The Exchanges

Q No way. When you think about how AI changes underwriting and what that actually means, how do you think about that?

A 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 want to access credit within minutes of joining our app, that's sort of our, our, uh, 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 bucks 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 twelve million connected accounts roughly on the platform at this point, and so twelve million 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. And when we launched the business, it was just a rules-based model, you know, when do you get paid, Our confidence, 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 dollars of credit, the average being around 50. You fade to twenty-twenty-four, at the end of the year, we reported the average amount we're giving out is a 180, and our loss rates are 1.2%. And you think about the power of…

AI assessment note: “the benefit is more credit approvals and higher credit limits are approved because of AI”

Q You've had so many interesting elements to the journey. One I really wanted to dig in on, and one that I'm thinking a lot about, is why does anyone go public today? In a world of extended private markets, where we have such large capital supplies willing to come in and extend that window, why does any private company want to go public today? How do you think about that?

A Well, one, there's the dynamic of the, there's too much press 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 prep. I mean, Dave, we have no preferred equity on our cap table. We have no debt in our business. We, we trade a hundred million dollars a day of volume, which means we have great liquidity to have employees get, uh, liquid on their, their equity. You know, it's, it's a real rich person's sort of, uh, 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 Adyen. 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 director of the consumer company like Dave, I think you leave a lot on the table and for the potential retail swing that the investors can drive with people that are really passionate about your brand. Like 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,…

AI assessment note: “the benefit of being public is you erase all the prep”

Q Was that a good move, do you think? Like now that would be considered like vulture VC. I love Mark. You love Mark. So I don't mean that badly on him, but that would be considered really bad form. Was that actually helpful?

A There's no way 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 dollar salary cap led to me overdrafting 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 Mark ended up leading the, the seed round for Dave as well. So, um, it was really an interesting story.

AI assessment note: “honestly, it was an amazing forcing function to try and build a profitable business”

Q Now, I would love to start. You sold your first business for eighty-five million dollars, reportedly. I'm just always oscillating on the fact that, bluntly, do richer founders make better founders? I think there's a lot with investors. When you think about it, do richer founders make better founders?

A I'd say yes. You know, I, I don't think it's the case every single time, but 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 exited 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 in my own YC class, because that company I sold was in, was in my accommodator. My second company was Dave, the founder of Opendoor. He had a small real estate company he sold to, I think Trulia at the time. Stripe was in my class. They had sold a previous company for like six million dollars, some eBay tools business. Like, it's just amazing the, the swing for the fences that some of the second time founders go for once they have a little bit of money in their pocket. Who otherwise were a little bit more conservative the first time around.

AI assessment note: “I'd say yes. You know, I, I don't think it's the case every single time”

Q You've had so many interesting elements to the journey. One I really wanted to dig in on, and one that I'm thinking a lot about, is why does anyone go public today? In a world of extended private markets, where we have such large capital supplies willing to come in and extend that window, why does any private company want to go public today? How do you think about that?

A Well, one, there's the dynamic of the, there's too much press 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 prep. I mean, Dave, we have no preferred equity on our cap table. We have no debt in our business. We, we trade a hundred million dollars a day of volume, which means we have great liquidity to have employees get, uh, liquid on their, their equity. You know, it's, it's a real rich person's sort of, uh, 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 Adyen. 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 director of the consumer company like Dave, I think you leave a lot on the table and for the potential retail swing that the investors can drive with people that are really passionate about your brand. Like 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,…

AI assessment note: “the benefit of being public is you erase all the prep”

Q Is there anything you would have done differently about the process when you review it now?

A 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 12 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, uh, forecasting our business. And so we decided to wait a little bit longer. We went public January, 20, 22. The market completely fell apart in April, 20, 22, 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 have been able to Turn over our earlier shareholders, bring more longer term capital. And like, we never would have gone to a five billion dollar valuation of fifty million market cap overnight. We wouldn't have happened. We would have 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.

AI assessment note: “I think we just went public too late, to be honest.”

Q No way. When you think about how AI changes underwriting and what that actually means, how do you think about that?

A 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 want to access credit within minutes of joining our app, that's sort of our, our, uh, 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 bucks 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 twelve million connected accounts roughly on the platform at this point, and so twelve million 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. And when we launched the business, it was just a rules-based model, you know, when do you get paid, Our confidence, 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 dollars of credit, the average being around 50. You fade to twenty-twenty-four, at the end of the year, we reported the average amount we're giving out is a 180, and our loss rates are 1.2%. And you think about the power of…

AI assessment note: “the benefit is more credit approvals and higher credit limits are approved because of AI”

Q If you were advising Nick, say I'm Nick, and I said, you know, Jason, I'm not going to put on his accent because he'll kill me and I sound like a bomb villain, but, uh, you're advising me, I'm entering the US market in three to six months. What should I know and do having your advice, having seen what you've seen?

