Eric Satz: The Case for Alternative Assets

What’s it like building a fintech company from zero to over $1 billion under management?

What makes starting a business fun and how is it not fun at all?

These are some of the questions covered when Fortune’s Path founder Tom Noser sat down with Eric Satz, serial entrepreneur and founder of Alto, an investment platform that allows ordinary people to use money in their IRAs to invest in things that used to be available only to the ultrarich.

Key takeaways:

• Why Eric is such a believer in diversification of investment portfolios - perhaps even more so than investment alternatives like crypto, art, real estate and fine wine.

• The illiquidity of alternative assets is a feature, not a bug. 

• Bitcoin, like money, is an invention based on faith.

• Alto's three levels of operation: a software business which owns a trust company and also owns a securities company.

• What comprises 'luck' in business: hard work, opportunity, and a third vector: remaining open to what's happening in the market.

• The cost - and there is one - to entrepreneurship.

Tom Noser (00:00):
What's it like building a FinTech company from zero to over $1 billion under management? And what makes starting a business fun and how is it not fun at all? These are some of the questions I ask Eric Satz, serial entrepreneur and founder of Alto, an investment platform that allows ordinary people to use money in their IRAs to invest in things that used to be available only to the ultrarich.

(00:32)
Eric was the co-founder of Currenex, a foreign currency exchange platform sold to State Street and Plumgood Foods, a gourmet food delivery service before those were cool. He's been on the board of directors of the Tennessee Valley Authority, a partner with the Tennessee Community Venture Fund. Today, he's the host of The Altogether Show, and now leads Alto, an alternative investment platform that enables you to invest your IRA in things most retirement account providers don't, like art, crypto, real estate, startups, and other private market assets. Eric has experience in startups, FinTech, investment banking, and building something out of nothing, and he's our guest on the Fortune's Path Podcast.

(01:12)
Eric, it's wonderful to see you again.

Eric Satz (01:14):
Tom, it's great to be here. It has been a while, hasn't it?

Tom Noser (01:17):
It has been a while, yeah. I mean, it's several years, but you've been busy in the interim.

Eric Satz (01:22):
I have been. That's one word for it.

Tom Noser (01:27):

How long ago did you start Alto?

Eric Satz (01:30):
So the idea first came to me in 2013. I really started on it at the end of 2015, had a couple people put together in 2016, and we launched in 2018.

Tom Noser (01:52):
Oh, wow.

Eric Satz (01:52):
And as is often the case with startups, the things that were hardest, the largest sort of hill to climb, if you will, was not the one that was expected. And so we just had to roll with the landscape or with the punches. But eventually, we got there. We launched in Q1 of 2018, and after some hard times getting to that point, we started to find a little luck along the way.

(02:32)
And so if you roll the clock forward, we now have 30,000 clients and $1.2 billion in assets under custody, and the business has expanded and we're kind of just getting going now.

Tom Noser (02:51):
Geez. There's a lot to unpack in all that. So I'd love to talk about, first, if we can get a quick definition of what Alto is, but then I want to talk about the hills you mentioned in startup. I think that's a really good point of the hill you thought you were going to have to climb wasn't the one that was actually the hardest. So first, tell me about Alto and then tell me about that hill.

Eric Satz (03:12):
So Alto helps individual investors access their retirement accounts to invest in alternative assets. And you can kind of define alternative assets in a straightforward way, which is to say private equity, venture capital, direct company investing, real estate, artwork, fine wine, other types of collectibles, crypto, which I know you're skeptic of.

Tom Noser (03:39):
Yeah, no, but we'll talk about that in a bit.

Eric Satz (03:42):
Or you can sort of go around the barn backwards and you can say anything that's non-publicly traded, non-registered securities, those are alternative assets. And so that's what Alto does, or I should say that's what Alto did for the first five years of its existence, but today, in Q4 of last year, we added our broker dealer license, we launched the Alto Marketplace.

(04:07)
And so if you're part of the majority of the population who previously has not had access to alternative assets, either because you don't have the network, or you don't live in the Bay Area or you don't live in New York or you don't live in Chicago, well, now you can come to the Alto Marketplace and you can find those opportunities. So that's what Alto is.

Tom Noser (04:31):
Wow. So my dad, I grew up in a house that was around Wall Street, and my dad used to talk about the three rules of Wall Street. The first one is a sucker's born every minute. The second one is don't wise up a chump. And the third one is anything worth having is worth stealing. And so-

Eric Satz (04:54):
I am surprised he didn't say, "If you don't know who the fool at the table is, it's you."

Tom Noser (04:57):
That's right. So I have taken a very simplistic, primitive point of view in investing as a result of that education, which is that I'm an index investor. I just invest purely in the S&P 500. And last year was, I think, 23% or something. Maybe not. Anyway, and it's up like 5% this year. Tells you how closely I follow this stuff.

(05:23)
So why would I invest in fine wine or art or real estate for that matter, if it feels like the S&P is doing just fine and is fairly low-risk and simple to understand?

Eric Satz (05:37):
And I think the S&P did really well in 2023, at least the last quarter of 2023. It didn't look that way for most of 2023.

Tom Noser (05:49):
No.

Eric Satz (05:49):
And so I worked on Wall Street, I worked for several investment banks early in my career. That's not to say I was on a trading desk. I was an investment banker. What can I say? I'm skeptical of Wall Street. I think the whole thing's fucking rigged. I hope you're allowed to swear on this.

