Rebuilding LatAm Banking

1. 0:00 – 0:31

   ARQ's $70M Series B

   1. AEAaron Epstein0:00

      [upbeat music] I am excited to welcome Fernando from ARQ, fresh off of $70 million Series B co-led by Sequoia and Founders Fund. So Fernando, thank you so much for joining.

   2. FTFernando Terrés0:14

      Thank you for having me.

   3. AEAaron Epstein0:15

      Yeah, it's awesome, uh, to have you here. We worked together five years ago, um, in Summer '21 in one of the COVID batches. The app was-- or your product was called Dollar App at the time.

   4. FTFernando Terrés0:25

      Yeah.

   5. AEAaron Epstein0:25

      Now you have rebranded to ARQ. Um, why don't you tell us a little bit about what ARQ does and the current state of the business?

2. 0:31 – 1:09

   What ARC Actually Does

   1. FTFernando Terrés0:31

      Of course. So ARQ provides global accounts for people in Latin America, where there's a massive, um, demand for dollar-denominated financial services. Uh, so you can imagine people who want to spend internationally, people who want to work for a company in the States while they live from a country in Latin America and get paid in dollars, uh, people who just want to have access to a global capital, uh, market system. So we use stablecoins to build that infrastructure and provide that, uh, service to the customers.

   2. AEAaron Epstein0:56

      Yeah. I feel like here in the US, we're so insulated from a lot of, uh, cross-border currency, uh, issues, and maybe, um, for people that are not as familiar with the problem, like, why is that such a big problem in Latin America and, and other places in the

3. 1:09 – 3:07

   The Real Pain of Cross-Border Money

   1. AEAaron Epstein1:09

      world?

   2. FTFernando Terrés1:09

      So perhaps, like, I can give you some examples of customer personas and how they interact with us-

   3. AEAaron Epstein1:15

      Yeah

   4. FTFernando Terrés1:15

      ... and compared to how they did it before.

   5. AEAaron Epstein1:16

      Yeah.

   6. FTFernando Terrés1:17

      So imagine you're someone from, let's say, Brazil, and you're used to traveling. Um, and, and where you travel, you want to shop, uh, and, and buy things. Just because you are not having a proper access to the US banking system, you may have to go through a horrible spread on every single FX transaction. So what should cost you, uh, 100 will actually end up costing you 102, 104, 105.

   7. AEAaron Epstein1:38

      Mm-hmm.

   8. FTFernando Terrés1:39

      Uh, so that would be one example. Another one is, if you think about it, there's many people who work for US companies remotely, um, and, and they need to get paid through, you know, direct deposit. And turns out that if you look at the remittance system, it's built for a percentage fee, uh, system, which is fine if you're sending a small transaction, but if you are receiving, like, I don't know, $5,000 per month in salary, like, 1% of that is real money.

   9. AEAaron Epstein2:00

      Yeah.

   10. FTFernando Terrés2:01

       Another good example would be people who want to be able to invest in stocks, ETFs in the States. Uh, that is not to be taken for granted. So im-imagine if every time you need to invest in a, in a, in a stock in the States, you need to send a remittance, uh, you need to wait for whichever, three to five days for it to settle, and, and, and you're late to buying Dip, right? So, so all of these inefficiencies are kind of the problem that we're trying to solve when we started the company.

   11. AEAaron Epstein2:23

       Yeah.

   12. FTFernando Terrés2:23

       In, in, in time, we actually, what we ended up realizing is that the opportunity was bigger. It was not so much only on the global financial side of the equation, but rather building a product for the top, let's say, 20, 30% of the pyramid, right?

   13. AEAaron Epstein2:34

       Yeah.

   14. FTFernando Terrés2:34

       It's kind of funny because if you look at, at fintech across the last few decades, most of the opportunity has been focused around democratizing access to FX-

   15. AEAaron Epstein2:43

       Mm-hmm

   16. FTFernando Terrés2:43

       ... access to, uh, investments, access to credit. Um, but no one has gone, "Hey, if we were to build a product for the mass affluent demographic," right? Not, not necessarily the top 0.1% of the pyramid, but rather top 30 in terms of wealth.

   17. AEAaron Epstein2:57

       Yeah.

   18. FTFernando Terrés2:57

       How would it look like, right?

   19. AEAaron Epstein2:58

       Mm-hmm.

   20. FTFernando Terrés2:59

       Uh, and so it turns out that the global class is having needs on cross-border banking, but there's so much more beyond that, that, that we need to tackle, right?

4. 3:07 – 4:10

   From Consulting to Startup

   1. AEAaron Epstein3:07

      Yeah. So obviously a huge problem, um, and you guys are taking a unique approach, but go back to the early days and, um, tell us more about your journey to actually starting ARQ.

   2. FTFernando Terrés3:16

      When I was in uni and as-- at some point I, I, I fell in the rabbit hole of, uh, YouTube, uh, and found these videos of, uh, the YC Startup School, you know? And like, um, v-very old school videos of, of YC, which makes it kind of funny to be here today, no? And, um, I remember being like, "Man, like these people, they're explaining in plain English, in very simple terms, uh, how to build a company that transcends, that impacts humanity." And I was like, "Man, it c- it just cannot be that simple, no?" Like, uh-

   3. AEAaron Epstein3:40

      Too good to be true.

   4. FTFernando Terrés3:41

      Yeah, I was like, "There's no universal-- They must be full of shit. Like, it cannot be true. No, I should go to consulting now, where people actually know." Um, which is k-kind of funny to be here today, right? And, but, but anyway, like, uh, I, I spent a couple of years in consulting, and then eventually I was like, "Look, like, I, I need to see how are these people who are actually changing the world." I, I, I got the courage to, to quit and join what back then was a very promising startup called Revolut.

   5. AEAaron Epstein4:02

      Mm-hmm.

