Navigating Net Interest Margins and Fintech Partnerships with Saira Rahman

In this episode of Fintech Layer Cake, host Reggie Young talks with Saira Rahman, VP of New Investor Initiatives at Fundrise, about the intricate world of net interest margins, the importance of strategic bank partnerships, and the evolving landscape of fintech.

Saira shares her unique insights from her experiences at both traditional banks and fintech startups, offering practical advice for navigating the complex intersection of banking and technology. Whether you're in fintech or banking, this episode will provide you with actionable insights to refine your strategies.

Tune in to learn why more bank partners aren't always better and how interest rates impact fintechs and banks alike.

Transcript

Reggie Young:

Welcome back to Fintech Layer Cake, where we uncover secret recipes and practical insights from fintech leaders and experts. I'm your host, Reggie Young, Senior Product Lawyer at Lithic. On today's episode, I chat with Saira Rahman, the VP of New Investor Initiatives at Fundrise. Previously, she led finance at the then-consumer bank, HMBradley, but has also worked in more traditional community and regional banking.

Fundrise started in 2012 and offered the first ever crowdfunded real estate project in the US. Nowadays, Fundrise offers their flagship real estate fund, a private credit income fund, and a venture fund that invests in top-tier tech companies. They have over 385,000 active investors and manage a portfolio of over $7 billion. Importantly, Fundrise's products include offerings that don't require investors to be accredited, so they're actually helping democratize access to real estate investment. I loved Saira's insights on the importance of net interest margins for banks, what smart user research looks like, her lessons from HMBradley, and why more bank partners isn't always better. So I hope you find this episode as fun as it was to record.

If you're going to be at Money 20/20 in Vegas this year, I'll be there along with a handful of Lithic colleagues. So if you're interested in connecting while you're there, feel free to reach out to me or fill out our contact form at lithic.com/contact. Fintech Layer Cake is powered by the card-issuing platform, Lithic. We provide payments infrastructure that enables companies to offer their own card programs. Nothing in this podcast should be construed as legal or financial advice.

Saira, welcome to the podcast. I would love to start in a kind of weird place, which is net interest margin. Before working at fintechs, you worked in finance in a kind of more traditional community and regional banking context, both at a community bank and then at B&F Capital Markets providing interest risk rate management services for community and regional banks. You previously made the great comment to me that most people in fintech won't touch talking about net interest margin because they don't get it, they don't understand it. You also said something along the lines of if you can figure out how a bank manages their net interest margin, then you can effectively win over the bank. So I'd love to start at this weird place, net interest margin, and what is it, why does it matter so much, why should folks in fintech know more about it.

Saira Rahman:

Yeah, right on. Well, first of all, thank you so much for having me to talk about literally my favorite thing, which happens to be interest rates. Net interest margin is the difference between how much a bank is bringing in from their loans, less how much they're paying on deposits. I think, last year, a lot of people were talking about maturity transformation, so the difference between how quickly deposits will churn versus how long the loans are on a balance sheet at a bank and how that also plays in here. That's all part of net interest margin. It matters because banks build that as their financial strategy. Your net interest margin, if you're a bank, is how you make money. It's how much money you're making. And the goal is to maximize that as much as possible, the difference between those two things.

Different banks have different strategies, different types of loans, obviously. They collect deposits in different types of ways. And if you can find the nuance within that, so if you can figure out how they manage that fulcrum of what the difference is between their lending side of their balance sheets, so what they're spreading out into the world in return for interest versus what they're collecting in order to be able to lend, you kind of have them figured out strategically, and you can have much more in-depth conversations with your sponsor banks and probably find a better suited sponsor bank in terms of someone that's more strategically aligned with you.

Reggie Young:

How does it differ from bank to bank? Because I have this simple model of money earned from deposits and then money lent and what's the difference. But you're hinting at, oh, there is variation across banks, and that impacts their strategy and how they view fintech-sponsored markets or just generally their business. What kind of key variations are there?

Saira Rahman:

Some banks lean more in towards agricultural lending. Some banks lean more towards industrial. Some lean more towards real estate. So there's that aspect of it, so the type of what they're attempting to accrue. There's also based on locality. A lot of community banks focus on specific regions, which causes them to be much better at targeting within a certain space.

