Think Like a Googler

By Corinne Steinbrenner. Photography by Gabriela Hasbun

You hear this mantra a lot from Google: “launch early and iterate.” Easy to say when you’re worth $356 billion. But what if you’re a fledging start-up taking your tentative first steps? Two ex-Googlers, Anna (Mongayt) Counselman (BSBA’03) and Cindy Chin Smith (BSBA’05), are showing it can be done. They jumped from the search giant to a Silicon Valley start-up that promised to revolutionize the entrepreneurial ­financing model. When the market didn’t respond as they’d expected, they took a page from the Google playbook—they iterated.

Three months ago, Anna (Mongayt) Counselman was head of operations for Upstart, a start-up that helped young people fund their dreams through income share agreements (ISAs)—contracts that enable individuals to raise money from investors in exchange for a percentage of their future incomes.

Today, Counselman (BSBA’03) is still head of operations for Upstart, now a start-up that helps young people fund their dreams through peer-to-peer loans—financial contracts that enable borrowers to raise money from lenders, usually at much lower interest rates than they could get from a bank.

True entrepreneurs, Counselman and her fellow cofounders were flexible enough to relinquish their original vision in the face of market realities, tapping their talented team to rapidly rebuild around a new, more bankable idea.

“The broader mission is still the same. It’s just that the vehicle we’re using is more traditional and easier to understand,” says Counselman, who left Google to help launch Upstart in Silicon Valley in 2012.

The new lending platform relies on the same sophisticated technology that powered Upstart’s original crowdfunding platform: an algorithm that uses such information as colleges attended, areas of study, grade point averages, and SAT scores to predict a person’s earning and employment potential. Upstart previously used these data points to help determine how much money an individual could raise on the platform and to help ensure that investors would get their money back. Now the company uses the data to calculate interest rates for its borrowers, most of whom don’t have credit histories long enough to qualify for affordable loans elsewhere. Much like banks, popular peer-to-peer lending sites, such as Lending Club, rely heavily on credit scores to rate borrowers and rarely offer loans to anyone with less than six years of credit history.

“Young does not have to mean risky,” says Counselman, “and we think we have a way to identify these prime borrowers at a time when they need money and to service this demographic better than anyone else can.”

Upstart made the dramatic shift in its business model at lightning speed. Counselman and her two cofounders introduced their idea of offering loans in addition to ISAs at a company retreat in late December 2013. Over the next four months, their team of fewer than 20 employees secured a banking partner, built the legal framework necessary to become a loan originator, figured out how to apply the algorithm to interest rates and origination fees, created an online application that could instantly calculate loan terms, and revamped the Upstart website to feature the new product.

Loans first became available on the website in late April 2014, and the company immediately saw 150 people a day applying for rates—about five times the demand it had seen for ISAs. Less than two weeks after launching the new product, Upstart announced it would no longer offer new ISAs so that it could focus on loans.

“We were onto the fact that young people have a need for money that’s not being well addressed by the market,” says Counselman, “but the product we had before required a lot of cognitive overhead.” Put another way, everyone knows what a loan is and how it works; income share agreements required more explanation. “As a young start-up,” the company’s CEO wrote when announcing the end of Upstart’s ISAs, “we need to listen to what the market is telling us.” And the market was saying it wanted something simpler. Loans are more straightforward, allowing borrowers to easily compare Upstart’s rates to what they’re paying on credit cards or private student loans.

Letting go of ISAs, a promising new asset class that Upstart had worked hard to promote, was a difficult decision, Counselman says. “But as a start-up, you don’t have the luxury of a long time line to bring the market to where you are.” When the demographic Upstart was trying to serve showed more interest in fixed-interest, short-term loans, she says, it had to follow.

Counselman understands all too well the need for funding sources like Upstart that recognize the potential of young people: as one of the first graduates of SMG’s entrepreneurship program, she was determined to start a business of her own, but she eventually ran low on money and decided she’d better opt for a steady ­corporate paycheck.

