Part 1 - Off the Beaten Path: Wall Street to Startup Investor - A Fireside Chat with Pankaj Jain, Founder of Invest Stream

Foreign. Hello everyone.

Welcome to investream. I'm Bunkaj and today we're doing a very special, special episode. We're turning the tables. This particular episode is going to be broken up into three parts. Part one is going to be talking about my early journey from Wall street to how I got to India. I hope you enjoy the episode. I am not going to be your host today. Instead, our host is going to be Ritesh Bansal, friend of mine from a long, long time ago. We have been through a couple of companies, a couple of startup adventures as well. And he's going to be interviewing me about my journey. So, Ritesh, welcome. Thank you for doing this.

Absolutely glad to be here. So 20 years ago, if someone had asked me, what would Panka Jain be doing in 20 years, what are you doing right now? Would be. Not even my last guess.

Probably not mine either. You know, definitely wasn't something I thought of as a career path or as something that I would be interested in or even knew that it was a career path or a just an option to do in life.

Right.

Like we didn't know about any of this stuff back then. And we also didn't have TechCrunch and Slack and WhatsApp or Twitter for all this information to flow around as easily as well. So it's, it's been a long and circuitous journey, for sure.

It's been a remarkable journey. I mean, coming from somewhat of a tech background, even back then from Carnegie Mellon, I knew of VCs. Right. But in a very sort of abstract sense, I dealt with a couple of them in couple of the early startups that are in the 90s. But you have had a remarkable journey from our days at long term capital to today. And for me, it's just a incredible story. So let's, you know, let's dig into it.

Absolutely.

And find, you know, what, what are the twists and turns that you took to get here? Right.

That's why we're here. Let's do it.

So let's start, let's start at the very beginning. You grew up in New York City.

So I was born on this day in this town. I was born in India, actually. All right, let's not go back that far. No. So, you know, yeah, I've lived in New York City my whole life except for a couple years when I moved to India and you know, grew up in the city, went to high school in Manhattan, went to college in Manhattan, worked in Manhattan after graduating college.

And you went to nyu Finance.

I went to nyu. I Did a double major in finance and information systems. Really know that, you know, engineering with computer engineering or software engineering was a career path at that time. You know, it was just. It was very foreign to, you know, definitely to my family. So was finance, for that matter. But, you know, it was just not something that we even knew. And like, even most of my friends growing up, other than a few folks in high school, most of them didn't really even have computers to work with. I mean, we had computers at school, but we didn't have any computer programming classes back then in school. So I went down the path of finance and eventually added a double major, information systems, partly because I was interning at Merrill lynch. And the stockbroker that I was interning for, it was an unpaid internship. And he wanted to build a database? Yeah, he wanted to build a database to, you know, send out, you know, a newsletter to his clients. You know, today you think about. It's like, it's no big deal, right? It'll take you 10 minutes to set something up on Mailchimp. Back then, it was. It was a chore. You know, you have to do a mail merge. And when he says newsletter, it wasn't a digital newsletter. These were actual letters that he was printing out and mailing to his clients. Right. So I asked, he's like, you know, do you know anybody who could, you know, build this for me? I asked him. I said, you know, are you. Are you paying to have this built? He said, yeah. I said, how much? He said, I'll pay five bucks an hour. I said, I'll do it. He said, you know how to program? I said, no, but I'll figure it out. And, you know, I walked out of work that day. There was a computer store a couple blocks away. I walked to the computer store, and this is when you actually bought software off the shelf. There was Microsoft Access 1.0 had just come out.

3 1/2 inch floppy disks.

3 1/2 inch floppy Disks. And it was this big box, like. I mean, it was probably like 2000 pages of manuals. And it wasn't just manuals, but it was. It taught you relational database programming. So that's how I learned how to program databases and how to build databases. So I started building it. I got really excited. I thought this was really cool. And so then I added Information Systems as a major.

And then after nyu, you went to JP Morgan.

