Philip Kelvin On Raising $100 Million To Transform How Your Business Pays For Service

Philip Kelvin has gone from studying history to investment banking to launching his own startup that seems incredibly well-timed to help others through today’s financial turmoil. The venture, Tranch, has attracted funding from top-tier investors like Y Combinator, Global Founders Capital, Soma Capital, and Clear Haven Capital Management.

In this episode, you will learn:

• How Tranch works
• Decision making
• The new banking crisis
• Debt versus equity funding

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About Philip Kelvin:

Philip is the Co-Founder and CEO at tranch. Philip started his career at Rothschild & Co. in Financial Services M&A before moving to Bain & Co. as a Consultant across financial services, consumer, tech, and private equity. Before launching Tranch in 2021, he was the CFO at Trussle, the digital mortgage platform.

Connect with Philip Kelvin:

• Crunchbase
• LinkedIn
• RocketReach
• BeamStart

Read the Full Transcription of the Interview:

Alejandro Cremades: Alrighty hello everyone and welcome to the deal maker show. So today I’m very excited about the gift that we have today. We’re gonna be talking a lot about building scaling financing all the good stuff that we like to hear and I think that you know also the fact that this foundary you know and the way that they’ve gone about going global.

Philip Kelvin: Are or.

Alejandro Cremades: You know, very very quickly. You know I think that is something that’s going to resonate too and something quite unique. So without further ado. Let’s welcome our guests today Phil it Kelvin welcome to the show. So originally born and raised in London.

Philip Kelvin: Hi Alejandro great great to be here. Thanks for having me.

Alejandro Cremades: Give a little of a walkthrough memory lane. How was life growing up.

Philip Kelvin: Um, yeah I was ah I think I was very fortunate with with with my upbringing, um, big focus of education on my family big focus on just you know as working as hard as you can and not only comparing yourself to others. Um, but Just. Try to do everything that you can to that highest possible standard.

Alejandro Cremades: Now in your case, you know you did your school there I mean you went to Cambridge as well now when it came to studies you know you studied history so out of all things. Why history.

Philip Kelvin: Great question I think one of the things that we’re quite lucky at in the Uk and also to the us as well. But potentially slightly different to Europe is that we are kind of encouraged to do things we’re interested in as opposed to purely professional items. I always got this question when I first started in embanking from my french colleagues to say you know why are you not a librarian um, you should have become a librarian you know, not not doing finance. You know I’ve done been doing finance degrees for the last six years and I think what I what I tell people is why I don’t think I had a good answer back then. But now reflecting back on doing something at your university very much the the job that I do kind of scaling um scaling tranche is very much about how do I absorb lots of information. And we’re all constantly being kind of bombarded with different information information about what we’re doing with our team with our customers with data with things happening outside in the market. All of this stuff and what a history degree you know taught me was how do you take lots of information. Um, be able to to work out what it all means and to be able to distill that and explain that to someone else and so everything else you can learn on the job.

Alejandro Cremades: And obviously history repeats. So so there you go now now in your case you know another thing that I found really interesting is that you did your masters in philosophy. So not only history repeats. But it’s also finding the why behind things. So so why philosophy come on. Okay.

Philip Kelvin: I Don’t know if there’s if I knew the answer to that I would ah I’d be Ah I’d be I’d be in a different role So I’ll hold the course on on on that one out of hand.

Alejandro Cremades: Now in your case, you know when you enter the world of working because I mean you did quiet day some time at corporate before you went at it as an entrepreneur and we’ll talk about your journey now with trancheche just a little bit but the first thing that you did is investment banking. You know one thing that is really incredible here in your in your journey is that many of the founders that I speak with that have gone out to build really meaningful companies. They’ve either been an investor. They’ve either been a banker or a consultant you’ve had in your case.

Philip Kelvin: Please.

Alejandro Cremades: You know the 3 of them really before going into into entrepreneurship. Um, you know you even moved to San Francisco we’ll talk about that in a little bit where you were advising investing and the the investment backing. Let’s start with that. That’s the first thing that you did so investment backing when it came to you know, really finding. Good companies, bad companies. Good management teams bad management teams. What were you seeing there.

