Scaling to a Million Customers: Lessons from Propel Holdings

The most important thing is to get on the court to do it yourself, because we've all got a different story and we've all got different personalities and we've all, you know, there's lots of ways to skin a cat and there's a best way, I suppose, but there's lots of ways and different people do it differently. So I would say that there's no substitute for hard work. There's no substitute for perseverance. There's been several times in both instances where I'm like, this is just too difficult. I can't see a path out of this, but first and foremost, persevere and never ever give up. And maybe that's more of a personal trait than another trait, but if you lead with hard work, if you lead with honesty, transparency, doing what you say you're going to do, building trust with the team, at the end of the day, there's an incredible amount of loyalty. And loyalty is a two-way street. And I've always assumed as the leader of the company that the onus starts with me. It doesn't start with somebody else being loyal to me. I need to be loyal to them.

Welcome to the Startup CEO Show. I'm your host, Mark MacLeod. In this episode, I sit down with Clive Kinross, CEO of Propel Holdings. Propel has a series of brands that lends to the underserved, so people who cannot afford to get loans from banks, and that is a large market. They've served over a million customers, and so they're changing people's lives. In this episode, we walk through his whole journey. He's a CPA like myself, so I have some envy that he went and started his own business. I, I never really did that. So we talked through his personal journey. He had a prior success in the car market with Openlane. We talked about that and just talked about the whole journey, including going public and how they were able to get a million customers. So lots of great insights here. I hope you enjoy the episode. Clive, welcome to the Startup CEO Show. It's a true pleasure to have you here.

Great. Yeah, it's a real pleasure to be here as well, Mark. I like your getup for the interview today.

This is just every day, to be honest. I worked on Bay Street for the first 6 years of my career and developed a real love for suits. And now I have a bunch of really nice suits gathering dust in my closet.

Okay, well, you've done a big, big correction over there. You're looking good on the other side of the screen.

I appreciate it. So maybe for folks who don't know, just tell us what Propel does and they'll just give us some context.

Yeah, yeah, absolutely. And again, appreciate being here today. What Propel does as a company, I founded about 14 years ago. Using our proprietary AI technology platform, we provide access to credit to underbanked and underserved consumers. We do that even either on our own balance sheet or alternatively, we do it through lending as a service programs whereby we manage the entire process and somebody else takes, purchases the receivables. And today we're operational in the US, in our home country, Canada, and in the UK as well.

Amazing. I'm curious, just as an aside, your accent is decidedly not Canadian, South African. How and when did you come to Canada? I'm just curious.

Yeah, born and raised in South Africa and spent now roughly half my life in South Africa and half my life in Canada, you know, so the accent stays with you. If you come at a certain point. Grew up there. I'm actually, and I think you know this, Mark, but your listeners don't necessarily, I'm a chartered accountant by training. I did my articles at Arthur Andersen back in the day and arrived here in Canada in 1997. Shortly after doing my articles of traineeship at Arthur Andersen, I spent a little bit of time in South Africa in private equity. It's kind of an interesting time to do that. You know, South Africa was just opening up. Post-apartheid, a lot of companies were being privatized. So I did that a little bit, and then my papers came through. I moved to Canada, spent a little bit of time here in merchant banking, and decided that rather than being a banker or an investor, I was maybe better suited to be an operator. And honestly, you know, it was a challenging period of my life because all I had discovered was that I didn't necessarily want to be an investor, and hoped that I had the talents and the skills and the drive to be an operator and an entrepreneur, but obviously didn't have the experience prior to doing it. And Mark, I met up with a guy by the name of Michael Stein, and Michael had just taken Caprite public on the Toronto Stock Exchange. It was actually the first apartment REIT that went public on the TSX, and the internet was going gangbusters in the late '90s, and Mike and I formed a relatively loose relationship whereby he was going to back me to start a business. And to cut a long story short, that culminated in the formation of a company that went on to be called Openlate. Started that in Toronto. What we did over there is we facilitated the sale and distribution of used cars over the internet. And really was a transformational business model. Used cars were distributed at the time through brick-and-mortar auto auctions. And I looked at that market and thought, here's a good application for the internet. And again, to cut a long story short, um, we tackled both, uh, the US and Canadian markets, even though I started the business out of Toronto. Grew that to a business with about 600 employees, um, with offices in Toronto, at Palo Alto, and Phoenix. Uh, we were taking that company public on the NASDAQ in '08. And unfortunately missed that window in the middle of the global financial crisis. Supposedly the business was going to be valued at give or take $1 billion at the IPO, and obviously managed all the way through a big downturn over there. We did a big reduction in force towards the end of '08, from 600 employees down to 400, and ultimately sold that business to Carr Holdings for just under $300 million. Open Lane continues today. The largest or the second largest auto auction company in the world. And obviously, I'm very, very proud to have founded that business. And then I took off a year, caught my breath, started developing the hunger again, and then kind of began the journey that culminated in the formation of Propel Holdings.

What a wild ride.

To put it mildly.

