On this special segment of the Full Ratchet, the following
investors are featured:
David S. Rose
Each investor describes a situation where they did
decide to invest, what the key factors were that led
to “Yes” and how that investment has worked out.
Imran: Sure, so I’m gonna talk about one of our early stage seed companies that we invested in called Pangea Payment. So Pangea is a company here, based out in Chicago. It’s focused on the global remittance marketplace. So, right away, global remittance, huge, huge market. And that’s really what you look for, first and foremost, outside the management team when you evaluated a business, is “Is the market a big, big market?” And Pangea has a unique approach in that it’s focused on the twenty-seven percent of the American population that is either unbanked or underbanked. So there are a lot of people in need of these services that are forced to flock towards Western Union and MoneyGram which are charging an arm and a leg, have very distinct brick and mortar presences, and Pangea has created a software system that essentially disrupts that. Their leveraging the prepayment debit lines that are used at most stores. So if you go to Walgreens today, or if you go to CVS today, you’ll always see a gift card rack. They are basically using that prepaid gift card rack to enable transfer of money cross boarder to your cousin in Mexico.
And they’re doing it in small dollar amounts and they don’t have to spend the infrastructure and they don’t have to spend the millions of dollars that it took Western Union and MoneyGram to build out their brick and mortar presences. And they’re just leveraging the thousands of retail stores that are already out there that are working with people who only deal in cash. So their software system is a disruptive paly. You’ve got two, maybe five at the very most, big entrenched players in that space, who are—you know, there’s a reason they’re called entrenched. They’re not moving in the right direction to fit consumers’ needs. They got a little bit of an innovators dilemma in which they’ve already spent and invested so much money on building up their brick and mortar presences that they can’t—they can’t afford to disintermediate their own brokers, their own people doing it.
So I think Pangea’s a great company. We’ll see, it’s early stage, but I have a lot of promise for them. They recruited a phenomenal board of investors and board of directors, including payments from Walmart, a board member from Walgreens, one of the initial backers of First Data slash MoneyGram. I think it’s gonna do fairly well, but we’re still in the early stages.
David: Sure. One of the interesting companies I’m involved with right now is called #Social Bicycles and this is a company in the bike sharing space. I first saw this company when the C.E.O. #Ryan Rzepecki presented a tech demo at the New York Tech Meetup which is the centerpiece for the New York City Technology York Community. That forty-five thousand members, well they meet once a month or at least named 21:01 (unclear) at NYU and here about ten or twelve demolition people, very short demos and so Ryan presented a pursuit of a demo, almost a prototype of a company called Social Bicycles which was a third generation bike sharing system. What US is their bike sharing system?
Well, the first generation Bike Sharing System is what literally bikes supported by a padlock and you’d lock up somewhere locking and you’d come home and get a key and then unlock it and the relock it. on look at a key. The second generation Bike Share Systems are what you now see the major cities around the world and in New York and Paris and places like that These 21:33 (unclear) are Smart Hubs. Also, the bike automatically blocks into a hub, you go up to the hub, you either you know, put in a credit card you have a special reader key and put it in; you take out the bike and you ride to a better hub and then you lock back in the to the hub where it goes back into the system.
Nick: Yep. I will just call up D.V. here in Chicago.
David: Yeah! Absolutely. It best to second generation Bike Share System. So, Ryan’s idea for SoB (Social Bicycles) was a third generation Bike Share System which takes the Smarts out of the hub and puts it on a bike itself. So instead of having smart hugs, you have smart bikes. You know, what does that mean? Well that means you have the locking system instead of being in the hub, is on the bike itself. It’s got a built in automatic lock. The computer is on the bike. The bikes got Gore; the bikes got G.P.S.; the bikes got all the controls to connect directly and specifically with the cloud. So, now you can pull out your SOB application find out where the nearest bike is to you 22:31(unclear) not in a hub. Say, I’m going to reserve the bike and then walk over to the bike and punch in your code and unlock the bike you know. Rest the lock on the bike that’s what the little holder for, go to wherever you’re going to pedal to and then lot of like back up to a standard bike back up a standard bike rack or a hub that happens to be nearby and you back in business.
Nick: That’s cool.
