How to pivot a marketplace into a different business model

A few years ago I noticed there was a handful of companies whose goal was to help founders raise money. This angel crowdfunding idea was growing in popularity and it felt like it was going to be the future, and for some reason, it wasn’t.

Joining me today is an entrepreneur who went down that path. He found that wasn’t actually the right approach. I invited him here to find out why.

My guest is Brock Blake. He is the founder of Lendio. Lendio is a marketplace for business owners to comparison shop and get loans that they need. So they’re no longer matching entrepreneurs like you with angel investors, they are now helping you get the loan that you need.

We’ll find out why he made the change in this interview.

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Brock Blake

Brock Blake

Lendio

Brock Blake is founder of Lendio a marketplace for businesses owners to comparison shop and get the loan they need.

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Full Interview Transcript

Andrew: Hey there, freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy where I interview entrepreneurs about how they built their businesses. And I do it for an audience of real entrepreneurs who are looking to understand really how other people built their companies and get some insights that will help them build their own company. So if you’re listening to me, I know you’re coming in this, yeah, looking for stories that’ll be interesting as you drive, as you run, as you do other things, but you’re also expecting that some little bit of knowledge will be stuck in your head that you can and will use as you grow your business.

So one of the things that I noticed was a few years ago, there were a handful of companies, many of which I interviewed here, whose goal was to help founders raise money. This crowdfunding venture angel thing was growing in popularity and it felt like it was going to be the future, and for some reason, it wasn’t.

Joining me today is an entrepreneur who went down that path who said, “I will help entrepreneurs raise money through angel investors. I will help them raise money.” But he also changed. He found that wasn’t actually the right approach. And I invited him here to find out why it wasn’t the right approach. And I’ll be honest, as I did some research, I found some issues that I want to bring up with him. I’m not sandbagging any of my guests. I did talk to him about it beforehand. Got it up here on the screen. We’ll talk about what happened that got him to change the direction of his business, and then how he’s doing today with a variation on the original goal.

All right. Let me introduce him. His name is Brock Blake. He is the founder of Lendio. Lendio is a marketplace for business owners to comparison shop and get loans that they need. So they’re no longer matching entrepreneurs like you with angel investors, they are now helping you get the loan that you need. This interview is sponsored by two companies that you’ve heard me talk about because they’re just phenomenal and they’re doing so well with our audience. The first if you’re hiring developers, you should go check out Toptal. And the second, if you’re doing email marketing, go to the best. They are ActiveCampaign. I’ll explain both of those later, but first, Brock, good to have you here.

Brock: Thanks, Andrew. My pleasure.

Andrew: What kind of revenue are you guys doing now? Let’s go to the bottom line.

Brock: Wow. Jumping right into it.

Andrew: Yeah, man.

Brock: I mean, we don’t publish our revenue numbers, but we have helped probably about 75,000 small business owners across the U.S. get access to capital. And literally today, we will cross the $1.5 billion of loan volume on our platform funded. And so pretty excited about what we’re doing to help small business owners.

Andrew: And then what’s your cut of that? How do you get paid?

Brock: Yeah. So a lender pays us a success fee when the loan closes. And so it’s free for that business owner to come in and sign up, go through that process, get multiple options, comparison shop them. When that loan books, the lender will pay us customer acquisition fee as part of the transaction.

Andrew: You mean the person getting a loan will pay you a fee.

Brock: No. For the borrower, the business owner gets the loan through the lender, the lender pays us when that loan closes.

Andrew: Got it. Okay. I do have some revenue numbers here. I won’t reveal them because you might have told our producer in private, but is it fair to say over $10 million? Do you feel comfortable saying tens of millions? Do you feel comfortable single millions? What do you feel comfortable giving us as a sense?

Brock: Yeah, tens of millions. Is that fair?

Andrew: It’s fair and I’ve got a good sense of it. You grew up in Utah. You told our producer, “Look, I was actually the youngest of six siblings and we were super competitive.” I’ve been wondering, like, what do you mean? As a kid, how competitive were you?

Brock: Well, as the youngest and there’s five boys and one girl as siblings. And we grew up in the backyard. Every single day we were competing on something whether it was soccer, or football or basketball, or if it was just who could eat their bowl cereal the fastest. I mean, every single thing we did was a competition my entire life.

Andrew: Are you like that today?

Brock: I am uber competitive, yes . . .

Andrew: What’s an example of how that come to play . . .

Brock: . . . but I’m toned down?

Andrew: Toned down. What’s an example of how it plays itself out today?

Brock: I think it really just part of my drive of who I am and that if I’m going to do something, I want to be all in and you want to win.

Andrew: Like what?

Brock: Well, I’m super . . . Like today, three days a week I play early morning basketball at 6:00 a.m. and it’s really, really good basketball and that gets my competitive juices going. In business, if you’re going to do something, you want to compete, you want to win. And so it’s not always competitive against someone like . . .

Andrew: But it’s even against your own numbers.

Brock: . . . antagonistic, but you’re . . . Yeah. You want to be able to hit your goals and you want to be able to . . .

Andrew: I feel like I need to reconnect with that more. What’s an example of something internally that you struggled with to you had to beat the numbers from last month, or you had to beat your past record so that you could be a better person, and your company benefited from it? Do you have an example of something like that that you did?

Brock: Yeah, let’s talk about this month. So we set management goals where we say, “Okay. Every month, here are the goals we want to accomplish.” And for 11 months straight, we have hit our goals, which means the last month that we didn’t hit our goal was last July. Now, July is always a really difficult month because everyone’s on vacation and business owners have the July 4 and all those types of things. But we were . . . We want to hit 12 months in a row, that’s a pretty big feat.

