Full transcript: Anil Stocker on London Real
0:00 In London, technology is the silicone roundabout. Introducing a new talk show dedicated to the people of the London technology startup scene. Silicon Real. Each week, interviewing entrepreneurs, venture capitalists, financial technology, accelerators and incubators in an exciting three person format. Learn about the people behind the innovation.
0:29 Innovation locally filmed locally sourced silicon real it’s about the people is silicon real the weekly talk show dedicated to the people of the London technology startup scene I’m Brian Rose I also host London Real in this same studio we’ve just had a Neil deGrasse Tyson the astrophysicist on the show that was cool the rock star yeah the guy who just who’s doing the show Cosmos now in like 170 countries or something. Yeah, he was huge too. He put me in a headlock afterwards.
1:04 He’s a wrestler, which usually he called himself defender of the geeks when he was in high school because usually those guys are not the most physical dudes, but he was pretty big and put me in a headlock. So that was fun. We’ve also got Edward Snowden’s attorney, Jesslyn Radick, on this week. She talks about being harassed at the UK border when she flew in and what Edward thinks and all that stuff. So that’s on London Real, but today we’re here to talk about tech.
1:27 My co-host is Colin Pyle, who runs online language schools and coffee companies. Crew Cafe is in the house. It’s really tasty. It’s kind of lemony. I like it a lot.
1:38 And I’m not just saying that. Good. Would you say it on air that you don’t like it? I hope not. No, but I wouldn’t say anything.
1:44 There we go. So you didn’t have to say it was good. No, things are great. A huge weight off my shoulders. We got our first shipment in this week.
1:51 And yeah, game on. we can kind of shift phase from you know nailing down the supply chain and actually selling the thing so it’s exciting really exciting and lingo’s is exciting right now too we just launched a bunch of new tools for students and teachers so lingos.co check it out it’s a really cool students can now do lesson requests which is a huge shift and it’s doing doing really really well so very nice and you get your coffee it’s what crew cafe cafe yeah you can see our U-K-A-F-E dot com. .com.
2:22 Yep. Awesome. Fantastic. Thanks for being here. Thank you.
2:27 Before we get to our guest, just want to say thanks to our sponsor, which is the Fintech Innovation Lab. They’re sponsored by Accenture. They’ve got seven companies right now. They’re a slave in a way in Level 39 out in Canary Wharf. One of them we had on the show was a Pixel Pin, right?
2:38 Yep, Pixel Pin. Smart dudes. And they’re going to be giving a pitch day on the March 26th at the Royal Institution in Mayfair. If you are an investor and you want to be there, email them at fintech at Accenture.com and you can try to get the pick of the litter. We had Digital Shadows, which was their company from the previous year in here.
2:58 Smart dudes, man. I mean, you know. I’m really smart. The fintech companies that are coming out is just incredible right now. Well, we’ve got one here too, so we’re going to get to that.
3:06 But thanks to those guys. And then I just wanted to thank our second sponsor, which is TaskRabbit, which is an online marketplace that allows users to outsource small jobs and tasks. They can clean your house, they can fix your car. They can even do like back-end YouTube video management, which is what they’re doing for Silicon Reel. Silicon Reel, and I’m even using them for Crew Cafe.
3:24 Look at you, really? Yeah. We have the coffee festival actually at Truman Brewery in early April, so I’m going to grab a Tasker and sort of help us out for the week because it’s going to be great. It’s awesome. It’s a great way to get some temp workforce.
3:37 If you want to just use them, you can get like two hours free, 25 pounds free. Use Reel25, go to taskgrabber.co.uk. Big fans of them. to welcome them to London so you know they really kick ass here and you can watch Lauren Sherman she’s our head of community she was on here about a month ago so another fabulous episode okay on with the show our guest today is Mr. Anil Stalker who is the CEO and co-founder at Market Invoice which offers a fast and flexible online method for SMEs to access the capital in their long dated invoices that would otherwise be tied up for 90 to 120 days great to be here thanks for inviting me no thanks for being here you traded over 130 million pounds worth of invoices to date, the government is investing directly in tech with you by putting five mounds in short-term financing.
4:20 Now, that’s real investment by the government, right? And welcome to Silicon Real. Thanks a lot. Great. Thanks.
4:28 It’s actually 138 million. Is it? There you go. We did about. We did quite a lot this week.
4:33 Fantastic, man. You know, I love your story. You know, I just, you know, I used to be in finance, so did you, and I know that short-term funding pretty much makes the world go around. I don’t know if people realize it, but it’s like how governments and corporations and And even some people, I used to live month and month on my credit cards, you know, keep their businesses running. And it can mean, especially with a startup, the difference between bankruptcy and success.
4:53 So this is kind of fascinating that you’re putting that online. I was wondering if you could tell us a little bit about market invoice. What have you guys done? What are you guys doing? Yeah, sure.
5:03 In fact, in fact, I was just thinking when you were talking about crew cafe, right? I mean, presumably at some point you want to supply it into supermarkets and the big challenge right about working capital is you got you get a big deal from a supermarket they say you’re excited you’re a hundred thousand pound deal but you got to pay your suppliers in China you got to pay your stuff you got to keep the lights on you got to pay rent so you know a lot of people don’t realize is that cash is what keep businesses going you run out of cash your business shuts down you might have a beautiful profit margin built into your product but cash is king yeah so it’s relevant for lots of different types of businesses what we’re doing and to give a little bit of the background I guess and I was at Lehman Brothers. That’s a prime example of working capital going wrong. You could argue that besides the stock price going to zero at the same time it was probably a working capital issue. Yeah they ran out of cash and they didn’t have enough to post on for collateral for all their loans and that’s ultimately what pushed them to bankruptcy. It could have been saved in in retrospect, but that’s another podcast.
