Slava Rubin, Founder of Indiegogo, to Keynote Broker Fair 2021
October 22, 2021
Broker Fair announced that Slava Rubin will be its keynote speaker for its 2021 conference on December 6th in New York City.
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Who is Slava Rubin?
Slava Rubin is an entrepreneur and innovator in the fintech space for nearly 20 years. Slava built an alternative investment platform, a venture fund, an equity crowdfunding platform, a perks crowdfunding platform, and an angel investment portfolio. Slava is a founder of Vincent, a company which has developed the largest database of alternative investments (crypto to NFTs, trading cards to art, real estate to venture and debt) and is changing how people access them. He is also founder & managing partner at humbition, a $30M early-stage operators venture fund built by founders, for founders. Slava also founded Indiegogo, a company dedicated to empowering people from all over the world to make their ideas a reality. As CEO for over 10 years from inception in 2006, Slava grew Indiegogo from an idea to over 500,000 campaigns and more than $1B distributed around the world. While at Indiegogo, Slava launched one of the nation’s first equity crowdfunding businesses. Slava’s angel portfolio includes 4 unicorns – Carta, Hedera, GOAT, & Turo. He is also a founding advisor to multiple companies including Hedera Hashgraph – a top 60 blockchain protocol.
Prior to Indiegogo, Slava was a strategy consultant working on behalf of clients such as MasterCard, Goldman Sachs and FedEx. He is also the founder of “Music Against Myeloma,” a charity that raises funds and awareness for cancer research in partnership with the International Myeloma Foundation. Slava is currently a member of the board for NYSE traded (WSO) Watsco Inc., and privately held, Indiegogo.
Slava represented the crowdfunding industry at the White House during the signing of the JOBS Act under the Obama administration and has helped navigate bringing equity crowdfunding to the American public. He also pioneered security tokens in the United States – having been a catalyst for selling fractionalized ownership of the St. Regis hotel in Aspen using blockchain technology. He has made many TV appearances including being a regular guest commentator on CNBC. He has also been often quoted in NYTimes and Wall Street Journal.
Slava has received numerous awards including Fortune 40 under 40, Observer 20 Heros under 40, and the Wharton Young Leadership award for 2015.
Slava holds a B.S.E. from the Wharton School of Business
Q&A with Isaac Wagschal on One Percent Ventures’ Intentions to Transform MCA
October 21, 2021One Percent Ventures, a loaded name with implications depending on who reads it, is the latest small business funding company to enter the fray. No, it’s not funding for the one percent, but rather the numerical percentage the company would make off first-time clients with near-perfect performance. They’d make just one percent…
The concept, which caught the attention of AltFinanceDaily, had to be explained in detail, especially when a merchant paying only $500 on a $50,000 advance was communicated as an example. Say what? The catch is in a rebate and the cost independent of the broker’s commission. Nevertheless, One Percent Ventures CEO Isaac Wagschal seems to be bringing in a new concept, one that was originally supposed to be 0%, he says, but he was already stuck with his company name. AltFinanceDaily did a Q&A to find out exactly how it all works.
– The Editor
Q&A
Q (Adam Zaki): Why did you choose the name One Percent Ventures?
A (Isaac Wagschal): The original idea for One Percent Ventures wasn’t to be a funding company that gives one percent deals. Originally, we were going to provide branding and marketing services to small businesses who do not have any marketing, but can benefit from it. Our compensation was to be a one percent partnership in the company. Then a situation came my way where I was able to form a team of people with extensive knowledge and experience in the MCA space. I grabbed the opportunity and switched from marketing to funding small business.
We designed the product with a rebate that refunds basically the entire cost of the first advance. I realized that if we changed the rebate where instead of refunding 100% of the 1st advance factor cost, we keep 1%, I wouldn’t have to change the name and logo of the company. This is the reason our merchants are now paying one percent. If I had not already determined the name, the merchants would have been paying zero instead of one percent.
Q: What was the most difficult part of the shift from marketing to funding?
A: Shifting from marketing to funding was very difficult because of the nature of the market which existed at that time. That difficult transition forced the creation of our unique product, which includes rebates and payment-pauses. I looked into the mainstream MCA product in-depth, and realized that from a marketing point of view the product is flawed, and cannot be marketed properly. The more I scrutinized the MCA industry, I realized that the problems are not just from a marketing perspective. There are existential problems that need to be addressed, or they will eventually cause the demise of the industry altogether. Default rates are so high that mathematically the industry is forced to charge extremely high prices. This makes the product unmarketable to merchants who are not in the absolutely highest risk bracket.
