The Pomp Podcast - #935 Adam Dell On Building Successful Fintech Companies

Starting point is 00:00:00 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. Adam Dell is the founder of Domain Money. He previously sold one of his companies to Goldman Sachs, and he was the head of product at Marcus. In this conversation, we talk about building technology companies, the viewpoint and perspective of incumbent financial firms on crypto, and how exactly Adam and his team of 30 people from Goldman have been building out domain money to be the leading platform for managed funds in crypto. I really enjoyed this conversation with Adam, and I hope that you enjoy it as well.

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Starting point is 00:03:45 All right, we've got Adam Dell joining us. Adam sold his last business to Goldman. He ran as head of product, the Marcus product over there, which is their big fintech platform, and left less than a year ago to start building out a brand new business. So super excited to talk to him. Adam, how are you? I'm great. Thanks for having me. I appreciate it.

Starting point is 00:04:04 Absolutely. Let's start with you're sitting inside Goldman Sachs. they bought your business, you become the head of product at Marcus, like, do people think that they can compete against the FinTechs? Is it like, oh, man, this is an uphill battle? What's like the mentality inside of these kind of incumbent financial institutions at the intersection of their core business versus like more of a technology enabled market that seems to be, you know, very, very popular with with investors and also users? You got to hand it to Goldman Sachs, you know, not having a meaningful retail business

Starting point is 00:04:34 And moving headlong into a fintech bank startup inside Goldman Sachs was a bold move for Goldman. And it's really paid off. You know, the deposits in terms of AUM, the number of customers, the Apple card, their distribution deals with GM, it really kind of knocked the cover off the ball. And, you know, I, being an entrepreneur, always sort of thought about large companies as these sort of slow-moving behemoths that didn't really innovate very much. But Goldman Sachs with Marcus really has done quite a good job. Yeah. When you think about actually building that, how much of it is, hey, we need to go compete out outside with these like fintech companies versus let's think about what we uniquely can bring to the market and just layer technology on top of our unique advantage. Like, is it competing and being forced by the external forces or is it more something being driven by the internal advantages? Yeah, it's a bit of both. I mean, one of the reasons they acquired my business, Clarity Money, is that we had developed a set of technologies that gave consumers a very useful way to manage their money.

Starting point is 00:05:52 And they recognized that that tool, coupled with the credibility of Goldman Sachs, layered on top of the offer that they made available to retail consumers, both in terms of the interest rate on deposits and the rate they charged to borrow on the lending side of the business, was very compelling. And that combination turned out to be right. If you use the product today, Marcus, it's very slick. It's very intuitive. It delivers a lot of value independent of banking or borrowing or lending, a lot of personal financial management tools that retail investors and bank customers find very useful. Yeah. When you're sitting there, obviously, Marcus has had incredible success across the industry. People look at it as kind of the light on on the hill. Right. In terms of how an incumbent business can go in and play in this kind of fintech space. uh at some point you decide hey maybe i'm gonna leave uh is it driven by like all right i've kind of squeezed as much economics out of this place let me go do it again and hopefully they'll buy the next one like what's the general thought process as to when you as an entrepreneur know i should stay and i should keep building you know inside of a place like goldman versus like okay now i think it's time to go leave and start another business yeah well i'm a serial entrepreneur i've

Starting point is 00:07:14 started five companies uh clarity money which goldman bought was was my last domain money is my current business. I left Goldman because I saw a real opportunity. I spent three years inside the bowels of our banking system, messing around with the roughly 100 ACH networks that make up our global payment system, and was shocked by how inefficient they are. I understood that at an intellectual level, but I really experienced it at an operational level when I was working on Marcus. And that really led me down the path of exploring blockchains more carefully. And the average ACH transaction takes two days and costs two bucks to settle. And while to the consumer, it feels relatively straightforward to buy your latte and swipe your credit card and

Starting point is 00:08:10 move on with your day, the back end of that process is incredibly inefficient. There are blockchains, Anthony, out there, as you know, that can do the same transaction in two seconds for a 40th of a penny. And if you look at the inefficiencies in the current system and the relative gain opportunities from the technologies emerging out of blockchains, it doesn't take long to figure out what a big opportunity is out there. And the other thing that really struck a chord for me was just the engineering activity. If you look for a startup focused on banking technologies, you can't find one that isn't doing stuff in blockchains. It's just, there's no energy there outside of the crypto ecosystem. And so the engineering community,

