The bank account is the product: Slash's bet on vertical SMB banking

Speaker A: Before we get into it, a quick

Speaker B: word about something we've built at, uh, Tearsheet. If you're a senior product leader at a bank or fintech, you know how hard it is to find peers who actually get what you're dealing with. Not vendors, not consultants, people doing the

Speaker A: same job at the same level who can tell you what's really working.

Speaker B: That's why we built the Teracheet Product Leaders Council, a peer network of heads of product from across banking and fintech, major banks, fast growing fintechs, the companies reshaping how financial products get built.

Speaker A: We meet regularly, we go deep, and everything stays off the record.

Speaker B: If that sounds like something you've been missing, go to Library Teresheet co counsel to learn more. Welcome to the Tearsheet podcast where we explore financial services together with an eye on technology, innovation, emerging models, and changing expectations. I'm Teresheet Editor in Chief. Zach Miller. Small business banking has always had a structural problem. The companies that hold your money and the companies that build your financial software have been two different things. One moves the money, the other tracks it. And small business owners are stuck in

Speaker A: the gap between them.

Speaker B: A new generation of fintechs has been trying to fix that, but most are still building horizontal tools for every business everywhere. A more interesting bet is vertical going deep into the specific workflows of a particular industry and automating them completely. My guest today is Victor Cardenas, co founder and CEO of uh, Slash, a business banking platform that started with teenage sneaker resellers and has grown into a $1.4 billion company by doing exactly that. Building industry specific financial products that legacy banks will never prioritize. Slash processes nearly $3 billion in stablecoin payment volume annually. And the company has been doing serious work rethinking how AI fits into both how they operate internally and what their customers experience.

Speaker A: Victor, welcome to the show.

Speaker C: Zach. Thank you so much for having me.

Speaker A: So we've covered a lot on this program about SMB finance. We've had guests that are approaching it from the ledger side. We have guests that are approaching it from the accounting side. It seems to be a lot like a renaissance of work that's happened over the past few years. We've actually called it that, but still feels like there's a huge opportunity. Small businesses still don't get the help that they need in terms of finance. Do you think there's a structural failure in how, um, the industry has approached SMB finance up until now?

Speaker C: Um, I think for the longest time there were two categories of companies that operate in the SMB finance space. There's companies that actually bank and move money on behalf of SMB and lend to them. And then there's companies that build financial software for SMBs.

Speaker B: Mhm.

Speaker C: And we're of the opinion that these actually should not be two kinds of companies. It's actually quite beneficial that the company that banks you and that has read and write access to your money is building all of the software that allows you as a small business owner to stay organized. So I think this is the convergence

Speaker A: we've seen over the past few years with embedded finance too.

Speaker C: Exactly where you have financial software companies that are starting to build on top of these embedded finance platforms to offer banking services to their end customers. But our philosophy at Slash has always been the bank account. Really the bank account is at the financial heart of uh, an SMB's finances. And so all the software we've built is really around it. And we're of the opinion that yeah, financial services platforms and financial software platforms should really only be one and the same.

Speaker A: And Ryder, why is it important to provide your service at the level of the account?

Speaker C: Well, it comes down to having read and write access to your customers. Three things really, like their transaction data. Uh, you can send transfers on their behalf, um, and then you can issue cards on their behalf as well. So these, your product is much more powerful if you are not only ingesting data and feeding it to some other system, but if you can act on the data that you are reading, um, and perform an action on behalf of the customer, for example, send out a payment. So you may want to, if you are your customer's business banking platform and their bank balance in your particular account is running low and you can see that they have money in some other bank account, then you can initiate a pull transaction there where if you're this platform that only provides software that helps them with treasury management, the only thing you can actually do is notify the end customer. So actually being able to touch the money and build workflow automations that are that, that are not, uh, only remind you or sync data from one place to another, we found has been massively differentiating for us.

Speaker A: Makes a lot of sense. And you guys have taken a vertical approach, right? Can you explain how you've approached, um, rolling out, I guess, specific tooling to different, to different verticals?

