Immad Akhund, CEO of Mercury: SVB, Neobanks, and UI

Welcome to World of DaaS, a show for data enthusiasts. I'm your host, Oren Hoffman, CEO of SafeGraph and GP of Flex Capital. For more conversations, videos, and transcripts, visit safegraph.com/podcast. Hello, fellow data nerds. My guest today is Immad Akhund. Immad is the co-founder and CEO of Mercury, a banking service focused on startups. Immad is a multi-town founder, and he was previously the CEO of Haysapp, He's also a prolific angel investor with over 300 seed stage investments. Imad, welcome to World of DaaS.

Yeah, thank you for having me, Auren.

I'm really excited. Now, Mercury got a huge influx of over $2 billion in deposits in the weeks after SVB, Silicon Valley Bank, collapsed. Walk me through that time period. Like, what was it like? I imagine it was just like insane. No sleep, caffeine. Like, what happened there?

The first 4 days, like the Thursday when the collapse started and Friday, Saturday, Sunday was this kind of weird shared experience that everyone in Silicon Valley had. Like all the investors were kind of freaking out because their money was sometimes stuck. And then all the founders were worried that they couldn't make payroll. And then from Mercury's perspective, it was kind of a roller coaster as well, right? We had a ton of kind of new signups all through the period, a lot of new deposits during the Thursday. And then on the next day, Friday, all new deposits stopped. SVB basically froze operations. It wasn't obvious what was going to happen.

But even though the deposits stopped, I imagine you still have all these people signing up for an account for the first time.

Yeah, people were signing up preemptively, but there wasn't any money flowing in. And then there was this general kind of worry that we had and people had was like 2 worries, like SVB will just literally all the money disappears or some percentage of the money disappears, and that will be a recession for the startup economy, which would be bad for us. Or everyone goes to JPMC or the other big banks and Mercury is left. Yeah.

And certainly some people did go to the Morgan Stanleys and JP Morgan, et cetera.

Yeah. It was kind of Saturday morning. I actually normally go play tennis on a Saturday morning. So we went to play tennis and we had this idea To try to do something to give people confidence in money held at Mercury. And that was kind of a two-pronged idea. Number one, we had FDIC insurance. We wanted to extend that. So at that time we were $1 million and we wanted to extend it to $5 million FDIC insurance. And then number two, I often tell people that like, hey, you put some money in your operational account, put the rest of it in US government T-bills. And at that point it's like pretty secure. Like it's spread over between the FDIC insurance and US government T-bills. Like that's a reasonable guarantee that your money is safe. So we wanted to make a product that would educate people about that, which we called Mercury Vault. So that was kind of fun.

I mean, it's kind of like a hack day project, but with the entire world watching you.

Exactly. Yeah, we're a 500-person company, so it's rare for everyone to be building one thing. But over that weekend, we just, as many people as we could get on this project, we kind of hammered it out. And I was on the bank CEOs that we partner with. I was on kind of calls with them to see how do we extend FDIC insurance? Even through these like stressful moments, as long as I'm like building something, generally speaking, I'll get like pretty excited about it. So that was kind of like a fun-ish kind of weekend where we had one part of the team doing support and onboarding, another part that was building this new product, which we managed to get out like Monday morning.

I noticed even on those few days that your product got noticeably better. The onboarding flow was better, just like a lot of little things improved.

Oh yeah, we made a ton of onboarding changes as well. Yeah, I'm surprised you noticed that because we do get thousands of signups a week anyway. So we were trying to make it so if you're an SVB hit customer, we would like get to you quicker.

Yeah, like just the KYC stuff. My guess is it's much easier to open an account at Mercury than it was at some of the more traditional banks as well.

Oh yeah, most big banks, you literally have to walk into a bank branch. I mean, it's crazy.

Totally. Yeah. And people were doing that on that weekend as well. They were actually going to like the local Chase branch, probably the first time they walked into a bank in 15 years or something.

Yeah, exactly. That was the kind of first like 4 or 5 day period. I would say after that kind of relaxed, like the general stress in Silicon Valley relaxed and like our customers were less stressed out and it was more a longer-term move. Like your deposits were safe. If anything, at that point, SVB was 100% FDIC insured and not just $250K. So it was generally a little more peaceful. We still had obviously elevated signups and movements and all this kind of stuff, but it got progressively more like a steady state.

I imagine there is a point where you also had to relay to your customers that things were safe as well, and that you've spread out over X banks and these other types of things. How did that messaging work?

It was kind of threading a needle to make sure people feel safe and that we're transparent and we communicate things properly without making them feel like we're overcommunicating or panicky or anything like that. So we were pretty open about things. I think it helps when you're making like product, like it's much better when someone's like, hey, we just launched this cool product. Now you can see where your money is. Or like, hey, we extended FDIC insurance from $3 million to $5 million. If you have very explicit things to talk about that make people feel like, okay, you're doing something about it and this is explicitly a better, safer option. That helps. If we were just talking our book, we were like, oh yeah, everything's fine. Here's the CEO saying everything is fine. I don't think people would have found that too compelling. So whenever we think about marketing, we think about it as product-first marketing, if you can do it. Obviously, that's not always the case, but if you can build something, and that's what our brand is about, like that's how we're different from a normal bank, that we actually build things. And that gives a good excuse to talk to people. And that's mostly the context we talk to people about, either educationally, like we were like, okay, this is how sweep networks work. You can learn about it. And we made this like really crazy how-to page about sweep networks and how Mercury works.

