The Distribution by Juniper Square
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.
00:26:16 · Brandon Sedloff, Nick Shalek
[00:26:16] S1: So that was, what, roughly thirteen years ago? [00:26:19] S0: Yeah. It was 2012 when we officially started to the first fund. [00:26:23] S1: So to... I mean, if if people Google Ribbit, they'll see all kinds of amazing accolades for the organization. I love what you said about, you know, backing rebels who challenge the status quo. Help me just... You know, help our listeners orient kind of Ribbit today and maybe, you know, size, scale, you know, known for fintech specialization, portfolio companies, kinda any... Anything. And, you know, if you don't promote yourself, I will help you, but, know, help help us orient kind of what the firm does today and kinda where you're where you're focused, you know, where you have the most conviction right now.
00:26:57 · Nick Shalek
[00:26:57] S0: Yeah. Our our thing, I I'd say from, you know, kinda from a a principle standpoint is it's concentration and conviction in in all things and and compounding. Those are, you know, kind of the, I guess, call... We'll call them the three c's that that drive a lot of the way that we think. We've... You know, we're now on, I guess, stats wise, we're we're now on the the twelfth fund or something. We've we've had a lot of different vehicles. We've always tried to undersize our funds so that we can be flexible in the moment and have had the belief that, you know, you take some vintage risk if you invest, you know, in a small number of companies in a fund, but that's more our problem. Our LPs are highly diversified across a lot of managers and asset classes. And so we've always, you know, we've we've always had the attitude that we should have a a smaller number of investments per fund than other people. That's led us to have, you know, have more funds, and I I can say more about that. But I guess by AUM, we've gotten quite large. Some of technology industry has grown a ton in the period that we started. So... But we've we've actually made our core funds smaller. And we've done that in a period of time where the asset class is getting bigger and other funds are are raising larger and larger funds. And I think that makes a lot of sense strategically for them. I think for us, going smaller has been a commitment to the idea that we wanna find, you know, we wanna find these entrepreneurs, these these rebels, and we wanna try to be their most consistent, pragmatic, trustworthy partners through cycles of greed and fear and change and and be there for them along the way. And you just can't do that with hundreds of companies. You you you can only spend that kind of time and attention and be that type of partner with a small number of bets. So we'll try in a fund to, you know, invest in 10 or 12 core positions. You know, that that might be six or seven or eight core investments a year and plan to work with those founders if we can for a decade or longer. I mean, with some of the the early companies we backed in Ribbit one or two, we're still buying their stock or, you know, going to their board meetings, talking to the execs and team all the time. And that's what we're... Was trying to do with the firm.