Brandon Krieg is the co-founder and CEO of Stash which is a New York-based digital investing and banking platform. The company has raised over $300 million from top tier investors including Founders Fund, Union Square Ventures, T. Rowe Price, Greenspring Associates, Coatue Management, Entree Capital, Valar Ventures, Goodwater Capital, Breyer Capital, and Lending Tree to name a few. Prior to this, he co-founded Edge Trade (acquired by Knight Capital Group).
In this episode you will learn:
- The process of giving up a successful corporate career for a startup
- How big Stash is today
- The key ingredients Brandon says it takes to connect with fintech consumers
- How to get free stock in the shops you shop at
For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.
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About Brandon Krieg:
Brandon Krieg is the CEO and co-founder of STASH – the financial platform revolutionizing the way millions of Americans save and invest for their future.
Prior to co-founding STASH, Brandon Krieg spent over 15 years in financial services, most recently as head of electronic execution for Macquarie Securities Group. Brandon Krieg co-founded EdgeTrade, one of the first and largest electronic trade execution and algorithmic software firms.
When Knight Capital Group acquired EdgeTrade, Krieg became their head of electronic sales.
Brandon has been recognized by Goldman Sachs as one of 2018’s “100 Most Intriguing Entrepreneurs.” STASH was highlighted by the Wall Street Journal as one of the “Top Tech Companies to Watch in 2018.”
Connect with Brandon Krieg:
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FULL TRANSCRIPTION OF THE INTERVIEW:
Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. Today we have a really exciting founder, and I think that we’re going to be learning a lot about fintech, building, scaling, financing, and a story that is fueled with adrenaline for five years, and you name it. So, I think we’re going to learn a lot. Without further ado, I’d like to welcome our guest today, Brandon Krieg. Welcome to the show.
Brandon Krieg: Awesome. Thanks for having me. I’m excited to be here and to chat about all things fintech.
Alejandro: Quite an interesting upbringing. Born in New York City, and then raised in Eurocell, and then you happened to end up in South Florida. So, how was life growing up?
Brandon Krieg: It was a lot of learnings. I grew up in a great home with great parents who had some big financial struggles when I was reaching my teen years. We ended up moving to South Florida and lived a different type of life that I look back on now and really value. I think it framed a lot of my current views in the world. It was great. I wouldn’t change anything if I look back. I liked living in Florida, and I loved living in New York, as well, and I’m happy to be back in New York now.
Alejandro: I’m sure that you miss the sun of Florida, especially during winters in New York City.
Brandon Krieg: Yeah, I definitely do. I’m not a big fan of the cold.
Alejandro: I hear you. At what point do you decide it’s time to move back to New York City?
Brandon Krieg: I graduated from high school, and I had no idea what I wanted to do. I was confused and ended up going to culinary school, and then decided that wasn’t right for me or what I wanted, although I now know how to cook, which is cool, but I ended up going to school. Then I decided that I just wasn’t doing enough with my life down there, and I wanted to move to New York and get into financial services and work on Wall Street. I moved up to New York in 1998, and I got very lucky. I met two guys that had just started a company called EdgeTrade and joined them in 1998. I was early in the electronic trading world. Ultimately, they made me a partner of the business. Yeah, I think moving back to New York is definitely an amazing thing that I did early on. I’m happy that I did it.
Alejandro: Now, when you say electronic trading, you get a sense and a glimpse of that, but back in ’98, probably a lot of people were like, “What is it?”
Brandon Krieg: Yeah. A lot of people that I have working at Stash only know electronic trading. Back in the day and what you see in movies now, the NYC Exchange Floor with all the guys and screaming and yelling and passing paper around. We looked at that and were like, “That’s insane.” Computers could do it more efficiently. Computers can do it in a way where the customer is put first. And it’s not about how big you are or how loud you are on an exchange floor, but how much work you’ve done or how much prep you’ve done to own a stock or to sell a stock. We started in serving computerized orders since the market and ultimately built a very large business that got acquired by a firm called Knight Capital Group in 2007. It was a really cool ride because we had to innovate everything and build everything, but it wasn’t during a time when there was AWS – there was, but in the early days, there wasn’t. So we literally had to put racks of servers in a closet and write everything from scratch. It was a lot of work, but it was really fulfilling seeing now, everything’s electronic, and when we started, it wasn’t. So I feel like I did my small part in changing an industry, which is cool.
