The Exchanges

Q in different ponds, and I love it. I've fished in different ponds too. We've got Australia, we've got Pakistan, we've got Latin America. I'm worried. I am worried, Sheil. I think in the macro, we're going to see complete retrenchment away from emerging markets that we mentioned there, Southeast Asia, Indonesia included. Um, are you worried, and how do you feel looking at emerging markets moving forward into this environment?

A Yeah, so I'd agree with you on the broad overall sentiment. Totally agree. Um, you know, in the last couple of years, it was risk on and you go out as far as you go out really far on the risk curve when there's a lot of capital. And so you invest in these frontier markets. And then as we've shifted, interest rates are lower, or sorry, higher. As interest rates are higher, you come closer to home. And, um, that's what we're seeing today. So I agree with you, but I'll, I'll put some new ones on it. I think there are, there are countries or markets now that have a homegrown ecosystem. India is one. There's so much capital in India by itself. Um, and they have Great local funds. Um, there's Latin America, which now also has great local funds and they, they can support you from beginning to end from seed through deep. Um, so Latin America and India have these funds and India is deploying into Southeast Asia. I think the markets that are in the most trouble are Africa and Pakistan. A lot of capital went into them in the last few years, and there has, there have been successful companies, but actually the most valued companies in both markets. So in Pakistan airlift, which, you know, well, um, recently, uh, I think announced shutting down. It's shutting down. I think it was the most valuable company in Pakistan in, uh, in Africa, the most valuable company is Flutterwave. They've had a…

AI assessment note: “Yeah, so I'd agree with you on the broad overall sentiment. Totally agree.”

Q in different ponds, and I love it. I've fished in different ponds too. We've got Australia, we've got Pakistan, we've got Latin America. I'm worried. I am worried, Sheil. I think in the macro, we're going to see complete retrenchment away from emerging markets that we mentioned there, Southeast Asia, Indonesia included. Um, are you worried, and how do you feel looking at emerging markets moving forward into this environment?

A Yeah, so I'd agree with you on the broad overall sentiment. Totally agree. Um, you know, in the last couple of years, it was risk on and you go out as far as you go out really far on the risk curve when there's a lot of capital. And so you invest in these frontier markets. And then as we've shifted, interest rates are lower, or sorry, higher. As interest rates are higher, you come closer to home. And, um, that's what we're seeing today. So I agree with you, but I'll, I'll put some new ones on it. I think there are, there are countries or markets now that have a homegrown ecosystem. India is one. There's so much capital in India by itself. Um, and they have Great local funds. Um, there's Latin America, which now also has great local funds and they, they can support you from beginning to end from seed through deep. Um, so Latin America and India have these funds and India is deploying into Southeast Asia. I think the markets that are in the most trouble are Africa and Pakistan. A lot of capital went into them in the last few years, and there has, there have been successful companies, but actually the most valued companies in both markets. So in Pakistan airlift, which, you know, well, um, recently, uh, I think announced shutting down. It's shutting down. I think it was the most valuable company in Pakistan in, uh, in Africa, the most valuable company is Flutterwave. They've had a…

AI assessment note: “I'd agree with you on the broad overall sentiment. Totally agree.”

Q Okay, so that's your mistake. When you look back at the last 24 months, what's the biggest mistake you've seen other investors make in the industry?

A Well, I think, I mean, obviously the same, and maybe, maybe going too deep into emerging markets, like you said, but other stuff, I think people can get too excited about an idea and invest behind the wrong founder just in that idea. And In our case, let's say, um, banking as a service. We talked about UNIT. So UNIT's a banking as a service company. If you want to, uh, create a, a debit card product within your company, you can work with UNIT. So like, if you're Toast, um, which is a point of sale system for restaurants, and you want to add more and more products, so they've added a payroll product, they can add a bank account product. And, um, If you are the operating system for that restaurant owner, you might want to also be where they bank, and UNIT offers you that opportunity. So UNIT is a company in this space, um, I think widely considered to be a very strong company, um, A lot of folks looked at that company and said, we love this company, but they couldn't invest. And they ended up investing in another company in the same space. And that was just a mistake. Like invest in the, in the best company, not in number two or number three. And a lot of those haven't have shaken out to not, not work out that well.

