The Pomp Podcast - #745 Bringing Stablecoin Yield To Corporate Treasuries w/ Brandon Arvanaghi

Episode Date: December 8, 2021

Brandon Arvanaghi is the the CEO of Meow, the alternative to a savings account for businesses. Meow offers a Corporate Treasury product that helps companies convert their balance sheet to yield generating Stablecoins that earn up to 4% In this conversation we discuss Stablecoins, yield generation, potential risks, Bitcoin on the balance sheet, and the institutional repsonse to the product. ======================= With 10M+ users, Crypto.com is the easiest place to buy, and sell 100+ cryptocurrencies. The Crypto.com Visa Card gives you up to 8% back instantly, and 100% back on Spotify and Netflix. Also, Crypto.com lets you earn up to 8.5% p.a. on BTC, and 14% p.a. on stablecoins. Get $25 when you download the Crypto.com App with code "pomp". Download the App now: https://crypto.onelink.me/J9Lg/pomppodcast2021 ======================= My friends at Coin Cloud will give you $50 in FREE Bitcoin when you buy $200 or more at any of their 4,000+ machines. Use promo code POMP to get your free Bitcoin. For details or to find your nearest Coin Cloud machine, visit www.Coin.Cloud/Pomp Coin Cloud has been serving customers since 2014 and has established itself as the world's leading digital currency machine (DCM) operator. More than just a Bitcoin ATM, Coin Cloud machines make it easy to buy and sell Bitcoin and 30+ other digital assets with cash. To find your local ATM and get $50 in free Bitcoin, visit www.Coin.Cloud/Pomp ======================= Ethernity.io: The world’s first authenticated and licensed NFT platform, trusted by over 150,000 members. Digital NFTs and exclusive real-world unlockables, authentic partnerships with athletes and artists. Visit Ethernity.io, where you can buy and sell authenticated NFTs from top notable figures, rights, license, and IP holders you can’t find anywhere else; the start of an entire ecosystem bringing utility to #NFTs. =======================

What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. Brandon Arvnani is the CEO of Meow, the alternative to a savings account for businesses. They offer 4% potential yields, three business day withdrawals, and they've got a very long waitlist of people who are interested in this new product. In this conversation, we discussed everything from stable coins, to yield generation, to the risks, to also what the reception has been from both individuals and companies, both in the public and private market. I really enjoyed this conversation with Brandon, and I hope you enjoy it as well. Before we get into the episode,

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Again, that's Athernity.io. All right, let's get in this episode. I hope you guys enjoy this one. Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only.

All right. Next, we have Brandon from Meow, which I believe is the right way to pronounce it. Is that right? Just Meow? As you would normally Meow. but do you like do you hit people with yes I'm the founder of Meow

or like how do you say it this might be my first like podcast appearance so yes this is the first time I'll say that all right let's do it all right yeah I'm the founder of Meow I'm the co-founder of Meow excuse me I just figured that that would be interesting

when you raised money did investors were they like hey what's up with the name yeah I got a lot of why Meow some people tricked me into saying Meow they said how do you pronounce the company name but less and less people are telling you to change the name

it's not going to change do you and your co-founder sit there and like in an investor meeting see how many times you can say meow we tried that once actually is there like a story behind it or no yeah honestly like it's a serious story I mean the space is so high entropy that no one knows what it's going to be in a year let alone like on a month to month basis

so if you pick a name like bit yield or block treasure yield or something you pigeonhole yourself you need a happy name that can be anything it needs to be and that's that's the really the genesis story of meow so you like cats yeah the cats all right i figured that was yeah the end uh ending there that's a good point and it's a memorable name yeah yeah right which is important all right walk us through uh what you guys are doing because i think that you guys are going after a very specific problem where there are certain types of folks who say hey i'm taking it absolutely on the chin from inflation uh my

corporate balance sheet is getting smashed right now. I got to do something. What do you guys do from a product standpoint that helped those folks? Yeah. So first off, everyone's taking it on the chin, whether they know it or not. Yep. And the forward thinking ones are looking for active solutions. It used to be a cute thing to look for alternative yield sources. But now since COVID happened and the money printer really is just jammed open, it's not a cute thing. It's a necessity for a lot of corporates to find potentially better yields on their balance sheet. So we take their cash and we source yields from crypto markets. So right now that's lending desks in the crypto space. It's directly to hedge funds in the crypto space. And in the next couple of weeks, we're

