We sit down with Bain Capital Ventures' newest fintech Partner Christina Melas-Kyriazi to talk about everything happening right now in fintech, and the experience of helping build Affirm and the BNPL space from crazy idea to massive consumer finance category. Anyone interested in the history and future of fintech will love this one. Tune in!
We finally did it. After five years and over 100 episodes, we decided to formalize the answer to Acquired’s most frequently asked question: “what are the best acquisitions of all time?” Here it is: The Acquired Top Ten. You can listen to the full episode (above, which includes honorable mentions), or read our quick blog post below.
Note: we ranked the list by our estimate of absolute dollar return to the acquirer. We could have used ROI multiple or annualized return, but we decided the ultimate yardstick of success should be the absolute dollar amount added to the parent company’s enterprise value. Afterall, you can’t eat IRR! For more on our methodology, please see the notes at the end of this post. And for all our trademark Acquired editorial and discussion tune in to the full episode above!
Purchase Price: $4.2 billion, 2009
Estimated Current Contribution to Market Cap: $20.5 billion
Absolute Dollar Return: $16.3 billion
Back in 2009, Marvel Studios was recently formed, most of its movie rights were leased out, and the prevailing wisdom was that Marvel was just some old comic book IP company that only nerds cared about. Since then, Marvel Cinematic Universe films have grossed $22.5b in total box office receipts (including the single biggest movie of all-time), for an average of $2.2b annually. Disney earns about two dollars in parks and merchandise revenue for every one dollar earned from films (discussed on our Disney, Plus episode). Therefore we estimate Marvel generates about $6.75b in annual revenue for Disney, or nearly 10% of all the company’s revenue. Not bad for a set of nerdy comic book franchises…
Total Purchase Price: $70 million (estimated), 2004
Estimated Current Contribution to Market Cap: $16.9 billion
Absolute Dollar Return: $16.8 billion
Morgan Stanley estimated that Google Maps generated $2.95b in revenue in 2019. Although that’s small compared to Google’s overall revenue of $160b+, it still accounts for over $16b in market cap by our calculations. Ironically the majority of Maps’ usage (and presumably revenue) comes from mobile, which grew out of by far the smallest of the 3 acquisitions, ZipDash. Tiny yet mighty!
Total Purchase Price: $188 million (by ABC), 1984
Estimated Current Contribution to Market Cap: $31.2 billion
Absolute Dollar Return: $31.0 billion
ABC’s 1984 acquisition of ESPN is heavyweight champion and still undisputed G.O.A.T. of media acquisitions.With an estimated $10.3B in 2018 revenue, ESPN’s value has compounded annually within ABC/Disney at >15% for an astounding THIRTY-FIVE YEARS. Single-handedly responsible for one of the greatest business model innovations in history with the advent of cable carriage fees, ESPN proves Albert Einstein’s famous statement that “Compound interest is the eighth wonder of the world.”
Total Purchase Price: $1.5 billion, 2002
Value Realized at Spinoff: $47.1 billion
Absolute Dollar Return: $45.6 billion
Who would have thought facilitating payments for Beanie Baby trades could be so lucrative? The only acquisition on our list whose value we can precisely measure, eBay spun off PayPal into a stand-alone public company in July 2015. Its value at the time? A cool 31x what eBay paid in 2002.
Total Purchase Price: $135 million, 2005
Estimated Current Contribution to Market Cap: $49.9 billion
Absolute Dollar Return: $49.8 billion
Remember the Priceline Negotiator? Boy did he get himself a screaming deal on this one. This purchase might have ranked even higher if Booking Holdings’ stock (Priceline even renamed the whole company after this acquisition!) weren’t down ~20% due to COVID-19 fears when we did the analysis. We also took a conservative approach, using only the (massive) $10.8b in annual revenue from the company’s “Agency Revenues” segment as Booking.com’s contribution — there is likely more revenue in other segments that’s also attributable to Booking.com, though we can’t be sure how much.
Total Purchase Price: $429 million, 1997
Estimated Current Contribution to Market Cap: $63.0 billion
Absolute Dollar Return: $62.6 billion
How do you put a value on Steve Jobs? Turns out we didn’t have to! NeXTSTEP, NeXT’s operating system, underpins all of Apple’s modern operating systems today: MacOS, iOS, WatchOS, and beyond. Literally every dollar of Apple’s $260b in annual revenue comes from NeXT roots, and from Steve wiping the product slate clean upon his return. With the acquisition being necessary but not sufficient to create Apple’s $1.4 trillion market cap today, we conservatively attributed 5% of Apple to this purchase.
Total Purchase Price: $50 million, 2005
Estimated Current Contribution to Market Cap: $72 billion
Absolute Dollar Return: $72 billion
Speaking of operating system acquisitions, NeXT was great, but on a pure value basis Android beats it. We took Google Play Store revenues (where Google’s 30% cut is worth about $7.7b) and added the dollar amount we estimate Google saves in Traffic Acquisition Costs by owning default search on Android ($4.8b), to reach an estimated annual revenue contribution to Google of $12.5b from the diminutive robot OS. Android also takes the award for largest ROI multiple: >1400x. Yep, you can’t eat IRR, but that’s a figure VCs only dream of.
Total Purchase Price: $1.65 billion, 2006
Estimated Current Contribution to Market Cap: $86.2 billion
Absolute Dollar Return: $84.5 billion
We admit it, we screwed up on our first episode covering YouTube: there’s no way this deal was a “C”. With Google recently reporting YouTube revenues for the first time ($15b — almost 10% of Google’s revenue!), it’s clear this acquisition was a juggernaut. It’s past-time for an Acquired revisit.
