Name: Don Muir, ARC
Uploaded: 2024-10-03T21:03:00.000Z
Duration: 16 min 28 s

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Don Muir

CEO & Co-Founder

Arc

play_circle_outline Offering cash management and capital services through intuitive software and AI

play_circle_outline Serving venture-backed tech companies with high touch customer experience

play_circle_outline Marrying high touch customer service with bleeding edge technology at Arc

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Don Muir, ARC

Don Muir

CEO & Co-Founder Arc

TheCUBE covers the opening of the new East Coast studio in New York City at the New York Stock Exchange. Don Muir, founder of Arc, discusses how the company offers cash management and capital services through software and AI. Arc works with early-stage tech companies and aims to disrupt the financial services industry by leveraging cutting-edge technology. They provide a high-touch experience for venture-backed companies and plan to launch a new product soon. Arc is hiring AI engineers, product specialists, and capital market experts to expand their team and ... Read more

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What are the core product pillars offered by Arc and how do they differentiate themselves from traditional banks? add

What sets your fintech brand apart in the market and who is your target customer base? add

What is Arc doing to combine high touch traditional banking with cutting-edge technology? add

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Don Muir, ARC

>> Welcome back, everyone, to theCUBE's special coverage here in New York City at our New East Coast studio location for theCUBE, here on the floor of the New York Stock Exchange. In partnering with the NYSE Wired community, theCUBE is bringing all the action from Silicon Valley to New York, deep dives, podcast style, really bringing you all the action. Don Muir is here, the founder of Arc, bringing some innovative solutions to the market. Don, great to see you.

Don Muir

>> Great to be here. Thanks for having me.

>> So we were talking before we went on camera about the journey. Let's get back on the table. What motivated you to start Arc? What is it? What's the company do? When did you start it? What was the origination story?

Don Muir

>> Yeah, sure thing. So by way of personal backgrounds, I grew up in the finance world, right around here. I was working in late stage private equity in New York before ultimately taking the leap into entrepreneurship, and so why that's relevant, I experienced the inefficiencies of the traditional model firsthand every day. When I went out to Stanford Business School, I had this epiphany where I saw these hyper-growth, early stage, venture backed predominantly, technology companies being underserved by the same financial ecosystem partners that I worked alongside in my prior life. So I had this aha moment where I could take the best of financial services on the East Coast and apply that to Silicon Valley and deliver that a lower cost through software, and that was really the inception of Arc. So I teamed up with a couple of classmates, I found investors in Palo Alto and we were off to the races.

>> So it's a classic entrepreneurial formula. It's almost so simple, it sounds almost stupid to be saying it, but you build a better product than the competition at a lower cost. That's simple business. That sounds like what you saw here, an underserved market and the product service wasn't as good. What specifically was the target service and what was the key?

Don Muir

>> The companies and the founders that we were serving, they were too small too early in their life cycle to actually get the attention of the big banks. The big banks had a mass market cookie cutter product that's built for their larger clients with hundreds of millions of assets. What we saw is the ability to take that financial stability, but deliver that through an intuitive and customized software experience to under-resourced tech founders in a CFO suite in a way that they can put their banking and capital market experience on autopilot.

>> So it sounds like the big guys didn't want to chase the little deals and they wanted the big bank deals, big checks, big commissions from the big whales. They didn't want the minnows, so to speak. What did you guys do? Is it a platform? Is it a two-sided marketplace? What's the product? How did you optimize the service?

Don Muir

>> Yeah, definitely. And so the real differentiation from the traditional model is that Arc is not a bank. We offer the two core product pillars of a traditional bank that serves businesses, and that's cash management and capital. However, we do it completely light and we deliver it through software and artificial intelligence. And so on the banking side, we partner with the world's largest and most reputable financial institutions that have trillions of assets at our global, systemically important financial institutions. We integrate those products into one user interface, allowing our customers to diversify cash across bank partners to maximize yield and FDIC coverage. On the capital market side, in a very similar manner, we've spun up a B2B debt marketplace with hundreds of bank and non-bank private credit investors. We've onboarded them, we've mapped their credit box, and allow them to drive more efficient deal making with our banking clients on the cash management side. So together, we've recreated the banking model, but with software and completely asset level.

>> That's really clever, and what you're doing is you're creating the same level of service to someone who would never get over the threshold or the pain required to go beg for access.

Don Muir

>> And that's a very key nuance. So there are other fintech brands in the market. Our differentiation on the fintech side is that we're serving a larger, more mature type of company. We're working with venture-backed companies. Many of them have raised 10 to hundreds of millions of dollars of capital. Their finance team is very lean and they want a banking experience that moves at the same pace that they do, but they still want a white glove, high NPS customer experience. So every encounter at Arc is a dedicated relationship manager. They're interfacing with the Arc application and we ensure that if the product isn't serving their needs, they want a higher touch experience, they have someone on the other side of the phone that they can call at anytime.

