Fintech Explained Profile: Luke Voiles, CEO at Pipe
Q: As Pipe’s Chief Executive Officer, can you share a bit about Pipe and the company’s mission?
Pipe makes customer-friendly capital & smart financial tools accessible to growing businesses inside the software they use every day. Software platforms can easily integrate with Pipe to offer financial products without needing to worry about the risk, compliance, and capital markets.
Pipe is solving the largest pain point that SMBs have - access to capital. SMBs need capital to grow their business, but it’s extremely difficult for a lot of small businesses to get capital today. Many of them—especially the micro businesses and minority-owned businesses—don’t have the business history to get approved, or don’t even have FICO scores.
We make capital available within the software to help them run their business. Not only does this make it convenient and simple, but it also allows them to access capital based on their business's performance instead of the lengthy traditional underwriting and paperwork. They can log into their software, see their offers, powered by Pipe, and know they have access when they need it.
Q: Today marks #NationalEntrepreneursDay. What unique gaps in the market does Pipe address, and how do your solutions cater specifically to the needs of early-stage founders building and scaling their businesses?
Easier access to capital is what we hope to bring to businesses and entrepreneurs. We do this by only looking at the transaction levels of the business - not weighing their FICO scores or requiring personal guarantees. We also have the friendliest experience, with a multi-draw advance with features similar to a line of credit that merchants can keep going back to for the life of their offer. This allows us to bring more capital to businesses more quickly to help fuel their growth.
Q: What are some of the most common challenges startups face, and how does your company help founders overcome these obstacles, particularly in managing finances and accessing capital?
We hear from businesses that they need capital to fund inventory, buy new equipment, hire new employees, or open up a new location. All businesses need capital to grow, and we deliver pre-approved offers to qualifying SMBs within the same platforms they use to run their business.
Q: From your perspective, what policy or regulatory changes are necessary to foster innovation in the fintech space and better support the growth of startups and entrepreneurs?
First and foremost, we need to see policies that address some of the inherent bias in traditional scoring methods for underwriting. So many businesses are locked out of the system because of the unfair impact of race, gender, or immigrant status on credit scores, and a system that wasn’t built for today’s dynamic businesses.
In terms of what else I would like to see, it’s actually more dialogue between regulators and fintechs. We believe when everybody plays by the rules, everybody wins. We built a robust compliance program utilizing a host of high-tech tools and experienced compliance professionals. But with the rapidly changing demographics and needs of SMBs, we need innovation in this area as well, which requires more dialogue between fintechs and regulators.
We also need to see regulatory changes that make it easier to curb fraud and compliance issues with less friction. Technology is making it possible to create incredibly safe financial products, but there are still some legacy compliance issues out there that are a huge hurdle for SMBs looking to access capital when they need it.
Four Ways Fintech Powers Entrepreneurs
Entrepreneurship is a key driver of economic growth, stimulating competition, creating jobs, driving convenience, and bringing new products to market. Start-up rates are rising, with likely business applications growing in all 50 states over the past three years. Financial technology – or fintech – is a major part of this success story. While legacy financial institutions have historically prioritized serving established businesses, fintech is stepping up to serve the startup and innovation economy, which in turn powers Main Street. Fintech helps founders raise and manage capital, accept digital payments, handle expenses more efficiently, and set up a bank account in minutes rather than days.
Expanding Access to Funding to Launch a Business
The barrier: The biggest challenge for many founders is accessing capital to fund their ideas. Traditionally, the startup industry operates within tight-knit circles, resulting in outsiders struggling to gain visibility and credibility. Outdated definitions of an accredited investor currently limit the opportunity to fund an early-stage startup. As a result, entrepreneurs face extensive barriers in getting their ideas off the ground.
The fintech solution: Fintech companies support the innovation economy and make it easier for entrepreneurs to access venture capital, manage equity, and streamline processes.
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The next step: Investing in a high-growth startup should not be limited to the wealthy and well-connected. Expanding the definition of an accredited investor – through legislation like H.R. 835, the Fair Investment Opportunities for Professional Experts Act – would allow more Americans to invest in early-stage startups.
Navigating Legal and Regulatory Requirements
The barrier: Navigating legal and regulatory requirements can be overwhelming for entrepreneurs starting a new venture, as they must choose a business structure, register with authorities, evaluate tax implications, and obtain permits and licenses. This is especially true for digital businesses, which must comply with regulations across states and tax jurisdictions.
The fintech solution: Fintech companies guide entrepreneurs through the complex federal, state, and local regulatory requirements and help streamline business formation and compliance requirements. These tools are often out of reach for new businesses underserved by traditional financial institutions.
The next step: Congress should enable electronic filing for key tax forms like the annual 1099 and Section 83(b) elections. Simplifying these filing processes by passing legislation like H.R.2611, the Eliminating Paperwork for Startups Act is crucial to helping entrepreneurs efficiently manage their ventures.
Expanding Access to Working Capital to Grow a Business
The barrier: More than eight in ten entrepreneurs struggle to access bank loans. That’s because legacy financial institutions have largely ignored entrepreneurs, which can be expensive and time-consuming. As a result, there is often a missing middle of high-growth businesses that lack access to working capital to grow their companies.
The fintech solution: Fintech companies have stepped in to serve the missing middle. By leveraging technology, fintech companies expand entrepreneurs’ access to working capital through innovations like cash-flow underwriting and revenue-based financing. These funding opportunities make it possible for companies to grow at critical stages in their life cycles.
The next step: Pursue policy initiatives that make it easier for entrepreneurs to access capital via innovative digital financial technologies in a streamlined manner at critical business inflection points. This could include the Small Business Administration issuing additional lending company licenses to alternative financing providers.
Streamlining Business Banking and Operations
The barrier: Traditional business banking can be inflexible, with high fees and strict requirements like minimum balances that strain early-stage finances. In fact, 70% of entrepreneurs admit to using their personal credit cards for business expenses. As a result, entrepreneurs often lack access to tools to manage their banking and financial needs all in one place. Juggling different services makes it difficult for entrepreneurs to accurately understand their business’s overall financial health.
The fintech solution: Fintech companies provide banking solutions that turbocharge entrepreneurs on their journeys rather than holding them back. Fintech solutions often offer a suite of services all in one place, from banking built for start-ups to business operations tools for accounting, expenses, invoices, and more. Streamlining administrative tasks and automating processes enables new ventures to operate efficiently, quickly determine their financial health, and focus on growth.
The next step: Congress should put the financial tools for success in the hands of entrepreneurs by passing legislation like S. 2330, the Small Business Technological Advancement Act, which would clarify that entrepreneurs may use the Small Business Administration (SBA)’s 7(a) loan program to pay for tools that support daily operations, including inventory management, product delivery, and accounting systems.
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