Eric Glyman - Reimagining Corporate Finance - [Invest Like the Best, EP. 275]

My guest today is Eric Glyman, co-founder and CEO of Ramp. Ramp is best known for its corporate cards but it has a range of software products to help finance teams save money and time. Since its founding in 2019, the business has grown rapidly and was last valued at $8 billion. Eric and I discuss Ramp’s initial marketing wedge, how the business has dealt with such fast growth, and why they hold stablecoins on their balance sheet. Please enjoy my conversation with Eric Glyman. For the full show notes, transcript, and links to mentioned content, check out the episode page here. ----- This episode is brought to you by Canalyst. Canalyst is the leading destination for public company data and analysis. If you're a professional equity investor and haven't talked to Canalyst recently, you should give them a shout. Learn more and try Canalyst for yourself at canalyst.com/Patrick. ----- This episode is brought to you by Lemon.io. The team at Lemon.io has built a network of Eastern European developers ready to pair with fast-growing startups. We have faced challenges hiring engineering talent for various projects - and Lemon.io offered developers for one-off projects, developers for full start to finish product development, or developers that could be add-ons to the existing team. Check out lemon.io/patrick to learn more. ----- Invest Like the Best is a property of Colossus, LLC. For more episodes of Invest Like the Best, visit joincolossus.com/episodes. Past guests include Tobi Lutke, Kevin Systrom, Mike Krieger, John Collison, Kat Cole, Marc Andreessen, Matthew Ball, Bill Gurley, Anu Hariharan, Ben Thompson, and many more. Stay up to date on all our podcasts by signing up to Colossus Weekly, our quick dive every Sunday highlighting the top business and investing concepts from our podcasts and the best of what we read that week. Sign up here. Follow us on Twitter: @patrick_oshag | @JoinColossus Show Notes [00:02:41] - [First question] - What was most notably awry about the industry before Ramp [00:04:45] - Breakdown of Visa; The business model of the Black Card compared to the business card offering of Ramp [00:08:40] - Causes and what he attributes their early success to [00:11:30] - Description of Ramp’s software in the beginning and the evolution of co-building it [00:16:34] - How he’s gone about building the company and team fast enough to handle their explosive growth curve [00:19:47] - Approaching all aspects of recruiting and acquiring such great talent [00:21:39] - Thoughts on the biggest mistake he’s made while building Ramp [00:24:05] - Lessons learned about marketing that this journey has taught him [00:26:13] - Learning to manage a senior team and advice for managing rapid growth [00:28:58] - Unique aspects of Ramp’s approach to the financing side [00:32:56] - Why they are storing some of their balance sheet in stablecoins [00:34:47] - What the idealized end state of Ramp looks like [00:37:26] - How the data and information he sees indicates trends in the economy writ large [00:39:33] - Providing secondary liquidity to employees in a world where companies stay private for longer periods of time [00:43:03] - Aspects of company building that are still unnecessarily hard [00:44:55] - What has him most excited about Ramp in the next 12-18 months [00:46:42] - The kindest thing anyone has ever done for him

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Patrick O'Shaughnessy?

  I know firsthand how complex the tech stack is for asset management firms. And seemingly every new tool and data source makes the problem even worse, adding more complexity, more headcount and more risk. RidgeLine offers a better way forward. One unified platform that automates away the complexity across portfolio accounting, reconciliation, reporting, trading, compliance, and more, all at scale. RidgeLine is revolutionizing investment management, helping ambitious firms scale faster, operate smarter, and stay ahead of the curve. See what RidgeLine can unlock for your firm. Schedule a demo at ridgeline.ai. This episode of Invest Like the Best is sponsored by Canalist. Canalist is the leading destination for public company data and analysis. Founded by a former buy-side analyst who encountered friction sourcing, building, and

• 0:43Patrick O'Shaughnessy?

  updating models, Canalist is now used by over 400 institutions, including the largest money managers globally, and by a number of guests on the show. With detailed company-specific models and data on virtually every public company, Canalist's clients are able to ramp up faster, update models instantly, and incorporate the highest quality fundamental data into any workflow. If you're a professional equity investor and haven't talked to Canalist recently, you should give them a shout. Learn more and try Canalist for yourself at canalyst.com/patrick. That's C-A-N-A-L-Y-S-T.com/patrick. Stay tuned after the episode for my conversation with Canalist's customer, Giuseppe Coco of LK Advisors. We talk about how Giuseppe has built Canalist into his process as an international investor and much more.

• 1:27Patrick O'Shaughnessy?

  This episode is brought to you by lemon.io. The team at lemon.io has built a network of Eastern European developers, ready to pair with fast-growing startups. We have faced challenges hiring engineering talent for various projects, and lemon.io offered developers for one-off projects, developers for full start-to-finish product development, or developers that could be add-ons to an existing team. Check out lemon.io/patrick to learn more. Hello and welcome, everyone. I'm Patrick O'Shaughnessy and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, stories, and strategies that will help you better invest both your time and your money. Invest Like the Best is part of the Colossus family of podcasts, and you can access all

• 2:10Patrick O'Shaughnessy?

  our podcasts, including edited transcripts, show notes, and other resources to keep learning at joincolossus.com.

• 2:21Speaker 01

  Patrick O'Shaughnessy is the CEO of O'Shaughnessy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shaughnessy Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of O'Shaughnessy Asset Management may maintain positions in the securities discussed in this podcast.

• 2:46Patrick O'Shaughnessy?

  My guest today is Eric Glyman, co-founder and CEO of Ramp. Ramp is best known for its corporate cards, but it has a range of software products to help finance teams save time and money. The business has grown rapidly since its founding in 2019 and was last valued at $8 billion. Eric and I discussed Ramp's initial marketing wedge, how the business has dealt with such fast growth, and why they hold stable coins on their balance sheet. Please enjoy my conversation with Eric Glyman.

• 3:13Patrick O'Shaughnessy?

  Eric, I'd love to begin our conversation by hearing what this industry that you're building in was like when you first approached it. Like, what were the things, looking back on the early days, that were notably awry about the existing incumbent solutions that motivated you to want to build a company here in the first place?

• 3:32Speaker 02

  Happy to go into it right away. I mean, so Ramp is a relatively young company, and it's stark how quickly things have changed. So, we incorporated in March of 2019, and I think the theme of not just the year, the day, the decade, frankly, was one of excess. The way to compete in the credit card industry, which is our first flagship product, was buyer card. We've got amazing sign-up bonuses. We might have great lounges for you, too. We've got points and rewards. We understand you uniquely. It was very marketing-forward. It was very centered around EOXS, metal cards, black cards, all these kinds of things. It was very much the idea of what credit cards could be and what they represented.

• 4:13Speaker 02

  What was strange to me about this was, first, I had a funny purview, too. I had a sort of company folks on saving. It was bought by Capital One, so my job was to ask people what they were looking for in turnout. It wasn't points, it wasn't cash back. It was more in their bank accounts. Next, when we started talking with finance teams, they weren't looking for points or sign up bonuses. These were marginal differences. It didn't fundamentally change outcomes of businesses. They were looking for more control. They were looking to be more profitable. They were looking to go of them earlier. And so it felt there was a large and fundamental misalignment. Where the large scale credit card issuers were thinking a lot about how to get people to spend more money, earn more points, show off the brand, whereas most business owners, people operating companies,

• 4:55Speaker 02

  were more simple, straightforward, and actually wanted to be more successful to do what they actually cared about. And it felt like business owners, the customers, wanted something different than what the core partners was. I would say it started with the fundamental misalignment that got us very curious and obsessed with, or eventually led into Ramp's focus on helping business owners spend less money, spend less time.

