441. ID’ing Generational Founders, Targeting Structurally Broken Markets, Bringing Venture Back to the Studs, and How Value will Accrue in AI Between Incumbents and Upstarts (Alexa von Tobel)

441. ID’ing Generational Founders, Targeting Structurally Broken Markets, Bringing Venture Back to the Studs, and How Value will Accrue in AI Between Incumbents and Upstarts (Alexa von Tobel)


Alexa von Tobel of Inspired Capital joins Nick to discuss ID’ing Generational Founders, Targeting Structurally Broken Markets, Bringing Venture Back to the Studs, and How Value will Accrue in AI Between Incumbents and Upstarts. In this episode we cover:

  • Support Innovative Companies Addressing Societal Problems
  • Investing in Structurally Broken Markets
  • AI Adoption, Future of Work, and Potential Job Automation
  • AI Value Distribution, Incumbents Vs. Startups, and M&A Challenges
  • Future of FinTech and Reimagining Products
  • Investment Strategy in Uncertain Macro Environment

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Transcribed with AI:

0:18
Alexa von Tobel joins us today from New York City. She is Founder and Managing Partner of Inspired Capital, a $900M AUM Pre-Seed to Series A venture firm backing fearless founders solving the hardest challenges facing humanity. Prior to Inspired Capital, she was a founder of LearnVest, a company that raised $75M and exited to Northwetern Mutual in 2015. Alexa, welcome to the show!
0:43
Thanks so much for having me. What a pleasure to be here.
0:45
It’s such a pleasure, I know that you’re a very famous podcast host for starters, podcast, check it out. She has many of the best unicorn founders and biggest tech companies on our show. But we’re here to talk about you today. So give us a bit about your backstory in your path to venture.
1:02
First, just again, happy to be here. My path to venture is sort of an interesting one in that I grew up in Jacksonville, Florida, I’m deeply an entrepreneur to my bones, like really sort of appreciated it in the rearview mirror that that was always there, went to college and undergrad actually got hired at Insight Venture Partners, and got a full time offer at the end of my junior summer, and was sort of building companies and all those types of things already and gotten to Harvard Business School, my senior year of college, and was one of the weird pre two plus two kids like a real guinea pig and ended up deferring and basically spent some time on the investing side. I’ve always been really good at numbers my whole life, and really comfortable in math and spreadsheets and looking at businesses and ended up at Morgan Stanley. And as literally Lehman Brothers and like the world is starting to collapse, I had to go back to HBS. But I’d written a business plan and for learn vests and a good friend named Sam lesson was like come to drop you and helped me build a startup in New York. And that was 2007 New York tech scene which did not exist. And that company got acquired by Facebook. And I finally had to go to HBS. Because they were like KD can’t keep different. And when I was there, the business plan that I had written May of 2007, it was now fall of 2008. Around really reimagining the American wallet and doing something differently for millennials. And as Lehman Brothers went under, I was like when the world’s age youth does act like this is the moment to drop out. So I dropped out, moved to New York, started building learn bass. And the punchline to answer your question of like, how did I get into investing was through building that business. I always dreamed about this venture fund that I wish existed for me it just like stuck in my head of like, what I wanted out of investors. And after I sold learn best for almost $400 million to Northwestern Mutual, I basically started angel investing and like, just realised that I would spend every waking hour doing that and helping people build businesses, and I was having the most fun ever. And once I finished my lockup, I basically said, I’ve got to go build that fun that like really was under my skin and kind of in my in my in my gut. And so in 2019 went lights on and launched inspired and
3:27
here we are amazing. So was the original thesis to invest in FinTech companies then based on your background,
3:34
or nope, from day one, we’ve been a generalist fund early stage napkin to series A investing predominantly around the country, but also opportunistically outside of the country. So deeply, deeply generalist. Got it? And
3:49
will you lead rounds? Do you co invest? You know, what’s kind of the portfolio construction
3:54
look like a question. So each fund will be about 30 ish companies give or take, we predominantly lead take board seats. But just given that we’ve so many really good friends who run amazing firms, we’re totally open to co lead with great people that we admire. And we’ll do that occasionally. And and then we have deep intentions to be kind of think of us as like a deep backbone as an investor for the company for 1015 plus years. And that’s really how we think about it.
4:24
So you are a generalist, investor, but give me like, what’s the perfect profile of a startup that comes in pitches you you know, give us kind of the highlights of maybe the broad strokes of a startup, that’s a great fit. Great.
