D (3:17)

Paul and I co founded Upstart along with Anna 14 years ago. So it's been a while. I was just turning 46 when we founded the company in 2012. Paul was just turning 21. So a rather odd mix. And interestingly, like the first day I met him, because it was sort of a random networking thing that put us together, I discovered that I'm older than his parents, which was a very odd mix for co founders. So for a long time, amazing. It worked out, by the way. You know, I mean, I'm not sure I would ever suggest people come together who don't even know each other, try to build a company with a generational difference, etc. But obviously it worked out great for upstart and for us and you know, so it's probably somewhere between five and six years ago that it became clear to me there was a time where Paul would become and should become the CEO. I sort of, I don't know, just naturally thought like, my 60th birthday is a great time, which I just passed. So Paul just turned 35. Earlier this year I just turned 60. And you know, the idea generally is, look, he's, he's been alongside me the whole time. He's been driving all the technology in the company really since the beginning. He's developed all the maturity and skills to run a public company. Just an incredible person. And he's only 35 years old. So I think really the opportunity that I thought was, wow, you know, what if he can be convinced to stay as long as I stayed, meaning until he's 60, you have a 40 year founder led company and that is the unicorn of unicorns in my mind.

B (4:49)

I got to say though, Dave, so first of all, you made it 60, congratulations. But you're five years younger than Tom Cook, you're 35 years younger than Warren Buffett, Right. So you could have kept going. You could have kept going and being the Omaha of the Bay Area, the. Sorry, the oracle of the Bay Area. So. So why are you respected? I get it about getting someone while they're younger, but are you going to disappear into the night or how hands on can we expect you to be as executive chair?

D (5:16)

Yeah, you know, it's an interesting point. If we were not in the situation we were in, I certainly would not have handed it off. I love the job of CEO. I'm healthy, I feel good. I probably feel like I would reasonably do it for another 10 years, at least five, maybe 10. You know, no one knows how they're going to age and all, but so from my personal perspective, like, I was somewhat neutral. I wasn't dying to get out of it. You know, I certainly have other things and I appreciate the fact that you only go around once and, you know, there's a lot of things in my life I put off or not done, so there's a little of that. But honestly, if Paul were not Paul and he weren't right next to me and ready for this, I would not be leaving. I would certainly not be bringing somebody in from the outside, at least not for another five or 10 years. But the situation was so unique. And to be honest, I think Upstart will be better. Like, I kind of feel no matter even if I think I'm really awesome, I don't. I mean, I'm good at some things, I'm less good at other things. But I really believe that at some point you just kind of need to shake it up. You know, it's like the Etch A Sketch. You need to, like, shake it up and start over on a little things. And, you know, I'm really happy to see very quickly Paul is jumping in and he's changing how things are done. The pace, the way we think about answering questions and making decisions in ways that I think are very, very constructive. I was afraid Paul might come in and just carry on what we've been doing for so long. It's worked well. We're a good company. We've been through hard times, but in the big picture, we're doing phenomenally well. But fortunately, Paul is really driving things forward in a very unique and different way. I think the market will begin to see that over time. I see it internally first, but I think over time, you know, Paul is just a genius. He's a Six Sigma ahead of the crowd in terms of his capacity to think through issues. And so I'm just super excited about it. I think it's great first and foremost for upstart.

B (7:05)

Do you think Dave, just looking at, just looking at your sort of seat and hearing your perspective here, there have been a number of CEOs younger than you actually. So Doug McMillan over at Wal Mart, we saw the Coca Cola CEO both say in sort of a moment of humility or self awareness both on cnbc, that they felt they'd actually tapped out in terms of how much they could bring the next wave of AI to their corporations. Just as you look at your peers in the non tech sector, do you think there is truly a generational moment here where the baton needs to be passed on to those who are more AI native?

