WSO Podcast | E96: VC Vice President Gets his Break on an Airplane
About
In this episode, Steph shares his very unusual path into venture capital. We learn how his lack of a traditional background both helped and hurt him repeatedly throughout his career. Listen to find out why he thinks he was successful and why when you drop out of VC it's so hard to get back in. Learn one piece of critical advice he'd give his younger self and his future plans.
WSO Podcast
Or Listen to the Podcast Here:
Apple Podcasts
Spotify
Stitcher
Resources:
WSO Podcast (Episode 96) Transcript:
Patrick (CEO of WSO): [00:00:06] Hello and welcome. I'm Patrick Curtis, your host and chief monkey, and this is the Wall Street Oasis podcast. Join me as I talk to some of the community's most successful and inspirational members to gain valuable insight into different career paths and life in general. Let's get to it. In this episode, Steph shares his very unusual path into venture capital. We learn how his lack of traditional background both helped and hurt him repeatedly throughout his career. Listen to find out why he thinks he was successful and why. When you drop out of VC, it's so hard to get back in there in one piece of critical advice, he'd give his younger self and his future plans. Enjoy. This was a really fun episode. All right, Steph, thanks so much for joining the Wall Street Voices podcast. Such a pleasure. It'd be great if you could just give the listeners a short summary of your bio.
Steph: [00:01:03] Yeah. All right. So I'm a venture capitalist by training. I've been a VC since twenty thirteen. Before that, I worked in Ingwe Bank, which is where I got started. And before that, I studied a double degree one in science, majoring in biotechnology and another one in majoring in economics. So that's kind of a very high level, and I'm sure we'll drill into that.
Patrick (CEO of WSO): [00:01:31] For sure. And then specifically, so when you started, like in undergrad, was finance or VC ever an interest for you?
Steph: [00:01:41] Yeah. So it actually took me a very long time to decide what I wanted to do professionally and people used to tell me all the time, you know, don't worry so much about the future. But in retrospect, the fact that I got where I did seem so unlikely and serendipitous that I really feel like I should have been a lot more worried. And you know, I tried. I spoke to career counselors, but no one gave me concrete information over what salaries looked like across industries or what a day in the life would look like for different professions. And I landed on finance kind of by accident. You know, I enjoyed economics at school, and I knew some of my parents, friends who studied economics and who had been very successful in their careers. And I liked watching Dragon's Den, which was kind of the early British version of Shark Tank before it became Americanized. And you know, that was that was the primordial soup from which my my econ major emerged. But without much more focus than that, I could have easily been very lost. When I graduated, I only found out about halfway through my degree that if you wanted to be an economist, you really had two options in New Zealand. You could go work for the Treasury or you could go work for the central bank, which is kind of what the Fed is here. And you were very unlikely to get either job because of the number of applicants. And frankly, even if you did get those jobs, you know, the pay wasn't great. So I kind of ended up I remember having this feeling, you know, why wasn't that pasted front and center on my econ prospectus when I was making my major choice? And a little later, I was attending this leadership program that attracted many people from very high paying jobs, lawyers, engineers. And I remember they were all very impressed with this one guy in the program who had just been offered a job as an investment banker. And I think my thought process, basically when something like these guys are impressive, the impressive guys think the banker is impressive. Therefore, banking is impressive. I'm going to become a banker, and that was the sophistication that went that life altering decision. And so, you know, I started to look into it, and that's when I landed on Wall Street Oasis. And finally, I found a community of people where people actually talk about compensation, they talk about progression, they talk about exit opportunities. This was all stuff that I was just starving for when I was studying. And with that, I also landed on the harrowing realization that if I really wanted to be an investment banker, I would have had to apply already to certain schools. I would have had to have been networking with certain people, and I hadn't done almost anything right to date. And I just felt like you're going to be. This would have
Patrick (CEO of WSO): [00:04:17] Been my sophomore year or
Steph: [00:04:19] Yeah, this would have been probably about so I did two undergraduate degrees in tandem. So it was a it was a five year program, so this would have probably been around twenty seven. Yeah, about two or three years into my program. Yeah. And you know, many years later, I actually had an associate who we hired out of out of NYU MBA program. And he made the point kind of really just casually offhand that information about opportunities is often one of the largest barriers to moving up in your career. And that just landed on me like a hammer that just resonated with me so strongly in terms of kind of where my path had taken me. Yes. Yeah. You know, on the one hand, I wish I had more guidance in focus. And on the other hand, I'm really glad it didn't, because perhaps if I knew too much, it would have seemed like such an uphill battle that I would have never even tried. And I think I landed in this beautiful, sweet spot between ambition, hubris and delusions of grandeur that just really let me do what I did. Yeah, so very much, very much an accident and not a straightforward path to getting here.
