Episode #454: Rex Salisbury, Cambrian - a16z Accomplice Turned Solo GP on Why He Believes Now's the Time for Fintech - Meb Faber Analysis - Geo Tv News

Episode #454: Rex Salisbury, Cambrian – a16z Accomplice Turned Solo GP on Why He Believes Now’s the Time for Fintech – Meb Faber Analysis

Episode #454: Rex Salisbury, Cambrian – a16z Accomplice Turned Solo GP on Why He Believes Now’s the Time for Fintech


Visitor: Rex Salisbury is the Founder and Common Accomplice of Cambrian Ventures. He was beforehand a founding associate on the A16Z fintech workforce.

Date Recorded: 10/12/2022     |     Run-Time: 1:01:18

Abstract: In right now’s episode, Rex shares an outline of Cambrian and the good thing about the fintech neighborhood he’s constructed over time. We contact on the three-body downside and the way it pertains to enterprise capital, the aggressive benefits of various VC’s, and why he believes you may be consensus and win in enterprise capital.

Feedback or recommendations? Inquisitive about sponsoring an episode? E-mail us Suggestions@TheMebFaberShow.com

Hyperlinks from the Episode:

  • 1:34 – Intro
  • 2:20 – Welcome to our visitor, Rex Salisbury
  • 7:43 – Launching a fund as a solo GP
  • 14:48 – ETF Architect episode
  • 15:36 – How the three physique downside pertains to the way forward for enterprise capital
  • 26:58 – Defining what FinTech means to him
  • 32:16 – How the chance set seems to be right now
  • 34:22 – The methods wherein Y Combinator has raised the standard of what founders know when beginning a brand new firm
  • 37:09 – Why is Rex solely investing within the US?
  • 39:01 – Rex’s request for startups
  • 43:41 – How laborious it’s to run and nurture the neighborhood he’s constructed?
  • 50:38 – How a lot of the result of his investments has been correlated to his conviction in them on the time he invested?
  • 55:45 – Rex’s most memorable funding
  • 57:54 – Be taught extra about Rex; LinkedIn; Twitter; cambrianhq.com



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Disclaimer: Meb Faber is the co-founder and chief funding officer at Cambria Funding Administration. Resulting from trade laws, he is not going to focus on any of Cambria’s funds on this podcast. All opinions expressed by podcast contributors are solely their very own opinions and don’t replicate the opinion of Cambria Funding Administration or its associates. For extra data, go to cambriainvestments.com.


Meb: Welcome, podcast mates. We’re again with one other enjoyable present right now. Our visitor is Rex Salisbury, a founding associate of the a16z FinTech workforce and is now a solo GP with Cambrian Ventures. In right now’s episode, Rex shares an outline of Cambrian and the good thing about the FinTech neighborhood he’s constructed over time. We contact on “The Three-Physique Downside” and the way it pertains to enterprise capital, the aggressive benefits of various VC fashions, and why he believes you may be consensus and when in enterprise capital.


Another factor earlier than we get to right now’s episode, whether or not you hear on Apple Podcasts, Spotify, or one other platform, go forward and go away us a assessment. We like to learn them, and it helps folks discover the present. Please take pleasure in this episode with Rex Salisbury.


Meb: Rex, welcome to the present.


Rex: Hey, Meb. Nice to be right here. Thanks for having me.


Meb: The place’s right here? The place do we discover you right now?


Rex: I’m calling in from the Presidio in San Francisco, the place you’ll find me most day by day. So I each dwell and work right here, spend loads of time working. Nice yard to have however nonetheless be within the metropolis.


Meb: Give us a fast Rex background, as a result of, , you left the nice and cozy, fuzzy confines of one of the storied and profitable enterprise capital corporations to exit by yourself, which, I think about, is a bit thrilling however nerve-racking on the similar time. Give us a bit origin story on you, the way you got here to the place you’re.


Rex: Yeah. So I form of by chance ended up in enterprise capital and serving to begin the FinTech observe at a16z, Andreessen Horowitz. That was my preliminary foray into enterprise. However how I ended up with this one, so that is Cambrian Ventures, early-stage FinTech fund, which I’m deploying out of now and began January of 2022, truly takes me form of approach again in that, at one time limit, I used to be an funding banker, discovered quite a bit, completely hated it, give up my job, moved throughout the nation. I used to be simply excited in regards to the alternatives for, like, constructing new issues in monetary companies, particularly round utilizing know-how. So I used to be like, “I wish to work in Fintech,” proper? However I’m an funding banker, so I’m getting gives, but it surely’s like, “Come work in finance for this, , monetary know-how firm.” It’s like, “I don’t wish to work in finance. Like, I wish to do one thing else.”


So I taught myself to code, even achieved a coding boot camp. So I got here out right here, gotten a number of gives in these form of nebulas, like finance ops roles at early-stage corporations, and I used to be like, “I don’t wish to do this.” So as a substitute, I truly went full in on the engineering aspect of issues, and I joined an organization known as Sindeo, working as form of lead again and engineer a billion of totally automated on-line mortgage pre-approval with one of many co-founders of SoFi, Andy Carra, who’s my CTO there. That firm was a failure, actually nice studying expertise, nice workforce, had a tremendous time. One of many issues I constructed there was this, like I stated, totally automated on-line mortgage pre-approval factor, like Rocket Mortgage, push button, get mortgage. I constructed out form of the APIs to energy an analogous expertise like that. And I used to be like, “Oh, that is actually…” this was circa 2014, “That is actually cool.” Like, mortgage, one of the necessary monetary merchandise in a shopper’s life, it’s extremely painful to get a mortgage, proper? It takes, like, three months. It’s extremely expensive. There’s all of this documentation concerned. Like, “Let’s try to work out how we are able to simplify that course of.” And so I assumed we’d construct some fairly fascinating know-how about that.


However in the meantime, throughout, like, all of economic companies, you may have these software program engineers and founders engaged on different issues. And I’m in San Francisco now, I used to be like, “I wish to discuss to these different people who find themselves working within the different corners of economic markets to form of construct new issues which can be cool and thrilling.” And so I began convening folks on constructing neighborhood for founders, , product managers, software program engineers to speak about issues they’ve constructed and launched in FinTech.


So 2015, I feel it was, we had our very first meet up in downtown San Francisco for Cambrian, the neighborhood. And we had, presenting there, my workforce demoing the appliance we’d constructed at Sindeo, we had the Plaid workforce demoing their API, after which we had a 3rd workforce demoing an software they’d constructed largely on prime of Plaid. And so, from that form of core kernel of simply, like, fascinating folks speaking about issues they inbuilt FinTech, Cambrian, the neighborhood, actually took off and, principally, by 2019, had, , 15,000 e-newsletter subscribers, 5,000 meet up remembers, I used to be working month-to-month occasions in San Francisco and in New York, had 2 annual summits, quarterly jobs gala’s, only a complete lot of stuff occurring, and I used to be getting much more vitality from doing the ecosystem-level work. And I’ve been pulled into investing and advising corporations through the years. And so I truly give up my job, went full time on Cambrian the neighborhood to run it as an occasions enterprise. So the plan was to lift a small fund.


