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- [00:00]
Zach Townsend
This is an iHeart podcast guaranteed human
- [00:05]
America 250 Announcer
this July 4th, come celebrate at America's Block Party hosted by America 250. America's Block Party is a can't miss 4th of July concert happening at the Los Angeles Memorial Coliseum. Experience music, performances from major artists, patriotic tributes and the kickoff to giving 4th, helping to make July 4th the largest day of giving in American history. It's more than just fireworks. Learn more about this landmark celebration at america250.org, org
- [00:36]
Jake Roquet
podcast.
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it's hard not to love Hyundai's Electric EV lineup From the ultra fast charging capability and long range of the Ioniq 5 to the impossibly spacious and luxurious cabin of the Ioniq 9 and the super powerful Ioniq 5N with up to 641 horsepower. With Engrin Boost engaged, it's love at first charge with the most electric EV lineup from Hyundai. Visit HyundaiUSA.com or call 562-314-4603 for more details.
- [01:31]
Zach Townsend
My name is Jessa. One of the things I love the most about working for UnitedHealthcare is that everybody matters. Every moment matters. There's a person behind every problem. I care because it's what I was put on this earth to do. I'm Ben and I work at UnitedHealthcare. I am just one piece of a larger puzzle, but every piece matters. It's more than just work. We want to make the healthcare system better for everyone.
- [01:57]
Hyundai/Intuit/American Family Insurance Announcer
I care because I want to make a difference.
- [01:59]
Zach Townsend
That's what Committed to Care means to me.
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This one's for all my TV lovers. My entertainment from DirecTV gets you 60 channels and Disney, Hulu and HBO Max all in one pack. But here's the thing. With so much great TV in my entertainment, you're going to want to talk about everything you've been watching. Just remember that your friends might not be as well watched as you. Don't be a spoiler and encourage them to get my Entertainment for just $34.99 a month. Go to directtv.com genrepacks and sign up today. New customers only. Service renews monthly unless canceled. Credit card required conditions apply to apps HBO Max Basic with apps begin after DIRECTV 5 day trial. Learn more@directv.com restrictions apply.
- [02:31]
Zach Townsend
Life insurance is the original huddle, right? So there's like this alignment between like what bitcoin is, what people perceive bitcoin to be for. I think that's where I see a lot of folks struggle.
- [02:43]
Jake Roquet
Fiat currencies always go to Zero hours will as well eventually over a long enough duration, yet there will be a long transition there. What you guys are doing is particularly useful to say, okay, let us help you navigate the in between human institutions
- [02:55]
Zach Townsend
that get to a certain size. You know, they're chaotic and they're messy and they're unmanageable and, and I think it's easy to want there to be some like, conspiracy. And even in the case of a company, you're like, oh, the CEO's in
- [03:05]
Jake Roquet
charge, it stays weirdly predictable in a way. You know, we have our Q4 top. We're down 50. Yep.
- [03:12]
Zach Townsend
I'm not calling the bottom, but we, we did start to buy bitcoin again in the low 60s.
- [03:16]
Jake Roquet
What's the most interesting thing going on to you right now in the, in the bitcoin space? That's like, I'm really excited to see where this goes in the next year or two.
- [03:24]
Zach Townsend
I think what's interesting in this moment is that like, bitcoins.
- [03:30]
Jake Roquet
Welcome back to Market Disruptors. I'm Jake Roquet and today I'm joined by Zach Townsend of Meanwhile. Welcome to the show, Zach.
- [03:37]
Zach Townsend
Happy to be here.
- [03:39]
Jake Roquet
Awesome. You have this, you have a pretty interesting career background. You were chief data officer of California, a McKinsey financial services leader, a Y Combinator founder, and you sold standard treasury to Silicon Valley bank, and now you're CEO of a bitcoin life insurance company. I have a lot of questions I want to ask about that journey through, through these career endeavors. But first, I know you've been paying a little bit of attention to the Iran conflict and the use that, the role that bitcoin has been playing in that. And so I wonder if you could just give me like an overview of what you understand of how this is connected. What role is bitcoin playing in the conflict? Why are we there? Maybe if you know some of like the effects of downstream implications of the rising energy. Yeah. What can you tell me about the role that's happening there?
- [04:24]
Zach Townsend
Well, I think tactically, as part of the last few months when Iran has threatened to close or close the Strait of Hormuz, which is where a bunch of oil travels through to get to global markets, there was a proposal that they might charge a toll on the oil flows that are going through the strait. And there was a suggestion that they were going to charge that toll in bitcoin. And I think that may or may not happen. But I think there's two bigger points and two bigger, I think long term implications for bitcoin. The first is there's something about the concern around dollar supremacy. I think that's great for us as Americans on a super specific level, but I think we're all concerned about the unsustainable debt burden. How long is the dollar going to have the position of a reserve currency globally? And one of the things that this highlights is there's a deep connection between bitcoin and energy and sort of bitcoin and freedom. And whether we agree or disagree with this particular instance of that, I think we can imagine a long term future where bitcoin's role in the global economy increases. That's why we have built a life insurance company in bitcoin, because we consider it the most long term durable asset in the world. I think more and more countries are coming to see that, you know, whether or not the price is, you know, $10,000, $100,000 or a million dollars today. I think the real question is like, what is the role that bitcoin is going to play in the economy 10, 20, 30, 40 years from now? And I think as a settlement layer for things like oil, whether it's during a conflict or not during a conflict, that makes a lot of sense for bitcoin's role.
