20VC: Index Ventures Partner, Mark Goldberg on The Questions Founders Must Ask A Multi-Stage Fund Before Taking Their Money At Seed, Why Most Angels Will Lose Their Money & Why We Will See Our First $100Bn Neo-Bank Shortly

Mark Goldberg is a Partner @ Index Ventures, one of the leading venture firms of the last decade with a portfolio including the likes of Dropbox, Revolut, Supercell, Plaid and Transferwise to name a few. As for Mark, since joining Index he has largely specialised on all things financial services and sits on the board of Plaid, Nova Credit, Intercom, Pilot and more incredible companies. Prior to Index, Mark spent 3 years in BizOps at Dropbox where the company increased tenfold during his time there. In Today’s Episode You Will Learn: 1.) How Mark made his way into the world of venture with Index having spent 3 years at Dropbox during a transformational time for the company? What were Mark's biggest takeaways from seeing the growth cycle at Dropbox? How did that impact his investing mindset with Index? 2.) Why does Mark believe that venture as an asset class is commoditising? What does Mark believe the best funds will have to do to stay ahead? How does Mark build relationships of trust and authenticity so early with founders? What works? What does not? What is the right way to deliver direct and tough feedback to founders? 3.) How does Mark feel about multi-stage funds re-entering seed investing again? What are the right questions seed founders should ask multi-stage funds when determining whether to take their money? What does Mark believe it takes to be competitive and win the very best of deals? How is the Founder <> VC dynamic changing with capital supply? 4.) Why does Mark believe that most angels are going to lose their money? What does Mark wish all angels knew when they started? How does Mark feel about the rise of founders investing alongside operating? What are the pros? What are the cons? How does Mark feel about the rise of scout funds? Where is there place in the ecosystem? 5.) We are seeing unparalleled levels of activity in fintech, is this a boom or are we at the start of a fundamental shift in the landscape? Why does Mark believe we will soon see our first $100Bn neo-bank? Why does Mark believe we will see a strong rise in the consolidatory environment for fintech moving forward? Items Mentioned In Today’s Show: Mark’s Fave Book: Barbarian Days: A Surfing Life As always you can follow Harry, The Twenty Minute VC and Mark on Twitter here! Likewise, you can follow Harry on Instagram here for mojito madness and all things 20VC.

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 the 20 Minute VC with me, Harry Stebbings. It's gonna be great to show you behind the scenes of how the show gets made. You can do that on Instagram at HStebbings1996 with two Bs. But to the episode today, and my word, I just have so much fun doing this one. It was actually quite hard to keep a serious face and tone, but it was such a blast. And I'm so delighted to welcome a friend in the form of Mark Goldberg, partner at Index Ventures, one of the leading venture firms of the last decade with a portfolio including the likes of Dropbox, Revolut, Supercell, Plaid, Adyen and TransferWise, to name a few, and all $5 billion-plus companies, I hasten to add. As for Mark, since joining Index, he's largely specialised on all things financial services and he sits on the board of Plaid, Nova Credit, Intercom, Pilot and more incredible companies. And prior to Index, Mark spent three years in biz ops at Dropbox,

• 0:45Harry Stebbings?

  where the company increased tenfold during his time there. I'd also want to say a huge thank you to Adam Nelson, Wassim McPilot and Mike Volpe for some fantastic questions and suggestions today. A heavy amount of mojitos on me to thank you for that. Before we move into the show today, though, I wanted to take a moment to mention HelloSign, a great example of a company that found success in building a product focused on user experience. HelloSign is an effortless e-signature solution used by millions to securely send and request legally valid digital signatures and agreements. They raised a total of $16 million in funding and recently got acquired by Dropbox for an impressive $230 million. Check out hellosign.com/20vc to join the thousands of companies and founders, including me, who value fast, secure and simple e-signatures. It really is a must.

• 1:30Harry Stebbings?

  And speaking of amazing products there with HelloSign, the team over at Pendo, the product cloud company, just launched a free product performance benchmarks microsite, where you can see how your product stands up against your peers. And they gave me this incredible sneak preview of it and my reaction was bleep me. I know so many founders who are desperate to compare their products to competitors and that's what Pendo has done. They've analysed more than 1,000 software products and created benchmarks for startups, scale-ups and enterprises across five different categories. It's all presented with some pretty slick visualisations and you should check it out today at pendo.io/products-benchmarks. That's pendo.io/products-benchmarks.

• 2:10Harry Stebbings?

