Mercury CEO: three years of profitability, accelerated FDIC insurance, and AI cutting 40% of support tickets

yeah, let's go for it. Uh, we just announced uh today on on Fortune term sheet that we hit three years of profitability. Whoa, whoa, whoa. I'm excited about our hitting all the sound effects. Founder is nice. That is why yeah full founder mode.

Uh yes it's been a one weirdick VCs hate this VCs hate this one weird trick man area man discovers profitability. Congratulations. It's actually really funny. You know I love my VCs but there's definitely every every board meeting they're like okay you know how can we spend this money a little bit faster?

But [laughter] I was actually talking to some CEOs just like last this week and yeah most of the time like spending more money doesn't mean you grow faster. And that's kind of like what I was, you know, trying to celebrate with this milestone that like it's, you know, you, we're building software companies here.

At least we are, not everyone. U spend money to grow. I got I got a bit for you. You're in a strong financial position. You should put out a press release say we don't need a backs stop. We don't need a government back stop. We are [laughter] we are proper. I didn't know there was a back stop available to me.

Well, I was ready to use I was ready to when when those comments started floating Wednesday, I was ready to use the analogy of like what would happen if there was a government back stop on venturebacked corporate cards.

I mean I mean truly you are you are a bank and you and you've obviously lived through you live through the financial crisis like can't say he's a bank. No. Okay. Okay. But we're not partner with partner but but you're obviously intimately familiar with the financial system.

Uh do you have any uh do you have any unique lessons or stories that you tell from the financial crisis? Uh warning signs that you pull from even just like movies or books or something that you keep going back to is like, you know, we want to stay [clears throat] sharp on this.

Um you know, I think like building trust in what Mercury does has always been it's actually probably the hardest thing we do, right? Because you know, we're asking a lot from people. We're storing all their money for their business.

And you know, it's like I had this conversation when we first launched Mercury with someone who'd raised $10 million and he was like this is more money than I've ever seen in my whole life. I'm not going to give it to a startup banking service. Uh and now we have customers that have more than 100 million with Mercury.

So like building that trust is always so important and you know obviously I don't know which financial crisis you you were referring [laughter] to 2008 actually but but I I do want to talk about what is like the SV crisis you know um take us through the SV yeah what what uh what were the biggest lessons from the SVB crisis?

Yeah, I mean the biggest thing for us was uh it can't just be all talk, right? Like if I you know and I was talking to founders saying like hey you should trust Mercury and they'd be like oh man like SVB is a 40-year-old company and they just like you know are dying. Uh why should we trust Mercury?

And then you know what we did and what we've continued to kind of invest in is to make it so it's not just about trusting Mercury. It's about like having products that that deliver like trust.

So, you know, we have like accelerated FDIC insurance, which is, you know, u I guess on the website we publish 5 million, but it's actually most accounts get way more than 5 million. So, almost all the deposits that sit at Mercury are FDIC insured. Uh, and that was the big thing.

I think SVB was at 80ish% uninsured deposits. Um, and and that's just because just for anybody that's not super familiar, that's because they had standard two and a4 million dollar of FDIC insurance, but almost every account had well beyond that because Yeah, exactly.

business, especially especially VC back businesses, you know, and also in a zero interest rate environment. In a zero interest rate environment, you're like, I'm just going to keep it in the checking account. I raised a $5 million seat. I'll just literally keep it in the checking account because like what's the point?

and if I move it to some other vehicle, I'm going to earn 0. 5% or 0. 1%. Now it's now it's a different environment. Yeah. What was it always the plan to get profitable, stay profitable as fast as sort of reasonably possible? I think like or did that happen?

If people are trusting you as like a financial platform institution, it it's not exactly comforting to know that you're burning money and your financial institution.

I think the other, you know, the other thing that was part of SB was, you know, like people just had so little time to move all of their banking operations and it's just like there's so much reliant on a bank account for a business. Uh, and it was such a funny I was I was with SVB.

It collapsed and I was like, I need to go someplace less risky. I'm going to First Republic. Yeah. And then [laughter] that collapsed too. And I was like, but that's that feels like an even old I don't know if which one's actually older.

I think First Republic was older, but it was this odd was a little I believe total total reputation of the Lindy principle. It was like actually go to Mercury. Yeah, would have been better. Sorry.

I was going to say I think one of the parts of that was like, you know, you rely so much of operations and it's even more extreme for Mercury customers because, you know, we do more than banking.

So we do uh people's credit cards and invoicing and yeah we've been building more and more features and our customers are reliant on a broader set of features.

