Wealthsimple’s Mike Katchen on Challenging Canada’s Banking Oligopoly, Achieving Profitable Growth, and Building for the Future

In this episode of the Startup CEO Show, Mark MacLeod interviews Mike Katchen, co-founder and CEO of Wealthsimple. Mike shares insights into Wealthsimple’s impressive growth to $50 billion in assets under management, his ambitious vision to become Canada’s largest financial institution, and the key decisions that transformed a small startup into a serious challenger to Canada’s banking oligopoly.

The conversation explores Wealthsimple’s evolution from a wealth management platform to a comprehensive financial services provider, the challenges of scaling a fintech in Canada, and Mike’s thoughts on entrepreneurship and innovation in the Canadian market. Stay tuned to get a rare look into the mindset of one of Canada’s most successful fintech entrepreneurs.

Without much ado, here’s the full interview with Mike Katchen:

Mark MacLeod:
In this episode, I sit down with Mike Katchen, co-founder and CEO of Wealthsimple. Wealthsimple just celebrated its 10th anniversary and Mike’s goal is to turn Wealthsimple into Canada’s largest financial institution.

They just crossed $50 billion in assets under management and added about half of that just in the last 12 months. So they have huge momentum.

In this episode, we unpack the journey for both his company and for himself. We talked about his thoughts on entrepreneurship in Canada and much more.

Mike, welcome to the Startup CEO Show. It’s a true pleasure to have you here today. How are you doing?

Mike Katchen:
I’m great. It’s great to see you. Thanks for having me.

Mark MacLeod:
Great to see you. It’s been a long time. I was trying to remember before this when I first met you, and I think it was at Metabridge in 2017, lifetimes ago, and we all got off of some event and I feel like you were there waiting for us with Wealthsimple marketing materials. And I was just like, this dude’s hustling. I was just instantly impressed. And that was maybe three years into your journey and here you are, just celebrated your 10th year. And so there’s so much I want to unpack.

And I’d love to start by discussing your ambition to become Canada’s largest financial institution. When I think about the Canadian economy, I think about financial services and resources. Other than Shopify, I don’t think about technology and that’s an issue. I think that has to be the third leg of the stool. But let’s focus on financial services because we’re here.

So, you just crossed 50 billion in assets under management by my math to be the biggest, you got to 22x that and beat RBC. So just tell me about your ambition to become Canada’s largest financial institution.

Mike Katchen:
I actually think it might be closer to 40x. It’s a big number. Whatever it is we have to achieve it. I mean, I think that both your assessment of Canada’s economy and its tech are similar. We have to fix what’s broken about Canadian business. We do two things. We don’t even do them all that well. We can’t build any new minds and resources, even though we entirely depend on resources as our economy today and we have a desperate need, I think, to diversify and technology is the best bet to do that.

But in areas where we’re strong like financial services, it’s bred this oligopoly that has made Canadians complacent. We’ve come to just accept a subpar experience and egregious fees. And that’s not just in banking, it’s in several different industries. Canadians are very familiar with it. And I think that it’s a shame.

And I think what we’re trying to do at Wealthsimple is transform that, build the kind of firm that I think Canadians deserve, which gives them the very best experience in the world when it comes to their financial services and managing their money really fair and low fees that help them get ahead and compound and build real wealth and the long term ability to take care of themselves and their families. And I think we’re fortunate, we’re having a good go at it, but we have a long way left to go.

Mark MacLeod:
When I think about the big five banks and how they intersect with technology other than being a personal client, that’s been my only kind of exposure to them given that I’ve only been in this tech industry for as long as I can remember, I would describe them as reluctant innovators.

So we say we’re doing things, but we don’t want to genuinely do things. And I have to imagine that Wealthsimple is very firmly on their radar screen now. So, how does that manifest for you? Are they sending you hate mail? Tell me about your relationship, if any, with the big five banks.

Mike Katchen:
It’s a weird industry where on the one hand, we are fierce competitors, on the other hand, we depend on the banks for a lot of what we do. And so there’s this very robust commercial partnership where we work together on a whole bunch of different things. But on the competitive side, I would say that probably for the first eight or nine years, I think the general attitude of the industry was, that’s cute, but we don’t need to take Wealthsimple all that seriously. And if they ever really do make it, we’ll either crush them or buy them and so it’ll be fine.

And I think something has changed pretty dramatically in the last 24 months where the numbers are rivaling those of the banks. The best metric we care about is net deposits. How much new money are Canadians trusting us with every year? We’re in the business of trust. We ask people for their life savings. And so it’s the best measure of whether we’re doing well on that dimension.

And I think we will crack the top five institutions in Canada this year for the first time on that metric. So that’s a huge milestone for us.

Mark MacLeod:
That’s amazing. Congrats. That’s huge.

Mike Katchen:
Thank you. It’s super exciting. I mean, we want to be number one. So, I think that it’s one of those funny things. You achieve something you never imagined you would, and then all you can think about is just how much farther you have left to go. So we’re really obsessing about how we can get from the top five to number one as quickly as we can.

Mark MacLeod:
I’m always fascinated with CEOs’ mindsets. Like, do you stop and smell the roses at all? Or are you just continuously focused on the gap and what you haven’t achieved yet?