I knew that unless we remade the product to be more attractive and marketable to a larger market share, the funding industry had no tangible room for expansion. Why would we want to get into this market space in the first place? As a team, we agreed that instead of hiring ISO-reps and underwriters, we would first hire accountants, actuaries, and data analysts.
We applied the same psychological principles used in marketing, where you try to predict and manipulate people’s reactions. By doing that, we were able to redesign the old MCA product. We introduced a rebate system that gives the merchant an opportunity to potentially only pay a $500.00 factor cost on a $50k advance. In this way, we expanded the current market share, and turned it into a hot product. I hear from ISOs on a daily basis who recontacted old unsuccessful leads, and turned them into deals after they presented the OPV-rebate and payment-pause-award system. This proved that the OPV product is expanding the market share.
Q: What are your thoughts about the market share in MCA?
A: The current market share consists of the absolute highest risk merchants who are willing to pay such high prices. It is becoming harder and harder to maintain deal flow. This has forced the industry to slowly keep raising the standard with respect to how many positions we are willing to accept. If nothing happens, we will soon find ourselves talking about 10th and 15th positions. This is certainly not sustainable, and puts an amazing amount of stress on the ISOs who are working tirelessly to maintain deal flow. They see it all happening, but feel helpless because at the end of the day, they can only present a product that a funder puts on the table. The tiny market of willing and able merchants is also a source of stress, and a key factor to the mistrust that is largely present between ISOs and funders.
Q: What are your thoughts on a relationship with the ISOs and funders?
A: Let’s face it, the way the current ISO-Funder relationship is set up scientifically creates a conflict of interest. It is simple math – when a funder loses a renewal that carried a potential profit of 50k and thinks that the deal could have happened if not for the 14 points that is reserved for the ISO, there is a natural conflict of interest. You can be honest with your ISOs and even give Rolexes and call them your partners on paper, but the spreadsheet still calculates a conflict of interest at the end. The lavish gifts are nice, but they do not eliminate the scientific conflict of interest.
We have corrected this fundamental problem by designing our business model so that our ISOs are genuine partners. This too is simple math – when a funder’s product is designed to issue an unheard-of large rebate, and 3rd party costs are deducted from the final rebate amount, the merchant will obviously be super happy because of the astronomic refund. More importantly, by using this model, the conflict of interests between ISO and funder is erased because mathematically the merchant paid the commission, not the funder!
Q: How does OPV make money? How do merchants qualify for all of your incentives? What are these incentives?
A: Let me first answer the latter part and explain how our product works and then I’ll come back to answer how we make money.
Our typical product is a ninety-day term at 1.49 sell rate. At mid-term, if the merchant didn’t miss any payments, they are eligible for an add-on, largely known as a renewal. At this phase, we begin to issue an OPV-Pause award after each cycle of four consecutive successfully completed payments. The pause awards can be submitted smoothly on our automated online system either one at a time, or they can be saved and initiate a pause for an entire week. After the final payment, if the merchant didn’t miss more than three payments, excluding the pauses, we refund the entire factor cost of the first advance except for 3rd party fees, processing fees, and 1% of the advance, which gives us only $500 profit on a 50k advance.
Every merchant that qualifies for funding, automatically qualifies for all the incentives. The OPV funding model is actually designed to perform better when more merchants actually receive the rebate. Why? Because that also means there has been a drop in the default rates. If every merchant was to qualify for the rebate, it would mean we had a zero percent default rate, which would allow us to make a healthy return, even if we made profit only on the 2nd advance.
This is precisely the reason we added the OPV-Pause awards. It is in our best interest to keep the merchant motivated to stay current on their payments, in order to qualify for the rebate. We even added a condition that in the event a merchant doesn’t have an unused pause award, they can purchase an OPV-Pause for 20% the daily payment. The goal must be to lower default rates so that we can lower the end cost. In this way we can expand the market share and keep the MCA industry alive. The OPV product is designed to do just that.
Q: What are your immediate goals for OPV? How about long term?
