#745 Bringing Stablecoin Yield To Corporate Treasuries w/ Brandon Arvanaghi

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 Arvanaghi is the CEO of Miao, the alternative to a savings account for businesses. They offer 4% potential yields, 3 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 stablecoins 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 Arvanaghi, and I hope you enjoy it as well.

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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.

Yeah.

But do you like, do you hit people with, uh, 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.

All right, I just figured that that would be an interesting thing. 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? Like I just did? Yeah, exactly.

Yeah.

Less and less people are telling me to change the name. It's not gonna change, so.

Yeah, do you and your co-founder sit there and like in investor meetings, see how many times you could say meow?

We tried that once, actually.

Really?

Yeah. 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 gonna be in a year, let alone on like on a month-to-month basis. So if you pick a name like BitYield or BlockTreasureYield or something, 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, I like cats.

Yeah.

All right.

I figured that was the end, uh, ending there.

No, but that's, 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. 'Cause I think that you guys are going after a, a very specific problem where there's certain types of folks who say, Hey, I'm taking it absolutely on the chin from inflation. My corporate balance sheet is getting smashed right now. I gotta do something. What do you guys do from a product standpoint that help 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 with the click of a button, all cash-based. People send us cash. We take care of all the nonsense behind the scenes of stablecoin conversion, putting it in the protocol. And give them cash back for, you know, 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 frontier of like super risky DeFi-related, you know, whatever is in that market? And then do you see that percentage changing? Is it 100% today just the traditional lending desk where you're essentially getting that yield via, I'm assuming, Genesis and a couple of these very large guys?

Right.

Or do you look at it in the future of this business as actually going into all this like 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's a problem, I wanna protect myself. I have the option to sit there and just take it on the chin.

Yep.

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 gonna do is I'm gonna leave a little bit in like what I'll call fiat traditional dollars. I'm gonna put a little bit in something like Bitcoin, and I'm gonna put a little bit in stablecoins, 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 gonna go and we'll take care of the stablecoins 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? Like, 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 earned on 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, 3 business day withdrawals, worst case. Now, if that leads to people storing Bitcoin on the balance sheet, I'm a big, big Bitcoin bull. It'll be as easy as one click with us as well.

And so is there an idea of, let's fast forward, right? So where you start, I think everyone always gets caught, and especially people who 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, do I think this person's 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 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? Or is it something where you're just saying, no, we only wanna go after people with dollars?

The market— I mean, we're going after savings accounts here. And that's a gigantic market.

So savings accounts is like— that's what I'm trying to get at. It's basically savings account or kind of corporate balance sheets is basically 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's the future of the financial institutions? Where are the yields going to come from? Where are the payments going to come from? It's going to be low-fee stablecoin networks. And the yields are going to be sourced from very liquid DeFi protocols at the end of the day. 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 interested in following the progression of Bitcoin yields, for example, ETH yields.

What are the differences right now in stablecoins, Bitcoin, or other asset yields? And none of this is financial advice. All this changes on a day-to-day basis based on user demand, et cetera. But as it is right now, generally, what's the ballpark or order of magnitude differences between them?

Yeah, for like Bitcoin right now, you're looking at like low, like 1%, 2%. But when it comes to like cash, stablecoin, things like that, a lot of that is dictated by premiums in Bitcoin futures, for example.

Okay, interesting. They're using the cash carry trade.

Exactly. So it's like very low risk arb there. So you can get anywhere from like 4% to 6%. And believe it or not, Pomp, 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 DeFi protocols to insurance-wrapped DeFi protocols to Bitcoin-denominated yields. There's a whole array of options. And now it's just a matter of focusing our attention on the winners.

OK, so you said Bitcoin is like 1% or 2%. You said kind of stablecoins is like, let's say, 4% to 6%. Yeah, something like that. And then I see in the headlines, just like everybody else, there's like 1,000% 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 what's going on there?

Yeah, they're denominating the returns of that in whatever the token is that's not a stablecoin. And that's what's happening there. That's not really our game right now. Ours is just— businesses know how to deal with cash. And stablecoins are pegged 1:1 to cash. And there's very innovative ways to get better yields via the stablecoin networks than their cash. I mean, their bank accounts are just such dinosaur instruments. We're just shaking stuff up.

Absolutely. And then how do you think about individuals versus corporations? So obviously, corporations, I think, has been a big focus. Michael Saylor, obviously, with Bitcoin. We've seen Square and Tesla do the exact same thing. But we've also had on Eric from Ramp. They came on, and he's talked about— they took— I forget if he told us the exact percentage, but I think it was high single digits or mid-single digits percent of their balance sheet, and they went ahead and they put it into a stablecoin. They're earning a little bit of interest on it. 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 gonna be selling to 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 4 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. You know, we make Some good sales, some people are not getting it, but we'll be ready when they inevitably come around.

Yeah, what questions do you two have?