However then a16z reached out to me, Andreessen Horowitz, stated like, “Hey, we’re beginning a FinTech observe. We love what you’ve achieved. Like, you perceive monetary markets out of your time in banking. You clearly perceive, like, how to consider an ecosystem and form of marshal folks and sources by your time constructing neighborhood at Cambrian. We’re going to start out a FinTech observe at a16z. Why don’t you be part of us and assist construct that out?” And so I used to be the primary associate who was introduced on externally there, with the understanding that I might keep for 2 years, assist construct out that observe, after which, if I wished to, exit and nonetheless go and do my very own factor. And so, spent two years there, targeted totally on the investing aspect of issues, had a tremendous expertise, nice workforce, wonderful alternatives to see, , one of many massive names in enterprise capital, go from, after I joined, name it 100 folks, they’re going to finish 2022 at about 500 folks, comparable form of scale by way of AUM as nicely.


However actually, what it got here right down to is, like, I’ve constructed this neighborhood, I had this sort of actually deep connection to, like, early-stage FinTech ecosystem, and by being impartial, I get to leverage loads of these relationships and networks that I’ve constructed which can be particularly, , well-designed for supporting corporations at form of their earliest stage. And so I focus solely on investing in form of first cash and checks for corporations with U.S. go-to-markets, normally, like, a 500k preliminary verify. After which the fund itself has form of a neighborhood taste to it. After which we have now, as LPs within the fund, loads of the highest founders within the ecosystem, from locations like SoFi, Plaid, Betterment, form of the listing goes on. We’ve received 20+ of us throughout all kinds of verticals in WealthTech, to InsurTech, to actual property, , monetary software program, the listing goes on.


Meb: So there’s a few jumping-off factors, I feel, are fairly fascinating earlier than we form of get in deep into FinTech and what you guys are in search of. The primary being, , clearly, you may have an superior pedigree at a16z, however constructing the neighborhood forward of time, I think about, is a reasonably distinctive, invaluable asset when deciding to launch a fund. Would love to listen to a bit little bit of that as a result of the way in which you’ve determined to do that is, primarily, as a solo GP, proper, and you’ll verify that. I don’t understand how massive your workforce is now, however I’m assuming it’s not 500. So, , Rex, Included. Is that one thing additionally that appears like might not have been potential 10, 20, 30 years in the past? I don’t know. Like, it looks as if a extra fashionable invention that is a bit more latest. So inform us a bit bit in regards to the resolution to be solo, in addition to form of the neighborhood side, if that was an enormous assist in launching this effort.


Rex: Yeah. So the primary reply, the one query, I’m a solo GP, and that’s the plan for the foreseeable future. I do have loads of actually nice of us supporting me, although, in numerous capacities. After which, particularly, despite the fact that I’m a solo GP, I draw quite a bit from the sources of the neighborhood I’ve constructed. So I already form of talked about the 20 founders, our LPs within the fund, even have loads of connectivity which can be of us within the enterprise ecosystem. And one of many different form of massive neighborhood equipment I’ve constructed up not too long ago throughout the pandemic is we have now a Slack neighborhood of 1,500+ FinTech founders, and so I feel, so far as I do know, the biggest form of on-line group of FinTech founders on the market. And that, so I’m always in touch and communication with a lot of of us within the ecosystem, whether or not it’s our portfolio corporations, these 1,500 founders within the Slack, the founders who’re LPs within the fund.


So, like, sure, I’m solo GP, however to your level, like, having a neighborhood equipment is extremely useful for me and the work that I do and extremely useful for me to form of marshal the sources of that neighborhood to help our portfolio corporations. However, , the neighborhood can be one thing that I’ve constructed to create worth for the ecosystem simply because I used to be passionate in regards to the ecosystem, like interacting with folks. And I began it six years in the past, and so now I get to form of use some facets of that to what I do in my day job as an investor, however I’m nonetheless targeted on making an attempt to simply create basic worth for the ecosystem by facilitating loads of connectivity between all of the completely different gamers inside FinTech.


I feel FinTech is a very fascinating class, , say, versus enterprise SaaS or shopper software program, the place it’s, by nature, extra extremely networked, partially as a result of it’s so extremely regulated, proper? When you’re constructing a monetary product, you’re going to want sure sorts of licenses, authorized counsel. You’re going to want numerous infrastructure suppliers. You’re in all probability going to want different companions and channel companions. And so there are all of those the reason why founders inside the FinTech ecosystem have arguably extra must form of join with one another than you do in case you’re constructing a shopper social app, proper? Like, in case you’re constructing a shopper social app, you don’t essentially want to speak to the entire different shopper social app folks, as a result of there’s not essentially a complete lot you are able to do collectively. However in FinTech, it’s, like, extremely collaborative by way of, , why you may should be working with folks within the ecosystem, and so I feel why a neighborhood method actually issues.


And you then additionally had…so I imply, like, might you do one thing like this, , 30 years in the past? No can be the very brief reply. However even for me, personally, I don’t assume that is one thing I might have achieved even 4 or 5 years in the past. I feel one is LP urge for food and curiosity in backing solo GPs. That’s form of a brand new class of factor. In order that wasn’t there. Two, even in case you did have the urge for food and the curiosity, the concept in case you wished to fundraise for a fund, you may do loads of that remotely, which I did, that simply wasn’t within the water. I’ve received two youngsters. I’ve received a five-year-old and a two-year-old, and so, like, the thought of spending, , months on a aircraft simply going to speak to folks is…I in all probability would have simply stated like, “Thanks, however no thanks.” So LP urge for food for solo GPs. The concept neighborhood issues, I feel, is form of a brand new concept. It’s one thing that I’ve been doing for a very long time however I really feel has change into extra scorching or topical simply within the final two years, partially as a result of one of many massive issues folks speak about in Web3 is how Web3 is a community-oriented motion, proper?


So LP curiosity, the flexibility to lift remotely, after which, additionally, , and that is the place form of the FinTech aspect of issues is, simply among the infrastructure that permits you to function corporations. There are loads of completely different platforms you may launch a fund on prime of now, proper? There’s AngelList, there’s Sidecar, there’s Carta, and people are form of extra holistic platforms, to some extent, though you continue to want loads of different help. There are additionally issues you need to use for, like, doc administration, rights administration. Like, there’s all of these items that makes it extra possible as a solo GP to have, like, nice tooling that makes it a bit bit simpler and quicker to stand up and working than it could have been, , a number of years in the past.


And I feel that’s actually thrilling, and also you’re seeing lots of people experiment with completely different fashions in enterprise. I feel one of the notable ones being that of the solo GP since you break down a enterprise agency, like, essentially the most atomic unit is a person associate. And if you consider you’re going to have a Nobel laureate in your present, I feel, later right now, however one other nice economist, Ronald Coase, , the Coase Theorem, the speculation of the agency is {that a} agency is one thing the place the inner transaction prices are lower than the exterior transaction prices. And so, in case you truly make it simpler to create enterprise corporations due to form of the substrata of each the infrastructure that exists in addition to the form of, like, LP urge for food and sources of capital that exist, you must anticipate to see new methods of being inside the entire form of enterprise ecosystem. And that’s why it’s going to be fascinating for the subsequent decade to see how enterprise capital, as an ecosystem, evolves, given all of those form of shifting parts by way of how one can take into consideration constructing a agency.


Meb: So did you find yourself constructing the fund on considered one of these web sites you talked about or companions, or did you do it a bit conventional approach? How did you go about it?