going to be announcing dollars to DeFi. So directly interacting with DeFi protocols, the click of a button, all cash based. People send us cash. We take care of all the nonsense behind the scenes of stable coin conversion, putting it in the protocol and give them cash back for 4% yields. how much of what you're doing today is the lending desks versus what i think many people think of as like the the frontier of like super risky defi related what you know whatever is in that market uh and then do you see that percentage changing is it 100 today just the traditional lending desk where you're um essentially getting that yield via i'm assuming genesis and a couple of these very large guys right uh or do you look at it in the future of this business is actually

going into all this kind of new stuff that isn't a traditional lending desk. That's exactly right. So the MVP, spinning it up is a lot easier when you just partner with existing institutions with reputable backgrounds, like Blue Chip only. But we're going to be the first, we think, to have direct access to a lot of these

Blue Chip DeFi protocols as well. Not just one. We're going to make it as easy as picking a stock in the next few weeks, which is really exciting. How much of it is going to be reliant on me? Let's say I am the CFO of a business. And to make it relevant to the audience, let's say that I'm not a publicly traded company. I'm a private company.

I've got anywhere between 10 employees up to 1,000 employees. I've been running my business. We come to work every day. We work our asses off. We've built a profitable business. And our balance sheet continues to grow, maybe not exponentially, but it continues to grow. I see inflation as a problem. I want to protect myself.

I have the option to sit there and just take it on the chin. I could go speculate in financial markets by buying the S&P 500 or, you know, whatever. I could go buy Bitcoin or I can do something like this. And let's just say for the sake of an argument, I don't have deep conviction on any one thing. So instead, what I'm going to do is I'm going to leave a little bit in like what I'll call fiat traditional dollars. I'm going to put a little bit in something like Bitcoin and I'm going to put a little bit in stable coins. Right. And whatever that percentage is doesn't matter for this example. When I come to you, do you just tell me like, thank you very much.

we're going to go and we'll take care of the stable coins for you and you'll get 4%? Or do I need to be an expert on the lending desk versus some protocol versus some other yield? How involved do I need to be versus I just know I'm making an asset allocation decision and therefore I get a higher return than I would get in another market? Yeah, the vast majority of our work right now is the education part. And we abstract all the nonsense away from you. So you know how to deal with cash, we take your cash and we will put it into these yield generating sources. You'll see your daily interest rate and your dashboard, you'll get the cash out. Now, as far as like Bitcoin, ETH and NFTs in the balance sheet, I think that's a lot of fun. I'm a big fan of Michael

Saylor personally, but the market's not telling us that that's where the demand is. There's crazy demand for yield. Everyone is yield starved right now. So this is what we're building right now is this cash-based bridge to yield sources with very good liquidity. I mean, three business day with Charles, worst case. Now, if that leads to people storing Bitcoin in the balance sheet, I'm a big, big bitcoin bull uh it'll be as easy as one click with us as well and so is there an idea of uh let's fast forward right so where you start i think everyone who gets caught uh and especially people who don't haven't spent a lot of time investing in technology what they do is they take a snapshot and it's like a static image and they're like okay your business today it's called

meow this is how you describe it this is the product like this sucks for whatever reason right then there's some people who take that snapshot it's like this is amazing this is exactly what I was looking for. In reality, a snapshot does not encompass the trajectory of a business, right? And so if you think of Facebook, right, it used to literally be like, hey, I think this person is attractive or not. Today they own Instagram and WhatsApp as well, right? So businesses can really change over a 10, 20 year period. With this, if somebody came to you in the future and said, hey, I already have an allocation to, let's say Bitcoin, maybe I have real estate and I have uh us dollar cash maybe they want to give you bitcoin and cash and say can you generate a

yield for me is that something that would fit kind of within the way you think about the business uh or is it something where you're just saying no we only want to go after people with dollars the market i mean we're going after savings accounts here and that's a gigantic savings accounts is like that's what i'm trying to get it's basically a savings account or kind of corporate balance sheets is basically the the two pieces that you think that's the kind of ideal customer right we're going to blow it out of the water i mean think about the future of savings accounts guys like what what's the future of the financial institutions where the yield is going to come from where the payment is going to come from it's going to be low fee stable coin networks and

