Katherine McConnell is the founder and CEO of Brighte, a credit technology platform making it easier for Australians to pay for home energy and home improvements.
With over 16 years of experience in Investment Banking and Financial Services, 14 of which were at Macquarie Bank, Katherine was perfectly positioned to bring her vision to life in 2015.
Since then, Brighte has approved more than AU$800 million in finance for about 100,000 Australian households and become the sixth-fastest growing technology company in Australia.
Along with that, in December 2020, Brighte closed a massive AU$100 million raise.
During a virtual fireside, Antler Managing Director Bede Moore spoke with Katherine about her career journey to date, her experience launching her business as a solo founder, her startup and fundraising advice for others, as well as Energytech trends she's seeing in the Australian market.
Or alternatively, read the transcript below, including the audience Q&A. This transcript has been edited for length and clarity and starts from the beginning of the panel discussion.
Bede Moore (BM) (00:00:08): Thank you guys all for coming and joining us. I'm sure that Katherine needs no introduction and actually how I know this, this is a bit of a funny story. So, I posted yesterday that I was really excited to have this conversation and promptly I received a text from a friend of mine. She was, "Oh, my God. You're talking to Katherine McConnell tomorrow. That's so exciting. I've been trying so hard to get a job at Brighte, can you please put me in touch with her." And I was unsurprised by this, but I think it's a sign of the success that Brighte has had, not just since inception, but particularly in the last 12 months.
Everyone here knows Katherine is the founder and CEO of Brighte. It's a credit technology platform that makes is easier for Australians to pay for home energy and home improvements. She had 16 years of investment banking experience, 14 of which were at Macquarie Bank and so had, I think, a perfect background to come and bring her vision to life in 2015. What I think is so incredible is that since then, they have approved more than $800 million in finance for 100,000 Aussie households and become the sixth fastest growing technology company in the country. That is an astonishing achievement. They just, last December, closed $100 million. I am really honored to welcome you, Katherine. Thanks for coming along.
Katherine McConnell (KM): Oh, Bede. Thank you so much. It was so flattering all the things that you said. So thank you for a wonderful introduction. Great to be here and share parts of the journey with you.
BM: Excellent. As am I. I'm looking forward to kicking off and look, can I be a little naughty and just say that when I think of the word banker, the second word that comes into my mind is not entrepreneur. So, maybe you can tell us a little bit how it was the second word that came into your mind and how it was you decided that you wanted to go ahead and build your own business.
KM: Well, Bede, reluctant entrepreneur or entrepreneur was never in my vocabulary. And even when I think about when I resigned, so the day I walked in and resigned and the events that led up to that, I never thought about being an entrepreneur. I thought there was this problem and this problem was real and big and it was urgent and I just felt that I had all of the skills that were needed to solve that problem.
It's funny, I didn't think about building a company or having to manage people or having to raise capital. I just didn't think about all of these things and so naivety for me, I'm really, really lucky. And if I had known, I wouldn't have done it, is the reality of it. If I had known what was going to be involved, I wouldn't have done it. And so, what I did know was that there was a coworking space. I'd read about Stone and Chalk and I gave them a call and I went there and I thought I'm here, I'm safe and where I need to be to start a company.
So, I was naive. When I looked back at the banking experience, it was a perfect experience. I think Macquarie is a great breeding ground. I know Larry Diamond of Zip was at Macquarie and many others. But it was a fantastic breeding ground and I reflect to be an entrepreneur.
BM (00:03:44): There must have been a period of time obviously when you were at Macquarie and you were thinking about building a business, was it ever in your mind, oh, you know what I'll do, I'll work on this nights and weekends and see how far I can get. You must have, at some point, said no, no, I literally just have to take the plunge here. How did that happen?
KM: Well, funny, one of the things was I started thinking that maybe I'd [inaudible 00:09:16]. So, we'd gotten solar in 2010. We got solar in 2012. We got more in 2015 and we got batteries in 2015. And I knew that when we got batteries, we were one of the first families. Tesla hadn't done its first installation yet. We were one of the first families to get the first generation with inline batteries. And I was really excited. I was excited about that technology, energy management technology and just what the future looked like. I got a glimpse of what it looked like and what I saw was that finance was going to be the biggest blocker that held back the uptake and acceleration of solar and then batteries.
And so, that started playing on my mind at the same time as when I got batteries. And so, my first step was, I just want to help people get batteries. And so, what I actually started, I started writing how do I help people get batteries? And then I thought about it more and I started writing about the problem and then I started writing about how you'd solve this problem and it ended up becoming a business plan that I worked on for about four/five months before I'd resigned. And so I'd wake up at... I had little kids at the time. And so I'd wake up at 3:00/3:30; the kids wake up at 6:00/6:30 and so I'd so three hours in the morning before they woke up and then at night, I'd get back and I'd do another hour or two.
