Do Rich Founders Make Better Founders

say yes. I think about this quite often. If you were to have a blank check VC fund and you just wrote a check blank, not looking at the idea, uncapped convertible note into every successful exit YC founder for their second company, you’d have probably one of the best VC funds on the planet. I look at some of the guys on my own YC class, because that company I sold wasn’t wasn’t Y Combinator. My second company was Dave, the founder of Open Door. He had a small real estate company he sold to, Trulia.

Stripe was in my class. They had sold a previous company for, like, $6,000,000 in some eBay tools business. Amazing. The swing for the fences that some of the second time founders go for once have a little bit of money in their pocket, who otherwise were went a little bit more conservative the first time around.

me, I I mean, probably the same thing for for guys like the for Paribus and a lot of people in my YC class, we weren’t willing to swing for the fences given how how little capital we were raising back then. So this company I started was in 2009, was the YC batch. I was in 2009 or 2010, and we had to fight tooth and nail to raise a $300,000 seed round. I mean, now, you raise $300,000 in in, well, every minute you’re presenting at the YC batch announcement.

But it was so difficult. I mean, Mark Cuban was our first check into that company. That wasn’t even a result of Y Combinator. I had to try and convince him and convince him for a year to get this small amount of money. And back then, Mark actually capped my salary at $30,000 a year until we could get the company profitable. Like, that’s how different it was back then to raise capital.

that would happen again today, but honestly, it was an amazing forcing function to try and build a profitable business and not raise too much capital. We never actually raised any capital beyond the seed round as a result of that. So it taught us just a lot about persistence and perseverance to try and come up with a scalable business model without burning a lot of capital, without hiring a lot of people. And interesting enough, the $30,000 salary cap led to me over drafting my checking account a lot, which pissed me off enough to start Dave as my next company after this one.

So in a funny way, it sort of led us to that, and then Marc ended up leading the the seed round for Dave as well. So it was really an interesting story.

We actually were willing to do it the second time. I’m not willing. I mean, we we would have liked to do it the second go around because it was so different. Yeah. Back when I did YC in in 2010, it was still Paul Graham and and Jessica. Paul was still cooking us dinner in a crock pot, serving us, like, vegetarian chili on Tuesdays. Like, it was a much smaller group. Mark Zuckerberg would come in and talk to, you know, 20 of us. You get the Google founders coming in.

It was this really intimate experience, but it was also a different time when this angel investing was starting to gain momentum. Again, going back to how hard it was to raise the seed round. Our demo day was very unsuccessful from a YC standard perspective. And so to go back in and get a bigger check mind you, the check size was only $17,000 back then for 6%, not whatever it is today. I think it’s a couple $100,000. So $17 bought them 6% of Stripe. Pretty impressive.

The difference this time around was really swinging for the fences on a bigger problem. I think the first time around, I was going for a a niche business, something that I knew we could get profitable quickly. So from that sense, it was a little shortsighted. We never could build a really massive business, and we didn’t wanna raise a lot of additional capital either. One, because it was hard. And two, I didn’t like the idea of sitting behind a bunch of preferred equity given this was sort of like my nest egg.

I knew that every dollar of cash that the company generated was 40% mine, and I really wanted to protect that. The second time around, I had some money in my pocket. I had a real bone to pick with a major industry. I looked at every major industry to try and go try to disrupt. Banking had the most personal pain point with. And so I think the second time around was really just having a lot more confidence in myself, confidence in the ability to fail and go for a a much bigger idea.

Going against the banks was sort of a a perfect time with all this new technology coming out like Plaid that

Yes. I do. The amount of capital that some of these companies have raised, a lot of them copycat companies too, like, that never should have been getting capital. I mean, people you should never go out and try and build a company as a copycat where you have no real skin in the game or no real bone to pick with the industry, because these companies take a long time to build. Like, they take everything. And so it’s weird to try and raise a bunch of money to go emulate something else we have no passion for, just because it’s the spur of the moment.

It’s the hot thing of of the time. There’s that issue. We have a lot of unpassionate founders. The second is, because of the press stack, it really kills their optionality. I mean, there’s a lot of companies that we would’ve probably bought by now that are very small, but have raised a couple $100,000,000 of pref, and so makes their inevitable outcome impossible.

