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Downsizer Solving Housing Affordability in Retirement.

August 24, 2023 · Hosted by Dexter Cousins

Mark Macduffie joins Dexter Cousins on Fintech Chatter to discuss Downsizer, a platform that helps homeowners and retirees with enough equity in their current house buy their next house with zero cash deposit.

“If we can free up 1.7 million households, that has a cooling effect all the way down through the housing market.” – Mark McDuffie


Downsizer solves the problem of housing affordability by qualifying retirees and downsizers using their proprietary technology to prove that they have sufficient equity to buy their next house. The platform aims to simplify the process for downsizers and help free up 1.7 million households in Australia.


Downsizer Helping Retirees and Homeowners:

  • Downsizer helps homeowners with enough equity in their current house buy their next house with zero cash deposit.
  • The platform solves the problem of housing affordability by qualifying downsizers and retirees using their proprietary technology.
  • Downsizer aims to free up 1.7 million households in Australia and have a cooling effect on the housing market.
  • The platform uses a blend of digital technology and a financial instrument to simplify the process for downsizers.
  • Downsizer is in pilot phase with mortgage brokers and is partnering with real estate agents to handhold downsizers through the process.

About Mark Macduffie

Mark Macduffie is the co-founder of Downsizer, a unique blend of digital technology and a financial instrument that helps homeowners with enough equity in their current house buy their next house with zero cash deposit. 

Mark brings a wealth of knowledge and expertise to the Downsizer team.  A digital, data and innovation executive with 30+ years of experience delivering products and solutions in five countries across multiple business and financial sectors. 
 
Find out more: https://www.downsizer.com/

Links from this episode.

Mark Macduffie on Fintech Chatter.

More on housing affordability on Fintech Chatter.

Full transcript.

Lightly edited for readability — filler words removed, wording otherwise unchanged.

Dexter Cousins
Welcome to Fintech Chatter, presented by Tier One People, leaders in fintech executive search. Follow us on your favourite podcast player or Fintech Chatter TV on YouTube.

Welcome to Fintech Chatter, the show for everything fintech down under. I’m your host Dexter Cousins, and today I’m joined by Mark Macduffie from Downsizer. Mark, welcome to Fintech Chatter.

Mark Macduffie
Thanks for having me, Dexter. Looking forward to it.

Dexter Cousins
Yeah, it should be good fun. First of all, thanks very much for joining me. Second of all, would you like to tell our listeners and viewers a little bit about Downsizer?

Mark Macduffie
Sure. Downsizer is a unique blend of digital technology and a financial instrument. Essentially we help homeowners with enough equity in their current house buy their next house with zero cash deposit.

Dexter Cousins
Awesome. So it’s a big problem. I don’t think we need to talk about the housing crisis here in Australia and housing affordability, but just to give some context, what is the big problem that Downsizer is solving?

Mark Macduffie
It’s solving for two sides of the marketplace. First of all, you’ve got a construction industry on one side that’s building apartments, where increased inflation and interest rates mean there’s less approved mortgages in the market, therefore less people buying apartments, and that has a cascade effect on the property stock and the construction industry. So on one side we’ve got property developers and vendors selling property.

On the other side, which is our buying personas, you’ve got downsizers. The data that we have, our proprietary data that tells us there’s 1.7 million Aussie homeowners that are planning on downsizing in the next 5 years, and often they’re asset rich and cash poor and don’t have the 10% deposit required to exchange off the plan or buy by auction. So we’re qualifying those downsizers using the technology that we’ve built in house to prove that they have the sufficient equity to buy the next house, and therefore they can enter into agreement through our service at zero cash deposit.

Dexter Cousins
So there’s kind of massive inefficiencies in the current system. I guess first of all, how did you get the idea for Downsizer?

Mark Macduffie
Yeah, I don’t think you’ve had the experience yet, so it’s one of those problems that as a founder you may not have experienced firsthand.

Dexter Cousins
Yeah, thank you, that’s very kind of you.

Mark Macduffie
My co-founders and I really started this because one of my co-founders, Mike Kelly, is a property developer in his own right, and he would often reflect that for every property he sold off the plan to an owner occupier, he could have sold two or three more to buyers that couldn’t find the deposit.

Our mission is to help an entire generation stop worrying and start living. And really, increasingly we’re seeing downsizers that want to simplify for whatever reason, whether that’s after COVID, they want to go travelling, whether it’s for health reasons, whether it’s for the bank of mum and dad. Often they walk into sales suites up and down the country, or open houses or auctions, and they really like the property, but they have to sell their current one first. So if we can remove that barrier, that means that developers will sell more stock, vendors and real estate agents will continue to sell.

But more importantly, you talked about housing affordability. It’s almost a national sport here in Australia, right? And it’s not just limited to Australia. But if we can free up 1.7 million, or help free up 1.7 million households, that has a cooling effect all the way down through the housing market. So long-held residential stock, this is mums and dads and grans and grandads that have handled their property for 25 years. They’re carrying a lot of equity, right? And our data tells us also about 85% of that 1.7 million householders have three or four bedroom houses.