Tom Noser (06:07):
No, swear away. Swear away.

Eric Satz (06:14):
But I think it's rigged and I think very few people control the flows and they control the trading. And if you're on the right side of it-

Tom Noser (06:24):
Yeah, it's great.

Eric Satz (06:24):
Amen. It's awesome.

(06:28)
The one thing about index investing, by the way, is you will not beat the index because that's why you're doing it.

Tom Noser (06:35):
Right, right, right. That's why I'm investing in it, right.

Eric Satz (06:35):
Right? And if it's performing, you're in good shape. What people often ignore is the fact that what goes up also goes down. And it's not that I'm a believer in everything should be alternative assets. I'm actually a believer in diversification. And what is proven is that if your portfolio is diversified, you've got lower volatility and higher returns over a longer period of time. And at some point, if what you're doing is investing in index funds, at some point, all you're doing is getting one more index fund, you're not getting any more diversification. And so the only way to get that is to go outside of the public markets.

Tom Noser (07:26):
That's interesting. So there was a long time where different assets would move in different directions.

Eric Satz (07:34):
There was a time.

Tom Noser (07:35):
There was a time. Now it feels like everything sort of goes up and down in tandem. So there's a lot about investing that feels like it is now divorced from, I'll just say, reality or at least from underlying fundamentals, or is that a misconception?

Eric Satz (07:53):
No, I think that's true today. But I think if we put it in a broader context, interest rates were abnormally low for a really long period of time.

Tom Noser (08:10):
A long time.

Eric Satz (08:12):
And now, because the Fed has been correcting for inflation for, what, 18 months now, we're probably higher than where we need to be. Although, by the way, this is nothing compared to the '80s, right?

Tom Noser (08:29):
Yeah.

Eric Satz (08:30):
And I think you and I are old enough to... I didn't actually know what it meant, but I remembered, right?

Tom Noser (08:39):
Yeah, me too.

Eric Satz (08:40):
And so knock on wood, let's hope we don't go back there.

Tom Noser (08:48):
That's right.

Eric Satz (08:48):
Okay? Because that's a lot of real estate defaults if that's the case. And I don't think we are. I think second half of this year, we're going to see the Fed start to loosen again.

Tom Noser (09:01):
That's what everybody's hoping.

Eric Satz (09:04):
So once we have that sort of reset to where we think a long-term interest rate environment lives, and I don't think we're there right now, but it's not zero either, let's just call it three, I think then we can see some separation between what the stock market does and what the bond market does. But right now, it's all a little bit haywire.

Tom Noser (09:33):
It feels like they're... So I'm going to go back to my basics. It was supposed to be stocks would go up, bonds would go down; bonds would go up, stocks would go down. They seem to be moving in tandem right now.

Eric Satz (09:44):
I think what's often confusing to people is how the bond market works. So as prices go up, rates go down. And so what we saw or what we've seen happening is the stock market going up whenever Jerome Powell says, "We think we..." By the way, he doesn't say, "We think we have inflation under control"-

Tom Noser (10:09):
He never says anything. That's right.

Eric Satz (10:12):
... because he's smarter than that. But you have to read the tea leaves when any Fed governors speak. And so the trading market would get ahead of rates. And so the stock market's going up because we don't think rates are going to go up any further, and as a result, because we're expecting rates to go down, that means bond prices are going to go up.

(10:41)
So you've got bond prices increasing and you've got stock prices increasing at the same time, which is historically not what we're used to seeing or have happen. But once you get a new normal, then you can have bond prices and stock prices move in opposite directions.

Tom Noser (11:01):
You talked about how if you're index investing, you're not going to beat the index. In some years, it's great, and some years it's like... I think the historical is like seven, something like that, 7%? It depends on what part of history.

Eric Satz (11:14):
It's probably five to seven, somewhere.

Tom Noser (11:18):
Okay. Somewhere in there.

Eric Satz (11:18):
I'm just going to use a ballpark crunch.

Tom Noser (11:20):
Right, because it depends upon what timeframe you're talking about.

Eric Satz (11:22):
Yeah, yeah.

Tom Noser (11:23):
So how did alternatives do last year?

Eric Satz (11:26):
I honestly don't know how alternatives did last year, in part because alternatives were kind of frozen in place, so people weren't investing. People have been... I would say that from the second half of 2022 through most of 2023, people were kind of frozen in place with the respect to alternatives.

And also, a lot of folks were waiting for valuation adjustments, certainly on the early end of the curve, meaning new early-stage companies and how those would get priced. But also, you had a lot of companies who raise money in 2021, the height of the market, and investors were waiting those companies out because what they weren't going to do is put money back to work in those companies at those same inflated prices. And so that kind of bubble had burst.

(12:26)
So I guess what you could say is while there may not have been... The other thing you know about alternative assets is that you can't mark to market every day. You exit when you exit. But I would say that implicitly, you could expect that whatever happened in 2021, the next financing for almost 100% of all companies would be lower if a company needed money in 2022 or 2023.

(13:01)
And the thing that I really like about alternatives is the fact that most humans are really bad traders, by which I mean, we know what we're supposed to do, right?

Tom Noser (13:18):
Yeah.

Eric Satz (13:19):
We're supposed to buy low and sell high.

Tom Noser (13:21):
Low and sell high, right.

