Salarify Talks With Hungary's #1 Super Angel, Jared Schrieber
Jared Schrieber, a serial entrepreneur and angel investor, co-founder and former CEO of InfoScout (later Numerator), who also invested in Salarify. After moving to Budapest, Jared quickly became an essential part of the Hungarian startup ecosystem. With his continuously growing portfolio of 25+ angel investments he became Hungary’s first super angel. Let’s see what Jared has to say about Earned Wage Access and the (in)visible barriers Hungarian startup founders have to face.
How and when did you hear about Salarify?
There was an entrepreneur and angel investor in Budapest who already knew Bence. He said: “Jared I think this is a founder and a company that you might be interested in.”. So he made the introduction and as soon as I met Bence and learned what Salarify does, I knew this is something I really wanted to be a part of!.
What was your first thought when you heard about our company?
I’d like to break that into two parts for the two key elements of Salarify’s business:
Part 1: Earned Wage Access.
My immediate thoughts took me back to my early career, when I was a college student trying to pay my way through university. In the US, college isn’t free - you need to come up with the money yourself, so I had to work my way through school. I remember how difficult it was to only get a paycheck once every two weeks. If your car breaks down or you need to go to the doctor, where are you supposed to get that money from? So many people I’ve known over the years had to take out payday loans, with a 20-50% (!) interest rate for a two-week period.
I have often wondered in Hungary, where employees only get paid on a monthly basis, “How do people survive, and not go into massive amounts of debt?” It must create incredible stress.
Whenever something goes wrong or life just happens (a car accident, somebody gets sick, or a child gets injured), it creates unexpected expenses. When you have a low income it’s very hard to deal with it, and if you only get paid once a month, it’s even harder.
When you worked in the US, were you familiar with other EWA providers?
The only option available was cash until payday loans or pawnshops. As soon as somebody takes their first payday loan, guess what happens? They pay off whatever expense they had right there and when they get their paycheck, half of it may go to the payday loan provider. Now they are left with much less than their normal salary to survive for the next two weeks. With that, it’s often impossible for them to make it until the next paycheck. So, you can guess what they do next. They are forced to go back to the payday loan provider for another loan, because 50% of their salary just isn’t enough to live off of. It’s a vicious cycle and it’s really heartbreaking.
Part 2: Verify.
Your new employment verification product also caught my attention because it addresses a painful process for employees and their employers. Getting any kind of credit or loan can result in too much work or lack of trust in the process leading to
- not getting approved for a loan as a low-income earner,
- or more effort spent trying to get approved,
- and potentially a higher interest rate.
If you can provide a trustworthy, automated approach to verify someone’s employment status and salary, you reduce the amount of work required to get qualified credit and you potentially reduce the interest rate as well. I think it’s a wonderful thing.
Moving to the topic of entrepreneurship in Hungary: what do you think are the biggest barriers that founders face in Hungary that don’t exist on other markets?
Let’s start with what happens when you decide to leave your job and start a startup. If you come from Silicon Valley, you may have worked for Facebook or Google, you may have worked for a startup which was successful, therefore you made quite a bit of money and have significant savings. It gives you the comfort of saying “I can afford to leave my job and go pursue this idea and see how it goes”. Most of the Hungarian entrepreneurs that I meet do not have those kinds of savings, so they get started by working on their startup during nights and weekends – often for several years.
Another problem is that in the US we have family, friends, and ‘fools’ to rely on to give us money to pursue our new idea. In Hungary many entrepreneurs don’t come from families sitting on an extra 100 000 euros that they can afford to risk losing.
Also, there haven’t been a lot of great success stories in terms of startups making it big in Hungary, so you don’t have many founders who ended up with great exits, and a lot of cash to invest in the next generation of founders and startups. There is a short supply of angel investors (aka ‘fools’ like me) here in Hungary to be able to make those very first investments in startups.
