The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:03:06 · Nick Shalek
[00:03:06] S1: As far as getting into venture fintech specifically, I wish I could tell you was the plan all along. But it's really been a series of unexpected introductions and some serious luck. I actually always had plans to be an entrepreneur. My mom was an entrepreneur. And so from about the time I was 10, that's what I wanted to be. But somehow, I've always ended up reading investment books and working as an investor. So at this point, I've just come to embrace that there's probably a reason for that. Yes, for Ribbit, about ten years ago, I got introduced to my partner, Mickey, who you know well, I was on what I would have told you at the time was an unwavering path to start an education company. I was working with a charter school in Oakland and finishing up my master's in education, and very much obsessed with the potential for technology to change education. I'd been an investor earlier in my career at Yale Investments, and then had been part of a team focusing on incubations at General Catalyst in Boston. So I knew the venture business a bit, or at least I had a lot of moderately informed but strongly held opinions about it. And when I got connected to Mickey by a mutual friend named Dan Levy, it was kind of with no pretense other than that I should meet this guy, Mickey, who was supposedly really great. So I had no problem telling him all the things I thought were wrong about his thesis for a new firm. But we hit it off. And I had a lot of fun getting to know him. And he told me he wanted someone ten years younger than to work with him. And we started talking about emerging businesses and ideas in FinTech. And I just found myself thinking about it all the time. So the decision started to kind of make itself. Fortunately, my wife convinced me not to overthink it, which is a good thing, because Ribbit's given me a chance to invest, which is clearly something I love to do, while also being part of the entrepreneurial journey of building a new firm with an amazing team of people.
00:04:35 · Harry Stebbings, Nick Shalek
[00:04:35] S0: Man, mean, what a ride it's been. I do have to ask because, know, we're gonna stay to schedule, but you said there about, you know, telling Mickey why he thought he was wrong in the early days. Charles, where did you think he was wrong in the early days? [00:04:45] S1: Look, the thing that Mickey wanted to do, which was start a sector focused fund that would invest internationally, it went against everything that I'd learned as an LP about what worked in venture. I told Mickey sector focused funds don't work that venture is a local business and we kind of hit it off from there. [00:04:59] S0: I love that. Well, sorry, man. I think Mickey was right on that one. [00:05:03] S1: He was and I came around to his point of view for sure. [00:05:05] S0: You mentioned Yale, you mentioned, you know, the prior investing. You worked with the legendary David Swensen. I have to ask this one, but what were your biggest takeaways and lessons from working with David? And I guess how did it impact your mindset, do you think?
00:05:18 · Nick Shalek
[00:05:18] S1: Yeah, it's really pretty amazing to me in retrospect that I got to have one of the all time great investors as my first boss. Obviously, it's not the usual path from endowment investing to tech investing. But a lot of what I took from Yale has really influenced my thinking. In my view, the LP and the venture business are actually similar in a lot of ways. Both are fundamentally about backing amazing people often with limited controller data as an LP, you know, you're mostly putting money in blind pools. So you learn to really fixate on how to underwrite people and how they might think or act in future scenarios. On lessons from Dave specifically, I'll riff on a few things. Yeah, first, I learned from him that the foundation of great investing is really about getting the incentives and relationships right. So if I were to summarize the Yale algorithm, it would be something like find remarkable people, put yourself on the same side of the table as them, then build rapport so they let you invest. So And they'll call you in the middle of volatility, which is when you find a lot of the best investment opportunities. The second thing, I guess I'd say is sort of ignore the received wisdom and try to approach investment problems from first principles. And when you're confused, come back to them. And people throw around this term first principles a lot these days. But Dave, you know, he actually lived it, he really reimagined what institutional investing should be with a few core ideas like that liquidity was overrated, or that you should pursue active management in areas of inefficiency, or that, you know, you should be equity oriented over long periods of time. These things sound really obvious now, but they were totally unconventional then. And third, you know, being around Dave showed me the relevance of the truism that people won't remember what you say, but they'll remember how you made them feel. He was this legendary intellect, but he had so much impact on me and I think so many other people, not just because of his enormous brain, but because he had enormous heart and wore it on his sleeve. I think about that, you know, quite a bit in our business, because there's so many smart people out there.
00:07:00 · Nick Shalek, Harry Stebbings
I mean, know this, Harry, who are chasing every deal, and you can't win just by being smart, you need to be passionate and authentic and consistent or some other set of personal things that really set you apart. [00:07:10] S0: I mean, I love that in terms of it's not what you say, it's how you make people feel. And I I always think back to that actually. It was a friend of mine, Mark Evans, who told me that one. But I do wanna ask, you know, we take this forward, you know, you obviously have the Yale experience. And then when it comes to joining Venture and joining Mickey, you said to me before, why I tell people not to do what I did when they called to ask about being part of a new fund. Help me out here, Nick. What's the thinking on this? And what did you mean by it?
00:07:10 · Harry Stebbings, Nick Shalek
[00:07:10] S0: I mean, I love that in terms of it's not what you say, it's how you make people feel. And I I always think back to that actually. It was a friend of mine, Mark Evans, who told me that one. But I do wanna ask, you know, we take this forward, you know, you obviously have the Yale experience. And then when it comes to joining Venture and joining Mickey, you said to me before, why I tell people not to do what I did when they called to ask about being part of a new fund. Help me out here, Nick. What's the thinking on this? And what did you mean by it? [00:07:34] S1: Yeah, I just think the odds of a new fund working are extremely improbable. You know, the reasons to be in the venture business is to have a chance to work with the best entrepreneurs. And it's very hard for most people to get in venture because there are these amazing storied institutions and legions of angels and VCs with every sort of angle and specialty. And I don't think you can learn the venture business the right way if you don't see what great companies and founders look like. And you're just at very high risk of that happening with new funds. So you need a really realistic appraisal of the situation. So I knew that and I knew the probabilities, but what, you know, why did I do it? Can I push back on you that? Like, there's a ton of firms that have technical debt. It could be in strategy. It could
00:07:34 · Nick Shalek, Harry Stebbings
[00:07:34] S1: Yeah, I just think the odds of a new fund working are extremely improbable. You know, the reasons to be in the venture business is to have a chance to work with the best entrepreneurs. And it's very hard for most people to get in venture because there are these amazing storied institutions and legions of angels and VCs with every sort of angle and specialty. And I don't think you can learn the venture business the right way if you don't see what great companies and founders look like. And you're just at very high risk of that happening with new funds. So you need a really realistic appraisal of the situation. So I knew that and I knew the probabilities, but what, you know, why did I do it? Can I push back on you that? Like, there's a ton of firms that have technical debt. It could be in strategy. It could [00:08:10] S0: be in structure. It could be in team that is bogging them down, that is slowing down investment decision making processes, that's reducing the quality of processes. I would actually posit a different opinion and say that actually a new firm can start with a completely real time thesis that works for today with no existing politics, no existing people debt, structural debt. And actually, you could put that in a poll position over the storied firm.