The Pomp Podcast - #430: Nikhil Basu Trivedi on The Mind of a Venture Capitalist

Episode Date: November 16, 2020

Nikhil Basu Trivedi is a venture capitalist who has spent the last decade investing in various successful startups, including Canva, Imperfect Foods, Color, and ClassDojo.  In this conversation, we discuss democratizing access as a business model, consumerization of healthcare, consumer subscriptions, decreasing division between consumers and enterprises, and Bitcoin. ======================= Choice is a new self-directed IRA product that I'm really excited about. If you are listening to this, you are likely part of the 7.1 million bitcoin owners who have retirement accounts with dollars in them, but not bitcoin. I was in that situation too. Now you can actually buy real Bitcoin in your retirement account. I'm talking about owning your private keys and using tax-advantaged dollars to do it too. Absolute game changer. https://www.retirewithchoice.com/pomp ======================= Pomp writes a daily letter to over 85,000 investors about business, technology, and finance. He breaks down complex topics into easy to understand language, while sharing opinions on various aspects of each industry. You can subscribe at https://www.pompletter.com

What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to The Pomp Podcast, simply the best podcast out there. Let's kick this thing off. Nikiopa Suh-Trivedi is a venture capitalist who has spent the last decade investing in various successful startups, including Canva, Imperfect Foods, Color, and Class Dojo. In this conversation, we discuss democratizing access as a business model, the consumerization of healthcare, consumer subscriptions, and decreasing the division between consumers and enterprises, and also Bitcoin. I really enjoyed this conversation with Nikhil, and I hope you do as well. Before we get into this episode, though,

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retirement account in a while, but if you have a 60-40 global portfolio with a zero interest rate environment, it might not be doing so hot. So go check it out and consider putting Bitcoin in that retirement account with a choice account. RetireWithChoice.com slash Pomp. Lastly, don't forget that I write a daily letter to over 85,000 investors about business technology and finance. I break down complex topics into easy to understand language while sharing my personal opinion on various aspects of each industry. You can subscribe at pompletter.com. Again, pompletter.com. All right, let's get into this episode with Nikhil. I hope you guys enjoyed this one. Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his

guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only. All right, guys. Bang, bang. I've got Nikhil here. I'm super excited about this. Thank you so much for joining us. Thanks so much for having me, man. Absolutely. Let's just jump right into your background. I think that you've got kind of a really interesting story. Kind of help us understand where you grew up, what you did,

school and then before you became a venture capitalist? For sure. So I grew up in England. My parents immigrated there from India. And so I was born in the UK, lived there until I was 13 before we moved to the Bay Area. And so I went from Reading in England to the heart of Silicon Valley. And that totally changed my life. You know, I got to learn about entrepreneurship and everything happening here in technology when I was in high school. And that led me to start working on startup ideas basically from day one in college. So I went to Princeton, revived the entrepreneurship club on campus there, worked on a number of different startup ideas. One of them actually turned into a real company

called Artsy, which is a marketplace for original art today. And then the light bulb went off for me that at some point, I'd love to be on the other side of the table to try investing. I had the chance to start out as an intern at Insight Venture Partners in New York, joined there full time, and then just kept going. And, and, you know, ended up joining Shasta Ventures back in 2012, spent almost eight years there. And so I've spent basically the whole last decade investing. Yeah. What was the desire to invest even if you'd already started a couple of companies? I think the chance to meet with some of the most talented people every day, entrepreneurs, was the thing that got me most excited to try my hand at investing. I just felt like, wow, you know, that chance to spot the next Google, the next Tesla, the next, you know, huge company and get a front row seat to being part of that journey as an investor was the sort of spark that attracted me the most.

And frankly, it's still the thing that I get most excited about every day. I just love getting to spend time with entrepreneurs. And I think it's very hard if you don't love that to love venture capital investing, because there's a lot of great ways to make money, and frankly, easier ways to make money than early stage investing. But the chance to meet with these incredibly talented people, to see them in the nascent stages of building their company, and then to get the chance to be a part of a few of their journeys as an investor is just an amazing privilege.

Absolutely. And you recently talked a lot about kind of this idea of a solo capitalist. It's interesting because you came from more of a traditional venture investing kind of structure and organization. What was the fascination or kind of the impetus for being intrigued by the solo capitalist kind of structure? Yeah. So back in March, I knew that I was going to end up leaving Shasta later this year. And so I started to write and I wrote up like a seven page memo about the current status of the venture capital industry and where I thought it was going to go. And it was really for myself to think through where do I want to play in this ecosystem moving forward. And one of the sections of that piece was about the rise of solo capitalists. And I sort of tried to define those people very specifically, which are folks who are raising funds that are greater than $50 million.

