Alex: All right, welcome to today's episode of the Curiosity Code, where we explore the cutting edge of fintech with the trailblazers and thinkers who are reshaping the financial landscape today. We're thrilled to have with us Zahra Alubudi, the CEO and co-founder of Levenue, the largest revenue-based financial marketing place in Europe. Zahra, based in London, has carved a nation of fintech through her expert plan of business development, commercialization, and innovative revenue growth strategies. Welcome to the show, Zahra.

Guest: Thank you, Alex. Thank you for having me. It's a pleasure.

Alex: Well, let's dive in straight to Levenue. So, Levenue, what inspired you to co-found Levenue and how did your previous entrepreneurial ventures prepare you for this journey?

Guest: Yeah, so maybe a bit of a background and context. I wasn't really the one who came up with the idea of Levino as my co-founder, but I'll tell you his journey into coming up with the idea and how we came together. So Ben, my co-founder, had a previous company that was capital-intensive in last-mile logistics. He grew the business and had to raise a lot of money. And that was his first intersection with experiencing how sometimes fundraising or getting VC money could also be harmful, because at a certain stage, I think it was four or five years down the line, his financial investors wanted to sell the company and he wanted to carry it on, but because he wasn't a majority shareholder anymore, he didn't have the option of doing that. So that was his first intersection with seeing how if you get diluted too much very early on, that you could lose a bit of control. So that was his journey. I met my co-founder at a VC fund where I was interning, and they had a big focus on tech, but mainly SaaS. So software as service company. And the beautiful thing about SaaS is that they have a very similar business model. They're very easy to analyze and their growth is relatively predictable. So after a couple of investments that he had in SaaS businesses, he decided to start Levinu and brought two people on board, our technical CTO and myself. I was, or my role within the business is everything commercial, operational, and gluing together. Every part that was broken. I like to wear multiple hats, and I love everything that goes from zero to one, which means that in the last couple of months and years, I've had a bit of difficulty with the stability of things. I always crave to go back to the small startup projects within the business.

Alex: But, yeah, makes sense. Speaking about the past year or two. I see that Levenue expanded to over 16 European countries. As far as I understand, this product offering has been previously mainly dominated by institutional players. But now it seems like revenue has become one of the largest revenue-based financial marketplaces. Can you share the journey to scaling your offering across the 16 European countries and the challenges you face along the way?

Guest: Definitely. I think looking back at the journey, the reason why we're able to scale was partially luck, but partially also a very good initial investment that we had made. So when we initially wanted to start, we realized pretty quickly that doing revenue based financing or providing any type of financial product in one or two countries was never going to cut it. It's either you do it in America, where you have a really big market, or you're able to scale it all over Europe very, very quickly. We are based in Belgium. We incorporated in the Netherlands, because I'm Dutch, and the regulation there was pretty easy, but serving one market was never going to be the solution to really expanding. So we took a step back, and before building the tech, which is what most of our competitors did, or even trying to launch a product, we wanted to focus on how can we scale this financial service as quickly as possible? And pretty quickly came to the realization that providing this type of financing in Europe, there was no streamlined regulation, there was no, hey, here's the global EU ways of providing financing. It was really country-by-country specific. So you spend the first three to six months doing an entire european analysis on every single country, what you needed to be able to provide financing there for the sell side company. So the companies with the recurring revenue streams, but also for the other side, the investors, which ones can you match with the other? So if you are based in Luxembourg and you're a sell side company, can you take money from a buy side institution or not? So we call that our internal legal rule engine. After a big investment in several months, we came up with a bit of a structure, which is in the middle, we have our standard contract, and then based on the countries where an investor or sell side is from, we would bring in the special clauses to make that contract or that deal work. What that enabled us to do was have a roadmap on the countries that are easy to trade in. We call them the dark green, then the green countries, orange and red. Now, there was a lot of really interesting countries like France, Spain, Italy, et cetera, that are really big SaaS markets, but were in the very red list, so really difficult to operate in. You would have to get an office, get a license get regulated, depending on exactly the country. So we were able to look at them and see what we needed to do to go to those countries. But we couldn't quite go there, like, from the start. So we started in the Benelux, and then the 16 countries that we're operating in are mainly the dark green, the greens, and then some oranges. And then as the years went on, we were able to, like, unlock small puzzle pieces. And, yeah, now we're operating in 16 european countries. So it was a good bet that we made initially because we knew that we wanted to scale very quickly, but also to see, okay, what are the most important markets and what are the barriers to entry. And now we know what we need to do for those remaining countries.