I was at JP Morgan for a couple of years. Two years almost to the day. I was in the Global Technology and Operations division of JP Morgan, this is pre mergers. So this is the old white glove, J.P. morgan. And it was a very different organization than it is today, much smaller than it is today as well. And so one of my earlier roles was to focus on network chargeback systems. So, you know, which was bizarre to me. I didn't really understand what any of that meant. But it was a way for a cost center within the bank to look like a revenue center because you're charging other divisions and other groups in the bank to use the wide area network, which was weird, but this is something that they had to do at that time. And you know, it was interesting, but this is around the time that J.P. morgan kind of looked at who they were as an organization and said, look, our core is finance and financial services. Technology is not a core aspect of our business. And they decided to outsource all of this. And this is something that a lot of companies were examining in the mid-90s. They created this Pinnacle alliance, which was a combination of IBM, Bell Atlantic, or maybe it wasn't IBM. I think it was Bell Atlantic, Accenture, or back then it was called Anderson Consulting. AT&T and two more organizations. There were five CSC and one more, I forget who. So there were five organizations that were going to take over all aspects of JP Morgan's technology. So that included project management, that included wide area networks, that included local area networks, included application development. So everything now had to be pushed out to these five different organizations instead of internal. And I was now going to continue doing the same job I was doing, but my whole team was now going to become employees of AT&T. So I said, no thanks, that's not what I signed up for. So I started looking for a job. And that's when I heard of LTCM and started going through the process of interviewing it long term. It was a long process, took quite a few months. And you know, I basically said, look, this is where I want to work. I don't want to even interview anywhere else. This is where I want to go. And part of it was because I had read Lyrus Poker when I was in high school.

We all had.

Yeah, yeah, well, yeah, well, most of us read it when we heard of ltcm, right? I read it. I read it in high school, you know, probably eight or nine years before interviewing at ltcm. And you know, that book had a huge role to play in my decision to not go into medicine or not, you know, go into other family type businesses, but instead go towards Wall Street. So it was that book and the movie Wall street, that kind of pushed me in that direction. And, you know, as a sophomore, junior in high school, my dream was to work at Solomon Brothers on the mortgage desk with John Merriweather. Now, fast forward eight, nine years and here we are in 1996, and I'm interviewing at LTCM, which was John Meriwether's firm, as you know very well, since we worked together there. And you know, so to me it was like a dream come true to have the opportunity to work with some of the best minds on the planet in finance. And pioneers of modern day finance, right? Everyone from the John Merriweather to Myron Scholz, they've all been pioneers of finance.

Just for our listeners, Long Term Capital at its peak was probably the most storied hedge fund in finance. And there was a cover of Business Week. I think I had it somewhere where they talked about. Actually, I have it right here. I'll share.

Share the screen.

Yeah, I don't know if JM would.

Approve, but go ahead.

Yeah, we don't work for Jim anymore. So here we are. So this is the COVID of Business Week. I think this is around 95 ish, 6 ish maybe. Right. And this is, I think, Merton. Right, Robert Merton. He, he won the Nobel Prize in 97, I think, in economics. And we had two of these Nobel Prize winners in a form of 180 people. Anyway, so that was Long Term Capital. We all paid a very high premium to work there. I remember taking a 50% pay cut from my next offer to come work at Long Term Capital. And remember, I was coming out of school, so I was a broke undergraduate with a lot of loans and I think a 50% pay cut. Because working at Long Term Capital was like being the waterboy on the Chicago Bulls at the peak of Michael Jordan. It's like, why would you not do this?

Yeah, yeah, absolutely.

Right. So you were ldcm, you were there for two years. You were a technology associate.

I was at JP Morgan for two years. I was at LTCM for about three and a quarter years.

Three and a quarter years. Okay. And we overlap there. That's why we know each other.

Yep. 96 to end of 99. Okay, well, we both left at the end of 99.

Right. And then you went to probably one of the most famous success stories in startup startup in New York City. Startups. New York City fintech startups back in the late 90s, which almost nobody knows about, Globeop. So tell us a little bit about Globeop, how you got there and what the journey there.

So they weren't called fintech startups at that time.

There was no fintech.

