The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:13:18 · Alan Chang, Harry Stebbings
[00:13:18] S0: Like, when you start incentivizing a metric, we need to think about, okay, what are the second order consequences? Right? Let's take a very simple example. Let's say, let's take a a recruiter. If you give a KPI to a recruiter, let's say on hires per month, what they might start to start to do, because their bonus depends on it, is trying to convince hiring managers to lower the talent bar. And I've seen that happen before. That's actually not what the company wants, right? What the company wants is actually keep the talent bar high. So instead, try, you know, some recruiters that really wanna chase their bonuses, they they try and negotiate with managers, try and convince them this is the best you're gonna find. You're find someone better, etcetera, etcetera. [00:13:51] S2: When we look at outcomes, I think so much of Revolut's success has come from product diversification and the testing that you guys did internally. When I interviewed Nick, the thing that struck me was he said about the 26 product experiments are being run internally at the same time. That was a really interesting way to approach company building to me that no one had ever talked to me about before. What did you learn from that? What are your takeaways from seeing that you... That you've applied to Fuse?
00:13:51 · Harry Stebbings, Alan Chang
[00:13:51] S2: When we look at outcomes, I think so much of Revolut's success has come from product diversification and the testing that you guys did internally. When I interviewed Nick, the thing that struck me was he said about the 26 product experiments are being run internally at the same time. That was a really interesting way to approach company building to me that no one had ever talked to me about before. What did you learn from that? What are your takeaways from seeing that you... That you've applied to Fuse? [00:14:15] S0: Yeah. I think product diversification is so important. I mean, let me give you like one example of why that was so important. So during the COVID lockdowns, the interchange revenue, so, you know, revenue from people spending on cards, especially abroad, went basically near zero. However, there was a lot of stimulus checks, right, from from the COVID times, and the stock market was booming, right, and the crypto market was booming. So whilst the interchange revenue went down, the, you know, trading revenue went up. So it kind of offset each other. So that was a great example where diversification actually helped make the company's revenues much more resilient. [00:14:49] S2: Do you think you should have gone for the banking license earlier? Nick's publicly said that he thinks he should have done. But when you look there, I think your product diversification was enabled by your not having the banking license earlier when Monzo did.
00:14:49 · Harry Stebbings, Alan Chang
[00:14:49] S2: Do you think you should have gone for the banking license earlier? Nick's publicly said that he thinks he should have done. But when you look there, I think your product diversification was enabled by your not having the banking license earlier when Monzo did. [00:15:00] S0: Actually, I think the product diversification could have happened even if Revler got the banking license earlier. I think Nick is totally right. The issue is, like, the bigger you get, the, I guess, more scared the regulators are of you. Because if you succeed, they have no upside. They don't get a bigger bonus. But if you fail, like, they might lose their jobs. So they're incentivized to be risk averse as opposed to risk neutral. Right? Whereas what's best for the economy is actually risk neutral regulators. [00:15:26] S2: When was the first time that you really felt incumbents and regulators were aware of how successful you were becoming? [00:15:33] S0: I still don't think they realized. I still don't think the the incumbents have woken up yet. [00:15:38] S2: Oh, dude, they have. They have? They have. I'm sorry. I spoke at one of the incumbents' events recently, and like pretty much the only thing that was discussed at their away day is Revolut. [00:15:48] S0: But what have they done about it?
00:15:48 · Alan Chang, Harry Stebbings, Harry Stebbings
[00:15:48] S0: But what have they done about it? [00:15:50] S2: Well, the trouble is they can't, and that's why you bet long on Revolut. Like... And I am trying to buy every fucking Revolut share I can at a good price because, honestly, the structures, the comp bans that they have, the policies that they have means they can't do it. It's it's almost like they know the challenge, but they are unable to fight against it. And no one has ownership. It's a 100 year old bank. As a hired CEO, he's been paid 5,000,000 a year for, you know, five years. He'd... Honestly, if he bounces, he'll go back to Marbella to the family home, it'll be fine. Yeah. [00:16:21] S0: Maybe. Talking about it and doing something about it is very different. [00:16:24] S1: Do you think it's important [00:16:25] S2: to have an enemy in a startup? Whether it's Revolut and banks, whether it's Fuse and, you know, traditional incumbents, is that important?
00:16:25 · Harry Stebbings, Alan Chang
[00:16:25] S2: to have an enemy in a startup? Whether it's Revolut and banks, whether it's Fuse and, you know, traditional incumbents, is that important? [00:16:32] S0: I think it's important to have a common goal. For example, at Fuse, our common goal is, like, no trade offs. You know, looking back, like, last twenty years. Right? This, like, green movement. Basically, telling people to use less. Right? So you you you had politicians that says, you shouldn't... You should drive less to work. You should turn heating on less often. You should fly less. You should do less of everything in order to save the environment. And then you have energy prices slowly creeping up over over the last twenty years as well. It's basically trade offs, I think that's completely wrong. It's actually moving in the complete opposite direction, right? It's we should be using more energy. There's actually a very strong correlation between how much energy you use per capita and quality of life. Right? And and if you look at the Americans, right, the Americans use, you know, almost eight times more energy than Europeans, and and look at the quality of life. [00:17:19] S2: But you're saying the American quality of life is better than ours?
00:17:19 · Harry Stebbings, Alan Chang
[00:17:19] S2: But you're saying the American quality of life is better than ours? [00:17:22] S0: For sure. Think about the average American home. Right? They have a large, detached house, big driveway, several cars, big backyard, maybe a swimming pool, maybe a sauna, and maybe a jacuzzi. And that's, like, you know, middle class. Like, we're not talking about, like, ultra wealthy Americans. Even if you look at, like, the wealthy Brits living in London. [00:17:40] S2: But, I mean, that... But that's bluntly built on a... An infrastructure of credit and borrowing that they are unable to afford, which you see in bluntly debt and borrowing levels in The US on the consumer side being higher than they've ever been. Whilst at the same time, respectfully, dude, their food supply chain is completely fucked, unless you're on either coast, and the quality of their food is shit and manufactured. [00:18:00] S0: That's that's also true. But if you look at the average cost of the American home, it's relatively affordable. [00:18:05] S2: So what do we take away from that? [00:18:06] S0: I think the takeaway is you can have it all three ways. You can have low cost energy, you can have more energy, and you can have lower carbon energy at the same time. [00:18:17] S2: People often talk about the energy crisis that we're in today, and energy is now one of the hottest topics. When people say, like, it's a quarter to midnight, it's a minute to midnight, how close are we to an energy crisis? Is it a minute to midnight? Are we far away? What does that look like?