So you know I think part of like being profitable and sustaining profitability is being you know making that promise to our customers that this is like something that's going to stick around.

So if they use us it's not like you know one day we don't raise a funding round or or you know whatever there's like a crash or something and people have to like worry about that. So it's definitely like a core part of that kind of having that trusted service. Yeah.

Where uh where are you guys getting the most leverage from AI? Yeah, good question. Um yeah, the biggest thing we've done is like back office stuff. There's just a to run a fintech, especially uh kind of on the banking side, there's just a ton of people that have to do a lot of back office things.

uh and you know it's like you have to upload a formation document and someone has to review it and you know there's all of these things are very ripe for u AI to just you know smooth smooth it out either like automated 100% or automate it 80% so that like a human can just review the review the answers.

So yeah lots of stuff on compliance risk back office is has been our biggest investment. We've got lots of you know I'm not uh I guess a lot of what we do at Mercury is like not kind of follow fads or whatever.

So we have we've done a bunch of things that are userfacing but you know we try to add like little bits of value here and there.

So yeah we have a chat bot so you can ask it questions and that's been actually actually it's solved like 40% of tickets uh customer questions are just like you know hey when's you know how long does it take for a wire to settle in like that yeah those kinds of questions.

So, and that's just a better customer experience than you know we think about how and that's 40% over the baseline of like because most most uh most customer support systems like if you email in it would just previously do like fuzzy database search to be like oh it seems like you're asking about this FAQ you got a 40% lift on top of that because you were already doing best practices I imagine um something like that yes it's a bit more complicated because we still have that email system when people email it So this did replace like the suggested topics in like the live messaging system.

So yeah, the suggested answers was way way less because people don't like reading those suggested things like they just want an answer and they want to move on. What about on the cost side? Uh we were talking to Ivan notion. He said that uh his inference bill was actually having an effect on his gross margins.

You've remained profitable. But if I'm looking deeper in your financials, will I see an uptick in inference bills based on actually is that something that you're actually trying to manage as you stay profitable or has it been low enough that it just Yeah.

I think like it's wildly different I think using it in back back office context where you're sort of processing forms and PDFs and things like that versus Ivan where people are like I'm going to generate you know trillions of tokens because I'm just making long documents and totally on the back office side it's mostly been a cost saving right like you're uh you're kind of giving leverage to humans and um or you're moving off of like a mechanical turk or scale or something like that for whatever workload it is exly uh and yeah on the userfacing side It's, you know, I think a big difference for us is, you know, we have 200,000 plus customers, but it's not that many customers, right?

Like, uh, a lot of like consumer services have millions of customers. Like each of our customers is obviously like much more valuable. And also, you probably don't have like a ton of DA DA I mean, you probably have a lot of DAUs, but you it's not the app that people open when they wake up, you know?

It's a great It's much more utility than productivity, right? people are actually kind of open. Exactly. And so and so the inference is just going to be so much lower than if Instagram is all of a sudden being like we're going to run an LLM query on every on every you know photo that gets uploaded.

It's like okay well that's a huge amount of inference. What uh yeah and we're doing more and more though. So you know potentially uh you know when you're churning through all these transactions will go up. I don't expect for us.

We also make way more on a per customer basis than actually I don't know about notion but than like most proumer consumer type things. Uh so I think it would net out that it would be a smallish percentage. Yeah, that makes awesome. What are you what are you seeing across your angel portfolio?

Like you've been you've been investing like like I guess for context I've I've done about 350 investments in the last 10 years. Uh I [laughter] don't know if I need a go for that. Uh and I just actually announced uh earlier this year uh my I have like a formal angel fund now. It was a 26 million uh kind of angel fund.

I mean I'm still mostly investing in the same way. Uh I mostly invest because it's just fun to talk to founders and I guess the same reason you guys run this podcast. It's like interesting to talk to founders and learn learn new ideas.

uh uh you know it's all it's very AI focused right now as you can imagine uh you know what's I think AI is kind of fun to invest in because like every 6 months what you're investing in like changes a lot right like for a while it was kind of dev tools in AI and now I feel like that's done uh so most of what I see right now is kind of deeper vertical uh kind of B2B applications of AI um do you think AI gives people the permission to invest in more unique categories because basically like there there used to be like a whole set of categories that were just kind of like small businesses or industrials or some niche some weird niche thing and they would just be kind of off limits because it would be like oh no no no like the real money is made in in fintech the real money is made in maybe maybe the edtech but that one's difficult or adtech or marketing mart attack, you know, it's like there were these easy themes, but with AI, you can go and and actually put together a pitch around something that's um maybe more or less untouched by tech and actually generate deck.

