#24: Ryan Cleary (FloatMe)

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Ryan Cleary (FloatMe) [00:00:00]: Helping them build savings, helping them get into a situation where they're no longer reliant on things like overdrafts or wage advances. Instead, they're able to start really thriving. And for us, it's really about making your members financially whole Land helping them achieve financial prosperity through a whole suite of financial products that are designed for them and match the experience that they need.

Jeffrey Stern [00:00:30]: Let's discover the Cleveland entrepreneurial ecosystem. We are telling the stories of its entrepreneurs and those supporting them. Welcome to The Lay of the Land podcast where we are exploring what people are building in Cleveland. I'm your host, Jeffrey Stern. And today, I had the absolute pleasure of speaking with fellow Venture For America alumni, Ryan Cleary. Ryan is the co founder and COO at Flowbee, a Fintech startup located here in Cleveland, Ohio Land in San Antonio, Texas. This. Ryan grew up here, though, in Cleveland, on the west side in Lakewood, and later graduated from Case Western before getting his master's from Harvard.

Jeffrey Stern [00:01:09]: He ultimately ended up moving to San Antonio though, where he co built and managed a startup accelerator before pursuing his longtime passion for financial equity By actually starting FloatMe in late 2017 when he met his cofounder Josh Sanchez at a startup weekend event there. Today, Flotme is on a mission to make financial prosperity achievable for all Americans. Starting by creating an affordable alternative to the 46 $1,000,000,000 overdraft in payday lending industries, while simultaneously offering tools to help people build savings. And so far, FloatMe members have saved Over $30,000,000 in fees. And FoldMe is on an absolute tear recently, closing on a $3,700,000 seed round at the end of 2020, Led by investors here in the Midwest, followed up by a $25,000,000 debt financing deal in April of this year. Personally, I am a huge fan of what Ryan is building. The lives of many Americans are whipsawed by a handful of predictable financial events that repeat with high frequency, The dates of which are entirely outside of their control though. Rent or mortgage payments, car payments, credit card payments, student loan payments, and ultimately payroll, when people actually get paid.

Jeffrey Stern [00:02:19]: FlowMe is really pushing a paradigm shift here, and I am excited to share Ryan's story. So please enjoy. So I want to start just kind of with an overview here of what FloatMe is. I think we can venture out and explore from there, but I'd love to just kinda set the stage here.

Ryan Cleary (FloatMe) [00:02:43]: Yeah. Thanks, Jeff. Really excited to be here with you and all our listeners today. So Flowbee is a Fintech company. And our mission is to provide a pathway to financial prosperity for low middle income Americans. So think individuals making about 25 k to 75 k per year. Today, we're doing this by providing a platform which offers all of our members access to interest free floats of up to $50, which help them prevent overdraft fees and avoiding these payday loans. As well as providing bank alerts, The financial information Land helping our members build savings in a whole variety of different ways.

Ryan Cleary (FloatMe) [00:03:19]: So our platform is currently live in both app Stern, and we're really excited to be continuing to expand it over time.

Jeffrey Stern [00:03:27]: Yeah. So this problem space is something I'm I'm really excited to explore with you here. We can definitely dive deeper into of the the macro topics. But I I kinda wanna start with just how it is that you came to define yourself wanting to found and build a company tackling this specific problem. And if you could just share a little bit about your own entrepreneurial journey and how it is that you arrived here at at Flotme?

Ryan Cleary (FloatMe) [00:03:51]: Yeah. So I'll say the problem is something that's very near and dear to me. So I grew up in Cleveland, went The school over at Case Stern, so very deep Cleveland roots on my end. My household growing up was, I would say, low middle class. We had always had enough money for the essentials, but the non essentials were kinda optional based on how things were going. My dad at the time was getting a business started during the rest of my childhood, so things were tight. And for me because of that, for me, money was always very top of Land, like many millennials who had parents who grew up during previous financial crisis, who came to age during the await financial crisis. There's a lot of conventional wisdom around how to manage money that maybe wasn't the best for you over the long run.

Ryan Cleary (FloatMe) [00:04:39]: Sure. One of those big things was, you know, credit cards are bad. They're dangerous. You know, you think back to the era, I think pre, it wasn't really till like 2010, 2011, people would go on campus, get college students, credit cards without disclosing a lot of the costs of them. So, you know, growing up, I didn't have a credit card until, you know, very late in college. I really, you know, basically was a scholarship student over at Case Western. So I worked multiple jobs, making my way through that. And getting into my senior year, money was really tight and I do some pretty crazy Stern.

Ryan Cleary (FloatMe) [00:05:16]: Just be able to afford my Land, year of college. I ended up selling blood plasma, ended up, you know, working multiple jobs. So The struggle of personal finance for the young millennials is something that's always been very top of mind for me. And yeah, at the time when I left school, I studied economics in undergrad. I really thought I was going The take management consulting and ended up actually, by pure happenstance, talking to somebody who worked at a local startup incubator. They suggested I should apply for a job there instead. It really just fell in love of, you know, the problem solving and dynamism of with startups in the startup ecosystem. And that really just was a major career shift for me.

