Interview: Perch Credit — Founder, Michael Broughton
Interview Series
Great to be back! This is the first interview of 2021. In this episode we interviewed Michael Broughton, the Co-founder of Perch Credit. Perch is a fintech app that allows users to to take common recurring expenses, such as their subscriptions & rent, and turn them into creditworthy payments. Perch has raised a total of $2.6M and is backed by Y Combinator, Citigroup, Concrete Capital, and Jay-Z’s Marcy Venture Partners.
Have you always had an interest in entrepreneurship?
Honestly the real answer is no. I didn’t really know what entrepreneurship was until I got to university. I came from a pretty low income family. A family of nine. I was the first in my family to go through the whole university process. FAFSA, ACT, SAT. I was really the guinea pig for all of them. When I got accepted to USC, I was $10K short in my tuition. We didn’t know what to do at all. It took me calling the university hundreds of times to actually help finance the $10,000 deficit. I didn’t know how many other people faced this exact problem. Once I finally got onto campus, my passion really became, “how can I diminish some of these barriers that people are having when it comes to accessing credit”. That’s what really started my journey. Three years later we ended up founding Perch.
How did you and your co-founder, Ayush Jain meet?
We met through a entrepreneurship club that I joined my sophomore year. The goal of the club is to build a startup from beginning to end. I had already came in with this idea of what I wanted Perch credit to be. I just needed the foundation. Ayush, on the otherhand was this really cool, driven tech guy. His first startup was when he was only 16. The last mile drone deliveries phase. He was just looking for something to hack together. My need for foundation and his need for exploration really led to us working together on the project.
What is Perch Credit and how does it work?
Perch is a pretty simply mobile app that allows people to build credit using their common reoccurring expenses; Netflix, Hulu, Spotify, Pandora, rent. We take these data points, make them credit worthy and automate the process.
What is the importance of credit score and what are some problems that people face today to rebuild a poor credit score?
It’s a huge problem. Ever since the Credit Card Act which came after the recession in 2009, people became really scared of credit and its accessibility. Ironically. The government was scared and the people were scared. All of our parents taught us, “the last thing you want to do is go and get a credit card”. You can go into debt and it can be a whole 9 yards of problems. I think that is the wrong mindset to have around credit but its something that has been established over the last 10–12 years. You can’t even get credit card if you are under 21 without a parent co-signing who can actually prove you can be credit-worthy. So if your parent doesn’t have the best credit score then you literally don’t have a first step into the system. It has created a huge problem. Over 11 million college students are not building their credit. Only 6% of people in the black community have approval on their first credit card. 55 million people in the US who are considered credit invisible or underbanked that can’t even get into the financial system. People are recognizing that finance is important and I think credit plays a key part.
Tell me about your ideal user?
We are super social-aligned in terms of helping those who need it. The product is very general. It crosses a lot of social economic lines. From people who have never even been exposed to credit to people already have established credit scores who are trying to find new trade lines. It’s really cool to see how many lives we can impact.
What has your experience been like working the credit bureaus.
For context on the bureaus, they haven’t really changed the way that they perceive credit for over 30 years. It’s always relied on like 4–5 data points. There are a lot of barriers for people who can have access to these data points. For example, guarantor, pre-existing trade lines, proof of payments, etc. When it comes down to the work we have done with the bureaus, the bureaus are starting to recognize their product itself is made for a certain demographic. Which is why they are starting to take in different data points. When it comes to our products, reporting your rent data affects your FICO 9&10 score. This is the score that people will be adopted by most lenders over the next couple of years. It will also be used to car decisioning, loan decisioning, credit card decisioning, and even opening up a new bank account.
Can you share some positive testimonials that you can share?
People who don’t have a much of a credit score, have seen their credit score boost to a 670–690 after a couple of weeks using the platform. Which is pretty huge. Especially for people who are looking for their first financial product or even an apartment. On the flip side, people who have established scores have seen increase of 60–160 points around the same time frame. I really encourage everyone to try it out and start working on their credit.
What impact has Y Combinator had on your fundraising process?
We got into YC, February 2nd of 2020. We had incorporated in December of 2019. So it was a really quick turnaround. We were super early, but YC gave us major validation not only from an investor side but from a product side. We were onto something special. We spent the three months in the Bay Area and we were the first ever, remote cohort. We were actually in a hacker-house with our entire team. It really allowed us to have hyper growth. More than we could imagine. It led to an awesome seed round after YC. It attracted awesome investors. We were able to tell our story of what the problem is and what our is solution is. It great to see investors really passionate about what we were building.
What advice can you give to first time founders that come from underrepresented communities?
Naturally, you start way before the starting for most people. For everyone step that someone else takes you will have to take 10. Its really unfair but that’s how the game is played right now. It’s what I had to do to get Perch off the ground. If you are really passionate about something, the basis to building a great company is solving a problem. I think it’s so undervalued. You can orchestrate how big of a problem something is and your solution solves that problem immediately then you are on to something. In particular with our story, we had no money, no product, nothing but an idea. People are not building credit -> here is are the numbers behind it -> credit access is important because of X. Our entire pitch deck was explaining how big the problem was. Basically 9 slides. One slide was, we built an app that solves all this in three minutes. After that, people were sold. I think solving a problem is step 1 and step 2 is if you are really passionate about something start tonight. There’s always time in 24 hours a day to put something behind a project that you are passionate about. If you really want it to turn into something then tonight is the time to start.
Since Perch handles data points from Netflix, is there a Netflix show that is worthy of a mention?
That is a good question. I really got addicted to the concept of “Love, Death, and Robots”. I’m pretty sure that season 2 is supposed to come out this year. I love this mini-series. Every episode is like 10–15 minutes. Some are even five minutes. Each episode is completely different from the previous. No correlation. These 5–15 minute stories pull you in and make feel like you’ve watched for a couple of hours. The last episode is called “Zima Blue”. Some of the episodes are about super-tech and space exploration. Definitely give it some time. It’s captivating and it makes you think about a lot of things.
Have a particular startup you want to hear from? Leave a comment down below with your thoughts on this interview and any interview requests that you have in mind. Are you currently raising a pre-seed round? Reach out directly to niregbulem@gmail.com
