SaaS Interviews with CEOs, Startups, Founders

671: Predicting The Future of FInTech with Steve McLaughlin, CEO at FT Partners

26 May 2017

23 min

4733 words

2 speakers

26 May 2017

Audio

Description

Steve McLaughlin. He's one of the founders and CEO of Financial Technology Partners. He is a former senior banker at Goldman Sachs, covering fintech for over 20 years. He was recently named Investment Banker of the Year, ranked number 2 banker in Silicon Valley by The Information, and he's top ranked on Institutional Investors. Online Finance 35 listed him as one of the most influential people in fintech. Famous Five: Favorite Book? – Jack: Straight from the Gut What CEO do you follow? – Jack Dorsey Favorite online tool? — Uber How many hours of sleep do you get?— 4-5 If you could let your 20-year old self, know one thing, what would it be? – "I wished I knew where all the stocks are going" Time Stamped Show Notes: 01:40 – Nathan introduces Steve to the show 02:27 – Steve's company advises firms across the entire fintech landscape on raising capital and M&A—they're on the sales side helping people figure out where to get money, how to get money, what the valuation is, what the structure is 02:53 – Total transaction volume you were involved with last year 02:58 – Financial Technology Partners transaction volume was around $10-15B 03:09 – Which of these 3 industries are you most excited about, like where your most interesting deals would be in? 03:34 – It's really across the board, anywhere from the B2B payments to consumer payments to online lending companies like Prosper or GreenSky and the payment space like Marketo 04:08 – Any other players you see in the space besides those two, Betterment and Wealthfront? 04:11 – Steve appreciates Riskalyze who are behind the scenes providing the same kind of technology to RAAs and other advisors or someone like BlackRock who he advised last year 04:45 – FutureAdvisor is a startup going initially after the consumer side, they pivoted a little bit to be a B2B player 05:23 – Blackrock acquired FutureAdvisor for a $150M back in August 27, 2015 06:32 – FTP generally gives advice for doing large transactions and are paid on success 06:47 – It's either commission or a percentage based on the value of the deal 07:38 – Deal size varies. On a multi-million dollar deal, it can be a percent and a $100M deal, it can be 7% depending on the scale and deal size 08:02 – Nathan asks: How do you value a wealth technology company like Betterment? 08:29 – Steve looks at start the factors affecting Wealthfront or Betterment and what they think the companies will look like in 7 or 10 years 10:08 – Andy of Wealthfront was in Episode 498 10:20 – The growth of Wealthfront and Betterment are the ETFs in their assets and management 10:37 – Steve would use ETFs as a metric to try to predict what Wealthfront and Betterment are going to look like in 5 to 10 years 11:03 – Steve personally thinks that they can have a lot of winners—there are a lot of companies in the mutual funds industry that didn't win and a lot that are dead 11:15 – So there's no saying that the guys who invented the popularized robo advisors are going to be the winners 11:28 – Steve also thinks that Wealthfront and Betterment are going to do quite well and he sees them from afar, he's a big fan and he anticipates they're going to be winner 11:34 – Wealthfront and Betterment have already proven that at some extent, they've outlasted lots of other guys 11:55 – Steve thinks Wealthfront and Betterment care a lot about the consumers behind the platform and they realized that their people actually manage their money correctly over the course of time 13:05 – Riskalyze has various risks tools and robo advisor tools that they sell into RIAs 13:15 – RIA stands for Registered Investment Advisor 13:55 – All the models could succeed, there's hundreds of mutual fund companies that did incredibly well 14:17 – These are fintech companies 14:59 – Nathan is a big fan of Warren Buffett who goes to all the annual meetups and just sticks to his advice 15:09 – "I'm not going to be active. I'm never going to beat the market. I'm never going to do this stuff and just going to put it in a passive, low exchange ratio, Vanguard, SMP and 500 index and that's what I do" 15:19 – Nathan was hoping that Andy or Jon could convince him to take a shot at one of them, throw $10K in both rooms, see what happens over a few years and do a comparison 15:45 – Why isn't Warren Buffett recommending Betterment and Wealthfront? 15:47 – Steve thinks that Warren Buffett probably doesn't know much about Betterment and Wealthfront 15:52 – What Steve likes about Betterment and Wealthfront is they're going to have really forensic case studies on stats of the population 16:21 – There will be perfect comparable data on which is better 18:36 – The Famous Five 3 Key Points: Wealth tech companies are becoming more difficult to valuate, thus a need for case studies and empirical data. Empirical data can help inform your decisions, but the FINAL decision rests on your judgment. How do you value a company? Look at the factors affecting their growth over a period of time. Resources Mentioned: The Top Inbox – The site Nathan uses to schedule emails to be sent later, set reminders in inbox, track opens, and follow-up with email sequences Organifi – The juice was Nathan's life saver during his trip in Southeast Asia Klipfolio – Track your business performance across all departments for FREE Acuity Scheduling – Nathan uses Acuity to schedule his podcast interviews and appointments Host Gator– The site Nathan uses to buy his domain names and hosting for the cheapest price possible Audible– Nathan uses Audible when he's driving from Austin to San Antonio (1.5-hour drive) to listen to audio books Freshbooks – Nathan doesn't waste time so he uses Freshbooks to send out invoices and collect his money. Get your free month NOW Show Notes provided by Mallard Creatives