Alex: What are those green countries?

Guest: So the green countries are a lot of the Nordics, Germany, the UK, Ireland, and then a few others, Belgium, Netherlands, Luxembourg, etcetera. So there's quite a few of dark green and green countries. The only problem was that the Benelux is an interesting market. The Nordics, they were green. The UK is fantastic, but then you have France, Italy and Spain, which are huge markets, and they are as red as it gets. They're really hard to operate in, so you have to build an infrastructure. And we've been working on a few of those countries, and we're going to open in them pretty soon. But, yeah, so it was lucky on one side because we got the UK and the Nordics and Benelux, but unlucky because France, Italy and Spain are really red.

Alex: Any, like, what, what's, what's the easiest country to operate? And in your opinion, in European Union.

Guest: It depends, because there is no, there is no clear answer in what is the easiest country. But there are countries that are less regulated, Germany being one of them, the Netherlands being one of them. That's why we decided to incorporate in the Netherlands, because it's not about easy, but it's more how flexible are the government to work with you? As an example, when we first incorporated, we wanted to apply for a certain license, and the dutch government were really speedy. We went to them and said, hey, we want to apply for this license, but it's only going to, like, come out a year, like a year later. And they said, hey, come to us, we'll start helping you now. Whereas Belgium said, no, come to us when it launches. So it's not really that easy. But how the system works, that's kind of what makes it easier to work in a country or not.

Alex: Makes sense. Makes sense. I'm surprised about Germany though. Anyway, talking about Levin, you as a product. So is it first in its nature product that allows private investors to access subscription as an asset class as far as I see, yes. And it's kind of disruption of the market and traditional financial models in a sense. Let's just talk a little bit about the product itself, what exactly it is, how it is disturbing the market and what advantages does it offer to both investors and companies?

Guest: Yeah, I'll start with the companies because it's easy to link it together. So for a company that has a subscription model, which are the types of companies that we finance, it really is a disruptive way and a completely new way of getting growth capital. I'll do a bit of a history on what these types of companies previously had access to in terms of financing and how they compare this product to what else is available on the market. So I get a question really regularly, which is why don't these types of companies just go to a bank? And the truthful response is that most of these companies that we are funding are unbankable. Banks don't want to give them any money. Can you imagine like going to Belgium and saying hey, I don't know Belfius, I'm a SaaS company and I have a bunch of clients that are paying me on a monthly basis. I have 50 million in annual recurring revenue but I don't have any contracts with my clients. They can all stopping tomorrow and there is nothing I can do about it. But please, I can guarantee you that I'm going to continue to grow and I have seen from the evolution of my subscribers that I'm not going to lose any clients. The bank will say, well fantastic, that's great, but what am I supposed to do with it? What is your collateral? Can I come and take your house? What are the guarantees that I can take? There is nothing tangible about your code and your subscribers that can cancel at any minute. So banks are not quite the option. And once you get to the level of being able to bank or to get money from a bank, you should take it because the pricing is going to be really, really good. The problem is the barrier to entry is just so high that most startups, and not only SaaS, right? I mean every startup that exists has a really hard time getting a loan. Then the alternatives for companies with the subscription models, of course, VC money. So going out and raising around, a lot of people ask us, are you a direct competitor to VC? Is this supposed to break the VC land? My answer is definitely not. I mean when you look at the types of companies we can finance, there are already companies that have been generating revenue for at least one year. So the start has to be VC funded. Then the part that Levenue funds is the growth capital based on the revenue streams that you already have, which means if you have 1 million in annual recurring revenue, you could get 30% to 40% of that. So if you want to invest in a very big R and D project or take big risks that are required to have a lot of capital, we probably won't be the solution. Right. So you can use the VC and combine Levenue for the growth, predictable funding that you need. And then the third option that they are comparing us to is the current discounts that they give to their subscribers. So most SaaS companies, I don't know if you've seen it, but they offer 30, 40, even sometimes 50% if a client pays on an annual basis. Spotify, do it, come by, do it is. Hey, dear customer, I've just invested a lot of money to acquire you, right? I spent a lot of money in marketing. Now you're going to become my client, but if you, I don't know, want to pay me a year in advance, I'll give you a 40% discount. So that is really, I think, the most comparable type of financing. And we just do it in a different way where we say, instead of giving your clients this annual discount, how about you give it to an investor on our marketplace? And instead of doing 30 or 40%, you can do somewhere between seven to 13%. So those are kind of. And then you have of course, debts, etcetera. But I think the most comparable that I've heard from founders is, okay, the discounts that we're giving or vc money, and how does that really, Interlink, does that answer your question from the sell side?

