The Exchanges

Q Final one for you. What was the most recent publicly announced investment, Angela, and why did you say yes and get so excited?

A Ah, Jeeves. It's fantastic. So this is a credit card and payment platform, so all non-payrolls. Spend for global companies. They're in Latin America. They're in Canada. They're expanding elsewhere. And why did I commit? Number one, massive market that's underserved. I talked to all of my companies, especially in Latin America, and they're using an array of janky solutions. And then two, the team, Dilip and Sherwin, had thought of it very much from an infrastructure point of view. Like, how do they partner with the best payment processor? How do they integrate with the local ACH equivalents? And they have Built this orchestration switching layer on top, such that by definition, their platform is going to be seamless from country to country. It's going to reconcile in the back end. It's just like a very, very clever way of approaching the problem that makes it very scalable, and as a result, they are growing very quickly.

AI assessment note: “Ah, Jeeves. It's fantastic. So this is a credit card and payment platform”

Q couple of cool components, and you know, a lot of people, if we start on market size, a lot of people get excited about the market size. You mentioned the size of the market being so large. I'm seeing the market divide between Brazil, Argentina, Colombia, so my question to you was, are you seeing the same division? Should we see LATAM as one big block, or these separate hubs?

A Yeah, so LATAM as a whole is large. It's six hundred and fifty million people in 33 countries. But to your point, the two largest, Brazil and Mexico, right, 210,000,130 million, and then they're still very large in Colombia with fifty million, Argentina with 45. Then you've got two-thirds of the population in four countries, and many more. And so what you see is entrepreneurs generally start in one of those countries. And You can build a really, really good business and a big business by just staying in that country, right? Like, you can build a big business of forty-five million people. But the most ambitious people are starting in one with very much the view of, I'm gonna go across Latin America. And that, easier said than done. Like, there's a lot more cases where that hasn't worked than cases where that has worked. Because expansions, especially, you know, I spend most of my time in financial services, are not that easy. Like, we talk about fintech being default local versus Default Global, because you want to hop from one country to the other, even if it's next door in Latin America, you've got a different set of regulation, a different set of infrastructure, probably a different set of cultural nuances, especially if you're going from Spanish-speaking Latin America to Portuguese-speaking Latin America in Brazil. But there's a lot of good examples now, you know, New Bank s…

AI assessment note: “fintech being default local versus Default Global, because you want to hop from one country”

Q that was exactly it, which is like, with the explosion that we've seen in terms of the financial service providers, my concern is twofold, and I don't know if actually either of them are right, so I'd love your advice on this. Like, with the explosion, does that not just mean a race to the bottom in terms of pricing because defensibility tends to be reduced given the accessibility increase?

A Decreasing barriers to entry's product quality, I'd make three points. The first being there is definitely going to be a proliferation of more services, which is great in that it's going to give consumers more choice. Because right now, consumers often have poor product quality, but they don't have that many choice. Yes, I agree with your point that many new experiments tried means that there's going to be a lot of lower quality services, but like in many industries, consumers will now be able to vote with their feet And choose the better quality products. What that will do, though, is it will make customer acquisition more difficult for new entrants, and we can talk more about that later. The second point I'd make is, you know, the oft-use saying that if you're not paying for the product, you are the product. And we've seen that in consumer with a lot of advertising-based models, but now shifting to subscription. And what consumers are showing increasingly is that for a high-quality product, a personalized product, They're more than happy to pay a predictable average fee per month, and we're seeing that business model move into financial services, which speaks to your pricing question. And right now, there's lots of banking services that seem free, but then you get hit with overdraft fees, you get hit with other frees, and consumers would much rather have a very transparent, v…

AI assessment note: “which speaks to your pricing question”

Q cap table ownership. And obviously, you know, the story and you know, that kind of you'd laugh at like, oh, you're going to do cap tables. Really? It's like, is that a venture play? And now obviously you look at the expansion over time that they have with now their financial services teams. My question to you is, how do you think about what makes exciting versus unexciting insertion points?

A I think I'm in two stages. Like the most exciting insertion points are insertion points where you can become the system of record. And that is very hard because usually even if it's a shitty system of record, one exists. It's been building up over the years. It's got tons of data. It's very hard to rip out. But if you can do that, very, very sticky. And then the second stage is, can you then become the centralized data sharing network? So let's come back to Carta. Cap table seems very unsexy, but most companies, it wasn't done very well. You have to get approvals. It's sitting in spreadsheets. And so Carta had the advantage of one recognizing this problem, but then also the advantage of there's all of these new companies that are going to need cap table management. And so the opportunity to grow up through the ecosystem, prove the points a little more, and now they're capturing businesses of all sizes. Stage one, becoming the system of record. Stage two, which they're starting to execute on now, is how can you be the centralized data sharing network? And they've written about this, but the vision for Carta X is right now you can be public and very liquid and private and very illiquid. What would be the platform or the stock exchange, so to speak, of private and liquid? And who best execute on that than the company that has the system of record for all of the private shares acro…

AI assessment note: “most exciting insertion points are insertion points where you can become the system of record.”

