Investing Billions - E256: What Fintech Will Look Like in 5 Years - Steve McLaughlin (FT Partners)

Episode Date: December 5, 2025

What does it take to build the most dominant FinTech investment bank in the world—starting from a $99 incorporation and a used laptop? In this episode, I speak with Steve McLaughlin, Founder, CEO, and Managing Partner of FT Partners, widely regarded as the leading investment bank in FinTech. Steve has personally closed hundreds of the biggest M&A, capital raise, and IPO advisory transactions in the industry—while pioneering a completely different approach to value creation in investment banking. We cover everything from the humble beginnings of FT Partners, to Steve’s philosophy of “never die,” to his groundbreaking thesis on AI, tokenization, defensibility in FinTech, and why he believes we’re entering a new era of trillion-dollar global financial technology companies. We also dive into the incentives model Steve built that has generated some of the largest fees in the history of investment banking—and why clients keep coming back.

Welcome back to the podcast. Great to be back, David. Good to see you down to Miami recently as well. So for those that don't know, tell me about the FD Partners origin story. I was at Goldman Sachs for a bunch of years. That was in their fig group from 95 to 02. That was sort of the whole dot-com run up, run down. In 2002, I had moved out to San Francisco with Goldman, was doing very well there.

And I was spending 100% of my time on FinTech. But FinTech was dead. The world was dead. The world was melting down from the dot com 9-11 and the war. you know, so it was a, you know, it was not a great time to be at a place at Coleman sex. They weren't paying very well. And they don't, you know, to, you know, do so in the markets now, which they, which they shouldn't. So I left, started FT partners. And the theory was that much my clients would follow me to FT partners. And turns out they didn't. You know,

I had to sort of start from scratch, you know, because, you know, when you're working out of your apartment with no money, no brand and, you know, no employees, it's not easy. So, but the origin story. That's part of the origin story. It's like I had to kind of build it up from scratch and hire people from day one of my own money, didn't have any partners, didn't have any capital coming in, no debt of nothing. So really just bootstrapped it from day one and literally worked out of my apartment in San Francisco for a year before we got our first, you know, a couple deal. I was 32 when I incorporated the business. I actually incorporated it on company corporation.com for $99, bought a used laptop, and I got $10 business cards at Kinko's back in the day. So it's

pretty humble beginning. And what scale are you guys at today? We are coming up on probably 250 people where San Francisco, New York, London. I happen to be sitting in Miami, but the firm's really global at the moment. We've got clients on pretty much every major continent. We just did a deal in Japan not long ago. We did a deal in Australia. We got a lot of big deals going on Latam and just flying all over the world constantly. I'm preparing for my interview with Bill Ackman and I've been studying his investment in Valiant and how it basically torpedoed out of him. And I just keep on seeing this over and over, these great business leaders go through these difficult times. I'm starting to wonder, is that actually the source of their power?

Look, I started it during the dot-com bus. So I know what it's like to be in a bad economy. And we did really well at that time. We actually did really well during the global financial crisis as well. So, you know, we're seeing Bear Stearns blow up over here, Merrill Lynch blow up over there. And Lehman get destroyed over there. And we're just like working 100 hours a week on 20 deals. You know, fintech was, was, wasn't booming, but we were, we were small and super busy.

We all, the whole industry had a pretty big bull run from, call it 2012 to 2021, early 22. And then, you know, the market really took a term, particularly in fintech. I think fintech was probably the hardest hit sector. There was a lot of negativity around fintech. People had overpaid for a lot of assets. And I think people thought, well, because everything had been invented, they could have been invented. And, you know, it is what it is. And it was the hype kind of went away a little bit and shifted over to, you know, AI and crypto and crypto really is fintech.

