Ep. 192: Building a Fintech Startup: Overcoming Obstacles and Finding Success with Lacey Shrum, SmartKx

Come on in and sit back relax, you’re listening to Episode 192 of the WealthTech Today podcast. I’m your host, Craig Iskowitz, founder of Ezra Group Consulting and this podcast features interviews, news and analysis on the trends and best practices all around Wealth Management Technology.

I had a fun conversation with today’s guest Lacey Shrum from SmartKx. Lacey was originally a lawyer, and then she became a Chief Compliance Officer, before she got the bug and started her first startup back in 2016. She became a FinTech founder in 2018 with her second startup SmartKx, which provides a billing software for RIAs. Follow Lacey on Twitter @Lacey_Shrum.

But before we get started, if you are an executive of a wealthtech firm that’s selling software to RIAs, broker-dealers, asset managers, TAMPs or others, then you should run, not walk to our website, ezragroupllc.com and fill out the Get in Touch form on the home page. Our experienced team can assist with software vendor evaluations systems integrations, improving operational efficiency, software implementations and a whole lot more. You can take advantage of our free initial consultation offer by going to EzraGroupllc.com. Now, let’s kick this thing off!

Topics Mentioned

  • A Startups Biggest Obstacles 
  • Hiring Decisions for Startups
  • Biggest Startup Mistakes
  • You Need a Mentor
  • Startup Culture
  • Future Trends

Episode Transcript

Craig: I am excited to introduce my next guest on the program. It is Lacey Shrum founder of SmartKx. Lacey, thanks for being here.

Lacey: Hi, thanks so much for having me.

Craig: It is a pleasure and we just saw each other in person last week in another way, far west out in Utah at the Riskalyze conference, it was great to see you.

Lacey: Yeah, it was so great to see you. Great conference. Impeccable weather. Can’t ask for anything better.

Craig: It was crazy how nice the weather was.

Lacey: I know. I know.

Craig: And where are you calling in from now, Lacey?

Lacey: I’m dialing in from Dallas, Texas.

Craig: Beautiful Dallas, Texas where we all love the people but hate the football team.

Lacey: I knew that was coming. And yes, it is a beautiful rainy day in Dallas.

Craig: It’s pouring rain in Dallas. It’s terrible. In fact, the weather is so bad in Dallas, that you’re jealous of me being in New Jersey right now where it’s sunny.

Lacey: It’s your show, Craig.

Craig: That’s right. Whatever you want to say. I’m just going to edit it out. Whatever you say about New Jersey was going to cut it out. For everyone who may be not aware of SmartKx, can you give us the 30-second elevator pitch?

Lacey: Yes. So I’m an attorney. I was at an RIA I worked with tons of RIAs, they all disliked fee billing. They would bill quarterly. They would grumble at it. It was difficult. It was manual. What was worse is the SEC would come in ask see the fees versus contracts. Most of the time they were failing. The SEC confirmed that last year in a risk alert. So I built SmartKx to automate the fee process into one seamless click of a button and along with calculating fees it also drafts and discloses the fees to the client. So your fees are automatic and always exactly as you and the client have agreed to.

Craig: I always find it interesting why someone starts a company, especially a tech company. It’s always an interesting story. So it was scratching your own itch, you were seeing the problems firsthand and decided to build your own solution.

Lacey: Yeah, I’m a lawyer, and I was interested in technology. I’ve had other businesses other, somewhat startups in the past just trying things, tinkering with things and there was just this massive problem with fees. And when you looked at it, you’re like, why were fees in a portfolio management system when they aren’t married to that. They have no relationship and they are married to what the client disclosure says what the math is and what the accounts are managing how you’re going to bill on those. So it kind of clicked for me from an automation perspective. I’m sure as you know, I went down the rabbit hole deep on crypto, specifically, Bitcoin and just learning how technology could take places of manual processes, and automate them and automate them and this was one of them. So that was kind of what started the journey.

Craig: And that’s, now I’m remembering how we met we were talking online on Twitter, we met talking about crypto and other technology things. And we talked a while online and then we finally met at the Riskalyze conference in Palm Springs in 2021, which was the first conference back after post COVID and it was so much fun out in Palm Springs finally get around people.

Lacey: Yeah, and the location was great. We were outside it was in and out. Everyone was out and back and got to see people in real life which I’ve been doing.

