Deepak Rao on how X1 pivoted, launched, built a +600K-long waitlist and fundraised in tough times

[00:00:00] Todd Jackson: Welcome to the show. Deepak

[00:00:02] Deepak Rao: Thank you for having me.

[00:00:04] Todd Jackson: X one has done extraordinarily well since the launch in 2021. I know people love the credit card. You're processing something like 60 million or more in transactions every month, uh, which is just very impressive. Uh, but your journey to get here, I know, has had a lot of twists and turns, and you did this pretty intense pivot at the peak of the pandemic, all these unexpected challenges around actually creating the card, you know, and it wasn't a straightforward path to product market fit.

[00:00:29] So I'd love to

[00:00:30] Deepak Rao: Absolutely wasn't

[00:00:31] Todd Jackson: Yeah, I'd love to retrace this journey with you and, and dig a bit deeper into some of those critical moments. And so to kick things off,  let's rewind to 2018. Um, when you initially launched as Thrive Cash, uh, what, what was Thrive Cash and, and who was it?

[00:00:46] Deepak Rao: Yeah, uh, that's a great question, and thank you again for having me. Uh, in terms of, uh, we start in the company in, uh, early 2018. Uh, that was where, um, the foundation for the company and the X one card also happened, but, uh, the company was started [00:01:00] as a completely different product. 

[00:01:01]  the company was started, uh, as Thrive Cash. Uh, the first product, and that was the only product that we were working on, was an unsecured personal loan,  that was catered towards college students. We were primarily targeting upperclassmen and graduate students. Um, and the way the product worked was very unique.

[00:01:17] Uh, and no one else was doing it. Still to this date, no one else does it. We were basically underwriting, uh, students, uh, Through an awful letter for an upcoming internship or a full-time job. So imagine you were an upperclassman, um, and you're about to graduate, uh, and you have an internship or like a full-time job lined up right after graduation.

[00:01:35] Uh, so we would give you an unsecured loan, uh, which would match the timing of your internship or your full-time job. You can get access to the funds when you're in college. You don't have to pay us a single cent until you have graduated. And then as you start getting paid from that internship or full-time job, you could pay us back.

[00:01:51] So that was  the crux behind the idea. We wanted to go as early as possible in someone's financial journey and then try and capture that audience.

[00:01:59] Todd Jackson: Got it. And I, I think it [00:02:00] was doing pretty well initially, right? You were at several schools and, and you know, underwriting successfully a lot of college students.

[00:02:06] Deepak Rao: Yeah, I think so. The first time, uh, we started the product in this, in, I think in spring of 2018. Uh, and, uh, we primarily launched the product at NYU in Columbia. And, uh, I think within the first six months we're able to originate about a million dollars of loan, primarily at those two colleges. It was all organic, all done through word of mouth.

[00:02:26] So that gave us  enough validation that okay, there is a huge market out there. And, uh, in the next school year we started expanding to more and more schools across the east coast. Um, primarily like New York, Massachusetts then made our way towards VAs Coast as well. And I think at the peak  right before covid, we're doing about like a 25 million like school year in terms of, 

[00:02:47] Todd Jackson: What do you think made it so popular?

[00:02:50] Deepak Rao: I think I, uh, just a little bit about myself. I am a product person. I come from a product background and we were not traditional financial services folks. Uh, we don't have [00:03:00] banking or financial, uh, services background. So we wanted to create a product which was more consumer friendly, extremely transparent, and really like fast and sleek.

[00:03:08] Uh, just where if you want access to capital, you open. Uh, within like a couple minutes, you would, uh, go through the entire flow end to end, and then the next business day you will have thousands of dollars in your bank account. No one was doing that, and especially for a college student, if you imagine going back when you were like 21, 22, there was literally no access to that amount of capital that fast.

[00:03:28] So I think that was like a huge factor for us. Uh, and you didn't have to go to a bank, you don't have to do complicated like driver's license or  face IDs and things of that sort. It was just very, very simple. You log in, you go through a few easy flows from your, uh, putting your assets to your phone number, sending us an awful letter.

[00:03:44] Within five minutes you get approved for a line of credit, you can rely on that line of credit as in when you want funds,  we would just send you the funds the next day. Uh, so it was, it was very, very

[00:03:54] Todd Jackson: Yeah. Sounds like a great product. Okay, so you're growing, you're expanding 20 18, 20 19, and then [00:04:00] 2020 Covid hits, what happened? 

[00:04:03] Deepak Rao: So it was very interesting.  right up until, I think if I remember about February of 2020, the business was growing really early, rapidly. I think we were almost like doubling month over month. Uh, we were on track to do about 25 million in loan origination across, I think just, I would say like 40 or 50 college at that, that time.

[00:04:22] And, um, Then I think the first set of shutdowns started happening. Um, and if you, uh, remember that time it was, uh, no one knew exactly what was going on. I think, uh, SF I remember shut down in the first week of March. Uh, and, um, there was  a time where, um, overnight our, uh, demand completely evaporated.

[00:04:42] There was not a single, uh, consumer who wanted to, um, get access to fund, just take a loan. They were completely went away. Um, so as we started talking to.

[00:04:52] Todd Jackson: they weren't traveling or they didn't need, they didn't need the money.

[00:04:55] Deepak Rao: Yeah, exactly. I think, I think so. It took us a while to understand what was exactly happening, why it was [00:05:00] the sudden change. So I think few things happened at that time. If you, uh, remember first thing was, uh, I think immediately the campuses were shut down. Uh, and, uh, people had to go, uh, either leave the campuses, most often had to leave the campuses.

[00:05:12] So our entire marketing strategy, our entire word of mouth was built on like campus where people would talk to each other. Uh, so that completely evaporated and no one was doing that. And then two biggest use cases of her product, uh, were, one was travel and second relocation. Uh, travel completely shut down cuz no one knew what was going on.

[00:05:31] Uh, and then relocation. Uh, companies had to adapt really, really rapidly, including ourselves.  everyone had to go remote. Uh, for first, if you had to start an internship, you might have to move cross country and, uh, then  put a deposit on, rent, for an apartment. Or you, uh, might, uh, need like money to go buy your flights or, um, buy  laptops and so on and so forth.

[00:05:53] All went away, completely went away. You could now just, uh, start an internship from your parents' apartment, uh, or from your dorm. Uh, you [00:06:00] can actually start your job in your pajamas, uh, sitting wherever you want. So it completely, uh, changed the equation and. That was  the biggest,  hit to the business.

[00:06:08] It wasn't that  people weren't able to pay you back because the economy was so bad. That's what we had anticipated might happen when there is  a minor recession,  It was a minor blip  in the GDP  during that quarter. But that was not what,  affected us.

[00:06:20] Our demand completely evaporated

[00:06:22] Todd Jackson: Yeah. Okay. Wow. So that, I mean, it sounds like it happened almost overnight or, or at

[00:06:26] Deepak Rao: it did. 

[00:06:27] Todd Jackson: period of days or weeks. So  did you do inside the company? When did you start to sort of say, Hey, we've gotta do something different here?

[00:06:32] Deepak Rao: Yeah, that was the most challenging time for the business, uh, cuz there was so much uncertainty and there was no precedence for something like this. Um, because, uh, we  just did not know how long would it take. Uh, and if you remember the videos at that time, people were talking about, uh, U-shaped recoveries, L-shaped recoveries.

[00:06:49] Like we shape recoveries. We like just did not know how to maneuver the business waiting for it till I come back. So, um, I think we basically decided to give it  a week or two to see if [00:07:00] the campuses would shut down. And I think every week it actually got more and more intense. Uh, the only, the first the colleges like I think in California were closed and like, I think the Ivy Leagues closed and people even in like the universities in Texas were  shut down in the end.