Then there are the legal barriers. Setting up a Kft. or a Zrt. is not as easy as it should be, and it requires a decent amount of capital that you have to put in, ten-times more than in other countries (e.g. US). The real problem is that when you set up a legal entity in Hungary, the structure is not supportive of the needs of your startup. It provides a fixed amount of shares, fixed shareholder structure, and it doesn’t work for founders to bring in new people and allocate shares to them. A founder must take shares away from existing employees, which is not something anyone appreciates. In the US or other countries if you want to add somebody, you add shares. If you want to add new investors, you add shares. The mentality in other markets is that we are going to grow the pie together. The legal framework in Hungary is based upon a zero-sum mentality whereby the pie doesn’t grow but gets sub-divided further. This creates real barriers when you are trying to grow and recruit executives and offer employee stock options. There aren’t clean ways of doing that in Hungary, instead you must use ghost or phantom shares.
Hungary’s legal frameworks also prevent use of the simplest, cleanest ways of getting investment into early stage startups. In other markets, convertible notes and SAFEs are used so that the parties do not have to agree on how much the company is currently worth or negotiate dozens of terms related to investors’ and shareholders’ right. Instead, we burden Hungarian startups with costs and complexities that take away from their focus on finding product-market fit – which is the single most important thing that will determine whether the startup succeeds or fails.
Do you see any solutions, openness to breaking down these barriers in Hungary?
The Hungarian Venture Capital Association, Hungarian Business Angels Network, Startup Hungary, and other ecosystem advocates are working together on a joint letter to the government to propose very specific changes that we think would make a real difference for founders and their early stage startups. I have also been positively surprised by the clarity of communication from our colleagues at the Magyar Nemzeti Bank, and are hopeful that we can find the right way to engage the Ministry of Finance.
Now let’s talk about your angel investment activity in Hungary. You have an amazing portfolio, what makes the companies you are investing in interesting?
I have the good fortune of working with some amazingly talented founders who are driven by a passion to solve meaningful problems in clever and innovative ways. Great founders have the drive to do this for the next 10 years at least, and they are not afraid to do it on a global scale. They are not looking at Hungary as their market. In some cases, Hungary can be a good test-market, but in most cases it’s not. The founders should test their concept on a larger market or a market with higher GDP/capita or willingness to pay more.
Finally, for me, I tend to invest in startups that solve real problems. When I say real problems, I mean that I don’t invest in things like gaming. Games deliver frivolous fun, which is fine, but I have no interest in investing in the next awesome gaming startup even though it could be the next unicorn. If I see a real problem and a passionate team, and I see that if they are prepared to give this everything they’ve got for the next 10 years, and that the world is going to be a better place if they succeed, then I want to support their journey.
Can you tell me about your upcoming book?
I actually got inspired by one of the all-time best-selling business books, Jim Collins’ Good To Great. Jim and his research team studied every publicly traded company over a 15-year period. They identified companies that really took off successfully, versus companies in the same industries that lagged behind. They then conducted research to figure out how these winning companies won, and why did the losing companies lost.
When I read it, I thought somebody needs to do it for consumer brands (instead of entire companies). Somebody needs to look at brands over an extended period of time, identify winners and compare them to brands in the same product categories that decline. That’s exactly what I set out to do.
I had already built two companies that used retail and consumer data at a massive scale, tracking every brand in America, over 25 000 consumer goods brands, and we also collected every advertisement across every media platform (from TV to radio and social media). We captured every promotion at every store along with all of the pricing, all of the product availability, and all of the online product reviews. My analytical research team and I studied these 25 000 brands over 5 years and identified 58 brands that really took off in terms of their retail sales and market share. It wasn’t just that their category was growing, they were dominating their competition in those categories year-after-year. Meanwhile other brands in the same product categories were in decline. We would pair these winners and losers, asking:
“what did the winner do differently from the loser to drive growth?”
We tested 39 different hypotheses and as a result, we came up new insights that we put into an entirely new framework called the Brand Growth Flywheel. This framework provides a structured way to harness the findings of our research and will be published on December 13th, with the title: Breakout Brands (link goes live soon).