AI assessment note: “invest in the, in the best company, not in number two or number three.”

Q So what do you do then? You get back and you're like, shit.

A Like, shit. So we're like, okay, we were shooting for, at that point we were shooting for a sixty million dollar fund. We said, you know what, we sent a letter to LPs saying, You know what? We're gonna go for, like, 30 to 40. And we said, we said all these things that in hindsight were wrong, which is we thought, we thought valuations were gonna come down, which, you know, at the time it seemed like that was gonna happen. Of course, actually the opposite happened. Um, and so we said we're gonna do a smaller fund. And then what happened was May, you know, interest rates go down, money printer goes brr, and Everyone came back, and even folks that had said no to us came back and said, hey, actually, like, we were looking at the managers that we spoke to, we'd like to talk to you again. And several of the folks that said no to us actually came back and came into the fund, and we ended up with a pretty institutional fund.

AI assessment note: “we sent a letter to LPs saying, You know what? We're gonna go for, like, 30 to 40.”

Q Okay, so when you look at these three, are there learnings that you take from them, having had those and having been through that experience?

A Yeah, I think, you know, the, the one, the company I didn't name, the learning was, If you're a capital efficient business, like there doesn't have to be a lot of dilution and that can be a way better outcome. So an example is that company, two hundred thirty million dollar outcome. It actually returned more money than another exit that I had invested in the same amount of money at the same price and is now worth nine hundred million. That actually is worth less than the company that sold for 230. So that's a huge learning for me is invest in capital efficient businesses. Businesses that constantly need venture capital dollars to acquire customers just aren't as good businesses. And you've seen it with the likes of Uber, you know, today, a fifty billion dollar enterprise value. There's twenty-five billion dollars of venture capital money that went into that company. And I think if you contrast that with a bunch of the SAS businesses that are very capital efficient, there's a way better outcome. And you see that headline number valuation is like kind of all people see. But actually like I learned from this experience, like actually it doesn't matter. Like I had a great fund return on this. You know, what many people would call a shitty outcome. I get two hundred thirty million dollars.

AI assessment note: “that's a huge learning for me is invest in capital efficient businesses.”

Q here. If we agree the power law being as powerful as it is, it would make sense to just spray everywhere, given how big the winners can be. If you're in Stripe, if you're in, you name it. How big they can be, you should just spray. How do you think about the right levels of diversification today with Better Tomorrow, given the awareness of just being in the winners?

A Yeah, so I think, I think, like, maybe that makes sense, the index approach, and there are funds that do that, um, out here, Soma Capital, Liquid II, I think, are taking the index approach or writing, I think, a hundred to 500 K checks in a lot of companies that they see. I think that can work. I think it worked a lot better Um, you know, they, those guys started a decade ago. And I think at that time it made a lot of sense when valuations were still reasonable, they caught the big upswing up until 21, 20, 21. Now things are probably falling down again, uh, in terms of ultimate valuations. Um, I think the reason it doesn't work for us, we couldn't put money into every company is we are hands-on investors and we invest in category FinTech. So we couldn't have invested in Stripe and Braintree. And all the other ones out there. Um, we have to choose one because that company is going to get our time and energy, and we're not going to invest in a competitor. So for us, um, we still have a relatively less concentrated portfolio than others. We have about 30 companies per fund. And the math is roughly, we do 10 investments a year, three year fund, fund life. And, um, And I think it works really well for us. Um, and, and in fund one, we had, uh, 50% reserves in fund two, we have actually 60% reserves. So we're, we're reserving more for follow ons. And, um, the reason we're doing that p…

AI assessment note: “for us, we still have a relatively less concentrated portfolio than others.”

Q So we have a 40% initial check. On the new fund sizes, that's sixty million dollars. 30 companies, we're doing two million dollars initial check. In a four million round, say, three to four million round, we're gonna get, like, seven to 10% ownership. How do you think about the, how do you think about the importance of ownership on that first check, and where's the bar for you?