Chapters

1. What is the main topic discussed in this episode? 2. What insights does Steve McLaughlin share about the fintech landscape? 3. How does Financial Technology Partners assist in capital raising and M&A? 4. What industries in fintech are currently attracting the most attention? 5. How do you evaluate the value of wealth technology companies? 6. What factors influence the valuation of companies like Betterment and Wealthfront? 7. How can empirical data shape the future of fintech investments? 8. What challenges do fintech companies face in securing funding?

Featured

Nathan Latka

Steve McLaughlin

Transcription

Chapter 1: What is the main topic discussed in this episode?

0.031 - 9.041 Nathan Latka

This is The Top, where I interview entrepreneurs who are number one or number two in their industry in terms of revenue or customer base.

Chapter 2: What insights does Steve McLaughlin share about the fintech landscape?

9.521 - 15.768 Nathan Latka

You'll learn how much revenue they're making, what their marketing funnel looks like, and how many customers they have.

Chapter 3: How does Financial Technology Partners assist in capital raising and M&A?

16.268 - 18.39 Nathan Latka

I'm now at $20,000 per talk.

Chapter 4: What industries in fintech are currently attracting the most attention?

18.41 - 34.907 Nathan Latka

Five and six million. He is hell-bent on global domination. We just broke our 100,000-unit soul mark. And I'm your host, Nathan Latka. I just finished traveling Southeast Asia for 41 days, and I usually always get sick when I travel, and quite frankly, eating is difficult for me.

Chapter 5: How do you evaluate the value of wealth technology companies?

34.927 - 47.179 Nathan Latka

It's hard to find a restaurant, and I'm spoiled in Austin with my personal chef. Well, I took these little packets with me this time, 30 of them, in my carry-on suitcase. They kept me totally healthy with 11 different secret ingredients.

Chapter 6: What factors influence the valuation of companies like Betterment and Wealthfront?

47.219 - 59.839 Nathan Latka

You can see them at nathanlaca.com forward slash juice. I'll tell you more later on in the show. That's nathanlaca.com forward slash juice. Folks, many of you reach out to me and you say, Nathan, so many guests on your show talk about the importance of batching.

Chapter 7: How can empirical data shape the future of fintech investments?

60.12 - 74.469 Nathan Latka

But whenever I try and batch, you tell me this. You go, Nathan, they don't book back-to-back times. Or they don't show up after they book. It's frustrating. The answer is, guys, you have to use smart tools. I use a tool called Acuity Scheduling at nathanlatka.com forward slash schedule.

