At our third Facts + Snacks lunchtime event with SA’s leading entrepreneurs, we chatted to Trevor Gosling, Co-Founder & CEO of Lulalend, about how his team goes about building strong tech partnerships with customers like Yoco, Takealot, Vodacom and Payfast.
Transcript of the discussion
Hello. Welcome, everybody. Trevor, it is so cool to see you and to get the chance to chat today.
Great. Thanks for having me, Jomiro.
So, welcome everyone and Trevor to our third and final Facts and Snacks event for the series. My name is Jomiro, and I’m the host of the OfferZen podcast. I work on the blog at OfferZen and Trevor I wanted to turn this into a bit of a party. For lunch, I was going to bring a whole bunch of vegetables and greens because you know, lettuce turnip the beet. But yeah, I like puns and eye rolls and I assume everyone is laughing, but I can’t hear you.
In this series, we chat with some of South Africa’s leading entrepreneurs every Thursday, between 12 and 12:30. As I said, this is the last one in this series, and we’ll be launching a new round of speakers at the end of September. So, keep an ear and an eye out for the invite. Welcome, Trevor. It’s cool to have you. Could you do a three-story elevator pitch, just to briefly introduce yourself?
Cool. Thanks for having me. Thanks, everyone. I know you could be having your snacks anywhere but thank you, thank you for being here. My name is Trevor, and I’m the Co-founder and CEO of Lulalend. Lulalend is an online business lending platform that we’ve been running for the last six years. Before that, I got into an entrepreneurial space and managed to exit the venture, and before that, I was a chartered accountant at Rand Merchant Bank in the investment banking space.
Awesome. Thank you. Well, we’ll dive into some of those details in just a little bit but to give a little bit of a flow to the event, in case you are here for the first time – although I see some repeat joiners in the participants – we’re going to have a quick, rapid-fire Q&A session just to get warmed up. We’ll follow that by a deep dive into a specific topic and then we’re going to have an audience Q&A.
So on that note, for anyone who’s joining, there is a list of tabs on the right-hand side or of your screen – it will be underneath the videos, chat questions and polls, please jump into the questions tab and throw all your questions that you want to ask Trevor in there. Upvoting means it will be more likely for us to pick them so also engage with other questions you want to see or you want to hear me ask and we’ll dive into that at the end.
I will remind you in between to do that as well though, and then on the poll, you can also engage in conversation and chat. You can share what you’re having for lunch and engage with some of the other people, and then also there’s a swag competition.
Jomiro [ 02:58]
One lucky attendee and unfortunately, this is only open to SA audiences, but we’re going to be giving away a swag hamper just for joining. So, make sure you stick around till the end to find out if it was you. With that, let’s jump in.
As you’ve heard, Trevor is the Co-founder and CEO of Lulalend, a leading South African FinTech company. He’s also previously founded Five Ounces, qualified as a chartered accountant, with quite a CV, so it’s nice to have you and to get to chat to you. Right – into the rapid-fire questions. Let’s start with this one. What are the two biggest lessons that you’ve learned about fundraising for your start-up?
I think that the biggest one, and I see this issue with founders all the time, is trying to put a five-year vision into a pitch deck and present it to a VC, or whatever the case may be, and try to sell them on this massive vision. What you need to be doing is yes, show your ambitions, this is our vision, but over the short term, this is what we’re looking to execute on, and this is the vision we need to get over the line, as VCs are far more interested in buying into that scenario.
Then, the other thing is just searching far and wide if you’re not feeling fortunate in the current market in terms of accessing finance. Look globally, that’s what we did. We’ve got a bulk of global investors behind us, and there is a global appetite in the South African market, and emerging market, so don’t limit yourself. There’s a lot out there.
I think the global appetite one is interesting because I think it’s easy to say it’s there, but it’s kind of scary to start looking for it and to know where to look for it. Do you have any lessons you’ve learned about approaching people or finding out where that global appetite lies?