A Yeah. Yeah, yeah, yeah. So, um, so our minimum is actually 10. So we have invested, um, so in fund one, our rough numbers, our average first check was a million bucks, and for about 10% ownership. So we invested on average at a ten million post in fund one. Um, despite the mark, and that was 20, 20, 21. Despite the overall market, you know, theoretically being down, Seed valuations in fintech, for some reason, haven't really fallen much. And so our 20, 22 numbers are actually higher. We're investing at a higher valuation than we were then. So maybe, maybe in this fund, we averaged closer to fifteen million post, but, um, We are shooting for 10 to 15% ownership. Right now we're probably, in fund two, we're probably averaging 12, 13%.

AI assessment note: “our minimum is actually 10... We are shooting for 10 to 15% ownership.”

Q So hit me. What are the, what are the biggest misses for you, Juan? And what did you learn from those?

A Yeah, so I think in fintech, there's this, like, wave of companies that came up. The most valuable recently, Robinhood obviously has fallen in the public markets quite substantially, but I saw it very early on, and I thought, you know, what's the difference? There had been other free trading apps before, and I also just, like, frankly, wasn't a huge believer in retail trading, that there would be a lot of retail trading out there. So obviously I was just completely wrong. Um, but I think what I'd missed is like the free trading apps of the past were very different than Robinhood. Robinhood was mobile first, and it was actually bringing a new class of investors on in that these like free trade and Zeko and others had not done. So I think that was a huge miss. Um, I think Chime was a big miss. Um, I, you know, I, I never looked at it very closely, but I thought like at 500, we'd invested in a company called simple and simple had exited. It was a nice exit. It was in the hundreds of low hundred millions. And, um, we thought like they'd grown a huge waitlist and then people hadn't gotten off the waitlist. So we thought, okay, it's just tough to make neobanking work in the U S and while chime at twenty-five billion is probably very significantly overvalued. They still have had a lot of success. And still I should have tried to invest in that company. Um, and I think what I missed wa…

AI assessment note: “I think that was a huge miss. Um, I think Chime was a big miss.”

Q here. If we agree the power law being as powerful as it is, it would make sense to just spray everywhere, given how big the winners can be. If you're in Stripe, if you're in, you name it. How big they can be, you should just spray. How do you think about the right levels of diversification today with Better Tomorrow, given the awareness of just being in the winners?

A Yeah, so I think, I think, like, maybe that makes sense, the index approach, and there are funds that do that, um, out here, Soma Capital, Liquid II, I think, are taking the index approach or writing, I think, a hundred to 500 K checks in a lot of companies that they see. I think that can work. I think it worked a lot better Um, you know, they, those guys started a decade ago. And I think at that time it made a lot of sense when valuations were still reasonable, they caught the big upswing up until 21, 20, 21. Now things are probably falling down again, uh, in terms of ultimate valuations. Um, I think the reason it doesn't work for us, we couldn't put money into every company is we are hands-on investors and we invest in category FinTech. So we couldn't have invested in Stripe and Braintree. And all the other ones out there. Um, we have to choose one because that company is going to get our time and energy, and we're not going to invest in a competitor. So for us, um, we still have a relatively less concentrated portfolio than others. We have about 30 companies per fund. And the math is roughly, we do 10 investments a year, three year fund, fund life. And, um, And I think it works really well for us. Um, and, and in fund one, we had, uh, 50% reserves in fund two, we have actually 60% reserves. So we're, we're reserving more for follow ons. And, um, the reason we're doing that p…

AI assessment note: “We have about 30 companies per fund. And the math is roughly, we do 10”

Q um, is when rounds get done, and they're good companies, this is not the tweeners, but they are extraordinarily priced, and you're going, What? I, I love the company, but I, I don't want to do my pro rata at that price. I'd love to hear, like, when you hear that, how do you think about pricing for reinvestments? And are there any times where it stands out to you?

A Yeah, so this is, this is a great one. I'd say, like, our strategy is to be, as you know, very sensitive on entry price. And we will, you know, like I said, we, we will negotiate hard on entry price, very hard and get the price we want and the founders we want to work with. But after that, We are fully committed to the company and we will do whatever the founder wants at, and we will help them raise the best round for them. It may not be the highest price, but if it is, if they choose the highest price we're in, and if we believe in that founder, we will do our full parada. Now, what has happened is particularly second half of last year, all of the series A's in our portfolio, like we were doing them at the price that, you know, we invest that, and then they were getting done at the hundred to 125 range. Which was just bonkers. Um, but we still participate in those rounds because, you know, we said, Hey, we believe in this founder. We've got our ownership. We've got pretty good ownership upfront. We can support them in this, in this next round and supporting them is introducing everyone guiding them through the process. And supporting them financially as well.