Patrick (CEO of WSO): [00:05:25] So let's talk about kind of being at such a small school in New Zealand of all places like what are the prospects in New Zealand for investment banking? Are there you shops there or there?
Steph: [00:05:36] Yeah, hardly any. So Macquarie is over there. But yeah, no, not many. And you know, I was I was at university. I'm just kind of trying to take myself back to that. I'm at university. I want to get into investment banking. The traditional route seemed close to me. And so really, with without kind of a clear path to that, I started taking opportunities that seemed like they would get me one step closer, even if they didn't get me there. And Wall Street Oasis gave me this vocabulary heatmap of sorts, right? Include words like analyst and banking and fund, and that became my North Star. So if I couldn't go straight to being an investment banker, every job I took had to at least get me a little closer. And at some point I got the opportunity to go join ING Bank on something that at the time was called the ISEC management traineeship, which I, very unorthodox, arranged as a sort of rotational management traineeship through several departments. And this had nothing to do with finance. I would be joining their internal communications department, but it had the word bank and bank was on my career word cloud. So I figured, you know, I might meet people doing the investment in that role, and then I would kind of weasel my way in that way.
Patrick (CEO of WSO): [00:06:52] It's not. It's not horrible to think that way. At least you're in the right kind of right firm.
Steph: [00:06:58] Yeah, kind of. Except when the opportunity finally did come, you know, I had an opportunity to tour a trading floor. So we were just doing this report on what was happening. This was the height of the global financial crisis. Know what was going on. Yeah. And I kind of asked around, you know, what would it take for me to work here? But I ran into a variant of the preparation problem. And so unlike in the U.S., I went to the Netherlands to do this internship because Angus, headquartered in the Netherlands. So in the Netherlands, most people get a master's degree. And so, you know, suddenly, oh wow, there was this extra step now that I had to take if I even wanted to work in the bank over here. So I studied for my Jamat. I pulled out a half decent score. I applied to one of the top business schools in Europe, the Erasmus School of Business, and I was outright rejected. And so at this point, you know, I'm feeling pretty significant headwind. And I started looking for opportunities to tack into the wind to borrow a sailing analogy, which will be hilarious to anyone who knows what a terrible sailor I am. But I start tacking is maneuver where you can't go straight into the wind. You start kind of zig zagging in the direction that the wind is coming from. Right. And in my case, that meant looking for another step that wouldn't get me directly to where I wanted to be, but that would get me a little closer. And that next opportunity came for me when I was on an airplane, and I, this guy in full Jewish Orthodox regalia, comes and sits next to me. And I was going through a bit of a militant atheism phase at the time and was arguing with anyone who would listen. But I decided to be good and I decided I wasn't going to go there and we start talking. And by that stage, I had kind of weaseled my way into working on a technology project. Wait, a
Patrick (CEO of WSO): [00:08:41] Second, you had been, yeah, you had been. Ingwe was kind of your first step right out of school, correct? Yeah. Yeah, that's right. Tell me a little bit about how do you even get that job and. You know, with any of the work ended up being, did any of the work end up being it was all communications like you were, you were a project director, right? But what does that? What does that mean?
Steph: [00:09:01] Yeah, yeah.
Patrick (CEO of WSO): [00:09:03] Before we move on to the to the serendipitous airplane meeting?
Steph: [00:09:06] No problem. Yeah. So yeah, so my first role was to work for the internal communications team. Again, this was the height of the global financial crisis. So our main job was basically just to sync it up as an organization just to get everyone's expectations set up on what was happening around us. It was the world ending or not? Mm hmm. And we, I mean, just to give you a sense, for example, we had this these crazy catch twenty two situations whereby India would fire five thousand people, right? And but they couldn't tell us internally that they were firing five thousand people because it could cause the stock to plummet. So the workaround for that was they were going to have a five a.m., six a.m. call, right with the analyst, with the market analysts who were watching IAG to tell them, Listen, you know, we're going to let go of all of these people. And then they would call us, they would tell my team, Listen, you've got to be in at 4:00 in the morning and 4:00 in the morning. We're going to tell you what's happening. So that doesn't give you any time to go leak this out to anyone else, right? So that it doesn't hit the market before we packaged it exactly the way we want to package it, right? So 4:00 in the morning, you'll get the information and you have two hours to basically translate this into eight different languages. And this email is going to go out to the whole company to let them know that 5000 people are being let go of. Wow. And I was working in a department of 60 people, and I was one of three native English speakers in that department. Wow. So very often, you know, I was literally correcting the spelling on these emails that were or the grammar on this, on these emails that were going out. And because these emails were pretty central, you know, we work directly with the C-suite. And so I got to build some. I got to build some relationships with some members of the C-suite, specifically with the guy called John Evander Bosch at the time, who was the chief procurement officer for Angie. And I had an idea for a project which I thought was going to save us a bunch of money. I pitched it to him, literally in an elevator. So taking the elevator pitch to like a complete literal definition. And he loved it, and he said, Cool, you know, like you're hired. Here's a budget move to my department and you can work on actually building this product out.
