Podcast: From NASA to Fintech: Chris Dean's Journey to Revolutionize Banking with Treasury Prime

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Show notes

Bios

Bill Cilluffo joined QED as a Special Advisor in the fall of 2014 and became a Partner in 2015. He is currently Head of Early Stage Investments after six years as Head of International, leading QED’s Investment teams in Latin America, Europe and Asia.

Prior to joining QED, Bill spent nearly 20 years at Capital One, spanning several roles and leading several businesses. He spent the first 6 years of his career leading Marketing, product development and credit policy for Capital One’s subprime credit card business; ultimately having overall P&L responsibility, and growing the business to become the most significant player in the market. He moved on to spend 2 years in various new business development roles, spanning the telecom, medical finance and small business finance industries. Bill spent 3 years as Deputy Chief Credit Officer for the bank, playing nearly every role there was to play in the central credit function, after helping build the department from scratch in 2002.

Bill then pivoted his career to general management, leading Capital One’s Canadian, and ultimately International businesses, over the course of 6 years. Profitability of the business grew significantly under Bill’s leadership, through new product and channel introductions, acquisitions, and significant cost take out. During Bill’s last 3 years at Capital One, he led its Co-Brand and Private Label credit card business, building the business nearly from scratch to one of the top few players in the US market, through a series of acquisitions, most notably including leading the acquisition and post-merger integration of HSBC’s US credit card business, which closed in May 2012.

Bill graduated with a BA in economics from the University of Michigan, and competed the SEP program at Stanford GSB.

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Bill Cilluffo:

You are listening to the Fintech Thought Leaders podcast from QED Investors, your deep dive into the world of venture capital and financial services with today's digital disruptors. QED is a global venture capital firm focused on investing in fintech companies all the way from pre-seed to IPO. Fintech Thought Leaders brings together the most talented entrepreneurs tackling today's biggest problems. If you're looking to learn more about what motivates our founders and team members to succeed, you're in the right place. Hello and welcome to the Fintech Thought Leaders podcast. I'm Bill Cilluffo, head of early stage investments at QED Investors. Today on the podcast, I'm excited to be joined by Chris Dean, co-founder and CEO of Treasury Prime. Chris, welcome to the podcast.

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Chris Dean:

Hey Bill, good to see you. Thank you.

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Bill Cilluffo:

Later on in the podcast we're going to get into a bunch of the details on Treasury Prime, but as we kick things off, I wonder if you can just give us a 62nd commercial on what Treasury Prime is and what the company does.

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Chris Dean:

Sure. Treasury Prime is a software company. We make banking as a service software for banks and tech firms in the US, so think of that like fintechs and embedded banking. We make an API that lets the tech firms open up bank accounts and do any sort of deposit operation at a bank that the bank allows. We make software for the banks, we make software for the fintechs, everybody's happy. We have a large network of banks and really our success has been based that we have two factors that no one else has. We have a deep technology moat that no one else does the way we do it. And we have a large interactive network of banks where the banks actually work together with the fintechs.

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Bill Cilluffo:

Awesome. And I know we're going to explore that a lot more, especially that network of banks, which I know has been a big secret of your success. So I look forward to getting into that later. But for the time being, I'd love to dive a little bit into the history maybe starting with how you entered the startup world. I believe you took a job as one of the first employees at a machine learning startup as one of your first forays into the tech world. Can you tell us about what led you to do that as a first entree?

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Chris Dean:

Sure. I was a machine learning researcher back in the day at JPL, which is one of NASA's national labs. My advisor at school was running the lab at that point and he said, "You should take a job here until you decide what to go for grad school." Because I was having a lot of difficulty deciding what to do, and I did that for a while and that was great fun. And my wife at some point said, "We need to move to San Francisco to take care of her parents." Whch seems like a great reason, so we did that and we took care of her folks and I needed a job and I was like, "I don't want to work down at Stanford." Because I didn't. So I got a job at a startup in San Francisco. I literally did not know what the word startup meant.

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I went out into my network of people and said, "Hi, y'all know me. I published this paper, that paper, I'm looking for a job in the commercial world." And someone reached out and I was the first employee at that startup and I didn't know that that was important and I just was like, "Okay, what do you need? Let's get going." They said, "Can you find an office?" So I found an office. "Can you get furniture?" So I found furniture. "Can you build out the data center?" So I built out the data center. I didn't know these were unusual because no one told me that this wasn't normal. So I did all those and that was a terrible startup for everything except my friends who were there who I'm still friends with, they were fantastic and I love that. But there's a lot of drama, like they're in startups, the founders hated each other.