Starting point is 00:08:58 which is really the driving force of innovation and where we're headed, has voted with their feet. And what they voted on is blockchains. And so to me, that represented a very exciting opportunity and why, why I started domain with roughly 30 of my colleagues from Goldman who joined me when I left the firm. Yeah. It's fascinating to kind of think through the psychology of it. Uh, you obviously saw the problems. Do you do a bunch of market research or like walk me through as a serial entrepreneur? Like how did you go about evaluating? Okay. I've got 20 good ideas, but are they actually great ideas? Is it worth starting a company? What's the actual adjustable market? Like what does that process look like for you? Yeah. I like that

Starting point is 00:09:39 question because I have a good answer for it. So we did about 10,000 consumer surveys where we really got into the head of different personas around investing in crypto, investing in this new asset class. And what's really clear is that you have a very powerful early adopter crowd that makes up in large part maybe your audience, Anthony. But there's a much larger segment of the population out there that recognizes that crypto is here to stay. It's a big deal. They don't really understand it. They want to make it part of their portfolio, don't really have a good way to do that other than guess. And guessing is not a great investment strategy. And so we saw an opportunity to come to market with a set of portfolios that we've curated and

Starting point is 00:10:32 managed through our investment team that spends every day thinking about which of the blockchain technologies and opportunities are the most interesting from an investment standpoint. And we've come to market with, you know, managed portfolios. You press a button and we'll buy a basket of assets for you and we'll manage those assets over time. That's a, you know, a pretty compelling value proposition from my standpoint. I'm obviously biased because I built a business around it. But to answer your question, I see very clearly a real disconnect between these technologies and consumers' experience. Let me explain what I mean. The average consumer can touch Amazon, touch Disney, touch Tesla, but it's very tough for

Starting point is 00:11:16 the average investor out there to really get their head around, what is Solana? What is Cardano? What is Ethereum? What is Polygon? What are these technologies and which ones are likely to win? And so I think there's a real need in the market for a solution like the one we offer, which is we have an investment team, we stay very close to the developer community, we really watch these protocols carefully, we look at transaction activity, economic utility, relative to alternatives, and we make our bets based on those parameters. Got it. And so when you are surveying those people, how are you doing it? 10,000 is a lot, you know, in the eyes of most people. Are you just running paid ads or how do you get this information to be able to really build your entire business off of? Yeah, we use services like Qualtrics and user testing, which are businesses that are designed to enable max diff studies and to really get into, you know, the mind of the retail investor. You know, one of my favorite things about the brain is that, you know, if you ask the brain a question, it furiously starts working to come up with an answer because, you know, you asked a question. Well, if you ask a question, there must be an answer. I love market research and consumer research that is much sneakier in its approach to teasing out intent.

Starting point is 00:12:38 One of the things that I really love is behavioral finance. Before I started Clarity Money way back, I spent about a year studying Kahneman and Thaler, Dan Ariely, who joined our advisory board at Clarity Money, really getting inside the head of what does the consumer really think about vis-a-vis their money. And it's a fascinating area of behavioral finance or behavioral economics, excuse me, because money is such an emotional thing. It's really a reflection of a person's self-worth. And so there's a lot of interesting dynamics about how people think about and approach money that are a little bit irrational, a little less intuitive than you might expect. Yeah, it's fascinating to kind of think through this. My brother, Joe, who who's got some questions here in a second, he interviewed Mark Lohr at one point. And Mark was talking about the idea that even though he's had multiple successes, he still gets turned down sometimes when he goes out to fundraise for various reasons.

