#214 - Jake Gibson - We Think This Idea Of Embedded Fintech Is Going To Get Really Interesting In The Years To Come
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We discuss scuba diving but also startup investing in the world of Fintech we get into some of the opportunities going forward from disruption products user experience and distribution models to help them non fintech companies may be able to start leveraging the infrastructure to integrate financial services into other products we touch on the next wave fintech banking as a service and a future that may evolve into a far deeper set of automated financial services that greatly reduced friction and improve the experience for the consumer stay tuned in to hear some detail about our guests new fun focus on pre seed and seed stage. Fintech companies. Please enjoy this episode with better tomorrow ventures founder Jake Gibson J. Welcome the show. Yeah thanks for having me let beer. We'RE IN LA global headquarters guaranteeing in San Fran. I watched the Little Mermaid with my three year old. He said it was a little scary. You got two twins but also heard your big diver. Where's dive spots my favorite dive? Spot right now is in the believes placentia. It's one of the places where you go to dive in the open ocean with well sharks. I've been there both of the last two years during well shark diving season to try to see some to follow up questions. We'll what what time of year is that in two is the big hole the big blue hole or something. That's lease right. Yeah that's kind of northern off. The coast of northern leaves. Placebos down in southern believes the reason placentia is special is because there's like an elbow in the continental shelf there that for some reason attracts a lot of massive schools of fish that come in to feed and breed this giant Balza Fish. Like he's the finding Nemo it'll be a bunch of them out there right off the continental shelf and the whale sharks eat them and so they tend to breed around full moons between. I think it's like March or April and June in so I usually gone around the full moon in June which serves as a remarkable trip to. Because you're kind of out in the middle of nowhere under a full moon in the evenings during the day. You're spending six to eight hours out on a boat in the open ocean like no land within sight no bottom of the ocean within sight and just kind of hunting well sharks in a sense l. Middle nowhere sounds like a pretty good place. If you quarantining right now. I did out of college when I graduated college. My Dad and I went on a fishing trip. They done the same. With each of the boys in mind we wind up going to Belize but on the islands. The he's yeah. He caught cocker quarter. Whatever the bone when bone fishing as awesome as during carnival. So we got we got. A bunch of paint is awesome all right. We'll look see me a lot of fun. You know you're now. Venture CAPITALISTS ANGEL INVESTOR. Will get to that minute it'll be. I think particularly informative at least burn through your background pretty quick to give the listeners a little bit of understanding where you came from what you've been up to so fellow not engineer but Science Guy Riding. Mitee UNDERGRAD yeah. I grew up wanting to be an engineer but ended up studying math and financed. I got a little distracted James. Yeah so spent my childhood sitting in front of a computer in teaching myself. How to Code and all that stuff? It was convinced the young age I was GONNA go to. Mit Computer Science. But I started school right. When the Internet bubble burst and so a lot of people in my cohort ended up kind of switching over a lot of my friends went into consulting a lot of the wind into banking or treating. I did the latter. I ended up studying math quantitative finance. It might went to go into interest rate derivatives trading. So I was at J.P. Morgan propagator from two thousand four until two thousand eight when all the prop traders went away that switch over to the sell side trading interest rate swaps for another year or so but during the time I basically from two thousand seven until the end there in early two thousand ten. I was convinced I was labor. I couldn't figure out how I was GonNa leave or what was going to do because you don't learn a skill set on a trading floor. This transferable anywhere else took the dramatic. Gre Didn't really think that either one of those was was for me though in ultimately decided you know what I'm just gonNA leave. I'm going to go to California. I'm gonNA start something since. Nobody's going to hire me for what I have today. I'm just GONNA build the skills at myself instead of spending two years on business school two years in some ungodly amount of money on business school. I'm just going to kind of create my own business school by trying to start a company and that'll be my forcing function to like meet people in learn and all this other stuff and if it doesn't work out which it probably will vote then at least after two years. I'll have a skill set that maybe somebody will hire me for an thankfully I ended up joining up with buddy of mine have known since eighth grade we grew up in Atlanta together and he had also gone to Stanford while I was at Mit. We live across the street from each other. In New York he worked at a hedge fund. While I was at j.p Morgan. We worked at a series of Von's will as a J. P. Morgan but also gotten laid off in two thousand eight notably started working on what would become nerdwallet and so when I left. Jv mortgage diabetes join with them and helped him build. That blows the original vision. By the way I don't know if I've heard the origin story where you guys just kind of kicking around all sorts of different start-up ideas was this one had been knowing for a while where we're from so it was tim's idea in the original vision was effectively. Kayak for credit cards. Like if you look at like by that point we had Kayak we had all these other products like web. Two Point Zero is starting. We had by phones. But then if you tried to find any sort of financial products online and like the classic story is his sister had just sold company and she was trying to get her finances together and restart the Tim Tim. You're a finance expert. Can you help me like I don't even know what credit card as she get like? Where what savings account. So she get where I should park my money in. So he went started doing some research online and the world at the time it was basically like bank rate credit cards dot com and then this massive long tail of random bloggers who were operating out their basements effectively. All the content was garbage again. It was basically all just there was. We joked it was. Nascar like every Pixel on bank rates website or on credit card credit cards dot com website were optimized for monetization and there was no customization. There was no transparency. Like if you're really trying to make the right decision for you in your own personal finances. Nobody was helping you and so he started working on this idea that would kind of become like a Kayak credit cards in originally. We thought it was just going to be a lifestyle company. We'd kind of work from home so I ended up moving to