Lauren Kolodny and Theresia Gouw are the Founders of Acrew Capital. Acrew DCF is a new growth stage investment fund from Acrew Capital, that aims to diversify the ownership and leadership of leading growth-stage companies through value-added capital.
Prior to co-founding Acrew, Lauren was a partner at Aspect Ventures. She joined at the founding of the firm and helped to build out the team. Previously, Lauren worked in product marketing at Google, where she led a number of launches for GSuite, including Google Drive. Lauren began her career building tech and finance partnerships for the Clinton Foundation in India.
Previously, Theresia was a co-founder at Aspect Ventures and a Managing General Partner at Accel. Theresia has been fortunate to work with many successful companies through IPOs or acquisitions including Forescout (FSCT), Imperva (IMPV), Trulia (TRLA), Hotel Tonight (ABNB), Astro (Slack; WORK), LearnVest (Northwestern Mutual), Jasper Design (CDNS) and Kosmix (WMT).
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SPEAKERS
Lauren Kolodny
Founding Partner
Acrew Capital
Theresia Gouw
Founding Partner
Acrew Capital
EPISODE TRANSCRIPT
John Darsie: (00:07)
Hello everyone and welcome back to SALT talks. My name is John Darsie. I'm the Managing Director at SALT, which is a global thought leadership forum and networking platform at the intersection of finance, technology, and public policy.
John Darsie: (00:20)
SALT talks are a digital interview series with leading investors, creators, and thinkers. And our goal on these SALT talks is the same as our goal at our SALT conference series, which is to provide a window into the mind of subject matter experts, as well as to provide a platform for what we think are big ideas that are shaping the future.
John Darsie: (00:39)
And we're very excited today to welcome two investors from the same firm who have invested and not only made a lot of money but made a lot of impact in the world, investing in these big ideas that we like to empower at SALT. And our guests today are Lauren Kolodny and Theresia Gouw of Acrew Capital.
John Darsie: (00:57)
Lauren Kolodny's a Co-Founder and Managing Partner at Acrew where she leads investments in Fintech and Future of Work. Prior to founding Acrew, Lauren was a partner at Aspect Ventures. Her investments include Chime, Divvy, Evident ID, Gusto, LaHouse, Papaya Payments, Pie Insurance, Tara.ai, among many others. Previously, Lauren worked in product marketing at Google where she led a number of launches for GSuite, including Google Drive.
John Darsie: (01:25)
Lauren began her career building tech and finance partnerships for the Clinton Foundation in India. Lauren is a Trustee Emerita at Brown University where she served as the University's youngest board member. She's currently a member of the President's Leadership Council. She's been recognized in publications as Wall Street Journal's Ten Women to Watch list, Business Insider's Rising Stars of Venture Capital, and she was named one of Forbes 30 Under 30 for Venture Capital in 2016. And I think we're probably around the same age and I'm feeling not very accomplished right now after reading Lauren's bio.
John Darsie: (01:58)
But Theresia Gouw is our second panelist today. Theresia's a Co-Founder and Managing Partner at Acrew Capital as well and was a Co-Founder and Partner at Aspect Ventures. Prior to Aspect, Theresia was a Managing General Partner at Accel. As an entrepreneur, Theresia was the founding VP of Business Development and Sales at Release Software, a venture backed company that provided software as a service to enable digital rights management and payment technologies for the software industry.
John Darsie: (02:27)
Earlier, she worked at Bain & Company, and as a Product Manager at Silicon Graphics. Theresia led early investments in Cato Networks, Deserve, Exabeam, The Muse, Crew, ShieldX, Observable, PredictHQ, and Solve Health.
John Darsie: (02:44)
She's a first generation immigrant, a passionate supporter of educational causes and increasing diversity in the tech industry. Theresia was named to Forbes 100 Most Powerful Women list and has been recognized nine times on the Forbes Midas list, including in 2020, and was named one of the 40 Most Influential Minds in Tech by Time Magazine, as well as being named to the Carnegie Corporations annual Distinguished Immigrant's list.
John Darsie: (03:09)
Hosting today's talk is our good friend, Sarah Kunst. She's a founder and Managing Director at Cleo Capital, a venture capital firm. Sarah's been gracious enough to bring us a lot of wonderful guests on SALT talk to moderate some great conversations, and we're looking forward to another one today. Thank you again, Sarah, for doing that. But with no further ado, you've heard enough from me, Sarah. Go ahead and take it away.
Sarah Kunst: (03:31)
Thank you, John. And I am so excited to have these amazing women here today. They are both my friends and we get to partner together on investments. Theresia is an investor in my fund and it's just wonderful to all be here today. So, with that, those were great bios but I always love to hear it direct so, Lauren, I'd love to have you jump in and tell us how you got here. And then we'll let Theresia do the same.
Lauren Kolodny: (04:03)
Absolutely. Thanks, Sarah, and thanks, John, for having us. I'm excited to chat with you all today. So I'll tell you a little bit about my path and how I ended up in venture. A bit circuitous but that tends to be the case in this industry, I would say.
Lauren Kolodny: (04:18)
So I grew up in San Diego. I studied undergrad at Brown University where I focused on Economic Development and, specifically, technology as a driver of economic development. I then went on, right out of school, to work for the Clinton Foundation on Technology Partnerships and, in that context, I was based in India and in the really early days, prior to the last recession, really early days of mobile money and started to see kind of how technology was driving financial inclusion in meaningful ways. And I think that really inspired me on some of the work that I've done since.
