Full transcript: Taavet Hinrikus on London Real
0:20 Let’s do this. This is Silicon Real, the video podcast dedicated to the people of the London technology startup scene. I am Brian Rose. I also host London Real, which is a similar format. We have guests like Tim Ferriss, the four-hour guy. We’ve had ministers of parliament, George Galloway, and we even had Max Kaiser here from Russia Today, and he was yelling a lot. Yeah, he was screaming.
0:46 He was really mad at Ben Bernanke and all these other people. He was. He was really angry, yeah. Not for children, that one. Oh, no, no.
0:53 I censored that one in a big way. My co-host today is Mr. Colin Pyle, who comes to us in London via Toronto, China, India. You’ve got epic motorcycle rides under your belt. You’re now an entrepreneur in London, living the life.
1:08 Working on it. Working on it. And this was your idea, and it’s your fault we’re here, which was to basically create a weekly talk where we meet really cool people from the London technology startup scene and this is episode seven Is that right? Yeah, and it’s going well so far, right? It’s amazing gas. Yeah. Yeah. I’m just loving these conversations more than fantastic Hopefully people are enjoying it. Yeah, no, definitely and the people missing here today are the beards who are also a part of silicone reel They are Bryce keen Michael Hobson and Joe Scarborough and you’re gonna be seeing their faces rotate through here as well They run the silicone drink about every week, which is fun as hell if you want to meet people that like their jobs It’s a really weird group of people people that are excited about their future So definitely stop by and check that out. And there you go. Our guest today is mr. Tovet Hinrikus Hinrikus who is the co-founder of transfer wise which is a peer-to-peer International money transfer business and according to their website. We help people save a lot of money I like it when it’s simple like that, you know, it was like Michael Michael Collison. It was we make Tran web transfers easier right a silicone reel is we have real conversations with people, right?
2:22 Nice and simple. So on top It was skype’s director of strategy until 2008 you have the infamous handle of being the first ever employee of skype very true So I started working with Nicholas and Janos when they were first working on the idea for Skype and a few companies before that. So ended up becoming the first employee on the team and had a hell of a lot of fun helping to build up that company from an idea on the back of a napkin to the first few hundred million users.
2:52 So a lot of good experience disrupting an awesome industry. And now we’re doing this again, it was transfer wise in a different industry, but very similarly looking to disrupt something which is an existing but very cumbersome and boring industry. Fantastic. Let me just finish out transfer-wise really quick. You’ve had funding from founders and co-founders of PayPal, of Betfair, of WONGA, and I think in May you announced a big investment round of $6 million from Peter Thiel’s Valor Ventures.
3:23 Is that correct? Very true. Awesome. And then you have all sorts of things like you were guys, The Guardian called you one one of the five startups to watch and then East London’s 20 hottest tech startups. That doesn’t put any pressure on you, does it?
3:37 I think more than that, we’re actually driven by what our customers tell us so I would recommend everyone to go and look at the reviews we get from our customers on a platform called Trustpilot and reading seed is actually what’s putting pressure on us and what’s driving us. we’re seeing how people are screaming day in and day out how using TransferWise has made a difference in their life, how something which used to be very complicated and very expensive has now turned out to be a very simple and transparent process. Right, as it should be.
4:07 Welcome to Silicon Real, first of all. Welcome, thanks for hosting me. No problem, and you’re kind of among guys that have been in finance. I mean, most directly, Colin, you sold your currency brokerage firm in 2008 to, was J.B. Morgan at the time?
4:20 No, we sold it to just a publicly traded transfer agency in Canada. Okay. But yeah, I know the FX well. You know the FX well. Quite well.
4:28 I worked in finance for a long time, mostly fixed income, but I know FX, and there’s nothing that winds me up more than getting ripped off on foreign exchange transactions as a customer. There’s nothing that infuriates me more that when I go to see Thomas Cook or these places in the airport, knowing that I’m getting jacked, I bid off for spreads, I can drive a truck through, and the transactions on top of that. And since I’ve been in the markets, I understand what a bid offer is.
4:51 And I tell people, I’m like, look at these exchange rates. They’re like eight big figures away where you buy and sell and there’s transaction fees. And then on top of that, if you use an ATM in a foreign country, I mean, I could get going and going and going. So I’m with you on the business model, but I was wondering if you could tell the people that don’t know about TransferWise and the whole concept of a peer-to-peer foreign exchange setup which you’re building.
5:14 I’m actually really hoping to learn from you guys. I mean, you’ve been in finance for much more than I’ve been, so I’m really hoping to write down at least three tips of how we can improve the business. That’s it. Good, good. Well, I tried it last week.
5:26 I’d be disappointed if I didn’t get some tips from you guys. Definitely. But going to Story of Transfroids, I mean, it’s actually very, it’s very simple. So I was born in Soviet Union. I grew up in Estonia, and that’s where I met Niklas and Janos and started working on Skype with them.
