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?
00:07:57 · Jason Wilk
[00:07:57] S0: Well, we were really quick towards an IPO, and more so more so than most. I think as of January next year, we'll have been a public company longer than of being a private company, which is really interesting. And so it's almost like we've forgotten life as a private business and don't miss it that much. And to be honest, we we like the rigor of the quarterly reporting. We sort of got ourselves in this quarterly reporting mindset, leading up to the the IPO. And fortunately, what gave us a lot of confidence is our business is very forecastable. We can... We have a lot of cohorts that have been with us for a long amount of time. We have a very heavy repeat users, and we want, like we felt the business was ready, even though we were early on to become a public company. As of January, we'll have been a public company, than being a private company, and don't really miss it that much, because our business is very... A lot of repeat customers. And so, we feel like we can forecast the business really, really well. I think that's a key for a public company, and investors wanna be able to build models they can rely on. And given we have 98% of our customers every month are our repeat users, we just felt very confidence, a lot of confidence in the core model. So aside from that, just building up the management team, getting the public board ready, and then going on the roadshow process to find our lead investors, is not too dissimilar from a a private capital raise, other than you have to convince 50 people to validate your valuation as opposed to one. And I think that's a major difference in public versus private. It's just your valuation in public is more consensus versus private is literally can be just the opinion of one person.
00:09:40 · Guillaume Moubeche
[00:09:40] S1: And how long did it take you from, okay, I think we should IPO to let's ring the bell? Like, what was the the timeline?