Craig: I had never been to Palm Springs before the airport is outside.

Lacey: I love it. Did you go into Palm Springs to see, are you into any of the modernism architecture or anything like that?

Craig: I am into architecture, but I didn’t go I just stayed at the resort but we drove through it to from the airport to the resort I saw a little bit but no, I didn’t get the chance to go there. Hopefully I get to go back one day. And then we saw each other last week at Riskalyze again, and we’re going to see each other MarketCounsel in December, which will be awesome. I prefer Miami to Vegas. But you know, Brian wants to happen in Vegas. So we’ll go to Vegas.

Lacey: I know it’s his conference, so.

A Startups Biggest Obstacles 

Craig: It’s his conference. When you’re starting a company, what are some of the biggest obstacles you have to overcome?billing software for financial advisors

Lacey: As a company in general

Craig: A fintech like you start, you’re still in startup.

Lacey: Yeah. So when you’re at the very very onset, you’ve got to obviously figure out who’s going to do the work. So I come from a ranching background. My family is in ranching and in construction and that makes it easy transition to any type of entrepreneur but also a fintech company, which we can talk about later.

Lacey: But one of the safety things in those industries is you can always go out and do the work right. You can go feed the cows, you can haul them somewhere you can do this, with a fin tech you can’t do that. You have to have somebody build it for you unless you’re the developer and I knew enough to be dangerous on the development side. Nothing to get this off the ground, which was super helpful in communicating between the problem, the product and actually how to build it.

Lacey: So finding somebody that you trust that has the capabilities that has the wherewithal of like how to just create something out of nothing, and what tools to use. That was difficult and then of course, like you get into the money aspect, and the other thing that you’ve got to figure out is like what is the one pain point that people will pay to have you fix? What is that thing that is bothering them that they said like this is the thing that I will I need fixed. And you are the person to do that.

Lacey: When you’re a FinTech founder, you have this whole vision out in front of you and like it’s all about being a visionary and skate where the puck is going and at the end of the day, that’s great. And you do have to have a vision, but you also have to just like get into the weeds of like, what is that nuance that somebody will pay for me to fix? And will they pay for me to fix it? That’s what it’s all about. Right? The problem I’m solving the SEC has said it’s a major problem, it is a headache that everyone wants solved. So you do have to get into the weeds and figure that piece out.

Craig: Part of product market fit is will they pay for it? You can have the great product but if no one’s going to pay for it, then it doesn’t make any sense that you have this great product because no one’s going to pay for it. You can’t make any money. Right?

Lacey: And then you’ve got to get them to you know, you got to get them to pay you for it and then still be you know, helping them towards that vision to what the extras are on that you can you can give them so much more right like you can get them in the door and then you can delight them with things that they’re like I did need this like I do, you know, I did have this problem. I need this. Yeah, I have this pain and now I have the painkiller. But yeah, you gotta get him in the door and have him pay your ticket.

Craig: So I’ll let the audience in on a conversation. Before we started the recording. We were talking about cliches and overuse of cliches you used two cliches and that one paragraph, you said, “skate where the puck is going” and “at the end of the day”.

Lacey: At the end of the day.

Craig: At the end of the day, skate where the puck is going.

Lacey: That’s it. That’s all there is to being a FinTech founder. You’re welcome.

Craig: That’s the tweet. Only time will tell. If you can read between the lines we’re not laughing at you. We’re laughing with you.

Lacey: Synergy.

Craig: Reduce friction. Find synergy. Yep. We just basically gave everyone the secrets to success.

Lacey: And life.

Hiring Decisions for Startups

Craig: Exactly. Let’s talk about, one thing I’m always interested in is hiring. When you’re running a startup, when do you hire some your first employee who is that employee, and how do you make those decisions when you’ve never done it before?billing software for financial advisors

Lacey: How do you make those decisions? Well, I mean, for me, getting a developer was I that wasn’t a choice, right? Like I didn’t have the option to go out and start writing code. I knew enough I did take web development classes, as a lawyer it’s a particularly interesting endeavor, because you already are writing and thinking so literally, but I didn’t have a choice. So obviously, I had to find a developer.

