Steve McLaughlin 打造了一家数十亿美元级投行，并在华尔街自己的游戏中胜出

So, how do you more than triple something in a few months, if you will?

Long story short, we ended up getting $550 million for the company. The other guys were getting $150 million in the sale.

Wow.

It was a weird time for anyone to be leaving a big bank. I was only a vice president at Goldman, but I was running most of the fintech group. The joke was that they all thought I was going to fail, basically.

The Goldman guys?

Yeah. They were just like, “This sounds insane.” No one had ever left as a vice president of Goldman Sachs and formed an investment bank.

Giving the founder higher things to achieve and more rewards creates this additional incentive that dramatically increases the pie for everybody.

I don't usually give this publicly, but Steve, thank you so much for coming on the show.

Tommy, thanks for having me, buddy.

Yeah, of course. You've been insanely gracious with your time and advice, and I'm just so glad you're here. You're one of the most important guests I think I'll ever host.

Oh, come on now.

No, I think so.

Steve, for the listener base, you're the founder, CEO, and managing partner of FT Partners. You're an investment bank focused on fintech. You have 250 people in a couple of different locations, and, interestingly, it's your 25th year in business. You guys have advised on thousands of deals.

To give people a sense of the scale of your business, you led Heartland's $4.5 billion sale to Global Payments, Deribit's $4.3 billion sale to Coinbase, Aquinity's [?] $4.2 billion sale to Bullish, GreenSky's $2.5 billion sale to Goldman Sachs, and AvidXchange's $2.5 billion sale to TPG and Corpay.

On the capital-raising side, you advised Worldcoin on its big Series C at a $2.5 billion valuation, raised billions of dollars for Revolut at a $33 billion valuation, and now they're up to a $115 billion valuation as a company. You recently helped Digital Asset Holdings, Mollie, Cross River, Monzo, Luma Financial Technologies, Gauntlet, CloudWalk, and Case [?] raise billions and billions in capital at some monster valuations.

The scale is insane. I've spoken to a number of the CEOs you've worked with and to a lot of people inside FT who have been really gracious with their time. I'm really excited to talk to you, so thank you for coming in.

You've done your homework. That's good.

It was a lot of homework, but it didn't feel like homework.

1. Leaving Goldman and Starting FT Partners

Steve, tell us about the origins of FT. In 2002, you left Goldman Sachs. I read that you started FT in an apartment in Pacific Heights, San Francisco.

Yeah.

What was the reason for leaving Goldman?

I was at Goldman from 1995 to, I guess, early 2002. I had a great time there. It was a great firm. I met a lot of great people and still maintain a lot of those relationships.

I always had the itch to go out and do something on my own. Following the whole dot-com bust, 9/11, and everything else, the market was kind of downtrodden, but my area of the world—fintech—was actually doing pretty well. So I saw an opportunity to leave Goldman, which I did in early 2002, and started the business from scratch.

Honestly, I didn't have a view that it was going to be as big as it is today, but I kind of knew it was big. I didn't know the firm would be as big as it is today or that I'd still be doing this literally 25 years later. It's all a dream come true for me.

I quit my job, went to get some business cards, and incorporated the company for, I would say, $99 at CompanyCorporation.com. I got the FT Partners name and business, and we were off and running. Within days, we had clients.

There were a lot of people who weren't getting the right advice from the bigger banks and the boutiques, so we hit the market at the right time. Twenty-five years later, we're talking to you.

Fintech wasn't as big as it is today back then, right?

Oh, my God, no. There wasn't even really a word, “fintech,” in 2002. We were Financial Technology Partners, the only investment bank focused on financial technology. It was straightforward.

Literally, I don't think we came up with “fintech,” but it was not anywhere near what it is today. There have been many eras of fintech, and I won't get into all of them, but there have been multiple times when people have said it's just not that big of a sector and it's not going to go anywhere.

When the dot-com world blew up, a lot of dot-com fintech businesses blew up with it. It was a slower sector at that time. Then, when the financial crisis came, people said, “Look, everything was ballooned up.” The same thing happened in 2022. There had been a lot of fintech home runs, but there had also been a lot of failures, and people were pretty downtrodden on the sector.

It's funny. BCG and we just came out with this report about the global state of fintech, and it was “From Recovery to Resurgence.” To get to recovery, it had to go down. It really was kind of a dirty word to some extent because people had shifted their mindset to AI. There's a whole conversation to have about where AI is in fintech, but I've seen the sector get hot and not many times.

When it gets not hot, I double down. I've always been hiring more people during the down markets, and that's how we got to be 250 people—just pushing really hard. For example, we've got competitors laying people off right now. We just hired a senior guy from Goldman Sachs, another senior guy from Catalyst, and we've got people from Morgan Stanley. When the markets are a little tough, we double down.

We just know fintech is going to be here and be big. It's still just a single-digit percentage of all financial services. If you think about it, it's growing on average 20–30%, whereas financial services is growing 3–5%. Banks and insurance companies just don't have the growth.

To me, it's a sector that's going to be here for 20 years, 50 years, 100 years, because it keeps regenerating. In a weird way, what winds up being fintech today is legacy tomorrow.

It used to be that people would think of Fiserv, FIS, and Jack Henry as core fintech companies.

Fiserv was a fintech play?

Of course. They're enabling banks to do online banking and core banking services. They went off and, I don't know the number of companies, but they probably bought 50, 60, or 70 companies between $10 million and billions of dollars. That's how they became what they became.

Now they've all merged together and become more legacy. They're on their 5th or 6th CEO, so they're now kind of legacy-ish providers. Hundreds of new companies came up in the last 15 years, and now there are hundreds more coming up that are fully AI-native.

It's just these waves and waves coming. No offense to the ones that are here today, but when you're all worth $20 billion, you'll probably be legacy, too, and there will be a new crop.

It just keeps regenerating because fintech and financial services—let's just say they're industries with no physical products. The only physical products you have are credit cards and maybe credit card machines, like terminals, and they're all going away.

When's the last time you pulled out your credit card? It's not that often. It's more Apple Pay, more CloudWalk, et cetera, and Venmo. Look at PayPal. They're obviously legacy now. They're on their 7th CEO, and, of course, their original CEO is now at SpaceX. It all comes full circle.

I think, like I said, there are no physical products. It always comes down to data, risk-taking, and transactions, and that's really beautiful for the AI world we're in right now. I think it's going to be an insane decade of fintech for the next decade. You're going to see some really big companies created and other ones dismantled to some extent.

Yeah, I want to get into all that. I just want to ask one more question, though. You clearly had a very good role at Goldman. The dot-com bubble was obviously horrible—for our listeners, probably way worse than 2008, you could argue—but horrible. You had a good job. Despite all that, you decided to leave. I feel like we're brushing over how important and how hard that jump is.

The thing I don't talk about too much is that I was only 32 years old when I left. I was a kid. I still feel like a kid, but I was definitely a kid back then. I had only had 6 or 6½ years of experience at Goldman.

It was a weird time for anyone to be leaving a big bank and starting something, let alone a 32-year-old young guy. I was only a vice president at Goldman, but I was running most of the fintech group at the time.