• 5:16Patrick O'Shaughnessy?

  Maybe you could describe and summarize, we've done it elsewhere, with like a breakdown of Visa that I encourage people to listen to. But maybe you could describe the core business model behind that black card, behind that Chase Sapphire model, and then contrast that against Ramp's conceptualization of its first model of offering a card to businesses. I would just love to understand the wedge, the business model wedge. People know how a credit card works. We'll get into some of the details. But would love you to describe sort of what you saw in a business model and what you hoped to design early on the Ramp side.

• 5:47Speaker 02

  Definitely. Every time a card is swiped, a series of transactions go off extremely quickly. First, on the merchant side, there's a request, let's say for a hundred dollars, approve or deny, thumbs up, thumbs down, sent through the merchant acquirer, card network down to the issuer processor, eventually the issuer. And within six seconds, the issuer has to say, yes, this is good or not. It's good to go. They get the clearing back. Effectively, the merchant, so long as they meet core conditions, is credited for this. They're credited not for the full hundred, but for a portion. And what's taken out of that is effectively interchange as well as network fees. Depending on the type of card used, that can vary anywhere from debit, call it thirty cents, to corporate or high-end premium consumer cards could be fees of up to, call it, three percent.

• 6:30Speaker 02

  A small portion of that merchant processor and the merchant bank, some portion will go to the network, but the lion's share of that will go to the funding party, which is the issuer. And so those would be your credit card in your wallet that's typically taking that. And the historical reason is they're taking the risk. Effectively, the funds have cleared if there's a problem with the payer who sent the funds. It's on the issuer that they have to hold through to this transaction. If there's credit involved, which is really the dominant product, most card tie-in like that, they are taking the underwriting risk as well. And for that, they're able to keep the majority. And so this can vary, call it from two, two and a half, 2.6%. From there, you have a set of fees. You might have the cost of financing that. Maybe you're borrowing, maybe you're using deposit, but there's some amount for every

• 7:15Speaker 02

  rolling period you're fronting that. There's credit losses, fraud losses, you have to account for that. And there's also rewards and rebates, which for most in the industry has become this number one big thing of the biggest cost of doing business was actually rebating it back to the customer. For the past 30 years, you really couldn't enter this industry unless you were a dominant player FDIC insured bank. Not a whole lot of innovation, but great marketing organization. And so it started this race to who's going to give away, make people think the points are worth more and in the background trying to devalue this. And so there was a fundamental game going on where both consumers and credit cards trying to outsmart each other. One of the things that we felt was back to that original premise, people aren't looking for more cash back or points, they're looking for more in their bank account.

• 7:57Speaker 02

  When you follow that through, you realize that 1% back, 2% back, whatever it could be, sounds great, but not spending that dollar in that first place for the end consumer is 50 to 100 times as powerful. And there's just a lot of waste. People do spend things on subscriptions they're no longer using, on services that they could get for less, whatever it may be. And so one of the fundamental premises of Ramp was could you identify that? And if so, you might actually much have a better claim to make a product that an end customer, a business owner, consumer want to use because it's much more powerful for them. You go from a startup company with literally 0.000% of the market share to suddenly being able to take things on and do that. So first was around savings.

• 8:39Speaker 02

  It fell further into monetary savings was great, but saving time for business owners even better. If you could replace software, that wasn't so useful to do that. And so could you actually use interchange, not just as a means of divvying up rewards, but as a fundamental pool to go and Create great software that creates a flywheel of value for your end customer. And so the premise was let's make things, if you can make things that people actually want to use, that people want to pull out user card more than others in their wallet, that'll create more volume, that'll improve the economics that you keep on funds flow.

• 9:11Patrick O'Shaughnessy?

  In the early days, I'm always really curious what you attribute the success to with new customers that are trying Ramp, which is not an established brand. And you said before we recorded, the founders of most of your competitors were top hats. These are old, old companies and this is a brand new one. So how did you win early on? Like, what was it that caused those early wins? Because Ramp's founded in 2019, I think it's one of the fastest growing companies by market value ever in the many billions of market value today in 2022. So what do you attribute that early success to?

• 9:42Speaker 02

  For me, building with and having real relationships with people building businesses, actually listening to them. From the get-go, before we shipped a single card or a single product, we talked with 100 finance teams and founders. And rather than going and saying, would you buy our products, or coming out, we said, we're trying to build a, I could focus on helping your business spend less money, spend less time, could we get your advice? And it shifted the relationship from being on opposite sides of the table, so to speak, or I'm trying to get something from you, would you buy to let's sit on the same side of the table together and problem solve and talk about what real issues you have in your business. And we started to learn things. We thought it was all about saving money. It turned out that actually for many finance teams, the problem was not can I get a card? It was I've got cards, I have seven. People don't turn in their receipts

• 10:26Speaker 02

  on time. I'm paying for things that are more expensive than what friends at other companies are getting charged. I feel like I'm getting ripped off. I could be running a lot more efficiently and my partner is trying to get me to spend more and outsmart me. And so there's not many people on the side. So even that relationship of we're here to build and align our business with you, and the sincerity of I'm here, we've got a team that almost entirely engineers at the time, and we want to build together with you was very different and refreshing than what most finance teams and the like were used to. And a card is somewhat different even from business model than traditional SaaS. It's not here's a contract, would you buy? And if you have seats,

• 11:05Speaker 02

  Kind of go with it. It's invisible. It almost pays you and our monetization effectively grows with people's growing trust in the business. And so the whole premise was how do we grow trust with you, build with you? And so that was the initial wedge in and why we were able to grow. It turned out that a lot of people who went were building great businesses. This wasn't a product where there was low awareness. People had heard of credit cards. In fact, they wanted to stop hearing about it. They had other problems to solve in their business. But when you make a decision, they would call up other financing founders, people in their network. And for the first time, people were hearing, actually, this product is different. It's aligned with us. It's saving us money. It's replacing other sets of software. You should use it. So that was the initial jump. And then the pandemic was a huge accelerator for us. And that just went from, the premise of savings went from, okay, sort of interesting to fundamentally important.

• 11:53Speaker 02

  If you didn't know what happened to the financing markets and how I'm going to deal with remote made our kind of digital product first important.

• 12:02Patrick O'Shaughnessy?

  I really like this concept of like almost the invisible business where if you're successful because they're using your software, which presumably you're not charging for some or all of it, just comes with use of the cards. No one has to make a big buying decision, right? Like you'd start at zero and ramp. Sorry for the pun. It could ramp very quickly and aggressively. So describe that software in the early days. If really what you're selling is an easier life made possible by easier software, and then you're making money on something that they're used to, but it's sort of invisible. What was that early software and what was co-building like? I love when especially enterprise companies do this, but the actual literal tactics of how you do it is very interesting to me. Like what kinds of questions were you asking? How often would you show them an iteration of the thing before it was shipped? The details of this co-building are really interesting to me, down to the most granular, if you can share them.

