20VC: Ribbit Capital's Nick Shalek on How To Think Through Ownership and Price Sensitivity, When More Money and Pre-Emptive Rounds are Good vs Bad & Investing Lessons from Yale's David Swensen

Nick Shalek is a General Partner @ Ribbit Capital, specializing in fintech they are one of the most successful venture firms of the last decade with a portfolio including Robinhood, Coinbase, Revolut, Nubank and more. As for Nick, he started his career as a Senior Analyst @ Yale Investments Office before moving to the world of operations as Director of Business Operations @ Verne Global, a provider of 100% carbon neutral data centers. In Today’s Episode with Nick Shalek You Will Learn: 1.) How Nick made his way from Senior Analyst at Yale's Investment Office to be one of the leading fintech investors in the world with Ribbit? What were Nick's biggest lessons from his time working with David Swenson @ Yale? How would Nick summarise Yale's investment algorithm? 2.) Entering Venture and Advice: Why does Nick tell many friends entering venture, to not join a new fund? What does Nick believe is takes to build an enduring firm in venture? What were the core reasons and inflection points in the success of Ribbit? What have been some of the biggest challenges in the professionalisation of Ribbit over the years? 3.) Pricing and Ownership: Is Nick concerned by the levels of pricing we are seeing in fintech today? How does Nick analyze his own relationship to price? How does Nick view the importance of ownership? Is it possible to build ownership across rounds? How does Nick advise founders now receiving very fast offers to pre-empt their rounds? 4.) Investment Decision-Making: How does Ribbit structure its investment decision-making process for initial investments? In what way does this process change for re-investments? Why does Nick believe in the benefits of not having attribution within venture partnerships? 5.) AMA: What has been Nick's biggest miss? How did it change his investment decision-making process as a result? What does Nick know now that he wishes he had known when he started in venture? What have been Nick's biggest lessons from his working with Micky? Item’s Mentioned In Today’s Episode with Nick Shalek Nick’s Favourite Book: A Piece of the Action: When the Middle Class Joined the Money Class Nick’s Most Recent Investment: Kavak

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Harry Stebbings?

  This is 20VC with me, Harry Stebbings. And today, I'm so excited to be joined by a guest who traditionally doesn't do much press and very much stays behind the scenes and out of the media. And so this was a really special one for me, and I'm thrilled to welcome Nick Shalek, general partner at Ribbit Capital, specialising in fintech. They are one of the most successful venture firms of the last decade, with a portfolio including the likes of Robinhood, Coinbase, Revolut, Nubank and more. As for Nick, he started his career as a senior analyst at Yale Investments Office before moving to the world of operations as Director of Business Operations at Vern Global, a provider of 100% carbon neutral data centres. I'd also want to say a huge thank you to Mickey Malka at Ribbit and Frank Rotman at QED for some amazing question suggestions today. I really did so appreciate that.

• 0:43Harry Stebbings?

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• 1:27Harry Stebbings?

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• 2:10Harry Stebbings?

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• 2:41Speaker 01

  You have now arrived at your destination.

• 2:44Harry Stebbings?

  Nick, my word, I've wanted to do this one for such a long time. So first, thank you so much for joining me today.

• 2:49Speaker 02

  Yeah, Harry, I've enjoyed and learned a ton from you and your guests over time. So I'm very happy to be here and thanks for inviting me.

• 2:55Harry Stebbings?

  Well, that is very kind of you to say. But I do want to start with a little bit on you. So how did you make your way into the very wonderful world of venture and come to be, you know, one of the leading investors in the mega wave of fintech today with Ribbit?

• 3:06Speaker 02

  As far as getting into venture or fintech specifically, I wish I could tell you was the plan all along, but it's really been a series of unexpected introductions and some serious luck. I actually always had plans to be an entrepreneur. My mom was an entrepreneur. And so from about the time I was 10, that's what I wanted to be. But somehow I've always ended up reading investment books and working as an investor. So at this point, I've just come to embrace that there's probably a reason for that. As for Ribbit, about 10 years ago, I got introduced to my partner, Mickey, who you know well. I was on what I would have told you at the time was an unwavering path to start an education company. I was working with a charter school in Oakland and finishing up my masters in education and very much obsessed with the potential for technology to change education. I'd been an investor earlier in my career at

• 3:47Speaker 02

  Yale Investments and then had been part of a team focusing on incubations at General Catalyst in Boston. So I knew the venture business a bit, or at least I had a lot of moderately informed but strongly held opinions about it. And when I got connected to Mickey by a mutual friend named Dan Levy, it was kind of with no pretense other than that I should meet this guy, Mickey, who was supposedly really great. So I had no problem telling him all the things I thought were wrong about his thesis for a new firm. But we hit it off and I had a lot of fun getting to know him. And he told me he wanted someone 10 years younger than him to work with him. And we started talking about emerging businesses and ideas in fintech. And I just Thinking about it all the time. So the decision started to kind of make itself. Unfortunately, my wife convinced me not to overthink it, which is a good thing because Ribbit's given me a chance to invest,

• 4:29Speaker 02

  which is clearly something I love to do while also being part of the entrepreneurial journey of building a new firm with an amazing team of people.

