On The Brink with Castle Island - Jon Birnbaum (Domain Money) on Increasing Access for Retail Investors (EP.300)

Episode Date: March 23, 2022

Jon Birnbaum, COO of Domain Money, a new investment platform, joins the show. In this episode, we discuss: History and launch of Domain Money Jon's path into fintech and then the digital asset industry Dimension of access to investing for the retail market Domain's product offering across crypto and equities Developing new metrics to help consumers think through investing Learn about Domain Money here.

Today, I sat down with John Burnbaum, CEO of Domain Money. Domain Money is an innovative investment platform developed by members of the team behind Marcus by Goldman Sachs. Domain provides more control and access to trading both stocks and cryptocurrency. I wanted to have John on the show to discuss Domain's launch, product offering, and key focus areas on helping a new set of consumers access cryptocurrency. Without further ado, here's my conversation with John Burnbaum. Brought down by Bad Mortgage Investors.

Lehman, which has 25,000 employees, will be liquidated. The federal government loans American International Group, AIG, $85 billion. This is a different kind of market, and the Fed is asleep! The federal government is stepping it to stabilize Fannie Mae and Freddie Mac, the two mortgage giants that have been threatened by the housing crisis. The Bank of England has pumped 75 billion pounds more into Britain's ailing economy with a new round of Concentive Easy. You've printed a couple trillion dollars and all of a sudden people start to worry.

So out of this worry, we have something called the Bitcoin. Bitcoin. Welcome to On the Brink. My name is Sean Judge. I'm joined today by John Birdbaum, Chief Operating Officer of Domain Money. John, thanks for joining us. Thanks for having me.

Well, to start, congratulations on the launch of Domain Money. It would be great if you could just share a little bit more about what you're up to and the history of the company. Yeah, sure. So Domain Money just launched a couple weeks ago. in the middle of January. Domain money, it's a new platform for retail investors to help build their wealth. We enable retail investors to buy sell crypto, buy sell equities, and invest in our actively managed strategies containing both crypto and equities.

Fantastic. Well, congrats on that. I guess stepping back, it would be great to get your personal background, John, and how you fell into the wonderful world of crypto. Yeah, sure. So, I mean, going way back, I studied computer science and finance at MIT and worked in finance at a college, always approached markets from an engineer's mentality, thinking about ways to improve markets and efficiency. So, you know, as I reflect, it seems like it was only a matter of time until the crypto industry kind of swept me up. I spent a bunch of years of Morgan Stanley on the trading desk, thinking about inefficiencies in bond markets and improving market infrastructure. At that time, I actually came across the Satoshi White Paper in 2010 and emailed my boss

saying, hey, this seems kind of interesting given the recent rise of skepticism around central banks and fiat currency, but didn't really think much of it. It was hard to think entrepreneurally as a young professional in a large bank. after I left Morgan Stanley, I started trading on Coinbase back in that 2017 bull market, spent some time at Bridgewater, running the fixed income execution trading team where I continued to think about different asset classes and market evolution. And once I, after I left Bridgewater, I spent a lot of time ideating about the brokerage space and retail trading in general, especially during COVID and lockdowns and the boom in retail trading. and was ideating new ideas for the industry because I knew there were a ton of problems to help retail investors trade better and invest better. And I had the opportunity to join SOFi as a business lead, which is a GM-type role for the invest platform. And soon crypto started taking off again,

end of 2020, beginning of 2021, where I focused entirely on improving the crypto platform. And from there, I eventually transitioned to domain where I had the opportunity to build a product from the ground up, which is just an incredibly exciting thing to do because there's just so many tailwinds in the space. That's awesome story. And I think computer science, finance, MIT is kind of the bullseye for having jumped on the white paper back in 2010 for you. Well, look, there's obviously a lot of DNA from Goldman's Consumer Banking Initiative, Marcus,

on the domain money team. It'd be great to understand that. and any key insights or learnings that led to some of the early excitement around starting domain. Yeah, absolutely. So the core founding team of domain actually worked together twice before. They built Clarity Money, which was a personal finance platform that competed with Mint going back to 2016, 2017.

