Welcome to Breaking Banks, the number one global fintech radio show and podcast. I’m Brett King. And I’m Jason Henricks.

Every week since 2013, we explore the personalities, startups, innovators, and industry players driving disruption in financial services. From incumbents to unicorns, and from cutting edge technology to the people using it to help create a more innovative, inclusive, and healthy financial future. I’m J.P. Nichols, and this is Breaking Banks.

I’m excited to share a new series we’re launching on Breaking Banks. You’ve listened to Guy Raz talk to entrepreneurs about how they built this. Well, now listen to Alex Johnson of Fintech Takes and I talk about, well, how I killed this.

These are candid discussions with entrepreneurs sharing lessons, failures, successes, and some of the tough decisions they had to make. Not everything goes up and to the right. Sometimes success is just getting out, either winding down the company, finding a soft landing, or exiting yourself.

These are the stories of entrepreneurs that made tough choices and to pick themselves up again. Welcome to our new series, Killing It. In the second half, we turn to Greg Palmer, host of our sister podcast, Finnovate, as he speaks with Tamara Stephens, Managing Director at Thomson Reuter Ventures, about her perspective on what’s on tap for Fintech and the funding ecosystem this year.

Enjoy the show, and we look forward to that first episode of Killing It with Shamir Karkal of Simple. Alex, thanks for joining me on the new series. I’d like to say I’m excited about it, but maybe pensive is a better word.

We hear so much about the unicorns and everything in a world that went up and to the right. I think 2023 was a great realization that everything does not go up and to the right. I would say 2024 is a realization, there is no silver lining, per se, that everything is guaranteed a soft landing.

If we talk about how I built this, this is the antithesis of how I built this. This is how I did not build this. This is how I failed this.

This is how I crushed the stores. Where we got the title for this is this is how I killed it. Actually, Dan O’Malley and I back in the day when Perk Street was a high flyer, and the reality was our investors were walking away.

Everyone’s like, how’s it going? We’re like, we’re killing it. Literally, we’re killing it is what we’re saying inside. Literally, the business is dying because a series of choices we’re being forced to make.

Totally. We struggle to say that. This is the podcast on entrepreneurs who are going to come in and talk about tough decisions that they’ve made, come lay down on our virtual couch.

Yes. No, I mean, you and I are not licensed therapists, but I think we do recognize that there is this unhealthy vibe in the fintech ecosystem, which is particularly coming out of 2020 and 2021. I’ve compared it to when you’d play Mario and you’d get a star and you could just run through the level and just bash through whatever objects were in your way and nothing could stop you or slow you down.

You’re like, I’m amazing at Mario. Entrepreneurship generally, it’s not like that most of the time. In particular, in the waters that we swim in and in fintech, with venture capital investors and people looking for unicorns and big exits, that’s a high stakes game where there’s a high rate of failure.

I think that so much of what we see just shared publicly, and this is what I see on Twitter, this is the discourse that I see a lot is, well, here’s how you get to peak performance. Here’s what success looks like. Here’s how you have to grind away.

The other side of that is, what does it feel like when you’ve been grinding away and doing all the things you’re supposed to do, quote unquote, to build a great startup, and then for reasons that have to do with the choices you made, but also reasons that have to do with just the broader environment and timing and luck and all these random things, what does it feel like to grind away and then get to the end and you didn’t get to where you wanted or where you did kill the thing that you were trying to build, or you do have to deliver terrible news to your co-founder or your early employees who believed in you? What does that feel like, and how do you bounce back from that? I think those are the questions we’re trying to answer. I think the thing that’s cool about FinTech is, and this is what we’re going to be hopefully exploring in this series, there are a lot of awesome people who have these type of stories. You have this story with Perk Street.

There’s a whole bunch of other folks in the industry who’ve gotten knocked down to the mat multiple times and have gotten back up and can explain to us in detail, in pain, what that feels like and what it takes to walk away from that. I get quite a few DMs or people who have my email reach out to talk about this, and they do feel like they’re alone. I’ll be honest, the story I told coming out of Perk Street was not 100% the reality.

Killing it was factually correct. We were killing it, but the reinvention piece of it, because there was so much shame associated with having been so publicly meteoric rise, and then little known fact, I don’t know that everyone knows this, but you find it if you Google, somewhat buried. One of our big partners was Dave Ramsey.

