This Next Billion-Dollar Startup Founder Is Helping People Pay Their Bills

  • 2 weeks ago
Phaedra Ellis-Lamkins built Promise into a $520 million powerhouse by helping municipalities and utilities collect unpaid bills with zero-interest payment plans.

For Promise cofounder and CEO Phaedra Ellis-Lamkins, treating with respect people who are struggling financially is what it’s all about. A 48-year-old Black woman who grew up on welfare and worked as a labor organizer in her 20s, Ellis-Lamkins also did stints as a nonprofit executive and pop star Prince’s business advisor before she turned her focus to helping folks pay their bills. But Promise is not a charity or a nonprofit. Instead, Ellis-Lamkins is out to prove that a fast-growing, venture-backed company can be successful without being exploitative. “We’re all trying to use capitalism to do things we believe in,” Ellis-Lamkins says.

Read the full story on Forbes: https://www.forbes.com/sites/amyfeldman/2024/08/13/this-kinder-gentler-bill-collector-is-helping-people-keep-the-lights-on-promise-phaedra-ellis-lamkins/

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Transcript
00:00Hi, everyone. I'm Maggie McGrath, senior editor at Forbes. The 10th annual Forbes list of
00:09the next billion-dollar startups is out now, and on the list is a company called Promise.
00:16It is a $520 million powerhouse that is helping people who are delinquent on their utility
00:22bills pay their municipalities. I am here with the founder and CEO of Promise, Phaedra
00:29Ellis-Lampkins. Phaedra, thank you so much for being here.
00:32Thank you so much for having me.
00:35So I just gave a brief overview of what Promise is, but I'd love to hear it in your own words.
00:40What is Promise and what does it do?
00:42Yeah. First, thank you so much again for having me. Promise is a company that works with governments
00:48and highly regulated utilities. And what we do is we help bring money into the government
00:52through interest-free payment plans, and we help money go out to people who need resources
00:57and run aid programs like emergency water assistance or climate credits right now in
01:02the state of Washington. So anywhere the flow of money goes in and out of government is
01:06where we are.
01:08What gave you the idea for this company?
01:11Yeah. I think I had more of a feeling. I had a pretty diverse professional background,
01:20and I was struck with the idea that most of the technology that was being built was being
01:23built by people who wanted technology to work for the things they cared about, guys
01:27who wanted a taxi when they got out of a club, people who needed parking or dog walking or
01:33dry cleaning. And it struck me that some of the world's biggest problems or the problems
01:38that people that I grew up with were not being addressed by technology.
01:41So originally, what we wanted to do is to build a company that was focused on people
01:47who were most in need of technology and would build technology that helped people. And so
01:53it was more about kind of what was the economic model. How do you make money? How do you use
01:57capitalism? How do you use technology in a way that is not predatory, but that grows?
02:02Right. We didn't want to build a social service agency. We wanted to build a beautifully
02:09working well technology company that was fundamentally dominating the market.
02:14Now, this I do want to underscore what you just said here. It is a for profit company.
02:19It has a social mission to help people and to help governments. But at the end of the
02:23day, Promise is a for profit company, correct? Yeah. And it's where like the thing I want
02:30to do is I want to beat people on margins. I want to beat people on revenue because I
02:34think people see it as a social mission because we're serving poor people. Right. But if I
02:38was staying a company, it's like we're going to provide service services for the richest
02:42among us. People like totally make sense. But I think when you serve people who are
02:48poor in a way that isn't predatory, it becomes a social mission. But that's what I want to
02:51do. It's like I want to be clear that we should build companies that at the core of their
02:56mission is winning for their customers, which in our case is government and poor people.
03:02Let's go through a typical use case, if you will. So my colleague, Amy Feldman, the editor
03:08of the Next Billion Dollar Startup List, has a great profile. And you should go on Forbes
03:12dot com to read all about Promise in detail. But for folks watching this video, let's say
03:17I'm a consumer in Pennsylvania. I have fallen behind on my utility payments. The municipality,
03:24my local government is coming after me for those payments. Where does promise enter that
03:29equation? Yeah, it's a great question. So in the use case of basic two products, payment
03:34plans are one of our products. And in payment plans, we find you. And so we get a bill.