“I wish Upstart had existed when I graduated from college,” she says. “So building this company feels like a way to give back to the next generation of graduates.”

Upstart is the brainchild of CEO Dave Girouard, who previously spent eight years as president of Google’s enterprise division. As he was leaving Google for his new undertaking, Girouard shared his business idea with Counselman (who was then head of Google’s enterprise customer programs) and encouraged her to join him.

“I originally thought I could spend my entire career at Google—I think it’s an amazing company,” Counselman says. “But when this came up, I thought, ‘I can’t not do this.’”

As a cofounder, Counselman is an articulate spokesperson for Upstart. As head of operations at a tiny start-up, she oversees nearly everything the company does, from how it handles collections to the procedures used for reviewing employees’ quarterly goals.

Until recently, the only other person on Counselman’s operations team was Cindy Chin Smith (BSBA’05), another former Googler. Operations Manager Smith handles a bit of everything (“whatever needs to get done—it’s a start-up”) but focuses specifically on working with borrowers: verifying their documents, answering their questions, and building the underlying systems that guide them through the loan process.

Despite two overlapping years on the BU campus, Smith and Counselman first met on the Google campus while working on an operations project. Counselman vividly remembers her first impressions of Smith. “In every meeting, she was the first person to raise her hand. She would say, ‘I’ll take notes. I’ll get that done. I’ll put this together.’ She was so ready to help and contribute.” So when it came time to hire her first employee at Upstart, Counselman knew exactly whom to recruit.

Choosing the right team is among the most important aspects of running a business, says Counselman. It’s a lesson she learned at Google, where hiring is not an art, but a science that relies partly on an algorithm that predicts a candidate’s probability of success within the company. (The algorithm was among Girouard’s inspirations for Upstart.)

“We’ll interview 100 engineers to find the one we want to hire,” Counselman says. “When you’re growing and you need that next person so badly, there’s a temptation to just hire the person who’s sitting in front of you, but it’s worth it to take the short-term pain of continuing to interview until you get that person who’s going to be awesome.”

Another Google lesson that’s proved invaluable at Upstart: launch quickly, then iterate, iterate, iterate. You can sit around conference tables debating product features, Counselman says, but it’s infinitely more valuable to get prototypes in front of customers and learn from their responses. Before they even attempted to build an online platform for their initial product, the Upstart team recruited a handful of investors and customers for an offline pilot.

“I literally drove around picking up checks from people in my car,” Counselman says. That early experience helped the Upstart team iron out kinks in its ISA contracts and think through the mechanics of operations such as billing and collections. The cycle of test-adjust-repeat also established a flexible company culture that allowed Upstart to pivot so nimbly to its new business model.

While many larger companies cut costs by reducing customer contact, Counselman says, “at a start-up, you have to take every possible opportunity to interact with your customers and learn from them.”

It’s important, adds Smith, that communication flows both ways. Things move fast at a start-up, she says, and you keep customers happy by keeping them informed of changes.

Another value Counselman and Girouard brought with them from Google is internal transparency. Less than 24 hours passed between the cofounders’ first conversation about retiring ISAs and an all-company meeting to discuss the idea. “There were no secret meetings in back rooms,” Counselman says.

“We really want everyone in the company to feel part of the team, to be pulling in the same direction,” she adds. “We saw how empowering that was at Google. A lot of people think the culture of Google is about the free food and the volleyball, but that’s not what makes people so passionate about working at Google. It’s about being part of the team—feeling really connected to the mission, feeling really included in what’s going on.”

What other lessons have they learned? “For me personally,” says Counselman, “I’d say it’s ‘Feel the fear and do it anyway.’”

Being at a start-up, she says, you won’t always have perfect information and won’t always know what you’re doing. “But it’s okay to just feel the fear and do it anyway and trust that you’ll figure it out as you go.”