Welcome to issue #1 of our recently launched Q&A series, Unicorn Spotlight.

This series is all about diving into the world-class technological innovation conducted by exciting UK unicorn companies. Getting to grips with the technology, the mission, and the stories behind them.

In each edition, we sit down with a different founder, leader, or operator in an easily digestible conversational style Q&A format.

Today we interviewed Philip Belamant, CEO and co-founder of Zilch, to find out how they're shaking up the payments market by building the most empowering way for people to pay.

What does that mean? Paying over time, or in one, anywhere, any way you want.

As their marketing folks put it: "Zero interest. Zero surprises. Zero stress."

But, it doesn't stop there. Thinking of the company as "just another BNPL service" would be a gross mischaracterisation.

Zilch is pushing the boundaries of 'BNPL' (buy now pay later) to its limits, and beyond. Essentially, creating its own category using an over-the-top, direct-to-consumer model. What Philip calls β€œthe democratisation of free credit.” 

With the cost-of-living sky-rocketing in 2022, this core vision leads to products that deeply resonate with financially pressured consumers. Customers can pay-in-one on debit (with up to 2% in cashback and rewards) or credit (pay-in-4) for no interest or late fees, anywhere.

And, there is unquestionable evidence to show this works.

In addition to better repayment choices and controls that suit the customer and not the merchant or credit provider, Zilch patrons have benefitted from over $55m in savings and rewards. And, the platform actively prevents problematic debt arising via the use of real-time open banking tech.

As if that's not enough, they've also created a 'value flywheel' by cleverly leveraging cashback rewards.

How so? When customers use their Zilch card and choose to pay for their purchase in full at checkout, they earn 2% cashback in Zilch Rewards. Cashback rewards grow over time and can be applied to future purchases.

This creates a frequent usage loop. Customers use Zilch more times in a month than some customers use competitor services *in a year*.

Now you have a little taste of what Zilch is all about, let's dive into their journey.

Highlights:

  • ❀️ How and why Zilch built their entire infrastructure around their customers (and acquired 1 million in their first 13 months)
  • πŸ’ͺ Surviving the pandemic when a $100m+ financing deal fell through
  • πŸ“ˆ Growing from 0 to 250 staff in 12+ months whilst maintaining the Zilch culture

This is a very special Q&A because the Zilch story has been *incredible* to date. Their growth numbers are a chart-breaking level of mind-blowing. And, their journey to achieving this is both inspirational and eye-opening.

How so?

They were born in the pandemic and hit product-market fit right out of the gate, hyper-growing from 0 to 1 million in *just 13 months* and hyper-hiring from 0 to 250 staff in a similar amount of time.

They became a *double* unicorn in 14 months following their Series A, and, achieved the accolade of "fastest-growing fintech in Europe to reach unicorn status". That was in Q4 2021, after growing 8X from Q1 of the same year.

Today over 2.4 million people in the UK use Zilch (that's 5-6% of the adult population!). And, they've just launched in the US - a move that could put them on a pathway to achieving decacorn status pretty soon.

Helping to fuel this growth is a recently announced $50m Series C extension, bringing the total for the equity round to $160m. In total, they've raised $460 million in equity and debt.

The journey to making this happen has been far from smooth. Philip and his team pulled this off in a market with intense competition and precedent-bias, during a global pandemic that at times saw investors running for the hills.

Right now, you're likely scratching your head frantically asking yourself questions like "How can you acquire 1 million fintech customers in a year!?" and "How on earth can you hire 250 staff from 0 so fast!?" and "What ingredients are needed to make this happen!?"

Let's find out! Watch the Q&A below or read the transcript, lightly edited for reading clarity. πŸ‘‡

What is the mission of Zilch?

Our mission is to build the most empowering way for people to pay.

A lot of people tend to bucket Zilch into BNPL (buy now pay later). There are a bunch of really interesting and amazing businesses in this space. Companies that all of us have heard about, like Klarna and Afterpay.

Fundamentally, the difference between these companies and us is who we serve - who the customer is.

For us the customer is the end consumer, rather than the retailer.

The way we think about the world is a little bit different to these businesses. If you ask these companies what they believe, they'll tell you they make checkout seamless and easy, and, how they provide their customers with payment choice.