And then there's also the actual overarching structure. A lot of banks, I think a lot of people learned recently, especially in the last few years, they don't actually lower rates quickly when rates tend to drop. And they also don't increase rates quickly when rates go up. So what you learn is some banks are excellent at maximizing net interest margin, which means they don't have to rely as heavily on the other piece of how they make money, which is non-interest income, which I think comes into play a ton with venture-backed companies, particularly in fintech, and we can dive into that in a second.

I think those two pieces combined really depict the financial strategy of a bank. In that sense, whether you're an early-stage or a later-stage, I think it helps you choose what type of bank you want, because banks that are very good at maximizing what they're charging in interest and they have a little bit more flexibility on the deposit side, I think that is a much better fit for certain types of neobanks versus a bank that will never want to increase rates on their deposits because they like to keep them near zero, and that's just where they've always been.

Reggie Young:

Yep. That makes sense. I love this discussion because it gets at something I used to talk about a lot when I worked at Bluevine, which is any business that's in lending, your product is literally money. And it's like a really weird concept at first. It's like, instead of making iPhones, you're like making money, and this is great. It’s like, oh, banks, their business is money. Their own internal supply and demand, deposits and the loans are making out. It's fascinating. It was a big epiphany for me getting into fintech. I'm like, oh, the product is literally money. Banks have to look at their cost of money and how much they're making the money they're giving out. So yeah, a fascinating illustration of that.

Speaking of interest rates, we are in a fun interest rate environment. The headline has recently been with the Feds likely to cut rates in- I think September is when folks are expecting it. We're recording this mid-August. I'm guessing we’re probably not going to see a precipitous decline in rates anytime soon, but it's just had to be thinking a lot more about- I mean, obviously, rates were near zero for a while, now they're higher. And as they're entering a more uncertain rate environment, I've been thinking a lot more about how is that going to impact both fintechs and sponsor banks. Given that you love nerding out on interest rates, I'd love to hang on this for a little bit. What do you think are some of the key ways that we're going to see interest rate changes, in either way, up or down, affect fintechs and sponsor banks in the coming years?

Saira Rahman:

The first thing I want to say is it's an interesting interest rate environment. It's tough to be in an interest rate environment where you're also in an election year. This was something I decided to take a deep dive on. It's actually very rare for interest rates to change in election years.

Reggie Young:

Interesting.

Saira Rahman:

Yeah. 2008 was an interest rate change year. But it's very uncommon, only because the market can change dramatically based on what happens with a presidential election. Sorry, I meant a presidential election year specifically. Regardless, it's an interesting year to be watching from the sidelines.

The interesting thing to me for fintech companies is that we're still, relative to historical interest rates, actually very close to zero still. I think it feels much higher because we've been near zero for so long. The vast majority of my career, our interest rates have been, for all intents and purposes, zero. I think the sad part is that we learned that there are a lot of start-up companies that were ZERPs, zero interest rate phenomenons.

In the scenario that rates continue to rise, I think that worsens. In the scenario that rates continue to stay where they are, I still think that worsens, maybe not as much. And then I think if interest rates come down, I don't know how much they're going to come down. I would challenge that we're going to get back down to zero. Never say never because you should have heard my boss in 2008 be like, we'll never see zero percentage. There's always a scenario where that happens.

I guess it depends on what type of product you are. But if I was a fintech company, it would really depend on what stage I'm in in terms of early stage versus growth versus later stage. But if you're an early-stage fintech company and you're in this interest rate environment, I would just be relying so much more heavily on leveraging some type of relationship that's directly off of the balance sheet of the bank versus offering them actual fee income, so not paying them on a monthly basis, versus if I was a later-stage fintech company where I'd be much more focused on trying to offer them fees so that I can keep more of my own revenue. I think that's how I would approach it strategically in the current interest rate environment. But I want to reserve the right to change that if interest rates go up or down. Because right now, I think it's actually in a pretty good place for that particular strategy.

Reggie Young:

Yeah. Interesting. I love your initial point of, oh, interest rates aren't actually that high. Historically, we're kind of average right now. People like to gripe about, oh, interest rates are so high right now. Not really. Most of the time I worked at Bluevine, interest rates were effectively zero. It's easy to manage your capital markets needs when interest rates are zero, but that job gets a lot harder. There's a lot of fintech founders who are trying to get into credit right now, and it's a lot harder now that interest rates are not zero. The capital markets management aspect of credit programs is a lot more complicated and nuanced, you blow yourself up a lot more easily.