6:08 Yeah, yeah. So you saw that happening. Let’s not go into that. So yeah, I studied economics at uni. I went to Lehman Brothers.
6:13 I was working in a private actually fund, so we were actually investing in mid-sized businesses. I spent a lot of time with financial directors of these companies, and they were all worrying about how do they manage their cash. I then, in my spare time, I thought, because potentially I’d start my own little fund to buy companies, I ended up with a few friends. We went out and met lots of businesses in the UK, all over the place, and we were kind of like, what do you need?
6:39 We want to invest equity in the business. And they were like, no, what we really worry about is working capital. That’s kind of, you know, debt, you know, how do we run our business from day to day? Looked a little bit at what was happening in the States, looked at, you know, companies like Prosper, Lending Club, On Deck, which were just getting started back in 2009, 2010, or ramping up, and I sort of thought, you know, invoice finance in the UK is huge. It’s an old market done by the banks in a very old fashioned way, expensive, rigid.
7:11 It doesn’t give companies what they want. It’s not online. You’ve got to go meet someone. It takes six weeks to get a decision. And I said, there’s got to be a better way of doing that.
7:19 There’s got to be a way that businesses can come online, apply, and within 24 hours, figure out whether they can use us or not to access the funding. And so that’s when I wrote the business plan. And what year was that? 2010. Like back end of 2010, we raised some seed funding and we got going beginning of 2011, February 2011.
7:39 So we’ve been around for about three years. Which is quite a while when it comes to a lot of companies around here. Yeah, look, I mean, it is. And it’s a fintech business, right? At the end of the day, you’re involved in loans effectively.
7:53 Effectively managing a system to get a company on board. You’ve got to screen them. You’ve got to make sure that they’re real. And you’ve got to ensure that the money comes back. So it’s not just anyone can give money out, but it’s also making sure it comes back.
8:08 And risk management is very important, so we felt that to go slowly in the beginning was the right thing to do, because that way you learn and you can refine your system, and only now we’re really sort of putting our foot on the accelerator. We spent a lot of time learning what’s the best way of doing it. And have you guys financed yourself from the get-go? No, we raised like a seed round, but we didn’t raise that much money. We raised kind of, I think it was 600 grand, 600,000 pounds to get going, they put a bit more money in.
8:35 So we’ve raised all in about 1.5 million pounds, but we’ve got nearly that amount in the bank because we’ve been making money for the past six months. So we were very lean, we’re being profit-making, great profit margins for the past six months, and that puts us now in a great situation because we can grow this business organically without taking on any more money, but we might take on money just to accelerate everything. And you’re hitting like 10 times the amount of loans you made in January, like the previous January.
9:04 Yeah, yeah. So last, this time last year we were kind of lending, we were facilitating about two to three million pounds per month to SMEs, small businesses. And now we’re doing, last month we did 15 million in a month. You know, this month we’ll do more than that, I think. And you know, thousands of transactions have gone through the platform since the beginning of the year.
9:25 In 2011, we did 3 million, 2012, we did 33 million, 2013, we did 66 million, and since the beginning of the year, we’ve done over 35 million pounds. So we’re kind of growing pretty strongly at the moment. And what makes you guys think you can win in this space? What’s different about you? What’s to keep a bank from coming in and just swooping into doing this online?
9:48 It’s something we always ask people, why will you guys win in this space? are very, they have a dominant market position but they’re very bad at innovating. They have legacy technology which is extremely hard to change like an oil tanker like it’s very hard to turn it around. They have processes and risk systems that have been in place for 40 years. I always say the key thing is that we were kind of like industry outsiders. I didn’t spend my whole career in invoice finance, SME finance, but we had the opportunity to build a system from scratch, using the latest data, using the latest technology, super focused on the product, all online, transparent pricing, fair pricing, a way to compare against other facilities and not miss selling a product that was too complicated and with long contractual arrangements and lock-in.
10:43 So to be able to start from a clean slate gives you a huge advantage from day one. And now it’s all about, and now we’ve learned, and now it’s all about going quickly. And I don’t think, I mean, competitors can try, but we kind of, we’re kind of growing so quickly, and also we’ve learned so much, and we are doing it in such a unique way that it’s very hard for someone to replicate what we’re doing. Sounds familiar, right, Colin? Yeah.
11:08 Yeah, I think it’s great. Maybe just for some of our listeners that may not be, you know, background in finance, explain like literally what happens with your because your customers come on yes and then sort of 24 hours later I guess risk assessment make sure their invoices are actually real and existing yeah and then a pool of sort of just investors out there buy their invoices from them yeah yeah let me talk you through sure imagine you know let’s say you’re a graphic design company right and And you’re doing a campaign for Boots, let’s say, big campaign. So the project is £100,000.
11:51 Let’s say, you go in, you’ve done the work, you’ve done the campaign, and Boots says, that’s great, send me the invoice, I’m going to pay you on 90 days. Now that’s great, you’re going to get paid in 90 days, but you’ve got to pay people. You’ve got to pay maybe your freelancers who came in, you’ve got to pay your staff. So what you want to do is you want to take that 100K and you want to effectively monetize it early because you’re going to have 100,000 coming in 90 days.
12:15 Maybe you need 70 upfront. So what you’ll do is you’ll come to Market Invoice, you’ll register, it takes about 15 minutes to sign up. We pull all sorts of data from public sources as well as what you put into your application form and we crunch that and we basically say this is a real company, it’s been around, of real people, and we understand the relationship between you and Boots, and we say, okay, we’re going to give you 80,000 pounds out of that 100,000 now.
