Ep. #918 - Alternative IRA Investments

Matt Watson 00:00
And we’re back for another episode of the Startup Hustle. This is Matt Watson, your host today. Today is a continuation of our episodes about the top startups from Nashville. So we’re covering quite a few of them. And today, we are covering Alto Solutions with Eric Satz. In our show notes, there’s a link to listen to all the different episodes about the top Nashville startups. Before we get started, today’s episode of Startup Hustle is powered by FullScale.io. Hiring software developers is difficult. Full Scale can help you build a software team quickly and affordably. And has the platform to help you manage that team. Visit FullScale.io to learn more. Eric, Mr. Satz. Welcome to the show.

Eric Satz 00:44
Wow. Mr. Satz, Matt, whatever. We should just end, we should just end now. I’m not sure there’s anything for us to talk about. Thanks for having me.

Matt Watson 00:53
All right. I’m sorry. Sorry, sir. I guess I shouldn’t.

Eric Satz 00:57
Oh my god. Mr. Satz and sir. All within like a minute.

Matt Watson 01:03
All right. Well, welcome to the show and excited to learn a lot more about your company today. And congratulations on being included in our top Nashville startups. You have accomplished like all of your life dreams by being a herbalist.

Eric Satz 01:20
I mean, clearly, right. I wouldn’t volunteer to subject myself to this much scrutiny if I didn’t feel that way. But you know, I’ve been in Nashville now. Well, I’m in my 20th year. So I’ve kind of been there before it was the bachelorette capital of the country. And I expect to be there when it’s no longer the bachelorette capital of the country. So Nashville has been a great place to raise a family and start companies. Yeah.

Matt Watson 01:57
So tell us more about Alto Solutions and your background. And have you done some other entrepreneurial things along the way? And kind of how you got here today?

Eric Satz 02:07
Yeah, I have. You know, I think, like you, being an entrepreneur is a bit of a personality disorder. Yeah, you know, you just sort of can’t help yourself. And there are wins and losses and successes and failures along the way. And of course, I don’t know if you agree with this or not, but I feel like you learn a lot more from the failures than you do the successes. And the first time I really ever failed at something, I left Wall Street. I left investment banking to start a coffee bar in New York City. And I raised money from friends and colleagues to do that. And long story short, I failed and I failed because I got all three things about retail wrong. I got the location wrong. I got the location wrong. And I got the location wrong. So all of those things I got wrong. So I ran back to Wall Street to dig myself out of this financial hole that I had created. And the next company I co-founded was an online foreign currency exchange business called Kern X. And long story short, State Street would eventually buy Kern X for close to $600 million. So that would, you know, so that was the flip side of the coffee bar. And then I actually became a venture capitalist and actually before becoming a venture capitalist when I moved to Nashville, I was living out in San Francisco. In the Bay Area. When we did Kern X, I moved to Nashville, I started an online organic home delivery grocery business called Plum Good Food. Which actually, back in his day, was voted like the best thing to happen in Nashville. Nashville will be a running theme here, a common theme. But then 2008 happened in 2008 just absolutely crushed us when you know, that’s when the world was blowing up financially speaking. And rather than try and push the string uphill, we took what funds that we had left, gave it back to investors and said, hey, maybe we’ll fight and will live to fight another day, maybe not. After that I started a VC fund. And within the VC fund was not only an investor but also helped create a couple more companies and through all of that process that actually led me to what is now Alto, oftentimes referred to as auto IRA. And the way that came about was, I was investing alongside the funds. And one of those times when I was getting ready to make one of those personal investments, my IRA statement showed up, and I had that proverbial light bulb moment of holy shit. This is the money I should actually be using to invest in these private companies. I can’t touch this money until I retire anyway, these are long-term investments. So from a duration matching standpoint, as well as tax advantaged standpoint, it made perfect sense. The only problem was I didn’t know if it was legal. And so I did what, you know, everybody else does. I went to Google, and I typed in the search box about the best investment retirement savings in private companies. And, Google said that was legal. So yeah, it had to be true. So I called my financial advisor and he said, hey, I’m gonna invest in this next company out of my IRA account. And they said, fine. I said, okay, well, you know, here’s the routing number, and here’s the company bank account number, just send it there. And they said, no, you totally misunderstand me. If you want to do that, that’s fine. But you can’t do it here. You can’t do it with us. You can’t do it with this investment firm, this brokerage house. And so I really wanted to do this. So then I had to go figure out how to use my retirement money to invest in a private company. And that exposed me to what has, up until now, most commonly referred to as the self directed IRA business, okay. And it took me like 10 weeks to make that first investment. And I ended up using other providers, other custodians more times, which was like, you know, hitting yourself in the head with a hammer. At which point, I was like, I got to see if this is a big enough problem to solve. Or I got to just not do this anymore. And it turns out with 30 plus trillion dollars sitting in retirement accounts. And such a small amount actually invested in alternative assets, which private companies are along with real estate and artwork. And other real assets, whether antique automobiles, or Rolexes, or Michael Jordan sneakers. Whatever the case may be, you know, so little of that retirement money had been invested this way. You know, I was like, you know, there’s a big opportunity here. If we can make it as easy to invest in alternative assets with your retirement funds. Sort of the same way that TurboTax made it way easier for self filers to file their own taxes without having to use an accountant. Rip out the people and paper out of a process, make it scalable, and therefore cost effective for tens of millions of people to be able to participate. Rather than, you know, call it 10s of 1000s. So that’s where Alto grew out of, you know, frustration.