So I was doing five hours a day, five days a week and then on weekends, I was doing about eight hours each day. And I did that for about four/five months. I started getting really crazy about it, so a bit obsessed.
When you said 3:30 in the morning, I think everybody was like, okay, crazy and obsessed. I think that that's when you know you're crazy and obsessed.
KM: I didn't see it. I didn't see it. I just started seeing urgency and I really delighted in those mornings, getting up early. I had this really lovely little postcard, which my husband actually got made into wallpaper in our study. And it's Mohamed Ali and it's him jogging on a road and it's pitch black and he's jogging. The fight is won or lost far away from the distance, behind the lines, out there on the road, long before I dance under those lights. And so I'd get my cup of black coffee and I'd kind of look around and then see all the street lights were on, but all the house lights were off and I thought this is it. This is me putting in the hard work now and one day it'll pay off. And that's kind of what I had in my mind.
BM: That is, I have to say, that is very inspirational and also incredibly daunting if that's what we all have to do to build great companies. I think I already know the answer to this question, but was there a moment where you were like, oh gosh, I'm going to exchange what has been a very stable income and corporate career for being a solo founder and building something from scratch?
KM: Yeah, there was a moment when, at work, I wasn't getting the acceleration in my career that I thought I deserved. And so that was the final bit that I felt, you know, my husband was the one who said, you have to back yourself. You have to do something. You have to back yourself. And I probably didn't have the confidence at that stage, but hearing from him that he thought it was okay to think about doing something with my document and hearing from him that financially, we started talking about the changes we could make as a family. Stop the cleaner, stop the lawnmower guy, take the kids out of private school. So we did lots of things, we talked through and how we'd navigate, financially, getting some money out and for the repayments.
So, we did a lot of discussion and then we found a way and found a pathway to funds. And I felt comfortable that that pathway would get me far enough to a point where I'd have something on market. And then I'd have to go externally to get some funding. And so when all those dots gave us both enough comfort, then I said, okay, next week I'm walking in to resign. So it took me a week to work out how I was going to do it and what I'd say. And it just happened. And it moved pretty fast from there.
BM (00:08:45): Okay. Can I just clarify because I read in the AFR and I just want to understand if this is your pathway, that you actually drew down on your mortgage to provide the first finance for solar panels and batteries? Is that what you mean by pathway because I would also describe that as being pretty gutsy?
KM: Yeah, absolutely. So, I don't know how much I like... I know it was in the AFR, but, yeah, we refinanced the house. We got it revalued and was able to extract great property prices in Sydney. They're going through the roof now. Great time for someone to start a business. Get your house revalued; get some money out. And so we'd been through a bit of a spike on the Northern Beaches and so we were able to get some money out and absolutely that money was ours, it was skin in the game. It was real and it just meant for me that it was never going to be a cottage industry. I was not doing this to start up a side hustle or something that was just going to be a really small business. This was going to be real, it was going to be big and I was going to risk our family's comforts, our family's financial security to bet on this. And my husband, my life partner, was backing me that I could do that. So that was just hugely liberating and a great way to start that journey.
BM: All I can say is it's very inspirational but I hear what you mean in that it was foundational, in that you felt that it provided you the platform, almost by committing it made it easier to lean into the opportunity, right?
KM: I was really fortunate that I had that capital. A lot of people don't have that and they have a great idea and that's where you can help. But I was really fortunate. I'm 45 now, so I was 39 when I started this journey. So we were able to get into the property market and have something to draw on. But having that skin in the game is really different and the responsibility you have to make it work is really different as well.
BM (00:11:06): Yeah. I think this is a genuinely important thing, right. It's part of the reason why I was interested in joining Antler was the prospect of financing people really at the earliest stage because, as you say, there are so many people out there that don't have any way, really access to any capital to get going and yet there are so many ideas and one-off people out there that you want to be able to help them. And you're right. That's one of our aspirations as a fund.
Not that it necessarily makes life, the experience of building a company is just such a tough one, no matter what your starting point is, right. My understanding is that you spent the next six months doing literally hundreds of meetings, 100 meetings or something to do your first round of funding.
I'm interested, right, because this is one of these things that can be quite a shock, I think when you first start a company to realize how many times you can get told no. And I think I know your answer as to why you didn't stop, but how did you come to terms with that? Because it's a really high level of rejection, right. You don't have that level of rejection in your merry life and then suddenly you're flooded with rejection. How did you deal with it?
KM: Yeah. And it's a great question for people who are in that early stage. I think it is firstly, I wasn't experienced in raising capital. I had a sales background. So I knew how to do pictures and I was able to draw on presentations and pictures and explain financial benefits for why they should invest. So, that held me in great stead. So non-financial experienced founders I think would have had that disadvantage. But starting to knock on doors, firstly, being rejected before you even get the appointment. And then doing the appointment and then presenting and then getting feedback. I'd like to say in all of the situations, I took it as, it's just no today. And some of them I did. I kind of got that impression that you just need to put a bit more work in and get a bit more product to market fit and you'll be here. And those meetings, I loved. Because I did just see it as, I'm going to get you on board.
