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31 May - 01 June. Dublin, Ireland
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Meet Eric Satz, CEO of Alto Solutions, which offers alternative asset investment opportunities for individuals using long-term retirement savings for long-term investments. This Nashville-based company aims to empower people to own their financial future by achieving true asset diversification in their retirement account portfolios.
We at Relevant Founders Podcast couldn’t pass up the chance to speak with one of the most astute leaders in the field. So we asked Eric about the birth of Alto’s concept, his views on outsourcing, the future of alternative investments, and other equally fascinating topics.
Table of Contents
Sooner or later, everyone who has retirement savings thinks about investing them. In 2013, Eric intended to use his retirement account to invest in a private company he was involved with. But due to complicated regulatory requirements and bureaucratic obstacles, he could not do so for a long time, although it was legal.
“At which point I started talking to people like, “Hey, don’t you think it would be this great idea if we built the platform that made this process easy, and you know, people would have way more options?”
“And so I sort of dug in a little bit more. It was a bit like a dog with a bone. And I was trying to figure out, am I the only person with this problem? Are there more people? How much money are we talking about?”
There were more than 30 trillion dollars in retirement accounts and less than 2% invested in alternative assets (private equity and venture capital, farmland, real estate, art, securitized collectibles, vintage cars, and crypto). And so, Eric began to figure out why this number was so low. After all, if we look at the portfolio of professional managers, they allocate 25-50% of their investments in alternative assets. Why shouldn’t individual investors do the same?
After thoughtful research, Eric found three barriers to adoption. The first was that people don’t know what they can do with their retirement money. The second was complexity. And then the third was cost.
“To custody retirement assets in the United States requires a trusted company or another legal custodian, and you’ll need to contact the company you want to invest in. I thought, what if I can build a platform that solves those problems? TurboTax was built to solve a similar problem with people trying to figure out how to file their taxes, at least in the US; well, then I figured we could build a big business, and that’s what we’ve been doing.”
Eric started fundraising for Alto in 2016. After raising $250,000, he launched a platform that was supposed to make alternative assets available to all investors, not just the wealthy or financial institutions. Most of the money came from people who opened IRA accounts with Alto and thus invested in it, proving there is a demand for this opportunity.
Today they have about a billion and a quarter of assets under administration, almost 30,000 clients, and many partners. And they continue to grow.
Eric admits that he is not a technology founder. He considers himself a business founder and more of a product founder. So he had to find people who could help him in software development. First, he hired an outside developer (who would eventually become the CTO). Later, Eric had to hire another part-time person to help oversee the MVP’s creation because he did not speak engineering. It’s not surprising that the company’s initial MVP was pretty simple. But it showed that people are willing to invest their retirement money.
Alto can be described as a fintech company that has created a network of alternative asset investment opportunities. The company’s technology architecture connects alternative investment partners to its platform through an application programming interface (API). Such integration with other companies makes it easy and cost-effective for people to invest right from their dashboard. These integrated investment partners include Carta and Assure for funds, Republic for early-stage companies, Coinbase for cryptocurrencies, AcreTrader and FarmTogether for farmland, and DiversyFund and CalTier for real estate, just to name a few.
“It took me ten weeks to make my first investment. And that was after I had identified the custodian. Now, with some of our fully integrated partners, you can get the same amount of work done in literally less than a minute.”
Eric does not hide that his company performs all software development tasks in-house. In his opinion, this is the perfect approach for his product and engineering team. Although Alto Solutions had three consultants at one point, they eventually became the initial engineering team.
“We haven’t outsourced anything. Why? Because our mission matters, I believe that’s not something you can outsource. At some point, that technology will not be just ours, but how we treat the customer will ultimately differentiate us from everyone else. It needs to come out in the workflow, it needs to come out in the messaging, and it needs to come out in everything that the user sees at Alto ira.com. If we hire people who believe in that mission, they will build differently from someone we have paid just to complete a project.”
