Product | People | Potential – our chat with Griffin
The purpose of article series ‘Product | People | Potential’ is to feature and showcase the very best UK start-ups with grand potential, truly inspiring businesses that are shaking up their sector. We capture and share the stories behind the name. We collate authentic peer to peer real-talk while celebrating the growth and success thus far and gather a glimpse of what’s ahead.
Jake @ ADLIB: Hi David, it’s great to meet you. Can you give us an introduction to yourself and Griffin, please?
David: Hi Jake, I’m the CEO & Co-Founder of Griffin which is a new challenger bank that enables companies to launch & offer financial services products.
Jake @ ADLIB: Why did you decide to set up Griffin and can you tell us a little bit about the early journey you’ve been on so far?
David: I’ve spent most of my career in Silicon Valley. Back in 2015, I was working for a US start-up called Standard Treasury where we were selling a technology product to banks that would enable them to offer API banking to their customers.
The US is about 5 years behind Europe in terms of its API banking landscape and the US didn’t (and still doesn’t) have any kind of API banking mandate and so we found the sale was a tough one.
Ultimately, we decided that the only way that we were going to be able to execute on our vision was to become a bank ourselves. The US, however, is a very tough place from a regulatory perspective to do that. Whereas here in the UK, the FCA and PRA are much easier to work with.
Jake @ ADLIB: What was the moment that you realised that you wanted to move to the UK?
David: Even back in 2015 we were interested in the idea that we could build this ‘API first’ bank in the UK. When Monzo was authorised in late 2016, it caused me to perk up and take notice because Tom Blomfield’s (Monzo’s CEO) background is much closer to mine than to a traditional banker’s.
After I saw that, my wife convinced me to quit my job, move to the UK, and start doing market research on what the vision for “Standard Treasury v2” would look like transmuted to the UK market.
The US and the UK markets are very different and so the pain points are different as a result. The US doesn’t have many banks with APIs, whereas here you do – but instead you see a lot more frustration around how long it takes to get set up and the complexity involved around keeping your company’s ledger in sync with the bank (a process called reconciliation).
After several years of interviews with about 60 fintech firms, we got to the point where the customer feedback was consistently “there’s value in this and nobody is offering this type of solution” and we’ve had further market validation since then with some other challenger banks starting to add offerings similar to what we’re looking to bring to market.
Jake @ ADLIB: What happened after that, leading to your seed round?
David: We raised a £3M seed round last year, with the bulk of that money coming from angel investors. One of the big issues that we had with that round is that a bit of ‘challenger bank fatigue’ is starting to set in. The authorization process can also take several years. If you’re a VC, hearing it’s going to take something like two years before your investment can book any revenue is a tough swallow because you typically have a 10-year lifespan to return funds to investors.
That said, we do have some institutional investors – we were fortunate to have Seedcamp double down after leading our pre-seed round, and we were also fortunate to have Tribe Capital come in and take a large chunk of this most recent round. Ultimately, the round was really driven by Paul Forster, who is a very active Angel investor and was one of the founders of Indeed.com. He now sits on the board and has been fantastic to work with.
Jake @ ADLIB: Raising £3 million is quite high for Angel rounds, and you’d have roughly 18 months runway on that; what’s your plan for future investments?
David: That £3 million should last us through the authorization process while we build the technology platform. We have a team of banking execs as well as a great group of engineers, which has brought the total company size up to about 11 people.
As we approach authorization, we’ll need to raise again. Based on our regulatory capital requirements that Series A will probably be in the ballpark of £20 million, which is what you generally see for challenger banks at authorisation.
Fundraising is challenging and I don’t think anyone you meet will tell you it’s a fun time; it can be very stressful. I think £3 million for a pre-revenue company that’s two years from launching is a big ask, so it was a tough raise. One of the nice things on the other side of that is, that when we were doing that raise, there wasn’t much awareness of our space yet, but in the last couple of months, the API banking landscape has started to explode in a good way. Visa’s acquisition of Plaid in the US for $5.3 billion was a big driver and has meant a lot more exposure in the marketplace to API banking.
