We are going to try to make this a fast paced convo that skips the basics and goes deep on the subject.
Some subjects:
- why did European challenger banks fail on their US expansion
- will the big banks be able to keep market caps as fintech continues to grow exponentially
3/
- will more challenger banks get bank charters
- what’s the future of partner banks and BaaS
- will embedded banking disrupt challenger banks
1/ As an investor you are often making very quick decisions about startups.
Here are some questions I think about:
Team:
- have they built something impressive before
- have they thought about the problems deeply
- have they shown perseverance
- do they care about the problem
2/
Market:
- could this be a $10b company if things went right
- if in a pre-existing large market a) are the incumbents old/un-innovative, b) do founders understand customers enough to find a wedge
- if new market a) how big can this grow in optimistic case, b) why now
3/
Future:
- is it inevitable that this will exist in 10 years time
- are there likely to be lots of competitors
- is there strong network effect at scale?
- will it improve the world 🌎
In winter 2009 Paul Buchheit (@paultoo) gave a talk to our YC batch.
He said if you want money you should go work at Google/Facebook instead of doing a startup and you should do a startup if you enjoy the journey.
I thought he was crazy at the time.
2/ I thought:
A) I wanted the end result and didn’t care much about they journey
B) Startup founders seemed to have such great exits
C) It seemed like doing a startup was pretty hard
D) I didn’t think people got paid that much at big cos
3/ Between 2009 and 2015, Paul was proven extremely right.
All my friends who had taken jobs at those big companies or other high growth startups had done very well.
1/ My fav "how to sell" book is "Never Split the Difference" by @VossNegotiation
One particular technique in it has come in super useful as an entrepreneur. It basically talks about never accepting the first "No" you get and ask 4 times in different ways
2/ We at @BankMercury always want to help entrepreneurs succeed and one of the biggest asks we get is startups wanting to connect with investors.
Instead of trying to accommodate these asks on a one off basis we decided to productize the process.
3/ We ran a small beta last month and were surprised by the level of interest from both entrepreneurs and investors. Both sides are looking for better tools to connect.
The beta resulted in 20 intros between startups and investors and at least 2 checks.
1/ One of the trickiest parts in a fundraising pitch is what to say when investors bring up an issue that is about a fundamental, unavoidable risks.
Every business at every stage has them, things like “what if Google enters your market?”, “what if CAC goes up”.
2/ My initial instinct is to turn these into discussions. “Great question, that would be bad, what do you think we should do?”.
I have noticed that devolves into a long, negative conversation that doesn’t resolve the issue and makes it seem like an even bigger deal than it is.
3/ What works is to have strong counter arguments that don’t leave too much room for discussion.
Question: what if Google enters the market?
Answer: Google has shown they don’t care about this market, the last 5 products they launched were a flop and it’s a huge market anyway.
1/ Back in Feb @naval pitched me AngelList Rolling Funds.
Initially I was skeptical, but over time I have realized that this opens up a new class of LPs and GPs.
We will see a rise of active founders like @shl and simultaneously running rolling funds.
2/ I have been investing for 4 yrs. I have invested in more than 150 companies, including 3 unicorns (Rappi, Airtable, Rippling) and have an IRR of 50%
I am v. busy with @BankMercury but love investing and supporting entrepreneurs, that's why I started Mercury in the first place
3/ Rolling funds make it so I don't have to spend 6+ months raising money and I can avoid time on back office work. I can do the thing I love, which is investing.
It also means LPs that wouldn't have access to the tech startup asset class can back me and be part of the upside.