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They would throw chairs across the room at each other and there was court orders preventing people from entering the building. Security guards making sure the wrong people didn't enter. And it was just awful. Actually, I really liked the parts that weren't the drama. So I've been doing that ever since. I found another startup who I thought could teach him how to do it correctly. I did. I ended up founding a couple of businesses with those people from that company and we sold one of them for a good amount of money. And at some point my friend Dan Kimerling, who too called me and said, "Hey, I'm having some issues with the product and tech side of my company, will you help?" And I said, "Dan, I love you, but no way. I'm retired." And he's like, "No, just have coffee with me." And so I'm like, "Yeah, I'll have coffee with you all day." And we spent all day having coffee and he convinced me in the room at the coffee shop basically to help him out. And that was, I don't know, eight years ago or something.

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Bill Cilluffo:

So that's quite the journey. So there's a bunch of things I need to dive into, which you just said. So when you said that startup wasn't very good, I did not guess your next sentence was going to be throwing chairs at each other, restraining orders, et cetera, that had to be pretty crazy. But then you also said a second later that you loved it, at least the drama-free parts. Can you talk about what was so great looking back in hindsight in such a bizarre situation?

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Chris Dean:

Sure. The leadership is not great there clearly, and the problem chosen was bleeding address. I'm always reluctant, now that I know what I'm doing. Hopefully that's a dangerous startup problem. Basically, if you're going to do your doctoral dissertation during the startup, that's probably a bad idea because it just takes too long. There's too many unknowns and we had a bleeding edge problem we were doing and we did okay at it. We solved it as much as we wanted to, but there wasn't really a good product market fit there and that also was bad. So if it was making a ton of money hand over fist, we might've gotten through the problems that we had, but it wasn't, it was struggling.

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But the product people I worked with I really liked because it was, here's a brand new problem and the measure of whether you're solving the problem isn't whether you publish it and the right people say good job. It's whether someone uses it or buys it. Cap One actually was an early customer. It was like a modeling for... In Cap One's case, who do I send card promotions to, basically. You should get the Michigan Co-branded card. And there's a lot of Michigan people, so maybe that's a good idea. You should do the Caltech co-branded card. That's a terrible idea because there's hardly any Caltech people and we would predict that. And I love the product, I love the feedback.

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Bill Cilluffo:

Well, I spent a lot of time working on that problem long before your company came to exist, so I'm sure you helped a lot.

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Chris Dean:

A hundred percent. It's not easy, but it's a machine-learning problem in many ways. If you can get enough data, you can predict this in aggregate, and I like that part of the problem. I like that when we did a bad job, people said, "No thank you." When we did a good job, people said, "Sign me up, I want to use this." And that was a great feedback loop and I felt I could solve meaningful problems and know if they were meaningful in the get-go. My original plan was to be a professor at some kind of mid-tier college somewhere. And I thought I could make a better impact and I was certainly having a lot more fun at the startup world, so that's why I stayed there. My next startup, which I don't always say the name to was BabyCenter, which is a dot com company.

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Bill Cilluffo:

BabyCenter?

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Chris Dean:

Yeah. I figured what is the opposite of what I've been doing, and that was BabyCenter, and that was a great choice because those guys were amazing.

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Bill Cilluffo:

Was that a Babies R Us type thing or what did they do?

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Chris Dean:

It's a content site for parents, new parents, like moms like 80, 90% moms and it would be like, "Hey, you're pregnant and here's what your baby looks on week 12," or whatever. Here's what's going on with the baby. The baby's now it's born, it's eight weeks old going on with brain development, stuff like that, just a content site. And it was very cleverly personalized on the age of the kid, on the baby. And so expecting, you can like, "Here's happened to your body, here's happened to the baby." For a couple of years, it's very predictable.

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And that was useful and I built that and then I built a commerce site attached to that, which sold strollers and stuff like that. And selling strollers is not what I had on my dance card that I was going to do, but I did, it worked. And I liked the fact that I got to help people who were having kids, which I liked. It was such a nice group of people, as you can imagine, because whose attracted to helping babies, right? A certain kind of person and that was great. Because that was not the same kind of person as my gig before then with the machine learning company.

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Bill Cilluffo:

So from NASA to machine-learning startup to a site focused on babies, an obvious next step would be getting into banking as a service. You can see the linear trajectory there, right?

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Chris Dean:

That's right.

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Bill Cilluffo:

So talk to me about standard Treasury, your first foray into banking as a service. How did that come to be? And that one was a much more linear getting to Treasury Prime, I think.

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Chris Dean:

It was Dan and Zach, founder's guy, Dan Kimerling who we know. They just had this idea that the amount of technical innovation that was going to happen outside of the traditional banks was large and that that needed a way to be managed. That every tech firm doing this individually to every bank was probably not sustainable. So they said we should make a platform that we can sell to the top 50, top a hundred US banks, and so they can use our software, which we built to talk to tech firms. Our first client was Silicon Valley Bank, but that was really reluctant for anyone else to sign up. You go to a meeting, you go to Citi or Goldman or someone, whatever, and they go, "This is a great idea," says the innovation group. And then you get to the risk group or the operations group and they're like, "Oh hell no, I'm so busy and I don't want to do this." And at the time it was you could only sell to most banks actually in the US as an on-premise offering, and they had to install in their data center.