What's the difference between a sweep network and a sweep account?

Yeah, this word sweep gets overused. A sweep network is like you put money somewhere and the network is the network of banks where it goes sent between.

Oh, got it. So that's where you have this like collection of banks where it deposits a little bit in each one.

Yeah, exactly. And a sweep account, I guess, would be an account in the network. Different banks have slightly different terminology for these things.

Do you think the future of, let's say, a checking account for a business is you're going to have some money which is accessible right now, and then maybe the rest of it is just in short-term or medium-term T-bills, and then you're going to be able to get it when you need it? Is that the future, or how do you think that's going to work for most companies?

I think it's really different based on your size. If you're a small company and you haven't raised funds yet, let's say you have tens of K, I don't think you're going to maximize convenience. On the other side, if you've raised $200 million and you have a CFO, like, they'll be irresponsible to not get yield and not maximize safety. So they'll be irresponsible if they don't have some sort of treasury component and they ladder it and all of that kind of stuff. Then there's just a middle ground.

But a lot of these Series A startups have raised $5 million. Earning 5% on that is actually not small.

Yeah, it's a no-brainer. Yeah, I think anyone above $500K— and I actually don't think they'll do it for the safety reason. I think safety is like a temporary motivator. I don't think it lasts very long, but greed is a much more powerful motivator. So anyway, anyone who's raised more than $1 million will be like, hey, 5% of $1 million is $50K. That's a reasonable chunk that will help hire someone or whatever. So I'm going to put money in yielding instruments. So yeah, as long as interest rates are above— we found that 3% was the time that people really started caring. Like 2%, people don't care that much, but 3%, suddenly people are like, wow, 3%.

The difference between 0 and 2 is nice, but once you start getting more than 2, it starts to get like really meaningful.

Yeah, exactly. And at 5, it's clearly meaningful. So as long as it's higher than 2, yeah, as long as people have raised more than $1 million, I think people will get yield for their non-operational accounts. And we make that very easy through this. We have a product called Mercury Treasury.

In the world of banking, there was this kind of meme in that March timeframe that some of the big winners were the really, really big, well-known banks kind of like flood to quote unquote safety there. Like, how do you think that Plays out over time?

There's like 2 parts to this, as in 2 views I have, and I'm not sure which one will be the winning view. One view is that regional banks are going to have trouble without extended FDIC insurance. So if you're choosing and you have lots of money especially, it seems like a no-brainer right now that either you want to go to a big bank or you want to go somewhere like Mercury and get more FDIC insurance. Choosing like a local regional bank, Unless you got a loan from them or something like that. Like, it just feels a little irresponsible right now. These smaller banks, ever since the Great Financial Crisis, they've been kind of shrinking anyway. There's been like a ton of consolidation.

The US has like 5,000 banks or something, right? It's just a lot.

Yeah. I also think with the internet, the concept of regional banks is not so relevant. It used to be that the only way you could get a bank was like you walk to it and it was local and all that kind of stuff.

But even there, if you go to like any random downtown and if you go to just any random suburb or even a rural area and you go to downtown, there's like 8 banks like right there.

Yeah. And normally the big ones are there. Yeah.

No, no, ones you've never heard of. There are ones you've never heard of that are at this place. Like there's like, you've never heard of 6 of the 8 banks at some random place. Like if you just go to some shopping center or something, you'll see them. And it's just unclear. I guess there must be a reason why they have all these branches.

Yeah, I mean, the main business that most banks are in is lending. That was one of my realizations when I started Mercury, that banks are not in the business of banking your deposits. That's a cost center to them. Their real business is lending. That's where they make money. Once you think about banks like that, it kind of explains a lot of things about them. Like, why does it suck a little bit to be a depositor? And why don't they improve the product? And they don't seem to care that much about you.

And at Mercury, you have the opposite. You're not making money from loans today. I assume the way you're making money is you take a small percentage on the difference of the interest that they get and on the deposits. Would that be an accurate statement?

Yeah, exactly. So we don't do any lending. We take a spread on the interest. We also get interchange. So whenever you swipe one of our credit or debit cards, we get a piece of that. We also have FX. So we mostly make money on those kind of payment flows.

Okay, got it. That makes sense. And to me, one of the things that really you focused on from the very beginning, which sounds maybe silly, is just the UI. If you ask most people about their bank UI, usually people get extremely upset, they start perspiring, they're really unhappy. Whereas the Mercury UI, it's very nice, it's easy, it's simple. Is that something only a newcomer could do? Like a bank that's been around for 100 years, you just don't think they could actually build? Something like that's beautiful and easy to use?

There's 2 aspects to this. Number one, most banks are not building the UI. So there's these third-party services, like people call them banking cores. So FIS, Fiserv, Jack Henry, and that's who's building the UI.

Well, those are for like, I assume the huge banks.

Yeah, the huge banks do. But even then it's often editing those types of things.

Okay, got it. So buying a platform and then they're editing it or something.