That said, while YouTube as the world’s second-highest-traffic search engine (second-only to their parent company!) grosses $15b, much of that revenue (over 50%?) gets paid out to creators, and YouTube’s hosting and bandwidth costs are significant. But we’ll leave the debate over the division’s profitability to the podcast.
Total Purchase Price: $3.1 billion, 2007
Estimated Current Contribution to Market Cap: $126.4 billion
Absolute Dollar Return: $123.3 billion
A dark horse rides into second place! The only acquisition on this list not-yet covered on Acquired (to be remedied very soon), this deal was far, far more important than most people realize. Effectively extending Google’s advertising reach from just its own properties to the entire internet, DoubleClick and its associated products generated over $20b in revenue within Google last year. Given what we now know about the nature of competition in internet advertising services, it’s unlikely governments and antitrust authorities would allow another deal like this again, much like #1 on our list...
Purchase Price: $1 billion, 2012
Estimated Current Contribution to Market Cap: $153 billion
Absolute Dollar Return: $152 billion
When it comes to G.O.A.T. status, if ESPN is M&A’s Lebron, Insta is its MJ. No offense to ESPN/Lebron, but we’ll probably never see another acquisition that’s so unquestionably dominant across every dimension of the M&A game as Facebook’s 2012 purchase of Instagram. Reported by Bloomberg to be doing $20B of revenue annually now within Facebook (up from ~$0 just eight years ago), Instagram takes the Acquired crown by a mile. And unlike YouTube, Facebook keeps nearly all of that $20b for itself! At risk of stretching the MJ analogy too far, given the circumstances at the time of the deal — Facebook’s “missing” of mobile and existential questions surrounding its ill-fated IPO — buying Instagram was Facebook’s equivalent of Jordan’s Game 6. Whether this deal was ultimately good or bad for the world at-large is another question, but there’s no doubt Instagram goes down in history as the greatest acquisition of all-time.
Methodology and Notes:
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Transcript: (disclaimer: may contain unintentionally confusing, inaccurate and/or amusing transcription errors)
David: Hello LPs. Welcome to our conversation here with Christina Melas-Kyriazi. We are so excited to chat with her. She is the newest partner at Bain Capital Ventures, focused on Fintech and she's been a personal friend of mine for many, many years. Her career is very impressive. She started her career in banking at Goldman, then at LinkedIn, went to HBS, and then has been pretty deep in some big, big successes in Fintech over the past few years.
She was an early employee at GoFundMe and then at a firm, where she was most recently in there through the IPO. She's been a longtime angel investor in lots of companies. We have many companies we've invested in together. Of course, now she is a partner at VCV. We're so excited to chat with her.
Ben: Indeed, and listeners, before we dive in here, huge thank you to our presenting sponsor of the LP show, Tegus. Those of you who are institutional investors (I'm sure) already know this because Tegus at this point in that community is really a household name and a very disruptive company, but if you're at an operating company, maybe in corporate development, or strategy, or thinking about buying companies in any way and want some intel, it's an awesome, awesome product for you.
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David: It genuinely is so disruptive. I know we've all been hearing that about Tegus for a while, but actually using it, the old way this was done was hedge funds and private equity firms did calls themselves with expert network groups and then those calls were just locked into their own private use. Now, these things are transcribed and available for everyone.
David: It's so much better.
Ben: I can't tell you how nice the UI is too as someone who's been deep in it. It's just really nice and really usable. Lots of big companies and investors use them like Spark, Thrive, Redpoint, and JFrog. If you would like to join the ranks, you can get a free trial of this very powerful product at tegus.com/acquired. Just tell him that Ben and David sent you when you get in touch, and click that link in the show notes or type it indirectly. With that, none of this is investment advice, do your own research, and onto our interview with Christina
David: LPs, welcome back. Very, very excited to have Christina with us. We've been friends for a long time and it's fun to record our first podcast here together. Welcome to the LP show.
Christina: Thank you. I'm super thrilled to be here.
David: I want to hear first, what's the most exciting trends going on in Fintech right now and what are you looking at Bain? I'm asking selfishly because I feel like there have been so many successes in Fintech, it has become such a pillar of venture capital there, obviously now. Many folks like yourself who just specialize in it on the VC side. I don't have a good sense of what's coming next. What should I and all our audience be looking for us? What's coming up next?
Christina: Great question. I would say, as you've probably noticed on Twitter, there are two camps of Fintech now. There are Web 2.0 people and there are Web 3.0 people. It is an interesting question of can you be both. Can you straddle the world of Web 2.0 and Web 3.0 successfully and find the best companies in each? I don't know the answer to that question, but what we're seeing is that most people are coming to the conclusion of no and you really need to be specialized in one or the other and spend your time going really deep.
In part because Web 3.0 is so specific on the technology front and the networks, that dabbling in it is difficult, which frankly is what I'm doing right now if I'm being totally honest. I do spend most of my time in Web 3.0 and Web 2.0, but I'm very fascinated by Web 3.0 from a technology perspective, in particular, the concept around how users can become owners.
There was almost $40 billion of VC money that went into crypto (I think) just in the last year, but if you look at crypto adoption globally, it's still quite low. I know a lot of people like to compare that to internet penetration data points. If you think about that macro, it's really exciting. The use cases that have been used largely to date are mostly around speculation. It's people trying to get rich fast or trying to invest in these currencies. That's why a lot of the pump and dump schemes have become meme stocks.
David: Arguably, that's also a financial product.
Christina: Exactly. It's definitely a financial product and it's created a lot of value. That's one use case. I think the other use cases that are very real are NFT's, digital art or media—which is really exciting—and DeFI which are all of these different use cases of decentralized finance.