Rex: Yep, I run a standard fund on prime of the AngelList platform. And they also assist me out with loads of the back-office-oriented stuff. After which I even have folks that I introduced in who aren’t essentially technology-oriented companions however partially as a result of there are extra solo GPs and extra rising managers now which can be of us who’re well-designed from a service perspective to help that. So I’ve an outsourced COO, CFO group that’s form of well-tailored to working with these platforms and focuses on doing and supporting rising managers. So each are, like, technological parts, but additionally, even the service and people-oriented parts have gotten extra developed for that form of factor.


Meb: Yeah. One of many cool elements is, in a lot the identical approach that loads of the phrases of startup funding has been templated, , the fund aspect now could be too. So it’s, in some ways, like, fairly turnkey, which is nice to see. We joke about this quite a bit in our enterprise with launching an ETF is, in most of the similar methods now, loads of the frictions and trigger. We’ve achieved exhibits with mates from ETF Architect, in addition to Tidal and others, that form of helps you to white label or launch a fund fairly merely. As a result of in case you look again on it, 90-some% of the phrases are fairly customary. I imply, so then, it’s simply getting the plumbing…


Rex: It’s loopy how a lot everybody at each degree of economic companies pays legal professionals to do principally the identical factor. Like, it’s simply insane.


Meb: Yeah. There’s nonetheless loads of fad on the market, as a result of that’s my, in all probability, primary line merchandise as nicely, that very, very private remark, with all the things that’s SEC-registered tends to get costly with the authorized workforce. We love our group. We truly use a San Fran…old-school San Fran enterprise. So shout out to Shartsis Friese, in addition to Morgan Lewis. Nice groups. All proper. So let’s discuss a bit bit in regards to the enterprise house, normally, after which we’ll dig into FinTech and form of what you’re doing particularly. We’ve talked about a few traits, , occurring in VC over the previous decade or two. What else is in your thoughts, as you look across the VC panorama, that appears to be shifting? There’s some huge cash floating across the previous 15 years, which I feel is nice. Enterprise is at its core nonetheless, form of a tiny asset space relative to different areas of form of conventional asset administration. After we say some huge cash, you bought to place it in context. What are some views on enterprise, normally? Another ideas on the house? I do know you have been speaking a bit bit in regards to the three-body downside idea, which, for many who haven’t been acquainted, is a science fiction work that I’ve learn. Or a minimum of I learn the primary one. I haven’t learn all of them. I hand you the mic, what’s some basic ideas? What’s occurring on this planet of VC?


Rex: Yeah. And have you ever learn that Frank Rotman’s Three-Physique Downside, which is his form of tackle equilibrium factors in enterprise capital? I don’t know in case you’ve come throughout that or not.


Meb: Let’s hear it. I’ve seen it, however clarify it for the viewers.


Rex: Yeah. So first, I’ll simply say…we’ll dive into that one a bit bit, however I feel, to your level, 100%, enterprise has gone from being this very, very small, very, very cottage factor. Like, I feel one of many very first funds raised was, like, Kleiner within the ’70s, and it’s them driving round…you in all probability know the story higher than I do, . It’s a $6-million fund, possibly, in 1970 that they’ve satisfied everybody of what this factor is and form of will get going from there. You may go even additional again, speaking about, , like, whaling and people form of fashions. However right now, even 10 years in the past, like, I’ve received a chart up in entrance of me for capital raised by enterprise funds within the U.S. in 2012, $23 billion, which is, like, a rounding error whenever you have a look at different sectors of capital markets, even non-public markets.


After which, in 2021, it was an all-time file, 150 billion, which is fairly significant, however they’re nonetheless, , in comparison with different markets, it’s not large. However we’re attending to the purpose the place it’s…, a16z, Andreessen Horowitz, my outdated employer, within the, like, a few years that I used to be there, went from about 10 billion in belongings to now, I feel it’s north of fifty billion. So that you’re beginning to get thus far the place you’re getting institutionalization of what was a cottage trade. Nicely, the form of panorama for how one can, , launch a fund, construct a fund, what that may appear to be, is altering. And so all that’s to say we’re on this actually fascinating interval the place it’s changing into an actual asset class, and it’s form of up for debate as to, like, what precisely will it contain into asset institutionalized. And what it’ll appear to be might be very, very completely different, and it’ll in all probability be completely different gamers who focus on completely different sorts of issues.


So I feel it’s a very good level to speak about form of “The Three-Physique Downside,” which is a chunk written by Frank Rotman, who’s one of many founders of QED, which is a FinTech particular agency, and he argues that there are form of 4 steady equilibrium factors that he sees because the seemingly locations the place enterprise corporations can form of specialize and be enduring, a minimum of for this sort of subsequent section, possibly 10 years. And a type of are, like, scale partnerships, the, like, a16zs, the Insights of the world. Two are form of the extra early-stage specialists and extra of the form of boutique kind approaches or early-stage generalists, specialists, I feel, is what he calls them. And that will be like, , the Benchmarks or the First Rounds. After which one other can be form of non-consensus alpha of us, individuals who actually simply exit and discover new issues which can be fairly a bit completely different. After which the fourth can be form of solo capitalists, solo GPs who’ve very distinct model worth, very distinct worth proposition for the founders.


And so these are form of the theories he sees. And the rationale and the way he will get to that conclusion, and , I truly interviewed him not too long ago, talked by a few of this, is you may form of search for historic antecedents for different areas which have gone by durations of change. I feel one of many fascinating areas to speak about, and love to listen to your ideas on this too, Meb, are, like, the massive asset managers that we all know right now, Blackstone, BlackRock, Vanguard. Three very completely different corporations, however all of them have been born across the similar time within the Nineteen Eighties as asset administration, particularly for public market fairness, granted Blackstone is extra of a non-public fairness platform. All of them received began on the similar time as a result of there’s that very same interval of institutionalization, And I feel we’re at that interval for enterprise capital right now the place, because it goes from being a cottage trade to an institutionalized asset class, you’re going to see these bursts of those form of massive mega-firms. In sure methods, I feel Andreessen Horowitz has an excellent probability of being a type of form of defining that class. And historical past doesn’t repeat, but it surely does rhyme, and so there can be some similarities by way of how the remainder of it shakes out.


And so that is the place Frank talks by different form of historic antecedents, issues just like the consulting trade, used to have a ton of form of boutique consulting corporations, and now we have now, like, the massive ones, like Bain, McKinsey, BCG, and many others. You have a look at accounting corporations, used to have a ton of boutiques, now you’ve received the Huge 4 and a protracted tail of different ones. And so one thing comparable might be going to shake out in enterprise capital the place you may have some actually massive names that construct out large presences, however you then even have this sort of different units of gamers who can exist inside the ecosystem. In order that’s form of a bit little bit of the overall taxonomy of the three-body downside however I feel a bit little bit of what’s going on in enterprise proper now. I, in fact, am biased, however I’m excited in regards to the skill of solo GPs to exit and ship worth, and the form of pitch there’s that, greenback for greenback, these must be essentially the most useful folks in your cap desk as a result of they’re normally extremely community specialists who ship very particular worth to you and your organization for a factor you want.


So my pitch, at Cambrian, for instance, is, look, I’m extremely networked into the house, however not simply myself, my connectivity into the neighborhood and the ecosystem that I’ve constructed permits me to marshal…I’m form of accessed to a community of networks, , the 20+ founders, our LPs in fund, the 1,500+ founders who’re members of the neighborhood, and simply the truth that I’m a non-lead additionally implies that I’m in a position to collaborate with multi-stage enterprise funds and plenty of different folks within the ecosystem in a approach that’s form of distinctive relative to different gamers. In order that’s a bit bit, I feel, a breaking down of among the taxonomy of enterprise, I’d say. However I like to listen to your ideas too, Meb. I’m positive you’ve thought of it a bit bit.


