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Asesh Sarkar has built a big finance business with an emphasis on blending social good and lending. His startup has already raised more than $100M in equity and $500M in debt financing from top-tier investors like Legal & General, Community Investment Management, Blenheim Chalcot, and Future Fifty.

In this episode, you will learn:

  • Debt versus equity capital
  • Investor expectations at each stage
  • What leadership is really about
  • His top advice for other startup founders

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About Asesh Sarkar:

Asesh Sarkar was born in the UK to immigrant parents, who had no support and little money. Just as he had seen his parents toil to provide for the family growing up, Asesh Sarkar also had to overcome his lack of academic ability by working extra hard.

Pursuing the career that suited him, as opposed to what his parents originally suggested he should do, led to a decade in finance and consulting, before eventually becoming the youngest ever partner at PA Consulting. From there Asesh Sarkar took a leap into the unknown to become a social impact entrepreneur, founding breakthrough FinTech platform, Salary Finance, in 2015.

Connect with Asesh Sarkar:

Read the Full Transcription of the Interview:

Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. Today we have a very exciting guest, a guest that is doing it, so talking about scaling, building, financing, you name it. I think that it’s going to be quite interesting and that you all are going to be learning quite a bit. So without further ado, I’d like to welcome our guest today. Asesh Sarkar, welcome to the show.

Asesh Sarkar: Hi. Thank you so much.

Alejandro: Originally born and raised there in the UK, so how was life growing up?

Asesh Sarkar: Life was good. I was born in a city, in a place called Lester. I had a brother 12 years older than me. He left for University, and that left me with my parents. I had a good time.

Alejandro: And you definitely studied quite a bit of business, not only for undergrad but then also you did your MBA and then this whole thing around consulting. You’ve been quite a consultant, so why studying so much business, and why going into consulting?

Asesh Sarkar: I guess I always wanted to be an entrepreneur, so I thought I would start with a degree in business, and that would help. During the early years, I never quite landed on an idea, so I thought if I became a consultant, that would help develop some of the core background and some of the core skills needed. What I found was since we were doing different projects and different sectors, you work at quite a senior level. It allowed me to experience a lot of good things early on in my career. I was pleased. I was 35 when I started my entrepreneurial journey. At the time, I was doing well, and I enjoyed being a partner in a consulting firm, but my heart was always in being an entrepreneur. With the benefit of hindsight, I’m very pleased I had that grounding and that I started the journey when I did.

Alejandro: Why do they say that consultants make great entrepreneurs?

Asesh Sarkar: It’s a good question. In general, to be honest, I’m not sure they do. What I find with consulting is that quite often you’re focused on very big organizations. Quite often, you’re navigating the politics of the organization, and in many ways, you’re playing a corporate game. For me, I was good at playing the game. I enjoyed it. I was able to progress within that system. Also, often, when you’re in a corporate, you’re based off from the customer. Where, actually, the opposite is the case in a startup. You start with the customer, and you start from the ground up, and you build outwards. There aren’t enough people to really do any politicking with. You don’t have an association with a big corporate that can help you, so you pretty much start. Once I was good in the corporate world, for me, I really enjoy business, and for me, business, when you’re doing it in an entrepreneurial environment is what it’s about for me as opposed to some of the – you know, when any organization becomes big, you focus on the business of navigating the organization as opposed to the business of business. For me, what I was really keen on is not just navigating an organization but actually core business, understanding users, scaling, and so on. I was pleased to make the transition when I did.

Alejandro: What was that process like of really coming across the idea of Salary Finance. You are doing all these years as a consultant. Then at 35 is when you started the business, as you were saying, but what was that process from identifying that need or that problem to actually taking it all the way across incubating it and bringing it to life? What was that process, that journey like, and that specific event that happened that triggered and pushed you over the edge to say, “Okay, let’s do this!”

