Don Muir of Arc On The Future of Money and Banking
An Interview With Jason Hartman
Make Technology Your Product. Capital is a commodity. To be successful in the modern finance world, it’s important to embrace technology. What differentiates fintechs from legacy, offline financial institutions is software, insights and data. Build tech that improves the customer experience and automates backend processes. At Arc, we’re focused on building the next-generation finance operating system to add value beyond the capital we provide. Not only do we allow customers to instantly access non-dilutive capital at the click of a button, we’re also building the finance software to help customers manage working capital to grow faster and more efficiently.
The way we bank has changed dramatically over the last decade. Not too long ago we had to wait in line in a bank to deposit money — today things are totally different. We can deposit, withdraw, and invest money without ever walking into a bank. In addition, the whole concept of money has changed. In the recent past, “money” meant fiat currency: bills and coins backed by governments. Today, the concept of “money” encompasses digital currencies, cryptocurrencies, digital assets (including NFTs) and more. So, what other innovations should we expect to see in banking in the short and medium term?
We talked to leaders in the banking, finance, and fintech worlds, to find out. We went deep and dove into the future of banking and money over the next few years. As a part of this series, I interviewed Don Muir.
Don is the Co-Founder & CEO of Arc, a B2B fintech platform that’s reinventing how software startups grow. Founded in 2021, Arc is the first software-driven bank for SaaS. Its market-leading product, Arc Advance, converts future revenue into upfront capital at the click of a button so that startups can invest in growth without dilution or debt. Unlike traditional offline banks that require restrictive covenants and a one-size-fits-all approach to funding, Arc provides a suite of digitally-native finance tools that were designed specifically for SaaS startups. Prior to Arc, Muir worked in private equity at Apollo Global and Onex Partners and management consulting at The Boston Consulting Group. Muir is a graduate of Stanford University’s Graduate School of Business, where he earned the Alexander Robichek Award in Finance, and Cornell University, where he was the Merrill Presidential Scholar.
Thank you so much for joining us in this interview series! Before we dive in, our readers would love to “get to know you” a bit better. Can you tell us a bit about your ‘backstory’ and how you got started in this industry?
I’ve been passionate about finance for as long as I can remember. I started investing at a very young age and went on to study finance at Cornell. After graduation, I moved to Manhattan and worked at a large publicly-traded private equity fund. That’s where I really caught “the bug” and developed a strong appreciation for fundamental investing.
During my time in PE, I witnessed firsthand the antiquated nature of capital raising. Companies paid millions of dollars to an army of investment bankers to run offline, manual, and redundant analyses in excel. There was virtually no automation, software or tech utilized in these processes.
Entrepreneurship was always an interest of mine but had been outweighed by my passion for finance and investing. It wasn’t until my time at Stanford GSB, where I met dozens of startup founders, that I realized I could fuse my competing passions for finance and entrepreneurship to solve a pain point faced by thousands of startups around me. I quickly realized that early-stage software companies are underserved by traditional financial institutions in spite of their strong business fundamentals.
The same offline and bureaucratic processes that I’d become accustomed to during my time on Wall Street prevented banks from serving the startup economy and costing software startups millions of dollars in dilution and inefficiency. Through backend API integrations and scalable cloud-based infrastructure, Arc could automate these legacy processes and serve this high-growth segment of the market at a lower marginal cost. That was the “ah-ha” moment when Arc was born.
Can you share the most interesting story that happened to you since you began your career?
During my first year at BCG, I worked on a $100+ billion M&A transaction of two publicly-traded pharma companies. We’d been grinding on this deal for months. It was late at night, and I was toiling away on some post-merger integration analysis when the Treasury Department issued a statement that it was going to block the deal. In real-time, we watched the acquirer’s stock price drop 20% in the aftermarkets. Me and a dozen Associates shut our laptops and went out for drinks in Manhattan.
Can you please give us your favorite “Life Lesson Quote”? Can you share how that was relevant to you in your life?