Mike Katchen:
The latter. It’s funny, we just celebrated our 10th-anniversary last month, and we were doing a little panel of the founders with the whole company, and people were asking all these interesting questions, and someone asked, hey, Mike, does it ever get to your head? And I said, I really hope not. And I really don’t think so.

And I think the best reason I could give you is I think the culture of Wealthsimple, in some ways, is a reflection of my dad. And people joke that you grew up with a dad and you’ve come home with an amazing mark on an exam. Their question is what happened to the last 1% or whatever it was? And I don’t ever remember my dad complimenting me growing up.

It was his 75th birthday a couple of years ago, we were a little delayed, but I took him on this golf trip to celebrate earlier this year, and we had this amazing father-son day. Golfing, fishing, ending the day with a scotch over sunset. It was just an amazing moment.

And he turned to me at sunset, and he looked at me and he said, Mike, I’m really proud of you. It was the first time in my life that he said something like that. And then he decided to continue and said, as a child, you really didn’t show any signs of leadership.

Mark MacLeod:
Wow, backhanded compliment. That’s fire.

Mike Katchen:
And I told the story to the team and I said, I really apologize to all of you. We’ve done some amazing things, and I hope I do a better job of complimenting how well we’ve done, but really, all I can think about is how much farther we have left to go.

Mark MacLeod:
Yeah, well, I don’t think you’re alone there. I think that’s the curse of entrepreneurship. In some ways, it needs massive optimism out of the gate. I mean, to think about the challenge you set for yourself. As you said, the Canadian financial industry is an oligopoly. At a certain point, if you were going to achieve your vision, you knew you were going to be competing against deeply entrenched competitors. So it takes a certain naivety and optimism to even begin that journey. I had Tobi from Shopify on this podcast in September, and I asked him the same question and even though they’re a clear market leader, he’s focused on the gaps.

Mike Katchen:
I think that’s kind of what it takes. I think that Bezos used to say in day one or day zero in his shareholder letters that the moment you think you’ve made it is a fast path to irrelevance because the world changes and you’ve got to constantly change. I mean, we tell this story at Wealthsimple. As you build a business, I think it’s important you’re trying to build these mythologies as you scale that people can internalize and really make the culture and the values come to life.

And one of them is we were fortunate that I think maybe even 2017, maybe that was the year when you and I met we also won our very first Webby Award, which is like the Oscars of the Internet. So it was a nice thing. We won the best financial services website in the world. It’s like a really fun evening and recognition. And what did we do? Well, the next day we came back to the office and decided to tear down the website and start from scratch.

I think in most companies, you get something that tells you you’re the best in the world at something. Don’t do that. You rest on it. Maybe change the homepage and say web view award-winning website. But this idea that there is no such thing as done and even the best in the world has to evolve and constantly change for fear of becoming irrelevant.

Mark MacLeod:
So let’s talk about AUM, assets under management. So obviously, a hugely important metric for you. Shortly after Paul Tashima joined your company, he and I were just kind of exchanging on LinkedIn and he made this comment about, dude, I’m happy to chat with you anytime and tell you about what we could do for you. And my perception was, well, I’m not Wealthsimple’s target customer.

Like, I’m older, there are more complex needs. But when I now kind of put myself in your shoes and think about playing the AUM game, the biggest pockets of AUM are people who were not necessarily your original demographic. So maybe talk to me about that. Like, did going after them take you away from this notion of simplicity? And I can still serve the people at the beginning of their financial journey, and I know you’ve got private markets and products so just tell me about that evolution and are you now chasing the big holders of AUM?

Mike Katchen:
I mean, I think the way we’ve always approached our business is to be our first and most important value as a company is the client. And it is always driven by our clients, what we build, and how we serve them. When we started the business our clients were me and my friends, I was 24 years old at the time, just getting started on my financial journey, and had a little bit of money to invest, but not that much, had a very simple needs, was a boring, passive, long-term, diversified investor.

What we’ve found as we’ve grown and built a brand that millions of Canadians trust is our client base has evolved and broadened and those clients that first trusted us 10 years ago are now 10 years deeper into their lives and financial journeys and have more complicated needs. And so we’ve naturally tried to evolve with them.

And I think as a result we’re now getting into a place where our fastest growing segment of clients is people with more than a million dollars with Wealthsimple and they’re at this phase in their careers where they’re entering or in their prime earning and kind of accumulation of assets, maybe starting to inherit wealth from their parents and grandparents.

And so by necessity, I mean those clients, we never wanted to ever have to leave Wealthsimple. And so we’ve introduced ways to serve them better. So we really ramped up the financial advice and access to financial planning capabilities that we have. We’ve started to make the investment offering more sophisticated, so access to private equity, venture capital, private credit, alternative investments that frankly unless you have a family office, in Canada in particular, there isn’t anyone but Wealthsimple I think offering the breadth of alternatives that we are, which can be really helpful building blocks for a long term portfolio.

Then obviously if you’re doing it yourself, like just a much more robust, sophisticated, low-fee offering to help people manage their own money. And so I think we’ve seen a lot of success going upmarket. Are we trying to serve people that have tens of millions? We have clients that I think have upwards of $100 million with us or so like very substantial assets.

But I think we’re really trying to help people who are in those kinds of formative years of growing their assets with Wealthsimple and building the tools they need to see us as their trusted financial partner for life.