Ryan Cleary (FloatMe) [00:06:02]: I ended up eventually doing Venture for America, which is a great community here in Cleveland, as well as nationally. Sure is. Yes, yes. Actually, I met you, Jeffrey. Ended up actually then moving to San Antonio to build an accelerator, a startup accelerator geared towards 2 year college students you know, down Land Antonio for about 2 years. And what anybody who's ever moved cross country knows, it makes you broke really quick, especially as you're a young 20 something, 22, 23, you don't have a lot of savings in the 1st Lay. Land then you it costs several $1,000 to make the move. And then on top of that, you have, you know, our lovely college debt payments to go along with it.

Ryan Cleary (FloatMe) [00:06:47]: So when I moved, I was pretty much underwater, probably was negative a little bit on the credit card Land is right a little bit after The move about 3 months when this was just a challenge of managing cash shortfalls, was still very fresh on my Land, I met my co founder, Josh. We met a startup weekend event, basically the last place that people normally Land, people that you build a long term founder Lay. Like we, all the boxes you're supposed to check with founders, we did not. We barely knew each other. We were both in our twenties. Neither of us was a highly technical co founder and we met at a startup weekend event, but he had recently been through this really just crazy set of circumstances. He had also recently graduated school, had started a new job and early 1st week of going to work, he's driving along down the street to go to work and he and his car get hit by a bus. Oh, jeez.

Ryan Cleary (FloatMe) [00:07:48]: Yeah. Land I always have to emphasize he was in the car at the he was okay. People sometimes think, oh, he got hit by a bus. There's now a picture, it's just, you know, guy in a car. Stern, still. Yeah, still that great. And the killer part of this, he had done everything right. He had car insurance, he had as much savings as he could, but he ended up having to take all the savings he had and put it towards co paying the copay, his car insurance Land a little bit more for the things that weren't covered.

Ryan Cleary (FloatMe) [00:08:17]: And the net result of that was Josh still had another a week to 2 weeks before he was going to get his 1st paycheck because the way pay cycles are stretched out with your 1st job and even in general. Yeah, he needs money for groceries, gas, you know, small basics. The small expenses that add up that you need to be able to function in life. And as he was walking down the Stern, at his job, he ended up seeing passing by a payday loan shop there. And Like me, he didn't have a lot of prior knowledge in financial literacy. He was from the Rio Grande Valley, just very south, southern part of Texas, which is a Land of financially challenged area in the US. So he didn't have a ton of all the background that he would have liked to have had either. And as a result, he didn't really know what he was getting into with that payday loan.

Ryan Cleary (FloatMe) [00:09:10]: And what he ended up finding out and was shocked by was a couple of things. The, you don't really understand the magnitude of triple digit interest rates until you really experience it. The average payday loan is between 300% and 700%, depending on what state you're in in the US. Your credit card typically somewhere between anywhere from 10 to 25%. A typical, I think mortgage right now is about 3%. So those interest rates are crazy. Extraordinary. Yeah.

Ryan Cleary (FloatMe) [00:09:43]: So, yeah, he ends up taking out this loan Land what also struck him, looking back on it is, it was for the minimum that they would do was $200. And this just caught him in The, you know, debt cycle where he eventually managed to pay it off, but it accrued a ton of interest. I think in just 2 weeks, it was something like $50 on a $200 loan, which he didn't actually need that much. It was just the minimum they would provide to him. He felt like really $50 or $100 would have been enough. Land he ended up also because of just the challenge of getting it paid of back and everything. It also ended up causing him to overdraft his bank account, which also carries really high fees. Typically, they're about $35 a pop just for going negative, even by a penny or a dollar.

Ryan Cleary (FloatMe) [00:10:30]: So we met at the startup weekend event and both of us had this whole financial cash shortfalls, very much on our minds. And that was just the point where, clicked for both of us. We discovered this other person who was very passionate about it Land we ended up developing this idea. Josh initially pitched the early version of building a better alternative for people who are experiencing a cash shortfall, who are employed, who are doing everything right, but there's been some sort of disruption in their life. And that's really how Fort Me was We conceptualize the idea of having a digital platform where somebody who'd go on and wouldn't be penalized for having no credit or bad credit. As long as they're employed, they could access a short term float based on wages that they had accrued. So they've been working, but hadn't yet been paid out. And we wouldn't charge any interest.

Ryan Cleary (FloatMe) [00:11:29]: Instead, we would just charge a membership fee. And then we would, once they're financially stable, we would help them increase their financial literacy. We would help them build savings so that they wouldn't end up in this situation again in the future. And then we would have the platform keep growing with them. So that was really what we conceptualized early on. In a lot of ways, it's pretty broadly stayed the same. But there've been small tweaks along the way. So when we left, we thought that we we were really focused on making this geared towards employees so that they can make it through those small emergencies.

Ryan Cleary (FloatMe) [00:12:03]: We were initially going to be a B2B company. And we had the good fortune of meeting not long afterwards. I think it was 3 months afterwards, our 3rd co founder, Chris Brown, not the rapper, who was an absolute tech wizard. He was with Rackspace in the early Lay. He built bank level infrastructure for major banks. It's been all around absolute badass. And that's really essential because Josh and I, we could probably code our way out of a really small box, but that's about it. Land we weren't gonna be capable of this.