4:39
So I would actually just start with the entrepreneur, and one unique thing and I didn’t go so much into who inspired is and what we what we do and how we think But amongst our team, we built 10 businesses. So we ourselves have stood up 10 companies and built 10 companies. We look for an entrepreneur who deeply is infected by a problem If it is something that, in fact, it is really the right word, because they can’t stop it, they can’t stop thinking about it. And they show up, and they are living living in a future state very clearly. And as you mentioned, at the top of this, I have a podcast. For starters, I’ve interviewed 130 entrepreneurs, who built multiple 10 plus billion dollar businesses. And many of them have this exact attribute, which is they’re infected by a problem. They’re living in a future state, they see an answer. So clearly, whether it’s quite literally visually, or they can articulate it clearly. And they’re so confident in that, that’s terra firma for them, that there is no way to walk them off that ledge or to change their opinion, they are so certain in it, that it actually gives them such conviction and belief in themselves to go and solve in will that company into existence. And so you asked for, like, what’s the perfect thing we like to see is we like to see an entrepreneur or team of entrepreneurs team of founders, that shows up and they see a future you can’t see, they have a reason an unfair advantage to tackling that the problem matters. So this is an important one, the problem has to really, really matter. Incremental ideas are not for us, we’re looking for meaty, societal, big shifts in technology, that matter that are doing something to propel the world forward. And those founders have another feature, which is they don’t really care about what people think around them. And I don’t mean they’re complete, arrogant jerks. They are okay. Being out on a ledge with an opinion that no one else thinks is smart. They’re okay with that. And they actually don’t look to sort of others for approval, they, they’re comfortable standing on hot coals for a while by themselves. And I think that’s a really important attribute. Because you have to be willing to constantly not follow the path to do things that really, really matter. And so that often is what it looks like. And then there’s some unfair advantages in either the business model or the technology that create a flywheel, but that’s what we look for. That’s it, and you kind of really know it when you see it. Awesome.
7:24
I’d love to talk more about that maybe a bit later in the interview. But back to inspired, you know, I guess, how do you think about venture as a category?
7:35
It’s a great, it’s a great question. And, you know, give a little bit of my background, because I really started getting interested in venture in 2004 2005. And so now it’s 2024. So it’s 20 years ago. And, you know, early venture preserve period was big swings, you know, doing things that felt impossible. And doing things that solved, you know, really interesting problems. And, you know, for, for us, obviously, between call it 2014. Through, you know, 2022, we lived in this really distorted period. And actually, I almost like to always take that and throw that period away. And the reason was, I think it created a lot of concepts of what venture was that I don’t think, is really what venger is all about. And I think for us, this is really simple. But we kind of have this belief it inspired, which is that we believe in properly deployed venture capitals, the most powerful economic engine that the world has ever seen. And it has made many of the greatest companies possible and is enabled some of the most innovative technological breakthroughs of the past 50 years. And we believe that the founders who get excited to go do that, or solving big, meaty, hard societal problems. And so that’s what venture is, and actually venture in its purest form is a beautiful economic engine that actually incentivizes people to do really crazy and hard things to make the world better. And it’s a pretty beautiful place to live in the capital stack.