12:43 You’ll still get the rest on 90 days. You still have an incentive to get that money in, right? Chase it, and at the end, we’re going to take a fee, right? Market invoice is going to take a fee upfront off the advance, and at the end, you’re going to pay an interest rate to investors, because this money is not coming from market invoice. This money is actually being sort of crowdsourced of high net worth, family offices, hedge funds.
13:09 People who had a lot of money want to deploy it straight into the invoice and earn a return maybe 1% a month. So all in, you’re saying, OK, what you’re thinking as a small business is, I need some money now. I’m making good profit on this. I might be making 30% profit. Am I willing to give up 1%, 2%, 3% depending on how risky the transaction is to a funder?
13:32 To get it now to get it now. Yeah, what’s an idea on rates? Just so we know I mean obviously no We don’t compare the markets out there They’ve gotten a hard time for some of their rates But what are your rates do you look at them annually and then there’s fees and well look I think it’s wrong It’s wrong to look at it annually because the beauty of our product is Is that it’s you can use it’s as you pay as you go, right? There is no long-term contract. You don’t need to use us for all your invoices. You don’t need to put all your customers through us That’s what the bank will say to you. You’ve got to put everything through us And you’ve got to sign up for a 24-month contract.
14:02 It’s like a mobile phone, right? Contract mobile phone, you’re paying irrespective of whether you use it or not. If you go away for a month and you don’t use it, you still pay the mobile. What we offer is the sort of pay-as-you-go SIM card. You use it when you need to.
14:15 And for businesses, that can be a huge saving because there’s another fixed cost of going into a facility. So how businesses are looking at it is what’s their profit they’re making off the deal, off the transaction? So what’s your profit margin? And how much are you going to pay to get most of that funding up front and get it done? And that ranges, I mean, on average it’s about two, two and a half percent of the invoice face value.
14:39 But if it’s a very long dated invoice, it will be more expensive if you’re exporting a company in the US and it’s the first time you’ve done that, it’ll be more because there’s more risk involved. Sure. So for like a boots kind of person, it would be a lower risk. Yeah. The beauty of a platform is that we learn, we collect a lot of data on you the more you use us.
15:02 So, the more you do with us, the cheaper it becomes because you become de-risked as a proposition. The first transaction is always the most expensive. It’s a bit like on eBay, right? With your power seller, over time people realize that you’re a good customer and you get a better rating. That’s the same kind of concept with us.
15:20 Like over time, we can see you put through a lot of invoices have all been paid on time. There’s been no delay. There’s been no dispute around the invoice. So you’re going to get better rates, and you’re going to get more fun though. What kind of default rates do you guys get here at KXA?
15:32 Yeah. So what is a default, I guess, right? Because we’re not in the business of insuring stuff. We’re not here to say, we’re going to give you the money, and then you don’t worry about ever paying it back. I mean, this is really just getting the cash flow quicker into your business.
15:47 Defaults happen when there’s trade disputes. So Boots turns around. At some point, he goes, I wasn’t happy with the work. I’m not going to pay you the 100 grand. I’m gonna pay you 50 grand in which case it does come back to you as a small business to repay that money All right, it is recourse back to you Defaults can happen Because it gets extremely like the payments get very Extremely delayed and we have to intervene and figure out what’s going on So we run currently at about 1.4 percent default rate. However, that doesn’t mean that that’s money lost it just means that we have to go and go out and collect on it and And we have like a 90% collection rate because either we get it off boots or we get it off you through kind of working it out.
16:30 And so our loss rate is around 0.03%. We’ve lost something like 40 grand for investors out of 135 million. And they’re kind of making kind of 10% annualized returns by putting their money with us. So it’s like I’m inundated with investors. I have a wait list of like 20 million quid, which wants to be deployed.
16:52 And my bottleneck is just finding more businesses at the moment. Sure, it’s because, you know, I’ve invested in a funding circle and stuff like that, right? So I guess, so that’s interesting. So as an investor, you can’t just go on your website and put money in. You’re actually, you don’t need more money.
17:08 No, look, we are accepting new investors. Is there a minimum amount? Yeah, there’s a 50 grand minimum amount, yeah. So you do have to be of a certain net worth, you have to be a certified high net worth or sophisticated investor. But even if you’re employed in financial services, you automatically qualify.
17:30 The different, I mean, funding circle is a different product, right? That’s like a long-term loan. We’re very much kind of the invoice finance, day-to-day working capital. And I guess the point I’m trying to make is a lot of people when I started said, you’re never gonna find anyone crazy enough to put money into the platform. But actually, it’s the opposite.
17:50 I spend more time finding the right kind of businesses, because we’re not for desperate people, right? We’re for growing businesses than worrying about the funding. Right now, in this low interest rate environment, lots of people have cash and are getting nothing on it in bonds or on deposit. Equities are quite volatile. So a lot of people like to put money into our system.
18:13 It’s really attractive for them. It’s interesting. I guess if you promise a return, then the cash will come. You know, this is a silicone reel. So we’d like to get real and ask a couple questions about your business model I mean, I see one thing here and You’re basically scoring people’s credit especially when it comes to a new company and I would I was wondering if investors How can they know that you can make a good call on a new company and whether they’re gonna get paid this whole invoice Dispute thing gets tricky, you know, yeah, if they don’t do the work and you find out three months later How are you guys qualified to do something like that? Yeah, look good quote. I mean You hit the nail on the head. I mean what we’re doing, right?
18:46 Is we’re actually figuring out a new way of risk management, a new way of credit scoring of businesses. And that’s been a notoriously difficult thing to do for everyone. You have a couple of what I would call goliath credit reference bureaus. So companies like Experian, Equifax, Dun & Bradstreet. And they try, they kind of try to give a snapshot credit score for businesses.