Exactly. Exactly. So you have this very common restrictions across every bank. For example, you can only search for transactions within the last 90 days. And the reason it's the same restriction across everything is everyone's got these cores. And this core software is really literally mainframe COBOL software.

Okay.

So that's one aspect of it. The second aspect of it is it's just hard to build good product. I don't think that should be underestimated. You need this maniacal focus on quality and like you need great designers and engineers and you need all of this package that tech companies have. It's very hard for a bank to go from not having it to having it. I mean, I'm sure it's not impossible if they had someone that really cared.

Right. And you guys have 100, 250 engineers focused on this.

Yeah, exactly. Yeah. I mean, it is doable for sure. It's very rare for a non-tech company to become a tech company. Maybe there's some exceptions.

Yeah. And it's great if you are a talented engineer or designer. Are you really going to go work for Citibank or something? Probably not.

Yeah. I think the other thing that's a little more subtle is there's these compliance teams at these banks that make things very tricky for innovation. The default view from compliance is like, hey, there's probably a reason that you can't search for transactions more than 90 days old. And you have to go through like a complicated process to get approval for something that basic.

Okay. So anytime you want to change something, it's like you got to get all the lawyers involved, which makes sense. I mean, banks are regulated institutions, and then so everything slows down.

Yeah, exactly. Compliance obviously has an important place, but I think it's also important to think about how do you understand your customers, and you can use data and have much better understanding. So we don't have a flat compliance scheme. If you're a startup and you're a funded startup, basically you will never commit fraud. maybe you'll defraud your investors, but on a bank level, at least you're a very safe entity. So you can have like very different compliance regimes for different types of customers if you understand them well, which big banks get people walking off the street. It's very hard for them to like really understand things.

Now, I assume your primary customer are startups and really venture-backed startups, which is kind of an incredibly volatile customer base. Like, how do you think about that?

Mostly we're about 40% startups, 30% e-commerce, and then the other 70% is kind of a variety of businesses. Is it a volatile customer base? I mean, from 2008 to 2021, it was only up and to the right, so it wasn't volatile, but—

Yeah, yeah, totally. Well, it was still volatile in that these companies are going out of business at a higher rate potentially, or—

Oh, I see, in that sense.

Or you're getting like huge inflows of cash one day. It's like they had $100K in their bank account, the next day they have $10 million in their bank account. Like that was probably not true It's not a dry cleaner or something.

Yeah, one of the things that I wasn't sure about when I started Mercury is like, sure, individual startups are volatile, but if you take a cohort of startups, like how does it perform? And I wasn't 100% sure when I started Mercury was like, if you take a cohort of startups, do they grow over time? I'm actually not still 100% sure about that, but up until mid-2022, they would grow over time quite significantly, actually. Like our deposits would basically double every year in that cohort. So you'd sign up a bunch of people, it would double after 12 months, it would double again After 24 months. Yeah, 2022, 2023 is kind of throwing off all the maths a little bit. So we'll see exactly how it settles off. But as a cohort, I'm pretty sure it grows over time. It is important for us to keep them as they grow. We're always investing in like—

The new features.

Yeah, that are upmarket. Like we just launched wire drawdowns, which is like, you only need it if you have more than $400,000 a month in payroll, but obviously bigger companies need it. So it's important to grow with the companies, but yeah, in general, cohorts do grow. It's not an easy market to serve, to be honest. It's quite a demanding market. Like they have international operations, millions are flowing through. So you need to really worry a lot more about the types of fraud you can be hit with and the types of alerts you have. I mean, that's partly why there are other SMB neobanks, but startups don't use them. Mostly freelancers don't use Mercury that much. But these kind of changes in how customers behave actually tend to lead to a differentiated experience that you have to deliver.

And one thing is a lot of these startups, sometimes they're fairly international from day one, and sometimes they have founders that are not based in the US. Or how do you deal with all that quickly? I imagine some of these guys like may even have trouble getting bank accounts sometimes and things.

Yeah, you know, when we launched, there was 3 things that were really differentiating beyond the product. Number one, I insisted on being able to serve non-US residents, partly because I'm an immigrant to the US. And I was like, we know that the startup ecosystem has got a lot of immigrant founders, and I wanted to make sure that we serve them. Number 2, we had wires and international wires from day zero. And then number 3 was online signup. So All 3 of those are relatively basic, but we were basic, at least on the first 2, we were the first fintech to do them, have wires, international wires, and non-US residents for business banking. And it was really an important segment for us in terms of how we do it. So they have to have a US entity so you can KYB the US entity. We look at passports and we have sanctions lists and all of that kind of stuff. So it just requires more work. We have 100% of applications have at least some manual component. We try to automate a reasonable amount of it, but someone has to look at it and make a judgment call. But yeah, you can walk into a normal bank and be a non-US resident and get a bank account. So there's no law about it. There's just extra risk and controls that you need.

Yeah. One of the things I was thinking about, back to the UI, like if you think of the average bank, like if you actually walk into their physical branch, they're usually pretty nice. They're clean, they're well maintained, the people are friendly. I mean, I don't really walk into banks very often, but I imagine it's actually a relatively good experience. But when you go to their website, it's like the exact opposite kind of experience. It's ugly, it's not well maintained. It's like, imagine if you walked into a branch and you saw trash everywhere and there were cockroaches and rats running around and stuff. But that's what they do to their website. It doesn't make any sense to me. It does seem like the website is kind of an important part of what they're doing. I don't know what the cognitive dissonance there is.