In his Commencement Address at Stanford, Jobs said: “Your time is limited, so don’t waste it living someone else’s life.” For the better part of my life, I thought I wanted to climb the corporate ladder in private equity or management consulting. But when I moved to Palo Alto to enroll at Stanford, I was inundated with this infectious entrepreneurial environment, surrounded by founders, professors, and engineers who inspired me. I quickly realized that I could pursue my passion for finance while building something of my own and making my own dent in the world. Two years ago, I was studying finance at Stanford as a student aspiring to be a Partner at a publicly traded private equity fund. Today, I’m running an explosive-growth VC-backed fintech platform alongside dozens of extraordinary team members, generating millions in revenue and serving hundreds of customers across the country. I’m pursuing my passions and living my life.
Ok wonderful. Let’s now shift to the main focus of our interview. Can you tell our readers about the most interesting projects you are working on now?
In partnership with Stripe, we’ve launched the first software-driven bank purpose-built for software startups. Arc is a first-of-its-kind B2B fintech solution where software founders can borrow, save, and spend all in one comprehensive digitally-native platform. We’ve built the finance operating system that helps customers optimize cash burn, improve margins, and accelerate revenue growth while maximizing ownership for the founding team. Every week, I meet with dozens of software founders to understand their pain points, and build the software and tools to help them grow more efficiently.
How do you think this might change the world?
Traditional banking for startups is offline and relationship-driven. It matters more which VC has invested in you than how your business has performed since inception. Arc is different. We make unbiased, fundamentally-driven underwriting decisions. Startups are qualified for Arc funding algorithmically based on operating metrics and rewarded for performance through better rates. As a result, we’re leveling the playing field for the thousands of software founders across the globe who don’t reside in Silicon Valley. Banking will look fundamentally different 10 years from now than it has the past 100 years. The future of finance is digital, and Arc is driving this change.
What most excites you about the banking or payments industry as it is today? Can you explain what you mean?
What excites me most is the speed at which the fintech ecosystem continues to innovate and evolve. A decade ago, banks would spend millions to build in-house functional expertise across KYB/KYC, underwriting, data processing, payments, and banking infrastructure. Today, each of these functions is available as an API service across a proliferating number of fintech point solutions, enabling Arc to get to market faster with a better product at a lower marginal cost. This rapidly evolving fintech ecosystem allows Arc to serve a much larger and more diverse segment of the economy than traditional banks while providing a meaningfully better experience to customers.
What most concerns you about the banking or payments industry as it is today? What would you suggest needs to be done to address that?
Rising interest rates, persistent inflation, global supply chain and labor shortages — coupled with one geopolitical crisis after another — have set the scene for a systematic repricing of capital and risk. Cautionary VC behavior is leaving startups short on runway and is otherwise driving down valuations for early-stage software startups. As a result, equity financing is more expensive than it’s been in years, and justifying dilutive capital has never been more difficult.
Rather than waiting around for funding to be approved, the finance industry should simplify the capital-raising process while redirecting time, control, and ownership back to the founders. Banks and digital platforms must offer fast, flexible, consumer-grade experiences to match the evolving demands of high-growth startups.
How would you articulate how the concept of money has changed in recent times? Is it really a change? How is it still the same? Can you explain what you mean?
In today’s world, money and technology are inextricably intertwined. In my lifetime, we’ve gone from writing physical checks and depositing cash at retail banks to sending P2P payments, banking online, and trading NFTs. However, the B2B landscape has been much slower to evolve, and business banking continues to be dominated by enormous offline corporations.
In recent years, businesses and high-growgrowth tech startups, in particular, have increasingly demanded an online, flexible, consumer-grade enterprise experience across the B2B stack, including finance. The concept of money — an economic unit used as a medium of exchange — will always remain the same. But how businesses access and spend money will continue to evolve as our technology advances to meet evolving business needs. Founders and business owners expect their financial services to work just as well as the consumer apps they use in everyday life.
