Reimagining Retirement Investing, Failing Fast, and Redefining Luck with Eric Satz of Alto

Eric, welcome to the show.

Justin, thanks for having me. Really excited to be here. And by the way, I like your haircut.

We share the same, Eric. We are, we are one kindred spirits in that regard. With Alto, I want to know, for people who aren't as familiar with Alto, what are you doing today with the company?

So we make it easy for individuals to access their retirement savings for purposes of investing in alternative assets. And the next logical question is, what's an alternative asset? So thanks for asking, and I'll go ahead and answer. Private equity, venture capital, real estate, crypto, artwork, collectibles. So antique automobiles, Rolex watches, Michael Jordan sneakers, whatever it may be, cultural assets as we now define them. And if you ask me, I think cultural assets are the the, the up-and-coming stock market, right? It'll be in addition to, uh, what we do on NASDAQ and, and the New York Stock Exchange. And so it's been really difficult up until Alto to be able to access these retirement funds for purposes of making these investments, things you know about, things you care about, things you want to be involved with. And so we have both tried to make it Uh, really stupid simple and cost effective.

I love it. And with your kind of more recently, obviously people are hearing more about crypto and some other ones in the past couple years, but you've been around even before then. Take me through the beginning. Why start this in the first place, Eric?

Yeah, so I had this problem, right? Like, it's just, it's the entrepreneurial, uh, stereotypical story of sorts. Although I will say that I do not think that any 2 entrepreneurial stories are the same.

Yeah.

Despite the clichés and the stereotypes. But I was looking to use my retirement savings to invest in a private company that I was involved with. The only problem, of course, was that I didn't know if that was legal. And, you know, I'm a recovering investment banker. I've been a venture capitalist. I'm a serial entrepreneur. You know, so in 30 years of being around investing, I had never I had certainly never used my retirement savings to make an alternative asset investment, much less even thought about it. And so what happened was one day when I was getting ready to make an investment in this portfolio company, my retirement statement showed up and I literally had that proverbial light bulb moment. I'll try and use as many cliché and stereotypical words as I can now in a single sentence. So, but the light bulb moment was, you know what, I'm getting ready to make this long-term investment because most private company investments are long-term. You got to plan on 7 to 12 years.

Yep.

Retirement money is the money I should be using for multiple reasons. One, from a duration matching standpoint, I may be old, but I'm not that old. And so— You know, I still have some legs on that, if you will.

You got 1 or 2 years left for sure.

Right. You know, it's like, you know what? I can't use this money until I retire anyway. I should use this money. And by the way, when this investment does really well, because I'm an optimist, the returns will all be tax-advantaged because it's sitting in my retirement account. And so, I thought that was a great idea. I thought I was so smart. Except I didn't know if you could do it. Didn't know if it was legal. So, I went to Google, which any rational, logical person would do, and I typed in, is it legal to invest my IRA in a private company? And Google said it was. So, well, there you have it. The only problem was figuring out the execution side of that because the major Broker dealers, trading houses, Fidelity, Schwab, etc. They're not going to allow you to do that.

Yeah.

And so this became my introduction to the self-directed IRA industry. I had to find a custodian who would enable me to invest in this private company. I did that. Long story short, I had a. Painful experience. And it was overly expensive and overly complicated and beyond overly time-consuming. So I did it 2 more times. But I used a new custodian with each of the next investments that I made. And what I found was that I actually picked the best of the worst the first time around.

Oh, gosh.

And I just said, this cannot really be this painful.

Yeah.

And me being me and having the personality disorder that I do, I decided to see whether or not it was a large enough problem to fix. We have $30+ trillion sitting in retirement savings accounts. I thought that was just large enough to try and attack and fix. And that's the origin story.

Okay.

In slightly longer than a nutshell.

There's a lot to unpack. We have a limited amount of time, so we can't go through everything. But with that, at the time, obviously people see problems out there that they have in their own lives. They don't just decide to start their own company. Your background's varied, so you could have gone a lot of different ways with this. You mentioned the investment banker side of it, investing as well. You have a lot of different things you could have done. Just, I understand the problem, what you mentioned, you're seeing this. But you're going the route of starting a venture-backed company. This is a whole slog in itself of a 10-plus-year journey. What got you over the hump of like, you just— exciting enough problem for you, big enough problem for you, like, you know, let's start our company? Because a lot of people don't go that route. I'm just curious to dive into it.

You know, that's a great question. And certainly, I determined that the economic opportunity in and of itself was just massive. So that's one piece. But as I was doing my diligence, my homework, if you will, the other thing that I uncovered is that we have a massive retirement problem in the United States.

Yeah.

And that is that come 2050, if things don't really change drastically, we're going to have tens of millions of people more not only at retirement age, but also living at poverty levels.

Yeah.

