Hey guys, welcome back to season 3 of the Fintech OG series on This Week in Fintech. To kick things off, we are joined by two of the most influential voices shaping the future of financial infrastructure. We have David Marcus, who is currently the CEO of Lightspark, but he was the former head of Libra at Facebook and president of PayPal, and Dan Kimmerling, founding partner at Deian's Capital and early pioneer in banking as a service. We cover everything from the rise and fall of stable coins to why Bitcoin might be the key to global money movement and what it takes to endure emotional highs and lows of building in fintech. I think you guys are really going to enjoy this episode as well as the other ones we have coming this season. So, don't forget to like and subscribe on Apple, Spotify, or wherever you listen to your podcast. Let's dive in. This episode is brought to you by Persona, the adaptable identity platform that helps businesses fight fraud, meet compliance requirements, and build trust. Listeners, how do you know you're really listening to me? These days, it's easier than ever for fraudsters to steal voices, faces, and identities. That's where Persona comes in. Persona helps leading companies like Branch, LinkedIn, OpenAI, and Corsera securely verify individuals and businesses accounts across the world. What sets Persona apart is its configurability. Every company has different needs depending on its industry, use cases, risk tolerance, and user demographics. That's why Persona offers flexible building blocks that allow you to build tailored collection and verification flows that maximize conversion while minimizing risk. Plus, Persona's orchestration tools automate your identity processes so you can fight rapidly shifting fraud and meet new waves of regulation. Learn more at withpersona.com/thisweekinfintech.
David, it's so nice to see you. And you guys, we are kicking off season three of this this week in fintech OG series with you two. I could not think of a better pair to kick off this season with, especially with some of the things that are going on in the Bitcoin, stable coin, etc. market right now. I It's hard to think of anyone better able to address some of the history of this area than David. And Dan, you have quite the eclectic background. So before we get started, I would love you guys to just do like a 30 to 60sec intro on how you got into fintech and how your careers have evolved and then we'll dive into different pieces of it, highs and lows, where you think we're going over the next few years, things like that. Does that sound good?
Fabulous. Well, Dan, you were you joined me first, so I will let you go first.
Of course. It's good to see you, Joy. Good to see you again, David.
It's been a minute for sure. I studied finance in college and graduate school but was graduated into the global financial crisis where there were no finance jobs. So I ended up moving out to the Bay Area to be the first employee at TechCrunch. David, I think that's where we were running Echovox if my memory serves quite a number of years ago at this point. And then after we sold TechCrunch to AOL, I ended up starting a fintech company called Standard Treasury, which was very early in banking as a service. And we successfully sold that to Silicon Valley Bank where I worked for a couple years. And then about 8 years ago, I started Deian's. We're a very early stage financial services venture capital fund.
Amazing. I love the small world, too. Well, David, give us a quick intro on your background as well. You've always gravitated towards the payment side of the fintech space if my memory served me right.
Yeah, that's right. I've been in payments for as long as I can remember. So, bunch of startups. The previous one is where I met Daniel. It was Echo that led to Zong that was a mobile payments company that was sold to PayPal then ended up running PayPal for a few years. Otherwise, I would have been back at startups earlier. Then when I was starting to think about other startups, Mark Zuckerberg pulled me into Facebook to have the first four years or the only four years I didn't work in payments was a nice vacation away from regulated madness. Building messaging products at Facebook and then I got the itch again because I felt the way that money didn't move was a massive anomaly in the world and it needed to be fixed and no one fixed it during my little vacation from payments. So, I went back at it with Libra, the infamous stablecoin blockchain project that was killed by Janet Yellen on the morning of June 2021 and then packed my bags in December of 2021 with a massive axe to grind and a sense of unfinished business and started Lightspark. This time trying to build an open money grid for the world built on top of Bitcoin because Bitcoin is unassailable and the most neutral form of money.
Amazing. Well, you mentioned a few things that I we have to start off by diving into because I believe the last time I saw you, you were getting shredded on Capitol Hill by congressmen and women that weren't such a fan of stable coins at the time, nor were they fans of Facebook and big tech at the time. And obviously, I think if you were sitting on Capitol Hill today, that conversation might have gone a little bit differently. So, I'd love for you to unpack when and why you think things have changed since you guys were doing Libra over at Facebook and how you're incorporating that into what you're doing at Lightspark today.