I am really interested in thinking through one, like where does decentralization make sense? What kinds of use cases from a consumer perspective that unlocks new products, new companies that I haven't even thought of to be built. Second is we've (Bain) invested actually in companies like Block5, for example, that enable on-ramps into crypto. I'm really excited about the consumer use cases around that.
I don't claim to be an expert and might need to decide, like do I go full hand into crypto? I do think it's the most exciting area if you look at Fintech and that's why you've seen this. My friends, who are really great engineers, are all starting Web 3.0 companies or dabbling in it, diving deep, and I can't ignore it. It's not an original answer, but it's definitely the most real thing that I'm seeing.
Now to go to Web 2.0 areas where I've spent most of my career, some of the areas that I'm really excited about. Bain has spent a lot of time on this idea of embedded finance. Financial infrastructure has come a long way in the last 10 years. When a firm was first launched, the amount of products and services that we could have used to build a firm was really different from what it is today because there was no banking as a service provider. There were no depth-of-identity providers and underwriting. All these services just didn't even exist. It takes six weeks to launch a bank account now, which is really interesting. Isn't that crazy?
David: It's so crazy.
Christina: It's so easy to launch financial services and embed them into your product. What does that mean? I think what it means today is that value is accruing even more to defensible distribution, and a lot of what I think about in Fintech and other areas where I'm investing, like commerce—those are the two areas where I spend all my time—is just how do you own a defensible distribution angle? Do you own a workflow? Do you own the customer? And then can you embed financial services?
Things like Shopify are the obvious ones who have done this so amazingly well. Same with things like Mindbody or QuickBooks. Shopify is the ecommerce platform, the storefront, then you make a lot of money on payments and financial services.
David: Oh my gosh. Shop Pay is game-changing. I don't know about you guys, but I spent so much more money over the holidays just because of Shop Pay.
Christina: Shop Pay is a beautiful product. A firm is the embedded lender within Shopify. If I think about companies that are platforms and then companies that are enabling financial services, payments was the biggest category. But now this is extensible to banking, lending, insurance, wealth management, and investing. I think there are really exciting things still happening there.
That's a huge macro trend we're spending a lot of time on. Even if you think in commerce, this is not a new concept. If you look at companies like Kohl's, and Macy's, and to some extent Target, they own a customer, and then they make a good amount of their profits off of their private label credit cards.
Christina: I'm thinking a lot about what's the next generation of that and what's the next generation of closed-loop systems.
David: There are a few companies that are now doing virtual private label credit cards for new brands, right?
Christina: There are a handful. I think all of them are still pretty early, but they're all great teams, really exciting. I'm definitely rooting/watching all. I made an angel investment in one called Imprint.
Ben: I was going to say yeah, that's the one I know too.
Christina: Yeah, awesome team. Made another angel investment and one called Catch. It’s a little bit of a different angle, but I think this space is really exciting.
Ben: Talking about credit cards, merchant-specific cards, loyalty, and buy-now-pay-later, we've never talked about buy-now-pay-later on the show. I'm curious, could you give us a primer on the history of how this came to be and how the world of BNPL is actually different from credit cards? Because it seems like we had a way to buy now and pay later. It's been sitting in my wallet since I turned 16. What's going on here?
Christina: I think there are a few things that are different. First of all, buy-now-pay-later is a big innovation. A lot was in the distribution. If you think about the fundamental difference between a credit card and buy-now-pay-later, it's not an open line of credit. Most of these products are installment loans or in a split payment product.
A credit card, you have a banking relationship or someone needed to go spend a lot of money to acquire you as a customer, offer you this line of credit, and hope that you stay for a long time, hope that you revolved on a balance, maybe paid a bunch of late fees because you missed your deadline for these private label cards.
David: The Blockbuster model.
Christina: Exactly. For these private label cards, a lot of them rely on deferred interest, which people like Max Levchin. To his credit, he actually personally made a dent in the industry moving away from that paradigm because it's not very customer-friendly. It's not because you think that you're getting a 0% interest and then if you miss one payment, all of a sudden, you owe back interest on the whole amount. It's a very consumer-unaligned model and that's a lot of the way that these business models worked.
BNPL—going back to it—is a better financial product. It's consumer-aligned, there are—for a firm, at least—no late fees, you know exactly how much you owe over time, so it's a better product experience.
From a distribution perspective, because you are distributing at the point of sale with retailers, you can give someone a microloan for $1000 and you can acquire that customer profitably because the retailer is incentivized to show it at the point of sale. That was never possible before because it would have been way too expensive to go find people out in the wild and give them a $1000 loan. Those two things are really fascinating.
For the retailers, why did everybody enable this? One, the credit cards weren't able to actually address all of their customers. When you're able to take underwriting and information from the platform around what someone's buying and underwrite them for one purchase, you can give credit to a lot more people than you can when you're trying to give them an open line of credit.
David: So people who otherwise wouldn't be able to buy a $500- or a $1000-item, you can underwrite just that item?
Christina: Exactly, and all of a sudden you are able to enable a new customer segment that wasn't addressable before. These merchants realized customers would pull forward purchases, and they would spend more. All of a sudden, this was a conversion tool for them. It was a marketing tool and it wasn't just a financial product. That is a really powerful thing. All of it came down to this innovation on the financial product and the consumer experience,
Ben: Which, of course, begs the question. Is it good that consumers are spending more sooner? You can imagine all the ways that that's bad, but what are the ways that it's beneficial and okay?
Christina: I think a firm in particular always took the view of, we want to help people control their finances and have visibility into what they're spending and match their cash outflows with their cash inflows a little bit more over time. Our underwriting models would not approve you for amounts that we didn't think you could handle. I think there's a little bit of that. But to some extent, I think if you're able to give consumers the right tools, like they should be able to make decisions themselves around what they should buy, this clearly is better as a construct.
