Jake Rosenberg of LendUp with Ali Rowghani | Transcription

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Introduction

Intro (00:00)

Jake, really awesome to have you here. Thanks for coming back to YC and spending some time with us and spending some time on the mic. Absolutely. Cool. So I wanted to ask you a few questions about yourself first of all.

Discussion On Lendup And Its Mission

Jakeisha, Yahoo, Pixar, Zynga, Lending (00:11)

You've got a really cool background. You got started in this industry a long time ago as a youngster and have been at some interesting companies. So tell us how you got involved in tech and where you've been and how you're today at LENDUP. Yeah, absolutely. So I grew up in the Bay Area. So I was here during the first .com boom. And when I was a teenager, I was really interested in tech in two main areas actually, messing around with computers and video production. And so the two companies that I really wanted to work for when I was a teenager and that I applied to summer internships for that I really was excited about were Yahoo and Pixar, which you know, obviously your background in Pixar. Yeah, that place isn't bad. It's pretty awesome place. And Yahoo ended up contacting me about a summer internship. Pixar is not. I'm still waiting to hear back. So I'm hoping you can help me there. You're in. Yeah, okay. And so I was in high school, yeah, I was 16 and I was looking for a summer internship. And so Yahoo ended up contacting me about being a production intern. So just coming in and doing anything they needed. So I went in and interviewed my mom actually drove me to the interview because I was 15 and a half. I hadn't had my learner's permit, but I didn't have my license yet. By the time I would get the job, I would have my license. So my mom drove me and then waited outside while I interviewed with some of the early people at Yahoo. They were about at the time they were 65ish people. And so they were when I interviewed, they were still private by the time I joined that summer, which was the summer of '96 they had gone public with like 80 people and 1.6 million in revenue or something like that. So it was a different time. So I ended up being a production intern that summer and worked on cold calling to try to get listings for Yahoo. Classified's cold calling car dealerships and getting them to export their cars and Excel and stuff like that. And then writing Perl scripts to like munch the data and load it into our database. So immediately got just thrilled and excited about what was going on with tech and with the web and wanted to be a part of it and sort of took off from there and never looked back. So went back to Yahoo the next few summers as I graduated from college with a degree in CS. And then went and joined full time and was there for about eight years building a bunch of different products, eventually working my way up to a more senior sort of architectural position there. And then after that I moved on to Zynga where a friend of mine who was a product manager was building out a team that was building infrastructure for all the games. So it was building out shared messaging and communications infrastructure for the scale of Farmville, Plus Cityville, Plus Mafia Wars, Plus Words with friends. So doing a lot of user-to-user messaging and the gifting system and email system and things like that. So really fun as an engineer did work on very, very high throughput high volume applications and really enjoyed that. It was there for a couple years through the IPO and then started on Linda. So my brother and Sasha and I embarked on that journey. Great. So tell me, so you've been an engineer at Startups and seen two amazing companies scale. You saw one IPO inside the company and obviously Yahoo was kind of a legendary company for a long time and still a big company today. What sort of told you, hey, it's time to start a company? Was that something you always wanted to do or did Sasha convince you to do it? Yeah, tell us that.

Why start Lending? (03:48)

A little of both. So I always was interested conceptually in doing it. But I was never actually steeped in startup culture. Even growing up here, I was out of what became very rapidly a big company. By the time I joined Zinga, they were 300 something people. So never really was, it was a big fan of Paul Graham and his essays, but never really got into following startup culture. And so it was never sort of reading blogs about how to be an entrepreneur or anything like that. I was pretty focused on the technical craft and improving my technical skills. And so when Sasha sort of came to me with his ideas around what we could do to reinvent financial services with technology, I got pretty excited by it. I got pretty excited by the impact potential by the technical challenges involved. But it was definitely a little bit of a leap of faith. It was not something where I was a little bit used to being at companies that had a little more structure, had a little bit of a safety net. And so I knew it was something I had always thought about and wanted to do, but it was definitely a little nerve-wracking to make that leap for sure. So one of the things, among many things that's special about LENDUP is the strong mission, the sense of purpose that you guys have. Can you talk about that and talk about how that pervades the culture of the company and the types of people who work there? Yeah, absolutely. And I mean, that was the thing that eventually did encourage me to make that leap. Financial services has such an incredible impact on so many people. And by making even small improvements to some of these products, you can really impact people's lives in a very positive way, especially in the parts of the market that are underserved or poorly served. Which is huge, right? Huge. Describe that for the audience.

