For Friday, May 1st is Brew Markets Daily and I'm Anne Bry. We almost called this episode Succession because coming up is a rare conversation with a founder CEO who's taken their startup public, scaled it to a market cap of nearly $3 billion and now 60 years young is handing over the big title to a 35-year-old. And that transition literally happening today. While the company is Upstart, ticker UPS, trading on the NASDAQ and at the heart of AI applications and finance with AI powered underwriting of consumer credit that uses non-traditional variables like education and employment rather than just credit scores to evaluate borrowers and using private credit partnerships intertwined with an AI powered lending marketplace that involves banks and credit unions to offer personal home equity and auto loans. Now, the aim is to improve credit access while lowering risks for lenders. Well, I last spoke with founder and CEO today turned executive chair Dave Gerard in November 2024, and a lot has changed since then. Upstart hit record revenue and profitability in 2025 and has aggressive growth targets for the next 3 years. But investors are watching closely as the company navigates this CEO transition, makes a strategic shift to seek out a national bank charter, and drops quarterly guidance right at the moment where visibility is at a premium. So stay with us for that conversation with one guest who does not mince his words, Dave Gerard. But first, this episode is brought to you by Charles Schwab. Is recency bias skewing your potential stock picks? Is attribution bias messing with your retirement plan? Overconfidence describes our tendency to overestimate our abilities. Loss aversion helps explain why losing a dollar hurts more than gaining a dollar. Financial decoder, an original podcast from Charles Schwab, explains how these cognitive and emotional biases can affect the decisions you make about your financial life. Host Mark Rey, head of the Schwab Center for Financial Research, and his guests offer actionable insights on what you can do to help fight off these decision-making biases. Download the latest episode and follow at schwab.com/financialdecoder wherever you listen. And now my conversation with Dave Gerard, co-founder and executive chair at Upstart.
Dave, co-founder and today CEO of Upstart. We're filming on April 30th. It's incredibly gracious of you to give us some time because it is your last day as CEO. Tomorrow, by the time this airs, you will be the executive chair. We last spoke, Dave, 17 months ago. I can't believe it has been such a long time because I follow you so avidly on X. I feel like I've been speaking to you more recently. Talk to us if you don't mind because this is a bit of a mystery move to a lot of investors. Talk to us about your decision to move out of the CEO role into the executive chair one.
Yeah, sure. So, Paul and I co-founded Upstart along with Anna 14 years ago. So, it's been a while. I was just turning 46 when we founded the company in 2012. Paul was just turning 21. So, a rather odd mix. And interestingly, like the first day I met him, because it was sort of a random networking thing that put us together, I discovered that I'm older than his parents, which was a very odd mix for co-founders. So, you know, so for a long time, amazing it worked out, by the way. You know, I mean, I'm not sure I would ever suggest people come together who don't even know each other try to build a company with a generational difference, etc. But obviously, it worked out great for Upstart and for us. And, you know, so it's probably somewhere between five and six years ago that it became clear to me there was a time where Paul would become and should become the CEO. I sort of, I don't know, just naturally thought like my 60th birthday is a great time, which I just passed. So Paul just turned 35 earlier this year. I just turned 60. And you know, the idea generally is look, he's been alongside me the whole time. He's been driving all the technology in the company really since the beginning. He's developed all the maturity and skills to run a public company. Just an incredible person and he's only 35 years old. So, I think really the opportunity that I thought was, 'Wow, you know what? If he can be convinced to stay as long as I stayed, meaning until he's 60, you have a 40-year founder-led company, and that is the unicorn of unicorns in my mind.'
I got to say, though, Dave, so first of all, you made it 60. Congratulations. But you're 5 years younger than Tim Cook. You're 35 years younger than Warren Buffett, right? So, you could have kept going. You could have kept going and being the Omaha of the Bay Area, sorry, the Oracle of the Bay Area. So, why are you stepping back? Like, I get it about getting someone while they're younger, but are you going to disappear into the night or how hands-on can we expect you to be as executive chair?