03:42Think about it as we get a file of all the people who are behind. We reach out to you
03:45by text and we say, hey, we see you're behind. Do you are you interested in getting an interest
03:51free payment plan? And people can sign up. Think of it as a subscription payment plan
03:57and they can pay through any method. And there's flexibility. And so we find you. You would
04:03sign up in app. Sometimes people find out about us through call center agents or you
04:09might call and say I'm behind or you get a call and someone's referred to us. But most
04:13people sign up through a text message they receive saying you're behind.
04:18Interest free sounds almost too good to be true. We're in this era of buy now, pay later
04:23and high interest rates. So if I get a text message saying interest free, I'm a journalist.
04:29I'm inherently skeptical. But I think in, you know, given the economic environment we're
04:33in, I would wonder, is this for real? So, yeah, I guess I guess what I'm asking is how
04:39do you do that? And how do you as a for profit company then make money if consumers are engaging
04:44with you on an interest free basis? Yeah, it's a great question. So maybe I'll answer
04:49it with the economics and the reason why those economics work. And so the economics are,
04:55for example, one of the cities profiled in the article that Amy wrote is the city of
05:00Richmond, Virginia. That's our client. They sign people up on payment plans all the time.
05:06And before we got there, they had less than a 15 percent success rate. And so if you think
05:11about the fact that they're trying to collect money themselves, that they're spending the
05:15same amount of energy and time that, in fact, they probably someone called to set it up.
05:18They probably had to apply to be able to put on a payment plan. So so one thing that they
05:22have to do is they have to have the infrastructure to offer a payment plan. The second thing
05:26is most people fail and then they end up at collections where they either sell the debt.
05:31And this is different than Richmond. But in most cities, they sell the debt. So you end
05:34up with a debt collector. You make it 20 cents on the dollar. You shut the person off.
05:39So in the utilities case, you have to have staffing to shut someone off. You sell the
05:42debt for less than it's worth. And people are unsuccessful and you cannot plan for the
05:48finances of the utility. And so in that case, the debt that was behind was 13 percent of
05:53their overall revenues. It's a pretty significant economic hit. We come in and we say we're
05:58going to sign people up for a payment plan. We have a really good sense for predictability
06:02of how many people we will get into a payment plan. And we see anywhere between 85 to 95
06:08percent repayment rate. So you go to someone and say you are not getting any money back
06:13right now. You're having to shut people off. You're staffing this yourself. We're going
06:18to come in and we no longer have to staff it. We're going to increase your repayment
06:22rate to 85 percent. In the case of Richmond, Virginia, it's 93 percent. And so it makes
06:27sense for the utility in that case to be able to make the investment of paying us
06:33because it they lose the operational cost and they keep a continuous source of income
06:37and they never have the shut off. And so so that's how it works. So the jurisdiction
06:41pays us because our principle is and we just we got offered a contract as an example in
06:45a state and we'd love to have a relationship with around property taxes. And they said
06:50we want you to put in property taxes. State law requires we charge interest. And we just
06:53said we cannot charge interest and will not. So you have to figure out a way to not charge
06:56interest because we're just not going to do it. It's so interesting. But when you apply
07:01the term government tech to your space I think some investors eyes can glaze over. It's not
07:08the sexiest space. What was the reaction when you took promise to Silicon Valley to the
07:14venture capital world to seek funding because you do have 51 million dollars in funding.
07:19So you've been successful in finding investors. But what was that process like. Yeah I mean
07:25I think so we've been lucky that we haven't really touched our last race because we're
07:30profitable as a company. And so we raised in 21. And so we I think been we've been good
07:36financial stewards of the company which I think matters. But when we were initially
07:40raising I think a couple of things happened. One I'd run revenue at a company that I'm
07:44now on the board of. So I think people had a good sense like oh you get how to make money.
