Arad Levertov is the cofounder and CEO of Sunbit which is a financial technology platform that helps retailers and customers split in-store purchases into manageable payments. The company has raised over $50 million from investors such as Chicago Ventures, Group11, Zeev Ventures, G-Bar Ventures, and Heroic Ventures.
In this episode you will learn:
- The future for banks
- How Sunbit works
- Who their first hire was
- How Arad chose his cofounders
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About Arad Levertov:
A FinTech veteran, Arad Levertov leads Sunbit’s Strategy and Operations.
Prior to this, Arad Levertov was COO of Enova International, where he successfully managed a team of 700 people in the $800M business across Product, Marketing, Strategy, HR and Operations.
Prior to Enova, Arad Levertov ran Operations and Systems Development at Intel.
Arad Levertov was a Major in the Israeli Navy SEALs, and received an MBA from Duke University.
Connect with Arad Levertov:
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FULL TRANSCRIPTION OF THE INTERVIEW:
Alejandro: Hello, everyone, and welcome to the DealMakers show. Today we have someone very, very exciting. I think that we’re going to be learning quite a bit of fintech today, and especially from someone from Israel. I really love founders from Israel because they have this training, especially from being in the military, that is really unbelievable. From Startup Nation coming to us today. Arad Levertov, welcome to the DealMakers show.
Arad Levertov: Thank you, Alejandro. It’s great to be here. Thanks for having me.
Alejandro: So, originally born and raised in Israel. Tell us about your life growing up there and being raised in Startup Nation.
Arad Levertov: It’s great. Being an Israeli now, it’s interesting because now, I’m raising my kids here in the U.S. When you grow up in Israel, back in the ’70s and the ’80s, you enjoy the simple life. You’ve got a lot of independence. Coming to school, you go out, and you don’t come home until the evening, and you play with friends, you make new friends, you do stuff, you organize different things, and you’re learning a lot of things. I think this was a great childhood. Then when I joined the military later, there were a lot of things that actually helped me to improvise and do things that are fun.
Alejandro: In the military, you worked for five years. So that’s quite a bit of time. In terms of work ethics and ways to handle stuff, what perspective or foundation did those five years give you?
Arad Levertov: I was lucky to be in the military and be in the [0:03:08] of the military. I spent five years. First of all, you do training. You come as a high school kid. You join the military. They tell you what to do. You do a lot of hard training. The first thing to learn is that you can do more than you think you can do. You can run 20, 30, 40 miles, and then after it, you realize you need to do another thing, you can do it. It’s just a matter of — it’s in your head, the way you like to say.
Arad Levertov: Another thing that was really good, and I think I learned it so well is the importance of the team. You can achieve much more when you have a team. If in the hard times and in the really tough times, when you have to be with them, you need to contribute to your teammate, and your teammate contributes to you. In general, in life, when I look at it — it was more than 20 years ago. It gives you the right perspective. So even right now, when things in the business are not right, sometimes, you always think, “Okay. It’s only business. Let’s try to figure it out, and it will be okay.”
Alejandro: Yeah. It’s interesting that you say that because I was actually thinking about this yesterday. I had a conversation with a very successful founder, and he said, “Look, Alejandro. At the end of the day, this is like looking at it as a game. If you take it too seriously, you’re going to fail.” So it’s like being on the task to the outcome and continue to look ahead strategically. What are your thoughts on that?
Arad Levertov: I will say right now that something that is interesting. At the end of the day, the worst-case scenario, which is, of course, that we will fail, in general, in any business. We need to remember it all the time. So, first of all, you need to make sure that it doesn’t happen and work hard to do it. At the end of the day, we’re alive. Your family, everything is good, so let’s focus on this, and the way we do it, and do better for people to make sure you contribute and add value to the people. Focus on this, and then focus on this in your business, it will 1) make your business better, and 2) will give you the right perspective of how to manage the business.
Alejandro: You really like problems. That’s why you went at it as studying industrial engineer, but why engineering?
Arad Levertov: I think in my case, specifically, I think it was the industrial engineer that attracted me. When I wake up in the morning before I do my kids a lunch bag, I will turn on the water for the coffee because I think I don’t want to wait for the water. I want to do something while the water is boiling. There’s something about eliminating waste that I probably was raised with this. My father was an industrial engineer. I think it was in my blood, so I went and thought, “I think I’m going to like it.” I think it’s good, and I enjoyed it, and I’ve been doing it from then, working in manufacturing and now in fintech.
Alejandro: Before diving into fintech, one of your first rodeos or experiences as a professional was Intel. Intel, obviously a really fantastic company in semiconductors. What was your experience with Intel like?