Matt Watson 08:21
So when you started on this path, were there other other service services that provided this like, were there alternative Ira type investment vehicles?

Eric Satz 08:33
So the self directed IRA industry has actually existed since the early 1970s, when ERISA was created. What’s changed with Alto is this implementation, and integration of technology in a way that had never existed before. And the other thing that we’ve done is we’ve built this network of investment platforms that enables any individual to invest in almost any alternative asset across industry sectors, right? So for example, if you’re doing a deal on AngelList, or you’re doing a deal with Republic republics, a crowdfunding platform. If you’re investing in art on masterworks, or you’re investing in farmland on acre trader, or farm together, we have created this seamless transaction execution process that allows people to easily use their retirement funds in a matter of clicks instead of 10 weeks. And so, recognizing that the real obstacles or hurdles to people investing this way was one access to knowledge, and three affordability, we felt like if we could address those, those three things, we could build a pretty big business. And I should mention along the way, we also had a crypto. So we have a rather significant crypto Ira business as well. All told right now we have just under 30,000 customers, and about 1.2 billion in assets under custody.

Matt Watson 10:31
I feel like IRAs, I’m curious, your opinion here is sort of an underserved market. And what I mean by that is, you know, when I have my 401 K, you know, my HR department, and all these people are telling me to pick what my investments are, and do this and whatever, and they try to educate me a little bit about it. And I randomly pick some shit to my 401k. But once I roll it over to an IRA, it kind of feels like it’s a black hole that most people like, really give much attention to what their IRAs are normally, like, they just didn’t know because people don’t have money too.

Eric Satz 11:04
So Matt, I think that’s part of the opportunity here, which, and that story I told about my IRA statement showing up and then me all of a sudden, deciding that I wanted to invest in this private company with it was the fact that I totally forgot that that IRA account even existed, right. And so, you know, the thing about this world that we live in today, where people are moving from company to company, and every time they do that, they have a new opportunity to roll their existing 401 k into an IRA account, and then invest as they see fit. Wow, that was loud. So what most people don’t understand is actually there’s more, there’s more money living in IRA accounts than in 401k. Accounts, it’s almost two to one.

Matt Watson 11:59
That makes sense, all right, because we get forced to roll them over. And they it feels like to me, they kind of almost get rolled into a black hole.

Eric Satz 12:07
That’s exactly correct. And so if we let people know that they actually have quite a bit of flexibility to invest the way they want, and what they want, then we can help unlock these alternative asset opportunities, which, up until now, have really lived behind this walled garden. All right, for the high net worth, ultra high net worth individual.

Matt Watson 12:36
Because my arrays are much more self directed, right? And so I have to log into my Charles Schwab account or whatever. And odds are all I can pick are public publicly traded options, and you’re saying legally, people can do it privately, it’s just they just didn’t know how or didn’t even easily have access to and probably 80% of the money. Is it places like Charles Schwab and there’s no access to any of it?