Therefore, they drive sales and reduce basket abandonment for retailers. That's what they believe. And they do a pretty good job of that.

What we believe is that no one should be financially excluded in the world. No one should have to be penalised financially for the privilege of having something they need when they want it, and, being able to defer that cost over time.

We believe that people shouldn't let payment get in the way of reuniting with loved ones, seeing someone who might be sick, or traveling to get that job interview. All these are the things that we believe.

So fundamentally, that's how we think about our product. And that's what we serve in consumers. It's just a fundamentally different way of thinking about the world.

How are you building and using technology to pursue that mission?

Everything is underpinned with technology.

This would not be possible without a whole lot of either our own tech or third-party tech.

We are a firm believer in that to disrupt the space, you don't have to completely disregard the ecosystem infrastructure that's been built before you arrived. In fact, our view is you should leverage this infrastructure. And then you can build something far bigger, far quicker.

If you look at a bunch of other providers in the space or people near us, they feel like you almost have to throw everything else away - "we need to do our own direct integrations with retailers". It takes a long time, you're almost building your own network up. You've got to go one by one. You've got to have a sales team.

Visa, Mastercard, and Discover have spent billions building infrastructure. And then you've got ad houses and sales agencies, etc. Why don't you just combine all of these things and build something over the top of this infrastructure? This way we could get bigger, so much faster.

And, we can leave all these jobs and tact. In fact, we can stimulate all of these businesses. We can continue to build revenue for them, and at the same time, build a lot of value for our business, and of course, our consumers.

So using a lot of infrastructure like the MasterCard rails, affiliate commission platforms, and intermediaries, etc. We leverage all this technology and pull it together with our own proprietary tech. That's how we serve our customer through our product, our app. Tech underpins everything.

What proportion of developers do you have versus overall employees?

At this point in time it's at least half, if not more, of the business. Ultimately we're a tech business. So the tech team is the largest by far.

And then a close follow to that is data. We have a data analyst or a data scientist in every single team in the company.

You are clearly very, very data-driven. How do you set objectives and measure success?

We run a matrix structure in the business. We have domains and then we have competencies that cut across all of these domains.

We've aligned the whole business with customers and what customers do - around any major action a customer takes. Let's say, for instance, we have new customers, we have a whole domain committed just to new customers.

Working on challenges like "How do we find them?" "How do we onboard this customer?" "How do we make that experience fantastic?" "What happens if they drop off?" "How do we really engage with this customer?" "How do we show them what we're all about?" etc. So that whole domain just focuses on it. And, it has a full-stack team.

We then have customers that spend with our product. And we have a whole domain just dedicated to this - "How do they spend?" "What's stopping them spend?" "Is there any fraud?" "What are the blocking rules?" "How do we unblock a customer?" "How do they self-serve?" etc.

And then we have retained customers, and so on, and so forth. So, we have all these domains that are very specifically focused on customer actions.

We set OKRs every quarter for each domain. We sit down and we say "right, this is what we're trying to achieve". We always talk about customers first - "How much savings are we trying to generate for customers over the next quarter?", "How many customers do we think we can save from high-cost credit products like credit cards, online lending, or overdrafts?" and "How much in fees and interest can we do we think we can save people?"

This is the big objective of the business.

Then what our teams do is they go in, they say, "right, how can we make that happen?" and "What OKRs within our team within our domain, and our squads in the domain, can we actually go and set for ourselves to make sure we contribute to this?"

This waterfalls down into the business. They go away and come up with three OKRs that could be something like "we're going to go and achieve sales of X" or "we're going to reduce bad debt by Y" or "we're going to increase conversions from month one to month two, retention by 10%", and so on, and so forth.

So every single domain in the business has the OKRs for the quarter. And then we use a platform called Looker, which is a real-time cohort analysis view of every cohort in the company across all the countries, to see how they're performing. "How are we retaining?", "Where do they go?", "If they come back?", "What's happening on an ongoing basis?"

That's awesome. Proper customer centricity at the heart of everything you do.

At Zilch you've gone from 0 to 250+ staff in 13 months.