   6. FTFernando Terrés4:03

      Which was, um, you know, a London-based, uh, fintech. Uh, it was like, I think it was like Series D. It was 2019.

   7. AEAaron Epstein4:09

      Mm-hmm.

5. 4:10 – 6:03

   The Revolut Years & Crypto Insight

   1. FTFernando Terrés4:10

      It's kind of funny because in reality it was like pretty early stage in many things when it comes to operating, right? So I spent some time in, in the growth team, then moved over to what we call the special projects, focused on making the company, uh, profitable, and eventually became the general manager of crypto. And it's kind of funny because I, I wasn't this sort of like expert in crypto, right?

   2. AEAaron Epstein4:26

      Mm-hmm.

   3. FTFernando Terrés4:26

      So, so my job was, yeah, on the one hand, like operating the business, but also figuring out what was crypto, right? And, and building my sort of mental model of the industry, which eventually became something like sort of two orthogonal axis, one being the asset class, right? Like Bitcoin, ETH, and then also like more like casino part of the equation. Um, but sort of orthogonal to it was the infrastructure.

   4. AEAaron Epstein4:46

      Mm-hmm.

   5. FTFernando Terrés4:47

      And for someone who has spent some time on payments, I was like, "Whoa, we're comparing a local-first system with a global-first system. We're comparing, you know, trust the counterparty and tedious reconciliations with, you know, an immutable ledger, uh, bank holidays and, and which are manual processes with a, you know, 24/7 fully automated system." So I was like, with the commission, there was gonna be a platform shift, you know?

   6. AEAaron Epstein5:07

      Mm-hmm.

   7. FTFernando Terrés5:07

      It's kind of funny because with Michael, founder Alvaro, like we had been working together since, uh, you know, consulting at BCG. And with Zach, like-

   8. AEAaron Epstein5:13

      Oh, so you met before Revolut, then?

   9. FTFernando Terrés5:14

      I guess we've been working together for a like, like, uh-

   10. AEAaron Epstein5:16

       Okay

   11. FTFernando Terrés5:16

       ... so we, we've been suffering each other for long enough already, no? [laughs] And, and also with Zach, um, with, who I met in, in, in Revolut, my, my co-founder and CPO.

   12. AEAaron Epstein5:23

       Yeah.

   13. FTFernando Terrés5:24

       We had been like in parallel brainstorming ideas on, on starting something. Like we, we had the, the idea of, of becoming entrepreneurs like for, for quite some time, no? And, um, so, so when, when, you know, there was this conviction around the, the platform shift on, on, on blockchain, again, not so much as an asset class, rather as an infrastructure-

   14. AEAaron Epstein5:38

       Mm-hmm

   15. FTFernando Terrés5:38

       ... for banks to be operating on at, at scale. My brain snapped back to when I was in, in consulting in Latin America, and I knew that all my colleagues were, you know, traveling with plenty of cash in the suitcase when they were going to the States. W-which, you know, my, my first reaction was like, "What the hell?" Like, who would be traveling with 10 grand of cash in the suitcase or whichever, no? And turns out that, um- You know, access to dollar is something that you may take for granted in the States, um, but, but it's something that in many parts of the world is a luxury.

6. 6:03 – 7:00

   First YC Check, Mexico City Mall

   1. AEAaron Epstein6:03

      Mm-hmm.

   2. FTFernando Terrés6:03

      And, and that's like a perfect insertion point, uh, to build on a platform shift, no? By, by starting with, with, with that need, no? But it's kind of funny because we were not really that aware of, of the whole situation. In fact, um, you know, with the first investment from YC, we just grabbed a flight to, to Mexico City.

   3. AEAaron Epstein6:18

      Mm-hmm.

   4. FTFernando Terrés6:18

      And I remember, um, I- I'm gonna sound like a not, not the smartest person here, right? But, uh, we went to a shopping mall and started to stop people asking, "Do you want to buy digital dollars?"

   5. AEAaron Epstein6:27

      Right.

   6. FTFernando Terrés6:27

      And so people were like a bit scared of us, like what are these-

   7. AEAaron Epstein6:30

      [laughs]

   8. FTFernando Terrés6:30

      ... two up to no's. Anyway, but, uh, funny story, right?

   9. AEAaron Epstein6:32

      Did you sell any?

   10. FTFernando Terrés6:33

       Uh, well, we, we didn't have anything to sell, right? Like, uh, we were trying to, right? But-

   11. AEAaron Epstein6:37

       Yeah

   12. FTFernando Terrés6:37

       ... uh, but like preempting, like we didn't have the product yet.

   13. AEAaron Epstein6:40

       Right.

   14. FTFernando Terrés6:40

       Um, but, uh, but what we did learn there is, is kind of funny because you only learn these things like the tough way, is that it was not only about access to the dollar, but the utility of it. Why did people want it, and what is the job to be done of dollar, no?

   15. AEAaron Epstein6:52

       Mm-hmm.

   16. FTFernando Terrés6:53

       And you see that people wanted to travel and spend internationally, uh, people want to receive, uh, transfers. So it was more of what is the actual use case, what

7. 7:00 – 9:57

   What Customers Actually Wanted

   1. FTFernando Terrés7:00

      is the actual need, you know?

   2. AEAaron Epstein7:01

      Okay, so you got this idea, um, from seeing all the infrastructure that you were building as part of Revolut, and then tying that back to your own personal experience.

   3. FTFernando Terrés7:08

      That's right.

   4. AEAaron Epstein7:08

      Um, what convinced you that this was actually gonna stick and actually gonna work? Like did you know this during the batch when-

   5. FTFernando Terrés7:15

      Yeah

   6. AEAaron Epstein7:15

      ... when you were so early and you were interviewing these people and trying to figure it out, or did that come much later?

   7. FTFernando Terrés7:20

      I, I just knew it was a massive problem.

   8. AEAaron Epstein7:21

      Mm-hmm.