9:16
Amazing. And, you know, in in such a crowded venture market, why did you build the firm and in how are you differentiated from other firms? Yeah,
9:26
thank you for asking this question. Because this is one that really matters to me on so many levels, as I said, you know, kind of in my own narrative, I was a fiercely competitive I was I was an athlete, I was a diver on the varsity team. In business. I’ve always been very interested in building businesses. I was like the kid when I was little, who was obsessed with CEOs instead of like pop stars. My parents were like, what, who are you at like 567? And, you know, fast forward as I was building learn best out. I remember New York City was I truly depleted of capital, there’s no capital here. And I remember that really getting under my skin because I was like it’s New York goddamn city. It’s the capital of the planet on so many levels. It is such an incredible intersection of ideas and people and diversity. And this should be a place where we we, we incentivize powerful thinkers to do important things for the world. And obviously, over the last decade, lots of capital in you know, 15 years has cropped up, but it kind of really got under my skin. And I really knew the firm that I wish existed. And fast forward finished selling my company finished my lockup at Northwestern Mutual, which had been a wonderful experience. And I started daydreaming about actually what I wanted to see. And I started with kind of two important principles, which is probably the most important, which is the who, and pulled some incredible people to be co founders and standing up the firm. But one of them was Penny Pritzker, former US Secretary of Commerce board of Microsoft board, Chairwoman of Harvard, very, very, you know, fabulous and principled and valued human being that I admired, literally built a lot of businesses and seen a lot of businesses as US Secretary of Commerce. And then my other two partners, Mark Batson and Lucy DeLand Lucy had helped co found and build Paperless Post to hundreds of millions of hosting guests around the world. And she and I were cohorts and Best Buddies and Mark and I had been together and built, learn best together and sold it. And so the who really mattered, which was some of the brightest smartest humans I’ve ever met in my life coming together who just believed the same thing that I believe, which is how to go and build companies is you have to sit still, you have to build durable businesses, every corner you cut is a problem that you have later. And synthetic results are not what we’re here for. We’re really here for genuine big movements and problems that you’re trying to solve to the who was awesome. And then the other thing was really coming together and standing up affirming this core principle of let’s go back and this week, the saying internally, let’s go build the inspired future, which is like the future we all know we need. The world has so many big fractures that are only getting worse, right now, let’s go be a platform where your world’s best entrepreneurs who want to take truly in some ways, psychotic, truly scary big risks at going after issues. Let’s go give them a home where they feel safe to come and build and tackle some of those problems knowing that they have a force of nature of a firm behind them. And that’s us. And if you ask what makes us differentiated we overlap 75 years of working together, which is pretty different. And just as you get to know us, and you feel us and then you actually get the whole team behind every deal, which is a pretty unique setup. You
12:51
know, when you are investing in these big ideas and huge markets? How do you avoid like platform paradox, you know, somebody that takes on maybe too much right out of the gate, starts building a platform at seed, and maybe misses the opportunity to address more near term pain points and kind of more opportunities with customers?
13:14
Hey, that’s a great question. And I think obviously, the company in the sector and what they’re focusing on, you know, in some places, it makes more sense to build a platform first, and then you know, tackle it from there. And other cases, it makes more sense to go after the wedge slice and build the wedge and then build up into the platform. What I would say is this, this is how we approach everything that inspired which is we really believe our most powerful weapon is our you know, if you ask our superpower, it is playing chess, it’s strategy. We like to sit still and really think deeply about the best way to build a business that’s authentic to the problem the business is solving that accrues unfair advantages. And I think that’s how we show up at work. That’s how we love business models, where as they get bigger, they get better. So you command more pricing power, better data moat, your product is better, and actually, you know, uncatchable, because it’s got some sort of unfair advantage. And so we always say we love we love businesses that have multiple chapters. We love businesses, that chapter one, unlock chapter two. And as I said, that’s all unique to those businesses. So very few books look the same, that there’s elements of playbooks that obviously match. That’s how we think about
14:30
it. Love it. You’ve also talked about investing in structurally broken markets. Can you give us an example of maybe one of your investments that is in one of these broken markets?
14:42
Sure, absolutely. I would say a few things. So the first thing I would start with is, you kind of know it when you see it, and we have one business called hobby AAPI. It’s in Latin America. Absolutely ferociously talented. team, but quickly in Latin America, okay, let’s go to Colombia. Let’s go to Mexico. If you’re going to sell your home and your middle class individual, you literally put a poster in your window that says My home is for sale. That’s insane. And you sell your home on average between 12 and 18 months. That’s how they sell homes. That’s insane. And so hobby was a business that we liked immediately from the outset, because it was a structurally broken market. And what hobby is building in this successfully making incredible progress is four companies married, it’s Zillow. So they’re the data asset so that you can now look up on the inner tubes, as opposed to a poster in the window, what homes are for sale around you. So the data asset, then they are compass, a broker and an open door. So they are the market maker for creating a marketplace for those homes to be able to sell or be sold by broker. And then at the end, they also get you your mortgage, the Rocket Mortgage. So they offer mortgages and the attachment rates, they’re in the 75 to 85%, which is crazy. I mean, that’s really can’t even think about it. Because we’re in the United States, we take our infrastructure here almost for granted. So if you stepped back, that was the flat field where you could take four businesses that are in the United States, each