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The consumer lending space has seen a great deal of innovation in the past decade or more. But the number of completely new lending concepts that cross my desk has reduced to a trickle in the past couple of years. That is why I was excited to see an idea that was completely original and compelling.
My next guest on the Fintech One-on-One podcast is Veetahl Eilat-Raichel, the CEO and Co-Founder of Sorbet. While you could think about Sorbet as an unsecured consumer lender, because that broadly defines them, they have discovered a niche that is completely untapped: PTO (Paid Time Off). Most employees accrue PTO that has real value and Sorbet has figured out how to tap into that value to create a lending product.
In this podcast you will learn:
- The founding story of Sorbet.
- The size of the unused PTO marked in this country.
- The percentage of employees that accrue PTO.
- How their PTO advances work.
- How they integrate with payroll systems.
- When the issued their first loan.
- Their unique capabilities to underwrite PTO.
- What they consider to be their technological moat.
- What happens if someone uses all their PTO and then leaves their job.
- The two types of personas that uses Sorbet.
- The average loan size and the range of interest rates charged.
- What they have learned in the data so far.
- How they are going to market.
- How they are educating the market on the concept.
- What they learned from the earned wage access space.
- The three revenue streams they have.
- Their biggest challenge in growing the business today.
- How they are funding their loans.
- The early pivot they made that transformed the company.
Read a transcription of our conversation below.
FINTECH ONE-ON-ONE PODCAST NO. 510 – Veetahl Eilat-Raichel
Peter Renton: Welcome. After more than 500 episodes, I have decided to give the Fintech One-on-One Podcast a bit of a refresh. You’ll notice new music, a new intro, better sound quality, and some more subtle differences as well. And we’ll also be launching some new features soon. Of course, you still get the same quality interviews that have made this one of the most downloaded podcasts in fintech.
Veetahl Eilat-Raichel: We estimate the market at over $300 billion annually, right? Every year that goes by, that’s the amount of money that is left on the table unused. According to our data, Americans only use about 62 % on average of their paid time off.
Peter Renton: This is the Fintech One-on-One Podcast, the show for fintech enthusiasts looking to better understand the leaders shaping fintech and banking today. My name is Peter Renton, and since 2013, I have been conducting in-depth interviews with fintech founders and banking executives.
Now, on the show today, we have Veetahl Eilat-Raichel, the CEO and Co-Founder of Sorbet. Now I’ve been around lending innovation for well over a decade. And I thought I’d seen it all when it came to different lending verticals. Of course, I was wrong. Sorbet is tackling the value in an asset that many of us have, but rarely think about. PTO, paid time off. Did you know the average salaried worker has $3,000 of value in unused PTO? It only gets paid out when the worker leaves typically. So this is an asset that has value and what Sorbet has done, they’ve built an unsecured consumer loan product to help unlock that value. Now they’re a young company, much younger than I typically get on the show, but I love the concept. So I wanted to highlight them for all of the listeners. And it just goes to show that innovation, even in the mature online learning space, it never stops.
Now let’s get on with the show.
Welcome to the podcast, Veetahl.
Veetahl Eilat-Raichel: Thank you so much for having me.
PR: My pleasure. So, you know, let’s kick it off. Why don’t you give the listeners a little bit of background, like where you’re from and what you did before you started Sorbet.
VE-R: So I was born in the US, in Boston, and then my family moved to Israel. So I grew up in Tel Aviv. But we kept going back and forth. My mom’s American, my dad’s Israeli, so still have most of our family over here. So I pretty much split my time. Started my career in consumer products. I worked for L’Oreal, the cosmetics company, as a brand manager. First out of Tel Aviv, then moved to Paris, worked out of there for a little bit. Then I always say that I must have hit my head at some point and for some strange reason decided to leave the glam of the beauty business and move to financial services, which is a very odd choice. And yeah, and that’s kind of where I’ve been ever since I did a little bit of wealth management and private banking in Switzerland, came back to the States to do an MBA.
Veetahl Eilat-Raichel (01:10.083)
But then just worked at a few multinational kind of financial services institutions. In my last job, I was the chief marketing officer of the largest credit card and payments company in Israel. That company IPO’d and after the IPO, I left to start what would eventually become Sorbet.
