00:23:53 · Doug Ricket
[00:23:53] S1: This is why I love the fund. I feel like we found this perfect balance. And I'm on both sides of it, right? I'm running Patreon, the tech company, and I'm an investor in the fund. Uh so think of that asset return. Or uh our CFO when he joined, he's he said, like, wow, look at this asset. This is an incredible asset. This is the most profitable, like productive, amazing asset I've ever seen. If you guys can't build a business with this, like throw your MBAs in the trash and go find something else to do because this asset, this is the gold mine that the company was built on. So the asset and the way we recycle it, you know, customers can pay two digits, but we recycle it, we can earn 100% yield on that $500 million. Let's see. So the default's already baked in. If it's 100% yield, uh we absorb that first out of Pedro's profit. That would go down to 15. If the asset was yielding 15, Pedro would earn nothing. The 15% return would go fully to the fund investors. And then if the asset earned 10%, they would get 10%. If it yielded five, they would get five. If it was negative 20, they would get negative 20. So there is that risk at the bottom, but that's after Pedro, the tech company, has seen all its revenue go to zero. Interesting. Interesting. So we're highly incentivized to keep that a good margin. That's our that's our profit margin. And the investors have they're second in line for the risk, but they have um you know, they're first in line to get their first 15% at the same time. Interesting.
00:25:18 · Oliver Smith
[00:25:18] S0: Interesting. Um, and and what about the regulations? Because obviously you've got borrowers in in one market and you've got investors slash lenders in another market, and you're sort of in the middle. How do you handle the various regulations, custody, the protections that are required across those those different markets?
00:25:37 · Doug Ricket
[00:25:37] S1: Yeah, I mean, it's it's exactly like you said, which is uh, you know, one foot in the US, the Pedro Asset Fund is in US dollars. And so we and we're a US headquartered company. Uh, but there's some cool things that come out of this. You know, we offer this USD investment. You don't have to think about currency. Oh, I should mention we hedge that currency exposure. So if we're lending in Mexican pesos and borrowing in dollars, we hedge that principle always. That is our policy. We don't want to be speculating in the currency market. I don't want our company to do that. I don't want that for investors. So the result is you get this really cool asset, which is hey, you can invest your million dollars USD that you have sitting around in your pocket, and you're getting diversified access to Ecuador, Peru, Colombia, Panama, Mexico, Indonesia, Philippines, India, South Africa, you're getting this great diversified portfolio uh with no currency risk. Like we hedge the currency risk, and that's a cost of operating that we've already taken. Uh so you get this really cool asset on the investor side. And then, yes, because we're US and uh we have to follow US security law and reporting and everything, uh, we do that compliance on the US. And then in the local market in Ecuador, uh, knock on wood, we're applying. We could be one of the first uh uh fintech lenders approved under a new fintech law uh that that's come through recently. That's really exciting. Uh in India, we got our uh non-bank financial company uh approval that we're set to launch in India in the next year. Uh so we do the local piece uh with one hand, we do US SEC regulation with the other, and we connect uh in the middle with with currency hedging so people don't have to take the currency exposure. Interesting, interesting.
00:27:24 · Oliver Smith
[00:27:24] S0: So I've got to ask, you've got a two-sided marketplace, and I want to ask what the kind of obstacles are for growth. Um is it the tech? Is it regulation? But also with this market, is it is it convincing more investors to get on board, or is it getting more borrower demand on board? What where's the kind of um where's the room for growth really?
00:27:46 · Doug Ricket
[00:27:46] S1: Yeah, so right now we have uh a waiting list on the fund, which is good. That's how we like it. I was talking with our head of capital and our CFO, like, don't we want to perfectly balance it and be able to take all that capital? And if we have if we have excess demand, we should bring down the price and balance it, right? And the answer is so straightforward, I I felt like I shouldn't have realized this. No, we want to be on one side of that curve where we have some extra capacity at all times, so that if Philippines or India takes off faster than expected next year and we need another couple hundred million dollars, we have those people lined up. We know where it's coming from, we just do a capital call, and within a week, we can fund Philippines for the next quarter. So we keep a waiting list on the fund side and then on the uh individual customer side, uh, that's where life is is pretty complicated. So, you know, we work with uh mobile phone retailers, and that is how um, you know, for for selling the phone, and then our customers now get a payroid credit card on that same day when they get the phone, which is really cool, and they can use the credit card for anything. Uh and because a million people walk into a phone store every day looking to buy a phone around the world, um we don't have a huge cack. Our our cost of customer acquisition is, you know, it can be 10% of if you were just a regular credit card company and trying to figure out how do we attract customers to come use our credit card? Oh, we're gonna have to do newspaper ads and TV ads and direct marketing and all this stuff. Uh your cost might be 10 times what it is for us because we're meeting customers at the point of sale in a phone store. And they they want to buy a good smartphone, but they don't quite have the money for it. We can finance it and we get them a card at the same time. Uh so we get to ride on that huge wave of of phones. Uh but that is certainly the more complicated side. Uh, you know, deploying this in uh nine different countries, going on 10, uh managing the operations, the logistics, the regulatory compliance, the collections, the wire transfers back and forth with us and the mobile phone retailers and and all of that.
00:29:58 · Oliver Smith
[00:29:58] S0: Um and we we've we've moved beyond the blockchain conversation that we started off with. But I want to ask, is the journey there ended? Have you have you deployed it? Are you happy with it? Or are there other parts of the business where you're looking and thinking, actually, we could take blockchain a little bit further here? Um or or is that is the is the is it just gonna stay on that one side of the business, do you think?