It just has not come yet. I still think people there needs to be more time for the capital to burn. People need to actually run out of money for that to happen. And because the amount of money that people raise, like, they’ve been able to make it last much longer than otherwise in previous years past.

Yeah. I guess we don’t find a lot of VCs going around trying to sort of just get their money back because your industry is such a home home run hits driven business that it’s not that interesting for them to try and break even on something. They’re putting much more of their focus on the the 10 to 20 x

Yeah.

Well, one is the dynamic of there’s too much pref capital going out there, which I would argue is not great for founders. And so the benefit of being public is you erase all the pref. Dave, we have no preferred equity on our cap table. We have no debt in our business. We we trade a $100,000,000 a day of volume, which means we have great liquidity to have employees get liquid on their their equity. It’s a real rich person’s not problem, but it’s a rare air for companies like a Stripe to be in where they have a true public comp in an Adient.

There’s really no point in them going public because they have such vast access to capital for secondary markets. But that’s only a select few companies. If you can be one of those businesses, and not have to be public, because you have such a clear comp, you don’t need to have the distraction to live with of being public, then sure. But I think that also works well if you’re an enterprise business. If you’re a direct to consumer company like Dave, I think you leave a mod on the table and for the potential retail swing that the investors can drive, people that are really passionate about your brand.

Tesla, I’d argue, would not be a trillion dollar private company, but because of sort of the the cult generation they’ve developed, the Tesla owners that buy the stock, mean, they’re the ones that have pushed it above and beyond any reasonable EBITDA multiple that they would be trading at as a private company. So I think depends if you’re enterprise or consumer and depends if you have great public comps or not, and it also depends if you have that access to the capital markets that you do, which I’d argue

I would say because of the turndown that we had to to weather, our focus on longer term bets, you know, certainly pivoted towards doubling down our core our focus on our core product offering, making that best in class, improving the margins. And so a lot of our long term focus on new products, you know, was overshadowed. We are now finally getting out of that now that the company is unicorn valuation again. We have real volume in our stock. We’ve gone through one of the most difficult times of my life to get us back here.

And so we have some exciting bets that we’ll ship later this year and into 2026 that we’re excited about. But had that not happened, those product product bets would have probably already be

Not enough time has passed. So I’d say, you know, I’m I’m not feeling like we’re through the woods yet.

I still think that the concept, the structure of a SPAC still makes a lot of sense. You know, you you get to raise a guaranteed amount of capital, at least through a through the pipe, at a valuation that is set versus an IPO process. You don’t really know how much capital you’re gonna raise. You don’t even know what valuation until you reach the market making process at the very end. And that’s an arduous process. Right? It’s nine to twelve months of work to build the s one, not to mention all the stuff you have to do to build out the finance compliance accounting functions to to get there.

If you’re a younger company going public on the earlier side, the SPAC is an amazing vehicle to give you a lot of confidence. I know it’s this much capital. I know it’s this much dilution. And in our situation, we had a a top tier investor that was leading the the pipe. We felt very comfortable. And if not for the the lower quality of companies that went public via that vehicle, I think you would have seen this be a much more pervasive way for good companies to go out.

quality companies that went public via that. I mean, access to capital was when you went to this zero interest rate environment, when access to capital anyone could could raise, you were having companies with barely any revenue, barely any business model that were going public via this structure, and it it really overshadowed the great companies that went public that could have also done a traditional IPO. And I think we were one of those companies that we could have easily done a traditional IPO. SoFi could have done a traditional IPO.

There are great businesses out there that went public via SPAC that didn’t have to, and I think we need to sort of separate that out.

If we can get a high quality company to to go out to reset the stigma, I think you could possibly, you know, save that being a real a realistic way to go public. And it’s honestly it’s too bad that it’s gone away, because, again, I I think it is a it is a real way to go out. Is there anything you would have done differently about the process when you review it now? Honestly, I don’t regret going out via SPAC. I think we just went public too late, to be honest.

I mean, we saw public too late. Too late. Too late. I think the company, realistically, was ready to go public probably six to twelve months earlier, and we were waiting. We wanted to find the right sponsor. We were trying to ensure a few things were were right within our sort of how we were forecasting our business. And so we decided to wait a little bit longer. We went public January 2022. The market completely fell apart 04/20/2022 before our lockup even expired. All of our PIPE investors from our IPO bailed before our lockup expired.