Arad Levertov: Intel, for me, was a great experience. I joined Intel after five years in the military. We did a lot of leadership experience and great adventures. Then my life started industrial engineering. Then I joined Intel as a manufacturing manager in the fabrication facility, managed a team of technicians. It was the interest of me to the business world, how to lead the team in the business world, how to set goals, how to communicate to the team, how to make sure that you achieve and focus on the important things, and not a lot of stuff around. A lot of people say, “We’re busy.” But the question is, how do you add value and not only being busy. I think what I learned at Intel in the manufacturing, the importance of adding value, eliminating waste, and how to lead teams in the business world, in general. A lot of great culture, a lot of learning, which I try to take right now in what I do.
Alejandro: Got it. Then you decided to go into business school. Why did you go into business school, and why the U.S.?
Arad Levertov: That’s a good question. When I was 17, I spent three months in the U.S. in a summer camp. It exposed me to some abilities behind Israel. As I mentioned, I grew up in Israel, great childhood, but then I realized there is something bigger out there. There was actually the big world out there that does a lot of things. I thought that I want to study in the U.S. I researched. I had a great career at Intel, but I decided to leave it and try something else. It was clear we can take what I learned before at Intel and try to apply it to other places. The entrance was towards the business school that I came to the U.S.
Alejandro: So, business school. What was that experience for you like?
Arad Levertov: Business school was also interesting because you come from a small country, and then you learn that also in businesses, you need to work with teams, you need to work with different people. For example, I was pretty good in math, but I wasn’t that good in English, or reading, or understanding the case. In my team, we used to work with a few Americans and people from India, from Korea, from China, which you work together. Everyone brings something else to the table, which you really learn to accept different cultures and understand that at the end of the day, it’s all about the right people in the team, and put each one where they can succeed. It was a really great experience. It exposed me to things that I couldn’t have done before.
Alejandro: And thinking about teams and new segments or industries, right after graduating, you went into Enova International. That was your first exposure to fintech. What was fintech like at that point, and why did you get so excited about fintech?
Arad Levertov: It was in 2009, I joined a company called Enova, first as an intern. I think the reason I was able to get the job is because I was working in operations within the company. I was supposed to improve the efficiency in the call center. Then I realized that basically in fintech, in learning specifically, there’s a lot of operations; there’s a lot of efficiency. When you make the decision about who to lend and who not to lend. You want to make it personalized. You don’t want to analyze people that are paying back because someone doesn’t pay back because you didn’t assess the risk right. So there are a lot of ways to improve and be more efficient. By this efficiency, you contribute directly to the consumer. I’ll give you a simple example, which I liked it and I enjoyed it. If you lend to ten people, and only five people will pay back, these five people need to cover the five people who didn’t pay back because you need to make sure that your bottom line is good. If you understand the risk of each one of the customers, and you are able to give ten people loans, and each one of them gives the right amount, and the right risk, and everybody pays back, at the end of the day, everybody benefits. Everyone will get a better loan; everybody will be able to do more with the money, which all of us are working really hard for the money that we are making. So I was excited about this when I got into Enova. I learned that it’s easy to say; it’s much harder to make it right because it’s regulatory, and you need to build a great product, and you need to be transparent with the consumers. But at the end of the day, fintech and lending specifically touches the people, which is one of the most important things. They work hard. They make money. They need to go back to their lives and try to make the best out of this money. So I was really lucky to join Enova and learn all this along the way in my six years over there.
Alejandro: Let’s talk about the moment where you decide that it was time for you to leave and build your own business. What was that process like?
Arad Levertov: It took a while to get to this conclusion in the process. When you come from a different country, first of all, I learned the system here because I wasn’t aware. In Israel, it’s a different system. There is no credit score. The lending is mostly connected to the bank account. It’s totally different here when it’s all separated. The second thing that happened is because I’m an immigrant, I actually had to build my own credit. I started without a credit score, and I had to build my own credit. I think a few months after I started working at Enova, I went to Costco to buy groceries. I realized, “I’ve been more than three years in the states. I work for a salary. It’s probably my time to apply for a credit card. So at Costco, I apply by the cashier. I’m with my three kids trying to apply for a credit card, and after filling out the form that had the questions: how much do I make, what is my social security number, where do I live, how much do I pay for it? I got declined. I felt it’s pretty embarrassing when you get declined in front of other people, and you don’t do it in front of a banker; you do it in front of other people. Then I realized it wasn’t only me. There were about 50% of the people who apply actually get declined. So try to investigate what we can do better. I said, “There must be a better way to accept a lot of people and not to charge a lot of money, and this by building a more personalized offer and more technology to do it. So thinking about it day by day, I realized that while I have a great career, I work in a good company, it’s growing, I was the Chief Operating Officer of the public company when I decided to leave. I realized that I learned a lot of things, and I don’t have a real excuse not to build something.