What would be like, you know, obviously, there's different options and all that kind of stuff, but what is the yield people should be able to expect from some of these type of products?

Yeah, so like the blue-chip ones, what I'd consider blue-chip, I mean, we just think that the yields are totally mispriced. I mean, 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, like, 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 a little bit about, like, what the average person would be looking for.

Yeah, so we're trying to— 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 on the balance sheet as well, that's us. We want to revolutionize the balance sheet for corporate treasuries. Gotcha.

So people obviously need cash to operate, right? What have you seen from how much allocation, like, the general company would do? Would they do 10%? Would they do 50%, 80%? What does it look like?

It's a great question. So we— because the liquidity is so good, it's 3 business days, like, at worst case.

Oh, really?

Yeah, so 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 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 3 to 6 days?

Yes, yeah, 3 business days, 3 business days, not 6, yeah, 3, yeah.

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 yield? Yeah, I mean, there's risk in every opportunity.

Of course, if anyone ever says it's not Sunny Snow, let's just kick them off the show, obviously. But the crypto markets would have to do something unprecedented. There was a day in March 2020 during COVID when crypto markets crashed like 70%. Some of the lending desk partners that we dealt with and some of the protocols still did not have a single default. You would have to have an impact bigger than COVID potentially. I don't even know how much bigger, but it's very battle-tested. 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.

[Speaker:BRANDON_ARVANAGHI] Yeah, what about, like, pension funds and folks that they're 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. So if you know any good ones, yeah, please send them over. But yeah, there's too many people want this for different purposes right now. So we're scaling up a lot to handle that kind of thing.

And most, when you say too many people, how much of the interest you have right now, like on a percentage basis, if you had to categorize it, are individuals versus like corporations?

All of our branding is for corporations, so we've been focusing on that. Yet we still have high net worths coming in, and we'll make the exceptions and stuff, we can easily service them as well. So yeah, but it's predominantly corporates right now.

One of those individuals is like, I am a business being.

What about like endowments too? Endowments might be interesting.

Yeah, that's another really good one. I mean, yeah, there's just— there's a lot of meat on this bone, honestly. Like, yeah.

How do you guys make money?

We're taking a small spread right now. I mean, we don't really care too much about the making money up front, frankly. We just want to provide a very, very good experience because phase 2 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. So right now—

Let's hear about that.

Yeah, I mean, look, everything I'm saying should be pretty obvious. Like, who likes Fedwire? Who likes ACH, right? A billing suite is the bane 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, right? 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, like, can give someone yield, um, for their stablecoin.

Yeah, the compliance considerations are pretty intense. I can't go too much into the weeds on that, but we've tried to build a solid foundation there. And we are a team of 5 ex-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—

What have the conversations been like with public companies? I'm assuming that's a much different conversation than with private. You know, companies or family offices.

I'm not even like— I had one conversation, it went so badly. Why?

This is important. Was it, uh, a lack of education, a lack of enthusiasm? Was it they just didn't like you? Like, why do you say—

I hope they didn't. I hope they liked me. But it was—

yeah, I hope you too.

I'm trying to help you.

If they didn't like you, then maybe you call them.

They're dog people, I'm sure.

Yeah, that was the crux of it.

I mean, yeah, having, honestly, having a name like Meow doesn't help when you're talking to like the $50 billion company, like, on day one. But it's already become a weapon for us for our target market, and it'll serve us well. What happened there was, 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, 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 the idea. But I'm not taking those calls anymore.

Yeah. And they called you, or you guys went outbound to them?

I had one intro to a major, major company through an interested investor who wanted to 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 skeptics— we were just talking to Alex from Amber, and part of it is almost— is this really crypto, right? It is 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, like, this seems to be, uh, 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, uh, the stablecoin providers, as far as I know, uh, the ones that I'm assuming that you're— that you support, like USDC or GUSD or whatever, they don't even claim to be decentralized.

Oh no, that's not part of the Valley property.

Right, yeah, like it's just like literally this has nothing to do with decentralization, there's nothing to do with like quote unquote 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 that you see.

Yeah, that's our job. And we've had people successfully get over the hump. They're tech companies, they're 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?

Uh, yeah, I hope so. Uh, we'll be ready when it does. If they want to put Bitcoin on the balance sheet, we need someone more than Michael Saylor to do it. And we'll do our part to encourage people 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, 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, it is kind of like an exchange and I'm gonna, uh, say exchange in that their business model was like, we don't care what you show up that you wanna buy and we don't care what the individual asset that succeeds or fails is. All we wanna 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 gonna see us like, you know, 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 like 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 know, you have the legacy finance corporate junk bonds at 4%, then you have some like pretty blue-chip, like, 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, like, 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.

Do something like that.

Yeah. Honestly, I think a lot of them— There have been some that we've just gotten over the hurdle. A lot of them know whether they're the kind of person to do this or not upfront because of how polarizing crypto is today. 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 how we view it.