Patrick (CEO of WSO): [00:11:28] Do you mind sharing what that was or you can't?
Steph: [00:11:30] Yeah, no, that's fine. So at Ingwe, we had this and most large organizations have this problem where basically they end up outsourcing work for skills that they have internally within the company. So this became super clear to me when a colleague of mine came to me and said, Listen, Angie in Greece just released this great recruitment video and it was made in Flash, right? The problem is that it has in Greece written all over it, and I want to just take out the word Greece and use it for our country, right? But to get someone at the time who could code and flash right to do this thing. Like when she was quoting this to external organizations that sell a cool twenty thousand euros right to get this thing done, just to remove the word Greece from the video. And you know, again, we had this whole procurement thing, so we would negotiate, and I think she managed to get it down to twelve thousand euros. But it's a huge waste. But it's insane, right? Like if you had one person inside the organization who has these skills, they could do it in five minutes. Right? So I basically just built a platform where you could say, Listen, I have a budget to outsource this. This is what I've negotiated to outsource this externally. If you can get this done internally for me, right? This will save Angie as an organization. This much money, right? And it was basically just a central repository for people to say, Here's what I'm planning on outsourcing. Can anyone save me this amount of money by doing this internally? And then I, Angie had this way of crediting internally within the departments. They could say, OK, well, you know, you saved us so much money. So we can we can.
Patrick (CEO of WSO): [00:13:02] We can bonus to you.
Steph: [00:13:03] Yeah, yeah. So, so so that was basically the idea on a very high level.
Patrick (CEO of WSO): [00:13:06] Were there any cash rewards associated that like the twelve thousand dollar project, if somebody took that, do they get like a thousand bucks or something?
Steph: [00:13:13] No. So that turned that turned out not to be positive. It was very much like all kudos. And this was also around the time that we were start. Like we had, you know, badges and we had like little kind of, yeah. So it was it was all social credit
Patrick (CEO of WSO): [00:13:26] Kind of fun. Yeah, very gamification. Yeah, kind of community oriented like Wall Street Oasis. Yeah, bananas. Ok, so. You're doing that for a few years. Do you like it? Is it fun? I mean, that's that project that take up the most of your time?
Steph: [00:13:42] Yeah, I mean, so it was fun in the sense that it gave me access to to very kind of high flying people. Yeah, I got to, for example, interview the CEO of IMG Brazil that had like, you know, a very cool expansion project that they were doing, he said. Yeah, show up at my hotel. You know, I'll take you to the C Suite for breakfast over here and like, we'll talk about what we're doing in Brazil. So that was super fun, but nothing to do with finance really right? I was just working in a bank on communications. So it became clear to me that like, I would have to leave. And that's why I ended up taking this position to work on this product for the tech team, because that was a little bit closer to what I wanted to do. It still wasn't finance proper, but it was procurement. So it was saving money instead of investing money, and it had to be working with engineers and designers and tech people. So that was just kind of it was somewhere on my heatmap that was a little closer to where I wanted to be.
Patrick (CEO of WSO): [00:14:38] Got it. So you're kind of tacking toward a
Steph: [00:14:42] Towards this
Patrick (CEO of WSO): [00:14:43] Goal. It sounds like the goal still here is to get to finance. You still held investment banking and super high esteem kind of is that is that accurate or at this point where you was VC on the map at all?
Steph: [00:14:53] Yeah, I did hold investment banking in very high esteem. I also helped trading in very high esteem because, as I mentioned, we had a trading floor at Ingwe. Yeah. And the traders were some of the smartest cookies I got to meet, and V.S. was always on my heat map. As I mentioned, it was a big fan of the TV show Dragons Den. Yeah, and also one thing I had mentioned I'm Israeli. I was born in Israel and Israel for this not very known outside of Israel or outside of the VC scene, but Israel's brand today as the startup nation, right? It completely disproportionately punches above its weight in terms of VC funding, in terms of startups created in terms of unicorns created in terms of IPOs, in terms of patents filed. So that was kind of always part of the grey noise of my extended network. Hmm. And so, yeah, that was very much on the heat map, too.