California. He actually stayed in New York for a while working from home. Trying to get staying up to like one or two million in revenue than we thought we'd either live off of it or sell it but after a couple years of that relies there was much bigger opportunity ahead of us and then he moved out here. We started hiring people and it was kind of off to the races. Moselle Company is it. Did you guys Bootstrap FROM THE GET-GO. Did you eventually take any funding and then how to the eventually victory for you exiting? Yeah so we. We bootstrap initially mostly because we didn't know any better are mostly partly because we didn't know any better like I said it was just the two of us. We thought of it as a lifestyle company and this was back in two thousand nine two thousand ten so the ecosystem as it exists today. Would all the angels in the scouts and all the micro. Bbc's all the money that's out there today didn't exist back then and all the content there is out there around like how to raise money why to raise money all that stuff how to build a startup. Di- didn't exist back then either so we just thought we were building a company. We weren't even really thinking this is like a startup. The way you think about it today. And we just didn't think anybody would fund us like we're not gonNA go knock on sequoias doors to schmucks. Just let their jobs that basically just got laid off from their job on Wall Street building a product that was intentionally under monetize relative to all of our competition. It was moving into an extremely crowded space during the middle of the biggest recession and previously the biggest recession in our lifetimes. And so we're like nobody's GONNA give us money for this. That's insane. We also just got a thought that as long as we have control over it we'd be able to do what's right by the in Consumer Ortega. That's how it evolved like once. We started getting traction and we thought people might actually want to invest in this thing. We were like why. Would we give up that control? Why would we raise money if the whole strategy here is we wouldn't be consumer? I build the brand around that gained market share around that rather than trying to go like. We thought we'd be forced out the BANKRATE OR CREDIT CARDS DOT COM path in tried to squeeze our users for every dollar good. Eventually we got to the point where we just amid since raise money anyway because we didn't spend enough we had nothing that we could have invested an that would have removed moved like we were making enough money that having to raising more money would not necessarily have changed any of our decisions that change the year after. I left so Alizarin until two thousand fourteen. We're in the middle of a massive inflection point growth wise at that point or hiring a ton of people and ultimately ten decided. We should probably have a war chest like if the cycle turns or something like we should have some money. If we WANNA make any acquisitions we should have some money in the bank. And so that's when they went out reserve first round of funding. I think it was January or something. Early dozen fifteen which was a remember. Exactly something like a seventy million dollar series. I The only primary capital we've ever raised or you totally associated with the company. Now you just say look I'm GONNA start procreating to go diving you know. I'm not on the board. I'm not involved day to day Tim and I are you know as does man at his wedding. Demir so good friends in. He keeps me posted on everything. That's happening over. There is still no some of the executives Stay off the extent that I can but it's more like I'm the arms length like Biz. Dev uncorked person. Just because of what I come across in my day to day job and how applauded nerdwallet helping keep them on top of all the different things that are happening in the fintech space. But that's that Emma on a shareholder so distorted investing at the same time. This is vintage around. Twenty fourteen on your own was the sort of evolution were today so my kids were born in. December of two thousand thirteen. At that point I had hired a few people to come in and replace all of the functions that I was doing wallet. I hired a new. Coo is just like one intern. You're like I can do one intern. Which is part of the problem guided realized that I wasn't doing my job particularly well because I was spreading myself too thin and not being particularly strategic when there were much better people out there. That could do the jobs so I helped him hire new. Coo who is going to be my replacement hired a head of finance. We are managing editor. We hired a few other roles like to fill out the senior sweet and then once they all came on board in March two thousand fourteen. Step down so that point. My kids are about three months old and I took the rest of sales and fourteen off. I just went home and largely decompress. I can't say I took the time off because I had to infants at home. But it was really just kind of disentangling myself from nerdwallet and trying to figure out what I was going to do next in my life and towards the end of that year. I'd started helping out friends of mine. That recently started companies informally advising mentoring. Whatever just giving me excuse to get out of the House and use my brain again and and talk to adults and stuff like that and I really enjoyed that amounted to be extremely rewarding and was able to like really help them out which I liked. It also made me feel a little better because I felt like I. I really sucked at my job. Nerdwallet hit a certain scale but being able to go back and work with founders. That were in those early stages and help them overweight. A lot of mistakes. We have made seemed like that was kind of the best way for me to tell Leverage Myself. Make an impact. So I've been doing that for a little while at a site of start putting my money where my mouth is so I'd say also early. Two Thousand Fifteen started angel investing. And I've been doing that full time up until last summer when I made the transition from Angel investor to somebody on twitter the other day. It was like full-blown vc now than I challenged me to update my twitter profile accordingly. Which which I did so now no longer angel. I'm a full blown. Vc doing air quotes for the people. That can't see me right now. So let's talk about is raising new fun better tomorrow ventures. Let's start broad though your background obviously been tack and maybe as a lead into this. I'm sure the people listening would probably love to say. Hey there's a founder of incredibly successful fintech company as a lead in. Is there anything that you learned from nerdwallet as far as fintech space in meaning from the consumer side opportunities mistakes that people make the Kinda the world of Fintech today the State of Kentucky on this for a while? I guess it's kind of a couple of themes that I tend to fall back on when it comes to Fintech and some of this is from my notable that experience a lot of from the fact that I was so steeped in kind of traditional finance before that having been at a big bank and been on an interest rate trading floor which gives you a pretty unique relative to equities and stuff