I just saw that I had 20-something years ahead of me—30 or 40 years—and I was going to go build this thing. I had the confidence, and it was really the clients.

I mean, I had clients that we had to turn down at Goldman, right? They were only taking on multibillion-dollar companies, and today we do many multibillion-dollar deals. But back when we first started, I saw real value in these multimillion-dollar companies that were getting completely ignored—not just by Goldman, but by dozens of other banks as well.

So, this mix of really focusing on a sector and then focusing on an underserved segment in that sector was just a winning formula. We've kind of doubled and tripled down on that over the years, but it was super risky.

I remember being on a plane once, and one of the MDs was coming on the plane. I was sitting in first class. He's like, "I like your expense policy." I said, "Well..." The joke was that they all thought I was going to fail, basically.

The Goldman guys.

Yeah. They were just like, "This sounds insane." No one's ever left as a VP of Goldman Sachs and formed an investment bank—

I'd love to see the FT website and see what they say—

And how [laughter] to be successful.

Actually, the funny thing is, the guy that said that is still there, oddly enough. He's been in the same building for 30 or 40 years. Great guy, by the way. But yeah, I think most people thought we were going to be a one-hit wonder, that fintech wasn't that great. It was a down deal environment.

But it's funny, what I said to myself back then is the same thing I tell my team today: What we do, which is provide really high-end, high-value, deep-dive advice, is never going to go out of style. Certain models of fintech may go out of style, but providing human-level advice at a senior level, where you really care about the client and you care a lot about the result, is just never going to go out of style.

And it's proven it. We're still pretty small in the grand scheme. We have a good market share, but there's still a long way for us to go.

2. Turning a $150M Offer Into a $550M Sale

For sure. Maybe before we move on to the next era of FT, what was the most defining deal? You mentioned you left Goldman, and you already had deals within a couple of days. There was no gap between starting a company and getting clients—the grind. It feels like you kind of left, and it was already off to the races.

What was the defining deal where you felt, "Hey, I left, I'm doing this deal, and I feel like FT is legit. I'm on the road"? What was that?

Yeah, there were 2 of them, and they're both longer stories. One of them was a company called LYNK Systems. It was a payments company, and they had previously hired another bulge-bracket investment bank at the time. It was Merrill Lynch, and the founder was a founder's founder. The guy was great. He built this great full-stack payments platform.

It wasn't a huge business at the time, but Merrill Lynch, I remember, went out, got bids for the business, ran their full process, and they were the kingpins of payments company deals back in the day. They ended up getting $150 million bids, plus or minus, and there were earn-outs and ugly escrows in there.

We came in, and they got fired. The guy wasn't happy with them at all. This got terminated, pushed out to the side, and the guy kind of stumbled across me—some ex-Goldman guy who started a boutique, etc. This was a year or so into the firm, and he said, "Look, I want to hire someone younger and entrepreneurial who's going to really dedicate time."

So, we got hired by this company, LYNK Systems—L-Y-N-K Systems. You probably never heard of it. But anyway, long story short, we deep-dived into the business. We practically moved to Atlanta, where they were, and stayed at this little crappy hotel down the street. We would go to their office every day, doing our work, interviewing every employee we could get our hands on, and building out the story.

It turns out the business was pretty complex. It had 3 different divisions. Each was a different size, and each was growing at a different rate. Unless you really zoomed in on everything and looked at the near-term stuff, the medium-term, and the long term, you really didn't get the picture.

We came in and, within a few months, went to market. Long story short, we ended up getting $550 million for the company, when just a few months earlier the other guys were getting $150 million.

So, how do you more than triple something in a few months? Maybe it was 6 or 7 months, and the company had only grown 15% during that time. So, really, it was all the stuff we were doing. We ended up finding 3 buyers that had never even been contacted in the prior process and unlocking a ton of synergies.

The guy was just blown away and became the biggest advocate for the business. That one deal showed me that when you have the bandwidth and apply yourself and actually care about the founder, you can get an outsized economic outcome.

We happened to get an outsized economic fee structure going because he set it up. I didn't set it up. He said, "We'll give you 1% or 2% up to $300 million, then we'll give you 5% or something above $300 million." So, we ended up making a pretty big fee selling it for $550 million or so.

I was like, "That's the blueprint." You just have to go insanely deep, which you can never do at a big bank, and you can't do at a boutique either if you don't have the staff to go do it. That was one of the defining deals.

There's another one where we sold a company called SoundView Technology Group to Schwab, actually. It was a sort of electronic, digitized research platform and investment bank that Schwab bought because they wanted to get into the research business back in the day.

That was even before the other deal, but it was a huge premium to market. It was a public company. It was actually a banker selling an investment bank, so that's kind of a cool thing to do. That CEO, Mark Laird, is now a client today in his new company, OpenExchange.

So, it's nice to see the client sticking with you 20 years later. We have a lot of companies like that, and we have a lot of companies where we sold the company at one moment in time, and then the guy started another company, hired us again, or we actually sold the company twice, or in some cases 3 times. So, it's been a heck of a journey.

Yeah. What did the LYNK Systems CEO say to you after you guys sold the company? Was he just blown away? I mean, 3X versus Merrill Lynch is nuts. I know why that guy got fired now.

He basically said, "Look, every single time I ever asked someone to do something—and I'm looking for perfection—I've never gotten it once." He's like, "I would tell someone to paint a wall black, and it would come back some other shade of black, right?" And he's like, "You guys are the only people that actually said you were going to do X and actually did more than X."

We still have the pitch book today. We pitched that—that was the price we thought we could get for the business. It was dead in the middle of what we said it was going to be. We got it, and so we were very, very proud of that. That's been the blueprint for how we've gone to market.

Maybe a small question, but was it normal at the time—and even today—to go in person, basically live at their office and work with their whole team? Was that what investment banks were doing back then, or was that unique to FT?

I'd say it was very, very unique to us. It was interesting because what I learned was, I didn't have a lot to do because we didn't have a ton of clients and we didn't have a big team.

So, when we had this 1 client, we had this big economic opportunity, and we said, "Let's make everything out of this, because this could really change the firm. It could change the trajectory. We could make our firm."

We were able to literally live in Atlanta, practically. We didn't live there, but we really did spend a lot of time there. To the point where everyone at the hotel knew us, everyone at the restaurant down the street knew us. We had a key to the office, or a key card, and we had our own office.

So, we really do that today as well, at scale. It's not that we're doing the exact same thing on every deal, but, for example, I would say if we have a client in Japan—which we do—and we have a team on the ground in Japan right now as we speak, we probably spend more time in Japan with that client than, say, Goldman Sachs and Morgan Stanley spend with their clients that are in Midtown Manhattan.

Because—we didn't get into it yet—but we're very global. We have clients on almost every continent on the planet. And so we've just always stuck by that thing: "We'll go to see you. We'll camp out in your office if you want us to. We can camp out down the street, or we can do tons of Zooms, whatever it is, but we're going to embed with you one way or the other."

And I think a—you didn't ask that question, but a good question is: How the heck do you guys do that at scale? The truth is, we got better at doing it at scale than we ever did when we were more ultra-boutiquey. That was really the vision: How do we be this ultra-boutiquey, deep-dive firm at some level of scale?

