Eric Queathem, Co-founder at Velocity: Building the first platform for global CFOs and treasurers.

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0:32Scaling Europe:Thank you very much. Hello and welcome back to the Scaling Europe show. I'm Seb Johnson. I'm here with Eric from Velocity. Velocity is building the future of global infrastructure for finance. They raised a big pre-seed earlier this year, and they have been crushing it since. Eric, thank you for joining me. Hey, thanks, Seb. Thanks for having me. It is my pleasure. For those who don't know you, don't know Velocity, can you just touch on what you're building? Yeah, absolutely. So like many right now, we're building in the stablecoin infrastructure space. But unlike many, we are what we think is the first platform that's really building for global CFOs and treasures.

1:10Stablecoins are not new. They've been around for a long time. There's been a lot of, I think, utility and people building in the space for quite a while. But I think they've really just started to become mainstream as the regulatory frameworks around the world had caught up. But the actual functionality, I think that's needed to serve mainstream use cases is not there yet. And that's what we set out to build earlier this year.

1:33Scaling Europe:And how are you planning on building that? Yeah, good question. There's a bunch of different, I think, components that go into it. I think, you know, foundationally for us, you know, what we found and what you kind of see in the market is as people start to build into the payments infrastructure ecosystem of the world, typically what people do first is find early traction. And typically where early traction lies is in often in high risk situations, people who can't get access to traditional payment or banking rails. And I think that's where a lot of the technology that exists today grew up. And there's been a lot of great success.

2:12And certainly a lot of those players have laid the groundwork for players like us to come into the market and to have learned from some of those things and to have a sense of where kind of the next evolution of where this technology goes. And so for us, foundationally, there's a couple of things that are really important. I think number one is we don't view the world as either fiat or stablecoins. We think the two are going to live together. They need to coexist. And actually, in order to effectively deploy stablecoin solutions, you actually need a very good fiat solution. You need the ability to provide a wide range of capabilities for both collections and payouts in fiat, which means you need a lot of banking partners.

2:56Those banking partners need to allow you to get access to local payment rails around the world. And you need to be able to work with these parties to do things like off-chain FX. You need to work with them and able to do things like third-party payouts. And so stitching together that fiat world is a really kind of core capability and something that we think is kind of lacking in the market. The second piece to this is all around what we think is the really important kind of proof point around liquidity. How do you bring hundreds of billions of dollars of fiat on-chain using stable coins in the current environment.

3:33And obviously, you know, those who follow the stable coin world will know that there is some liquidity, right? We've crossed the$300 billion mark a couple of weeks ago in terms of supply in the market of stable coins. Some of those on regulated providers, some of them unregulated, but largely dominated by two players. That is, I think, just the early kind of innings of where the world needs to be from a liquidity perspective. And the short term as we're building liquidity around the world for really complex currency pairs, there's going to need to be functionality for off-chain liquidity, the ability to trade into currencies where I can get to the depth of liquidity I need in order to execute large transactions.

4:12There are trillions of dollars that flow around the world from a payments perspective. And so in order to really serve the non-edge use cases and get deep into the payment stack of how the world operates today, you need a lot of liquidity. And so building for that, and how that works is, is somewhat complicated. And I think will evolve over time, but it's kind of pillar number two of what we're building. The third pillar is, is very much around the risk and compliance framework. I think when you look at the generational payment companies that have existed, they all have one thing in common, which is they've all for the most part, own their own regulatory licenses.

4:50They built a very kind of robust set of thinking and framework around the importance of risk and compliance, and they've kind of done it the right way. We've been a little bit surprised that more players in the market haven't aggressively pursued licensing around the world. And so that's a very big kind of pillar for us. We are licensed in Europe today. We've got four other pending applications around the world. And I think you'll see us, you know, towards the back half of last year, Merge is the highest or most regulated or licensed player in the world. And we think that's another really important key component, particularly for serving super enterprise organizations around the world.