Yeah, look, I think we had a number of years certainly the Biden administration at that time was the most aggressively trying to kill crypto and digital assets in America because they saw it as a challenge on their control over the financial system which to call a cat a cat that's basically what happened. And so we just landed the worst possible time trying to launch a massive stable coin project that would have been distributed and used by billions of people around the world and substituting itself to the unit of account that's controlled by central banks around the world which was and doing it by the way with the sponsor that was at the time one of the most hated companies. So we checked all of the boxes of having the most irritants possible for regulators and politicians around the world and in the US included. And I think now the new administration has figured out that if we don't win at digital assets and crypto at a time where it's going to completely reinvent our entire financial infrastructure, we're going to be left behind and we have to catch up. So it's a massive whiplash of things for all of us in this industry.
Dan, I'd love your perspective from the investor side. So we're hearing David's side from the entrepreneur, founder, and executive within companies trying to do this. I'd love your standpoint because I'm sure you get loads of pitches from stablecoin related startups especially in the last 6 months or so. What are you seeing as some of the areas that you think will be truly transformative in this space?
I think what the issue at hand is that we have a crisis in the legitimacy of institutions. I am a big institutionalist. I believe institutions are important and powerful and I will fight for the legitimacy of institutions. I don't think decentralization is a virtuous. A lot of people think there is a virtue in decentralization. I'm not one of those people. That being said, the question is around the legitimacy of institutions and whether or not the stakeholders of those institutions believe them to be legitimate in their authority. And in my own lived experience, I think where stable coins are most interesting is in parts of the world where the quality of their institutions is the weakest. As Joy, I think, and David perhaps you may be familiar. I'm very involved in financial services in Africa. I'm very involved with a company called Chipper Cash, which is one of the largest financial services companies in Africa. And we have seen the work that they are doing around stable coins in partnership with various jurisdictions in Africa be very powerful and I think there's a strong argument for that and other you've seen news about them in certain Latin American markets. So I think I'm just so I think that's quite interesting and I'm excited about that. But at the same time, I also want to argue for strengthening the legitimacy of our institutions rather than trying to burn them to the ground.
Fair. At least in the US, their institutions tend to be at least slightly more trustworthy than in some other geographies for all and our currency tends to be more trustworthy than other geographies as well. David, moving back to you. I would love to talk a little bit about Lightspark, what you're working on right now, and how that is similar and different to things like what Circle announced a couple of weeks ago and what they're doing with the I think it's called the CPN, Circle Payments Network, and of you guys are tackling the same issues or not.
Yeah, look, I think first of all, if you look at global money movement today, like the job to be done is really interoperating domestic real-time payment systems. Domestic payment systems have become real time. So you have FedNow and RTP in the US, you have SPEI in Mexico, you have Pix in Brazil, you have UPI in India, you have SEPA Instant in Europe. So domestic money movement from regulated institutions has for the most part been solved. What remains to be solved is interoperating those domestic payment systems with one another. And today, the best thing that exists is Swift and correspondent banking that takes 2 to 5 days to clear a transaction. Doesn't work Friday after 5:00 p.m. Doesn't work on weekends. Doesn't work on bank holidays. That's why they call them that. And it's massively expensive, too. Only banks have access to it. Like most banks, unless you're one of the top banks, like really hate it. And it still moves $5 trillion a day. And then closed payment systems that use their clients liquidity to fake real-time money movement globally like the JP Morgan global money movement platform or Citi Move another 10 or more trillion dollars a day. So the opportunity is here and we might be hyped up about stable coins and everything else but even at the current numbers they barely make a dent in that. And so I think the key lesson for us is from Libra is really that if you're trying to build a global money movement platform that's actually built and dependent on a single stable coin then when it gets to that level trillions of dollars a day or you project that risk that it's going to happen then that thing will die because if you're the government of Brazil or if you're the government of India or if you're the central bank of Europe, a US dollar denominated stable coin that's fully centralized and run by people that are easily identifiable as part of a company that fully controls the reserve because stable coins are fully centralized is not going to be an acceptable even if you're just using it for interoperation. If you're controlling the ins and outflows of say 30 40% of all of the ins and outflows into India or Brazil, your thing is dead. So our strong belief is that if you want to actually build the right solution here, it has to be on a neutral form of digital money that can serve as TCP/IP packets for money between those real-time payment systems. And the only asset and the only network that is fully neutral or neutral enough is Bitcoin. And that's why we're building on top of Bitcoin. We have a strong belief that if you're interoperating between or you're sending dollars to someone in Mexico who's receiving Mexican peso, having Bitcoin in the middle completely abstracted from the user experience is really the way to go. And that's what we're building. We think stable coins can serve a purpose in that network. But if you're building a network that's solely dependent on a stable coin, then it's a very fragile set.