Goldman acquired the platform, and that team came in and built out a lot of Marcus, so Marcus Savings, Marcus Invest, worked on the Apple. credit card partnership. And so it just has really good fintech chops thinking about the market, thinking about the customer that we're going after at domain. And so Adam Dell, our founder and CEO, identified what he believed to be avoiding the market for the regular person who is interested in crypto, not that crypto enthusiast who's reading about blockchains on their spare time, but just that somebody, because we essentially see crypto as a way. wedge in building a new financial platform. We like to think about it as a brand reminiscent

of a fidelity as a Schwab, something that doesn't really feel like a toy or too wonky for sophisticated traders. That's what we want domain to be. And so we believe that there's a limited window to actually establish this brand as a lot of the incumbents, both new entrance and crypto and existing world platforms, are starting to move into the space. So we're executing an extremely fast clip to establish ourselves at that brand. And so the team, you know, given the experience at Clarity and Goldman, it's incredibly high caliber. Everybody essentially knows what to do and we're going out and doing it, which is great. That's great.

It's a really impressive team. Check out the website and a lot of folks from obviously, as you mentioned, Clarity and Marcus, your background at Bridgewater and SoFi. Can you share any more details about some of the other team members that you've assembled and their backgrounds? Sure. So we're led by Adam Dell. He's a serial entrepreneur, has had four prior exits and was most recently a partner

at Gilman where he's head of product for Marcus. And he's a product obsessed CEO who is just thinking and obsessed with the product experience. Matt Jacobs, he's our head of engineering. He's joining us from Marcus. and Pryor was a co-founder at Clarity and worked at Common Bond. Yuri is our head of product engineering, another Goldman Clarity alum. He's an alum of Betterment where he built out there back-end systems. Our CMO, Mark Caruso.

He had leadership roles at a bunch of other fintechs, such as Clarity, Elvis, Betterment, and a whole bunch of others who were the leads at both Clarity and Marcus. We then rounded out the roster with a handful of others joining us from other fintech backgrounds. We're joined by a season chief compliance officer, Alan Reid, who joined us from Coinbase and formerly Toghomi. Our head of investment in management, Andrew Pesco spent his entire career at GSM and was on his way to start his own crypto hedge fund when he decided to join forces with us. our head of trade ops Adam Asch is the former head

of global trading from Canter and extremely seasoned markets professional which we're very fortunate to have I heart of growth Deanna Sherwood joined us from BlockFi where she led growth initiatives and Brad Olson is our head of content joining us from Seeking Alpha where he's VP of News

and prior Bloomberg I could go on Yeah very impressive team that you've assembled too in a very short period of time, which is terrific. So congratulations on that. I guess jumping into the market, you know, the market for investable assets evolved over the last three to 10 years. It's just changed pretty dramatically. Can you walk us through what's new and where there's gaps in the market for retail investors specifically? Yeah. So I think it's best to frame about what's happening

in retail markets as first seen through the lens of the dimension of access. So the last 10 years has been essentially like the final crushing or removal of market frictions for retail investors along a few dimensions. So you have the rise of mobile that's allowed retail investors to trade anywhere. You've had the removal of commissions. So now you could trade for no fee. And you've had fractionalization so you can now trade with no minimums. So you've removed all the blockers that used to exist to enable an individual to go out into public markets and to trade stocks. And subsequently, you've seen a massive rise in retail participation in markets. Some estimates show from 10% a couple of years ago to as high as 25 to 30% in 2021.

You know, zooming out, that's analogous to similar large shifts, such as internet access, allowing people to now trade on the computers, rise in e-trade in the 90s, you know, before that, you know, fund structure is allowed pooling and participation through mutual funds. So you've kind of hit what I think is like the end of the Berkridge 1.0 journey of removing frictions as it pertains to public equities. And now you're starting to see, I think, the similar stories start to play out across, other asset classes. Options trading, for example, has become more prevalent as it's become easier in the removal of commissions. And alternatives, you know, obviously we could talk about crypto, but there's also real estate. You have firms like Crowd Street and Roofstock and many other platforms that make it

really easy for you to kind of go on an app, click in and become a real estate owner, private companies, you know, through Angel List. secondaries through equities in, art, NFTs. So there's going to be, I think, and continue to be tons of alternative platforms that emerge and proliferate as a lot of entrepreneurs hold this very simple belief that why not create access. You know, a lot of times you say democratize access. It doesn't necessarily mean there'll be liquidity.