>> Yeah, we saw a lot of the things come out. AngelList had a cool product. Carta has this cap table management. That was the beginning of the services that would come in to serve the companies, and that's going to become the scale point. The human capital and AI is only going to help that. Before getting into some of the things that you see with AI to serve the client, your customers, what's the threshold to get in? You said venture-backed, so does someone have to have a certain round size? Where do you create the line? If I want to ride the roller coaster, how tall do I need to be?

Don Muir

>> Definitely. So we work with what we call venture-track companies, so companies that are going to go on to raise substantial amounts of capital, build teams, generate north of 10, typically 50 million of revenue within the next three years of onboarding to Arc. We'll start very early. In fact, we're winning a substantial share of Y Combinator. These founders, our product really resonates with these founders. They'll join before they raise their seed round, and then they'll work with us through series A, series B and beyond.

>> So you will take pre-venture-backed companies that are on track to get VC. How about self-funded companies that don't have VC that are, I'd say, ten-plus million in revenue that are going to maybe get funding with AI? We're seeing a lot of I say lifestyle businesses that are going to get funded because of gen AI because they're in market. Is that something that you'd look at those kinds of companies too?

Don Muir

>> Yeah, there are many of our favorite clients at Arc and our most loyal clients at Arc. These bootstrap SaaS founders who are sensitive to dilution. They don't necessarily want to raise more equity. Many of them raised the seed round and then decided, "Hey, there's lower cost capital out there, and we can tap into the capital markets in a way that hasn't been done before and access multi-million dollar term loans allowing them to put the pedal to the floor without incurring unnecessary -

>> So you're not just a debt... Because Paul Graham did a post, I've been saying vocally that if you're not careful, debt could kill a startup, because you want to have debt as a certain managed asset, but you're bringing more than just, say, debt. Do you have that on the marketplace? You're bringing cash management infrastructure. Is that right?

Don Muir

>> That's the beauty of the product, and I completely agree. Debt is not for everyone. However, it is an extraordinarily valuable tool for high performing companies that can take on and service debt.

>> That can really manage it well. It's not a freebie.

Don Muir

>> That's exactly right.

>> It's not like, "Hey, I got a $20 million A round. Let's just get some venture debt." Whoa, hold on. That might be a little bit dangerous if you don't get product market fit.

Don Muir

>> That's exactly right.

>> That's a time bomb waiting to happen.

Don Muir

>> And what happened following the regional bank crisis is many of these companies, even the most efficient, highest quality, oftentimes bootstrapped cash flowing companies, they didn't know where to go for debt. But the reality is dozens of new private credit investors poured into the tech ecosystem looking to work with these businesses. We've done it and aggregated all of that supply side, and made it available on demand to companies who are eligible for it.

>> Are you in New York? Where's your headquarters?

Don Muir

>> So we're split 50/50 between our two headquarters in San Francisco and New York.

>> Great. So the Silicon Valley Cube teams could work together on content in our Palo Alto studio. I think New York's a hot area right now, I got to say. What I love about New York right now is that it's got the Silicon Valley vibe in the sense that, and here's how I can tell, when I'm walking down the street, obviously New York's huge, people are talking tech.

Don Muir

>> Yeah.

>> Go back five years ago, it wasn't that tech-savvy. I hear people talking about provisioning microservices yesterday on Bowery Street. I'm like, "What the hell?" That's when you've got the tech infiltration. Tech's now a lifestyle, so I think we're at a crossover point now where people are realizing that technology isn't an IT thing, or it isn't like some consumer rocket ship company. That now, AI is going to infuse this into all of our operations, and so if you don't bring software and, say, digital technologies into the departments, like what you're doing. You're basically bringing a financial system in that would be for a mature company.

Don Muir

>> That's exactly right. When I first moved to New York to start my first role in finance over a decade ago, I didn't have any sense of the West Coast culture, Silicon Valley, entrepreneurship. That was all foreign to me. I was working for a value-oriented private equity fund. We would buy cash flow and pay as little as possible for that cash flow. It was a great experience, a very valuable experience understanding the pain points of the traditional model, but it wasn't until I moved to Silicon Valley that I saw this market opportunity to apply the best aspects of the traditional model in an intuitive and innovative way to this new IC, to this new customer segment. And when I moved back to New York, you're right, it seems like the tech ecosystem has really flourished here, and we've been doubling down building out that startup community.

>> It's not like, "Oh, you're in tech." "Hey, what do you do?" "I'm in tech." "Oh," and then people don't know what to say. Now they do. They get the tech scene. What's next for you guys. As you look at your venture, I love the business model. I love marketplaces and I think everyone knows I'm a fan of marketplaces. Amazon's marketplace is blowing it out, Google's marketplace is blowing it out, so when you have products and services that can be consumed easily that actually help companies scale and be more efficient, it's a winning formula, so congratulations.

Don Muir

>> Thank you.

>> What's your business plan now? What's next? What's the progression? Another round of funding? Are you guys making money? Are you selling? How many customers do you have? Can you share some of... You don't have to give customers, but give us where you are in terms of the traction.

