Soloman Lax of Revenued On 5 Things You Need To Succeed In The Modern World Of Finance & Fintech
An Interview With Jason Hartman
I often get people wrong on the first iteration so when I finally get the right person, I do my best to hang onto them. Caring for your team and wanting the best for them is the number one thing to get right. All the rest of my list can change over time but if you have a tight cohesive group of talented people that trust each other, you can do great things.
As part of my series about the “How to Navigate and Succeed in the Modern World of Finance”, I had the pleasure of interviewing Soloman Lax.
Solomon Lax has served as Chief Executive Officer at Revenued since 2015. His 15 years of experience as a venture capitalist and investment banker include bridge and venture debt financing, restructuring, distressed company investment, and mergers and acquisitions. Sol was a general partner of CS Capital Partners LLC, an early stage venture fund, and a board member of several portfolio companies.
Thank you so much for your time! I know that you are a very busy person. Our readers would love to “get to know you” a bit better. Can you tell us a bit about your ‘backstory’ and how you got started?
I have always been intellectually curious about new things including from childhood a love of sci fi. While a lot of it didn’t get the future right some of it was eerily prescient. I was recently discussing optimizing our marketing funnel with some behavioral economists and I mentioned Asimov’s Foundation novels. The reference was before their time but the concept of scientifically manipulating behavior was around a long time before Tick Tock algorithms. So I “got” here by a combination of chance and loving the application of technology and imagination to business challenges.
Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lessons or ‘take aways’ you learned from that?
The funniest mistake I made as a rookie CEO wasn’t particularly funny but was dramatic. I hired someone that had been rumored to have been involved in the tragic death of his wife several years before he applied for a job with us. He had never been charged and our background checks turned up clean. After a reasonable amount of additional diligence we hired him. A couple of months later he was arrested and convicted. Ironically he had been a model employee up until that point.
I learnt that sometimes the obvious thing to do is really the right thing to do even if analytically you can make multiple arguments against it.
Are you working on any exciting new projects now? How do you think that will help people?
We have recently launched the Revenued card which is the first business card and flexline for business owners with subprime credit. It is helping give small businesses access to credit. We are starting to work on our next project which is using tools like our credit modeling for business credit counseling. We think that there is a lot of value we can unlock by our understanding of small business cash flows.
Thank you for that. Let’s now shift to the central focus of our discussion. Extensive research suggests that “purpose driven businesses” are more successful in many areas. When your company started what was its WHY, its purpose?
Our purpose is to make capital available and intelligent for small businesses so they can use it similarly to driving a car on autopilot. You can’t really take your eyes off the road but you can drive far with less fatigue. Too many small businesses are locked out of the credit markets because of FICO and when they access credit don’t know the best way to utilize it. We felt this purpose most acutely while working on PPP during Covid. We felt that we were essential to the survival of small businesses.
Do you have a “number one principle” that guides you through the ups and downs of running a business?
I think it’s really reductive to limit things to a number one principle. If I was forced to, I would say that realization of the complexity of the world is it. Social media is forcing us to live in shorter and shorter cycles and compression doesn’t lead to great ideas or leadership.
If a fellow business leader would ask you for advice about whether to bootstrap or to look for VC capital, how would you help them weigh the pros and cons of that decision?
How much money? What valuation? Who controls the board? Is it just money to scale or are you still trying to figure out market product fit? I wish it could be reduced to a simple algorithm but I have known people who were happy with vc money and some that were miserable.
What measure do you use to determine the value of a company? What advice would you give to other leaders about how to get an optimal evaluation of their business?
I believe that all the classic value guys got valuation right. Ultimately you need to produce the bottom line to be worth something unless you are a strategic acquisition. That is true for the longer term. In the short term you can achieve an optimal valuation by being in a trendy space. If you can pivot to Chat GPT opportunities now is the time.
What would you advise to a founder who initially went through years of successive growth, but has now reached a standstill. From your experience do you have any general advice about how to boost growth and “restart their engines”?
Rethink the customer needs from the ground up and have as many customer conversations you can personally have. The pressures on a founder of a company has years of growth to do everything else but customer conversations are huge.
What are the most common finance mistakes you have seen other businesses make? What should one keep in mind to avoid that?
In fintech, going fast and breaking things usually means breaking the company. A credit and risk management mistake is a very different scale of mistake than the ones that agile product development encourages. Forgetting that “fourth dimension” of credit risk in fintech is generally the fatal error.
Ok, here is the main question of our discussion. Based on your experience and success, what are the five most important things one should know in order to succeed in the modern finance industry? Please share a story or an example for each.
The five most important things one should know about startup fintech are your people, vision, risk management, agility, and making sure the right swag is received.
I often get people wrong on the first iteration so when I finally get the right person, I do my best to hang onto them. Caring for your team and wanting the best for them is the number one thing to get right. All the rest of my list can change over time but if you have a tight cohesive group of talented people that trust each other, you can do great things.
The second is vision. Much of what drives fintech is trendy and looks alike, primarily I guess since VC funding is usually “hot” money. Maintaining a consistent vision over time is difficult but as time passes, if correct, is really powerful.
The third is risk management. It’s really tough to create growth while managing risk in fintech. Leverage is really like pouring jet fuel near a fire and trying to make things move without blowing up. If you don’t take any risks you can’t find out anything but if you go all in you can blow up. My story about that is getting pushed hard by investors who saw a couple of competitors grow quickly while we grew slowly. We thought we knew what we were doing and just couldn’t make the case for dramatically lower pricing given the risk profile. Sometimes cutting margins is great and sometimes it’s a disaster. Having a longer term view means that you don’t avoid risk but manage it carefully.
The fourth is agility which I can tell a little about, since during Covid we went through the equivalent of an open heart transplant under field conditions. During the onset of Covid we stopped originating. I remember discussing with a board member my desire for continuing to fund small businesses during Covid where I asked rhetorically if he wouldn’t fund a hospice paid for by Medicaid. When he said no I knew we were done. Shutting down for an interim period meant potentially shutting down forever since we didn’t have the financial means to wait out a twelve month pause. We pivoted to becoming the tech platform for PPP processing for a bank and ended up doing 4B in PPP loans and 1 million applications. It was a really crazy experience but if we hadn’t had the agility to pivot we would be out of business.
Finally, we had a vendor who owed us big time. He asked my CIO what we wanted for Christmas and he could have asked for a Machallan 24. Instead he asked for a case of Mountain Dew.
Which tips would you recommend to your colleagues in your industry to help them to thrive and not “burn out”?
Lock up your phone and stay offline for one day a week. It sounds impossible until you try it. Think of it as a psychic cleanse.
You are a person of great influence. If you could start a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. :-)
As an executive group, we have a great deal of influence in a small country in the Balkans where we have most of our staff. We started with some back office functions and have now grown it to cover skilled functions as an organic part of our company. Our introduction of new ideas including senior management roles for women is revolutionary for them. We hope it spreads virally and makes a real difference.
How can our readers further follow your work online?
Most of everything fintech related I think about is posted on my linked in profile. https://www.linkedin.com/in/sol-lax-bb190/
This was very inspiring. Thank you so much for joining us!
