[00:00:28] Jay: Hi everyone. Welcome to The First Customer Podcast. My name's Jay Aigner. Today I am lucky enough to be joined by Ryan Rosett. He's the CEO and founder of Credibly, based in Detroit, I think. Ryan, how are you buddy?

[00:00:38] Ryan: Thanks, Jay. Yeah, doing great. Thanks for having me on, your podcast.

[00:00:42] Jay: Are you in Detroit?

[00:00:43] Ryan: I am outside of Detroit, but you know, within, you know, 15 minute drive, so close enough.

[00:00:48] Jay: Okay. What's the vibe in Detroit now? is it, you know, I, it obviously was like, you know, kind of, a little sketchy there for a while, but I've heard it's getting nicer or better, or is that kind of how people feel around there?

[00:01:00] Ryan: it, yes, I would agree with that. It's, it had a really good momentum going into COVID and then, you know, sort of when COVID hit the office market sort of shut down, it affected the retail. But all in all, I'd say Detroit has, really sort of come back in a big way. you know, thanks in, you know, to a big part, you know, from the founder of, Rocket Mortgage, he's invested heavily, in downtown Detroit.

And, so it's been, And it's made a huge difference.

[00:01:28] Jay: Awesome. alright, so where did you grow up? Did you grow up in Detroit and did it have an impact on you being an entrepreneur?

[00:01:34] Ryan: it did. I mean, my, I grew up in a family that was, My dad, was an entrepreneur. he owned a number of dry cleaners. so I just always, you know, that was part of my life growing up. Just the ebbs and flows of small businesses and going to work for him and working alongside him, you know, for a period of time.

But yeah, it was, something that I, it was sort of ingrained in me.

[00:01:56] Jay: What do you think the biggest thing that you do now? you can kind of trace back to some of the stuff he was doing.

[00:02:03] Ryan: That's a good question. I mean, I would just say, you know, he was good at, Managing a lot of different aspects of the business. I think what I did differently maybe than he did was he would do it all. And I like think, I realized sort of early in my career that I can't be good at everything, even I could be okay at a lot of things, but having specialists is, you know, sort of changed.

My way of doing business or the way I look at business and, you know, having people that are really good at what they do is so much better than, you know, me trying to muddle through something, even though it took a while for me to get there from a delegation standpoint.

[00:02:45] Jay: how do you identify those things today? Like if something you're doing and you're like mid thing and you're like, oh shit, I should probably not be doing this. Like what, how do you kind of identify those things that you should hand off to somebody else even today?

[00:02:59] Ryan: well, if I, you know, if I feel like I'm doing something and I, don't feel like it's going as well, as it should or as well as, like I would expect, even if it's me doing it, I like. You know, some people don't like having smarter people around them. I prefer having really smart people sort of around me and, making decisions whether they be right or wrong, but just having a conviction.

Thinking it through, articulating sort of a strategy as it relates to something and then doing it. and you know, one thing I've also learned over the years is just like having mistakes is important. Making mistakes is important. Having small failures, you know, is the best learning experience you could possibly go through just because you then realize quickly what it was that you did wrong and you hopefully don't repeat that.

[00:03:52] Jay: Love that. What's your background in, before you ran the company?

[00:03:56] Ryan: So, I have a business partner. both of us are lawyers by education. I started, I never practiced law. My partner did practice law for a period of time. I was in, I started a couple businesses. One, I started when I was in law school. It was a, coffee shop. I went to school in Ann Arbor.

I went to University of Michigan. and there was like 18 coffee shops. And then I went to law school in Detroit. And when I, and I lived in a town called Birmingham, Michigan, which is just outside of Detroit. and there were no coffee shops. And so I, you know, in my infinite wisdom said, well, I'm gonna build one.

You know, and this is like. I don't wanna say predate Starbucks, but it, you know, Starbucks had like a, I think 150 stores at the time. And it was largely in Seattle. and so it was like a different time, for the coffee house business, and it was really successful. But I learned I didn't love retail.

So like, you know, in my life, you learn things. And I was working a lot and going to law school and and then I sold my interest in that business. And, then I did another business that wasn't successful. another great learning experience, but it was, it was a beer of the month club.