Fintech became a bad word. SPAC became a bad word. Unprofitable growth company became a bad word. We were sitting in the worst possible place of all time. Had I gone public nine months earlier, we would have had the chance to raise potentially more capital. We would’ve been able to turn over our earlier shareholders to bring more longer term capital in. Like, we never would’ve gone to a $5,000,000,000 valuation of 50,000,000 market cap overnight. It’s not wouldn’t have happened. Like, we we would’ve had actual insulated support with analyst coverage.

We had nothing. We were just a sort of a sitting duck. You know, some call it like a fallen angel where you have no pathway back even if you build a good business. It was it was tough times. I mean,

Yeah, it does piss you off. You know, I actually called some of these investors before going out, and I said, hey. The market looks choppy. Why don’t we do this as a private round? And their response was, don’t worry. Stock goes down. We’re gonna buy more. We’re here to support you. And within a matter of weeks, they were out. I had no support in my stock. We were fucked. And they had a decent amount to do that.

You know, you can’t look. You couldn’t look. I mean, it was so depressing to see all this value that you had accrued a race overnight. A buddy of mine texts me over the situation, and he’s like, look, it was never real, because you guys never even got to the mock up. You know, you never actually were possible to sell. By the time our lockup had expired, only six months after going public, the stock was already down 90% with no fault of our own. Right? We had a ton of capital in the in the bank.

We had a great business. And his response was it was never real. So there’s nothing you can really worry about. All you can think about is the path forward. And as a founder, that’s all I could do, was talk to the team about we had this this statement that we delivered to the company around patience and performance. Like, let’s just keep our heads down. The best companies ultimately go public. If we perform and we’re persistent, we’re gonna eventually see people turn around and start to buy the stock.

Thankfully, it it did. For me, I never started the company to make a lot of money. I started the company because I had I I believe in this mission to sort of level the financial playing field for everyday Americans paying all these overdraft fees in their account. I would advise any founder to really double down on having a very set mission for the company, because it’s a really important way to recruit people to bring them into the company. Even when our market cap went down 98%, the amount of people that left the company during that time was so small, because people weren’t here to make millions of dollars.

That’s a byproduct of the mission being successful. What we did, though, to incentivize people was we issued a bunch of performance stock units that were way out of the money. You know, we said, look, market cap’s market cap’s $50,000,000. If we get a stock price from $1 to $5 to $20 to $80 to a 100, you’re gonna hit all these new targets. And I think we probably minted more millionaires at the company as a result of the performance stock units than we did in the actual IPO process.

And so the people that did leave actually left a lot of money on the table, because those performance units were quite valuable at the end of the day.

think, the only thing that got me through it because it wasn’t like there was a moment in time where I had the ability to just go get a $100,000,000. Like, it wasn’t a realistic opportunity. I I I never had that because the stock dropped so quickly that

I’ve got a fantastic wife. She was incredibly supportive through the entire process. She always believed. She was actually a seed investor in in the company. A $50,000 check into the seed round. Those are only only ever seed investment. So I think she’s up, like, a 100 x on that particular deal. But she was a a believer. She’s stuck by my side. And I think the one benefit of being in LA, it’s not a very tech heavy hub. You know, my golf club, my playad, has no tech founders, and so I was able to sort of escape and not sort of be surrounded by it at at all times.

I think also being a a virtual company helped helped as well.

Certainly, we started the company, no. It was so hard to raise capital for Dave. Even though we had these amazing results, going back to the concept I said earlier where investors had never heard of a of an overdraft fee, like, that was a real thing. For us to raise our series a, even though we had our our CAC was $5, we had this amazing growth going out at the company. I think I took a 120 meetings for our our series a. That was back in 2017, 2018.

So before, like, things really got crazy in in Venture. It was hard. People did not understand

Yeah. That’s right. And we ended up raising the series a entirely from one investor who it was actually more of a health care focused fund. It was really just a result of one of our board members saying, trust me. This is a good idea. It’s going to work. And he wrote us the the check. Pretty interesting times. What was the check, and what was the price? It was 10,000,000 on roughly 40 was the price. And we took that all the way to a billion dollar valuation was our next or next round in our series b.

And, actually, we only raised 60,000,000 in primary capital prior to going public. I mean, we were just incredibly capital efficient, always a small team. I kept that sort of profitability mindset always from my last business. We had this sort of good balance between profitability and growth. Yeah. 60,000,000 to to get to public.