Alex: Yeah. What about investors?

Guest: So for investors it really ranges, right? So we have currently today on our marketplace a lot of family offices, some high net worth, some insurers. For them, they see it as it can be one of two things. Either they see it as an alternative way to get exposure to high growth tech companies. Most family offices deploy in venture funds because they want exposure to that market. They either see it as a comparable or an alternative way to get exposure to high growth tech companies, but in a shorter duration because all of our contracts are twelve months. So yeah, that's, I think how they.

Alex: Look at it makes sense. Makes sense. So it's mainly family officers who are interested in that kind of dynamics.

Guest: Well, not mainly family offices. We started with family offices and insurers because it was, we had the network. It was easy. Easier. It wasn't easy, but it was easier to convince some family office than a big balance sheet because a big balance sheet would need years of track record and they practically behave like a bank. So having a smaller family office is where you could explain the product related to things that they understand. Private credit was the first step in. As we have evolved, we're really opening up conversations with the bigger balance sheets, but you need a track record. So now it's been three years. It's a completely different story than, okay, it's been three months. But for us and for Levineau's future, there's definitely a road into opening this up to retail investors or just accredited trusted investors. So that's going to be our journey for the coming year.

Alex: By the way, talking about early days, revenue is a marketplace essentially, right? And every marketplace as a business model faces the challenge of chicken and egg. You need to balance two sides, and it's the biggest challenge of this business model in general. How did you leverage that in early days? How did you find. Right. Startups that were ready to deal with you while you were still starting up and at the same time find the investors who will be interested in to invest? Let's talk about that.

Guest: Yeah, so you're right. Every marketplace has the chicken or egg problem, and we have a very unique one. So if you compare, let's say, eBay or Uber or Airbnb, for every rider there is a driver, right. It's a one on one equation. Every person that wants to rent a house, there's somebody lending it or giving the house. You can match one by one, calculate that pretty easily. The problem we have is that it's not a matched system. So for the companies that want financing, it's an individual, right? So we have ten companies, 20 companies, 30 companies for the investor side. And this is where the exercise began to be very hard, or not very hard, but harder to predict and maneuver that you always had a balance. An investor or family office could come on board and fund ten or 15 different companies. Right? So understanding how many companies a buy set was going to deploy in and trying to match that with how many sells that were coming in, that was the first balancing act, which even to this day is incredibly difficult to just maintain because sometimes you get an investor that wants to deploy tens of millions in german based companies and then you're like, oh, well, we. This is a bit of a different switch in the dynamic because they're german and they want to support the german ecosystem. Right. So that is the hardest one. And I would say we've gotten better at it. We're nowhere near perfecting it because we still have months and weeks where it's completely disbalanced. And that's when our team goes in, either tries to find more companies or balance out with more capital for certain companies that are waiting. That's the first one. The second one is depending on the month and the year. We've always had a complete switch of who wanted more. So I think at the start, because of our network, we had interested investors that just, again, luck and network believed in us, believed in the product, and wanted to just take the risk. But it was a small quantity. It was people that we had connected with through our career that believed in our product and what we were doing. And it was hard to convince companies to give all of their data to a company that they had never heard of and opened their banking and opened all of these very sensitive topics. Now, remember, actually, it was the founder of the company that we acquired cake before we had ever thought about acquiring them or buying them just by his trend of luck. Because I knew the guy, I called him and I said, hey, how did you convince clients to, to connect their bank accounts? Because their product, you had to connect your bank account and then you would get insights into your data and your spending and you could get money from that. I said, nobody wants to connect their bank account. They don't trust us. So that was the first couple of months. And after a few trades, it became easier of saying, okay, well, these companies have done it before, here's the proof, etcetera. And then you had a complete switch. And I think in the last year, with valuations going down and the VC landscape being pretty difficult to operate in, we had the complete switch where so many more companies wanted financing than we had capital to provide, and it just went completely the other way. So it's still an exercise.