[00:07:14] So there was literally like nowhere for us to go and  market the product. And I think that was  a good realization at that point. All businesses have some flaws at the end of the day and, uh, While you're working on a startup, you have some duration to start and fix those flaws. I think in our case,  the two flaws of the business were one was seasonality and second, it wasn't a daily engagement product cause people were still buying things.

[00:07:38] People were still going to grocery stores, they were still buying workout equipment, but they were just not going, traveling or doing  relocation. Uh, and they were still living their lives. So I think that  accelerated the biggest flow of the business, which was it, it was extremely, uh, seasonal and it was very  oriented towards a certain use case.

[00:07:57] Um, so I think that took a while to realize, uh, [00:08:00] and I think it's, it's, it's an emotional journey. At the end of the day, you're, you're in it. Uh, you don't want to  let go of something that was working really, really well that you just raised money for because it was working so well and then just overnight it stopped working.

[00:08:12] So you try to kind of hold onto. Uh, I think we, we, we did a good job, I would say within a couple months. We pivoted the entire business, changed the company, uh, did a lot of things and I can, uh, go deeper into all of those.

[00:08:24] Todd Jackson: Yeah. Well, so, okay. You mentioned you had raised money already,  when Covid struck, how much money was in the bank and how many employees did you have?

[00:08:31] Deepak Rao: yeah, I think so at that point, given the growth was so great, we had about, um, I think around like  16 to 18 employees at that time. Uh, and uh, we had about 3 million in the bank at that 

[00:08:42] Todd Jackson: Okay. So this was after your seed round, but before your series A.

[00:08:46] Deepak Rao: yeah, yeah. Before the A around.

[00:08:47] Todd Jackson: Got it. 

[00:08:48] Deepak Rao: yeah, we still had about, uh, 3 million in the bank at that point.

[00:08:51] Um, but our bond rate was really high. We were burning about  two $50,000 every month. So, uh, cuz the business was  going in this one particular direction where we knew, [00:09:00] okay, now we're gonna go from 50 colleges to two 50 colleges and go raise money, uh, for the next round. Uh, But then you had to  course correct, like dramatically.

[00:09:08] So what we had to do, uh, we had to take some, um, just  hot steps we had to let go of some people. Uh, but we  wanted to like keep as many good folks as possible and they had been with us from day one, so we offered everyone in the company in ability to, uh, get more equity in the company if they would  lower their salaries.

[00:09:26] Uh, we had a hundred percent participation rate for that. Every single employee, uh, in whatever they could afford from like going lower in salary. Some people went like crazy down, uh, in order to get more equity in the company. And we were able to reduce their burn rate from I think two $50,000 to about a hundred hundred $20,000 more than half, uh, over the next like couple months, which gave us at least 12 months of, uh, runway to be able to figure out what to do next.

[00:09:51] Todd Jackson: Interesting. And you did this when you had 3 million in the bank still.

[00:09:55] Deepak Rao: Yeah.

[00:09:55] Todd Jackson: it's, it's kind of like what a lot of founders, I think are thinking about today, like acting very [00:10:00] early to try to extend that runway sort of as early as you can is what you

[00:10:04] Deepak Rao: Yeah, and I think. Absolutely. And I would, I would get credit for all of this to David Sachs. I think he, he was extremely, extremely influential in all of this. I think he was pushing early aggressively. He was like, you have to cut fast, you have to cut really early, deep, uh, and we were hesitant. Uh, so it's one of those things where you're emotional and you wanna make sure you, you're resuming that, oh, things will work out.

[00:10:23] Maybe the school year will start in the next few months. But I think  in hindsight, he was obviously right. He was like, you have to go very, very deep. You need to give yourself the most amount of time to be able to recover from this. Cuz you, who knows how long this would last and  who knows how long it would impact the business at like a, a longer term horizon.

[00:10:38] So, um, that he, I, I give him credit for all of it. I think he was very, very helpful throughout this process. And then I think we just  completely cut our expenses went in  this like development mode cuz we didn't know what we would do next. Uh, cuz the business as we had built it to that day, did not  exist basically overnight.

[00:10:56] Todd Jackson: Yeah, so it's, it's this incredibly intense, it sounds like [00:11:00] about two month period where the first thing you had to do was sort of like, let go of the old idea, your attachment to that, and then you figured out how, how we cut costs, and then what did the,  beginning of the pivot start to look like. How did you figure out what you were gonna do?

[00:11:13] Deepak Rao:  so.  one of the things that  I mentioned early on, I think the two, uh, key flaws of  the old business, uh, was it was not a daily engagement product. You couldn't use it daily. At the end of the day, it's a loan. You could maybe take it once a school year, uh, maybe twice if you're using it like a line of credit.

[00:11:28] Uh, but we wanted to create something which you could use daily. Um, and the second, uh, aspect was, uh, we had a huge seasonality element. Uh, In order to use the first product you need to a, have an internship or a full-time job, then you needed to have a need for capital if you were relocating or if you were traveling.

[00:11:46] So it was very seasonal.  spring quarter was huge for us because people were on the like, uh, last  set of funds that they might have saved from either previous shops or just like their, like savings or like from their parents and  There was  a huge [00:12:00] demand for cash and spring quarter was huge for us, but  the fall  wasn't that big.

[00:12:04] So, uh, we wanted to fix those two things. 

[00:12:07] and I think one of the things as you, uh, if you now go back in, I think it was May and June when things were starting to open up slowly, you will still, uh, going to restaurants and getting takeout and then going to grocery stores. So people were still spending money every. I was still using my credit card every single day to buy something or the other.

[00:12:27] It's just the category of purchases completely changed. Instead of travel, you are ordering dumbbells or pelotons or like workout equipments. Uh, you are  ordering a lot of takeout, new people were not going to movies. So the category of spend change, but the spend did not change. I think that was like one of the things which  stuck with us where we said we have all this infrastructure to like be able to underwrite consumers really really well, uh, but there needs to be an instrument that they could use on a day to day basis, which is not a personal loan. Uh, I think that was  the [00:13:00] first  insight into moving towards a credit card. Uh, and we always knew that we would need something when a consumer graduates to build a relationship with them.

[00:13:08] We just  decided to accelerate that. So that's how the, uh, the credit card started to like shape up basically.

[00:13:15] Todd Jackson: Got it. And so then I, I mean, I imagine building a credit card was a brand new thing for you. What, what, how did you start to figure that out? How that would actually work?

[00:13:25] Deepak Rao: yeah, it was, uh, it was totally brand new cuz uh, I think the only thing that we, uh, could have taken on from the previous,  business was just the underwriting ability, but everything else was completely brand new. Um, and there haven't been that many credit cards, at least, uh, startup credit cards that have been successful or are actually even out there in the market.

[00:13:43] So, uh, the sample size to go rely on was really, really, small Um, so I think the next  few months was  a huge amount of  partnership research, uh, talking to companies like Stripe and Marketta to see if they would be able to help us build these programs. Uh, and then just figuring out [00:14:00] like how do you even go build a credit card from scratch because, um, if you notice up until, I think even today, uh, almost all like Neobanks in the country are heavily debit card led.

[00:14:10] Uh, the two largest neobanks in the country are chime and cash up. They don't even have a credit card. Uh, they're primarily debit cards. So all the infrastructure was, uh, built around debit cards and no one was building credit cards. There was very,

[00:14:22] Todd Jackson: is that? Do you?

[00:14:24] Deepak Rao: I think it's extremely complicated to build a credit card, and it took us a while to realize that.