And at the beginning of this month, we had almost everything that could happen to us bad did happen to us. We were in a brand new building and our power went out. In our New York office, we had the internet go down for two days and we . . . I mean, we had all these things and we just said, “We want to rally. We want to be able to . . . ” And we’ve got some really great momentum with the business and we’ve been able to rally and as of late last night, we actually hit our company goals.

Andrew: You did? What did you do? What did you do that was beyond what you would have expected? What’s the stretch that you had to go through to get to that?

Brock: Well, honestly, what’s helped us the most is that the amount of customers that we’re seeing coming to Lendio is growing. Our organic traffic, people coming through Google, through referrals and reviews, we have partnerships. And so not only is it the rally of our team, but it really is. So we have this tremendous momentum of customers that are coming and experiencing the Lendio insurance.

Andrew: So momentum, you guys didn’t even do anything, the lights happened to go out, but momentum carried the day.

Brock: Yeah. I mean, we rallied the team and everyone was motivated and everyone had their personal goals. And within the organization as a team, we’ve really adopted this whole, what’s called 4DX, which is 4 Disciplines of Execution. And I won’t even get into all that, but it’s an operational cadence where an individual has a goal, a team has a goal, a department has a goal that rolls up to the company goals. And I think that everyone just looked at this month and said, “Hey, it would be pretty awesome if we hit it 12 months in a row. Let’s make it happen.” And so the momentum . . .

Andrew: So it was just telling people, “Look, we’re going to do this,” and then everyone has their own individual numbers and they need to get competitive against those numbers the way you are because they’re picking up on the culture that you established when you were a kid. And they’re pushing through those numbers because you need to at your company, you need to if you’re part of Brock’s family.

Brock: Hey, we celebrate high-five moments. That’s what it’s about. Yeah.

Andrew: Okay. This whole thing, this journey that you’re on right now started with Brigham Young University entrepreneurial competition.

Brock: Yep.

Andrew: Right? They said, “You’re going to win a prize if you win this business plan competition.” And did you have an idea kicking around before?

Brock: No and I had no idea what I was going to do. And there were 100 young entrepreneurs or people that wanted to be entrepreneurs that applied. And it’s kind of like the TV show The Apprentice without all the “You’re fired.” and the glitz and glamour and all that. But they narrowed it down to 20 individuals. Twenty of us went through an eight-week boot camp, somewhat of a competition, where we had to do a sales competition and then a networking event and all these different marketing things. And at the end, there were five of us that were selected and we were given $50,000 to go start a business. And so I was one of the five. I could use that to go out and do some research and find out, “Was I going to buy something? Was I going to start something? What was I going to use?”

Andrew: Oh, so they weren’t testing your business plan, it was more of testing you, Brock, saying, “Are you someone who can network? Are you someone who’s got what it takes to figure this out? And if you are, we’re going to give you $50,000,” in your case 50,000. And what you do with it is now fund the idea that they invested in or that they backed but find the idea that you’re going to go behind, right?

Brock: Yep. That’s right.

Andrew: So what’s one idea that you considered that was in second place that you almost went for?

Brock: Yeah. There were two that I was looking at pretty closely. One of them was a business called Calendar Hop, which was an idea that someone had come up with, and it was basically Google calendars where you could subscribe different calendars and you got multiple calendars into one. And at the time, we didn’t really have Google calendars as it stands and I thought that was a really interesting opportunity. Good thing I didn’t do it because there’s no way I would have been able to compete with Google.

The other one that was very close that I almost did was this really innovative ice cream business where you were able to use liquid nitrogen to freeze this liquid to turn it into this creamy ice cream that’s amazing and the experience was cool. And I thought we might be able to franchise it or do something like that, but in the end, decided to launch Funding Universe.

Andrew: And Funding Universe, the original idea was?

Brock: Our goal was . . . As I was out, I had this $50,000, I was out doing research trying to figure out what I was going to do. I was talking to small business owners trying to learn from them about what worked and what didn’t work. Almost every business owner that I talked to, their biggest pain point was that they needed capital to grow their business and they weren’t quite sure how to do it. It was hard to get it from . . . They get a loan from a bank. They wanted to raise money. Everyone wanted to raise money from an angel investor, but how do you find an angel investor? I don’t even know who I’m supposed to talk to.

And so the original concept was, let’s connect entrepreneurs to investors in almost like a dating format. You go online, you post your business plan, then it evolved into, “Let’s pull together events.” We invented this thing called speed pitching where kind of like speed dating, you’re going table to table, the table pitching your idea, almost Shark Tank-style. It was this concept of, “Let’s marry dating website to helping entrepreneurs connect to angel investors.”

Andrew: Was there something also called CrowdPitch from what I saw?

Brock: Yep, CrowdPitch. SpeedPitch was private connecting entrepreneurs to investors. CrowdPitch is you had a panel of investors on a stage and then you had an audience of entrepreneurs. So you actually pitch to the audience, and the audience used this Monopoly money basically to vote with the money and choose the winner, and then we had a prize package and some fun things like that.

Andrew: Yeah, I’m looking at older versions of your sites to get a sense of it and I could see that there was even an online SpeedPitch, and then CrowdPitch came to lots of different cities, including San Diego, and Phoenix, and Boise.

Brock: Yep.

Andrew: The controversy that I saw around there was that you were charging the entrepreneurs to be on stage instead of charging the audience who was going to listen or instead of charging the investors who are going to be a part of it. And I wonder, like, how much of it were you aware of it that’s not the practice in this space versus how much of it was you saying, “I’m going to try something different.”?

Brock: Yeah. I mean, we were providing a lot of coaching and guidance to those entrepreneurs. And there was a selection process of helping them. And so we weren’t . . . That really wasn’t our revenue model. It was just to help cover the cost of the event and we were trying to figure out the best way to do that. And so we experimented with different ways and I think we charged 500 bucks to the entrepreneur to be able to . . . The one that was selected to present. I don’t . . .

