Chad Byers, Susa Ventures - Starting a VC, Robinhood's Seed Round, & A WFT Exclusive Announcement!

Foreign.

Hello everyone and welcome to today's episode of the Wharton Fintech Podcast. I'm your host Ryan Zauch and today I bring you one of the most impactful and information dense episodes to date with Chad Byers, Partner and co Founder of suse Ventures. Suse is an early stage VC investing in strong compounding moats such as proprietary data, economies of scale and network effects. They're sector agnostic and have made multiple investments in areas like enterprise software, fintech, logistics, healthcare and much more. Some notable early stage investments that you might know from the fintech space we'll start with Robinhood where they wrote a $200,000 check in their seed round. Other investments include Fast Flexport, Policygenius, Okra LendUp, Nova Credit, Rails, treasury prime and more. Quite a list. Chad was named to the Forbes 30 under 30 for VC in 2015. Prior to SUSE, Chad was the Senior Director of Platform@integrate.com and held various roles at Silver Spring Network, Bloom Energy and Electronic Arts. What I loved about Chad in today's episode is one he's a natural scrappy hustler and he's got some great stories that show that today and 2 his advice in today's episode is so real, authentic and tangible, I think it's a must listen for anyone remotely interested in VC and startups. He really came prepared. In today's episode we discuss his unusual path to venture and the tools he used to become an incredible cold emailer to meet people like Andreessen's Chris Dixon and Box Group's David Tisch. The incredible story about turning a Jon Stewart taping into an Internet phenomenon. Critical pieces of advice for starting a first fund his seed investment in Robinhood, including the moment the light bulb went off, the fintech trends he's most excited for and much, much more. I hope you all enjoy this episode as much as I did. Let's get started. Hi Chad and welcome to today's episode of the Wharton Fintech Podcast. It is great to have you on the show as a guest today.

Thank you so much for having me.

Great. So to start, you know where are you located right now and where have you been quarantining over the last year or so?

I spent the first part of quarantine with my parents in the South Bay of the Bay Area and then moved down to LA shortly thereafter when I realized that living with my parents was not the year I had envisioned for myself. Moved down to L A with a couple friends and did a quarantine house. A couple venture buddies and founder buddies and got to have the social side of having hanging with friends while still being safe. And it was a blast.

So going off that point of, you know, the parents house in the Valley. So you were raised in Silicon Valley, you know, where venture capital was just all around you. And you have a quote that goes, when I was graduating college, a mentor told me to find a job that didn't feel like a job. So can you walk us through your journey from the Valley to kind of this moment in your life and then what came next?

So luck has already always played a major role in my life. And that starts with blind luck, and that begins with where you're born and who your family is. Right.

Lucky sperm club.

So for me, being born in the Valley was one of those things where you don't really fully appreciate the opportunities that come with it until you're older. And there's kind of two stories that I think bring this to light a little bit more. The first is when luck played a major role in my life, which was getting exposed to some of these tech companies really early and mirroring that opportunity with my personality. And I'll tell these two stories, and the first one is really a story of pursuing what your passions are. It was 1999, and eBay was just getting going. And as a kid, I was just a natural collector. I collected everything, baseball cards, Beanie Babies, pins, et cetera. And I realized on ebay that the prices for Beanie Babies was all over the place. And I met a kid at summer camp who was from China, and I had this kind of Kelly's blue book of pricing for Beanie Babies. And I figured out that the most expensive at the time was this purple elephant. And in China, he could get it for really cheap. Oh, wow. So one year I paid him money to bring me back 10 the next summer from, from China. And I listed them on ebay. And you know, again, this is another example of you don't appreciate these things till you're older. But like that experience of using the Internet to exchange goods, getting the product from China, finding an arbitrage opportunity on the Internet was incredible for me. And I had so much fun doing it. That story ended quite strangely where I ended up listing them all on ebay, selling each one for $350, which for an 11 year old was like all the money in the entire world.

That's incredible.