And Steve—

Happy to talk about it.

No, no, for sure. It kind of dovetails well because I spoke to several founders that you’ve worked with. I spoke with Michael from AvidXchange, Bam at Mesh, and several others. One of the strongest recurring themes was your ability to understand these companies—not just the companies, but the founders, the companies, and the data—to a degree that is so nuanced that you’re able to help them at every specific juncture.

3. How FT Partners Values Companies

That changes over the life of a company, from the start to the raise to a sale, with a bunch of deals in between. I’m trying to figure out what the process is for understanding the story so well. You could walk in and have a key to the office, but if the founders aren’t talking to you or spending time with you, that’s difficult. How do you get that nuance so you can help them?

Sure. I think it’s helpful to explain a bit of our framework for doing these things. There are a few angles to it. One is that we figured out over time—and I came up with this analogy—the microscope view, the binoculars view, and the telescope view of a business.

You told me this.

We had to simplify how we do very complex things. When you think about the way a buyer or an investor looks at a business, they’re going to really, really zone in on the microscopic element of the business. What I mean by that is every single known fact about the business, the environment, the team, the culture, the financials, the metrics, the KPIs, the tech stack—anything that could be looked at under a virtual microscope, including near-term things that you say you’re going to do that are about to happen.

It could include the cap table and your investors. We microanalyze all that stuff, and it winds up being hundreds of pages and thousands of hours of work just to get that view. We then look at what’s next: Where’s the world going in terms of the binoculars and the telescope?

I came up with this analogy because I now have 3 kids. When I started, I had no kids. One of them is at least a bit into what’s going on with the galaxies, the beginning of time, the Big Bang theory, and black holes.

Light conversation at night.

We started thinking about the Hubble Space Telescope, which was the big telescope. Then they came out with the James Webb Space Telescope. The James Webb is out in outer space, and it can see eons better than the next-best telescope that was out there before.

What’s interesting is that, with the right lens set up the right way in the right location, you could actually see and learn just about as much about the galaxy and things that were 14 billion light-years ago, and look at black holes in as much detail as you can see an ant under a microscope. It’s all about what lens you’re using and what you’re seeing.

Of course, the analogy is that the binoculars are everything in the middle. For us, we focus on all 3 of these elements in an equally important way. What we see is that investors and buyers really tend to spend 90% of their time, if not more, looking in the microscope. But that’s not really where the value is in a business. The value is in the binoculars and the telescope.

If they spend 95% of their time painfully extracting all this information, all this diligence, and all this work, and have to put it in slides, 1st, they won’t do a very good job of it. 2nd, it sucks up all the time in the room. 3rd, there’s no time to look at the other stuff.

What we try to do is simplify all that for them and literally give them that information, so it’s completely and utterly transparent how the company works, how the tech works, who the people are, what the cap stack looks like, what the technology is, and what the LTV-to-CAC ratio is in a real way—on a decile basis by channel, by employee if needed. Whatever we can think of to do to make the picture super clear to people in a very short period of time.

Then they’ve got—and let’s say that’s maybe 10% of the available time—the other 90% of the time to focus on what’s in the binoculars. Hopefully, ultimately, more than half their time is spent on where the business can go in the future.

That’s what we do for all our clients today. Then, of course, you have to go find the buyer, get them interested, negotiate, and there are a million other things that we do. But that framework helped us think about how to construct the firm.

We are the 1st and only firm to create a data science and financial forensics team. We hired one of the leading guys in the world to build this group. We call it the Special Execution Group because it’s a specialized team of ninja data scientists that can literally plug our code into your APIs as a client, pull any or all of your data out, and then we spend many, many hours analyzing it.

This was even before Claude and everything else, but now with Claude and all the code we’re using, the insights we’re getting out of that are quite fascinating. We can get that level of microscopic detail. Of course, there are all sorts of other things we do through that lens, and then we do the same types of things for the other parts.

For example, as it relates to the telescope side of the story, take Revolut. We raised $1.25 billion for them at a $33 billion valuation when the prior round was at $5 billion several months prior. Our big thing was, “Look, get the microscope stuff out of the way. Focus on the next 2 years, but let’s really focus people on 20 years.”

We actually built a 20-year financial model for Revolut, saying: What geographies? What products? How much SMB versus enterprise versus consumer? We essentially said, without a doubt, more or less, that we believe this company is going to be a multitrillion-dollar company—the 1st fintech company ever to become, in our opinion, a multitrillion-dollar company.

We had such conviction over it that we put our own money into the company. We ended up raising money at a big price and helped get the CEO this big, Elon Musk-style compensation package. We really applied everything in that kind of situation.

That was probably the penultimate example of what’s in that telescope. It took people a while to get that and actually say, “Okay, I believe you’re going to get somewhere near there.” That’s why I convinced them to pay 6 or 7 times the prior round and still make money. They’re now worth $110 million, I think—$200 billion.

It’s a crazy, crazy successful story.

It’s a great story.

Steve, one of the things I wanted to ask you on the storytelling side was that it’s obviously really important for you to tell stories for all the stakeholders you’re dealing with. When I meet with founders on the VC side, generally I want a founder who I know is killing it. You want to help them, but you don’t want to have to help them.

But from the FT side, you’re going in and helping them tell their story, maybe better than they’re telling their story already. It’s obviously a different industry—banking versus venture—but you’re doing both. How do you view your ability to tell the story better than a founder? Don’t you want a founder who’s able to just knock it out of the park? Are you helping them? Are you adjusting that? Walk me through that a little bit.

Yeah, look, founders have so much going on. I think it’s interesting that a lot of VCs will say a founder should be able to find their own capital. That’s nice, and that may even be fair. But to some extent, how is a founder running a business in founder mode, working 24 hours a day, 7 days a week, going to also know every VC in the world? Or even the top 10, 20, or 30 VCs? Is he only going to be captive to the few that call him or the few that his board members know?

We all know that there are literally thousands of venture capitalists, particularly the smaller ones. I was just looking at 3 or 4 different things yesterday. It was like, “Here are 50 new VC firms that got created in the last 3 months, 6 months.” No founder knows any of them.

As soon as someone starts a VC fund of any magnitude, we get to know them immediately. If you’re a VC out there and we don’t know you, please call us and get on our list. We’ve been able to open up the aperture of who they should be talking to.

Of course, we love Sequoia, Accel, Coatue, all these guys, and SoftBank, but there are also a lot of other investors out there seeking investments in fintech. They’re all calling us, saying, “Who are your best companies?”

We’re kind of the network effect between these 2 sides. Part of it is storytelling, part of it is connections—it’s all of the above. We look at what we call deal DNA and deal strategy. Deal DNA is what’s going on with the company.

Deal strategy is: What do I do? Sometimes you have a founder who has amazing decks and an amazing data room, and they just raised a round. The guy is incredible at telling his story, but maybe that founder doesn't know the top 10 VCs. So the value there is connecting them.