We do CrowdPitch events today in a totally different format all around lending and we don’t charge anyone, audience or the business owner. But it was part of the . . . As an entrepreneur, you’re trying a lot of things to figure out what sticks and what works, and some things are great successes and some things are complete failures, and the key is to kind of learn from those failures that you did.

Andrew: What you take from that experience? I know that David Cohen, the founder of TechStars, did a post saying that . . . He wasn’t attacking you, but at the time, he was saying . . . And the post has been taken down. So it’s been 10 years almost exactly since he posted it, but it’s gone. But he did say at the time that he didn’t like it that he said, “Some of us want to vomit when we hear the promising entrepreneurs are being charged,” by that he meant Brad Feld was the one he was referring to. When this happened, what did you take away from that experience?

Brock: Yeah. I mean, we knew Brad and David Cohen and they’re good friends with one of our investors and . . . There was . . . From our standpoint, we’re entrepreneurs. We want to help entrepreneurs and we weren’t trying to . . . Like I said, we weren’t making money off of it. So we had a conversation with David and said, “Listen, we respect your posts and we appreciate it.” And it actually was really good guidance for us on how we should approach it. So, honestly, it was . . .

Andrew: How did you change?

Brock: . . . deserved to be written. Huh?

Andrew: How did you change as a result of that?

Brock: Yeah. So we stopped doing . . . We stopped kind of doing the pay to play in our pitching event.

Andrew: Okay. Yeah. I don’t know that I would have known back in 2008, 2009 that that was not the right approach that it felt like if you’re offering the benefit to entrepreneurs, then they could pay for some of the costs involved in offering that benefit to them, versus the audience who’s there almost to support the entrepreneurs. I get it. There did become this really big movement to not charge entrepreneurs, instead, charge the service providers and then give the upside somehow to the investors. Like, even the investors don’t seem to get charged for stuff. It’s the service providers, the lawyers, the accountants who are all around it, that it’s acceptable to charge, it seemed.

Brock: And that’s how we changed it. We changed all of it to be sponsorship-driven where we had accountants and attorneys and law firms and insurance and all those guys that were the service providers that sponsored those events so it could be free for all the entrepreneurs.

Andrew: Yeah. And one of the things that I liked about . . . that I always admire about David Cohen was that he wasn’t somebody who would use this as fodder for fight versus Jason Calacanis who would, at the time, like when he decided that he was going to do the TechCrunch 50, which eventually became TechCrunch Disrupt. He said, “I’m actually going to use my competitor’s funding model or pricing model against them.” And then he started going on the attack. David Cohen was much more quiet and said, “Well, all this doesn’t seem like the right approach.” And I could see why he would talk to you. I did see this Forbes’ article. Not to keep hitting you with . . . Before we get into the hard stuff with Forbes’ article.

Brock: Bring it on. Bring it on.

Andrew: Let’s talk about the Inc. magazine. You got into Inc. magazine. I recognize it even in storytelling and let alone like in storytelling there’s highs and lows to balance each other out so [inaudible 00:17:18].

Brock: Okay.

Andrew: . . . a tough day, tough conversations . . .

Brock: I didn’t knew what I was getting myself into, Andrew.

Andrew: Yeah. I’ve kind of got a reputation for this stuff. Let’s talk about the high, which was Inc. magazine. Do you remember getting into Inc. magazine? That’s like an external approval, external proof that you’ve actually hit the mark or the growth mark.

Brock: Yeah. Yeah. That was a fun day for our team to be able to celebrate and grew the growth of the business and what we’re trying to accomplish. And I remember the morning it came out and hit the newsstands I went out and bought as many publications as I can and put them on every single employees’ desk with a congratulations in the note and thank you. And so those are . . . I always say being an entrepreneur includes the highest to highs and the lowest to lows, and you can’t get too high and you can’t get too low, you have to be able to enjoy that journey. And so that was definitely one of those highest of highs high-five moments.

Andrew: Let me talk about my first sponsor and then we’ll get back into the story. My first sponsor is a company, Brock, you’re probably going to love this company. It’s a company called Toptal. And they’ve been known for being the best place to go hire developers. And I talked about that in the past.

But what I want to talk about today is I had a situation where I wanted another pair of eyes, Brock, on my income statement, somebody to look and see, “Where is Andrew missing the mark? Where is he making mistakes? What does he not . . . What does he not picking up on?” And I didn’t want it all be on me, and so I went to Toptal and I said, “You guys acquired this whole MBA division. Can I hire a finance person?” They say, “Yeah.” I said, “I want a chief financial officer who’s going to come in part-time and look over my stuff.”

And they said, “Let’s get on a call,” because the way that they always start everything off is get on a call with a matcher, they can even see if they could find someone for you before you get started. So I get on a call with them, the guy listens, listens, listens, and I think, “All right. I got it.” He then follows up with me with an email and he says, “Andrew, what you’re really looking for is a profitability advisor, somebody to look over your income statement to see if you’re missing something that will help with your profits.” I said, “Yeah, that’s exactly right.”

And they put four different people in front of me. One woman was like a year or two out of Stanford University. There was one long-time entrepreneur. There was this one person from McKinsey . . . They just went through and they gave me a list of different people. Not too many, but enough that I could see a broad range. I picked this guy, Jack, I started working with him, and almost immediately he paid for himself, like, many, many times over.