What Lendups mission (05:41)

So for context, LENDUP is essentially a company that is creating socially responsible financial services products online focused on the 56% of the United States that doesn't have access to prime banking and credit services. So that means essentially since 2008, there's been a huge move based on a number of different factors in the market and regulation that have created a lot of financial exclusion. That basically meant that there are a lot of people who don't have access to traditional credit products. And LENDUP is trying to fill that gap by offering online personal loans and credit cards and continuing to build more products as we build out a whole ecosystem for that group. And these are people who have potentially poor credit history and don't have access to banks and credit unions and therefore need alternative products. So just to put a point on that, I think what you just said is 56% of Americans don't have the ability to get loans at reasonable interest rates or credit cards that admit perhaps at all. And that 56% number is the fight go cut off of 680 or below, which is what banks would consider subprime. Right. And so you guys are focused on that population. We're focused on that population and giving them safe, constructive credit products. And then tying those credit products together using incentives and education and gamification to essentially help them improve their financial well-being by incentivizing the right behavior. So we win when they win. We set the products up so that when they succeed, we do well as well. So going back to your original question about the mission, that was the big insight that Sasha had that really set the company up to be mission oriented, which is that we could create a product where the consumer succeeds and we succeed and we align those incentives together so that the consumer can go through multiple different products in the ecosystem, continue to grow, we can educate them, bring in financial services, education, and incentivize the best possible behaviors to help improve their credit score and get them access to more money at lower interest rates and basically just help them improve their financial lives and have a long-term relationship with that customer and have a good relationship with that customer over the long-term and create a profitable business at the same time. And by doing that, we could force a lot of the incumbents also to change the way they view this market and the way that they treat the market, which is in many cases not constructive to the consumer's financial health. Right. I've seen some of the customer testimonials, your customer testimonials. Can you just describe the type of person that you serve, the type of problems that you help them with just so the listening audience just has a sense of that? Yeah. There's actually a pretty wide mix. I think people's natural instinct is to assume you're dealing with low-income consumers. It affects income volatility as just a rising problem with the nature of our economy moving towards service and information-based economy, the gig economy coming up. We see a lot of significant income volatility. A huge percentage of our customers have income fluctuations of over $200 a month. And that makes it really hard to budget, really hard to plan, and it actually affects a wide group of people. It may not be the person that you might have in mind. It really affects a large group. We refer to it as the emerging middle class because it really is a huge percentage, as I said 56% of the US. We spend a lot of time, actually. I personally like to spend a lot of time in our servicing center and listening to calls because I feel like, for me, it's personally just really inspiring. First of all, I get energized every time I go in there. It's exciting to see the way that the customers love the product and are excited about the opportunity. When you give somebody a chance that they may not have had that other companies wouldn't take a chance on them, the level of commitment and loyalty that it generates is just really amazing. But in addition, I like being in there because I see how our products are working, whether they're resonating with consumers, what features we need to be building, what servicing tools we need to be building for our customer service account managers to see if we can improve their efficiency and make their job easier and better as well. So it's just a really great experience to go in there and hear about, hear from the customers and learn about it. But as I said, a lot of them are struggling with income volatility and they are looking for ways to smooth out their financial lives. That is the common thread that we see a lot. Terrific. So you mentioned one thing that motivated you was to start a company. It was the incredible social mission of serving an underserved population. And the second thing was the opportunity to build your own technology and do this in a different way than the traditional financial services industry did it.

