Originally published by Max Levchin on LinkedIn: Why Affirm Beat FinTech's "Down Round" Trend

Last week, Affirm raised $100 million in Series D funding. I chatted with LinkedIn New Economy Editor Caroline Fairchild about the deal as well as other trends I am watching right now in FinTech.

Caroline Fairchild: It’s an interesting time to be fundraising — what did the round feel like on the ground?

Max Levchin: The rumors are true. It’s very challenging to raise money right now. It is definitely self-serving to say, but startups that are seen as more ambitious and run with stronger teams are getting funding. People are looking for indicators of value creation. We did not have a difficult time raising money at a significant up round. Everyone told us that the environment was really brutal, and we should expect a down round. Somebody told me there hasn’t been an up round in FinTech at all.

CF: Affirm isn’t the only company trying to become the next generation consumer bank. What makes Affirm uniquely positioned to win?

ML: It’s very easy to see the quality of the team. It is exceptional. We obviously have the results to show for it at this point — the product works. The millennial demographic that we are trying to serve is growing. We are on the track to become really, really big. It isn’t hard to convince people in this country that financial institutions are really, really broken and there is an opportunity to build something that could revolutionize the entire system.

CF: Why did you feel like you had to start with consumer lending?

ML: I see building any bank as an exercise in building trust. To get there, you have to go through a lot of trust building. This is not easy at all. In the universe, there are some things people are willing to trust. We started with consumer lending because it is a good assessment of trust and can be made by the checkout counter by a person while they are making a purchase. We chose it as an entry point so we could start to build trust with the consumer.

CF: Do you believe that what you’re building is serving some sort of public service?

ML: There is a whole new trend in business building these days where companies hold themselves accountable for more than profitability for the shareholders. They are saying that we have to build a business that feels like a valuable and important part of the structure. For most businesses, that has always been the case. If you go to your local tailor shop frequently, they will know your name and your preferences. Today, people don’t like their bank — they make money when you screw up or make a mistake. So this notion of making your bank like your favorite tailor shop is what we are trying to do. It is not so much a higher calling, more us trying to get our industry to care about their customers.

CF: Do you feel like you are changing the way millennials view the banking industry overall?

ML: It is very early days. We are the fraction of the fraction of the size of most consumer banks. We definitely have exceptionally strong customer review scores. Our NPS score is very high compared to even some of the best banks — banks can quickly find themselves with a negative NPS score with their customers. We are in the positive 70s, which is unheard of. We are trying to signal to the rest of the industry how you should treat your customers.

CF: You’re leading a negative cash flow business. Does that intimidate you going into what is looking like a slowdown in startup fundraising?

ML: That is definitely why we fundraised. We want to be well-situated for the downturn that the stock market has already seen. It hasn’t really had an impact on the consumer. If we go through a real recession or a reduction in credit value, it is very valuable to have cash on hand. In general these days in Silicon Valley if you are building a big business, the question is when and how are you going to be profitable, so building what we are building, we are eyeing that goal. We are going to have to raise more money before we get there. Profitability is visible for us, but we are not there yet.

CF: What is your take on the current FinTech market? Have we hit peak investor demand?

ML: FinTech investing is all over the place because it covers a lot of ground. There are the alternative lenders, which in itself can be divided into two or three different parts. There is marketplace lending, which I think people are now evaluating with a more critical eye. There are people like us that are known marketplace lenders that have a speciality in underwriting and assessing risk. What we do is take the risk and put it entirely on our balance sheet, which a lot of people like because we can stand behind a loan permanently. So it is all over the place, but I think generally people are being a lot more critical and asking what the advantage that a particular company has.

CF: Is there any one area in FinTech that you think is more exciting right now?

ML: There is a tremendous amount of stuff going on in international markets where access to credit has been really, really low-quality, overpriced, and unfair. Democratizing credit outside of the U.S. is something I am watching carefully to see what happens there and am excited to get involved there.

CF: We recently asked our Influencers what their advice would be to the #nextpresident. What would be yours?

ML: Outside of financial services, I think we have other problems that need a ton of attention. One of the top things I care about is immigration. I think that we have a broken system in our country, and we are losing out on talent. We need to get that right and then from there, figuring out what is going to happen with education. That is the next big frontier.