Eric Satz (13:22):
And human beings, because psychology is what it is, more times than not do just the opposite. But when you're talking about alternatives, you can't wake up and hurt yourself.

Tom Noser (13:33):
That's a good point.

Eric Satz (13:34):
You're like, "I cannot exit." And so you had a thesis, which is why you invested to begin with, and you got to ride it out.

Tom Noser (13:43):
Yeah. So illiquidity is a feature, not a bug.

Eric Satz (13:46):
I think it's a feature, not a bug. Correct.

Tom Noser (13:49):
Yeah, that's interesting. So let me go back to what we talked about a little earlier, which is you said the mountain you had to climb was not the one you thought. What was the one you thought, and then what was the one that you did have to climb?

Eric Satz (14:02):
So I'm going to reverse that.

Tom Noser (14:06):
Sure.

Eric Satz (14:06):
I'm going to tell you what the mountain turned out to be. So when I first got into this, the idea was to rip the people and the paper and the complexity out of a workflow process that made it really hard and inefficient for millions of people to participate in alternative assets using their retirement account. I thought the easy part was going to be what I would describe as renting a custodial license from another trust company. That turned out to be the really hard part. And that's what took us so long to get to market.

(14:52)
The workflow actually turned out to be, while it's always hard to take something that's incredibly complex and turn it into something simple that people can follow, it takes time. And so as long... It turned out we had way more time than we needed because of the custodial piece, and so that's where it got reversed.

Tom Noser (15:20):
Interesting. It sounds like it was more a legal challenge than it was a technical challenge.

Eric Satz (15:29):
And it was a legal challenge. I might describe it as even a business challenge. So when other trust companies understood what it was we were going to do to the industry, they weren't so keen to work with us.

Tom Noser (15:45):
To work with you?

Eric Satz (15:45):
Yeah.

Tom Noser (15:47):
How did you get around that?

Eric Satz (15:49):
I eventually found a partner where the fit was appropriate, and we worked with them for a couple of years and we learned how to be a trust company. And then we filed our own charter.

Tom Noser (16:05):
Nice, yeah. So particularly in... Because I'm going to give you a hypothesis, feel free to say, "This is not true." When you're starting something, do you need to find co-conspirators?

Eric Satz (16:22):
By which you mean co-founders?

Tom Noser (16:25):
No. People who share a desire to shake things up in a way similarly that you do, so part of their motivation is to make a stink.

Eric Satz (16:40):
I think it depends. One of the things that I have learned over the last five years is that the first five employees are different from the first 20, which are different from the first 50, which are different from the first 100. And there's a different level of risk tolerance. There's a different level of acceptance of ambiguity. There's a different sort of characteristic or desire to wake up in the morning and just go figure shit out.

(17:19)
And in the very early days, you have people who can wear lots of hats, and that's where they get energy from. And in the later days, you get people who... You need people who can do specific things. And the people who used to wear lots of hats may not fit anymore or they may not be interested in the role where they're just kind of doing one thing. And so there's a lifecycle to the company the same way there's a lifecycle to our life, and depending on what age we are.

Tom Noser (17:58):
How big is Alto now in terms of employees?

Eric Satz (18:00):
We are 60-some-odd people.

Tom Noser (18:02):
Are you happy at that point? You want to...

Eric Satz (18:06):
I am very happy at 60 people right now, yeah.

Tom Noser (18:09):
Yeah. Was it that guy, Sam Altman I think is the guy who does ChatGPT, says he wants the... He's looking for the one-person billion-dollar company that uses AI.

Eric Satz (18:18):
And I'm not going to bet against Sam. Right now he's out there trying to raise trillions of dollars for his next thing.

Tom Noser (18:27):
For his next thing?

Eric Satz (18:29):
That's another level.

Tom Noser (18:30):
That's another level.

Eric Satz (18:31):
Yeah.

Tom Noser (18:33):
Well, that sort of takes me to crypto.

Eric Satz (18:36):
By the way, in my very first PowerPoint that I used to raise money for Alto, I had a quote from Sam that came from a tweet he had put out that basically said it was crazy that he couldn't invest his retirement money in alternative assets.

Tom Noser (18:58):
That's interesting. Now, was there a change in law that allowed people to invest their retirement income in alternative?

Eric Satz (19:06):
There was not actually. So when ERISA was created in the early 1970s, it allowed for this. It's just nobody did it.

Tom Noser (19:14):
Nobody did it. So the institutions grew up around it saying, "We're not going to let you do that."

Eric Satz (19:20):
Well, also, I think if we go back in time, alternative assets weren't a thing. It wasn't until Blackstone, in its early creation, started to invest in companies directly, and then you saw a bunch of investment/merchant banks begin to do it. And eventually, this whole asset manager universe, probably driven by KKR and TPG and Apollo and others, where they were going out and they were raising money from large institutional investors, endowments, pension funds, insurance companies, et cetera-

Tom Noser (20:13):
It all goes to those guys in the end.

Eric Satz (20:14):Right. And then everybody saw the returns that these guys were generating, especially when some of them went public and you got an inside look, and then the ultra-high-net-worth investors said, "You know what? I want some of that. How do I participate in that?" And so it's been 20-some-odd years of growth and evolution in this space.

(20:41)
And what we're trying to do, what our mission has been, is to make some of that accessible to everybody else. And so...

Tom Noser (20:52):
Let me sort of poke the bear a little bit on this. So along with the things-

Eric Satz (21:00):

That's why I'm here, Tom.