But there were many others that I kind of thought the way they gave the feedback wasn't kind, wasn't human and that's definitely off-putting. And I think it's just resilience. It's easy to say that. It does get you down. You've got to keep on going and I was just really lucky that I believed that the problem is real. And I believed it was big and I'd done the numbers and I knew it made sense.
So in the end, I had to find my advocates. I had to find people who understood the problem and when I found them, it was easier to explain. And it was just different things I had to give them comfort on. It wasn't everything. Once you found people who either understood point-of-sale finance or they understood credit or lending, I didn't have to explain everything. I then just had to justify the addressable market, the size, and that I was experienced and could bring a team together to be able to deliver on this idea.
So, it is really soul-destroying, you know. You've got to be resilient, but it comes back to the first principle and you really just have to believe in what you're doing. And I absolutely did.
BM (00:15:00): Yeah, I think one of the things I read that you'd said previously is that you need to have more than a good idea, you actually have to have real depth of experience. And I think that that's something that we really believed. One of the things that we do is we spend a lot of time looking for domain experts, right, who have deep subject matter expertise.
And just listening to your last answer, what strikes me is, if you were really knowledgeable about your area, one of the things that you're actually doing when you go out searching for investors is finding ones who have this kind of shared knowledge or at least the sympathy for what you are talking about. Where else do you think it matters? How do you think it helps you navigate day to day complexities and influences the way you build the business?
Because I think, obviously one is you know the type of capital you want but there are other parts of building a business that really draws on your experience base. I'm just interested to hear where you think that is most relevant.
KM: So, now we've got 140 people and we're delivering this same product on market, plus we've got a second product that's about 13% of our business. So the majority of our business is the product that I set up. So when we set up, it was me and I had one other person, because I'm not a tech background, so I had someone to be the developer. And so why domain experience is really important, is I had to do it all because I had to conserve my capital. And it's a highly regulated industry, really complex with credit lending, reputational risk, and so many systems and so I had to set that up. And so for me, it was important to have that domain expertise because I didn't have the capital to be able to pay everyone to do that.
And so to set that up at the start, but then now, that continued and over time, we were able to bring more people on but for the first year, I was still doing many of those functions. You do the capital raise, you can bring more people on. You have eight people working for you. So you can hand off some of the responsibilities. But you continue to do so many jobs and wear so many hats and so, for me, that domain expertise was just really important to get the business off the ground. And as I raised more capital, I could bring in more people to take on more of the tasks. But that's why it was great. I still have the ability to dive in deep when it's needed. But now I've got to be more at the peripheral and up-top and around everything. But that ability to dive in is only there because I have that domain expertise.
BM (00:18:00): I'm just going to paraphrase a question that's come into the Q&A from Mark. Do you see the innovation of the company as being in the technology or it is in the lending space or is it both? How would you describe what you think is kind of, what makes you a market leader?
KM: Firstly, I think it was in identification of the problem that you could be niche and service this niche industry of energy, specifically. I think that was the first thing that we did well. The second thing was, it was identifying that you could use a technology solution, a technology platform to address that problem. And so there was an existing solution on the market but it was paper-based. And so we came in, we've never had a paper solution. Everything was an app and we've got a web portal. So day one, it's always been digital. And so it's built on a technology platform and that makes it scalable.
So, focused on a niche area in energy. Used a technology platform to create a scalable solution. And I think they're the two things. Outside of that, I think it's around execution. Building a team that can execute because it's so complex. The business that we've set up, to do what we've done in this timeframe, I think our IP then is really bringing the team together and being able to execute. And that might sound easy, but that's really hard to do. So building the right culture and building a high-performing team that has the ability to execute.
BM (00:19:39): This is really interesting. I think, I'm going to guess, or at least for me, 2020 was a real year of a really hard lesson, I think in the importance of culture in building a business. And how it can be incredibly sustaining in hard times as well. How did you think about that? Was that something you thought about from day one, saying I know the type of person, the type of culture that I want to be in this business along with me or is it something that has evolved as you've right now, got 140 people and it's an absolute necessity?
KM: So I guess yes and no. When I think about it, at the start, I hired people that were a technical fit.
So I never had a culture and values document. And talked about them with people on day one or day 350, I still didn't have that. However, when I think back, I always hired people that I thought were genuine and empathetic and effectively shared values that I find are important. And so someone I thought was arrogant or didn't kind of connect well. So it wasn't unconscious bias, but it was... I think there were things that I thought were important.
