How I Invest with David Weisburd
E163: How Thiel Fellows Build Billion-Dollar Startups w/Zaid Rahman
Tue, 13 May 2025
Zaid Rahman is the founder and CEO of Flex, a breakout fintech startup that’s reinventing credit and payments for the middle market. Backed by the Thiel Fellowship and known for his “Delta 4” product philosophy, Zaid is building a multi-product platform that’s helping profitable, owner-operated businesses unlock capital and scale faster. In this conversation, Zaid breaks down how Flex is using AI to radically reduce underwriting time, why he’s obsessed with hiring 10x talent, and how “taste” and first principles thinking guide everything from product design to risk management. If you’re building in fintech, hiring in tech, or just obsessed with the craft of company-building, this episode is full of tactical insight.
Chapter 1: What is the Thiel Fellowship and why is it so exclusive?
Something like 10% of TL followers have started billion-dollar-plus companies. A third of them have started companies valued over $100 million. Some of the best companies in the last 10 years have come out of the fellowship, including things like Figma, Loom, Luminar, OERooms, Ethereum.
Today, I'm excited to welcome Zaid Rahman, founder and CEO of Flex, the fintech super app transforming financial management for small businesses. A serial entrepreneur and Teal Fellow, Zade has recently raised capital at a $225 million valuation in order to build an all-in-one platform that bundles credit, banking, payments, and expense automation for business owners.
Without further ado, here's my conversation with Zade. You were part of this very elite fellowship, Peter Thiel's fellowship, which is over 10 times more difficult to get into YC, which itself is elite. Tell me about that program and tell me about your experience.
Peter Thiel started the Thiel Fellowship now 12 years ago or so. The idea was that, you know, he would select 20 people every single year and give them 100 grand with no conditions except one that he had to drop out of college. At the time, it sort of started as a kind of like a social experiment. Over time, it sort of scaled into this much bigger thing.
Something like 10% of TL followers have started billion-dollar-plus companies. A third of them have started companies valued over $100 million. And so the program itself is doing fantastically well. Some of the best companies in the last 10 years have come out of the fellowship, including things like Figma, Loom, Luminar, OERooms, Ethereum, and so on and so forth.
And so it was sort of an awesome experience just being part of that. And from my kind of vantage point, I like to sort of joke that I'm the least sort of qualified person in the room when I'm around these guys, because to me, it's sort of been just about surrounding myself with the right kind of peers. And the fellowship just comes in with this amazingly elite group of people that
kind of all very driven to be extremely ambitious and kind of really change the way things are done. And so it's been an awesome sort of experience being part of that.
Last time you were talking about this very specific way that you use the fellowship in order to scale Flex and to solve problems. Tell me about how you benefit from the fellowship today.
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Chapter 2: How does the Thiel Fellowship community support its members?
The TL Fellowship has this amazing group of 285 people. And so, you know, a couple of years ago, I thought it was crazy that we were not all in a WhatsApp group together. And so I created a little group chat and that became pretty successful. I think the group chat is like 250 of the 300 or so fellows now.
And in that context, you know, if you go on the group chat, I mean, even right now I can see it on the side. There are people talking about all sorts of problems that they're running across. Just yesterday, someone mentioned that, you know, they're going through an M&A and there's a difficult investor and, you know, they're giving them a hard time, you know, in the M&A process.
Has anyone gone through that? They have three tail followers, some of them very successful, giving them advice on how to sort of navigate that situation. It's been really awesome to sort of see up close problems that, you know, this sort of elite group of founders are facing together and sort of take that as an opportunity to sort of learn and also be part of that community.
So you're not only benefit from the camaraderie and everybody going through similar difficult problems, you're also building relationships with people, having a personal mentorship network. And also you get to see, maybe some of these problems are not as esoteric. So you get to see these problems solved live. Some problems you may not even realize other people have the same problem.
Exactly, right? Like the M&A context is an interesting one, right? Because at Flex, we have recently been stepping up on M&A. We've done two transactions and we're looking to do a third one shortly. And so seeing what founders are complaining about in the M&A process is really interesting. And, you know, it's sort of like an accumulated knowledge base, right?