   9. FTFernando Terrés7:22

      Um, I knew that it was worth solving because I had seen what people were doing. When you see people doing weird stuff around a big problem, there, there's always something there.

   10. AEAaron Epstein7:30

       Yeah.

   11. FTFernando Terrés7:31

       But we were completely clueless. No, I, I think like maybe, I think like every founder has their own story, but we were not like so hyper-rational and, "Oh yeah, this is what we'll do, this..." It was more like the FAFO sort-

   12. AEAaron Epstein7:40

       Mm-hmm

   13. FTFernando Terrés7:40

       ... sort of framework, no, where we knew that there was something-

   14. AEAaron Epstein7:43

       Yeah

   15. FTFernando Terrés7:43

       ... and, and that if we spent enough time understanding it and, and going to a root cause of, of what customers need, we'd be able to solve a massive problem, you know?

   16. AEAaron Epstein7:49

       And do you remember, what was your focus during the batch? You were obviously very early. I remember you're trying to build the first version of the product.

   17. FTFernando Terrés7:55

       Yeah.

   18. AEAaron Epstein7:55

       And, and even going live is-

   19. FTFernando Terrés7:56

       Right

   20. AEAaron Epstein7:56

       ... you know, a big challenge for a product like yours.

   21. FTFernando Terrés7:58

       Yeah. Initially we were thinking that it would be like more store of value side of the equation. Um, and, and, and again, like, uh, eventually what we realized is, is, is, is more the utility component, no?

   22. AEAaron Epstein8:09

       Mm-hmm.

   23. FTFernando Terrés8:09

       Um, and that was game changer because once we realized that, and, and, you know, we got the courage, no, to, hey, like, uh, this is what we need to build, this is where we, where we're headed, and then reverse engineer all the steps to get there-

   24. AEAaron Epstein8:20

       Mm-hmm

   25. FTFernando Terrés8:20

       ... uh, made our life way easier. No, but you think about it, building a, a fintech product is not something that straightforward, which is like very painful to be in the cave building that for a few months, you know?

   26. AEAaron Epstein8:30

       Right.

   27. FTFernando Terrés8:30

       Because you cannot get so much customer feedback, and if you ship an MVP that is half-baked, you're gonna get a signal that may not be the best, uh, representation of, of where the product should be going, you know?

   28. AEAaron Epstein8:40

       Yeah. Do you remember how long it took you to actually get live with your first, uh, users?

   29. FTFernando Terrés8:44

       I mean, the, the, the first part was only access to store of value, was like-

   30. AEAaron Epstein8:47

       Yeah
8. 9:57 – 11:19

   Imposter Syndrome Is Universal

   1. FTFernando Terrés9:57

      there.

   2. AEAaron Epstein9:57

      Yeah. And talk a little bit, I'm sure there's a lot of people that are watching this that, um, feel that imposter syndrome themselves. They see a video like this of, you know, a successful founder building a successful company, and I think maybe what's special about you is you would probably respond to that and say, "We've, we're not successful yet. We have not done anything yet." But, you know, to, I think a lot of the people watching, um, they probably aspire to be in the position that you're in and have the company that you have built to this point. Um, how do you overcome that imposter syndrome and-

   3. FTFernando Terrés10:24

      Yeah

   4. AEAaron Epstein10:24

      ... and be able to find the confidence in yourself that actually, you know, you can do this just like anybody else has?

   5. FTFernando Terrés10:29

      Yeah. It's k- kind of interesting, no, because if you reflect on it, maybe here in Bay Area it's kind of very normalized because everyone knows many people who, uh, you know, have gone through a startup, have started their own startup and, and been successful. Um, but that's not something that you can take for granted in many parts of the world, where-

   6. AEAaron Epstein10:44

      Mm-hmm

   7. FTFernando Terrés10:44

      ... where we don't have like so many, uh, cases of successful entrepreneurship in technology that are close to us, right? But, but I, I guess like there's sort of two answers I could give. One answer is there's something a bit positive in always feeling that you're u- under threat and, and you're fighting for survival, you know?

   8. AEAaron Epstein11:00

      Yeah.

   9. FTFernando Terrés11:00

      And, and, you know, day to day, like feeling almost like you're the caveman and there's a lion waiting for you outside.

   10. AEAaron Epstein11:04

       Yeah.

   11. FTFernando Terrés11:04

       Um, that, that, you know, always helps you to reset expectations.

   12. AEAaron Epstein11:09

       Yeah.

   13. FTFernando Terrés11:09

       And all the time have these like sort of survival experience.

   14. AEAaron Epstein11:11

       Yeah.

   15. FTFernando Terrés11:12

       That I'm not sure if it's intentional or rather like a, you know, a kinda like the, the, the result of years or decades, no, since I

9. 11:19 – 12:38

   Never Celebrating Milestones

   1. FTFernando Terrés11:19

      was a kid, right?

   2. AEAaron Epstein11:19

      Yeah. Where does that come from for you? 'Cause I, I think that is actually a quality of some of the best founders-

   3. FTFernando Terrés11:24

      Mm

   4. AEAaron Epstein11:24

      ... is they're just perpetually never satisfied.

   5. FTFernando Terrés11:26

      Mm.

   6. AEAaron Epstein11:26

      'Cause human nature is, I don't know, you guys have grown to more than 10 billion-

   7. FTFernando Terrés11:29

      Mm

   8. AEAaron Epstein11:30

      ... annualized volume.

   9. FTFernando Terrés11:31

      Yeah.

   10. AEAaron Epstein11:31

       And I think a lot of people would be like, "Wow, we're doing really good. Maybe we can chill out." You know? Like that's like the natural human instinct-

   11. FTFernando Terrés11:38

       Yeah

   12. AEAaron Epstein11:38

       ... I think. But also the people that get to that level-

   13. FTFernando Terrés11:41

       Mm

   14. AEAaron Epstein11:41

       ... don't operate that way, and I see that in you. And yeah, I'm curious, like-

   15. FTFernando Terrés11:46

       It's, it's got-

   16. AEAaron Epstein11:46

       ... how do you find that in yourself?