Jake @ ADLIB: It also helps to be in London which is so deregulated and is the Open Banking “capital” of Europe. I still think there needs to be more education for the general public, but I think it’s slowly getting there with stuff like Starling’s marketplace and similar offerings…
Jake @ ADLIB: Coming to People, could you tell us a bit about the team at Griffin?
David: The company was founded by myself and my friend and former colleague, Allen Rohner, who was the Co-Founder and CTO of a successful developer tools company called CircleCI. Allen and I had worked together at Circle and co-wrote a book on programming a few years later which gave us a good experience of working together. It helped too that we did both of those at a distance as he was based in Austin, Texas and I was in San Francisco.
He had followed my career at Standard Treasury and thought they had some good ideas there. I went back to him in early-2017 and said to him that I wanted to do something together and set up a real bank to do this properly.
My mother is from Bristol and so I have a British passport which made the UK move pretty easy. I did some of the early tech builds – leveraging my background at standard treasury – before handing off all responsibility for tech to Allen and focusing full-time on market research and fundraising. Allen had spent some time at Funding Circle as well which was a relevant technical experience and also highlighted that the problem Griffin was solving wasn’t just one for small start-ups.
After I moved to London, we were fortunate to raise a small pre-seed round from Seedcamp and we used that money to put in place a team of people who would be able to help us on the banking side.
Jake: Who were your first hires?
David: In order to get authorised as a bank we knew we needed – at a minimum – a Chief Risk Officer, Chief Financial Officer, and a Chair for the Board. We found our Chair, John Weguelin, first – a Board Chair isn’t something most start-ups need or care about but it’s incredibly important if you’re a bank! We’re very fortunate to have a Chairman who has run multiple banks in the UK before as CEO and had gone through the new bank authorisation process himself in setting up one of those banks.
After working with him for a while, he introduced us to the CFO who he’d worked with at the last two banks he worked at, Sam Perera, which then gave us the collective experience of two people who have gone through the authorization process. He said, “if you want someone to handle finance and never have to worry about it, then this is your guy” which was a pretty strong referral!
We found our Chief Risk Officer, Paul Virno, through a headhunter. Paul has a background in both banking at big banks like RBS & Barclays but had also spent time in the payments space where he was CRO of PaySafe, so he had the insight into what this market looked like from a customer’s perspective as well.
So those were the roles that you sort of MUST have if you are applying to become a bank. You cannot go through the authorization process seriously without a Chairman, Chief Risk Officer, CEO, and CFO.
While we were going through this and started our fundraising, we also found our Chief Operating Officer, Rupert Whitten. It wasn’t a position that we were actively looking to fill, but Rupert had some relevant experience in setting up a wholesale bank in the UK a few years earlier and seemed like he could roll up his sleeves and take on just about anything. As a founder, you’re not always hiring but sometimes when you come across someone that exceptional you have to move on them.
Jake @ ADLIB: You seem to have an ultra-experienced team for such an early-stage company, what inspired them to join you?
David: That’s a really good question. With the Chairman, it was an interesting project for him working with a younger team doing something innovative and where he could serve in a mentorship role with the CEO, which is how I would describe my relationship with him. We ‘dated’ for 6 months, spending a lot of time together before he was appointed, and meeting with our regulatory counsel in particular to looking at the governance framework. It sounds so heavy-handed but it’s critical if you’re launching a challenger bank as there is so much groundwork you need to do. You need to build the business as if it was one or two years in the future, and you really need to frontload it.
I mentioned him introducing us to our CFO; he had a similar mentorship relationship there and so I think when he went to Sam and said “this is a really interesting opportunity and I think you should take a pretty serious look at it”, that also really did a lot of the heavy lifting in terms of convincing Sam to come on board.