And it ended up being that all of them were fake, so they didn't meet the standards of what was considered real. And the person I had sold them to Sent them back. And so the whole thing failed, except that I had put insurance on the UPS order and UPS ended up cutting me a check for the total amount sold. But it's kind of, again, this example of being exposed to an opportunity, taking advantage of it, and getting to really follow my passion, which at the time was collecting. And actually there's some really interesting parallels we can get into later with what's happening happening right now in the NFT world. And actually baseball cards are coming full circle with platforms like Alt and others that we can talk about. The second is really a story, actually that happened in New York City, but it's born out of this experience I had as a kid, which is when you see opportunity, jump on it. And this entrepreneurial mindset being built into me from the earliest days, being in the valley around tech and entrepreneurship, et cetera. And that was when I was at the Daily show in 2013. They were interviewing Peter Dinklage from Game of Thrones and he mentioned this term nerd glaze. And Jon Stewart, quite literally on air, says, if someone doesn't own nerdglaze.com, they need to buy it. And I was sitting in the live taping and I was eating dinner after the show, realizing I saw that before it went live. So I bought a domain on my phone, set up a landing page, setting up an email submit bar, and as it rolled across east coast, Midwest, west coast, set up a Google Alerts and Google Analytics on the page. I just saw hundreds of thousands of traffic come to the site and eventually ended up turning that into a nerd focused blog, like a barstool sports but for nerd content. So we covered anime and movies and all sorts of stuff. We had all these writers writing free content and it was an amazing side project. But again, it was a reminder to me that if you kind of marry an entrepreneurial spirit and mindset with opportunity, then eventually these kind of breaks in life come along and if you do enough small projects, eventually one project will work. And that kind of leads us into suse, which SUSE was just another one of my kind of entrepreneurial mini projects that happened to become very much my life goal. And in 2013 started SUSE. And we can now dig into kind of what that is.

Yeah, absolutely. And I actually have a great Twitter thread documenting this story of nerdblaze. I'll be sure to link it in the episode description. I. I came across it a long time ago, actually, before I had even knew who you were. And we put together this podcast and then I rediscovered it again when doing research. It's a great story and very serendipitous. So jumping, as you said, to SUSE adventures. So it's 2013 now. You have nerdblaze.com kind of under your wing. What happens next? What is the start of SUSE Adventures, and what does it look like in that year?

Yeah, I spent five years while doing these side projects like Nerd Glaze on the operating side. So after college, I spent a couple years at a company called Silver Spring Networks, which was at the intersection of cleantech, which is having a nice kind of revitalization right now, and got to see a company go from the early stage to an IPO. And the IPO is, I think, a $900 million enterprise value, which at the time felt enormous in this market. It feels small compared to some of the IPOs of today.

Peanuts.

Peanuts today. And I loved operating. I loved building products. I loved building teams. I loved the people side of work. And in 2012, I moved to New York, where the Nerd Glaze story happened, But I was still at another startup out there. And so I was on the operating side, but I started doing angel investing. And I kind of learned angel investing very much on my own in New York and New York ecosystem, which at the time was super small. And we'll talk more about that. But the genesis for starting SUSE really came out of this idea that I loved investing. But every time I talked to my friends who were at big venture funds, they didn't really get to operate the fund. They were just writing checks and working with companies. And I wanted to do both. I wanted to build a startup and invest. And the only way I felt like I could do that was starting my own venture fund. And that was the impetus for the firm. And my partners and I had gotten to know each other through mutual friends, and we kind of acted as a syndicate of angel investors for a while before we said, okay, all of us, let's leave our jobs and try to get this thing off the ground?

And who were maybe, you know, maybe two or three of the most important people that you met during that stage and got connected to? Were there any meetings that you had where you kind of left and say, you know what? I think I can do this thing, and this is what my next step should be?

Absolutely. It was such a good question because it brought back these memories that I hadn't thought about in a while. There was two people. I cold emailed a ton of people. People, first of all. But this was New York 2012, 2013 tech was a thing, but it wasn't what it is in New York today with the Mongodb's and Pelotons of the world. There wasn't that many massive companies at the time. The hot names for throwback for some of the listeners was Foursquare and zocdoc. And these were the top businesses in New York at the time.

Oh my God.

And I cold emailed two folks that had a big impact on me. One was David Tisch. So David Tisch at the time was running techstars New York. Techstars was a force of nature for tech in New York at the time and still is. And David's gone on to start Box Group. Box Group co invest with SUSE all the time. They're one of our closest peers. His team over there of Adam and Nimmy and Greg and et cetera are all close friends. And he answered a cold email and I went over to techstars and I met with him and he gave me not only the lay of the land of tech in New York, everyone I needed to know. He made intros, he continued to meet me on a regular basis. I had zero value to give to him, although I tried my hardest. But the value exchange was absolutely lopsided at the start. I'd like to hope that I've made up for some of that with how many times we've co invested at SUSE and Box. But he was just incredibly helpful, incredibly knowledgeable, knew everyone. He might have made this intro or I believe it was also another cold email which was to Chris Dixon, who is now a general partner over at Andreessen Horowitz. At the time he was angel investing and running hunch still and he's now been in the press recently because of his investment in Coinbase. I think he led the Series A and they returned $14 billion or something to Andreessen with that investment.

Decent day.

