00:42:24 · Jackie Reses
[00:42:24] S0: Okay, I don't believe there was debanking. I think it's a crack of shit. I think it's an absolute crack of shit. Let me just say this. There's 5,000 banks in The United States. We have a lot of red states. Are you telling me that in lots of red states, including where my company is headquartered, which is Kansas City, Missouri, those banks were not willing to bank, for example, conservative companies? I think you have to believe that that's not true. That's one piece of the debanking argument. Second piece of the debanking argument, you can't bank crypto companies in the 2022, 2023, 2024 framework time period. Well, let's think about this. There are lots of crypto VC firms. When those VC firms were wiring money into the portfolio companies that they were investing in, were they bringing it in a wheelbarrow of cash? Or was it being wired to somebody's bank account? I think I heard bank account. And so as we go and fund crypto companies of that era, they were being funneled into bank accounts. Now, it might not be the banks that everybody wanted to use, but there were plenty of banks that were funding and supporting the corporate accounts of all of these companies. And so then you have to ask yourself, well, were these companies actually getting debanked? So let me tell you what was happening. So what debanking actually means is that banks transitioned out of offering crypto products or risky products like adult entertainment or something like that. Why did they choose to do that? They either didn't have enough density in their client base, the juice wasn't worth the squeeze. Like, you don't have enough density of clients, so you don't go hire specialist compliance teams. You don't go hire specialist finance teams. That yields you pulling back from an industry. You go, it's just not worth it for me. I don't have enough clients. That was one thing that happened. That's legit. That happened to lots of companies, but that is not systematically debanking. That's choosing not to invest in the industry. The second thing that happened is that there was an era when digital asset companies were less mature. Some of them had chosen not to pursue all of the legal and regulatory issues that you need in order to comply with banking regulations. If you're not gonna comply with US banking regulations, guess what?
00:45:05 · Jackie Reses
You're not gonna be able to keep your account at every bank. And so a lot of companies, depending on what they were building, the infrastructure that they were building, there were parts of that infrastructure components that like wouldn't have met a KYC standard. KYC is know your customer. And those clients were removed from that bank's system. So they were technically debanked. But if you're not willing to follow some of those KYC requirements, I'm not sure you should be banked. And so there's lots of logic as to why that happened. And then there might be cases where a bank just decides to not include executives in a particular industry, or they choose, they don't want the risk associated with something. That is their prerogative, and banks can make decisions based on their own reputational risk. Now, whether we all see reputational risk in the same lens, I think that's up for judgmental debate. But thankfully, you have 50 states and 5,000 banks. And there are plenty of people who would take a pro and a con of each side of those judgments and be able to offer services to many of those people who say that they were excluded from the banking system.
00:46:25 · Molly O'Shea
[00:46:25] S1: Today's episode is sponsored by VCX by Fundrise, the public ticker for private tech, allowing investors of all sizes to invest in venture capital. Learn more at getvcx.com. Some of you may not have heard this yet, but our sponsor Public just launched something called Generated Assets, and it brings AI into investing in a way I've honestly never seen before. Here's how it works: You type in an idea like AI powered supply chain companies with positive free cash flow or defense tech companies growing revenue over 25% year over year. Publix AI then dispatches a swarm of agents that scan every single US stock, evaluates them, and instantly builds a custom index around your thesis. What really stands out is how clearly it explains why each stock is included. And before you invest, you can even backtest your idea against the S and P 500, so you're making decisions with real context, not just guessing. And beyond generated assets, Public lets you invest in stocks, bonds, options, crypto, all in one place. They'll even give you an uncapped 1% match when you transfer your investments over from another platform. If you want to build a portfolio that actually reflects your thesis, visit public.com/sorcery, paid for by Public Investing. Full disclosure is in the description. Enterprise AI runs on Merge, the AI infra platform for integrations, agent tooling, and model orchestration, so your teams ship product, not plumbing. Mistral, Dropbox, and Drata already trust Merge in production. Start building at merge.dev. Founders scale faster on Deal. Set up payroll for any country in minutes, hire anyone anywhere, get visas handled fast, and get back to building. Visit deal.com/sorcery. That's deel.com/sorcery. So let's pull this forward to today with Lead Bank. You've raised $180,000,000 at a 1,500,000,000 valuation from some incredible names, which I can't even list off the top of my head because it's a long list.