It was like when microbrew started getting, you know, sort of hot and it was realizing quickly that it turned into a Christmas gift mostly. and that's what it was. It was a completely seasonal business, so you had to plan your cashflow around that. and then I was in real estate development for 15 years and then I was in short-term bridge lending backed by commercial real estate.

And then I've been in this business for 15 years, so I just summed up my whole life 

[00:05:19] Jay: I mean, that was quick. That was good. hats off, to the quickness. how much is a coffee shop? Just, I mean, you can kind of extrapolate based on inflation and other things, but just in general, how much does a coffee shop bring in per year? 

Just like a regular coffee shop you see downtown somewhere?

[00:05:35] Ryan: yeah, so like, keep in mind, I'm going back to 1993.

[00:05:40] Jay: Sure, sure. Yeah,

[00:05:41] Ryan: So, it's not adjusted, you know, we were doing, on an average day we were bringing in, you know, 2000 to $2,500 in revenue, and then like on the weekends we would do up to 4,000. So, you know, just as like just over probably, you know, a million, two million, three revenue type business.

you know, total revenue.

[00:06:01] Jay: Yeah, because I always see the, all the Brick and Mortars I see today and just like, as much as I love, business stuff so much, and I always just wonder like. How are people, how are they staying afloat with like, all the stuff you have to pay for and rent and people and machines and technology and blah, blah, blah, blah.

Even there a coffee shop these days, I would have to imagine, I mean, your operating expenses have to be pretty high, right? I mean, there's a lot of things to just, even to be in a building somewhere is like a lot and rent's expensive

and insurance And everything else. 

[00:06:31] Ryan: you got it. And so in like, in that type of business, look, I mean in a lot of businesses, locations, everything, especially retail, you know, certain locations, you know, if you're hotel who cares where you're located, but like. on, a retail basis, I would just say, you know, you had to have like the prime location.

We were right next to a movie theater in this downtown location, and we needed some parking. And you know, you have to think about all this AM traffic versus PM traffic. The way that people like driving patterns work just because you want to be on the right side of the road. As you know, if people are going at, are commuting to work and they're getting a cup of coffee, I mean, there's a whole bunch of things.

And then do you think about the store design and, you know, you want them to walk past the. Pastry case, so hopefully you can upsell 'em on some, you know, like all these like little things you have to sort of think through, as you're designing it. But you are correct. The expenses associated with running a small business is expensive.

and, you know, understanding that and understanding the, whether it be seasonality or the ebbs and flows of the cash flow is vital to a small business. And, you know, that's what. You know, and I'm sure we'll get there, but that's what we exactly do today at Credibly is, you know, kind of provide this working capital solution for small businesses.

And it's not just the unexpected, it's like when they expect it, you know, they could be in this business for five, 10 years and say, Hey, we're going into a slower season. I need to put a little bit of cash in my bank account so that I can weather, you know, the colder months of the year.

[00:07:58] Jay: That makes a lot of sense. And that's a perfect segue into Credibly, why did you start it? When did you start? Just kinda gimme the genesis of where it came from.

[00:08:07] Ryan: Yep. So, I mentioned I was in,for about three years I was doing, Bridge loans backed by commercial real estate that were income producing. And we were lending, and this is, going back to the great recession. so, you know, call it 2007 to 2010, we were lending at a, like a loan to value.

So if the buildings were. 2 million, we would lend up to a million dollars and what we were doing is doing discounted payoffs to banks. So banks were like sort of purging their assets because they were over leveraged. The borrower or the developer would come to us, seek money, and we would provide sort of a bridge capital loan secured by their real estate.

I then came across this business, which was, at the time it was a merchant cash advance business. And it was interesting to me because I, one, I had a deep understanding of small businesses. Two, we were coming out of this. you know, whether it was a double dip recession or, the great recession, we were like sort of an unknown territory, and banks notoriously do not lend during uncertainty.

So, you know, they are very patient and they wanna make sure that they get paid back. so there was a real credit crunch for small businesses and so we opened it up. My partner and I, my partner has a. wholesale mortgage background, experience. So he brought like more underwriting and I was bringing more on the, origination side, revenue creation and technology.