He's now running the crypto part of Andreessen full time. But again answered a cold email to a stranger and walked me through how he thought about angel investing and his criteria for evaluating entrepreneurs and evaluating markets. And I think one of the takeaways is that people in this community are so welcoming and I've definitely been a benefactor of that and have tried to pass that on and do so whenever I get a well written kind of cold email to respond and be helpful to the extent that I can. And both of those, although those data points might seem small and those meetings might see a blip in the Radar. These relationships have compounding effects over time and they've been two that I've cherished.

Yeah, Chad, really agree on the nature of compounding effects. It really came to life in my own journey over the last last two years. So, you know, when Miguel and I took over this podcast, the first six months or so were, you know, a lot of fun and just one off connections. We had gone from an episode a month for the previous host to, you know, four episodes a week. Then you know, by the time last fall came around, I kind of looked around at Miguel and I's day to day who had we had spoken with and the people I was able to, you know, call on for insights or connect classmates to and it really added up. And like you said, you know, you don't know the outcome of each relationship going in. So I do have one quick question before moving on. You know, you're sending so many of these cold emails to people. You know, you were a young kid at the time. Like you said, nothing to add. What were some of your cold email tricks? I'm sure some of our audience would love to hear these.

Yeah, my core premise was a couple things. One, make it really personalized and show that you've done your research. Two is offer ways to help without expecting anything in return. Three was do the work for them, make it easy on them to say yes, to make the meeting happen, to choose the date, whatever. And so the combination of those three things worked well. And so to make it probably a little bit more real when I get them today, the things I look for is if it's just if I can tell it's template, I pretty much don't respond. But if it's like, hey Chad, you've invested in Robinhood and Flexport and whatever. I'm particularly interested in how these companies are doing X, Y and Z. I'm interested because I'm a senior in college and I'm doing a thesis on it or I'm just starting to angel invest and I've done a couple deals in that space. So there's some contextual relationship to the experience I have and why they would be interesting. And then the ask is really small. Can I grab 10 minutes of your time to hear how you evaluated that investment and why you made it? I'm always willing to make those. There's always time of the day for these types of things and I do it all the time. So those would be a couple pointers.

Great pointers, Chad. Well, hopefully you don't get flooded with too many Cold emails. Now, once this episode goes live.

Bring it on. Bring it on.

I mean, Twitter, of course, in my opinion, is the ultimate power tool. The amount of, I think business deals, connections, investments, podcast connections that get done over Twitter is crazy. This episode, I think, yes, was actually sourced from a DM. I sent Leo, your co founder, a while ago to see if SUSE would be interested in collaborating. So now going to suse, you met Leo Polevets and Seth Barron, your co founders. How did you get in touch with them? And can you tell us more about what exactly SUSE Ventures is?

Yeah. So let me start with who we are at suse and I'll talk a little bit about the partnership and how it came together. So SUSE Ventures at its core is an early stage venture capital fund that invests in technology businesses. We primarily vest in four different areas. Healthcare, fintech, logistics, and vertical software. Within those four categories, you compass roughly 90% of what we do. Our core business, we invest 1 to 2 million dollars checks in rounds that are typically somewhere between 2 and 4 million at the seed stage, and then we aggressively follow on into those businesses as they build. We've done this about 130 times since 2013 when we started. We were the first institutional capital and stuff like Robinhood and Flexboard and Mux and these stores are unicorn companies now. But we have so many other exciting businesses that are still building great technologies and teams that are in the marching toward big company stage. Stuff like Stored and New Front Insurance and Viz and Steady and many more. So our business at its core is partnering with small teams at the inception of their businesses, getting really excited about what they want to go build in the world, and then doing everything in our power to be teammates to those entrepreneurs as they build their businesses. The new update for us, which we haven't really broadly talked about, but I'll kind of give a little sneak peek on the podcast. We're now raising a larger opportunity fund to allow us to more aggressively follow on into our existing best companies. And so you could think of our business as always partnering at seed, but playing a larger capital role, not just advisorship role in these businesses as we build. So that's a little bit about suse. How I met the team was really serendipitous and what we talked about, the rule of kind of compounding moats of relationships. Both my partners I met through mutual friends and it was an alignment around what we wanted to build. Shifting from our operating careers into investing all at the same time and essentially doing founder dating for About a year we'd look at companies, evaluate them together, see if we were complementary and how we thinking about it and decided to go into business together. My partner Seth is very much a networker, very charismatic, very people person. My partner Leo is an engineer by background. One of the first engineers at LinkedIn, worked at Google on payment fraud detection. Kind of a brilliant mathematician engineer. So across the team we have different personalities, different views, different skill sets, and felt like we as a team were very well rounded for starting the firm together and kicked it off officially in 2013 and have been building the business together for about eight years.

That's fantastic. And at first I saw that it wasn't the easiest journey. You went 0 for 50 on institutional investors in the first fund. How was the fundraising process like and what was your value proposition as pretty green investors trying to convince institutions?

