Michelle He On Raising $700 Million To Overturn Financial Norms And Make Affordable Loans Inclusive Using AI

Dr. Michelle He has already raised $700 million for her 3.5-year-old fintech startup that is increasing access to credit and affordable loans, beyond just relying on credit scores. Their investors include Citi Group, Waterfall Asset Management, Hambro Perks, GSR Ventures, K3 Ventures and Varengold bank. 

In this episode, you will learn:

• The disadvantages of fundraising when you come from a corporate background
• The stages of fundraising
• The future of credit and lending

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About Michelle He:

Dr Michelle He received her PhD in AI / machine learning from National University of Singapore. Before setting up Abound, she worked over a decade in the in financial industry in Europe and Asia, focusing on credit, analytics, digital lending and operations. She was also trusted advisors to other Fintech companies.

Connect with Michelle He:

• Crunchbase
• LinkedIn
• RocketReach

Read the Full Transcription of the Interview:

Alejandro Cremades: Already hello everyone and welcome to the dealmakerr show. So today. We have a very exciting you know an entrepreneur she is building a really incredible company and a a massive you know amount of money that they’ve raised already 700,000,000 so I mean last run though they did pretty pretty big. We’re going to talk about all of that stuff but definitely a very interesting story because you know she did the whole corporate thing and it’s not like she went right out of it. You know after university you know she took her time. You know we’re going to talk about that but the incredible shift you know, incredible rocket ship that she’s building. And super inspiring story. So without fartherdo. Let’s welcome our guests today Michelle hey welcome to the show. So originally born in China you know you were born there in. Ah.

Michelle He: Hello. Thanks thanks for having me. Um.

Alejandro Cremades: Area that was industrial that was all about car making and manufacturing all that good stuff in a lot of pressure around education and getting good grades and attending the best school so give us a walk through memory lane. How was life growing up.

Michelle He: Yeah, very happy to so I was born and grow up in China my hometown is called Hubei it’s right in the center of China it is actually a main industry area. A lot of likegar car manufacturing and and and a steel ah manufacturing business. And like what do you said is known as a very competitive province in terms of education. So when I was a kid I was expected to work very hard and get good education I finished my university degree from one of the top engineering schools and in China and I always love numbers. Not data and problem solving. Later on I went to Singapore to do my ph d machine learning and artificial intelligence. Um, after I got to my ph d I worked with there for a couple of years I studied yeah

Alejandro Cremades: And before before before you you go deeper there you know because it’s very interesting. 1 of the points there is that when you studied engineering I mean you also you know, got your ph d you know on machine learning ai now everyone is talking about machine learning and Ai you know, but they obviously you were ahead of your time. Um, but in university you know, like there. You know it was like thirty thirty men and 3 ladies I mean in class I mean I’m sure that you know you you found yourself to be very comfortable. You know in male dominated spaces which is incredible and.

Michelle He: I.

Alejandro Cremades: And I love this because I have three girls I’m my girl’s dad so you know this is this is exactly I I know that times are changing I couldn’t be more excited for the future that they’re going to be living into but it’s all thanks to you know people like you Michelle you know that they.

Michelle He: Little ah.

Alejandro Cremades: That just went right in and it didn’t matter if it was 30 or 40 men and just 2 or 3 women. It just didn’t matter. So how was that for you and then also I guess what did you learn about hey I don’t care if this is male dominated or or there is women or non women I don’t care I’m going to do it anyways.

Michelle He: Yeah I have I have a daughter my daughter is a six years old and 1 of the things we should drive me to work hard now and even harder than before is to be a role model for my daughter so that if she will be grown up in a very confident way. Be comfortable with herself. Um, yeah, it’s very interesting though. I started mechanic engineering and and when I joined a university I realized you know this is really a male- dominating environment. There were 30 boys and only 3 girls including me and but. I think I learned when I was very young when I was a kid and that it doesn’t really matter what is your gender and then later on when I traveled from Singapore and and the na was in the yeah u k I’m also the minority and against the uk the minority of women and what I learned is that. That doesn’t matter what is your gender and what are your race. What it really matters is that what’s your drive and what what do you believe? And how do you put your hard work and and and and and your face together to do something really really meaningful if you feel if you feel that you are. Satisfactory about what you’re doing it makes you a better person and that will naturally impact the people who are around you see in my case, my daughter my family and my friends are around me they see you are happy. You’re self confident and you are making the impact that is really meaningful.