And so the idea was, you know what, we can do something that can have a meaningful economic impact for stakeholders, but also for the clients of the company, right? And so the whole idea is to shift that, uh, return curve up, you know, to— for, for the curve itself to, to move up as opposed to over, right? And, and by doing that, uh, by investing in alternative assets and having an opportunity to, um, to earn what, what is referred to in the industry as alpha returns, like these Outsize returns beyond that, what you can expect from a mutual fund or some other index version of the stock market, well, then hopefully we can enable people to be better positioned in the future for whatever future it is that they are thinking about and want. And so it was sort of like, you know, doing well and doing good.

At the same time, equal parts. No, I love that, having both aspects of that. I think that's important. Even with what I think about my own career and stuff we've done, it's like with Vitalized Angels and our angel community we have, it's like we're allowing anyone to angel invest, which actually we'll have to talk about this with also. But that's interesting because people have asked the same question about can we invest our IRA in it? Like, yeah, it's more complicated, but you can. It's something I want to—

Have to be though, is the real answer.

Exactly. Which is why I'm so curious about what you're doing. But what I want to know from the beginning though, obviously in the starting point when you did start this company. Take me through that first hurdle, like getting it off the ground in terms of who you're going after for customers, any issues you had at the start. I'm sure it's been a fun journey since then, but talk to me in the beginning and how you're kind of getting your legs under you at least.

So I think the biggest hurdles are those that you don't see, right? So in the initial In the initial research, I thought the easiest part of creating the company was going to be the trust company side of the business, which is really a commodity part of what we do. You have to have a trust company involved because you need a custodian. The custodian is the administrator of the accounts and the securities that are held in the name of the IRA. And seems pretty straightforward. It actually turned out to be the hardest part of what we did. And I should clarify.

Yeah.

From a regulatory standpoint, getting the necessary powers in place, not having had any experience as a trust company when we started many years ago. That turned out to be the biggest wildcard that was unexpected. But in terms of the client, we sort of felt like the lowest-hanging fruit was to start with someone who actually looked like me. The problem I was solving for at the time was, hey, I'm an accredited investor. I want to be able to use the money in my retirement account to make these accredited investments. But again, as I was doing my homework, what became abundantly clear was that the SEC and the financial world was expanding and moving in a direction that was going to become far more inclusive. As it should, to enable more people to invest in these alternative asset opportunities. And so there was something called the Jobs Act and Title III and Reg CF, Regulation Crowdfunding, and that was happening at the same time. And so my thinking was, you know what, if all these Reg CF platforms, these investment platforms, Republic and WeFunder are two good examples.

Yep.

Uh, if they're going to exist and if they're going to thrive and if they're going to grow, well, then the retail customer has to have access to their investable savings. And where is their investable savings? It's not actually in their checking account or their savings account. That's, you know, that's for dry cleaning and gas and utilities. The investable savings in the, in the retirement account.

Yeah.

And so, the whole goal was to enable the retail investor, the everyday individual, to access that investable savings in a way that made sense for them and for the company that was raising money, which means we had to make it a really easy transaction experience, enable transaction execution all online, all on the altoira.com platform. And by using technology to do so, we could charge really effective prices in the process. And for me, the North Star was doing for this self-directed IRA industry what TurboTax had done for self-filing, right? Take this otherwise people and paper burden process, overly complicated, takes too much time, too expensive. Flip all of that on its head. Yeah, make it simple, easy to follow, easy to do, and cost effective.

So to that point, then take me through the process of that. So if someone's someone's joining Alto, they want to use them. Like how long does that process take? Looking at the types of investments they have to choose from. Just tell me a little bit more of the process of once actually using the product.

I'm curious. Yeah, so it I think there are a couple important things to get across in this answer. The first is that. You can have any number of IRA accounts. Okay. So you don't have to move everything from one IRA account at, say, Fidelity or Schwab to Alto. You can create an Alto IRA account and then you transfer the amount of money, you transfer the funds that you want from that other account into Alto.

Okay.

Okay. And all of that is online. And so long as you know your account number, And all the information related to where your other IRA is, then you're talking about no more than 15 minutes. The other thing that—

Excuse me.

The other thing that you can do is you can make a cash contribution. So if you're less than 50 years old, I think the cash contribution this year is $6,500. If you're more than 50 years old, it's $7,000. Okay. And in which case, if you're opening your IRA with new cash contributions, it's like, you know, 5 to 10 minutes.

Yeah.

Right? You know, and you're using Plaid to move money from, you know, your savings account or checking account into your new Alto IRA account. So, If you're having a hard time with it, then we've really messed up.

It's easy. You make it simple. I love that. Going back to something you mentioned real quick, you mentioned the accredited investors. That was what we were going to start with. You had the problem. Let's attack the people you understand you have the problem from. How did you go about that in terms of what was your strategy around customer acquisition in those early days? Obviously, that's like the cold start problem of sorts. How'd you go about that?