Like, one of the things that he did that I didn’t think of was, he said, “Let me take a look at you the way that you do your own personal health coverage.” He looked at my insurance, he looked at the way that I do my HSA. I thought, “This is kind of small, but okay, small wins, we got it.” Then he said, “Andrew, I think what you’re missing out on is you’re taking for granted that you have to pay these credit card processing fees. We should look at it.” He went through all the paperwork for the credit card processing companies to understand what we could do to reduce the fees. He got my fees reduced, and he got them reduce lower, then we went back to Stripe, I had no idea you could do this, and help me negotiate with Stripe. We actually couldn’t negotiate with Stripe, but we tried. And we got a milestone that we need to hit in order to reduce the percentage. That was a great win.

Then he created a competition for people in my team to reduce like the software that we’re spending money on. And that worked out because they knew what they could get away with not signing up for if they had enough of an incentive they could do it. Let me see one other thing that he did. Oh, yeah. He kept pushing me for months on who to not work with as much. He said, “I know you love these people, yet, you don’t need them. Let’s find a way. Let’s find a way.” This is months and months a month and I probably should have move faster, but I eventually did. And all that helped increase our profitability.

All right. The reason I’m bringing this up is that’s what Toptal did for me. If you’re looking for someone like that, you can get it. Toptal also has finance people to help put together your income statements, your financial projections, everything that you need from a financial point of view. Go to them, talk to them. And maybe it’s not exactly what you’re looking for, but something even better which is what happened to me. Go to toptal.com/mixergy. They’ll even give you 80 hours of Toptal developer credit when you pay for your first 80 hours in addition to a no-risk trial period. That’s top as in top of your head, tal as in talent .com/mixergy. I’m really glad that they’re sponsoring.

Let’s then go back to this Forbes’ article that I read. This Forbes’ article is really painful. How was that to read?

Brock: Well, this was probably the most challenging time in my business career, not probably. This was the most challenging time of my business career. And essentially, what happened was we had a scenario where what we did at a time is we realized only a small percentage of business owners that come to Lendio or, sorry, at the time, Funding Universe are actually going to raise money from an angel or a VC. Only one or 2%.

And so we started looking at this other universe of 98% of these entrepreneurs that needed access to capital or trying to raise money from an angel, but their business plan was a mess and their financial model they didn’t have one and they didn’t have a good website. And so we thought, “Well, we should be able to help these business owners improve their situation and get them prepared to talk to investors, we can increase that chance. Instead of it being 1% or 2%, maybe it’s 5% or 10%.”

And so we started helping these business owners with those things and they pay for a financial model and a business plan and those things. And then once they were prepared, we put them in front of our investors. The challenge with that is that, one, you’re constantly trying to . . . As passionate as we were about helping that small business owner, a lot of times it was hard to meet the needs of that business owner. Like, I can’t write a business plan as well as you’re going to write a business plan for your business. And even though we might be an expert at putting any other financial model, it may not accurately reflects exactly what that business owner wants.

And then even if we put together the most amazing package possible, there’s no guarantee you’re actually going to get money from an investor because the investor they’re acting with their own money on the types of businesses and some days they like to do restaurants and other days they like to do tech companies and other days they like to do the stock market. We have no control.

And so what became as this sincere desire to help these business owners and get access to funding from angel investors actually really backfired on them and it’s like, “Well, I paid money, but I didn’t get funding.” “Well, we didn’t guarantee you’ll get funding and we’re trying . . . We want to do our best.” But enough of that where you’re getting that customer feedback. And we had a lot of success stories, but we also had a lot of stories where they paid money and they didn’t get what they were looking for because it was just out of our control.

Andrew: How were you?

Brock: And so . . .

Andrew: I’m sorry, go ahead. Sorry, go ahead.

Brock: So I was just going to say, I mean, you learn that . . . I mean, we tried every different way to make that happen and just like hitting our head against the wall, like, “How do we make this work?” And one day you just have to put it out there that the business model is flawed. You don’t . . . Business owner were coming to get money yet you were charging them for the services, and in the end, they don’t get the money. It was a . . . And part of that was we had some customers that were upset because they weren’t able to get the money and it turned into a story. So that was painful.

The message came across like we were trying to be dishonest or trying to scam these customers. And that wasn’t the case. It was just . . . It was out of our control. The business owner paid money and they weren’t going to get funding, and yet we had to pay for these services. We had people, hard costs, working on building the financial models and building the business plan and all that. So, anyways, that’s a long story to say. It was a long painful experience for us, learned a lot. I’m better for it, but not a fun time.

Andrew: How were you getting the investors? That if you’re matching investors with entrepreneurs, I saw that over the years you had on your site links for investors to sign up and view unlimited business plans and so on. But how are you getting investors into this marketplace? It feels like that’s the key. If you could get the right investors, then everything else comes together, if you don’t, nothing does.

Brock: No. I mean, I could see that. We actually had a really good base of investors. And the way we actually acquire them as we went into communities, as you saw, and we did these events, and we did speed pitching events. And we had local attorneys and things that sponsored it that said, “Hey, okay, these are the most active investors. Let’s pull them together and we’ll do these speed pitching events.” And the investors loved those events. They loved coming and seeing 10 deals over lunch. And as part of that, they came in and signed up for our site.

And so we had a really good base of our investors, but the problem is, is that even if you have a great base of investors, most angel investors they don’t want to invest in mainstream businesses, they don’t really want to invest into a retail shop, they don’t really want to invest into a restaurant business. They’re looking for the next high flying Twitter, Uber, all of that. And so it was just this disconnect of business owners that really wanted angel money and we’re going to do what it took, but at the end of the day that wasn’t going to happen. There was a disconnect there.

Andrew: Okay. I get that. And at the same time, you told me before we started and you told our producer about an issue with customer service, which is something that this Forbes’ article from 2011, I want to say, brought up that this one couple contacted you guys and then they didn’t get a response. What . . .