Yeah. And I saw you listening intently there. What are your thoughts?
It is. Well, I agree with David in the sense that Bitcoin is the only solution that I've seen that could in theory get the various stakeholders aligned. It actually hearkens back to a pre-World War I understanding of currency reserve. If any of your listeners are interested, there's an incredible book called The Lords of Finance that involves David is shaking his head. He's clearly read it. It's an old Pulitzer Prize winning book which it talks about like the movement of gold as an incredibly important way in which like pre-modern central banking existed and if you think of Bitcoin as something akin to digital gold which is not I think an unfair metaphor then we're like everything that is all new is everything that is old is new again. It's like we're just like repeating a certain set of lessons here. I think that there's a question around there are certain jurisdictions where let's say backdoor dollarization via either moving assets into a USD denominated stable coin or actually moving assets out of local currencies and into US securities which is another kind of dollarization methodology is just a profound reality especially in markets where they have weak currencies or tight currency control in other places like some that David was mentioning the Europe, Japan, India where they have stronger currencies, stronger currency control regimes, stronger central banks. I think there's more nationalism around the currency and so I think in many ways it's not an either or it's an and there will be certain times where backdoor dollarization is actually a feature and in other situations where it's a liability.
Yeah, I think just to react briefly on that I think the key is really to make the distinction a stable coin is just a content type for money. It's digital dollars. It's not a payment network. And so the question is if you're building a payment network that's on top of Bitcoin that can move fiat currency to fiat currency and also support stables, which this is one of the reasons we launched Spark, which is this brand new Bitcoin L2 to support stable coins and a few other use cases not well supported by Lightning and the core L1 of Bitcoin. Then you can have like really a neutral network, neutral rails that can move fiat currencies that can move stable coins that can move any asset that people want to move. But the core network doesn't have a single point of failure that's so fragile and vulnerable. And if the internet is any guide, the different types of content types that are moving on the internet have standardized over one protocol like SMTP for email etc. And we think Bitcoin is that for all of the money in the world. It just needed the right technology and capabilities to be built around it so that we can actually support that global money movement and that's what we believe in and that's what we've been working on at Lightspark.
I think there's a question around in my mental model is that the cost of a payment should asymptotically approach the cost of the risk associated with said payment. I think there's an economic convergence of those two and then the question is as the speed of payments goes up and payments become irreversible and immutable does that lower the risk or increase the risk and therefore lower the cost or increase the cost and I would argue that as the honeypot of breaking a transaction goes up in that scenario and therefore one should pay more for it. But I think different people don't agree with that. Different people have different views on that perspective.
Switching gears a little bit, you both have obviously been very successful, hence part of the reason you were on this podcast, but not a single career is without its highs and lows. So I would love to dive into a little bit of those cuz I feel like so often we only see where people get to and we lose sight of the missteps that might have happened along the way. So Dan, let's start with you. What are some of the if I ask you like name a career high and a career low, what are some of the first things that come to mind? And in particular for the low, what were some things that helped you overcome?