I think I said to my team 20 different times during the last three years prior to things bouncing back really hard in 25. What we do is a firm, FinTech, investment banking, high-end, elite, deep client service, you know, that's never, ever, ever going out of style. So even during those three years, we made money, you know, kept the team together. And, you know, I think we're seeing today, like there was massive layoffs across the street in 22, 23, 24, and losses, all the big, boutiques with losing money. And, you know, we kept all our people, our key people. And the big banks are now super strapped for resources. One of my clients has a motto, never die. And it's not really my motto, but I like the idea of just, you know, just be there, be consistent, you know, whether it's, you know, playing basketball or, you know, a sport, any other sport, or, or

banking, you just got to show up to work every day and keep doing grinding. And have good things happened. You mentioned one of your rules, don't die. In venture, oftentimes it's only three to six months every decade where investors make the crazy returns. And there's really only two models there. One is you could pick those correctly, which is incredibly difficult, if not impossible. Two is you could be there for a decade. That's the hard part. Being there for a decade, being there for 20 years and continually to be consistent so that you get that asymmetry in the market when things get better. Yeah, this business is not meant to be like smooth, right? You're building up your deal flow. You're building up your backlog, your pipeline, your credibility.

your friends, you know, your employee base. And then when when the good things happen, the tidal wave of business, the tidal wave of profits comes, that's what we're seeing. That's what others, I think, are hopefully seeing. But that's kind of what it's been for us. I mean, there's been, you know,

sort of slower periods and busier periods. But you've kind of been around long enough, you know that the big, big wins are going to come. And so that's what's happening now. And I see that over the next year. I think our backlog has something we publicized. It's at least $2, $3 billion of revenue. to like signed clients that if they did their deal tomorrow,

be billions of dollars of revenue. So we've never had that in the history of the firm. So, you know, it's a, it's a good time to be infantech. How would you differentiate your talent strategy versus the Morgan Stanley's of Goldman Sachs? Our world is more people that don't want to work at the big banks, right? Sort of like how do you differentiate Sequoia employees from, you know, Goldman Sachs?

If you are really good at what you do and you're the obviously best, you want to go off and do it on a smaller platform and, you know, prove to your, prove to the world that you can do things better than the big platform. So, you know, how does a 200 person, 250 person firm beat Goldman Sachs morning state that she'd been working in all the time? It's a teamwork in the elite team that we have and the results. It's all in the results driven. You know, we're very results driven place. And, you know, we kind of figured, you know, whatever the big banks are doing, we need to do something differently, right? So that's the whole

reason I left Goldman Sachs, you know, was I just didn't see the kind of work getting done that I would do for myself if I was a client, right? So, you know, we started doing things very differently from day one and we've doubled down and I don't know the course of the time. And our team needs to kind of understand that. A lot of times we've hired people from big banks in a case they say, why are you guys doing 500 page decks or 500 page decks for a company and why are the models so deep and so detailed and so long dated and why are you guys, you know, paying McKinsey a million dollars out of your own pocket? Why did you develop a data science team? Why do you have sort of a meeting a kinsie inside of the firm why you know why why you're doing all this extra stuff all you

have to do is throw you know a 40 page deck together and start working the and i'm like that's just the right way to do it you know so we're we're you know we're throwing a lot of money at the team a lot of money at innovating things in this space so we've always been an innovator in the way we do this isn't public yet although it might be about the time this podcast goes out but we just invested 25 million dollars in a company that's basically the leader in AI for financial services in investment banking. So company called Model ML. So we with a lead investor in a $75 million round that many of the Silicon Valley elite were trying to lead. So we broke in and took that lead role there. And so we're going to be AI, you know, all over the firm, whether that's looking

for buyers, looking for investors, talking to investors, doing analytics, doing deeper data science work, using and applying AI to every single thing that we do as an investment bank and then giving that AI to our clients. So for example, right now, it hasn't happened yet, but these AI tools can today, and they will certainly tomorrow, be ripping through thousands of documents and data rooms and financial spreadsheets and audits and historical legal documents and being able to basically tear all that down in a matter of minutes and create multi-hundred page reports. So, you know, we're going to be arming our clients on the sell side with that kind of, you know, deal of diligence and defensibility. So if someone's going to come and look at your data room with

1,500, you know, AI agents, you know, you better be prepared on your side to make sure you've done that work ahead of time. So, so, yeah, $25 million back into the business, actually into model ML for the support of our clients. And so, so we're just constantly adding many, many, many, many elements. As a fact, we just, we were in Vegas at Money 2020, um, had an amazing time there. And we decided through our offsite, you know, a couple of days before Money 2020. And the theme was F1 racing. So it was kind of like, you know, we want to be like the fastest F1 team in the world, and it's such as the driver or the brand of the car, but it's all the people around the car, all the people around the brand, all the people around.