very, very big businesses, Zillow, open door compass and Rocket Mortgage, put them together and go build a potentially super business that has incredible structural moats and data driven unfair advantages. So that’s an example of one another example is a business called team shares, which we were really, really early into. And effectively what they do is they go and take businesses where there is zero digitization, and there’s zero liquidity, which is, you know, again, pennies US Secretary of Commerce, the small business economy is a third plus of the US economy. It’s a huge driver of the US economy is small electricians and plumbers and all of these businesses that make our world go round, that are often owned by the founder, and they have a duration of 35 years. And then there’s is they want to go retire, there’s nowhere to go. And to those businesses, team shares, acquires and transitions the ownership to the team through a really powerful software instructor should think of it as like Carter for the old economy. And then they centralise incredible services. And that’s a massive structural advantage of a business because nothing like good exists. And those are hugely important illiquid assets, that fuel a third of the US economy. And so providing digitization and visibility and a marketplace for those assets, is, if it continues to work really well, which it’s going really nicely, could be a very, very big passive business. So that gives you a sense of how we like to think. And in both of those cases, you saw chapter one, and two, and three, and four, and it continues to unlock rates to win and markets to open. And, you know, quick one note on that, like Hobby can go horizontally, and can move into other countries around it. It can go deeper vertically, it can add on insurance, taxes, and titling and all these other big financial service parts of that equation. And there’s really no limit to how big that can continue to grow for a long time. And so those are the sort of instances we like, because you’re inspired, we really do like to think about finding a business that truly has the potential and we’re comfortable taking huge risk to being worth 510 $20 billion. And those businesses are quite rare. But that’s how we like to think
18:45
I love the example you gave about the business that’s incorporating open door and Rocket Mortgage and, you know, all these different Zillow, you know, all these different platforms into one and maybe in an emerging market. I’m curious to hear your thoughts on why you think that works? Well, in a lot of these international contexts. You know, like the Matewan and the ROP ease, often they’re bolting together multiple different concepts that have worked, maybe in the States, you’ve got DoorDash, you know, together with Uber together with Yelp, why does that work so well in an international context? Or does it I guess, you know, certainly those platforms have been well funded. And why in the US, you know, is everything kind of, we have the standalone entities, you know, fitness isn’t one broad platform startup, it’s, you know, you’ve got your mindfulness apps, and you’ve got your workout apps, etc. Any thoughts on that? Yeah,
19:45
I mean, I think the reason why some of those bets work is you you have sort of a natural unfair advantage, which is you get to actually see into the future. So human nature’s pretty hardwired. So technology will change a lot in the next part. ticularly decades with AI, but particularly over the last 100 years, and they will only continue to change, no doesn’t change very rarely changes us, we are so hardwired in a certain way. And that’s an important thing to remember, as you’re an investor, which is we are hardwired humans where we do not like change, we do not adopt change. And so being able to see something that works, a company of any kind that works and interacts with humans, in United States works really well to then be able to go to an emerging market and take the one you now know it works with humans, and they’re humans and other markets do. And you can pick up the company and you can bring it over. And as long as you’re really thoughtful around geopolitical risk, and you know, other important elements, and cultural differences, but you can see the future of what works in United States, pick it up and take it elsewhere. And the most important ingredient often is the human and knowing that something really works. It’s sort of an interesting way to see into the future and think about bets.
20:58
Do you think some of those brands in the US over time will merge into much larger, more integrated entities or remain standalone? I
21:08
mean, potentially, I think that, you know, a lot of interesting things can happen. So yeah, potentially.
21:15
So Alexa, generative AI is all the rage at the moment? How quickly can we expect Gen AI to be adopted in the coming years?
21:24
Great question. You know, I sort of view it by the way, none of us know the answer. So I’ll start by saying, I can tell you what I think and what I believe, but having consumed as much content as I can, and with my own read and might, from my own experience, the way I view this is, you know, over the next zero to five years, there are going to be a lot of sticking points, there’s gonna be a lot of issues that pop up morality, and how do we set these up and things that we think could work and it’s too soon, or challenges with execution. And we have to remember, AI, like people have to learn it, you literally have to learn how to use AI, it doesn’t just, there’s a there’s learning curve for every human that’s using AI in the present. But if you think 10 years out, I think the change is going to be so much more transformational than most people are even processing. I think often our brains, I studied psychology undergrad. And so it’s often like how I approach a lot of investing in thinking which is, in the short term, we don’t see wild, powerful change. But in a decade, I think we’ll move through the world, in this construct bth better than human where AI is already better than human and so many places in most places. And as a result, it will fill those gaps and it will it will thrive in those jobs. And I think in 10 years, the world will have moved far more than we are actually thinking about and talking about. And, you know, I think there’s many in our circles that are talking about just how profound that change can be. But I very much believe that we are potentially in the most powerful decade of advancement of technology that we’ve ever seen period, which is both exciting and scary. There’s there are a lot of scary elements of that,
23:15
right. Like if we double click on that, I know that you’ve done some investing around future of work. And I’m curious to get your thoughts on what sort of entry level jobs you think AI will automate. And you know, what’s next for that layer of talent? You know, if AI does come in and, and replace some of those jobs?
