SCS: You've been doing this for years, looking at the different financial products out there. And of course, artificial intelligence (AI) is the moment. Everybody is putting out a different AI-driven product. How is your ETF different?

JF: I say this all the time. It’s difficult to explain why Pepsi-Cola is tastier than Coca-Cola, right? It’s just different. 

We are not the first actively managed ETF, nor AI-powered [one], but we’ve been doing this for years. We have our methodology and take on which investment strategies we like, and the underlying assets that we focus on.

For example, at the moment, we’re not focusing on products such as cryptocurrency. If it’s left to pure AI, what would be chosen would be investment assets that have risen tremendously in the last couple of years. Our focus is mainly on the defensive side. Many investment strategies are designed to make money when the market goes up. But what happens when it goes down? We care about that the most. 

This goes back to when I was a financial advisor in 2008, and in the trenches, I felt the pain of my clients losing their hard-earned money. I thought to myself, there must be a better way.

The ETF leverages proprietary AI computing logic alongside years of quantitative investment experience. During market downturns, the DRAI model can respond promptly, reducing volatility and potential losses. So we don’t have to decide what to buy, our AI does that for us. It just takes the worrying out of play with our investments.

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SCS: At the same time, there is some risk, right? A malfunction could happen as technology doesn't always work. 

JF: The AI is not a robot that does the trading itself. Our AI gives us a view of the next 7-10 days after digesting all the macroeconomic data, whether it’s bullish, very bullish, bearish or very bearish. We have different investment themes with preset logic, percentages and allocations. The AI tells us which is suitable for the current moment in the market.

SCS: And Steve, this is somewhat a new chapter with Taiwan being part of it. What does today mean to you?

Steve Chen (SC): Twenty years of my life was spent in San Francisco, Silicon Valley, in roles with PayPal, YouTube, through the acquisition by Google and then doing a lot of investing there as an angel investor or into venture capital funds.

But in 2019, I was kind of influenced by family and wanted to have my two kids get some exposure to living outside of the US, so we decided to move to Taiwan. At the time, it was just [going to be for] a month, but with Covid coming three months after we moved, we’ve extended and extended our stay. Now we’ve indefinitely extended our stay in Taiwan.

It was through meeting Jack that I got excited about what we’re building at Draco.

One reason is there’s been a disproportionately high number of Taiwanese-American entrepreneurs who have started companies in Silicon Valley. You have Nvidia, AMD, Twitch—the list goes on.

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Taiwan has a population of 23.5 million, it’s a pretty small country. I’ve been asked by the Taiwanese government what is so special about Taiwanese-American entrepreneurs. Of course, there are the TSMCs and the semiconductor industry in Taiwan. The engineers are highly skilled, creating products that can’t be replicated anywhere else in the world when it comes to semiconductors. But the Taiwanese government is keen to see more consumer-facing startups, and there haven’t been many of those in the last 20 years.

With Jack, we started thinking about how there’s nothing that can prevent us from creating almost a satellite of Silicon Valley within Taiwan but focusing on a much larger audience, for the entire world. That was the initial discussion that got us started. 

We've definitely reached a checkbox phase here, to be celebrating this moment, this time in New York.

SCS: You both joined hands in 2020. Steve, what did you see in Draco? Of all the different ways that you could be investing, why in this way, with this ETF?

SC: It came from my personal life experience. I was managing my finances and trying to figure it all out, working with teams from Singapore, Silicon Valley and New York. It still came down to trying to simplify managing my finances. I remember thinking, ‘Wow, if I had just known some of these things back in 2007, 2008.’ I wish it didn’t take my own funds to learn these hard lessons! 

It was going through those stories with others that I realised I wasn’t the only one. 

Jack and I started talking about how these financial decisions can be massively simplified. So we worked on bringing in our past experiences and together, in a hybrid way to create something—me with my technology and ad background, Jack with his financial background. 

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SCS: That leads me nicely to this next question, Jack. Steve has been pretty good at choosing his co-founders from one chapter to the next, with Chad [Hurley], with Jawed [Karim]. Now, he’s in partnership with you. What has that meant for you and Draco Evolution?

JF: Well, you know, he’s Steve Chen, right? He’s a star everywhere!

You know, Draco Evolution is more of a tech company. So this is where Steve comes in.

We had a question yesterday. Why is he the CTO, not the CEO right? To me, a CTO is more like the company’s brain. The CEO does a lot of the selling, the dirty work, but Steve gives us direction. Steve would have a different take on matters from me. 

I would have more of a traditional hedge fund manager mindset. For example, with Draco Evolution, we are launching an app, but when building a product, I’m eager to know early on where the money will be coming from, i.e. the income.

With Steve, he has a different mindset from how he built YouTube. Instead of charging people $4.99 per month or $19.99 per month, he wants to offer everything for free. That’s not what I’m used to. But Steve thinks about reaching and getting to the global market, getting people to use the product.

SCS: User experience before the ads.

SC: Always the consumer first! When it comes to innovation, the key metric that is important at the end of the day is user happiness. None of the users are that happy when they have to pay hefty subscription fees. This was done at PayPal, at YouTube, and this is still done today, even with what Google’s doing with YouTube. They’ve tried as much as possible to make sure that at the end of the day if they have to show you an ad, let’s make the ad relevant.

