20VC: Fintech OG Sheel Mohnot on Lessons from Investing in Flexport and ChipperCash and Missing Robinhood and Chime, Why Overly Large GP Commits are Dangerous, Biggest Mistakes Managers Make with Fund I and Emerging Markets; Which Survive?

Sheel Mohnot is a Co-Founder and General Partner @ Better Tomorrow Ventures, a $225M fund that leads rounds in pre-seed and seed-stage fintech companies globally. Sheel and Jake (his co-founder) invested for many years together before founding BTV and wrote checks into Mercury, Flexport, Ramp, and Hippo Insurance to name a few. As for Sheel, before BTV he ran 500 Fintech for close to 7 years, and before that was a founder, founding two companies, both of which were acquired. If that was not enough, Sheel is also a master at measuring the width of swimming pools and making cameo appearances in music videos with Justin Bieber. In Todays Episode with Sheel Mohnot We Discuss: 1.) Entry into Venture: How Sheel made his way into the world of venture having founded 2 fintech companies? Why did no LPs give Sheel money in the early 500 Fintech days? What were some of his biggest lessons from investing in 100s of companies with 500 Fintech? How did BTV with Jake come together most recently? What are the biggest differences to Sheel of being a fund manager vs being an investor? 2.) The Power Law: How does Sheel define "the power law" in venture capital? What multiple of return would be power law status? Given the size of outcome available with these power law returns, how does Sheel approach portfolio construction? Would it not be best to invest in 100s of companies? Who does Sheel believe has done the indexing approach best? Why? 3.) Venture Capital has Never Been Less Collaborative: Why does Sheel disagree with Harry that venture capital has never been less collaborative? Why now, for the first time, are large multi-stage funds taking single-digit ownership? Does Sheel agree with Harry it is moronic to have "guaranteed pro-rata"? How does Sheel approach re-investment decision-making? When does he pay up vs not? 4.) The Biggest Wins and Misses: What have been Sheel's biggest wins from a cashback and a multiple perspective? How did Sheel miss the chance to invest in both Robinhood and Chime early on? What did he not see? How would he have thought differently with the benefit of hindsight? How have Sheel's biggest hits and misses impacted how he invests today? 5.) Emerging and Frontier Markets: Does Sheel share Harry's concern for the removal of capital from emerging markets? Why does Sheel believe that India, South East Asia and LATAM will be fine? Why does Sheel believe Pakistan and Africa are most in trouble? What advice does Sheel give to his emerging markets founders today? Items Mentioned in Today's Episode: Sheel's Favourite Book: Enders Game

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

• 0:00Harry Stebbings?

  Welcome back to another week in the world of 20VC and our guest today is truly unique. Many talents include being a fintech OG, measuring the width of swimming pools to the closeness of accuracy, and even making cameo appearances in music videos with Justin Bieber and Ariana Grande. Now, I know what you're thinking, there is such a large option pool of VCs that this could be, but I'm so thrilled to welcome Sheel Monet, co-founder and general partner at Better Tomorrow Ventures, a $225 million fund that leads rounds in pre-seed and seed-stage fintech companies globally. Sheel and Jake, his co-founder, invested for many years together before founding BTV and wrote checks into Mercury, Flexport, Ramp and Hippo Insurance, to name a few. As for Sheel, before BTV, he ran 500 fintech for close to seven years,

• 0:44Harry Stebbings?

  and before that was a founder, founding two companies, both of which were acquired. And I want to say a huge thank you to Ariel Zuckerberg and Amit Kumar at Excel. Some fantastic questions, suggestions today. But before we dive into the show today, I want to talk about an incredible tool that I use every single day, Notion. Now, I am the worst for having 50 tabs open and constantly hopping between an endless array of tools. Do you feel me? Are you with me? Well, then Notion came into my life, providing one tool to do it all, with everything from seamless project management to easily organising 20 VCs company information. A fascinating stat on Notion usage, more than 70% of companies who start using Notion stop using two plus other tools. And so Notion can even save you money, given how many other tools it can displace.

• 1:27Harry Stebbings?

  Notion has a worldwide network of millions of users, creating templates, tutorials and new inspiration. The product's getting better and better every single day, and you always have the support you need. Learn more and get started for free at notion.soh. Take the first step toward an organised, happy team today, again at notion.soh. And speaking of foundational infrastructure like Notion there, Angel List has been a key partner for me in managing my investments. I just love using the Angel List platform because it abstracts away all the complexity and operational burden of fund management. Whether you're running SPVs, a traditional venture fund like me, or a rolling fund, Angel List has you covered. I'm also super excited about their new product, Angel List Stack, which is purpose-built for founders. With Angel List Stack, you can create a fundraising Ready startup in just a few clicks.

• 2:12Harry Stebbings?

  Angel List handles your company's incorporation, banking, cap table and fundraising process all in one single place. And this allows founders to focus on building. If you're a founder, you can launch your company at stack.angellist.com/20vc. Whether you are a founder or a funder, you're in great hands with Angel List. And finally, from websites and online stores to marketing tools and analytics. Squarespace is the all in one platform to build a beautiful online presence and run your business. There are three things for me that I just love about Squarespace. First, mobile optimized websites. All websites are optimized for mobile. Content automatically adjusts, so it just is really beautiful on any device. Second, email campaigns. Squarespace makes it super easy to grow and engage your audience with Squarespace email campaigns.

• 2:57Harry Stebbings?

