A series of interviews with innovators operating at the intersection of consumer behaviour and business transformation: Eyal Lifshitz, founder and CEO, BlueVine.
Bruce Rogers: Tell us about BlueVine and how it came about.
Eyal Lifshitz: We provide financing to small businesses and we are an online company. We have provided two products to date, invoice factoring online and a business line of credit. We’re soon to be introducing our third product and what we really pride ourselves with is a couple things: One is leveraging significant technology in terms of the way that we both onboard and underwrite small businesses, such that we’re able to provide capital to more small businesses and also deliver products that they otherwise wouldn’t be eligible for or would not be able to access.
The second thing is we provide financing products that are sophisticated. There is a lot of demand from small businesses for these products and we deliver them in a very simple, easy, intuitive way. The harder stuff is sometimes to take services and products that are complicated and actually make them simple and easy. So, that’s another thing that we do.
The third thing is we deliver multiple products on the same platform because our philosophy is making sure that we have the right product at the right time for the small business, and making sure that we’re addressing their needs, not just their headline asks. So, that’s what really sets us apart, and I can double click on any of these three.
We’re based in Redwood City, have an office in Jersey City, and a development centre in Tel Aviv, with about 270 employees worldwide. We’ve financed nearly $2 billion to small businesses so far throughout the almost six years that we’ve been in business. We launched our first product four and a half years ago and are very passionate about helping small businesses succeed and thrive.
Rogers: How did you come up with the name and what does it represent?
Lifshitz: A vine is a growing plant. We really love the message that we’re sending to small businesses that we’re here to help them grow. The message of growth and enabling and empowering small businesses, that’s where the “Vine” came from. Blue is my favourite colour. It symbolizes credibility and is associated with financial services [and] fintech We [also]learned about a flower called a blue trumpet growing in a vine, and it looks really nice. It makes the vine look blue, and some people call that a “blue line.”
Rogers: What was the white space in the market that you felt wasn’t being met?
Lifshitz: Before I started BlueVine, I worked at Greylock Partners in Israel and covered that region and also Europe at the time. It was a time where a lot of innovation in financial services was happening, specifically in lending. I firmly believe in the thesis of lending as an online product. Financing is one of those things that you can say was born to be an online product because there isn’t a consumer or a small business owner that will tell you that they prefer to go to a physical location, fill out a mountain of paperwork, then wait three weeks to get an answer, versus sitting at home or in your office or in your pyjamas on your computer clicking a few buttons, filling out an online form, and getting potentially an instant response.
That is a better experience. The online experience for the consumer and the small business is better for financing. I completely believe in that trend and the innovations around capital and innovations in machine learning.
I learned about invoice factoring, which is a form of commercial financing, while at Greylock. It’s a form of financing for businesses and it is one where nobody had yet made an online product.
And so, that was the initial idea. For me, I was always passionate about small businesses. My dad was a small business owner. His dad was a small business owner. For me, that kind of two passions came together and I saw the opportunity to deliver a product that made a lot of sense for small businesses but hadn’t yet been brought online. The vision since then has expanded considerably, but that was the initial thinking.
Rogers: My perception is that the small business online capital funding category is getting a little bit crowded with On Deck, Lending Club, Kabbage, Funding Circle, etc. Was it the factoring part of the service that you saw as missing?
Lifshitz: In the beginning, yes. Over time, the strategy has somewhat changed, but initially, you’re right, we weren’t the only ones, but nobody was doing factoring online. This product as a category makes sense. It serves a different need. It has different benefits than other types of financing, and that category had not yet transitioned online. That was the initial thinking.
Rogers: What were the small businesses that your father and grandfather were in?
Lifshitz: My dad owned a physical therapy clinic on the Upper East Side of New York for two to three decades. His father had a lighting electricity store for over 40 years, based in Tel Aviv. I spent my childhood around my dad’s business.
Rogers: Is retail business your primary market?
Lifshitz: It’s evolved considerably over time. Maybe it’s worth sharing with you the journey of where we started and where we are today to provide some further context. We started with factoring and we made it online and the service itself resonated with small businesses. We were delivering a product and service that made a ton of sense and we were just making it exponentially easier and simpler both to onboard and to use and so on. However, we learned that not all small businesses are the same and that specific financing product need is more the end result. Their journey starts with their need, which is very primary. They need money.
Small businesses have a lot more flexibility in substituting between the financing products that align with their needs. It’s different than consumers. As a consumer, your choice of financing is almost always tied to the use of proceeds. For example, you want to buy a house, you get a mortgage. You want to buy something at the store, you use your credit card. You want to finance your education, you get a student loan. You don’t start your journey and say, “Oh, I want to buy a house” and then get confused along the way and get a student loan [by mistake].
We had businesses that were using us for factoring because they like the fact that factoring scales, but alongside this, they were also using a line of credit from another provider for things like inventory purchases, and line of credit wasn’t tied to their invoices and they could pay it over a longer period of time. So, we were seeing differences like mixing and matching financing options, and that realization has gotten us to understand that for us to really create value for our customers, the journey needs to be one where we actually have a suite of products.
Rogers: How did you get that intelligence from your customers when you’re an online-only business?
Lifshitz: We may be an online-only business, but our customer-facing teams speak to our customers daily. Something that I’d say is a little bit philosophical for us, we’re very much a technology-enabled company. We have a lot of technology. We’re almost 270 people, and about 40 per cent of the company employees work in tech or tech-related roles, so we’re very heavy on technology in terms of the investment of the company. That doesn’t mean we don’t have people here. We have account executives. We have account managers. We have live support, and we speak with our customers every day.
