The Exchanges

Q and Z. Fantastic. Would you make the introduction? Yes, of course. Always fun. Um, I do want to ask, uh, I spoke to Andy Ratcliffe before this, um, obviously a benchmark and now Wellfront, and he said in terms of your LP letter, the first strategic positioning of your LP letter was rather jarring for your LPs. Why was it jarring? How did they respond, and how did Andy respond?

A So, so Andy's been a, a long time, uh, mentor of mine and has just been incredibly giving and generous with his time. Uh, I think in his advice over my, my entire career, uh, and someone that I, I listened to a lot and, you know, he, I, we have him as a, as an investor today and, you know, he's, he's been a, he's been a supporter sort of since, since day one. Uh, and I think that what he's referring to was, you know, one of the early letters that I, I, I, I think I wrote something along the lines that, you know, our goal is to win, right? Our goals is, is really not to miss the next huge hit. Uh, and it's not to minimize losses. Uh, and I think some, some investors, especially some more traditional investors kind of reacted a little negative, negatively to that idea of not trying to minimize losses. And I remember having this conversation with Andy and him just saying how it kind of just never ceases to amaze him, like the number of people in venture that play not to lose, right? And, and how you really can't win by playing not to lose. I think that that really stuck to me. And I think it's something that I had a little bit of my, my gut instinct, right? That you have to play to win. You don't have to play not to lose. Um, and I think that You know, as you said, how did, how did Andy react to that? I mean, Andy actually then, uh, at that point decided to kind of double down on …

AI assessment note: “traditional investors kind of reacted a little negative, negatively to that idea”

Q thought and perspective. Can I ask, when you think about being contrarian in venture, I spoke to a mate, obviously at Loft, um, and he said about you being a contrarian thinker, and everyone kind of bandies it around, kind of bullshit often, but he said he really is. How do you think about yourself as a contrarian, and does it make sense to be a contrarian in venture anymore?

A So I, I wouldn't describe myself as a contrarian. I would describe myself much more as an independent thinker, right? I think we, we in the fund, we try to come to, I think the right answer or what the truth is in, in any one given case. And, you know, that's something that we try to build from the inside out and kind of bottom up really thinking about what are our true beliefs about this, about this market, about this model, how we think this is going to evolve. So we aren't necessarily seeking the next hot deal just because the market is chasing it. Uh, we're investing in companies because we truly think that they're going to be massive in the future. And I think that sometimes that approach leads us, uh, to non-consensus investments, right? And from the outside, it may seem like it's a contrarian investment, but that's really a result of our process, not the goal of our process. But, but just to also get the hook that, that, that you left there, I do think I am particularly happy when our process leads us to a non-consensus view. Because I, I do believe, and maybe, you know, some people think this is outdated. I, I would disagree with them. I do think that the best returns still are those non-consensus and right investments, right? Sort of the, the, the Howard Marks, uh, two by two matrix. Uh, and, and, and I think I've heard a lot of times that, you know, in venture, you mi…

AI assessment note: “I wouldn't describe myself as a contrarian. I would describe myself much more as an independent thinker”

Q my, my, my final question to you before we do a quick fire is, you know, you've seen this boom and bust cycle before as an operator and now obviously seeing it as an investor. Um, when you think back to the Paci Urbano days, um, advising founders today, how do you advise founders in this current boom and bust cycle on operating today in these current conditions in LATAM?

A I'd say rule number one is just to be in the game and stay in the game. And I think that what that means is sometimes being a little bit more cautious, right? And I think what that means is again, maybe you should cut a little bit more than you think you need. I think a lot of founders, they err on the side of just cutting a little bit of the fat. I think it's healthy sometimes to cut through the fat and into the muscle, uh, because you can always undo that later. If you were wrong, maybe you cut a little bit too much. You might have to rehire people or you might have to You know, reinvest in things that you reduce investment in, but if you cut too little and you end up being wrong and you run out of money, you can't undo that, right? And you're out of the game. So I would, number one, just over index on being more aggressive and having more runway and being more conservative in times of uncertainty like we have today. I think the other thing I learned is that you can always do less with more and your team and yourself, you're always going to think, look, if I, You know, cut 20% of my workforce. I reduce this investment. We're never going to be able to deliver this. And, and I guarantee that you're going to be surprised at how much, you know, smaller and more, you know, motivated teams can do, even when compared to bigger teams. I think you're going to have better and even more…

AI assessment note: “rule number one is just to be in the game and stay in the game.”

Q Julia, do you think boards add much value? I've sat on boards with some of the best. Rarely have they added any value. Genuinely, do you think they're valuable?

