Nik Storonsky

(upbeat music) In 2015, Nick Skaronsky started a small company designed to help people with their foreign currency exchanges. Today, that company is Revolut. It is the most valuable pre-IPO company in all of Europe. I had a chance recently in Washington DC to sit down with Nick Skaronsky to talk about his amazing story, how he grew a very small company into such a giant financial behemoth. Let's talk about Revolut because it's a company that's based in UK, focus more on Europe than the United States. We'll get to that in a moment, but let's talk about what it does for the American audience, for example. What is Revolut? What does it actually do? - Well, Revolut is a digital bank. So we provide global banking services for people in more than 40 countries. So everything is packed into one simple app. So you can do your banking, you can do a wealth management, stock trading, you can see these bones, crypt, can borrow money. And you also have a lifestyle service. For example, you can get yourself ECM, you can book a lounge, you can book a hotel, and so on. So everything is in one app for your financial services. - Do you have a partner that you started with? - I actually started alone. So I built a product, I hired a team. Then one of my first situers that I hired. So I laid them, made him, I think it was until 70th on 18th. I made him a co-founder as well. 'Cause it was easier for him to recruit engineers if he had title co-founder. - So you start the company, and the mission you had was to enable people to do what that they couldn't do. What was your purpose in starting the company? - So I was a trader back then, and then I'm very quick in calculating numbers in my head. And then every time when I went abroad, or when I sent money, I could instantly calculate, okay, I lost here, $10, $50, and so on. And my initial idea was to build a product a simple app with a cut at the street that allows you to spend money anyway in the world at interbank rate. So saving your effectively 50 to 70 dollars and every $1,000 that you spend. - In other words, you weren't trying to convert people's currency. You were letting them have a card, they would enable them to buy something and whatever currency they wanted. - Yeah, so it's both right. You can pre-exchange currency, or you can buy directly from your existing currency. - Normally throughout Europe, when you go to Europe, you see everywhere, currency exchange places. And they always charge a fee, I don't remember what it is, six to seven percent. So you decided to start a currency exchange business without charging a fee. - Well, you can call currency exchange business, here's an interbank rate without charging a fee, correct? - You didn't go out and build a physical bank, you did it all online, is that right? - Exactly, yeah. - So how did you get people to know about this service? Did you start advertising online? - Funny thing, we didn't spend any single marketing for the first five to seven years of for being an operation. So it was all a road of mouth. So I remember when I finally launched the product, it was summer 2015. And I physically was selling my product to France, family, even people, I don't know. Okay, so if I go to London today, and I say here's $10 and I want to change it on a regular place, I would get back pounds minus about a six, seven percent, eight percent fee. - Correct, yes. - So if I went on your service, what would I get back? If I would I get back everything with for essentially no fee. - Exactly. - Then you make the money in effect on the float because you're getting paid by somebody, and then you kind of can invest that money and then you don't have to pay somebody for a while, is that how you make the money? - So every time when you spend with a cot, mentioned effectively pays two to three percent. - Okay. - But that's not a customer paying but rather business itself. But I want to be clear, there was an initial product in 2015, now especially for years customers where fully kind of licensed digital bank providing all kinds of services. - You have a European banking license now, is that right? - So we have European bank aless, so we are regulated by European central bank. We have UK bank alessence, regulated by PRA. Then we also have multiple other licenses, for example, Mexico, Colombia, Perruzón. - And you're now applying for a US banking license. - Correct, yes. - How long does it take to get a US banking license? - Right now, I should take, I was happy to tell months, but again, it depends. So official target is four months, but then there are multiple steps involved. It can be longer. Are you confident that you can get a banking license in the United States, you think you'll get it? - I think it's obviously much easier for us than given an new administration plus that we have so many other bank alessences plus we have a bank aless in your cano. So for us, it became much easier compared to two years ago. - Do you have a credit card business as well? - You have credit cards in several markets, yes. - Is that, and you have credit cards and debit cards? - We have debit cards in every single market and credit cards, I think, in five or six markets. So in Europe, we have 20% penetration. So one out of five adults in Europe, they use the revolute cards. Then in certain markets, we have much higher penetration, for example, in Ireland, we have four out of five adults using a revolute. - So younger people seem to like things that are called cryptocurrencies. Are you involved in cryptocurrencies? Do you trade cryptocurrencies or make markets for people? - So as a business, we have pretty large cryptocurrency business. I think we have the largest, we have the largest crypto business in Europe with our volumes. Personally, I