Alejandro Cremades: And you know it’s It’s obviously easier said than done I mean I’m I’m an immigrant too in the Us and I remember at the beginning you know like people were making fun of my accent. You know and you know I got to a point that I was even laughing at it too I was like hey you know I got to laugh at myself. You know so that people can laugh at it too or so why we why?? what? Why we’ll not laugh about it. Not so but it’s it’s not Easy. You know to kind of like get out of your own head get out of your own way. And just keep keep keep pushing where perhaps the odds are not in your favor. So How were you able to do that.

Michelle He: Well I think that I what I learned is that I turned the these serve advantages to other advantages. So for example, being an immigrant to do a new country in like in the U K like a chinese girl come to the western world and that was that was a lot in in many ways. That’s a disadvantage because when I first came to the uk thirteen years ago I came here to work for a bigger company. Well paidid stable job where educational background and a very healthy spend. But no banks wanted then the £5000 to me because I was credit invisible in this country I didn’t have any footprint like credit footprint in the ecosystem in the U K like in many other developing countries like same me in the eu ah us creditors score is still dominating. Um. As a decision decision-ma tool by banks and and theendds and then look at ah you know your credit school who have you borrow the money ah before in this specific ah country. So in my case, my credit is ah my credit history in Singapore doesn’t account. It’s like ah what havingt died in the Uk. But as a new to the country I haven’t. I don’t have any footprint so ah, later on I worked and almost over a decade before I set up a boundund I worked over almost a decade in in the credit industry digital lending and eventually I wake up one day and told myself if I continue doing what I’m doing now to help with the big banks to improve Accredit decisioning.

Michelle He: I can’t even help people like myself because everything still around the creditor school which is the stone age technology used for for the last eighty years so I want to do something really different and um to revolutionize the credit industry and then with the birth of open banking which is. Very very developed it means the uk and the Uk is a leading leading country in the world in terms of open banking ecosystem. My co-founder geral and I found this is this is it. This is the thing. The revolutionary is the credit credit and lending industry and um, we look at it we look at it and we developed it very distinctly for technology. Based on a combination of Ai and open banking so to answer your question I I now feel I turned what people think is a dista advantage to a ah advantage.

Alejandro Cremades: Yeah, you know it’s say it’s some amazing because I was actually getting flashbacks when you were talking you know I remember when I moved to the us um, it was August thirteen two thousand and eight you know I even remember the the guy the taxi driver his name was luigi that was driving me from the airport to ah to the city. And I remember you know it was not easy. You know with credit I I had like landlords that were asking me to pay upfront twelve months in advance I mean it were like what the hell I mean absolutely ridiculous now 1 thing that is very interesting here is that it sounds like you guys really stumbled on a problem on a problem that. You were really familiar with because you know you were obviously working the corporate world for so long, but but but hey let’s face it. You know you had a steady you know, ah career. You know, very nice paycheck. You know the 9 to 5 you know, very comfortable. You know live you had you know, moved there to the u k. You know a pretty successful story but all of a sudden you decide to ah to shift gears. You know, typically people would start companies out of university but they starting a company when you’ve had you know. Shaha long and steady you know corporate career. It’s tough to leave that because 1 gets really comfortable and attached to it. You know and the unknown becomes very uncertain and very scary. So how did you come to the point where it was just so real and so vivid.

Alejandro Cremades: You know that future How compelling you know it was that you were living into that you said I got I I kind of leave this thing behind I I need to take action here. Yeah.