Ryan Cleary (FloatMe) [00:12:38]: So, you know, fast forward a little bit. We spent a long time doing market research well over a year interviewing. We did a couple 100 interviews. We got, I think close to 15,000 survey responses really validated out before we even did the 1st beta test back in winter 2018. And we raised, I think, 10, The maybe $10,000 from this community pitch event and the rest of it, we purely bootstrapped until we were ready to do a private beta in August of 2019, which coincided with how we came back to Cleveland. Well, really came to Cleveland and how I got to come back and really reconnect with The community that is very near and dear to me. We went through the Venture for America Startup Accelerator. The 1st year was in Cleveland Land had a great experience with The, raising our 1st institutional round Lay mainly by Cleveland Stern.

Ryan Cleary (FloatMe) [00:13:38]: Really, it was just a very exciting time and that's really what kicked off all the momentum that got us to where we are today.

Jeffrey Stern [00:13:43]: Wow. Yeah. What a what a story. There are a lot of threads here I wanna pull on. As you were telling that story, this quote kept coming to mind. I'm certainly gonna butcher it, but it's I think it's an Einstein quote. That's along the lines of compound interest is the 8th wonder of the world. He who understands it earns it, and he who does not pays it.

Jeffrey Stern [00:14:02]: It's something like that. And I think that concept of compound interest and how Powerful it is. It's really this kind of wild concept. And I wanna come back to the problem just from a macro level and and kind of understand What is the scale of this problem? When we talk about overdraft fees, cash advances, borrowing against your next paycheck, The high interest payday loans, dearth of emergency funds. Like, beyond the the kind of personal anecdotes, you know, at a national level, what are we talking about here?

Ryan Cleary (FloatMe) [00:14:34]: Yeah, so when we started this out, none of us imagined it would be as big as it is. In my Land, I always pictured it as it's something The, you know, people who working, you know, minimum wage jobs probably have this problem. You know, maybe people who've had a big major financial event, like a huge car accident or medical bills. And it's actually really widespread. So Land year, you're just looking at payday loans, just that specific segment. You're looking at last year in 2020, about 12,000,000 people took out a payday loan, 12,000,000 Lay people, which accounted for about, I believe it's $11,000,000,000 in fees. And that compounding interest that you're talking about there, Jeffrey know, typically what happens is somebody doesn't just take out 1 payday loan. Typically what happens is those fees and that interest so high that 2 weeks Lay, when they go to pay it back, they actually can't afford to.

Ryan Cleary (FloatMe) [00:15:33]: So the way the payday lenders like to do it is they wrap it up and they create another loan for them. They use that 2nd loan to pay off the 1st loan. This happens again and again. It typically takes almost 8 months. Land that's just-

Jeffrey Stern [00:15:47]: Just like compounding, compounding interest.

Ryan Cleary (FloatMe) [00:15:49]: Exactly, exactly. It's this really nasty cycle. So that's just payday loans right there. If you look at everybody across the US, if you take 3 people at random, The of those 3 people last year overdrafted their bank account. And The works out between payday loans and overdraft bank accounts to be about $46,000,000,000 in fees that American employees paid. Just fees. Just fees. That's not the actual loan principle.

Ryan Cleary (FloatMe) [00:16:21]: And that's ignoring a whole bunch of other financial products like high interest, you know, revolving loans The, you know, we can't even really get into. You know, that's just $46,000,000,000 in fees Land it's a problem that may have gotten worse just with the pandemic. The the one side, that's the people taking out the loans. The other side is people who are vulnerable and at risk. And that's 78% of Americans pre pandemic were living paycheck to paycheck, which translates to 43% not being able to handle an emergency that was just $400. They didn't have $400 worth of credit or savings available. And that's I guess like 2 tires, getting 2 tires replaced on your car. That's maybe a larger than normal doctor's visit with some blood work.

Ryan Cleary (FloatMe) [00:17:09]: You know, for a family of 4, that might be, you know, a week or The of groceries. So there's a lot of Americans living right on the edge Land you know, you're talking 100,000,000. Yeah. Maybe who are being affected by this type of issue. And the reality is, and the reality that we saw is that the situation sucks. If you need a small amount of money, you can't get from that from the bank. A bank wants to loan you $1,000. They want to loan you $5,000.

Ryan Cleary (FloatMe) [00:17:39]: When I was getting a used car, I had a huge problem in college. Being able to find a bank that would lend me, you know, just $25100 pay for this car. They all wanted to do 5,000 or $10,000, which means that we have this gap in the market where for people who need just a small amount, it's either, you know, go to a payday lender, overdraft your bank account, which is really, it's the most efficient way to get a quick, fast loan, but, you know, $35 on a $20 overdraft, that's some really high interest right there. Or if you are lucky enough to have family or friends who can afford it, go to them, which his own set of challenges. And for many people, you know, their social group is in a very similar financial situation as them. I probably wouldn't have dreamed in college of going to my parents if I needed help. Josh didn't go to his parents, you know, because both there's maybe some financial challenges, but also there's some pride too. You don't want to go get people The you care about you and begging for money, especially when you're very early in your adulthood.

