Voices that Matter: Cleo serving up smart money decisions with AI
Cleo is the world’s first AI financial assistant. It recently celebrated its return to the UK, a $350M ARR and the release of a powerful new autonomous financial intelligence product - autopilot- that will take action to better people’s financial wellbeing.
We sat down with Barney Hussey-Yeo, Co-Founder and CEO, as part of our Voices That Matter - Red Book interview series.
In the crowded and competitive world of fintech, there’s no story quite like that of Barney Hussey-Yeo. The UK-based computer scientist & poker player turned tech entrepreneur has managed to crack the U.S. market with Cleo.
Inspired by his experience at the once high-flying Wonga, which was lauded for its innovative approach to offering short-term loans before entering administration in 2018, Hussey-Yeo could see there was a need in the market for a new kind of tool that could help people make smarter decisions with money.
Backed by a group of elite angel investors and earning early backing from LocalGlobe, Cleo soon found itself on a trajectory that would see it establish an early lead in the U.S. market.
Today, Cleo stands as one of the UK’s most exciting startups, with ambitions that stretch far beyond its London roots.
Q The idea of conversational AI is very much of the moment. But you started Cleo nine years ago. What was the original vision?
A I was a data scientist at a fintech back then, and everyone was creating these neo banks. They were cool, but just like prettier banks in my opinion. If I looked at the customers I was serving at that fintech that wasn’t going to solve their problems, they needed actual financial advice. They needed real help, real guidance.
I just believe that you could build an AI that would talk to you and converse with you and help you make better decisions. And I thought that was really the only way to like, properly, intelligently engage with someone.
So we built it to start with, on SMS and then Facebook messenger.
There was a whole kind of hype wave of chat bots at the time. I quickly saw that it was going to be something that people really wanted to interact with, even though we couldn’t respond very intelligently back in the day.
People would ask so many goddamn questions, and like just the uptake and how people were talking to it was pretty bizarre and weird. There’s definitely this human phenomenon of wanting to talk to an AI. I kind of latched onto that very early and built it from there.
Q The fintech you mentioned was Wonga, which was celebrated for its innovative short-term loan model before it collapsed in 2018. You’d spent 13 months there in 2014/2015. What did you take away from that experience?
A It was a really fascinating place to be. If you look back, then, there weren’t actually that many billion dollar startups, right? There were very few in the UK and European ecosystems. It was a bit of a darling. All the best VCs piled in money. It was growing very quickly. What that enabled them to do was get a really good talent density, so they were able to hire really exceptional people then. I got to learn a lot there.
But the thing that made me start Cleo is “founder market fit”. I was spending all my time there looking at the data of the customers coming in.
It was 10 million of the UK population taking out these Wonga loans. And it was the same story again and again. They were nurses, they were teachers, they were normal people, and they were pushed a huge amount of credit very early on by their bank, given no financial advice or help, and then they end up in this, like, sad cycle down where the interest rate racks up and they’re having to spend more servicing the debt all the time. And because it’s how APR and interest works, it gets bigger and bigger over time you don’t pay.
This is all completely f****d, right? Like the banks are completely screwing over their customers. They’re giving them no help. It’s leading to people taking out these very high-cost, predatory loans. There was clearly a need for something to intervene early in someone’s financial life and guide them in a better direction.
Q It seems like the failure of Wonga set you up for the success you’re having at Cleo.
A Yeah, massively. That was like an accelerated MBA, in a way. I got to earn a huge amount, very quickly about the market, how to build products, what works, what doesn’t work, and the kind of customer problem in landscape. I learned so much about wage stagnation and inflation and real wage growth, and this is post-global financial crisis, so it’s very much of that moment. And I wouldn’t have understood those kinds of fundamentals if it wasn’t for that experience. So it was definitely a really great first year of work, and set me up for Cleo.
Q So you went to Entrepreneur First next. What did you get out of that experience?
A I was applying to a PhD at University College London at the time, and one of my cohort from my masters had done Entrepreneur First and told me about it and how exciting it was and about all the great people in the cohort. Then I went on LinkedIn, I searched through all these people on EF and thought, oh my God. These people are amazing. These are the people I want to be associated with. And I ended up meeting Matt Clifford and Alice Bentinck and eventually just got sold on it by Matt. We went for a beer in Bermondsey. He was doing demo day the next day, and he was all hyped up about the next cohort of EF and what they were going to do. And then he was kind of like he was messing with me. He’s like, ‘what did you do today?’ I was like, ‘oh I worked on risk models’ and it wasn’t very exciting.
Yeah, that got me to join. It was a really seminal moment in my life, and the accelerated learning in a six month time period from never having founded a company to raising funding – I only raised £600K, but I was very excited about that at the time.