- [06:11]
Jake Roquet
And what is, what do your product offerings look like over at Meanwhile? So I understand, like the basic model for life insurance, but when you have it on a bitcoin standard, let's say we have a policy where somebody pays in 10 bitcoin and they have a 15 bitcoin payout at the time that they die, essentially. How does that process look like? Where are the funds going and where does that yield come from in that setup that you guys have?
- [06:39]
Zach Townsend
Well, as you said, we're a bitcoin life insurance company and just to start, our entire company is nominated in bitcoin. So people will pay premiums. As you said 10 bitcoin. We pay out claims. As you said 15 bitcoin and we do everything in between in bitcoin. I think we're one of the few companies that does this in a regulated space. We have full audited financial statements, but those statements are entirely in bitcoin. So for us as a company, truly, one bitcoin equals one bitcoin. We operate on the bitcoin standard, whether it's our actuarial opinions, as I said, our audited financials are all the actuarial math, the promises we make, all entirely in bitcoin. So how the product works, it sort of depends on where you live. So for Americans, you might pay that 10 bitcoin actually over 10 years, you might pay one bitcoin a year for 10 years. So you've given us 10 and then we promise you 15 internationally. For folks they can actually pay us upfront. The reason it's a 10 pay in the United States is to comply with all these Internal Revenue Code rules about like what is and isn't life insurance. So for some international people, they might just pay us that 10 bitcoin up front. And to bring it back to the Iranian conflict. I think what we are seeing is that as people are concerned about the dollar, as people are concerned about their local currency, they're very concerned about whether they should have long term, how much of their long term savings should be in those other currencies. So if you're concerned about currency risk or political risk or jurisdictional risk, I think a bitcoin life insurance policy can make a sense, a lot of sense. And then certain places like the United States, there are all these tax benefits around our policy. Yeah, Let me, I can come back to the yield question if that makes sense or if you have follow ups.
- [08:32]
Jake Roquet
Yeah, I guess one, one question for that is what, what's the summary of the, of the tax benefits? Like essentially, would you be borrowing against your life insurance policy and that helps you buy.
- [08:43]
Zach Townsend
That's exactly right.
- [08:44]
Jake Roquet
Okay.
- [08:45]
Zach Townsend
Yeah, yeah. So I think Mark talks a lot about whole life actually, or he knows a lot about this. But fundamentally the benefits of whole life insurance in general are one, it goes to your beneficiaries, your kids, your wife, whatever, a trust, income tax free. The second is that the value in the policy is compounding tax free. So as we mentioned, I mentioned or you mentioned, you know, we are getting some yield on the bitcoin and we can talk about how we do that, but that yield is compounding tax free. So we are actually like, even if you could do exactly what we did to get yield, we would get further because you would owe, you know, income tax or interest tax every year you were earning that. Right. And the third is, you mentioned it, you can borrow against the policy tax free. And in our case that is borrowing in bitcoin. Right. So you put this 10 Bitcoin in and now imagine Bitcoin's million dollars a coin. You know, it's 20 years from now you could borrow one bitcoin out of the policy. And from your perspective, and more importantly the perspective of the Internal Revenue Code, that's a fresh new Bitcoin. So you wouldn't owe any capital gains tax between now and Then you would just have that like new fresh basis bitcoin. So actually as the price of bitcoin has gone down a little bit in the near term, we've actually seen a slight uptick in people buying policies because this like capital gains deferral is like even more valuable actually the lower the price of bitcoin. And as you buy a life insurance policy, the question isn't like what's the price tomorrow or next month or even later this year. It's like, what do you think the price of bitcoin is going to be in like 2040, 2050, 2060? I think we all agree, we think it's going to be quite significant compared to the dollar.
- [10:42]
Jake Roquet
Yeah, let's go back to the where. What does it look like for you guys to be generating that additional yield over the, over the terms of the policy? How are you guys managing that?
