The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:25:38 · Harry Stebbings
[00:25:38] S0: Because I was chatting to someone the other day, and they were like, yeah, man. We're gonna pay up for this company. And I was like, oh, it's pretty quick after Ribbit did it. And they're like, yeah, but Ribbit did it. So, like, we just pile on. And I'm like, is that a concern for you? Because now you do have the brand of success, bluntly, in fintech where, bluntly, people just wanna give your company's money because you're it. Is that a concern for you? And how do you advise founders on taking those preemptive rounds and taking that cash that is coming very aggressively and sooner than planned?
00:26:05 · Nick Shalek
[00:26:05] S1: I think it's really hard, Harry. You know, mostly what we encourage founders to do is keep their head down and focused on the business. You know, it's rarely the case that more money will make the business successful. It's never the case that more money will, you know, patch over a lack of interest from customers or a lack of execution by your team. So there are thousands of ways you can die as a startup. Having more money is one of them, but there are lots of others too. It always sounds like self serving advice when you're coming in as an investor and around, I'm sure you've had this conversation many times around encouraging founders not to get too far ahead of the company on valuation, but it's a little easier once you're already a partner. And like with anything else, try to give founders our perspective and share some examples and then let them make their own decision. You know, the one thing I would point out since I think it's bad to look a gift horse in the mouth is that we could, you know, view all this capital as a bad thing through a competitive lens. But I actually think it it can bend the curve on returns for some types of businesses. Like when your competition like it does in fintech comes from incumbents with huge balance sheet and regulatory advantages, having more capital can increase your chances of success in a material way. Like, I don't think this is true in all areas of venture or even in all fintech companies. So the idea can and is most often applied incorrectly. But I do see, like, the fluidity of capital today is more of a challenge that we can adapt to rather than an existential threat. And the thing we struggle with more is what you, you know, brought up earlier is around the speed of deals.
00:27:23 · Harry Stebbings
[00:27:23] S0: No. I totally get you. I mean, speaking of speed of deals, one final question for the quick fire. But you led a multibillion dollar raise into Robinhood in what I think was about twenty four hours. What was that like in that twenty four hours?
00:27:34 · Nick Shalek
[00:27:34] S1: I'd say it was very busy. I went by in a flash. In some ways, it felt like an eerily unremarkable day. We've known the company for almost a decade. And we'd been through a bunch of complex situations together. We'd re underwritten and invest in the business, I think, seven times, like from the A to the G. Micky had started his career as an entrepreneur building a broker dealer, and we'd built a very deliberate thesis around brokerage, and we'd invested in the category all over the world. So when Vlad called in the morning and said Robinhood had a collateral issue and needed an impossible sum of money right away to try to live up to their brand promise, was actually pretty straightforward for us to say yes and just get to work. And because we understood the problem and because we had... This is really important because we'd spent years building relationships with our banks and LPs and co investors and various people at Robinhood, like we were able to figure out terms and get the liquidity to wire them $500,000,000 that day. I don't want to play it down. Like for us, it was really important across the team, you know, not just we think it'll be a good investment, but because we had the chance to help an amazing company at a moment of fear and volatility. And that's what like Ribbit aspires to be is just like in financial services, you're going to have these challenging moments. So we want to have a steady hand and be smart investors, but more importantly, be good partners.
00:28:42 · Harry Stebbings
[00:28:42] S0: Can I ask you, Nick, when you have those moments where it's like, how much do you need? You know, 1,000,000,000, 500,000,000, or I don't know, not obviously Robinhood, but another company where it's like, we're gonna lose our regulatory authority. How do you deal with them? Are you level headed? Are you quite frantic? What do you do, and how do you digest these oh shit moments?
00:28:59 · Nick Shalek, Harry Stebbings
[00:28:59] S1: I was talking earlier about the value of being thesis driven. You know, another way of saying this is sort of pointing out that you want to pre negotiate the ideas in your mind. When we underwrite an investment, we work really hard to imagine these types of scenarios. And often, like you live through them in small ways with these companies or with other companies across portfolio. That's what it felt like with Robinhood, like we'd been to this movie before. So I think when you've done that, you don't overreact even in a frightening situation, feel like, you know, we understand this business, we've done the work, and let's be steadfast, and the right kind of partner is not the kind of partners who, you know, suddenly try to re examine everything that they know to be true. I think there's a lot of things actually about being a sector focused fund that are a disadvantage that people think are advantage like expertise that we talked about earlier, because, you can become way too full of your own ideas, and you miss that the best companies are often have some very core simple insight. But one of the advantages of being a sector focused fund or a focus firm in general is you can really underwrite and get to know companies and a theme. And I think that can make you steadier as an investor over a long period of time. [00:30:01] S0: I do wanna move into my favorite though, Nick, which is a quick fire. So I say a short statement and you give me your immediate thoughts. Does that sound okay? [00:30:07] S1: Sounds great. Okay. So what's the favorite