Sebastian 'Seb' Patel - Co-founder & COO - Franc Group
Your Smart & Simple Savings App
Welcome back to 728 Founder’s Series, I have still not cracked my forgotten password. At this stage it feels like a lost bitcoin. But still, we move. The ongoing pandemic has been catastrophic for millions of families around the world, that cannot be understated & we cannot overlook the amount of loss we have had over the past year.
We are now more conscious about how we live our lives, how we spend our money & the importance of saving to be financially ready for tough times.
I have a post sitting in my draft page titled ‘Robo-advisory in South Africa’, but it doesn’t hit the way I want it to. I needed something more genuine, I needed a story with more compassion about how to save your money in South Africa. Then, I came across a Youtube ad that went like this:
“Hi I'm Tom, I'm an engineer, hi I'm Seb I'm an actuary & together we are the co-founders of Franc, an investment app built to make savings easy & accessible to everyone. We just couldn’t understand why only 5% of the population (South Africa) invest, despite being the highest country in the world with the search term of ‘how to invest’… ”
I found that interesting.
Before dedicating my life to technology & startups I had dreams of walking around Goldman Sachs trading floor in London shouting “there’s blood in the water call an ambulance” — I might have watched too many Wallstreet movies but those were my dreams and I cannot be judged.
What I know is that it is extremely important for people to be in control of their finances, to be able to save money for a rainy day & whatever they want. Looking into Robo-advisory I wanted something that looked like Betterment or Wealthfront — I wanted self-driving money™. Something that gives a better interest rate than a bank’s savings account, something that is not sold by someone in a suit, something so simple that I can even refer my mother to it — something like…Franc, a smart & simple savings app.
So I had to ask Seb to share the journey of Franc with me & you.
Enjoy.
Hey Seb. Thanks for doing this.
To start can you talk about who Seb is & how he came to co-found the Franc Group?
I am an actuary who spent just over six years in Nedbank's M&A team and eight years at BEE investment outfit Brimstone Investment Corporation. I have been a non-executive director of a number of companies in sectors ranging from healthcare, asset management, QSR and investments.
Franc was founded in 2018 by my university friend Thomas Brennan (I joined a year later in 2019). After working in Discovery’s R&D lab and being exposed to a broad spectrum of financial services, Thomas couldn’t understand why only 5% of the country was investing, despite being top in the world for the search term ‘how to invest’.
I, being the financial and investment person in my family and in some of my friend circles, was often asked for advice as to where people should be investing their money. So when Tom came and chatted to me about Franc, it really resonated with me as I knew this was a big issue that needed resolving. Many people just didn’t know where to start because of financial barriers, product complexity and limited access.
For people who might not know about the Franc Group or better Franc.app. Can you explain what you & your team are building?
We are trying to demystify financial services products, starting with an investment app that gives access to a leading cash and equity fund without any minimum investment requirements or rigid policy-like products which penalise you if you miss a payment. You can invest any amount at any time.
We want to be known for our simplicity and ease of use, whilst providing great advice (through the app, social media and our blog) to our customers. We want everyone to access investing. All this without unnecessary complications and big words that nobody really understands!
The reasons for the inequality in SA are many, but one of them is that many people have not had access to quality investment products - if the stock market has a long term return of 15% pa and salary inflation is c.5% pa, we can see why the rich get richer. Also, many people sit on money in their bank account not earning any sort of return when they can earn an inflation-beating return in our cash fund without tying their cash up in a fixed deposit.
Love that, my favourite big word is risk-adjusted-return-on-capital (RAROC).
At an early stage startup, the mission of the organization is imperative. It helps attract investors, employees & most importantly customers. The destination of the mission seems unattainable to some but it is what drives innovators to innovate. It drives a sense of belief, in hope of achieving something great.
Great companies are built around a mission. Google’s “Organizing the world’s information” & Amazon’s “To be the Earth’s most customer-centric company” come to mind.
What would you say is the mission of Franc?
“The World’s most trusted advisor” is our big hairy audacious goal, haha! But as part of that, our mission is to build Franc into a trusted and household brand, recognised for relevance, honesty, transparency and integrity.