  Say what? No other provider needed? Amazing news. Finally, SEO tools. Squarespace takes the guesswork out of SEO, so you'll get found in search by more people more often. And if that wasn't good enough, go to Squarespace.com/20vc for a free trial. And when you're ready to launch, use the offer code 20vc to save 10% off your first purchase of a website or a domain. Now, I'm so excited to hand over to the one and only Sheil Moen, general partner and co-founder at Better Tomorrow Ventures.

• 3:31Speaker 01

  You have now arrived at your destination.

• 3:34Harry Stebbings?

  Sheil, I am excited for this. I have heard so many good things from snacking options that you love to jumping over pools. This is going to be a unique interview, so thank you so much for joining me today.

• 3:45Speaker 02

  Thank you for having me. And yeah, I've been a listener for so many years, super excited to be on the show.

• 3:50Harry Stebbings?

  That is a very kind way of saying of my aging, but I would love to start today.

• 3:55Speaker 02

  Well, you started when you were 18, so.

• 3:58Harry Stebbings?

  This is true, I'm actually Benjamin Button in disguise. I want to start with a little bit of your context. How did you make your way into the world of venture? And then how did you come to found Better Tomorrow most recently?

• 4:08Speaker 02

  Yeah, so I made my way into venture as a founder. I first joined on with a friend to start a company and then that company got acquired in 2012. Ended up starting a company shortly afterwards. Company got acquired in 2015. At that point, 500 startups who had invested in the first company asked me to join them. Originally, I was just joining them as a mentor and then I found that I loved it, thought, hey, maybe I can make my career doing this. So at 500 startups, I started a fund, 500 fintech. And then over the course of a couple of years, I started interviewing at other funds. And I was interviewing alongside this guy Jake Gibson, who was a friend of mine. He'd started NerdWallet. I knew him well.

• 4:47Speaker 02

  He became an EIR of mine at 500 fintech and we're both interviewing at other funds. Things are going well, but we're talking to each other on the phone all the time. How did your interview go? What did they ask you? What was difficult? What's the next step? So we kind of just became like really close during this time. And it's to some people, it could have been a rivalry. Like we were probably competing for the same jobs. Like there's only going to be one GP that specializes in fintech at a tier one fund, but we took it as a friendly thing. Anytime a fund was interviewing one of us, we'd say, oh, hey, have you considered Jake? Have you considered Sheel? So we ended up getting offers at funds, but decided during this time that he and I got to know each other a lot better. We decided, hey, maybe we should just do our own thing. These funds are not for us.

• 5:30Speaker 02

  Some of them are too bureaucratic. Some of them have different personalities than we like. Let's just do our own thing. That was towards the end of 2019 and we haven't looked back. It's been amazing.

• 5:39Harry Stebbings?

  I mean, you're singing from my hymn sheet, baby. I'm completely unemployable. So I don't think I would have been offered the jobs. I agree with you on starting your own. Thing I want to ask is a couple of things. And I go off schedule. After years of doing it, as you kindly reminded me, I can do what I want. So I'm starting on the acquisition side. I always wonder with the first bit of money that you get, how much of an unlock is it? When you sold both companies, were you in a position where for the first time you were financially independent? And how much of an unlock is that moment actually?

• 6:07Speaker 02

  So yes, absolutely. I did not come from money or anything like that. Didn't have much money before. So it was a big unlock and the first thing I did was started investing in other companies. Literally like within a month of getting the paycheck, started angel investing. And I was moving to San Francisco from Chicago and I thought it would allow me to do a few things. One, get to know people like I could do. 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 my initial thought. In terms of an unlock, I'm a pretty low burn lifestyle guy. One of the things in my past that I think put me on this track is I lived in India. I did this fellowship, lived in India on a dollar a day.

• 6:52Speaker 02

  So very, very low burn lifestyle. I was working in microfinance, decided I would live like my borrowers. And my borrowers lived on a dollar a day, so I decided I would too. I realized that there are very few monetary things that make me happy. I just don't need any material things to be happy. It's been great for me ever since. I think a lot of people get into a trap where they constantly have desire more material things. And I just like am the luckiest guy that don't have that.

• 7:21Harry Stebbings?

  Mate, have you ever been to Laura Piana?

• 7:25Speaker 02

  Yeah, it's beautiful stuff. I just don't care.

• 7:28Harry Stebbings?

  It ain't a dollar a day, baby. I do want to ask though, Jeremy Liu actually from Lightspeed asked me this question once and it was such a good one. It was like, we're all a function of our histories. With that in mind, what parts of your history are you rebelling from first? And what parts of your history are you running towards?

• 7:46Speaker 02

  Good question. So rebelling from, so I'm 40 years old. My grandmother's in from India. I was talking to her about her age and I realized when she was 40 years old, I was already born. She had a grandkid at the age that I am. So very conservative family, people get married very early. There's only a few professions that they want you to be in. My mom, to this day, like I'm a venture capitalist, she wishes I was a doctor. So much so that, actually funny story, until five years ago, five years ago, I think my mom told me, hey, you do so well on tests, you could probably still take the MCAT. The MCAT is the medical college admission test. Why not just find out how well you do?

• 8:26Speaker 02

  She still would prefer today that I go back to medical school and become a doctor because that's the great profession to be in.

• 8:34Harry Stebbings?

  And so you're running from that?