19:12 But what we found is that if we relied on that, we wouldn’t have given money to anyone. Because by definition, if you’re a small business and there’s not much public information about you, it’s very hard to have a meaningful score. So it’s oil tanker again, yeah, yeah, exactly. So we have to, we have to basically what we do is we pipe in that data, we use that as a kind of starting point, but then we refine it with our own interpretation and bringing in more data sources, right?
19:38 So you know, we pull data from the application form, we pull more data about the directors, We do online profiling. We have a statistical approach to certain industry. We know that certain sectors are more risky than others, right? So we’re kind of crunching. I guess that’s kind of our secret source, right?
19:54 That’s going to be the thing that’s super valuable about our business is the fact that – The credit data that you guys have. Yeah. Yeah. And also then when a company starts to use us, we build up – we have like that payment information and that suddenly means that our score is kind of much more real, real time than the credit reference agency. Right.
20:14 And that’s proprietary information. Yeah. So the exact way how we use that data is kind of what we’re all about. And new stuff like social profiling, just like in terms of anti-fraud, is really interesting. Because in the past, banks would send people to go and meet businesses and look them in the eye, and then they’d come back and say, that’s a real guy, and that’s a real company.
20:35 Well, now everything, you can pretty much identify whether a person is real or not by their online presence. Sometimes that can be misleading, but we believe that there are certain online social slash online footprint metrics that are predictive of a fraudster or changes to online profiles that are predictive of a certain catastrophic event. So that’s kind of the fun part right now. We’re in a whole new world. So your intellectual property really is your credit scoring at the end of the day would you say?
21:09 I mean, I think that’s an important part, so how we acquire business, how we market the product is a whole new world, right? No longer you need to go around with a car and knock on doors. I think you can do quite a lot of acquisition online. In fact, B2B sales is becoming almost like B2C. Business owners are becoming more and more like consumers, especially our generation, right?
21:31 We don’t go and talk to an accountant or a bank manager. We go online. We go to Google. We figure out what we want to do based on that. Acquisition it’s a new new world risk management. It’s a new world and I guess also the final bit of innovation is around The fact that we’re crowds, you know, we don’t have a balance. We’re not a bank, right?
21:50 We’re actually the platform right and then we’re allowing people to take very diversified portfolios Directly, so it’s not like give us the money and we’ll manage it for you and guarantee your return You’re actually going to be in and diversified across everything yourself who thought receivables could be so second It’s amazing. It is really amazing. There’s so many facets of this business model. Yeah. And I think, you know, I don’t want to give away sort of your future secrets, but I see so many different avenues that you guys can start going into.
22:20 Have you thought about that? You know, if one of these good companies have been with you for two years and, you know, they ask you for a million pound loan. Yeah. You know what I mean? Yeah.
22:30 Is that something that… They finance them? Yeah. You could finance them. Well, yeah.
22:35 I mean… customer. Exactly. And what happens is that as businesses use us more and more and really enjoy using us, we’re like the first port of call. So for example, some companies have said, look, I’m growing like crazy and I want to raise some equity. Can you do that? Right now I can’t. We’re not an equity kind of crowd source platform. But there’s going to be ways of deepening our suite of products based on the information that we collect. Already companies are coming to us and say look I’m great it’s great using you for the invoices but actually what I need is I need prepayments for the Chinese factories because I’m importing my stuff from like Guangzhou and they need me to post 20% as a deposit before they ship me anything can you help with us now that’s a completely different risk profile and there’s a lot of things that can go wrong yeah so that’s much riskier but it should be possible over time to build in a price to make that happen it might not be two three percent then it might be five, 10% because it’s riskier.
23:35 But those are like apples and oranges, aren’t they, when it comes to receivables and then import, export? Yeah, yeah, yeah, trade finance. It’s in the international law. But at the moment, banks do both, right? Banks do trade finance, letters of credit, purchase order finance, invoice finance.
23:51 They don’t do it particularly well, right? And there’s lots of reasons for that. But I guess what I’m, we have more than enough to do with invoices. It’s huge. I mean, at any given point in time, there’s like 15 billion outstanding in invoice finance in the UK alone, and we did 15 million last month, right?
24:08 So there’s a long way to go. You can grow a thousand times, what you’re saying, to take over the whole market. Yeah, and I mean, so even if we do 1% of the market, 2% of the market, we are big player and our business is amazing in terms of what it’s doing, right? But one of the things that I know Compare the Market’s been talked about, I mean, people think Compare the Market’s just, you know, loan sharking online, but they’ve been talked about, Their intellectual property is giving these credit scores, and they can check things like, have you paid your most recent phone bill and things like that, that can really give a good metric whether an individual can pay this stuff back.
24:41 And they found these real-time credit scores, and like you said, these experience and stuff, well, they never had to innovate, and now they don’t use any of this tech, let alone social profiling and that kind of thing you’re doing. Yeah, look, that’s the whole advantage of, you talked about fintech and how you’re excited about it. It’s absolutely exciting. I mean, we view ourselves as part of like a universe of FinTech companies. So you’ve got like people like TransferWise, who are, I don’t know whether you’ve heard of them, but they’re doing cool stuff for the show.
25:07 Yeah, Taver was here. I use TransferWise for my coffee business now all the time, and I used to be an FX trader. So I know how much, how bad you get at HSBC and all these guys, but it’s incredible. What’s happening is that you’ve got smart companies going after specific segments of of stuff that the banks used to do all under one roof badly and they’re not gonna be able to compete with that, right? So how long do banks have?