- [10:51]
Zach Townsend
The big thing we actually do is a fully collateral bitcoin for bitcoin loan. And you might say like, why the hell would anyone do that? So imagine you're a miner and you mined a bunch of bitcoin and that bitcoin has a low tax basis. If you want to sell that bitcoin to buy electricity or buy rigs, you suddenly own 21% or 30% corporate tax. Right? So what we do is we actually take some of the long duration bitcoin that our policyholders give us and the miner will post as collateral their bitcoin. Right. So it all just is sitting there. So they might give us 100 bitcoin and then we'll lend them 97 of our bitcoin that comes from our users. We have no credit risk. Right. Because 100 Bitcoin that came from the miner is just sitting there. We lend them the 97 that from their perspective is fresh tax basis bitcoin. They sell that bitcoin that we've given them, they pay for electricity, they mine more bitcoin, they give it to us. And there's a variety of other things that folks do. We don't do any of these things. But if you are running a cover call strategy on bitcoin, you know, trading your bitcoin for cover calls or perps or whatever, like that's a taxable event, that's taxable disposition, like do that trading. So before someone will do that, they'll actually do this tack trade with us to like get new fresh bitcoin and then they'll do whatever yield generating strategy they have. So we do trades like, like this that are all around Basically trading the thing that we uniquely have as a life insurance company, which is like duration, time, Right. Our users are trusting us for the long term, and what we get in return is credit protection. Right. So a life insurance company is designed, built, regulated to be incredibly conservative. And that conservativeness expresses itself in not taking a lot of credit risk.
- [12:54]
Jake Roquet
It's an interesting intersection because, you know, a lot of bitcoiners are sort of allergic to the traditional financial products. And then I would also imagine on the other side, there's a lot of people that are interested in the traditional financial products like life insurance who might have an aversion to bitcoin as well, or be like, you know, how do I know that I can trust this Bitcoin is going to be here for a long time? I wonder, how do you, how do you navigate both of those groups? You know, the bitcoin hardcore people who are like, I want to stay out of the traditional finance system and the maybe more traditional finance system people who are like, why would I be using bitcoin? How do you approach both of those groups?
- [13:26]
Zach Townsend
Yeah, well, you actually hit the nail on the head, right? We have like these two different Personas and we're like, somewhat attractive to them for different reasons. Right, so for like the bitcoin whale or the bitcoin purist, you know, look, I think we all have skepticism about the legacy financial system, but I find that that skepticism is frequently really about legacy money. What the Federal Reserve is doing, where the debt's at, the future of the dollar or other currencies is sound currency. And for us, it's not that life insurance as an idea is flawed. It's like what you're putting in that policy might be flawed. So that's exactly why my co founder and I set out to build what in some ways, you're right, is a traditional financial institution with a regulator and an auditor and these relatively traditional or straightforward products, but then entirely in, like, what we think is the currency of the future. Right, Bitcoin. And then what we're seeing is that sort of tends to be coupled with a maturation of those people themselves. Right? So we're seeing a lot of bitcoiners bitcoin whales. You know, they might have bought Bitcoin 20, 13, 14, 15, 16, 17. They probably tended to be a little bit on the younger side. They're now literally growing up. Just as bitcoin is maturing. They're maturing, they're getting married, they're having kids. They're still quite allergic to the traditional financial system. But we sort of arrive and say, hey, here's a traditional financial product. Here's the tax benefits, here's the estate planning benefits, you know, here's how you can protect, you know, your wife or your kids or whatever it is in bitcoin, sound money. And that's really attractive to them. Very briefly, on the, on the more traditional side, again, I think as Fidelity and BlackRock are out there saying 2, 3, 4% of your retirement savings should be in bitcoin, as all these complex things are happening in the world, whether it's like Russia invading Iran or, or the war, sorry, Russia invading Ukraine or the war in Iran, or what's China going to do with Taiwan. You're just concerned about what's the future of the global order, what's the future of the dollar. This idea of having some long term exposure to Bitcoin is really attractive to those traditional finance folks, whether or not they're a family office or they've actually even never thought about having bitcoin. And yes, some of them folks are really educated about life insurance. They might not have, they might have hundreds of millions of dollars of life insurance. And then we arrive and say, hey, you should have 5% of your life insurance exposure in bitcoin, just like you have 5% of your market exposure in bitcoin. You know, it's a hedge, it's digital gold. And that resonates with that traditional finance group. You know, we don't have to necessarily convince them of every single thing about like our macro beliefs about bitcoin, but I think that they are primed to believe that the world is chaotic right now. And you know, bitcoin's a good and important hedge.
- [16:53]
Jake Roquet
It's interesting to see this transition now between bitcoin being so risky. Oh my gosh, you're putting 1%, 2%, 3% of your portfolio in bitcoin. That's so risky to. Now the shift is kind of like it's risky to have no exposure. You know, like you can't risk that. The risk of systemic collapse is so high that you, you need to have something outside of the, the system. You know, it's, it's interesting.
- [17:16]
Zach Townsend
And look, they aren't putting all of their millions into bitcoin, but you're exactly right. Like the, the, the, the risk that seemed impossible is now merely remote. And then the way that gets articulated, I think is having some bitcoin exposure for those more traditional folks.