Peter Renton (01:27.32)
Okay, so tell us a little bit about that journey. What was the genesis of the company?
Veetahl Eilat-Raichel (01:38.135)
Well, I had originally wanted to do something entirely different. My passion was around this idea that I had to help employers help employees finance child care. I’m a working parent myself, and I would keep seeing highly qualified people ramp off their career because of child care concerns. That was my initial kind of passion that drove me to my entrepreneurial journey.
But somewhere along the line without specifically asking about it without specifically kind of researching the space I just kept hearing from employers all across America, that they were very concerned about the fact that employees were not taking time off. And, you I think we’re kind of programmed to think about it in the currency of time, you know, days that we can take off as a vacation. And we clearly all collectively have a really, really messed up relationship with the idea of going on vacation.
But the real light bulb moment for us was when we realized that it’s actually a financial asset. It has a clear financial value attached to it. The vast majority of employees in the US will end up getting paid out the cash value of their unused PTO when they terminate, when they leave their employer. And as such, we thought that there was an amazing opportunity to provide value and unlock this otherwise illiquid asset and give people access to it now instead of them having to wait until some unknown point in the future when they leave their employer.
And that’s kind of what got us on our way.
Peter Renton (03:03.674)
Interesting angle. That’s for sure. Maybe we could talk about how big is the unused PTO in this country. mean, what are some of the numbers when you were deciding to start this business that you looked at?
Veetahl Eilat-Raichel (03:22.957)
Well, we estimate the market at over $300 billion annually, right? Every year that goes by, that’s the amount of money that is left on the table unused. According to our data, Americans only use about 62 % on average of their paid time off. Again, just to understand the construct of how PTO works, your salary essentially reflects a certain amount of days that you’re paid to work, and then a certain amount of days that your employer actually pays you not to work.
That’s what’s embedded in a PTO policy, in a pay time on policy. Now, when you end up not using those days off that you’re paid not to work, you essentially work extra days that are not reflected in your salary. So if you think about it, employees inadvertently lend money to their employers at 0 % interest because they work, they don’t get paid, they earn this money on paper, right? It’s theirs, it’s on the pay stub, it’s on the HR system, but they can’t get paid for it and they can’t use it to pay at the supermarket or the gas station or for an emergency medical expense.
And they will only get paid out when they leave. So it’s even from an employer perspective, it’s not like, you know, it’s not part of like some sophisticated financial planning by the CFO to, you know, lend money from your employees and then have this unexpected liability get paid out at some point in the future. So from all sides, it’s a huge market failure.
Peter Renton (04:53.275)
Right. And so what percentage of workers have this? Because I there are some companies, right, that just will have it to use it or lose it, right? Your PTO will come in. And then obviously there’s some that just accumulates forever. And I presume you’re focusing on the latter market, right? But how, what percentage of workers are covered by that?
Veetahl Eilat-Raichel (05:15.341)
So according to our data, over 65 % of the market still provides an allocation of time off, which at least a portion of which will accrue and roll over from year to year. Now, certain employers may have a maximum cap on how much you can accrue from year to year, and some would have like an expiration date of the period of time you can accrue. But still, the vast majority of the market, there are, to your point, about 20 % of employers that apply a use it or lose it policy, whereby if by the end of the year you don’t use it, you essentially it gets expunged from your balance, but more and more states in the US on a state level are illegalizing that policy. And so we’re seeing more and more of the regulator being conscious to the fact that, again, to my point before, you can’t force people to overwork and not pay them for it. There is also this new kind of new-ish trend around unlimited PTO or flexible PTO.
Peter Renton (06:10.322)
Right.
Veetahl Eilat-Raichel (06:12.939)
A rather cynical, if you ask me, play by employers to kind of get around that regulation, essentially remove the responsibility from themselves to make sure that employees take time off. And according to hours and many others, obviously results in the exact opposite, where people end up taking significantly less time. But again, it’s a fraction of the market, and the vast majority of employers still are relevant to a solution like ours.
Peter Renton (06:41.878)
Right, right. Okay, so I think a lot of the audience knows what earned wage access is. I’ve had many guests over the years talking about that. How does PTO advances work? Maybe you could just describe the mechanics of what you’re doing.