25:32 Do you know what I mean? It’s one of those- I think Tavett answered this question because when you were talking earlier, I was like, this is Tavett all over again. Because it’s like, and I mean, I worked in a bank, you know, you work near banks. It’s just like, the thing is is they won’t even care until it’s quote unquote too late and then they’ll either acquire or then they’ll have to innovate. In the meantime, they’ll get their fees, which are, you know, five and eight and 10 times transfer-wise and probably not you because your receivable percentages are probably somewhat comparable but yeah this is what I’m thinking is that what you think yeah I mean I think it would be a shame for like people to sell too early back into the big behemoths of the banks because usually they like stifle innovation I think like you know we’re building like a home we’re building like a whole new institution with a different culture with a different makeup with a different DNA, right? We’re like much more tech-heavy. We’re super concerned about the product we start. Our premise is that we want to start building product from the point of view of the SME owner, the small business owner of the FD, who has 50 million things to worry about and doesn’t want to spend six months getting a loan. He wants it to be done almost overnight because he’s got other things he needs to worry about. He needs to find his clients. He needs to hire. He needs to be doing lots of things. The money
26:48 Should just be like commodity, bang, this is what I can get, this is the price, let’s do it. So we build our product with the customer as central as possible. And you can’t really do that if you sell out too early and you’re owned by a big corporation and they’re saying this is what profit you’ve got to deliver, otherwise it doesn’t make any sense for us. So I’d say that there’s a long way for the new guys, like us, to go to make a meaningful difference.
27:22 Because we’re not here just to make money, we’re here also to change the world, make it a better place. Look at that. I got that one in there. That’s not a sign. For you and for me.
27:34 Are you on the radar of banks? Do they know about you? Do they care about you? Yeah. They’re all the same, right?
27:39 I mean, there was that, I think what was it, Gandhi said, first they ignore you, then they laugh at you, then they’re afraid of you, and then you win, kind of thing. But yeah, so in the beginning, when I met some people, they were kind of like, you’re going to fail, it’s never going to work, then it was like, yeah, you’ve only been around for a little bit, it’s kind of beginner’s luck. And I guess now they’re really looking at, I guess, all of these companies that are coming up and saying, they’re starting to take notice.
28:06 I think we’re in the phase now where they’re starting to take notice and they’re trying to spy a little bit on what we’re doing. But for them to, for the banks to do what we do, it will take a long time for them to change. I just don’t even think they’re, they can, like they’re so risk averse and they’re so slow at making decisions. They’ve got so many problems. They’re trying to fix.
28:27 Like I bank with HSBC and it’s just horrible. I have all my business accounts and personal accounts of them and they are just so slow. You know, it’ll take me four, five, six weeks to change in a dress. They won’t capitulate until, not until it’s too late until it’s a two, two years after too late. And if you look even further, that’s because their margins are so high and they have all these other insular businesses that they get just by the fact that you’re a customer.
28:49 So like they don’t have to change. And so like they don’t even, they’re not even looking north of the city right now or east. You know, just doing their own thing. And then one day it’ll be hit them in the head and they’ll be like, Oh yeah, we better, we better bank online now. And then they’ll make this jump.
29:02 I’m guessing. Yeah. You know, 15 billion a day and you guys have 15 million. Do you know what I mean? It’s still have so much of the market and they, you know, they’re making so much money off the big guys that yeah I just hope yeah how do you guys scale I mean I’m sure you were hoping probably two years ago that you you would be it at you know 1.3 billion you know for a total or you know you’d want ten times the market and then that’s how you really start making the money how do you scale and what’s the biggest problem you have yeah yeah you’re right I mean look when you write a business plan like anyone you hockey stick yeah you you kind of think that you’re gonna be further than you are having said that what was really surprising is that, like, we hit, we started to make profit much sooner than we thought. I mean, last year we went, it was kind of this crazy period where we hit it, but we made a hundred thousand pounds of revenue in August, and then we made like a hundred thousand pounds in profit in October. So, so that kind of gave me a feel. Very few companies. Yeah, that kind of gave me a feel for like, hang on here, like, there’s something, there’s something that we’re doing is clearly right here, because, I mean, it seems to make commercial sense, right?
30:08 Am I doing something illegal? Call your lawyer up. Can you just check this out? So then we looked at it and we suddenly realized that companies are willing to pay money. We don’t just go around and say we are the cheapest option.
30:26 That’s not what we say. We say our product is the smoothest and the best and the fastest and people are willing to pay more for that. They’re actually they pay a little bit more to have the peace of mind and it’s all sorted quickly, right? So because it’s a digital need for these startups. Yeah need the cash Yeah, and you know as an SME owner myself It’s like if I’ll pay you more money as a fee just to get it done quickly to get it I like what time is so valuable exactly and if I can save a week of my time Not not emailing the bank and going down there for four hours. It’s just like your job is to grow exponentially Yeah, and if he can you know get you financed and you’ll pay whatever person And that’s why so many other customers are willing to go on the record, talk to journalists about their experience using us, right?
31:07 I mean, they’re like, this has revolutionized my business. I’ve been able to export to the US for the first time because I didn’t have to sit with my bank for six months and figure out what they needed in terms of paperwork. I met a company this morning. They said that for six weeks, the sales guy at the bank said, yes, yes, we can help you. And then on the sixth week, the risk guy from the bank said, no, we can’t.
31:29 But he had based his whole six-month plan on getting that money. If we’re going to say no, we’re going to say no in 24 hours. Draw a line on it. You move on. A quick no is so much better than a long protracted no.
31:44 To come back to the question, of course, we want to do more volume, of course. I want to be doing 30 million pounds a month by the end of the year, double what we’re doing last month. I think we’ll get there organically. We’re hiring people. We’ll get it done.
