The Distribution by Juniper Square
00:17:22 · Nick Shalek
[00:17:22] S0: It was different, but you could start to see the outlines of what it was gonna be. I mean, you know, Google and Microsoft and Facebook were were ascendant. The cloud was kind of emerging as as a theme. So we... We're just... For context, we started the company at the end of two thousand seven or maybe early two thousand and eight. You know, there were a few early data center businesses like Equinix or DuPont Fabros or Digital Realty Trust that had gotten some amount of scale. And mostly, they had done that by buying the... You know, buying it below replacement cost when, you know, a lot of assets had gotten built during the Internet boom. And then it, you know, had been puked out by... Either through bankruptcies or other processes. And so some, you know, some some smart real estate investors who knew the data center space had made a bunch of money buying, you know, cheap assets and then effectively releasing them to these growing tech companies that had more and more need for data center space. So it was it was a period of time when you could see that this was gonna be a really big business, and it was, you know, starting to be. But it's just a fraction of what it is now. You know, another trend at the time that was pretty nascent but growing was around clean energy and and trying to find ways for especially big corporates to, you know, reduce their their carbon footprint. There was a lot of global effort, you know, to figure out some kind of carbon trading regime. Like, that was the moment actually a lot of venture firms started investing in clean energy, you know, in that period of time, not not to particularly good effect. But the the thesis we had was, look. There's there's a need for a lot of power for these data centers. There are places like Northern Virginia where there are clusters that work, especially if, you know, that you need for low latency applications. You wanna be pretty close to populations. But there's a growing number of less latency sensitive applications. You can kinda put data centers anywhere. Where in the world is there an abundant amount of power that's very cheap and that's clean? And can we appeal to, you know, especially large companies with a pitch that saves them money, saves them carbon.
00:19:27 · Nick Shalek, Brandon Sedloff
And and in our case, we were thinking about Iceland because General Catalyst had an investment in a gaming company in Iceland that built a lot of relationships there. Helps a a country like Iceland that's stranded, you know, has or has a big stranded energy resource, but otherwise is a very strategic place, you know, strategically located in other ways and, you know, helps them figure out how to export power. So, literally the same conversation we're having. So this has been a kind of a common thread for me over the last, you know, however long it's been, fifteen years. Because also, you know, Ribbit, we started investing in Bitcoin early and, you know, and and Bitcoin mining and Ethereum mining has actually given birth to some of the companies that now have become the AI data center leaders. So this idea of, like, how do you take power from one place and effectively, you know, transmit it somewhere far away through some other mechanisms been been a big, you know, common theme, I think, we'll be talking about also for another twenty years probably. [00:20:27] S1: So you went to... From there, you went to Stanford for business school? [00:20:32] S0: Yep. [00:20:33] S1: And that brought you to the West Coast?
00:20:35 · Nick Shalek
[00:20:35] S0: That brought me to the West Coast. It... Yeah. I was ready to start something, and I just didn't know what it was gonna be. And I I thought education would be, you know, radically transformed by technology. Like, another another thesis or theme that may be more true today than it was twelve years ago or or fifteen years ago, I guess, when I was thinking about this. And, yeah, it's just by luck. I I spent a few weeks over a summer, I guess, ten weeks at at Facebook. And I I just happened to be assigned to work with a guy who was running payments. Facebook had had launched their platform. Zynga and other companies were growing on top of the platform, and Facebook didn't have any way of monetizing that. So, you know, you looked at Apple, and they were charging 30% for anybody selling anything in the App Store. But Facebook was basically giving free distribution to companies like Zynga that were becoming big businesses. So Facebook was trying to figure out how to build a model, an investment model that works or, you know, business model. And the pitch... Or the plan was to build a a digital currency. And so Facebook credits was their first attempt, first of of of several future attempts to build a global payment network. And I got to work on this. Anybody who's done an internship, you know, it sounds like a short period of time, ten weeks. But, actually, it was pretty... I learned a ton. I learned a lot about an amazing organization. And, also, I learned a lot about payments. I worked on how Facebook's relationship with Visa and Mastercard would work around Facebook credits. And the guy who ran that group, an amazing person and and entrepreneur, Dan, he was friends with Mickey. He introduced me to Mickey. So I've got him to thank.
