Transcription
Kathryn:
We went to the grocery store and as we were walking out, I dropped the gallon of milk and it broke open and all the milk was spilled. And she started to cry and she was really upset because she didn't have enough money to get another gallon of milk.
Bobbi:
You're listening to Financial Grownup with me, certified financial planner, Bobbi Rebell, author of how to be a financial grownup. But you know what? Being a grownup is really hard, especially when it comes to money. But it's okay. We're gonna get there together. I'm gonna bring you one money story from a financial grownup, one lesson, and then my take on how you can make it your own. We got this!
Bobbi:
Hey Financial Grownup friends. We all have memories of childhood that stay with us forever. As you heard with our remarkable guest who you'll get to know, Kabbage co-founder, Kathryn Petralia. In her case, literally her mom, crying over spilled milk; Kathryn never wanted to be in that position and one might argue that that moment, that defining moment and the realization that came from it, was her financial grownup moment.
Bobbi:
Welcome to all of you. So glad you can spend the time with us. We value that time so we keep the Podcast short; about 15 minutes. But if you have more time, feel free to binge. And if you like it, please share with a friend and don't forget to subscribe. New thing I learned recently: take a screenshot, share it on social media, and tag me so I can thank you. The show is free and if you feel it's giving you value, share it with someone that you think would enjoy it as well. Let's get to Kathryn's story. Stay to the end, by the way. Her everyday money tip is going to save you hundreds of dollars, if not more, on your next vacation. I'm serious. This is a really good one. Here is Kathryn Petralia.
Bobbi:
Hey, Kathryn Petralia. You're a financial grownup. Welcome to the Podcast!
Kathryn:
Thanks so much for having me.
Bobbi:
Congratulations on all the success of your venture, Kabbage. Tell us a little more about it.
Kathryn:
Kabbage is a data and technology platform that enables realtime lending to small businesses. We've deployed over five billion dollars to 150 000 small businesses in the United States.
Bobbi:
Wow. And by the way, just so our listeners know, you're a big deal. You were named recently in the Forbes 100 Most Powerful Women of 2017, along with some peers like Oprah and Sheryl Sandberg, so congratulations on that.
Kathryn:
Oh, thanks a lot. I was really shocked by that, frankly. I'm super honored to be part of that crowd.
Bobbi:
Well, I think as more people get to know you and all that you've accomplished, I think people will not be at all surprised. And on that note, I wanna hear your money story because it has to do with your childhood and the framework that set you up to have this drive to make sure that you were successful in business and in your family as well. Tell us your story.
Kathryn:
Well, when I was about six years old my parents had recently divorced and my mom was struggling to make ends meet because she was getting her PhD and didn't wanna take alimony or child support that the court didn't order; this was in 1976, so that was a thing back then. And so things were really tight for her financially and we went to the grocery store and as we were walking out, I dropped the gallon of milk and it broke open and all the milk was spilled and she started to cry. She was really upset because she didn't have enough money to get another gallon of milk. That just had a really big impact on me, you know, at that time and I've remembered that story for many years. What's funny is my mom doesn't remember it anymore.
Bobbi:
Oh my goodness! It's so interesting always looking back the things that make an impact on a child and it just becomes part of the everyday fabric of life for adults. What else do you remember about that period of time in your life, in terms of your mom and what was going on with her? Did you guys have discussions about it? Did that incident open up any kind of dialogue about money? Or was she always trying to put on a brave face? Because it sounds like she was a really strong woman.
Kathryn:
Well, you know, she was always very transparent with me about everything, so it's not like she tried to hide it from me. She certainly didn't want me to be stressed about money, so it wasn't like she was saying to me, "Oh, we only have $14 this week," or whatever. But if I asked for something, she was really honest about, "Well, we can't really afford that now. Maybe we can do that later." I've lived with both my parents, so back and forth, so I had these two totally different experiences.
Bobbi:
Oh tell me more about that.
Kathryn:
Well my father's an attorney, and so he had obviously more money. He had a job; he wasn't working part-time. And so I was able to get things that I wanted and needed from my father and I was able to protect my mom from those requests, I think ... I learned a little bit about protecting my parents back then.
Bobbi:
Yeah. It sounds like you were taking on a lot of financial ... I don't know if it's decisions, but you were certainly thinking about money at an early age.
Kathryn:
Absolutely.
Bobbi:
Can you expand on that?
Kathryn:
I guess I just knew that there were different ways that people lived. So if I had only been in my dad's house all the time, then I think it was really useful to me to understand that not everybody has everything they want and some people really have to struggle to get by just to pay their rent and just to buy groceries. And I think that was a valuable lesson for me.
Bobbi:
Interesting. If you were able to see two ... You basically grew up almost in two different socio-economic levels in that you had to see both sides of the story.
Kathryn:
That's exactly right. But not forever. I mean, my mom got her PhD and married a professor and so I think everything was a lot more the same by the time I was 11 or 12. But certainly there was a period of time where things were different.
Bobbi:
Tell me more about your day-to-day life then with your mom and your dad, how it differed financially.