Brock: Yep.

Andrew: Can you talk about that, and then we’ll go into . . .

Brock: So that’s where . . . Yeah. So that’s where it all came to a head. And this is, again, is what driven so much of who I am today is gone through is because of these painful experiences. So, during this time, we had customer service manager. Any customer service emails were directed to this email inbox and this customer service manager was replying. His job was to field every customer service email, respond to them, and then direct it to the right business plan writer or website creator or whatever. We had all these different service providers.

And for a period of a few weeks, this individual was acting very erratic and we couldn’t figure out what was going on. And so it got to this point where we decided, “This isn’t . . . There’s something wrong here. We don’t feel like it’s the right fit. We feel like there should be a separation.” So we let him go on a Friday afternoon. Come Friday night, I get home, it’s about 8:00 at night, I think, “We let him go at 2. I wonder if there’s any customer service emails between 2 and 8. I’m going to go log into this email and I’m going to check it and respond to anything.”

And as I logged into the email and I checked it, I realized that he hadn’t responded to any customer service emails in about 30 days. And there were probably about 400 to 500 customer emails that were unresponded to. And when you don’t respond once, now someone thinks you’re ignoring them and now they’re writing back and they’re now including cuss words, and then they write back again, “If I don’t hear from you on this date, I’m going to go here and there and . . . ” I mean, I literally I almost fainted when I looked at. And I’m not just using those words. And I had to just shut the email down and go for a walkout at night. And then I came back that night and stayed up basically all night, all weekend, my entire team responding to every single possible email we could and say, “Hey, we’re very sorry. Let’s . . . ” I mean, we were trying to dig out of that and it was painful.

Andrew: And soon after you said, “All right. We’re not going to be in the business of getting you equity investments. We’re going to switch to loans.” How did you know loans were the right approach?

Brock: Well, so, at that point, that was kind of the straw that broke the camel’s back, right? We were trying so hard to make this thing work and it was like, “You know what? This right now solidifies this isn’t the right model.” And we’d already kind of started working. We already started kind of brainstorming, “What is the right model? Let’s . . . ” And the way we looked at it is we said, “There’s couple of things that were really important to us.” The first thing is we wanted to not charge the business owner. We wanted it to be a free service. One.

Two, we wanted to focus on the customer segment of this 98% that which is main street business, restaurant owners and landscapers and retail shops and construction businesses. We wanted to be able to help them.

And then three, I didn’t want to employ all these service providers where it was all manual and you’re dependent on all these people. So it had to be technology-driven.

And so we started, but we knew the demand for capital was high. We had a lot of business owners coming saying, “Hey, I need capital to grow the business.” And so we started using those three parameters saying, “How can we launch . . . What can we do? How can we launch a new business based on those three things?” And the more we studied it and the more we really started talking to customers, the more we realize that most of these business owners could get loans, that they needed a $20,000 line of credit or a $50,000 term loan or an SBA loan.

And so we shut down Funding Universe in January 2011 and launched Lendio in February 2011 and with this goal of we have conviction that we do it right, we could have an amazing customer experience, we could help these 98%, and we could build it with technology. And let me just make one last comment on this whole technology thing. When you’re working with a lender, a lender always has a formula that they want to underwrite A plus B equals C, like every single time, A plus B equals C, A plus B equals C.

When you’re working with an investor, sometimes it’s A plus B equals C, the next day it’s A plus B equals Z, the next day it’s A plus B equals F. And there’s no way to create technology and scalability because their preferences change. They’re just individuals who have money and are deciding when and how they want to invest. So the fact that banks and lenders have this real structure around the way they want to lend, it allowed us to build science into it and technology around it and we could scale it because it was predictable.

Andrew: And you went from how much revenue when you were in Funding Universe to how much when you started out with Lendio?

Brock: So we were doing . . . When we shut down Funding Universe, we were probably doing about $800,000 a month in revenue and went to zero overnight. We were at about 75 employees and kind of took this core team of eight people and said, “Okay. We’re starting over. Scrap everything we’ve done because it doesn’t work. And let’s go.” And it was . . . That was an experience.

Andrew: And the owners stayed the same. The investors who invested in the business kept equity was just moved into this new product, Lendio.

Brock: Yeah. We did a whole recap of the company and going to repivoted it and everything else. Yes.

Andrew: How did you get your first businesses on to Lendio? I imagine that getting the lenders was fairly easy. They’re out there and they’re just paying for the connection? How did you find the businesses?

Brock: Yeah. So, during that time of building up Funding Universe, one of the expertise that we learned how to build is how to acquire customers, business owners online and through Google and Facebook and through other kind of referral sources. And so we kind of . . . Basically, the reason why we shut down Funding Universe besides the fact that the business model was flawed, was that we wanted to kind of redirect customers from that previous business to Lendio because the customers we were getting at Funding Universe were the same customer that we thought would be the best fit for Lendio. So we started small, but redirected the customers from Funding Universe over Lendio.

Andrew: Got it. And I did see when I was looking at Funding Universe, you guys were doing some pretty strong SEO. Like I think you had . . . And Go Big Network as site that you guys are kind of related to at the time, and when “The Wall Street Journal” announced that you guys were out and launching and helping entrepreneurs, they also mentioned Go Big Network. And I feel like both of your sites were good at having a lot of content. And so I think you had a whole collection of business plans based on topics, but I wasn’t able to see what they looked like. You had a collection of business histories that you took from somewhere.

I think that one time Go Big, not you guy, took the whole Crunchbase database and populated the site with a section of business information. So that was pretty big early on. How did you get that expertise? How did you get that understanding of search engine optimization at a time when people thought it was either all black hat or just nonsense?