Q local flavor is enough of a defensibility? And what I mean by that is, you know, we're both invested in, say, like, Pomelo, you know, banking as a service. You know, Galileo could come into the space. Bond could come into the space. Stripe could. Like, how much of a defensible moat do you think that local flavor is, say, in a case like Pomelo, or in any other aligned?

A Yeah, hi. And part of it is psychological. Like, one of my favorite quotes Is this Richard Dawkins quote, right? Like the rabbit runs faster than the fox because the rabbit is running for his life and the fox is only running for his dinner. So the local company very much in that. So you can take Pomelo, which is building sort of issue processor and infrastructure starting in Argentina, but then moving beyond. And then a company I'm very familiar with who've been invested for a while, Adi, which is buy now, pay later, right? Which is actually a great example because there's lots of global buy now, pay later companies. But here's the piece that I think you don't understand until you get into the market, and a lot of it is around infrastructure. So you think, like, okay, I show up in Columbia. I need to underwrite people. Oh, I'll just ping the credit bureau. Well, that doesn't really work, because, like, you don't have broad enough coverage. Like, fraud in Latin America is a lot higher, so you have to develop all sorts of systems internally. You don't have the same kind of as-a-service, sort of KYC, like, ledgering, a lot of the other infrastructure stuff. So you have to build all of this infrared technology that is not entirely obvious right at the get-go. So any new international player is going to have to go through that same experience, and the local team is going to have a v…

AI assessment note: “any new international player is going to have to go through that same experience”

Q Final one for you there. We said about misnomers. What do you think is the biggest misnomer? You know, obviously, you are so deep in, you know, the region and spending time on it. What do you think is the biggest misnomer?

A The other question I get asked a lot is just, like, how are you going to find the people to scale your company? And this, like, this gets asked in any region, right? Like, I'm from Canada originally, and You know, home of Shopify in Ottawa. And do you think of prior to Shopify being in Ottawa, there's a lot of questions like, oh, well, how are you going to find the people to scale your company? And that's going away because there are lots of unicorns in Latin America. But what I would say is like, there's, I always laugh because this is the same conversation with every ecosystem, and then it grows up and nobody asks these questions anymore. So you take LATAM, like it's got all of the raw ingredients. Like it has amazing universities, many of them public, by the way, from great access perspective that produce great Technical, science, and engineering grads. So there's a lot of very, very smart people to recruit. And then we're starting to get more and more large companies such that people have experience, right? Like you've got NewBank, Rappi, Dlocal, right? And so like the kind of mafias from those companies are going to spin out and join the next generation of companies or grow the next generation of companies. And I think the other thing that's happening that's really to the benefit is that now people think about their careers as like, I could live and work anywhere. And so t…

AI assessment note: “how are you going to find the people to scale your company?”

Q local flavor is enough of a defensibility? And what I mean by that is, you know, we're both invested in, say, like, Pomelo, you know, banking as a service. You know, Galileo could come into the space. Bond could come into the space. Stripe could. Like, how much of a defensible moat do you think that local flavor is, say, in a case like Pomelo, or in any other aligned?

A Yeah, hi. And part of it is psychological. Like, one of my favorite quotes Is this Richard Dawkins quote, right? Like the rabbit runs faster than the fox because the rabbit is running for his life and the fox is only running for his dinner. So the local company very much in that. So you can take Pomelo, which is building sort of issue processor and infrastructure starting in Argentina, but then moving beyond. And then a company I'm very familiar with who've been invested for a while, Adi, which is buy now, pay later, right? Which is actually a great example because there's lots of global buy now, pay later companies. But here's the piece that I think you don't understand until you get into the market, and a lot of it is around infrastructure. So you think, like, okay, I show up in Columbia. I need to underwrite people. Oh, I'll just ping the credit bureau. Well, that doesn't really work, because, like, you don't have broad enough coverage. Like, fraud in Latin America is a lot higher, so you have to develop all sorts of systems internally. You don't have the same kind of as-a-service, sort of KYC, like, ledgering, a lot of the other infrastructure stuff. So you have to build all of this infrared technology that is not entirely obvious right at the get-go. So any new international player is going to have to go through that same experience, and the local team is going to have a v…

AI assessment note: “the local team is going to have a very, very big head start.”

Q couple of cool components, and you know, a lot of people, if we start on market size, a lot of people get excited about the market size. You mentioned the size of the market being so large. I'm seeing the market divide between Brazil, Argentina, Colombia, so my question to you was, are you seeing the same division? Should we see LATAM as one big block, or these separate hubs?