Saira Rahman:

Yeah, absolutely.

Reggie Young:

Fun times. Given your community and regional banking background, what else do you think folks in fintech often get wrong about how community and regional banks see the world?

Saira Rahman:

I think the biggest thing is really that there's this perception that banks don't understand fintech companies. I just wish there was a little bit more humility in our industry behind that because I disagree with that on a fundamental level. I think there's nuance and there's so many amazing things that we're building that absolutely your bankers aren't going to get that. They're not going to understand some of your IP, period.

But at the core, a lot of these companies that are being built can easily be comprehended by their cash flows. And you have to give banks credit because, in my opinion, banks have some of the most complex and interesting balance sheets that you could look at. You have the people running them that you'd be talking to, and they understand what they're talking to, what we're building. Generally speaking, they do. That's probably the biggest thing, is that we don't give them as much credit as we probably should.

Outside of that, I would probably say the other thing that we get wrong about community and regional banks is that if you find the right bank, if you find the right bank partner, I actually think it's a total knockout of the park. I think you end up having a much easier time if you spend the time seeking out the right sponsor bank versus if you just take the cheapest term sheet.

Reggie Young:

Yep. I have so many thoughts on all of that. I think to your first point about, oh, banks do understand fintechs, I think that's been my experience. The sponsor banks understand the space pretty well. It's more that sometimes there's a misunderstanding from the fintech angle of, banks don't understand our product because they're so focused on the downside and the risks. It's like, yeah, that's how banks view all of these relations because they have to because they speak to this language of risk to keep the financial system safe.

The second point I love, too, because it's something I've been talking a lot about this year around this idea that having one or two really good bank partners is probably the path forward as opposed to- I think the past two, three years prior to this year, the mindset was get as many bank partners as you can and diversify. And now, oh, there's a bunch of consent orders that come out. Yeah, sure. But even if your bank partner gets a consent order, it's not the end of the world.

It's better, I think, in the current market and generally going forward, it's going to be better to have one really good relationship with a bank partner who’s like, oh, if they do have regulatory scrutiny, if they do get a consent order, they're not going to off-board your program because you've been a good partner, you've been invested with them, and you're both in it for the long term. That's a much healthier, I think, framework for building sustainable fintech businesses than like, oh, we're just going to sign up eight bank partners and hope that not all of them get consent orders.

Saira Rahman:

I completely agree there. And I think in a post-Synapse world, there's just a lot of stuff that needs to get sorted out. And I think the partnership part of working with the sponsor bank is going to become much more critical. So there's suddenly going to be much more of a need to be super friendly with everyone on the board of those banks than there was previously. That's also where I think that financial strategy will become so critical. Net interest margin will become a bigger focal point for all of these banks because every single basis point is going to count that much more if they're also a sponsor bank. And having that teamwork and understanding their balance sheet and showing that you're doing your homework is going to matter so much more.

Reggie Young:

Yep. The former PM from Lithic once made the great comment to me that she, at some point, realized that being a product team at fintech means like your job is, yes, one-fourth product and engineering stuff, but also one-fourth partnerships, one-fourth compliance, and one-fourth legal, which is unique to fintech. But I think to your point of partnerships is super important, it's actually a key part of your product road map, the kind of bank partnerships you have.

Saira Rahman:

Yeah. Also, I think there's a little bit of stigma surrounding what bank partner you choose, too. Some bank partners are definitely better than others. And it's super clear when you choose the right bank partner that your reputation is on the line a little bit, too.

Reggie Young:

Yep. Definitely. I’d love to switch over to your experience leading finance at HMBradley. I imagine going from your traditional community, regional banking background to more of a consumer neobank fintech type probably came with a little bit of a learning curve at first. Did you have any big aha moments or big realizations about how consumer neobanks work while you were ramping up at HMBradley? Just broadly, because I want to ask that question again in a second, but finance focused. So we'd love just the 30,000-foot view of, oh, this is very different from working at a full chartered bank. Any big moments like that?