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And actually it wasn't until really Cap One announced they were doing stuff in the cloud that all the other banks said, "Oh, I guess that's okay because Capital One knows what they're doing." I'm like, "Yes, they absolutely do. You should definitely listen to them." And I can tell you that if Cap One hadn't done that, Treasury Prime would not exist. We are all a hosted SaaS platform and that would never have worked otherwise. But we tried to sell that to all the banks and it was hard. And at some point, there's a rumor that Wells was going to buy us and we were like, "We should just pivot." And right then Silicon Valley Bank said, "No, no, don't pivot. We'll buy you." And so they bought us and the software we had worked, it could open bank accounts, could do everything the banking and service players do now basically. And SVB bought us. I expected to stay there three months maybe to get my folks settled and it was a very minor acquisition, but it was enough for the engineers to buy houses.

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So I'm like, "That's a good exit, so that's worth it and I'll stay there and make sure they're fine and then I'll go and do something else or go back to retirement." And I stayed there two years just because SVB people were very nice and that mattered to me. And every week or two I would learn something about banking operations that I did not know. And I was gobsmacked by how, and from my impression, how terrible it was. Like don't you realize you could just write a piece of software to automate these 20 people's jobs and they could do something interesting instead of shuffling proverbial paper around. And that was kind of the aha moment. I did that for two years. At some point, I'm like, "Okay, either I have to take over the bank or I have to leave because all I'm doing is playing whack-a-mole here with all these problems." So I left and Jim and I started Treasure Prime.

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Bill Cilluffo:

Did you start Treasury Prime right away or did you... based on what you learned at SVB or did you think about a bunch of different types of problems again?

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Chris Dean:

No, we actually figured out the model for Treasury Prime at SVB. We couldn't come up with a model for a long time. We were there maybe a year in, and I'm like, "The product market fit on the banking as a service stuff is so good that any dummy could launch something and you'd have amazing growth the next day." And I'm a startup guy, that's very unusual, it's very hard. I'm like, "We should do something here. We could do something interesting." And Jim's a very good strategic thinker and he's like, "Let's think through this and what is our actual goal?"

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And so we came up with our actual goal, which is very touchy-feely high concept, and then we tried to figure out how to accomplish that. And it took us, I think a good six or eight months to figure out the business model. And it's a business model we have now and we can get into that. But I'd tell you that took a long time. Jim and I didn't feel comfortable discussing this in the SVB office because it would just seem like not kosher, not nice. So we would always take these long walks outside the office for lunch. And I have walked many, many miles around San Francisco trying to figure this out.

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Bill Cilluffo:

And I noticed how many hills San Francisco has, so that must have burned a few calories.

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Chris Dean:

Yeah, it's like, "You want to go to Chinatown?" "Ugh, it's so far."

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Bill Cilluffo:

So with Standard Treasury, you kind of saw the power that if the banks could find a way to talk to fintechs more effectively, that would be useful. Obviously, you added to that given some of the knowledge you learned at SVB. I'm going to go back to something you started with, which is one of the key premises of Treasury Prime is this notion of multiple banks. Is that something that came out of this experience or is that something that you guys came to later?

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Chris Dean:

That was from the get-go, we looked at it and said, "Well, we could go to a couple banks, a decent size banks, once again like top 50, top a hundred and we probably could get one of them. We need two of them because we needed to be not beholden too much." We said, "We could pretend to be a bank," which is what most of the folks have thought of since then and during then. If you look at Synapse and Solvay and that's what they do, they pretend to be a bank. And we're like, "To do the right amounts of volume, you actually need a pretty big bank." And so I went and talked to them, went and talked to them all and everyone was like, "No, thank you." I talked to Goldman and Citi and talked to Capital One and folks like that, and no one was really that interested, which makes sense.

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But all the small banks were interested and our basic premise was, "Look, you actually need to be a bank to do this correctly. You need to be a bank to manage the risk properly. It's hard to outsource the compliance when the regulators show up." So we need a bank who's really on our side and so we need a big bank or maybe two big banks. And I couldn't do that and Jim or I, can't remember which, had the idea, "Well, it's the same as a couple big banks is a lot of smaller banks. So if we go to a lot of community banks, a billion dollars or 5 billion instead of a hundred billion, really you only need $25 billion banks to equal that one. So that seems possible." And when you start from that premise, I think everything else flows from that where you say like, "Oh, if I have that many then it's really a marketplace and it's really more about a matching problem between the fintechs and the banks than it is just about finding the fintechs."