They have the ability to lead rounds that are $5 million and above, and they're playing at a higher level with higher dollars than the super angel investors of a decade ago. And there's a bunch of these folks who have cropped up and are competing on leading seed rounds, leading series A rounds, maybe even leading series B and C rounds against traditional firms. And so I started writing about them for myself and started talking to a number of other people in the ecosystem about them earlier this year. And then that's what led me to finally publish this piece in July, where I think I was the first one to use this term solo capitalist and define it. Um, and, uh, and again, it was, it was a selfish motivation for me to figure out where do I want to play in this ecosystem, but to also, uh, expose it for both founders and other investors as, um, a new class of, of investor that's, that's, that's rising up in the ecosystem. Um, so that was, that was the impetus. Absolutely. And, and maybe talk a little bit more about kind of where you see those specific types of investors fitting into the ecosystem? So you kind of drew this like big

industry map and then identified solo capitalists as one of many different types of roles. But how did you kind of see that evolving over time? Yeah, I mean, so number one, I think we're going to see more and more individual investors who attract founders and more and more founders who get excited to work with individual investors instead of traditional firms. And the reason I feel that way is if you look at the traditional firm world anyway today, you have certain individuals, usually it's actually like one or two individuals at any given firm who are the real draw for founders to that firm. And so the individualization of venture capital has been happening for a long time. And I think the solo capitalist movement is the sort of purest

manifestation of that trend. And so where I see them fitting is these people like Elad Gil, Ray Tonsing, Lockheed Groom, Josh Buckley, Meenal Hassan, Addy Lerner, Nico Wittenborn. There's several of them. And actually, at some point, I should publish a follow-up post that tries to name all of them or have like an ongoing list of a bunch of them. But I think we'll see more people like this, number one, in the ecosystem. We'll see more of them leading rounds instead of the traditional firms leading a seed round or a series A round in particular. And then the big question is how long can these individual investors sort of practice their craft before they end up turning into firms themselves with more people around

them? And I think that's a big question because it is hard to scale as a solo capitalist. If one day you're handling 50, 60 portfolio companies, you're on the boards of 30 of them, that's a challenging place to be. And our business notoriously doesn't scale anyway. And so I think that's kind of a big, um, unknown question. Yeah. I think that the whole idea of you're basically unbundling a venture capital firm with the solo capitalists. And then at some point it has it in everything, it just gets bundled back together again. Right. Yeah. I think, I think that's, that's potentially likely. Uh, I'm sure we're going to see, um, a handful of them join together as well and, and raise funds together, which will be very interesting too.

Uh, I think the final point that's, that's noteworthy and important to make is the limited partner ecosystem, the LPs that invest in venture funds, these are university endowments, family offices, funder funds, pension funds, they have increasingly become comfortable with the idea of a sole GP. And the fact that they are stepping up and committing to these funds is a huge reason for why they can exist in the ecosystem today. And so I just thought it's important for folks to understand that aspect as well. Absolutely. I want to kind of go through a couple of companies that you've invested in really with the goal of trying to unpack kind of the investment process or how you develop an investment thesis. The first one I figured that

we would start with is ClassDojo. Maybe tell us a little bit about what this company does, how you came across them, and then what ultimately got you excited about investing. Yeah, ClassDojo has a special place in my heart because it was the first company that I got to work on as an investment at Shasta. And so we ended up leading the Series A round back in March of 2013. And back then, ClassDojo was a behavioral management product for teachers to be able to use in the classroom. And basically, ClassDojo helped teachers manage behavior and make their classrooms happier and more productive. What ClassDojo is today, seven years later, is a communication platform for teachers, parents, and students, and also a place for parents to

uh to have more content and um and more engagement with their kids beyond school uh and that's actually the way that the business monetizes is that we uh we have a subscription offering for parents um and uh and we can upsell that to any parents on the platform we are free to teachers and and always will be um and so back in 2013 what got us excited about class dojo was it was organically growing to um teachers around the country and around the world and um you know traditional companies in education technology had been selling into districts and selling into school systems but what class dojo was doing was actually giving away a product for free to teachers and thereby organically spreading and so the company number one had a whole bunch of

early signs of product market fit when we invested. Number two, we felt that there was this chance for them to unlock an amazing business model with parents down the road because they had heavy engagement and retention of parents already on the product. But they weren't yet offering parents anything more than the ability to see what teachers are saying about their kids. And so that was kind of the second part of the thesis is, hey, this is a chance to actually build a consumer education technology company. And then the third part of the thesis was mission-driven founders who were working on their life's work. And I think the thing that got us over the edge about Class Dojo was the belief that Sam and Liam, the founders, were people who would stick to

building this for the next decade or more, who are incredibly kind of driven by the mission of making kids and teachers and classrooms happier, more productive. And I would say that's also very much played out in the last seven years since we invested. So that's a little bit about kind of three pillars of the investment thesis, what got us excited about it. And, you know, seven years later, really proud of this investment. You know, the company is now tens of millions in revenue with parents who subscribe. And so we've unlocked that business model that we predicted. And the product is used by tens of millions of parents, students, and teachers around the world. It's used by most of them for free.

And I think for the founders, this is still a decades-long journey ahead. I wouldn't be surprised if it ends up being the last job for both of them. Absolutely. How do you test for or try to unpack that commitment, that mission-driven element of a founder? There's a lot of investors who will talk about the easiest way for a company to fail is for the founders basically to give up. So how do you kind of unpack that during diligence and as you get to know somebody? Yeah, I mean, I think this is the most, in some ways, it's the hardest part of early stage investing because so much of the decision ends up being about the people and about these founders' ability to sort of get through wall after wall to make their vision a reality, to grit through everything, to persevere, their ability to prioritize well, their ability to hire well. And so you can try to test for some of this stuff at the early stage, but oftentimes you're making a sort of gut judgment on the founders. And it's probably the most subjective part of early stage investing. I would say with ClassDojo in particular, you know, we spent a bunch of time with Sam and Liam, the founders. I remember going on a walk with Sam, the CEO, as we were actually right after we had decided

