Competition, Intensity & Building a $115 Billion Global Bank | Nik Storonsky, Revolut

good effects rates and then at later stage i expanded into other products into credit wealth and trading crypto or business accounts we also build a lot of non-financial services business Zalt now, we are a large digital bank providing all the services the banks provide, plus providing a lot of services on top of it. For example, you can book stays with us, you can buy eSIMs and so on. And then the idea is to build a large global bank, which is number one in at least 100 countries. That's what we are trying to do now. So right now we're live in 30, probably 38 countries. In majority of them, we have banking licenses.

And then we are slowly expanding 10, 15 new markets every, I would say, one to two years. Okay, so this goes back to, again, we just hit on how this company started. You're super competitive. You say these like little lines, right, that you just drop there. But you're just like, oh, I want to build the number one bank in 100 different countries. Yeah. You understand that's a wild thing to say and an ambition. And I don't think you say it casually, like, oh, yeah, I just want to be 100, you know, top number one in 100 countries. Like, you actually mean it. So, like, go into, like, how this, like, what is your inner monologue in terms of, like, competition and how you view, like, this game that you're playing?

Yeah, basically, mentally for me, if I chose to do this game, right, and as I said before, I need to be in number one initiative. And right now, there is a huge opportunity in the world where we have many countries, and then in each country, we have 10, 20, 30, 40, 50 banks. They're all very fragmented. Basically, there is a unique chance in the world to build a global bank, which provides much better services and products at a much better price in every single country. And then effectively to optimize, to compete with these banks, to drive prices on their products down, to improve customer experience, to save customers' time as well.

because you don't need all these physical branches for banks and so on. But you're going to say more about this ambition or this competitive drive that you have. So how does it manifest in your life every day? Do you wake up with just a burning desire to achieve mission success? Are you looking at yourself in the mirror and just like, I'm not doing enough? What is happening? I'm interested in you, the entrepreneur, and then we'll talk about the business, but this is the fascinating part for me. Well, basically, it's a banking business and the way I view it, okay, if I've chosen to be in this business, I need to be number one and obviously there are tens of thousands of banks in the world and what it means to be number one okay it needs to be number one in country one two three four and so on let's say it's a hundred And then in terms of competition, how I look at competition, I mean, to be honest, I don't really look at competition, I look at kind of myself, right, and then what would I do to beat up myself, right, to out-compete, to out-smart somehow, and the philosophy is very simple.

So every day you need to be like almost 100% every day. And then even if you lose to competition, then you cannot really blame yourself because, okay, every day you're at 100%, right? So I think, you know, that's the mentality that will help you win most likely. I love this. Have you spent any time with Toby Luque, the founder of Shopify? No, not yet. Okay, so he was on the show. I'm actually recording with him in like another like two weeks. But he says he likes to take the view that he's a corporate raider, that somebody now has bought Shopify, it's him, and he's like, what the hell was the previous management doing?

How would I essentially improve every single element of what this previous management was, even though it also is him? So you said basically the same thing. It's like, well, okay, you can't really control what your competitors do. I control what I do. Let me analyze how I'm doing, and then how would I beat me from the outside? Yeah, let's probably get this a little bit. Why do you think you have this opportunity to be number one? What do you see that you're doing wrong that you think that you can do better? A lot of them, they're not founders. That's number one, right? So they're there only for three, four years at best.

They just collect their bonuses and the search, right? And then they might, you know, optimize certain operating metrics. But, I mean, they are not really 10x people, right? So they are, I mean, they're just there for their bonuses, effectively, for three, four years. As a result, they don't really do bold decisions. They always play in defense. they never play in the fence. I have a different style, right? So, yes, of course, I play defense as well, but I always think, okay, what I can do more, right? Which industry I can go, like, which product can I launch and so on. So it's like, you know, always pushing myself, pushing myself to do more. Why do you think it's important that you're competing against non-founders?

I mean, it's much easier to compete not against founders, right? If I would be competing with all the banks and they were all founder-led as a road, we would all have, you know, much better products but no, that's not what's happening, right? Say more about the difference in your perspective between a founder and a professional CEO. Well, professional CEOs, ultimately, their goal is not to improve organization, right? Their ultimate goal is to... protect their job so they with definition uh they make some optimal decisions for for the company because they they think about themselves and they think about the companies as two entities right i think about myself and as a company as a one entity right like i do everything what is good for the company and i never kind of try to diverge myself what is good for me uh this should be different to what is good for the company for me it's the same so i have like 100 alignment with the company yeah i heard you say something like your entire life is work it's like 99.5 of your time is dedicated to your built to building your business correct yeah yeah yeah also what we when we speak with regulators they're all kind of yeah but you know growth or it's not a good mentality and so on and the mindset is very simple uh every time when

you think as a regulator that i'm excessive risk taker it's completely wrong right because I'm the only one motivated for this company to succeed and to survive, right? And that means I'm actually not going to take stupid excessive risk compared to professional CEOs or professional boards. Because there's no separation. This is what I hate when I was like, oh, it's just business. It's not personal. It's like no such thing with founders. Yeah, yeah. So this is another thing that surprised when I started reading about you was originally you set out to like not be regulated. And there was something about you saying this is like the worst mistake you ever made.

Can you talk about what happened and how you learned this lesson? Yeah, basically, when we got several million customers and then we applied for a banking license, the entity with zero customers is less risky compared to an entity with millions of customers. And then in the regulator eyes, they become much more risk-averse to you, right? Because for them, it's much easier to give a license to a company with zero customers because maybe they will have zero customers in three, four, five years' time, right? If you give a banking license to a company with five, 10 million customers and something goes wrong, right, then my regulator will be to be blamed.

Why were you not regulated before? What was the state of the business when you applied for the banking license? What were you doing before? Well, we simply got e-money license, payment licenses. So we went for much lighter licenses, yes. Okay. Yeah. And then the idea was a banking license back then was three, four years to get. while e-money lies you can get within one year. So obviously, as a founder, you want to do things faster. So that's why we... We went for e-money license, then we got a lot of customers, and then we moved to banking license, and then it became almost impossible because we were very, very large.