It wasn't until about two years ago that we codified those as a business. And so we spent a lot of time documenting them, debating them as a business. They weren't allowed to be aspirational. They had to be who we were and what we thought was important in our culture. And we documented. And then now we live by them, we talk to them every day. They're so intrinsic to who we are and how we hire. But I didn't have the luxury of hiring on values at the beginning. When I think back with people that I had to move on, potentially they were moved on because of misalignment with other spoken values that I have.
BM: It's really interesting the impact that it can have. And again, when you suddenly define them, how much clearer they become in the way you manage the company, right?
BM (00:22:03): So I remember, my wife and I started a business together in Indonesia back in 2012 which was a crazy ride. And we've kept the financial model which was an NPV model that showed that we were already worth $34 million as a reminder of how ridiculous and silly we were. I'm interested to know for you when you started and you were trying to build the business model and thinking about the economics of the business, how that looks now several years later, how realistic it was and how much it defined the way that you built the company over the first couple of years? Did you need to know that or wasn't it as important initially?
KM: So, I think I go back to the point at Macquarie, I would never have resigned, had I not thought this was going to be a billion-dollar business. I just wouldn't have. And so I could have had a great career at Macquarie, I could have made money and got promoted and... I was never going to go and do my own thing and risk everything, had I not thought this was going to be huge. So, that's firstly the premise. And I remember when people, I found it frustrating talking to people when I said I'd left Macquarie. And they're like, "Oh, you must love the workplace flexibility that you have, working from home and being with the kids all the time." It used to make me irate. I was thinking you don't understand what I'm trying to build. So I just found it easy enough to talk to people that year actually, just my husband and the kids, which I actually did as well.
So, I had this belief it was going to be big because I knew how many people had solar. I knew how many homes... So, now, there's 2.6 million homes with solar. I think five million are solar suitable. There are only about 75,000 batteries. And so, I'd done my numbers on the unit economics and the profitability of each customer for the first transactions, second and third transactions, the lifetime value profitability. I kind of knew about the inputs, so one of the biggest being cost of funds. And I knew up front where I was going to start and I defined a pathway for how I was going to bring that down to 20%, 10% really, of where we're going to start off with. And how I was going to increase the profitability and that interest margin. So I knew all these inputs. I'd done the work and I really believed in how big the opportunity was. That was all in my business plan and that was part of what I was able to communicate to the investors.
BM (00:24:54): It sounds like you were all over the financing component of it. There must have been aspects where it was like, okay, hey, we know that we've got no idea what this is. And I'm going to guess that that was more around like acquisition... It must have been the acquisition funnel. How did you think about that and how did you get comfort? You obviously made the bet, okay this is a growing market, lots of people are going to... And we just need to be there. But how were you thinking about that before taking the mortgage out on your home?
KM: So the acquisition, so we acquire customers through vendors. So the businesses that sell solar or the home improvements. My background is sales. So, I'd worked with 300 of them before I left. They were the ones that told me that they had a problem and couldn't I fix it up for them at Macquarie. And I said, no, I can't at Macquarie.
So I knew the acquisition. When I'd left, I got letters from lots of them saying once it was set up, they were going to start using me. Things like that helped with getting funding. That was one of the things... I was not the tech founder. And so that was where, when I think about it, strong in product in the sense I knew the problem; I knew my customers; I knew what the journey had to look like. So I developed all of that. But as far as the tech platform, the code and the different systems, that was not my strength. And so that was unknown to me. How much it will cost? who I should trust? And I wish I had a tech co-founder, but that was the bit for me that was like a black hole. I just didn't know how I would navigate that. But I knew what the experience needed to look like, and the speed.
BM: Yeah. So, I was just kind of complaining about how tough 2020 was. For you, it ended in a $100 million raise, so that is, perhaps we had divergent years. It's an amazing achievement, by the way. It's just incredible. So how is that experience, what was that like, just in raw, pure enjoyment terms?
KM: It's crazy. And also, I think the thing to note is we raise equity and debt. So we raised just under $500 million of debt and we raised in addition to that, about $150 million of equity. So as far as the business, we're 650 or so total capital in five years. That 100 million, it is a big number. We have a plan for use of how we're going to spend that, potentially in two years or less, so we've got big aspirations. And what that type of thing does is it makes you... Something, when I had a meeting with Mike Cannon-Brookes once, he said to me, think bigger, move faster. And I wrote it down on a little Post It note and had it on my light for a long time. I don't know where it's moved to but...
BM: Your husband's getting it framed.
KM: I've got to find it. What that allowed me to do, the 100 million, is to think much bigger and move much faster. So move faster as far as that's... That's why we're hiring 61 people. So we're going to move faster and we're going to stay focused and aligned with our vision but we're going to move faster as far as there are multiple problems we can now solve, not just the one problem. So we can go wider and go deeper. Yeah, the 100 million, we want to stay scrappy. One of our values is think big, stay green. So the 100 million cannot change us in the sense that we're like a corporate. We can act on something. We can spend more money without thinking. So we still want to keep our mindset as startup/ high-growth, but this gives us the flexibility and the ability to think about solving bigger problems and not moving from every year, doing a capital raise. And having to think about largely how do you make sure that the recurring revenue is big enough to justify the growth that you need to do another raise next year. So it gives us the ability to solve much, much bigger problems.