Eric Satz 13:02
That’s right. In fact, most of it’s at Fidelity followed just but you know, just sort of number one is fidelity, then the Schwab and then there’s everybody else around it. And, and and if what you want to do is invest in public companies, and or mutual funds, or ETFs. And by the way, we don’t think those are bad things. We just don’t think they’re everything.

Matt Watson 13:27
Yeah. Well, in the markets moving away from it, right. Like, I don’t know the numbers, and you probably know the number, but it seems like there’s way more money in private equity now than there is even in the public markets.

Eric Satz 13:37
Yeah, we’re getting trillions of dollars a year going privately. And that never happened before. Right. And we talk a lot about portfolio diversification. And in fact, it is a free investment tool. And what we know about diversification is that it’s going to reduce overall portfolio volatility, and over time, increase portfolio return. But this ability to diversify, again, was really only accessible to those with alternative asset opportunities, the ultra high net worth, the high net worth individual or the very large institution. And so by building what we have, with all this technology platform that enables everyone to access these asset verticals, we’re giving everybody else this free tool available to the wealthiest people, to those to the professional investor. We’re basically democratizing that capability, which we can all now take advantage of.

Matt Watson 14:45
So I can imagine you several years ago, come up with this idea. And you’re figuring it out and you’re doing this proof of concept of like, okay, I figured out I can do private investments in my IRA, but I just couldn’t do it with fidelity. I had to go figure all this crazy shit out and get it. And then you’re sitting here thinking to yourself, you know, I can make a business out of this. And then you’re like, holy shit, the legal complexity of being a custodian of all this and the legal shit I have to jump through. Seems like suicide. At what point? Did you have that moment? Because you had to have had that moment?

Eric Satz 15:19
Yeah. So in fact, I wanted to, to avoid finding answers to those questions for as long as I possibly could.

Matt Watson 15:31
It’s like, it’s like the cat and Schrodinger, Xbox, or like, I just don’t want to know. Yeah.

Eric Satz 15:36
But I actually had a solution to it. And the solution was to partner with a Trust Company to partner with a custodian, yes. And then and then function as their agent, and build all the systems ourselves that we were eventually going to use, that the hard part was in finding that partner. And, and, and the hard part in finding that partner was the fact that when those people heard what we were doing, they could recognize that we were gonna kind of disintermediate their business. And so they didn’t want any part of it. Eventually, we got lucky. And I believe you have to get lucky along the way. And with startups, we found a partner who had all the necessary custodial powers we needed, but really wasn’t focused on the retail investor, and certainly wasn’t focused on IRAs. And so we were able to overlay the technology that we were building, together with the custodial powers they had in order to launch. And then it took us about two or three years or something in between there, where we learned how to be a custodian along the way, and to build in compliance and all the necessary regulatory pieces. And once we knew how to do that ourselves, we then went and applied for our own Trust Company, which we now have and became a Trust Company and then eventually parted ways with the original partner, which they knew was going to happen anyway.

Matt Watson 17:23
So even today, for example, you mentioned that you do stuff with crypto, I’m gonna guess you guys are not the custodian of the crypto, I would guess you have a partner like Coinbase, or somebody who’s actually the custodian of that part of it. Right?

Eric Satz 17:33
That’s right. In fact, coin bases are, I think, our third largest investor, and Coinbase is our custodial partner. So we add that we do not custody the crypto assets correctly.

Matt Watson 17:47
And that’s gonna do and that’s the same thing with like, you know, potentially you have to you have to be a custodian of just dollars, right? Just regular dollars. So it’s like, are we a bank now? And we have to, you know, abide by everything that a bank would do? Or do we just leverage some other bank that does it forest, right, like that’s, that’s the thing is like, can you build on top of it? Where you don’t have to be the custodian of dollars?

Eric Satz 18:07
That everything, so that’s 100%? Correct. And in fact, I asked myself that question all the time. Do I actually want to be a bank? Do I want to buy a bank? And so far, the answer is still no. We’ll just keep our dollars with other people who are experts at being banks. And so we, we partner in that respect. I could see, I could see a day where that changes, but it’s, it’s not on the most recent radar screen?

