I founded Funding Circle with two friends from university. We quit our jobs at the end of 2009, launched in 2010, and we now have offices in San Francisco and London and employ about 350 people. We’ve raised around $300m of equity capital for the business.
We’ve lent over $1.3bn to businesses through our platform, and I expect us to do between $1bn and $1.5bn over the next 12 months. We’ve funded around 12,500 businesses – connecting investors to businesses who want to borrow money.
We have around 50,000 different investors. They range from people who have savings to invest, central government, the British Business Bank and local government. We also have institutional investors, which are long or speciality funds lending through our platform.
We’ve historically grown between 120% and 170% a year on average. But although we’ve grown consistently, we see cycles – growth isn’t always linear or exponential and we have phases where we grow and other times where we consolidate.
I remember in our original business plan, we drew a lovely hockey stick and we’ve been able to achieve those growth plans, growing faster than we imagined back then. (Although I would add I’m pretty sure we were meant to be hugely profitable by now and that has yet to be the case.)
Before I get started, full disclosure: we weren’t the first business to adopt this model. Zopa, which was set up by a bunch of guys who worked at Egg (the first internet bank) applied the model to consumer loans; we’ve since applied it to small business loans. We’re the leader in that globally and it’s probably fair to say we’re the only real global presence in terms of peer-to-peer lending.
The following are some of the challenges I think are really important with growth.
Short-Term Versus Long-Term Targets
In the process of setting up the business I spoke to investors, mentors and other business people. You’ll get a whole bunch of people who will talk to you about the importance of iterating, getting things done quickly and producing a minimum viable product. They’ll say move fast and break things, get it out quickly, and test-learn-test-learn. Others will suggest investing for long-term goals and achievements.
I think it’s analogous to politics. You often hear more experienced politicians – those in the House of Lords or retired – talk about an inability when they were in power to make longer-term decisions, because they had to get elected. The same can be said in some businesses, and, for us, because we are venture capital-backed, we’ve had to demonstrate that we’re growing, meaning there can be pressure on making trade-offs.
We have managed this well, but we were very fortunate to have really supportive venture capital investors who really believed in the long-term project, allowing us make appropriate trade-offs, especially when investing in our product and tech.
This challenge changes over time. When you first start you have to iterate really quickly and then as you get bigger, the impact of failure or things not working out as you’d planned is larger and therefore you need to invest more time, effort, energy and planning into the longer term. It’s something I’ve always wrestled with and it’s a difficult thing to do.
Growing a People Organisation
When we first launched Funding Circle we had five people, including the three founders. We grew the team to eight people and before we knew it we were hiring one person every week. But we were still in the same location working together and we still knew everyone in the office. Then we got to about 60 or 70 people, we acquired a business in the US and although they only had 10 people we were growing in two locations, and communication became more difficult.
I’ve learnt that with a business like ours, which is trebling every year, some people change and grow with the organisation, but some people who helped get you to where you are today aren’t going to get you where you want to go tomorrow. As a business leader and founder, I wrestled with the balance between my loyalties to those who have helped us achieve what we have, while making sure that we’re bringing in the right people so we can all achieve what we want to in the future. Different members of the team are going to take that conversation differently.
Some will feel like they can’t give up what they’ve previously been doing. Perhaps they’ve owned all of risk analytics and suddenly you need to compartmentalise and split some of their tasks among others. Some will embrace change and see it as just a natural progression of growth, but others will find it very difficult – I think the skill is making good, quick and fair decisions about how you grow people, how you develop them, and how, frankly, you deliver the results to make sure your team delivers. This is one of the most important and challenging things in growing a company and I think learning to make sacrifices and being led by a level of integrity in how you treat people is vital because others in the team will see that. But, equally, you need to be honest and say: “this person isn’t scaling, isn’t growing at the same rate as the company and we need to take action on that.”
Building Controls and Structure
The third area, which is really important and something that you rarely hear about – especially during the tech start-up meetups I take part in – because it’s not sexy or interesting, is how you put in more controls and structure. For most people entering a start-up these are extremely negative ideas. Obviously, most people acknowledge that they’re important but I think it’s something that needs to be thought about more.
Inevitably controls and structure have an impact on the culture that’s created. At Funding Circle, we identified our culture quite early on and we developed a set of values. If you’d asked me when I first set up Funding Circle what I thought of creating values for companies, I would have thought they were nonsense, artificial and that no-one cares.
But as a founder of a company, developing the values was a great process. I really think they’re super important, though only if everyone buys into them. You have to make sure everyone fits within those values, lives those values and that ultimately their success is associated with them. Otherwise, they’re viewed like they are at large companies – where people just don’t believe that they are relevant.
We now have traditions that help reinforce how our culture operates, which should stand us in good stead as we bring in controls and structure to the business. I’m not going to lie to you: it’s really complex. But the inevitability of our growth is that we need these controls and we need structure, and I think bringing that together in a way that actually changes your culture, your core values and core style of the company – what I think of as the soul of the company – is the same.
We evolve and we change, but someone coming into Funding Circle today still has the same fundamental experience as people who came in years before. That’s something we worked really hard to achieve and has been very important to our growth. Without it, no matter how much control or structure you put in, you will lose the important things that got you to where you are today.
Communication is Key
Encompassing all of these three points is how you decide to communicate across your business. When we set up Funding Circle, I was more worried about making sure that we’ve got loans out and it got executed properly, but communication is fundamental to and key to our success.
One of our values is about being open and transparent. We’ve focused hard on making sure our communications are really good and that we’ve been open. But there is a trade-off for being open and transparent – and it’s not talked about enough. I don’t think it’s as difficult for me as a founder as it is for the next tier of management; being open and transparent for them is an extremely difficult thing to execute, because some of the more traditional ways of managing and leading is to control communications. For example, (not that we communicate people‘s salaries to each other) why can’t we just tell everyone what everyone’s salary is and deal with it that way? Well, clearly there are downsides to it.
We’re open as far as we can be given privacy issues. When we have an issue, or something comes up, or we’ve decided to do something with our business, or we have a failure or success, we’ve been open. We have made sure that, whether it’s a success or failure, it’s shared and people aren’t embarrassed about it. We’ve avoided an over-control of communication.
These are my main thoughts about what’s really important about growth, what’s made us successful and what we’ve implemented to give us the ability to grow further.
Andrew Mullinger is co-founder of Funding Circle. This speech was made at a Power Lunch sponsored by Radius that took place on 15th September 2015.