Don Muir

>> The company across both the cash management and capital markets that have been growing very nicely over the last couple of years. Our last funding round was in 2022. We launched the capital markets product in January of this year, and we've been heads down building something really exciting that I'm eager to bring to market in the coming months. It pertains to this AI discussion that we were having before this started, but what I will leave you-

>> So you're going to have a new product launch?

Don Muir

>> We have an adjacent product launch on the capital markets business that we're really excited to share with the world, and is actively in the ground with a number of customers today where they're getting real value from the application .

>> When can we expect that announcement?

Don Muir

>> In the coming months? We're fine tuning the technology.

>> All right.

Don Muir

>> We're in deep private data with a number of folks and we'll be bringing it to market as soon as the product is ready for general availability.

>> So a little teaser there. What is your vision on AI? Because obviously, like I said, one of the patterns we're seeing in this modern era, certainly in the professional services side of the business where it used to be labor-intensive, you're seeing a dual model flywheel developing where you have great professional service and then a dual platform play for operating leverage. This seems to be quite the pattern and folks that are in market in these professional services tend to not be venture-backed, but profitable businesses or funds, maybe they get some capital strategy along the lines. You're thinking about more diverse, not so traditional categorically VC, but as they add AI, they get platform-like capabilities or data that's valuable or working with the managed service to give them a platform leverage. This is new. We're starting to see, this is only for the 1% of the companies out there could do professional service with platform. Now, democratization of platform AI is coming. What's your vision? Because you're one of those companies that's enabling this professional service power dynamic in a good way for lower costs with operating leverage, so it scales on the human side, not to scale bodies to technology. I can scale one here and go 10x platform, that step function.

Don Muir

>> That's exactly right. I have a lot of thoughts on the topic. A couple that really resonate from what you said. First of all, I don't believe there's an industry that is more ripe for disruption or technological innovation than financial services through the advent of generative AI, and that market opportunity, that white space opportunity is enormous. And we really haven't even cracked the surface of the potential of the AI applications in financial services. In no specific sub vertical is that more true than banking and capital markets, and so I won't go too far in the weeds, but what I will say is-

>> Feel free.

Don Muir

>> I lived this firsthand. When I was a private equity associate and senior associate here in New York, I've done these menial redundant tasks firsthand. I've worked with armies of investment bankers and commercial bankers and management consultants to run commercial due diligence, then financial diligence on investment opportunities, and I know where there's opportunity to automate core repeatable tasks with AI in a way that's never been done before.

>> Don, I think you're onto this generational shift. I remember when the web hit the scene, I remember the magic formula was make it easy to use, reduce the steps it takes to do something, and make it intuitive. That was the secret to the web. What you're getting at there is you see repetitive tasks that they're doing over and over again. Because it's a different client or whatever opportunity, they're doing the same thing over again, which is the definition of insanity. So you're bringing AI to that automation, but then the human capital piece is the key process. So again, another pattern we're seeing I want to get your reaction to is people who just adopt a tech stack or software approach, that's an IT answer. The process answer has to be matched. This is a front end, back end innovation cycle where in the history of my lifetime, I've never seen before. It's usually either front end or back end. Cloud was back end, mobile was front end, web was front end. Now it's front end experiences and back end, so if you don't do process and tech, it fails.

Don Muir

>> I'm so glad you made this point. It is core to Arc's value prop in the market. I believe in marrying white glove customer service, so human in the loop, with bleeding edge technology. I don't believe there needs to be an artificial trade off. That exists today in the market. You either get a software platform that is fully self-serve, figure it out, or a traditional bank which really has limited technology. What Arc is doing is marrying the two, the best of the traditional banks, which is the high touch, high NPS experience, with financial stability and big bank partners married with AI, financial API integrations and a really intuitive front-end software experience.

>> Well, Don, congratulations. We're excited to collaborate with you and follow your mission. Give a plug for what you're working on. Share with the audience where you're looking. Obviously, you've got some good business growth opportunities in front of you, you've got the AI wave you're riding on perfectly. What are you looking for? You're hiring in places in Silicon Valley, New York. Give the plug.

Don Muir

>> Definitely. So if you are a tech founder or CFO, there's no better place to work than Arc, on the cash management side or with capital markets. Within one place, you can tap into the private credit markets in a couple of clicks, access hundreds of lenders to see what type of non-dilutive growth capital solution you're qualified for. On the commercial banking side, you can maximize yield, FDIC coverage, all in one application and one intuitive experience. And then in terms of our hiring, we're looking for AI engineers, we're looking for product and we're looking for capital market experts who can come in and serve our mission, to help innovate and improve the legacy model.

>> All right. Don, thanks so much. Great opportunity to join a growing team, but really highlights that this opportunity for every company to capture growth with AI. You've got financing available, you've got new platforms. Again, this is just more goodness, great personalization, human in the loop. AI is a generator of value, it's a disruptive enabler, and of course, we're bringing all the action here. Disrupting technology coverage, theCUBE. I'm John Furrier, host of theCUBE. Thanks for watching.

Don Muir

>> Thanks very much. Thanks for having me.