Capital Discipline, Debt & The 10-Year Founder Mindset | Dr. Serge Santos

Most founders think growth is a funding problem.

Dr Serge Santos sees it differently.

As CEO of Bedrock Enterprises and founder of a UK SME lending platform, Serge has deployed capital at scale and worked across both equity and debt markets. His perspective is simple but uncomfortable: the way founders think about money is often what limits their long-term success.

In this conversation we explore why capital discipline matters more than access to capital, how debt and equity are misunderstood by most entrepreneurs, and why chasing exit can quietly distort the way you build.

We also dig into what it means to think in 10-year horizons instead of short-term wins, and why the strongest businesses are often the ones designed to outlast their founders entirely.

This is a conversation about patience, structure, and building something that lasts longer than you do.

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Connect with James on LinkedIn or at peer-effect.com 

Transcript

SPEAKER_01 0:00

I have many examples of companies doing the wrong thing, like someone taking 12, 13 loan that are very expensive as opposed to maybe being more patient and building the capital to invest instead of paying interest to someone else. What are you doing? It's extremely comforting to have cash on your bank account and that's already an achievement. But what do you do next? I don't want to have to worry and have even a sales where I end up with a cash on bank account. What do I do with that? So having a business that continues and maybe will be passed on to my kids later on, pass on to the next generation. This is a fantastic gift you give to your kids and next generation. And not only your kids, but the kids of your kids if you do it well.

SPEAKER_00 0:49

Hi, I'm James Johnson, founder and CEO coach, and this is the Peer Effect Podcast, where your peers will tell you what's unlocking their 10 million plus business. My guest today is Serge Santos. He's the co-founder and CEO of the Funding Alternate Group. They're a UK-based SME lending platform which have deployed over 30 million since 2022. And Serge himself won Entrepreneur of the Year at the 2025 International Brilliance Awards. Today we're going to be talking about the power of the 10-year plan and about not rushing for exit. Before we go any further, hit subscribe on your platform, whatever you're listening to us on. Don't want to miss out on any great episodes. And without any further ado, let's jump into the show. Okay. Serge, welcome to the show.

SPEAKER_01 1:34

Thank you very much for having me on your show.

SPEAKER_00 1:36

My pleasure. And when we're doing the research test, we discovered that unusually you have not one, not two, but four postgraduate degrees.

SPEAKER_01 1:43

Oh yes. Indeed. Yeah, I went overboard. But you know, you don't do things halfway. So I started my careers as a scientist, and uh I'm a physicist by passion. So I studied physics, did a master's in physics in Switzerland, and then continue with a PhD, which was the natural continuation. But when I realized I'm not really an academic in essence, I realize I need to do something else. So during my PhD, I did a master in operational management and business, gave me a good understanding for all the aspects of operation and business, and then moved on with my career. And later on, I did a master's in finance at uh London Business School, which was very helpful to get a foot in the financial industry. Wow.

SPEAKER_00 2:29

So I mean we're going to talk today a lot about so having a different perspective. But I imagine having sort of these four different sort of qualifications must give you four different perspectives on things.

SPEAKER_01 2:39

Absolutely. And I think that's a one of the key aspects, give you a very broad sense of what can be done, what are the different elements of not only business, but physics fundamentally gives you a mindset, a way to look at the world, rationality over emotionality, for instance, or you know, looking for uh not looking for the big picture before looking at the details. And these these mindset sets are essential in what I do. I still use that. But you still know a need to have some very specific knowledge of areas like finance, for instance, has been extremely useful. Um, but also, yeah, simply logistics, how companies are organized, what are the key elements of doing business. So this has been instrumental in all what I did. The only thing I would say with that is being overly academic is very dangerous because you can be very theoretical. And I've learned and evolved from that days when I was studying stuff that I'm a theoretical physicist, so I love general relativity, standard models, and all these complex ideas, but reality is much different. It's uh a lot of pragmatism and solving real-time issues.

SPEAKER_00 3:52

I mean, I think there's a lot a lot of that's a problem that a lot of people come face coming into sort of being a founder, that sense of coming with lots of theory, lots of big ideas, and actually realizing that the implementation of those ideas requires some like almost gross simplification to get have any chance of getting them done.

SPEAKER_01 4:08

I completely agree. And that that's absolutely a fair point. And I think the world is easier and and simpler than people think. However, um, I think it's it helps to get a bit of uh a perspective sometimes and take a step back because a lot of people, and I've seen that in all my um uh businesses, one in particular, which is the lending business, funding alternative, which is a fintech business. We see a lot of companies doing the wrong things, being uh addicted to debt and being in need for cash as opposed to being more careful and thoughtful the way they conduct business. So there's an element of pragmatism that can lead you in alleyways and and and paths that are very often misleading. You think you're doing well, but actually can be very dangerous longer term.