Yeah. So the way we started, first of all, and Um, you know, at some point in any early-stage company, you got to get lucky.

Sure.

And, and you got to get lucky oftentimes more than once. And, uh, we got really lucky in that AngelList wanted to be an integrated partner with Alto at the very beginning. And, you know, wanted to be, uh, may actually be strong. I should flip it around. AngelList was willing to be an integrated partner with Alto from the very beginning. And so for those who aren't familiar with AngelList, it was very clearly the single most important angel investing platform that existed. So when we launched, it was early 2018 with them. And, you know, having AngelList as our partner meant that angels who were making these alternative asset investments would get exposure to Alto and begin to understand that they could use their IRA to invest in these companies that they were attracted to. So, so that's how it started. And we literally just grew word of mouth. Um, from that AngelList integration up until pretty much, uh, almost through Q3 of last year. And it wasn't until some point in Q3 or certainly in Q4 of last year where we started to, to do direct-to-consumer marketing.

Why, why the switch at that point? And how did you decide that, that flip?

So, so we made the switch at that point For 2 reasons. One, we had raised a whole lot of money and we could.

Absolutely.

And 2, because crypto was on fire and we had built a crypto integration with our partner Coinbase and Coinbase, our 3rd largest investor. And so we wanted people to know about our crypto IRA products and give them the ability to invest in crypto in a tax-free slash tax-advantaged way. I love that.

With that too, take me through that in terms of— you mentioned when you started this, you had the JOBS Act, then you had the actual like kind of implementation of that more so with what happened. And then seeing these different assets come up, how has that changed? Or how's the evolution of that adjusted? You mentioned just now, obviously, crypto just taking off, you really had to kind of put fuel on the fire, let people know about it. But how has that generally gone for you as you've seen different assets pop up, interest in them rise over time? Take me through that.

So we're not a fiduciary in a traditional sense. We don't tell people what they should or shouldn't invest in. We're the platform that enables those investments. And so when we see interesting asset verticals, asset classes, whether it's real estate, which can be divided up into probably 100 different asset classes. Like it's right, it's crazy. So whether it's some subsegment of real estate or some form of private credit, like whether it be peer-to-peer credit or small business credit or accounts receivable credit, whatever it may be, or whether it's crypto, if we think that there is a strong investment platform partner that we can work with who is going to do, um, the necessary amount of homework and diligence with respect to the end users that they work with, then we try to make those avenues available to, to our clients.

To the point you kind of mentioned as well with the growth and putting more fuel on the fire with the $40 million Series B you had, $17 million Series A, Just taking a step back from that, as you've grown this company, I think you mentioned somewhere about storytelling and the importance of that for entrepreneurs and founders. Take me through how you leverage storytelling in terms of whether it be acquiring, not necessarily acquiring customers, but growing your team and also on the investment front to obviously sell the bigger vision of what Alto can be. And obviously that's what they're investing in. Just tell me more of that and how you see the power of that in your business.

Well, I think it's important to understand that it's not just about storytelling.

Sure.

It, it, storytelling is an important component in that if you cannot effectively communicate the problem, the solution, and the opportunity, yeah, then it's not going to work. And I, and, and by that, I don't mean simply for fundraising purposes. I mean, for attracting customers or clients, whether they be end users in terms of consumers or B2B commercial partners. If you can't effectively and concisely explain the benefits of Working with you, well, then you're just shit out of luck, right? And and and so oftentimes, especially when you're do something doing something that that 99% of the people don't know exists, you got to be able to tell that story because stories, you know, they have a beginning, a middle, and an end, and they tend to. Flow and people can follow them. And so long as you're able to articulate the beginning, the middle, and the end, then I think you're going to do okay.

Yeah. With your experience as well, having started a different company before previously as well, different companies, I should say, what do you take from that into Alto, how you've ran Alto, things you've done? Obviously, look at any businesses different in many regards, clearly different models and everything, but just anything from that being a multi-time founder that you've taken to this company?

Yeah. And so, um, this is total, totally cliché, by the way.

We'll take it. Clichés are there for a reason.

Yeah. But, but, but this, this one is true, which is to fail fast. Right. So, and, and by that, I don't mean have the company fail fast. I mean, try things, get them out in an MVP form, and understand whether or not it has any future opportunity, right? And also the ability to not get wed to your own ideas and your own perspective and your own view of the world. Like, you have to be able to keep an open mind as to whether or not this really is something that's needed or it's just a solution looking for a problem, right?

Yeah.

And so the biggest thing about starting Alto for me was, sure, I had this problem, but I didn't know if I was the only one.

Yeah.