Tom Noser (21:00):
That's why you're good. With some of the things we talked about earlier about, like you said, if you don't know who the sucker at the table is, it's you, so one assessment of private equity is that it's based on the greater fool theory. There's always somebody willing to pay more for this asset than I paid for it. And so if we think about all the money that's gone into the economy, all of this inflation, all the printing of money, for many years before inflation really showed up, where was all that money going? And you can probably make a case to say, "Well, it went into asset classes."

(21:41)
So the market, whether it's the public markets or private markets, assets became highly inflated because there was a lot of money chasing too few things. So you can release some of that pressure by developing alternative assets. We probably both know a guy who has essentially a hedge fund around whiskey, or as you're saying, fine wine or art, all kinds of anything can be financialized. It's sort of what fungible tokens... I forget the right name. Anyway.

Eric Satz (22:17):
NFTs.

Tom Noser (22:17):
Thank you. NFTs.

Eric Satz (22:19):
You're welcome. Which I think are total fucking horseshit, by the way.

Tom Noser (22:22):
Me too, me too. Yeah.

Tom Noser (22:23):
Yeah, total horseshit.

Eric Satz (22:25):
Yeah.

Tom Noser (22:27):
So you're saying the professional investment class says, "Okay, we've run things up pretty high here in private equity. Who's the greater fool? Oh, it's the public. Let's get them where they can start buying into private equity and we'll begin to pass our mistakes onto them," which is a tried and true Wall Street strategy.

Eric Satz (22:52):
So you may be surprised by this-

Tom Noser (22:54):
Please.

Eric Satz (22:55):
... but I entirely agree with the last statement. The idea that the SEC protects the public investor when a company goes public is bizarre. It's nuts.

Tom Noser (23:07):
Yeah, I agree.

Eric Satz (23:08):
It is. The SEC doesn't opine on the quality of a deal. It just says whether or not you've checked all the boxes. But I think that's less about private equity, by the way, and more about venture capital. And what we've seen, if you go back in time, at one point we had close to 9,000 public companies. Today we've got, I think, less than 4,000. And so companies have stayed private longer and longer, which simply means that if you're not participating in these private opportunities early, you're not going to get the return that you used to get in the IPO market. That's gone. It's been whittled away by many, many rounds of private investing prior.

(23:56)
I do not believe in the greater fool theory as one might apply to a private equity lifecycle by itself. When you have one private equity firm taking out another private equity firm, that's typically at different stages in the lifecycle of the company. You got a lot of really smart people doing a lot of homework to figure out whether or not the investment that they put in is going to take the company to the next level. It doesn't mean they're always right.

Tom Noser (24:36):
No.

Eric Satz (24:37):
I mean, life just doesn't work that way. So I don't believe in the Greater fool theory within private equity. I do think there can be an unfortunate greater fool theory when companies go from $100 million to $250 million to a $500 million VC round, and they're running out of money and the board says, "Let's go public."

Tom Noser (25:11):
That's right.

Eric Satz (25:12):
Right?

Tom Noser (25:15):
You mean like WeWork?

Eric Satz (25:16):
The reason they're going public is nobody else is ponying up. And nobody writes that fucking book, by the way. Somebody should write that book. And we saw it in... God, I'm trying to-

Tom Noser (25:31):
WeWork just did it.

Eric Satz (25:33):
Well, WeWork did it, but we saw it in the grocery delivery business more recently. And it's like no one's willing to put up any more private money-

Tom Noser (25:52):
So let's go to the public markets.

Eric Satz (25:53):
... so let's go to the public markets.

Tom Noser (25:55):
It's interesting.

Eric Satz (25:55):
And I hate that.

Tom Noser (25:56):
Yeah. So you had talked a little earlier about how you felt like Wall Street was a rigged game. Tell me why you think it's a rigged game.

Eric Satz (26:06):
I just know that... So I don't have incredible data around this, okay?

Tom Noser (26:12):
Sure.

Eric Satz (26:12):
This is my intuition. There are certain firms in the world that control the majority of money flows. And if you're on the opposite side of what they do, you lose. If you're on the same side, you do okay. Not as good as they do-

Tom Noser (26:33):
Right, you do okay.

Eric Satz (26:35):
... but you do okay. And so I think the idea that the public markets are where there's no concentration and incredibly diverse, I think that's just shrunk. There is significant concentration.

Tom Noser (26:55):
And so it sounds like that's one of the things that attracts you to alternative assets is that there hasn't been the same level of concentration yet.

Eric Satz (27:04):
Well, not only has there not been the same level of concentration, but I feel like you can do... So let's talk about GameStop.

Tom Noser (27:16):
Yeah, yeah, yeah.

Eric Satz (27:19):
You can do a shit ton of homework on GameStop. You can know that it is not worth-

Tom Noser (27:24):
No.

Eric Satz (27:25):
Right? This is it. It is not worth what it's trading at. And yet, what's interesting is it reversed in this case where it used to be that you could have an institution drive the stock price one way or another, where here you had the public via Reddit act like an institution to fuck the institutional investor. Right?

Tom Noser (27:52):
Yeah.

Eric Satz (27:53):
They were all wrong. GameStop just was nuts. But it doesn't matter. And so what I don't like is that the fundamentals are irrelevant and can be irrelevant in the public markets. In the private markets, the fundamentals should drive returns.