Mark MacLeod:
So I’m with private banking today and it’s great because I need something done and I just send an email and it gets done. But of course to your point, I pay significant fees for that. Do you see yourself playing in that world as well?

Mike Katchen:
For sure. I mean our banking business is a pretty new business in our history but extremely fast-growing and extremely important to the future of the company. I mean the number of people who are now cutting their cord with a traditional bank and moving their full banking relationship to Wealthsimple is pretty exciting for us.

And I would say we have a long way to go to feel like we have a fully featured capability, things like wire payments, and if you’re a private banking client, often you’re emailing your private banker to do a wire for you. That is the primary use case.

Mark MacLeod:
That’s exactly the primary use case. You’re absolutely right.

Mike Katchen:
I think that we will be able to compete with that very soon, I would say. And so I’m pretty excited about our trajectory on that front.

Mark MacLeod:
That’s really cool. I’m curious, about all these innovations, like you recognize your core client is getting more sophisticated, accumulating more wealth. Like, did these innovations come from the clients, or was more you just trying to project and put yourself in the shoes of the client and imagine what they would need?

Mike Katchen:
I mean, we have a really strong affinity for the concept of dogfooding, which is eat-your-own cooking. And so I think that that’s like something we feel really strongly about. I’ve always struggled with businesses where they might be wonderful businesses, but you’re building some B2B software in an industry with nothing about it because the concept kind of seems interesting to you.

I much prefer businesses where you are a customer of the core product because you know what you want. You see the failings and gaps every day and you desperately want to close them. Not just because you want to build a better business and serve your customers, but because people are selfish too and you want people to be motivated, self-motivated, and interested in fixing those problems.

And so I think by nature of that, that’s been a lot of what’s driven our innovation is what are the things we want to see. And I think we’re now in this interesting spot where we have this collection of products that we offer that gives us the chance to actually do things that are quite different than anyone else in the world.

I don’t know of any other fintech company that does investments, banking, tax filing, crypto, or mortgages. We actually think the future of our industry is how you make these products work together so that the value of doing something with Wealthsimple gets better the more business you choose to trust us with.

So it’s like one thing we’re trying to do is if you do all your investing with Wealthsimple and all your banking with Wealthsimple, shouldn’t we be able to automate tax filing for you? And that’s something I think we’re going to unlock in the not-too-distant future. And no one is asking us to automate their tax filing for them. But how amazing would that be? Tax filing sucks. No one likes filing taxes. I think we can make it go away for people. So, that’s the kind of thing that I think we’re now in a pretty cool position to tackle.

Mark MacLeod:
I have to say, the Simple Tax product is really good. I used it for years because they were a partner at FreshBooks before you bought them. And I still use it to do my wife’s tax return every year. Yeah, it’s a really great product.

So maybe let’s zoom out. You just kind of posted about your 10th anniversary this year. Like, let’s take a look back. From your vantage point as founder and CEO, what were the key moments, and the key decisions and inflection points? Just give us the highlight and low-light reel.

Mike Katchen:
Yeah, I mean, when we got started, everybody said it would never work. Banks have a monopoly on trust. The first few years were all about hustle. Why would anybody trust us? We had no track record, we were kids, and we had never worked in the industry before. The product was still pretty janky, even though it was like a lot of hustle to overcome those barriers. I think we realized early on that Canada has some unique challenges in financial services.

Other markets, especially the US by nature of their size, have this layer of the industry where you have these infrastructure providers. So if you want to launch an investment service, you just build on a set of APIs that someone else has built for you. If you want to launch a credit card, great. You just plug into someone’s set of APIs. Simple.

Now, Canada has none of that. And so one of the first major turning points for Wealthsimple was the decision to buy our own custody and back office provider. We did that super early. It was a company that was, I think 10x or more our size at the time we bought them.

But we realized that if we really wanted to deliver something that was just 10x better than the incumbents, we had to own the full stack capability. And that proved itself many times over, but was a pretty scary and not the typical sort of startup decision.

Mark MacLeod:
I’m picturing a snake unlocking its jaw to swallow something much bigger than it.

I’m curious about that decision. Presumably, this company had other clients and you didn’t necessarily value that other business. So how did you think about valuing that? Did you continue serving those clients? Tell me about that.

Mike Katchen:
We continued serving those clients for many years until we felt like our own product was sufficiently capable of serving them too, and asked folks to transition over so we didn’t have to support both of them in perpetuity. It was important to us to do the right by those clients.

I mean, it was an old-school business valued very differently than a technology company. I think it was an all-cash deal at the time or 50-50. It was very doable even though we were much smaller scale. Scary but doable and ultimately a very good choice in hindsight.

We were for the first several years of our business only in wealth management with this long-term diversified investing strategy. I remember we had a very big internal debate about launching more products because typical startup advice is to do one thing and focus and not ever get distracted.

And we decided to launch Wealthsimple Trade, our brokerage business. And it was extremely controversial internally with the board at the time. No one wanted us to do it, but we felt strongly that our version of innovation would be launching new products and trying to build a more fulsome relationship with our clients. And so we did. And that totally changed the trajectory of this company.