23:35
Yeah, I mean, if you think about the concept of bth better than human, like, where’s AI already better than human? If I am in New York City, and I’m looking at it, every big building, every big building is filled with all these people. And those people are reading content and consuming meetings, and then summarising them in emails, and pulling out the insights and then hitting send. And that’s the job of most people in corporate America is to consume content and information and summarise it and pull out insights and hit send. And I can do that. And it can do all those jobs. If you think about strategy, consulting, and the biggest consulting firms in the world, whose jobs are to ingest a lot of complex information and then come up with recommendations based on what has happened in the past. AI can do that AI can do that instantly, they can do immediately. And it’s pretty darn good and doesn’t cost $10 million in a big consulting contract. You think about lawyers, and a lot of those jobs can be automated. Most of what we do as people is writing and AI can write better and faster and instantly. I mean, it takes all of us a long time to write a full page. Well AI does it in milliseconds. So it’s already done it. That’s the thing. It’s already doing those jobs. And I think every major CFO in corporate America and you know, I got acquired by Northwestern Mutual and absolutely fabulous company. They’re about 170 years old, doing 10s of billions, you know, almost 40 billion of revenue. I don’t know what the Latest number, but that’s close. And, you know, I do believe that and I was chief digital officer there. And I do believe that every major company in America right now, there’s somebody next to the CFO whispering where can we use AI to get rid of huge swaths of cost for customer support, you know, for customer communications. And that’s all happening now, that’s already happening. And so it’s just a matter of it actually fully catching up. And I haven’t even gotten started outside of big corporate America. So I believe these changes are rapidly happening, because they are. So the advantages to the cost structure of companies, you can overnight save margin pretty quickly, by leveraging these technologies in that there’s a big difference. Like when people were talking about crypto, people didn’t know the problem, crypto was solving. Every big company in corporate America paused and would say, yeah, maybe I’ll learn to put my toe in with AI. You know, it’s already here. It’s in full Swat, and everyone’s trying to implement it as quickly. And that’s a huge difference to think about. And so now, it’s just a matter of actually watching that waterfall down through businesses and watching where jobs very quickly disappear.
26:17
What jobs do you think, are protected, at least near term?
26:23
I mean, there’s think it’s funny, I actually, you know, just like everyone else, the day opening, I release Jackie, up in, everyone’s started playing with it. I was like, what skills? Do I need to teach my kids? The first question I asked it, and I like made a little list of what I thought they should be. And what came out was people skills, interpersonal communication. And so effectively, everything that’s EQ related everything that is communications related, sales related, creative, instant, strategic problem solving, where there’s complexity, and there’s really not one right answer, but your judgement using a decision. Those are the sorts of skills that I think will matter more. But again, I know nothing. I’m just like everybody else. This is sort of my vantage point, in my viewpoint, I have been on the learning curve here, which is I really do believe. I think EQ is going to be something that is really important in the future. And
27:23
how about the topic of value accrual in AI? You know, how do you think market share will be distributed between incumbents and AI, native startups?