Alex: Makes sense. Makes sense. That's truly amazing. It's balancing these two parts of the business, acquisitions. So you already mentioned acquisition of cake. I also see in the public media that you also acquired Meat founder. What's that about? What strategic advantage this acquisition offer and how do they align with Lebanon's mission?

Guest: Yeah, so there was a third one as well, right at the start recur that we acquired, but that was a direct dutch competitor of ours. I think in terms of acquisitions, we've done a few, all for different reasons. And they've told me a lot. I think cake was the most educational one, because the other two that we had acquired were direct competitors of Levenue, which means that the product was the same. The people understood exactly what we were doing, because they were providing the same service just in a different country. In the case of recur, was the same exact country. So for cake, do you want me to go through the reason why we acquired them or the learnings of it?

Alex: Well, more like a strategic direction, reasoning mainly. And how that helps to expand your offering or strategically.

Guest: Yeah. So for cake, maybe a bit of context on what they do or what they did. So they specialized in enriching banking transactions, which basically the product that they rolled out of that is not relevant. But that was the core. Yeah, the core technology that they were building is taking role banking transactions and then enriching and categorizing them. The reason we needed that is because when companies onboard, and we have. So it plugs into our underwriting model, which is one of our biggest focuses this year, to expand that to a completely new stage. So when companies want to get financing, they have to connect three data sources. Subscription manager, accounting and bank. A bank connection is really reliable and hard to manipulate. Then you have accounting, which is, well, as you know, in every european country, you have different formats, different structures. And sometimes, if you're really smart and creative accountant, you can make things look completely different than they really are. Right. It's not as trustworthy, let's say, as a rural banking connection. And then you have the subscription manager, which is very easy. It's simple. Four or five lines that are really important. How many clients do they have? When did they start subscribing? How much did they pay, et cetera. Those are the three data sources we use to analyze a company. So we first take those three, cross reference them and analyze the company. And then based on that, they can either get a trading limit or not. The key component that apart from the fact that the cake team are really capable and skilled at data analysis, underwriting metrics and enriching data in general, that was their core business focus. So the team was fantastic, but we used the banking enrichment tool that they had to start drafting what we call our synthetic p and l and balance sheet from the accounting. So eventually what we want to do is steer away as much as possible from receiving anything from the client, but just being able to produce ourselves. So how far can you go with never having to take anything from the customer? The reason for that, and it's not that we have trust issues. No. Yes. We do. That's exactly the reason. The whole point of this type of financing is that there is no human intervention, and the analysis can be based on true data that cannot be manipulated. So the cake team are now working on taking the accounting, which is probably the most risky part of the analysis, building our own synthetic p and l and balance sheet, and then cross referencing that, but then also just taking the whole underwriting to a completely new level. And with their capabilities and knowledge, that was the reason we acquired them. But it was, it was interesting in many ways. I think the most interesting part was that when at the time we acquired cake, we were smaller than they were. So we were with seven, and they were with about 30 before some people were let go. So in a normal case, in most acquisitions, the acquirer is the bigger company and the company being acquired is the smaller one. And we had a complete, like, opposite switch. And these numbers sound really small, like, oh, seven people, 30 people. People. It's not a lot of people, right. But it still felt completely overwhelming, and I would not recommend it. I mean, it worked out well, but incredibly difficult.

Alex: How did you manage to keep your own culture, since such a culture?