Asesh Sarkar: I had a couple of full-stops. A couple of times, I had come up with ideas on the side of the desk, and it made me realize that it’s not just about a great – I had [05:36] and in future years, and other people take similar concepts and actually become very successful. There’s a general feeling, which I had, which is, it’s not just the quality as I did, it’s also the quality of execution and then reach off the side of your desk. To me, it included because I was going to be an entrepreneur, then I wanted to do it in a big way, and that I would need to commit to it. The real pivotal moment for me was I had just become a partner at a consulting firm, and I worked very hard to get there. Then it really concluded when I thought I was going to be an entrepreneur, and now was the time because once you enter into a partnership, actually you need to do a good number of years in that partnership to gain equity value. There’s no value in being half-in. For me, what was going to happen was every year you become a partner in a consulting firm, and the opportunity cost becomes bigger. Then you would just get hotter and hotter. So I thought, “Okay, look. I’ve become a partner. Draw a line in the sand. At the same time, I really developed the idea around [06:40] products. I had the idea. I felt like I had achieved something, a nice kind of milestone in my corporate career, and then I was also very fortunate to be able to raise capital on it, as well. So, it felt like the three of those things meant, for me, it was the right time to make that plunge. Whereas before, either it wasn’t quite the right idea, or I wasn’t confident enough to leave on it, and I was unsuccessful raising capital at the time. The triangle of a great idea, right moment, kind of press you professionally, and funding were the key things.

Alejandro: In this case, we’re talking about a good idea. Were there any steps that you took in order to validate it and to make sure that you were taking the leap of faith, perhaps through a tunnel that there was cheese at the end of the tunnel?

Asesh Sarkar: Yeah. I would say a lot of it was instinct-driven, and a lot of it subsequently luck-driven. The idea, the business I run, Salary Finance, I guess two things resonated: 1) analytical reasoning, and 2) emotional reasoning. Behind all of this was a line of thinking I had been developing over a number of years, but which was around this concept of business for social purpose. Increasingly what I could see was in a not-for-profit world, actually a really long-tail not-for-profits, good intentions, definitely doing good, but not necessarily scaling, and the general kind of halo effect, if you work in a not-for-profit that you must be great. Then I saw lots of people in the commercial world, really high talent, achieving brilliant things, but the outcome of that, again, not necessarily delivering great stuff for the world. So I thought about this concept of where you try to align both, where you have the best talent working on really important things, commercially viable, but also with an eye to actually from a society perspective living something of value. It just struck me that, to me, the worlds of not-for-profit and commerce didn’t need to completely operate separately, that they could be a Venn diagram where certain ideas would operate in the middle, and it would benefit everyone. When it came to consumer finance, two things happened in parallel. One is, we have two children, and we have a nanny. It just shocked me how hard it was for our children’s nanny to get access to finance. In many ways, I felt very guilty. I worked in the city. I worked in banks as a consultant. I had loans. I would pay 5% for those loans. My children’s nanny would work very hard because my children are very active. But she couldn’t access bank finance. She would be using high-cost credit cards, payment loans. So, every month, we would pay her, but a significant portion of her income would just go on this high-cost credit. I could see how inequality happens, which is, basically, for me, someone who is relatively high-paid, and getting lower and lower asset capital. Those more middle-income, they were finding it much more difficult. But on the equally on a rational side, I could see from working at banks that it wasn’t necessarily bad because it wasn’t a bank saying, “These poor people, let’s make as much money as we can from them.” Basically, they’re just looking at the economics; they’re looking at the risk and pricing and the risk. I was sitting in the middle of these two things, which is, one, I could see the impact that a lack of finance has on someone in the middle-to-low-income setting, and I could see on the banks, they weren’t necessarily bad actors trying to do anything wrong. I could see how this was normalizing to that effect. Now, I take it one step further around looking at how there is not good or service in the world which has this dynamic where the less you work, the higher price you pay. It’s like going to a sandwich shop and the rich person paying a pound for a sandwich and the poor person paying 10 pounds. It just wouldn’t be acceptable. When it comes to money, it’s fully normalized. Essentially, what I had done for my children’s nanny is I had given an employee a loan. We paid off her debts. I collected a small amount from her paycheck each pay period because I knew I was going to get paid. I didn’t charge her interest. But I came to this concept around, as an employer of one, I had made a real difference for her using the security of the paycheck. Then, I thought, “What if we do this on a much bigger case? What if we work with much bigger employers?” Those employers offer their employees financial benefits using the fact that they’re employed, they know how they’ve been there, and they have access to the payroll, so they’re top of the pen hierarchy. Then, it chimed with my business for the social purpose because my case to employers would be that “You employees are really suffering here, and you can help them.” Those three things came together: the emotional. I could see how helping my children’s nanny had made a big difference to her, individually. I could see from a bank perspective that they’ve gotten into this cycle of a regressive model, and I could see how by working through employers, we could change the economics and do something at that scale. Those three things coming together helped give me confidence, and the model would have at least some merit for giving it a go.

