Thanks to Anil Stocker’s leadership, MarketInvoice has helped small businesses bridge a £1.5bn gap in their balance sheets and the startup is now surging toward success
When Anil Stocker, co-founder and CEO of MarketInvoice, the invoice-finance marketplace, first hit the road to speak to small businesses about their cash-flow woes in 2010, the same story came up time and time again. "Business owners had completely lost trust in the big banks: they blamed them for their plight," he says. "They said bankers didn't really care about their customers; they only really cared about their bonuses." SMEs desperately needed new lending solutions but, having worked at Lehman Brothers shortly before its collapse, Stocker had seen first-hand what happened when the big banks took big risks. With regulators on the warpath and some bankers even facing criminal prosecution, there was no way the Big Four were going to risk getting their fingers burnt offering radical new lending products. Fortunately, Stocker was part of a new cohort of startups that was in the process of transforming Britain's financial sector. "We all looked at banks and they were doing the opposite of what they should have been," he says. "So we thought: 'let's pick things up and do them better'."
And if anyone was well-placed to become one of the forefathers of the UK's innovative fintech movement it was Stocker. Growing up in Switzerland, he was immersed in a very entrepreneurial culture. "I'm actually half Swiss and half Indian but the Indian side of the family is from Kenya," he says. "So I grew up surrounded by a really different mix of cultures." Among Indians of Kenyan heritage, Stocker explains that there is a long tradition of entrepreneurialism and building businesses, meaning that he never lacked for role models. "As a young kid, I was hearing a lot of conversations about people starting companies and the trials and tribulations they faced but also the enjoyment of what they were going through," he says. "I really looked up to that."
Without a doubt this had a marked impact on the young Stocker: by the time he moved to the UK with his family at the age of 13, he had already clearly embraced the entrepreneurial mindset. "What really gives me a kick is taking an idea and turning it into reality," he says. Not only did he set up a school newspaper – a particularly memorable series of interviews featured the Chilean members of the school's cleaning staff, who it transpired had been exiled during the Pinochet regime – but he also became the CEO of a company as part of the Young Enterprise scheme. Getting through to the regional finals with a business that sold alumni cufflinks for local schools, Stocker's company for some time held a Young Enterprise record for generating the most revenue – although there were still a few lessons for the young entrepreneurs to learn on the way. "I always joke with my team at MarketInvoice that this is where I first came across working capital and the challenges for small businesses," he says. "Customers all started sending us cheques for like £40, so we were sat on all of this cash and suddenly we were like 'hang on: we need to actually make the cufflinks.'"
After finishing his A-levels in London, Stocker went to Trinity College, Cambridge, to study economics – which is where he met his future MarketInvoice co-founders Ilya Kondrashov and Charles Delingpole. Upon graduating, he hit the milk round but at the time it was impossible to escape the gravity of the finance industry's largest players. "The City was sucking up all available talent," Stocker says. "I remember all the big investment banks coming to Cambridge and competing with each other to offer the best jobs and salaries." Clearly making an impression on the recruiters, Stocker was selected for a role at one of Lehman Brothers' private equity funds and he soon found himself learning how to identify companies to buy, work alongside financial directors and CFOs, analyse cashflow forecasts and develop business strategy. "It was a tough school: going into a big aggressive American bank was hard," he says. "But that's probably where I got my first sense of why getting finance into businesses was so crucial."
While Stocker feels like he learned a great deal from his time at Lehman Brothers, he saw it more as a means to learn about the ins and outs of enterprise than as an opportunity to make it big as a career banker. "Culturally I didn't really feel like I belonged in the big investment banks," he says. "I viewed it as a stepping stone to learn about business." As a result Stocker began to get itchy feet and, desiring to work in a smaller, more intimate investment environment, he followed the lead of a co-worker and jumped ship to Cogent Partners, a smaller investment firm. And the timing couldn't have worked out better: just two months later, Lehman Brothers announced it was filing for bankruptcy, essentially kickstarting the global financial crisis. "I saw the boom and bust of that era: 2006 was the high point for those investment banks and that kind of culture," Stocker says. "And 2008 was the end."
Making smaller investments for several years helped Stocker recognise where his passions lay and in 2010, with his boss's encouragement, he began to look at ways he might be able finally stretch his entrepreneurial muscles. "My heart really lay in helping small-business owners scale," he says. "I was really interested in using technology to look at the problems that small businesses face." And in light of the faltering global economy, there were plenty of problems that needed addressing: big corporates were shoring up their balance sheets by lengthening payment terms while banks were cutting back overdraft facilities, leaving many small businesses struggling to make up the shortfall. Fortunately, huge technological change was not only seeing swathes of financial data being made easily accessible for the first time but increasing numbers of startups Stateside were bringing the power of the crowd to consumer finance. "There were some interesting companies in that space that were using a marketplace model," Stocker says. "That gave me an idea."
By marrying a marketplaces model with the reams of data that were becoming available on companies, Stocker and his co-founders realised that they could make it easier for investors to lend small businesses money against the one asset that was in plentiful supply: their unpaid invoices. "You're not just lending them unsecured funds on a pipe dream they'll pay you back in the future," he says. "You're actually bridging future revenue coming in." While invoice financing wasn't exactly a new concept, introducing a touch of tech in this way would allow small businesses to get much faster decisions and enable them to quickly access capital from sources far less risk-averse than the big banks. "Company owners want to concentrate on their business: they don't want to spend half of their time worrying about the finance facility, maintaining it or dealing with bureaucracy," Stocker says. "We are giving time back to the business owners so they can focus on what their passion is."