Starting point is 00:13:36 People are at the end of the life of their fund. It's outside of a sector they're interested or whatever. In your fundraising process, was it just everyone just poured as much money in as you wanted? Or like, how does that go for something like this, where it's very related, although a little bit different, but very related, same industry where you've had a lot of success in the past? Yeah, I'm a little bit fortunate and unique as an entrepreneur in that, you know, this is my fifth rodeo and I've had very consistent investor base for each of my endeavors. You know, it turns out if you end up making money for people, they tend to want to back

Starting point is 00:14:12 you again. And so knock on wood, I've been very fortunate in my career and in the various things I've started that they've worked out pretty well. And so I have a track record of figuring things out. And so, you know, fundraising for me, at least historically, has been relatively straightforward. I send out my deck to, you know, a short list of folks that I've worked with in the past. We have a little bit over the terms and pretty quickly, you know, set a lot of transaction and then get busy getting to work. You know, the fundraising is really not the thing. It's the building and it's the doing and creating that is the thing. And so I like to spend much more of my time and energy focused on that

Starting point is 00:14:53 rather than thinking about fundraising. Yeah. One of the things that I also find interesting is as you started building this business, you basically have ridden what I'll call the exuberant wave of crypto, Bitcoin, etc. Everything was running up, hitting all-time highs. Now we're in more of kind of a corrective phase.

Starting point is 00:15:11 Some people think it's going to be a true on bear market. There's concerns around interest rates and some of the macro stuff. How do you as an entrepreneur think about, you know, do you worry about macro economics? Do you worry about interest rates? Do you worry about the price of the assets? Or do you just keep your head down and build? Like, what's your approach here? Yeah, that's a good question.

Starting point is 00:15:29 You know, I mean, the trends and the data that I pay closest attention to is the economic utility that comes out of technologies. Right. So, you know, the speculative nature of crypto and the euphoria around this opportunity set, you know, certainly quite possible that the market has gotten ahead of itself. As you think about the the hype curve. Right. You sort of have this expectation of utility and then sort of the trough of disillusionment, which is sort of like what's really going to be here. And then over time, it slowly grows and fulfills its promise. And I think that Web3 and blockchain, metaverse and all these technologies that are emerging out of this effort among a very small engineering community, if you really look at it closely, we're very early in this cycle. Right. I mean, there are roughly 27 million engineers across the whole planet. Right. That's every iPhone. That's every, you know, easy path, you know, RFID thing that you swiped when you drove in your car. You know, that's all the engineers. Right. Every data center, everything in the cloud. There's seven million Java developers globally.

Starting point is 00:16:49 OK, the entirety of the blockchain developer ecosystem is probably 25,000 developers total. That's tiny. And then if you look at the underlying technology stack of the various protocols out there and what have been built, it's very, very early in this game. And so there's enormous economic promise yet to be fulfilled. And the things that we focus on are the volume of transaction activity that are happening on various protocols, how fully developed the stack is of some of the underlying projects out there, and what is the relative economic utility of that compared to its alternatives. Like, look at Ethereum for just a moment, OK? Clearly, the grand poobah of winning the developer game and bringing more people into the ecosystem.

Starting point is 00:17:40 Last year, Visa did roughly $10 trillion in transaction volume across their whole network. Ethereum alone did $11 trillion. And so if you look at the economic utility of the Ethereum network relative to the number of years it's been out and how long it took to develop, you see enormous promise in these technologies. I think we're very, very early in the utility of these protocols as alternatives to things like ACH networks coming to fruition. And so despite the current volatility and interest rates and headwind from macro environment outside in the market, I'm much more interested in what is the long-term utilities of these technologies. And those have yet to really fully be realized. Yeah. My last question, and my brother's got some for you, is when you start thinking about the various strategies that are employed via this kind of managed platform, how do you guys evaluate what strategies to pursue versus not? And really, that's a proxy, I think, for like what works and what doesn't work in the market, right? Obviously, I'm assuming you want to offer things that are best suited for users, but what's that process look like? Yeah, we've put together a number of portfolios with our investment team. So our investment team comes out of Goldman Sachs and Bridgewater Associates. We've crafted baskets of assets. One of our strategies is called Domain Edge.

Starting point is 00:19:05 And it's really meant to be, you know, broad exposure to the crypto asset class, you know, press one button and okay, you've invested in this asset class, you've made an allocation across your portfolio, you don't need to worry about whether or not, you know, any one of these individual investments needs to be, you know, switched out because we're going to handle all that for you. And we've also put together a strategy around the metaverse, because we believe there's enormous opportunity there. And speaking about both of those strategies, our broad thesis is around infrastructure. To my comments earlier around ACH networks and enabling economic utility, our focus is on the fundamental building blocks of enabling these technologies to deliver utility in the market. We're not interested in chasing hype or momentum or sort of meme coins.

