How I Invest with David Weisburd - E92: How FT Partners Beats Bulge Bracket Banks (Steve Mclaughlin)

Episode Date: September 5, 2024

Steve McLaughlin, CEO at Financial Technology Partners sits down with David Weisburd to discuss the hidden values and success of top fintech companies, insider perspective on the work-life balance myth, and the powerful face-to-face strategies that elite companies swear by.

They ultimately got $150 million valuation of the company. We came in, did all of our work, we found three buyers that they never contacted and got them a $550 million valuation, right? We of course had a big fee trigger above $150 or $200 million. So we made three times the amount of money that we would have made if we gotten a regular outcome. So we started getting addicted to this thing where if you dedicate 510x the level of effort and you've got 3x the level of expertise, you're going to wind up getting a better outcome for the client we worked on Revolut which is kind of a company that was getting a lot of bad press at the time and you know the prior evaluation that was achieved by JP

Morgan was five billion dollars right so we came in a year later and we're like the guys are hey can you get us 10 or 12 or whatever and so we came in and we got 33 billion for the company we sort of uncorked a lot of things about the company that the other bankers didn't. We built a 20-year model. We got under an actual belief that this could be a trillion-dollar company and it could be one of the biggest winners in fintech. Three years later, here we are today. They're doing a deal at $45 billion. I asked you when we last chatted whether PayPal was sold at the right price. And you said you would have sold it for $5 or $10 billion, not the $1 billion that it was sold for. Tell me about how you would have gone about selling PayPal.

Yeah. You look at PayPal, and again, the joke is like, you got the PayPal mafia, all these people that were remembered from the great things they did to PayPal, Elon Musk, and so on and so forth, right? Steve, I've been really looking forward to talking. For now, close to a decade, I've been really looking forward to talking for now close to a decade. I've been hearing about you and thank you to Avi Dorfman for the introduction. Welcome to the 10X Capital Podcast. Great to be here. Thanks for having me, David. It's my pleasure. So you run really the number one fintech banking platform in the world. How

did you go about starting FT Partners? I guess the background is I was at Goldman Sachs for a bunch of years from 95 to 02. And their fig group eventually ran or co-ran the FinTech department there and then moved out to the West Coast. And so in 02, at the ripe age of 32, I bolted and started FT Partners, kind of thinking and believing that the world of FinTech would actually be big. But that was not something people thought that much of in 02. And that was 22 years ago. So I've been doing it for quite a while. When you started at 32, were you running away from the corporate banking route or were you going towards building something new? I think it was a combination.

You get your training grounds at the bigger firms a lot of times and you just kind of want to do something smaller, entrepreneurial, where you can see the impact of what you're doing more directly. When you're part of such a big, giant machine like a Goldman Sachs, it's hard to really see the impact of what you're doing more directly. You know, when you're part of such a big, giant machine like a Goldman Sachs, it's hard to really see the impact of what you're doing sometimes. And I think, look, from a very young age, I was doing entrepreneurial things. I didn't even know it at the time, but I was, I painted rocks, put people's addresses on them

and sold them to the old lady and made five bucks. And I did my time at GE and then Goldman Sachs. And I think I'd had enough of the big firms and wanted to go do it on my own. So yeah, it's never looked back. It's one thing leaving Goldman Sachs to go to JP Morgan or Morgan Stanley but you left Goldman Sachs to start a new firm did people think you were crazy they literally thought I was crazy like literally they're like what are you doing like it makes literally no sense and not to to anyone's horn on my end but like no one's ever really done that

before you know like it was like unheard of you, like you'd have to be like a very special. Yeah. I mean, maybe if you're like running a gigantic apartment and you're like running and you're 55, you know, that's when like Perella Wasserstein from Perella Wasserstein and the big banks who went out and started his own thing. And Ken Mollis left, you know, UBS when he was like 55 or, you know, whatever. And they've already got their big career going. So this was a way more humble beginnings.

I think I remember incorporating the business for $99 using an online service called companycorporation.com. And I went to what was then Kinko's to get my business cards. And I worked out of my tiny kitchen table in my two-bedroom apartment in San Francisco for the better part of a year with interns in the early days. It wasn't until a couple of years then we knew it was going to really work. You made a key decision at inception to focus exclusively on FinTech. Walk me through that decision-making to focus on such a niche at the time. I mean, not only was it a niche, it was a niche no one seemed to care that much about, and the market was completely decimated. It was right after the dot-bomb, right after 9-11.