Yeah, well, hopefully they'll never get that religion.

Yeah, yeah, good point. It's good for you that they haven't figured that out. Now, one important part of banking, I imagine, is just like service, and that's not necessarily like something tech companies are known for. How do you really instill that? How do you think about that?

I think there's like 2 ways of thinking about it that I think are important for us. So number one, we really think about customer service as part of product. So whenever there's a customer service issue, we have a team that literally combs through customer service issues. We have 2 teams actually that will try to come up with like, oh, a common issue is X, let's build a product that improves that issue. My view on it is if a customer is calling in or emailing or whatever, like that's a big failure because it takes a lot of pain before a customer gets to the point where they're like, okay, I'm going to contact. And like for every person who does, like 10 probably don't. So if we can fix those, and often they're not major things, they're like little things like, when should I expect this wire to arrive? And if there was just like somewhere on the website that was very obvious and where they would expect it and said like, oh, wires take this much time kind of thing, it would actually answer a lot of kind of questions. So we do a ton of that and continuously improve the product to like solve customer service queries and educate people before they need to contact us. And then B, everyone is in-house. Like it was me and my co-founder doing customer service initially. Now we have a— Team of 40-ish people, everyone's in-house. When we hire someone, we do product interviews for customer service roles. We take it like as a very serious part of the product and part of the talent we have. We don't think of it as like, oh, it's the customer service people. Let's just get the cheapest people that can answer tickets. So I think those are 2 things. And then 3, and this does help us, we are much better when we are serving a startup or e-commerce company. That's most of our customers. We can relate to them. We can understand what's happening. 5% of our customers are real estate. And like, we probably just don't do that good a job if someone asks us a question that's real estate-specific and banking-specific because it's a niche for us.

Now, you were not in banking before you started Mercury, and I've kind of heard you say that there's an advantage to founding an industry without really knowing a ton about it. Like, how would you give advice to other founders?

On a personal level, I like doing new things. So I've done 4 startups. They've all been in different spaces. I think that's like an intellectually fun exercise to learn something new. And like the first time I talked to fintech and banking people, I was just like, what the hell are you talking about? They love their acronyms and things like that. But after a few months, I was like, okay, I kind of understand what's going on. That's kind of cool. So that's one aspect of it. I do think, especially in these kind of incumbent spaces, if you're in the space a lot, people expect that things are the way they are because that's just the only way they can be. And you start Defaulting to the paradigm that exists. And if you approach it with like, I know nothing about this, but I'm going to question everything. And I was surprised about this. Like, you kind of expect regulatory stuff to all be like black and white, but a ton of it's gray. It's like, just things have always been done like this and that's just the way it is. Whereas if you keep going, okay, but why? And then they're like, oh, there's this law, but you could interpret it like— you end up with a ton of gray area. Not just the law, but everything is gray, basically. You can bend the world to your will as long as your will is logical and not stupid. I think it's a fun exercise, actually, getting to learn something new and understanding the limitations of it and what you can change. But yeah, there's also an element of it is hard. It is hard to build a fintech company. I would say it's at least 3x harder than a normal software company. It's like you've got the normal software bit, which is just the interface, and then you've got the full regulatory compliance risk part of it. Like almost everything you do, they can steal money from you. And then you have this backend fintech legacy things that you have to interface with. And there's probably like freaking 40 vendors involved in delivering Mercury. So you end up like every time you do something that involves the financial part of things, it just takes a lot more effort than seems reasonable. So yeah, there's also that element that if you don't know how tricky it is, you're more willing to like— Go through the pain.

On the plus side, from a customer perspective, I think they understand that there are certain types of businesses that are regulated, and then when you do improve on them, it's actually very delightful to the consumer. I remember 20 years ago, the first time I flew on Virgin, and they had this kind of whimsical safety video. It was the first time in my life I didn't see the most boring safety video from a plane. Now every plane has that, but at the time they must have had to talk to like 50 lawyers before they were able to put out that. But they're like, hey, we want to have a fun video. There must be a way to get a fun video and not a boring one.

Yeah, yeah. And that kind of stuff does really leave a positive impression. I'm always like, the standards are just set so low in banking that like we do like some stuff which I consider relatively basic. We're like, oh, we make it easy for you to copy your account number and routing number. And people are like, wow, look at this insane feature.

One of the things you guys have focused on is these, the passkeys and stuff. And then you also have apps for Chrome. And these are things I really didn't see in many companies, even outside of banking, like anywhere before Mercury. Like, why have not other companies done like a Chrome app and other types of apps?

Yeah, I mean, we have a pretty creative design and engineering team. So that Chrome app, I actually tweeted about. I was like, I didn't even know we built this. I thought that was kind of cool. One thing that we do, which I think we did relatively early on, is we have these product teams that are fully autonomous. They're smallish teams, mostly like 6, 7 people.

It's like the 2-pizza teams.