BM (00:29:45): Yeah. I can't believe that I'm trundling this out after you just talking about 2020 being my year of culture, but 2021, it's been, for me, one of my lessons is that concept of vision. We talk to so many entrepreneurs and so many people building businesses and it's always really, it's kind of bracing and refreshing when you meet somebody who just outlines a vision that is huge. And I think it really is the only way to go and build a great culture. And so many of them obviously don't work ultimately, but unless you do that, you're never going to be really big. One of the questions on this, if you're happy to answer it, was in fact, which was the first bank to say yes on debt finance, all the way back?
KM: NAB #morethanmoney. I love their slogan. I will advocate for them any day. I think they've been fantastic. They have been a huge supporter of high-growth companies. I know they gave loan facilities to Afterpay and to Zip and Wisr and this is public. But they invested early, as far as debt. They came in pretty early. They started with a corporate debt facility and then progressed to a securitization warehouse and then did our first issuance, our public market issuance for us. And that was a great strategic relationship for us. They helped us move along the journey, navigate what we needed to, to get to maturity and they are and continue to be a great strategic partner for us.
BM: That's really interesting and good on them. Just following that, one of the questions here is about the BNPL industry and whether you think that new players, or existing players that are in other segments, may move into the same place, into the same segment.
KM: Yeah. When I left Macquarie, it didn't have an industry name. It was called no interest ever payment plans. And so it's matured, as I've been part of the journey. I'm a board director on the Australian Finance Industry Association and AFIA has just developed the first code for buy now pay later. And so it's self-regulation and we just launched that a month or so ago. And it's only now that there's some form of regulation for what's now called buy now pay later. For the past five years, people called it unregulated credit. It was regulated by different regulators, but you didn't need an Australian credit license to provide this type of credit. And so that's what restricted, a company like Macquarie, providing this type of credit. So the reputational risk and also other banks, previously providing this type of credit. So their potential reputational risk in operating ineffectively what was a regulatory gray space.
Now that there's been more clarification; they're still not regulated by ASIC, but now that there's more clarification, there's a code of conduct, I think it's given some parties more comfort in participating in the industry. Prior to that, there's been a huge cost on us and others in the industry in navigating the relationship with different regulators and industry stakeholders. So I think in the future, you might see, CBA's kind of said they're there. They've invested in [inaudible 00:38:46]. But the thing that I always think is, there's always been credit cards with interest-free periods. So there's been credit cards and there's 30 days, 60 days, 90 days interest-free. They've always had a similar product. So, it's similar. I don't think it's about the product. I think it's about the user experience. I think it's about the innovation. It's the mindset. I think there are other things that might make it difficult for one of the big banks to compete head-on, even if they do use the same product.
BM (00:34:19): So, I'm interested, talking about finance, but a different type of finance. You've raised money from GROC, from SKIP, from Airtree, probably everybody on the line would like to raise from those offices and funds. The most recent raise, was the experience of doing that raise different? And when I say that, I'm not just talking about the quality of the lunch that they took you out to, but did you have to learn new skills or has this just been so familiar that the financing aspect's been familiar and it's not really been something you needed to learn about as you were going along?
KM: The last round was a little bit crazy. I don't know how much I can even go into it, but we were given a term sheet for a round.
KM: Yeah, and then we worked backwards to go to the other existing investors to see if they wanted to take pro-rata entitlements. So it was a really different... It'll never happen to any... It'll hopefully happen to lots of people but I understand most of our investors haven't seen it happen before.
BM: I'm talking about just from the founder lens, and this kind of evolution of your capabilities, have you found yourself having to, each time you've raised finance and the business has kind of taken another jump. Has that resulted in another kind of personal education project of like, oh my God, now I run a monster business and how do you do that? Or is it just going to come naturally as it's moved along?
KM: Yeah, no, so I think on two fronts. One is the types of things you have to talk about in a round are really different at each stage of maturity. And then secondly, part of it comes naturally because part of that journey has been what you've been experiencing, so you can talk to that naturally. But then, there's always that next what's up ahead. How do you convince people of what's up ahead and that the TAM is as big as you think it is, the addressable market. And your ability to capture that and your ability to create new products, to be able to extract that lifetime value.
So, I think there's those parts of it. So as we've done different rounds, each stage, it looks really different because you're proving different things. And so it's helped bringing people into the team who've been through that before, who can help you work through that, working closely with your existing investors and getting their help to navigate how you would do the pitch and their feedback on your pitch before you go to market. So that all helps, having great investors on your register. And then it's always hard doing the rounds. I find it personally exciting. And I-
BM: Well if people are turning up to you and just being like, hey, here's a lot of money, yeah, I agree with you. That sounds exciting. That sounds like a fun experience.