You can imagine we did that a couple of years later was Covid Meme stocks. We were at the absolute center of that very bananas time in the markets and it was a roller coaster where it was just crazy up and we had to do everything we could to hang on and make sure that the systems didn’t melt because we were growing so fast and every brokerage across North America was going down. We were managing to stay up and it was just like a question of can we hang on?

And then the opposite happened. Post-Covid markets crashed, business totally nosedived and volumes collapsed. It was a brutal kind of reality because we’d made the same mistakes that so many tech companies at the time had done, and then revenue was collapsing at the same time.

So we had this moment of wow, we’ve actually gotta reset on how we’re thinking about building the business, the resilience of the business model, how we’re driving growth. And that was a brutally difficult period where well before I think even in its own right, but especially well before the kind of technology sector started to course correct on over hiring, we decided to do it I think a year in advance.

And doing a RIF was absolutely one of the hardest things we ever had to do as a company and it felt super lonely at the time because no one else had started doing it. So we were concerned about how to do it right, how do we take care of our employees who are going through this really brutal period.

And then on the other side of it, how do we rebuild the company? Because we were in this very precarious position and I think it was like a couple of years of just trudging through the mud. And to be now on the other side of it, to have rebuilt the business, the growth being more robust than ever before, to be profitable and achieving the kind of scale in numbers that we are, is remarkably rewarding and exciting. But it definitely hasn’t all been straight up.

Mark MacLeod:
It never is. And if it is, it’s for a very short period of time.

You referred to yourself as a startup, but you’re also a financial institution and with all the compliance and dotting of I’s and crossing of T’s that comes with that. So I’m curious, what is your management team’s mindset? Are you still able to think like a startup or are you forced to compromise and think in a more institutional way?

Mike Katchen:
I think there’s a balance. I mean, we definitely see ourselves as a startup and I think that’s something I feel very strongly about preserving. Yes, we are a larger company now and have some real scale, but we are so far from how big we want to be and the impact we want to have that if we set ourselves up to simply protect what we have, we will fail to reach the ambitions that I think we as a team share about what the opportunity is at Wealthsimple.

So, startup in my mind just means growth. Like I think Paul Graham talks about that and it’s always resonated. A startup is growth and we have to grow for a very long period of time if we have any hope of achieving our mission and the impact we hope to have. So I think that’s super important.

I think part of the job of a founder as you scale is to beat back the natural pull towards bureaucracy that just creeps in as you grow. It’s so easy to just hire people to tell you here’s how it’s done and here’s how we’ve seen it a million other places and here’s the playbook and here’s the policies that you need to introduce to cover every little use case in the business.

And I think you have to introduce some of that because there’s a lot of people here now and people have to know the rules of engagement and how to make their lives easier so it’s not just chaos. But I think part of the job is trying to beat back too much bureaucracy.

On the compliance front, to me, we operate in financial services. There’s a compliance burden that exists. But our philosophy has always been there’s a good reason that compliance and regulation exist. It exists from first principles to protect investors and everyday people and to ensure fair and free capital markets.

While there are specific rules that are sometimes antiquated or out of date, if you approach the rules from first principles, you can often find novel ways of doing things and show the regulators new ways of doing things for the right reasons and bring them along in that journey.

So, unlike a lot of fintech companies that have a reputation of shirking regulation or working at odds with regulators, we’ve always tried to partner deeply with our regulators here and we have a history of innovating in the regulatory landscape to change the rules because often they are antiquated or don’t make sense in kind of a digital modern era.

But it’s always been from this philosophy like how do we approach it from like the intent of these rules and do business the right way.

Mark MacLeod:
Yeah, I love it. Going back to the journey when Wealthsimple first came on my radar, I feel it’s similar to when you did series A with Power Corp. And I don’t pretend to be a journalist, I don’t fact-check everything but I feel like maybe you sold over 50% of the company in that round. And you were working with Power out of the gate, and now you have a more institutional, kind of diversified shareholder base.

But clearly Power played a huge role in helping get you go because when I think about the Canadian venture market, there’s really no appetite for consumer stories at all. So, just tell me about that series A process and kind of the relationship you built with Power. Let’s talk about that decision you made to kind of own our own back office, which I think presumably depended on having a partner like Power. So yeah, I’m curious to hear about that.

Mike Katchen:
Yeah, I mean, we did a very weird, wacky deal that I think is another great example that almost like in the last 10 or 15 years, you feel like there’s this playbook that has come out about this is the way to build a company, and every great company is built this way. But then you peel back the layers and you realize so few companies have ever actually followed that playbook to a T. And everybody has their own twists and turns and unique stories.

Mark MacLeod:
If there was a playbook, I wouldn’t have a coaching business. So I’m glad there’s no playbook.

Mike Katchen:
Yeah, exactly. So, I think you nailed it. We were trying to build this business and no one really believed in it, got rejected from YC Venture Capital, and didn’t really get it. Canada was too small. What the hell do you know about this industry? You’ve never worked in it before.

And we got going anyway. We put together a small seed round from some people who were just incredible partners who believed in what we were doing. Shortly thereafter, I met Paul Demery, who’s the chair of our board and became our advocate within Power to make the deal happen.

And over a series of months, getting to know each other kind of realized we had a very similar vision about the future of the industry. And we had a team that they would have never been able to assemble at Power. And they had a capital that we were sorely unable to access.

