Lessons from Sequoia–How Roelof Botha stays on top of the game and be a good investor & Open Banking, Explained
Roleof Botha, Partner @ Sequoia Capital and Brankas CEO Todd Schweitzer & CPO Mike Dickinson
20VC: Sequoia's Roelof Botha on His Biggest Lessons Working Alongside Don Valentine, Mike Moritz and Doug Leone, Leading Sequoia's US Business and What Sequoia Do To Retain Their Edge at the Top & The Crucible Moments That Define Startup Success
(October 26, 2020 - 40 minutes)
Roelof Botha is a Partner @ Sequoia Capital, one of the world’s leading venture firms with a portfolio including the likes of Airbnb, Instacart, Stripe, UiPath, Zoom, the list goes on. As for Roelof, at Sequoia he has led rounds into the likes of YouTube, Instagram, Eventbrite, Square, MongoDB, 23andMe and Unity Technologies to name a few. Before joining the world of venture, Roelof was the CFO @ Paypal playing a key role in their hyper-growth from 2000-2003.
The Twenty Minutes VC - Venture Capital, Startup Funding, The Pitch
By Harry Stebbings - Founding Partner @ Stride.vc & Founder of 20VCMicrofund
Part 1
Growth of all costs vs capital efficiency mindset
While many say that having the money burns a whole new hole in the pocket, it is a bit of a double-edged sword because certain companies can't succeed without a boost in the capital. Because of this, there will always be a tension of how much money you raise and whether you're actually being wasteful.
"Startups die from indigestion, not starvation"
While Roelof doesn't fully believe this, he mentions that the biggest challenge for most startups is finding product-market fit. Without it, you die of starvation. But once you do have it, you usually would have too many choices which lead to a prioritization issue and you run the risk of spreading yourself too thin.
Prioritization tips
Prioritize your partners first. In Sequoia's case, they believe in playing a team game and if they ever need your help, you owe it to them to help make the best possible investment decision. Next would be the founders you serve; be there for them. and finally, investment opportunities would be the last priority.
Is the market crazy?
Roelof mentions that it is crazy in a way where the pace has drastically accelerated, but this applies to all industries as a whole. Thanks to technology, the time span for decisions has been compressed and people need to respond quickly. While this can usually lead to gun-slinging decisions, his team relies on sector analysis when it comes to making decisions on a company.
Building trust with compressed timelines
It is true that in an online era, you might not truly replicate the trust you build through in-person meetings, however, it will come back once COVID is over. In order to combat the shallower trust levels, the temporary remedy would be to just be more thorough when it comes to personal references.
Filtering references
It's important to understand that founders and employees are different; founders don't just accept the status quo but rather challenges it. When going through references, Roelof prefers to keep a lookout for these personalities.
The prolific rate of preemptive rounds
To Roelof, it's a mixed blessing. On one hand, it's good that investors have to work hard instead of waiting for opportunities but there is a danger that this becomes mimetic behavior–there's a "hot" company and you rush over with a term sheet without due diligence. This could lead to burning a hole in your pocket if a company is overcapitalized.
Keeping the "You're only as good as your next investment" mindset
When it comes to retaining the mindset, the factors would usually be who you recruit, the firm's culture, and how you provide feedback along the way. The way Sequoia was set up was that you hire someone to take over you, not work for you. This gives everyone the accountability to leave the company in a better place than it was, ultimately working to retain the culture.
Part 2
Providing accountability without the paralysis
Roelof admits that this is a tricky balance, similar to investing where you balance fear and greed. It all comes with the risk that it won't work out and it takes enormous resilience to cope with losing money. However, you have to accept it as part of the business and learn from it.
Dealing with failure
In this business, you're always likely to see more failures before success, which can eat away at your self-confidence. Always see what you can learn from your decisions, positive or negative; find the missing links and understand the circumstances then. Hurry is the failure of imagination, which has been Roelof's biggest source of his failures.
Keeping a fresh mindset
While this is very hard to do, try to allow your experiences to slightly shift your perception and assessments of companies and opportunities instead of making it binary and extreme.
Maintaining that competitive edge
To quote Bezos, you want to be competitor-aware but customer-obsessed. While it's good to learn from your competitors, if you want to lead, you'll have to innovate which stems from being customer-obsessed.
Roelof as a board member
He mentions that it's important to understand that you're an invited guest at some level. The responsibility of management lies with management and not the board; the team on the ground is a lot closer to the details than you are and your job is to lift the team's focus from short to long term. Ask questions as questions, and not imply them as suggestions.
*Be careful with what you say. Even a joke can be misinterpreted and have far more meaning than what you intended
Advice for first-time board members
Listen, as opposed to talking for the sake of hearing your own voice. Always be willing to ask questions when you don't understand. It's a lot worse to pretend you know something, then be caught later that you don't.