• 4:35Harry Stebbings?

  Man, I mean, what a ride it's been. I do have to ask, because you know, we're going to stay to schedule, but you said there about, you know, telling Mickey where he thought he was wrong in the early days. Carl, where did you think he was wrong in the early days?

• 4:45Speaker 02

  Look, the thing that Mickey wanted to do, which was start a sector focused fund that would invest internationally. It went against everything that I'd learned as an LP about what worked in venture. You know, I told Mickey sector focused funds don't work and that venture is a local business and we kind of hit it off from there.

• 4:59Harry Stebbings?

  I love that. Well, um, sorry, man. I think Mickey was right on that one.

• 5:03Speaker 02

  He was, and I came around to his point of view for sure.

• 5:06Harry Stebbings?

  You mentioned Yale, you mentioned, you know, the prior investing, you know, you worked with the legendary David Swenson. I have to ask this one, but like, what were your biggest takeaways and lessons from working with David? And I guess how did it impact your mindset, do you think?

• 5:18Speaker 02

  Yeah, it's really pretty amazing to me in retrospect that I got to have one of the all time great investors as my first boss. Obviously, it's not the usual path from endowment investing to tech investing, but a lot of what I took from Yale has really influenced my thinking. You know, in my view, the LP and the venture business are actually similar in a lot of ways. You know, both are fundamentally about backing amazing people, often with limited control or data as an LP. You know, you're mostly putting money in blind pools. So you learn to really fixate on how to underwrite people and how they might think or act in future scenarios. On lessons from Dave specifically, I'll riff on a few things. Yeah, first I learned from him that the foundation of great investing is really about getting the incentives and relationships right. So if I were to summarize the Yale algorithm, it would be something like find remarkable people,

• 6:02Speaker 02

  put yourself on the same side of the table as them, then build rapport so they let you invest. And so they'll call you in the middle of volatility, which is when you find, you know, a lot of the best investment opportunities. The second thing I guess I'd say is sort of ignore the received wisdom and try to approach investment problems from first principles. And when you're confused, come back to them. And people throw around this term first principles a lot these days, but Dave, you know, he actually lived it. He really reimagined what institutional investing should be with a few core ideas like that liquidity. Was overrated or that you should pursue active management in areas of inefficiency or that you should be equity oriented over long periods of time. These things sound really obvious now, but they were totally unconventional then. And third, being around Dave showed me the relevance of the truism that people won't remember what you say, but they'll remember how you made them feel.

• 6:48Speaker 02

  He was this legendary intellect, but he had so much impact on me and I think so many other people, not just because of his enormous brain, but because he had an enormous heart and wore it on his sleeve. I think about that quite a bit in our business because there are so many smart people out there. I mean, you know this, Harry, who are chasing every deal and you can't win just by being smart. You need to be passionate and authentic and consistent or some other set of personal things that really set you apart.

• 7:10Harry Stebbings?

  I mean, I love that in terms of it's not what you say, it's how you make people feel. And I always think back to that. Actually, it was a friend of mine, Mark Evans, that told me that one. But I do want to ask, you know, we take this forward, you know, you obviously have the air of experience. And then when it comes to joining venture and joining Mickey, you said to me before, why I tell people not to do what I did when they call to ask about being part of a new fund? Help me out here, Nick. What's the thinking on this and what did you mean by it?

• 7:34Speaker 02

  Yeah, I just think the odds of a new fund working are extremely improbable. You know, the reasons to be in the venture business is to have a chance to work with the best entrepreneurs. And it's very hard for most people to get in venture because there are these amazing storied institutions and legions of angels and VCs with every sort of angle and specialty. And I don't think you can learn the venture business the right way if you don't see what great companies and founders look like. And you're just at very high risk of that happening with new funds. So you need a really realistic appraisal of the situation. So I knew that and I knew the probabilities, but why did I do it?

• 8:04Harry Stebbings?

  Can I push back on you that? Like there's a ton of firms that have technical debt. It could be in strategy, it could be in structure, it could be in team that is bogging them down, that is slowing down investment decision-making processes, that's reducing the quality of processes. I would actually posit a different opinion and say that actually a new firm can start with a completely real-time thesis that works for today with no existing politics, no existing people debt, structural debt. And actually you could put that in a pole position over the storied firm.

