The $2.2B Founder's First Advice | Sadi Khan, Aven

1. 0:00 – 1:40

   Don't Start a Company (Unless You Have This)

   1. SKSadi Khan0:00

      My first piece of advice to most people would be, "Don't start a company." The reason I say that, you know, a lot of people told me that starting a company is really hard. Everyone told me this. I did not believe them. Everyone says this to every potential founder. I have now said this to many founder, and I could see it in the eyes that they do not believe me, that they think, "Oh, how hard could it be?" I do believe it genuinely is very, very hard. I think the most important advice I would give any founder is the level of conviction they should have on deciding this is the problem that they're going to work on should be extremely high. It should be a higher degree of conviction than almost anything else they have ever done in their life to that date. I've had kidney stones in my life, which are very painful and very hard. A startup is a whole new type of hard. It's hard over a very long area under the curve. Look, if you just want to make money, there's a lot better ways to go make money. You should only start a company when you have such a high degree of conviction that this is the most important problem you should solve in the world, that you are willing to go for decades without getting paid, without being recognized, and potentially being rejected by everyone all around you to go work on this problem and nothing but this problem for decades at a time. I'm Sadi Khan. I'm the co-founder and CEO of Aven. We announced our Series E fundraising, where we raised a little bit over $110 million at a $2.2B valuation. This is doubling our valuation from last year. Aven's mission is to reduce the cost of capital for consumers. Today, there's $1 trillion of credit card debt in the United States. Consumers today are paying almost $200 billion a year on just interest payments. Not the principal,

2. 1:40 – 2:51

   Meet Sadi Khan & Aven

   1. SKSadi Khan1:40

      just the interest payments on it. If we can reduce that by 50%, then we will have saved US consumers $100 billion every single year. Our thesis is very simple. We think that unsecured debt in the United States is very, very expensive, but transactionally very efficient to get access to. On the other hand, we think that secured debt, debt backed by assets you already own, is much, much cheaper for consumers, but it's transactionally quite inefficient. Take, for example, home equity. It's the largest asset class that US consumers own today. However, it takes weeks to get access to your home equity, and it costs thousands of dollars in origination fees, both for you and actually for the lender. Aven set out to solve this problem. We built our flagship product, the Aven Home Equity-Backed Credit Card, home equity line of credit in the back and a credit card in the front, with a goal that in as fast as 15 minutes, we want to reduce your interest rate by 50%. Aven isn't stopping there. We're excited to continuously invest in building new and better products that are the lowest cost, most convenient, and most transparent access to capital for homeowners across America.

3. 2:51 – 5:40

   How One Graph Created a $2.2B Company

   1. SKSadi Khan2:53

      About seven years ago, I retired from Facebook and stepped down, and I was taking some time to figure out what I want to do next. Retirement was very challenging for me. I've been an engineer and a product manager my whole life. I felt that I didn't have much value I was creating in society in my retirement time. It didn't last very long. You know, my wife would claim that I was only retired for three months. I would claim I was retired for six months, so the truth is somewhere in between there. But I became excited about this core thesis that I think most people in the world when they're looking to solve problems will end up solving problems that are about helping society be healthier or be wealthier. And if you want to help society be wealthier, you either want to help people make more money or you want to help people save money. One of the interesting graphs I stumbled upon at this time was this actually this publishing from the CFPB, which published this graph, which to this day is actually our North Star graph, and it's a graph that shows that the total revolving balance, the total balance on credit cards since inception of credit cards, has grown to up to a trillion dollars over the last three-quarters of a century. And so this graph kind of just goes up and to the right, and it doesn't seem like it's decreasing anytime soon. But there's another very fascinating line that was overlaid on this graph, and this line shows you the interest rate on this credit card revolving debt over the same period of time. So over half a century, the interest rate on credit cards have actually hovered between 20-ish to 20-ish, 25% for this entire period of time. If you look back in history over this time, we've invented the internet. We've invented all of the modern tech companies we see in Silicon Valley, from Facebook, Google, Nvidia, Amazon. But we haven't been able to reduce the cost of interest on a trillion dollars of credit card debt in this period of time. Heck, at this point, we're inventing entire new currencies, from Bitcoin to Ethereum. But the cost of capital for consumers has really not changed. In the pursuit of helping society be wealthier by helping consumers in America save money, we thought that was kind of ridiculous, and we thought we can build better products for consumers to help them save money. And that's how we started Aven, which is taking the largest asset class that US consumers own, which is home equity, which is also the most inconvenient to access. It costs thousands of dollars to access home equity. And today, it takes about three to four weeks to get access to your home equity. And we decided to make that much, much more efficient by machining this process for maximal efficiency. We were able to bring this down to be almost as fast as 15 minutes with transactional costs that are orders of magnitude lower than anything else in the market, and put it in a form factor that consumers are comfortable and already are familiar with, which is a credit card. And we launched the, our flagship product, the Aven Home Equity Card.