SPEAKER_00 4:57

Well, maybe let's jump into the capital discipline topic then, because I mean you're quite unusual in that your first sort of entrepreneurial journey was raising 700 million for someone else, which is a slightly obscene amount of money to raise for for yourself or anyone else. Um as this scenario that you know a lot about. What what do you actually mean by capital discipline?

SPEAKER_01 5:16

Capital discipline is in my world is is finding this balancing act between short-term and long term. So uh there are examples where you have to, it's it's it's similar to the marshmallow test. You know, you probably, I don't know if you're familiar with the marshmallow test you give to kids, but basically it's uh putting a kid in a in a room with one marshmallow and asking them for 10 minutes not to eat the marshmallow, and if they do that, so they will get a second one. So there is this always balancing act between short-term satisfaction and feeling of doing very well short-term versus long-term. Give you an example. In one of my companies, the industrial engineering business that I bought in 2017, we've been living with an ERP system, so which is the basis of what we do. When I came in, bought the business, we didn't have any system or a very ancient system, we replaced it. And it's been quite good and operationally efficient for us. However, very recently I realize we could we we are okay if we keep going down that path. However, there will be huge benefits that are not yet tangible to change a system that allows us to use AI, for instance, or what we hear about, more connectivity, more functionality, more flexibility. And this is uh not a small investment, it's very disruptive to the team. It's eight months of hard work to implement a new system. But I decided to do that not because we needed it, because I saw in five to ten years a huge benefit to get us to where we wanted to be. So this is this dilemma between investing today for the future. It sounds very, very simple, but a lot of people are very easily swayed in just solving the immediate issue of working capital, doing their VAT, paying their people, and not thinking about long-term. I have many examples of companies doing the wrong thing, like someone taking 12, 13 loan that are very expensive as opposed to maybe being more patient and building the capital to invest instead of paying interest to someone else.

SPEAKER_00 7:29

So, I mean, that comes up quite a lot, this idea of sort of raising capital in some form to grow. So it sounds like you're suggesting that you could actually be quite analytical about what type of finance you raise and your growth rate. It sounds like almost objective, oh well, if I can get something for 7%, I think I can grow at 10%. We're entrepreneurs, people think, oh, I can grow at 20%, 50%. Well, of course I should borrow money to to grow, but it sounds like it's not that simple.

SPEAKER_01 7:56

I don't think it's yeah, uh yes, and no. Uh the the in in the world when I I remember when I joined uh the investment bank, um I I joined Lehman Brothers back in the days before we it go, it went pop. It's not by my fault I wasn't involved, but um I've I've learned that there are two essentially many markets, but one is equity. A lot of people think about the share, they can trade, and they're used to that, but there's a much, much bigger market, which is a debt market. The same for companies, they're debt and equity. And many entrepreneurs I meet um day to day or in London, you know, entrepreneur high growth, they always think about raising fund as equity, which is the most expensive way to raise funds. So in my world, debt is the first place I would go to. Debt can be, however, dangerous because debt means you have a repayment obligation and you can default on a debt. It's hard to default on equity. It is true that you can default on equity if you have a lot of constraints, and that's what happened with startup and and big sophisticated investors like private equities. However, this dichotomy is debt versus equity. Always think first in terms of debt. And I think a lot of entrepreneurs are sidetracked in thinking of raising fund by raising equity first. That's their world first.

SPEAKER_00 9:19

Because for you, I mean you you clearly demonstrated you can raise a lot of money, but you have for yourself, that is not a route you've gone in terms of equity fundraising, larger. It has been predominantly debt financing, if at all.

SPEAKER_01 9:33

Correct. And and the reason being equity, as you know, is control. You want to be uh the master of your own destiny. So it's it's it's like everything, it's it's harder when you have many cooks in the kitchen, it's more complicated. So retailing control, it's not necessarily just the financial aspect of it. Because if you succeed, you want to reap uh the most benefit of the upside, but you want to be able to not have too many constraints on your business. Debt will have put constraint on your business covenants, you need to perform in a certain way, but that forces discipline and very, very typically they are quite in line and attuned to what the business can deliver because a debt holder, someone who gives debt, doesn't want the business to default. It's never been the uh the plan. I know that because funding alternative my company is precisely a debt funder in very risky companies. So our last the agenda is not to get our customers in a worse position after we lend than they were before.