A Yeah, so LATAM as a whole is large. It's six hundred and fifty million people in 33 countries. But to your point, the two largest, Brazil and Mexico, right, 210,000,130 million, and then they're still very large in Colombia with fifty million, Argentina with 45. Then you've got two-thirds of the population in four countries, and many more. And so what you see is entrepreneurs generally start in one of those countries. And You can build a really, really good business and a big business by just staying in that country, right? Like, you can build a big business of forty-five million people. But the most ambitious people are starting in one with very much the view of, I'm gonna go across Latin America. And that, easier said than done. Like, there's a lot more cases where that hasn't worked than cases where that has worked. Because expansions, especially, you know, I spend most of my time in financial services, are not that easy. Like, we talk about fintech being default local versus Default Global, because you want to hop from one country to the other, even if it's next door in Latin America, you've got a different set of regulation, a different set of infrastructure, probably a different set of cultural nuances, especially if you're going from Spanish-speaking Latin America to Portuguese-speaking Latin America in Brazil. But there's a lot of good examples now, you know, New Bank s…

AI assessment note: “we talk about fintech being default local versus Default Global”

Q also say about kind of, kind of, existing banks catering to the affluent, and the opportunity almost in the underserved. My question to you is, I'm not sure really how to say it, but it's like, I've always been taught that it's the best business to cater to the affluent, especially in fintech, and small accounts don't make money. Why is that wrong, and how do you think about that?

A Banks do mostly cater to the affluent in most countries. I'd say in Latin America, it's an even more egregious case to that, and then layer on a lot of bank concentration, right? So the, like, top five banks have 80% of the market in Brazil, and Serve maybe 10 to 20% of the socioeconomic pyramid. Layer on top of that, like, the Latin American banks are some of the most profitable banks in the world. So return on equity, a good measure of measuring this, is over 10%, which is literally double that of American banks. They don't serve many people, and they're very fat and happy. So that proves your point, right? But that is why we're so bullish on fintech companies, right? And so let's, to your point, deconstruct a little way, like, what is bank profit consist of? In a very simplistic It's the cost to acquire your customers, less the cost to serve your customers. So you can think of it in terms of distribution minus infrastructure. And financial services companies are going after this saying, great, how do I lower the cost of distribution? And how do I lower the cost of infrastructure? And so if it was cheap for me to acquire customers, and I didn't have to say, spend, you know, 30, 20 to 30 dollars a month keeping the lights on for a bank account, like a lot of the companies in the US, then I could serve customers That don't spend a lot on my credit card, or don't keep a lot of d…

AI assessment note: “because my fixed and variable costs are infinitely lower”

Q The other thing that I get a lot from LPs is like, we like that you're really looking at LATAM and we like the, the influx of capital is going there and that's great. But don't you need boots on the ground? Like, local players will always win. You're never going to win because they want hands-on local investors. How do you think about that?

A We love partnering with local investors. I think, like, it takes a village to, you know, help build a company, and the team, and the CEO, and the exec team, and all of the entrepreneurs, like, they're doing the vast majority of the work. Like, let's, let's be clear. So the rest of us VCs can only help, but, like, local investors are going to know How to help better with recruiting. They're going to know better the nuances of local markets. Like there's lots of things that they will do better than international VCs. We often look to partner with the local VC. And then what do we bring? Like we've seen these models play out around the world. We've scaled many companies to like very, very large scales and have more of them across our portfolio. And so we just bring a different flavor and a different skillset such that it makes a lot of sense to partner with a local VC and someone like us.

AI assessment note: “We love partnering with local investors.”

Q I'm sure. To say the least. Are you nervous? How do you advise me? How should I engage? Because I enter these rounds, and it's two on eight, and they end up on nine on 40, or 45, and I'm going, I don't know, this is a different deal. Like, how do you think about price sensitivity, and just the sheer influx of capital going into the region so fast?

A The way I think about it is, we often underestimate market size and potential in the short term, right? Like, new bank, At a billion dollars, looked pretty damn expensive. What's it worth now? Like, thirty-five billion dollars? Not so expensive. It turns out, like, there was a lot, millions of 1,000,030 1,000,040 million, and growing people that were underserved and wanted a modern financial services infrastructure. You know, we take Pomelo that we share, which is the infrastructure, right? What's expensive there? It's like, well, if there's going to be 100,000 of companies that need new banking as a service to start up All across Latin America, that's a pretty damn large market. So I view it much more like, is this team the team that can prosecute building into a multi-billion dollar company? And then like, what is the need? What is the market size? And if you think that they can be number one, maybe even number two across very, very large categories, then it probably looks expensive at the time, but not so expensive in retrospect.