Speaker C: Yeah, very core to the Slosh thesis is this idea that business owners deserve banking products tailored to the needs of their specific industries. What, what an accountant at a construction company does all day or a finance professional or a small business owner, uh, does it looks very different from what an accountant or finance professional entrepreneur does at a marketing agency. They're, they're reconciling against different systems of recording. They care about vastly different things. And historically legacy banks have sold and even fintechs that came before us, one size fits all products. To all these end customers the slash strategy has been about let's find one particular vertical and then let's automate every possible finance task um, associated with it. And so I'll give you an example I talk about frequently. One of our largest verticals are performance marketing agencies. So businesses that run ads on behalf of, of other direct to consumer e commerce brands. And the status quo before slash comes along is I'm a marketing agency, I have 20 different customers and at the beginning of every month customer one sends me a hundred thousand dollar prepayments for the odds that they want me to buy on their behalf. Customer two sends me 50, customer three sends me 150, customer four sends me 200, et cetera. Suddenly I have $9 million sitting in my Chase account and nothing in my Chase account tells me what of that belongs to each one of my end customers. So I need to have an on payroll person tracking every inflow on a per customer basis which are the incoming wires and every outflow which is the spend on card. And it gets very messy very fast here, very high velocity businesses. So what we built is this product that lets these agencies create a distinct virtual account or sub accounts for each one of their end customers, give the end customer visibility into how much of their prepayment is left and where it's been spent and automatically charge their agency fee as uh, ad spend is spent down. So their business model is um, I've spent ads on your behalf, I charge 5%, we notice that and transfer from their sub account to the primary account right away. And so this is an accounts receivable product or a financial workflow um, that is only really relevant for this one particular niche. But the fact that we were able to tailor our offering and uh, provide not only everything that a traditional bank offers, but this value added service on top has allowed us to sell quite aggressively into this market. So the same dynamic exists in a lot of our other markets. We're integrated into long tail, uh, types of ERP software uh, that allow our customers to reconcile their financial transactions against some system that's not QuickBooks, Netsuite or Xero, the big ERPs, um, and we've plugged into uh, Payment methods that are only really relevant for a small subset of customers. For example, we let our customers send and receive USDC and USDT from their business banking banking platform which is something that basically no other business banking platform allows you to do. And that's been massively differentiating for import export businesses for example that have to pay uh, suppliers abroad. And so that's really been the slash thesis that we can win a lot of business if we focus on what makes uh, an industry unique and catering to those specific products.

Speaker A: So would the model be that you have uh, uh, I guess a huge library of different industries that you service with those workflows pre built?

Speaker C: Yeah, that's.

Speaker A: Or do you focus just on the ones that you're on there now? Like where, where do you decide to, how, how wide to build?

Speaker C: So I would say that the Slosh product is valuable for any kind of business owner in America. It, it, it, it's, it's and, and, and you know tershee, you Zach, you, you guys don't have a uh, an account with us but if I were

Speaker A: pitching you, we're a small business. Yeah, we need help.

Speaker C: Exactly. There's three things, three reasons you just sign up for slash. The first is phenomenal rewards. 2% cashback on your card spend and 3.82% yield if you ah, keep over $500,000 in a Treasury account with us. So great rates the Costco of business banking. The second is we try to bring the feel of a community bank to fintech. So 99% of the revenue that we generate is from an account that is managed uh, of an account that is managed by a human that works at slash. So that's the second. And then the third is we just have an extremely simple user interface and we centralize a lot of the financial software that you have to consume so you don't, if you use slash you don't have to buy an invoicing product from somewhere else or an expense management product from somewhere else or a bill pay product for some somewhere else or a reimbursements product from somewhere else. All these financial workflows live inside of Slash. And so that's my pitch to the end run of the mill SMB. Anyone that comes to us, I tell them those are the three things you should, you should do. But on top of that if I'm talking to a business, let's say a marketing agency, uh, or an import export business like I mentioned before, I really double click on like those features that are most relevant to them and so the way the product actually looks like. It's not like you pick and choose. It's not like we have like this library of features and you're like, hey, I want this. It's that every customer has access to every feature, but not every kind of customer will use every feature.

Speaker A: Right?