AI assessment note: “we still participate in those rounds because, you know, we said, Hey, we believe in this founder”

Q mentioned kind of really seeing the power law take effect early. I do want to get into, like, the hits. I think people are wrong when they say you don't learn from success. I think that's bullshit. Um, when you look at, like, your biggest hit, what, what's your biggest hit been from a cashback perspective and then from a multiple perspective? And what have been some learnings from it?

A Yeah, ok, so, Personally, my biggest tip from a cashback perspective is Flexport. I think rough numbers, when I invested, it was like, 15 cents a share, and I sold at 25 dollars and 40 cents a share. Um, and then from the fund, my biggest was, uh, a company, actually, I'm not allowed to name, but, um, it actually, this is interesting, it was not What you would think of as a screaming success, the company exited for two hundred and thirty million dollars. So not a success these days by any venture standard, but I had invested at a two and a half million dollar valuation and the company didn't take much dilution. So for me, it was an outstanding win, um, investing from two and a half to two hundred and thirty million quickly. And I was able to, um, show DPI immediately in my fund. So it was a huge win for me. Um, so that, that was, that was a good one. And then unrealized, I think my biggest is a company called chipper cash. Um, my first investment in the company was at a two and a half million dollar valuation about three years ago, and the last round was over two billion.

AI assessment note: “Personally, my biggest tip from a cashback perspective is Flexport.”

Q I mean, listen, you are so much better looking in person. But first, I want to start with a little bit on you. And for those that missed our first show, so how did you make the foray into Vansha in a very succinct two to three minutes?

A Yeah, sure. So I, uh, I had always wanted to be in business. Like, it's in my blood. Uh, for those Indian people, you can, I'm a, I'm a Rajasthani, and, uh, I didn't know what to do. Uh, but I, I always was tinkering with ideas as a kid, always had a bunch of small businesses. Then I went into the corporate world. I was a management consultant. Then a buddy of mine was leaving to start a company, a fintech company, payments company, and I joined him. And then we sold that company in 2012. Then I ended up starting a company that we sold in 2015. And then at that point, I thought, hey, I've really loved what I've seen on the other side of the table. Like, I've loved what I've seen from VCs interacting just when I was fundraising. And aren't they the smart ones? Is sort of what I was thinking. And of course, now I know better. Like, now it's the other side of the table. It's the founders that are the smart ones. Um, but it's possibly just like anyone across the table for me is smarter than me, so. That's just how it works.

AI assessment note: “I thought, hey, I've really loved what I've seen on the other side”

Q And so I'm just like, do you know what I mean? And so I just, I've kind of pushed back on that because I think it's an easy trope to be like, oh, no one knows what they're doing and it makes us feel better. But no, they do, and actually that's often why they continuously have the best returns.

A So I, I'll push back on that. So with Bill Gurley in particular, let's say, I, Pat, I haven't spent much time with recently, but so, um, with Bill, I was talking to another one of his partners about their meetings, and they were talking, they actually had been talking about something I tweeted, and he said they had a rigorous internal debate about the right way to, about What was correct? And they don't know. Like they couldn't come to a conclusion about the right, about what was right. And I think it's like, there are ways that you can invest, but actually knowing what to invest in or what a mode is, I think people are still figuring it out. And even if you look at the greats, they have a bunch of misses and they have a bunch of companies that you say, like, why did you do that? It didn't, didn't make sense in hindsight.

AI assessment note: “So I, I'll push back on that.”

Q Is it better for you now because there's much less competition?

A I think so, yeah. I think there's less competition, So less competition for capital, but also less competition for companies. So in 20, 20, 20, 21, every company we funded, there were five companies just like it. Also with great founders, with great investors. And so what ended up happening is a bunch of capital went into these companies and five companies serving the same customer set. That's a lot of competitive pressure. And nobody makes money because you're all price competitive and, and you're all serving the same, same customer set that now is comparing against others. Um, I think now we're in a much better place and the people that, that incremental founder that was building in fintech because it was cool is now building a gen AI tool. And that's great.