Alejandro: So what was that trigger for you to take the risk and the plunge on saying, “I’m going to start my own business”?
Arad Levertov: I thought, and I still think that there is a way to give better credit for people, much cheaper for everybody, and to include everybody, not only the people that are prime customers. After thinking and investigating, thinking about how you can do it, and you can do it better, based on my experience at Costco and the product we develop, I had in my mind that I can develop. When I look back in my life, and I say, “Yeah.” Maybe I was good in the corporate world, but I had the chance to do something bigger, I should try. I will definitely regret for not trying. So I decided to leave, moved my family from Chicago to Los Angeles, built a founding team and started founding.
Alejandro: And why Los Angeles?
Arad Levertov: From the regulatory point of view, the way we wanted to start, we needed to be in California because California had the great regulatory to the specific product that we started with. In the founding team, we decided out of three co-founders, which I assembled from people that I knew for many years. We decided together that the engineering team will come from the Startup Nation. We’ll have the engineering and the data team based out of Israel. We have two co-founders over there right now. To realize we don’t need right now, engineers in the U.S., but we have them in Israel. We found that Southern California would be good from the region’s point of view. So my co-founder and friend moved from New York to lead the sales, and I work from Chicago — decided that Southern California is a better place to start working on something.
Alejandro: Four co-founders. I think that managing just one ego is tough. Managing four is even tougher. So how did you guys manage the process of understanding who was accountable for what and how to diversify responsibilities?
Arad Levertov: That’s an amazing question. You probably hear it from every entrepreneur with experience that would say, “The founding team, the co-founders, this is the most important thing in your journey because maybe the business we change, but the co-founders are the co-founders. First of all, I was lucky to pick up the industry from people that I knew before or the head of engineering used to work with me at Intel about 15, 20 years ago. We used to be childhood friends, and we used to live together in [0:18:27]. For me, the head of analytics, I knew for about seven years in Chicago when we used to live together and to understand. Before we started, we had two days of knowing each other because I knew each one of them, but they didn’t know each other — really set up the expectations from the standard we are going to work together for many years. We set up expectations. We aligned our goals that we tried to build something that will last and will be big. We divided the responsibilities. I can say that right now, we are more than four years since we had this meeting, and we are still working really well together. It doesn’t mean we don’t argue, sometimes we disagree, but as long as we put the goal ahead of us, that’s what we do. You mentioned about ego. I think that we decided to make sure that the ego is on the side, but the company is in front, and we fix it day-to-day.
Alejandro: The company in front. I love it. It’s not who’s right or who is wrong. It’s what’s right for the business. I fully subscribe to that school of thought. Now that you have the band coming together, and being there in Los Angeles so that you have that regulatory framework that was more adjusted to what you guys were facing with the business, what were some of the early days like?
Arad Levertov: The early days were interesting. Before that, I was managing about 800 people. Then I moved my family. Now, you need to start actually doing it. So you’ve been thinking about it seriously, and now it’s happening. The first days, I went back to what I learned at what you call lend manufacturing about you need to make sure you add value all the time. From one end, we worked on the product, which we had the thought about what we needed to do. We created a new product, and as we worked with the team in Israel, which were basically two. On the other hand, what we did, I just walked around stores, here, tried to realize who would be my first partners. Tried to tell them, “I have a new product. You might want to try it. It isn’t ready yet, but it might be ready in two months. Let’s figure it out if you want to try it.” That’s basically what we did. We found the first store, a small boutique in [0:21:25]. Worked with them. Go with the first letter of intent, and then the chance, and took it from there.
Alejandro: What were some of the challenges that you guys were encountering as you were building out the business?
Arad Levertov: There are challenges along the way. Even right now, there are challenges all the time. The first thing that was interesting is you need people because our business is, we help the retailer sell more by providing them a great tool of point-of-sale financing. But you need the retailer to trust you because they will put your product in front of their customers and ask their customers to give the personal details to you. The first store — we wanted them to give us a chance. So we came there, and we came with the family, and we bought, as a customer, to make sure they know us and get us to know. So it took us a while. After we got a few stores — I think we got 20, 30 stores here in Los Angeles. We needed to identify what is the best vertical that we work with. Also, it took us a bit of time to make it clear and realize that our product is super important for what we call Non-Discretionary Expenses, where people just need to get things done, like fixing the car, going to the dentist, going to take care of themselves. At first, we tried different stores, which [0:23:12], but then once we realized it, we said, “Let’s focus on this. Help customers and help customers go back to their life right away.”