Ben: How does that underwriting work? I've never used a firm before. Let's take it away from a firm so we don't make it about the company but any BNPL provider. How does it work? Is it checking my credit score? What's going on there?
Christina: It depends on the financial product. If you're asking for a $4000 loan versus if you're asking for a $150 loan, it might look different, and the financial product in the regulation is actually going to look different for each of those types of products. Largely, the platforms we'll be looking at, who are you? What's your credit history? What's your purchase history? There's some other magic around where you're shopping and what you're buying as well.
David: I've never actually used a BNPL product.
Ben: You bought your Peloton outright?
Christina: Why did you do that? Free money.
David: Why would I do that? I made a poor financial decision. We get into a whole sidebar about the Peloton purchasing process. I think Bahama Ben on Twitter who was a Peloton Ball, is a great Fintech follower. He tweeted the other day that Peloton, which he gives up, amazing product, business totally broken. Anyway, that is neither here nor there.
How much information do the platforms get about the purchasers? Do they get employment history or status? Or is everything that they're inferring based on other consumer information?
Christina: I think it really varies. Usually, it's not that level. I don't think you need someone's employment information to underwrite someone for an installment loan. I think if you're talking about other financial products that are more open-ended in nature and you get into the whole alternative underwriting industry, that is maybe where that's more useful.
Part of the beauty of a buy-now-pay-later loan is that it's a short duration. That's actually one of the reasons why this class of lending companies has done differently and better than the last class of lending companies. If the market turns, you can adjust in real-time and your book turns over much quicker than when you're giving out. Obviously, a mortgage but even a longer-term loan.
David: Even a lending club or previous generation lending companies, that yeah, that exactly the problem that you're saying.
Christina: Exactly. These categories actually are much more recession-efficient. For example, part of what I worked on, I owned a lot of the foundational products of things like identity, fraud, and servicing. When COVID hit, that was a time when we had to think through, how long is this going to last and what changes should we make? The executive team did an amazing job of saying, we don't know but let's be prudent. Let's give people tools to help repay their loans flexibly. Let's be 100% on the side of the consumer here because that's our brand and it's going to create more value for us as a company in the long-term.
David: How much PayPal DNA was there at the company, either in terms of people or just in terms of having lived through some of those market cycles with a financial product in the past?
Christina: Interesting question. I actually hadn't thought about that too much before you asked, despite the fact that in the first five years of a firm, (I think) a lot of headlines were like Max Levchin, founder of PayPal, which has changed. It's always now the founder of a firm. Amazing.
Ben: Yeah, funny thing about being a public company CEO.
Christina: That's right. The PayPal DNA, at least in my experience and I'm just one person, didn't really present itself that deeply. We looked at PayPal as an example of a consumer wallet that's done really well. It's created a deep customer relationship, built a merchant network and a consumer network, so there are lessons you can learn from that. But I wouldn't say that the DNA was that deep.
Ben: Let's shift away a little bit from BNPL and go to broader Fintech trends. It seems like neobanking and peer-to-peer payments are the first things that got Fintech’d. I have a new debit card that's tied to this fancy tech company or I'm able to send money to my friends. What do you think are the hardest things? If you think about the traditional finance landscape, what are going to be the last things to be addressable by a tech startup?
Christina: I think to some extent, getting someone's core banking relationship off of Chase or Bank of America is still really hard. Despite the fact that you're seeing an explosion in neobanks and I think that companies like Chime have done a really good job addressing a certain segment with a wedge of getting paid your paycheck two days faster.
Obviously, in other countries, too, we see new banks. There are clearly very large neobanks to be built. There are ones targeting freelancers, which have very specific needs. There are a lot of categories where you can say this is a specific vertical that has a specific need. We're going to build a neobank for them. No neobank has actually gotten me to switch away my direct debit from my employer into them yet. What's the wedge that will get me to do that? It's actually not totally clear yet.
Ben: It's kind of amazing that consumer investing happened before the core banking relationship that so many people are willing to say oh, Fidelity, Merrill-Lynch? No, thanks. I'm with Wealthfront, or any of the other [...] of advisors.
David: Robin Hood or what have you, yeah.
Christina: It is really interesting. I think for those platforms, again, it's like what was the wedge in the value prop that was a lot better for Robin Hood? It was investing one point, Charles Schwab used to call your broker and now it's online, but there are high fees, you're still paying the fees. It's online. Robin Hood's like let's undercut that. I think the next version of that is going to be social actually, like how do you build a community around that separate.
David: You think of speed, too. I actually still use Vanguard, but I don't pay any fees in Vanguard. But it's such a laborious process to make a trade-in there. I wouldn't have considered switching it for that.
Christina: That's right. Speed is obviously huge as well, and just a good consumer interface goes a long way. The Vanguard app, like what?
David: I don't even bother with the app.
Christina: Sorry, Vanguard.
David: I know. I love Vanguard. Amazing company. We should tell that story some day.
Ben: So disruptive, the ultimate counter-positioning story.
Christina: I would definitely listen to one on Vanguard for sure.
David: Oh, that would be so fun. Definitely not a tech company.
Ben: No. This will be fun. Later on when we release the Vanguard episode, it’ll be fun to point to this moment with Christina, where we decided to do the episode.
Christina: Yeah, I'll take credit there. Then when I go and try to send a wire transfer from my Chase account, it's still terrible, right?
Christina: I do sometimes think in this funny way, like macro, all the investment that has gone into Fintech and all the companies I'm looking at, all the amazing things happening, and then my day-to-day Fintech experiences, there actually is still a gap, which makes me excited, frankly, about still investing in this category.
