Elliot Moss
That was Milestones from Mark Murphy, a brilliant way to start the programme here on Jazz Shapers. Good morning this is me, Elliot Moss interviewing another shaper from the world of business and that is what Jazz Shapers is all about. We put the people who are shaping the world of jazz, blues and soul right next to those people who are shaping the world of business right in front of us and my Business Shapers today I am very pleased to say is the UK managing director and co-founder, a bit of a mouthful there – I love titles, of Funding Circle. They are the peer to peer business who are doing rather well and I think, I believe have lent 1.4 billion pounds and counting. You will be hearing lots about how James and his team have managed to create a phenomenal success. In addition to hearing from James you will be hearing from our programme partners at Mishcon de Reya some words of advice for your business and then we’ve got the music of course. We have got Gil Scott-Heron coming up, Gregory Porter and this from Dr John and the Dirty Dozen Brass Band.
Dr John and the Dirty Dozen Brass Band, I just like saying the name, When You Are Smiling - and you know the song - The Whole World Smiles With You. Well let’s hope James Meekings my Business Shaper is smiling by the end of this very gentle interview that I am going to do with him now. He is the, as I said, the UK managing director and one of the co-founders of Funding Circle and if you are familiar with the world of investments and the like then you would have heard of the Funding Circle and if you haven’t you will know all about them by the end of the programme. James thank you very much for joining me. Give me the elevator pitch on what Funding Circle is?
James Meekings
No problem. So Funding Circle is a platform where people like you and me can go and lend money directly to small businesses and over the Internet. It is our job to vet those businesses and make sure that they are very likely to give you a return. So we launched this in 2010, since then we’ve had the UK Government lend, larger institutions start lending as well and we have returned about 7% after taxes to, sorry after kind of losses to investors. So we have got about fifty thousand people in the UK who are signed up. There has been about 1.4 billion pounds which has been lent through the platform so it has been going pretty well so far.
Elliot Moss
Is there a minimum amount if I wanted to invest tomorrow that I would have to spend?
James Meekings
If you wanted to come on you could put £20 on the platform but what we encourage every person to do is to lend to you know, a hundreds of different businesses, that way your money is spread across lots of different businesses spreading your risk so you know, we think people should come on and lend about £2,000 and that way you can lend to a hundred businesses. But I guess the key point is, this is open to anyone. This is open to anyone who wants to take on a little bit more risk and earn a bit more with their money.
Elliot Moss
And how do I decide, a technical question, there won’t be many more. How do I decide where I am going to put? Is there some guidance about the kind of companies, are their ratings and that stuff?
James Meekings
Yeah sure. So you know, we open the platform up to all types of businesses across the country so there’s bakers, butchers, accountants. There’s even like recording studios etcetera so all types of businesses across the country and some people want to dig into those business and understand them, other people don’t want to spend so much time doing that so we cater for both. So you can choose. We also provide this tool which basically choses businesses according to your own preferences so you’ll say ‘I want to lend to these types of businesses, I want to lend this much money to each one’. You set the tool up and it automatically then lends your money across hundreds of different businesses. So for people without much time that’s the best option.
Elliot Moss
Now you are quite young James and in the sense that…
James Meekings
I’ll say yes on radio. People can’t see me.
Elliot Moss
…in the sense that you have been out of, I mean you started at Oxford, you went into the strategy business and the management consultancy business OC&C. When you first set this business up in 2010, was it just ‘well I imagine if we could do this’? I mean what was going through your head? Did you think you would be where you are now or is it totally natural that you are where you are now?
James Meekings
So I think the beautiful point about entrepreneurs they have to be incredibly naïve when you start a business so are we where we wanted to be now, well if you actually look at the top line growth, so revenue number of customers, yes. If you look at the bottom line that’s all the costs in the business, we invested more money and I think that hints at the complexity when you start a business. If you knew everything that you had to do and how difficult it was going to be a lot of people would never start a business in the first place. So I think, you know, you get these great companies which are started by young people and I think people say that’s amazing. I actually think it is because young people are incredibly naïve and then start off and if you had more experience you’d actually know how much work it was going to be and how difficult it was going to be and you may opt for the easier life. So I don’t think… the three of us are twenty six when we started the business and at that point you have you know, some savings because you have obviously earnt money since you left University but you don’t have… you’re not married, you don’t have children, you don’t have a mortgage so if it goes wrong, you know, what’s the downside. So I think yeah a lot of people now between the ages of twenty five, thirty five who are thinking this is the time I start a business and that was certainly the camp we were in.