And we just started doing it. And like when we did it, we were doing everything we were doing. We were originating, we were underwriting, we were doing portfolio management. If a deal went into collections, we would be the collectors. So like, you know, there wasn't a part of the business that we didn't touch when we started.

And then as we started to grow, we brought on more, like I discussed before, like specialists that were really good at what they did and brought an expertise that we didn't bring to the business, which, you know, really sort of made us more professional.

[00:10:04] Jay: I mean, you could argue that, you know, I'm not gonna say you guys are trying to outsmart the banks, but there was like a level of risk that you guys are willing to take that they weren't. Is that kind of why the business took off when it did?

[00:10:18] Ryan: and it's still the same. So it's like all we're doing is picking off a very small segment of the bank's business. We don't do treasury, we don't do bank accounts. all we're doing is small business lending. and we picked something that bluntly like we don't think banks are very good at.

and I'll tell you why, is because like our average loan size is around $65,000. Banks, if you think about a bank lending, going through the entire process to originate a $65,000 loan, which could take two, three months, there's just no money in it Banks just don't have the ability to. Underwrite the file and make it a profitable relationship. So, you know, where we excel is that when somebody makes an application to us, we typically can give an approval within two hours, and fund same day.

So, and then you compare that experience to a bank where you're supplying all types of documentation. It could take 60 to 90 days and you may get rejected. So after that period of time, so like, yes, we get financed through banks, okay. And we do asset-backed securitizations. So the cost of capital is going to be, we are gonna be more expensive than a bank.

that being said, the certainty that comes along with our approval is there. So if somebody has an opportunity and they can say, Hey, Credibly, you know, I need a hundred thousand dollars and I can buy something at a discount, where I can make good profit, or whatever the case may be. That's a great, use of our capital.

so it's in, today's world where banks are, you know, saying no or are being a little bit more risk adverse, we take risks. that's our business and the way we price a certain deal is if you're a doctor, you've been in business for 20 years, you're gonna get much better pricing than if you're, you know, somebody who, opened an ice cream store six months ago.

It's not to say that we won't give you an offer if you open an ice cream six months ago. It's that somebody who has established business, their cash flow is pretty steady. And again, we're really, we look at the credit profile of the customer, but it's not a majority of the, you know, it's probably 30 40% of what we do.

we're really just looking at cash flow, so we look at the cash flow, the bank statements, and make a determination as to like what a small business can afford, and we wanna put the business in a good position where they can pay us back, and still operate their business with like ample cash flow.

[00:12:52] Jay: I mean, there's just a giant risk when you guys started that like, people don't pay you back and you guys are screwed. Right. is that, I mean, that's the biggest risk in a business like that for you guys, right?

[00:13:02] Ryan: Absolutely. So, I mean, and you know, so we are unsecured. I mean, there is a personal guarantee on our loan documents and you know, if we do offer two products. We offer merchant cash advance and a loan product. majority of what we do are loans, but The, merchant cash advance has a springing personal guarantee.

So like, if somebody does fraud on us, there is a personal guarantee and their signature matters. but if you borrow from us and you legitimately go out of business, that's on us. You know, that's like, it's not something we pursue. So that's our underwrite.

[00:13:34] Jay: how are you guys able to do what you can do that the banks can't? Like is it is they're just too big and they have too much overhead and it's just not worth it for them to do those small loans. Why are, why can you guys do it and they can't?

[00:13:47] Ryan: that's a good question. you know, it's not that they can't, they can, they choose not to for some reason. So we're using, you know, a ton of alternative data, machine learning. we're using generative AI in our decision making process. There's a number of like, sort of soft. data information that we're able to extract.

you know, even like the age of the email and like when something was created on a website and Secretary of State polls and, you know, and this is all like instant. This isn't something that we're having somebody pull in. It's all through automation. It all gives us the information in real time and we can then.

