Credit Beyond The Score with Andrew Endicott

Credit scores feel like destiny, but they’re built on a thin record of borrowing and repayment while ignoring income, cash on hand, and real assets. That blind spot blocks credit for immigrants, younger consumers, gig workers, and anyone whose financial life doesn’t fit the classic bureau file. In this episode, Nik sits down with Andrew Endicott, co-founder of Pedal and now co-founder and GP at Gilgamesh Ventures, to talk about how cash flow underwriting and open banking data change the game, and what it takes to build fintech that lasts.

Andrew walks through his path from law and investment banking into founding a credit card company, including the post-financial crisis reality where regulation and risk constraints pushed banks to pull back. We unpack why fintech emerged to fill those gaps, what founders often underestimate about finance, and why areas like fraud, compliance, and risk management aren’t “later” problems. 

We also get into Andrew’s upcoming book, Finance Technology: Insights for Building an Enduring Fintech Company, and the framework he uses to map the ecosystem into four buckets: banking, payments, insurance, and infrastructure. 

Learn more about the book: https://www.amazon.com/Finance-Technology-Insights-Building-Enduring/dp/1954892225

Subscribe for more founder-grade fintech conversations.

Connect with the Hosts & Guest

Nik Milanović: https://www.linkedin.com/in/nikm

Andrew Endicott: https://www.linkedin.com/in/andrewendicott

About This Week in Fintech

This Week in Fintech’s Podcast is where the decision makers shaping the future of finance come to talk candidly about what’s working, what’s breaking, and what’s coming next in fintech. Hosted by Nik Milanović, founder of This Week in Fintech and General Partner at The Fintech Fund, the show goes beyond headlines to unpack the real stories behind product decisions, regulation, and market shifts with leading founders, C-suite execs, and ecosystem veterans. This is your front-row seat to the people and ideas moving money into the future.

Transcript

Intro

Andrew Endicott 1:36

Credit bureaus. It only looks at a small subsection of things. Uh like what have you borrowed money? And if you have, did you pay it back? It doesn't look at how much money you make. It doesn't look at what assets you have. None of these things are considered.

From Law To Fintech

Nik Milanović 1:55

Welcome back to This Week in Fintex podcast. I'm your host, Nick Milanovich, and I am really excited for today's conversation because it is with Andrew Indicott. For those who may not know him, and I feel like most of our audience does, Andrew is the co-founder and general partner of Gilgamesh Ventures. He's also a board member at Encore Bank and previously was a co-founder and president of Pedal, building a credit card using cash flow underwriting. Andrew also hired me at Pedal, so he's my former boss. And now he's about to be a New York Times bestselling author. I'm really excited to sit down with Andrew. It's been way too long, and I wish this was in person, but it's good to see you either way. But I'm excited to sit down and hear a little bit more about your upcoming book is finance technology, insights for building an enduring fintech company.

Andrew Endicott 2:43

Good to see you. You too, man. This is uh this is awesome. It's uh it's cool to do this and excited to hear what we're gonna talk about.

Nik Milanović 2:50

So the treatment for the book you sent me, which I've got to do a little sneak peek of, was really cool. I'm so curious to hear the thinking behind how you broke it out and a few of these chapters, which really goes into different parts of the fintech universe and the trade-offs that people should think about when they're building. I thought maybe we could start by hearing a little bit more about everything else you're doing, just so that people have context. Um, but I do want to call out I love that the book uh has the Arkansas state on the first page, and it was written in Fayeville.