• 8:36Speaker 02

  Am I running from that? I, to a certain extent, maybe. Now, on the other hand, The other side of the question is, what part of your history are you ranked towards? There is this business side to my history as well. Really because they couldn't do anything else, everyone ended up in business in very small form. So they might have run a small store in a village in India. Ultimately, like my grandfather on my mom's side grew from that into many businesses throughout time. So he had a business that made payphones. He had a business that made TVs and he got into a bunch of like small scale manufacturing that I think is fascinating. And I think that part of him trying different businesses out is very much a part of me.

• 9:14Harry Stebbings?

  Can I ask, what did you learn from five hundred? Five hundred is a unique experience to go through. You invested in a lot of companies at five hundred and it was also your first like fund experience.

• 9:23Speaker 02

  Very much, yeah.

• 9:24Harry Stebbings?

  What did you learn?

• 9:25Speaker 02

  Number one, it gave me a start and a fund that I could invest out of. I'd done a bunch of angel investing, but I didn't really know what running a fund entailed. Because as you know, it's very different. There's a lot of other things. So five hundred, I wasn't just investing out of the fund. I started my own fund, distinct LPs, fundraising, all that stuff. Although I should say, it was really hard. I had no track record. There's no reason that anyone should give me money, to be honest. So for the first eighteen months, I was basically funding it out of my own pocket, pretending like I had a fund. And it was most of the money I had at the time. I was selling stock to invest in startups to pretend like I had a fund. But I'd say the things I learned most, you can read about the power law, but actually seeing it for me was a big game changer.

• 10:10Speaker 02

  And you realize actually, even though I invested in seventy plus companies, there's only a handful of them that really matter. The one biggest one represents a five X on the fund. I'd heard about these things, but you don't internalize it for a long time.

• 10:24Harry Stebbings?

  What specific moment did you realize the power of the power law? Which company and what moment?

• 10:29Speaker 02

  So it's actually more recent. I'd say in the past year, there are three companies that each represent multiple turns on the fund. I realized, oh, wow, I had the opportunity to sell secondary late last year. And I realized, wow, I could sell just a small portion of this and return multiples to my LPs. That's a good idea. I think it really informed how I think about investing, which is these smaller exits are not necessarily gonna get you anything. Even like a three, five X return, unfortunately, it just doesn't move the needle that much when you have a hundred X return out there. By the way, all of this is like twenty twenty one crazy valuations and there's a great chance that that doesn't hold anymore.

• 11:13Harry Stebbings?

  Did you take any chips off the table? My biggest regret and my biggest lesson is that I didn't because I believed in Sequoia's hold on to your winners, never sell your winners. And I didn't. And I probably could have taken off about twenty five million dollars for an eight million dollar fund.

• 11:27Speaker 02

  So I have unfortunately the same lesson.

• 11:32Harry Stebbings?

  Fuck.

• 11:34Speaker 02

  So I did take off some, but not as much as I should have. It's a lesson I will keep forever. I should have sold more when I had the chance and it was quite silly not to.

• 11:45Harry Stebbings?

  My lesson is as long as you take real learnings from it, it's okay. I mean, it's painful, but it's okay. We live and we learn. The question then that I have is 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.

• 12:14Speaker 02

  Yeah, I think maybe that makes sense, the index approach. And there are funds that do that. Out here, some capital liquid too, I think are taking the index approach or writing, I think a hundred to five hundred K checks in a lot of companies that they see. I think that can work. I think it worked a lot better. 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 twenty one, twenty twenty one. Now things are probably falling down again in terms of ultimate valuations. 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 a category fintech. So we couldn't have invested in Stripe and Braintree and all the other ones out there. 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.

• 12:58Speaker 02

  So for us, we still have a relatively less concentrated portfolio than others. We have about thirty companies per fund. And the math is roughly, we do ten investments a year, three year fund life. And I think it works really well for us. And in fund one, fifty percent reserves in. One to we have actually sixty percent reserves, so we're reserving more for follow-ons. The reason we're doing that, people have asked, like, why did you make the shift? So what happened was like when we started Fund One, which was only two and a half years ago, Jake and I again had been writing smaller checks. We hadn't been lead investors before. So we asked people, when you're leading investments, like, what happens? And people said, oh, get your ownership upfront. You're not going to be able to follow on into companies.

• 13:41Speaker 02

  And I think our model is a little bit different. We're pretty hands-on. In almost every case, we introduced the founder to their Series A and Series B investor. So I think because of that, we haven't gotten cut out of our pirata yet. One time, we had to take a little bit less than we wanted, but for the most part, we've been getting our pirata. So because of that, we actually need more follow-on, and our companies have had a pretty high follow-on rate. And we want the ability to follow on into our winners and also be able to support companies that need the money.

• 14:12Harry Stebbings?

  Okay, so we have a forty percent initial check. On the new fund sizes, that's sixty million dollars. Thirty companies were doing two million dollars initial check. In a four million round, say, three to four million round, we're gonna get like seven to ten percent ownership. How do you think about the importance of ownership on that first check? And where's the box for you?

• 14:31Speaker 02

  So our minimum is actually ten. So in Fund One, our average first check was a million bucks for about ten percent ownership. So we invested on average at a ten million post in Fund One, and that was twenty twenty, twenty twenty-one. Despite the overall market theoretically being down, seed valuations in fintech haven't really fallen much. Our twenty twenty-two numbers are actually higher. We're investing at a higher valuation than we were then. So maybe in this fund, we average closer to fifteen million posts, but we are shooting for ten to fifteen percent ownership. Right now, we're probably averaging twelve, thirteen percent.

• 15:02Harry Stebbings?

  I'm gonna sound like a total knob, but I'm gonna go for it anyway. Where are you finding these deals? And are these like then C-class deals? I never see

• 15:11Speaker 02

  Great question.

