Latest / Leaders In Payments / Luke Voiles, CEO of Pipe | Episode 318

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Luke Voiles, CEO of Pipe | Episode 318 · Leaders In Payments

• 0:01
  Speaker 1: Welcome to the Leaders in Payments podcast, where we talk to C-level leaders from across the payments landscape.
• 0:06
  Speaker 1: We'll be discussing the products and services that impact the payment space today, as well as trends and predictions for the future of payments.
• 0:14
  Speaker 1: We will also hear stories from our guests about their journeys to the top.
• 0:18
  Speaker 2: This is the magical part about bringing the banking into the place where you're running your business.
• 0:23
  Speaker 2: If you need to draw, like, the first time takes three or four clicks, the second time takes one, the third time takes one it's just a single click.
• 0:30
  Speaker 2: Draw to draw more capital and you know it's there, it's persistent, it's that security blanket that follows you around.
• 0:34
  Speaker 2: That is what small businesses want.
• 0:36
  Speaker 2: They don't want to go search for loans and get paired for loans.
• 0:50
  Speaker 3: They want to just know that they're qualified and be able to click and get it and have a fair offer, and that's what Pipe enables.
• 0:53
  Speaker 3: That was Luke Voiles, the CEO of Pipe, and he is my special guest on this episode, episode 318 of the Leaders in Payments podcast, and I'm your host, greg Myers.
• 0:58
  Speaker 3: Pipe is eliminating the friction and bias in traditional financing, connecting business builders to quick, easy capital and helping small to mid-sized businesses build something bigger.
• 1:09
  Speaker 3: Luke and I dive deep into Pipe, including what makes it different and unique in the marketplace.
• 1:14
  Speaker 3: We also discuss Luke's extensive background in the space and how helping small businesses succeed is not only his passion but the mission of the company.
• 1:22
  Speaker 3: We've got a great episode ahead, so let's get started.
• 1:24
  Speaker 3: Hi Luke, thank you for being here and welcome to the Leaders in Payments podcast.
• 1:34
  Speaker 2: Hi, greg, appreciate it.
• 1:34
  Speaker 2: Excited to be here.
• 1:38
  Speaker 3: Great.
• 1:39
  Speaker 3: So let's go ahead and dive right in, If you don't mind.
• 1:40
  Speaker 3: Tell our audience a little bit about yourself, maybe where you grew up, where you went to school, where you currently live.
• 1:43
  Speaker 2: A few things like that.
• 1:44
  Speaker 2: Yeah, I actually grew up in a town called Sherman, texas, which is about an hour north of Dallas it's probably 15 miles from Oklahoma.
• 1:50
  Speaker 2: Went to a public high school there called Sherman High School, but I played soccer in Sherman and then ended up going finishing school at Austin College for undergrad on Sherman and then got a JD and an MBA from SMU, also in Dallas.
• 2:05
  Speaker 2: So my stepdad raised cattle, so I grew up on a ranch.
• 2:09
  Speaker 2: My dad was a fishing guide on Lake Texoma, so I'm a bit of a redneck in a sense, I guess.
• 2:15
  Speaker 2: At the same time, but I've been in San Francisco now for 13 years, I guess north of SF, in Marin.
• 2:22
  Speaker 2: So I live in Larkspur here.
• 2:23
  Speaker 2: I have four kids, so like every half my answers are probably in a reference that I don't have any time because I have too many kids running around doing stuff and they're age four to 14, two boys, two girls.
• 2:35
  Speaker 2: That's what life is all about.
• 2:36
  Speaker 2: So that's it Awesome.
• 2:38
  Speaker 3: Awesome, thanks for sharing that.
• 2:39
  Speaker 3: So let's discuss Pipe.
• 2:41
  Speaker 2: So tell the audience what Pipe does, yeah, so we basically help solve the largest pain point that small businesses have.
• 2:48
  Speaker 2: So small businesses, if you look at the research, it consistently shows up where the biggest pain point is access to capital.
• 2:55
  Speaker 2: They just need money to grow their business to pay payroll, to just pay the bills, just working capital.
• 3:00
  Speaker 2: And so what Pipe does is that we make capital available to small businesses from within the software they use every day to run their business.
• 3:09
  Speaker 2: So we announced a partnership with Boulevard recently and so Boulevard is a SaaS vertical offering for spas, nail salons, hair salons, businesses like that, and so those business owners can solve all of their pain points, complete all of their business operational tasks in one software.
• 3:28
  Speaker 2: Right, they don't need to use five different things.
• 3:30
  Speaker 2: They just log into their Boulevard account and go manage their business.
• 3:33
  Speaker 2: They complete tasks there, and now when they log in they can see the Boulevard capital offers that are powered by Pipe.
• 3:40
  Speaker 2: So we're basically just bringing the banking system into the software where businesses spend their time.
• 3:46
  Speaker 2: So I've talked a lot about how businesses don't go into the banks anymore to do anything.
• 3:51
  Speaker 2: They don't go get cash for the next day, they don't deposit checks anymore.
• 3:55
  Speaker 2: There's no opportunity for the loan officer to cross sell because the business owners don't go there anymore.
• 4:01
  Speaker 2: They just go into the software.
• 4:02
  Speaker 2: Like 10 years ago they were just going into QuickBooks and into Square to do things, these horizontal software offerings and now the new verticals are popping up and you can see it across all kinds of different industries.
• 4:14
  Speaker 2: But Boulevard is a really great example of just having great design and great customer focus on solving nail salon, hair salon owners' pain points.
• 4:22
  Speaker 2: It just makes it really easy to go run a business and start a business if you just use that software.
• 4:25
  Speaker 2: So that's the gist of it.
• 4:27
  Speaker 2: We just make capital available to small businesses where they spend their time.
• 4:31
  Speaker 3: Okay, and do you also sell directly to small businesses?
• 4:36
  Speaker 2: That's not a channel we focus on.
• 4:37
  Speaker 2: Yes, you can come to our website and log in, and if you process through Square, stripe and some other processors on the e-commerce side or the commerce side, we're able to lend you money or advance capital to you.