I think in the history of the UK, it never happened before that a company with 7 or 8 million customers in the UK applied for banking license. So was that a difficult process? Like, what happened? It took us almost five years to get a banking license in the UK, yeah. Okay, so what would you do differently before? You would have tried it, like, what you, I think the way you put it is, like, regulation, it's not a moat, that's not the right word to, but it's like, there's a huge benefit to actually getting yourself regulated. Is this correct? Is this the way you thought about it? It's like, there are pros and cons.

Nik StoronskyTo build a large business, it's a must, right? Because if you want to really compete with banks, you need to get trust from customers.

They need to put salaries in. They need to put a lot of their wealth in their accounts. They need to start trading stocks with your ETFs and so on. So they need to trust you. And then in their minds, I mean, they trust banks. What do you think the American fintech companies are doing wrong about this? To build a very large business, to capture large market share, it's just unavoidable. So I think in the U.S., a lot of companies started like Chime, CashShop. It was simple before, 10, 12 years ago. So they all never went for a banking license. I think it's a big mistake. So they could never become a large business.

Explain why they can't become a large business without it, though. Just because they are not a bank, right? They can target certain niche audience, certain cohorts of customers, I don't know, low income and so on. But they can never go to prime audience, right? And they can never become a prime bank account without a banking license. But why do you think that relegates them to being a small company? Well, just because, yes, early adopters, 1-2% of the population will try them. Maybe it will go from early adopters to their friends' family, another like 90%. So 4% of the population when you want 40, 50, 60, 70%.

For example, in Ireland, we have 80% micropenetration. In Ireland? Yes, 4 out of 5 adults use Revolut accounts. Okay, how did that happen? Slowly, I think a combination of lack of competition, very bad banks. They have only four banks, which are bad, plus a very small country with a lot of people living outside of Ireland as well. So I think altogether, it led to us being 80% of the market. market. If you look at other markets, for example, in the UK, we're about 20% penetration. France is 20% Spain. Certain markets are 30, 40% penetration. So it is possible to go to 60, 70, 80 as Ireland shows, but for it, you need to be a banker. So I'm very curious, like when you're going into a new market and you said there's just bad banks, just like low competition here, like what are you seeing that they're doing wrong? Well, they're stuck in limbo of professional management who are extremely risk-averse. As a result, there is zero lack of or zero intention to innovate. And then all the resources are spent on protecting what they have already, right?

So, for example, you can have a very old legacy third-party core banking system. Obviously, you need to change it to your own or to some new provider, but then banking management will never do it because it introduces risk, right? Because you need to migrate customers, you know, something might go wrong and they never take a risk, right? So that's the problem. Plus on top of feet, because a lot of them, they are not technical, so they don't really understand how to do a lot of technical things. As a result for them, our default choice is to not do anything for regulators and for legacy banks because doing anything is risky in an industry where you lack certain skills, so certain technical skills.

And banking is not only about regulation, it's also about building tech. And I think all these people are very bad at building tech. I want to tell you about the presenting sponsor of this podcast, Ramp. I have been reading a lot about SpaceX lately. SpaceX is one of the most valuable businesses in the world And one of the main themes in the history of SpaceX is constantly attacking and questioning your costs. Ramp helps many of the most innovative businesses in the world do exactly that. The median company running on Ramp cuts their expenses by 5%. And one thing SpaceX has demonstrated is that a religious dedication to controlling costs can help actually increase revenue because you can pursue opportunities you couldn't otherwise.

And we see that in the Ramp data too. the median company running on Ramp also grows their revenue by 16%. So when you're running your business on Ramp and your competitors are not, you have a massive competitive advantage that compounds over time. Ramp is the only platform. designed to make your finance team faster and happier. Many of the top founders and CEOs I know run their business on Ramp. I run my business on Ramp and you should too. Go to Ramp.com to learn how they can help your business save time, save money, and grow revenue. That is Ramp.com. Deal is how the best founders turn the world into their talent pool.

I've been studying how history's greatest founders operate for a decade. And one thing they all have in common is they understand that recruiting and hiring, the very best talent is your most important priority. A players recognize other A players, which is why top companies like Ramp, Shopify, ElevenLabs, Uber, and DoorDash all use Deal. Many of the top founders I know have personally invested in Deal after using their product. And what they discovered is that Deal is the best company in the world at building infrastructure for global hiring. Deal will help your business hire, pay, and manage any worker anywhere in the world so you can retain the best talent anywhere and spend the rest of your time focusing on what you do best, delivering value to your customers.

The founder of ElevenLabs has a great description of the value Deal can give your company. He said, we built ElevenLabs to break down language and communication barriers. With Deal enabling us to hire and support exceptional talent anywhere, we can accelerate our innovation and bring more voices, stories, and ideas to every corner of the world. Deal is trusted by over 40,000 companies and growing fast. Learn how they can help your business by going to deal.com forward slash Senra. That is deal.com forward slash Senra. So one of your advantages, as you see it, is you're competing against non-founders, you're competing against professional CEOs, and these professional CEOs are not technical.

So they actually can't invent technology, so therefore they cannot innovate. And that's what you're attacking. Yeah, exactly. They just don't even think about building products, right? Because they just don't feel it. They don't use it. They don't know how to do it. They're just professional managers. I think it's very important to build a successful business. You need to obviously be a great manager, like a very tough manager, be very in details, and be a very good product person as well. To know how to build and turn the product, tech regulation, compliance, people all together. It's like a machine, right?

So there are inputs, and then the whole machine should produce your right output, which is an amazing product that people use. Okay, explain how you're building this machine. I mean, you need to visualize in your head kind of, you know, what are the inputs in this machine and what you want to achieve, what are the goals, right? And then... Inputs is obviously your organization, your structure, your people, how you build product, what you want to build. Then you effectively observe the whole structure working, the whole product being built, and you always interfere if something goes wrong. And then you kind of change certain parts of the machine.

