Over 70 in-depth interviews of Fintech Founders provide lessons from some of the most successful fintech entrepreneurs that will help you understand the challenges and opportunities of applying technology and collaboration to solve some key problems of the financial services industry. This book is for entrepreneurs, for people working inside of large organizations and everyone in between who is interested to learn the secrets of successful entrepreneurs.
In this advice-filled resource, Rubini gathers advice that comes from a diverse range of financial services niches including financing, banking, payments, wealth management, insurance, and cryptocurrencies, to help you harness the insights of thought leaders. Those working inside the financial services industry and those interested in working in or starting up businesses in financial services will learn valuable lessons on how to take an idea forward, how to find the right business founders, how to seek funding, how to learn from initial mistakes, and how to define and reposition your business model. Rubini also inquires into the future of fintech and uncovers provoking and insightful predictions.
Financing is of paramount importance to the world, since it can help people and businesses expand, and it can also foster positive sustainability behaviors from big organizations. It is a massive market around the world that encompasses many different types of companies and business models. Lending also leads the rankings in terms of companies that have gone public, with sixteen that had done an IPO at the time this book was published.
Innovation in lending has been very strong in different areas, especially in the United States. Through this section, you will read about different lending topics, and look at how lending requirements change depending on the geography in question.
I included credit ratings in this category as well, as credit rating is always an important factor for providing business loans. While at some point the business model for credit ratings providers was to sell the data to personal consumers, nowadays this information is being offered for free to consumers, and revenues are being generated through other means, mostly by referring clients to providers that can qualify for lending proposals. I caught up with Gamal Moukabary from Bonify and Levi King from Nav to understand what they are doing in this field.
Consumer lending is a very mature area, where processes have been developed in extensive detail. I enjoyed looking into the innovation that some US companies are bringing, such as Upgrade, which is trying to educate consumers at the same time as providing them with lending. It is interesting for me to see how lending is approached in countries with thin credit files, such as Brazil. I spoke with Sergio Furio from the Brazilian firm Creditas to understand how they operate. I also enjoyed looking at what companies in Asia are doing. I interviewed Simon Loong from WeLab to understand what they are doing around mobile lending, and Geetansh Bamania from Rentomojo, a company that is introducing a flexible ownership solution providing home essentials and electronics.
Finally, I looked at several companies that specialize in SME lending. This is an area that is very complex, with a lot of risk, a lot of data sources to consider, and a lot of opportunities for innovation. In the US, Iâve looked at different companies. I discussed the future of point-of-sale financing with the founders of Financeit. Furthermore, I explored with Sam Graziano how Fundation serves different SME niches, and I talked to Henrique Dubregas about how Brex provides corporate cards to different groups, such as well-funded startups. In the UK, I had a chance to catch up with Rishi Khosla from Oaknorth, who showed me the secret on how to get to break-even within the first year of operation. In Europe, I looked at how Conrad Fordâs Funding Options is helping SMEs find the right loans, and I interviewed Christoph Rieche to understand how iwoca fulfills business loans. In Latin America, I discussed with Alejandro Cosentino how Afluenta has rolled out P2P loans in several countries. In India, I looked at how Harshvardhan Luniaâs Lendingkart has grown its business lending through different states.
This fintech subsector is very dynamic, and still developing intensely. I hope you enjoy reading the different views from these founders.
Chapter 1 Henrique Dubugras
Company name: Brex
Location: San Francisco, California, United States
Brex provides a corporate credit card called the Brex Visa for technology companies. It helps startups of all sizes (from recently incorporated to later-stage companies) to instantly get a credit card that has 20x higher limits, completely automates expense management, eliminates receipt tracking, and integrates with accounting systems. Henriqueâs story is very inspiring; from a very young age he succeeded in business by founding Pagar.me, one of the largest payment processors in Brazil. Brex has been a very fast growing company, achieving a valuation of more than $2.5 billion in just two years.
Roles: Henrique Dubugras, Cofounder and CEO
In the next five years I think regional banks will lose a lot of market share in the US and a lot of new challenger banks will gain market share.
AgustĂn: Iâm interested to know how you started in entrepreneurship.
Henrique: My story starts when I was around twelve, because there was this video game I wanted to play and my parents didnât want to pay for it. I figured out that if I learned how to code it, I could play it for free. I started coding because of that. I basically built a version of this game; instead of being charged to play, you were charged to have advantages inside the game (like a premium model). I did that for around two years, the software became popular in Brazil, a lot of people are playing it and I made some money. But then, after two years I got this legal notification saying that I was breaking some sort of a patent. I didnât know what patents were, but my mom got super upset and told me to shut everything down. That was my first experience in coding and entrepreneurship. At that point I was fourteen.
AgustĂn: So you were an adolescent who wanted a cool gaming feature. How did that transform into being a teenager who is making money out of the whole experience?
Henrique: I think it was kind of natural in the sense that I needed money to pay for the servers, so I found I needed to charge for something and didnât want to charge monthly fees like the original games did, so I found another way to monetize it. Other games were monetizing advantages inside of the game.
