Before the A — Jeff Myers from Gatsby
Before the A, is a show dedicated to telling the stories of fintech founders who’s startups are seeking their “A round” of financing.
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Gatsby, is an options trading application that makes options trading available to the masses.
Full audio interview:
Interview Teaser:
John Siracusa: (1:27)
So why don’t we get started with, what is Gatsby?
Jeff Myers: (1:28)
Yeah, so Gatsby is a mobile app that re-imagines the way we trade options. We fell in love with options. We think they’re a very powerful tool set and realized that none of our friends were touching them. And we asked everybody why, and they said options are scary. All of the traditional brokerages make it very complicated and seem like it’s exclusively a tool for professional traders.
John Siracusa: (1:50)
So you provide options, options, for the regular consumer?
Jeff Myers: (1:57)
Yep.
John Siracusa: (1:57)
Okay. Why? What makes you decide to go in that direction specifically?
Jeff Myers: (2:01)
Yeah, so the story that I like to tell about the moment I discovered options and, and saw the power of them was if you remember the United Airlines passenger who got dragged off of his flight as he was, sat on the tarmac.
It was like an overbooked flight. And the video went very viral. And I had never traded an options contract before, but I saw it early, in its viral trajectory online. And I realized as I don’t come out of finance, I come out of technology, but I realized any two year old could tell you that this is about to go very viral. And it was probably gonna tank United’s stock. And I called up my now cofounder and said, what is the asset I can use to leverage this information? And obviously I couldn’t sign up for a brokerage and options brokerage account in time, but had I bought the put that I wanted to buy, I think the returns I look to, historical returns would have been 40 X or something crazy. So I saw like there’s power in the amount of leverage and the control over the amount of risk and reward that you can take in an options contract. And it really didn’t make any sense for more casual traders, retail traders to be boxed out of that based on complicated looking interfaces, minimum capital requirements, bad technology, commissions, etc., jargon. And we knew that that was just such a low hanging fruit.
John Siracusa: (3:21)
So how are you onboarding new customers? Because doing a B2C play is obviously difficult.
Jeff Myers: (3:26)
We built out a wait list of over 14,000 traders. We’re onboarding them.
John Siracusa: (3:32)
How do they come on board by the way?
Jeff Myers: (3:33)
Onto the wait list or into the app?
John Siracusa: (3:35)
Onto the wait list.
Jeff Myers: (3:36)
So a lot of them through a lot of them organically we had a mechanism in our wait list where if you invite friends to sign up for the wait list, you get bumped up. So that was an encouragement to some of our more avid would be traders. A lot of it was through running ads. So just to give you like an example of how we would target and what sort of targeting was the most effective. And we actually use that more as a proxy just to get to know our customers a little better and see which, which types of users out there resonate the most with options. And so I think the best keyword or the best targeting that we had in terms of efficiency of converting onto our wait list was hitting someone with Coinbase installed on their phone on Instagram. And they would convert for under $2 often a very inexpensive way to attract interest. And I think that’s testament to sort of the overlap and attributes between a crypto trader who loves looking at volatility and trying to speculate on it and options as an asset.
John Siracusa: (4:32)
So is the, is the biggest constraint you have today? KYC and AML?
Jeff Myers: (4:36)
Yeah, we’re being very careful. The industry, basically all of our advisers, all of our investors have warned us that of course concern. So we want to do it right, we want to take it slow.
John Siracusa: (4:46)
So why is now the right time for this?
Jeff Myers: (4:48)
Yeah, so I think this sort of sub 35 year old trading group has been aging into, they’ve been accumulating wealth and with that they are sort of dipping their toes into more and more sophisticated tools. You know, everyone had their first job at a university and they needed a savings account. And Simple was a great startup, beautiful mobile, no frills, but everything you need savings account and then you get more money and you, you get into robo-advisors and then you want to start managing that money, self-directed. And you get into equity trading. And then I think this generation, millennials and gen Z wanted to go a step beyond equity trading. They wanted to speculate. They want it to be less passive. And crypto trading became sort of like a stop gap solution because there was so much fervor around it. And I think that was a band aid on this evolution toward options I think are the next natural step in that process. I think it’s culminated in a ton of interest among young traders in options. There was a study that came out a year or two ago, two studies actually, with similar results. One from I think TD and one from E-Trade among their users they surveyed, there’s low penetration among millennial traders, but when they do trade options, they do at double the frequency of their older counterparts. So like I think the lack of information kind of keeps them out of this asset class. But once they discover it, they fall in love with them, because it gives them sort of like this leverage that they can’t get in what they’re accustomed to trading.
John Siracusa: (6:21)
So it seems like to me there’s a few things that need to make this work. Obviously, you need a really powerful tech stack obviously and an understanding of the markets, right? So why are you and your team the right team to build this out and build this model out?
Jeff Myers:(6:36)
Our two first investors, even before Barclays invested were Alex Wahl and Davis Gaynes who are founders and they both since come on full time as our COO and CSO. Alex, came out of Goldman, ran Goldman’s derivatives desk for a decade. Davis, was an early employee at instinet and sat on the board and then when they sold to Reuters, sat on the board, Reuters America, we hired our head of engineering out of, he was a senior engineer at Amazon and then at Apex Clearing our, our clearing broker. So is very familiar with like a lot of these processes that we needed done with a great head of brokerage. So the team really came together really well and each element of the team I think is just an expert in areas that I’m not in. So it was sort of like a perfect, over the course of six months filled in all the gaps that I recognized that Ryan and I both lacked.
Listen to the full interview below:
About me:
I’m the host of the ‘Bank On It’ podcast recorded onsite in Wall Street at Carpenter Group, a creative services agency focused on the financial services industry and ‘Before the A’ podcast recorded onsite in Flat Iron at Barclays/Techstars Rise NYC. Stay in the fintech know by subscribing to ‘Bank On It’, ‘Before the A’