Yeah, I've learned a tremendous amount about fundraising that hopefully can be helpful to other folks as they think about becoming angels or full time VCs. When you raise a first time fund, it makes complete sense to me why everyone passes on you. You have relatively little track record. You're a new team at the time. I always joke, our pitch probably couldn't have been worse. We had no track record, new team, and we were all living in different

cities, the Holy Trinity.

And so your data is correct there. We pitched 50 institutions. I remember driving from New York up to Connecticut. In Boston, we were trying to take a meeting with every wealthy family person we could meet, every institution we could meet, and we went over 50 on institutions. Luckily there was 75 crazy families out in the world that gave us a couple hundred K each. And we kind of stitched together that first fund of 25 million. It took us about 11 months to raise, which for first funds I've now come to learn is not totally crazy. And they take a long time is the reality. It's probably helpful to share a little bit about what it's been like since then. So that first fund was all family offices. The second fund we raised in 2016 was 50 million and it was the first time we added an institution to that fund. Horsley Bridge came in and anchored our second fund and they've been our anchor partner since. They're a very well known institutional fund of funds in the Bay Area that's backed kind of the who's who of great venture capital firms. And one of the key learnings there was the relationships we built in that first funnel. Despite them all saying no, they've ended up becoming partners. We've actually added to the firm over time. And so that relationship building again, it all comes back to these compounding moats of that have been really valuable for us. Our third fund we raised in 2019 was 90 million. We further added institutions. It was the first time we added a university endowment to the LP base. And now we're kind of institutionalizing as you go. And that's traditionally kind of the history of how these capital raises end up happening. But it's been a tremendous kind of learning curve and learning experience since then.

So my co host on the podcast, Miguel Armasa, is launching Gilgamesh Ventures, which is of course a FinTech focused VC alongside two FinTech veterans over the last year. Plus I'm seeing him go through just the really scrappy process of building a successful first find, of course, doing the fundraise, figuring out different legal questions and all that comes with it. But he's done an incredible job and it's been a blast supporting him, cheering him on and watch it all come to life. I'll be sure to send this over to him. And so of course Chad, what you hope for in this first find is to get a home run investment to set up your brand. And you know, you of course got that with some companies, but most importantly Robinhood. And since we are on the FinTech podcast and they are about to go public, I'm sure our audience would love to hear how you were able to meet the Robinhood team. What did this pitch look like at the time and what was your conviction in this crazy commission free brokerage so many years ago?

Absolutely. And we should come back and talk a little bit about folks that want to get into venture and fund formation because I have a bunch of thoughts about that definitely. So we met Robinhood in 2013 and just like any VC, you're really as good as your network. And this is another example of luck. I met this team through my brother. My brother is brilliant. At the time he was finishing up his PhD at Stanford in bioengineering, which obviously is not related at all to FinTech. However, the world is small and he had mutual friends with the founders, heard that they were raising around for their company. My brother at the time was also moonlighting essentially if you will, for Google Ventures, the venture arm of Google, and writing checks for them. So we met the company through my brother and I flew out from New York City again at the time we were in different cities, our team and we all met at the Rosewood on Sandhill Road and Vlad and Baiju were there with A pitch deck and a demo. And the demo was essentially what's wild to think about. It looked and felt like Robinhood today, except you couldn't trade a stock. So it was just a stock ticker app, if you will. They didn't have their broker dealer license, so you couldn't execute a trade. But you could click on a stock, you could see its price, you could see its graph. It was beautiful. The UI UX was so similar to today, which actually is part of their secret sauce that I'll get to here, in my opinion. But we had had a prepared mind. And this gets back a little bit to my opinion of investing. When it comes to early stage investing, it's so helpful for investors to have a prepared mind around a category of markets, something they think is interesting. And at the time I had been friendly with Aaron Patzer who had started Mint.com and that company sold to Intuit for about 170 million. And at the time it was a beautiful web product for managing your finances. And we thought as a firm someone was going to build a beautiful mobile first fintech product. And we didn't really know what the right wedge would be. Right. Is it a checking product, savings product, whatever. But that prepared mind came in helpful when we felt like there was the opportunity. And they convinced us in that meeting when they told us brokerage was the wedge, the light bulb went off. Because brokerage and stocks is the one thing people talk about in the finance world with their friends. No one talks about their high interest savings account. Right. No one talks about me potentially, I guess, a little bit of credit cards. Definitely not like debit cards. Right stuff. And it totally dawned on us that was the wedge. And so we invested in 2013 about 200k in the seed round. And that seed round proceeds were used primarily to go get their broker dealer license and started signing up customers for their eventual product. And the other thing that dawned on us, take away from that investment was just the entrepreneurs themselves, Vlad and Baiju were incredibly insightful, incredible product people. They had an opinion of the way the world was working. They deeply believed in the mission of creating a financial product that allowed the next generation to access the capital markets in a way that was cheaper, easier and better. And that was so clear to me how important that mission was to them. That's something that's guided our investing since then, is making sure it's what we call founder market fit, making sure the founder is obsessed with the mission because that'll carry you through the eventual lows of building a company, which happen in every company, and make sure that you get to some of the highs. So that gives you a little sense of kind of how we sourced it, how we met them, how we were thinking about the investment.

