In the wake of Black Lives Matter protests, Bayen got in touch with me to talk about how he wants to inspire other Black entrepreneurs to succeed. He published a Black founder’s guide to raising a seed round in a recent Medium post, and he has also written an essay about personal responsibility versus societal responsibility.
I met Bayen back in 2013 at a VentureBeat event. At the time, he was running a startup called ICS Mobile, creator of FreeAppADay.com, an app promo site that was particularly useful for early game developers on the App Store. As an athlete who came to the U.S. from France and stayed, Bayen had a different background from other African Americans and a unique perspective on the industry.
His company did fine, growing to $18 million in revenue, until Apple decided to stop letting apps use push notifications to promote other apps. After that, Bayen tried to launch a new discovery platform but was unsuccessful.
He did some work as an entrepreneur-in-residence at the Science VC fund in Santa Monica, California. Then he started a company called LennyCredit, just as other micro-lending startups like Acorn and Venmo were getting off the ground. He wanted to find a way for people of color who had trouble accessing credit and other poor folks to establish good credit.
An Asian investor decided to fund him, but in a ridiculous way. The backer wanted to give him money if he would pivot his company to focus on app-based bike rentals. Desperate, Bayen agreed. But just as he got his funding, he ran into competition from rivals like Lime Bike that were raising hundreds of millions of dollars. Bayen returned to his credit idea and renamed the company Grow Credit. He grew his diverse team to a dozen employees and recently raised $2 million in venture funding.
In our interview, we talked about his journey and his perspective on being a Black tech entrepreneur.
Here’s an edited transcript of our interview.
VentureBeat: What has your timeline been like? What happened between the earlier companies you were with and now?
Joe Bayen: I started with ICS Mobile, which made FreeAppADay.com, a promo site for apps that made them free for one day. When Apple made the change in 2014 to stop apps from using push notifications to promote other apps, they shut down every app except us. I wish they had shut me down. I wish they had told me. They were sending us clients. Out of respect for us, they kept us in the App Store.
They just told us to change our business model. I attempted to do that for a few months. I poured another $600,000 into the company. We ended up launching a platform called App Exchange. We tried to launch a new discovery platform, but it didn’t work. We had to fold after that, because the business model only worked the original way, using push notifications. So Apple not kicking us off of the App Store cost me $600,000.
VentureBeat: What year was that?
Bayen: That was 2014. Science, the VC fund run by Mike Jones out in Santa Monica, was located a block away from our office. When I shut down, Mike asked me to come join him as his EIR at Science. Science is famous for seed funding Dollar Shave Club, which was sold for a billion dollars. But back then, in 2014, they didn’t know anything about mobile apps. They didn’t have any mobile app plays, didn’t know about mobile marketing, didn’t know about the app stores. They were completely new to the market. I went there for about two years to coach them, to share my knowledge, and help them with their mobile initiatives.
In late 2014, I noticed that Acorn and Venmo were coming on the market and starting to do well. That’s when I thought that developing a micro-lending platform to help millennials establish and build credit was a good idea. Back then there were no lenders on mobile devices at all. In 2015, I partnered with FICO to launch LennyCredit. We lent up to $500 over the phone using Plaid to consumers, and we coached them, gave them credit score indications, and helped them build their credit.
What was very interesting is that I took my knowledge from my gaming into the fintech world. I used a gamification system to empower users to build their credit. Instead of using gamification to extract revenue from consumers, I used it to empower consumers, helping them establish and build credit by giving them points each time they behaved in a way that was conducive to a higher credit score. Whenever they made payments on time, they got points. When they were maintaining their utilization ratio at a low level, they got points. When they were reading our credit indication blogs, they got points. They could redeem those points for balance increases.
It was a pure gamification play, but this time to help consumers establish and build credit faster. The larger balance increase was directly associated with a higher credit score. I transferred all my experience from the freemium model into fintech, and that resulted in consumers gaining about 61 points in their credit score, on average, in a nine-month span.
That was the first incarnation of our credit-building platform. I bootstrapped it to $18 million revenue in about three and a half years [at ICS Mobile]. I owned about 80 percent of the company. I saved a lot and purchased a home, but I had enough resources to reinvest in my next venture. But I didn’t know that I’d have to expend all of my cash into this new venture. I put everything from the next five and half years into this.
The reason I had to do it was, first of all, I didn’t know anything about lending or banking. I was a complete newbie to the industry. And in lending, at some point you need debt financing to scale your business. But back in 2016 and 2017, banks didn’t know anything about fintech or lending on mobile devices. It was extremely hard to raise debt financing from banks.