Dexter Cousins
Yeah.

Mark Macduffie
They don’t need them, and yet here we are talking about a housing crisis.

Dexter Cousins
Yeah. So why is there such an inefficiency in this? Because it seems that just shouldn’t be a problem to solve, right?

Mark Macduffie
I mean, I have different perspectives, but I can only talk about what we’ve kind of encountered in our customer-centred design exercise. You’ve got on one side property developers that borrow money to construct property developments, and the current model or the status quo would be those developers have to sell 100% of the debt cover that they borrow to build the property before they can put a spade in the ground. And the construction lenders that work with those developers mostly insist on 10% cash deposits.

Now if you are retired or pre-retirement, you might not have your 10% cash deposit squirrelled away, but you’ve got a house worth two or three times the property that you want to buy. So to us it was a simple, it’s a bit of a cash flow issue. If I can prove to you that Dexter owns a house that he says he owns, and Dexter’s house is worth $3 million and his net equity is $2.5 million, if Dexter wants to buy for $1.5 million, why should he have to find the deposit? He’s good for it. And we enter into that kind of three-way agreement between Dexter, who’s buying a property from a property developer, and we ensure that in the middle a bond provider.

Dexter Cousins
So how does the actual platform or their kind of system work? One of my biggest pet peeves, and I talk about this a lot on the show, is these kind of antiquated credit risk assessments, that as a business owner I feel like I’m tr like a Trump in the street, Riders, from a credit perspective.

Mark Macduffie
Yeah. So me myself and my leadership team have got an average of 25 to 26 years of senior experience in financial services, property or technology, right? So we’ve come from a financial services background, heavily regulated as well. We’re trying to innovate around old ways of doing things.

If Dexter has the $3 million house that I said you had, let’s keep using Dexter’s $3 million pad as an example for everyone. If Dexter’s got a $3 million house and he wholly owns it or mostly owns it, and he’s buying a property for $1.5 million, we don’t see that as a kind of credit assessment, because we’re not assessing your income. We’re saying you’ve got a house that you wholly own or mostly own, and you’re entering to a contract to buy your future home. We work with property developers on the other side to say, hey, Dexter’s got four times the equity in his current house, he’s a good bet, compared to maybe a first-time homeowner who’s got 10% deposit and 90% LVR mortgage. They’re higher risk, right?

So if you come through our process and you see a property that you want to purchase, or in fact if you want to be pre-qualified, we can do that for you so you can go house hunting. And we do that by simply looking at the house that you own, your debt position and equity position in that, and that’ll give you a pre-approval to a certain level. That means you can go shop.

If you’re already in retirement, you don’t qualify for bank guarantees or bridging finance, which are, every situation, every consumer should have the choice of whether they want a Downsizer bond, which is what we offer, or bridging finance or a bank guarantee. That’s your choice. But if you’re 65 and above, you’re unlikely to get approval for that because you don’t have an income, or you’ll go through three to four weeks of paperwork to prove your income. Or if you are still working, again, even if you had a good credit history, in this market it will take you weeks. We can do it in minutes, because we’re not looking at the same way.

Dexter Cousins
And doing it that fast, is the technology that you use, that gives you advantage as well?

Mark Macduffie
Yeah. I mean, I’ve been working in financial services technology for my whole career, and the ability to do what we do is, that’s the answer to that “why now” question. When you’re speaking to investors, why now is the tech and data and the integration points make it easier for me as a business entrepreneur to connect all of those dots.

Our system that we’ve built in house is ours. We have 14 different integration points from industry players like Equifax, like Domain, like Co Logic, like the government’s digital verification system. So we’re pulling together 14 different APIs into one place to make that decision instantaneous. Depending on which state you’re in, there’s two states at the moment that aren’t online, so we’re kind of subservient to the land title office, for example in ACT as 48 hour turnaround. But we can do a decision in principle in minutes.

Dexter Cousins
I was having a chat this morning with somebody where we’re talking about the distinction between this term kind of expert, and I think really for me it’s not necessarily that you’re an expert, but that you’re more informed or better informed than other people in your space. And it kind of sounds to me a bit like you’re able to make better decisions because you’re more informed, because you’ve got all those different data points that are coming in that enable you to make, I guess, a fair assessment of somebody’s propensity to make good on, I guess, on the bond, right?

Mark Macduffie
Yeah, 100%. I mean, I think the industry tells you 10,000 hours, I think, is the industry standard to call yourself an expert in any domain. I don’t have the hair to show it, but I’d be grey if I had any hair. We’ve been around the block is really the message. And yes, we do have a lot of expertise, particularly in technology, in financial services strategy, design, implementation globally. That’s a lot of our IP and thinking.