AI assessment note: “looks expensive at the time, but not so expensive in retrospect.”

Q first interaction being with gaming, or with being driven by software being, as you mentioned there, and as Tally often solves, to what extent does regulation put a barrier up in terms of requiring KYC, requiring AML, requiring any of the traditional financial Restrictions that make the process cumbersome. To what extent do we need a regulatory infrastructure change to allow for this seismic change on financial services for consumers?

A Yeah. Regulation is, when done right, is very important, right? You don't want some new company coming in and fraudulently taking advantage of consumers. And so the regulation is in place when done well to protect consumers. But over the years, especially in the US, it has become exceedingly, exceedingly complex. Getting all of the regulatory systems in place has been a very large barrier to new innovation in this space. And so the new companies have to take regulation very, very seriously. The question is, how can we be compliant and still launch in a reasonably fast way? And this is where we've seen some of the smartest and best infrastructure type entrepreneurs going after this space, such that they can translate thousands of pages of regulatory code Into modern APIs that the new companies, both pure fintech or consumer or business companies can launch.

AI assessment note: “Getting all of the regulatory systems in place has been a very large barrier”

Q that was exactly it, which is like, with the explosion that we've seen in terms of the financial service providers, my concern is twofold, and I don't know if actually either of them are right, so I'd love your advice on this. Like, with the explosion, does that not just mean a race to the bottom in terms of pricing because defensibility tends to be reduced given the accessibility increase?

A Decreasing barriers to entry's product quality, I'd make three points. The first being there is definitely going to be a proliferation of more services, which is great in that it's going to give consumers more choice. Because right now, consumers often have poor product quality, but they don't have that many choice. Yes, I agree with your point that many new experiments tried means that there's going to be a lot of lower quality services, but like in many industries, consumers will now be able to vote with their feet And choose the better quality products. What that will do, though, is it will make customer acquisition more difficult for new entrants, and we can talk more about that later. The second point I'd make is, you know, the oft-use saying that if you're not paying for the product, you are the product. And we've seen that in consumer with a lot of advertising-based models, but now shifting to subscription. And what consumers are showing increasingly is that for a high-quality product, a personalized product, They're more than happy to pay a predictable average fee per month, and we're seeing that business model move into financial services, which speaks to your pricing question. And right now, there's lots of banking services that seem free, but then you get hit with overdraft fees, you get hit with other frees, and consumers would much rather have a very transparent, v…

AI assessment note: “we're seeing that business model move into financial services, which speaks to your pricing question”

Q first interaction being with gaming, or with being driven by software being, as you mentioned there, and as Tally often solves, to what extent does regulation put a barrier up in terms of requiring KYC, requiring AML, requiring any of the traditional financial Restrictions that make the process cumbersome. To what extent do we need a regulatory infrastructure change to allow for this seismic change on financial services for consumers?

A Yeah. Regulation is, when done right, is very important, right? You don't want some new company coming in and fraudulently taking advantage of consumers. And so the regulation is in place when done well to protect consumers. But over the years, especially in the US, it has become exceedingly, exceedingly complex. Getting all of the regulatory systems in place has been a very large barrier to new innovation in this space. And so the new companies have to take regulation very, very seriously. The question is, how can we be compliant and still launch in a reasonably fast way? And this is where we've seen some of the smartest and best infrastructure type entrepreneurs going after this space, such that they can translate thousands of pages of regulatory code Into modern APIs that the new companies, both pure fintech or consumer or business companies can launch.

AI assessment note: “has been a very large barrier to new innovation in this space.”

Q Right, you are too kind, but for those that missed our first episode, I do always love the context, so tell me, how did you make the way into the world of venture, and how did you come to be, you know, one of the leading fintech investors today?

A Yeah, my path into venture is, is rather circuitous, which is probably familiar to most people's paths into venture, being circuitous. I grew up in Ottawa, Canada, always had a Passion for financial services, although didn't know what to call it at the time. I wanted to be an accountant growing up. I used to balance the family checkbook, like the physical checkbook back when those things were a thing. And then I started doing taxes. I started, you know, interested in the markets on the side. And then a good family friend sort of talked me into doing engineering rather than accounting because I would have potentially a broader purview of career options out of that. Got to study mechanical engineering at Queens University in Canada, where I probably spent more time managing the student pub than actually studying engineering, which gave me a flavor of what it might be like to start and run a business. I was very aware I knew nothing about starting and running a business. Now, in Silicon Valley, if that was the case, you would go and join a startup or potentially start a startup. Back in Ottawa, you thought, I'll go to business school, and the only business schools that I'd heard of were Stanford and Harvard. I quickly looked at the price tag. It I was like, holy shit, and that's American dollars, and the exchange rate was pretty crazy at the time. So luckily, consulting companies …

AI assessment note: “Yeah, my path into venture is, is rather circuitous”

Q to touch on some misnomers on the region more broadly, but you mentioned also kind of the cash-based nature of the region. It reminds me of kind of India in that respect in a lot of ways. The question I have for you is like, do you think about market timing with regards to kind of consumer societal behavior changes when making investments in, say, a more traditional cash-based society?