Michelle He: Yeah, so first of all the corporate life I had is not a nine nine to 5 I guess you mean for 9 am to five p m my life was a covid knife was pretty stressful sometimes it’s probably from 9 am M to 5 am m but that’s not as a reason and I didn’t I didn’t really get a bored I still got on like ah a very good training and like professional training for my career. I worked with um, a lot of like the you know the biggest bank in in in the world helped than with a lot of problems including the the operations accredited decisioning but what I did was not actually what I want to do I want to be ah on chopno I want to make an impact. And I want to solve a problem which can at least help people like myself when I first came to the uk thirteen years ago I want to be able to get a known because abound does not exist at that time and ah 13 years later if I look at it now most the lander is if not all of them. Banks and lenders are still using this approach to you know have a computer says no to accredit worthy people I was um, like I was I was testing this with some of our our colleagues and like one of them is a young engineer um and a head of engineer.

Michelle He: He just his name is Carlo. He just moved from Hong Kong to to the Uk a couple of months ago and and you know two master degrees 1 from germany 1 from us used to work a data scientist the project in Nasa in the Us. You know, very very tananted the guy and he came here, ask him? you know do if you need a known you search it and they just attest it. It turns out that he can only get a 2 loans from from the aggregator website number 1 is abound number 2 is a very high cost term known. So. And and a couple of other conics. You know have the same situation tested it over over dinner as well. So it. It is true in the last thirteen years I have been there. This problem has not been really solved by anybody else and and we have a very sensible solution here which is basically look at people’s. Real-time bank transaction information the customers to share with us applies artificial intelligenceages to really understanding the process. The information extract the signals for the noise so that we can identify if the customer can really afford to payback the loan or not regardless if this person is new to the country or ah other types.

Alejandro Cremades: So then? so then I guess for the people that they that are listening to to to really get it. So Obviously you know here you guys you know were like okay you know like like what they say screw it. Let’s do it and you went at it. You know with a company and I guess. For abound you know So The people that are listening to really understand it. What ended up being the business model of the company. How How are you guys making money.

Michelle He: Um, so we have 2 business lines one is abound. Another one is render so a boundund is a digital lendor so we provide unseccureded loans up to £10000 to people here in the uk and with customer consent. Ah we have read access to their bank transaction information. We download their bank transaction information and process it with our ai engine and we calculate. Basically you know, ah we understand how much do they earn? where do they get the income from how how they spend the money and as a risk signals and from the found a lot of noisy and unstructured the information and that we provide that a loan. Um, so the so so our business model is basically to provide affordable loans to further bound it provide affordable knowns to the consumers here in the uk. That’s one part of the business is a digital lending Basically it’s um, ah, netty interest the marching business model. The. And the part is a really exciting bit of our business is that it’s render that is provide a credited technology to um, financial institutions. That’s the international business we’re providing ah credited technology as a software. To ah lender and the non-bank lenders. Ah banks that were non-bank lenders here in europe and and globally and there a lot of synergy between a boundund and a render is 2 business if we come back to our mission. Our mission needs to expand access to affordable loans.

Michelle He: And we build a very distinct technology which is a render based on the abound business because we can only get this information our customers information and our own data our customers ah profile by direct andending to the customers and. Currently we have achieved a 75% reduction in credit or norse or or the bad debt compared with the market that is very very powerful and now we offer that one as a software as a service to to other lenders because it’s it’s really difficult to build and in the last three and a half years we have. We have the best team in this industry we spend as an ask for three and a half years only doing 1 thing which is basically open banking based of for divinity technology that is render.

Alejandro Cremades: And how how difficult was it to to go from having your own office. The space with people you know all that stuff to all of a sudden you know like when you guys started this in pretty much in a lockdown you know during Covid. You know all of a sudden you see yourself alone at Home. You know, like no one around you I mean that was quite the change you know because it was different from everything that you were used to So How was that adjustment as well for you.

