[00:00:02.010] – Alex Serman

Hi, I’m Alex Serman, Managing Director of Wealth here at First Rate. And this is our next edition of the Whiskey & WealthTech podcast. Today I’m joined by the Managing Director of First Rate Ventures. Here at First Rate, Marshall Smith, hosts his own podcast – Ventures in WealthTech. So Marshall, why don’t you tell us a little bit about your podcast? And we’re not drinking whiskey today. What are we drinking?

[00:00:33.460] – Marshall Smith

Well, hey, thanks for having me here on the Whiskey & WealthTech podcast. I’m a big fan, listen to all your episodes. And yes, that’s right, I do host the Ventures in WealthTech podcast. I think our podcasts are sisters or brothers, and we talk all things early-stage tech and innovation in the WealthTech space. And so First Rate Ventures is First Rate’s corporate venture capital strategy where we invest in early stage wealthtech companies around the globe. And we also represent First Rate interest in acquisitions around the globe. And so the reason that we’re not drinking whiskey today is because we’re drinking a pisco. And I was introduced to pisco on a recent trip to Santiago, Chile, where we just announced an acquisition of Finantech. And so I think it’s fitting for this episode that you were generous enough to move slightly beyond whiskey to the pisco variety. And so that’s what got us here today.

[00:01:39.600] – Alex Serman

Excellent. Well, without further ado, let’s try this out. Cheers. So pisco is more of a brandy type liquor than it is a whiskey. And so this was made out of grapes, but I’m getting a lot of really good metallic vanilla, woody notes, kind of similar to what I would think, Canadian whiskey you typically imagine. So it’s really smooth, not like other branches that I’ve had.

[00:02:12.640] – Marshall Smith

Yeah.

[00:02:13.550] – Alex Serman

What do you get, Marshall?

[00:02:14.790] – Marshall Smith

Well, I’m not sure what I’m getting, but what I’m getting is it’s really, actually pretty nice to drink. It’s easy to drink. It doesn’t shock the mouth. It just kind of goes down smooth. But I get a little bit of maybe licorice is the thing that I was tasting.

[00:02:26.970] – Alex Serman

Okay.

[00:02:28.030] – Marshall Smith

Maybe I think the vanilla that you said and maybe metallic is the right way to describe it. Now, when we were in Chile, we were introduced to the pisco in a pisco sour, which is like a margarita, essentially. And they’re really easy to drink. Even easier to drink than this is neat. And so you get a few piscos in and then you’re having fun.

[00:02:50.230] – Alex Serman

So not only normally do you drink pisco in a sour, but also, you’ve heard, mixing it with a soda or some other carbonated beverages, pretty common as well. But Chilean pisco, like what we’re drinking, is typically mixed with Sprite or a Coke, whereas a Peruvian pisco, where the termer originates from, that’s where you get more of the pisco sour from. So in addition to moving away from whiskey, we’re also going to do something that’s a bit odd for our podcast. We’re actually going to try mixing our pisco with soda as the way it’s intended, so we’re not affronting any of our new Chilean counterparts down in Santiago.

[00:03:32.010] – Marshall Smith

Yeah, I can see the comments coming into the YouTube stream now. You’re drinking it wrong. But we’re doing our best and we’re enjoying it. And I have to say it’s pretty easy to drink.

[00:03:40.910] – Alex Serman

Yes, it is.

[00:03:51.130] – Marshall Smith

So I got a question for you, Alex. Will this be the first and only time that you don’t drink whiskey on the Whiskey & WealthTech podcast?

[00:03:59.870] – Alex Serman

It is indeed the first time. We’ll see if it’s the last time.

[00:04:04.210] – Marshall Smith

Okay, I’ll take that.

[00:04:09.390] – Alex Serman

I could see other opportunities for us to enjoy other beverages than whiskey, depending on the situation. So we have had one episode where we had an interviewee actually smoking a cigar rather than drinking a whiskey.

[00:04:25.690] – Marshall Smith

Wow, that reminds me of Elon’s episode where he was smoking something else on the episode. I don’t know if we’ll ever get there. Here Whiskey & WealthTech that might be a little bit.

[00:04:38.490] – Alex Serman

Too far afield.

[00:04:39.950] – Marshall Smith

For the Whiskey & WealthTech. Okay, cheers. Cheers. Very nice. Yeah.