It was an environment where there's no deals at all, let alone in tech or FinTech. So it was quite a contrarian thing to do. And I'd like to say it was like a genius decision or whatever, but it was kind of what I knew. And I think life is a little bit of serendipity. I mean, had I been in the energy and utility group at Goldman, maybe I wouldn't have done it, or maybe I've done it and failed. In the dot-com world, it became famous later. And there was PayPal and a few other ones, right? But largely, they all failed. So actually, seeing them all fail and say, look, and it's a little bit of the story today,

20 years later, where I've seen a lot of fintech companies fail, but the TAMs, the market sizes that they're disrupting are still just as big. The problems are just as big. They just didn't have the right solution. I make a simple analogy to like the old web ban back in 99. It completely blew up,

even though Goldman Sachs put a hundred million bucks instead of everyone else. It's like, because their idea was let's deliver groceries to your house. But in order to do that, let's get refrigerated trucks, giant warehouses, and all this kind of stuff. And it just didn't work economically. Some things just take time to get the model right. I think fintech is one of the things where the TAMs and the broken parts of the world are still broken. It's just someone needs to come along and hack away at the one thing that's going to make that work. So it was at a moment in time where I saw all these failures, but I realized the problem was still there. So I knew the companies had to be created.

Sometimes having a big pain isn't enough. You need to have the right solution with the right market and the right time in the market. Yep. You regularly go into pitches. It's Morgan Stanley, Goldman Sachs, NFT partners. How do you get in these rooms and what is your differentiation against the larger banks? I could go on for a long time on this one. The number one, I mean, we're entrepreneurial people working with entrepreneurs. So we generally work with private companies that are on a growth journey, right? So the same ones that Sequoia and Dreesen or, you know,

KOTU or whoever are going after, they're the ones we're going after. You know, it's not the older school, more boring public companies that are growing 6% and trading at eight times, you know, even Don. And they're fine too, but we tend to go with the smaller. So they like the entrepreneurial side of what we do and it matches up with what they do. I think that's one sliver of it. I think the biggest liver is, look, when I was at Goldman, I was shocked at the level of quasi-mediocrity that I saw across the deals, right? And everything was based upon high-level analysis. Everything was based on, let's get the deal done. The depth of understanding that the bankers had of the client itself were pretty thin.

And so when I started FT Partners, the one thing I looked at actually was Goldman's IPO. When Goldman's IPO was going on, they had like 50 people working on it, right? And they were going super deep on their own IPO. And I was like, oh, so that's what client service looks like. I'd never seen it before, you know, but when I saw them doing it on their own company, I was pretty blown away. And so I said, there's a next level of banking that can be done. And I think it can only be done in a niche by niche basis by people that really understand the niche and really commit themselves permanently to that niche. So you can accumulate lots of knowledge. Some of our first assignments, we didn't have other assignments to work on, right? So we were able to go super deep with

the clients. It was something I always wanted to do, never had the time to do at Goldman. So we would learn the tech stack. We'd learn the customer service center. We'd learn their market. We'd study their competitors. We'd look at the pricing trends. We'd look at the valuation through a whole different lens that other people would tend to look, right? And we ended up getting hired by a company called Lank Systems in 03 and ended up selling it in 04. And this is a company that had previously been banked by another very large bank, remained nameless. And they ultimately got like $150 million valuation of the company. We came in, did all of our work. We found three buyers that they never contacted and got them a $5 550 million valuation, right? We, of course, had a big fee trigger above 150 or 200

million. So we made three times the amount of money that we would have made if we gotten a regular outcome. So we started getting addicted to this thing where if you dedicate 510x the level of effort and you've got 3x the level of expertise, you're going to wind up getting a better outcome for the client. You say you're only as good as your last deals. A number of years ago, we worked on Revolut, which is kind of a company that was getting a lot of bad press at the time. And the prior valuation that was achieved by JP Morgan was $5 billion, right? So we came in a year later, and we're like,

the guy's like, hey, can you get us 10 or 12 or whatever? And so we came in and we got $33 billion for the company. And we sort of uncorked a lot of things about the company that the other bankers didn't. You know, we built a 20-year model. We got under an actual belief that this could be a trillion dollar company and it could be one of the biggest winners in fintech.

