Fintech’s free will — Fintech Beat Podcast, Episode 73

Jenny Xia Spradling, the co-founder of Free Will, recounts her journey, why she walked away from her first startup, and how her new big venture has enabled over $1 billion of donations to nonprofits

Dr. Chris Brummer: Welcome to FinTech beat where finance technology and policy come together. I’m your host, Chris Brummer, and the future of finance is now. You don’t have to imagine how COVID is impacting the economy. You see it every day with people locked down, the private sector has been sent reeling. Restaurants have closed businesses shuttered and jobs have been lost. And the turmoil has sent businesses into a problem solving overdrive, as they attempt to understand just how the pandemic will play out and how they can navigate and hopefully mitigate the most dire consequences of the pandemic. But how do nonprofits raise money in a pandemic? After all the economic consequences of COVID 19 have not been evenly distributed with vulnerable communities, especially hard hit and people with the resources to make a difference themselves, plagued with the uncertainty the public health crisis has created for even successful ventures.

Enter FreeWill, it’s a new startup with the goal of making charitable giving easy by providing a no cost estate planning platform supported by hundreds of nonprofit organizations that has already enabled more than 1.6 billion dollars to be committed to nonprofit organizations. Behind it all is the co-founder of the platform, Jenny Xia Spradling. Now Jenny is a prodigy of the FinTech world. Having already worked at McKinsey and Bain Capital, where she launched their first impact investment fund and even founded a company, Paribus, that was later acquired by Capital One. And now she’s already in her second, go around with a mission focused on inclusion, diversity, and transforming the world of giving. For this reason, it’s a pleasure to have her on the show and to explore just what it means when technology truly enables a free will.

Jenny, thanks so much for making onto the show.

Jenny Xia Spradling: Thank you for having me.

Dr. Chris Brummer: So I guess, we’ll get to FreeWill in just a second, but I have to say you are one of the most interesting people in the world and your story is really interesting and I think it’s worth just delving into it, just a moment to get a sense of that story and how it’s really informing this this new venture. This is not your first go around in the startup world and you’ve held lots of hats. Maybe you can talk about your journey, just sort of up to this point. And how did you move from the land of management consulting to no cost online wills?

Jenny Xia Spradling: Yeah, it has been kind of a windy journey and I will repeat the statement that I’m as interesting as you say, but otherwise happy to kind of share how I got here. So I started out management consulting after college for maybe an unusual reason, which is, I frankly fell a little bit but backwards into it. I had some good friends who were applying and I decided to apply for one firm, McKinsey. And the reason why I ended up taking the offer was because I, the impression that these people were really good at speaking, which sounds so silly, but as someone who grew up as a total math nerd, I did math competitions growing up. I was applied math in college. I was just like, wow, these people really make you listen. They have this gravitas, this confidence, I frankly did not have.

I feel very comfortable with numbers and not that comfortable with words and how powerful would it be to have this magic power of being able to speak and influence people so well. So, that’s actually the weird reason why I went to management consulting and funnily enough, it is actually played out to be one of the most important skills as an entrepreneur, because what you’re trying to do all the time is just influence various people to kind of get on your team and buy into your mission. So, after management consulting or actually during, I had one of my friends from college, approached me with this idea for Paribus and he, Eric Glyman I’m in is brilliant. So now onto his second FinTech venture as well. And when we initially joined forces, I thought this was kind of a fun thing to do, but otherwise totally outside the realm of possibility that we could be successful with it.

Dr. Chris Brummer: So, why don’t you walk us through that then? So you go to McKinsey, pretty standard story. And while you’re there, you then decide to start a company, Paribus. Maybe you can take a second and just explain what Paribus does.

Jenny Xia Spradling: Paribus is a company that automates price protection claims. That is just a big word to say, when you go to the Gap and you pair pants and then the pants go on discount for 20% of the day after. And you’re so mad because you just paid full price for these pants that most of these retailers and companies actually have a policy that say, we’ll just refund you the difference. So a lot of people weren’t aware that these policies existed, especially back in like 2013, when prices were fluctuating all the time because companies were just waking up to the magic of using data to change prices depending on the person the day. And so what the app did is you would sign up and then you would sit there and it would just generate you free money. So we were literally selling money, like free money.

So you would sign up for the app, it would plug into your email e-receipts, and then it would track prices over time. And if the price is something you bought dropped, it would automatically, using AI, apply for the refund for you, and you would just get money back your bank account. So was a really simple idea. And the thing that drew me to it was, “Hey, you kind of have this unfair thing where these big companies are using big data to price discriminate and basically optimize how much people are paying. What about the consumer, who who’s using big data for the consumer?” So, that’s the idea that really captured us.