Alejandro: Very cool. You were talking about raising capital earlier. How much capital have you guys raised for Salary Finance?

Asesh Sarkar: Over the four rounds now, we’ve raised just under 100 million pounds.

Alejandro: Got it. How has the fundraising journey been for you?

Asesh Sarkar: It gets easier. I would say, particularly in the UK, raising seed capital is very difficult. It’s been a very short supply across the UK and the U.S. What I see in the U.S. is just a lot more equity available for the seed stage. I was lucky when it came to the seed stage that I had established some credibility in the market, so I had a combination of VC angels. Ultimately, who I raised capital from at the seed stage was an organization called [12:56]. They’re what they term venture builders. They have more operators; they do fewer transactions but much more deeply involved in it. What I liked about them is they have a big focus on being operators rather than financiers. They understand the numbers, but where they really excel is being good operators. Then, for me, with my kind of consulting background, I quite like the operational – people who had built and lost companies themselves that I can resonate with. As I said, with previous ideas, I had been unsuccessful raising money, so for this one, I had the good fortune of having a range of options. But it was difficult and easier as you further into your career. I chose the venture-builder route of venture capital or angel capital.

Alejandro: For a business like this, I would assume that you also have some debt to be able to put it into the operations. How much have you guys raised on that front?

Asesh Sarkar: We’ve raised well over half-a-billion pounds now.

Alejandro: Half a billion. How do you put that into perspective? What’s the raising equity versus raising debt? How does that all come into place, and how should an entrepreneur think about that?

Asesh Sarkar: Equity, I guess, is the operating capital of the business. Particularly in the early stages, once we have raised a lot of capital, now – we have done it in stages. You have all of these proof points, and the first proof point for us was, can we win a client? Does this proposition resonate with executives, and they become caring enough about their employees to solve this? Then, we got comfortable with that. Then the next proof point was, we’ve gotten into some employers, but do their employees need this product? Are they going to take it up? We got comfortable with that. Then when we lend these employees money, are they going to pay us back? Is it going to work economically? Then we got comfortable with that. Okay, yeah, that’s all working, but can we scale this? It’s great that it worked in two companies. Can it work in thousands of companies? Every time you get more confident and you prove these proof points, you’re ready for the next stage of equity. I would say, personally, when I take money in from an equity investor, whether an institution or a private individual, for me, that’s money that I’ve worked hard for. I take that with a lot of responsibility. I never look to raise more than we need to get to the next proof point, up until where we are now, where we have many, if not all of the proof points, and now it’s in a multiplying stage game. On the debt side, it’s a bit different. When it comes to funding consumer loans through debt, at the beginning, you have no data. People who work in traditional debt finance love data. At that stage, you have to work pretty hard. After we joined the beginning stages, we actually had to use equity to do our first debt funding. Fast-forward to get to where we are today, which is we’ve done half-a-billion pounds in employee loans using employment data, collecting repayments on payroll. Basically, one of the – if not the best-performing consumer asset classes have performed even better through COVID. Now, when we go out to raise debt funding, there is a queue of people. There’s nothing not to like about the model; it’s socially progressive. We’ve got tons of outcome data. It’s proven over the cycle. As you progress, it’s just a data game at that point. As things get easier on the equity side, it’s very much around what are the growth levers, and how much of those have you proven?

Alejandro: Got it. You were alluding to this: in terms of the scope of the operation and size, is there anything that you can share, like the number of employees? Whatever you feel comfortable sharing.

Asesh Sarkar: Yeah, sure. We have 150 people in the UK. We have about 40 people in the U.S., and we have about 50 people in India.

Alejandro: Very cool. Then, what’s in store for Salary Finance? If you were able to, let’s say, go to sleep tonight, and you wake up in a world where the vision is fully realized, what does that world look like?