I got a whole other set of stories to be telling about that one. He went so far, when we were in the sales process and we kept him abreast, he went on his radio show, like him or not, has quite a following, called Dan and I Slime Bags, and that we deserve to be dead, which also made for a pretty interesting response. We had to actually hire security at Perk Street because we had rabid followers who turned more rabid than- Yeah.

Yeah. Yeah. That’s crazy.

Yeah. It’s interesting when you think about the rebirth, I don’t often show this. I don’t think I’ve ever put it on camera publicly.

One year at Dave’s holiday party, he gave me, you can see here, zoom in, a Dean Ramsey special. He had a cask of Blantons and knew I love my bourbon, Don. You will note this has not been opened.

It’s not been digested, but it has sat on my desk now for eight years. I call it my FU Dave Ramsey bottle of bourbon. I look back at that bottle of bourbon all the time and I say, I don’t know what success it is or when I’m at the end of the journey that I’m actually going to open this and have a drink, but I’ve proven to myself I can claw my way back.

I think that’s part of the message. Absolutely. Yeah.

No, I completely agree. I think that to add to that, one of the things that people don’t talk about a lot with this stuff is there’s a lot of vulnerability associated with this. I felt a version of this within Tech Takes, but there’s something very scary about saying, this is an idea I have for a thing that should exist.

The world should be different in this specific way. Pursuing that idea, pushing that idea out there, getting really, really aggressive, in your case with Dave Ramsey, pushback on this vision that you have for the world, it not again working out or things not going exactly the way that you had anticipated. It’s funny.

Failure looks different to everybody. I’ve definitely talked to founders, and I’m sure you have too, where they ended up getting acquired. Financially, they did okay.

Their employees ended up at a new place with stable employment, and they feel like a failure because the thing they had in mind was a different exit or was going public or was doing something else. I think in a lot of cases, and this is something I’m looking forward to exploring in this series, what were your expectations going into this? How did reality and those expectations smash into each other? Because feeling like a failure, feeling that shame is a lot of times a function as much of our expectation as it is about anything else. The expectation setting, I think, is an important part.

One of the guests we have coming up to tease out storied bio, when you look at the products and companies he has been involved in, and yet one of the things he shares as we were prepping, asking him to be on this series, was each time letting go of that, how difficult it was. It makes me think the analogy almost of letting go of a part of your life, whether it be the letting go of college, that was a period, or the post-college, or relationships or friendships. There’s a sense of loss.

In one of the consistent themes or words that has come up as we’ve been doing prep for this is, whether it’s an exit, a good exit or a bad exit, whether it is exiting, but the company goes on, is the grieving process that goes with this. Yeah. I think that the other concept that’s tied right into that, that you just hit on really well, I like the analogy of when you’re in college, as an example, you build your identity around this stuff.

I think that it’s not at all unhealthy, I don’t think, to wrap your identity around what you’re doing or what you’re trying to build or what you’re trying to accomplish. It does feel like a part of your life and a phase of your life, because again, talking these entrepreneurship stories, you’re eating at Subway every night, because you’re literally trying to scrimp and save every last dollar and preserve this time in your life. That’s really resonant.

It becomes a part of who you are. Much like any other type of loss that you have to grieve, part of it is you’re grieving a change in your identity and how you conceive of yourself. I think it is so interesting.

I am looking forward in this series to talking to people who are at different stages of that, because we’re going to be talking to serial entrepreneurs who’ve been through this a lot of times and have a lot of scar tissue buildup. We’re going to be talking to folks who walked away from companies that are still doing well and are still in business, because just personally for them, they couldn’t continue along that path any longer. We’ll talk to people who’ve been through their first failure from an entrepreneurship perspective, and it’s still a very fresh wound.

Everyone has a different experience based on where they are in that journey, letting go of those identities. I wish you and I had had this conversation eight years ago, because I feel like it would have been helpful to realize how much of the loss that I was feeling was that loss of identity. We did a double whammies.

My wife wanted to get out of Boston. We moved back to the Midwest to a place where we literally knew no one in terms of who we worked with. The upside, people didn’t know the backstory, but I also felt like a person without an identity.

My identity was my golden retriever. You’re clinging to these last things that can be a part of your identity while trying to build something new. I’m glad you mentioned the moving thing, actually, because that’s the other thing that hopefully will come up or that we can explore in this series a bit.

I’m actually fascinated by how entrepreneurship and location are connected to each other and maybe becoming somewhat unmoored from each other. I think for many founders, their experience founding a company is really tied to a place, San Francisco, New York, Boston, wherever. This is a legacy of coming out of 2020 and 2021.