like that would seem to be very company specific like being the interest rate world gives you much more macroeconomic view on how how the world works than having lived through the financial crisis and everything just you learn a lot about the plumbing and so a couple of things. I always come back to. What is it a lot of financial services in most financial services I would say especially on the consumer side distribution is everything and so. There's a lot of product focused founders out there who you know. It's Kim Classic Y C Line. Make something people want? There's also just so much lower in silicon valley that if you make the prettiest APP like you'll win but that's just not how financial services work like you don't you don't really get the word of mouth advantages and stuff like that with with financial products that you could get with like a cool new social. App. There's no there's not really network effects most of finance. There's not really. You don't really get variety in most of finance and most of what's been built. Inventec over the last ten years is not really tech. It's more Finn. There's not much of a technology differentiation that you can use for defensibility in fantastic is wildly Which means that the whole game is how you acquire customers and if whether or not you can do so more cheaply at scale relative to your competition and the crazy thing about finance in particular is like your competition just has such an incredible scale advantage. I can't tell you. How many founders? I've talked to over the years that thought. That like millennials hate their bags. So Chases GonNa go away. You've lost your damn mind if you think Jason going anywhere like the scale advantage and the cost of capital advantage are worth so much more than anybody really gives them credit for and one of the things that Sheila both facile my partner better smart ventures we found over the years is a lot of people building. These companies a lot of people investing in these companies. Just don't fundamentally understand the business models and where the strategic advantages and financial services companies tend to come from this when people out there that do and are doing a fantastic job but there's also a ton of investors out there writing checks crazy valuations into crazy companies. Just don't fundamentally we don't get the sense really understand what they're investing in. They're investing in these if they're just like consumer tech APPS when we need the finance side of things so much more so much more than just kind of the consumer front end so distribution. It's one of the big ones in the incumbent's ability to compete and the advantages that they have and the unlikelihood that a small startup can overcome. Some of those are things that we keep going back to. I think a big one obviously in our space in the public markets is simply vanguard where they're just like this enormous death star me Bud one hundred perspective. That's just you know consuming everything and rightly so I mean that's a great product. It's really hard to compete at. When you're three basis points index was saying well. Let's do this at fifty while the top competition so as you look around the world today. Let's start chatting about some of the opportunities and feel free to use any Companies as case studies if you like but but what are some of the spots that you guys personally over? The last five years have been interested in and and then look to the horizon to on spots. You think there's a lot of opportunity. Yes I'd say. One of our overall themes is that we think that the next ten years offen- tack is GonNa look very different from the previous ten years for the previous ten years. Roughly has been like. Let's take all the existing financial services that we know kind of go line item by line. Item down the income statement of every financial institution and create a bunch of startups in. That's based so you had your life. Insurance companies are auto insurance companies. Your neo banks. You had your Robo Advisors. You had your personal lenders everything anything you can imagine basically just create like an online version. And that's really all it was. Let's take an existing business model and put it online very similar to what happened with the Internet was first getting off right like it was very hard very expensive. Took a long time to start an internet company and so a lot of what was happening was let's take an existing business and just put it on the web but bookstore pet store a grocery store or whatever just put online took the yellow pages put it online and just copy the business model but give it a different form of distribution. And that's exactly what's been happening in. Fintech over the last ten years personal lenders. Snb Lenders Robo Advisors every type of insurance you can imagine basically anything in personal finance very consumer focused here as you can tell but the same things happening on the BBC side. All of these have essentially just been. Let's copy what already exists in. Put It online hoax. Put it in a mobile APP but just like what happened with the Internet. That's now led to people going on to create new companies kind of the next layer of all right. Let's build infrastructure and let's build tools. That would have solved a lot of the problems we dealt with. When we're building that first wave of companies so now we're starting to see all this crazy stuff like I should say crazy received this really interesting stuff. Baking service platforms were seeing like loan servicing as a service. We're seeing underwriting as a service. Kyc is a service like fraud. Prevention has service is all kinds of identity. Stuff out there now you name it. There's like investment platforms basically Robo advisors as a service. Everything is being built. Now like all. The different of the stack are being. Api fight in a way that they weren't previously so we think gonNA open up a lot of opportunity going forward so that's not only GonNa make it easier to build a lobbies fintech APPs which is both a blessing at occur. So that's why there's a thousand neo bags out there now that all exactly the same but at the same time it. It means that you have a lot more flexibility a lot more freedom to innovate and experiment. When you can build something in a few months I used to take a few years when you can build it for less than half a million dollars when it used to take five to ten million dollars and so we think that's GonNa lead to like fundamental disruption in what kinds of financial products are available. What kinds of user experiences are available distribution models business models? You name it. We're not creative enough to know what that is but the founders will find it will find them as kind of our thinking then we also hear where basically companies that don't look like Fintech companies today start to become fintech companies because they can start to leverage this infrastructure to integrate financial services into their other products. So then you know I said before. Fintech has not been tackled. Just been fen basically. Well now you can start honing tech platforms that actually have marketplace effects network effects. Maybe some veracity