- [17:35]
Jake Roquet
Yeah. And as the Lindy effect takes hold and as it's longer Years go by, you know, that starts to become more compelling of a case. What's interesting to me, you know, I also think too. So we're what, 17 years into Bitcoin existing. I think that there's a lot of bitcoiners who don't have as much understanding of the traditional finance system. Let's say they've lived. A lot of the younger bitcoiners, especially as you said, who kind of grew up the past decade using Bitcoin as their primary financial vehicle, let's say they're less well versed in the system. Yet Bitcoin is going to be a long term transition. A lot of times people think that. Well, so I theorize, let's say, but you know, a lot of times bitcoiners say slowly and then suddenly, you know, like systemic collapses previously have happened quite rapidly. You look at like Weimar Germany is a good example. That was probably like a 3, 4 year duration for the primary part of that hyperinflation. Yet it's really different when we're looking at a reserve currency. There's a lot more levers the Fed and other players can push and pull. And so I think that fiat currencies always go to zero. Ours will as well eventually over a long enough duration, most likely, yet there will be a long transition there. And so if there's a 30, 40, 50 year period that we're looking at that what you guys are doing is particularly useful to say, okay, let us help you navigate the in between. Let us help you have some of these traditional products that are bitcoin backed up. But you know, we're going to be able to help you get these tax strategies, do some of the financial engineering that maybe your average person hasn't dedicated hundreds of hours to figuring out sort of thing. And so that's, that's an interesting component of that, that, you know, helping transition that in between.
- [19:18]
Zach Townsend
I'll just say I completely agree with that, Jake. I think the caveat I'd make is, I guess, I think in 100 years if you think, even if you believe that the entire economy will be bitcoin eyes, I still think then there'll be financial institutions. So I, I think that people will still want to, you know, build, save and protect wealth in the form of Bitcoin. And that's like fundamentally our mission as a long term insurer and a life insurer. You know, people are still going to be hit by buses or whatever and you're still going to want to protect your kids. So I think we're bullish on. Not that we're just here for that transition but that we're here at the end of that transition as like just, just as there are these dollar life insurance companies that you know the name of that have been here for 200 years. Our plan is that we're building like one of the defining financial institutions of the bitcoin economy.
- [20:11]
Jake Roquet
That's cool, that's great. It's. We need more people building the alternatives on the, on the bitcoin standard. I wonder where do you see opportunity related to that? So you've built a fully bitcoin based service in the financial services industry. Where else do you think we're like in desperate need of more bitcoin based alternatives to the traditional system?
- [20:32]
Zach Townsend
Yeah, that's an interesting question. I mean honestly, when we started the business four years ago, which was like we thought we were thinking about it late 2021. We started the business January 2022. The way we actually started it is exactly like where this question is going. Which was my co founder and I saw the whiteboard and we wrot. We were like, okay, the bitcoin economy is going to be an economy now. It's going to be weird and that it's like global and it's decentralized and you know, there's no, there's no central bank or fiat whatever, but fundamentally it's going to be an economy. And then like what are the financial institutions that exist inside every economy? Right, so there are, you know, custodians and trust companies, there are payments companies, there's life insurance companies. You know, all of those things will need to exist. And if you asked me then I probably would have said like, oh, there's a bunch of low hanging fruit now I think, you know, whether it's all the companies out of lightning or like other forms of payments, you know, what Unchained is doing with their trust company in Wyoming. You know, I think a lot of these, you know, US and life insurance, I think a lot of these holes are being filled now. Are those institutions as big as they will be? You know, absolutely not. Because as you said, we're in this like long transition between like one financial system and another financial system. And that transition is, I don't know, like the British pound of the to the dollar, you know, as a reserve currency. It's not an overnight thing. Usually it is like this long transition. But I think, you know, whether it's us or some of the payments companies, some of the trust companies or, or whatever it is, I think that we're going to be there, you know, helping people get through that transition and then ultimately being defining institutions of the next financial system.
- [22:31]
Jake Roquet
Do you, shifting gears a little bit back to some of your history, you served as the chief data officer of California, which I just thought was like a really interesting role. I'm curious what you were focused on there. What sort of data were you overseeing? Like what duration of time were you there? What was that experience like?
- [22:47]
Zach Townsend
Yeah, well, as you mentioned, I like went through yc, I started this company, I sold it to svb, sort of can talk more about that. But you know, public service has always been really important to me. You know, I don't always agree with everything that our elected officials do, but I do think that, you know, serving people is important. And I had this like moment in time where that made a lot of sense for me. So Governor Brown, who by the standards of California is basically a Republican or at least relatively conservative, he and his staff recruited me to be the first chief data officer of California. And I really worked on these really pragmatic tactical projects on the one hand and like big like bureaucratic sounding things on the other. Right. So on the bureaucracy side, it's a lot of like how like what's data governance in the state look like and what, you know, one department collects information on who, who are the low income people in California who are supposed to get health insurance and then there's another department that works on who gets the earned income tax credit from California. And, and like those two departments don't talk to each other and like, so these like big, not illegal things about just like trying to make the government more effective. I think I'm, I think there's a lot of arguments that you can have about like whether the government is efficient with our dollars, like where do our tax dollars go? I'm sure your listeners have a strong opinion about that. I think what I was really focused on is like if the government has decided that we're going to serve people in this way, you know, if we're, you know, apportion water rights or whatever, like how do we do that effectively? And that's like where data can like play a really powerful role. So I did a lot of like helping bring data together, but then also just like basic analytical projects, you know, and sometimes that it's like they sound really small than the AG if you can make the DMV 5% more effective. And it's like time to close cases, you know, maybe for every individual that doesn't matter a lot but it turns out when you do that for the 30 odd million people who live in California, you can like feel pretty good about yourself.