Sometimes the founder has never raised capital before. They bootstrapped the company, have never even put a slide together about their story, and they're running their business 24/7. We may add value there. We're pretty good at going in, figuring out what's going on, and determining where we can add value.

The last place we want to work is where they don't need us. A lot of times, a CEO will say, “Look, I need you guys more in the back office to build my slides, build my decks, do my data analytics, and tell me which investors to call. But I want to call them, right? Or I want them to call me because I want to have that relationship. I want to build that relationship.”

So we're very flexible in terms of what we're doing. Some say, “I've got all the materials in the data room, and my CFO is amazing and all this kind of stuff. I just want you to talk to investors and screen out any lookers or whatever, and just give me people who know my space and can add value.” We have quite a bit of flexibility and creativity to bond with each and every founder, and we do whatever it takes. We're happy to be front line or back row; it doesn't matter.

4. Building Long-Term Founder Relationships

So, Steve, one of the things that I keep hearing from founders you've worked with is that they keep coming back to you time and time again to work with you as an investment bank. One of the founders I met with has known you for 20 years, and he's done nearly a dozen deals with you.

It seems really unique because, as an investment bank, it's transactional by nature. But you're building these lifelong relationships with founders who keep coming back to work with you. How do you figure out and achieve this level of long-term partnership with these clients?

I think at the end of the day, they're coming back for the relationships and results. We call the firm Financial Technology Partners, and the partnership is with clients. We think about it as, “Let's get together, let's work on a partnership, and how do we do this together over a long period of time?”

In a business like ours, you're not a SaaS business, so you don't technically have recurring revenue. But you can have recurring relationships, recurring clients, and a long-term engagement where you're contracted to work with the client for a long time. We've got all of the above.

As I said earlier, we've sold some companies 2 and 3 times. A lot of our model is that we want to be there early to support founders, and then we want to be there later on as well. We'll do a lot of work in between for free. In between deals, we're still always there.

We're doing the data analytics, and we may be looking at buy-side opportunities. One of the clients we have—we did something like 15 deals for them. A bunch of them were capital raises, an IPO, and a sale. We did all of that, from when they had less than $10 million of revenue up to a multibillion-dollar outcome.

Along the way, we helped them find and buy 6 different companies, and we never charged them a dime for any of the acquisition work we did. Every other bank would be sending in multimillion-dollar bills. We said, “Look, we're partners. This stuff we're going to do for free, and we'll just include that in the package. We'll make our money when X, Y, and Z happens.”

They were very gracious and grateful for that. I got married in 2019, and I looked around, and half the room was my friends from high school and college, and half the room was my clients. They were all mixed together, and a lot of those guys have actually become friends.

There's an extended FT Partners family out there. Even though we do some podcasts and all that kind of stuff, we really don't have card-carrying MDs out pitching and trying to win business. It's all referrals.

Literally, probably yesterday, we got 3 referrals from founders or clients we knew, or VCs we knew, saying, “Hey, we have Company X. They need to go raise $200 million,” or, “Company Y is a billion-dollar company, and they want to use us to go do it.”

We figured out a way to create recurring revenue, recurring relationships, and recurring referrals. We have to have a very, very, very high NPS score for that to matter because we literally don't have any banker who has commissions, is card-carrying, or has quotas. We don't keep track of who does what revenue.

If we did, people would only want to work on the higher-revenue deals. We make a lot of our money over the course of time by working on deals where the revenue isn't there at the beginning and might be there 5 or 10 years down the road.

There's a lot of contrarian thinking in what you're saying. When I think of an investment bank, I think these guys want to know their numbers, they want to know the deals, and they want to know their commission. But that's not the case?

Right. We closed 2 deals this last week. This week, we signed 2 deals. One company we sold several years ago went public, and we sold it again as a public company. That was something that got built with a private equity firm we'd done work with years and years before.

The second company we sold was with a private equity firm called LLR. This is our 3rd or 4th deal with those guys. We've invested in their deals, shown them deals, and brought them transactions. We're all about trying to create good vibes, deliver value, and build friendships.

People should not hire you purely on relationship. It's got to be relationship and skills, and you always have to bring it. That's our mantra. We never, ever, ever, ever want to rest on our laurels. We always want to act like that firm in 2002, 2003, and 2004 that was as hungry as humanly possible to do a great job for these founders.

I've had spouses and kids come up to me at closing dinners and throw their arms around me. I've had whole rooms of people erupt in cheers over the work that we've done. It sends chills down my— it gives me goosebumps, I should say. I feel like I'm working more for the spouses, the kids, and the future generations than I am even for the founders. We take it very seriously.

I like that. It speaks to how involved you get with the companies. It's incredible.

5. Founder Incentives and the Revolut Bet

Another contrarian thing you hit on earlier, which you wouldn't really think of when you're thinking about an investment bank, is that you negotiate or build structures for these founders to own more of their companies over time. I spoke to a couple of founders. One guy running a bank was great to talk to; it was incredible.

I read that you mentioned it a little while ago with the Revolut round. I think you negotiated a package where he got 10% of the company or something more over time. Why is it so important to increase the founder's ownership while they're also, de facto, getting diluted on a sale or a deal? It's moving in 2 different directions.

I think one of the themes of the firm is creating win-win situations and increasing the pie. A lot of people feel that if management gets additional shares or options, that's being taken from some future fixed pie. We come from the world of realizing, similar to Elon Musk and many other people we've worked with, that ultimately—not in all situations, but in the right situation—giving the founder higher things to achieve and more rewards creates an additional incentive that dramatically increases the pie for everybody.

We've convinced many, many, many boards over the course of time to think in that way. The natural thing—and there's nothing wrong with it—is to think, “For every percent I give the founder, that's 1 less percent for the rest of us of some fixed future pool.” I definitely do not believe that way because I've seen it, every single time, create a much bigger pool for everybody.

In the Revolut scenario, this was a company that we were just incredibly excited about. We invested in the deal before we actually did the deal. They raised money at a $5 billion valuation, and we put $50 million of our own money into the company between the $5 billion and $33 billion rounds.

That really helped sell the story. It was, “Look, we put our own money into this deal. We bought common stock from the founder, by the way, not even preferred.” When we were negotiating the deal to get $1.25 billion in the door—and keep in mind, they were only going to raise a couple hundred million—it wound up being $1.25 billion because the valuation was so high.

$1.25 billion there.

$1.25 billion, yep. We were the sole adviser, and in the process of negotiating the transaction, I said to the investor, “Look, I know you guys are paying a reasonable price for the business, but would you consider kicking back 10% for the founder if he crushes it and makes, say, 3 or 3.5x, or whatever it is?”

I'm fast-forwarding and speeding up the story, but essentially they said, “Yes, we would be willing to do that, but we want everyone else to do it as well.” Since everyone else was in at $5 billion or $1 billion, getting to $100 billion and something was a massive home run for everyone else, let alone the founder.

This was written up in Bloomberg and many other places recently. Ultimately, Nik fully deserved and got a great package.

So, he's going to get probably 10% of the company back as they hit certain milestones. I've come to see that a lot of times, investors who are coming into a deal can max out on price, but they're willing to do some sort of giveback of a massive upside.