AI assessment note: “I think so, yeah. I think there's less competition, So less competition for capital”

Q Do you have to? Can you not do the strategy of, hey, you know, we lead and then we're totally aligned to you and want the best for you, but we don't actually write anything beyond our first check.

A You can do that. I think for a fund like ours, it doesn't really make sense where we're, I think for a lead investor, it doesn't really make sense because what ends up happening is some companies Need more capital, and you, and like, not the ones that are killing it. The ones that are killing it are able to raise easily. But there are other companies that are doing well, but need a little bit more capital, and you have to put more money into them. And, you know, they're doing well, but not well enough to raise the next round. And we've had companies like that that ended up being super successful. Um, actually, one of the companies recently, we, we led a seed, and then, um, We put a little bit more money in, like, six months ago, and then they just raised at a hundred million valuation from Andreessen. And we're really fortunate that we put that a little bit more money in. Um, and I think if you don't do the follow-ons, like, if, if your strategy is just to do one check, but you have to do some follow-ons, then you end up, um, not Following on to your best companies, you end up following on when you have to, which can be your worst companies.

AI assessment note: “You can do that. I think for a fund like ours, it doesn't really make sense”

Q Final one, I promise. Um, what do you think of like founders who have funds on the side?

A I think some people have done it well, but I think, I think there are founders who have funds on the side who like lead deals. And that is crazy to me. If you think about like, especially now when we have a bunch of companies that are struggling, we had the SVB crisis, like you need to be there for your founders. And if you're there for your founders, you're not there for your company. And that is a problem. So I think founders was fun with like investing checks on the side occasionally is fine, or, or if it's strategic, it's fine. But I think there are founders who are like leading rounds. I think that's bonkers. If you think about, like, we have a company going through some shit right now, and I'm there for them any day, any time of the day or night. And if I was running my own company and this wasn't all I was doing, like, I wouldn't be able to do that. And I don't, I don't know how you square that. Like, how can you, how can you be operating a fund and running a company? What do you think?

AI assessment note: “founders who have funds on the side who like lead deals. And that is crazy to me.”

Q And so I'm just like, do you know what I mean? And so I just, I've kind of pushed back on that because I think it's an easy trope to be like, oh, no one knows what they're doing and it makes us feel better. But no, they do, and actually that's often why they continuously have the best returns.

A So I, I'll push back on that. So with Bill Gurley in particular, let's say, I, Pat, I haven't spent much time with recently, but so, um, with Bill, I was talking to another one of his partners about their meetings, and they were talking, they actually had been talking about something I tweeted, and he said they had a rigorous internal debate about the right way to, about What was correct? And they don't know. Like they couldn't come to a conclusion about the right, about what was right. And I think it's like, there are ways that you can invest, but actually knowing what to invest in or what a mode is, I think people are still figuring it out. And even if you look at the greats, they have a bunch of misses and they have a bunch of companies that you say, like, why did you do that? It didn't, didn't make sense in hindsight.

AI assessment note: “So I, I'll push back on that. So with Bill Gurley in particular”

Q Do you have to? Can you not do the strategy of, hey, you know, we lead and then we're totally aligned to you and want the best for you, but we don't actually write anything beyond our first check.

A You can do that. I think for a fund like ours, it doesn't really make sense where we're, I think for a lead investor, it doesn't really make sense because what ends up happening is some companies Need more capital, and you, and like, not the ones that are killing it. The ones that are killing it are able to raise easily. But there are other companies that are doing well, but need a little bit more capital, and you have to put more money into them. And, you know, they're doing well, but not well enough to raise the next round. And we've had companies like that that ended up being super successful. Um, actually, one of the companies recently, we, we led a seed, and then, um, We put a little bit more money in, like, six months ago, and then they just raised at a hundred million valuation from Andreessen. And we're really fortunate that we put that a little bit more money in. Um, and I think if you don't do the follow-ons, like, if, if your strategy is just to do one check, but you have to do some follow-ons, then you end up, um, not Following on to your best companies, you end up following on when you have to, which can be your worst companies.

AI assessment note: “You can do that. I think for a fund like ours, it doesn't really make sense”

Q Is it better for you now because there's much less competition?

