20VC Plaid and Column CoFounder, William Hockey on Why the Brands that Win in Fintech Will Not Be Financial Services Brands, What US Banking Can Learn from China & Why Companies Can Be Built Slower than People Think

In this episode of 20 VC, host Harry Stebbings interviews William Hockey, co-founder of Column, a nationally chartered bank for developers, and former co-founder of Plaid. Hockey discusses his non-traditional path from a farm in California to tech entrepreneurship, emphasizing the value of building within the regulatory perimeter to drive innovation in financial services. He shares insights on leadership, including the importance of hiring patiently and the benefits of working quietly and persistently without seeking external validation. Hockey also touches on the future of fintech, predicting a shift towards specialized financial brands and the potential for companies like Column to become leading banks by offering direct APIs that simplify the money supply chain. The conversation also includes mentions of Harvard Management Company's role in venture capital and Mercury's banking services for startups.

• William Hockey is the co-founder of Column, a nationally chartered bank for developers and builders.
• He was previously the co-founder, president, and CTO of Plaid.
• Plaid's acquisition by Visa for $5.3 billion was blocked due to regulatory issues.
• Plaid later raised funds at a valuation of $13.4 billion.
• Hockey also serves on the board of Scale AI.

"I'm thrilled to welcome William Hockey, co-founder and Coce Column, the only nationally chartered bank built to enable developers and builders to create new financial products."

This quote introduces William Hockey and his current venture, Column, highlighting its unique position as a nationally chartered bank designed for developers.

• William Hockey grew up on a farm in Central California, engaging in hands-on building activities.
• He started programming in college as a socially acceptable way to build things.
• Hockey co-founded Plaid with his best friend Zach during his senior year in college.
• After working with financial institutions and fintechs through Plaid, he saw a massive opportunity to build within the regulatory perimeter.

"So I grew up on a farm out here in central California, and I grew up building everything."

This quote provides insight into Hockey's early life and his inclination towards building and creating, which eventually led him to the tech industry.

• Hockey realized the value of operating within the regulatory perimeter, rather than outside of it like most Silicon Valley companies.
• He and his team bought a regulated bank in California, which required a significant upfront investment and a longer time horizon for growth.
• This approach contrasts with the typical Silicon Valley model, which favors quick, scalable ventures that can be started by young entrepreneurs.

"What I realized actually is you can drive a huge amount of value if you actually jump in, be a regulated bank, and actually build it from scratch."

This quote explains Hockey's strategic decision to establish a regulated bank, Column, and the advantages he sees in building within the regulatory framework.

• Hockey's upbringing instilled a "live to work" mentality, valuing tangible, pragmatic problem-solving.
• He believes in addressing current problems rather than focusing solely on far-off, intellectually appealing ideas.
• Hockey identifies as a pragmatist, preferring to work on solutions that are practical and immediately applicable.

"I think a lot of times, Silicon Valley and broader tech, we can kind of get a pine sky and only talk about far off future."

This quote reflects Hockey's perspective on the Silicon Valley mindset, emphasizing his own preference for practical and immediate problem-solving.

• High performance, according to Hockey, involves the ability to work diligently and quietly without the need for external recognition.
• He believes that true success comes from sustained effort over many years, often without immediate validation.
• Hockey acknowledges that everyone has an ego, but the key is balancing the need for recognition with the focus on long-term goals.

"It's all about how long can you do that and can you do that in the shadows?"

This quote encapsulates Hockey's view on high performance, stressing the importance of perseverance and humility in leadership.

• Hockey recognizes the universal desire for validation but strives to emulate those who achieve success without seeking the spotlight.
• He credits his stable group of friends, who have been with him since before his success, as a foundation that allows him to take risks without tying his self-worth to his company.
• Hockey believes that wealth can provide the security to work on problems with a longer time horizon and to take more significant risks.

"I think everybody's vain. Anybody that tells you that they don't need that, myself or otherwise, they're lying to your face."

This quote candidly acknowledges the human tendency to seek recognition while also highlighting the importance of finding a balance.

• Hockey contrasts his experience leading Plaid during a boom with his current leadership role at Column in a more constrained environment.
• He notes that leading a self-funded and employee-owned company requires a different approach, including being more ruthless, pragmatic, and focused on delegation.

"Having a leadership style where you have much more constrained resources, where you have much more resources, is very different."

This quote reflects on the different leadership styles necessitated by the varying levels of resources available to a company.