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And it's more about building software so that the banks can run the compliance portion, the governance portion of the fintech properly and that will keep the fintech safe. And that's important because what you do not want under any circumstance is your best, biggest, largest customer to churn and leave the platform because they can get a better deal across the street or because they reach your growth limit or God forbid there's some compliance issue. We said, "We can do this if we have lots of banks," because we can always find them a home. We can split them up between bank A and bank B so that three or four different banks. And it all flowed from that, and that was the business model we had and then it was just a matter of how do we get there. Once we realized the destination, figuring out the path to get from where we are to there was actually pretty easy. It only took a couple of weeks probably.

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Bill Cilluffo:

So it sounds like you arrived on that model in part out of necessity. You started out trying to get one of the big dogs to play. What if one of them knocked on your door today? Do you think that that's an interesting model or given the path you've gone, have you learned, "Hey, this multiple marketplace, many different banks is actually the superior answer anyways?" Have you thought that through?

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Chris Dean:

Yeah, I think it's a superior answer anyway. I think if you look at even the big banks, they're only going to do 10 or 20 deals per year. I always just say 10, sometimes people do more, right? Even a big bank, but if you're only doing 10 or 20 a year and you're Goldman, well there better be pretty big 10 or 20 a year. So what does that leave all the smaller folks who only have... they're too small for that. Well, they still need to home. And the wonderful thing about the US banking system, there's lots of terrible things, but the wonderful thing is it is a highly competitive capitalist system.

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There are many, many commercial banks out there and they're all interested in doing business and you just need to find enough where they're willing and happy to work with your customers, their customers really. And that's easy to do because they're competitive. The smaller banks are competing with each other. The big banks eventually care. We have a couple big banks and the thing is they do the same amount of work the little banks do. Our biggest bank has maybe what four fintechs, but they're all gigantic. And our smallest bank has maybe 20 fintechs, but that's it. I mean it's not, one has 1000 and one has two. They're really much closer than that.

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Bill Cilluffo:

Yeah, that's pretty interesting. Now, if you're out talking to clients, I mean I know you have competitors, as you mentioned, most of those competitors to use your words, pretend to be a bank. What are the major advantages of the system that you've built and if any, are there disadvantages to the system you've built?

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Chris Dean:

Yeah, both of those are true. We compete against two really different entities, which is irritating, surprising. The main one we compete against is actually other banks, so the Green Dots of the world, Coastal Community Bank, people like that. These are good well-run banks, they know what they're doing. The common wisdom here is that you should have a direct relationship with the bank if you're a fintech, and I think I agree with that. However, we are also a direct contact with the bank because we're just a software company, we're not a bank. And if you have a relationship with the bank directly either with one of our banks or a regular bank, that's a big competing force. And those we compete with all the time, I don't think that's going to stop. Our strategy there is to try to get them on their platform, then whenever they win, we win.

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The other ones we talk about are just our tech firms. They're the banking as a service companies like the Synapses of the World. It's kind of the OG player here. And when we compete against them, what we say is, "Look, you're essentially outsourcing compliance to a third party that has no regulatory oversight. And eventually, the regulators are going to notice that and you're going to have a challenging day and you don't want that. Also, maybe you don't want to be just at one bank. Look at the chaos of Silicon Valley Bank this year. You probably want two or three banks that you can flip between, and that's a hard technology lift unless you're with Treasury Prime.

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And then we have a large network of banks and you can switch between them whenever you want. It's a commercial deal. You can have more than one bank if you want." Those are the arguments that, "Look, we're not a bank. You can have a direct relationship to bank, which gives you the economi incentives you want. We're safe because you have the economic incentives. And the one thing we have that other banks don't is we have lots of banks. You're not just making a deal with one, you can make a deal with four or five if you want, which our customers do." One of your portfolios and one of my customers has, I think five banks. It's a lot, right?

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Bill Cilluffo:

Well, let me jump into that. I mean, you referenced it a second ago, the crazy weekend that SVB had some issues and not just SVB, I know a number of others did as well. I mean, this was a situation that probably we all thought kind of went away in the era of the Great Depression, the old run on the bank, and clearly that did not go away. I mean, you had a complete front-row seat to all of this. I wonder if you can take us inside that weekend, what did it do for you guys? I know it was a crazy hectic weekend, but it was also a big catalyst for you. I wonder if you can just kind of take the listeners a bit inside the rope, so to speak, for your front-row seat there.

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Chris Dean:

Yeah, it was chaotic for sure, but chaos brings opportunity and so we were lucky enough to be in the right position there and have the right mindset. I worked at SVB for a long time, for a couple of years, and I knew something was happening just because a rumor mill and Silicon Valley is a small community and my office is a block from SVBs office. I just see people on the street and you could tell something was up. And I remember I was at some dinner with our friend Nigel and a lot of other people, and everyone was like, "Oh, what's going on?" I'm like, "Yeah, this is terrible." But I mean it's a well-run bank, they're fine. They did some stupid thing, but they're fine. The only thing could happen unless there's a rent on the bank that'll never occur.