D (7:41)

I think there is something to that for sure. I mean I feel like I'm pretty AI native. The whole notion of upstart from the beginning was bringing AI machine learning to credit. You know, I obviously feel like I am fluent. I don't know if I would call myself native. Paul is native. And I do think there is a generational difference when people just grow up immersed in something and they just have no legacy to drag along with them. And so I respect that those CEOs, you know, Doug McMillan, etc. You know, Tim Cook, I don't know if his is the same situation but you know, I think there is a time we have to realize it's a young person's game and that to really bring the energy and the thinking not to say you can't do it, it. I mean Buffett has been Buffett for a very long time. Investing and operationally running a company are I think very different things for sure. But in any case, I think there is something to that and personally I'm very excited. Paul is as in as you can possibly be in the world of technology and AI. And I think it's very unique amongst our peers and amongst, you know, the fintech world to have somebody of his caliber leading something is trying to solve an extraordinarily difficult problem which is improving access to credit. And it's just something that it's not going to be solved in a year or two years or I'm not even sure in five years. It's a problem that will just take incredibly long effort to solve because of the nature of credit and lending. But the impact is enormous and the potential is enormous and I'm just really excited somebody like Paul is here to take us through the next hopefully couple of decades worth of effort in it.

B (9:18)

Well, lots of those tuning in, Dave, are familiar with the upstart business model, but some of them aren't. So if you don't mind, just give us the 62nd version in your own words, of where upstart is focused product wise and what its edge is at the moment.

D (9:30)

Yeah, what we've really been focused on for almost all of our history is bringing AI and machine learning into the domain of credit, particularly consumer credit. And that really comes down to making much smarter risk models that can price somebody accurately and can also sort of take all the friction and process out of the origination of credit. And so when you think about a loan, I mean nobody loves getting loans, let's just say that, right? Why, you know, why do loans cost so much? Why are they so difficult? Right. I mean a lender has to pay for customer acquisition, they have to pay all these hard costs associated with verifying information and processing the loan. Then of course they have losses. And for every loan that is lost, you have to charge someone else more money. So there's just enormous inefficiency. And so we saw way back when that AI and just much smarter models could, could eliminate almost all of that inefficiency. And so we're on this pathway to do that not just for one type of loan, but for really all forms of credit. So you know, that's really, I think the opportunity we've been pursuing, we've really started in a model where we are marketplace and structure. We predominantly third parties fund most of the loans, whether that be depository institutions or whether that be private credit, etc. And then we market directly to consumers. We did announce just a month or so ago that we are applying for a federal bank charter with the OCC in the US and, and really just decided for a lot of reasons. It simplifies our business in a lot of ways. And we really kind of believe that AI in credit and lending has gotten to a state of maturity, that it should come under the domain of the regulators in the U.S. it should be accepted across the financial services industry as a much, much better, much more efficient way to originate credit. And so that's sort of what drove us to announce just a couple of months ago we've submitted an application for a federal bank charter.

B (11:27)

Let's take a break and when we come back, more of my conversation with Dave Gerard. Lets face it, major medical might not have been designed to cover everything. And unfortunately sometimes all it takes is an unexpected medical or dental bill to throw your carefully curated financial world into

A (11:41)

disarray and your wallet isn't the only thing thrown off. Financial stress can also mean lost employee productivity impacting business costs.

B (11:49)

That's why Aflac works to pay claims quickly, accurately and fairly to help employees find their balance again.

A (11:54)

Offering Aflac plans comes at no direct cost to businesses, and these plans can save businesses and employees tax dollars when payroll deductions are pre taxed.

B (12:02)

Learn more at aflac. That's athlac.com brewmarkets

E (12:09)

ready to soundtrack your summer with Red Bull Summer All Day Play. You choose a playlist that fits your summer vibe the best. Are you a festival fanatic, a deep end dj, a road dog, or a trail mixer? Just add a song to your chosen playlist and put your summer on track. Red Bull Summer All Day Play Red Bull gives you wings. Visit Red Bull.com BrightSummerAhead to learn more. See you this summer.

B (12:35)

And now back to my conversation with Dave Gerard, co founder and executive chair at Upstart. So when we last spoke in November 2024, that wasn't something that was on the docket at the time. You know, having your own bank. So has the regulatory infrastructure changed? Have the people in the, in the regulator seats changed so that they are more up to speed with what's going on? Or was it more that your business has changed to be able to fit the regulatory framework?