31:57 Our system is super scalable. We could be doing four times what we’re doing today, and there’d be no problem in terms of processing it. And then the medium-term goal is to be doing 100 million a mile, that’s over a billion a year in invoices. And that’s when we’ve got a company that’s a serious player. Okay.
32:18 Are you looking across the Atlantic? You must at least have to see what’s going on over there. It’s funny. You meet investors, and they’re always talking about the states. This is a tough place, right?
32:30 So it’s competitive. There’s already companies doing amazing things, Lending Club, OnDeck, and New York, I visited them recently. And also, it’s not a country, it’s like a continent, and each state has their own way of doing business. In some ways, in what we’re doing, the state is actually a little bit behind the UK. There’s less data.
32:52 In the UK, you have one company’s house, which has information on every business. in the states you have these federal bureaus of information, some of which are offline. What surprised me when I looked into it is that a lot of businesses, small businesses in the states get paid by check, like much more than here, where most stuff is done by wire. That adds another complication in terms of how you settle these transactions, if there’s like checks floating around.
33:20 There’s different laws, there’s different competition, there’s a greater culture of like unsecured debt in the US. So actually, the biggest market for invoice finance is the UK, by far. It’s bigger than America. So I would say that I’m in no hurry to go west. I think there are certain places in Europe which probably interests me a little bit more.
33:45 What about Asia or emerging markets? Not on any kind of roadmap. We get approached all the time by business saying, we love what you’re doing, we wanna do it in country X. can we license your technology? But it’s too distracting.
33:59 We wanna consolidate our position in the UK and then think about the next step. It’s a first world product at the end of the day, isn’t it? Things go wrong, you need the rule of law, right? It’s not kind of, some countries, some things go wrong, that’s it, you can’t recover anything because there’s no real legal process. Here there’s a way of getting things done.
34:22 Okay, so you’re not going to the States. First time we heard that, I think. Yeah, it’s kind of refreshing. I’ve yet to be convinced. Okay, two other things come to mind. You know, if you did get say You know 10 million pounds right now Could you use it in a productive way?
34:36 And the second thing is do you see companies out there that you really would like to partner with because you could it could speed up Your growth whether that means someone of your equivalent in New York City or not So we’re currently talking to investors not because we need the cash but but because um it’s good to To think about the next kind of phase Always good to ask for money when you don’t need it. Yeah, that is definitely true. It’s funny how that Yeah, you should definitely you should definitely think about raising money when you’re in a position of strength but Yeah, definitely like six I’d say like much more than ten million It would be maybe a bit too much. But but I think Ten million dollars we could definitely put to work and that’s just about going quicker, right?
35:23 So just being bolder, right? Is that mostly marketing spend? Yeah I mean, we’ve done hardly any marketing spend like our brand has been built literally just through word-of-mouth and kind of smart PR at the right moments and Client testimonials You know compare the market spends I think 25 million pounds a year in marketing and that’s a fraction of what the banks spend They’re actually quite effective in how they use their marketing spend So, you know, we want to we want to spend a bit more in marketing want to build a brand want to build out our sales team We want to build our technology team the future will be you asked about who we want to partner with interesting will be integration with e accountancy platforms because right now very few businesses use them people like zero and free agent and There’s sage even sage the kind of old-school one is is moving on to the cloud So people will start to do their accounts through online software like hosted in the cloud and then you can plug into that and do Cool things about that’s perfect for you. Yeah, it’s perfect for us call them and say, you know, we can give you this this Yes. Yeah, exactly. So You know, I’d say that’s that’s interesting like channel partners people Plugging in with software that SMEs are using to kind of say, okay You’re growing have you thought about using us and we can give you this based on just what we’ve gleaned already. So that requires quite a lot of technology, kind of work, API hookups, sharing data. That’s
36:54 The way the world is going. Yeah, no it is. Colin, what am I missing here? My finance mind is going through. Yeah, no, I think, you know, how do you, I guess we briefly touched on it, but I guess, you know, at the end of the day, some guy could come in and spend 25 million right some some big us competitor come in yeah 25 million in marketing right off the bat They have the the platform they have the investors How do you compete with that well? It’s I mean that I guess that’s that’s a fear Yeah, it’s a genuine. I mean I think if you ask everyone including tabet, right? He’s got a great business the fear is always that someone comes along with a lot more resources and with some superstar management team and and they see that you’ve done a good job and they can they can nail it but I’d say like the bigger there’s a bit of network effects here like the more businesses use us the more data you have the more local knowledge you have the more your message has been disseminated across like the SME world the more that the additional investor wants to come to you because you have the most track record and you have the lowest default rate or you have the biggest depth so you can spread your risk so there is a like a positive feedback loop that when you get out of the early stages and you can kind of really grow quickly, you cement that position. So if I was to raise money it would be to go quicker because alternative finance is definitely
38:19 Holding up. Yeah and you want to get there as fast as possible because that gives you market share and that gives you sustainability. If you had you know if you got that 10 million, where are you spending your money on marketing? Or would you ideally like to? Are these because as an SME myself I don’t know Are they googling it, you know, are you able to people like you and me? Yeah Google stuff, right?
38:40 So but the problem is that not every business owner is I Mean, there’s no is as tech savvy. Is it just you know old-school cold calling? Yeah, look, I think old-school cold calling. I’m just blindly cold calling is not the right approach You got to be smart and what you do and also with with social networks. You can also you can be smarter, right?
39:02 So I’d say without going into too much of specifics because It’s kind of like a bit too much detail. There are offline ways of acquiring customers online and I think the future is online but you still have to do some offline stuff and you’ve got to do some stuff like advertising, right? You need to build a brand and that’s not cheap and depends what medium you’re using. I mean, I don’t think you need to go to the extreme of sponsoring like the Super Bowl kind of thing.