A I 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, uh, competition. And I think companies like Dave have done a great job in Chime to build a significant penetration in the market. We're at twelve million customers. Chime, I think, is, you know, a similar type of penetration. Cash App's done a good job. They've got fifty million people using their product. Like, I think that he would have to think about this population as something that he needs to build an attractive product for, because I think it's going to be an uphill battle. Unless he wants to spend 500 bucks on customer acquisition, then maybe you could go after the incumbents.

AI assessment note: “I would just look at all the different types of customer segments and pick the one”

Q You look fresh. Like, your face, your face and skin looks fantastic condition. It's fine. Um, you chose to SPAC. Why did you choose to SPAC versus traditional IPO? Help me understand that.

A So, 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 going to 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 12 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 I'm gonna raise 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 quality, the lower quality of companies that went public via that, that vehicle, I think you would have seen, uh, This be a much more pervasive way for good companies to go out.

AI assessment note: “you get to raise a guaranteed amount of capital, at least through a, through the pipe”

Q Is there anything you would have done differently about the process when you review it now?

A 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 12 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, uh, forecasting our business. And so we decided to wait a little bit longer. We went public January, 20, 22. The market completely fell apart in April, 20, 22, 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 have been able to Turn over our earlier shareholders, bring more longer term capital. And like, we never would have gone to a five billion dollar valuation of fifty million market cap overnight. We wouldn't have happened. We would have 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.

AI assessment note: “I think we just went public too late, to be honest.”

Q And then there's the flip side, bro. It's like, the hottest companies continue to be the hot companies, and they go on this soaring trajectory that is unstoppable. And I'm, I always try and think, like, which is the The more common path to success. Um, fascinating to hear. One thing that was critiqued was the movement into crypto. How do you reflect and think about that in the pathway?

A 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, in what Bitcoin is doing to show, show stored value within digital currency. At the time though, I think the, the move was actually heralded. 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 hundred million dollar convertible check into the company. And it was, uh, it was sort of boom time for crypto. It was boom time for Neobank. And, you know, thankfully we never actually went live with that partnership, but we wouldn't have launched it anyways because of 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, uh, moving more of our focus to.

AI assessment note: “It was a distraction, which ultimately, you know, we had to sideline”

Q In that period, before we move to the turnaround, which is just incredible, is there anything you did that looking back you think strategically I wish we hadn't done that?

A I would have rather just doubled down on the core product more closely from the onset of 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, we're down to nearly one percent loss rate underwriting a younger slash subprime consumer for short-term credit. It's 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 into things like crypto, which were not as core to the product to improve what we're doing for everyday Americans.

AI assessment note: “Versus going into things like crypto, which were not as core to the product”

Q Listen, I'm a VC. I'm paid to surmise very grandiose statements from little data and project it with a lot of confidence. When I think about that, the kind of common statement is, listen, it's simple. Banking for poor people is a bad business. Is that wrong?

A What I think, 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 want to sort of jump the gun on the story here, but we developed a very crisp message to the street, which was that, and I, I would, I would, uh, 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, a 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, ah, message to investors and to the company as well, that once Dave reached 2.1 million 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 2.1 million monthly paying members, we would reach significant profitability. And so when we hit that number in Q four of 23, we had our first ten million dollars of EBITDA profitable quarter. We've since compounded user growth through 2024. We had 2.5 million monthly paying members in Q four of 24, and we generated thirty three million Of profitability. And fade to 25,…

AI assessment note: “banking for people poorly served by incumbent banks is an amazing opportunity”

Q show, and he said that kind of the next generation would see really the consolidation of banking providers. Five global banking providers absolutely dominate and be trillion dollar companies. Um, you'd see the removal of kind of localized banking, um, and these kind of global players would dominate. Do you agree with that statement on the consolidation of banking providers and five or six taking the majority of market share?

A 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. I think Revan Wood's doing a really nice job. I think new banks 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, this, uh, innovation around stable coin, 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, uh, a major incumbent like a chase or a B of A doing that, but I could see a, a digital bank taking that on and being quite successful.

AI assessment note: “I don't know about five or six players. I do think, though”

Q I mean, that is the most masterful play from Y Combinator. Um, can I ask you, when you reflect on like the thing that you did very deliberately and strategically differently the second time with Dave, that you really think is the case of I learned my mistake or the lesson from last time and I applied it with Dave, what would you say that one or two things is?