to give them a term sheet as we were trying to win them over and coming away from that hour long walk feeling, wow, this is someone that I'd want to work for. And this is someone who you can tell just how authentic the desire to build this is to him. Again, it's really hard to quantify that, but I think once you have met with a bunch of founders and once you've had some recognition of what it takes to commit and to stick to something, you can start to see patterns in those extraordinary founders who do end up figuring it out. I think we had elements of that that we saw in the Class Dojo founders at the early stage. Yeah, that's awesome. Another company is Canva, which many people may not know, but this is an absolute monster of a

business. Talk a little bit about that one and kind of what the thesis was and how you guys got comfortable making the investment. Yeah. I mean, Canva is an absolutely amazing company, which has a software platform that enables anyone to design anything. And so this is a company that today is hundreds of millions in ARR, a profitable business growing really quickly. I like to say to people that I hope one day Canva becomes a public company. And I think it'll be the closest to Zoom of any financial profile S1 that I've seen in recent memory, if that public offering happens for Canva one day, because it's just an extraordinary business on sort of every financial metric. But when we invested in the company, it was 2014, so a year after Class Dojo.

And the company had launched about six months prior to our investment. And like Class Dojo, the first pillar of the thesis was a whole bunch of early signs of product market fit. So the Canva product in month six, month seven had hundreds of thousands of monthly active users. Those users were creating over a million designs a month. You could see in the early cohort retention that 30, 40, 50% of every cohort was still using the product and sticking around. And then there was this subset of tens of thousands of users who had already created tens of designs each on Canva and were basically using it for everything. Everything from you know social media infographics to slide decks to um to uh editing photos um to flyers

and and so and the final thing was the product was growing 30 40 50 organically every month without the company doing anything to drive that growth and so you could see on a whole bunch of dimensions growth engagement retention um that canva was special in like month six month seven. It wasn't yet monetizing. And so there was this question around, Hey, how's it going to make money? Actually similar question. Now that I think about it to, to, to class dojo, but we believe that there were enough dollars going off to design that one day there would be a premium subscription that people would pay for to use Canva. And so, you know, I would say we, we got over that, that hump that, that there wasn't any revenue yet. And then again, the final thing that was

just amazing about Canva was these two founders, Melanie Perkins and Cliff Obrecht, who were out in Sydney, Australia, building this thing. Canva was actually the second business that they'd been working on. They'd worked on a yearbook business beforehand and found it was actually difficult to design that yearbook and they needed great software to make the design. And so Canva was born out of a very authentic pain point for Melanie, Cliff and that early team. And you could just tell their insane passion for what they were working on. And that passion was translated into a lot of different aspects of that product and a lot of reasons for why those early customers loved the product. But, you know, it's just been a remarkable journey since then to see what they've

done in the last six years. And it's definitely exceeded, you know, our wildest expectations. Absolutely. And when you look at a company like Canva, obviously, as you start to get data, you can really begin to understand, you know, is this working or is this not to some degree? How do you get comfortable investing before there's that data or before you see that product? Like walk us through maybe kind of your process or some of the things you keep in mind when you are pre-product, pre-data, pre-revenue? Such a great question. I mean, I think, again, this is really hard. For every investor who invested in one of these generational companies pre-product and certainly pre-early signs of product market fit, I always tip my hat to those

people because I think that's way harder than investing once there are some early signs of product market fit. And to be honest with you, most of the investments that I've made in my venture career have been once there are some early signs of product market fit. The handful of places where I've broken that rule have been where I've just felt so compelled by a founder or so compelled by a market opportunity or so compelled by maybe an early mock-up of the product that I was able to get there conviction-wise without seeing any early data. And then a few of my regrets too in investing have been that way. So for instance, when I looked at Robinhood at the Series A, there wasn't early data that showed a whole bunch of signs of product market fit.

there was a wait list of hundreds of thousands of users who wanted the product, but the product was only in the hands of like 100 people in the beta. The thing that I was super excited about was seeing that product in action on the test flight and seeing how powerful stock trading was on mobile and believing that, wow, this could change the whole industry. And that's, of course, what Bezier and Vlad, the Robin Hood founders believed. But I think those are really hard bets in venture capital to make where something isn't working yet. And I think you just have to rely on instinct around either the founders, the product, or the market. But it's instinct versus data. The obvious answer to how you compensate for essentially taking more risk would be you'd

want to pay a different price for what you're investing in. Are there other things that you take into consideration when you are taking more risk other than just price? Yeah, I mean, I think it's price, but I think you also are thinking, I certainly think about how big of a swing is this? Because I think if you are taking, you know, more of a risk, then you want to believe there's just much more of a reward. And some of that is related to the entry price, but some of that's of course related to, you know, the ultimate exit prize, prize, not price. Maybe I'll use that phrase one day. You know, so again, this is something that's very hard to quantify, especially because some markets are unintuitive and hard to predict, you know, how big they can become.

But, you know, where I would take pre-product market fit risk would be on someone working on a disruptive technology that maybe no one else is working on or no one else could be working on. You know, I'd like to think if I saw something like SpaceX or Tesla at the very early stage, Like that's the type of thing that's worth doing pre any signs of product market fit, because you believe that, holy shit, if they pull this off, it could be massive. And I would get less excited about an incremental idea pre product market fit, if that makes sense. Absolutely. Another business that's a little bit different than the first two we talked about, you've invested in is called Color. It's in a whole different industry. Maybe talk to us a little bit about that business and kind of what was so intriguing about it.