Tom Noser (28:09):
They should, yeah. But so there's-

Eric Satz (28:15):
By which I mean company success, okay?

Tom Noser (28:17):
Yeah.

Eric Satz (28:18):
And whereas a company could be successful or not successful in the public markets, and it doesn't matter.

Tom Noser (28:27):
Well, so we'll talk about real estate for a second. So the former president is being sued by the state of New York for fraud. And he is saying essentially, they're like, "Well, you've dramatically overestimated the value of your assets." And his response isn't untrue. His response is, "The value of these assets is whatever anybody will pay me for them."

Eric Satz (28:48):
I agree with that statement.

Tom Noser (28:49):
Yeah. I mean, I agree with that statement too. And he also was saying, "Because I was president and maybe president again, I'm going to get a premium on a building that other people won't get."

Eric Satz (29:02):
That may or may not be true.

Tom Noser (29:03):
May or may not be true. But if he's selling it to the Russians and the Saudi Arabians, it probably is true.

Eric Satz (29:08):
I agree. Which takes us in a whole other direction.

Tom Noser (29:12):
A whole other direction. But the point I'm trying to make with that story is that you mentioned earlier how in a private market, things can't be mark to market every day, so that makes valuations pretty difficult.

Eric Satz (29:24):
It can.

Tom Noser (29:25):
It can be. Yeah, it can. So how do I know the fundamentals are driving the value of an asset where I really don't know what the value of the asset is?

Eric Satz (29:38):
You don't know if the fundamentals are driving the value. What you know is whether or not the company is performing. But at the end of the day, the private company valuation isn't any different from the real estate valuation; it's what somebody else going to pay. But I don't believe that is dependent upon a greater fool theory. I think that's people doing homework trying to understand what the future growth of the business can be.

Tom Noser (30:11):
But there is, in private equity, there is a pressure to turn over your portfolio. I mean, I don't know if there are a whole lot of companies that are sitting on a... They had a private equity investment 10 years ago, and they still have that same investor at that same level.

Eric Satz (30:27):
Oh, actually, I think there are more and more companies who are, or I should say, more and more investors who are 10 years in with a given company, in part because there's a portfolio theory at play. They're not betting on just one company. There's what's often referred to as the power law, which is like, hey, just sort of akin to portfolio diversification for an individual investor, each of a venture capitalist or a private equity investor is looking for portfolio diversification too. And sometimes you're in for 10 or more years, and that's just kind of the way it is today.

(31:15)
The other thing is we have a lot of family offices who, most of them are actually long-term investors, and they do not have the same level of pressure as maybe an institutional private equity or venture capital investor may have to try and figure out how to exit or get liquidity. And so I think this market continues to evolve. And that's not to say that we won't go in the reverse direction at some point, but I think you can find a lot of investors with companies that they've been in for 10 or more years.

(31:54)
The other thing that's happened is the investor-company relationship has changed. And so when you're looking for money as an entrepreneur, founder, CEO, whatever it is, oftentimes there's this pitch from the investor that, "We're in it for the long haul." Some people mean it, some don't.

Tom Noser (32:22):
Some people don't.

Eric Satz (32:24):
But to the best of your ability, you're going to look for references the same way someone hiring someone is going to look for references to know whether or not they really mean it. And if you find the right investors, they're going to be in it with you for the long haul.

Tom Noser (32:43):
So let me talk the structure of Alto. You talked that you had to become a trustee and you just got your broker dealer license. So are you a hedge fund or are you... No. Okay. Talk to me sort of about what your structure is.

Eric Satz (32:58):
So we have a software business which owns a trust company and also owns a securities company. And so the Alto Solutions business enables easy transaction execution for someone to access retirement dollars to invest in some alternative asset. The trust company is the custodian on behalf of those IRA investors.

And now with the marketplace, the securities business is the broker dealer introducing buyers and sellers for assets that people didn't know they could invest in before or didn't know how to access. In the first example, you can bring your own deal to Alto. In the second example, you're coming to do search and discover.

Tom Noser (33:56):
So do you... Bring your own deals. So let's say that first example, say I want to invest in Kentucky bourbon, and how would I do that through Alto? Would I need to know, "Oh, I found Barrel Stock Trading Company. They invest in Kentucky bourbon. I want to buy some of Barrel Stock"? And do they then come to Alto or how does that process work?

Eric Satz (34:25):
So assuming that Barrel Stock is raising a fund, either you, Tom, come to Alto first and establish your IRA and invite Barrel Stock to create an issuer account. So we have two types of accounts. We have the investor account and we have the issuer account. You're the investor, Barrel Stock's the issuer. Barrel Stock's raising a new fund. So either you can create your Alto IRA account first or Barrel Stock can create its issuer account first and then invite you.

Tom Noser (34:59):
Gotcha.

Eric Satz (35:00):
Okay? And so the only people, in this bring-your-own-deal construct, the only people who see the Barrel Stock offering are the people that Barrel Stock invites to the deal.

Tom Noser (35:12):
Yeah, because some of these alternative investments have a cache related to their exclusivity and so they don't necessarily want to be public or publicly listed. They want to be an invite-only kind of thing. So it sounds like this absolutely supports that.

Eric Satz (35:34):
It does. It does.

