Thought Leaders in Financial Technology: Expensify CEO David Barrett (Part 7)

Sramana Mitra: I just talked to an entrepreneur in Romania. 30% of his business is tying in with another e-commerce platform called Wix. I can tell you that if you talk to that guy, he’s going to give you a completely different point of view than the one that you are pushing which is people shouldn’t depend on Wix or partners.

If you’re getting 30% of your business through Wix, why wouldn’t you leverage that? This is a strategy. If you test a strategy and it works, go with it. What’s wrong with that?

David Barrett: It’s not about right or wrong. I would go for a diversified strategy.

Sramana Mitra: That’s right. A diversified strategy and then figuring out which ones are working and putting more momentum on that. That’s how you build a business.

Let me ask you the closing question. This interview is a FinTech interview which we’ve gone way out of. What do you see in FinTech? Where are there opportunities in FinTech in your opinion? Is that a saturated field in your opinion?

David Barrett: I would say that everything is saturated and that includes our field as well. We like to label things to try to control them, but every business is a FinTech business in some way or the other. Everything has to involve the flow of money somehow.

In our space, we see a lot of flash-in-the-pan businesses that come about just because it seems like VCs discover a new industry and throw tons of money at a failed business model. The newest thing is the explosion in corporate cards.

The big thing now is losing money at scale on corporate cards. Previously, it’s losing money on other things. If there’s no need for profitability, then yes anything can lose money. It can be hot so long as people are willing to lose money on it.

There are certainly successful FinTech companies out there that create positive cash flow. The vast majority of the hot FinTech companies today generate cash flow. They are just hemorrhaging cash at scale. I find it hard and disruptive to focus on.

Just because someone is losing money at scale doesn’t mean that they are successful. The jury is still out on Uber. Is it going to go to zero? It might be that this entire thing might have been a big mistake. 

Sramana Mitra: It still doesn’t mean that it hasn’t added value to the process. It has brought into existence behavior changes. This has been a big behavior change that people do ridesharing. It was not part of society.

David Barrett: Its investors subsidized a bunch of public transportation. That’s cool and it’s definitely interesting. Was it the most efficient way to do public transportation? Maybe public transportation should be paying for rideshare, because it’s just a money losing preposition. 

Sramana Mitra: I think if we played out this conversation where both of us would agree on, it is this saturation of the incessant appetite for venture scale companies. There are too many funds trying to put too much money to work, all of whom want to invest in billion dollar companies. This is not a viable situation. 

David Barrett: Going back to the hotness of FinTech, nothing’s changed. When I launched Expensify in 2008, my tag line was, “Expensify, the corporate card for the masses.” That was in 2008 and now we are in 2020 where people are still hung up on corporate cards. The economics and technology of corporate cards haven’t changed.

Nothing has changed other than suddenly, there has been a fad in the world and that has changed things. Now, it turns out that there are a lot of people who are willing to lose a tremendous amount of money on something. It’s a change, but it’s not a FinTech change. It’s an investor fad change. 

Sramana Mitra: The place where the FinTech world has opportunities is in geography. If you look at the emerging markets, for example, in Latin America, Mercado Libre which is their version of Amazon, has a payment product that is gaining some traction.

The fluidity in digital payments is something that is gaining traction in these emerging markets. There are behavior changes that they are engineering, for instance, Paytm in India and the whole Kenya story of digital payment and micropayments.

All that has a completely different unit economics model. It’s a completely different profitability. There are opportunities to do disruptive things or even do incremental things that add value. 

David Barrett: I think that none of that is new technology though. It’s existing use cases being perfected and distributed in new markets. That’s great. 

Sramana Mitra: New technology is not a requirement, right?

David Barrett: We agree entirely on that. I would say technology is the least important part of it. Any startup that’s laboring over their hot new technology written in the latest language on their finest tech, none of that matters. All your creativity needs to focused on customer acquisition because that’s the hard part of what you are going to do. 

Sramana Mitra: New technology matters if you are writing the next database architecture. There have been companies that have been built on that principle. For example, Cassandra ecosystem, the data stack, and MongoDB which are heavy duty new technology plays. 

David Barrett: When it comes to FinTech, there’s nothing new. Every use case has been resolved forever ago. All of the technology that people are using has been established. Maybe Cryptocurrency is new now and it’s a whole different world.

Innovation is a consolidation of use cases into even more powerful platforms that does more for you in a seamless fashion. That’s the future of FinTech. 

Sramana Mitra: The other thing in FinTech that is interesting is behavior change. The issue is not the technology; the issue is if people are going to accept behavior change. COVID has been a massive behavior change in users on the FinTech side.

For example In India, digital payments have gone through the roof. It’s that 12 years of change in 12 weeks scenario. Market adoption is happening at a pace that’s never been seen before.

David Barrett: The existing use cases and the existing technologies are being deployed faster and broadly than ever and that’s an exciting change. 

Sramana Mitra: There are broader use cases and then there are narrow use cases. One of the things I like about people willing to work with smaller ideas is that you can take something that is out there and wrap additional domain knowledge or workflow elements and cater to a niche market and add value on top. 

David Barrett: I wouldn’t say that there is no intrinsic value. I think the value that I care about is living a rich and satisfying life. You can do that as a one-person company to a thousand-person company.

The key is not to lose sight of what you are trying to do instead of killing people in your company to chase a number on a spreadsheet and to have an exit on paper when, in fact, everyone lost money and wasted time.

I would encourage entrepreneurs to focus on family, friends, people they work with, and how they spend their time and making sure it is adding up to a rich life because no number of entrepreneurial success is going to replace that hole deep within. 

Sramana Mitra: That I agree with. That’s very much in the philosophy of One Million by One Million. Excess is not a requirement and that dollars don’t breed happiness at all. Great speaking with you. 

This segment is part 7 in the series : Thought Leaders in Financial Technology: Expensify CEO David Barrett
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