Argentina Entrepreneurship, Endeavor, and Global Lessons w/ Wences Casares and Reid Hoffman

Welcome to Graymatter, where we bring in some of today's top tech entrepreneurs and business leaders to share their story from startup to scale up. Today's episode was recorded in Patagonia, Argentina, featuring a conversation between Greylock partner Reid Hoffman and Wences Casaris, founder and CEO of Xappo, a company that provides bitcoin wallets and storage vaults. Reid and Wences talk about global entrepreneurship, including how growing up in Argentina helped Wences see the potential of bitcoin earlier than most. And how the nonprofit endeavor transformed both Wences's entrepreneurial journey and the economy of Argentina.

So Wences, we're down here on this island of your favorite chef, my favorite.

Chef in the world.

Tell us how you and Malmon met.

You know, I sort of grew up knowing about Malmon because I'm from Patagonia and Francis Malmon is a celebrity down here. He grew up here and he made the way of cooking in Patagonia somewhat world famous or cool the world over. I used to come to this island when I was a kid, sometimes even swimming my parents ranches near here. And in one of those trips I was with my friends doing a barbecue. We ran out of wine. We got into his cabin, got some wine and the wine we were having all of a sudden my friends noticed was much better than the one we were having before and said, what are we having? And I look around and say for my dear friend Francis Michel Rohan, like wow, I guess we got some good bottles from there. Many years later I went to Francis nice restaurant in Buenos Aires and I bought the best bottle of wine and I told him that story and instead of getting upset, he laughed widely and we became good friends.

And he also got quite interested in bitcoin from what I recall.

Yes, he is an interesting man in that he's sort of a renaissance man. He has a lot of different, like you, many different interests and he pursues some of them in depth in not only how much he reads, but how far he will travel or meet people to learn about something. And he's quite tech savvy, which was surprising to me and interesting to see how he uses technology in his life. And he got very interested in bitcoin and so that's something else that we now share. I'm his bitcoin guy.

You're many people's bitcoin guys, including mine.

But yes, very proud to be your bitcoin guy.

And we're going to come back to bitcoin because part of what we're doing for endeavor down here In Argentina is kind of the importance of entrepreneurship, the importance of entrepreneurship for endeavor. And what are the lessons for global entrepreneurs that come out of Argentina? Let's start that a little bit with your entrepreneurial story. And why don't we start the first part of it with the lessons that you took away from hyperinflation when you were a child.

So, growing up in Patagonia, where my parents were and still are to this day, sheep ranchers, I saw my family lose all of their savings three times. I think that an average family should be very unlucky to happen. One of those things happen once in their lifetime and hopefully never. So now that I am older, I can realize how unusual it is to see it happen three times when you're growing up. The first time it was because of Argentina's biggest devaluation to date, wiped out their savings. The second time, almost 10 years later, it was because of hyperinflation and wiped out their savings again once they had recovered. And some years later, seven to eight years later, when they were recovered from that, the government confiscated bank deposits. So he wiped them out again. My memory from those events, and I can tell you a lot of funny now, not so funny then, stories of what happens when the. My memory is not an economic or financial memory. The way I think about those things now, back then, what I remember is my parents fighting about money and the world around us collapsing as we know it. Right. Like the things and the people that you rely on all of a sudden may not really be there. And sort of the social fabric somewhat degrading. And how scary a feeling that is has nothing to do with money or economics or finance. It's just a feeling of everybody on their own, like going back to animal spirits, and of being vulnerable, exposed in a scary way.

Do you think this is part of what prepared you psychologically for making the choice to turn towards entrepreneurship?

I think that probably that had a lot to do with it, especially the not wanting to suffer that again. Right. The uncertainty of that. Definitely. I think that part of the drive comes from not having to go through that or my kids have to go through that.

So tell our audience. Although maybe in Argentina, most people already know this. A little bit of how your parents were hoping that you would go discover a university career and a degree and so forth, and instead you stopped out, started a business, dragged your sisters into it.

Yeah.

What was the set of choices and what does that path look like?

