Up to date, large merchants have had to support an array of payment service providers (PSPs), particularly those operating in more than one geographical region. This has resulted in poor user experience, lack of transparency, complex pricing and substantial technical overhead.
Primer provides an open payment infrastructure to merchants through a single integration, managing the front-end checkout process and backend consolidation of payments services. Currently in their Seed round, Primer is ramping up to enter a Series A with the aim of offering their services across the UK and Europe.
Problem
Large merchants face multiple issues when having to do their business across multiple countries and involving a collection of different gateways and systems. This has an impact on the user experience at checkout, and critically reduces visibility of data across increasingly complex payments ecosystems. There is a true product-market fit for Primer’s offering, as there is no streamlined and centralised solution for merchants supporting multiple PSPs.
Solution/Product
Primer offers a unified payments API that helps merchants consolidate their payments stack and support future payment methods through a single integration. This allows them to connect PSPs, fraud providers, and other third-party services (Apple Pay, Stripe, Braintree, Sift), manage all transactions in one dashboard and offer a flawless checkout experience for costumers. Furthermore, Primer offers a greater visibility of transactional information through connections to business intelligence and analytics tools.
Market
Primer is currently targeting the trillion dollar e-commerce market in the UK and Europe. Appendix 1 delineates a rough bottom-up approach to the SAM. The SAM — calculated with conservative variables — Primer aims to serve is worth around $2.5b.
Moreover, with favourable market conditions, low interest rates, and a growing disposition to alternative lending, Primer has also managed to start this venture at an ideal point in the economic history of Western Europe.
Team and Track Record
The two co-founders: Paul Anthony computer science major, serves as the technical arm of Primer while Gabriel Le Roux an IE alumnus, serves as the business development and strategy head of the venture. Paul and Gabriel met at Braintree, a division of PayPal, where they worked with merchants to optimise their payments strategies, expand to new markets and offer new commerce experiences to their consumers.
The team has already gained some traction, and recently received funding from Balderton, Seedcamp, Kima Ventures, and Speedinvest, four reputable VC firms based in the UK and France. In effect, Primer has already recruited 14 members to their team, mostly software, infrastructure and front-end engineers. Furthermore — through video call discussions — it can be noted that the two founders have the necessary entrepreneurial spark and hunger to make a real difference in this industry.
Risk-Return Analysis
Appendix 2 delineates the risks that are tied to Primer’s 2 upcoming growth phases. Note that there are a small number of key risks that will need to be addressed by the team. Most notably are the key risks found under the market heading in the expansion phase. Strong technology will be a key driver in developing product/market fit and will require consistent talent acquisition to pursue growth.
In recent reports, the median public SaaS company valuation stood at 9x run-rate revenue. Applying the historical private company discount of 28%, private SaaS companies had a median multiple of 6.5x revenues. Depending on sources, fintech startups have seen EV/EBITDA multiples as high as 18.1x. These valuations, with a large market, result in substantial returns (Appendix 2), with a probability weighted MOI of 10.6x.
Appendix 1 — Market Sizing Exercise
Appendix 2 — Risk-Return Analysis
Recommendation
In conclusion, I believe that investing into Primer would yield favourable results for the fintech fund. The (i) significant market size, (ii) experienced and passionate team and (iii) innovative product are all hallmarks of a successful venture.
While promising, there are still a number of considerations that need to be taken into account when meeting the team to better approximate the returns on this venture. Primarily, it is key to understand what strategies Primer has in place regarding their defensibility from incumbents. Additionally, a hiring plan of promising candidates, primarily in software, would allow us to see if Primer’s final product obtains good traction during the expansion phase. On that note, key metrics need to be scrutinised namely the ARR, LTV and CAC and their relation to the current commission-based business model.
Nevertheless, Primer and the team are addressing a significant market need that has historically been served in an analogue manner, ripe for disruption, which makes this venture very promising in the long run.
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