[00:14:28]  there are few reasons. Uh, first, when you spend, uh, money on a debit card, uh, it's actually your own money. Uh, you are literally using the money in your deposit account to buy or make a purchase. So it is not as regulated as a credit card because credit card, every single purchase, even though someone like you and I pay it off and full at the end of the month, it is technically still a loan because you have the ability to  not pay it off and full at the end of the month.

[00:14:50] So the regulations were very, very, uh, intense. So, You had to figure out how to build the product around those regulations. Uh, the second is the capital [00:15:00] constraints. Now, uh, keep in mind  our bank balance was going down, uh, rapidly. We had like two, two and a half million dollars at this point. But to build a credit card every time you swipe your credit card is not your own money.

[00:15:12] It's someone else's money, uh, that you are, uh, using until you pay them back. Uh, so you had to float all this money, uh, for like 30 days minimum, and then could be like years maximum if someone decides to carry a balance. So the capital and back in p Covid, uh, where, uh, people didn't know if the debt markets would  survive and how would they behave?

[00:15:34] You didn't know how you would get access to that capital. Um, and I think the third and the most important one in the end was, uh, there wasn't access to a processor,  which you can rely on to build the rails of the credit card on. Uh, so companies like Stripe and Marketta, they do not support, uh, consumer credit cards.

[00:15:51]  actually all the, all cards out there from Chime to, uh, square and stuff, they use Marketa or uh, Stripe in some shape and form. But neither of [00:16:00] those companies offered a consumer credit card, so we had

[00:16:03] Todd Jackson: basically like you're finding how difficult it is to create a new credit card. What was giving you the confidence that like this was a good thing to do? Like you mentioned that you wanted to kind of get away from some of the seasonality and other things that were impacting Thrive problems that you wanted to solve in the business, but how did you know that consumers actually like wanted a new credit card or there was space for a new credit card?

[00:16:24] Deepak Rao:  this was where we got very, very lucky. Uh, we, uh, had underwritten, uh, thousands of college students, uh, based on like a personal loan product. So, uh, we had access to their credit reports.  and we used to monitor their credit reports as a part of just underwriting on a monthly cadence.

[00:16:40] And a lot of,  our first  or the second batch of the students that we had underwritten, they had graduated. Almost always about like, I would say a hundred percent of the times, uh, within like, uh, the first six months of graduation, uh, people would apply for a credit card and you could just see that they were, uh, getting inquiries for a credit [00:17:00] card and a lot of people were actually getting rejected.

[00:17:02] That was like a key insight where we saw where a lot of people try to get your Amex  or like Chase,  Sapphire card and a lot of them, they won't get

[00:17:10] Todd Jackson: Oh, so you saw what? What you thought were kind of creditworthy, people getting rejected

[00:17:15] Deepak Rao: Yes, exactly.  these were folks who had jobs at Google. These were folks who had like an, uh, job at, uh, Goldman Sachs, and they would apply for an American Express card, uh, right after graduation or during like that time, and they would get rejected.

[00:17:28] So they all had to take these, like very low tier cards with really small limits. We actually saw the limits of the cards that they were getting approved for. Uh, and those limits were actually lower than the loan that we had given

[00:17:40] Todd Jackson: Oh wow. Okay.

[00:17:41] Deepak Rao: we knew there was like a huge  opportunity there where, uh, if you are, uh, graduating from any college and you have a job  in consulting, banking, tech, education, uh, Whatever, uh, earnings you were making,  they did not have access to those earnings to be able to underwrite your, um, profile.

[00:17:58] And they would give you a credit card with [00:18:00] a limit of thousand dollars, $3,000, where we could have given them a loan of up to $10,000, even like $15,000 in some cases. So we knew there was a huge mismatch. Uh, we remember talking to this one individual. He was at duty, Austin. Uh, he got a credit, uh, limit of $1,500 and uh, he was a software engineer who wanted to buy a laptop.

[00:18:19] Uh, he couldn't buy a Mac on his credit card, uh, cuz the new Mac with, you know, like the core process there, about like 1800 bucks. He, he couldn't do it on his credit card. Uh, this was a person who had a job at Google who was getting paid an engineering salary. Uh, but the credit limit wasn't enough for them to be able to buy a laptop even.

[00:18:37] So I think those were some of the things where we started,  looking at the data and then talking to the existing customer base. We knew that okay, there's a huge opportunity

[00:18:45] Todd Jackson: Yeah. What were, what were people saying? Cause it sounds like you saw a lot of signal in the data, like, these people are applying for credit cards, they're either getting rejected or low limits because, you know, the insight is like, you should underwrite these people on their future income rather than, you know, whatever credit history they have.[00:19:00] 

[00:19:00] And so the data was telling you that, but then did you start to actually like, talk to users and, and hear the stories yourself?

[00:19:05] Deepak Rao: Yeah, I think so. Uh, when we, uh, we did a lot of research. Uh, so again, I think some of the things that  benefited us where we had this  access to this huge customer base, uh, from the existing business, which was still a relevant customer base for us. Uh, and, uh, we used to turn a lot of surveys, uh, and we had access to this entire college directory.

[00:19:23] And you can, if you remember at that point, people didn't have much to do. They were not going out or like doing much. So you would send out surveys and people would fill out surveys on like, how are they deciding the next credit card? Uh, and the teams were very, very common. I think the, apart from the obvious things like rewards and like no annual fee and so on and so forth, uh, the two key things that almost every person  wanted was either high limits and like making sure the crowd was extremely transparent.

[00:19:47] It was like unanimous. Every survey we ran, uh, apart from points and  no exorbitant fees, which was just a given at that point, the two things that they cared about were, uh, limits. Uh, and then credit [00:20:00] card that was extremely transparent.

[00:20:01] Todd Jackson: in terms of, of fees.

[00:20:03] Deepak Rao: Yeah. In, in terms of just fees and like interest. It's not predatory.

[00:20:06]  You can like access your information online. They are not like trying. Uh, charge your late fees behind the scenes and so on and so forth. So, uh, everyone has heard some stories,  which  have negative connotations attached to it, so they just wanted to make sure that they are like, uh, working with an instrument that they can truly trust.

[00:20:21] Todd Jackson: Okay. That makes sense. So how many surveys did you run?

[00:20:26] Deepak Rao: I would say we had data for thousands of, uh, college students at

[00:20:29] Todd Jackson: Okay, got it. Okay,

[00:20:30] Deepak Rao: thousands of college students, and then, uh, did a lot of qualitative research as well. Almost every day used to talk to like da. And so, uh, college students, uh, upperclassmen, even people who had graduated and had these jobs who did not have a good credit card, even back even then, they were working at Google, uh, had these like, incredible jobs but had like really bad credit card.

[00:20:49] Uh, so that was, that basically gave you motivation and that kind of kept you going even against like all the odd. Where no one had built a credit card. None of the companies [00:21:00] that you admire like Stripe are supporting a credit card. You, we did not have capital. Uh, it was heavily regulated and it would have taken at least 18 months to get it out and running.

[00:21:09] But, um, I think maybe that was just like a little bit naivety. I don't know what it was, but somehow you just like knew that, okay, whatever we are seeing, there's a unique insight here and we should just keep on following through

[00:21:21] Todd Jackson: I mean it sounds like you had discovered, gosh, this is gonna be really hard to do, but we've got a ton of conviction that it's a good idea based on the data that we we're seeing in the surveys and talking to people. How did, like at, at one point where you're just like, we know it's hard, but we just have to do this.

[00:21:36] Like when, when was that moment of sort of conviction for you?