But we also have at our core human-centred design, which allows us to really look at a problem and a need from different angles. We involve the participants, and have involved the participants, throughout this design. Two or three years we’ve been talking to people about this concept, and if you involve buyers and developers and sellers and agents and conveyancers in the process throughout, you’re continually learning. That builds you the knowledge. We obviously bring some knowledge to the table, but my point is the human-centred design approach that we’ve used, and agile technology delivery married to that, means that we’ve moved pretty fast and pretty quick in building quite a complex set of user needs into minutes.

Dexter Cousins
Yeah. It’s a really tough market to crack. Brokers tend to be highly suspicious of anybody utilising technology to make the space just better. What kind of feedback have you received from the market so far?

Mark Macduffie
Yeah, I think, I mean, one of our, it’s something that we live by, is that if you want to go somewhere fast, go alone; if you want to go far, go together. We’re in pilot with mortgage brokers. We recognise that from a distribution standpoint, everybody has a part to play. If we were coming here trying to disrupt different industries, that’s not what we’re doing. We’re trying to optimise the ecosystem rather than, I don’t really like the, often there’s this connotation of disrupting through innovation.

I don’t think it needs to be too disruptive. I think it can actually be really simplification. There’s a real estate sector globally, and in Australia is the biggest asset class. There’s enough space to play here. Consumers should have as much choice as possible for the scenario that they want.

Dexter Cousins
Funny you mention that word disruption, because I think I kind of phrase in 2014, 2015, when everyone was using it and using Uber as the example. You made the kind of analogy of being, remember that kid in the back of the classroom that disrupted? It wasn’t good, it wasn’t positive, it screwed it up for everybody else, and they went off and just did their thing, worse everybody else suffered. And I kind of think that’s played out to be kind of fairly true, right?

And I think we’ve certainly in fintech recognised that the kind of upstart disruptive approach has not worked, and it needs to be something that, we use this word collaboration a lot, but I think there has to be a lot of collaboration, harmony. And look, it has to be positioned in the way that we’re not here to replace you, we’re here to actually create better opportunities for you.

Mark Macduffie
Yeah, I completely agree. I mean, the last maybe three to four years of my large corporate career was in a quite outdated global markets trading environment, and there’s a lot of guys and girls in there that have been doing Ms boss screens, and they’re doing multi-million dollar deals for foreign exchange trading and commodities on scratch pads. And for me that was a difficult environment as a digital and innovation guy to come and transform that, again using human-centred design techniques: to make it better for you, we can help you sell more, we can get you a better client outcome. So that resistance to change is kind of always going to be there when you’re on the edge.

For us, we kind of, it’s a bit cheesy, but we think if you are operating outside your comfort zone and pushing the boundaries, it is going to be uncomfortable from time to time, but you are going to be growing at a faster pace and you are genuinely making a difference. We think if you’re orientating yourself around a genuine user need or market need, which we are, it’s a macroeconomic trend. It’s not limited to New South Wales or Australia, or even just the UK. We’ve looked at 12 different countries. This exists quite easily, and it’s portable to those countries.

Dexter Cousins
So tell me a little bit about where Downsizer is at now: number of people, kind of funding stage.

Mark Macduffie
Yeah. So we, friends, family, fools up until December 2022, so six or seven months ago. We had kept it mostly bootstrapped until that point in time. Difficult capital raising environment last year. We were going, travelling pretty well, we were getting good indicators in the market, and the music stopped for startups, fex and I like shifting more towards faster path through break even. And where we ended up through that really challenging time, I’ll be honest with you, it was really tough, but we landed with a strategic investor.

It’s publicly available, right? So our strategic investors are the Lombard group, who are actually an insurance family, let’s say, of multiple brands globally in 12 countries. They’ve taken a strategic position in us. They are patient, they are supportive, they are our bond provider ultimately. So what that means for us is a couple of things. We’ve been able to iterate on the bond financial instrument quickly with feedback from our developers and our clients alike, so we can move quicker and we’re more agile than a financial institution I’ve been used to working in. We have access to distribution network through their mortgage broker network, so that allows us a greater reach.

So December we raised $3.4 million on a valuation of about 12.5. As I said, difficult environment. Since then we’ve kind of scaled from three states to five states in Australia. We’ve completed $30 million of property sales for off the plan. We’ve actually had one existing property as well, so we’re moving into different use cases. So $30 million of sales. We now have developer stock for sale on our site in five states that’s worth currently 1.5 billion, with another $1 billion of property about to be loaded and published as soon as the developers kind of release their projects.

People size, we grew from five contractors, including myself, in December, to 11 employees, some part-time, mostly full-time, and another 15 techie contractors. So we’ve scaled up very quickly from a human perspective. As I mentioned before, we’re in pilot phase with mortgage brokers, helping our distribution. But one of the biggest things that’s also changing the game for us is we have our, fairly exciting news that not many people know, we have our own corporate real estate licence.