• 4:53
  Speaker 2: But fundamentally, the whole customer acquisition approach for Pipe is the B2B2B approach, and so we announced that we signed three new partners, and together they have nearly a million small businesses that are powered by those partners, and so our approach then really is to go sign new partners that have access to more hundreds of thousands of businesses and then help those partners make their small business customers aware of their pre-approved offers in product.
• 5:22
  Speaker 2: And so we will just scale dramatically faster if we partner with other software companies that have 100,000 customers already and then go scale under that opportunity.
• 5:32
  Speaker 2: Going direct is really hard right.
• 5:35
  Speaker 2: So I led the marketplace at Intuit, where Funbox and Funding Circle and Bluevine and OnDeck they all made loans to small businesses through our marketplace.
• 5:45
  Speaker 2: Many of those other earlier alt lenders tried to take the direct approach.
• 5:51
  Speaker 2: If you look back at the public filings on some of them, you see that 40% of revenue was spent on acquiring customers in a direct manner.
• 5:59
  Speaker 2: That approach is just a treadmill and I don't think really works at scale.
• 6:03
  Speaker 2: We've taken the B2B2B approach and it's been working great so far.
• 6:07
  Speaker 2: Our conversion to loan to advance made has been extremely high and it's it's a pretty magical experience for the business owners that pop into the software and see a see a security blanket show up, basically right, here's your pre-approved offer and it's a multi-draw line of credit from their perspective, by the way.
• 6:23
  Speaker 2: So so they can draw down whatever they want whenever they want it, and it's always there and it's always present.
• 6:27
  Speaker 2: So for us, the acquisition approach is B2B2B.
• 6:30
  Speaker 3: Okay, and is it typically white labeled by the partner?
• 6:34
  Speaker 2: Yes, it will always be white labeled.
• 6:35
  Speaker 2: So you get and Intuit I was spoiled because we Intuit.
• 6:39
  Speaker 2: They're really QuickBooks and TurboTax are some of the most trusted brands in the world.
• 6:44
  Speaker 2: You get that immediate trust when you launch something like QuickBooks Capital, which I led the team that built that.
• 6:49
  Speaker 2: You have the trust automatically when we partner with businesses like the Boulevards of the world that have built a ton of trust with their small business customers.
• 6:57
  Speaker 2: When the business owner or the nail salon owner sees an offer of Boulevard Capital, they immediately know that and they trust it.
• 7:04
  Speaker 2: We enable Boulevard to do that and so white label like the pipe brand won't show up directly in these partnerships.
• 7:11
  Speaker 2: It just enables the core software businesses to serve their customers better.
• 7:16
  Speaker 2: Basically, we're kind of behind the scenes in a sense.
• 7:19
  Speaker 3: Right.
• 7:19
  Speaker 3: So I know a similar model.
• 7:21
  Speaker 3: Obviously, embedded payments, right.
• 7:23
  Speaker 3: I'm sure Boulevard has some embedded payment solution.
• 7:25
  Speaker 3: One of the challenges they typically face is how do you get those end merchants to convert or to take up the offer.
• 7:35
  Speaker 3: So do you do anything with a partner together to try to promote the solution, or how do you convince the companies to come on board and take your solution?
• 7:47
  Speaker 2: Yeah, I've learned a lot in the last eight years on this part.
• 7:50
  Speaker 2: This is the hardest part for a lot of folks.
• 7:52
  Speaker 2: So if you look at what works at Intuit, a third of the traffic came from email.
• 7:57
  Speaker 2: So if you send out pre-approved offers via email, it works.
• 8:01
  Speaker 2: I'm a like I'm a.
• 8:02
  Speaker 2: I'm a nail salon and women owned like immigrant women owned business owner that has no FICO score and all of a sudden you get an offer and product that says you're qualified for $200,000 because your business is amazing.
• 8:13
  Speaker 2: You're doing 2 million a year in revenue, filling all of your seats in your locations, just like nonstop, like that business is fantastic, but that business owner has never had access to capital for.
• 8:23
  Speaker 2: So when they see the pre-approved offer showing up, it's like, well, I never thought I could even apply or like thought it would be hard to apply.
• 8:29
  Speaker 2: But when they see the summary of how easy it is, they come through.
• 8:31
  Speaker 2: Email alone can drive about a third of the traffic.
• 8:34
  Speaker 2: The other third kind of depends on what your software looks like and what your customers do in product right.
• 8:41
  Speaker 2: So one of the things we do with each partner is a workshop where you go through and it's an analysis, effectively, of task completion.
• 8:49
  Speaker 2: So what are your small business customers doing in your product?
• 8:52
  Speaker 2: Where are they doing it and why?
• 8:54
  Speaker 2: And where are they spending time?
• 8:55
  Speaker 2: And each of those task completion points, when would they be thinking about needing money, right?
• 9:02
  Speaker 2: And so there's a bunch of different access points that are kind of at the point of need, and so we did one that performed pretty well into it.
• 9:10
  Speaker 2: That was pay payroll with capital.
• 9:12
  Speaker 2: Right, when you're paying payroll, you need money to do that.
• 9:14
  Speaker 2: The other was when you're sending an invoice, you generally have to wait to get paid, right.
• 9:20
  Speaker 2: And so, hey, send your invoice and get paid now, by drawing down your line, for example, and so getting it completely embedded into the product with cards that show up at the point of pain will drive the other third to a half of the flow.
• 9:32
  Speaker 2: There's a couple of other access points that are pretty pervasive and so something like Square.
• 9:38
  Speaker 2: The business owners are coming in to see the balances page where they're basically the main payments dashboard for each partner.
• 9:42
  Speaker 2: It's the equivalent of the Square balances page where they're paying.
• 9:43
  Speaker 2: It's basically the main payments dashboard for each partner.
• 9:45
  Speaker 2: It's the equivalent of the Square balances page.
• 9:47
  Speaker 2: A third of the Square capital traffic came from that balances page.
• 9:53
  Speaker 2: The business owner is coming in to see how much money is coming into their account that day and that's where you can say, hey, if you need more money now, you can go ahead and draw down your line.
• 10:01
  Speaker 2: You're taking advance from Square.
• 10:03
  Speaker 2: Square had a one and done product.
• 10:05
  Speaker 2: It wasn't a line of credit like ours but you could draw down there and that one drove a third of Square Capital's traffic.