Rogers: Any other metrics that you can share?
Lifshitz: We finance thousands and thousands of customers. We don’t provide the exact number, but we ’ve been growing our originations very quickly. We’re looking at originating over $1billion more or less this year. So, every year we’ve almost doubled originations. We’re now one of the five largest non-bank SMB financing companies in the U.S., along with some of the companies that you’re familiar with like Square, PayPal and OnDeck.
While there are a lot of lenders in the market, the market actually is very concentrated. The largest probably five to ten lenders hold the majority of the market. It’s a little bit similar to the banking industry. The top ten banks hold 60-70 per cent of the deposits. It’s similar in the online lending world. There’s a clear benefit to scale even in our market. We’ve been more than doubling revenue every year and we already have nine digits in revenue run rate. We’ve been growing over 100 per cent year-over-year.
Rogers: You also have a fair amount of strategic investors and several rounds deep into that, so it’s a big valuation. Are there any numbers that you can attach to the market opportunity?
Lifshitz: I think it depends on how you define the market and how you cut the market. For us, the market opportunities keep expanding, because the way we view ourselves is not just limited to a single product. We will continue building more and more products. We are now thinking about building our first non-credit product. We are looking to build a suite of financial services, including payments and cash management. Essentially think about it as we’re building somewhat of a financial operating system for small businesses.
The more you expand, the more the market category grows. There are 30 million small and medium-sized businesses in the U.S. It’s a huge segment. The outstanding credit card debt for the entire U.S. population is about a $1 trillion-plus market. Some 20 to 30 per cent is a small business or small business related, just to give you a sense of the magnitude. It’s a large, large industry. Financial services are one of the largest GDP categories and small business is a very large segment. You can assume we’re talking about a really, really large opportunity, and some of it is competing with things that we don’t have in the market yet, but we will have in the future.
Rogers: Are there plans for the public markets?
Lifshitz: We’ve not made a decision yet, but ultimately we believe we will go public. There is a benefit for a company like ours to being a public company because being a public company, one of the things that you’re required to provide is more visibility into your financials and so on. The benefit for a company like ours is one, it adds credibility to our customers seeing that we’re a public company. It adds more trust to people that consume our services.
The other benefit is the ability to better access capital markets. When we originate or when we provide financing to small businesses, we need to raise debt on the other side to be able to do it. So, our ability to tap the capital markets around debt will be more advantageous as a public company.
That said, we’re not in a rush to go public, and the reason is there’s a good side of being public and giving a lot of visibility to the market, but at the same time, you want to be ready when you do that. You want to have your story really fleshed out and more stable and defined before you become a public company. For us, we are at the point where we are continuously building more and more products and services and our story is evolving.
Right now we’re still in a market where there is an opportunity to secure large investments from private investors. If you were looking ten years ago, being able to raise $200-$300 million as a company from private investors didn’t exist. Today, we don’t necessarily need to become or to go public with an IPO to raise a large amount of money. We will become a public company, but we’re not rushing it.
Rogers: Where does this idea that you could be the master of your own destiny by running a business come from?
Lifshitz: You’re right before I started the company, I actually had not taken a lot of risks in my life. I worked in a brand name venture firm. Before that, I lived in the U.S. and worked at McKinsey. I started my career in engineering at Texas Instruments, so you see a pattern of blue-chip, brand name companies.
I’m different than some of the entrepreneurs that, for them, it is their life destiny to be an entrepreneur. They know from the get-go. They go to college and it’s like a burning thing for them to become an entrepreneur. For me, even though my dad was one and my grandfather was one, I never thought I would actually start my own company. It wasn’t something that I thought about. The reason it kind of came about for me I’d say is one, I was working in the venture, so I saw a lot of entrepreneurship around me, and that gets you itching a little bit.
The other thing was just the size of the opportunity. Sometimes there are entrepreneurs who say, “I will be an entrepreneur no matter what. I will find an idea.” For me, it was the other way around. I found an idea. The invoice factoring idea struck me and I decided to found BlueVine. In the beginning, I had a little bit of an investor mindset and my initial thought was “let’s find somebody to be a CEO of this company. Let’s find somebody else to do it.” I wasn’t thinking about leaving my cushy job and doing this, but as I started working on it, I got a little bit obsessed with the idea.
I felt the vision of what we were building, it could be so massive, such a huge opportunity. The reason I decided to go and pursue it was a little bit about having no regrets. I felt if I wasn’t going to pursue this opportunity which I felt was so enormous, that I would be sitting at home at age 70 just regretting that I didn’t go and do it.
Rogers: How did you put your team together? Was it something you were working with together on the idea and it sort of came about or did you say, “This is my vision, I’m going to go recruit the people I need for it”?
Lifshitz: I had a broad vision. There was some refining. It wasn’t like I got to a point where it was completely baked and then I hired a team, but I had an initial concept and then I was looking to find people to start the company with. Being in a position where you’re an inventor, the good thing about it is you hear about people who are good in the industry and who could be potentially good partners for you. For example Nir Klar my co-founder and CTO, I met him through a common friend. He was the CTO of another startup at the time.
He was looking to leave, and so we kind of got connected on a little bit of a blind date. We got to know each other and there was a click. We had another cofounder earlier on that we parted ways with about a year in. That was also was through a mutual introduction. I knew I needed a team. I was connected through to my co-founders, and then we fleshed it out and set out on that journey.
Rogers: Thank you.