• 8:36Speaker 02

  I think that's right, Harry, but hundreds or thousands of people who try to get into venture. Business, very few of them managed to figure out how to stick around. And the reason I'd say it, and the reason I joined Mickey, despite what I told you earlier, that what he wanted to do, what we were talking about, broke the rules of venture as I learned them. My gut feeling from spending time with him very quickly was that he passed this sort of simple litmus test, and I think it's the key one to answer your question, which is, say it this way, a friend of mine has a theory that any decision or any investment can be whittled down to like one single most important question. And for me, in venture capital, that's like, will great entrepreneurs consider working with us? You know, there are lots of good people with smart ideas like you talked about, but if you can't get the best entrepreneurs to consider giving you a meaningful slot on their cap table, then it's, you know, it's not worth it. And after spending time on with Mickey, I thought that could be true at Ribbit.

• 9:21Speaker 02

  And I thought I'd have a lot of fun and learn a lot working with him. So we got started trying to make that true. But this is the other thing I'd say, like, even with all that, a lot had to go right for us. Like, we've been able to track a brilliant team of people who work exceptionally hard, from our partner Nikolai, who was the first person to join us, to our partner Jordan, who recently joined, just about everyone who's landed at Ribbit's been extraordinary. But even with the right people, we just benefited enormously from timing, like, the wind being at our back in tech and fintech, and even more from getting to back entrepreneurs like Fred and Brian at Coinbase, or Ken at Credit Karma, or Vlad and Beja at Robinhood, you know, early on. And that gave us the right to play further and find the next set of great founders. So my comments are really about trying to build a firm that establishes a presence and lasts. And I just think that's a really hard thing to do. It requires a lot of luck and a lot of good timing and hustle.

• 10:04Harry Stebbings?

  No, I, listen, doing it today, I totally understand and agree. It's challenging, but I totally understand the perspective there. I want to also, because you mentioned there about kind of the fundamental question being, will founders pick you? On the flip side of that, obviously, you also have to want to invest. And you said first principles being like thrown around a lot. The other one is conviction, conviction, and everyone has conviction on this investment. So when we chatted before, you said conviction is critical, but certainty will kill you. Can you unpack this one for me? What did you mean when you said that?

• 10:32Speaker 02

  Yeah, yeah, definitely. And I'll make sure to say this all with a lot of conviction. You know, we felt from the start of Ribbit, one way to be a great investor is to be thesis driven. It doesn't mean you have to have the answers. In fact, you shouldn't, but it means that you have thought hard about what they might be. You've looked at all the data you have available to you, developed a reasonable hypothesis. about the future. So we might take an area like crypto or insurance and write a thesis and share it with our friends and LPs and entrepreneurs and use the feedback and dialogue from all that to get us to a level of conviction that gives us an advantage. And that advantage is when a great founder walks in the door and wants to start something, it's easy to say yes, since we've already pre-negotiated our enthusiasm for what the company might be or how the space might evolve. And to me, that's conviction. The danger in all this is you get too stuck on your ideas. Focusing intently on something doesn't give you a crystal ball about it.

• 11:17Speaker 02

  You know, things that that work are often the things that fly in the face of experience. So for example, early days at Ribbit, we had a view that digital payments were commoditizing and would be a declining margin business. And it's the kind of thing an expert would say, and it sounded smart to me at the time, but it turns out to be very naive and reflect a very static view of the world. We just had too much certainty, you know, and at some point we wised up and adjusted, but it costs us a lot of great returns in the meantime. If I had to generalize this, and I think you probably agree, like I'd say in most cases in tech investing, it's great to have conviction about things to invest in or to do, but you gotta be really weary of conviction around things not to invest in. Like type two errors are a lot more painful than type one errors.

• 11:56Harry Stebbings?

  Can I ask, how do you prevent past successes or failures, investment decision making? So you could look at a certain vertical and it went incredibly well. You name many of your companies that have gone to multi billions and valuations. And then kind of anything else in that vein, you automatically view with this kind of rose tinted spectacle. And then when it's done badly, you're like, ah, we're never going to make money. And as you said, that kind of pain is declining margin business, whatever. How do you retain that mental plasticity with the successes that one has?

• 12:22Speaker 02

  You just have to train your mind to constantly be paranoid. And for me, this is a lot of what trying to be a good investor about is maintaining the optimism to see how big something can be. And the skepticism to not believe sort of your own BS. And I think it comes from constantly examining what you believe and then comparing it against the actual data. You know, does this belief hold up? You know, we're all subject to confirmation bias and we want to find data points that suggest that we're right. And it's really easy with the sort of filter bubbles that exist today to go find lots of people who tell you that you're really right about something. But I think when you step back and you say, well, what's the consumer actually doing? What's the customer want? Are they responding to this thing? And why are they doing that? And that was the thing with payments was we might have this intellectual view of how the space was going to develop.

• 13:06Speaker 02

  But then when you really looked at what developers were doing or merchants were doing, and then you started to see the incredibly smart people who were attracted to companies. Like, you know, Stripe is of course the most iconic example. You know, at some point, you just have to capitulate and realize you're fooling yourself.

• 13:19Harry Stebbings?