• Silicon Valley's successful companies often create abstractions around complexity.
• Companies like Stripe, Twilio, and Plaid identified complex systems and made them easier to use.
• These companies address market needs with limited initial capital, ideal for smart engineers and thinkers.
• However, such abstractions may not fully address systemic issues, sometimes only superficially enhancing the system.

"So if you look at stripe or if you look at Twilio or you look at plaid or something like that, right? They identify this big problem. They're like, look at all these systems. They suck. It's really hard to use."

This quote explains how certain successful companies in Silicon Valley have built their businesses by simplifying complex systems for users, identifying a significant market need and addressing it.

• Column's approach differs by building from the bare metal, avoiding existing complexities.
• This approach requires more resources and capabilities, often only possible with experience and success from past ventures.
• It's a fundamental solution rather than an overlay on existing systems.

"Let's go like all the ways down below all the turtles and say, hey, what's at that very bottom? And you actually get a build from that."

William Hockey discusses Column's strategy of digging deep into foundational issues and building from there, which contrasts with creating abstractions over existing systems.

• Plaid's co-founder excels in maintaining patience during the hiring process, even if it temporarily hurts the business.
• The ethos at Plaid was to wait for the right candidate, even if it took months or years, unlike most companies.
• At Column, they strive to maintain an exceedingly high bar for hiring candidates.

"We are going to rate until we would get for that a candidate. Maybe it take twelve months, maybe it would take 24 months, who knows?"

William Hockey emphasizes the importance of waiting for the ideal candidate in the hiring process, reflecting a philosophy of prioritizing long-term quality over short-term convenience.

• Most companies should not aim to become 500+ person companies; many could achieve the same with fewer people.
• As companies grow, it's necessary to distinguish between roles that require top talent and those that do not.
• Hiring A players for every role can lead to attrition risks and dissatisfaction among highly ambitious employees.
• Early stages of a company may require more A players, but it's crucial to accurately assess candidates.

"I think most companies shouldn't be 500 person companies."

William Hockey challenges the notion that large headcounts equate to success, suggesting that many companies could be just as effective with smaller teams.

• The pressure for speed and rapid hiring may be a misconception; companies can be built more slowly than commonly thought.
• Value creation over a longer period can be more significant than rapid execution.
• The right features and execution strategy depend on market position and the level of execution necessary.

"I think companies can be built much more slowly than people think."

William Hockey argues against the prevailing startup culture's emphasis on speed, advocating for a more measured approach to building a company.

• Venture capital is traditionally meant for innovative businesses that require significant upfront capital and have long durations.
• Silicon Valley venture capital tends to favor businesses where technology and engineering are the main success factors.
• Column's business model includes critical components beyond technology, such as risk management and regulatory strategy.
• Success in Column's space may not be as rapid as in others, but the potential for long-term value creation is significant.

"This is what venture is meant to fund, not the SMB payroll management system that can be spun up with no code in a weekend."

Harry Stebbings challenges William Hockey's view on venture capital suitability, suggesting that ventures like Column are precisely the type of businesses venture capital was designed to support.

• William Hockey's personal wealth is primarily invested in Plaid and Column, with minimal diversification.
• He has not focused extensively on portfolio construction, preferring to invest in what he knows best—his own companies.
• He believes investing in oneself has the potential for the highest return, despite higher risks.

"99.9% of my wealth is in plaid and column. That's it."

William Hockey reveals his investment strategy, indicating a strong belief in his ventures by having the majority of his wealth tied to them.

• CEOs, especially in tech, tend to be risk-takers rather than conservative financial allocators.
• Public company CEOs with investment backgrounds might be better at pure financial allocation.
• Tech CEOs are more focused on building and innovation, which may not always align with traditional financial allocation strategies during volatile market times.

"Ceo's probably are a little bit too risk on."

William Hockey suggests that CEOs, particularly in the tech industry, are inclined to take more risks than might be ideal for pure financial resource allocation.

• Column hires individuals who are generally over the age of 26-27, with an average age over 30.
• Employees who have witnessed company booms and busts understand the value of long-term growth over immediate success.
• The team's composition has naturally selected for individuals who resonate with the company's patient approach.

"After you see a couple of companies boom and bust, you start to recognize that coming out of the gate too strong can actually be a potential negative."

William Hockey explains how experience with the tech industry's volatility can lead employees to appreciate a more deliberate and patient approach to business growth.

• Column is a bank offering APIs to move and lend money, addressing the money supply chain problem.
• Historically, financial services required multiple intermediaries due to banks not being technology companies.
• Column's acquisition of a bank allows them to innovate in financial services by controlling the protocol and risk decisions.
• The money supply chain problem is similar to traditional supply chains, involving numerous intermediaries.