Dexter Cousins
Oh, great.

Mark Macduffie
Which is really helping us. So we have five real estate agents in two states that are really helping us handhold the downsizers through the process, because we learned in our pilot that maybe there was some resistance there from the existing sales models that were maybe resistant to a new thing, and worried about introducing a new thing into a property purchase. So we’ve learned from that, and we’ve really gone hard. You talk about collaboration: we’re partnering with a real estate company that has a track record in off the plan sales. So now we have access to five agents that are helping us retain more revenue. Great path to revenue, just to break even, just got quicker, and really help us acquire more developers and make more sales.

Dexter Cousins
And in terms of feedback from customers, what have you heard so far?

Mark Macduffie
It’s been mixed, right? I mean, we’ve probably had, I would say, more than 10 now potential buyers that have gone through the process and then walked away because they think it’s too good to be true. Literally they’ve said, “Don’t believe it. My family tells me it sounds like a scam because it’s too good to be true.” So market adoption has been tough for us, because our pricing is ridiculously low compared to the alternatives of bridging finance or bank guarantees, for example. So people just don’t trust it.

But the ones that we have done, we’ve really helped a number of people. When we started this, we were looking at that stereotypical downsizer of retiree or pre-retiree, asset rich, cash poor. One gentleman was in his 80s, lived in his house for 30 years. He had about $66,000 in his bank account, and he had a line of credit with one of Australia’s biggest bank, racking up interest of $600 a month. You don’t have to be a mathematician to know that he was in trouble.

Dexter Cousins
Yeah.

Mark Macduffie
But he’s got a house worth $1.1 million. So he answered an EDM from one of our developers, walked in, bought an apartment off the plan for 650. Nine months later sold his current house, moved into the new one, paid off his debts, has financial independence back, and he’s going to be one of our poster childs going forward, right? So he’s real advocate for us now.

I mean, other feedback we’ve had: we’ve had investors buying as well, because our instrument works the same way. If you’ve got an investment portfolio, that’s super fund or a trust account that’s buying investment property, you can use our bond as well. So we’re seeing people come into the market and use that. We’ve completed two investor sales.

And increasingly what we’re seeing in this market, and we’ve touched on it a little bit with inflation and mortgage rates, we’re seeing more people downsize refinance, right? So it’s no longer your mums and your gran and granddad. Maybe the first target market was 55 and above. Now we’re seeing a sway of people that are in their 40s and 50s. After COVID, perhaps, maybe they sell their property in Sydney, move 20 or 30 ks, or maybe up the coast. So you move up to Newcastle, for example, and you get more bang for your buck. You’re downsizing your finances but not downsizing your lifestyle.

So we’re seeing more and more of that, and that’s another reason why the mortgage broker pilot works for us, because we’ll be able to refer mortgage broker leads for refinancing as well.

Dexter Cousins
Awesome. So tell me about the genesis then of Downsizer. How did it all happen?

Mark Macduffie
Yeah, as I mentioned earlier on, one of my co-founders is a property developer in his own right, and he would often say he would sell two or three more if he didn’t have to find the deposit. So we often spoke about that, and he was trying to find different ways around it that were perhaps more legal, contractual. And with my background, I kind of got sick of listening to it and said, there’s a better way to do it, and you need tech at the centre of it, and you can pull all this together quite easily. But you do ultimately still need an insurer or a bond provider to provide the underwriting. So there’s genesis was over a couple of months of back and forth of conversations, and me kind of, there’s a better way to solve this.

Dexter Cousins
What made you decide to take the leap of faith and leave a really comfortable, well, I’m assuming comfortable, job in a big four bank?

Mark Macduffie
Yeah. I mean, I’ve had a number of health issues myself, so I had worked in large corporates for all my career, maybe 26 years at that point, something like that. And I began to really believe, the more research we had on this little idea that we kind of put together, the more research we did, the more customer-centred design we did, the more obvious it became that this is a genuine macroeconomic opportunity. So that really excited me about jumping on and creating something from scratch.

I sometimes regret that because it’s hard. It was hard. I’ve learned more in three years than I’ve learned in 30 years.

Dexter Cousins
Yeah, so it is true what they say, right? Like startup years are kind of like dog years, right? I said exactly the same thing a couple of weeks ago. I’m actually only 25. So yeah, I turned 50 actually in a couple of months, and I still feel like I’m 21 in my head. And I think a big reason for that is, one, having kids later in life, because they keep me young, but then creating my own business kind of later in life as well. And you just, one is you have to learn, right? You just can’t be closed-minded, you can’t be stubborn, you can’t be dogmatic, you can’t be set in your ways, right? Because you will get slapped around the head every single day if that’s, kind of, how you approach it.

Mark Macduffie
It’s the wrong game if you’re anything like that. I mean, one of the biggest points of pride for me this last few months is that we as an organisation created our first set of values, and one of them is that growth mindset, and looking at things in a different way. Because if you don’t do that, you’re not learning, you’re not moving forward, and closing off to opportunity.