Veetahl Eilat-Raichel (07:02.243)
So somewhat similar in concept, both our solution and an earned wage access essentially work on the premise that you have some sort of a deferred portion of your compensation that you will only get access to at some point in the future. In the case of an earned wage access solution, it’s a short term deferred compensation and more often than not, kind of two weeks ahead. But PTO similarly, you will get this money at some point in the future. And the idea is to unlock it for you now.
We essentially have a pretty straightforward application process that any employee in the US can do on our website. It looks very similar to any kind of personal loan application that you will see or a mortgage or a car loan or anything like that. With one unique component where we ask for your permission to integrate into your payroll system, your employer doesn’t have to know anything about it. You provide us with credentials to access your payroll information so we can verify your PTO balance. And then we conduct our decisioning and underwriting, decide if you’re eligible. Once approved, we send these funds directly to your checking account. You begin to pass monthly interest-only payments, so a very nominal monthly amount. And you will ultimately pay us back once your employer pays you out at termination.
Peter Renton (08:21.195)
Right, so that could end up being a short amount of time or it could end up being 10 years potentially, right?
Veetahl Eilat-Raichel (08:28.456)
And actually part of our risk assessment and our underwriting also tries to predict your ultimate tenure with your employer.
Peter Renton (08:37.592)
Okay, and obviously you’ve got averages. I… Okay, so you’re doing a monthly interest only and there is no term, right?
Veetahl Eilat-Raichel (08:51.853)
So there is a 24 month term officially. So it’s 24 month or termination the earlier the two. If you leave your employer prior, then that accelerates the loan. However, if after 24 months you haven’t left your employer yet and you haven’t been paid out yet, we will re underwrite you and potentially refinance this advance, assuming you’re still in good standing because the idea, the thesis really is to try to prove that there is this additional influx of cash that most Americans have and that all other lenders are blind to this additional cash flow and that assuming that we have the capability to not be blind to that asset, to take that into account, then we will be able to provide people with better financing solution as a result.
Peter Renton (09:34.681)
Right, Okay, so then you’re getting, you don’t have an API connection into the payroll systems, right? You’re getting, you do. Okay.
Veetahl Eilat-Raichel (09:43.726)
We do. We use a third party platform called Pinwheel. They provide us access to the vast majority of payroll systems. There are people who will either not provide us with consent to access their payroll or that their payroll system would not be covered, in which case we would ask for manual pay stub uploads. And we’ve developed a unique capability to extract the information directly from the pay stub and obviously verify that it’s reliable
Peter Renton (10:07.255)
Right, gotcha, okay, that makes sense. That’s a much better user experience for sure. Okay, so then when did you issue your first loan? Or do you call them loans or do you call them advances?
Veetahl Eilat-Raichel (10:13.379)
Thanks.
Veetahl Eilat-Raichel (10:20.683)
It is. It’s a fully regulated loan. We originate our loans through lead banks, so we’re fully licensed in all 50 states. We originated our first loan in June of 23, so not that long ago, but immediately saw incredible product market fit. There’s obviously a lot of need for liquidity in the U.S. right now. Everyone’s feeling the crunch, you know, with inflation and raising prices. And this is a this is a really great and novel approach to getting access compensation without, to your point, using an earned wage access solution, which cannibalizes your paycheck and potentially puts you in this never-ending cycle of eating into your salary, or alternatively, lending against your 401k, which eats into your long-term savings. It’s cheaper than a credit card. And so it was very clear from the get go that there’s a significant amount of demand out there.
Peter Renton (11:20.229)
Right, right. And so then when you’re underwriting, you have to underwrite two things or potentially even three things. You have to underwrite the person who’s taking out the loan. Then you have to underwrite sort of the PTO and the behavior there. And you have to underwrite the employer, I imagine. I tell us a little bit about that, how you go about that process.
Veetahl Eilat-Raichel (11:43.095)
Yeah. So obviously this is kind of our unique differentiator and this is our technology. You’re absolutely correct in that we try to apply all of the regular financial underwriting practices that every lender does. But in addition to that, the real arbitrage happens where we can combine that with our unique capability to underwrite PTO, which has a lot of components to it. To your point, the employer, the employer’s policy.