We never really get asked about that. You know, I I think at the time crypto I I I still believe in the the foundation of blockchain, the ability for things like stablecoin to move money. I still think there’s, you know, inherent value in Bitcoin is doing to show show stored value within digital currency. At the time, though, the move was actually herald. I mean, we had this big partnership with FTX. That’s when our market cap reached its all time high was when we announced that partnership, and they wrote us a $100,000,000 convertible check into the company.

It was sort of boom time for crypto. It was boom time for neobank. And, thankfully, we never actually went live with that partnership, but we wouldn’t have launched it anyways because of the the path to profitability. It was a distraction, which ultimately, you know, we had to sideline a lot of our initiatives to just double down on. Really, AI was what we we ended up moving more

Well, our situation was a little unique because it was a convertible note. So we we owe the money back no matter what. It wasn’t an equity investment that they made into into the company. And so we did benefit quite greatly from paying them back early. That note was not due until 2026. And I think it was last year, January, we paid them back $71,000,000 as opposed to the you know, at the time of repayment, would have been probably a 109 or 110,000,000. So pretty accretive transaction.

And I think that also sent this really strong signal to the market last year because we hadn’t yet announced our first profitable quarter. So when we were wanting to part ways of 70,000,000 of cash, I think people realized that we were about to start to show some pretty explosive numbers.

Honestly, I think I would have rather just doubled down on the core product more closely from the onset of the the IPO. I think we just have so much room to run-in that core business, and the real unlock around how AI could impact our business. We started investing in AI years ago as a way for us to impact our underwriting. Now Dave was a we were a pioneer in cash flow based underwriting, the first company to partner with Plaid to access connected account information as a way to use for short term credit underwriting.

If that was the thing that we unlocked, and AI ended up being the perfect solution to analyze cash flow data to underwrite risk for for consumer credit and fade to to twenty twenty five, or we’re down to nearly 1% loss rate underwriting a younger slash subprime consumer for short term credit. Been pretty amazing. And we also now have 80% of our customer support inquiries are driven by AI. And so both of those things I would have much rather doubled down on versus going to things like crypto, which were not as core to the product to, you know, improve what we’re doing for everyday Americans.

You know, there was the cleanup of some contracts. Like, we had some legacy agreements with our networks and our processors, which we improved. All of our infrastructure costs, could improve. We fortunately never had to do any any rift. The result of profitability was never because we had to lay people off. We were 300 people at the IPO. Dave is 300 people still today. The investments, in AI is really what led to a lot of the profitability, reducing our support costs considerably. But it was really the AI innovation within underwriting that unlocked a ton of leverage in the business.

Well,

actually a better NPS score around the the experience. If you wanna talk to you know, typically, this this would be the same for most banks, and especially neobanks in the country. Most sort of call center support is gonna be offshore. That’s gonna take some time to get to. We you can interact via chat. But mostly that support, they’re looking at a FAQ list to derive the response. AI is able to quickly ingest all that, get you the answer you’re looking for within a matter of seconds.

And so we actually get better scores for a fraction of the cost. Because I think it it probably costs us 2 to $3 per contact if someone wants to talk to an actual agent at least. And so when you think about the cost reduction of someone interacting with an AI agent that costs literally nothing, I mean, that alone is gonna be pretty impactful. We don’t have an insignificant amount of people that are contacting support each month just to understand what their approval limit is. You know, how do I access this part of the the app?

It’s pretty it’s well, not pretty.

always had an escalation team that sits domestically. That team’s been the same size, but we’ve also, keep in mind, scale our customer base two x since then. So we kept the same size team. We’ve had less reliance on the outsourcing because more has gone into the AI support. So there’s been no sort of staff reduction at the core team in The US, but it is less reliance on these sort of offshore companies.

I’ve only been thinking about it in one way is what’s the consumer benefit to this? And the benefit is more credit approvals and higher credit limits are approved because of AI. When you think of how we do it, Dave, if you wanna access credit within minutes of joining our app, that’s sort of our our, you know, our our key go to market for the company. Our ad, if you see an ad for Dave, it’s get up to $500 in five minutes or less. We can do that because a customer comes in, we have them link their existing bank account via Plaid, and Plaid gives us access to six months of a customer’s past transaction history.