• 12:52Speaker 02

  Happy to. Let's follow that premise through. We're building this together. We're trying to seek advice for people and people would give you advice and that it was excellent and you were seeing common themes and a lot of the art was, went back to this Henry Fordism of. You want to build a car, not a faster horse. Trying to really understand what's the problem, what's the job to be done? And how do you build products that ultimately align to solving it in problem? Not necessarily solving it in the way or in what people are asking for. Often they're going to the familiar. The first product that we came out with was this corporate card design to help you spend less was the moniker. And if you look through it, it actually was a set of products streamlined all around helping people close their books faster.

• 13:32Speaker 02

  Going from card, which would trigger IRS requirements if you spend over seventy five dollars to collect receipts. Label that, getting it into accounting software and the like. And then trying to give insights around ways that you might spend less. That was the first product. The way that it was built, give you a couple of examples. So one of our early customers was the direct to consumer business called Candid. I think Nick Greenfield has been on one of your early episodes. And they were scaling incredibly rapidly at that time. Went from, I think, ten people to two hundred and fifty in the time period of, I want to say, a year and a half, two years. And there was a lot of chaoticness. Like anything, when you hire new product teams and new design teams, they would have problems. Like they're spending on lots of project management software.

• 14:16Speaker 02

  They're spending on lots of new design software and suites. Our statement to them was, we want to save you time and money. Are there areas that you know are wasting time for you guys or money? Some years they knew, others they didn't. On the second part, we wanted to save you money. We said, okay, would you send us your past ninety days of transactions? We'll go through and see what we can do. And at the time, it was very much done by hand. We were trying to figure out based off of the credit card descriptors. We see it was super not clean. Can we build some scripts to help clean that up? And so things like T R L star thousand eleven, you could see, okay, that was Trello. S M R T star, the invoice number, that was Smart Sheets, so on and so forth. And we started to see patterns emerging. If you actually understood what the merchants were, you clustered them.

• 14:58Speaker 02

  It turned out for them, they were paying for, I think, a number of five sets of software that did the same thing in product management. They were paying for some vendors where they were grandfathered into an old annual plan. And the new plans were actually materially less. And we came back to them early on, not just, hey, if you use this card, we'll give you these insights on an ongoing basis. We found a quarter million dollars in savings. Let's talk through it. And it went from, okay, this is a vendor trying to sell me some product to use. So they just spent time going through our data, showing us how to spend less. We'd be happy to switch card spend over. And it was lots of moments like that. It was both putting in the elbow brief and the manual work to figure out what were the patterns, what could you automate through software to take what was a raw manual process

• 15:39Speaker 02

  and have that done through code to next starting to build patterns within the software that would save things. So that was money. Other ones were focused on time. Most painful experiences for anybody who's worked is like this weird relationship on getting receipts in. It sort of fundamentally doesn't make sense. I tend to believe that if the credit card issuers actually just collected receipts, did it concur and expensify shouldn't exist, you could actually pull a lot of data from the merchants and getting into your books. It's sort of a bizarre thing that's there in the first place. And because they didn't, there's all these bad design decisions that follow from it. If you want to get a transaction from Amex to concur, it takes 24 hours. It means that if you're an employee and you're at dinner, you're not going to take a photo and wait the next day. You usually kind of put it in your wallet and

• 16:23Speaker 02

  forget and the average receipt is turned in a month later. So we're hearing this all the time for finance teams. And we said, okay, well, the problem is you can't close your books. You have to restate things constantly or ask for your bad hygiene. Let's just do this. We're in the authorization layer. Let's text the cardholder when they have a receipt in their head. Let's build some OCR to be able to match it to the right transaction. And from then to today, the average receipt is turned in within 30 minutes on ramp. The question was not, again, how do we design something that'll get people to use a card? That was one of the byproducts. It started with what's costing business money they shouldn't be spending? What's costing them time? And then how do we either manually or through the software process line and experience, help them achieve these goals? And then that became the product.

• 17:05Patrick O'Shaughnessy?

  If you look at the website today across the four categories, start, scale, streamline, and save, it's more than a dozen individual things. I don't know how many of those live in the same screens of software or something, but there's a lot going on in terms of the functions or the jobs that you're doing for your partners. And again, the business is less than three years old. So talk me through how you've gone about building the company itself and the team fast enough to be able to do that many different things well, because typically the story in this world would be you might build the initial product for three years and not even launch it to make it really tailored to the customer. Seems like you've built much faster and in more directions. And so I'm really curious, what made that possible?

• 17:46Speaker 02

  Yeah, that was an explicit design decision around fundamentally what the company needed to be. And some of this came from, we'd sold our last company to Capital One and saw what were they extraordinary at? But what were they not great at? Spent a lot of time with American Express with our prior company. Got to know Chase in a lot of ways and our viewers, they had fundamental things they were excellent at. Whether it was extraordinary brand, extraordinary credit rating ability to turn to distribution. But they were incredibly slow. Form factor of a card has hardly changed in 30 years. Compliance functions that were set up for real and important, I think regulatory purposes were extended to become effectively a bat that made development take three months for even changing a webpage or the color of a button

• 18:29Speaker 02

  because of real and mostly perceived plausible risks. And so a lot of the question was, how could we design parts of our own organization that dealt with regulatory, potential legal or even financial services that could not and could never go down to the extremely mythological and deliberate, but for most of the rest of webpage generations of software services on top that didn't involve the movement of money directly. How do you make that go really fast? How do you actually deliver what we hoped that the first kind of really engineering and product driven organization in the credit card space? And so that was a lot of the initial premise. And to do that, we put our money where our mouth was. The first 10 people, seven were engineers, one was on design came from IDEO. One was on talent.

• 19:15Speaker 02

  It was people who could build things of structure, who endeavored to try to find extraordinary talent. And even from the first pool, we worked really hard to find really outlier levels of talent, whether it's some of the team Paribus that best of, to folks like Calvin Lee. Calvin was top of his class, MIT finishing two and a half years, Google Brain, Facebook AI Research. Came out of a team, Viral Patel, Viral extraordinary, who was going to WWDC from the time he was 14, building apps. Pablo, who built out the engineering office for Lipton New York and the like. And so we tried to have a team that was extraordinary in capabilities from the get go that would attract other people who wanted to work with other great people, wanted to build incredible processes that for areas of engineering, we needed to go super fast.

• 20:00Speaker 02

  We would do this and operate and ship consistently. And parts of the infrastructure that needed to go slow, have very low latency, could never be taken down, do that, but isolate them and have separate processes around and make sure the engine around talent was really a forefront focus of the company.

• 20:18Patrick O'Shaughnessy?

  I think about recruiting as being about pitching who you're going to work with, what you're going to work on, how much cash you're going to make, how much equity and therefore potential upside are you going to garner? How would you say Ramp approaches those four things in balance? Are there some that you emphasize more than others? Why were you able to get those people to all say yes?

• 20:39Speaker 02

  Just trying to understand what was important to them. Everyone has dreams, aspirations, things they want to do. Some want to work on and build great companies, be a part of great organizations. So having a strong talent density is just, you know, why does so many people go to McKinsey? Why does anyone go to Goldman? Why does anyone go to decisions? Well, because other good people are there. So trying to explicitly have an interesting mix of people and sort of this talent density was important as a goal in and of itself. Next was ownership, especially for people going on and taking that much risk. They either want to work really hard and be able to spit on the upside. And so compared to others, we allocated a lot, not only to the pool, but even actually delayed the founding of the company, put debt on it originally. So people, the first time effectively could buy founder shares and be thinking not just

• 21:22Speaker 02

  about ownership, but also tax optimization, things you could do for people early at the company. And so thinking of the long term from their perspective, what could be great? Next, getting of a lot of responsibility and then having no illusion about the long term. It's possible that we'll all work together for 20 plus years building this company. That'd be great, but it's possible some want to go there, see what it's like and go and start their company later. And when I look at some of the first 22 have gone on to do that and we've been there to support them. And so I think a lot of this is around having like a real, exciting mission that feels worth pursuing. Credibility, not just in what you're doing, but that you actually asking or listening to what's important in their own life and career, following through on that. And as it changes, not just having a relationship and building the company, but helping them

• 22:06Speaker 02

  actualize what they care about and believe in over the course of their life.