One of the best stories in terms of how we got going when we raised our pre-seed round, when we needed a sizable piece of capital in SA terms, for European investors, it doesn’t look as big.
I got onto LinkedIn. I heard about an angel investor. In his capacity, he was quite successful out of Europe and I heard that he had invested in local African start-ups before, so I pinged him on LinkedIn. He got back to me two weeks later, asked for a pitch deck, sent that through, he bought myself and my Co-founder tickets to the UK to talk terms and then we signed the deal from there.
LinkedIn is a channel but don’t limit yourself, ask for introductions and that sort of thing. I’ve also gone and introduced several people into our investment network, but people know people and more global investors have gotten into space over the last few years, so there is more opportunity to get in touch with the right people.
Yeah, I’ve also heard that people are generally quite willing to share advice even if you just reach out and say, “Hey, we’d love to pick your brain” – that’s been a really good way as well. Interesting story, thank you for sharing. What are your two tips on the best way to establish a product-market fit?
I think on the product-market fit side you’ve got to know your product-market fit equals traction. You know it when you have it, but it’s also always evolving, it’s always changing. You’ve got to know how to measure it, and you’ve got to know how to work towards it. It’s never static, and you’ve always had to keep that in mind.
In terms of two top tips, I think, first and foremost, when you find a customer who’s completely satisfied or enthusiastic about your, product, you’ve got to work tirelessly to understand, you know why they’re so excited about it, and when you found out exactly what it is, then you got to double down on that and make sure you’re doing it better than anyone else in the market.
To extend your product-market fit you have to approach those customers who are happy for the same reasons as that other customer, but there are other areas where they’re not as satisfied and drill down into those areas, and start solving there, and leave the rest of the customers out of the equation at this point because, once you’ve sold for those two areas, then you’ll start feeling that traction is coming through.
Jomiro [ 07:24]
And what’s the best advice that you’ve received about starting a business?
I think the best advice I received or picked up I mean, I can’t remember specifically being told it, but it was not living or operating your business with excess, or in excess, meaning make sure every cent counts. That’s because the longer your cash flow runway is, whether it’s in your business or your personal life, it gives you more time to succeed eventually. If I think about my first venture, I saved up enough money for about nine months, as I knew I wouldn’t be able to draw a salary. That eventually turned into 18 months before I was drawing a pay check out of business. So, you can imagine, I was living super lean and one polony sandwich away from throwing it all in but giving myself that time to get to that point where you’ve evolved into a healthy exit scenario was cool. That was the best advice I still use to this day. I mean, you realise that we live on so much excess so many times, but we don’t need to be surrounded by materialistic things that don’t add any value, both in our personal lives and in the business.
Just before we dive into the deep dive questions, I’m curious to know what are some of the ways you live lean? What were your biggest ways of saving on expenses when you were starting your business?
Cut down everything. You realise exactly what it is you need to survive but to live comfortably, things like owning a house I think for a Founder – especially if you’re pretty young, and you don’t have much capital to your name – isn’t the best way to go about things. Rather look for a cheap rental option to get yourself through.
Then just extravagance, I didn’t buy myself a new pair of clothes or anything for 18 months. My girlfriend at the time, now my wife, treated me to two pairs of pants and two new work shirts, and that is all I had in 18 months, but you realise you don’t need much more than that. It was eye-opening for me, especially coming from an investment banking background where it is the opposite – it’s all about how you look, and if you have a flashy, nice car, fancy watch all that sort of thing, which you find that is fairly irrelevant in the greater scheme of things.
All of a sudden socks for Christmas become quite an asset. Cool. Thanks for that little intro into the rapid-fire questions. Just a reminder for everyone, please use the questions tab, ask your questions. There are already some people asking, so feel free to upvote the ones that you’d like me to touch on. But while you’re thinking of questions, Trevor, Lulalend has worked with some of the biggest brands in South Africa, brands like Vodacom, PayFast, Yoko, and Takealot by offering your platform as Software as a Service and integrating your tech there, but why was lending as a service integral to your business model in addition to direct to customer?