Ryan Cleary (FloatMe) [00:18:48]: Yeah, the other big thing that we found, this actually came from, you know, when we were doing some of those early tests in winter 2018, we get asked a lot about why why $50? Why is that our cap? Why is that our max? And really what we found is, you know, we started off doing it, the early testing with $100 to $200 because we thought, oh, that's what payday loans Dell. They must be onto something.

Jeffrey Stern [00:19:15]: Right, right.

Ryan Cleary (FloatMe) [00:19:15]: There must be a reason for this. And what we ended up finding is we have a lot of data. Our members, you know, that we effectively operate, you know, by being able to link up and directly transfer funds. And when we looked at the data, we found that most of them didn't actually need a full $100 or $200. Instead, what we saw is that people would just they would take out whatever the max that you were offering them. And this is The whole psychology research area around this, but basically people will take out the max you offer both as a hedge against risk and also just Land of a psychological quirk. But what we found at a larger scale, we started digging further into this, both in our product and also looking for what research others had done, is that America as a whole has a huge over borrowing problem. The have Pew Charitable Trusts who are very reputable research firm, as well as the, I think it was the St.

Ryan Cleary (FloatMe) [00:20:12]: Louis Federal Reserve. The didn't find that in case of overdrafts, the majority of those overdrafts, they weren't being caused by $100 transaction Gen or $200 or even $50. They were being caused by just a $24 shortfall. So we decided to reduce our float limit to $50 Land many of our members actually do start off a little bit less at closer to 20 to 30 because that's what most of them actually need. And we decided to employ techniques like nudge theory to help them make more optimal financial decisions, decisions that would be better for them in the long run.

Jeffrey Stern [00:20:47]: Right. Right.

Ryan Cleary (FloatMe) [00:20:48]: And what it really helps them out with is it's Lay lot easier to repay, you know, a $20 or even $50 float than it is to repay a $200 loan that has a ton of interest piling up on it. That difference of maybe 2 hours worth of work versus, you know, dozens or even days. So, yeah, so there's really big problem, really big problem that we're hoping to solve.

Jeffrey Stern [00:21:16]: Yeah. I wanna build on the psychology component For a bit and ask about trust. You know, you've made you've made the comparison yourself of, you know, what float me is building to to the current System, which is clearly broken, payday loans. And, you know, people, I think, tend to stay away from anything new that Tries to replace the old system for fear that the new system may be even worse. And, you know, you have those, like, colloquialisms that there's no such thing as a free lunch. And, You know, if it sounds like what you're offering is is too good to be true, especially in a world where there are so many sinister predatory products out there, how have you gone about building trust with with these users who are really putting a lot of faith in in your product and and offering in FlowMe Land educating them about the reality of maybe some of the alternatives out there, but also what it is that you're actually doing for them.

Ryan Cleary (FloatMe) [00:22:09]: Yes, that's a really great thing to chat about. One of the biggest things with trust is between us and our users is really being transparent across the board. So if you go on our website or if you go on the App Store, we are very upfront with what our pricing is. You know, we don't charge interest. We don't charge any hidden fees The are buried in, you know, terms of service that we all know most people don't actually read.

Jeffrey Stern [00:22:38]: We're

Ryan Cleary (FloatMe) [00:22:38]: upfront with, if this is a dollar 99 per month, here are the requirements for you to be eligible. And we offer the 1st 30 days for free because sometimes people hop on, they realize they're actually not eligible. Sometimes they realize this isn't right for them, but it's all about making it so that everything is very clear, very transparent. The made sure that our cancellation process can be done in app or can also be very clear instructions for how to do it outside of the app even. We we want people to feel like all the information that they need and care about is out there and available. So that's piece 1. It's just being very transparent. And let's say it's also a cultural thing.

Ryan Cleary (FloatMe) [00:23:19]: Within the company, we try to be very transparent as well. Somebody has questions about financials, pretty much all our financials are easily accessible to all most of our employees. We're always happy to share them and answer any questions. As a team, we try to keep our Slack channels even very transparent, so everybody's aware of what's going on. And for our customers, the other pieces. In addition to being very transparent and also being very clear about what makes us different. That's a potential reason why we use the word floats. We could use the technical phrase, which is early wage access program or earned wage access program.

Ryan Cleary (FloatMe) [00:24:00]: But that's a whole new category that the CF, Consumer Finance Protection Bureau, it didn't exist before 2017, so none of them really know what it is. So we came up with a you know, Phrase that makes it clear what we do, what it is, but clearly delineates that. But the other big piece is making sure that our customers and members feel heard. So for us, we're big believers in fanatical support. And some of this comes from our DNA of a lot of our team members were part of Rackspace in the early Lay. And Rackspace really, you know, they're this cloud hosting startup back in the early 2000s. Since then it's become a multi $1,000,000,000 Behemoth and hosting. But back then, they were really big on solving the customer problem and being very available for their customers.