00:48:25 · Jackie Reses
[00:48:25] S0: But you've raised from Andreessen Horowitz, Kotu, Greycroft, Iconic Capital, Coastal Ventures, Zieve Partners, Ribbit Capital, and also Larry Fink, Rob Goldstein, Larry Summers. So when you were starting this, why did you decide to buy an 100 year old community bank? So in order to do what I wanted to do, you needed to own a bank, and you needed to own a bank holding company. So I had a vision to build a fintech infrastructure company, to be the underlying infrastructure to support fintech, crypto, e commerce companies. So in order to do that, you have to have the right set of licensing in order to go build those products. So I went and looked across the country for the best banking law to support what I wanted to build. And I came across Lead Bank in Kansas City, Missouri. So I went and bought the bank and then brought a technical team of product design and engineers in order to build the technical infrastructure that was needed to build the products that we now support. And so it was a really cool idea. It was actually born out of the struggle that we had while I was at Block. I ran all these financial services products, and they were all built on the rails of old school traditional banks. And those banks are all in typical red states. They're all sub $10,000,000,000 They were typically a billion dollar to $5,000,000,000 banks, and most of them had no engineers. So imagine being the world's biggest fintechs and operating on the rails of these tiny banks. And so when I was working with a lot of these institutions, I decided that I didn't want the risk associated with their infrastructure. And I went while I was at Square and built a bank. So we coded the first line of code, we built all the policies, and that bank was something that no tech company had ever done before. Even today, fast forward eleven years from when we did that, I think it took eleven years from when we went and pursued that license for the next person to go and actually get one of those special licenses. And so it just wasn't something that tech companies ever did. And so with the really arcane knowledge of how do you go build a bank, I then knew enough to know that I wanted to go buy a bank in order to build this infrastructure myself.
00:51:12 · Jackie Reses, Molly O'Shea
And I knew how to build it so that it would be scalable and built in a way that clients could deploy it against massive financial services products. [00:51:23] S1: Let's talk about your clients because you have no sales team.
00:51:26 · Jackie Reses
[00:51:26] S0: This has all been referrals and you've reached over 200,000,000 in revenue? Yeah, our last year's revenue was about $280,000,000 Yeah, and about $31,000,000 of net income. Wow. And all referrals, can you list out some of your clients? It is all referrals, but, and honestly, our clients are really our sales team. And between our clients or me, that's sales. And so, you know, our first client was actually Ramp. And at the time I was at a CO2 conference and I was with Eric and I pitched him on what we were building, and he was like, I'm in. And we ended up working on one product with them, and his philosophy was you can be no worse than the traditional banks that we use. And given the roadmap that you're going to build and the technologists that you're working with, you'll be incredible. And so I'm willing to wait the six months when you go build out your tech and advance your technology in such a way that we're willing to wait, and I know you won't be worse than what we work with. And so we got very lucky to have such a high quality client. And so that was our first client. And then Atlas was one of our other clients. And they had just had a situation where another bank ran into trouble and Atlas had to come off their rails along with a handful of other clients. So they immediately came to us in an emergency and said, can you take us? We hadn't even closed the deal when I said, you have to go talk to the team before we own the company. But if they onboard you, we will absolutely deploy our technology to your products. And so we ended up onboarding Atlas as our second client. And then from there, we've added Stripe, Walmart's One Pay, Affirm, Flex, Self. And so we have an amazing, amazing roster of clients. Revolut is a client. And so I think they're just absolutely incredible clients to work with, and they're the world's best consumer and fintech companies. We have lots of crypto companies as our clients, over 100 of them. And so we're lucky that they refer us into the network and our investors refer people to us. And it's all word-of-mouth. We're really lucky to have such an incredible client base. What is the core of the technology and how did you build that tech stack? So we have five core API sets. First is lending, second is money movement, third is issuing, fourth is accounts, and fifth is stablecoins.