Hossein Azari sold his first startup to Goldman Sachs for nine figures. He has already raised funding for his second fintech venture that you may describe as the Google of finance. His startup, Cmorq has raised funding from top-tier investors.
In this episode, you will learn:
- How Cmorg works
- The future of financial services
- Hossein Azari’s top advice to other entrepreneurs
- The Steve Jobs mindset you need to build big influential companies like this
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 Hossein Azari:
Prior to Cmorq, Hossein Azari led the Data Science team at Clarity Money, building a trusted financial advocate for himself and all consumers who feel puzzled when it comes to managing their finances.
Prior to Clarity, Hossein was a Senior Research Engineer/Scientist at Google Research where he initiated and led multiple projects in collaboration with product teams such as Ad-Exchange. His contributions included the identification and improvement of inefficiencies through exploratory data analysis and efficient algorithm design using ML in large datasets, as well as building complex A/B testing frameworks for auction systems to measure and illustrate improvements.
Hossein’s research work is in the area of computational economics, machine learning, and statistical modeling with applications in social computation, consumer behavior, and experimental design, where he designed scalable algorithms for driving products and features based on large data sets.
Hossein has a Ph.D. in Computer Science (Economics and Computation group) from Harvard University. He has an MBA from Columbia University, a Master’s degree in Statistics from Harvard University, and a BS in Electrical Engineering from the Sharif University of Technology.
During his PhD, Hossein focused on designing scalable algorithms for analyzing rank data in applications such as social choice, voting, demand estimation, crowdsourcing and recommender systems.
Connect with Hossein Azari:
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FULL TRANSCRIPTION OF THE INTERVIEW:
Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. Today, we have a very exciting guest, a guest that has been there and has done it. Now, he’s on his second company. The first one was a really nice outcome, but without further ado, let’s welcome our guest today. Hossein Azari, welcome to the show.
Hossein Azari: Thank you, Alejandro. It’s great to be here.
Alejandro: So originally from Iran, from a place that is very cold, close to the mountains. How was life growing up there?
Hossein Azari: It was cold, but it was fun. It’s northwest of Iran. You’ve heard about Turkey. It’s very close to the Turkey border.
Alejandro: Was there anyone in your family that was an entrepreneur or in business? How did you get that incredible drive and ambition?
Hossein Azari: Pretty much everybody. The thing is, back home, you’ve got to be an entrepreneur. You hear about some of the developing countries. Entrepreneurship is your top choice. You don’t have the corporate jobs, or maybe you have a smaller company that they would hire, but they wouldn’t hire as much. Entrepreneurship is how everybody starts thinking unless you work for the government, which is also another alternative. My family, my dad, uncles were all building things from the time that I was growing up. My dad would take me to the deal rooms where they would negotiate stuff, and I would run around with the papers. I had a lot of exposure to that kind of life and seeing how things are.
Alejandro: Why Harvard, because here you are, you’re seeing everyone doing their thing, and they’re in Iran making business happen. Then all of a sudden, you decide that it’s time to pack the bags and come all the way to the U.S. and go to Harvard. Tell us what was that journey like and why?
Hossein Azari: Yeah, that’s a great question. When you look backward, you do see some disconnect from entrepreneurship on the surface. But actually, it was a lot of adventure for a 22-year-old kid or even an 18-year-old kid who is getting to learn the stuff I wanted to study in school that was top-tier, and I wanted to see the rest of the world. Then, you take it to the next step, and then you have basically the U.S. as the place that things happen, possibilities. You really don’t envision what it will exactly be, but you see a lot of opportunities, and there’s a lot of respect for the institution, Harvard itself, and how it can train you to be part of this greater, broader community and country. It all made a ton of sense as a growth period. Also, it was 2008 when I arrived here. Everybody was going to graduate school, and it was a good time to spend in graduate school and start looking for jobs after the crisis was over.
Alejandro: I hear you, and, obviously, you started looking, and you definitely found something meaningful in a place called Google. Why Google, out of all the places. When you go to Harvard, the doors open, and everyone wants a Harvard grad. How did you land in Google? Why Google?