Michelle He: Um, it was um, it was not a very easy in the beginning. But I think a part of it is because people the entire world is a shifting from a normal world to a knockdown world or so even I didn’t leave my job I will still have to adjust it to that kind of lockdown working from home mode. For me specifically when I and quit my job I didn’t have any income. We didn’t have office and actually for the very first year when we founded the business we didn’t have an office and we didn’t need to have one because it’s a knockdown mode and we have a small team all of us work remotely. So we actually work from and a bittonnet fan flat of my co-founders and um and it’s just very small team. We have so much work to do and and I found. It’s actually super productive because you know I can sit there like 16 hours just the focusing on. Building the things you know writing the business plan and then you know my my my co-founder and I basically building the prototype and a coating the prototype before we before we have engineering team in place. So. It’s a very different environment where. Because we are so focused on just doing 1 thing while my job before is like you know I probably have a couple of meetings throughout the day. There’s people management all of other corporate related things. But when we shifted to um, a startup and we started building everything from scratch. It’s it’s just so focused.

Michelle He: And and we have to be focused because it’s very few people and so much work to do and we don’t have unlimited the funding. We don’t have unlimited the time.

Alejandro Cremades: So then so then in this in this case when it comes to um to to the to the to the co-founders not like the the founding team. You know how did the founding team come together.

Michelle He: So Gerald and I are co-founders of the team and gerald and I used to work together and I when I first came to the Uk I joined and a team in in yy where he was the team lead and we walked very closely with each other for many many years and the later on he left ey to join mckinsey and he walked there for a couple of years but we stay in touch. We. You know we meet from time to time to discuss what is the the industrial drained and then Korea path and they just one day I remember it’s the summer of of 2019 we talked to each other and we’re so excited about this open banking thing and and and and we we both believe open banking is going to be transformational to the credit and lending industry and in fact, the that we were in the very beginning we were doing small projects for for. Big banks using their own transaction data to say this is a proof of consng sa this is so powerful if you compare this one with a traditional ah traditional credit score approach. But um to convince the big banks to.

Michelle He: The companyity replaces your neck as system. It’s super difficult. It’s probably a 5 to 10 year cycle. Um, so in the end we just decided to do it by ourselves because this is really really sensible.

Alejandro Cremades: And also you guys have raised a lot of money How much money have you guys raised.

Michelle He: Ah, in total we raised about $700000000 so far. Um, and that’s a lot of money for three and a half year business.

Alejandro Cremades: No kidding I mean that’s definitely a lot of millions and why did you raise so much so much money and how has it been the journey of raising all that money because I mean recently you landed 500000000 as well.

Michelle He: Yeah, so recently we lended the £500000000 which is $600000000 um, that’s a combination of equity and the debt and so a large part of is debt. We need to. Grows the the knownbook to continue to basically grow grow the known book and have more data and the trend continuesly improve the credited technology part of is the and the equity for us to continuously build the technology. So um, the journey has. Wow, it’s it’s definitely not an easy journey in particularly in this kind of market. Um, it’s a very very tough market and to be able to raise this kind of money from some of the smartest investors you know in this space is is not easy, but it’s also give us a lot of confidence that. And know smartest investors the top investors sees the distinctive value of our technology and the business. That’s why they put a lot of money in by a lot I mean hundreds of millions.

Alejandro Cremades: And and in this case I mean you were all coming from corporate. You know you didn’t have the networks. You didn’t have you know perhaps like the background of having built a successful company in the past you know it was just like the first first time founders but also first time founders coming from corporate. So how did you guys go about. Building the network so that you could get in front of the right investors and then also how did you build that? trust so that they could give you all that money.

Michelle He: Very good question and because we are not both my co-founder and I we are not a very classic and like on choos we found we both came from a bigger corporate. We used to be consultants. Um, and we founded our business when we are almost like you know our later 30 s we found it the business so in the very beginning when we had nothing um ah the first initial founding of the the initial cup of a minute was super challenging. Um. We have raised the $700000000 so far. But I found it the most difficult way is the first five million because it was there are 2 challenges one is the chicken and egging. Um people don’t see us like a classic on chocklause. You know like you ah on on the own. Ah. Um, the mid 20 s and the come you fresh. We want to change the world. Um, and we we also faced the chicken egg situation where we are still in the we were still in the process of getting the raury license so without the license we could not lend without lending. We could not. Proof is ah ah technology using our own data. So a lot of it is about as ah, you know the story and and a lot of people don’t actually trust people with a pure big corporate but background so in the beginning it was very very challenging and the second to me.