Oftentimes I actually won't. And it takes some time for the math of CAG versus LTV to play out. And then you'll see some aggregate rise. So we're seeing a lot of the story around access play out. But I think the more interesting story, once you hit the end of kind of like that access trajectory, is you have a very obvious other pain point, which is actually helping investors achieve their goals and educate investors to help people actually figure out what they should be doing.

There's a ton of confusion out there. And it makes sense. You have, you know, fish in market theorists talk about, you know, put your money in an index fund and call it a day. You have a ton of noise by financial media, YouTubers, FinTalk, talking about how easy is to make money by taking active bets. So how do you kind of wrap your head around the confusion and how do you come up with a philosophy that makes sense for you? So I think there's still tons of opportunity to help educate investors to help figure out, you know, how to establish investment goals and then how to achieve your investment goals.

And we could certainly go into clicks below about what I mean around those things, but I'll pause there. Yeah, no, that's really helpful. And I think it's probably a good segue into where domain fits in for today's consumers, particularly with us being a crypto-centric podcast, you know, thinking about the ways that consumers access crypto, accessing other assets, and having that be part of kind of a holistic view with the rest of their portfolio. Maybe that is a good place to kind of go into where domain fits for consumers. Yeah. So, I mean, look, there's no shortage of choices in terms of how to gain access to crypto today. I mean, this is a whole other conversation where every surface area where you

essentially have money is now becoming an on-ramp to crypto between incumbent brokerages, payment platforms, et cetera. There's a ton of noise out there. And what, I think what we found in our research is that consumers care most about trust, transparency, and security. They want a platform. They can really trust, feel good about it. And for our target personas, they care a lot about education and learning and having financial resources as well. And so we've crafted domain to have a product first experience where it's very easy to go on and execute a trade.

There's a lot of, we've messed a ton into content and education on the platform to help teach simple market principles and market mechanics, such as around dollar cost averaging and rebalancing. And we've put into our product, what we call our actively managed strategies to give the consumer turnkey access to crypto. So instead of shifting the burden onto the,

customer to go on to research, figure out what to do, we've crafted strategies that have different risk weightings to gain access to the crypto market. And then if you so choose, we offer a ton of enriched information at your fingertips to make decisions to invest in the market yourself. Awesome. Yeah, maybe it would be helpful to understand some of the investment strategies that you offer today, you know, what is in domain balance versus domain access, domain core, and how you thought about crafting those? Yeah. So our team takes a fundamental approach towards investing in crypto, where we look at the entire market, both crypto and equities, and we establish certain themes and companies that we want to be long on. And through this fundamental approach,

which we essentially took, we essentially wrapped together for distinct products for investors to gain access to the market. So you named a handful of our actively managed strategies

and the fundamental differences between their strategies is they have different combinations of equity weightings and crypto weightings, which essentially can be conceived as going out on the risk spectrum of something that's 100% crypto

will have more volatility, but we believe it has a higher potential for, you know, what market theorists would say that higher volatility will result in higher potential returns over the long term. We have strategies such as domain balance, which is 50% crypto and 50% equities. And our most popular strategy has been Domain Edge, which is actually 100% crypto, which compared to the overall market, we think that's probably the biggest pain point for the customers is finding something that is distinctly in crypto,

given that the market for managed equities is very mature and very well established. So that domain edge product, with it being 100% crypto, is it safe to say that you're providing a service for an individual that says, look, I want to get exposure to crypto. I don't really know how. I don't know which cryptocurrency to choose. And I'm going to rely on the education resources that domain provides and kind of get access through this vehicle. Yeah, exactly. What we essentially wanted is if you think about

somebody you know in your network who hasn't yet invested in crypto or is kind of primed, they know that crypto is a thing, but hasn't yet done it. What do you go to tell them? You could say, hey, maybe go on Coinbase, buy Bitcoin and Eath. Those are kind of like your gateways into the entire ecosystem. But then what? And it's extremely overwhelming. People want exposure to more than Bitcoin and Eath because they know there's an extremely large, middle and long till of exciting projects that actually will have a lot of the

growth going forward. And so we've crafted Domain Edge to be essentially our flagship strategy of hit a button, get exposure to our best thinking around crypto. That's a solving huge pain point for those that work in crypto that can now, instead of saying just buy Bitcoin or Eith and stop asking. The other really interesting thing from a product perspective that you guys have developed is finding some signal around assets. Can you walk through what each of these signal items that you've developed,

like what they provide and consumers? Sure. So we've developed a product that we call Signal that essentially is a host of metrics to inform you about a cryptocurrency or a single equity. So we'll show you fundamental information such as the overall supply,

the current market cap, the inflation rate. We'll show you technical information such as price ranges, volatility, time held and alternative indicators such as exchange flows, project health, and social sentiment, along with news. So we've partnered with a dozen other vendors to kind of curate this breadth of offering, which we've kind of enriched baked into our product and have it at your fingertips.