We have 12,000,000 connected accounts roughly on the platform at this point. And so 12,000,000 accounts times six months of account history, and then we get a connection on an ongoing basis, we have access to nearly a billion transactions. When we launched the business, it was just a rules based model. You know? When do you get paid? Our confidence in your ability to keep a positive balance over a certain amount of time. Our loss rates when we started the company were north of 10%. And at that time, we were only offering people $75 of credit, the average being around 50.

You fade to $20.24, at the end of the year, reported the average amount we’re giving out is 180, and our loss rates are 1.2%. You think about the power of AI analyzing that cash flow data, it can look for commonalities in what makes up a good credit quality customer or a bad credit quality customer based on where you work, where you shop, even types of ATMs? Are there clusters of fraud around certain types of areas? Like, you can start to suss out areas of risk that a rules based engine would never be able to get to that AI can quickly analyze.

And because Dave were an overdraft product or an overdraft killer, the duration you’re actually borrowing money from us for is very short. So you’re gonna utilize our product for five to ten days on average. We’re getting to maturity on the entire loan portfolio so fast that the AI’s constantly able to teach itself what it did good and what it did bad, versus, you know, a long term installment loan company that may use AI, but they’re not gonna know the efficacy of that model until six to twelve months in.

Our model actually learns every couple of weeks. And so the power of that’s resulted in more credit per user at lower loss rates. You generally see the opposite. To drive better loss rates, you usually have to pull down your credit limits. We’ve actually seen the a divergence of that, and it’s really, really powerful.

I think north of 5%. And it’s huge. I mean, go going back to the levers for profitability, When you are originating I think we did 1,600,000,000 of originations in in the fourth quarter. Every 10 basis points of loss rate is gonna is gonna result in significant amount more margin into the business. And so we’ve been able to improve our gross margins on Dave from at the low point in ’22, we were in sort of in the mid forties, and our gross margins in Q4 were 72%.

Do

It’s just very different. I mean, how they would integrate AI, the way that it works for us, our whole business revolves around having a very lean and digital first cost structure. When I think about how the incumbents are operating their business, they have a they have a legacy problem, and you’ve heard the JPMorgan consumer CEO talk about this, Mary Anne, and that it costs them $300 per year just to break even on a basic checking account.

And so if you’re not a consumer that is using a Chase Sapphire card or has a mortgage or uses Chase private private client, the only way they can make money off the younger consumers or the lower income consumers is by charging heavy minimum balance fees and heavy $35 overdraft fees. That’s the only way to recoup your cost. When I think about a company like Dave, we have no bank branches. My annual cost to serve is nearly 40. And so I can offer a vastly superior product at a fraction of the cost and still generate 72% gross margins.

Our checking account is free. We have no overdraft fees on the checking account. Our cost to access credit is only $5 if you wanna borrow a $100 a day. And so that experience compared to paying $35 for access to buying a cup of coffee on overdraft at a major bank is so vastly superior. And then that ultimately drives the low cost, drives a low CAC, because people tell their friends about it. And our acquisition is 30% word-of-mouth. So it drives this flywheel that I don’t think the big banks would ever be able to catch up to.

And I think they will ultimately seed on the lower income and younger consumer. And instead, you’re seeing the bigger banks doubling down on more of the private wealth, higher end clientele. Right. I would say the banking system is actually quite good in this country. It’s really for the 50% of Americans that are earning less than a $100,000 a year, paycheck to paycheck, overdraft in their account a lot. They’re the ones that should not be banking with the incumbents because it’s just too expensive.

I think people had that stigma early on when the company was burning capital, but we developed a really this is part of sort of the turnaround, so I don’t wanna sort of jump the gun on the story here, but we developed a very crisp message to the street, which was that I would advise any founder to figure this out for themselves is you’re building a highly scalable technology platform. At what point, whether it’s a user metric or revenue metric, does your platform actually become profitable? Because what is so great about technology companies, you should have a lot of operating leverage built into your business.

It doesn’t need infinitely more people to support infinitely more customers. Right? And so, we have this message to investors and to the company as well that once Dave reached 2,100,000 monthly paying members, that the platform would reach profitability. And every member that we added thereafter, because we didn’t need to add more headcount to service the next 2,100,000 monthly paying members, we would reach significant profitability. And so when we hit that number in q four of twenty three, we had our first 10,000,000 of EBITDA, you know, profitable quarter.

