Face the fear: Simon Lee, Co-Founder & CEO at PromisePay
Simon Lee is CEO and Co-Founder at PromisePay. PromisePay is a fintech startup that builds a payment platform for marketplaces. They’re heavily focused on building trust into the payment flow. If you’re buying a car off Carsales, the PromisePay platform is what you’ll use to pay the seller via escrow.
The company was founded in 2013 and has subsequently grown to 40 people – recently raising $14 million dollars from investors including Westpac and the Carsales Network.
Some of the highlights of this interview include:
Simon talking about how his last business failed, and what he learnt from the experience: “I feared failure and then I wasn’t actually operating in an effective way” (video from 2:17)
Simon talks about the importance of persistence, and the number of people who said PromisePay could never work (video from 7:38)
An interesting discussion about the parallels between product design and organisational design (video from 14:05)
PromisePay’s strategy out to 2020 and how they’re leveraging strategic investors to launch internationally (video from 17:25)
What Simon wishes he knew on day one: The importance of confronting problems early and belief (video from 20:00)
Steve Pell: Hi, I’m Steve Pell from Management Disrupted. I’m here with Simon Lee from PromisePay. Simon, could you start by telling us a little bit about who you are and what you’re doing here?
Simon Lee: Sure, I’m cofounder of PromisePay. We started out about two and a half years ago. Originally we just wanted to fix payments for freelancers and contractors because we saw there was a trust issue there. I’d run a consultancy before that, I was owed a million dollars at any one time and really wanted to improve that.
We quickly realised that there was this huge opportunity in marketplaces because there were trust issues in payments on these platforms. Around that time, we got backed by Jim McKelvey from Square Payments and we pivoted into this new platform for payments, which quickly turned into all these other opportunities for us.
We’re signing many new platforms now. A platform could be anything such as Xero or Reckon accounting software. Now we’re actually signing banks, to be the backend for services for banks as well. Because what we’ve built is it’s not just about transactions, it’s actually about building all this understanding of risk into transaction flow, and banks need this technology.
It’s very exciting for us. We’ve just raised $14 million dollars from some exciting backers such as the Carsales Network and Westpac Bank.
Steve Pell: Is there a simple analogy you can give for what you do for someone who’s not in the payment space?
Simon Lee: A simple analogy is basically we build trust into the payment flow.
A good example is if you know the Carsales brand, you trust the Carsales brand but you may not trust who you’re buying the car off. We simply build the trust into that transaction so that you can trust that when you pay for this car, you’re going to get what you pay for.
Steve Pell: What does the organisation look like today, Simon?
Simon Lee: We’ve gone through some pretty rapid growth. We’re live in New Zealand, Australia, America, and soon to be Canada. We’ve got demand for launch into South America and South Africa.
We were 10 people last year. We’re 40 now. we’ll be 75 by the end of this year and we’ll hit 130 next year.
Steve Pell: So explosive growth?
Simon Lee: Explosive growth. Very busy.
Steve Pell: Let’s talk a little bit about your background. How did you come to this role?
Simon Lee: It’s a bit of an interesting story actually. I’d always been a consultant. I consulted to banks and things like that. I started my own consultancy and I built that around 70 people. While we were building that, we had a profitable business and things were going quite nicely.
We decided to build these new products and we were going to raise some money to do it. We had a signed term sheet for $10 million to build these products.
Then a couple of things happened in market. We took a downturn in our consulting business. We went from extremely profitable to losing money. Instead of cutting costs, we put it all into these products because we had this money coming in, and it didn’t come.
So, my last business actually failed. It was quite a hard thing to go through as an entrepreneur but probably one of the most freeing things I ever had was actually going through failure. It actually put me in a better position this time because I don’t fear failure. I don’t let failure control me when I need to make decisions.
When that happened, I basically got up and I think I wrote down 50 business ideas. I wrote minor business canvas type plans for 9 businesses and ended up choosing this one. Here we are today. We started with $5 grand and it’s worth tens of tens of millions of dollars now.
Steve Pell: Not too bad!
Simon Lee: Yes.
Steve Pell: Let’s talk about that last experience. What did that teach you about management?
Simon Lee: We had good structures in place and everyone had good performance plans. The business was actually quite well run but I think there were two fundamental issues that I think went wrong. We didn’t have a board in place.
