Lisa Jacobs’ arrival at small business lending platform Funding Circle was, in a sense, a full circle moment. Since childhood, Lisa had learnt all about the unique challenges faced by small businesses. Her first-hand experience in the sector was varied, from helping out with her parents’ manufacturing and distribution business (she built their websites) to holiday retail jobs and eventually consulting at the Boston Consulting Group. And so joining the London-based startup in 2012 as its chief strategy officer was a natural fit. Lisa sat down with Sifted’s Carly Minsky to reflect on her startup journey.
Where do you think Funding Circle sits in the fintech landscape?
We were one of the very early pioneers of direct platform lending, particularly to small businesses. No one focusing on small businesses had got to a large scale.
Small businesses for so long have been underserved by traditional industries because they fall between the cracks of big ticket corporates and the consumer, mass-market approach. Because small businesses are so varied — your dentist, a manufacturer, the shop on the corner, your landscape gardener — they have typically been a difficult customer base to serve.
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There has been this wave in the last 10 or 15 years in which technology has allowed businesses to serve small businesses, and to serve them well. For example, iZettle changed the game for payments, and companies like Etsy, Amazon and FarFetch have opened up the whole world for retailers.
Lending was hugely broken and there was no one focused on that space. For consumer lending, predictive credit scores allow you to start lending pretty quickly. But small businesses have been harder to predict so no one really tackled it.
It creates some interesting dynamics. Because of the difficulty in serving small businesses, you don’t get as much competition and so historically there has not been as much innovation. The product for small business hasn’t been as good because they have not had that choice. So what we are able to do is serve that customer very well. We have very high NPS scores in the 80s, our repeat rates are very high; 85% of business who borrow from us come back .
What fed into your decision to join Funding Circle in 2012?
I was in consulting for around 5 years or so, and for me it was great because it gave me a good variety across different industries. But you are always a step away from the action.
I wanted to do things and get my hands dirty.
I joined Funding Circle when we were pretty young;it allowed me to drive some real change.
How was it pitched to you back then?
“We are going to be a global leader in small business lending.”
It’s been quite consistent since then. The funny thing is, if you look at the business plan they started off with, the growth verticals are international expansion and partnering with infrastructure. This has been consistent in terms of mission and ambition. The idea of supporting small businesses — this underserved group which is so important to the economy and job creation — really resonated very strongly with me.
It was a bit of a risk. It was a big salary cut and it involved huge uncertainty. But there was an ambition there that was very exciting to me. My view on this is that you have to take risks; you have to keep pushing yourself.
Back then we were 40 people in one office, and we are now 1,000 in four countries.
Has your role changed over that time?
I have had what I think is the best role in the company — but perhaps I am biased! My role has been a combination of strategy and business operations. In a business of 40 people that covers a multitude of plugging gaps and filling in.
The core throughout it has been strategic growth. When a company is growing from 40 people to 1,000 and generating £5bn in lending to 50,000 small businesses, it is quite a lot of strategic growth! I led on our growth into the US, Germany and the Netherlands which we did through acquisitions, and I have led our fundraising in the private space from series C through E, and I have been a core part of the IPO we just completed, as well as other strategic product initiatives over time.
Clearly that risk turned into a success story; what are the indicators to pay attention to when evaluating whether to take a risk like that?
I’m not sure you ever 100% know. The philosophy is the same as when investors evaluate a start-up.
It is interesting because we have a range of different investors across Funding Circle and they all have slightly different theses. I was nowhere near that sophisticated when I made my decision, but all of those theses played a part in it.
Some of our investors are very focused on the management team: is this a team that is going to deliver and have the entrepreneurial spirit and an awareness of the market? Whenever you go to meet with a team it is really important that you get the sense that they are going to deliver on a strong vision, and that the vision makes sense. I’d want to know if they have prior experience with delivering a proof of concept.
Other investors focus on the business thesis and whether it makes sense. For me in 2012 that was a question of whether I believed that financial services were going to be disrupted by technology. It was a pretty easy one to answer. Going further, I’d ask myself: do you believe the product is going to be successful in that market?