4. 5:40 – 9:00

   What 12 Years at Microsoft & Facebook Taught Me

   1. SKSadi Khan5:42

      Through my time at Microsoft and Facebook, probably the single most important thing I learned is the value of an extremely elite technical team. The differential between the 99 percentile or the 99.9th percentile engineer and the 95th percentile engineer is vast, is not small, is a huge amount. The amount of resources you spend on the acquisition and retention of the absolute best technical talent far surpasses any other investment you should make and can make. When we look for the best technical talent, and at Aven my, and I think the team's, single highest priority is the collection and retention of the absolute best technical talent in the world. There are three main things we look for when we look for great technical talent. The first is raw intelligence. We are unapologetic about looking for the absolute smartest people we can find in the world. We will ask for SAT scores and other forms of standardized tests, as controversial as that may be sometimes. I will personally review transcripts and look at exactly what grades people got on what classes. For engineers specifically, we look for people who've taken courses in operating systems, distributed systems, compilers, games engines, the hardest technical courses one can take, and how did they do on them. And importantly, did they attempt the really, really hardest courses that, that can be taken. Intelligence is massively underrated in how important it actually is in helping build products and companies. So that is our number one and most important thing we look at in technical talent. The second is work ethic. You can have all the intelligence in the world, but if you don't want to apply it, if you do not have the motivation and the endurance to apply that intelligence, you're not gonna create much output or much value to society. And so we look for people who have the endurance, the ability to work hard consistently over time. At Aven, every Sunday at 6:00 PM, our entire leadership team meets to identify and finalize and lock in our roadmap for the next seven days. This allows us to operate with high precision and high velocity, and it gives us a very important thing, which is we should not be wrong in our roadmap for more than seven days, 'cause we revisit our roadmap every seven days to make sure we're working on the right set of things in the right priority order with the right set of people. The third thing that's really important in elite talent is an alignment of the mission of the enterprise, in our case, the mission of reducing the cost of capital for consumers, with the ambition level of that person. Trying to reduce the cost of capital for all of America is an extremely ambitious undertaking. So the person that we need to bring in needs to be super smart, super hardworking, and has to have an alignment with this mission and an alignment with the ambition level of this mission so they can sustainably work on this for a very long time and push the boundaries of how we would achieve this mission day in and day out. If Aven are to be successful, we will drive the single biggest change in the cost of capital in American history, and we need to find the absolute best talent in the world so we can do that. And if we can't find the absolute best technical talent, we will not be successful. And that is why we spend so much of our time and so much of our energy on this specific problem, and it's probably the most important thing I ever learned at Microsoft and at Facebook.

5. 9:00 – 11:03

   Most Founders Don't Know Why They'll Fail

   1. SKSadi Khan9:03

      Aven's flagship product, the first product that we wanted to build, was a home equity backed credit card. The reason it was very important for us to understand the legal and regulatory landscape for this product is because this is a very highly regulated industry. It is both a mortgage product and a credit card product. And it's very important for myself as the founder to have a deep understanding of the regulatory landscape for this product to, A, understand can we build it, and B, to make sure we build it in a safe and compliant way. That's why I went through and read personally a lot of the regulations in this space, whether it be Dodd-Frank Act, CARD Act, TILA, and others. I think it is very, very important for the founders and the CEOs to be very deeply involved in the details of the products that are being built by the company. I think in the case of founding a new company or building a new product, even at a big company, oftentimes the core value is the inventing of something new, something that hasn't existed before or something that hasn't been built yet before. In order to build something new, I think you must first understand the history of what has been tried before so that you can efficiently build something new. Most new ideas are terrible. Most new ideas are bad. There are very, very few new ideas that are actually better than all the old ideas before. And so in order to assess that, in order to deeply grok whether or not your idea is better, it is often very useful to understand what were the ideas, at least the big ones, that have been explored and built before. Why is your new idea better than what has already been built before? And in order to do that, you must often invest the time to understand and learn very deeply about this industry and this domain and all the smart people that have come before you so that you can come up with good new ideas and assess that they are indeed better than what has been built before.