the yields are going to be sourced from very liquid defy protocols at the end of the day it's it's obvious to us it's going to be the case so we want to be the first to do that that's the biggest market right now now we're certainly uh interested in following the progression of bitcoin yields for example if yields um what are the differences right now in uh stable coins bitcoin or like other asset yields and uh none of this financial advice all this changes on a day-to-day basis based on user demand etc but like as it is right now generally what's the ballpark or order of magnitude differences between yeah for like bitcoin right now you're looking at like low like one percent two percent uh but when it comes to like

cash stable coin things like that a lot of that is dictated by premiums and bitcoin futures for example okay interesting there's the cash carry trade exactly so it's like very low risk are up there um so you can get anywhere from like four percent to six percent and believe it or not pop we've we we've dealt with so many different customers some of them say this is too risky some of them say it's nowhere near risky enough they're looking for 10 15 so there's this wide array of offerings we can provide from riskier defy protocols to insurance wrap defy protocols to you know bitcoin denominated yields there's a whole array of options and now it's just a matter of like focusing our attention on on the winners okay so you said bitcoin is like one or

two percent you said kind of stable coins is like let's say four to six percent and then like i see in the headlines just like everybody else there's like you know a thousand percent stuff like what's going on there how are they generating what they're calling yield which i'm assuming isn't like they're lending it out and somebody's paying them that so like what's going on yeah they're they're denominating the returns of that in whatever the token is that's not a stable coin that's what's happening there that's not really our game right now ours is just you know businesses know how to deal with cash and stable coins are pegged one-to-one to cash and there's very innovative ways to get better yields via the stable coin networks than than their cash i mean

their bank accounts are just such dinosaur instruments and we're just we're checking stuff yeah absolutely and then how do you think about individuals versus corporations right so obviously corporations i think has been a big focus michael saylor obviously with with bitcoin we've seen square and tesla do the exact same thing uh but we've also had on uh eric from uh ramp uh they came on and and he's talked about they took i forget the exact if he told us the exact percentage but i think it was a high single digits or mid single digits uh percent of their balance sheet and they went ahead and they put into stable coin they're earning a little bit of interest on it um and so i know that private companies specifically are really doing this

how do you think about the kind of corporate environment public versus private and do you think that you'll have more success with either one of those two groups to start with yeah you're exactly right I mean we're not going to be selling the Coca-Cola or Pepsi this year I can just like say that very clearly but the series A through D startups

tech companies, SaaS companies they get this you know they price this in their heads as engineers that's like four more engineers I could hire if I was getting 4% so we have a lot of success with those tech companies and if I get shut down by someone when I sell this product they say I don't want to deal with this crypto nonsense I'm quite happy about that

because that means we're right on the good side of slightly too early. We make some good sales, some people are not getting it, but we'll be ready when they inevitably come around. What questions do you two have? Obviously there's different options and that kind of stuff, but what is the yield people should be able to expect from some of these type of products?

The blue chip ones, what I'd consider blue chip. We just think that the yields are totally mispriced. You look at 4% from the crypto space, it's night and day compared to the legacy finance alternative which is a corporate junk bond. I mean, you're risking a lot there, in my opinion. So some of the more blue chip protocols, blue chip lending desks, et cetera,

4% pretty consistently, 4, 5, 6%. Now, some of the more aggressive DeFi funds we're about to launch, they can be in the 15, 20% range as well. It depends on the risk appetite. And believe me, we've heard people asking for both sides of that. So we'll be ready for both.

I was going to ask, what is the risk appetite for this stuff? I'm assuming most people are looking for some type of diversification within that, but maybe just talk to a little bit about what the average person would be looking for. The average company is most comfortable with the blue chip offerings, I will say.

But the extremes have a lot of capital as well. Like the family offices, for example, they're looking for 10, 15%. They have a lot of capital. And so we're building some of these products directly for them as well. And if you have one interface to interact with the blue chips, the risks,

and then even one click to put Bitcoin in the balance sheet as well, that's us. We want to revolutionize the balance sheet for corporate treasuries. So people obviously need cash to operate, right? What have you seen from how much allocation the general company would do? Would they do 10%, would they do 50%, 80%?

What does it look like? It's a great question. Because the liquidity is so good, it's three business days at worst case. They start with something like 30%, 35% to get their feet wet. As they get more comfortable with the product, they see their interest accumulating.