Ryan Cleary (FloatMe) [00:24:49]: That was The ads. That was how they competed. And, you know, there's a lot of areas that we compete on, but we believe that making it so The our customers can always reach can always reach us through our support portal, know that they're going to receive an answer Land it's going to be a truthful and transparent Scanstar. That helps build up a lot of trust. We sometimes have customers who come to us with issues that really aren't ones that you know, Lay to our product, but we still take the time to help them solve it. Land we've had cases where people have come to us where they're concerned about identity theft, where their bank account Lay have been breached in some way or a credit card, which, you know, it doesn't affect our systems or anything like The. But we've had agents actually go out and help them find articles and resources and, you know, the identity theft reporting website. So it's going The extra mile.

Ryan Cleary (FloatMe) [00:25:41]: And the other area really about building trust is things like reviews. I think for many companies, reviews seem like such a Land of small piece of the equation or maybe something that they put someone on to do as a task. But for us, we view that as being the first line of us understanding and knowing what our customer needs are, what they're feeling challenged by. So we make a point of having a team member every single day where a big chunk of their job for the day is just going and living in our different app store views, keeping an eye on things that Google Play Land making sure that they are being responded to. If somebody says they haven't gotten response in support, for example, we'll actually go out and try and find, you know, the support ticket that they submitted and see did somebody reply to this. So all in all, it's just being transparent and making our members feel like they're heard Land really just practicing what we preach on all that.

Jeffrey Stern [00:26:40]: Yeah. The thing that you mentioned that I wanna come back to, the intentionality of the word float. One of the things that came to me when I was just thinking about Flow Cleveland what you guys are doing. It was just kinda like how it is weird that with salaries and employment, you get paid after you do all the work. And I was just thinking, like, in in most other transactions, it's this thing that happens temporally at the same time. There's like a an exchange of goods and services that happen as they transpire. But if you just, like, kinda reason, It's it's a little weird that people accrue wages that are paid, you know, monthly. And it makes sense that you should be able to access these wages that you have earned, but it just it's like the logistics of of the payday system and and when you actually get paid.

Jeffrey Stern [00:27:30]: So I I was really just curious. How are employers perceiving what FloatMe is doing, and why can't employers actually just offer wages up earlier to employees to kind of help them out with these situations?

Ryan Cleary (FloatMe) [00:27:42]: Yeah. No. That's I mean, that's a great question. So your data on as far as the pay cycles go is really kind of an archaic system. I mean, back 20 years ago, before we had all the Stern back before even like I think ACH became really big in the nineties. Automated clearing house payments. Before that it was all checks. Banks would actually send checks via tube, vacuum tube systems.

Ryan Cleary (FloatMe) [00:28:08]: There's some crazy stuff around there, but with nothing being digitized, it would take weeks for The accounting department to process everybody's paychecks, get it in the mail, get so people could actually cash it out. So it made sense to have kind of a 2 week, roughly 2 week pay period. Yeah, weekly pay cycles weren't common at all back then. And it also is of, you know, also kind of advantageous to employers too at the time in that, you know, the whole concept of, you know, float is, you know, having excess cash to kind of help you carry your company or even your personal life, they'll help carry you for a period of time. So for companies, they were kind of almost getting a 2 week to 3 week loan from their employees. Is your price that already worked? They generated the cash, you know, the value by being productive and doing lots of great work for you. And then you as a business owner. You know, you got to keep that for 2 weeks so you could invest in, you know, infrastructure or pay vendors before you actually had to pay your employees.

Ryan Cleary (FloatMe) [00:29:15]: Land since The, really, technology has caught up. I mean, I of, we have a payroll system that we use called Gusto. But, you know, ADP and all these other ones do a lot of great stuff too, where you can turn around and you can if you want to. I could have my employees, The could work, have their pay cycle end of The 30th Land I could pay them on The 1st of the month. That's still a little bit challenging just because you have to make sure that all the taxes are taken out and all that. But there's really no reason it needs to be 2 weeks or even a month for monthly paid employees like it used to be. But yeah, but that's kind of where some of what we're doing in early wage advanced programs come into play is it basically lets employees get paid early. We actually started off being a B2B company.

Ryan Cleary (FloatMe) [00:30:01]: To answer your kind of question about how employers perceive us. The were 1 or 2 other companies in the space who were doing a pretty nice job. They were getting things up and running at the time. I actually really have a lot of respect for what folks over at DailyPay, for example, have really done. Where they integrate directly with employer payroll software. So they would integrate with ADP or Gusto, just a couple The big ones. And you know, they would basically be able to see how much employee has been, how long his employee has been working, see what they're going to be paid out and then facilitate the transaction directly that way. And we thought what they were doing was really nifty.

Ryan Cleary (FloatMe) [00:30:44]: So we decided to do things a little bit differently, but still work directly with employers. And we specifically looked at school districts because teachers were demographic that we found that certain times of the year, there is a major cash crunch. Some cases around the summertime, depending on how the school system pays out. Salaries, especially in the early fall and early spring. That's typically features pay a lot of money out of pocket for things like school supplies and classroom supplies for their kids. The of our early employees, you know, wives was teachers, so we had a lot of insight into this. And what we also ended up finding was there's a lot of enthusiasm from employers. Like they love the idea of being able to offer this as a benefit to employees.