We reached a point where I literally–we were almost on our way out, almost about to shut the company down, until a Chinese fund reached out to me out of the blue and invited me to San Francisco. They told me, “Hey, we want to invest in LennyCredit. We want to launch a bike sharing program.”
Mind you, this was in 2017. I had no idea what a bike share program was. Nobody knew. I went to a meeting expecting this fund to invest in my company, and they told me, “No, you should launch a bike sharing program.” What’s going on here? But we were running out of cash. They offered $1.2 million dollars for us to kickstart a bike share program.
I scratched my head a little bit, went home and thought about it, and I stuck with the vision. I just adjusted the tactics. I came back to them with a plan to create a subscription-based bike share program that would also help build credit. I called it LennyBike. The way it worked, I would essentially lend the consumer $500 and they would pay me back in increments, say $20 a month, and then they could use the bike in a limited fashion. But they would build their credit score at the same time.
The idea was to work with colleges. We started a partnership with Santa Monica College and the University of Illinois. It was really simple — use the bike to get around and build your credit at the same time. We were scheduled to launch in June of 2018, and then, of course, the nightmare happens. LimeBike raised $230 million to expand their program, and then Bird Scooters raised $300 million to expand their e-scooter business. We had all of $600,000 to launch this business, so immediately it was game over.
I talked to the investors and I was honest with them. Listen, we can’t compete. We’re done here. They agreed with me, so we had to shut down that business. But then I realized that I’d created a subscription business that could help build credit. There are subscription businesses everywhere — Hulu, Spotify, everywhere. We could use those subscriptions to help consumers build credit.
I was fortunate that Peter Mansfield, who was the founding member at Marqeta–Marqeta is a fintech platform that just raised $150 million two weeks ago at a $4.3 billion valuation. Peter Mansfield, our advisor, was a founding member there. He introduced us to their team, and then over the next three or four months we built a solution around using their technologies to enable consumers to establish or build credit using a MasterCard that is strictly restricted to processing subscription payments.
Using the MasterCard and their technology, this little company became Grow Credit. Consumers could download the app, sync their bank account, and we would underwrite them using their account balance and other underwriting balances. We could issue them a virtual MasterCard instantly. With the card, we have about 30 subscriptions they can apply that credit to, like Netflix or Spotify. They go to their subscription accounts and use the Grow Credit card to process their payments. The balance gets reported to the credit bureaus, Equifax and TransUnion and Experian. All of a sudden we enabled consumers to establish and build credit with their existing subscriptions, which was a first in the United States.
Most important, we also were the first company to enable consumers to build credit for free. That’s a game-changer. We do this by offering $15 a month they can use toward any subscription, and then we report those payments to the credit bureau. They can do that completely for free. We generate revenue through the interchange fees. MasterCard gives us a cut whenever a transaction is made. But what’s interesting, we have 10 percent of our audience tipping us about $4 a month just for providing them a valuable service, by helping them establish and build credit.
We also have two premium plans. We have a plan that’s $5, and then consumers have access to $50 that they can use toward any subscriptions, and then a plan that’s $9.99, and they have $150 that they can use toward subscriptions. The difference between the plans is that with a larger membership, we report a larger balance to the credit bureaus, and a larger balance is associated with a higher credit score. With a free plan, users can build credit with no problem, but with a higher membership plan, they’re able to build credit faster. It’s a freemium model. It’s what I learned developing freemium games, but replicated in the fintech environment.
VentureBeat: Is that what helped you raise the $2 million here?
Bayen: The novelty of the model is really what helped me in raising the funding. It’s a completely novel structure. It uses all my gaming experience, knowing the psychology involved–it’s a conversion rate game. But yes, that’s what helped me convince investors.
Being a Black entrepreneur
VentureBeat: Your story is one that any entrepreneur could have told me. But what’s interesting about how we started is that you’re a Black entrepreneur. If you went back and noted that this was the case, how does that change parts of your story? You’ve had this entrepreneurial spirit for a long time. You’ve started more than one business. You’ve pivoted. You’ve found what you think is a good business now. But you’ve done this while beating some very strong odds.
Bayen: Yes. I was raised in Paris. The difference between this country and France–it’s not that pronounced. But for instance, in Paris, when you go to clubs, to parties and events, everyone mixes together. Everyone goes to parties together. You don’t really see a distinction where it’s whites on one side, Asians on another side. Everybody is mixed together.