  And finally, creating great products is why you start companies, not to track financial statements or make cash flow spreadsheets. However, now we have Pilot and Pilot for bookkeeping gives you back the freedom to focus on your business and your product. Every month, your dedicated account manager will send you an accurate, detailed financial report and Pilot does accrual basis bookkeeping in QuickBooks Online. So you're never locked into a proprietary platform. Plus, you'll work with the same person each month. So you can really rely on them to become an expert in your business. And with Pilot, you can say goodbye to exporting CSV files and emailing attachments to a bookkeeper you can never get a hold of. Get your company's books in order today and get your time back. Check them out today at pilot.com/20vc. You've heard quite enough

• 2:53Harry Stebbings?

  of these dulcet British tones, so now I'm very excited to hand over to a dear friend, Mark Goldberg, partner at Index Ventures.

• 3:04Speaker 01

  You have now arrived at your destination.

• 3:08Harry Stebbings?

  Mark, we've known each other for a while. I've heard so many good things from Mike Volpe and from the whole team at Index and Waseem at Pilot. I mean, the list really does go on. But thank you so much for joining me today, Mark.

• 3:17Speaker 02

  Harry, thank you so much for having me. It's a real pleasure to be on the show. I'm a huge fan.

• 3:20Harry Stebbings?

  That is so kind of you. But I do want to kick off today with a little on you, Mark. So tell me, we both know it's a slightly weird and wonderful world, but how did you make your way into the world of venture and come to be a partner at Index today?

• 3:30Speaker 02

  Really, by accident. The way that I got to Index was I had been at Dropbox before this. I was running a business operations team and I had seen the company go from about 200 to 1500 people. I picked my head up looking for the next thing. And what I thought I wanted to do was to do another operating role. So actually, the way that I started looking for kind of the next generation of up and coming companies was to talk to some of the smartest VCs I knew, which led me to Index, who had actually been an investor in Dropbox, a large investor. When I spent more time with the team, I just kind of fell in love with a group of people working here. And I knew that at some point I wanted to get into investing, wasn't sure when, but ultimately decided not to do another operating role and to jump right into venture. That was just over four years ago and it's been a really great book for me.

• 4:14Harry Stebbings?

  It was the good looks of Martin Minier. I don't blame you at all. That man is one incredible adonis, but I do wanna dive into.

• 4:21Speaker 02

  He has the best beard at Index and I would say probably in the VC community.

• 4:25Harry Stebbings?

  Oh, it's magnificent. But before we spend the whole episode on Martin's beard, I do wanna touch on the element of Dropbox there because I spoke to your partner Mike Volby before and he asked a great question. He said, what were your biggest takeaways from seeing the growth cycle at Dropbox? And I guess really what were the learnings and how it impacted your mindset?

• 4:41Speaker 02

  So I learned a huge amount from my time at Dropbox. As I said earlier, it was a period of extreme hypergrowth. So I have a lot of lessons and it's informed how I think about investing now on this side of the world. But the number one thing I learned was the importance of hiring. And just to give you an anecdote, when I joined, I had had, I think, like an eight-week interview process. I finally started and my boss at the time, who's now the CFO of Dropbox, Ajay Bashi, took me aside and said, you're gonna spend eighty percent of your time the next six months hiring. And I was furious. It sounded crazy to me. All I wanted to do, there was so much work, was to put my head down and do the job I'd been hired for. And I was just totally wrong. The right decision when you're in hypergrowth like that is to make the investment in people.

• 5:25Speaker 02

  And it's so funny looking back because we hired tens of people into the organization together and those people all created wonderful talent pyramids beneath them. So it was one of those things where it was counterintuitive at the time, but absolutely the right thing to do for the company. And it's something I think a lot about now as an investor.

• 5:42Harry Stebbings?

  Absolutely. I think people forget about that kind of cascading waterfall of quality talent hiring that happens when you bring in one great person, then they bring in three more. So I totally agree with you and that's an amazing lesson to learn. I do wanna start today on the venture landscape, obviously given the name of the show. But we've got more money than ever, more hundred million dollar rounds than ever, most importantly, more funds than ever. And when we spoke before and I asked for some suggestions, you said venture is commoditizing and the best funds will have to innovate to stay ahead. How can I not double click on this one, Mark? Why is venture itself commoditizing first?

• 6:12Speaker 02

  I think what people get wrong about VC is it's a highly commoditized product. It's money. And there's more of it now than ever, as you just mentioned. There's larger funds, there's new funds, there's hedge funds coming into the world, there's corporate venture. Funds, it is a phenomenal time to be a founder because there is so much money out there. So when I said that the industry is commoditizing, I think what's happening is there's just more money coming in. And the onus on great VC funds is to figure out how to do more than just offer that product.