You could probably build an LLM to sort of search through all the stuff that's being talked about, right? Another interesting anecdote, as Doge was like picking up, you know, there were a lot of fellows helping Doge sort of optimize government spend. And there was just a lot of chatter around that. It was super interesting to see, you know, people coming in from like, you know, all sorts of...
all sorts of industries talking about how the government could be made more efficient. And so that in itself, like if someone like just took that kind of piece of knowledge and converted into a report of like actionable next steps, that could be a roadmap for like the next 10 years.
You're using AI within Flex to underwrite, to make credit underwriting decisions. Walk me through how you go about doing that and what have been some of your learnings.
At Flex, you know, our wedge product is our business credit card where we offer you net 60 terms on every single transaction. So two months of free float or you pay us early and we give you cash back in points. And so that net 60 product has been extremely powerful. You can now use it to even pay for ACH and wire transactions through a bill pay later product.
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Chapter 3: How is Flex using AI to revolutionize credit underwriting?
Underlying all that, you obviously need to manage your risk really well because you're providing these business owners the ability to sort of use working capital to extend payment terms. And so we have had significant amounts of investment in order to automate our risk management, our portfolio management, and just how we think about transactions at the time the transaction happens.
Let's say you're a $50 million revenue business in logistics. Go up to a regional bank, which is what most of these business owners rely on for working capital in the mid-market, which is another counterintuitive thing. You go and ask for a credit line.
What ends up happening is that a banker will ask you for a bunch of documents, P&Ls, tax statements, bank statements, credit card reports, and those types of things, and spend four weeks going back and forth to underwrite this business. Well, it turns out the challenge that the sort of SMB credit industry has not been able to solve for is all of this data is unstructured.
And if the data is unstructured, you have to first normalize that data to actually then use it to analyze it. Once the data is structured in a way that's like normalized in the same format, it's actually quite easy to sort of build a basic algorithm and sort of figure out where the current ratio and quick ratio and cash volatility of a business is and so on and so forth.
And so we started implementing LLMs for the specific problem of normalizing unstructured data in the SMB space in general. And that has sort of allowed us to take underwriting from 25 days down to 48 hours on average, which is allowing us to scale our business significantly.
And if you look at the reports the LLM is able to generate, you won't be able to distinguish this from a manual underwriting approach. showing significant improvements in time and sort of effort. And then beyond that, I think there's a huge opportunity to then re-underwrite these businesses on a daily or even multiple times a day basis to see if they're
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Chapter 4: What challenges does AI address in business credit underwriting?
quality of revenue and expenses is going up or down to offer even more credit over time. And so that's been a very exciting kind of piece of sort of improvement that is orders of magnitude better than where we were even six months ago.
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Switch now while your back office has breathing room. Learn more at junipersquare.com. How much paperwork is the AI analyzing on a typical underwriting decision? And why is it 48 hours? Why is it not five minutes?
What we did with LLMs was we just feed it something like 40 distinct files per application, somewhat automatically, that is collected through these API integrations, and then basically spit out a report that takes 10 to 20 minutes for the system to generate. And then we have today at least a gatekeeping function where
One of our senior underwriters will then review that and decide if the company is valid and maybe ask some follow-up questions. But we've started to add LLMs even in that process. And so we think we can take the 48-hour window further down to maybe 20 minutes.
How accurate is the AI today, and how has that evolved since you've started implementing AI?
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Chapter 5: How accurate and efficient is AI in Flex’s underwriting process?
We started implementing AI two years ago. It used to be not super accurate two years ago. A year ago, it was a little bit better, but still not super reliable. As of Q1, the AI is like 90% of the way there. I mean, it's able to think of things even our underwriters sometimes miss. And so we have started to ask ourselves the question, what else can we do based on this analysis?
To talk about your competition, you have
heavily VC-funded Brex and Ramp as competitors, how do you differentiate against these other competitors?