• 15:12Harry Stebbings?

  Under a ten million dollar. I mean, if it's a great team out of a great company, you're four on twenty, day one.

• 15:19Speaker 02

  Let me just tell you from Fund One, I'll just tell you our top four companies, their entry point, where we invested and what they're worth today. Number one, we led a deal at twelve and a half million. It's now worth one point two billion. Number two, our first check was either eight or ten million, and it's now six hundred million. Number three, first investment was at two million. It's now 600 million. And number four, first investor was eight and a half million. It's now at 300 million.

• 15:46Harry Stebbings?

  Again, how were they that priced bluntly? Because

• 15:49Speaker 02

  So there's a few things to note. One is if you fish in the same pond as everyone else, then things may end up getting priced up. The other is there's a difference between a price taker and a price maker. So oftentimes a founder will say like, this is what I want. We say, okay, totally understandable. If you want to work with us, the price is X. Here's a bunch of folks we can connect you to who have 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.

• 16:23Harry Stebbings?

  Tell me, reserves, you mentioned the pro rata's there. I think we're about to see like a tide change in reserves before in like great years. Man, if we did reserves or not, no one cared. Like the big funds would just gobble it up. I think that's going to change. How do you think about first on the reserve allocation side, proactively planning ahead of time for unknowns that are future unknowns? How do you think about that challenge?

• 16:47Speaker 02

  There's so many unknowns. A lot of people think about it on a per company basis. We really think about it on a fund basis. We're constantly looking at the spreadsheet of how much money we have, how much money we've deployed, how much into first checks, follow-ons and subsequent rounds. There's no absolute math that we need to do. We haven't thought about it in that much detail.

• 17:02Harry Stebbings?

  You, is it not simple that if I was you, which I'm not, but we'll play this one anyway. Do you want 150 million for the early? You do, I don't know, 52 million checks and then you've got a load of other costs and stuff baked in.

• 17:15Speaker 02

  Yeah, yeah, yeah.

• 17:17Harry Stebbings?

  And then you've got the 75 million in the opportunity fund, double down on anything there. So initial checks is from the early and then reserves is for the absolute all-stars. And then bluntly, I believe that the pro rata for your middle tier is never actually a great thing anyway. The messy middle pro rata, you're not going to regret not doing it. How do you feel about that actually? And also a lot of funds they say, oh, we always do our pro rata. I'm like, well, that's moronic.

• 17:44Speaker 02

  Yeah, we definitely don't always do our parada. We are choosy, but also there's a lot of companies which you want to turn over another card. They've done a good job. They're a great team. They haven't quite cracked it yet. Let's turn over another card and they need a little bit more money. We've been there on that side of things and been there to turn over that card.

• 18:02Harry Stebbings?

  What do you do when you don't want to turn over another card and you have just lost faith?

• 18:06Speaker 02

  Yeah, it happens a lot. I'd say we're always supportive of the companies and they'll probably get disproportionate amount of our time. The ones that are in trouble that we don't want to support with our money, but we're not going to continue to support companies that we don't believe in.

• 18:19Harry Stebbings?

  Agree. In terms of like getting the ownerships that we spoke about there, a little bit is about collaboration between different players in market. I specifically think that venture has never been quite so sharp elbowed and has never been as uncollaborative. Do you agree with me and how do you think about where we are in the sliding scale of collaboration between venture funds?

• 18:39Speaker 02

  I don't agree with you, actually. I think.

• 18:41Harry Stebbings?

  You're wrong.

• 18:43Speaker 02

  I'll tell you a simple thing to prove it. A lot of the like multi-stage funds, historically leading series As, they used to have an ownership threshold of 20% minimum. And now they have a lower ownership threshold, 15. In part, it's rounds can be less dilutive. In other part, though, they make space for the earlier guys because the folks I introduce deals to, they know they can't cut me out of my parada because they're not going to see the next deal. I think we're less sharp elbowed than we used to be. There was a time when seed rounds were a bunch of angels coming together and cobbling together a 500K round. That is no longer with the emergence of seed funds, but in almost every company we've invested in, there are other investors alongside us.

• 19:24Speaker 02

  And we love working with these guys, folks who write one to 500K checks and then a bunch of other angels and sometimes a co-lead. We're very collaborative. Obviously, there are some funds who are lead only, no co-lead that we can't work with, but we love working with other funds.

• 19:39Harry Stebbings?

  I think bluntly, the reduction in ownership requirements is because of founders wanting less dilution and them having the power to do that. So I think that's why the rounds are 20%, not 25%. And then I think we've seen the rising importance and power of operator angels, getting a Claire Hughes Johnson, getting an Emily Choi from Coinbase can be fantastically needle moving for your business. And so they make more room. And then you've actually got this emergent class of Josh Buckley's, Lucky Grooms, annoying people for funds. Who actually have real money. We're not like Better Tomorrow Ventures with teams, we're different in that way. I think that's annoying for the funds and it's much less.

• 20:20Speaker 02

  Are you saying collaboration at later stages or at seed?

• 20:22Harry Stebbings?

  I'm saying seed and A.

• 20:24Speaker 02

  I think A is the toughest round to get multiple people into because there's typically a lead investor, typically a single one. Although actually in our last few deals, even at A, there have been co-leads. And these are like great funds who chose to take 8% ownership each or 9% ownership each. I think it's happening and that never used to happen. You wouldn't have like a tier one fund taking 8% ownership in a series A, but that's happening.