Saira Rahman:

Oh, yeah. Having actual control on a balance sheet versus begging for the ability to have some control, it's just so different. Like I said, it's like that needing to be a partner and having to build a relationship and getting them to trust you to do the right thing for the bank when you're not actually at the bank is so different. It's honestly a much harder task because you start out from not having the trust versus if you're an employee, the expectation is that you act like an owner. So it's a different perspective that I had to take on, which was the first piece of it.

I think the second thing that I did learn is that the language is still the same. You're still talking about the same stuff. You still need to know the same stuff. The only difference is having a CEO like Zach, I suddenly was learning technical stuff, too, because technology is not emphasized at a company and certainly marketing is not emphasized at a bank. So they do their own thing, and they have their own niches there. Marketing and tech are insignificant, which is usually the focal point, at least at our neobank it was.

Reggie Young:

Totally. That's such an interesting comment, too, because when you read some of the third-party risk management, regulatory guidance out there, and just generally a lot of the folks in compliance and legal and fintech will talk about how actually fintech programs are more like marketing arms for banks. The way Chime is talked about is as if it's its own company, which at this point, it is big enough. It is established, mature enough that it is. But for a long time, it was really more like a marketing arm for the banks it partners with.

It's interesting to hear you say that that was a big realization because, yeah, it makes sense coming from a bank. They may not necessarily be thinking about investing in that marketing muscle as much, but at a fintech, you were effectively an extension of the bank's products that layer on it from expansion of reach angle. What about the finance function now in particular, how does a finance function differ at a community bank versus HMBradley?

Saira Rahman:

It's substantially easier. Banks have to manage day to day. So an interest rate fluctuation and like an exodus of deposits- actually, let's use the example of the pandemic. Pandemic happens, world shuts down. Banks were actually a necessary business. The branches were required to stay open. There were a whole lot of people that did not want to go back into those branches. But everybody's still going into the branches. People are coming in to take out money. Suddenly, there's not enough money in the safe inside of the branches. You're seeing a massive deposit exodus because nobody knows what's happening. Managing just that scenario alone because of the nature of community and regional banking was crazy. It was wild.

Taking a look at a neobank, a similar situation, online, I think money is much more fluid. People that are more literate with using mobile apps, with using technology, money can come in and out much quicker. But also, we have technology backing that money that makes that transaction much more seamless. And so there's no like, is there enough money in the safety? We need to go and bring in more. There was just so much more of a logistical problem in that scenario. And I think that's a perfect example of just how different it can be from a physical versus- I know that I said originally that it was easier. It is easier in terms of the actual numerical management as well. Did that explain your question?

Reggie Young:

Yeah, different problems, different considerations, makes sense. Yeah, I bet that the experience of COVID hitting at a bank with physical branches is very different from online, you can move your money easily situation.

You mentioned to me before that you helped rebuild the financial strategy twice while at HMBradley. This is more of my own curiosity as a lawyer who's never worked on a finance function at a fintech, what does that process look like? Not to get into specifics, but just high level, what does building the financial strategy at a fintech look like, and what are some of the key considerations or aspects of that process that non-finance folks like myself may not realize or appreciate?

Saira Rahman:

I think it depends on the stage of the company. For what it's worth, we were doing really well at the time that we did this big rebuild, and had to go on to another bank's platform and switch over. Going to another sponsor bank is a crisis in and of itself because it's such a complex and difficult thing to do, and there's attrition and all kinds of other things that you end up facing. But really, it's looking at your strategy that's winning in terms of how you're growing your base, and then attempting to keep that part of the secret sauce while creating some other type of ramp that's going to not cause the entire thing to blow up.

I think it's different for every single entity. You'd have to look at the overarching interest rate environment. You'd have to look at the sponsor bank that you're going to, and you have to kind of pass through them like, this is what we're thinking about doing, this is what we want to do. And they're either going to come back to you and say, that's perfect, or they're going to come back to you and say, absolutely not.

HMB, that team, we all got really lucky because the sponsor bank that we went to loved the idea that we compiled. But it's like a combined, okay, can we do this from a marketing perspective? Okay, cool, you're fine with it. Okay, can we do this, Mr. CFO, at a sponsor bank? Cool, you're fine with it. Okay, can you check with your compliance team? The compliance team is cool with it. Awesome. And then we bring it back to ourselves, and then we say, okay, is this actually what we want to do? For sure. And then you execute. But it's like, first, you build the financial model, then you argue it out with everybody and make sure that it's exactly what everyone agrees to before actually flipping the switch. But it starts in an Excel model. It starts in Excel.