Tom Noser (35:35):
Okay. It's interesting. So if I have my IRA and it's like, "Okay, I want to get involved." So my IRA is in Vanguard, that's okay, just transfer some of that money into Alto and it starts off in a, I don't know, like a cash account essentially.

Eric Satz (35:57):
Yeah. So you'll go to Alto, you create your new either traditional Roth or SEP IRA at Alto, and then from Alto, you're going to initiate a transfer of cash from Vanguard over to Alto. No tax consequences whatsoever. You can transfer between IRA account and IRA account as many times as you want.

Tom Noser (36:18):
I gotcha. And then at that point, now I'm open to go after these alternative investments.

Eric Satz (36:24):
That's right.

Tom Noser (36:25):
All right. So I forget which famous investor, but there was a guy who said, "Never invest in things you don't understand." I don't remember which ones. Probably more than one guy said that.

Eric Satz (36:33):
I think a lot of people said that.

Tom Noser (36:34):
Said that, right. And so if I'm like, "You know, I think fine wine sounds like a really interesting investment, but I don't know anything about fine wine," why would I want to invest in fine wine?

Eric Satz (36:46):
Because you want to go learn about it. You have an interest. The interest may originate from the fact that you had a great bottle of cab the other night with a friend of yours, but you should go learn about it and you should research the industry. It turns out that wine has historically great returns. That's why... Me, I like to drink it. But we actually have a fund offering right now with a company called Vint that is raising money for a wine, I think it's wine and whiskey, but what I'll say is you should go to AltoIRA.com and-

Tom Noser (37:25):
And check it out.

Eric Satz (37:26):
... go to our marketplace and check out the Vint offering and it's pretty popular.

Tom Noser (37:30):
And so when you say, "Historically good returns," what does that mean?

Eric Satz (37:36):
It's the same as the art market or the baseball card market or the antique automobile market, which is that over time, you actually get returns that exceed the public market returns.

Tom Noser (37:54):
So are we going to see things like synthetics in things like the antique car market? There's only so many antique cars that can actually be purchased. It's like gold. Their value is based on their scarcity. But we've seen synthetics and other markets-

Eric Satz (38:11):
I actually don't understand the value of gold, but that's a different story.

Tom Noser (38:14):
Yeah. It's the same thing as the value of coin.

Eric Satz (38:18):
You don't understand the value of Bitcoin, I don't understand the value of gold.

Tom Noser (38:18):
Right, understand the value of gold. To me, we could talk a little bit about that, these things are all based on faith, in my opinion. There is no such... Money is an invention.

Eric Satz (38:30):
I totally agree with you by the way.

Tom Noser (38:32):
Yeah. So it's just the-

Eric Satz (38:33):
Which is why Bitcoin with me from day one.

Tom Noser (38:37):
So tell me why it resonated with you. What was it about Bitcoin that was interesting?

Eric Satz (38:43):
Because of the point you just made, which is if people believe and if people understand that this is going to be our currency, and enough people believe, then it is so. There is no other reason. It just is so. The same way you know it started with shells on a necklace, and eventually we got to golds. And by the way, there was value in gold when the US dollar was on the gold standard. Totally get it. As soon as we went off, don't get it. Right?

Tom Noser (39:24):
Yeah.

Eric Satz (39:25):
Show me how you're going to eat with gold, and I'll say you can eat just as much with Bitcoin.

Tom Noser (39:31):
Right on point. So I guess it's how many people would accept gold in a transaction versus how many people would accept Bitcoin in a transaction?

(39:39)
Now, the reason why I don't think Bitcoin's ever going to take off, it has had some regulatory success recently. I can't remember exactly the details, but it was approved for some form of trading. Maybe it's an ETF, I'm not sure.

Eric Satz (39:52):
It was. The spot ETFs were traded, were approved for 12 or 13 different issuers, including the largest asset manager in the world, BlackRock, followed by Fidelity, by the way.

Tom Noser (40:06):
Right, so we're looking at concentration once again.

(40:10)
The reason why I don't think Bitcoin can win against fiat currency is that Bitcoin has no army, that ultimately, what the value of the United States dollar is is based upon the strength of the United States' military.

Eric Satz (40:26):
We should print some more money.

Tom Noser (40:28):
We should probably print some more money. Yes.

Eric Satz (40:34):
By the way, I'm not burning or throwing away my dollars anytime soon.

Tom Noser (40:37):
No, no. But I mean, this is one of the fascinating things about... My own investment philosophy is random walk, which is like nobody knows. This year, one thing does better the next year. It's very difficult to tell what's going to be in style and what's out. And that's why it's like, "Okay, no, I don't think anybody beats the index consistently so I'll just be the index and be happy with that," because it feels to me like it's just a bet in the future and that's very hard to know.

(41:10)
Why is that wrong? What is wrong with that point of view?

Eric Satz (41:13):
I don't think it's wrong. I think it's different strokes for different folks. I think that's what it comes down to.

Tom Noser (41:21):
Do you get a lot of satisfaction when you have something that it's like, "Oh, yeah, your S&P was 23 and my fine wine was 80," or whatever?

Eric Satz (41:29):
No, I don't... That's kind of irrelevant to me.

Tom Noser (41:35):
So what attracts you to the investing business? What attracts you to finance?

Eric Satz (41:46):
It's a funny question because it's not that I'm interested in the investing business or in finance. I'm interested in building companies, and that's what I do. And in this case, I saw this enormous gap where ultra-high-net-worth and professional investors could participate in a significant financial opportunity, but the rest of the world couldn't, and I wanted to fix that. That's what I was attracted to.