Tenure as we’ve discussed before. Wage inflation. You will ultimately get paid out according to your salary when you leave, not according to your salary today. How much PTO do you get? How much gets rolled over? Historic usage patterns up until now, potential behavior change over time. So there’s a lot that goes into it, but ultimately you’re right. The other part of our underwriting component is that unique component of being able to underwrite PTO. And by the way,
The biggest challenge here was the data itself because while it exists in a lot of systems out there, payroll systems and time and attendance systems and HRS systems, it’s completely raw. No one has ever found a business use case to normalize this data in the past. And so our biggest challenge and our biggest kind of technological moat essentially is our ability to create heuristics and a clear taxonomy around how to normalize this data and index it such that we can apply all of our modeling on top of that.
Peter Renton (13:10.819)
Right, right. So let’s just say, I want to take a hypothetical example. I think it’s a really, really interesting use case that you’ve created here. So someone hasn’t taken up much. They may take a week of vacation a year, every year, and then they, so I’ve got a decent amount of PTO accumulated. And then they take out a loan with Sorbet. And then they decide like next year, they’re going to go on a four week trip to Europe and they use a whole bunch of their PTO and then they come back and they get fired a month later. What what happens there?
Veetahl Eilat-Raichel (13:49.155)
First of all, that can certainly happen because it’s important to note we don’t deduct these days from your HR system or your payroll system. That’s part of our premise, both to employers that want to offer this as a voluntary benefit to their employees and to employees who simply apply on our website. It’s essentially up to us as part of our risk modeling to anticipate your usage patterns over time. Now, at the end of the day, it’s an unsecured personal loan.
So you will be on the hook to pay us back regardless, but it’s up to us to both communicate to you and through, again, that payroll integration month over month as we see your updated balance to make sure that you are aware that you will ultimately not get paid out from your employer to make yourself whole on this commitment to Sorbet. And then ultimately, if we didn’t do our jobs right and we didn’t underwrite this correctly, there is going to be regular recourse against this individual, but basically that’s kind of our technology and what we’re supposed to underwrite. We obviously never give 100 % of what we think you will receive. And the sad reality is that PTO is kind of the gift that keeps on giving, right? You keep accruing more and more days as the year goes by, more often than not using that time as well.
So, the more common use case we’re seeing is actually people who are eligible for additional advances rather than people who get exposed the other way around.
Peter Renton (15:21.396)
Yeah, it’s interesting because I imagine a lot of people don’t think about PTO and then it is an asset as you said, but it’s almost like I could imagine some of the borrowers that you’re working with, it’s almost like free money that they’ve discovered. And so they go, look, can take this loan out and pay for my vacation actually.
Veetahl Eilat-Raichel (15:35.523)
Mm-hmm. 100%.
It’s a very common use case actually, and you’re absolutely right. We’re definitely seeing two types of broad strokes, high level. We’re seeing two types of personas in our loan. One is more of the usual suspect of who you would disobey to take a personal loan. So people more on the blue collar end, living paycheck to paycheck, and then using this for daily necessities like groceries and gas and rent, or debt consolidation or credit card repayments or things like that.
But then we’re also seeing, to your point, a lot of people who you wouldn’t suspect to be the regular consumers of a personal loan, who exactly to your point are saying this is found money. I mean, it’s theirs. Why shouldn’t they use it? And there, we’re seeing people definitely paying, using some of this money to pay for their next vacation or for home improvement or just retail purchases and things like
Peter Renton (16:34.324)
What’s the average loan size you’re doing and what’s the range of interest rates that you’re offering?
Veetahl Eilat-Raichel (16:45.251)
Our current average loan is around $1,400. We’re constantly, as a relatively newer player to the market, we’re constantly gaining more more confidence and conviction in our underwriting capabilities. So we believe we can reach slightly higher amounts between now and the end of the year. Just to give you an idea, an average employee in the US will hold approximately $3,000 of unused PTO at any given moment in time. Obviously, averages are very deceiving.