Yeah. I was a CFO for a company called Tungle in 2008. And we closed a Series A 3 days after Lehman Brothers crashed. And at the time, nobody knew kind of what just a macro systemic shock we were in for. I think if we had been a week later, I don't think the round would have closed. And then, you know, you get into '09 and like venture capital literally dried up, you know, so it was a, it was a rough period.

It's really, it's really interesting. You know, it's interesting that you say that. I remember those days, a day over the, you'd wake up in the morning and it was like, holy shit, but where did that happen from overnight? You'd spend the day trying to manage through a particular situation and wake up the next morning only to be hit by the next bombshell. And as you say, capital dried up. I mean, the lending markets, you know, and this was prior to Propel, but the folks that continued to lend throughout '08 and '09 will tell you that was some of the best vintages they ever underwrote. And that's particularly in our segment of the markets, just given where we fit in in the credit waterfall, lending to you know, consumers with bruised credit profiles. And with everyone ahead of us, banks, credit unions are risk-off and they don't lend. A lot of those consumers move into our segments of the markets. And as a result of that, those that continue to lend through that cycle literally could cherry-pick the best consumers. So oftentimes, particularly our industry, when we are hit under a broader call it recessionally challenging macroeconomic times, it's oftentimes a very, very good time to lend and the vintages coming out of that for the reasons I just outlined are often some of the best.

Yeah, no, that makes sense. Yeah, so let's talk about that market, right? You know, so you're lending to underbanked, underserved consumers. That sounds like a really giant TAM, but also maybe some risk in it. Like, where did the insight come? Did it come from the previous business with these customers trying to arrange financing or was it just totally separate? Separate idea?

No, it's not a business, uh, to be honest, it's not a business I'd even heard of, um, let alone knew about, let alone had any insight of. Not dissimilar actually to the Openlane experience where I had no idea how large the used car market was. It makes sense when you think about it and start thinking about how used cars are distributed, but certainly in a North American context, it had never occurred to me that 40 to 50% of the consumers live paycheck to paycheck. And banks and credit unions are just not inclined to lend to them. They're risk-off. Banks and credit unions, for the most part, make their money either from wealth management or from lending. Our customers, for the most part, don't have savings, so the wealth management side's not interested in them. And then you look at the lending side, and a lot of our customers don't need auto loans, don't have mortgages. A lot of them are renters. And as a result of that, the banks and credit unions have turned them away. And as I say, 40 to 50% of them live from paycheck to paycheck. And when they need access to credit, it's very difficult for them to access it. And as you can imagine, sorry to be a little bit repetitive over here, but living paycheck to paycheck, things happen every once in a while and you need access to credit. So, you know, growing up in South Africa, I had buddies of mine that started businesses there lending to consumers throughout Africa. Only there, what we would consider an underbanked or underserved consumer based on their credit profile, in Africa, that would be considered to be a relatively good consumer, if you will.

Right.

So I saw buddies of mine build out big businesses over there. Never occurred to me again that an industry like that existed in the North American context and really stumbled upon it in 2002, beginning of 2011. And like any industry in North America that's a multi-billion dollar industry, this one's well served through conferences, associations, that type of thing. I got more engaged and more curious and traveled around from conference to conference, developed skills early in my career to build a rapport with people, ask people if I could come in and speak to them just to learn about their businesses. In many instances it was was with folks that would become vendors or partners of ours. So they saw the opportunity and were only too happy to provide an hour of their time. And I learnt about the industry for the best part of 8 or 9 months and thought that this was a market that was proven, unlike Openlane at the time, which was a brand new transformational business model. When I was getting started, there were a few folks that were doing this, albeit in a less organized fashion, I was seeing a big move from brick and mortar to online lending, which was fascinating to me. And I saw some of the guys in the online arena building reasonably sized businesses, and in many instances, profitable businesses as well. So, you know, it was a confluence of a big underserved market, a business model that appeared to be working and appeared to be profitable. And, you know, those were the ingredients I was looking for in an industry that was changing. As well, moving from brick and mortar to online. And those were some of the key items that were really appealing to me, which is why, um, which is why myself and my founding team, um, ultimately took the plunge.

Yeah, listen, private credit is probably as old as all of commerce. Soon as commerce happened, people were probably lending to facilitate commerce. So definitely an old market. I'm curious, you know, I've had a couple of CEOs here who, like yourself, are building consumer-facing companies in Canada. And you know, a thing that we discussed, funny, funny that you mentioned kind of auto sales. I had Dan Park from Clutch on the podcast recently. So he's building not an online auction, but very large, you know, retailer of used cars. But an observation that we discussed with those other guests was that there just isn't a large appetite by institutional investors for consumer stories. So I'm curious What was the funding story for Propel? Like, were you forced to go public early or were you able to access private capital? Just tell us about that.