Yes, exactly. But we did that early on. We did it when we had only 60 engineers. For example, we have a security team. Some of the time they're dealing with some actual security breaches or whatever, but they're also just making cool stuff. So they made the Touch ID thing and then, yeah, I'm not even sure which team made the app install, Chrome install thing. I think that was a hack day actually. So it's very hard to do these kind of small-ish innovations top-down. I think it's much better if you have teams that have like these remits that they can continuously do things. Also hack days are like just a great way, like we do them like once every 2 months or so, but they're a good way to just kick out a bunch of like cool things and see what sticks and go deploy one of the things that sticks.

Now, when you raised your Series B in 2021, you did kind of like a community round, which was interesting. Like, what are your takeaways from that process?

Yeah, it was great. We actually had about 3,000 people invest. You didn't need to be an accredited investor to do it. It was the exact same terms as our Series B.

It was like an RUV type of thing?

Kind of, but you didn't need to be an accredited investor. It was done by WeFunder. We had about 10% of our top 1,000 customers do it. It was cool.

Amazing. And you could put in a few hundred bucks even, or what was— was there a minimum?

Yeah, there was no limit. Actually, the smaller was easier for us. We wanted to get as many of our customers in there as possible.

So you could even do $200 or something if someone wanted to?

Yeah.

That's so awesome.

I think maybe it was $10 was the minimum. I think $5,000 was our maximum that we allowed. So it was a lot of small people. It was $5 million of the $120 million was basically this.

Where did you run that?

There's a company called WeFunder.

Oh, WeFunder. Okay. Yeah.

Yeah, they do a bunch of them. And yeah, my thinking was I just wanted to align incentives as much as possible. I'm a big fan of getting as many people with skin in the game as possible. So I had 60 investors in my seed round, 40 or so in the Series A, and then I guess 3,000 in this round. The more people that have a little bit of skin in the game, the more random serendipity you get because people are like, oh, I told my friends about it and I'm a small investor. And it's kind of a cool feeling. I think actually that's partly the power of, let's say, Tesla. They've always had this massive public market kind of advocacy from the retail investors. So yeah, I think it's cool. I think more startups should do it.

Especially ones that have a lot of customers, then they can go get their customers involved.

Yes, exactly. Sadly, it gets like a little bit of a bad rep because some people who fail to raise a normal fundraise then go do a crowdfund and end up with like some selection bias.

Ah, got it. So it's like, hey, we already raised from a top-tier VC and we've got a piece of the allocation. We raised $50 million, but $3 million is going to go to you guys and you guys can take it up or something like that.

Yeah, exactly. So doing it alongside a real fundraise, because, you know, it is hard for a normal person to vet a startup.

So you basically say, hey, this top-tier VC invested, you're going to get the exact same terms as them. We're not going to obviously give you all the private information, but they did the due diligence, they did all this stuff. So you're not getting anything different than they're getting, except for maybe they have some special information and board rights and veto rights or something, but you're getting the exact same terms that they're getting in the investment.

Yeah. Yeah. That's the way it should be. But often with any sort of thing where money's involved, there's like some abuse.

Yeah. Now you're not only the CEO of Mercury, but as we mentioned, you're also a very prolific angel investor. I would call you a dual threat CEO. And the data that I've seen on these dual threat CEOs is they've often way more successful investors than even full-time VCs. Why do you think that is?

If you think about investing, there's 3 pieces to it. There's like, how good's your deal flow? How good are you at picking? And then how good are you at being picked, if that makes sense. And I think generally speaking, founders, especially once you have some success, have an unfair advantage in being picked. I would always pick a founder over a non-founder investor. Sorry to all my non-founder investors, but like a founder investor, like they've been through it. They can help you with like very specific advice when you're in that situation.

A current founder is also different than a former founder. Someone who exited 7 years ago, like The entire world has changed. Maybe the very big things haven't changed, but every other thing in your company has changed during that time.

There's also some weird benefits you get from having founders. Like, for example, I had Keizar, who was invested by Andreessen Horowitz, and he committed to us just before Andreessen Horowitz did for our seed round. And he was basically like the advocate in the room. He was saying, hey, you should invest in Immad, like, he's great. It's hard to get that from non-founders. So there's that element. And then the deal flow element is also, I have mostly nowadays, I get inbound deal flow where people are like, oh, I know you invest. And, you know, especially if they're fintech or they serve startups or like there's some sort of relevance, you end up getting like pretty strong non-positive deal flow. And then the last bit of picking, I think, especially if it's at all related to like your kind of space, you have an advantage.

No, some of them also may even be products your company uses. So it's like, I use this product, I know it's good.

Yeah, I actually, I don't do later stage stuff very often, but often I'll do it for ones that I just did. MidDesk, because I'm like, oh, I use MidDesk, it's cool. And that's like a KYB thing. And I just did Linear as well. So yeah, if you've used it, I'm always like, I think Mercury is pretty picky about which vendors we use. So if we pick it, it's probably a pretty good chance that's a category winner.

Okay, interesting. Now I'm with you on the fact that being a founder CEO makes you a better investor. Does being an investor make you a better CEO?

Some people, especially— this used to be the case— people would say if you're doing anything but your startup, then you'll fail.