Guest: Well, culture was a three month battle. So I think, Levenue, the core culture of us is that we were bootstrapped for the entire. Until exactly that acquisition, we had never raised any external capital. It was funded by myself and my co-founder, Ben. Mainly by my co-founder, Ben. And so every day that we were working, we thought about, are we making money? How close are we to being profitable, and how can we save as much as possible because we're spending our own money? This is not backed by a big vc. The person's money that you're spending, you're literally looking at him in the face. So the culture became really tough, a bit rebellious, but also really saving, like classical Dutch, right? Really making sure that we're not spending a lot of money, and just doing everything and calculating our risks. So there was no margin for error at all. So I think that was one of the biggest differences that a lot of startups, and it's not just cake, it's a lot of startups in the last three years have grown up in an environment where capital was really easy to access and cheap. Everyone got a lot of it and they were spending a lot. So it wasn't the same type of calculations that they were making in terms of how much does this cost me? Is this going to be good? Can I take this bet, yes or no? It's good in some ways, right. So we had that discipline, but we couldn't take a lot of risks because we didn't have that extreme amount of capital to just flush out. So that was a cultural problem that was aligned pretty quickly. I think one of the good things I did was I over exaggerated what our expectations were. And I do this by just regular hiring as well. But I really just drilled in how intense it is, the work environments that they're going to have to work under and probably scared a few of them and then kind of saw what are the bad reactions and what are the types of people that aren't going to fit in the new infrastructure and just clean that out all in one go, which is not, it's actually, it's a really hard emotion, like having those calls the entire time and then having to do a lot of. Yeah, yeah. Firing people or just saying, hey, I'm sorry, you're not going to be in the next chapter. It's difficult, but it has to be done at the start. I got that feedback. So I spoke to a lot of founders who had done acquisitions and said, how do you handle the human aspect? This is really difficult. And that was like the recurring thing, fire everyone at the start right before they come in and just set the tone on what the company culture is going to be. But verbally saying that the entire time.

Alex: Makes sense. Well, that's quite a journey. Quite intensive clash of cultures. Well handled. Congratulations.

Guest: Thank you.

Alex: Let's look a bit into the future. Given your success and rapid growth of livenue, where do you see the future of revenue based financing heading and what role will revenue play in the shaping of that future?

Guest: Yeah, I think revenue based financing, when I think about Levenue, I don't really think about revenue based financing. It's weird, but I kind of think about it from how will financing for companies just evolve? I think even now when you look at startups, we are dealing in the most innovative tech advanced and high growth sector within the world. Right? We're building tech companies and everything is innovating. And the fuel that we use to fund these types of companies or to accelerate this industry has not evolved since when it was just incorporated. And let me put some color on that. VC's or how companies get valued or how companies get financed from an entire perspective has not changed. It's still the same process of, hey, I like your idea. You have a bit of track record. Give me a lot of your information. I'm going to decide if you want to. If I want to invest in you. Yes, or no. So I think when I look at the future of levy, I don't think of revenue based financing. I think of how can we make the access to capital more streamlined. Even if you want to go to a VC and you don't want revenue based financing because you want a big name to join your cap table and take a risk on you and deploy tens of millions because you want to build something new, how can you change that infrastructure? Instead of it taking three to six months of calling one person after the other, collecting an entire data room with all of your financials, getting questions again and again? And that is, I think the most exciting part, is seeing that when a company has revenue, what are the types of data sources that you need to just provide a financial overview, being a revenue based financing or not. Right. One of the unique things that we have currently, today at Leavenworth is that we have a lot of companies that are connected onto our marketplace that don't qualify for funding. They are not SaaS companies. They are just companies that have revenue streams and they connect themselves not to get financing, but just to look at their financial metrics. And that is a powerful tool that one could use to get other types of financing. Right, to get debt, to get venture capital money. So that's kind of how I see the landscape evolving. I hope I explained this in a correct way. Sometimes when it's in your head, it's completely different.

Alex: No, it makes sense. It will make sense. The way you outlined how Levenue versus revenue based financing, that totally makes sense. What is next for Levenue? Are there any exciting projects or expansions on the horizon that you can share with the audience?

Guest: Yeah, it's always exciting for you. Okay, what can I say? What can't I say? I think for us right now, the 16 countries that we're operating in are exciting, but we're working on a special regulation to just be able to access every single european country, which is supposed to hopefully come out next month ish. It always takes a bit longer than you expected. So the entire team is really excited to be able to operate in the big countries that we don't have access to right now and provide financing over there. So that is one of the big things in our timeline. And then the other two I've kind of mentioned briefly, but, yeah, diversifying our investor base and being able to open it up to different audiences, both from retail investors, private or accredited investors. But also the bigger balance sheets is a big focus for us. And I think, I mean, when we started, the entire idea was being able to open this up to as many people as possible. It's always been an idea of ours wanting to do it, but never having the infrastructure. I tried right at the start, I think within our first year, and then completely failed, both due to infrastructure and regulation. So now, three years later, we're giving it another go. And hopefully now that we're bigger and more stable, we have the resources to be able to do that.

