Fintech Cleo hits $350m ARR and returns to the UK: An interview with Barney, the Founder and CEO

0:00Barney:Hello and welcome back to the Scaling Europe show presented by Deal. I'm Seb Johnson. Today I'm joined by Barney, founder and CEO of Clio, one of the most exciting AI fintech companies. I guess you kind of straddle both. You're absolutely crushing it. And today you are launching back in the UK. Congratulations. How does it feel? thank you it's been a while um started in the uk in 2016 and a decade later we're back we're back in the home market so it's um no it's good to be home it's exciting i think i must have downloaded the app like five or six years ago i feel like it was during covid or something i don't remember when you left the market but yeah super exciting to have you back why is now the time to come back to the UK?

0:41So I there's obviously the business opportunity in the UK is a massive 60 70 million person market high GDP per capita blah blah blah but the the reason I was really drawn to come back is because I think it's really important that companies that found here that are built here are able to scale and list in the UK I think it's critical to our success to GDP growth that if you've launched a company in the UK, you're able to hire staff here, you're able to operate here, you're able to pay tax here, you're able to list your company here. So it's an endeavor to try and make that happen. It might not work.

1:23I might get hammered by the Guardian and the Labour and they might kick me out at some point, but we're going to try and make it work. We're bullish on the UK. We're bullish that this can be a great country that produces great tech champions. And we're bullish that we can increase productivity with highly productive companies like Clio. So we're going to go for it.

1:46Barney:Your employees are obviously pretty productive. You know, you posted the other day that they're now doing 750K of ARR per FTE. That's up 3x in three years. I think at the end of 2022, based on the chart that you shared, it was 250K. How have you managed to do that? It's a lot of hard work. Like, it's a lot of hard work, but, like, we've had massive tailwinds as well. If you think about our business, we launched AI Assistant before you had LLMs, before you had the transformer architecture. So when ChatGPT was launched, I mean, it's great LLMs. Everything just got a lot easier for us. It was finally the technology was kind of there.

2:22You can say we maybe started the business a couple of years too early, but that pre-LLM period helped us build a huge competitive advantage in terms of billions of conversations, millions spent on annotation and writing the responses to questions. We built this great data set for supervised fine-tuning and for reinforcement learning, which has given us a big competitive advantage there. So you've got a big tailwind there, and then you've got a big tailwind, and we've grown with the customers over time. So we've added a lot of products, expanded the product set, and our customers have matured in financial stages and are higher lifetime value customers than they were previously.

2:57It's like both of those things have you know built a business that as of today is 350 million ARR grew 2x year on year last year and is profitable there's very few companies in the world that have those kind of three things of big ARR base profitability such an early stage and growing fast as well so yeah tailwinds for sure and yeah maybe we got a little bit lucky with the open AI turning the world around but So yeah, it's a great time to be an investor. It's a great time to be a founder. Like building AI products is, you know, right. It's just like the internet. It's just like when, you know, when the iPhone was launched and like two years later you had Uber and Airbnb and people taking advantage of the APIs.

3:39We're at the same moment now with large language models. So no, it's a fantastic book. And you had your head start, right?

3:46Barney:Which has obviously been really powerful because it wasn't that you were building something new. It just kind of gave you like a new engine to supercharge what you had already built. which I think has put you in an amazing position. Now, for somebody who in the UK hasn't come across Clio because you've been focused on the US market, can you touch on why somebody should download it and use it? Yeah, so we're launching a new feature this week. It's kind of a combination of things we've been doing for a while, but I think it's really powerful. And basically, if you are a user, you can come into Clio, you'll connect your bank accounts with Clio, and then we have this amazing onboarding now to what we're calling autopilot or self-driving money, where you will have a voice conversation with Clio or you can text and Clio will play back your entire financial life for you.

4:31So all your spending, what you do versus other people, how are you different to people like you in a similar income bracket and she'll play it all back for you. So you can really learn about where your money's going, how you can improve, what is going on. And we have this like little interview with you where we kind of figure out your financial goals. So maybe it is, you know, getting a mortgage, getting out of student debt, Maybe it is retiring by the time you're 40, whatever that goal is, people generally have some sort of big aspirational thing and we'll take that and then we'll break that down for you over a multi-year horizon.