We create our own proprietary score of the customer, which has a probability of default. And then we, you know, make an offer to the customer that is, you know, risk adjusted. So that's really how we operate. There's no, we take risks. We're in the business of taking risks and, but we do see thousands of applications on a daily basis, and so we have to kind of sort through 'em and make a determination as to, you know, which ones we're making offers on and all within this like, sort of service level of, you know, what we shoot for is like a two hour kind of turn 

[00:14:57] Jay: So who was your first customer and how did you get 'em?

[00:15:02] Ryan: That's fun. That's a good question. There was a restaurant not far from us and it was called Dominic's. And it's an Italian restaurant, my partner and I, we, you know, reviewed the application. We were, you know, it's not like we had. Well, we had plenty of time because it was our first, deal and we were being very prudent in terms of, how we were gonna deploy this $15,000 loan.

Okay. But, you know, to us it was still like important. and we,went and visited him and the guy at the end of like, sitting with him for an hour. Said, listen, this is absurd. I'm asking for $15,000, like you guys are spending an hour with me. And so, and we proceeded, you know, we funded him, but that was like the first one.

And we subsequently, we funded him multiple times since then. But it was, you know, like everything, it's a learning curve. And we learned a lot during that process. But that was our first customer. 

[00:15:54] Jay: I think there has to be an overwhelming majority of Italian restaurants named Dominic's. Just across the United States, I feel like there's a Dominic's

everywhere. There's always a 

Dominic's. There's always least a couple. And even in your little town, you'll

find Dominic's. that's good. I like that.

alright, well, who's your customer today, as opposed to back then and how's that kind of changed over time?

[00:16:16] Ryan: So, you know, I would say we started, it, we started doing mostly what was called split processing. So we would look at their credit card receipts and then we would take a portion of their credit card receivables and it would pay us back automatically. now we rarely do that. it's all, we provide the capital and then we do.

Like a daily or weekly a CH is how we get paid. and our customer profile, we do, I wanna say there's over 300 different SIC codes that we lend into. So basically like any type of business, we probably have funded the ones we don't fund. It's very few, but. Like adult entertainment, gambling, you know, and it's more dictated by our banks than us.

So cannabis, you know, just the things that are I would say headline risk issues,we stay clear of, but like, you know, those three industries, and there might be a couple more. and the interesting thing about our business also is that it our business where, like, for example, trucking.

Okay. Like, so, you know, we lend to logistics. but In certain times it does very well, and it's a very cyclical business, and other times it doesn't do well. So we have the, ability to where we're always checking our, where our portfolio updates are daily. We're constantly tweaking, like what we feel is the right amount of risk based on industry modifying that.

so it's an evolving. Process. And if there's a natural disaster, we may require a site inspection, which we do. It's a very simple process. It's an online, you know, we send a link to the person's cell phone, it launches their cell phone or their, camera. They take a few pictures. Just making sure that there's no damages to the location, you know, before we find it.

So, like we have a lot of protections built in just because we wanna ensure that if we're funding a business. In California where there's wildfires, we wanna make sure that their business isn't burned down. And, you know, so those are things that we do and we can implement in, minutes notice, and make changes within our system. 

[00:18:12] Jay: What's the biggest loan you guys have ever given out?

[00:18:17] Ryan: 600,000. That's kind of where we cap out. So, yeah, there's, I think that, you know, anything over 600,000 largely probably should go to a bank, you know, just because it becomes expensive and, you know, it's not to say that we don't do 'em, but we do 'em.

But, you know, and I would say like our sweet spot is. Sorta anywhere up to 400,000, you know, is really fast and, you know, anything, you know, four to 600,000, you know, obviously is, it's meaningful money to anyone that we, you know, it requires a fair amount of ability. 

[00:18:50] Jay: If you serve so many different types of businesses. How do you, know, especially the last five to 10 years, it's just been like niche down, niche down, niche down. I actually hate the word niche down or term niche down at this point, but how do you stay focused with your sales and marketing if you're so spread out, you know, as far as actual vertical that you're. Customers are coming from, and I get the most, they're just under this small business umbrella. So you can kind of target 'em under that. But like, how are, you paying any more attention to other types? And you kind of alluded to it a little bit there with the trucking and logistics thing to be, maybe it's cyclical, maybe it's seasonal, whatever. Are you doing anything to kind of focus in on any one group or subset of that big, giant, small business, you know, pie that's out there? how are you guys focusing on any individuals or individual market?

