Reed McGinley-Stempel On Building A Billion Dollar Business In 2 Years By Building The Passport For The Internet

Reed McGinley-Stempel is the cofounder and CEO of Stytch which improves security and user experience with passwordless authentication. The company has raised over $100 million from top tier investors such as Index Ventures, Benchmark, Coatue, Thrive Capital, and Contrary to name a few. 

In this episode, you will learn:

• How Stytch works
• Reed’s top two pieces of advice when thinking about starting your own company
• Fundraising from top investors
• Expectations along the way

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About Reed McGinley-Stempel:

Reed McGinley-Stempel grew up in Las Vegas, but went to school on the East Coast. Frankly, he didn’t know what he wanted to do and “stumbled” into management consulting. When I dug into how someone stumbles into this profession, he mentioned that early on he got some sage advice from his older brother about not rushing to law school because… being a lawyer isn’t that fun. So, he followed some friends to Bain & Company.

The more projects he was involved in, the more he got interested in technology. Candidly, one of his motivations for going in tech was the fact that his was moving out to San Francisco to support his wife through law school at Stanford. He considered continuing to do consulting with Bain, but decided tech was the best route and eventually, joined Plaid. Outside of his professional career, he is into the outdoors, loving hiking and taking his very active dog outside. He mentions that living in San Francisco makes the outdoors super accessible.

Reed and his Co-founder both came from Plaid, and worked on the adaptive authentication team. There, they explored how to secure bank authentication to maintain security, but also do it in such a way that reduced friction and created an amazing experience. They found that the biggest problem to be solved was the combination of security issues with passwords, and the low conversion rate of sign up / sign in forms requiring passwords. They wanted to fix this. 

Connect With Reed McGinley-Stempel:

• Crunchbase
• LinkedIn
• Twitter

Read the Full Transcription of the Interview:

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Alejandro: Already hello everyone and welcome to the deal maker show. So today I’m very excited with the founder that we’re gonna be having as a guest. He is definitely building at hyper growth company. We’re gonna be learning quite a bit on. Basically. Building financing scaling you name it. So I guess without further ado. Let’s welcome our guest today read Mckinley Temple welcome to the show. So originally born in Las Vegas and also racing Las Vegas I mean

Reed McGinley-Stempel: Thanks for having me aljandra.

Alejandro: Unbelievable I mean how how how was life growing up there.

Reed McGinley-Stempel: It’s interesting I I have to be honest I think people probably expect it to be more exciting than it was I lived in a pretty you know, regular average suburb. But you’d go into the strip every month or so for a show or to go to a restaurant or something like that. So. It was pretty amazing to have that type of kind of. Bizarre social atmosphere. So close to home.

Alejandro: And did you have like anyone in the family involved in entrepreneurship or anything like that or or did this spark like a little bit later.

Reed McGinley-Stempel: No, actually my parents are both law professors in Las Vegas at at the University Unlv and I would say very academic, not not necessarily super entrepreneurial, but definitely interested in what I’m working on now

Alejandro: I Mean you did follow that academic route because you after after going to University you were in research and then and then also policies so to certain degree you follow the footsteps until you didn’t follow them any longer. So so how how how was that journey for you then

Reed McGinley-Stempel: Yeah, yeah, so you know, growing up in a family of lawyers or law professors I Certainly thought that was one likely outcome for me I Always found the law was interesting intellectually and so I think I probably expected I would go to law school at some point after college. I’m thankful that I had a number of people in my life that are lawyers in their twenty s and thirty s who were pretty adamant that I try something else before going down that path and I think they had good feedback for me as well. Which um, you know they obviously saw something in what I found interesting and how I like to use Creativity. They thought would not be a great fit for the Legal Realm and so I’m really thankful for those you know friends and family that our lawyers had gone through law school and saw that it probably would not be my favorite profession to actually go down.

Alejandro: Now you before before the startup world I mean obviously you did a little bit of the entrepreneurship you know type of thing where you join you know a startup a rocket ship and then you went at it on your own and we’re gonna talk about that in just a little bit but 1 of the things that that I come across a lot is. So of the best founders are those that have an experience or a background in consulting and in in your case. That’s why you did too. So why do you think consulting prepares you so well for coming and entering entrepreneurship.