Elliot Moss
Stay with me for more from my Business Shapers, James Meekings. He is on the virtues of not quite knowing what’s in front of you. Maybe that was a good thing indeed. Time for some more music, this is Gil Scott-Heron with Lady Day and John Coltrane.
That was Gil Scott-Heron with Lady Day and John Coltrane. James Meekings is my Business Shaper today; managing director of Funding Circle, also one of the founders and we were talking earlier James about not knowing and then knowing. Now the initial set up of a business like this quite heavily technology-based. It is obviously an on-line platform. Lots of regulation, lots of stuff you absolutely have to know before you even get past go. Did you in those early days and weeks and months think ‘I might have bitten off more than I can chew’. Did you ever think I am not going to do this?
James Meekings
I think we had to raise quite a considerable amount of money at the time before we launched so we had our first fund raising round was seven hundred thousand pounds. Looking back on that you know, it’s not a huge amount of money in terms of venture capital but as you know, three twenty six year olds with no experience as a first time business, you know, it was challenging so I think that process was the most difficult but as soon as you raised that money you had however many, fifteen, twenty angel investors to answer to so there was no backing out by that point. Especially when half of them were family members, aunts, uncle’s etcetera. So we needed to work for them after that point in time. I definitely think it is probably true after three or four months of leaving employment and working on your own you stop having so many long lunches and you start working a little bit harder because you realise unless you put in the hours and the sweat and the blood and the tears, nothing is going to happen but I think when, you know, when things come up which are difficult whether they are regulatory-based or technology-based, you just have to see them as problems which you have to break down and intellectually solve. An entrepreneur by definition isn’t going to have all the skill sets but they need to try and solve all the problems. I mean that is part of the fun and if you see it as daunting and you don’t see it as fun then you are not really an entrepreneur. So I think it comes with the DNA.
Elliot Moss
When you raised that money, why do you think they gave you the money, the three of you? Was it because they liked you, was it because they trusted you, was it because you had a brilliant business plan?
James Meekings
I think its business plan, you know the timing of what we were doing and what we are still doing today is incredible. You know, if you look at what banks, the challenges banks have after the financial crisis of 2008 and we could go on for hours about that. You know those are still, those are still in existence today so low interest rates etcetera, businesses still need a way to access money and people still need to get a return and I think that’s now more true than ever and I think every angel investor saw it and saw the vision that we had as well. You know we weren’t trying to just create a small business in two or three years and get a fairly good return, we are actually trying to genuinely change the financial infrastructure of the world and I think that is pretty incredible. I mean the problem that we had in 2008 as a country and tell me to be quiet if this is getting too, too technical but the four major banks accounted for 90% of lending. So if your bank didn’t lend to you as a small business you had no options and so we wanted to create a system which was better for the UK economy and what that means is we’ve now got a platform where even if some of our lenders say we are not going to lend, someone else can come in and stand in their shoes so you know you’ve got the Government, the British Government and the British Business Bank is lending, you’ve got the European Investment Bank that lends so in any downturn, so say Brexit leads to some form of downturn and banks decide that they don’t want to lend to small businesses anymore there has never been a more efficient mechanism to get money into you know, the life blood of the UK economy than we have today and so that’s the story we sold to people that are our investors and back in 2009 and some of them thought we were doolally and they didn’t want to invest and I think they regret that now – and that puts a big smile on my face – and you know, others came along for the ride.
Elliot Moss
I am sitting here with the Che Guevara of the banking world. He is a revolutionary and that is indeed the story that people have bought into. It’s a great story. Latest travel in a couple of minutes but before that it’s another part of our Future Shapers series, it’s someone who is going to be shaping the world of business in the very near future.
You are listening to Jazz Shapers with me Elliot Moss; every Saturday morning I am very lucky because I get to meet someone who is shaping the world of business. My Shaper today is James Meekings; he is one of the founders and he is the managing director of Funding Circle and Funding Circle if you don’t know are doing rather well. I think they have lent over 1.4 billion pounds and they are an amazing alternative platform to the big banks and we were talking earlier with James about the revolution and the story that he presented to potential investors and some got it and they did well and some didn’t and James laughs in their faces. Not quite but he is probably, you know, he’s moved on…
James Meekings
Some pleasure.
Elliot Moss
…some pleasure, he’s derived some pleasure from that. The three of you when you founded the business obviously there was a mutual understanding, there was belief in it, there was chemistry. What happens as you grow because I know that some of the founders are less involved now than others and things. How do you decide along the way who is going to do what and who is also going to take a step back and were those difficult decisions?
