Understanding tech: Gregor Mowat, Co-CEO and co-founder, LOQBOX
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We spoke with Gregor Mowat, Co-CEO and co-founder of LOQBOX, about building financial resilience, expanding into new markets as a disruptor and the move from incumbent to start-up…
At a time when many are tightening their belts, Tom Eyre and Gregor Mowat’s credit builder company LOQBOX’s services are more needed than ever. A former partner with KPMG, Gregor’s first-hand view of how financial exclusion can lock individuals into a difficult cycle of credit led him to develop LOQBOX. Tom and Gregor’s solutions are being taken to the US to disrupt the industry on a global scale.
We spoke to Gregor about how financial resilience should be built on both a personal and professional level, and his experience of funding rounds and international expansion…
Tell us about your background, and how you started LOQBOX.
I was a long-term partner with KPMG overseas, and after a career of moving around the world, I decided to move back to the UK and try my hand at angel investing. When researching how to find business pipelines for investment, I met Tom Eyre, my co-founder at LOQBOX. At that point, he’d created his first financial inclusion business called Credit Improver. I really liked the look of Credit Improver - it met my investment objectives: any investment had to be in an industry I understood, it had to be scalable, and it had to be socially positive. Credit Improver was trying to help people who were locked out of the financial system, and I liked that.
I invested into the business as a minority at first, but working together with Tom, we realised that we were both working full-time on the project. Both our roles changed after we realised that the business as it stood didn’t address all the underlying drivers of financial exclusion; we then came up with a solution, which was LOQBOX. We went into it together as partners.
That was how I came to be a founder in this industry, and I have thoroughly enjoyed a really interesting, stimulating friendship with Tom since we went into this venture together. It's been a fascinating ride.
Industry: Financial Services
Ownership: Privately Held
Size: 11-50 employees
In a nutshell, what is financial exclusion and why does it occur?
Financial exclusion, as far as we understand it, ranges from the most obvious and extreme case – not being able to open a bank account - right the way through to not having a mature or well-curated digital financial profile, meaning you are locked out of getting credit, having access to telephones, or accessing products and services. It can also mean being excluded from the same opportunities as others who have the same profile as you.
To understand LOQBOX, you have to understand the three drivers behind financial exclusion and the mission of LOQBOX to end this phenomenon globally. The first driver is that people don't have the opportunity to participate. For example, in a classic case, you don't have any credit history, but you have to have a credit history to get credit to build a history. It’s a Catch-22, and you’re denied the opportunity to participate.
The second driver is a lack of financial resilience, or effectively savings. Back in 2017, I believe the FCA announced a statistic that 40% of UK adults struggled to put their hands on £100 in an emergency. Another statistic put about 25% of UK adults as being unable to raise £500 full stop. These sorts of stats tell us that lots of people do not have financial resilience in the UK. If you don't have financial resilience, what do you do when your washing machine breaks down? You’re caught in the payday loan spiral. That's very difficult to come out of. Building up a little bit of resilience is a very sensible thing to do in terms of financial planning and general peace of mind.
The third driver is a lack of financial capability. We don't teach finance in the UK. We don't tell people how the financial system works. It creates a constant feedback loop where nobody talks about money, it's not dealt with in school, and you are let loose on the world with no financial acumen. That lack of financial capability can result in financial mistakes that can end up with you being financially excluded.
We created LOQBOX to address this issue. With LOQBOX, you create a credit payment history, which offers you an opportunity to participate; you save money, which builds your financial resilience; and we give you a basic course on how to master your money, which tackles financial capability.
What challenges did you face coming from a traditional business to becoming a start-up founder?
Moving from being part of a huge entrenched incumbent into the world of start-ups, there were a huge amount of adjustments to make. I think I was lucky that my mindset was such that I was ready for it. I had taken a decision to leave a really well paid role in Russia and gave myself almost 10 months to think about how I wanted to take this step.
I have at various points during my career invested in and tried to start a number of businesses. All of them were gloriously unsuccessful, but they taught me that there's a lot of rolling your sleeves up and pivoting.
"The commercial aspects are more important than making sure in the early stages that you've got every single “I” dotted and “T” crossed."
The main challenge was the stretch on the capacities of the two founders. When we started there were three of us: Tom, myself, and Eugene O'Neil, our outsourced developer. We bootstrapped LOQBOX modifying the existifng Credit Improver platform, and being very economical.