When I moved to Los Angeles for the first time to see that there were white nightclubs and black nightclubs. White people and black people didn’t interact with each other all that much. For me it was a complete culture shock. I was coming from a view where–it’s unusual to say, but I wasn’t accustomed to planning my night because of the color of my skin. I wasn’t raised in an environment like that. To be honest, I was even wondering–the civil rights movement was back in the ‘60s. Why is there is still a problem in the early 2000s? I didn’t understand.
It wasn’t until I took African American history that I was able to really begin to understand the deep racial divide that still exists. The civil rights movement was really just yesterday. People still feel the impact of racism, of segregation, of Jim Crow laws. It’s felt to this day within the African American community.
I learned about this by studying it, but also by talking to African American friends. As a black man, my experience was completely different from theirs. I was here in Los Angeles. I was running track and field at Santa Monica College. I had friends who lived in South Central, and they were able to tell me these crazy experiences where their friends died, killed by police or killed by gangsters. I just couldn’t believe it, that young men in America would die by gunfire. In France it’s almost impossible to get access to a gun. We just don’t see it. If there’s a knife attack it makes the news, because it’s so rare. When I came here and saw gun violence on the news, all over the place, I was shocked.
So I learned about that experience and I started to understand the divide, that there was a lot of work that still needed to be done to bridge the racial gap in the United States. I’ve been here for 23 years now, and I’ve noticed things getting better over the years. We ended up with Barack Obama as president, for one thing. I’ve noticed things improving. However, I feel and experience racism–just a few months ago, walking on the street, an individual calls me the n-word out of nowhere. I was trying to give food to a homeless man, and he turned around and said, “I don’t take anything from black people.” Imagine that. You try to extend some charity and you’re turned down because of the color of your skin. It’s still there. It still affects us. Things are getting better, but it still affects us.
Racism in business
VentureBeat: Do you remember the first time you learned about this kind of racism in business?
Bayen: In business, yes, in the sense that I’ve felt–my former co-founder was white, and people were always surprised when they found out that I was the CEO. I could see it in conferences. There was always a bit of shock when people learned that I was the CEO and he was the CTO. I’ve felt it, yes. But did I care? No. Because of my mindset–I have a take-no-prisoners attitude. It fuels me. When someone dismisses me or doesn’t think that I’m good enough to hold a CEO position, for me, that fuels my fire. When I hear “no,” it’s the best thing. When I’m rejected, it’s the most powerful thing that can happen to me, because it empowers me to prove people wrong.
Throughout my business career, yes, I’ve been–what’s the term? Not taken seriously. But for me, I use it as an asset to become better, to improve my skills. Each time someone told me that I couldn’t do it, I would do it, and I’d take pictures. I’d do it twice and take pictures. It’s a different mentality. I was an athlete. I operate beyond the pain threshold. Even to this day, when I work out, I do eight miles a day on average. I push myself to the limit. That’s where top athletes operate. When you can operate beyond the pain, you’re going to perform at a higher level.
VentureBeat: There’s something interesting here, where you can run a race and beat other people. But in business, if someone doesn’t like you, they can come up with all kinds of reasons to say no. The reaction can be more subtle than overt. I wonder how you adjust to that or deal with that.
Bayen: I’ve felt it. I’ve sensed it. I’ve seen some companies receive funding that were not at a stage as advanced as we were, so I felt slighted sometimes. But for me, again, I take it as a personal challenge to become better. When I felt slighted, when I’m dismissed, I subsume that negative energy into a positive. I study what I may have done wrong, where I could improve in our business, to prove that individual wrong.
When you deal with VC funds, often the nice way they say no is to say, “Well, we need more traction.” In my mind I’d think, “All right, I’ll give you more traction.” I use this as a way to–I’m coming back with more traction than you’ve ever seen. Even if I have only a one percent chance of being funded. Every challenge, I take what they’re saying to heart. I’ll come back in six months with the KPIs that you’re looking for. Even if it’s out of this world, really challenging, that’s for the best.
It gives me an opportunity to break any mental barriers I have. If someone tells me, “I need you to have 50,000 UUs in this amount of time,” and that’s a crazy number–most people would be intimidated. They’d say it was impossible. I just go the other way around. I’m going to do it. It’s a different mental course. I’m being challenged, and I rise up to the challenge. That’s why any rejection makes me better as an entrepreneur. I feed off it.
If you watch Michael Jordan in The Last Dance, it’s the same attitude. I wouldn’t compare myself to Michael Jordan, but it’s the same attitude. When you’re challenged–I’m going to work so hard that you’re going to regret having challenged me. I’m going to show you. It’s that athletic mindset that makes me oblivious to racism, really.