Technology stack (10:51)

Can you talk about that? What have you guys built and what's different in terms of the technology stack? Yeah. So we approach the problem as my background, as I said, is distributed system, web application engineer. This is actually my first foray into financial services and I've had to learn a lot as I went. But we approach the problem from first principles. How would we want the product to work and how would all the systems that support a credit product work in real time? And can we build all that infrastructure on a modern technology stack? And by doing that, we've been able to have a bunch of firsts in terms of customer features and enabling them to use the product. So for example, we were the first company that had fully algorithmic instant decisioning where someone could apply online for one of our products and instantly know whether they got approved for the product or not. And we did that fully across the board. We were the first lender to roll out instant funding so that we could deploy capital to people's bank accounts really rapidly when they needed it, which is a big deal for our customer segment. We're trying to deal with emergencies that may arise or again, trying to smooth out their financial lives. So coming at it from first principles and building everything in real time allows us to make sure all of the systems that we have that support those products can work in concert. And what we've seen is that competitors oftentimes are buying their technology from vendors. They think of IT as sort of an outsourced function in the business. And that gives us a huge advantage because we have the ability to completely customize our tooling, our efficiency, as I mentioned, for our account managers is much higher than our competitors. We have a fully in-house decisioning system. We can tune to take advantage of new data sources, to roll out new machine learning models as quickly as possible.

Customer Data Integration (12:45)

And in addition, the data pipeline is a huge part of that. We have a holistic view of how all those systems are working in real time and offline for analytics. And one of the first times that I realized that lineup was going to be really successful was early on when we were starting out, I had a competitor call us up and want to talk potentially about an acquisition, potentially about a partnership. And they wanted to learn about the risk management infrastructure we had built, the real time decisioning system. And this was a pretty big competitor doing like a billion dollars a year of originations. And I was thinking, man, what am I going to tell these guys about risk management that they don't already know? We got on the phone with their chief risk officer. And the first question he asked me was, when you make a loan to someone, how do you know they don't already have a loan out with you? So I genuinely did not understand the question. I was like, are you joking? What do you mean? But he meant it because his customer relationship management system and his underwriting and decision management system didn't talk to each other. And so that was the moment where I was like, whoa, we're going to kill these guys. We have infrastructure that can communicate, can adapt in real time, and can really help our customers succeed in ways that they're just not able to. And so that was the moment where I knew that we could align the mission that you were talking about before in terms of helping the customers do better with efficiencies in the business to make something that was effective and scalable and sustainable as well. Got it.

Rolling Out Products, NPS, and Feedback (14:24)

So financial services, banking, lending, et cetera, is highly regulated. It's regulated at the, I think that the federal and state level in complicated different ways. How much does that hamper your ability to kind of build what you want to build on the technology side? What unique challenges does that create for you? Yeah, it definitely creates some unique challenges. So you have to start with every product that you build. Compliance with all those state and federal regulations is table stakes. And we have a value that will set the new standard where we say we want to go above and beyond being compliant, which is the base that you have to do to meet the requirements of the law and set a new standard for our customers, our partners, and our regulators. But it does, you know, there is a base level of certain statutes that you must comply with. So in certain areas, and some of those statutes are written for an era of pen and paper or, you know, brick and mortar. Right. Right. And so some of them are and is relevant. So what we've done is try to establish really good relationships with all of our regulators so that we can have real-time conversations and say, hey, we want to do this thing. We think it's in line with the statute. We think it's better for the consumers. How do you feel about that and create a good two way communication so that we can try to innovate? But there's also plenty of room for innovation within the balance of what the statute provides. And there's also an opportunity, I think, from a competitive advantage perspective to do the compliance better through technology. So automating a lot of the compliance validation and automating a lot of the infrastructure that we use for reporting. So we've been able to get some leverages against, you know, other, because the compliance affects everybody in the market, not just us. And by using technology, we can actually view that as an advantage. There's an element there as well. So you're the CTO of LENDUP today. How big is your engineering team? Yeah, so we are 60 engineers, roughly, and growing fast, so hiring as fast as we can.