• 10:12
  Speaker 2: So really it's for the modern tech partners.
• 10:15
  Speaker 2: You're deploying deeply in product at the point of need, when they need it, and so they'll start to see it showing up Like you're qualified for 100,000.
• 10:23
  Speaker 2: It'll show up and that security blanket will follow you around in product and when you need it you draw down whatever you need.
• 10:28
  Speaker 2: You can draw $10,000, you can draw $5,000, you can draw $50,000 or $100,000 if you want, and it's persistent over time.
• 10:36
  Speaker 2: This is the magical part about bringing the banking into the place where takes one.
• 10:44
  Speaker 2: It's just a single click, draw to draw more capital and you know it's there.
• 10:47
  Speaker 2: It's persistent, it's that security blanket that follows you around.
• 10:50
  Speaker 2: That is what small businesses want.
• 10:52
  Speaker 2: They don't want to go search for loans and get paired for loans, they want to just know that they're qualified and be able to click and get it and have fair, a fair offer, and that's what pipe enables.
• 11:02
  Speaker 3: And what would you say?
• 11:03
  Speaker 3: Differentiates Pipe from your competitors out there?
• 11:06
  Speaker 2: This is a ridiculously hard business to operate in and you have to perform perfectly at every single step of the funnel.
• 11:11
  Speaker 2: So I think one of the things that really differentiates us out of the gate is that we just have the most amazing executive team and experienced team.
• 11:20
  Speaker 2: And so Pipe was a unique story right.
• 11:22
  Speaker 2: The founders raised more than than 300 million of equity and when I came in there was most of it was left right, and so we were able to hire the most amazing executive team that is just the most experienced across the entire function.
• 11:36
  Speaker 2: And so I think, if this, the team we've built, now feels more like a private equity, like execution, than it does a scrappy startup trying to figure something out Like we knew exactly what we building and we built it and it's worked.
• 11:48
  Speaker 2: Our CTO led payments for Coinbase, led payments for Facebook back in the day, and so she's just an amazing, amazing leader that knows tech.
• 11:58
  Speaker 2: We have the highest tech engineering team with Xstripe and Plaid engineers as well.
• 12:04
  Speaker 2: We're just very high tech in a sense.
• 12:06
  Speaker 2: The chief legal officer I worked with at Square he helped Apple launch Apple Pay from the legal side.
• 12:13
  Speaker 2: He helped Klarna get into the US.
• 12:14
  Speaker 2: He helped Square launch Square Capital.
• 12:16
  Speaker 2: He helped get the charter at the bank that's where I met him and he went to Afterpay for a minute and then came back.
• 12:21
  Speaker 2: But he just has 20 plus years of experience doing exactly what Pipe does, and so we just have that across every function.
• 12:27
  Speaker 2: Our CFO he was at Wamuu for five years, at Visa for a decade and then went to Intuit where I worked with him and he led finance for the payroll and banking and capital business and then became the CFO at MailChimp when they acquired MailChimp, and so we just have an IPO quality team of really amazing execs.
• 12:45
  Speaker 2: So that's the first piece.
• 12:48
  Speaker 2: The second piece is we just solved the small business pain point differently.
• 12:51
  Speaker 2: We have what feels like a multi-draw line of credit for the small business to draw down whenever they need it.
• 12:57
  Speaker 2: We can go deeper into the risk stack than anyone.
• 13:01
  Speaker 2: We don't need FICO score, we don't need bank transaction data, we don't need commercial scores.
• 13:05
  Speaker 2: We simply use the credit card transaction history to underwrite and can go make capital available in the most unbiased and fair way, because the transactions speak for themselves and the customer gets that security blanket that they want.
• 13:17
  Speaker 2: Our competitors don't have that type of security blanket.
• 13:20
  Speaker 2: Some of them have a true line of credit and they have to underwrite all the expenses and try to figure it out.
• 13:24
  Speaker 2: They cannot go as deep as we can.
• 13:26
  Speaker 2: They cannot serve as many customers as we can.
• 13:28
  Speaker 2: From a scale perspective, in order to scale a business like this, you have to be able to get to what's called a balance sheet light setup where you can unload the risk that you deploy.
• 13:39
  Speaker 2: So we'll be a market maker where we deploy the risk into a nail salon, so to speak, and they'll agree to pay us back $200,000, then we can turn around and sell that $200,000 receivable into the capital markets and we've structured it as a product that the capital markets knows and trust, Even though it feels like a multi-draw line of credit to the small business.
• 13:59
  Speaker 2: Every draw is its own cash advance, effectively in the back end.
• 14:04
  Speaker 2: So here's the way to think about the product.
• 14:06
  Speaker 2: It is the same product, from a risk and in the flow of money perspective, as Square Capital, Stripe Capital, PayPal, Working Capital, Addie and Capital.
• 14:16
  Speaker 2: It is the merchant finance product.
• 14:17
  Speaker 2: That's the same.
• 14:18
  Speaker 2: That's a product that the capital markets knows and trusts.
• 14:21
  Speaker 2: Right, the only spin we put on it was the multi-draw line of credit.
• 14:24
  Speaker 2: But each draw creates its own individual advance in the back end for the capital markets to take.
• 14:29
  Speaker 2: Let's rewind here again.
• 14:30
  Speaker 2: So the most amazing team.
• 14:32
  Speaker 2: We have way more resources than any of our competitors hundreds of millions of dollars of resources from the equity raises the multi-draw line of credit for the customer, the risk that the capital markets wants.
• 14:43
  Speaker 2: And then we also have this pretty amazing, unique setup for our third customer.
• 14:47
  Speaker 2: So if you think about the customer as a pipe, it's the small business number one, it is the capital markets to help unload the risk and it is the partners right.
• 14:55
  Speaker 2: So the setup we have for the partners is very unique as well, like we're able to do this in a way that doesn't mess with payments at all.
• 15:03
  Speaker 2: Right, and so basically, normally, when you do a product like this, you either have to just do ACH payments, where you're actually behind the expenses if you do that and it's a much riskier position to be in, because ACH happens at the end of the day all the other transactions happen first and whatever's left is what you're left with and that's hard to deal with.
• 15:21
  Speaker 2: So you really need to be in the flow of money.