  You mentioned that kind of how big things could be. This is often what people will tell me when I talk about my concern around pricing. They go, oh, but Harry, companies are now so much bigger than they ever were, and we ever thought they could be. So you can pay 3X the entry price. I'm inherently a lot more skeptical and worried. Are you as concerned as I am about the levels of pricing today, especially in fintech, actually?

• 13:39Speaker 02

  Harry, I'm always concerned about pricing. I always have been since the start of the firm. So you're asking the wrong person. But what upside multiple is attractive is subjective question for everybody to answer for themselves. Like, it's something you negotiate with yourself and your LPs based on what success looks like for you. Our simple answer has always been like, we don't think of ourselves in the venture or the growth business, but in the business of making asymmetric bets on the exceptional people are going to change finance. So whether we're investing at seed or in a public company, whether, you know, we tell ourselves that a price, you know, round is cheap or not, the conversation has to come back to the question you're asking, which is how big can this be? You know, for us, it's like, can this become one of the most important companies in the future of financial services? I think finance is big enough that if you get that question right, you can earn venture type returns,

• 14:22Speaker 02

  sometimes even at a later stage, and sometimes even when it's incredibly hard to write down on paper what you need to believe for something to be that big. You know, the only way to to earn exceptional returns, this is sort of the framing that I would bring it back to, which is a little different than what you're asking. But I think it kind of cuts to the core is like, if you want to generate several multiples of whatever LPs trust you with, which is, you know, our goal. The only way to do that is to be contrarian, since otherwise returns get competed away. It's just sort of like the law of investing. So we always ask ourselves, like, do we have a non-obvious or non-consensus point of view? And it's not always clear. Like, it's very obvious when you're truly non-consensus in retrospect, like how it felt when we first invested in Bitcoin and Coinbase. And most people just had no idea what we're talking about. But then you look at something like crypto today with Coinbase as a public company.

• 15:04Speaker 02

  And is it non-consensus? Like, I think in the broader scheme of things, it still is exceptionally early. So, you know, even when everyone's Seems to agree with your general points, like say neo banks can be big. They might not agree on degree. And this, you know, gets to the heart of what you're talking about. You know, like one of the hardest things I've found in tech investing is updating your priors. You know, one point you can only see Stripe as a billion dollar company. And then you got comfortable with as a $10 billion company. But how do you get over that view and see it as a $100 billion company or a trillion dollar company? And this imagination and constant reframing is like, seems to be one of the key intellectual traits of the best investors. It certainly might be the case that people are tricking themselves and overapplying this kind of thinking. I think that definitely happens because you see too many companies priced too richly. But, you know, for us, it might be true that the best fintech companies are still in the phase of selling DVDs and books.

• 15:48Speaker 02

  And if you believe that, like what might happen next? Warren Buffett has this saying that time is the friend of the wonderful company. More than valuation, which is very important. We all need to focus above all things on like, what are really the wonderful companies? And I imagine that's true for you too.

• 16:01Harry Stebbings?

  It absolutely is. I think what I find challenging also is bluntly, in a world of COVID and less in-person interactions, the compression of fundraising timelines and Zoom fundraising. Bluntly, it's just made it much harder to build a relationship with the founder, build a relationship with wider team members, feel the culture of the office, and understand that fabric of wonderful, if that makes sense and isn't too cheesy. Do you struggle with that too?

• 16:24Speaker 02

  A hundred percent. I think that's the biggest challenge for us. The fundraising environment, the valuation environment, I should say, is one thing. I think that's just a reality that you have to adapt to. But how to build meaningful relationships and partnerships, which we see as kind of a cornerstone of how to be a great investor, that that's harder to do. We always think when we're underwriting a deal, and this I learned, you know, as an LP too. The first decision is important, but it's, you should do the work to make the second decision. Cause you often will have to, and especially in this environment, you have to make that decision before you have a chance to collect all that much more data. But, you know, even more importantly, if something goes wrong, which is, you know, almost is inevitably the case in fintech companies. If there's some, you know, regulatory issue or balance sheet issue, you want to have, to get back to that word, you want to have the conviction to be great partners at that time.

• 17:09Speaker 02

  And I think a lot of the worst behavior we see from investors is where they came into something quickly and they didn't really understand it. And we really work hard not to be those investors, but it's hard to do on a three day timeline on Zoom. So we're. Working on it, adjusting and trying to do a lot of things to figure out how to be on the front foot rather than the back foot.

• 17:24Harry Stebbings?

  I mean, I'm so glad that I'm not alone in that one. I do want to ask you, in terms of like, you mentioned the reinvestment decision making process there. When you think about ownership, often a lot of funds, certainly of your size, have very specific ownership requirements. How do you think about ownership requirements on entry? And then how possible do you think it is to build ownership over time? Often I find with the best companies, they get taken away by the best and you never see them again. How do you think about those two?