Speaker C: You know, sign up for a Slash account and unless you're making some payments in USCC to a vendor and uh, I don't know, some designer abroad, like most likely you won't use your stable payments. So I like to think of it as this big house and has lots of rooms and not every single person that lives in that house goes to every room. They only go to the one that's relevant for them.

Speaker A: Got it. Uh, I want to switch gears a little bit and talk about AI. It is an important topic, um, particularly for the incumbent financial industry. A lot of our community members are, are really grappling with like what role AI is going to play in their current business and the future business, its impact on their team structure, skills they're hiring for, as well as impact obviously the end product, where it touches the customer. How do you guys view AI and how do you use it?

Speaker C: Yeah, look, um, one interesting thing is from January of this year we've been spending around 50% of our engineering hours building internal tools to maximize company productivity instead of external product for our end customers. Because the pace at which actually AI native organizations can innovate is so different to the pace at which pre AI, uh, companies can innovate that we've just been obsessing over how can we rethink the way our organization does work. And I'd say the most impactful initiative we've, we've embarked on and we've been very successful at is building uh, what I like to call our company Brain. We, we launched this AI agent internally, we call it Twin. And it is this all knowing uh, being that has perfect real time context on literally everything to do with Slash. Um, and it's collaborative so so people access it within Slack it's, it's this agent that's hooked up to our company's database, to our datadog which is our logging system. It's hooked up to our code base so it knows who shipped what product and when. It can read all prior Slack conversations so it has conversation over context over what different teams are working on notion and so it's made onboarding for example new employees drastically faster. Everyone wants to get context around how a particular part of the slash product works and they don't have to ask and find the person that has the perfect context and ask them. They can just message this agent, and this agent will tell them in perfect detail everything about everything there is to know about the company. So I would say that in AI there have been a few products that have gained true product market fit over the years. The first was just a chat interface. ChatGPT. Everyone likes ChatGPT. I think coding agents were another really big one. So, uh, these agents that go out and build software on your behalf. And then number three, I think right now we're seeing this new skew, which is this company Brain. It's this collaborative, uh, oracle that can surface perfect, uh, context over all your organizations, flows, uh, to your team. And so what I would say is, if you're a company in the later stages, definitely try to think about how you can repurpose everyone at your organization's time whose job it is to bridge communication gaps between different teams into doing actual individual contributor work. Now, AI can actually act as that. Um, sorry about that.

Speaker A: Bless you.

Speaker C: Can actually bridge that communication gap between every single person on your team. And so we obsess over every single person at our organization producing a valuable unit of work every hour that they are here. And what I mean by a valuable unit of work, that means being on a customer call, you know, taking out a customer to launch, writing code, writing a product spec. These are things that are actually getting revenue for our business or improving our product. Nobody should be doing merely managerial tasks or bridging communication gaps, because AI is not phenomenal at that.

Speaker A: Got it. And so what would it take for you, Victor, then, to start embedding AI, uh, where it touches a customer? Like, how far along that journey are you guys?

Speaker C: Yeah, so we have a product. So, so this agent twin, we launched a simple version of it to our customers, um, and with only one integration, which is slash. So they can't connect their database and their code base and do all the stuff that we can do with it, but they can connect their slash accounts. So every single action they can take via the slash dashboard, they can take in natural language, right? So they can message the agent and be like, hey, um, you know, I just hired this new employee, Zach Miller. Issue him a card. Here's his email. Boom. And then it just issues the card.

Speaker A: I want the chief marketing job, by the way.

Speaker C: Yeah, please, please. Uh, or what are my current transfers? Uh, that my finance team has queued up for approval, and then it lists them and say, okay, approve these three. And then it approves them. So in the same way that there was this big shift from branch, you know, in person banking.

Speaker A: Hm.

Speaker C: To online banking and then from online banking to mobile banking. I think we're going to move from mobile banking to agentic banking where, where it's important that you as a financial institution or fintech company make it possible for your customers to take action on your product uh, via text, um, as if they were texting a private banker of theirs. Um, um, not just by logging into a click and drag ui.

Speaker A: Got it. Um, just a question I guess off, off that I thought of as we were talking here. We've also seen some fintechs um, apply for bank charters. Do you, do you imagine at some point like you talked about having access to the bank account at some point it makes sense for you to actually own all the whole stack?