Yeah, I remember in one of the earliest meetings that we had, Globe Op was being labeled as an application service provider or asp. That was the common term that people used at that time. And the idea was let's spin out of. Well, not even spin out. We're all going to leave LTCM and let's recreate the infrastructure that LTCM had. We all had expertise in technology and operations, so let's rebuild a new technology and operations platform for multiple hedge funds to use, not just ltcn. And LTCM was not a client of Globe Op, but we started Globeop at the end of 99 and it was probably not the most optimal time to go start a financial outsourcing back office type of company. This is right in the middle of the dot com bubble. Like everyone is starting up a company and taking it public within weeks and there's just money all over the place. So hiring people was a big challenge. Right. Like almost everyone who started Globe up was a former LTCM employee in the beginning. So I think out of the first 15 people, probably two or three were not LTCM employees. And you know, we all left one by one and kind of joined LTCM and did this. We built the business from nothing. Our first customer was a spin out of a proprietary trading desk in Citibank in London. Part of the. They prepaid a million bucks. So that was our seed funding. Right. We didn't raise money out of the bank. We, you know, the founders put money in and we had a client prepay and our job was basically to get this client separated from the mothership and get them operational. So all of the technology that they needed, all the operations that they needed, this is what we did.

Right, so you were, you were one of the first employees.

Yeah.

And you had equity in the company?

Yep.

Right. Okay. So you were one of the, one of the founding employees? Basically, yeah, yeah.

I mean, I was one of the founding employees. I think, you know, unofficially I was probably number one. I wasn't on a payroll, there was no payroll set up at that time. But I was going to meetings in the city and figuring out what our technology stack is going to be, what our operations might look like. And slowly over time, I got added to the payroll. Took I think two or three months for me to get onto the payroll, but I think I was probably employee number eight, nine, something like that, had equity in the company. So I did not have options in the company. This is a really Important part of my philosophy and my perspective on founder dilution and rewarding employees, especially early employees. All of us who joined Globe Op in the beginning, whether, you know, you were very junior person or a very senior person, didn't matter. The founders had the equity. They created a pool of equity and they created different classes of stock. And essentially all of the employees were allowed to buy stock in the company at par value. So we didn't have stock options with condoms, explorations, the strikes, no, none of that. We had to purchase our equity and at par value. So I paid $50 for my equity or, you know, $55 for my equity. I had to fill out, I filled out what form it was, but I had to fill out a form and submit it to the IRS by a particular date. So now it was an investment that I had made in the company. So it would be taxed at long term capital gains rather than as income, whereas options are typically taxed as income. Right. And so, you know, we had a huge opportunity to put in a very small amount of money to invest in this company, have some ownership in the company. And as the company grew, we had a vested interest in wanting to see it succeed. And you know, all of us, whether we were founders or not, we approached everything that we did at the company as founders. We had our problems, we had our challenges amongst each other and politics and all that, just like any very fast growing organization might. But we still all had a very singular vision of what Globe Ops should be and what direction Globe Ops should take and what my role in allowing that to happen is going to be. Right. So that was an incredible journey to 99 to 2004 was, you know, a rocket ship. I mean, we built a real business. We went from having nothing, having one client who wasn't even in business, to having, I can't remember exactly, but when I left, I think there was about 170 different hedge funds that were on our platform. I don't remember the exact numbers, but I think there was somewhere around 30 billion of assets, 30 or $50 billion of assets that were flowing through our system at that time. Some of the really popular names in the hedge fund world were customers at some point in time of Globe Ops. It was an amazing ride, but it was also a very difficult ride. You were no longer sitting in the front office dictating to vendors what needed to be done. You were the vendor.

You were the vendor.

Yeah. And you were being.

You were actually the one they were now.

Yeah.

Giving marching orders to.

That's right. And if Something went wrong. You know, your neck was on the.

Line because there were big numbers involved.

That's right. Right. Especially when you're doing all the accounting, you're doing the operations. You know, risk management is run off of actual positions. So there's a whole domino effect of things that happen based on what we did as the books and records of these hedge funds. And, you know, it was a very stressful time. It was a very difficult time. I tried to quit multiple times partly because of my health. The stress had taken a significant toll on me. And, you know, my doctor said, look, everything that you're having to deal with is purely stress related. Decrease your stress and you'll be fine. You know, keep doing this and you're going to end up in a grave. And so I tried to quit a couple of times. I'm like, look, I, I just. My doctors tell me I'm going to end up dead. And you know the Tom Deegan, who you know very well also, who was.

One of the partners. Founding partners.