How on earth did you manage that? Maybe you can talk me through the secret sauce there!?

As you would imagine, it's relatively painful.

We initially started scaling up the teams during COVID. So, we had this bizarre situation where we went into COVID with 20 odd people. And the first time we all got together as a team, when we were allowed to, we were maybe 120 people.

So it was just a strange situation. Those of us who knew and met each other beforehand, were we had been working together for a year already, we then got back together and there was another 100 people in the room. And, everyone's like... "what's going on here!?"

Scaling through Zoom interviews was certainly more challenging than what it is today. Now people can come in and we can have interviews face to face.

We deployed a multi-pronged strategy on talent acquisition. It's the usual story - you start with two agencies. That has its place, and that's fine. What we then discovered is we need to build an in-house talent team. We really need people who 'get us', who understand our culture, who can express this to anyone who wants to apply for any role, and can talk them through exactly how we are as a business.

And so we started building the in-house talent team. Then, at the same time, we said "let's start to migrate away from agencies, let's go and plug in a third-party who can help augment the talent team".

Ultimately, we ended up with about 25 talent acquisition people just dedicated to hiring all day long, that's all that this team was doing outside of agency. Then if something got to a period of time that we couldn't fill this role with this team of ours, we then went to agency.

And that's basically the engine we use to drive the growth in the team. And that's the way we've managed to control the culture of the business really well. Everybody comes through an in house team that gets us. They know what the culture is here.

This means we don't just have agencies saying "let's put bums on seats". That didn't really work for us. It's a combination of all of those things that we've used to really then scale up the team.

That plus the profile of building up the business as we've raised further capital and as our valuation has increased, this certainly helps. People are reading about the company, they're aware of what we're doing, and they're excited about our mission. They want to be part of the business. The inbounds have certainly increased dramatically.

A combination of all of these things created a scenario that we could go and execute quite well against. But, it's still tough. At the end of the day, the market has been completely insane. When it comes to hiring phenomenal people, we've got Google below us and above us in this building. We have Facebook across the road.

It's been an unbelievably heavy lift. In some cases, some of our top management spends 50% of the time just on hiring.

What has been your greatest challenge so far?

There's been so many.

We were born in a pandemic. About two and a half years ago we had a term sheet from a really amazing VC plus about 100 million of debt lined up based off the term sheet. We lost all of it in one phone call.

Basically, COVID arrived on the scene and everyone said "we're not sure... we're going to wait and see" and reneged on the deal. We'd lost all of that.

We went into COVID and said we're going to invest further - myself and my co-founders - in the business. We doubled down on the product, the team, and said let's just carry on.

Then we came back to market right in the middle of the pandemic, to raise money. I think I needed to invest in a new chair every week! You're doing like 250 calls. You're just sitting on your chair from seven in the morning until 10 at night every day and all day. It took 300 calls to close our first round of funding right in the middle of the pandemic, which was pretty phenomenal.

Then it rolled forward. There were a lot of initiatives from the UK government to help businesses, which was really amazing. So you had the Future Fund and all of these types of things come out. And we were like "wow, this is exciting!"

So they'll put a pound for a pound, for every pound you've raised? We thought this is a great way for us to raise additional capital! However, on the first round, we used convertible notes. So it wasn't actually equity at the time and had not been converted yet. So we didn't qualify for the Future Fund.

Then here we are today. Last year was extremely bullish. Markets were pumping. Everything was going crazy, which was great. We grew rapidly, which is brilliant.

But as we sit here looking at the market today, we're going "what's happened? everything has turned again". There's always been a challenge. I think that's the same for any company, regardless of whether it was COVID or something else.

But for us, we've been presented with some pretty tough environments and challenges right from the get-go. There are too many to list really.

What we've done well is manage both our capital story and our product. That's the focus.

I feel like the capital market really does understand what we're doing and why it's unique. And that's very useful. Because one big challenge has been trying to divorce our story from BNPL. Because really, we don't believe in BNPL. We think point-of-sale finance buttons are commodities. We don't like the business model, it's a race to zero, and we just don't think it's a great space to be in, which is why we specifically chose not to build a business in that space.