Matt Watson 18:39
Yeah. Well, just imagine not not only Jeff worrying about being a custodian of just dollars, but also custodian of all the publicly traded assets, and crypto and all these things. Like it’s like pick your battle, or do you just right, you know, are you right on top of all these other people, right, like, you create value on top of them. You’re not trying to replace what they do?

Eric Satz 18:59
No, we’re not, we’re not trying to replace, you could almost think of us as having built an aggregator of services. Yeah. So the technology isn’t proprietary, but the workflow is right. And the workflow is the hard part, right. And so we’ve enabled people to connect with all different asset categories. To deliver that promise of portfolio diversification.

Matt Watson 19:28
Well, I think that’s the key here for other entrepreneurs. And where a lot of entrepreneurs make mistakes, right, they end up trying to create all these things like, Oh, well, we need to be a custodian of this. And we have to be able to bank and we have to do this, we have to do that. Versus like, you know what we’re going to build on top of all these things, we’re going to we’re going to create all these partners, we’re going to integrate all this together, because trying to do the details of all these little things is suicide. What it’s all for Newars. It’s what we do as a software. I’m a software guy, and as a software guy, I’m like, Yeah, I could build that. Yeah, I could build that and then like, I just build stuff. I never actually make anything work because of what happens.

Eric Satz 20:01
Well, you know, someone who has sold, built and sold three different companies successfully, you understand the challenges of? Well, we can say it both forwards and backwards. One is focus, right and not chasing every shiny new thing. And then, of course, the other way is product creep, which you’re fighting, right? Which is, okay, sure, that would be great. But is it necessary? Yep. And, you know, I struggle with that every single day of every single week, every single month, every single year. Yeah. Yes, those things are hard.

Matt Watson 20:48
Well, speaking of product creep, remind everybody that finding expert software developers doesn’t have to be difficult, especially when you visit FullScale.io, where you can build a software team quickly and affordably. Use the Full Scale platform to define your technical needs, and then see what available developers, testers, and leaders are ready to join your team visit FullScale.io to learn more. I also saw a note in here that I needed to mention the fact that you guys are hiring software developers, is that right?

Eric Satz 21:15
Well, isn’t every FinTech hiring software developers?

Matt Watson 21:18
I think every company in the world is. Yeah, I mean, except the US government because they don’t want to optimize anything. They just want to hire more and more people and spend more and more money. But all the rest of us are trying to figure out how to optimize things and save money with technology.

Eric Satz 21:35
Yeah. I should have been an engineer. I feel like I could have had way more professional choices. Had I done that.

Matt Watson 21:46
It’s like the government, the government is, you know, released, passed this big bill this week. And they’re supposed to hire 87,000 people to work at the IRS or whatever. And I don’t know about you, but I’m sitting here thinking, how do we just automate this shit? Like, we need 87,000? less, not more? Like how do we just automate the technology, so I’m gonna have to fill out my taxes every year, like, this is insane. Get some helpers to automate this shit, this is crazy.

Eric Satz 22:12
I actually think they should go one step further, which is to totally change, change the tax law, just rip out all the fucking crap and loopholes that are in there and just say, like, how much did you make? Then send me a number 10% 12% 10% at? Like, what, what really is the average? That, you know, you look at all the income and distributions and all that stuff. What? What is the average that they collect every year? So just simplify everything for everybody and just say how much you make me?

Matt Watson 22:43
And I’ve had guys on this, I had somebody on this podcast once that provided a service to help high net worth individuals pay zero on their taxes. Like, it doesn’t matter how much money you make, I can make it zero every time.

Eric Satz 22:58
That sounds like a good business.

Matt Watson 23:00
Yeah. So I mean, it doesn’t matter. Anyways, whatever the government does, is, there’s all it’s a cat and mouse game, right? But, you know, back to what you do, there’s a huge tax benefit to using IRAs. Right. So for those who are thinking about this today, and think, hey, maybe maybe actually could use this thing? Can you educate us real briefly about IRAs and the benefit of them? And that Sure, should have them and the two different types of IRAs, because nobody can ever remember the difference?