Certain people have, I’ve seen $10,000 and $30,000 and obviously people who have none, but as an average kind of the $3,000 mark and as I said before, we never will give 100 % of that just to make sure that the person, the borrower and ourselves are not exposed.
As for the terms, ranges anywhere between 9.99 to 29%, obviously subject to usury rules by the state, but think about it from a comparable, as I mentioned earlier, just slightly more cheap than what a credit card would charge.
Peter Renton (17:48.193)
Right. given it’s only been like, you know, not quite 18 months since you did your first loan. Are you finding that the payback term is quicker than you expected? mean, what have you learned, I guess, in the data that you, the actual data that you have gathered so far?
Veetahl Eilat-Raichel (18:06.743)
Well, we obviously don’t yet have a fully matured cohort to speak of like default rates per se, but we are using delinquency rates on the monthly interest payment and following the repayment and collection curves there to estimate what the ultimate default rate would be. And we’re actually very encouraged with these results. I think the fact that, again, we have this unfair advantage in our insight into this additional collateral plus the fact that the monthly interest payments are rather nominal to begin with are creating a pretty healthy book over time. And yeah, I think that my general assessment of the market currently is that this need for liquidity out there is certainly palpable, but the consumer balance sheet in the US is still very healthy, relatively speaking.
Peter Renton (18:57.698)
Mm-hmm.
Veetahl Eilat-Raichel (18:59.299)
I do believe that there’s a lot of room to grow for novel credit solutions like ourselves.
Peter Renton (19:06.275)
Right. So then how are you actually getting the word out? Are you doing this direct to consumer? I mean, how are you going to market here?
Veetahl Eilat-Raichel (19:27.341)
So you’re right. I would say our biggest challenge is around awareness and market education. Because like you said before, I know a lot of people who wake up in the morning and go, I want to advance against my PTO. That’s not something that’s top of mind for most people. Yeah, we did start off doing only kind of strictly direct to consumer. And like I said, found really amazing product market fit. mean, the company grew in a really compelling way. And what started happening then was actually kind of cool, the classic story of this bottom-up motion that begins to happen when something resonates with people.
So we began to identify clusters of employees within the same employer. We’ve had a few really cool instances where, you know, it just so happened that the person that applied was like the head of HR and benefits in their company and they would come to us and ask if they can offer this to the rest of their employees or people kind of word of mouth referring their friends and coworkers. And we did, you know, most recently start offering this to employers as a voluntary benefit. And again, I think that’s, it’s a really unique proposition to, or a position to be in where we can offer a stunning financial benefit to employees without the employer having to really do a lot about it. It doesn’t cost them anything. They don’t have any kind of HR overhead in administering this. It’s completely external to the employer-employee relationship. It’s not a payroll event. There are no tax implications associated with it. So it really is kind of like a pet insurance in the sense that they can just offer this to their employees, provide them with additional compensation and not have to do a ton to make it happen.
So we have started to see some traction on the B2B2C side. And as a result, we now have a partnership in place with Mercer, the largest benefit broker in the US and increasingly signing more and more partnerships with benefit platforms that are able to bring us to market to increase that employer part of our business.
Peter Renton (21:38.472)
Right. Yeah. I mean, the B2B2C, obviously that’s going to be, you get a lot more bang for your buck there, right? Because it’s, it’s hard. mean, we, we look at the, the unsecured consumer lenders and it’s taken them years, sometimes a decade or more to get to break even because it’s, it’s a, it’s a hard cost. Requisition costs are high. I you’ve got it. You’ve got a, interesting product in that you’re, you’re not really going up against 10 other competitors that are also doing PTO. So there is, there is this sort of found money type thing, but still, as you say, you’ve got to get the word out there. And I think that’s a, that is a big challenge. And I wanted to talk about sort of education because it’s, you know, like I said, most people don’t think about their PTO. Are you finding that when it’s explained, people get it right away, go, yeah, of course, I’ve got this asset that I didn’t even think about. mean, and how are you going about doing education?
Veetahl Eilat-Raichel (22:45.987)
So I think that once, yes, to your question, once explained, people get it. We have a really great experience on our website and our application process where you start off with this calculator. You can answer a few simple questions and you will get to see for the first time ever what your PTO is actually worth. And again, that’s like the main aha moment where this thing where you thought of in terms of hours and days turns into dollars and cents.