• 15:31
  Speaker 2: You're naturally in the flow of money if you're a Square or a PayPal, but for Pipe to get in the flow and not mess with payments, you could ask the partner to split payment for you to say, hey, if the customer does $10,000 in sales today.
• 15:38
  Speaker 2: Please hold 10% of that and give it to us as the one advancing the capital.
• 15:43
  Speaker 2: That's a really hard thing to do.
• 15:45
  Speaker 2: You'll mess up cash reconciliation.
• 15:47
  Speaker 2: You'll mess up payments reporting.
• 15:48
  Speaker 2: It's just a very difficult thing to do and it's a hard build to go partner with a lending partner that would ask you to do that, and so what we do is say you know what?
• 15:57
  Speaker 2: Don't mess with any of your payment stack at all.
• 15:59
  Speaker 2: You probably are using a partner to do it anyways.
• 16:01
  Speaker 2: So all you need to do is change the bank account where you deposit the money into this new FBO account that we open at the time of funding, for the customer Pipe will handle taking the money at that layer and then we'll go ahead and put the money into the small businesses Normal.
• 16:18
  Speaker 1: Bank of America or.
• 16:19
  Speaker 2: Wells Fargo account, whatever they may be using or Chase account.
• 16:21
  Speaker 2: We only have this kind of neobank in the background to get into the flow of the money.
• 16:25
  Speaker 2: We only have this kind of neobank in the background to get into the flow of the money.
• 16:26
  Speaker 2: And what that does?
• 16:28
  Speaker 2: It makes it super frictionless for the small business because it's just one consent to open that account to let the money flow through.
• 16:34
  Speaker 2: It's the last step of the advanced acceptance process From the partner's perspective.
• 16:42
  Speaker 2: All they have to do is link one data API and then figure out a way to operationally change the settlement account to this new account and that's it.
• 16:50
  Speaker 2: It's you can.
• 16:50
  Speaker 2: You can on board with pipe in a week and we can do the entirely hosted experience, white labeled for your offering in there.
• 16:56
  Speaker 2: Or you could use our SDKs and APIs if you want to do it deeper, Like there's multiple ways to do it.
• 17:01
  Speaker 2: So basically, what I'm saying is we're just doing a little bit in a lot of places.
• 17:05
  Speaker 2: That's just better across the spectrum, and when you do that you end up with conversion that's 3x any of the competition.
• 17:10
  Speaker 2: And so it's just because it's such a magical flow and starting with pre-approved offers all the way through to the end.
• 17:16
  Speaker 2: We also have a sales team in Atlanta at the bottom of the funnel that when customers start the application and are confused, we can reach out and say hey, you know what?
• 17:25
  Speaker 2: Let us help you understand what this is.
• 17:26
  Speaker 2: It really is only three clicks.
• 17:28
  Speaker 2: It's okay to go ahead and click submit.
• 17:30
  Speaker 2: A lot of people just want you to hold their hand, and so you actually have to do that at the bottom of the funnel too, to make sure people understand it and they're ready to move forward.
• 17:37
  Speaker 2: So it's a lot of little stuff that comes together to this just perfectly magical experience that drives very high conversion.
• 17:44
  Speaker 2: It drives very high conversion and we were seeing like 95 plus PRS.
• 17:47
  Speaker 2: I've never seen a product recommendation score that high in some of our initial pilots and so it just works.
• 17:54
  Speaker 2: So I think we just do a little bit better across the spectrum, because we've all kind of been there, done that before and we know what we're building.
• 17:59
  Speaker 2: That's it.
• 18:00
  Speaker 3: Great, great.
• 18:01
  Speaker 3: Well, where do you see this part of the industry headed, say, in the next three to five years?
• 18:06
  Speaker 2: I think this is the future of small business banking.
• 18:09
  Speaker 2: Right?
• 18:10
  Speaker 2: It is so hard to serve the micro-merchants Right now.
• 18:14
  Speaker 2: The only companies that are able to do it are the ones that have tons and tons of customers and have the scale to do it, like a Stripe Capital or a Square Capital or a PayPal Working Capital.
• 18:23
  Speaker 2: They're offering this product to their customers because they have the payments data and they have the customers.
• 18:28
  Speaker 2: Pipe is really the first time that's going to enable, in this truly high-tech way, all of the other payments facilitators or all the other payfax that are software verticals, to offer the same financial services to their customers.
• 18:41
  Speaker 2: I think in the next two, three years we'll figure out how to do this with the banks as well.
• 18:46
  Speaker 2: So we're actively talking to five or six banks right now about how they can partner with Pipe so Pipe could serve the small businesses that they can't with their credit products right.
• 18:59
  Speaker 2: So most banks don't really have any credit products for businesses that have less than $5 million in revenue.
• 19:03
  Speaker 2: Some banks don't go below $25 million in revenue right million in revenue.
• 19:08
  Speaker 2: Some banks don't go below 25 million in revenue right.
• 19:09
  Speaker 2: And so if we can figure out how to work with the banks to have Pipe deploy capital to their population and serve back, rev share back 20 to 25% of the revenue to the bank.
• 19:17
  Speaker 2: That's just straight to EBITDA.
• 19:19
  Speaker 2: It's an offering that the bank can't do themselves.
• 19:21
  Speaker 2: They can partner with Pipe to deploy it.
• 19:22
  Speaker 2: The bank could even lend us the money to lend to their customers, and it's a win-win for the bank in that respect as well.
• 19:29
  Speaker 2: We will start gathering deposits with our new products.
• 19:32
  Speaker 2: We'll have a bill pay and expense management and an apparel product at some point, and there's a lot of float in those products.
• 19:39
  Speaker 2: We'll be able to route that float back into our bank partners to serve their own customers.
• 19:43
  Speaker 2: So we can become this tech.
• 19:44
  Speaker 2: We can become the true tech partner for the banks to actually deploy all this stuff and make it happen and serve a population that just is underserved right now, but do it through the banks too, and so that's one of the things I'm super excited about trying to figure out.
• 20:04
  Speaker 2: It's a really tough space, though, because you have Fiserv and FIS and Jack Henry and NCR and Q2 and all of these gatekeepers on the tech side for the banks.
