Why Start-ups Shouldn’t Always Try to Reinvent the Wheel
Lessons from the CEO and founder of Loansolutions.ph
The lending market in the Philippines can be inefficient and inaccessible due to stringent requirements of banks and limited financing options, leaving many at the mercy of pawnshops and high-interest lenders. One entrepreneur is changing that: Jean-Patrick Bisson, CEO and co-founder of Loansolutions.ph, a web-based platform that matches borrowers with banks and other lending institutions.
The company was established in the beginning of 2014, and has so far received US$250,000 in funding from Kickstart Ventures, KK Fund, and other investors. According to Bisson, the company is very close to profitability.
Before Loansolutions.ph, the Canadian Bisson lived in Portugal, Brazil, Uruguay, and Argentina, until he found himself in the Philippines wanting to tackle real social problems. Plus: He dreamt of setting up an office by the beach.
The office by the beach didn’t quite pan out. But it was close enough. The company is now based in Cebu, a city in the south of the Philippines where beaches are within reach.
At a talk hosted by Philippine-based corporate venture capital firm Kickstart, he shared with fellow start-ups the lessons he picked up along the way:
1. Don’t try to reinvent the wheel.
Industry disruptors challenge conventional business models, the way Uber and AirBnB changed the way we think about transport and lodging. But Bisson says radically changing the status quo at the outset is risky.
Bisson learned this the hard way. At its start, Loansolutions.ph wanted to completely change the Philippine lending industry. Bisson and his team felt that connecting borrowers directly with banks was the most logical way to go, until they discovered that banks were not prepared to consume the leads they were generating. They were pushing borrowers to the banks in real time, but banks would wait two or even three weeks before they got to the borrowers. By then, the borrowers had already found alternative means of financing.
What they had to do was start from a working business model—banks and borrowers needed to see them as a modern loan brokerage agency.
“We take all that stress out by brokering the loan for them,” Bisson says. Borrowers come to Loansolutions.ph from a myriad of channels and input the kind of loan they’re looking for—car, home, business, or personal.
Loansolutions.ph then collects all the relevant information in order to match them with a growing network of over 20 banks and lending companies. After completing the online application, borrowers get a call from one of the company’s 35 agents within five minutes. The agents ask more questions, collect the necessary documentary requirements, and complete the application on their behalf to all the matching institutions.
The application is then forwarded to the bank to either approve or reject, and the borrower gets to see the status of his application through a portal.
“I’m of the belief that it is better to iterate in small steps from a proven business model towards the goal of changing things drastically,” Bisson says.
2. Customization is a road that never ends
Bisson’s idea in the beginning was to simply send leads to a bank’s own software systems and integrate along the way. The team developed a lead-management dashboard for the banks to consume the leads. For banks that were not using their system, the team tried to tailor-fit their system to the banks’ way of operating. That’s when their troubles started.
One major bank, for instance, was not allowed to access third-party software not approved by their I.T. department, the process for which would take about six months. Other international banks had strict policies about consuming leads through encrypted emails only. As the company worked out solutions to comply with individual requests, they found that their tool or system became less scalable and more prone to bugs. It also became less applicable to what they were developing for other partners.
“When you start customizing for your partners, that’s a road that never ends,” Bisson says.
The biggest setback for the team was when partner banks for whom they heavily customized the system were still not consuming the leads in a timely manner.
3. Don’t be afraid to fire partners
Along the way, some of the company’s partner banks were charging application fees and higher interest rates—contrary to what they had initially told Bisson. They had to part ways.
For Bisson, this was a small price to pay for integrity.
“Our sense of mission is to make lending more accessible to Filipinos and to get rid of loan- sharking in the Philippines,” he says.
While it is easy to be blinded by profit, great businesses are founded on a very strong reason for being. He says that the best, most loyal, and hardworking employees work for companies that believe in a bigger mission and aren't just there to make money.
“People are also becoming more in tune and enlightened with the impact they create, so they choose wisely who they work for and invest their time in,” Bisson says.