- [25:24]
Jake Roquet
Do you live in California now?
- [25:27]
Zach Townsend
I do. I again, I wouldn't say I agree with every particular decision the state makes but you know, the, the weather is great, so can't really fight with.
- [25:38]
Jake Roquet
Yeah.
- [25:38]
Zach Townsend
Fight with that.
- [25:39]
Jake Roquet
Yeah. I mean I'm a, I grew up in Southern California. I've lived in a few different places around the world. I'm a staunch California lover. I would say, you know, there's lots of reasons to criticize California. I get it, I get it, calmy for you, blah blah, blah. But if you lived here, you'd get it. I got to say, it's beautiful, it's great. We put up with a lot of craziness, but the beach is beautiful, the weather's great. I'm a. Yeah, I love it here.
- [26:05]
Zach Townsend
So I live in the Bay Area and sometimes I like to say, you know, Maya on in a typical week in the winter it could be 60, 70 degrees down here. And then my kids are skiing in Tahoe on snow capped mountains. You know, that's all happening in California. So it's hard for me to complain.
- [26:24]
Jake Roquet
Yeah, surf in the morning, snowboard in the afternoon, you know, not all. Yeah, exactly, indeed. Where do you. So what. But there's a lot of things we know California has problems with. We know that waste, fraud, some of the welfare stuff that's been happening, the daycare, childcare stuff. It's quite frustrating to see how much money goes to fraud. We're all here working hard. A lot of people come in from here from other countries, find ways to pull out massive amounts of money from the California government. What in your time there, what did you see that? Is there anything that California does exceptionally well and where were the things that were going the most wrong that are in need of servicing that you think would probably continue to today as well?
- [27:11]
Zach Townsend
What do we do exceptionally well? I mean, despite working for the government? I think obviously the most important thing about California is the people who choose to live here and the sense of entrepreneurship and the ways in which the state can encourage that. And you know, I think it can be easy to criticize California as you say, but then yet things are, are still happening here. They like the, the future is being built here. So I think a lot of what I was focused on again was making sure the nuts and bolts. Like I, I don't know if you're going to like, I don't think the DMV is like amazing or, you know, the Water Resources Board. But those things exist for a reason. And, you know, those reasons aren't, you know, they make, they make sense and like trying to make them better. I think on the like, fraud and waste side, a lot of what I was trying to do was create more transparency. I think, like that is often the first step towards really understanding like inefficiency, fraud and waste. I didn't experience any time my state government tenure, and I don't think a lot of people do where I like saw something egregious. Like if I saw something egregious, I would do something about it. Right. I think what happens in practice actually is that there's a lot of people and they do well meaning things and they like make a bureaucratic system. And then the like result of that system is that some outside adversarial actor can do bad things. Right. So a lot of what I was trying to do was bringing information together, bringing data together so you can see those patterns when they exist. But I think it's more a lack of knowledge or a lack of capability that creates these opportunities than it is the blatant fraud or corruption on the part of the bureaucrat or even the elected official that people want in their mind to believe. I just think it'd be a lot
- [29:28]
Jake Roquet
simpler if it was that way.
- [29:29]
Zach Townsend
Yeah, it would be a lot simpler. Like the truth is like one. Actually, I'll say what, I'll say the most negative thing I say to my friends about working at the state government, which is like, I'm just not sure any institution with 5, 6, 700,000 people can be effectively managed. I mean, maybe now in the age of AI, but that's how I felt like when I was doing this in 2017, 18, 19. And by the way, that's just as true about, I don't know, JP Morgan and Wells Fargo or our big competitors, traditional competitors in the life insurance space, human institutions that get to a certain size. They're chaotic and they're messy and they're unmanageable. And I think it's easy to want there to be some conspiracy. And even in the case of a company, you're like, oh, the CEO's in charge. But the truth is it's this more confusing, chaotic thing than that.
- [30:29]
Jake Roquet
So you're living up in the Bay Area still. You were a Y Combinator founder, which is like a very prestigious thing. Maybe you could explain that for those. What, the Y Combinator startup group. I forget what the right word is was. And Then the process of building standard treasury and exiting that, selling it to Silicon Valley Bank. Like, what was, what's the story there? What'd you learn? What was that experience like?
