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A Quick Q&A with Funding Options

By Ryan Edwards-Pritchard, Managing Director, Funding Options 

1. Tell us what you do and what sets you apart from the competition?

Funding Options is – by far – the UK’s leading online marketplace for business finance, this year matching thousands of UK firms with tens of millions in vital finance, from more than 50 of the UK’s best lenders. Our sophisticated matching algorithm finds the most suitable SME lenders out of millions of possible combinations. We’re delivering unprecedented levels of ease and convenience to small firms: our record is financing an SME customer is just one and a half hours, which we achieved with fellow Innovate Finance member Iwoca!

What sets us apart is:

Customer advocacy – with a score of 9.8 out of 10 on Trustpilot, we’re one of the most highly rated companies in the UK’s world-beating alternative finance sector.

Government backing – we’ve been chosen by the government-backed British Business Bank to help businesses find finance when they’re unsuccessful with the major banks.

Market-leading technology – we’re current holders of Banking Technology magazine’s global award for Best Use of Technology in Lending; other category winners are BBVA and Morgan Stanley.

 

 

2. Companies have to compete hard for talent – how do you attract the workforce you need to scale? Any tips for keeping employees happy?

We’ve found many of our current employees through word-of-mouth recommendations, and we’re developing a reputation as one of the best fintech businesses to work for. That doesn’t happen overnight – it’s a result of continuous improvements like building up a perfect score on Glassdoor.

We try to make iterative improvements to our culture, just as we make iterative improvements to our operating model. I talk about Sir Dave Brailsford and the ‘accumulation of marginal gains’ a lot – it might be a bit of a cliché, but it has really worked well for us so far.

We’ve had a fundamental mindset shift from a traditional ‘talent management’ strategy to one of ‘growth management’, which is helping us ensure everyone in our team is moving in the direction of their aspirations, ensuring that our team collectively improves over time, and most importantly that even without the largest headcount we outperform our competitors and contemporaries pound-for-pound.

 

Keep our superstars challenged

We keep our superstars happy by challenging them and making sure they are constantly learning. I personally run monthly one-on-one sessions with every single employee, including senior management, where we’ve adopted a well-known Google management practice known as OKRs. Having individuals focus on their Objectives and Key Results for the previous and upcoming months means everyone stays focused on what they’re doing, and why it matters to the wider business – and it’s also a really good forum for feedback and dealing with any day-to-day issues that come up. Overall, it means that anyone can have their voice heard, no matter what level they are at.

 

Recognition

Recognition comes in many forms, but one way we try to recognize those rock stars in the team is to designate them as ‘gurus’ or ‘go-to’ experts. This is also really effective for ensuring new starters always have someone to turn to for advice during their on-boarding process and beyond. It also ensures we’re constantly upskilling our team for succession.

We have regular company celebrations, for example when we hit monthly or quarterly targets, as well as an individual ‘achievers lunch’ for colleagues across our quota and non-quota carrying teams who have exceeded targets.

On the hiring front, we make sure our operating principles are ‘baked in’ to hiring and onboarding, so even our newest members of staff are up and running quickly. This is starting to yield some really impressive results as we’ve heavily reduced the ‘ramp up’ rate for the time it takes our quota carriers to close their first deal and hit their first full quota.

We’re in scale-up mode now, and to grow successfully we need to keep pushing the ability to make decisions down through the ranks – so the people closest to the work can make high-quality, responsible decisions quickly.

 

Fair performance ratings & rewards

Finally, we’re creating an outstanding blueprint for our compensation plan via a data driven approach. There is a clear grading system across the entire business which I recently implemented, so salaries, bonuses, and equity (which everyone has access to) are correlated with the grade of the individual – and it’s clear what each person needs to do to get to the next stage. The scheme aims to be transparent, clear, fair, and rewarding, which are all important for employee satisfaction.

In my eyes, to build a great team it’s essential to understand how each person’s job fits into their life goals. You really need to get to know each person who reports directly to you, and to have real, human relationships.

From a day-to-day management perspective, there are 3 key responsibilities I endeavour to maintain:

  1. To create a culture of guidance that will keep everyone moving in the right direction
  2. To understand what motivates each team member well enough to avoid burnout and boredom, and keep the team cohesive
  3. To drive results collaboratively

 

 

3. Raising funding is often crucial for startups to scale – what do you think is the key to getting investors to back your company?

It’s really important to demonstrate product-market fit, and how that fits into the bigger picture of your ‘Total Addressable Market’ (TAM). In a hypercompetitive market, it’s essential to demonstrate a well-oiled machine with a strong core product, customer base, geography and vertical.

Investors will also want to see sustainable unit economics, rather than just vanity metrics or projections. Business repeatability is one of the most critical aspects when looking at growth – a repeatable sales process is the bedrock of a scalable business.

One of the reasons we were able to raise our initial Series-A investment from AIM-listed fund GLI Finance two years ago was that we had already largely figured out our operating model, and provided a clear roadmap in terms of ‘money in, money out’. In other words, our pitch was based on tangible and repeatable achievements, rather than abstract theorising.

Since that fundraise, our revenues have grown more than 15x (1,500%) while costs have merely trebled. That said, we’ve barely scratched the surface of our Total Addressable Market, which equates to about £15 billion in the UK alone. Continental Europe is next!

 

4. How important was being chosen by the British Business Bank for the Bank Referral Scheme for the growth of your business? 