What gave you the confidence to pursue this new idea?
We had support from a few parties in the early stage. We managed to cut an excellent digital marketing agreement with a digital marketing business who agreed to work for free up front with a revenue share at the backend, so they built our website for us and that was a very nice add on.
We also had support from BDO, who gave us VAT advice that saved us a huge amount of money. It would have broken the business model if we hadn't had sound advice that we were going to be fine from a a VAT standpoint. The audit team gave us informal accounting advice over about a one and a half year period, which meant that when we had the money, we then used them for our audit. Having that informal support was very helpful, and they’ve continued to help us with introductions, finding partners and more.
What was it like going through the fundraising experience?
I hated it! It's a massive distraction from what you're doing, particularly when you are very tightly resourced anyway. It takes the management team out of the business for large chunks of time. It's a massive mental distraction - your head is not fully on the strategic stuff that you're trying to do.
That being said, we didn't find it at all difficult to raise the funds. We completed our fundraising on the first of April right at the height of COVID, and we secured it with a single investor who has been a hugely positive influence on the business since he joined our board. We've got a business model that's very unfashionable in fintech, which is that we actually make money!
If you then find the right sort of investor with the right sort of mindset who's interested in the market segment you’re in, your business becomes quite compelling and the process is easier.
How has the company weathered the current global situation?
I wouldn't say we have been unaffected by COVID-19; there was an initial drop in interest – as for any company - but as people got their heads around what was going on, we have seen supercharged growth. There’s no greater need than now for financial security. The UK government has furloughed a lot of people, and many others are going through hardship.
With our product, you have to pay a fixed sum every month. That's how you build your credit history. It's not as flexible as we'd like it to be, but we’re planning to improve that.
At the minute, the profile of people who come to us are employed, even if they’re furloughed, so they have some spare cash to invest in their financial future. They’re looking for insurance against issues arising in future, and they might actually have the time right now to look at them. We saw a big uptick in our numbers as a result, and we have no reason to expect that not to continue.
What has your experience of expanding overseas been like?
We came out of a pilot recently in the US - we've had a small friends and family pilot running since the end of December 2019, and that's all gone pretty smoothly so we're opening up the door to the public.
"On 17 September, we rolled out to 40 US states which gives us coverage of around 80% of the US population."
It's enormously exciting setting up a business in the States, because of the size of the marketplace and the fact that the demographic there needs this even more so than in the UK. In the UK when Tom created Credit Improver, credit building was just not a thing at all - ClearScore didn't exist back then. The concept of curating your credit history and your credit score was not widely known beyond people who were paying Experian £15 a month to access their credit score. We've been creating a market here for our own product and that's very hard work.
In America, credit building's been a thing for 20-30 years. There's a big credit building industry, but it's expensive. LOQBOX is very much looking forward to going to the US and offering a free credit builder. By going into pilot, we were the first company in the US to do so, and already competition is springing up! For us, it's an exciting market from a disruption standpoint.
Also, in the US, it's properly diverse. People are headquartered in Philadelphia, Boston, Chicago, New York, California, in LA or San Fran, Orange County… the possibilities are huge. Luckily with everything now being remote, we can communicate without having to set foot on a plane. It’s logistically challenging, and there are regulatory challenges, but thanks to some of the introductions and relationships we’ve built, we've had tremendous progress.
Do you have any advice for founders going through a similar journey?
Don't ever think about starting a direct to consumer fintech business unless you want to age dramatically! That's the flippant advice.
On a serious note, prepare to be resilient. The regulatory framework in most countries, not just the UK, is set up to protect large incumbents which makes starting a business exceptionally hard. This is particularly true for a business that challenges some of the existing accepted norms.
Be very prepared to take advice from as many people as you can, but know your own mind because you'll get lots of different advice.
One important thing I have learnt: eke out your resources to the absolute maximum, but then when you do have cash, remember those who helped you, be fair and make sure that people do actually get rewarded for having stuck with you.
Be prepared, but embrace the experience, because it's enormously rewarding to create something that's unique in the world and to change the way that people think about something as fundamental as money. Embrace it, enjoy it and take a bit of time to celebrate the successes because around the corner from every success, there’s probably a bit of a gut punch.
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