David: Maybe that's actually a good place to bring it back to Web 3.0 versus Web 2.0, Fintech, and the tensions and trade-offs therein. Are Web 3.0 use cases and applications as they get built out maybe the best chance for porting over Bank of America accounts, or Vanguard accounts, or people who otherwise wouldn't have been tempted to switch to new technology players?
Christina: Yes, I do think so. I think there are still a lot of challenges for Web 3.0. It's not fast enough. Are they going to store their private keys on a piece of paper in their little safe at home? There are a lot of consumer questions (I think) that haven't been solved.
David: Yup. I guess BlockFi actually is a first piece of this, right?
Christina: Yeah, which is why I think they're a really exciting company. Like the consumer on-ramp, I think I'm really excited about that. I think there are categories where it makes a lot of sense, like gaming, for example, is an obvious category because you have the virtual currencies, you have the in-game economies, you've already seen sort of this trend in Asia around the super apps and having a more of a consumer-focused, put all your currencies and gaming coins in one place. Maybe we'll see that in the US.
There are places where I think it makes sense. I just think we're still far away on the crypto thing, but I'm an angel investor in a company called Eco, for example. It's built on top of crypto. It's targeting saving and spending but higher rewards. You can get people higher rewards. That's where I'm excited because you can do things that are different on top of new protocols. So yes, potentially.
Ben: I'm going to shift it in what's-it-like-being-a-VC direction. I want to start with a question that I've often asked myself as someone who's often had a day job and a side project. I worked at Microsoft as my day job and I did a bunch of Startup weekends and worked on a bunch of apps as my side project. When I started doing what I'm doing now, this startup studio and venture thing, it was actually my side project that led to that and had very little to do with what I had done at Microsoft. I'm curious as you look at going the venture route and focusing so much on Fintech, did that spring more out of your angel investing or did that spring more out of your work at a firm and GoFundMe?
Christina: I think the deep interest in Fintech sprung from my work at GoFundMe in a firm. I remember the first moment I got really interested in Fintech. I was at HBS and Bitcoin influencer/founder of Xapo, Wences Casares came into our class. This guy's amazing.
David: Awesome. What a story.
Christina: Yeah. I remember this. It was 2014. I was in the classroom when he said, Bitcoin is the Internet. It’s 1992 and you all MBAs really need to pay attention. Why is it you can go on Skype and see someone across the world anywhere instantly, but you can't send that person a dollar. It was just an aha moment for me just around money movement, Fintech, and problems are still left in this space globally in general. That was an igniting moment.
Then I purposely tried to spend my time in my career in it, but angel investing really made me so excited from a day-to-day perspective that I was like, wow, I could be a VC. In particular, I'm a product person. I love building things and I love the zero to one phase. I just started being drawn towards spending more time with the founders that I angel invested in. I kind of got convinced that, okay, there's actually a platform where I can do this full-time and someone will pay me. That's crazy. My husband John, had been a VC at Spark Capital. I had seen that through him, and even the whole time, I can't believe someone pays him to do this job.
David: What do you do all day?
Christina: I do stuff like this. I pontificate correctly or incorrectly.
Ben: My understanding is that that's the main part of the job. That's what you get paid for it.
David: We're going to talk more about liquidity, content, capital, and all that to come.
Christina: I don't claim to have all the answers, but certainly working with people at the earliest stages, thinking through a user and their needs deeply and what's a delightful way to address that? What's a wedge? What's a moat you can build, and what's a go-to-market strategy? I just really love that. I just built conviction that as a VC, I could spend all my time doing that so here I am.
David: It's an interesting year for all of us now, I think, on this podcast episode. Have experienced investing, both as a VC and as an angel capacity. I think we all know that these are quite different beasts. The upside of being a VC is everything we were just talking about, that people pay you to invest in companies, go on a podcast, that's ridiculous than fun. It is, but it also has very, very different dynamics that make it a lot more challenging sometimes than being an angel investor where it's easy to get into rounds. You're not leading and you're not on board, and you're not fighting for allocation, or you're not fighting to lead around. I assume none of this was a surprise to you having been in the ecosystem so long. How did you think about okay, I'm ready or I want to make that transition?
Christina: There's no question that being an angel investor is very different from joining a multistage VC firm, investing out of a $1.3 billion fund where your time is the biggest constraint. You're not just putting little checks into a bunch of companies. You are incentivized to make bold, high-conviction bets, take board seats, and partner with people, which is a totally different beast, and frankly, something I'm still getting used to.
I thought a lot about what platform I want to join. Do I think that I have a right to win both myself and on that platform? For Bain Capital Ventures, we have a deep history of investing in Fintech and commerce. I think I have a competitive advantage being attached to Bain Capital, which is a $130 billion asset manager, a large player on Wall Street, owns a large retail portfolio and a portfolio of other companies on the private equity side.
We’re quite collaborative, so as I thought about what platform that can scale and where in the verticals that I really want to invest in, we have deep expertise and right to win, I was really excited about joining BCV.
Davis: I actually didn't realize that there was still a relationship there. I assume that BCV had spun off Folio, but is that not the case.
Christina: Yes. We are a separate fund, different LPs, and manage fully independently, but still part of Bain Capital. So my email address is @baincapital.com. There are some synergies in terms of the overall brand and the platform, even though it's separate.
Ben: What are some stats on BCV? Just so our listeners can get a sense of the shape of the organization, fund size, number of partners, that sort of thing.
Christina: We're currently investing out of a $1.3 billion fund. We have about eight partners right now. We are very vertical-focused, so we like to be really deep in the areas we invest in and the verticals are Fintech, commerce, application software, infrastructure, and security. We really stick to those verticals and we are multistage funds. We'll invest everywhere from seed, even some pre-seed in the sense of we’ll incubate some companies and we’ll partner really early with founders, so seed all the way to growth.