James Meekings
Yeah I think… so the three of us were University friends and so when we started talking about this in each other’s kitchens when we were twenty five, I mean most twenty five year olds would probably be out you know on a Thursday night in some kind of grungy pub/club in London.
Elliot Moss
I didn’t want to say you were a bit of a square James it’s alright, I was just thinking it, it’s fine.
James Meekings
It’s okay I can take it. And we would be talking about how to you know, build a better financial world in the kitchen so you know, I think we had a unique blend of friendship to start this up and we also had quite unique skills so Andrew was involved in risk, Samir was involved in financial services looking at buying companies like Northern Rock and you know, I was a consultant in kind of the retail media spaces so we all had very actually different skills but underlying that we had a friendship and I think you know that’s, any founding team when you look at them as an angel investor you have to understand like how far do you think they are going to go as a team and you have to weld together people with very different skill sets but there needs to be some common bond and either it has to be for the vision of what they are doing or it has to be some kind of friendship and I think without our friendship, the business definitely wouldn’t be in the situation it is today because what it allows you to do and I think this is important even if you are not friends as founders, to have robust conversations i.e. arguments which may go on for hours and you know they are painful but then the next day you kind of wake up and you say ‘I’m really sorry I didn’t mean to say all those horrible things’ and you clear the air and I think any founding team needs to do that. And I think it is easier the closer you are right and some people I guess start off as friends you know, other’s don’t and that I think makes it easier as you progress to have honest conversations about how skill sets are developing. You know, do you take on different roles within the business? Are you needed on a day-to-day basis any more. All of those kind of things which should be harder conversations become very easy if you start off with an open kind of relationship between the founding team.
Elliot Moss
Important decisions to make when you are indeed setting up a business. Stay with me for more from James, lots more coming up but right now we have got some more music, this is Gregory Porter with Wind Song.
That was Gregory Porter and Wind Song. James Meekings is my Business Shaper today and as I said he is managing director of Funding Circle. They are doing rather well, peer to peer lending business and we were talking earlier about the notion of friendship and how that’s really facilitated your ability to have robust conversations. When you get bigger James you start employing people, they are not your friends, they become friends.
James Meekings
Some of them are.
Elliot Moss
They become friends and some may well be but how do you manage to have those, as the team grows and the stakes get a bit higher because suddenly there is more attention on you, you’ve got bigger investors as you said, you’ve got people of substance saying I believe in this. It is no longer just a story, it is now a reality. How do you manage to have those robust conversations with the people in the business? And are there some secrets that you learn or is it just been, because again you haven’t been doing this that long and what got you to the start line was the vision.
James Meekings
Yeah.
Elliot Moss
You hadn’t necessarily run a big team or created a big team so how have you managed all those things?
James Meekings
Yeah I think, look it’s leadership and you need to have difficult conversations with people and you need to earn the right to have those difficult conversations. I always think of it as a like a two-by-two with like challenge on one side and rapport on the other and if you haven’t built up rapport with your team how do you challenge them? So you need to build up enough you know, credits with your team and respect and to keep them motivated and then when you have harsh words with them I think it has even more impact. So I think you need to do that and I think that is probably something that as a kind of a founding team with friends is actually probably easier because the three of you obviously have rapport so when you grow that team out they learn from how you three interact with each other and it is much easier to have rapport and I think to your point when you grow the team it does become more challenging you know but in Funding Circle globally we have six hundred people so how do you build up rapport with that many people and I think the honest answer is you can’t but you’ve got to choose the right people and give enough time to it.
Elliot Moss
And as you have grown obviously you are opportunistic like any good business is. What have been the drivers for those expansions in brief? What’s pushed it, is it just simply that you can see the commercial opportunity or is it a bit more than that?
James Meekings
Yeah I think look we have a desire to change how the world works and we had a very successful UK business, we could have stayed just operating in the UK or we could have taken what we were doing and the ideas, the technology, the brain power overseas and you know, that’s what we did. We bought a US business and last year we bought a European business. Now we are in five countries and you know I think that comes with you know, wanting to like change something fundamentally. There is no way we could have stopped you know in the UK, it brings new stresses, new challenges but ultimately it is why we get out of bed in the mornings.
Elliot Moss
I mean changing how the world works is a pretty big thing to want to do every day and I suppose that would drive most people. I will be having my final chat with James plus play a track from Thelonious Monk, that’s after the latest traffic and travel.