5:42 And during such journey, at one point, I moved from Estonia to London. However, I still stayed on the payroll in Estonia. So which meant very simply that every month I was getting my salary paid in Estonia in euros, but every month I was having all my spending in pounds in the UK. So every month I went to the bank and went to the bank transferring 1,000 euros to London, and I was expecting to receive 750 or so. Every month I look at my bank account in London, and I see that I only got 700 or so, a big chunk of it got missing.
6:15 It’s kind of like someone’s greasy hands were there and just taking whatever stuck to it. Or me, yeah. It wasn’t a great feeling. At that point, I met Christo, who is now my co-founder in TransferWise, and he’s another nice Estonian fellow. He had moved to London.
6:33 He was working for Deloitte, doing some consulting here, and he was getting paid in London, but he had a mortgage to pay back in Estonia, so every month he walked to a bank here. He actually had to go to a physical bank branch office because you couldn’t make foreign transfers online. So every once he walked to a bank branch office with a pile of cash, and he was making a transfer to Estonia. And similar to me, he realized that the bank is screwing him. The bank is taking way too long time to process it.
7:00 And he has to go to the bank branch every once. So we met, and we were both scratching our heads and saying, hey, guys, there’s going to be something we can do about it. It’s not a modern way of doing it. And we realized that we have a problem where we can actually help each other. So next month, we set out to do things in a different way.
7:21 So what happened is I made a transfer from my account in Estonia to Chris’s account in Estonia. So that’s a local transfer, so it’s essentially free of charge or very inexpensive. And then he made a transfer from his account in London to my account in London. And then we just looked at the interbank exchange rate and you said, boom, it worked. And instead of 700 pounds, I got 750 pounds.
7:44 A big difference. And so we started doing it this way. We even had a couple friends join us. So we had a little Skype chat. We can call it the virtual trading floor.
7:54 Somebody said, hey, I need 2,000 pounds. And somebody said, I need 3,000 euros. And these trades were matching, and we’re just doing it. And very soon, we have saved thousands of pounds in bank fees. And thousands of pounds, that’s equal to a few nice weekend trips anywhere.
8:09 It can take a month-long vacation. It’s a very noticeable amount of money. So on the back of this experience, we figured that there are many other people who have the very same problem. And then we thought, OK, let’s set up TransferWise. We went about it in a very lean way at first.
8:31 So we built a site, we got the license, and we launched it. And as we launched it, we had an article about us in Tech crunch, and 15 minutes later, first guy sent us 2,000 pounds. That was a moment of shit. What are we going to do now? It wasn’t really thinking it’s going to work so quickly.
8:50 And that was kind of two years ago, and now we’re sitting here, we’ve transferred some $200 million of our customers’ money so far. So we helped them save more than $10 million in bank fees, and we’re growing fast. We started out with only doing pounds and euros. Now we’re doing about 10 currencies without another 10 currencies this year. And lots more, lots more development happening in every area of the business.
9:16 So, super exciting and above all what’s driving us is really getting some feedback from our customers. Seeing how these people are coming to us and thanking us because it’s something they’ve been, it’s a problem they’ve been facing for years. And now we’ve come up with a way to do it very transparently, very easily. And they’re just loving it. Just real quickly, just to run out of the business model, I know you got a question.
9:39 Do you have to go through banking regulators, whether there’s money laundering issues or any of that stuff, because I know you’re kind of a peer-to-peer network where you’re like, well, I’m just transferring money to this guy on an agreement. Or do you have to go through all that financial regulations and jump through those hoops? We do, and I think it’s actually a good thing. Because we’re dealing with people’s money, so trust is incredibly important. And therefore, it’s good that we’re regulated.
10:03 We’re following same rules and regulations as any commercial bank does in the European Union. So we’re doing the same checks for anti-money laundering, no customer. Now I think it’s all, it’s required and it makes sure that there won’t be a company starting in a random street where people will just take their money and disappear. So I think if you deal with people’s money, a certain amount of oversight is required and it’s good. Yeah, the regulatory question was right, because actually when I was running my FX business we got to a certain size and all of a sudden it’s just like, hey, we’re going to throw a compliance officer in and it just drove me crazy, but yeah, so you guys are completely regulated in dealing with that kind of oversight from the UK government or from, you know, because you deal in multiple territories.
10:55 So Europe is a wonderful place, because in Europe’s regulation is largely unified. So we’re licensed by the FCA in the UK, and supervised by the HMRC as well. So we do all of that here, and this gives us a license to operate all over Europe. So as we expand to new countries, which we’re busy doing, then we have to establish what’s the local regulatory environment. We have to apply for the right licenses and follow those rules.
