Illustration: Carolina Moscoso for Bloomberg Markets
How Virtual Banking Made Saving Risky Again
When a software company called Synapse failed, some app users lost access to money in FDIC-insured bank accounts. How is that even possible?
Adam Moelis and Ben Doyle had an outside-the-box business pitch: Many Americans struggle to build a savings habit but also enjoy spending money playing the lottery. What if they could combine a bank account with a sweepstakes to make savings more fun?
The two entrepreneurs developed the idea with the help of Y Combinator, a storied tech incubator where business founders can hone their ideas and get them in front of venture capitalists. In 2020, Moelis and Doyle launched a finance app called Yotta. For every $25 users deposited into Yotta, they’d get a virtual sweepstakes ticket instead of interest. Prizes ranged from 10 cents to $10 million. Drawings would happen once a week, encouraging people to keep coming back to the app. Yotta Technologies Inc. got early investments from VC firms including Base10 Partners and Core Innovation Capital, as well as hedge fund manager Cliff Asness and Moelis’ father, Ken, the billionaire founder of the investment bank Moelis & Co.