Dr. Chris Brummer: That’s really interesting. So, you come up with this idea sort of already sort of fighting for the little guy by sort of turning certain kinds of concepts of big data on its head. And then you just kind of to decide to, to leave that company, I mean, what really was the driver and then how did you sort of meander from the success for Paribus into FreeWill?

Jenny Xia Spradling: It was a hard decision, but frankly, the reason why I left was because of imposter syndrome, I think it’s a big word to just say it was scary being 23/24 years old and saying, “Okay, I was so privileged to have a fancy education, to have a great job behind me and a job offer for Bain Capital, which is this private equity job that would pay me more than my entire family combined, right?” This is a crazy opportunity by any means, my parents immigrated from China. This was their dream for me. And to give that up, to take a shot on really myself, myself and my doofus friends, that we would be wildly successful as entrepreneurs. I just didn’t think it was possible. And I think a lot of that comes from a place just not really seeing examples of it, right?

The entrepreneurs that I read about at the time were Mark Zuckerberg and Bill Gates. And I’m like, these people are just geniuses, right? They’re not me, and I think since then I’ve changed my view on what it takes to be a successful entrepreneur in part, because Paribus was so successful, at exit Capital One. And I was like, “My friends did that, like they, they did that.” That’s so crazy. So yeah, I think it’s that confidence that I needed to shatter that imposter syndrome to go about it the second time around.

Dr. Chris Brummer: You know, that kind of honesty is so refreshing and really it speaks to something I think we all forget, which is just how human we all are, even the mighty entrepreneur. So what then drove you to start a new venture we’ve had on the show, a range of people from CEOs of psychometrics firms and others talking about the importance of confidence, but also empathy and soft skills. What was the shot in your arm that drove you back into startup land? After leaving the first time around?

Jenny Xia Spradling: There were a few things and they all happened when I was at Bain Capital. So rewind now we’re a year into Paribus. And I tell my co-founders like, look guys, I just, I don’t think I can do this, right? Like I need to take this job. It’s pressure for my parents, pressure for myself. I just, I need to do it. So I go to Bain Capital and work there in private equity, help them with their very first impact investing fund, which is now I think one of the biggest, maybe the biggest in North America. And through that experience, I learn a couple things and some of them are about myself and some of them are kind of more about who can be an entrepreneur. The first one is the difference when I work on something that I really care about and something that I am trying to you care about is totally different.

And so when people are saying, “find your passion”, I was like, “I don’t know what that means. What is passion?” But what I learned is, “Hey, if I’m working on the impact investing fund versus the private equity fund, my level of care and detail orientation and the hours I’m willing to put in. And the creativity that I bring to the problems is just so much more when it’s something mission oriented.” So, that’s something that I learned about myself that I just need to work on. Something that I, I believe will change people’s lives or the environment in order to, really be my best self. The second thing is, while I was at Bain Capital is when Paribus had their exit. And that was a moment when I was like, “Wow, people like me can really make this happen. Right?”

You don’t have to be the person who was selling lemonade since you were six years or dropped out college in order to be a great entrepreneur. There are people of all different backgrounds with strengths who can be great, so I think that was really important for me too. And then the last thing was, I just had these great mentors at Bain Capital who looked me in the eye and they were like, “Look, Jenny, you can do this job successfully if you wanted to. But when I see you talk about Paribus, your eyes light up. You are so excited to talk about every little piece of it. And when you talk about debt on a company, your eyes just glaze over. You could not care less about this topic. And I want you to know that no matter what path you choose, you’re going to be fine,” From a financial standpoint, from a safety standpoint. And frankly, at that point again, I think part of this is my background, immigrant parents, all that sort of thing. I just needed someone I really respected to tell me that.

Dr. Chris Brummer: You know, it’s fascinating and important, how important role models are. And when you look at the FinTech space and we’ve talked about it as well if you don’t necessarily look like everybody else, sometimes it can be a little bit more daunting, especially if you’re trying to jump into creating an entirely new business.

And I think I’ll circle back around to that point in just a second. But I do want to move to FreeWill, because I think it’s an interesting comparison of two different companies and sort of your unique space that you’re occupying now. So, tell me a little bit about FreeWill and, and how you sort of stumbled across this idea. I mean, obviously if you’re into impact investing, social enterprises clearly are the things that make you get up in the morning. How did you stumble onto this idea of FreeWill and how did you begin to put a team together to build on this idea that you eventually did come across?