Yeah. So Color Genomics is a genomic testing business, which started off with a cheap and more convenient way for anyone to get a cancer genomic screening test. And so there's a number of different genomic markers that we now know have a higher level of likelihood to ultimately lead to cancer than sort of if you don't have those those markers and the original color test, uh, was a fast, uh, accurate and cheap way to get that, um, get that screening. Uh, the company has evolved a bunch since our original investment, which was, I believe in 2017. Um, uh, today, for instance, uh, they've done an incredible job in the last, uh, eight months spinning up, uh, a testing business for COVID-19. And, um, you know,

if you're in a place like the Bay Area, you know, colors testing sites are all over the place and are one of the fastest and cheapest ways to get a COVID-19 test, which has been terrific for a whole number of reasons in the last eight months. You know, this was a company that I think the primary reason we made the investment was frankly the founders. We got really excited about uh elad gill and artman laraki uh who were the two founders of color they they founded a company previously um a lot of people know elad now because of his uh investing activity the books that he's he's written um artman is the ceo of color and sort of more under the radar but equally if not more accomplished uh an incredible angel investor an incredible operator um and so we

thought that this was just an incredible team that was getting built to work on the intersection of biology, healthcare, and computing, which is an area that I actually studied in undergrad. In college, I majored ultimately in molecular biology. And so I'd had a passion for this area for a long time. And I'd been looking for a team that could go execute against something really interesting in the space. And Color stood out to us as just an extraordinary team working on a really interesting problem and a market that had potential to expand. And so that was actually very simply the investment thesis. We definitely couldn't have predicted, for instance, that they would get into COVID-19 testing three, four years later. But I think that's kind of the reason to

take a swing on a really high quality team is the chance for them to iterate over time, to find these even more compelling opportunities than their original business. And I think that's right now the story of color. Yeah. And it's so funny to hear kind of each explanation of these businesses because the team is so important. And if you look at some of the great businesses today, right, whether it is Amazon, whether it's Twitter, a lot of these businesses either started out doing something completely different and evolved, or they've drastically expanded what they've done. And ultimately, that is how you scale and build very, very large, successful, valuable businesses. And so just like people are buying into Jack Dorsey or Jeff Bezos or Mark

Zuckerberg, you're really doing the exact same thing at the earliest stages of a business. You're just finding people that may not be known as the person who can go do this yet. For sure. I mean, And I think if you look at the arc of almost every amazing business, they had an act one that got to a bunch of signs of product market fit, a good business, maybe a great business in some cases. But then these companies had an act two, an act three, even better businesses that expanded the size of the addressable market as well. And that's the story over and over again.

And if you look at Tesla from, you know, Roadster to Model S to Model 3 to, you know, what they are today, Amazon from books to the everything store to AWS, Shopify from e-commerce stores to now, you know, financing and a platform and all this other stuff that they've done. It's the story over and over again. And that story relies on incredible entrepreneurs and leadership teams delivering on a successful transition from an act one to an act two and an act three. And those things are just not going to be present in an early stage company. So they're fundamentally things that you're betting on the team to do. Absolutely. I want to switch gears a little bit and talk about a couple of topics that you've written about. I always like to kind of get you to expand on things you've already kind of put out into the public sphere. You've probably gotten a bunch of feedback on things that people agree with, things that people don't agree with. And so maybe we can kind of dig a little bit deeper. The first is this idea of democratizing access being a kind of valuable thing. And you broke it down into this framework of essentially cheaper, free, or more convenient. So can you

kind of talk through why that specific framing and then maybe some of the ways you've seen this applied and been successful in the market? For sure. So when I reflect on a lot of the investments that I've made in the last decade, a lot of them actually come down to this thesis of democratizing access, which is we know that there's this product or service that a bunch of people love, a bunch of people use, but it's not yet accessible to the broader population. And so a company comes in, makes it more accessible, and that expands the size of the market opportunity.

That's the thesis in a nutshell. And so I started to think about, okay, what are some of the most powerful companies that I've seen that have democratized access? There are companies, let's take FinTech as one area, right? Robinhood is a company that's democratized access to stock trading, and they did that by making it free and on mobile. Coinbase is an example of a company that's democratized access to people holding, buying, selling cryptocurrencies. And I would argue that the primary way they've done that is by making it more convenient. It's actually more expensive on Coinbase than on a bunch of other platforms because the Coinbase fee is more expensive. But it's more convenient.

And then there are a bunch of companies. for instance, I recently invested in a company called Alto IRA, which enables people to invest in alternative assets out of their retirement funds. And I think you might be involved in companies as well in this space. But that company has made it cheaper to invest in alternative assets out of your retirement funds, like your IRA, than a bunch of the traditional incumbents in that space that make it super expensive to do that. And so, you know, I think these three axes, cheaper, more convenient, and then free are the three axes through which most companies democratize access. And that's what I was trying to flesh out in that blog post.