Lauren Kolodny: (04:58)
And then, after wrapping up with the Clinton Foundation, I went and worked at Google in Product Marketing on the Google apps team, before it became Gsuite, as you heard. I led the Google Drive launch and a bunch of others. But in that context I think I got really excited about consumerization of enterprise and bottoms up business models, which also segue ways into where I now spend time.
Lauren Kolodny: (05:20)
And meanwhile, actually while I had been living in India with the Clinton Foundation, I had been asked to join the Board of Trustees at Brown University. They had done a governance review and determined that they needed some more representative perspective around the board. And I was fortunate and joined. In that context, I actually got to know Theresia. So we worked really closely together on projects related to digital strategy for the University and a bunch of others. And she became kind of a friend and mentor.
Lauren Kolodny: (05:52)
And so then when I moved to Silicon Valley to work at Google we ended up spending more time together. I then went to Business School at Stanford and, as I was gearing up to graduate, Theresia let me know that she was going to be leaving Accel to start Aspect and I was very eager to join her in that endeavor. So first investor on the team there, built out our Fintech Investing practice, as well as some of our future work investing. And then, happily, co-founded Acrew Capital with her in 2019. So happy to tell you more about that part of the journey, as I'm sure we will, but that's kind of the summary of how I got here.
Sarah Kunst: (06:33)
Awesome. Theresia?
Theresia Gouw: (06:36)
Thanks, Sarah. Thanks for having us. So I'll try to be brief because I think John covered a lot of it. So thank you both for having us. So, I came to the U.S. I was born in Jakarta, Indonesia. We came to the U.S. when I was quite young. Actually lived... I know we have some shared roots. Lived in Michigan at first, for a little while, Sarah. Ended up growing up in a small town outside of Buffalo, New York. Went to Brown undergrad. Studied engineering there. Quickly realized that while I loved technology, which is why I did engineering, I really thought that being more on the product management side seemed more interesting than sitting behind a computer doing CAD drawings all day.
Theresia Gouw: (07:17)
I worked at General Motors and I worked at British Petroleum and the only people who move from engineering to product management all had these things called MBA's. I didn't necessarily know what that was. I looked it up, studied for my GRE and decided that was what I needed to do if I was going to become a product manager.
Theresia Gouw: (07:36)
And so was fortunate to get into Stanford Business School. Lauren and I both went there. Came out here to the Valley, I thought for a few years, have never left. Fell in love with the Valley and learned that there were these things called startups and not just big giant companies, like Silicon Graphics or Hewlett-Packard or others.
Theresia Gouw: (07:56)
And went back to consulting for a little bit to pay for my business school loans and my undergrad loans. But as soon as that was done joined a couple of classmates from Stanford Business School who had just raised a seed round of funding. This was the late '90s so forever ago in the last decade, doing this company that was trying to do digital rights management, encryption payment for software downloads over the internet, when the internet was mostly dial-up internet. So it had to be really, really small software, or software that you could download at work, like Adobe or Netscape servers.
Theresia Gouw: (08:34)
Anyway, that was how I got to know what venture capital was. I helped raise a bunch of venture capital, decided that I wanted to leave that startup when we had our third CEO in 12 months. I didn't know a whole lot but I was like, hmm, probably not really great for my stock options. So maybe I'll go to my VC board members and see if they have other startups that are looking for somebody with my background. And that was how I ended up in venture.
Theresia Gouw: (09:01)
One of my board members introduced me to three super early stage pre-A companies and also introduced me to three venture funds. That's how I ended up at Accel, joined in '99, was there for 15 years doing a mix of early and late stage investing. I spent a lot of time in cybersecurity and infrastructure. I also do some Future of Work investing, along with Lauren, and actually also do some community activated and consumer net investments in things like Trulia, Early Days, as well as Hotel Tonight which is now part of Airbnb. Anyway, it's a range of different things. You do something long enough all the sectors start to make sense.
Sarah Kunst: (09:48)
I love it. Theresia, do you know that I spent more out-of-pocket on Hotel Tonight than I did on college?
Theresia Gouw: (09:54)
You did not.
Sarah Kunst: (09:55)
It's the only thing I've used for travel, personal and for work. And you know how much work travel there is. So literally, I have spent, I think I'm at level, I don't know, 30 something. So yes, yes.
Theresia Gouw: (10:12)
Well you're crushing me. I'll let Sam know. He'll be very happy. So we did a later stage, what we called proprietary investment, in Hotel Tonight and out of our first funds, Lauren and I working together and Vishal. Which Sam was like, he groomed the company and he had turned it profitable and he was like, "Theresia, this is going to be like my last round before we get bought or go public." And we were like, "We're all in." And then 12 months later then they got bought by Airbnb and then, obviously, they've had a really successful IP last time.
Theresia Gouw: (10:46)
But I first met them when it was a seed investment and I remember exactly when it was because I think he was one of my first meetings after my second maternity leave. So my youngest was born in July of 2009 so I must have met him in August of 2009 because I was back after two to three weeks.
Theresia Gouw: (11:05)
Anyway, he was only in two cities and it was only on IOS. They didn't even have Android and they literally didn't even have a website. But, he saw that the move to mobile was real and just shrinking down. Your Bookings.com or Expedia website onto your mobile phone was not going to do it and just completely remade the user experience. And he'd done a great job.