27:34
Fabulous question, Nick. And I can tell you the sort of way that I think about this is, if you just step back, and, you know, pennies on the board of Microsoft, and Microsoft has a billion users, and Google is 3 billion users. So for a lot of things that could be built, those huge incumbents not only have all the compute power, and all of the excess profitability to have, you know, throw a lot of r&d at compute and strategy. And, you know, testing interesting products. But when they have something that good enough, they can instantly roll it out to, you know, in some cases, almost half the planet. That is just such a tremendous advantage. And even if those and you know, I’m particularly talking about like workplace and workplace software and things that we will all use. You know, if Google has a product that pretty darn good with calendaring, and helping write emails, and it’s not perfect, but perfect is the enemy of good enough, and they release it, you know, a startup in that place is going to, you know, that when the elephants dance, don’t be an ant. It’s the they’ll be annihilated. And so I think we are in a moment in time where for the most part, a lot of AI value accrues to the big incumbents, the big tech incumbents that are very well situated to create tremendous value. There’s two exceptions to that, in my mind, one is in the infrastructure space, which is everybody needs to figure out how to use this, how to leverage it, how to interact and, you know, infrastructure and application layer, where how do we make these hugely impressive, LLM ‘s and datasets deliver more value for us? So those are the two places infrastructure, which is how do we actually build on them and use them? And application which is how do we how do we have them? Again, we’re still human, we haven’t changed. We’re all lazy. We all default to so make it easier for me to use. And then the only other place that I’ve been thinking about lately, and this isn’t a fully perfectly baked idea, but I do believe that there are a set of incumbents, so I’m going to call them the non tech incumbents. And they won’t name companies because, you know, just think non tech incumbents big big companies out there that Been around for 100 years, 50 years, and they are not technically oriented. They are still absorbing the digital transformation. Literally every one of them had a big digital transformation agenda of getting on mobile and getting in the cloud and getting up to speed and figuring up their datasets. And now you’ve the AI transformation, which is way harder. The talent is so much more expensive, their million dollar figure for talent versus 250. For not that, you know, a software engineer, I think they’re gonna lag pretty hard at getting up to speed. And obviously, this is like a, you know, sort of blanket statement, there’ll be plenty that actually are very forward thinking and traverse that bridge quickly. But I think a lot of them are still just getting their head around the digital transformation into this AI transformation. I think that’s going to be placed a lot of interesting opportunity.
30:49
Well, even, you know, cloud based software adoption is still less than 50%. Right? I mean, it’s crazy to think how much Yep, on rim is still out there, Nick.
30:59
That’s my exact point. There’s still catching up to like five years ago. Yeah, so being able to leapfrog 15 That’s, that’s a real challenge. And so I think that I think it’s going to create a lot of white space where big, big $10 billion businesses can be built, just going head to head with an incumbent, but building it in a fully modern AI driven an AI native way. Yeah,
31:23
the other tricky thing, you know, as you talk about Microsoft, and Google, you know, these companies have a track record of copying a lot of things that work, right. Calendly works, superhuman works. grammerly works slack works. All right, we’ve seen those companies have success, let’s incorporate that into our suite, where file sharing, right, let’s incorporate that into the suite. And so a lot of these big companies have the benefit of kind of watching what the upstarts do. And if the upstart doesn’t have some data moat, or some network effect based moat, then the big incumbents can just from an AI standpoint, we’ve seen it with software, but they can just take those applications and build them into the offering.
32:10
Yeah. And then there’s one other element I want to add to this, which is, given what’s happening with m&a and the FTC, we are in a moment in time where, after a certain amount of revenue or certain amount of scale, it’s really hard for publicly traded companies to come in and acquire these businesses. So it’s forcing one of two things either earlier, Aqua hires where it’s not exciting for venture because you know, the great idea you had getting acquired for 50 or 100 million dollars, which is not why we’re here. Or actually, it does give the company an unfair advantage because they they they can’t be acquired, they have to keep going and growing unless a big private company comes in. And so I think that’s another thing you have to be really watchful in AI investing is a lot of these best teams are getting picked up really early, like almost too early. Because at the FTC and so that that’s an interesting thing that we have to watch out for.
