Lending Could Change Forever With Fuse Finance | Andres Klaric – Investment Banking – Capital Raising

Hello everybody. This is Natu Myers here back with another podcast from the raises. com top capital raiser show. And so today I’m joined by a special guest and his name is Andres Cleric. He is a Harvard business school alumni, wall street veteran, and the co-founder and CEO of a venture capital backed company called Fuse.

So his company is looking to transform the loan origination process. And, Andres, it’s great to meet you on this podcast. so much for having here. It’s, it’s an honor to be part of the conversation and, uh, really looking forward, uh, our discussion. Yeah, same here and, you know, fantastic profile. And so can you just perhaps walk us through, you know, your background, you worked at Goldman Sachs and Credit Suisse.

So can you just walk us through some of your background and, uh, where you’re, you’re coming from as an entrepreneur? Yeah. So I, I actually started. in a completely unrelated place to invest in banking. I started as a car salesman. I paid for college selling cars. I paid for college. Uh, as I mentioned that, uh, in the US working on a dealership in Northern Virginia. I, I do think that dealing with the rejection at a very early age, uh, as a teenager, if anything helped me, uh, face, like. Interviews and things that came out afterwards in life, and I other like, social situations that you undertake. Um, and, uh, that’s not to be similar to like kind of once you kind of raise the bar and you go to a bank, right?

I would say the biggest, takeaway from my investment banking years was just the stamina, the sheer, just the amount of hours that you work, the expectations for excellence, the reality that despite the fact that you’re not saving any lives, right? You’re just checking numbers. You cannot be wrong, right?

99 percent right. You’re still wrong in that category of business. So, uh, a lot of, uh, just the search for perfection and like, uh, the attention to detail that you develop and just the ability to just work beyond the point of exhaustion. It’s something that I treasure from those days. I don’t think that I’ve ever seen the work ethic at a level like the one you kind of, you kind of developed during those years.

And after that, like most investment bankers would like, not most, but like a good chunk of folks in my cohort. I went into the buy side, right? I, my dream was to kind of continue into the investing world, and I’m usually consulting in investing banking roles, act as, uh, kind of platforms for, for, uh, aspiring, uh, buy side, folks to go through.

I, did that, uh, pretty much until, two, three years ago. And, uh, and after. Pretty much a decade of investing in tech and business services companies. I decided to start my own business. and along the way, of course, I had the chance to go to business school. I had a quick pit stop at Harvard business school, and that’s where I met Michael founder a little bit over eight years ago.

No, fantastic. And I mean, the hard work shows in the results. So. Harvard business school, you met the co founder and what are any some, some takeaways? was it the network? Was it the, the lessons? What was some of the biggest takeaways that you had at Harvard? I mean, I think, it’s a component of you’ve got a business school like, well, it doesn’t accelerate it for your career to switch paths to kind of network.

There’s multiple reasons why people go I usually I will call it a portfolio of reasons. Some people are just burned out to write and everyone just goes there be it reality is that, in most business schools in the US. Or at least top business schools, their grades don’t matter. So like just some people that just, just go for two years to chill.

And, and, and the networking happens in those, in those opportunities, right? It’s, it’s, it’s part of like the experience. I would say I went with the with with the with the goal of like, uh, just accelerate continue on a path like for had I wanted to continue just being an investor like I was going to business school was the right with the right decision.

Unless I wanted to like just go into like more like public market draws in general. Yeah, you go a different path, although many people out of business school will join public market investing funds right. Um, I went with the idea of like, Hey, I want to continue being an investor. Uh, I want to expand the network and, uh, and it doesn’t hurt.

I, you can also ultimately see it as the, as the biggest piece of insurance from a career perspective that you have, right? Like you kind of like set a floor, uh, from an earning standpoint, if you want to see it through a downside protection, I always, I almost saw it, I always just saw it as like a, Hey, like opportunity wise, uh, this is like something that it’s, Really expands the set of options that I I can act on.

And as one professor told me there, it’s not really about optionality. At some point, you’re going to have to use those options. And I think, uh, I quickly realized that, uh, you don’t you don’t just live off alternatives, right? You just need to actually start choosing. Uh, and I think starting fields. Uh, being able to do this with a classmate, it kind of like speaks volumes on like, Hey, like, I’m actually making choices that are pretty intentional versus just letting the, just drifting through life through like, uh, uh, decisions that are not made by myself.