Yeah, well, bear in mind, I'd already had the experience and my experience with OpenLane to a large degree shaped what I wanted to do from a funding perspective with Propel. Mike again funded that business for the first few years and we were burning money for a long time. It was a very, very difficult business to build. We ultimately merged with a competitor. They were funded with quite a bit of venture capital money. So through the combination, I got exposed to venture capital, particularly the Sand Hill Road crowd. And I mean, that business went out and we raised additional venture capital, late-stage venture capital from the likes of August Capital, Meritech Capital, Madison Dearborn Partners were an investor, Enterprise Rent-A-Car were an investor in that business. So I got exposure to that world and, you know, some of the dynamics in that business is even though Mike, my partner, was the largest shareholder, he didn't hold a controlling interest in the business, nobody did. And through the combination, the operating teams, there was excellent chemistry and an excellent culture, but at a board level it was quite challenging. And even though I would interact with the board maybe every 6 weeks, we probably had 9 or 10 board meetings a year. The challenges with the board caused a tremendous amount of stress to me personally, and also lived through the challenges of a board who, A, had conflicted interests compared to somebody who was running the business and trying to derive shareholder value. They had different interests based on their fund, based on the timeline of the fund, based on their individual economic arrangements. And I often needed to appease investors who didn't necessarily understand the business. And again, with my personality, it caused me a lot of stress and a lot of sleepless nights. And coming out of that, I said, with my next business, I want to keep venture capital out of the business for as long as possible. I want to retain control for as long as possible. And as much as I can, not bring on institutional investors until as late as possible. So that was all born out of experience, frankly. If you would have asked me in advance how I would have felt about that, I would have said I would love to bring on these fancy venture capital and Sand Hill Road with their beautiful lobbies and fancy art and the rest of it. But living through it, I decided against it. So in this go-round, I had the credibility from building Openlay that wasn't particularly difficult to do an initial seed round. We raised $4 million. Mike again was a partner, is a partner, he chairs the board today. So obviously delighted to keep that relationship. Mike's been my mentor and great friend over the years. So we had great experience there and I said, Mike, come along, come along, let's do this again. And at the same time, passed it around and raised the balance of money literally from family and friends. And that was the $4 million in equity that we needed all the way up to 2021. Which is the year we took the company public. So, you know, the obvious question is, how do you, how do you take a company public from $4 million all the way up to, I think when we went public was about a quarter of a billion dollar valuation. After about 2 or 3 years, we understood how to manage the portfolio. I co-founded the business, by the way, with 3 other co-founders, Noah Buckman, Sheldon Sederkowsky, and John Gora, all of whom are still with me today, and all had very different skill sets. And were all very disciplined. And within 2 or 3 years, we were operating the book profitably. The business wasn't necessarily profitable, but on a loan basis, we were profitable. On the back of that, we flew into New York, we raised some debt capital, and ultimately grew the business with debt capital as distinct from equity capital. The first partner that we brought on, Bastion Management, on the debt side, is still with us today. Even though today on the debt side, I think we've worked 11 or 12 different partners, it may be even 12 or 13. I'm not going to name them just in case I leave anybody out. And again, a lot of the growth has come through a combination of debt capital and growing profits. Every single year from the get-go, we've grown our revenues, still growing our revenues by approximately 40 to 50%. Every single year we've grown the profits of the business. Our first year of profitability was 2015. So through a combination of debt capital and profits, we funded the business. 2021, the opportunity arose to take the business public. And, you know, it's something I'd thought about for a while for a few reasons. I wanted to raise the capital to get into additional markets and be able to roll out new products at a high level without kind of, without getting into the details of that. Happy to, but just at a high level. And also wanted to create, obviously, liquidity. For early investors in the business, and it was a natural way of doing that. And ultimately use the stock or a combination of stock and the ability to access the public markets for more capital to grow and expand the business internationally. In fact, we did our first acquisition in October of last year, did about a $150 million bought deal to fund that acquisition. And we are the best performing IPO of the 2020-2021 vintage.

First of all, I love that. I love that you use the word profit. Many startups don't know what that word means. If I look at the cohort of recent, you know, you're not a pure tech company, you're a financial company, but there's a technology component. But certainly if I look at the recent cohort of Canadian tech IPOs, like they're all deeply underwater. So I love actually that You've had some success there. Are you still taking your own meeting notes? Let me tell you about an AI tool that I'm using to take meeting notes for me. It's called Fellow. It's an AI meeting assistant. It takes human-level AI notes. It tracks my action items and decisions and keeps everything in one place. Built with security and privacy at its core, Fellow is the only AI meeting assistant that leaders trust to capture meeting notes and recordings while keeping your data safe. Thousands of organizations are consolidating tools and relying on Fellow to capture their meetings. The team at Fellow is so confident that you'll love it, they're offering an insane deal to Startup CEO listeners: 90 days of unlimited AI-powered note-taking and recording completely free. Visit fellow.app/ceo to sign up today and experience the AI meeting assistant trusted by leaders everywhere. Has your life changed much as a public company CEO? Like my imagination is there's less time operating and more time just communicating and investor relations, but like I've never run a public company. So, and I never will. So I'm just, yeah, I'm curious.

