Jul 26, 2021 · 37m · 20vc
20VC: Ribbit Capital's Nick Shalek on How To Think Through Ownership and Price Sensitivity, When More Money and Pre-Emptive Rounds are Good vs Bad & Investing Lessons from Yale's David Swensen
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In this episode of 20VC, Harry Stebbings interviews Nick Shalek, General Partner at Ribbit Capital, about Ribbit's unique investment philosophies, collaborative culture, and sector-focused fintech strategies. Shalek shares key lessons from David Swensen, explains Ribbit's decision to operate without deal attribution, and details how deep domain knowledge enabled the firm to navigate high valuations and execute Robinhood's $500 million emergency raise.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 30.7% of the talking time here. How this is scored →
Harry as informed peer 3.6 Guest teaching 4.8 Guest disagreement 1.1 Harry pushing back 2.5
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 8:04 Nick countering host's argument on new fund advantages
Nick firmly rejects the host's optimistic thesis about new funds having an edge over incumbents, insisting that most new funds fail because they lack the ability to secure cap table slots from elite founders.
Hardest push from Harry ▶ 8:04 Harry challenging Nick's skepticism of new venture fundsHarry explicitly interrupts Nick's premise about new fund failure rates, arguing that incumbent firms are burdened with technical, structural, and political debt that new firms do not have.
Biggest teaching moment ▶ 11:25 Nick explaining how rigid intellectual certainty led to missing StripeNick educates the host on the nuance between conviction and certainty, sharing how Ribbit's theoretical belief that payment margins would compress caused them to miss massive early investments in payments.
Harry holds his own ▶ 8:04 Harry articulating a detailed counter-thesis on VC firm technical debtHarry demonstrates strong industry insight by detailing how legacy VC firms accumulate operational and political debt, placing well-structured new funds in pole position.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Nick Shalek's Journey into Venture Capital and Ribbit | 2 | 2 | 1 | 2 | Harry asks a standard conversational opening about Nick's career path into VC and Ribbit. Nick shares how he initially told Mickey Malka that a sector-focused international fund broke standard LP rules. | |
| Key Investing Principles from Yale's David Swensen | 1 | 5 | 0 | 0 | Harry prompts Nick for key lessons learned from David Swensen at Yale. Nick provides an insightful breakdown of relationship underwriting, first-principles thinking, and long-term equity orientation. | |
| The Hard Reality of Launching New Venture Funds | 6 | 6 | 3 | 7 | When Nick claims new venture funds are extremely likely to fail, Harry steps in to actively challenge the premise, arguing that legacy firms suffer from technical, structural, and political debt. Nick counters by framing the single most critical litmus test as whether top founders will give you cap table allocation. | |
| Balancing Thesis Conviction with Open-Mindedness | 4 | 6 | 1 | 2 | Harry asks how to balance strong conviction with open-mindedness. Nick gives a masterclass on thesis-driven investing, acknowledging how Ribbit's past intellectual certainty regarding payment margin compression caused them to miss massive returns in Stripe. | |
| Navigating Valuations and Identifying "Wonderful Companies" | 4 | 5 | 2 | 4 | Harry expresses strong skepticism regarding current high valuation multiples in fintech. Nick gently reframes the issue from short-term entry pricing to identifying truly wonderful companies that compound over long horizons. | |
| Remote Fundraising Dynamics and Re-Underwriting Decisions | 5 | 5 | 1 | 3 | Harry probes how compressed remote fundraising timelines affect relationship building and follow-on underwriting. Nick outlines Ribbit's approach to allocation trade-offs and rigorous re-underwriting. | |
| Why Ribbit Operates Without Deal Attribution | 3 | 4 | 1 | 2 | Harry asks why Ribbit refuses to track deal attribution internally despite LP preferences. Nick explains how non-attribution removes political posturing and encourages true team alignment. | |
| Fintech's Evolution, Brand Strategy, and Pre-emptive Capital | 4 | 5 | 1 | 2 | Harry brings a question from Frank Rotman regarding Ribbit's transition to a stage-agnostic powerhouse. Nick explains how fintech evolved rapidly, citing major market capitalization shifts from traditional banks to top fintech firms. | |
| Robinhood's $500M Emergency Raise and Sector Focus | 4 | 6 | 1 | 2 | Harry asks about emergency capital raises, leading to Nick sharing the story behind Robinhood's $500M emergency collateral raise within 24 hours during the GameStop market volatility. | |
| Quickfire Questions, Lessons Learned, and Recent Investments | 3 | 4 | 0 | 1 | In the quickfire round, Harry asks about books, past mistakes, advice to younger self, and recent deals. Nick reflects on early direct Bitcoin purchases in Fund 1 and recent investments in Adam Nash's new startup and Kavak. |
Statements from this episode (21)