• 20:49Harry Stebbings?

  I get you totally. And I think this fucks me off, like they should be taking 8% because if you are one of the big multi-stage funds doing a seed, be more collaborative, do your 8%. You can jump on the A and get another 10% there. Let people in, be more collaborative. In terms of like growing ownership, do you have the chance to actually grow ownership with round? I was always taught that you would be able to grow ownership. You might protect it, but you can't grow it. Do you find?

• 21:14Speaker 02

  No, and we have, yeah. In some of our best companies, we've grown ownership over time. The one that comes to mind, we started it at around 10 and now we have 13. So over time, we've grown. Another one, we did our first investment that was like one at 10. And then we did another investment months later at 18. And then in the series A that got done recently, we've maintained from that. But like we grew between our first check and second check.

• 21:42Harry Stebbings?

  Can I ask, one of my biggest mistakes 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 love the company, but I don't wanna do my prorata at that price. When you hear that, how do you think about pricing for reinvestments? And are there any times where it stands out to you?

• 22:03Speaker 02

  Yeah, so this is a great one. Our strategy is to be very sensitive on entry price. And like I said, we will negotiate hard on entry price, very hard, and get the price we want and the founders we wanna work with. But after that, we are fully committed to the company and we will do whatever the founder wants and we will help them raise the best round for them. It may not be the highest price, but if they choose the highest price, we're in. And if we believe in that founder, we will do our full prorata. Now, what has happened is particularly second half of last year, all of the series As in our portfolio, we were doing them at the price that you know we invest at, and then they were getting done at the hundred to hundred and twenty five range,

• 22:45Speaker 02

  which was just bonkers. But we still participated in those rounds because we said, hey, we believe in this founder. We've got pretty good ownership upfront. We can support them in this next round. And supporting them is introducing them to everyone, guiding them through the process and supporting them financially as well.

• 23:03Harry Stebbings?

  Have there been anywhere you haven't done it and you should have done it and it really stands out to you?

• 23:08Speaker 02

  I think any of these companies that have raised a bunch of money way ahead of the traction, it's too early to say. You can't say, oh, I shouldn't have invested every cent in it because it's too early to know whether it's gonna work. That's another learning from being in venture now for six and a half, seven years. The ones that seem like they're winning early may not be the ones that actually ultimately are winning.

• 23:24Harry Stebbings?

  Well, you mentioned kind of really seeing the power law take effect early. I do wanna get into like the hits. I think people are wrong when they say you don't learn from success. When you look at like your biggest hit, what was your biggest hit been from a cash back perspective and then from a multiple perspective? And what have been some learnings from it?

• 23:41Speaker 02

  Yeah, so personally, my biggest hit from a cash back perspective is Flexport. When I invested, it was like fifteen cents a share and I sold at twenty five dollars and forty cents a share. From the fund, my biggest was a company, actually I'm not allowed to name, but it was not what you would think of as Being success, the company exited for two hundred and thirty million dollars, not a success these days by any venture standard. But I had invested at a two and a half million dollar valuation. The company didn't take much dilution. So for me, it was an outstanding win. Investing from two and a half to two hundred and thirty million quickly and I was able to show DPI immediately in my fund.

• 24:21Speaker 02

  So it was a huge win for me. That was a good one. And then unrealized, I think my biggest is a company called Chipper Cash. 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.

• 24:35Harry Stebbings?

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

• 24:41Speaker 02

  Yeah, I think the company I didn't name, the learning was if you're a capital efficient business, 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 and thirty million dollar outcome, it actually returned more money than another exit that I had invested 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 two hundred and thirty. 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, today fifty billion dollar enterprise value. There's twenty five billion dollars of venture capital money that went into that company.

• 25:23Speaker 02

  And if you contrast that with a bunch of the SaaS businesses that are very capital efficient, it's a way better outcome. You see that headline number valuation, but actually I learned from this experience, actually it doesn't matter. Like I had a great fund return on this, what many people would call a shitty outcome, like a two hundred and thirty million dollar outcome.

• 25:40Harry Stebbings?

  And listen, I totally agree. I always think of Viva Systems with Peter Gassner, which is obviously now like

• 25:44Speaker 02

  Totally.

• 25:45Harry Stebbings?

  Million dollar company with thirty million total raise, they're insane. Okay, we also have misses. I have some misses.

• 25:52Speaker 02

  Oh, yeah. A lot of them.

• 25:55Harry Stebbings?

  So hit me, what are the biggest misses for you one? And what did you learn from those?

• 26:00Speaker 02

  I think in fintech, there's this wave of companies that came up, the most valuable recently, Robin Hood obviously has fallen in the public markets quite substantially, but I saw it very early on. And I thought, what's the difference? There had been other free trading apps before. I also just like frankly, wasn't a huge believer in retail trading. So obviously I was just completely wrong. But I think what I'd missed is the free trading apps of the past were very different than Robin Hood. Robin Hood was mobile first and it was actually bringing a new class of investors in that these like Free Trade and Zekko and others had not done. So I think that was a huge miss. I think Chime was a big miss. At 500, we'd invested in a company called Simple and Simple, it was a nice exit.

• 26:43Speaker 02

  It was in the low hundred millions and we thought like they had grown a huge waitlist and then people hadn't gotten off the waitlist. So we thought it's just tough to make neo banking work in the US. While Chime at 25 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. And I think what I missed was like they did things differently. They had a few different things and I think the biggest miss for me was you look at a model, you've invested in a model that didn't work and you have the idea that it can't work. And actually, no, that's not true. It's just like the founder didn't do the right things to make it work. Could be what's happening.