A: Phase I was designing the product and building the platform. Now in phase II, we plan to fund deals for at least a year before making any significant changes. We want to build relationships and earn trust by being transparent and honest, even when it hurts. At phase III we will analyze the data and make tweaks we deem necessary. At phase IV, given that the canary returned from the coal mine, we will share our intelligence, and license the OPV platform to reputable funders throughout the MCA industry.
Q: What is your outlook on the future of the non-bank small business funding/lending sphere?
A: In an effort to truly make a constructive change towards preserving the MCA industry, I will speak openly about the elephant in the room. We are all aware of the unfavorable new laws and regulations that constantly threaten our existence. As long as there are politicians who need to win elections, they will be on the hunt for “do-good projects.” There will always be a lobbyist that is looking for deal-flow, who is willing to provide the perfect “do-good” project. One of those will be – “Let’s save the poor merchant from the greedy funder.” The politician can only succeed because the nature of the MCA industry is such that our funders share only the good news. The bad news is confidential, so there is a stigma of excess profit in the MCA sphere. If we can successfully change that stigma, then we will be a thriving industry for many years to come.
SBA Task Force Set to Begin Campaign
October 19, 2021
In response to an unprecedented economic situation, a mixed group of regulators, bankers, small business owners, funders, attorneys, and social media representatives are coming together in a task force to work with the SBA, members of Congress, small businesses and entrepreneurs to transition small business into a “new phase.”
Dubbed the SBA Task Force at last week’s Bipartisan Committee summit on small business recovery, the group’s goals are to address the state of small business in the U.S., how the current economical and political climate is impacting the practices of merchants across the country, and to address concerns from interested parties directly to the federal government.
“The SBA is at a crucial moment: its laudable performance during the COVID crisis has thrust upon the agency new expectations and new responsibilities,” said Pradeep Belur, former COO of the SBA and co-chair of the committee. “To fulfill those, [the] SBA needs not only enhanced capacity but also modernization to enable it to execute effectively. I’m honored to help chair this task force and pursue measures that will support the agency and help the heart of America’s economy.”
Alongside Belur as co-chair of the committee is Ann Marie Mehlum, a Senior Advisor at FS Vector with almost four decades of experience in banking. Much like Belur, Mehlum is committed to continue the largely unfinished project of improving the operating conditions for small businesses.
“The work of assisting small businesses is never finished—the SBA has continually sought to respond to new needs and reach more types of small companies,” Mehlum said. “The members of this task force, which I’m delighted to help chair, are committed to working with the agency and Congress to improve the ways in which that work is carried out.”
The founder of the committee, Angela McIver, is the owner of an after-school math program for children based in Philadelphia. When faced with pandemic related troubles, McIver pivoted her business from a brick and mortar learning program into a fully virtual, nation-wide learning platform.
“One of the smartest things I did was develop a relationship with a community bank” said McIver, when asked what advice she would give to small businesses at the BPC’s summit. “We didn’t have a lot of the challenges that small businesses had because we had a relationship with a small bank that knew who we were, knew our challenges, and [they] were able to step in when it was necessary.”
Other members of note on the force are Christopher R. Upperman, a Manager & Team Lead in the Governance Organization at Facebook, Jessica Johnson-Cope, President, Johnson Security Bureau and co-chair of the 10,000 Small Businesses Voices National Leadership Council, and Ryan Metcalf, Head of U.S. Public Policy and Global Social Impact at Funding Circle.
“Our participation in the BPC’s task force reflects our ongoing commitment to advocate for government policies that are in the best interest of small business owners” said Metcalf, exclusively to AltFinanceDaily. “We truly believe that the strongest path forward for the SBA involves leveraging the proven capabilities of fintechs to quickly and efficiently reach typically underserved communities through a modernized approach to government-backed small business lending.”
Metcalf and his company seemed to be excited to take part in the committee, having a direct impact on the space in which their business operates. “On behalf of Funding Circle, I look forward to working with stakeholders across the lending landscape to support an effective bipartisan SBA reauthorization that best prepares the agency to help small business owners,” he said.
Members of the committee are confident that the group will help modernize the practices of the SBA while also empowering them. “The government agency dedicated to supporting [small businesses] must do the same and adapt its systems and programs to support that evolution,” said BPC Board Member and former Senator and Chair of the Committee on Small Business and Entrepreneurship Olympia Snowe. “I’m confident that this task force will successfully develop ideas and recommendations to enable the SBA to do that.”