He was one of the founding partners and at that time he was COO of Globe OP and my direct boss. I went to him and said, look, Tom, I gotta go. He basically took my resignation letter, folded it up, stuck it underneath his keyboard and said, all right, you know, that's, it's fine, we'll talk later. So. Okay. And I don't, I don't remember. I think it was like I gave him a month's notice or two months notice or something like that. And you know, he came. By the way, this is not the first time that Tom was my boss. Tom was also my boss at LTCM Capital.

Yes.

Yeah. So we, we had a long relationship of working together. And so I went back to my desk, did whatever I did. And, you know, the weeks are counting down. You know, I'd see Tom would talk, but not about me leaving, not about transitioning my work or anything like that. Just, you know, just stuff. And, you know, time flies by. I'm like, tom, you know, we got a week left. Don't you want to transition stuff over to somebody? You know, some. He's like, listen, tell you what, why don't you go part time for the summer, come in two days a week and the other three days a week just be on call, right. If something goes on and we need your help, just be available that we can reach out to you and just call you. I was like, all right, you know, that's fine. And he's like, it'll give us time to like, transition stuff. Over to other people. I was like, okay, fine. Summer rolls through, and it's fine. You know, I go in two days a week, do my thing. September rolls around, I'm like, hey, Tom, summer's over. You know, who's taking over? We still don't know who's, you know, who. Who should I be transitioning stuff to? He's like, hey, listen, by the way, we have this other group that is needing some help and need somebody to take over. Would you mind taking over this group? I'm like, tom, I'm trying to decrease my stress, not add to it. I'm walking out the door. Instead, you want to add another team for me to handle. And it was a very problematic team that was being nobody else wanted to do it. So he was asking me, hey, you want to take. I was like, I don't even know anything about this. This was pure financial operations type of work, right? And data. So that was, you know, I was like, all right, fine, I'll do it. I'll try it out. And look, if my health continues to suffer, I got to go. He's like, okay, that's fine. And I took it on. And it was a lot of interesting things for me to learn very quickly, you know, because this wasn't a team that had a mission to succeed with. This was a team that was failing every single day. And, you know, I had to now find out, how do I fix this? And, you know, at that point, one of my 26, 27, something like that, I had no experience managing such large teams. I had teams before, but, you know, five, 10, 15 people now, I had teams across three continents that I had to manage, and it was like 50 people, and all of them have their own ways of doing things, and they're all fighting with each other and arguing. I was like, great, here goes my stress, right? But to me, it became a very important learning point. Not from the mechanics of what I was doing, but more about loyalty. And, you know, like, Tom and I had worked together at ltcm. We worked together at Globe op. It was a great working relationship. And, you know, he said to me, he's like, listen, if you leave now, you're going to leave a lot of money on the table, right? Your equity vests over a certain amount of time. You leave today, you're going to leave a lot of that equity on the table. Stick around for another year, you know, or two, something like that. I don't remember exactly how long it was, but another year or two, you'll vest all your equity you'll get other stock options that we're going to implement in the compensation plan. So you'll, you'll get more and more of this company. And you know, that was the loyalty that he was showing to me. Right. As somebody who worked for him saying, look, stay here, it's going to be good for you. Right. We'll work with you to figure out your health issues and solve that. But keep doing what you're doing, you know, solve these problems, help us, and you're gonna make a lot of money. Right. Not so many words, but that was kind of what was being communicated to me. And that's between ltcm. I mean, you remember the story at LTCM when, at the end where or at the end of August in 98 when Warren Buffett and Goldman had sent the offer over and JM and everyone called everyone out onto the trading floor and said, we're not accepting this offer. And this is why. And you know, all of you are going to get paid out through the end of the year immediately. Right. That was a show of loyalty that the partners showed to the employees. Right. And you know, so I kept getting these experiences that really kept showing me the value of loyalty, which is in sharp contrast to a lot of the things that I've seen and read in Silicon Valley. Right. Like hire fast and fire faster. That's completely the opposite. It's the opposite of what I experienced and lived through. Right. Not just with myself, but with others also. Like, I had never fired anybody until 2008. Right. And you know, I started my career in 92ish. I never fired anybody in my life. I worked with those people and said, hey, what, this may not be a job that's suitable for you. What could be, let's try to figure that out. Right. And like, let's move people around if we need to. That's what I learned. Right. Like loyalty to people and it goes both ways. So that was a really, really important aspect of the first couple of years of my career that has stuck with me today to today. Right. And that's what I try to do for people that I work with. And I like to see that same thing in return. Right. Like that loyalty is a two way street. It's not a one way street. And, and when it is a two way street, it can be very rewarding for both parties or multiple parties.