Why Cash Flow Underwriting Works

Andrew Endicott 3:22

Yeah, that's right. The the the the publisher's epic, uh, which they're based there, so it was really cool to have them involved. Um yeah, yeah, I think I think it's a good place to start because the the book really does reflect a lot of kind of its author, which is me, um, and kind of what I've done kind of in life. And and um and Nick, you you gave gave a lot of the things I'm up to, but I'll I'll kind of just start from the beginning. Um, so I in terms of my career, I kind of I graduated from college right as the financial crisis was beginning. Um, and which, you know, in retrospect was not the greatest time to to start a career in a lot of ways, not the greatest time to get a job. And and um so unsurprisingly, I did I decided to continue my education. I went to Harvard Law School Um and I'd done well in the LSAT and was able to get in there. Um so I took that opportunity, did my three years there, met a lot of really great people, um, enjoyed it. I was not the smartest person um in the class, um, which is probably not surprising if you met me, but um, you know, really enjoyed it and but came out with a lot of student loans that I needed to pay off. So I I kind of sold to the highest bidder um and moved to New York and and started working for a large corporate law firm. Um, and I did that for a while. Uh so I was a lawyer to begin with, and and uh spent several years doing that, working on large corporate deals, MA, private equity acquisitions, and so on. And I really enjoyed it. And I worked with a lot of different industries, but um, you know, I didn't like that lawyers don't really get to make decisions. I wanted to be a decision maker. Um so figured out that law was probably not for me. I wanted to be a business person. Uh so I left there. I I next went to an investment bank called Lazard. Um, and that's where I started to really encounter fintech. Um, so I I worked mainly um in um kind of exits, MA transactions for companies that were lenders. Uh they called themselves specialty lenders at that point, but really today these companies would call themselves fintechs. Um so I did that for quite a while, met some really interesting people, learned how lending works, um, and started to see some opportunities myself. Um, and I'd always wanted to do something entrepreneurial, and I saw a great opportunity in the credit card space, um, and and had had a had a really good friend from law school that that wanted to start something too. And so I we both left our jobs and started pedal um in the in the credit card space, like you mentioned, um, and spent you know, a lot of the next decade building that business uh from soup to nuts. Um our our mission was to expand access to credit uh by using bank account data or cash flow information to underwrite risk, um, which was uh is still, I think, somewhat of a novel idea, but it was a very novel idea at that point. You had you had um technologies like plaid and yodely, uh Finicity and others uh finally for the first time giving third parties via open banking the ability to see transaction information in a consumer's bank account. Uh and we had the the crazy idea that we could use that to underwrite credit for people who didn't have credit histories. And that's that was really the foundation of the business and settled on the credit card as really the way that we were going to manage a relationship with the customer, used that to underwrite, and built a pretty, pretty large business over the next several years. We ultimately were doing over 100 million in in revenue as of the time we sold the company several years back. But along the way, I fell in love with fintech. I love entrepreneurship. Um, I've seen this world from like from the lending and kind of the more the banking side of things uh than everything else. But as as as that chapter closed, um, I really wanted to stay in that world, didn't have any driving, you know, passion to start another company. Um, and so very naturally I think becoming an investor made a lot of sense. Uh so I I partnered um, you know, as as as I said, as as pedal ended, partnered with with um with uh my my friend Miguel Armaza um and started Gilgamesh Ventures, um, which what we do is we we invest in in um in fintech companies globally. Um and and I kind of have the background as an entrepreneur. Um Miguel spent a lot of time in the banking world. He also has has an interesting media side of what he does, but we we invest at the seed stage in companies really building the future of finance. Uh, and about half of it's in the US and half of it's outside the US. Uh, so we really can invest anywhere. We a lot of the investments we've made are also in Latin America, which is a strength of ours as well. Um, and as you mentioned, I so I've been an entrepreneur, I've I'm an investor today. I also uh spend a decent amount of time um in the kind of the traditional side of finance as well. So I I'm a board member with Encore Bank in the southern U.S., uh operates in several states in the Southeast and the Sunbelt. Um I've done that for I think eight years. And I'm also more recently a board member for Mangrove Insurance in Florida, uh, which provides homeowners insurance um to uh people in Florida, which is a very unique and interesting uh place to have insurance given hurricanes and all these things. So um so I yeah, I think I think that that's that's that's my background. I've been kind of on both sides of finance, the side that's that's innovating a lot um with the technology and and other models. And I also spent a decent amount of time kind of in the the more traditional uh stuff as well.

Nik Milanović 8:57

So yeah, I mean, starting at the beginning of that story, you're at Wolkiefar for a couple years, then you were at Lazard for a couple years. I'm curious in that tenure, where did you start saying to yourself, hey, there's much more interesting opportunities happening in tech and fintech specifically? What were the light bulbs that went off? Because we we there's so many people who come from banking or consulting and they end up going into fintech, and they're like, Yeah, it was infuriating to see how poorly things are managed at scale by enterprise financial services companies.

Andrew Endicott 9:27

Yeah, there was there was a lot of little things, you know, dumb, dumb stuff like chasing around a wire that that had vanished. That happened to me a lot, actually, over my career, both as a lawyer and a banker. I one time I I lost a wire that was very large. I don't remember exactly what it was, but I think it was approaching nine figures, and it just was kind of unaccounted for, uh, which is crazy. Um, we eventually found it, thankfully. But um little stuff like that happened all the time. Um, but I think also the as I was uh particularly at Lazard, uh in a little bit at Wilkie, I worked on the Yodley IPO. So that was part of it. Um I got to see open banking and and fintech really in its infancy. Um you'd had PayPal a number of years earlier, but there hadn't been a whole lot after that. And that was the beginning of a wave that I think really started post-financial crisis and you know was really significant probably until a couple years ago. Um but I think really at Lazard, I I um the companies we were working with were filling a gap that had really been created by the financial crisis, where you had the financial crisis, banks were in extremely bad shape after that. And the the regular in Congress and the government stepped in and passed a bunch of laws, mainly in the form of Dodd-Frank, which most people really don't think about today, but it really drove a wedge between what banks can do and what they can't. Um and and it it really constrained what banks can do. Banks used to be able to do a lot more stuff than they really do today, and that's changing some, but it's it's still mostly true. Um, and as a result, there emerged this kind of ecosystem of different parties, different actors filling the gap because a lot of consumer needs and business needs were just not being met by banks, which were hamstrung. Um, and so that these these institutions started by calling themselves specially lenders, they used technology a lot more uh than banks did, mainly because they were just new institutions, but they also had to be resourceful. They had less capital to work with, um, and they they you know they had to do things differently. And that was really probably the beginning of where I started seeing this. Uh I worked with some alternative lenders while I was at Lazard as a banker, and it it was a pretty natural evolution. I think the the smartphone really had come into its prime with Uber becoming a mature company. It was just very obvious that there was going to be a lot of change in finance. Um, because a lot of if there'd been change in a lot of other parts of the consumer world, but not as obvious in the finance world when I was getting started. Whereas today, that's not really true. We've got a lot of very established fintech companies. But at the same time, I would argue we're kind of starting over a little bit with generative AI in that innovation cycle, which probably will occur a little bit faster, but definitely will take some time uh to unfold. So I I think it was it was a couple things. It was direct experiences, you know, basically you know, dealing with a very, very uh rigid financial system, having problems with it in a practical sense, and then just the the amount of change happening in the economy drove a lot of it too.