So if you go back to what drove me away from a corporate environment, it’s there a lot of energy and a lot of excitement that only this kind of environment can bring. It can be heartbreaking at times. It’s been really tough, I’m not going to lie, it’s hard out there, but it’s ultimately really fulfilling.

Dexter Cousins
Yeah. Now, you talk about some of your health challenges as well, Mark, and I don’t want to kind of pry anywhere that you’re not comfortable talking, but I think it is important, right? Because that toughness of the market that you’ve talked about, I think, one, kind of mental health has been a real challenge for everybody in my network, and also it impacts physical health as well. And when you don’t have your health, you don’t have the energy, and doing something like this takes a lot of energy and a lot of mental kind of agility as well.

So I guess, first of all, look, really commend you on taking the plunge, ’cause leaving that safety net of a big corporate, and then to have compounded of, hey, I got some kind of challenges here around health as well, must have been an extremely tough but brave decision to make.

Mark Macduffie
Incredibly tough, yes. I think bravery and courage, if you’re getting into any new venture, you’ve got to have that anyway, whether you’re sick or not, right? I mean, one of the things that we teach, we often have graduates through, which is a fun tip for resourcing your startup cheap: make good relationships with the unis. But for us, it’s if you’re not brave enough or have the courage to show someone a new idea, how are you ever going to make a startup work? So you have to put yourself out there and push yourself. If you’re not out of your comfort zone, then you’re not going to create anything new, in my opinion, right?

Health-wise for me, I’ve had 11 years of chronic illness, and my wife as well. So at times I’ve questioned whether I’m doing the right thing, but ultimately my health is getting better. From our standpoint in the organisation, we are human first. That’s one of our other values. Human, family, friends first, number one, two and three. Having been through that, I have a very different mindset. If there’s sickness, illness or whatever in the office, it’s non-negotiable: you get yourself home and look after yourself, whether it’s you or family.

The illness does give you resilience, which I think sets you up well for this kind of startup environment, because you know what? It’s not that important. If it doesn’t fail, you’ve given it a red-hot go and you still get your health. Having been bedridden and seen a lot of health challenges in the last 10 years, for me family’s the number one. If it doesn’t work out, which I’m certain it will in some way, shape or form, it’s not the most important thing in the world.

Dexter Cousins
Yeah. I think it’s really important, what you’ve shared, because when I do look at those who unfortunately have failed, and I mean real failure, lost everything, when they kind of looked back, there were lots of warning signs that were saying, look, just get out, just stop, just get out. And I don’t want to say ego takes over, ’cause I don’t think it is. I think it’s just you’re so heavily emotionally invested into what you’re trying to build that oftentimes you might not see the signals, or you’ve kind of created this belief, right?

I remember there’s a saying, which is fake it till you make it. I don’t think founders have that. I think they’d have to believe it before they make it, and they have such strong belief in that vision that it’s almost impossible to let go. And I think kind of one of the skill to learn in going down this path is the time when you just have to let go before it kind of becomes way too much.

Mark Macduffie
Yeah. I mean, first of all, there’s been some significant startups in the last 6, 12 months really have to wrap up. I don’t want to say fail. Fail for me is learning, and I think, yeah, it’s hard. Anyone that’s had a crack at it, I respect. Anyone that’s had a go at this, this is relentless. You can stay in a corporate career for 30 years and take a cheque, and I respect that as well. But there’s a newfound respect I have for my fellow founders in this environment in particular.

I do want to shout out to, there’s industry bodies there that are doing a great job of connecting the ecosystem, like the PropTech of Australia, I know that you know them pretty well, and PropTech Brisbane. They’re really looking after founders and connecting people. There’s a lot of great collaboration, and I genuinely feel part of that community is looking out for each other. I really love that.

You talk about the fake it till you make it, but you got to have belief. I think there’s an entrepreneurial spirit that blends between those two, right? There’s a belief. Sometimes I fake it till I make it because I know I’ve got belief in myself. I think it’s believe it till you make it, right, is, I think, what’s the better kind of acon for that. That’s it.

I think the other thing I would highlight is I’ve got an amazing network of support, mentors, group advisers. I know that any given point in time, I, my gets have done the show and say, this is having an impact. I’ll be honest, it has happened in the three years. People have said, are you right for this? Are you okay? Your health is suffering again. It’s the healthy check-in.

But if there’s anybody out there that’s kind of going through that kind of thing, it’s build a good network. It’s not a sign of weakness to ask for help. It’s not a sign of weakness to say that you’re failing. It’s not a sign a weakness to walk away. This is the toughest environment to operate and create a new business that I’ve ever seen. But yeah, I mean, it’s believe it till you make it.