Rupert (our COO) had been working on a payments company as a sort of ‘hobby project’ with a friend of his and they had struggled to find a bank to work with them. I happened to meet him right at the point in time when he was dealing with this and so he got the value right away. Rupert ended up really doing quite a bit of work for us before we closed the round and were in a position to pay him…thinking about it now, I don’t think he necessarily intended on joining us while he was doing that. I think he really just believed that there was value in what we were doing. But it gave us a fair bit of time to get to know each other and we got to a place where I thought we would just be crazy not to try to bring him on.
Our Chief Risk Officer was also coming at this with recent payments experience (albeit at a multi-billion-dollar company rather than a hobby project) and so could see a massive opportunity right away.
There are a lot of people who idly think about starting a bank, but you really have to appreciate how much work is involved in order to be successful. The people on our team were not about to sign up to a project that didn’t have a realistic chance of getting authorised. I think the fact that I could speak credibly to the bank’s requirements and to our customers’ specific pain points was what gave them the confidence to come on board.
Jake @ ADLIB: What challenges do you think you’ll face as you transition to becoming a high growth challenger bank?
David: Well as we’ve just discussed, a lot of the team has an incredible depth of experience, whereas I’m still educating myself. Sometimes the biggest challenge can be understanding where you have an information gap! Of course, I’ve made some mistakes and we’ve had some false starts.
Jake @ ADLIB: It’s always going to happen in a start-up!
David: It’s unavoidable! Anybody who says they’ve never made a mistake is lying.
Jake @ ADLIB: Coming to Product, can you tell us about the product suite that Griffin will look to offer and the companies that will benefit from it?
David: Our customers are companies that are not banks but offer financial services. This includes payment institutions, firms in the capital markets space, etc. – the common theme is that these companies need a bank where their customers’ funds can be safely held in specially designated & segregated accounts, so they don’t get mixed up with the company’s operating cash.
In the UK alone we’ve been able to identify at least 7,000 firms that need something like this. These firms sit on vast amounts of cash and, as a bank, we earn money on the deposit float, access to payment rails, etc. One of the things that we saw that could differentiate ourselves was that we could provide built-in compliance and ledger services that no other bank was offering.
What that means for our customers is that they can get to market in days or weeks rather than the current industry standard which is at least 6 months with onboarding fees in the £10s of thousands of pounds.
Jake @ ADLIB: Time to market is certainly something that challenger banks have struggled with no matter the size of the bank.
So far, you’ve been talking mostly about payments and holding money – will you also be lending?
David: Yes! So a lot of our customers have funding gaps where they need to pay a customer or buy something on behalf of a customer before the funds they need to do so have cleared. Most banks won’t touch this space, because these firms are seen as too risky, which causes them to borrow from debt funds and that can be really expensive.
Because we’re fintech experts and we’ll also have a lot of data about the viability of these firms’ business models, we should be able to offer a superior set of loan terms. The cost of debt is what makes or breaks a lot of these companies, so we think this is really exciting.
Jake @ ADLIB: Both products sound great. After those two years are up and you’ve gone through the authorization process, what do you think your route to market will be?
David: A lot of the people we interviewed for our market research are pretty senior (i.e. CEOs or founders) so we have a strong network with which to go to market. While our competitors may have upped their game by the time we launch, I think we’ll still be coming into a big gap into the market.
One cool thing about what we’re building is that while different companies have different pain points, there are a number of common themes that emerge, and you can slice and dice those pain points while creating a core product that solves most firms’ problems.
At the end of the day, we’re a product-driven company rather than a consultancy, so the goal is to find that core that lots of people can use to build their products.
Jake @ ADLIB: Finally, coming onto Potential. What’s the ultimate aim for Griffin?
David: The ultimate aim for us is to build a new global, developer-first clearing bank. We see the UK as the best market in the world to launch a fintech company, but we want to build something that enables companies anywhere in the world to build and launch financial services products on our infrastructure.
Amazing, thanks David for your time!