The kind of way I got introduced to Bain Capital Ventures was via one of my good friends from HBS, who's a partner here investing in growth stage Fintech, Merritt Hummer. It's really fun to collaborate with her. We've been doing a lot of LatAm. My very first week of the job, we went to Mexico together. She also went to Sao Paulo. Matt Harris was the OG Fintech partner.
David: Yeah. OG Fintech investor in the whole ecosystem.
Christina: He coined the term embedded finance and the fourth platform. He's just one of the smartest and nicest people I've ever met. It's just been amazing to work with him and have him as a partner. He's super deep in the ecosystem so I honestly feel really lucky to be working with the people I work with. That doesn't even include all the other partners. Scott Friend is a partner on the commerce side, who I work really closely with, who invested in things like jet.com and Rent the Runway, Attentive, and a bunch of other really exciting companies.
It's actually very collaborative, which, again, a lot of people say from the investing side, but I was almost surprised by how collaborative it is. I love it as someone who comes from a team-based operating background. It's been really good.
Ben: As you think about how you inform your theses, do you go into a hole for a while and do a bunch of research to figure out, hey, I think the market is headed in this direction. Then you know how to approach startups with, as Sequoia would say, a prepared mind? Or is it more I'm going to go meet a bunch of startups and let that shape my view of the way the world is unfolding?
Christina: I think it's a little bit of both. Sometimes you'll see a cluster of companies pop up all at the same time, where it's oh, I feel this pop from entrepreneurs, where it's this spark. Clearly there's something there. Maybe I hadn't thought of it. Let's go dig in.
Other times, it'll be more informed by, I have relationships with a bunch of people in various roles at commerce companies. I'll make sure I spend time talking to them and saying, hey, what are your problems? How are you solving them? Where's the market going? Then I'll say, okay, well, I need to find a company to solve this problem. So it's both.
David: Certainly after you joined BCV, you did something interesting.
Ben: Contrarian, one might say.
David: That was really fun. And actually sparked us doing this podcast episode together, which we should have done anyway. But it's oh, well, we got to talk about this. Well, BCV has had a scout program for a long time, right?
Christina: It's not. It's actually fairly new. I don't know exactly how old it is, but I wouldn't say it’s a long time.
David: Okay. Well, BCV has a scout program like many venture firms.
Ben: But typically those scouts have names rather than pseudonyms.
David: Typically, you added a synonymous scout. Can you tell us about that and how it all came together?
Christina: Yes. This was maybe a contrarian move, like whatever on the job, but I got to know Litquidity on Twitter, where all beautiful relationships are formed on social media, of course. So then we started trading notes on areas we're excited about, talked a lot about crater economy, DeFi, Web 3.0, all the various ways of democratizing finance, giving people better access, and we just formed this relationship. I said, do you want to come be a scout for us? So it's really that simple.because we were really excited about it.
David: Did you talk to anybody at BCV before?
Christina: Actually, no. I didn't. I just did it. Again, back to my obsession with distribution. He who owns the meme, I think Elon Musk tweeted something about the memes of production and I loved that. It's just, I think Lit has a great pulse on consumer culture, in the intersection of memes, finance, and startups. I was like, this is great. Let's work even more closely together.
Ben: Is Lit getting a great deal flow, because of the just unbelievable, I can't look away social media posts, or is it more like Lit is getting a great perspective on where the world's going, so they're useful on that front?
Christina: I think it's really both because Lit has created this community of engaged followers. Startups want to not only distribute to that group, but Lit also has an interesting perspective, helping push the culture forward.
David: This is just brilliant. Lit has about 200,000 Twitter followers, I think. Why wouldn't you want somebody if they were a non-synonymous entity who had that number of followers and engagement in a vertical that a VC firm deeply cares about? Of course, everyone would want that person to be their scout. I just thought this was so brilliant.
Ben: Well, David, you say the 200,000 Twitter followers but if you go look at it, it's 650,000 Instagram followers. The fascinating thing as someone who is not a meme lord but an admirer of meme lords, I like the science behind how people decide to curate different channels differently, and Lit has a very intentional and different way that they engage on Instagram and Twitter.
David: Oh, I'm not on Instagram so I’m missing the whole [...]
Ben: You're missing the audience.
Christina: Got to get on Instagram. No, that's right. I think that's what good influencers do. They often pick one or two channels and now Lit has a podcast too and a newsletter. Lit has diversified channels, but usually I find that influencers pick one or two that they get up to speed, gain a lot of distribution, and then they try to own their customer relationship more directly with whatever channels. Often that's email that's more direct but can be other ones. Let's ask you.
Ben: We're serious podcasters. We can't really talk about memes. We have no idea.
Christina: I think someone made a joke to John that I should brand myself as the VC meme queen.
David: The beast.
Ben: I like that, meme aggregator.
Christina:Yeah. If any other meme accounts want to come chat, call me.
Ben: I think anybody who's anti-meme is missing the future. I mean, to Elon's point, you might say society is going to hell in a handbasket because of it but memes drive people's decision-making. I think if someone sees a sufficient number of memes about a certain company, it decides whether they're going to go work at that company or not, or make an investment or not. They just drive very significant economic decisions at this point.
Christina: I totally agree. I think that's why you see so many people trying to hire meme marketers. Companies are trying to do this. I don't know if it's authentic enough from that angle, but there is no question that a meme is a very powerful medium that taps into something deep, elicits emotion, and drives decision-making. There's no question.