We’ve since compounded user growth through 2024. We had 2,500,000 monthly paying members in q four of twenty four, and we generated 33,000,000 of profitability. And fade to 2025, we’ve guided for the year to achieve 110 to 120,000,000 of profitability. And so you really start to see the the teeth of the operating leverage built into these businesses. And so banking for, I wouldn’t call it poor people. I’d say banking for people poorly served by incumbent banks is an amazing opportunity, because you can bank them with a highly scalable, highly efficient platform that is inexpensive to to operate because of that drives very efficient CAC.

And so it’s actually an amazing business, and most people missed it, except, people like Imran that put money in at the

moat.

That, would point again back to the underwriting. So, because of the high velocity of this extra cash product, where people are borrowing money for a very short period of time with Dave, we’ve actually issued that product a 130,000,000 times at this point. People use it a 130,000,000 times. So the more that the system actually sees those positive repayment behavior, you’re gonna ultimately it’s hard to be see better loss rates, and that results again in higher credit limits per user. And so it drives this flywheel of success.

And so there’s absolutely an economy of scale. And with all of our service providers and our our networks, the more customers that we get on the platform, the cheaper our cost to serve actually gets. And so it enables longer

I don’t know about five or six players. I do think, though, that there’s an interesting time for someone to build a global neobank. Now I think Revolut is doing a really nice job. I think Nubank’s trying to do something similar, where because you have these digital first tech stacks and you have banking as a service built into more and more countries, Plaid is now in 14 countries, you can start to build these sort of global banks. And then with things like Bridge and Stripe with sort of this in this, innovation around Stablecoin, you can start to get rid of sort of this cross border currency friction that doesn’t exist, and you could finally build a global bank.

I just don’t see a major incumbent like a Chase or a BofA doing that, but I could see a a digital bank taking that on and being quite successful.

It’s, yeah, so sorry to cut you off, but I mean, it really is the different markets that we’re serving. And so, I think I said earlier in the call, the the banking market for people making over a $100,000 a year, if you keep enough money in your checking account, if you have a pretty good credit score, banking’s not so bad. You have access to pretty good products, pretty inexpensive products. The you have access to a mobile application to manage your money. You can get access to a financial manager.

Like, it’s not bad. It’s it’s the poorly served customer that’s not making a $100,000 a year that is not able to maintain that minimum balance. That’s the market to disrupt in The US. It is a massive one. I can’t say what Chime is worth at this point, but Revolut is going after a different market. You look at some of the countries are super successful, and they’re going for markets where, like, the main banks don’t even have a mobile app yet. Like, they’re actually becoming the first kind of digital first mobile application for a broad swath of consumers there.

If you go talk to Nubank, they’re not actually banking the lower income consumer in the country. Like, banking’s actually screwed up for everybody. If you were to talk to David Nubank’s CEO, he’s gonna tell you that his customer base in Brazil and Mexico is actually a middle to higher income consumer. It’s just a very different opportunity that us and Chime are disrupting in the market, where there is just this systemic legacy issue of how the banks are not built to serve the lower income population well here in The US, and that’s still a massive opportunity.

And could one of us be a $60,000,000,000 company?

When I think about the go to markets that Revolut is solving for, sort of the cross border currency friction, like that doesn’t that’s not really a thing in the in The US. Like, the need to open up an account very quickly on a, you know, on a mobile app. Like, we have that here in The US. That doesn’t exist in a lot of the countries that plays like Revolut is disrupting. And you’ve you’ve seen a lot of the European companies try and be successful here in The US.

They haven’t. I mean, they’ve consistently tried to come here and retreated because their product offering is just not a fit for The US, at least in the the way they go to market in these other countries. Just to show you how different the the two companies are.

It depends how they’re gonna try and attack the market. But we have not seen this sort of super app mentality be successful here the way it’s been successful in other countries where there’s just a lot less

would just look at all the different types of customer segments and pick the one that is the most poorly served by the existing the existing competition. I think companies like Dave have done a great job in Chime to build a significant penetration in the market. We’re at 12,000,000 customers. Chime, I think, is, you know, at a similar type of penetration. Cash App’s done a good job. They’ve got about 50,000,000 people using their product. Like, he would have to think about this population as something that he needs to build an attractive product for because I think it’s gonna be an uphill battle.