Asesh Sarkar: Basically, it looks like – with finance, you have lots of different channels. You can go to your bank. You can go to a neo bank. You can go to a specialist. For us, we believe that if you access finance through the workplace as an employee benefit, then there are a lot of advantages to that. You cut out the cost of acquisition so you can pass it down to an employee. There is no fraud. You collect your payments on payroll. You can design it. Lots of people don’t get paid monthly like bank products are done, so you can design your payments to match them with pay cycles. For us, a world where the majority of the finance you consume is through the benefit of your employer where you are getting, as an employee, benefits. Then it becomes completely mainstream. In the UK, for example, we now reach about 3.5 million employees across 600 big companies, so 20% of the Fortune 100, one in four hospital trusts, eight of the big ten supermarkets. So, it’s getting mainstream. We reach about two in ten working people in the UK. For me, mainstream is when it’s six or seven people of every ten in the UK that can access their primary finance products through the employer as an employee benefit. In the U.S., we’re at an earlier stage but making good traction. We would love to see similar growth there as well. Then, hopefully, more countries will follow.

Alejandro: Very cool. One of the typical questions that I ask the guests that come on the show, Asesh, is: you’ve been at it now for about six years. During your consulting years, you also learned quite a bit. If you had the opportunity of going into a time machine, and you go back in time, and you have the opportunity of having a chat with that younger self, with younger Asesh, what would be the one piece of advice that you would give to your younger self before launching a business and why given what you know now?

Asesh Sarkar: I would say – and actually, I’ve probably been known to take this advice today, which is, I am fairly conservative. I take a lot of responsibility for the equity capital we bring in. When you’re a bit conservative, you’re limiting the downside. When you limit the downside, you’re also limiting the upside. When I see the real breakthrough entrepreneurs, they take that out of their brain in terms of limiting the downside. They’re fully focusing on the upside. I’ve always been a bit more balanced about the two, which is in Salary Finance, every investor that has invested in us, we are a fairly successful business, and everything is progressing as it should, but ultimately, you always want to be ten times bigger. So, for me, how you can program your mind to protect the downside and focus on the upside is quite key. It is a balance because the reality is, most startups fail, so having some downside protection is a good thing that you’re careful with money and of those types of things. But, equally, if you’re going to go through it, then there’s a lot to be said about being – kind of feel us in your pursuit of scale, as well.

Alejandro: Very cool. Obviously, you were talking there about the growth and the number of employees that you’ve had. What has been your biggest lesson around people?

Asesh Sarkar: That’s a very good question – loans in really enormous amounts. Our leadership coach that comes in to help our executive team and me, I always call it just my Leadership. One of the things I really realized as you progress is, at the beginning, you think a great leader is someone who leads and everyone else follows. Particularly when you’re an entrepreneur, you think, “Wow! I came up with this idea. I have lots of data points, and everybody should just follow.” Probably, as we got 2.5 years in – and actually, people who talk about leadership coaches, I say, I have zero time for leadership coaches. I’m doing this in the real world. I don’t need a coach. But one important thing about a leadership coach, and we’re fortunate to get a real good one, it really flipped our mindset around. It’s not about you as an individual; it’s more about how you can build an organization of people that have the setup to succeed individually. By them succeeding, you succeed. For me, that real shift in mindset from what can I do to grow this business quickest to what can I do to have a brilliant group of people around me that are enabled, motivated, and understand how blocks are removed. Then you multiply your ability to scale. For me, it’s been a real change from starting as an entrepreneur where you start yourself maybe with some kind of co-founders, through to everything you’re doing to drive through, through to getting to a certain point of scale where it no longer becomes about you. It’s really about the quality of your team, the quality of your leadership, the quality of your environment, and that’s what sees you through. It doesn’t matter how much you work or how good you are, you can never replicate the force of a big organization functioning on point.

Alejandro: Absolutely. As they say, you can go faster alone, but farther when you go together. So, Asesh, for the people that are listening and watching, what is the best way for them to reach out and say hi?

Asesh Sarkar: I’m on LinkedIn, and I’m very happy to connect with people.

Alejandro: Amazing. Asesh, thank you so much for being on the DealMakers show today.

Asesh Sarkar: I’m very happy to be. Thank you for having me.

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