5:04So instead of saying, oh, I want to get a mortgage, it's saying, hey, in five years, we're going to get a million pound house and we're going to save for a deposit that's 250k. And every month we need to save this amount based on your bills and your income and your spending. This is exactly the plan for you over that time period. and the amazing thing now with the llms and reasoning is every day once we've got this big plan set up we come to you and we practically tell you like how you're tracking towards that plan and we update and we change based on your life there's ups and downs in lives i often spend uh more money than i should on things that i didn't really mean to and my plans got to change but it's adaptive it reasons over your finances every evening every night and then it comes to you with an updated plan, builds this relationship over time, finds you better for financial products.

5:51And the final thing with that is it'll start to take actions on your behalf if you want it to. So you might have a credit card. Maybe it's not the best rate on the market. You might have debt outstanding. Could we refine that for a cheaper price? You might have subscriptions we need to cancel or a bill you need to renegotiate. Clio can now go out into the world and help you take actions to save you money. So it's a thing that maybe in like 10 minutes time, having a a lot of conversation could instantly go get you four or 500 quid um without you having to do anything which is incredibly powerful uh when we think about the mainstream consumer um so that's that's autopilot and we're launching that this week so i'd love people to to sign up give it a go back in the uk um need the support i need to get those user numbers up in the uk i think we had 200k weekly actives before we uh went to the us so and you know hopefully we get some more of those users back um that we disappointed leaving the market so anyway very excited amazing and do

6:51Barney:you have a target in mind that lets you know this has been a success is it 200k within the first month or something like what targets are you hoping to hit i actually i never set for brand new products i never set um great targets initially i said is this like a world-class product that people love and we're getting real value from so even internally at the moment it's like we've got 400 people just dog fooding the app and it's like do we all truly believe in it do we think this is a world-class product and until enough people in the business like yes fuck yes then i probably shouldn't swear should i um then we don't launch it or we don't want to we don't want to get lots of people towards it so we're going to build a really kick-ass product and then we'll scale it um in the next year or so amazing and and um what's the like go-to-market plan like how are you planning on scaling across the uk and getting to however many hundreds of thousands or millions of users it's it's an organic growth strategy to start with so we're going to do no paid marketing in the early days we're going to go purely word of mouth friends uh referral schemes like that thing multiplayer in the products but everything's going to be organic in these new markets so we're doing uk but we're also doing australia canada ireland new zealand english speaking kind of countries like ours so we've got a big kind of phase one of international expansion coming soon they'll all be organic and then we'll just launch the ai assistant first with no financial products then over time we'll start to monetize financial products and bring those in from other markets but it's a pure ai first data first can we build something people trust and love and then we scale it up so that'll be fun that'll be fun and how much bigger do you think this makes your market uh well it's it's another you know california right um it's a big addition adding almost saying the uk should be a 51st state there i don't give trump that idea yeah those countries that i've listed there i can get another you know 100 150 million customer total addressable market and their income per capita is similar to the us culturally english lots of good things about all those countries in terms of open banking so i've dramatically expanded my TAM and I've done it quite easily because open banking allows me to just with open AI tokens and just with open banking move to a new market pretty quickly and start monetizing directly with AI assistance so um yeah like we'll need to continue to do markets as we grow but there's also like a huge amount of headroom in the U.S.

9:22I'm less than two million paying subscribers in the U.S. so there's there's still a long way to go in the U.S. and to dominate that market but we want to be a global player. We want to be the assistant that a billion people use every day that helps them manage their money. And I can't get to a billion people in the US alone, Seb. So I'm a fantastic expansion.

9:42Barney:That's what we love to hear. It's like the scaling you at Mantra, but you're scaling the globe. So look, you're growing quickly. You've got loads of ARR. You're growing efficiently. You're profitable. Everything's going well. You're now expanding your market. You've posted on X recently about fundraising. in what are you thinking are you thinking about raising a big round legs this year to again like supercharge international expansion what are you thinking the nice thing about the business is i don't have to take capital like it's actually a weird feeling i am planning on doing a round um you know this year for sure but normally when you do a round you've got six months of capital and it's kind of like a gun is against your head and you've got all these employees like oh my god I've got to pay these paychecks in a while.