don't speculate crypto, but I use it sometimes in order for transfers. - So in the United States, what do you hope to be able to do with your banking license if you get it? What is the market gap that you think you can fill that maybe others aren't doing? - So basically, I mentioned already our retail business. So it's one simple app where you can do everything, everything we need for your financial life. And then second direction, we also provide the revolute business accounts for businesses. And again, it's end-to-end services that you need to run your business. So payments, banking, credit will come as well, wealth management or treasury, we call it treasury, then acquiring as well. So for example, right now if I'm an American company, I'll need to stop, say, strive for acquiring then GP Morgan for my business banking, then something else for payouts, something else for payroll. So we provide all the services in one product. - Well, if you conquer the US, the way you've conquered UK and Europe is China next or you're not gonna focus on that. - Asia where they're focusing. So spending a lot of time are studying Asia. And then as a search, we applied for multiple banking license in Asia as well. And then some of them, we got already. And then China is on the list as well. One day I hope we can set up a business there. - Some people have written that your bank, revolute is worth $75 billion. Have you ever thought of taking your organization public? - Well, the way I think about it, we kind of will be ready for all in two years' time. But then again, depends on how good the market is. - Vince, you don't have an IPO. How does people who work for you make some money, do you make a market for people to sell their shares internally? - Yes, so we do secondaries every one or two years. One people can sell some portion of their stocks to excellent investors. - So you've done secondary sales for your employees. So employees can then get some liquidity. Do you expect before you go public, you'll do any more of those or you just gonna wait to go public before you liquefy any more stock? - Yeah, I think so. We might do secondaries as well before we do IPO. Because we do it every one or two years. So we might do secondary as well. - All right, well, if anybody wants to sell their shares to me, let me know. And have any investors and bankers told you why they're the best to do the IPO for you? - Yeah, obviously every single one is the best. - Everyone is the best. You're not in a rush to do it. You don't need the money. - So we have bank. And then for the bank, it's super important to have trust. And then public companies are trusted more compared to private companies. So that's the reason. - What are you most proud of having done so far? What do you most enjoy? - Well, it's basically designing something, designing a solution to solve a problem when I see it or being realized and then I'm using it. That's what I enjoy when I see some elegant solution. - Many people think that companies like yours, which are often called FinTech companies, financial technology companies, are changing the world dramatically. But they could be changed dramatically. So for example, artificial intelligence is coming along. You worry about artificial intelligence or do you use artificial intelligence to help grow your company? - It's additional tool that we obviously use. And the thing with LLM chatbots. So it's another surface on top of the infrastructure that we build because banking is not a simple app, right? Under app, you have a lot of backend, a lot of systems, a lot of regulatory systems and so on. And then app is effectively interface to all these backend logic. And then LLM can be something on top of the app or directly interacting with our backend logic. So call it another interface. That's where we're building as well. And allowing people to interact with all our products through childhood. - Let's talk about how you came to start the company. So you are, doesn't sound like you're a native of England from your accent. - Originally from Russia, so I came to UK first in 2006 for the internship. then in 2007 I came for another internship on the afterwards I stayed to be employed by Liemann Brothers as a trader. And at what age did you leave Russia? 20 years old. And then as soon as I finished my university I moved to London to work full time for Liemann Brothers. And were your parents educated or they math specialists or they have computer training or not? So my father he is a physicist by training, my mother she's a teacher. I assume you're a pretty good math student or physics student or something because you have technology background I assume. Yeah I was always trained in the math physics as well. Right so you go to England and did you have a job lined up before you got there? So Liemann Brothers came to my university and then they tried to recruit some people for the internship. So they recruited me for internship. I came there in summer 2006. And then they invited me for second internship in spring 2007 and they also gave me a job offer for full time when I graduated from my university. So when I graduated in July I think it was July 2007. I came to London to work full time for Liemann Brothers. Didn't Liemann go under at some point? 