6. 11:03 – 13:31

   Do Half of What You Think You Should

   1. SKSadi Khan11:06

      In the first two or three years of building Aven, we made a series of product decisions and a series of people decisions and a series of process decisions. I think in the product we would've been even more ruthless in prioritizing the feature set that we were building for in the first version. And I think this is, you know, generally true for, for most PMs when they launch a new product. They... If you were to look back and ask any product manager what products they've launched before and what they would do differently, almost all of them would tell you, "I would've cut these, you know, 5 out of the 10 features and shipped a smaller, narrower version of this product to a fewer set of people and really deeply gone into a kind of a more focused product feature set." And so I think that also applies to Aven, and I think it applies to the product that we built. I would've kind of made it narrower and simpler in the first version. The other big thing is in the early days, there were these really funny stories of consumers going through our origination process not sure that this was real, and we would get tickets and calls to say, "We don't know if you guys are a scam or not." And we would have to respond, including sometimes myself saying, "No, we're, we're very real. We're a real company, and we're here to help you get access to your home equity, and we have a real product that you can use." And sometimes it was that ability to talk to somebody at the company and the ability to hear from somebody's voice at the company that gave them the confidence to continue, uh, and go through our application process. Um, I do think one of the interesting things that happened with, with Aven is that we were able to find people who were kind of on the, on the, on the border of potentially considering a home equity line of credit. And many folks were actually sometimes in the process of applying for a home equity line of credit to, to other, other lenders, and then they would see an ad from us and go, "I wonder if this is true. Can I get a home equity line of credit in as fast as 15 minutes?" And they would almost test us out as like a, almost like an experiment to see if this is, like, real. And when they went through the process, they would be kind of amazed and shocked, and then they would actually book an account with us instead of whoever they had started off on a home equity line of credit application with before us. And so that was, I think, an interesting kind of lesson learned. And, you know, many people in the beginning didn't believe that this was possible to do.

7. 13:31 – 18:01

   Why Feelings Are Your Biggest Scaling Enemy

   1. SKSadi Khan13:36

      My ideal form of leadership is one that maximally rational. I observed and, and learned a lot of that from Mark at Facebook. The reason this is important is because being extremely rational is a very predictive behavior. And being predictable as a leader is very, very important because people can then replicate or predict what you would do even when you're not there. And that is important for people to be able to reproduce your decision-making system even when you're not present. And my goal as a leader is to make decisions that are so rational that if everyone else also had the same information that I had, they too would all make actually the same decision. And the two incremental things that I provide as a leader that, let's say, an individual contributor in the company don't necessarily have, is that I have significantly more context and a lot more information sometimes than others, and my job is to actually make sure as many people have that context as possible. And two, I have the privilege of being able to optimize for a much longer time horizon than anyone else in the company. So these two things are the incremental value propositions that I bring to a decision that is not always possible for every single other individual contributor to always bring. But if they were to actually have those two things in their mind, they should be able to compute to the same conclusion that I come to, and that is my goal as a leader. If I were to just make decisions because I emotionally felt like this was a good decision or not, the problem with that, even if I'm occasionally right, they're very difficult to scale. Because if I, I can tell somebody that decision that I felt we should do X, and sure, because of my authority, some people will do X. But when that person needs to explain it to two more people, it is very difficult for that person to explain it to two more people other than just saying, "Well, Sadi feels that way," instead of explaining, "Here's the logic of why we made this decision." And that logic is a very scalable form of decisioning that then you can, like, actually send to a lot more people to execute effectively. And this is really important because a lot of what, you know, an early stage startup or frankly any company does is try to perfect its execution. And the only way to perfect execution is to have extreme clarity. And to have extreme clarity in what we are trying to do, you must often have extreme clarity on why we are doing it in the first place. And I think that clarity must stem all the way from the CEO and the founder to the individual contributor who's working on the smallest and the minutest of diffs that need to go out the door. I think it stems from a philosophy of trying to be maximally rational. The reason for this is, is quite simple. If we were to achieve our mission of reducing the cost of capital for as many consumers as possible, the first most imperative item we must achieve is we must first not die. If we are dead, then we aren't helping too many people reduce that cost to capital. In order to not die, we must make sure we generate profit and are, to a certain extent, a good business. Then we derive, well, how many people can we save how much money for? And that becomes like the maximal optimization function in a sustainable way. And therefore, I think having a very disciplined approach to the profitability of the business while at the same time maximizing our mission is actually quite rational for us to pursue. The most important goal for, I think, everyone and any company and any person is to create a lot of value in the world. And profitability comes from capturing some amount of that value that you create for the company and doing it efficiently. If you kind of think about, like, today there's $1 trillion of credit card debt in the United States. Consumers today are paying almost $200 billion a year on just interest payments. Not the principal, just the interest payments on it. If we can reduce that by 50%, then we will have saved US consumers $100 billion every single year. Our profit should come from savings that we bring to the consumer because that's the value we've created, and our goal is to be profitable by saving people money. And I think that achieves our mission and is very rational and mission aligned to what we are trying to achieve in the world.