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And then that happened. And as soon as that started I was like, "Okay, let's have to make sure we, Treasury Prime is safe." We had tens of millions of dollars at SVB that we were like, "Well, let's make sure we're not, move some of our capital of one of the backup banks we have because we have a lot." And our first impression was to move it to First Republic because that was our main backup bank, that was not a good backup bank. We ended up moving it to one of our client banks. I had to call the CEO and said, "Look, I'm about to deposit a significant number of capital in your bank." They're like, "Thank you, that's good. Please don't move it for a quarter or I'm going to look like an idiot." I'm like, "No problem."

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And so I did that. She was very nice about it and that happened for us, meanwhile, everyone else SVB is panicking and my phone's ringing off the hook because everyone's like, "What do we do? What do we do?" And I'm like, "First of all, make sure your payroll's covered. Just make sure of that." And they said, "But what about all our clients?" We had someone I know who runs a payroll company or did run a payroll company out of SVB and they're like, "We're doing another payroll on Monday. It's Thursday night. Can I be live by Monday?" And I'm like, "You'll have to work all weekend. I'm not guaranteeing I can find a bank because it's not my decision because I'm not a bank, I'm just a software company, but I'll call in all the favors I have and we'll make it work."

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And that happened half a dozen times more. And we worked all weekend all the next week and all the next weekend, and we got a lot of new business from that. And what happened first was that everyone moved over and then there was a sigh of relief and everything was fine, everyone's happy. Then there was a beat and maybe a month later everyone called me again and said, "Now I need another bank, not that I want to move banks, but I just want to back up because I didn't have one before and I felt that pain. So what do we got?" And we turned on a lot of people using more than one bank. And so that's a very common occurrence for anyone over even a modest scale now.

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Bill Cilluffo:

And I would imagine that prior to that weekend, you're probably fighting a little bit of an uphill battle, "Hey, come to this marketplace model because you don't want to take compliance risk and you want backups." But it was all kind of somewhat esoteric, even though your arguments make sense. I would imagine to clients this weekend really helped that hit home from a very practical way why this is so important. I mean, did you find a notable increase in the amount of your sales message resonating?

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Chris Dean:

A hundred percent. I mean, no question. I remember most of the embedded banking folks especially are not really sophisticated banking people. They don't really understand that banks are real businesses that have people running them, that good things can happen to and bad things can happen to. They think, "Oh, it's a bank, that's perfect and permanent, right?" I'm like, "No, they're businesses like any others. They're generally well run but not always and bad things can happen." And when SVB was a real example, that changed everyone's attitude. Before then we had, what three clients? Just three who used our multiple bank product because they were just big and they were like, "We want our deposit spread around." They had some cannabis stuff they were doing, and only one bank would do the cannabis stuff. But the yield of that bank was small, so they only wanted to limit out the cannabis stuff.

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And they spread it around and others were like, "We have a lot of deposits and we just want to make sure that we don't overwhelm the $2 billion community bank with deposits. So we want to spread that around." And those people are fine and happy and the product worked. But post SVB, it's completely different. Everyone, "I need a backup just for safety." And once they started using more than one bank, they realized, "Oh, actually this is really beneficial to me." We have our own private payment rails between our banks so we can move money around between our banks. And pretty soon all the fintechs start treating the banks as one large virtual bank and they move money between accounts and it just works for them. They basically have different costs and different yields and different kinds of customers they can onboard at different banks, but otherwise, to them it's the same. It's the commercial terms which are different, it's not the operational. And for them, that's a big deal. And once they've tried that, they'd never go back. They never want to go back.

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Bill Cilluffo:

You mentioned that some of your first adopters even before this weekend were the large companies that had sufficient number of deposits or complexity that it just makes sense. What's your advice to younger companies when they should start thinking about this? I mean, is it literally, "Hey, I just took in $200,000 of angel money." Or does somebody really need to get to a certain scale before they really start to think about this diversification?

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Chris Dean:

It's a scale issue. So I always say to people, and this is very self-serving, but I definitely believe it. Don't start there as your first move to have two banks, but it's going to be your second move. So make sure you can make that second move because if you're growing, you don't want to also have to switch banks. You want to add a bank, not switch banks, and you don't want to have to get your engineering staff to integrate with two separate banks because that's just a real big lift. Basically my whole job is to do that work and we're very busy doing that. So you as some random fintech, don't want to have to do direct integrations to multiple banks. It's too expensive. So don't start there but realize that's your next move. So start with us at just one bank, make a deal, get to a certain scale, prove your product market fit as you start to scale. That's a good reason, do another round, do a seed or get a few million dollars in the bank and then say now's the time to add that.

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Bill Cilluffo:

Let me switch gears a little bit less laser focused on Treasury Prime for a second, but more broadly. You've got a ton of experience in venture across a number of different stages, a number of different types. Amias Gerety, one of QED's partners, and our lead partner who works with Treasury Prime, asked me to ask you a question here today, so let me just put it in now.