• 27:18Harry Stebbings?

  That was going to be my question because I have the same challenge where you look at, I don't know, healthcare and you'd invested there before it sucked because of selling to a lot of providers, sales cycles, whatever the problems may be. And then you say all healthcare sucks and actually it's not going to work. How do you retain mental plasticity that actually, yeah, Simple had these issues, but actually Chime could be different or yeah, Free Trade might have not unlocked this new market segment. But Robin, how do you retain mental plasticity?

• 27:44Speaker 02

  You know, it's hard. It's something I still struggle with, but there have been times when I invested in the same model, once it didn't work. And then I felt like I found the right founder and then invested in that company.

• 27:56Harry Stebbings?

  I get you. We heard about some of the great wins. When we think about 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?

• 28:10Speaker 02

  Number one is not being price disciplined. A lot of the funds started in the last couple of years. Folks have only seen an upmarket. Pretty much anything you invested in the last few years, someone else would come along and invest at a higher price. And then Series As were getting done in the hundreds of a hundred million dollars. 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. You can't invest in a seed company at a fifty million dollar valuation and expect to make money. If you're doing that, it's just going to be really tough. I see a lot of folks doing that today. I think the other is thinking through portfolio construction, reserve strategy, and how to invest more in your winners.

• 28:50Harry Stebbings?

  When you look back at BTV Fund One, what would you say your biggest mistakes or regret was in the deployment? Very candidly on mine, I'd probably say, I don't think our ownership levels are high enough. I think we're in great deals, but I don't think our ownership levels are where they need to be.

• 29:04Speaker 02

  I don't think our ownership levels are where they need to be. I think our biggest mistake is not buying enough of the companies. We really put in a lot of time with founders and founders consistently tell us that we're their first call. And some founders have said, I wish you owned more of this company. I wish I didn't have those other folks on my cap table at seed. I wish I'd given you more. So I wish we owned more. We average ten percent and in this fund, we're hoping to average closer to fifteen.

• 29:30Harry Stebbings?

  I do want to ask one final thing and then we're going to move into something where I have a lot of thoughts with this geography.

• 29:35Speaker 02

  Oh, yes.

• 29:37Harry Stebbings?

  Final one is like overly large GP commits. How do you feel about these overly large GP commits?

• 29:43Speaker 02

  So I mentioned in five hundred fintech, I had to fake like I had a fund because for the first eighteen months, zero people would give me money, zero. So I invested in my own capital, which is not a huge corpus, but I did the first almost thirty investments from my own pocket. There was a pretty big chunk of my net worth. So then, as I think about it now, if a huge chunk of your net worth is in the fund, overly large GP commit, then you do things differently like. Oh, I want to buy a house. Maybe I should take secondary in this company, even though that's not what's right for the fund. You could make those mistakes. So when people encourage overly large GP commits, I just think about that. You might make choices based on your life that you should not be doing, but aren't in the best interest of the fund. And I think nobody's talking about that.

• 30:24Harry Stebbings?

  What do you think is overly large?

• 30:26Speaker 02

  I think it really should be some portion of your net worth. And maybe it should be up to 10% of your net worth should be in a fund. And that's a significant portion. You're not going to want to pull out like 3% of your net worth for something. So I think 10% of your net worth is a good guide.

• 30:40Harry Stebbings?

  I also find it moronically because you insist on a certain bar. The managers can't do it out of their own personal capital. And so then they pay for it out of fees. And then that means that they are fundamentally capped from reinvesting in their own teams, platforms, businesses, and prevent quality in the funds. And it's like, well, well done. You got 2%. But it's actually coming out of the fees anyway, and it just puts a barrier on what we can do.

• 31:02Speaker 02

  It's true. It's true.

• 31:04Harry Stebbings?

  Anyway, another area, geography. As you said, like you fish in different ponds and I love it. I fished in different ponds too. We've got Australia, we've got Pakistan, we've got Latin America. I'm worried. I am worried, Sheel. I think in the macro, we're going to see complete retrenchment away from emerging markets that we mentioned there. Southeast Asia, Indonesia included. Are you worried and how do you feel looking at emerging markets moving forward into this environment?

• 31:28Speaker 02

  I'd agree with you on the broad overall sentiment. Totally agree. In the last couple of years, it was risk on. And you go out really far on the risk curve when there's a lot of capital. So you invest in these frontier markets. And then as we've shifted, interest rates are higher. As interest rates are higher, you come closer to home. And that's what we're seeing today. So I agree with you, but I'll, I'll put some nuance on it. I think there are markets now that have a homegrown ecosystem. India is one. There's so much capital in India by itself and they have great local funds. There's Latin America, which now also has great local funds. They can support you from beginning to end, from seed through deep. So Latin America and India have these funds and India is deploying into Southeast Asia.

• 32:13Speaker 02

  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 have been successful companies. So I think people look at those markets and say, last year they were looking at those markets and saying, I gotta be in this market. Today they're looking at those markets and saying, oh shit, I've never even been to Pakistan. I cannot write a large check into this market. I don't know what's going on. So I think there's going to be some challenges in those markets. I think there are other fantastic companies in these markets that are probably totally shielded from it. I mentioned Chipper Cash is in our portfolio. They're doing super well. They're relatively shielded. I do think that incremental dollar is way harder to raise. There could be challenges ahead and running a business in the market is challenging. But I think there are some companies that'll do do fine.