Yeah, you know, it's an interesting point. If we weren't in the situation we were in, I certainly would not have handed it off. I love the job of CEO. I'm healthy. I feel good. I probably feel like I would reasonably do it for another 10 years, at least five, maybe 10. You know, no one knows how they're going to age and all, but so from my personal perspective, like I was somewhat neutral. I wasn't dying to get out of it. You know, I certainly have other things and I appreciate the fact that you only go around once and you know, there's a lot of things in my life I've put off or not done. So, there's a little of that, but honestly, if Paul were not Paul and he weren't right next to me and ready for this, I would not be leaving. I certainly would not be bringing somebody in from the outside, at least not for another 5 or 10 years. But the situation was so unique. And to be honest, I think Upstart will be better. Like I kind of feel no matter even if I think I'm really awesome, I don't, I mean I'm good at some things, I'm less good at other things. But I really believe that at some point you just kind of need to shake it up. You know, it's like the Etch A Sketch. You need to like shake it up and start over on a little things. And you know, I'm really happy to see very quickly Paul is jumping in and he's changing how things are done, the pace, the way we think about answering questions and making decisions in ways that I think are very, very constructive. So I was afraid Paul might come in and just kind of carry on what we've been doing for so long. It's worked well. We're a good company. We've been through hard times, but in the big picture, we're doing phenomenally well. But fortunately, Paul is really driving things forward in a very unique and different way. I think the market will begin to see that over time. I see it internally first, but I think over time, you know, Paul is just a genius. He's a six sigma ahead of the crowd in terms of his capacity to think through issues and so I'm just super excited about it. I think it's great first and foremost for Upstart.
Do you think, Dave, just looking at your sort of seat and hearing your perspective here, there have been a number of CEOs younger than you actually. So Doug McMillan over at Walmart, we saw the Coca-Cola CEO both say in sort of a moment of humility or self-awareness both on CNBC that they felt they'd actually tapped out in terms of how much they could bring the next wave of AI to their corporations. Just as you look at your peers in the non-tech sector, do you think there is truly a generational moment here where the baton needs to be passed on to those who are more AI native?
I think there is something to that for sure. I mean I feel like I'm pretty AI native. The whole notion of Upstart from the beginning was bringing AI machine learning to credit. So you know I obviously feel like I am fluent. I don't know if I would call myself native. Paul is native and I do think there is a generational difference when people just grow up immersed in something and they just have no legacy to drag along with them. And so I respect those CEOs, you know, Doug McMillan etc., you know, Tim Cook, I don't know if his is the same situation, but you know, I think there's a time we have to realize it's a young person's game and that to really bring the energy and the thinking, not to say you can't do it. I mean, Buffett has been Buffett for a very long time. Investing and operationally running a company are, I think, very different things for sure. But in any case, I think there is something to that and personally, I'm very excited. Paul is as in as you can possibly be in the world of technology and AI and I think it's very unique amongst our peers and amongst the fintech world to have somebody of his caliber leading something that is trying to solve an extraordinarily difficult problem which is improving access to credit and it's just something that it's not going to be solved in a year or two years or I'm not even sure in 5 years. It's a problem that will just take incredibly long effort to solve because of the nature of credit and lending. But the impact is enormous and the potential is enormous and I'm just really excited somebody like Paul is here to take us through the next hopefully, you know, couple of decades worth of effort in it.
Well, lots of those tuning in, Dave, are familiar with the Upstart business model, but some of them aren't. So, if you don't mind, just give us the 60-second version in your own words of where Upstart is focused product-wise and what it is at the moment.