A I think so, yeah. I think there's less competition, So less competition for capital, but also less competition for companies. So in 20, 20, 20, 21, every company we funded, there were five companies just like it. Also with great founders, with great investors. And so what ended up happening is a bunch of capital went into these companies and five companies serving the same customer set. That's a lot of competitive pressure. And nobody makes money because you're all price competitive and, and you're all serving the same, same customer set that now is comparing against others. Um, I think now we're in a much better place and the people that, that incremental founder that was building in fintech because it was cool is now building a gen AI tool. And that's great.

AI assessment note: “I think so, yeah. I think there's less competition, So less competition for capital”

Q What are the biggest like sources of tension between VCs and founders?

A I think a lot of VCs, I've seen it in some of our portfolio companies, like a lot of VCs are very prescriptive on how to do things. And, um, we try to not be that. We try to be just like the founder's friend and, uh, supportive, but not too prescriptive. Um, I think you can get into a mistake being too prescriptive, uh, and, and sort of telling founders what to do rather than like recommending what to do. Um, and I've seen that even from like good investors, That I've been alongside on the board. I've had founders, like, call me after a board meeting saying, like, hey, what the fuck was that? Like, I'm doing everything I was supposed to do. Why is this VC telling me what to do?

AI assessment note: “a lot of VCs are very prescriptive on how to do things”

Q Final one, I promise. Um, what do you think of like founders who have funds on the side?

A I think some people have done it well, but I think, I think there are founders who have funds on the side who like lead deals. And that is crazy to me. If you think about like, especially now when we have a bunch of companies that are struggling, we had the SVB crisis, like you need to be there for your founders. And if you're there for your founders, you're not there for your company. And that is a problem. So I think founders was fun with like investing checks on the side occasionally is fine, or, or if it's strategic, it's fine. But I think there are founders who are like leading rounds. I think that's bonkers. If you think about, like, we have a company going through some shit right now, and I'm there for them any day, any time of the day or night. And if I was running my own company and this wasn't all I was doing, like, I wouldn't be able to do that. And I don't, I don't know how you square that. Like, how can you, how can you be operating a fund and running a company? What do you think?

AI assessment note: “I think there are founders who have funds on the side who like lead deals. And that is crazy”

Q So hit me. What are the, what are the biggest misses for you, Juan? And what did you learn from those?

A Yeah, so I think in fintech, there's this, like, wave of companies that came up. The most valuable recently, Robinhood obviously has fallen in the public markets quite substantially, but I saw it very early on, and I thought, you know, what's the difference? There had been other free trading apps before, and I also just, like, frankly, wasn't a huge believer in retail trading, that there would be a lot of retail trading out there. So obviously I was just completely wrong. Um, but I think what I'd missed is like the free trading apps of the past were very different than Robinhood. Robinhood was mobile first, and it was actually bringing a new class of investors on in that these like free trade and Zeko and others had not done. So I think that was a huge miss. Um, I think Chime was a big miss. Um, I, you know, I, I never looked at it very closely, but I thought like at 500, we'd invested in a company called simple and simple had exited. It was a nice exit. It was in the hundreds of low hundred millions. And, um, we thought like they'd grown a huge waitlist and then people hadn't gotten off the waitlist. So we thought, okay, it's just tough to make neobanking work in the U S and while chime at twenty-five billion is probably very significantly overvalued. They still have had a lot of success. And still I should have tried to invest in that company. Um, and I think what I missed wa…

AI assessment note: “the biggest miss for me was you look at a model, you've invested in a model that didn't work”

Q Has there been any time when that's really bitten you?

A Yeah, I mean, plenty of times. Uh, I mean, you made the joke about, about, uh, jumping over pools. It's like a stupid thing to do. Um, I'd say, like, it comes with, like, a sense of adventure, which I think I am willing to try anything, and I love new experiences, and You know, I think it, it sometimes doesn't, it doesn't always work out. And so like I've tried businesses that were stupid in hindsight. Um, an example is I, I don't even like vitamins, but like a friend of mine loved vitamins. So I tried building this like automated vitamin company where like you had a quiz that would ask you questions and we had a machine that would spit vitamins customized to you into it. And it was just like, I didn't give a shit about vitamins. So like, why did I start this company? Um, I was just throwing spaghetti at a wall and seeing what stuck, but, you know, I've gotten a little bit more focused over time.