Dubbed MarketInvoice, the new business wasn't the only startup to be using tech to upturn traditional finance – TransferWise, Funding Circle, Crowdcube and GoCardless were also just getting off the ground. But while it was exciting to be blazing a trail, there were drawbacks to be operating in an entirely new vertical. "We were the first pioneers, before fintech was even really a term," says Stocker. "London was a different place: there weren't very many startups and there wasn't the great ecosystem there is now." This meant that when it came to raising investment there weren't hordes of hungry fintech VCs on the hunt for the next big thing. "We got through to one angel investor who said that he would put in £60,000 and then used him to get other people interested," Stocker says. "Knocking on the doors of a lot of friends of friends, angels and people we'd worked with, we managed to raise £330,000 to get going."
Given the fact there seemed to be a paucity of lending available, the co-founders assumed that it would be relatively hard to find people to invest through MarketInvoice's platform. "But there were lots of pools of private capital out there," he says. "I remember I had one conversation, the guy sent me £100,000 an hour afterwards and said: 'can I deploy?' We were like 'we don't have enough opportunities for you yet'." Conversely, while Stocker and his fellow entrepreneurs had thought cash-strapped companies would be queueing around the block to access funding, convincing business owners to take a chance on a new solution took some work. While the British Business Bank committing to invest £40m in small businesses through its platform in 2013 certainly drew in borrowers in their droves, Stocker has never forgotten how important building confidence can be when someone's livelihood is on the line. "When you're building a financial services brand, trust is so important," he says. "And working capital and cashflow are so integral to small businesses' existence that they're not going to take risks with it."
But if Stocker has learned anything from his Young Enterprise days, it's that customers alone aren't enough: you also need a product. Fortunately, it wasn't hard for MarketInvoice to assemble a crack team of coders and banking buffs to help it build its platform. "The quality of people applying was just mind-boggling given the fact that we were just a small startup," says Stocker. "We have some really amazing minds working here." And working in one of the city's sexiest sectors doesn't hurt: not only has the industry been able to draw in talented technologists, data scientists and machine learning experts but the experienced execs and gifted graduates that were once swallowed up by traditional finance are now being drawn to fintech startups like MarketInvoice. "Rather than going into banking or consulting, they want to join a company with a clear position and a mission they believe in," Stocker says. "So London has been great for talent: all I hope is that it stays like this."
Sadly a spectre is haunting European startups: the spectre of Brexit. With Britainís departure from the EU threatening to turn off the tap of talent and trigger an exodus of big banking brands, the country's fintech ecosystem has reached an interesting point in its evolution. "We are concerned about talent: thatís probably our biggest worry,î Stocker says. "When we've talked about it with our staff, there is anecdotal feedback that people feel less welcome in Britain than before." But talent isn't the only thing that's under threat: FX fluctuations and an inability to predict the long-term economic picture is making it hard for both fintech startups and their customers to focus on their long-term goals. "Not having clarity as to what's going to happen when just creates uncertainty," says Stocker. "Our current political leaders need to crystallise very quickly what will happen and how it is likely to unfold."
Fortunately, fintech founders are fighting back: Stocker was invited to join Tech City UK's fintech delivery panel earlier this year by Eileen Burbidge, founding partner of Passion Capital and the British Treasury's special envoy for fintech, and now regularly meets with various stakeholders to represent the industry's interests. "It's important that entrepreneurs who are building companies have a structured way of feeding back on and guiding government policy," he says. "And there are big banks represented in that panel as well, so it's a good forum for us to discuss mutually impactful things that are happening in the market." However, while it could be easy for this to turn into an echo-chamber that drowns out the voices of enterprises elsewhere in the nation, Stocker is keen to stress that the last thing the FDP wants to do is assume that it speak for other regions. "If we can be helpful in some way and raise the profile of certain schemes that helps," he says. "But you've got to let entrepreneurs around the country take it on themselves to push things forward."
And Stocker is also doubling down on his ambitions. Not only has MarketInvoice now funded over £1.5bn in invoices through its system – currently it's funding nearly £80m a month – but it has begun to look at how it can support businesses later in their growth journeys. "As customers were growing bigger, they said they wanted a slightly different product to help them scale" says Stocker. "So this year we launched an invoice finance facility that's better suited to larger businesses turning over more than £1m." And while it's currently under wraps, in November the startup is due to announce a new initiative that will help widen the number of businesses it can help in the UK. Thanks to these new products, MarketInvoice already has its eye on its next milestone: breaking the £2bn-funded mark. Additionally, as MarketInvoice has helped support small businesses exporting to 93 countries around the world, Stocker isn't willing to rule out potential international expansion. "We think that once we've got the right product set and the right foundation we can definitely go to other markets," he says. "We think that some European countries could be very interesting for us."
Certainly, it seems like things have come a long way since small businesses were bemoaning their lack of options way back in 2010: while the first fintech wave has now crested, a new generation of startups is already swelling up behind it. "There's a lot more innovation coming," says Stocker. "More and more finance is being done with smartphones and there are also huge advances in things like blockchain, smart contracts and cryptocurrencies." With established fintech brands bridging the gap between the old world of the big banks and the radical future being ushered in by these scrappy startups, clearly MarketInvoice's journey has scarcely begun. "We want to be the go-to destination for businesses to raise their working capital and get that monthly oxygen of finance," says Stocker. "But excellence takes time and building a big financial services business is not an overnight thing. So there are going to be lots of challenges and lots of things to get excited about."