D (13:01)

I think it's and more the former really. You know, we have forever thought about it and we've said publicly many times we don't expect to become or to create a bank. It just didn't make sense for a lot of years. It was, for most of our history there was no new bank formation almost whatsoever in the US Regulators just made it very difficult. Not totally clear why. I mean one would think you'd want, you know, new competitors in the industry to retain its edge and, and do right by consumers. Yet there was almost no bank formation for many, many years. That did change in the last couple of years. So that sort of changed the equation a bit. I think we also realized that because we have 100 plus depository institutions that originate on our platform is they are all regulated by somebody. And so even though it was indirect, there was this enormously inefficient thing where all of these bank partners, credit union partners, are getting examined by a regulator and they're trying to communicate what AI does and how it works. And we just felt all of this could be radically simplified if, if we could actually just have the relationship directly with the occ, who we consider the preeminent federal regulator and at the same time still continue to work not just with these hundred plus, you know, credit unions and banks you already work with, but hopefully as many of the the large banks across the US Because I think quickly the world is learning the power of AI is so strong that, you know, you just risk being left behind otherwise.

B (14:28)

Let's talk about that learning when it comes to market coverage. Dave, you are such a good sport. When I last spoke to you because I remember asking you a question which I actually didn't think you would answer. I said, you know, what is Wall street missing? Because at that time, a lot of the Wall street analysts had price targets in the $12 to $14 range. Even though your share price was higher, there was some volatility. And your answer at the time was that financial services analysts, not tech analysts, were covering upstart and that they, quote, lack a fundamental understanding of our business. I'm now looking at the price targets on upstart in a very different spot. At the high end, you've got 80 bucks a share. The average is about 44. Your share price today is just under 32. So what happened? Did the same analyst kind of get with the program and understand your business or was there a shift in your coverage much more towards those who are tech native?

D (15:20)

I don't think there's been a real shift in our coverage. I don't know how much there's been more understanding. Sometimes I think the analysts are following where the stock goes as opposed to making some sort of firm gut prediction about where they think it should be. So, you know, when the market multiples drop for Fintechs, which they did, people move our stock price down even though there's no new news about us. And they're doing it because the market, you know, re rewrote fintech. And so I don't really care too much about that. The important thing to us is our business has improved pretty dramatically from, from, you know, we went through a very hard time when interest rates went up a ton and capital dried up way back in 22. But our business has really come a long way and it's much more diverse business. It's growing quickly. We have a lot of leverage in our business, so I think we're really proving the thesis. But ultimately, I think an analyst or an investor for that matter, has to believe there can be a differentiation in credit. All credit, all lending is not the same. Technology can actually make an enormous difference in the caliber and capability to originate and service credit. And I think we are Step by step proving that out. I think we have more work to do. I think there's certainly things we could have done better. But there is nobody in our view out there who is investing nearly as much in the application of AI to credit than is upstart.

B (16:40)

Well, let's talk about some of the numbers and how this is translated. I've got some of them in front of me. As of the end of Q4, 2025, your transaction volume for that quarter, Dave, just under $3.2 billion, up a solid billion dollars from the comparable quarter prior. The year prior, your total revenue hitting 296 million, up from 219 the comparable quarter prior. So what was it that sort of pushed that growth into a different level at a different pace?

D (17:09)

Mostly it's just acceleration of the AI models. When the AI models get better, they tend to eliminate risky people and give lower rates to less risky people and approve more people and then they just make it easier. More people can get the loan without having to submit so many documents. We have new products coming out, we have a home equity product, we have an auto product that are really taking off. I mean that triple digit rates, they're very small still, but they're growing incredibly rapidly. So we're really taking this core AI capability, beginning to apply it in a broader set of larger markets. So I think the addressable market is growing really quickly. But so yeah, that is leading collectively to growth though, to be honest, back to your point, I saw an analyst comment recently which says if upstarts growing faster than the market, that just tells us that taking on more risk. So all I could just say is like, wow, there's kind of no winning in certain people's view of the world. If we're growing faster than the market, do you really think that means we're taking on more risk? Or maybe we just have some better technology. So there is this sort of like, I don't know, it's a Jeff Bezos kind of thing. We just have to be prepared to be misunderstood for a very long period of time because there's a lot of history and credit. But without question, I think the numbers speak for themselves. The business is strong, it's getting stronger, it's getting more diverse. And I think, you know, I think those who stick with upstart really believe in us are going to be rewarded for that in the long run.

