1) Bill! You’ve now been at LendUp for six months. What’s top of mind for you these days?
Time flies when you’re having fun with Finance! I am focused on a few key areas:
- First and foremost is enabling growth by getting additional equity investment in the company. We’re in a really exciting time with the rapid expansion of our credit card product, the launch of a new one, and consistent growth across our San Francisco and Richmond offices. We’re tapping a huge market, and we’ve built all of the credit models, infrastructure, the management team, and everything else we need to go and capitalize on this market. At this point our biggest limiting factor is equity, so I’m focused on getting us the equity we need to continue to scale.
- Closely following equity is diversifying and expanding our funding sources. Because we are a lender, our cost of funding is very material towards our overall financial performance. So driving that down will be key, and we’re making great headway. I’m excited about Bob Novick, our new VP of Capital Markets, who’ll be working the capital markets to reduce our cost of funding as well as to diversify it. This will let us continue to have resiliency in our funding structure so we can build the business as quickly as we can generate new accounts and new balances.
- Elsewhere, I’m focused on continuing to build out the management and finance teams, to strengthen our financial function across the board. I’m also working closely with our head of People to ensure our compensation models are aligned with making LendUp an employer of choice.
2) When talking to the investment community about the consumers we serve -- the half of America shut out or mistreated by mainstream banking -- what most excites them, and what’s the biggest misperception you’ve heard?
Everyone seems to be most excited about our market potential. Due to regulatory pressure and a low interest rate environment, banks have moved toward prime and super prime customers. But they’ve completely neglected the subprime or non-prime segment. That’s created a massive underserved market where, by virtue of being underserved, the margins are relatively strong and the target population is huge. And investors can appreciate that -- especially considering the prime and super-prime segment has seen immense competition and margins have been beat down.
Investors also understand the barriers to entry in our market. Particularly in the credit card business, barriers to entry are big. Starting a company requires lots of investment and a long period of time to prove out credit models. As the first VC-backed credit card company, we started our cards business years ago -- as a result, we’re a long way down the road, and growing faster than we could have predicted. No one else is this far down the road in this part of the market.
The biggest misconception is easy: that subprime is the riskiest segment. Most people think of risk as just absolute loss levels. If you look at it that way then the market in which we work would be the riskiest. But for investors it’s not about absolute levels of loss; it’s the risk of an unexpected outcome, because investors need to have predictable returns. That means that credit risk needs to be predictable, and in the subprime segment the risk of an unexpected outcome is lower than in the prime and super prime segment. That’s reflected in data that shows that during the height of the great recession, loss rates on the subprime segment increased from 40-50 percent, whereas for prime and super prime it increased by multiples of their pre-recession levels.
3) LendUp is the first venture backed company to launch a credit card, which has quickly become our largest product. What makes it such a big opportunity for LendUp in particular?
I think again it comes down to the same reason why investors are so excited about LendUp generally. There’s a huge market and high barriers to entry. And LendUp has built its business in a way that starts with loans, and uses income and learnings from that to help incubate and build a credit card business. This puts us in a position that we’re uniquely ready to take on the opportunity that exists in this market.
4) You joined LendUp as our first CFO and a member of the Executive Team, reporting to co-founder and CEO Sasha Orloff. What’s that been like?
What has been really exciting is to come and be part of an incredible senior management team, with an incredible depth and breadth of experience. These senior leaders bring diverse perspectives -- not just from banking or credit card businesses, but across all sorts of industries and company size. Because our leaders have been part of very successful organizations and companies, they understand that growth is great but what is really challenging (but satisfying) is when you can have both growth and strong financial performance. And that’s the way to build a sustainable, strong company that is really valued by the market.
5) You’re a veteran of financial services firms such as Chase and First Electronic Bank but you’ve spent an almost equal amount of time at manufacturers such as BMW and Tesla. What’s your perspective on being mission-driven -- does mission matter in a for-profit company?
YES! I have had the good fortune to work for some amazing companies. Chase and BMW are incredibly powerful brands with long histories and strong financial performance. But it was only when I joined Tesla that I learned the power of a mission-driven company. What I saw there was how a group of people who are motivated by a strong sense of mission could come together -- and how that could help them unite to overcome what seemed like insurmountable obstacles. And when I joined LendUp I found a very similar sense of mission. I believe it will help us to do the same as we go forward, and help us build a lasting company. This sense of mission helps keep us focused on what’s important, gives us a framework for making decisions, and generates a kind of energy in the company that I think will serve us extremely well as we grow and scale.