We’re seeing a lot more remote work or hybrid companies or starting up in interesting locations. Talk about feeling lost or feeling lonely. At least when you were starting a company in the old world where everyone was in the same room, which still a lot of people do, at least there’s a bonding experience there.

I can’t imagine starting a company now and being remote and just sitting alone in an office. There’s all these layers to the experience of going through this and how it’s changed. I can’t wait to unpack that.

Well, in compounding that with the number of solopreneurs, I think back to early, first in my entrepreneurial, then VC journey and back to entrepreneurial, almost always you had a founding team. More often now, especially I think things started in Zerp where money would flow to an individual or you might have a founding team, but it really was a founder and somewhat of a team. I can’t imagine going through Perk Street again without Dan.

His daughter, who’s now old enough to joke about it, used to assume anytime he was on the phone late at night, he was talking to me because that’s what we did. It was not only the strategic and tactical, but it was the, how do we weather this? Yes. Yes.

No. I think that that’s a really, really good point about just the experience that you go through. Another element to this that I’m fascinated by, and this is a contrast between the Zerp years and now that we’re out of those, but the idea of bootstrapping versus raising money.

I talk to lots of founders all the time who will describe different parts of the entrepreneurial journey really differently. They’ll talk about, oh, yeah, when we were building the product or when we were talking to users, it was amazing. It was hard.

It was stressful, but it was so energizing. Then they’d be like, and then we had to go into fundraising mode. That’s a totally different, it’s like downshifting almost.

It was super stressful. We had to go talk to investors, and we weren’t sure what the right timing was. We were trying to time the market.

I think the other part of this that’s so hard is, to your point, there are all of these different ways of doing it. There’s not one playbook for building a business. The decisions that you have to live with are, and we’re going to talk to some other folks about some of these hard decisions.

At the time, our thinking was, oh, the environment is X. We can raise whenever. Everything’s going great. We just want to stay heads down, but with the benefit of hindsight, it turns out that that was exactly the wrong decision.

Again, even for serial entrepreneurs, there’s no way in the moment to know which of those decisions are going to be good and which are going to be bad. You just have to live with them in retrospect, which is really hard. Even if you’ve done it before, history is no secret roadmap for what the right decision is the next time.

I do think we discounted the value of experience in thinking through these things, but it’s not perfect. No. Actually, maybe the shame might be even more for someone who’s been through it a couple of times and then still kills it and finds out that, wow, as much as I thought I had learned about this experience, it turns out, yeah, entrepreneurship is hard every single time you do it and experience isn’t a perfect guide to what to do in the future.

Yeah. I feel this so often now relegated to the investor role and advisor role with CEOs and coming and saying, thinking through this decision, what should we do? It still gives me that moment of panic. I’m not the one who ultimately has to live with the decision, but just how hard it is for those to begin to feel like life and death.

I think that becomes particularly painful when you’re facing decisions that could ultimately lead to death. I think the one that every entrepreneur and especially first-time entrepreneurs wrestle with is downsizing, getting budgets right. It’s hard, especially people who’ve given so much to get you where you are.

Well, and I think that’s a really good one where it’s like, and I’ve been through this a few times personally, it’s not necessarily the fault of anyone. It’s always easier when there’s a very clear, like, oh, we’re going to do this because you screwed up. That’s a very different experience.

It’s tough, but you can probably live with it. The one that’s really hard is having to tell people who gave everything for your business and your idea, who did everything that you asked and did it well, it’s not going to work. A lot of times, the reason it’s not going to work is because of a decision that I made where I screwed something up.

I think you’re absolutely right. The weight of responsibility being in this type of role is just incredibly hard and something that, again, we don’t talk about. We glorify the upsides to it.

There are really fun parts. I’m sure you had a lot of those experiences at Perk Street too. When you’re riding high, it absolutely feels amazing.

It’s funny. It reminds me a little bit, and you and I talked about this a lot offline, but the entrepreneurship journey feels a lot like parenting, I think, in a way. I don’t know if you remember this because I know your kids are now a little bit older and your brain causes you to forget these things.

I remember when we brought home our eldest son from the hospital. That first night, the level of sheer panic you feel where it’s like, I am responsible for keeping this thing alive, and I have no idea what I’m doing. It’s a magical experience in a way.

You can understand how people get addicted to entrepreneurship or, in my case, having more kids. There is something cool about that level of responsibility and that level of engagement, but man, is it stressful. Yeah.