Reed McGinley-Stempel: It’s really the best business education that I’ve like maybe the best theoretical business education that I’ve had in my career and so I think about you know going to college I learned a ton in those four years but just in the couple years of doing consulting at Baden company. I was exposed to a number of Frameworks for thinking and actually like the theoretics of how to think around business that I would never have gotten exposure to in undergrad and so to me I found that to be very powerful foundation. Obviously I don’t think I would have been able to apply it at you know, founding a startup if I had not gone. And worked at another tech company after that and seen a little bit more of how the sausage was made but I think one of the things that consulting really does well is teaching you how to think especially from a foundational layer as well as giving yourself Frameworks to approach new problems. How to find the right data when to use data when to use Instinct. And so that’s probably that’s probably the reason I found it most helpful is just the foundation. It’ set I still felt that I needed to get a lot of the real- worldl experience of actually working at a tech company and seeing the machinations of it but certainly the foundation was important to me

Alejandro: And then what kind of worldview. Do you think it has opened up the fact that you’ve been living in so many places I mean North Carolina also in Washington d c in Germany from Las Vegas now in San Francisco I mean you you’ve been all over the place. Read.

Reed McGinley-Stempel: Yeah I think the most interesting thing to me is how different you know behaviors that we take for granted around the user experience are based on where you’re living city or country. For example, you know I worked in fintech at a company called plaid before starting stitch and having lived in Germany. Before going to work at plaid I knew that fintech experiences were dramatically different for the german population. They are the Us population. For example, Germany is heavily cash-based and so that’s very different than the us were very card-centric a lot of your data then lives within an account. And so that plus examples of you know, living in Las Vegas you know living on the East Coast North Carolina you take for granted that something that you do and expect to be normal is actually what everyone does and so I’ve always been drawn to kind of platform companies where they can take a much more neutral view of the world of how something should look. As user experience and allow companies to decide how to use those tools to build something for their specific demographics. So whether that’s a company in latam using now stitches apis and products to build something for their demographic that they know better than us or ah, you know a payments company in Europe or 1 in southeast asia and so that’s kind of been my experience is that you really can’t translate your own user behavior and user experience outside of your bubble very well you can kind of make some broad guesses and trends. But ultimately anyone that’s kind of like at the actual. Ground level of a community is going to understand how users users behave far better than you will.

Alejandro: Now in that regard. Let’s let’s talk about you know, also entering the startup world. So at what point does the idea of joining Platt come to mind and and I mean I’m sure that that was a really big jump for you going from like corporate and. And then all of a sudden you know you you find yourself into this like fast-based you know type of environment. So so how was that process like how was that switch like for you.

Reed McGinley-Stempel: if if I reflect on my time at Bain and working in consulting. There were certain things I loved like for example I really loved the people I met I thought they were incredibly smart learned a ton from them. Loved the foundational thinking and like frameworks that were provided to me in the business training. Thing that I never really loved about consulting and why I thought it’d be interesting to try startups is that it sometimes felt like you weren’t actually solving the key issue for a company you would be able to come give them kind of a bird’s eye view of some issue that they’re seeing in one one function or some you know certain part of the business. But often what you do is you’d be spinning decks and analysis and then feeding it back to the c-suite and hoping that it got implemented and so I always had kind of an issue personally with the disconnect between the theory of what should be done and then the actual implementation of how it gets done and what the actual result is and I do think that you know consult. Consulting consultancies do have really big impacts on companies that commit to implementing those things but I was personally finding I was a little bit too removed from that process and didn’t feel like I was getting the ground level view of how a business worked I was getting more of the frameworks and you know theoretical thinking and so just kind of randomly. A Sourcer from plaid had reached out to me while I was working there I’d been thinking about moving out to the bay area because my then girlfriend now wife was going out to law school out here and so I was excited about the idea of working at a startup and kind of getting that experience and then you know interviewing at plaid and. It was a company I had not heard of before I started. It was you know 8085 people at the time I think it was a series b $200000000 company. Ah but what I found was they were incredibly bright similar to my peers at Bain but they were still in the motion of building something great. They were very much in the implementation phase of like we just need people to do things. Like the market is here. The product is here. There’s just a lot of like boots on the ground things that we need to do and so that was what really appealed to me is getting a little bit more of the operational viewpoint of how you actually go and change things fundamentally within the business realm or at ah you know at a company itself. And so that was really the exciting piece for me to make the move to plaid and I had ah you know a great experience I will say it is jarring at first going from more of a you know theoretical approach that a lot of the consultancies take or maybe if you’re an I banker to something that’s very hands-on and operational. Ah, but the thing that you learn pretty early on is that. Frameworks that you you know learned in those previous very analytical roles sets you up really well to decide. What’s a priority and what’s not a priority and then you get to decide like what is you know, a lot of things are broken at a startup What’s okay to stay broken and leave broken for a couple quarters versus what is an actual fundamental.