Ryan Cleary (FloatMe) [00:31:29]: There's a lot of evidence that for employer having a program like this, it increases the retention of employees. It helps decrease things like absences, flop employees. The might not be able to afford to go to The doctor or they might not be able to afford gas to make it to work we're doing necessary car repair ahead of time, which in turn also, all The things help you retain good employees Land also means that you don't have to pay out money to recruiting employees, which is really one of the most expensive parts of the process. It also helps you be a little bit more competitive and the Cleveland tends to be very popular. The big challenge with working with large enterprises though, like school districts is it is a really long sales cycle. Like you're talking sometimes years. And since we are bootstrapping everything, that was a little bit of a challenge. But when we were running, we ran a small test with a couple, I think it was The Sinus Institutes in San Antonio and a couple The smaller businesses.

Ryan Cleary (FloatMe) [00:32:30]: And in order to do that small test, we ended up having to put our app up on the app store just so that those employees could access it. We're doing I think we're planning on doing, like, you know, 30 to 40 employees total. Mhmm. We suddenly started having a bunch of people, you know, contacting us on our website, asking us, oh, can I sign up and use this? Oh, you know, this is looks really interesting. I could really use this. And we couldn't figure out what was going on until we looked a little more into it and we found out these were individual people just working at companies who around the US, they're employed. Some of them actually send us proactively things like pay stubs and other info, which was a little alarming at times, for like, please don't send us The, this is really sensitive, but it kind of really underscored how big Lay problem it was for them. And that really drove us to kind of pivot as a company Land focus set on being direct to consumer.

Ryan Cleary (FloatMe) [00:33:26]: Instead of partnering with employers directly, we thought, let's start off with actual individual employees. There's really nothing that prevents us from doing this. And so we shifted focus as a company and that led to us kind of redeveloping the whole product, which took the better part of I mean, it really took the better part of a year and a half to do that. But during that time, we were able to build a wait list of I think it was about 70,000, you know, emails. Yeah. We did we've never advertised. All our growth today has always been organic. And a big part of The, though, was, you know, having that early wait list.

Jeffrey Stern [00:34:02]: So I I wanted to build on that bootstrapping idea Land really kinda, on the tactics side, understand how it is that you go about building this kind of company where you need bank partnerships and The regulatory compliance Land how you Thought about like risk and fraud prevention in the early days Land and a lot of these things that I think many startups may not have to think about so early in their life cycle.

Ryan Cleary (FloatMe) [00:34:26]: Yeah. So at a high level, we had the good fortune that the CFPB, that's the Senior Financial Protection Bureau, they issued The set of rules in 2017, which basically said that they understood the challenges with payday loans and bank overdraft fees. Land that it was a huge problem in 2 ways. 1, the way that all those players operated were not good for the consumer. Yeah. So they introduced a lot of rules around disclosures that they had to of, but that they also realize that the problem, the core problem The people do need these small wage advances, that they do need these small amounts of money in order to make it to payday. It wasn't going away. It wasn't something that you could just solve by banning an entire industry.

Ryan Cleary (FloatMe) [00:35:14]: So instead they issued this the set of guidelines, a set of rules The, encourage other companies to really innovate and really set a pretty clear framework of what was okay, what wasn't. And, that was really instrumental for us early on because no one of the team were lawyers. We found out we had some really fun, surprising things along Lay. When we originally conceptualize this, Josh and I, when we were in the startup weekend, we thought we were going to do a peer to peer lending platform. It turns out, that unless you have something like $700,000,000 back The, that may have changed since then, you basically couldn't do this specific thing called shelf securities legally. So that kind of nixed that idea and we got to pivot hard Land that's how we you know, ending up not being a peer to peer lending space, be really cool. Maybe somebody could do it today. But so, combined with really clear guidelines from the CFPB, which of course have since been amended and further clarified, which we are eternally thankful for.

Ryan Cleary (FloatMe) [00:36:19]: I'm sure. Yeah, they're really good, but it's a lot of reading. If you ever really wanna, you know, you're having a hard time falling asleep, just pull out titles of the, or like read through the truth in lending act. You know, there was a lot of reading, a lot of notes. The good thing is, you know, there were some other players who were adjacent to us in the space who'd already done some of that leg work for us. The entire concept of doing these small dollar amounts to support employees. That in itself wasn't entirely new. There were, you know, platforms like Zopa in the UK.

Ryan Cleary (FloatMe) [00:36:56]: There was The organizations like LendingClub and Funding Circle, which were Land of of precursors to this particular industry. That we were able to look at and say, okay, here's things they were able to do successfully. Here's the things that they had to adjust for. So that was all really helpful. And then, you know, this is advice I'd give to anybody who is founding a company is once you feel like you've gotten most of the early research done, but you haven't actually really built a fancy solution yet. Go talk to a lawyer who is really familiar with startups. We're very lucky that there's a firm who is very friendly with venture firm, Erica, who I knew and worked with at the Accelerator, where they helped us draft up all the company documents for a very reasonable rate. There are a couple of really great firms in Ohio, you know, that I've definitely had some good experiences with as well.

Ryan Cleary (FloatMe) [00:37:47]: It's a case of like just, you know, your lawyer becomes your best friend at a certain point. And a good lawyer is The will tell you what you need them for versus what you can do do yourself. Yeah. So that's, you know, part 1 is just navigating. It's just a lot of reading, having a good lawyer to Land of answer The questions that you yourself aren't. You know, you hit a point where you start looking at something that's in the Lay, it just makes no sense. That's the point where you go to the lawyer and say, okay, this is what I think it means, what does it actually mean? In addition to that, we brought on some people who were experts in certain areas like Chris, you know, 3rd co founder. Yeah, he built bank level infrastructure.