• 17:49Speaker 02

  Ownership definitely matters. To me, that's like almost a immutable law. But I think this is one of the tricky dichotomies of the business and there are a bunch that you can never quite reconcile. There's this F. Scott Fitzgerald quote that I remember maybe from college that like the test of a true first rate intelligence is the ability to hold two ideas in your head at the same time and still retain the ability to function. And that's what I think about on this topic all the time. So here's my two opposing ideas that, you know, seem hard to reconcile. Like first, ownership really matters, mostly because we're all limited by the time we can allocate. And at Ribbit, we really believe in making concentrated, focused investments and putting our money where our mouth is. But second, at the same time, I think investing in the best companies should be the tail that wags the dog. You know, you certainly shouldn't back a weaker company

• 18:31Speaker 02

  because you think you can own a few more percent of it. So the thought experiment for me goes like this, like if the best founders only want to sell you X percent of their company and X is lower than your ideal, you kind of have three choices. One, you don't back the founders. Two, you just shut down your business. Or three, you try to find ways to align your desire to own more with their objective to make the business successful. So we start with who we want to back and then we get to working on number three. And our arguments are usually based around trying to show them in lots of ways, the value of being partners with us. And if we can give them more money over time and we still think the return is asymmetric and meets our absolute bar, it's the highest return on time thing we can do. This is how we think about it. I don't envy stage focused generalists because I think it's an even harder challenge these days.

• 19:12Harry Stebbings?

  I do want to ask, on the reinvestment decision making side, how do you process that? What does that structure look like? I mean, I know a lot of funds have the automatic prerada that they kind of guarantee. How do you feel about that? And then also, how do you structure your reinvestment decision making process?

• 19:25Speaker 02

  You know, I think if I were to criticize it, arguably, we spend too much time on it. But our principle for From the beginning is we re underwrite every deal, including follow on decisions. In follow on decisions, we certainly take into account the importance of the relationship and the fact that we've been that it's our default posture to be supportive of companies. And then going back to what I was sort of alluding to before, Harry, I think if a follow on decision happens within a short period of time and you're struggling with it, a lot of times it's because you haven't done the right work upfront. So I always think like, try to do the right work upfront so that we can be supportive of the company over time. And then you take everything on a case by case basis. So what we do is we assign, you know, a few people on the team and we do the same sort of underwriting.

• 20:08Speaker 02

  Maybe it takes us a little bit less time than we would have done in in any other scenario. And we try to let that guide us in in terms of what to do.

• 20:15Harry Stebbings?

  Can I ask, is it consensus decision making or is it like partner led, one person can do it?

• 20:20Speaker 02

  Neither consensus nor partner led. I would say we have a process that's intentionally conviction driven, meaning somebody on the team needs to pound the table, but we try not to attach that investment decision to a person because I think that often leads to people thinking about investments in the wrong way, rather than just being, you know, very straightforward about analyzing the investment or the opportunity. They get hung up in, you know, the kind of politics of the internal process and at the mode of the way we're trying to manage the firm.

• 20:46Harry Stebbings?

  Well, I do want to touch on that because attribution is so core to a lot of how LPs think. And obviously LPs love it. Most venture firms do actually have pretty clear and granular attribution. Given that you don't, like going a little bit deeper, why do you not? And what are the benefits of not having attribution?

• 21:01Speaker 02

  Yeah, it's just always seemed right to us for Ribbit not to have attribution. Like deals almost always have advocates, is what I'm saying. Like, in fact, we sort of have this loose rule that if someone's not pounding the table, there's no point in considering an opportunity, a little different than the follow ons where we we have to consider it or, you know, we have to think about it. But we never label something Nick's deal or Nikolai's deal or Ray's deal. The biggest reason is we just think it's more fun to live and die as a team. And once we've decided to do a deal, there's no credit claiming or finger pointing. And it does get rid of a lot of the pathologies of venture. It's, it just becomes a Ribbit deal. You know, from an investment perspective, we try to depersonalize it. Like it can be easier, and this is what I was alluding to before, like it can be easier.

• 21:40Speaker 02

  To bring the wrong biases when it's a deal attached to a person like we need brutal honesty as a firm and a kind of no holds barred kind of debates. But you might think about supporting the person behind the deal, which is a nice sentiment, but it's not very productive. When something's going in the portfolio, like our promise to founders, the way we structure is that everyone on the team is available to them. This all rings a lot truer internally and externally, like if everyone feels like they're contributing to a joint body of work. But I don't want to be Pollyannaish, like there's a cost to looking at the world this way, like deal attribution makes the whole venture industry go around. Like when Forbes puts together the Midas list, they want to know what investments you've made. So attribution clearly motivates people. I think what we're asking of ourselves as a team is to be motivated by something else, like the desire for Ribbit to win and the joy in feeling like we did it together.

• 22:23Speaker 02

  And at the end of the day, that's not only a choice about what makes the firm perform best, but about what makes it worth doing.

• 22:29Harry Stebbings?