Sarah Kunst: (11:31)
I just checked. I've stayed 140 nights using Hotel Tonight, which also means that I'm a little bit ungrounded but happy to be helpful to the portfolio. So, I would love to talk about Acrew. Tell us about the team. Well, tell us all the things, all right? The founding, the team, the AUM, the stage, the sectors.
Sarah Kunst: (11:55)
But the thing that I find so fascinating and really inspiring is sort of your approach to having a cross-generational team and kind of what that means around decision making and all of that. So Theresia, I'd love for you to talk about the founding and that piece of that. And then we'll throw it to Lauren to talk a little bit about the size, stage, and sectors.
Theresia Gouw: (12:15)
Actually, let me suggest, if it's okay with you Sarah, can we do it in the reverse way? Lauren, why don't you talk about the founding, because it'll lead into some of the new things we're doing in terms of stage.
Lauren Kolodny: (12:25)
Sure. Happy to do that. So, as I said, our team has been investing together now through three funds. Initially at Aspect and now at Acrew. And so the bulk of the team that we worked with together at Aspect is part of the Acrew team. When we launched Acrew in 2019, we spent a lot of time. We actually spent three days at an off-site, all of the five founders, thinking about our values and who we really wanted to be, what learnings we wanted to take from our past experience, what we wanted to leave behind, and what we wanted to be.
Lauren Kolodny: (13:01)
And one of the things that I think is just super core to us, it's in our name, is our team orientation. So the name Acrew has the emphasis on Crew by design. Of course, we also like the finance double entendre and certainly attempt to accrue meaning full value for all of our investors. But, I think that we really wanted to put a stake in the ground around this notion that venture can really be played as a team sport. And that, in doing so, you can take advantage of the diversity of perspective that exists on your team. And Theresia, I'm sure, will talk about this more but we've been really thoughtful there too in terms of really trying to design a team that.
Lauren Kolodny: (13:46)
Work represents a lot of different perspectives, both in terms of background and lived experience, gender, race, and ethnicity. And so, that means that, as you mentioned Sarah, we have actually three generations on the founding team itself. We think that is pretty unique. A lot of our peer firms get founded by age peers and then add more people to the team later. In a clear hierarchy, where we really wanted to make sure that we were building something to kind of stand the test of time, and we figured one of the ways to do that was to make sure we had multiple generations on the founding team.
Lauren Kolodny: (14:27)
And the way that we take advantage of all of the diverse perspectives, both among those founders and in terms of the newer team members that we've brought on, is that we give everyone on the investing team, regardless of seniority level, an equal voice in investing decision making. So everyone is allowed to veto a deal. It doesn't happen often but occasionally it does. And to varying degrees, everyone is enabled and empowered to actually lead a deal. For the more junior investors it's seed investments but we really try to give everyone a meaningful seat at the table when it comes to the vast majority of what we do, which is making investments. So that's kind of the philosophy of the firm and we're really proud of what we're building and the team that we're building it with.
Theresia Gouw: (15:21)
So just adding onto that and then getting into our stage and sectors. So adding onto that, I think the other part of the team orientation on the investments is that every investment has two deal team sponsors. Obviously, that doesn't mean, well we really take two board [inaudible 00:15:37], I try to think almost never. But there's got to be two people on the investment team who are equally excited and pounding the table about it. So we think that using the team elements actually strengthens our decision making because we need to have at least two people on the team that are really excited about a potential new investment. And that's a good sort of counter-balance.
Theresia Gouw: (15:56)
In affect, any one person could say no to a deal, as Lauren was saying. Fortunately, that doesn't happen very often because it's a much more collaborative process. If Lauren and I are championing a deal and someone else on the deal team has some strong concerns they'll bring it up in the group meeting but they'll probably also call me aside if I'm the lead or Lauren if she's the lead and sort of be like, "Hey Sarah, I want to make sure you really heard what I was asking you. Please look into this. I've got some serious concerns." So it works out really well from that perspective.
Theresia Gouw: (16:30)
It also works because we're very thesis driven in our investing. So you could be at Acrew for five or six years, like Lauren and myself. Or you could be at Acrew for five or six weeks. But if you are part of the Fintech practice that Lauren and Vishal, right, you've been spending time, you're very aware what's in our portfolio, the things that we've been looking at. And so you can quickly get up to speed and know an awful lot about consumer financial services or Fintech infrastructure because you've been looking at our portfolio and things like everything from Chime, and FNEX, and Pie, and Divvy. And so you get up to speed much more quickly, even if you're a new investor.
Theresia Gouw: (17:13)
So being thematically driven. So in addition to Fintech our other big sectors, I would say, are cybersecurity and infrastructure, Future of Work or Work Reimagined that Lauren's led and we've got investments like Gusto, for example, in that sector. Also community activated, as we were talking about with Hotel Tonight or The RealReal as some examples. And then a fifth sector which is a little bit more cross sector, what we call data interconnected, like data API's and data platforms. So there's a lot of cross sectors there.
Theresia Gouw: (17:48)
So, that's how we think about our investments, Sarah, is we're very thematic. And I know we've got some co-investments with you and, I think, that certainly would be financial services reimagined but it might also be in part of our data platform. So we have a lot that kind of fit into two.
Theresia Gouw: (18:05)
And then, historically, we've been mostly early stage focused, which is why we're excited to partner with you on some of these early stage things. So seed and A but, as you can see, even with the Hotel Tonight example, these companies over three, four, five years, some of them, we hope many of them but, some of them grow to be market leaders in their space and they become what would traditionally be thought of as growth stage or late stage investments.