Meb: I largely agree with you, and we’ve been speaking about this for a very long time within the conventional public house, stated, “Look, the bottom case now within the public areas is zero,” which means zero charges. You will get a world ETF portfolio.


Rex: It’s barely destructive. Isn’t there one that you simply receives a commission now, or is it…? I assume Constancy has the zero, proper? So Constancy has some zeroes.


Meb: It’s a few foundation factors, however when you embody brief lending income, you’re primarily getting paid on a portfolio, which is wonderful. Finest time ever to be an investor. It’s tremendous cool. It’s additionally the simplest time ever to mild all of your cash on fireplace and blow it up with dynamite, , with entry to buying and selling actually something. So, to me, that’s, like, the competitors, and there’s nonetheless tens of hundreds of funds on the market that cost much more than zero, proper? And so, once more, it comes again to what’s your worth proposition. And so you may have loads of these legacy belongings the place persons are paying much more than zero, however they, primarily, are simply getting beta. In order that they’re getting the S&P 500, for example, for shares.


Rex: It’s insane. And I do know you’ve talked about this, however what number of S&P 500 ETFs there are that cost, like, 1%? Like, they simply take a very long time to die. In order that’s in all probability going to be true in enterprise too that there can be these legacy platforms which can be clearly dying, but it surely’s going to take some time as a result of these are 10-year funds, they’ve deep relationships with LPs. Like, , it may possibly take some time, even when it’s very clear they’re on their approach out


Meb: Yeah. I imply, look, and top-of-the-line issues you are able to do as a newly minted GP is have a very good first fund or get a bit lock. However that form of christens you…there’s been a bunch of educational analysis, additionally within the VC house, on this that it christens you as somebody who actually is aware of what they’re doing and will get a for much longer leash on future funding and fundraiser. However, like, let’s say even in case you’re a storied agency that’s achieved nicely, and also you hit a few tough patches, like, you continue to get a good period of time earlier than that goes away. And so, enterprise and personal fairness have such lengthy lock-up durations or simply form of time to fruition, a few of these being nicely over 10 years, 15 years typically. However, yeah, so the asset on the general public aspect, I feel, the normal gamers, , there’s folks…cash tends to get cozy the place it’s till disturbed. And so the folks which can be solely promoting these when somebody dies, when there’s, like, a taxable occasion, divorce, or one thing actually dangerous occurs, like an enormous, fats, nasty bear market, but it surely doesn’t return, , to loads of the normal no-value-add incumbents.


So I feel you’re spot on and that you simply’re going to have…I imply, this has all the time been true, but it surely’s changing into extra true, you must have a really clear worth proposition going ahead. Within the public house, in case you can cost greater than zero, I haven’t seen as a lot of the pricing stress in you all’s world but, or in any respect, possibly there’s, but it surely looks as if loads of the argument in VC is that, “Hey, you’re taking pictures for this prime quartile. And if you will get it, , you’re going to have an enormous unfold on the efficiency.” So anyway, I agree with you. So we attempt to be…our tagline once we discuss to folks we see, “We wish to be bizarre, concentrated, and completely different,” , which some folks like and a few folks actually don’t like. However you form of must, for my part, in case you’re going to cost greater than zero.


So you may have this case the place you bought these big gamers, like a16z. You’ve got this new rise of solo GPs. You talked about a number of of your form of calling playing cards and worth provides. So let’s form of, like, stroll by the method, . So that you raised a fund, 28 million, I feel, and what number of names are you guys focusing on per fund? Is it 10, 20, 100?


Rex: Yeah, I’m focusing on about 30 and deploying over about 2 years, and that comes right down to being a operate of each what number of nice entrepreneurs do I feel are on the market within the ecosystem that I wish to be backing and what number of entrepreneurs do I feel I can truly help nicely. And my dedication to entrepreneur is to be very concerned for the primary form of 12 months to 2 years, possibly even a bit bit extra of that firm’s lifecycle when entry to these networks and relationships actually matter and will assist them discover alternatives they may not uncover on their very own. When you get by your…I’m normally first verify in, your subsequent spherical of funding or your subsequent two rounds of funding, normally, I’ve a bigger workforce, you may have a way of product market match, the place to look, you may have a workforce that might construct out these relationships, and at that time…and you’ve got a board. And at that time, having somebody like me is much less useful, since you’ve form of…you haven’t figured all the things out, however you figured loads of the unknowns out, proper? And form of the place you’re trying, whereas the place I may help is, like, determine the alternatives you may not even have thought to search for early on, in addition to, like, one of many massive issues I may help out with is, , serving to with subsequent fundraises, so.


Meb: Whenever you say FinTech, it means loads of various things to loads of completely different folks. So for you, whenever you’re form of beneath this umbrella, like, what does it imply? What are you guys in search of on this FinTech ecosystem? Are there sure areas of it that you simply assume are extra relevant to form of your wheelhouse and fund investments?


Rex: Yeah, completely. I feel one of many issues criticisms of FinTech initially was, like, “Is it even a class?” Like, this was, like, 4 or 5 years in the past. There actually hadn’t been any exits. And you then had Credit score Karma and Plaid. In fact, Plaid and Deel find yourself going by. So it’s, like, okay, now, it’s form of a class. I feel now, the issue is, like, it’s so broad of a class, it’s like, “What does that even probably imply?” And I feel what I’m enthusiastic about is simply form of the subsequent layer down of economic companies, in addition to form of intersectional areas. So in case you have a look at FinTech because it intersects with, like, HR tech, FinTech because it intersects with well being care, I’ve achieved one funding that’s doing form of a vertical software program play in well being care. When you have a look at InsurTech, there’s form of a bunch of stuff that hasn’t essentially been achieved there but.


When you go right down to the subsequent degree of simply software program and information orchestration throughout all of the platforms, there’s a bunch of fascinating work to be achieved there. Digitization of banking software program I feel was once form of poo-poo’d by loads of FinTech traders, like, “Oh, you’re promoting software program to, like, the incumbents. You’re going to die.” And that’s, like, form of studying that, “Oh, they in all probability aren’t going to die, and they’re going to have, like, a very massive function to play in sure areas of finance for a really, very very long time.” So, like, that’s a complete one other class. Industrial actual property lending is one other one the place in case you…I spent loads of time with shopper, residential, mortgage, actual property, very complicated, tough ecosystem. Industrial actual property lending and sure segments, simply as massive, even much less know-how.


It’s an space the place most individuals haven’t spent a complete lot of time who’re technologists, however a number of groups, truly, as a result of the FinTech ecosystem has gone so massive, have spent actually significant time constructing information platforms in that house or different form of issues, so that they now perceive that downside each as…, there are many folks within the monetary and actual property markets who do perceive it, however there aren’t that a lot of them who’re additionally technologists. Now, you may have people who find themselves each.


Meb: And so you’d take into account these to be, like, for the normal vernacular, pre-seed?


Rex: Yeah, pre-seed might be one of the best ways to name it. We name it pre-seed or seed.


Meb: And so what’s the vary on form of the market caps and checks you’re writing for these, only for perspective?