Q So how did you come upon the idea for Cleo?
A It evolved and morphed through EF. They give you money after three months, and you’ve got to make it to demo day. The first three months, I thought I was gonna get kicked out. I had built the first version for myself, but it was very heavily machine learning and very graphs and stats, and it had this one little feature of sending me SMSs and hassling me about my money, which eventually kind of became a bit of a eureka moment of like, oh, that’s got heat, that’s got traction.
Anyway, the first day I launched the landing page, I had 10,000 sign ups, and it went to the top of Product Hunt. And this was just a recorded conversation of me and Cleo, completely faked, no machine learning, no anything, and just like a waiting list. And once I got that live, I kind of knew that it had inherent product market fit.
Then I just ran with that direction very aggressively. And I went from being like what I thought was the company that’s gonna get kicked out, to being like the best in the batch – the one that was growing. Small things can make a big difference!
Q How did you get to know Saul and Robin from LocalGlobe?
My angel investors, when I did my first round, were all founders, and they were the best founders. So they were Niklas Zennstrom, Taavet Hinrikus from Wise, Errol Damelin from Wonga and Matt Robinson who did GoCardless.
It was a really elite group of angels. And I knew I wanted angels because I’d spent time with Wendy Tan White and Joe White in the batch of EF and I was like, Oh, these guys actually know what they’re talking about.
So I’ve got this really great cohort of angels, and they were very close with Saul and Robin. Robin had heard about us through the angels, which meant that Robin kind of leaned in and Robin and Saul just preempted the round. They gave me a term sheet, and I didn’t have to pitch.
They knew this was going to be successful, and they came after me, which was great for me, because I didn’t have to do any work. And it was good for them because they got a good valuation, but it kind of showed that they trusted those angels, but they also kind of saw the future in a way, and they they had conviction on the idea and the team, and they just raised the cheque, which is very unusual for a VC. “LocalGlobe was, and still is, the best seed fund in Europe. If you want to get a seed round done in Europe, that’s the one you want to get. So it put me on the map…” PULL QUOTE WITH BARNEY PHOTO
Q What did that £2.5 million seed investment in 2017 mean for you and your mission to build Cleo?
A That was like the first stamp. LocalGlobe was, and still is, the best seed fund in Europe. If you want to get a seed round done in Europe, that’s the one you want to get. So it put me on the map, and then enabled Balderton, who heard about us from LocalGlobe, to lean in and do our Series A as well.
So you’re kind of on this path when you raise your first venture round. You’re either in the top tier of like venture backed companies, or you’re not. And that put me on a really good trajectory from the start.
Q What was the benefit of working with people who had such deep experience with fintechs?
A Robin wasn’t taking any more board seats, and I forced Robin to join the board. He wasn’t that happy about it. He was on the board at the time of Money Supermarket. He’s obviously on the board of Wise. He was on the board of Wonga. If anyone knew fintech, it was Robin Klein. So he was the Godfather, and still is. Fintech wouldn’t be fintech in London if it wasn’t for Robin. So he was very, very good. So I had Robin and I had Errol Damlin who did Wonga. They were both on my board. So it’s quite a heavy hitting board, almost too heavy hitting for a little seed founder. They were really instrumental, and pushed me very, very hard in a great way, to build a generational company. I think many European VCs are like, ‘yeah, like a billion dollar exit is fantastic for us, and we’d return the fund multiple times over.’ But Robin had bigger ambitions. And he was like, ‘we’re going to be a Google science company’. And I kind of kept that from those guys. I always wanted to be global. Wanted to take the U.S. very quickly and wanted to be the category leader in this winner take all market. And the level of investors and advisors I had really did make us a lot more ambitious than we would have been otherwise.
“... We went all in on the U.S. to build great economics, diversify the products, make the AI better, which was like a good forcing function. And it’s worked out very well. But we’re now launching back in the UK” PULL QUOTE
Q Cleo is remarkable because you’re one of the few examples of a UK- based company enjoying incredible success in the U.S. How did you manage that?
A Normally, as a company, you’ll get pretty big in your home market, and then you’ll expand. I was a little bit more ambitious than that, and again, pushed by Robin, Saul, Niklas Zennstrom and Taavet Hinrikus. They were like, if you want to be the category leader Barney, you have to win in the U.S. and because of that, I focused a lot on the U.S.
We were 15–20 people at the time, but we launched in the U.S. in two weeks anyway, and grew very quickly. The U.S. became our dominant market and was growing faster than everything else. Covid happened in 2020 and we had just raised our series B, so we’d raised 25 million, and we were a team of 40, and I told all the press and everyone else, we’re gonna do 40 countries and we’re gonna be global in the next year.