Ryan Cleary (FloatMe) [00:38:28]: So he really does know things like, you know, KYC and anti money laundering, like what you have to do on technical side around that to be in compliance and PCI. So that's a whole area The, having somebody knowledgeable helps out when it comes to just keeping track of everything that's going on, going through the legislature. That tends to be me, in addition to economics, I also studied political science. So that's a little bit of a policy wonk at times. So I actually enjoy doing that and following it. That's quite lucky. Yeah. Yeah.

Ryan Cleary (FloatMe) [00:38:59]: So yeah, make sure if you're building a company, make sure you actually love the parts around it. You're in for a really rough time otherwise, but yeah, so The bigger. And then as we scaled up, you know, you progressively get find more experts in the space to answer those questions. And may I also say there's a lot of other people. People are very willing to give their time and energy to help answer your questions. I can't express enough gratitude for people within the Cleveland startup community who have answered some sometimes really stupid questions that I have asked you know, in the San Antonio community, you know, before we made where we had the ops team up here in Cleveland, you know, before we were that big. There are a lot of people who just helped us a long way or able to answer questions The, you know, we just didn't know the answers to, and we didn't even, sometimes, know where to start looking. As far as banks go, we actually really don't have to I mean, there's a couple banks we do work with and some merchant processors, but the of of rules there are really clear for us.

Ryan Cleary (FloatMe) [00:40:07]: Banks are very by the book. As long as you're doing something that's by the book and get they can just plug and Lay, they tend to be very happy. And they're like, oh, yeah, we have a form for that. Oh, you need this? Oh, we have another form for The. And there's some really innovative banks out there too. I mean, we, we experimented for a little bit with, basically automated savings accounts that we offered. We partnered with the National Bank of Kansas City, and they're this very forward thinking bank. We ended up finding out really wasn't the right fit for our users.

Ryan Cleary (FloatMe) [00:40:37]: But you know, for several months, you know, they gave us you know, they helped connect us with the right people. They helped, you know, of guide us along some of those processes. There's just really forward thinking banks out there. But you just have to you have to ask. You have to ask the questions and Land the right people, I guess.

Jeffrey Stern [00:40:56]: Yeah. So The last macro topic I I wanna get your perspective on is treating The symptom versus, like, addressing the root cause of this. And, you know, you mentioned early on that what float me is doing is more than just the the floating of the of of money and and cash, but there's a financial literacy component and work to be done there. And so with with this context of treating the symptom versus addressing the root cause, when you think about the direction that you wanna take FLoatme, How you're thinking about that because, again, coming back to that that Einstein quote of, you know, compound interest, and those who understand it, you know, earn it and those who don't pay it. I really think that, you know, if you're borrowing money or getting credit, you don't actually realize often that you are paying for it. And societally, we've fallen into this pattern where these financial products put people on The losing side of that deal. From an outsider's perspective, what I think is awesome about float me is that you're actually saying, no, that's, like, not actually how it has to be. You can have this access and control.

Jeffrey Stern [00:42:00]: But you got to understand the kind of concepts here to really kind of leverage it.

Ryan Cleary (FloatMe) [00:42:05]: Yeah. So for us, it really the end goal is to solve the underlying cause, not just the symptoms. I mean, part of the challenge that honestly, even some of our investors early on or folks we talked to about investing, didn't always get is sometimes in order to solve the underlying cause though, you do have to address the symptoms. You have a little bit of Lay Tylenol before you can solve that acute pain point before you can start giving people vitamins to make them healthier. Yeah, that's really why we focused in on the floats first and offering those, you know, basically helping people get paid early, helping them prevent overdrafts. Because for many of the members who are coming Stern our platform. If you go and tell them to save money, they're going to say how? I don't have enough money as it is. I need to solve my problem today.

Ryan Cleary (FloatMe) [00:42:58]: So that's really why we focus there. But over the long run, really what we're trying to do is provide a holistic financial experience. This is kind of the longer term vision that we have. We're not trying to replace a bank. I think there's a lot of great neo banks out there who are coming in doing really cool stuff there. But what we're really trying to replace is, for many of our members, their current banking experience and making it better. So an example I'll give is if I want to invest, I bank with JPMorgan Chase. JPMorgan Chase is VeriGray in a lot of ways.

Ryan Cleary (FloatMe) [00:43:36]: But if I wanna do, like, you know, investment and get actual advice on it, they're not even going to talk to me because I don't have $100,000, like I'm small Lay to them. So really our goal and like the financial tools a lot of banks produce, they're helpful, but they're not, you know, they're not their main focus. So as I said, our focus is to produce really tailored financial tools that solve pain points that our specific customer demographic has. So that's by providing all those supplemental auxiliary products that we know that we can do a better job of than Land individual customer's basic bank and really solve those initial pain points. So, right now that's solving that cash need Land helping them bridge that gap. We know that from day 1, our goal. When someone solves The financial cash gap, we want to help them have a better financial picture. So that's why we've been introducing features into our platform, into our apps that tell people about their cash flow.

