BETA
This is a BETA experience. You may opt-out by clicking here

More From Forbes

Edit Story

Transforming The Small-Business Lending Customer Experience: Kabbage CEO Rob Frohwein

This article is more than 5 years old.

Kabbage co-founder and CEO Rob Frohwein attributes the success of his company to four words: “taking small business seriously.” The start of Kabbage, in 2009, was almost comically modest: financing tiny eBay-based businesses. Meeting with these smallest-of-the-small businesses at industry events, Frohwein says, “our whole pitch was, ‘can I buy you a beer?’ What I mean by this is we were there to take them seriously, to truly listen to them, face to face and eye to eye. I can’t begin to tell you how thankful they were, and continue to be, to be taken seriously in their concerns, worries, and wishes.”

In the intervening years since Frohwein and his friends, Marc Gorlin and Kathryn Petralia, started Kabbage “with an idea and a misspelling of cabbage” (a slang term for money), it’s gone on to fund more than 150,000 small businesses, representing a wide variety of industries, with over $5 billion of working capital. And in that time, the goal has evolved, says Frohwein, to “never allowing you to go below zero.” What he means by this is “to keep entrepreneurs away from that pit-of-the-stomach feeling, which I know as a former small business owner myself: Deciding whether to pay vendors first, or make payroll, or invest in marketing, and knowing you need to do all three but it’s going to kill you because your cash flow just isn’t working out. It’s here that Kabbage can step up and help.”

Kabbage's effect on the existing lending landscape has been notable, including overhauling the process of qualifying small business customers for lending approval: reducing the friction involved in applying (on the borrower’s side of the equation) and in approving borrowers (on the lender’s side of the equation).  As a customer experience and customer service consultant, I’ve kept an eye on the customer experience/user experience/customer service aspect of the Kabbage story for some time and wanted to talk with Frohwein about how they got to where they are and where they’re going in the future. 

Micah Solomon, Forbes:  I’m interested in how you went about pushing back against the traditional customer experience norms in lending.

Rob Frohwein, Co-Founder and CEO, Kabbage, Inc.: Everyone knows that banks have been underserving small business customers, but our transformational moment came from asking “why?”. It turns out that a large part of the reason is the costly, manual processes that make underwriting small business loans time-intensive and unprofitable. Kabbage’s technology quickly analyzes the live business data of a small business and fully automates the underwriting process, so businesses get an answer and access to capital in minutes, not weeks or months. 

Is there a particular framework or philosophy that guides you in envisioning and executing customer experience and operational innovations?  

We have a saying: “Design for the customer, solve for [fill in the blank].”  This means you figure out specifically what the customer wants and needs, and that’s what you build. The blank is meant for the business concerns you might need to consider: risk, legal, regulations, marketing, etc. It doesn’t mean you ignore these considerations, but you do avoid being like the many, many companies that first incorporate the limitations into the design of a product before they even start to build it. By doing things this way, their end result is doomed to never meet customers’ expectations. Instead, you should first figure out the key “must haves” from a customer perspective and make them the center of your solution.

Many of my readers are entrepreneurs. Would you mind sharing an anecdote from a time in your business when something went really wrong and you solved it or learned from it –or that other entrepreneurs can learn from.

We were in the early stages of the business and had signed with a bank partner to issue loans to small businesses. A week or two before launch, the bank partner called us and said the deal was off because they were having regulatory challenges. In a moment, the business went from full steam ahead to dead. Tears were shed that day. However, we got together, brainstormed options, and came up with an alternative funding method called merchant cash advance. Within a week, we recoded and rewrote the entire site and were ready to go. We went that route for more than three years before switching back to a lending product with a different bank partner and we haven’t looked back since.

There are few issues that really kill a business. An entrepreneur needs to both be able to look around the corner as to what might kill it in the future and have the fortitude to make difficult decisions. Businesses are constantly faced with life or death scenarios—the ones that make it through those issues are the ones that become great. 

 What do you think is coming next in banking/lending, either within or outside of Kabbage? 

Financial systems that leverage artificial intelligence are in the position to not only predict what’s going to happen, but to also take appropriate and proactive actions on a customer’s behalf. To accomplish this, a company needs to understand the complete financial picture and have the ability to take action. 

What do you think is coming next/what do you see happening now in changes to/innovations in customer experience and customer service in any industries, not just banking? 

The field is constantly being leveled thanks to technology, enabling the small business to compete effectively with larger businesses. There has never been a better time to start a small business and gain some control over your life and work!

And for Kabbage? What’s next for you.  

Another internal saying here is “Let the bakers bake.” A baker didn’t start their business to deal with back-office financing all day long. They want to serve their customers and perfect their craft. We’re in the business of giving small businesses back more time in their day and to remove unneeded friction.

Micah Solomon

Having more than 2 million live data connections with our customers today gives us an inherent advantage in the market to deliver unique products fit to match their business. We’re taking this concept and expanding it to all sorts of products and services that allow the small business owner to focus on doing what they love to do.

Follow me on Twitter or LinkedInCheck out my website or some of my other work here