- [30:56]
Zach Townsend
Yeah, well, look, my. Just a little bit. My, my background before that is, you know, I graduated college and I worked at this small management consulting firm. And it was all people that worked for Mike Bloomberg when he was the mayor of New York. And we did like consulting projects for foundations and nonprofits and cities and states across the country, trying to actually be more effective with data, think about performance management, like thinking about ways to do things. And one of the, the projects or several of the projects I worked on there was around financial inclusion and financial empowerment. And I came away from that with the belief that the system can be remade, that technology can be really important, that the marginal cost of database entries is 0. And also I think a lot of early bitcoiners, in my case I graduated college into the great financial crisis, right. So the system seemed quite broken. So we applied to Y Combinator and our theory was to build technical infrastructure to make it easier for other people to build fintechs. And we sort of invented what now would be called like banking as a service. And that might not be meaningful to anyone, but basically it's the idea of building infrastructure to help other fintechs get created. And what we were trying to do is actually start a bank recently in the current administration, it's quite possible, but at the time was like basically impossible. So we built all this technology. You asked about yc, like Y Combinator is a. They wouldn't call it this, but like a startup accelerator. They really help you start your company, give you advice. It's probably the most famous and prestigious of these, the most effective. Right. So in my batch, the big success story was actually Doordash, which probably sounds like it's always been big, but used to be three guys in summer 2013, but Airbnb Stripe, just tons and tons of companies have gone through yc and it's sort of like a boot camp for startups.
- [33:04]
Jake Roquet
Who's overseeing the accelerator.
- [33:09]
Zach Townsend
Originally there were a couple co founders, the most famous of which was Paul Graham, who's sort of like a essayist slash startup founder who really with his wife, well, his now wife started start and a few others started yc and then it's sort of like gone through iterations. There was a period where Sam Altman was running YC, this is before OpenAI and currently there's really like a partnership of folks who run it. The president is Gary Tan, who was himself, I think all the partners now are actually YC graduates. So it's sort of become this self perpetuating institution. Gary is an incredibly thoughtful, nice guy. He had started a company called Posterous that got bought by Twitter and then he ran a venture fund for a bit and then he came to run yc. So there's these partners and then they offer advice, they admit the batch. I think there's now three or four a year and then they give that batch advice and then 15 years later some of those companies are Stripe or Doordash.
- [34:28]
Jake Roquet
And you mentioned Sam Altman. I know that he was an investor and meanwhile I think was a part of an early raise with Gradient Ventures. And then you guys did another round with Framework Ventures and Polychain. I'm curious to hear about that. What was the core thesis that these investors found compelling and did they have specific interest in a bitcoin based life insurance company? Was the bitcoin piece of that compelling for them? What did that look like?
- [34:59]
Zach Townsend
Well, yeah, so Sam and another good friend named Locky, they co led our seed round and then our series A was Folger Ventures which is like an all bitcoin shop and Framework. And then we raised another round that was like Bank Cap, Crypto and Han Ventures and Pantera. So all in all we've raised about $142 million for Sam. He's not a big. I haven't talked to him in depth, but I wouldn't characterize him as a big believer in bitcoin. I think what we talked to Sam about was that this was a once and forever opportunity to like build a long term insurer, a life insurer, a savings institution. So what we said to him is like, you know, our ultimate vision is to serve a billion people. There's about 200 million people in the world right now who have long term insurance. Like we want to serve a billion people and we think we can do that at scale because of bitcoin and we think we can do that profitably because of AI. So we sort of hit all that his buttons which is like he really loves big dreams, big ideas, big ambitions. And obviously there's like the AI for the other investors. As I mentioned Folger, we have another amazing firm called Stillmark which actually based down in la. Those folks are like true believers in bitcoin for Framework, Han bankap, crypto. They obviously have a broader perspective on whatever crypto, digital assets, Web3, whatever that we're choosing to call it this week. But I think they all are believers that bitcoin is going to be sort of like pristine capital and pristine collateral. And you can have differing opinions on this protocol or that protocol or decentralized computation or whatever. I think at the end of the day, bitcoin is the winner on store value. And there's a real alignment between that story, that narrative, that belief and life insurer. Right. So a lot of those funds aren't bitcoin specific, but I think they are believe in bitcoin and then they particularly believe in bitcoin as like working with life insurance, even if they might not be huge investors in this lightning company or that custody company or whatever.
- [37:33]
Jake Roquet
So they see a clear use case for the, the application of bitcoin on life insurance, essentially. What's your relationship with these investors like now? Like, what does it look like when you raise that much capital from a group like that? What sort of reporting do you give them? Yeah, I'm curious what that stage of it looks like for you.