[00:21:39] Deepak Rao: Yeah, I think we, uh, that was sometime in, I would say May and June. We, like, we knew we have to do it. Uh, we knew if the business has to survive, we need to build a new product.  we didn't have any better ideas. We didn't have any more, uh, insights. We knew that this is it, uh, and we have to figure out a way to do it.

[00:21:53] Uh, so I think around that time,  even though, uh, we had, uh, paused, originating from Thrive Cash sometime in March [00:22:00] or April, um, but I think this two months of like slow rollout, slow, just like letting go of the older company, it still took a little bit longer, but I think  by around June, every single person in the company was only working on one thing, which was the credit 

[00:22:13] Todd Jackson: Oh wow. Okay. So yeah, it was, it's, it's like you were very decisive almost, cuz you had no choice, right? Like, this is, this is the path forward, or, or we're gonna, we're gonna shut down almost.

[00:22:21] Deepak Rao: Basically, yeah, I think, yeah, it was, it was that close for us. 

[00:22:24] 

[00:22:24] Todd Jackson:  So that, so now we're sort of in like the second half of 2020. Sounds like what? Take us through that time period.

[00:22:31] Deepak Rao: Yes. So, uh, it was, uh, extremely challenging because in order to build a credit card, you need to go partner with the issuing bank, uh, because, uh, in the United States, you cannot issue a credit or a debit product unless an issuing bank is gonna, uh, be a sponsor for that. Uh, and, uh, we just did not have enough money for them to feel comfortable partnering with us.

[00:22:53] Uh, we went into, I would say, dozens of banks out there, uh, to see if anyone would partner with [00:23:00] us. Um, we had no leverage. No one gave us a term sheet, uh, because, uh, they said, oh,  you don't even have couple million dollars. Uh, it's a heavily capital intensive business.  even the covenants that they had, like that, you need runway for 24 months and so on and so forth.

[00:23:14] We could not meet any of those. Um, so that was the critical piece and you cannot do it without the bank. Uh, so I think at that point we made a decision that we will do everything else without the bank and we'll figure out the bank later. Uh, so we started, uh, working on the design of the card, how it would look, how it would feel, um, and uh, we started working on a processor.

[00:23:33] Uh, so we ended up working with this company called Pfizer. Uh, they're a public company based in, Nebraska at this point. Um, and they, uh, are the, uh, our processor for the card. They, uh, work with the likes of SoFi, uh, city, um, even Capital One. Uh, and uh, that was the company we picked. Uh, we did a deal with Visa, so we did everything around, uh, the, uh, bank and, uh, even though bank is the [00:24:00] most critical piece of it, uh, but, uh, we were like, we have to start making some progress, uh, to be able to, uh, see if this is

[00:24:06] Todd Jackson: What, so and so what was the plan? Like, Hey, we'll we'll try to build everything around the credit card except the, the critical issuing bank  and we will, what we will, you know, get interest for that credit card and then we'll raise funding and then we'll be able to go to the issuing bank. Or what was the, what was your

[00:24:22] Deepak Rao: Yeah, it, I think that was it. Basically, we were like, okay, we don't know if this is gonna work or not. We need demand, we need validation. Uh, so we were  okay, let's  get the card like ready. Let's see what is possible to build in this card. How do you write a product brief? You get all that  information and then you just announce the card.

[00:24:36] Without having anything built. Uh, and then see if people, uh, wanted or not. Uh, that was very, I don't think anyone, like, most don't, people don't do that. We literally had nothing, uh, at the time when we announced the card cuz we knew that, okay, if we had to build this best product out there, let's conceptualize it, uh, at least design it and see how it looks and feels.

[00:24:57] Get the branding right, get the uh, messaging right, [00:25:00] get the product spec right. Uh, with literally no base behind it, like without building any of it. And then just announce it. Uh, and if it works out, uh, then we have leverage, then we can go, uh, to banks and be like, okay, there is demand for this product.

[00:25:15] Todd Jackson: Wow.

[00:25:15] Deepak Rao: or we could go raise more money.

[00:25:16] So I think that's the strategy. I think we were kind of forced into that strategy cuz that was the only way out basically.

[00:25:22] Todd Jackson: Okay, so let's, let's talk about all the like, kind of major things then leading up to this announcement. Um, when was the announcement?

[00:25:28] Deepak Rao: Uh, the announcement happened in September 17th, 2020.

[00:25:32] Todd Jackson: Okay. Oh, so pretty fast.

[00:25:34] Deepak Rao: Yeah, it, it was, I think within like a couple months basically we, um, had to decide on a name. Uh, we had to

[00:25:40] Todd Jackson: Yeah. How did you, how did you come up with the, with the name X one?

[00:25:43] Deepak Rao: The, it, it was very challenging. Uh, the name Thrive Cash, just like didn't feel like a good name for a credit card. Uh, and, uh, I think, uh, as one of the things we learned during the pivot process, uh, as we were doing more and more  reading and just, you have to let go.

[00:25:58] That's the hardest part. I think the more you like, [00:26:00] hang on to the older thing. The basically higher your odds of failure are, you just have to let go. Uh, I remember like reading a lot of, uh, Things about Stewart Butterfield and how he, cuz I think he has done two,  of the most successful pivots out there.

[00:26:13] So, uh, very famous ones. And David Sachs had did one with Yammer, I think they started at Genie and they ended up doing Yammer. So I think the common  thing for any  success was you just have to let go. So we decided, okay, we gotta like, just let go of Thrive Cash. We cannot  use this name, we'll just like start from scratch.

[00:26:29] We'll come up with a new name, uh, a new identity. Um, and the naming is really hard. So, uh, if you, uh, follow the industry or if you search for any credit card, like series out there or any name that you can come up with. People have like taken those, if you want to come up with colors, like cuz all cuts are a series of cuts.

[00:26:47] So if you can come up with colors, tones, mountain peaks, like anything you can think of, everything's taken, everything end to end. Uh, so there was literally, that's all credit card companies too. They just have a bunch of marketers who just come up with new [00:27:00] unique names. So almost nothing was available, so we had to have like an empty slate.

[00:27:05] Uh, we had to come up with something which did not mean anything, uh, cuz then we could  brand it and fill it however we wanted to. And  uh, if you read the Nike book, I think it's called Shoe Dog, where they talk about the, like key characters to use when you're naming companies.

[00:27:19] Uh, and I think when he was coming up with uh, Nike, I think there were three characters. There was one, I think it was k uh, X, um, cuz like Clorox had that brand like Nike. And there are some of these characters that are uh, that are just much more memorable and uh, make your brand more like recognizable, especially from a consumer product standpoint.

[00:27:38] So we started like, uh, thinking about, okay, what kind of characters can we use, which don't mean, uh, much, uh, which are like strong like an X or a K. Um, and then we also decided to see if we could have a series of cards, which uh, cuz we eventually wanna build more cards for people, which could easily like translate into a series.

[00:27:58] So, The [00:28:00] first iteration of the Cotton name we came up with was number one. Uh, we were like, is it really unique? No one was gonna call their company number one. Uh, it was the dumbest idea out there because uh, every time we would tell anyone that we were building one, they would like, oh, is it O one or is it number one?

[00:28:17] Um, and it was just like, oh, that's not gonna work out cuz how would you tell like your employees where you work, how would they tell their parents where they work? Uh, so that was like, uh, very quickly, like gave upon it. Then we, uh, we like the, uh, character X, uh, and I think, uh, it's like extremely strong as like a would and a lot of like iconic companies like space, like Chlorox and all these other

[00:28:37] Todd Jackson: Yeah. As you were saying that, I was thinking, gosh, it's like Xerox Kleenex, brx, like there's so many x, you know, names

[00:28:44] Deepak Rao: Yes, exactly. And I think, so we were like, oh, let's just go with X. Um, and um, then we ended up realizing after the fact that Elon Musk owns x.com and we were like, okay, if that's one like person, you don't wanna like build the  name around that. We actually even tried to see if he could buy the [00:29:00] domain.