Alejandro: It’s amazing because you were with EdgeTrade for quite a while, over nine years, and then you even stayed with KnightCapital for five years after they did the acquisition, which I’m sure it was an exciting outcome because I see that it was publicly disclosed that it was $60 million. For you, the first type of rodeo like super interesting to see it all the way to the finish line. Prior to the acquisition, if you had to go back and think about all those 9 ½ years of building and scaling a business, what kind of big lesson did you take away from that experience?
Brandon Krieg: It’s the same lessons that luckily, I’m able to carry into Stash now. Every day you’re learning, and you have to listen very attentively to your customers. When you listen, and you learn, your customers will ultimately tell you what to do. If you ask enough of your customers, and you really hone in on a pain and understand a problem that you’re solving, and you’re solving a real problem, not making one up, then you could ultimately build a really great business. I learned early on that sometimes when I put my ego into things like, “I know what the customer needs. I’m not even going to ask the customer. I’m just going to build what I think they want.” Those things never really worked. But when you ask your customers for feedback, things go great. That’s an early learning that I had in being consultative with your customers. That business at EdgeTrade and Knight was a B2B business. It wasn’t a direct-to-consumer business, as now, but the same principles apply: don’t try to invent a problem but be a pain killer to a big problem that exists. That was a big lesson I learned. It goes to grey-hair theories. Pay attention to mistakes that are made. Learn from mistakes because I believe that micro-failure is a really good thing. If you fail at something, if you fail at any little thing, as long as you learn from it, you’re going to be great. You’re going to be okay. It’s when you constantly make the same mistake over and over again and have the same failures over and over again, where things become problematic. We were able to build that straight up and innovate while we built this business, and it had a great outcome. I stayed at night for over five years because the culture was great, it was a great place to work, and it was really cool because I got to see that little baby that I helped create and grew up. Knight was trading almost a little bit over a quarter of the U.S. Stock Market every day. It was crazy. So it was a great seat to have and had a great time. It was a lot of fun, but ultimately, I had to move on. It was a cool run. It was like almost 14 to 15 years that technically I was at the same job. Just wild considering nowadays, that’s not normal.
Alejandro: From the time at Knight Capital Group, you probably learned, as well, about integration because you go through the acquisition, then you stay for five years with them. Maybe you got a lesson or two about integration. What would those lessons be?
Brandon Krieg: Integration in what regard?
Alejandro: In M&A, in an acquisition, integration is a beast. Integration is super difficult, so maybe as the acquisition actually happened, and you transitioned, the business was under that umbrella of Knight Capital Group, maybe you learned a thing or two as to how you do that integration with flying colors.
Brandon Krieg: Yeah. I don’t know if any integration is super simple. They’re all really hard, but when we integrated at Knight when they took EdgeTrade over had a lot of systems that they ran. They were a really big firm, and making our system work there, it took time. Luckily, they gave us a lot of time to do it. I think it took us about a year to a year-and-a-half to fully integrate everything over. One of the things that they did, which I thought was really cool, is that they were good at integrating our culture because from ’98 on, we were a true startup, and we acted like a startup. We moved really fast; we tried to be lean; we tried to ship software quickly; we tried to iterate quickly. One of the concerns that you always have moving a business into another business is, is the culture going to break because if the culture starts breaking, then you not only have problems with your customers, but you start having problems with your employees. Any good acquisition keeps its employees, especially the employees you need to have around. Knight was able to work with us to make sure that happens on both dimensions that from a technology an integration perspective, it was easy and seamless to get it in, although it took a little time. But also that we were able to keep the important things that the employees cared about. At Trade, they got to keep those important things at Knight. I think that’s really important in any integration. It’s not just about the product; it’s also about the key employees that you want to keep and have them continue to be a big part of the company. That EdgeTrade business is still going on right now, and a lot of the original employees that were there in the early 2000s still work there today, which I think is really cool.
