GE Alum Brings Discipline to High-Growth Financial Firm

Chris Capozzi, formerly chief risk officer and a divisional CFO at General Electric, tackles a world of challenges and opportunities in a new indus...
David McCannJuly 28, 2017

After 16 years at General Electric, Chris Capozzi was still a young man. That was because he’d joined the company upon graduating from Boston College, where he earned a degree in finance and management information systems.

Chris Capozzi

Chris Capozzi

It was early 2015, and Capozzi’s career was fully flourishing. After rising through the ranks and becoming CFO of two divisions, including GE Capital Corporate Finance, he was now chief risk officer for the big parent company.

Then, in April of that year, General Electric announced plans to exit from most aspects of GE Capital. The news prompted Capozzi to start considering what a life outside the only employer he’d known might be like. “It wasn’t obvious to me what my next steps were, but I recognized that it was probably a logical time to think through whether I wanted to finish my career at the company,” he says.

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He worked on the puzzle for more than a year, during which he talked to several GE alumni about different scenarios: a divisional CFO role in another Fortune 100 company vs. a stand-alone finance-chief job at a smaller company; a growth-oriented company vs. one that was restructuring; public or private company.

Eventually, one of the alumni introduced Capozzi to Stone Point Capital, which had just become a major investor in Freedom Financial Network, a privately held financial services firm. Everything clicked with the company’s co-founders and co-CEOs, Bradford Stroh and Andrew Housser, so Capozzi moved across the country to start work as Freedom’s CFO at the beginning of this year.

About 75% of Freedom’s business is in the consumer debt-settlement space, where it is the largest player. Its customers are individuals with an average of $30,000 in debt, who may be considering bankruptcy or taking out an expensive debt-consolidation loan. Freedom negotiates with their creditors on their behalf to reduce their debt burdens, for which it receives a fee. It may take up to four years to get a particular customer’s debt-to-income ratio back into balance, Capozzi says.

The company was founded in 2002, shortly after Stroh and Housser graduated from Stanford Business School. Debt settlement remained its primary business until 2014, when it began a marketplace lending operation for consumers.

Both businesses are growing fast. The company had 700 employees in 2015, started this year with 1,200 workers, had 1,800 of them by late July, and expects to surpass the 2,000-employee threshold by year-end.

That kind of growth poses a host of challenges, of course. CFO recently spoke with Capozzi about them, as well as about opportunities for Freedom and his role there. An edited transcript of the conversation follows.

What kind of culture shock was involved in leaving GE and starting at a different company?

Certain elements are similar or the same. For example, Freedom’s expectations for its CFO are one and the same as what I experienced at General Electric.

I break those down into three components: controllership and compliance; the ability to be an operating leader, driving systems of accountability and delivering outcomes for the enterprise; and acting as strategic adviser to the CEO, or CEOs in Freedom’s case, helping guide capital allocation decisions, M&A strategy, new product introductions, etc. You’re expected to wear the hat of a chief operating officer, essentially.

What’s different is the public-vs.-private dynamic. Here there is a much more intense focus on long-term value creation. You don’t run into any of the distractions you see in a public company, where you’re sometimes forced to balance the long-term view with shorter-term investor expectations.

The other difference is the rapid growth. I’d never been in a GE division with this kind of topline growth. It’s the biggest challenge of the job. In part, what I’ve had to do to be successful in this environment is take some of what I learned at General Electric — the operating framework and the disciplines that drive alignment across the C-suite, like capital allocation. It’s about fitting that into the Freedom operating environment and culture.

What specific challenges does the fast growth pace present?

In this kind of high-growth environment, you’re outgrowing your real estate footprint every 12 to 18 months. And you have to make foundational investments in a technology stack that will allow you to further scale the company. That stack covers everything from accounting and financial reporting, to human resources, to all the data and analytics we want to harvest to [enhance] our customer-acquisition capabilities and our service-fulfillment capabilities.

Also, how do we set goals and objectives for the organization? It’s easier when it’s a smaller entrepreneurial company and everyone is within easy reach. But as it continues to scale, what are some frameworks we could use to drive tighter alignment across the organization on what our top priorities are? And what are the expectations for the leadership team?

What kinds of opportunities are you focused on?

In my first seven months here I’ve spent a lot of time with the two CEOs talking liquidity and access to capital markets, and building data and analytics capabilities.

When I arrived we quickly identified the need to restructure our credit facility. That gave us the opportunity to better position the company for growth. We’ve expanded our credit facility from two financial institutions to five. Those partnerships will incredibly important to the company’s future.

Secondly, we’re in the process of developing a securitization platform to complement our existing sources of capital and further expand our investor base, which will enable the growth on the marketplace lending side. Initially the plan is to securitize unsecured consumer loans, very similar to what other marketplace lenders, like SoFi and Avant, have done.

You didn’t have any experience related to consumer lending. What has it been like getting up to speed on this new business?

I feel comfortable in that type of situation, because it’s very typical of the path that a finance leader at General Electric takes. They’re very often rotating you in and out of divisions that you’ve never had any prior exposure to. You’re expected to be able to come in and ask the right questions, climb the learning curve, and build the right types of relationships to deliver the necessary or expected outcomes for the enterprise.

Still, given your lack of specific experience, why do you think Freedom was interested in you?

I think they liked the diversity of my profile. I’d operated in the capital markets, raised both debt and equity capital, helped architect a turnaround at GE Water, and I had experience in financial services, albeit commercial finance. They also saw me as an operating leader that could bring capabilities from larger, more complex organizations into a rapid-growth environment. Our leaders have been at this for 15 years, but right now we’re trying to put in place a lot of foundational infrastructure.

How are you monitoring the company’s performance?

In a consumer finance business like ours, whether on the debt-settlement side or the marketplace lending side, there’s a heavy day-to-day focus on the customer acquisition funnel.

But it’s not purely about the volume. We have the ability through data analytics to project a net present value for every customer we acquire through 40 to 50 different channels and partnerships. We have to take a view on our ability to retain customer, because the longer we do, the more revenue each customer will generate.

In terms of liquidity needs, does the company have any advantages because you’re in the debt business yourself and are negotiating with banks on behalf of your clients?

That could pose some challenges, actually, in that a lot of the creditors we’re renegotiating with issue credit cards. They could have some reservations about lending to a company that’s attempting to restructure consumer obligations.

But that’s more of a legacy risk that faced the company in its first 10 years, as the debt-settlement industry was working through some growing pains with regulators. Looking at where we are today and our growth, I think it indicates a recognition by both creditors and consumers that this is a viable solution for over-leveraged consumers.

Are there opportunities for Freedom to get into other kinds of businesses?)

Without question. The natural extension is, when you’ve put an over-leveraged consumer on a path to financial recovery, where their FICO scores are recovering, you’ve created a lot of loyalty and trust with that consumer.

So, part of what we’re thinking about today is, what other types of financial services products could we cross-sell to that consumer? It could be anything from a savings product to a wealth-management product, an insurance product, mortgages, student loan refinancing — all viable options for us over the next one to five years.