You go three years later, here we are today, they're doing a deal at 45 billion. I personally think it's worth double that. I think it'll be bigger than Stripe and many other companies. So we get in and we see these companies and we help them get the value they deserve by going deep, partnering with them and helping them achieve great things. So it's just a level of depth and actually caring a lot about the outcome and caring about the founders, caring about the founders, employees and their shareholders and trying to get people the best outcome. It isn't always about getting the best valuation at all. I mean, a lot of it's

what's the right fit, what's the right culture, and there's many more important things in valuation. And we want to make sure investors get great returns too. So we're not going to represent a company and pop up the value if it's not something we feel really strong about on the positive side. So for me, it's good to create an ecosystem where everybody can win, but the company shouldn't be the losers in the equation either. You mentioned that you were able to get a $550 million valuation for $150 million company, and you got triple the fees. Presumably the large banks also like to make fees. What keeps them from being able to offer the same level of service and get the same level of economics? What keeps the army from being like the Navy SEALs, right? You

know, you can't train everyone. You can't have that elite force in that wide of a spectrum, but we're more super proactive, very founder friendly, very much an advocate for the seller. We're not trying to get fees from the big buy side of the world or the big buyers. We've never once been hired by Visa, MasterCard, Discover, Capital One. We're always on the side of the sellers. We can be very loyal and unconflicted in that regard. We're not trying to win business from T. Rowe Price or Fidelity, where Goldman's trying to get them

to buy every single IPO on the street and getting commissions for them on trading and all sorts of other stuff. So the strictly independent advice matters. And when I was at Goldman, I was trying to do what I'm talking about when we're doing NFT partners. I was like slapped on the wrist.

You know, Steve, you're being too much of a zealot. You're trying too hard. You're working too hard. You need to spread yourself thinner. You need to work on bigger deals. Why are you spending so much time trying to get such a great outcome for this particular company? And these things were said to me. It was like, just get the effing deal done was, you know, the mantra that I heard as opposed to get it done right.

And we're sort of measure twice, cut once, get it done right. And we become, you know, as well known for telling clients not to do deals than to do them because we don't feel like it's a fair deal. We like having negotiating leverage. We like having clients that don't have to do deals. If we have a client that absolutely has to do a deal, then we'll find a way to get the deal done well. But if they don't have to do a deal, then you've got the ultimate leverage. That's why companies that are profitable, that are growing, they can always say no. And a lot of times the bankers put pressure on you to get a deal done.

A lot of bankers are compensated annually based upon how much revenue they bring in that year. So it's a huge conflict in the compensation model where they're very much motivated a lot of times to bring a deal in sooner rather than later, close the deal sooner rather than later, even if the fee's lower. So we're not motivated that way. We're more, use the term out of Goldman's playbook, long-term greedy, but you have to really be long-term thinkers. And we've got clients we want in 2008 or 2009 that are still clients today where we've done 10 transactions. Coupon DeWay could have sold 10 years ago

for $100 million or now worth billions of dollars. So, you know, they're running around the world saying, hey, the company's called Avid Exchange. I'm talking about what's written up in the Wall Street Journal article that came out on us where the CEO said, look, you know, Steve's the one that told us and FT's the one that told us not to sell. Steve was always a zealot for keeping the company private, keeping the company going, take it public someday and become a $10 billion company down the road.

So telling someone and advising people not to do certain deals, you know, can add a lot of value and you get paid on it later. So we're still making fees off of that exchange 10, 12 years later. And I get why you as the founder at FT Partners would be incentivized to push business down the road to do the right decision to company growth. How do you incentivize your employees to have the same way of operating? Easy. I mean, I think the one measure we have, and I talk about this all the time at the firm is client happiness. And that's a basic premise, right? But we literally have a thing where every single person on every single team can click a button once a week about what their perception is, the client happiness. If it's not like 10 out of 10, you know, we're doing something about it. Right. And so that's how you measure people in a weird way.

Right. The revenues will come. Right. And when we've made big profits, we've paid big bonuses. Right. And so people have to have a trust in the founder of the company, the person that's actually deciding on all the bonuses, that if it's not short-term thinking that's being a reward, it's long-term thinking that's being rewarded. But you got to reward people for those activities, right? So when we do have a big outcome in five years from now, I got to reward the people that were there along the way, right? So that's something that we've done over and over again. So most of our senior people have been here 10, some 20 years because of the way we think. But a lot of times, yeah, we'll work on deals.

And sometimes people say, why are you guys working on a $25 million capital raise for this young AI company? It's like, well, we think it's going to be a $5 or $10 billion deal in the future, right? And sometimes you'll have a junior banker, maybe a director, younger MD that will really bond with that MD and kind of work with them over 10 years. And those companies are super loyal down the road. So for us, it's been important to get the culture where everyone's addicted to the long-term thinking. It's very hard though, think about it. I make this analogy sometimes, a lot of companies are doing licensed software where they get all the fees up front, and then they were trying to transition to more subscription where it's like

lower fees, lower subscription revenues, but more recurring. Right. And it's a little bit like the banking thing where if I'm a bank where I've always paid for short term profits, I can never really shift to long term profits. And then there's a period of time where I have no profits. Right. Versus if we've been long term since 2003, then the decisions we made to be long term back in 2003 were paying off in 2010 and 11 and 12 and 13 and 14. So we've now got a whole ecosystem going on where half our revenues that are coming in this year from deals we did and started relationships five or six or seven years ago. We have one of our biggest fees of all time. It's just coming in right now in a company we're hopefully signing a deal on in the next week or two where it's like pretty phenomenal outcome client. But like we could have sold that company for $100 million three years ago.