11:22 So, you know, it’s a necessary and larger part of the business, and ideally, I’d like it to be, but it’s the way we have to do things and making sure that we comply with everything is critical for the business. You know, one of our standard questions we ask after they kind of describe the business model is why will you win in this space? And if you could answer that, why you guys? Is it the timing you guys did? Is it because you listened to your customers?
11:50 I think it’s very simple. You know, we’re up against the banks and if you think that how the big banks doing the business, it is just simply outdated. I mean, if you think about the experience you get from a bank, things are slow, things are expensive. It’s just not what you’re expecting. So let’s go a few steps back and let’s think about what’s happened in the world at large.
12:13 I mean, over the past 10, 20 years, a number of different industries have gone through a complete revolution. Publishing has changed. Aviation has changed. Thanks to EasyJet, thanks to Ryanair, we can all fly for much cheaper, there’s much bigger choice, much more transparency. Same thing happened in telecommunication 10 years ago with Skype.
12:31 Now we’re all expecting that we can make high definition video calls for free across the world. So now we’re getting to the last dinosaur in town, which is financial services. Consumers have come to expect much faster services, much more transparency, much lower prices across all industries. And now banking is standing up and, no, we’re not getting it, we’re not changing. So I think there is a very large amount of change coming in financial services.
13:00 We can see this happening right now with all the peer-to-peer lending. We can see it happening with the likes of Stripe. Every different, every part of financial services is being changed. And it’s being changed not by the banks. It’s being changed by startups like Transferwide, like Stripe, like others, like Funding Circle in the UK.
13:18 And I think there’s a very big structural difference. We’re operating as modern online companies without having some balance sheet which has lots of brick and mortar and so on. We’re setting things up in a modern way in our IT system. We’re not relying on mainframes from the 60s. So I think there are a lot of structural differences which make it possible for us to win.
13:40 And if we’re going specifically into what we’re doing in money transfer, the other big difference we have is periodical liquidity. So facts that we’re utilizing our customers’ money to make services available for other customers is a big difference. Every bank you go to, they will wire physical money from one country to the other, so they’re using old networks for it, so they’re using Swift for it. So these things are just much more slow or much more expensive.
14:06 So there’s a very big structural difference which enables us to provide a service for a much different price and much quicker than compared to traditional banks. One other thing that struck me about their business model is that they look at mid-rates You know in FX and 10 years ago nobody knew where the mid rates were unless you worked at a bank That was part of their power was the power of information. It works on corporate bonds It works on derivatives and so now I mean you couldn’t have done this 10 years ago Could you because would there have been that kind of publicly and from available information for foreign exchange rates?
14:40 Yes, we could I mean, I think 10 years ago, you know There was a number of large exchanges where we could have gotten this information I mean, even now, I mean, if we talk about the mid-market rate, I mean, the whole topic of exchange rate is something which still continues to puzzle me in a sense that, you know, if you look at… That’s the way they want it. Yeah. There are lots of different exchanges. Yeah, I mean, you know, banks are on purpose hiding this, you know.
15:04 Sure. This is the next big scandal to hit the banks, you know. We look at, we look at FT, for example, you know, we see it reports an exchange rate. That’s mid-market rate for yesterday. Now I go to my bank today and I ask them, hey, I want to exchange a thousand pounds.
15:20 And tell me, here’s the rate. And I tell them, hey, guys, but the rate is different. But they say, no, no, no, that’s the rate today. I mean, that’s the rate we’re getting. And then I want to tell them, what about if I exchange a million pounds?
15:31 It’s a different rate. So, you know. But this way, the banks are charging 300 basis points. It’s complete, it’s robbery in broad daylight. And, you know, the way we look at it in the research we’ve done, on average you lose about 5% if you make a thousand pound transfer from London to Paris.
15:51 And it’s gonna take you three, four, five days to get there. That’s complete ridiculous. It’s utterly ridiculous. You know, in 2013 taking 5% and three, four days, it’s BS, you know. We recently demonstrated getting money from a debit card in the UK to a bank in Europe in five minutes.
16:12 And for a very low cost, one pound, and making six chains at some mid-market rate. So, I think there’s just no reason why consumers should not love this. Okay. We have some hard. And, you know, I think we’ll probably see over the next years, over the next three, five, 10 years, that banks will also probably have to, you know, say have to stop charging 300 pay this point.
16:37 I think consumers will become smarter and they’ll go asking for mid-market rate. So I think this kind of embezzlement will end over time. Yeah, you might be right, but you know, we’re driving it. These banks have also owned these markets for hundreds of years. But I’m gonna ask you a couple of hard questions.
16:54 You have a hard question coming up, right? I’ve got one. Now, people come to you and they wanna say exchange a thousand pounds or a thousand euros, and you have this peer kind of exchange there of some guy that wants to buy euros at this level, buy euros at this level. But I think I heard you on an interview saying if the amount is larger than that, then you guys kind of need to go to a foreign exchange market yourself. And so, at that point, you kind of turn into a bank, do you not, or turn into a trading firm that is kind of reliant on other exchanges.