It was me and a business partner. When it came to making some really tough decisions, it was me or him, so if he had a different idea… His idea wasn’t the one to fire our team to get our profit back to margin. His was he had an idea to get out of that. Mine was to fire the team to get back profitability.
You choose the one you think is going to be the best for everyone instead of making the tough decisions. If we had a board in place, the board would have said, “No, cut back.”
It’s something I’ve done from the start now. I’ve got a lot of mentors in place. Andrew Walsh ex-CEO of Hitwise is our Chairman, Mark Harbottle from 99Designs is a mentor and we’ve got the likes of Westpac on our board and things like that to make sure we’re making good management decisions.
Basically, as I mentioned before, fear began to control our decisions. I feared failure and then I wasn’t actually operating in an effective way.
The other thing we did was we focused on too many things. We were trying to run a consultancy and build product and that was defocusing the business. It meant that when the consultancy business started to go down, we didn’t actually react quickly enough.
Two things we’ve done now is we’ve got really good advice and we’ve got a really strong board in place, a really good chairman in place. I’ve got all those mentors around me that I can make sure we’re being guided in the right direction but also really, really strong about saying no to things and de-scoping. Every time I see there’s more than one direct path in our way, I cut the scope and make sure we focus on specific things. That’s what you have to do as a start-up. A large business can do multiple things at once but a small business has to be really nimble and react quickly.
Steve Pell: Let’s talk about what you said in there about managing the fear. What kind of techniques have you put in place to manage fear to move forward now?
Simon Lee: Do you know, the biggest thing I think happened in my last failure was that I didn’t listen to my gut. Your gut is your intuition. Your intuition is saying, “Something’s wrong here. Something’s wrong here.” What actually happened then is the more I said, “No, we’ll figure this out,” I was ignoring my gut saying, “There’s something really wrong here,”
That started meaning that I wasn’t sleeping properly because I was going, “Something’s wrong. Something’s wrong.” I thought, “Gee, something’s wrong,” and I wasn’t listening to my gut. What I do now is if I start to feel that way, “Hey, this doesn’t feel right,” I really trust my gut and I’ll bring something back into scope.
It might be just sometimes the way that you might be looking at it the wrong way. Maybe you’re not quite meeting sales forecasts and you’re really getting kind of upset about that. Instead of getting upset about that, just reframing it in my mind so then it’s, “Actually but you’ve signed all this and you’ve done this,” and actually reframe the situation. The biggest thing out of the last business is I really got myself into a state because I didn’t listen to my gut and I feared that failure, and now I put things in place and as soon as I see myself getting, “Okay, I’m a bit worried about this,” I correct it before it becomes a problem.
Steve Pell: Let’s flash forward 10 years. You’ve written a bestselling management book. What would that be called?
Simon Lee: Interesting question actually. For me it would probably be almost a management/start-up book called ‘Persistence and Never Give Up’. We got this business off the ground with little to no money and that was basically by being extremely persistent and getting out there and just talking to everybody and being a really outward bound business.
Trying to run a financial services business is extremely difficult. It cost me millions of dollars just to get the licences to do what we needed when we started this thing. We had $150,000 raised initially and everyone said we couldn’t do it. Now we’re on track to be a half a billion dollar company in 2018.
Yes, it would be just purely about persistence, never giving up and sticking out with your goals and believing in yourself. Belief I think is really powerful.
But there are probably five other things that I think is my kind of management ethos:
I think that everyone needs a vision. A vision is really important.
I think recognition is the second most important thing and there’s always people giving positive feedback and positive feedback on what they’re doing.
I think people need ownership and accountability. They need to feel like they own what they’re doing and are accountable for what they’re doing. I think that’s the really great thing about PromisePay is everybody in the business treats it like they own it.
The last thing is that empowerment. If they’re empowered to make decisions, we know mistakes are going to happen and people are going to do not always the right thing but by empowering them to know they can make the decision means that you get a highly efficient growth focused team, and that’s what I think we’ve got at the moment.
Steve Pell: Let’s talk about the worst management mistake that you ever made personally. What was that?
For me personally, the worst management mistake I’ve ever made is not putting a board in place for my last business. That cost me millions of dollars. Again, a lot of money and a lot of stress. I guess management is also managing up and making sure you have the right structure above you. The worst mistake I ever made is not having a board.
Steve Pell: It could also be the best mistake you ever made because it led to this company.
Simon Lee: Exactly. This company is already worth five times the valuation of that business. That’s good in that sense.