If you're going to be better than everyone else in the world and getting better every single year, you need that elite team and you've got to glorify and thank and love every single person on that team at F1, yeah, sure, Max Verstappen's a guy in the car and he's great, but without the car, without the brand, without the team. He's sitting in a go-car, you know, on a low track somewhere. So I feel like we've got, you know, a great team, a great, you know, about an innovation and everyone works together kind of like that proverbial f1 team and and it would look when you're in a big firm you know it just doesn't work that way you don't have all those tools of Goldman Sachs if someone

of Goldman Sachs said or Morgan stanley jp morgan bammell whatever said hey you know ft's got that great data science team and they're like taking all the data cubes and running you know two days worth of analysis overnight to run their models and to prove out their their client's data you know we should do that across all of our groups but they'd have to add a billion dollars of cost you know or something like that to get all these people on board, but then it's not going to do that. You know, someone said, let's go hire a mini, let's go build a mini consulting group for every single niche within Goldman Sachs to provide that extra layer of service. That would, they'd just never do that, right?

I remember when I was at Goldman Sachs, they even pitched my boss, Peter Krause that we should go buy McKinsey. That didn't go over too well, but it would have been a great idea at some extent. So, yeah, that's always been in my mindset either from a young age, to provide the best of the best service. And I guess there's two ways to look at traditional. bolt to bracket banks. One is that all the people are short-term focused, focus on the deal over-promising under-delivering. But then there's also a second aspect of that, which is the firms have

no loyalty either. They'll pay you based on not on future performance, not on past performance, but future performance, all these things that large banks have. Large banks are the incentivized quarter to quarter versus in the long term. So I'm still trying to wrap my hands around about how you create a different system, because these are the default operating principles in banking. Why is FD partners different? What upstream decision did you make to make a different? There's a few things I talk about, which you have to new employees and their new team members. And I think about every day, it's like, we chose to be in a highly, in a high growth sector with companies that are largely not public, right? I mean, there's a number of public companies,

obviously, but most of the market cap is in the private world. And these companies are generally high growing. They're usually not at their full EBITDA margins. They're usually losing money or breaking even they're you know changing their their business uh changing the business models or a couple years they're you know altering the landscape of financial services and they're hard to value so what i figured out was that the skill set of being able to value properly and actually attain proper value for highly opaque assets is the you know best job in all of investment banking right if you're at goldman sax and i say goldman sax like since i work there and i've asked with respect for Goldman Sachs, but at the end of the day, if you're one of these big banks,

you know, and you're working on, let's say, an IPO, first of all, you're one of five or six or seven or eight firms working on the IPO. And second of all, you're one of any 50 people on the meat grinding process on the IPO just at one firm, right? You got the bankers, the ECM, you've got, you know, equity sales. That could be research. You got back office. You've got, you know, stabilization people. And it's this whole entire process. And it's very hard as an individual banker or is anyone on the team, really. any one of the banks to sort of claim credit for, oh, I was the one or our team was the one that added all the value, you know, to this, to this particular deal. As a matter of fact,

you take a debt deal. It's like, is it really adding that much value to wire someone out $500 million to do a bunch of credit work and hope to get it back? Sure, that's value. Wow, but it's like you're giving someone $500 million and charge you in the library. It's commoditized. It's somewhat commoditized, right? And then if you're working on very large, you know, M&A, it's generally seen as these companies typically trade it, you know, 25, 30% premium to market. That's the average over many, many, many deals. So you go in there, there's already 10, 20 hours covering the stock.

So there's no mystery there. They've been public for how many years, how many quarters. Everyone knows the market premium is 25 or 35%. So if you get 25% or 35%, you're basically doing an average shop, right? There's no glory in it. You didn't add that much value. You've got to be administering and processing the deal. If we're on the buy side, you know, you're not really creating a lot of value.