17:23 And is that, doesn’t that limit you? So, let me ask you a question, what defines a bank? Okay, or another market player that has to, a quote, exchange. So, you know, what, I think what matters to us is, is making sure our customers get to send money from A to B in a very quick way, very easy to use way, for a very low cost. Well, if there’s no peer on the other side that wants to go for the same price.
17:47 Then we face a very hard question. Do we tell our customer, sorry, can’t send money today? Or do we decide that whatever it takes will make it possible to send money? So we decided that in case there’s no counterpart at the moment, we’ll buy the bullet. We’re going to go on the market, we’ll buy that money, even if we lose money.
18:10 Because for us, it’s more important to make sure our customers are happy. It’s more important to make sure the money gets from A to B, as our customers want it. So you make markets in foreign exchange? Yeah, I mean, I guess you can call it that way. Okay, will you call up other players or will you go to exchanges if you have to get the other side of that transaction?
18:29 We’re set up and connected to a number of different exchanges, you know? Sure, I mean, maybe at one point, if we succeed, we’ll become possibly a large exchange ourselves, but that’s not, you know, we’re driven by helping consumers and small to medium businesses do this. So, you know, we’ll do whatever we have to to make it work. And, you know, as scales get bigger, maybe we have to become an exchange, and hey, you know, if that’s needed, then we’ll do that.
18:56 Would you turn someone down, and if you said, look, this is gonna cost you 3%, it’s not worth it, either wait or go somewhere else, because we can’t provide you that service today. Would you ever do that in the case? No, we haven’t. No, actually, sorry, I’m lying. I think it was about a month after we launched when we had a customer make, so we had a limit of 2,000 pounds maximum, and we had a customer make 15 trades with 2,000 pounds in a row, and he actually sent us some money the next moment.
19:24 Sounds like a bank on the other side. I was like, We’ll test these guys out. I think we had to send the money back to the customer. But that’s the only time we’ve done it. So now we’ve been continuously expanding sort of currencies.
19:41 We’ve been expanding the limits. So now we’re doing trades up to a million pounds. And I don’t see why we would refuse anything. We’re set up right now. We’re plugging those exchanges if we need.
19:52 We have our own liquidity. We are well-funded. So that’s what we do. Back then, one month after launch, it was a little bit different. Do you ever worry about market players coming into your market that aren’t peers, that aren’t individuals, that businesses are J.P. Morgan down the street and, you know, trying to crush your foreign exchange markets.
20:13 I don’t see how they would crush it, but I would see this as a sign with one if they come. Okay, so you don’t see much funny business going on where big sizes are coming in, okay. I’m sure you know what I mean. Yeah, yeah, yeah. Because most traders would love to try to exploit anything they can see is kind of that.
20:29 Yeah, the one thing, See, you guys don’t really take risks because you don’t actually give the client the rate until you have their funds, right? So that’s where like a guy on a trading floor to be tricky would just try to call you up and be like, hey, I want to buy a half a million and then, you know, maybe not deliver on the trade and screw you guys. But because you wouldn’t actually get the rate until you receive the half a million that the risk is really, there is no risk for you guys.
20:55 I mean, you will, we’ve very carefully built our model so that we don’t, we’re not exposed to unnecessary risks. So if you want to get it right right away, then you can use a debit card and we’ll guarantee you a right right away. And thinking forward, there’s a suite of services that we can offer where you can reserve a rate and if you think about what businesses need within a kind of spot trades and forward trades and so on, so much more, much more we can do and we may decide to do this thing in the future, but right now we figure that it’s simplicity which wins.
21:31 Getting your money from A to B for a very low cost, very quickly in a super easy to use way. That’s kind of, that’s our bread and butter end. And that’s where we figure that none of the other things are needed, like doing forwards or any of the funky stuff is not what our customers want. And the little guy is the one that’s getting crushed right now. If you’re a big business player doing forwards with decent size, you can really wind your bank trading floor down to give you pretty decent rates.
22:00 But the guy doing a thousand pounds, he’s the one that’s getting hit hard. Totally right. And that’s where you guys really come in. And our customers, you know, there are people like us. You’re from Canada.
22:10 I’m from Estonia. States, America. We’re from states, you know, we’re all immigrants here. Thanks to the UK for taking us. But you know, it’s people like us who are using us.
22:22 It’s people who have really stayed abroad, lots of Brits who got through the state in Spain, lots of British pensioners who retired to South Spain, South of France, it’s students, it’s these kind of people who use us. Funny enough, we have lots of people using us to work for a bank. Yeah, sure. Have banks kind of gotten overtly in your face or have banks come to you and said, stop this, or are they just waging their own silent war against you? And also, second, do you think you’ll ever be acquired by a bank?