Nik Milanović 13:11

Yeah, it's interesting. You know, you're talking about early fintech and um Yoli was part of that cohort. Another part of that cohort was London Club, and I know Renaud, uh, who was the uh London Club john who writes the foreword to your book, so we'll get into that in a little bit. Um but you know, Renault actually and London Club were a great analog to what you and Jason started at Pedal. For people who aren't familiar, Pedal, um, which was recently acquired by Empower uh was using cash flow under aim back in 2016 to be able to price people for credit. And so the idea that you were locked into the score from the three big CRAs in order to be able to assess whether or not you deserve credit was already really outdated. And it feels like a niche market, but then you think about um anybody who's moved to the US without a credit history, anybody who's younger, uh, anybody who has uneven cash flows, anybody in the gig economy who has cash flows but doesn't have a uh you know a W-2 salary or a job, it's just an increasingly growing segment of the population. And I feel like you guys saw that back in 2016 and realized, hey, there's an actual opportunity here. Now, you know, every fintech company is talking about AI and generative AI, but you're using machine learning back then to be able to underrate people um using you know nothing but ML models in order to be able to assess cash flows. I'm curious, like what made you decide? You know, I've got student loans that have paid off. I've had this comfortable banking job, I've lost a wire here and there, but these guys like me pretty much. What made you decide I want to take the leap and be a founder?

Why Write A Fintech Book

Andrew Endicott 14:50

Yeah, I mean, I don't think it helps the the the corporate culture on Wall Street was uh let's just say uh a little demanding. Um, you know, that was definitely part of it. Um I don't know if it's gotten better or worse in the last several years, but it was pretty pretty intense when I was there. Um, but a lot of it I think goes back to people. You know, Jason and I, when we started Pedal, uh, we had a really good friend named Burke, who was also a co-founder of Pedal. Um, and and um, you know, Burke had been an immigrant himself um from Switzerland. Um, and he we'd met him when we were both in in uh Cambridge. He was at MIT and we were at Harvard Law School and became friends and got to know each other. And Burke had had um, you know, over the years that we'd known him, he had all these weird problems with the financial system that you know, some some you know, kind of computer scientist, quantitative guy from Switzerland you think would not have a lot of problems with the financial system. That sounds like somebody who has a lot of solutions for the financial system or who the financial system really wants. Um and that was weird. Um just one of those examples that struck with you. This doesn't really make a lot of sense. Um and at the same time, all this data was becoming available, um, which I think is something it's a little hard to see today compared to what it was then. That that, you know, if you go back to the 90s, the the credit bureaus were amazing innovation. Uh these groups that just they they found ways to collect all this information that they had themselves. Nobody else got to touch it. It was theirs. Um and you know, they they built that into huge, huge businesses. It's not just one of them. You've got the three big ones, then you've got some other smaller ones. Um, and and really the entirety of consumer finance, at least, was built on that edifice. The that that information, that data, credit bureaus. But the the problem is that information is very incomplete. Um, it it only looks at a small subsection of things, uh, like what have you borrowed money? And if you have, did you pay it back? And how much money have you borrowed? And boiling it down, that's really what credit bureaus look at. It doesn't look at how much money you make, it doesn't look at what assets you have, which is particularly wild that that it that it doesn't look at how much cash you've got, whether you have you know a car that's paid off, none of these things are considered. Um, and so that there are huge deficiencies in it, that if you were to apply those same things to Burke, for instance, who had a good job and was making a great income, he should have been able to qualify for most forms of credit. But because he didn't have this specific credit bureau type of data, he couldn't. Um and so as you know, as all these things were kind of happening, you know, Jason and I were sitting around and looking at this and just said there's there has to be a huge opportunity here uh to change how people underwrite credit. Um and there was. Um, you know, we were able to build that into a very large credit card business. And today, you know, it's it's thriving with Prism in the in the cash flow underwriting space um on its own, uh, which Jason still still is running. And so um it it was it was a combination of people, what's happening in the economy, and then just things that we saw, and probably helped a little bit by not wanting to work, you know, a hundred hours a week at at a at a place where you didn't always feel appreciated.

Nik Milanović 18:14

That was probably what I was sure they appreciated you. It it does seem like you know, Wall Street, I don't know, people think of Wall Street as a fixed thing, but it does go through waves and changes. And there was the uh the pre-Dod-Frank era and the post-dot-franc era. And now to your point, things seem to be changing again. And you have a lot of the uh a lot of the role that banks used to play being fulfilled by private credit, being fulfilled by non-bank lenders and and institutions. And I guess you could say that fintech is also stepping in and playing a lot of the role that we would see banking play beforehand. So I'm uh curious to learn a little bit more about the book. Um, so the book for everybody, what's the date that it's coming out?