AI assessment note: “I've tried businesses that were stupid in hindsight. Um, an example is”

Q as you kindly reminded me, I can do what I want. Um, so I'm starting on the acquisition side. I always wonder with, like, The first bit of money that you get, how much of an unlock is it? Like when you sold both companies, were you in a position where for the first time you were financially independent and like how much of an unlock is that moment actually?

A Yeah. So for me, so yes, absolutely. I had, did not have, did not come from money or anything like that. Didn't have much money before. Um, so it was a big unlock. And the first thing I did was started investing in other companies. Uh, literally the, like, literally like within a month of, uh, getting the paycheck, I started angel investing and I think it's, it's a passion of mine and. You know, when I, I was moving to San Francisco, um, from Chicago, and I thought it would allow me to do a few things. One, um, get to know people like I could do angel invested and meet interesting people through that. Maybe be inspired to start my own thing, or maybe be inspired to join one of these companies was, was my initial thought. Um, in terms of an unlock, I'm a pretty low burn lifestyle guy. Um, one of the things in my past that I think Put me on this track is I, um, I lived in India. I did this fellowship lived in India on a dollar a day. Uh, so very, very low burn lifestyle. Um, I, I was working in microfinance and decided I would live like my borrowers and my borrowers, you know, lived on a dollar a day. So I decided I would too. And I realized that there are very few monetary things that make me happy. Like, I just don't need any material things to be happy. And so I, it's been, it's been great for me ever since. I think like a lot of people get into a trap where they constantly ha…

AI assessment note: “So for me, so yes, absolutely. I... Didn't have much money before. Um, so it was a big unlock.”

Q um, is when rounds get done, and they're good companies, this is not the tweeners, but they are extraordinarily priced, and you're going, What? I, I love the company, but I, I don't want to do my pro rata at that price. I'd love to hear, like, when you hear that, how do you think about pricing for reinvestments? And are there any times where it stands out to you?

A Yeah, so this is, this is a great one. I'd say, like, our strategy is to be, as you know, very sensitive on entry price. And we will, you know, like I said, we, we will negotiate hard on entry price, very hard and get the price we want and the founders we want to work with. But after that, We are fully committed to the company and we will do whatever the founder wants at, and we will help them raise the best round for them. It may not be the highest price, but if it is, if they choose the highest price we're in, and if we believe in that founder, we will do our full parada. Now, what has happened is particularly second half of last year, all of the series A's in our portfolio, like we were doing them at the price that, you know, we invest that, and then they were getting done at the hundred to 125 range. Which was just bonkers. Um, but we still participate in those rounds because, you know, we said, Hey, we believe in this founder. We've got our ownership. We've got pretty good ownership upfront. We can support them in this, in this next round and supporting them is introducing everyone guiding them through the process. And supporting them financially as well.

AI assessment note: “if they choose the highest price we're in... we will do our full parada”

Q not being cynical actually can be relatively challenging. Um, I do want to ask you, when we, we heard about some of the great wins, um, when we think about like fund ones, you see, and I'm sure you get asked a lot of advice from fund one managers. What do you think are the biggest mistakes you see fund one managers make in the deployment of their fund ones?

A I think number one, Is not being price disciplined. And I think like I've learned through my Fintech time, the importance of price discipline. And I think there's a lot of folks out there. A lot of the funds started in the last couple of years. Um, folks have only seen an upmarket where like, you know, pretty much anything you invested in the last few years, like someone else would come along and invest at a higher price. And so you, and then you had the idea and then like series A's were getting done in the hundreds of a hundred million dollars. And that's not normal. That was an aberration by cheap money that came and that happened in the last two years, COVID induced. And that's not normal. So you can't invest at a seed company at a fifty million dollar valuation and expect to make money. Like that's, if you're doing that, it's just going to be really tough. And so I see a lot of folks doing that today. And fortunately I learned the lesson at 500 FinTech. And so I think I'm not doing as much of that. Um, so I, I think that that's one. Um, I think the other is thinking through portfolio construction reserve strategy and, you know, how to invest more in your winners.

AI assessment note: “I think number one, Is not being price disciplined.”