Reggie Young:

Fun. Have not had to spend too much time in Excel as a lawyer. Grateful for that.

Cool. Yeah, I'm always fascinated by that process. It's not entirely a black box to me, but just fascinating. I think you're right. It varies so much by where the company is at and your given constraints. Of course, early-stage companies are probably not going to have much of a strategic finance model because it's trying to find product market fit. That is the model.

Saira Rahman:

Yeah, the model is if you need to pivot, you need to know how to hard-pivot really quick.

Reggie Young:

Yeah. Okay. In the intro to this episode, I gave a brief spiel about Fundrise, but we can switch gears to Fundrise a bit more. But I'd love to hear your take on what you see as the company's key products and strategy pillars. You can look online, you can see all their products, but I'm curious to hear it directly from you. How would you summarize the key products and strategy pillars?

Saira Rahman:

Yeah. We have three things that you can invest in. We have real estate. We have private credit. You have venture capital. Essentially, we own the entire vertical for those three things. We do everything from going out seeking plots of land. We then will build on those plots of land. We will then rent on those plots of land that now have, whether it's multi-family, logistical, whatever the case may be on it. Then we manage those properties, and we convert those properties into an investment vehicle, an investment vehicle that you can purchase directly on our platform, shares in. We did the same thing for private credit, and we did the same thing for venture capital. So we go out and we seek those investments, wrap it up into an investment vehicle, and then offer it on our platform.

Reggie Young:

Yeah, folks should check out Fundrise if they haven't. I'm a big fan. Saira knows I'm a big fan. I'm excited to get her on here.

Saira Rahman:

I'd love to hear that.

Reggie Young:

So at Fundrise, you're currently VP of new investor initiatives. They're focused on the company's strategies and partnerships, part of why I wanted to ask the product and strategies questions to start out. How does working at a more real estate-oriented investment tech platform differ from consumer neobanks? I started out in investment management as a lawyer, and now done more like a consumer and business facing- fit more like a traditional fintech start-up stuff. Not that I called start-up stuff traditional, but I recognize there's a big difference in how things operate in an investment management, like wealth management arena versus the card issuing stuff that Lithic does. I'd love to hear your experience. What have been some of the big differences between Fundrise and HMBradley?

Saira Rahman:

Sure. Probably the coolest thing is that we just have nascent technology. We build everything in-house. We have internal-facing APIs. Everything is so intensely different from any other investment management company that exists. It's something that I really love and I'm passionate about at our company, is that we did build everything from the ground up. And so that was all a huge part of my learning curve when I first joined.

The similarities about our particular investment management company, something that I love is that it's very similar to a bank in that we bring dollars in the door, and then we deploy them into investments. They're not unlike what you would see at a bank. So that still feels very native to me. And it was really easy for me. You probably already have caught onto this, but the way that I learn a company is actually by building the financial model and then understanding all the levers and how we're nuanced. When I saw that, I had my aha moment. I was like, this is actually very similar in that sense.

Reggie Young:

Interesting. That's fascinating. Net interest margin, coming back in, a true theme of this podcast. Part of your role entails user research. How? How do you do user research? I think there's some basic things that most folks would think of like, oh, you interview your users and you do surveys or ask for NPS scores, stuff like that. But to me, that's kind of like 101. I know you're a lot smarter about that kind of stuff. So I would love to hear what are some of the more nuanced lessons you've learned about how to suss out what users actually think and what their actual- because what they're going to put on a survey doesn't necessarily represent how their actual behavior will be. So I'm curious, what's kind of the 201 that you've learned of user research?

Saira Rahman:

Yeah. I think that last comment that you made is so critical because what people say isn't necessarily what they do, because I think there are assumptions surrounding whether investors on our platform are passive versus whether they're more active. And I think we're still kind of sussing out exactly what percentage is passive versus active, but there's tiny little nuances in there that I think point in certain directions, which I think are so critical in listening.

User research to me is listening to what everyone's saying, but then actually observing what they are truly doing on the platform, so extracting from the data to understand the behavior and then listening to them and recognizing why they're doing that, not necessarily asking them outright why they're doing it, because they're not going to tell you what the actual reality is.

