FRISCO, Texas—When it comes to fintech, there are buyers and sellers, and a view from each of those perspectives—as well as lessons learned and advice—was shared with credit unions here.
Sharing their viewpoints during the VentureTech conference were Tony Boutelle, president and CEO of California-based Origence, which has acquired a number of companies over the years; and Seth Brickman, president and CEO of QCash, the CUSO that provides small dollar loans that was acquired earlier this year by Alloya Corporate from Washington State Employees Credit Union.
Brickman founded QCash, while Origence (then known as CU Direct) was founded by Boutelle while he was with California Credit Union League.
The session was moderated by Nick Evens, president and CEO of Curql Fund.
‘Augmenting’ the Value Prop
Boutelle said Origence—which expects to do $65 billion in funded loans in 2023--has done approximately 12 acquisitions over its lifespan, most recently making an investment in ZestAI.
He said the company is always looking for ways to augment its value proposition, including having also purchased an insurance brokerage company that sells products to auto dealerships, such as gap and warranties. That was later sold to Allied Solutions.
“We really try to get things that make sense and take them to scale. If we can’t scale them up we go to exit,” said Boutelle. “In our experience you have to want it, but not that much. I would say that for every one (deal), there have been four or five we didn’t do.”
Here is a look at what was discussed during the Q&A:
Evens: What led to the sale of QCash? What has happened since? Have there been any landmines?
Brickman: When we sold we weren’t for sale. That is something fintechs have to be aware of--your timing may not be someone else’s timing.
Over a three week period at end of 2022 I had seven different companies reach out and say we’re interested in buying QCash. I went to the board and said this is a unique thing that’s happening, just allow me to do due diligence. We had a mix of firms. PEs, VCs. As we went through the due diligence with each one.
The other thing that was unique was our growth was so substantial we broke the PE model. Some that were really interested in us said we can’t purchase you because we can’t value you. As a CEO, that’s a little heartbreaking.
The other thing is we are a mission-driven CUSO and the mission is very important to us. So, if we were going to be sold it had to be another that would keep that mission alive. That’s how we sold to Alloya FCU. They brought a lot of resources, but most importantly, I sat down with their CEO and said if you’re going to buy us, you have to keep this mission.
I would say as a founder or a CEO or owner of a fintech, number one, know who you are as a company, what you stand for and what you’re trying to accomplish. Stand firm.
A landmine is you might have a lack of growth that will have you getting valued below what you think the valuation is.
Don’t sign an exclusivity contract until you get to the point where you have chosen them and they have chosen you and you’ve agreed to the overall terms. It will really hamstring you in getting the most for your company and doing the most for your company.
Evens: From the buy side, any advice to a CU looking to buy a CUSO or for any other buyer?
Boutelle: I would just say you should look at what you have today and ask how you can augment that value proposition for your members.
Evens: Your advice?
Brickman: We were owned by a single credit union. If you are a fintech or a CU that owns a CUSO, find other CUs, other leagues that are willing to partner with you to grow the footprint of that fintech. This is a very cooperative movement. Don’t keep your goodness to yourself. Share.
For other groups out there looking to be part of a CUSO, I like to say it’s cool to come up with something new, but 90% of new ideas fail. But what if, while we were coming up with something new, we found the fintechs out there that are doing really interesting work and we brought them in? We don’t all need to build the same thing when it’s already out there.
Boutelle: There are a lot of CUSOs that haven’t been able to get to scale, but they have a lot of capabilities. There have been a lot of CUSOs brought into this world over the last few years, and I do think it’s time for consolidation among like-values. It is a slow decision process in credit unions. Hockey stick growth doesn’t happen in credit unions. You have to be patient.
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