It could be the color of my skin. Sometimes it’s not even racism, though. That’s an important comment I’m going to make. I’ll be frank with you. When I go to conferences, even game conferences, or when I went to Money20/20, I didn’t see many black people. I just didn’t. We both went to the Apple event that they had in San Francisco. We didn’t see a lot of black people. It’s just not common. When I saw a black individual at that event I was surprised. You have to look at it from a human nature standpoint. The most basic rule about investing is that you have to invest in what you know. If you don’t have an affinity to interact with African Americans on a regular basis, it makes it a lot harder to make an investment.
I don’t think it’s racism. Some of it is. Racism is everywhere. But sometimes it’s just plain human nature. You’re not used to it. I’ll give you one perfect example. If I go to a Chinese restaurant and the cook is black, that puts a question mark over my head. It’s conscious and unconscious biases. Sometimes we don’t even know that we have it. Sometimes I don’t know that I have it. You see things that are unusual, and it’s a human mechanism to be afraid of what we don’t know.
And because of the way venture capital was established in Silicon Valley, a lot of these VCs are in places like Palo Alto. A lot of them are Stanford alumni. It’s a fraternity of sorts. You invest with people you know, people who went to the same schools. You’re familiar with them. The impact of the past, the impact of segregation, the impact of racism, that still has impact today. African Americans, before 1965, couldn’t even try to go to the best schools.
The 1% chance
VentureBeat: In your post, you brought up that 1% number. What was that referring to? Were you pretty aware that your success was going to be in that one-percent group?
Bayen: Yes. I was certainly aware of it. The data compiled by Crunchbase–they worked out that one percent of institutional funding goes to African Americans, 1.8 percent to Latinos, nine percent to women, and 17.7 percent to Asian Americans. Asian Americans are the best-represented minority in terms of seed funding. So I was fully aware of the challenges I was going to face. But the reason I went in is because the mission mattered more.
As a person, I feed off helping people. Keep in mind, my first business, we were helping indie developers popularize their applications on the app stores. We made a discovery platform to help indie developers monetize their games. At the same time, we helped consumers with kids, with limited money, get access to the coolest apps for free. That made me happy. That’s what was driving me. I was writing app reviews for our audience all the time, because I loved it. I loved the fact that we were helping both consumers and developers.
In this business, it’s the same thing. I went toward this business because we were going to help people in need of credit score relief. Experian has some very important data on this. Before the crisis, there were 100 million consumers with weak credit or no credit at all. 100 million U.S. consumers were subject to high interest rates on credit products, credit cards or lease payments. Because they had a poor credit score, their life was much more expensive. Imagine that. You’re poor, so your life is more expensive. That doesn’t sound right. That’s not fair.
With the current crisis, we ended up with 40 million consumers going into unemployment. As we speak, those 40 million consumers are seeing their credit scores damaged. By the time the economy recovers, their life will be more expensive around everything. They have to pay more to purchase a car. The cost of financing will be extremely high because of the crisis environment. That’s why I took on the challenge to help that section of the population with an effective product that helps them lead a cheaper life.
I was willing to go all in because that’s what makes me happy as an entrepreneur. Helping consumers is what it’s all about. Serving consumers is what drives me. That’s why I never give up along the way, even though I only had that one percent chance of succeeding.
VentureBeat: What do you think about this unrest that’s drawing attention across the United States?
Bayen: I wasn’t surprised. I was shocked, as a black man. For five days I was in complete shock. When George Floyd died, I saw myself die. I only saw maybe one second of the video, and I couldn’t watch any more, because that was me. Institutional racism has happened for decades. It’s only because of phones and cameras that we’re able to see it live. And really, it’s only been 10 years that we’ve had video cameras on phones like this, that it’s become common everywhere. We’ve seen all these black men die at the hands of the police, but it takes a video camera for the world to see.
What happened with George Floyd was the most gruesome death of all. All the civil unrest, it’s a case of–not only black people were outraged, but white people, Asians. It was outrageous for the entire country that a man would be subject to such violence because of the color of his skin.
VentureBeat: Does it inspire you to do something yourself, to change something?
Bayen: It inspired me to be–for instance, the blog that I just wrote today, I don’t think I would have written that if it wasn’t for that incident. I wrote it to help African Americans, the mass of African Americans–to give them the tools in an environment where it’s challenging to receive funding to bring their ideas, to build their dreams into reality. I feel obligated as a black man to share my knowledge, my skills, with my fellow African American founders, and really any minorities. To give them the tools that I’ve gathered over the years, to empower them to overcome any barriers they may have regarding getting funding, whether it’s from VCs or not.