Now it's going to be, you know, hundreds of millions of dollars a couple of years later. And we're going to make a lot of money. And you have to be doing that for a long time for everyone to kind of get in the culture and have it pay off. So that's the long-term thinking is super critical. You mentioned when we were talking last

that it took you 10 years to really start compounding returns for your business, another 12 years of harvesting. Tell me about that. Yeah, well, the first 10 years, you know, we were very small, right? And it was kind of where we were figuring out how to build a business. We're getting one or two deals done a year was great in the early, early days. And we wanted to keep the quality very high. So we stayed small. And what I realized over the course of time was... And really, I was the only real MD for the first

7, 8, 9, 10 years. And we had a lot of junior people and it was mostly kind of a cottage kind of a thing. And then I started seeing the results getting better and better. The depth that we were going was getting deeper as I was able to hire more people and the results were getting better in and out of the financial crisis, global financial crisis. I started seeing that our phone was starting to ring off the hook. And despite we never made any outbound calls about winning business, people would hear about the work that we were doing. And we were kind of going from sector to sector to sector to sector with record breaking transactions and happy clients referring us all over the place. And that also jumped over into London, UK and parts of Western Europe. And so it was really kind of in that 2012 to 2022 decade,

where the second decade, if you will, where we really started institutionalizing things. We built out our HR function. We built our finance and accounting. We built the back office. We used to use Salesforce. Now we've built our own proprietary deal flow platform, which we're now applying AI to and other things

with our own developers. We decided to hire a team of data scientists to do a deeper level of work on the data analytics. We decided to build out a mini McKinsey internally for strategy and long-term thinking and TAM development and market mapping and things like that. And we have a million plus or minus people that are reading our work every month. And that doesn't count who they forward it to because it's all free at FTPartners.com or Twitter at FTPartners. But we build out all these other functions. Now we have operating executives. We have the founder of Merchandise Solutions helping us out. We have

the founder of OpEdge who ran a big part of Northern Trust as an operating executive. We've now built out five or six different functions of the company that don't even exist at other big banks. I've kind of realized it can be impossible to do this at like a Goldman or Lazard scale, even Lazards and Mollisuses. It's really just a bunch of silos of individual bankers doing their own thing. And God bless them, it works just fine until person X retires. We used to compete with Evercore and the stock exchange technology business, but when Jane Wheeler retired from there, they pretty much vanished off the face of the planet in that big sliver of fintech. We built out the institutional side of our business. We built out the verticals, we built out the geography.

So we're now covering 10 distinct verticals within fintech. That was really the second decade building all that stuff out and the business flowed in and we were able to turn down a lot of business and really take on the things that we thought made sense that we can do a high quality job on and it's still happening to this day. Congratulations, 10X Capital podcast listeners.

We have officially cracked the top 10 rankings in the United States for investing. Please help this podcast continue climbing up in the rankings by clicking the follow button above. This helps our podcast rank higher, which brings more revenue to the show and helps us bring in the very highest quality guests and to produce the very highest quality content. Thank you for your support. There are a lot of entrepreneurs struggle from that transition of this rockstar salesperson to building an organization. So how did you scale your organization

starting from year six, seven onwards? And tell me about preserving the culture and how were you able to scale FT Partners and not lose your edge in the marketplace? It was this mindset of we're not going to grow at all unless we can get better, right? I would way rather be a 50-person firm offering amazing line service and making good money than a 250-person firm that's mediocre. And so it was all those groups that we built out. So when I was younger and

kind of lording over every single element of every single deal in the early days, this is kind of in the 2003, 4, 5, 6, I was doing a lot of things that I realized I couldn't personally do at scale. And it was actually hard to get even individual bankers to do at scale. So that's why we built out these centers of excellence. Like for example, we built up a whole financial forensics and data science and due diligence team

that is typically seen as being used by the elite private equity firms to do diligence when they are buying multi-billion dollar companies. So we ended up hiring the very people that were working for them and with them on our side of the equation. What we used to do is have junior analysts and associates from Harvard and Stanford that really crank out the best models that they could. And they were infinitely better than what the bigger banks were doing. But then we said, you know what? The buyers are getting more sophisticated, the investors and buyers, and saying, I want the whole data cube.

