In many ways Funding Circle represents a Lawyer’s dream business. The Government backed British Business Bank with a growing following in the US could be about to become a victim of its own success. Funding Circle bears all the hallmarks of a start-up built to keep pace with the revolution in Tech; it has grown fast, lends fast, making investment decisions within 48 hours, and, says Adam Blair, Head of Borrower Sales and Wednesday night’s guest speaker, its risk appetite is such that Company default and failure is welcomed as a sign that its investment models are healthy.
The trouble with revolutions, history has taught us, is that all too often they end up reinforcing the status quo, rather than smashing it to smithereens as originally intended, and on Wednesday night it was clear that a Pinsent Mason “Fintech revolution”, was an altogether different animal to a Tech one.
They say a change is as good as a feast, and Adam’s opening remarks were all amuse bouche, as he breezily explained the differences between P2P lending, i.e. crowd-funding, small fry and insubstantial, versus P2B lending, most likely to kick off at a lip smacking £25k. On the other hand, P2B is like fast food, order it in just 20 minutes via an online form, and your stash of cash is signed off just 48 hours later, for pick up in 1-2 weeks. No bank can match that turnaround, and there you have Funding Circle’s USP.
To date the Company has funded £285 million of deals; the figure stood at just £6.5 million when Adam joined in 2011 as the Company’s 6th employee, since when it has raised an initial £20m, followed by £40m last year, to fund its own growth; now, with 150 employees globally, Adam feels it has achieved the credibility he identified as his biggest challenge when he first joined.
Credibility, check, success, check. Now, and this is where the lawyers come in, it is all about integrity. It has taken the banking industry, with the help of a regulatory framework built by firms such as Pinsent Mason, 6 years to recover a sense of respectability, after the debacle of the global collapse of 2008, and during this arduous period envious glances will no doubt have been cast in Funding Circle’s direction, by banks unable to lend as freely as they would have liked. Now that Funding Circle is eating at the same table, will it have to be more circumspect, take more care to understand the risks associated with deal funding, become more corporate in nature?
Yes, but compliance can be fun, due diligence a hoot, AML documentation a blast, is Adam’s slightly contentious reply. HSBC, Barclays and the like will be choking on their pretzels. Lawyers get paid for applying the brakes, asking questions, establishing processes that are anything but fast track. Would a major bank proudly display a deal funding counter in pride of place on its website? Doubtful, they are all too busy filling out forms. They have come to see Law as the Atkins diet of funding; smaller stakes, no carbs, lots of guff.
But that is unkind; Pinsent Mason has been at pains to try to understand the Tech start-up culture, to try to work within its unique framework, understanding that if London is to maintain its pre-eminence in the Tech industry, second only to New York, then speed of funding will always be of the essence, its umami if you will. If the marriage is to work, sacrifices will need to be made on both sides. Adam, for his part, is clear that Funding Circle both expect and want more regulation. Monica Gogna, his interviewer tonight, Partner and head of the Fintech Lawyers team at Pinsent Mason, is here to grant his wish.
The marketing will change, as communications are scrutinised to ensure they are Clear, Fair and Not Misleading; Systems and Controls must be put in place, extra due diligence carried out. Quarterly updates published. VC funding replaced by IPO’s? If Adam wanted a new challenge, he has certainly got one.
Will it work? Adam believes so, and there is no reason to doubt him. All companies who expand as quickly as Funding Circle has will experience these kinds of growing pains, but, by sticking to their core principles of transparency, behaviour, and culture, Funding Circle can mature gracefully.
It may have to get used to being a smaller player in a far larger market, however. Better watch out for a Napoleon complex. For as George Orwell pointed out, in what is likely to be a trillion dollar industry by 2025, you may find yourself looking from Funding Circle, to the major global banks, and wondering which is which. But that will be then, and this is now. Kudos to both Adam and Monica for fielding some tough questions, making a lot of sense, breaking bread and new ground together.
GKIC meeting; Number Eight Club, City
The GKIC gang are down to earth, good to know and very good at what they do. Although numbers were slightly down from last month, the meet-up delivered the usual helpings of Direct Marketing expertise, witty banter, and generous giveaways.
David White at Web Optimiser is the Chairman of the London Branch of the Glazer Kennedy Insider Circle, to give it its full name, and introduced us to Lee Callender, an ex semi-pro golfer, and founder of Mail Magic, who guided us through the unlucky 13 most common mistakes made by email marketers. Unbelievably, 294bn emails are sent daily across the world, of which 97% are classed as spam. If you don’t want to end up in your client’s junk box, you would do well to follow Lee’s advice!
David continued a celebrity themed day by espousing the virtues of famous person brand endorsements, without stumping up a hefty fee for their services. It is clever, intuitive stuff; you may know, or even advise, more famous people than you might think. If Abraham Lincoln were alive today, there is no doubt he would be an avid reader of Haggerston Times, like George Clooney, Martin Clunes, and the Dalai Lama. Just kidding!
Fergus McLelland was as vocal as usual, as he turned his attention, and lilting tones, to the art of the telephone call, and the rule of 3. Or 4, if you are Margaret Thatcher and trying to confuse journalists. She would have loved this blog too!
After the event, a chance to network and learn more about what makes GKIC members outstanding in their field. It was a riveting experience, as David, Tim Coe, and others dashed from interview to interview, and I took the chance to discuss Purify Health with Dev, the brains behind the website. Oh yes, and also picked up an impromptu Marketer of the Month Award for my write up of last month’s meet, for which I won a copy of Mr Kennedy’s new book, “Marketing to the Affluent”. Haggerston Times’ first award, cheers guys!
Funding Circle: Adam Blair, Head of Borrower Sales; www.fundingcircle.com
Bootlaw: Thilo Schneider; firstname.lastname@example.org
GKIC: David White; David@weboptimiser.com