If it wasn’t for the civil unrest I don’t think I would have written that story. I don’t think I would have been–I would have been more focused on the business itself. Okay, we received some money, now let’s get this business going. Writing that story took me a few days. I would have been focused on the business. But now, because of what happened, my focus changed. What can I do to help African Americans succeed in fundraising, regardless of color? That was directly inspired by current events.
VentureBeat: So you’re saying, “I’ve been able to succeed. I’ve learned a lot. You can do it too, and here’s how.”
Bayen: Exactly. And I wouldn’t have written that piece in another environment. It inspired me to share everything I knew. The past three weeks led me to draft that piece. That was my best way of serving my community.
VentureBeat: I thought it was interesting that you also acknowledge that you had help along the way, that there were people who opened doors for you. That’s always unexpected.
Bayen: Throughout my life–to give one example, Mike Jones at Science. He allowed us to host our company at Science for the past five and a half years. We had an office pretty much for free. Without him, if we’d had to find our own office, it would have been another expense. That allowed us to maintain a very low operation cost.
VentureBeat: How many people work for you now? Have you tried to build a diverse workforce?
Bayen: We’re 12 people now, seven men and five women. Two Asian women, two white women, one Hispanic woman. On the men’s side we’re three white men, three Portuguese men, and one black man, me. Diversity is strength. There are tons of studies out there explaining that having a more diverse team leads to better outcomes for investors. By having a more diverse workforce, it’ll lead to greater return on investment.
VentureBeat: You raised this $2 million. Do you feel hopeful right now, about things in general?
Bayen: Mucker Capital is a great fund. They seed funded Honey, which was acquired by Paypal for $4 billion last November. The fact that they trusted us is a major endorsement. The $2 million gives us a two-year runway, although it’s a little more complicated than that. We’re working closely with MasterCard as our partner. They’re providing us with some co-marketing budget to market our platform, and we’re completely in line with their financial inclusion initiatives. We’re in discussions with Paypal about the types of integrations we can do. We had a call with the M&A and venture team at Paypal this past Wednesday. We have a lot of support.
Keep in mind that I’m a UA expert. These are conservative figures. The only thing that’s slowing us down is on the debt financing side. Are we going to be able to raise enough debt financing to support our growth? I’ll be raising debt financing most of the time over the next couple of years. Luckily for us we have two bank partnerships already. We’ve partnered with four banks, and two banks will be providing us with a warehouse line of credit. But our business is expected to be pretty gigantic, where we’d most likely have to request some debt facility from other lenders out there.
Paying it forward
VentureBeat: I would guess you feel good that this is also going to help African American consumers.
Bayen: Exactly. This is a business that’s going to help–African Americans are subjected to low credit scores. The cost of borrowing is outrageously expensive. This platform will help all minorities, and particularly African Americans, in a significant way. All minorities are set to benefit immensely from our platform.
To put it in real numbers, if you have a credit score under 700 versus a credit score above 700 and you have to purchase a new Volkswagen Jetta, say–if your score is 720, you can expect the lease payment to be around $200-250 max. That’s the range. If your score is below 700, you can expect to pay more like $300-400. We’re helping consumers save thousands of dollars on their car payments, on any type of financing, just by using their Netflix or HBO account or their phone bills. Giving a tool to consumers to establish credit without accumulating more debt. That’s a powerful aspect of our platform. Netflix is becoming practically a necessity nowadays, especially when people are cutting off their cable TV. In a crisis like we have right now, people still need entertainment. The fact that they’re able to benefit from that payment is pretty powerful.
VentureBeat: Are you also hopeful about African Americans succeeding in business?
Bayen: Yes. There’s massive change happening right now. We’ve seen one bank setting aside a $100 million fund to invest with African Americans. In politics right now, in the Senate, they’re working on rules to prevent police brutality. The movement in the streets is having an impact at the state and the federal level, and even at the investment level, where funds are recognizing that they should be doing more. Andreessen Horowitz I think set aside another $2 million as well, but to be honest with you, $2 million is chump change. When they announced that everyone was laughing. You can quote me on that. $2 million is nothing.
VC funds should have a team that focuses on investing in minority businesses and founders. Again, the returns–there are tons of studies that show us that the return on investment will be much higher, not only by investing in diverse teams, but also by investing in minority-led teams. It’s good for business to set aside a unit that will focus on investing in minority businesses. I don’t know if they’d like me to say it out loud, but that’s one of the advantages of Mucker Capital. They realized that early on. They make it a point to invest in minority-led companies, and that’s worked out really well for them.