And I think—not that this is our mantra as a firm—but I really see founders giving away so much of the company in early rounds because they don't have the right advisor. Maybe it was super risky, and they end up giving a bunch of the shares away. That was maybe the market thing at the time, right?

But when you look and fast-forward to the big, big, big success days, of course, the last guy on Earth who needs more money is Elon Musk, but he still gets more and more of the company the more it achieves. So I think that's the ultimate proof of how smart it is to do this for founders. We think it's a win-win, and all the boards that we're working with now are more like, “This is a win-win.” It doesn't mean just give founders ridiculous equity for no reason. They've got to go earn it, right? So that's important.

And I mean, incentives run the world. It sounds like you're taking that to heart in a few different ways. It sounds like the deal structures and the comp that FT earns, and the comp that you want the founders to earn, are all multifaceted in terms of how well you do. That seems like a recurring trend. Was that something you originally started with? Is it something you found out? Obviously, the Revolut deal is awesome. Nik definitely deserves that.

Yeah. And he should probably do it again, too. But I think that it's not something I had any idea about when I started the firm. It's just spending my life sitting across a table, hanging out with founders, hanging out with VCs, and figuring out how to uncork value for everybody, right?

To me, you mentioned our fees, and we're kind of well known for having higher fees than the average bear and having incentives and big kickers for outstanding achievement. We've had some tremendous outcomes with that kind of structure that are not really in the norm, if you will. They're outsized in terms of the results, and the fees to some extent, but what's good for the goose can be good for the gander in all these respects.

I find that when they say, “Show me the incentive, and I'll show you the actions,” or the outcome, right? So I think it's very important to think this way. I don't usually give this publicly, but it's interesting how private equity and VC businesses work. I've never even seen a venture capital firm with less than a 20% carry. Can you think of any?

No, I can't.

I know plenty that have 25%, 30%, and even 35% levels.

And some 50%, right?

50% on carry.

50% on carry, yep. Got ahead of my docs standpoint.

Yeah. And if you get the right results, right? But if I came to you and said, “I started a private equity fund, and I'm going to give you 10%,” you'd probably think there's something wrong with me. Why am I not charging at least rack rate, you know?

I often say that bankers tend to get paid as a commission, some sort of 2% or 3% kind of a thing, but the kickers are not really there, right? So if you're giving a private equity firm 20% of all upside, or a VC firm—and by the way, this is for real estate firms, this is for bankruptcy firms, any investor on Earth—has a standard 20% minimum upside over the dollar they were given, right? And they, of course, can put that dollar anywhere they want, for the most part, within their sector, and they can wait 5, 6, 7 years or longer—13 years if it's an early-stage VC fund, right?

So why would you not reward an investment banker in a similar way when they really don't get to pick the asset, right? The asset's your asset. They don't get to pick the hurdles necessarily. A lot of times the clients will pick those, but why not create these 10% and 20% kickers so that the team that actually helps create that excess value gets the big incentive?

And that's kind of what we try to do: unlock some of the upside and create that extra motivation. That may come with patience, that may come with timing, that may come with helping the company to position differently, helping them do interim rounds. So it kind of creates a similar incentive for everyone to do the right thing.

Totally. It definitely makes incentives around the world make a lot of sense, and I think it definitely is clear from how you operate and how you work with the founders. I also spoke to Bam at Mesh, and he mentioned that we should talk about the fees. But I think about it as: if you get a higher valuation, everything makes sense, but we'll see how it goes.

The other things I wanted to ask you were a bit more about work ethic—how FT is run, how you do it. When I spoke to a lot of people at FT, like Sam, Mattheus, Lindsay, Chase, and a bunch of people, 2 things came out. The first one was that no founder is below you in terms of time. You're very gracious with me with your time, and I've heard you meet with founders pre-MVP, before they're incorporated. That seems unique at your level of scale. Usually, you'd send an associate or something like that.

The other thing was your time spent. Everyone's like, “Steve works banking hours for 25 years. You've emailed me back things at 1:00 or 2:00 in the morning.” I'm a time-management nut. I just don't understand how you have the time to both give so much time to early-stage founders and also work those kinds of hours. Just curious how you think about those.

Digital twins. No. [laughter] No, look, over the course of time, we've managed to scale the business in a way that I've been able to apply myself in the highest-value way humanly possible.

In the early days, when we didn't really have that many employees, I was maybe even doing models and PowerPoints and all that kind of stuff. We kind of veered away from this, but to institutionalize the work that we were doing, like I said, we created that data science team called Special X. We created sort of an internal mini-McKinsey to help with all the growth stories and the big stuff on the telescope side of things.

So, you've built all these different segments within FT.

Exactly. Exactly. As I always say, necessity is the mother of invention. As we started scaling, we built out these different pods of things that don't exist in any other investment bank in the world.

If you hire Goldman Sachs or Moelis or something, you basically get 4 bankers on your team. You get an MD, a director, a VP, an associate, maybe, and an analyst, right? They don't have a data science team that they can bring in to crunch the data, so they don't do it. They don't have a mini-McKinsey they can bring in to do the extra story-building, to do market research, to do surveys, to do our own podcasts and our own webinars and things like that, right?

They don't have operating experts. So we have operating experts—former CEOs of companies, former CFOs, former technologists—that we can bring in, almost our own expert network, right? We have our own private capital markets team that just covers the thousands of companies that invest in fintech companies. It used to be that I knew the top 100 investors or 200; now there are thousands of them. No human being could know all of them and do all these other jobs. So we componentize all these parts of the firm to make it ultimately scalable.

The other thing, if you think about these eras of the firm—the startup era, the growth and institutionalization era—I talk about how we had to hire world-class general counsel, CFO, HR, tech, and so on. In the early days, I was practically the CFO and all these other things. We didn't have any HR people for 15 years, by the way. We were really low-budget on the back office.

But as we scaled up, we realized these things were super important. So now we have world-class versions of all these functions, and they've got their teams. I spend almost zero time on those ancillary functions, and my team is doing God's work in terms of cranking the deep-dive work. I'm able to apply myself on every single transaction, usually in the most value-added way possible.

I'm there at the beginning, middle, and end, and everyone in between, but I'm not building the models anymore or doing the PowerPoints; I'm helping to design them. Believe it or not, I'm in the weeds. I'm popping open models, popping open decks, making tons and tons of comments, and reviewing all this kind of stuff.

But I don't have to do that as much as I used to because my team is now ultra-good. I would bet that even if I were to disappear off the face of the planet, the firm would crank on without me because I now have team members who have been there for 25 years and 15 years.

Most of our MDs have seen 90%+ of our deal flow, right? They’ve been ingrained in the FT culture. We call it the FT way. The FT way is simply that we don’t care how anyone else does their job in the world; we’re going to do our job at the 100% level it needs to be done at. So everyone in the firm uses that kind of terminology, down to junior analysts and everyone else. We have a really killer team of 250 people across the firm.

That segues well. One key question I had is: when you meet a founder who’s at your level of success, breadth, depth, and experience, and who’s as big as you are, it’s definitely stressful to think through the firm beyond the founder, right? There are 250 people at FT. How do you think through the firm beyond Steve? How do you manage that?