So when you look at an asset, you could use this information to help inform your investment decisions. Got it. Awesome. So thinking about the stocks side of things, is there any key decisions you made as a company from a regulatory lens? And how do you think about, you obviously have the crypto bucket, but how do you think about managing and crafting some of the strategies around which equities to put into, call it, you know, the domain balance bucket versus the domain access bucket? Yeah.

So I'd say it's, you know, the fundamental thinking is very similar across both crypto and equities. I'd say for equities, we kind of think a bit more about, you know, super high level investable themes that we think are, are real, really matter over, you know, a five, 10 year horizon, such as cloud computing and AI. There's a, there's a host of others and our team has written kind of long form papers that are published on our website, kind of thinking through our exact investment methodology. And so, you know, for equities, it's middle to large cap companies that we've kind of looked at looking at the market, top down, and then doing bottom analysis and putting them into the portfolio. And we take those equities and with various mixes, depending on which the strategies you're in, change the weights. Got it.

So I can come on as a user. I can buy, you know, Apple or Amazon directly. I can buy Bitcoin directly or I can access one of these strategies that you've crafted and kind of leverage some of the resources that you've provided around why, you know, domain balance might be a more interesting product for me versus access or core or edge. Exactly. And there's a, you know, there's a fundamental tension here with platforms that are trying to solve this problem for investors where you could give them ultimate flexibility and say, you know, choose, you know, some ratio of equities to crypto or choose which investable

themes. Or, you know, you go to the opposite approach and say, there's only one product, but, you know, take it or leave it. Somewhere kind of how like wealth front and betterment kind of got off the ground. Here's the efficient markets portfolio. And so we've taken a lot of time to kind of debate and figure out what we believe might be the best approach to, you know, resolving this tension. And so, you know, our starting approach is to package it up into a handful of different products that have fixed weights between equities and crypto. We'll see what resonates. This is an ongoing and constant investment problem. And not only for something unique to domain, but we also have to think about how you choosing something on our platform fits into your broader

portfolio strategy. For many, this might be a little bit more crypto than we, what they're holding elsewhere. For others, it's their first foray. And we need to, this is an ongoing thing to figure out. But we believe that for most users, these starting choices will be optimal. In terms of product roadmap, can you share anything around what we can expect to see from domain money in 2022? Absolutely. So we're out on iOS today and we're quickly working on rolling up both Android and Web so it could be fully cross-platform. We're developing a handful of large product features, such as the ability to borrow against your portfolio, including both crypto and equities. And we're also developing a domain credit

card that will be secured by your portfolio on the platform. We're also developing a mechanism to offer yield through crypto and stable coins as well. And looking a bit further down the line, we're actively looking at extinctions the platform to offer direct access to defy. And alternatives as well are on a radar, particularly NFTs, giving the overwhelming demand we see in the platform. And lastly, I wanted to call out that we're spending time wrapping up on content and resources to help customers understand what's going on in the market and to contextualize.

But broadly, you know, it's a long year ahead of us. It's an exciting year. And we have tons and tons of ideas swirling around that we need to kind of figure out with our customer base what makes the most sense to prioritize, given all the themes that I talked about above in terms of, you know, solving all these problems for customers. to help them invest better. Awesome. I can attest to what a terrific product experience has been.

So really excited to see some of those new products roll out this year. Well, John, this has been great. Where can people follow you and learn more about domain money? So I'm on Twitter at John Byrne, J-O-N, B-I-R-N. The best place to learn about domain money is our website, domainmoney.com. And if you're on iOS, the best place to actually, see it is to go ahead, download it, check it out, give it a spin. Awesome. Good stuff. Thanks so much, John. Appreciate it. Thanks, John.