Hossein Azari: Yeah, I was lucky, and it is an amazing place to work. I worked on a couple of problems around machine learning and aggregating opinions and the Networks Competition Economics. It turns out Google cared about it. It was important for them on designing all the money-making parts, the auctions they run, and advertisements. They were looking for people on those topics. I was in this conference called NeurIPS. It’s one of the top machine learning conferences out there. I actually had two papers in there presenting. Then I met this Google director there. She was nice enough to give me a job. It was an amazing place, and I learned a ton. Actually, I think I got a lot of stuff done, as well.
Alejandro: You were there for close to two years. This was around the time that you decide that maybe there’s something bigger for you; maybe you can actually launch your own thing, your own baby, and this led you to build your first company, Clarity Money. I think it would be very interesting for the people that are listening and watching. What was that transition like with you coming up with the idea to all of a sudden make that jump because I’m sure that when you were calling back home and speaking with your parents and telling them that you were leaving Google, one of the most respected companies in the world, to start your own thing, they probably thought you were completely crazy? So, what was that like?
Hossein Azari: It was tough until I told them that I was leaving. The moment after I did that, it was like I got unchained. It’s a lot of pressure to make that decision, and obviously, a lot of uncertainty when you are part of a company like Google or any other corporation, as a matter of fact. You have a lot of risks taken away. It was tough, but at the same time, there was, and there still is, a 20-30-years-out view that I tried to use in my decision-making, like what is the next 5-10. When I was thinking, and I still think about 20 years out, or at that moment, advertisement, ad-tech, the way that companies like Google make money have been beaten to death by these guys. The scale and size of the operations and the money they make shows how much innovation has gone in there. If you have aspirations to build something new, you want to look for somewhere that not many people have explored. That is part of trying to figure out a place that you could actively be impactful. I looked around, and it was also part of my own problem that I wanted to know how you invest your money. I was just making some money that got me to think, “What do I do with this? Do I keep my Google stock, or do I diversify? Do I invest in this? Do I spend like this? I didn’t have a source to have a clear answer, at least a clear view of what I should do. That got me thinking how little technology has gotten to the consumer finance side. There’s a lot of technology in hedge funds, quant trading, no doubt. But not much on the consumer finance side, especially in 2014/2015. That got me thinking maybe that’s an area I can jump in and start making an impact.
Alejandro: Do you remember the event where all of a sudden you said, “You know what? I’m just going to go at it and do this thing?”
Hossein Azari: Yeah. It was more like a continuous effort, and I gave myself and people around me chances to stop me from doing it. I wrote a proposal. Google Assistant back then was the early days of it. I said, “Google Assistant is a cool idea. Why not build it as a Google Assistant to help you with your financial decisions?” I went around and talked to enough people to get a good sense of “If I was doing this in Google, and I wanted to get this done”—obviously, I was just hired. I was not a director or VP that has actually had the capability to take a high-risk project. With whatever I could, I went around. With this slow process, I discovered that there is a clear project here. It’s not a bad idea. It’s just there’s an inherent risk there that your Google director might not like to take. But as long as you have a clean carved out risk that you think you can take and it’s a bet that you want to take and other folks don’t, then go take it outside. There’s that logical progression that helped me to first validate the idea and then say, “This is good. Now, basically, there’s the risk part that I should be the person taking it.”
Alejandro: Yeah. In this case, you go at it. What were some of those early days like at Clarity Money? What was that?
Hossein Azari: I think there was a lot of uncertainty, obviously. But also, something interesting was that there were many other people trying to do similar things. I remember, at some point, I counted and there were 13 other apps that wanted to help consumers. It really boiled down to the technology side that we had a great team on, as well as thinking from the product side and even just a narrative: how do you approach consumers? How do you tell them? There were these total things that we would use that people would rather have a beer than go through their finances. There’s a best-way problem that you could tackle. Many people were trying to tackle it, so it was a verified problem, but at the same, seeing what would work, what was a good problem to solve and to think about as a team. The space also has been evolving. 2010 to 2020, we have had so many fintechs, so many changes on how you deal with your finances, even under what is called, these days, traditional finance. Even in that world, you had so much change. It was exciting, also, to be dealing with all those dynamics of how fast companies were innovating and how fast products were coming out.
Alejandro: Got it. For Clarity Money, what ended up being the business model so that the people listening and watching get it?