A This is somewhere where markets can look deceptively large, but then when you dig into the actual dynamics, they're not large at all. And this is very much changing, but you hit the point, Mexico, or pre-pandemic, I think was 90% cash transactions. Even people who bought things online would then go to the locals or Seven 11 or OXO and pay for them in cash. Brazil was 70% cash. And so you can look at the reasons for that, and it's a complex set of things that's not going to be solved through, through one initiative, right? Like, Some of it is access. It's just a large population of, of unbanked for a whole variety of reasons. There's a large trust and education concept in that even if you have a debit card or a payroll card, often the user will, or the customer will still go to an ATM to take out cash and then just use cash. So it doesn't come like actually a charge card. And then merchants, like a lot of them have the local square equivalent, but they For either they want to stay more in the informal economy to avoid taxes, or they don't want to pay the fees, or, you know, everyone's paying cash anyways, and so they don't have to use it. So it's this very large cash economy that's been slowly moving more online, but hadn't hadn't gone quickly enough. There's still a large enough market to make it pretty interesting, but big, big cash based economy. Then along comes, you know, t…

AI assessment note: “Then along comes, you know, the pandemic... this is where the biggest shift happened”

Q Oh, that is so nice of you today. A little ego inflation always makes me smile, but I would love to start with a little bit on you. So tell me, how did you make your way into the world of venture first, but also kind of most recently come to be a GP at Andreessen?

A Yeah. So a circuitous path, which I think is fairly common for the venture world. I grew up in Ottawa, Canada, and I wanted to be an accountant growing up, followed by a tax lawyer. I used to balance the family checkbook, the physical one, back when those things actually existed. Luckily, some smart friends talked me into a broader way to study math. Went to university for mechanical engineering. Joke that I spent more time there managing and running the student pub on campus. And that is what gave me a pretty interesting lens into what it could be like to start and run a business. I obviously had no idea what I was doing right now. If you wanted to solve that problem, you'd go join a startup back then from Kingston, Ontario, you think business school. And so that's what led me to join what is now Oliver Wyman, which gave me a broad view of larger companies, but also had a fantastic carrot in that they would pay for me to go to business school, which is what brought me out to California to go to Stanford. Side story, I took a couple years off after GSB and tried to make the Canadian Olympic team for the marathon. Longer story, but the relevant part to venture capital is that my part-time job while I was running was working for a Stanford professor in making video case studies and interviews of entrepreneurs and how they scaled their companies. So, not in as good a way as 20 Min…

AI assessment note: “that is how I discovered Venture. Worked at a venture firm for a couple of years”

Q Oh, that is so nice of you today. A little ego inflation always makes me smile, but I would love to start with a little bit on you. So tell me, how did you make your way into the world of venture first, but also kind of most recently come to be a GP at Andreessen?

A Yeah. So a circuitous path, which I think is fairly common for the venture world. I grew up in Ottawa, Canada, and I wanted to be an accountant growing up, followed by a tax lawyer. I used to balance the family checkbook, the physical one, back when those things actually existed. Luckily, some smart friends talked me into a broader way to study math. Went to university for mechanical engineering. Joke that I spent more time there managing and running the student pub on campus. And that is what gave me a pretty interesting lens into what it could be like to start and run a business. I obviously had no idea what I was doing right now. If you wanted to solve that problem, you'd go join a startup back then from Kingston, Ontario, you think business school. And so that's what led me to join what is now Oliver Wyman, which gave me a broad view of larger companies, but also had a fantastic carrot in that they would pay for me to go to business school, which is what brought me out to California to go to Stanford. Side story, I took a couple years off after GSB and tried to make the Canadian Olympic team for the marathon. Longer story, but the relevant part to venture capital is that my part-time job while I was running was working for a Stanford professor in making video case studies and interviews of entrepreneurs and how they scaled their companies. So, not in as good a way as 20 Min…

AI assessment note: “the relevant part to venture capital is that my part-time job while I was running”

Q It's interesting you mentioned gaming there, because you've also aligned to Fintech before to Google Maps. And I spoke to one of your founders, Sanket at Synapse before the show, and he mentioned your chat on fintech being used as this engagement layer for social networks. How do you think about that also? And how does that tie in to how we think about the next generation of financial services?

