00:00:00 · Jason Wilk, Guillaume Moubeche
[00:00:00] S0: Every great company starts with somebody having a bone to pick with some big problem. And the pain of the $34 overdraft charge on a cup of coffee, we look at your cash flow data, not your credit score, to offer you a $75 micro loan. And we went from being a $5,000,000,000 company to a $50,000,000 market cap company within a matter of nine months. [00:00:19] S1: Today on BILLIONS, I'm sitting down with Jason Wilk, four time founder and the CEO who took a 98% stock collapse and turned it into one of the greatest comeback history in fintech. His first company, Gold Club for a dorm room. His second, a Nat Tech play out of Y Combinator that sold for $85,000,000. He used that money to start a war against one of the most predatory fees in American banking, the $38 overdraft charge that quietly bleeds $30,000,000,000 a year from the people who can least afford it. He called his company Dave, as in David versus Goliath. Jason, welcome to BILLIONS. [00:00:59] S0: Thanks so much. [00:01:00] S1: Can you maybe, like, explain to people why you decided to start Dave in the first place?
00:01:00 · Guillaume Moubeche, Jason Wilk
[00:01:00] S1: Can you maybe, like, explain to people why you decided to start Dave in the first place? [00:01:05] S0: Personal pain point. I think every great company starts with somebody having a bone to pick with some big problem. And for me, that was going through high school, college, starting my first business, and the pain of the $34 overdraft charge on a cup of coffee or a tank of gas was just incredibly punitive in a time in your life where you need every penny counts to to make it through. And I knew if I had that problem, there were lots of other people that might be having the same issue. And it turns out it's over half the country is dealing with things like overdraft fees, not having enough credit score to afford mainstream credit products, and ultimately, just the banking system is too expensive for the everyday American. [00:01:45] S1: So how do you attack such problem? Because, you know, it looks like a banking system is huge. Like, how do you get started with it? Like, how do you create your new bank?
00:01:55 · Jason Wilk
[00:01:55] S0: I think the way we started actually led to a lot of our success in the sense that I knew we always wanted to offer a full suite of banking services, but to offer that back in 2016, there was... It would have been a tremendous amount of work to either get a bank charter or go through the bank partner process. At the time that Dave was launching, there had been several neo banks around previously that had not really seen a lot of traction. And so I had in the back of my mind that people's excitedness to open up a checking account was really not there, but their pain point around short term credit was. And so, we decided to start with that part of the spectrum first. And so, a company launched in 2015 called Plaid, which was the conduit between fintechs and large banks. And there was only one interesting company that was using the service that I had seen so far, which is a business called Acorns, which was connecting to your primary checking account, looking at your transactions, and rounding up your purchases to put into the stock market. I said, you know, that's a really interesting. If we could use that same cash flow data to underwrite people for effectively a micro loan in The US, that should eradicate the need for traditional overdraft. And so Dave's first product was a app where you connect your checking account. We look at your cash flow data, not your credit score, to offer you a $75 micro loan. Smallest loan in the country. And this mall had worked in places like India and Africa, where micro lending was a real thing, but no one had really tried it in America as a way to solve sort of short term gaps. And the real vision there was that short term credit of this small dollar amount, FICO is an irrelevant score, because that's based on long duration credit, your ability to pay a mortgage or an auto loan. And we've really proven out that your cash flow data on your account is very, very valuable. And I knew that to be true, because I always knew my paycheck was coming in. I was a great customer for my bank. But why charge me such a high rate when they know that I'm good for for the money? And so, that was really the foundation of the business. Start with the credit, migrate to banking later, and we've really followed it along that journey.
00:04:10 · Jason Wilk, Guillaume Moubeche
We didn't launch banking really until 2021, where people could make Dave their primary accountant, and should they choose. [00:04:18] S1: And can you maybe like walk us through the equity story? Like, did you have to raise fund in the early days? Like, who were your investors? Like, was it easy? [00:04:26] S0: The seat round was fairly easy, because I utilized most of my investors from my previous company. And one of our investors, I had a a deal with that whatever they made in the previous company, they would automatically write me a check for the next company, sight unseen for 50% of whatever their profit was. So that check was Nice. Was real easy. It turned out really great for that guy, because he never would have written that large of a seed check usually. And it's... I think that stake's worth over a $150,000,000 now. So he's done done quite well. And then two of my other lead investors from my last business also participated. We rounded out the the group with Ron Conway and as SV Angel among some other people in the seed round, but that was a $3,000,000 round, which we used basically to buy the domain name, give us some capital to hire the early team. And also, we needed some principal capital to actually lend out to users because we didn't... At that point, had no credibility with private credit, and certainly no bank was gonna be willing to lend us money with no experience. [00:05:32] S1: And the second round, like, how exactly did it go? Like, did did you feel like you had to to work a lot harder or like
00:05:42 · Jason Wilk
[00:05:42] S0: The second round was really difficult because we clearly had product market fit. Customers were loving the product. We were scaling. Our CAC was really low, but our loss rates were really high. They were like 20%. And so it wasn't quite clear that the... This customer profile that we were underwriting was gonna be able to be able to lend to profitably. And so we had that going against us. And also, every venture capitalist, at least that I spoke to, had never really even heard of overdraft fees. They didn't recognize it as a major problem. And the third was that neobanks historically had not gained a ton of traction. The most successful exit thus far was, I think, Bank Simple, which sold, I think, for a $150,000,000. So, you know, not great comps, not great loss rates, problem that investors don't really understand. And it took me about a 120 meetings to get the series a done. And ultimately, it was with an investor that wasn't even in writing checks into fintech. It was just a connection with one of our board members who said, trust me. It's a smart team. Jason's hard working. You know, he'll figure it out as he always does. And so that really was the catalyst of getting the check there. We had a tremendous performance from that $10,000,000,000 check. We got loss rates down to a few percent. We were scaling users. We got to an enclosed to a million users in first couple of years. And we didn't raise our next round of funding until we reached a billion dollar valuation in 2019. And that was a big deal, because there weren't that many unicorn businesses back then. We weren't in a hurry for raising more capital, and so we'd be more patient. But the traction we had at that point was sort of irrefutable at that at that point in time. And so raising around was a little bit more competitive, and we brought on a great investor of Norwest Venture Partners who led that round in... Entirely. And that $50,000,000 equity check lasted us all the way to the IPO. So it's incredibly capital efficient. I think we're around 63,000,000 of total primary capital raise, the, yeah, the next round was our our public transaction.
00:07:51 · Guillaume Moubeche
[00:07:51] S1: How exactly do you, like, prepare for an IPO? And when do you decide, like, if you're ready or not?