A 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 niche Business. Something that I knew we could get profitable quickly. So from that sense, it was a little short-sighted. We never could build a really massive business, and we didn't want to raise a lot of additional capital either. One, because it was hard, and, 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, you know, 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, tried 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 much bigger idea. Going against the banks was sort of a perfect time with all this new technology coming out like Platt that we were partnering with.

AI assessment note: “The difference this time around was really swinging for the fences on a bigger problem.”

Q So if SPACs are actually a more functional and efficient mechanism than people give them credit for, why have they been so ridiculed? And I mean, today, obviously we're both operating in this ecosystem. The word SPAC is almost a poisonous word. Why is it so badly tarnished?

A Just the sheer amount of low 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. It's just, you were having companies with barely any revenue, barely any business model that were going public via this structure. And it really overshadowed the great companies that went public that could have also done a traditional IPO. And I think, you know, 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.

AI assessment note: “Just the sheer amount of low quality companies that went public via that.”

Q be honest in terms of size. Um, size of company, size of market cap, size of people. Uh, and, uh, my question to you is not in banking. Again, Revolut is sixty billion dollars now. I don't know what the Chime is quite, but it's what, 15 to 20? What, help me understand, genuinely, I never get this. Why is the US smaller when it comes to neobanks than Europe?

A 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 dollars a year, if you keep enough money in your checking account, if you have a pretty good credit score, banking is 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 dollars 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 China's 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 new bank, 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, the new bank CEO is going to tell you that his customer base in Brazil and Mexico is actually a middle to higher income consumer. And so, it's just a very different opportunity that us …

AI assessment note: “It really is The different markets that we're serving.”

Q What form of lending do you not do today that you would like to do that would be most transformative?

A 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 these 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 a, as a customer. And as we do that, we think more people will ultimately end up banking with us because if we start to serve you for more needs than just gas and grocery money, you'll start to make us more of the meal to, to take the words out of your mouth.

AI assessment note: “We see a lot of overlap with things like buy now, pay later.”

Q Why? Sorry, I'm in the UK, so I'm learning.

A 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 going to 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. You heard the, what I said about the JP Morgan CEO around the, the cost to serve statement that was directly related to if you get rid of over job fees, we're just going to 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 over job fees, b…

AI assessment note: “Well, just his approach to less regulation in general.”

Q Given we had so many companies raised so much in 21 and 22, do you think we have a founders, a group of founders, that are generally pretty fucked, given the size of the pref stacks that they have to claw back to?

A Yes. I do. I mean, 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 a You know, the, the spur of the moment. It's the hot thing of the time. And so 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 have probably bought by now that are very small, but have raised a couple hundred million dollars of prep. And so it just makes their inevitable outcome Impossible.

AI assessment note: “Yes. I do. I mean, the amount of capital that some of these companies”

Q So if SPACs are actually a more functional and efficient mechanism than people give them credit for, why have they been so ridiculed? And I mean, today, obviously we're both operating in this ecosystem. The word SPAC is almost a poisonous word. Why is it so badly tarnished?

A Just the sheer amount of low 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. It's just, you were having companies with barely any revenue, barely any business model that were going public via this structure. And it really overshadowed the great companies that went public that could have also done a traditional IPO. And I think, you know, 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.

AI assessment note: “Just the sheer amount of low quality companies that went public via that.”

Q But when we think about AI on underwriting and customer support, how has it changed the margin structure of customer support for you? You know, we always hear like, oh, AI changes customer support. And I'm always like, great, cool. Like, what's the actual impact?

A Well, one is actually a better NPS score around the, the experience. So if you want to talk to, you know, typically this, this would be the same for most banks and especially, especially in neobanks in the country, most sort of call center support is going to be offshore. And that's going to 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 two to three dollars 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 going to be pretty impactful. We don't have an, a 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. It's very impactful.

AI assessment note: “costs us two to three dollars per contact... interacting with an AI agent costs literally nothing”

Q when governments give away free money, um, because it makes me just think, shit, is this just a race to the bottom? If I'm willing to give away a dollar cheaper than you're willing to give away a dollar, that doesn't feel like a very good business. Why is it wrong of me to think, oof, it's a race to the bottom on who can give dollars away for free?

A So I don't think about our interest in BNPL as going to give away free credit and build merchant relationships. We would charge for it. I mean, our customers are very willing to pay for access to credit. When I say BNPL, I think my customer wants more duration to pay us back versus having to pay me back in eight or 10 days. And so if I were to issue, I don't know, 500 bucks of credit, you might use that credit differently if you have six paychecks to pay us back versus one. And so I'd like to think that we can build these various use cases to help you borrow money for longer amounts of time using my cash flow data, which we call CashAI, to underwrite you.

