Great Affirm CEO Max Levchin interview

THE INFORMATION did an interview to Max yesterday, the full article can be read here (free access by registering an account):…

Here are some of the highlights which might also address some of Saul’s concerns especially on Afterpay being acquired by Square and whether there is huge growth space down the road:
But despite a gold-rush mentality over the past few weeks, as PayPal and Square both struck big acquisitions, Levchin told The Information in an interview he’s not rushing into deals. “We’re going to be judicious” about acquisitions and may “partner more than we’ll ever acquire.”

And Levchin didn’t definitively rule out selling. “I’m not convinced that we want to be acquired as a company,” he said, although he added “we’ve got a long road map” to build the company.

Levchin, a co-founder of PayPal earlier in his career, said he wasn’t “overly concerned” about PayPal’s arrival. With buy now, pay later only in its infancy in penetrating the market, he said, “there’s a lot of road to go before you run into anybody.” And PayPal could help “educate the consumer.”

Detailed: Q&A:
On recent share price run up:
MAX LEVCHIN: I don’t really pay attention to it. Not that I don’t care. Obviously, as a steward of shareholder capital, it’s my job to care. I want to make sure the stock performs. That said, I think measuring company stock is supposed to be at least a good reference to a company’s performance. I’m very, very concerned with the company’s performance. That’s the only thing I really care about. [Affirm’s] stock ebbs and flows, and the volatility is not for the faint of heart. I keep myself sane by glancing at it occasionally.
It’s gratifying to see investors reward the performance. But I am very focused on the next five to 10 years of Affirm and not the next close.

On PayPal acquisition going into BNPL space:
MAX LEVCHIN: BNPL [buy now, pay later] is a fraction of total U.S. e-commerce. We’re still looking at 3% to 4% penetration. And what we’re doing is unbundling the credit card. So there’s a lot of road to go before you run into anybody. In that sense, I’m not overly concerned.
[My own take]: BNPL as an industry just in its infancy stage and to Max, they want to disrupt credit card industry, not focusing competing with other BNPL players instead as the market is so huge to allow multiple players to succeed.

On partnering with SHOP and AMZN:
MAX: Presumably, Shopify had their pick of all the players in the buy now, pay later space, and they chose us. We are a very technology- and engineering-driven company. If you’re building something as giant as Shopify, you care about scalability and availability and engineering excellence as much as you [care] about conversion and NPS [net promoter score, used to measure the customer experience] and marketing prowess.

What we bring to the BNPL conversation—more than anyone else by a very wide margin—is we’re a strong technology team. And that extends into the product itself. We take the risk on every transaction. These giant enterprises want to partner with someone who knows how to underwrite and knows how to manage the risk in good and bad economic times. The fact that we are so serious about it, and have had a decade of experience doing it in North America, really matters to our partners.

On possibility of being acquired by Amazon or Shopify:
Max: I’m pretty focused on building a great business. I’m not convinced that we want to be acquired as a company. As a responsible steward of shareholder capital, I will of course give thoughtful consideration to everything and anything, but we’ve got a long road map. Most importantly, we have so much product to build. As you build things, it ebbs and flows. We build a bunch of stuff and bring it to market, then optimize it, and then grind at the things [we] want to make better. We’re in that part of the curve at Affirm right now. We’re just launching all these cool new products. And there’s even more to come.

On acquisition strategy:
Max: Absolutely.
As a CEO, and hopefully long-term thinker, the one thing that you want to still care about from the point of view of stock is having a currency. The reason we went public in part is to have a currency that we can use to acquire like-minded companies and bring them to our portfolio.
Fundamentally, we are a great engineering shop; we know how to build things. We know how to underwrite, we’re a pretty good risk manager, and we are quite thoughtful about capital markets. As an acquirer of companies, we look around and pass the question, if we brought our expertise in risk-engineering capital to this, would it have a force-multiplier effect?

On Peleton concentration:
Max: From the shareholder point of view, you don’t want too much concentration risk in any one particular partner. But on the flip side, Peloton has been an exceptional partner to us, and we have a great relationship. We went live with them before they even sold the first bike, and so we kind of grew together a little bit and watched each other invent new things and do well. I want to see them grow as quickly as possible, and I want to be there to help them grow.
I don’t have a point of view of “I want more Peloton or less Peloton.” I want Peloton to be as successful as possible. We’re always looking for more brands. We benefit through association with great brands. But reducing Peloton is not a goal. In fact, growing with Peloton is an important goal.