Dexter Cousins
I think the number one reason why I’ve been able to build such a strong and large network has been for the simple fact that I just sit and listen, and want to listen. Every CEO, every founder, whether they’re in a big bank or they’re a startup founder, has got the same worries, the same problems, all got imposter syndrome, all think everybody else is killing it whilst they’re getting crushed. And everybody’s gone through exactly the same stuff. And I think when they hear that, it’s almost like liberation, right? Say, oh wow, it’s not just me.

And I think the more that we have these conversations and that support, we normalise what this is, right? Rather than trying to glamorise it, there’s kind of really not much glory other than the self-satisfaction for most people, right? And the kind of payoff is putting your head on the pillow at night knowing that, hey, look, when I’m at the end of my days, at least I can look back and say I had a shot.

Mark Macduffie
Yeah, I couldn’t agree more. I mean, if we take it back to lessons learned from my health issues, is towards the end of my career in CommBank I was hiding a lot of my illness, because I had this kind of, my family are Glaswegian tradies. I grew up in a fairly hardworking environment where talking about your feelings was often seen as a sign of weakness. And I didn’t tell people what was going on, and it was pretty bad. As soon as I had to and showed vulnerability, everybody, without exception, changed the, it changed the way I live, right?

And as a result of that, now we have meetings with every member of my team, ask me anything. And sometimes those meetings are good. Sometimes those meeting are quite challenging and dark. I had one yesterday with the whole team, and I said there’s some bad news and this is what’s happening, but I’m telling everybody how I feel and how it’s impacting me. There’s not one person in that company that doesn’t know what my health situation is like right now. And I completely agree with you: the more people that talk about it, the better.

So yeah, I mean, vulnerability for me, it begets the same. And blokes my age and our age, I think the more people talk like this, the more people you get it straight back. It comes back in with extra.

Dexter Cousins
Yeah. It’s interesting though, you mentioned that word vulnerable, and kind of one of the terms that really kind of gets my back up is this whole vulnerable leader, right? Like, leader is vulnerable, right? It’s the most vulnerable position in an organisation, right? I think one of the reasons why I’m almost like this agony uncle to you CEOs and founders is, I kind of term, you’re the filling in a sandwich, right? You can’t speak up, right, because you to your board and chair, right? It’s kind of often a difficult relationship just to be able to blast, and you can’t blast down, right? And so you’re kind of keeping all of this stuff, and it gets internalised.

And I think oftentimes I’ve been fortunate to be that person. I say fortunate, maybe it’s not the right term, to be the one that gets unleashed, right, and people just kind of dump. And I think that it’s healthy to have that kind of big dump and that unleash as well. But it comes because there’s just this challenge or perception that you can’t actually just be honest and straight with people, because it’s termed as being vulnerable or a weakness. And it’s just like, it’s just being transparent, right?

Mark Macduffie
Transparency, or just authenticity. I mean, I’ve had the benefit, and I often say, and I’ve been on record of saying this, I’m glad I’ve got chronic illness, because it changed the way I behave, right? So if I hadn’t been chronically sick, I might still be that kind of little bit toxic masculinity, and I know that’s a bit of bandied around a lot as well, but you hide it and you internalise it, you don’t talk about it. Completely changed my life because I got sick.

Dexter Cousins
Yeah. I grew up in Newcastle, very similar to Glasgow, right? Really similar, both shipbuilding towns or cities, right? Similar kind of mentality of work hard, drink hard, right? And you remember things like playing football and you’d get injured and you’d cry, and you seven, eight years old, and you toally, get up, your big Jessie, and stop crying. Whereas I look at my boy, and it’s old cuddles. So very, very different kind of upbringings and just environments, that it takes a long time to get that out of your system and just kind of accept it. Hey, actually, that’s not me, right?

Now, one thing I wanted to ask you: research that I’ve done over the years has indicated that approximately 90% of people who move from a large corporate environment directly into a startup will leave within the first six months. So first of all, congratulations, you’re in the 10% that haven’t. But I wanted to kind of run that by you, to kind of see if, from your experience of we in those environments and now in a startup, you could see that, actually, yeah, that makes sense, I understand why that ratio is so high.

Mark Macduffie
I would say that my leadership team, the four of us are ex-com bankers, right? We all have shorthand for running a business without a standard operating procedure, because of a lot of the discipline that those large organisations bring us. When there’s issues, we know when to get together, we know what an issue looks like, we know when we need to have HR meetings quickly. There’s no standard operating procedure for this. It doesn’t exist.

But we have had people come in, maybe they want to get out of large corporates, and they think that startup life’s, to your point, some people think it’s quite glamorous. It’s not. And they come in and they go, well, where’s the procedure for that? Or, I don’t have the pitch deck for that. Or, I’m doing a presentation in 10 minutes to whatever, what’s the material? Like, you’re making that up, you’re doing it. If it’s 80%, the agile kind of methodology, done is better than perfect.