And they want like thousands and thousands of lines of data or millions of lines of data and thousands of rows and columns and cube. And so ultimately that's impossible for a junior person that isn't an expert in data manipulation. And Excel just would blow up and break down. So, you know, we ended up building

a whole entire group out of this using third-party, sophisticated third-party data analytics platforms that can visualize things and use machine learning and AI to kind of get insights out of the data that really tell the true story of a business, right? And then we can even help companies change the way they run their business, change the way they run their marketing. We do this every day. So we're actually operationally helping companies change how they run their business, how they do marketing, how they do sales, how they measure their salespeople, because we're seeing insights into the data.

I met with a company the other day, and we were analyzing their data. And we actually, I'm up in Napa right now. We have this company up in Napa. I'll give them a little plug. It's a company called Levonta, who is growing like a weed. And yeah, we were showing them their data. And every chart, they're like, holy shit, that's amazing. We knew we were crushing it, but we didn't know

we were crushing it that much. And then we show them another chart about retention, another chart about net revenue retention, another chart about churn, another chart about cross-sell. And even these guys who we love, they were getting a lot of value out of the data that we were showing them for their own business that they're running every day. That kind of stuff, we couldn't even do

when we were trying to be artisanal, if you know what I mean. But at scale, you can do that if you have a center of excellence, right? You amortize that across all of them. That's right. We don't charge anybody for that. So people often say, hey, you guys, we do probably charge a premium price and get premium outcomes. But because you have very expensive people doing a lot of hard work, that adds up to getting greater insights on a business. We do that and no one else does that, right? There's not a single investment bank on the planet that's going to sit here and talk

about their data science team that works for clients. It doesn't exist. How much of your unlocking of a company's value has to do with framing the story and painting a bigger picture? And how much of it is, it seems like you have a lot of granularity when it comes to numbers and not painting a bigger picture per se, but painting a much more accurate picture of the future. I mean, you're hitting on something that's crucial. You heard me talk about we have a mini McKinsey, right? That's quite visionary in terms of telling stories and things like that. And I'll give away a little bit of our, it's not secret sauce, but the way that we think about the world is we have a pitch page that we describe in a very

simple concept of investors look at a business and should look at a business with a microscope, binoculars, and a telescope. But you need different lenses and different tools and different types of people that are going to engineer the microscopic look, the binocular look, or the telescopic look at a business. What a lot of people do is they try to, they actually don't do a good job of any of those things, quite frankly. They're giving, oh, my LTV to CAC is X. Okay, but what does that mean? How do you calculate L and lifetime value? There's 87 ways of doing that. How do you do CAC? Well, what about by channel? What about by cohort? What about by region? What about by product? How does the funnel work? How much of that's organic? You can drive an investor crazy by making them ask a thousand questions to get essentially the truth about a company, right?

What's the truth about the economics, the unit economics? How's it working today? And then you look out the binoculars, which is like, you know, call it like the two, three, four, five year view. And the telescope is that five to 10 to 20 year view, depending on the business and what timeframes make the most sense. So we try to do all that work and bring that all into crystal clear focus. You know, you want to see what we are today. Here's the micro feature, the micro slide or whatever it is. And you can see the DNA of the company, right? That's fine. But that's actually super helpful in trying to see what's in the binoculars right out in the future, because you're kind of extrapolating a little bit. And then if the company's projecting something that is kind of off the obviously extrapolatable information, then they better be good at

explaining it. Right. And then, of course, the vision, it's a little bit like impressionism, you know, like, you know, the Monet of the world where it's like, I can kind of see what's going on there. I don't need to know with ultra exacto knife precision what that looks like. But oh, okay, take a Revolut or a Cloudwalk where they start in a niche product or a niche set of geographies. Oh, but they're really going to 90 geographies with 20 products. And someone has to tell that story, right? And that's kind of what we help people do. And we did the Revolut deal and the $33 billion valuation, which by the way, has now proved to be cheap, not expensive, like everyone thought. Yeah, we built out the 20-year

model, all the different lines of business from personal lines to kind of consumer banking, to business banking, to payments, to payroll, pet insurance, you know, throughout all these different geographies that we're able to sort of say, here's why we think this company could be a trillion dollar company. These guys could really get to be 50 billion in EBITDA, right? And at that time, you know, that's a trillion dollar company. And so people got excited about it and wrote a billion 250 check when they were only really looking to raise 250 million. So when you raise a billion 250 at 33 billion versus a 250 at 10, that's an extra billion, and you're only taking 3% dilution. So that's going to change the whole entire trajectory of the business.