Far too many people in South Africa have gone without access or knowledge of investing for far too long (or why they should be doing it). Many people don’t understand the financial products that they have been sold (and often they are sold products that are not suitable).
Relevance, honesty, transparency & integrity — hope those are the internal values haha!
I heard you speak about the fundraising journey & how difficult it is to raise capital. What lessons have you learnt along the road raising capital?
It has definitely been much harder than anticipated. The team bootstrapped up until late last year (2019) and started getting external investor funding ever since then. I am fortunate to have a good investor network (not VC, granted) given my past background but it has still been challenging for us to raise our seed round.
Founders with limited business and financial experience would probably find it even tougher than we did and I am sure there are lots of good potential businesses that are slipping through the cracks as a result of the limited pool of early-stage funding available in SA (this is getting better slowly). This is compounded by the fact that there are limited successful founders locally who have “been there, done that” who one can get advice from or who can seed other startups like the Silicon Valley ecosystem allows for. Talk to as many people as possible, you never know what doors may open.
We were lucky in that our Google and Grindstone programme participation allowed us access to people who could see things we couldn’t and accelerate our learnings though.
Dr Thomas Brennan, your Co-founder & yourself have been able to attract a diverse group of people to help build Franc. I believe there are 3 things that make a startup successful. 1. The mission; is the mission big enough & does it matter. 2. People, can the startup recruit the right people at the right time to build the company & 3. Culture, can the startup build an inclusive culture that can scale. What are the values of Franc as a start-up? & How do you navigate recruiting, especially for talented engineers?
Franc is a remote working, young and dynamic team. To date, we have been lucky enough to handpick a team who are all as passionate about what we want to achieve as Tom and I are. We are united by a strong sense of purpose, are open to change and have a relentless focus on success. Focusing on what’s best for the customer is genuinely at the core to what we do.
Regarding recruiting we have mainly recruited people that have worked together before or with other colleagues so that we know what we are getting and that they will fit in the team. We have made a few “fresh” hires and luckily for us these have worked out well but the challenge will be to do this at scale going forward. “Hire slowly and fire fast” is something that may work in the US but not so much here so we have to be careful.
When you first began building Franc, it was based on the community-based savings culture of South Africa, called Stokvels. Otherwise known in global spaces as a ROSCA,
(Rotating Credit and Savings Association). How has the business model changed since then?
We are still using the stokvel model. Our community of users share the common purpose of investing into funds that might otherwise be inaccessible to them. For instance, Franc’s cash fund, Allan Gray Money Market fund, requires a R20,000 once-off deposit to open an account. By coming together as a digital community, the members of Franc Stokvel can pool their resources and access the best investments.
Franc Group (the app) is the platform that facilitates and administrates the Stokvel members investments into the cash and equity products, so these are 2 independent entities.
Understood.
COVID-19 & the unexpected change in consumer behaviour has tested a lot of businesses. How has the pandemic with its various lockdowns affected your own business?
As an already primarily remote working team, we were largely unaffected and were able to continue operating without interruptions. The lack of some physical interaction has definitely been a negative but hopefully this will get better soon.
In terms of customer growth, the pandemic definitely sparked an interest in investment products which was a trend all over the world, so in this sense, it helped our business grow. People realised why they should have been putting money away and adoption of digital products accelerated given the lockdown.
We appreciated how many customers turned to us for sage advice during this trying time. We saw our ‘Francly Speaking’ blog readership and social media platforms increase as people sought to educate themselves.
Lastly, by the end of 2020 & going into 2021 most companies are struggling with how to plan for the next 12 months. There is still a lot of uncertainty around what the world will look like in 6-12 months. As an early-stage start-up, what is your plan for 2021? What are you looking to accomplish, despite the uncertainty?
Our business’s primary focus is on customer acquisition – to get as many people as possible to download the app and start their investment journey. We started off growing organically through word of mouth when we didn’t have much of a budget, but as we got funding on board we increased our marketing efforts. That said, we still believe word of mouth is the most powerful marketing tool for Franc — and we hope our clients will be the ones who market the business for us after they’ve had a great experience using our app. Ultimately, we hope that Franc will assist millions of South Africans realise their financial dreams.
Thanks again Seb, take care.
For more information on the Franc Group, visit Franc.app
Download the app: iOS - Android