Alejandro: That is. That is really cool. Then after spending five years here after the acquisition, then you go to Macquarie, and you had a big-time job there, and you decide to give that up, but at least it was a pivotal moment because here you met your co-founder at Stash. Tell us about that segue, especially this short stint at Macquarie, which only lasted for a little bit over a year.
Brandon Krieg: Macquarie was a really cool place. I not only loved working there, but I made a lot of great friends there. They had reached out to me after I left Knight and said, “Do you want to come to Macquarie and build a global electronic trading business that kind of looks like your old startup.” I said, “Well, yeah. I do. It’s really awesome.” One of their amazing employees, Ed Robinson, who was located in London – Ed and his wife moved to New York, and Eddie and I partnered up to build this new business. I was there actually a little over two years. What I learned is that although we’re able to accomplish the things we wanted. There was a great story that happened about a little over a year in. Somebody who worked at the bank giving advice out to customers walked to Eddie and I saying, “I have some extra money. What do you do, Eddie? What are you doing with your money? Where would you invest some extra money?” Eddie and I looked at each other, and we said, “You know, we’re in electronic trading. Why is he asking you, Eddie, this question?” One day, we walked outside, and we just decided to ask someone else in the street the same question. We walked over to someone in the street, and we said, “Do you invest? Do you save? Tell us about it.” I’ll never forget this. The person was like, “Oh, no. I really want to invest. I just don’t do it.” We said, “Why don’t you invest?” They’re like, “Oh, I don’t understand it. It’s so confusing.” I was like, “Really? Why else?” “I’ll invest later when I’m rich.” I said to the person, “What’s rich?” The person said, “I don’t know, but it doesn’t matter; I’ll do it later.” I was like, “Oh, my goodness. That just happened. That’s interesting.” This is around the same time that a lot of consumer fintech companies were launching into the market. We didn’t do anything right away. Some founders would say they had an immediate lightbulb that went off. We didn’t. But we knew that there was something going on here. It took us some time to figure out that we wanted to do something, Eddie and I, in consumer. To really truly do something in consumer, we couldn’t do it while we worked inside of a bank. We couldn’t. It wasn’t fair to our employer; it wasn’t fair to our families or our time. So, ultimately, we spoke to Macquarie, and we both resigned. The first thing that we did after we left was go right back to the street and just start asking everyone that would listen to us and talk to us, the same question. Alejandro, I’m telling you, every single person that we asked said the same exact thing. “I really want to invest. I don’t understand it. It’s so confusing. I never learned about this at home. My parents never taught it. I didn’t learn about investing or money at school. So, I’ll do it later.” But we never had anyone say, “I’ll never do it.” It was always the kick-the-can down the road game. So, we said, “All right. I think we know what we need to do here. We need to build a new type of private tech. We need to build a wealth manager for the non-wealthy, so basically for 80% of America. That’s the very condensed story of how we got from meeting each other at Macquarie to literally just walking up to strangers in the street. Those conversations that we had just with so many amazing people that would talk to us, and I’m talking hundreds of people, set what we’re doing now at Stash in motion.
Alejandro: How do you guys arrive to hitting it on product/market fit?