39:32 I mean, we’re not consumer fast sales for screw and all of a sudden they’re sponsoring the Super Bowl. It’s crazy. Yeah. Yeah. I mean, we’re not consumer stuff.
39:42 Right. So, but, but, um, there’s ways to blow a lot of money in marketing. Yeah. We had, we had a busu. Have you heard of busu, uh, online language, uh, learning.
39:53 They got, they won a competition. They got like 4 million to spend in Germany on like, uh, you know, TV advertising. And yeah, it’s interesting kind of how much that stuff costs and it takes a long time. Yeah, and how little it can do, unless you, yeah, he had a whole story. You can watch that show if you want.
40:09 He coordinated it with kind of an online presence and they had a much greater success with that television ad. Yeah, it’s interesting. Yeah, you can spend a lot of money. You know, real quickly, I wanted to get your thoughts on London. You know, everyone always talks as London has the edge when it comes to fintech because I guess technically it’s the center of currency trading, finance, and it’s right next door to the tech center.
40:28 But I was wondering what you think London lacks And then what do you think we have going on that’s much better than the rest of the world, specifically the Valley and the Alley? I love London. I moved to London when I was 12 years old. So I view myself as like a Londoner. From where?
40:42 I used to live in Zurich in Switzerland. And it’s great. I love the cosmopolitan nature of it. It’s changed like radically. Like, I mean, when I went into Lehman in 2006, I don’t think anyone talked to me when I was finishing university about doing a startup.
41:01 No one was going and no one was talking about all these exciting things going on in early stage companies. Everyone was just like, I want to be a lawyer, I want to be a banker, I want to be a trader, I want to be a hedge fund manager, and that was it. So the city has changed considerably. And I get emails from old friends, old colleagues who used to work with me in finance, going like, I want to quit my job and I quite want to come and work for you at Market Invoice, and that’s just crazy, right?
41:27 These are people who normally shouldn’t be thinking about that. But there is a bit of a buzz that’s happening now. And I used to live just near Hoxton and Old Street. And that’s also changed the type of people who are coming over here. There’s influx of smart people from the States, from Europe.
41:45 So I think there’s lots of positives. I think it happened organically. I think the government tries to jump onto that a little bit and say Tech City is like a government initiative. I think that was happening. I think that’s the way it should happen, it should be organic.
42:01 There are some success stories now, right? Such as? You’ve got like the Mind Candy, King, you’ve got, I mean, to a certain extent you’ve got the Wongas, right, who are doing great stuff with technology. You’ve got… I think I was thinking of Wonga when I was saying compare the market.
42:18 I was thinking of Wonga the whole time. So you’re starting to see some UK success stories, and that motivates people because people think like, yes, it can be done, yeah. Downside, I think there’s still a fear of failure in Europe. I think Americans are amazing in the sense that they embrace failure. It’s like you’ve learned how to do things now, and you won’t make the same mistake twice.
42:43 And so actually, like, have a go at it, and it’s not like you fail. I remember one guy telling me when I was raising a seed round, like, I know you have to realize that if you lose money, you’ll never raise money again. That’s what someone said. And I was like, that’s pretty scary, right? And that makes you conservative.
43:00 That makes you actually be less ambitious. Now you get some angels that say they won’t invest in an entrepreneur unless they’ve failed. Yeah. Well, yeah, but I think, I don’t know, correct me if I’m wrong, guys, but London still has, I think, I mean, maybe it’s different for our people who come over from the States, But guys who are homegrown here, there is that fear of failure still. And is that sort of what will society think of me if I run a business and it doesn’t work and I try again?
43:27 Which is the worst thing for entrepreneurs, right? You need a risk attitude or nothing happens, right? Yeah, exactly. So that’s where it’s kind of lacking still. I think so.
43:38 I think it’s going to hopefully all change, right? It’s come a long way, but it’s still not… When I meet investors and entrepreneurs in the States, I’m just always blown away but just how big they think they think like we can dominate the world our product can be huge and you’re gonna do it and this is the money that is gonna be required to do it and go on and and be amazing right yeah I think when you grow up also in that market where you’ve got 300 and some odd million potential consumers and there’s no language issue there’s not a yeah a border issue that you just you know you’re born into that we have to think this way and that’s I’m competing against people that think this way so I think the people that you meet a lot of the times have won out against the people that might not have thought that way so yeah yeah it’s you know people have done it right you know I think you have the Zuckerberg’s a hundred billion valuation and you know the what’s up it’s like it’s like holy cow that’s a lot of fucking money those realities make a big difference and we always talk on here when those really start happening and you start getting money not just in the founders pockets but in the top 20 people there and they make the companies, it’s going to change the landscape.
44:46 And we ask everyone who’s on here a couple questions at the end, I’m going to hit you with them. If you could make a phone call to the 20-year-old, I don’t know if you were still in Zurich, and give that young man a bit of advice, what would you tell him to do? That’s interesting. Short Lehman. Yeah.