This has created an opportunity for Arc to serve tech startups in a way that traditional offline banks never could before. Arc is the future of banking — we are a fully-integrated, digitally-native full-stack finance solution that allows its customers to instantly access, manage, and spend capital at the click of a button. What used to take months now takes minutes. Arc is rising to the challenge and building the future of finance for businesses.
Based on your vantage point as an insider in the finance industry, what innovations should we expect to see in banking in the short and medium term?
With the proliferation of API services, we’ve enjoyed an extraordinary increase in the accessibility of business data, enabling fintechs to make faster, data-driven decisions. Vertically focused fintech platforms like Arc will continue to build a moat around their business with data and technology. We are building the finance operating system for software companies, driving value that’s rapidly outpacing banker relationships or structured loans. As fintechs scale and dominate traditional financial services, capital will no longer be a competitive advantage, and the relationships that once drove Wall Street will be rendered obsolete. Software is the future of banking, and Arc is leading the charge.
How has the pandemic changed the way banks interact and engage with their customers?
The pandemic was an accelerant for the much-needed digitalization of the B2B fintech ecosystem. The pandemic underscored the importance of UX over offline banking relationships. It reminded tech companies that they deserve a tech-driven finance stack. Legacy financial institutions are still scrambling to adapt while fintechs are aggressively moving upmarket to bank enterprise customers that traditionally worked exclusively with large publicly traded incumbents.
In your particular experience, how has the pandemic changed the way you interact with, and engage your customers?
I founded Arc with two MBA classmates out of my living room in Menlo Park during the peak of the global health pandemic. Stanford was in lockdown, classes were fully virtual, and most students left campus. My focus shifted exclusively to building Arc. I used that time to map out my vision for the future of finance, the role that Arc would play in that utopia, and the business plan we would execute to get there. We sent out thousands of cold emails to software founders, setting up hundreds of Zoom meetings where we learned the pain points of the CFO suite. We learned that capital raising and banking are distracting, manual, offline processes. But by leveraging API services, they didn’t need to be. So we built a modern finance stack for the modern software company. Customers can be onboarded in 2 minutes and access growth capital in 2 days. We’ve built a consumer-grade front-end experience that’s so seamless and intuitive that customers never have to talk to a banker or CSR if they’d prefer not to. But we also offer a hands-on white glove customer experience for those who want it. Most importantly, we’re building the finance operating system that allows customers in the Arc network to manage capital more efficiently to grow faster and preserve ownership in the business they’ve worked so hard to build.
In my work in the telecom space, I’m very interested in the importance of user experience. How much of your interactions have moved to digital such as chatbots, encrypted messaging apps, phone, or video calls? How has this shift impacted the user and customer experience? What challenges do these apps present when used as a customer engagement tool?
Born out of the global health pandemic, Arc has been digitally-native since day one. Every customer interaction and vendor negotiation has been conducted virtually. Our onboarding process is entirely self-serve. At the same time, we leverage Loom, Zoom, and Slack to provide a white-glove customer experience with 24–7 support available to customers. These tools have enabled Arc to offer a differentiated customer experience relative to offline commercial banks that rely on in-person relationships and brick & mortar banks to win deals.
If you could design the perfect communication feature or system to help your business, what would it be?
Today, we’re offering 24-hour virtual support to our customers. An ideal communication tool would be some combination of AI chatbot + Zoom + Slack where customers can flexibly receive 360-degree support across the channel they prefer at any time.
Fantastic. Here is the main question of our interview. What are your “5 Things You Need To Create A Highly Successful Career In The Modern Finance, Banking and Fintech industries? (Please share a story or example for each.)