Brilliance. Instead of taking the last path, the least effort, you’re, you know, you decided on the thing that is the highest leverage. And so then now there’s fuse the company and then there’s. This, this company, you’re trying to solve some problems in the loan origination process. So how does the loan origination process work to those who aren’t familiar?

Yeah, I mean, frankly speaking, I, I was not even aware that like companies like what fused us to they existed, like we actually. The way that we landed into this market is because we first try to be a direct consumer, uh, loan broker, right? So we were helping other banks, credit unions and finance companies originate loans.

And, uh, in order to do that, we had to devise kind of like an orchestration layer of technology so that someone can apply, we can vet them and ultimately send them to other banks, credit unions, finance companies for them to like finally fund that loan. And that entire orchestration layer app, kind of like workflows and dashboards that needed to be built, we originally built it as an internal tool.

Uh, what we didn’t realize is that by virtual building that internally, we had actually built something way more flexible than our partners had. So we were funding people at a record rate and in record time with no mistakes. And like lenders approached us and they were like, Hey guys, it’s kind of cute that you’re selling us loans, but would you be perhaps interested in like selling us your technology?

We can like see more value in that. And we will be interested in doing so. Would you be, would you like to go that route? So of course, like the initial reaction, it’s like, I don’t know, like, I mean, we, we’ve raised capital to build a, and now we’re going to do B. Uh, and so we, we, we had to build initial conviction around it and we quickly started signing up a bunch of customers.

We realized, hey, like, listen, if this is like, if we’re going to follow the theory of fast moving water. And this, the fast moving water is, is in in the, in, in the B2B tech side. That’s kind of how we landed there. Um, what the product, what the product does today, v vis-a-vis, what we were doing before is fairly similar.

Of course, we made it much more robust, more enterprise ready. But in essence, like, like if I had to summarize what it is, is a bunch of integrations, meaning like the ability to like run credit, uh, uh, fraud checks, uh, income identity verification. All of that orchestration layer, you’re going to. You there’s a bunch of vendors, you need to be able to like coordinate.

There are workflows, right? How you actually decide what is your criteria for underwriting? What type of things you do when you actually do the API calls in such a way that you don’t incur a lot of costs. And the last thing is the dashboards, right? You’re going to have distinct roles for which you’re going to have the underwriters, the funders.

And those dashboards should actually reflect the true nature of their job, right? So those three things are the key components of an LOS and loan origination system. And if that’s kind of how, well, why we are today, right? Like there’s way more than we can be. But like our bread and butter today is those three pillars.

No, it’s brilliant. And I like, I like it when you said following the fastest moving water and, um, that led you there. So, I guess you already answered how it integrates with the credit unions and banks. So these are the main customers, right? Credit unions and banks. Yes. And I would, I would add a finance companies to that to finance companies, although they’re like non depository institutions, they do, they, they do, uh, comprise of, uh, uh, uh, fairly, uh, material amount of our customers.

Okay. No, fantastic. Okay. So you work with these customers, what it like when I’m looking at this, what would you say are some of the biggest pieces of advice you have for lenders? Lenders that, you know, they’re not really efficient as, as you used to be when you first started this business. I mean, I think that you need to be extremely empathetic with their current situation, right?

Like it’s not just telling them like this technology school, right? Like, obviously they are figuring out to make money and be profitable businesses with their current tool set. So you need to make not only a technological case, right? You need to make a business case for them to actually like pay. Proper attention to the value that you can create for them.

Right. Like, I think that, uh, sometimes like technologists forget the fact that like, Hey, like not ever, if, if, if the best technology always won, then they, they would have like beta, beta would have, uh, been VHS. There’s a bunch of examples, right? The same applies in our industry. It’s not like the best technology that wins is the, it is whoever really figures out the best way to make, to make a business and technological case.

For that particular partner, right? So, uh, the way that we approach it, uh, is aside from highlighting the power of the three pillars that I, that I mentioned to you, it’s like really showing the power of automation, right? Like, kind of use it as a tool, augment the job of, uh, and the quality of time that our lenders have with their clients, right?