• 6:40Harry Stebbings?

  Okay, so if we dive into kind of what they can do in terms of the more, how do you think about innovations on the venture model? And I guess really what it takes to stay ahead with the influx of capital that we've seen over the last years.

• 6:51Speaker 02

  Yeah, well, I think we've seen this evolution over the last decade and a lot of our peers in the industry have taken different strategies. I mean, and recent has just done a phenomenal job with their services organization. Some folks focus on sector expertise, I think of maybe like a Ribbit in fintech who I work closely with and think highly of. Other people rely on data, maybe that's Co2 or Sigma Fire. I mean, what I think is going to be the differentiator is relationships. And I think anyone in your audience who's a founder and who has pitched a VC knows when they are connecting with an investor. And when that spark is there, and probably more important, knows when it's not there. And there isn't that sort of shared passion and excitement when the investor is all into the idea. And to me, that is ultimately what's going to differentiate because when you've got that, it's just foundation of trust.

• 7:36Speaker 02

  And then there's just the opportunity to become more than just money. You can become a board member, a cheerleader, a critic, but it's all underpinned by this foundation of trust. And so there's a lot of different ways to differentiate, but the strategy we're pursuing here is just trying to build those sort of kind of deep relationships from the beginning of founders.

• 7:52Harry Stebbings?

  That's super interesting. The biggest thing I've learned from working with my partner Fred is really how to enhance the founder experience. And he always says like, project the relationship forward to a case where you're not being pitched by them, but you're actually working alongside them to discuss evolution of CAC. How we think about channel partnerships, whatever that discussion may be, but in the very first meeting. I guess my question is, how do you think about how one and how we as a VC can enhance the founder experience from the very first meeting?

• 8:16Speaker 02

  I think the way that you can enhance the experience is to be direct and upfront from the very beginning. And that's really what sets that foundation of there is no mystique beyond the term sheet. What you see is what you get from the very beginning. Ultimately, and as a multi-stage investor, a lot of times our relationships with founders go for 10 plus years. And so if you're trying to be someone either as an investor or as an entrepreneur that is not authentic to who you are, you're doing a great disservice to the relationship. So one of the things we think a lot about here is we're going to do everything we can to win a great deal and to work with a great entrepreneur, but we're never going to lose that north star of being authentic to who we are.

• 8:52Harry Stebbings?

  Absolutely. In terms of that authenticity, really to win deals, you have to show that authenticity, but also be super competitive. And when I spoke to Adam Nelson, a mutual friend of ours before the show, he spoke about your rise through the ranks with Index, largely being through your ability to win super competitive deals. He asked, for young investors out there, how would you recommend they differentiate themselves from the pack?

• 9:12Speaker 02

  First off, that's very kind of Adam. I think one of the things I got right in joining the venture industry was finding the right team and the right platform. Just for context, when I came into Index, I was 30 years old and I was offered a position as an associate. I'd been an associate eight years earlier in my career at a private equity fund. So it felt like from a title perspective, I was taking this massive step backwards. The reason I did it, it was because what Index promised me was a flat hierarchy, a ton of autonomy and the ability to start doing investments. And that is really, I think, what has given me the chance to learn and to improve in this job very quickly. And so I guess my advice to earlier stage investors or investors a little earlier in their career would be find a platform that is willing to give you that autonomy and to let you

• 9:56Speaker 02

  learn and to open the aperture to risk because you need to get comfortable with that and that's how you're going to become a great investor.

• 10:02Harry Stebbings?

  I'm super intrigued. You said there might kind of the ability to write investments. And I'm sorry for getting slightly off schedule here, but you said about the ability to write investments at that earlier stage. I got involved in this Twitter thread on the weekend. I didn't actually say anything, but for some reason my name was just in there. But I saw all of the things and it was basically saying whether associates should or should not meet with founders. And what I mean by that is should founders spend the time with associates themselves. And Paul Graham and Yves Thibault said certain things and other people said lots of other things. What do you advise founders in terms of interactions with associates and whether it has to be a partner?

• 10:32Speaker 02

  I strongly disagree with the notion that it's a waste of time for a founder to meet with a non-partner. Though I do think the important question to ask an investor is, are you someone who can lead a round? So irrespective of title and titles have Become so meaningless in the current venture environment where a partner means one thing at one fund and a very different thing at another. What you want to know is if can the person sitting across the table from you, if they share your excitement for the idea, can they lead your round? And if the answer is no, then you may want to reconsider, but at Index, our associates are more than capable of doing that. And so I think it's a little bit of a misnomer in industry and some kind of old thinking from people that don't understand that.