they have some instability like a real tech product but then monetize it through financial services or maybe get some sort of distribution advantage or something that depending on what the product is. What the Financial Angle is and once you tie that all together you get like very different user experiences very different access points. Different distribution of different data advantages around the products. That you've built and you can just fundamentally changed the business models as well business models that previously weren't accessible in terms of kind of niche marketplaces or something become a lot more accessible at a lot more scalable or like higher margin and much bigger businesses. Once you can start to involve financial services and we see too much of the big companies. Do this already. So Uber Uber Money. Flex Board has flex for capital. Airbnb is obviously involved in a bunch of different types of product shop. Affi- has lending arm. But what we're seeing now is it. Because of all this infrastructure we have preceded seed stage companies. Coming to us who on days zero are saying. Fintech is going to be a big part of my model and they have the capability to build that now. So that's kind of how we see the world having evolve your last two years in House. GonNa Develop the next ten years. Obviously we're very involved in a lot of the stuff that happened in the last five or ten years we did a lot of investing in consumer insurance. We've done a lot of B. Two B. Product selling into insurance companies insurance brokers bags. You name it like all the things that I was just talking about. We were heavily involved in but we think the nextwave is GonNa look very different all right. Let's start talking about the next day and you can either outline any current companies or just broad ideas. What are some of the more specific niches or ideas that really got you excited interested in wanting to fund so the companies were nothing Too early at what a step out of line and call them out by name in terms of themes like some stuff that we've seen seen recently that we really like baking as a service is going to be a Bagel and there's a few companies out there working on stuff like that now with the idea being like integrate into a bank on the back end do all the kind of Harry Work of building the. Api's down into their core into their banking core systems but then provide API's things like Kyc mail fraud prevention issuing debit cards provisioning bank accounts in potentially even lending on top of that so the other tech platforms gig worker marketplaces for example can start to issue white label bank accounts similar to what he does with kind of the prepaid debit cards for their drivers. Like imagine if you could just start issuing bank accounts debit cards and then using the data from all that to do kind of working capital lines of credit and things like but specifically targeted towards you as a platform are able to start issuing that stuff in a white label format to the users of your platform. So that's that's the thing that we think is really cool. We think that this idea of embedded fantastic is going to get really interesting in the years to come Slezak. We've seen similar types of things like insurance actually. What can we talk about? Public scored leisure. I think can start fit into the stack at some point where they're effectively a securitization platform for basic. Dnc risks. Right now we have the insurance linked securities market I L S market as primarily large contracts focused on catastrophic risks traded between hedge funds and reinsurance companies. But imagine if you could take that same idea at bring it down to kind of smaller packages of consumer and commercial insurance were. You can standardize it. Securitise it and then you don't need to have this kind of cumbersome stack of like reassurance with insurance with brokers and agents on top of it and everything very much a risk silo with lots of correlated there as well you think about kind of California fire. Risk like Florida or Texas Hurricane. Risk or something in your homeowner's books for example is regulated on a state by state basis. So you end up with these kinds of silos of risk that tend to be overly correllated so imagine if you could just as a broker price the risk in sell it off to the open market at a much more market price versus whatever the the Reinsurance Company whatever. The carrier wants to charge. And then give you a lot more. Give the reassures in the hedge funds. Whatever a lot more room to be asset managers in a sense and then give the allow the carriers to be much more capital efficient and kind of thinner and a sense like really play up this model. This model that allows the insure texts have been built on the last few years. She gives you a lot more flexibility to underwrite and and package up risk much more cheaply and much more scalable. This idea has such a large potential and we asset manager. The Insurance League space in catastrophe bonds phase is this really fantastic quote asset class not really an asset class but more of an active strategy transfer risks where you can invest insecurities like you mentioned that. Insure against the risk of hurricanes earthquakes in Japan or even pandemics etcetera etcetera and. It's for large part often not correlated with each other in in many other things so from the end. Investor standpoint is branching but it's not particularly liquid. It's a bit complicated. We'd we'd consider There was any possible way to do it as a open-ended five minutes now really much is one group that does it. I'm blanking on the name. It's called like Stone Ridge or something. It doesn't Mutual Fund but ledger is so their business model like business to business. What is they're SORTA concept? Yeah it's essentially like an institutional marketplace. They're effectively brokering the risk from do you have like a specialty insurance program. One-sided selling like commercial auto or life or could be just be like a package of consumer auto insurance or homeowner's insurance richards like any kind of any kind of like commercial or consumer PNC insurance and then effectively the brokers would underwrite that risk and then through the ledger plot forum. They would sell it to carriers reinsurers hedge funds anybody that wanted to invest Senate and to your point. It's highly correlated risk. While the most words on correlated what's interesting right now is clearly pandemic for catastrophic pandemics and markets are correlated and interestingly enough like pandemics and auto insurance or negatively correlated like loss ratios in auto insurance basically gone to zero this year. But you can think about like if you are a giant reinsurance company managing tens of billions of dollars of assets like being able to invest some of it in consumer audio over here and homeowners over here and so on and so forth and not kind of be stuck into the same kind of pipelines through your carrier relationships that they do now you get a lot more diversification and even for you know high with individuals family offices or whatever like you could potentially use something like this is part of your cash management strategy or something where