It's a fantastic question. So if you take a step back, on one end of the spectrum, you have these tiny micro-businesses that are running with two or three employees, a few hundred thousand dollars in revenue. That's what historically the big retail banks have really, really focused on. So Bank of America, Chase, Citi, etc., etc.,
On the complete other side of the spectrum, you have very large enterprises and venture-backed businesses that have large inflated balance sheets, right? That's what the sort of glamorous B2B fintech companies have focused on.
Ramp and Brex being awesome players in that space that have done amazing work, particularly Ramp, which has gone very deep in the enterprise and has done hundreds and hundreds of integrations that are very specific to Fortune 500 businesses. However, there's a very large middle market, right? And these middle market folks, we call them jumbo shrimps internally. They're small, but kind of large.
And now these folks, you know, have very interesting dynamics, right? They're running EBITDA positive businesses. They're owner operated. They tend to be really profitable. And if they're profitable, they tend to spend a lot of money. This is the client base that Amex's black card really serves today.
If you go around and see someone with an Amex Centurion card, more likely than not, they're actually a mid-market business owner running a business in some sort of boring kind of traditional industry like construction or logistics or kind of a large franchise restaurant or something like that, right? And so we are really focused on these types of folks
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Chapter 6: How does Flex differentiate itself from competitors like Brex and Ramp?
capturing every single dollar in their financial journey from the time they make a single dollar of revenue to the time they spend it on their personal lifestyle.
You've ramped up Flex very quickly. You're a CEO entrepreneur. This isn't your first startup. How did you go about building your team and recruiting in a hyper-competitive marketplace?
That is the startup ecosystem. It's a great question because recruiting is something that we spend a lot of time thinking about. So there are a few things. This is my third company. I've sort of gone through the ups and downs of being a founder. And the reality is that the team you build is the company you build. And we know what Costa is saying.
There's a huge difference between a $0 million company in a $0 billion company, right? And so from that context, going about how you hire is really, really important. And so in our context, we have really, really focused on making sure that every single person is, quote, unquote, a 10x hire, right? Where you've heard the phrase 10x engineer. What if you could hire a 10x salesperson?
10X marketing person, 10X customer success management person, and so on and so forth. And so in order to do that, you have to be extremely selective about And so now we're about, you know, approaching 100 people. We have been very sort of selective in who graduates through our funnel in recruiting. Typically, the last interview is me. And, you know, replicate is not sort of a novel thing.
A lot of very successful founders have done that. And one of the things I do just as a sort of a practice is, you know, on average, I try to say no to two and three people that are presented to me just to sort of up level our bar in terms of who we are hiring.
And then over time, I think our team has gotten better at pattern matching and who are the most amazing people who are brought onto the team. That typically sort of involves people who have extreme sense of urgency and agency and are
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Chapter 7: What is Zaid Rahman’s approach to recruiting and building a high-performance team?
very intense in the work they do and they don't mind working super hard and working super smart and are very obsessed with creating amazing user experiences for our customers across every single aspect of the company.
Thank you for listening. To join our community and to make sure you do not miss any future episodes, please click the follow button above to subscribe. High agency, obsessed people, delivering customer value. Double-click on some of those characteristics. If you look at your best employees today, what are some patterns among them?
I came across a framework a while back by one of these sort of unicorn Indian founders. The framework itself is called Delta 4. Have you come across this at all? No. No. So it's a really, really interesting framework. Yeah. If you think about the most impactful products in the last 10 years, they all share this characteristic, which he describes as Delta 4. So I'll give you an example.
What was the user experience quality of hailing a cab in New York City in 2008 on a scale of 1 to 10?
In New York City, probably a 6.
In San Francisco, somewhere around 2. Okay, let's say San Francisco, right? The experience is 2 on 10. Now, think of an Uber, right? On a scale of 1 to 10, what is that sort of experience like? Probably 9 or 10. Right? So the delta going from 2 to 9 is greater than 4, right? So when you have this delta of greater than 4... Three things happen.
The first thing that happens is that it is totally irreplaceable, right? Like, you're never going to go backwards to hailing a cab in San Francisco, right? The second thing that happens is that it's extremely brag-worthy. You know, you're talking to all of your friends about it. Like, the first time you use an Uber, you probably told, you know, 20 friends about it, right?