SPEAKER_00 10:39

Well, I mean we could we could probably spend a whole episode talking about this debt versus everything, but we also want to today talk about the sort of the 10-year sort of legacy horizon, which sort of ties into how you fund it. But big picture you've spoken quite a lot about being for legacy in 10 years rather than sort of racing for exit. What benefits do you think that has?

SPEAKER_01 11:01

Yeah, it has it has many benefits. I mean, we it's it's a key question, fundamental question is what game do you want to play? Uh is having your eye on in eyes on an exit makes sense. I completely understand. And I know a few entrepreneurs, we know probably a few from the clubs we uh we are in who had exit in the 30, 40, 50 million, and and kudos and very well done to everyone who does it. But it doesn't answer the question of uh uh you know, I and I've been there myself actually. I had an exit in 2016, I could have retired, semi-retired, but it doesn't answer the question of meaning. What are you doing? Because you it it it's extremely comforting to have cash on your bank account, and that's uh I think already an achievement. But what do you do next? You've hamassed a huge amount of experience, you have drive, you know what you could do and you could achieve. And I missed this part of the meaning. And one element that came to also to me uh after a while is you know, having a company that you want to run for long term, and I talk about more than 10 years, so I would like my companies to survive the founders, survive me at all, has many benefits. First of all, you're forced to create a culture that is not you. You have to put your ego on the side because I made myself redundant. I want to have a role. You know, this is this role between being extremely involved in the business or being absolutely passive, like a shareholder, just waiting for the paycheck, or in between a semi-passive role where you influence a company, you can see it developing, you bring the experience, but also the company is not you, it's your team. So, first benefit is creating a culture, a very strong culture that is not you. And I think this is makes you the company much stronger. The second is you can create a few businesses. And what I realize over time is you end up with an ecosystem of companies, and there is cross-fertilization. So I have people working on two companies, like a bookkeeper, someone I trust, someone who does a bit of both, know exactly what I need, and we work very much uh well, very well together. Same with HR. A few functions, but also what we learn in one company can be applied to the other one. So it's way more than just one company with one struggle, it's sharing knowledge and experience.

SPEAKER_00 13:36

I suppose you're coming to this later on in terms of you've say you've had an exit, you've had this very sort of varied career, you have both the sort of the executional rigor and the financial knowledge. Do you think this is this this approach is something that's only applicable to someone once they get to a certain stage? Or do you think you can do this earlier? If you're a founder listening who was, let's say, 30, do you think the same thing is possible?

SPEAKER_01 14:03

Yes, uh I I think the younger the better. I'm 57, started very late, uh, was um very loyal food soldier until my mid-40s, until I was made redundant, which forced me to rethink my career and the way I was doing things. But the the way I went about it is is is quite interesting. Is again the same question, which game do you want to play? And as a physicist without going too technical, there are many ways to look at life. One is, you know, you can play a game of flipping a coin, and the odds of winning or losing are pretty much normal distributed. So it's a distribution like that. And you have the other game where you can compound, like investing in a stock. And the distribution of earnings are log, normal, distributed scroll. So it's uh something with a longer tail, and this is a game where you have to be consistent, and if you amass enough and make more out of this, it can grow to extremely high level. And there is a third game, which is all these entrepreneurs and scale-up people who are looking for what's called a um power law, which is uh the same process as uh earthquake, for instance. Earthquake, there are many of a little tremor and we don't even feel a lot of them, but the big one, you know, the big uh chaos happened very, very rarely. And you can play this game very successfully or very unsuccessfully, because you hear about this successful entrepreneur or these people who are tried but didn't succeed. And it's a very tough game. It's like a portfolio of venture capitalists. They expect eight businesses out of ten to fail, only two to make a fantastic return. So you can play this game or the game of log normal, which is mine, taking a business which is uh like a flipping coin, which is a fairly steady business, and taking it to the next level where you compound, create an ecosystem around it, growing the business. And I've seen that as a catalyst, and that gives you a grounding. So the thinking was and it's a bit serendipity, but when I bought my industrial engineering company, I was very novice at managing a business. I've learned a lot since then. But this business gave me the foundation. I have a recurring revenue, income. It's a very steady, very predictable, but also a very exciting game because you can grow it. And that gave me the certainty, which allowed me then to create another business that is more risky. The lending business is a risky business, essentially. I had enough cash to fund it, so I didn't need anyone else. Now I'm looking for a third venture where I have all these ecosystems, the learning and the resources to do better.