Alejandro: Walk us through the business model so that the listeners get it.
Arad Levertov: Our product is, we help retailers to help the customers to finance their purchase. Let’s say you go to fix your car in the Toyota dealership or Honda dealership, and you realize there’s a customer, and it’s going to cost you $500. The associate in the store [0:23:54 – 0:23:56] and will tell you, “Alejandro, it’s going to cost you $500. Just give me your driver’s license. I can see if you qualify for a payment. They take your driver’s license, which you would give them anyway. Scan the barcode, and from this information and with the customer consent, we are able to get the soft credit report and authorize the customer and allow each customer to split the purchase 3, 6, or 12 months. This takes seconds, and we are able to do it for 9 out of 10 customers, which is unique and still maintain the credit card rates. Hopefully, each customer will get the better rate compared to the alternative. The way it works, you complete the transaction. The customer completes the sale, and then we pay to the store, and we collect the money over time from the customer. We get some revenue from the store and also some revenue from the customer and try to find it in a way that everybody’s happy. The customer is happy. The store is happy. We are happy, as well.
Alejandro: So then, regulation. How do you go about regulation because regulation is a beast for these types of companies?
Arad Levertov: That’s true. Regulation is a lot. If you look at the legal bills that we have to make sure things are right, it’s pretty high. I think you need to build things right. Our first employee, other than the founders, was a general counsel that actually has a lot of experience in this area. You need to understand that building things right takes time and takes money. But if you do so, if you understand the details of how you can take the loan, how can you present it with experience with the customer, and still make it a good product that looks good. If you do it right, it gives you a great advantage because there are a lot of details of explaining the product that are covered by regulations. For example, how do you start in California because it’s a regulation that would be good to California, but not good enough for the entire country? So you start in California. You build the record, and then you move to the entire country with [0:26:21]. It helps you to be more efficient.
Alejandro: Got it. Was getting the general counsel as one of the early employees, was that a strategic decision or a financial decision?
Arad Levertov: No, definitely strategic. In this type of business, the legal is part of building the product. You cannot build the product while ignoring the regulation from the legal if you want to build something that will last.
Alejandro: Of course. I was just wondering whether when you guys took a look at it and said, “Whether we outsource legal, like every startup does versus having legal inhouse,” when you were doing the numbers, was it cheaper, or was it more costly?
Arad Levertov: It wasn’t cheap. It wasn’t financial. It’s understanding that you need to build something right, and you do it right from day one.
Alejandro: Of course. Obviously, operating in fintech and especially for paying those bills, it costs money. So how did you guys go about capitalizing the business?
Arad Levertov: Right now, we’re looking. We raised, so far, over 50 million dollars in equity. But we start small. We start, of course, with friend and family, the people who believe in you, the people who just heard the story that they just said about you living a job and doing it or what you’ve built over your almost 40 years of career before we started — 40 years of age. I think we started simple friends and family getting $25,000 for this, $50,000 for this, etc. Until we found the right partners for leading the feel and the [0:28:20] around which — I think the right partners are the partners that from one hand, understand what you are trying to do. But from the other hand, understand that you are the expert, and you need to drive the ship, which we were lucky to find. At the end of the day, there are many investors that sometimes will want to tell you what to do versus “I’ll be with you. I will tell you when I think I’m wrong, but you drive the ship. I’ll help you as much as I can.”
Alejandro: Yeah. Understood. So as you were looking into partners, and especially the institutional investors — raising over 50 million is not easy, especially when you’re looking at onboarding people in your cap table is how we know it. It’s tougher to divorce your investor than your husband or wife. When you were thinking about the right partner, what did that right partner look like for you guys? Did you guys get together, the four co-founders, and basically went through the trades or through the characteristics of what that investor needed to have in order to bring them on board? What was that? What did that profile look like?
Arad Levertov: When you learn, and you start, you talk to a lot of people because that’s how we learn. We didn’t plan with the right profile and do it because we didn’t know what we know right now. You just start talking to people. Then you realize that many people you talk to, it’s not relevant because they don’t into fintech, or they don’t into retail which you want it to be. You want to understand retail and fintech. We were able to find, for example, Chicago Ventures, which are based out of Chicago in the Midwest. They have a great experience in retail, and also understand fintech. On the other end, we found Group 11 here in Los Angeles, which also really understands fintech and tries to focus on the fintech space, and both of them really liked the story of what we tried to do, which means find the customer exactly when they need them. Give them a great offer, finally to everybody, and they believe now our ability to execute. So we were able to find them early days, and they’ve been with us from the seed round all the way to [0:31:02].
