The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:28:03 · Nik Storonsky, S1
[00:28:03] S0: I mean, already, we already run the business as a public company. We're just not public company. So we we run everything because we're a bank, so we need to have even stronger controls compared to public companies. [00:28:15] S1: So why would you want to go public? You know, we saw Databricks do this secondary transaction. I think yesterday it was 6 to 8,000,000,000 of liquidity to investors and to employees. Obviously, Revolut publicly done the secondaries. Why would you want to? Oh, we still have [00:28:29] S0: a lot of VC investors. Right? But sooner or later, they'll want to kind of, you know, sell their shareholdings and the return money to investors. I think public markets allow you to to have more liquidity compared to just private markets. [00:28:41] S1: There's no way this is gonna get kept in, but I have to ask it. [00:28:44] S0: Sure. [00:28:45] S1: Would you list in London? [00:28:46] S0: The problem with The UK is if you think about UK versus US, our UK is much more liquid. And then, trading in The US is free, right? If you look at trading in UK, you always buy a standard tax which is 0.5%. So I just don't understand how the product which is being provided by UK can compete with the product provided by US. It is less liquid, so it's much worse compared to US. Plus, it's much more expensive because you pay stamp duty. So it's just not rational. [00:29:15] S1: I agree. And so you would list in
00:29:15 · S1, Nik Storonsky
[00:29:15] S1: I agree. And so you would list in [00:29:17] S0: The US? Because everyone's a rational person. Right? That's that's all I can answer. So unless I have, you know, a better product from UK, then... Yeah. If I get the bet... Better product from UK, I will list in UK. But so far, if you just compare these products, one is far ahead compared to the other. [00:29:33] S1: How do you respond to the suggestions that you've moved to Dubai? [00:29:36] S0: Well, I I do spend some time in Dubai, every year. So we have a large team there, plus we're getting licenses. But, no, I don't live currently in Dubai. [00:29:45] S1: Is the culture different across the world? When you go to different offices around the world, is Revolut a monoculture, or are [00:29:51] S0: they actually very different independent cultures? Our culture is the same across all offices. Offices. So people are smart, people are hungry, people are working hard, people want to achieve things. That's common across all the cultures. [00:30:02] S1: Can I ask you one on? You mentioned the liquidity to investors earlier. You've been unbelievable at maintaining a really tight control of your Cathayne role where other founders haven't. What have you done to maintain such good control of the cap table? Control it in the water. In preventing secondaries, preventing private transactions, preventing side deals? Yeah. Just because, again, it's pretty obvious. Right?
00:30:02 · S1, Nik Storonsky
[00:30:02] S1: Can I ask you one on? You mentioned the liquidity to investors earlier. You've been unbelievable at maintaining a really tight control of your Cathayne role where other founders haven't. What have you done to maintain such good control of the cap table? Control it in the water. In preventing secondaries, preventing private transactions, preventing side deals? Yeah. Just because, again, it's pretty obvious. Right? [00:30:25] S0: As soon as you don't have control, so then every time when you try to raise a primary round, you're competing with all these early investors who want to sell at a large discount because, I mean, they make so much money. And they're okay to exit, as soon as possible because they they make, like, I don't know, like, x, 100 packs. Right? And it actually prevents the company to to raise primary because they're really kind of in the heading of the company. We had to put all these controls in place. [00:30:49] S1: In terms of competitors that you really respect around the world, who do you most respect
00:30:49 · S1, Nik Storonsky
[00:30:49] S1: In terms of competitors that you really respect around the world, who do you most respect [00:30:54] S0: and why them? Like, obviously, if I look at competition, NewBank is amazing what they do. Well, country's also great. Right? There's no competition there, and the rates are high. Credit card have, you know, very high rates as well. So I think, you know, new bank is very strong. Then I think JPMorgan, you know, have a good team in The US, so it's a bank, and very strong. If you look at Asia, right, so it's a bit different dynamic. So we have companies like WeChat, so they're very strong. I mean, already there are like many good companies in [00:31:23] S1: this Which will be a harder market for you to win, US or Asia? [00:31:26] S0: Nothing Asia. Why? Well, because they don't allow you a banking license, right? In The US, I mean, there is a lot of challenge. You get it. [00:31:33] S1: It's also a fundamentally different UI that they're used to. I mean, it's it's an entirely new product paradigm that you have to engage with. Culturally, it's not nearly as aligned as US and UK's are. You must have quantum like Nik.
00:31:44 · Nik Storonsky
[00:31:44] S0: So, yeah, let me maybe just spend one minute on explaining what quantum light is. So basically, because I was raising money, so many times, I've done it like seven or eight times, and, like, almost every time I experienced some very negative experience. For example, I think it was 2019, I agreed the term sheet with investor. I think it was, like, 7,000,000,000 valuation. And then next day, market dropped 10%. CP dropped 10%, then term sheet was withdrawn, and then it became like 5,000,000,000, however. Then, like even recently, like, you know, secondaries that were done, we kind of, you know, agreed everything with all the investors, and then, there was like, you know, market drop, Then luckily it went back, but we had some investors, you know, withdrawing term sheets. Or like when I was raising money for Series A. Like, one believed me. No one wanted to invest. I spent, like, you know, four, five, six months going through every single investor and saying to them, That's okay. It's really a great business. They looked at my unit economics, and unit economics was negative. Of course, it was negative because, you know, I just started. Right? It's a volume game. Anyway, what I learned that a lot of investors, they are A, following the crowd very often, and B, they're very emotions driven, right? Sometimes they like the founder, sometimes they don't like the founder. They don't like the founder and don't invest. So it's it's not very scientific. So two years ago, I stopped effectively a small team of data scientists and data engineers who collected a lot of data on startups. And then we trained machine learning models of the startups, selecting the best startups. And then the machine learning model, actually amazingly outperforms 95% of VCs over there on on backtest. That's how I started this business. I have an independent team of 20 people who are building, polishing, data science models. And then models give you a list of companies where to invest, and then we just go to these companies and invest.
00:33:36 · S1, Nik Storonsky
[00:33:36] S1: Where's the entry point? Because you need to have [00:33:38] S0: enough Serious B. [00:33:39] S1: Okay. So you need to have enough data. So it's series B. Okay. So you can select the best companies better than the best. That's fine. Generally, though, if you can select them better and there's data for that, the winners are more obvious. Yeah? And so if the winners are more obvious, selection is one thing, but winning is another. How do you think about winning when there's five others and you've got Sequoia and you've got Index and you have all the pretty