Eric Satz 23:30
Yeah, and I’m in the business, I can hardly remember the difference, but they really break down into two big buckets. The first is Roth IRAs. And with a Roth IRA, you’re contributing after tax dollars to a savings account. And as a result, so long as you wait until you retire to take your distributions from the Roth IRA. No matter what happens from the time you put it in until the time you take it out. If you make awesome investments, like Peter Thiel famously did and miss $500,000, from, from a Roth IRA into, into Facebook, turn it into a billion. That’s all tax free. Thank you. So everything that happens in a Roth account, when you take it out, so long as you meet the age requirements and distribution requirements, that all comes out tax free. No capital gains, no income tax, no nothing. The other account is traditionally referred to as a traditional IRA. And with the traditional IRA, you’re contributing dollars pre tax, and then you pay tax upon distribution. So same thing, in terms of what happens between point A and point B, all those capital gains tax free. But when you then take your tax distributions at retirement age, then you’re paying income tax based on your current income levels at the time. So huge. You know, Einstein gets credit for this, by the way, I’m not actually convinced that he said it. But he referred to compound interest as the eighth wonder of the world. Yep. And so whether it’s compounding interest or compounding returns, you get compounding returns in a Roth IRA and in a traditional IRA, and you just can’t replace that. Right? You know, so if, instead, every time you make a good investment, and you get, and you exit, and you have to pay taxes, it’s like, you’re not starting over, but you’re starting, you know, 30%, lower, right. And the easy way to check the math, of course, is to just, you know, go ahead and multiply one by one point, call it 1.08, or 1.09. And, and just draw that out over, you know, 30 years and see what number you get. And it’s a surprisingly significant number.

Matt Watson 26:28
So I’m looking at your website here, of all the alternative investment options you have.

Eric Satz 26:35
There’s a shitload of them.

Matt Watson 26:40
Yeah, they’re like, there are a metric shitload of them like a lot. Like, you guys must have a crazy amount of integrations and partners and all this stuff. I bet there’s like, is there like, 100 companies on here?

Eric Satz 26:53
Are you talking about the partner companies?

Matt Watson 26:55
Say like Investment Partners? Yeah. Yeah,

Eric Satz 26:58
I think they’re around 80. Wow. Yeah. So there are opportunities for people to invest in all sorts of asset classes that you didn’t know about. Were possible.

Matt Watson 27:14
Yeah, I didn’t know I could buy acres of farmland. You can. That’s crazy.

Eric Satz 27:19
And you know, Matt, that’s the thing that’s changed in today’s world, largely driven by technology, which is that you no longer have to have $100,000 to buy farmland, right? You can, you can do it with $10,000. Now, you don’t get your own plot of land, you get a piece for a plot of land. But you know, that’s, that’s something hugely different. That wasn’t possible, really, just 567 years ago. And so you can invest in real estate in a way that you couldn’t do before. And, you know, the same way now, I guess, who’s doing fractional shares of public companies? Robin Hood’s probably doing it. I imagine there are others, I think just about everybody does now. Yeah. So but you know, that’s one of those things that was always legal. And theoretically possible, but the technology wasn’t there to support it. Now, the technology is there. And the technology is also there to do the same thing with these alternative asset classes. And that enables affordability and accessibility. So that’s what we’re trying to deliver.

Matt Watson 28:33
So I love the idea of rolling over my Charles Schwab IRA into this, by the way.

Eric Satz 28:40
And then being able to buy. I love the idea of you doing that.

Matt Watson 28:44
So one question I have for you, you know, you have these at different partners and all these different, you know, types of investments. Not that it’s super important, because an IRA is long term, but how was the liquidity and some of these things. So if I decided I want to do acre trader and invest in that, and then like a year from now, I’m like, You know what, I’d really rather do Bitcoin instead or whatever? Are you locked up in these things? Or is it worth it?