Yes, I think there are two parts to it. So initially, just launching the business, we needed to launch through a partnership, and I’ll explain why because five years ago, the digital learning environment was very different. There was no one giving B2B loans, especially in a digital context and you never actually meet a customer.
For us, it was super important to launch with a partner, and we were very fortunate that PayFast at that time had built a pretty sizable business and had a lot of merchants who were utilising the gateway and were keen enough to partner with us and saw the value add. For us going with a partner in a market where no one vetted anyone online on a B2B space, there were a whole bunch of inherent risks around it. We thought going with a partner was the best way to start to test our concept to see if there was interest in the market there.
At the same time, we could access data around those merchants through PayFast once an applicant approved that they’re happy to share that data. We could use that data into our credit modelling, understand the business a whole lot better and fund them from there.
That was the initial entry into our partnership. We knew longer-term partnerships were going to be key to our business, but at the same time, we knew that you know, partnerships are a lot of work and are resource intensive. So post-Payfast when we knew that there was traction and that base merchants were largely focused on the e-commerce space, we knew there was an appetite to go into the broader market, and that’s when we opened up our direct lending business and started growing Lulalend as a brand to start lending.
Until about two years ago, where, through capital raisers we were in a good position, we could start focusing our business on partnerships a whole lot more and giving them the resources and attention that they needed. Over the last two years, that’s been a big focus of ours because for our direct business, we will continue to grow that linearly well, but you’ll never have that real step up growth. If you’re looking to dive into that step of growth that’s what a partnership can offer to you and that’s why it’s been a bigger core focus for us.
In terms of partnerships, what did build partnerships require from you in your context specifically, what were those requirements?
The biggest thing is a partner who was interested in partnering, and the value adds that they could give to their merchant base, give them access to funding and at the same time, the partner being tech base so that they would be able to do the necessary integrations to go along with us. That’s how it looked from the partners perspective.
Internally on our side, we’ve had to look at our platform and say, how do we develop something very flexible, very customisable, to be able to suit the needs of any new potential partnership, and we don’t have to go back to square one for each one and start developing, a completely new platform to be able to service them.
At the same time, automation has been key to our journey and especially, in a partnership landscape where end-to-end, we give our businesses that are looking for funding complete automation. They can make an application online and get access to funding or an immediate decision on the application. When you step into a partnership environment, these tools need to be available immediately so that you can serve as their base and they can get the expectations that you’ve promised at the start. Those have been the two areas internally that we’ve focused on.
Do you have any advice for how to make that effective because my assumption, for example, on the automation and tooling side, just having those isn’t enough, that’s not the silver bullet, having the thing is not the silver bullet. Do you have any advice or principles that have helped you in building partnerships effectively?
We look at it as three parts to any partnership. So, there’s the upfront part, which is you pitching the partnership opportunity, but you are aligning strategically with the partner. If I talk about the principle in that space, we need to be empathetic to the partner’s needs, understand what they’re trying to achieve commercially, the person that you’re speaking to, if it’s a big organisation, what are their KPIs that they’re looking to meet, and make sure that they’re, interested and have full buy into the solution that you’re proposing. Then the partner’s customers as well, you need to keep them in mind constantly. We will call that the top level, being empathetic to the strategic relationship that you’re looking to get into.
Then once you pass that you go into the implementation development side of the partnership, a key guiding principle there is just reliability and open communication. If you can continually practice that, there’s a good chance you’re going to get over the line to make sure that this partnership comes to fruition.
The third one, when you’ve gone through the implementation of developments and your products live, it’s about being dynamic at that point, you’ve done all the hard work, but at least you think you have, but there’s still a lot to be done. You need to be dynamic to continually evolve that partnership and take it to where it needs to go. You can’t just sit back and say, all right, the works done, let it fly from here.