Theresia Gouw: (18:30)
So just this week we announced that we were adding onto the Acrew Capital platform, double entendre on purpose, as Lauren said. In addition to raising our fourth early stage fund, we've announced that we're doing our growth stage fund, our spin on the growth stage, late stage fund, is an entity called Acrew Diversified Capital Fund. So it's Acrew DCF. All the existing Acrew founders and investors are core members of it and we're excited that we've added a couple of new folks onto the team, both as formal team members, like Sukhinder Singh Cassidy as a venture partner onto that platform. And then also some great advisors and partners like Sarah and Charles from Free Cursor and others. That's where we are. We're deepening our sector focus and now we can invest both at the early stage and the late stage.
Sarah Kunst: (19:22)
That's awesome. And huge, huge congrats on the announcement of the new fund, or the opportunity fund, and super far past time. And I think the work that you do there, that we get to do there, will be really, really impactful, which is very exciting. That's great.
Sarah Kunst: (19:38)
Lauren, we'll also have you kind of dive into some of the areas like Work Reimagined and Financial Resources Rebuilt, that you spend time thinking about too.
Lauren Kolodny: (19:51)
Sure, I'm happy to. You got kind of the overview of the categories from Theresia. Maybe I'll spend a little bit of time talking about what we're focused on in Financial Services Rebuilt. And yes, clearly that is a fancy name for Fintech. But it's not just marketing language. There actually is an intentional thesis behind it which is that we think that if you look at all the activity that's happened in Fintech over the last decade it's really catalyzed a new opportunity.
Lauren Kolodny: (20:23)
So if I think about this last sort of era in Fintech development, we saw a lot of companies that built amazing digital faces to existing financial products. They democratized access, they came up with much more creative distribution strategies, and they really leveraged technology to sort of deliver a better consumer experience.
Lauren Kolodny: (20:46)
But, changing legacy financial infrastructure is very hard. And so, that was less possible in what I would characterize as this first kind of major wave in Fintech. As a result of the success of so many companies like Chime where we're very proud to be investors but also clearly Plaid and many others, I think we are starting to see some real sort of dynamic changes in the industry where legacy financial institutions are really coming to the table to engage more deeply in this reinvention. And a lot of money is being put into really rebuilding the sort of financial software stack from the ground up.
Lauren Kolodny: (21:32)
So, as a result of that, we're seeing a lot of opportunity in financial infrastructure itself. Clearly there is a lot of momentum there to kind of rebuild things like the legacy banking core that was built in the 1970's and hasn't changed since then. But we're also seeing, and we believe there will be kind of a new wave of consumer Fintech and user level Fintech as a result of this, where in leveraging financial infrastructure that's being built, entrepreneurs will actually be able to create fundamentally new financial products that have never been offered before. And that's what we're really excited about and that's where we're looking for new opportunities.
Lauren Kolodny: (22:14)
And, by the way, what's interesting is that you couple that with the fact that, as a result of COVID and this remote world that we're all living in, new populations are actually much more, I think, addressable for Fintech than they had been before. So clearly Gen Z, up and coming, not a lot of assets yet but we'll be entering the workforce. That one, we all could have anticipated. What I think is interesting we might not have otherwise anticipated is that the retired repopulation as an example has been forced to live their lives online and are now more comfortable adopting digital first products. And I think that'll extend to Fintech so we're looking for opportunities there as well.
Sarah Kunst: (22:55)
Are you on WallStreetBets?
Lauren Kolodny: (22:56)
Yes, I am. I feel like I have to be, right?
Sarah Kunst: (23:01)
It's the only way to keep up with the market.
Lauren Kolodny: (23:03)
Exactly. I wouldn't be a prudent Fintech investor if I wasn't at least following what's going on.
Sarah Kunst: (23:09)
Exactly, exactly. Awesome. No, that's super. That's awesome and at my fund we look at a lot of the same areas and totally agree. I was just having this conversation with a friend earlier that... I think, Lauren, we're the same age. I don't remember, even as smart undergrads right out of college, we were super focused on getting a good job and putting money into your 401K. I don't really remember sitting around trading stock tips. And this was when I lived in New York and my office building was in the same office building as a hedge fund, right? It just wasn't really something that people were talking about.
Sarah Kunst: (23:48)
And now you go on Tik-Tok and obviously it's oh how are my For You pages curated? But there's so many kids and they're not coming out of major universities with finance degrees or econ degrees. They're just sort of talking about stocks the way that maybe an earlier generation you would have talked about sports teams. And so it's really, really fascinating.
Sarah Kunst: (24:10)
I don't know, when you look at things like the whole GameStop debacle, I don't know if you call it necessarily financial literacy but it's certainly financial exploration in a way that I truly do think, for this generation. But we'll see if it lasts. But it has kind of become a part of their culture in a way that I don't think we saw even 10-12 years ago.
Lauren Kolodny: (24:33)
I totally agree. And I think the other thing on that too, Sarah, is you and I have talked about this before. I think there's a massive opportunity for collaborative personal finance and it's really coming to light as a result of this, right? It's showing how this generation really cares about... maybe GameStop is not the best example for a prudent collaborative investment. But I think the idea that people want to learn from each other and understand what their friends are investing in and make decisions informed by their peers, I think is very real. And I think that's going to extend across financial services on a go forward basis. I don't think this generation is as closed off about personal finance as others that have come before.