• 11:08Harry Stebbings?

  I totally agree in terms of the question of can they lead the round and I know all of the associates at Index and yeah, I love the really special group of people you have. Now, I was debating the next question because it was potentially too controversial for me to put in, but then I thought, fuck it, I'm a seed fund and I should probably ask. So the question was, Index included have been hitting seed hard again, like Sequoia have done and like many other multi-stage funds. And we had Sam O'Shaughnessy on the show and he said founders are voting with their feet and bypassing seed funds for multi-stage funds. So would you agree with this and how would you respond to that founders kind of bypassing seed funds for multi-stage funds earlier than ever?

• 11:45Speaker 02

  Yeah, I mean, first off, nothing's too controversial. So I'm glad you asked the question. I mean, we, like many of our peer funds, as you mentioned, will lead seed investments. And for us, it's all about finding great founders as early as we possibly can. So we'll lead a seed round, but we'll also partner very closely with a seed fund. To me, this is just good for founders, having the optionality of working with either a seed fund or a venture fund. It's just creating option value and I think regardless of the platform that you choose to work with, my advice to a founder would be, find a partner that shares your passion and is going to have your back. And then, you know, beyond that, think about what's the platform that supports that partner.

• 12:19Harry Stebbings?

  You said nothing was too controversial, so I have to ask you. The common thing that I say is like, as a percentage of funds, just from a rational perspective, it doesn't make sense to get huge amounts of partner time if it's a quarter of a percent of the fund. Is that a fair summarization of me or do you think actually it's not as binary as that?

• 12:37Speaker 02

  I think that a founder should be conscious of the fact that a VC has a limited bandwidth to spend on their investment. And so the sort of questions I'd be asking a partner, if I were going to go found a company and was debating, do I work with a seed fund? Or do I work with a traditional venture fund is are you going to dedicate the time to work with me on getting? The next stage. And if the answer is no, because it's a large fund and this is a rounding error in terms of the investment, then that creates a difficult relationship, or at least, you know, you should go in eyes wide open, knowing that that support's not coming. Our strategy's been a little bit different. When we lead a seed deal, we lead fewer seed deals and we make sure we can allocate the same amount of time irrespective of the check. In some ways, it's funny, it's actually counterintuitive. You end up spending more time with the earliest stage investments, because sometimes they need the most help and you can have the most impact.

• 13:22Speaker 02

  But I think it's less about the size of the fund and more about that kind of communication of what is the time commitment expectation? And making sure there's alignment there.

• 13:30Harry Stebbings?

  Yeah, I totally agree in terms of ensuring the alignment upfront and that's incredibly annoying for me to hear.

• 13:39Harry Stebbings?

  It's so wonderful when you're just incredibly biased as well, like I am today. Anyway, I do want to discuss another element of the venture landscape and kind of all his wonderful machinations. But we see more angels never enter the market. It seems that everyone's an angel's day. And you said something that was really interesting before the show and you said angel investing is not for everyone. Most people are going to lose their money. It's a contrarian statement, which I always love on the show, obviously. But why will most people lose their money, do you think, Mark?

• 14:05Speaker 02

  I'd start by saying, first off, I can understand the allure of angel investing. I mean, it's exciting, it's fun, it can be financially rewarding. But I think what most people fail to understand is that it's extremely risky. I mean, you probably have a better shot at going to a casino and winning roulette than making money angel investing. So I think the other thing that people might misunderstand is even when you get it right, which statistically you won't. But when you do, the upside has its limitations as well. I mean, best case scenario, you're talking about having your money locked up for probably over a decade. At which point the company has raised so much additional capital that your position could be diluted down to less than half of what it started with. So it's really not for the faint of heart. And I think that listeners who are debating whether or not to get into angel investing should just be really open minded about why they're doing it.

• 14:50Speaker 02

  And if why they're doing it is to make money, they're probably going to be disappointed.

• 14:53Harry Stebbings?

  Yeah, no, I do agree with you to a logic cent on that basis. I do want to ask, because angels is one thing, but we've also seen a large rise in the amount of scout funds. How do you feel about the founders that you back actively angel investing or kind of running operator funds? I'm really interested to hear your thoughts on kind of the pros and cons of especially actually founders investing and how you feel about that.