And we agreed to a very wacky deal where they essentially became our exclusive capital provider for a number of years, put up hundreds of millions of dollars, and we were a tiny business, just seed-funded at the time, but it gave us the ability to build with confidence knowing that we would be able to have some serious capital behind us to do things like buy our own back-office and build on top of that, build a brand which, for a number of years we were building a brand that people loved.

People would always comment on Wealthsimple as this incredible creative brand. But our CAC looked bananas. If we were raising a traditional venture, folks would have never underwritten the strategy we pursued around building. But 10 years into building the company it is now like a deep differentiation that will be hard for others to replicate or overcome.

So we did a wacky deal. It worked really well for us. Power took control of the business. They always had a minority economic stake today in the forties, so we did give up control. But they’ve been incredible partners.

Mark MacLeod:
Yeah, you could have never done this the traditional way. Selling a little bit at a time.

From my vantage point, they felt like the perfect partners because they were able to do a deal that probably no one else would do. And if you think of, again, the big banks, kind of old power, old establishment, like they actually understand that world. Like so they can navigate. They were able to talk to you and your startup context, but they also understood the world you were going up against.

Mike Katchen:
Totally. And they’ve been incredible partners. And we’ve worked hard over the last few years to bring in other shareholders, which has been really helpful. Some incredible more traditional VC investors, growth stage folks that have joined the company, a few of them who have joined the board who have at this stage of the business really helped us think about where we’re going next.

Everything is like a series of iterations, including the cap table. And people don’t realize it’s like there’s no such thing as being done. You always kind of have to figure out for the next stage what’s going to work and figure out how to get there.

Mark MacLeod:
So many follow-up questions. This is your first CEO role. I think Wealthsimple is now over 1,200 people. How have you personally kept up with the growth of the company and what do you do to make sure you’re always the best CEO for the business?

Mike Katchen:
I work hard at it. I tell every onboarding class, because I still spend an hour with everybody in their first month as a group, and I tell them this is my first time ever as a CEO. I work really hard to earn the seat I’m in. It’s possible there will come a day when I’m no longer the right person. But until then, I’m gonna work really hard to try and earn the seat. But my philosophy is like, I don’t know how we’re gonna get from here to there.

And so when new folks come on, I tell them it’s this kind of your job, it’s why you’re here, is to help us figure it out. And it’s a little bit of my management style is to try and constantly bring in really sharp people who make us better, who I would work for, who help us get to where we want to be at.

So I’d say one thing that is like recruiting amazing people is how I try to keep getting smarter and earning the seat. I have worked personally with coaches over the years, which I have found to be quite useful and really helpful.

And I think one of the things that has been important to me is I try to find space to think. I have a morning ritual which I find very useful. I try to spend the first two hours of every day in a coffee shop with a book and a notebook and no distractions. And I would say I am a little less consistent today than I would like to be but for a long time, I was very rigid about that time and it’s been one of those rituals that’s been super helpful.

Mark MacLeod:
Good for you, man. I love that because it would be so easy to just let this job happen to you and just get pulled in. And now I’m like surfing this company and like I’m getting pulled into everything. And to actually create the space to think, I really love that because at the end of the day, if you look back on a year, yes, you make decisions every day, but there are a few that kind of move the needle and the more presence and mental clarity you have for them, obviously the better decision you’re going to make. So I really, really love that.

I’m curious, about two things. One, you brought up the first principles a couple of times. Is that a methodology that you use for decision-making?

Mike Katchen:
Of course.

Mark MacLeod:
I can think of one other highly successful first-time CEO who uses first-time principles thinking, which is Tobi from Shopify. So that’s definitely an endorsement for it.

I’m also curious what role. You know, you’re still young and semi-invincible, but 10 years less young than when you started. So I’m curious, what role does physical fitness play in your performance? Is it a thing you focus on?

Mike Katchen:
Interesting. I would say I have been historically inconsistent. I love sports. I played sports all the time growing up. And then I’d say I really fell off the bandwagon for a number of years when we were getting going and starting a family. And in the last year, I have really become much more serious about it and I am really loving it. I’m finding it’s both like just physically feeling fit and healthy is really a great feeling. It’s like I have more energy, I feel like I’m sharper.

I always hated the gym, really hated the gym. But I’ve been going, I see a trainer twice a week now I go one day with my dad. It’s my way of forcing him to come and take care of himself with me.

Mark MacLeod:
Does he still go on about how you demonstrated no leadership potential back in the day?

Mike Katchen:
Of course, I do an amazing set of something and he’s like, yeah… No, I’m making him sound too harsh. He’s a wonderful dad. But I find the physical activity has been a great introduction and really helpful for me.

Mark MacLeod:
Love it. So important. Again, you’re a mental athlete and the expectations that are on your shoulders are not dissimilar to the expectations that are on a professional athlete’s shoulders. And so you think about a professional athlete, they surround themselves with a team to make them peak themselves. So do you do any of that? Like, imagine you’ve worked with coaches in the past, maybe therapists. Do you have someone like, I’m gonna outsource my meals, so I just get nutritionally macro-balanced meals? Do you think about surrounding yourself with support resources or not so much?

Mike Katchen:
I’ve thought about nutrition. It’s not something I have seriously explored yet, but I could imagine that being something I introduce in the next year. I have explored therapy in the past in particular. It can be a pretty brutal job at times. And there was a moment in particular where stress. I’m a very even-keeled person and naturally benefit from that disposition.