2008 yes I was in the year. So you were there then? Yeah I was there. I was one of probably 200 people on the trading floor. My role happened. I still remember there was a big Sunday evening announcement. Then I was wondering I could do any to come on Monday morning to my kind of job. So I came and then we had always 200 traders locked at one trading floor everything. All the systems were locked and we're all playing the same game. I think it was a game shooting helicopter or something. All 200 people because there was nothing to do. So did you think capitalism wasn't such a great system at that point when you go to Liemann Brothers and they go bankrupt and you're out of work? Yeah I was full of confidence right about myself. I was never afraid to lose the job because I knew I can always find a new one. So did you have a hard time finding another job? No I got kind of a job offer from the Mura and then from Credit Suisseville. All right and so where did you go? I went to Credit Suisse. You went to Credit Suisse? They've had their problems too. Did you leave Credit Suisse before they had their problems? Yeah of course I left Credit Suisse 2013. So basically as soon as I got my British passport I resigned and then when I came to UK it was never kind of objective to stay there more than two years. I was wanted to start my own business but then I know I said one year then the second year and the third year and then after year six when I got my passport I decided to resign and then start my own business. Okay so you started your business in 2015? So started working until 2013 and I launched 2015. Did you have any capital to help you start the company? I have my own savings yes. All right so you put in some of your own money but you presumably weren't a multi-billionaire so you didn't put in that much money right? I mean back then I put probably about half a million dollars and half a million overall but obviously I also didn't work for two years myself so if you don't count my salary I didn't have any salary so to build something back then was my cheaper compared to now it is. You have a venture capital arm I just called quantum light so it's a separate business I said I think it was three years ago as an entrepreneur I've done a lot of fundraising rounds with the VCs and then I think a certain point of time I was very pissed off with the crowd thinking mentality right? I had cases when termships were withdrawn sign termships I had cases when round was marked down because the S&P was down so I had quite quite a lot of negative experience with VCs and then as a founder I also wanted to invest my own money and I thought I can create something better in terms of investment or I think there has to be a scientific approach rather than human judgment and then we build effectively models that invest in startups series B based on millions and millions data points on our startups so they are trained machine learning models that invest plus on top of it I'm able to share with these startups my personal knowledge as a founder of Revolute plus we help our startups to distribute their product through Revolute or to sell into Revolute so overall it's a much better value proposition to fund this compared to VCs but what would you call what you're doing angel investing or around A or we would do series B we started okay we just launched the fund for Ceres C as well but did you raise money for it I assume people gave you all the money you wanted but did you just use your own money and your friends money did you have to go out and raise money first fund was 250 million dollars so I put around 25% my own money and then the rest was external LPs and what types of rates of return do you think you can get in that fund so basically when I had this idea when we build a model and then we started back testing the model it produces effectively 40 to 50% year-on-year returns long-term returns so when we started investing based on the model I think now we are called top 4% of our percent of the funds the world in terms of returns so it's usually a 30 to 40% returns so you ever use your credit card and it gets turned down in other words you got to use a credit card at a restaurant or somewhere and they say your credits the night is that ever happened to you or initially yes but it was more than eight nine years ago when service wasn't that stable now we just don't have declines but now when that happened to you did you tell people who you were or you didn't say look I'm the founder of the company and you can't just calling in junior soon and trying to find out what happened why why why is the client how many customers this revolution have now so how 75 million customers how big do you think you can take it you think you can take it to 100 million customers or more yeah we can take it to 100 million customers our internal target is 100 million daily active customers than 100 million daily active customers will transfer about 300 million monthly activities it's said that companies if they're really going to survive and prosper for over many period years at time they have to have a good culture what is the culture you're trying to build in your company so we have this five cultural values pretty well defined starting with never settle so never settle as about being ambitious and setting up big goals secondly it's about a dream team so we prefer to work in a small team of extremely high intelligent people rather than in the last teams of average people third one is get things done it's very important to be kind of you know getting things done oriented then we have a cultural principle called the deliverable it's about almost perfection and everything what we do in terms of product let's suppose I say I have an account at a famous British bank but I'm not happy with it and I feel secure because I know they got all these buildings there and it seems like they have a lot of money behind them you don't have many physical place for me to go right exactly so we are solving these trustees through different methods for example yes you're absolutely correct it's a problem for people visually see a big building with massive columns and then feel as you know there is a lot of money behind the building so we do differently