Andrew Endicott 18:54

Uh April 1st.

Nik Milanović 18:55

April 1st, April Fool's Day is finance technology, insights for building an enduring fintech company by Epic Books and Andrew Endicott. Um what made you decide to sit down and write a book? I mean, it's I've never written a book. It seems like a huge enterprise to undertake.

Four Fintech Categories That Matter

Andrew Endicott 19:12

Yeah, it so I I didn't, you know, I I never really had thought a lot about writing a book. It's not something I dreamed of by any stretch of the imagination. Um I really just found myself over the last several years having a lot of ideas that I didn't really hear anybody else saying. Um, and I don't want to say I'm the I'm like just this like you know, tower of originality or anything, but I just I'd seen a lot of things from my perspective that I hadn't heard other people voice about entrepreneurship, about finance, about fintech, about business, about markets. Um that that I I honestly, I, you know, before I got hit in the head hard at some point or hit by a bus, I just wanted to get on paper before I forgot them. Um and that was really a lot of the reason why I wanted to write it, is I I had ideas that really just voicing them in conversation didn't feel like enough. And I don't have a uh you know, like a huge social media following to that that really would want to read them. Uh so a book was the best format for me. Um and I wanted to be kind of you know, kind of what what I've seen. I wanted to be from from kind of my viewpoint, um, not really a survey of what other people have seen, but what I've seen. Um and so the the structure of the book really it goes back, it looks at kind of says who I am. It goes back and it looks at um how finance has worked over you know the millennia, which is a weird place to start a technology book, but it I did it because part of my thesis for you know the differences between fintech and finance and what makes fintech companies successful and so on and so forth, is that at the end of the day, a lot of this stuff is all the same. Um, there's just categories that are created by different market features and regulation and so on. But the the problems that fintech companies and and banks, insurance companies, and other finance businesses are solving are really often the same things that they've always been. Um and people are just using technology uh to solve problems in a better way. So I begin with going through history of kind of how how finance has changed over time with the invention of writing, the invention of computers, smartphones, getting us to today with generative AI. Um and then really the the way I take the book from there is you know how you start a company, um, how how companies in fintech really get going and how they evolve over time. And part of this is it's part of a course that I've taught over the last couple years at where I went to college. And so I've I've gone over this material quite a bit, uh just kind of speaking it out loud. And then last, I really talk about the different components of the different types of fintech company companies. So ranging from banking to payments to insurance to infrastructure, um, those four big categories, banking, including both credit and and deposits, um, and and how they those different types of buildings, businesses are built. Um, so that's kind of how I organize the book. Um, but throughout, it's really just the the the as you know, lar partially through being an entrepreneur, partially through being an investor, and then other experiences I've had, kind of what I've seen that works, what I've seen that doesn't, and most importantly, the things that that um are often just missed. Um a lot of to me, there are a lot of recurring errors that entrepreneurs in fintech make um that pertain specifically to how finance works as opposed to how entrepreneurship works. Um and I wanted to voice those, and they they typically come down to things around risk, compliance, fraud, these kind of unique things that finance and in fintech have that other spaces just don't. Um so I wanted to talk about those things. And my goal for the book, hopefully people will read it and and find some, you know, find an opportunity to to you know avoid making a huge mistake that's gonna derail their company, or a board member can make suggestions to an entrepreneur that help create better outcomes. Um but that that was generally the motivation for me. And and the title also um is finance technology, um, gets back to a lot of the central theme, is is that that if you zoom out what we're doing today is just using technology to solve the same problems in a different way. But the problems at their core are often really the same.

Nik Milanović 23:44

Yeah, I like the taxonomy that you use. So the book's divided into three sections. One is, and so it begins, and it talks about the founders and the personalities behind fintech companies, how to raise funding, whether you just start a fintech company at all and go through this. You know, people say you're signing up for a 10 year journey, but I don't think I don't think anybody really internalizes how modern that 10 year journey really is until you actually are like halfway down. The second section is the four horsemen at FinTech. And I really like this taxonomy because it goes into banking, payments, insurance, and infrastructure, which also speaks to your own experience. You know, banking, you're seated on CoreBank, payments, obviously, what you built to pedal, insurance with mangrove, then infra, which is what Prisms become now. And I feel like that's a pretty common trend at FinTech because you see a lot of companies start with a direct to consumer offering. And the idea is, well, yeah, of course, this is good for people. And then you realize that a lot of the problem is actually down the stack. And a lot of companies become enablers rather than direct-to-consumer companies because you want to solve this at scale, but like meet consumers where they are. I think Paddle, by the way, had 400,000 cardholders.

Andrew Endicott 24:52

400,000,500, something in that area, yeah. They get close to the city.

Nik Milanović 24:58

Cash flow underwriting is definitely not a niche problem to solve. Um how did you kind of put together a framework to break apart these four categories and how do you think about them in distinct ways?