Shalek: Sector-Focused International Funds Can Succeed in Venture Capital
“Look, the thing that Mickey wanted to do, which was start a sector-focused fund that would invest internationally, it went against everything that I'd learned as an LP about what worked in venture. You know, I told Mickey sector-focused funds don't work, and t…”
Shalek: LP investing and venture capital are fundamentally similar models
“In my view, the LP and the venture business are actually similar in a lot of ways. You know, both are fundamentally about backing amazing people, often with limited control or data as an LP, you know, you're mostly putting money in blind pools. So you learn to…”
Shalek: David Swensen revolutionized institutional investing through unconventional principles
“He really reimagined what institutional investing should be with a few core ideas like that liquidity was overrated, or that you should pursue active management in areas of inefficiency, or that, you know, you should be equity oriented over long periods of tim…”
Shalek: Core VC metric is whether top founders choose your firm
“A friend of mine has a theory that any decision or any investment can be whittled down to like One single most important question. And for me in venture capital, that's like, will great entrepreneurs consider working with us? You know, there are lots of good p…”
Shalek: Type two errors are much more painful than type one errors in tech investing
“In most cases in tech investing, it's great to have conviction about things to invest in or to do, but you gotta be really weary of conviction around things not to invest in. Like type two errors are a lot more painful than type one errors.”
Shalek: Ribbit Capital made early non-consensus bets on Bitcoin and Coinbase
“Like how it felt when we first invested in Bitcoin and Coinbase. And most people just had no idea what we're talking about.”
Shalek: Updating priors and reframing scale defines the best investors
“One of the hardest things I've found in tech investing is updating your priors. You know, one point you can only see Stripe as a billion-dollar company, and then you got comfortable with as a It's a ten billion dollar company, but how do you get over that view…”
Shalek: Investors should prioritize top companies over strict ownership targets
“I think investing in the best companies should be the tail that wags the dog. You know, you certainly shouldn't back a weaker company because you think you can own a few more percent of it.”
Shalek: Ribbit Capital re-underwrites every deal and follow-on decision
“Our principle from the beginning is we re-underwrite every deal, including follow-on decisions.”
Ribbit Capital requires deal conviction but bans individual partner attribution
“I would say we have a process that's intentionally conviction-driven, meaning somebody on the team needs to pound the table, but we try not to attach that Investment decision to a person because I think that often leads to people thinking about investments in …”
Individual deal attribution creates unhealthy political biases in venture firms
“Like it can be easier to bring the wrong biases when it's a deal attached to a person. Like we need brutal honesty as a firm and a kind of no holds barred kind of debates, but you might think about supporting the person behind the deal, which is a nice sentime…”
PayPal and Square surpassed Bank of America and Goldman Sachs in 2020
“Last year, you probably know this, but you know, you've heard some of these stats, like PayPal became more valuable than Bank of America and Square became more valuable than Goldman.”
Top fintechs took $800 billion in market cap from banks in 2020
“Like if you take the top seven, eight fintechs and the top seven, eight banks last year, Something like eight hundred billion dollars in market cap swap hands between them.”
Most Ribbit-backed founders invest their own money into Ribbit Capital's funds
“A significant majority of the founders, we've backed our investors in Ribbit, which means a lot to us.”
Ribbit Capital re-underwrote its Robinhood investment seven times from Series A
“We'd re-underwritten and invested in the business, I think, seven times, like from the A to the G.”
Ribbit Capital wired Robinhood $500 million in emergency liquidity in one day
“We were able to figure out terms and get the liquidity to wire them half a billion dollars that day.”
Shalek: Sector-focused funds often get blinded by their own expertise
“There's a lot of things actually about being a sector-focused fund that are a disadvantage that people think are an advantage, like expertise that we talked about earlier, because, you know, you can become way too full of your own ideas, and you miss that the …”
Shalek: Ribbit Capital should have concentrated capital even more into top winners
“We could have been even more concentrated in the companies that we really believed in. We've done plenty of doubling down on our winners, but I would try to do it even more.”
Ribbit Capital passed on early investments in Stripe, Adyen, and Stone
“Early on at Ribbit, we had the opportunity to invest in, in Stone, in Adyen, in Stripe, you know, in a number of companies that are relatively early stage. And we said, we're not doing payments right now.”