so we build trust and reputation through brand so for example if you look at European airports so majority of European airports we advertise on we effectively buy the whole airport and then advertise on the whole airport on the bridges and so on so we build the brand through through a lot of advertising rather than having these massive buildings banks were in the business hundreds of years ago principally to do two things one have a place where people can park their money and also to borrow money you borrow money from banks can I borrow money from you yeah you can borrow money from us all right so where do you get the money balance sheet right the reason people like dealing with you rather than the big conventional bank is that you're you're less expensive so we're not only saving their money we're also saving that time everything is automated if you look at the future of the financial service world do you think that there's a future for large banks to keep having these big buildings or do you think ultimately five or ten or 15 years or now everybody's going to be online with everything in five ten years time we'll see more more consolidation and thing we'll see more and more certain digital champions in the regions taking more and more banking shares in these regions so maybe it will take ten years maybe it'll take 15 years 20 years but I do think that we'll see less and less legacy banks or less and less legacy banks will make so much money so are you enjoying doing all this are you enjoy running the bank running the venture fund and doing interviews with people like me are you having a good time or are you not that happy I mean certain like certain things I like certain things are I don't like so I love building products I love kind of solving problems I don't like delays which can be quite often in a regulatory business because certain things can be outside of kind of you know your decision-making a speed what are the skill sets that you think are required to build a company like this and do you look for those same skill sets in the people you hire well you don't need to be good at trading at all right For me, when I started, I knew nothing about banks, because I was in Trader. The investment bank has very different organization compared to retail bank and payments companies as well. So I learned everything from scratch. And skills-wise, I think you definitely need to have ambitions and hunger plus as a character. Plus, you know, a lot of energy because it's pretty painful, you know, in a lot of ways with all the problems. Plus, you always need to have very strong logic, logical thinking, abstract thinking. You should be good with product as well, like, you know, ability to build something nice and slick. We're just looking for ultimately three things. First is high IQ or brains. You don't have certain ways how to understand what a person is smart or not, whether they're logical or not. Number one, number two is the character, how ambitious they are, how hungry they are. And third is their skills, right? If we hire designers, they need to be good at designing, so on. What new world do you want to conquer? You've built a big company. Eventually, you might take a public. You've got a great venture capital firm. What do you want to do next? Well, majority of the time, I dedicate still to a revenue. We're still scratching the surface in terms of what is possible in building our first truly global bank. Are you worried that somebody who's 10 years younger than you is going to come along and with a better mouse trap and beat what you're doing, or you're not worried about that so much? I mean, really, I think there are windows of opportunity in the world, when there are certain tools, certain opportunities. And then usually what happens, 10, 20 people jump on these opportunities in this particular country to do this particular product and then people compete. The opportunity for Fintech, thinking the majority of countries is gone now, because they're already players and legacy banks. They can even cut up as well with products. So it's very hard to build anything new in Fintech, or at least I don't say opportunity. But not, or less, maybe I don't say anything. Maybe there is someone smart who can come up with a better product. So most of the bankers I know have hair that's like mine. It's shorter. Yours is a little bit longer. Is that your trademark, or if you want to get a banking license in the United States, you think you need to cut your hair or not? I think you definitely need to wear a suit. That's whatever. Do you have friends from high school that call you up and say, remember me, I was your friend in high school? Sometimes you have friends of friends. But it's not that hard to get a hold of you. No, no, it's easy. It's easy. OK, well, next time I'm in London, I will call you up and say, how is it going to be? Make sure you tell me your number so I'll record it. Otherwise, I don't pick up. No, no, no. You're now probably the richest person in the UK. Certainly one of them. What are you going to do with this? You're going to build art galleries or museums or give it away to social causes. What do you want to do with all this? Well, if you can't spend $25 billion in your lifetime, probably. Well, I'm just very focused on business, continue to make the best product, then continue to expand. And then all this wealth is in the company, right? I don't really plan to sell the company, then spend all this money. So I just continue to work on what's necessary to build a first-level bank. Because now we're in 40 countries. We want to be 100 countries. Thanks for listening. To hear more of my interviews, you can subscribe and download my podcast on Spotify, Apple, or wherever you listen. [MUSIC PLAYING]