Speaker C: I think so. Look, um, but not in, not in the immediate future. There's, there's two ways you can really innovate in fintech. You can innovate up rates which is uh, you add and you ship more product that is uh, that enables the customer to do something that they could not do with a legacy financial institution. Or you innovate down, right, which is you own the stack. You get regulatory, creative, uh, and you can do business uh, in ways that other financial institutions uh, could before or you could onboard customers that perhaps they're

Speaker A: uncomfortable debulding regulatory innovation in a way.

Speaker C: Exactly. That's like regulatory innovation. And we're really focused on like product innovation right now and it's so competitive right now, the B2B fintech space that if we want to be competitive we just have to ship so much product and demonstrate to our customers that we are the most complete solution. We are the all in one. Um, we are the solution that's going to save the most time and the most money and that regulatory innovation at the bottom can come down the line. We have a great, great, great bank partners already and column and lead bank and uh, they've just been phenomenal to work with.

Speaker A: We've seen um, young startups that have gone on to become unicorns that started with like a foothold product, you know, kind of got initial traction, then expanded, um, particularly upmarket like they started maybe with small businesses and then went towards enterprise. Guess like how is that a possibility

Speaker C: along the way for us to sell into the enterprise? Yeah, 100%. We have, we have um, many multi hundred million dollar revenue businesses on slash. And uh, we had a similar story to the one that you described where we had a bit of A foothold with teenage, uh, sneaker resellers. That was the markets that we were first popular in. And the Slash story has been one of expanding concentrically out of that into much larger uh, and more established uh, niches.

Speaker A: Or you didn't want to stick with the sneaker. The sneaker market wasn't large enough.

Speaker C: Look, I love those guys. Uh, most went out of business in 2022 actually, which was catastrophic to our company. Um, no, I definitely have ambitions to build something much larger than that. When I'm trying to convince people to join Slash, I'm telling them we want to build this generation to J.P. morgan. And if we want to do that, we definitely have to serve many kinds of entrepreneurs, not just one. In this initial segment that we started out in.

Speaker A: Well, it's interesting because I use that company as an example because they also have a consumer facing business, obviously. Um, do you imagine also that companies that. But didn't you just say J.P. morgan, J.P. morgan?

Speaker C: Yes, yes, yes, of course.

Speaker A: Yeah. Um, and I'm just, I'm just curious, like we, we've also seen like Mercury roll out recently. Like you know, a business facing business like that also addresses maybe the entrepreneurs behind the business as well. Like is there a consumer aspect that's tied in here too?

Speaker C: Not yet. At some point, yes. We will also want to launch a consumer product just because it's important that in the same way we try to bring this community bank feel to FinTech, part of that involves, um, understanding the actual customer who is the owner, operator, not just the business.

Speaker A: Um, so, and they're commingled. In most small businesses it's to some level they're commingled.

Speaker C: Exactly. And so being able to differentiate, to distinguish between personal and business accounts is, is, is huge right now. It's quite easy because they only have their business with us and they have their, their consumer bank out somewhere else. But, but it is a way for us to kind of be able to grow, grow our, our ltv, um, and, and just monetize more of the customer relationship. But I would say similar to getting a charter, it's a little bit, a little bit down the line.

Speaker A: Victor, I want to go back to something you said earlier. You talked about the stablecoin functionality that you've rolled out, which is, you know, somewhat unique here. Um, can you talk about some of the success you've had there in terms of volumes and what opportunity you see in that market you mentioned, particularly like import export type businesses, I guess, where there's some type of foreign currency Exposure.

Speaker C: Exactly. Look, our business processes almost $3 billion a year in stablecoin payment volume. Um, most of it has to do with some form of cross border commerce there. It doesn't really make sense for a US uh business to pay another US business via stablecoin because ach and wires are good enough and there's even real time payment rails that exist here. But uh, the world trades in dollars, the dollar is the world reserve currency. And increasingly there are US companies that are asked by their suppliers internationally um, to get paid in stablecoin. So it's really two cases. It's American companies that have foreign customers that want to pay them in stablecoin instead of dollars because they don't have access to the uh, US financial system. And it's much cheaper to send a stablecoin payment than it is to send a swift payment. One and two, it's American companies that are buying goods and services from businesses abroad. And those businesses abroad tell them hey, can I please get paid in stablecoin? So it's just really important that uh, the traditional financial system and this new one that's being built on top of stablecoins are interoperable and we believe that's, that's going to happen. And uh, we focus on a product perspective on making that possible.

