Neil Patel

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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.

During our interview on the Dealmakers Podcast, Sarkar talked about finding the idea for a good business, the triangle needed for a great startup idea, and the truth about leadership. Plus, working your way through funding rounds with progressing investor expectations, and raising debt versus equity.

Listen to all of the details from this episode here.

Here is the content that we will cover in this post. Let’s get started.

The Trifecta Of A Great Startup Idea

Asesh Sarkar was born and grew up in the UK. He says that he always wanted to become an entrepreneur, but just didn’t feel he had the perfect idea for a while.

So, he began applying himself to his studies in the meantime. It just made sense to build his knowledge and skills in preparation of doing his own business.

That took him through his MBA, and then into the world of consulting.

Working on consulting gave him the insight of being able to work on a variety of projects in different industries at a high level.

Consulting Vs. Entrepreneurship

Many highly successful entrepreneurs have come out of consulting backgrounds. However, Asesh is the first guest we’ve had on the show out of hundreds to bring a new perspective on the differences between consulting and being a startup entrepreneur.

In consulting he points out there you are typically focused on very big companies. Big organizations with lots of politics and corporate games. You are about as far detached from the real customers and front lines as you can get.

You spend a whole lot more time navigating these politics as opposed to doing the business of the business.

Launching a new startup is the opposite. You should be starting small, with the customer on the front line. You begin with understanding users before scaling and building the organization.

He was glad when he made the change. Still, Asesh had done well in consulting. He had finally made it to becoming a partner in a consulting firm. It was a good marker to achieve by most professional career standards.

Yet, it was also a wake up call. He realized that you really have to be all in to get value out of a partnership like this. To create that value you would have to keep mounting your sunk costs into year after year. While the missed opportunity cost of doing your own thing gets more and more expensive too.

This was also just when the two other parts of the triangle of a great startup idea fell into place for him.

He says it all comes together with:

  1. The right moment
  2. The funding
  3. The right idea

Good Business

Two things came together to form the apex of the idea Asesh finally struck on. It presented the combination of what he calls both analytical reasoning, and emotional reasoning.

Over the previous years, he says he had been juggling and developing the concept of business for a social purpose.

As many have realized, often well-intentioned non-profits just don’t scale, and certainly aren’t efficient.

Yet, businesses that have scaled into big and effective organizations have continuously proven that they are not good. They can have all the great talent and are able to accomplish really big things, but they aren’t necessarily pushing good things out into the world or being kind or healthy for their customers.

He had long craved to do something which could meld the best of both together.

Salary Finance

Asesh ended up having two children. They had a nanny. He became shocked at how hard it was for their child’s nanny to get access to good financing.

He had been working in the city, had a good job, and could get loans for just 5%. The nanny would work hard. Though she would have to rely on high-cost personal loans and credit cards to finance anything. A lot of her income would end up just disappearing on paying these loans back and the high interest.

This bothered him. Basically, he found a lot of inequality. If you were high paid things were cheap for you. If you weren’t, but worked equally as hard, perhaps doing an even more important job, then you were really penalized for that.

Of course, there is some logic to this. Especially in regards to risk-based pricing. Yet, that logic had become normalized by banks.

It’s just like a rich person and a poor person walking into a coffee shop together, and the cashier charging the rich person $1 for the same cup of coffee they charge the poor person $10 for.

If you saw that type of blatant discrimination out there in the real world you would probably be outraged. Yet, this is exactly what is happening out there every day in banking and finance. From regular deposit banking to credit cards, personal loans, mortgage loans, auto loans, financing basics like washers and dryers or refrigerators, and more. It has just become normal.

His first step was to loan his nanny the money to pay off all of her debts. He took a small amount out of each of her paychecks to repay the loan, with no interest. It was really a no-brainer because he knew he was going to recoup the money.

He had made a real tangible difference for her, with the security of her paycheck, and without it really costing him anything.

That got him thinking. What if employee loans like this could be done at scale? Employers are already providing other benefits on a similar thesis.
This became his venture Salary Finance. They’ve already raised a substantial amount of capital.

They already have around 3.5M customers across 600 large companies. That includes 20% of the Fortune 100, one out of four hospital trusts, and eight of the 10 biggest supermarkets. Or about two out of every ten working people in the UK. They are already making progress in the US and expect to expand even further.

Read the full transcript for more on:

  • 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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