Right, right. Even if you have kids, like, you can't even have kids, you can't have a relationship.

Yeah, exactly. I think that's silly. I've been doing startups 16 years, if you're not doing anything else, you just give up. You'll burn out. There's just no way you can only do startups.

And there isn't anyone who is not doing anything else. Everyone is at least doing something.

No, some people— I was just talking to a founder, especially early founders. They get bought into this idea that if they do have a relationship, they're not focused on their startup. I think it's insane. But yeah, it's not healthy. But then there's also a reverse of it. There's definitely people that are too distracted by going to conferences, investing, and all of this kind of other stuff that's not driving your startup. So there's a balance to it. have to recognize that. So I've always seen it like, 99% of the time I'll do my startup and I really see investing as a hobby. Like I'm not doing it in terms of like, it's not my real job.

Yep. It's like your tennis thing or something.

Yes, exactly. And especially for those types of things, you should only do things that energize you. Like I love talking to founders. I love hearing cool ideas. It doesn't take away from my energy at work. So that's one element. What was your original question?

Do you think it actually improves you as a CEO?

I think there's elements of it, especially as Mercury scales. It's nice to keep being reminded of what 5 people in a garage can do. It's easy to go like, wow, we have 500 people. And it's easy to go like, oh, this is such a hard project. Like it's going to take 6 months to do this thing. But I'm like going like, oh, I know a small team can get this done quickly. Like we should be able to get it done quickly. So there's that element of it. There's definitely An element of learning what is the latest thing. Mercury has currently no generative AI or AI element to it, but I have a pretty good idea of what is the latest there in terms of like what people are doing just because I hear those pitches.

But Mercury might be using some gen AI tools for helping Copilot or something like that, helping your software developers or maybe helping your UI people or someone. They're probably using the tools for sure.

Yes, the Copilot thing for sure. And we're using a little bit of it in support, but we don't have a major product that is customer facing there, but It's nice to know, like, what are people doing and how are they doing it? And yeah, I feel like you end up staying near the cutting edge of a pretty reasonable variety of things. And I guess lastly, I think a lot of running a startup is how do you keep yourself motivated and willing to do the grind for years and years? So like having these kind of creative outlets is an important aspect of it.

If there's a new founder listening right now, like, where do you think the big opportunities in the fintech space are?

One problem right now, no problem, problem for that founder is that everything in fintech was funded in 2021. So if you think about the idea space of all the things, every neobank, every lending thing, so you really have to go like, what is new? What is something that hasn't been explored? So I think the 2 ways I would consider is like, do you have like a deep insight into a space? So. I've seen a couple of these banks that focus on HOAs, or neobanks, I should say. And that's potentially interesting.

Some sort of core niche that you can dominate or something.

Yes, something you have a deep insight in, and fintech is just the tool you're applying to that insight. That's one way. To some extent, Mercury had a deep insight into a kind of startup mindset. And the other way would be you try to apply— AI is the most obvious thing, but some new technology, some new movement that's happening, and you apply Or maybe there could be a big regulatory change in some part of the world or something. Yeah, regulatory. If you're in the US, the US financial services market is so much bigger than the rest of the world. It's like 10x bigger than the next country or something, maybe excluding China. So I do think the US is the place to do fintech if you have a chance to do it here. Yeah, it's like, what are interesting AI applications for it? Maybe you pick something which is very services-based, maybe wealth or something, and then you apply like a massive kind of efficiency to it with AI. Yeah, I don't know what the idea would be, but that's the kind of approach. I do think the positive thing right now is no one is coming up with new fintech ideas that much.

So yeah, they're not getting funded.

If you have a good idea, you could have a 2, 3-year run at it without competition, which is very hard to come by in previous years.

Speaking of the US, you were born in Pakistan and you moved to UK, I think, when you're around 9 or so. And then later to the US as an adult. Walk me through these kind of like different places. Like you chose to kind of start a company in the US. You could have started anywhere. How did that process go through your head?

Yeah, so I did my first company in the UK. I was like 22, I guess. So this is 2006. And that company didn't go anywhere. It was kind of like a Yelp, but back then Yelp was not really in London. But I really got addicted to the idea of startups. I would go to all the meetups and I would talk to other entrepreneurs. I'd be like, wow, they're doing like such cool things. I was just sold that this is what I wanted to do, even though the company didn't go anywhere. One thing that struck me is most of the entrepreneurs, like the people doing new things, weren't very successful in London. Whereas I would read TechCrunch and whatever, and I'd be like, wow, like these people are raising serious rounds in San Francisco and Silicon Valley. And especially in 2006, like there was just almost none of that in the UK. I felt like even in 7 months of doing that startup, I had met everyone and I was like near the top of the field, even though my startup was not a success. So I was like, okay, I want to be where the action is. And the only way that I'd seen anyone do it, move from London to the Valley, was through Y Combinator. So I was like, next company, I'm going to do Y Combinator. So we did YC for a company in 2007, and then I moved there. And this was a really fun time. It was the Facebook app craze. So this is like 2007. And it was just so cool. Like I'd go to this meetup, I went to F8 back then, and you'd meet these people that are like, yeah, we launched this app. It has a million users and we launched it like 3 weeks ago.