Now they've got columns of money to invest in advertising and product that they wouldn't have had otherwise and a lot lower dilution. That we were helping were really detailed on the microscopic side, and they had never built a 20-year product vision or that in their head. I mean, these guys know it inherently, right? But investors don't. And that you have to understand, like entrepreneurs think investors can very quickly pick up on everything that they're thinking over their five years of history of the company, but they can't. You know, I always joke around and say, there's no magic, you know, Star Trek Vulcan thing where I can put my hand on your head and my hand on the other guy's head and just transfer all that information. Like it's got to be done carefully. And we think in writing, so we tend to write it all down and give people the data. And a lot of times people think what

we do is like some sort of like people joke around, like you guys have some magic pills or whatever, and you guys are creating magic. And we hear that all the time, but it's like, man, if people knew how much hard work it was, nobody would want to do it. The way that I look at it is to use an analogy, a company is like a plot of land on the beach and there's gold underneath. And you could either do the hard work and use the shovels to dig it up and show it to the investors or a very smart investor will come in, do a bunch of work and figure out that that gold is there. And that's kind of where the alpha goes. It either goes to the investor, to the company or somewhere in between. A lot of great investors, great bankers are good at uncovering that and presenting it so that people don't have to be geniuses to discover that.

And look, I mean, you're hitting on something that reminds me of this myth out there that we hear a lot of CEOs will say, well, hey, why do we need a banker? I can do it myself. Or my VCs tell me that if I have a banker, it means I can't raise money. Is that true at any stage? Do you see that? Like, certainly there's a negative signal series A or C, or tell me about that. Or is it different from fintech? I think it's a longer discussion, you do a whole podcast on this, right? And I think it'd be something that should be kind of exposed a little bit where there's some truth to everything, right? But there's also a lot of, I think, falseness to those kind of statements. And I'll give you my little speech on this.

I'd say there's a lot of companies out there that really do have a lot of hard time raising money and they talk to 50, 75 investors, they can't raise it. And then they need help. They need to find a banker that needs to go help them raise the capital. And those are not our clients, but there's a lot out there like that. And so if the banker takes on that business

and then goes and shops at the Sequoia and Kleiner and A16Z and TCV and whoever else, there's a pattern recognition there that they're seeing a lot of deals from bankers that aren't that good, right? So there's that element of it, right? And that could be true. But it doesn't mean that when I show up

on your doorstep with Revolut, that Revolut isn't a super high quality company because they have a banker, right? Yeah, Revolut's the best company in the world and they chose who? FT Partners, right? You look at OpenAI's founder, Sam Altman. He has another company called WorldCoin. Well, Sam Altman, the person involved in hiring us on WorldCoin, right? We raise money for WorldCoin. It's not

like Sam Altman is a guy that needs help raising capital, but sometimes having someone there that helps you is not a bad thing, right? And one of our clients in Brazil, CloudWalk. I mean, everyone wants their best in that company, but we've been their banker for years. They keep us around. We've done a great job for those guys and they're growing like a weed. So I think there's some of the most elite companies have bankers and that's a great thing as well. But I think a lot of investors are scared of bankers on good companies. And so they try to scare the CEO by saying, you don't want to be like one of these bad companies with these dumb bankers. You should just do it on your own. Well, what CEO who was maybe never a banker, never raised any money, spends all their time running their company is just so perfectly naturally acclimated to

knowing every VC in the Valley and knowing exactly how to value their company and probably zero, honestly, right? Everyone could use a banker, whether you're an okay company, a good company, a great company, or an amazing company. We've proven it. FT Partners has such a good filtering and screening that if you've got FT Partners as your banker, then you must be a good company. So it's the opposite signal, right? And that's kind of what we try to create. That's why we have a huge filter and we're actually turning down lots of deals. I asked you when we last chatted whether PayPal was sold at the right price.

And you said you would have sold it for $5 or $10 billion, not the $1 billion that it was sold for. Tell me about how you would have gone about selling PayPal. Yeah. You kind of look at the future and say, well, what should have happened in the past, right? So if you look at PayPal, and PayPal's been kind of up and down, all that kind of stuff.