I always said that I had three super lucky accidents. One was my dad, one was my mom. And the third one was the US and the way they happened was my father became a ham radio operator because the branch is so isolated as a way to communicate. And he built his own radios because they were very expensive. That led him to play with transistors and eventually computers, or build a very simple computer. And he drag me along in the programming part of it. To this day, I don't really fully understand the hardware. He has tried to explain it to me many times. He finds it fascinating. But the software was a fascinating world. And obviously in retrospective, that very, very unusual in a Patagonian sheep ranch. And it changed my life. And my mom was always very entrepreneurial, so very unusual for a woman in Patagonia, especially back then. And she would turn part of the wool production into sweaters. And we would sell those sweaters all over the touristy parts of Patagonia. My job was to. To help her with the sales and to help with the accounting. And I grew to think of the accounting sort of like the score. It was fun. And, you know, in all Catholic cultures, it's sort of wrong to want to do well, to want to make money. And my mom, sort of, without meaning to, I think, inoculated me against that. It was fun. It was okay to want to make money. And then I came to the US as a Rotary exchange student when I was 17, after finishing high school. And I was fascinated with what I saw back then. That was before the Internet. So it was the first time I was far away from my family was painful, but it was quite a growing year. And also just to see how things could be so, so different, especially from a business, entrepreneurial, economic point of view. And that made me very, very curious when I went back to Argentina to go to college. I went to college in Buenos Aires, which is very far from Patagonia. We were living in a very small apartment the size of this studio with my sisters when I decided to start this company and I convinced them to drop out. And my father was coming to visit, a very strict Patagonian sheep rancher, tough guy. He would come to visit once a year. And my sisters came to me and said, look, we've been talking and we are totally okay doing this thing with you having dropped out of college, but Papa is coming and you talk to him, not us, and let us know, because we don't want to be anywhere near when you do that. So I practiced in front of a mirror, and it was a terrifying conversation. I remember he was silent. He said he needed to talk to my mom. And then when he got back to me and says, like, okay, I understand you guys are dropping out of school to do this thing. You guys better do it well, don't you know it's okay. But this is not a game. This is not just like fun and games. I'm okay that you guys do that, but really apply yourself, do it well. And I never know. I don't think I could have done it without that endorsement from my mom and my dad. It made a huge, huge difference.

So how did you encounter endeavor?

I had been trying to raise money for my company for a year and a half and I had had 33 meetings. I kept very detailed notes about each meeting. I would meet with anyone who had any capital. It was hard for me to get those meetings. I had a 30 minute presentation that I had rehearsed over and over and over. I never once got to do the 30 minute. I was interrupted minute 10 onwards, usually 10, 15, 20 minutes at the most. And they would finish the presentation and basically ask me a version of who's your father? Trying to see if they knew my father. They wouldn't because he was in Patagonia. Which school did you go to actually? Meaning which private school did you go to that maybe my kids have been to? And that was usually the end of the meeting. Back then the capital in Argentina was tightly controlling a small group of families. Venture capital wasn't a thing. And I was very resentful of that. And I remember coming to Silicon Valley in 1994 for a conference and I couldn't believe what I saw. That these kids from the middle of nowhere in Wisconsin or India or China would be giving $3 million without people thinking that they were going to steal it. Like, oh my God, I really was in awe. And I said I have to come here more often and get inspired. And we were in this tiny little office that was a loner from a friend and trying to get this thing started. Having raised any money we were behind with our payroll because we, anyway, it was not a good time and we have been trying to raise money for too long. And the bell rings and I open and there's Linda Rothenberg. She tells me that she's heard our names from Andy Freire and Santi B. Linkes and that she started a non profit in New York to help entrepreneurs in emerging markets and, and that she liked to see if they can help me. And I remember thinking that this is too strange. I really thought like, these Mormons are getting more and more creative. I've been trying to, I was reaching out and without any success. All of a sudden someone reaching out and he kneels down. And then it sounded too good to be true. And then I said, do you provide money? We were still at the door. And I said, no, we don't provide money, but we help you in other ways. And I said, you know, whatever. I have nothing to lose. Come on in. And she changed my life. I wouldn't be sitting here with you if it weren't for Linda and for Endeavor.

