Finley CEO Jeremy Tsui — on modernizing debt capital management
Today, Nate Gee hosts Jeremy Tsui, founder and CEO of Finley.
Check out the Episode on Spotify | Soundcloud | Apple Podcasts
Nate and Jeremy discuss:
The original idea for Finley
Jeremy: I remember back in 2019, I was in the Special Situations group at Goldman Sachs. And we did a wide range of lending and investing — so everything from software companies, to sports franchises to waste management companies. I realized that regardless of the type of company we worked with, we had really similar pain points. There was a lot of spreadsheets, a lot of emails that weren’t tracked anywhere, tons of data that was really cumbersome to report on and much less make sense of, so I remember trying to explain this all to my brother who had a software background and really grew up in Silicon Valley. And fast forward a few months…lucky for the co-founding team to get together and tackle a space that we’re all passionate about with the help of Y Combinator.
…I think there’s a few ideas I’m passionate enough about to build a company and probably even fewer people that I’d start something with. So when the timing worked out I figured that it’s kind of a now-or-never type of moment.
…So fast forward to now, we have been around three years, and we’re a mighty team of a few dozen split between San Francisco, New York and a few other cities. We’re really still on the same mission to create software that lenders and borrowers love. And while we’re finding that debt capital is really an industry where software and tooling hasn’t changed in decades, the attitude around the space has really begun to shift even in the short time that we’ve been in it, to go in from believing that it’s an industry that lacks innovation to believing that it’s a software-shaped problem to, you know, investors and companies now searching actively for tools to make their lives easier. It’s all kind of been compressed in a pretty short timeline.
Inspiration for innovation at Finley: consumer credit and technology on the equity fundraising side
Jeremy: We actually look to innovation that’s happening in the consumer credit space. Nowadays, if you’re a consumer, you can easily apply for a credit card, unlock the card, check your credit score, you see your credit limit for that month — none of that really exists in the corporate credit space. When our customers, maybe Series B Series C fintechs, are applying for $50 to $100 million loans from a Goldman Sachs, the process might take three to six months at times. And oftentimes, it’s painful and lengthy enough to get access to that $50 million credit line. But it can be just as painful, following all the rules and the hundred-page credit agreement so that you don’t get penalized by Goldman for breaking a covenant or two.
…I believe that someday in the not too distant future, companies can go to banks and get access to loans — loans that power their growth, or that can be the difference between growth and stagnation. And then staying in compliance and operations won’t require a team of analysts and accountants working on-end to comply with Goldman’s or JP Morgan’s rule set.
…But then also, the equity side of the house, or kind of the cousin of financing — if you’re finance leader or CFO today, or even a founder, you have Carta to manage your cap table, you have AngelList to assist with the fundraising side of things. But zooming out, if you think about debt, which is really the only other way to finance your business — very, very little tooling is available to those finance leaders. It’s still spreadsheets, it’s still emails with dozens of investors and difficult to track correspondence.
Debt capital use cases and management now in the past
Jeremy: There is so much complexity to debt, and we’re very lucky at Finley to have a front row seat to what the most innovative lenders and borrowers are doing and how they’re using debt. I would say the number one thing that we’re seeing is just probably an increasing number of use cases and how debt is used by companies today. I think, even 10–15 years ago, venture debt was maybe not quite a thing. And then you fast forward to now, debt has really inhabited a lot of the space of equity investors. And where equity investors have retreated, you see structured debt, structured equity, venture debt…and from a Finley perspective, we really have one goal: it’s supporting the lender-borrower relationship with software and tooling to help both sides navigate a relationship that is inherently really complex. You know, when there’s hundreds of millions dollars on the line, it follows that there should be rules to protect both sides, and guardrails in place to make sure that both sides are set up for success.
…For us, I like to think about our tooling and our configuration, and our North Star of what are the requirements that are market today and in those credit agreements between borrowers and lenders. And so, as we’ve seen innovation in how lenders are lending to borrowers, sometimes they’ll lend for example, based off of…2, 3, 5, or 10 years of runway before they’ll extend you this $20 million credit line. It’s that much more important that we can track those types of financial rules and keep up to date with how companies are being evaluated.
Finley’s customer base and future expansion
Jeremy: My personal ambition for Finley is that 3, 5, 10 years from now, we’re the one debt tool to rule them all. So it doesn’t matter the type of debt type of industry, the type of segment, every lender and borrower should be able to operate and do business on Finley. From a go-to-market standpoint…we were born in the heart of Silicon Valley with Y Combinator, Bain, and CRV as investors. And a lot of our early customers were our peers, the Series / A Series B startups, but zooming out, I’ve always believed that, rather than trying to pick which areas of debt are going to be really hot and, and having that crystal ball, just to really talk to your customers, talk to the institutions, the funds, the banks, of areas they want to invest in in the next year or couple of years. And if you keep your nose to the ground, and continue chatting with your customers and your clients, they’ll kind of lead you on where to go to, and make sure that you can always support their use cases.