The third thing that happens is that you have a very high tolerance for bugs, right? You're willing to withstand just a ton of issues. Like even if like an Uber ride for whatever reason wasn't super high quality, you're still going to call another Uber tomorrow. And so from my kind of perspective, in order to create a Delta 4 experience for our customers,
It starts with people who really, really care about providing that Delta 4-like experience. And so when you think about fintech, the reality with fintech is that it's a commodity. All these products, using a credit card, a bank account, sending an ACH, the reality is that these things have existed for decades.
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Chapter 8: What is the Delta 4 framework and why is 'taste' important in fintech product design?
But the opportunity that exists is making the individual experiences super duper simple to use and stitch it together with each other so that it creates one large cohesive experience, much like an iPhone or driving a Tesla. where, you know, the individual units in a Tesla have existed for a long time.
But when you add kind of all the components and vertically integrate it, it becomes a very interesting sort of experience for the customer. And so effectively, my kind of definition of what makes a great sort of teammate is how much do they care about creating these Delta 4 experiences for our customers?
Double click on that. Why would somebody care? What are the characteristics of someone that cares about creating these Delta 4 experiences? The first starts with taste.
You can't teach an employee taste. And so you have to, you know, I think the job of the founder in some odd way is actually to be a tastemaker. You're curating the taste of your company and the products you create, right? And it sort of boils down to every single thing. So how you commit code and what do we think is high quality code in production? How we think about architecting systems, right?
Do our systems work well together, which is allowing us to move faster? And then when you think about, you know, abstracting code even further in an AI-first world where you can use something like Cursor and generate entire sort of parables of code in seconds... you know, that's not possible if you haven't modularized your systems in such a way that you can move faster, right?
The really subjective, hard to quantify thing here is taste. And you will see that in every single successful founder out there where, you know, there's some kind of X factor that's hard to describe. And I think that's sort of the X factor thing that we're looking for in every single person we hire.
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Chapter 9: How do you evaluate candidates’ problem-solving skills and first principles thinking?
I think what happens at most companies, though, is, you know, you do that really well for, let's say, the first 20 people or even 50 people or maybe even 100 people. Then you start compromising on quality. It sort of becomes really hard. You know, you're sort of like you don't have the bandwidth to interview every single person at the company. And then soon.
the company culture dwindles and that's when you hear about these cases where the company needs to lay off hundreds of employees and you have bloated middle management of people who are just managing people and not really contributing to the underlying code or the marketing collateral or sales or risk or whatever, you know, that person may work on.
And so I think there's an opportunity to like really, really focus on, you know, just keeping the bar super duper high and finding people that have, you know, insane amount of care about their craft and, you know, a highly proactive sort of high agency resourceful people working on building this amazing thing.
And how can you tell somebody's taste through recruiting process, through the interview process?
What exactly are you looking for? The easiest way to figure out if someone's full of shit or not is just ask them, what is the most complicated project you've worked on? What were the challenges you faced? And how did you solve it? And then just listen. And then ask follow-up question after follow-up question to figure out if they are BSing their way to an answer that's interview-appropriate.
By minute 20, they typically will start cracking and showing signs that, you know, of their like actual like work, right? And so that's when you start like deciphering like how they think about making decisions. And you can apply this to every single role, right?
You know, we ask this for literally people working on our risk automation engine, all the way down to folks working on, you know, our brand design to folks who are sort of, you know, even... I shit you not, we even asked folks, you know, who are sort of talking to customers, you know, in the wee hours of the night. Right.
So it's just a matter of like, what is the most complex thing you worked on and how do you think about solving these things? And then you just decide subjectively if you, as the founder of the company, would have gone about making similar decisions. And sometimes you'll be surprised. You'll learn some things. Right. Right. And you learn kind of ways to sort of operate better.
And it's just that simple. What's a great answer to that? So you ask somebody how you create a risk management system and they start going into details. What are you trying to ascertain?
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