[00:29:00] Uh, and uh, yes, uh, it was the dumbest thing ever. We asked David to see if he could like, introduce us to Ilan to see if he'd be willing to either invest and give us the domain, because if you, uh, read their, like original thesis around x.com, it was very similar. They wanted to  change financial,  services and he wanted to do it through a bank.

[00:29:18] Uh, so like, oh, maybe he'd be open to doing that. Um, thank God we'd like then go with that name, obviously. Uh, and um, then we were kind of stuck. Uh, and then I think we just like, uh, were iterating around and we just came up with  okay, why don't we just combine X and one and just call it x.

[00:29:35] Todd Jackson: Oh, gotcha.

[00:29:36] Deepak Rao: That was it, that that's how it like came in and um, it might just seem like always in hindsight, but this was like a lot of like, uh, iterations and a lot of searching for inspiration to come up with a name.

[00:29:45] Uh, and X one kind of stuck. Uh, there was clean SEL around X one. No one owned like the next X one company. We actually were able to get X one Inc. Uh, straight up without like any technologies or anything, you literally were able to register [00:30:00] for X one Ink. So we looked at, okay, can we get the legal in? Can we get a domain x one.co was available?

[00:30:06] Um, so all these things started to  go in that direction and. , then we were like, oh, if we want to create a series of cards, we could call it X one, X one, two x x three, or X one A, X one B. There's so many permentations that open up. Um, and then one of our employees told us that,  I think Bell X one was the first, uh, rocket, uh, aircraft where,  I think  it was the first aircraft where,

[00:30:28] The speed of the, uh, uh, aircraft exceeded the sound barrier. So there was like this amazing, like positive connotation attached to the name as well. Uh, so we were like, okay, we're just gonna go with X one. Um, and then cuz the name was very, very important cuz the name had to be printed on the cards. Uh, and the cards are metal cards and the cards take at least, uh, a few months to produce.

[00:30:49] So the name was the, I would say the limiting factor. You had to, had to get the name right because you cannot like, do any of the other branding because it's a physical product. So we actually did this name exercise in  a [00:31:00] compressed two week window. We had to come out of it with a name and a domain and  everything.

[00:31:03] And we just came out with X one.

[00:31:05] Todd Jackson: Wow. Okay. Um, so now we've got the name. And then what about like the look and feel of the card? You said it was metal.

[00:31:12] Deepak Rao: Yes. So,

[00:31:14] Todd Jackson: did you, how did you do the design?

[00:31:16] Deepak Rao:  all the credit, uh, goes to the founding, uh, designer.  we found him, uh, right after he graduated from Stanford. He was this like 22 year old kid, one of the most talented people I've ever worked with. And he had this like eye and of trying to just stand out.

[00:31:31] Um, so he designed our logo. It's the same logo still this date. Um, and  the card comes in a box. He actually was the one who pushed to get a box. Uh, he didn't want the card to show up in an envelope. He were like, oh, we have to stand out. So he was the one who were like, okay, I can do something cool.

[00:31:47] And he had no background in like industrial design, no background, and actually even traditional design. Uh, he, um, just like studied philosophy and was a designer by like, just like, uh, his hobby. And he came up with it. He [00:32:00] came up with the look and feel of the card. He came up with  the packaging of the card.

[00:32:03] And that has still like endured. It's been two years since then. Like everyone loves it. Uh, some of the things that we wanted to, uh, emphasize while designing it was we wanted it to be very, like, memorable and something you could take a photo of. So if you look at our car today, you will notice that there is  no primary details in the front of the card.

[00:32:21] It just says X one and Visa signature, uh, cuz all the name and the number of the card is at the back of the card. Uh,

[00:32:28] Todd Jackson: Oh, and you did that intentionally so that people could take photos of the front of the card.

[00:32:32] Deepak Rao: Yes, I think  cuz we wanted to go viral on social. We wanted people to take videos of unboxing and we were like, oh, they won't be able to do it if you put any like, information, like any PII at the front of the card. So the pi had to be at the back of the card. And we also made it vertical cuz we wanted to stand out.

[00:32:49] So it shows up  in a vertical box. You do an unboxing and you can

[00:32:52] Todd Jackson: Oh, that's really clever. So you unbox it. The card's vertical. It just says X one card on the front. There's no

[00:32:58] personal information, and so [00:33:00] people were taking photos of that and posting it like on Instagram.

[00:33:03] Deepak Rao: Yes, absolutely. Even to this date, if you go to Instagram, TikTok, um, YouTube, you'll see dozens and dozens of videos of people like, uh, taking photos of the cut and then unboxing the cut. Even on Twitter, like almost everyone does it.  they take a photo of it and either they send it to a friend or like they post it on social.

[00:33:18] Uh, so that was like, uh, something again, coming back to like the product, uh, DNA of the company, we wanted to make sure that like, uh, we at least relied on these, uh, intuitions that we had, like learned from past lives that you have to create something which is more memorable, uh, and is more shareable. So that was something which was, uh, at least thought through, um, and made sure, and in two years, fast forward still like, uh, continues to work

[00:33:42] Todd Jackson: Yeah. Do you think those things are, you know, obviously the visual appearance and, and of the card and being shareable and soci, but what about like the, the feel of it, the weight, the material? Is that stuff important to.

[00:33:53] Deepak Rao: It is, it's absolutely very important.  most people, I think if you, uh, in like our network will have either an Amex Platinum or [00:34:00] an Amex Insure card, they also have like a heavier metal associated with it. Uh, and then we did a lot of reading and research around what  motivates people and is way to status of symbol and like premiumness.

[00:34:11] So we found out that the first Beats headphone, uh, that were created, they actually put additional weights on the sides of the headphones. So they seem heavier even though they're not that heavy. And to this day they do that. Um, so it's one of those things where, uh, you stuff you associated with, with being premium, uh, just more durable and like, more  prestigious.

[00:34:31] So, uh, we wanted to go with like a metal cut, which, um, makes a sound when it, you hit it on like a dinner table. Uh, it's not just a plastic card. It  truly, truly stands out. Um, so that was some of the, uh, motivation behind,  going with the metal cut.

[00:34:46] Todd Jackson: Okay, cool. So now I feel like we got the name, we got the design. Did, are you ready to like announce now or  what were the final steps leading up to the announcement?

[00:34:54] Deepak Rao: I think so, uh, the final steps leading up to the announcement, like, okay, what are the product spec? Is it a no [00:35:00] annual fee credit card? What are the reward structures? How would it differentiate? What is the tagline? Um, so I think we have to figure all those, all those out in parallel, uh, while like, uh, aligning on like, uh, announcement date.

[00:35:12] Uh, so we did two things. We  had like a little bit of money, so we were able to get a PR firm on like a couple month contract. Uh, and we set up an embargo date with them. And that date ended up being September 17th. I think this was in like, uh, mid August. Um, and, uh, myON and I were working with the designer to just like get the perfect landing page out there.

[00:35:33]  we have no data,  literally no way to know if this will all work out. And you have to write this like, Product brief in the live on a website with literally  no understanding of whether this will even be possible, whether you could do it in the end or not.