Unless he wants to spend $500 on customer acquisition, then maybe he could go after the the incumbents.

We’ve just taken a very different approach to building our our businesses. Our focus for Dave has been building a sort of a credit first neobank. You can download our app. We specialize in AI underwriting to get you approved for credit within five minutes of joining. Chime’s taken a very different approach, being very methodical about wanting to be your primary bank. They wanna make sure that if you have any value in their product, that you’d need to be a direct deposit member of their app. And we just find that to be a a very expensive value proposition to sell to consumers.

Because in my view, people don’t wake up in the morning excited to open up a new checking account. It’s very cumbersome to go switch all your bills over, figure out who you need to pay. It’s a new strange bank relationship. Whereas with Dave, we get to know you and try to get you to switch over time. I’m gonna get you approved for a couple $100 when you join. We give you the Dave debit card to to try us out. We’re gonna give you some benefits to help you earn some extra money if you take a few surveys here and there.

And then we’re gonna ask you to direct deposit over time. But my CAC is $16 because I take this speed to value approach where I wanna make you a happy customer immediately. Chime’s taken a very different approach where it’s a no fee account. They’re very conscious this is a bank account you’re opening, and that they want you to be a a long term user, or

That’s our approach. I think if you wanna raise a couple billion dollars and spend a couple billion dollars on marketing, you can do this direct deposit. And I think Chime’s done a good job. They’ve they’ve raised the most capital. They put the most capital to work. Again, we got to IPO with 60,000,000 of primary capital because we’ve taken that snackable approach to build this relationship. But, also, I think from a long term competitive advantage between us and the neobanks, the data set we’re building around this AI underwriting is gonna be such a leg up when we start to get into additional forms of credit.

I think we’re so early on in our monetization as a business, given we just offer basic checking and an overdraft product called extra cash. But if we wanna get into any other forms of lending, we have such an advantage by using this AI cash flow data.

We see a lot of overlap with things like buy now, pay later. We know our customers aspire for that. Our extra cash product, because it’s so short duration, people tend to use that for gas, groceries, rent. But if you wanted to buy a airplane ticket or books for school or a t shirt, like, discretionary items, people are not using Dave for that, at least from a credit perspective. And we like to think that we can be there for you in every potential point in your credit journey as

thing people miss was the the inherent operating leverage built into these fintech platforms. Like, they’re so scalable, especially with AI. And so as these neobanks start to compound user growth beyond what it cost to pay back the cost to build their platform, there’s just these are great businesses. So I think people really miss that. It’s that’s one. And then two, the ability for the neobanks to to get deeper into credit and use their expertise there to disrupt the legacy costs there? Because there’s just still such expensive credit for consumers out there.

Compounding interest credit cards are terrible for consumers. They’re incredibly expensive. They’re not great products. If you use them to buy things for long duration and you’re you’re just paying off a minimum balance, the fees you’re paying are massive. And it’s like $3,000,000,000,000 of credit card debt sitting out there that people are just revolving and paying too much money for. So I’d love to think that neobanks can leverage their low CAC and their cheap operational structure to start to eat into the fee structures that the bigger banks are also getting fat on.

Well, just his approach to less regulation in general. Again, this is less of an overhang for companies just to focus on building true, innovative products without the need to constantly feel like they’re gonna trip some government wire. You know, I don’t know that the government really understands this customer base, and you see the things that they try and push forward, like 10% cap on credit card APR. Like, do you realize what that would do to credit card approval rates? Like, the reason why people charge what they do for risk is because there’s risk.

And the second you take away someone’s ability to monetize just means they shrink the funnel. So it’s like, great job. You capped rates. You just kicked a bunch of people out of the credit card ecosystem, and now they’ve gone to, like, go take out payday loans or something. It’s just not a it’s such a headline win for a regulator that doesn’t actually take in mind the end consumer. The same thing goes for around trying to cap overdraft fees.

What I said about the JPMorgan CEO around the the cost to serve statement, that was directly related to, if you get rid of overdraft fees, we’re just gonna jack up the cost to maintain a monthly account with us, because we need to recoup our cost to serve somehow. And so it’s another one of those, like, regulator wins where, great, you know, headline, no more overdraft fees, but guess what? The banks have now increased cost for a monthly account fee, and now no one gets approved for overdraft, which is a lifeline for everyday people to go get gas and groceries.