Starting point is 00:19:58 We're focused on what is the core function this technology does and how valuable will that be in the market as we think about product market fit, the size of the developer community, the token economics, the relative alternatives in the market, and how those technologies compare to those alternatives. Those are the things we focus on. Makes complete sense. Joe, John, what questions you guys got? Yeah, my question would just be around how you think this evolves over time. I think most people probably understand the platform itself after your description and so forth. But how do you guys think about just the total addressable market? Is this something where every kind of retail investor today is going to have exposure to crypto and kind of the digital atmosphere or something else? Just talk me through kind of how you think about that. Yeah, again, you know, there's the crowd that loves to delve deep into, you know, what's going on on this layer one project, what's going on on this layer two project, you know, happy to kind of dive into those things. And then there's a much larger segment of the population that might be an E-Trade customer, a Fidelity customer, Schwab customer. They have their equity portfolio, but they don't have a crypto allocation.

Starting point is 00:21:08 And they're looking for an intelligent way to do that beyond just, you know, an ETF, right? They want somebody to actively manage their crypto investments for them. That is a massive market that we think is relatively untapped. And so we're unique in that in terms of our offering. You know, long term, our ambition is to be a full service financial services provider to mass affluent retail investors. We plan to offer crypto rewards, credit card, the ability to borrow against your portfolio, a deposit account. You know, we are we do have the ability to accept deposits. We're FDIC insured. And so we're putting the building blocks in place to deliver all of the things that someone would need around their financial life.

Starting point is 00:21:54 But, you know, startups don't fail for lack of ambition. They fail for lack of focus. And so our focus today, you know, being a very young company and very early in the market is managed portfolios to give investors access to crypto in a very intelligent, diversified way. Adam, can you talk about how you guys reweight and how often you guys reweight these portfolios? Yeah, we are constantly evaluating the allocations of the underlying assets and the strategies and balance them regularly. Adam, when you start to think about the users themselves, how much of these portfolios are you seeing allocated to crypto versus other assets? And then do you see crypto as kind of a entry point to eventually get other assets that they may be investing in? Or is it just stay, you know, ironclad focused on crypto and kind of just go deeper and deeper there with more sophisticated managed portfolios? Yeah, we'll listen to our customers over time. I could envision a domain offering other alternative assets on the platform over time, whether that's real estate or other alternative investments.

Starting point is 00:23:03 But again, as a young company, our focus is on our core value proposition, which is managed portfolios, giving people access to crypto. You know, if you guys step outside of the crypto ecosystem that you're so deeply steeped in, which is an interesting, fascinating, dynamic, rapidly growing one, and you sort of just walk down Main Street of middle America, you ask, you know, what's your crypto holdings and what assets are you interested in? And, you know, you kind of get a very bewildered look on your face, you know, in response, because people are confused by these technologies. As I said, they're so removed from their day-to-day lives and experiences, yet they do recognize that they should have an allocation. And so we're the answer to that allocation. Yeah. And so when you start to think about this, really the parallel in my mind, and you'll correct me if I'm wrong here, is uh kathy wood and arc they have kind of uh managed etfs uh that give a specific type of investor exposure what you all are doing is kind of with the technology layer doing something very

Starting point is 00:24:19 similar what are maybe some of the the things that you can learn from you know those parallel attempts and kind of other capital market structures and then what are some of the things that you guys have identified from like a risk standpoint that you want to use technology to help avoid? One of the things we've developed internally is a tool to measure many, many different signals that make up the health of the underlying assets. I mentioned the developer community. We follow GitHub submissions. We look at the number of connections among developers, among projects that we think are particularly credible and interesting. So we stay really, really close to the developer community and watch what we call signal.

Starting point is 00:25:02 Doquan is on our advisory board. We're big believers and fans of what he's doing and his efforts with Terra. And so, you know, if anything, I would just say that what we've really learned is that being close to these underlying communities of developers that are actually doing the work of building these technologies is the thing that we focus on. Yeah, it makes complete sense. Where can we send people to find you on the internet

Starting point is 00:25:30 or find out more about Domain Money? DomainMoney.com. You can also find us in the App Store if you'd like to download our app and try it out. You know, it's really been quite a fun adventure. We've been in market for just about 100 days. We have nearly 10,000 users that we've amassed in that short period of time.