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Chris Dean:

Oh shoot, it's terrible.

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Bill Cilluffo:

No, this one isn't too embarrassing. Maybe there's some more embarrassing stuff later. But if you're a younger operator and you've spent your whole career really in venture in the last 10 years or so, what is it about the venture ecosystem you might not understand or you may not get right? And I think some of the context for that is we had, I don't know, a 10 year, I think Frank likes to call it super cycle, where everything was working in venture. We've now seen about a year and a half where that's not the case. Maybe two years where that's not the case. But having seen a lot more than your typical new to the venture ecosystem, what are some things that they may get wrong or they may not understand if they've really only lived this over the last 10 years or so?

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Chris Dean:

Yeah, I mean I've been through multiple cycles of this now. I didn't found a company then I found it right after, but I was part of the dot com companies. That BabyCenter company I mentioned was a dot com. We got purchased by a larger company that went public and face planted, I went from being worth a lot of money on paper to worth no money on paper pretty quickly. And that was a good learning experience. And then the 2008 crash was also indicative because it was a time of constriction. And two things I really noticed then, one is that the companies that started right around after that ended usually were great companies and they were very strong and did well. And you can point to lots and lots of examples there. And I always wondered why was that. I thought it's because they had to get their basic problem right, because they couldn't just go and say, "I need a series A, series B, a series C, a series, whatever at some inflated price to patch up any problems."

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They actually had to have their unit economics work out well, their product market fit, their ability to serve their customers right. I mean, there's lots of capital things that happen, but really, you really need to focus on making sure that your unit economics are correct. Because if they're not correct, then no amount of capital is really going to fix that. And you can say like, "Well, don't worry, I'm going to make it up in volume." Generally that doesn't work. It's true that you can spend a lot of capital to grow quickly once you know what you're doing. So take the time to know what you're doing, that's the thing I usually see that's wrong. And the one thing I say to everyone, and no one really gets this, but taking venture money from someone, be careful who you take it from. Be careful of the person, be careful of the firm.

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I like Amias, you know the story. I don't know. Amias and Frank were my first choice for doing our series A. And I met Amias and he preempted the offer and I'm like, "Well just say yes." Even though the offer was lower than I wanted, but just say yes when the right person comes along because you're marrying them and the firm, you can't really divorce them. They're on your board forever until you have an exit and you want someone you can trust over the long, good and bad times. The capital matters less than the people and the support you're going to get along the way. You're going to face plant one day, everybody does. And you need to make sure that there's someone there who can dust you off and say, "You're doing fine. Keep going. Here's some advice." That's what you need. And I don't think most people in the boom years cared about that. They're just like, "Sure, crypto money, FTX seems fine. Let's just take it." I'm like, "Dude, you're not getting anything good from that, so just stop."

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Bill Cilluffo:

It is actually the single biggest surprising thing for me as I look back over the 2020, 2021 boom when rounds started to take four days long and companies started to get 10 different term sheets, why that was the result. So in some level, if you get 10 different term sheets, why not take the time to figure out which ones you like best? Whereas when the market got hot, it all collapsed to speed. That's sort of the one thing I never quite internalized why that was the equilibrium there. But anyways, that'll be a subject for many PhD research papers probably. But look, so I appreciate that advice. Let me switch a little bit to leadership and culture within Treasury Prime and just personally. So let me start with a bit of a personal question. How would you describe your biggest superpower? And conversely, is there one thing that if you could be instantly better at, what would you pick?

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Chris Dean:

Sure. I'm a very, very good engineer. Very, very, very good. I know I'm not the best engineer because I met the best engineers and they're better than me. So this is sort of an answer, sort of not an answer. It's like you've been a great baseball player your whole life and all of a sudden you get into the major leagues and you go, "Oh wait, there are other people who are just as good." And, "Oh, that guy over there, they're way better." Change sports if you want. "Oh, it turns out Michael Jordan's a better basketball player." Who knew, shocking. And I know people like that. My superpower is really being able to recognize talent. I think that I'm good at that. I'm good at recognizing when people are good at their jobs and that they are going to be good at it for a while and they're not too crazy. You can be a little bit crazy but not too crazy. Hiring is very important to me.

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I think that's kind of the one thing that makes startups work or not work. There's like four or five things, but that's one of the biggest ones and I'm good at that. And so I use that all the time. My staff generally hates me because I'm like, "Nope, this person's terrible kick." And they're like, "But everyone else loved him." "Well everyone else is wrong so you have to deal." And they'd say, "Is that fair?" It's like, "If you said that to me, I would also say that's fine." So I'm saying it to you so you have to say it's fine. The thing I could be better at, I am very impatient and a harsh judge of situations and I wish I had more patience in my life than I do. Sometimes if something doesn't work out, I'm like, "Nope, blow it up and move on." And I think that can be a good instinct, but generally I wish I had more patience in my life.

