The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:35:15 · Jack Zhang, Harry Stebbings
[00:35:15] S0: Well, you're asking the right question now, maybe. [00:35:18] S2: But can... Oh, you just mentioned Yuri there. Yuri is a astonishing man himself. How was that meeting? [00:35:25] S0: At that time, you know, I think I was... You know, Sequoia and and sort of Tencent and and Mastercard led them on Series A. And Series C, we got like because we just rejected acquisition offer from Stripe for close to $1,200,000,000 and that was a big thing. And we got term sheet from Hill House, from Goldman, wanted to lead, you know, a billion dollar round. And the term was not the best. And Niu Shen from, you know, Sequoia, China at the time, and basically don't want me to take the deal because he's the one that recommend me not to take the Stripe deal. He still said, you know, you should just make the right decision for yourself and for the company. And Niu Shen introduced me to two companies. He introduced me to Zhang Lingfeng from DST, and he introduced me to Scott from Tiger. You know, I had a chat with both, and DSC ended up leading the round. [00:36:20] S2: How was the meeting with Yuri? Was it a was it a cool meeting? You mentioned him asking about I [00:36:24] S0: mean, it's a it's a weird meeting. I mean, imagine you are Series C, you raise that above a billion dollar, and all you really care about is how you grow up. It's kind of weird, right? And they give you literally a verbal term sheet on the spot. It's also kind of weird. [00:36:38] S2: Again, I don't know if it is. When you think about the true [00:36:40] S0: Like a billion?
00:36:40 · Jack Zhang, Harry Stebbings
[00:36:40] S0: Like a billion? [00:36:40] S2: I've never The true generational defining companies are founder led. We have Bailey Gifford on the show. And of their top 10 positions, nine of the best companies in terms of performance are founder led. If that is the case, 90% of the best performers are founder led. We're only here... Jack, the other thing that you both know, we both know now as investors, a billion dollars does not cut it. $10,000,000,000 is what we need for this venture model to work. If that's the case and they found the lead, I didn't I didn't care about your pricing this quarter or your growth this quarter. I care about you. I... I'm not sure. [00:37:08] S0: I mean, I just saw there's crazy people willing to bet on people at that point at billion dollar valuation. [00:37:13] S2: I do just want to go back and take it chronologically because it's such a cool story. Okay. So the matrix term sheet was pulled, and we get some other VCs in. Cool. What happens then? Like, when does first product go out? When do we get product market?
00:37:28 · Jack Zhang
[00:37:28] S0: So the money we raised from the first $3,000,000 from Lucy, the other VCs really kind of drawing up that when we try to build this peer to peer algorithm, which is never going to work. And we kind of know that. And then we were like, oh, we need like basically doing the hard way. We really need plug our FX engine to an interbank liquidity, you know, whether the Goldman or GP or like, obviously Goldman or GP not going to take my course. And we kind of need to build a, getting licenses everywhere around the world, you know, connect to the local clearing infrastructure one by one. You know, it's going to be like a hard, but that seems the only way we can do it. And we basically pivoted at that point that is I cold called Macquarie. 8AM, I remember, then I cold called a guy who took like overnight shift in Macquarie to cover the markets, because FX is 24 by seven twenty four by 5.5 markets, right? Tom took the call from Macquarie. He's like a junior guy, can only work on like a night shift at a time. And he was about to finish work at eight And he took my call and somehow, I mean, I pitched him, he got him excited. And he's willing to invest a whole team of engineers from Macquarie Bank to connect me to the interbank market so that I able to get sub, you know, two basis point of liquidity from a cost point of view. So I can even build my FX engine by streaming prices. You know, for the first couple of years, our FX price was literally trading back to back to Macquarie. Because normally for the interbank liquidity, you can't trade, you know, sub 500,000 or million bucks, right? So that's how you kind of trade on the interbank. And I able to convince Macquarie to build me a product that you can even trade $20 at a, you know, two basis point cost price. Wow. That cold cold worked. I remember even like after Series A when we raised $13,000,000 from Sequoia and Tencent and stuff and MasterCard, I went to pitch to Barclays. A friend I used to work together, I met him in Hong Kong and I sit in one side of the boardroom, which is like a five meter long, you know, table. He want to sit on the other side of the boardroom. And I was like, Dude, what is happening? And I made a pitch. He's like, Oh, you know, come to talk to me when you have like a billion volume.