You may be trying to compress value and maybe getting a deal of the hung, you know, but most of the time, you know, bankers are paid very little for the buy side because they're not really doing a lot of work. They don't really get in the weeds and understand the fundamentals of the company and decide is this going to work buying or not. They're doing more or less back at the envelope or work to figure out or the company might be worth X or Y and the increase it might be worth A or B and so, but it turns out all those things are like administrative roles, right? And you deserve to be paid administrative fees for administrative roles. And like, like, There's nothing wrong with that. The Goldman Sachs is an amazing place. They had a huge market share. And the same with more than salient around, nothing wrong with their model for the kind of deals that they do. But if you're a smaller elite firm

and you can pick one or two things on Earth to do, those would be capital raising and sell-side M&A in the private markets where values are highly opaque. The clients don't really know the buyers that well. They don't know the investors that well. And we can kind of be a network between the buyers and the investors and the company. and help get things done in a high-class way.

Like I said before, another, other, maybe your podcast, like it's always about maximizing the value. It's finding the right fit. None of my clients wants to maximize, maximize value. They'd rather find a good partner and a quick deal that made sense for all sides. So that's actually the harder to do. It's actually fairly easy if you want to just maximize value.

There's one function, maximize value. You don't care who the buyers. You don't care what the timing is. You don't care about anything. But we're trying to think about, you know, speed and certainty and quality partner and what happens the employees and you know you want you want the buyer to be happy with the transaction as well so you know there's or the investor for that matter so it's a that matchmaking game is you can add an enormous amount of value in that equation and you know you can get paid for that right you know we have a deal right now we have a lot of our deals that are you know we get you know x percent up to say 500 million and y percent above that and you know we just got a this is not public i'll make a public here for you but we just got a hundred and sixty seven million dollar fee on one transaction and which is the largest fee in the entire year.

There's been two articles in the Wall Street Journal that Goldman Sachs got $110,000,000 fee on this deal, the largest deal in the firm's history, and Merylton's got $137 million deal. And those were on like $40, 50 billion deals, right? You know, or even bigger, right, frankly. I think the BAML was even a bigger fee on a small fee that was on a much, much larger deal.

But we came in and we actually added billions of dollars of value to a, you know, to a company. And so, you know, we got paid it. a, you know, a good fee for that. So, you know, we kind of figured out how to turn, you know, basically, you know, get paid on a value added model as opposed to an administrative model. And that's really what we do. So it's a, it's a, you know, how do you get paid for adding value versus being an administrator of a transaction? And it's, it's very similar to, you know, if you're, you know, managing treasuries, you're not going to make as much money as Sequoia makes

adding value to its portfolio companies and it's, it's investors all piece money. They're making 35% of everything over X par, right? Because they're adding value to that X, right? They're quite dripling that X. They should get 30, 35% of it. I always say, why don't bankers get 10, 20, 30% of everything they get? They help achieve over a certain benchmark. And the reason is that bankers don't have any track record of doing so.

In P.EBC, there's a perfect track record of who added value who did it, right? You know exactly what your money, money returns. You know exactly your ROI is, you know, exactly what your IRA is, I should say. And everyone knows it and it's completely 100% truthful. There's not a banker on the planet that has anything like a track record of adding actual economic value. And we do, right, because that's the only thing that I'm known for outside of fintech and selling companies is that everyone sort of says, you guys have really served your clients well and your loyalty suits to clients. and you've actually gotten them great outcomes over the course of time.

And it's been really consistent over 20-something years, right? It's not just, oh, there was this one deal that was a high valuation that, you know, maybe you got lucky on that deal. Tell me about the best practices when it comes to structuring these kind of deals. What are some things to do? What are some things to avoid? The thing about the business is we are very flexible in terms of what the client wants. So we're happy and interested in working on really early stage companies.

and we're really excited about working on much larger companies, too. So we have clients that are $500 billion in market value, half a trillion, and we have clients that have no revenue, right? So we'll be advising, for example, model ML, which is in the, you know, sort of lower end of the revenue spectrum and one of the, you know, probably hopefully fastest growing, you know, AI companies out there. But, you know, that's a plan of ours. And we've got clients that are, you know, 40 billion, 50 billion, et cetera, many hundreds

of billions as well. So we're really able to be very wide on that spectrum. So in a lot of times, if the company is super early, we're sort of well known for sometimes going in and saying, look, you know, if you want us to be your banker between now and when you ultimately exit, we can do that, right? If you want to do by the drink and it's $6 million capital raise, that's just not something we can do bambwise, right? So we have to work on fairly high ROI things. But the ROI can be stretched out over 15 years or it could be, you know, 15 weeks. know, we're very flexible. So a lot of times we'll let the client sort of set the terms.