When I was fourteen, I was having this fourteen-year-old crisis, and I started to do some normal stuff; so I found a girlfriend and started watching TV shows. There was this TV show called Chuck; he was a really good spy, hacker, and programmer, and he worked for the CIA and he had this awesome life and he went to Stanford. I decided that I wanted to be like Chuck; I wanted to have his life. So I needed to go to Stanford as well. Thatâs how I got interested in studying in the US, but at that time it wasnât easy to do it from abroad, there was the whole application process. You need to take SATs and write essays and get recommendation letters and fill out an applicationâand I didnât know any of that. So I found this Brazilian guy that was graduating from Stanford and was starting a ticketing company in Brazil. We made a deal where I would code for him for free, and in exchange, he would teach me the Stanford application process. I did that for a year; and after a year, he had raised a bunch of money. He hired a bunch of senior engineersâthose senior engineers taught me a lot, I really improved as an engineer. After a year, I decided I wanted to start my own company. And then I joined some friends and we tried to start this education company that helped Brazilian students with their US application process. I did that, we got a bunch of users, but we were never able to monetize it, so it failed after nine months or so. I had invested most of the money I had made on the game into this company.
AgustĂn: Sounds like a little hurdle along your path. What did you do then?
Henrique: I was running out of money, and there was this Hackathon that was worth fifty thousand dollars and I thought, âHey, if I can win this thing, itâs more time being able to support myself.â So I went to a few friends and we built this app called âAsk Me Out,â which was basically like Tinder, but instead of geolocation it was based on Facebook friends. You could like and match your Facebook friends. It turns out we won, we got the fifty grand, came back home, and we tried to launch it; and it didnât work. I tried to monetize it and I had a really bad experience implementing payment rails. Around this time, my cofounder Pedro Franceschiâwhoâs also a programmer and entrepreneur, and who had worked at a payment company in Brazil during his teenage yearsâand I had implemented a payment system. We decided to build a better system, together. Thatâs when we started our first company Pagar.me, which was like what Stripe does, but in Brazil. We started that company and raised a seed round. It was the only money we raised, but we grew the company from the two of us, to over around 150 employees, very profitable, around a billion and a half in transaction volumes. We sold that company in September 2016 and then moved to the US to go to school at Stanford. But three months after we got there, we decided that we wanted to build another company and we got into Y Combinator for a virtual reality idea. We soon gave up on that idea, and decided we wanted to go back to fintech and payments. We saw all these startups that had no way to get a corporate credit card without personal guarantees, and they had low limits, and so we decided to build something better and thatâs how Brex started.
AgustĂn: Thatâs a good summary of a few years of your life. Could you describe the offering and the reason for Brex?
Henrique: Brexâwe have three things that are different. The first one is the underwriting model. Today, weâre the only corporate credit card that doesnât require any kind of personal guarantee. We can give you ten times higher limits and you can go from zero to a card in five minutes. You can get a card in five minutes with no personal guarantee and very high limits, compared to the incumbent banks, where it takes multiple weeks to get a card, with a low limit and you have to personally guarantee it. The second thing that we did was we rebuilt the entire technology stack from scratch, and that allowed us to basically build our own functionalities so we have better expense management, better reporting, things like that; so just better software in general. The third thing is that we built a rewards program that is geared toward startups. You get 7x points on rideshare, 4x on travel, 3x on dining, 2x on software. Software and rideshare are not categories that existed in traditional cards, as opposed to Brex, and those are things that a company can spend a lot of money on; so they can actually accumulate a lot of points. S, those are the three main advantages of Brex. While today we are focused on startups, the vision is expanding to other sectors, so other types of companies can also use Brex as their corporate credit card. Not only startups, but restaurants, retail, consulting, all construction, all the industries, is the vision. As well as building other B2B finance products over time.
AgustĂn: How many employees have you got right now at Brex?
Henrique: Weâre around eighty.
AgustĂn: Eighty, thatâs a lot. How did you go about funding the company? Records say about $182 million has been raised.
Henrique: We raised a Series A back in March 2017 led by Ribbit Capital, Peter Thiel, Max Levchinâa bunch of people participated in that round. Then we raised a Series B of around $50 million in April 2018 led by Y Combinator. And then we raised our Series C; that was around $106 million in September 2018 and that one was led by Greenoaks Capital and DST Global.
AgustĂn: In terms of funding, this is obviously not your first company, so Iâm assuming this one was a lot easier to do; but how did you approach asking for money in Pagar.me for example?
Henrique: Pagar.me was more like a begging situation. We were both sixteen, we didnât know what we were doing, and we were hoping that someone would fund us. They funded us, really quickly, and we were able to raise three hundred thousand dollars. But then over the lifetime of Pagar.me, we built a lot of relationships in Brazil and Silicon Valley, so it was easier because we already knew people, weâd already had a successful exit and so it was easier.
AgustĂn: How do you see Brex growing? Where are you focusing?
Henrique: Weâre focusing on expanding to new sectors and going to larger companies. Today we serve, really well, companies from up to a couple hundred employees to more than a thousand, two thousand to three thousand employees.
AgustĂn: Thereâs a lot thatâs been written around your partnership with Pedro. How did you get that started and what are the dynamics between you? Is one of you good at something and the other good at something else? How do you guys get along?
Henrique: Pedro is really strong. Weâre both engineers by training but in Pagar.me I ended up doing more of the business stuff and Pedro doing more of the internal technology and operations. Iâm really good at pitching things and product and strategy; Pedroâs really good at internal stuff, like technology, operations, and integration of the company.
AgustĂn: Iâm really surprised about the whole coding thing. Is there any secret sauce that you guys have created to be able to have launched such successful ventures?
Henrique: I think a little bit of the secret sauce is that we rebuilt the entire technology stack f...