And we found that to be obviously very compelling to people. And with that, again, I think that there is a very clear groundswell of word of mouth coming through when people find this out and tell this and are excited about this and tell this to their coworkers and their friends. And we are investing quite a bit in outlets like yourselves to tell the story. I really do believe that this is an agency issue, right? It’s about allowing people, the agency to choose how they want to use their pay time off and giving them the option. And to your point, once they realize that, they can decide to either keep their days because they would want to take them at some point. They could decide to use some of them and then use the rest of it to fund their next vacation or an emergency expense. But it should be up to them to decide. And I think that that message really resonates both with employers and employees.
Peter Renton (24:19.529)
Right, right. That makes sense. then, you, I know you’re still a really young company, but it seems to be that the earned wage access, there’s rules that are coming. They’re gonna be controversial. There’s gonna be lawsuits flying around as soon as the rules actually get announced and get released.
So there’s a lot of regulatory activity, shall we say, in the earned wage access front. How like have you started sort of talking with regulators and what if you have, what are those conversations been like?
So we were actually in somewhat of an infliction point at the beginning of our journey trying to kind of figure out how do we want to go about it. And we really did take a very deep look at the Earned Wage Access space and immediately were alerted to the regulatory concerns around the practices in Earned Wage Access. The main concern there was that while they charge fees, if you were to look at it as, you know, in terms of APRs and interest rates, they become somewhat egregious from that perspective. And so we made the decision early on to go about it differently, to pursue the path of being a lender, fully regulated under all of the required regulation, which really kind of extracts ourselves from this conversation. And like I said, we currently originate through a partner bank and are subject to their compliance and diligence. So, we feel very comfortable about our docs being very much in a row in that respect.
Peter Renton (26:05.119)
Right, so then how are you making money? What’s the business model exactly?
Veetahl Eilat-Raichel (26:09.827)
So our main source of income is obviously the interest that we charge on the loan, but we have two additional revenue streams. One is that we do allow people, if they so choose, to receive the money instantaneously instead of waiting for a regular ACH they can take up to three, four business days. If they opt to go for the, what we call an express option, there is a fee associated with that. So that’s our second revenue stream.
And then our third revenue stream goes more to our vision of where we want to take this company from day one, essentially, which is that we never sought out to build a kind of transactional lending product. And we view this as more of a financial platform. So what we do is we harness this relationship and we harness the unique data that we have to offer people with additional, both financial and non-financial products from day one.
So additional liquidity solutions, savings and investment options, offers around travel, hospitality, entertainment and retail. We’re currently doing that through third party partners, but obviously the vision is that one day we will be able to offer all of that in-house. And obviously right now that creates a deeper and more fruitful revenue stream for us.
Peter Renton (27:32.824)
Right, right. So are you not charging an origination fee then?
Veetahl Eilat-Raichel (27:37.485)
We are currently not charging an origination fee.
Peter Renton (27:40.044)
Okay, okay, interesting. That is interesting. So then what is the biggest challenge for you right now? Is it really just getting the word out? Are you finding that when you get people who explain to them, they’re like, my God, I’m totally on board with this and there’s a pretty significant uptake on the, on the product.
Veetahl Eilat-Raichel (28:30.556)
That’s definitely the main challenge when it comes to our consumers is just bringing this to people’s attention and making sure that they’re aware. Other than that, the regular kinks of a lending business is making sure you’re lending to the right kind of people. I always explain to people who are not familiar with the lending space that unlike an e-commerce player or a service provider, we essentially in essence go out there to the street and start yelling at people, who wants money? We have money for you. The tricky part is not giving people money. It’s about giving money to the right kind of people. we are slowly but surely making sure that we’re building a healthy and sustainable business over time. Kind of learning from mistakes of fintech’s past. It’s not just about growth for the sake of growth. It’s about really, truly showing cohort by cohort improvement in our unit economics and in our delinquency rates and making sure that we’re building a really viable business. We’re deeply passionate about the fact that we’ve cracked something that would allow people more access to funds. But we have to prove that thesis over time and I would say that this is our main focus
Peter Renton (29:42.992)
So then, how are you like, let’s talk about funding for a second. Obviously there’s equity funding and you require debt funding as well. Where are you on that journey and how, like, if you could, how have you been funded to date?
