The Exchanges

Q So, um, Any other, any other players, any other players you see in the space besides those two Betterment and Wealthfront?

A Well, I like some of the guys that are doing B to B, um, sort of arms race kind of guys, guys like Riskalyze who are, you know, basically behind the scenes providing the same kind of technology to, um, RAs and other advisors, or someone like a BlackRock who we advised last year in buying a company called Future Advisors. So, you got the guys that are going directly after the consumers, um, and, you know, we like Betterment and Wealthfront quite a bit. We also like Personal Capital and some of those types of players, um, but the B to B guys we, we like as well. So, um, It's a lot, a lot of, uh, good activity.

AI assessment note: “guys like Riskalyze who are, you know, basically behind the scenes”

Q but according to my research, that was black rock acquiring future advisor for about a hundred and fifty million back in August, 27, uh, 20, I think 15. It was so healthy deal. Were you on the soap? Steve, Paint, paint FT partners into this for a second. Were you on the cab table at future advisor or you were just brought in at the end to maximize the exit?

A So, interestingly enough, um, I mentioned at the beginning, we generally are on the sell side. On this one, it's not unusual, and we were on the buy side, so we actually got hired by BlackRock as an advisor, so we got made an advisory fee for advising them on, you know, how to do the deal, what to pay, how to think about it, how to structure the, you know, compensation, and other things like that, so, and what was going on with the other deals in the industry, so we were their advisor, so, you know, we, like I said, normally are on the sell side, but, you know, we've been hired by BlackRock on the buy side, Google, Google Capital, you know, Ally Bank, CIBC, Nomura, some very large FIs, financial institutions have brought us on their team, uh, to learn how to buy these sort of startup companies.

AI assessment note: “we actually got hired by BlackRock as an advisor”

Q And how do you, yeah, it is. And for people that are not familiar with kind of this space, how do you make money? I mean, what's your business model?

A Sure. I mean, generally, you know, we give advice for doing large transactions. So someone calls us up, they want to raise a hundred million dollars or two hundred million dollars, or they want to sell for a billion, or they want to buy a company for a 150 or two hundred million, or whatever the number is. You know, we're basically paid on success. It's some sort of commission, usually on a percentage basis of the value of the deal. Sometimes it's related to, um, how high the deal is. You know, the percentage can go up and up and up as we have more value. So, um, so we're in there, um, you know, putting presentations together, doing market research, contacting buyers, um, developing valuation thesis, uh, work on these deals and, um, you know, essentially putting buyers and sellers together and trying to make a market for these companies. Sometimes we get hired by the seller and they just, there's just one buyer and we're going to talk to that one buyer. Sometimes we go out to 50 buyers. Sometimes it's going out to just US buyers. Sometimes it's China, Asia, um, the rest of Europe and the rest of the world. So, um, can be very wide, can be very narrow.

AI assessment note: “we're basically paid on success. It's some sort of commission, usually on a percentage basis”

Q dollars in assets under management, and their model is a quarter of a percentage, right, on assets under management, right, so people can do the math and figure out what their revenue is. BlackRock has, has hired you, or some other, some other big companies, Vanguard, has hired you, and they want to buy a company like Betterment. How do you value a wealth technology, you know, company like Betterment?

A Sure. Um, I think, uh, the last thing we would do is look at, you know, uh, AUM or revenues today. We would sort of look at what are all the factors affecting Wealthfront or a betterment, and, you know, what do we think that company's gonna look like in seven to 10 years? So if everything goes according to plan, they become a dominant provider and have eight hundred billion. At that level, they're gonna be at scale. They're probably still gonna be growing quite quickly. Um, they're gonna have EBITDA. They're gonna have real earnings, real margins. And we would look to see what it was worth out in the future. So you, you'd run 50 different scenario analysis to figure out, you know, what the company might look like in the future and then start picking the ones you think really reflect your personal view of the future. And then that's, that's a certain dollar amount in the future. Uh, and they say, what would I be willing to pay for that today? And that's a function of what return I would require for taking that risk. And so we're always looking out five, 10, 15, 20 years and seeing what could a company be worth. And then saying, how do we get value for that today? So, um, it's, it's much more complicated than just looking at a company's current revenues or current earnings, um, particularly for these higher growth companies, um, like the ones you're talking about. So it's a very,…

AI assessment note: “run 50 different scenario analysis to figure out, you know, what the company might look like”