Brandon Krieg: That’s a big story. We had to do a few things first. We had to open a bank account and get some money. So Eddie and I used a lot of our own money, and a lot of our friends and family wanted to support us in building this new type of financial company. I think we raised a half a million bucks in total, and we put it in the bank, and we wanted to approach investing and financial services or fintech in a consumer-first way, but in a way that was led by solving the biggest pain in the customer’s head. If you remember back to what I just said, what we heard when we asked people about this was, “I don’t understand it. I never learned about it.” That was the first thing that we realized was that to build a financial services company that’s going to do well and do well by its customers, we had to lead with education. We needed to build a financial education platform in addition to an investing platform, in addition to everything else that we’re building, that we wanted to build when we launched. That was the first thing. The second thing we learned – and we studied an industry that most people don’t relate to financial services. We studied the weight loss industry and studied it closely. We looked at Weight Watchers. Weight Watchers has a very interesting good model, which is you don’t tell someone you need to lose 30 pounds overnight. Instead, you help them lose one pound, and you celebrate them. Then you help them lose two more pounds, and you celebrate them again. You make them feel good, and you make them see that they can reach those huge milestones by having little, small, incremental wins. So, we said, “How do we replicate that with investing and saving?” So we decided to build something called Auto Stash, which basically helps people save small amounts of money on a regular basis. We can talk about how these products are doing now. I’ll give you a recap of that after, but they’re, quite frankly, incredible now, and they’ve changed a lot of lives for a lot of our customers over the years. We also didn’t want to be like a robo-advisor where you give us the money, and we invest it for you. We wanted to be there with you on the investing journey, but we wanted you to invest with intent. We wanted you to choose what you invested in, and we would give it to you in a super simple way that wasn’t written the way of Wall Street, but written the way of Stash, which is, “We’re going to give you the information that you need to make a choice; we’re going to teach you and educate you about all the things you need to understand like what’s an ATF? What’s a dividend? What’s an expense ratio? But we’re going to do it in a way where we’re not going to take someone else’s content and just put our name on it. We went out and hired teachers. One of our early employees, I believe, was a 2nd or 3rd-grade school teacher, and she joined our team to help us teach investing to our customers as they were investing. It looks like STEM, basically, and you tinker as you learn engineering. You are investing as you are learning investing, and you’re learning to save as you save. The last thing is, we heard a lot when we were talking to people on the street that, “I need to be rich to start.” We said, “What’s rich?” And no one could answer that question. So we said, “We have to get rid of this whole hurdle. All the hurdles that Wall Street has typically put up that you need to have a lot of money to start. You need to have this huge minimum.” We said, “We’re going to have to build a fractional investing platform, and we’re going to drop the minimum to $5.00.” We went on now to drop the minimum to a penny because we can’t have anyone say that they can’t afford to do it because the biggest obstacle that people have is, they’re not starting. But once they start, they start building that good habit, and that’s what we put together as Stash, and we launched it October 15th of 2015 in the market. We very quickly opened a couple of thousand accounts the first day from a launch list that we had, and then it got quiet. Then, Apple, out of nowhere, featured us as the best app in the app store our first week, and we were not ready for that, by the way. We opened another huge wave of accounts, but then things settled down to numbers that weren’t good – less than a hundred new accounts today, in the early weeks and months. We realized that great, we built a prototype and MVP. We got it in the market. Now, how are we going to actually find product/market fit and scale this thing?
Alejandro: So, then, what was that moment because when the feature of Apple goes away, it’s like you’re in the desert trying to find your way. So how did you eventually find the way to get to where you wanted to be?
Brandon Krieg: Yeah. During this time, we had raised our first professional institutional investment round, so an amazing venture investor named Chi-Hua Chien, from Goodwater Capital reached out to Eddie and me and said, “I’ve been watching your progress, and I’d like to talk to you.” We ended up raising our first seed round from Goodwater. We proceeded to have the entire team get on the phone and call customers constantly. We just called and called and called. Our engineers started iterating. The process of iterating started about a week after we launched in 2015. We’re still iterating today the product just as much. We have a much bigger product now with a wider feature set, but calling customers and iterating is just so critical. In the early days, we did that. We probably iterated the product 100 or so times. And all the sudden, the 50 accounts today became 500 accounts today, which became 1,000 accounts today, which then became 2,000 to 3,000. There are days we open lots more accounts than that in a day. I think it was around listening to our customers and understanding that even though we set out with this MVP, and we had this really good idea, what we had in our minds didn’t perfectly portray into the software, so we had to start the process of changing the software. As we did that, we started finding that, “Wow. We’re really solving a problem that our customers have, which is they never felt that they could invest.” They never felt that they would be given a vehicle to learn how Wall Street works or how long-term investing works. I think it was just so powerful to know now, looking back at Stash’s founding story, there was no silver bullet. There was no grandstand homerun that we could step up and hit. It was just hitting singles and singles and singles, and continuing to listen to our customers and develop the product that way. And that was great. Another interesting learning that I’ve had is that founders sometimes go into things with preconceived notions. My Wall Street background of 15 years before Stash, I had a lot of things that I thought everybody knew. I’ll give you an example: I thought everyone knew that when you sell a stock, the money is held up for two days in unsettled funds. I never thought that anyone wouldn’t know that. So, when we were building the original product, we put in “Unsettled Funds, two days.” Then we started seeing app store reviews come up going, “Why are you locking my money up? Why are you holding my money back for me?” I was like, “Uh-oh, I guess people don’t know what that is.” So those preconceived notions, in the early days, they are what they are, but over time, we had to strip anything that we thought we knew about finance and reframe it and repackage it in a way that the 80% of America that we look after can understand. Those are all things that led to the real success of Stash.