5:26They want to, you know, they don't have Web3 teams. They don't understand the stuff at the level of detail that an exchange or maybe somebody who's kind of been operating close to or in the space for a long time. And so they're going to be looking for that kind of standard of licensing in order to work with players and to do so at a global scale. And the fourth part, and maybe the most important that we've seen is today's stable coins have always lived kind of side of desk. They've been a, you know, additional set of capabilities that folks have added to augment their current fiat technology. But what hasn't happened is that technology being integrated back into the way people run their businesses today.

6:07There isn't a easy way for folks to integrate this stuff into the financial operations or the treasury operations of how these global organizations run. And if you work in a big organization like I did for nearly a decade, what you find is these big companies have hundreds, if not thousands of bank accounts. They have armies of people who are keeping track of this capital around the world. You think it all flows through beautiful bank APIs. Some of it does, but there are huge internal systems of record that allow them to do this, to do it at scale, to do it accurately, to meet their regulatory and reporting requirements as an organization.

6:41And you can't just introduce payments or treasury capabilities without building into that infrastructure and becoming part of it. And so that's the last kind of core tenant of kind of what we're building. All of that comes together and provides this beautiful layer of payments and treasury capabilities, which we've taken live with the first transaction last month.

7:03Scaling Europe:That's amazing. What was that moment like getting that transaction over the line? um yeah it's exciting right i think um you know to see you know start to finish we stood at this company in april um and uh you know we've been building and obviously we've been um kind of accelerating as as we've scaled the team from zero to 20 people over that time frame but getting to that first i think big milestone was at least for me as a first-time founder the the point at which you know you feel like you you've started to build something quite special and so it's exciting that That being said, I think V1 of the product is only scratches the surface of kind of what we're building and the services and capabilities that we want to provide to the market.

7:45And so we're kind of, you know, back heads down building and get ready for V2, which will launch early next year.

7:52Scaling Europe:And how do you find it building for and interacting with stakeholders from very traditional financial backgrounds? You know, not just within financial institutions, but often I imagine CFOs themselves who are probably more risk averse than other stakeholders and businesses. and you're trying to introduce this whole new world to them. How do you manage to do that? Yeah, I think I wouldn't have wanted to be doing this a couple of years ago. I think two, three, four years ago, this would be a tough sell. I think the reality is, in my view, the market's ready for it. The work and the foundation that's been laid on the regulatory side, I think Stripe's acquisition of Bridge was a massive accelerator in the market.

8:31I kind of liken that to a little bit of the COVID area and forcing people to think about multi-channel and how they go online, click and collect. That was a big watershed moment for people realizing that one of the smartest and most innovative payment companies in the world is actually leaning into this and views it as a core capability that will sit as the backbone of how payments and other related treasury or banking capabilities work in the future. So I think right now the conversations aren't that hard to get going. I think the complexity is some of those pieces I mentioned, right, which is the technology that exists in the market today is missing a few components that large enterprises who aren't Web3 first, who maybe have zero people in the organization thinking about crypto and Web3 on how do you bridge the gap of how it works today versus how they start.

9:23And some of our go-to-market and the things we're doing, we think lend really well to people getting started. What's the easy button? How do you do something so that as an organization you can start learning? And I think that's the big thing. Everybody wants to say yes, but they don't exactly know how to get started. And once they are started, I think that's when they actually start to internalize the capabilities and understand that, hey, this isn't that scary. It looks and feels very similar to the fiat structure of the accounts I have today. and that's the journey we're trying to take people on.

9:55Scaling Europe:And you mentioned the change in market down the most and the way that it's become a lot more acceptable and I think people are realizing this is the way that things are going. How important was that when you raised your pre-seed earlier this year? I think at the time it was one of the largest or if not the largest pre-seed in the UK at the time this year. And it was exciting. It was like these guys know their stuff when it comes to fintech. They raised a$10 million round to try and unify fiat and stablecoin currencies into one single account. What gave the investors who came with you and wrote big checks very early on the conviction that you guys had the capability in the team to build something meaningful here?

10:34Yeah, so from a payments perspective, we weren't that early. We are definitely not even close to the first who started building in this space. I think some of our ideas and what we're doing on the treasury side are actually quite innovative and quite unique. And so I think in a way, the pivot to not being payments only, but providing payments and treasury services was quite appealing. I think more than any of that though, is I think a lot of folks have been looking to deploy capital in this space. And I think the issue they've fallen into, and certainly from a lot of the traditional pay tech lens is they haven't probably found a team and had excitement around folks being able to bridge the two.