07:49I think our investors some had experience with government but most did not. And I think
07:56they believed that we understood the market that we knew how to make money and and that
08:01the market is pretty significant. If you look at government spending around these issues
08:05it's much larger than the private sector in many cases. And I think large companies sell
08:11to those markets where you can't imagine. You can't imagine a Microsoft without selling
08:15to the government. But it's a new thing I think for investors. I think they got that
08:20you're going to make money. You understand what the total adjustable market is. You know
08:23how to sell. And and we were able to sell pretty quickly which I think gave people a
08:29sense of confidence. But we were purposeful about the investors we took. We wanted
08:34investors who were deeply understood how to scale and grow and also knew how to run
08:40operations. You talk about growing pretty quickly. I think Amy had a line in there about
08:45how you didn't have a sales department. It's just it's inbound interest. So is word of
08:49mouth just spreading faster than you can get the word out yourself. So embarrassing.
08:55We our sales team is growing. We just hired two people. It's been two of us. And I think
09:03that I wanted to make sure the product was really strong. I think when you have a strong
09:06product it does sell itself. And I think the one of the clients we introduced
09:12Amy who did the Forbes piece wrote like a three page list of why promise worked. And I was
09:19like she should be our person our marketing spend because she was like promise made
09:24promise kept. Here's the economics. Here's why it makes sense. And so I think building
09:29credibility worked for us building a product that worked well and not focusing on selling
09:34but really focusing on delivering was the right way for us to do it. You said embarrassing
09:39but it just sounds like you were dealing with a lean operation and you wanted proof of
09:42concept before you know before building out a sales department and really going whole hog.
09:48Yeah I appreciate that. Yeah I think our investors are very interesting because for a long
09:54time you're like spend more spend more. And I think the last downturn of the economy people
09:57were like oh that was so smart. I was like really because I was like I'm not. That was
10:01brilliant because I think there was a time in venture where people were just like growth
10:05growth growth spend spend spend. I just don't think that's sustainable. I think I'm not you know I'm
10:11not a young founder. I I understand how important these things are to people that we serve
10:16and you know a lot of times if we send a text that sends a wrong message that your water is going to get
10:21shut off that you're not going to get paid or you're going to get paid and you really don't. The
10:25consequences of our work are really significant. So I wanted to make sure we could really
10:30deliver. And I just thought putting our head up and hiring a big team was not the right decision
10:35for us. And it ended up working out for us. But for a while I had a lot of pressure to spend more. And so I
10:43love this moment. This like the company's got to work moment. It's a moment that we were built for in many
10:48ways. It's so interesting because in Forbes women and at Forbes in general we talk about how female
10:54founders and female founders of color are often more capital efficient than their white male
10:59counterparts. And what you have just described seems like an example in action of that capital
11:05efficiency and how that can pay off later on even when you're getting pressure to spend spend spend.
11:11Especially I think because we could raise I think what I was lucky about I think as a as a female founder and a
11:18founder of color is it which very few black women have this experience that I could raise capital. Right. Like if we
11:23wanted to raise right now we could raise a very high valuation and we could raise a lot of capital. But it is unusual
11:28I think that we were just like I don't want to dilute the company. I want people who work here to become
11:34independently wealthy. And I want our product to be amazing. And so if I spend my time fundraising if I'm thinking
11:41about returns in a different way like am I in the articles am I doing this instead of saying like does our product
11:47deliver. Does the economics of the company make sense. We don't do business at the margins don't make sense. And I
11:54think that's the right thing for us. But yeah I definitely think you're right that I see it among female founders. I
12:00also think I see it among people who are who have life experience in different ways because it's like at some point it
12:06is not sustainable to not make money. And the growth required for that thesis to work is so high. Like it makes sense
12:12if you're Amazon but it doesn't make sense for startups with 50 people to have fancy offices. Like I always know we
12:19have a joke internally you know when someone's going to feel when you walk in and it's a startup and they have an
12:23office it's been designed by someone. And you're just like oh this is not. That was not the right decision. That was not
12:29the right decision. You mentioned a different background. Phaedra can you talk a little bit about your own personal
12:35background and how that has fueled both the idea for the company and the way you are growing it.