Patrick (CEO of WSO): [00:15:44] So let's go back to the plane ride. So you're on a plane? Yeah, where are you flying and what's going on? So I had
Steph: [00:15:51] I had just been visiting family in Israel, and I was flying back to New Zealand, where I, where I grew up and where I went to school. And I was flying to New Zealand via Korea, and this guy comes to sit down next to me, who was on a business trip to Korea. He was a project manager for a Danish company that made software for forex trading. And I was working on a project at NYAG Bank, and so we had a lot in common with what we were doing. And so, yeah, we got we got talking. And he said, Listen, you know, if you're ever in Israel, I'd love to take you out to lunch, give me a call. So I kept the lead very warm, you know, and I knew he had a few topics that he was very interested in. He was very interested in Chinese politics, for example. So I read up everything I could in Chinese politics. So it was always just forwarding him little articles that I was finding in Chinese politics. And about a year later, I find myself back in Israel and I say, Hey, listen, you know, let's grab that lunch. So we talk. And he says, Well, what do you want to do
Patrick (CEO of WSO): [00:16:52] Before you go further? Why did you did you know instinctually how important networking was? Like, how did you know to keep that lead warm and send those stories which just from reading Wall Street, Oasis a hundred times and people screaming, networking over and over again? Or was it just something that comes natural to you where you felt like, Hey, I or this guy just seems really important, I'm going to fall?
Steph: [00:17:13] Yeah. So a few things over there. So first of all, my mom is just a networking master. I have that as an example from a very young age, very cool. So I think that was part of it. Another part of it was, you know, as I mentioned, I had tried to follow the straight and narrow formula and I was hitting doors wherever I turned, right? So it was very clear to me that I wasn't going to get into an investment bank through the front door. Like I just I hadn't done anything right to date. I was going to have to do it in an alternative way. And so networking just kind of seemed like the logical way to do it. That finding you were going to have to have something that wasn't going to be on the on the checklist.
Patrick (CEO of WSO): [00:17:54] I agree. I think that is OK. So you were you were savvy enough or at least your mom had taught you enough growing up that you did that kind of instinctually naturally where you're like, Hey, I'm going to keep in touch with this guy. I'm going be back in Israel. And it could. Who knows what it were?
Steph: [00:18:09] Yeah, I mean, yes, but I would just take out the word naturally. And you know, my mom, if she ever gets to listen to this, will laugh at this. But for the longest time, you know, I would I would try to corner her and say, like, how do you do what you do, right? Like, how do you get people to like you? Because to me, it just seemed like black magic. Like, I never understood how people could do that. And because it just seems like something that took. So much effort and had such a low chance of actually paying off. You know, I'm like a very kind of like rational cerebral
Patrick (CEO of WSO): [00:18:44] Person, a little more a little more cynical.
Steph: [00:18:46] Yeah, but I just think I think very statistically, right? So like I know that of the last 20 contacts that I've made, right, like maybe one of them has been useful, right? So right then for if there's a five percent hit rate and then becomes very difficult to motivate myself to quote unquote network when I know that this only has a five percent chance of being successful. But, but you know, like just through elbow grease and grit, I just eventually kind of like it slowly sunk in that, yes, this is important and it's a numbers game. And if you do enough of it, even though most of them will fail, the five percent that materialize will be a big deal. So, yeah, that was that was kind of eventually I did learn that lesson, but I wouldn't say it came naturally at all. Well, you were
Patrick (CEO of WSO): [00:19:27] While you were at NYAG before this, before this plane ride that ended up changing your life, we'll get to that. Were you kind of actively networking throughout, through within IAG and outside IAG?
Steph: [00:19:40] Yeah. So I mean, I guess my shift from internal communications to IAG banking to IAG, IT banking, which is where I led this tech project that was a contact that I made with the chief procurement officer. So that was a great example of networking. My project also ended up getting picked up within IAG, right? So it got picked up by our internal IAG TV, which was my former team, right? So that's kind of like back networking through your previous contacts within the organisation. Iag also opened something called a customer success centre, which was this area for what they were calling entrepreneurship right. So entrepreneurs within IAG to come in basically float all their ideas and work together and collaborate on all these cool projects. So they had heard of my project and they said, Hey, listen, you know, if you come here, we'll give you a desk so you can work on this thing and make it work. Yeah, so definitely networking the whole way was very important. But unfortunately, none of those things materialized into what I wanted them to be. None of us worked out to be a job in finance proper, but they definitely gave me a lot of experience that I could then later leverage to getting that job.