• 22:10Patrick O'Shaughnessy?

  How do you think about the biggest mistake that you've made so far in Ramp and the lessons that it taught you that might be portable to other entrepreneurs out there?

• 22:20Speaker 02

  Generally, the moments when we found ourselves in like the most trouble is when like when we knew there were problems along the way, or there was something fundamentally broken, we were getting signals, we didn't act on it quickly enough. I think that this can happen sometimes, and whether it's talent is probably one that it can be broadly related in building a company, it's doubling for the revenue sixty-five times over year over year in twenty twenty, seven and a half in twenty twenty-one. At that scale, people who were really proficient and great at getting ten percent better, five percent better every month, mathematically, we're not scaling, keeping people in roles or actually expecting that people who were ahead of to be able to take things on at large and large scale, either resulted in teams having to work around and getting effectively parts of the organization

• 23:05Speaker 02

  crash on each other, or extreme stress on people who probably would have been happier and better off. We just looked like you're great, but being able to work with someone who's seen it, done it, you're going to get further in your career. And so not addressing those. And then similarly, in some customer conversations, we have some extraordinary relationship with, whether it's from potato farms, companies setting things quite literally into space, multi-thousand carholder deployments at single companies, publicly, stage private, you name it. But for some of our larger customers, in this enterprise relationship, like I come from a consumer background where it's generally simple, we want to have a product, let's do this. I think in some enterprise relationships, it's really complex, it's finding trust, it's whatever. And so I can think of one without giving the specifics, one relationship where we were in a pilot with a large scale public company for

• 23:50Speaker 02

  a year and a half. And there was a never-ending list of like asks of different things that people wanted. And I think that the team, I think on both sides, there was mutual trust loss because you couldn't get actually what people were looking for. They were making asks, we were getting the team working, I was getting exhausted from, you've asked us for, you know, this is the fourth RFP, you've asked us for forty sets of things, you're tired of it. And then rather than working through the problem, people gave up. I generally think that the failure modes are when people work around each other and don't actually address something here is broken. Do we want to take this forward or not? Like we're adults, we're as a company, how do we actually get to the heart of the problem? I think it probably stems, both of those stem from avoidance or not actually facing what is a fundamental breakdown in a problem. And typically, that's where the most problems and bad things

• 24:35Speaker 02

  have happened for us.

• 24:36Patrick O'Shaughnessy?

  What have you learned most about marketing? Obviously, you've been an entrepreneur before Ramp. So I guess this could be a holistic question. But at Ramp specifically, what lessons in marketing has the business taught you?

• 24:48Speaker 02

  I think a couple, and it's evolved pretty heavily over time. The first one is that you need to test things and actually show it to people. So this is not like go out and do studies and try to go and get people's perspective. In many ways, Ramp is a large scale relationship business. We have over 100,000 cardholders. These are 5,000 businesses. And if you want to, you can talk with a ton of them every month, week, whatever. And if you're putting ads out, not only do your existing customers see it, but others. And I think one of the best things that you can do is as you're going and creating, actually show it to people and say, you've got three different versions. What do you think about this? What do you see? Because you can actually start to go and get real insights and perspectives about what you're doing. So that's one, like real earnest showing it to people. You can generally arrive much better and your best ads are never the first.

• 25:33Speaker 02

  It's usually like the 10th or 15th. And you need to cycle to get real honest reactions, not just hear what people say, but also like look at their eyes, look at their face, are they smiling? And these subtle things, you only get one first impression, but you want to see those first impressions on people is one. The next, I think that there's a tendency, certainly I had it, but I think a lot of founders have it, to focus heavily on product and tell you about all the features and things it can do rationally. And organizations are bizarre ecosystems. The map of what people are looking for is unfortunately not always rational. And your model of rationality is necessarily even the reality of it. And so thinking less about marketing the product and the features and getting more into how do you create desire? What are people looking for?

• 26:18Speaker 02

  How do you kind of tap into that? And think of it less of about informing, showing what a product could look like, what are the features or the ROI? But what are the things that make people want to do things? Like get stuck in their head, they can't stop thinking about it. These concepts that just stick with people. And so I think that those are the key things for me, that this is a significantly larger dollar scale than the last company we had. And I think that if you can do those two things, you can go a pretty long way.

• 26:44Patrick O'Shaughnessy?

  It reminds me of my friend Jeremiah's note that for any company, you should understand what they make versus what they sell. And the gap between those two things is often the story of their margins, which is really, really interesting, basically saying the same thing. What have you learned about managing a senior team? I'm curious how many people report to you, but more generally, in something growing this quickly, you must be very good at delegation by definition. But how have you done that? Well, like, what advice would you offer others trying to manage growth of this speed? 65x in a year? Sounds great from the outside, but I know, having seen it from the inside of companies, that it's hell on earth in certain ways. Growth is very hard. So what have you done there to improve the way you manage people in the senior team?

• 27:26Speaker 02

  Some of it was like a framework shift. I feel like people's first company, it's don't go out of business, be terrified, don't let a dollar go. It's often a scarcity mindset. And people say, let's talk about this abundance mindset. But for me, what really internalized it was, there was a day when I was quite literally 33% of the headcount. Today, I'm like 0.3%. I'm just quite literally not as helpful and not as impactful as what I used to be. And I think that the larger that companies get, I think that the more the role of a founder and people managing shifts to one, really clarifying, where are we trying to go? And what is the vision? And so making clear, what is it that we're trying to solve for? Can you go down to the end of more concreteness? And so people can say, I understand it. Nothing is left to ambiguity. Let me go and propose different ways and paths that I can get there.

• 28:11Speaker 02

  I think part of my job is clarifying that vision, some of the quantitative goals, some of the versions of how. And so people can start to trade off and you can actually create alignment among larger organizations. And the second, one of my favorite business thinkers ever, often we're coaches, whether it's like John Wooden, UCLA, Bill Walsh, Scotty Sarif itself. I think a lot of my job is not to do, there are moments, well, to go into the org and break things apart and even just work on things together. It's much more about helping people live up to their potential.

• 28:43Speaker 02

  If you're trying to hire extraordinary people, there is a reason in leadership roles they're capable of great things. And I think a lot of the question generally failure mode happens for me when I try to go and solve what is the functional problem versus what makes this person great and how do I put them in scenarios that tap into their strengths? Now help them see some of their blind spots and allow them to do the things that make them great. And so I think a lot of my management cell comes back to trying to remember what are the strengths, go over that, identify what are the gaps and say like, this is painful. You're spending a lot of time. How do we find someone to compliment you? Should this be your responsibility or do we want to give this away? And generally, when you do that, things start moving a lot better.

• 29:23Patrick O'Shaughnessy?

