Starting your fintech with no money – extract from interview with Sam Graziano from Fundation

This is an extract from the Fintech Founders book, find out more about it here

Fundation is a credit solutions company that enables banks and other financial institutions to modernize the way they deliver credit to small businesses. Fundation also acts as an originator of small business credit through a network of partnerships. It has modernized the way small business credit is delivered in the market. Its technology helps top regional and community banks develop a great experience for their customers and employees who serve small business customers.


We can see a lot of change in the retail space already. How did you fund the company originally and how that has evolved with time?

The first year or so, we didn’t have funding, it was our own dollars. We were really just working for nothing in the first year or so, to figure out where we were going to go with the business. We weren’t one of the fortunate companies that had money from venture capital on Day One. It took a while for us to earn some credibility from investors and some friends and family that contributed capital in the early days. We actually started by not taking salaries or anything like that for quite some time. About a year after starting the business, we were able to do the traditional seed round. Then another year later we were able to find a very progressive multi-family office that stepped up to provide us more operating capital and some capital to start our lending program. Very shortly thereafter, we realized that in order to really scale the business we were going to need institutional capital. That is when we partnered with the primary investor we have today, a firm called Garrison Investment Group, based here in New York. They convinced us to collapse the corporate structure we had and become a balance sheet business. They’ve been our equity partner ever since, but we’ve layered on debt facilities since then. We’ve got a few debt facilities in place, so we’ve really started to optimize the structure of the balance sheet between debt and equity over the last few years.

In terms of advice for new entrepreneurs and wannabes, what’s the best way to keep capital with your equity, without having to give too much away in terms of all of these funding rounds?

What I would say is that you usually need more than you think in the early days. I would say you probably should be willing to take a little bit more dilution in the early days to get more money, so you can make more progress
before you have to do any subsequent rounds. The other is, be careful not to give too much equity away to other people even if you think they are the right person and have the right intentions. Everything feels good in the early days because everyone is excited about the opportunity and there is a tendency to give quite a bit away in the early days to people that you think are going to be important parts of the journey. But what you believe you are going to be getting out of others doesn’t necessarily play out. In fact, it often doesn’t. What I would say for a founder is just be very careful with who you’re giving what to. What are you giving them, why are you giving it to them, and what are the expectations of that? And then have the right control mechanisms in place to where people don’t necessarily walk away with quite a bit, without actually providing value. Most companies that have more than one founder don’t make their way all the way through the journey together and that is not because people aren’t necessarily valuable, it’s just because people decide to go in different ways with their interest or skill sets, or the needs of the business change. Building a company from the early days to becoming a real institution, it is an evolutionary process to say the least, and things are constantly changing. I would just say, be very thoughtful about where equity is granted, both to investors and to other individuals in the early days and what the expectations of that are.

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