You mean today or someday?

I guess someday—10 years from now. You want it to be FT, right?

Look, I think that, like I said, even if I were to evaporate right now, the firm would just carry on and crank out. Goldman Sachs lasted far beyond its founder, and so did every other investment bank. I don’t think Smith Barney is around anymore, or Lehman, or whoever, right? These firms merged into other entities, but at the end of the day, I think it’s about creating a culture and creating an institutionalized version of what we have.

Probably the thing I’m most proud of is that we’ve done that. Our team is really, really strong. I don’t get complaints from clients like, “Hey, you’re not doing your job. I thought you were going to run the deal. Who’s this other guy?” They’re more like, “We love this other guy,” or gal. We have female MDs as well, of course. We’ve just got really strong people.

Every day, or every other day, or every week, I’m getting a call saying, “Your MD is a rock star.” The other day, someone basically just emailed me out of the blue and said, “Steve, you did an amazing job. This person did an amazing job, but this junior guy is a rock star.” I said, “We know. Thank you for that compliment.” But it’s all the way down the stack for us.

Nice. One thing we covered before that I think was unique was that you mentioned you invested—was it $50 million in Revolut?

Yeah.

Who knows the company better than you guys when you’re investing? You’re doing all the work; you’re in there at a banking level, but you’re still investing on top of that. Is that unique to FT? You said you built out all these subsystems. This sounds like a really important segment of FT.

Look, early on, we didn’t have any money to invest anywhere; we were just putting everything back into the business. Our first investment has always been in FT, so whatever we can do to pump money into FT Partners, I’ll start with that first. We put so much money back into the firm to build all these platforms and systems.

We used to use Salesforce. We completely eliminated Salesforce and built our own deal platform. We were building our own AI inside the firm. We invested our own money—$25 million—into a company called Model ML, which is the future of investment banking automation. They’re automating transcripts, building models and decks, and, you name it, they’re going to help us automate it. We’re doing some things ourselves as well.

We’re putting a lot of money back into the firm and sometimes investing in companies that are actually technology companies enabling our business. We can talk more about this later if we get to the AI side of what we do.

We built up a portfolio of great clients over time, and some of them have asked us, “Hey, do you want to invest in the company?” when we were taking on the assignment. Like you talked to Mike Praeger, we invested a not-huge amount of money into the company at a $20 million valuation, and we sold it for $2 billion 10 years later. It took a while. I talked to him, and I’m like, “Damn, I’m talking to a really successful founder here.” He was a nice guy.

Yeah. No, he’s great. He’s great.

We invested multiple times along the way as well and never sold a single share up until they sold to Corpay and TPG in the last year. We tend to hold these shares for a long period of time. It helps create the bond and helps create the partnership.

We don’t do it all the time because we don’t have infinite money. We don’t have a fund; it’s just our own money. Sometimes we pass that hat around to employees when it makes sense. Sometimes we invest before we get hired, and that builds a relationship. Sometimes it’s as we’re getting hired. Sometimes it’s in the middle of getting ready, and sometimes it’s when we do the deal. Sometimes it’s all of those things.

We put some money into Digital Asset Holdings before we ever got hired by them. Then we got hired by them, and we just closed a big, close-to-$400 million capital raise, and we re-upped in that round. We’re kind of putting our money where our mouth is. For better or for worse, all I know is fintech and investing in fintech, so we’re putting a decent chunk of money to work.

6. What Steve Looks for in Great Founders

I want to move on a bit to the lessons you’ve learned from building FT and dealing with all these companies. You’ve worked with so many insanely successful CEOs, and as a VC, I’m just selfishly trying to figure out how you size up the best CEOs to work with.

Do they come to you and you do your due diligence to figure out if this is someone you want to work with? Are there certain patterns that emerge? How do you size them up to know, “I want to spend FT’s money. I might want to invest in these guys, too. They can be a big deal”? I know a Michael can grow into a $2 billion company. I know Revolut can grow into a trillion-dollar company. How do you size up these founders to know that you want to work with them?

Good question. We talk about founders, and we talk about these early-stage companies. Our clients are obviously sometimes really early and hard to assess, and we take chances on them. Sometimes they’re very scaled, like Equiniti. When we took them on, they had hundreds of millions of dollars of EBITDA, so that was a fairly easy one. We loved the CEO, we loved the backers, Cyrus Capital—Frank Baker and his team, great people. That was a no-brainer to take that deal on. We got it done with Bullish. Same thing with Deribit. Coinbase is a multibillion-dollar company.

We do think really hard about the people, and we try to get that right because we’ve turned down even billion- and multibillion-dollar deals if we thought the people situation, or maybe the investors, weren’t the right setup—if they were just never going to sell the company, or had some sky-high price that didn’t make any sense, or just seemed like they were—you have a nose for it at some point in your life. We want to work with good people, right? That’s 99-something percent of people, but you occasionally find the opposite.

When you get earlier-stage, you really act like a VC, right? I think sometimes companies get kind of surprised with us. They come to us, and they want to hire us, and we start doing diligence on them. We’re asking a lot of questions, and we’re asking for their data rooms. We’re doing a lot of pre-work because we only want to work with great companies, or future great companies, that investors will make money on.

In our ecosystem, even though we want to do great for the founders, it has to be a win-win for the investors. We have to make sure that the companies we’re taking on and ultimately selling or raising capital for are really solid companies, with solid people and solid backgrounds. We do background checks on folks, and some people don’t pass that, and we have to recheck those.

We’re in the weeds on everything even before we ever get hired because the last thing we want to do is get hired and find out later that it didn’t meet our criteria. We’ve had to fire certain clients that didn’t meet the criteria later, right? We’re doing that work up front, and we’ve certainly done that times 10 before we go to market.

We really want to make sure investors have an incredibly deep view of the business. I think there’s a view that, with a lot of bankers, everything’s opaque, right? You don’t really know all this information, and there’s a lot of hype and FOMO and whatnot. We’ve never done a deal like that.

All of our deals—we won’t even take a company to market like that. We want the investors to have full access to everything: full access to the CEO and full access to the team. We’re not there to be a shield or a blanket, or to put lipstick on something. We’re there to show exactly what it is, warts and all, pluses and minuses, but also try to get people to understand where it’s going to go.

Like we talked about, the 3 segments of studying a company, if you will. For us, when we’re doing that diligence, a lot of times we just find things that we don’t like.

It's just like—you know, there's such a thing as a good company but not a great client, right? Just like Sequoia or anyone would tell you, there are good companies and good investments, right? Certain investments are overpriced, moving too slow, or moving too fast. We try to be incredibly diligent about what we're doing.

A lot of it comes down to what you're talking about: this relationship with the founder. Not the relationship, but the understanding and the sixth sense—is this person the real deal? Are these people going to build something big? Are they going to deliver on what they say they're going to deliver on? Are they going to enhance our brand in some way, right? That's very important to us, so that our brand matches their brand in a lot of ways.