Reed McGinley-Stempel: You know lever that will change the business’s outcome in the next couple years and I found that to be really exciting. Once you started to take the prioritization and kind of theoretical level of you know what should we do and then actually being able to run with it because often at a startup you know the the team is just grateful when you run with a problem and you start solving it because. There’s too many problems for any c-suite or any you know team lead to to solve on their own. So I found that to be a really empowering experience.

Alejandro: Now obviously you were mentioning I mean you you had the experience in consulting and now Imp Pla you had the experience of being in a rocket ship. So I mean you developed a certain degree pattern recognition of what works really? Well and I’m sure that you took that with you to develop later stitch I guess in terms of that pattern and and what really worked. Ah, with plat I mean what would you say that was because.

Reed McGinley-Stempel: I’ll give you one very concrete example before some of the other more high level things that I think they did really well. But I think this is something that’s underrated by a lot of entrepreneurs and companies. Um plaid did employee onboarding exceedingly well to be honest. Probably better than my employee onboarding at Bain which was also a great employee onboarding and I was kind of shocked by that when I first started because you know this is an eighty person company I had never worked at a startup I kind of assumed it would be chaotic and yes, there’s a lot of chaos at a startup but it was clear that plaid had invested from kind of a. Ah, hr peopleops perspective in making sure that employee onboarding after that two weeks you could be really efficient and immediately start driving value for the company and that’s something that I carried with me to stitch where even before we had our first employee start we did a lot of work on thinking through what the ideal employee onboarding would look like. Um, and I think we’ve done a pretty good job. Obviously you can always get better. But the reason I found that so important for plaid is I think it sets the tenor for the entire kind of relationship of you as an employee at this company where yes, it’s a startup and I have a lot of friends that have worked at startups where you hear horror stories about how things are operated internally. When you got to a company like plaid and you saw the onboarding at even you know a small size of 80 you knew this was a company that was taking itself seriously and that they expected others that were joining the team to rise to that level. So that’s like maybe you know a smaller thing that gets overlooked sometimes but. I found it really impactful as you know, a new employee onboarding to the company and then generally what I think plaid did really well beyond that is they hired really smart ambitious but also kind people and I think that’s something that we talk a lot about at stitch is like what are the actual values that you have on the hiring side I care a lot about. Both ambitious and empathetic people because I think you need ambitious people that push a company to how can we get to a 0 or a trillion dollar outcome like thinking really boldly, really creatively. But I think if you don’t also kind of correct and make sure that they’re empathetic individuals. You’re going to end up with a lot of cutthroat politics. Um. Potentially some chagrin internally that actually stalls your ability to reach those objectives. So I think you know plaid obviously did a lot lot obviously did a lot of things. Well beyond that like product engineering talent. Um, you know, go to market. But I think those are some of the things that I don’t hear. Companies talk about as much that I found that they executed really well on and I’ve thought a lot about as we started stitch.

Alejandro: So what? what? what is the ideal onboarding of an employee look like because I’m sure that there’s a lot of people that listen I mean they’re like oh I’m wondering what that looks like.