Lacey: And then we as we brought on clients, we back filled some of the dev work, some of the product work. And I’ve always been fortunate to meet people in my network or the stars have aligned, the interwebs have aligned that what they were looking for, we needed and they had talents and capacity to take that on. So the people part has been challenging at times to get the right people in and sometimes the right people or the right people for a certain time and then they have to move to something else. They don’t have those tools that you need. So it’s just it’s relying a lot on what your capital will allow you to do and what talent you need. And of course, what talent is out there that’s coming to your door.

Craig: Yeah, I always find interesting, there’s so many different things you can hire for. So you can outsource some, you can hire some you can do both. Which way did you go in terms of outsourcing versus bringing in hiring people full time?

Lacey: We start with outsourcing. So our marketing now that’s outsourced, and as that kind of takes over capacity of not making financial sense anymore. We transition and if that person is ready to transition to employment or you know, seek somebody to fill that spot, but it is in a FinTech at any stage but you know, it is cashflow management, you have to have the cash to survive. And you don’t want to mess that up.

Biggest Startup Mistakes

Craig: No, that’s difficult for some people to do, right because it’s you know what, how long do you go on and making payroll? It’s one thing we can’t pay consultants, another thing when you’ve got your employees when that payroll comes to two weeks, you’ve got to pay it. Because it gets laying people off sucks. What are some mistakes that you made in the process? That you wish you could do over again? What would you recommend people have avoid those mistakes?

Lacey: I would say that the every business that I’ve had in every endeavor like you just learn how to do things faster. So the mistakes while they’re not something like I fortunately knock on wood have not gone would have not had a mistake where I’m like, Oh, I wouldn’t have you know that was so horrific, but it is something that you can move on faster from and get over sooner. So I think the the biggest thing I’ve learned about in product is just what we talked about at the very beginning like get that whatever that little thing is, it is hopefully part of what your vision is, but it may seem to you like it’s just so basic, like how is this how is this person having this problem or like, you know, this that seems like such a tiny little piece of the big problem I want to solve, but you’ve got to kind of let all your guards down to be like, okay, but it doesn’t matter. This is the problem they want solve. So like let’s start solving it is a grain of sand in the big vision and kind of letting the product letting the market sort of guide you. But also, you’ve got to keep some parameters in place.

Lacey: So that was a big one that took a little bit longer, but I think the other one is just getting your messaging down. I mean, everyone talks about just listening, listening, listening and being able to move fast. So being able to move fast over like things that aren’t working, getting to a yes. Or if not a yes, getting to a no. And keeping your mindset in a way like it’s all I mean, you are at Riskalyze last week, Jackie Joyner-Kersee she talked about it’s all your mind. Like she talks winning that winning that last bronze was better than, she didn’t come out and say gold, but she certainly said it was better than that silver she won in their first Olympics. All about your mindset. So like keeping the right people around you the right things that are coming into your brain and keep your your mental game very strong.

Craig: I was listening to an interview with Michael Phelps, his trainer and talking about how what he believes one of the strengths besides that Michael Phelps is an incredible athlete, but there’s lots of incredible athletes out there. It’s that they he built up a regimen that Michael Phelps did every day of a meet. He had the exact same regimen he would drive there at exactly the same amount of time before the meet started. He would sit in exactly the same place, he would listen to the same music, have the same breakfast. He would do the same number of warm up laps, everything the same that way. He was so used to that that it destroyed all the pressure that you normally have in these things because he was just doing his routine everything became a routine. And it helped him was one of the one of the things he said help them towards being one of the greatest swimmers in the world.

Lacey: I will say very similar. I mean having babies is the same way and young children, a routine just like you thrive on a routine and it makes even just a day old baby like makes him feel confident they know what’s coming next. The vulnerability is not there and you have to teach him you know when things do go off course when the temperature for Michael Phelps in the water is slightly colder like you have to be able to adjust but if you are confident in your routine, and people will ask like well motherhood having a startup like it is actually a benefit because I am in that routine. Like I am in a daily routine. There is no cutting corners. There is no you know burnout of hustle culture like I am in a routine that the time is very set and thorough.

Craig: Oh definitely. I have three children as well. Three daughters, who are all grown now, but routine is freedom for children, right because you put them in a routine and they just thrive and understood that that’s something that you learn fast as a parent, that routine is important.

Lacey: And even as an entrepreneur because you could just you don’t as you answer to clients, but that’s it. You could just spend the day not.

Craig: Well, your kids or your clients too, right. They admit they’re very demanding clients.