It’s interesting thinking about the parenting piece of this. The challenge isn’t just the baby. The challenge is the number of stakeholders you have invested in the baby.

So true. We’re giving you advice on like, hey, I used to have kids. This is the grandparents.

That’s not how we did it. Are you sure you want to do that? It’s like, I know you want the best. I know you’re invested in this round and you just want to see this company succeed, but could you back off and just let me do this? You know what I mean? I’m sure that comes up all the time.

Yeah. With my luck, this will be like the episode my mother decides to listen. Right before COVID, we moved to Minnesota into my parents’ basement while we looked for a house and then did a renovation.

Oh, sure. And there’s nothing like raising children under your mother’s nose. I’ve never had that experience and I hopefully never will.

That sounds intense. Right. I think we see this online and in person when people talk about the struggles.

The challenge becomes, are you going to get the… I wouldn’t say you’re doing it wrong, but you’re like, what did I do? I can tell you’re not happy. I’m like, I don’t want to tell you what to do. I’m just saying.

Well, and the analogy is a really good one, actually, between the grandparents and the investors because the other problem is the investors are who they are because they probably succeeded, right? They probably built a great company, had a great exit. They have a great track record. And so as a founder, I’m sure you look at it and go, when you go that sound like, oh, God, maybe I am screwing up.

They clearly know what they’re doing. And I feel this way, I mean, sort of egotistical, but I feel this way with my parents because I’m awesome and my parents raised me. And so clearly they have a track record of raising great humans.

And so if I’m screwing something up, I don’t want to do that. So there is this weird pressure that you feel from that larger ecosystem to say nothing of the fact, and I promise I won’t stretch the parenting analogy too far. But one other point on this is there is a broader industrial complex wrapped around all of this, right? Which is, from a parenting perspective, how to not screw up your kids, how to not raise assholes.

There’s all these larger forces putting pressure on you. And I see that same thing with entrepreneurship and tech startups and just the industrial complex of performance coaches and advice from thought leaders in quotes on Twitter about how to build companies and how to build businesses and all the things you’re doing wrong. And so to the extent that you can drown out the noise immediately around you, there’s still a broader ecosystem that’s putting a ton of pressure on you for how to do things the right way.

Yeah. And fleshing out that ecosystem that can be hard, admitting to your friends, family, to your spouse, that the thing that you sacrificed so much for wasn’t going to come to fruition. And then let’s keep layering on, you have to let employees know, you have to let angels know who wrote the first checks for you, some of which you may be related to.

My uncle slash godfather was the first angel check I ever received back in 1999. For a good 20 years, every year on my birthday, I got a card from him saying, I would have given you money, but you already lost some. And it was not as much as he himself was a successful entrepreneur.

He got it. It was tongue in cheek, but you felt that weight. No, for sure.

You have to tell your investors. And they might be professional investors, meaning they have somebody else’s money they’re investing, but it’s still hard. And I do see a tendency on all of these fronts.

And we’ll have Matt Harris of Bloom Credit on at some point to talk about him leaving Bloom and what he’s doing now with coaching entrepreneurs around this is the tendency is to jump on the ball and hope you recover from it versus those hard truths. It’s actually the absolute wrong thing to be doing. I can tell you from experience, both my own and hearing from others is you actually need that ecosystem.

And it’s going to be a lot healthier, not only as an individual, but I think you’ll realize the people that rally to you and are more supportive than you might expect might actually get you in the right place. Yeah, no, and I think I mean, just to sort of end on a sort of up note, because some of this stuff is pretty, pretty intense. And we’ll be we’ll be talking to folks who are going to share hopefully some stuff that’s, you know, pretty personal, and in some cases, you know, big challenges that people have been going through.

But I do think we are also hoping to highlight, like what that looks like, when you find out people who are really truly invested in you, and not just like your business, or trying to get a good return on their investment, or, you know, finding employees that you had, who follow you to the next company, and the next company after that, and the next company after that. And I think there are a lot of those really cool stories that come out of this that, again, like, the they’re not shared, because they’re part of a larger story about failure. But there’s some of the most meaningful parts of your life over time are that, you know, the people that you find during failure, and the lessons that you learn from that.

So I think we’re going to try to highlight those as well. And, you know, hopefully, this is a pro-entrepreneurship, pro-trying new things, and getting off the mat podcast at the end of the day, right? Well, I mean, it’s about the rebirth. And that rebirth doesn’t necessarily mean another successful startup, right, or an exit, or, you know, an Amanda Payton, hey, you know, let’s, you know, pick up from the ashes, literally, you know, pick it up and, you know, reinvent the business itself.