And that was actually pretty tough to figure out. And that took- I want to say we were north of probably 50 or 60 interviews. And I say we because I was led by an amazing user researcher. I was almost along for the ride, and she was teaching me as we were going along how she examined things. And I was more of the fintech expert coming in and asking questions that I understood about both investments and about our platform. And that was how we complemented each other.

The outcomes are always things you kind of knew, but you weren't able to pinpoint. You weren't able to verbalize until you had enough repetitions of the same exact behavior so you can prove it in the data. And they're not quite saying it, but they're- I don't know what the right word is, they're kind of describing it without actually-

Reggie Young:

Revealing it.

Saira Rahman:

Yeah, yeah, yeah.

Reggie Young:

Yep. It's fine. We definitely had some of those moments at Lithic where whatever our customer success people or whoever is having conversation with the customer will be like, oh, they told us this. And everybody's just like, oh, duh, that's been staring us in the face. But until we looked at it, yeah, looked at how they're actually engaging with the API, not necessarily something we would have thought of. So it makes sense.

Saira Rahman:

Exactly.

Reggie Young:

When we did the prep call for this episode, we talked a little bit about the joy of integrating tech with other maybe more legacy players in the space. I want to get to that in a second, but I think two concepts that might help listeners get oriented for that conversation are the concept of transfer agent and custodian. As I mentioned, I started at investment management, so I hear custodian just immediately, like all these flags and bells and whistles go off in my head. I've come to appreciate it, but I think that might be a fun, good context before we get into that conversation. So what are transfer agents and custodians, and why do they matter in the real estate space?

Saira Rahman:

Yeah. Transfer agent is essentially the person that is like the record keeper. Every time you have a transaction, they are keeping track of the transaction occurring. To me, the way that I view them is they're like the library of every single transaction that has occurred. The custodian, and a lot of times it's a bank, they will be in custody of whatever assets are inside of your investment vehicle. So in the real estate world, the properties that are being transferred into investment vehicles, they are in custody of the funds that are attached to that. That is the difference between custody and transfer agent.

Reggie Young:

And then for the transfer agent piece, you were saying like, oh, those are transactions, like a log there. Is that like an individual investor's investment, the portfolio, and then that gets all put in the library that the transfer agent runs?

Saira Rahman:

Right. Exactly.

Reggie Young:

Okay. So now to the integration, it's fun stuff. So Fundrise builds all this custom, great stuff, like you were talking about, like amazing internal APIs. But now my understanding is the company's at this place where you're starting to integrate with other platforms. For example, I could log into my brokerage and see my Fundrise investments alongside my brokerage portfolio. How has that integration process been? Has it been smooth and easy, or what have been some of the big observations?

Saira Rahman:

The big observation is that a lot of legacy players have a very specific way that they like to be integrated, and having nascent technology does not work well with legacy players. As I think everyone knows with banks, it's a very similar situation on the investment side. Everybody has a way that they like to do things in a way that they're structured. And the big behemoth of the investment industry, they want to be built a certain way, and they want the Lego stacked exactly in order. And if you didn't do that, if you didn't start that way because you built your own tech stack, you make everybody angry, and you have to rebuild the path to tie out to how everyone wants you to be built.

Reggie Young:

Not surprising. Banks have specific ways that they want to work with card issuers, for example, so gotta be accommodating a bit. So you built from the ground up your own transfer agent, custodian stuff. And now it's not like an easy Lego bricks fitting together with other players situation.

Saira Rahman:

And honestly, it took me so long just to- because we built such a beautiful machine, it took me a minute to understand our machine. And then I went out and I was like, oh, wait a minute, this does not look like our machine. Because I was like, oh, you could just plug it in here and plug it in here. And they were like, excuse me, that is not how that works here.

Reggie Young:

No, it's because I've definitely seen some of that. It's interesting, too, because I think from the bank's perspective, there's usually a way, I'm thinking from a card issuer point of view, there's usually a way banks have things done this way. There's usually a good rhyme or reason for it, but there may be a better way in the long term, but you gotta play the games that everybody else wants to play in the interim.

Saira Rahman:

Right. Exactly.

Reggie Young:

Fun integrations.

Saira Rahman:

Yeah.