  Do you think that Ramp has done anything out of the ordinary we're talking about on the financing side? I mean, you already mentioned the notion of delaying the founding of the company, which is more on the employee side, which is super interesting. I hadn't heard that before. But when it comes to investors, you've got a great cap table, many of whom are familiar to our audience. What have you done that's unique or differentiated here? Or do you think you've just really tried to run a best in class cap table process every time?

• 29:49Speaker 02

  There's definitely some things that are unusual, both on the cap table and assembly of capital, as well as also some of the use of it. I think we're one of the largest companies that holds a material portion of stablecoin in our balance sheet. And so there's some interesting things on both portions, but we've never actually made a fundraising pitch deck. Whether it was a seed to even the most recent rounds, we've never gone out to rates. Typically, we've, in the same way, went to customers and said, we never said, would you like to buy this product? We would say, could we get your advice on this? We would meet with investors, say like, we're working on this. How do you think about this? We would show progress and get their advice. And so you transform the relationship from the get go. They're not trying to go and raise funds from me, even though who knows, maybe they would entertain that too. They're trying to solve a problem. And you're an expert in

• 30:32Speaker 02

  the business or in the industry, you see things, how can we go and solve these problems together? It created almost a pool instead of people to pitch, but people that potentially you could fill it out and see if you would want to work together on some problems, whether it's closing customers, thinking your business challenge, hiring people, when you saw Things were working, both parties wanted to work with each other. So a different kind of design premise. Next, I think that a lot of founders think in terms of you need to go out and run a process, whoever has the highest price, go do that. And I think that people optimize locally of the highest price and the least solution surely must be the best thing. Argue there's a wrong optimization. It's about maximizing long-term total enterprise value. And doing that is much more about assembling a world-class set of investors who want to be there with not just now, but over the course of many, many years.

• 31:16Speaker 02

  People who trust you throughout the industry and want to build together with you. And the way to do that is not by trying to stretch and squeeze every last dollar and save every last share, but trying to foster like love and trust. And so we'd meet with a lot of people, build relationships. And then when it came time to do rounds, generally it might be someone was thinking about it. We'd say, look, we appreciate it. I'm not going to obviously shop for share, but for folks to say like something is happening, would you like to think about it? Or if some ranges, people would come together. We would never pick the highest price. And that was for a reason. I mean, first, we'd never pick the highest price, but we would try to figure out how do we get a collective of people working together? Find people with unique skill sets that we can go into, whether it's for advice around certain components of our business.

• 31:57Speaker 02

  Once we had done that, we would say, okay, well, it sounds like people wanted to buy, call it 20%, 15% of the business. We would like to do it at a lower price, but we would also like to sell less to the company. And so our rounds in the past are very different than the typical 20% round or it's 15%, there's one lead than everyone else. It's often much more of a collective pattern. And there was a few things that we experienced that happened about first, because you're not taking the highest price for employees. It's much more of a, okay, wait a minute, maybe my, the foreign NA is lower. Again, submit actually for employees, there's long-term benefit, but if you're like, there's excess value on the table, I can have some comfort in this. For investors, maybe it was a lower amount, but you want to talk about it. You invested in this thing. It was a hot round you bought in.

• 32:39Speaker 02

  And actually the true value is probably above it, which demonstrates your ability to get into great investments. And more people talk about it, the more people hear about it. If you way overperform, you of course can raise. If things don't go perfectly to plan, you have some operating room and leverage and it starts to create. I think what it adds up to is the sense of inevitability. I think at least in the entrepreneur world, Elon Musk was sort of famous for doing this with SpaceX, where they would never take the highest price, kind of slowly build this up over time. And then you knew if you were buying SpaceX stock, it was going to be a great investment. And so in many ways, it was modeled after that philosophy of how do we go and bring the right people together, view this as a team effort, not as an average relationship, and just try to build a great long-term company we're here to do.

• 33:24Patrick O'Shaughnessy?

  You piqued my interest with the stablecoin thing too, in terms of use or storage of funds in this case. Why are you doing that? Like, how much of the balance sheet is in stablecoin? What's the benefit to ramp of thinking about that?

• 33:35Speaker 02

  It's twofold. I mean, single-digit percentage, can say that, can say more, but it's substantial. It's meaningful, eight figures, funds that are in it. There's very interesting characteristics now. If you actually think about it from a treasurer perspective, your alternatives are earn one to two basis points. Your bank, which is fun to do that. And I think the predominant use of that is there because it should be defensive. What's interesting about this is you can use a small portion in securities that functionally almost like a covered bond, where it's asset-backed, one-for-one with dollars, collateralized and audited to by professional orders. But yet the yield on it can be high, single-digit percentage points. Very month-to-month, it can go from five to nine percent was your highest one-month yield. And effectively, you can buy this in one-month rolls.

• 34:20Speaker 02

  And if you do this with, we'd call it a small portion of your balance sheet, you can make what the next 95% plus would do in terms of yield. And so one, it seemed interesting from a defensive ability to start to go and get yield and get a little bit more. And this we only did later, once we had hundreds of millions on the balance sheet. But second, we serve fast-growing businesses and daring businesses across different industries. And the amount of growth in the cryptocurrency industry has been really substantial. And so what better way to have credibility and to actually be a real market participant? And first, it's financial, but the second is you start to think about what are the problems that you run into in being a cryptocurrency-related business. And so today, beyond it being useful from a balance sheet perspective, some of the fastest and growing and largest cryptocurrency companies use ramp.

• 35:05Speaker 02

  Today, we don't offer any cryptocurrency-related services for product, but it's a realness of saying, it's sort of walking the walk. It's like, I understand your business, we're holding part of it, we're exploring and thinking about it, and it creates its own opportunities.

• 35:17Patrick O'Shaughnessy?

  I often like thinking about not the progression of a business, not as kind of marching forward from here, but continuing to work backward from some sort of idealized end state.

• 35:25Speaker 02

  Love that.

• 35:26Patrick O'Shaughnessy?

  What do you think that story is for Ramp? Like, what is the beautiful, incredibly frictionless, amazing experience at the end of the rainbow that doesn't exist yet?

• 35:38Speaker 02

  I think about it almost as what if your card you're building into your software was quite literally so smart that if you were spinning through the software, a dollar else were counted for a dollar five. What used to take days, hours, could be totally automated away. And so first, you have more financial leverage on every dollar that comes through. You have time back. You can quite literally be more profitable or have your team working on strategic work. And then last, starting to really use data to benefit not just the single one-to-one relationship with which cards built historically have done, but you start to get the benefit and wisdom of the crowd, just as ways in many ways revolutionize navigation and traffic. It wasn't about having a map and knowing where things were. The most interesting data was other cars in the network, where were they stuck in traffic and how could you use

• 36:23Speaker 02

  it to help the system be more efficient? And we think about that for our customers. Could you go and see what the highest performing finance teams, how do they run their companies, spend on things, close their books quickly? And how do you bring those insights to the thousands, tens of thousands of other companies, use that and collectively make them all more successful? And so I think it comes from focus and general line that we want to help your business be more successful, spend less money, spend less time, have frictionless and automated processes, and then using data to actually help you be there. And so some of the manifestations of that have started to become clear. It's fully automated expense management where 6% of our companies that enable all of our integrations with Gmail, Amazon for Business,

• 37:05Speaker 02

  and 90% of all their receipts are fully automated, no human touch at all. It allows them to be, employees to be really productive. They don't need to spend time forwarding receipts, snapping photos of stuff. They can just go back to their work. And so that's simple versions to, you could imagine, extensions where you're buying a set of software and suddenly you see their sales team got you and you're about to pay far above market. But Ramp could help to just running through ongoing procurement processes through travel entertainment processes where when people are buying hotels, could your car be smart enough? Could your bill payment software be smart enough to deliver not just the movement of funds to where you want to go, but to make sure that your dollars and your hours actually go further? So that's the type of feature, I know it's probably more in spirit than and can clearly

• 37:48Speaker 02

  hear what that looks and feels like, but those are the things that get us really excited and focused. We have so long to go to get there.