Brock: Yeah. So one of our co-founders with Funding Universe was a gentleman named Paul Allen. And Paul Allen was the founder of Ancestry.com, myfamily.com, and just had this incredible expertise around SEO and content marketing and all kind of white hat materials and just knew that if you put out great content, it would attract business owners. And so we went and acquired thousands and thousands of business plans with different verticals to help and we gave it away for free and company histories and some other things like that that we used.

This is all a total blast room and this is like 10 years in the making. All these questions are like . . . All my podcasts recently have been like, “How I go to Lendio?” This is like, let’s go back 10 years and tell me this history.

Andrew: Ten years, I went back to your childhood and we found out about the competition at the dinner table.

Brock: That’s true. That’s true. That’s true.

Andrew: How did you connect with Paul Allen? I’m looking up his history. He’s a really impressive guy.

Brock: He’s awesome. He’s great.

Andrew: How did you connect with him?

Brock: Yeah. So when we first . . . He was one of the individuals . . . When I had that $50,000 and I was going out and interviewing people, he was one of the people that I met with and he’s just great. He’s a big supporter of entrepreneurs. And he was one of the individuals that said, “Hey, I think there’s a huge need here with helping business owners connect to investors. And let’s do this.” Funding Utah was the original concept and then expand it. So he was an early shareholder, kind of co-founder of Funding Universe and a big part of a mentor for me in like, “Let’s figure out how to help business owners.”

Andrew: And he was teaching at Brigham Young University I think back when you were in the competition, in the business plan competition. Am I right?

Brock: Yep, that’s right.

Andrew: Okay. And was that the connection through school or some other way?

Brock: I can’t even remember. It was probably through school, but I can’t remember how we ended up connecting for the first time.

Andrew: Super impressive. I can’t believe I hadn’t dug into his background before. All right. I should talk about my second sponsor. It’s a company called ActiveCampaign. What do you guys do for email marketing, Brock? I feel like you’d be good at this. Do you know?

Brock: Yeah. So we use HubSpot.

Andrew: Do you know what some of the things that you do on HubSpot are?

Brock: So we do a lot of marketing automation. So when a business owner comes in and they sign up, a validation email and then if they’ve fallen out of the funnel, okay, what is . . . You create kind of a drip campaign and email newsletters and all those things that help you communicate with your customers.

Andrew: To bring them back in. Like, if they’re not engaged with your . . .

Brock: That’s right.

Andrew: Got it. All right. I see actually on BuiltWith that you are using it. So you’re a WordPress site, am I right? But you still use HubSpot for marketing automation for forums, for stuff like that.

Brock: Yeah.

Andrew: Interesting.

Brock: Yeah.

Andrew: Here’s what I like about ActiveCampaign. Everything that you mentioned, totally doable in ActiveCampaign. It also connects back to the website. They give you a little pixel you put on your side, a little piece of code you put on your site, and then if you find, for example, that people keep looking at one specific type of content, like, maybe for you I should look and see what . . . How would we know? Let me take a look here. For us what we do is . . . Well, here. Oh, look at this. Loan calculators, loan types. Oh, here we go. Great.

So imagine if somebody just keeps going to SBA loans, small business loans, and that’s what they keep spending time on, they’re reading it, they keep coming back and clicking over, you know that they’re interested in Small Business Administration loans. You just tag them in your email system and then you can start sending them an email based on how the SBA works, how you help businesses who are looking for Small Business Administration loans, success stories geared around it. They don’t even have to fill out a form saying, “That’s what I’m interested in.” They may not even be aware that’s what they’re interested in. But the fact that they’re clicking on the site tells you that.

The second thing you could do is, if you have videos on your site, you can start tagging people based on what they’re watching all the way to completion so that you can send them messages that are relevant to what they want. And yes, of course, you could ask them and you could track links of people who are clicking to target for them what they’re most interested in.

Now, once they buy, maybe you’ve got a lifetime . . . I know you guys are big on having lifetime relationship with your customers. Maybe after they buy, you stop . . . And you guys don’t do this, but for many businesses, they still sell to clients after they bought. It’s a simple thing with ActiveCampaign to tag someone as a buyer so that you don’t anymore promote your product to them the one that they already bought, but instead start nurturing them and then start talking to them about how they could buy something else or work with you again in the future.

All this stuff is doable with lots of different software. What I like about ActiveCampaign is they make it super simple. And not only do they make it simple, but if you use my special URL, they will actually make sure that you use it all. They will give you two free consultation calls. So here’s how it’s going to work. I’m going to give you a URL. Once you go there, you’re going to get to try this software out for free. Just sit back, have a drink, enjoy it, go through it. If you’re Brock . . . Brock, I imagine you don’t have a drink, but you might have what? Is it club soda? What’s your drink of choice?

Brock: There you go. Root beer.

Andrew: Root beer. For me lately, my mock cocktail is club soda with bitters. Oh, I don’t know why. Even when I’m at home alone and not trying to pretend to someone that I’m drinking alcohol, it just slows me down enough. So root beer, club soda or whiskey, whatever is your speed, sit down, go try out their software. If you like it, you’re going to love it and you’re going to want to continue. If you don’t like it, move on. Nothing lost.

If you do decide to sign up, your second month will be for free. Yes, they will also give you two free one-on-ones, but here’s something that they will do for you. They will migrate you from your email provider for free. All you have to do is go to this special URL, it’s activecampaign.com/mixergy to get that. What is your management style? Do you have one, Brock? Is there something that’s like codified or is there something that you just know is you?

