I want to make an impact and make a dent in that statistic.”

The podcast is rated in the top 25 entrepreneurship shows, and she’s grown the listener community to 300,000 women.

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What’s Possible?

Even though Madhani has had plenty of opportunities to move on from Stax, she wouldn’t trade anything for the journey.

“Every day I get to show up for something different, for a job that was harder than the one I had yesterday,” Madhani says. “It doesn’t get easier. You just get better.”

“It doesn’t get easier. You just get better.”

The consistent advice she shares on CEO School and with fellow founders on Instagram is execute.

“The exit will happen, the outcome will happen, the success will happen, as long as you focus on execution,” Madhani says. “There’s no such thing as a billion-dollar idea. It’s only a billion-dollar execution.”

Stax is a four-letter word for a reason. In 2020, Madhani made one of the toughest decisions of her career to rebrand from Fattmerchant to Stax.

“As a founder, you have to be able to see what opportunities there are for your company according to the market, according to where your customers are headed, [and] according to how your company is growing,” Madhani says.

Stax’s growth is toward an eventually IPO-sized business, far beyond what Madhani could conceive around her parents’ dinner table a decade ago. But what’s next is beyond just Stax. It’s about making her story the first of many.

“I don’t think it’s about what’s next. It’s about what’s possible,” Madhani says. “It’s about how I can take this platform and show other women that they can do it, too.”