Been There, Done That, Killed It
Chris Dean presented his startup idea for a banking as a service company at YC Winter 2018 Demo Day. That company is Treasury Prime, which builds the essential technology layer enabling companies to embed banking services into their offerings. Treasury Prime now handles more than $1 billion in monthly transaction volume on its platform, and was recently named “Best BaaS Company” by Tearsheet. Investors include Deciens Capital, QED Investors, and SaaStr. Here’s the story of how Chris and co-founder Jim Brusstar got their pitch ready for Demo Day and convinced major VCs to invest in the company, and includes tips he has for other YC startups to slay their demo day presentations.
The YC interview is a very demanding 15 minutes. In Treasury Prime's case, Jim and I had to go through two rounds of interviews. First, we did a full interview where the partners questioned the basic assumptions of our business. We did a fantastic job, but the interview team decided to bring in another partner who was more expert in banking to vet us. We waited hours for a new partner and then another 15-minute inquisition. Unsurprisingly, the second interview was just as challenging as the first. That night, Jim and I were at a party in an SF Bar when Aaron Harris called to congratulate us and offered a place in the Winter 2018 batch.
For a deeper dive into how you can launch your product by Demo Day, watch Chris' full webinar with the YC cohort.
The elevator pitch
The U.S. banking system is surprisingly antiquated compared to the rest of the world. The fragmented structure of 10,000 deposit institutions and multiple regulatory agencies make the U.S. banking system 20 years behind the rest of the world. Treasury Prime has invented a hack that will connect banks and the new market of up-and-coming fintech companies. We have built a single product that can run both a bank and a fintech and allows us to move U.S. banks into the modern era.
This is very similar to the product we created at Silicon Valley Bank and the product that we sold to other banks when we were at Standard Treasury. A bank is full of manual systems and our vision is to wrap the entire bank in a programmatic API, so it becomes a programmable entity. Then we just hand the APIs directly to the fintechs, allowing them to do anything the bank can do in a safe way, facilitating payments, ACH and wire transfers, card transactions, and more.
Tip #1: Focus on one problem
The smart startup will try to focus on one specific problem. If you tackle one problem, you might be able to do it well. If you try to take on three problems at once, you would probably do all of them badly. So we decided to focus on the deposit side of the banking business rather than the credit side because it seemed like a wider open market. You couldn't find automated account openings when we started. And even now, it's still kind of rare to find automated commercial account openings because it’s a bit more complicated with lots of signers and beneficial owners.
Tip #2: Find something that people actually want
Do you personally understand your client base? You want to learn everything you can about them. Find one thing they need and build that for them and put it in their hands and have them use it, and make sure they actually want it. Don't make something that seems cool to you; it has to be cool to them too. Often, you as the entrepreneur are way ahead of your users. You have to take them on a journey with you, you can’t just get mad at them for not showing up. You have to go where they are. For us, we initially opened commercial accounts for a bank even though that was not the main type of business we wanted; we had a much bigger vision. But that was the thing our first client wanted right then and so we did it.
Tip #3: You don’t have to be an expert right off
If you look at a massively successful company like Airbnb, the founders actually had very limited experience running rental properties. They knew none of that, and in fact they just moved to San Francisco and didn’t have jobs. They noticed that all the hotel rooms in the city were sold out for a local conference, so they bought some air beds and put up a website offering visitors a place to sleep. That was their experience; that was it. The key is they understood the need. So just experiment. Gain expertise by doing.
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Tip #4: Don’t automate too quickly
A mistake entrepreneurs often make is they try to automate too quickly. They’re trying to make sure their margins are good too quickly instead of learning about their customers by being hands-on. Back to the Airbnb example: on the early listings the founders went out and took pictures of the rooms themselves, wrote the copy and placed it on the website. And they personally went above and beyond to make sure those first customers were happy. By doing that, they got some initial traction, but more importantly, they learned what the customers wanted because they were in close contact with them. The fact that you have to handhold initial customers is okay, and doing these things which aren't scalable is actually a good idea in the beginning, so that you can identify what the real problems are and address them.
Tip #5: Listen to the partners
Being in YC can be stressful and every week you have to report progress. The competition is intense. There's always one person in the group who’s like, “Yeah, I doubled the size of my business this week.” And you’re thinking, oh man, we’re the worst company in the whole batch, which everyone feels sometimes.
My advice is to talk to the partners, the more the better. YC really forces you to do lots of iterations quickly. Then test the next thing based on what you learned to keep growing. This is where the partners can be helpful, because they've been through this so many times and they'll give you sound advice. A common YC saying is that in batch, people ignore about half of what the YC partners say. And a year later, they wish they had done it all.
The first version is just the first version. Keep iterating on that until it's the best version. It's an experiment. Don’t quit, keep going, keep getting better. Eventually, you'll get somewhere.
Demo Day: The clincher
The funny thing about Demo Day is that there are almost no demos. The thing about Demo Day is not to tell anyone what your product does; It's not to make them understand at a deep level what you do. The point of demo day is to get an investor who might want to give you money interested enough to talk to you again.
Our pitch was basically—We have a product for doing banking APIs in the U.S. Look at this giant market. There's no competition. We're experts in the field. We have one customer live right now and we're actually working. Mic drop.
I wanted to be able to say on Demo Day that we were live in production with our first client. So that was very hard because banks are slow. It was a crazy idea because we didn't get any sleep for three or four days before the product launch on Demo Day. But then I was able to say with a straight face on stage, we're live right now, we’re legit.
It’s a proof point. The best Demo Day pitches are always the same. They’re able to show steady growth. They say, “Look, we're growing a few percent every week.” You add that up. I mean, it's already grown by 10x this year. Yeah, those are the best ones.
To learn more about how Treasury Prime can help your bank or fintech grow through collaboration, get in touch with our team.