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Bill Cilluffo:

No, it makes sense. I mean not everything works out the first time, right? So sometimes things do take a little bit of time to marinate. Well, let me come back to this people topic and the hiring. I mean I know that you and your co-founder Jim, are incredibly committed to this. The comment that you made once, believe the best startups have the best people. That's probably something that 90% of startups would say. What is it about how you guys think about things that really differentiate you? And I know that you're a harsh critic at times, and so if you're self-identifying that this hiring great talent is truly the superpower, I'm quite confident that's true. How do you really think about distinguishing yourselves in that type of environment? When if I ask most people what the key to the business is, they would probably say something related to people.

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Chris Dean:

I mean the things are, you got to get product market fit, you got to make sure it's a market that you can serve and make money at. You got to make sure you have enough capital and you can execute properly. But really most of the executing properly is people. You need the right people to do that. And I think everyone says they want the great people and mostly they don't have the discipline to stick with it. At a startup, you're less than a hundred people. I would confidently say we should not fill that slot if we can't find the right person. We want a new engineer or a new sales leader, something like that. You wait until you can find the right person and you just wait and you keep looking and you look harder.

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But you do not hire someone because you have a desperate need for another customer success person. And this one's okay, but not great. You say no and you wait until you find the great one. And I think most people at the end of the day aren't willing to do that. When we grade people who we're interviewing, candidates, which we do grade them, the common thing would be to grade them like one to five or one to 10. And I don't do that. I say you get one to four because there's no in the middle. You can't do two and a half, you have to do, one is they're terrible, two is they're not great, three is they're okay, and four is they're great. One, two, three, four, that's all you get.

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And I can tell you we don't hire people unless there's mostly fours. And that means we mostly don't hire people and it just takes a long time and that's what you got to do. And I think most people are not willing to do that. They feel the pressure of moving faster. They want to hire someone and they do that. I can tell you that is a short-term win and a long-term lose. It's like eating that cake. You want that cake so you eat the whole cake and it tastes great that day. Next day you're going to feel terrible, so maybe don't do that. You can hire this person, it'll be fine for three months or six months. So then it'll be terrible, so don't do that.

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Bill Cilluffo:

Yeah, I mean what you described I think is such a common thing that people struggle with, right? People that I know are unbelievably committed to really hiring the best talent. Yet you just see, make compromises because, "Hey, I've got to get this thing done. And if I don't get this thing done and I need this person." And so what you're describing I think is one of the hardest things to continue to do as time goes along. So kudos to you guys for really living up to that.

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Chris Dean:

The flip side's true though. I mean you need to hire people who are good at hiring people. One of our early hires was a completely overqualified head of people. She's our chief people officer, I think her title is, she's fantastic. I talked to her for 10 minutes and I was like, "Well, I don't care what else I do this week. We got to close her." I had a Amias call her, I had everybody talk to her until she said yes. And that was one of the best decisions we ever made at Treasury Prime. The reason that we're a good company is because we have great people. The reason we have great people is because she's there making sure that we only hire the best people and the people we have, we train them. And that has played dividends over and over again.

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Bill Cilluffo:

Yeah, the next part of people, I mean we talked about hiring, but creating a great environment, creating a great culture. If you don't have that, then the people aren't going to stay and they're not going to be productive.

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Chris Dean:

That's true.

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Bill Cilluffo:

What did you learn about building a strong culture from the various different startups that you've done? And I know you've arrived at a strong one within Treasury Prime. How did that kind of serial entrepreneur nature help develop your philosophy on creating a great culture?

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Chris Dean:

Yeah, I had an office mate a long time ago who was a Navy SEAL, the commando guys, and he talked about this decent amount and he said this was true across most of the military elite things. It says that what you think you want is someone who is the best soldier that is... or the best sailor I guess called it. That you want someone who can run the mile fast, can shoot the weapon, can sneak around, can do all the things that you do. He says that's true, but that's not the most important thing. The most important thing is they can work with the team and the team trusts them. It's about the trust. So if you want to make sure you're building the right culture, you have to have great people. And on a scale from best to worst, do you want the best performers?

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You absolutely do, but actually more important, that is trust. So you need to find people who actually can work together, who can trust and respect each other. And if you can do that and provide the right model from the leadership side, the culture that you want will create itself in many ways. But it starts from finding the right people who are going to gel together. And that's what we do. We're careful about the people we hire, we make sure that we have a certain set of principles. Here's a fun fact for you, Bill, that you know what our first principle is? It's about focusing on the team and that's the most important thing. And it's the team, the team, the team because Jim went to University of Michigan and apparently that is something that football people from Michigan say, which I don't know.

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Bill Cilluffo:

He is definitely a good man quoting one, Bo Schembechler.