Right? So, no matter how much money was sitting in retirement accounts, if I was the only person with this problem trying to do this, then who really cares? You know, you can't build a business around it. So, as part of the homework that process involved, Um, confirming the hypothesis that no, actually a lot of people would love to be able to do this. Yeah. They just don't know they can't. Right. And, um, so that's, that's what we call, you know, proof of product, you know, proof of concept. Right.

Yeah.

Uh, and proof of concept is, is hugely important. You know, in starting a number of companies, um, I think the hardest thing to do is to understand when it's really not working and it's not worth, like, continuing. I think, I think that's hard to do. Um, the other thing is that, yes, there are some really smart people out there and there are people who work really hard and there are some really smart people who work really hard.

Yeah.

That doesn't guarantee success.

Yeah.

There, there is a component of luck involved in every company that goes on to, uh, do really well. And this idea that, um, you control that fate yourself is, in my opinion anyway, completely misguided.

Yeah.

And something that, uh, folks have probably heard elsewhere is that luck is the intersection of, uh, hard work and opportunity. I actually have a slightly different amended view, which is that luck is an intersection of hard work, opportunity, and awareness. So, um, you know, you can be working really hard and opportunity can hit you right in the nose, but if you can't see it, it doesn't matter.

Yeah.

Right. And, and so that includes whether or not you're staying the course on something or you're pivoting into something else, uh, or, or whether there's something that's tangentially related that you didn't know existed until you actually got into the business. And one of the things that I really like to say is that you have to be on the field in order to make plays.

Ah, yes.

And, and, and so getting the company started and kind of putting the players on the field, right, then gives you the opportunity to assess the defense And decide what play you want to call and what you want, what, what you want to run. And then, you know, when you do that, you also got to be ready to call an audible, right? It just doesn't, you know, the famous philosopher Mike Tyson used to say that everybody's got a plan until they get hit in the face.

Yep.

And I think he's right.

I know we're out of time. I have one quick question though, to kind of wrap it up here with everything you've done with Alto, your past businesses, etc. What do you look for from investments in terms of investing in companies, uh, what you've done in the past or currently investing in companies with the experience that you have? I'm curious because at Vitalize we have our own views as well from different things. I'm curious how you look at things.

So I, I look at investors the same way I look at potential team members, um, and a, a really There's a guy named Bill Johnson who was the CEO of the Tennessee Valley Authority when I was on the board of the Tennessee Valley Authority, the TVA. And we were at a board dinner one night and I was sitting next to Bill and I was looking at his team and I, and I thought his team was just stellar. And I said, I just, I didn't say, I asked the question. I said, how do you attract such talented people? And he said, well, it's really simple. First thing I do is just look for really good people, as in good human beings.

Human beings. Yeah.

It's so simple and straightforward, right? And so it's what we look for in team members. It's what we look for in board members, investors. It's like really fucking good human beings.

Yeah.

Um, they're, they're at the table having a conversation with us because they have the skills, the background, the experience. But what we, and, and every VC you're talking to about investing in your company, at least most of them have the money.

Yeah.

It's not about the money, right? It's, do you have a rapport with this person? Do you trust them? Do you want to go on the 6-hour plane ride with them? Do you want to be stuck in a car with them? Right. And what I can. Quite easily say about every one of my investors and board members is that they are awesome people. Yeah, and life's too short otherwise. And what I would encourage people to do, especially other entrepreneurs, and if you want a starting place, you can go to altoira.com and and look at the about us and and see our core values. But the, the core values are what we live by, and that's how we add team members. We interview for those qualities, those characteristics. And the thing I want to add to that, and I appreciate you asking me this question, is that we didn't sit down and say, what do we want our core values to be? I think you're kind of lost. If you have to say that.

Yeah.

What we did was to say, we have to sit down and write our core values down.

Yeah.

Like we already knew what they were. We just hadn't put them on paper or we hadn't now put them on a website. Right. And it did for us anyway, it didn't take long. It took like 15 minutes.

You guys knew already. Yeah.

And we tried, we knew what they were and what we were trying to do when we were writing them down is make them so that other people could understand and remember and digest and get a sense for who we are. So whether it's celebrate the victories or you do you. Or see something, say something. We wanted those things to be quickly understood with respect to who we are and what we're about. We also have a no asshole rule, but that's saying it backwards.

A great rule to have. I think every company should have that if possible. I know that you mentioned Alto RAs where people can go, obviously, to learn more about what you guys are doing and everything. If people want to connect with you as well, Eric, where should they go?

Uh, I'd say Twitter and LinkedIn.

Perfect.

You know, and I'm just, I use my real name. I believe in real names. Eric Satz.

Wow. That's bold of you. I'm just kidding. I do as well. I do as well. But we could obviously talk for hours and never run out of time. But Eric, thank you so much for taking the time to come on the show today.

Justin, thanks for having me, buddy. It was fun.