Since it first launched its iPhone app in 2012, Simple has pitched itself as the anti-bank: More customer friendly, more technologically advanced, less bureaucratic.
So when news broke yesterday that it had sold itself for $117 million to BBVA, the giant multinational bank holding company, you could be forgiven for doing a double take.
Yesterday, I sought out Simple co-founder and CEO Josh Reich for an explanation.
Reich explained that an acquisition by BBVA wasn’t the only option available, something that others familiar with the company have confirmed. Reich said the company had multiple term sheets on the table from venture capital firms willing to pour more money into the Portland, Ore.-based company that has already raised more than $15 million.
If it went down that path, Simple would have stayed independent and had the money to add a bunch more services — which currently include checking and saving services, with deposits held by a partner bank, as well as a debit card — through partnerships with other banks. And it would have remained truly independent. But there were also downsides to that option, he said.
“We would have had to have made some significant compromises to what we dearly care about if we went down that path,” Reich said.
Among the potential compromises Reich says venture capitalists were asking of him was relocating operations from Portland to San Francisco and trimming the customer service staff in favor of automated tools such as online chat technology.
Reich said he wasn’t willing to budge on either. Right now, about half of the company’s nearly 100 employees work in customer service — something he says has played a huge role in the company’s growth from 20,000 customers at the beginning of 2013 to more than 100,000 currently.
“We were very clearly on a path to profitability,” he said. “That’s why some of these things rubbed me the wrong way.”
But what about giving up independence for a company looking to upend the traditional way consumer banking is done? Reich maintains that’s a big reason why Simple was comfortable selling to BBVA. The holding company would allow Simple to remain independent, with Reich as CEO, while giving it the money and connections to add staff, expand its banking services and eventually help it go international.
If you don’t buy the independence talk, Reich said you only have to look at other acquisitions BBVA has made as proof.
“What’s different from a lot of other banks and people is that BBVA has a history of building much more of a holding company structure,” he said.