Michelle He: A lot of like a generic Vc investors have very negative bias on the consumer len sector and in particularly you know when when there’s sort of an like abandon sheet lending ah alimenting in there. So it was very challenging what we did in the end was we ah we end up. Um. Basically convincing the people who already knew us and trust us and it’s basically family and friends in the end who give us a cup of a million and um ah later on actually soon after that we got um, £30000000 about $40000000 as a debt funding from a german bank. And and the once we had that one basically it gives us you know the what do we need for the first 1 or 2 wo years and after that we have the data the track record have a lot of information to prove that this technology really works. That’s how. Eventually convinced and bigger players like a Cd bank because we have a lot of you know information to show evidence to show to them that it really works.

Alejandro Cremades: So so so let me ask you this because you guys have raised money. You know in a really good way. You know since you found that the company and you didn’t weigh too much. You know between 1 financing cycle to the next I mean typically people would raise money. You know every 18 to twenty four months in your case, you didn’t wait that long. You know in between in between the rounds that you’ve done. You know why did you think that that that was the way to go to raise all that money you know as quick as possible instead of maybe like waiting a little bit more in between financing cycles.

Michelle He: Um, because the um I think it’s it’s it’s it’s mainly driven by the um ah the growth and the market opportunity. Um, there is a so on the technology side. Um, there is really a vacant in terms of. A kind of open banking Ai based the technology in the credited world. There is a lot of demand and on another side.. There’s also a lot of demand from the consumers who who need affordable knowns in this kind of a particular in this kind of particular world. Um, while traditional lenders because they use credit Score approach which is right on average by the wrong or every single person they make decisions like I would say a lot of decisions are random decisions just the computer says. No I don’t know how I said how to assess this person I just say no to be on the prudent. The side. As a result, a lot of people are Exclud excluded from the yeah from the ecosystem and um and but you know, ah but lending can actually help a lot of people in particular you know at all times in difficult times and you know in in ah you know in the good times help people to you know to achieve their target help the economy to grow. And we see there’s a massive opportunity in there and there’s clearly a lot of demand both on the tech technology side by the financial industry also by the consumer side.

Alejandro Cremades: And you guys have also been growing really nicely. The headcount I think in the last twelve months is like an increase of 36% according to Linkedin so how have you guys gone about adding you know more people without breaking the culture.

Michelle He: Um, very very good question so we have ah 55 people in total so far, probably not all of them are on Linkedin half of the team are full-time engineers so we are a very heavy technology focused company and and. The culture thing is is a pretty good question because in the very beginning a lot of the people in particular is the management team are people we walked we know each other for decades we walked closely with each other so it’s easier to build to the culture because we know what to expect from this person and ah. Ah, we know that I’m not going to be upset because this person said this thing because this is how he behaves but it’s it’s good intention and and as the team gets bigger. Ah we get more and more people who we didn’t know and so it’s form that kind of organic digital channel we recruit um building the company culture is something. I mean I personally like thinking about how do we actually do it better every day. Um, we are super outcome. Focused. We are laser focused the company and because I think it’s being contrasted to my experience. In in a bigger corporate I think there are a lot of inefficiency in bigger corporates like how you know how the governance works and how the decisionmaking works. Um, when we are doing a small start. We are still a startup or you call to scale scale up, but it’ still pretty small. We have.