22:50 So I think banks, you know, it’s kind of very similar to what happened when we’re getting Skype going. You know, we were thinking, what are the telecos gonna do? You know, what will telecos do? Will they crush us? Will they block us?
23:05 Will they kill us? Will they buy us and shut us down? You know, all kind of stupid thoughts we had. The reality is telecos have done nothing. They’ve done checkshoot.
23:15 You know, now Skype will turn 10 this month And Skype now competes with all the telecos in the world. It also partners with many of them. But Skype owns 30% of long-distance calling minutes. What has the telecos done? They’ve lost most of the market.
23:32 Prices have come down. Market share has been lost from telecos, though. Not much they could have done. And the exactly same thing will play out for us in the money transfer market. I don’t see it playing out in any different way.
23:49 So banks are earning way too much money from this right now. So they will not be dropping their prices until the very last moment. So we’ll just slowly keep on growing. We’ll keep on earning our market share. And then in one point, well, a few, five years from now, we’ll be competitive with all the banks.
24:09 And we’ve achieved certain market shares. The banks have gotten their acts together, and it’s going to be happy competition. That is exactly what will happen. I worked in banking for over 10 years and you are not on the radar if you are, they just don’t look at you and they’re gonna concentrate on what they’re still doing best, maybe innovator’s dilemma and not until the very end will they say, oh. I mean, the innovator’s dilemma has been researched so much by now.
24:32 They should know. The sad thing is there’s actually no good solution. The smart ones, and let’s be honest, there are lots of smart people at banks. As market guys will realize that the structural change is happening in the market, the best thing for them to do is keep on earning money today because no bank today will benefit from dropping their prices. They’re not going to get more customers.
24:56 If you’re HSBC today, that’s not going to make a difference for you. So the best thing for you to do is know that the market will change over the coming years. Think about what are you going to do once it happens, but until that, keep on milking. Yeah. Keep squeezing away.
25:11 But at the same time, they lose a customer like me, right? So I use you guys last week. Yeah, but then what are you? You’re one out of a Brazilian. Exactly.
25:20 Well, that’s the thing. They just don’t care about the average user. And at the end of the day, they still make money off of me going to you. It’s not like they lose completely, right? Because I’m making a transaction that I would have not made.
25:32 I’m making a transfer to you that I otherwise would never have made. So they’re not earning zero. They’re just earning maybe a bit less than they would have otherwise. And I think also besides us, this is a golden opportunity for a lot of companies to build up competing financial services. I totally believe that banks will get to act together in three, five, 10 years’ time.
25:55 But until that, it’s a golden opportunity for lots of fintech innovation. A lot of large companies will be built, and then the market will change, everybody will adjust, but it takes a lot of time if you’re HSBC to adjust. Yeah, definitely. How was your transfer wise experience? Yeah, fantastic.
26:12 What did you do specifically? I moved money from Canada to the UK. And at first, it wasn’t an option. I emailed you guys and it was like, you know, why can’t? Why isn’t Canada showing up?
26:24 And they’re like, because in Canada, to transfer over use a Swift network and it’s actually quite expensive to send a wire transfer from Canada to Estonia. But your customer service got back to me right away. They opened it up. I made the transfer. The one thing is fees, right?
26:40 When you’re making, it’s HSBC Canada. If I just transferred it from HSBC Canada to HSBC UK, I would pay no transfer fees, but they rate me on the FX. So I went through you guys and they raped me on the wire transfer fees, but I got a good FX rate. So it’s kind of like, they’re neat. At some point, I’d rather just say, hey, why don’t I just have a bank account with you guys and I can transfer internally and get good rates all around, right?
27:08 And that’s what eliminate that problem. Yeah, I mean, we’re not open for customers in Canada in the way we would like it to be. We’d like to be open in Canada so that you can use a local transfer in Canada or pay with a Canadian debit card. That’s something we’re still working on. So until that we have this work around so that you can transfer money from your account in Canada to our account in Europe, which is an expensive, complicated, swift foreign transfer, which will most likely cost you between 20 and 30 Canadian dollars.
27:45 But if you’re transferring a larger amount of money, you can still make meaningful savings on the exchange rates that you get from TransferWise. I still wound up ahead. Okay. PayPal, what do you think PayPal is doing right and what are they doing wrong right now? Ooh, it’s a tough one.
28:02 It’s tough because some of their people are your investors who are asking a loaded question. I just noticed recently I can hold the sterling balances and dollar balances on my PayPal. I had a big transfer recently. They made me switch it to a corporate account. They’re not the easiest people to deal with.
28:17 I think PayPal has… And their FX rates, you’ve seen? Have you ever done it through PayPal? No. Huge.