Alex: Yeah, sometimes it's just not the right time.

Guest: No, it wasn't, but I learned a lot from it. And actually, right before our call, I was rebuilding a sketch of how that was going to work again. And it's very similar. And it's funny that the idea didn't really change a lot, but just the experience and the infrastructure that you have and the resource they have now, it's like, oh, now we can do this idea, which it's exactly the same as it was two and a half years ago, but today it works. And two and a half years ago, it completely failed.

Alex: Great, good luck with that. Let's wrap things up. I usually ask our guests about their word of wisdom and advice to the entrepreneurs that are looking to navigate the world of fintech. What would you say?

Guest: So I had a call today with some clients, and I always have a hard time introducing myself because I never went to university and a lot of, and I know that now, like, this is a cool, hip thing. Like, Mark Zuckerberg didn't go to university and they all dropped out. But in all honesty, saying stuff like this, even today, is a bit weird. And I had to explain myself on why I decided to not go to university. So from a young age, I mean, I grew up in a household of entrepreneurs. So my mother was an entrepreneur, completely different, like industry, not comparable at all, but entrepreneurship nonetheless. So for me, it was really important to just not go to school and just start working because I knew that you'd learn so much more being on the ground than any school could provide you. This is not saying if you want to become a lawyer or a doctor, because you really need degrees for those things, right? I mean, I would really love for my heart surgeon to have gone to university and studied and practiced a bit.

Alex: Small disclaimer.

Guest: But I think being an entrepreneur, even looking at day zero of Levenue, what we thought the business was going to be versus where we are today is a completely different thing. And I can guarantee you that any entrepreneur you ask will have the exact same response, which is the product I thought I was starting until today. Is completely different. There is one thing that is a recurring theme, and it happened with cake. It happened basically every quarter or two quarters within my lifetime of Levenue, which is we have an idea. Most of us have no understanding or knowledge about the topic. I mean, my background was a bit in entrepreneurship, a bit commercial, my co-founder, Ben, a bit legal, a bit investor. Everyone had some parts, but there were a lot of topics that nobody had any knowledge about. And the one similarity you see between me, my co-founder, and most entrepreneurs is that during the stage of building your company, you're going to get faced with wanting to do something that you have zero knowledge about. And it's more about how quickly are you able to learn just enough to be able to make calculated decisions without having to be a full on expert within the field. I hope that makes sense. Yeah. And that is something that I've had to do. Yeah, sorry. I think there was a bit of a lag with the Wi Fi, and that's something that I've had to do over and over and over again in completely different parts of the business. If it was with our investors, if it was with the underwriting team, just being able to go from I know nothing to I know enough to take a decision and how quickly you can do that over and over again. And it's like a muscle, right? You exercise it and you do it, and it's painful at the start, and it takes longer at the start, but then it's also really not humiliating, but intimidating. Sometimes when you hire somebody who knows about this thing and you have to manage them and you don't know anything and you have to just make that jump really quickly. I used to shy away from it and just try to do it alone. But one thing I've learned in the last couple of years is just going to those people and saying, hey, look, I'm really impressed by what you do. Don't quite know a lot about it. Let's do a deep dive together. Explain to me how you're thinking, and then try to absorb from them instead of hiding and saying, no, I know it's all going and studying it and then coming back. I think that's a tip.

Alex: Embrace the continuous learning and you'll be fine. Well, thank you very much, Zaref, for being a guest. I really appreciate your time. It's been a pleasure. And I learned, I personally learned a lot about this type of business that you do. Never knew that there is one like that. So hopefully it will be interesting to learn about it to our audience as well.

Guest: Thank you. Thank you so much for having me, Alex. It was a pleasure.

Alex: Thanks. Alright, so that was another episode, so don't forget to hit the like button and subscribe and see you next time. Bye.