I was at F8 as well. That was an amazing event.

That was a cool F8, right? Yeah, Mark Zuckerberg was there. Anyway, it was just a really electric atmosphere. It was probably like what AI feels like now, actually, in San Francisco. But I was just like, I can't leave. That was such a great kind of experience moving in. It was also, this was a very early class of YC, '07. And back then, most YC companies would die. It was literally like, 2 or 3 would get funded and the other 10 would just stop working like the week after Demo Day. But the ones that would get funded and stick around, like a lot of us lived in the same building. It was called Crystal Towers. So it was just like this really, I don't know how you would recreate that atmosphere. Hopefully it is being recreated for other people, but it was just such a fun atmosphere to move to. I enjoyed it a lot.

Do you think your experience as kind of a double immigrant, or you've kind of immigrated twice in a way, I imagine that Gives you kind of a leg up on being a founder because you're kind of used to all these different kind of changes and differences.

Yeah, I don't know. My sisters also had the single immigrant experience, at least, but they're not as entrepreneurial or anything. So there's definitely an element of just personality. I've never really viewed risk in a way that most people seem to view risk. Most people are like really scared of risk, but probably shouldn't say that. But like, I get excited about it. I like new things. I like changing things.

Is it really risky to start a company? Maybe you just calculate risk differently, but you might be actually risk-averse.

I know. Well, we are not normal, Arun. Most people do consider it risky. Yeah, the risk is not starting a company from my perspective.

Right, right, exactly. Not being happy, not being fulfilled.

Yeah, that's how I view it as well. But it is an unusual way to view risk. I think most people, they have something and they worry about the downside of losing it. Whereas I'm like, okay, I did have a job once and I know I could get another job. So that downside to me doesn't really exist. I'm like, there's always a backup option. Then the only downside is not doing something.

And the risk is capped too. You might lose X dollars difference in salary from your start, but you kind of know what that is. It's less risky than going to graduate school or something and paying for graduate school.

The other aspect, which is the non-monetary side, is even more important. Like, I had a job at Bloomberg and it was just like so soul-crushing. Like, I would just go in, I would find it so boring, and I would work the minimum to like get by. And then I would come home and I would feel so tired. Whereas like I did a startup and I was working way harder, but I was like fully energized and like feeling it. A life not well lived is the biggest risk.

Absolutely. Now, you're still in San Francisco. Why do you think San Francisco is still the best place to build in your view?

I mean, you can do it in other places and it's probably become easier to do it in other places. So I think there is a personal choice to it, which is, hey, I love investing. I'm fairly myopic. All my friends are entrepreneurs. I like it like that. So if you want to be surrounded by entrepreneurs all the time and you want to be in that ecosystem and feeling all the time, I don't think there's a better place for it. There are, I think, lots of little advantages you get. I can always talk about whatever problem I'm having in a startup with the people around me. I can say like, hey, oh man, this fundraise is really hard, or like, I don't know how to do it. And they'll come back with pretty knowledgeable, interesting ideas or like people I should talk to. And like, that's just casual. That's just the default conversation you have in San Francisco or Silicon Valley or the Bay or whatever. But in most places, there's just not a critical mass of people around you doing the same thing. So there's just these advantages that you pick up over time that I do think compound. And then the other element is all the VCs are here, or if they're not here, they're coming here quite often. So I do think you shouldn't always be fundraising, but I think every 6 months or so, it's worth sticking your head up and just going talking to a bunch of investors. And I've done that throughout Mercury and throughout other things and having to travel here just to go have a few hours of meetings would be quite a lot more expensive. So I think there's a bunch of these kind of subtle advantages you get from this network effect of concentration. So If you're sure you want to be a startup entrepreneur, you want to be in the ecosystem, or you want to be a VC, I think this just maximizes your chances if you're here. But you can do it other places and lots of people are now.

All right, cool. This is 2 more questions before we leave. One, I'd love to get your thoughts of a conspiracy theory that you believe.

I'm quite a nuanced person, so I always see the 2 sides to it. I don't know if this is a conspiracy theory or not, but I'm like a pretty I'm a big believer that China is going to be pretty screwed because of its demographics. Is that a conspiracy theory? I think one side of people are like, oh, China is going to have the biggest GDP in the world and America is going to be like a secondary superpower. But I think it's pretty obvious that China is about to like cap out or has capped out. Like last year, I think more people died than were born in China. So it's just very hard to fight that trend. Especially for a country that's based on cheap labor force. It seems inevitable to me that China is going to basically be where Japan was in the 1980s, where everyone was worried they'll be like bigger than the US and it kind of capped out.

But you think like the main reason you're not as bullish on China is because of the demographics rather than like their political system? You hear lots of different arguments.

There's a few books on this, but I really like Peter Zeihan's book, Accidental Superpower, that talks about demographics and geography. It's a good book.

Yeah, that's a great book.

But I'm pretty sold on it. You can see it in every country. You can see it in Europe, but you also see the reverse of it, like in Africa and India. They have a very young population and a lot— it just fuels this kind of vibrancy and growth when you have a young population, then the young population's growing. I actually think the People who don't believe that have somewhat zero-sum thinking. Like, more people, more young people especially, is just better for economies because literally wealth is created from nothing if you have more people. That's like kind of what is what's happened in the last 100, 200 years. It's like we've had more and more people and more and more wealth, and it's actually more than nonlinear. Like, 2 people is not just 2x more wealth, it's actually 2.5x or something like that.