Andrew Endicott 25:09

Yeah. Yeah, I the a lot of the you know, I I the the generally the book, I didn't sit down and like research how to write this book. It was kind of a series of things that I have spent time thinking about in various at various times throughout the years. But this part in particular, I I think it was probably two years ago. Um for Yogamesh, we were writing something to our investors. I don't remember what it was. And you know, I think this was probably like 2023, probably. And you probably had the same same kind of general observation that 2023 was a really interesting year because it felt like we kind of come full cycle on a lot of things. Um, you know, looking back to you had at whatever point post-financial crisis, the smartphone really came out or started really getting adopted. Um, and then there was this huge wave of innovation. And then by 2023, a lot of the you know, kind of the land had been claimed um in fintech. There a lot of the ideas had been tried. And then it, but also in 2023, you you started to see the glimpses of how this is gonna happen again uh with generative AI, which is a you know just a platform innovation on the the level of of the smartphone, probably bigger, um depending on what you think is gonna happen and who you're talking to. Um and as I was looking back in in 2023, I wanted to kind of draw a a little bit, kind of just look at the scoreboard for what had succeeded, what hadn't. And I think to do that, you kind of got to carve things into categories. Um you've got a ton of subcategories. You've got neo banks, you've got crypto, you've got you've got um lending companies, you've got anti-fraud, you've got compliance, you've got all this stuff. But to me, there were really four big buckets: banking, insurance, payments, um, and infrastructure. Um, and and I I think there's some just general observations that I had. I think, you know, if you really look at the the data pretty objectively, I think payments has had a lot of success. Um, I think you had companies like Stripe, like AdDian, like Bill.com, like others, there's a lot of these businesses that have really gotten big and have really thrived. And I think the there are features of payments that make it to where some of those businesses are um not necessarily easier to start, but if you if you get the right place in the right time, you can create something huge and you can create a first mover advantage and network effects that are really hard to catch. Um, so that was an observation. On the other end, there was an observation that although there have been some pretty there have been some successes in insurance, it it really they've been different. You've had some companies IPO, but it hasn't gotten nearly the attention that other categories have gotten. Um, and even those IPOs have not performed always the best. Um so I spent a lot of time thinking about why that is, and I still haven't really figured out the exact answer, but it's it's definitely an observation. In the banking side, you had a ton of activity. Um, and I think that the the results are are more that there's there's kind of more of it's it's I don't know if I'd say mixed, but there's just there's there's a lot of variance in the results in banking. Um, you know, you've had a lot of really big successes, you know, Chime, SoFi, Afirm, others that have gone and done really well, but there's a huge amount of capital that went to that area that some some of it went well, some of it didn't. And last, to your point, infrastructure um is you know, quietly also some of the most successful companies. I think the you've got companies like Prism that that kind of came out of you know a direct-to-consumer and other business to create things that banks and other lenders and other fintechs can use to be better at what they do. Um and then you just had a lot of pure software um that that um you know that that really is just made is just a step change function better than what you had beforehand when you, you know, just in terms of the quality of the technology. Um and so I I that's how I kind of cut it. It was really to understand what had succeeded, what hadn't. There are clearly like big winners and big losers in all those categories. Uh, but to me, that's the the clearest way to kind of carve it up in a way that makes sense.

Nik Milanović 29:34

So if you were advising somebody starting a fintech company today and they didn't yet have an idea that they really gravitated towards, I'm curious which of these sectors do you feel like you would push them towards today?

Andrew Endicott 29:46

Well, as a threshold matter, if they didn't have an idea they were really passionate towards, I might tell them they shouldn't be an entrepreneur. Um because there's there's a you know, the the when times are tough, having a little religious fervor uh behind you is is uh is helpful. Um but um kind of that to the side. Um I think it's an interesting question. I don't know. I think the like I said earlier, I've the the innovation um kind of life cycle has restarted. Um it restarted 2023 or so. Um, you know, whenever chat GPT 2 came out is probably the the really the dividing line for for when that began, depending on I, you know, there's a lot of different ways you can cut it. Um and I think that you know we'll probably see different outcomes this time. Um I I think that we're gonna see similar levels of activity, and we already are um across all of these things. All of the infrastructure is gonna be, you know, for the foreseeable future is is is gonna be primarily generative AI driven, but also some crypto and and blockchain driven things. That is that's uh there's continuity with that. Um and then I think I don't know, Nick, if if you've if you've read kind of the Mickey Malik, his article a couple years ago about the death of fintech, um, which is a little bit related to all this as well. That you know, all the all the big all the the the big treasure chests had already been seized. You know, you had the winners are established, you're not gonna be able to unseat them. And I think what's happening now is in reality, there's just there's a new race to to go after the same pot of gold um in each of these markets. And that race has been the rules of the race has been redefined by generative AI, and you're gonna see the exact same thing happening today that you saw 10, 15 years ago um with the emergence of the smartphone. And so I think if you're I think there's some very exciting things you can possibly do around uh banking and credit and and uh and lending and deposits. Um we're gonna see a lot of of um, in essence, kind of neo-neobanks, if you will, that are using generative AI as the as the platform layer for those businesses and engaging with with their customers using you know a different form factor. Um I think the same thing is gonna happen um in the insurance space. Maybe there'll be more success this time in insurance. And then payments will probably be the same thing. Although I do have, I think the interesting thing for me is payments, it's not clear that the the the depending on which there are definitely some parts of payments where there's gonna be heavy impacts from generative AI, but I think it's it's not there are gonna be some parts that aren't. Um and so um, you know, the there's a lot of people building interesting business around Digentec Commerce, which I would generally call kind of a payments um, you know, kind of activity, although not it's not entirely that that's probably gonna see a lot of change. Um I don't know if the you know kind of the individual payment rails are gonna change that much, although stable coins um are a huge area, which is totally unrelated to Gen AI for the most part. Um so more of that activity is is it maybe not gonna be the AI, but it's gonna be other stuff um driving a lot of it. So I don't know is the is the long answer. I think I I I don't think people should really, I'm not a big believer in in looking at TAM and looking at at um market size and these abstract ideas for um building a business. I think you really I believe that that people should start the businesses that they're passionate about. People should start the businesses they're gonna be good at building. And so if you have a lot of relationships in OneSpace or you have a lot of knowledge about OneSpace, or you have a network in it, or just a just a zeal for changing it, if you've encountered a really significant problem in your life that you want to solve, um, that's where you should go. It shouldn't come down to creating an Excel spreadsheet and saying this is where the you know the technology is most applicable. That should be part of it. But that that's not the driving force. And I think there's going to be huge defining, you know, kind of market defining companies in all aspects of these categories. Um, but we'll have to see who they are.