Kathryn:
I could ask my dad for things or I could ask to go out to eat or I could ask for a toy. I really didn't ask for a lot of stuff, anyway. But with my mom I was more careful and I knew that it would be a treat to go to Dairy Queen and get a Dilly Bar, which is like the D since back then. She wanted that too, so I picked the things that she could treat me to so that she would feel good to.
Bobbi:
Looking back, it's interesting because in many divorce cases you hear that one party wouldn't pay the other one, or something was going on, but your mother, it sounds like proactively did not wanna take child support or alimony. What's your sense ... Is that something you've ever talked to her about? Because it certainly would've made a lot of those times easier.
Kathryn:
Well, from her perspective it was her decision to leave the marriage and so from her perspective he didn't owe her any of that. In fact, the court actually wouldn't let my father not pay her, so she gave him the money back and she paid income taxes on it, I mean, because she's just a very stand-up kind of person, I guess. And she wanted to make her own way and she didn't feel like it needed to be his problem. So I think I've picked up on some of those tendencies from her, too. But thing's were different in the '70s.
Bobbi:
In what way did you pick up on those tendencies?
Kathryn:
Just to not expect things from people. To know that I have to make my own way and to not rely on other people to get what I need.
Bobbi:
You've always been fiercely independent it sounds like, at least certainly in terms of your financial drive and your ... You've got a lot of ... Like, look at what you've accomplished. You've done a lot and you're still pretty young.
Kathryn:
I don't feel that way now, but I mean ... I could tell you that my knees hurt when I stand up, when I get off the floor with the baby. But you think the independence is driving. I think it does drive me maybe to do more than I would otherwise and to not take something from someone and to try to get it myself. But sometimes that works against you, so if I really need for something, like this weekend my husband's gonna be out of town and he's at home with our two kids and I really would make my life easier if I had somebody come and watch our baby for a couple of hours so I could do something with the older child. But I'm probably not gonna do that. I'm probably gonna just try to get it all done myself and nobody's gonna have a great experience because I'm not asking for help, so I think there's a downside to that, too.
Bobbi:
I think we've all been there. So tell me, what's the lesson for our listeners from this? Because there's a lot of takeaways. It's very interesting and I really appreciate you sharing this with us.
Kathryn:
Well, I think because I went through some financial uncertainty as a child, it means that I know that people can get out of it. So I've never really been afraid of financial instability because I know that it's possible to make it through. I got married really young, right out of college, and my husband and I moved to Atlanta. We didn't have jobs or even prospects for jobs. I wasn't worried about it at all. We just figured it out, we got some jobs; I think I learned that from my mom. My husband's been a stay-at-home parent for 18 years since our 18 year old was born, and so you have to make a lot of sacrifices for that too to be the only one working.
Kathryn:
It's a little different as a woman, especially 18 years ago, being a stay-at-home dad wasn't a thing as much back then as it is now. But when we started Kabbage 10 years ago, we went without any income at all for a year and for way less income than we'd had for a long time for a couple years after that. And kudos to my husband for sticking it out, but I wanted to make sure ... One thing I wanted to be really careful about was that our eight year old at the time didn't feel any kind of stress from that. He knew what was going on and he knew that things were a little bit different around the house, but he wasn't worried that he wasn't gonna be able to eat dinner that night. And it was important for me to protect him from that.
Bobbi:
When you look back, do you feel like you're protecting him in reaction to the fact that you were not as protected as a child.
Kathryn:
What I've done is we have that same level of transparency that my mom had with me, and really my dad, too, frankly, about finances. So he knew exactly where things stood, but if we were worried about anything like were we gonna have enough money to pay for his college; we didn't talk about those things with him, if that makes sense.
Bobbi:
Right. You're not worrying him about big-picture stuff but you're talking about the day-to-day stuff.
Kathryn:
Right. And even since then, he had ... I got him a checking account when he was 10 and he's had his own debit card. So he buys his own toiletries today with the money that we give him so that he's having to make decisions about what to buy. That's also been important to us.
Bobbi:
Which is good, because you're making him into a financial grownup, which is amazing!
Kathryn:
I would tell you: sometimes I think he doesn't make very good decisions, but he'll learn.
Bobbi:
Look: I always say at the end of every episode, "We're getting closer." Because it's always a process. Right? We're never fully grown up.
Bobbi:
So I wanna hear your everyday money tip, because this was one. We were talking beforehand coming up with one and you came up with this and it's brilliant. I've never heard this before. Go for it.
Kathryn:
Well, my husband loves to travel. Vacations are important for him. But we couldn't do that for a couple of years while we were starting Kabbage. AirBNB was just becoming popular I would say, maybe what, seven or eight years ago. But what we've learned in the last couple of years is that when you find a listing that you really like on AirBNB, sometimes you can figure out that it's actually managed by a property management company and they have other properties as well. And you can find their website you can save a ton of money by going directly to the property managers as opposed to going through AirBNB, and my apologies to AirBNB for telling you this hack.
Bobbi:
Well, they'll understand. Because also it brings you to AirBNB to even check it out to begin with; I think they'll be okay. Do you have any example? Do you remember any trip that you took where you did this?
Kathryn:
I have one I'm just about take where I did this!
Bobbi:
Awesome!