• 32:58Speaker 02

  Overall, it's just a lot more challenging market. I agree with you.

• 33:01Harry Stebbings?

  This is where I've developed as an interviewer. I used to just like, yes. And now I'm like, I don't know, I disagree. I disagree on LatAm. I don't know if we have the lifecycle funding in LatAm that we think we do. You've got Kazakh who are amazing and fantastic, but they will tap out at a certain level. They they need help. I mean, they can't run out of the whole ecosystem. And then you've got great local funds, Monarchies, Canary.

• 33:24Speaker 02

  Yeah, yeah, yeah.

• 33:25Harry Stebbings?

  But they're not doing growth capital. And then you've got General Atlantic, sure. But I mean, that's split between, you know, doing a billion in China and a hundred billion in Asia and doing everything that General Atlantic does. NASP is sure, but again, it's pretty split. I don't see someone actually carrying the big baton with weight.

• 33:45Speaker 02

  I think you're right on LatAm more of an extent, especially SoftBank pulling out of the market is a big hole. I do think overall, though, there's still appetite from US investors to invest down there. New Bank was obviously a tremendous success, even in this market is doing fine as a public company. I think because there has been success, there will be more capital. But I agree with you, there's going to be less capital than there was before.

• 34:06Harry Stebbings?

  So how do you advise your companies in emerging markets?

• 34:09Speaker 02

  More than ever, and I hate to say this, but it's about getting a free cash flow positive as soon as possible. What's annoying is for the last couple of years, that was not the guidance. People built these companies in a way that was somewhat unsustainable and you have to make a shift on a dime. We actually have companies that have been able to do it. And like, we have a company that went from burning seven million dollars a month at the beginning of this year to probably being free cash flow positive in the next couple of months.

• 34:36Harry Stebbings?

  I think the thing that people also don't anticipate, which is so true, is how much a mindset of aggression and steroid growth is built into a team. And when you suddenly say free cash flow positive tomorrow, please. It takes a very significant lag in time for the team to embrace the mindset shift of all risk on versus risk off.

• 34:58Speaker 02

  A hundred percent agree. Some founders just are so fucking good at it. Some founders just are able to do it, make the changes they need to make very quickly.

• 35:05Harry Stebbings?

  What's the most memorable first founder meeting you've ever had?

• 35:08Speaker 02

  Yeah, I think the most compelling first pitch I had was Ryan Peterson at Flexport. He just like knows the industry so well. Actually, my, my favorite founders all love learning and they love learning something and then teaching me about it. So he taught me a lot about the freight industry. Another founder that comes to mind is E. Tai at Unit. He loves learning about the banking industry and then just sharing tidbits that I find so fascinating. I could see as he was learning, he was teaching me at the same time, and I think that's a great trait for a founder.

• 35:39Harry Stebbings?

  I thought he was fantastic. I do want to move into my favorite, which is a quick firearm, my friend. So I say, and you ready to rock and roll?

• 35:46Speaker 02

  Let's do it.

• 35:47Harry Stebbings?

  Listen, you're going on holiday next week. What's the reading material and what's the favorite book?

• 35:52Speaker 02

  Okay, this is a embarrassing confession. I don't read books. I haven't read a book in a dozen years. I find that books are too long and full of fluff. I get a lot more out of reading articles, long form articles or listening to podcasts. So I don't read books. My favorite book from the past, though, from when I was a kid, is a book called Ender's Game. Very famous science fiction book and I just love that it was written forty years ago, but has So many predictions on the future and it was just like such an entertaining read. I love it. I had read the whole series. So I absolutely love that book. What's your biggest strength and what's your biggest weakness, Sheel? I think my biggest strength is I'm willing to try anything, not afraid of failure. Sort of the other side of the coin is that's probably my biggest weakness too. It's like I'm willing to try things that are stupid.

• 36:37Speaker 02

  Has there been any time when that's really bitten you? Yeah, I mean, plenty of times. You made the joke about jumping over pools. It's like a stupid thing to do. 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. It doesn't always work out. I've tried businesses that were stupid in hindsight. An example is, I don't even like vitamins, but like a friend of mine loved vitamins. So I tried building this like automated vitamin company where you had a quiz that would ask you questions. And we had a machine that would spit vitamins customized to you into it. I didn't give a shit about vitamins. So like, why did I start this company? I was just throwing spaghetti to walls and seeing what stuck, but I've gotten a little bit more focused over time. What's the hardest element of your role with BTV today?

• 37:22Speaker 02

  Saying no to founders, without question, is just so hard. People are coming at you with their dreams, their aspirations. In saying no, they take it as a, you don't believe in my dream, my baby's ugly. It's so hard to do and I struggle with every single past message. I try to be thoughtful and helpful as I can, but I don't always get it right. What would you most like to change in the world of venture today? I think there probably still aren't enough people solving hard problems. And even within fintech, there's so many things that I think about on a daily basis, like why is this so fucking hard? And it requires a major leap to change this, but I think it's changeable. So I think there aren't enough people solving enough hard problems and we should be funding those things. You can take one luxury on a desert island. What do you take, Sheel?

• 38:06Speaker 02

  I don't need any luxuries. So I would take a box of pizza. Love pizza. What's your favorite pizza? I don't have one. In San Francisco, there's a place called The Mill. It's my favorite here. In New York, believe it or not, I love a lot of dollar slice places. Does pineapple belong on pizza? Absolutely not. Disgusting. Does chocolate belong in the fridge? No, gets all white and stuff. You don't need that.