Generative AI Resets The Playing Field

Nik Milanović 34:14

Yeah, you know, I like that you brought up um Mickey's uh so Mickey, for people who don't know him, is one of the uh co-founders of Rivet Capital, which is you know one of the most successful fintech investors the past decade, um, one of the most successful successful VCs, period, over the last decade. Um, but the piece on you know the death of fintech is interesting because um you kind of have these generational waves where a couple companies set the tone for new ideas. In fintech, probably like Robinhood, like best categorized that like post PayPal wave of, hey, we're gonna go into other products and just make them work better for people by bringing them online and cutting the costs and just making it like a really easy web interface. But you probably can't start Robin Hood today. Like there's not that much room in the market. You can compete on brand, and maybe you can compete on some kind of pricing, but there's not that much room in the market for like multiple, multiple Robin Hoods. Because that's what internet businesses do is it becomes a little bit more winner-take all. You don't have to go into your local Robin Hood branch and like I'm not walking into my Feinfeld branch of Robinhood and then my New York branch of like the New York Robin Hood. Um, but when you have platform shifts, that really does open up new opportunity. And so, you know, probably the most important one is the one that you brought up. AI. If AI becomes, if generative AI becomes the new platform that people are using to access information and access services, then all of a sudden all these business models look a little bit shakier. And um, you know, Robinhood's great, but if I have an AI native version of Robinhood that sits inside whatever service I'm interacting with, whether it's Chat GPT or Claud or whatever else, and I can just say, like, hey, set up this trade and you know, make it a limit order and bail me out if this happens, like that's a lot better than me having to go log into a platform and like click through the interface and understand things. And I can just ask things, like, what's the latest pricing? What's the 10-day forecast? Like, what um, you know, does the history look like? So, you know, maybe this isn't the best example, but um when you have like mobile or internet or AI or other big platform shifts in how people access information, you get a lot of new opportunities to build new business models. And I feel like we're kind of right on the cusp of one where you know, what got you here isn't necessarily gonna get you there. And what makes you a good fintech founder is gonna change. I'm curious how you think about it.

Andrew Endicott 36:42

Yeah, I mean the the I'm I'm not gonna claim to know all the answers. I mean, that there's a lot of there's a lot of smart people talking about kind of what makes an entrepreneur in the area, uh era of generative AI, you know, succeed versus before. A lot of people are talking about how knowledge is less important. Uh, a lot of people are talking about how um you know kind of team building is different. Um and I I can I I agree with both both those things to some extent. Um and I do think deeply understanding context is still really critical. I think that that it's that I think, and again, going back to the whole theme that I that I wrote about, I think the understanding why financial markets operate the way the way they do generally requires some time spent in it. Um there's a lot of counterintuitive things that happen um in most parts of the financial system that you really don't understand until you've you've you've dealt with it as a business person and seen it go wrong. Um, you know, the the I think fraud often is the biggest one, but there's other stuff too. I think compliance is a big one. Um and I I think that that is not something that generative AI is gonna change. It may actually magnify. I think there's a chance um really deeply understanding those things. And I think also some of the problems in the financial system are gonna get worse. I think the the um I mean the one that I I don't just think about in my day job, but I think about daily in my personal life is you know, the evolution of fraud itself. Um is is I can feel it getting worse, and everybody else can probably feel it getting worse as well as as fraudsters use these new tools as well. Um, and that's gonna that's gonna create a lot of disasters, but it's also gonna create a lot of opportunities for people that know how to solve those problems for financial institutions and for other fintechs and other financial actors. Um, so I think understanding context is still very important. I think understanding how to build something that doesn't create huge risk of downside is still really important. Um it's something that that uniquely characterizes companies in the financial space, whether FinTech or not, um, that mistakes can blow up your company. Um and it happens in almost every part of the financial stack, um, including software. Um there's some things you simply cannot get wrong, and if you get them wrong, you forever lose trust of a lot of your either your customers or your partners. Um and so I think um people that have the the right, I'd almost say like the right temperament uh to not just see you know the good things, to understand how things can go wrong with the right level of risk tolerance. If you're an entrepreneur, you can't just go around like a pessimist seeing bad things all day. You'll never do anything. Uh you have to be an optimist, but you can't be a blind optimist. Um you have to be a um kind of a realistic optimist who takes you know problems really seriously, um, particularly the the big problems really seriously. Um and the you know the the the point where that becomes an issue is not really when you're starting out your business. It's really as you start to get scale and getting from some scale to a lot of scale. A lot of what separates those companies is is really the the temperament of the people running them, I think.