KM: The only time it happened. We worked for it every other round. I think we have been really prudent. So the capital that we've been given, I think we've invested that well. I think we've been prudent managers. I think we have had a really good track record on delivering on everything we said we would do. So when we come back, I think hand on heart, we can go we've done this plus we've done these other things. And I think that's really important.
BM (00:38:01): And so, beyond, so now I'm probably talking a little bit earlier, but beyond just hey, here's what we're going to do and delivering on it, how much of subsequent capital raising do you think was through effective cultivation of good investor relations with your earliest investors? Do you think that played a part or was it not a thing?
KM: Yeah, no, the last couple of rounds I haven't taken new investors on. It's all been done with existing investors on the register.
So, absolutely keeping your investors updated on your journey, even if they're not directors. So, just doing regular updates and even the first investors that I took on, 33 seed investors, high net wealth, we continue to do updates to them, providing them with as much information as we can, telling them about wins and where we're heading. And so, absolutely, in this last round, when I went around to pro-rata-ise, I still had participants from the family and friends, high net wealth round that were still coming in and saying, "I want my pro-rata." Because they were kept up to date, they understood what we were doing. And I just think that journey and keeping everyone on the journey, keeping everyone engaged is really important and from our example and experience, I think it can help you move faster with future capital raises.
BM: Yeah, yeah, obviously. Is super important. This is interesting, you've got a question that's come through about talking about your early hiring and I think you've kind of touched on it a little bit. But when you were sitting down, and those 3:30AM starts, and then during your kind of early months of building a business, did you have a hiring plan? Did you know, or was it just like, hey, I know I need some technical guys and then we'll work it out from there?
KM: I guess I did have a hiring plan. I knew I needed to hire and engineer and then I knew I needed that person to help me map out who else he needed in his team which we talked about. And I said but how long can you do it on your own, you know. So pushed him as much as I could, probably regret doing that. And he helped me build that out. And then I knew how far I could take certain things on my own. And so I did start speaking with people that I wanted to bring into the business and, yeah, so I guess I effectively did have a hiring plan, probably for the first 18 months I'd thought about who I was going to bring in and the specific skills I needed, and budget as well.
BM (00:41:22): So, over the past three years, you have had 912% revenue growth which makes you the sixth fastest growing technology company in Australia, according to Deloitte. That's wild. What contributed to that? Perhaps even more, did you know that there was a point where you would just go, doot? Did you start seeing that that was coming or did you get three months into it and you're like, oh my God, this is going crazy now?
KM: I knew it. Annuity income is like SaaS income. So, effectively our average loan size is 48 months; sorry our payment plan. So it's 48 months. So we recognized the revenue over time. We don't book it up front. And so when I write payment plans that are three years, four years, five years, effectively each month, I'm realizing one 36th of that revenue. So I lock in income for three years, four years, five years. So I'm stacking it up. So, we don't really have bad days here. You'd have to have bad months or years really. So, you're really lucky with that annuity income being stacked up.
So, as long as you can keep a great control on ensuring your customers pay on time. So effectively, your arrears, your hardship, you can manage customers pay on time and when they miss payments, you're able to help them get back on track. So as long as you can manage that, you've effectively got future income locked in. And then if you can build a product that helps those customers use you again and again for other things, which is what we've done. Customers can use us for solar or batteries or other things around their home. You can lock in future revenue just after that first payment plan. So it's similar to a SaaS, where you have subscription income coming in. It's very similar to our type of business.
BM: And so, just for my benefit, actually I was lucky because my wife navigated the complexities of putting solar on our house, because it's difficult. How do you do that? So you prompt customers and you say, hey Bede and Suzie, have you thought about putting some batteries now on your house? Is that how it works?
KM: It's actually partners. So, we've got about 6,000 different sales agents that are using Brighte at their point of sale. And so we've built a relationship up with different electricians and trades people across the country. We've trained them. We've given them our app on their phone. And so, when they're at your house, because you've contacted them, you may have contacted three and so you could have three, effectively tradies coming to your house. And they could all be saying, do you want to pay cash or do you want to pay it over time. It's no interest. It's $100 a month. Or do you want to pay the $8,000 now?
KM: And you're like, I'll pay nothing now. I'll get the job done. And then when the job's done, I'll start paying you $100 a month. So it's the trades person. So we acquire a vendor; the vendor acquires the customer and then the customer comes to us and pays us over time.
BM (00:44:38): So Margarita is asking how has your product or product offering evolved over time and did you have a point at which you had to kind of pivot? And then the second thing that I think is related, Chris's question, she says that she's read that you're getting an energy retailer license. Is that a change? And how is that related then to your gentailer plans?