Jenny Xia Spradling: FreeWill helps people write free online wills and estate plans exactly, as it sounds. And we make it really easy for people to leave money in those wills to charity. And it’s kind of a funny idea. One of our investors who I love and respect [inaudible 00:13:13] says we basically took two really bad spaces to build companies, which is trying to build technology for charity. Those oftentimes fail and, and trying to do legal tech and mash them together. And somehow came up with this company that works really well, which I always laugh at. So, the reason it is so interesting is because if we take a step back and look at what’s happening with demographics in the US, you have 70 trillion dollars that is going to be left by baby boomers to future generations. And that’s going to happen in the next couple decades, regardless of what happens to the economy, regardless of what happens internationally, it is just a demographic transition that’s going to happen.

And it could be a really big opportunity for philanthropy. That is the insight that kind of my co-founder and I came to you. But the problem is that people hate doing their estate planning. It’s remarkable, you have more than half of baby boomers with no plans at all for what’s going to happen with all of their property, the guardianships, all that sort of thing. And so if you have no will, there is no chance that any money is going to go to charity. And so that was a fundamental insight. That we came to, which is if we just make this process a little bit easier and help a few thousand people make their wills, well, gosh, their ability to leave 5% of their houses because they’re baby boomers and probably own their homes to charity ends up being a huge gift, $50,000, a hundred thousand dollars.

This could be really meaningful for these charities for decades to come centuries, even. So, that was a fundamental idea that we kind of started from. And then the moment I think, when we thought, “Wow, this might really work,” is we put together this like really bad website in Squarespace, and we put a Typeform in it and it was like, basic will form kind of fill in the blank, just like you might order an office max. Like if you go to the back corner, they have “do yourself” will forms. And we put some Google ads against it and we realized by spending $20 in Google ads, one person left $70,000 dollars to St. Jude’s. And we were like, this is an insane return for charity. If nonprofits aren’t doing this they’re missing something.

And so I think it was that bringing together technology and the very basics of what learned about human behavior and how the smallest frictions can prevent someone from doing something that’s really good for themselves. And combining that kind of behavioral economics with this space, which frankly not much capital has gone into and not many technologists have really tried to change, which is this philanthropic nonprofit space.

Dr. Chris Brummer: When you saw those results did you get a sense that it was more because the platform was, was free or do you think that it’s really just a friction issue and it was just easy. So people did it?

Jenny Xia Spradling: It’s definitely a combination of all the above. So we ran another experiment. The experiment was, we’re now going to charge $20 for this will. So just to put that into perspective, like if you’re going to see a lawyer, it’s going to cost a, a few hundred dollars at minimum, probably a couple thousand, if you have more complex estate to do your will. So we’re like $20 really shouldn’t matter to people in this grand scheme of things. However, when we ran that experiment, 95% of people dropped off versus when it was free. So the difference between free and a dollar or free, and $20 dollars when we’re talking about an estate that’s worth 500,000 or like a million dollars shouldn’t matter, but that psychological friction does really matter. So, that was interesting.

Dr. Chris Brummer: That is really interesting. And then I guess the last sort of point here you’re talking about the fact that there hadn’t been very much money kind of put into this space. I mean, I is from a technology standpoint, was there anything that was particularly difficult or, or is it really just the ingenuity of the idea and finding a way to connect stakeholders in an efficient way and an efficient platform that was the major hurdle?

Jenny Xia Spradling: I really think a lot of it was the latter. And I think if we look at some of these really challenging spaces like FinTech, how do we get to financial inclusion, healthcare, IT, how do we get people to do preventative medicine? A lot of the great innovations are not going to come from breaking technology. It’s going to come from, how do we socially nudge people to do the thing that’s good for them, by reducing these frictions and all of those practices have been invented in large part. I think in marketing and advertising, and they just need to be pulled into these spaces to solve the really hard problems that really impact people’s lives.

Dr. Chris Brummer: What do you think has been the major difference? The second time around with FreeWill as compared to Paribus? What do you see have been the major in terms of raising money and the success of the firm and just you as a person. I mean, how have you approached it differently and how are you experiencing the second venture differently?

Jenny Xia Spradling: I think the biggest difference between the first and second time around is having people around who I can go to task all of the stupid questions with entrepreneurship. The fact of the matter is no matter how much, you know, going in, 95% of the path is learning new stuff. It doesn’t matter how many times you’ve been a serial entrepreneur. You are going to have to, you run a bunch of experiments and learn your space and your customer basically from scratch. And so I think the real asset that you have the second and third time around are people around you, whether they’re potential investors or advisors or other entrepreneurs, especially who you can go to, to ask all of these dumb questions and also vet your experiments and hypotheses against.

Dr. Chris Brummer: You are a rarity both as a woman founder and as a minority founder, how has this impacted your business? I mean, certainly we got a sense of that when you were talking about the imposter syndrome, but in terms of an operational stand point, what does it mean to you?