• 20:09
  Speaker 2: You can't do anything with a bank unless you go through those gatekeepers, and they take a massive tax for anyone who wants to go partner on the tech side with a bank.
• 20:17
  Speaker 2: That structure needs to be broken down.
• 20:19
  Speaker 2: Pipe wants to figure out how to do it outside of these old cores, figure out how to help these banks go, serve their customers better and just make it happen.
• 20:27
  Speaker 2: And so for me, I think three to five years from now, Pipe's not going to be the only one playing here.
• 20:33
  Speaker 2: It's possible that some of the other platforms that do it already start to lead with the capital part.
• 20:38
  Speaker 2: Like Pipe is when they see that it works and we're proving that it does, instead of just leading with payments, because they all just lead with payments.
• 20:45
  Speaker 2: Now I think there's going to be a transition.
• 20:47
  Speaker 2: A lot of these businesses will get access to capital through programs like this and like a bunch more like Pipe will pop up and start serving more and more small business, and I think that's a great thing.
• 20:55
  Speaker 2: To use these alternative data sets to make more capital available through.
• 21:02
  Speaker 2: Whoever the business happens to spend time with is the future, and pipe's on the forefront of it.
• 21:07
  Speaker 2: I think this is the next generation, I guess, of alt lenders.
• 21:11
  Speaker 2: The last generation went direct, tried to partner, tried to figure out all of the data it wants to get to a cash flow type, debt service coverage ratio type underwrite.
• 21:22
  Speaker 2: But these new iterations are narrowing the problem.
• 21:24
  Speaker 2: Set to just the payments data and then advancing capital against just that one stream.
• 21:29
  Speaker 2: You narrow the problem, you solve that problem better and this is just the beginning of it across the spectrum.
• 21:34
  Speaker 2: So I'm super excited it works and it's going to scale fast.
• 21:38
  Speaker 3: Yeah, and I think it's definitely part of what I often hear people talk about on this show and just other conversations this whole embedded finance kind of industry, which people define that so many different ways.
• 21:52
  Speaker 3: But if you just say what are the financial products that a small business needs and how are they going to be served through these software companies which are their operating systems, that's the future of commerce, in my opinion, especially for small businesses, and you guys are obviously solving a huge chunk of that with your solution.
• 22:12
  Speaker 2: Yeah, I mean you just look at the latest research.
• 22:13
  Speaker 2: I think Addyan funded something with Bain, maybe, or BCG, I can't remember which one, maybe BCG, but they talk about the future of embedded platforms, right, or platforms of powering software.
• 22:25
  Speaker 2: And the two things that pop up at the top of the list from the pain point perspective are one, access to capital, and number two it's card and spin mechanisms and spin management.
• 22:34
  Speaker 2: Nobody's serving, nobody's got a card that works for micro-merchants yet, like Brex, walked away from it.
• 22:40
  Speaker 2: They closed down all their small, small business accounts because they couldn't scale, they couldn't monetize, they couldn't acquire a customer.
• 22:46
  Speaker 2: Pipe changes that.
• 22:47
  Speaker 2: We have the risk engine that can monetize and help the customer get access to capital.
• 22:52
  Speaker 2: We have a B2B2B acquisition model that acquires those small businesses for cheaply at scale.
• 22:57
  Speaker 2: So we'll be able to actually serve an offering to these micro-emergence on the spin side too.
• 23:03
  Speaker 2: You can think of Pipe as the ramp for micro-emergence if you want.
• 23:06
  Speaker 2: Ramp just raised a ton.
• 23:07
  Speaker 2: They scale rapidly by signing one giant customer, like a square or block, as their customer and then they can launch a bunch of cards to all the employees.
• 23:17
  Speaker 2: Pipe's going to be able to do that for the mom and pop small businesses.
• 23:21
  Speaker 2: It's going to be five to 10 employee businesses that we can go offer all of these the same quality offerings to these micro merchants because we just have a better approach to go serve the micro merchants right.
• 23:31
  Speaker 2: And when I say micro merchant I actually mean like 100,000 in revenue, up to 5 million in revenue, like truly small businesses.
• 23:38
  Speaker 2: Many of them will be sole props, right.
• 23:39
  Speaker 2: These products all work for that too.
• 23:42
  Speaker 3: Yeah, love it, love it.
• 23:43
  Speaker 3: Well, let's switch gears for a minute and talk a little bit about you.
• 23:46
  Speaker 3: So tell us about your journey, how you got to your role there as the CEO.
• 23:50
  Speaker 2: I got a long version of this story or a shorter one.
• 23:53
  Speaker 2: Let me go with a short to medium version.
• 23:55
  Speaker 2: Let's go backwards in time.
• 24:08
  Speaker 2: I arrived at Pipe just over a year ago.
• 24:09
  Speaker 2: It started in February last year.
• 24:10
  Speaker 2: We've built effectively the offering that we announced last week, this Pipe Capital, as a Service offering.
• 24:14
  Speaker 2: So Square Banking was the Square Loans product, the debit card and checking account, the savings account.
• 24:21
  Speaker 2: We had a credit card, we had an instant transfer product and so we were live at scale in the US.
• 24:28
  Speaker 2: We were also we'd launched in Canada, uk and Australia and we were considering the Japanese market as well.
• 24:34
  Speaker 2: While I was there so that was when I left it was 20% of the gross profit of Square.
• 24:40
  Speaker 2: So that's the thing.
• 24:41
  Speaker 2: Ignore the App side, just think about the Square side.
• 24:43
  Speaker 2: A lot of the growth of Square was coming from the Square banking products, because the Square banking products were growing way faster than the core payments business.
• 24:51
  Speaker 1: So that was an amazing experience.
• 24:53
  Speaker 2: Square under Alyssa Henry was really set up in a single-threaded GM structure, was really set up in a single-threaded GM structure where Amazon style actually came from Amazon, and set up the single-threaded leadership structure that Amazon does so well, which is you're an autonomous leader of your business unit, right.
• 25:09
  Speaker 2: So I led the entire team.
• 25:11
  Speaker 2: The only thing that didn't report to me was HR, legal and finance, but we had five on the finance team and five on the legal team that spent most of their time with my team, so it felt like a global kind of banking business.