But people obviously look at installment payments and they go "oh, it's BNPL". So for us, one big challenge has been changing that. Making sure people's understanding of Zilch is completely different from what's come before it in the likes of these other products and services like Klarna and Afterpay. It's a great business, but we just don't want to be one of those companies.

But certainly, I think the success so far has been attracting phenomenal people. And finding product-market fit as early as we did. People underestimate how hard it is to actually find product-market fit. We were just really fortunate that we were able to find it so quickly with our initial product offering.

We only managed to do that because we have been able to attract and retain phenomenal people who've obviously gone and helped us build such awesome products.

Philip Belamant

Absolutely. It definitely sounds like you'd be described as a 'wartime CEO' given those challenges.

It certainly is. No choice. That's just it. We're not peacetime people. So we revel in this type of scenario.

What advice would you give your younger founder self?

Oh, that's an interesting one. A lot of people ask what advice you would give to entrepreneurs.

But, what advice I would give to myself?

My last business became a very large payments company out of South Africa, throughout Africa. And that business was on my own as the sole founder of the company. With Zilch, I have a co-founder in Sean O'Connor. We work really well together because he really focuses on the capital market and fundraising equity side of the business. And, I focus on driving, running, and operating the business, product, and strategy on a day-to-day business. And this really works nicely. It's a nice balance.

If I had to go back I would say "do your best to find a co-founder... someone that you can depend on, because all of us are human." You've experienced this, I'm sure many nights, Adam, lying awake and you're like "I'm not sure how we're going to fix this". And the problem is if you don't figure it out, no one else will.

Yeah, it's not the kind of thing you can just discuss with your team, always.

And that's why you get these entrepreneurial organisations popping up. Because they recognise this and are saying "how could you actually speak to someone who can meaningfully help you?"

I find a lot of advisors might have something great to say at a high level, but mostly it's rubbish, right? You have to be in the company to really help. Otherwise, you just don't understand the mechanics.

When you're lying awake at night you have a big issue. You don't know how to fix it. What do you do? If you don't figure it out, it can be a little lonely, right?

Because you're like "if I don't fix it, no one will!"

If you can find a co-founder that you can rely on, so when you wake up the next morning, and you haven't slept all night, and you get a call, and that person says to you "hey, I couldn't sleep last night. But guess what I came up with? What do you think about this?" That's pretty cool.

That allows you to dovetail a little bit. Because you have your peaks and troughs. Everyone's got high energy days and low-energy days.

And the other thing is probably just not forgetting to manage the capital side of the story. You're selling two products. You're selling a product to capital markets and you're selling a product to consumers, whether that's businesses or people. But you must do both.

Tell me about what's next for Zilch.

We're in the UK today. We've just launched in the US. The focus is on continuing to grow in the UK, but knocking it out in the US.

The UK is the third-largest ecommerce market. The US is the first, arguably. And we're really excited about putting a lot of our energy and time into this.

We're not one of these businesses that likes to plant flags. So you're not going to read "oh, Zilch launched in this country, that one, this one, that one" and we do all of them a little bit badly. When we do something, we do it right. And we just execute it. We don't underestimate the heavy lift for us to really be successful in the US.

We've seen a lot of European companies try to move over to the US and it didn't quite work out. So we don't take it lightly. We're going to put in the same level of grinding it out that we put into the UK. We don't have a choice, it must work. And we will not sleep until it is working. And that is the phase we are in. So it's almost like we've got blinkers on. We are not talking about anything else. We are going to absolutely knock this out of the park.

We intend to also bring a pan-European rollout of our product relatively soon. But that will be off the back of us growing well in the US.

As a product we just want to be the most empowering way for people to pay. So what that means in our minds and our customers' minds is: we should allow you to pay any way you want, anywhere you want, and using any form of funding you want.

This means you can fund with fiat currency, rewards, crypto, and things like Nectar loyalty points. The idea with Zilch is that you can pay any way you want. You could use any form of funding. We think that's going to unlock a lot of value for our customers.

When we sit and talk to customers they're like "wow, that would be amazing... if I could go and use my Emirates miles and pay anywhere." So that's the aspiration for us as a business.

Epic. Thanks, Philip!

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