“I think it’s worth mentioning how important the first hire is and then how important the next nine are. Your culture is built there. Who these ten people are, how they interact with each other, their expectations for success, and the quality of their work sets the tone. And so, getting those first ten people right, I owe a great deal of credit thanks to all of them.“
“Switching from 10 to 30 is a different challenge because you can no longer all be in the same room, and people can’t know everything. With ten people, everybody can still understand everything and feel totally included. But you can’t do that anymore when you go from 10 to 30. There is too much noise.”
“And then, by the way, not everybody needs to know everything anymore. And sometimes, people feel hurt. Like, “how come I didn’t know that.” “Well, we don’t need you to know that right now. We need you to do this and that other day.”
“Because even as you know, at 30 people, they still wear multiple hats. When you’re at 10 people, you are wearing five hats, 30 you wear just two or three, but when you’re at 80, we want you to wear just one.”
Eric advises accepting the fact that you will make mistakes in hiring for a variety of reasons. Often this is a mistake on both sides, the hired person and ourselves, in the hiring process and decision-making. The hardest thing to do is not to let that fester. Perhaps a saying he voiced that won’t be new to our audience, but it’s always true: hire slow-fire fast.
“When you grow from less than $400,000 to over $6 million, you are hiring fast by default. And when you make a mistake, you often feel embarrassed to correct it because the mistake is not necessarily in the person you hired. It is a two-way street. But I think one of the things we did right at Alto was that we built the team earlier than most companies do. When we hired the vice president of people, we had 30 to 40 people. And I think it was the smartest thing we did.”
Alto now has 114 employees, up from 140 previously. Because of the crisis, they had to cut the team ten weeks ago. While Eric didn’t want to let anyone go, he also had to protect employees, customers, and investors during the economic downturn. So he had to make this hard decision.
“Raising a business is no different than raising a human raising a child. There will always be issues. They’re just different.”
Eric says many people are on the sidelines but have no direct competitors. “People always like to sit in the stands of a bullfight to see if the matador makes it out alive. It’s apparently good entertainment.”
“Some of them are doing parts of what we do now. But there’s still nobody that has put the whole platform together to unlock access to all alternative asset categories. We’re the only ones who have built a platform that connects what we reference as the supply and the demand side. The demand side is your investors. Supply-side is those who are trying to raise money and serve as the transaction hub.”
It was July 2021 when hackers impersonated Alto with Verizon and GoDaddy and got control of the two FA factors necessary to gain control of the company URL. Eric says it took close to two days to regain their domain. Those were the worst two days of Eric’s life.
“But the good news is that we had constructed our architecture such that getting control of our domain didn’t give it access to what they were looking for. But we still had to chase them around the world to shut them down and get back control of our domain. But that was easily the single most important technology challenge. It was also the beginning of our InfoSec team, which we didn’t have then. We probably accelerated our InfoSec activities by like five years.”
Alto’s current investment partners include AngelList, AcreTrader, Coinbase, EquityZen, Masterworks, Republic, and Wefunder. When we asked how Eric imagines a successful partnership, he answered this way:
“There is no secret formula or trick. The most important thing is to find investors you want to partner with and people who believe in you and your mission. When looking for investors, I knew enough, and I didn’t need people who wanted to run the company. I need people who can give me advice, guidance, understand their past experiences, and help us position ourselves in the future.”
We could not ignore the question of the near future of the industry. Eric believes that the downturn happening in crypto right now will be good for the crypto ecosystem. The introduction of regulation, a regulatory framework, and the institution that people can lean on will also benefit and contribute to the significant growth of cryptocurrencies and blockchain over the next ten years. And his company is determined to help investors take advantage of this growth potential.
“Another thing we will see is a more efficient way for everyone to invest in alternative asset classes. Marketplaces will evolve to help those looking to diversify their portfolios outside the public markets to reduce volatility and potentially increase returns. After all, you get true diversification not by investing in another fund, but by spanning alternative asset classes.”
In parting, we asked Eric to formulate advice that he could give to all other founders and what he would like to know at the beginning of his journey as a founder. And this is what we got:
“If you’re doing it for the money, don’t do it.”
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