Philip Kelvin: Yeah that’s a really good question I think for me I had no idea that I want to go into investment banking and that’s um, I still sometimes question it. But I think when I look back at you know my old team my old company for me. It was it was a learning experience and you know these these jobs especially in the junior level and look I was very junior It’s my first job out of out of college is is is incredibly tough and um, you know in those roles you’re analyzing information you’re learning about finances company balance sheets and you’re seeing kind of a bit of the real-word in action. Um, rather than just in the textbook. So for me going into the corporate side and maybe why we see entrepreneurs come out of the corporate side. It gives you a really good solid understanding. Um, not only how’d you work hard to a really high standard how’ do you work long hours. You know if that’s something or. How to work efficiently or inefficiently but you um, you get a really solid corporate kind of footing that enables you to apply those skills later to your own business. Even if you know you were dealing with massive billions of dollars of businesses etc or even smaller ones. Um, it’s really interesting and I think you know we had. Lot of my generation were coming out of the cycle after the financial crisis so we were still seeing some of the impact of the financial crisis and my speciality was working with financial and institutions you know across Europe um, and we saw a lot of things that we might have experienced because we were too young at the time.

Alejandro Cremades: And you were obviously as well working on doing cleanups now. So when it came to cleanups What what did that meant and and what did you see.

Philip Kelvin: Um, well I can’t go into carve all the information. But definitely I was sent to a few interesting places I I remember a board meeting in cyprus where I was sitting there with my with my boss and then um, suddenly everyone started shouting in Greek. Um, in the board meeting and to this date I still have no idea what was said which could make your job quite quite difficult if you’re operating in another country but clearly something happened at the end of it and and then we left. But so there’s a lot of a lot of really interesting things coming out of that and now you know we’re seeing with the banking system. You know the fragility that I saw back in you know, even still in 2014 where you know we’ve seen in the last month

Alejandro Cremades: Now in that case, you know what? you’re seeing in the last month you know what? what kind of things have you seen you know that maybe that you were seeing before or that you learned on how to prepare you know yourself or the storm I mean what? what were some of the things that. That you learned you know like the top 3 things about preparing yourself for one of those storms.

Philip Kelvin: Yeah I think you know again I was too young when the financial crisis happened so I don’t think there are and yeah when I was working in best banking the opposite happened interest rates dropped massively um and and then they stayed low for you over the last ten years or so so um. Actually the thing that helped us over the last month and we’ve been doing a lot of work supporting the community as well as managing our own internal risk is actually the covid crisis when I was a cfo of the last company that I was working with um and we were a consumer- faced. Facing business in the property sector we were a digital mortgage platform. Um, and when the pandemic hit in the Uk and no one could leave their leave their home suddenly we were thinking. Well what’s going to happen to the business because no one could leave their home how they’re going to buy another home and what you realize is that everyone adapts. And in those moments where you know we’d be looking at you know the Tv broadcast what what is the government saying today. What’s changing, etc and adapting to that on a daily basis over the last month with the collapse of Silicon Valley bank and obviously the other issues in the banking system. All we can do is adapt. We can plan to a certain extent but. When a bank run happens a bankru happens and you have to adapt from that and so I don’t think I learned about you don’t learn to adapt in the bad tie in the good times you learn to adapt often in the times where it’s tough.

Alejandro Cremades: Now the next the next stop for you was consulting and you did bain you know I find that when you work at 1 of those consulting firms. You really understand how to grab a big problem and how to break it down into small problems and then you tackle them each so from app.

Philip Kelvin: Or one port.

Alejandro Cremades: Approach or from a lensov approaching problems from a various strategic ah point of view. What did you get from your experience at Bain.