12:40Yeah I mean I grew up with in some ways really lucky which is my mom was not wealthy. My parent my family was not
12:51wealthy. But I was in I was lucky that I was smart. So I was in a lot of programs where I got to see the way that people
12:58had a lot of resources lived. And there's some negative consequences because then you realize I'm not one of those people
13:03and I get treated really differently. But it also gave me a strong sense of justice a strong sense of of what I wanted for my
13:11own life and what I wanted for other people. Because one of those clarifying moments for me is in my life has been was
13:18going from free lunch to reduce lunch which is you just paid 40 cents instead of having it free. And in the the lack of
13:26dignity we give kids. And so like in when I was getting lunch the people who had free lunch they would call it out and you would
13:32stand in the free lunch line. So because you needed a different system say to check you off instead of taking money. And I just
13:38like felt embarrassed as the only one of my classes ever that was on free lunch. And it gave me a sense of shame. And I just
13:44think we are better than that as a country. And we should use technology to make it so that kids don't feel shame because
13:53they're in poverty. And and so that's that's what drives me is like how do I build the government that I think kids deserve.
14:00How do I build the government that kids deserve. Continuing along that line you did not start your career in fintech. You worked
14:08in labor organizing. Can you talk about the jobs that you had before promise because they're all very very interesting. Sure. I
14:16have a very weird career. And I started in the labor movement working for unions and really focused on organizing because I
14:24thought the most important thing you could do is build economic power for people that you can increase wages and give people
14:29independence to make the best decisions for themselves. And so I spent a lot of time in the labor movement. I ended up running a
14:35labor federation and thinking about how do you create policy. I I then went I was I was fascinated with the idea that in a lot
14:47of there was a lot of false choices in the labor movement. And one of those false choices was jobs versus the environment. And it
14:53struck me that always jobs like paving or anything else would be like we need those right because they're good jobs. But it was
14:59always like poor communities that ended up with the consequences of that whether waste incinerators or roads or anything else. And so I
15:06wanted to understand how could we build an environmental agenda that worked for working people and that was not kind of like fancy
15:14people. It felt like it was like oh all the fancy people who didn't realize they needed jobs. You still need to go to work. And so I went
15:21to work at an organization called Green for All. I ran that organization. And then I was was ended up weirdly working with the
15:30musician Prince and working with him. And it was really interesting because I saw a common thing happening which is technology was not
15:38good in any of those places in the labor movement. It changed the way people worked. So a D value physical work in the environment. The
15:46consequences of it were pretty significant from the physical components to the to the way we thought about growth. And then in music it was
15:54devaluing content. So you had musicians of color musicians who were all of a sudden the things they did were valued less than they were
16:02before. And so I wanted to understand how could you have a vision for technology that helps people. That was good for people. And and so I
16:11went to a company called Honor which was focused on home health care and using technology to build home health care and was there. I went
16:21there to run operations. I ended up running revenue everything that wasn't engineering. And and then I learned a lot. It was like the best
16:28schools best school to learn and especially running revenue because you learn about the choices and then left. I joined the board of that
16:36company and started promise.