So we've got clients where, you know, for example, amazing story, right? We got hired in 2009 by a great little company at the time called Abbott Exchange. It was worth $20 million, give them much its way, but they were raising money for $20 million. And they wanted us to come in and help them raise, say, $6 or $7 million because they were buying a company for $3 million. Sort of famously said, you know, Mike, he's just too small. We can't really do it. And after many, many, many conversations, we agreed that we would basically be their banker for the long term and they could fire us more than they want, but they'd have to pay us for 49 years post, you know, fire, which basically means that, you know, you're not going to fire us. So we now worked with them from 2009 to 2025.

So we just sold them this year for $2.3 billion to TPG and Corpays. It was a private equity industry teamed up by the company for 100x what it was when we found them. And of course, along the way, we raised a billion dollars for them. We helped them do eight acquisitions, never charge them for any acquisitions, helped them go public and help them on the sale. And I believe it would have worked with them, even if we didn't have the long-term engagement letter. But, you know, that certainly helped.

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But in general, we're trying to let clients pick the fees. And so that way, they're just going to be happy with them. I have to say, I was a little skeptical of this model. And then you invited me to breakfast in Miami and we were sitting down and you started talking to me about what structure you should put on your own home with the agent. that's right there i knew you were true believer i mean it's it's yeah i believe in it and the clients believe in it too the the the clients that have paid us the most money we have multiple multi-hundred million dollars fees i must have gotten four referrals in the last two weeks from one of our clients who paid us a multi-hundred million dollar fee and you know for um and and and

the guys that they just paid us a multi-dollar fee like they're our best clients right they're the ones that so it's always the clients that are a little thrifty that are kind of missing the ball and saying I'm self-fulfilling yeah I mean yes and no I mean hopefully not but but you know if someone says and show me incentive I'll show you the activity right so or something like that so I think you know would you would you pay a private equity manager you know one and and four right I give you one percent you know to just manage my money and then I'll be a four percent of everything over a dollar you would never hire that person because like they must not be qualified they must not have confidence themselves they must not have the

motivation. So I think that, you know, actually giving investment bankers similar types of upside as other financial professionals and other industries like private equity, venture capital, et cetera, you know, makes a lot of sense. Does that have to be to entwined? No, it doesn't have be that at all. It could be more. It could be less, whatever. So, and I just think that that's something that will change over the course of time. And a lot of bankers are trying to emulate what we're doing. But the truth is you need to build a track record. first. So if you're working on a big buy site on Monday, a merger of two companies at no premium on a Tuesday, a big bankruptcy recovery for FTX on a Wednesday, you have a debt deal

on a Thursday, IPO on a Friday, a secondary next week. And then, oh, you just got to sell a private company, but that's like one of 15 things that you do, you're not going to really build a track record, right? It's like, so, you know, you really got to do the same thing in the same space, same people for a long, long, long period time in order to have the credibility, you know, to, or the audacity, you know, to charge, you know, greater than average rates for your service. Unless you're proven value add kind of a firm or person or team, it's very hard to do. We've seen a lot of people try to replicate our fee models and they don't get it. And pretty much every single time we get hired, people say, well, hey, we want to, you know,

give you guys your really great incentive. and it's going to be way hard in New York and vendors because you're the guys we think that could actually hit it, right? Or that would understand how to make that happen. Again, you know, there's a lot of great banks, a lot of great bankers, and we respect pretty much everybody out there. It's just different models. It's different strokes for different folks.