And what were the things that back then Endeavor helped you with?

One of the most important things they did is that they sent an MBA student to work for us for the summer, which helped me a lot with the business plan. And thank God because I don't think I could have ever raised money without having that experience before. I was thinking about the business incorrectly, I was pitching it incorrectly. There were a number of things that were very, very valuable. That's the first thing that comes to mind. Second, we were growing a lot and I had never hired, not at that level. And I would ask some and there were people to help me with the interviews. And I remember thinking I would already knew who of these three people I would hire. And I would ask them. There were mentors to help me, just to see if they would choose the same. I wouldn't tell them, never. They always either chose a different one or very often they send none of those ones. As you're looking in the wrong place, the wrong person. And that in retrospective that had a huge impact. And lastly, because I was so frustrated with fundraising, I said, can you help me with a roadshow? And they set up meetings for me in Brazil. I said I don't want to have any meetings in Argentina, Brazil, Mexico and the US and that's what eventually led to a meeting with Fred Wilson, who became my first venture capital. And I was so grave and I'm grateful to this day that he trusted us and gave us that endorsement which changed that company. But also my career now Fred's actually.

Awesome and is broad minded enough to recognize interesting entrepreneurs and new plays and actually do that. Whereas a lot of VCs tend to be the well, is this the next Google? You know, the kind of is like looking for a narrow stereotype, you know.

Shortly after that we were in our first board meeting. I never had a board meeting before in New York. This thing about being in New York for work board meeting was all new and exciting and scary and I had raised $4 million led by Fred. And Fred brought Chase. He was doing Flatiron at the time. And he had a lot of capital from Chase, who sort of followed him. And I said that I wanted to buy this broker dealer in Brazil that was $4 million. And said, Wences, when we invested, you were already behind payroll. We gave you $4 million. You already have less. How are you? And I said, I don't know, we'll figure it out. But it's very important. It's a strategic asset. So we went around the board. My angel investor, Fred, I think Susan Segal was there, and basically I was saying, I want to do this. And they were saying, you're not. And after two rounds of this, I look at Fred and I say, I've never had a board before. Do we vote? We do this, we don't do this. And he told me something that I remember to this day very often, because I think it's a way of working that really works for me, which is like when says, we don't tell you what to do, it's not our job to tell the CEO what to do. Our job is to ask you questions. Your job is to listen to our questions, to answer those in an intellectually honest way. Then you have to do what you believe in. And it better works because our job is to hire you and to fire you, but you go do whatever you think is best and hopefully it works. I really appreciated that. And it's a way that I can understand.

Fred's absolutely correct. And again, surprisingly few number of people understand that, but understanding it is really key. So how has entrepreneurship in Argentina evolved since then?

It's day and night. I like that we all always look forward on all the things that could be better. But sometimes I need to look back to draw inspiration, to keep fighting, just to see how far we've come and how much things have improved. Today, Argentina has a thriving entrepreneurial ecosystem. Venture capital. Some very formal venture capital funds, some informal venture capital, angel investors. It has some lawyers who really understand venture investing and some that are great for the entrepreneurs, some that may be great for the investors. It has consultants, a whole ecosystem, recruiters. It's day and night from only 20 years ago. And that's very encouraging and to see the impact in. Argentina was one of the first countries that Endeavor went to and there are a lot of things that happen at the same time to isolate the effect. I like to compare sometimes Uruguay, where Endeavor has been for quite a while, with Paraguay, where Endeavor has not been. They have fairly similar number of inhabitants, gdp, GDP per capita. In many other ways, they're more or less similar countries. One has Endeavor and one does not. And when you go to Paraguay raising capital, there's not much of an entrepreneurial ecosystem. Raising capital feels like Uruguay 20 years ago. Meaning you're begging the 15 families who have the capital to see if they will give you capital. And if you haven't gone to private school with one of their kids, you won't get it. And you go to Uruguay and it's completely different story. Today, there is a thriving entrepreneurial ecosystem. There's venture capital, there's some funds, angel investors, there's entrepreneurs, there's lawyers who understand this, there's people who want to work for these startups. I think it's quite inspiring to see the effect that Endeavor can have in an economy in what's relatively a short period of time. Time.