In the US, the median age has been going up, maybe not as dramatically as some of these other countries, but now it's like 39-ish or something like that in the US, and it's only continue to go up, it seems like.

Yeah, the only thing that saves the US is immigration. Obviously, I'm an immigrant, so maybe I'm biased, but I mean, if you just do the maths, the replacement rate of the existing US population with no immigration is like below 2. So we would also be shrinking if it wasn't for immigration. It's kind of sad that neither party is pro-immigration right now. Everyone was like, Trump is awful for immigration, but then Biden came in and he basically didn't undo any of the anti-immigration things that Trump did. So Ideally, and someone will re-get Religion of Immigration, we could have like a really nice skill-based immigration system in America and we could solve a ton of America's problems with that. I just read another book actually that's really good. I can't remember the author, but it's called like A Billion Americans or something like that. Have you read this book?

I've heard of it, but I haven't read it. Yeah.

His thesis is like America is actually very non-densely populated.

Yeah, you can fit like a billion people in Texas or something.

Yeah, exactly. Well, that would be extreme.

I think it's something like if you put every American in Texas, you still have one acre per person or something.

Oh, really?

Yeah. Yeah. So, because Texas is roughly like 300 million acres or something.

I mean, that is the power of America. I think that I can move here, whatever, 16 years ago, and I feel pretty American. I feel more American than I do British or Pakistani. And my kids are just fully American. They don't even think of themselves as non-Americans. So, You don't get that in other countries. Even in the UK, if you're Pakistani and you're second-generation Pakistani, you kind of still feel like Pakistani because to be English is to be white.

Well, but the UK does have a South Asian PM.

Yeah, maybe it's changing now, but there's like a relative amount of segregation. I don't know. And America is just a different place. There is no American. Like, everyone can be American, and that's a pretty powerful thing about it. So hopefully we'll get it back.

Okay. Yeah, I like that. Last question we ask all of our guests. What conventional wisdom or advice do you think is generally bad advice?

Maybe I should have prepared for these questions. Everyone doesn't give this advice, but I think almost everyone who can should go to college. I think this is a little anti-college movement right now, but I do think it helps you learn who you are, and that is an important thing.

Because it's a bridge between adolescence and adulthood, but couldn't you learn that in the army or some other thing?

Okay, sure. There's maybe other places that you could do it, but for most people, if they go straight into a job, you don't have the same time and social circles. In college, most of the time you have a lot of time and you have a lot of opportunity to do things outside just your field. I think it's a powerful time.

But you're really talking about these more well-known 4-year universities too, right?

I did 3 years computer science specialized in Cambridge, but still you have a ton of time on your hands and you get a lot of exposure to people that you wouldn't normally. Obviously you have to be open to that, but I think it's a really good experience and it's very hard to see what replaces that. We kind of replaced church. Religion is for most people gone, but we didn't really replace it with anything else.

So people now lack community and Maybe political ideology or something like that is the people's religion.

Yeah, I know, but we've replaced it with things that are less complete. And I worry a little bit about that as well. Like, people are going to replace college with something that doesn't quite fulfill most of the things that college was about. People who think college is about getting a job and all of that, at least to me, that's not what it was about. Sure, it helped with that, and that is like a side effect of it. But as you said, the bridge from adolescence to adulthood is quite a powerful bridge.

How do you think, like, in adolescence, a lot of kids feel a lot of pressure to go to a good school? And you have kids, and I imagine, like, and the pressure can get pretty intense for kids. Is it a good thing that they're all trying to get into X school and thinking about that, and they're kind of like doing maybe more rote things that they think the admissions director will like them?

It is unfortunate. I mean, some level of pressure is not bad. Like, we live in a competitive world, and I'm not a fan of zero pressure either. I think it's good that you prepare hard and work hard and like get ready for tests and learn things and all that. But yeah, I think there's definitely like an unhealthy level of it as well. So it's just like having a good balance. It's tricky when you have kids. You're always trying to like strike a balance of motivating them but not feeling— make them feel pressured, making them feel loved and all of that. So hopefully People try and set the right balance for themselves.

Thank you. This has been amazing. Thank you, Imad, for joining us on World of DaaS. I follow you @Imad. You have a great handle, @Immad, on Twitter, and I definitely encourage our listeners to engage with you there. This has been a lot of fun. Yeah.

Thanks for having me, Orion. This has been fun.

Thanks for listening. If you enjoyed the show, consider rating this podcast and leaving a review. For more World of DaaS, and DaaS is D-A-A-S, You can subscribe on Spotify or Apple Podcasts or anywhere you get your podcasts, and also check out YouTube for videos. You can find me at Twitter at @auren, that's A-U-R-E-N, Auren, and we'd love to hear from you. World of DaaS is brought to you by SafeGraph. SafeGraph is geospatial data for physical places. Check it out at safegraph.com. And by Flex Capital. Flex Capital invests in data companies like those we talk about at World of DaaS. Check it out at flexcapital.com.