I mean, the number of times that I’ve thought, oh, you should I do Park Street 2.0? And then yeah, you know, dismiss it, that isn’t necessarily the path. But some of the journeys we’ll have on our people who walked away from entrepreneurship altogether, that are happier for it, right? Yeah, right. And not everyone needs to be a founder, not everyone needs to be an entrepreneur, not everyone needs to work within fintech, that’s not a failure.

But I don’t think the entrepreneurial journey is one that many people do benefit from if you want it, it teaches you something, right? Like whether you stay in it or not, you learn something from it. Yeah, exactly. And I think the, what I would love to come of this series is a safe place for people to share that journey and for the listeners to think through and go, oh, I’m not alone in doing that.

The failure is to stuff it, to not want to deal with it, to let it affect my physical health, my mental health, my relationships. So what I do next, do I fall out of the ecosystem altogether? Because, you know, I feel like people are judging me and how, you know, the approach, it’s timely because I just listened to it this morning. Um, the podcast, the guy who wrote the subtle art of not giving an F and one of his life lessons, he said that he thinks everyone needs to learn is other people spend far less time thinking about you than you do.

The spotlight effect, right? Where it’s like, you feel like you feel like everything is falling on you. I will tell you, that was one of the greatest revelations that I had in my life was when that I finally figured that out. And of course it came like at the end of high school.

And I could have used it way before that. But like there, there are these moments where you realize, you know, and you have to, you have to go through it. You have to come out the other side of it and go, you know what? Like I failed, the world didn’t end.

Um, you know, people aren’t judging me based on this one thing that happened. In fact, a lot of times, you know, I think you come out of these experiences depending on how you handle them. And I’m looking forward to hearing some of these stories better off, right.

With a better reputation with like lasting relationships and you know, I, I think one thing I’m, I’m really curious to ask some of the, the entrepreneurs that we have on this series is what are decisions that you don’t regret even though they didn’t work out, right. Because like a lot of times I think with, with particularly these sort of early, early stage companies and building these things, you’re sort of forced between choosing to do the thing that you think is the right thing to do versus the thing that might have slightly higher odds of keeping your company alive or stretching things out or whatever. And those are incredibly difficult decisions.

And I, I would just, I’m still looking forward to hearing about how people sort of think about those decisions in retrospect and how they wrestled with them because, you know, I’m not going to sit here and tell people there’s a right way to do it or a wrong way to do it, but how you live with it is the thing I’m really curious about. At the end of my first entrepreneurial journey and you know, a lot of lessons learned that I don’t think most people know. So co-founded a company at 27 in biotech in the late nineties when biotech wasn’t a thing and young founders weren’t a thing.

Lesson learned founding a company with two brothers who are exceedingly close, like puts you in the middle of battles that they’ve been having since they were five and six years old together. Like physical wrestling was not an uncommon occurrence in the halls of US genomics. And it was actually Brad Feld had recommended someone they worked really closely with a management consultant, management consultants, as in consulted to management around leadership development by the name of Artemis Joukowsky.

And this has stuck with me. So this is how many years later, you know, 35 years. I don’t actually want to know how long that is.

But one of the big things he brought up around company culture, and it’s true of all relationships. I think when you worry about, will people work with me again? Will they invest in me again? Will they partner with me again? If I, in my perception fail now because it doesn’t go the way I wanted. And what he said was, here’s what defines life.

It is the promises you make, the promises you keep, and more importantly, what happens when you have to remake or ask for forgiveness for promises that have been broken. That’s amazing. Yeah.

I mean, that’s exactly right. And it’s one thing. And I think you and I will find this when we were kind of progressing through this series.

I’m blown away constantly by just how small the fintech industry is, right? And I talk to people all the time about this, where it’s like, the more deeply you get sort of embedded in the ecosystem, the more you realize, you just keep running into the same people. And you keep talking about the same stories. And like, and I think this is true everywhere.

Like these, these ecosystems where great things get built are really small. And the currency of those ecosystems is relationships, to your point. And so like the relationship aspect to all of this, particularly contrasted with like how lonely the process is, I’m really interested to explore because I think that’s extremely well said.