That's part of the reason why both of us have been on the board of Endeavor for a significant amount of time is because its impact in all of these entrepreneurial economies is just amazing.

Yes, I think that for me, no one has to convince me or tell me I've seen it firsthand. It changed my life, and I also see how it changed lives around me. So it's hard for me to find the cause I believe more in than Endeavor.

So I'm working my way towards the bitcoin conversation. But let's start with what do you think Silicon Valley can most learn from entrepreneurs in Argentina? What's the kinds of problems they need to solve? What's the way they look at the world? What's the problem that they find that we are so lucky to have all this capital and have a whole bunch of tech and everything else where we don't understand how entrepreneurship works in other areas of the world.

You can think of Silicon Valley as being super central to getting the first billion people online. And those first billion people who were the first billion people to get online all over the world, they look a lot like people from Palo Alto. Even if they're not in Palo Alto, even if they're in Bangalore, even if they're in Istanbul, even if they're in Paris, what I mean by that, those are the billion, more or less, best to do, not only financially, but those billion people, for the most part, were educated. They may have a car, they may have a bank account. They have a lot of things in common. So I think it felt somewhat natural for Silicon Valley to bring them online because there were people like them, they spoke the same language, even if they didn't speak the same language in terms of, well, what they aspire to educate how they look at the world, et cetera. That changed in the second billion people who went. Some of them look a little bit like that. Most of them begin to look very different. And right now, we're in a completely extraterrestrial territory. The people who are coming online now from the 2 billion onwards, have nothing to do with the people around Silicon Valley. Meaning that they, for the most part, may not have an education, may not have a bank account, may not have a car, may not just have a very different view of the world than we have. Most of those first billion people had a computer. Most people now who are getting online now do not have a computer, may never have a computer. I think that because of that, I think this is a speculation that at some point we're going to see the first big Instagram, WhatsApp, Airbnb, Uber come out of the emerging world. It would make sense that some entrepreneurs in the emerging world understand that public and those needs better than Silicon Valley. So far, I am wrong. So far this hasn't happened. Even WhatsApp, which is very much an emerging market dominant player, was started in Silicon Valley. But I do expect that at some point to change, because there are some advantages in Silicon Valley around access to capital, access to networks and lessons, and understanding what's working, what's not working really quickly. But at some point, those are a smaller part of the success recipe, and understanding the customer needs and the economy and the environment is more important. I think it's only a matter of time before we start. Argentina has a remarkable number of entrepreneurs, much bigger than it should for the size of the economy, much bigger than it should for how volatile an economy is. And people who are very resourceful have a stock of very good, very educated people, and the flow is unfortunately diminishing. But it used to have very good education, and that shows in the quality of the entrepreneurs, some of them already successful and well known, like Mercado Libre and Globent and Despegar and many others, and even more impressive, the ones that are not yet known. You know, if we spend the day in Buenos Aires looking at startups, you're blown away that all of that is going on there. And I think that that's inspiring. And I hope one day we'll see one of those companies be the next. I think it's only a matter of time.

Yeah, I agree. I mean, the entrepreneurial fervor down here kind of shows the degree of willingness to be experimental, to take risks, to work hard, to invent and innovate it's all super important. What would be the guidepost that you would give entrepreneurs here in Argentina to say, here's how to think global?