Like, we’re telling them, hey, like, it’s not about posting your branches, um, Or firing people or things like that. It’s more along the lines of, hey, if you’re going to spend the same amount of time with someone, make it quality time, right? Like ensure that when someone is at a branch applying for a loan, instead of having to ask them, Hey, I don’t understand how I’m writing here.

It should be more talking about their aspirations. Like not to, what do you want to do with this money? How can I help you kind of invest? And how can I help you like get the best deal in that house? Things like that, that are far more value added and like relationship building. Then like, just the frustration of asking someone 50 times for a photocopy of their ID.

It makes a lot of sense. You’re talking about the vision and the benefits, not just the feature. That makes sense. No, they make, if you’re talking about features, you’re wasting your time. Like you need to really talk. Of course you need to pay attention to what type of features they want. But people want to talk about.

Outcomes, not like all the gadgets they want, it’s, it’s kind of like, it’s, you watch a bond movie, you enjoy the part of the gadgets, but you want to see bond win, right? Like, so just let’s get to the point in which bond wins. Yeah, exactly. And so tech seems to be pretty slow in the finance world. And then, but then there are some people like you that figured it out.

So like, why, why do you think tech is really behind in finance compared to other industries? It’s, uh, first of all, regulation, right? That’s, that’s number one reason, right? Like, uh, for example, when you think about AI or black box models, good luck, uh, telling a regulator, uh, not being able to explain why a decision was made made in a way that, you know, an attribute to AI, right?

Like, The regulator is going to prove what they can understand, right? So it’s important that like you’re able to kind of have not only not necessarily paper trail, but the equivalent of a paper trail electronically, which you can explain, like same situation, same person, same, same response, right? Like, and you can actually explain and trace it back to a particular thing that is very important, right?

So that is, that is one of the reasons And second is like, Hey, like Excel is a phenomenal tool, right? Like I am a big believer that. If you have, uh, a lot of the businesses are already very profitable businesses, so it’s very important then again to not only talk about the technology, it’s very important to talk about the business case.

Why are you adding value? Why, of all the billion priorities that they have, why, why is it that what you’re offering that is so important? And that, that is, that varies case by case by lender. I think with, uh, with the three pillars that we have as an organization, those three really allow us to resonate with them and there’s like what they, what they’re missing in their current solutions.

Yeah, that’s what, that’s what, and we were discussing some of this offline, but when on the lender side to switch gears. If I’m a lender, or I’m a financial institution, I want to use your service. I want to use Fuse. Well, how does it work? Like, is it like, do I pay a fee or do I get like, origination I pay?

Like, how does the, it work with my business model from the financial point of view? Yeah, it’s a pure SaaS play. Like, it’s, uh, software as a service. Okay, type of play. Uh, so to some extent, we’re not creating a market. We’re kind of, uh, disrupting a market in terms of like what the tool that we bring. So, um, there, there are incumbents in the space that have already kind of dictated how some of the, uh, how business is done.

So it’s important to when you’re actually ripping and replacing incumbents, that you actually kind of adapt yourself to what the industry is used to, right? Like, You cannot completely change absolutely everything, right? So I do think that like, uh, following that, uh, software as a service pricing model, like, but for now really benefits, uh, uh, the way that like our customers understand, uh, the engagement and value.

It makes a lot of sense because you have to go with what people already believe, uh, in order to take the current demand, instead of trying to change their beliefs. Um, you need to minimize friction, right? Like you need to, uh, you need to find the shortest path, uh, for them to, uh. Feel comfortable with, with, with, with, with the change you’re proposing, because change is uncomfortable, right?

You need to make it easy for them to like, make that choice. It’s my job and my, or my, my, my, my, the rest of our organization to like, really make the case for us. No. And so, so speaking of change, uh, at the time of the recording, the interest rates are pretty high. So, you know, does your business or how does this business, how do you find the change in interest rates?

Uh, for the use of this software, does it matter or is it fast? Is it doing better because of the high interest rates? Like, how does that affect the business? And we’re, we’re, we’re top of funnel, right? So we still see applications, right? I do. Um, what do you see is more rejections, but from our perspective, we get, we, it’s not that we’ve seen less people applying, right?

It, it, it just did like. The quality offers are either people get more rejections or just the quality of the, the approvals that people get, they’re probably not necessarily meeting, uh, what they, let’s say they want to refinance. Right. They’re like, Hey, like, I’m, I’m be saving X amount of percentage. I’m not sure if it’s worth my, my time to do this, but like the bottom line is like for us, for our type of business, the way that we’re structured.