Reed McGinley-Stempel: Yeah, so well I’ll give you a contrast and then what I thought was a good experience at plaid and what we do at stitch here. Um, the contrast is I’ve talked to a lot of friends that have joined a startup you know, maybe it’s 700200 people and they’re always surprised. Or you know, maybe they’re not surprised because they’ve worked at other startups like this but they jump in day one. Maybe they get like a little guide or pamphlet on you know here’s what your role is going to look like or here’s what the company does ah but often it’s like 1 or 2 onboarding sessions and it’s like go create value and that person is being dropped into a very low context environment. And I think the smartest individuals can still find a way to make an impact but they’re definitely going to be less efficient than if they’re in a context-rich environment when they get dropped into a new experience and so the way that we think about it at stitch because I think plaid did this really well is that the first two weeks are a couple main objectives around onboarding. The first is make sure that they have each individual has a really good understanding of what each function’s role is at the company so have the function lead of finance versus sales versus marketing ah versus you know product engineering versus but backend engineering actually provide an onboarding session. That teaches the new employees something about the company whether it’s how you sell the product if you’re sales or on the backend engineering team for us. It’s what does an Api call actually look like what are our developers doing with the api. It doesn’t matter to me if you’re on the marketing team. Still want you to know that because that’s going to matter a lot in terms of how we think about our product differentiation. So 1 objective is make sure they understand at a functional level what each team in the company does and what’s most important for everyone else in the company to know about that team. Even if you can’t know everything. That’s 1 thing. The second thing is how do you break down kind of the natural divides that are created in an organization as it gets larger and I think the biggest one is just if you don’t know someone. It’s much higher friction to ask them for something and so I think about friction as something that matters a lot for whether you have the right communication cadence at a company. And so the other thing that we did we did and we kind of emulated from what we saw at plaid is that we’ll also register a number of kind of um coffee chats on the new employees calendar when they start so you’ll probably show up. You’ll have maybe 10 onboarding sessions over the next two weeks that are an hour long with different functions. Ah, you’ll also have like 10 to 15 coffee chats. It’s a little overwhelming but really what the intent there is for you to get more of a kind of personal relationship with people on different teams but also learn what they’re working on also have that contact in the future. So that there isn’t friction when you’re trying to communicate across the organization and so.

Reed McGinley-Stempel: Those are always like the 2 biggest objectives. The third is of course that we don’t want to just hire people that know a lot about apis because that’s a very small set of talent in the world and so we care a lot about how well do you know the product and what we do and how we talk about the product by the end of onboarding and so I’d say those are probably the 3 primary objectives we think about in employee onboarding and I think plaid did a really good job with that as well.

Alejandro: So and let’s talk about stitch So at what point you know that’s really the idea come to mind and and for you to say? Okay, let’s let’s go

Reed McGinley-Stempel: At plaid I worked on 2 different teams and my last year and a half in particular I started thinking a lot about authentication and so in my 3 years at plaid the first half I was on the go-to-market team thinking about growth. Ah, the second half I was on the product team and the product surface area I was responsible for was a product called adaptive authentication and so this is a pretty core feature to how you know thousands of Fintechs use plaid today if you’re robinhood or your coinbase or your venmo. You need to allow a user to authenticate their bank account in order to connect it to your application so they can fund the account in order to buy bitcoin or a stock or send money to their friends or if you need to do an identity check for example and so. Our team on the authentication team was responsible for kind of 2 different objectives around this bank account linkage experience. The first was how can you increase security for the end users that are linking their bank account. So how do we prevent account takeovers stolen funds from some you know hacker fraudster stealing their username password. And then trying to go link it to coinbase to buy bitcoin. Ah the second objective for us and focus area was also how do you increase conversion of good users that are going through this funnel because if you think about it if you sign up for robinhood and you go through 10 steps to onboard and then you get to the last step where. Robinhood’s about to make money and it’s you connecting a bank account every percentage that they lose there is really painful for them from a customer acquisition cost perspective and of course will then impact their ability to serve that user because they’re not funding the account and so mattered a lot to our customers conversion. It also frankly, selfishly. Mattered a lot to plaid because plaid only monetizes when you can successfully connect a bank account and so those were kind of the 2 pieces we focused on on the team security and conversion and what was interesting to us is that you sometimes hear a cliche in the security world that. Anytime you need to improve security. You have to reduce convenience for the user to a degree and I think one of the things that we found where that truism was actually not true was when working on password based authentication at plaid because what we realized was our biggest headache on the security side. And our biggest drop off in the conversion funnel was actually the same cause it was passwords and password based authentication that were creating the issues for us and so if you think about the security example, the biggest source of fraud in account takeovers and stolen funds is that end users. Ah.