I don't know the answer to this dilemma, but something that I tend to see that plays against entrepreneurs all over the emerging world, particularly in Argentina, is that because access to capital, it's harder or perceived to be harder, they rely on providing services on the side to pay for the expenses. Sooner or later that ends up being becoming the main business. But it's very hard to keep a service business with a product business. And usually if you don't have the capital to feed the product business, the service business takes over and wins. So one advice that I generally have is to be conscious of this dilemma and to try to feed the product beast and to try to starve the service beast as much as you can. And I know that I'm asking for something very hard to do. People often say, oh, that one is easy for you to say because you have the money or the capital. And I know what I'm saying and I know it's a lot to ask, but if you have a global ambition, I think you have to start there. And then I think that today there's a lot of traffic in this startup world between a hub like Buenos Aires and Silicon Valley and New York and maybe London. But the traffic across emerging markets is not so common. Where I think there may be some gems. Right. Something that you think you're very knowledgeable about. The Buenos Aires market, there is, I think, a lot of value in being also knowledgeable about how that is similar to the Istanbul market or the Jakarta market or the Moscow market. And there are not so many people who understand there are more commonalities than we see and they're not being established as well as it seems. I think that there's also some value in being able to leverage capital without having to move. If you can develop the track record, the trust, whatever is needed for you to get the capital from wherever it is. Sometimes it may be Silicon Valley, sometimes it may be London, sometimes it may be New York. But without having to be there, I think that that's increasingly possible and it will become a structural advantage. I would imagine some of these teams who win in emerging markets to be really local in how they execute, but really global in how they access capital and other know how.

Yep. And this is obviously one of the things that Endeavor seeks to provide through its global network. And one of the reasons why you and I and many other people go and help them with this, because this is, you know, how does the world get transformed globally through entrepreneurship? Creating new products over services, you know, creating new jobs. That's a key part of this.

I think Endeavor is a great tool to be in that position right where you can raise capital without having to go to another country or access best practices or best talent without having. It's a little bit of a seal of approval. I believe that in our world of entrepreneurship and startups, the endeavor seal of approval is more important than an Ivy League at Harvard, mit, a Stanford seal of approval, a little bit like Y Combinator is in Silicon Valley. I think outside of the US Endeavor is that seal of approval that it's harder to get than an MIT seal of approval. And it goes a long way to help us bridge that gap between emerging markets and what we see in best practices in Silicon Valley and elsewhere.

Totally agree. So now let's shift to Bitcoin. Tell me a little bit about your first purchase of Bitcoin and what the circumstances were.

I have a group of childhood friends with whom we drive a bus from Buenos Aires. Public transportation around the world, a week, a year. Instagram, elbondi60. We have a lot of fun. Just the guys get together and drink, mate and make many, many miles. We had to send some money for fixing some things in the bus. And it was 2011 and Argentina has shut down Western Union, PayPal, everything. You could send money, but to the central bank. And the central bank would held it for a while, asked for a lot of paper, and then would send it to whoever you said, but at the official rate, it was cumbersome, expensive. I was trying to ask if my sister could give my friends the money and then I could pay her somehow. One of my friends said, have you looked into Bitcoin? And I was very skeptical, partly because this friend of mine doesn't care much for technology, doesn't care much for financial products. He grows plants, how you say? He sells flowers and decorative plants and trees. So I said, I'm supposed to be a tech guy. I'm supposed to be a finance guy. And I had not heard about these things. What is that? He says, well, I read it's a new currency that you can send money anywhere without third parties, without anyone. I was super skeptical and cynical. I found on Craigslist an older man who was willing to sell me $2,000 worth of Bitcoin told me to meet at a Cafe Paris Baguette in Palo Alto. We met a guy, looked like Gandalf, very kind. And I gave him $2,000 in cash. He made me download some app and read some QR code, and he sent me supposedly $2,000 worth of Bitcoin. I walked back to the office convinced I got scammed trying to figure out what this thing is. And then I sent my friend 200. That was my share of what I had to send. And I kept working and doing some things and meetings, and in between, playing around with this bitcoin thing, reading about it, by the end of the day, my friend said, hey, wences, I got the bitcoin. I sold them for pesos. We're good. I'm like, what did just happen? I went in a rabbit hole, lasted six months where I was first super cynical, and it took me six months. I think it played against me that I know a little bit about finance or tech. If I had not known, I may have understood it more quickly. But in six months, I became. I said, I want to dedicate the rest of my career to help this succeed. Because I think a world in which bitcoin succeeds for billions of people is more important than one in which the Internet succeeds.

Or at least as important.

Yes.