Lacey: They are, one told us this morning at breakfast. I told you last night I wanted syrup on the side of my French toast, you should have written it down.

Craig: And now you can go sit in timeout.

Lacey: That’s right.

You Need a Mentor

Craig: My mother’s favorite line was, “this isn’t a restaurant”. Who helped you the most in your startup life to become a successful startup?

Lacey: I wouldn’t say the most, I would say there has been a host of people throughout my life who have like made it easier and have invested in me and supported me or just sort of teed up. Me and my family is from an entrepreneurship background. It was always you know, everyone was running businesses at different businesses. So my dad was a rancher. He was an auctioneer and an auctioneering company. You know, if something wasn’t working or something could be better like it was an opportunity to be the one that made that and set that better. So I think that and then the fact of like, when you’re a rancher an auctioneer and construction like something’s always breaking, so your skin is pretty thick. And so you know those kinds of teed it up.

Lacey: My husband has his own business as well. So this the support there and like the mental support is supremely helpful. And then I’ve just been lucky to have individuals who have invested in me, my partner at the law firm that I initially hired and then worked for and they invested. He’s like he took a gamble on me and both financially but also just emotionally has been a mentor through you know, how to raise capital, how to negotiate terms what that looks like, how to set that up for success the next round. Another gentleman has have helped me with like establishing relationships and networking and building like that home base. I’m not from Dallas. So like, my network here is all homegrown and like I’ve done it all myself. And then other startup founders who have had successful exits, just basic things like how to negotiate a contract, how to what things, enterprise sales are looking for, what they’ll give on things like that, that are just supremely helpful to know that you have those that support behind you with their expertise has been wildly influential.

Craig: Yeah, I can agree to that. I did some investing. And the first time you again, we sign these papers, they send you the documents and you start reading through them. It makes no sense. You’re looking at and trying to figure out what in here should I be paying attention to which terms do I need to worry about? And am I getting screwed? I don’t know. I went to some people who had done this many times and their advice is invaluable in terms of how to structure the deal and how to structure the shares and all the different aspects of a deal that can go wrong for you that you don’t even realize.

Lacey: You just want to set yourself up for success long term, odds are that you’ll raise capital multiple times and you can’t solve for everything but you want to make sure that you’re protecting your investors, yourself and your employees.

Craig: Especially employees. There was another company that shall remain nameless. Fintech, a wealthtech firm, that the CEO sort of became enamored with fundraising. They just wanted to keep saying he raised this money, raised that money kept raising, raising, raising, and wound up diluting the employees tremendously where they got screwed in the end. They didn’t realize it, but when they finally got bought out, the employees got very little, way less than they expected and investors took most of the money because that’s the way the deals were structured, poorly structured deals.

Startup Culture

Craig: Would you stop when? You know it’s time right? The writing’s on the wall. All right. You have to remember what goes around comes around. We have to remember that every cloud has a silver lining. So in this case, what about company culture? So it’s another thing when I’m looking at startups, we hear a lot about culture. What’s the culture at SmartKx, did you intentionally create a culture and how does it help you grow?

Lacey: Everybody, I think now obviously, it’s cool, but like who doesn’t want to be at a tech startup and you’re going to make billions and you’re the first employee like all these things. In Dallas, our venture is a little more tame, just to begin with, because we’re not on the coasts. And so it’s not as wild as you know, we’re looking for the next unicorn. So it’s a little more tame here. But just like, especially your early investors are usually friends and family, like making sure that they understand and your employees that you’re giving equity to understand, like, Here how you’re going to get paid if this is successful, is important rather than like anything just selling this rainbows and butterflies. I can’t quit with a cliches, I’m sorry.

Lacey: Our culture is someone asked me this the other day and so I hadn’t done a lot of thinking about this. I’ve thought a lot about it in my personal life, just what our internal household culture is, I guess, and it’s it when I sat back and looked at it, it was very intentional, and it has been with SmartKx. We’re fully remote. So like, our biggest culture piece is all online like we don’t see each other we don’t that time for social is just different in a remote environment.