We have other investors who go very deep on diligence and look at all the fundamentals. I have to say that I didn’t do any such modelling prior to joining. I think I did some scrappy excel workings.
I was in a relatively fortunate position in that I had spent a year freelance consulting so I had a plan B If it didn’t work out, I would go back to freelance consulting. It is really important for people to figure that out because it is really difficult to take that risk, and it varies in different life stages.
What has it been like moving from a consultancy culture to a startup environment, and how has the culture changed as the company grows?
Company culture is table-stakes for a new generation of employees who are coming through and have expectations not only on the mission and values but also on the culture and the environment — with reason.
When I joined and we were only 40 people, the culture was felt really keenly. We were all in the same room and you could just shout across to someone. There is this mythical utopian startup culture that everyone wants to try to create and replicate and make sure it doesn’t degrade over time. It does exist but the mythicality comes from people seeing it as this prized environment that can’t be recreated if you get too big.
We addressed this because everyone was so scared about us being really successful and growing into a huge business; there was this sense that we would lose the mythical startup culture. So we asked ourselves, well what is that? Can we understand what it is about the culture that makes it so great and how to preserve that? This became more important as we expanded into other markets. We thought about what it is that makes the culture exciting and we tried to bottle it.
We distilled it to our five values: Think smart; Make it happen; Live the adventure; Be open; and Stand together. Then we embedded them through our review process and through the recruitment process. We talk about them a lot. There is a weekly award for someone who is living our values, across all our offices. You often hear people saying things like “That is a really great example of you standing together” or “let’s go and make it happen!”
It was a really important thing for us to identify how we keep that culture. We are really focused on it now as a business. The values and our culture committee are part of what I think helps the business continue to innovate.
We also talk a lot about the velocity of decision-making. When you are a small business and you have everyone in the same room, decision-making is incredibly quick, but the risk is that as a larger business there are processes which take a long time. So we always challenge ourselves on how we make decisions and how to create the right environment so that we can keep moving quickly.
On a company level, how do you manage communication and transparency with your employees as you expand?
We are still learning about this, as all businesses are. There are a few things we have done to try and support communication. We have a weekly meeting with all our offices which rotates on various different topics. We have updates from MDs in each country and updates from our executive team on specific projects. It is an opportunity for 20 minutes each week for everyone in the company to be in the same virtual room.
We also have the quarterly meetings which are really important times for the business to get together to talk about what we are really focused on. As you get bigger, what is really important is that you have alignment around the vision, the mission and the key objectives. If you have that then people can have their autonomy and be empowered to make fast decisions, but everyone is still heading in the same direction.
I think Steve Jobs said that focus is not about saying yes to things, it is about saying no to a thousand things. Coming together to define our objectives each quarter is really important to keep our focus in alignment.
How do you encourage feedback from employees to ensure it is not just a top-down process with executives refocusing or reiterating what the mission is?
One of the rotations on the weekly call is Town Circle which is an opportunity for anyone across the business to ask questions. People are pretty open and ask good questions, which do get answered openly. There is generally a culture of talking across the business. One of the things we do really well is foster approachability among leadership, whether through Slack or face-to-face.
We also take a culture survey every quarter which gives us an opportunity to aggregate how people are feeling across the business. One of our core KPIs that we track globally is employee satisfaction so that is an important measure for us. We also get really rich qualitative feedback.
What is the most distinct feature of Funding Circle’s company culture?
My sense is that employee benefits are becoming quite normal. The things we offer were once a novelty but now are fairly standard. In the US we offer unlimited holiday days for example but all US tech companies do that now. We have free fruit and a subsidised bar and free barista coffee. I wouldn’t say any of those are unique now. We have “Bright Idea Days” for employees to take two days off every year to work on a pet project that can drive forward something at Funding Circle. Again, Google do a similar thing.
We do all the things you would expect but the real thing that is very unique about what we do is the sense of purpose: a commitment to working for small businesses.