Engineering Strategies (16:30)

Right. Yeah. And what are the kind of the most interesting problems you're working on today on the engineering side that you're psyched about? Yeah. So I think one of the things we're doing internally is, you know, for a long time, we were moving really fast, building technology really quickly. And we're trying to just shift the culture just a little bit towards one of craftsmanship. One of the big, the two big engineering values, I think, are really critical for a strong engineering culture are pragmatism and craftsmanship. And pragmatism is about thinking about what you build in the context of the business and making sure that you are building things that are relevant to the business. Yeah. And craftsmanship is about building things well and building them right and having pride in what you're building on a regular basis. And those two things sometimes feel like they can be at odds, but I actually don't think they are most of the time. Most of the time, being pragmatic about what you choose to build and then building it really well are not in conflict. But I think we needed to, LENDUP really think about, we spent a lot of time thinking about how we could get to market quickly, how we could build the products and test things very rapidly. And we're trying to build a more of a culture of craftsmanship within the organization. And that means shifting to every time we build something, thinking about how does it work really, really well for our customer. And that's a change that is challenging. It happens as your organization scales and you have more to lose and more to think about as you scale your company. And it's something that is really critical as we get to the next level, because our products are not something people use casually. They affect their lives in a very real and genuine way. They have a huge impact on their daily lives. And so if they don't work really, really well, it can have a really deleterious impact on our customers. And as I said, when I'm in the call center, you know, talking to customers, if something doesn't work right, I see how it affects them on a daily basis. And so it's become really important that we improve the craftsmanship and quality of what we do every single day. So that's one of the cultural shifts that we're making. In terms of the technology challenges specifically, you know, there's a huge machine learning pipeline that we've built that has to do with taking all the data that we collect on consumers, behavioral data, credit bureau data, everything else that we collect, and enabling our data science team to analyze that experiment and build really powerful decision models, models around fraud, models around risk management, and just really helping improve our ability to identify customers, the right product for the right customer at the right time. So that's a huge challenge that we're always working on and always improving that real time machine learning infrastructure. And then I think one of the other big ones is how do we build the best in class data warehouse and data infrastructure? The data that we have is so complex. It comes from so many different sources. One of the things I've learned about financial services is just the amount and variance of the data is just really huge. And the reporting similar to the way the product works and when we're dealing with people's money, the reporting has to be dead on accurate. Right. So when I was at Zynga, and I was looking at clicks or looking behavior, as long as you were in a rough, rough ballpark about how people were using the product, you could make decisions that were accurate about what to build next. When you're dealing with financial and compliance reporting, every penny has to add up. So really improving our data infrastructure and data pipeline is one of the big things that we're working on as well.

Lessons from Zynga about games (20:00)

Got it. I mean, you mentioned Zynga on LENDUP. On the one hand, they seem so different. But can you talk about what you learned at Zynga that you were able to apply at LENDUP? Yeah, absolutely. Well, the most obvious one is about the gamification piece. So we, a bunch of the things that I learned about at Zynga and how you incentivize behavior in short and medium long-term incentives and goals, we applied to our financial products to try to help people use them as responsibly as possible. So for example, we have the way we tie our loans products together is that a consumer comes in and takes a short-term small dollar loan. And then we immediately, once they've been approved for that loan and we deposit the money in their bank account, we give them the opportunity to participate in credit education. And by participating in the credit education and by making their payments on time, they earn points, which then allow them to get access to larger dollar products at lower interest rates and with longer terms to help stabilize them. So that entire incentive structure sort of came out of the gamification stuff that I had learned at Zynga. I think Zynga had an incredibly data-oriented culture. All the decision making was data-oriented. Mark Pinkis was very much a data-driven CEO and he culturally instilled that across the company. So that's something we've tried to do as well. When you're having a conversation about what you should do next, what you should prioritize, how to think about what to build, usually someone has data and someone may not. And the person with the data can tell the story of why something is important, whereas the other person might just be telling their own narrative of where they think things may go. It's always good to follow the data and let the actual data tell the story. And so that's something culturally we've tried to definitely instill. You guys, LENDUP has a couple of credit card products in the market today. And they have some really neat features that maybe haven't gotten as much attention as they deserve. Can you describe like the LENDUP credit card product and some of the features that I think are only available on your card? Yeah, absolutely. So we're really excited about the card product. It's the next natural step in the ecosystem that we're trying to create and being able to graduate people from personal installment loans onto credit cards is revolving credit products are ideal for a lot of customers in terms of managing that income volatility that I mentioned before.