For example, when we started, it was a very small team, 10, 20, 30 people. We hit the bottleneck when kind of team grow, but then speed slow down. machine stopped working so what i did i i just ensured that we have you know a lot of very small independent team who just work on the same platform right and then speed increased because people people work was paralyzed so they work on different products different features using the same tools and they were all independent but then again we hit bottleneck with regulation compliance again i build another muscle in the machine which is reg affairs government affairs department and so on. So they had to produce certain outcomes. And we hit again a bottleneck with hiring fast enough good people. Again, we build a lot of process for recruitment, targeting the best people, and so on. So it kind of moves in circles, right? You build something, then you hit the bottleneck, right? You identify the problem, you solve the problem, you go again.

And so now you're adding another, essentially, like skill to this machine that is your company. You were, before you started Revolut, you were doing, you were a trader, right? Yeah. I heard about what you just described before, where it's like you have a, I don't even know if you call them bets. Like you'll have like 20 different ideas or like small teams working on 20 different ideas, right, at the time. Explain how these teams are structured and like how your previous career as a trader influenced the way you're building and managing your company. I think what was useful as a trader was risk management and then like quantifying everything.

because unfortunately in banks or in other organizations a lot of things are evaluated based on their people's intuition which in a lot of cases is simply wrong. So in order to evaluate correctly what is done and what is not done you need to have a metrics, you need to have KPIs. Wait, are you saying dumb or done? Done, done. Okay. Well, Grady said dumb. Dumb as well, yeah. metrics and KPIs that actually kills politics within an organization because look, everything is transparent, right? You as a Individual contributor, user manager, do you achieve your metrics? Do you achieve your goal, right?

Why you haven't achieved it? So it doesn't matter what you say. I mean, there are objective numbers. I think it's extremely important to have as a part of the machine. When I worked in the bank, they didn't really have it. So they had the professional CEO, and they had a lot of politics within an organization. And I think it's just simply wrong how people run general businesses. Okay, so explain setting these little bets up. I mean, to be honest, it's pretty simple because we were always high-velocity for the company when we released a lot of features, a lot of products. And then at a certain point of time, I decided to install a discipline in building bets because we were building a lot of things, but we were not really tracking how they were performing.

So we simply build a staging process when first there is a decision to produce a bet. It can be bottom-up or top-down. Then there is a discussion, call it committee, whether it makes sense to produce the bet. And then if a decision is made, we fund the bet. So we separate a team of up to 10 people, front-end developers, back-end developers, designer, product owner, sometimes data scientist, operational manager. And then they build a new product within 9 to 18 months. And then when they launch the product, we simply look at growth of the product in terms of gross profit. And because we've done it for the last 10 years, we already have launched, say, 50 bets.

And then we know that our top 10 bets, they grow, say, 10%, 20% month on month, and they produce 1 million GP, 2 million GP, 3 million GP each month consecutively.

Nik StoronskyThen if we release a bet and then we see that this bet is historically in cohort of the bottom 25% of all the bets, we simply sunset it.

So we instill discipline when we're not really running businesses which are not growing very fast. And then bets which are growing very fast, we're actually doubling down, right? So we give them more teams. One team becomes second team, three teams, four teams, five teams. Then it becomes department. Then it becomes a major opinion alliance. So I think this process is just, you know, very disciplined to always filter out things that don't work out. Even myself, I kind of, you know, I don't really trust my intuition in terms of which products to build, which probably is not to build, because historically I was wrong so many times.

And I think only approach which like completely algorithmic, right? Top bets you've continued to find, bottom bets you just cut, like within 18 months. This is the trader in you. Exactly. There's a lot of what you're saying reminds me of Bezos, and the way he describes this, all these, like, obviously, these disparate bets that he would place inside of Amazon when he was obviously building the company, and he has a great line where he's like, you need to pour gasoline on the promising sparks. So your whole thing is, I'm going to cut the bottom, but then the top performing, do you have a percentage?

Is it 10% top? It's usually up to 25% for all of Bezos. Okay, and then you're just, now we know. You just scale it up. Okay, and you're dedicating a lot more money and resources. Why is it important at the very beginning, before it's unproven, to cap the team size at 10? It's not necessarily 10. It can be a bit more. It just depends on how complex the product is. But generally, it should not be more than 10 people. As a rule of thumb, you need probably two, three back-end developers. In our case, because we also produce mobile apps, you need to have two to four front-end developers, So three to four backend developers, one product owner, one designer, that gives you 10 people.

Is the way you're structuring these teams changing because of AI now? Yes, that's actually a thing now that I'm kind of trying to change because last 10 years, I think I optimized a lot how you direct people, how you build organization around people, around their strengths and weaknesses, like avoiding politics, putting KPIs and so on. That's actually avoiding people's weaknesses, right, with AI. Instruction needs to be a result, to be honest with you. I think the team, we should not be 10 people anymore. It should be two people, three people at best, because one developer can do front-end, back-end, can even do data science as well.

So it should be a result. Can you give me a download of your thoughts about how AI is changing the way that you're running your company? Well, many things, and I think we're just in the beginning.

Nik StoronskySo we automated customer support, so 90% of all customer support team is automated now.

We're doing the same. Before it used to be 5,000 people plus, now it's much less. Obviously, engineering is automated as well. We increased speed of engineers by 30%. Translation, cross-selling as well done by LLMs now, a lot of things. But I think the ultimate goal is, or at least a bet for us now, is to be able to build a full-stack AI employee. I think it's completely doable with current technology. Not like a chat tool or another interface where you tell what to do and then it produces something. No, it's more like AI employee, which can join calls with you, which have email, which have Slack account, which have access to all internal back office system and can do work.

So I think that's kind of the ultimate goal. I mean, sooner or later, a majority of companies will come to. Yeah, you keep mentioning over and over again, like, I don't know if you use the word bureaucracy. I don't think you did, but you hate politics. You want to minimize that. you want like data you're much more like just i don't care what you say it's like did we hit the numbers or not and is this growing or not what's your organizational structure you just have a shitload of direct reports like alexander wang was sitting in that chair like two weeks ago and he had some crazy shit like 200 direct reports yeah so like what's your how are you organized uh so i have about 50 51 52 um reality i'm not even speak well i speak with my dark reports but I always go deeper. I go down to individual contributor in important projects so I can speak directly with designer, with product owner, with developer.