00:39:44 · Harry Stebbings, Jack Zhang
[00:39:44] S2: That's helpful. [00:39:45] S0: Thanks. Yeah, that's helpful. I'm like, Dude, like, well now, you know, Barclays is a great partner, but, you know, we only start working together when I have like $10,000,000,000 volume or something, you know? You know, and Tom, the guy who took my Coca Cola, now is the head of distribution in Macquarie. [00:40:00] S2: Phenomenal pick from him. Okay. And so we have that. Do we have product market fit pretty much straight away post that? [00:40:07] S0: No. And I got the FX engine, build it out, and I need, like, a bunch of payment rails. So I connect to a bunch of, you know, aggregators initially because I need the coverage and then I even connect to Currency Cloud who ultimately become a competitor later. Essentially, connect to a bunch of competitors ultimately to get me the coverage of the network. And have the product going, but in terms of the customer we want to target to, we're initially targeting SMEs in Australia. We just never really figured out what the product is. We built an invoicing product to allow SME to sell around the world to get paid through a payment link and then by kind of integrating with a bunch of payment service providers. And we just never really get product market fit on that product. It's because the acquisition is too high of SMBs and we never really got product market fit. At that point, we kind of know we need to raise more money, otherwise we're going to be dead. So we basically went to raise money from Sequoia and Tencent with a product we know it's going to fail.
00:40:07 · Jack Zhang, Harry Stebbings
[00:40:07] S0: No. And I got the FX engine, build it out, and I need, like, a bunch of payment rails. So I connect to a bunch of, you know, aggregators initially because I need the coverage and then I even connect to Currency Cloud who ultimately become a competitor later. Essentially, connect to a bunch of competitors ultimately to get me the coverage of the network. And have the product going, but in terms of the customer we want to target to, we're initially targeting SMEs in Australia. We just never really figured out what the product is. We built an invoicing product to allow SME to sell around the world to get paid through a payment link and then by kind of integrating with a bunch of payment service providers. And we just never really get product market fit on that product. It's because the acquisition is too high of SMBs and we never really got product market fit. At that point, we kind of know we need to raise more money, otherwise we're going to be dead. So we basically went to raise money from Sequoia and Tencent with a product we know it's going to fail. [00:41:07] S2: What happens? So basically I have
00:41:07 · Harry Stebbings, Jack Zhang
[00:41:07] S2: What happens? So basically I have [00:41:09] S0: a product that's working, right? I know it's not going to have product market fit, but I need more money to figure out what the product market fit is. And I basically went to pitch for Sequoia and Tencent And one of the ideas is actually to pivot the product to API product to servicing Tencent to kind of power WeChat Pay global settlement. So you know when Chinese tourists come to London Airport, they will pay using WeChat. In some way, it will settle the merchants doing the FX on the back of that. And we were thinking we can do a lot better over the SWIFT network, and we can do a lot better than Tencent Treasury Department. And the idea is to maybe that's an opportunity to pivot and leveraging Tencent's volume to grow the business. And then knowing that the SME product probably going to fail because we haven't we only got like 100 customers by that time. And we were raising at a $60,000,000 valuation with no revenue. [00:42:03] S2: But how does that work? You know that this isn't working. You know that it's not going to work and you're going to have to figure it out. And so you go to Sequoia and you pitch what? Ideas or... Well, pitched [00:42:16] S0: a vision. I pitched a vision of building the largest payment network in the world, alternative to SWIFT. And that fundamental infrastructure is going to be so important and that's going to take years to build. That's why we don't have any revenue. [00:42:30] S2: How did it go? How did the meetings go?