I mean, the end of the day, will people work with you again? Will people work for you again? Will they jump off that entrepreneurial cliff with you again? Will they invest in your company again? It all is a function of those relationships, much more so than like, was it profitable or not? That’s not how it works. Yeah. I mean, I’ll be honest.

There are, as an investor, companies that have made money for me, and I will never invest in again. Back to the how you manage the relationship. You may have generated a return on my investment, but the journey was not worth it.

Yes. And there are others that have lost money that I don’t even need to know what you want to go do. I’m happy to like write a check because of how you handled that.

Yep. Yep. Exactly.

No. And I think that again, and we’ll be talking to folks who’ve been on this treadmill for a long time and are repeat entrepreneurs who keep going at it. I’m curious to talk to them about how that advantage compounds over time, because I think the overall goal you have, particularly if you’re going to stick in entrepreneurship for a while, is you want to create unfair advantages for yourself over time.

And I think compounding value of relationships is such an unfair advantage for people in this space. And if you’re starting your entrepreneurship journey, or you’re thinking about, Hey, this isn’t going well, I’m going to have to unwind this first, you know, go at it. It’s not going to work out the choices you make about how you manage those relationships.

These are the seeds of those compounding advantages that you’re going to build over time, regardless of what you do next. Absolutely. So for anyone who’s listening, if you have a story you would like to hear told, you know, drop it in the show notes, respond on Twitter, DM us.

If you have a story you’d like to tell yourself about that journey, or even just a question, you know, to ask either specific people or, you know, us to pull, you know, welcome lay down on the psychologist couch here and, you know, let’s have a therapy session about FinTech in the new era. That’s right. We have plenty of room on the couch.

So we hope that you will join us. Plenty of room. Thanks for being part of the journey with me here, Alex.

Yes, sir. I feel better already. Me too.

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Learn more at AlloyLabs.com. Alloy Labs. Banking Unbound. Hi, everybody, and welcome.

We are talking to Tamara Steffens, Managing Director at Thomson Reuters Ventures. Tamara, thank you so much for taking the time to connect with me here. Thanks, Greg.

I’m delighted to be here. Yeah. So we’re going to be talking a lot about high level where the fintech ecosystem is and what we can expect to see over the course of the next year and beyond.

But to start, will you give us just a quick background on yourself and how you came to work at TR Ventures? Yeah. So I’ve been in the startup world for many years, 20 plus, mostly working with companies out of the Bay Area. I think all of them were out of California.

My previous stint was at M12, which was Microsoft Ventures, after an acquisition of my last company called Accompli, which if you’re familiar with Outlook Mobile, then you’ll know what Accompli is. But I think I was addicted to startups and then ended up in a big company and then landed in their venture fund talking to founders and writing checks. And I really loved it.

The folks from TR reached out and said, we’re starting a brand new fund. We like what was done at M12. Can you replicate it here? And we talked about what their focus was.

Super thesis driven company, very focused in legal tax and risk fraud and compliance. And we’ll talk a little bit more about that. But love the fact that they were thesis focused and I got to start it from scratch.

So we’re going on two years as of January 31st. Yeah, that’s great. Congratulations.

And off to a strong start. So what would you say are your priorities right now for TR Ventures? What kind of areas are you guys focusing on? Yeah. So going into year three, we’re going to look at the same thing we’ve done and repeat the formula.

We generally focus on Series A. So opportunistically, we have invested in a couple of seed stage companies where we think we can really support and help. Difficult for funds who aren’t set up to support seed stage companies to invest. You have to be very conscious, I think, of that.

So we’re careful not to take on too many seed investments. But Series A in tax, legal and risk fraud and compliance, think of us as investing in Horizon 3. So we tend to acquire or build a lot of what is needed now. And then as we look at the future and where the fintechs are pushing and legal tech is pushing, we like to invest there and partner and go to market and try to understand and help them grow their market with our customers.

Yeah, that’s great. Really interesting. So I’d like to take things up to a super high level with a simple question that’s going to be probably pretty tough to answer.

And it’s this. Is the fintech ecosystem healthy right now? And you can put healthy in quotation marks if you like, if it helps to conceptualize. But broadly speaking, is the industry doing about what it should be doing? Is it functioning in the way that it should be functioning? I do think there’s still a lot of innovation that’s happening.

And we’ve seen a lot of startups that I really do consider pushing out to that Horizon 3. And at Microsoft, we used to say even Horizon 4. So we are seeing a lot of great new tech. So I do think innovation is happening. I think for the companies, the early stage companies that may have raised in 2020, 2021, they may or may not be able to step into the shoes and the valuations that they raised at.

