Building a Public FinTech Company From Scratch: OppFi CEO Todd Schwartz (Part 4)

Sramana Mitra: What about the technology? Did you build all that?

Todd Schwartz: I do not believe in going out and blowing a bunch of equity to build this beautiful shiny technology system. In four years, it’s probably not going to be the best system with the rate of change. I used off-the-shelf solutions and did API integrations into them. I spent little on technology. I didn’t have a CTO for the first five years. They were all variable costs. I didn’t have to outlay a lot of equity. I was able to grow with a variable cost model.

Sramana Mitra: Everything was available in components?

Todd Schwartz: I had to bolt it together. When we got to some scale, that wasn’t enough anymore. What was nice was when we started to generate cash flow, I was able to pull out parts and start to build and invest in technology. I also got the benefit of time. As time went on, all these technologies got way better and more robust. I had the benefit of that. Yes, we can build a CRM, but there are companies that are so good at that. Why try to recreate it?

Sramana Mitra: Your approach makes perfect sense. You’re not a technical entrepreneur. You’re not trying to invent the next big technology. You’re trying to solve a problem. Your approach is the right approach for that scenario.

Todd Schwartz: What was really interesting was our website. I’m embarrassed when I go back and look at the website. I built it on a web builder. I read a Harvard case study. It said, “What do consumers value?” Immediately, I thought it was the price. If you get people discounts, it’s going to be the thing that customer values the most.

It’s actually not. It’s fast, efficient, and consistent service. Customers are willing to pay more if they have a consistent experience. I said, “We don’t have the best tech or the best user interface as long as it’s efficient service.” When we say no, we do it early in the process, so we’re not dragging people through the process. We can’t always say yes, unfortunately.

Sramana Mitra: How much money did you put in before things started to roll and revenues were enough to cover your costs?

Todd Schwartz: We put in about $7 million in total. Then we started to use a sub-debt. When we started to hire a management team, I didn’t want to dilute management. We did essentially debt with an interest coupon that is fair and agreed upon.

In business, cash flow is always something that you’re highly focused on. If we’re growing better than expected, I didn’t want people to be penalized by raising more equity to capture that growth. That’s what got us there, but no more than 15 total. Within five years, the sub-debt was taken out and we went to more traditional sources of capital.

Sramana Mitra: You did raise money afterward?

Todd Schwartz: No, never raised outside capital.

Sramana Mitra: The $7 million was your family’s money.

Todd Schwartz: That was not all mine. Originally, yes. I wanted to use my own money. Then I started to get a lot of confidence.

This segment is part 4 in the series : Building a Public FinTech Company From Scratch: OppFi CEO Todd Schwartz
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