[00:04:51.090] – Alex Serman

Tastes like any other whisky Coke ever had. Yeah. How’s the piece go with Sprite?

[00:04:57.550] – Marshall Smith

It’s pretty nice. I think it actually mixes really well with the Sprite to where you don’t pick it up too much. So, a dangerous drink in the summer on a hot day, I’d say. I can see that being good. You just think your drink is bright.

[00:05:11.750] – Alex Serman

Excellent. So, Marshall, tell me, how did First Rate get involved in Chile? How did we end up acquiring a firm there, and what’s the overall strategy?

[00:05:21.680] – Marshall Smith

Man great question. I’ll tell you. We didn’t have a strategy to acquire a firm in Chile. First Rate, as you know, has a majority of its customers here in the US. Primarily banks, all in wealth management, wealth reporting, performance analytics, that sort of a thing. But our company has a vision to expand globally in the Latin American market. While not one of the top markets in terms of wealth, it’s an underserved market in the sense that the people who are serving the customers there and there are family offices, there are private banks, there’s wealth managers, independent financial advisors, very similar markets and type use cases and segments to the US. Market. What we saw is that mostly they’re trying to be serviced by a US. Entity. So a US based fintech or a European based fintech flys people down into Latin America, tries to land customers, but they generally service it from their hubs, San Francisco, New York, Miami, from Europe. And so when we started exploring that region, we came across a company that seemed to be doing a lot of things similar to us. They did performance, they did reporting, they did data aggregation.

And I reached out to them over LinkedIn and more or less said, hey, you guys are doing wealthtech, you’re doing performance reporting. So do we. We’re a private company and we’re interested in exploring the Latin American market. Let’s talk. And I sent a message that was to Jose Antonio, who is the President and CEO of the company. And we just got on and had a nice chat and just talked about what they’re up to, what we’re up to, just started becoming friends, really. And then over time, we actually were exploring becoming a minority investor in Finantech because we thought, you know what, you guys know what you’re doing there. We’d like to be a part of it. We’d like to explore growing in Latin America. We have some solutions they didn’t have, but frankly, they had a great team. They had customers, they were profitable and they were growing quickly and they were a bootstrap company. And so we’re not a traditional venture investor where we always require an exit in certain amounts of time and that sort of a thing. So I think they saw us as a friendlier party to just collaborate with.

But over time, it just became clear what was really their primary interest was to sell the firm to a US based fintech and to continue working in that firm. And there’s a number of different reasons for that. Maybe one day if you interview them, they could go into those further. But the reality is that there’s some challenges in the Latin American market, some potential instability with different governments and regulatory approaches and that sort of a thing. And so many people who have wealth in Latin America want to custody those assets in the US. And they’d prefer if the fintechs hosting all that data was based in the US. In some instances. Some instances they want it local. Sometimes they want it in the US. So the more and more we talked about those things, they just started making sense. What First Rate has is a platform that’s going to continue into perpetuity. We’re going to operate forever and we’re never going to exit. And we want to have an operating base in Latin America serving wealth management customers in that market. So we didn’t want to acquire business, shut down the office and run it all from Arlington, Texas.

Our mission is to have people on the ground in countries and markets around the world leveraging our culture and our DNA to have successful operations to make impact on clients, coworkers and community. And over time, it just became clear that First Rate and Finantech coming together was the way to do that. So it really was an accident, but perhaps it’s a divine appointment. And so far, so good.

[00:09:07.650] – Alex Serman

Excellent. So what are the kinds of things that Finantech is bringing to First Rate, other than just being able to be a hub for us in Latin America? How many coworkers, what kind of technologies are we going to be able to leverage that we might not have had before?

[00:09:20.970] – Marshall Smith

Yeah, great question. Well, the three primary things they do is data aggregation. They do performance calculations and they do reporting. Those are three of the things that we do as well. They actually had quite advanced in that they were using tech to take unstructured data and they’re imaging those and using OCR technology to scrape them and automate a lot of that because 90% of the data going into the system is unstructured data. So there’s not as a mature of a data feed system and network in the Latin American markets. So first, they had some pretty impressive technology around how to do that and they’re really leaders in the space. That’s one of their main differentiators. The second is that they had built the platform specifically for lower volumes and higher customization and that’s common in the family office market. Whereas in the bank wealth management RIA and down towards the broker dealer and retail spaces. It’s all about volume. It’s about getting the same package of reports out the exact same way. So the two of the founders of the firm had worked together in a private bank in Chile in their early years and they calculated performance manually themselves.