But there was one moment in particular when stress got the better of me. I came down with the shingles. I was in a brutal mental state. And my partner pushed me to explore therapy, which for me was helpful, but has not been something that I’ve stuck to, but I think there’s a lot of value.

I mean, my mom’s a therapist and a psychologist, and both my in-laws are psychiatrists so I’ve been around a lot of mental health professionals my whole life and I see a tremendous amount of value in it. But for me, it was kind of an acute moment which was quite helpful rather than an ongoing practice.

Mark MacLeod:
I love that you went for that when you. The CEO role is actually very lonely. Even though you have a leadership team, the difference between you and that team is you can fire them, they can’t fire you. And ultimately every issue in the business is your fault. Then of course, the bigger the business gets, the more everybody wants a piece of you. And so, some CEOs just want to go and crawl under a rock. So it can be a really lonely brawl.

On that morbid note, let’s carry on. So more numbers. Correct me if I’m wrong, but 2/3 of your AUM has shown up in the last 12 months. Is that so? And kind of what’s causing all this momentum?

Mike Katchen:
Well, I think we’ve added north of $20 billion in the last 12 months of net new deposits, and then the markets had a really great year. I don’t actually know the real numbers, but I wouldn’t be surprised if we’re more than 50 now and 30 of that has been in the last year. I mean, the growth has been pretty remarkable in the last 12 months.

I think what’s exciting is it’s really coming from a whole bunch of different places. There’s no one thing that’s really the story. We’ve made the product better. So we’ve really focused on going deeper into wealth management. We talked about adding alternatives and just building a much more sophisticated offering. Really leaning into financial advice and planning so we can help clients think more holistically about their future goals and help them get there on the brokerage side.

Filling in gaps that have existed in our product for a long time. It’s a new business. It just takes time to build the stuff that people want in terms of account types, features like margin options, and all sorts of things that people need to build portfolios and manage their own wealth. Banking has gotten better. And so I think it’s like both a completion of what we’re doing, really focusing on serving clients better.

If our first seven or eight years were getting people started with Wealthsimple, the last two years have been about figuring out how we help people start living their entire financial lives on Wealthsimple, creating it, making it more rewarding, delivering more value, the more and more you trust with us. And that formula seems to be working really, really well.

So I think it’s in that orientation just how do we go deeper with the clients that we’re serving because we want to be the only financial partner they need to navigate all of life’s myriad of financial choices.

Mark MacLeod:
And so, you mentioned you were just a one-product company out of the gate and now you’re a multi-product company. I’m just curious how you structure that. Do you have like a mini CEO for each product and they have a revenue responsibility or a P&L responsibility or is it more like you have product leads and there’s somebody who’s overall responsible for the P&L?

Mike Katchen:
I’m not sure that we cracked the code on this, but what we have works for us. We have product leaders who are product managers who drive the roadmap. They work with counterparts across the business and engineering in regulatory and compliance and marketing and advice and service.

And so, to deliver and own kind of the product experience, we then have like company level priorities, so call it four to six of them that we kind of stand up a year as the core overarching ones and the P&L is a little bit baked into those priorities. And rather than having a single leader, which would be typical advice, we actually usually have two or three and it’s a cross-functional group that owns that priority and has responsibility for delivering against it.

And we found that to be helpful because when we’ve experimented with single leaders on things often the challenge they faced was they felt accountable to a metric but didn’t own all of the cross-functional resources required to make it happen.

And so when there were cross-competing priorities, they really got frustrated that they couldn’t control their destiny. We found that getting the right group of cross-functional leaders to own a priority collectively, actually made things a lot smoother for us. So that’s kind of been our philosophy. It’s worked quite well, but I’m sure we’ll change it again in the future.

Mark MacLeod:
It’s smart. I haven’t operated a consumer company, but I think back to my operating days I’ll just take FreshBooks as an example. The most important metric for any SMB SaaS company is churn. And churn is a multi-headed beast. If I appointed the head of customer success to own churn, well, a bunch of churn issues are in product, and a bunch is in pricing. Like, there are so many layers to that onion. So yeah, it kind of makes sense.

Mike Katchen:
And I think one tier I have that is super important for us is I actually think one of the reasons the banks will struggle to ever compete with us properly is because they have these extremely well-defined business units around products. And the mortgage business doesn’t talk to the credit card business, which doesn’t talk to the banking business or the wealth business. And so, unless you have a private banker that sits on top of all those things and fights for you as the customer to get the best pricing or whatever, it’s as if you’re a new customer every time you try to open up a new account at the bank.

For us, it’s very important that we don’t ship an org chart and we work backward from the customer experience and deliver this incredible value proposition. Everything works really, really well together. It’s seamless. And if you start to create these artificial lines that kind of make sense in a business context, but not really from a customer standpoint, I think you introduced this like friction that actually can make you get in the way of delivering something awesome.

Mark MacLeod:
Yeah, totally. You don’t need these like fiefdoms where it’s all about that. What’s more important is growing my little empire versus serving the customer.

When I was reading the 10-year anniversary letter, I loved to see that the business was robustly profitable. And when I think about companies that are big enough to go public feels inevitable that you’re going to ring the bell at some point. One of the biggest issues is that they have the scale but they don’t have the profitability. And so I love that you’ve crossed that already.