28:24 Shocking. PayPal, I think, they’ve forgotten who their customer is. They’ve forgotten what got them going. really got going by helping people transfer small amounts of money from one to another. And now, if you look at the user experience on PayPal, it’s pretty damn horrible.
28:41 If you look around at the customer support experience, I haven’t heard a single positive thing about it, but I’ve heard about 200 negative comments about this, and they’re fighting 10 different battles. So to be honest, I’m kind of confused what the hell they’re trying to do, because as As a user, they’re not doing anything to make the service better for me. They’re giving me different fees. If I look at foreign exchange, people charges between, depending on the country and currency, between three to four percent for making a currency exchange.
29:13 They’re the new bank in town is what they are. Totally. They started off as the, like you said, kind of the internet, different kind of business model, but now they’ve turned into this horrible customer service, ridiculous rate, new bank, right? That’s the way it feels as a user experience. the online bank.
29:29 Yeah, I mean, which seems like, I’m sure they’re making a lot of money, but I don’t know how sustainable that is. I mean, don’t get me wrong, cause I have a great business and, you know, as every very large business, it’s, you know, you get a set of very new challenges and, you know, things are complicated. I just, you know, what I’m confused about is what’s the battles are in, as they’re also in a lot of merchant services so on, so I just don’t know what’s the battles are in, you know, my feeling is that the business of helping people send money not much they’re so focused on anymore so okay I could be wrong you know I just try to I’m gonna move us right along here to have it you’ve been in Skype before and now you’re in transfer wise you’ve seen a lot of different business models and this is something we like to ask people here on the show is it if you had to sign an NDA it could be completely out of the transfer wise business for the next two years and we gave you say 10 20 million pounds of startup capital what would you go do or what what industry really excites you right now, assuming you had to stay in London, too.
30:27 I really think London is a great place for fintech. I think fintech could be what defines London on the world startup and technology map. We’re seeing TransferWise, we’re seeing Funding Circle, we’re seeing Wonga, even Betfair. There’s a lot of success stories already in London for fintech, and many more coming. So I think London as a fintech capital, it’s really starting to sound well.
30:56 So I think fintech in London is an incredibly hot area. And I think those are very exciting ones, our education and health, where we’re gonna see so much change happening. And maybe as an outsider, it’ll be good to go into education or into health. I think it’s gonna be a lot of change happening which will affect many people’s lives, lot of great companies built. So you talked about FinTech as an opportunity so you’re transfer wise you’re tackling the banks on FX rate what other opportunities in FinTech do you think are sort of prime for a real opportunity? Think about anything you do with your bank today. Debit and credit cards, loans, mortgage, money transfer, information services, anything the bank is offering is is already being disrupted by a number of different companies who are not the banks.
31:55 So these are all humongous opportunities. Pretty much everything the banks do, they’re doing wrong. So there’s an opportunity in building a new online bank, which many people are doing. But that’s inherently going to be a local game, but a huge opportunity. The guys who are building banks simple in the US doing a great job at this, Censair is opportunities building some specialized vertical solutions like TransferWise, we wanna make sure that people around the world can send money anywhere they need to.
32:26 So, it’s a thin vertical, but we can do this on a global basis. So, many different ways of building large businesses. So, how old are you, Tevin? 32. 32, all right.
32:43 So, if you could make a phone call and speak to the 20-year-old Tevin, I guess back in Estonia, and give him a bit of advice. What would it be? I stock and scape. That’s about to say, right? I know, it’s always easy to say that everything you’ve done has been as right.
33:08 And actually, I’m pretty happy with where I am, what I’ve done. Lots of experience in various ways. Is there anything you want him to study more, or to take more time, or to take more risks? I dropped out from university, which was a pretty good experience, I think. I did go and get an MBA from a business school later, which was also good fun, but I think one year was totally enough for that.
33:35 I think the question is combining various different things, enough experience working, education, and travel, I think having a wide set of experiences is what helps people be successful. Hanging out with different people in your life, making sure you don’t get stuck doing one thing too early. And what’s the best piece of advice you’ve ever received? Probably have forgotten that one. Fair enough, and if there’s a 20-year-old listening right now who wants to be like you one day or wants to be part of this whole tech startup scene, whether it be Skype or money or fintech, what should you tell them to do?
34:21 What one piece of advice, whether they should look to do this or do that? Learn to code. No, but I think really, it’s about being persistent. You know, if you look at the world of entrepreneurship, the world of startups, I think people are getting fixated on success stories. People get fixated on Skype, people get fixated on Facebook.
34:46 The reality is that even these businesses have gone through hard times, and these businesses are one out of a million. Most successful businesses get built over a period of five or ten years, so it’s all about being persistent, having a goal in mind, and getting yourself ready for a marathon. You can’t start too slow, because then you’re never going to make it, and you can’t be too too fast because then you’re gonna fall down there after the first 10K. So I think it’s about being persistent, having a goal in mind and then just slowly but surely building your way towards it.
