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How Tyro Built a $500 million business by disrupting the Australian banking system

Andrew Rothwell started his career in software development before co-founding Tyro, a Fintech company specialising in merchant, credit, debit and EFTPOS systems. Through innovative technology, determination and exhaustive research, Andrew and his team tackled the Australian banking industry in the early days of electronic banking and have since grown to become Australia’s youngest bank.

Andrew moved from software development to engineering before settling into a sales-focused role where he grew Tyro’s transactions from $4 billion a year, to $11 billion a year and grew the sales team from 20 sales staff to 60 sales staff. Tyro has also raised over $100 million dollars from high calibre investors like Mike Cannon-Brookes and is now valued at over $500 million. Last year, he left Tyro after 14 years of running the company, and is now the COO of Data Republic.

Andrew will be sharing her full story at The Entrepreneurs’ Unconvention this March. Get your ticket here if you’re interested in coming along.

We had the opportunity so sit down with Andrew ahead of Unconvention, to discuss the early days of Tyro and the challenges the founders had to overcome. We also picked his brain about how he sees the role of team leaders, and asked his advice for new startups looking to follow in his footsteps.

The trajectory of Tyro is quite interesting from its origins as Fintech company to becoming a bank. Can you talk a little about the early years and what it was about for you back then?

The three co-founders of Tyro were software engineers and business people who had a deep technology pedigree in design engineering, software coding and hardware experience. We had worked together for over seven years so we understood each other well enough to know what it would be like when times were really hard. In the beginning, when doing a startup or small business, it’s a real battle so you need to understand the people you’re going to go into battle with.

Our core idea centred on finding a way to disrupt the credit and debit card acquiring business in Australia from a technological perspective. Back then, EFTPOS machines were antiquated, unreliable and didn’t scale well. Using our experience, internet integration and the latest technologies, we thought we could improve the POS experience.

We raised $300,000 and gave ourselves one year to solidify our knowledge about the banking industry in Australia while learning enough technology to build something that was bulletproof in terms of reliability, scalability and performance. Our product also had to be secure since it will be handling transactions. We had to have a really good security story.

At the end of that year, we had absorbed a stack of banking manuals that was easily a metre high. We also learned new technology and programming languages, we learned about the Open Source community and we learned about Agile project management methodologies. By the end of 2003, we realised we understood everything we needed to build our product and decided to go out and raise a few million. However, back in 2003, the Venture Capital community in Australia was very naive and under cooked so it was harder to raise money. Thankfully we found some true believers and raised a couple of million which allowed us to hire some more software engineers to build-out the transaction switch.

Jost Stollman came on board as CEO in January 2005 and accelerated growth especially when it came to attracting investors and in developing the sales and marketing side of the company. Jost had a solid business pedigree including building a company called CompuNet, a systems integration company, which he sold it to GE for a billion USD. He had also been the Shadow Minister for the Economy and Information in Germany under Gerhard Schröder. His background and entrepreneurial flair, combined with our technology skills, were a perfect fit to drive company growth.

So those were the early days. My part in all of that was that for five years I wrote a bunch of software to build the core systems. It was absolutely fantastic! The best days of a company are those first few years. The culture of the company was really special back then as it always is with small, tight-knit groups. It is something that never happens again because as you hire more people the culture naturally changes. Having five employees and having 400 employees can feel very different.

Which part of the journey did you enjoy more? The five people family feel, or the larger, more capitalised but different culture of 400?

Five people because it’s all about the culture. I have this belief now that companies have to have an all-for-one and one-for-all attitude. We’re going to stand on the wall, we’re going to protect our own, and we’re going to fight like hell to win. If your team thinks that way then all sorts of cultural values fall out of that. Team members that trust each other and have loyalty will earn each other’s respect. Confidence will be inspired because I’m going to stand for you; you’re going to stand for me. So you can see, from one cultural belief, all-for-one and one-for-all, all these other things start to fall out.