Yeah. So let me just, let me just, first of all, your, your initial comment about profits. I started off saying I'm a, I'm a, I'm a child of the Caribbean and you probably know this being a CA yourself. We're trying to be very prudent, actually. You know, I think prudence is one of the fundamental accounting principles. And you spend the first few years just thinking about risk. You know, that's what you're trained at from an audit perspective. And that gets fairly ingrained, you know, after many years of studying and many years of auditing, this whole notion of being a prudent risk manager and understanding risk and looking for risk. So from my perspective, I always say businesses need to be You need to make profits to survive. Tshepi, that was the environment in South Africa, and I only really learned about this notion of, you know, raising money to continue to grow your business when I arrived in North America. And it could work in certain instances, you just don't know when the capital is going to dry up. And from my perspective, the other thing I always understood was ultimately the way to value a business and the way to create value is the present value of the future cash flows, meaning you need to be profitable. Sometimes businesses are valued on other multiples temporarily, and those temporary, temporary multiples could vary by industry, industry to industry, based on the hot trend at the time. But ultimately, over a sustained period of time, it comes down to a business's ability to generate profits. So it was that discipline that I said, we're not doing anything unless we could do it profitably. You know, you're not, you're not good in business if you're generating a bunch of revenue and losing a bunch of money. That's not, that feels like an unfair game to play, if you will. The real hard part is running the business and doing it profitably. And I've always had that mindset since day one. And if anything, from the Openlane experience, again, I think where we were misguided by our board, frankly, is they wanted us to grow without so much of a focus on profitability. Didn't resonate with me. It caused some tension with me. And in fact, in the '08 global financial crisis, You spoke about capital raise a few minutes ago. We needed to bring on capital because the business wasn't self-sufficient, particularly in that set of circumstances. And you don't get particularly good deals when you need capital. You get good deals when you raise capital and don't necessarily need it. But when your back's to the wall, as it was then, and as it often is for companies that aren't making money, particularly when they're not flavor of the day, you could find yourself in a fairly precarious situation. So that's not what I wanted to do and certainly not what we do here at Propel. So wanted to just touch on that quickly. And yeah, look, running a public company is a different experience. I'm a founder. I'm a founder. I'm an operator. I'm an entrepreneur at heart. I know the business very well. I'm very, very hands-on with the business. And from 2011 to 2021, I was that's what I was doing day in and day out, running the business, thinking through strategy, thinking through tactics, trying to improve every element of the business every day, building up the team and so on. The skill set running a public company is quite different, and it's really forced me to develop skills, not necessarily develop skills, but fine-tune skills in other areas. As you say, a lot of my time I'm communicating the story. I probably wouldn't be doing this podcast with you if I was running a private company, as an example. I would say that 30 to 40% of my time today, as a CEO of a public company, is doing things that I wasn't doing as a private company. We report every quarter. Part of reporting every quarter is getting the script right, getting the narrative right, putting all the collateral together for those quarterly calls, getting the auditors to sign off. No, in fairness, Sheldon and his outstanding finance team are more involved in that, but helping with the narrative on the scripts, delivering that to shareholders, and then going on the road and marketing as we do every quarter. You know, as a public company, folks don't just find you because you're a public company. You need to go out there and find the right institutions and tell them the story and explain to them what the plan is. And hopefully, hopefully, as we've done, execute on the business and the share price and the shareholders register follow.

Going back to your, your thoughts there on the importance of profit. So yeah, you and I do come from the same background. I think I'd make a really bad accountant or auditor these days because I've been in this funny startup world for so long now. And when I first got into the startup world in 1999, this is when the dot-com bubble was kind of all happening. And there were like companies like pets.com going public, literally being valued as a multiple of their website traffic, like literally. And like losing money on every single customer. You look at more recent examples like Uber, very valuable company, but literally accumulated $50 billion of losses. And so you could argue that Uber didn't deserve to exist financially for most of its life. And I think what your, you know, your instincts actually speak to 99% of businesses, right? Which is like they should just make more money than they spend. But I've been a little influenced by this world of the 1% that make no sense until they make a lot of sense or fail, right? Spectacularly. So it's just a different world. And I'm pleased to hear actually that it's only 30 or 40% of your time that's spent on this other stuff. I thought it might have been all-consuming. So I'm still not going to run a public company, but—

Yeah, it depends. You know, it depends. It can be. It can be. You know, I think as CEOs, A lot of folks do what they like. A lot of CEOs do what they're good at, at the end of the day. And first and foremost for me is making sure we deliver our results. And I've got to tell you, it's a lot of fun marketing. In fact, before this call, I just sat with the IOR team and we looked at the schedule over the next few months. We report Q2, I think, at the beginning of May. So there's a couple of events leading up to May, and then we come out of blackout, and that's the real opportunity to market. And we have trips in New York and Boston and Vancouver and Montreal. And I think in Miami as well. And these are great destinations. And, you know, you're meeting with smart, interesting people along the way. It's kind of intoxicating and very, very enjoyable. You know, sitting and telling people about your business. It's a great conversation. And if I wanted to, I could do a lot more of it. But it doesn't ultimately drive the results and it doesn't help with strategy and it doesn't help motivate the team and develop the culture at the company. So I need to be really disciplined about making sure I'm spending the right amount of time marketing, not too much, and focusing on the area where I'm really best and that's operating the business, bringing the team together and thinking through strategy. And if anything, I wish I could do both more. Frankly. But I think for the long-term benefit of the business, having my head down and running the business is probably better than spending more time marketing. With that said, and here's where it gets interesting, you know, we had a blowout year in 2024. We did about $450 million in revenues. That's US dollars. Our adjusted profits were $62 million. And bear in mind, that's coming from in 20— just The LTM in 2021, before we went public, I think our revenues were about $95 million, our profits were about $9 million. So we did what I've just described to you organically from 2021 to 2024. And we put out guidance for another approximately 40% top line growth this year, about 50% bottom line growth. On our earnings call, we told, we told investors that we're having a great Q1 of this year. Notwithstanding some of the quote-unquote global uncertainty, you know, the fundamentals have never been more sound. And notwithstanding all of that, our share price is probably down by, you know, 40-45% in the last, in the last few weeks.