LendUp Credit Card (22:04)

So we're really excited about that product and we're really starting to scale it. We've done some pretty cool stuff with it. So first of all, we're really thinking about it as a mobile first product. With the loans product, the amount of interaction that you do with that product on a daily basis as a customer of that product is not that high because you're coming in to maybe make it an extension, make a payment, look at your balance. But it's pretty rare. Whereas a credit card is a highly transactional product. It's in your wallet, you're using it on a regular basis, you need to you know, you need alerts, you need it's a real time product. And so we're thinking about that as a mobile first product and built into the mobile app, we actually partnered with our credit card processor that we use for interacting with the networks. And we injected ourselves into the authorization stream that happens every time somebody makes a swipe with one of our cards. And what's cool about that is we don't just see the stream so that we can do things like push notifications, which actually has not really been offered in credit cards beyond the vertically integrated cards like MX and Discover. There are no master card and Visa cards that actually do push notifications. You can get them through Apple Pay, but you cannot actually get them through the card issuer because they're not doing they're not seeing that stream. So we have push notifications, but not only can we see the authorizations as they happen in real time and react, but we can actually participate so we can approve or decline transactions in real time on behalf of the customer. So what that means is we are experimenting with a bunch of really interesting features that allow people to set limits for what they spend in various categories or to create fraud prevention in terms of geo geofencing or geo locations where the card has to be within a certain distance of them where they have to be in a certain area for it to work. Their phone has to be here for the card to work and it has to be within location of the card. So there's some really interesting stuff we can do there and we're experimenting with those features right now. We're rolling out that app as a beta to our card customers as we sort of learn more about what's working there. Got it cool. So can someone listening to this podcast get a lend up card? Not yet. Not yet. So we're we're planning we're hoping to open it up to open applications. Right now it's still a beta program. Got it. Start targeted. Yep. Got it. We're scaling it pretty significantly, but it is still a close, close beta. Got it. Great. So it's being invited. Yep. Okay. It's cool. Okay. You won though. Okay. Yeah. I won't. So let me ask you. So what you described at the beginning of the podcast, you've been in this industry a long time. You got involved and I think you said you were 15 and a half when your mom drove you to Yahoo for an interview. For any sort of young engineer early in his or her career listening to this podcast, what advice would you give today for someone who's looking to enter the field and make a big impact? Yeah, it's a great question. So the thing that comes to mind here is, you know, when I was early in my career, as I mentioned a little bit earlier, I was really focused on honing my technical craft and really wanted to be the best possible engineer I could be on a technical level. Wanted to learn all kinds of patterns and operations and various other pieces of what it meant to be a well rounded software engineer. And I think I really neglected to look at the context of what the work I was doing, how it fit into the businesses that I was working in until much later in my career. So it really wasn't until late in my career at Yahoo, some of it at Zynga, and really what really pushed me was starting my own company and knowing that everything I worked on had a direct connection right to what the company was trying to do, where I really understood what it meant to fully understand how your work fits into the context of a business. So what I often tell younger engineers now, some of them naturally at age 19 just have a business sense that, you know, is amazing to see. And when that happens, great. But a lot of engineers I see early on in their career are really focused on their technical skills and don't look at the how what they're doing actually moves the bottom line for their business or the top line for their business or the mission of their business, all of which are critically important if you're actually going to be really successful as an engineer. If you want all those things that you're working towards in your career like mastery and autonomy and purpose and all the ability to create and innovate, the way that you're going to get those things is by making a big you are you know if you're working at a company the company has a mission, it has a bottom line, it has a focus, think about how your technology moves that forward and then start looking for the leverage points about where your technology can advance that. And the earlier you start thinking in that context, that sort of that pragmatism that I mentioned before in the context of the business that you're working in, the better engineer you're going to be because building a really beautiful tech that doesn't advance anybody's goals is really fun.

Focus on the business (26:58)

You know, I like messing around with home automation stuff all the time, but at the end of the day what creates value in the long run is trying to advance the mission or enterprise that you're involved with. And so that's the biggest mistake I see young engineers make is just focusing too much on am I a good software engineer? Can I code and not enough on what is my code doing in the world? Whether it be the impact that it's making for people or the impact on the bottom line of the business that I'm in. Right, great. What about mentorship? Like that's one thing I haven't asked you about. Were there? I'm sure you're a mentor now to people. We earlier in your career, were there important mentors for you?