Philosophy is very simple. Whenever you hire smart, self-guided people, you don't really need to manage them. You just need to show them direction and then ensure that they're all synchronized. It's like an army. You need to ensure that all people are using the same standardized equipment. That's what you need in the company as well. You do not need every single team or department to reinvent their own bicycles or their own weapons. Now, it has to be the same standard approach. And then if someone invents some additional kind of tool or additional instrument, which allows us to move even faster, then we need to standardize it across all the teams and departments. And that's what I do very well. I'm very good at supporting our innovation in one team or one department and then actually spreading it across the whole company.

Can you give me an example of you spotting an innovation and spreading it through the other departments? For example, recently it was for design we always used Figma. Right now I supported that one team is actually producing designs much faster using LLMs and then instead of actually designing in a certain interface they simply uploaded our design system on the code level to LLM and then they prompt to produce certain flows based on our design system. As a result, the whole design And it's not really a frame in Figma, but it's like a live interface on your laptop or on your simulator. So you can click through things, it reacts and so on.

But the most important thing, you can do it three, four times faster compared to doing frames in Figma or screens in Figma. And then I'm pushing the whole system to all designers now. Have you spent any time reading about entrepreneurs from the past at all? Yeah, of course. Like anybody stick out that you admire or you studied? Yeah, of course. I read books about Henry Ford. I'm glad you said Henry Ford. You're sitting there talking about like you're building a machine. You're like observing these innovations in all different parts of your machine. And I need to make sure that it's spread throughout this entire machine.

That's like Henry Ford, Andrew Carnegie. He would travel around the world. Now we obviously technology can proliferate. You know, somebody could tell you about it. You see it online or whatever. He'd have to like physically go and travel to the factories because they're building physical stuff. I'm like, oh, wait, this idea in Britain, I'm going to take back to America. And that's the way Carnegie, Ford did this too, but Carnegie specifically sounds exactly like you, where he's just like, I don't care if it's a 5% improvement in 1% of our business. Like, if there's a better way to do it, we are going to do that.

And he was moving against usually older competitors that would not invest in technology. And in fact, when they found out that he was spending so much resources on it, They thought he was fucking crazy and actually gave him, because he ran that company for 30 years, it actually gave him this compounding advantage that by the time, like his competitors could never catch up. He was like so far ahead. But it's like you were thinking very similar to Carnegie in what you were just describing. I think it's super important. It's just building a machine which moves fast and which achieves the goals. And then if you support innovation in certain parts of the machine, you need to spread it as fast as possible.

Yeah, and so this idea that you kind of hate managers that just pass along what to do, correct? You've eliminated them from your company? Yeah, exactly. I've seen so many by now, the last 10 years. Just simply what they do, they take information from their individual contributors and then they pass it to stakeholders, right? I mean, it's like, what's a value add, right? Did you change direction of the team? No? I mean, they know what they're doing. Okay. Did you bring any innovation? Did you identify the easiest way to achieve the roadmap, right? No, not really. But I mean, what's your job? Like, you know, just, you know, taking numbers from them, passing them to myself. I just don't get it.

You prune your team. is what I've heard, and you're searching for, I think, what you call self-guided missiles? Self-guided people, yeah. It's almost like a founder and employee forum is what you're going after. I always joke that, you know, self-guided people are self-guided missiles, right? So you've got brilliant people. You don't even need to tell them what the goal is. They self-identify the goal, and then they self-reach it, right? So they're like self-guided missiles, which also identify the goals. then people who are good but not excellent you need to tell them the goal and then there without any kind of iteration they they will reach the goal average people you tell them the goal and then you need to spend weekly iterations with them to direct them to tell them what to do and then they will reach the goal right so you spend management time that's what i i don't want and then below average people okay you you gave them the goal uh you spend time on them and then most likely they will not hit the goal, right? So that's the problem. So in order for you to have

Nik Storonskyas many direct reports as possible, you just need to minimize management time spent on each of them.

Let's just assume you've gotten rid of all your below average people anyways. How do you identify the average people and then do you just fire them as well? I do, yes. Like a lot of people I know who are very good executives, they struggle with this. Why do you think they struggle? I think it's just, you know, they much more care about being empathetical to other people rather than caring about winning. So I think if you're much more weighted in terms of winning, right, your empathy to other people is second place and then you will do right decisions even if they are tough decisions. And then people who are kind of more empathetic and less attached to being a winner, then they might prioritize being number two or number three or number four rather than prioritize getting better people in their team.

Have you heard how Elon speaks about this? No. So he would tell the people managing the engineering team, he's like, if your engineers like you, you're not doing the right job. And his whole thing was exactly that. He's just like, we're here to win. We're here to achieve the goal. and then how people feel is like completely secondary to that. Yeah, exactly. That's more how you think. I think it's very important, whatever you hire an executive or you observe executives, like people who are very likable by their direct reports, they might not be the right people. I think the best... Executives, they're very tough, right?

Well, they might be likable, right? But then likable is never the goal for the executives. The goal is always to achieve the goal, right? With the minimum number of resources spent. So they're the best. Say more about this, because I've heard this, like, you like small, you like large outcomes that come from small inputs. You just said something like that just now. Like, achieve the goal with the minimum amount of resources. Yeah. So it's almost like an art to, like, I know you don't think of yourself as an artist, for sure. But, like, there is, like, an art. You're trying to, like, it's not just you want to win.

You also want to win, like, the right way. Where it's, like, you could win and you just expended way more resources than somebody else. But it's like, no, I want to try to find the minimum input possible for the largest outcome. Yeah, exactly. If you think what founders do, what entrepreneurs do, what are, like, great executives do, okay, they have the goal. They need to reach end to end. So what it means, okay, they need to identify direction, where to go. And then they need to build something within this direction with a minimal number of resources spent. Do you see a lot of waste in the American entrepreneurial ecosystem, though?

I think there is too much money, right? A lot of founders, they think money is free, which is probably almost free in California because you can raise so much money at ridiculous valuations and then just spend. So I think there is a definite culture of trying to solve problems with money rather than with your brains. Explain to younger entrepreneurs that are going down that path why that's not the right move. Well, for example, you're into B2B business, right? And then you kind of, you know, set up a company. You have your first sales, first, say, 1 million ARR. And then you decide to scale it.

and then suddenly decide to hire an expensive VP of sales who will hire like 50 salespeople to sell your product.