AI assessment note: “We would charge for it. I mean, our customers are very willing to pay”

Q What's your boldest bet on the future of the neobanking ecosystem in the US when you look forward to the next three to five years? What do you think is very clear that many other people don't see?

A I think the, the big thing people miss was the, again, to go back to the early conversation, 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 costs to pay back the cost to build their platform, there's just, these are great businesses. And I think people really miss that. That's one. And then two, the ability for The neobanks to get deeper into credit and use their expertise there to disrupt the legacy cost 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 just paying off the minimum balance, the fees you're paying are massive, and it's like three trillion dollars 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.

AI assessment note: “the big thing people miss was the, again... the inherent operating leverage”

Q I specialize in asking basic questions. You mentioned they're having the same customer basis as in terms of volume or number as like a chime. Why are chime more valuable then?

A I can't say for certain, right? They're not public yet. I don't know what their most recent valuation is. Um, 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 want to make sure that if you have any value in their product, that you 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 going to get you approved for a couple hundred bucks when you join. We give you the Dave debit card to try us out. We're going to give you some benefits to help you Earn some extra money to take a few surveys here and there, and then we're going to ask you to direct deposit over time. But my CAC is 16 dollars because I take this speed of value approach where I want to make you a happy customer i…

AI assessment note: “we've just taken a very different approach to building our, our businesses.”

Q Listen, I'm a VC. I'm paid to surmise very grandiose statements from little data and project it with a lot of confidence. When I think about that, the kind of common statement is, listen, it's simple. Banking for poor people is a bad business. Is that wrong?

A What I think, 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 want to sort of jump the gun on the story here, but we developed a very crisp message to the street, which was that, and I, I would, I would, uh, 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, a 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, ah, message to investors and to the company as well, that once Dave reached 2.1 million 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 2.1 million monthly paying members, we would reach significant profitability. And so when we hit that number in Q four of 23, we had our first ten million dollars of EBITDA profitable quarter. We've since compounded user growth through 2024. We had 2.5 million monthly paying members in Q four of 24, and we generated thirty three million Of profitability. And fade to 25,…

AI assessment note: “banking for people poorly served by incumbent banks is an amazing opportunity”

Q If you were advising Nick, say I'm Nick, and I said, you know, Jason, I'm not going to put on his accent because he'll kill me and I sound like a bomb villain, but, uh, you're advising me, I'm entering the US market in three to six months. What should I know and do having your advice, having seen what you've seen?

A I 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, uh, competition. And I think companies like Dave have done a great job in Chime to build a significant penetration in the market. We're at twelve million customers. Chime, I think, is, you know, a similar type of penetration. Cash App's done a good job. They've got fifty million people using their product. Like, I think that he would have to think about this population as something that he needs to build an attractive product for, because I think it's going to be an uphill battle. Unless he wants to spend 500 bucks on customer acquisition, then maybe you could go after the incumbents.

AI assessment note: “pick the one that is the most poorly served by the existing”

Q Given we had so many companies raised so much in 21 and 22, do you think we have a founders, a group of founders, that are generally pretty fucked, given the size of the pref stacks that they have to claw back to?

A Yes. I do. I mean, 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 a You know, the, the spur of the moment. It's the hot thing of the time. And so 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 have probably bought by now that are very small, but have raised a couple hundred million dollars of prep. And so it just makes their inevitable outcome Impossible.

AI assessment note: “Yes. I do. I mean, the amount of capital that some of these companies”

Q And then there's the flip side, bro. It's like, the hottest companies continue to be the hot companies, and they go on this soaring trajectory that is unstoppable. And I'm, I always try and think, like, which is the The more common path to success. Um, fascinating to hear. One thing that was critiqued was the movement into crypto. How do you reflect and think about that in the pathway?

A 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, in what Bitcoin is doing to show, show stored value within digital currency. At the time though, I think the, the move was actually heralded. 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 hundred million dollar convertible check into the company. And it was, uh, it was sort of boom time for crypto. It was boom time for Neobank. And, you know, thankfully we never actually went live with that partnership, but we wouldn't have launched it anyways because of 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, uh, moving more of our focus to.

AI assessment note: “It was a distraction, which ultimately, you know, we had to sideline a lot”

Q But when we think about AI on underwriting and customer support, how has it changed the margin structure of customer support for you? You know, we always hear like, oh, AI changes customer support. And I'm always like, great, cool. Like, what's the actual impact?

A Well, one is actually a better NPS score around the, the experience. So if you want to talk to, you know, typically this, this would be the same for most banks and especially, especially in neobanks in the country, most sort of call center support is going to be offshore. And that's going to 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 two to three dollars 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 going to be pretty impactful. We don't have an, a 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. It's very impactful.

AI assessment note: “we actually get better scores for a fraction of the cost”