At Tyro, especially within the sales team, we were able to grow the transaction volume from scratch to $11 billion by having each other’s backs. It’s really, really important. It promoted this joie de vivre, this camaraderie where people were going to do the job no matter how hard it was. At the same time, they would come to work and they would have fun. I think that was one of the hallmarks of the company, for a long time, that people enjoyed coming to work, working with each other, having fun and having a few beers at the end of the week to celebrate whatever milestone was there to be celebrated.

It sounds like there was a lot of deep intellectual challenges along the way from technology to regulation, all that stuff. What were some of the biggest challenges for you? Becoming a bank in Australia can’t be easy. What were some of the biggest challenges as a company?

There were many challenges but the biggest ones we faced came about when we started to navigate the world of banking. The ideas around our product were vastly different from what the Reserve Bank and APRA, the prudential regular were used to. Traditionally, they needed to see functional specs, design specs, test specs, a programme plan and the like but we were using an Agile methodology so we didn’t have those. It certainly diminished their confidence in us from the outset was they had never heard of Agile but once we explained how it worked they came around in the end. We showed that our way was designed mitigate risk which is really what they really cared about. It also meant that they wouldn’t have to step into our world, and over-regulate us. The more we explained the concept, the more questions they asked and the more excited they became. Eventually, they even switched their systems over to Agile due, in large part, by our conversations.

We were also met with opposition when attempting to get connected to the major banks and credit card schemes like Visa and Mastercard. Our product takes business away from those institutions so they were not happy about connecting us and tried to charge us a quarter of a million dollars to connect up to us. In those days, we couldn’t possibly afford a quarter of a million dollars and even if we did come up with the money, it would take two years to actually go through the whole development, and testing, and regulatory. If we’d gone down that route, by the time we’d actually had some transactions flowing, we would have burned through all our capital to get there. Thankfully, the Governor of the Reserve Bank stepped in to make the banks allow us to connect to them in order to shuttle Air Force transactions.

Why did he do that?

Because the RBA and APRA had issued two bank licences to promote the efficiency and competitiveness of the Australian payments system. The only one that was really rising to that challenge was this little company called Tyro. So the guys at the RBA and APRA went, okay, you guys, we’re gonna fly air cover, you guys are going to be the poster boys and girls for the new world. And so the big banks were asked to play nice.

As a co-founder, how do you know when it’s time to exit?

Ah man, you just know. That’s an impossibly difficult question to ask. Things build-up over time. At one level, you look back at the accomplishments and ask yourself ‘Have I achieved what I set-out to?’ I built a company that has allowed local graduates to work for a high tech company in Australia, without having to go to Silicon Valley, and live that life. They could actually stay in Sydney and go to the beach and enjoy the lifestyle here, all the while having a great, high tech career with the financial benefits that would attract people to Silicon Valley. Did we do that? Yes.

You would’ve been exposed to a hell of a lot of great entrepreneurs, and probably a hell of a lot of not so great entrepreneurs, some really great investors along the way. What are the key differentiators that you see that make somebody a truly great entrepreneur?

I think any entrepreneur that’s working as a solo founder is a really rare beast. I think that the best companies are started and operated by 2-3 founders. In companies that succeed, the founders have known each other for quite a while and know how to be with each other. There are no surprises in terms of behaviour and there’s also this notion of sensible risk taking. I think the great founders, the great leaders of business, are very good at understanding risk. When to go hard, when to raise a lot of dough, or when to pull back. And I think that was a hallmark of our time at Tyro. We knew when we shouldn’t spend a lot of money.