Michelle He: Ah, limited resources timing time ah people and also financial resources compared with big banks. 1 of the things I’m trying to always encourage people is be super focused and then laser focused on things and focus on you know, prioritize what is most important, the thing. Instead of wasting their time on unnecessary things I give you an example and one of the new joiners really likes making powerpoint smitees and one of the things that he he showed me recently is ah to download the data from from our you know, ah data center and is then put in the nicely on a power point. I had very strong objections to that I said you know if anyone wants to see it. They can just go to the data center. It’s real-time why thing we need to someone a middle person to download and a format it their own upon point and share it even irregularly. That’s. That’s not how we do things you know focused on your time on the most important things instead of this kind of things which not create you much value.

Alejandro Cremades: So so so then obviously you know to get all these people to get all this money. It required vision a very compelling vision. So imagine if you were to go to sleep tonight Michelle and you wake up in a world where the vision. Of a bound is fully realized what does that world look like.

Michelle He: Ah, that a world looks like more people. Um ah and look ah the the financial industry is more inclusive. It is smarter I think that it is the the future and the lending. Ah, decisions are more responsive. That’s what I’m looking for um to to make it a more you know smarter better decisions and the more inclusive you Need. We We. We need much better technology and we need to understand the customers’ Che affordability rather than just treating them as a walking correct score rather than just to use a belonged average to apply to every single person that is the things that are which. You know, which which keeps me waking up every morning to go to work because we want to put something to revolutionize the credit of technology.

Alejandro Cremades: Now 1 thing here is that as part of the company. You guys are pushing 2 products and 1 is about you know and then the other one is render. So how do you guys? go about that in a way that it doesn’t create confusion and you guys you know, keep up with the efficiency.

Michelle He: I don’t see it’s confusing at all because these 2 business are there’s a lot of a synogy between these 2 business again if I come back to the mission of the company. Our mission is to expand access to affordable nodes. We do this via 2 things 1 is. Direction lending to people here in the yeah uk that’s what abounded us second is that ah we partner with international um ah landers by renting our technology to them to give powers and to make better decisions. And and and and take a less business risk and also provide a more or affordable loans to consumers outside the Uk as well. So it’s a lot of the synergy between these 2 business render is not going to be rendered without without a bound because theagonology webued and the zm. Ah. You know the the the technology we built over time for render is actually trained form form form abound and the likewise our mission is not going to be fully achieved if we only focus on you know the Uk a consumer lending business. It’s much it’s a much bigger it’s a much bigger ah play. If we do the render bit by building an international business by partner with lenders internationally.

Alejandro Cremades: Got it. So it’s like the way that they feed from one another that ultimately makes you know like the company magical. So I can get that now we’re talking about the future here I want to talk about the past but doing so with a lens of reflection Michelle let’s say i. Put you into a time machine and I bring you back in time I bring you back in time to you know, maybe that moment where you know you were you know they are speaking with Gerald and you guys had one of your you know conversations where you were getting together. Maybe for coffee or for or for tea like you would do there.

Michelle He: You suffer.

Alejandro Cremades: In London and and let’s say you were able to show up to show up to one of those get togethers and you were able to give those 2 individuals sitting at the table. 1 piece of advice before launching the business. What would that be and why given what you know now.

Michelle He: Um, started a bit earlier I would say you know they I always wanted to be a entrepreneur I have thinking about this for many many years but I did to take my time to actually start you know to take this a step. It. It took me you know a couple of years to actually quit a corporated job and the start start on Cho but actually it’s it’s it’s very It’s a very different The challenge is very different experience. The things I have learned in the last three and a half years it is it is tremendous I think from the personal development of perspective I feel I’m I’m just a different person the way I think about the things it’s it’s tremendous so I would I would encourage people who is listen to this. This is what I’m going to tell my daughter when she grew up as well. If she really wants to do something. Do it earlier.

Alejandro Cremades: I love that now. Michelle for the people that are listening that will love to reach out and say hi. What is the best way for them to do so.

Michelle He: Oh feel free to reach out to me on Linkedin my name is Michel he my surname is h e and I am a Ceo and the co-founder of abound and render.

Alejandro Cremades: Amazing. Well hey Michelle thank you so much for being on the deal maker show today. It has been an honor to have you with us.

Michelle He: Thank you.

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