Rex: Yeah, they vary from form of 5 to fifteen caps, usually, on a post-money foundation. And simply commentary by way of how the market has developed after I first began out very early in 2022, I might say the window, once more, skewed, however the entire window of valuation ranges was from 10 caps to 50. And now, it shifted right down to what I simply talked about to you. Pricing is lastly beginning to appropriate on the pre-seed.


Meb: Good to see, as a result of I’ve been ready. I really feel like, and I don’t see it like the way in which you do, clearly, as a lot, however I attempt to hold tabs on it. And positively, it was form of going bananas the previous couple of years. After which I noticed it begin to form of appropriate earlier this 12 months, but it surely’s good…I imply, it’s good and it’s dangerous.


Rex: Seed is the longest. It’s, like, essentially the most insulated folks. If it’s your first spherical of funding, your alternative is all the time simply to attend. Whereas if it’s your second, like, you must elevate, and similar for later-stage corporations which can be burning by money, and so that is the a part of the market that takes the longest to regulate. And we’re in a bit little bit of a bizarre state of affairs proper now the place offers are taking longer to get achieved, partially as a result of that’s historically simply how offers have normally taken three months for folks to undergo diligence, and many others., however partially as a result of there’s rather less readability out there as to what the form of basic market clearing value must be.


If you consider promoting a home in a scorching market, you simply have a look at, like, the couple of homes down the road that bought within the final month, and also you’re like, “Okay, that is how a lot this home ought to promote for. Now, in case you’re going out and also you’re elevating, nicely, lots of people didn’t elevate, like, new cash, there are loads of extensions over the summer time, not as many individuals raised new rounds over the summer time. After which your final comps are form of from Q2, so that you’re like, kina, “What’s the market clearing value?” So, like, A, I’m going to take longer in diligence, B, there’s much less certainty about what precisely the worth must be. And so issues are a bit bit bizarre proper now as they reset.


So it could possibly be, , issues proceed to go even decrease or it could possibly be they form of begin to stabilize and even go up due to one thing else, I’m positive, you’ve talked about. Like, there are file quantities of dry powder within the ecosystem proper now and loads of these giant multi-stage funds. Enterprise capital fundraising for 2022 was nonetheless at an all-time file, despite the fact that the markets have slowed down, proper? There’s a bit little bit of a lag impact there. And loads of these multi-stage funds do wish to deploy into seed or pre-seed, they usually virtually don’t know the right way to write small checks. And so what that may imply is there may simply be this sort of everlasting form of stability for the earliest rounds that corporations elevate, however we’ll see. We’ll have extra readability on that within the subsequent couple of months.


Meb: Yeah. Historically, that is form of, like, a half millioncheck, a millioncheck, or what’s form of the ballpark for you guys?


Rex: Yeah. I normally write a 500k initialcheck.


Meb: Nice. So inform us a bit bit about…how’s the chance standing in search of you? , your course of normally simply form of, as a solo GP, you may have a novel asset, which is that this community. Are many of the offers coming simply by mates, by folks ? Like, what’s your course of like, and the place will we stand now so far as alternative standing at overwhelmingly tons of nice founders? Is it fairly focused? What’s the world appear to be for you?


Rex: Yeah, I’m actually excited as a result of I’ve been…within the final two months, I might simply say, the variety of actually extremely certified founders I’ve seen has truly been larger than it’s been up to now, and I feel a part of that motive is in case you are beginning an organization from scratch proper now, you’re not doing it as a result of it’s, like, this cool, attractive, simple factor to do the place you may, like, stroll out of your, like, model title FinTech firm and get a $5 million time period sheet in every week from an organization or type a enterprise agency that hasn’t achieved a complete lot of diligence. It’s, like, it’s extra work, and that is one thing you’re actually compelled to do, and also you in all probability have a novel motive why you’re doing it. And so I simply really feel like, usually, each form of a quantitative view or qualitative view that these founders I’ve seen now are actually nice after which quantitative, simply the variety of them that I’m seeing and I’m form of actively engaged with is larger now than it has been up to now.


When it comes to how I come throughout, there’s loads of stuff, proper? So I run the Slack neighborhood, so I see loads of of us who’re becoming a member of there on the very earliest levels. I truly do co-founder matching about twice a 12 months, which is generally only a approach for folks early on to have a lot of conversations, assist ideate, after which typically, additionally, , discover their co-founders. That’s one other space. The 20+ founders who’re LPs within the fund, , they ship of us to me who’re, early on, even when they’re not elevating as a result of I may be very useful in serving to them discover co-founders, serving to them refine their concepts, serving to them do buyer validation and discovery, in order that’s one other supply. After which I’ve lots of people attain out, name, on LinkedIn, and on Twitter, and thru the web site. So there are form of all these completely different sources that come collectively. And so typically it’ll be somebody I’ve by no means met earlier than who reached out, known as, or different instances, it’ll be a workforce that I’ve identified for a very very long time by the neighborhood and simply by the ecosystem.


Meb: Yeah. And it appears, as an outsider, and you’ll in all probability touch upon this, however simply the arrival of loads of the Y Combinator, Techstars, accelerators over the previous, I don’t know, decade-plus, has raised the standard of a minimum of what loads of the founders learn about form of beginning an organization. Is that correct or inaccurate assertion? And , they don’t appear as inexperienced as to simply understanding how this complete recreation works.


Rex: Yeah, completely. So, yeah, going from zero to at least one just isn’t as a lot of a darkish artwork anymore, proper? Like, a lot ink has been spilt about, like, how to do that. A variety of that ink has been spilt by Y Combinator, proper? Like, you may go to their startup college, like their curriculum. It’s primarily open-source at this level. They’ve additionally achieved an amazing job of reducing out some standardized paperwork that permit you to rapidly elevate preliminary rounds of funding, the YC Secure, and many others. So, yeah, I feel the zero to at least one simply from, like, understanding what that appears like, even in case you’re a first-time founder, you will get far more on top of things. However then, take into consideration the truth that there are actually, , name it, 1,000 unicorns. Like, there are simply additionally so many repeat founders within the enterprise ecosystem that the variety of folks you may discuss to to study from is bigger than ever earlier than.


Oh, and by the way in which, you is perhaps a type of repeat founders. Like, in case you have a look at the Cambrian portfolio right now, loads of of us even have helped begin corporations earlier than, so. However I feel that is truly form of an fascinating query for what function does YC play within the ecosystem, or accelerators. I feel, earlier than, it made sense for plenty of founders, particularly virtually each first-time founder, to undergo YC, or by YC itself, as a result of there’s the curriculum, there’s the community, there’s the sign related to it. Whereas now, what I see for many refined FinTech founders, whether or not they’re first-time founders or repeat founders, is that they’re like, “I don’t actually wish to undergo YC, nor do I must, as a result of one, their phrases aren’t as engaging as I can discover elsewhere, two, I form of already know the curricular stuff. I’ve my very own particular networks which can be related to FinTech, and their networks are nice, however, like, it’s form of a special kind of expertise. And so I’d actually fairly elevate from folks on higher phrases who’ve very particular area experience and connectivity.”


And so, for me, like, usually, the forms of corporations I’m backing haven’t even thought-about going by Y Combinator as a result of they’re form of like, “I don’t want that,” proper? However that’s additionally as a result of their ecosystem is bigger than ever earlier than. So there nonetheless are a lot of folks for whom YC is a very good match, but it surely additionally means, now that the ecosystem is bigger, there are some individuals who simply don’t want that, which is why you may have other forms of corporations who’re doing different form of specialization, and many others.