Veetahl Eilat-Raichel (29:59.413)
So we were very lucky to take very good advantage of the happy days of 2021 and went into this journey pretty well capitalized to the point where we were able to fund our initial kind of book through our own balance sheet. That certainly allowed us the privilege to, you know, conduct these learnings that I was speaking to and show actual traction before going out there to start raising a debt facility, which we’re doing right now. I will say that you know, early days, but there’s definitely a little bit of a credit crunch out there for companies like ours. It would seem like the appetite for like first facility type deals have somewhat contracted in the last few years and the environment out there is a little bit more challenging, but we’re, you know, we’re very positive about our outcome because again, I think we did all of the right things in terms of focusing on unit economics and showing results over time.
So that’s kind of the near-term goal is to secure our first external facility. And after that, we would probably be looking into raising additional equity capital sometime in kind of the first half of 2025.
Peter Renton (31:12.565)
So, okay, so you raise capital well in advance it sounds like of launch. What like I guess how long did it take you to kind of build the platform?
Veetahl Eilat-Raichel (31:24.557)
So it’s actually an interesting journey that we took because the thesis has always been the same and the market failure has always been the same, but we actually originally wanted to go about it slightly differently than we ended up.
My original thought was that we would solve this problem by actually approaching employers and convincing them to cash this out for employees and that we would finance it for them. Kind of like a reverse invoice factoring if you think about it that way. We thought it was a very clever idea and obviously a lot of really smart people on the VC side shared our thought, but like sometimes or very often actually happens, we did not find product market fit for that specific solution.
It was actually a really fascinating and learning experience because again, in theory sounds like a no brainer and why not, know, offloading this from companies balance sheets, turning an unknown liability into a short term liability. But at the end of the day, there were two stakeholders in the sales cycle, which made it very, very difficult. We had to both get buy-in from HR and from CFO. Sales cycles were really, really long. Also, you know, the cliche around building something that people really, really, really want.
At the end of the day, while CFOs acknowledged that this is a problem and thought that the solution was clever, it wasn’t a kind of, you know, keep you up at night top 10 concern for them at the time. But what we did see, which was very fortunate that sometimes companies don’t, you know, get to do is we’ve rather quickly identified that while crossing over the employer was challenging, once we did go live with employers, employees loved it and the demand was palpable. And so at some point in early 2023, we decided to pivot to a consumer solution and the rest is history. And the company has been growing quite compellingly ever since.
Peter Renton (33:22.774)
Right, right. Well then, finally, can you give us a sense of the scale you guys are at? Like, how many people on the team? What’s the makeup?
Veetahl Eilat-Raichel (33:31.711)
We’re pretty lean, but 27 people on the team currently. All of the business functions sit in New York in our head office in New York. We have a small dev team out of Tel Aviv. And yeah, lean, mean, and ready to go.
Peter Renton (33:46.697)
Well, Veetahl, it’s really a fascinating story that you’ve got. When this came across my desk, I thought I’d seen all the different lending products that there was to see, but this was a new one. So I had to come and get you on. I’m really glad you decided to join me today. And yeah, thanks for your time.
Veetahl Eilat-Raichel (34:06.605)
Thank you so much for having me. It was a pleasure.
So I’ve always loved lending innovation. And what I love about Sorbet is that they have found a new asset to lend against. Well, of course, these are not secured loans. We need to make that clear. Veetahl made that point earlier. The fact is that many consumers will look at this as an opportunity to find an affordable source of capital. The interest-only payments are compelling.
And that I think is what is going to hook a lot of consumers. Now, whether or not they can make this a sustainable business depends upon how the loans perform once that balloon payment comes due. It’s a big if, but you can tell that Veetahl and her team have thought deeply about that. Anyway, I commend Vital’s creativity and I thought this was an idea worth highlighting, certainly a company to watch.
Anyway, that’s it for today’s show. If you enjoy these episodes, please go and leave a review on the podcast platform of your choice. And thank you so much for listening.