16:39And then the idea before promise was actually grounded in bail reform. Can you talk a little bit about that. Yeah. What I was struck by is
16:48it the two thirds of the people who are incarcerated in county jails are there because they can't afford to get out. So ideally you think
16:56bail is a way to keep people like who people think are potentially a risk to society incarcerated. But most people who are actually
17:03incarcerated are not people because of high risk situations are just there because they're poor. And so I I wanted to understand how
17:10technology could help. And I had a personal thing which is something I cared about was I had to make a choice because they had child
17:19support in DUI payments and they couldn't do both. And then there was a warrant out for their arrest and they misread the court date. So
17:26they they'd gone and it looked and I could see it looked like a four and it was a nine or I don't remember. It must have been it was they
17:33thought it was a nine and it looked like a four and they didn't know how to deal with it. And I was lucky that my co-founder is a criminal
17:39defense lawyer. And so we were like this is where I was like this is horrible. Can you believe this. And she was like yeah happens all the
17:43time. And and so we dealt with it and helped him. But I just realized that there's just practical cases of people who are good humans who
17:53have these kind of false choices. Do I do I pay this. Do I make sure I do child support. And you know I wanted to build something that
17:59gave people the ability to not think of incarceration. You should keep working. There should be an incentive for you to keep working and being
18:07incarcerated for someone who has a full time job who is a full time dad who wants to be a good parent. We should want that to work for
18:13people. And that seemed to me what technology should be good at. And then ultimately there was a line in Amy's story where you were
18:21building that product and you saw the way that it could be used for opposite intents. And you got the advice to pivot. How hard was that
18:29pivot moment for you. And it was really scary because I was I was in a meeting and I was just like sitting there. I just was like oh. And it
18:39wasn't they would use the technology for that. It was that the efficiency would ultimately be harmful because even if you do something good
18:44if you build for a system that's fundamentally not working well for people then you realize you've made a system more efficient right at
18:51the at the essence of the institution. And so I had to call investors and I was scared because I think at that point we'd raise me
18:58seven million dollars. Very few black females have been able to raise that kind of capital. And I was worried like does it make me look
19:03insane. I'm like oh I don't want to do this business. I think it's a bad business. It doesn't feel good. And we have clients. And so I was
19:11very personally cognizant of the idea that I was carrying other people with me and that I didn't want to let people down. And and also
19:21the people that believed in us like you the people who trusted us as customers. And and so so we made the pivot. I was very lucky. And I
19:30think this is why investors matter. I did not have one investor who was not supportive and just said like one of them. Bill said to me
19:38go in the forest find yourself. And I just think most women and people of color don't get that. We're just like go find yourself. You'll
19:44figure it out. And but but without fail that is what our investors said. That is such interesting advice. And now with promise I just
19:54want to go back to those repayment rates because it's pretty astounding changes that you're seeing in some of these municipalities
20:02something like 13 percent repayment or 30 percent repayment going up to 85 95. What happens to the 5 percent who even with no
20:12interest are not able to pay their bills. Yeah I mean it depends on what the institution is that we're working with. Right. In some
20:20places let's say you're a water or electric utility. Your power or water gets shut off. So just pretty severe in in this time in you
20:29know with heat and you know water. Like it's the basics like all of the things we work on are the basics. And so those are the
20:39consequences. So we don't obviously shut some off. We send them back and we say they haven't been able to fill their payment plan with
20:44us. But if you don't pay it there's pretty severe consequences on everything we do.
20:50And how would you characterize promises growth. I mean we talked a little bit earlier about how word of mouth is spreading and you're
20:55choosing now to build out the sales team. But what's your projection for the next year or two in terms of revenue growth and markets
21:02that you're in. Yeah I mean this year we're in the tens of millions and next year we'll be over 100. And part of that is because our
21:12largest revenue actually doesn't come from payment plans. Our largest revenue comes from running aid programs for government for
21:17states. And there we're getting money out. So what we do is we use machine learning and we say for states it'll give maybe two
21:25examples. State of Virginia. We ran their water assistance program. So we go find out who's on snap who's on different programs. We go
21:32get their utility information and we're able to send you a text message and say you qualify for this program. Please click this link
21:39which is why I joked about the text message because when you get that message like you you should be getting money from the government.
21:44Here it does feel a little. It feels great but a little shocking. And in in that case and we've given out a couple hundred million
21:52dollars. And in some places it looks like the state of Washington. We're working on climate credits. Two hundred dollars one in four
21:59families will get those climate credits on the utility bill. And so that's actually where you see a lot of our revenue growth is is not
22:06through payment plans continue to grow. But our work on aid and state governments is actually the largest part of our revenue as a
22:12company right now. That's so interesting. And it leads into a quote actually from Van Jones who you worked with. Or how did you work
22:20with Van Jones. He's known on CNN but there was a Prince connection there. No. So I've known him forever. He used to run be the
22:28executive director of a nonprofit in Oakland. And it's funny because we met many years ago at the time. He was like you're so harsh.
22:35Oh you care. You know like he was harsh and he was like very progressive and young. And and I was in the labor room in politics and I was
22:46like you have to measure results. It has to be much more pragmatic at the time. But I for a long long time.