And then, of course, it just went on to such incredible growth. It was a company that I loved. Toward the end of college and my first years in New York, I think all of my friends had Robinhood accounts. And then we have to touch on the last few months, the Robinhood saga took a pretty nasty turn with Gamestop. From an investor perspective, what did that month and a half or so look like? And do you think Robinhood is still on good ground as it prepares for its IPO later this year?

Yeah, absolutely. So, as I hinted to you, I think the special sauce of Robinhood was their maniacal focus on simplicity, the product. Very few products in the world get to the scale that they had gotten to with so few actual UIs. There might have been three UIs in the app or portfolio view, a stock view. I mean, it's so simple. Yeah. And a lot of building companies as an exercise in saying no, right. What are you not going to go build such that you can still focus on the important things. And I think they nailed that almost as well as anyone has ever nailed it, in our opinion. And the eventual vision for that company is obviously much larger than brokerage, and they'll get there. To answer your question around what this year has been unprecedented and what happened during COVID with this explosion of trading and Robinhood is now, your users probably know, jumped into literally the most downloaded app in the App Store many times during COVID during these crazy moments of volatility, both in the market and also in the press cycle for the company itself. I think as an investor, the way we've thought about it is I think when you dig in deeply to what happened with the gamestop of pausing, trading, et cetera, I think it's rational to understand why that decision had to be made. And frankly, it was happening to a lot of the clearinghouses and brokerages at the time, which was the truth of the matter. I think obviously, from a PR and communication standpoint, it probably could have been improved. But in our opinion, everything should come back to what is the core mission of the business. And it hasn't wavered since 2013 seed round, which was, can we provide a better access to the financial markets for this next generation? Every decision you make as a business should be in service of that mission. And so the reality for them, you know, Vlad's gone on to Clubhouse and explained it kind of all over the place. At this point, it was a business decision they had to make that was partially a structure of how our financial system works a little bit forced their hand on these capital requirements required by these brokerages to make the decision they had. You can imagine it was not an easy decision by the company and was obviously something that had to happen. And my hope is they'll come out of this stronger in a place to again, better serve what they have always set out to go do. I think from an investor standpoint, not only did I not freak out, I actually leaned in and invested more into the business. So, wow, a group of investors that were already on insiders, it's now been publicly talked about the convertible notes that they raised during that kind of really crazy four or five days with Tiger and others. We participate in that. So that shows you our level of conviction in the team, the business, the idea and the mission. And I think they're going to come out of this more than okay and I'm so excited for them to kind of continue to serve their mission for customers.

Yeah, that's a great point. I think a bit of a contrarian take, as so many people that I see just think Robinhood is headed in a downward spiral, but I think they forget that it's been the number one app in the App Store for a long time now. And of course, if listeners want to learn more, we had Gretchen Howard, the COO of Robinhood, on the podcast earlier this year. We also had Eric Schoichet of Atom Finance, who came on and debated, paid for order flow and a couple other things. I'll be sure to link those in the episode description. We'll save that conversation for another podcast.

Chad Sounds good.

So I want to return back to what we were talking about earlier in terms of advice to emerging managers and starting your own fund. So if you had, let's say, Miguel, my co host, in front of you right now, you have this wealth of knowledge, you've started a fund from scratch, what advice would you be imparting to him right now and what he should do differently?