KM: Okay. So in the business, everyone here knows the dirty word, pivot. I know it's acceptable in startup speak. It feels as though it's accidental and a mistake. So, we don't make mistakes; we learn. But that's got nothing to do with where we are. So we're solving a deep problem. We want power to shift to the home. We want homes to be empowered. We want them to generate and store their own energy. The first problem we solved with customers getting solar was point of sale finance. That was it. The biggest block to customers getting solar was they needed finance at the point of sale, because the vendors all told me. And from my own experience in buying solar, it was a problem. So we solved that problem.
KM: In my business plan, I saw the future with homes getting batteries. So 2.6 million homes with solar; 100,000 of them only have batteries. So many of them are going to get a battery in the next few years. We think a million in five years will have batteries. Part of the problem that we'll be able to support batteries is finance, but there are other things that we need to do to solve the problem with accelerating the uptake of batteries. And so that's what we're doing now. And so, point of sale finance was who we were and what we had to do to solve the first problem.
The second problem around homes storing their power, we need to do some other things to make it work. And so part of that is finance highly complex, energy retail highly complex. But our vision is if someone generates their own energy and someone stores their own energy and they're paying those costs back over time, why should they have to pay a separate bill for any supplementary energy. Why can't they just have a single... And when they have that single bill, it could be with Brighte. And what they can do is they can effectively convert what is a bill; it's an operating expense. But they can convert that to a capital expense to pay back an asset that they own.
And solar's got a 20 year life so you can turn bills into operating expenses. So it's like converting riding in taxis to converting it to paying back a car that you own. And so you can have it with one provider in one single relationship. And so what we need to navigate, is we need to take the complexity out of it for customers. They shouldn't be paying two payments. And to accelerate solar and batteries, it needs to be simpler. The model needs to be simpler. It needs to be easier and we're going to remove those blockages and we want to make it super simple for homes to get batteries. And to do that, we have to do some complex things, like become an energy retailer and present customers with a really simple offer that is compelling.
Solar has feed in tariff which you get paid by your energy retailer. Batteries also can earn a revenue stream. And there are lots of different ways you can do that and so we're going to do that on behalf of our customers and we're going to use that to bring down the cost of batteries. So that's one of the ways we're going to accelerating the uptake. We've got lots of people here that are working on some really innovative ways to make that more appealing and accelerate the uptake, but it really is, like I mentioned, this capital has given us the ability to go deeper into the problem, to look at what other blockers and barriers were. If you've got a great team, your investors trust you to solve more problems and go deeper. And that's effectively what has happened.
BM (00:48:39): I'm interested because we talked earlier about vision and that is, right, that's just from initially just financing solar panels to becoming a retailer and all of it. Do you think of it as a change in vision? Do you say, gosh, wow, it's gotten so much bigger? Or are you like, actually no, the vision is the same but I feel like these stepped are just parts of the evolution.
KM: Yeah, absolutely. It's like multi-product companies. So the first blocker that we removed was finding point-of-sale finance. The second was make it easier to get batteries. Have to do some other things on top of what we've been doing. And in the future, we're going to make it easier to get EVs, make it easier to do many other things for the home around sustainable homes. And so, over time, we're going to continue to grow the business, grow the revenue streams, grow the team and keep solving more problems. So I don't see it as pivoting. I see it just as a big problem and there are different things we're going to have to do to tackle the problem.
BM: Yeah. So, actually, multiple questions coming around. And I think this is really often one of the most challenging issues that you can face when you first start building a business. Because you might have domain expertise in one area but typically building a business is about orchestrating multiple pieces of expertise and you don't have all of it, right. And in some cases, according to these questions that manifest in finding a good tech partner. How do you manage knowledge gaps when you're hiring key personnel in areas where you don't have prior experience? What's your way of getting around that problem?
KM: Like the honest answer -. I got lucky. But then as when I think more recently, when I've hired my first CFO and Chief Risk Officer, so all of those roles I have gone to either people I know and often the VCs or the investors that I have and I've asked them to introduce me to people who do those roles. And I usually meet three or four of them. And I tell them, obviously you know I've never managed someone like you, so what do you need? What do you think a good you looks like? What type of background and I get lots of info. And then I kind of put it all together and get the JD to get it out on market. And often I'll rely on those people, even when I'm interviewing, just to get confirmation or feedback, their instinct and... And then for some roles, I do bring in other people actually. I'll bring in the board to get their confirmation if it's an area that I feel a bit exposed or weak in.
BM (00:51:41): And what about mentors. Did you have them before? Do you have them now? Are they the same people? How's that evolved from... Again, we look at a lot of super early pre-seed businesses and everybody likes to put on their advisors and whatever else. I think it really matters. I know some people who have very, very strong mentor mentee relationships that have evolved with them throughout their time building companies or throughout their careers. How's that work for you? How do you set up an advisory panel, so to speak, for Katherine?