- [37:51]
Zach Townsend
Yeah. So for Sam, which people ask about, like, like Sam's an amazing person. He's obviously very busy apparently prepping for the ipo. So for Sam, I like to say that like Sam's like a secret weapon. He, he'll do whatever you ask him to do, but you can only ask him to do like one thing a year. Right. So I, I make sure to like save that request and send it to Sam at the right moment. Right. For other investors, sort of depends on how much they invested. But the biggest two of the those investors have board seats. Some others have board observer seats, quite active, not under. Like, I don't have an obligation necessarily to tell. You know, you mentioned, you said reporting like that's not really the relationship. The relationship is, you know, these are people I'm, I'm communicating with on signal or telegram. You know, I'm pinging ideas off them. I'm giving them updates on where the business is at. They're introducing me to other investors or potential partners to do distribution or you know, customers. So I'd say that I have a very positive and friendly relationship with all of our investors. And of the, all the names I mentioned, like, those are, you know, big positions, useful folks and help in whatever way makes sense.
- [39:25]
Jake Roquet
What do you think of proof of reserves for your business? Do you guys ever consider providing those? Like there's some people who can, you know, say, have make cases for, against, blah, blah. I wonder how you guys are thinking about that ads. I feel like it would be a, a unique place for the Application of
- [39:40]
Zach Townsend
this, I should say our full audited financials. So that is, there's like a third party auditor that's like an audit firm are on our website. So that's like meanwhile BM Financials, we haven't published our wallet addresses. Not out of any like deep belief on. I don't know what quantum sensor doesn't make. Yeah, I'd say it's mostly that like we, you know, we're operating a life insurance company. Like we're moving Bitcoin around actually like quite a bit. The addresses change, you know, some of it's on Anchorage, some of it's on Coinbase, some of it's elsewhere. We're in the business of using Bitcoin as, as money, you know, not just like gold in the ground, but like money in the world. So for us it's a pretty active thing. It's, it, it moves around. Right.
- [40:47]
Jake Roquet
You're not just storing it in a wallet somewhere.
- [40:49]
Zach Townsend
Yeah, we're not just, we're not just trying to like back some ETF or, or whatever.
- [40:54]
Jake Roquet
Sure, sure.
- [40:56]
Zach Townsend
So we think the audited financial statements are. Which we publish as like soon as we can every year. You know, that's pretty, pretty good. And something that like a lot of people in bitcoin and crypto have like never achieved. So you know, though they're full audited financial. So every single bitcoin we have and every estimate we make and our reserves and all that are fully vetted by a third party auditor.
- [41:27]
Jake Roquet
What advice would you give somebody? They have an idea for a bitcoin based new type of company, let's say, or financial service, something like that. They have the idea, they're starting at square one. They want to take this idea to fruition, become a founder. What advice would you give them on the early stages of that process?
- [41:49]
Zach Townsend
Look, the big thing that I've pushed people on currently is not so much, I don't know, I think there's a lot of people who are just building stuff because it can be built on bitcoin. And maybe that sounds like my business, but I think that there has to be some alignment between what bitcoin is about and the company and why customers are going to use it. So in our case those three things align. Right. People want to, I joke that life insurance is the original hodl. Right. So there's this alignment between what Bitcoin is, what people perceive Bitcoin to be for and the product we have. And I think that's where I see a lot of folks struggle, is they want to be an entrepreneur. Entrepreneurs, they want to believe in a bitcoin financial system. But those things, like, don't necessarily just bolt together in a way that is perfectly aligned with customer value. Right. So, you know, things like Y Combinator are great if you don't have a lot of inroads to investors like that. I'm really glad I did it. When I was on the younger side, I didn't really know anyone in Silicon Valley. I didn't know any investors. It was like a great introduction. And Y Combinator is the most prestigious. But there's TechCrunch and there's others. But what do those folks all look for? They look for a business that's going to make sense. I think the thing I would focus on is understanding customers, building something that really makes sense for customers. And in my case, this partially started because my co founder and I were thinking about ourselves. Like, we're both. We're now, we're like in our 40s by the time we were in our 30s. You know, I have kids. Like, I bought life insurance and I just like, had this. I, you know, this sort of reaction, which is like, what is this policy actually going to be worth again? This is like 2021. Yeah. And it was Covid. We were like, we were looking at a bunch of inflation. And like, you know, you buy a million dollars of life insurance, which I had a real reason for. Right. Like, I have kids, like, we have a mortgage. So buy this million dollars in life insurance. And then I was just thinking, like, wait, the. The purchasing power of this policy is disappearing.
- [44:22]
Jake Roquet
Right. You're paying in dollars at their value now, and you're getting those dollars back at their value, hopefully a while out, whenever I die. Right.
- [44:30]
Zach Townsend
In some ways it doesn't make sense, but doing that in bitcoin makes a lot of sense. So just my advice is to actually have a customer problem or solve it.