35:25 Good advice, really good advice. You know, I saw that you got some funding recently and I’m guessing you guys had the choice or some choices when it came to VC funding and I’m wondering how do you choose the right VC? VC is investing in people. So you want to make sure you have a match on a personal level. You want to make sure that the guys who invest in you are the people who you’re happy being in bed with for the next 10 years.
35:54 It really comes down to finding people who will complement you, who will help you build a large business. Yeah, I mean, obviously, from the very beginning, we were looking at investors as a kind of extension of the team. We were looking at how do we get the smartest guys around the table to help us build this business out. It would have been lots of ways to take dumb money and maybe take more money and better trends. But we figured that we were really looking at making sure we’re building the best team around us.
36:31 So that’s why we got the index involved with great VC in London. We got IA Ventures who are leading us around from New your great fintech experience. We got lots of people in, you know, we got Saul and Robin Klein involved in London as well. We have David Yu from Betfair. So, you know, we made sure that we have people around us who know how to help us in various ways.
36:56 We had Max Lauschen invest in our seed round, founder of paper, you know, he knows a thing or two about building online fintech businesses. So we were looking at what are the gaps and making sure that we fill each of these with one or two people who can help us. Great position to be in. Yeah, how do you all agree on evaluation when you have all those people involved, and is it a number that moves around a lot or not, when you’re getting those kind of investments?
37:25 Kind of yes and no. I’d say it hasn’t ever been too much of a discussion or a roadblock for us. You know, in some ways, if you’re at a very early stage, I think there’s a certain amount of kind of just like generic market, market average outs are. And there’s a lot of kind of VC economics which as an entrepreneur you have to understand to know how things work and to know what outcomes other people are looking at, you know, how the math works. And then, you know, there’s also a question of figuring out what do you want?
38:04 And you know, what do you think, what do you think is right, you know, having some market information? And then I think these decisions are, you know, it’s not gonna be roadblocks. And one question we always seem to ask here is, is people, when you look to hire someone or maybe even invest in someone, what’s that one quality that you really need to see in them that makes you wanna kind of do that deal? So I’ve done a bunch of angel investing and, you know, I actually look at it always as investing in people.
38:35 So businesses will change. The question really comes down to what are these, are these the right people who are willing to stick to it for the next five or 10 years to make some business a success? Do they have that in them? And when I look at hiring people, it’s actually three pretty simple questions that I ask, which is first, are they smart? And are they the smartest guy for the job?
39:01 Second, do they get things done? And third one, can we work with them? Oftentimes you have super smart people who get things done, but something gets in their way, whether it’s their ego or something else, which just means that in this company, you’re not going to be able to work with them in the role you’d like it to be. And it happens, unfortunately, quite often. But then if you get a match of these three things, then it’s really about giving them the tools to succeed and just watching on the sideline and helping them out.
39:31 Good. I got a question for you. Bitcoin, does it scare you or excite you? It excites me. Okay. Are you worried that you know, if there’s this one currency globally then TransferWise is in trouble or no?
39:47 It’s so far down the road. I think Bitcoin is a great opportunity. Right. For us and for many other people. I would draw another parallel from Skype experience. Skype is a business which is today earning more than a billion dollars in revenue, and most of it is coming from enabling people to call regular phones. So if Skype is ultimately successful, there won’t be regular phones to call. But the reality is that’s going to take a long time. It’s going to take another 10, 20 years. In 10 years time, managers might not be around. So who knows what’s going to of Skype. So in the same sense Bitcoin will never take over the world. So it’s a huge opportunity for us and for many other people. Are you accepting transactions in bitcoins? We don’t because for a very simple reason.
40:45 It’s a regulatory framework around Bitcoin are too unclear so we’re just not feeling comfortable around anonymity, know your customer, all these things when it comes to Bitcoin. As soon as these things get settled in a way that regulators around the world agree, we’d love to work with Bitcoin businesses. Until that, unfortunately, we feel that we can fulfill the obligations that have been put on us. Because the bid and ask spread on Bitcoin is huge. Yeah.
41:18 I mean, the Bitcoin exchanges are sort of churning out good money right now. Great little business. I went to an exchange and there was no bid, there was just offers, you know, so I couldn’t even see how wide the market was. Take that. Yeah.
41:34 You want some? Here’s where it is. It’s really old school. You want some? You pay the price.
41:39 Or you walk. Yeah. I lifted the offer and got a couple of bitcoins. That was my conclusion. What did I miss?
41:46 Those are some really good answers, very succinct answers. What about this? No, I think it’s great. I think great business. I guess, yeah, will banks wake up?