Reggie Young:

Okay. So real estate has been in a funky place overall for the past year. Performance headlines relative to market- I mean, I'm thinking, I'm recording this from San Francisco where all the headlines have been like, oh my God, commercial real estate, never going to recover, downtown, whatever. All those fun headlines. How has it been for Fundrise to navigate that sort of environment with users? Has it affected user behavior? Have you had to change how you think about interacting with customers at all?

I have to imagine that your user base, which tends to be people who care enough about diversifying their investments to affirmatively opt into real estate crowdfunding, is probably going to be a more informed and stickier base of users, might have different behaviors than users on a stock trading app. So yeah, curious, how's the past year been navigating the kind of funky real estate market for Fundrise?

Saira Rahman:

What's interesting about Fundrise is that the users, and this was one of the things I uncovered in our user research, is that we just have power users. They love our product. They know our product. They live and breathe it. I can't even begin to explain how much they enjoy investing. And they don't see the small- because there absolutely has been some dips in real estate, especially in the office sector, which we thankfully are not really in at Fundrise at all. But that still causes some fears with the market. I still think that causes some problems, especially in the public REITs. But we don't really feel that kind of pain at Fundrise just because our users tend to- they understand. They get our product, and they understand it's a long-term investment. And especially for non-traded REITs, it is a long-term investment. And we're just lucky in that sense that a lot of our users have been around for long enough to know sometimes you just gotta sit and wait.

Reggie Young:

Yep. Makes sense. Yeah, I imagine by the time folks have signed up for a crowdfunding real estate investment, they're probably expecting to make a more longer-term, stickier platform.

Saira Rahman:

You say crowdfunding. Crowdfunding is what we did in 2012, 2013, maybe 2014, but we shifted to the investment vehicles that we're in now, which, originally, they were eREITs. Now they're 40 Act funds, interval funds specifically, tender offer funds if you're in the venture one. But they aren't technically crowdfunding.

Reggie Young:

They’re like a regulatory crowdfunding box.

Saira Rahman:

Yeah, they're not Reg CF. Correct.

Reggie Young:

Yeah, no, that's a good point. I should clarify to listeners I'm not referring to reg fund. The regulatory context is more like, oh, it's distributed, democratized, more people can access it, the layman's sense of crowdfunding.

Saira Rahman:

Yeah.

Reggie Young:

Looking ahead, what are you most excited for at Fundrise? What's on the horizon?

Saira Rahman:

Oh my gosh, so many things. We have some really cool partnerships that are underway that I'm really, really excited about. We have just so many cool things that we're planning over the course of the next several months. It's hard to say. And we also have a ton of really cool investments. It's one of those things where it's like, I can't talk about any of them.

Reggie Young:

Yep. Hopefully it tantalizes listeners, and they go and they sign up for Fundrise. Not an endorsement, but just saying. Awesome. Well, yeah, I'm excited. I'll be keeping my eyes open for some Fundrise headlines.

Saira Rahman:

Awesome.

Reggie Young:

My favorite wrap-up question, which I'll now ask you, is there anything you've been thinking about a lot in fintech that you think people aren't talking about enough? It can be net interest margin. We can go full circle.

Saira Rahman:

No, no, no, we don't have to go full circle. Something that I'm seeing more of that I think people aren't talking about is how many companies are shuttering instead of contemplating an acquisition. And if I were to leave one piece of advice for any founder that was listening, I would say, if you are contemplating a fundraise right now, it's also a great time to contemplate an acquisition. And there's nothing wrong with getting acquired. I think that if you look at both simultaneously, you're better off if you run out of money and you aren't able to fundraise than just shuttering. That is the one thing that I think nobody's really talking about. It's too many companies, in my opinion, too many great companies, have shuttered that could have gotten acquired, but they just ran out of money.

Reggie Young:

I have not heard anybody voice that view, so great opinion.

Saira Rahman:

Thank you.

Reggie Young:

Awesome, Saira. Well, thanks so much for coming on. If folks want to find out more about Fundrise or get in touch, where should they go?

Saira Rahman:

fundrise.com/saira.

Reggie Young:

I love it. You have your own landing page. Amazing. I got to figure out what I got to do at Lithic to get my own Lithic landing page.

Saira Rahman:

Just ask Bo.

Reggie Young:

Awesome, Saira. Well, thanks again so much for coming on.

Saira Rahman:

Thank you so much. Have a good one, Reggie.