00:45:26 · Nik Storonsky
[00:45:26] S1: I mean, one of the advices was, okay, you know what? You need to hire an experienced executive. You know what? Now it doesn't work. When I started first five years, I had probably 50 plus experienced executives, or I kept only two, right, within one year. It just doesn't work. Why is that? Why experienced executives, you know, almost never works... Or work out? It's the same as football players. Right? They they have their prime. Like, reality, I mean, there is a prime age. And, like, it doesn't mean they became less good. I think they they changed their priorities. Right? Plus, probably they became less good. Plus, things changed. Times changed. Competition changed. So people who were good before or had, you know, past track record of being good before, they might not be good in your company for the future. That's number one. Extremely naive to think so. And then number two, the results are negative for selection bias. Right? If you think of people who are extremely good, like, for example, how I hire people. I look at their track record of achievement, And then they need to be top 1% of... Compared to their peers in terms of their career progression. And then I try to pick up them when they are 25, 30 years old. So they continue on the same trajectory in Revolut. Whenever you're hiring experienced executive, relative there is a negative selection bias because people who are extremely good already made it. Right? I don't know. They either probably running their own businesses or they're retired or something else. And then people who ever had this extreme career progression, who you hire as experienced executive, they just seem not very definitional as good compared to people with extremely fast career progression who are already not in the market.
00:47:10 · David Senra, Nik Storonsky
[00:47:10] S0: Okay. So you found basically the advice they gave you to be completely the opposite of what you should have been doing based on what you just said? [00:47:16] S1: Yeah. Exactly. Yeah. Then our... Yeah. A lot of advice around, you know, the thing that certain people in the company are good because they experienced. Well, I think completely opposite. And then one of them... He's actually quite quite a good investor. He he was forcing me to fire my best person because he was too hardcore. So a lot of Who who really wins? Yeah. Lot This [00:47:43] S0: guy needs to work nine to five. Okay? So how did this... Like, tell me more about this. Like, you obviously fought back. The guy didn't get fired. What happened? [00:47:50] S1: I mean, of course of course, I didn't fire him. Said no. That's it. [00:47:54] S0: Okay. But that's it? The guy didn't take [00:47:56] S1: it to leave. Yeah. Have him. And then went to fight him. [00:47:58] S0: Did you have a fight with the investor? Like, what happened? Yeah. And so how did you settle it? You had all the power? Like, what happened? [00:48:04] S1: I fight it with him and then... Yeah. Even though they they they had the collision of, you know, many investors, but, you know, they they they stepped back. [00:48:13] S0: Okay. So how did you get him to step back?
00:48:13 · David Senra, Nik Storonsky
[00:48:13] S0: Okay. So how did you get him to step back? [00:48:14] S1: Well, I think, you know, pretty early on, I realized that, like, quite quite a few of VCs, they are not very operational and they can be actually dangerous for the company if they have enough power. So every single investment route, they just, you know, removed for VCs. So it took, you know, all seats. So now I don't have any VCs on the board. I think that's the best. You always need to have operators rather than VCs on the board who... People who actually build this who who know how to do things. [00:48:45] S0: Your mindset reminds me a lot about Travis Kalanick from Uber. He was on the show. And I think it's like one of the clips that went, like, got millions and millions of views was on this, where he just actually thinks that like, just doing no harm is an excessively high bar for a VC. He's saying like over 90% of VCs, they can't even not fuck things up. Not much... He's like, not even be helpful. They just can't not fuck things up. And then he said like 1% in his experience have been actually helpful. And his thing would... Which he he would tell entrepreneurs, I think he said on the show, is just like, tell them to give you the money and go away. That's how you think. [00:49:18] S1: I mean, Elizabeth, and, yes, ensuring shareholders' agreements, they they just don't have any powers. [00:49:23] S0: Yeah. I will make you rich... Richer. You just leave me alone. It's basically... Yeah. Also set up your own... I don't know if you call it a VC fund. Like, what is is a
00:49:23 · David Senra, Nik Storonsky
[00:49:23] S0: Yeah. I will make you rich... Richer. You just leave me alone. It's basically... Yeah. Also set up your own... I don't know if you call it a VC fund. Like, what is is a [00:49:32] S1: VC fund. So basically... What's it called, first of all? Quantum Light. Okay. [00:49:37] S0: Explain what you're doing. This is funny. I just picked up on this now because you were analyzing like the legacy banks, know, like, I'm not like, look at all the obvious mistakes they're doing. Some of that came through experience, right? Hard fought experience. The way they're doing it doesn't make sense. I'm going show you a different way to do it. [00:49:52] S1: Yeah. Basically, the idea was in... I think it was 2022 or 2023 when I came out with this idea. And the idea came actually from my personal pain, from a fight with investor. It was actually one of their big names. They entered or they invested in Revolut. It was, I think, just after COVID or during COVID when all the stocks went up, they invested at 33,000,000,000 valuation. So basically they had legal right to not to allow us changes in shareholder agreement because they were like, you know, less investor, blah blah. So you had a bunch [00:50:31] S0: of these bad experiences with VCs. You're going start your own VC fund. Explain how you're
00:50:31 · David Senra, Nik Storonsky
[00:50:31] S0: of these bad experiences with VCs. You're going start your own VC fund. Explain how you're [00:50:36] S1: funding different. Funds. Basically, I had this fight and then, you know, I was extremely pissed off and I thought, know what? I I I also need to compete with VCs in their business because they they... They're so bad. And out of my frustration, I started the fund as well. And then the idea was basically to invest not based on the human judgment, but based on their science and based on their machine learning models. Statistically, investment is number one. Number two, actually help with founders with operational advice playbooks or that we developed to try to help to hire people, to do performance management, how to do product expansions. And then finally, help them sell their product as well. Because we are a large enterprise, we are buying from a lot of vendors. Having us as client helps to sell into other enterprises or potentially sell to our customers as well. Our Revolut customers. So I think overall, plus my personal advice, obviously. So I thought overall, the package was so much better compared to purely financial players, VCs. You just had your personal advice as well. So, like, are [00:51:39] S0: you just making concentrated bets? Is this, like, another thing where you're doing 20 or 50 at a time? Or you're just, like, concentrating money behind a handful?
00:51:39 · David Senra, Nik Storonsky
[00:51:39] S0: you just making concentrated bets? Is this, like, another thing where you're doing 20 or 50 at a time? Or you're just, like, concentrating money behind a handful? [00:51:47] S1: It's again, it's statistical investment prices based on machine learning models. So, the way it works, our model selects 30, 40 companies to invest over two, three years. And then it puts equal amount of money in each in each startup. So, we started with a fund, series b fund. So it's closed. It's fully invested. It produced now, like, 56% IRR. [00:52:10] S0: And you started, like, 250,000,000 or something. Right? [00:52:13] S1: We started to fifty million years with the first fund. So now it's, like, 5056% IRR. We started investing second fund now, which is 500,000,000. So it's series c in our companies. Again, based on the model, also very high return. Think it's top 5% of funds in the world now in terms of returns. We'll probably do a large fund as well for for leads. [00:52:34] S0: Where is the money coming from? [00:52:35] S1: It's different LPs. So initially, started... 20% was my own money. So I put 20% of it or 25% of it. And then the rest came from other founders. Second founder already got quite a few institutional players as well.