The this rate the right environment doesn’t really affect us as much what it really affect what it really the ones that are affected our customers in the way that we help them navigate a high interest rate environment is using technology. They’re like, allows them to adapt to this tighter funnels right if your conversion funnel is essentially approving less people.

That means that your cost of acquisition are going up right because you’re doing more data pools and all of that. With the way that are kind of like, uh, kind of API integrations and workflows are built, it allows them to have much more of a control on how to gauge for that, that kind of cost of acquisition.

Right? So We help them kind of plan for that, automate, reduce costs that today they wouldn’t be able to manage otherwise. Really? No, I, because, because you’re saying is when the, um, when the amounts of applications get denied more, then you just help the companies become more efficient. So they’re able to, you know, get more through in your software.

So FUSE solves that problem of efficiency. And it’s just more important in this market. Exactly. Even even more important, right? Because it’s it’s cost. You need to look at more folks to approve the same amount. Yeah, that makes sense. And so you help companies a lot in that sense. So what are some of the future plans?

Like, um, you know, because this can this technology be applied to different industries or plans? Or is it just you want to focus on debt? Or what are the future? We’re going to be remained focused for now. The L. S. Market. Uh, it’s for $40 billion space, right? So there’s plenty of opportunity, uh, to stay there.

I do think that like the applica, the applicability of our tool set it, it’s, it, it, it’s really like very wide, right? Like when you think about, uh, lending, I can, I can think of a bunch of examples of industries that have similar kind of process flows and workflows. A natural one is. When you think about insurance, the process of like underwriting, uh, uh, an insurance or binding a policy is naturally similar.

Of course, you’re going to have to make different, uh, API calls and like the vendors for that data might change a little bit, but, uh, this in the grand scheme of things, fairly similar, right? Like, so I do imagine that like, Uh, companies with our philosophy, if it’s not us, because some companies with our philosophy will probably attack similar problems in adjacent markets.

I think remaining focused for now is, uh, it’s a core priority for us. Got it. Because you want to be the master at what you’re currently doing. Yeah, we are pretty excited about the space and the opportunity we have. We should, we should remain focused, attack, and, uh, and, uh, put all our Efforts in the space that we’re in.

Oh, makes sense. And so there are some people watching this listening to the podcast or watching the video that. May be in, in that market, there may be a, a lender, a loan officer, you know, one of the, uh, either credit union or even part of a bank. How can somebody who wants to get in business with you, how, how would they get in touch to learn about, uh, you, how your, your process works and to work with you?

Yeah, they can, uh, first, the first option is go on fuse finance.com. And the second alternative, of course, uh, they can, uh, ping me on LinkedIn. I’ll do my best to respond to them as soon as possible. I’ve always had phenomenal mentors in the past. So like, not only to talk about business, we talk about career, I’m happy to make the time for people.

And, uh, and, and for folks that are trying to understand the tech stack and priorities, uh, we’d love to just be a sounding board and see like we can, how we can actually help them. Or at least allow them to, uh, compare notes on how they’re thinking about next steps in their own, uh, tech, uh, tech journey. No, fantastic.

Because candidly, you know, now that we wind to a close, like, I mean, you’ve done some great things with your career. You’re on Wall Street. You’re in Harvard Business School and now you, you run this company. So if anyone wants to get in touch with them, please, we’ll put the, we’ll put the notes in the description to it to go to fuse finance.com and then to reach out to Andres on LinkedIn.

So any, any last things that you wanna share before we, uh, wrap it up to close? Well, I hope everyone has a, a fantastic 2024. Uh, I’m full of hope for everything that comes, uh, and, and I hope that in 366 days, because we’re gonna. Beer. Uh, we’re, uh, we are, uh, wrapping up a much better, uh, uh, year for the, for the entire world and the human race.

Fantastic. Fantastic. Hey, Andre is great. Great company. Great to meet you. And, uh, with this head to fuse finance. com. This has been a racist. com. Now tomorrow is the top capital raiser show, and we’ll see you in the next video, everybody. Thank you.


Lending Could Change Forever With Fuse Finance | Andres Klaric – Investment Banking – Capital Raising

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