Nik Milanović 40:29

Um so I think that like I think uh the way I've put it well is like hardiness. You're just you're hardy, you can deal with problems as they come up, you expect more problems to come up, but every single time problem comes up, you know that, all right, well, we will solve this. It might be a one-week thing, it might be a three-month thing, but we will figure it out.

Founder Traits: Risk And Speed

Andrew Endicott 40:48

And and the last thing I think is, and this is something I'm sure you've seen as well, Nick, the um just speed. I think speed was important. Speed is probably more important now. And speed, I think speed is misunderstood by people that don't work with entrepreneurs. I think they uh speed is is similar to recklessness. Um, I think that's how a lot of you know, just and the people in the general population see it. But it's it's really different. Speed most of the time comes down to understanding how much information you need to make a decision and understanding the the you know the the relative reversibility, upsides, downsides of a given decision, and according the right amount of time and focus to the right decisions. And so some people call this, I think a broad term is decision velocity. Um you make a lot of decisions. How quickly can you make a lot of important decisions? Um and making important decisions is is is uh it's not it's not like I wouldn't say that it's intellectually hard. It's almost it's almost emotionally or psychologically hard because you you're easy, it's easy to get overwhelmed. Um it's it's like a feature of personality or or maybe experiences, I'm not sure. And I think sometimes there are like elements of cultural forces at work with this too. Um you interact with many Israelis, they're really good at making decisions really fast. Um, but the the um you know, I think that that your ability to make decisions, high-stakes decisions quickly and well, although I'd almost say quickly is as important as well, the importance of that has increased. Um and it is probably never going back. I think you're you're gonna, that's the world we live in that the people that can do that effectively are more important today than they've ever been. And that is a really, really important skill for building a successful company.

Nik Milanović 42:48

Yeah, you know, you see um people talk about ramp a lot in this context. Um Keith, who's now at CoastLab, was at Founders Fund when he backed them, is one of their uh primary investors, and he was talking about this a lot in a recent interview. It's just the rate of shipping matters a lot. Um, and if you can grow as an organization but still commit to continuously shipping a lot of product, um you'll be able to kind of outrun competitors and an advantage you'll limit at the same time. Um but it probably means, especially for new entrepreneurs, I'm curious for your thoughts here, is shipping things that you think are ugly or that don't work perfectly, just getting things out the door in order to start getting live data and live users on them, knowing that you're gonna go back and improve them afterwards.

Shipping Fast Without Being Sloppy

Andrew Endicott 43:39

Yeah, it it it um prioritization is something I've learned a lot about. Um, you know, knowing when is enough is critical. I mean, Mark Zuckerberg said a long time ago that done is better than perfect. Um and uh, you know, it's it's I I don't I don't think it's the right decision to to um you never want to be sloppy. You you don't want to just sling out stuff and and create crap and build crappy products and then say you're gonna get feedback because you you're not gonna get the right feedback. You're gonna get the feedback that this is crap. Like you need to start over, which is not, you know, sometimes that that is what you want to hear, but you want to hear you want to hear kind of more nuance in in your feedback. Um, but I think I think a lot of it goes back to what I was saying is being able to be fast when it comes to to making decisions and to because ultimately products and features are really just a thousand small decisions all piled together. And and being being really intentional about making those decisions in the right order, focusing on the right decisions and doing it is really critical. Um, and you know, I think this is something that ramp is really good at. I think they they um they they get something good enough and then and then they ship it. Uh they let the market give them feedback and then they improve it, and they're able to create enough autonomy on their team where everybody on the team is doing that. Everybody in the team has enough decision-making discretion, not ultimate discretion, you know, not complete, you know, total, unlimited discretion, but they have enough enough discretion and they hire good people that are able to work within the constraints and do what they think is best and then let the market give feedback to them, um, which is extremely hard as an entrepreneur because many entrepreneurs want to make all the decisions. Um, and as an entrepreneur, there are decisions that you absolutely must singularly make, uh, or a group of co-founders need to singularly make, um, and you don't delegate to everybody else. Getting that mix right is extraordinarily hard, but you can't do it for everything. Um, and so I think Ramp has been incredible at that. And so I yeah, I think you're right. I think it's the the the speed of the speed of shipping has accelerated dramatically as people are able to To build products faster. I also think that building the right products has probably gotten more difficult because if you can build 10 things in the time that it takes to build one, you may not spend as much time thinking about well, where do I focus my attention? Because you can you can get to everything, but that's that's never going to be the reality. You're never gonna get to everything. You need to get to the right things first and then follow in and importance after that. So um yeah, I think all these things are really critical for succeeding today.