Philip Kelvin: Yeah I think they’re really valued working on problem solving really on where you had to and not just problem solving kind of general and saying are his problem. Let’s break it down for me the most interesting thing was learning something new very quickly. Often when you’re doing a diligence on a company for for an investment firm. You have you know, less than a month to become an expert in something that you would never encounter before and you’ve got to quickly understand the industry to market the competitive landscape. Um, and you know whether that is a good thing based on everything you can glean in a very short amount of time and I love that. Um you know and you become ah you become an expert in very weird and wacky things. You know I did a big project on whether it was a good idea to buy european train toilet company. I knew nothing about train toilets. But now I’d say I know quite a lot probably too much that I want to know. But um, that ability to get up to speed very quickly to digest information and work out. What’s important and what’s not I think is what gives you is where the skill set comes and after that is problem solving and after other software skills. You’ve got to be very quick at getting to the root of the issue.

Alejandro Cremades: So At this point you were dealing with a lot of operators and you know really seeing like the the stuff that they were dealing with and and their abs the downs the strategicness the um, you know all all ah, all of the above Above. Um. You decide to really shift gears and to go more on the operating side. So what? what trigger that.

Philip Kelvin: Um I think for me I’m I’m very honest about this I Saw a you know, very good career path in the consulting World. You know a number of years in this position a number of years here here here and you kind of climb up in the corporate world. But at that specific time and for me I. Wanted to feel the exposure of the problems being your own problems and therefore being more invested in them rather than solving other people’s problems and feeling disconnected and saying look. We’re here to help you company. A here is our findings go complete this strategy or. This is a good thing or a bad thing. It’s very different from owning that P and L yourself um and owning your p and L owning that owning that P and L yourself and um, really taking on that risk yourself and I think that’s what I was looking to do. By joining a startup at the time and one with a problem that I believed in at the time as well.

Alejandro Cremades: So in this case I mean you you moved quite the um quite up the ladder I mean you started there and then all of a sudden you know, like really doing operations and then all of a sudden you find yourself as the cfo especially during you know some really interesting time. So how was that journey like.

Philip Kelvin: Yeah I think for me, it wasn’t expected I I was doing a lot on the operations and strategy side and then there happened to be. You know there was a change around management and I was given an opportunity and something that I hadn’t factored into my career path if you said hey Philip Jonna be A. Cfo of this company when you’re 27 28 in a global pandemic I probably would have said no or that’s not the role that I’m kind of interested in. But I think what you realize is that everything you do you know from being that investment banker back in the beginning is a building block to something that will later happen and that’s very much philosophy that I that I take and. Um, I think anyone that believes they’re going to have a linear path through life is is going to be kind of surprised because things happen in unexpected ways. Um, so um, for me I wasn’t particularly sure. Um, but I said you know what? I’ll give it my best shot. Um. But we’ll see what happens.

Alejandro Cremades: So here you guys were doing detail you know mortgages you know, pretty much you were a detail mortgage broker ah and eventually one thing that you really got access to was to see how the company went through the different cycles and more importantly to go through an acquisition. The company was acquired by Better. So How was that how how would you say that that gave you visibility into the world of deal making and and and more importantly into the world of the really like seeing the full cycle of a company like going From. You know one stage to the next all the way until reaching the finish line. How was that for you.

Philip Kelvin: Yeah I think well first I would say the finish line probably wasn’t the finish line that the company and investors and originally wanted. You know it was a very difficult time for the company and we thought that there was that was a better route the better route to go. Um. Because it was incredibly difficult to fundraise as well. And so we saw a better combination for everyone with the with the bigger presence and I’m pretty open about that. um so I think it was um I think I learned more in that year than I had learned previously. Um, you know over over the career. And I think you know what you see is we’ve seen this in different times. You know you go through these periods where it’s incredibly easy to raise money and then it’s incredibly difficult and then taking it through the cycle I think the more of these experiences you have and these lived experiences the more it will help your la’s point because you either have perspective or you’ve learned something. And so I think especially at the beginning where you know you really see one part of the cycle now we’re starting now. Yeah someone at my generation is starting to see a ah full interest rate cycle you know where. Being cut to to nothing and then coming you know, not all the way back up but back up and then we’ll see what happens over the next nine months and it’s ah you know a black swan event covid was black swan event. We now have a war going on in Mainland Europe which is infecting inflation across you know the whole world and we also um, have had you know two bank.

Philip Kelvin: 2 what 2 or 3 bank failures in the last in the last month um for the first time in quite a while. So it’s all kicking back off again? Um, and but each of these experiences make you a better leader and a better person to be able to take a step back and think strategically through it.