But at the end of the day, let's just say it was sold for a billion. It was generally worth $100 billion long-term, even though it was at one point worth $200 billion, or maybe it's worth $75 now, whatever. But it kind of went from $1 to $100 billion in a pretty 20-year period of time, right? And you take another company, which was massively undersold, which was MasterCard, right? People forget at the IPO of MasterCard, you can Google it right now, folks,

what was MasterCard's IPO value? It was like $5, $6, or $7 billion, less than 20 years later. So that was in 2007. In 2024, their market cap's like five to $600 billion. So why was it only worth $5 billion then when it's processing half the transactions on the planet between MassCard and Visa? Well, it was a private company. It was not well understood. It was run as an association of banks. People didn't really know exactly how to price it. So they priced it $5, $6, $7 billion, whatever it was, the IPO, they sold half the company, right? So a bunch of T-Row prices and Fidelity's and everybody else who all made $250 billion on their investment. And it was one of the worst transactions in history. That being said, every banker on the street says, I worked on the match card transaction. I'm super

proud of myself, right? Yeah. You worked on like one of the worst price transactions in history. PayPal is another one, right? I mean, again, it's hindsight, it's 2020. So you got to take this all with a grain of salt, right? But you look at PayPal. And again, the joke is like, you got the PayPal mafia, all these people that were remembered from the great things they did to PayPal, Elon Musk, and so on and so forth, right? But they raised hundreds of millions of dollars, raised money in an IPO. And they really only sold the company for like a billion two or something like that,

right? So it's like, it wasn't like that much economic value created. I mean, it was enough to get Elon 100 million bucks to go start all these companies. It wasn't like this thing was like Brex or Stripe or something, it wasn't really recognized for what it was, right?

You could also argue that it was actually a great company, but it wasn't a great process. Of course. Perhaps you could have come in and sold her for 5 billion, which in today's dollars, today's tech M&A dollars would be like $50 billion. So it goes to show the inflection point of a sale, how much that could affect the financial outcome. I mean, also, if you think about PayPal was one of the primary ways to pay on eBay.

And eBay, remember, eBay is the one that bought it. eBay bought PayPal. They spun it off and all that kind of stuff. But at that moment in time, eBay was the primary marketplace for SMBs and for people to sell things online, right? SMBs or human beings or individual consumers, whatever. And because it was a primary place, like everyone in 1999 that was on the Internet had an eBay account, right? So you had like every single consumer has an account and every single seller has an account. And so if you were to find and own the payment method to connect all those people, you've got a closed network, a closed loop, and you'd have millions of sellers and millions of buyers, then it wouldn't be that hard to deduce that that could become ubiquitous around the world, which is kind of what happened, right?

That story wasn't clearly told because a public company, probably covered by 10, 12 research analysts at the time, solid estimates for what they were going to make next year. And at that time, they probably weren't going to make that much money the next year and they ended up selling it for a billion dollars so could i have sold it for two three four five ten who knows right an article going back to 2021 that you say that said that you still work nights and weekends at your age and i know you're also very proud to be a father and that's been a big part in your life talk to me about work-life balance does it even exist how do you make that trade-off personally versus professionally it's become work-kid balance. There's no life, really. I'm kidding because the kid stuff is life. So, you know, look, I went a long time without

a wife or kids and I was able to work 24-7 and that was great. I always knew I'd get married and hope to have kids. And I've got two amazing kids and actually one on the way. So I'll be under three and a half end of the year, hopefully. And I'm the most happiest, proudest dad in the world. That whole question you asked about with the second decade of building up the firm, we built up an amazing company with amazing people. And in order to scale the business,

I now sort of co-run a lot of the transactions. I co-lead a lot of the teams that we have. And I don't have to do every little thing, every little task on every deal. And, you know, we build just a great team. I think it's really, really important for all my employees that have lives outside of the office or partners and husbands and wives and kids to spend time with them. And we really do encourage that. We have one MD who's on a six month sabbatical right now spending time with his family. You have all the associates a month off to spend time with their families and friends. So it's really, really important. And it's one of the reasons we scale the firm up so much,

because we want to have some flex time for people, including myself. I mean, I really, I think it'd be a sin to really be a workaholic. Do you have issues taking time off? No. I mean, you know, I would have more of an issue going golfing every weekend for eight hours with the guys. You know what I mean? Like, I don't do that. When I wake up on Saturday at six o'clock in the morning, I run like a child running to a Christmas tree to wake up my kids, just super dedicated and super excited about them every day. And so I cherish all the moments I have with them. And, but also they need to see dad working. So dad works his ass off. And my three year old knows what work is. He knows what Zoom is. He knows what a business is. He knows what

money is. And he knows what toys are and birds and things too. But he knows every day we wake up and first thing out of his mouth is seize the day. So I'm going to try to raise him and my daughter as hardworking individuals and not entitled kids and all this kind of stuff. So I think that work and home life can be mixed really, really well. But I think you really got to raise your kids and be there for them. In a client-centered business, how important are in-persons? What's your cadence? Tell me about Zoom versus in-person. It's got to be a strong mix of both. I mean, we don't kick off a project, you know, without trying to do something face-to-face and some of that's work stuff, face-to-face. So Spana mentioned that company earlier, LaVonta that we invited out to Napa.