Tom Noser (42:21):
So are you going to keep this business for a while?

Eric Satz (42:22):
I hope so.

Tom Noser (42:23):
But if you like building businesses, will you move on to something else?

Eric Satz (42:29):
It's a fair question that I don't have an answer to. You know, I'm getting old, Tom.

Tom Noser (42:35):
Well, in my opinion, every business is like a bond. So it has a face value that is determined by the market and it produces some return on equity. And so you can say, "Well, if I sell my business, I get X of profit. But if I keep it for," and that assumes seven years of profit, "well, if I keep it for 10 years, maybe I'm better off. Depends on what I'm going to do with the money I get from that sale."

(43:06)
But to me, businesses are sold for a lot of reasons. I think most of them are emotional. It's like you reached a certain stage where you're like, "I've had enough," or, "I want to try something else," or, "I think this is my capstone. This is going to be the happy ending of this chapter of my life." I don't think selling businesses are 100% financial decisions.

Eric Satz (43:33):
They aren't. And by the way, the seven years, 10 years, three years, five years, it's like what kind of growth do I expect? So that's a huge component of it.

(43:49)
As you know, this isn't my first rodeo. I'd like this one to be the last one. I don't know that I want... People read all the stories. Startup life is hard.

Tom Noser (44:10):
It's very hard.

Eric Satz (44:11):
It's just hard. And it's hard to get from time zero to one year later. It's hard to get from one year to two years. We're more than five years into it, so we've done a bunch of... We have both done a bunch of things right and we've gotten lucky. And what I don't think a lot of people understand is that luck is required.

Tom Noser (44:37):
I actually think that luck is the majority of success, but-

Eric Satz (44:42):
I'm not going to argue with you.

Tom Noser (44:43):
Yeah. But the trouble about it is that I can't depend on it. Luck, by definition, I can do nothing about. All I can do, the thing I can control is how hard I work and how intelligently I work.

Eric Satz (44:59):
People like to say that luck is the intersection of hard work and opportunity. I tend to add a third vector, which is awareness because you could be working really hard on a really big opportunity, but if your eyes aren't open to recognizing what's happening in the market at the right time, then you miss it. So I do think there's a third component. And you make your own luck. I think people are referencing the hard work and the opportunity component of it. I do think that's true. It's still beyond your control.

(45:59)
But this is why, when you talk about startup businesses, and there's a lot written about it and spoken about it now because of the lessons from startup company classes out at Stanford and where else, but prove product market fit. It still amazes me the first person that gave us money to invest in an alternative asset. Sure, I know that... I started the company because I had this problem. It was too hard. It took too long. It's too expensive. It made no fucking sense. I'm like... IRAs are the largest bucket of retirement money in the country.

Tom Noser (46:58):
Yeah, they're enormous.

Eric Satz (46:58):
Like $13-plus trillion. Right? I like opportunities. Let's start with trillions.

Tom Noser (47:02):
Trillions, yeah.

Eric Satz (47:03):
Right? Basically Sam Altman and I trust the same. Right?

Tom Noser (47:10):
Yeah, go ahead.

Eric Satz (47:11):
So $13 trillion, and most people think 401(k)s are the biggest, but they aren't. They're sort of like between $8 and $9 trillion. And IRAs are growing at a faster rate than 401(k)s. The reasons, I'm not going to go into.

(47:28)
I totally forgot the question now.

Tom Noser (47:30):
It's all right. We were talking about luck. We were talking about the element that luck plays in your success.

Eric Satz (47:37):
Right. And so the idea that someone would give us money, it's still crazy to me, but you had to put the shingle out. When I tell you that the system we launched with relative to the system we have today is like there's no fucking way I knew we could build what we have today. And it's pretty fucking awesome. What we launched with? Oh my word.

Tom Noser (48:12):
But it was good enough.

Eric Satz (48:14):
That's the point. It was MVP, minimally viable product. And somebody gave us money! And then the next person gave us money, and then all of a sudden 50 people gave us money, and now 30,000 people have given us money. Right?

Tom Noser (48:33):
It's pretty amazing.

Eric Satz (48:34):
It's pretty cool. It's pretty cool to think about.

Tom Noser (48:37):
Yeah, yeah. So I recently produced my second book and I sold a box of 48 books to a really, really cool shop here called Shop Alice. It's a beautiful women's fashion store. The woman who runs it, Betsy, has been in the business forever, and she just, I guess, liked me. No particular reason for her to buy 48 books. That $432 is the most fun money I've ever made in my life.

(49:11)
And so I think there's that feeling of somebody believed in me, this dream I have, take this out and somebody says, "Sure, here's some money. Congratulations on your dream." That, to me, is what startupness is. It's not showing up on the cover of Wired Magazine-

Eric Satz (49:34):
It's not.

Tom Noser (49:35):
... being famous. It's that feeling of, "Wow, this was nothing, and now it's something." So what advice, I mean, I'm sure you talked to a lot of young people who are starting businesses, what advice do you give them? What are the mistakes that you just like, "Don't do what I did"?

Eric Satz (49:53):
The first thing I say is, "Don't do it."

Tom Noser (49:54):
Don't do it, yeah.

Eric Satz (49:55):
Yeah. And if that's enough to stop them, then they definitely shouldn't do it then.