B (18:35)

Well, one of the places I looked to Dave for signs of momentum, frankly was just your news section of your website. So, you know, April 29, 2026, Upstart announces one and a quarter billion dollars forward flow agreement with Fortress Investment Group. April 22. A one and a $1.2 billion forward flow agreement with Centrebridge Partners. March 17 the 1 billion forward flow agreement with Altura Ventures. So the private credit partnership docket is getting bigger. Why is that happening right now at a moment when private credit is getting a bit of a tough wrap?

D (19:07)

Well, you know, people sort of paint private credit with one large brush. The part of private credit that's coming under scrutiny is really where they're funding or lending toward acquisitions of SaaS companies. And so that is really a case where private equity companies have bought, taken SaaS companies private, have leveraged up to do that, and now there's some question of whether AI is going to suddenly render these SaaS companies obsolete. That of course has nothing to do with us. I mean, we're a completely different pocket of money and a different use case. But my view generally is, look, private credit is a very good thing for America. Banks can't do everything themselves. It doesn't make sense. So if banks can't do all the lending in the world, who's going to do it? Private credit is sophisticated investors making smart investments. Some of them aren't going to be so smart, by the way, but that's the way capitalism works. But I'll say this, we feel that we have a lot of strong private credit relationships. Every single one of them has renewed. We've had zero loss of any partners. We continue to add new ones and our credit has been extremely strong performing. And ultimately, if you deliver them the returns that they expect, I think we should expect those partnerships to continue. They're very. We have risk, we have skin in the game. So there's alignment. The credit performance has been great. Our belief really is the technologies we've developed, while you can't completely eliminate sort of credit cycles per se, I do believe that a smarter technology that reacts more quickly can mitigate downsides of cycles of credit cycles. And I think, you know, we've proven that some in the past. I think we'll see it even more as we go forward.

B (20:46)

So when I think about the bank, upstart bank that you are, you know, the application is going through. How should we think about the composition of the credit likely to sit on that bank's balance sheet versus what is being offloaded to some of your private credit partners?

D (21:02)

Yeah, that's a great question. I mean, we like to think we're opening a bank, we're not becoming a bank. So there's really two parts of upstart, then the technology business and then this bank that does hold capital. And for sure, sort of you can think of our goal is not to increase the amount of loans that we hold ourselves. We do some of this together already today. It makes sense in order to experiment and test new models to sometimes sort of play a buffer role because third party capital can always be coming and going in different ways. So I think there's always room and there should be. It makes sense for us to have capacity in our balance sheet. Doing it within the context of a bank is far more efficient and with a much lower cost of funding than how we currently sit today. So it's good that way. But having said that, we are not fundamentally changing our business model. We are not fundamentally becoming a bank who is driving net interest margin as its core business. We will really be predominantly a fee based business with some part, as we do today, of loans that are on our balance sheet that we're using to test and prove out new models and new products.

B (22:06)

So when you think about auto versus home versus personal loans, which ones could you see going into what would be the insured bank more quickly? Is there going to be a phasing or do you anticipate all parts of your offering to go into the bank out of the gate?

D (22:24)

I mean they maybe go into different ratios. There's less reason for personal loans to go in there because it's a very large product, very proven, lots of partners. So. So that's a sort of well proven product. Some areas of it will always be testing and trying and balancing things out. So there'll be some. But I think it makes sense to think of some of the newer stuff we're doing now. We do that in a very conservative way. We're not going to put super risky things at scale on our balance sheet for sure. I mean we have to be very cognizant of the capital ratios and such. But again, we're not a balance sheet heavy type of of company. We don't anticipate becoming one. But we do want to have the capacity to innovate very quickly on new models and new products. And you have to have some capacity, hopefully an efficient one, to hold loans and test new models in ways that make sense.

B (23:16)

Well, let's talk about how that translates into aggregate performance. Dave. Upstarts guiding for $1.4 billion in revenue for this year with a three year target of 35% compound annual revenue growth through 2028. And that's not enough. You've also thrown out that EBITDA margins expanding to, you know, these are not shy goals. These, you know, this isn't being coy. So what is it? Everything that you just described adding up, accumulating to translate into this or have you got something else coming down the pipe that we should be looking for?