So I do, that number, the ratio sounds high, but I understand it and I’ve experienced it. I think what works well for us, and I can’t talk for every other startup, is that we do have that shorthand. We’ve been through almost the same training courses, so we don’t need a manual. But I can see that some people don’t thrive in this environment, and it’s terrifying. I’ve seen it.

Dexter Cousins
Yeah. Do you think that kind of grounding that you’ve had in large corporates has been beneficial then to you, then being able to, guess, operate the way that you do?

Mark Macduffie
I absolutely think it’s kind of core to how we’re enterprise, acting as a startup, right? From the first line of code, the discipline that we have brought means that I can flick a switch and move into another geography really quickly. So the discipline and the rigour absolutely helps. I think handling humans absolutely helps. Like HR challenges: as soon as you manage 30 people, you’re going to have HR. A lot of your time is spent there. So again, that rigour, and how to handle and how to behave, absolutely.

I think those that I’ve seen struggle from large corporates in startup land are often they’ve been in the same role in the same department for 10, 15 years. I never did that. I moved around regularly. I’ve worked in five countries. I know my team have all worked in different countries as well. So I think that comes when we did our values session, right? We deliberately didn’t want it to be corporate. How we ended up there was a little bit of couple of workshops here and there, but we very much landed on this growth mindset, which is you kind of need to be open-minded to everything. Sometimes if you’re in the same job in a large corporate for 10 years, you’re not going to be as open-minded.

Dexter Cousins
I look at Australia and I always feel it’s a really entrepreneurial country. It just has this kind of spirit of entrepreneurship, and I can’t help but think that that’s because of the diverse culture that we have, and that there’s a DNA of immigrants right throughout every single, I guess, community in Australia. I live in Newcastle, right, and it’s got this same suburb names because a bunch of miners from Wales and Newcastle kind of went and basically created that city and all those neighbourhoods around it. So you’ve kind of got this, I guess, strong kind of sense.

Do you think that the fact that you’ve worked in different countries, and you’ve just experienced what it’s like to rock up? I remember May 1 day in Melbourne, and I had a suitcase and a laptop and I didn’t know anybody, and it was literally, you’re 30 years old and you’re starting your life again from absolute scratch. And I look back at that now and think that’s kind of daunting, right? But at the time it didn’t really feel daunting.

Mark Macduffie
Yeah, I think, I mean, from a diversity standpoint, I absolutely buy that. Australia is incredibly diverse nation, a young nation, is growing. But I mean, let’s face it, the Indigenous have been innovating for 60,000 years here. I actually worked in a CTO capacity for an Indigenous charity between CommBank and Downsizer, to pay the mortgage. So I think diversity is large part of the Australian fabric. Completely agree.

From our standpoint and my standpoint, just having again that growth mindset. For us, human-centred design: humans are humans. You observe as many humans in as many different scenarios, from as many different cultures as possible, with as many different problems as possible, you’re going to have a well-grounded base for looking at opportunities, I think.

Dexter Cousins
Awesome. Now Mark, you kind of mentioned some news, where we’re coming up to a wrap. We’re going to kind of just talk about what’s next for Downsizer. But before that, look, we are, I feel it, a bit of an inflection point here in the fintech industry, and as you mentioned, funding’s been pretty tough to come by. I’ll back that up by the data that I’ve collected: funding last quarter was 90% down on what it was corresponding quarter in 2022. So there, kind of, it’ll be all right, and great businesses are built in a downturn. I don’t think it’s going to be enough to kind of feed the ecosystem. What’s your sense as a founder as to where we’re at, and what do you think kind of needs to happen in order for us to kick on? ‘Cause it feels like we’ve just stalled completely.

Mark Macduffie
I think, my observation is that we’re in danger of stalling from a fintech and proptech perspective, absolutely. Funding, yeah, we witnessed firsthand when the music stopped last year, and I mentioned at the top of the show we’re actually really happy with how that ended up for us, because we now have a strategic partner as patient, and we’re one of the lucky ones. But we don’t take that for granted. We’re diversifying, certainly. We’ve listened to the market, and Downsizer is like one brand of many that we have in our pipeline, so we are diversified to protect ourselves.

From what-needs-to-happen standpoint, I mean, that’s a very big question, but some observations for me anyway. I see these big fun, and I’m going to shoot myself in the foot here probably, but I feel like early stage startup seed investment in Australia just doesn’t seem to be as prevalent, and as easy, not easy, but as mature as it is in America and in the UK. In the UK there’s great tax incentives for investors for seed rounds, where you can get, I think as an investor you can get up to 250,000, and 50% of that is kind of almost protected from a tax incentive from the UK. So you only need 10 of those in the UK and you’re away.

I feel like a lot of the VCs here, some of the VCs want to follow on and protect, and they’re in a difficult position, right? Because we had advanced talks with one, and they said they had the choice of investing in us at a seed round or bailing out 10 that they’d helped in 2020 and 2021. So I feel for the VCs, but I also feel that we need to get mature in early stage entrepreneur and backing, like backing them. Because I feel like the cheque size has seem massive was for something that’s proven, but it’s not evenly distributed for lots of amazing ideas and people that come into.