"What we did is we went out and we actually bought a bank, took on that regulatory heft, and we think that's really the only way to actually truly innovate in financial services."

William Hockey discusses Column's unique approach to solving the money supply chain problem by directly integrating banking and technology through the acquisition of a bank.

• William Hockey discusses collapsing the complex supply chain in financial services by connecting directly to the Federal Reserve (the Fed), bypassing intermediaries.
• This approach intends to streamline the process of building financial services on top of the Fed.

"What we are doing is we are simply just solving the supply chain. We're saying there's 20 things to solve this one very basic problem, which is building on top of the Fed and we're just going to collapse all that in one and we're going to go straight to the Fed and do it ourselves."

The quote explains the core objective of simplifying the financial supply chain by eliminating the need for multiple intermediaries and creating a direct connection with the Fed for more efficient service delivery.

• Intermediaries in the financial system have not presented a coherent problem statement in response to the proposed changes.
• Large banks may not fully grasp the extent of the paradigm shift occurring in financial services.

"There's so many and they're so disparate. I don't think I've really heard a coherent problem statement yet."

The quote reflects the scattered and diverse nature of intermediaries, implying that there has not been a clear or unified response to the changes proposed by Hockey.

• The current system requires developers to build on top of banks, which is a slow and costly process that limits product development.
• This barrier to entry stifles innovation and growth in financial services.

"Anytime you build in financial services, you have to build on top of a bank. And to do this right now, it takes 9, 12, 18 months. It's extremely painful, it's extremely expensive, and you can only probably ship 10% of the products that you want."

The quote highlights the difficulties faced by developers in launching new financial products due to the lengthy and expensive process of building on top of existing banking infrastructure.

• The primary focus is on enabling builders of new financial services, rather than directly working with consumers or businesses.
• The goal is to facilitate the creation of innovative financial products by providing the necessary infrastructure.

"The only people that we work with are people building new financial services."

This quote clarifies that the target audience is developers and companies looking to create new financial services, emphasizing the B2B aspect of the business model.

• William Hockey passionately believes that the U.S. financial system's underlying protocols are strong, but their implementation by legacy banks is flawed.
• He suggests that by focusing on the protocol layer, most of what is desired from crypto can be achieved within the U.S. financial system.

"What do I mean by that? So you see all these tropes in financial service about, oh my gosh, everything's built up. Building like cobalt, or if we have super slow payments in the US, they're built on this rickety infrastructure. What they are talking about, they're not actually talking about the underlying protocols at the Fed or TCH or kind of like the really bones of the US financial system."

The quote explains that criticisms of the U.S. financial system often mistakenly target the outdated implementation by banks, rather than the robust underlying protocols that exist.

• Innovations such as 24/7 payments can be achieved by leveraging the capabilities of the Fed, without the constraints imposed by banks' operating hours.
• By addressing the protocol layer, financial services can be modernized to meet consumer demands and provide features commonly associated with crypto.

"You know what, you can actually do that on top of the Fed. I can't send a wire past 04:00 p.m. That has nothing to do with when you can actually send a wire at the Fed. It's all about when the bank is open for you to send that wire."

The quote suggests that limitations in financial transactions are not due to the Fed's capabilities but rather the banks' operational practices, indicating potential for innovation at the protocol level.

• While the U.S. financial system has strengths, particularly the dollar, other countries like China have made rapid technological advancements.
• The U.S. could potentially learn from China's ability to quickly adapt their financial system to changes.

"I think China has innovated on the financial system very quickly. I think there's probably a lot of stuff that you can take away from that and we can learn from."

The quote acknowledges China's rapid innovation in the financial system, suggesting that there are elements from which the U.S. could learn and apply to its own system.

• There's a need to find a balance in regulation that encourages innovation within the regulatory perimeter without pushing activities to unregulated markets.
• The FTX scandal could potentially push regulators to find this balance by highlighting the risks of too much or too little regulation.

"But if we have absolutely no regulation, then it's a wild west, and that's really bad as the regulator is going to focus on, hey, how do we allow people to actually move quickly so we can attract people to build inside the financial system, which makes everything stronger and safer, but not go too far in the extreme where we just push everybody to the gray and the black?"

The quote discusses the necessity of having enough regulation to foster innovation within a safe and regulated environment, while avoiding overly restrictive regulations that drive activities to unregulated markets.

• The landscape of financial brands is expected to change, with a shift away from large banks servicing consumers throughout their lives.
• Niche problem-solving and specialization are anticipated to be the winning strategy in the financial sector.