33:08
Watch those earn out time periods closely founders out there. Alexa, let’s talk about FinTech a bit. You know you you’ve built a successful company, you’ve exited that in the finance space. I’m curious to get your thoughts on the future of the American wallet. You mentioned this term before. And and also just where you see, you know, the opportunities in the future for FinTech
33:32
Sure, obviously this is a topic I love. I’m such that when I was running learn bass, which was TurboTax for financial planning, I became a certified financial planner pass the series 65 wrote, you know, now three books, New York Times best selling on the wallet in the future, the wallet, and effectively here’s how I think about it, Nick, which is when I was building learn best 2007 2008 I think of that as like FinTech 1.0, which was simply in plain sight and actually to knock myself there wasn’t like, I would never say it was wildly innovative, what we were doing at the time, it felt wild, people thought it was like totally out there not going to work. In the rearview mirror, it seems so obvious and simple, which is just for bringing things online, taking your mobile device and you know, for learn best specifically, we became digital financial planning, connecting you with a financial advisor all digitally, transparently, and in real time. And we were open 24 hours a day, seven days a week because even banks are not there’s no online nature, and even so a lot of banks. So that’s what we did. And I call that one point. Now I’m going to fast forward to today. I believe we’re in but I sort of think of as FinTech 3.0, which is we now are getting into the far more interesting elements, which is actually reimagining products entirely. So leveraging AI leveraging unique understandings and ways we live In work, leveraging regulatory and compliance advantages, you now are in a place where really amazing founders are fundamentally building new products. So not taking the old products and digitising them and, you know, dressing them up and moving them into real time, you’re actually looking at completely new products, with structural advantages, reimagining the future. And we made a few of those quietly, right now actually, all of them are still in stealth, for the most part, where it’s a founder, fundamentally reimagining a product from scratch, leveraging interesting Moats. So that’s really exciting. And some of those businesses are quietly growing very, very quickly. And so those are the kinds of things that we get excited and inspired about the second part of that thesis, which is pretty obvious, but important to say, which is the world is only getting flatter. The barriers between countries are only going down, think about today, we live, you and I are doing this over zoom remotely, the amount of work we can do remotely. And at the end of the day, you know, the world is still driven by balance sheets and profitability. And so the fact that we can constantly have a flatter world, where if you can hire your call centre in the Philippines, as opposed to Utah, and for 30 cents on the dollar, those are good decisions. And I think we’re going to continue to see not only fundamental reimagining products, and building new products for our future that make more sense. And you’re gonna see flatter and flatter cross border worlds. And so we backed company called neural, which is the future of payroll, where you pay not only employees, anywhere and everywhere, and it’s turnkey, but also built in set up to pay agentic agents of AI, which one day may be part of your workforce. And so it’s really, really reimagining the future. And we back to another company called Orem was somebody that I worked with on the learn best team Stephanie, which is instant payroll and payouts, sorry, instant payment, and payouts for Flatworld, cross border, etc. And so that just gives you a sense of we just believe the world only gets flatter, which is such a good thing for society. And that’s only that’s only going to continue every year to go up.
37:28
Do you think the power law gets more severe and more significant in the future? Another way to ask that is does value accrue to, you know, one player in these markets? Do they become more monopolistic? Or do you think value accrues to a wider distribution of players in this new environment for finance and AI?
37:52
That’s a really good question. And I think it depends on the product. So in general, there are certain categories where they’re so big, where many players can be multiple billion dollar businesses, we back to business bank called row or HMO, where, you know, there’s a number of business banks out there, we know them all ramping American Express, etc. And that’s just a category that’s really, really, really large. And then the challengers make up 2% of the market, and that market is getting bigger. And so that’s a place where we think many companies can win neurol is another example of that the pay the payroll product, where Global Payroll is only going up. And so we like to back businesses with entrepreneurs that we think are profoundly visionary. And then we are patient, we are willing to sit still and take 1015 years and get it right. And we have this comment, Nick, that we say we’re like, we don’t want synthetic results. We don’t want you to deliver value, because it looks good on paper, but isn’t actually valued in the business, like build real value in your business make the long term decision. So in many places, it is not winner take all. And then of course, there will be really interesting places where winner take all may be exactly right. And sometimes that’s really hard to know. And so we like to just back entrepreneurs that we think are nimble and smart enough to go tackle their problem, and patient enough to make a good decision every day. We always joke we like the tortoise is not the hare because the tortoise, the tortoise can slowly slowly build massive businesses where people tell them it’s not possible and claim a category because they just make good decisions every day. Hopefully that kind of answered your question, but it’s more about the process and the judgement every day than it is about being like we’re going to be one of five that claims this market or the only solo company in the market. It’s about good judgement every day.
39:58
Totally 100% luck. I’m curious to get your thoughts on the macro, we are in an uncertain macro environment at the moment, we’re seeing high cost of capital changing regulatory environment, also in the midst of an election this year, talking about the macro environment and how that impacts your deployment and investment strategy.
