Max Levchin may have just resigned from Yahoo's board, but he's still a staunch defender of CEO Marissa Mayer.
"I really respect and enjoy watching Marissa work, so I stuck around as much as I could," the PayPal co-founder said in an interview this week. "If you look at what she's accomplished so far, it's actually quite impressive. She doesn't get any public market love for it."
Levchin, now running the consumer lending startup Affirm, raised eyebrows last week when he resigned from the search giant's board of directors. He tweeted at the time that it was business, not personal: "I remain a fan and supporter of Yahoo, Marissa, her dedicated team, and the board," but Affirm "requires all the energy, brainpower, and time I can give it."
On Monday, Levchin expanded on those comments to Inc., in the process becoming the latest Silicon Valley celebrity to throw his support behind Mayer. She's facing yet another inflection point in her company's troubled recent history: Last week, Yahoo unveiled its latest plan to divorce itself from its stake in Alibaba; while this week a small hedge fund, SpringOwl Asset Management, made headlines with an extensive turnaround proposal, which calls for a new Yahoo CEO.
Levchin says he's particularly impressed with what Mayer has done with Yahoo's mobile strategy. "They have some really cool product initiatives," he says. "I was really excited just at the glimpse that we got. Hopefully they can compartmentalize all the Asian asset disposition so her mind can be occupied by things product-related."
So why exactly did he resign from the Yahoo board? Time and focus, Levchin says. He'd already quit his other board of director jobs, including Yelp's, earlier this year. "Yahoo was the one where there was the most at stake, the most complexity; I was learning a lot," he says.
But since Affirm offers loans for retailers, as their customers prepare to check out online or in person, the holiday shopping season is exactly the wrong time for outside distractions.
"Yahoo had a super-intense period with nonstop demand on the directors' time," says Levchin. "You want to fulfill your fiduciary duty; you can't just flip through a couple thousand pages of legalese. You have to understand exactly what's going on. This is literally going on right around the time of Cyber Monday and Black Friday"--peak season, in other words, for Affirm.
In a wide-ranging conversation with Inc. this week, Levchin also discussed his outlook for Affirm, his concerns for the startup economy as the Federal Reserve prepares to raise interest rates, and his predictions that financial startups will see funding start to dry up in 2016.
On Fintech Startups:
The so-called fintech, or financial technology, sector had an unquestionably breakout year in 2015, following the initial public offerings of online financing companies Lending Club and OnDeck a year ago. But Levchin's starting to see warning signs.
"My general view of the world is that raising money for series B will be harder in 2016 than it was in 2015 in fintech," he says. "There's a perception of oversaturation or at least significant overinvestment in too many small bets being taken by venture capital."
Affirm, which closed its own series B round this spring, is starting to get approached by startups offering to sell themselves, Levchin says. "It's still very few and far between right now, but I expect it will increase significantly," he adds. "My guess is that you will see a lot of M&A and failure activity."
On the Changing Economy:
Speaking a couple of days before the Federal Reserve was widely expected to raise interest rates for the first time in more than nine years, Levchin said he wasn't expecting much immediate impact on his business.
"We lend to the very short term," so a small bump in interest rates won't really cut into what the company's making on its loans, he says. On a more long-term basis, he adds, "the rate going up signals that the economy is on the right footing and there should be more lending going on, so that's good news. On the other hand, low rates are always a good thing if you're trying to start a lending business."
Expect more of it, Levchin predicts. "One of the things that'll happen in 2016 is probably more regulatory attention to the fintech segment--which is on balance not a bad thing," he says. "It's young, there's a lot of money at stake, people are probably making some good and some not so good decisions, so I think that's reasonable and expected."
But unlike traditional banks, most online lenders and finance companies are not regulated by the federal banking agencies. That's starting to change: This summer, the Treasury Department said it was looking into marketplace lending; and in November, the Consumer Financial Protection Bureau said it was also interested in the sector.
Levchin has a front seat to this regulatory scrutiny, as a new member of the CFPB's consumer-advisory board. And he sounds pretty sanguine about the impact of increased regulations on fintech. Regulators always want to know, "What's the worst that could happen here? How do we make sure the consumer's ultimately protected?'" he says. "So long as there are intelligent people on both sides of the table and there's communication, it's hard to imagine things going too terribly out of whack."
The consumer finance startup, which Levchin co-founded in 2012, had a packed year: It tripled employee ranks, to 100; quintupled distribution, to more than 500 merchants who offer its loans as customers check out; and unveiled several new products, including student loans for coders and a layaway program for people who want to apply for Affirm's loans in person rather than online.
Next up for Levchin in 2016? More new products, which he wouldn't discuss yet; and "probably my number one resolution is to hire more engineers, because my engineers are overworked," he says. "I think that's every CEO's resolution in Silicon Valley right now."