And so I’m just curious about what it’s like to run a high-burn business. Presumably, you could still burn because each of your customers are profitable annuities so it could be strategic for you to acquire more and more of them, even though it means burning. So what are your thoughts on the trade-offs between kind of burning versus now running a profitable business?

Mike Katchen:
I think that the most important thing for a CEO or founder to do is to figure out whatever the right answer is for you and kind of tune out the noise. I think the problem in our industry is it kind of moves in packs. It was fashion to burn a ton of money for the sake of growth and then all of a sudden it was out of fashion and it was fashion to be profitable.

And I have found that VCs who are often like writing the rules of this industry as they move as a herd. There’s not much independent thinking in the advice that they give. And that whiplash can cause a problem for you if you’re trying to build a business. And I think the most important thing is to figure out what makes sense to you and have conviction in it.

And the problem is it can be totally the right answer to run up, burn, and try to grow. But if you’re going to do that, you better just not be naive about what’s on the other end of it because fundraising sucks. It’s a brutally difficult environment now. And what you had was people who were naive and just always able to raise the next round, it doesn’t matter, burn it all, grow fast only to find out that there was no market.

As a result, they put their business in this precarious position where they had no control, no out because they built up the cost base to such a place where there was just no way to get back home again if that round never materialized.

So I think the question is less about whether there is a right or wrong answer. It’s just to think it through and make sure that you are in control of your destiny. And if you’re going to burn, then at least if you’re not able to put together the round, know what you will do and by when.

The number of calls I got in the last year from founders who were weeks away from being out of cash that had real businesses. Like I remember I talked to companies that had $50 million in revenue that were weeks away from being out of cash because the round never materialized. You can’t put yourself in that sort of position.

Mark MacLeod:
First of all, you can’t even do an orderly wind down at that point.

Mike Katchen:
Well that’s the point. It’s like, be thoughtful, run the strategy that makes sense that you have conviction in, but don’t be overly naive. And I would say that if you could choose, you would have of course a thousand percent chosen to be a high growth profitable business which is one we find ourselves in that position today.

And that is an extremely luxurious position to be in. But wow, that is awesome because you feel like you have control. You can choose how much to dial up or down your investment. And that’s a really exciting place to shoot for.

Mark MacLeod:
If I think about kind of what topics are coming up with my CEOs outside of a lot of the topics we’ve just discussed already. But a big one is AI and some folks love it and are leaning into it, some folks are scared shitless by it. I’m just curious about what role AI plays in your business and what role you think it could play and I guess financial services overall in the future.

Mike Katchen:
I’m pretty bullish on AI as I think most people ought to be. My favorite analogy for how to think about it comes from Benedict Evans who analogizes some of these new AI tools as not some new platform that is like mobile or the desktop, but it’s more like Microsoft Word.

It’s this massive productivity tool that does change the game. And when I think about the use cases that are showing the most at least early promise at this early stage of the AI cycle are productivity enhancements.

And so really focusing on how we help the team adopt tools, whether that’s in engineering or CS or just in composing content to make you much more productive and faster and more efficient at doing it. Where are the areas that are still administratively heavy where a productivity enhancement could just make it that much less friction-filled and faster?

Those have been the kind of early use cases that we’re seeing really awesome gains in and I’m trying to invest quite heavily in. And we’re still pretty excited about even bigger ideas that are coming down the pipeline. But I for one am not a doomsday AI believer.

I think that this is an awesome change in productivity and that people would be wise to embrace that productivity gains both personally in how they run their day-to-day and then also in their businesses.

Mark MacLeod:
So you’re not watching Terminator and chewing your nails or anything like that?

Mike Katchen:
Not yet. And yeah, maybe I’m wrong.

Mark MacLeod:
Yeah, well, we’ll find out.

So you recently launched Simple Ventures. Tell me about that.

Mike Katchen:
Simple Ventures was born from a few passions. One is early-stage companies. You know, Wealthsimple is not the super small scrappy team that we were when we started. And I really love the super small, scrappy days of a startup. So selfishly was looking for a way to get more engaged in helping founders at that stage of their journey.

Two is Canada. Passionate about Canada and deeply worried about our future. And so, I get asked to speak on panels every week about how Canada needs to be more entrepreneurial and more productive. And Canadians really like to talk about issues. And I just kind of was fed up talking about the issue and said, what can I possibly do about it? And so this idea of let’s start companies, let’s just start more companies kind of came out of that idea of what can I possibly add to this issue in Canada.

So we’re trying to do three to five companies every year focused on the Canadian market. The insight we have is that as much as we love Canada, Canada is a deeply unloved market. And so Canadians miss out because some of the best companies around the world just write off Canada and they never come here.

And so the very best products never make their way to Canada. Why don’t we fill that gap? Because we can actually de-risk starting a new business. You don’t have to do product market fit. You know, the company, the product has achieved some level of validation.

You can cherry-pick the ones you think have the best business model that can work in the market or size structure, and you can make life better for Canadians along the way. So it’s kind of what we’re doing. I have this amazing co-founder who’s the CEO of Simple Ventures, Rachel Zimmer. We’ve launched three companies today and we’re having a ton of fun.