• 37:55Patrick O'Shaughnessy?

  You're lucky to be able to see tons of the finance activity at, you said, more than 5,000 different client customer companies now. What is all that information telling you about the world and the economy? It's obviously been a tumultuous period here for the last six months. Let's call it a bit longer than that in some areas. What insight can you share with us on how businesses are thinking about their own challenges or just any trends or data that you've seen as a result of your unique perch?

• 38:22Speaker 02

  What I can say that's been very clear has been kind of a sudden return and rapid growth of travel and entertainment spend where it's not the way that it used to be, where people are booking all the time to go see clients and it's from one kind of central node, but heavy degree of companies are having constant offsites. They're moving. So we see it in the list of travel, the hotel spend of Ubers and things like that, but it's much more distributed. It's moving instead of from tier one to tier one city to tier two to different kind of destination. And even the relationships that people have within companies are much more, and that is even haven't spoke, but it's often just spoke, companies moving from different centers across the country, traveling more often and more frequent kind of hybrid offsites. And so that's been one, still a far cry from what

• 39:05Speaker 02

  it used to be, but the travel patterns are differing quite a bit. And that's, I think, because financial products have been improved, the efficiency is possible to get short term, long term, we're seeing more elements of efficient balancing of capital. Your solution is not no funds raised or $2 million term loan, but you'll see companies starting to go and whether put things on card or flex payments on call it 30 day, 60 day products and more efficiently map your direct to your e-commerce inflows and sales versus your inventory timeline of getting things shipped. And so I think there's a lot more capabilities even for small companies to engage in financial engineering, whether it's through products like Ramp or others. And so just different movement patterns as well as to more efficient capital matching

• 39:47Speaker 02

  and ability to, maybe this is just Amazon's philosophy of being cash flow efficient. Wearing off on the rest of the world, but thinking not just an income statement, but in matching cash flows over the course of a company's life are the two things that we're seeing is just happening more at small and mid-sized businesses that I frankly don't think happened or they weren't empowered to do in years before.

• 40:08Patrick O'Shaughnessy?

  You mentioned SpaceX earlier as an interesting example of innovation in sort of how they deal with the private markets. And I'm curious how you think that another thing they're known for is running this very clean internal process for getting liquidity for people that own equity that are employees or whatever over time to finance their life, just like anybody else would. How have you thought about that for yourself, for your teammates with a market value that's grown so quickly in a very different business, like you said, than when it was three people, a real thing that's going to be around? How do you think about providing secondary liquidity to employees? Because it seems like the philosophy of that is going to matter for a lot of these companies that are staying private for longer, potentially keeping their options open for longer. What has been your strategy? How do you think about it?

• 40:53Speaker 02

  It's all now starting to get quite relevant. So I'd say it's very top of mind. I don't think that we're fully settled in the view of what this looks like. I think that principles basis, first, it's important. I think that people are obviously here to create value over the long term. And sometimes for people, being able to take a little bit off the table so you can really focus full stop over many, many years matters to people. I think as a premise, especially for companies that are getting over how vested stock in with the company for a period of time, it is time to do that is one. And so I think viewing just talent as a key input, you know, making sure that people in their life continue to be really happy is important. So that's one. Next, there's a lot that goes into just the design of those programs, whether it's private placement or tender offers. There's

• 41:38Speaker 02

  different time duration. A tender has to take place over three months plus. It has to be broadly marketed, attributed, maybe balancing kind of supply and demand. And there's some platforms to do this, but there's a lot of different rule and design decisions with it. SpaceX was, I think, the market book, a good one, but well, I know as well, I understand that Airbnb was another example that. Said if you're at the company, you can't sell secondary and it created this negative incentive for people to say if you need liquidity, leave, leave to go sell it. There's been a growing up in the industry of, okay, you need to think about how you can give liquidity to people who are there. Keep long-term aligned incentives and often that comes in the form of can't sell more than X percentage of your stock of long-term vested or no more than Y percent per year. Trying to do that and then run regular processes.

• 42:23Speaker 02

  And so I think space is the old age. I think a lot of people today talk about how Android does this where I think they call it on the order of every half a year, just about. So long as there's sufficient interest, people can go and say what they're thinking about. And that's been such a hard stock for investors to buy that there's generally requisite interest that effectively there's matching processes to go on through. And so I think it's going to evolve a lot over the coming years. I think the other trend as well has been loans that people can take against it, sort of going from only Silicon Valley Bank, First Republic, to even companies being built specifically to provide this. And so we're fascinated by it. I wish I could give you a conclusive of here's what we've settled on, but you can't run around it.

• 43:02Speaker 02

  And I also think too, if you're sort of asking what are people's desires in the same way, people's impact, they'll take care of their families. You need to be a party to that. And actually I do think it's an obligation of management teams to get to. And I think it tends to happen in probably the third to sixth year, depending on the stage of the company. And I think we've fallen into it. So in the coming months, let's talk about it.

• 43:23Patrick O'Shaughnessy?

  It's a fascinating one. It raises the question for me of if there are other areas of this company building art and process that you think just should be much easier for the founding leadership team. Are there aspects of building a company still that you find just crazy and necessarily hard or look back on it's like, I can't believe that was so difficult?

• 43:42Speaker 02

  I think one of the fundamental premises of this is like, you cannot be good at that many things at once. Even the greatest company in the world can pick a couple of things that they are extraordinary at. The rest maybe are halfway decent and hopefully not too many terrible. But if your plan is to be excellent at everything, it's a fundamentally crazy plan. And in the same way, it is a little bit nuts that for most companies, it's like whether you're like a deep tech company working on self-driving fundamentals of machine learning, data sets to delivery company to a farm. One of the core first challenges you need to figure out in your credit card software, your management software, your accounting software, your HRAS software, all these different sets of suites or manual processes. And so I think that this trend of the standardization of if you use the stack to be more successful is a good thing.

• 44:26Speaker 02

  You like to be a part of that. I would say that for me, generally like the things that I've hated come in these sort of sets of TDM. And so we've been better, I think, on the financial side of automating away some of these sorts of challenges. But one that I think is very interesting, and now we're seeing it with larger brand, sales stack, there's even basic things like if you want to manage through the inputs, it's very hard. So while it's great that there's CRM's like Salesforce, I think all the rest of the things of like, how busy are calendars? What's the productivity, the calculations around specific people? If you actually dig into how, I would say for me, this is top of mind, sales ops, revenue operations, it's very bespoke, I think, in a lot of companies right now, and a little bit chaotic. And so that's a space that I think is important, particularly in the context

• 45:10Speaker 02

  of companies can grow faster than ever. There's still, in my mind, is not correct stack. And what you can get there is by heavily constraining it and trying to pursue that. So that's the space that for me, I think someone solves it, will buy it. Other people would use it. That's my.

• 45:26Patrick O'Shaughnessy?

  What has you most excited about Ramp, specifically in the next 12 to 18 months, sort of that intermediate term, probably edge of your like near-term planning? What gets you excited? What's getting you out of bed?