40:18
So it doesn’t at all, we just, we just closed on three earlier this year, a single day dry clothes, of 330 million we’re deploying fun to, and not much really changes our deployment schedule, we have what we look for, and we wait till we find it. And when we find it with high conviction, we back it. And that that really is how we show up to work every single day. So that’s how inspired functions. And then if you move past that, and you think about the portfolio, you know, one of the most amazing things about having Penny Pritzker, as a business partner and co founder and just teammates in life, is, she just has such a profound wealth of knowledge, you know, not only her White House experience, her brother’s the active governor of Illinois and among many other connections and relationships. And so we actually think it really is important for companies and even back when I was an entrepreneur, building learn best I always said, I kind of slept with when I opened the macro, because it’s really important to remember that there’s not you’re in a business, you can control a lot of things. And there’s things that are truly out of your control you, you cannot control what the Fed does. And to interest rate, you cannot control that COVID income you cannot control that in the election may be wildly chaotic and cause X, Y or Z issue. So keeping an eye open to those and knowing in advance how if if something moves one way or the other, it changes your business gives you levers of how you run your business, in terms of your you know, being more conservative at moments being more aggressive. At moments, I always say driving into the turn at moments because you feel you’ve got the momentum and you’re like, let’s go, we’ve got a window open here. It’s a bit of like a race car feel, honestly, for our portfolio. And so we always say like keep an eye open in the macro, we provide these incredible State of the Unions about what’s happening in the macro. So our founders don’t have to try to keep up with it all just can’t do that and run a business. And you know, right now, cash is really expensive interest rates. This is it’s quite expensive. And as a result, you want to hoard it. And at times, if in the future decade becomes a lot less expensive, then you get to function differently. But until that happens, cash is really, really expensive. And it’s it’s an important thing to remember. And as a result dollars are quite actually more important and more precious. All
42:47
right, a few wrap up questions here. Alexa, if we can feature anyone on the show, who do you think we should interview and what topic would you like to hear them speak about?
42:57
I have three because it couldn’t pick one. I mean, I absolutely love Josh Wolf and what he’s built over a luxe, and he’s a wonderful human being. And so I would ask him a little bit about brand building and how he’s built his brand. I absolutely adore Chris peek over at pace. And he has an ability to see the future so clearly and so humbling. He’s just a special human being. And the third is my husband, who’s also a venture investor. Built a firm called galvanise with some other people. And he has been an energy investor for 20 plus years and has been fascinated with the category since he was in his teens. And I would ask him about the nuances of the climate space and it’s incredibly nuanced. And I also have husband is Cliff Ryan, Ryan, and I happen to also think he is the most talented investor I’ve ever met my life.
43:56
Amazing. Alexa, what book article or video would you recommend to listeners?
44:01
The book I would recommend is called the coming wave by Mustafa Seligman. And it’s all about how much we really, really, really need to think very, very thoughtfully about the consequences of this AI age, and just the the weight of those consequences. And it had me sort of step back. You know, Mark Zuckerberg was my classmate, Harvard undergrad, and 20 years later, Facebook has brought such incredible joy to the world, but it also had pretty unforeseen consequences with misinformation and child mental illness, profound issues that really matter. And AI has the chance to do things like that faster and maybe more dangerous scale. And so I would recommend everybody read this book. Alexa,
44:49
do you have any habits, tactics or techniques that are a secret weapon?
44:53
I’ll give you my two quick thoughts, which is one I believe in the power of now. I tried to do everything truly just right now. I am not procrastinator in any way. And I try to stay as organised as humanly possible. But I think the second one is really hit always do the right thing. And none of us are perfect and just always do the right thing actually, like there’s times we’re doing the right thing is way harder and takes way more time. But I believe that your life is like a wedge of cheese and you want to move through your career and by the time you’re at the end of it, you want more people having followed you more people trusting you more people wanting to work with you. And I’m really proud of the inspired team. I’ve overlapped, working with people here 75 years, which is totally nuts, and celebrating someone’s 15 year anniversary with me and I think take the time do the right thing. You won’t regret it and long term. It’s the most efficient thing you can do.
45:46
Perfect. And then finally here, Alexa, what’s the best way for listeners to connect with you and follow along with Inspire?
45:52
Well, on every platform, you can DM me on Twitter, you can message me on Instagram, you can email me all of our information that inspired capital.com. And yeah, just thank you so much for having me. This has been such a pleasure.
46:04
She is Alexa Von Tobel. The firm is inspired capital. Alexa, thanks for the inspiring discussion. Please pardon the pun and looking forward to hearing more from you via your podcast. Thanks for watching.
46:17
Thanks so much. I really appreciate it. Nick, what an incredible burst of energy being with you today. Thank you.
46:22
Thank you so much.
46:28
All right, that’ll wrap up today’s interview. If you enjoyed the episode or a previous one, let the guests know about it. Share your thoughts on social or shoot them an email. Let them know what particularly resonated with you. I can’t tell you how much I appreciate that some of the smartest folks in venture are willing to take the time and share their insights with us. If you feel the same, a compliment goes a long way. Okay, that’s a wrap for today. Until next time, remember to over prepare, choose carefully and invest confidently thanks so much for listening