10:28It's amazing to be in control of our own destiny. To have that control of a business as a founder is an amazing, amazing feeling. It really kind of changes your psyche. So I'm only going to take money on two conditions. One is I love the partner and I think the partner is a world-class operator and someone that can join the board and add real advice and is going to be credible to public markets. and then two probably uh just valuation like um are we like are we valued as highly as i think we are because i don't want to dilute the business if uh you know the valuation is not up to scratch so we'll take it on those two conditions um yeah i would like to get around done i'd like to expand a bit more aggressively in terms of hiring and people and new products new geos more ai there's always more to do right like we're still limited by software we still need to write more software and that is the big constraint of economic growth so um yeah more people the better and anything you

11:29Barney:can share about what you think a reasonable valuation or multiple might be i mean the last time that you raised publicly you was under a billion right it was a long time ago that you raised publicly i don't know what the valuation was but it's in the hundreds of millions now there's no way that you'll be valued anywhere near that you know it's going to be in the billions for sure do you have an idea of what kind of multiple you think you you would deserve it's a really interesting one because we're kind of like straddling something between frontier ai and financial services and fintech and it's not you know it's not clearly one it's not clearly the other so it'll be interesting to see where we land on this our last round for context we got a 22x um ARR multiple on that so if I got 22x again I'll be I'll be very happy um it might be a little punchy at 350 million ARR but um always shoot for the you know shoot for the stars right um so we'll see we'll see and last time this globe I think was back in August or September you were talking about five being the minimum that you needed to really think and think about the public especially in the US markets and are you thinking about public at all I mean obviously you're about to raise a growth value are you looking at this as maybe like a pre-ipo round or are you still thinking that's years away no this is you know this is maybe the last um in probability is like we're going to be just throwing off it'll be very profitable right i'll be throwing off cash so it's like how much capital do you really need at some stage so this will be the last or the second to last i think in reality i say that and then i'll maybe i'm stripe and i'm still raising it like 200 billion market cap but yeah exactly i think they're on it might run out of letters soon at stripe but um you know i would love to ring the bell and i would love to just as starting something from nothing in your bedroom to being else beyond the nasdaq ring the bell or the lc we won't take off the table but being able to ring that bell and say you're you built a public company that's in the tens of billions of market cap hundreds of billions of market cap it's a pretty cool thing to do when you're you know you're a year out of your first job you know a year and a bit out of your master's to be able to do that for nothing is one we live in an incredible society where people who are just computer scientists and nerds like me can go start a business with a fucking laptop and nothing else they can raise money they can hire hundreds of people they can build an incredible business there's no gatekeeping like that's the amazing thing about western liberal democracies and free markets enables anyone, a kid from a state school in Sheffield to go build a billion dollar plus company from nothing is exactly what you want as a society and exactly what we should want.

14:15We should want founders in the UK. We should want businesses to be scaled here. We shouldn't accept them because of success. So I think we need more founders. We need more computer scientists. We need more people to learn to code, especially with the advent of AI. It's got so much easier.

14:32Barney:it's an amazing story and i think it's a story that you need you need more stories like here in britain you know we don't have that many great stories of people like yourself you know british born building billion dollar companies and not being torn down by the media just yet so you know we need like some more positive stories of great people building ways in businesses uh i was wondering you mentioned nasdaq you mentioned you're not already got the lc what would it take for you to need what need to change for you to either listen the lsc or maybe even do what you always did the lsc has just got a lot more risk on in terms of we know liquidity is just not there at the moment pension funds aren't investing of these big pools of institutional capital that don't go towards growth stocks or don't go towards public markets which is a crying shame and why multiples are so low you know as well as slow growth business in the uk being there and then the listing rules are like amazingly worse than the nasdaq right like um everything around um dual stock share listing just regulatory that everything is harder and more expensive in the uk than versus the us you like disclosure of ceo pay just everything is more scrutinized in the uk and is a setup for a more risk adverse kind of set of investors and if you want technology companies to list and stay listed here like wise then you've got to make the listings and the ability to list easier and more advantageous for a company in the uk and yeah until they make some of those big sweeping changes anything is going to happen and if you look at the us as well like just in the taxation we're not going down a great path in the uk of wealth taxes exit taxes increasing capital gains we should make you know we should incentivize on to list and we should say hey if you list and stay listed here you will get a great deal and you will be um treated just like someone in the u.s who um you know your first 10 million in the u.s you don't pay capital gains on um we keep clawing away at things like that in the uk which makes people move to the u.s think about hey i'm gonna list in nasdaq and spend my time in austin or miami or wherever it is um so we just need a system that on every dimension is pro-entrepreneurs pro-founders pro-growth and it's not that hard like i've written all of these policies down and sent them to hmc a million times it just needs a little bit of will to get behind it um but yeah hopefully we'll see some change i think so too i think i think there seems to be more positive engagement i think with the government i think they are ready to listen i think there is an optionism um but we'll see but look Barney thank you so much for joining me today it's amazing super exciting to see you back in the UK uh I can't wait like we should catch up in a few weeks and do like a sort of recap on how it's on how it's gone um but thank you awesome man good to see you I'll see you soon bye