Meb: You additionally…Cambrian is such an amazing phrase for this, however you begin to see this, I really feel like, in different geographies. , you may have a profitable firm, and it mints a bunch of millionaires, And unexpectedly, these millionaires can now angel make investments or begin new corporations, and it simply form of populates this complete new ecosystem of founders and angels which form of propagates, which this complete form of snowball pattern appears to bolster itself, which is form of just like the Silicon Valley being exported to all the world, which looks as if a reasonably wonderful pattern. Like, it’s actually thrilling to observe it occur in Africa and all kinds of Pakistan and different locations now. Are you guys U.S.-only for now?


Rex: I’m U.S.-only for now, and the plan is to try this endlessly. So I feel there are wonderful issues taking place around the globe. Simply concentrating and doing one factor nicely is necessary. The U.S. is the biggest unified market, with good rule of regulation on this planet. And loads of what I do is dependent upon networks. So if I spend money on loads of the good FinTech corporations within the U.S., there’s a lot of alternatives for cross-pollination throughout the portfolio. If I begin flying to completely different continents, there’s quite a bit much less inter-portfolio connectivity. And, oh, by the way in which, like, my time solely scales so nicely, and worldwide flights value loads of time, so.


Meb: Yeah. And plus, you bought two beneath 5. My spouse stated, , “I ought to make you a deal. You may nonetheless journey as soon as we have now a child, however we get to choose and select on which journeys we go along with you on.” So oddly sufficient, they’d comply with go on journeys to Dublin or Eire as a substitute of, , and I’m not throwing shades, Cincinnati or someplace within the U.S., Chicago even. And I say, “Actually, we’re going to take a two-year-old to Dublin? Effective.” It’s a good deal. So, okay, let’s discuss a bit bit about…you may take this considered one of two methods, it’s as much as you. Since loads of the portfolios are in stealth, you may both discuss broadly talking about among the stuff you’re seeing which can be fairly cool or concepts or sub-industries of FinTech, or you may take, , what are you in search of that you simply haven’t seen, , some areas or some issues that you’ve got stated, “Man, I’d love somebody to be doing XYZ,” or you may reply each.


Rex: Our very first funding we did was in OatFi. OatFi, like I discussed, is doing embedded lending for B2B platforms that do invoicing, and many others., so like a enterprise model of BNPL or factoring can be one other mind-set about it. Nevertheless it’s this embedded lending element. If you consider being a small enterprise, everybody is aware of money circulation is king, however particularly in case you’re making an attempt to get a sub-$100,000 line of credit score, it’s simply very laborious so that you can go to a financial institution and get underwritten for that, as a result of they’re going to take a very long time, it’s going to be a really expensive course of, it’s not going to be very highly effective for them. So loads of small companies prolong their extra capital due by very form of costly sources, like factoring, however even that’s usually, like, a separate space and could possibly be fairly costly. If as a substitute the lending is embedded into your on a regular basis form of circulation, like, the provider who you’re working with, after they bill you, there’s only a button you may click on to get extension of debt. And that provider themselves has a button on their finish the place they will speed up account. That’s a really fascinating approach of simply seeing enterprise lending embedded into the common circulation of enterprise versus pulled out and obstructed away right into a financial institution department, proper?


In order that’s, like, A, only a very massive and fascinating pattern, and there are additionally so many extra vertical software program platforms. Like, let’s say you’re a vertical software program for somebody to run a hair salon, or a dental provider, or a trucking firm, you’re going to want to make use of, like, , Stripe to simply accept funds, however you’re additionally in all probability going to want to make use of some form of software program to do the invoicing, after which, as a part of that, you in all probability wish to monetize to some extent by lending, nicely, you may simply combine with OatFi, and OatFi, on the again finish, has numerous capital supplier that they construct out debt amenities with who can then present the credit score in your provider. And also you truly get a bit little bit of a rep right here. So now, you may monetize by monetary companies by, like, , you will get a take charge out of your, like, integration with Stripe. You can too get a take charge out of your integration with OatFi and the credit score you’re extending. However you, your self, don’t must be a fee course of or a stability sheet, a lender. And so that concept of embedded finance, particularly because it pertains to the thought of individuals constructing vertical software program companies that monetize your monetary companies, is, like, a very, actually massive concept, I feel, usually.


After which, just a bit bit…I feel that is fascinating in understanding how, like, the Cambrian neighborhood works. So I initially met Mike, the founding father of OatFi, when…truly, I initially didn’t meet him. He joined my Slack group, and I didn’t discuss to him for, like, months. I’d inform him to affix. I, like, ship a basic welcome be aware, which is one thing I all the time do. After which, like, a number of months later, somebody talked about to me that they have been elevating, and I used to be like, “Oh, that sounds fascinating. Like, let’s go on the cellphone.” And the primary time we get on the cellphone, Mike’s like, “Rex, it’s, like, nice to attach with you.” Like, “Oh, by the way in which, our very clients, and we met by, like, the Slack group.” And I’m like, “That’s nice.” I’ve achieved no work, and the primary particular person you’re going to go dwell with is somebody you met organically by the neighborhood. He’s like, “And considered one of our first infrastructure suppliers,” so somebody they used to do one thing, like, mortgage administration stuff, they’re like, “That’s additionally somebody we met.”


So right here’s somebody I haven’t even talked by who’s interacting with the Cambrian neighborhood who has now gotten first clients, infrastructure help, and many others. After which I ended up investing, like I stated, within the pre-seed, and as a part of that, introduced in, truly, one of many founders from our 20-founder LPs to co-invest in that spherical, as a result of they’re, like, good, form of overlap there. Additionally discovered another of us who become involved. After which, subsequent to that spherical, did loads of work by way of, anytime somebody joined the Slack neighborhood or I simply interacted with another person of their early-stage ecosystem who might conceivably wish to embed lending into their platform, simply ship them over to Mike. They’ll have a collaborative dialog…are additionally very early-stage founders who’re making an attempt to determine the right way to construct their enterprise, they usually wish to monetize by lending, however they’re like, “That’s loads of a carry.” And I feel that’s on my roadmap.” And Mike’s like, “Look, we may help you deliver that ahead in your roadmap by making it quite a bit simpler due to how our platform works.”


And so, like, simply form of the casual connectivity over time. And they also even have a number of clients which can be going dwell that they’ve form of met by the Cambrian community. After which, like I stated, QED ended up preempting their subsequent spherical of funding. They only did their announcement.


Meb: How laborious is it to run that community? And what I’m pondering of is conventional, loads of communities. You get folks misbehaving, whether or not it’s, , simply being basic social media turds but additionally spamming and advertising. And, like, how laborious is the neighborhood you may have? Are you, like, a strict mum or dad, one strike and also you’re out, or, like, how do you monitor and simply run that complete present?


Rex: Yeah. Communities evolve over time, proper? The Cambrian neighborhood I’ve run has developed over time. Began initially as simply form of month-to-month in-person occasions in San Francisco. We truly haven’t achieved an in-person occasion of that kind for fairly some time now. Now, loads of my neighborhood work is extra digital and thru, like, the Slack group. The Slack group right now is about 1,500 members. They’re all founders. They’re all individuals who know what it’s prefer to be in an analogous state of affairs. And so I’ve had very, only a few situations of what I might classify as poor habits. I do fear that because it begins to scale once more, like, possibly that’s one thing we’ll have to consider. However to date, I’ve been making an attempt to maintain it form of usually constrained. So I do take into consideration that, however I’ve been lucky that I really feel like people who find themselves founders and builders, usually, like, know and respect what different persons are going by, and due to this fact, attempt to behave accordingly. And that’s usually been my expertise.