A Yeah, I like the Google Maps analogy because again, we put no thought into how we're going to get somewhere and what is the best route, right? You type in your destination, It tells you how to get there, how long it's going to take. Oh, by the way, you should take this route based on traffic, and you could probably just add in a coffee shop. You take something in financial services, and it is infinitely more complex. I know you've talked to Jason Talley, who's been on the show, but let's take, I want to get out of credit card debt as an example. The U.S. infamously has a trillion dollars of credit card debt. You talk to people with this debt, they often have three, four, five, Five cards and are just paralyzed with anxiety along with not knowing how to go about the process. You've got four cards. That's four times, 12, 48 due dates per year. The cards all have different interest rates. So do you pay off the card that has the lowest balance? Do you pay off the card with the highest interest rate? Oh, by the way, what was that card again? And so, yes, we should all better understand the financial ecosystem and know how to do this. But I'd make a strong argument that software can do a much, much better job. They should understand all of your cards, understand your finances, pay them off for you, make recommendations and actually move money in terms of how you should better optimiz…

AI assessment note: “our financial lives will become more and more automated and just optimize in a much better way”

Q Right, you are too kind, but for those that missed our first episode, I do always love the context, so tell me, how did you make the way into the world of venture, and how did you come to be, you know, one of the leading fintech investors today?

A Yeah, my path into venture is, is rather circuitous, which is probably familiar to most people's paths into venture, being circuitous. I grew up in Ottawa, Canada, always had a Passion for financial services, although didn't know what to call it at the time. I wanted to be an accountant growing up. I used to balance the family checkbook, like the physical checkbook back when those things were a thing. And then I started doing taxes. I started, you know, interested in the markets on the side. And then a good family friend sort of talked me into doing engineering rather than accounting because I would have potentially a broader purview of career options out of that. Got to study mechanical engineering at Queens University in Canada, where I probably spent more time managing the student pub than actually studying engineering, which gave me a flavor of what it might be like to start and run a business. I was very aware I knew nothing about starting and running a business. Now, in Silicon Valley, if that was the case, you would go and join a startup or potentially start a startup. Back in Ottawa, you thought, I'll go to business school, and the only business schools that I'd heard of were Stanford and Harvard. I quickly looked at the price tag. It I was like, holy shit, and that's American dollars, and the exchange rate was pretty crazy at the time. So luckily, consulting companies …

AI assessment note: “my path into venture is, is rather circuitous”

Q to touch on some misnomers on the region more broadly, but you mentioned also kind of the cash-based nature of the region. It reminds me of kind of India in that respect in a lot of ways. The question I have for you is like, do you think about market timing with regards to kind of consumer societal behavior changes when making investments in, say, a more traditional cash-based society?

A This is somewhere where markets can look deceptively large, but then when you dig into the actual dynamics, they're not large at all. And this is very much changing, but you hit the point, Mexico, or pre-pandemic, I think was 90% cash transactions. Even people who bought things online would then go to the locals or Seven 11 or OXO and pay for them in cash. Brazil was 70% cash. And so you can look at the reasons for that, and it's a complex set of things that's not going to be solved through, through one initiative, right? Like, Some of it is access. It's just a large population of, of unbanked for a whole variety of reasons. There's a large trust and education concept in that even if you have a debit card or a payroll card, often the user will, or the customer will still go to an ATM to take out cash and then just use cash. So it doesn't come like actually a charge card. And then merchants, like a lot of them have the local square equivalent, but they For either they want to stay more in the informal economy to avoid taxes, or they don't want to pay the fees, or, you know, everyone's paying cash anyways, and so they don't have to use it. So it's this very large cash economy that's been slowly moving more online, but hadn't hadn't gone quickly enough. There's still a large enough market to make it pretty interesting, but big, big cash based economy. Then along comes, you know, t…

AI assessment note: “along comes, you know, the pandemic... And this is where the biggest shift happened”

Q It's interesting you mentioned gaming there, because you've also aligned to Fintech before to Google Maps. And I spoke to one of your founders, Sanket at Synapse before the show, and he mentioned your chat on fintech being used as this engagement layer for social networks. How do you think about that also? And how does that tie in to how we think about the next generation of financial services?