Not as important as you might think! To be chosen for the Bank Referral Scheme we went through an extensive designation process, and we were laying the groundwork almost 18 months before the scheme launched, but we always said the changes we were making were for the sustainability of our existing business – although of course, they helped us prepare for the Bank Referral Scheme too.

Things like full FCA authorisation and meeting government information security standards were things we would have done anyway, and our work over 2015 and 2016 naturally aligned with the Bank Referral Scheme rather than being designed specifically for it.

In a nutshell, we were setting the business up to grow – which it has done exponentially – and were determined to succeed with or without the Bank Referral Scheme, so when the Treasury selected us it was a bonus rather than an essential part of the plan.

 

 

5. What has been the biggest challenge so far and how have you overcome it? 

There are so many challenges in scaling a business that it’s hard to pick one!

Probably one of the most important things for us has been steering clear of the vanity metrics that stifle a business. We’re not interested in waving irrelevant figures around – we’re much more focused on getting our unit economics right, lowering our cost of acquisition, and increasing the volume of customers coming through the door.

Acquisition has been a big one for us – as we’re seeing more and more lenders enter the market, we’re also seeing lots of ‘me too’ businesses like Funding Options crop up. There are more and more players competing for the same traffic online, so we’re under pressure to stay ahead.

Speed of execution is also really important for us. We have daily standups and weekly steering meetings designed to ensure we’re making the most of opportunities as quickly as possible. We’ve also recently started working with a Kanban system which has helped nudge us towards a culture of continuous deployment and development, and helped us focus our technology and product team on measuring outcomes as opposed to outputs.

Ultimately, if we’re going to win in this market we have to learn faster than anyone else. For that reason, we have quick post-mortems on pretty much every project, to evaluate the process and results through the lens of our operating principles. We’re always testing something!

‘Analysis paralysis’ is a genuine thing, so we need to understand the metrics that matter. For example, if we identify an issue with conversion, our process of decision-making needs to be fast enough that we can pivot quickly and solve the issue before it has a serious impact. We’re always thinking about the end-to-end process – it’s not just acquisition, it’s retention, and customer lifetime value is only going to get more important as we grow.

 

 

6. What’s next for Funding Options?

We’re looking to build deep technological ‘moats’ and we’re currently exploring AI-driven intelligence systems. The secret sauce for our intellectual property has evolved from a specific engineering solution, to the accumulated operating knowledge and insights into the problems and processes involved in getting SMEs access to much-needed finance.

There are a couple of regulatory issues on the horizon which will expedite this. From January 2018, Open Banking will break the banks’ historic control of customer data and cause a huge structural shift in our industry. The Competition and Markets Authority (CMA) has sent a clear message to the incumbents, and we need to be ready to make the most of the treasure-trove of data that will be available to us. We’ve been selected for a £5 million bank-funded challenge prize to build Open Banking solutions for SMEs, so we’re one of a very small number of fintech firms already experimenting with anonymised Open Banking data. If we have one mantra at Funding Options, it’s that a lot of people talk about fintech, far less are actually doing it!

In turn, we’ll see more and more technology-led intermediaries like Funding Options taking on the role of both loan origination and due diligence. Our current record for finding a customer finance is 90 minutes from the initial enquiry to money in the bank – with Open Banking, there’s no reason we can’t reduce that number to fifteen minutes, and help customers find the right finance in less time than it takes to fill out an old-fashioned loan application form.

We’re already starting to see traditional commercial finance brokers struggling to adjust to new SME behaviour online, and they’ll be even more challenged by new FCA compliance rules. So there will be a multi-billion pound gap in the traditional commercial finance brokerage market, which can only be filled by a next-generation, technology-led intermediary – which we fully intend to be Funding Options.

 

 

7. Running a startup is hard work – any tips on managing stress?

Be careful of burnout

It’s fair to say that burnout is a very real thing, and running a startup can be pretty stressful at times. The reality is that problems flare up unexpectedly day to day. There’s always a fire somewhere that needs putting out – and trying to put out every fire is a sure way to burn yourself out!

Pick your battles

Ultimately, the challenge is understanding which problems need solving, and which ones do not. Being able to rank these in order of severity, and deciding how to conserve your energy for the biggest blazes, becomes the balancing act.

This is also why I really quite enjoy high pressure situations and my job – it really encourages me to do my best. That being said, it can also become counterproductive and unsustainable over a long period of time.

Create time to think

I make sure I create windows where I have plenty of time to think things through. I’m currently training for my second Ironman, and when you’re training for an event which involves 140 miles of swimming, cycling and running, you inevitably spend a lot of time alone. As strange as it sounds, I’ve found the distraction of the activities quite therapeutic for switching off. But at the same time, I’ve also found the long cycles really beneficial for thinking through problems.

Morning Routines

With the Ironman looming I’ve found my mornings have a predictable and scripted sequence of training – which has become non-negotiable as I get closer to the big day! But I’ve subsequently found myself far more productive throughout the day after spending that first hour either swimming at Tooting Lido or out on my bike at Richmond Park.

Also, my morning routines don’t involve coffee – as much as I love coffee, I gave it up when I started training for my first Ironman last year, and decided not to start again. It might be against the grain in scale-up world, but I’ve found that going without caffeine seems to be beneficial to my energy levels throughout the working day.

Stay focused

I’m always making sure we don’t lose sight of what we’re trying to achieve at Funding Options – for me personally, it’s all about believing in the incredible founders and entrepreneurs that we help gain much-needed funding for every day.