Crucible moments
Crucible moments are decisions that truly affect the ultimate outcome of a company. The challenge for management is always in identifying these moments and equipping yourself with the best advisors and information to help you make the best possible decision then. A lot of the investor's job is to help the company identify and navigate through phony decisions that can have big bearings on the ultimate outcome.
**At Unity, they never had a board or investors up until Sequoia. And so, one of their first important decisions was to change the business model of the company. Based on the team's thesis and information, they believed that Unity would have a seat with the giants if they had a larger footprint for developers, hence having the team adopt a freemium model which has led them to what they are today.
Handling vulnerabilities
During investor get-togethers, the team usually starts up with a check-in where you share a little bit about what's going on in your life, professional and/or personal. The expectation is to share what really matters to you. While it is uncomfortable, this helps the team build enormous trust among them allowing them to make more rational decisions that aren't affected by their fear of how they are perceived.
Open Banking, Explained: Todd Schweitzer & Mike Dickinson of Brankas
(Feb 23, 2021 - 33 Minutes
Brankas leads Indonesia's nascent "Open Banking" movement. It seeks to address friction in digital banking, collapse costly layers of middlemen, and change business models on payments, credit scoring and more. Brankas CEO Todd Schweitzer and CPO Mike Dickinson share views on Indonesia's banking and payments systems today, and offer some predictions on the future of Indonesian Open Banking.
Indo Tekno Podcast - A biweekly podcast devoted to covering Indonesia's technology eco-system
Digital Banking & Momentum In Indonesia
Currently, Indonesia has a 40-45% banking penetration and 5% card penetration with the locals relying on direct bank transfers or banking services to make online payments. Other popular payment methods are virtual accounts, e-wallets and the QRIS. The driving forces behind digital banking have been the COVID-19 pandemic and subsequently, the closure of bank branches. These forced banks to approach FinTech partners to sustain themselves and allow customers to continue access to basic banking services.
Business Models
Mike shares that incumbent players such as the banks, payment gateways, credit cards and e-wallets have been trying to garner customers through attractive promotions of their services. Newer players are trying to capitalise the removal of payment intermediaries in hopes to strengthen direct payment models instead.
Challenges with Indonesia
The first challenge to workaround is the geography of the country, which begets difficult logistics. Next would be the lack of education amongst the locals on finance and payment matters. Thirdly is the regulatory complication between the main managing bodies of payment and lastly, ownership of the banking industry by the top 4 banks that remove any sense of competition.
Going Online
Todd shares that Brankas aims to connect the largely offline financial world to internet-based platforms with their solutions in the form of API integration. He believes that doing so will help bridge the connection between different computer systems while being scalable without the need to dedicate exhaustive IT resources.
Online Payments Ecosystem
Mike stresses that Indonesia is still slow on the uptake with online payments as observed in a few instances. The existing QRIS network has limited parties that could be transacted on. Next, the cap set for online transactions is not accommodating for larger transactions with a 0.7% transaction charge. However, overseas remittances and cryptocurrencies are gradually improving.
Pain Points in SME’s & Enterprises
Todd shares that there is equal and possibly more friction within the BRB payment space and among enterprises to archaic methodologies. Another observation amongst these businesses is the use of costly payment gateways in their operations. As such, he believes that these businesses should not only have a feasible payment mechanism in favour of the scalability of the business.
Government & Institutional Roles
The four main bodies are the Bank of Indonesia which manages payments in Indonesia, the Association of Payment System Providers (ASPI) who works with the former to oversee transactions, OJK which regulates the banks for non-payment matters and lastly, the FinTech Association (AFTECH) which surfaces new regulations that amendments. While an open banking roadmap has been drafted by the central bank, it is a commercially pioneered initiative by financial institutions, lenders and FinTechs.
Bottlenecks for Indonesian FinTechs
Aspiring FinTech startups are faced with a regulated industry whereby the regulations quickly change. Furthermore, they would have to operate within the definitions and business categories of the KBLI. Another challenge would be facing competition and strain from government supported tech startups.
Winners & Losers – Payment
Companies that succeed will undoubtedly shift from an intermediation payment model to a technologically driven one. Moreover, those who have foreknowledge on the regulatory changes in Indonesia are able to establish themselves and better compete within the market as well.
The Brankas Business Model & Goals
Brankas is an open banking technology company and generates revenues from partnering with banks and financial service providers to provide API which supports their many products. Alternatively, their revenue stems from providing online businesses a simplified connection to a bank. Brankas aspires to penetrate more into the South East Asian market and expand product networks in areas with greater momentum.
Democratisation of Financial Data
By advocating accessible data, customers could better decide which services to apply for. Moreover, the access and sharing of information with merchants in turn, allows them to process their goods quicker. Another advantage that users could benefit from would be to not repetitively input their data into multiple applications.
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