And so they knew the pain of producing these customized reports and they knew the pain of collecting the data via unstructured methods. And so they set out themselves to solve that problem. And over time, they were actually in the family office space themselves and so understood the challenges of the family offices. So they really built the solution from scratch as users and as customers. And so anytime you have a user and a customer of a use case on the building side of it, paired with a really technical leader like Jose Antonio, who leads the product team, and they’re just scrappy. They’re building things that are needed. They have a quick iteration loop on use case to feedback, to solution, and they’ve really built something that really works well for the Latin American market. And so there’s nine coworkers that will be joining First Rate. Jose Antonio will be the managing director of First Rate Chile in our Latin American division. And the other two co-founders, Javier Peters and Philippe Mao will be joined us as well as strategic advisors. And so we’re really excited because just with this combination, we believe there’s a lot more opportunity just within Chile itself.

And so they’ve been able to do a number of deals there. But being a small bootstrap company, doing larger enterprise deals can be challenging. They need security and compliance processes that First Rate has. So we’ll be able to help them there, do larger deals within Chile, but we believe in the neighboring Latin American markets, they are very underserved and it’s a green field for a provider that has people on the ground in market understanding those peculiar differences about their data and their reporting and the investments that they’re doing there. So we plan to grow the office in Santiago and start serving customers in neighboring countries. We’re looking at Colombia, we’re looking at Peru, we’re looking at Uruguay, we’re looking at Mexico. And so we’re really excited about the growth in the Latin America.

[00:12:26.650] – Alex Serman

Excellent. That all sounds great. We’re happy to welcome a few more coworkers here to First Rate to be able to start spreading that First Rate culture all the way down to Santiago. So Marshall, now that you helped us acquire Finantech, and it’s going to be run by Jose Antonio, what’s next for you? So what’s on the horizon for Ventures now?

[00:12:49.660] – Marshall Smith

Yeah, great question. So we’re just going through our 2023 planning and review cycles, and so Ventures is very excited to continue helping First Rate grow into some specific markets. We’re going to be focused on the Asia Pacific and European markets in 2023. That’s a focus area for us. There are opportunities in the US market that we’re also interested in. There is a pending transaction that we can’t announce yet that you should be hearing about here in the next 90 days that will be very exciting for us in our US market. So we’re going to be focused on the Asia Pacific and European markets. Those are two markets we actually have traction in just in the last two weeks. We signed our first customer in the Asia Pacific region, and we should be signing a second and third customer in the next quarter. And in Europe, we’ve had customers now for over ten years and a direct customer for the last two to three. And now we have employees now in Birmingham. And so what we want to do is look at potentially acquiring firms or investing in early stage firms that have a presence in those markets.

So really, Ventures does two things. We’ve been talking a little bit about acquisitions today, but we also look at early stage companies that we want to partner with and that do have products and solutions that are complementary to ours and where we can add value to their company as a strategic investor. And so we’re really looking at early stage investments as well as acquisitions in the global markets. We’re also really interested in exploring the Middle East, North Africa in 2023. That’s what we see as an emerging market. There’s lots of development going there for tech and blockchain, and we believe that there’s a ripe opportunity to serve the wealth management needs of that market.

[00:14:29.950] – Alex Serman

Excellent. Well, it sounds like you’ve got an exciting 2023 ahead of you. I’m looking forward to hearing more about it. And maybe you bring me a few other non whiskeys or international whiskies that we might be able to share together.

[00:14:41.970] – Marshall Smith

Hey, I wouldn’t reject another offer to come on the Whiskey & WealthTech with a new regional variety.

[00:14:49.890] – Alex Serman

Well, thank you so much, Marshall, for your time today and for sharing some pisco with us. Looking forward to hearing about your next new adventure. And thank you everybody, for tuning in to the Whiskey & WealthTech podcast. We’ll be with you next time. And cheers.

[00:15:10.310] – Marshall Smith

Cheers. Awesome. Sounds good.