That's working with great people, doing great things, and helping investors win. We don't want it to be a win-lose situation. Everyone wants it to be a win-win. Every single client we've ever had would always leave 10 or 20% on the table to get a great investor—these high-quality people, a high-quality partner. That's what we aim for. We don't aim to say you have this or that valuation parameter, but we do want it to be a win-win because you've seen a lot of situations on earth where there's a mismatch between investors. I think it's Vinod Khosla himself who says 85% of investors destroy value, and I don't know if he's serious or tongue-in-cheek about that, but I think he actually believes it. So getting that right alchemy between the founders and CEOs and these investors or buyers is critical.

I really like that. I've never made money FOMOing on something, so I'm glad I've always lost money that way. I'm glad there's some validation here. One thing, again, from the VC side—or from the founder side—that we look for is the chip on their shoulder: the founder who's persevered, who's seen success, who really wants to prove themselves or has something to prove. How much of that psychology or psychometrics or whatever plays into your decision on whether you want to work with somebody? Do you care about that?

Yeah, no, I think so. I think, look, what we look for, I'd say, mostly, aside from good people and a good business, is someone who, if it comes down to it, we want to hear say, "I want to add value to my customers." When you talk to Nik Storonsky, he truly, truly believed the banks were gouging on every single product and delivering poor service. This is going to be really easy—of course, nothing's easy—to pick these guys off. I'm not quoting him, but, in a general sense, he wanted to add real value to people who really need those savings and really need the service. So that, to me, is really important.

I do think having that chip on your shoulder is also important. We all believe in coming from a rougher background and having grit and determination and maybe having failed at different things in life, like we all have. That, to me, is really important. I mean, I'm that way. I didn't come from anything. I didn't go to Harvard or anything like that. I went to Wharton for business school, but that was many, many years later, after going to Villanova—what a great school, by the way—but it's not exactly Harvard. My parents went to Harvard, right?

I think that grit and determination that founders have—we talk a lot about Rocky Balboa and all these stories. That's a little bit of how we think about ourselves, and I think it's good to have that chip on your shoulder. A lot of our clients, I think, do. We're not afraid to go after the first-time founder, but second- and third-time founders typically have a level of resilience that's something to behold and then helps create much bigger companies.

Yeah. By the time they get to you, they've clearly cleared that venture hurdle, right? They have a lot of revenue, they have a name, they have a product. Another lesson I'm curious about: there's obviously 250 people at FT. There have probably been a lot over the years who've come and gone. What's the most important advice that you give the people at FT who work for you? Not the casual stuff, but the real "This is something I really believe after all these years; this is why you could be successful here." What would that piece of advice be that you give people?

I think it's just being able to have faith that the business that we're in is doing good things, that you're going to learn a lot, that it never gets boring. You can do well financially for yourself and your family, and over the course of time, it's going to really pay off, right? Like anything, there's a lot of sacrifices in investment banking. There are long nights, long hours, tough clients, and tough deals. A lot of times, as I say, it's 9 yards in a cloud of dust to get everything done. But those who have stuck with it—we've got people who've literally been here 25 years, 20 years, 15 years, and 10 years—these are really great human beings.

I've seen them commit as young people, get married, have kids, and put their kids in grade school and college, even in some cases. Something I'm just super proud of is that we kind of created a good home for people, and it does feel like family. So I think we look for young people to be like young partners at an early age. These days, I can proudly say to people that probably some of the junior people we're hiring today will run the company in 10 or 15 years, or whatever it is—20 years—and if they stick it out, there's a huge opportunity.

You don't want to retire anytime soon.

No time soon. I mean, I have young kids, so they've got to see Dad working for quite a long time. I'll never stop working. I'll be working to the grave.

I really do think that grit and determination, believing that you're with a team of people who care about you, nurturing them, and treating them right are important. We really do care about our team. We do a lot for them, and they do a lot for us. It's a great team. We're very fortunate.

Yeah, I like that. I'm blessed similarly with my Delphi partner, so I totally get it. One other lesson I want to ask you about: 25 years is a long time, right? Most people are at jobs for 2 or 3 years. There's a bad market day, a bad week, but you've been through 2008, you've been through COVID. There's a lot of really hard times here, especially for banking, that you've persevered through. I don't know the best question to ask you, but what has gotten you through the worst of the times in the market and in life to grow FT? Because 25 years of growing a firm is nuts. You mentioned a couple of companies people won't even remember because they're not here anymore: Bear Stearns, Merrill Lynch merged with Bank of America—they're not even here.

Yeah. During the history of FT, we saw Bear Stearns, Merrill Lynch, and Lehman Brothers all go under, not to mention Greenhill and a bunch of other well-established boutiques that got sold or didn't do that well. I'd say a couple of things. One: fear of failure. I'll throw that out there. Just not wanting to fail and never being willing to quit, never giving up.

Number 2, any time there was a downturn in the market, we still had 50 clients that needed us, right? That needed us badly. In the tougher times, I remember the financial crisis like it was yesterday. We were working on so many transactions, and they were all, in some way, shape, or form, related to the financial services industry and the stock market, right? The financial markets were crashing around us. We got almost all our deals done. I barely remember the financial crisis because we were working on the 20 deals that were going on.

So the advice is just keep working.

Keep grinding. Those are a couple of things: the fear of failure, the grind. Your employees need you; you need them. The clients need you. You've got to get your transactions done. It's a no-fail situation.

On top of that, I have to give a lot of credit to my brother Andy. My brother quit his job, like, 3 or 4 years into FT Partners, and joined FT Partners. I know a lot of founders, and a lot of our clients have brothers or siblings working with them. There's just nothing like having a really great family member in the business with you.

Andy isn't on the front lines. He's helping build the firm behind the scenes: our database, our operations, our technology, everything. Andy's a big part of that. Having someone whose shoulder you can cry on during the shitty times, who will be there for you and encourage you even when things are tough—that's been the rock for me, because there have been tough times along the way.

I’d be lying, and everybody would be, if they didn’t admit that. I was watching something about Elon Musk last night. How many times did Tesla and SpaceX almost go out of business, and he rescued them from the brink of nothing?

I have a picture of him in the factory with the exploded rocket in my office. It’s powerful.

Yeah. We’ve had some tough moments here and there, but he’s been there to help me out. Obviously, my wife, too. Just having people around you who are rock solid—that’s been important.

And now, the truth is, having 3 kids is like rocket fuel for me—talking about rockets. This business has to go on. It has to succeed. The kids have to see me working, and it sounds like a weird thing to say as a banker, but it’s true. It’s really highly motivating for me to see the business succeed and see my clients be happy.

The kids read great things in the stories about their dad.

I love the idea that your kids see you working. I think that’s so powerful, because if I didn’t see my dad working, I wouldn’t have the same work ethic. I really like that line.

All those things get me going. And the team, last but not least: the team. We have this incredible group of human beings who work so hard. They’ve all got their families, and I want the firm to succeed for them. I want them all to take it over someday.

All these motivations get you through the tough times. And also, you just have to ignore the tough times. You have to persevere.

I’m with you. I always think through hard times, “Damn, I’m having hard times, but I’m in better places as we go.” It’s crying on nicer shower floors or something.

Exactly.