And we're passionate about the way we do things. And it's been recognized around the world. You've been labeled if you Google it, it says, World is Riches Banker. Is that a double-edged sword or what is it? I mean, I'm not counting, you know, You know, and I don't really care about money, honestly. You wouldn't think that for what I said, right?

But, you know, we're trying to raise a family. We got three kids. You know, we are, you know, trying to raise them, you know, like we got raised. It's hard, you know, because we've done okay. But, you know, it's like, I'm not to say the money part is keeping score and all that kind of stuff. But at the end of the day, all the money is going to go to charity someday. So it's just trying to try to do good by the world at some point in time. when you have the time to go do that kind of charitable work.

I'd say that people are shocked when I get on the phone, right? And they're on like 100 my dollar coming. Like, what are you doing here? You've done so many deals and this now. Like, this is what I do. I represent companies like you guys every day. I'm just grinding and having a fun time. And it would be able to scale the company.

I'm such that we've got great CFO, HR, legal compliance, you know, all that stuff. So I don't really have to do any of that kind of stuff. I can just really be client service guy and work with the teams. So, but yeah, I don't, I don't think about the money, you know, on a personal level. I think about building a great franchise, building a great place for the teams that we have here, the people that we have, the families that we have for the firm to prosper long term. It's more about them than me. And I worry about the clients more than me. The incentives sometimes are like, the clients are the ones that went way more than us.

Yeah, we get a little win here and there and the fees, but, you know, say what's good to the goose is good for the gander. So it's like, but yeah, I don't know. I'm sure Jamie Diamond's doing okay. but we'll see. Let's talk about fintech today. What's the most underrated trend in the market today? And where are you most bullish if you had to pick one spot? I don't know if it's fully underrated, but I think the world of real world assets is something that really gets me excited and the tokenization I should say thereof. So, you know, companies like digital asset holdings, tether, you know, taking a digital dollar, taking a digital mortgage or a digital

stock or what have you. And to me, that's really the future of financial services. And I don't think the traditional way is going away anytime soon. It's more of a percentage game. I think for a long time, a percentage of the market is going to be done just the way it's done today on NASDAQ, on NISI, you know, and you could trade through Robinhood or whatever. But like slowly but surely some portion of that market is going to go tokenized, right? And so you can be trading on the blockchain, settling instantaneously. with anyone in the world. And that's happening with stocks today.

That's happening with pretty much every asset class around the world, starting the dollars with people like certain tether. You know, tether's now half a trillion dollar company. I think that that world is just going to go very big. You know, I think in the old days of, you know, 20-something years ago when you would electrify a sector, you'd be electrifying a piece of the sector in a small, you know, single geography.

Now, all this stuff is much, much, much more global. So it's kind of a trend that's affecting all fintech, but the companies are starting off being very global and can get very, very big over the course of time. So that's, for better for worse, that's where we see things going. So, yeah, digitization of real world assets is. You go to sleep tonight. You wake up in a decade and you look at the fintech market.

What does it look like in a post AI to fintech? A lot of the companies that we think of as fintech today are going to be legacy, right? And there's going to be a whole new breed of company. So, you know, it's funny. You look at like the FISA's and the, you know, first data's and all these kind of guys. And, you know, they're growing single digit percentages. If FISA stock was down 40, 50 percent the other day, you know, because they're getting

neat and alive by lots and lots of smaller players. They got too big founders laugh at the future. I think you're going to have some trillion-dollar companies. You know, we've been on the record saying long before anyone, those people heard of them or knew much of our Revolut that that was going to be a multi-trillion-dollar company. So I think you're going to see lots and lots of, you know, a trillion-dollar company. in 10 years. And, you know, who's that going to be? But, you know, nobody knows, but I would put Revolut, Cloud Walk, digital asset holdings, you know, and, you know, anyone that's doing things

that are fully global, fully disrupting the old world, you know, that's where we're putting our time. And again, you don't have to be a multi-trillion dollar company to get our attention at all or potential to have that. But I think, I think the, you know, AI will just be commonplace at that time. It won't be disrupting anything. I think that all the disruption will have already happened. And then there'll be another way of the disruption. That's the thing I think about fintech and financial services is it's never going to be fully old school. It's always going to be probably 50%, you know, 50, 60, 70% old and 25% new and the new choose the old.