Yeah, yeah. So, you know, just to shore that point up, you know, my experience working with Tom and I recently worked with him on a small project he wanted some help on.

Yeah.

And it's now been close to 25 years.

Right.

And one thing I learned from Tom was invest in people. Never, ever let them fail. And whenever I have personally applied that, it has paid incredibly rich dividends. I mean, people just show up and they will fight through anything to not let you down if you invest in them.

Absolutely.

And that is something that Tom taught me, how to be a good coach. Because Tom never bosses anybody around. He just tells them, hey, you know, you got to figure this out and you got to solve this. And just. He just leaves.

Yeah.

And he does take you out in the evenings and, you know, just feed you a lot of booze and just hang out with you.

Yeah.

And take care of everything. So that is a, I think, a very key lesson. And even today, he reminds me, hey, if you had taken my offer, come to Globe Op, you would have walked away with, you know, several million dollars, some number he throws out. And I'm like, can we not talk about that, please? It's been 25 years. Remind me every single time. So that's Tom, and I think it's a very, very valuable lesson. So you were at Globe Op, and I think I have this. They were bought out in. Let me see. Let me see if I can share this.

Well, Globe Op went public first in 2007.

They went public in 2007. Okay.

They went public in 2007. And I had left. I had left at the end of 2004. They went public in 2007, and then in 2010, they were bought by SSNC. So it's called SSNC Globe Op today.

Correct. That was almost a billion dollars. Right. Back then.

Yes. So I forget the exact numbers, but Globe Op, I think, went public in 2007 on the London Stock Exchange at somewhere around a 5,500 million dollars pound valuation, if I remember correctly. And then they were bought in 2010 for a little over a billion dollars.

Right here. Yeah. And they closed their acquisition. So it's really interesting that that was the first ASP SaaS company. Really? Yeah. Infrastructure operations as a service.

Yeah.

And there has been similar firms in the financial space, but not a whole lot. I mean, finance is really done very similar to the way it was done 20 years ago.

Absolutely. But I think what you're on the enterprise side, and specifically Wall Street. Yes, I think you're right. But, you know, there have been a lot of Globe Op clones that have popped up over the years. Citadel launched one around 2004. 2005. No, it was a little bit later than that. I think it was 2007, around that time when Citadel launched globe op clone. There's a couple of others out in Jersey. I think some of them have been acquired. So there has been that type of, you know, back office, middle office application software stuff happening on the Wall street side, but it doesn't get a lot of attention. It doesn't necessarily get a lot of venture funding. And it's kind of a black box. And it's very separate from the whole Silicon Valley ethos or the whole startup ethos. Right. But I think we do see on the consumer side, like the sofi's of the world. Right. They are similar in nature in the sense that they're taking complex financial things that have to happen for an organization and allowing them to push that out to an outsider and say, okay, you focus on this and provide it as a application and as a service to our employees. Right. So I think we're seeing more and more of that on the consumer side. B2B2C is what I would call it.

B2B2C. Yeah, yeah. But B2B2B finance is about 5% of the U.S. economy. So some number of very large dollars that are mostly being done in legacy way. So let's continue. So you left globe up 04 and then somehow you ended up in New Delhi. What happened there?