Well, I think in many ways they would be the same thing which was selling Standard Treasury to Silicon Valley Bank. It was one of the highest highs and lowest lows. On one hand, I've come to see that as an entrepreneur, I want to run a company that is my life's mission and therefore I don't ever sell it. That would be like an idealized mental model of this situation. I think I started Standard Treasury when I was 26 and I might have had a more mercenary view of it and we successfully sold it and that was obviously lucrative and validating in certain ways. But at the same time I've come to see though that you don't really want mercenary founders. You want missionary founders. And sometimes when you sell a company, it's emotionally unsatisfying because you didn't necessarily complete the mission, right? Our mission at Standard Treasury was to have banks have open APIs. And we were somewhat successful in that, but we always scratched the surface. And what helped me get through that was a fat stack of cash. That always helps. I continued working on that with the same people at Silicon Valley Bank. And that's what enabled the Stripe Atlas product. If you all remember Stripe Atlas and then many of those people are now working on Treasury Prime and I'm still very involved with Treasury Prime and on the board there continuing with that mission. So we've continued to be strong advocates for this idea of open banking and banking as a service and so both one of the highest highs and lowest lows.
Well, I think you know that morning of June 21 at the bi-weekly meeting of Powell and Janet Yellen basically telling Jay Powell that she wouldn't support him letting the project move forward, which was his intention and that it was political suicide for him and she wouldn't have his back. And that was basically the end of it. The next morning, the general counsel of the Fed picked up the phone and called like all the participating banks and told them that they were uncomfortable with them moving forward, which was basically no legal basis, shakedown style, and that was it. Like that was basically the moment that Libra died. I still call it Libra because it's a better name than Diem, but yeah. And so that was a pretty low after having spent 3 and a half years really trying to fight the fight and convince everyone of the merits of a global 24/7 real-time low-cost settlement network for money that would have lifted so many people up that would have enabled so many people to have access to liquidity and capital in ways that they didn't have access to. But there was also there's no regrets whatsoever in this journey because the setup was wrong. Back to the point I made earlier, even though we tried to devolve power and try to not make Facebook the key decision maker of the network and how it was run. The reality is it was still too centralized. Like the 28 members of the Libra Association all cared more deeply about their core business than they cared about the success of the project and with that came a lot of pressure surfaced and that's how the project died and hence you know me now never building on anything else than Bitcoin because you can't pressure Satoshi Nakamoto or miners or whomever these people are to change the course of travel. So, and I also think the other learning is back to the point we were just discussing with Daniel earlier, which is if you're threatening to substitute intermediate sovereign currencies with a fully centralized digital dollar, then that's just not going to work well in many large countries. And helpful in others as a form of unit of account of settlement but in most cases not helpful and threatening to governments in ways that are just not sustainable.
So second half of that question what would be one of your career highs then was it selling Zong to PayPal was it something else?
I don't know I feel like for me like the messenger years and messaging at Facebook were great because it was a lot of fun we had such an amazing engineering team we were really building features faster than we could think of new ones. We got this thing from 150 million monthly actives to 1.5 billion users built like messaging business for the first time in the west at very large scale. This is like a double-digit billion dollar revenue line for Meta now. So that was a lot of fun. Also not subject to many regulations and headaches. So like really really felt a lot of freedom there. So that was fun. And I think what I'm currently doing with Lightspark is very hard, but also probably the hands down the very best team I've ever worked with. So I get a lot of pleasure and satisfaction in working with all of my team here day in and day out. So it's a lot of fun.
Amazing. I think entrepreneurial journeys, David and I have both been on quite a number of entrepreneurial journeys and I think empirically most of them are unsuccessful. The data is very clear that most of them are unsuccessful. And so you have to I think get a lot of pleasure out of the process like the people you work with the kind of like day in and day out because if you hold all of the pleasure in the outcome you're likely to be displeased.
That's very true. And I think it's the other thing I would add to that. You have to believe in it so deeply that you just you have to go solve it. And if a hundred people tell you your idea is stupid, you'd have to believe that those hundred people are all wrong and you're going to prove them wrong.
Izzy Sharp, who started the Four Seasons, you know, the hotel group that is now owned by Bill Gates and his family, Izzy Sharp said that excellence is the capacity to endure pain. Sounds familiar.
And having a really good therapist while you're an entrepreneur probably doesn't hurt either. A really good, a really committed significant other is also a huge part of it. I think the significant others of entrepreneurs are often the unsung heroes of the entrepreneurial journey because they are not in the boardroom. They're not on the cap table. They're not but if David is anything like me, you know, when shit gets real and it does a lot, they're the people that have to pick up the pieces.