So there’s going to be a few bumps in the road here, particularly, I think, in 2024. There’s another infamous venture capitalist podcaster that I think he referred to it as kicking the can down the road that was happening in 2023 with extensions and safes and A-pluses and B-pluses. And I think right now, they’re going to have to figure out, do I have enough cash to survive? What am I going to do to get me through the next 24 to 36 months? And so fintech has always been a big area.

It was very big in 2020 and 2021. So I think some of those companies are going to come up against a backstop and have to determine what direction to take as far as getting additional capital to keep going. But I think it’s still plenty of innovation in fintech to be had.

Yeah, I think I tend to agree with you. I think people sometimes think of a healthy industry as being one that is without pain. And I think as much as we wish that could be the case, the honest truth is not every company that gets funded will end up going on and having a successful exit.

That’s the reality that we live in. And I think for a while, we potentially as an industry drifted a little bit too far away from valuations that we could actually back up with anything in the real world. And so now there’s this greater emphasis on getting to profitability more quickly.

There’s a greater emphasis, I think, on doing less with more. And I know some of the folks that I talked to on the fintech side will disagree with that viewpoint and say, well, if you’re going to build something that’s going to become a world beater, you need to have a lot of capital in order to go and do it because it’s a really difficult thing to do, which is valid. I think that’s true.

But I think that also needs to be balanced with this idea that you do have to demonstrate a path to profitability. You have to demonstrate a way that you can run lean that will make it yourself a more attractive option for venture capitalists like yourself. So I think there is certainly, you know, I’m not saying that the pendulum is exactly in the right spot right now, but I think we’re getting closer to propping up valuations of companies that we can actually sustain and that can actually be backed up by real world results.

So, you know, it’d be interesting to see how that plays out. But I think from your standpoint in Series A, what are you kind of how are you looking at it when you see companies? Are you asking them to be to have some revenue coming in already? Yeah, we generally focus on post revenue. So, and I would say north of a million, much of what we look at as, you know, two million, we like to see product market fit.

Difficult for us to help a early stage company that doesn’t have a shipping product because we’re a corporate fund. And although we function with the financial return as our north star, which means we’re just like any other venture fund, financial return is how we get graded, if you will. It still matters what we can do for them.

And for that startup is to take them to market right with our customers or use the product internally, find some sort of distribution for them to grow the revenue. If they don’t have revenue and a product shipping and that product market fit, it’s probably not a perfect fit for us, right? Because we’re usually pretty ready to partner in and go to market if it’s something that’s in our wheelhouse. And in tax and legal as an example, but in tax in particular, since we’re talking about FinTech, we can even look at things that are surrounding, you know, if you will, the tax world, right? So payments and you and I were talking earlier, we just invested in a company called Payal that was also invested in by Andreessen that’s cross-border payments and early stage, they do have product market fit.

Now they’ve got some revenue. Andreessen, you know, gave them a pretty good seed round to get them going. I think they’ve utilized it wisely.

But when you’re talking about FinTech and what you referenced earlier, not everyone is going to win, right? Now I’m betting they will. I think they have one of the best cross-border payment solutions we’ve seen. And we’ve looked at a lot of areas or adjacent areas and companies in that space.

So we’re going to bet on them. But the reality is every venture deal is a bet, right? Is it going to go that direction for cross-border payments? Do they have the right solution that the banks are going to pick up and use that? So everything’s a bet. Like you said, everybody’s not going to make it to the finish line.

Yeah. Yeah. I think it’s just one of the unfortunate realities and having been in the industry for a while, certainly I’ve seen some really strong companies who haven’t quite been able to get there.

So where do you see the biggest opportunities right now in FinTech? You kind of hinted at this a little bit with some of the pieces that you’re investing in, but where do you think there are holes that the current FinTech ecosystem isn’t properly serving? You know, I hate to be a broken record and say AI, but because we focus so much on tax, tax is a very, very difficult problem to solve, right? And so there’s corporate tax, there’s personal tax, small business tax, mid-market, all of the, you know, things around it that you need to make it work. And I think it’s just an area where artificial intelligence is going to be able to do a lot, right? So think about reading all the tax rules, tax laws that literally change daily. And so understanding those and being able to apply those for the benefit, in most cases, you want to have good software, good CPAs, good advisors that are looking at what they can do to help you with your tax burden, either as a corporate or as an individual.