And the new becomes the old. And it just kind of keeps happening. So, you know, when you have a product like financial services, like I said, this is fully digital. I mean, other than credit cards and ATM machines, which are all both going away, by the way, or cash itself. you know, the whole space is going to be fully digital. There's not many other spaces that are like that health care, there's hospitals, there's medicine, there's drugs, there's gurneys. I mean, that's stuff's not going away, right?

But in financial services, everything being digital, you know, you can't really imagine a world where it's perfect. And so until things are perfect, there's going to be a lot of innovation, right? With 30 years of fintech development, I find very few things in my life or anyone's life I know are from underbanked up to, you know, Warren Buffett, where like the financial aspect of their life is just smooth. and perfect and frictionless and all decisions are made in a highly out of the way. I mean, that's where we're like 2% of the way there, right?

I think with AI, it's going to get a lot closer, but it's going to take a long time. So, but yeah, long-lived FinTech. And you referenced it, disruption, the opposite of disruption is defensibility. What are FinTech companies doing to become defensible? And is that even possible in an AI world? The best ones are arming themselves, you know, with as much AI as humanly possible. I mean, it costs a lot of money to do that, but I think what we're seeing is people hold the line on expenses and just push everything into AI, right? Every single function of a company has got to be completely embracing AI.

And I think if you're out there and you're not absolutely using AI in every single function of your company, you're going to be extinct or on the way to it pretty quickly over the, because the space is going to get highly efficient with a lot of new players and a lot of the old players, you know, changing their model. So it's going to be, you know, I would not want to be long a lot of traditional financial services companies over the next 10 years. I'd be pushing my money into fintech and, you know, blockchain and AI-driven, you know, financial services companies. So there's going to be a lot of change coming. Do you think AI is fully priced into the fintech market or do you think it's mispriced? I think the market is still trying to figure it out. There's not that many sort of really great scaled, you know, AI first fintech companies. right you know you've got a couple here and there um like model ML you know but they're not

scale right there it's a great company but it's early stage and it's it's got a scale and there's a bunch of platforms like that you know there's something that are doing call center stuff is it's pretty exciting but there's what's more exciting as companies like revolut cloud walk and others using AI first in their in their current businesses right using AI for advertising for fraud detection for customer service for onboarding for offboarding etc so i think those companies are the ones that are, I think, that they were, they were already highly innovative and they immediately caught on to the AI, you know, wave, right? We've single-handedly gotten certain clients to just completely abandon the always doing things and just pushed them,

said, look, here's examples of six-year competitors that are doing X, Y, and Z. So they literally just within a month changed their whole philosophy and, you know, went full-blown, you know, AI. I mean, you know, you don't get there in a month, but you change your mindset in a month, right? there's been CEOs of companies that have, you know, we're like writing off blockchain or writing off AI as anything that was going to really cheat their business and they're all going full

crypto, full stable coins, full AI. So, you know, I think, yeah, people are getting religion. I look at AI as a dragon and the only safe place is on the back of the dragon. Although once in a while, the dragon could look around and burn near, but it's still safest place

versus being anywhere in the village. 100%. That's a good one. I'll use that one next time. I try to convince the client to do AI, but, no, it's a, it's, it's, it's ignorance. Ignorance is a strategy, said another way, not using AI itself as a strategy. You can pretend it's not a strategy and you could pretend it's not decision, but it's a, it's a decision to not make a decision. It's not a buzzword, right?

It's, it's real. Yeah, you've really got to lean into these things. And boy, it would it be exciting to be a 25-year-old kid, you know, building the next-gen companies using AI. Yeah, one of the tricky things about AI is, is like, can everyone just build the same company, right? you were telling me about someone else in one of your podcasts is saying open AI is going to be dead because anyone could build a big large language model or whatever his rationale was,

but can anyone build any of these businesses, right? And because AI can do all the building, I could copy your business as well. So what's really going to be the competitive differentiation in the future? And that's the part that's probably got me scratched with my head to some extent, you know, is how that's all going to come out. Are you going to wind up having like 50 competitors doing the same thing?