Um, does that drive you crazy?

Yeah, I could go out and speak to more investors and tell them to invest and invest and invest. And again, I do do that as well, but I always maintain my time better spent making sure we deliver on what we say we're going to do. And the markets in the long term catch up to the business's success.

I agree with that 100%. Yes. Let's talk about the business a bit. Like if I had a pie chart for all the different elements of value creation over the life cycle of a company, I would say the biggest single slice of the pie is distribution, go-to-market. You know, product's important, team's important, but you know, once you've kind of got a repeat, you've found product-market fit, you've got repeatable channels, and now you're just settling into grabbing more and more customers. That's really where the value kind of grows., and you've served a million customers now. So I'm curious, I don't want you to reveal any proprietary playbook, but like just generally speaking, how do you scale to, to reach a million customers profitably?

So the first thing you said over there, Mark, is product's important and team's important. And then you kind of pivoted from there into speaking about distribution. Um, but I don't want to step over team, you know, because nothing happens without a team. Without a team, you can't develop a product, you can't develop technology, you can't develop distribution channels. And, you know, I would say, and you've probably heard this before as well, I'm guessing, but I would say our team is best in class. You know, I've still got the same co-founders as I had when we started the business. There's 4 of us today. We've got an exec team today in excess of 20 people. Believe it or not, we've never lost an executive. This is a 14-year-old business. We've never lost a single executive except for one, kind of, which frankly, you know, was a situation that just wasn't working. And that's pretty special, you know, that's pretty special. We are obviously very serious about our business, but at the end of the day, we are friends. We have one another's backs, both business-wise, both personal-wise. My team is well compensated. My team is very much aligned in been being shareholders or option holders in the business. And I think first and foremost, before we speak about anything, you can't build a business without an incredible team. And having that longevity not only helps develop the internal culture of the company, but we know the broader industry. We know which doors we need to knock down. We know who to speak to. We have the relationships. And once we bring the business in, we know how to navigate our own 600-person-plus organization today in getting things done. It all is about the team. I can't overstate, I can't overstate it enough. And the folks that know Propel and our team really well, and there's a few of them these days, will turn around and say to me, Claude, besides anything else, they have never seen a culture and a team like Propel. So I'd be remiss if I, A, didn't brag a little bit, but B, if I didn't get busy.

Could we double-click there for a second? Let's talk about that for a second.

Like, I do want to come back to a distribution question.

We will. No, no, I want to talk about it. But yeah, it's just double-clicking team for a second, right? Like, so you're 14 years in. Most high-growth companies would be like on V3 or 4 of their leadership team by 14 years. So I'm curious, like, what do you do as CEO to develop yourself and your leaders so that they keep up with the growth of the business?

Look, the first thing is I'm very, very hardworking, maybe even more so when I built Openlay. And there's no, you know, I could kind of give all the secrets, because there aren't really any secrets, but I could say everything that I've learned over the years. The reality is the most important thing is to get on the court to do it yourself, because we've all got a different story and we've all got different personalities and we've all, you know, there's, there's lots of ways to skin a cat and there's a best way, I suppose, but there's lots of ways and different people do it differently. So I would say that there's no substitute substitute for hard work. There's no substitute for perseverance. There's been several times in both instances where I'm like, this is just too difficult. I can't see a path out of this. But first and foremost, persevere and never ever give up. And maybe that's more of a personal trait than another trait. But if you lead with hard work, if you lead with honesty, transparency, doing what you say you're going to do, building trust with the team, At the end of the day, there's an incredible amount of loyalty, and loyalty is a two-way street. And I've always assumed as, as the leader of the company that the onus starts with me. It doesn't start with somebody else being loyal to me. I need to be loyal to them. I have an incredibly talented team, and I know that there's a lot of opportunity for such talented people in the world. And if I want them to be part of what we're doing together, I need to treat them the right way financially, in my dealings with them, both personal and business, and I think that's something that probably I learnt when I was growing up. I've got buddies of mine that have been my buddies for over 40 years. We have a loyalty and a cohesion and one another's backs like nobody else. It's kind of ingrained in our value system, and I think that, as well as the family that I come from, very much framed the way that I think about my team and what's possible in the business context. When you come to Propel, it really is a different kind of environment. You feel the warmth, you feel the connection with the people, and first and foremost, that energy and that level of trust allows us to focus on the business and not focus on the petty BS that goes on too often with businesses and people who don't necessarily have the same trust and camaraderie amongst one another. So that's at the outset. The other thing is, having built the business already, I had a lot of experience, and it's much easier the second go-around than the first go-around. There's a lot of mistakes I made in the first go-around that I knew to avoid in the second go-around. Um, my team was very complementary with me, my founding team. They were roughly, still are, roughly 10 to 15 years younger than me. And so, you know, an excellent group of guys that were highly competitors, still are highly motivated and just excellent learners. So, you know, not only have they learned from me over the years, I've learned from them over the years, and they're always working on self-improvements and ways to get better. And we spend and continue to spend a fair amount of time on coaching, on development, and making sure that the same people that we have in the early phases of the business are able to to continue to make the leap to the next phase of the business. And, you know, I think our average tenure of our 20-person-plus executive team today is probably 8 or 9 years. And if you asked me a year ago, it was probably more than that. Why is it less than that today? Over the course of the last year, I think we've hired 3 or 4 external executives who have all been outstanding. And we all augment the talent pool and add to it and upgrade it, not by replacing execs, but really bringing on new execs as the business gets bigger.