So here's my list of things. As a manager who has started a fund, how I would kind of advise new folks thinking about this and perhaps this is a little bit for folks starting a venture fund and we can get to also starting your angel investing journey because I think these are related but potentially slightly different. So I have like four key points I think for folks starting their own funds. The first is don't worry too much about your fund size. Just get in business. And what I mean by this is if you're attempting to build a generational firm or a multi fund firm, it's likely you're going to have more than one fund or that is your eventual goal. Whether your first fund was 1 million, 10 million, 25 million, 50 million, all that really matters is that you show the next set of investors to back your next fund. That you one, have access to great companies. Two is you have the ability and brand in the market to win allocation in those great companies. And three, you have the skillsets and the ability to build relationships with entrepreneurs and be helpful such that they can be the references to help you win the next deal. Those are three fundamental things you need to build a firm over the long haul. And your first fund size matters, but it doesn't actually matter as much as proving those three things. And the reason this comes up for me is I remember when we put in our filing that we were going to raise 25 million. We were stuck at 21 million for three months and I was so embarrassed that we had this number and we weren't going to get to it. And looking back on it, it wouldn't have mattered if we had built the portfolio we built. It didn't matter if it was 21 or 25 or whatever. So set a number you want to go raise. But just get into business and build the portfolio you said you would build and invest in the type of businesses you said you would invest in. So that's number one. The second is front load fees and my partner Leo has alluded to this in some podcasts, which is fee structures and venture firms. They're 10 year entities. They typically have a fee structure somewhere around 2%, sometimes for small funds, 2.5%, et cetera. But a typical fund will look something like 2.5% or 2% for five years and it starts to trickle down there after that every year. For early stage funds that are small, obviously you need that capital to build your business. You need to pay for potentially some employees or some legal fees or marketing or whatever, right? And so front load your fees in the earlier part of those years, Maybe you charge 3% for the first two years and then it trickles even faster at year three or something because that's your operational time of that vehicle. You're either going to have your second fund raised by year three and that will start paying fees for your second fund or you won't be around in that significant of a way. And it probably won't matter. So I think that's a great suggestion by my partner Leo and I totally agree. The third is get into great name brand deals, which is more important than having some elaborate portfolio construction or discipline. And so what do I mean by that? When you go to raise a second fund or you're trying to build credibility as a fund manager, getting in a Robinhood or a Flex Port was far more valuable to us just the fact that we were even associated with a great company. Right. Than anything around being an actual venture capital portfolio manager. Which by the way, as you build your firm and you get to your third and fourth fund, it's actually what LPs all they care about, everything switches to well, how are you thinking about portfolio construction and risk management and how are you thinking about liquidity and number of portfolio companies and the vintages and your deployment cycles and all these types of things? That all matters for a first fund, but just get into name brand deals. And the reason I bring that up is don't be too disciplined. So we were a first fund and we said we would do seed, but if we saw an amazing company at the A and we thought it was a rocket ship, we would just do it in that first fund and that matters far more. So be a little bit less disciplined, get in rocket ships if you can name brand companies. The last one is try to network as much as you can with as many great investors as you can. And the reality is this, there is this differing belief in venture of how much the syndicate or the other investor Signal matters in a deal. And Seuss is of the opinion that you should have your own conviction, your own opinions. But signal really matters and this is in the data. If you look at the performance of the top funds of time, if you're co investing with them, on average you're probably going to perform slightly better. And so care about who you're investing with, care about the group of people around the table, pay attention to that signal, develop your own conviction as I mentioned, but weigh that early on as you're building your own pattern matching, as you're building your own investing taste. In my opinion, we did that early. We leaned on some amazing partners who were invaluable to us and it really helped us get into some great companies early that at the time we may not have said yes to.

Yeah, I love that. It's sometimes contrarian advice. Of course you have to do your own research, but I think people have been knocking, just chasing the herd. But you know what, if you see a 16Z sequoia. Some of the smartest angels that you know in a space, coming after a company and, and you're not sure if you see it, they probably might know something you don't or have a pretty good track record and been doing it a lot longer than you. So on that note, on angel investing, you know, a little bit similar to vc, but a completely different beast. A lot of our listeners, I'm sure, are thinking about it. A lot of operators in fintech are getting very interested in angel investing. You've done quite a bit yourself. I've started doing it as well. Well, what advice do you have for new angel investors just starting out and kind of chasing those first few allocations.

Yeah, four quick bullets here. So the first is treat it like a fund. And so what do I mean by that? Think about it. It's kind of the reverse advice I just gave on starting a fund. When you're going into angel investing, think about it as a fund. And so what I mean by think about the core inputs to what goes into fund construction. One is how many dollars do you want to commit to this? The second is how many deals should you do in a portfolio? My opinion is that there should be at least 20, 15, 20, if not more angel investments to build enough diversification of risk in a portfolio. How many years do you want to do this over? I think you should at least do it for two years. I think committing to angel investing for six months makes no sense because you want to de risk a little bit on vintages, vintages of venture investing actually matters a lot, which we can get into. Those inputs will output. Essentially what should your average check be per deal? And it's a bit nuanced, but making sure you have some level of normalcy across check size actually matters such that if you hit a winner, the portfolio math pays out where that company can pay for all of the losers or the companies that didn't perform. And so that all is to say is think about it like a fund. Put on a fund manager hat as you think about your own angel portfolio as the first one. The second is, it's actually what I said on the first one around fund creation is network with as many great angels as you can. The benefit you have as an angel investor is your check size is typically much smaller than funds. And so what that enables you to do is squeeze into rounds that other funds can't get into. And so a round that Seuss is leading or first round or Sequoia. See, I'm casually throwing myself into those top funds, even though those are all funds that are far more well known than us. But squeezing 50, 25k 10k into a round being led by the US is far easier to do than another fund trying to get 500k in. And so leverage the fact that you're nimble, leverage the fact that you're small. You can bring outsized help and advice for the check size you're writing to co invest with the best people in the world and try to network to them. That brings me to the third point, which is actually something you alluded to. Twitter and social media today allows you to be anywhere in the world and connect with the best investors in the world.