8. 18:01 – 24:08

   Kill Decision Fatigue Before It Kills You

   1. SKSadi Khan18:05

      One of my somewhat controversial opinions around decision making is that I really hate pros and cons lists. They're like maybe one level below useless. I think a much more effective framework to make a decision is to first of all lay out what are the axes of this decision that are most to least important to this decision that you're going to make. And then To list out each of the options and to lay out where this option kind of sits relative to that particular axis. So for example, let's say you need to make a decision on what car you want to buy, and, you know, the axes that matter are things like price, things like performance of the car, let's say reliability of the car, and let's say style of the car. Much more effective than trying to build a pros and cons list between like let's say a Toyota Camry or a Honda Civic, is to list out what is your priority of each of these axes. Is it speed/performance? Is it style? Is it cost? Is it reliability? And once you prioritize this set of axes, then you can look at your option space and see which one fulfills the highest order priorities for your decision-making. I'm such a big believer in this. We actually teach this process in our boot camp at Aven. I tell people in boot camp that this is a process that I've used to make almost all my decisions in my life, and I would argue this was also a process that I implemented when I was looking to get married very early on in my life. This is a very important framework to help people make decisions, not just in their professional life, but, but I still think in their personal life. And I think the simple focus away from the options and more into the prioritized list of axes that matter is much more functionally beneficial to the quality of a decision-making. I will add that I wear the same clothes every day, the long sleeve black T-shirt, the blue jeans, and, and the vest. I am a very big believer in simplifying as much of my life as possible. I have a very boring personal life. I live five to six minutes away from the office. I moved my home to be near the office. I don't drink. I don't party. I don't really go out that much. I enjoy spending time with my family. I like to cook twice a week. I have a very kind of regular routine with my family on the specific nights of the week that I cook for my family. I go to the gym, and I work. Because I have a very simplistic life. Another thing that I, for example, like to optimize is my computer keyboard, mouse, and chair layout. And so I have three workstations, one at the office, two in home, and all of them have the exact same mouse, exact same keyboard, and exact same monitor layout so that I can very optimally get to my workstation and begin working instead of setting up or adjusting, you know, my keyboard or my mouse. I mean, you probably know this already. If the keyboard is off by even a millimeter, your typing error increases massively because you have to adjust. One of the reasons our company is located in South Bay and not in like a major city like San Francisco or, or San Jose, is that we want to provide our employees some calmness, some serenity, so that we can focus on the mission at hand and not be distracted by the hustle and bustle of, of around us. And I like to have, like, frankly, a very boring life. You know, I, I think I told somebody this, is if I were to know everything that will happen to me between today and my death, I'll be very happy. I have no need for surprises or excitement. Um, I love boring. Boring is great. If my life could be just boring, I'll be very happy. [outro music]

Episode duration: 22:21