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Chris Dean:

That's right. The team. The team, the team. And we say it all the time. And that helps create the culture of cooperation and dependency. The team works hard because they want to support the rest of the team. They don't work hard because of some other reason. They want to support each other. They all believe in the mission for sure, but it's about supporting each other and that's the culture we want. We want that culture around the team. Then we have other principles like innovation and trustworthiness and things like that, but really it's about helping each other. Once a quarter we get together virtually usually, once a year we get together physically, so we fly everyone out somewhere because we're all remote. We have weekly all hands Zoom staff meetings where everyone talks and ask questions, hopefully ask questions. And I see my executive team, my direct reports once a month in person because they're all remote too. And that time we spend together matters and that's how we develop the culture.

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Bill Cilluffo:

Yeah, no, that's wonderful. I've got to ask one shockingly specific question here because I think you guys have a program that I've not seen anywhere else. That you have a really interesting benefit, which is, you give everyone on your team financial wellness, education and unlimited financial advisor sessions. This is interesting. This is something, we have a couple portfolio companies that are trying to make headway on financial education and financial benefits, but it seems like you have a commitment that goes way beyond what most companies do. Can you just talk a little bit about what led you to go down that route for your employees and why you're so passionate about it?

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Chris Dean:

I think I have too much education, probably like you too. Well, I mean you and I have different degrees, I studied physics and never once did anyone tell, "This is how you should manage your financial life. Let's take a class in that." Maybe the economics folks did, but probably not. Probably they're talking about the big picture things. And I made dumb mistakes in my life and at some point I realized I didn't know what I was doing, so I better learn. And it's some specific way we want everyone in our company to be supported, and that's a good benefit. There's another more Machiavellian view of this, which is why it's actually a good business idea. It's that our problem we have is very complicated.

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Learning about how banks work and learning about how fintechs work, there's not a lot of overlap between those two, frankly. And so we need people who are going to be... we train and are in it for the long term that have a long tenure, so it makes sense for us to invest in their lives. I don't want them staying around for six months. I want them staying around for five years or longer. And if you're going to do that in the startup world, you really have to invest in people. And we have to show people that, "Look, we are here for your whole journey and part of your journey is your financial one, and we're going to teach you how to do that because you don't know." It didn't start out unlimited. It became that when it was obvious no one knew what they were doing. They're all as bad as I was. No one knew what they were doing.

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Bill Cilluffo:

No, I've been involved in a couple of nonprofits over the years, really trying to teach more personal finance to high school kids and it's stunning how much of an uphill battle any of those are. And you could take that to college. I probably did have a little bit of an advantage taking economics, but you're right, most of it is theoretical and personal finance is only a very small piece of that. So's huge kudos to you and I totally get, there's both the kind of, I don't know, humanitarian side of offering it because it's the right side to do it. But I think you're also making a great connection to why it's a good flat out business decision to make sure people are stable. Especially choosing to join a startup, which probably means they're not maximizing their short-term earnings and instead for a little bit riskier career that could pay off down the line. So that makes a lot of sense.

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Chris Dean:

A good portion of our staff could go work at Google or wherever tomorrow. That's a good financial life. And they're choosing to do this because they believe in the team and the mission and it's fun and all that stuff. And I want to say, "Good, I appreciate that and we're going to make a lot of money together. That's fine, but you're going to need to wait a little while before that money comes. In the meantime, what can we do to support you that is more tractable than paying you a Google salary?"

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Bill Cilluffo:

Definitely. Well, Chris, I really appreciate you spending the time with us here today. I mean, it's a fascinating story. I mean, Treasury Prime is a company, it's funny, Amias made the case when we invested and certainly talked up the benefit of this bank network in comparison to what other companies did. And it was always made sense on paper, a little bit of a theoretical advantage, and then all of a sudden in one weekend we're like, "Oh yeah, that's one reason why it's right." And it's just becomes so blindingly obvious. And we're thrilled to be partnered with you on this journey.

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Chris Dean:

Me too. Amias is the best.

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Bill Cilluffo:

So Chris, I'd love to end with just one question. I always ask it of everybody. I've already asked you a little bit longer version of this question early on. But anyways, as we finish up, I mean hopefully we have a bunch of young prospective entrepreneurs listening to this podcast over time. Is there one tip, if you could just share one tip that a new entrepreneur could take away, what would you suggest?

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Chris Dean:

Just one, be committed. You're not going to do it in a weekend. You got to make sure you're here for multiple years before you decide that it's not for you. You have to commit. If y'all do it as a side hustle, that won't work.

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Bill Cilluffo:

So, so true. I think that's wonderful advice. Well, look, thanks for joining, Chris. I really appreciate the time and to all you listeners, until next time and take care and thanks for listening. This has been the Fintech Thought Leaders podcast, your window into the world of venture capital and financial services with today's digital disruptors. QED is proud to provide the best fintech advice you can get. To learn more or to read the full show notes from today's episode, check out qedinvestors.com and be sure to also follow QED on Twitter and LinkedIn @QEDInvestors. Thanks for listening.