   17. FTFernando Terrés11:47

       It's an interesting reflection. Like, um, we, we've gone like through all these, you know, stages and-

   18. AEAaron Epstein11:52

       Yeah

   19. FTFernando Terrés11:53

       ... w- we've never really celebrated milestones.

   20. AEAaron Epstein11:55

       Yeah.

   21. FTFernando Terrés11:56

       But, and, and, and, you know, we're happy about it, but we've never thrown a party.

   22. AEAaron Epstein11:58

       Yep.

   23. FTFernando Terrés11:59

       And it's interesting because if you think about it, the reason why we're happy when these things happen, when these things, um, uh- Come to be true. It's not so much that we got there, but hey, if we got here, where are we gonna be in 12, 24, 36 months?

   24. AEAaron Epstein12:11

       Mm-hmm.

   25. FTFernando Terrés12:12

       Um, and it's like, it's like an interesting dynamic. You know, it's, it's hard to tell where it comes from. I think probably my sort of intuition would be being comfortable with enduring pain.

   26. AEAaron Epstein12:21

       Mm-hmm.

   27. FTFernando Terrés12:22

       Because at the end of the day, like, ah, look, like, e- every week as a founder you need to reset the bar and say, "Look, all of these things that we did great last week, they no longer matter. We're not going to discuss them. We're going to discuss the two, three things where we need to do better."

   28. AEAaron Epstein12:35

       Yep.

   29. FTFernando Terrés12:36

       And, and you really need to do that every

10. 12:38 – 16:04

    The "Unreasonable Ambition" Value

    1. FTFernando Terrés12:38

       week. You need to build a culture that enforces everyone is doing it this way.

    2. AEAaron Epstein12:41

       Yeah.

    3. FTFernando Terrés12:42

       Right? And, and, and the moment you get satisfied, right, like, uh, you no longer think in this way and you're no longer gonna keep compounding.

    4. AEAaron Epstein12:47

       Yep.

    5. FTFernando Terrés12:47

       Um, a- and it's kind of interesting because, you know, I have this, like, sort of, sort of theory that, you know, companies get as far as they want eventually, and everyone who stops growing at this exponential pace at some point it's because they decided not to, no?

    6. AEAaron Epstein12:59

       Yep.

    7. FTFernando Terrés12:59

       Which, um, may, might be, like, an oversimplified narrative, right? Um-

    8. AEAaron Epstein13:04

       I think it's true

    9. FTFernando Terrés13:04

       ... but, um-

    10. AEAaron Epstein13:05

        There is a component to that because, um, you know, companies I think are only as ambitious as the founders, right?

    11. FTFernando Terrés13:10

        Mm.

    12. AEAaron Epstein13:11

        And so you have that sense of urgency, and you're perpetually never satisfied, and always looking at what is the future next thing that we're gonna go towards.

    13. FTFernando Terrés13:18

        Yeah.

    14. AEAaron Epstein13:18

        And how do you drive that amongst the rest of your team to make sure that everybody else operates that way? You mentioned the culture. Like, how do you-

    15. FTFernando Terrés13:24

        Right

    16. AEAaron Epstein13:24

        ... create that in the culture o- of the team?

    17. FTFernando Terrés13:26

        You know, it's, it's kind of funny, like, we, we, not so long ago we did, like, the first culture exercise.

    18. AEAaron Epstein13:31

        Mm-hmm.

    19. FTFernando Terrés13:32

        And, um, you know, when we were doing it we were thinking of culture first, like, you know, the, the temptation is to think about it as the, you know, who you would want to be.

    20. AEAaron Epstein13:39

        Yeah.

    21. FTFernando Terrés13:39

        But at the end of the day, like, p- people converge with who they are.

    22. AEAaron Epstein13:42

        Yeah.

    23. FTFernando Terrés13:42

        So if you do that, like, uh, you're, you're gonna get to something that is, is not really aligned with how people behave.

    24. AEAaron Epstein13:46

        Yeah.

    25. FTFernando Terrés13:47

        So instead what do we do, like, the most senior people in the organization who've been already for some time and, and they, they know how we operate, right? And we ask them, "Hey, what are the no negotiables?"

    26. AEAaron Epstein13:54

        Mm-hmm.

    27. FTFernando Terrés13:54

        It's kind of funny because what we did is the three of us, the founders, like, like, for the first part of the session we couldn't really speak.

    28. AEAaron Epstein13:59

        Yeah.

    29. FTFernando Terrés14:00

        And you had to sit there and listen to everyone saying-

    30. AEAaron Epstein14:02

        Right
11. 16:04 – 18:44

    How They Hire & Set Goals

    1. FTFernando Terrés16:04

       Like, there, there's two components. Like, the, the first one, which is m- maybe, like, a bit of a cliche, but it's hiring for culture.

    2. AEAaron Epstein16:09

       Uh-huh.

    3. FTFernando Terrés16:09

       Right? Like, uh, and, and, and you know, like, we're still, like, uh, relatively small in the, in the grand scheme of things. Like, uh, but, um, it's kind of like a humbling experience when you hire people that are way better than you at specific things.

    4. AEAaron Epstein16:21

       Mm-hmm.

    5. FTFernando Terrés16:21

       And, and, and, and you need to absorb this knowledge, you need to absorb these things that improve the way you think about operating and, and cascading across the whole organization, right? So, so part of it is, like, that is very important, is the, the, the hiring for culture-

    6. AEAaron Epstein16:36

       Mm-hmm

    7. FTFernando Terrés16:36

       ... um, piece. But then again, we try to be extremely output oriented. So basically, and maybe, like, there's many companies that have been successful in being, like, input oriented companies, but what we try to do is we set a north star for the company. Uh, like, one metric that we define as success criteria.