Alejandro: Without a doubt, the importance of listening to your customers, so hopefully, people that are listening that are right in it right now and trying to find product/market fit, hopefully, they got really good insights from that. Right now, how much capital have you guys raised to date that is publicly disclosed?
Brandon Krieg: We’ve raised north of 275 million dollars now into the business. We just did our Series F round.
Alejandro: I was going to ask you about your latest round in the middle of COVID. How do you do that?
Brandon Krieg: It was a lot of work. It wasn’t really that it was hard to raise the round. It wasn’t because we had a few amazing investors come into the round. We had started those conversations before COVID, so it wasn’t about the difficulty of raising the round. It was just like doing all of this over Zoom and Hangout Calls was new. I could tell you that, but Lending Tree is an amazing company. They came and invested in a round, and then funds managed by T. Rowe Price also came into the round. We’re able to add more gasoline into the Stash fuel tank, which has been great for the business. We’re continuing to accelerate, and we’re continuing to grow. The story, though, if you really think about where we started, was just a straight-up micro-investing platform. We’ve grown up so much over the years because all of that to what you just said, Alejandro, is like, “We have to listen to our customers.” As we listened, more and more posts the first year of the business, we heard, “I want to put money in a retirement account, but I don’t understand how that works.” Or “I didn’t think I could ever have a retirement account because I didn’t have enough money.” So we went out and built a retirement platform for our customers so they could open up Rothe and traditional IRAs on the platform. Then we started hearing, “I want to do this for my kids, but I can only have one account on the platform, so I’ve got to pick between my kids or me.” So, we said, “Okay. We need to build a custodial platform.” So, we built Stash for children so that parents could open up a custodial accounts for their children or friend’s children, and that’s been a wild success. We heard from a lot of our customers through our call center asking us about insurance. “Can you help me with life insurance? Can you help me with renter’s insurance?” We said, “Why? Why are all our customers asking us about this?” We started calling customers and learning, and what we learned is that there’s a ton of confusion over life insurance. That is something that everybody should have. It’s just that people think it’s way too expensive, or the policies that they hear are way too big, or the industry just confuses people, so you have to use a broker to do it. So, we went out and became a 50-state insurance broker and integrated insurance sells into our product, which has been a huge success, not only for us but for our customers. Lastly, we wanted to be the core bank for our customers, so we went out and found a partner bank and integrated banking into Stash. We just crossed over a million bank accounts opened after a year on the platform. We could talk more about that because it’s really cool what we’re doing on the banking side, but I think it’s all about listening. Our customers have almost, in some ways, formed our product roadmap for us by telling us where their pains are.
Alejandro: So, you were listening to the customers; you developed all these different ways of giving them what they were asking you, but I’m wondering: how do you maintain simplicity all across the board, and especially when you go through different types of market conditions as well?