00:22:16 · Brandon Sedloff
[00:22:16] S1: So from Facebook to your kind of your introduction to Mickey, what what was the, what was the business idea that he told you was no good?
00:22:26 · Nick Shalek
[00:22:26] S0: Oh, I was working on, I I was working with a a really cool organization in California called Aspire Public Schools. Aspire had built a data and performance management system internally that was known inside Aspire Schools as Godzilla. It was sort of like this all knowing, you know, powerful beast internally. And a lot of other school systems wanted it. It was a great system for helping, you know, manage teacher performance and do teacher development and help track kids. You know, so much of the challenge in education is figuring out how, given economic constraints and the constraints of the classroom and other things school needs to do, like, how do you deliver a very personalized experience to kids? And it was a great product, and it was a great thing inside Aspire. And actually, Lindsay Ziggenhaegen, who ran that group, and and her team ended up spinning it out, and I got to be a little part of that and turning it into a a company that they built. And it was successful, but just... I had in my mind, I wanted to build a really big venture scale business. And what Mickey Mickey just said, you know, you're you're talking about incompatible things. The the distribution problem in education is so hard. And Mickey had been a really successful financial services entrepreneur. And I think, you know, had been... He had started a a business as a young young guy in in Latin America called Patagon that ended up being like e trade in Latin America and sold it to Santander in in '99 for a lot of money and had gone to Europe and had run a bank inside Santander called Open Bank. It had started a a bank in Brazil, Banco de Limon, and sold that. And and then, you know, started a mobile payments business in Palo Alto, came to The US to do it. So he'd been watching the evolution of finance for a really long time in financial services. And when I met him was sort of this mobile moment when you could see, you know, that mobile was gonna be a really big deal, but we didn't know what the applications were gonna be yet. And Mickey had really the, like, the right insight about the opportunity for people to build new brands, including in the space he loved, which was financial services. You know, you'd had some innovation in payments or some people selling software to banks, but nobody, you know, for a long time had built...
00:24:30 · Nick Shalek
You know, I guess PayPal would be a counter example. But other than that, nobody had built really big businesses. I mean, Square and Stripe had been started, but, yeah, they were they were still pretty nascent. And the thought was that mobile and digital distribution, you know, the the banks could, in theory, compete, but they're gonna be too slow. And there'll be entrepreneurs that get emboldened to go take on this problem of actually serving end customers, and they're gonna use mobile. And the changing point of sale, you know, people won't go to branches in the future was, like, the the really simple thought. And I loved Mickey's thesis. I liked him a lot. But I also told him, you know, sector focused funds. Because he got excited about this idea and wanted to start a fund. And my view was like, I'd learned that Yale sector focused funds don't really work in venture because, you know, the opportunity in venture might be in one place today, but it's gonna be somewhere else tomorrow. And this was... This kind of conversation was was what we, you know, what we built a relationship around. He also, you know, from the very start, he wanted to and then we wanted to, when we started working together, make Ribbit an international firm. Like, we thought this opportunity would play out all over the world. And while I'm a coastal American, he's very much an entrepreneur who had built in a lot of places. And so the aspiration was to build a global firm or a firm that operated from The US but invested globally. And that was also anathema, you know, in venture. You were supposed to be a generalist, sage disciplined, and geographically focused. You know, famously, Sequoia. I think Don Valentine said, you know, we only invest in companies that we can ride our bikes to, you know, because you wanted to have that close personal relationship and understand all the context. And so we set out to do that thing, but to do it globally. And that was kind of the start of Ribbit.