Q as you kindly reminded me, I can do what I want. Um, so I'm starting on the acquisition side. I always wonder with, like, The first bit of money that you get, how much of an unlock is it? Like when you sold both companies, were you in a position where for the first time you were financially independent and like how much of an unlock is that moment actually?

A Yeah. So for me, so yes, absolutely. I had, did not have, did not come from money or anything like that. Didn't have much money before. Um, so it was a big unlock. And the first thing I did was started investing in other companies. Uh, literally the, like, literally like within a month of, uh, getting the paycheck, I started angel investing and I think it's, it's a passion of mine and. You know, when I, I was moving to San Francisco, um, from Chicago, and I thought it would allow me to do a few things. One, um, get to know people like I could do angel invested and meet interesting people through that. Maybe be inspired to start my own thing, or maybe be inspired to join one of these companies was, was my initial thought. Um, in terms of an unlock, I'm a pretty low burn lifestyle guy. Um, one of the things in my past that I think Put me on this track is I, um, I lived in India. I did this fellowship lived in India on a dollar a day. Uh, so very, very low burn lifestyle. Um, I, I was working in microfinance and decided I would live like my borrowers and my borrowers, you know, lived on a dollar a day. So I decided I would too. And I realized that there are very few monetary things that make me happy. Like, I just don't need any material things to be happy. And so I, it's been, it's been great for me ever since. I think like a lot of people get into a trap where they constantly ha…

AI assessment note: “so yes, absolutely... so it was a big unlock.”

Q Has there been any time when that's really bitten you?

A Yeah, I mean, plenty of times. Uh, I mean, you made the joke about, about, uh, jumping over pools. It's like a stupid thing to do. Um, I'd say, like, it comes with, like, a sense of adventure, which I think I am willing to try anything, and I love new experiences, and You know, I think it, it sometimes doesn't, it doesn't always work out. And so like I've tried businesses that were stupid in hindsight. Um, an example is I, I don't even like vitamins, but like a friend of mine loved vitamins. So I tried building this like automated vitamin company where like you had a quiz that would ask you questions and we had a machine that would spit vitamins customized to you into it. And it was just like, I didn't give a shit about vitamins. So like, why did I start this company? Um, I was just throwing spaghetti at a wall and seeing what stuck, but, you know, I've gotten a little bit more focused over time.

AI assessment note: “I tried building this like automated vitamin company where like you had a quiz”

Q Um. Okay. Pretty, pretty, pretty good. So my question to you is like, what did you see? Like, how were they that priced bluntly? Because.

A So there's a few things to know. One is if you fish in like the, the same pond as everyone else, then like those are the deal, you know, then things may end up getting priced up. The other is there's a difference between a price taker and a price maker. So like, Oftentimes a founder will say like, this is what I want. And we say, okay, like totally understandable. If you want to work with us, the price is X. And here's a bunch of folks we can connect you to who have chosen, chosen that. And those are our founders. And they can tell you why they chose to work with us, even though it wasn't the deal they initially wanted. And they can tell you that they would do it again and again, and they refer their friends to us.

AI assessment note: “there's a difference between a price taker and a price maker”

Q not being cynical actually can be relatively challenging. Um, I do want to ask you, when we, we heard about some of the great wins, um, when we think about like fund ones, you see, and I'm sure you get asked a lot of advice from fund one managers. What do you think are the biggest mistakes you see fund one managers make in the deployment of their fund ones?

A I think number one, Is not being price disciplined. And I think like I've learned through my Fintech time, the importance of price discipline. And I think there's a lot of folks out there. A lot of the funds started in the last couple of years. Um, folks have only seen an upmarket where like, you know, pretty much anything you invested in the last few years, like someone else would come along and invest at a higher price. And so you, and then you had the idea and then like series A's were getting done in the hundreds of a hundred million dollars. And that's not normal. That was an aberration by cheap money that came and that happened in the last two years, COVID induced. And that's not normal. So you can't invest at a seed company at a fifty million dollar valuation and expect to make money. Like that's, if you're doing that, it's just going to be really tough. And so I see a lot of folks doing that today. And fortunately I learned the lesson at 500 FinTech. And so I think I'm not doing as much of that. Um, so I, I think that that's one. Um, I think the other is thinking through portfolio construction reserve strategy and, you know, how to invest more in your winners.

AI assessment note: “I think number one, Is not being price disciplined.”