David: Well, this is also part of what I thought was brilliant about you doing this is I don't know any examples for sure, but I am 100% certain that there are many VCs, firms and individuals out there who have meme ghostwriters for themselves or their firms. That would be the obvious easy thing to do. Instead, you went and you were like no, I want to have a relationship with you. I don't want to hire you to come write my memes. I want to have a relationship with you.
What's the business relationship with Lit? Is it a standard scout agreement? Would you do more like that? Would you consider other types of business relationships with influencers and meme accounts out there?
Christina: Yeah, it is a standard scout relationship. To your question around what I consider other ones, I think, definitely, I'm investing in Fintech. I think that a lot of Fintech companies that have broken through, you couldn't maybe predict it beforehand. I do think having a pulse on where people are excited, what's the conversation, and who's able to resonate with the consumer, and then distribute to them is a very differentiated thing today.
I would love to spend more time on that. Yes, I don't think I'm ever going to be the person who makes the memes. I think that would probably not be the best use of my time, although I could argue it is a good use of my time. But certainly, I want to help give those people access to capital and a platform in partnership with me around making investment decisions.
Ben: Someone should raise a fund this way. It strikes me that there's an opportunity to raise a capital pool and then have exclusively the capital allocators, or at least the deal flow. Part of it be a bunch of meme accounts and it's just their capital pool. The hard part is how do you develop the right investment committee out of that, but to the extent that this is the future of distribution to founders, then it's a big problem if you're a capital pool that's not leveraging this.
Christina: Yeah. I think people like Turner Novak, Banana Capital, I mentioned Paki. I think Harry Stebbings was the original one here, turning a large distribution in this podcast into a fund and I think he's done an amazing job. I don't know him personally. That's an interesting idea. Maybe I should do that. No one else takes that idea. That's mine. Call it.
David: Part of what I think is cool about this is in many ways, us, Paki, Harry, as much as we love ourselves, we're the old school. I think the pseudonymity of it is really interesting. Nobody knows who Lit is. Lit could be a 12-year old in a basement and that shouldn't matter. Whereas, who Ben and I are, who Harry is, who Paki is, that matters. I just think this is really cool that not only does this person have influence, they now have capital.
Christina: Totally. There's an open question around, did Marc Andreessen tweet this? Somebody tweeted recently, we're going to be shocked about how we use the internet in 10 or 15 years, and everyone's going to be shocked that your identity is that you disclose so much about you online. I don't know if that's true, but certainly there's a version of the future where you have many different identities and you choose to show different parts of them. I think we're trending towards anonymous for a lot of reasons.
First of all, you can just speak a lot more freely. I think this goes to another question about platform dependence. I don't want to necessarily belabor this point. I love the article substack wrote recently about defending free speech. It was a beautiful defense of it from a tech company, just around we have a trust problem in society. We actually need to make sure that we allow people to have a voice. It is really interesting. I think the crypto movement actually ties into this a lot. So it's a trend, it's something that I am paying close attention to.
Ben: It is interesting how crypto was the final unlock for being able to incentivize you to be anonymous online, because there were lots of anonymous Twitter accounts before that. If you were really serious about developing a whole identity, at some point, you needed to off-ramp to fiat currency. It was like, well, I can stay mostly anonymous but if I'm going to do some kind of revenue generating deal based on the identity and life that I've built, it's a non-starter. I have to be a person who has a job in a real regular person way.
This completes the circle where you actually can build distribution and monetize it, and stay anonymous the whole time without risking doxxing yourself. I think that's not technically true. I think if you run a forensic scan on a crypto wallet, it's pretty easy to narrow it down to a certain set of people, but we're getting there.
Christina: Exactly. It's not technically true. Also, the other piece of this where it breaks down is if you're Delaware C Corp. If you're incorporated in the US, you still are regulated like a financial institution with going through KYC. We don't have free money movement like US companies, very intentionally because you don't want to enable money laundering and you don't want terrorists to be able to move money on your platform.
There's a lot of regulations that are truly useful for this. That's an area that means that the promise of Bitcoin being this fully anonymous money movement, you can't reconcile that fully in the US today.
Ben: All right, I have a left field question for you. What is the least widely-held belief that you believe today? Or another way to put that as maybe what's your most contrarian thing that you personally believe?
Christina: The things I do believe that are contrarian I probably wouldn't say on a podcast.
David: You say those on your anonymous Twitter account?
Christina: Exactly. This is why I needed an anonymous Twitter account. All comes back to that. I don't know how contrarian this actually is. Based on my Twitter account, it is definitely contrarian. I am long, San Francisco. This is talking my book a little bit, being a San Francisco resident. I think that the city is going to continue to thrive. It's a beautiful place to live. We have problems. They seem to be getting addressed slowly.
People are paying attention. It's really exciting to see that. I think that in 5 or 10 years, this is still going to be an important place for technology. Of course, globalization and the fact that you can build a company fully remote, and there are exciting pockets of innovation everywhere. Of course that exists. I'm looking all over the world but I'm long San Francisco.
David: I'm curious in the context of BCV and joining BCV. Many of your partners are not in San Francisco, right? It never happened.
Christina: Yeah, so we have partners in Boston, New York, and SF. Those are our three major locations. Who knows where we'll have partners in five years. Maybe we'll have some internationally. Maybe they will be more distributed. I think for partnership, having hubs is helpful, in my view.
David: It's interesting in San Francisco. I agree, right? There's so much narrative. I actually think it is contrarian to be long in San Francisco. If you're in tech Twitter, everybody's moving to Miami. If you're in the mainstream, San Francisco is going to hell in a handbasket. Is everything wrong with the neoliberal experiment? And yet, there is still such a center of gravity here. I'm not sure that there's anywhere else where you can go for a walk this morning with a longtime friend who is a general partner at a top venture capital firm. I could do the same every day of the week with a different person here. I don't think there's anywhere else in the world that's like that.