Alejandro Cremades: Absolutely now in your case once this transaction was done. Basically you moved to San Francisco ah you were experiencing their innovation meeting people advising you know, helping others and why did you decide to do that and how was that the immediate. You know, step for you to really take action and and start your own company.

Philip Kelvin: Yeah, So for me, um, it was ah something that um I moved out with I moved out there and I I wanted to kind of learn and experience a space and kind of understand what other companies were going through and have an opportunity to do so. Um, with a friend of mine and so um, for me, it kind of gave a lot of exposure. It made me realize that I had quite a lot of experiences in my short time that could be helpful to others. Um, and it also made me realize that actually you know the imposter syndrome that I had as a Cfo. Ah, an early stage business not having ever really particularly you know applied for the role or anything like that was the same similar to the imposter syndrome that that many founders have you know, including myself as well and but that many founders have around their career and their choices around entrepreneurship and you know I realized that well actually. You know I you know i’ had gone from a ban advising companies thinking you know, maybe maybe I could work on the inside to then kind of advising founders especially around fundraising and deals and various items thinking. Well actually maybe I could be a founder myself. Um, and so. That’s why kind of led me to say well actually maybe I can take Maybe there’s an opportunity for me here to to explore doing this myself and I went through a process by where we got to the current business.

Alejandro Cremades: So what was that process like.

Philip Kelvin: Yeah, it was um for me, it was all about who I would set up the company with and as well as where our field of Expertise was and I partnered up with my former head of engineering. Um.

Philip Kelvin: At the last company and I said I needed a technical cofounder and someone that I trusted and worked with for a number of years. Um, and so for us we we went through a process whereby we looked at the problems that we had as a business and that we had an orange tree and then we said well where are our capabilities as well. Yeah, we’ve been doing financial services both of us on the technical and the non-technical side for a number of years and we wanted to be able to apply that but also with some things that we learned and we decided not to go down a consumer business route because we knew how hard consumer businesses were and we’d done one of them and we didn’t want to do a second one for them for the moment. So that’s why we weren’t back down the um, we went into the b two b route but we knew that we want to be around financial services and we went through the various pain points and then you start crafting your idea and you start testing on people and you start working out. Ah wow can I do x ys then? etc. Um, and um, you know we’ve learned an incredible amount in the last kind of 18 months.

Alejandro Cremades: And for the people that are listening to really get it. What ended up being the business model of tranche. How do you guys make money.

Philip Kelvin: Yeah, so tranche is a b to b buy now pay later provider that enables software and services businesses to get paid up from while offering their customers flexible payment terms. So we partner with everyone from major law firms to software providers to be able to offer their customers flexible payment terms. So rather than saying please send us a wire Acl check they can come via a tranche checkout for a small fee pay flexiblely over 2 to twelve months to provide working capital management to mean that these larger costs that they can invest in upfront but still spread them out and that’s where the business was. Came out from the ability to split payments into charges.

Alejandro Cremades: And also why do you guys decide to go so quickly. Globally, you know, typically people would do a few cycles of the business and then you know they go global. But in this case, you guys did U K and the us and you know you had that approach but go ahead. Why.

Philip Kelvin: So yeah, really good question Alejandro and and I think for us we um, we realized that there was a lot of opportunity in the us and that the market was a lot bigger and there was also kind of different attitudes around credit and payments. So for example in the Us. Um. 40% of b two b payments are via check versus 1 % in the Uk. So the payment system was very much behind in the us which is where we thought we could make the most impact for customers and that’s why we we also participated in the y combinator accelerator program and for us that was a great impetus. Um. You know as a us incorporated company to say look we’re just going to be a us business and we retain a european presence which is where we have our software engineering and development.

Alejandro Cremades: So how did you think too about the distribution of teams because obviously as they say you know there’s different cultures. You know in different offices. So how did you go about you know, making sure that there was some type of unified culture to certain degree.

Philip Kelvin: Yeah, was.