  I totally agree, and I'm with you on the non-attribution model. I think it removes so much of the politics. You mentioned that the kind of Swiss Army knife team and the expansion of the team. And this one was actually from Frank Rotman at Q E D. But he said, you know, you've had the most incredible journey professionalizing from small, early stage specialist to now stage agnostic powerhouse bluntly. And he asked, what were the biggest challenges in making the transition and the professionalization of the firm as you have done?

• 22:54Speaker 02

  You know, I'll take anything from Frank. You know him and Nigel and Q E D, and they're just actually awesome. To be honest, I don't think we've changed the core parts of Ribbit. We always defined ourselves by our thesis and by wanting to work with the best people who are changing finance, not really by a particular stage or a kind of deal. You know, just for example, in the first fund, we had early companies and mature companies across several GOs. We had fun surprises like Bitcoin and that same thing is true in the current fund. Like we love to invest as early as we can. Ownership matters, be thesis driven, you know, rather than reactive and do it with a scrappy team with a lot of data and not much process. And all that has stayed very consistent. You know, that said, what's definitely changed is the market, like fintech's gone from being this sort of ignored backwater to one of the hottest sectors in tech.

• 23:38Speaker 02

  Last year, you probably know this, but you know, you've heard some of these stats, like PayPal became more valuable than Bank of America and Square became more valuable than Goldman. And the speed of that happening has shocked even us. Like if you take the top seven, eight fintechs and the top seven Bank's last year, something like $800 billion in market cap swap hands between them. You know, at the same time, the number of companies identifying as fintech is actually going down, while the number of software commerce businesses that consider fintech core to what they're doing skyrocketing. And crypto has gone from approximately nothing to nearly a couple trillion dollars, depending on the day. So value's moving, and if we want to work with the best and be relevant, we have to keep evolving tactics while staying true to that core.

• 24:14Harry Stebbings?

  When you think about engaging with founders at the earliest and earliest of stages, and when you think about the decentralization of entrepreneurship, you have to be the first thought for fintech founders in LatAm or in New Zealand, you name it. How do you think about Ribbit's brand? Because you've done so well despite not being out there. How do you think about that? And do you think it will change as you move forward?

• 24:35Speaker 02

  This is something that Mickey and I discussed probably in our very first meeting together. It aligns with my personality and with what I believe, but I really kind of like learned the value of it from Mickey, which is, you know, just being comfortable letting the work speak for itself. We've always believed that the brands that that matter the most are the ones that we back and have thought that like if we do our job well, the word should get out about Ribbit. And that there are a lot of people that were out there shouting with megaphones, you know, much, much bigger megaphones than our own, some who are doing it incredibly well with great star power and teams of people, that we shouldn't try to play that game. We should try to do something that felt more authentic to us. You know, I think that's like a subset of a broader thing, which is, you know, I've seen from Mickey's like really good at framing what success looks like and not getting caught up in the noise. And we've tried to carry that, you know, on at Ribbit.

• 25:19Speaker 02

  Like, for example, early on at Ribbit, we said, you know, what if one of our core KPIs was how many of our founders would actually invest their own money in Ribbit? You know, after working with us, that's been a great guiding light today. A significant majority of the founders we've backed are investors in Ribbit, which means a lot to us. And it's always a good way of framing whether we're doing the things that we need to do to build the brand.

• 25:38Harry Stebbings?

  Because I was chatting to someone the other day and they were like, ah, man, we're going to pay up for this company. And I was like, oh, it's pretty quick after Ribbit did it. And they're like, yeah, but Ribbit did it. So like, we just pile on. And I'm like, is that a concern for you? Because now you do have the brand of success bluntly in fintech, where bluntly, people just want to give your company's money because you're it. Is that a concern for you? And how do you advise founders on taking those? Preemptive rounds and taking that cash that is coming very aggressively and sooner than planned.

• 26:05Speaker 02

  I think it's really hard, Harry. Mostly what we encourage founders to do is keep their head down and focused on the business. It's rarely the case that more money will make the business successful. It's never the case that more money will patch over a lack of interest from customers or a lack of execution by your team. So there are thousands of ways you can die as a startup. Having more money is one of them, but there are lots of others too. It always sounds like self-serving advice when you're coming in as an investor and around, I'm sure you've had this conversation many times, around encouraging founders not to get too far ahead of the company on valuation, but it's a little easier once you're already a partner. And like with anything else, try to give founders our perspective and share some examples and then let them make their own decision. The one thing I would point out, since I think it's bad to look a gift horse in the mouth,

• 26:49Speaker 02

  is that we could view all this capital as a bad thing through a competitive lens, but I actually think it can bend the curve on returns for some types of businesses. Like when your competition, like it does in fintech, comes from incumbents with huge balance sheet and regulatory advantages, having more capital can increase your chances of success in a material way. Like, I don't think this is true in all areas of venture or even in all fintech companies. So the idea can and is most often applied incorrectly. But I do see the fluidity of capital today as more of a challenge that we can adapt to rather than an existential threat. And the thing we struggle with more is what you brought up earlier is around the speed of deals.