Eric Satz 29:06
It always depends on the asset class and the asset itself. And so if you go to an Acre trader, they will show you as they’re, they’re offering various investment opportunities, they’re going to show you the characteristics of that particular opportunity. They may say, you know, we don’t expect liquidity for 33 years or five years should 12 years. And that’s the thing with alternative assets. You’re signing up for an illiquid asset, which is why you get a premium return. Right, right. So, to say it backwards in the public markets, there’s actually a liquidity discount. Which means in order to be able to just sell and take your money out at any time, you’re agreeing to a lesser return. You don’t know it, but you are. Okay. And so when you lockup your money and you know that it’s going to be put to work and not within your control to get liquid on for some period of time. You want to expect and demand a higher return for that risk that you’re taking?

Matt Watson 30:15
Makes total sense to me. Yeah, I imagine the length of investment for these things is all over the board. And, you know, I’ve done several different startup investments myself, and some of them were shot 10 years ago that still are locked up, who knows when I’ll get liquidity out of them.

Eric Satz 30:34
You and I both.

Matt Watson 30:36
And several of them have blown up along the way. But that’s what’s fun about startup investments is I did one that is like, worth 20 times what I invested in it, and then the two or three that are dead, and two or three that are still alive, limping along, you know, it’s just you never know. But the great thing is, being able to do this like an IRA and deferring all the taxes. So for my one that I did, that’s up 20x. You know, being able to be Peter Thiel would be great. And deferring that, you know, I wonder if he really made a billion dollars. So second, to the point where it’s like, you can take money out of your IRA B can only take like, a small percentage every month, like he can never, he could never draw that money back out. Or Wow, that, yeah, he could take the whole thing. You can take the whole thing? Yeah. It’s like when I turned 67, I got a billion dollar check.

Eric Satz 31:27
If he wants to. Yeah, yep.

Matt Watson 31:30
I wouldn’t want to get those big checks. Like the really big one.

Eric Satz 31:33
Those are the rules. Yeah, no, I think you have to join sweepstakes to get a big check like that.

Matt Watson 31:39
I want the big cardboard check. Yeah, no.

Eric Satz 31:42
I think you just, you know, apply to some sweepstakes somewhere, and you’ll get that big cardboard check. Some I think somebody, a couple of people bring it to your house with balloons. There we go. You know, that can be fun.

Matt Watson 31:57
Yeah. So now that you guys have built this, and obviously it was Uber complicated to do this and regulatory and have ad partners and all this stuff? Do you have a lot of competition in this space? Or do you have competition only does like just crypto like I know, I know, you have a competitor that only does crypto?

Eric Satz 32:17
I hear their mindsets. So we really have competition in the crypto space, but not so much competition, everything else. Okay. And you’re gonna see some big changes on the non crypto side of the business coming q4 of this year. And so that’s the fourth quarter of this year and the first quarter of next year 2023, we have some really big developments that we’re rolling out that are improvements to the workflow, the user experience, user interface, as well as investment opportunity. So really looking forward to what we’re doing at the end of this year and early next year, and that there should be some, I think, really well received improvements. And the other thing I would just say is, look, I think crypto is an important asset. I think it’s here to stay. And it should play a role in everyone’s portfolio. But that said, it’s just one alternative asset. Yeah, like, portfolio. Diversification is the key.

Matt Watson 33:32
So, speaking of that, I mean, what you guys have created in some forms is a marketplace and a consolidation of having access to all these asset classes. What about people who would want to use a platform like yours outside of an IRA?

Eric Satz 33:48
That’s a great question, Matt. And I like the way you think. Maybe that’s something you’re gonna see in 2023.

Matt Watson 33:58
All right, well, we’ll stay, we’ll stay tuned for that. I think I could definitely see that being very useful as well.

Eric Satz 34:05
Me too. So I’d like to do everything in one place. I don’t know about you.

Matt Watson 34:10
Yeah, absolutely. Well, I definitely feel like IRAs are a black hole. And you guys are definitely filling a big void there where people can, you know, take in and be more self directed. And that’s amazing that you can get access to all these different asset classes. So thank you so much for solving this problem.

Eric Satz 34:30
So it is a great pleasure.

Matt Watson 34:33
Yeah, absolutely. So do you feel like the hardest part of this is behind you and you get to that stage where, you know, the company is just growing and it’s fun, or is it still really hard at a slog every day?