Philip Kelvin: Yeah I think one one of them is just around how you manage time. So for example, you know we hold most of our meetings that are kind of either in the morning in the East Coast and in the afternoon in in in Europe. Just to essentially ensure that this’s kind of decision making can happen in the common hours and then kind of the individual work can happen at the other hours so for us is all about the time zones and being communicative um having everything within kind of unified workspaces or everything’s either on notion. It’s in slack. Um. Having a structure to the cadence of meetings for different teams information flow and so that we can keep the teams unified and then by myself personally I split most my time between the 2 places so I try and act as a common link between.

Alejandro Cremades: So in this case for you guys. How much have you guys say how much have you raised? you know in terms of capital to late.

Philip Kelvin: Yeah, so you know we’ve raised a mixture of debt and equity and we raised around you know over $5,000,000 of equity and we’ve raised a credit of facility. Yeah, that enables us access to over $100,000,000 to be able support businesses kind of with their with their working capital.

Alejandro Cremades: And how is the equity versus debt work for a company like this.

Philip Kelvin: Yeah, so you know we use our equity for our operating expenses and you know funding some of the credit facility and then and the credit facility is what we use to lend out to um, our our businesses to help them pay flexly on their terms.

Alejandro Cremades: And for our financial services a business like this. How do you go about navigating the rising interest rates.

Philip Kelvin: Yeah, really good Question. So It’s something that we factored into the business for a while and it’s something that we’ve got to manage I Think on the one hand it has increased demand because Equity has become more expensive and it’s become kind of more restrictive in the sense that there’s less but around as interest rates have risen. Um, but also that you know Banks have also retreated in this time so turn to finance alternative payment providers um are really helpful because what we do is we use open banking. We use banking connections to underwrite customers which enable us to essentially be able to provide a different level of kind of credit insight. Than are um, ah than are um than say traditional banks who um, you know are are much slow in this process and typically when interest rates Rise are more restrictive on credit. Um, and also you know with a number of backs kind of going bust as Well. There’s also a kind of a greater opportunity for alternative payment providers as well.

Alejandro Cremades: And is the um, the the the regulator regulatory hurdles. You know another component to deal with as part of a business like this. So.

Philip Kelvin: Ah, less so because we’re in we’re in commercial credit. Um, So there’s a lot of folks on the consumer side and rightly so on the commercial side it it really varies state by State. So Definitely entering into the Us was was interesting because we had to navigate different state licenses and rules in various places. Which means it’s much more Complex. You’re never entering the Us you’re entering into 50 states.

Alejandro Cremades: And if you were to go to sleep tonight Philip and you wake up in a world where the vision for tranche is fully realized what does that world look like.

Philip Kelvin: Yeah, it’s really great question for me. It’s that every business has a choice to pay flexly for any invoice and that they can go through a digital experience. Not just receiving a paper or offline Pdf invoice and that they can manage that flexly in 1 place. Um, and on their terms and we’ve essentially massively speeded up kind of the dealings of commerce. There’s commerce between businesses across the us. Yeah, we think it’s a huge problem. Um, everyone ultimately wants to be paid. Um on time and everyone else wants to pay flexibly.

Alejandro Cremades: Because how big of a problem is this.

Philip Kelvin: So 60% of invoices in the us are overdue right now. Um, and you know we see the impact of you know with Silicon Valley bank first public etc signature bank. There are still people that don’t have access to bank accounts. They can’t even send payments at the moment. So the payment connections in the us and the payment rails are significantly behind what we see in Europe.

Alejandro Cremades: So as people say you know being at the right time in history is everything so it sounds like with what you guys are doing and with you know, shit hitting the fan you know, sort of saying you know it sounds like maybe that wave you know is going to go a little bit faster. The one that you guys are writing so.

Philip Kelvin: Some parts of you least.

Alejandro Cremades: So how are you thinking about that and how are you thinking about writing it in the most effective way possible.

Philip Kelvin: Yeah, definitely so for us. Yeah, um, on the the day that the svb crisis hit. We didn’t have any money in the us bank and we decided that we would essentially offer we would adapt we offered a thirty day credit line product that would enable customers to pay their short-term. Um.