• 25:25
  Speaker 2: We even owned a bank, right, and so that bank was in my P&L at Square, and so it was a very interesting learning experience on actually how to maintain really high product velocity within a highly regulated space.
• 25:34
  Speaker 2: So I learned a lot about how to run a business in the P&L and build stuff fast.
• 25:39
  Speaker 2: So Square was awesome.
• 25:40
  Speaker 2: I learned a lot at Square.
• 25:40
  Speaker 2: I was only there 18 months before the pipe opportunity came along.
• 25:44
  Speaker 2: Before pipe, I was at Intuit for five years, and so Intuit was an awesome experience for me too, because that was the first kind of real operating role I had.
• 25:53
  Speaker 2: I came out of private equity before.
• 25:55
  Speaker 2: I'll say more about that in a minute.
• 25:56
  Speaker 2: But I landed at Intuit wearing collared shirts, like coming from like a coin-operated private equity space and landing at a place that has the most amazing culture that you can imagine.
• 26:06
  Speaker 2: It's.
• 26:07
  Speaker 2: Scott Cook has built a business that just manufactures CEOs Like Alex Chris is the guy who hired me into it.
• 26:14
  Speaker 2: Right, he is now the CEO of PayPal.
• 26:16
  Speaker 2: He runs the leadership like mission-based leadership playbook that Intuit does so well and the customer-focused playbook that Scott Cook did so well.
• 26:25
  Speaker 2: Scott was so focused on the underlying customer pain points and knowing what the problems were and then going and trying to solve those problems.
• 26:33
  Speaker 2: So Intuit does two things really well.
• 26:35
  Speaker 2: It's really great at the mission-based leadership and how to have an amazing culture where people are so excited to come to work every day to help small businesses and help consumers.
• 26:44
  Speaker 2: Like that's the purpose.
• 26:45
  Speaker 2: That's why everybody comes to work every day is to help those businesses succeed.
• 26:48
  Speaker 2: And then the other side of that, as I mentioned, is the Scott Cook style, like focus on understanding the pain points and solving them.
• 26:54
  Speaker 2: I'll just say, like Intuit is not very good at building new businesses, though.
• 26:59
  Speaker 1: And that's okay.
• 27:00
  Speaker 2: Intuit's playbook is to do M&A.
• 27:02
  Speaker 2: At this point.
• 27:03
  Speaker 2: They bought MailChimp.
• 27:04
  Speaker 2: They saw that small businesses needed help with marketing and they decided not to build it.
• 27:08
  Speaker 2: They bought MailChimp and now they have an AI-powered email marketing machine for the small businesses.
• 27:15
  Speaker 2: That works great.
• 27:15
  Speaker 2: They bought Credit Karma when they realized that the consumers needed help on the credit side.
• 27:19
  Speaker 2: Instead of trying to build it, they partnered with Ken Lim and pulled that business in and so saw that pain point through acquisition.
• 27:26
  Speaker 2: If you go back in time, the payments business, the payroll business, TurboTax were all acquisitions.
• 27:30
  Speaker 2: So Intuit's really good at mission-based leadership, knowing the pain points and then doing acquisitions to go solve those pain points and staying and maintaining scale and speed, and so learned a lot about leadership and customer focus and product really and design at Intuit.
• 27:44
  Speaker 2: That was a five-year grad school in tech.
• 27:47
  Speaker 2: For me really that was awesome, and so that's like eight years of tech, I guess.
• 27:51
  Speaker 2: Before that I was a distressed credit guy, so we bought lots of bad loans from banks, and so I was at a company called Sixth Street Partners, which at the time was part of TPG Capital, one of the largest and most well-known kind of private equity companies in the world, and so I spent five years there mainly buying bad loans from banks.
• 28:11
  Speaker 2: We bought Resi, mortgage, commercial real estate loans, all kinds of special situation stuff like off the, anything that you could predict the future cash flow on and put a bid on we would look at.
• 28:20
  Speaker 2: So like I have really about a decade of experience doing that.
• 28:24
  Speaker 2: So before before, tpg pulled me into san francisco so I moved here for tpg.
• 28:29
  Speaker 2: I've been here 13 years.
• 28:30
  Speaker 2: As I said, at the beginning I was at another company called Lone Star Funds in Texas and before that a company called Highland Capital Management, also in Texas.
• 28:37
  Speaker 2: Two big ones, a CLO fund.
• 28:39
  Speaker 2: The other one's a kind of global distressed fund on the private equity side.
• 28:43
  Speaker 2: So kind of a decade of looking at all the bad loans, like seeing every way that originators screwed it up from either a regulatory perspective or from a risk perspective, and then trying to decide whether to buy those loans or not.
• 28:53
  Speaker 2: So learned a ton about risk and credit.
• 28:55
  Speaker 2: So if you think about what Pipe's business is, that background's a pretty good fit.
• 29:00
  Speaker 2: A lot of our competitors are either good at tech or good at credit, but each of those things are so hard to do individually it's very rare to find a team that can do both at the same time.
• 29:11
  Speaker 2: We built Pipe to do that.
• 29:16
  Speaker 2: So school-wise I've described myself, I guess, as a mile wide and an inch deep.
• 29:19
  Speaker 2: From an education perspective, I was a computer science undergrad.
• 29:22
  Speaker 2: I have a JD and an MBA and so and then spent time in credits Like I know a little bit about all the functions but like know enough to hire the experts to go make stuff happen and just unblock people.
• 29:32
  Speaker 2: The only thing I've ever found that kind of uses.
• 29:42
  Speaker 2: Everything I've learned across my whole life has been FinTech.
• 29:44
  Speaker 2: It's the most complicated, interesting space to go help solve problems and put the pieces together in a way from a regulatory and a risk perspective.
• 29:46
  Speaker 2: That just makes sense.
• 29:47
  Speaker 2: So I love FinTech and I get excited to wake up to solve businesses' problems and putting the pieces together in the US.
• 29:54
  Speaker 2: And then now we're actually about to launch with a partner in the UK.
• 29:57
  Speaker 2: Shortly We'll announce that one, that partnership, probably next month, but we're able to move fast, and new geos too.
• 30:03
  Speaker 2: It's pretty exciting.
• 30:04
  Speaker 3: Cool, cool.