Hossein Azari: We’re fighting for the consumer. We are telling them, “We are here for you, and we will try to get you better deals. We will act as if we are doing this for ourselves,” which in my case, I was doing it for myself at some level, so the product, basically. That is what the consumer is hungry for. With all the banks and everything around like personal finance, it’s a little bit focused on the finance than the personal side, but there are things that when you connect with the customer/consumer and tell them that you’re fighting for them and show them; make it easy for them to act on things that are going to be better for them, then you have them listening to you, and you have a chance to make an impact.
Alejandro: Very cool. For Clarity Money, how much capital did you guys end up raising for the business?
Hossein Azari: I think, at some point, we had raised more than $13 million, probably $14 million.
Alejandro: That was a pretty good outcome being your first baby. It ended up getting acquired by Goldman Sachs. Some media outlets report that it was about $100 million. How was that experience for you going through the full cycle, and why did you guys decide to sell versus perhaps continuing to build the business? It seems that at least having raised $14 million, you guys were still at an early stage in the game.
Hossein Azari: Yeah, those are good questions. On my side, it was obviously a lot of things happening in those couple of years, and I wanted it. The more you learn, the more ready you are to do the next thing. With that said, it’s just with the companies like that; the good side of it is also a lot of hectic things. But a ton of learning, things that you can’t learn in school or you cannot learn by talking to people or by just watching YouTube videos. In terms of the fintech companies, and not just Clarity Money, but looking at a good range of companies, a good number of companies in the last ten years, that they started and they basically ended up seeing the scale aspects as when you want to grow really big. We have some of the startups out there; even some of them are trying to be banks, applying for bank charters. Some of them are required by larger banks. The distribution is a really key point.
Hossein Azari: And, obviously, a bigger institution that has a goal to build the same product, provide the same service, has more distribution capacity and capabilities. I think you see that in many of the fintech out there that they end up being observed in a larger, heavier momentum in terms of distribution. That is, I think, an inherent property of traditional finance. I do see my new world defined, the centralized finance and Blockchain to have different mathematics for some fundamental reasons.
Alejandro: Let’s talk about that because after you did a little bit of vesting and resting at Goldman Sachs, literally not even a year, you decide that it’s time to go at it again, and here you started with cmorg. Why don’t you tell us; what’s cmorg about? What’s the business model?
Hossein Azari: cmorg started as a B2B business providing services for other businesses in the Blockchain space by aggregating and making access to Blockchain easier for everybody. So you didn’t need to deal with a complex haystack when you want to build a product on top of Blockchain. In 2018, when cmorg has started, it was just after a big crash in crypto prices, which leads to retail being burned out. Even VCs were not as interested, so they called it crypto winter. It was really a time to reflect and think about the B2B side. There was not much retail activity besides people trading on Coinbases of the world. We saw a continuous improvement from 2018, obviously, to March 2020 that there was another crash due to COVID. But the big inflection points for me, and I think for this space, was the summer of 2020. They even call it DeFi Summer, Decentralized Finance Summer. What happened was, you started seeing these protocols that they could do, for example, Uniswap, that they could do exchange of assets as just a protocol without any centralized entity involved. For example, Uniswap started surpassing Coinbase in volumes. That moment, for me, was basically an inflection point, realizing that now is the time we could actually build a consumer product in DeFi, which I call it Consumer DeFi as opposed to Consumer Finance. Now you have the backbone. You have, for example, another protocol, a series of protocols that are for lending. One of them is called Compound. You could actually go there. You could lend your U.S. dollars there and earn 10% to 11% interest in some cases. You could lend your crypto; you could borrow against your crypto. You could do all these consumer finance activities, but with protocols, without needing to have anybody involved or any credit score involved, etc. That was the inflection point that we really started pushing our retail product, which is now cmorg app, and that’s where we are now with cmorg.
Alejandro: How do you guys make money?