• 27:23Harry Stebbings?

  No, I totally get you. I mean, speaking of speed of deals, one final question for the quickfire. But you led a multi-billion dollar raise into Robinhood in what I think was about 24 hours. What was that like in that 24 hours?

• 27:34Speaker 02

  I'd say it was very busy. It went by in a flash. Sometimes it felt like a pretty, like an eerily unremarkable day. We've known the company for almost a decade and we'd been through a bunch of complex situations together. We'd re-underwritten and invested in the business, I think, seven times, like from the A to the G. And Mickey had started his career as an entrepreneur, building a broker dealer. And we'd built a very deliberate thesis around brokerage and we'd invested in the category all over the world. So when Vlad called in the morning and said Robinhood had a collateral issue and needed an impossible sum of money right away to try to live up to their brand promise, it was actually pretty straightforward for us to say yes and just get to work. Because we understood the problem and because we, this is really important because we'd spent years, you know, building relationships with our banks and LPs and co-investors and various people at Robinhood.

• 28:18Speaker 02

  Like, we were able to figure out terms and get the liquidity to wire them half a billion dollars that day. I don't want to play it down. Like, for us, it was really important across the team. You know, not just, we think it'll be a good investment, but because we had the chance to help an amazing company at a moment of fear and volatility. And that's what, like, Ribbit aspires to be, is just like in financial services, you're gonna have these challenging moments. So, we want to have a steady hand and be smart investors, but more importantly, be good partners.

• 28:42Harry Stebbings?

  Can I ask you, Nick, when you have those moments where it's like, how much do you need? And it's, you know, a billion, half a billion, or, I don't know, not obviously Robinhood, but another company where it's like, we're gonna lose our regulatory authority. How do you deal with them? Are you level-headed? Are you quite frantic? What do you do and how do you digest these old shit moments?

• 28:59Speaker 02

  I was talking earlier about the value of being thesis-driven. You know, another way of saying this is sort of pointing out that you want to pre-negotiate the ideas in your mind. When we underwrite an investment, we work really hard to imagine these types of scenarios. And often, like, you live through them in small ways with these companies or with other companies across the portfolio. That's what it felt like with, with Robinhood. Like, we'd been to this movie before. So, I think when you've done that, you don't overreact, even in a frightening situation. You feel like, you know, we understand this business, we've done the work, and let's be steadfast, and the right kind of partner is not the kind of partners who, you know, suddenly try to reexamine everything that they know to be true. I think there's a lot of things, actually, about being a sector-focused fund that are a disadvantage that people think are an advantage, like expertise that we talked about earlier,

• 29:42Speaker 02

  because, you know, you can become way too full of your own ideas and you miss that the, the best companies are, you know, often have some very core, simple insight. But one of the advantages of being a sector-focused fund or a focus firm in general is you can, you know, really underwrite and get to know companies and a theme. And I, I think that can make you steadier as an investor over a long period of time.

• 30:01Harry Stebbings?

  I do want to move into my favorite, though, Nick, which is a quick fire. So, I say a short statement and you give me your immediate thoughts. Does that sound okay?

• 30:07Speaker 02

  Sounds great.

• 30:08Harry Stebbings?

  Okay, so what's the favorite book and why? What must you be reading on the summer holidays?

• 30:11Speaker 02

  You know, I, I really, I love fiction. So, if you ask favorite book, I'd say something like East of Eden or All the Kingsmen, just because I think they're timeless parables and beautiful. Beautifully written and fun to read and reread. But if you want something about fintech and innovation or entrepreneurship, I think a great thing to read is a piece of the action, which is Joe Nocero wrote this book about financial innovation in America over the 20th century. And one of the reasons I love it is it just reminds you, like I think a lot of good business history, that nothing is new. Like before Robin Hood, there was Schwab and before Stripe, there was Visa. Before Chime, there was Bank of America and on and on. Very well researched and written with great pacing. You are also the first person on the show to suggest that. So that's a great moment for me. Tell me, you've been back at the Ribbit journey. What would you have done differently? Yeah, it's easy to say because hindsight's 2020.

