How to ignite innovation with smart capital

In this episode, Legislate meets Dominick Peasley, CEO of Sprk Capital, an online lending platform that enables SMEs to access their R&D tax credits as they incur expenditure. Dominick explains how Sprk Capital have reduced friction in the R&D claim process through standardisation and the benefits of standardised contracts.

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Listen to the episode below:

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Learn more about Sprk Capital

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Charles Brecque: Dominick, thank you for taking the time. Would you like to please share a bit of background about yourself and Sprk Capital.

Dominick Peasley: Thanks very much and thanks for having me on the Legislate podcast. A little bit of background on myself, Dom Peasley. I'm the CEO of Sprk Capital. Going back, a little bit of a chequered career. I started my life as an accountant with PwC, in fact, I'm one of the few that actually started with Coopers & Lybrand many moons ago. From there, I went into the world of structured credit. I worked in US sub-prime and European sub-prime markets all the way through the crisis and followed that with a stint at Goldman's, where I looked after their capital raising on their asset management arm. I then saw a slight gap in the market where fintechs were coming out post-crisis with lending products and a lot of them were what you would call peer-to-peer. So, it was you and I investing parts of our hard earned money through our ISAs and lending that through platforms, but there was a huge problem with scaling those platforms when they were using retail money. I started looking at the institutionalisation of capital within that world and that led me to work at Funding Circle, which became one of the largest leading online providers of small business finance in the UK. From there, I was very privileged to work with the British business bank and the treasuries through the COVID-19 crisis, working on all the government support schemes, whether that was the Corona Virus business interruption scheme, the bounce back loan scheme, the recovery loan scheme. And it was clear to me that SMEs needed speed and certainty of capital when they were looking to borrow and that there was a lack of capital available to SMEs in the market. And one thing the pandemic had done it had accelerated this trend from offline lending to online lending. And I think when you've got bank branches which are closed.

You've got call centres which are jammed up with people looking for help, people turned online. So, the concept of Sprk Capital was born. It's been in the making for quite a while. One of my co-founders had built a very similar business in Australia which had become the largest fintech tech lender to business engaged in research and development and we wanted to build the same thing over here. Now obviously, COVID-19, no one could travel. I stared building a team here with colleagues down in Australia, building a local presence because we thought that was what was a Sprk is an innovative online lending platform. So we aim to be an integral part of an SMEs cash flow planning when they're engaged in research and development. So we provide capital to companies lending against their eligible R&D expense so we look to accelerate cash flows for SMEs by up to about fifteen months. We enable them to invest more in R&D and we help them retain ownership of their company through providing a non diluted source of capital. So very simply we look to accelerate the growth of small businesses and power UKGDP with a smarter source of capital.

Charles Brecque: Throughout this career and these experiences, what's been your favourite moment so far?

Dominick Peasley: There are highs and lows when you're building a business. I think we've all been through them but they're a couple of points that stick out in my mind. I think that one of the key ones is actually when our first employee said yes. It's great and it's amazing when you find someone who trusts you, shares that vision and personally that's very rewarding but also we get to speak with some incredible businesses. The range of innovation that goes on in the UK is sometimes overlooked. So we've spoken to businesses like yours which are providing an amazing online service through to businesses which are enabling shoppers to talk to their computer to create a wardrobe. It's amazing to see what goes on in this world of R&D which I never really got exposure to before I started.

Charles Brecque: I think the R&D tax credits are an amazing tool for entrepreneurs and something they should definitely, you know, pay attention to because it can definitely extend runway and I guess what you're doing is extending runway in a much more certain way because you're receiving the credits, you know, now as opposed to in fifteen months when you're most out of cash.

Dominick Peasley: Exactly and I think that's the one thing we've found has been great and a differentiator for us in that we've seen businesses who've looked at R&D tax credits and they've seen it as almost like a bridge lending product just as they're trying to file their tax return and they've been paying fees up front for it. And really our view was well why are you paying upfront fees and diluting your cash flow when I'm trying to provide a non diluted source of capital. They're trying to create something which didn't have borrowers putting out money up front, meant they didn't have to make repayments through the life of the loan. It meant it was a very simple way for people to accelerate all the way back to even Q1 on their expenditure to bring that cash flow forward.