Reed McGinley-Stempel: We’ll likely use reuse passwords across dozens of different accounts online because we’re asked to manage you know 200 different usernames and passwords and we find it easier to just use the same password across many different accounts. So what happens is that you’ll see an attack on a company like http://target.com or Linkedin. Something. That’s seemingly unrelated to finance but immediately what attackers will do when they steal those 10000000 usernames and passwords is they’ll actually try to go send those to the banks and to the bank aggregators like plaid and try to you know, disguise their traffic as real end users to see. What percentage of these users at Target actually reuse the exact same password at Chase Bank of America coinbase and then that’s a much more valuable account for them to steal because there’s tens of thousands of dollars versus them having to order a physical good and then fence it and so that was 1 big issue. We had with passwords on the security side is that. No matter how secure you can be and how you accept passwords into your login flow There’s always a chain of liability and risk that gets created by how well to do other companies that this user has a password with secure that password that they’ve created because that’s just a memorized secret that then when breached can be used to take over other accounts. So that was 1 big issue that we had and I think Verizon had a good report that 81% of all account breaches online are caused by weak or stolen passwords and that was definitely a pain point that we were dealing with the other side though of conversion I mentioned that plaid only makes money when you successfully connect a bank account and we were shocked when we looked at our funnel. To see that a very large double-digit percentage of our users dropped off because they forgot their passwords so they may have even used another fintech app like venmo in the past. But now when they are going to a financial budgeting app if they forgot their password many people would say you know, not worth the five minutes of friction for me to reset this. Because then I also won’t be able to login on desktop and it will just create a lot of headache for me as an endus and so end users are very likely to drop off at that point which becomes you know hundreds of millions of dollars lost in revenue to both platis provider but also to our customers that are then therefore seeing higher acquisition costs. Because they had a lower conversion at the last step of the funnel so to us that was really frustrating that passwords were such a kind of epicenter on both the security side risk and also the conversion sync and we started thinking about you know why couldn’t you actually build password blesss authentication for these use cases. We had started to notice that companies like square cash or cash app revolution monzo bank ah slack medium had already started going passwordless and when you talk to their growth and security teams about it. It had been a no-brainer both from a fraud perspective and a conversion perspective and so when we were curious about doing this at plaid.

Reed McGinley-Stempel: We looked around the kind of landscape for authentication companies. You have the big incumbents like Okcta and oth zero and what we found was that they’re architected around passwords as a service and so they really didn’t have the password list features that we were looking for if we wanted to build this in-house and the other piece was. They were built really inflexibly because they were built built to solve passwords and so they were built in a way where they actually didn’t want the developer to have much control over how they integrated it because it was a security feature at the time. Don’t let this end developer touch a memorize secret like a password and that to us kind of like. Gave us the aha moment as my cofounder Julianna and I were having coffee one day and kind of you know hitting our heads against the wall on some of the authentication issues we were running into that there really wasn’t a stripe for authentication in our perspective and what we meant by that obviously stripe for x is cliche at this point. But what we meant for that. Is something that is both an exceptional developer experience. But you also get a better end user experience on the other side like they’ve done for payments and that’s what we wanted to do with passwordless authentication make it really easy and flexible for apps and websites to incorporate it and then as a result. Um, you’d be able to get the benefits on the end user side of higher conversion lower acquisition cost higher lifetime value of those users because they’re not resetting passwords and dropping off at that step of the funnel so we are a usage-based platform.

Alejandro: So then how do you guys make money with this.

Reed McGinley-Stempel: We have kind of 2 different plans right now there’s a pay as you go where there’s not actually even ah, a monthly minimum that you have to commit to and that’s ¢10 per monthly active user that covers all of our authentication products. Unlimited logins per user per month but it’s yet. It’s usage-based there are a lot of enterprises that may not want to. They may want to you know. Price for scale if they have a million users or 10000000 users. So what we do with them is we’ll actually negotiate monthly minimum commitments that you can eat against with your usage and then you can get a discount you know, ¢8 per monthly active user ¢7 depending on your scale and that’s typically how a price is on that usage-based pricing.

Alejandro: And in terms of racing money I mean for an operation like this is is capital intensive but you guys got started in 2020 and you’ve been quite successful with racing money. How much capital have you guys raised today.

Reed McGinley-Stempel: Yeah, we’ve raised over 120000000 through our series seed series a and series b benchmark letter seed and then thrive letter a and co to just letter b a couple months ago. Actually.

