Three startups and a b-school: from LBS to Wayflyer

Wayflyer is one of the leading European providers of revenue-based financing to e-commerce companies. The Dublin-based company recently raised $150 million in an all-equity Series B funding, thus joining the unicorn club at a $1.6 billion valuation. Co-founder Aidan Corbett MBA2013 sat down with Gary Dushnitsky, Associate Professor of Strategy and Entrepreneurship at London Business School, to discuss Wayflyer’s innovative funding proposition and share his hard-earned advice for aspiring entrepreneurs.

Gary: Wayflyer, a company you co-founded less than three years ago, has recently reached unicorn status. Can you share with us the Wayflyer value proposition?

Aidan: Wayflyer provides revenue-based financing to e-commerce companies. We developed a proprietary technology platform that analyses marketing performance on a daily basis and underwrites up to $20m in funding in as fast as 24 hours.

Our growth is, in part, attributable to the proliferation of e-commerce activity during the past decade, and particularly since the pandemic. As customers and businesses migrate online, we have seen entrepreneurs going from a modest start to substantial monthly revenues. Many e-commerce companies find that while demand is strong, they face a common hurdle to growth; the lack of working capital to fund inventory and fulfil customers’ demand. It is a major hurdle that e-commerce entrepreneurs face on a daily basis.

Traditional banks often shy away from e-commerce businesses. The reasons are varied and have to do with the asset profile of those companies and the limited capabilities banks possess at assessing the profitability and future prospects of e-commerce businesses. To me, that underscores the value proposition of vertical financing. That is, specialists who understand a specific sector and can accurately assess prospects and price risk.

At Wayflyer, we have developed a deep understanding and the capabilities to serve the e-commerce sector. We found that e-commerce entrepreneurs are accustomed to sharing marketing and financial information with platforms such as Shopify, Amazon and Stripe, and are keen to do so if that implies access to fast and well-priced capital. Our outbound marketing email campaign exhibits a conversion rate in the high single digits – to me it suggests that access to working capital is a major pain point. Our technology integrates the data entrepreneurs share with digital signals we derive across multiple platforms. As a result, we are capable of underwriting funding needs within hours. Moreover, we share the insights from our analytics with the businesses and therefore aids with further improvement in customer acquisition and overall profitability.

Gary: It is a fascinating proposition which I would like to explore further. Before we do so, let’s take a couple of steps back. I understand that this is the third startup you have launched since graduating from London Business School. I am curious to learn more about your entrepreneurial pursuits to date.

Aidan: My time at LBS was instrumental to the development of my entrepreneurial journey. I started my MBA with a clear goal of breaking into private equity. By the second year, I had come to realise that it was not the path for me. Rather, I turned my focus to technology and worked on honing my coding skills, watching hours of how-to coding tutorial videos. At the same time, I observed that many of my classmates were perfecting their skillset in Excel and PowerPoint in preparation for a career in finance or consulting. The idea for my first startup, Kubicle, was born.

I spent the first year after graduation at home, writing code and developing the Kubicle platform with the aim of providing online Excel and PowerPoint training to business professionals. The inflexion point arrived a year later, once I brought in a person with sales experience, who led Kubicle’s successful expansion into the enterprise space. Within a year Kubicle had over $1M in revenue and it continued to grow sales and the number of customers in the following years.

In late 2016, I co-founded my second startup, Conjura. The company, which continues to operate today, provides a technical infrastructure for e-commerce companies to optimise their digital spend on revenue. Based on the learnings from my first venture, I opted to do things differently. At Kubicle I drove technology development, which allowed me to bootstrap the business. With Conjura, I took the decision to raise capital from the start and hired talent to develop the technological platform. In the early days, the business operated as a consultancy which was instrumental to gaining a keen understanding of our customers and the challenges they face. We built on that experience to drive our development efforts and achieve product-market fit. As a result, we were able to tailor a technological solution that caters to the needs of e-commerce businesses.