• 15:12Speaker 02

  I mean, I love it. If I were going to leave index to start a company, the first thing I would be doing is thinking, who are the smartest people I know? That I'd want to bring into my cap table. And so I think the sort of things I'd be looking for is someone who's been in my shoes before, which founder fits a great profile. Maybe someone who has a Rolodex that can accelerate my business. So I think what scout funds are doing is tapping this rich vein of talent that historically might not have had the liquidity to be a part of this ecosystem and is now kind of helping meet that demand. So I think it's a really positive thing for the ecosystem, having all these great founders and operators who are now getting deeper into the investing side of the world.

• 15:47Harry Stebbings?

  No, I do totally agree with you. I think the interesting element, and I'd love to hear your thoughts actually on this, and we can take it out if it's too much of a controversial one. But like front, they had obviously founders entirely lead their 60 million series C. How do you think about actually founder wealth increasing more than ever before? And actually founders propensity to move upstream into multi-stage funding rounds. How do you feel about that and think about that?

• 16:09Speaker 02

  Well, I think that was a clever move to bring some fantastic founders into that round. At the same time, I think when you're talking about leading large rounds, again, if I put myself in the founder's shoes, I think having an institutional lead can be very powerful. And so working with a fund that has great resources and potentially experience through a lot of other board seats and experience on the investor side can be invaluable. So it's fascinating that a round that was that late stage was ostensibly led by a number of very strong founders. At the same time, I think that's a bit of an aberration and many companies will decide to continue working with institutional leads where they get just a little bit more than you could handle from a single individual.

• 16:51Harry Stebbings?

  Yeah, no, I I do agree with you in terms of the value that an institution really provides. I I do have to ask Mark, you've mentioned board seats a couple of times and this is the joys of doing the show. I can go totally off schedule and just ask what I'd love your advice on.

• 17:02Speaker 02

  Love it.

• 17:02Harry Stebbings?

  What would you advise me? I've just joined my first three boards now over the last twelve months. What would you advise me in terms of what it takes to really kind of make your mark as a board member in the first twelve months?

• 17:12Speaker 02

  I think the most important thing you can do as an early board member is listen. And I think one of the mistakes that people make is they feel like they need to have a strong voice in every topic and every meeting. And I think you in a lot of ways lose the power of your authority if you overplay your speaking position in a boardroom, especially as a new member. So I think one of the things that I've seen kind of joining an increasing number of boards with fantastic board members across the table for me is the power of being judicious with when to weigh in and how to use the political capital you've built with a founder to both offer praise but also to offer critique. You know, so I think one of the things I would think about is where are the most impactful areas that you can dive in?

• 17:55Speaker 02

  And then maybe consider stepping back from areas where you don't have as much expertise.

• 17:59Harry Stebbings?

  That's really reassuring because my question was, you know, there are certain areas where, you know, I think I'm great. And then there are many other areas where I'm sure that there are better people, more qualified to speak. And so I did want to ask about that. I do have to ask, you mentioned some.

• 18:10Speaker 02

  Yeah, and to follow up on that, I mean, I think that there's a lot of trust and vulnerability when you acknowledge when you are not the right person to opine on a question. So I would say in a lot of meetings, I'm not the right person to say, hey, I can give you the best tactical advice on building out, for example, your customer support team expansion internationally. But let me help put you in touch with three people that can, and I'll follow up with you after a board meeting. I think that's so much more important than kind of BSing your way through a topic that you might not have the mastery over.

• 18:37Harry Stebbings?

  Yeah, I do agree. And relief for me to hear indeed. You mentioned some of the incredible people you sit on a board with. I have to ask this, and again, it's a tough question, so forgive me for it. Which board member have you learnt the most from? And what's been your takeaway from watching them on a board?

• 18:49Speaker 02

  Oh, that's a great question. I'm going to actually go to a board member who actually sits on my team at Index. And before I became a partner at Index, one of the great things about coming up the team here was getting to be in board. Meetings with many of the other partners index and probably the person who I learned the most from was watching Mike Bolby. And I was fortunate enough to join him for a number of boards. But one of the things that he is so good at is understanding how to communicate hard messages to founders. And that can sometimes be in a board meeting, it can sometimes be outside the board meeting. But the sort of personal finesse of having hard conversations and delivering hard messages is something that I learned a lot by watching him. And continue to think about now that I'm independently running a lot of different board suits.

• 19:31Harry Stebbings?