11:19And so I think, well, the technology we're building bridges it. I think much more our background and being, you know, sad five folks, you know, almost a decade at will pay or is acquired in the world. Like that level of experience, I think is, is quite unique for folks who are building in this space because the intricacies of how the world works today, like how the trillions of volume are moving today is maybe more important than the Web3 experience because it's much more about getting that part of the world and that side of the aisle per se comfortable with experimenting and building and accepting that there's capabilities here that can augment what they're doing today and create value.

12:01And so I think for our early investors, it was probably the biggest thing was like, is this a team who can actually speak to the way folks are operating today and can actually bring them into the tent and get them excited about this in a really safe environment?

12:17Scaling Europe:Amazing. And yeah, that was early the start of this year. You mentioned that you've raised some more money that you haven't quite announced yet. Can you search a bit on that as well? Yeah. Yeah. Yeah. There's a lot of capital looking to be deployed in the space. Obviously, we came out of stealth and we launched the company in April. We came out of stealth in May. We announced the round, which was led by Active and Capital, who have been a phenomenal partner. And we started to get a lot of inbound from other players who, obviously we didn't cast the widest net in that early set of fundraising. And so off the back of that, we got a lot of bit of inbound interest.

12:58And what we decided to do off the back of that was do an extension. So we raised another$8 million, brought in one new large investor, Dragonfly, who led that round. And so in kind of the first five months of business, we raised$18 million, which I think talks a little bit to a few things. One is, I think in a way, building regulated financial infrastructure is capital intensive. And so I think what it allows us to do is be very aggressive in our regulatory approach. I mentioned earlier, we're chasing four additional licenses to the one we already have around the world, and that number will only continue to increase.

13:36And so it allows us to very aggressively be applying for licenses, building the internal and external risk and compliance support we need to do. I think it also allows us to build into the breadth of products we want to build. We've got four core products we're building on, and that is significantly broader than most of the folks playing in the space. And so what it's allowing us to do is to build and to be very aggressive about kind of the early days of how we build the platform and the breadth of products that we want to bring to market. And so yeah, it's been very excited. We're obviously super fortunate to be in a position where we can be, you know, building as fast as we are.

14:15And obviously, you know, trying to make very smart decisions when you're moving this fast. Every hire still matters. Every dollar you spend is still important. And so I think for us, it's the trade-off of how do we do it in the right way and make sure that we're building things in a linear path. What we don't want is lumpiness where we're kind of going up and down in terms of our trajectory. And I think to date, we've managed to do that and we'll continue to keep the gas or the pedal on the gas for the next few months. And then we'll see where that takes us, right? I think we're quite excited about where we've landed over the first roughly eight months of the business.

14:54But like I said, we've got a lot more we want to deliver on that next version of the platform.

14:59Scaling Europe:Amazing. And yeah, it's a phenomenal result and news that you're getting inbounded by VCs. You're able to extend your pre-save that was already quite large by another 8 million. You're obviously building in a really interesting space and doing it in a way that's slightly different. But how important was yours and your co-founder's background? I mean, I know your co-founder is a fintech entrepreneur. You've obviously spent a decade at WorldPay, I think a decade almost. So you're both very seasoned fintech executive entrepreneurs. How important was that for the investors? I think that was key, right?

15:33I think that was the deciding factor of how we got folks excited about where we're building. I mentioned it a little bit earlier, but I think where stablecoins go and kind of where web three infrastructure meets tradify i think is much more about understanding the current landscape and how you bring those folks along on this journey um everybody's excited about it um but i think you know when you spend time in the space you forget that there's a lot of complexity right there's a there's a ton of different stable coins uh so a ton of different assets there's a ton of different networks that can be used both layer ones and layer twos there is lots of different wallet infrastructure and the way that those funds are held, whether they're, you know, custodial, non-custodial, hot wallets, cold wallets.