D (23:47)

Well, I think we have the products today to deliver that growth. Certainly I expect we'll launch more in that time frame. But you know, we have just tiny market shares in vast markets. Personal loans itself. I think there's a lot of room for us to grow. Auto and home are much, much larger categories. And we're just getting started really with very differentiated product. And then actually just, you know, a few weeks back we launched cashline, which is our first revolving product. And that's really, it's a subscription product so you can sign a subscription and have reliable access to a credit line for consumers. And that's our first foray into that. So it could. A lot of the areas we're in, they just have a lot of room for growth in ways that we feel as long as we keep executing the models, keep getting better, the relationships with capital partners, deliver, etc. Those are goals we can hit, we expect to hit. And I just, you know, we just wanted to be really clear with the market. We are optimistic that this is a high growth business for years to come.

B (24:48)

Well, one thing that you've done with respect to your communications with the market is, is pretty interesting. Dave, you've dropped providing quarterly guidance. Talk to us about that decision, if you don't mind.

D (24:58)

Yeah, we made a few changes all at the same time at the beginning of the year one we just referenced, which was providing three year guidance, which was really to give a sense of what we could do. And of course we did annual guidance as we always do. As you said, 1.4 billion is what we guided for 2026. But we really decided that trying to predict the next three months sometimes was forcing suboptimal decisions and such. And we felt like if we sort of looked at our history on an annual basis, it was, it made sense. It's just this is who we are, this is what we can do, we deliver, but on a quarterly basis. A business like ours can be a bit noisy. So I think we want to just reflect that view to investors and say like, look, we're not saying it's always going to look exactly up and to the right every quarter, the same amount, et cetera, et cetera, but we feel very good that on an annual basis we're going to be a growth company and a profitable company and not just for one year, but for multiple years. The other thing, Ann, that we added, which was totally unique, is every month, just a couple days after the end of the month, we actually say exactly what our volume was for the prior month. The original total dollar value volume of loans from the prior month. This is really a combination of we have nothing to hide. We're going to be as transparent as we can and help people build better models to understand us and really understand what they should expect from us and how things are going, all these things. So it was a lot of change, but I think the reaction of investors has been incredibly positive. Definitely to get sort of the end of each month, the volume. I mean, that sort of takes a whole bunch of things off the table in terms of understanding how the quarter's going. And we just felt like it was a better mix that reflects who we are as a company and who we want as investors as well.

B (26:46)

Did you get the same reaction from both institutional and retail investors, Dave? I think about 20% of your floats held by retail. Was there any distinction in the responses of the two constituents?

D (26:56)

I guess I saw some of the retail responses. They seem sort of like, I think everybody loves the monthly volume release, right? Who doesn't make more data sooner? So I think that was universally well received. I think that we didn't see any really negative reaction to not doing quarterly guidance. And I think that the three year guidance was received though, of course, it's like, you know, show me. So fair enough, people want to see you, you know, sort of make good on it and in the first year, etc. And, and so I think, you know, people took that and said, well, thank you, we'll keep watching. But no, I don't, I don't think, I think there was sort of like, I did not hear anything either from retail or from kind of institutional investors that I would describe as like, oh, why did you do this? We would have preferred the old way. I think almost across the board we saw, we heard that, you know, this is a nice step forward.

B (27:50)

Well, I'd love to get your perspective on something that sort of tangentially related but is still there. Again, you are doing something unique in increasing your monthly reporting or provision of data. So the cadence is increasing there. But let me ask you a question. If the SEC goes through with an option that's sort of being discussed at the moment, which is to remove quarterly filings, is that something you would be comfortable with? Upstart doing. Again, you're providing monthly data, but would you ascribe to the view that providing quarterly filings actually isn't that helpful?