Brandon Krieg: The one thing I’ve learned over the years is, it’s really, really easy to add a bunch of new features, and it’s really, really hard to keep the product simple. I think it comes down to having amazing employees. My partners in the business – we have 270 employees at Stash now that listen to the customer and understand who our customers are. Our customers are the aspiring Americans, but not the wealthy. There are a million options for people out there who have a lot of money – not a lot of options for 80% of America. So, we have to know who our customer is and who we’re serving, and then keep continuously reminding ourselves that we have to build products that they understand and that they could use, and they could make a bit part of their life. You have to do that through following almost a principled approach to building product, which is: just keep it simple. Keep it simple. Simple in copy; simple imagery; simple in design. Simple doesn’t mean a bad product. Simple just means understandable to the customer, and that’s something that is a big focus point of ours, and we have to constantly go back and keep looking at our products to keep refining them and making them better for the customer.
Alejandro: I hear you. Imagine, Brandon, that tonight you go to sleep and it’s an amazing snooze. You wake up like five years later. Then you wake up in a world where the vision of Stash is fully realized. What does that world look like?
Brandon Krieg: That’s a great question. I do go to sleep thinking about this. I’d like to see Stash have north of 25 million customers. I think we’re going to do that – banking, investing, and saving on Stash. One of the things that we’re proud of is something we built called Stock-Back. Every time you spend on the Stash card, you get stock wherever you spend. So if you go to Walmart and spend on the card, you become a shareholder in Walmart. If you take an Uber or Lyft, you become a shareholder in Uber or Lyft. Get gas at Chevron – get stock at Chevron. I love this concept of building a portfolio that mimics and mirrors how you live your life. So, I think that everyone in America should be doing this because everyone should be an owner in the brands that they spend at, and everyone should receive not only great products that they spend at, but all the lifetime benefits they should get through stock ownership. I think that we’re in an incredible spot. I think that we’re starting to think a lot about the liability side now – how to make and bring transparency into lending; how to make sure that our customers are aware of their credit and their credit score and how their life changes affect their credit score. I don’t think we’ve scratched the surface yet on how much we could do for our customers, but we’ve literally opened over 5 million customers to date. We did that in about four years. I think yesterday we crossed over 5 million open customer accounts, which is really cool, and we haven’t scratched the surface.
Alejandro: Wow! Congratulations.
Brandon Krieg: Yeah. Thank you. It’s so cool.
Alejandro: That’s amazing. So this is your second rodeo now with Stash, and I’m sure there are a lot of people in the audience that are waiting for me to ask you the question that I typically ask the guests that come on the show, and that is if you had the opportunity to have a chat with that younger Brandon – that younger Brandon that perhaps recently moved to New York City and that was thinking about starting something, what would be that one piece of business advice that you’d give to your younger self and why knowing what you know now before launching a business?
Brandon Krieg: I’d tell myself to shut my mouth more and listen more.
Alejandro: I love it. Again, that’s my same thing I would tell myself. I love it 100%. Would you mind expanding a little bit more on that, Brandon?
Brandon Krieg: When I was younger, I thought I knew a lot, and as I get older, I realize that I didn’t know ****, and I needed to just listen and learn and keep learning and listening. I’ve grown so much since I moved to New York and got into startups. I think that’s really important advice: keep listening. Everything that I think I’ve done in my career, and I know I can speak for Eddie on this, is about listening to your customers and then learning and then being able to give them back real solutions to the big problems they’re having – not trying to make up a problem and solve it. I think that listening is what yields that, and I think it’s one of the reasons we’re doing really well at Stash and why and hopefully will continue to do really well.
Alejandro: I love it. So, Brandon, for the folks that are listening, what is the best way for them to reach out and say hi?
Brandon Krieg: I would love for people to write me. It’s firstname.lastname@example.org. We just bought our domain, by the way. After years, we bought our domain.
Alejandro: Oh, you did?
Brandon Krieg: Yeah.
Alejandro: Very nice. Any action on social media, Brandon, on Twitter, LinkedIn, or anything like that?
Brandon Krieg: My Twitter name is @brandonkrieg1.
Alejandro: Amazing. Well, Brandon, thank you so much for being on the DealMakers show today.
Brandon Krieg: Thank you so much for having me.
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