Alejandro: As you’re thinking back now and in terms of fundraising, I’m sure that there has been a lot of learning and a lot of pitching, too. What has been your biggest lesson?
Arad Levertov: I think my biggest lesson is that in many cases, especially when it moves a little bit farther when you need to raise more money like we just did from the [0:31:26] Ventures about five, six months ago. You need to tell a story that you actually can execute. People will not believe until you start showing some traction. I’ll give an example. At first, we used to say, “Okay. It can be in many places.” But say, “No. Show me where it is going to be.” So we found the one vertical, which is a car dealership repair. We start growing this business significantly. Then we say, “Only if this will be this vertical. This is a huge business. Let’s invest in it.” So you need to tailor your story and understand that the audience is there to believe you in the things that they already see that you can do. Don’t tell stories that are not relevant. Even though you know you can do it, you need to prove to them that it’s already done.
Alejandro: Interesting. I’ve been told multiple times that the way that banks exist, they’re not going to be the same way. Probably, they’re not even going to exist in the way that we know them in, let’s say, 10 to 15 years from now. You’re very deep into the fintech world, into what’s going on. Where do you think fintech as a whole is really evolving?
Arad Levertov: I think we’re only in the beginning. Today, with technology, with data, a lot of things that you can do. You don’t need to have a branch. When was the last time you went to your branch for the bank? Probably, it’s months ago if not years ago. When our parents used to do, they used to do it once a month to go to get money or to deposit money and deposit a check. I think that the banks are there right now, and they’re going to be there because they have the advantage of the regulatory framework of the structure. However, the fintech companies need to learn how to work with the banks in order to give a better service for the consumer. So either the banks will change and start focusing on the consumer more and more efficiently, or they will partner with fintech companies who can bring this innovation, and bring more value to the consumers, which can do a lot from the home with the phone, or today, or maybe even in the future with the watch without actually going and walking into a bank branch.
Alejandro: Got it. One of the questions that I typically ask the guests that come on the show is if you had the opportunity to look back, and obviously, now, it’s an incredible experience, what you have accomplished with the business during the good times, during the bad times. Going back to that moment when you were thinking about the possibility of launching your business if you could go back and speak to that younger self, knowing what you know now, what would be that one piece of business advice that you would give to yourself and why before launching a business?
Arad Levertov: I think we did right with the right people and choosing the right things. I think what I personally would have done better is, I would focus more on the right investor to talk to before I just go and talk to everybody. It took me a while to learn it because then it would be much more efficient. We spend more time in building the business than raising money. But this is something I learned along the way, and I could have done it probably too.
Alejandro: So how do you go about optimizing for finding the right investor, rather than wasting time? How do you do that?
Arad Levertov: I think you really need to understand and learn who the right investor is interested in the area and try to get them in the right way. Make your list shorter and try to get them with the right connection. Of course, get traction before you do it, and that’s something we actually did well. We had a product before we went to investors, but learn, network on the right, specific. Try to learn from previous entrepreneurs who did it before. I think there is something right in the community of entrepreneurs that actually help each other, which is pretty cool. People are willing to introduce you to the right people. Take advantage of it, and then it will help you along the way, which is like paying it forward because you will be able to help other people in the future.
Alejandro: Yeah. I think that finding the right investor, like you were saying, fortunately time is all the founders have. If you’re wasting it either speaking with investors that are maybe in fundraising mode and they’re not deploying, or maybe investors that are investing in healthcare rather than fintech, or maybe that are investing in the growth stage where you’re in an early stage. Those are like the common mistakes that perhaps founders can avoid to reduce the time.
Arad Levertov: Yeah, exactly. To understand also what you are looking for and who will be the right investor. I think that you do want to go to talk to the growth stage because you want to know them later, but maybe it’s not the time. Maybe you need to wait another six months before you start talking on the growth stage. Talk to the seed people right now. It will help you better.
Alejandro: How big is Sunbit, so the folks that are listening get an idea?
Arad Levertov: We started in California with this one store. Right now, we are in over 2,200 locations across over 40 states, growing in the rate of 100 locations a month — growing in the business, we have over 100 employees, and we are over the last two and a half years going in double-digit number month after month.
Alejandro: That’s amazing. So, Arad, for the folks that are listening, what is the best way for them to reach out and say hi?
Arad Levertov: Reach out to me by email or contact me at Sunbit.com. I’m happy to see anyone. We are based in Los Angeles.
Alejandro: Amazing. Arad, thank you so much for being on the DealMakers show today.
Arad Levertov: Sure. Thank you, Alejandro. It was great.
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