KM: I haven't formally had mentors and I guess at one stage I was looking at it and I found the person I was thinking of, I'd probably outgrow too quickly. The one person I'd say you could never outgrow would be Mike Cannon-Brookes; he's so smart. He's never been a mentor but he's been... I guess what I found is that along the way instead, what's worked for me, is I reach out to people when I have specific problems. And I ask if they have time to help. I continue to get their feedback and support, input and really value that. And so that's what's worked for me, not having a formal mentor program, not any individuals and I've not been involved in any kind of groups as well.
I am really fortunate that I have fantastic investors. So at Grok, I've got Jeremy Kwong there, Bryan Rollins who's now joined the board as well. Airtree; I had Craig Blair and now I've got Gill Finlay who's joined the board. Peter at [inaudible 00:58:30], Kim Jackson at Skip. They're fantastic and they're available. So relying on them all and Mike, in the start, I used to meet with him every month or two and he helped me with different things I had going on from late 2016, so early 2017. I didn't say will you be my mentor and they said yes, but there are definitely people I rely on for feedback, advice, guidance and support.
BM: So, if you didn't do that, just practically speaking, you wanted to see Mike, you had a really good meeting, you get to the end of the coffee, oh, Mike, that was pretty visionary and I'd love to hear more. Were you just like hey, are you free on the 27th of next month? Or how did you actually make sure you pinned that down?
KM: So, no, Mike specifically, when he was looking at investing, he said listen, as part of that, Jeremy said, Mike'd be able to catch up. And every month or two and we'll lock it in. So, his EA locked that in and that was just something that was locked in the diary, fortunately. So I didn't have to say that.
With the others though, if they're board directors, we'll lock it in. Otherwise, I'll give them a quick call or do you have time to chat. So I think, depending on the relationship and over time, I think you get more comfortable with a person and you can definitely more comfortable in how you ask for time.
But I definitely have reached out to people on LinkedIn quite a lot. Randoms or I ask people to be connected. And where someone has a specific skill set and I need to talk to them. So, yeah, I have and still do do that. I did it today.
BM (00:55:10): Okay. Couple of industry questions here. I'm going to wrap up in the next five minutes, but I'm trying to get through all the questions here. Onto, this is kind of a more industry related one, what do you think the impact of virtual power plants would be on Brighte? And do you have plans to involve into an energy sharing model or block chain model?
KM: So, I definitely think that when, firstly we solve the problem of more than 75,000 homes have batteries. So when we've got a million homes with batteries, I definitely think that there will be ways that those homes will group their batteries together and it may be like community batteries, definitely you need virtual power plants. So, virtual power plants are what I call monetization of the battery and we're absolutely going to be doing battery monetization. So, that is something we're going to be doing and I think when households get more batteries, existing regulations will change and ways that people think about using their battery will change.
Numbers are low. There's lots of papers and pilot programs now for what people are thinking might happen. But there's going to be so much change over the next few years.
BM: When do you think that is? 75,000 homes. Just at a guess. Like it's obviously going to ramp up super quickly at some point. It feels like we're still a little bit of time. I remember, I think it was last year, I remember reading in the AFR that Robyn Denham had just had batteries installed at her house and I'm like, if that's reportable in the AFR, we're still a long way away. But how far away do you think it is?
KM: Well, they talk about attachment rates and so attachment rates of batteries are about 5% to 10%. I think they're 5% in the US. So we need more people who are buying solar to get batteries. So, I think the costs have just... I've got so many charts here of how the costs have come down. They'll continue to come down with time. It's this concept of pay back. In solar, how it worked, so paying back the cost of your solar comparing to paying energy bill. So if you could displace 40% of your energy bill, well how long can 40% of your energy bill take to pay back the cost of the solar. And so when I started looking at it, it was like 10 years to pay back solar, eight, seven, six, five, four, three. It's four to three years now for the payback of your savings to pay back the solar.
Batteries are still at 10 years. Sometimes you can see examples of it at seven. There are different ways you can bring the payback down. You can see the cost of lithium-ion come down. You can see the efficiency increase. You can see subsidies. You can look at monetization models, like VPPs and arbitrage. So there are different ways you can bring that pay back down. And for the uptake to accelerate, you need to bring the payback down. So we saw it happen with solar. We are big believers that it's going to happen with batteries and what our big thing that we're backing now is that we're going to actually contribute to the acceleration of uptake of batteries. We're looking at all the different parts where we can move the dial on reducing the payback of batteries and they're the problems that we're going to solve now.
BM (00:058:46): That's really exciting. Well, I look forward to becoming a customer of that because we certainly looked at it last year and we're like, oh, it's a little expensive, but I'm glad that you are going to bring it to our house. Thank you so much for your time here this evening. It's a very inspirational story from a real hero of green energy in Australia. Thanks for talking to us about how you built the company and giving us some of your time tonight.
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This article was written by Sarah Kimmorley, Director of Communications at Antler in Australia.