Importance of Mentorship (27:55)

And would you advise young people to look for that as they get started? Yeah, absolutely. The story about mentorship that I always tell people is that when I did graduate school, it was 2001, and it was a very, very bad time in tech. It was post first dot com crash. And I had an offer from Yahoo to go work there full time. And I was graduating. It was May of 2001. I was graduating with a degree in computer science. And I got a call from my then manager at the time who said, "Hey, I'm going to FedEx you your offer letter." And it was like Monday. You're going to sign it. You're going to FedEx it back. It's going to be on my desk by Wednesday. And I was like, "What's the big deal? What's going on?" He's like, "Just do it." And I was like, "Okay." So I got the thing. I signed it. I FedExed it back. And then the day after he got it and my offer was confirmed, Yahoo announced like layoffs, hiring freeze, the whole deal. So I was this close. And because I was so focused on Yahoo and had been a part of it from early on, I wasn't looking other places or interviewing or getting my resume together. And I was always a little bit of a tinker or builder, not an academic. So my academic performance was, shall we say, spotty? And so I would have been in real, real trouble. And that moment for me was just a masterclass in mentorship and in management, in that he knew what was going on with every one of his people at any given time. And he made sure to think about them, to protect them, to make sure that they had what they needed to be successful. And as I continued to work for him, I saw him demonstrate that in so many different ways. And I ran into someone after years of not working with that mentor. I ran into someone who knew him. And they mentioned that he had been following everything that I'd been doing, that he had been talking proudly about lend up and all this other stuff. And I hadn't talked to him in a really long time. And it's just further cemented that he was just the kind of person who just genuinely cared about the people that he worked with and the people who worked for him. So I always try to model my mentorship and management on that is really learning about the people that I'm working with and investing in them and knowing I'm not naturally like a networker and someone who keeps in touch with people on a regular basis. And so it doesn't come naturally to me. But it matters so much in the connections that you make in the long term.

People Management

Managing People (30:26)

And so it's something I've had to train and sort of grow in myself. Right. That's a great story. Okay. Last question. If we imagine the world five years from now and think about all of the potential and possibilities for lend up, what does lend up look like five years from now in your vision and your dreams? Absolutely. So my dream for lend up has always been that we create an entire ecosystem of products that are all constructive for consumers, but are all designed for different use cases and different types of consumers in that realm of people who don't have a lot of options. And we connect those all together with technology that can essentially look at an individual customer and figure out what they need to get to the next level. So when they come and they apply, there's a product for them. There's something that they can start with that helps solve their immediate need. And then we customize a path for that person through a series of our products to help them improve their financial lives over time. And that may be credit or maybe other things, budgeting and financial management. There's so many opportunities to help people manage their financial lives more effectively. Bill, pay. I mean, you name it, right? There's so many things we can do. And so I want to build a whole suite of financial services, sort of what AMX is to the wealthy business traveler in terms of this whole suite of services that they provide that are all cohesive and work together. I want to provide that to the half of the country that doesn't have access to banks in a constructive way. And I want to tie it all together with machine learning that customizes a path for every single person. So every single person comes, gets a customized product, and then has a very customized path for them. This is what you do next to grow your financial well-being. And then that adapts as they behave, right? If they're succeeding, it continues. If they are struggling, then we change the way it works for them as we learn more about them and how they operate. And so that's the dream. So there's a bunch of products that we have that we're thinking about next in terms of continuing to build out that ecosystem. But it's a huge, huge market. You know, credit cards in the US is 350 billion, depends on who you ask, but somewhere between 350 billion to 450 billion in revenues. So this is not a small market. And that's just the United States. And so we have plenty to grow in where we're at right now, but we want to continue to innovate and add new products to the ecosystem as well. Terrific. Well, that's an amazing, amazing vision. You guys have made a huge amount of progress. And we're looking forward to seeing kind of what comes next. Me too. Yeah. Great to see you. Thanks for the time. Thanks. Thanks for having me. Awesome. Thank you.