• 30:05
  Speaker 3: I think that's a good segue to the next question about passion.
• 30:07
  Speaker 3: What are some things you're passionate about?
• 30:09
  Speaker 3: So maybe one work-related passion and one personal passion.
• 30:12
  Speaker 2: I mean work-related it's, I think.
• 30:15
  Speaker 2: Let me tell a story on this one.
• 30:16
  Speaker 2: My passion on the work side is to help small businesses succeed.
• 30:21
  Speaker 2: When, after COVID, we were so we were in a lending business sit into a QuickBooks Capital.
• 30:26
  Speaker 2: Covid hits nobody like Main Street is closed.
• 30:30
  Speaker 2: You could walk down your Main Street in your hometown and there was, it was a ghost town.
• 30:33
  Speaker 2: That means every single business there was no longer making any revenue.
• 30:36
  Speaker 2: Some of the e-commerce providers, yes, were able to scale fast during that frame, but anybody that had a physical location was kind of done for and it was awful.
• 30:46
  Speaker 2: There was nothing we could do about it.
• 30:46
  Speaker 2: We couldn't deploy capital because we couldn't take the risk, because we didn't know when the businesses would open and start up again.
• 30:51
  Speaker 2: And so when PPP happened the Paycheck Protection Program, where the government took the risk and partnered with fintech and banks to go deploy the capital we rallied a 500-person team at Intuit to just go make it happen.
• 31:03
  Speaker 2: It was the hardest I've ever worked in my life.
• 31:06
  Speaker 2: It's the hardest my team has worked in their life, like the largest cross-functional team I've ever led, and everybody there was so excited and so happy to do it because we were helping businesses survive.
• 31:19
  Speaker 2: That acute pain point makes you realize immediately how much you can actually help.
• 31:21
  Speaker 2: When you see those customer stories and you hear that they're not able to put food on the table for their kids because their business is closed down and you're able to actually get money to them that they will not have to pay back because it's a government-sponsored program, it's the most amazing feeling ever.
• 31:36
  Speaker 2: And so when you roll that forward and you think about that acute problem, all of these features that we're building on the fintech side are actually solving a similar problem.
• 31:46
  Speaker 2: Sometimes it's as acute for an individual customer.
• 31:49
  Speaker 2: They can't put food on the table, they can't pay their payroll, their business is going to close down or they need to grow it.
• 31:54
  Speaker 2: Payroll their business is going to close down or they need to grow it.
• 31:56
  Speaker 2: All of these things we build are helping these small businesses.
• 31:58
  Speaker 2: And when you see the customer stories and you see the tears and you see the joy that's what I live for on the fintech side it's like we're here to help these businesses succeed.
• 32:06
  Speaker 2: It feels great.
• 32:06
  Speaker 2: That's what I'm the most passionate about, that's what I get excited about doing, and then using all of the stuff that I've learned to help go solve that major problem.
• 32:14
  Speaker 2: So, from a work perspective, it really is about the mission.
• 32:16
  Speaker 2: It's about trying to help customers get access to capital, so I love that part.
• 32:20
  Speaker 2: I mean the Pipe's mission is to empower financial freedom for business owners through open, accessible and unbiased financial products.
• 32:27
  Speaker 2: That's our whole mission here and that's what I'm passionate about.
• 32:30
  Speaker 2: That's why the team gets excited to go to work every day.
• 32:32
  Speaker 2: That's the work side Outside of work.
• 32:35
  Speaker 2: Like I have four kids, like that's it.
• 32:38
  Speaker 2: Like I love my family and it's so much fun to like I'm a driver and a spectator for the most part.
• 32:42
  Speaker 2: Now I have a 14 year old, a 12 year old, a 10 year old and a four year old.
• 32:46
  Speaker 2: The three older kids are all playing competitive sports, mainly soccer, and I'm mountain biking for my son too.
• 32:52
  Speaker 2: And like ballet and horseback riding.
• 32:54
  Speaker 2: So like I literally just drive my kids around and watch them like compete.
• 32:57
  Speaker 2: It's fun.
• 32:58
  Speaker 2: So like for me it's how do you balance?
• 33:01
  Speaker 2: Like a fully remote team plus my family?
• 33:05
  Speaker 2: Like it's.
• 33:05
  Speaker 2: It's actually a pretty fantastic balance to be able to be the ceo of a, of a big fintech company, operating it remotely, and then being present for my family at the same time.
• 33:14
  Speaker 2: Is everything.
• 33:15
  Speaker 2: The only thing outside of that I sort of find time for is riding my bike, and so I have a Zwift set up in my office.
• 33:23
  Speaker 2: I try to ride every morning, like from like 8.30 to 9.30 if I can, and I'm on Slack and email catching up, like trying to multitask, get some exercise catch up, and then someday I hope I'll find more time to ride my bike outside again.
• 33:36
  Speaker 2: One thing that's been fun actually.
• 33:42
  Speaker 2: So my son rides for the Redwood High School mountain biking team and it's a club and there's like 50 kids that ride and I volunteered as a coach, so I actually have an excuse to go out on Sunday mornings and go on long rides with my son and the rest of the high school kids there.
• 33:54
  Speaker 2: So it's awesome.
• 33:54
  Speaker 2: They just crushed it.
• 33:56
  Speaker 2: We live in Marin.
• 33:57
  Speaker 2: We're doing like 30 mile rides with 4,000 feet of incline.
• 34:00
  Speaker 2: These high school kids are kicking my ass.
• 34:02
  Speaker 2: It's fun.
• 34:03
  Speaker 3: That's fun.
• 34:04
  Speaker 3: That's fun, well, great.
• 34:05
  Speaker 3: One last question so you know, as you've mentioned, how exciting this sort of FinTech payment space is is and how much more opportunity there is.
• 34:14
  Speaker 3: We've got colleges now that offer courses and maybe even degrees in fintech.
• 34:20
  Speaker 3: Say, one of them comes to you and they say, luke, I'm interested in getting into the fintech space.
• 34:24
  Speaker 3: Maybe they want a job with your company.
• 34:26
  Speaker 3: And they say, what do I need to do to be successful in this space?
• 34:30
  Speaker 3: What would you tell them?