• 30:55Speaker 02

  But I would have done more of the things that we knew we should do. Like the biggest manifestation of this is we could have been even more concentrated in the companies that we really believed in. We've done plenty of doubling down on our winners, but I would try to do it even more. Some of this is classic bull market thinking, but I think the signal was really strong after working with, you know, with companies even for a matter of months. Other than that, like I think most of what I would have done differently fits in the bucket. We talked about earlier where we just had the wrong idea about something or about a company and we did an armchair underwriting. It's fine to have boundaries in places where you defocus, but you also need to just go meet the founders and hear it from them. And our worst mistakes have been where we sort of judge from afar rather than finding ways to dive in with real curiosity. What's been your biggest miss and how did it come about, Nick? Yeah, the biggest miss has been in payments. We've ended up making large investments in payments,

• 31:40Speaker 02

  but early on at Ribbit, we had the opportunity to invest in Stone, in Adyen, in Stripe, you know, in a number of companies at a relatively early stage. And we said, we're not doing payments right now. You know, that allowed us to focus on a number of other things. So you can't really run the counterfactual. But again, I think the miss was we had an idea and we wanted to stick to that idea rather than just really go and listen and look where the data would take us. Tell me, what do you know now that you wish you'd known at the start of your career in venture? Oh, there's a lot. I'll give you two. You know, there's the platitude that you have two ears and one mouth and you should use them in proportion. And in the early days, I thought I needed to have an opinion on everything and that's how I could provide value, especially since I was young and I didn't have a track record building a huge company. I felt like I needed to have a strategic view on any topic.

• 32:24Speaker 02

  It simply is not true. And worse, it's counterproductive since no matter how smart you are, like your job as a VC is to cajole and challenge and suggest, but you can't possibly have the answers since you're so much further from the customers than the entrepreneurs. But secondly, if I was giving myself advice, I'd just say buy more Bitcoin.

• 32:41Harry Stebbings?

  Well, I mean, that was actually gonna be my next question is like Ribbit invested Fund One directly into Bitcoin. Talk to me about that process and the decision there.

• 32:48Speaker 02

  Yeah, very early at Ribbit, we were working in the office for Mickey's old company and it was me and Mickey and Wences, Mickey's longtime business partner. And Mickey and Wences just wouldn't shut up about Bitcoin. It was, you know, very fringe and I thought they might be out of their minds. But for two longtime fintech founders from Venezuela and Argentina, it was just mind blowing that there might be a global digital non-sovereign form of money and that you could transact with it fully peer-to-peer without any financial institution in the middle. They'd both lived through hyperinflation. So it wasn't a weird idea to them that the currency of record in your country might not be a reliable store of value. Yeah, I'd worked briefly on Facebook Credits, so I knew some of the problems of trying to build a centralized digital currency. But when Mickey started making noises about buying it in the fund and I said, all right, if we're gonna do that, like, we better

• 33:31Speaker 02

  write a letter to our LPs about what Bitcoin is and why. Yeah, I spent a few weeks on that and myself have been kind of hooked on crypto ever since and convinced that, you know, it's one of the best risk-adjusted bets you can make anywhere in the world. A lot of people have asked, like, how we thought about buying crypto in the funds, which other firms just felt like they couldn't do. You know, at the end of the day, I think you get the investors, you know, the reactions you asked for. Like, we always told our LPs we might do unexpected things, so long as they were great investments. And it turns out Bitcoin was just the first of many to come like that. And we took the risk, but we also, we've been fortunate to have amazing partners from the start who trusted us.

• 34:03Harry Stebbings?

  I mean, I love it and I love the conviction back there. I do want to finish though, Nick, with, you know, the most important probably, which is the founders themselves that you invest in. Most recent publicly announced investment, and why did you say yes and get so excited?

• 34:15Speaker 02

  I'll name a couple because they're both great and very different ends of the spectrum of what we do. Like, we recently backed Adam Nash, who was a longtime, you know, friend and who was the CEO of Wealthfront in the past in his seed round. We don't do many seeds, but we break that rule when we've known a founder for a long time and we're excited about their product vision and just want to work with them. I'm thinking, because I don't think the company has a formal name yet, but it's definitely something to watch. We also recently backed a Mexican company called Kavak, which we're convinced could end up being one of the largest companies ever built out of Latin America. The founder, Carlos, is fantastic and he's assembled a really world-class team with a global ambition. This is a company that we missed for years, just for context, Harry, because we didn't have a thesis on the used auto market, but we see huge upside and very excited to be investing with them now.

• 34:55Harry Stebbings?

  Nick, as you know, I've wanted to see this one for such a long time. So thank you so much for joining me. Stan, for putting up with my wayward questions that were a little bit off schedule.

• 35:02Speaker 02

  Harry, no problem. It's great chatting with you and thanks for having me.

• 35:07Harry Stebbings?

  Love that discussion with Nick and just in awe of all, Mickey, Nick and the team at Ribbit have built with the platform over the last decade, just incredible to see. If you'd like to see more from us, of course, you can on the 20minutevc.com. But before we leave you today. I have to say, I just love using AngelList's fund admin platform to manage my investments. The team and the platform at AngelList takes care of all my back office needs so that I can focus on working with great founders. Leading fund managers have made over 10,000 investments into 6,000 startups by AngelList, all online and all in one place. And with the recently announced Rolling Funds, you can easily find and invest in these top fund managers on angellist.com/rolling. And let's face it, this new world of remote work is here to stay. And so are all of the new headaches that come with running a remote team though, which

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• 36:35Harry Stebbings?

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