Nik Milanović 46:41

You know, it's interesting. I hear a lot of feedback from founders um about other VCs when we share a cap table, and they have meaningly higher affinity for the VCs who themselves were founders before, um, or operators who built startups. Um it gives you an appreciation for what actually matters in a way that I think is non-obvious when you first start a company. Um, obviously, rate of shipping is a big one. Um, but even just focusing on being out in the wild with live customers. I spend a lot of time with first-time founders who like really just want to get everything absolutely right before they have any live customers on it. I'm like, you gotta go put this in somebody's hands and see what they do with it because I promise you they will surprise you. And that surprise will drive a lot of insight. Um, your experience, you and Miguel Arkmatza, who started Gilgamesh, um, what's it been like transitioning from builder to investor? And how have you found you know, the subject of this book, the experience building a fintech company, really paying dividends for you at Gilgamesh?

Builder To Investor And Closing

Andrew Endicott 47:49

Yeah. I mean, well, you'd have to talk to our entrepreneurs to really get the real answer, but the the uh which which hopefully is good. But the the uh you know what I would say is it's it being an investor is very different than being being an operator, being an entrepreneur. Um you know, it in the there there is kind of a the there's it's funny because a lot of times as as an entrepreneur, or sorry, as an investor, you see all these problems that your companies are handling and you want to dive in and and and tackle them with them. And really that's not your job. Um I'd kind of say that it's almost the difference between between being a parent and a grandparent, um, where you know the the parent you know is is directly responsible for managing you know their kids. Um and the grandparent kind of sits back and they you know give them candy and and tell you know wild wise old stories and and jokes and and then they they leave. You know, they're they're not there all the time. And it's kind of the same thing. The the founders of the company are kind of like the parent, the company is the is the kid, and the the kid kind of hangs out with the the grandparent a little bit, and you get to say some things and give wisdoms, but you're not there actually doing the things. You're not you're not there actually managing the day-to-day. Um and it does, it's also not always good when you when you when you try to get in and manage things day to day. So I find that that that that dimension is it probably took me some time to adjust to it. Um because I I'm by nature I'm a pretty proactive person. I like to do stuff. Um but as a as an investor, you you you that's not necessarily always what you should do. Um but I think the big thing that that entrepreneurs appreciate about investors who've started companies and also investors that have simply spent time working at companies to a material extent. So Nick, I mean you've you've you've spent time doing this too. You've seen kind of the the beast from the inside. You've seen the kind of what it's really like to build a business, how messy it is, um, and how how simple things are difficult for reasons that are really hard to articulate, and how stressful it can be to build a business. I think a lot of it is simply, you know, in communicating with entrepreneurs, somebody who has built businesses and now is an investor is just gonna talk about things differently. They're gonna understand, you know, almost subliminally how things are hard that seem easy. Um, and you can simply relate to people, you can empathize or sympathize with them better in both directions. Um, and so I find that the conversations I get to have with entrepreneurs because of that are very different. I can share war stories, I can share, you know, kind of you know, just funny stories about things that went horribly wrong. And and and you know, and and other investor investors don't really do that the same way. Um, either because they don't know about it or when it happened, they were pissed off, or like the they it's they just experience it very differently than somebody who has kind of been in the seat um that they're doing that. And um, and I I think last, I think as a former entrepreneur, you understand a little more intuitively what actually helps the entrepreneur. Um you know, the the not so much giving them tactical advice on how to run their business. I guarantee you the entrepreneurs have thought about all of it. Um really making introductions for them that that nobody else can make, that's a huge one. Um, you know, just listening some, I think is also good. Sometimes when an entrepreneur wants to talk to you, yeah, they just want to they just want to unload. Uh they can't tell people a lot of this, they can't tell their employees all the things that are on their mind. Um, and they probably can't tell you everything, but they can tell you a lot more than they can tell other people or people that don't work at the company that there's they they don't listen actively in the same way that you're going to be able to do it. So um, yeah, I think I I I don't I I not every investor should be a former entrepreneur. I think that there's really great investors that haven't done that. Uh, because being an investor is hard. You you you it's it's a skill in and of itself. Um and and you know, Warren Buffett didn't run companies, but he was a really good investor. Um, and and um there's some of that in venture as well. And there's an art to venture that you do get better at over time in the same way as anything that you practice a lot. Um, but I think that I think every cap table benefits from having some of the folks on it who've actually, you know, run something in the past.

Nik Milanović 52:35

Well, even if you can't find an investor who's a former founder, at least you can now reach a great book with insights on how to actually build a fintech company. Very different, I think, from building most other kinds of tech companies, honestly. FinTech is not consumer products, it's not software, uh, it's not you know hardware durable hard products. There's a lot you have to understand. That's not true in many other sectors. So I'm glad that fintech founders now have one more resource. Andrew, thanks for joining us. Is Finance Technology Insights for Building an Enduring FinTech Company coming out on April 1st?

Andrew Endicott 53:07

Thank you, Nick. This is great. It's always fun to talk about this stuff. And and uh yeah, I encourage everybody to check the book out. It's it's uh I I it's also got some funny illustrations that I did myself, which I don't know, I'm not qualified to do that at all, but it's uh at least can give it give a small laugh as you're reading it. So um yeah, this has been a lot of fun.

Nik Milanović 53:27

That's worth it alone, man. Good to see you.

Andrew Endicott 53:30

You do