How important is it for a company to have two of three versus one of three or three of three versus two of three? Like, is there kind of additional value that is captured by having multiple components. So like Alta is a good example. Not only is it cheaper, but also it's more convenient, right? So they kind of check two of the three boxes. How do you think about that? Yeah, I think that's right. I think, you know, I didn't make this point explicit in my post, but I did get feedback around it and I've reflected on it. And I think the key is to probably spike on one of those three dimensions. So either, you know, you're spiking the consumers because you're offering this thing that used to be really expensive and now it's cheaper, or

something that was actually pretty cheap, but now it's free, or this is just way more convenient than any other approach. And I think, so I think you have to spike on one of them. And I think ideally you want to be more convenient as well as free or more convenient as well as cheaper. And so again, it probably deserves at some point a follow-up and I'd love for others out there who've thought about it to follow up and, and, and sort of push back. One of the best parts about writing is, as I think, you know, as well, you're getting your thoughts out there, and then having a bunch of really smart people respond to them. And so I think you're right, that it's likely multiple that lead to the deadly combination. Yeah. Another topic you've written about is kind

of the consumerization of healthcare. When people think of healthcare, they don't necessarily think of user friendly interfaces or user experiences that leave you delighted. I think what you wrote about was really one, compelling, but also two, kind of gives people a peek into the future of healthcare. So maybe unpack that a little bit. I think broadly speaking, healthcare is one of the giant categories, especially in the US, that has actually become more expensive over the last several decades and has become a worse experience for a lot of people. And so there's so much to do in this area. I think if you have to pick one segment of the economy that is one of the biggest and the most painful for the majority of people, it's probably healthcare. And there's so much to

do here. What I've been encouraged by is there are now finally a number of success stories of companies that are consumerizing healthcare, that have figured out a way to get to the end user, the patient and deliver something that's just a way better experience for them. And in many cases, they've actually gone direct to the consumer in how they've gone to market as well. And so as an example of this, about three years ago, I spent time with a number of players in the market who were working on a combination of telemedicine and pharmacy delivery to enable a much better consumer healthcare experience.

And so I'm thinking about companies like HIMS, Rho, Neurex, and Pill Club. These are kind of the four players that are all hundreds of millions in revenue now through a combination of telemedicine and pharmacy. And if you think about that, they've basically eliminated multiple steps that are painful in the existing healthcare experience for many people. You know, they've eliminated the step of having to go to the doctor to tell a doctor about something that's going on with them and then go to the pharmacy to get the prescription and then maybe sometimes go back to pick it up. You know, all of that is replaced through one online mobile friendly experience for getting things like birth control, ED medication, hair loss medication, et cetera. And so as I started, you know, these companies were the first that I saw really have true signs of product market fit directly with consumers in health care.

and um and so i've been thinking about this thesis uh really for the last three four years you know color feeds into this thesis pill club and other of my investments fits into this thesis and i wrote the post because i'd love to make more investments around this because i think number one there's a ton of um you know potential return there to to be made for an early stage investor like me but number two i think it's really important for our society that we uh we build more of these products. Yeah. And what's really interesting about Rowe and HIMSS, and I think a couple of the others, a lot of them got started right around the same time, right? And so what I've always wondered is, is it something where one entrepreneur kind of identifies a market

opportunity, word spreads quickly, and there's two or three fast followers? Or is it more of there's some inflection point, whether it's a regulatory thing, it's a technology advancement, you know, something kind of opens up the opportunity, and you just have a lot of smart people constantly thinking of ideas and a number of people come to the same conclusion around the same time. How do you kind of evaluate, okay, there's this telemedicine plus pharmaceutical mechanism, multiple companies are going after it. Does that scare you away? Does that actually make you more excited because it validates an opportunity? Just what's that framework you use? So number one, I think to answer your question directly, it's probably a combination of those

factors usually that leads to a whole bunch of companies working on something similar at the same time and this has happened over and over again um uh you know so so i would say it's a combination in in this particular area of telemedicine plus pharmacy i think it is very much a combination of regulations changing to enable broader access to telemedicine to enable a prescription to be made electronically and then delivered via mail or via courier very easily. Finally, and another market tailwind around being able to advertise direct to consumers

and platforms like Facebook and Google making it more accessible for these companies to get directly to consumers I think also enabled these businesses to sort of all start to work at the same time. And then my guess is, you know, they all sort of saw the others doing well, and that propelled sort of more entrepreneurial activity, them all becoming a little bit more aggressive. And so to answer your second question, when I see these types of areas, I would say I get interested often. And then I try to figure out which is, you know, the player that I want

to invest in within that area. And what are the types of characteristics of that particular market that would lead to one player becoming bigger than another, or potentially multiple players all becoming really big? You know, what I've learned over the years is even though some categories may seem that they are winner take all, most categories are actually not, you know, most categories, especially ones that are expanding rapidly, can have multiple winners. And we have seen that if you think about, you know, transportation, right? You know, Uber and Lyft are both successes, especially for early stage investors. In food delivery, there's a whole bunch of successes. It isn't actually just Uber Eats and DoorDash and Postmates and Grubhub.

It's also Domino's, for instance, right? And which I know you're a big fan of. But, you know, there can be multiple big winners in some of these massively expanding markets. And so I think about that too. Absolutely. The third topic I want to talk about is consumer subscriptions. It seems like the world has woken up to subscriptions as if it's some new thing that was just discovered last year or something. You see this with everything from the sub stacks of the world all the way to Netflix, etc. But obviously, it's a business model that's been around for a very, very long time. Why kind of bullish on this? And what was really driving the intrigue or interest? Yeah, so I would say this is an area that I probably know the most about from all the different things that I've written. That's why I saved it for last.