We'll see it progressively go up and up to 60%, 70%. Anything that's non-operational, pretty much, they would put with us. That was even my other question, was what was the liquidity? You can get their cash actually back out to them within three to six days. Yes, three business days, three business days, not six, yeah, three.

The other piece of this is, let's say that you're sitting down with a CFO or an individual and they say, all right, this sounds amazing. I can earn higher yield. What's the downside? Like, what's the risk in terms of absolute doomsday catastrophic scenario? Could everything go to zero? Is there like some, you know, drawdown potential? Like, how do you think about what the risk somebody is taking in exchange for the higher?

Yeah, there's, I mean, there's risk in every opportunity. Of course. If anyone ever says it's not something's no risk, just kick them off the show, obviously. But I mean, the crypto markets would have to do something unprecedented. So there was a day in March 2020 during COVID when crypto markets crashed like 70%. And some of the lending desk partners that we dealt with and some of the protocols still did not have a single default.

So you would have to have an impact bigger than COVID potentially. And I don't even know how much bigger. But it's very battle-tested. And the reason these inefficiencies exist, why these yields exist, is because there hasn't really been a clean, compliant way to have institutional capital come into these markets yet. it's always been own your own wallet it's always been kind of take a leap on the compliance side

we're hoping to address both like we have an API we're hoping to announce some partnerships soon with fintechs to bring in like institutional money by the hundreds of millions quite soon so this is I think the gateway to a lot of money coming into this and closing these arbitrage opportunities effectively yeah what about like pension funds

and folks that they're you know heavily reliant on driving returns for somebody else right have you had any conversations there or any thoughts in terms of how to get those folks involved? Yeah, it's a great idea. I've been kind of spread thin on the sales side with the other side. If you know any good ones, yeah, please send them over.

But yeah, there's just too many people want this for different purposes right now. So we're scaling up a lot to handle that kind of thing. And when you say too many people, how much of the interest you have right now on a percentage basis, if you had to categorize it, are individuals versus corporations? All of our branding is for corporations,

so we've been focusing on that. We still have high net worths coming in and we'll make the exceptions and stuff. We can easily service them as well. but it's predominantly corporates right now One of those individuals is like, I am a business baby What about endowments too? Endowments might be interesting

That's another really good one There's a lot of meat on this bone How do you guys make money? We're taking a small spread right now We don't really care too much about making money up front We just want to provide a very good experience because phase two of the company is what's even more exciting

There's just a million ways to weaponize AUM when you're obsessing over your customers, making them very happy. Let's hear about that. Everything I'm saying should be pretty obvious. Who likes Fedwire? Who likes ACH? A billing suite is a ban of your existence, probably.

Now, if you take a low-fee stablecoin network, I'm not talking about USDC on Ethereum or something like that where the gas fees are $200. Low-fee instant settlement, B2B payments, bill pay, contractor pay, that's obvious. And you have a compelling initial foothold with a yield offering, that's how you build a fully digitally native

financial institution the first of its kind in my opinion it's not going to be like these existing dinosaur banks adding a crypto integration or adding one API and calling it a day it's going to be from the ground up and I think this is the right time to try to build that What advantages does Meow have

because there's other companies that can give someone yield for their stablecoin The compliance considerations are pretty intense I can't go too much into the weeds on that but we tried to build a solid foundation there and we're a team of 5X Gemini engineers. We've been through a lot. We have a lot of institutional knowledge.

Bridging the TradFi world and the crypto world is not easy to do. That's why you see companies typically build only in the crypto world, which is great. I mean, that's a big part of the future. But that kind of institutional know-how, being ready for a bear market, that's kind of a life.

What have the conversations been like with public companies? I'm assuming that's a much different conversation than with private companies or family offices. I'm not even, like I had one conversation that went so badly. Was it a lack of education, a lack of enthusiasm? Was it they just didn't like you?

I hope they didn't like me. I'm trying to help you. If they didn't like you, then maybe we can call them. They're dog people, I'm sure. Having a name like Meow doesn't help when you're talking to a $50 billion company on day one, but it's already become a weapon for us for a target market and it'll serve us well.

what happened there was uh it was just the crypto skepticism even no matter how much user education you'll do there are a lot of cfos who wear crypto skepticism as a badge of honor and i don't blame them this has been the wild west there was the ico boom of 2017 2018 there was yeah there's not a compliant way to get money in there's like investigations happening left and right so we'll be there when they're ready is is the idea but i'm not taking those calls anymore like it was yeah and they called you or you guys went outbound i had one intro to like a major major company through like an interested investor who wanted to like be helpful.