One other thing I want to ask you is, you’ve obviously met an insane number of people in your life—insanely successful people. You’ve given them advice, and they’ve given you advice. What’s the most important advice you think you’ve been given, maybe in building FT Partners? It doesn’t have to be during a tough time; it could be during a great time. What’s the best advice you think you’ve ever received?

Good question. I think it was—I mentioned earlier that we went literally 15-plus years without having an HR team. We were more thrifty back then and didn’t really think we needed one.

Someone gave me the advice: “Listen, the most important thing you could possibly do is build your culture.” We had a good culture. We had a great culture. But you really have to build it, and you have to build it with the right people around you who believe in the shared vision.

In our business, people are everything. We’ve had to work really hard to build the team, keep the team together, and keep them happy, motivated, and excited. To me, it’s kind of obvious, but if it were that obvious, I would have had an HR team in the first 15 years.

We’ve done a great job pulling the best of the best together.

7. The Future of Fintech, Crypto, and AI

Nailing the culture makes sense. It’s what you look for, too, in the companies you work for, so it definitely makes sense that you want it, too.

Yeah.

Steve, I want to close out with one question on the future of fintech. It’s so hard, because I’m not deep in fintech, to picture what the space would look like without FT Partners. Would these products be here? Would these founders have raised the money? Would I have these apps on my phone?

It seems like you’ve obviously had an impact, but I’m curious where you see that going with AI, crypto, and everything you’re seeing. What’s your view on fintech over the next couple of years? I know it’s a broad question, but I’m curious about your thoughts.

There’s a lot in there with fintech, crypto, and AI, so I’ll try to blend it all together. Number one, like I said before, fintech just keeps going and going and going. You look at the report we just put out with BCG, and it’s a single-digit percentage of the financial services sector. It absolutely has to take over a much bigger percentage of the sector.

There’s still very little perfection in buying insurance, submitting a claim, or managing your finances. I don’t know anybody—if you could interview any of your relatives and say, “Tell me about your financial life,” or any business, and ask how much of that is anywhere near perfect.

Steve, just to clarify—dumb question—but fintech is totally eating the existing banking industry?

Yeah, banking and insurance and asset management and everything else.

I think we define crypto as just a piece of fintech. We’re massive believers in blockchain and crypto. I’d say we’re okay on Bitcoin—Bitcoin is great, we love Bitcoin—but what we really think about long term is the real-world-asset side of it.

All things—this building, that bridge, that plane—being buyable and sellable on the blockchain in some infinitely divisible fractions. To me, money moving around the world, assets moving around the world, and taking all the friction out of that stuff is going to be massive. That’s a huge wave that’s barely started.

Matias told me that, right?

Yeah, Matias.

Matias told me that you’re a huge believer in real-world-asset tokenization. And he’s at FT Partners.

We absolutely are. It’s been a big part of my life. It’s really cool. You’re in fintech for 25 years, and along comes blockchain and crypto, and now real-world assets. It’s a whole new revolution.

Then, boom, next thing you know, AI is mixed into the mix. Every single company we’re dealing with—90% of the conversation is about AI. If it isn’t, they’re probably not going to be a client of ours. You’re going to need to be knee-deep in all things AI.

The best thing about it is that it’s barely started. What we’re doing and seeing today—everyone thinks it’s 100 times what it was a year ago—but that’s just scratching the surface.

To me, it’s about time that the big FIs really fix and automate their back offices. They won’t do it fast enough, unfortunately for them, and that leaves a massive amount of room for new service providers to help them do that and new competitors to take that business away from them.

I think AI is going to be a bigger disruptor than the internet, the dot-com era, mobile phones, or anything else, including crypto. AI is really the thing that’s going to dramatically change everything.

Sorry, one last question. You’ve been through all the eras. You’ve been through the dot-com bubble, early internet, and fintech, and now we’re in AI. It clearly feels a little bubbly, but this time might be different. This time might not be different. Where do you land?

I don’t think there’s anything wrong with bubbles. Valuations get high—that’s the world. Bubbles have been popping all the time in fintech across a long period of time.

The good news about this bubble is that everyone fully realizes it may be a bubble. During the dot-com moment, everyone thought everything was going to go to the moon. Bank branches were going to go away. They didn’t. Insurance agents were going to go away. They didn’t. Tax accountants were going to go away. They didn’t.

Everyone thought all that stuff was real. Nowadays, I think people think it’s real, but they also know they’re in a bubble. Every day on TV, it’s “the bubble, the bubble, the bubble.” At least you know what you’re getting into, and retail investors can either take the chance or not.

I think we’re in such unprecedented times that I don’t think Anthropic, OpenAI, OpenEvidence, MosaicML, or any of these great AI-first companies are in a bubble. There are probably a ton of vertical solutions that are me-too solutions. If something can be coded by 10 or 20 different people and there’s really no moat—there’s no data moat and no network-effect moat—then those things get competed down to maybe nothing. Those kinds of businesses could be in a bubble.

But take a company like CloudWalk, for example. If you ask me what my next favorite company is outside of Revolut or whatever, take a company that, 5 years ago, was building all its technology, but in the last 5 years literally went AI in everything. They built everything full-stack. It’s a Brazil-based company going very, very global.

They built their own fraud stack and their own payment stack. They built every single possible thing. They built their own AI.

They build their own ad networks, so every single part of the company is running on AI, and you see the effects of that. They've gone from, say, lower margins to massive margins. They'll be hitting close to $1 billion of EBITDA by the end of the year. Most people haven't heard of the company, right?

I honestly hadn't until you brought it up.

You'd never heard of it, right? Yeah, and they are one of the heaviest AI users of all fintech companies. Behind the scenes, they've gone from breaking even a number of years ago to making $1 billion of EBITDA—not revenue. They're coming up on that.

That's the thing that's exciting to me, and I'm looking for founders like Luis who can take existing companies and transform them. I love Brex—we helped them out on a lot of transactions, and we were also investors in Brex. We love the Ramp guys, too. Great business, but Ramp has really taken over and pushed AI into the platform, and now it's worth $40 billion.

You can see that, in really short periods of time, these businesses that weren't AI-first from creation can become fully native AI and turn into something spectacular. So that's what we're looking for.

Steve, do you have any advice for founders who, for whatever reason, don't know FT and want to get in touch with you and do a deal with you? Is it good luck, or is it—

No, it's similar to a VC firm. We're all about referrals, right? Probably everyone knows someone who knows me. If you don't, you can email me steve fdpartners.com. That's pretty easy.

It's not meant to be an advertisement, but we're really easy to get ahold of. I guarantee if you email me right now, we'll reply back to you pretty quickly. It's not a big deal. My cell phone number is on the website; you can text me, whatever. We've also got 20 MDs. Anyone will take a call.

To me, we're very easy to get ahold of, and we'll literally meet with anyone. We'll be available. We have a big team of people, and we know so many companies and so many founders. We're quite easy to get ahold of.

I love that. Steve, thank you so much for being so gracious with your time. FT Partners is insanely successful, and it's just crazy what you've built over 25 years. It's awesome to talk to you, so thank you.

It's a privilege being here, Tommy. You've been gracious with your time, and your audience is amazing. Thank you.

Thank you, Steve.