A Yeah, I like the Google Maps analogy because again, we put no thought into how we're going to get somewhere and what is the best route, right? You type in your destination, It tells you how to get there, how long it's going to take. Oh, by the way, you should take this route based on traffic, and you could probably just add in a coffee shop. You take something in financial services, and it is infinitely more complex. I know you've talked to Jason Talley, who's been on the show, but let's take, I want to get out of credit card debt as an example. The U.S. infamously has a trillion dollars of credit card debt. You talk to people with this debt, they often have three, four, five, Five cards and are just paralyzed with anxiety along with not knowing how to go about the process. You've got four cards. That's four times, 12, 48 due dates per year. The cards all have different interest rates. So do you pay off the card that has the lowest balance? Do you pay off the card with the highest interest rate? Oh, by the way, what was that card again? And so, yes, we should all better understand the financial ecosystem and know how to do this. But I'd make a strong argument that software can do a much, much better job. They should understand all of your cards, understand your finances, pay them off for you, make recommendations and actually move money in terms of how you should better optimiz…

AI assessment note: “I like the Google Maps analogy because again, we put no thought into how”

Q I think another thing that I often get posed is the exit environment. They go, what are they going to do? Like, IPO in local markets? That's not very interesting. They're going to go to NASDAQ? That hasn't happened very much. How do you answer the question of, like, bluntly, where do the companies go when it comes to exit environments?

A I think that is a natural question to ask in any market that's earlier, right? Like, now there's lots of companies starting up in Africa. I think that question is exactly being answered. If you look at LATAM, like, there were five IPOs in twenty-twenty. I expect that there's going to be more. And so the way that ecosystem develops is initially early entrepreneurs. It's hard to find any funding at all. There's some very entrepreneurial early stage locally BCs that start up. And then everyone has the question of like, okay, you can raise your seed in your A, but like, where's your B going to come from? Nobody's going to follow on. Like every investor is worried about who's going to do the next round. And then as there starts to be better and better companies, surprise, people with deeper confidence show up and they do the Bs. As there's better and better companies, along come the Cs. And then, you know, as you start to have IPOs that we have now, like the world is looking at Latin America. Like there was close to, I think it was a nine or ten billion dollars of venture funding poured into the region just in the last year. Half of that was fintech, by the way, right? So we're walking up the capital stack. There's a lot of capital interest. There's a lot of talented entrepreneurs building great companies, and those scale and those exit. And then, you know, LPs that I'd say are at t…

AI assessment note: “If you look at LATAM, like, there were five IPOs in twenty-twenty.”

Q often have founders like, we're going to expand into X country, should we raise... Pre-week expand or post-week expand? And I'm always like, pre-expansion, you don't know how it's gonna go. Like, it could be shit, and then you're really in trouble. Like, would you agree with me in terms of that advice, or would you actually say, wait, if it works, you're gonna be way up on the round?

A You know, there's the expression that nothing ruins a good story like data, but I think it depends how much cash runway you have. You know that you're gonna expand. Let's say that you're waiting on, you're sitting on two years of cash. You think it'll take you six months I've hired a very talented Brazilian GM or lead for my business, and like, this is their background. Or I've got these initial proof points of, you know, these customers that are going to adopt me, or these merchants that are going to integrate my solution. So there's lots of things that you can do before getting actual metrics that can help prove that you're going to be able to move countries.

AI assessment note: “I think it depends how much cash runway you have.”

Q massive problems, Oracle, NetSuite, Intuits of the World, all have kind of their ancillary markets being attacked. You mentioned it in terms of Wells Fargo. In terms of, like, the rebundling on the business side, Do you think we'll see this period of re-bundling on the business side, or do you think the unbundling will continue there also with your expansifiers, plios, everyone attacking every element of their core business?

A I think the finance CFOs are like, oh, thank God, people are finally building software for my function. It's been very much focused on sales, marketing, other verticals over the years. I think of software for the finance suite as less of a unbundling, re-bundling story and more of a new functionality or real-time story. So what do I mean by that? If you think Of what does the finance team do? At the bottom of the pyramid, they acquire the data, they structure the data, they scrub the data, and there's just a ton, a ton of time spent there to, at some point, bubble it all up to enable business leaders to make decisions. And I think the limitations of so much of the software suites right now have come to the forefront, given what we've been going through with COVID, like hits in March, Every company on the board on goes through very different cashflow planning scenarios. Like what is my customer pipeline going to look like? Do I still want to hire those people? I'm a lending company and my defaults have gone through the roof. And what became very, very prevalent was the existing tools don't enable us to do that in a fast and dynamic way. So step one is often being a layer on top of the general ledger, some of the other services and hooking in and just providing a better viewpoint. For business leaders and finance suite. So step one is very much solving that problem, and it's thin…

AI assessment note: “less of a unbundling, re-bundling story and more of a new functionality”

Q Now, this is one where most people do a politician's answer and fail to identify one person. So, uh, I'm sure to these days, who's the best board member you've sat on a board with and why? And it doesn't have to be best. It can be most memorable.

A Oh, I'm going to be a politician, but I'll try and do one better because there's so many. I can't just name one, but I'll say this. The best ones have these two things in common. One, they ask really good questions from a unique point of view. So that's either their world-class sales, the best at building brands, or they prescribe to the Charlie Munger worldly wisdom and just look at the world in a very different way and bring up like very important things that you're not thinking about or don't want to be thinking about and should be. And the second point is they work really hard on behalf of the company, and without necessarily being asked. Like, there's a lot of ways that investors can help and move the needle around the edges, and the best investors have both these two characteristics.