[00:35:47] So I think we had to take this huge leap of faith, uh, and we were like, okay. Uh, We're gonna write the perfect product brief, uh, from first principles. If we had to build the perfect credit card, how would that look like? Uh, how would that [00:36:00] behave? Uh, and how does it need to be jaw dropping? Cause I think that's one thing we learned, and I've learned that from you as well, where most consumer products have to be jaw dropping.

[00:36:08] Otherwise,  like if they're just lukewarm, they will never like work out. So everything about it has to be jaw dropping. It had to be an incredibly amazing landing page where you go there for the first time, even you either hate it or you love it, but you will a hundred percent talk about it.

[00:36:22] So I think that's the kind of emotions that we were trying to  get out of individuals. Uh, if you actually go to our website, you will notice at the very bottom there's this section where you can play the sound that the card makes when it hits the table. Uh, it's.

[00:36:35] Todd Jackson: like the, the clanking sound of a metal

[00:36:37] Deepak Rao: yeah, the, the clanking sound of it.

[00:36:39] So we, we put all this effort into it cuz we, we thought, okay, this is the perfect way to stand out. Uh, and, uh, we had to come up with a tagline. We didn't wanna go with anything traditional. Uh, and we wanted to go with something that, uh, shows people that, uh, it's built by a technology company. Uh, so we had landed at the smartest credit card ever made.

[00:36:58] Uh, these were very bold [00:37:00] statements, so, uh, could be like a little bit hyper bold, but, uh, we said we're gonna like, own it.  We're gonna design the perfect product and, uh, we'll just see if it like, resonates with

[00:37:10] Todd Jackson: and then, and then before you went live, so you went live on September 17th, you said 2020. Before you went live, did you, cuz you said, you, you, we wanna make this jaw dropping. And I'm always a big proponent of like getting user feedback and with a small number of users and seeing like, is this jaw dropping or not?

[00:37:26] Like did you, or did you just go for it?

[00:37:29] Deepak Rao: Yeah, I think so. We basically, we were doing some usability testing, uh, and I think the first version of the product from like a, um, economic standpoint used to have a $95 annual fee. Um, and, uh, that was a little bit lukewarm. That was the only part that  people were hesitant about cuz they, uh, it was a new product.

[00:37:47] It will have higher switching costs if you like, commit to a $95 fee from the get go. Um, and I think that was the only part which we weren't fully, fully sold, uh, by. And then we also used to ask like, the team internally, would you drop your American Express and go to this [00:38:00] card? And there were some hesitation and you know, people are not, people try to be very polite, uh, when they're giving you like, uh, fee feedback.

[00:38:06] Uh, so I think that was the last  thing where, um, a week before the announcement, uh, we actually changed the structure and made it a no annual fee. Just one week before the announcement with no data,  we knew that this was not jaw dropping, and if you remove, the animal feed will become jaw dropping.

[00:38:21] Um, and uh, this happened a week before it, so our PR firm had to go back to all the journalists and they had to change the, like, uh, spec of the actual product itself. Uh, but, uh, I think internally we knew, uh, and like I think you have to trust your instinct and like God, during these like, uh, phases as well, we knew that okay, this will, this will be it.

[00:38:40] Uh, people would like, uh, end up using it. And then this amazing thing happened, uh, two days before, uh, the announcement was about to come out on September 17th, there was a Reddit thread on the God, uh, this person, uh, wrote a Reddit thread saying that, Hey, I came across this card called X one. Is this real?

[00:38:57] Todd Jackson: Oh, because you had, the site was already up. You just hadn't

[00:38:59] announced [00:39:00] 

[00:39:00] Deepak Rao: was already up. Yeah, the site was up. We had the site ups couple days ago and someone found it. Um, and we were constantly derating on the site at the same time as well. And, um, and my general like impression with Reddit is like, people are very, very opinionated. Uh, they will either like, really like you or they really hate you.

[00:39:15] So, uh, from  the thread that we saw, it was very, very well debated. It people were in two camps. They were either really liking it or really hating it, and they were kind of going after each other of how this could be like, cool how this underwriting could be really cool because they're looking at income.

[00:39:30] Because we had learned all that from the previous product, how this branding is good, how are they offering this for no annual fees. Uh, this just seems like insane.  So I think at that moment I personally knew that, okay, this will work out. Uh, but I could never tell it to anyone in the team because you don't wanna over promise, uh, because you have no data.

[00:39:48] 

[00:39:48] Todd Jackson: 

[00:39:48] Deepak Rao: 

[00:39:48] Todd Jackson: 

[00:39:48] Deepak Rao:  And I think some of the people are like, oh, these guys are gonna run outta money. They just don't know how hot it's gonna be. No one can like build this, like what they're trying to offer. So like, oh, that's the kind of sentiment that we're like, uh, hitting basically, 

[00:39:58]  so I think that was the [00:40:00] thing that at least gave me confidence at that point. Uh, that, okay, we'll be fine. Like, some people would like this, the announcement would go well. Um, but then the announcement went like to  a level that we could have never, uh, anticipated.

[00:40:13] Could have never, yeah, just couldn't even dreamt if she even asked me like a day before, what would be like the most number of people I could, we would like call it a success and

[00:40:22] Todd Jackson: Wait, so what actually happened on like the morning of September 17th, the, the press article went live

[00:40:27] and then everybody, and now there was traffic to the website.

[00:40:30] Deepak Rao:  so basically, uh, some of it was like, uh, crafted. We wanted to do as much like, uh, buzz and awareness around the product at that moment. So, uh, we picked the date, September 17th. We put together a wait list in order to get to, you had to like, just sign up for a wait list. Um, and uh, September 17th at six in the morning, tech GR came out with an article.

[00:40:49] Uh, they were the first article that came out about the card. Um, and, uh, by noon that day, there were a thousand people per second, uh, who were trying to sign [00:41:00] up for the wait list. Uh, Our website crashed. We had done all this uh, stress testing. Uh, we had not anticipated, obviously, these amount of people. And we also, uh, did a few more things, which kind of worked in our favor where we, uh, we have really good group of investors who have really large Twitter following.

[00:41:18] So we did like a, a tweet storm from the cod, uh, from like the official account and had everyone cowe that, um, just so they could like, see the features. And the, the tweet storm was also, it really stood out cuz the, it had the same video of the card dropping and making a sound, uh, which people, uh, did not know why we were doing that.

[00:41:37] But it led to a lot of debate. Um, And then a bunch of our investors, I think including you, also tweeted about it throughout like the day. And, uh, it just like went viral. It started trending on Twitter. Um, uh, mark Andreson followed me. Chima Poll, Padilla tweeted about it. I've never met those folks. Uh, and  suddenly just like the flywheel kind of like moving, I got like all these friends from like high [00:42:00] school and like college texting me about it.

[00:42:02] It, it was just incredible. Like by the end of the first week we had more than 200,000 people on the wait list. Um, and, uh, it was just absolutely insane. It just like, um,

[00:42:13] Todd Jackson: at Deepak, what do you think? It sounds to me like it was the combination of a really cool, well designed like great looking card, a high limit, awesome rewards, like smartest card I've ever made and like no annual fee. And it was like sort of like the combination of those things that made it jaw dropping

[00:42:31] Deepak Rao: Yeah, absolutely. and you could cancel subscriptions in a subscription payments in a click of a button. You could actually spend anonymously at a merchant if you want to. Um, and we did not know how we would do it

[00:42:42] Todd Jackson: and you hadn't built any of these things.

[00:42:44] Deepak Rao: no, no, we, and, uh, we just figured out, I think, so that all credit goes to my co-founder. He just like figures out how to do these things. We just made all these bold promises and to this date, everything that was posted on the website, um, we actually delivered almost all of it, so didn't have to [00:43:00] take anything back.