David: So, what that effectively has done is to turn a physical bike instead of relying on the hubs in the whole infrastructure system, it turns a bike into a digital object because now that effective the cloud can control the bike, that means you can do things like congestion pricing, you can do things like’ “Oh, we’ve got too many bikes downtown, we’ve got up down so hey, bikes today are now free. If you pick them up uptown, why do downtown?” but you know, more intense if you buy them down in 23:12 (unclear). You can track individual 23:14 (unclear) through the G.P.S. There are people who are actually riding their bikes but what the traffic patterns are so and I’m very, very helpful for communities and for biking and then so hey, I thought this was actually one of the coolest I don’t ever seem because my background even before Angel investing was as 23:30 (unclear) and I thought Ryan was very impressive. So, I sort of race downstairs, I was on the balcony, race downstairs and grabbed him literally as he walked out you know, in the auditorium and said, “Okay, I got to invest in this deal.” Not exactly the way that an Angel should be negotiating a deal but I thought he was appealing and I thought the idea was brilliant and really leverage all the stuff I’ve been doing at Singularity University elsewhere in terms of a next generation system. Singularity, you know my very first group that I was mentor for. I mean, our first years program was get around,nd the California car rental company that does the same kind of thing with cars and smartphone apps and so after being looking slightly askance at this crazy guy who just raced down and jumped on top of him and eventually he let me invest. I led the deal, there was a New York Angels Investment and they had run to production and then they began to keep… began to get some traction and began to raise additional cash. He then walked out into #S.O.S. ventures. This is a really cool venture fund led by Sean O’Sullivan but actually now sponsoring a whole lot of Accelerator programs around the world and so SOSVentures came in with a big chunk of cash and so with the board now consists 24:41 (unclear) are me and #Brad Higgins from S.O.S Venture who’s formally like CTO of City of the State Department 24:46 24:49 (unclear) and amazing guy and then just to you know… So let’s say they have an angel, they have an angel group, they have a V.C and t we have an agent wrote the head of the sea. And they want to run to the ground out there. They’re sourcing. So we did another round with our crowd. The online platform. Primarily out of Israel to it’s really interesting stuff. Very early in the books from our crowd so here said so that at the perfect poster child for a rest from the start up. They raise on reply from a V.C. and 24:56 (unclear) out there. So they were sourcing. So we did another round with our crowd, the online platform primarily 25:03(unclear) but doing some really interesting stuff 25:05- 25:07 (unclear). So now as the perfect poster child for a scrapping startup, they’ve raised a platform in V.C, an angel group and individual Angels and the company has been executing amazingly well. I mean, they’ve now got bike share systems all around the country when actually North America including the Hamilton Ontario, Long Beach New York and Long Beach California. They’ve got you know, very and the system is working. It does everything it’s cracked up to be. They grew team Leaders now. I think they’re the third largest bike share provider in the country at this point. They’ve built a great team and it’s doing really, really well. So this was a case where it was a great idea, a great entrepreneur 25:48 (unclear). He was a first time entrepreneur who had the mind and never start up a company before. In fact, he never worked in a company before because he came out of the New York City Department Transportation where he worked in their brochure systems. So, a lot of investors early on were sort of scared off because Ryan didn’t have the background. I mean, he had driven a New York horse and carriage before that.
David: So he didn’t have startup experience but I sensed in him somebody who was really smart, really dedicated, he had his own cash in here, he had friends and family cash in here, he had gotten a long way on a little bit of resources and I saw something in him I really, really like and we called it “bet on the jockey not the horse.” So, the combination to me of a platform play which is what this is based on the way the world is changing with exponentially advancing technology which is one of my key areas, combined with an entrepreneur whom I had a real faith you know pushing over the edge and it’s been a pleasure since then.
Nick: On today’s special segment, #Tomasz Tunguz. Tom, can you walk us through a situation where you did decide to invest, what the key factors were that led you to “Yes” and how that investment has worked out so far?
Tom: Absolutely. So I’d highlight a company called #Looker which is a business intelligence company based in Santa Cruz and it’s founded by this great guy named Lloyd Tab who himself as a remarkable career. He actually wrote the first application server in the mid ninety’s and sold it Netscape and then went to become a serial founder of a handful of different businesses, Looker being the last one and we first heard of look at because we were investors in an e-commerce company called Threat Up which sell second hand clothes and so now they process like twenty-thousand items of clothing a day. So, it’s a very operationally intense business and I think they were the first Looker at customer and I’ll never forget you know, the first time I saw all this data about the warehouses that we were operating in a board meeting. So the Threat Up C.E.O… The board asks James as C.E.O. thread Up a question about, “Hey, what’s going on inside of our warehouses and James pulls up Looker and it was a revelation and that was the first time we’d heard about it and then not long afterwards, a friend of mine who was V.P. of Product of 27:58 (unclear) and said, “Hey, we just installed Looker and our sales teams have gone from unprofitable to profitable overnight because now they understand exactly what they need to do in order to achieve their targets” right? and so I immediately reached out to Lloyd and we set up a meeting and you know, he’ll tell you this moment where you know he’s five minutes into the pitch and there’s like a light bulb that goes off my head. He shows me why I look or is so different right and it has beautiful technology underneath. It’s got this modeling technology which is a huge differentiator and so we had this moment where we were like, “Boom!” we were on the same wavelength and then you know, I was like well we have to invest in this business because this is the way databases and business intelligence are going. So we did a bunch… You know, we did as much work as we possibly could and we cheered on the references exactly the same thing which is we installed Looker sixty- eighty percent of the employees in the company use it on a weekly basis and we can live without it and so we did everything we could to lead that around and we were really fortunate to be able to invest in the company.
Nick: It’s amazing how the timing works out on some of these things. Like the biggest frustration I have is when something like that happens but it’s too late. You know, I’m finding out about it too late or they just got fund. That’s the worst. Those are tough days, you know.
Tom: You’re just like one step behind.