"The financial brands that we think of are changing... the idea of these large banks that are going to service a consumer cradle to grave I don't think is going to happen."

The quote predicts a transformation in the financial industry, with a move towards specialized financial brands that focus on solving specific problems effectively.

• Vertical software targets specific industry needs, such as construction, gardening, or plumbing.
• Financial services are seen as commoditized and software-like.
• Companies with low customer acquisition costs (CAC) and existing customer relationships are positioned to succeed by offering ancillary software.
• New financial brands will likely emerge from non-financial services brands.
• Traditional banks may recede into more background roles, while those unable to adapt may cease to exist.

"You have these people that are building, I know this audience, maybe it's a construction person, it's a gardener, it's a plumber. Whenever I know their needs really well. And so what my specialty is is building software directly for them."

This quote emphasizes the advantage of having in-depth knowledge of a specific customer base when creating targeted vertical software.

"What will happen is these large banks that you and I have heard of will probably dissipate behind the scenes."

William Hockey predicts that established banks will transition to less consumer-facing roles, indicating a shift in the financial services industry.

• The key to success is knowing the customer well, not the diversity of products offered.
• Technology and financial services are becoming commoditized, making customer relationships more valuable.
• Companies that understand their niche and audience are more likely to succeed in the long term.

"What's most important is to have an audience and to know that customer."

William Hockey argues that customer knowledge is more critical than product diversity due to the commoditization of technology and financial services.

• Acquiring companies may become more challenging due to regulatory constraints.
• Companies are likely to build services in-house.
• Financial services can be commoditized, and companies can build on existing platforms to enhance their offerings.

"I think acquiring is probably going to be much more challenging over the next ten years."

William Hockey agrees that regulatory tightening will make acquisitions more difficult, suggesting a shift towards internal development.

• Apple is seen as an original vertical specialist, excelling in the consumer market.
• Microsoft is contrasted with Apple, being more enterprise-focused.
• Vertical specialists like Procore and Appfolio are successful due to their targeted expertise.

"Apple is actually like the original vertical specialist is what do they know? They do consumers really well."

William Hockey highlights Apple's success as a vertical specialist, focusing on consumer needs.

• Non-traditional financial brands may become the largest banks in the future.
• Goldman Sachs and JPMorgan are adapting by moving aggressively into new financial services.
• Traditional banks that cannot adapt to new consumer expectations may fail.

"I think we'll probably be the largest bank out there. Some of these large vertical software companies will probably be the dominant financial services players over the past ten years."

William Hockey predicts that large vertical software companies will dominate financial services, potentially becoming the largest banks.

• Cold emails can be a powerful tool for career advancement.
• Social anxiety and introversion can coexist with success in business.
• Working with a spouse can align incentives but blur personal and professional boundaries.

"Will cold emails save lives, no matter how powerful, rich or famous you are?"

William Hockey advocates for the effectiveness of cold emailing as a means to connect with influential individuals.

• Government decisions can be unexpected and impactful, as seen with the blocked sale of Plaid to Visa.
• Adapting to government regulations and viewing them as a static entity is crucial.
• Overcoming disappointments can lead to greater success, as shown by Plaid's increased valuation post-deal blockage.

"It was a really good lesson for me is I don't think it was fair, don't think it was correct. But my opinion doesn't matter is that the government is a decision maker."

William Hockey reflects on the lesson learned from the government blocking the sale of his company, emphasizing the ultimate authority of regulatory bodies.

• Working with a spouse can lead to fully aligned incentives.
• The intermingling of personal and professional life can be taxing.
• Maintaining work-life balance is challenging but important.

"I think the best thing is you have a lie to incentives."

William Hockey discusses the benefits and challenges of running a business with a spouse, noting the alignment of goals but also the potential strain on work-life balance.

• Venture capital is essentially capital allocation in private technology.
• The tech industry should recognize itself as a part of a larger financial ecosystem.
• Honesty about the role of money in building businesses can lead to more transparent relationships.

"I think generally we need to remember in venture that cash is green and everyone should just admit that venture is just capital allocation in private tech."

William Hockey calls for a more realistic view of venture capital, likening it to the role of mutual fund managers rather than operators.

• Startups are challenging but rewarding.
• The pace of change may be slower than anticipated.
• Persistence and resilience are key to long-term success in the tech industry.

"I think we should recognize that starves are fucking hard. I've never found anything more fun, but the world probably be slightly slower than we think."

William Hockey shares his personal outlook, acknowledging the difficulties of startups while suggesting that industry changes may not happen as quickly as some expect.