Incredible.

It's incredible and I've seen it time and time again and I've actually become LPs and people who have done this better than anyone. I think the penultimate example of just straight hustle is Harry Stevings. Grew up in the UK and has now interviewed. He's my hero, every top VC in the world and has built a network. I've literally now backed his fund. Amazing example. So use the Internet to get access to great people. And how you get access to great people is having a real opinion and expertise in the world. Again, back to the point of provide some value and it'll flow back to you in spades. So use those channels, get to know people. And then the last one, which was so helpful for me in my journey, which was I just took every single possible meeting I possibly could. I just went like, network, network, network. I didn't know which meetings would pan over the long term. I'm sure I wasted a bunch of time. But when you're just getting started, I went to every demo day I could. Good ones, bad ones. I met with every company I could, good ones, bad ones, every investor I possibly could. And what's interesting now is as you build, you can start to filter who you spend time with and which relationships you maintain. But even the bad ones, early on, you start to build your pattern recognition for what good and bad look like. What's a good and bad pitch? What's a good and bad founder? What's a good and bad investor? Not even bad, but just maybe something that you don't resonate with, et cetera, et cetera. And so go super, super hard on the network front, obviously doing it in a way that feels organic and natural to you. But those are kind of the four bullets I'd hit on.

That was fantastic, Chad. I'll probably be re listening to this episode to make sure that I get all of those bullets into my head. That's great. And so, last question that I want to touch on. We touched on this briefly at the start of the episode, but some fintech trends that you're interested in. Of course, the rise of NFTs, alternative investments, alt. Alt investments and tokenization have been absolutely surging over the last six months. I'd love to understand some fintech trends that you're most excited about over the coming year or two. And of course, your thoughts on this massive tokenization and democratization boom that we're experiencing.

Absolutely. So this is something near and dear to my heart because as a firm we talk and think about this quite literally all the time. So here's some things that are top of mind for our firm and frankly, this is how we map the world and we're quite literally making investments against these theses. So the first big one for me is international opportunity in fintech. The US is such an interesting market because we throw so much stuff at the wall on what could possibly work and you see trends start to emerge. We think that there's incredible playbooks to learn from that you can go run internationally. And actually, literally today, the day that we're recording this, we announced a new investment in a company called Okra, which was essentially an African based plaid. If you guys all know Plaid, it allows any fintech app to connect directly with a consumer's bank account. It's what Robinhood uses to pull funds into an account, et cetera. And so this is a company doing this on the African continent. They're based in Nigeria. Incredible entrepreneurs. I think international opportunity for kind of fintech that we've learned the models in the US apply to international markets is super exciting. The Second is infrastructure APIs. PLAID is actually a good example of that in the US that we just talked about. But infrastructure APIs for other aspects in fintech. We recently made an investment in a company called Rails R A I L Z, which is building APIs for developers to integrate with all major accounting software. So why would you want to do that? Let's say you're a bank and you want to build automatic underwriting of SMB loans. You can just pull those SMBs, actual accounting software, directly using this API. Right. So I'm giving you kind of Suse's own examples of how we've invested in these theses broadly, which I hopefully maybe brings in a little bit to life. The third is just core innovation on payment Rails. When you look actually at how the payment system works or how the financial system works in the US it's relatively archaic and actually Vlad from Robinhood has been talking quite a bit about some of this as it relates to the brokerage world, which people might have tuned into. This is happening for all sorts of stuff and we've seen a ton of innovation around ACH and other things. And so I think there's going to be some interesting pure kind of true infrastructure innovation around the payment rails of how the US kind of finance system works. The one you alluded to, I think is the next one we're paying a lot of attention to, which is trading platforms broadly defined. Obviously we were in kind of the big wave, one of what these mobile experiences looked like. And despite big companies, I think we're actually still in the early days and you alluded to some, but obviously in crypto you just had the coinbase IPO which was massive. You have these huge new platforms around NFTs, obviously NBA top Shot has now processed billions in transaction volume. It's wild. You have even smaller companies that are Series A and B, OpenSea being one of them, foundation being another. There's a bunch of these around NFTs. You have cultural item marketplaces. A friend of mine, Michael in New York who started skillshare, started a company called Otis which is super compelling. You now have StockX around shoes and other things. In the baseball card world, you have a company called Alt, which is working with trading cards, et cetera. This whole idea of trading platforms is still in its infancy and I think is fascinating and we've been taking pitches nonstop in that sector and we'll probably make some investments there shortly. I think one of the last ones that comes to mind for me is the Mint 2.0 vision, which is. I don't know about you, but I have literally eight fintech products on my phone, all with some capital in those doing different things in the world. Whether it's passive investing, ETF investing, direct investing, equities, whatever. Someone's going to build an integrated app that pulls in all your disparate accounts, gives you that one single view that starts to touch a little bit of the wealth management side and bringing wealth management down to everybody. It shouldn't just be for the wealthy and someone's going to tackle this kind of Mint 2.0 world in the fintech world. So that should give you a sense of how just some trends we're thinking about. I think fintech is so interesting. I guess the last big one now that I'm thinking about at top of Mind right now is we are going massively into insurance tech.