    8. AEAaron Epstein16:52

       Mm-hmm.

    9. FTFernando Terrés16:52

       Um, and then we try to cascade it down into different things that if they are all true, like, it ties up to, to, to the main north star-

    10. AEAaron Epstein17:01

        Yeah

    11. FTFernando Terrés17:01

        ... of the company, no?

    12. AEAaron Epstein17:01

        What's your north star metric for the company?

    13. FTFernando Terrés17:03

        So we're looking at core MAU.

    14. AEAaron Epstein17:04

        Uh-huh.

    15. FTFernando Terrés17:05

        Which is people who are engaged with us to a level that is, um, representative of a deep relationship.

    16. AEAaron Epstein17:10

        Uh-huh.

    17. FTFernando Terrés17:10

        Right? Um, and again, like you-

    18. AEAaron Epstein17:11

        So not just signed up one time-

    19. FTFernando Terrés17:13

        Correct

    20. AEAaron Epstein17:13

        ... but, like, actively using-

    21. FTFernando Terrés17:14

        Correct

    22. AEAaron Epstein17:14

        ... the product in meaningful ways.

    23. FTFernando Terrés17:15

        Correct. A- and then we cascade that into all the components that need to be true-

    24. AEAaron Epstein17:18

        Yeah

    25. FTFernando Terrés17:18

        ... for that metric to go up. No, you have, hey, the, the growth component, uh, the, the breakdown to every single one of the, of the products, no?

    26. AEAaron Epstein17:26

        Yeah.

    27. FTFernando Terrés17:27

        Um, and then w- we try to make sure we have this hardcore orientation around your number. So actually o- one of our values is also, um, own your number. I, I think we have observed that accountability very often matters more than specific knowledge.

    28. AEAaron Epstein17:40

        Mm.

    29. FTFernando Terrés17:40

        You know? So, so, like, in, in the conventional way of structuring an organization there's, like, more, like, function led. You have all these weird situation in which the end-to-end, uh, process is not owned by anyone.

    30. AEAaron Epstein17:51

        Yeah.
12. 18:44 – 23:47

    Why They Rebranded from Dollar App

    1. FTFernando Terrés18:44

       right?

    2. AEAaron Epstein18:44

       Right. That, maybe that kind of leads me into you started as Dollar App.

    3. FTFernando Terrés18:47

       Mm-hmm.

    4. AEAaron Epstein18:47

       Then you rebrand- rebranded recently as ARQ. Um, talk about what went into that and, and maybe how the company has evolved to, to make that necessary to happen now.

    5. FTFernando Terrés18:56

       You know, I, I was thinking before another, the story of when we, you know, with, with the 125K from YC-

    6. AEAaron Epstein19:01

       Right

    7. FTFernando Terrés19:01

       ... we went to Mexico to-

    8. AEAaron Epstein19:02

       Right

    9. FTFernando Terrés19:02

       ... people wanted dollars.

    10. AEAaron Epstein19:03

        Yeah.

    11. FTFernando Terrés19:03

        And, and, and again, like we didn't really understand fully, um, all the nuances around it, but that had, like, two problems. The first one is that it became pretty self-limiting, right?

    12. AEAaron Epstein19:12

        Mm-hmm.

    13. FTFernando Terrés19:12

        You know, how do you tell your friend that the best way for you to, you know, uh, invest in, in US stocks is Dollar App? Or the best way for you to, you know, um, save in Brazilian reais is, is, is Dollar App? Like, shouldn't it be Real App, right?

    14. AEAaron Epstein19:25

        Right. Right.

    15. FTFernando Terrés19:26

        Um, so it bec- it became, like, pretty self-limiting. Then the other component, which I think in, in hindsight might be the most interesting, right? I- if you think about our old brand, right? Like, it was in a big chunk articulated around financial inclusion, right? Like, you cannot have dollars. Now you, you can have, like, a pseudo dollar, right? So the name is Dollar App, right?

    16. AEAaron Epstein19:44

        Mm-hmm.

    17. FTFernando Terrés19:44

        If you go to our old website, the tagline used to be something like, "The world has borders, your finances don't have to."

    18. AEAaron Epstein19:50

        Mm-hmm.

    19. FTFernando Terrés19:50

        So we are a Latin American company that includes you in the US, right? What is kind of funny is that if you look at our customers, it's mostly top 30% of the pyramid in terms of wealth, as I was saying before, right?

    20. AEAaron Epstein20:00

        Mm-hmm. Yeah.

    21. FTFernando Terrés20:00

        So it's people who travel, who have, like, a global lifestyle, uh, who work for an international company, who like to invest. These people, they don't want to be included.

    22. AEAaron Epstein20:07

        Mm-hmm.

    23. FTFernando Terrés20:07

        So it was, like, a brand that was completely misaligned who, with who was our customers.

    24. AEAaron Epstein20:11

        Yeah.

    25. FTFernando Terrés20:12

        Um, so anyway, like, uh, that was kind of the, the, the story, no? Like, I think, like, at some point you need to, uh, start becoming really good at, at marketing and at distribution at scale.

    26. AEAaron Epstein20:20

        Mm-hmm.

    27. FTFernando Terrés20:20

        And if you don't have a good brand for that, uh, y- you're gonna be in a, in a really poor position at scale.

    28. AEAaron Epstein20:25

        Yeah. I mean, that was obviously a big milestone with, with the branding, um, and change. But what are some of the other milestones, um, along the way that you've hit? Or what have been some of the inflection points that have, have gotten you to this point? You mentioned earlier you're at over 10 billion in, in annualized volume, which is, like, a crazy number to think about.

    29. FTFernando Terrés20:42

        Yeah.