A couple of years later, I was approached by my current co-founder who was running an e-commerce incubator. Together, we saw the opportunity in going beyond marketing advice and further empowering e-commerce businesses. We set out to build a solution that marries an understanding of customers’ needs along with knowledge of profitability drivers and capital requirements. Wayflyer was born.

Gary: I wonder whether you can share two or three learnings with those who contemplate launching an entrepreneurial venture of their own.

Aidan: I have reflected on my experiences, and the current landscape, in an attempt to distil a few key learnings. I am happy to share those with our community and open to engage in future conversations.

One key learning is the value of establishing product-market fit. At the start of my journey, I spent a lot of time on coding and the development of the technical platform. I have learnt a lot but upon reflection I probably delayed the answer to a major question; is there demand for your product or service?

Of course, back in the day, I had to spend the time developing some sort of a prototype to engage with prospective customers and establish demand. Fortunately, for those who contemplate an entrepreneurial venture these days, this is a much easier feat. Nowadays, there is an abundance of low-code or no-code tools that allow you to set up a prototype, a minimum viable product, within a couple of days. In other words, today’s entrepreneurs can begin by focusing on exploring product-market fit and turn to building the technology once they have established customer traction.

A second, related learning has to do with the critical role of sales in technology businesses. With my first startup, Kubicle, customers and sales have grown at a moderate pace. The inflection point was once I hired an experienced sales professional. It brought in a set of capabilities and knowhow that realised our full potential. I have seen a similar pattern with other companies. Therefore, I would emphasise the value of investing in your sales team and capabilities.

Finally, I am a big believer in learning what ‘world class’ looks like. If your goal is to build a business, let alone a unicorn, you will need talented individuals to be part of that journey. But what does world class talent look like? Over the years, I have used the following ‘hack’ to address that question. Specifically, I would reach out to experts from tier-one companies and engage them for up to one hour. For example, I would ask the VP at a well-known unicorn to help interviewing a prospective hire. Those interactions empowered me and the learnings were invaluable in taking my venture to the next level.

Fortunately, the three learnings are readily accessible to aspiring entrepreneurs. Those are tools or contacts that should be within the reach of everyone who are part of the LBS community.

Gary: Those are sterling pieces of advice. Let us draw on these insights and circle back to Wayflyer. Nowadays, as you noted, there is a cadre of entrepreneurs who led successful e-commerce companies. They often do not fit the traditional venture capital profile and many may be uninterested in raising dilutive equity financing. What advice would you give an e-commerce entrepreneur who is contemplating revenue-based funding.

Aidan: We see many successful e-commerce startups with a strong brand and a loyal group of customers. These businesses can generate consistent monthly revenues in the $10-20m range. And while many have the potential to grow sales and customer base, they often lack the resources to invest in inventory and related items. The barrier to growth is capital, and specifically access to working capital. Enter revenue-based financing. Shopify, the celebrated e-commerce platform, launched Shopify Capital in North America about five years ago and has already disbursed over $2B in loans to date. The popularity of revenue-financing is growing in Europe. When it comes to thinking about this path, an entrepreneur may want to contemplate several factors.

First, as with any funding solution, there is pricing. You should understand the cost of capital, or implied rate, when comparing different revenue-based funding options. Second, and relatedly, there is the issue of flexibility and simplicity. For example, can one choose a repayment profile that meets their specific needs. In addition, it would be useful to look beyond the next quarter or two and think about financing needs that may arise over a longer time horizon. It leads to the third point, the ability to draw on larger amounts as the business successfully grows and so do its capital needs. Fourth, at a time where VC differentiate themselves in the level of support and value-add they offer, one should similarly understand the opportunities afforded by each revenue-based providers. Because different providers vary in the nature of engagements or the extra services they offer, one would be wise to go with a profile that bests suits their needs.

All in all, this is an exciting time for e-commerce businesses and the entrepreneurs that launch them. There is a wide set of funding options available to them, including non-dilutive revenue-based solutions.