Meb: Yeah. Nicely, whenever you’re able to host an L.A. pleased home, we’ll sponsor it. So you may come on down whenever you want some sunshine in San Francisco, and we are able to do a meet up.


Rex: Subsequent 12 months, I plan to try this a number of instances, in 2023. So I feel L.A. is on the map. In all probability, we’ll additionally do some in New York and possibly in locations like Salt Lake Metropolis and different form of FinTech hubs that I do know a lot of nice entrepreneurs in.


Meb: You have been going to say one other startup that has come out of stealth.


Rex: Yeah. The opposite one is Hold Monetary, and so that is form of FinTech on the intersection of HR tech. If you consider being an HR group, particularly in a post-COVID world the place issues are extremely distant, and now, workers reside in all 50 states, there’s simply, like, loads of issues so that you can handle. And loads of stuff you handle as an HR division are round coordinating compensation and other forms of, like, monetary closing compliance for these workers. So there’s simply loads of stuff on the intersection of FinTech and HR. It’s an space I’ve been fairly enthusiastic about for some time. My spouse, as one instance, leads, like, go-to-market ed, Guild Training, training as a profit bought into Fortune 100 employers. And so they’ve achieved fantastically nicely. So into that basic space, which I’ve been for a very long time, met Rob and Kathryn, or re-met Rob and Kathryn, who’re the founders of Kabbage, the small enterprise lender. Their new firm is named Hold Monetary. They’re a bonus administration platform for employers.


So that is an illustrative instance. Burger King just isn’t a buyer of theirs, however let’s say you’re Burger King. And also you wish to rent 10,000 frontline staff, and also you wish to subject them a $5,000 signing bonus. Nicely, you may do this, after which, like, the folks join, they get the cash, after which they, like, don’t present up after the primary day of labor or one thing. And also you’re like, “Nicely, that didn’t work very nicely.” However we’re truly within the tightest labor market, nonetheless, for sure service sector industries, whilst, , form of the macroeconomic indicator shift, the tightest labor market in, like, the final 70 years. Employers are determined to recruit and retain expertise.


I like the worth proposition that Hold says, as a result of they’re like, “How do you recruit and retain expertise?” It’s, like, you pay them. And also you pay them by bonuses. And beneath the hood, these bonuses, that is form of the monetary product, however they’re structured as forgivable loans that vest over a sure time period. So now, after I offer you this $5,000 signing bonus, it vests over a sure time period. When you go away early, it may be forgiven. Like, a portion can be forgiven, after which the remaining may be form of repaid at zero curiosity over some time period.


So now, you, as an HR chief, have a brand new device in your toolkit to consider, “How do I recruit staff?” By the way in which, the identical platform you need to use to retain them. You may subject spot bonuses or retention bonuses. And so, if you find yourself being a really giant employer, like, it truly will get fairly difficult to consider how you’d wish to construct out this program at scale. You’re like, “Nicely, how a lot ought to it’s? Like, what about in case you’re this degree versus that degree? What must be the vesting interval? Like, how do I truly disperse the funds? How do I truly handle, like, the state-level registration as a result of this can be a mortgage product?” Like, all of these are literally fairly difficult questions. Like, how laborious is it for a corporation to pay bonuses? And also you’re like…nicely, you begin to consider it, you’re like, “Oh, it’s truly form of laborious not solely to do it simply from a useful perspective however to do it from a approach that really drives the result that you really want.”


And in order that’s why I feel they’re a very fascinating firm, as a result of one, it’s an amazing workforce. Like, Rob and Kathryn have constructed a number of companies collectively earlier than. Kabbage they bought to Amex, I feel it was round, like, a $500 million exit. However they’re a workforce that’s labored collectively extremely nicely earlier than. They’ll materialize a workforce. In addition they have deep connectivity into the sorts of management groups on the forms of employers they’d wish to promote to as their preliminary clients, in addition to their form of, , tremendous enterprise shoppers sooner or later. And so this can be a nice instance, I feel, of…this isn’t a FinTech firm in a way that it’s actually an HR answer that occurs to have a monetary product that’s underpinning it, and also you by no means would have had somebody, a workforce, that was in a position to consider the way you construct this product however then use it for a really explicit answer.


That’s one thing that’s due to all the things that’s taking place and simply the attention and the standard of the entrepreneurs, however then, additionally, they’ve a banking associate beneath the hood who’s serving to them, , energy loads of this, which, 10 years in the past, there are 0 banking companions, proper? Quick ahead right now, there’s, like, 30 to 40 to 50 banking companions, plus 20 banking as a service platforms. So that is the place the title Cambrian form of is available in, proper? There’s been this explosion of the fundamental constructing blocks of economic companies which can be form of reconstituted by know-how that individuals can mix to new and novel methods to sort out issues. So I feel Hold is a good instance of, like, a very nice workforce, FinTech on the intersection of one thing else, ultimately that few persons are truly fascinated by. Like, that is form of a brand new…there actually isn’t anybody else doing this proper now. However when you hear it, you’re like, “Oh, that’s fairly fascinating and thrilling,” proper? So these are our factor, two corporations and two nice tales by way of fascinated by what the subsequent era of actually nice FinTech corporations can appear to be.


Meb: Yeah. I imply, it’s loopy. I tweeted earlier this 12 months. I stated, , I went by a technique of getting a mortgage, and it was absolutely the stupidest course of I’ve been by in, like a decade. And I’m an in conventional asset administration. I imply, we used to must fax in our commerce. So I’m nicely conscious of silly processes, and I’m like, “I can’t imagine this in 2022.” You had a tweet some time again. Listeners, you may observe Rex on Twitter. He’s nice at posting charts and different stats.


Rex: Numerous charts. Numerous charts.


Meb: You have been complaining about…you’re like, “I needed to pay 20 bucks to ship a wire,” or one thing, “And I known as in, they usually waived it.” And also you’re like, “Can we simply waive this sooner or later in order that I don’t must name in?” They’re like, “No, you must name in each time. We felt we’ll waive it in case you’re calling it.” Like, are you getting me? Like, what’s improper with this? As you look again at your time at a16z, it’s in all probability much less right now as a result of it’s so new, . I’ve heard you speak about form of fascinated by consensus, anti-consensus when form of concepts and founders. But in addition, I ponder, in your expertise, how a lot of the outperformance, in case you have a look at form of conventional offers you’ve seen and been concerned in, have been on the time you made the funding? So that you checked the field for sure. So the portfolio that you simply’ve seen. How a lot of the eventual end result was associated to preliminary conviction, ? So excluding those you didn’t spend money on, however simply those that, like, you stated, “Okay, these have been in our orbit.” Is there any correlation as soon as it hits the sure button, or is it loads of randomness within the end result as nicely?


Rex: You may be very extremely convicted of some companies, however yeah, I feel, like, for absolutely the excessive outcomes, it’s very laborious to know a previous. So in case you have a look at, like, Slack, considered one of a16z’s massive early wins, they actually have been a special enterprise that pivoted into one other enterprise earlier than doing extremely nicely. I feel you may usually underwrite sure investments to, like, a reasonably excessive flooring, however that’s truly utterly ineffective. You get a very skilled entrepreneur who’s constructed and bought a enterprise up to now, saying, “Okay, the ground for this enterprise is $200 million,” however that’s truly utterly ineffective by way of driving what you want from a enterprise return perspective.