I love it. So you used an important word, loyalty, right? So there's an assumption, I'm guessing, when you hire someone that this is going to be a long-term relationship. So I'm wondering, does that change how you hire? Like, do you hire slowly, take time to get to know people because you know it's not transactional?

Yeah, what's the old expression, you know, hire, hire slowly and fire quickly. Not that I do that, not that I do that, by the way. If anything, you know, to the extent that we do fire, I'm guilty of doing it a lot later than I otherwise might do. And I don't want you to take that comment into thinking that the exec team that we have today aren't the best in class. They're absolutely the best in class and certainly at an exec level. We operate with, you know, I was going to say without compromise, but that's not true because every human being goes through what they go through in their lives, ups and downs, personal journeys. And it's not every single day that they come to work and on their best form. I don't think Michael Jordan went to work every day and was in his best form. So I think we understand that and we have a tolerance for that. But the first thing that we do from a hiring perspective is, you know, we look for values. I think that you could teach smart people the skills in running our business, but I don't think you could teach people who aren't aligned with our values how to change the values that they grew up with. And it's not particularly difficult to spot like-minded people who fit into the Propel value system. And then from there, you know, there's very specific skill sets that we're looking for, and we have an experienced team, including an outstanding human resources department who understands how to look for the specific skills that we're looking for. And I think, I think we've done an exceptional job recruiting the talents. And what I will tell you too, and one of the other benefits of being a public company, it does give you a profile. We've been a really successful public company, so that creates its own magnet, if you will, for people to want to join the company. And if anything, it's gotten a lot easier as a public company to find and recruit that exceptional talent relative, say, to where we were below the radar.

I love it. That's great. So let's go back to distribution and let's talk about that path to a million customers.

Well, this, you know, this, the starting point at a high level is, you know, we distribute over the internet versus brick and mortar. And as a result of that, we're not we're not really constrained by geography. So being in Canada, it's a great destination. You know, we've got incredible talent here in Canada. Generally speaking, the Canadian dollar is weaker, so you could bring on that talent for a little bit less, especially if you're generating US revenues. And the US market is way bigger than the Canadian market. So the starting point in growing out our distribution was choosing a much bigger market and cruising, the internet is a distribution mechanism. Air Canada, as many challenges as I have with them, flies about just about everywhere direct. We're on the East Coast, which is a great place to raise capital and again, a great place to access different parts of America. So geographically, we're in Canada, in a good spot in Canada, doing business in the US. And the US market of underserved consumers, anywhere depending on where you look, 70 million to 100 million plus consumers. So that's the addressable market that we're looking at. But you don't bring them all on day one. You know, in our business, um, it's highly regulated. Every state has its own laws, its own regulations. And in the early years, um, we got license by license by license. And we had, if you can imagine, the stair-step growth, adding to our distribution, adding new partners all along. But the partners that we could add were operating only in the states that we operated in. We couldn't really onboard national partners because we didn't have a national program, if you will. Even still, we developed a very robust business doing that, and back in 2019, we forged our first bank program partner with a company, or with a bank called CBW. With CBW originating the loans, we were then able to take a ubiquitous product and offer offer it to consumers across the entire United States. And I'm exaggerating a little bit because we can't offer that to every consumer in every state, but certainly the vast majority. And with our bank partner and CBW as the originator, we did that. And that ubiquitous product allowed us again to access wider markets. And on the back of that, built on our business development team under Noah Bachman, and have onboarded lots of exclusive distribution partnerships. The one that's kind of highest profile recently is actually in Canada where we partnered with Cohab and we're their exclusive unsecured lending partner. But we have lots of other similar partnerships where we act as the exclusive— us and our bank partners act as the exclusive lending partner for those folks. In addition to that, We've just gotten better over the years. You know, we do lots of our own organic marketing, be it pay-per-click, be it SEO, be it direct mail, and a host of other tactics that we use to bring consumers to us today. I think we look at about 70,000 to 80,000 unique customers each and every day across our various businesses. And by the way, Mark, as you can appreciate, with a million customers, we're just scratching the surface. And, you know, if you're an underserved, underbanked consumer, you don't necessarily stay there. A lot of our consumers have graduated out, kind of into the mainstream banking sector, and there's lots of other new consumers that have entered our market. What we try to do is stay with those consumers from the time they enter our channels, and we upgrade them to better and better products all the time so that we're staying with them, particularly our best customers, throughout their credit journey.