Yeah, and next big thing, you know, a lot of them, I feel a little bit like a poser writing about something or, you know, an outsider looking in. I don't actually know that much about it, but at Shasta, over the last eight years, I invested in a number of subscription businesses, both digital, such as Canva and Class Dojo, which we talked about, and physical, businesses like Pill Club, which have a physical component of delivering, in their case, medication to their consumers on a recurring subscription basis. And so what I've actually wanted to write for many years is a series of posts around consumer subscriptions. And so this is one that was kind of pent up for a while. And what has frustrated me about kind of the literature in this area is not that many people have talked about it. Whereas if you look at marketplaces, another business model in the internet, there's tons of writing about marketplaces. You have all these terrific posts about different factors of marketplaces that make them successful, such as one that Bill Goey did, I think, about eight years ago. we have all these lists of like the top marketplace companies, the top marketplace founders, but I've just felt that the literature is lacking on the subscription side. And I wanted to write a series of pieces around that. And so that was really the driving force. It isn't a new thesis area for me

per se, but I think one that deserves more exploration because of how prevalent it is. And so hopefully people found it interesting for that reason. Yeah. And how do you see consumer subscriptions evolving specifically through the lens of, it almost feels like there's, jockeying might not be the right word, but there's this balance like every time SaaS startups with kind of this recurring revenue model makes a leap forward, it seems like consumer subscription companies aren't that far behind. And there's a lot of similarities in just the subscription nature of the revenue and things. And I'm specifically thinking through, you know, take a company like maybe Pipe that does sort of, you know, they help to get capital to a company without it being dilutive. And they use this recurring revenue as a way to determine how much and when they'll give them that capital. That to me feels like a very much SaaS-like service that's been around, right, or servicing SaaS companies. But now that type of stuff is trickling into the consumer subscription space. And so is that something that we should maybe expect to happen more? Is that something that's just like, there might be some one-off examples, but not necessarily a trend, or maybe you haven't

even thought about it that way and think about it some other way? I think it's a really interesting point. I mean, broadly speaking, the way I think about the world is that there's less of a division between consumers and enterprises than ever before. I mean, this is kind of a theme. If you think about it, we've already talked about this in this very podcast episode, we started to talk about solo capitalists at the beginning, and the sort of unbundling of venture firms. You know, And now we're talking about kind of the unbundling to a certain extent of businesses into individual end users and consumers at those businesses. And so I just think there's a lot of learnings from traditional enterprise businesses that one can apply to consumers and traditional consumer businesses that one can apply to enterprises. And I hope to flesh out more of this through Next Big Thing.

You know, I wrote the second issue of the newsletter is all about the blend of consumer and enterprise and the blurring between those lines. And so I think you're absolutely right that there's a bunch of stuff from software as a service, you know, B2B businesses that one can apply to consumer businesses. And I think there's a bunch of stuff from consumer subscription businesses that apply to SaaS. um with pipe specifically i mean the thing that started running through my head is you know could you see a world in which um you know uh number one there's uh there's some sort of alternate funding mechanism for consumer subscription businesses because like sas businesses they are more predictable than um a non-subscription based consumer business and i I think there should be. And then the other thing I started to think about is, you know, for the consumers of subscription businesses, will there be financing products for people like you and I that, you know, enable us to somehow, you know, spend more of our money on subscriptions or sort of have more peace of mind that when we're spending on subscriptions,

um that's not you know uh you know pushing us into um you know a challenging income territory or a challenging sort of um balance sheet uh i don't know the answer to that but i think it's an interesting idea because i do think we're going to see um a bunch more proliferation of consumer subscription services yeah the other piece that i've thought about and uh by no means have answers to but but i think are interesting questions is um if you think of traditional uh kind of content business let's use them as an example right so podcast there's a bunch of people now talking about like oh there should be subscription podcast right there's subscription emails there's subscription uh television and streaming and like all these other pieces of

content and um you know theoretically that makes sense uh there's a couple of people who have made it work but there's also a lot of people who have tried it and it hasn't worked and i always kind of start to think through is it a business model friction point right like is it are you testing the business model or is it no if it works for all these other different types of content it will work here it's just somebody's got to figure out the right pricing the right you know technology platform the right experience um right value proposition like you know it's kind of the unknown a little bit but it always feels like there's this debate around um is it this is the right idea just hasn't been properly applied yet or is it no the idea is wrong and therefore

everyone who tries is going to eventually you know kind of come to the same conclusion i think um first of all i think a lot of things can be subscriptionized including podcasts i think one of the hardest things in podcasts in particular is that we've just been accustomed to getting them for free and so the ad supported model especially in in the U S has been dominant for a long, long period of time. And so I think when something is already free, uh, moving it back to being, uh, paid and, you know, premium subscription model is difficult, but I still think in podcasts, we're going to see a bunch of different attempts. I think even this morning, um, Spotify made a bunch of announcements around, uh, you know,

a premium podcast service that was ad free. Um, and I, I suspected that this is where they were going. I was actually surprised that as a premium spot, Spotify subscriber, I was listening to spot of the podcast on Spotify that still had ads. It was kind of a weird experience to go from like never having ads in my Spotify experience to suddenly having ads when, when a podcast showed up. And so it's completely unsurprising to me that they are going to go down this path and going to try to have people pay for podcasts that don't have ads. And I suspect that we'll see a bunch of people pay for them because it is a better experience for a lot of people to not listen to the ads. And then I think there's all these other things. I mean, I don't know. I think