Sarah Kunst: (25:24)
I agree. I also think there's a lot more transparency and people aren't refusing to talk about how much money they make or where they're making it from, which I think is great.
Lauren Kolodny: (25:35)
Exactly.
John Darsie: (25:38)
I think something that's interesting, Sarah, talking about GameStop... and sorry to jump in here but a fascinating conversation. You know, there's two things that happened with GameStop. One of them was the collaboration that took place over the last year on WallStreetBets, where there actually was an interesting thesis. They're going to pivot to E-commerce, there's all kinds of other elements. I don't want to get into the full story of it but I had a front row seat to it because a friend of mine who works in biotech life sciences approached me a few months ago and said, "GameStop. I'm on this Reddit channel. There's this amazing story that they've put together about why GameStop is going to transition to be a dominant E-commerce platform for video games and they're going to get out of the bricks and mortar business."
John Darsie: (26:16)
I said, "Actually it's kind of compelling but I have certain restrictions, as a regulated financial services professional, around buying individual stocks." I didn't participate in that with him. But he made a substantial amount of money, sold a little bit early, didn't ride it all the way to the top but also wasn't left holding the bag like some people.
John Darsie: (26:33)
I think the mania of it happened in the aftermath of the construction of that thesis is separate and distinct from what was a really collaborative process of people that are smarter than I think the media is giving them credit for now, that built this thesis around GameStop.
Sarah Kunst: (26:48)
I remember once in 8th grade advanced math. My teacher, we had to pick our predictions for the stock market. And I picked, it was right before the Super Bowl, so I picked Frito-Lay. And I was like, I think it's going to go up because it's an exciting Super Bowl this year so people are going to buy more snacks. And she's like, "That's not how earnings work. That's not how the stock market works." But it's exactly how the stock market works.
Sarah Kunst: (27:11)
And so it's interesting, I think, to see some of that. You know, it took me what, 20 years? But I was right and I just want my math teacher to know, if she's watching, I was right. But I think that people are slowly realizing that their everyday instincts, what they're interested in, we are the market and as that happens I do think especially Gen Z is getting a lot more involved in trading it for better or for worse.
Sarah Kunst: (27:38)
That's awesome. So for a totally different topic, Theresia, I would love to have you dive into cybersecurity infrastructure, the work that you're doing there. What are you seeing there right now that's exciting?
Theresia Gouw: (27:54)
Thanks, Sarah. So I think that, and maybe a way to sort of tie it together is at the end of this I think there are some intersections between cybersecurity and particularly cryptocurrencies that we're invested in. And maybe that's a lead in to you and Lauren can talk about our joint investment in that space.
Theresia Gouw: (28:13)
But in general, so look, I think the good and the bad news is cybersecurity is sort of like the gift that keeps on giving, right? So when I started doing cybersecurity investments in the early 2000's it was really because, actually because of my lived experience when I was an entrepreneur. We were doing encryption and payments and it was still really, really hard to get an export license to do 1024 with encryption, to do payments outside of the United States. That was all stuff that I had to do as the Product and Business Development lead.
Theresia Gouw: (28:51)
So, in 2000, when there were no more consumer opportunities to be done and the music had stopped, it's like, "Okay, what am I going to do? I've got to find something that's going to be interesting and still investable." And so it started out as sort of more of a backwater but it was like, look, this isn't going to go away. People are eventually going to start buying things on the internet again. Crazy, right?
Theresia Gouw: (29:10)
And so we've got to figure out the security part of the payments piece, right? At that point, unlike the things that you guys were just talking about and you're investing in now, there weren't really alternatives, right? You had to figure out how to connect into the old legacy cobalt [inaudible 00:29:25] systems so that you could take credit card payments and all that kind of stuff.
Theresia Gouw: (29:29)
But there was a whole new layer of security that needed to be built on it. So that was kind of like the first wave. The interesting thing about security is the bad guys from the early days, for those of you who remember. You might remember from watching it as retro, right? It used to start out, if you remember, Matthew Broderick in War Games? We used to call those hackers script kittys because they were a lot like these uber smart, uber precocious high school kids who just wanted to prove that they could hack into stuff, to show how cool they were or how smart they were.
Theresia Gouw: (30:01)
And then, as time went on, in '99 when the internet happened, like in '99-2000, it was a lot of organized bad dudes trying to make money, right? Fishing scams, stealing people's credit cards, all of those things. Obviously with what happened last year with the Solar Winds hack and even before that we think about the Sony hack. The Sony hack was probably the first provable nation state attack.
Theresia Gouw: (30:30)
I bring up all this stuff to say that what started out as hey, I've got to find some stuff to invest in in 2000, and was like really a small part of the venture investment ecosystem, has become not quite as large as Fintech but probably usually it's in the top three, second or third in terms of sectors. So it's a big deal now. Everybody needs to worry about it, even small companies, even individuals.
Theresia Gouw: (30:57)
So I think the biggest trend... there's the bad guys trend and then there's sort of on the bottoms up infrastructure. Every time there's a conversion. And last year the biggest positive thing in tech was the pull forward of people's adoption and moving to the cloud, especially to the public cloud or hybrid cloud, was accelerated by 5 or 10 years. And people see that in terms of a bunch of the infrastructure stocks that were super hot last year, like Snowflake for example. But also security companies like CrowdStrike just had a crazy year last year. And we see it with our private security companies too.