you can earn like low. Double digit returns would know strict market risk double digit returns. Attract people right now with. Us bonds and the one percent range. It's very cool world in concept. I hope they figured out at certainly debt. What else you got your brain on and the other kind of specific ideas or ones that you wish someone would tackle the currently or not as other areas that were related to dead. We're looking a lot at international markets so like Latin America Africa maybe even South East Asia. We think there's still a lot of where there's not as much low hanging fruit in terms of financial services products here in the US with a still plenty of opportunity overseas when you put together like young populations digitally native increasingly educated increasingly wealthy. But no like very little financial infrastructure to support them within is GONNA be a lot of opportunity in spaces like that and so we made an investment out of the new. Find the In Mexico City real excited about you mentioned earlier. The challenge of the incumbents. You know of of like chase in the challenge of finding those you know. What is the big reason that a swear plaid or any of these striped firms would move in two big opportunities about America Africa it? What's what's the thinking there is it. Governmental is was the big opportunity. Sir I can't speak to the actual roadmaps of companies. But I don't I don't think they won't necessarily. I think there's plenty of opportunity for them to moon base. That doesn't necessarily mean that there's not opportunity for for new entrance but also say that anybody who's starts in America is gonNA tend to spend a lot more time in America than overseas because we're the biggest market so you're you're seeing it with a lot of the NEO banks stuff now. There's some new started in Brazil Monzo in twenty six years other companies started in Europe. And all of them are starting to look at the. Us as their next market because they've basically saturated the markets that they're in Readily the something like I'm GonNa screw up the numbers but I want to say something like sixty percent of banks like bank account holders in the UK have neo bank accounts now so like where do you go from there you go to the US so anybody who started in the US probably still has a long way to go before they have that kind of market share in is often they have to make hard decisions about how much time and resources they're gonNA put into moving overseas versus staying in the US that said like striping. Swear at a scale where it does make sense and Jack Famously. Last year was talking about moving to Africa for a while and looking at that market so I'm sure they will at some point but at this point I mean the company that we invested in Mexico City is GonNa a start to notice a theme here as a parametric earthquake insurance company. And so. That's not something that anybody in the. Us is particularly focused on and was up until a few weeks ago. Very top of mind in Mexico that one cross replay was it just network friends of friends. People reach old. What's the typical process? They're generally so she'll spend a lot of time overseas talking at conferences going to events and things like that he knows founders investors all over the world and he tends to be our our lead on anything international but in this particular case it was a founder who was the head of product at another one of our portfolio companies at this point between five hundred. Fintech in my angel portfolios we have something like a hundred and sixty portfolio companies. Already in so we see a lot of things like this. He was the VP of product at another one of our portfolio companies. Any left to move back to Mexico or his family as a decided to start insurance company in Mexico and we were as I call. There's an area are actually talking with you about this somewhere and you can correct me if I'm misinterpreting hertie something along the lines of there's a big challenge with personal finance and investing education. You know and whether it was an insurmountable problem is did no good. What are your Josh on? Trying to educate because we don't teach it in high school. It's like ten percent schools or something. It's a constant thing I bemoan about. What are your thoughts there and isn't an opportunity at all you know? Having ran a consumer focused essentially fintech education site which McDonald's by views largely that maybe there's some Education that's necessary but at the end of the day. None of us don't know we need to eat more. Broccoli right the chat or maybe some of us do for like. That's not the problem. The biggest problem is not that we need to be educated on what foods are healthy. Foods aren't healthy. The biggest problem is compliance. And it's the same thing and financing. Finance and health are very similar. And there's a lot of reasons why that is the industries are set up to take advantage of our psychology and make these things difficult for us. A big part of the thesis behind Nerdwallet was like you should never believe begged marketing because they are one hundred percent setup to take advantage like they make the products as confusing as possible and then make the advertising. Seem like. It's easy in order to get you to sign up for like a five percent cashback rewards card when you're going to be paying thirty year interest which obviously is not in your best interest so my view is basically that it's compliance it's hard and there's plenty of companies in founders. You've tried over the last five or ten years to help that. Like create these good-looking apps that help people will stay on top of their budgets. Or let you know how you're doing against your goals when it comes to paying down your debt or whatever but they've always kind of struggled to hit real scale because engagement is just so difficult like you. You'll acquire a customer super cheap in in the early days because it's the early adopters that all WanNa try the new new thing. They'll play around with it for a few weeks. And then once they get a sense. They'll just churn are stop using it and all these products are monetize ing through or all. These APPS are modernizing through referrals to financial products. So if you're not engaging they can't refer to anything they're not making any money and then it was so easy to build a product like this there ended up being hundreds of them essentially just front ends on top of plaid and now cost of acquisition is just through the roof and so basically. It's just hard to get people to keep coming back and keep engaging them so one of the things Sheila night talk about. A lot is that and this is kind of neural. It's kind of following the same path like we started by just doing content. We're affectively like money magazine right. You know. It was mostly content. We'd help you make the right decisions. Point you in the right direction and send you on your way but it required a lot of work. Only a certain subset of the population. That's willing to do that. Where so even started moving more and more towards all right? We'll give you a product to like give you more insights that are personalized to you and the future is. We should just be able to do that for you. Like we're rather than telling the best credit card rather than giving you the tools to figure out what the best credit card is a rather than give you the tools to figure out what the best loans are for you or just telling you like. Hey maybe you should have a lower rate on your student loans or something. We should just go out do the research automatically and just review or we should automatically be pulling money from your deposits and paying off loans in an optimal way putting money. Emergency savings putting money in your no. Well Front ACORNS. 