How do you think your background as an Argentinian entrepreneur helped you understand and see the potential of bitcoin so much earlier than anyone else? Because I refer to you as bitcoin patient zero for Silicon Valley. But it was already going in other places, but you got it much earlier than anyone else.

I think that the experience that we talked about before in Argentina helped me a lot. I have to say I feel incredibly lucky to have been around at the emergence of the Internet. And I think most people don't have something like that happen to them in their lifetime. And I had that happen to me in my lifetime. And I think I got to see that again with bitcoin. That's incredibly lucky. I never imagined lots of things that happened in my life, but in this case, I would have never imagined. I wouldn't even think that it was possible that my love for technology and product would have anything to do or marry at some point with my passion for macroeconomics and in such a robust way that really backs my ideas of how the world should be better. Yes. I think that having grown in Argentina helped me understand bitcoin a lot better when I first saw it. Because if you live in the US the dollar has worked really well for you, has worked for your parents, has worked for your grandparents. And it's very easy to get a credit card and a checking account. It's very easy to make A payment with a credit card or with PayPal or with Venmo, etc. So you don't really see a problem there. And in general, Americans have this very positive view about they assume that the government will always be there and the government will always do the right thing. So you have to have grown up in a different country to say, look, the government may not be there, may not always do the right thing, and. And that currency may not always be there and may not always do the right thing. So it's always worrying to say, okay, but what do we do if that's not there? What's the alternative? In Argentina, people defended themselves if they could, buying dollars, physical dollars. What would you do if all of a sudden you couldn't even trust the dollar? And I think that helped me a lot in understanding Bitcoin when I saw it.

The final two questions for this interview. The first one is, does that help you pitch your Argentinian friends? What's the difference in pitching Bitcoin to your Argentinian friends and to your Silicon Valley friends? What is it like in the first case? What is it like in the second? And what do you mean?

It's a very different pitch. And pitching Argentines is very, very easy. In fact, whenever I pitch it to Argentines, I've learned to tell them to moderate their exposure, not go all in, because it's not like the dollar yet. It's very experimental, it's very volatile, have some, but have a moderate amount that you can afford to lose because it's experimental and it's super volatile, which is not what you have to worry about. In the US it's like in the US you have to worry, make sure you have a little bit. But in Argentina, people understand it because of that insecurity of what they are forced to hold and the difficulty of getting dollars, et cetera. Whereas in the US it's a more abstract exercise of first showing that this thing, the dollar that you never question the. You assume that it was always there. It's like at some point it wasn't there. Why is it there and it may not be there in the future? And what drawbacks does it have today? And how could the world be better if you could improve upon it? It's a much more abstract exercise and takes longer for people to get their arms around it because it's such an embedded concept that we don't even question. And it's been working well for most people.

And how does that pitch change when you're talking to Silicon Valley people?

I always Think to myself that being the bitcoin guy, pitching bitcoin to Silicon Valley, it's probably. I don't know if there was someone who was the email guy, but it's just as boring. Meaning Silicon Valley has been waiting for a bitcoin use case for it to tip or catalyze. Warsaw has been waiting for payment adoption. And in both cases they largely missed it because they were looking for the wrong thing. They were looking that way and it came this other way and they missed it. And I think they will keep looking the wrong way and they will keep missing it. Which is for bitcoin to do. Well, it only needs to do copy paste the last 10 years. It's been around for the last 10 years. If it copy paste the next 10 years, it's success without any killer app, without any payment adoption, just copy paste the same kind of behavior of the last 10 years. And it's not unlike email. Imagine we have to report on email every month and say, so what's new with email when it says in 1992? Well, more people are using it, some people are using it outside of academia. The other day someone used it to say happy birthday. The other day someone proposed over it. It's like more and more people, more and more use cases, more and more engagement, more messages per user. Super boring, but effective and hard to dethrone. Same thing with bitcoin.

I totally agree. Well, I think the fire pit may be going now and so I think we actually have to head off for the traditional Malmon feast. And so it's awesome to be down here in Argentina with you.

Thank you for coming, Reed. It's a pleasure to have you down here.