Eric Satz 34:48
Absolutely. Not the hardest thing. The hardest parts are not behind us. Do you have kids?

Matt Watson 34:54
I have four kids. Yeah.

Eric Satz 34:56
So you know, the problems, don’t you? They don’t disappear as they get older, they just change, right? And so, again, as a zero founder, I’m not saying anything you don’t know, going from zero to 10 is like one phase, going from 10 to 30 is another phase 30 to 50, yet another phase 50, to 100, another phase 100 to 150. And the new challenges, new problems, new things to work out, you know, we’re 120 people now that you’ve got to put systems in place and processes. And, you know, I was, I was, I like the, you know, like the really early startup stages where everybody knows everything that’s going on. And so these are all new challenges. The problems don’t go away, it’s still fun. It’s an incredible learning experience, the learning curve is steep, figuring out how to get everyone involved in the way that they want to be involved and empowered to do what they need to do this raw, you know. So the problems don’t disappear. You don’t just, and in fact, I think at this stage that they’re, they’re somewhat harder and more complicated. But that’s the fun part.

Matt Watson 36:22
For sure, you know, as you grow a business, you hit those plateaus, where you haven’t 50 employees, 100 200 300, whatever, or revenue, you know, milestone to everyone look at it, you definitely hit that, like at the Full Scale side, we have about 300 employees now. And of course, we have dramatically different problems than when we had 20 employees, right, like, just some things like, hey, we finally figured out how to buy laptops, and if we have a problem with the laptop, there’s somebody that can help them fix it. Like we solved that problem a long time ago, like that was a huge headache for like, how to acquire hardware.

Eric Satz 36:55
People actually, you know, entrepreneurs, super problems. Who hasn’t been there yet. It’s like, you don’t think of that as a business problem. Yeah, but it is a very real business problem. You know, getting people their equipment. Yeah. And, and having it set up in the right way and protected in the right way.

Matt Watson 37:22
And, you know, we have equipment in a developing country that you don’t just walk down the street and buy.

Eric Satz 37:27
No, that’s that too. We haven’t had to do that. But I imagine that’s a whole nother Yeah. Especially from an info security standpoint, like, get it getting that to, to work properly. But even something you know, when you’re 120 people and hackers start phishing your employees by sending them texts pretending to be you. Yes, you have to make sure that everybody knows, you’re not actually going to text them and ask them to go get your dry cleaning. Yes, right. Like,

Matt Watson 37:57
I used to hear that all the time. At my old company. It was like this running joke that everybody would get emails from me about that same sort of stuff. And everybody, like always, joked about how they were getting, you know, emails to get my dry cleaning or whatever. And I’m like, I didn’t do that shit. By the way, I don’t send emails, I only send you slack messages. So if you get a single email from me, it’s junk. Like, I don’t send any of them. But yeah, and right, it happened all the time.

Eric Satz 38:20
And in fact, that people who were at Alto, you know, from the very beginning, will tell other people like, yeah, if their capital letters and punctuation is in there, and by the way of his names included, it didn’t come from him like that, you know, and if it’s more than, like, six words, it didn’t come from him. Yep. So yeah, those are Yeah. But when it is when you go from 30 to 120, not everybody knows that anymore.

Matt Watson 38:49
Yeah, it was, it was a wake up moment, when in my first company VinSolutions. Like you get on the elevator. And, you know, you ask somebody Oh, like, what? He asked me, oh, what floor? Are you going to? And I’m like, Dude, you work for me? Like, we’re going to the same place, right? Like, yeah, you know, when you have 20 employees, that doesn’t happen. But when you get a couple 100 employees, like, it’s a whole different world and the whole do your exact right, it’s a whole different set of challenges. So, I mean, what do you see as the biggest challenge for you at this stage?