Ryan Cleary (FloatMe) [00:44:44]: We're telling them like, this is your cash in, this is your cash out. Here's a very clear visual. From The, we can expand into tools to help them budget better. But in a way that actually makes sense to somebody who is making, who's 31 and making $42,000 a year, which is our typical customer. Not somebody who has a ton of investments or you know, is getting ready for retirement. That's or is making 75,000 or a 100,000 because they're in a very different financial situation. Land once they have that financial picture, we wanna help them put their finances on autopilot so that they're not having to constantly think about it or worry about it. And from there, it's then our goal as a company is to keep expanding our platform to meet more and more of these member pain points.

Ryan Cleary (FloatMe) [00:45:32]: We think that one of those areas, you know, is probably going to be helping them build credit. Land there's a lot of different ways we Land do that. You could do things like a secured credit card, you could do credit builder loans where they're backed by a different instrument. Like, for example, a CD, as a win win. You'd be doing things like reporting rent because we have all these insights into customer behavior. And we can see that they're making, you know, that they're actually very good candidates for credit products. But it's really, you know, stuff like that that we're really excited about because it's all those things are getting past, you know, The initial pain point for a customer, helping them build savings, helping them get into a situation where they're no longer, you know, reliant on things like overdrafts or wage advances. Instead, they were able to start really thriving.

Ryan Cleary (FloatMe) [00:46:23]: And for us, it's really about making your members financially whole and helping them achieve financial prosperity through a whole suite of financial products that are designed for them and match the experience that they need. Yeah.

Jeffrey Stern [00:46:39]: I mean, I'm also incredibly excited about the the work that you guys are doing and and really just the the direction that the industry is headed. These problems are they're just enormous in scale. And I think that there's a lot of progress that we can make, and it's very cool to see what you guys are doing.

Ryan Cleary (FloatMe) [00:46:56]: Yeah, absolutely. It's been a really fun experience along the The. It's had some ups and downs. Yeah, I can Lay, frankly, the COVID pandemic was, that was my nightmare scenario of not knowing how a black swan event like that would affect us. And we were very fortunate to have had a great group of investors based in Cleveland, San Antonio, who helped support us and actually helped us keep up with some pretty significant growth that was starting to cause some champagne problems around then. So, yeah, can't. Yeah, a lot of people were very thankful for along this journey.

Jeffrey Stern [00:47:34]: That's great to hear. Well, we'll tie it back to Cleveland actually to to wrap it up. And one of the things that we're we're doing is, just over time painting a collective collage of people's, not necessarily favorite things in Cleveland, but hidden gems, things that other people might not necessarily know about. So with that, I will ask you about hidden gems in Cleveland.

Ryan Cleary (FloatMe) [00:47:55]: Oh man, The is, I'd say from a self interest standpoint, I'm a little sad to have to give some of these up because I'd love to keep them all for me, but.

Jeffrey Stern [00:48:04]: For our massive audience.

Ryan Cleary (FloatMe) [00:48:05]: Yeah, for a massive audience here. The of my favorite places I think is a little bit tucked away is Lucky's Cafe down in Tremont. They do amazing The did amazing food in general, but if you can go out there on a, you know, weekends and get brunch over there, it is incredible. Especially if you're diehard Cleveland, a lot of their stuff is very locally sourced. They have a full service bakery as well, outdoor patio, really just a great spot, somewhere that I'm very much looking forward to being able to visit again soon. Yeah, totally hidden gem, but yeah, everything out there, I love the outdoors, Cleveland Metroparks. I'm very excited for all the bike trails coming up and being able to bike to and from the office moving forward. Yeah.

Ryan Cleary (FloatMe) [00:48:54]: It's good to be back in Cleveland. Good

Jeffrey Stern [00:48:57]: to be back. Absolutely. Well, Ryan, really appreciate you coming on and and, sharing your story. And, Again, I I think the work you're doing is really exciting and impactful, and I'm rooting for you guys.

Ryan Cleary (FloatMe) [00:49:10]: Well, I appreciate it, and I'm really excited to hear more episodes of the podcast, Jeff. I've been loving it.

Jeffrey Stern [00:49:17]: Alright. Glad to hear that. If people have anything that they wanna follow-up with you about or questions, follow-up interest, where's the best place for them to reach you?

Ryan Cleary (FloatMe) [00:49:26]: Yeah. So, you know, if they they're interested in the company as a whole, they can visit us at www.floatme. Io. If you wanna contact me directly, I can be reached at ryan, c as in cat, at Fluteme. Io. I'm also on Twitter with a very creative handle of Ryan P Cleary. So I'm really easy to find if anyone wants to reach out to me.

Jeffrey Stern [00:49:59]: That's all for this week. Thanks for listening. We'd love to hear your thoughts on today's show, so shoot us an email at lay of the land at upside dot f m, or find us on Twitter at Lay of the land, at, or at Sternjefe, j e f e. We'll be back here next week at the time to map more of the land. If you or someone you know would make a good guest for our show, please email us or find us on Twitter and let us know. And if you love our show, please leave a review on iTunes.