  I'm really pleased you said that about delivering hard messages to founders because it's a super hard thing to do. And it can often, if not done right, which is obviously my skill, but if not done right, it can lead to founders retreating. And you said to me before, don't bury the bad news, investors are on your side, so don't treat them like metrics cops. So I guess really for me, the first thing is like, is it not the responsibility of the investor base to create environments and relationships of trust where the founder can tell them anything?

• 19:56Speaker 02

  Yeah, absolutely. It's, I would say entirely on the investor base to create that environment where a founder feels comfortable. I mean, if a founder or an entrepreneur comes to you with bad news and you make them feel terrible about it, they're never going to come back to you with bad news again. And that does the business a great disservice. So it's very much on the investors to figure out how to make sure that the founder understands that you have their back. And I think more importantly, that one of the value adds that venture investor can provide is to help put in context different stumbles. That might feel catastrophic and existential to a founder, but are extremely normal. I mean, just reminding the founder that, hey, I've seen this situation 10 times before and here's how we navigate it together.

• 20:35Speaker 02

  Is, I think, extremely helpful to a founder who might feel like one problem is going to trip up the whole vision for a company.

• 20:42Harry Stebbings?

  Totally with you in terms of the kind of the value of that context. We said there about creating those relationships of real trust, honesty and almost intimacy. I guess the question is, there's lots of different styles. What do you think you do and how do you think your style is in terms of creating that relationship with the founder?

• 20:56Speaker 02

  I think it's two things. The first is I try to be very open and to some extent vulnerable with a founder. And acknowledge what I can be helpful with and also the areas that I will probably need to compliment myself to really drive that value. And I think if you start from a position of honesty. And vulnerability, you're going to get the same reciprocity in return. And that is the foundation for a very strong relationship. So I think part of this is trying to be open and direct, as is kind of, I think, the cornerstone of any good relationship. The second thing is just, there's no substitute for knowing someone for a long period of time. I feel very fortunate to be at a multi-stage fund where we can invest as early as we see the opportunity. You know, a lot of times we meet founders early and we get a bra at these early stages.

• 21:37Speaker 02

  But if we're doing our job correctly, we're still building that relationship and opening the door to financing it down the road. I think that helps mitigate what is a new facet of the venture market, which is these shotgun processes. Where a founder tells you about a round that closes, you know, forty eight hours after the first news of it. And if you've known a founder for a long time, it can help avoid that sort of shotgun marriage at a later stage round.

• 22:00Harry Stebbings?

  You mentioned the ability to actually kind of invest for the first time, post meeting them at, say, the seed round. So you could do the series B, having met them at seed. The question I have, and it's something that I struggle with, which is like the saying no. To be able to do that, you have to be incredibly good and gracious at saying no. Have you had any big lessons in terms of the right way to say no? Because as you said, it's not like me with seed where I'll never see them again to invest in the company. You do potentially have to keep them on site. How do you think about the right way to say no?

• 22:26Speaker 02

  Yeah, it's such a good question, Harry, and it's so hard to say no. It's actually one of the things that I really struggled with when I first started, where I'm a people pleaser. It's a hard conversation to tell a founder, we don't think we're the right fit for you. But some lessons I learned and I've really taken to heart. One is, again, to just be really direct about why you're passing. A lot of times we pass not because we don't like the founder or the idea, but just, it might not be a focus area for the stage or the fund. The second thing is to not leave a founder hanging and to close the loop. I think the bar is so low for this in VC, where I'm sure a lot of your audience will relate, where you meet with an investor, they say, oh, this is so interesting. And then they ghost you and you never hear from them again. That's something that I think is totally toxic to building a relationship. We try to close the door and I try to close the door with every founder I meet.

• 23:09Speaker 02

  So they know exactly what my position is and if I'm passing, why I'm doing so. The third thing I'd say is if you are direct and then complement that with different ways of helping a founder, even though you're not going to be leading around, whether that's making Introductions to an investor who you think is more appropriate or to industry folks that might help the business. That's the sort of thing I think a founder remembers and will come back to you for a future financing. So it's not easy. It's a great question and it's something we're constantly working on, but those are different strategies I have.

• 23:36Harry Stebbings?

  I think totally right in terms of providing value post that no, but like, hey, these are the three things we thought and here's the people that you should meet. I totally agree and I think that really stays in the memory of the founders. You said there about not being the right stage or sector for maybe the fund or for the partner. In terms of sectors, you know, I spoke to Mike before the show and he waxed lyrical in terms of your love of the fintech industry. So I do want to touch base on this. The boom in fintech has been greater than ever. Many saying it's overinflated, some saying it's not. What's your current view on the market itself today, Mark? And are we in a bubble or is it actually just right?