Charles Brecque: What do you wish you'd known before starting Sprk Capital?

Dominick Peasley: That's a tough one. I think it is extremely hard to hire good talent in a start-up environment and I think there are a lot of tools at our disposal now, where there are online advertising portals where you can go and post jobs. There's the traditional route of going through recruitment consultants, but as I said with that first part, making sure that you can have people that buy into that vision is the biggest challenge of all and I wish I'd known how hard that was to begin with, when we started hiring. We also deal with multiple third parties that we are reliant on, that provide analytics, provide open banking services and no matter how hard you work and no matter how great your tech team is behind the scenes, you can make everything look like a swan and you know how hard people are peddling behind the scenes to make sure that nothing breaks. I think, as a business builder, you have to constantly evolve and change tact because you always want to make sure that you're providing the best borrower experience. But the day to day of just diving into a new problem but the volume and scale of those problems sometimes are something I wish I'd known. Maybe I should have expected that.

Charles Brecque: As a CEO of a company, what are the key contracts that you interact with the most?

Dominick Peasley: Oh, we have multiple types of contract so if I think about the groups. We have our suppliers. We have our service providers. We have our employees. We have consultants that we use and we have our borrowers and overarching all of that when we're engaging with businesses we have things like non disclosure agreements and it's surprising how much time that contracting process can take. For me, it's really about how do you create fairness and speed in a process where you're trying to scale a business quite quickly.

Charles Brecque: And when you say fairness in speed and that there were areas of friction, what are the common issues and how have you managed to reach fairness and speed?

Dominick Peasley: How you can have the ability for a contract ready to read in plain English with very clear terms attached to it and, in some cases, having a very simple repeatable process. There are some areas where we have standardised contracts. For example, on our borrower portal, when a borrower goes through their customer journey and we generate contracts off the back of that, we try to reduce friction by standardising as much as possible. Now, there are obviously going to be times from time to time where we do need to adjust something, but if I can get 95% done on a standardised contract, the same where we are looking at working with some of our service providers or suppliers, where we're entering into non-disclosure agreements as well, we like to standardise that from our side that we have key terms, key reps, key warrantees that we're comfortable with. From that point of view, we deal with multiple suppliers and service providers, as you probably do on your business as well and having something which is simple and repeatable is key for me.

Charles Brecque: What's the vision for scaling Sprk Capital?

Dominick Peasley: So, my vision is to accelerate the growth of every single company that's engaged in research and development in the UK and we want to do that by advancing capital to them, to bring forward innovation and to encourage investment in UK PLC. Now these evolve over time and I think it's really how does that mission I suppose gel with developments that are going on in the market as well at the moment so how can you make that process simpler. How do you enable that scaling to happen. We've been very fortunate. I talk about hires. My first hire was an amazing tech expert called Ivan and he has been instrumental in looking at areas of open banking so the ability to integrate a borrowers bank account, their accountancy software to enable a very swift, smooth underwriting processes. Again, trying to standardise, whether it be through a contract or be through a process the experience the borrower has when they come because that to me is the only way that you can really scale a business successfully is if you can provide the same level of service to somebody borrowing a £1,000,000 and the same to £10,000.

Charles Brecque: If you're being sent a contract to sign today what would impress you?

Dominick Peasley: I would look at how simple that contract is to understand. I think having clear terms and conditions within a contract is, for me, the indicator that someone has actually thought about the person that is signing that contract, rather than just the legal drafting of it as well, which is obviously key and important. That level of transparency for me means that it takes less time to understand, I can get a grip on it, I can present that internally to stakeholders effectively and know that the counterpart that I'm dealing with is also thinking about the way that they're coming across and that's important.

Charles Brecque: Thank you very much. Bye, bye.

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