When I think about all the neobanks that have tried, to our point early on, I applaud every one of them for having a crack. There’s a lot of lessons learned there that we’re going to lose, the IP. If I had a business and it was disappearing like that, as a government that was giving out the licences, I’d be trying to harvest as many of those learnings and those people as possible. But I don’t know, I could go on for a while about that. It’s a big topic.

Dexter Cousins
Yeah, it is a big topic, and I don’t think we’re going to ever solve it by chewing the fat, that’s for sure. And in terms of, I guess, the thing that’s got you excited most when you look at fintech innovation: one of the things that we didn’t touch on is that you’re actually looking at utilising blockchain technology as part of your solution. My position on it is I’m kind of long technology, I’ve got a little bit short on people, kind of seeing what’s going on in the last couple of years. And you mentioned some of the stigma that you’ve dealt with, just because of the ease of your solution, and people automatically saying, oh, if it sounds too good to be true, it must be a scam. You then put blockchain on top of that, and I think you kind of…

Mark Macduffie
Yeah, we, yes, our back end, Ure insurance handling contract, was built from first line of code to do that. I’m long tech. I believe in the benefits that distributed ledger technology can provide the industry, but I know I don’t need that. It’s like 5% of my solution. That only really starts paying dividends if we do multicurrency, multiscale. I’ll be the first to admit that, but I also be the first to say, and I always have said, I believe in the benefits of it for the right use case. Our use case isn’t relevant yet.

And if we fast forward, some countries are looking at distributed ledger technology for land titles, for example, and insurance smart contracts and automation. Those two things together with my solution, perfect. That’s why we built it in from day one. But it is not fundamental to our business. I could turn it off tomorrow and my product still works. It’s there, but I’m a believer. I’m not a token guy, unless I’m looking at fractional ownership of houses, but I’m not a crypto guy. I don’t see that. And a guy that’s worked in markets, global markets, I just, it terrifies me what that could do.

Dexter Cousins
Well, we’ve seen some examples anyway, 12 months ago. So what has got you excited right now?

Mark Macduffie
Excited and terrified is probably, and all in the same mix. The next wave of AI, for me. There’s not one industry that couldn’t benefit from looking at that in different ways. I mean, I, as a technologist, have been blown away with what’s possible. Really terrifying and exciting all at the same time. I think a lot of people are recognising, we’re in London for London Tech Week with O Trade recently, and a lot of topics there on AI were governance and ethics. I just can’t believe they’ve let it out into the wild, right?

Dexter Cousins
Yeah.

Mark Macduffie
It terrifies me. I’ve heard some horror stories. I love tech and I hate it at the same time. It’s not managed and governed and controlled in the right way, so that ethical AI, AI excites me. Without the ethics, it terrifies me.

Dexter Cousins
Yeah. Mark, it’s been fantastic to have you on. Before we wrap up, what can we expect from Downsizer in the next 12 months?

Mark Macduffie
Next 12 months for us: scaling in Australia, obviously. Our componentised architecture means that we’ll be releasing different brands, so we’ll be releasing a white label solution to the market, October, let’s say. And then we’re already looking at adjacent opportunities like boat deposits. So if Dexter is retiring, and I know he’s got a $3 million house and he’s buying a $1 million house, I know he’s good for another half million dollar boat if he wants to go cruising around in his retirement. So we’re starting to look at those adjacent opportunities that downsizing releases.

And I guess the medium to long term is we will be looking to pilot in the UK early 2024. We’re fairly far down the path of finalising that pilot participant. So yeah, we’re going pretty hard. But the funding is going to be a challenge for us at some point, the same as it will be for everyone. Runway is only long enough if you’re not getting the revenue in the door. So it’s going to be tough, but we’ve got some big plans.

Dexter Cousins
Awesome. And as you know, we have some awesome talent listening to this show. If there’s anybody listening who thinks they’d love to find out more about being part of the Downsizer journey, what’s the best way for them to find out about careers?

Mark Macduffie
Drop us an email there. You can hit me up on LinkedIn. I’m pretty active on LinkedIn, so hit me up and shout me a coffee. I’m always one for a y.

Dexter Cousins
Brilliant. And as always, folks, you can catch up with me on LinkedIn and Twitter. We’ve just set up a new newsletter, which essentially is a weekly summary or digest of my musings on LinkedIn. Is anything from job tips, job hunting tips, career tips, how to raise capital, basically all my mumblings. So if you’re interested in that, check out our LinkedIn page, Tier One People on LinkedIn. And until the next episode, keep well.

Fintech Chatter is produced by Tier One People, leaders in fintech executive search. We’ll find world-class leadership talent to build world-class fintech ventures, and you can find us at tieronepeople.com.

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