Alejandro: Wow I mean it’s It’s incredible that you went’ right away with a heavy hitters on a seat round because typically you would wait a little bit for like a series a to really bring someone like Benchmark so you went right at it. So what? what was the thinking you know be so behind you know, perhaps. Bringing the big guns right away and.

Reed McGinley-Stempel: For us. It was thinking about the right partner fit so who was the board member that we thought was going to have the most tangible you know impact on the probability of success for stitch and we had heard fantastic things about the board member that we work with. And partner that we work with from benchmark chathan putagunda you know he’s been on the board of mongodb elastic modern treasury. He’s fantastic when it comes to developer focus companies and when we were pitching him we realized in every conversation that we were. Getting way smarter around how to build and scale a developer experience company or an developer Api company like stitch and so for us it was kind of a no-brainer once they extended the term sheet and we’re interested in leading the seed. We knew that you know we had a lot of good intuition about what we were building on the product side. But we had not seen anything near the different you know developer experience company use cases and kind of different functions. You need to scale etc that Chathan had in his past and so it’s been amazing to have him on the board and then also more recently bring on you know Gora Va Whoja from thrive and Luca Swisher from kotu.

Alejandro: Now typically you would wait you know and and you would give yourself at least 18 to twenty four months between financing rounds you literally raise the seat this the series a and the series b all within the same year. Why.

Reed McGinley-Stempel: It’s interesting. You know we hadn’t intended to raise that quickly and frankly I think part of the calculation is that one of the benefits of you know the traction we are seeing and the idea resonating with vcs is that often. We were not going out to Vcs and asking for money. Ah, they were coming to us and asking us if they could preempt our next round and frankly that was a very good situation for us. Once we knew we had the right partners at the series a and series b where these are vcs where we knew we were aligned on the mission vision. They’d seen the traction. They’re excited about where we were going and. They gave us you know terms that made it so we didn’t have to go waste three months my cofounder and I pitching every vc on Sand Hill Road and so for us that allowed us to focus much more intently on product and scaling the organization and so I think to answer your question. You know we had never intended to raise capital this quickly. Ah, but we are seeing the traction. We’re seeing the demand seeing that there’s a lot to build and a lot of the team that we needed to scale out and so when you find the right partner at the right terms and it just makes sense to us that was kind of a no-brainer to partner with those funds.

Alejandro: So broadly Some of the people listening you are wondering what what did readid mean with prating the the next round. What? what? what does that look like read.

Reed McGinley-Stempel: Yeah, so you know after the seed round you start hearing from a lot of vcs that are you know, interested in staying in touch building the relationship for the next round and frankly like you know we’d love to chat with all of them. But you also have a company to build and. Ah, company a company building is much more than fundraising and so often what we respond with is I’m sorry we’re heads down like we’re really working on the product like let’s you know, maybe meet next year at some point once it makes more sense for us to consider a fundraise and I think what was really interesting is that this is something that happened with both thrive and cotu where. They were just digging so deeply into the product space through expert calls through their own research and thinking about what we are doing relative to companies like octa ah 0 so even though we are saying you know we’re not fundraising. They were just being really helpful to us with customer intros. Ah, bringing their own research and analysis to us and kind of showing us all of the work that they were doing on their side to the point where yes we are not in fundraise mode but they were showing to us that they were going to be really great partners for us to partner with to the point where they knew we were not fundraising but they would extend offers. Um, in the midst of kind of that relationship building and so preempting really was like we were not fundraising but they were excited enough but about what we were doing and what they were seeing in the market that they effectively you know were thinking about how do we pull your fundraise forward. This is going to save you months of time in terms of fundraising and going out. And so you can focus on product and for us that was a really compelling pitch.

Alejandro: Nice now if you were to go to sleep tonight read and you wake up tremendous news. You wake up in a world five years later and in that world the vision of stitch is fully realized what does that world look like.