Tom Noser (49:59):
Then they definitely shouldn't do it. So what's been... I mean, you've been, like you said, this isn't your first rodeo. I mean, Plumgood Food... Yeah, keep going.

Eric Satz (50:08):
So I want to add to the answer to a question you asked a few minutes ago, and I think this may be where you're heading a little bit. I love creating something from nothing. I just do. I have not yet, in my career, gone from where we are today to where Alto is today to the next level. And along over the course of the last couple of years, my wife has said to me, "Are you happy?" And there are times where I'm like, "I don't know."

(50:51)
But ultimately, with a bunch of self-reflection and talking to a coach and to my friends and to people in the company, what I really want to do is see us to that next level. I've done the zero-to-one thing. And I like it, don't get me wrong. I'm looking for a different challenge.

Tom Noser (51:16):
Yeah. That question, are you happy, I've actually tried as a cold call. I'll call people up with product in their title and say, "Conducting research, trying to understand are you happy?" And it stops people. They're like, "Uh, yes, I guess. I don't know." A lot of people can't answer that question.

Eric Satz (51:36):
So I think that people who just immediately say, "Yeah, I'm happy," aren't really thinking about the question.

(51:50)
What I will tell you is that I am happy. I'm really happy, but maybe not for the reasons that outsiders think. I love seeing what happens to our team members as they grow from one position to another, and as their skillset evolves, and as their confidence grows. And I love seeing our team members experience success, real success.

(52:30)
So look, we've raised a lot of money at Alto, and every next day, I say to the team, "Don't believe the hype." Companies aren't about raising money. They're about reaching profitability and sustainability and making the lives of their customers better, and when you do that, when we get the feedback which says...

And we're a "Trustpilot company," which means that people come online and they do something with Alto, and afterwards, they get an email which says, "please tell us about your experience, blah, blah, blah." And I think we're at a 4.5 out of five, which in finance, is kind of hard to do, and it's serious business. And when people see that feedback and when people get to understand that they created that experience, that's pretty cool.

Tom Noser (53:36):
Very cool. So to me, what you're describing is child-raising and that idea of seeing them grow in maturity, seeing them have success. My kid's success is vastly more rewarding than my own.

Eric Satz (53:50):
I have a... God, I don't know if he's 24, maybe 25 now, a guy on our team who went to Columbia undergrad, wrote his thesis on the importance of alternative asset investing. We hired him as an intern out of school. He now runs product at Alto.

Tom Noser (54:15):
Oh, that's fabulous.

Eric Satz (54:16):
He served as chief of staff for me for a year. To see his growth... And by the way, he wants to leave and be an entrepreneur and I'm 100% supportive. But to see his growth and evolution is awesome. And that's just one story.

Tom Noser (54:38):
Yeah, yeah. So you talked a little bit earlier about the cost of entrepreneurship, but there's a lot of like, "Wow, this is a lot of fun. We have a great time. We play ping pong, we get rich."

Eric Satz (54:52):
We don't play ping pong.

Tom Noser (54:53):
Yeah. Tell me about the cost.

Eric Satz (54:56):
If your family is not bought in, if your partner or your spouse, the person you live with, whatever you want to call them, if they're not bought into what you have chosen to do... And by the way, I'm not just talking for the CEO or founder; I'm talking for everyone who joins an early-stage company. If your family is not bought in, it's not going to turn out well. It's just not because it is a roller coaster.

Tom Noser (55:32):
Yeah. I think it's like being in a band. You know?

Eric Satz (55:39):
Yeah.

Tom Noser (55:41):
Your odds of success are very, very low. A lot depends upon how you all get along, but there has to be a leader. Every band has to have somebody who books the gigs. There has to be a leader.

Eric Satz (55:58):
What I would say on that front is I've been incredibly fortunate with our team members. I have an incredible chief people officer. I think she's the heart and soul of the company. I have another senior leader who's only been at Alto for a year, but the glue that he has brought to the organization has been spectacular. And we each have different skillsets, and you need that as you grow. I am not an in-the-weeds, detail-oriented person. I'm more bigger picture, macro level, story type, corporate development, business development stuff. These other people are really great operators. And you got to have that.

Tom Noser (57:03):
Yeah, but you didn't have those immediately, right? I mean, we're not working-

Eric Satz (57:04):
No, definitely not. Definitely not.

Tom Noser (57:07):
I mean, initially, you had to, as you talked about product market fit, to me in the beginning, it's like, "What can I sell and do I have a repeatable sales process?"

Eric Satz (57:15):
Right. So I can run a company at 20 people or 30 people. Running a company at 60 people requires a different level of organization.

Tom Noser (57:28):
Yes.

(57:30)
Eric, this has been a lot of fun. I really appreciate you coming into the studio to talk to us today.

Eric Satz (57:34):
Tom, thanks for having me, man. It was really great to see you again.

Tom Noser (57:37):
Great to see you.

(57:37)
The Fortune's Path Podcast is a production of Fortune's Path. We help SaaS and health tech leaders unleash the power of expert product management and competitive intelligence. Find your genius with Fortune's Path.

(58:00)
Special thanks to Eric for being our guest. Music and editing of the Fortune's Path Podcast are by my son, Ted Noser. Look for the Fortune's Path book from Advantage Books on fortunespath.com.

(58:12)
I'm Tom Noser. Thanks for listening, and I hope we meet along fortune's path.