One of the things for a company, you can fail by not raising enough, by drip feeding. If you drip feed, you can’t develop product fast enough. You might not be able to get it to market fast enough. It’s awful. But the converse is also true. If you over invest in the company, then it’s very easy for then maybe to try and scale the company out too fast. You can die scaling too quickly. Some people might say, well how’s that possible? It’s really easy if you go and hire like 30 people, even though you’ve got a whole pile of work for them to do, if those people can’t be assimilated in the way of giving them all the knowledge and the skill and expertise that’s required to execute on the job. Or if they can’t assimilate the cultural values of the company, then you’re never going to succeed. You’ll wind-up by having all your experience and genius constantly looking after all the people who’ve just joined. And that’s death. Great company leaders can find that middle ground between under-investment and over-investment and continue to scale the company out in a way that promotes the company without destroying it.

How do you get a sense of that middle ground? Is that a sense thing by sort of having an intimate, on the ground feel, and exposure to capacity, how everyone’s doing, how culture is assimilating? Or is it more of a quantity of analysis, or a combination of the two?

Personally, I tend to operate from my gut and not to be too quantitative but there are also clear signals as well. You can see a general uneasiness about the organisation that begins to arise. It happened to us at Tyro when we went from 70 people to 190 very quickly, within 18 months. All I could sense was this continuous scramble. We’re hiring all these people, we’ve got all these projects, but we haven’t planned all the work for them properly. We haven’t set-up an HR function that would deal with induction of new staff, it was all seat of the pants stuff. So someone joins and inside of three months they’re still not productive because they haven’t been inducted, they don’t have the knowledge, the skill, the culture. It’s just not all lining-up. So for me the big signal was that general unease. It’s very easy to tell, you can smell it from a mile.

Did the people that invested in the company initially buy into you, or the idea?

So the initial investors absolutely invested in the people first and then they invested in the idea. I mean, clearly the idea was extremely attractive. If we could actually disrupt the acquiring business then there was money to be made. But you need the right people to actually go do it.

What do you look for when investing into, or partnering with a start-up or a high growth organisation?

I’ve made some small minor investments in start-ups and I’m still learning what the right qualities are to look for. I’ve made one or two mistakes where I’ve been blinded by the beauty of an invention and I’ve also been blinded by the characters that turned-out to be not quite what I expected. When you’re first meeting people you can very easily be blinded, especially if they’re brilliant people, and they have amazing ideas, and you tend to sort of buy-into the idea of what they’re trying to do, before you buy into the personality. I guess my answer to the question would be, take a long hard look at the people that you want to partner with. You can’t just go out on a date a few times, and hope for the best, and then sign a check. Take your time whether that is 3 months, 6 months or more, even if that might not meet the investment window. In the end, I’ve got to be a true believer in the person before I invest.

If we went back to the day before you started Tyro, what’s the number one piece of advice you would give your younger self knowing what you know today?

Have patience. When we’re young, we all want to get somewhere really, really quickly. And there are so many lessons to learn along the way. When I first started out with Money Switch/Tyro, the idea was to hit this goal of like, we’ll build this thing in five years, it’ll cost us $8 million, we’ll flick it, it’ll be worth however much money, you know. That idea of getting rich became more and more secondary to me along the way. The journey for me became all about the people.

By the time I walked out the door of Tyro for the last time, I had given up all ideas about wanting to be a hero selling a $100 million contract, or being a hero because years before I designed a piece of software that was going to solve a problem. Instead it actually became about being in service of people to help them be the best they could be in their jobs. That’s what it was about. So for me, being the head of sales was about servant leadership. It was about leading from the front, leading by example, and leading by vision. It’s also true that you can only go as fast as your slowest team member and so you have to pick them up and give them whatever tools and support they need in order to get them moving quickly with the rest of the team. If that can’t happen then you have to gracefully find another career outside the company for them. It’s all about servant leadership because your success as a leader of a company is predicated on the people that work with. Actually, that’s the advice I would give myself. Jump into a servant leadership role as quickly as you can.

Want to hear more from Andrew Rothwell? Get your ticket now to the Entrepreneurs’ Unconvention now, where Andrew will be sharing his story with 100s of entrepreneurs.


About The Entourage

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