Jenny Xia Spradling: Yeah, I think the biggest thing is I am lucky to get the best talent, and I genuinely believe that this is something that if you invest in diversity early as a startup, you will get that access. And if you decide it’s not important enough early, and you’re going to do it late, it’s going to be a catch up game for the rest of your journey. So I’m a huge advocate for people thinking about kind of diversity in their founding members in their early employees. And for us, we’re now, 50% female execs, 50% female engineers, more than half our promotions have gone to women. And all of that momentum builds on itself.

Dr. Chris Brummer: How does that happen? I mean, seriously when you hear particularly in Silicon valley, the kinds of… Everything from explanations to excuses about how diverse your teams are, particularly on the technology end of things. And you have been spectacularly successful, not just in terms of your business, but in terms of the people behind your business, why do you think have been able to achieve those kinds of results in terms of your human talent, that others haven’t been able to achieve?

Jenny Xia Spradling: Frankly, brute force. I wish I had a better answer to this, but for us, it was literally just putting in the hours early. So when we were five or six people, I was doing all the engineering hiring, and I would interview 50 engineers per person that we hired. That is just a crazy ratio. If you talk to entrepreneurs, it is very time consuming to source and go through the interview process and do all the reference calls and stuff. But that’s what we needed to do to get to these goals early. But then by the time we were 10 or 15 people and half my engineers were already women, that virtuous cycle started kicking in. And now we, I won’t say we don’t try, but it is natural that our pipeline for engineers when we go out to the market is about 50% women. And I think it’s just putting in that effort up front.

Dr. Chris Brummer: Yeah. I’d heard when you had said that a lot of times candidates aren’t, know what they’re getting when, when they’re choosing to work somewhere. And if you’re known to be a place that add welcomes diversity, that that gives you an advantage. And I would assume that being a minority woman in that field at least helps to dispel some doubt that some other minorities, men or women may, may have about whether, what kind of climate there may be. Do you think that human capital that you have… Does it spell itself out, does it lend to any particular kinds of results, better results in terms of your operations given sort of what FreeWill does?

Jenny Xia Spradling: Yeah, I mean, I think there’s plenty of research that points to diverse teams are better at solving complex problems, but I think the practical manifestation of this is really constructive conversations, where you have a lot of different ideas coming to the table and conversations that are frankly efficient, because people are making and taking space in a way that is fair and surfaces as best ideas. So, the research kind of points to it, but we’ve seen it firsthand at FreeWill.

Dr. Chris Brummer: You know, one of the reasons why I find you frankly so interesting is that, you really do have a very interesting introspective self-awareness if one will. And self-awareness is not something that you normally associate with Silicon Valley, especially sort of emotional self awareness. Was this something that you felt that you just sort of matured into, or do you think that being an entrepreneur, being a successful entrepreneur dedicated to the kinds of things that you’re educated to, it was just, it’s a prerequisite to being able to achieve results?

Jenny Xia Spradling: You know, I think self-awareness is closely tied to a sense of humility and humility is a double edged sword. I think one of the reasons why you don’t see it in Silicon valley is that you kind of have to be crazy to think that you’re going to succeed in most of these areas. But the benefit of having it on your team is that you are less likely to be wrong and make those bets that are stupid and not have your team be able to speak up and tell you, you’re wrong. And it’s funny that you bring up self-awareness because it’s actually something we interview for in every single person, because we think that it ultimately makes a team that will make better decisions going forward. So I’m humbled that you mentioned it, but it is really important to us at FreeWill.

Dr. Chris Brummer: Thanks, Jenny so much for joining the show and really your journey is as interesting as your company. And I wish you the best of luck.

Jenny Xia Spradling: Thank you so much, Chris. It’s been a pleasure.

Dr. Chris Brummer: Starting a business isn’t easy, and you never quite know what direction a new venture may take much less a career. But Jenny’s journey and that of FreeWill is a lesson in the imagination of just what’s possible even yes, during a pandemic. The question of course is how generalizable is FreeWill’s success, especially given the extent of economic dislocation, impacting the wellbeing of so many people in the United States and around the world. It’s a big question. And no one of course knows, but this story gives me hope that the ingenuity behind some of our most innovative technologies might just begin to be matched by the ingenuity and desire for positive social change.

Thanks for listening. If you enjoyed the show, please be sure to subscribe on Apple, Spotify or wherever you get your podcasts. And we’d love to get your feedback, if you’d like to get in touch, just hit me up at Chris Brummer, Dr. That’s at C H R I S B R U M M E R D R. We’d love to hear from you.

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Hosted by Dr. Chris Brummer, Fintech Beat covers fintech and policy through interviews with key players. Transcripts of the podcast can be found here.

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Fintech Beat

Fintech Beat

Hosted by Dr. Chris Brummer, Fintech Beat covers fintech and policy through interviews with key players. Transcripts of the podcast can be found here.

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