A In, in my experience, having a moment where you bring in different investors and different advisors together, you know, to, to check in and talk about strategy and talk about direction, that conversation is valuable. Whether that has to happen at a board meeting and whether it has to happen sort of in the formal construct of a board of directors, I don't, I don't think so. I think a lot of the most valuable conversations I've had and strategy planning conversations I've had weren't in board meetings. That doesn't mean to, that doesn't mean that board meetings can't also be helpful. But I don't think that they are, they are necessary elements of having those important strategic discussions and conversations that guide a firm. Uh, and that's a little bit of also why I, I think that being, you know, formally on a board or, you know, listening only to your board members isn't necessarily, uh, as, as important as I think a lot of investors make it out to be. I think as a, as a founder, a lot of the people that helped me the most weren't on, on the board, right? I think you mentioned Mickey Malka. Mickey Malka started as an angel investor Uh, and Pace Urbano is probably one of my, my greatest mentors. He eventually joined our board, but he probably added as much value before he was a board member as after he was a board member. So I'm, I'm a believer that getting the right people to …

AI assessment note: “I don't think that needs to happen within the construct of a board.”

Q Can I ask, one of my biggest mistakes over the last years was I didn't take cash off the table. I could have done, and I didn't. I believed in the Doug Leone. Always, you know, hold on to your witness. Thanks, Doug. Um, but my point being, did you take money off the table, and how do you think about secondaries and providing DPI?

A As an angel investor, we often, I often took money off the table. Um, and you know, that was probably 10 or 20% of the total position value. It was never sort of selling the entire position. So definitely kind of guaranteeing some returns and guaranteeing some of that money is in the bank. And I think for the biggest investments I made, uh, definitely we sold when there was, when there was an opportunity. And I think that we, we look back and we're, we're happy about those decisions. You know, as, as an investor, you know, frankly, I haven't been Uh, in the venture business for long enough to have had, you know, great opportunities for liquidity, but I think that honestly, um, I would probably think about it in a similar way. You know, if, if a company is a big enough position where selling 10% of it, maybe even 20% of the position, might be able to return your fund, might be able to distribute to limited partners, that might be, that might be a good trade-off to guarantee some of the returns in the short term, but still leaving plenty, plenty of exposure for, for the upside cases, because you want to make sure that you're, Going to be compensated for that huge risk that you're taking at the early stage. I would probably never sell an entire position, um, you know, before, before a final exit, but, but I would, I would seriously consider, uh, taking maybe 10% off of a position …

AI assessment note: “As an angel investor, we often, I often took money off the table.”

Q and Z. Fantastic. Would you make the introduction? Yes, of course. Always fun. Um, I do want to ask, uh, I spoke to Andy Ratcliffe before this, um, obviously a benchmark and now Wellfront, and he said in terms of your LP letter, the first strategic positioning of your LP letter was rather jarring for your LPs. Why was it jarring? How did they respond, and how did Andy respond?

A So, so Andy's been a, a long time, uh, mentor of mine and has just been incredibly giving and generous with his time. Uh, I think in his advice over my, my entire career, uh, and someone that I, I listened to a lot and, you know, he, I, we have him as a, as an investor today and, you know, he's, he's been a, he's been a supporter sort of since, since day one. Uh, and I think that what he's referring to was, you know, one of the early letters that I, I, I, I think I wrote something along the lines that, you know, our goal is to win, right? Our goals is, is really not to miss the next huge hit. Uh, and it's not to minimize losses. Uh, and I think some, some investors, especially some more traditional investors kind of reacted a little negative, negatively to that idea of not trying to minimize losses. And I remember having this conversation with Andy and him just saying how it kind of just never ceases to amaze him, like the number of people in venture that play not to lose, right? And, and how you really can't win by playing not to lose. I think that that really stuck to me. And I think it's something that I had a little bit of my, my gut instinct, right? That you have to play to win. You don't have to play not to lose. Um, and I think that You know, as you said, how did, how did Andy react to that? I mean, Andy actually then, uh, at that point decided to kind of double down on …

AI assessment note: “Andy actually then at that point decided to kind of double down on his investment”

Q Is there anything you would do differently with the benefit of hindsight, and how do you advise managers today raising a first-time fund?

A I think the main thing I would advise a new manager is just that there's no shortcuts, right? Like I said, it took me hundreds of meetings, and I think that's just, that's just the way it is. I don't think there's a shortcut to raising a fund magically. It requires hearing a lot of no's and trying to find, honestly, what the right product market fit is for your fund, right? Who are the people that want to back you and who want to back this strategy? And once you find them, just look for more people like them. I think start out with people that know you and that trust you and are willing to make a bet on, on you as a person, uh, and then try to have other people that, that think in a similar way than they do and kind of go and expand, expand in that way, rather than I think try to follow any formulaic way for, for getting a fun off the ground.

AI assessment note: “the main thing I would advise a new manager is just that there's no shortcuts”

Q Can I ask, what does winning a market mean? When founders think about winning a market, what does that actually mean in reality?