And therefore pricing is going to go to the point where no one can make any money and no one can differentiate company A from company B and the minute company B comes up with a good idea, company A copies it. So it's going to be, I think it's ultimately going to be very good for consumers, that the products are going to be very good, the prices are going to be very low. You know, there's all this question about, will there be enough jobs for everybody? And robots start, you know, taking over. And, you know, it's funny.

We're doing a lot of studying about robots these days. And one of our clients is investing in robotics companies and becoming the payment rails for these robots and things like that. So there's just some wild stuff going on out there with AI and robots are coming. So only a matter of time and using fintzac. What's a big thing that you've changed your mind on in the past six months? Six months. Well, it's a short period of time.

Usually I say a year, but with AI, you have to make it down to six months. I don't know. I mean, maybe it's just leaning heavy into it in my own business, right? I think, again, not to keep harboring on this investment in Model ML, thinking through, you know, can you really revolutionize what we do? It's a high-end craft business at the end of the day. Apprentice, you're cranking spreadsheets, you're writing memos, you're reading data rooms, and you would think that I don't want a machine doing this stuff.

But it turns out a lot of that work can be done a lot quicker, a lot more streamlined. And even if you're doing a lot of it manually, it can be checked by these agents, right? You know, a lot of the backoff stuff that we do, that was kind of exciting. But then I started realizing that this could really benefit the execution of transactions is one thing in investment they just save money on you know cheaper cost of building spreadsheets or you know building decks and things like that that's not something that gets me that gets me that excited it's nice but um to me what gets me more excited is getting to market faster for the clients so you're getting to market more thorough way you know a lot of times these these clients that

were selling they might only be worth a hundred or two hundred million dollars right or 300 million whatever the number is well it turns out that now the world is so global the buyer could come from literally any continent right and you're talking about only writing a 300 million dollar check as a buyer. The number of buyers can buy any given company is probably like 1,000, right? And no banker can know 1,000 companies. No banker can contact 1,000 companies. No banker can analyze 1,000 companies.

But with AI, you can't, right? You can sort of look at the whole entire world and look with the whole entire very, very detailed product description of what company X client does and what even small divisions of large companies or private companies that have never, you've never heard of that you don't speak to language, and you couldn't even read their website. you know, could be buyers for, for certain companies in the U.S. or Australia. So you can now sort of use today, you know, AI and not just chat DVD. Chad TBD is going to be good for a lot of things.

But I do believe that the hyper verticalization of a space is going to be very important. When we're starting to train our own models on our own ecosystem and all the deals and all the buyers and all the buyer type of criteria that we think, you know, so I think it's the human side of what we do mixed in with the AI side is going to make, I think, a big difference in locating and finding buyers. One of the things that we do as a firm is we publish a lot of reports and we get a lot of

imbalance from companies all around the world that we've never heard of that want to buy companies that are in the reports, right? And so, again, like even as good as we are, there's companies all around the world that no banker knows because they're not big enough to know that are on the radar, you know, and so we know that just even in the regular world without

AI, we go out inbound with people that we don't know, look at a company's that we're affiliated with that with AI, we should be able to like significantly increase to it, to an asymptotic level of perfection, like the buyer research outreach, you know, kind of process. Same thing with investors, right? I just think that leaning into AI,

leaning into automation, leading into this kind of stuff, it's very expensive, you know, but there's no bank in the world that on a pound for pound basis is putting more money towards the client service that we are. And every single client I talk to is like, this is differentiated. like what you guys already doing is like 10x differentiated, but this is,

this takes it to 11, right, or whatever, so it's, yeah, try to be on the leading guys. I think that's something's got me super passion. And then that's got me passionate about, investing in AI as well and investing in FinTech, so we're doing a lot of investing in companies on the side.

It's just a fun game to be in right now. The prevailing paradigm, and they say among generalists is that AI is about cost cutting, but it actually has this revenue expansion that's highly undervalued. Well, Steve, three years in, a lot more interesting things to come for FT partners. Thanks for jumping on the podcast again and looking forward to continuing this conversation soon. David, thank you, buddy. Thank you, soon. That's it for today's episode of How I Invest. If this conversation

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