Q&A: Novo’s Michael Rangel on empowering small businesses to make a positive impact on their local communities

The challenger bank is developing a suite of products to give its SME customers access to the capital and financial tools necessary to thrive despite uncertain macroeconomic conditions.

By Riley Kaminer

Perhaps the biggest challenge facing challenger banks is simply staying alive. The virtual graveyard for these banks seems to get more crowded every year, including companies that have shut down such as Azlo and Daylight – and those that have either pivoted or closed specific verticals like N26 (left the US), Spiral (no more B2C offering), Kinly (sold to a bigger affinity neobank).

But in this competitive environment, Miami-based Novo continues to thrive.

Earlier this summer, Novo, a fintech platform serving small businesses, announced a $125 million investment from Victory Park Capital to provide their users with access to working capital through a new feature, Novo Funding.

Novo reports it currently has over 200,000 customers – including around 5,000 in Miami alone – and over 300 full-time employees. The company has also had some remarkably successful products launched within the platform, including an invoicing feature that has enabled customers to receive more than half a billion dollars in less than two years since launch.

Refresh Miami sat down with Novo founder and CEO Michael Rangel to discuss the fintech’s bigger picture play of helping small business owners thrive by providing a suite of financial tools. He also weighed in on the company’s community efforts and their future plans.

This interview has been condensed and edited for clarity.

Refresh Miami: Fill us in on what’s been happening with Novo over the last year.

Michael Rangel: In the past year, Novo has undergone significant transformations, evolving to meet the changing needs and expectations of our clients. We’ve solidified our financial position, allowing us to focus on long-term growth and reinforcing our commitment to becoming a pillar in the Miami business ecosystem. This financial stability means we are not pressured to fundraise in the short term, enabling us to concentrate more on expanding our reach and thinking ahead.

Our product development has continued on an upward trajectory, with more deliberate efforts to connect closely with our customers and address their specific needs, particularly given the current macroeconomic challenges. We’ve made numerous enhancements to our core product, including improvements to the user experience. And we are excited about the expansion of our invoicing capabilities, the addition of new integrations and partnerships, and more.

As we continue this rapid growth, maintaining our company culture is a priority and something I take very seriously. We aim to differentiate ourselves further in the market in 2023, not just as another challenger bank for SMBs but as a unique entity offering distinct, value-driven products and services. We are still on a path of evolution, focusing on educational components and aligning our offerings with the right value propositions to ensure we stand out in our category.

How has the higher-interest rate environment and overall macroeconomic environment changed your business and your customers’ businesses?

Focusing on our customer base first, many of them are small businesses, perhaps not immediately impacted by fluctuations like this, as they might be more concerned with increased material costs and such, which certainly affect their margins. Yet, we strive to support them by facilitating their operations and fostering connections that allow them to learn and grow.

From Novo’s perspective, we find ourselves in a somewhat favorable position amidst these higher interest rates, primarily because we have secured substantial funding that grants us a substantial runway. This environment has also positively impacted the revenue generated from the interest we accrue since Novo currently offers non-interest bearing accounts, which are standard in the industry.

What are the most significant challenges and opportunities facing the neobanking/fintech sector these days? How will their role evolve in the next 5-10 years?

The fintech sector is at a crucial point of evolution. There was a great article in TechCrunch about this recently that emphasized how fintechs, at their core, are technology companies. The real victory lies in constructing exceptional software, something that has been overshadowed in recent years by the race to replicate successful business models or an overemphasis on customer acquisition.

Looking forward, the pressing challenge and opportunity alike is to reorient our focus on innovation and the creation of enriched customer experiences. At Novo, we’ve always been geared towards developing superior software solutions, aiming to intertwine various functionalities seamlessly that traditional banks have perhaps sidelined or shown no real interest in pursuing.

What can we expect to see from Novo from a product perspective in the near future?

Our focus at Novo is to amplify connectivity and automation, essentially evolving into a one-stop-shop that caters to all the requirements of a small business, alleviating the strain of navigating through multiple online portals.

We are currently developing a payroll product that integrates seamlessly within what we refer to as the ‘hub’ of every small business – the checking account.

While I hesitate to draw parallels with Apple – I believe what we’re aiming for has a similarity in the sense that, just like how Apple devices offer an interconnected and hassle-free user experience, we envision Novo as a platform where businesses find so much value that the thought of switching becomes nearly unimaginable. Essentially, we want to create an ecosystem where everything just works, enabling business owners to focus more on their passion rather than getting bogged down by cumbersome manual processes. It’s about fostering a space where businesses can truly thrive without worrying about operational hassles.

It’s been great to see Novo get active in the local Miami community. Tell me more about that and your plans for engaging the Miami tech community?

At Novo, we’ve been thinking a lot about building a community, focusing not only on facilitating online connections but also fostering real, in-person interactions. We are actively working to provide content, mentorship, and opportunities for product feedback and support. Through these efforts, we aim to transcend the traditional boundaries of a fintech/bank and offer something more holistic and connected.

A testament to this initiative was a recent event we hosted in Miami, which lasted around eight to nine hours, featuring various programs and a roundtable discussion. We were thrilled to see over 160 customers of diverse backgrounds and business types attending, far surpassing our initial expectation of a dozen or two. It became a space where people could network, learn from each other, and even initiate business ventures together. The vibrant atmosphere and the exchanges that took place underscored the potential of such community engagement activities, not only in fostering relationships but also in enhancing customer retention and acquisition through referrals. 

In today’s digital age, the epidemic of loneliness seems to be intensifying, and this trend is particularly pronounced among small business owners and founders, who often find themselves isolated behind screens. We envision a future where the digital interface does not entirely replace human interaction. We believe in the power and magic of human connections, where people can find not only business partners but perhaps friends as well, creating a support network that is often lacking in the digital realm. 

By facilitating these connections, we aim to alleviate some of the challenges faced by business owners, who find themselves bogged down by administrative tasks, freeing them to pursue their true passions. The positive feedback we received from participants from diverse sectors and backgrounds during the event affirmed our approach and strengthened our commitment to supporting businesses in a unique, community-oriented manner.

What are your thoughts on #MiamiTech these days?

I’m really excited about what’s happening in the Miami tech scene these days. Living here most of my life, I can genuinely say there’s a noticeable shift happening. Conversations have evolved; it’s not just about clubbing and partying anymore. Nowadays, you overhear chats about the latest in technology and venture capital, which is super cool to witness.

I’ve been attending more local events recently, and I’m meeting all sorts of interesting folks – from new investors to fellow founders. It’s just a really cool time to be here, connecting over coffee and really feeling the pulse of this budding tech hub. I’m quite optimistic about where things are heading, and I’m looking forward to being part of it. We just need more of it all to create a viral loop: more startups, more investors, more talent. But we’re getting there.

When it comes to the future of Novo, what are you most excited about?

I’m really excited about carving out a unique path for Novo, one that’s different from the existing narratives surrounding banking platforms. It’s more than just being another challenger bank or lining up as an alternative to the big names like Bank of America or Chase. We’re envisioning Novo as a unique entity, combining the facets of a bank with the dynamism of an innovative software system, essentially serving as a mini ERP for the small business sector. I see us as catalysts of change, giving small businesses access to tools and resources that enable them to have a positive impact on their local communities. 

Members of Miami’s community and Novo’s team at a recent Novo community event.

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Riley Kaminer