A I think it, to me, it means achieving a level of excellence and market share, um, and, and barrier to entry that a new competitor can't easily come in and undermine you and sort of steal market share. So oftentimes, uh, it's, it's about building those competitive moats, making sure that they're strong enough that no one can easily come in and sort of dethrone you. Uh, and a lot of times it's just getting to sort of the market share or getting the network effects to start kicking in in a way that sort of the, the acceleration curve is very clear that As you grow, that, that moat or that competitive advantage is only going to get greater, and no one else is going to be able to, you know, reliably or, or no one else is going to be able to come in there and reliably challenge you in a way that you should be worried about.

AI assessment note: “it means achieving a level of excellence and market share, um, and, and barrier to entry”

Q Mickey, I mean, I did no work for this show. I just spoke to our mutual friends, and they gave me all the answers, but Mickey asked a great question, which was, if you had the time again, and you were starting a company today in Brazil, what would you do differently, and who would you partner with, and who would you not partner with?

A This, this question of who, who would I would partner with and who would I, you know, raise money from? Honestly, I think I would probably do a lot of it, uh, the same. You know, I think we had really amazing partners at, at Pace Urbano, right? We raised our, our first round from, from Benchmark Capital. You know, I went on to start another company and raise money from Benchmark Capital again, so I've, I've definitely done that before. I think even our, our, our growth investors at, you know, General Atlantic and T-Row, I think that what was, um, What was most important there is that not only were they helpful and supporting us when we were hyper growth and we were doing excellent, but actually when the company was, you know, going through a lot of rough patches and I think was in the, in the process of even, um, of, When the company was going through a lot of rough patches and was really in a lot of trouble, I think that's actually when they really leaned in and helped us out, right, and where they're supportive to make sure that we did well. You know, obviously, I don't think every single partner was great, but I...

AI assessment note: “Honestly, I think I would probably do a lot of it, uh, the same.”

Q Can I ask when you're growing that fast, what are the first things to break?

A When you're going that, when you're growing that fast, you're bound to make a lot of mistakes, right? And I think it's, it's important to grow fast and make mistakes because it's the only way that you can move so fast, but it's also important to just be cognizant that you're making those mistakes and you're going to have to clean things up. I think there's some types of mistakes that you really can't make, right? That you really can't compromise on. You can't compromise on culture, can't compromise on the people you hire and the way that you treat them and the way that they behave. Uh, with each other. But I think there's a lot of, a lot of problems that you end up solving by just throwing more bodies at them. And I think that those typically are the first kinds of problems or the first kinds of things that you break, you know, processes that probably should have been optimized and you probably should have solved through software. But while you're building those software solutions, you probably ended up hiring, you know, 20 or 30 people to kind of keep pressing, uh, keys on a keyboard and solving them. And ultimately when you have anything that's so people heavy, um, and so, uh, mission critical, It's, it's bound to break, right? The site's, you know, gonna go offline or, you know, some reimbursement's not gonna happen or some client's gonna be unhappy. And, and it's, and it's,…

AI assessment note: “those typically are the first kinds of problems or the first kinds of things that you break”

Q Is there anything you would do differently with the benefit of hindsight, and how do you advise managers today raising a first-time fund?

A I think the main thing I would advise a new manager is just that there's no shortcuts, right? Like I said, it took me hundreds of meetings, and I think that's just, that's just the way it is. I don't think there's a shortcut to raising a fund magically. It requires hearing a lot of no's and trying to find, honestly, what the right product market fit is for your fund, right? Who are the people that want to back you and who want to back this strategy? And once you find them, just look for more people like them. I think start out with people that know you and that trust you and are willing to make a bet on, on you as a person, uh, and then try to have other people that, that think in a similar way than they do and kind of go and expand, expand in that way, rather than I think try to follow any formulaic way for, for getting a fun off the ground.

AI assessment note: “I think the main thing I would advise a new manager is just that there's”

Q importance of vision. I always find it quite hard for founders, because sometimes when you don't have product market fit, you hear it's all about resilience, stick to your vision, and always hold on to it. But then there's also a time when you need to let it go, and you need to change. How do you think about having enough data to keep going versus when to give up?

A I think I'm a big fan of the strong opinions loosely held, right? I think you, you have to have a high degree of conviction on, on where you're going. And I think ultimately what the long-term vision is of what you're building and for who you're building it and why it matters in the world. Uh, and, and the way you get there, I think is, is sort of a second, a second point that you have to define. And I think that's where you need to have the flexibility and the And the capacity to change your mind and change your path and explore different things and pivot around, but ultimately sort of with that same end goal that I think is what ends up attracting a lot of the early employees. And I think just keeps people, keep people motivated, right? Like what, what gets you coming into, to work every day and sort of working hard seven days a week and really pouring your heart and soul into something is, is usually what, where you're going in the longterm, right? What's the problem that you're solving and who are you solving it for and why? And why does that matter? And I think that's a lot about the vision rather than the specific road that you're taking to get there.

AI assessment note: “capacity to change your mind and change your path and explore different things”