Theresia Gouw: (31:31)
Because what happens is, whenever there's an infrastructure change all the big, traditional financial service institutions, governments, they have to buy a whole new set of security solutions because the last set that they're using was for the wrong... they're protecting the wrong infrastructure, the wrong stuff underneath. So that creates an opportunity.
Theresia Gouw: (31:49)
And then, maybe not surprisingly, but work from home last year just accelerated the security opportunity because people usually price security based on number of endpoints and amount of bandwidth. Well, even for Acrew, our 12 person company, we went from having two offices to now we have 12. So everybody's spending had to increase.
Theresia Gouw: (32:13)
So I think that's the biggest thing. So it's that sophistication of the bad guys which means that you need to have more and more sophisticated countermeasures. And then just the massive acceleration of cloud means everyone needs... if you were a big enterprise and you were thinking about this slow transition and therefore also slow security transition over the next three to five years, it happened in three to six months. Or else you just weren't doing business. So those are the trends that we saw last year and they're continuing the pace this year for sure.
Theresia Gouw: (32:47)
I think most people, most of the surveys, nobody thinks it's going to go back to what it was before. So even if we're not 100% work from home, we're going to be in this hybrid environment which means that the scale of the infrastructure that needs to be secured has grown massively.
Sarah Kunst: (33:03)
Those are all excellent points. It feels like cybersecurity has gone from something that is someone else's problem to something that is everyone's problem. And it will only continue. That, like you said, is a great segue into a deal that we got to do together recently, that was super exciting. I'll have maybe Lauren, do you want to talk a little bit about Alto IRA and kind of what they do and then we can chat about getting to work on it together?
Lauren Kolodny: (33:32)
Absolutely. So I think one of the other kind of sub things that have been interesting lately, and it ties in perfectly well with this conversation we were just having about GameStop and personal trading and everything else, is the democratization of alternative assets.
Lauren Kolodny: (33:49)
More and more people are recognizing, they see these companies that are performing exceptionally well in the stock market but they know that people like us are getting in earlier, right? So tech is one example, private tech companies is one example of a category of alternative assets that I think is quite appealing to a lot of people. But as is real estate and many others, right?
Lauren Kolodny: (34:07)
And so, what Alto IRA does is it enables people to move their IRA investment, their traditional IRA, into alternative assets. And there are obviously major tax benefits to doing that. I think IRA's tend to be where people want to source their capital for alternatives, at least when they're first dabbling into this space.
Lauren Kolodny: (34:37)
I think what's really interesting for the company is an opportunity to help facilitate alternative asset investments more broadly down the line. And that is what I got really excited about and why I was excited to collaborate with Sarah on this because I know it's a space that you all, at Cleo, with future of income, have been thinking about a lot too.
John Darsie: (35:01)
Sarah, I don't know if you even know this but I've got to chime in on Alto IRA. So we use Alto IRA at SkyBridge. So we recently launched a Bitcoin fund. We saw sort of the marketplace of different Bitcoin products out there and some of our client base weren't comfortable with investing in Bitcoin by a coin base or a gray scale Bitcoin trust. So we created a private fund for our credit investors to invest in Bitcoin just to pass the product. But we've used Alto IRA for people who want to invest via their IRA. Fantastic platform. The team there is extremely responsive so hats off to you guys for identifying that company and helping them grow because it's a great solution for us and we think we're going to continue to do more business on the platform.
Sarah Kunst: (35:44)
Awesome. That is great news. We love customers. The Acrew team had already invested in Alto and Lauren brought it to me and I was super excited to chat with them. And then in that conversation we actually led to us being able to help them partner with Gemini as well. And I know that the twins were on SALT talks not too long ago.
Sarah Kunst: (36:09)
And so, yeah, it's an awesome product. And for us, with our future of income visas it made a lot of sense and complicated consumer, which is these are hard things to manage. Most people, the bulk of their net worth is wrapped up in pretty illiquid assets like their home or their IRA's. And so being able to make that a little bit more self directed, that's a really powerful tool.
Sarah Kunst: (36:34)
And if you've ever tried to do a self directed IRA without tech help it is, from everything I've heard, one of the most painful experiences in the finance world, if you can imagine that. So the ability to do it easily and simply and cost effectively is really kind of a huge game changer when it comes to accessing things like crypto or like investing in private equity vehicles or venture capital or even some real estate vehicles.
Sarah Kunst: (37:01)
So really, really, we are talking our book, but it's a book that makes the world of investing a lot more accessible and I think that's something that everybody on this call gets super excited about. So, yeah, that was an awesome company and we are just so excited to see them grow. So let's talk about your billion dollar... I'm sorry. John has a question. John?
John Darsie: (37:29)
I hate to take up too much oxygen but we were talking about the legacy financial system being disrupted by Fintech. We have several Goldman Sachs alumni at SkyBridge so I hate to throw them under the bus but they came out recently with some negative research on Bitcoin, basically saying they'll never allow Bitcoin into client accounts at their private bank.
John Darsie: (37:49)
And I find it ironic, they were also jockeying for the Coinbase IPO. Coinbase is doing dutch auctions right now for price discovery ahead of a direct listing. And I think there's a decent chance that in the first few weeks of it going public, that Coinbase's market cap could exceed Goldman Sach's. So just the irony of that disruption that's taking place is interesting to watch for us as somebody who has one foot in the legacy system and one foot trying to invest in disruption of space.