• 38:28Harry Stebbings?

  We ask the important questions here, just in case.

• 38:30Speaker 02

  I don't like any sweet in my main entree. Cranberries and salads, I don't want it. Peaches, I don't want any of that stuff. I like my salty stuff to be salty.

• 38:38Harry Stebbings?

  Totally with you. Hate it.

• 38:39Speaker 02

  Yes. Figs on pizza, absolutely disgusting.

• 38:42Harry Stebbings?

  And I do like chocolate in the fridge. Oh yeah. It's what I ask on like a date, which is like, hey, the other thing is I say on dates and it's probably why I'm single, but I said, you know, most dates are fraught with this hidden posterior, like I'm brilliant in all these ways. I'm like, I'm fucked up in all of these ways. Which one would you like to dig into first? And then by the way, does chocolate belong in the fridge? And how they respond to the how fucked up I am, that doesn't matter. But the chocolate in the fridge, this is a deal breaker.

• 39:08Speaker 02

  What's the math on that one?

• 39:09Harry Stebbings?

  Oh, actually, I'm arguing against myself. Chocolate, like scientifically loses flavour when it's in the fridge.

• 39:14Speaker 02

  Exactly. Yeah, exactly.

• 39:15Harry Stebbings?

  I didn't ask for your opinion, Sheel.

• 39:17Speaker 02

  You did. You did ask for my opinion.

• 39:20Harry Stebbings?

  So it does, it loses flavour, genuinely, but I like the crunch. It's like, it doesn't melt in the mouth as much. Texture.

• 39:27Speaker 02

  I like the crunch aspect. I also, I need the flavour. And the fruitiness of chocolate is so wonderful.

• 39:32Harry Stebbings?

  My friend, I've got one more question for you, and this is a big one, okay? What do the next five years hold for you and for BTV? Paint that picture. With 2027, you're 45.

• 39:41Speaker 02

  Yeah.

• 39:42Harry Stebbings?

  Where are we now?

• 39:43Speaker 02

  Our goal with BTV was always to build the fund that we wish we had as founders. I think in the next five years, we want to be recognised as such, as the number one place to go. If you're building a fintech startup, you should go to BTV. No matter where you are in the world, they should be your top choice. We're not there yet. That's where we want to go. And we want to build a team around us that helps us get there.

• 40:03Harry Stebbings?

  On the personal side, where are you going?

• 40:04Speaker 02

  Where am I going personally? I think more of the same. Life is a fun adventure. I love living it. I love exploring more places and hope to continue to do so. Perhaps there's kids in my future in the next five years, perhaps not, but I would like that, but you can't predict, especially at this age.

• 40:21Harry Stebbings?

  Sheel, I've absolutely loved doing this. I'm glad that I was such a professional interviewer for this incredible, so professional. I loved it. Thank you so much, man.

• 40:31Speaker 02

  Thank you. I loved it too. It was really fun.

• 40:35Harry Stebbings?

  Hands down, that was one of the most fun shows I've ever done. I did not expect to go into pineapples on pizzas, chocolate in fridge. What a great discussion with Sheel, and I could not be more excited for all that he and Jacob building with BTV. So a huge thanks to him for joining me today. But before we leave you today, I want to talk about an incredible tool that I use every single day, Notion. Now, I am the worst for having 50 tabs open and constantly hopping between an endless array of tools. Do you feel me? Are you with me? Well, then Notion came into my life, providing one tool to do it all, with everything from seamless project management to easily organising 20VC's company information. A fascinating stat on Notion usage: more than 70% of companies who start using Notion stop using two plus other tools. And so Notion can even save you money, given how

• 41:20Harry Stebbings?

  many other tools it can displace. Notion has a worldwide network of millions of users, creating templates, tutorials, and new inspiration. The product's getting better and better every single day, and you always have the support you need. Learn more and get started for free at notion.soh. Take the first step toward an organised, happy team today, again at notion.soh. And speaking of foundational infrastructure like Notion there, Angel List has been a key partner for me in managing my investments. I just love using the Angel List platform, because it abstracts away all the complexity and operational burden of fund management. Whether you're running SPVs, a traditional venture fund like me, or a rolling fund, Angel List has you covered. I'm also super excited about their new product, Angel List Stack, which is purpose-built for founders. With Angel List Stack, you can create a fundraising-ready

• 42:05Harry Stebbings?

  startup in just a few clicks. Angel List handles your company's incorporation, banking, cap table, and fundraising process, all in one single place. And this allows founders to focus on building. If you're a founder, you can launch your company at stack.angellist.com/20vc. Whether you're a founder or a funder, you're in great hands with Angel List. And finally, from websites and online stores, to marketing tools and analytics, Squarespace is the all-in-one platform to build a beautiful online presence and run your business. There are three things for me that I just love about Squarespace. First, mobile-optimised websites. All websites are optimised for mobile. Content automatically adjusts. So it just is really beautiful. On any device. Second, email campaigns.

• 42:47Harry Stebbings?

  Squarespace makes it super easy to grow and engage your audience with Squarespace email campaigns. Say what? No other provider needed? Amazing news. Finally, SEO tools. Squarespace takes the guesswork out of SEO, so you'll get found in search by more people more often. And if that wasn't good enough, go to Squarespace.com/20vc for a free trial. And when you're ready to launch, use the offer code 20vc to save 10% off your first purchase of a website or domain. As always, I so appreciate all your support and we have an incredible 20 sales episode on Wednesday. Do not miss that and I so appreciate the support.