The ads have become so relevant on YouTube that they’ve become somewhat useful. You have times when people are sharing videos, but those videos are actually of Coca-Cola or Nike ads. One of the most popular videos on YouTube early on that reached a million views was this Nike video of Ronaldhino juggling a soccer ball. Every time someone shares this, they’re endorsing and helping market Nike, but people don’t see it that way because they’re actually entertained. 

So I think there’s this blend between the two, as to the things we should prioritise especially in the early phases of the Draco Evolution app. When it comes to the consumer side, this is different from many other startups you see in Taiwan, where it’s one thing to be dealing with semiconductors and hardware, but when you’re marketing to actual consumers themselves, then you have to really think about what that end-user experience is like.

So when talking with Jack, it was about making sure we build a product that’s loved by our users, an app that they want to virally share themselves.

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SCS: I can see Jack shifting in his seat a little bit, but this is good. It’s bringing interdisciplinary views into what ultimately is a consumer-facing product, right? Jack, talk a little bit about Draco and the evolution of the company. What is the roadmap here?

JF: DRAI is our first actively managed ETF, but we have many good strategies. We’re constantly doing R&D. 

We do commodities, futures, pair trading, day trading. We have many strategies, but it takes years of testing. We don’t just backtest numbers. We put our money into these strategies to see how we can improve. But we could launch an ETF every year using a different strategy. So DRAI would be the first one, but we plan to launch more AI-assisted investment tools in the future, continually seeking innovative investment methods. We chose the ETF because of the transparency, liquidity, and also, to reach global investors. 

SC: I’ve been interested in it from the perspective of just placing myself in the shoes of the average consumer.

And what I’m expecting is, I think, adjectives like “fun”, “exciting” or “simple to use” are hardly words that you hear when you think about financial apps. At the end of the day, probably one of the most important things in everybody’s lives is how you’re managing your finances. 

Many people, my parents included, let others manage their finances and they talk once a month with their advisors. How do you make a financial app that somebody gets excited about, that makes logical sense of complex items you have to deal with, that is trusted to the point you want to share it with others? It’s a high hurdle to get there and we’re well on our way with our engineering and development team. 

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SCS: Taiwan is top of mind because both of you built your relationship there. For Asian startups building for the world, what are some lessons you can share?

SC: Taiwan has its gold card programme to attract entrepreneurs, especially serial entrepreneurs who have started companies outside of Taiwan to move to Taiwan. I think that it’s an interesting period right now to be trying to build something from Taiwan, not targeting just the 23 million people, but targeting the global audience from day one. 

It’s different in Silicon Valley where in the last 20 years, whenever we talked about building a product, it was just trying to build a solution to a problem that ‘we’ faced but for ‘us’ to use, that meant all Americans, the 300-plus million Americans.

I only realised this when I moved to Taiwan in 2019. A problem in the US may not be a problem that’s faced in Taiwan. Coming back to Draco itself, I think it's fortunate that we happen to be geographically based in Asia. This is where Draco can act and serve as that bridge between Asia and the world.

SCS: What about specific takeaways for founders based on your past experiences in Silicon Valley?

SC: When I reflect on my time at YouTube, what happened was that we were first aiming to be a dating service where people would upload videos. It was a dating site that had received zero views and was close to being a failure even with all the technology we had built. But we made these changes along the way, including something that may seem as simple as changing the “hearts” to “stars” to rate the video. We didn’t have the full picture and we were pivoting around to get to the next point. And I think that’s one of the biggest differences I’ve seen with entrepreneurs based in Silicon Valley; they’re a lot more open to taking risks and trying something out before figuring out the entire monetisation strategy. It’s more of a “let’s just get it out there and see” because some of those problems may never surface, because the product won’t go in the way you think it’s going to go.

I always say this to founders: if you have an idea, just take the first step. You don’t have to figure out the next 20 steps that you’re going to have to take.

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SCS: How about for you, Jack, as closing words here on lessons learned as a leader, as a Taiwanese-American launching this global product, building a global business?

JF: Steve had an example of focusing outside of Taiwan. Sometimes we focus on what we know, but we just have to leave our comfort zone. Get out to the global market, which is difficult at the initial stage. If I were to do it again, I’d find a great mentor to guide me. 

Earlier in my career, I wasn’t satisfied with the returns of most investments we were making nor agreed with how assets were being managed. Being in the trenches in 2008 was brutal; I felt the pain of our clients losing money in the financial crisis. A voice in my head told me I could build something better than this at a lower cost and with more transparency. 

Instead of focusing on these high-net-worth individuals, who already have tens and hundreds of millions, I wanted to focus on everyone else and allow them to have access to our investments. 

I don’t want to just focus on the 0.5 percent, 1 percent ultra-high net worths. I want to focus on opening the doors for the everyday mom-and-pop.

SCS: And the impact that you both seek to make then is, if you could sum it up, would it be bridging the different generations through financial access? 

JF: The future of finance, yes. That’s what we’re aiming for—bringing good investment products to the world.

Quotes have been edited for brevity and clarity.

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