Nik StoronskyYou need to find a way to start selling a product cheaply, build the system, and then simply feed additional employees into the system so you always have great payback.

Starting big, hiring a very expensive VP of sales who will hire also a very expensive team is wrong decision. Okay, so essentially, like, they remove the constraint from money. Therefore, they're not developing the skill set that constraints make you. If you're going to survive under the constraints, you actually have to be good. You actually have to be talent. You actually have to be resourceful. And they're essentially papering that with money. And it might work for the short term, but long term, they're going to get beaten by somebody like you. I mean, if we are in the same... I mean, in many cases in the U.S., it's not that competitive, right?

Wait, that's a wild statement. Why would you say in the U.S. it's not that competitive? I feel other people would feel it's the most competitive environment. What do you see as a European? I mean, Europe is even less competitive. Yeah, so you're saying it's not China? China is competitive, yeah. So China is 9.6, right? And then even if you are good in Europe or even if you are good in the U.S., I mean, how can you out-compete the people who work 9 to 9, 6 days a week, right? Plus, they have a very good education, technical education, so it's very hard. When I started, I started in the co-working space with 140 companies.

Within five years' time, only three companies survived. They all worked on the weekends. Within 10 years, only two companies survived out of 140. So I think working on weekends is a must if you want to survive, purely statistically. Okay, so working seven days a week is one thing, but working 9 to 9 or 10 to 10, and what is the actual culture? Well, I work like Lash, right? You're the founder. I don't know a single founder that's like, no, I'm on PTO. I understand that. I'm talking about your... Yeah, my direct reports, absolute majority of them, they work like Lash, right? They might be a bit less alignment for direct reports of my direct reports.

But still, I think out of all European companies, we're probably one of the hardest working. and I think we are also one of the hardest working companies if you include us as well. I want to know what you think the entrepreneurs that have this California tech culture and operating system what do you think they're doing wrong? You said there's just too much money they're not that competitive Everything else seems there there is an ecosystem talent is very good, you go to great universities plus Like a lot of expats coming to study in these universities, people are rather hardworking. The culture when there's too much money and then people choose to spend a lot of money on the problems, I think it's wrong culture.

Because they're not actually solving the problem, the underlying problem? I think it's just a lot of waste, number one, and then you're not really developing yourself as an entrepreneur. It's so easy to close the problem with the money. If you have unlimited number or unlimited amount of money, I mean, you just, you know, throw money here, here, here, but then you're not prepared for the future. For some reason, money can disappear. That's a very interesting take. You're not developing yourself as an entrepreneur. Yeah. Give me examples of how you developed yourself. Well, what we started, if you look at the unit economics of the business, we started with a negative gross margin.

And the negative gross margin continued for the next three, four, five years until we optimized it to up to 80% of positive gross margin. And then if you look at why is that, right? So in our business, if you look at Europe, everything is extremely kept and regulated compared to US. For example, interchanges, 20 base points versus 100% in US, credit card rates are kept in majority of countries. Credit is very limited, right? You cannot really freely give credit to many people. It's very difficult to effectively set up a bank in Europe, going country by country. Because even if you have a bank alliance in Europe, you cannot be a primary bank because Because with regulation, it doesn't allow you to start issuing local accounts unless you stop a local branch of the bank.

You have that physical location. I mean, you need to have an office, you need to have local connectivity, local regulation, and so on. So you go country by country, and it takes a lot of time, a lot of resources as well. So different languages as well. And you had to do all of this? Yes, plus very tough employment laws in many countries. In the U.S. it's very easy, right? I mean, it's like employment as well. in Europe it's not like that so you need to be very careful how you hire who you hire so all this together is actually a produced environment which is not very profitable and very difficult to build a company then even in that environment we kind of succeeded we succeeded because we spend a lot of time and a lot of energy and a lot of brain power to optimize on every single problem if I would start the same business in Brazil or like in the US or maybe in other countries, in Mexico, certain aspects would be much easier.

If you look at unit economics, credit is so much easier to give. Interchange is not kept. Technically, this difficult environment in Europe actually taught us how to build business in a very competitive landscape. You see what I mean? Okay, so if you were surviving in this very difficult environment, now you have a skill set that people that did not have to go through that, and now you have to compete head-to-head with them I mean, let's say, like America, they're going to be very hard to compete with. You're going to be very hard to compete with because they haven't developed the same skill sets and they didn't go to the other side.

I did. Okay, that makes perfect sense. I found one of my all-time favorite quotes when I was reading the book Zero to One. The quote says, The single most powerful pattern I have noticed is that successful people find value in unexpected places. And they do this by thinking about business from first principles instead of formulas. That is exactly what AppLovin has done with their advertising platform. AppLovin connects you with over a billion potential new customers in mobile games. AppLovin allows you to capture undivided attention. AppLovin ads are full screen videos that are watched for an average of 35 seconds.

That is retention that blows other ad platforms out of the water. And you can launch on AppLovin in minutes. You set the goal and AppLovin achieves it. No complex setup, no expertise needed. And AppLovin scales quickly. They can put your ads in front of over a billion potential customers. Other businesses have seen immediate results, scale to hundreds of thousands of dollars of spend per day, and increase their revenue by millions. so you want to get started quickly before all of your competitors are on applovin and you can do that by going to applovin.com that's applovin.com you've said some very interesting things about investors that i want to talk to you about because it's really important this show the whole idea was just like i think entrepreneurs are the most important people in the world the idea that you know somebody has an idea and it doesn't exist and they they through do determination agency, you know, aggression, like they make something that didn't exist that started in their mind real.

And in your case, you have, you know, you're in 40 countries or whatever the case is, thousands of employees, how many customers, tens of millions, like from an idea that you had, you know, when you were what, in your late 20s? Digital on ALT. Yeah, it's absolutely incredible. I think that's a miracle to me. And yet a lot of the discussion that takes place that what founders say about investors in private, they do not say in public. And so, we were talking earlier, because I saw this clip of you, where you compared investors to football cheerleaders. Yeah. Can you explain why you made that comparison?