So I think tax is just an area that is ripe for disruption and a lot of the adjacencies around tax, right? We talked to a very cool company earlier this week that has, you know, is working with Anthropic as their LLM, but they’re pulling data from the IRS and they’re able to work with life insurance companies to help them determine whether this company is insurable, the employees are insurable. It’s a very interesting market and how they’ve been able to automate something that’s been done manually for many, many years. And now using AI, they can basically replicate that in a matter of seconds.

So I do think there’s going to be a lot of disruption in fintech broadly, but I do think tax is going to be able to benefit from AI right away. So I think you’re going to see a lot of people jump on that bandwagon in 2024. A lot of people jumped on the legal AI bandwagon in 2023.

We made a bunch of investments in that space, even a couple of acquisitions and our products, we certainly continued to, you know, adapt them and add more AI. We’ve always had products that have had AI in them, but, you know, we’ve added to them as well. So I think the, you know, 2023 was the year of legal 2024 will be the year of tax.

Yeah. Yeah. I mean, certainly it’s a massive pain point.

And I think it’s an area where there are, there’s obviously significant revenue to be made. And anytime you have a situation where you have a number of people who are struggling with something and there’s, it’s something that they can’t avoid. It seems like a perfect fit to go and make sure that you are tackling that space.

So what do you think is going to happen this year? That’s going to catch a lot of people by surprise. So, you know, I would say a lot of people, and even in some of the articles that I read yesterday from a number of analysts, that they’re predicting that interest rates are going to get cut and that we’re going to see more upward movement in the market. I don’t believe that.

I believe the Fed is going to hold interest rates for the entirety of 2024 because they’ve been pretty conservative. And frankly, in my opinion, maybe raised rates too high, too fast. That said, you know, it did, it did help, I believe from, from bringing down inflation, but I don’t think they’re going to hurry to bring those rates down.

So I don’t think we’re going to see those rates come down in 2024. And what that means is there’s going to be the same type of business climate that we had in 2023, where corporations were hesitant to make new investments and, and spend a ton on tech. But the good news is I do see some movement even in this quarter.

I think corporations are loosening up. We’re seeing numbers from many of our startups there. They appear to be having better Q4s than they anticipated.

So, and that seems to be, you know, pretty, pretty common with many of our startups. So I do think there will be an upside because corporations will start to loosen up next year, but I don’t see interest rates coming down. And what that means is LPs that can generally continue to give money to venture funds, new funds or funds that aren’t really established and have like a great track record are going to have a difficult time trying to raise in 2024.

It’s not going to be impossible, but I think we’re going to see smaller funds. So that means there’s going to be smaller checks. And so companies raising in 2024 are going to have to do more with less.

And that’s common. That’s not a prediction. Everybody’s been saying it.

I’ve been around for a while. So my first startup was in 1996. We were public in 99.

And I can promise you, we didn’t raise any money until the very last second. So we had only given up 10% of the company, which turned out to be amazing. And we were able to go and do an IPO.

But that is very, very rare. And so to hear that a company can bootstrap all the way to the finish line of an IPO or all the way to the finish line of a sale is unheard of because there’s been so much venture capital out there. And I think those days are going to change.

I think that the idea of bootstrapping a company is going to be in vogue again if it isn’t already. Yeah. Well, certainly, I think having seen a lot of the industry before it really got frothy back in 2012, 2013 time frame, there were a lot of founders who were really leery about how much capital they wanted to take, what they actually needed it for.

And we did see a lot of companies who were kind of rejecting VC funding for as long as they possibly could, to your point. And I think that that really worked out well for a lot of them. Now, if you’re in a company that needs that capital for something specific, then, of course, you should go out and get that capital.

But getting away from the kind of ego side of it, which is, well, we got this much funding, which makes our valuation over a billion dollars. Now we’re a unicorn again. Take that out of it.

Because just because you got a big Series C doesn’t make you a unicorn, right? And I think this is where the ego potentially got the better of some people who wanted to have the biggest rounds they could, have the biggest valuations they could. And now maybe we’ll see a departure from that. Maybe we’ll see people who kind of approach it from the other side, which is more just how big can I make this completely on my own? Going to be fascinating to see.

But my hope is that what ends up coming out of the market is a couple more sort of battle-ready, battle-hardened, more resilient startups, which can do really impressive things. So, yeah, we will have to leave it there. But I really appreciate you taking the time to share your thoughts.

Tamara, thank you again for joining me. Thanks, Greg. It was super fun.

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