• 24:09Speaker 02

  I think fintech is booming. I don't think we're in a bubble. I think we're on the precipice of an explosion in activity in the space. And I'm all in on where I think this category is going. I mean, to me, there are these big tectonic shifts in the industry where you've got a trillion dollars in market cap in the incumbent financial institutions that I think is just starting to shift to this new crop of digitally native consumer finance companies. So I'm hugely bullish on where the industry is going. I mean, obviously both founders and investors need to be discerning about where they're focusing on within fintech. I mean, 10 years into a bull market, I think it's pretty hard to get excited about lending companies or companies that have large balance sheet exposure.

• 24:48Speaker 02

  But if you kind of zoom out to the 30,000 foot view, I think people are going to do really well investing in and starting companies in fintech.

• 24:55Harry Stebbings?

  You said the trillion dollars that's held within incumbents there. Now, speaking of, you know, Mike waxing lyrical about your love of fintech, I've waxed lyrical about my hatred of HSBC on Twitter. And you mentioned before, God, they're going to love me for that one, aren't they? I make friends very easily, Mark.

• 25:12Harry Stebbings?

  You said before, there's going to be a hundred billion dollar neo bank. So I have to unpack this. What's the thinking here? And how does that play out and look in your mind in terms of the hundred billion dollar neo bank?

• 25:23Speaker 02

  Yeah, I mean, I think the first thing I'd say is that banks have largely taken their customers for granted. And I think about my own financial services experience where I have a lot of money sitting in a checking account, collecting zero interest right now. And that's just one example of a bank that has absolutely taken advantage of me as a customer. And to put in context, just the scale of these businesses, the 50th largest bank in the world has a market cap of $50 billion. So my sense is when you combine the trends of both a better consumer experience from some of the new entrants, a market that is so vast that can support obviously very large companies, we are going to see huge consumer finance companies emerge in the coming years.

• 26:02Harry Stebbings?

  So I totally agree with you. My question is, and this is actually a core concern for me investing today, so I'd love to hear your thoughts. We've seen the rise of Monzo and Revolut largely dominating in terms of the UK for sure and large parts of Europe. And for me, my concern investing today is are they actually not just going to add these ancillary products, student loans, mortgages, consumer lending and own the entire stack, having owned the nucleus, which is your current account and your credit account?

• 26:26Speaker 02

  The best ones will. And I don't think this is specific to the UK. I think in every geography right now, whether that's what Robinhood and Chimer doing in the US or what Neo Bank's doing in Brazil, you're going to see companies start with a specific product. And I agree with you that I think the stickiest one is a current account and then cross-sell the rest of a bank's products around that. But to me, that's actually the opportunity, which is these companies, the best companies are still growing, still doubling year over year. And they have an ability to dramatically increase the amount of revenue they're generating per customer. So to me, this is what we're seeing is the germination of the next generation of banks, which is going to be massive.

• 27:00Harry Stebbings?

  It does, but can I ask, does it not render all the other separate ancillary service style companies, student loans, consumer lending, mortgage applications, does it not render them uninvestable?

• 27:11Speaker 02

  Oh, there's going to be a massive consolidation in this industry. So my belief is that this will be a tale of haves and have nots, which the haves are the companies that use product-driven growth to get to massive scale and continue to find ways of just growing the active users in their customer bases. Those will be the winners and those are the ones that will rebuttal all banking services. The companies that are stuck in point solutions and rely on performance marketing to grow will die and will be acquired.

• 27:38Harry Stebbings?

  Yeah, no, listen, I'm very pleased to hear the alignment there because I was concerned it was just my negativity and pessimism, but I'm glad that we're both just negative and pessimistic people. So that's great. I do want to finish it, Mark, on my favorite element being the quick fire round. So I say a short statement, you hit me with your immediate thoughts. Are you ready to dive in?

• 27:54Speaker 02

  Let's do it.

• 27:55Harry Stebbings?

  Okay, so I promised myself I would read more this year. What's your favorite book and why?

• 27:59Speaker 02

  So my favorite book, and this is from the last 12 months, is Barbarian Days. It's by William Finnegan, a New Yorker staff writer, and it's a biography about a life spent surfing with a wonderful section on surfing here in San Francisco. If you've ever wondered what it's like to be in enormous surf in cold water and don't feel like putting on a wet suit, you should read that book.

• 28:20Harry Stebbings?

  I love that. My favorite book of the last 12 months. My favorite book was when I was about six because it was the last book.

