The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:59:32 · Jack Zhang, Harry Stebbings
[00:59:32] S0: I mean, don't think she's that great anyway, so it's kind of fine. But just she has so much proprietary knowledge of our network, and we were worried about she's going to give it away to Stripe. That's a long story. Yeah, I mean, that's... Really, I went back to Melbourne and changed my mind. I was like, I don't think I want to be doing another start at 01:38. I think I'm going to give it a shot on this one and put all my life into it. And that's it. So one thing that really inspired me from talking and spending time with Patrick is that I said, oh, what's a long term thing for Stripe or for yourself? Are you going to be here forever or blah, blah, blah? And then Patrick just said to me that he's going to build Stripe for the next twenty, thirty, forty years. And I've just never heard a founder told me people who dedicated their entire life to building a business. That was so inspiring to me. That's what I want to do, you know? It'll build a real economic infrastructure that changed the world, impacting millions of businesses growing on the internet or growing globally. [01:00:35] S2: So we turned that down, and we're now back to business, baby. We need to scale volume. We have Shein, and we have this other large provider. Is it now, like, just all hands to the pump scale scale scale? [01:00:51] S0: Yeah. And we've got the money from DST, so we've another $100,000,000 and a bunch of other investors. When you raise
01:00:51 · Jack Zhang, Harry Stebbings
[01:00:51] S0: Yeah. And we've got the money from DST, so we've another $100,000,000 and a bunch of other investors. When you raise [01:00:56] S2: a $100,000,000 and you suddenly have, like, quite a lot of money, is it difficult in terms of constraints that are now removed and just spending Yeah. [01:01:04] S0: And I didn't understand what that means at the time. I don't know what is financial discipline. So I don't have a budget. I'm just like, hire as fast as possible, blow it all up. And realized at one point that we're running out of money. Like, I was like Yeah, [01:01:18] S2: you didn't have a budget.
01:01:18 · Harry Stebbings, Jack Zhang
[01:01:18] S2: you didn't have a budget. [01:01:20] S0: Yeah. And we went from like, I think like 100 something people to like 600 or 700 people like in a year. And then I realized our volume grow, but our revenue didn't grow as fast. We kind of really need to raise another round. And we also the vision kind of started evolved after Series C. After rejecting Stripe offer, I'm like, Okay, we're going to compete in long term. And, you know, I mean, obviously, Stripe is a payment lab business. We are banking lab business. But at that time, we're not a banking business yet, right? We're just like a global money movement infrastructure. We were like, Okay, we need to become a true global new bank. And then we need to build our card issuing infrastructure so we can issue corporate card. We need to build merchant acquiring infrastructure so we can handle the payment side of the money flow as well. So we basically need to evolve from a single product company to a multi product company, an end to end platform with infrastructure and software to supporting global businesses. I basically put most of the money out of the $100,000,000 to build this new product and not investing in the existing product. And that is the biggest bet I made. Essentially, you've investing like more than half the money you raise onto the product that you're not gonna have any revenue for the next three or four years. [01:02:32] S2: Did that not strike you as alarming at the
01:02:32 · Harry Stebbings, Jack Zhang
[01:02:32] S2: Did that not strike you as alarming at the [01:02:35] S0: I kind of realized once we sort of reject the Stripe offer, and ultimately we're gonna compete, it kind of scares me that if I don't invest fast enough, ultimately, you know, we just don't have a role to play. [01:02:47] S2: So it was the right thing to make those investments? [01:02:49] S0: Well, we kind of did two things. We went all in to international expansion. So we started opening offices in The UK, in The US, and everywhere. And that kind of took me a disaster because we kind of didn't have product market fit in any of these places. And then that international expansion basically just failed. [01:03:05] S2: And that was because of product market fit? [01:03:07] S0: Yeah. We're not hiring fast enough. We're not building product enough. We don't have a real product in The UK, but we hired a bunch of teams here. [01:03:14] S2: How long does it take you to realize that the international expansion not working rollback? [01:03:19] S0: Pretty quick. I mean, you just don't have any revenue because nobody gonna buy your product. [01:03:23] S2: So six months later, were like, uh-uh. Cut. [01:03:25] S0: Yeah. I didn't cut. I basically keep going. And because we had an infrastructure here, we needed people to manage in the infrastructure, and we keep trying. And a lot of the people I hired, like, are my friends. [01:03:36] S2: So you just, like, persisted through Yeah. To product market fit in these geographies? [01:03:40] S0: Yeah. Took me three years to get PMF in The UK.
01:03:40 · Jack Zhang, Harry Stebbings
[01:03:40] S0: Yeah. Took me three years to get PMF in The UK. [01:03:42] S2: Wow. That's a lot of money. [01:03:44] S0: Well, I mean, it's a small team, and then we also churn a lot of people. So that was the mistake I made. [01:03:50] S2: When you say that was a mistake you made, what was that mistake? [01:03:53] S0: Just bad hiring? We also didn't have the product. I think we just hired too early, and also, like, we don't really know what sort of people to hire. It's kind of a combination of both. What do you mean [01:04:02] S2: you don't know what sort of people to hire? [01:04:04] S0: I'm a product engineer. I really have no idea how to build a commercial organization. And all we did is selling to large enterprises, right? But we have a lot of VC network in APAC. And when I come to UK, I don't have the VC network. I don't really know how to sell to large enterprises. I don't have any VC network here. No one opened a door for me. And we just couldn't really sell the product. The vision really evolved from a single product company to a multi product company. But that evolved to three and a half years to get the initial product market fit. Just during that three and a half years, we are too aggressive in international expansion while we don't have a good product. [01:04:38] S2: And so we need more money. Yes. And at this point, our last round was the 1.1 with DST. [01:04:46] S0: Yeah. What happened? And we're running out of money again. [01:04:47] S2: Are you nervous when you're running out of money?
01:04:47 · Harry Stebbings, Jack Zhang
[01:04:47] S2: Are you nervous when you're running out of money? [01:04:50] S0: Yeah. And I'm at SoftBank. And I was like, okay. So SoftBank was the gold in VC. This is 2019. [01:04:57] S2: Okay. [01:04:58] S0: And I fly all the way to London in October 2019, and SoftBank going to lead the round. And this WeWork stuff happened. And they stopped investing, and they did all the work, but the partner going to invest in us got fired. And I literally in a situation we're going to kind of die again if I'm [01:05:17] S2: not able to raise money. What happens then? Basically, I [01:05:20] S0: would have convinced the existing investor to give me a lifeline of convertible notes. So DST and Tencent led the convertible notes. Wow. So we raised essentially, I think, 70,000,000 to $100,000,000 kind of a convertible. But the idea is that we're able to raise another round straight after that. And I need to find an alternative to SoftBank. And Heydosofia is the answer. So Ian from Heydou that led our Series D to kind of get us going. But the funny thing is that COVID happened in 2020. When we signed in the SPA, because we have a business in China, we know that the virus is taking off. And this is like February 2020. And we were literally going through this due diligence stuff. And everyone's sort of the investors start asking me, what is this COVID thing? I didn't know how to answer the question because I was like, this is going to be really, really bad. And I can't say that. [01:06:12] S2: You knew it was