Brock: Well, for me the first thing that I’m looking for in a team . . . Well, I mean, the cliché, but this is reality. The first thing is that I want to . . . I’m building a team of people that are smarter than me. Right? And then what I’m looking for is . . . The first question I ask is, “What are you passionate about?” And I’d love to . . . I like to find people that are so passionate about what they do that they’re thinking about it like on the nights and weekends and in the shower, on the drive and whatever. And so if that’s the case and if you hire right, then my management, because I don’t want to micromanage, I want to be able to paint the vision, “This is where we’re going. This is how you fit within it. I’m going to give you the resources you need and then I’m going to get out of the way.” And there’s some counter . . . We have accountability sessions and things like that, but for me, it’s hire people that are extremely talented and paint a vision for them and just empower them, remove roadblocks from them. That’s my goal.

Andrew: Tell me what you think about this approach. What you said makes me think of one of the things that I don’t recognize that I do, but I guess I do it intentionally. I like people who just will do things even without me being there. And I mean, like, the guy who’s doing our courses, Dan, I haven’t been able to get on a call with him in a month because I just keep packing my schedule, but I love that he’s still producing, he’s still talking to entrepreneurs, recording courses. He just recorded one with Sherry Walling.

And when I think, “Well, Andrew, maybe what you’re doing is not paying enough attention to your company,” which I do think I need to pay more attention to my people. I also realize that it kind of reminds me of . . . I don’t know if you read Phil Knight’s book, “Shoe Dog” where he talks about the rising of Nike. There’s a guy in there, I think it’s Johnson. He keeps referring . . . Johnson keeps writing him handwritten letters with ideas, with stuff that he’s doing, and he just ignores it. Handwritten letters about how much he is enjoying working with him and he just enjoys it.

He comes in and negotiates with his dad for more like percentage or salary or something, he goes, “I can’t give it to you.” His dad is upset. Johnson goes, “I’m just going to do it anyway and I’m going to continue to work with you.” And I realized that last part we don’t do, but the rest of . . . I just need somebody who’s going to continue even when they’re pinging me and they don’t get a response back because they love it so much and they can’t stop doing it, those are the people who I love to work with. Like, what is . . . Am I making a mistake? Am I just hanging my business management style on this one example that maybe I’m not picking up properly from the book? What do you think?

Brock: Well, I mean, I heard . . . When I was actually at BYU, I heard I heard an entrepreneur lecture series where this guy said, “I owned six locations and this one location had this manager and it was so good. And so I honestly never really showed up to that location. I was always spending my time in these other five locations.” And this manager came to him one day and said, “So and so I feel like I must not be doing a very good job because you spend all your time over there.”

And he said, “The reality is the realization that I knew but I didn’t kind of like think through it was that you’re doing . . . It is the best compliment that I can possibly give you that I don’t ever show up to your store because that means you’re doing a great job that I trust you, that I have confidence in you and that you don’t need my help.”

And so I think there’s that balance of being a manager where you want to get feedback, regular feedback, or accountability or things like that, but if you’re not always kind of in their world, that probably means that you have a lot of confidence in them and trust them, and then you can focus on other areas that actually need your attention.

Andrew: I feel like the big takeaway for me for that is that I need to let Dan know, “I’m not spending too much time here. Thank you for being the CEO of this program and working with them and being somebody that I can entrust all of our course leaders and entrepreneurs to.”

Brock: Yep.

Andrew: I do like stories for that . . .

Brock: I loved when you said, “Be the CEO.” We talked about here at Lendio all the time. Be the CEO of your job. To that exact point.

Andrew: And that’s exactly what I need. And I found that there’s some people who can’t work that way. Even if they’re doing a great job, they need you to let them know they’re doing a great job and they need almost permission and okay from you for everything that they do, permission before they do it, and yeah, it’s okay to do it afterwards. And they’ll do a great job. I just can’t do that. I don’t have that in me. I need somebody who can be a CEO who can say, “Somewhere inside, I know this is the way to go and I’m just going to keep leading it until they tell me to stop.” We talked within the sponsorship message about how your goal at Lendio now is to create a lifetime customer. What’s the process for that? How do you follow up with people?

Brock: Yeah. So, first off, it is . . . The first thing is, “Are we taking care of that customer?” And we have thousands of online reviews of these business owners that came to us looking for financing, they needed help, we gave them options, we walked them through, got them the loan that they need. And so there’s nothing that replaces that first experience of dealing with that customer.

Then what happens from that is if they had a great experience, then the likelihood that they repeat is extremely high. We have 60% of our customers come back to us for a second, third, fourth loan. They might need an equipment loan one day and the next three quarters later, they need a line of credit or vice versa. And so we help them . . . We try and provide a great experience, then as soon as they get that first loan, we’re reaching out to them with our customer experience team to say, “Congratulations on getting a loan. Here’s how we can help you going forward. Here’s my email. If you ever have any questions about anything, give me a call, let’s talk through it.” just because we’re trying to build that relationship. And then as we talked about before, we use marketing automation that kind of keep them more and more with tips and tricks and what to look out for and some of those things. Because we feel like if we take care of that customer the first time, they’ll come back to us again and again and that’s where your lifetime value increases.

Andrew: And then the customer originally gets to you how? I was looking at traffic sources. It looks like you do a little bit of Google, you do some Facebook, you do some ads online like there are Taboola ads that are running for you guys, right? What’s your top thing? What is it that drives the business?

Brock: Yeah. We have a lot of partnerships. Our first major partnership that we landed was with Staples. And then we’ve have partnerships with Heartland Payment Systems which is big merchant service provider, TSYS, GoDaddy, sba.com. We have about 50 different partner organizations that when they have small business owners that frequent their site and when they need a loan, they get referred over to Lendio and we help them through that loan process. So most of our customers come through a partnership site or a program.

Andrew: And it’s like an affiliate commission that Staples gets in return for sending their people over.

Brock: Yeah.