401k whatever Ira Doing that in an automated way. So that you you at the end of the day just kind of get a second pay stub that says this is much disposal cash. You have take a lot of that friction away from the away from the consumer. You think we are from now because you've seen some of the robos People do what you're talking about. Which is you know in many ways. A lot of this is what a true fiduciary financial adviser should be doing right now after it's not automated certainly in in certainly software could takeover Most of the role the problem you have so much as most of the world is still not to do Sherry and also that some of the fintech startup. You see the problem that you mentioned. Because of the cost they start to creep into areas. That aren't customers. Best interests whether they editor not and I've seen it multiple times already where it's just like that is clearly a monetization effort. Now in the consumer's best interests far. We wave from that actually kind of happening. Yeah I think we still got a ways to go. I couldn't put an actual time on it but I know a bunch of companies that are working on different parts of this in interesting ways. And hopefully it'll start to conceal and we'll see more movement here but I have a portfolio company called Astra. That's automating a lot of the money movement stuff but they're doing it and it's more focused on power users to begin with but can kind of adapt over time. Like if you think of it as like Xabier if this then that for moving money between your different accounts you set up your own rules like I want fiber set of my paycheck to go to this account. I went three percent to go to this account. Ought to percents ago. This account every single time I get a paycheck. The use set up those rules and then they'll automatically manage the the money movement for you have much more complicated routines you can design than that. That's an easy example. There's a company called Northstar. That's also trying to do a lot of automation. They're working on that kind of pay stub idea that I mentioned to you. Where using machine learning to analyse. You're spending tantalize rebels. Analyze your debt. Whenever you get paid. They'll can figure out the best places to put all the money and then let you know what you're supposed to income. As and they're offering not as a financial wellness benefit to employers to give to their employees says Northstar one of my portfolio companies. Grove was trying to do tech based financial. Planning like what you were just talking about as a fiduciary helping you figure all this stuff out through technology. They ended up selling to wealth front and are now running wealth fronts of self driving money. Initiatives is inching idea. There I think the Could shift is more of a regulatory barrier up till now that you couldn't have the discovery in financial advisers is tough because you can't testimony oils so you can never documentations. You can never say this guy's naps idiot. You know so there's no like Zach Dr visors but recent rumblings has been. They're gonNA lift that. I would love to see a lot. More transparency in disinfectant in that world. Because I think I don't know the exact business model is because it gets you paying for leads with testimonials is currently legal. Obviously but someone will eventually figure it out so if you ever find me on the the does it let me know I would certainly invested. There's certainly some opportunity there because it's so opaque with so many people with the world still being most most of the being non fiduciary which already right there is is a tough tough spot to be in your Alto Iran duster to is that they should have been in. The last. Podcast will publish by the time this comes out. Just talk about it so it should be and the right linear order or the other areas that you think are. You just haven't seen a company do it yet that you really love to you know for me. I was looking last. Night was starting to do my taxes with turbo tax which is like you know like most frustrating and I couldn't even download them. I couldn't even get a picture of like how look through the years. There seems to be a lot to any other areas. Where you're you're a call to entrepreneurs out there that you wish it's a good idea that you wish someone would be doing. I have terrible ideas. I could talk about for hours. Yeah you know. I'm I'm usually not the creative. When it comes up with the ideas like I I see problems in hopefully. There's founders working on smart ways to solve them that there have been any others. Just Bang you on the head where you're like. Wow that is fascinating or really cool idea that I just hadn't really considered or you think is a much better approach to the landscape. Anything come to mind know. I have seen some like kind of off the wall stuff lately that I'm just not sure if it'll work and haven't figured out what the right approaches and all this other stuff but now there's another company recently that is doing basically like lending to help people get their four one K. match so it's you know employers offer this 401k batch effectively free money but not a lot of people are able to take advantage of it because they're not putting enough money in their 401k. It's not a model that really works as stated earlier. I'm not convinced that it'll it'll work that way but I thought it was just like so off the wall. It was one of these things. It was just crazy. It might just work. I actually spent some time on it but like that's the kind of out of the box thinking that I would like to hear more of from founders at another founder recently who wanted to start basically like the new credit union which on the face of Another neo backed by another name. But when you spend more time thinking about there's actually a lot of interesting differences in credit unions that don't really exist for banks and other model. That's really hard to get off the ground and may or may not work but I do think there. There's a lot of value. In credit. Unions and credit unions are never going to adapt technologically into to this new world. Maybe there's a way to create you know credit unions to point and is obviously an audience out there for it giving all the people voting for Bernie. So I think that there's there's gotta be something to that as well I Community based banking or affiliation based bagging. Where the kind of benefits accrue back to the to the end users you eliminate actually kinda start out this way as well as a mutual are like originally. The idea was to be an insurance mutual. Pivoted away from that. But I think there's something to that we're like the your