If I understand correctly, so you have a million customers, you've done $2 billion in originations. So that tells me the average loan's around $2,000. Is that right?

Yeah.

And so what's the use case for that? Is that just, like, that's not obviously home renovations or it's just like, I'm going through a dip. It's just a hard period. I need to straighten out the cash flow. Is it as simple as that? Or?

Yeah, you know, a lot of people who aren't in that category of consumer don't appreciate that over the course of the year, We go through spending and saving cycles. Maybe, maybe we do appreciate it, but we all go through spending and saving cycles. And the first thing is the way we spend money is quite seasonal. You know, as you're coming out of, certainly in the US, as you're coming out of Thanksgiving into Christmas, that's a time when we spend a lot of money. Either we're going on vacations or we're buying gifts or there's lots of discretionary spend at that time. And that goes on, call it to mid-January. Another time of fairly big discretionary spend is over the summer months, July and August. Kids are off school, so there's lots of activities and lots of spending going on with them. Maybe there's vacations going on, maybe there's back-to-school spending going on as well. So you've got a couple peak times of spending for the year. And then from a saving perspective, generally in Q1, we're getting, particularly in the US, our customers are getting refunds from the government, they're taking those proceeds and they're paying down loans. Demand goes soft and credit performance is excellent. So all of which is to say, Mark MacLeod, that as a general rule, there are these spending and saving cycles, and a lot of the use of cash over there is for those discretionary type items, number one. Number two is shit happens. You know, when you're living paycheck to paycheck, shit happens. Child needs a dentist, there's a leak in a faucet, your car breaks down. There's a whole range of these things. And, you know, when you've got an addressable market, today in all of our countries of 100 million consumers, there's a lot of things that could happen month to month with 100 million consumers that they need access to short-term capital. And sometimes the $2,000 could be $4,000 or $5,000. In fact, our loans go up to $10,000. Oftentimes it's less than that, but $2,000 is the right midpoint that A, it addresses what consumers are looking for from a cash perspective, and B, their income supports, and their incomes and credit profiles support giving them a loan up to what is an average $2,000.

And so that tells me, again, A, just because your business was profitable, but B, you know, running the math, right? You've got a certain interest rate spread on a $2,000 loan, that tells me like your customer acquisition is really efficient. And again, I don't need to know the specifics, but just, you know, intuitively it feels like, yeah, you must be acquiring for very low cost. Otherwise the math wouldn't work.

We do everything really efficiently. You know, I had one of the investment banks, interestingly enough, in my office this week, and we don't compile metrics. Against our competitors like maybe an investor would. We compound metrics against ourselves. We know what we need to do to run a profitable business. We know where our marketing costs need to be. And the investment bank came in and showed us our comps again against our public competitors. We're growing faster than any of them on our top line and our bottom line. Our provision for loan losses is lower than any of them. Our marketing cost per loan funded is lower than any of them. And at the end of the day, we just, we're good at what we do. You know, we're very, very focused on what we do. We understand the unit economics of our business. We have a philosophy and a way that we know that this is what we need to lend at to be profitable. We've got a very conservative posture, notwithstanding the incredible growth that we've demonstrated. And, you know, selling money, bluntly put, compared to selling used cars is a lot easier. It's not a particularly difficult thing to do.

Yeah, yeah. There's a demand for money. That's true.

The hard part's getting paid back. And where a lot of folks lose money in this business is they grow too quickly. They lose discipline. And in many respects, that was the story of the 2008 global financial crisis. Everybody was not underwriting properly for the level of risk they were taking on. And I'd rather grow a little bit slower. And I say that for a company that's been compounding at about 40 to 50% top line. I'd still rather grow a little bit slower and know that we're managing the business responsibly rather than the other way around.

Mm-hmm. I love it. No, yeah, you're right. 2008, there's a lot of craziness going on. And even more recently, you know, up in Canada. I don't know if you followed Clearco, but you know, Clearco kind of grew like— I had Andrew, who's a good friend and former CEO of Clearco, on the podcast recently. And you know, they grew really fast, and obviously in retrospect, too fast, you know, lost the discipline and have retracted from those peaks, you know.

On my late— you know, my late grandfather always used to tell me, you can't make widgets for a dollar and sell them for 99 cents. And make up the difference in volumes. You now understand the unit economics. And as you were saying, once you understand the unit economics and you understand the distribution, and that's when, that's when you could put your foot on the gas.

Yeah, I love it. Maybe final question, uh, Clive, you know, when you were describing, uh, the business upfront, you talked about it, uh, using one of the terms you used was AI. And so I'm just curious how AI impacts your business and do you see more of a role for that?