45:06 I think I bought some Lehman stock before it went, but I was like, surely they can’t let it go bust. we won’t go into that. My views on, it’s interesting, my views on education are like changing quite a lot. I question how useful like doing a traditional kind of university course really is. I mean I think it teaches you some stuff. I mean I went to Cambridge, I studied economics and half the stuff I studied I never used or forgot kind of straight away. I mean it teaches you a methodology but I think probably one regret, one thing I would say is learn how to code and you know I’ve picked up a lot and I understand a lot but you know I think it just when I look at, I went back to my old school and I met some crazy intelligent 17 year olds who are like developing apps in their spare time and and just being able to speak that language and and do things and just experiment is just so powerful and and and I think I know it’s like they’re doing this year of code I think I have some friends involved in that and and despite the kind of PR machine that’s working on it I think the underlying message is important that you know world way people learn things and the way that you the way that you do stuff now is so different to to just going to university as a right of passage and reading some books and coming out the end of it and trying to figure out what you want to do I think you got to you got to do things right
46:32 I think he’s got to be more there’s gonna be you would have more links right into the real world doing businesses learning how they Were figuring out how you write a basic script and and experimenting Yeah, cuz back in the day you just go to university which was basically detached from the rest of the world Yeah for three or four years and then you would be born into the corporate world where you’d be screaming like a baby You’d be like what the hell’s going on? Yeah, and that was exactly what I went through right I went into this kind of ivory tower of Cambridge where everyone was living in different century and you know, it was almost like technology was looked down on right like it was more like something that you don’t do because you’re Studying an academic subject right and then when I came into the world of work, it was very painful so I think I Would I would say I wouldn’t say not don’t go to university. I would just say, you know temper that with Learning some practical stuff. Okay. Second part of that question is what’s the best advice you’ve ever received in?
47:29 Business or personal Lots of I’ve received a lot of advice and I think I read it. I was talking to someone who said You know, I think it was something along the lines of You know sort of Think big like stay focused and and and you know, don’t give up when it gets painful So starting starting market invoice was extremely painful. It took us a long time to get off the ground We’re building something from scratch and there were moments when you can kind of doubt what you’re doing But you know stay true to that kind of instinct that you have that this is a product that can work and just really persevere Yeah, so I think Start young think big and stick at it and then you’ll get there good advice You know, I was gonna ask for the advice to the 20 year old listening But I think I think you said it and that’s good. That’s code We’ve heard that so many times here And I mean not it’s not like I’m I didn’t tell you to say that and we’ve got like 50% of our guests have said that learn to code. Yeah. I wish, I wish, I wish I could code. It’s not too late. I’m learning right now, right? If I ever have it like a gap off again, I’m a hundred percent code, code, code. It’s funny when you, when you, when you have a problem with your development team or whatever, and you need stuff done quickly, it’s almost like being, so I traveled around China, you know, it’s like being in a Chinese, a third tier Chinese city when
48:56 And no one speaks English, and you’re just trying to sort of get your way around. You’re so out in the boat, like it’s just nothing. And a few phrases are even better. And then, you know, and then to become fluent is obviously the ideal in it. Right.
49:10 And I like the girl from SnapFashion said last week, it’s even know enough so you know you’re not being had. Yeah, yeah, exactly. Even know enough so you don’t spend 25 grand on that piece of code that should have cost two. Yeah, I met people who go, oh, I’m gonna, I wanna build an internet company and I’ve outsourced it to a company, I’m gonna I’m gonna just give them a hundred and fifty grand like that is that’s like a major red flag Yeah, right, but only you know that now because you pay you paid your dues Um, you know, it’s a fascinating company when you look at it the surface of you’re like, okay Like I said receivables aren’t sexy, but there’s so much cool stuff going on here And I really it’s I’m very impressed with the fact that you guys have kept it simple, you know You focused on one product we’ve heard so many people say that as well Focus on one thing and don’t try to do everything for everyone and FX or you know, whatever I mean in time that can come but I think that’s so that’s so crucial. So fantastic talking to you Appreciate you being here. How do people get in touch with you?
50:02 Twitter guy. Yeah, no. Well, yeah email my emails out there. I have a blog page. We’re recruiting like crazy So short plug we’re looking for great tech people and if they’re interested, how do they contact they go through the website?
50:15 There’s a career.com market in was calm backslash careers. There’s a full list of the openings And you are looking for like 10 people. Yeah, we’re looking like especially good tech people front and back and We’re moving into a new office. So it’s really exciting times. Fantastic. Awesome. Very good If you’re listening to us on iTunes, you can see the whole video of all of our lovely faces on YouTube channel silicon real We’re on Twitter at silicon real. Yep. Send us a message. Hello at silicon real calm We got people helping us out We got guys cutting video clips for us if you have guest suggestions or if you know of someone that you would like to see on Silicon real tweet us right now that that person we’re looking for founders and CEOs We want to start the story from the ground up, but we’re looking for people across the specter. So that that would really help Yeah, yeah help us out. This is the end of the day. We’re doing it for you guys So and girls and let us know who you want to hear about and what stories and all that sort of stuff And you know if you’re CEO founder traveling through You know, you’re going to be in London at some point in time, you know, drop us a note.
51:17 We’d love to hear different perspectives from around the globe and what’s going on. So yeah, definitely. We shoot every week right here. And the last part of that is if you want to get your company out and in front of, say, the 15,000, 20,000 professionals that are watching the show every week, let us know. We’ll be happy to talk to you about advertising.
51:32 So there you go. They say it’s about the people on Silicon Real. And thanks for your time today. I wish you all the best. It’s going to be exciting to watch you take that billion plus market by storm.
51:44 Yeah, thanks a lot. Good luck. Enjoyed it. All right, guys. Take care.
51:56 Cheers. I want to be like the Google of visual search. So I want to be like if anyone sees something, they kind of reach for Snap to go and find it. We were the first to market with this technology and we’re still the only people that can do kind of cut analysis and the cross-platform visual search. Where we started was doing real pure visual search and I literally wrote algorithms just for fashion.
52:12 Photo of an item of clothing in a magazine on a catwalk in a shop window and then we’ll try and find you everything similar on the high street. I really really like running a lean startup because I think people feel really empowered in their own kind of job role. I just want to be able to search the world using pictures.