- [44:39]
Jake Roquet
Yeah, that makes sense. Not just like, we're airbnb on bitcoin, we're Uber on bitcoin. I've seen a lot of people being like, we're the bitcoin version of this. And that makes sense to be like, how does the application of bitcoin to this service actually make it better than the old version? Yeah, that makes sense. What's the most interesting thing going on to you right now in the bitcoin space? Anything you're seeing on X. Anything in the world that's like, I'm really excited to see where this goes in the next year or two.
- [45:10]
Zach Townsend
Fundamentally for us, I think what's interesting in this moment is that bitcoin's a little bit out of favor on the Twitters and the Instas. And fundamentally it's an interesting moment in. You want to think it's a four year cycle or just like the cycle where the price of bitcoin like isn't that low, but it's like lower than recent highs. It. There's so much institutional adoption that's like still happening. Like we're onboarding with like huge insurance brokers at the same time. It's sort of like off the narrative on Twitter and sort of like out of people's minds. And from our perspective we just keep working like, look, we ran this business when FTX blew up, we ran this business when BlockFi blew up and I don't know, we just keep trucking because we believe in bitcoin as a store of value measured in decades, not days. I think there's occasionally a lot of excitement about what is and or isn't going to happen in Quantum relative to, to bitcoin. You know, there can be a lot of, I think drama around what's the state of this company or that company relative to, you know, the, not the low price of bitcoin, but fundamentally for me, like we're trying to build an institution that is for the long term.
- [46:48]
Jake Roquet
So you're not spending too much time thinking about that short term price movement sort of stuff.
- [46:54]
Zach Townsend
That's right. I might spend too much time on Twitter, but I try to not spend too much time thinking about the price action of bitcoin, for example.
- [47:03]
Jake Roquet
Sure, sure. On that short term. Yeah. I mean it's, it's interesting to look at the, it stays weirdly predictable in a way. You know, we have our.
- [47:11]
Zach Townsend
I know we always think it'll be different.
- [47:13]
Jake Roquet
Yep. Maybe this time it's different.
- [47:15]
Zach Townsend
You're at the all time high. Yeah, yeah.
- [47:17]
Jake Roquet
It feels different every time, you know, feels the same at the bottom. It's hard to fire off those. We're down 50%, why couldn't we go down another 50% are the sort of things people are thinking. Right. I remember this is. I watched this happen last cycle. I remember 20, 21 down 50%. I full ported essentially and we had another 50% drawdown basically, which you know, is a total in total a 75% drawdown. But that, that additional 50% from there, you know, you feel that, you feel that we're down about 50% now and, and there's a lot of people who say, hey, we're at the previous cycle, all time high. This should be the floor. There's a lot of people who say, no, not yet. We're down 50%. But the shallowest bear market drawdown I believe we had was in the 75, maybe 78% range. And so even though they've gotten progressively shallower and shallower, the volatility is dampened to the upside and to the downside. As cycles go on. It's good to be prepared for it to continue doing exactly what it's done before. Yeah.
- [48:19]
Zach Townsend
As a company, we bought a ton of bitcoin in the like 17 to $20,000 range last time, which is like the bottom. We, I'm not calling the bottom, but we, we did start to buy bitcoin again in the, you know, the low 60s. You know, we're. Again, we're. If you are thinking in decades long horizons like this will be a blip.
- [48:46]
Jake Roquet
Yeah, certainly. And another, you know, it's worth considering. There's a big difference between buying.
- [48:51]
Zach Townsend
Buy your life insurance policy while it's cheap. That's all.
- [48:54]
Jake Roquet
Yeah, yeah, yeah, that makes sense. That makes sense. You know, I think that's a pretty good place for us to get wrapped up. Where can people connect with you? Is there anything. Yeah. You want to point people towards that you're working on right now besides meanwhile.
- [49:08]
Zach Townsend
No, I mean meanwhile. Bm. I'll say the way the flow is set up is, you know, I think nobody sends us a ton of bitcoin without talking to someone. So if you go to our website and you say you want to sign up, you're really signing up for a phone call with either me or, or two other people who work for me and work with me and you can have a detailed conversation about like the policy, the product and whether it makes sense for you. Yeah. Beyond that, if it's not spending time with my kids or building this company, I don't do a lot of it. So I'll leave it, leave it at that.
- [49:48]
Jake Roquet
Yeah, that's a good way to put it. We'll also, we'll have your X account, any other socials and everything so people can connect with you there in the description. Thanks so much for coming on. Yeah, this is, this is cool to talk about. I feel like for me I'm more in the camp that spent more of my time in the financial space is more on the bitcoin side. Just like I'm 30 years old. So for the past 10 years that I've been paying close attention to this stuff. I've been more on that side, but it's cool to hear the bridge and the connections and even a little bit of the case for why would you buy a life insurance policy? Why is it important? At what stages of life might you pay more attention to that? Yeah, it's cool to hear.
- [50:25]
Zach Townsend
Jake, let's get you a policy and we can take it from there. All right. So much.
- [50:30]
Jake Roquet
We'll talk. Thanks so much.
- [50:38]
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