41:57 And I think banks still control the cash, right? At the end of the day, every user through TransferWise has a bank account somewhere. And so either they jack their fees and they try to sort of hit people that way or they just start to wake up? So I think that’s again where I hope the regulation will help us, you know, banks, I would be very anti-competitive behavior and luckily most banks in the world are open governments now, so.
42:30 I’m hoping that’s number 10 and White House and other places who own these banks will tell them that that’s not a good idea to stop little guys helping customers and buildings our businesses, so. Do you think you’re- No, it surely, you know, surely there are risks around that, but I don’t think that’s gonna be, that’s gonna stop the business. Yeah, there’s gonna be a country where there’s a local king who owns the banks, and they’ll make sure nobody can use transfer wise, but you know, it’s gonna be a few countries out of 200, so.
43:03 Will your exit potentially be with a bank, or is that the last thing on your mind? An exit is the last thing on our mind. We’re building a global, sustainable business, and we’re not really thinking about the exit. So, I mean, honestly, can’t tell you. No, I mean, all, some of the guys- They don’t have any idea.
43:21 The great companies don’t have exits in mind. You don’t look at Steve Jobs or Zuckerberg. They want to build this for their career. Why would they retire early, right? They want to build things, so.
43:31 No, that’s awesome. You bring a really good perspective. I think having your Skype experience makes you see a lot of things you’ve seen before as far as patterns, and it’s interesting that you say that however successful Skype is, you still have to deal with phones, landlines or mobile phones. And like you said, you still have to deal with banks in some capacity. So it’s nice to know that you’re thinking about that stuff and not thinking we’re gonna change everything.
43:52 And also you talk about like 10 year periods. I think a lot of people, maybe people that don’t know enough about the tech startup businesses, they think I’m gonna get in for two years and three years. But we talk to more people that sit in that chair and they’re like, seven to 10 years is what we’re talking here. You’re in bed with your VCs for 10 years. I mean, these aren’t small decisions.
44:10 Now, it’s just interesting to know that people are really thinking long-term here, so, awesome. I got, sorry, one more question. Yeah, go ahead. Skype revolutionized changed people’s lives. What idea out there now that hasn’t fully taken shape, do you think has the same scale opportunity in terms of changing the average person’s life?
44:33 I look at Skype, it touched everyone, globally, excluding some places, and change people’s lives. My brother lives in China, I lived in Canada for most of my life, changed our life being able to sort of communicate that way, and I just, do you see something else out there that has the same potential? Today, maybe not. I think, you know, opportunities for that probably will be in transportation. Maybe also in health tech, you know, you’ll have things which will have a huge impact people’s lives. I think Skype is a very unique and very iconic company in that sense. I’ve lived in five countries, I couldn’t have lived my life without Skype. Most people can now, even you know it’s amazing. Yeah, complete game changer like you said and completely changed the way you communicate with people. Just having that image is just it’s so different but yeah hard to see the next one is maybe it’s in life sciences I don’t know. Yeah you You know, health tech, transportation, Elon Musk’s getting involved in this crazy teleport, not teleport, but like this rail magnetic system that goes like 4,000 miles an hour or something.
45:48 Yeah, you know, think about building a, think about building a Maglev train between London and New York, which will take you there in an hour. Yeah, yeah, that’ll change the world. Pretty cool. Yeah, that’s very cool. You know, you can’t really compare that to another new social network on mobile.
46:06 Well, that’s the innovation that I that I get excited about, you know, this app on top of another app or this You know, you see a lot of the same stuff. It’s it’s just sort of adapting things. It’s not innovating things and Recycling old ideas Awesome. Well, I’m gonna open up a transfer wise account because I’ve got dollars in sterling I’m trying to juggle them and it’s quite a nightmare. Really. I mean, you know, I still can’t figure it out I’ve got counts both accounts on PayPal at my bank here and so I’m gonna I’m gonna check you out if you don’t mind um thanks for being our guest if you’re listening to us on iTunes please subscribe if you want to see our faces we’re on YouTube channel silicon rail correct silicon rail yeah awesome we’re on Twitter and we would love your suggestions the only reason we’ve had these people so far is because former guests have suggested this guys so if anyone has any ideas what’s the best way tweet at us yeah tweet at us the best way and yeah suggestions if you’re interested in getting involved and helping out you know again this is for you guys and we’re here to make it the best we can with the resources we have and and so so tweet at us help out give us ideas recommendations all that stuff and we’ll be at the drink about us every Friday some stop by and say hi a lot of people have come up to us and introduce us to people you think should be guests and we’ll just keep going yeah all
47:22 Right alright thanks so much until then it’s about the people take care they’re always hard-working and that’s why I talk about the need for balance because a lot of the founders here are just so busy focusing on your business and it’s fantastic but balance is important too because then you need to be healthy and happy to grow that company to the next level.