Covid meant that we had to not hire anyone for basically two years.
So we had to keep with that tiny little team, and to service three markets was kind of untenable. So we had to make the strategic choice of, where do we put our time, effort and focus? And that was clearly going to be the U.S. So we put the UK and Canada on hold, and we went all in on the U.S. to build great economics, diversify the products, make the AI better, which
was like a good forcing function. And it’s worked out very well. But we’re now launching back in the UK at the end of the year.
Q What was it about Cleo that appealed to the American market?
A It was so different from anything on the market. So I think if I was Revolut or Monzo and I tried to do what Cleo did, I’d have failed, because there’s Cash App and Chime and Robin Hood and a whole bunch of other very similar neo banks. But because we bring something completely new to the market.
It was an AI assistant. Yes, we sold products that were similar off the back end, but it’s a very different entry point, and it just resonated. They didn’t understand things like fortnightly and some of the British jokes, but that was easily changed.
Q Why are you looking to relaunch in the UK now?
A We’re doing very well as a business. We’ll hit $340 million ARR by the end of the year. We’re net income profitable and have the ability to take on more capital, because the market is good. We’re an AI company and it makes raising money a bit easier than it was two years ago. So we’re able to go raise a bunch of money and hire more people and to deploy those people effectively. It’s good to expand the total addressable market. The mission is to get a billion people that love and trust Cleo. So I’m not going to get there in the U.S. alone. So there’s a bit of work to do, both in Europe, LATAM and the U.S still.
Q The product also continues to evolve. You’ve recently launched Cleo 3.0 what does that do that your previous versions didn’t and what’s powering it?
A So reasoning models have been the big like seismic shift in AI at the moment, and what that enables you to do is basically call tools during the interaction. So previously, when you put something into the LLM, you’d have to get all the data beforehand. You would then construct the prompts and get a response back. With reasoning, you can ask a question, but then the LLM knows it has all of these APIs or tools that it can call and then it will reason over all the data, fetch that data itself instead of being put into the prompt, and it allows it to answer questions that it can’t do with just a single shot prompt. It’s basically chain of thought, on steroids. If you’re familiar with LLMs. That’s been such an unlock for us and the quality and accuracy of conversations we’re having. The second thing is voice. So we launched some voice-only features. You can talk to Cleo. You can converse with Cleo. We’ve got this game called Money IQ, a weekly trivia game, where it’s hosted by Cleo with voice. It’s very fun. I think if you look over the next three to four years, you’ll have lots more voice first apps. So yeah, we leaned hard into reasoning, and we leaned hard into voice for 3.0. It’s massively improved the economics and retention, all that good stuff. As these reasoning models get better and better and as we add more and more tools, it just becomes almost human-like in its ability to respond.
“It’s very important [for the UK]... that we have that technology companies stay here, scale here, list here, and we can actually, as a state, capture the value” PULL QUOTE
Q What’s your current thinking about when, where, and under what circumstances Cleo would IPO?
A So next year, we’ll be at the size to IPO. So we’ll be $500–600 million in annual recurring revenue, which is kind of the median go to market for these types of companies. I’m very vocal about the UK trying to turn it around. It’s very important, basically, to get out of the stagnation that we have that technology companies stay here, scale here, list here, and we can actually, as a state, capture the value. The problem is there’s no exit path for startups in the United Kingdom or Europe today, because all the people that you would either sell your company to are based in the US, and if you’re going to exit the public markets across Europe and in the UK, aren’t fit for purpose. There’s not enough liquidity in them. Pension funds aren’t investing, endowments aren’t investing. So really, the only chance to have a tech IPO is in the United States today. So you’ve got this very worrying trend for Europe and the UK. If we don’t turn this around, it means that we will create all these great companies. We’ll create the next DeepMind and the next Revolut, but all of the value will eventually go to the U.S. or other foreign powers. For us, it will be in a couple of years, and it will be a NASDAQ or New York Stock Exchange listing, pretty much 100% at this stage.
Q What is your ultimate goal for Cleo?
A We want a billion people to love and trust Cleo. And that it makes a real, meaningful impact to their financial health. I think if you look at what’s wrong with society and what’s going very badly. We’ve had real income stagnate for multiple years. You’ve had a rampant rise in consumerism, and people therefore feel worse off than they were. It’s harder to buy a home, it’s harder to get by. Public services are crumbling and people need more money in their pocket.
Ultimately, the economy is everything, and being able to change it from the lens of behavioural change and change it from people’s understanding of money, their actions they take, that’s a whole new dimension and a whole new thing that we can do for society to help them live a more prosperous life. So if I could change how financial services work, and give the power back to the people in a meaningful way. That’s worth the best decades of my life to try and do.