Andrew: Got it. And I think I even saw that even in the beginning of Funding Universe, you guys were big on affiliate programs, and this is like a next-level affiliate program because it’s vetted partners whose credibility helps drive the relationship.

Brock: Yeah. Back then it was more affiliate. Yeah. Today, it’s not as much. We really don’t get any traffic from like true affiliate partners. These are like strategic partners that we’ve gone out and we’ve pulled together a deal and it’s specific to that partner.

Andrew: How do you do that? What’s your process for finding those types of deals?

Brock: Yeah. Well, identifying . . . We identify different segments of who are the companies that help small business owners today? What do they look like? The restaurant associations, and are there accounting shops, and are there big-box retailers like Staples, and are there merchant service providers? We identify the different categories, and then just started creating lists of . . . And so when we landed Staples and we made some . . . That really helped us with the credibility because they did six months of diligence and customer research and looking under the covers and all that. And then we started to have partnerships come to us saying, “Hey, we see what you’re doing. We have a lot of customers. We want to help you get a loan. We think you’d be the best platform to do it.” So, yeah, it’s two ways.

Andrew: How did you find the right person at Staples to get the whole thing started then?

Brock: In that scenario, we were fortunate that Staples had done their own customer research and found that business owners needed loans. And so they . . . And they decided, “We are going to get in the loan business. We just need to find the right partner.” So they did an RFP, and we were competitive against about 30 other groups that were trying to land that partnership.

Andrew: Maybe this is like way too business basics, but I love asking these types of questions to you. How do you even know that they’re doing a request for proposal, an RFP?

Brock: They reached out to us.

Andrew: They just reached out.

Brock: They found us.

Andrew: They were looking to see who’s there. Got it. And now I am on Staples’ website on their loan section. It says, “With Staples, you can Staples business loans,” and then underneath, “It is powered by,” and then the Lendio logo.

Brock: Yeah.

Andrew: And so that’s you guys powering up their loan division. I see. This is something that I don’t think much about because I can’t find data on it online and so I don’t think about partnerships as much as I think about where are they advertising, what are they doing for SEO, etc. But partnerships are something I need to be more aware of and bring up in the interviews and frankly, do it even for my business.

The thing that I could tell fairly easily because I use Ahrefs, I’ve been a customer of theirs. And I’ve been pushing my interviewees’ URLs into it. I could see what you’re doing is really smart as far as not just SEO but online content. Little things like HubSpot has a list of customer testimonials. Your guy, Adam Shiflett, is on there talking about how he uses HubSpot for Lendio and there’s a link back to you.

But also there’s an article on Forbes “21 Employee Perks that Attract the Best Talent.” Something like that is written by you, gives you credibility, sends people over to you and raises awareness, and then it might lead to other articles which I see one on Forbes about “Are Deadlines Important?” and they site your company and the way that you think about deadlines. And I feel like content is big, offline content, I mean, off of you site content. What do you think about that?

Brock: No question. I mean, we didn’t really put as much emphasis. We started off saying we want to grow through partnerships first. And then about a couple of years ago, we really made an investment in the content marketing side. And that investments definitely paying off right now. And it is. It’s, you want to create great content that others are going to write about, link to, business owners want to consume, that’s helpful, it’s relevant. And so we have Melissa Zehner on our team leads our content marketing strategy and she’s just done an incredible job with that.

Andrew: Including the fact that she got you on Mixergy, you like second-guessing her ability when she got here, was like, “I came in for a nice easy interview?” What is this? Is that part of your feeling?

Brock: Hey, listen . . . No. I am grateful to be a part of this. And you guys do a great job. And I’m not . . . For me, people may judge you like, “Oh, man, you went through this really painful time and you’ve made some mistakes along the way.” But every single one of us in our lives, we have learning experiences we go through, and if we had bad intentions and we were trying to create a bad experience, then that had been one thing and we were like we’re trying to hide it and it’s not. We had good intentions and we just went . . . It was the wrong business model.

And the reason why we have such amazing customer reviews today is because I went through that pain and I knew what that tasted like and I don’t want to have this business in any way go through that again. So I’m going to start from day one, I’m going to look at all the customer service emails and we’re going to have multiple eyes on it and we’re going to have . . . It’s not going to be manual and it’s going to be technology-driven and we’re not going to charge . . . So who we are today as Lendio is because of that pain. So I don’t mind you bring it up. Let’s talk about it. Hopefully, others can learn from it and they won’t go through some of the pain that I went through.

Andrew: All right. The website for anyone who wants to go check it out is lendio.com. And sure enough, like, I still do research even as we’re talking. I’m checking to see what do you guys like on G2. For some reason, I can’t get any data from G2, but I can see from Trustpilot reviews 1,734 excellent rating from them. But for some reason, when somebody says something in an interview, I just have to look it up and I think the audience benefits from it, but if they don’t, too bad, guys. There are tons of other podcasts. If you’re into this, keep on listening, subscribe, tell your friends to subscribe. And if you want to check out Lendio, go check them out at lendio.com. Let me know what you think of them.

I want to thank the two sponsors who made this interview happen. The first will do your email marketing right, it’s called ActiveCampaign. And the second if you’re hiring, it’s Toptal that you should be looking for. And again, that’s toptal.com/mixergy and activecampaign.com/mixergy. Finally, since I brought up Dan, if you want to see the courses he’s been creating, he brings back past entrepreneurs who I’ve interviewed, asked them to teach this one thing that they’re good at, grills them, then he does incredible production values to make it look good. If you want to go check it out, it’s at mixergy.com/courses. And Dan, thank you so much for doing that. Brock, thanks.

Brock: Yeah, Andrew, thanks for having me. I appreciate it.

Andrew: Same here. Bye.

Who should we feature on Mixergy? Let us know who you think would make a great interviewee.

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