Yeah, what we've really been focused on for almost all of our history is bringing AI and machine learning into the domain of credit, particularly consumer credit. And that really comes down to making much smarter risk models that can price somebody accurately and can also sort of take all the friction and process out of the origination of credit. And so when you think about a loan, I mean, nobody loves getting loans. Let's just say that, right? Why do loans cost so much? Why are they so difficult, right? I mean, a lender has to pay for customer acquisition. They have to pay all these hard costs associated with verifying information and processing the loan. Then, of course, they have losses and for every loan that is lost, you have to charge someone else more money. So, there's just enormous inefficiency. And so, we saw way back when that AI and just much smarter models could eliminate almost all of that inefficiency. And so we're on this pathway to do that not just for one type of loan but for really all forms of credit. So you know that's really I think the opportunity we've been pursuing. We've really started in a model where we are marketplace in structure. We predominantly third parties fund most of the loans whether that be depository institutions or whether that be private credit etc. And then we market directly to consumers. We did announce just a month or so ago that we are applying for a federal bank charter with the OCC in the US and really just decided for a lot of reasons. It simplifies our business in a lot of ways and we really kind of believe that AI in credit and lending has gotten to a state of maturity that it should come under the domain of the regulators in the US. It should be accepted across the financial services industry as a much, much better, much more efficient way to originate credit. And so that's sort of what drove us, you know, to announce just a couple of months ago, we've submitted an application for a federal bank charter.
So when we last spoke in November 2024, that wasn't something that was on the docket at the time, you know, having your own bank. So has the regulatory infrastructure changed? Have the people in the regulator seats changed so that they are more up to speed with what's going on in AI or was it more that your business has changed to be able to fit the regulatory framework?
I think it's more the former really. You know, we have forever thought about it and we've said publicly many times we don't expect to become or to create a bank. It just didn't make sense for a lot of years. It was for most of our history there was no new bank formation almost whatsoever in the US. Regulators just made it very difficult. Not totally clear why. I mean, one would think you'd want, you know, new competitors in the industry to retain its edge and do right by consumers. Yet, there was almost no bank formation for many, many years. That did change in the last couple of years. So, that sort of changed the equation a bit. I think we also realized that because we have, you know, 100 plus depository institutions that originate on our platform, they are all regulated by somebody and so even though it was indirect there was this enormously inefficient thing where all of these bank partners, credit union partners are getting examined by a regulator and they're trying to communicate what AI does and how it works and we just felt all of this could be radically simplified if we could actually just have the relationship directly with the OCC who we consider the preeminent federal regulator and at the same time still continue to work not just with these 100 plus credit unions and banks you already work with but hopefully as many of the large banks across the US because I think it quickly, the world is learning the power of AI is so strong that you know you just risk being left behind otherwise.
Let's talk about that learning when it comes to market coverage. Dave, you are such a good sport when I last spoke to you because I remember asking you a question which I actually didn't think you would answer. I said, you know, what is Wall Street missing? Because at that time, a lot of the Wall Street analysts had price targets in the $12 to $14 range. Even though your share price was higher, there was some volatility. And your answer at the time was that financial services analysts, not tech analysts, were covering Upstart and that they quote lack a fundamental understanding of our business. I'm now looking at the price targets on Upstart in a very different spot. At the high end, you've got 80 bucks a share. The average is about 44. Your share price today is just under 32. So what happened? Did the same analysts kind of get with the program and understand your business or was there a shift in your coverage much more towards those who are tech?
I don't think there's been a real shift in our coverage. I don't know how much there's been more understanding. Sometimes I think the analysts are following where the stock goes as opposed to making some sort of firm gut prediction about where they think it should be. So you know when the market multiples drop for fintechs which they did people move our stock price down even though there's no new news about us and they're doing it because the market rewrote fintech and so I don't really care too much about that. The important thing to us is our business has improved pretty dramatically from, you know, we went through a very hard time when interest rates went up a ton and capital dried up way back in '22. But our business has really come a long way and it's much more diverse business. It's growing quickly. We have a lot of leverage in our business. So I think we're really proving the thesis. But ultimately I think an analyst or an investor for that matter has to believe there can be a differentiation in credit. All credit, all lending is not the same. Technology can actually make an enormous difference in the caliber and capability to originate and service credit. And I think, you know, we are step by step proving that out. I think we have more work to do. I think, you know, there's certainly things we could have done better, but there is nobody in our view out there who is investing nearly as much in the application of AI to credit than is Upstart.