Pandemic-Induced Pivot Results in Innovative Lending Software
October 15, 2021
“What the hell are we going to do now?”
Kunal Bhasin, CEO of 1West, saw the light at the end of the tunnel for his business in March of 2020. Instead of closing his doors and pursuing other options in finance, Bhasin held strong and began developing a product that was merely an idea prior to his business’s abrupt halt.
“I made the decision at that point when everyone was running, I hired two full time engineers. I said hey, I’ve had this idea for a long time, the whole company has had this idea for a long time, we just never had the time to implement, and then all we had is time because we [weren’t] closing that many deals.”
The idea, a software called ABLE (Automated Business Lending Engine) is a platform that minimizes the lapsed time that occurs in the funding process. “There were deals all over the place in different people’s inboxes. And then those people would have to put those deals into our processors, which created huge gaps of time,” said Bhasin.
“We needed to centralize the deal flow. Whether the deal is coming from a partner, or the deal is coming from a customer, [we needed] a centralized place where a customer could land and start completing the process.”
With the help of his former college roommate, engineers, and staff, Bhasin put his idea to fruition— and ABLE took off. “We rolled up our sleeves and spent the better part of the last 16 months building it, and now the largest percentage of my time devoted to running 1West is on the software and the platform.”
Bhasin claims that his product gives his company a huge competitive advantage, as he is able to use AI to evaluate, process, and determine the type of funding and through which lender is best on an individual basis.
“[ABLE] really shrinks that entire gap time so when the lenders get in early morning, when the funders get in early morning, our stuff is always in queue, and it’s created really nice returns on the amount of customers we’re getting and the amount of deals we’re funding.”
The automation of the application process has allowed potential borrowers to not only find the ideal package for their needs, but allows them to apply for different types of capital streams, something that would take tons of manpower and time without the ABLE software.
“Greater than 90% of the customers who come into ABLE apply for more than one product,” said Bhasin.
When asked about if there were any plans to license the product in the future, Bhasin was hesitant to give a definite answer for the future of his creation. ABLE is already white labeled by 1West for brokers.
“Maybe,” he said, I want 1West to reap the benefits of it for 6-12 months and fix all the tweaks we have to make. We have a lot going on.”
Elevate Announces New Financing Facility for Non-Prime Credit Product
October 13, 2021
Elevate Credit, Inc., a top provider for credit solutions marketed for non-prime individuals, announced Wednesday a $50 million financing facility, which may increase to $100 million, according to a company press release. The funding is to grow the Today Card, a credit card designed to expand access to credit while promoting intelligent credit decisions for people with less than perfect credit scores.
Financing for the Today Card will come from Park Cities, an asset management and alternative investment company that provides flexible debt solutions to its customers. The partnership will help reduce the amount of capital required by Elevate for the project.
“The Today Card has seen outsized demand and has been the fastest growing brand over the last 12 months,” said Elevate CEO, Jason Harvison. “To continue that growth, we have announced a new lower cost credit facility. Park Cities has demonstrated a deep understanding of our space. I am pleased to both diversify our financing and promote our platform’s ability to serve non-prime consumers at even lower APRs.”
Backed by Mastercard, Today Card offers all the benefits of a regular credit card to individuals who may not qualify for the same perks through other creditors. Family share, fraud control, and flexible payment options are all packaged into the Today Card product. These options will familiarize cardholders with these types of benefits should their credit improve in the future and they qualify for other cards with different banks.
“Elevate is changing the game for non-prime Americans. We are proud to partner with a mission driven organization and help enable their growth,” said Park Cities Managing Partner, Alex Dunev.
Elevate has originated $9.2 billion in non-prime credit to more than 2.6 million non-prime consumers to date, and has saved its customers more than $8.5 billion versus the cost of payday loans, according to the report. They already offer borrower incentives like reduced interest rates over time, free credit monitoring, and free financial training.
What Makes a Great ISO?
October 13, 2021
Working and developing relationships with ISO’s can be some of the best and most difficult parts of working in the small business finance industry. The relationships between the merchants and these individuals can make or break the success of a funder, and a great ISO can take a funder and the merchant to the next level.