    30. AEAaron Epstein20:42

        Um, what were some of the milestones that stand out to you along the way to get there?
13. 23:47 – 27:57

    Expanding to Four Countries

    1. FTFernando Terrés23:47

       in, in the company. And of course the cultural component, no? That something funny you can do is just, like, ask people to tell, tell you their story, you know?

    2. AEAaron Epstein23:53

       Yeah.

    3. FTFernando Terrés23:53

       And, and you can see if they were, you know, uh, back, back to the sort of point on the, on the values, no? Like- Were those people choosing unreasonable, uh, ambition? Uh, are those people solving the real problem, like the point I was saying before? Are these people owning their number?

    4. AEAaron Epstein24:06

       Mm-hmm.

    5. FTFernando Terrés24:07

       Are these people raising the bar to themselves and to others constantly?

    6. AEAaron Epstein24:09

       Yeah.

    7. FTFernando Terrés24:10

       So, so you can, you can get those things if you ask someone to tell you their story, you know?

    8. AEAaron Epstein24:13

       Yep. You're live in a number of countries now-

    9. FTFernando Terrés24:15

       Mm-hmm

    10. AEAaron Epstein24:15

        ... right? Is it four?

    11. FTFernando Terrés24:17

        Four already, yeah.

    12. AEAaron Epstein24:18

        Yeah. Four countries. I know that's always something that is a challenge for founders, is figuring out, especially, you know, if you're location-based or you have multiple different types of customers, how do you expand to each of those? Um, like go into a new market-

    13. FTFernando Terrés24:31

        Yeah

    14. AEAaron Epstein24:31

        ... um, figure out how to roll out. What's the playbook for all of that?

    15. FTFernando Terrés24:34

        Yeah.

    16. AEAaron Epstein24:34

        What have you found in expanding to all these different countries and actually making it work in each one?

    17. FTFernando Terrés24:39

        Yeah. It's a discussion that we, I've been having since the very, very early days with, um, uh, one of our first investors, Hernán Kazak, no, that, you know, invested right, right at the end of the batch, no?

    18. AEAaron Epstein24:48

        Yeah.

    19. FTFernando Terrés24:49

        And, uh, and he's been sitting in the board since then, in, in the company, and he, he has like these two success stories that he's seen. One is Mercado Libre-

    20. AEAaron Epstein24:55

        Yeah

    21. FTFernando Terrés24:55

        ... which he was a co-founder, and then NuBank, that they, they were like one of the first investors, if not the first investors actually.

    22. AEAaron Epstein25:00

        Yeah.

    23. FTFernando Terrés25:00

        And, um, and it's two very different stories, no? One that was, you know, doing many, many things in parallel, one that was like very, very focused on-

    24. AEAaron Epstein25:07

        Uh-huh

    25. FTFernando Terrés25:08

        ... on, on the key bets, no? And both were wildly successful, no? So, so it, it's hard to say like this is the right model, this is the wrong model or, or vice versa, no? So again, go back to people, you know, tend to behave in a way that ties up to who they are. So in our case, the way we try to approach it, uh, is we try to do more things than, than, you know, than, than, uh, NuBank in this case, no? It was like super focused surgically on credit in Brazil for a very long time.

    26. AEAaron Epstein25:34

        Mm-hmm.

    27. FTFernando Terrés25:34

        But we try to have the market pull from us, no? So we try to do, hey, what is the minimum we need to do to, to, you know, get something out of the door and test that the market wants it and how customers behave with it, and then double down. No, there's sometimes that you, you know that there's something there, and you need to be way more top down than bottom up-

    28. AEAaron Epstein25:51

        Mm-hmm

    29. FTFernando Terrés25:51

        ... when it comes to it, right? And, and you know, like actually going back to the point in the early days, we knew that people wanted access to, uh, a dollar-denominated financial system, right?

    30. AEAaron Epstein25:59

        Yeah.
14. 27:57 – 29:42

    Surviving the 2022 Crypto Crash

    1. FTFernando Terrés27:57

       it, you know?

    2. AEAaron Epstein27:57

       Yep. You don't like to celebrate the highs-

    3. FTFernando Terrés27:59

       No

    4. AEAaron Epstein27:59

       ... but I'm sure the lows stick with you. [laughs] Um, what's something that, like any kinda tough moments? I think from the outside it looks like you've just been on this-

    5. FTFernando Terrés28:07

       Mm

    6. AEAaron Epstein28:07

       ... this amazing rocket ship.

    7. FTFernando Terrés28:09

       Mm.

    8. AEAaron Epstein28:09

       Um, what have been some of the, the challenging moments that stand out to you over the years?

    9. FTFernando Terrés28:13

       It's interesting. I'm not sure if we really dwell so much on the bad moment. Uh, to be fair, like if you do that, like, uh, building a startup is gonna be a nightmare, no? You need to have like thick skin to-

    10. AEAaron Epstein28:23

        Yeah. Yeah

    11. FTFernando Terrés28:23

        ... to, to an extent. But there's been like so many moment. I, I, I, I... that I would like very, very tough. I remember, again, like we're in the bunch in, in, in '21.

    12. AEAaron Epstein28:29

        Mm-hmm.

    13. FTFernando Terrés28:30

        It was like a pretty good moment in, in the market, right? It was good for crypto.

    14. AEAaron Epstein28:34

        Yeah.

    15. FTFernando Terrés28:34

        It was good for Latin America.

    16. AEAaron Epstein28:36

        Yeah.

    17. FTFernando Terrés28:36

        It was good for fintech, no?

    18. AEAaron Epstein28:37

        Yeah.

    19. FTFernando Terrés28:37

        So we are like a cool kid in the playground.

    20. AEAaron Epstein28:39

        Mm-hmm.

    21. FTFernando Terrés28:40

        And man, you remember what happened, right?

    22. AEAaron Epstein28:41

        Yeah.

    23. FTFernando Terrés28:41

        Like, uh, like crypto was suddenly a, you know, red flag. Latin America was suddenly a red flag. Fintech was suddenly a red flag, no?

