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I asked a couple dozen female founders and founders of color in fintech about their experiences raising money from VCs and how that process can be improved.
Here’s what they said:
Alex Johnson
19.6K posts
- There's a saying in Fintech: You either die a consumer goods company, or live long enough to see yourself enter financial services. One company has managed to do both. Let me tell you why Starbucks is one of the most successful banks in the U.S.:
- If this guy had been on the Titanic, he absolutely would have shoved women and children out of the way in his rush to the lifeboats.
- Replying to @AlexH_JohnsonIf you found this thread interesting and if you would like to see more such analysis: Subscribe to my 2x/week newsletter: workweek.com/discover-newsl…
- In 2017, Economist Richard Thaler won the Nobel Prize for his research on a concept called "Nudge Theory". But, fintech companies have been using "nudging" principles for over a decade to game your dopamine receptors. Here's how they do it 🧵
- Replying to @AlexH_JohnsonHere's the magic of the Starbucks Rewards Program. Each time you load your rewards card, Starbucks holds onto that money until you're ready to spend it. Multiply this by 25 million active rewards members, and you have a company that reported $1.6 BILLION in deposits last year.
- Replying to @AlexH_JohnsonThe reason that Starbucks can do this is that it doesn't have to keep an adequate reserve on hand to facilitate redemptions. The only way to cash out of Starbucks' balances is to buy something from Starbucks! So that money can be put to work in higher-yield opportunities.
- Replying to @AlexH_JohnsonThink of it as a zero-interest line of credit. Need cash to build a few dozen new locations? Really big ad campaign in the works? Upgrading equipment? No need to borrow from a bank at 2-4%. Just dip into your cash reserves and replenish it later.
- Replying to @AlexH_JohnsonSince money loaded onto the app/physical gift card never expires, a significant amount of the money is NEVER spent. Starbucks is even able to use historical data to quantify "Breakage" - How much money will never be redeemed. How much? $141 MILLION of free money in 2019 alone.
- Replying to @AlexH_JohnsonFor reference: Discover, the 4th largest credit card provider in the country, only holds $470M in deposits (photo from 2016). Every year, rewards members load about $10B onto their Starbucks cards! So what does Starbucks do with all that extra cash lying around?
- FFS. None of this is correct. The CFPB is the most pro-competition federal banking regulator. Relative to its treatment of incumbents, it’s a friend to “little tech”. To the extent that debanking is a real thing, the CFPB has nothing to do with it. And it doesn’t happen toMarc Andreesen on Elizabeth Warrens agency CFPB which has spent the last 4 years terrorizing people via debanking. This is going to be a 3 part thread.
00:00 - Replying to @AlexH_JohnsonThe Starbucks Rewards Program is responsible for ~53% of spend in their stores, making it one of the most successful rewards programs ever... While also making the company one of the most successful banks in the country.
- Replying to @AlexH_JohnsonThis credit line equates to roughly 4% of the company’s total liabilities. It also improves the health of the balance sheet by increasing FCF and decreasing working capital needs. With the current liability balance, Starbucks actually earns ~10% in interest on these "deposits".