[00:43:00] You can actually spend anonymously using our card. You can cancel subscription payments in a single click of a button. You can give cards to your spouse, your, uh, like significant other to your parents, uh, to kids like you can do anything that we just like had conceptualized back in 2020. We ended up building all of it.

[00:43:18] Todd Jackson:  so then let's talk about the weeks and months kind of following this like epic announcement. Um, where now it's like you've got all this demand, you know, it's demonstrated now you gotta build this thing, ship this thing.

[00:43:30] Deepak Rao: Yes.

[00:43:31] Todd Jackson: that work? Oh, and at this point we still don't have the issuing bank, right.

[00:43:34] Deepak Rao: we still don't have the issuing bank. No, we still don't have the is issue bank. So when the announcement, uh, went out, like, uh, the journalists always were asking us like, oh, who's the issuing bank? ? We did not have the name behind it. Uh, so we told them we're gonna disclose it at a future date.

[00:43:47]  I think at that point we, uh, the, the demand of the wait list and the card was incredible. If you, I think if you compare it to Robin Hood, Robin, who had about 50,000 signups  to their  product in the first week we had about [00:44:00] 200,000.

[00:44:00] So that was the, uh, that was the biggest like, uh, signal for us. And, uh, we felt that this was enough for us to go actually raise a proper Series A so we have enough capital to be able to go back to the banks, uh, and then like show them that okay, we have the funding to be able to go through like the next few years.

[00:44:19] So I think that was the first thing we did. I think we, uh, we announced the account on September 17th. Uh, Next week we started fundraising. Uh, we closed around in October 15th, uh, like, uh, 12 million savings day. And, uh, then we, uh, started like, uh, shopping the issuing banks around.  I think we got about eight term sheets now, uh,

[00:44:40] Todd Jackson: Oh wow. So what a difference. So it was the combination of this like really, you know, amazing launch plus the series A funding and now all of a sudden they wanna partner with you.

[00:44:49] Deepak Rao: Immediately it all changed. I think they gave us incredibly, uh, generous terms. Uh, we, one of the banks also gave us a facility to be able to fund the receivable so we don't have to use our own [00:45:00] capital, uh, which is why we can support 60 million of spend by only raising $12 million. So, um, that was, uh, that was the key moment I think, where it's one of those things.

[00:45:10] And I think it just took like longer to realize at the end of the day, market wins. I think you can do everything.  You can like save whatever, but if you have demand and if customers are using it, everyone like, I think everything kind of falls into place from there onwards. So, uh, just from like September 17th to like October 15th, we had like, uh, funds in the bank.

[00:45:30] Um, we had like a term sheet with the bank signed before the end of the year. Uh, we had the first card, uh, to like the employees done by March. Uh, me, my younger brother, he was the first external card holder who got the card. Uh, and yeah, and in October we just started giving it out to the wait list. Um, so it just like, I think the flywheel started moving from there onwards, but, uh, it was incredibly hard.

[00:45:55] I would say  would have not anticipated that it would work out this well. Um, but uh, [00:46:00] yeah, it was, it was one of the hardest things I think we had to ever go through cuz you had to let go of like, uh, the product that got you to that stage. You had to let go of the people and all that was just incredibly hard for us to do.

[00:46:12] Todd Jackson: If you could boil this down Deepak into like a couple pieces of advice for, for founders today who are kind of on this journey to product market fit, you know, the, the winding path to product market fit. What would some of those be just based on your learning?

[00:46:27] Deepak Rao: I think one on the consumer product side, uh, I can give feedback on the consumer product side cuz I'm not an enterprise or a SaaS person, but I think on consumer, consumer product market fit, I say maybe 20 times, like 50 times harder than like, let's say an enterprise product market fit.  it's extremely elusive.

[00:46:43] Um, and you generally like find out very fast.  I think you can continue to iterate, but there's always gonna be a moment where you will have escape velocity. If you think of any companies that you have admired all the way from Google to Facebook, to Snapchat, any  consumer companies, I think.

[00:46:58] They just have this escape [00:47:00] velocity  really fast, which means it resonates really, really well with individuals very fast, or it's resonating with like a small amount of people, but it's very, very, very engaging.  like a Twitch or a Pinterest goes in that like bucket. So you have to look for signals that are not look warm.

[00:47:15] Um, I think that was the other thing. And I think, uh, the first product, uh, now in hindsight, we used to think was very successful. We were doing about $25 million in year in terms of loans. We now do over 60 million in spend every month. So the sheer amount of scale was completely different. So I would say that's the first thing.

[00:47:33]  if you're working on a consumer product, uh, and chasing that elusive product market fit  lukewarm is not enough. Uh, it's very binary, uh, for any signals that I have like seen, I think. And you try to like convince yourself that the lukewarm is the right thing, but most often than not, it isn't.

[00:47:48] You just have to have escape velocity faster.

[00:47:52] Todd Jackson: That makes sense. So  if you were starting a brand new consumer startup today that had nothing to do with credit cards or lending, what would your [00:48:00] process be that kind of like, how do you look for that elusive product market fit and, and really find something that you're, you're describing extreme product market fit that you know quickly, whether you have it or not.

[00:48:09] What would you do? What would your process be?

[00:48:11] Deepak Rao:  it has to come in from an internal like, uh, viewpoint. It generally cannot come from like a research. I think research, uh, generally in a consumer product, people do incredibly good jobs at doing usability research. And like, I think that's the kind of stuff research is really helpful for and like validating your feedback but not to like get  the idea in the first place.

[00:48:31]  that's something that we learned where you cannot rely on research to come up with ideas. I think that's  very consulting. Uh, you have to just like, uh, have the idea either through your own experiences or your own  intuition or own gut or own  upbringing. And then you just have to  put forward that idea in  the fastest  uh, and easiest form factor and get it validated quickly.

[00:48:52] So I think that's primarily it. I think I used to over-index on research in the early. And I think research would've never, uh, [00:49:00] led to Tesla's founding or Pelotons founding, or even the iPhone just won't have happened. So I think you have to have some intrinsic thing that you're chasing, uh, based on whatever you have learned in life or seeking.

[00:49:11] And then you just have to go do it in the fast amount of time and then use research to validate it and iterate on it. I think research is immensely valuable for the latter. It's not valuable for the former. Uh, you cannot go and get the idea based on research. So I think that's, that's how I would  approach it today.

[00:49:28] Todd Jackson: That makes sense.  And so,  talk about a little bit about X one today. You know, you got the cards in people's hands. It sounds like they're, they're using it very actively. What, what are you guys thinking about today and, and sort of how are, where are you taking the product?

[00:49:42] Deepak Rao: Yeah, I think the, uh, the business has matured  significantly over the last year and a half.  it ended up from being a product to a business. Uh, uh, today, uh, we do about $3 million in revenue every month. Uh, we have, uh, almost, uh, I think 35 employees. We have full on like mature functions of [00:50:00] finance and risk and legal.

[00:50:01] So it has just become a proper, scalable business and the market is really, really large. So I think our, where we are today, our biggest priorities are to just like, grow in the most organic way possible. Cuz to this date we don't do any paid marketing. It's still organic, it's all word of mouth, which is rare for a consumer product and rare for a consumer FinTech product.

[00:50:23] Um, so, uh, we want to just like continue to  expand on that and serve as many consumers as possible. Cuz I think now, uh, We're operating at a really significant scale. I think in terms of analyzed volume, we are close to a billion dollars, I think about $750 million in analyzed volume.  close to $40 million in analyzed revenue.