Got it. And so it's interesting because my guess is that they're convinced they need higher yield because they're getting absolutely slammed. And so the crypto skepticism, we were just talking to Alex from Amber and part of it is like almost like, is this really crypto, right?

It's like a weird way to think about it because technically what you're doing is you're upgrading the technology of the US dollar and then you're simply generating yield the exact same way that the bank generates yield. You just happen because you're using new technology to have an imbalance of supply and demand and therefore that leads to higher yield, right?

Like in some crazy way, if people think this is crypto, right? And I'm putting that in air quotes for those that are just listening, then like wait till they find out about other crazy shit, right? Like this seems to be nothing that's really different

than the legacy world. It's just like almost like an arbitrage opportunity. It's straight up arbitrage. A lot of these yields come from Contango, like I mentioned, that's existed for, you know. Yeah, I don't even think that the stable coin providers, as far as I know, the ones that I'm assuming that you support,

like USDC or GUSD or whatever, they don't even claim to be decentralized. No, no, that's not part of the value property. Right, yeah, like it's just like literally this has nothing to do with decentralization. It has nothing to do with like crypto. It's just literally the ability to take an asset, lend it, earn, yield, and then pay a piece of the yield.

And so when you start to think about that, like in some way, having crypto skepticism really means that they don't understand like what this is, right? And that's the education opportunity. Yeah, that's our job. And we've had people successfully get over the hump. There are tech companies, there's Series A through D,

there's family offices who get it. But yeah, the giant public companies are not going to get that yet. But you're exactly right. I mean, decentralization is not something even retail users think about, frankly. I would love to live in a world where everyone's transacting in Bitcoin, for example.

It's just not the world we live in. The corporates want cash. They want better yields on their cash, right? That's what they want. Will that change? I hope so. We'll be ready when it does. If they want to put Bitcoin in the balance sheet,

we need someone more than Michael Saylor to do it and we'll do our part to encourage people to, to invest in hard assets. Yeah. And then basically it fits right within the same system, right? You, you, cause really what, if I think about your business, you have a, I'm gonna call it a platform or a marketplace, right? You can take a bunch of different inputs, literally whatever the input, whether it's cash, uh, uh, Bitcoin, whatever in, and then you can basically place it in a place where it generates yield.

Right. And then you bring back some of the yield for those individuals. and so there's a very clear kind of hey here's the first place to start but you can almost open up both sides of the marketplace to be supportive of more assets yeah and over time you you it is kind of like an exchange and i'm going to say exchange in that their business model was like we don't care what you show up that you want to buy and we don't care what the individual asset that succeeds or fails is all we want to do is provide the venue right and to some degree you guys are doing that uh over time right now you start out with one specific thing but over time you could become that.

Yeah, you're going to see us one-click integration with Compound, one-click integration with Aave. I don't think there's any other company that's done that yet. And we're going to be one of the first to have every kind of blue-chip DeFi protocol available.

And if you think it's inevitable, look, DeFi is not, I come from the Bitcoin world, Bitcoin's my favorite. I think Bitcoin's its own asset class. DeFi is in competition with legacy finance, which is a net positive. You have the legacy finance,

corporate junk bonds at 4%, and you have some pretty blue-chip tested DeFi protocols and things like that. I think that's inevitable, that the composability of these DeFi protocols is going to do very good things for the financial system. So we're providing a bridge to them, no one else has. And we have a clean UI to be able to click

and interact with them, and education is what we're doing right now. What is the biggest hurdle convincing companies to do this? To me, it seems like a no-brainer. Yeah, honestly, I think a lot of them, there have been some that we've just gotten over the hurdle. a lot of them like know whether they're the kind of person to do this or not up front because of how polarizing crypto is to date but the ones that we flipped was explaining kind of the history of

these yields how there has not been a default ever how they are battle tested how there was a 70% drawdown in bitcoin's price in march 2020 and pointing out the inflation statistics so the boat's taking on water this is not like a cute hobby your boat's taking on water if you want to fight back meow is the place to do it that's that's how we view Thank you.