Steve Pell: How would you describe the culture of this company?
Simon Lee: Very hard working. There will be times on Friday where we all go and have a beer and we may not get back to work. It happens maybe once a month and we kind of really do wind down. I wake up at 5 in the morning generally and I’m on emails and most of my team are on emails.
I’ll be doing some work late and night and I expect that I’ll be doing that because I’m the founder and maybe my other founders are as well. But what I think is really interesting is our guys are always just logging on and checking things and working. They have that focus on that part of the business. The business is as much theirs as it is mine and that’s a great thing. I think what helps with that is an ESOP to show they own part of the success of the business.
Steve Pell: Will you hire for culture? Do you hire on a cultural basis?
Simon Lee: I hire culture over skill set, yes.
Steve Pell: Will you fire for culture?
Simon Lee: Yes.
Steve Pell: It’s an interesting discussion. A lot of companies say they’ll hire for culture but won’t fire as well for it.
Simon Lee: I think culture is really important. If you’ve got someone in there that’s being negative, negativity grows. It’s like a melanoma or cancer. You’ve got to cut it out early. If that person is making life difficult for a number of people then you’ve got to get rid of them. In the first two years, we fired four people. As we’ve been growing we’ve let people go.
Steve Pell: Let’s talk about work/life balance. What are your views on it? Do you think it’s a misstatement? What do you think?
Simon Lee: As a founder, it’s very hard to have work/life balance. I try to. We actually don’t have a set working hours of the business. People can work whenever they like. We don’t say you have to be in the office at 9 and leave at 5. We don’t say you have to be in the office at all. You can work from home. That kind of gives a little bit of control to our employees.
I’ve got two kids. I need to get up in the morning. Between 5:30 and 8:00, because my wife’s been up all night, I get our 8 week old up and I get our 1 and a half year old up and I get them all ready and I get them dressed and then I get to work. Then I need to get home for bath time. I want to be there as a dad for bath time. It’s really important. Those are the important things for me so I’ll work around those things. We try and do that for everyone.
There have been times when some guys have worked some massive hours but we’ll send them all on vacation. Or they may not come in on a Wednesday because one of the guys volunteers in the morning but he’ll make up his time on a Saturday. I think it works quite well. We haven’t really had to pull anyone in and say, “Hey, you’re taking liberties here,”. We leave it to them to go, “Where’s the balance for you?”
Generally by giving people that freedom, as a company it’s better because some days you just can’t be bothered. You might have done a massive week and you’ve got a Wednesday afternoon where you haven’t got anything on, why not just go home? You’re going to sit at your desk because you think you need to be in the office? You don’t. Go home. Take the afternoon off. That’s what I do.
Steve Pell: It sounds like a lot of trust that sits under everything that you do here.
Simon Lee: Yes, actually part of that kind of test we do on ourselves is our trust is actually the highest that the company that we use for doing our testing has ever seen. The trust in the business is at a 100% rating.
Steve Pell: There’s an interesting view that the core characteristics of your product need to be embedded in the organisation for your product to be successful. Do you see that kind of parallel between the product and your organisation?
Simon Lee: We do actually. It was interesting when we did this test that characteristics of our product came out in the test of exactly how the business is. It needs to be about trust and reliability… That’s where our scores were highest on these employee engagement tests.
Steve Pell: What’s keeping you up at night at this scale, apart from your two kids?
Simon Lee: Nothing is keeping me up at night at the moment. I sleep really well. I did stay up a lot last year, when we’d only raised $1.5 million and the banks were asking for a million dollars of bonds.
We didn’t quite have the customers yet to do a big round. We didn’t know how long we were going to be there for. We only had six to nine months of runway and were trying to build this thing. We had all this compliance and potential issues around Australian Financial Services licence and regulations and PCI compliance and all this other stuff that we had to do. It was so difficult. It was a really stressful time.
But now, we’re funded for the next four years. We’ve got the right support around us. We’ve got the right team around us, the right deals coming in. There’s nothing keeping me up at night. The only thing that I am concerned about in any small way is how long does this feeling of euphoria last for?
Steve Pell: Great problem to have.
Simon Lee: Yes.
Steve Pell: Are you a better strategic or tactical thinker?
Simon Lee: I definitely love strategic thinking. I love laying out the five year plan.