Mark MacLeod:
Are you familiar with Rocket Ventures?

Mike Katchen:
Yeah, very.

Mark MacLeod:
You reminded me of them when you were describing this. For anyone listening or watching, Rocket was an incubator focused on the German market, taking the best things that were in the US market predominantly and then building a German version. So, was that an inspiration for you?

Mike Katchen:
In some ways, yes. And in other ways, no. And yes, I think it would be hard to say Rocket’s not the most successful startup incubator studio and maybe startup studio of all time. Other incubators may be more successful, though, somewhat controversial in that their strategy was to preempt the American companies that are coming to Europe, whereas our whole view is that these companies are never coming to Canada.

You know, sadly Canada is increasingly irrelevant as a market. And so if we didn’t do this, these companies would never be here and Canadians would continue to miss out in perpetuity. And so it feels like it’s solving a gap specifically for the Canadian market. And rather than trying to preempt someone else only to sell out to them later, that’s a difference in our philosophy and approach.

Mark MacLeod:
So I think, I also worry about using that word about the Canadian market. You’re doing something about it. And I guess you’ve given this advice on all these different panels, but I mean, what does Dr. Katchen prescribe for Canada?

Mike Katchen:
I mean, there’s so many things we just need to do better. I mean this is maybe not popular in our tech industry, but I would start by saying we need to do what we do better. So Canada is a resource-heavy economy. We need to figure out how to lean into that and do it in a way that is environmentally conscious and thoughtful about all sorts of challenges of being a resource-dependent economy.

But not forget that that’s actually a huge part of how we afford the lifestyle and the way of life that we have here. We need to be able to build more minds. We need to be able to provide that. You think about what happened with Ukraine and Russia a few years ago and Europe was desperate for natural gas. We couldn’t get natural gas out of the country. And what an opportunity it could have been for Canada to build an industry that was desperately needed around the world.

You have the same with specialty minerals that are required for solar and AI chips and all of these elemental components that are a requirement. We have a rich set of deposits in those things, yet we can’t figure out how to build an industry around it.

So do what we should be doing really, really well, and in parallel, we need to diversify our economy. I think we really need to build the technology sector. Culturally, people need to be less okay with mediocrity and be willing to take more risks and be ambitious in the businesses that they’re building.

One of my favorite books is Why Mexicans Don’t Drink Molson. Andrew Mandel Campbell wrote it. It’s like 20 years old now but it’s that. It goes through, I think it’s five or six industries. Starts with beer. And asks the question, why is it that Canada has all the ingredients to win yet we produce one-twentieth as much beer as Mexico, a country that has nowhere near the richness of ingredients that Canada does? It goes through five or six industries and it talks about how, again, we just have all of these ingredients. We can’t figure out the recipe.

I think a big part of it is culture. I think we desperately need to celebrate ambition and people who take big swings. We need to create conditions that encourage people to build businesses here. The other component to our growth strategy historically has been immigration, but when you pair that with a housing crisis and taxation, we’re not really setting the conditions to say, if you are an ambitious new person to Canada who wants to build a business, that you should come here because this is the best place to do it.

And I think that’s part of what we need, is if we want to attract the very best entrepreneurs from around the world to build their businesses in Canada, you need to create the conditions to make that possible.

And so those are the few things that are on my mind doing what we should be doing really well. Stop kind of shooting ourselves in the foot about the businesses that we should be in and should be world leaders in, and create the conditions to attract the very best talent from around the world to build their companies here in Canada.

Three, win. Don’t be so sheepish about it. We gotta win. That’s how you pay for the things that we desperately need like healthcare and a social safety net, which are important in Canada. We need winning companies to do that. So I don’t know if that’s a rambling answer or what but those are some of the things on my mind.

Mark MacLeod:
It’s very specific. It’s actionable. I love it. Okay, final question, Mike. What do the next 10 years for Wealthsimple look like?

Mike Katchen:
Like I said, we have to keep growing. I mean, I think we want to build the largest financial institution in Canada and totally redefine what this industry looks like so that Canadians have the best shot in the world to achieve financial freedom and this incredible outcome for themselves and their families. And so the next 10 years is, can we grow from $50 billion to a trillion in assets? Can we help 10 million Canadians achieve financial freedom and redefine what this industry is all about?

Mark MacLeod:
Amazing. Well, I’m definitely cheering you on because you’re one of the good guys and because I am considerably older than you I have a venture fund of highly risky either angel investments or venture fund investments. And one way or the other, those are going to come to fruition hopefully, knock on wood, in the next 10 years. And I’m going to be moving my assets wholesale into different asset categories and I’m already a wealth sample customer, but I’m sure there’ll be a lot more transfers coming your way.

Mike Katchen:
Well, we can’t wait to support you and feedback is always welcome. We’d love to hear what you think.

Mark MacLeod:
So far so great. But yeah, I’m really excited for you, Mike and it’s been great to catch up. Thank you so much for being on the show.

Mike Katchen:
Thanks, Mark.

Hey, thanks for listening to the Startup CEO Show. If you’d like to connect with me, be sure to visit my website at markmacLeod.me, or follow me on LinkedIn at The Mark MacLeod, or X account @markmacleod_, and if you want to tune in again next week, be sure to subscribe on YouTube, Spotify, Apple, or wherever you get your podcasts. See you next time!