It's definitely like a you know this extension of the software is eating the world kind of vibe that Mark Andre talks about, right? A little bit more of the world on the edges. Like 10 10ish years ago, it was all like social and mobile, right?

everything like even Mercury is like 10 years ago it was probably off limits to like try to make something that went after the banking market and I remember when I started in 2017 it was like you know it sounded weird right like it was it was it was not something that was done uh I think the thing that AI does is like open up labor right like in robotics it opens up physical labor and then in the case of um kind of the uh white collar workers.

It opens up like human uh kind of intellectual labor. Uh and that is like a whole set of categories. So you know people generally VCs hate services firms, right? Like it's like they'll be like oh that's like a services firm. But now like services firms are cool.

You like [laughter] oh yeah it's human it's human AI uh plus human services firms are like the the thing that a lot of people are investing in. Ideally trying to get to like fully human only uh sorry fully AI only.

Uh but yeah, it's definitely like opened up a lot of industries that wouldn't have been interesting from a investment perspective. Do you do you think people have been overly bearish on on SAS?

It's you know notable that uh OpenAI uses everything from Salesforce to Slack to Qualrix and I imagine you use a lot of on on your business. I don't think anybody's out there saying you know I'm going to vibe code a bank.

you know, even if they could even if you could somehow build that on like a banking as a service platform, it's like the the the level, you know, the amount of work you need to do to maintain a vibecoded bank on top of, you know, just doesn't make sense.

Generally, I mean, I think uh there will be a wave of disruption that will happen in SAS, but I don't think the answer will be everyone's just making their own end to end like Salesforce like that just that sounds ridiculous to me.

I do I mean I hope someone builds a much better salesforce uh but it'll still yeah and maybe their pricing won't be like per seat and it'll be like per sale or whatever but I think the category will exist the shape of the category will change the business model will change but I don't think the answer is everyone's building their own salesforce like that just that just sounds inefficient like it just sounds ridiculous to me but uh there will be like I think actually like the incremental new applications people build will actually make will just be more applications right like if the number of vendors you had was like 10 and like you're paying a lot like maybe you'll have another 90 internal apps that like people just made for like small use cases.

So like the amount of software people will use will go up I think because of VIP coding uh and the ease of coding but I don't think like these big categories are going to just disappear because like people can now make it themselves and do you think do you think companies will go multi-product sooner and are you seeing that across the portfolio if like the engineering actual engineering hours are less to go from you know one product to a second to a third that that will just encourage you know more companies I think it's going to be like industry specific fake.

Uh I mean I think a big story about fintech in the last couple of years has been like every fintech going multi product right uh I think it's partly because you know when we started in 2019 like no one was building like a better uh neo bank so that's you know that's all it took like our first product was a bank account and it was like really good.

Uh now to compete against Mercury, you would have to have you know bill pay and credit cards and invoicing because like that's just what people look for like they look for more of a bundle product.

Uh so I think it depends where you're competing and in to some extent it gets a little easier because you can just make products quicker. Uh but making like amazing products is is never easy, right?

Like I think you just like like the quality and craft and all of that like do matter and yeah we try to invest a lot like when we make a new product it's never easy like it takes a lot to make an amazing product.

Uh but when you're like very new to a category and like almost everything in AI is like very new you can build more quicker and then like kind of refine it over time. Uh but it's a good question. And I think a lot of the ways people will end up competing with incumbents, right?

Like I've heard a ton of like I don't know why we're picking on Salesforce, but I've heard a lot of like how do we beat Salesforce kind of strategies and a lot of them are like oh actually we're going to bundle like AISD and some you know X and Y and like we're going to make it like a much more fully featured kind of version of like Salesforce.

Uh uh so I think like when you compete against incumbents like doing a bundle strategy sometimes is like a better strategy. So like we'll see that play out. Yeah. Very cool. Well, congratulations to the whole team three-year milestone.

Uh looking forward to the fourth, the fifth, sixth, and hopefully hundreds of years of Mercury profitability. You got to get past the the SVB mark, become the the long [laughter] longest standing institution. Funny, they were started like a year before I was born.

So I have this like exact mental model of like they were started 42 years ago. That's amazing. Maybe maybe I'll stop thinking about that one when they're going to further down. Very cool. But yeah, really appreciate you having me on. Yeah, we'll talk to the whole team. Have a good one. Cheers. Bye. Bye.

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