    24. AEAaron Epstein28:48

        Red flag, yeah.

    25. FTFernando Terrés28:49

        And, uh, like it's, it's, it's non-obvious moment, you know?

    26. AEAaron Epstein28:52

        Yep.

    27. FTFernando Terrés28:53

        But a kind of interesting thing is that at the end of the day, the, the, the interesting take is that all these things are not so much a m- point of what is the current reality, but rather what is your time horizon?

    28. AEAaron Epstein29:04

        Mm-hmm.

    29. FTFernando Terrés29:05

        And you're very long term minded. The fundamentals of the opportunity, uh, the, the quality of the team didn't really change, you know?

    30. AEAaron Epstein29:11

        Mm-hmm.
15. 29:42 – 31:12

    The Next Five Years for ARQ

    1. FTFernando Terrés29:42

       right?

    2. AEAaron Epstein29:42

       Yep. So what is the future for ARQ then the next five to 10 years?

    3. FTFernando Terrés29:46

       We're just starting to scratch the surface when it comes to building a product fit for the, for the mass affluent, um, demographic. One, one of our new products, for example, is, is, is pretty cool. Uh, we're starting to release, um, slowly is the prestige card. Uh, so basically we've rethought how credit cards work.

    4. AEAaron Epstein30:01

       Mm.

    5. FTFernando Terrés30:01

       Um, and, and effectively what we realized is that, um, in many cases, credit cards have a relatively low, uh, credit line and very high APRs.

    6. AEAaron Epstein30:11

       Mm-hmm.

    7. FTFernando Terrés30:12

       And it's kind of interesting because if you look, if you look at how the, you know- Uh, the, the people who are in a private bank relationship, uh, manage their finances, they'll never borrow at 25, let alone 54% APR.

    8. AEAaron Epstein30:22

       Right.

    9. FTFernando Terrés30:22

       But they don't take margin, which is a, you know, maybe SOFR, like, which are Federal, uh, Reserve rate-

    10. AEAaron Epstein30:29

        Mm

    11. FTFernando Terrés30:29

        ... plus whichever 100 bips whatsoever, no? Uh, so we've built a credit card using that same logic.

    12. AEAaron Epstein30:35

        Mm.

    13. FTFernando Terrés30:35

        Uh, we design in a way that you will never be liquidated, right? Like, I don't know, we, we discount assets a lot, uh, for you to have a, a credit line. But still, like, you have, like, whichever 50K in S&P 500, you can get a 25K credit line.

    14. AEAaron Epstein30:46

        Mm.

    15. FTFernando Terrés30:47

        The r- rate if you, if you decide to, to finance your, your, your purchase is, like, 8%.

    16. AEAaron Epstein30:52

        Yeah.

    17. FTFernando Terrés30:53

        So instead of designing a credit card for people to have a heart attack when it comes to, to paying and, and otherwise I'm gonna get a, a 50% APR, which, which is common in many markets in which we operate-

    18. AEAaron Epstein31:02

        Yeah

    19. FTFernando Terrés31:02

        ... actually the smart thing to do is to, to, to finance your purchase, and then keep your money in the S&P compounding for the long run.

    20. AEAaron Epstein31:08

        Yeah.

    21. FTFernando Terrés31:08

        So anyway, like, that's just one example of, of the direction in which we, in which we wanna go.

16. 31:12 – 37:07

    How They're Using AI

    1. AEAaron Epstein31:12

       How are you guys using AI within the company right now?

    2. FTFernando Terrés31:14

       So when it comes to the CapEx piece, first and foremost, it's kind of obvious that more than 90% of the code that we produce is already done with, with AI.

    3. AEAaron Epstein31:23

       Mm-hmm.

    4. FTFernando Terrés31:23

       Which again, like, probably these days is, like, something that's almost for granted, right?

    5. AEAaron Epstein31:27

       [laughs]

    6. FTFernando Terrés31:28

       Um, beyond that, one thing that is also very interesting is that we have this tool called Backoffice where everyone builds, um, mini apps, right? So whenever we think of building a new process, doing a new marketing campaign, um, everyone's expected to be able to build those tools-

    7. AEAaron Epstein31:41

       Mm-hmm

    8. FTFernando Terrés31:42

       ... um, including non-technical people, right?

    9. AEAaron Epstein31:43

       Yeah.

    10. FTFernando Terrés31:43

        Um, pairing with engineers sometimes more autonomously, right? You know, in- instead of going and outsourcing things, build it in-house, uh, in a way that tailors very specifically to how we run the company, no?

    11. AEAaron Epstein31:53

        Mm-hmm.

    12. FTFernando Terrés31:53

        So those were, like, tools to, to invest capital in more, in more efficient ways, no? On the operating side, again, like, ki- kind of obvious, but there's so- sort of two things that are very interesting. One is building an, a support agent, and it's kind of interesting because it can already take a very meaningful chunk of, of the work-

    13. AEAaron Epstein32:10

        Mm-hmm

    14. FTFernando Terrés32:10

        ... and allows our human agents, uh, to be focused on the cases that matter the most, that are most complex, uh, instead of the, the parts of the, of, of support that are less relevant, right?

    15. AEAaron Epstein32:20

        Yeah. You've got millions of users to support as well, right?

    16. FTFernando Terrés32:23

        Right.

    17. AEAaron Epstein32:23

        So it's the thing that enables you to scale.

    18. FTFernando Terrés32:24

        Correct. And it, it's also very interesting when it comes to, to fin crime and all the AML part of the equation because not only it's more efficient, which is the, the, you know, the, the classic, um, train of thought, but also you can do things now that you could not do before.

    19. AEAaron Epstein32:38

        Yeah.

    20. FTFernando Terrés32:38

        So if you look at how traditionally you would think of the AML component, no? Because you cannot scan a huge number of transactions in real time, because it's impossible, even if you wanted to, to hire such a big team to do it, right? It's not a matter of efficiency, it's just, like, you cannot do it in real time.