• 45:36Speaker 02

  Just feel lucky and giddy, frankly, just to have the chance to, this is sort of the moment that many of us had dreamed about years ago, came sooner than we anticipated. But to nine figures in revenue and less than two years from launches, a little bit wild. And so some of this is just, don't screw it up, stick with it and stay humble. The ones for me, very specifically, some of my background was around turning data into savings for customers. At the last company, we processed 100 million emails a day to generate nine figures plus some savings for our customers. And I think that placement and some of the workflows that Ramp is in, combined with the value can present back. I want to go a lot deeper there to go not just from laying of best-in-class tools, but real interesting data products and

• 46:20Speaker 02

  savings, time, money, everything on top of it is a big space that we can do a lot more of. Is one. And I think that the other one for me is overlaying, if you're deeply embedded close to the metal in the movement of funds, you have insights about what best in class looks like. Could you make recommendations and build more efficient processes for people? And so when you think about the card, it's fundamentally, it's a 30 day fixed product with interchange as a way to pay for it. But we're moving over a matter of months after launching bill payments over a billion dollars a year and through bill payment trails and the like. Could you go and start to help people, no matter how they're paying, get more balance cash flow is more of every dollar an hour. So it's starting to take our fundamental components and mixing and matching them to new form factors, simple ways for however

• 47:05Speaker 02

  companies want to financially improve their company, ranking partner for doing that with high precision.

• 47:12Patrick O'Shaughnessy?

  Eric, it's been so much fun. What a crazy business story. You said zero to 100 million in a couple of years is not common. So really cool to hear the story and how it was accomplished. And we'll keep going from here. I ask everybody the same traditional closing question. What's the kindest thing that anyone's ever done for you?

• 47:28Speaker 02

  I mean, this is going to sound really trite and I think it's believing in me and checking in. And I think that one of the hardest things about starting and scaling a company over many, many years is it's a constant battle of it's not going to work or come back with proof. And to have someone, and there's probably a dozen people who I'll never forget it at different moments, you took a shot and said, you know what, I'm going to trust you. Go give it a shot and prove it. And gave the rope, gave the possibility, a chance for me to go and try it. What else can you ask for? This fundamental, most unkind things that someone can do in business and also people's life is, as far as I know, people only have one shot. And I mean, the worst thing you can do is say, no, I don't

• 48:11Speaker 02

  believe in you or don't do this. And there's times when it's too busy, it's not going to fit. But I think that giving people that shot in that opportunity, whether it's investing in them, it's spending time, it's simply saying, you know what, I believe this can work. How can I help? And being sincere about that is really rare.

• 48:27Patrick O'Shaughnessy?

  It's one of the most common answers. This won't surprise you, you know, taking a bet, maybe beyond the current evidence or beyond some need to or whatever. It's obviously something we should all do a lot more of. So wonderful conversation, Eric. Thanks so much for your time.

• 48:39Speaker 02

  Thanks, Patrick. Appreciate it a lot.

• 48:42Patrick O'Shaughnessy?

  Next, you'll hear my conversation with Catalyst customer Giuseppe Coco of LK Advisors. We talk about the good, the bad, and the ugly around proprietary models and how Giuseppe has made Catalyst a key component of his investment process.

• 48:56Patrick O'Shaughnessy?

  So Giuseppe, I think the place to start is with the concept of a deep economic model on a business. You've got a unique background in banking where I think you spent, God knows how many hours, building complex models. And I'd love to just begin there. Just talk us through your early experience building models, sort of the good, the bad, and the ugly.

• 49:13Speaker 03

  Yeah, so you know, we started out with investment banking, which is very much on the private side. And there, obviously, you have a lot more information and so you can go in a lot more detail. So you would look at the models that we were building for deals were frequently 20, 30, 40, 50 tabs, thousands of lines long, only like to get to a very simple output. And you know, you would spend hours just changing this, changing this, updating this. It would literally take forever and was very difficult, almost like to audit. You would find something, okay, you know, this number should be this, this number should be that. And you would literally go back and spend hours and hours and nights just trying to reconcile that.

• 49:52Speaker 03

  Just because most of the times people are just adding more and more complexity to those models and always ask for incremental complexity.

• 50:01Patrick O'Shaughnessy?

  What do you think is the most useful and the least useful part of how those complex models are built on the banking side? Obviously, precision is good if you can get to it, but false precision is bad. What do you think the good and the bad is of that style of model building that's so complicated?

• 50:15Speaker 03

  I think to a lot of people, it provides false comfort because it's more like the more the merrier. But it's actually not the case. It's more sort of, you know, what are the relevant things? What are the key things that actually make a difference? And frequently, that unfortunately just gets lost in the detail. On the good side, to be frank, I don't think there is actually much because think of a solution like Catalyst, which the first time I opened a Catalyst model, I was amazed by the level of detail and precision that they could get basically into their one-tab models. I was totally amazed by that, that it was even possible, you know? Till that point, I mean, that hasn't even crossed my mind that it was really possible to build such a detailed and sophisticated, yet simple model in a manner that they do.

• 51:00Patrick O'Shaughnessy?

  If you think about those early days and what Catalyst does, or when you first encountered it, What did you like about the service when you first encountered it? Like, what did it replace for you? And because you didn't no longer have to do those things, what did it open up or unlock for you with your time?

• 51:14Speaker 03

  When I first started on the buy side, started out by sort of models manually. My former boss asked me to build like models manually into this and that. I mean, obviously, like your work basically piles up. And I mean, it just takes hours, can easily take a few hours until, you know, a few, you know, one, two, potentially even like three weeks, depending on the degree of complexity, to build a proper and running and fully integrated model for any of the companies. What Catalyst does is basically condense all of that process. So it's as simple as downloading, you know, any PDF file just from the internet. And you have the whole model there with all the relevant KPIs, with all the relevant drivers, so you can overlay basically your inputs. I think from all the tools I have been using on the buy side and I'm using today,

• 51:56Speaker 03

  it is the one that reduces friction the most.

• 52:00Patrick O'Shaughnessy?

  Giuseppe, I'm curious, where did you first hear of Catalyst?

• 52:03Speaker 03

  Funny enough, I actually heard about Catalyst on your podcast in an ad. And, you know, it was one of those evenings, I was at home listening to a podcast and like, you know, I heard automated models, auto updating. I was like, oh, my God, this is exactly what I need.

• 52:16Patrick O'Shaughnessy?

  And I'm curious if you've interacted with others in the investing industry too, that are using it more and more, like, are you seeing more colleagues or even competitors or friends using it too? Is that part of the growing network of it?

• 52:27Speaker 03

  Here in the UK, my previous firm, I started using it and our team started using it. And then, you know, a team that was sitting like next to it was like, okay, hey, what are you guys doing? You know, how are you doing this so fast? And then they started using it as well, so it became sort of viral. And then when I joined here, so our CIO, funnily enough, you know, when we first met, we talked about it. It's like, you know, hey, this is amazing solution, which I'm using as part of my process. It was like, oh, yeah, he's ex fidelity. One of the Catalyst founders is also ex fidelity, so he had it very much on the radar. And, you know, it wasn't even a discussion to get up and running with it. Coming here.

• 53:00Patrick O'Shaughnessy?

  Maybe just talk about your day to day life at L K Advisors. What exactly is it that you are doing? What is the daily workflow so that we understand how it slots in?