SPEAKER_00 16:45

I mean, that sounds a bit like sort of the Berkshire Hathaway start, where you kind of took uh so if he took Warren Buffett took sort of insurance business because it was low risk, positive cash flows, good generation off the back of that, over 50, 60 years, built huge amounts of value. Was was was that part of your thinking?

SPEAKER_01 17:07

Absolutely. And you know, being 57, I know that you know none of my business will be for sale, so maybe it will happen if it happens, but it's not the the objective. Although thinking about exit is very healthy because you need to prepare your business to look always the best it can look, and and so this is a mental hygiene exercise talking about exit, but it's never been an objective and will never be.

SPEAKER_00 17:31

So then if if you've got for for founders listening, if we're saying you've got you're both preparing for exit, but exit's kind of 10 years plus.

SPEAKER_01 17:38

No, it's not even uh you prepare to have an exitable business because you need to have the discipline to make it as efficient, as well performing as possible. But the plan is never to exit. I'm 57 if say I have another probably 30 years to go or even more. I don't want to have to worry and have even a sales where I end up with a cash on bank account. What do I do with that? So having a business that continues and maybe will be passed on to my kids later on, you know, as a semi-passive income if there is a professional management at the helm. And there are a lot of family doing that. The Rockefeller, um, the um group in Germany or the Wallenberg in Sweden. They passed on the Wallenberg on the sixth generation. It's a tremendous wealth. I think they make up 30% of the uh share um share um equity of the country in Sweden. It's huge. They have a huge power, but they manage to find the recipe to build business in the long for the long run, pass on to the next generation. This is a fantastic gift you give to your kids and next generation. And not only your kids, but the kids of your kids if you do it well.

SPEAKER_00 18:47

So how let's say you go to plan for like a 10-year plus, what practically could founders listening do differently today to make this a reality?

SPEAKER_01 18:58

I think there are a few elements. The first one is make yourself redundant first. So you need to create culture, get the right team. Could to great is a great book, would start with the first chapter thing, right people in and on the right seat. It'd start with that. You need a team that can operate without you, or despite you for certain people, depending on your management style, can operate long term, will be there committed, and um that's the first thing. So create a culture that is long-lasting, where the values are what you want the business to be, not your value, not what you need from your business. I think that's that's an element. So it it needs to be built over time. Culture is not changed very easily, it's not formed easily. When you're a startup, you struggle with so many things, you don't have stability of people. But once you have, you need to embed something that is will last longer than you. The second is when you think about uh strategy is where do you want a business to be in 10 years? Not what do I need to do to sell it in three years' time. So this is an element of that. What can be proud of? What are the elements? So the capital discipline, the investment, despite the you know, investing today for benefit tomorrow, be careful not to invest in stupid things that I've seen as well. So there's an element, but the more you do that, and the ecosystem again is is very helpful. So start with one company once you can extract yourself and have the knowledge. You may think of starting another company with other people, which is exactly what I did this time from scratch, and and benefit from from from the knowledge and the expertise you've had on the on the other side.

SPEAKER_00 20:42

Amazing. Well, Serge, I think if you were listening, that's it's it's a really refreshing view to go, okay, how can you compound almost different types of businesses together for increasing returns? Think about those kind of different investment buckets and styles. I really like the earthquake one. And then just those very practical tips on how you can create this long-term mindset.

SPEAKER_01 21:04

Yeah, as well. And uh maybe there is an element of uh don't be too gritty and um invest in your people. Branson said um a quote which uh is invest in your people or educate them or form them so they can leave, but treat them well enough so they don't leave. And that's and there is so much satisfaction in in building a team that you can believe in and are performing uh very well. There's a lot of satisfaction more than just looking at your bank account at the end of a year and thinking, oh, I've done so well. There is a there is an element when I invested or bought my first company, I bought a few. And um I thought it was a financial investment, but it grew very quickly on me and realized you have responsibility to what people. These are people with families, they are people who are giving a lot to to the company and and Building that and seeing that flourishing and blossoming is I mean makes my day.

SPEAKER_00 22:06

Amazing. Well, Serge, thank you so much for coming in today and uh look forward to chatting more about us in the future. Pleasure. Thank you very much, James. Such a great episode with Serge today. Remember, hit subscribe before you go anywhere, and we'll see you next Monday for an episode with Freddie or Wednesday for another founder episode. If any questions, just reach out at hello at peer-effect.com. And in the meantime, thanks for listening and happy scaling!