From a user’s perspective, what key insights have you gotten from your users that you didn’t know before you started this process?
I think what’s beneficial to all of this is that we, being a direct lender, feel the pitfalls day-in-day-out of what an end-user feels in terms of using our product. That already gives us a head start when we go into these partnerships – we know ultimately what their customers want this to be successful.
I think that’s been beneficial in how we think about things and making sure that what we’re building and what we’re developing and what we are reiterating is, really going to move the needle and it’s not just doing it for the sake of it, because this is a customer requirement, it’s going to improve the customer experience, it’s going to give more opportunity for us to fund the business. I think we’ve been fortunate in terms of how we thought about it, and versus a company who’s gone more just one approach but, they’re not living it today.
You can get over that hurdle by really just being completely involved and entrenched with a partner if the opportunities are there but if it’s not, it’s very hard to be solving for a partner and not living it on a day to day basis.
I’d love to use this opportunity to jump into some of the Q&A questions or some of the audience Q&A. I think it segues quite nicely off the back of some of the stuff you’re saying. Just a reminder, jump in there now, if you haven’t upvote ask your questions. We’re going to be diving into those.
To start, Vinny says other credit platforms that he comes across usually struggle with the manual vetting process, so how are you managing that?
Yeah, that’s taken a lot of work and a lot more than we thought it would. I would say when we looked at this business model six years ago, we thought all right in a year, we’re going to be completely automating the underwriting process because that’s the fundamentals.
Where it gets tricky is, we are underwriting completely different businesses, we can have a restaurant making an application, which is completely different from a construction company, looking for funding. It’s just been a case of building up data over the years and moving from heavy analytics models to more machine learning-focused models. That’s allowed us to reiterate continually, take the performance of our loan book, throw that back into the model, and then continually tweak things to get to a situation where only in the last couple years have we had the complete end to end automation where we had solved completely for that.
That’s interesting, and maybe I’m going to steal the spotlight for a sec just to pick on something you said. What has been the biggest lesson for you in that I think automation is an end goal for a lot of people. It might not be something you can do immediately, but what has been the biggest lesson in that process for you?
I suppose in our environment, you have to be, super cautious, especially upfront, we are giving out money, if you get it wrong, you don’t get money back and that immediately hurts your bottom line and any ability to continue as a business. So, we’ve had to be cautious about that upfront, but you’ve got to take those leaps of faith at the same time. If you feel things are working, you got to, just like the product-market fit, you’re going to funnel all your energy in there and continually solve for that so once you take a step back and that piece is solved, you’re comfortable that you can take your hands off the wheel sort of thing and this can run itself.
Cool. Thanks for indulging me. On to the next question from Tumi, she wants to know what common red flags to be wary of when working with companies as a fledgling start-up?
If she’s talking around if someone is just looking to understand your idea, but never move forward with you, I think, be cautious around that as it does happen. Initially just share what you’re comfortable with, make it super appealing and if you get to a stage where you start aligning yourselves on interest and commercials do this as soon as possible rather than waiting too far down the line. If you’ve left it too late, but you’ve opened yourself up and spoken through everything that’s going to put you in a bad position. If you’re a fledgling start-up, you can’t potentially survive something like that.
I think trust is a massive thing but develop that relationship with the person you’re with and try to get as honest as possible as soon as possible, That’s the best way to go about it.
Then Luke says, your first customers are a great source of feedback for your product direction. Do you have any tips for filtering through the feedback and deciding on what input is most important?
Yeah, I think our head of product will have a far better idea of that. It’s continual surveys, and you must have a certain number of customers with a certain amount of feedback before you can work off the back of that. It’s about your constant engagement, whether it’s through surveys through phone calls, through customer visits, just to understand who they are, and the pain points being solved for them.