Speaker A: One of the things um, I'm curious about is who you see as your competitors because you have a pretty full suite of, of services. Who do you find yourself winning business from?

Speaker C: Bank of America, Chase, American Express in year capital one. Look, 95% of American businesses right now bank or spend with uh, what I would call a bank. Right? A legacy, traditional, not traditional bank, not a fintech. And so we're starting to sell into tech companies. And when we're selling to tech companies we mostly sell against the fintechs. But tech is a very small percent of our business right now. But by and large we're running into Amex, we're running to Chase, we're running into bank of America and those are the business that we're most displacing. So I think um, especially because fintech companies are kind of the loudest, we lose sight of the fact that there are these behemoths um, in the room that actually control most of the market share out there. So it's really them that we're competing against.

Speaker A: And how are you reaching those people? I mean what are your channels in terms of um, customer acquisition, um, lots

Speaker C: of chat, Um, I would say it's evolved over the years. But one thing that, that works Particularly well, um, has been trying to m. Maximize face to face, uh, interaction. So we have uh, reps that are all over the country and they obsess over bringing folks in different parts of the country together.

Speaker A: Um, ah, and they're meeting people in real life.

Speaker C: In real life. In real life, man. I think one of the, the, the places where I, where AI will not actually, um, take headcount from is sales. More than ever, people want to buy from a person, people want to buy from other people. People want to use a product that's provided by an organization or where somebody they really like is employed. And so even me personally, I, A lot of my personal time goes towards selling the largest accounts and then showing them that the CEO cares about, about them, them using the product. So um, yeah, I think there's something to be said about the importance of face to face interaction.

Speaker A: I also want to make sure we, uh, talk about a recent fundraising. You had. You saw that you announced $100 million round. Um, million dollar round. Yeah.

Speaker C: Yeah. So it was $100 million round at a $1.4 billion valuation. Uh, Rivet Capital, Coastal Ventures, Goodwater Capital, LED and then NEA and Y Combinator also participated. So NEA, it's the fourth time they've invested in slash Goodwater, second time they've invested in slash. YC is also the fourth time they've invested. So uh, what, what, what a privilege it is to, to see, you know, these stored investors continuing to want to, to invest in Slash. And it's a huge responsibility. Right? It's a very flashy moment. Uh, it's an excuse for us to, to make a lot of noise about, hey, we're this very well capitalized, uh, entity. We're here to stay. But at the same time it's now we have to put those dollars to work and we have to use that to build an even bigger business. So I couldn't be more excited to, to come into work, uh, and you know, work my tail off, uh, to make that a reality. And uh, it's both exciting, but a huge responsibility as well.

Speaker A: Congrats. Those are some great names around the table. Um, I'd like to ask one last question is what are the use of proceeds? What are you planning? How are you looking to deploy that capital?

Speaker C: More markets, uh, more geographies? Like I mentioned, uh, core to the slosh thesis is this idea that business owners deserve banking products tailored to the needs of their specific industries. So building more product for more industries and hiring more people that know those industries very well. Uh, so just pouring fuel on the fire on our product and go to market strategy. And then two. Um, is. Well, we, we actually didn't talk a lot about this, but stablecoins, um, make it possible for American fintech companies to offer USD banking products to businesses all over the world. So we can offer corporate cards to businesses outside of the US we can offer an account and routing number, not quite an FDIC insured bank account, but to businesses outside of the U.S. and so we want to be the dominant global B2B banking platform. And, um, yeah, man, that's the other one. Just how do we provide value to businesses outside of the US On a jurisdiction by jurisdiction basis?

Speaker A: Victor, it's been great talking to you. Thanks for joining us on the TSD podcast.

Speaker C: Zach, thank you so much for having me.