customers own. The company in a way and like the benefits accrue back to them instead of just shareholders. I think we'll start to see more and more stuff along those lines. And maybe eventually we figure out a way to do with technology but the new fund guys exists mostly in the sort of pre seed seed series A. What's what's his check size. What are you guys looking at or just a little bit about your opportunity there yes? We're preceding seed exclusively focused on leading deals. We Wanna be writing like half million a one and a half million dollar checks being the primary if not the only institutional investor around. We have a little bit of flexibility to co lead with some of our friends in the industry but for the most part like this is a couple of things that we look at we would be in position to be that primary institutional relationship. And that's just very broad based in fintech are tongue in cheek thesis since the beginning has been everything Fintech. So if you play out this embedded fantastic idea. And how essentially any company has the opportunity to eventually monetize through financial services like that our mandate is actually quite broad so we have a couple of my Angel Investments Warehouse into the Fund. There's a trucking company. There's a company in there that's tracking software company. I should say there's a company of their that's software for landlords random stuff like that but will be able to monetize through financial services over time and I imagine it has a prey traditional. Vc structure. Now that you're of these see yet you still plan on syndicating? Angel lists or other SORTA investments as well as totally fun related in would also love to hear about the angels experiences a syndicate lead to focus on the fund. Now the only thing that will only stuff that I'll do one angeles going forward would be if any of my current Angel List portfolio companies. Raise another round or I can get allocation. I would offer the pro rata to the existing Angeles but I won't be doing any. Investments RANGE ELICITS. More does kind of managing the existing portfolio in. I guess my experiences Angel Lewis has been a way to kind of get leverage as an angel investor in kind of practice playing BC. Which is the way that I looked at it. It has its positives negatives like it's it makes it very easy for you. I don't have to manage the back office or anything like that which I just wouldn't be capable of doing as an individual anyway you know. They've got a great marketplace of capital there but at the same time not having a dedicated set of. Lp's means that it's hard to do these types of SPD's it was hard for me to go to a founder and say. I want to invest too in Fifty K. Or half a million dollars in your company about like giving me a couple of weeks to figure out if I can actually fill that or not does I haven't actually found any real. I've had some deals that oversubscribed immediately. Some bills took me weeks too busy to get them filled. And it's not always obvious what's GONNA put one company at one bucket versus another like the investors make delicious. Tend to be fickle. So if you look back at you I think I heard you say you've done over. A hundred private investments at this point is that right. I've done about ninety in. We ran the five hundred fintech fund before this which invested in another seventy five or so companies. Talk to me. If you're just a moment about you know the challenge with Angel and venture capital often is that so much returns dominated this public markets to so much it returns dominated by the big outliers. And you know the the hunter baggers or more if you go back and look at your investments or your experiences. Is it a situation that you go back and look at them? And from the get-go it was obvious your conviction at the time. The ones that became the big winners Was it somewhat? Random House played out over the past almost decade. I mean there's there's a ton of uncertainty in all of this. It's always really hard to know which ones are going to be. The best ones is the way that I've thought about. It is my goal as an angel was to build a network. It was to invest in a lot of companies relatively small dollar amounts into any individual company and built out a pretty expansive network and learn a lot and learn as much as possible so being involved in companies across every sector that I'm interested in basically and over time your deal flow starts to improve like in theory. If you're doing your job Greg your your your deal flow improved over time. You should get access to better stuff and then you just start to like narrow your aperture. The it wasn't until I really felt like that had happened or was happening that I would feel comfortable raising a fund. Now I feel like I've seen enough both through the experience and through my own angel portfolio to have a pretty good sense once I spent a couple of hours with founder. And you know kind of have the the prepared mind around certain ideas. Now that I've seen enough of it I feel like I have a pretty good sense when I mean a new company of what my interest level is going to be. You learned little things along the way all the time like how important it is that you just in Italy have feel like a good kind of financial opportunity but this is a founder. You're going to be working with very closely for a long time. So like you have to evaluate that to like. Am I gonNA sit across from this person every week for an hour and helped him build this company and also going to give a shit about this idea enough to put in the effort to help this founder bill? This company some. It's somebody that's like. Yeah that obviously is GonNa make a lot of money. But I don't care about bringing that idea into the world is just not something that I get out of bed for in the morning. Probably a red flag is probably not something. You should invest in founder rubs you the wrong way in subway. Then that's probably not something union lesson and these are things that you can pick up on as you over time as you learn more and more again can kind of start to narrow your focus houses this year change things in the world have been tack and investing in BC and everything else in a major takeaways other than. We're doing this from your couch in my bedroom. Yeah so I think just in terms of investing zero. You know. Somebody's gotTa do a match on a powder keg still waiting for the dust to clear before anybody can really start to the analogy. That I heard recently was like you know we're still putting out the fire and only then can we assess the damage can start planning for the future and I still feel like the uncertainty level is high enough. That's that's very much the case I'm not GonNa make any strong judgments on what the world's GonNa look like six months from now although one thing that's been really interesting that we've seen in all sectors but FINTECH has been count one that's been affected really strongly by this as like overnight digital transformation. We've been talking about that. You know technology's been kind of slowly creeping into industry for the last ten fifteen twenty years now or definitely since the famous Mark Andriessen Wall Street Journal Article