Building a $60K/Month Online Lending Business – An Interview with Fig Loans Co-Founder & CEO Jeff Zhou

In this post, we talk to Jeffrey Zhou, the Co-Founder and CEO of Fig Loans. Fig Loans provides affordable financial products to borrowers by aligning business model with customer financial health. They are essentially building a bridge between bad and good credit by offering an alternative to pricey payday loans that strapped consumers turn to when they have an unexpected financial emergency and have no other option.

Key Stats

  • Monthly Revenue: $60K
  • Date Started: April 2015, 3 years in business
  • Location / Homebase: Texas + New York
  • Number of Employees: 6

What inspired your company

John and I were able to start Fig because along the way people took a chance on us. Whether it’s an education, job or an investment – they could have picked anyone else, but they gave us that opportunity. As a result, these institutions are more than just schools, employers or investors to us.

The catch-22 of credit traps people out of the traditional credit markets. You need to get credit to build credit, but if you have bad credit nobody will give you credit. Fig takes a leap of faith every time we lend. We give our borrowers an opportunity to show they’re more than their credit score. And after we’ve helped them succeed, I hope they’ll think of us as more than a lender.

How did you validate the idea?

The original Fig personal loan started as a collaboration between Fig and United Way THRIVE. On October 14, 2014, we cold called 50 nonprofit organizations to learn more about how online payday loans in Texas affect people and communities. We wanted to speak to financial coaches who had first-hand experience working with payday loan customers.

The United Way of Greater Houston took our call and that was the start of the conversation. A few months and working sessions later, we presented our theory for the Fig Loan to a room of 80 financial coaches in Houston and they loved it. The non-profits said when can we have this loan and the rest is history!

During the launch phase, did you maintain a full-time job? (or even currently)

We started Fig while we were in school and gave ourselves 9 months after graduation to focus on Fig before considering full-time jobs. As we were getting ready to transition into doing Fig part-time, things started to pick up (ironically and naturally it always happens in the 11th hour). Fortunately, part of our momentum included being accepted into TechStars, which made the decision very clear to double down on Fig.

Can you describe your business model and how you feel it works?

Fig is a bridge between bad and good credit. Unlike other lenders, Fig’s loan products are designed specifically to just cover our operating costs. We’re not interested in making an extra dollar when our customers need it the most. Instead, we want to help our customers unlock their potential as a future traditional credit customer. To this end, Fig’s business model generates profit from referrals to traditional credit providers. The best part about this model is that it creates perfect mission alignment. Fig’s business return is maximized when our borrowers achieve the highest credit scores.

Did you do any email marketing/outreach?

We have not. Our original customers were in-person referrals from non-profit partners. We’ve done some emails to our existing customer base, but never cold outreach.

How did you acquire customers/subscribers/users?

Our primary acquisition channels today are word of mouth, SEO and channel partners. We put a lot of work into providing outstanding customer service and I think it’s a huge driver of our organic traffic. Financial services companies often don’t get great scores for customer service, so focusing on that as a strength allows us to be very memorable to our customers.

One of the most important things that we look for in acquisition is customer intention. We want our channels to inherently tie to customers making responsible financial choices.

Once you developed a user base, how have you maintained it?

TLC – Tender loving care! Taking care of customers is critical to executing our business model. Customers have to stick around for us to help them maximize their credit score! Unlike other technology companies, one benefit of our business is that every user is a paying user, so there is a clear business case for investing in each relationship.

What software/platforms/tools have you utilized since launch? Which have worked / not worked?

From a tech stack perspective, our backend uses Ruby on Rails with a Postgres database on AWS. Our frontend to date has been almost entirely native javascript, CSS and HTML. We’re exploring ReactJS now and are very excited to upgrade our frontend!

Outside of the stack, our most used tools are Google Apps, Google Analytics, Slack, Dropbox and Microsoft Office. Coming from consulting and finance backgrounds, we have a soft spot for Excel and Powerpoint. The team is also split down the middle on Atom vs. Sublime.

Fortunately, we’re relatively light on tool use and so there haven’t been many bad experiences. The two biggest gripes we have with Google Apps are organizing emails and viewing team member calendar availability. We’re also still looking for a workflow management tool that we like. We’ve tried Asana, Trello, and Workflowy but nothing has stuck so far.

How did you fund your startup and how does it make money?

The first $50K in Fig was funded by me and John. Since then, we’ve raised $2.6M in equity funding to grow the company. We actually just announced our fundraise a few weeks ago! Our investors include: Village Capital, Techstars, Access Ventures, Purpose Built Ventures and Tubergen Ventures.

As I mentioned above, Fig’s business model generates profit from referrals to traditional credit providers. In some cases, this can take multiple years and so we’re in it for the long haul with our customers. The company uses our loan interest to cover operating expenses along the way.

What were your KPIs when you started, have they changed?

When we started, the main business KPIs were # of new loans, customer acquisition cost and loan performance. Today, the KPIs have not changed. While we’ve tweaked how we measure and track these 3 indicators, the core indicators themselves will always be the best barometer for the sustainability of our company.

To date, what have been your biggest challenges as a company? What have you done to overcome them?

Can I say everything? If I had to single out one, the biggest challenge for our company has always been navigating our unique position as a social impact fintech company. Imagine a Venn diagram of technology, finance and social impact, Fig is in the dead center! Technology people think we’re a finance company, finance people think we’re a non-profit, and non-profits aren’t sure what we are but they like what we do! Fig is a complicated idea and unfortunately, there is no easy way to distil our company into a simple description. Fig’s complexity is how we’re able to tackle a very challenging problem, but it also creates communication challenges.

To overcome this challenge, we’re very judicious in tailoring our communication to the audience. Focusing first on establishing all the ways we do fit the prototype that comes to mind and then transitioning into what makes us different.

What are your plans for growth?

We originally started in the state of Texas. Last month, we entered our first new market, Missouri. For the rest of 2018, we’re planning to enter 3 more markets. This will allow us to attract larger partners in every area, from the community to operations to marketing partners. The plan for growth has and will always be to grow sustainably. We’re not interested in growth for growth’s sake because with each step forward more and more people depend on Fig to be there when they need us.

If you had to do it all over again, would you? What would you do differently?

Absolutely! Aside from hindsight 20/20, I’d do it all the same. As for advice, I would give younger me two pieces. First, be firm in the plan for your company when communicating with investors. Even on things where you are flexible, lay out an ideal path forward with backups instead of saying you’re prepared for any outcome.

I think early on we wanted to convey adaptability, but it was often misinterpreted as lack of planning. Second, I would tell younger me to relax, roll with the punches, and let things run their course. When we started Fig, there was a constant feeling that the company was riding on knife’s edge and that every meeting was made or break. We tried to control every outcome but the unpredictable drove us crazy! It’s like trying to keep your bike stable on very mountainous terrain (i.e., the startup life rollercoaster). Where I used to fight the topography, today I instead look for ways to harness its natural swings. We can debate the outcomes, but the ride is definitely much more enjoyable!

Lastly, if anyone reading this wants to know more about your company… where do we send them

For more information about our company visit www.figtech.com, to learn more about our latest product Fig36 you can visit https://www.figloans.com/community-loans.

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Building a $60K/Month Online Lending Business – An Interview with Fig Loans Co-Founder & CEO Jeff Zhou
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