Sarah Kunst: (38:17)
And I mean I think that's the smart thing. Will the multiples hold? I'm a good Michigander so put a glass of wine in me and ask if I really believe Tesla's worth more than the big three auto makers. And I might have some controversial opinions but the reality is that these newcomers, I think, are massively helping shift where the focus is and I think that it pushes everybody in the industry to look a little bit more around the corner and all of a sudden these incumbents can't be sort of comfortable and complacent and think they'll be market leaders forever.
Sarah Kunst: (38:57)
So yeah, that is all great points. Speaking of that, to jump back to the billion dollar elephant in the room, let's talk a little bit about a tiny little company of yours that I heard is starting to do okay, called Chime. I would love for both of you to jump in and tell us about the deal and what made you excited early on. And then remind us all of how wildly successful of a ride it's been so far.
Lauren Kolodny: (39:29)
Happy to tell you about it. As hopefully is evident, we are very thesis driven as a firm. And back when we made the Chime investment that was the case then too. So we had a thesis at the time which was around millennials who were entering the workforce in droves. At the same time they've really come of age in the last recession and candidly were quite scarred from it and had pretty inherent distress in legacy financial institutions.
Lauren Kolodny: (40:04)
At the time, I think the number was... one data point that I think was helpful to exemplify this was that only 40% of the population had a credit card and shockingly it hasn't gone up much since. But I think that, as a result of that experience, millennials were looking for something that was more transparent and that offered a better consumer experience than what they perceived of legacy banks.
Lauren Kolodny: (40:31)
And then coupled with the fact that millennials also were digital natives and grew up with devices and the internet, we established this thesis where we really believed that that population in particular would adopt a digital first bank. And we shared that with some of our frequent co-investors and we were very fortunate in that both Forerunner and Homebrew had flagged the opportunity for us. The company had just gone through a bit of a pivot at the time and were, at that moment, sort of now a reflection of their current business. And so we led what was a kind of the second A, but the series A for the new model into Chime. We were both, Theresia and I, I think pretty blown away by the founding team.
Lauren Kolodny: (41:26)
Chris, with deep financial services and Fintech expertise as the CEO, and Ryan the CTO who had real technology tops operating as a CTO at Plaxo and Comcast, and a bunch of other places. And so we really thought they had it in them to build this thing. And we could never have predicted just how well they would execute. And I would say, I like to say that their secret weapon is Melissa Alvarado, their CMO, who is unlike any digital marketing person I've ever met.
Lauren Kolodny: (42:01)
So they scaled this thing and we invested. Our round was in 2016 at a 34 1/2 million dollar post-money evaluation and the most recent round, led by CO2 has been sitting at just over 14 1/2 billion. So it has been a pretty wild ride. T, I don't know if there's anything you would add?
Theresia Gouw: (42:25)
I think the only thing that I would add is that when I talked a little bit before about the fact that we need two people who have high conviction and it's 100%. Lauren's thesis, Lauren built this, Lauren's driven all of our, along with now Michelle, after she recruited Michelle, our Fintech practice. I think for sure it was Lauren's conviction on it.
Theresia Gouw: (42:50)
But I think that it really works when you have two people who have conviction on an investment. And sometimes you need that to overcome some other people who might not be as close to the sector. And granted, I'm not close but I think very highly of Lauren and spent a lot of time listening to her thesis about this.
Theresia Gouw: (43:15)
So the one thing I do know is, I think after doing this for a long time, as I'm sure you feel too Sarah, we need to know our thesis areas. We need to know about technology. We need to know about business model changes. But at the end of the day, especially at the early stage, what are we investing in? We're investing in people. So we need to know when an amazing founding team, like Chris and Ryan, walk in, even if you don't... and I will say, even if you don't admittedly understand 100% about all of their business model and what they're trying to build but you know when someone is an authentic, experienced, and passionate founder.
Theresia Gouw: (43:50)
I mean, Chris really knew the space. I mean, his prior company, you can look it up, I won't mention it because I don't... and it was very successful financially. But what he didn't like about it was that he was using his knowledge and smarts around how the traditional financial infrastructure worked to market to people who'd been overlooked by traditional financial institutions and to market them a product that they wanted but it wasn't necessarily a great financial trade, a great deal for them.
Theresia Gouw: (44:24)
And so that's why Chime, it just really, when you told the story it just spoke to me. It's like, I'm going to take all of that knowledge of how I know how to use ACH and debit rails and not credit card rails because it's more cost effective. I know how to build it but instead I'm going to use it for good. I'm not going to try to keep all of those bases points for my company. I'm going to put it back out into my users because what I really want them to do, I don't really want to make money on their transactions. I want to make money on them putting their direct deposit and becoming essentially their mobile first, their bank of record, right?
Theresia Gouw: (45:06)
So that's maybe a longer story, part of not... Lauren's story is the whole story but that was like the specific thing that I was like, all right, so here's a guy, here's a team, here's a founder who knows his space deeply. He's had one success and now he wants to take it to do something else. That really seemed incredibly thoughtful and authentic and genuine because it's obviously been a fantastic company, knock wood. Those valuations are what they are in the public but it's because it's been driven by their massive growth with accounts.
Theresia Gouw: (45:41)
And what he thought about really speaks to the mainstream America. That's who's on Chime. And he didn't want to create a product that was just created by tech dudes for more tech dudes, excuse the shorthand. But something that really was for mainstream America. And I thought he had exactly the right insights on how to do that. And he's obviously turned out to be even more successful than... maybe Lauren saw it but I was like, okay he's going to be successful but I don't know that anybody in a series A walks in, Sarah. They come in here like oh, it's going to be a $15 billion company.