OP. Ed Whatever. It's the software eating the world thing is it's it's been slowly creeping out there and Fintech is one of the more recent kind of examples of that is like soffer is kind of slowly creeping into into finance earliest kind of consumer facing finance. But now all of a sudden overnight has been accelerated like our kids are learning zoom. Now my mom's accounting firm just adopted slag in dropbox and bought laptops for the first time a couple of weeks ago. Like we're seeing all all of these different companies and all these different industries this overnight have to figure this shit out and like move everything to the cloud start using collaboration software. All this other stuff and then it's happening in Fintech to from talking to some of our portfolio companies things like digital banking is kind of finally saying. It's Day because all these like bank branches aren't open right now. And they're closing. A lot of them permanently dislike the push of a button basically in the digital makings gonNA become more and more important going forward like contactless payments digital payments. Mobile payments are definitely going to be accelerated from here on out anything that required a human touch to sell a lot of insurance life insurance for example life insurance very top of mind for people right now and at the same time like most life insurance is sold by like talking to an agent face to face. An often even do like a physical exam on you. Well that's not happening right now. So companies like ethos and latter bestow and stuff like that to do fully online life. Insurance are having some of their vestments right now and we're seeing that in a bunch of different types of insurances well because the traditional agent model is kind of breaking down. They're just not set up to sell insurance when I had to reset online but they have now people are just sitting at home buying insurance or signing up for credit cards or getting loans. But what's the what's the credit card log? You gotta you gotta you gotta chase from the the normal founder mind. You gotta give us the goods. So she'll make fun of me because of the credit cards that are in my wallet especially given my background Founder so chase hates me and refuses to give me any of the premium credit cards. I've been rejected for a chase Sapphire reserve every time I've applied for the past three years and I'm like it's even funnier with Jas because I worked for you for six years. I've been a customer of yours for something like twenty years. I also one of your biggest distributors for about four years. Why why did he reject it? I signed up for two minutes as credit cards over the years and has always a different. It's like there's the five twenty four rule they called me out on and then it was like we can give you the Sapphire Reserve. Because you had you gotTa Sapphire preferred for years ago or something. Every six months go back and apply again to see if they've relaxed. The rules are or if I've kind of run out the time period but it never works and then even like I tried to get their premium united credit card and they rejected me for it. Just gave me the regular united credit card. I can't have like a united credit card. I have The Marriott bond boy that I've had used to be the SPG guard of had that for a million years. My Business Card is actually a ramp card because they are a portfolio company of mine. Some other breakfasts when I saw brax hit such a rocket ship evaluation because their their name logo looks nearly identical to one of the biggest stock frauds wall time which was Korea was the mining company. And I saw that you guys. No one stopped thing because this was a terrible idea but whatever I have. I've not heard that. What company was this? Look up reacts in the story is fascinating too. There's a lot of sort of cloak and dagger people died in like helicopter. Crashes and stuff. It was one of the biggest frauds of all time. I think it was Canadian but it was. It was like a gold mining company. Anyway it look it up. It's IT'S FUN. It's like a silk roads style story just crazy to believe looking back on the career so far not including nerdwallet spend your most memorable investment made. It could be that computer. What was your first computer? You started coating on by the way. It was the commodore sixty four now. Like literally the first computers. I was playing around with. It was just parts that I cobbled together. It's like take a motherboard. Six minutes to video card on it and put it in a white box or like a beige box. My first computer didn't have a hard drive. Was booting everything off of a five. And a quarter INCH DOS. Floppy the play video games and run word perfect and stuff like that Q. Basic See I don't even know if it had a brand on it and to be honest with you I I never had one of the. I didn't have the apple two or the Commodore Sixty Four. Any of the south is like some of my friends. I'd about go there and play like amazing video games and loved them but I was always just bare bones. So so on the investment side. Nothing comes to mind. Even your trading interest rate will be trading interest rate futures. The Banking Day has little bit of everything I was reading. Swaps Eurodollar futures options. You know swap Dollar future options. A lot of that stuff didn't have all your retirement. Money and J. P. Morgan stock and the financial crisis. Yeah even worse like all of my liquid assets from the stock market because I was only twenty five years old or whatever and so like why wouldn't I have all my money in the stock market and then half my net worth was in investor J. P. Morgan stock and I was getting paid? I was joking. I didn't mean for that to come home. It's so close to home. You learn a lot of lessons in a seat like that. I learned a lot about correlated risk and leverage two thousand a year that basically none of us got paid and I almost got laid off and I lost at least half my money so I'd also recently bought my mom a house in Florida. That's the best. I was investments when he can't sell one to especially when they go down fifty or sixty percent value. Where do people go? They WANNA find more out about your fun what you're up to. Where's the best places? Twitter is probably the best place. These days tend to be pretty engaged on twitter. It's like the only social media stuff that I do. Well added to the show notes was the handle. I am Jake Stream got it was the story behind that you know. It's that handles. Ten years old and I think I loosely borrowed it from Fight Club. You're name's Jake like your name has always taken when you join something new and so I always come up with where things may look. It's been fine. Thanks for taking the time out of your Corinthian let you get back to whatever craziness that's engulfing you and your world. Thanks for joining us. Thanks for having me. This is fun podcast. Listeners will post show notes to today's conversation at met favored dot com slash. Podcast if you love the show if you hate it shoot. Us feedback at the net favourite show dot com. We love reviews these on I tunes subscribe to show anywhere. Good podcast found. Current favorite is breaker. Thanks for listening friends and good investing.