Kristin Parisi, ISO Relations Manager for Park East Capital, shared with AltFinanceDaily what traits, characteristics, and commonalities separate the best reps from the rest of the pack.
“I think the top thing is someone that is super attentive,” said Parisi, when asked what is the biggest factor that makes a successful ISO. “Someone [who] is available to speak at all times, after sending something in an email or they send me something, I’ll call them and they’ll pick up, someone easy to reach out to, and someone who cares about the deal.”
Kindness also plays a big factor in making a great ISO according to Parisi, who said that sometimes the attitude of certain reps can impede business and make funding deals much more difficult. “I have come across some people who can be super rude,” she said. According to her, kindness and honesty can make or break not only an individual deal between a funder and a rep, but can be the foundation for the entire relationship between the two.
“It’s like a friendship type of thing,” she said, when describing the ideal relationship between both parties. “Someone who is trustworthy, loyal, someone who won’t screw you over behind your back, who won’t send your deals somewhere, someone who won’t screw you over for money. Honesty is the main thing.”
Parisi credits her success to these developed relationships. “The ISO’s I do work with are all my friends now, and I think we have a great thing going,” she said.
She noted the challenge of dealing with ISO’s from a female perspective, setting boundaries and being assertive while also trying to be kind and develop positive relationships. “Being a woman in this industry is a little different than being a male. I’m kind of approached differently, the girls on my team are approached differently. I’m one for being really kind and honest, but [only] to a certain extent because [ISO’s] will walk all over you.”
Apart from the personality that is projected on the funders themselves, another key trait is the professionalism of the ISO themselves, according to Parisi. She spoke about the younger, money-hungry mentality that can lead to ISO’s becoming disingenuous or difficult to work with. Rather than a hustle and bustle mentality, she credits understanding the terminology and how the industry functions as a desirable trait in a potential ISO.
“You don’t need ten plus years in the industry,” said Parisi. “You need a few months in the industry, you get it, and you’re good.”
Facebook is Buying Invoices, But is it Factoring?
October 8, 2021
After Facebook announced Facebook Invoice Fastrack, a program that would allow the company to enter the invoice factoring business effective October 1st, few knew what to expect.
“My gut tells me here that Facebook is not all of the sudden getting into the lending business,” said James Cretella, Partner at Ottoburg LLC and guest speaker at the IFA conference last Spring. “Big tech is seeing the information symmetries, especially in small business lending. It’s very fragmented, and [tech] is trying to exploit that to bring down the cost, and to consolidate that industry,” he said.
Cretella expressed a positive outlook on Facebook’s entrance into the factoring sphere. “I think it’ll be a very good thing for small businesses when big tech gets involved.”
Others believe that big tech is doing pseudo-funding in an effort to break into the space and improve their public image. “There’s always a question when big tech or similar big anything’s get into factoring,” said Robert Zadek, Of Counsel for Buchalter and CEO of Lender’s Funding. “They might call that factoring, but it’s not. It’s a fake factoring product. Fake in the sense that it’s only part of what factoring is,” Zadek said.
Since then Facebook has revealed its program partners, Supplier Success and Crowdz.
The major component here is whether or not Facebook is doing the standard operating procedures of a factoring company, or just purchasing invoices owed. “They’re probably not filing a financing statement a UCC-1, because that takes a long time, and [tech] likes fast,” Zadek said. “Filing is slow and almost manual.”
Without going through the processes of a factoring company, Facebook may just be banking on the good faith of borrowers to pay and eating the costs of those who don’t. “[Facebook] is left with an earned 1% fee with no work, which would be profitable if they get back. If they don’t it’s like a write off,” said Zadek.
According to a Facebook announcement, the company has already practiced factoring with a handful of small businesses, claiming that the program has successfully helped these select businesses grow, even giving some businesses opportunities to just keep their doors open.
We wanted to make a commitment to building tools that made information and inclusive funding partners easy to find and understand,” said Ronnie Cameron, Product Manager, Social Impact at Facebook. “We’ve been able to engage with some amazing [organizations]. The pandemic brought to light the gaps in access to funding that have always existed for underrepresented business owners.”
Facebook is positioning itself in a way that appears that the company is providing an exclusive service to a community who had already been underserved prior to the pandemic, and now, according to them, needs help more than ever before. As the company has had a tough time maintaining a positive image to the public, this could also just be a slightly profitable way to fix their public perception.