D (28:21)

No. I mean, I think even if the SEC said fine, you know, you don't have to do quarterly earnings if you don't want to. I am as far, I mean, we haven't thought too deeply about it, but my initial reaction is we would absolutely continue to do it. I just don't see value in not sharing how the business is doing. I mean, as strange as it sounds, I really thought maybe we should just report every month. But you know, and there are, I think, I think progressive might do that. I'm not sure. There's a few rare businesses out there that do release financials every month. I don't want to do that, by the way. But no, I feel that it doesn't really make sense to withhold information to the market of how the business is doing. I think guidance and actually reporting are very different things. There are times when guidance of varying sorts makes sense or doesn't make sense. But in terms of reporting to the market how the business is doing, I certainly would be a strong advocate for most companies that they should continue to do quarterly reporting regardless of what the SEC allows.

B (29:19)

Well, I'm going to ask you one last business related question then I'm going to come back to you, Dave. And the business question is it looks as though we're going to have a new Fed chair coming in, likely to be Kevin Wash if things keep going as they're going to. Anything that you're seeing that could materialize from his appointment that could affect one way or the other upstart in its trajectory?

D (29:36)

No, of course we look at interest rates. Fed rates affect things though, of course. It's really like two year Treasuries closer to what matters to us, two year swaps even closer. So yeah, certainly our business benefits when rates are lower and Warsh was presumably a little more dovish on such things. But you know, we're also sensitive to the fact that we don't need to see inflation run away. So we're not enormous advocates one way or the other other than we strongly believe in Fed independence and that, you know, proper weighing of the risks of, you know, prices as well as the job market, et cetera. Full employment is really an important and key thing to do. So. But you know, I don't, it's not something that, you know, it's funny, I do think often, certainly in the retail world, I just hear people say, oh my God, you know, rates go up 25% or 25 basis points down 25 basis points. It's amazing. For upstart or it's terrible. I'm like, they're almost nothing. I mean, they're just, you know, that sort of difference is almost immaterial to us. So we don't follow that so much. I just, I think we do believe in a healthy and independent Fed.

B (30:45)

So Dave, where next for you personally? Maybe you'll have some more time on your hands, maybe you won't. But how are you going to be spending it?

D (30:52)

Well, first of all, job number one is still going to be upstart and being supportive of the team. I'll be talking to Paul probably multiple times a week. I talk to other members of the leadership team pretty regularly, other board members. So it's still job number one. I'm the largest shareholder by a significant margin, so I'm not going away. I'm very involved and expect to be for a very long time to come. I'll probably get involved in helping some other companies in various ways. So I'm, you know, I'm not too anxious to jump on other boards. But you know, I will see what's interesting. I'm cloud coding like a lot of people really, you know, I haven't written code since the 90s, so like it's been a long time and I'm just, I feel like there's just so much going on there that I'm going to just delve into it and, and feel like I'm part of it. I know what's going on. I think it'd be helpful to upstart. But also who knows what else will uncover there. And a lot of personal things with my family, my kids. My daughter's a musical theater kid so going to see her perform and things like that are important to me. I'm learning to speak Spanish, which I had never done and regretted. So just a lot of fun things like that. But mostly I'm still 100% on upstart in terms of where my head is and don't expect to take a full time job anywhere anytime soon. So I think those years are behind me.

B (32:11)

Dave Gerard, founder of upstart. Please come back. You're going to have an even broader lens through which to share your wisdom and you can come and show off some of your Spanish as well next time you're on the show.

D (32:21)

Thank you, Anne.

B (32:22)

Well, huge thanks to Dave Gerard for joining us on a big day. Can't wait to have him back. That's it for today's Brew Markets Daily

C (32:30)

and Brew Markets Daily is hosted by Anne Barry and produced by John Gratteau, Tarkab Delatif, Avni Laroya and Emily Miller. Our technical director is Luis Farias, Brittany de Taco is our audio Engineer. Booking by A.B. silver and the President of Morning Brew, Inc. Is Devin Emery. If you have any feedback or a company you'd like us to COVID leave a comment or send an email to brewmarketshoworningbrew.com have a great weekend and we'll

B (32:51)

see you back here on Monday. Same time, same place.

C (32:59)

Some follow the noise, Bloomberg follows the money.

D (33:03)

Whether it's the funds fueling AI or crypto's trillion dollar swings, there's a money side to every story.

C (33:09)

Get the money side of the story.

D (33:11)

Subscribe now@bloomberg.com.