I think where I’ve got really good co-founders and team is that I’m not actually really good at implementing that. I might come in and we might get a really massive opportunity, think about how we can structure that deal and everything like that, but the rest of the team are really awesome at actually pulling that together and making it happen. Without them, it would just be an idea.
Steve Pell: I do think it’s really important that people understand where their weaknesses are?
Simon Lee: I’m pretty much the strategy guy and the rest of the team and my cofounders, actually make it happen.
Steve Pell: Have you set out a vision for ten years forward? How far forward do you plan? You talked about 2018 a lot.
Simon Lee: We’re up to 2020 at the moment. I think we’ve got a really good journey there. The things we’re thinking about at the moment is our long term strategy to launch internationally into more countries, which is quite difficult because it can take a long time to actually launch a country properly. We’ve got a bit of a plan of how we do that. How do we launch in South America because we’ve got demand in South America?
But also part of the strategy as well, we’re now doing all these deals with banks, and potentially what we can do is have a bank as an investor. Most of our investors are strategic investors, being that they’re going to drive revenue and volume and value to our business.
We’re kind of thinking, “Okay, 2018, how do we build and grow this business?” Do we actually go out and start selling our technology to banks, actually sign strategic, exclusive deals with banks globally.
Now instead of going, “Okay, if we actually launched our tech in this country, and it’s going to cost us $2-$3 million dollars to launch in each country”, we’re actually launching into countries where we have those customers already. The banks are going to win because they get new technology and a new customer base. We’re going to win because we’ve got product and revenue flow.
Steve Pell: Often when you’re in an organisation and you’re hearing people talk about things that are five, ten years out in the future, it can be a confronting versus your day to day reality. How do you balance the short-term versus long-term vision for the company?
Simon Lee: I think it’s really important everyone knows the big picture. Our team all knows the big picture but also what are we doing in the next quarter. When you’re in a start-up, in the first two years it’s really hard to go, “What does five years look like?” Because you barely know what the next 12 months look like. Before we did this big round, we could only look three months ahead. We could say, “In 12 months, this is what we think it is. We definitely could not tell you what it is in two-three years because there’s just too much changing.”
It’s the first time now that we can go, “Okay, we know it’s going to be in 2020. This is our plan. This is what we want to do. But we can only do that with funding.”
But it’s an interesting thing. It’s getting that five year plan in place but also going, “Okay, the next quarter is really important. How do we track it and measure it.”
I think it’s actually having really strong KPIs in place and knowing that effectively anything that you try to plan to do more than six months out is probably at a 30-40% accuracy anyway. If you’re not hitting your goals in that quarter then obviously the other quarters are going to change anyway.
Steve Pell: One last question. What do you wish you knew on day one that you know now?
Simon Lee: In management or in start-ups?
Steve Pell: We’ll do them sequentially. Let’s start with management. We’ll go back to day one of your management career.
Simon Lee: Actually probably the biggest thing I know now is the thing you mentioned before, is confronting problems early. It’s really easy to be really positive and really encouraging and act like everything’s okay but confronting problems early is a major part of getting effectiveness out of people.
Something that I didn’t do really well for a long time actually, and it’s probably only changed in the last year, is actually confront those problems up front and to make sure they’ve been addressed up front. It’s the biggest thing I wish I’d done earlier.
Steve Pell: What about from a growth perspective?
Simon Lee: From a growth perspective or a start-up perspective is belief. Go out there and believe. We always thought a little bit too small. We were going out for rounds thinking, “If only this would work.” We were thinking a little bit too small.
It’s actually really thinking big and telling this massive story. Then when you tell a story of what you’re going to do, you actually end up going and achieving it because if you believe you’re going to go do that, you go to do it.
The biggest thing for me was thinking big and believing that you could do it. It was a massive thing. Mark Harbottle, the founder of 99Designs, gave me a lot of mentoring on that. I was always going out thinking, “Maybe our valuation should be this.” He’s like, “No, double that.” I’m like, “Really, I don’t believe it’s worth that.” He’s like, “No, it’s double that.” He coached me on believing that this thing had to be this big and this big. It was really great because you go, “Yes, it is this big.” But it took me a lot to believe in actually this thing could be this big.
Any advice I’m going to give advice to other start-ups out there is actually believe in this thing, that your business can be big and valuable.
Steve Pell: Simon, thank you so much.
Simon Lee: Thank you. Cheers.
— This transcript has been edited slightly for readability —