Zadek compared tech’s entrance into funding to when MCAs began competing with Factoring Companies. “Instead of whining about MCAs, why don’t you give the client more money?,” he asked his predominately factoring audience when they would complain to him about MCAs. “The MCAs don’t have a death wish,” he told his audience. “They are giving money because they believe they are going to be paid back.”
Sticking to the notion that Facebook’s take on factoring is different from what his industry does, Zadek summed up his take on Facebook’s announcement.“They’re not doing factoring, they’re doing something that has little pieces of factoring in it.”
Miami is Now Making Money Off of Its Own Crypto Coin
October 7, 2021
Francis Suarez, the crypto-crazed mayor of Miami that has attempted to make his city the next center of innovation in the industry, has recently generated more than $7.1M in funding for Miami’s government via MiamiCoin. Arriving in the form of a crypto “donation” to the city, it was all made possible by CityCoins, a nonprofit that allows users to mine coins that the company claims can help the wallets of both coin holders and the cities with whom they look to invest in.
According to CityCoins’ website, each time a city launches a new coin, users can mine coins themselves. They are an open-source network that allows developers to create smart contracts on top of the same layer used by Bitcoin, a feature normally reserved for blockchains like Ethereum or Cardano.
“Each time a new CityCoin such as MiamiCoin launches, 20+ unique wallets are needed to activate the token’s mining process,” the site reads. “Once this happens, a 150 block (~24 hour) countdown begins, signaling the start of the CityCoins’ mining process at the end of the countdown period. From there, anyone is eligible to participate in the CityCoins mining process within a given Stacks block and be rewarded for their contributions.”
The system creates a bidding process, sending Stack tokens to the chosen city’s smart contract for a specific block. The more Stack tokens that are sent to the contract, the more likely a user is to win rewards for that block. This creates a system where anyone can compete for the coins, as the process of mining a CityCoins product is completely free of any type of hardware.
Thirty percent of miners’ forwarded Stacks is directed into a crypto wallet for the respective city, and the remaining 70% can be used to earn Stacks or Bitcoin. Winners of the coins through CityCoins’ mining process, are chosen by a Verifiable Random Function (VRF) that takes into account the number of Stacks sent to specific contracts.
Anyone would be forgiven if the process and potential utility sounds convoluted. It becomes even more so after examining what exactly a “Stack token” is.
Stacks, a type of blockchain token originated into existence in 2019, were previously registered as securities with the SEC, a rarity in the crypto space. The company that issued them, however, has since changed course and has chosen to no longer register them. This was based upon the company’s own legal opinion, not the SEC’s.
Bottom line: However this CityCoins systems works and whatever the reasons why anyone would participate in it, it has somehow managed to yield more than $7 million for the city of Miami.
While everyone today likes to focus on the negative and want to create conflict and division…We made 1 million dollars on Miami Coin…TODAY…think about that! https://t.co/Ycbwre6Wss
— Mayor Francis Suarez (@FrancisSuarez) October 1, 2021
When speaking about the city’s involvement in becoming a fintech hub with The Floridian, Suarez credited timing to why his city is becoming the go-to spot for fintech businesses to flock. “We had an opportunity,” Suarez said. “You had cities across America, urban cities, pushing out innovators through taxation policies, sometimes elected officials saying “F” Elon Musk, or Amazon picks New York and they push them out.”
Suarez, a member of the Florida BlockChain Task Force, also credited his December 2020 viral tweet as a reason for tech’s attraction to Miami. Suarez answered a tweet with “how can I help?” after a user took to Twitter asking people if they believed Silicon Valley should move to Miami. “It was so counter-narrative to the way elected officials were dealing with technology and technologists,” he said, in reference to the Tweet.
According to Suarez, the city’s focus on crypto and fintech has made Miami a tech-trendsetter for other cities. Thanks to tech’s arrival, Miami is the first city to pursue paying workers in Bitcoin, the first to allow citizens to pay taxes in Bitcoin, and hitting huge numbers in the city’s job market. According to Suarez, the city added 8,000 jobs with an average annual salary of $120,000 in the past nine months.
“For the first time in [Miami’s] history, we are now creating high paying jobs,” Suarez said.