Well, let's talk about some of the numbers and how this has translated. I've just got some of them in front of me. As of the end of Q4 2025, your transaction volume for that quarter, Dave, just under $3.2 billion, up a solid billion dollars from the comparable quarter prior. Your total revenue hitting 296 million up from 219 the comparable quarter prior. So, what was it that sort of pushed that growth into a different level, a different pace?
Mostly it's just acceleration of the AI models. When the AI models get better, they tend to eliminate risky people and give lower rates to less risky people and approve more people. And then they just make it easier. More people can get the loan without having to submit so many documents. We have new products coming out. We have a home equity product. We have an auto product that are really taking off. I mean, at triple digit rates. They're very small still, but they're growing incredibly rapidly. So we're really taking this core AI capability beginning to apply it in a broader set of larger markets. So I think the addressable market is growing really quickly. But so yeah, that is leading collectively to growth though to be honest back to your point on I saw an analyst comment recently which says, you know, if Upstart's growing faster than the market that just tells us it's taking on more risk. So all I could just say is like wow there's kind of no winning in certain people's view of the world if we're growing faster than the market. Do you really think that means we're taking on more risk or maybe we just have some better technology? So you know there is this sort of like, it's a Jeff Bezos kind of thing. We just have to be prepared to be misunderstood for a very long period of time because there's a lot of history in credit. But without question I think the numbers speak for themselves. The business is strong. It's getting stronger. It's getting more diverse and I think those who stick with Upstart really believe in us are going to be rewarded for that in the long run.
Well, one of the places I look to, Dave, for signs of momentum frankly was just your news section of your website. So, you know, April 29th, 2026, Upstart announces one and a quarter billion dollar forward flow agreement with Fortress Investment Group. April 22nd, a $1.2 billion forward flow agreement with Centerbridge Partners. March 17th, the 1 billion forward flow agreement with Eluro Ventures. So the private credit partnership docket is getting bigger. Why is that happening right now at a moment when private credit is getting a bit of a tough wrap?
Well, you know people sort of paint private credit with one large brush. The part of private credit that's coming under scrutiny is really where they're funding acquisitions or lending toward acquisitions of SaaS companies and you know so that is really a case where private equity companies have bought, taken SaaS companies private, have leveraged up to do that and now there's some question of whether AI is going to suddenly render these SaaS companies obsolete. That of course has nothing to do with us. I mean we're a completely different pocket of money in a different use case. But my view generally is look, private credit is a very good thing for America. Banks can't do everything themselves. It doesn't make sense. So if banks can't do all the lending in the world, who's going to do it? Private credit is sophisticated investors making smart investments. Some of them aren't going to be so smart, by the way, but that's, you know, that's the way capitalism works. But I'll say this, you know, we feel that we have a lot of strong private credit relationships. Every single one of them has renewed. We've had zero loss of any partners. We continue to add new ones and our credit has been extremely strong performing and ultimately if you deliver them the returns that they expect, I think we should expect those partnerships to continue. They're very, we have risk, we have skin in the game so there's alignment. The credit performance has been great. Our belief really is the technologies we've developed while you can't completely eliminate sort of credit cycles per se, I do believe that a smarter technology that reacts more quickly can mitigate downsides of credit cycles and I think we've proven that some in the past. I think we'll see it even more as we go forward.
So when I think about the Upstart bank that you are, you know, the application is going through, how should we think about the composition of the credit likely to sit on that bank's balance sheet versus what is being, you know, offloaded to some of your private credit partners?