Christina: Totally. I was walking in the mission last week with another VC. We just ran into four or five really interesting people on our walk around Dolores Park. I don't think that happens quite in the same way anywhere else. Maybe if we continue to see the city crash and burn and everybody leaves, I could be wrong here but I love the city. I think it's one of the most beautiful places in the world. I think that the quality, the idealism, and the desire to build is deep-rooted here. I'm here to stay.
Ben: That and deeply-entrenched network effects.
Christina: That definitely helps.
Ben: All that is true. My God, is it hard to chip away at a flywheel that is that big and spinning that fast? You have some pandemic that's creating some friction, so it slows the flywheel down a little bit. But to stop a flywheel and get it to spin the other direction is an immense task.
Christina: That is exactly right.
David: How are you thinking about how you're spending your time now at BCV? In some ways, that's sort of a trick question. It is like VCs are always thinking about that. But given that you're relatively new starting out and are coming in with all of this context. I'm curious in every dimension, location, and travel. Your first week, you're in LatAm, which is awesome. We were texting about that and we were so happy, especially our relationship with SoftBank, LatAm, and everything going on there. And yet, also San Francisco, and partnering with Litquidity. How have you thought about this question coming into the role?
Christina: This is such a good question. This is the number one biggest difference from a day to day perspective, being an operator versus a VC. As an operator, you know how to spend your time. As a VC, there is absolutely no playbook. Also, there are many ways to get it right. I think for me, the key thing I've been doing is trying to build the flywheel of people and ideas, so that I can be in the mix. That will help me over time develop the larger theses and areas I want to double down on, and the geos that I want to double or triple down on.
Today, that looks like spending time with my network and the smartest people I know, spending time with early-stage investors or people who are on the forefront, whether that's a meme account, or an engineer at X Company. Then the rest of it is really just meeting great founders in any way that I can and trying to partner with them early and be there hopefully before someone else's. I know it's just really competitive these days, but I think that's where I get excited. I want to try and be there and be a partner to them as soon as I can. The flywheel I don't know. It's going to evolve but it's great. It's just spending time with smart people.
David: What did those meetings with those founders look like? I imagine they're not coming to the office in San Francisco to give you a formal pitch for a round that they are formally raising. I'm guessing that happens 0% of the time these days.
Christina: It's maybe 1%.
David: Not zero? That’s the contrarian move to do that.
Christina: Actually, I would love to do more in-person stuff. I was trying to be a little bit careful with Omicron, but I miss in-person. I think that the difference between Zoom and in-person is vast in terms of relationship-building and cutting through the noise and just getting to the core of, okay, what are you building and how can I help? Ultimately, today, you have to get to how I can help faster than before and that's part of the reason why I wanted to be really focused on Fintech and commerce. You have to be deep already. Then you have to evaluate quickly and you have to get to how do I help quickly, so in-person helps with that.
David: How many of those meetings and interactions with founders of a company that you might lead a round or you want to lead a round? Is it a formal meeting or is it text? Is it getting introduced? What's the process like right now?
Christina: It totally varies, I would say. It depends because sometimes I'm meeting someone, they're like I'm raising a Series A, and we're already in process with a bunch of firms. I'm like okay, we got to scramble. Versus if it's building a relationship that might look different. A lot of time on Zoom, a lot of time, if I can see them face to face, go for a walk, meet in the office, whatnot.
Then I think when it gets closer to a fundraising process, I like to have them get exposed to other people in the partnership, maybe meet some of my partners, loop in some of the other people on the team to really show the collaboration, and also show how we want to help you specifically. If I can, I'm already saying here's some customer intros, here's some ways I can help. I'm not an overly formal person. I'd love for everyone to be able to be comfortable texting me. That's the relationship I strive to have with the founders I work with.
David: It's funny hearing you say that. It's not that different. Some of the mediums have changed. It's not that different from how things used to go down, at least in my experience, back when I was at Madrona leading rounds there years ago. For that relationship, to lead a round to be a major investor, I think on both sides, you still want that depth of relationship before you enter into it, which is so different from an angel investor.
Part of the reason I asked is most of the rounds I do these days are in a text. There's no Zoom involved. There's no talking, there's no face to face, but it is still very different in an institutional context.
Christina: I think that's true. The product that BCV is trying to offer is and we strive to offer is we're an active investor and partner. Now I think there are different VC products that are not predicated on that. Maybe that's, hey, actually, we don't ever. We're just money. That would be different.
David: That definitely exists in the market.
Christina: That definitely exists in the market. It's something that the market competes against. I think for the value-added investors or people at the earlier stages, I don't think there's something that replaces a relationship. The way people build relationships have changed because of Zoom, but the fundamentals of the relationship isn't different and hasn't probably changed for a very long time.
Ben: Well, speaking of building the relationship, Christina, if folks are listening to this, and they're oh my God, I have the perfect startup that Christina should know about. Perhaps they're another venture investor that wants to work with you. What's the best way to find you on the internet?
Christina: I'm on Twitter. My email is email@example.com. Twitter or just if you google me, you’ll find my email address. We'd love to hear from you.
Ben: Awesome. Well, we'll link to all that in the show notes.
David: I hear Twitter is a great place for building relationships.
Christina: I love Twitter.
Ben: I hear that too. Alright, well, listeners, thank you so much. Thank you also to Tegus, our presenting sponsor for this episode. We’ll see you next time.
David: We’ll see you next time.
Note: Acquired hosts and guests may hold assets discussed in this episode. This podcast is not investment advice, and is intended for informational and entertainment purposes only. You should do your own research and make your own independent decisions when considering any financial transactions.
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