Sarah Kunst: (46:14)
Yeah, it's truly a special company. On that note is this the space where it's winner take all? Chime is always going to be an outlier in terms of its speed to market dominance. But what is the term neobanking even mean anymore, right? I feel like anybody with an app that links to a bank account is a neobank. But it's interesting to think about what do you think the future looks like there? Are the big banks going to die and it's going to be all neobanks or the big banks are going to become neobanks? What happens here?
Lauren Kolodny: (46:53)
That's a good question. I wish I definitively knew the answer. I guess my view is that I don't think it's winner takes all. I think Chime obviously has a real stronghold on their member population which is people in the United States that are living paycheck to paycheck, which is the majority of Americans. I think they really speak to that population.
Lauren Kolodny: (47:16)
But as we've seen, neobanks haven't been super successful at traveling across borders is one point. So I do think that in different geos there are still opportunities. I also think that a lot of this infrastructure is enabling other companies to become financial services providers, right? And I think we're going to see a lot more consumer brands that have real loyalty and trust with their members, their users, start to offer banking products kind of embedded in their offering. We're seeing that already.
Lauren Kolodny: (47:53)
So I think that the movement is towards Fintech as business model, so to speak. And I think it will be really interesting to see kind of 5-10 years from now, are people still getting a lot of their financial services from traditional financial services providers? Or is it more these kind of crop of tech enabled banks but also other kind of consumer technology companies? My bet is on that.
Sarah Kunst: (48:23)
It was funny the other day.
Theresia Gouw: (48:25)
I was just going to say so, hanging onto that point. I was actually going to turn it back to you, Sarah, because actually in many ways, in terms of consumers and thinking about consumer segmentation, you're the deepest one on this call. But just building on what Lauren said, I said in addition to there's the geo piece because both consumer taste as well as regulation dip from geography to geography.
Theresia Gouw: (48:46)
I think what Lauren was saying is, if you think about, especially something specific like time which is consumer facing there will be multiple players because they might be the largest, right? The mainstream brand, right? But when you think about consumers in the United States and the winning brands there's always consumer segmentation, right? There are certain brands and certain offerings whether that's in banking or in retail. There might be one that's the largest because it speaks to sort of the broadest part of the population but there's always opportunity for people who speak to a very specific subsegment of the consumer base and have a differentiated value proposition and brand for that consumer. So I think that's the way we sort of see it playing out. I don't know if that's consistent with the way you think about it because I know you spend time in both of these sectors, as we do.
Sarah Kunst: (49:36)
I totally agree. I was thinking the other days, and obviously I'm friends with them so it's different but Gemini is gearing up to launch a credit card. And I was thinking about how 12 years ago, 15 years ago, you wanted a black card. Some day in your life you can maybe get an MX black card. I'm like, I would take a black card but I'm really excited to get a credit card that is my friend's company. And that is something that I'm excited about.
Sarah Kunst: (50:03)
And so it's just fascinating when you think about that from where the consumer loyalty goes. Fintech, it feels like, it's eating the world and maybe that's not such a bad thing. I think that exactly you're right. It's going to be a lot more than hey, there's only three companies you can trust. Now there's lots of places that are trustworthy and so it really comes down to who shares your values and who are you excited to be aligned with? That is going to be, I think, a really important part about the decade ahead in Fintech. So this has been so great. John, do you have any last questions?
John Darsie: (50:44)
I feel like we're just getting started but we'll have to have you guys back on for another conversation because we're fascinated by Fintech and just the way you guys look at trends. You talk about Chime, we have some involvement there. It's just interesting, like I said, to see which legacy companies are embracing the future. It's almost getting to the point now where some of these big banks, things like Chime, things like Plaid, things like Stripe that maybe a big bank or credit card company might have wanted to buy a few years ago, they can't buy them anymore because they're too big and they're disrupting them.
John Darsie: (51:14)
So it's a matter of whether they choose to embrace the future or they're going to become dinosaurs. So it's fascinating to watch and congratulations to you guys on being able to see around the corner and see some of these stories super early, Sarah, Theresia, and Lauren. So thank you guys so much for joining us, but we don't want to go too far into overtime here, but it's been a pleasure to have you on.
Theresia Gouw: (51:36)
Thanks for having us.
Lauren Kolodny: (51:40)
Yeah, thank you. This is great.
John Darsie: (51:40)
And thank you everyone who tuned into today's SALT talk with Lauren Kolodny and Theresia Gouw from Acrew Capital. Just a reminder, if you missed any part of this talk or any of our previous talks, whether with venture capitalists or hedge fund managers or public policy innovators, you can access all of our SALT talks and sign up for our future talks on our website at salt.org/talks.
John Darsie: (52:05)
Please follow us on social media. We're most active on Twitter I would say but we're doing more on Instagram. We post some of our content on Facebook and LinkedIn as well. And please spread the word about SALT talks and about SALT. We love growing our community and this lockdown has sort of offered a silver lining that we've been able to grow our brand and grow our community while everybody's sitting at home watching these SALT talks digitally, as opposed to having these space constraints that we have at our conferences, which we also enjoy.
John Darsie: (52:31)
On behalf of the entire SALT team, thank you again also to Sarah Kunst for organizing today's talk and introducing us to a wide variety of great guests as well. But on behalf of the SALT team and for Sarah, signing off for today. We'll see you back here again soon on SALT talk