• 28:28Harry Stebbings?

  What would you most like to change about Silicon Valley and tech today, Mark?

• 28:32Speaker 02

  The thing I'd most like to change is to probably have more private investment in climate change. I think this isn't being addressed efficiently by the venture capital industry, and I think it's kind of the defining issue of our generation.

• 28:43Harry Stebbings?

  Tell me, why did Plaid sell and is it a good move for Visa?

• 28:47Speaker 02

  I think it's just a huge win for consumers. You know, we're so happy to have been a part of the Plaid story, and I think the merger just is going to accelerate products for consumers who will really be the beneficiaries.

• 28:58Harry Stebbings?

  Tell me, what keeps you up at night? What are the big concerns?

• 29:01Speaker 02

  Oh, right now, my eight-month-old son Gabe is keeping me up at night because he's in the middle of teething. So hopefully we'll get that issue solved in the next few weeks.

• 29:10Harry Stebbings?

  Tell me, what advice do you hear given most often that you disagree with?

• 29:13Speaker 02

  The advice that I hear is for enterprise software founders, you need to get to $1 million in ARR to raise a Series A. I think that's total BS. I think an enterprise software company that has a great product is going to have no trouble raising capital before certain financial milestones.

• 29:30Harry Stebbings?

  I totally agree. I find the benchmarks actually really quite frustrating because also founders read these blogs and listen to them and so they never approach you until they're at like 1.2 and they've like killed product development for the last chance to get there.

• 29:41Speaker 02

  A total fallacy. I agree.

• 29:43Harry Stebbings?

  Okay, hit me, Mark. Most recent publicly announced investment and why did you say yes and get so excited?

• 29:48Speaker 02

  Well, I'm gonna kind of answer your question, but I actually just made an investment this week that we haven't announced, but it's in a data privacy company, which I'll be telling more about kind of down the road. But the upshot is a phenomenal tech team building in a new category of software to go after data privacy, which I think is an exploding issue and in 2020 is going to be one of the major trends to watch this year.

• 30:09Harry Stebbings?

  Mark, as you can tell, I have so enjoyed this episode. I'm glad that we managed to mitigate all swearing from me. So that was a win, but seriously, thank you so much for joining today.

• 30:17Speaker 02

  Harry, thank you so much. I'm such a fan of the show and it's such a pleasure to be joining you here. So thanks for the time.

• 30:24Harry Stebbings?

  What can I say? I told you what a total hero Mark is. So much fun doing that episode. As you can tell, I absolutely loved it. If you'd like to see more from us behind the scenes, you can on Instagram at H Stubbings 1996 with two Bs. It's always great to see you there. But before we leave you today, I wanted to take a moment to mention HelloSign, a great example of a company that found success in building a product focused on user experience. HelloSign is an effortless e-signature solution used by millions to securely send and request legally valid digital signatures and agreements. They raised a total of $16 million in funding and recently got acquired by Dropbox for an impressive $230 million.

• 31:01Harry Stebbings?

  Check out hellosign.com/20vc to join the thousands of companies and founders, including me, who value fast, secure and simple e-signatures. It really is a must. And speaking of amazing products there with HelloSign, the team over at Pendo, the product cloud company, just launched a free product performance benchmarks microsite where you can see how your product status up against your peers. And they gave me this incredible sneak preview of it and my reaction was bleep me. I know so many founders who are desperate to compare their products to competitors and that's what Pendo has done. They've analyzed more than a thousand software products and created benchmarks for startups, scale-ups and enterprises across five different categories. It's all presented with some pretty slick visualisations and you should check it out today

• 31:44Harry Stebbings?

  at pendo.io/products-benchmarks. That's pendo.io/products-benchmarks. And finally, creating great products is why you start companies, not to track financial statements or make cash flow spreadsheets. However, now we have Pilot, and Pilot for bookkeeping gives you back the freedom to focus on your business and your product. Every month, your dedicated account manager will send you an accurate, detailed financial report, and Pilot does accrual basis bookkeeping in QuickBooks Online, so you're never locked into a proprietary platform. Plus, you'll work with the same person each month, so you can really rely on them to become an expert in your business. And with Pilot, you can say goodbye to exporting CSV files and emailing attachments to a bookkeeper you can never get a hold of. Get your company's books in order today and get your time back.

• 32:29Harry Stebbings?

  Check them out today at pilot.com/20vc. As always, I cannot thank you enough for tuning in. It really does mean a lot to me and I can't wait to bring you another fantastic Founders episode on Friday.