It would suck to get stuck at the gas station just because a governor regulator wanted to get a headline win when I needed this money. Like, screw you.

Trump’s gonna help get rid of that. We just need to get rid of the grandstanding and really try to think about what is gonna be the best thing for the end consumer. And that’s where I go back to, there’s enough competition in this space where you can’t screw the consumer because they have they have enough options.

we that I probably regret as a founder in sort of this this business was with venture capital dollars, the big push to hire seasoned pedigreed c suite executives. Not as easy as it sounds. Very difficult. I would really question every founder who’s trying to overhire too fast in the c suite. Be very careful who you bring into your close circle.

There’s scaling issues by having some of your junior team try and get into more senior positions over time. I would just be careful how you meet these people. Get to know them over time. Don’t make rush decisions, and just be sure that they truly align with your culture and your vision, because they can be very disruptive to your culture, but they also can be very disruptive when they leave, because people don’t like seeing c suites leave. So this it’s a very important decision. I don’t think pedigree should be your necessary filter, because one company success does not mean it’s gonna be successful for you.

Which competitor do you most

I would say a lot of respect for what Revolut’s doing. I think they’re I’d almost call it, like, regulatory as a service. Their ability to just go into these different countries and set up operations is is pretty remarkable. I mean, if I could snap my fingers and repeat that capability, I think our products are needed in more than just The US. But the superpower they have to be able to go in all these countries and do that quickly, I think is pretty impressive.

hold

stock for ten years.

I haven’t looked at the most recent stats on just overall retail penetration, but I think Amazon is still pretty small when it comes to owning the overall retail market. I still think that’s a pretty good stock to own for for ten years. What have you changed your mind on in the last twelve months? I’d say more 24, but, you know, the shift to profitability was probably the only thing I thought about for for a solid two years. And how have you changed your mind? Sorry. It’s just a philosophy shift in doing that.

When you’re going from a growth at all cost mentality, which everyone’s pushing you for, to go to a profitability at all costs, like, it’s such a major mind shift. It’s such a shift for the entire company. That was probably the hardest thing and the most most thoughtful thing we’ve had to do over the last couple of years.

consumer brand do you respect the most? Apple. Aside from maybe their delay on AI, they just build the most polished consumer product, and they have a great, well respected brand. I think it’s, everyone, I think, aspires to reach the level of polish that Apple has been able to to develop.

I don’t feel comfortable asking answering that one as a public company CEO. I do not like short sellers, and so I don’t wanna give them any any ammo. Do you not think any

I think the ways in which they derive their profits are not always above board. And so maybe it it helps drive us an efficient market if there’s the capability of shorting. But I think if you had a long only stock market, it wouldn’t look terribly different.

Well, you’ll see some companies, they’ll get these short reports that people put out, where an analyst is out there, you know, similar to a sell side analyst. They’re actually writing research on a company to get people to to short it. And oftentimes, those facts are incorrect. Their assumptions, they’re they can be blown out of proportion for things that, again, are just for for purely for profit. That’s it. Is that legal? Isn’t that, like, misinformation to change economic activity? I believe is legal. I mean, I I think if as long as you’re not saying a blatant lie about the business that could be deemed sort of defamation, which is hard to prove, You see big companies.

I think most interesting was the one of Hindenburg being shut down. They’ve written short reports on places like Square, Cash App, and they decided to exit the business, which I thought I thought was kind of interesting.

We’ve got 12,000,000 today. I’m not committing to some sort of a user target, but Dave is gonna be much more prominent in your credit life than it is today. I think I alluded to this, I really feel strongly that our our company is is very early on in its monetization journey today, given we have a three year old checking account business. We have a ten year old extra cash short term credit business. And our ability to continue to grow those two parts of the business, plus add in new capabilities on credit to add to those those opportunities, I think, are just massive, massive things for the company.

So Dave, in ten years, has multiple credit products. We are more of the primary bank for for the vast majority of our consumers, and it’s just gonna be a much bigger business because of the operation levers we talked a lot about today.

Jason for being so open in that discussion. If you wanna watch the show, you can find it on YouTube by searching for 20 VC. But before we leave you today,