Eric Satz 39:24
Organizational structure, right, like so. Again, as you’re growing, I’m going to try and describe it this way. At the beginning, everyone wears five to 10 hats. Yes. Right. And then when you go and and by the way, I think your first 10 employees are the 10 most important employees and they set the culture for the rest of the company from you know, the DNA, the DNA of the company is then imprinted. Yeah, right. And, and, and you’re growing from there. And so this is the first time Employees are wearing, you know, multiple hats when you go from 10 to 30. You’re them asking people to go from, you know, five hats to just two to three hats. And then when you go from 30 to 50, you’re beginning to say, hey, I want you to do just that one thing, right? And they’re like, Oh, but I used to do all this other stuff. And it’s like, I understand, but now we’re hiring subject matter experts who like to do just that. Yeah, right. We need expertise and efficiency in, in given areas. And then eventually, you say, as you especially as you go from 50 to 100, just like, Okay, we have these functional groups, these people are all on product, these people are all in engineering, these people do marketing, these people do sales, etc. Yep. Right. And then it’s that there’s friction in every sort of organizational structure, by the way. And the hardest thing for us right now is trying to figure out like, is it a functional org? Is it more of a business unit org, where you have general managers, and they have all their own dedicated resources? Or is that a matrix is a combination of the two things and trying to figure out what’s best for us, and how we all align strategically. And, by the way, up until just like, a few weeks ago, we never used OKRs. Right? And now we’re implementing OKRs. And making sure that we have a waterfall of alignment, from top to bottom, to figure out our strategic priorities and making sure that everybody knows what those priorities are, so that somebody else comes to you, including me, by the way, it says, oh, I need you to do this thing. You’re like, yeah, that doesn’t actually fit into any of the objectives or key results. So I’m not going to do that. Right. And it’s, it’s implementing focus, right. And I think that really is the single greatest challenge for us right now.

Matt Watson 42:11
And you’re, you’re absolutely right. And as things change, all that all that kind of stuff comes or goes or changes, you know, you, you hire you, you bring somebody in that brings that kind of experience and operational discipline. And the hardest part is you mentioned earlier, like when you first start out, you need people that are kind of Swiss Army knives, they can do a lot of stuff you’re like, you know, Sally helped figure out how to do compliance, because we really needed to figure out how to do this compliance thing. But then like two years go by and you’re like, you know what, yes, Sally figured that out. But we have no idea how she figured it out. And she didn’t do it the right way. And now I need to go hire an expert for that thing, right? And it’s like to some degree, you may outgrow Sally, or whoever it is, it’s like, we don’t need Swiss Army knives anymore. How many people are experts at these things? And then then it’s like, well, what do we do with our Swiss Army knives that have been great employees for five years? Yeah.

Eric Satz 42:59
I think it works both ways. Right, which is that sometimes the people outgrow the company and sometimes the company outgrow people? Yep. And I think what’s really important is to make sure, especially for the people who helped you launch and helped you build what you have today that you treat them fairly. As they exit if they have to exit.

Matt Watson 43:31
Absolutely take good care of those who hope to get where you’re at 100%. So, as we wrap up the show today, we want to remind everybody that if you need to hire software engineers, testers, or leaders, Full Scale can help. They have the people and the platform to help you build and manage a team of experts. When you visit FullScale.io, all you need to do is answer a few questions and let the platform match you with a fully vetted, highly experienced team of software engineers, testers, and leaders. At Full Scale, they specialize in building long-term teams that work only for you. To learn more, visit FullScale.io. And I hear you’re hiring developers. So if anybody’s listening and wants to come to work, go check out Alto, it’s Alto IRA. Yes, www.altoira.com. Yes, you guys. You guys are hiring.

Eric Satz 44:19
Yeah, everybody else. We’d like our mission. And so hopefully, folks will be attracted to that. And if you’re mission driven, you want to change the world. You want to make sure that people have a strong financial future. We want to hear from you.

Matt Watson 44:36
Well, and you might have got a new customer out of me because my IRA Charles Schwab is sitting in a black hole and I wish I could use my son’s 529 A.

Eric Satz 44:46
Can you add that to your list? We don’t do 520 940 1K.

Matt Watson 44:51
I could use help with all these things. So maybe in the future. Keep that in mind?

Eric Satz 44:55
Absolutely. So Morrow Kismat focuses on more opportunities.

Matt Watson 45:00
All right, well, thank you so much for being on the show.

Eric Satz 45:03
Thanks, sir.