…If you would ask 2020 wide Jeremy, I would say hey, it’s, it’s these five verticals, it’s FinTech, real estate, transportation, and these five only. But I think what we’re realizing now at Finley, growing up through a few cycles, is, you know, a few years back, small loans — $10–20 million credit facilities — were pretty in. And then in the current climate, we’re seeing loans actually get much bigger. So capital is kind of attracting to the larger companies. But I wouldn’t be surprised if in a future cycle, albeit next year or five years from now, we see a cyclical pattern for loans getting smaller, and more fragmenting of the space. We try to stay nimble, try to stay flexible to accommodate all types of debt…Call it versatile, call it fickle, oftentimes we’re dealing with investors that are also shaping their investment strategies.
Partnership with Clear Haven Capital Management
Jeremy: One partnership that we’re really excited by is with a firm called Clear Haven Capital Management out of New York. They partner with startups, a lot of fintech startups that launch their own financial products. This is a really exciting partnership because recently, we worked with Clear Haven to establish a program where from the very first moment that some of their corporate borrowers onboard to their lending platform, we’re right there every step of the way to make sure that those CFOs are equipped for everything that’s required in the Clear Haven relationship, and then really just equipped with best practices as they go to scale their their startup from a Series A company to a growth stage company, to public and beyond. So we’re very excited for the partnership with Clear Haven and to really just be a trusted adviser from day one of these companies that have really never taken on debt before and to grow and scale the fund over time.
Finley’s experience with Y Combinator and recent investment rounds
Jeremy: We came out of the winter 2021 Y Combinator batch. And so for myself, being on my founder journey, I found it incredibly helpful — just the mentorship and the community provided by YC at that time. If I had to pick a one thing that was really helpful from YC was, I think, just creating space for the founding team to have conversations about the DNA of the company. Are we a move quickly and break things type of company, or a measure twice, cut once company? Do we care about, like, radical transparency and communication? Or are we cool with a decentralized org and everyone owning their own outcome? I think YC was a great forcing function for the founders to really get ahead a lot of the tough questions and identity forming parts of the company that really happened in the ensuing few years….You build a great product and attract the right people, and the score kind of takes care of itself. I thought YC really helped us just get our priorities in order and really get on the same page as an early team.
…For any great company, the biggest asset is this talent and the people. So we’ve been really lucky with our venture partners that like CRV, Bain, Upper90, and YC just helping us source, evaluate, reference, and screen for the best talent. Even at this stage of the company, we’re deeply entrenched in debt capital, the idea, the space, the product vision is pretty clear. So just getting the right people on board before we enter the next phase is always top of mind, and having like minded investors makes it all the more easier…They’ve invested in companies even earlier than ours and taken them public. So just having a sounding board for who the right types of leaders, who the right types of contributors at every stage, has been really helpful for me personally.
AI at Finley and beyond
Jeremy: Like everyone else, I’m pretty curious about the role of AI in fintech; I think some think it’s going to be a magic bullet from everything from credit scoring to underwriting to self-written credit agreements and document generation. Others are pretty skeptical; like a lot of other areas, financial services might be the laggard or late adopter when it comes to the newest tech. So we have our own views at Finley. We’re certainly tinkering with how we might be able to use the latest and greatest in tech to speed up implementation or, you know, help make sense of all the interesting debt and capital markets data that we’re seeing and have access to. But yeah, I would say that’s probably the one of the things that that keeps me up at night is just making sure we’re not behind on any of the latest trends.
….We do use AI today to basically create SparkNotes versions of the credit agreements, these 100–200 page agreements…I think we’re just scratching the surface for, call it glorified note taking, if you will, of the legal transaction documents that we touch. But certainly, there’s much cooler, powerful, sexier use cases on the horizon.
About Finley
Finley creates software that provides companies with a range of tools to better manage their debt capital, from automating operations and digitizing credit agreements to providing analytics and performance tracking.
About Jeremy Tsui
Prior to co-founding Finley in 2020, Jeremy worked in Goldman Sach’s Special Situations Group where he invested across a range of industries. Beforehand, he worked as a strategy consultant for financial institutions at Oliver Wyman. Jeremy grew up in Texas and graduated from the University of Texas at Austin.
About the Author
Nate Gee is an MBA and MA Candidate at the Wharton School and Lauder Institute. He’s a member of the Wharton FinTech Podcast team and is excited by fintech’s capacity to improve the efficiency and accessibility of financial services across the globe. Don’t hesitate to reach out with questions, comments, feedback, and opportunities at ngee@wharton.upenn.edu.
As always, for more FinTech insights and opportunities to collaborate, please find us below:
Wharton FinTech: Medium Blog | Twitter | Our Website | LinkedIn