[00:19:40] Ryan: Yeah. So, like any, you know, so we have a fairly robust marketing team and we're doing a ton of digital marketing, so you know, certain keywords, you know, that, are. larger customers for us, you know, like for example, eating establishments. You know, that's a, I don't wanna say it's like, you know, probably 8% of our portfolio is like some form of a restaurant or eating establishment.

so like we would market to that customer recognizing that's a customer that's generally gonna be underbanked and will, and is somebody that, that we've done quite well with and, you know, and is accustomed to using alternative financing. sources to fund their working capital. So that's, an example.

So like our marketing team will channel certain industries that in certain times, so, you know, like tax season for example, like we may, you know, where there's taxes due and we know certain businesses that may have like. You know, certain taxes that are due. I mean all businesses have taxes do generally, but like, you know, where there's opportunity and again, the way we look at it is like, you know, their cash flow is like an asset that, they can leverage.

and that's what we're providing leverage on is their cash flow and how they use their capital is up to them. Like we're not tracking per se, how they use it. how would we prefer they use it? We prefer that they used it to enhance their business, but if they were paying a tax bill, you know, I think there's an argument to me be made that's a pretty good use of capital because like who would you rather owe money to?

Credibly or the government, you know, I would say Credibly, you know, so, I mean, that's just an example. But, you know, things come up and,if there's somebody who has a, you know, we've seen bank statements and, you're seeing, a thousand drafting, kind of polls in their bank statement.

It gets, you know, that, automated, its an automated decline. So you know that they're like, they have a gambling sort of issue that they're running through their business and like, so there's certain things like in our algorithm that we'll pull and we're just not interested in, lending money to a customer like that.

so I mean, and when I say like, I just raised two things, but you know, there's hundreds of nuances that we have built 

[00:21:49] Jay: Okay. Love that. All right, I have one final question for you. This is not about Credibly, it's not about business, it's not about, you know, anything entrepreneurship related. I'm curious, just Ryan, being Ryan, if you could do anything on earth and you knew you wouldn't fail, what would it be?

[00:22:08] Ryan: if I could do anything on Earth and I knew I wouldn't fail, what would I be? 

[00:22:12] Jay: What would you do? 

[00:22:13] Ryan: Wow.

[00:22:14] Jay: I know when people say it back to me, it's a great stall tactic because it's my favorite question to ask that nobody has an answer.

[00:22:20] Ryan: It's a great question. Here's so here. Okay, so here's what I'd say and I've,tried it and I'm not good at it, but I would love to be, I love the time to do it. I would love to surf. 

[00:22:31] Jay: There you go. 

[00:22:31] Ryan: the water. I would, so I can't say I am good at it, because I've only done it once and I kind of sucked.

But if I had an opportunity to like redo, I think surfing would be like 

[00:22:42] Jay: There you go. Look, and then in this example, you couldn't fail. You would be Kelly Slater or whoever the hell is the popular surfer. I don't

know any other surfers besides,

[00:22:50] Ryan: In my own 

[00:22:50] Jay: know any other surfers besides him, but, awesome. Well,

Ryan, you're great. I love. Kind of the genesis. I think there was some stuff people can pull out there if people wanna reach out to you about anything they heard directly. how do they do that?

[00:23:04] Ryan: So, I mean, obviously there's, you know, you can find us at credibly.com. you know, if anyone is interested in, having a question with me, I'm generally available. My email's ryan@credibly.com.

[00:23:15] Jay: All right, man, well, you were awesome. you know, I'll give you a Go Lions. Is that what you guys say over there? What do you say? Is that like your chant. We say Go birds. It's

[00:23:21] Ryan: Go lions. there's a, yeah, 

[00:23:23] Jay: Is ROAR. I won't ask you to do the ROAR today, but, you know, I wish you

guys luck until you face the Eagles.

And, other than that, man, have a

great rest of your day. Have a good week, and we'll talk to you soon. All right.

[00:23:34] Ryan: Okay. 

[00:23:34] Jay: Thanks Ryan. See you, brother.