Well, basically, I gave this history before. So, when I saw the company was 12, 13 years ago. Back then, in Europe and in the UK, it was an extremely difficult environment to raise money. Simply, there were not that many VCs around, and then they were all more like private active guys, like extremely aggressive, extremely legalistic. So to raise money, you had to sign a lot of bad conditions. You know, shareholder agreement, liquidation preferences, board seats, or like, you know, reducing your voting rights as a founder and so on. So these people basically think that because of them, the company was kind of created because they gave money and that they are entitled to Lash part of its success.

So that's the mentality of like, you know, There are quite a few investors that invested very early on, like in my company, for example. I think it's kind of leisurely wrong, this mentality, because getting money from LPs is extremely easy. Wait, getting money, you said? Getting money from, because their business is very simple, right? Okay, they have LPs, they collect money from them, and then they invest in startups. And then they have a business model of 220, right? So it's so much easier compared to building a real operational business from scratch because there never is with their own money, right?

They don't really need to work hard. I mean, there is competition, but competition is just, you know, for getting deals. So I think their job is so much easier. That's number one. And then number two is back then there was, you know, almost no competition compared to what it is now in VC circles. and back then there was basically this opinion that we as a VC will help you run the company, the company will be successful because we'll give you advice, you know, how to run the company. Reality, like almost none of them, they ever build any company, right? So they just raise money from LPs, so they invested their money in many companies and sometimes they have both seats, sometimes they don't, but having a both seat doesn't teach you how to run a company at all, right?

You're just an observer. As a result, you have all these people with a lot of power, right? Because they give you money, they put certain conditions in shareholder agreement. And then they also have this mentality that they can't tell you what to do as a founder, right? And that's, in my experience, was very dangerous. And I had many cases in the past when certain VCs, I mean, the advice was simply wrong for the company. So I think, you know, my advice to entrepreneurs also would be, even if you raise money from VCs, try to pay a lot of attention to sharehold agreement, right? And then to ensure that they're purely financial.

Nik StoronskyThe players that have no right, no voting right, no seat at the table at decision making, super important.

Because if something goes wrong, right, you effectively have cheerleaders, you know, who look at the match. And then they try to play this match, you know, instead of professional players. And that's, you know, always a disaster. Why did you say some of the advice they gave you was dangerous? i mean one of the advices was okay you know what you need to hire experienced executive you know what now it doesn't work uh when i started first five years had probably 50 plus experienced executives or i kept only two right within one year it just doesn't work why is that why experienced executives you know almost never works or work out it's the same as football players right they have their prime like reality i mean there is a prime age and like it doesn't mean they became less good i think they they changed their priorities right plus probably became less good plus things changed times changed competition changed so people who were good before or had you know past track record of being good before they might not be good in your company for the future is number one. It's extremely naive to think so. And then number two, there is also a negative selection bias, right? If you think of people who are extremely good, like for example, how I hire

people, I look at their track record of achievement and then they need to be top 1% compared to their peers in terms of their career progression. And then I try to pick up them when they're 25, 30 years old. So they continue on the same trajectory in Revolut. Whenever you're hiring experienced executive are relative there is a negative selection bias because people who are extremely good they already made it right uh i don't know they either probably running their own businesses or they're retired or something else and then people who never have this extreme career progression who you hire as experienced executive uh they just say no by definition that's good compared to people with extremely fast career progression who are already not in the market okay so you found basically the advice they gave you to be completely the opposite of what you should have been doing based on what you just said yeah exactly yeah and then our yeah a lot of advice when you know they think that certain people in the company are good because they experienced well i think completely opposite and then uh one of them he's actually quite quite a good The investor, he was forcing me to fire my best person because he was too hot-core.

So a lot of these things... Who do they think wins? Yeah. This guy needs to work nine to five, okay. So how did this... like tell me more about this. Like you obviously fought back, the guy didn't get fired. What happened? I mean, of course, I didn't fire him. I said no, that's it. Okay, but that's it, and the guy... You take it or leave it, yeah. I'm going to fire him. Did you have a fight with the investor? like what happened yeah yeah and so how'd you settle it you had all the power like what happened i fight it with him and then uh yeah even though they they they had a collision of you know many investors but you know they they step back okay so how did you get them to step back well i think you know pretty early on i realized that uh like quite quite a few or vcs uh they are not very operational and they can be dangerous for the company if they have enough power so every single investment route they just remove VCs so now I don't have any VCs on the board I think that's the best you always need to have operators rather than VCs on the board, people who actually build business who know how to do things Your mindset reminds me a lot about Travis Kalanick from Uber he was on the show and I think

one of the clips that got millions and millions of views was on this where he just actually He thinks that just doing no harm is an excessively high bar for a VC. He says something like over 90% of VCs, they can't even not fuck things up. He's like, not even be helpful. They just can't not fuck things up. And then he said like 1% in his experience have been actually helpful. And his thing, which he would tell entrepreneurs, I think he said on the show, is just like, tell them to give you the money and go away. That's how you think. I mean, Elizabeth, yes, ensuring shareholder agreements, they just don't have any powers.

Yeah, I will make you richer, you just leave me alone. It's basically. You also set up your own, I don't know if you call it a VC fund. Yes, it's a VC fund. What's it called, first of all? Quantum Light. Explain what you're doing. This is funny. I just picked up on this now because you were analyzing the legacy banks. You're like, I'm not. Look at all the obvious mistakes they're doing. Some of that came to experience, very hard-fought experience. The way they're doing it doesn't make sense. I'm going to show you a different way to do it. Yeah, basically the idea was in, I think it was 2022 or 2023 when I came up with this idea.

And the idea came actually from my personal pain, from my fight with the investor. It was actually one of their big names. They entered the investing revolution. It was, I think, just after COVID or during COVID, when all the stocks went up. They invested at $33 billion valuation. So basically, they had legal right not to allow us changes in shareholder agreement because they were like, you know, as an investor, blah, blah. So you had a bunch of these bad experiences with VCs. You're going to start your own VC fund. Explain how your fund is different. So basically I had this fight and then, you know, I was extremely pissed off and I thought, you know what, I also need to compete with VCs in their business because they're so bad.

