Charles Phillips

For those living paycheck to paycheck in difficult times, financial calamity is an ever-present possibility. And in that dilemma Charles Phillips and some of his classmates from the Stanford GSB Class of 1999 saw a way to make a difference.

Calling themselves Allies 99, the group approached Phillips to create and lead a new company that could offer short-term credit and community support to people in financial distress. They named their startup Sawa, a Swahili word that Phillips translates as “no worries.” And, in practical terms, “we’ve got your back.”

Phillips, 48, is a Wiggins, Miss., native whose far-ranging executive career has included work for companies in telecom, private equity, industrial water treatment, and military housing. Sawa’s goal, he says, is to create a community of people willing to help others weather financial storms by joining with Sawa to contribute to borrowers who might otherwise be forced to use predatory lenders.

“Sawa would provide some of that capital, but we would also encourage the community to contribute and/or loan them money,” he says. “People will be interacting with us in a way that they may not feel comfortable with their creditors, and they’ll be able to interact with each other. Imagine a situation where someone is $500 short on a mortgage payment. We want to present them with a community option to meet that payment, as opposed to them having to go out and get a payday loan. It’s a pay-it-forward model at a high level.”

He adds that customers will benefit because Sawa will make sure they “stay on top of their responsibilities.” Partners will benefit because there will be a reduction in defaults and delinquencies.

The fledgling company is working to better understand human behavior and willingness to collaborate, and then will develop the technology needed to roll out the program.

Phillips says everything he’s done until now, both successes and failures, led him to this opportunity to provide credit services to underserved populations. Asked why he took on that challenge late in his career, Phillips says “the clues come from me leaving the Valley and thinking about what I really wanted to do with my life.”

“There’s a reason this is a ‘Voices’ profile and not ‘Profiles in Success,’” Phillips jokes. “I’m grateful for every failure I’ve had. But the challenge in life is to learn enough to be successful, and not be too tired to try. I still have enough energy to do this and I know enough to do it. Sometimes I see what’s coming and think, ‘Oh God.’ But I still get out of bed.”

What is the scale of Sawa at this point?

Right now we’ve got five employees, including me. We’ve raised $3 million. All in, there are 10 investors. The primary investor is Precursor Ventures, founded by Charles Hudson [MBA ‘05], another GSB alum. I’ve known him since we played pickup basketball when I was at GSB and he was an undergrad.

First, tell us about the detour.

I raised money for a start-up when I was in my second year at GSB. It ultimately got sold for $100 million after I helped them raise $2 million. The VC wanted me to drop out of business school, but I was convinced not to. I left that company and then graduated. Then I went to work for Knowledge Networks, which was an online marketing company. Then I had a job at Siebel Systems, helping with alliances as a business development person. Finally, I worked for a high-speed internet company in Las Vegas. All that happened between 1999 and 2003. When the crash came, the music stopped and there was no chair. So, I had a tech background for the first four years out of business school, then left technology altogether.

You also became a military contractor.

I worked in Iraq and Turkey for a while, building housing for U.S. military for a lot of guys who looked like me and came from underprivileged backgrounds. I was getting closer to the roots I had growing up. The reason I was doing that was not to make a lot of money, because, frankly, we didn’t. But I learned how to do procurement, contracting, and privacy management in the physical world as opposed to the virtual world. I was able to put those skills to use when I got back.

How so?

When Hurricane Katrina hit, I got work as a subcontractor working for Bechtel building evacuee camps for Katrina victims. That was 30 miles from where I grew up. It was the first time I could take the skills I’d learned back to the people I grew up wanting to help. My skill set is taking people who have the ability to do things, including contractors, and giving them access to things they don’t have, like insurance and bonding and loans. It has an economic multiplier effect. So if you’re trying to figure out why I’m doing what I’m doing… that was eye-opening.

Then, after the George Floyd murder, some of your classmates came to you with an idea about how to address the racial wealth gap.

A lot of people were trying to figure out how to be helpful and how to be activists. My pitch to them was that it had to be a for-profit enterprise. But the one thing I don’t want to emerge from this is that I’m a Black guy running a Black-owned company to help Black people. It’s handy shorthand, but it does a disservice to what we’re trying to do. I thought at first it was a racial problem. But it’s not just racial. The gap is more widespread.

What systemic reasons explain why some people’s ability to pay is poorly assessed?

If you’re one of the haves, it’s easy to get access to additional credit. If you’re not, it’s very hard. You’re either eligible for a credit card loan at 20%, or you’re getting a payday loan at 365%. There’s really no in-between. Giving someone a 30% loan, while not as good as a 20% loan, is better than a 365% loan that the person can never pay back. I believe no one can better their economic station unless they have access to a dollar today that they can pay back at some reasonable rate a year from now. The loan business I’m talking about — underserved credit — is about a $100 billion industry. We’re trying to displace that.

Are there models for that kind of disruption?

It started in the steel industry. Big steel mills sold to Boeing, Chrysler, and clients like that, and they weren’t trying to make rebar. Those businesses ran into trouble because they were purpose-built. The folks who could make rebar and do it right had smaller businesses and served customers that weren’t as fancy, but there was a lot of opportunity to serve underserved people. A lot of the companies providing credit are built to serve people who have 700-plus credit scores, and no one’s trying to help the people who are below 650. But they need help, and can pay.

How does someone access the help Sawa offers?

We haven’t done that yet. I’m a back-to-front guy. We didn’t build a technology and then go find a use for that technology. We’re going to build the technology, but the way we’re getting there is by trying to create a certain type of behavior in folks. We want people to collaborate around their finances and help each other.

How do you intend to do that?

First, we’re working with Common Cents laboratory at Duke University. They’re conducting behavioral studies on our behalf to understand how to get people to collaborate. We’re running pilots and behavioral studies to figure out what we’re asking this customer base to do. We’re developing a platform now, but that won’t be finished until we have all the behavioral information.

How will you measure Sawa’s impact?

In terms of measuring delinquencies and defaults of the population. That’s the long view. The medium view is we’ll measure the impact of people’s willingness to engage with each other. We think a lot of people right now feel alone financially, and that forming a community is just as important as anything else. The third thing we’ll measure is financial fragility. We’re trying to figure out how to make people feel better about their situations.

What forces most shaped what you’re doing now?

I grew up in Wiggins, Miss., a town of about 3,000 people. I knew almost everyone. People used to have barn-raisings. We had a lot of support from the community. My dad was career military, and he was also a Baptist preacher. My mother was a teacher. So we were integrally involved in our community.

Nobelist and former Stanford GSB Dean Michael Spence is chair of your board. Are there other GSB professors who have been especially helpful?

My favorite professor at the GSB was David Brady, who spent a lot of time talking about how non-market things affect businesses. He has been a mentor for me throughout my life, and he’s also on our board. The thing I am most proud of is that 23 of my classmates think highly enough of me to back me. I would not try this and would have no chance of success without the GSB. Properly used, it’s the most powerful network in the world.

Photos by Shaun Roberts