#1: Team is everything. Try to never be the smartest person in the room. And if you are, find a different room. If you want to be a successful operator in fintech, it’s crucial to surround yourself with a winning team. Modern finance companies are cross-functional and complex operationally. Our success at Arc has been unlocked by the all-star team we’ve built. We’ve brought together software engineers from big tech companies like Tesla, Google, LinkedIn, Meta, and Affirm with operating experts from finance shops like Brex, Amex, SVB, Divvy and SoFi. “A” players attract other “A” players, creating a competitive advantage that compounds as we scale. As a team, we challenge each other, learn from one another, and leverage prior experience to drive outsized outcomes for our customer. These results can only be achieved with a top-decile team.
#2: Make Technology Your Product. Capital is a commodity. To be successful in the modern finance world, it’s important to embrace technology. What differentiates fintechs from legacy, offline financial institutions is software, insights and data. Build tech that improves the customer experience and automates backend processes. At Arc, we’re focused on building the next-generation finance operating system to add value beyond the capital we provide. Not only do we allow customers to instantly access non-dilutive capital at the click of a button, we’re also building the finance software to help customers manage working capital to grow faster and more efficiently.
#3: Stay nimble in an evolving industry. In an industry undergoing significant regulatory and macroeconomic disruption, it’s important to have a strong vision but stay open-minded. Study the market, listen to your customers, and don’t be afraid to embrace new ideas. At Arc, our product roadmap was built by our customers. I spend 8 hours every day talking to our customers and understanding their pain points so we can build exactly what they want and need.
#4: Make Data Driven Decisions. To be successful in the modern finance company, it’s critical to leverage data to make informed decisions. During my time in finance, it never ceased to amaze me how 99% of analysis is conducted offline in excel. To be successful in the modern finance company, you need to leverage data to make decisions. Over the last decade, the fintech ecosystem has evolved, exponentially increasing the accessibility of financial data. Functional areas that once were required to build in-house at a bank are now available as modern API services through fintech point solutions. At Arc, we use machine learning data enrichment and modern BI tools to make automated underwriting decisions. This results in better, faster processes and allows Arc to make funding decisions in minutes whereas traditional banks take months.
#5 Put the customer first. The new generation of founders deserves the functionality of a traditional commercial bank without sacrificing the UX associated with a digitally native consumer-grade enterprise experience. To be successful, a good financial product simply isn’t enough. The bar has been set high by Personal Finance Apps like Robinhood and Chime as well as B2B applications like Zoom and Figma. Why should the B2B Finance stack be any different? At Arc, we’ve built an integrated full-stack front-end experience that’s so intuitive that our customers can deposit funds, raise capital, and manage cash without ever picking up the phone.
You are a person of great influence. If you could inspire a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger.
The startup world is filled with untold stories. Stories of unparalleled successes and failures. Stories of building and breaking. Stories of David vs Goliath and Tech Titan vs Tech Titan.
If I could inspire one movement, it would be for founders and startups to tell their stories. To share exactly what they have experienced while building their company because as I’ve come to learn, founding a company can feel lonely at times.
In the media, building and growing a startup is glorified. All of the positive aspects are intensified, and all of the negative aspects are ignored. The reality is that building a company is really tough. One day you feel on top of the world, and the next, you feel like the entire world is against you. It truly is a roller coaster ride filled with incredible highs and lows.
So as Steve Jobs said, cheers to you dreamers, “the crazy ones, the misfits, the rebels, the troublemakers, the round pegs in the square holes … the ones who see things differently… While some may see them as the crazy ones, I see genius because the people who are crazy enough to think that they can change the world are the ones who do.”
One final note for the startup employees and founders out there: I want you to know that I am so proud of you. I am proud of you for taking the leap, for all that you have accomplished, and for all that you will accomplish. I know that it’s not an easy journey, and sometimes you might feel like giving up, but please keep pushing through it. Push others to think big and take risks, build up your peers, friends, and employees, and make others better because of it.
How can our readers further follow your work online?
Visit https://arc.tech/ to learn more about Arc’s platform, how to sign up, or join our team.
Thank you so much for the time you spent doing this interview. This was very inspirational, and we wish you continued success.