The wonderful Thelonious Monk with Straight No Chaser. James Meekings is now here, straight no chaser, just for a few more minutes and we have been talking about changing the world and a revolution and how that as three friends in a kitchen many years ago drove you to this point and this point now James is I guess a really important moment. The top line is there, the innovation is coming, you are International. I read about you dedicating a floor of your office in London to other businesses and having them come in and we work type style thing and do all that. I like the idea of the securitised platform. All these clever things. This is well and good. How long is it going to take you to turn a profit because that is obviously important. How many more years would you predict give or take – because we won’t hold you to it but roughly where do you think you will be – what year will you be in?
James Meekings
I think it is a decision about you know when you want to slow down the growth and when you want to stop building like the long-term infrastructure. I think in different parts of the business as well so you know, I think the UK is close to that point already today and then we have a decision. It is like do we want to take profit out of the business and give it to where is the question. Or do we want to invest it into more growth and that might be growth in terms of the top line or it could just be in terms of better infrastructure to take to other countries. But you know we get this question quite a bit from a British audience and you know what we like to you know think is Britain needs to find the next Facebook. There has been so many US companies which have lead the way. No one asks the question in the first five years of Facebook you know, when’s Facebook going to make profit. I mean when it IPO’d they did and look how silly those people look now right and I think that’s the same with these businesses you know, and to go back to you know, the earlier conversation we were having about the first angel investor round, I think one of the challenges for founders in the UK is that angel community ask a lot of questions about you know, when am I going to get my money back? What’s the revenue model in the first few years? You know if you are investing in building something that you genuinely think is going to change the world it is going to take you time and it is a long-term investment and it would not be, if there is a window of opportunity and for us there is a big window of opportunity now with how banks are. It would not be right to be trying to deliver profit today. The right decision is you know, how do we grow to take advantage of that window of opportunity.
Elliot Moss
So you measure your success, and I like the long-term view of it, you are going to measure your success by whether you really change the world or not? I mean in the sense…
James Meekings
Yeah definitely.
Elliot Moss
…and if you do that though, just to take that further. How long are you going to be on this ride for? I mean you, as I have said…
James Meekings
Personally?
Elliot Moss
Yeah.
James Meekings
I will be here for however long I am useful to the business. But to go back to like what do I really want to get out of it and this sounds really cheesy right but I want to be like a granddad and be able to tell my like grandson or daughter what I have done and for them to be like ‘whoa how did you do that?’ and the reason I say grandchild, I think you can… anyone might think their parents and they are really proud of them but to impress your grandchild like that you know you’ve crossed generations and I think that is what we are doing at Funding Circle. I think we are doing something which happens once a generation and we are changing something which is incredibly proud and I think all of the six hundred people that work at Funding Circle feel that too.
Elliot Moss
James it’s been an absolute pleasure to be in the company of you because I just love the fact that you have got this proper vision, that you mean it and you are on the way. I am never going to ask the question about short-term profit again ever. I promise because you are right, it’s the wrong question. Just before I let you go, what’s your song choice and why have you chosen it?
James Meekings
Yes so the song choice is BB King and Paying The Cost To Be The Boss. So when we decided to choose this song I was sitting down with Andy Mullinger who is one of our other founders talking about you know, what would be most appropriate and we came up with this one because I think before you start a business you think that being your own boss is going to be easy, you are going to go out for lunch every day, you are going to work not many hours and you are going got be free of the boss. I think that is categorically not true. I’ve never worked harder, it’s never been more difficult and it can be lonely at times and you realise that after you’ve done it so I think this is quite apt for anyone who is thinking about or even is an entrepreneur.
Elliot Moss
That was BB King with Paying The Cost To Be The Boss, the appropriate choice of my Business Shaper today James Meekings. One that he made in fact with his co-founders. The same co-founders and those co-founders that along with him decided they wanted to revolutionise the world of lending and that is exactly what they have stuck to since they launched the business. James also talked about not knowing much when he launched and the benefit of being naïve in a way because if you weren’t you wouldn’t actually go ahead and do the things that you were actually going on to do and finally, a really interesting insight into how he has built a team, that notion of challenging people but building rapport with them so that you can indeed have those robust conversations that you need to have as you grow a business. All great stuff. Do join me again, same time, same place - that’s next Saturday, at 9.00am sharp for another edition of Jazz Shapers. In the meantime though, stay with us here on Jazz FM because coming up next it’s Nigel Williams.