Kathryn:
I gotta travel to California for work and my husband and baby are coming with me and so he found a property and I noticed that it said it was offered by a particular company. We went directly to the site and saved like $600.
Bobbi:
Wow. That's awesome. $600 on how much? On a week or something?
Kathryn:
Five days.
Bobbi:
Awesome. Alright. You're definitely the money expert here. I wanna hear more about Kabbage, because it seems like you're disrupting an area that was really needing to ... It's sort of an open niche between the small businesses needs that ... It's like bigger than a personal loan, but not quite a full medium sized business loan. Tell us more about what Kabbage does and what's unique about it that's so disruptive and that's getting so much attention. And frankly I've been reading some really large numbers in terms of valuation, Kathryn. I know you haven't disclosed all of them but there's a B in front of some of these numbers, my friends.
Kathryn:
There is a B.
Bobbi:
B as in billion.
Kathryn:
US dollars. So, yeah, we've certainly grown a lot. And I think we've been the fortunate beneficiaries of access to realtime data. Our business couldn't have existed 10 years ago the way it does today because the data wasn't available for us to give our customers the experience that we give them. We can actually ... A small business owner who comes to our site can get through the entire application and have actual money in their account in less than 10 minutes. The average is like seven or eight minutes.
Bobbi:
Wow.
Kathryn:
So businesses need capital, but they also need time. Small business owners are running all over the place. They're managing their families, they're managing their businesses, they're doing all kinds of financial things that they probably weren't trained to do and maybe even don't like doing. And so we try to make this as painless as possible for them and really transparent so you're not wondering for days and weeks and months, are they really gonna get that loan and what did that loan officer think.
Kathryn:
That's a big part of the challenge today is that most small business loans are a very manual, time-consuming process. So businesses looking for less than a quarter of a million dollars from a bank? The banks have a hard time doing that cost effectively, so they generally don't even make those loans. And I think that's really the reason our business is able to exist because we could cost-effectively using technology and automation. We can cost-effectively serve those small businesses.
Bobbi:
How did you first come up with this idea?
Kathryn:
My co-founder Rob had the idea because he was working with another company that was using a recently launched Ebay API. They gave third parties access to seller and transaction level data. All the data was authorized. You know, the customer's authorize Ebay or QuickBooks or can't even process where to share the data with us, so they know that we're getting it. But he thought, "Wow. Wouldn't it be interesting to use that data to make a small business lending decision about that business that sells on Ebay?"
Kathryn:
And my background was in FinTech, which wasn't called that then, but that's what it was. So he called me up and said, "Hey, what do you think about this idea?" We had worked together previously and I thought, "Wow, that's really cool." I love that you could use data in that way and consumer lending's been automated since the '90s. But the small business funders hadn't already picked up on that, apparently. We didn't really realize that.
Bobbi:
So it's an underserved market?
Kathryn:
Absolutely. It was an underserved market and it remains underserved. It wasn't because of the financial crisis that it was underserved, but it's always been that way.
Bobbi:
Well I'm glad that you are now helping out in that area. Tell us where people can learn more about you and about Kabbage.
Kathryn:
I'm not a huge social media person. I have the best Twitter handle ever that I don't use well and that's Kabbage; @Kabbage. And you can find out more about Kabbage at www.Kabbage.com and it's Kabbage with K. Although, if you use Cabbage with a C, then you'll find us there, too. We originally named it Kabbage with a K because it was cheaper to get that domain. It was like $1200 as opposed to $75 000 for Cabbage with C. But-
Bobbi:
Oh, wow.
Kathryn:
... we got the Cabbage with the C recently a lot cheaper, so we're excited now we have both. And you can find out more about me on LinkedIn; you can connect with me there. I'm not a huge social media user, but you can always find me on LinkedIn.
Bobbi:
Awesome. Thank you so much!
Kathryn:
Thank you!
Bobbi:
Hey friends. Here is my take on what Kathryn had to say. Financial grownup tip number one: don't be too hard on yourself. Kathryn remembers dropping the milk and her mom crying so vividly. But her mom didn't even remember it. Move forward, don't dwell on past mistakes. Financial grownup tip number two: educating your kids about money doesn't mean you have to tell them everything. It's more than okay to protect them from the scary stuff before they need to know or if it's not age-appropriate. Even if they may never need to know the details of your financial life, it doesn't have to be transparent. Kids can learn about money without knowing everything going on with your family finances. You can just say no to a request for something without saying that you can't afford it. You can just say, "We're not buying it."
Bobbi:
Alright my friends. I am curious. What money lessons did your parents teach you growing up that you remember? Connect with my on social and DM me your thoughts. In Instagram, I am @Bobbirebell1, on Twitter @Bobbirebell, and on Facebook, @Bobbirebell. Learn more about the show at www.bobbirebell.com/financialgrownuppodcast. And the show notes are at www.bobbirebell.com/podcast/kathrynpetralia. And while you're there, sign up for the newsletter. And thanks to Kathryn for helping us all get one step closer to being financial grownups.
Bobbi:
Financial Grownup with Bobbi Rebell is edited and produced by Steve Stewart and is a BRK Media production.