AI assessment note: “I can't just name one, but I'll say this.”

Q massive problems, Oracle, NetSuite, Intuits of the World, all have kind of their ancillary markets being attacked. You mentioned it in terms of Wells Fargo. In terms of, like, the rebundling on the business side, Do you think we'll see this period of re-bundling on the business side, or do you think the unbundling will continue there also with your expansifiers, plios, everyone attacking every element of their core business?

A I think the finance CFOs are like, oh, thank God, people are finally building software for my function. It's been very much focused on sales, marketing, other verticals over the years. I think of software for the finance suite as less of a unbundling, re-bundling story and more of a new functionality or real-time story. So what do I mean by that? If you think Of what does the finance team do? At the bottom of the pyramid, they acquire the data, they structure the data, they scrub the data, and there's just a ton, a ton of time spent there to, at some point, bubble it all up to enable business leaders to make decisions. And I think the limitations of so much of the software suites right now have come to the forefront, given what we've been going through with COVID, like hits in March, Every company on the board on goes through very different cashflow planning scenarios. Like what is my customer pipeline going to look like? Do I still want to hire those people? I'm a lending company and my defaults have gone through the roof. And what became very, very prevalent was the existing tools don't enable us to do that in a fast and dynamic way. So step one is often being a layer on top of the general ledger, some of the other services and hooking in and just providing a better viewpoint. For business leaders and finance suite. So step one is very much solving that problem, and it's thin…

AI assessment note: “less of a unbundling, re-bundling story and more of a new functionality or real-time story.”

Q On the system of record, Blake, every startup today truly claims to be building a system of record or transitioning to becoming the system of record. It's a tough question to ask, but how do you fundamentally determine whether they actually are or whether it's kind of fundraising BS or a real stretch?

A I think it is like when you're starting off, you're obviously not a system of anything because you've barely Built the product. But I think a lot of great entrepreneurs have a strong thesis around that. And so, for instance, coming back to your question of market size, which I think is very related to the system of record. One of my favorite examples here is a company called Centrelink, which helps deal with synthetic fraud. So what is that? The founders were part of the risk and fraud team at Affirm, and here's what they noticed one day. They're looking through the database, and they see a Fairly obscure name linked to 13 different social security numbers. Like, oh, okay, this is going to be an easy thing to solve. Like, which of these pairs has a credit profile? Turns out all 13 have a credit profile. I was like, well, that doesn't make sense. Turns out fraudsters can pick a nine-digit number seemingly at random, go apply for a credit card, you get turned down, but then your profile is created in the credit bureaus, and so it looks like you exist. This was a big problem for a firm, which they solved Cleverly. But this founding team was like, well, if it's a problem for a firm, it's a problem for lots of other fintechs. And oh, by the way, it's a problem for tons of banks out there that don't have the engineering resources to hire best in class risk and data science folks to t…

AI assessment note: “coming back to your question of market size, which I think is very related”

Q Now, this is one where most people do a politician's answer and fail to identify one person. So, uh, I'm sure to these days, who's the best board member you've sat on a board with and why? And it doesn't have to be best. It can be most memorable.

A Oh, I'm going to be a politician, but I'll try and do one better because there's so many. I can't just name one, but I'll say this. The best ones have these two things in common. One, they ask really good questions from a unique point of view. So that's either their world-class sales, the best at building brands, or they prescribe to the Charlie Munger worldly wisdom and just look at the world in a very different way and bring up like very important things that you're not thinking about or don't want to be thinking about and should be. And the second point is they work really hard on behalf of the company, and without necessarily being asked. Like, there's a lot of ways that investors can help and move the needle around the edges, and the best investors have both these two characteristics.

AI assessment note: “Oh, I'm going to be a politician... I can't just name one”

Q often have founders like, we're going to expand into X country, should we raise... Pre-week expand or post-week expand? And I'm always like, pre-expansion, you don't know how it's gonna go. Like, it could be shit, and then you're really in trouble. Like, would you agree with me in terms of that advice, or would you actually say, wait, if it works, you're gonna be way up on the round?

A You know, there's the expression that nothing ruins a good story like data, but I think it depends how much cash runway you have. You know that you're gonna expand. Let's say that you're waiting on, you're sitting on two years of cash. You think it'll take you six months I've hired a very talented Brazilian GM or lead for my business, and like, this is their background. Or I've got these initial proof points of, you know, these customers that are going to adopt me, or these merchants that are going to integrate my solution. So there's lots of things that you can do before getting actual metrics that can help prove that you're going to be able to move countries.

AI assessment note: “I think it depends how much cash runway you have.”