    21. AEAaron Epstein32:52

        Yeah.

    22. FTFernando Terrés32:53

        You usually would go with a solution that maybe is like you apply limits on the accounts, and then when you hit that limit, then you go into a review, right? You have, like, a small team reviewing everything that was flagged by a machine learning model, right?

    23. AEAaron Epstein33:04

        Mm-hmm.

    24. FTFernando Terrés33:04

        And these days you can actually have the machine learning model a big team of agents that do the first pass, and that they, then they escalate to the humans who are actually managing the team of agents, right? And that's great, because then you don't need to be so restricted from the limit side of the equation because you do have the bandwidth to do all these checks.

    25. AEAaron Epstein33:18

        Yeah.

    26. FTFernando Terrés33:19

        And you have the, the external part of the, of the equation, no? That, um, we're, we're starting to, to build into it. Uh, one thing that makes me very excited, uh, of, of building in the, in the next few months, is the idea of creating a bot, a, you know, sort of private banker assistant for you, that you can forward, you know, a PDF, "Send this wire for me."

    27. AEAaron Epstein33:38

        Mm-hmm.

    28. FTFernando Terrés33:38

        "Send the wire to my friend." You know?

    29. AEAaron Epstein33:39

        Yeah.

    30. FTFernando Terrés33:40

        And then having, like, um, an approval mechanism similar to what you have, like, in 3D with, with credit cards in the app for transactions that are below a, a limit, no? So, so we, we always try to think of, of these two things and encourage it across the whole, um, organization.
17. 37:07 – 39:50

    What YC Did for ARQ

    1. FTFernando Terrés37:07

       no?

    2. AEAaron Epstein37:07

       What kind of impact did YC have on you?

    3. FTFernando Terrés37:09

       Uh, the impact was, was massive. We wouldn't be here if it wasn't for YC.

    4. AEAaron Epstein37:13

       Looking back to the early days and thinking about yourself, you know, thinking about applying to YC and, and going through the batch, is there any advice that you wish somebody had given you or that you would like the, the next generation of founders coming up now to, to be thinking about?

    5. FTFernando Terrés37:27

       In the context of YC, there's two things that were super interesting. One, the first one is making us believe.

    6. AEAaron Epstein37:32

       Mm-hmm.

    7. FTFernando Terrés37:33

       Which, uh, I mean, we had a very, very rough idea. We knew that the opportunity was big and, and cle-

    8. AEAaron Epstein37:39

       Mm-hmm

    9. FTFernando Terrés37:39

       ... and that was, uh, pretty clear, I would say.

    10. AEAaron Epstein37:40

        Yeah.

    11. FTFernando Terrés37:41

        But, but still, like, uh, very often it's so non-obvious when you're in a good position in a great company like, like Revolut is, no? And, and we're in a very privileged spot and but we still didn't have the courage to do it. And I remember, like, getting the call from Dalton back then, like, uh, "Would love to invest." And I was like, "Man, these, these, these guys, they're so stupid. Why, why would they give us money," no? And that was, like, the first reaction. Like, a few hours later, I was like, "Whoa, these people, they know what they're doing. No, they have like... they've backed, like, some of the most impressive companies in history, right?"

    12. AEAaron Epstein38:09

        Yeah.

    13. FTFernando Terrés38:09

        So there, there, there is something, right? And then the other thing that had been, like, a constant. You know, you guys have this habit of slapping entrepreneurs in the face with truth. Like, ki- kind of back to what I was saying before with, uh, you know, the YC startup school videos, right?

    14. AEAaron Epstein38:22

        Yeah.

    15. FTFernando Terrés38:22

        I, I remember like, I know, like, all the lectures were, like, sort of, like, very obvious things, and that's what make them, like, so, so amazing, right? Because sometimes it's very hard to outline in very plain terms things that are obvious but are really, really important.

    16. AEAaron Epstein38:37

        Mm-hmm.

    17. FTFernando Terrés38:37

        Actually, I remember in, in, in another call we had, um, when like we were, like, so lost back then, no? And, and you said this thing like, uh, "Guys, what I like about the product is that it's obviously the best product out there." And, and again, like, it was like, whoa. We hadn't stopped and thought about it, you know?

    18. AEAaron Epstein38:52

        Yeah.

    19. FTFernando Terrés38:52

        And, and again, it's all, all these times when, you know, you have all this chaos around building a startup, no? That that clarity of thought is not to be taken for granted, you know?

    20. AEAaron Epstein39:00

        Mm-hmm.

    21. FTFernando Terrés39:00

        And, and all those pieces of advice of, that we received from you guys, again, I'll go, like, not so much in the direction of the specific advice, but rather helping get the clarity of thought, you know?

    22. AEAaron Epstein39:10

        Mm-hmm.

    23. FTFernando Terrés39:11

        And, and, and being able to find this clarity of thought is, is non-trivial. Eventually you, you manage yourself to, to be able to do it, no? But in the early days, like, uh, you, you, you guys were super helpful for, for that, no? From getting the courage to do it. From, hey, what are the fundamentals? And making sure you, you know the end direction which, in which you're going, no?

    24. AEAaron Epstein39:27

        Yep. And sounds like you, um, you've built a lot of belief in yourself over the years too-

    25. FTFernando Terrés39:31

        [laughs]

    26. AEAaron Epstein39:31

        ... which has been really amazing to see.

    27. FTFernando Terrés39:33

        Yeah.

    28. AEAaron Epstein39:34

        Very cool. Fernando, thank you so much for joining and sharing your story and, uh, giving us a peek behind how you've been building such an ambitious company.

    29. FTFernando Terrés39:40

        Thank you for having me, Aaron.

    30. AEAaron Epstein39:41

        Yeah.

Episode duration: 39:50