Reed McGinley-Stempel: So much less friction on the internet so to to make this a little bit more tangible. Our our mission is to eliminate friction on the internet and we think one of the biggest pieces of friction is authentication, friction and passwords in particular. So obviously that’s part of kind of the near term strategy is how do you eliminate passwords. But we see a lot of problems beyond just password creation and remembrance when it comes to how users sign up and access applications securely we see that most of us are asked to fill out the exact same fields when we go from application 1 to 2 to 3 to 4 and it’s kind of crazy to us because we have a logged in state. On our laptop or our browser. But we’re still asked to jump through the same hoops to use these different products and I think friction has a real cost and it’s not even just to businesses obviously businesses see this every day when they lose a user in their funnel that they can’t convert and or a user drops out because they forgot their password. But the end user experience also hurts them where what if you don’t sign up for that budgeting app because it was just a little too much friction and so therefore you don’t balance your books or for example, you know I’ve been trying to get a doctor’s appointment for the last couple months and every time I was asked for my health insurance card I would think to myself you know I have no idea what this is like I don’t want to spend like. 5 minutes coming through my email trying to find it going into different login portals and resetting my password and it’s a small thing but I think humans are just generally deterred by friction and so when I think about where things could be in 5 years with the products that we’re building. It’s effectively. We think about how could you create a passport for the internet. Where a user can have one very secure or a couple very secure passwordless authentication methods whether that’s face id or touch id or one one click kind of email verification and then that allows them to share and provision any data that might be relevant for a particular app. So whether that’s health data for this health tech. Um, company that you’re trying to onboard to whether that’s you know, financial or identity data for this fintech or that’s just general you know personal identity information for the saas application that you’re signing up for so we we see a world not only where passwords are gone in 5 years but hopefully if we’ve done our jobs right. You have many fewer fields and forms to fill out online because you have this kind of logged in identity. That’s both very secure through things like biometrics but also very seamless for an end user to share across the web.

Alejandro: So now imagine if I put you into a time machine and I bring you back in time perhaps to that moment where you were thinking about starting stitch and you have the opportunity of giving a piece of advice to that younger self. You know before starting the company. What would that be and why given what you know now Read. So.

Reed McGinley-Stempel: It’s a great question I think well 2 you know 2 things 1 is like obviously I did go out and start the company. So I would I would give the positive affirmation that like just do it like I know I was thinking through it very analytically at the time which was leaving a good job during the beginning of the pandemic. Um, kind of the cost of that as well as I was still vesting my you know the fourth year my last year of my initial grant at plaid which obviously plaid’s a really valuable company and so there’s you know, definite definite financial questions in the equation I think you know looking back at it. It was 100% the right move both from a. Interest level I have in this role and like how much fun I’m having as a founder so I would give my former self that positive affirmation to just go for it. You know we had done the research we knew it was a big market. It’s great to see how quickly things have moved. But even if they didn’t move this quickly. It would have been an amazing experience and and I would give that positive affirmation. The other thing I would think through is the faster you scale and the farther away you get from being an employee the easier it is to forget certain elements of how you felt as an employee now that you’re in the founder position and so I would like write down everything. That you find you would want to improve in a future employer experience and think about how you would do that as a founder of your own company and so for example I think we did a lot of that to start with stitch but there are also things I learned on kind of a continuous basis where one of the things I say to other friends that are founders is I really don’t think that you can repeat yourself too much as a founder. You always take for granted how much context you have in your head versus the rest of the team has and so those are things where you know even if a founder is doing a really great job at a company you might say I don’t know how x product fits into our vision or roadmap those are the types of things where like internal communication becomes really important. And so that’s definitely something that you know I was aware of when I started the company but it’s probably even something I would nudge myself my former self down that road to think a little bit more intently about which is what are all of the things that you feel right now as an employee and how would you want to take you know demonstrable action to. Ah, address that in your future role as a founder.

Alejandro: That was very profound I Love that read. So for the people that are listening. What is the best way for them to reach out and say hi.

Reed McGinley-Stempel: Yeah, so couple different ways if you’re more if you’re interested in learning more about stitch. You can go to http://stitch.com that’s stytch and you can either sign up directly and get started or we also have an option to talk to an off expert I see all of those requests. So. I can’t guarantee I can get on every call but I’ll try to help out if you’re looking for help on going passwordless. Also you can reach me on Twitter I check my Dms and my Twitter handle is mixedempel I have a very long name so it’s concatenated to mcste m.

Alejandro: Amazing! Well read. Thank you so much for being on the dealmakerr show today. So.

Reed McGinley-Stempel: Ceo. Thanks for having me bill appreciate it.

 

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