And out of my frustration, I started the fund as well. And then the idea was basically to invest not based on the human judgment, but based on their science and based on their machine learning models. Statistical investment is number one. Number two, actually help with founders with operational advice, playbooks that we developed at Revolute, how to hire people, how to do performance management, how to do product expansions. And then finally, help them sell their product as well, because we are a large enterprise. We are buying from a lot of vendors and having us as a client helps to sell into other enterprises or potentially sell to our customers as well, our Revolute customers.

So I think overall, plus my personal advice, obviously. So I thought overall the package was so much better compared to purely financial players, VCs. You just said your personal advice as well. So like, are you just making concentrated bets? Is this like another thing where you're doing 20 or 50 at a time? Or are you just like concentrating money behind a handful? It's again, it's statistical investment, right? So it's based on machine learning models.

Nik StoronskySo the way it works, our model selects 30, 40 companies to invest over two, three years. and then puts equal amount of money in each startup.

So we started with a fund, a Series B fund. So it's closed, it's fully invested. It produced now like 56% IRA. And you started like $250 million or something, right? We started $250 million, yes, with the first fund. So now it's like 56% IRA. We started investing in second fund now, which is $500 million. So it's Series C now in companies. Again, based on the model, also very high return. I think it's top 5% of fans in the world. now in terms of returns we'll probably do a large fund as well for for leads where's the money coming from it's different lps so initially i started 20 was my own money so i put 20 of it or 25 of it and then the rest came from other founders second fund we already got quite a few institutional place as well i've never heard somebody building a bank compare themselves to like meta so i'm gonna get into that in one second but you don't do anything like half-assed or like small right It's just like, okay, I started at 250.

Now you're just gonna see how far you can take this. Is it gonna be like a giant, like renaissance technologies kind of thing? Well, obviously the goal is to build something large like BlackRock, but in private markets. Again, we'll see if we get there. But I think idea and approach makes sense because like you now have a lot of data on startups and then you can apply all these machine learning models to identify the best ones. And then model is pretty sophisticated. So, for example, one of their signals we'll look at, we'll look at who invested in the company, who is investing. And we'll look not only in the fund performance who invest in the company, but down to the partner level.

And we'll also look at the age of the partner. And there are very interesting things when you look at these variables as age of the partner. And then you'd rather not invest in companies where partners who are investing are older than 40 years old. So the best cohorts are 30 to 40 years old of young partners who are investing. They're the best at identifying good companies. Same as with executives as well. So there's a certain prime age, what you need to look at. Again, there are many variables, right? Age is not only one thing, right? But statistically speaking, that's what you need to look at.

And is this a separate company from Revolut? Yes, completely separate. Okay, so completely separate. And you have somebody else running it? Yeah. Okay. You said something about helping them sell their product as well. Talk about the early days of marketing. I heard you spent nothing on marketing for the first five or seven years. Yes, first seven years, it was completely organic. Plus, COVID also hit. And in 2021, I remember our company was six, seven years old. COVID hit and our revenues went down, I think, 70%. And back then, we were not in banking business, we were still kind of, you know. e-money with a travel card.

So it was very heavily related to or related with travel business. And then as COVID hit, travel business completely gone. So we had to survive or somehow we kind of optimized a lot during that time. Okay, but explain why you decided to start spending money in marketing. Because I go to Europe and it's like, I feel like I'm blanketed with your ads. I see your stuff everywhere. Now it makes perfect sense after talking to you. It's not like, oh, yeah, I'm going to do like a little bit here, a little bit there. It's just like once I find something works, I just, you know, essentially go scorched earth on it.

Yeah, basically the way I think about marketing. So I haven't done it for six years, seven years. I just didn't have time, plus we didn't have enough resources. But when I started doing it, I went really, really deep. So basically I started with who we need to hire to run a proper marketing machine. Not like here and there, but scientifically, right, where we need to invest money in marketing with a proper return. And then my idea was very simple. Who are the companies with the largest marketing spend and who are extremely cautious with their marketing spend? Where is, you know, very low margin of error?

And back then it was gaming companies, right? Gaming companies had a lot of marketing spend, performance ads, or certain companies were also doing a lot of above-the-line campaigns. Did gaming companies doing well or not? Gaming companies were the largest spending companies in the world. on marketing. So if you look at their budgets, it could easily be $1 billion plus on Google. And a lot of them are going to AppLovin. Yeah. AppLovin is going to print like $6 billion in profit this year. Yeah, it's like amazing. Yeah, yeah. So I ended up hiring an extremely good person who started running marketing at Revolut.

And then we also went... Before I let you go on, am I understanding you're studying how gaming companies are advertising, or you just wanted to know what they were spending? The idea was who are the best professionals who know how to spend money in marketing, right? And then the idea is that these professionals will work in gaming companies because they have the ledger's budgets. Got it. So that's how I got my first, well actually second, first one. I fired. He wasn't from gaming. Probably VC's cousin asked you to hire him or something. And anyway, we went very deep into performance marketing, LTVs, payback.

And then recently we also started doing, because we got the banking license, and then What we realized, or what I realized quite early on, is all about trust, right? If you're a digital banker, you don't have branches, people don't see you physically. They trust you less by definition compared to HSBC, Lloyd's, JPMorgan Chase, and so on. Then, okay, how you build trust, how you arbitrage, effectively, performance marketing spend. Because in performance marketing spend, you pay per impression. And then there are a lot of spaces in the physical world which you can buy, which will also produce impression, but at a much cheaper price compared to the digital world.

So, for example, we bought probably now 50% of all airports in Europe, right? Like in almost 50% of airports in Europe, we now have ads, right? Again, because of simple math. How many times a year people travel, right? How many times a year they're in the airport? How many impressions we produce? How much will it cost us? There is arbitrage to performance marketing. And then similar ideas to other places in the physical world. For example, we started now doing our equivalent of legacy branches, what we call a cult rev store, rev experience. So we set up our first shop in Barcelona. Again, arbitraging impressions in the physical world versus the digital world.

because how many people pass every year our shop? What is the shop though? I mean, it's more like Revolut experience. So it's not a real banking legacy branch. You come in and then you experience all our products. It's all done in a very modern way, like Apple type of store, but for Revolut. And then the idea is we just generate impressions for people which pass the street who come over as well. Like a lot of companies advertise in airports and it's just like, oh, it's up on the screen maybe for 30 seconds or whatever. It might be one billboard. It's like you walk, I'm walking for like two minutes and it's still, I'm like enclosed.