any small business or entrepreneur has the chance to offer something on a subscription basis. I mean, you look at like Patreon, which is enabling the patronage model for influencers, I'm thinking a lot about like local businesses. And, you know, could you imagine becoming a subscriber to your local pizza restaurant or your favorite fine dining place in your city? I mean, first of all, these businesses need more predictable income than ever before. Second of all, I think any way people start to think about themselves as like patrons of their favorite local business. And so it's a natural existing behavior. And so I just think there's a ton of opportunity yet to be explored. And that's just one small idea around subscriptions. Yeah, I love the way you think

about it. The last topic I want to cover before we get into the rapid fire to wrap up is crypto. I don't think you've ever publicly talked or definitely not a lot talked about Bitcoin and cryptocurrencies what's kind of your view uh on the assets themselves the industry and whether you've ever done anything in the space yeah first of all i feel weird talking about this given how much of an expert you are in this area but i'm fascinated by it i mean i i started exploring um crypto through buying bitcoin i think back in 2013 or maybe a bunch in 2013 and 2014 team and just decided to hold so that I have some small percent of my net worth in crypto assets.

And of course, as those assets have risen in prices, suddenly it's a more important part of my overall net worth. The thing that I've always been looking out for that I've yet to see come to fruition is, you know, an amazing end user driven consumer application or enterprise application that is a better experience than the status quo. And, you know, the big reason for that better experience is crypto. But that isn't the thing that gets people excited to use the product or the service. It's just an underlying reason for why the experience is way better. And I hope that we see more and more products like that going forward. I mean, the obvious place that I think

we could see it is in financial services where you could have a payment product or a money transfer product or a lending product that just has way lower transaction costs, way lower fees, lower interest rates, et cetera, et cetera, because the underlying technology is powered up by crypto, but we haven't yet seen, I think someone really come out and have that amazing use case and deliver an end user experience that's just, you know, broadly applicable. And I think when we see that the floodgates will start to open. I'm curious if that resonates with you or how you feel about that. I think you're directionally correct. Like the big difference or kind of line I would draw is just like, there's the consumer applications to do

things with them outside of a financial type asset. And then there's like the financial asset type application. I think that the part where we've seen a lot of improvement is on the financial asset side. So like Bitcoin being used as a store value or a medium of exchange, what are all the things you can do if that was a financial asset? So can I use it as collateral to get a US dollar loan, right? Can I use it to earn interest? Can I use it to, you know, do a whole host of other things? That part to me feels like that's really accelerated, especially over the last like two, three years. But when you talk about what can I do with Bitcoin, in terms of, you know, can I go to the store and quote, unquote, buy coffee with it, right? It's kind of the example

everyone always uses. And like, some people just argue, like, that's not really important right now, right? Like that's kind of like the last thing that needs to be developed. Other people would argue like, look, there's some progress that's been made, but obviously there's not, you know, in New York City, millions of people walking around spending Bitcoin, right? And so you can kind of try to unpack some of this. And so I always think through on the crypto side specifically, like how much of it should look like the traditional technology world, right? Like all the things that you and I would think about, whether it's consumer enterprise, whatever, versus no the point of this is to like be different to kind of disrupt the status quo

right and so like the more it looks the same actually the least the the less disruptive it's going to be right and I frankly I don't have a good answer for that like like that's something I constantly think through but but to your point in either one of those scenarios you have to have very user-friendly type interfaces you've got to have products that are intuitive And I think that, you know, what we saw was the true technologists, right? The people who aren't designers, who aren't kind of UX experts, they aren't growth marketers and kind of all those, you know, important roles, but not the actual technologists themselves. They just haven't been in the space, right, up until maybe two years ago. And so now you're starting to see more and more come in, products are improving, but, you know, compare that to the traditional technology world and still got a ways to go.

Yeah. I think you made a bunch of really, really good points in there. My brain has started to think through just the low-hanging fruit that you described. I mean, if there's a set of people out there, which it seems that there are, who are just holding Bitcoin, for instance, as a store of value, there should be some risk models that take that into account as those folks are underwritten for things like mortgages um and i don't think that that's happening yet and and but it should be i mean you know i you know even for myself selfishly like you know if i want to refi our mortgage it would be great to have the crypto holdings taken into account through through some way of course interest rates are very low right now but yeah but you know or you know a down payment through

crypto or whatever it is um and uh and those feel like the low-hanging fruit for the set of folks that that hold it today is as purely a store of value yeah the two pieces of this that are really interesting so obviously um it's become pretty public now that it's like 63 percent of all existing bitcoin like in the circulating supply haven't moved in the last 12 months so generally that just means like there's a lot of people holding and not trading or using it whatever um and uh we invest in a company everyone who listens will know it uh blockfi which uh one of the first products they had was you deposit Bitcoin or crypto. They take possession and then they give you a US dollar loan against the collateral. But what was so fascinating when