Trevor [ 22:53]
Again, I don’t think there are any real silver bullets but listen to your guts. I think after you’ve accumulated the information, you see what’s making sense, what the common themes are, what sits comfortably with you then you know, this is the right call to make for all.
So, I’d like to highlight something you said, and I think that’s a critical point and there is a bit of understanding pain points. I think feedback on its own can be misleading because you can’t change your product to every piece of feedback but if you understand the pain point that the person experienced, which caused them to give that feedback that is way more useful for product delivery, and you’ll often find people have the same pain points, but different feedback, and then you can work on fixing the pain point as opposed to just reacting to the feedback. I think that’s a good point to highlight.
Then we have – how would you go about validating your ideas?
You know, once you have an idea, move fast to get to an MVP scenario, and get it out on the market. Don’t be scared, don’t sit on it, don’t wait for perfection before you get it out there. It just needs to be at a level that it can work. Once you’re comfortable there, put it into markets, and the market is going to validate it for you.
If there’s an appetite for it, you’ll start feeling it soon after that. If you see that not a lot is happening around it, there’s no real buzz or excitement you will know, that’s the insight you need at that point in time, and you need to understand, is it a product tweak scenario or is it never going to result in any product-market fit for yourself.
Next question, when did you see a point of inflexion in your business’s growth and what triggered that?
First lending is a very different environment, and I can say that if I compared it to my eCommerce company beforehand where you had your products, and it was a case of, pushing it as hard as possible and identifying the channels that helped it grow.
Lending is a different animal because you can’t grow too quickly. You can’t put too many loans out in the market until you’ve validated the performance on those loans and if you’re getting repaid, you almost have to take it step by step, and you can’t be too aggressive.
In our environment, we know the appetites there, a lot of people are looking for funding, or need access to funding so for us it’s been around solving the scoring elements of that. Once we solved the scoring elements, we were able to be a lot more aggressive, and then it became a real constraint on the capital side.
We were able to access more capital and then we could start growing there. A very different journey to how I think about my eCommerce venture, which was based on finding that inflexion point through the channel. That comes through testing. You’ve got to test across all channels to understand if you have a channel product fit. When you see it, when you see that sort of inflexion in a channel, that’s when you double down and make sure you get as much out of it as possible.
Then just a last question before we run out of time, Gareth says, and this is relating to your lending as a different space. It is a competitive space, as new entrants are coming through all the time. So, what is your plan for staying ahead of the game, potentially fighting competitors that have, I guess, like larger war chests behind them?
Yeah, you got to differentiate yourself continually. I think we had a bit of a market advantage in that we were the first completely technological lender but especially in times of COVID, guys who maybe we’re a little bit more offline focused, they very much delved into the digital space.
We know the competitive landscape is only going to get more and more, but I think it goes back to what we’re trying to do for our customers and solve for them. So, we want to be the d-cash-flow solution; however, that might look in different forms in different products; it doesn’t just have to be lending but providing the cash flow solution for any SME in South Africa. That’s our goal and focus, and we’ll continue to develop there, listen to our customers and understand their pain points, and how they want to, more successfully run their business and those are the areas we continue to evolve in.
Fantastic. Trevor, thank you so much for your insights and sharing some of your experience in the industry. It’s cool to hear from people who have been there and are potentially still in the trenches.
If anyone asks questions or still wants to ask a question that we didn’t get to, we will try to wrap that up and send it through soon. Also, these questions are being immortalised in content, so you’ll be able to see the video and rewatch some of the questions if you like.
The swag winner is – drumroll in the background – Marie! I hope I pronounced that correctly. We’ll be reaching out to you super soon and getting your swag to you, so keep an eye out for that.
Also, keep an eye out for our next series. You should get something in an inbox near you, hopefully your Gmail one, or like, an email one. Thank you, Trevor. Thank you. Thanks for bearing through with load shedding. We got there. See you all soon. Cheers.
Cheers. Thanks, Jomiro.