22:53OK so Amy spoke with him for her story and he said about the work that you did with Prince because you helped Prince get rights to his
23:02master recordings. And he had said Phaedra force the powers that be to relent. And I'm wondering is that a mission statement for what
23:12you're doing with promise. Are you trying to change an industry here.
23:19Yeah it's a it's a one thing to ban. It is. I actually think people want to do well. Right. Like we have pretty diverse clients. Everyone
23:28from Republican to Democratic governors to to utilities like in our in our local work. And my belief is most people want government to
23:37be more efficient. I happen to come to it from a justice perspective. But it's it's it is really most people want government to work
23:45better. And but I do think that government is not evolving quickly enough. It's not. And I think there are some places like digital
23:53drivers licenses as an example where because of a digital wallet people are going to have to figure stuff out. But I definitely see my
24:00job as to make institutions accountable to the people that rely on them and to do it in a way that is beautiful and that gives people
24:09both grace and dignity. But yeah absolutely. Because the one thing that drives me insane is in the defense industry. No one thinks
24:16that government should go build planes themselves. No one thinks that government should should run certain parts. We should have the
24:22same expectation on health and human services. It should run the most effective and we should expect that it does. And that's what we are
24:29building as a company is the expectation that the things that technology should do it should do well and and we should build it and we
24:37should make that investment. Are you seeing copycat competitors come in and do what you do. And or if not would you welcome
24:45competitors to the space. Yeah it's so funny. One of these companies just launched a product called Promise to Pay which is this
24:53hysterical. But we definitely see competitors and an investor actually email me this morning and said someone just like people like
25:00literally just cut and paste your material. And I think that the thing that is good about that the big competitors the large SaaS
25:10companies and enterprise companies. I don't worry so much about them because it's the product still really poor and it takes a month
25:18for them to shift. Right. They can't shift as easily. The this the smaller startups are the companies that exist in the space that just
25:27copy our language and then trash you which is always shocking because one of the clients were about to go before an agency to have the
25:34vote on the contract. The current provider was like they're horrible. We've never met the memory. They're horrible. And they can't give any
25:41examples. Right. So they're just like oh we don't like them. And it was and we are launching a product called Promise to Pay. So we
25:50were like OK got it. And but I think that's what people do. And the thing I try to remind myself competitors will make our product
25:57better. It will make us have to be quicker. It will make us have to deliver better. It's me. It's putting pressure on me to like feel like
26:05we've got to build a stronger sales team so that we can be selling like we can't just build the most beautiful perfect product. And and so I
26:12like it because before I've mostly in my mind been competitive with defense contractors where I'm just like OK how are they growing this
26:18quickly. OK. I got to be I got to be quicker than this company grew. I got to be you know faster. So the good part about competitors is
26:25it like excites me which I'm not sure is healthy. I'm just like yeah. Like it just drives something in me where I'm like great. Now we've
26:33got to beat those people. I don't know. I think competition can fuel growth. And on that note we're sitting here in August 2024 a few
26:43months out from the presidential election. A lot can happen that will affect the governments that you work with. If we were to speak one
26:50year from today what do you expect to be able to tell me that promise has accomplished. Yeah I expect to be able to say we are running
27:01government programs in pretty diverse states. Those programs have changed the application flow because it doesn't make sense that
27:08governments ask the same information from people over and over and over again and that they don't have a way to manage fraud. At this
27:14point the idea that there's like investigators when you could actually use A.I. or other tools to evaluate documents instead of like
27:22you know having kind of investigators going out to people's door. And so my expectation is that we will increase the amount of people
27:30we're able to build beautiful but accountable programs that are efficient for government and that I'll be able to say to you that we
27:40are doing it that they are growing. The company is rapidly growing and that we're really proud of the work that we're doing around
27:45payment plans. We signed contracts for large national utility companies that we launched this year. And so I think I want to talk to you
27:54about the amount of the market we're impacting which is I want to be able to say we're in 30 percent of the market. And that will be
28:02that's a very important market for us. Phaedra Ellis Lampkins thank you so much for joining us and telling us about promise. And I do
28:09hope to check in with you in a year to see how much promise has grown. But in the meantime thank you so much for your time. Thank
28:15you so much for having me.

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