I looked at it was, you know, let's take a car loan, for example. Basically, if you're the bank and I'm the person buying the car, I come to you and I say, hey, Nikhil, you know, I'm a really good person. I promise I'll pay you back. Give me the loan, right? And the collateral will be the car. But I'm going to take the car. I'm going to go drive it around every day. And you'd say, okay, like make sure you make the payments. And if not, I'm going to come find your car and, you know, confiscate it and then liquidate it. And so like you as the bank actually took quite a bit of risk, right? You had to underwrite me. And then if something went wrong, you had to go find the collateral. With this model, basically somebody gives the Bitcoin, you hold on to it,

you give the US dollar loan against it, but it's also an over collateralized loan. So if I give you, you know, $100,000 of Bitcoin, you give me $30,000 loan. If I do anything stupid, I don't pay you, you know, whatever you have the collateral already and it's over collateralized. So with the volatility and, and we started to unpack this and we're just like, wow, this is a way better experience for the lenders. Um, because basically it's the Holy grail of lending, right? It's like, Hey, I'd love an over collateralized loan where I hold onto the collateral and basically have no risk, right. Or very little risk. Um, and so I think that to your point, it's like, okay, that's one example. There's probably 50 others that people will come up with where like this

asset provides a unique mechanism that doesn't exist in the legacy world, but we can take kind of lending or spending or, you know, whatever it is and apply it in a unique way. Yeah. And the question is how to make it really easy to understand for, you know, both sides or the lender in this case, as well as for the consumer and, and help them understand why it's, it's so powerful and and so much better than the status quo um and maybe that's actually the hardest part of all this is not you know the the sort of product itself more the the messaging and positioning and um education around it as uh as somebody told me uh the word cryptocurrency is uh scary enough like crypto anything people are like ah that's you know i'm gonna get hacked right it is like

kind of the reaction. So it's an uphill battle. Uh, but before we, uh, we wrap up, I ask everyone the same two questions, uh, and then you'll get a chance to ask me one. Uh, the first question is just what is the most important book that you've ever read? Oh gosh. So, um, I'm assuming you have many. Yeah, this is really hard for me. I think, um, the first one that, that, that comes to mind is Between the World and Me by Ta-Nehisi Coates. And the reason I've been thinking about that book all year is, you know, it talks about what it's like to be Black in this country and just the experience for all of American history, you know, for African Americans here. And for me, having grown up in the UK and not being exposed to this history as a kid, reading that book,

I think about five years ago now, was really powerful and really educational and helped me understand more about that experience as an outsider. And I just think it should be required reading for everyone who lives here. And frankly, everyone around the world. So that's the one that jumps out nothing related to um business or technology but but really really impactful yeah that's a great suggestion second question is more fun aliens are you a believer or a non-believer i'm a non-believer um you know why you know i just think uh i don't know i think that um, this planet is really unique from everything we can tell. And, um, and, uh, you know, I just think that, uh, you know, if, if they were out there somewhere, then we would have already found

out, but, you know, maybe we are just living in a simulation or something and I'm completely wrong. Uh, Elon, uh, obviously believes the, uh, the simulation is more likely than, uh, than most others, but, uh, we will see. Uh, you could ask me one question to, uh, to wrap up. What do you got for me? How's married life during the pandemic? And yeah, what's that been like now? You got married recently as well, right? Yeah. We got married almost two years ago now, two years ago. Okay. We got married pre pandemic. So we had that adjustment period. And then suddenly the pandemic hit. Whereas you guys, I think got married during the pandemic, right? We did. Um, so everyone's a little bit different. We'd already lived together, uh, for, I don't

know, a year and a half, almost two years maybe. So like a lot of the, Hey, we're just moving in together. Like let's get used to living with each other, uh, was already out of the way. Um, when it came to the wedding itself, uh, we were already going to have a small wedding and, uh, it was one of these things where we were going to get married in April. And so when everything hit in March, it's like, ah, no way this is going to go on for four weeks, right? Like two weeks. And so they said, you know, two weeks later, you're like, okay, let's push the wedding back as far as we think is necessary. There's no way this will still be going on in July, July, you know, kind of June 15th or whatever it comes around. We're

like, oh, this is not going to end anytime soon. And so we made the decision. We said, look, we'll just go get married ourselves, just the two of us. So, you know, not even our parents were there. But it was one of these, you know, kind of decisions of like, am I really gonna postpone my life basically for a year, right? And kind of wait till the next summer. And we had a lot of friends who did that. But for us, it was just, I don't know, it just kind of it was for us anyways, right? So it's like, let's just go get married. But I do tell the story on the way to the quote wedding. My brother was the kind of the, not the priest, but like the officiant. And Polina was already there. And I had a text her and I said, I may be a couple minutes late. We literally are

in an Uber and we're stuck in a protest. We were driving down the road and in New York, right? And so it was just, you know, a pandemic, all the social unrest, like all this stuff going on. and uh it just is not what you planned right but uh but you kind of just deal with it and uh and sometime next year we'll have like a little party or something so uh you can celebrate with friends and family so it'll it'll be good but uh provides a lot of good stories right yeah sounds unforgettable and i think you know if you guys have uh been able to figure out you know your relationship and getting married and all the stuff during this time i'm sure you can conquer anything together so hopefully that's the great upside. Right before we got married, every married couple we knew said

the same thing. If you lasted this long locked down together, you'll be fine. Exactly. All right, Nikhil, listen, where can we send people to find you on the internet, find out more about what you're doing and kind of your writing? Where would be the best places to connect with you? Yeah, I mean, you know, on Twitter at NBT, my initials, they also happen to be the initials of next big thing. So nbt.substack.com is next big thing, the newsletter and at nbt on Twitter is where you can easily find me and reach out. You're building a monopoly on those three letters. I like it. Awesome, man. Listen, thank you so much for doing this. I'll have to do it again in the future. Sounds great. Thanks so much for having me on.