You know, there's a lot of big credit agencies. I mean, we've all got a credit profile as citizens. You may have, you know, TransUnion, Experian, Equifax. And when the big banks are lending to a consumer, they pull up credit reports and they get a FICO score or a Vantage score depending on who the credit bureau is. 750+ is generally, you know, prime, super prime consumer. They've got an uncheckered history, credit history, and at the end of the day, they want a loan. You look at their income and you right-size the loan based on their income, just because they've got a good FICO score. It's not particularly complex. My mother, um, who's never underwritten a loan before, uh, could do that. So you don't need AI or anything like that. And I'm obviously simplifying it a little bit, but that's generally how it works. In our world, our customers have bruised credit histories. While they got bruised credit credit histories, they've had spotty jobs over the past, they've got missed payments, they may have defaulted on a car loan, and they may have a lot of bounced checks, a whole host of different things. And frankly, um, their FICO scores, Vantage scores, not only are less than 750 in many instances, they're materially less than 750. So traditional credit scores just don't work with our consumers. Um, in order to be able to score those consumers, assess their creditworthiness, especially at scale, 70,000 to 80,000 consumers a day, you need a different methodology to do that. My co-founder, Dr. Jonathan Gola, studied artificial intelligence, did his master's and PhD at MIT. Absolute brilliant guy, knew nothing about credit, frankly, prior to be a co-founder in Propel. And he's taken those predictive AR models and has an outstanding team of PhDs. And through that, what their predictive AR models do is they're able to understand the relationships between certain variables that don't necessarily look like they have a relationship to one another, but are predictive as to whether a consumer is going to pay back their loan or not. The reality is oftentimes we're looking for consumers who really have turned the corner, not over the last year or over the last 2 years, but oftentimes over the last 3 to 4 months. They look like they've got a steady job, they look like they've got a steady income, they're getting back on their feet. Um, we could see that they're not fraudulent consumers based on a whole host of different criteria that we look for, and have frankly developed our own proprietary scoring mechanism based on artificial intelligence to determine determine whether they should qualify for credit or not. Mark, a lot of the data that we use in those determinations is historical data, our own proprietary data, as well as other sources. Oftentimes the future is not necessarily reflective of the past, and that's where human judgment comes into play. We're looking at our own performance and how our loans are performing to gauge what's going on in the broader market. We're also looking at the news, both locally and nationally and even internationally, to understand how that may impact not only credit performance, but credit performance in different geographies and different industries. And it's— we then apply human judgment into how we set those filters on a go-forward basis. We are— we have a relatively tight underwriting posture right now, just given the uncertainty, and a tight underwriting Cost share generally means we'll be approving fewer of the folks that apply for loans for us, which in turn means that it could dampen growth a little bit. But here's the good news. And with this environment, banks and credit unions are turning down more customers today than they've probably turned down since the 2008 global financial crisis. Those are customers who might otherwise get access to credit from a credit union or from a bank, being denied by them, and then they're moving into our segments of the market. In turn, not only does our addressable market increase as a result of that, but even with our tight underwriting, we could continue to grow at the rates that we're growing at. And the quality, or the credit quality, of the customers that we're onboarding, all other things being equal, has never been better. So despite the fact that there's kind of this uncertainty uncertainty out there, and you've got, you know, the Trump presidency and tariffs and a whole host of other things that are creating uncertainty. Our credit performance has never been better. And to a large degree, macro uncertainty in the broader markets spells opportunity for Propel. We've been doing this for the last 14 years. In many respects, this is the ideal scenario for us.

That's cool. That's a big role for AI, bigger than a imagined, but it makes complete sense given who you serve. Well, I gotta say, you know, as a fellow accountant, I thought many times over the years about starting a business, and I was in the startup world, and I kind of felt, well, I kind of need to be a product or a person or engineer, and I'm neither, so I won't do it. But I think you found a business that really does leverage your core expertise, and then you've learned to go way beyond that. So it's, it's fascinating. Yeah, I really, um, I really appreciate you making time to come on the show.

Yeah, and I appreciate it as well. And I, you know, I do think that an accounting background is an outstanding skill set for an entrepreneur. It's an outstanding education. If you're not an entrepreneur, I believe that, you know, finance, accounting is the language of business. And somehow, if you're able to overlay that with personal skills and sales skills and ability to motivate and bring teams together, those two core competencies I think that, I think there's a lot, there's a lot you could do in a host of different either businesses, if that's your interest or in other areas of life as well.

Yep. No, I totally agree with that. Awesome. Well, thank you so much, Clive. Really appreciate it.

Thank you, Mark. I really enjoyed it. Thank you so much.

Hey, thanks for listening to the Startup CEO Show. If you'd like to connect with me, be sure to visit my website at markmacleod.me or follow me on LinkedIn @TheMarkMacLeod or Twitter @MarkMacLeod_. And if you want to tune in again next week, be sure to subscribe on YouTube, Spotify, Apple, or wherever you get your podcasts. We'll see you next time.