• 53:08Speaker 03

  Depends on the time of the year currently, you know, we're going into earnings season. So what we're doing right now is lining up our numbers across the models for the companies that we're holding, seeing where our estimates are. And then obviously that's just like preparation work at the moment. Rest of the time is screening for new ideas, speaking to management teams, attending conferences, setting up calls. And for all of this, candidates is extremely helpful because you know, you always have a single source of truth, which we can refer to look at the numbers and to get a better sense for whether it is and how, you know, something that a management team may say, something that we like learn may impact our estimates and where and how that could potentially translate into value.

• 53:49Patrick O'Shaughnessy?

  That single source of truth thing is interesting. How historically in firms like yours or in your experience, knowing other analysts and P M's, how is ownership of the model typically handled? Because it seems like one nice thing, like you said about catalysts, it's a single source of truth. Like it's almost its own ownership. You don't have to worry about it as much. But how in the absence of something like catalysts are models typically shared? And responsibility for them shared between teammates?

• 54:14Speaker 03

  Maybe like even going back to the previous experience, I think generally in finance and I think most people will agree that models are sort of the model on a company, one idea or whatever it may be, is sort of viewed as the holy grail. The numbers that people use to base their estimates on of value. And it's sort of like the most things sort of, you know, what is the impact of fill in the blank? Get X, Y, Z. So people hold it in very, very high regard and people are very, I want to say almost jealous of their model. And everybody thinks that if you own the model, you own the process and you ultimately like have to do. But the model also is, it's usually in pre-cannabis type of times. It is extremely time consuming and inefficient to maintain.

• 54:56Speaker 03

  The way it's normally like shared among sort of teammates is usually it's quite easy for mistakes to sort of sneak in. Catalyst is great because there are no mistakes in their models. If you want to have something added, right, you can just read out to the support team and product analysts and they will mandate to your satisfaction. So thereby using Catalyst, you don't need to worry about maintaining your single source of true.

• 55:20Patrick O'Shaughnessy?

  How would you compare how you use Catalyst from your sort of hedge fund days to what you're doing at LK Advisors? Is it different? Is it similar? Is it highlighted anything for you about the product or products?

• 55:32Speaker 03

  It's a bit different. I think in my previous role, the coverage universe was a bit more fixed, a bit more Europe focused. So it was more about updating, maintaining, forming a rolling view. I think in today's role, it's very different because our coverage and our universe is basically global. So when I came in, I had to think of, okay, so how can we actually like leverage this? And one of the thinking was, for instance, I was very keen to build a, what I would call a quality scorecard, which would allow me basically to, when you have to think about cross-developed markets, what is what most of what we do potentially even like some emerging markets? How do you compare, cross compare companies on a qualitative basis?

• 56:15Speaker 03

  So we started building out this process, which looks at more than 250 KPIs to help us build sort of a scorecard, which has to score any company along those KPIs from one to 10. And this is a process that we found very well working for us. And without Catalyst, I mean, it would have been virtually impossible.

• 56:37Patrick O'Shaughnessy?

  Taking years or something?

• 56:38Speaker 03

  Yeah, it would have taken multiple years, multiple years.

• 56:41Patrick O'Shaughnessy?

  What do you think is interesting about where you sit? You know, you're in London, obviously a global coverage and universe is probably a little bit more important to you sitting there than if you sat in New York or something. How does that transfer into the use of Catalyst and the global nature of what you do?

• 56:55Speaker 03

  Catalyst over time, you know, since I started. First using the product, they have expanded massively, you know, and wider into especially like European companies as well as EM and developed Asia companies. So the the universe has expanded tremendously. The other great thing is, you know, we we work closely with the product team to make suggestions on sort of, you know, companies that we care about and companies that we know, sort of, you know, people here in Europe care about. And they are extremely reactive to initiating and launching on new models when we ask them to. That gets put on sort of like a waitlist. So, yeah, we continue doing that as we, you know, take an interest in different companies here in Europe. And I think the roadmap was sort of, you know, to get to like sort of 10,000 companies slash models, which is a pretty wide scope.

• 57:39Patrick O'Shaughnessy?

  What do you still do that's, I'll call it very manual, that you don't think is too high value and you wish could be automated? Another way of asking it is like, what do you hope is on Canlis product roadmap?

• 57:50Speaker 03

  I think it would be nice to have something what I would call a buy side consensus. If you ask many people in the industry today, buy side consensus is this very elusive concept or whisper, what some people may even call it. It's like in a sort of unformed expectation and it may vary. What would be amazing would be to have some sort of Canlis user weighted anonymized average of what actually the users on the other side thinking and then, you know, sort of providing an opt in or an opt out, whether you kind of think you want to participate in that. I think that would be amazing. The other thing is they are currently working on this Canlis platform and we have like an internal developer who's working with their team

• 58:35Speaker 03

  to scale this scoring mechanism that I have just mentioned to you through a Python enabled web platform to basically like run that even at larger scale through the entirety of their platform. And as that becomes basically like more alive and. Or consumer friendly as the website, you know, I think that could open up very exciting opportunities and use cases down the line.

• 58:58Patrick O'Shaughnessy?

  I'm curious, Giuseppe, if there's anything that you think is lost in the process of outsourcing some of this model updating. Another way of asking it would be, you know, if you're updating these things manually, does that give you some sort of felt sense for the business that you can't get just by looking at the numbers? And do you think that's worth it at all? I mean, obviously, you're a big catalyst user, so I can guess your answer. But I'm just curious whether there is a downside to, I'll call it outsourcing, some of this manual work around updating the models.

• 59:25Speaker 03

  I think the first part is that once, you know, when I remember when I opened my first cannabis model, you see all these things and it's more like, okay, how does this work, right? You would click an introduction, it's like, hmm, you know, I like it, do I trust it? And I think it's more when you have your sort of, you know, the companies that you know, and you follow them, and you have a sense for the history. Obviously, you know, you need to look at the numbers and you just anecdotally get a feel for what it is. But I think the beauty of cannabis is, as you mentioned, right? So you open a cannabis model, there are five tabs, and they have these like beautiful summary sheets. And I almost find it a lot easier to just look at those trends and get a sense for how something has performed, what is driving X, what is driving Y. They actually enhance, in my view,

• 1:00:09Speaker 03

  that process of understanding what is going on. I had this debate with multiple friends, and my view is that it's totally overrated to say, sort of, you know, you need to build the model to entirely understand the business. I think you just need to like, look at the numbers, understand and how they flow, which is, you know, what cannabis helps you with and do. I think the other thing that I found super helpful that initially wasn't as intuitive is their custom templates. So cannabis has like standard templates, or an LBO, an ECF, comps, all these like usual things. We have our sort of proprietary process of how we look at things, how we value things, the scorecard that I've mentioned to you. So we spent, we invested, you know, a decent amount of time into like building our own

• 1:00:53Speaker 03

  templates that correspond to our process that work exclusively on the cannabis platform. Once we scale, we put in that, you know, it incrementally helps us understand and make sense of a business and whilst we can, you know, continue to comply with how we do things and how we think about.

• 1:01:09Patrick O'Shaughnessy?

  Awesome. Well, Giuseppe, thanks so much for taking the time to do this today. Really interesting career arc that you've obviously done a lot of modeling. So a great set of experience to understand why this is valuable. Thanks so much for your time.

• 1:01:19Speaker 03

  Thank you.

• 1:01:21Patrick O'Shaughnessy?

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