Starting point is 00:25:52 So we're growing quite quickly. You know, really delighted with the response we've received from the market, you know, excited to continue to build out this platform. One of the other things I would say is that there's a very rich repository of content that we've developed. We've done a lot of fundamental research. Why blockchains matter? What's the difference between an ETF and an actively managed portfolio to your earlier question? we've really done a lot to try to educate the customer about what is the value of these technologies and what is the value of a managed portfolio. And so, you know, our objective is to hold the hand of our customer along the way and educate them about what we're doing

Starting point is 00:26:34 every step of the way. You know, our mission as a company is to build our customers' wealth. And so you'll find a lot of content and resources to help us do that. Yeah. I've got three kind of rapid fire questions for you that are a little bit more fun to end this thing. First is David Solomon, DJ Soul there. Are you spinning any beats on the weekends as well or going to any of the concerts? No, that's not really my jam. All right. Sleep schedule. One of our sponsors is Eight Sleep, which allows you to thermoregulate the bed. And I sleep like a baby with it really, really cold. What's your sleep schedule or nighttime pre-sleep schedule? Well, my routine is I read before I go to sleep. I find it an incredibly efficient way to ensure that I read a little bit every day and that I don't waste time trying to fall asleep.

Starting point is 00:27:27 So, you know, whether I read one page or 30 pages, I know I'm going to read and I know I'm going to fall right to sleep because nothing puts me to sleep faster than a complex technical book that is late in the evening, you know, that puts you right to sleep. That's my sleep check. I love it. And then my last question is behind you on the kind of the imagery, you have a what appears to be an older kind of old school banker who's laying on the ground. It says no one took Bryce seriously, not until they saw his Domain Money account. What's up with the imagery? We're just playing around with a little bit of nostalgia and some of our creative. We have a whole series of ads that are playful and nostalgic of this era.

Starting point is 00:28:14 There's some thinking behind it. Most of our customers, our average customer is 39 years old. And they're squarely mass affluent individuals. uh and and and they're you know uh of an era that is nostalgic for the you know sort of 80s 90s kind of look and feel and so we're playing around with a little bit of that with our with our creative and so that's that's why i threw this up this morning or this afternoon yeah that is uh that's awesome i love it i i think that the like 80s and 90s uh wall street vibe needs to come back for sure so uh i i can uh i can appreciate it i don't know if you have one more question i just wanted

Starting point is 00:28:58 to wrap up by saying i really appreciate an opportunity to be on your on your program i really am impressed by and and amazed by what you guys have built and and just the the the activity of creation uh particularly you know in a connected world where we have tools that enable anyone to create a platform for themselves and sort of reach a large audience with their message and their ideas is is one of the great things about technology there's there's things that need to be managed about that on the other side of it because misinformation but but you know i really really uh am impressed by what you guys have done and just want to tell you how much i appreciate the opportunity to spend some time with you today listen we're super impressed by you as well and as

Starting point is 00:29:39 you guys continue to build uh domain money we'll definitely have to bring you back i think you've got some unique insights not only as a serial entrepreneur but also uh having spent that time at Goldman. And around here, we like to joke about bankers quite a bit. But I feel like Goldman out of all the banks, they've navigated many, many technology cycles over the years. And so they continue to be at the forefront of a lot of this stuff, which is which is cool to see. So thank you so much for joining us. Thanks for having me again. Appreciate it. All right. See you later, buddy. Thanks so much for listening to today's episode. I really hope you guys enjoyed this one. Make sure you're subscribed on Apple, Spotify or your favorite podcast player. And if you're

Starting point is 00:30:15 looking to try to transition to get a new job in the Bitcoin or crypto industry, we've got you covered. Head over to palmscryptocourse.com. We've developed a curriculum with the top teams across the industry. It's a three-week intensive training program with over 50 events packed into that three-week time period. Go to palmscryptocourse.com to learn more, and I'll meet you guys for the next episode.

The Pomp Podcast - #935 Adam Dell On Building Successful Fintech Companies

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