Lacey: The first thing that all of us have done exceptionally well is we show up for people like we show up for each other. We have a team meeting every single day, whether it’s two minutes or 30. We all show up. We’re ready to go through our points who we’re waiting on for what, we do have some personal some back and forth. We are always readily available to each other and our clients bill mostly on the border. So like the quarters are an exciting time for us. They’ve become less exciting, but they’re in the first few quarters that’s where our team was built the strongest and that things were going wrong. We were all there to help fix it. It wasn’t done until each one of us was done and each one of our clients had what they needed for their quarterly billing. And I think that’s the piece that has been the bedrock of our culture as it is now is that we show up and we are supportive as the team regardless if it’s virtual or in person that we’ve all got each other’s backs, like my team we can slack each other right now. We’re all there we laugh about it. Like I said before things break. You got to have a good humor about it. You know, curse a little roll your eyes, but it’s you know we’re it’s not brain surgery. And so we’re here to fix it and we have each other’s back.

Craig: Jim Gaffigan, the comedian, he’s hysterical. He has a bit where he says, we always talk about well, it’s not brain surgery. Well, what do brain surgeons say? Because for them, it’s always brain surgery every day.

Lacey: I hope that they have a routine like Michael Phelps and something that keeps them coached routine.

Future Trends

Craig: Well, you know, Lacey, we’ve only scratched the surface here. But the writing’s on the wall, that we’re running out of time. Before we go, tell me, let’s talk future trends. What are some future trends you’re seeing that you think are going to be impacting our industry? In the next 6-12 months, but thought the for the future? 12-18 months? That’s fun.

Lacey: That’s hard.

Craig: Of course it’s hard. I wouldn’t ask you the easy questions.

Lacey: I mean, I think clients are going to become more persnickety, like last year was great everyone made a ton of money. The market was lovely. You know, advisors. Of course, I’m partial to billing advisors were able to fill it was easy. Life was good, and I think clients, I know that it doesn’t seem that way but I am old enough that I lived through 2008 clients are just unsettled. I think they’re unsettled from everything we’ve been through in the last three years. It doesn’t look like there’s any like, you know, calm seas ahead of us. So I think there’ll be a lot of persnickety clients and advisors are going to have to ramp up the client service, ramp up their knowledge of the markets get deeper into understanding the Fed economics, geopolitics, what that looks like. And I think though, that as with any industry, like the ones that have invested in themselves when things were calm and collected, will prevail.

Craig: We you and I met I believe on Twitter. So news of Twitter going private, your thoughts, go.

Lacey: I think it’s a payment play.

Craig: Why?

Lacey: Because, Elon Musk I mean, he has been in the payment space, obviously

Craig: Paypal mafia, right?

Lacey: Yeah, PayPal Mafia mafia. And he I do believe he’s a Bitcoiner, it doesn’t necessarily need to be Bitcoin, but I think he understands that the rules that we’ve traditionally had to have banks or other intermediaries to move money, so if I’m going to send you money, there’s probably about 10 to 15, intermediaries that are in there to send money that technology can replace, replace those intermediaries. Twitter has a great social network. And I just I think it’s a payments play. I think you’re going to see that payments, you’re going to be able to facilitate payments between people and also payments for goods or services, services also, including research, education, blogs, podcasts, things that you’re interested in. You can transact a lot more efficiently. It’s it’s faster, it’s cheaper. You can transact in like tiny, tiny increments, which we’ve seen. It’s been the trend with technology. Is to, you know, smaller but more. So I think it’s a payments play.

Craig: That is an interesting way to look at it.

Lacey: It’s not my original thought, I have done a lot of research, I’m not that visionary there.

Craig: Were very few original thoughts, but yeah, I get it.

Lacey: That’s true.

Craig: Well, only time will tell.

Lacey: That’s right.

Craig: And the Internet moves at the speed of light. And all’s well that ends well and this podcast is ending very well and what goes around comes around so you’ve given out a lot of information that’s going to come right back to you. And when life gives you lemons make lemonade. Okay, so where can we find out more information about your firm Lacey Shrum?

Lacey: You can go to Smartkx.io I’m on Instagram, I’m on Twitter. And then of course, you can set up a meeting on our website or you can just reach out directly to me at lacey@smartkx.io.

Craig: Lacey, thanks so much for being here. It was a pleasure talking to you.

Lacey: Thanks for having me.



The Wealth Tech Today blog is published by Craig Iskowitz, founder and CEO of Ezra Group, a boutique consulting firm that caters to banks, broker-dealers, RIA’s, asset managers and the leading vendors in the surrounding #fintech space. He can be reached at craig@ezragroupllc.com