Philip Kelvin: Needs and we had customers apply to us. We’ve never been busier in that same 2 hours I think I work the entire weekend while traveling between the us and the Uk and um clients that came to ours had over a billion dollars locked up an svb and they didn’t know what they would be able to do and so we were there for the community at that point and you know we. Had a lot of exposure trying to support people that weekend and that’s because we made a very quick decision to say that we would support no matter what and we would work as hard as we could to to help to help people so you you never know when as you put it? Yeah, things are going to hit the fan as such. Um, we have to do as a leader is say look I’ve seen things like this I haven’t seen this what are the risks of doing x y and z how do we know? you know how can we think through this but also made quick decisions because we’re a small and nimble team that enables us to support people. Um, and we had to react very quickly and that that wasn’t easy, but you know we’ve learned so much in that two week period as a result as well.

Alejandro Cremades: So I Guess you know dealing with with something like that you know being able to um to obviously capitalize on the on the situation too because I think that that for you guys you know was phenomenal as Well. I mean how do you?? How do you? I Guess you know like maybe you got something from the. Consulting years when it comes to really taking a look at at the picture and being able to understand what is the best course of action and doing it in a very proactive way and making sure that the team is rowing you know towards the same place at the same Time. No.

Philip Kelvin: Yeah I think there’s no such thing as a kind of best course of Action. There’s only as best course of action based on the facts that you have at that time and you know both acting you know as a founder and a cofounder. Um, to to be decisive but also making sure that you bring your team in on that journey so that they feel part of the decision-making journey as well. Even if the accountability and responsibility is with you as Well. So I think you know there’s no such thing and you know certainly we’ve we made Mistakes. Um. But all you can do is play what’s in front of you as I say play? What’s in front of you and with the best facts and with your risk management hat on as well and um, things will always happen that you don’t expect to happen.

Alejandro Cremades: So obviously during you know this time either as a founder or you know working with with the previous company with trusta mean you’ve you’ve learned a lot you know, even you know working at Bain or or at Roschild if I was to put you into a time machine. And bring you back in time you know maybe to that moment that you were you know in the middle of your studies you know history philosophy and you had the opportunity of having a chat with your younger self and you know let’s assume that Philip. You know that younger Philip was listening right because our younger selves you know, typically don’t listen as much. But.

Philip Kelvin: Is.

Alejandro Cremades: Let’s say that younger self was was listening and you were able to give yourself 1 piece of advice before launching a business. What would that be and why given what you know now.

Philip Kelvin: For launching a business I think you know the advice that I give is um, the advice that we learn at Ycombinator which is launch quickly and make sure someone wants your product before you build it? Um, so.

Philip Kelvin: There’s so much technology out to do things very quickly and to do an Mvp but there’s always a tendency in us as humans to be perfectionists make things look pretty make things feel in certain ways and I think the great thing with where technology is at right now is that you can mock something up. And you can put it in front of customers and you can get people to be very interested in something and so I think starting early launching quickly and not being afraid to fail. Ultimately, um I think in the us what I’ve learned is there’s a very different culture to failure than there is in Europe. Um. In Europe if you failed at something. Maybe you need to take a timeout and kind of think again. Um maybe go back to a normal corporate job whereas in the us I think there’s an attitude that says if you fail then what are you going to do next. How are you going to take those learnings. Um. And then the final thing is is you know when you’re young, you think I get into my first job and this is what I’m doing till I retire I was scared of that I saw these people at this bank that ed worked there for 4040 years and I said is this am I going to be in this team for 40 years it’s quite scary when you’re 21 um, and then what you’ve realized is that life’s not particularly linear and that you you know you do move between places and you learn a lot and you you build on each of those experiences and it forms the next thing that makes you a better person and a better leader.

Alejandro Cremades: Absolutely I love that so Philip 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.

Philip Kelvin: Probably just come on to Linkedin and send me message. Um I’m always on there and pretty activeive so feel free to to connect send me message and now you would grab a coffee or or jump on a suit.

Alejandro Cremades: Amazing, amazing! Well Philip. Well it has been an honor to have you on the show with us. Thank you? So so much for taking the time.

Philip Kelvin: Thank you very much alexander.

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