[00:50:43] So the, uh, the business is, uh, very different from a wait list with no consumers. So, and it just all happened, I would say, in the space of 16 to 18 months. So it just, um, yeah, it happened way faster than we had anticipated. So now I think we're, we're just kind of keeping up and like [00:51:00] trying to just make sure that, uh, we can, uh, take full advantage of the opportunity, which is so large because.

[00:51:06] Millions of Americans still don't know about us. Uh, they still have a subpar credit card experience, and we could do much better for them. So that's the goal. We just wanna serve as many, uh, American consumers as possible to,

[00:51:18] Todd Jackson: Yeah, it's amazing and I, so I assumed we sort of skipped over, but I assumed along the way there. You also raised another funding round after the series A

[00:51:25] Deepak Rao: yes, I, we raised a series B, uh, in, uh, June of this year. Uh, Wesley Chan led around, so that was a 25 million series B. Um, and, uh, that was another more validation like that, uh, we're doing something unique, uh, even in the fundraising climate that like we had gone through over the spring and summer. Uh, we continued to just keep our head down and continue to grow.

[00:51:47] Todd Jackson: Interesting. So it sounds like, you know, just looking back over and again for future founders, the history of the fundraising was you raised your seed round on the Thrive Cash idea and it was, it was working and you had that capital, which got you through the launch, the [00:52:00] announcement of X one, you raised the series A based on the strength of the announcement and the, and the consumer response.

[00:52:05] And then the series B was after the card had shipped and was in people's hands and they were spending with it and loving it.

[00:52:09] Deepak Rao: yeah, yeah. I think Series B was, uh, primarily based on numbers. Um, just like revenue growth rate, uh, and then like the potential of the business. I think Series A was, uh, still like based on this demand without the product. Um, C Round was for a completely different product. So,  those were the different, like, uh, funding, uh, stages for

[00:52:27] Todd Jackson: Is there advice Deepak you have or thoughts that you have just like on fundraising and how founders should approach fundraising kind of from the very.

[00:52:36] Deepak Rao:  in terms of, um, what I personally, uh, saw  couple things. So, Instead of trying to convince someone, uh, whose thesis doesn't match with you, uh, that like, uh, they should, uh, fund you, I think that's just a lost cause. It leads to like a lot of wasted time.

[00:52:53] Um, I think the, the job of fundraising is not to convince someone. I think the job of fundraising is literally to find someone who[00:53:00]  sees the world similar to you. See them. Uh, that's literally it, I think. And,  if you try to chase the, uh, the former, I think it just leads to like a very  long winded process where you're extremely exhausted cuz you're trying to convince someone who doesn't materially believe in  the thing that you are doing.

[00:53:16] So  the job gets much easier if you just find someone who sees the world similar to you. See the world. Uh, it

[00:53:21] Todd Jackson: Did you just learn that by experience or how did you figure that?

[00:53:25] Deepak Rao: I think we, I would say experience, especially after fundraising in the current climate in like June, I think you can, uh, talk to as many venture capitalists as possible and try and like, uh, convince them why you're doing is different.

[00:53:36] And at the end of the day, I think they have a very particular thesis and like a viewpoint of how they see the world. Uh, this changes I think when you are, uh, like a, I dunno, like a 10 billion company and then that's a different kind of mindset. But until then I think it's, um, it's kind of a full seren to try to convince people who  are not sold, uh, in your thesis to begin with.

[00:53:55] So I think for now future fundraisers, I, it's very like, uh, casual and [00:54:00] easy because. I never go pitch again. I just will like talk to the people and I understand what their thesis is about the industry that we're in, how they think about it. And very quickly you just understand now that okay, there's no way they will ever, uh, invest in your company so you don't waste all this energy and diligence of weeks and weeks trying to convince them.

[00:54:18] Um, I think that's the biggest thing that

[00:54:20] Todd Jackson: Very interesting to find investors who see the world the way that you do, rather than trying to convince investors who don't see the world the way that you do that they should.

[00:54:28] Deepak Rao: Yeah, exactly. And I think it just, it just never works out. Like cuz you are like trying to do all this diligence and they will have more cautions and then they'll have more cautions and then you're spending weeks on diligence for someone who's like fundamentally not looks at the world at the way you look.

[00:54:42] And eventually they will always pass if you, uh, try to do that.

[00:54:45] Todd Jackson: 

[00:54:45] Deepak Rao: 

[00:54:45] Todd Jackson:  So Deepak, just wanted to wrap up today with a couple questions,  for you about things that you've learned in the past. Um, what is the best piece of advice you've received and actually used?

[00:54:56] Deepak Rao: Look, I'll give you the most non Silicon Valley answer for, uh, this [00:55:00] one. Uh, so, um, in 2019, uh, I was watching Dave Chappelle get  the mock tw uh, prize.  And I think he had this quote during his acceptance speech where he talked about Miles Davis, who was this incredible jazz composer.

[00:55:14] Uh, and that quote, like stuck with me, uh, uh, for the last  three years. And I wish someone would've told this to me earlier. Uh, So the code goes as follows. It's, it was done by Miles Davis. I think he, he said that it took him years,  to learn how to play like himself. 

[00:55:29]  and  being in Silicon Valley and like, uh, being surrounded by these like incredible like personalities and, uh, people who try to  do things in their own way, you try to like emulate them in some shape and form.

[00:55:40] You have all these success stories of people like  Steve Chops and Chef Pezo is now Elon Musk. So, and I was fortunate enough to be at Twitter to get to work with people like you, like Jack Dorsey, max left, and everyone is so smart and just so like inspiring that you try to kind of emulate yourself to fit how they think.

[00:55:59] But I [00:56:00] think the right way. Uh, and it took me longer than I should have to realize that as you get older, you get better at these things. You just should like be yourself, I think cuz there's no one path to success. Uh, success is kind of an anti-patent and people unnecessarily overfit. Uh, so you just have to  learn how to be like yourself without trying to  mold into other people's personalities.

[00:56:18] So I think that was it. That like, has been the best advice that somehow no one gave me. I wish they would've given me, but I think I have like, uh, learned over the years that for me it works really, really well.

[00:56:29] Todd Jackson: I love that. Great quote. Um, what about books or resources that you'd recommend to founders?  who are, you know, where they are now is where you were four or five years ago, just getting started.

[00:56:40] Deepak Rao: So, uh, I think the things that have benefited me personally, uh, is this podcast called How I Built This.  

[00:56:45] Todd Jackson: Sure. Guy Ross. 

[00:56:46] Deepak Rao: by Giras. Yeah, it's incredible.  cuz you get to like, uh, hear from these incredibly unique personalities who are also different, uh, from like the Chucky Cheese founder to the, like the five R Energy founder to like 1800 [00:57:00] God junk digit to all the way from Brian Chesky and like, uh, the Strip founder.

[00:57:05] So, uh, it gives you like a huge like, array of like different ways to succeed. So that was  something where I found a lot of inspiration from. Um, I love Zero to One as like a book for, uh, as you're starting a company, but I think. The best book for me over the last  few years has been, uh, the founding story of Nike, um, by the founder Phil Knight called Shoe Dog.

[00:57:24]  cuz I felt that I had a long and odd journey to go through the, uh, pivot, but I think they did that for 20, 25 years and like, it was just this incredible story of how to build enduring values. 

[00:57:35] Todd Jackson: Awesome. Deepak, thank you so much. This has been incredible. You know, just hearing your story of the original idea, the pivot, the path to success, uh, and kind of some of these lessons that you've taken with you. Um, and, you know, best of luck with, with X one card and I can't wait for, uh, X two and X three.

[00:57:52] Deepak Rao: Thank you so much. Thank you. Thank you. Uh, thank you for calling me here.