• 34:30
  Speaker 3: It's interesting.
• 34:32
  Speaker 2: I think you got to move to San Francisco.
• 34:33
  Speaker 2: It's the heart of where most of this stuff is happening, it's where the engineers are, it's where the energy is.
• 34:39
  Speaker 2: I would say just come out here and then figure it out.
• 34:43
  Speaker 2: That's the honest answer.
• 34:44
  Speaker 2: The concentration of opportunity and options you have is way higher here than any market elsewhere.
• 34:50
  Speaker 2: It doesn't even depend on what function you're in.
• 34:52
  Speaker 2: If you're on the accounting side or the finance side and you want to switch careers, like I did, san Francisco is the place to be.
• 34:58
  Speaker 2: If I didn't move to San Francisco for TPG, I would not have been on this path into technology, into Intuit, into Square.
• 35:06
  Speaker 2: That opportunity would not have existed, I think, in Texas.
• 35:09
  Speaker 2: Honestly, to be at the heart of where all of this stuff is happening and where all the new cool stuff is happening is what you need to do.
• 35:14
  Speaker 2: That and just be curious, like if you're a computer science major and you want to code, like that's an interesting path in If you're on the marketing team, like find an internship at a technology company.
• 35:25
  Speaker 2: But again, like it's about concentration of options and like opening up more and more options.
• 35:30
  Speaker 2: I don't think there's any place on the planet that has more options than San Francisco does, and so I'd say you got to move to Silicon Valley is the honest answer.
• 35:38
  Speaker 3: Nice.
• 35:38
  Speaker 3: Okay, we're about to wrap up the show, but I wanted to see if there's anything else you wanted to talk about before we go.
• 35:44
  Speaker 2: I mean.
• 35:45
  Speaker 2: One last thing that I'm kind of super excited about, I guess, is this is like how can you use AI to help the small businesses succeed?
• 35:53
  Speaker 2: Right, and I think we're landing on something that's super interesting.
• 35:56
  Speaker 2: One is verticalized data sets.
• 35:59
  Speaker 2: Right, we're partnering with some very narrow verticals and the data sets that they're collecting on their customers are extremely unique in that it could be 5,000 hair salons and nail salons, or it could be 10,000 pest control businesses, or it could be yogas and daycares and gyms, things like that.
• 36:18
  Speaker 2: But these verticalized data sets, training the LLMs, the language models on these data sets, to just give you relevant information for the first time, I've watched other horizontal businesses try to do AI on small business.
• 36:33
  Speaker 2: They just treat the landscapers the same as restaurants.
• 36:37
  Speaker 2: There's no uniqueness in the verticalization of the data.
• 36:40
  Speaker 2: You try to train the model on the horizontal of like a hodgepodge of different industries and it doesn't spit out valuable information.
• 36:47
  Speaker 2: It's just very generic, right.
• 36:49
  Speaker 2: I think the verticalized data sets are going to actually make it work for the first time on the LLM side, so you can just talk to your phone and say, hey, like, let me know when I need to go buy more shampoo, but when I run out, it'll just be able to talk to it Like what was my revenue last week?
• 37:03
  Speaker 2: Well, last month, how am I doing compared to the competition?
• 37:05
  Speaker 2: Like you can just start interacting and learning about your business in ways you couldn't do before, in a natural kind of language type of way.
• 37:17
  Speaker 2: The other thing that I think is super cool is large action models.
• 37:19
  Speaker 2: All of these tasks that are being completed by these business owners could be automated In the most generic sense.
• 37:23
  Speaker 2: It's like how do you take robotic process automation and use a large action model to control it and go complete the tasks in the software instead of you having to do it as a business owner?
• 37:33
  Speaker 2: So the future vision here is that a pizza shop owner can come to pipe and say hey, I'd like to like launch this pizza shop.
• 37:41
  Speaker 2: Can you help me with your like pretty slick AI sidekick here to help me run this business?
• 37:44
  Speaker 2: We'll say, sure, that's great, we can do that.
• 37:47
  Speaker 2: Here's all the embedded financial services you need, and we recommend that you actually use slice as your end to end vertical software, because we're integrated and it works and you can go manage everything automatically that way, and so it becomes a complete shift in how businesses think about running their business on a go-forward basis using modern AI tech on the verticalized data sets, and so that's kind of a moonshot for us that we're working on already, that we're excited about really because of the verticalized data sets we'll have access to.
• 38:13
  Speaker 2: So that's that that, I think, is really cool.
• 38:15
  Speaker 2: And that like, yes, about three to five years out, like the broader vision, I think, is that honestly.
• 38:20
  Speaker 3: Yeah, I love it.
• 38:20
  Speaker 3: I love it.
• 38:21
  Speaker 3: Well, luke, it's been been great to hear your story and what Pipe's doing and all the cool things you're working on.
• 38:27
  Speaker 3: You know we're coming to a close of the show, so I wanted to thank you for being here.
• 38:31
  Speaker 3: I know your time's super valuable, so I really appreciate you being on the show today.
• 38:35
  Speaker 2: No happy to be here.
• 38:35
  Speaker 2: I love telling the story.
• 38:36
  Speaker 2: Like I'd love other folks to like learn how to help small businesses too.
• 38:41
  Speaker 2: Like anything I don't like we're so open here because we want the competition to do this too.
• 38:45
  Speaker 2: Like let's go help these small businesses and make it happen.
• 38:48
  Speaker 3: Yeah, I love it.
• 38:48
  Speaker 3: I love it.
• 38:49
  Speaker 3: Well, thank you again for being on the show.
• 38:51
  Speaker 3: I appreciate it.
• 38:52
  Speaker 2: Awesome.
• 38:52
  Speaker 2: Thank you so much.
• 38:53
  Speaker 2: It's fun to be here.
• 38:54
  Speaker 3: And to all you listeners out there.
• 38:55
  Speaker 3: I thank you for your time as well, and until the next story.
• 38:58
  Speaker 1: Thank you for joining us this week on the Leaders in Payments podcast.
• 39:02
  Speaker 1: Make sure you visit our website at leadersinpaymentscom, where you can subscribe to the show and where you'll find our show notes.
• 39:09
  Speaker 1: If you enjoyed listening, please share on your social channels as well.