I feel there’s an fascinating factor round, like, what sort of investments do corporations are inclined to do over time, and if we return to the, like, free physique taxonomy of, like, scale corporations, I feel, if I take into consideration…enterprise is a humorous class as a result of, normally, you must be non-consensus and write to win. Whereas enterprise, arguably, you may form of be consensus, and since just one particular person will get to do the deal, you may nonetheless truly ship outperformance if consensus-oriented offers nonetheless delivered adequate returns.


And so, after I have a look at a16z and different giant corporations and you consider what sort of offers are best to get partnership buy-in, you may have this sort of unactionable power the place scorching offers, offers that get loads of time period sheets, are the one the partnership will get most enthusiastic about. As a result of in case you do, like, actually sensible pondering and provide you with, like, a intelligent thesis, you must talk complicated nuanced concepts throughout quite a lot of folks. When you usher in a take care of 5 different time period sheets out of your three greatest opponents, together with your three greatest opponents, you simply instantly have, like, activation and curiosity.


And so I feel there’s this fascinating factor the place, over time, giant retailers change into extra consensus-oriented, as a result of that’s simply the simplest option to get offers achieved. However sarcastically, in enterprise, that’s the one place the place that technique can nonetheless ship cheap returns, arguably, versus each different market the place it’s simply you had the purchase button and there’s a little bit of unfold in, like, you’re competing towards everybody else within the ecosystem. In order that’s going to be a bit bit fascinating to see how precisely that performs out over time.


Meb: Yeah. I want I might return a decade in the past and begin advertising all of the offers that I’ve invested in, which I feel is over about 350 now, and say, “Right here’s Meb’s….” It made the sure standards, however scale of 1 to 10, right here’s how assured I’m. As a result of I have a look at the outcomes, and I don’t assume there can be any correlation. And oddly sufficient, like, I like studying all these…I get the behavioral aspect that persons are making an attempt to try this are sometimes like, “It is a scorching deal. It’s closing. It’s 10 instances oversubscribed.” And infrequently, I’m like, “That is truly…” I’m a rarity, I assume, however, like, this sort of repulses me in lots of circumstances. Like, I don’t discover, like, loads of those the place I have a look at, I’m like, “Wow, nobody’s on this.” After which trying on the end result through the years…anyway, I want I might time journey, however.


Rex: Yeah, no, completely. However that is why you can too have a number of methods that went in enterprise markets. You is usually a consensus store that all the time wins and does scorching offers and doubtless delivers adequate returns. In all probability the perfect returns are by non-consensus of us who discover these offers nobody else believes in. These must be laborious to underwrite although as a result of these are normally concentrated portfolios with a excessive diploma of zeroes and a few actual bangers. And so, then, for you, because the restricted associate investing in funds, for instance, you’re like, “Was that genius or luck?” And like, to what extent is that? It’s virtually simpler to again the consensus retailers, which in all probability simply delivered adequate returns, than it’s the non-consensus of us.


So you must…it’s an fascinating query to consider, like, , the place LPs must be fascinated by allocating capital and how much LP ought to choose what sort of agency, as a result of you must be fairly refined to try to again the non-consensus stuff. I’m fortunate, I get to perform a little little bit of each, proper? I’m not tremendous unconcentrated, however I’m not tremendous concentrated. I can, as a non-lead verify, make investments alongside tier one corporations who’re main offers and have achieved that on many events but additionally spend money on offers that aren’t alongside tier lead corporations, or typically I commit, after which it seems, like, they’re , and they also are available in. However you are able to do a bit little bit of each by way of my contract, which is a bit bit completely different, so.


Meb: Rex, what’s been your most memorable funding that you simply’ve been concerned with that could possibly be both as your profession as a VC or one thing completely unrelated, good, dangerous, in between? What you bought?


Rex: Most memorable funding, I received a full trip to school, and so I used to be a part of that, had some cash post-graduation and used that to purchase a home that I lived in.


Meb: Was this a drone league sponsorship? Had been you a soccer lineman? What was the story?


Rex: I used to be not. This was only a basic educational and management factor. So I used to be a Belk scholar at Davidson Faculty, which is, like, the Davidson model of the Moorhead or the Jefferson however a lot much less well-known than these two different packages.


Meb: Is that this the Charlotte Davidson?


Rex: That is the Charlotte Davidson. Steph Curry, sure, was a classmate of mine, if that was the subsequent query.


Meb: I did a baseball camp there as soon as upon a time, a few years in the past. Stunning, stunning campus.


Rex: Nice campus. Nice college. Nice neighborhood. So in any case, yeah, I purchased my first home proper after graduating, and it was, A, a very good funding however primarily only a actually good studying expertise. You’re a university graduate, so that you’re like, “Oh, I studied economics. Like, let’s construct a mannequin to grasp what the returns for this home appear to be for me as a university senior. Oh, let’s go and truly get a mortgage, proper? Let’s exit after which truly see what it seems to be prefer to personal and function an asset over a interval.” I used to be truly dwelling in it for some time too, which…that’s form of an fascinating arbitrage alternative for quite a lot of different causes. And I nonetheless personal it right now, and so I get to trace it.


After which, as you get this fascinating educational train, was it a very good funding? And also you, like, benchmark it to the S&P, and also you’re like, “It’s fairly good.” However you then benchmark it to, like, REITs, and you then benchmark it to single-family REITs, and you then’re like, “Nicely, what about my time? What in regards to the truth …?” Like, it’s simply an fascinating lens, and I’ve refinanced it a number of instances, and it’s been throughout the interval the place the rise of single-family rental REITs has been a factor. So it’s simply been an amazing studying expertise by way of understanding how all of those markets work. After which it’s additionally a reminder of simply how complicated finance is, as a result of, like, simply to reply the very fundamental query of “Was this a very good funding?” simply making an attempt to determine what the fitting benchmark must be is, like, a really laborious query. After which, to not point out, like, all of the stuff round time, and many others., so.


Meb: You have been adulting, can be the 2022 phrase you hear extra usually, lengthy earlier than it was cool, as a younger school grad. You don’t see that an excessive amount of. Rex, greatest place folks will discover you on all the assorted locations. The place do they go in the event that they wish to take a look at what you’re doing, excited about your fund, all that great things? The place ought to they go?


Rex: My title is comparatively distinctive. So in case you simply Google Rex Salisbury, you’ll in all probability discover me on each LinkedIn and Twitter, or you may go to these platforms particularly. After which the web site is cambrianhq.com, and there, you may subscribe to our e-newsletter, discover a few of our different social profiles. And in case you’re a founder, you can too discover the hyperlink to affix the Slack neighborhood.


Meb: It was a blast, man. Thanks a lot for becoming a member of us right now.


Rex: Yeah, thanks a lot for having me, Meb. Actually respect it.


Meb: Podcast listeners, we’ll put up present notes to right now’s dialog at mebfaber.com/podcast. When you love the present, in case you hate it, shoot us suggestions at suggestions@themebfabershow.com. We like to learn the opinions. Please assessment us on iTunes and subscribe to the present anyplace good podcasts are discovered. Thanks for listening, mates, and good investing.

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