Yeah, I left Globe Op and just landed in Delhi. No, I left Globe up at the end of 04 again. Tom and I started working together in early 2005 in tech startup. That was an interesting experience. It was a great learning experience, not a great financial outcome. But after that I kind of decided, well, do I go back to Wall street and just get another job or do I look at doing something else? And podcasts today are very popular and everybody's talking about them, listening to them. Nobody listened to podcasts back in 2004, 2005. I got hooked on two podcasts in particular. One was Venture Voice, which was Greg Gallant here in New York. And the other one was podtech.net which was based out of the Bay Area. I think was Ryan something, I can't remember his last name, that started these. And these were all about startups, right? It was all about building something. And I got really excited about that and I started working on an idea that I had. And a lot of it, funny, it revolved around podcasts. So it started with that and kept evolving, kept evolving over time. And I tried to get some developers to kind of start building out. This essentially was a reverse auction platform for, for transcription and search engines. Couldn't read audio at that time. They still can't. But transcription is much easier today than it was automated transcription, whereas back then it wasn't. And the idea was to build a auction platform where people can just say, hey, I have this length of audio, here's the topic, and I'm willing to pay X number of dollars per word or something like that, or per minute of audio to have it transcribed. And at that time, I found that there was a whole bunch of medical and legal transcriptionists that suddenly didn't have as much work as they used to. And there was. They were basically sitting on the sidelines in places like the Philippines and India. So I said, well, here, you know, here's a marketplace that can be created. And that was the idea. And it kept evolving. And when I went to India to kind of meet some developers and see, you know, can we put a team together and start really ramping up development of this, I met a bunch of other folks and I started seeing another problem, which was, you know, there were everybody in the middle class was looking for people to help them with work. Right. Whether it was a nanny, you were.

Now living in New York or you moved to Delaware.

I was living here, I was living in New York, but I was visiting India in late 2006. And, you know, that kind of introduced me to some problems that existed in India. And this was like, you know, there was one side of the equation which was people that needed people to work for them.

Household help, drivers, unskilled labor.

Yeah. And then the other side was just these groups of people that were looking for jobs.

But this is 0607. So they don't really have broadband.

No, there is no broadband.

They don't have smartphones, they don't have 3G, they don't have 2G.

So, yes, 100% correct.

They don't have phones like they have cell phones, but they're very expensive still. Because this is after the first Reliance, but before jio.

Yes. So cell phones are expensive. Service is still cheapest in the world, and almost no one had even GPRS on their phones. Right, right. They had no data. I was, you know, one of the few people that had data when I was there, even on vacation on this little expedition trip, where to decide, like, hey, how do I build up a team over here? And people like, you want data on your phone? What are you going to do with data? There's email, there's stuff that I.

This is really, really early to be doing anything in India.

Yeah, yeah. And, yeah, I just Got really excited about the problem of, like, hey, how do we help the underprivileged get better quality jobs, better pay, and over time, how do we help them improve their skills and get the best job for the skills that they have? Right? So that, that became a problem that I really wanted to solve. Like, it, it just resonated with me and I was like, this is, this is like, it could have massive impact.

But that, but that problem is still not solved here.

It's not solved anywhere.

It's not anywhere. Right. And with all the infrastructure. So doing this back in 6, 7 in India was, you know, it was crazy. Yeah. I was trying to build a, you know, bridge greenhouse on Mars today.

Yeah, yeah, yeah. You know, in hindsight, it was the dumbest thing to do, but, you know, it was. I think, you know, the, the, the thing that resonated with me when I was there was that the plight of the poor there is so much worse.

Right.

And that, that affected me in a way where I was like, look, you know, can we help? Can we figure out ways to improve. Improve their quality of life even marginally? If we can, it can have a massive impact for so many people. Right. And just the sheer numbers was another reason why it was something that I started getting very passionate about. So, you know, I convinced my wife to quit her job and we moved to India in early 2007 to do this. And, you know, fast forward about six, nine months, we still couldn't get a business up and running. You know, the sheer bureaucracy of everything, the, the number of scams that people run. You know, we were learning the hard way that this is not going to be this point.

You had never lived in India, but you had visited occasionally?

Yeah, yeah, I'd visit every couple of years. You know, see family and, and I didn't know anybody in India except for extended relatives. Right.

So we're all not in the tech space.

No, no, nobody's in the tech space. And, you know, so it was, it was, it was really challenging. You know, honestly, there wasn't a single day that went by where I was like, you know, what, what are we doing here? Why don't we just go back and, you know, my wife was really great about it. She's like, look, give it some time. It takes time. You know, you wanted to do this, just keep doing it. And, you know, she was extremely supportive. She, through various networks, started doing some work over there and eventually wound up at Mint, which is a business newspaper over there. And they had plans to launch a television station so she started working with them on that whole thing that took a whole bunch of twists and turns, but essentially she was working. So it was like, okay, great. I can focus on what I need to do. And her career was going great. It was like, whoa, rocket ship. And it was on the right path.