Interesting.

So there is tens of billions of dollars of public market insurance company market cap up for grab, in my opinion, for people using technology in better ways to both underwrite, to engage with customers, to distribute insurance, et cetera. And we have made probably five or six investments in InsurTech and want to make that a huge part of our portfolio going forward.

Those are awesome trends. I mean, can't go wrong. And on the second to last one of all these alternative assets, we just had Rally Road on the podcast the other week. I'll be sure to link that in the description. As well as Michael Sidgemore of Broadhaven Ventures, who's been investing all over the place in the alt alt space and of course in insuretech. I think just such an underrated part of the fintech ecosystem. I think it still gets slept on. We had a senior partner of World Innovation Lab who dives into InsurTech if you're interested in learning more. And last thing, Chad, eight fintech apps. I think those are rookie numbers. You got to get those up. I'm at like 22 because of this podcast. My tax reforms this year are a disaster. I'm still putting them off.

I love it.

So in closing, Chad, you have reached the final part of the episode, which is the rapid fire question round. We've got about 10 or so questions for you, Max. You know, 10 second response each. Are you ready?

I'm ready.

All right, first one. What is the first job that you ever had?

I collected eggs from our chickens and I sold them down the street.

Always such an entrepreneur, a merchant in your young age. All right, next one. First fintech app you ever downloaded.

Probably this sounds crazy, but Robinhood.

Now, what is the best and worst collection that you ever had? You mentioned you're a big collector.

Best and worst. I mean, worst is probably my beanie beauty collection, which as a basket has gone pretty stale and undervalued. My best has probably been I'll say something cheesy and go with friends.

Oh my God, that's so cheesy. I'll give you that one, though. All right, next one. Why is a gorilla the logo for Susan Adventures?

Suse's premise is communities go farther than individuals, and we put community first at everything we do at suse. SUSE comes from the name of a mountain gorilla family in Rwanda. It's a group that we had all visited actually independently of each other before we knew each other. And mountain gorillas form the strongest community bonds in the animal world.

Great. Now, what is the one piece of advice that you try to give to every founder that you come across?

Become an expert on storytelling. Storytelling is used in fundraising, it's used in recruiting, it's used in PR, it's used in selling customers. The number one factor we've seen in our portfolio of about 150 companies now, possibly 300 founders. The biggest trait that we've seen indicative of success is the ability for someone to tell a compelling story.

All right, next one. I've heard you're a huge skier and outdoorsman. I love to ski as well. What are the three best places you've ever skied?

Love this question. One Bald Face Lodge in Canada. It's a Kat ski operation near Nelson, bc. It has the best champagne powder in the world, the nicest people in the world. I'm a huge fan of Canada in general. In the US My number one spot is Jackson Hole. It has the best terrain, best side country, and I'm always a loyalist to where I grew up skiing, which is Alpine meadows in Lake Tahoe. Although these days the snow's not as good. But when you know a mountain well, it makes it the best place in the world.

Well, Chad, this was fantastic. I want to thank you for coming on today's episode of the Wharton Fintech Podcast. A lot of really good, tangible, actionable advice for our listeners. First time founders, first time investors, entrepreneurs, angels and more. Really excited to share this with our global audience.

Thanks Ryan. I appreciate what you guys do. I'm a big fan.

Thank you for listening to today's episode of the Wharton Fintech Podcast. If you like the show, please consider leaving us a review. If you're looking for more Fintech content, subscribe to our podcast channel and find us on LinkedIn, Instagram, Twitter and Medium at Wharton Fintech. There you will find articles, videos and much more analyzing all aspects of the industry. I've linked our accounts in the episode description. I would also like to thank our editor Rafael Ostria for his incredible work on our episodes. Signing off, I'm your host, Ryan Zauc.