We had a big work day and then we had some wine tasting and yucked it up a little bit and got to know them. And so I think for us, it's just great to be able to mix a lot of fun and face time, just getting together face to face. And one of the things that I do is we try to get in front of the clients all the time because that's also a great time to spend time with your employees, right? The office and everyone's running around, that's one thing. But when you're on location in Austin with a client for a day, well, maybe we might take three or four hours as a team and go grab dinner or drinks or spend time with the team too. So it's not just Zoom with your clients and Zoom team too. You've mentioned that you've really evolved your business. What do you focus on doing now yourself as Steve McLaughlin versus what do you

farm out to other people with different competencies? A lot of it's teamwork as opposed to just farming this out or farming that out. Certainly accounting, finance, taxes, ops, engineering. We have all those functions as a company, but we have an amazing CFO, legal people, COO type people, like running all those kinds of things. I'm very, very client centric, right? And team centric. So it's my job is to make sure we bring in the right people, that we treat the clients right, and that we get the clients the right attention. And so I think that is my best and highest use. And I think where I spend a little bit of time is thinking strategically about the firm, where are we going, all these groups that we developed.

But it's funny, I just had a conversation with one of our junior guys today, Axel, I talked to him this morning, I said, kind of talking about him and motivating him and saying, look, look, all jobs are 99% first region, 1% inspiration. So like a lot of it's grinding, grinding, grinding. But your brain has to be working about what should I be doing differently? How should I grow the business? How should I treat my people? How should I run the company?

And so I spend a little bit of time every day thinking about that kind of stuff. But then we have good people that can go execute. We don't have mid-level kids running our data science team. We have a guy that's been running financial forensics and data science stuff for 20 years. So we have adults running all of our key parts of the firm. We've got a master engineer, engineering team building up our tech platform. So you just have to have really, really good people. So I can spend my time on the things that matter, which is the people and the clients.

You mentioned the people and the clients. What percentage of time do you get to spend on that? Is that 20%? Is that 60%?. What percentage of time do you get to spend on that? Is that 20%? Is that 60%? And what percentage of time does it take up today? It takes up the large, large, large majority of my time, you know, and most of that's on the, all the operational stuff is all been farmed out. And that's been the most amazing thing.

It's like when I farm something out to the right people, they blossom. I mean, I'm learning things all the time that our teams are doing. And I'm like, we're doing that. We're doing that. Like electronicronified, our whole finance department, you know, it's all paperless and perfect. And the data science tools that the team is buying and building and designing and integrating into our FT-based API and into our client systems. I mean, stuff I never even thought, I would never think of that. I think it was Jobs or somebody

said, you know, let's not hire smart people to tell them what to do. Let's hire smart people to tell us what to do. And that is an important mentality to have. So I'm really smart, hardworking, driven people that are driving the company forward again. And I just like working with clients and building the team. So that's where I spend almost all my time. That's great. I could learn a lot from that. Thanks for jumping on the podcast. When it comes to FT partners and yourself, what would you like to shine a light on for our listeners? I'd say number one, like you heard me talk a lot about the team today. We've got an amazing, incredible team of people that have been here a long time to work very hard,

their families they're sacrificing for. And we're here to build something for us, but also to do great work for our clients. So we're here to do amazing, amazing work for the clients. And thank you all for the work you do and thank our clients for hiring us and trusting us with your billion dollar babies. The world of FinTech is something that's near and dear to all of us. I think FinTech is doing good for the world and we only want to work for the companies

that are doing good for the world and FinTech and financial services. So there's a real mission behind everything that we're doing, which is to try to really help entrepreneurs succeed with their dreams and make things better. It actually makes me feel good that Nick Stronsky is killing it at Revolut

because he's actually on a complete and utter mission to just bring down price and increase quality of products for the world and financial services. And I think he can do it. You know, the stuff that the WorldCoin guys are doing, I understand Altman. And so we try to find these companies that are doing good

and that makes us, I think, perform better and do better. And so it's a little warm and fuzzy way to end, but we're very lucky to be in the position we're in, in the geographies, in the countries, in the state of the economy that we're in, and just thankful for everything that's gone on well for us and look forward to another 20, 30, 40 years ahead. Absolutely. Well, I'm looking forward to finally sitting down in person as well. And a special shout out to WorldCoin, one of our portfolio companies as well. There you go. All right, David. Thank you. For more ideas on how to raise venture capital in this market, make sure to subscribe below.