16:21And so there's all this new lingo and all this new kind of complexity that no one in this kind of TradFi world has spent enough time to probably feel like they've got their arms around it. And so I think for us, dumbing that down, using words and talking to these businesses in the way that, you know, they know today in in terms of kind of their fiat infrastructure and mimicking that, I think has been, you know, a real differentiator in helping us both get investors comfortable, but also tell the narrative about how we're going to go to market and commercialize this.

16:56Scaling Europe:Amazing. Yeah. And it makes total sense. It's a really, really powerful founding team, I guess, to be building in this space. And at the moment, I imagine it's been very much build, build, build, you know, you're trying to really build the infrastructure. You mentioned you kind of had your first transaction last month. How do you see that changing over the next 12 to 18 months as you go from pure building the infrastructure and the rails themselves to trying to do more selling and go to market and commercialize the proposition? Yeah, I think a couple of things. One is we learn something new in every conversation.

17:31And so the ideas on what we want to build and how we want to build it just every day continue to be refined, which I think is really exciting. you know it's it's quite cool when you leave a conversation and the the reaction isn't like hey we're not ready it's actually like well if you could do this that would be even more interesting and so I think that's you know that's quite exciting I think in terms of where we are as a team you know we've got a phenomenal product team a phenomenal development team we've actually we've hired a phenomenal CTO he's built on and off-ramping capabilities for a long time at one of the the largest on-ramp providers in Europe.

18:11He's based in Warsaw. We've been building our tech team out of an office in Warsaw and supporting that with a bit more of tech and product support here in London. And so we'll continue to kind of scale that linearly and be adding a developer to every month for the foreseeable future. I think for now, because we found such early product market fit, for us now, it's about organizing ourselves. This is a global business, right? We've got people around the world now selling this product. We've hired a head of Asia who's sat in Australia. We've got folks in the US. And so now I think it's about bringing a little bit of structure and transitioning away from founder-led sales where my network has created the opportunity to get into a lot of different discussions along with our advisors and our investors to actually institutionalizing the commercial approach.

19:02And we're starting to make that transition slowly. We hired our first kind of true sales rep. this week who will be starting in early January. And we're, we're looking forward to, you know, aggressively building out the commercial team next year.

19:15Scaling Europe:Amazing. It seems like you're really ramping up. And I wanted to ask one last question about velocity and where the future of kind of stable coins is going. But I guess, you know, how long do you think it's going to be until every major organization in financial services, but also large enterprises is using or accepting payments in this new stablecoin world? Yeah, it's a great question. I think when you think about the utility of stablecoins, there's three big things that in my mind are important for businesses to think about. Number one is control. And I think for the most part, folks feel largely in control of their funds in developed markets.

20:01And in undeveloped markets, they might feel like the banking infrastructure, the payments infrastructure still is somewhat immature and therefore they can feel more in control by having their assets on chain. The second is, am I worried about speed and does speed matter? And I think that's an issue that the fiat world is not well positioned to solve and stable coins will always provide a better solution. And then the third is FX and FX arbitrage. And I think a lot of probably the biggest input or assumption to how big does the stablecoin market grow, I think kind of comes down to that last bucket.

20:43How stubborn are the tier one banks who are largely consuming the majority of the FX economics around the world today around taking compression and allowing their current existing set of enterprise customers or treasury customers around the world to get better rates? Or do they sink their heels in and therefore does it force people to go on chain and to think about other solutions? And so I think every single one of those is a consideration for different businesses. And depending on how painful each one of those different pain points is, I think will dictate to how fast they move on chain. I would be surprised if in three to five years, 100 % of Fortune 2000 companies in the world aren't doing something on-chain, whether that's accepting payments, making payments, holding assets on -chain from a treasury perspective, thinking about stablecoins and stablecoin payments accounts as a long-tailed bank account and simplifying collections, movements of funds internally across their business.

21:49there's not been an organization we've talked to in the world yet who isn't isn't thinking about this and isn't excited about using stable coins to solve one of those problems amazing and look

22:01Scaling Europe:you guys are going to be super well positioned for that so Eric thank you so much for taking time to speak to me I love what you guys are building awesome thanks Seb we'll talk soon cool sounds good bye-bye

22:17Thank you.