Hossein Azari: Obviously, the B2B side, we sell data that is a monthly subscription. There are setup fees and API-type pricing on the products that are related to doing API calls, etc. On the B2C side, we are really building ourselves as the place you go to get better financial deals. I like to see this as a Google of finance where you come in, and you have a certain goal, the way that you would want information from Google. I see the capital version of that. In fact, back in 2015, when I was going around in Google, I took Google’s motto that says, “Make world information accessible to everybody.” I said, “Let’s make the world’s capital accessible and useful universally.” So what’s the difference of capital and information? It has been five or six years, but now, Blockchain and these platforms enable us to think about capital the way we thought about information in the internet age. Basically, you come in. You need capital. You want to lend, borrow; you want to exchange. You have your intention. You come to the app, and there are all these protocols that want to serve you. We provide you the protocol that we think is the best for you to use by finding the best deal. That is the engine that cmorg offers you. In the world of open Decentralized Finance, the dealmaker, Google, is cmorg. That is the way we think about a core value and how we monetize it as part of some of the protocols now actually provide bonuses to their providers, like us, that help people come to the protocols. Some of the protocols provide bonuses to the users that we would naturally be able to get a cut of it as well as any other product that consumers use, be it a tax product, a data product, an accounting product. We do have partners that we provide leads to them when our users want the product by the partner. We also have a lead generation revenue stream.
Alejandro: Got it. Obviously, you guys are still early. You’ve been at it for a couple of years only, so how much capital have you guys raised to date?
Hossein Azari: The total sum to date is $1 million. We have also been a very lean company, and obviously, we have been making revenue for a couple of years now, but we do have gross plans. The way I think about it, and our board and company are built around and agrees with the general attitude of keeping the company lean and really waiting for when it is a good time to make a big impact versus just burning a whole bunch of money and seeing what happens, which is a common VC mentality.
Alejandro: And I think that once you’ve gone at it, at least once, in your case, you’re really able to see what works and what doesn’t. It’s like pattern recognition when it comes to the execution, so it makes total sense. I guess in this case, Hossein, I want to ask you a question that I typically ask the guests that come on the show, and that is if you had the opportunity to go back in time—let’s say you go into this time machine, and you go back to where you were still at Google, and you’re able to have a sit-down with your younger self, maybe one of those times that you were coming out of the meat-packing district office in Google, and you were going to have lunch, and you were able to sit down with that younger Hossein, and you are able to give yourself one piece of business advice before launching a business, what would you tell that younger Hossein that was perhaps taking a look at launching something and leaving Google?
Hossein Azari: That’s a great question. I never thought about it that way. Obviously, I can talk about a lot of things that I would say in that situation, but you’re looking for one line. Right.
Alejandro: There you go. Just one piece of advice. That’s all you have.
Hossein Azari: It always takes longer and costs more money.
Alejandro: And that’s why you’re thinking about cmorg more as a 20–30-year project?
Hossein Azari: And look, as an entrepreneur, you’re ambitious. You want to change the world tomorrow. But forget about us. We are just these little guys trying to do whatever. But think about it like Steve Jobs. This guy starts companies and gets kicked out of his own company. If you look at his journey, he didn’t come up with Apple and the iPhone overnight. This dude had been going back and forth through tough things and successfully, also, like investing, in the meantime, buying and selling companies. If you think about it, even for his vision to materialize and get closer to the reality of what he built, it takes time, and it costs a lot of effort and money. That initial ambition is great. It drives you, and it has to be there. It is that kid’s excitement about the playground. But knowing that it’s going to be a longer ride, getting how you buckle up and get ready. I would just try to build that attitude a little bit more, not to stop. The risk is like when you focus on that attitude, you might get discouraged, but it’s like a little kid trying to do something, be very encouraging, but also, at the same time, have that mindset that, “I have a great mission. I really want to do something that helps with leveling the financial playing field, helps with giving access to capital because that’s where I’m coming from. The same flesh and blood in the U.S. or a developing country that has talent could be as impactful if they have the access. Building such a thing is a lot of work, and it takes long. For me to think that it was going to happen between 2016 and 2018 was good, was ambitious, and it helped with doing things. But at the same time, really buckling up and trying to build something that you know it’s going to change the world in 20 years. And Consumer DeFi, I do know it’s going to change the world in 10 to 20 years. I think I’m just trying to play a role here and be part of it. Join the ride. Jump on this train and try to also help it if I can. I think that attitude would have helped. But I’m not complaining. I think it’s all good.
Alejandro: I hear you. So, Hossein, for the people that are watching and listening, what is the best way for them to reach out and say hi?
Hossein Azari: I’m on LinkedIn. I’m very active on LinkedIn. Send me a message. I’d love to connect.
Alejandro: Amazing. Well, Hossein, thank you so much for being on the DealMakers show today.
Hossein Azari: Thank you very much, Alejandro.
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