Chapter 8: What challenges do fintech companies face in securing funding?

74.509 - 93.086 Nathan Latka

I'll tell you specifically how I use it later on in the episode. This is episode 671. Coming up tomorrow morning, Adam joins us who runs his own agency and he breaks down how to run from an agency model where you have to hustle for new clients every month to a software model with predictable revenue.

93.607 - 112.388 Nathan Latka

Be sure to tune in, especially if you are an agency founder and tune in every morning for a new episode. Good morning, guys. Nathan Lackey here. My guest this morning is Steve McLaughlin. He is one of the founders and CEO of Fin Financial Technology Partners and former senior banker at Goldman Sachs, covering FinTech for over 20 years.

112.429 - 130.954 Nathan Latka

He was recently named Investment Banker of the Year, ranked number two banker in Silicon Valley by The Information, which, by the way, they've got a very interesting business model. And he's top ranked on Institutional Investors Online Finance 35 list of most influential people in FinTech. Steve, are you ready to take us to the top? Ready to do it. Let's go, Nathan. All right.

130.974 - 145.986 Nathan Latka

So we had John Stein on in yesterday's episode with Betterment. In episode 469, we had on Andy with Wealthfront. You are actively playing in the financial technology space. Give people an understanding quickly about how you're playing in this space. What do you do?

146.624 - 164.474 Steve McLaughlin

Sure. My company does two things. We advise firms across the entire fintech landscape on raising capital and M&A. So we're usually on the sell side, helping people figure out where to get money, how to get money, what the valuation is, what the structure is, you name it, or where to find a buyer or both at the same time.

164.634 - 173.188 Steve McLaughlin

So that's pretty much what we do across everything from wealth tech to payments to insurance tech and any other part of fintech.

173.354 - 177.378 Nathan Latka

So take us back to last year. Give us a sense of total transaction volume you were involved with.

178.479 - 189.049 Steve McLaughlin

Sure. Probably $10 billion, $15 billion in total transaction volume. Largest deal was probably $4.5 billion. Smallest was probably raising $10 or $15 million for a wealth tech company, actually.

189.309 - 206.677 Nathan Latka

So you've got... You kind of mentioned these three sectors, kind of wealth tech, you have then payments, then you have kind of like robo-advisor things. It sounds like that's how you're categorizing these. Which one of these industries... Well, my question is going to be, which one of these industries are you seeing kind of the highest valuations in from buyers or potential investors?

SaaS Interviews with CEOs, Startups, Founders

671: Predicting The Future of FInTech with Steve McLaughlin, CEO at FT Partners

Chapter 1: What is the main topic discussed in this episode?

Chapter 2: What insights does Steve McLaughlin share about the fintech landscape?

Chapter 3: How does Financial Technology Partners assist in capital raising and M&A?

Chapter 4: What industries in fintech are currently attracting the most attention?

Chapter 5: How do you evaluate the value of wealth technology companies?

Chapter 6: What factors influence the valuation of companies like Betterment and Wealthfront?

Chapter 7: How can empirical data shape the future of fintech investments?

Chapter 8: What challenges do fintech companies face in securing funding?

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SaaS Interviews with CEOs, Startups, Founders

671: Predicting The Future of FInTech with Steve McLaughlin, CEO at FT Partners

Chapter 1: What is the main topic discussed in this episode?

Chapter 2: What insights does Steve McLaughlin share about the fintech landscape?

Chapter 3: How does Financial Technology Partners assist in capital raising and M&A?

Chapter 4: What industries in fintech are currently attracting the most attention?

Chapter 5: How do you evaluate the value of wealth technology companies?

Chapter 6: What factors influence the valuation of companies like Betterment and Wealthfront?

Chapter 7: How can empirical data shape the future of fintech investments?

Chapter 8: What challenges do fintech companies face in securing funding?

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