There's like a huge, like I'm in a cocoon of Revolut ads. How did you come up with that idea too though? Just buying full airport. I can't think of another company that I've seen do this. And I think like it's actually a really smart move. More people should do that. It's like, I may not use your services, but like I definitely know you exist and what you do. Like you essentially are aiming for ubiquity is the way like I was thinking about that when I was walking to the airport.

Nik StoronskyIn my mind, we're just paying for impressions much cheaper in the physical world compared to digital world.

It's not just like paying for impressions, though, because like, you know… I mean, building trust as well. I think the trust thing was actually one of the most interesting… insights. And you said a lot of interesting shit today, but like, I think there's something about the ubiquity of it. It's not just one sign saying, you know, this is Revolut and this is what we do. It's like entire hallways, like you're just walking and I'm being surrounded by this. It's like, I'm telling you, I can't think of another company. This is before I even thought of having you on the show. I was just like, this is actually a really good idea. I'm not going to walk past this and not know this company exists. One of the last things I want to talk to you about goes back to this like grandiose, like ambition you have. I think people that may have not known you before this, pick up on your super competitive, I mean, I love the fact that you were like kind of got pissed off at VCs, like, all right, well, now I have to compete with you because you made me so mad.

But I've never heard anybody else building a bank. One, you said there's really no true global bank and you want to be the first one. So I like the level of ambition. But then you compare just like we want to be a global technology company. And I think you might have mentioned a few companies, but the one I remember was a global technology company like Meta. Explain that, the connection between what you're building, which made people think that maybe even a boring business has been around, banks have been around for a long time, but that's not the way you're viewing what you're building. Basically, our idea and goal is to generate enough cash flow from this business to be able to fund really big bets, which can consume a lot of capital, right?

Like, for example, I would love to go into LLMs as well to build our own models. In fact, we build our own transactional model called Pragma. So it's LLM, but all transformer based on transactions rather than words. But I would love even to go deeper, right, to kind of build our own data centers, to train our own models to kind of do a lot deeper tech compared to what we do now. But then, you know, it requires a lot of investments, right? And a lot of cash flow. So basically to build a large business so that it produces so much cash flow that it is possible to fund some kind of moonshot bets which might not necessarily produce P&L in the next three, four, five years.

Are these moonshot bets unrelated to like financial services? Yeah, most likely, yeah. Because I mean, in financial services, I mean, what else can we do? I mean, almost everything is invented already. So we just like, ultimately, we're just rewriting legacy products, right? So we're building the same financial products, but we're building them much cheaper and much nicer compared to old ones. Plus, we're putting them under one umbrella in one app, so it's all very convenient. Plus, we also innovate on top, so they're all kind of interconnected with each other, talk to each other. But ultimately, it's the same old banking, but done in a new way, right?

What I really love to do is to go out of it and then do something that was never done before. Inside the industry? In all industries, yeah. All industries? More like in the tech industry. Have you shared publicly some of these moonshot ideas or you're keeping inside the company? For now, all these ideas I just have in my head. And then I just know that we don't have enough resources and time to build them. But I hope in three, four, five years' time, we might have enough resources to build them. Pragma is a foundational model trained on our transactional data. As a search, we have 30 million transactions every day.

So we have billions and billions of transactions. And then it is possible effectively to train a transformer-based model on transactions and then use it in almost any aspect of our financial services. So it can be anti-fraud model, it can be a credit model, potential can be investment model, and so on. When you launch here, why would I want to use your bank as opposed to like J.P. Morgan? So J.P. Morgan is very local, gives you a U.S. bank account plus U.S.-based products. If you ever have exposure outside of U.S., we're a banking partner because we do everything what J.P. Morgan does for you in the U.S.

Plus, on top of it, we provide all the global assets. You can have global accounts with us. So being in the US, you can open an account in Europe or Australia. You can send money instantly between all countries and so on and so forth. So instead of giving you local-based financial products, local-based benefits with points, we give you effectively global exposure. So that's the other proposition. Plus, on top of it, it's much nicer in terms of interface, plus much cheaper compared to J.P. Morgan. What's the difference way that you make money compared to the way they make money? They are much more credit focused compared to us.

We are much more subscription focused plus transaction business plus commission focused. What are you doing on the credit side? Are you just selling all that off? Credit is just standard products, credit cards and loans. Selling them off or not yet, no. Because it's still a very small portion of our balance sheet. So you think your advantage relative to legacy banks is you're more of a technology company? Our advantage is tech. And then if you think about banks in the past, whenever they expanded country to country, they just bought other banks. As a result, they have many systems in many countries.

They don't really control anything to produce any report. It takes a month to extract data from different systems. Our advantage is that we have just standardized one system, one ledger across many countries. As we go from one country to another country, we do not need to write things from scratch. We just adjust configuration of our software. And then, for example, onboarding in the UK, we adjust seven configs to change onboarding to US or to change onboarding to Mexico and so on. So it becomes one product which is highly configurable. We do not need to build another bank, another country from scratch.

As you do it, you obviously need much less people to maintain it compared to 10 banks in 10 countries. As a result, there is an economy of scale, so we can sell products much cheaper compared to other banks. Plus the whole institutional knowledge, how you build products, how you do marketing, and so on. So you reply to the same knowledge in any new country. And I think over time it can become an unstoppable machine, right? because it provides much better products and services at a much better price compared to local banks. Over time, I'm building an unstoppable machine. That's a great place, Dan.

Thanks, Nick, for the time. It was awesome. I hope you enjoyed this episode. Please remember to subscribe wherever you're listening and leave a review. And make sure you listen to my other podcast, Founders. For almost a decade, I've obsessively read over 400 biographies of history's greatest entrepreneurs searching for ideas that you can use in your work. Most of the guests you hear on this show first found me through Founders. You