Patrick (CEO of WSO): [00:20:46] How did you have the guts to even pitch that in the elevator to such someone so high up?
Steph: [00:20:50] Yeah. So I think part of that is cultural. So again, born in Israel, raised in Israel and Israelis are just notoriously disrespectful of hierarchy. So this there's actually this bringing in the Netherlands back again. There's this Dutch researcher called Hertz hurt Hofstetter, who he has an organization called Cultural GPS. And what he did is he went and he mapped every country in the world on how they compare on all these parameters and, for example, how individualistic versus collective you are. You know, America is a very individualistic Chinese. People are very collective, right? But t on this one measure, how respectful are you of authority when they finally came to put Israel on that scale, they just broke the scale, right? Like as well as just completely off the chart and how disrespectful they were authority. So I would say. Part of that is cultural, and then part of that was also just my nature, and part of that was that I'd had a lot of practice in activities that I'd gotten involved in in school and just dealing with people like that.
Patrick (CEO of WSO): [00:21:54] Do you have any guesses to why that is culturally?
Steph: [00:21:57] Why are Israelis? Is it so I think I think part of that comes part of that comes from the from the military. Right. So in order to be and I didn't go to the military as a disclaimer, I left Israel when it was 12. But people like military strategists will often talk about this. For example, they say that in order to be effective as a military, you have to be very decentralized, right? Because in a in a combat kind of situation, things I've smoked all the time. Yeah. Things are changing all the time. No single person can process all that information. You have to decentralize decision making and autonomy and authority to people in order to actually, you have to empower people to make decisions in order to actually be effective. And so I think I think part of that is just trained into Israelis in the military and then that kind of trickles down into society at large. That's fascinating. So I think that's that might be part of it. Yeah.
Patrick (CEO of WSO): [00:22:52] Very cool. I learned something new. So, OK, so your let's get back to the. So you go back to is you find yourself back in Israel a year later after this initial kind of plane ride and you had been kind of keeping the contact form, sending an interesting articles on Chinese politics, which was this. And so tell me how that all went.
Steph: [00:23:13] Yeah. So he says to me, what? What do you want to do right? And I said, Well, Start-Up Nation, I want to work with startups. So he says to me, OK, so you got to making an appointment for it. You've got to be at this address at this time. Show up and I'll meet you there. And so I rock up at this house and this is in Jerusalem and in Jerusalem. Real estate is ridiculously expensive because you can't throw a rock without hitting something sacred. And I show up at this house and it's huge. And that already tells me this guy is loaded and, you know, like walls and cameras and the whole thing. And I get buzzed in and as I'm walking into the property, I get a call from this guy, Danny, who had set up the meeting for me. And he says, Listen, I'm so sorry, something came up last moment. I'm not showing up. Just talk to Alan and he's a nice guy. You'll get along with him. Great. And so, Alan, this guy brings me into his house and starts walking me down the staircase and it's, you know, two stories underground or something like that. And at this point, you know, I start having like, how well do I know this guy who I met on a plane two years ago that I'm now underground in this guy's house who I've never met before behind a big wall, right? But anyway, it turns out to be totally fine, and he sits me down in his office and he says, What's your name? Simple question now. I had been going by Steph Jansen for 14 years by that stage, but I was born Steph or Stefan Allen Isaacson, which is my Israeli name. Yeah, and I hadn't used in so long, you know? But I just I was back in Israel and I said, OK, I'm going to use my Israeli name. So I introduce myself. It's 16, and he says to me, it's six, and I know that name from somewhere. I've never met anyone who knows my last name. Yeah, but he says to me, Where's your father from? I say South Africa. He says me too. He says, where in South Africa? I say Johannesburg? He says me too. Where in Johannesburg? I had to ask my dad, and he says, that's where I know your dad from. We were the only other Jewish family on that same street in Johannesburg, South Africa, and then he names my aunt because he went to high school with her. That's correct. So it was just like the craziest coincidence. And so he was religious and he took it as a sign and there and then just picked up the phone and called up the fund manager who ended up hiring me, said, John, you've got to hire this kid, and that was it.
Patrick (CEO of WSO): [00:25:42] And so what fund was this, what was this next role?
Steph: [00:25:45] Yeah, so I joined a VC fund in Israel called OurCrowd. And this was it's very much in its infancy. Ourcrowd was a at the time, I think, I think, something like $50 million in assets under management, like very small fund. I think the biggest deal we were doing at the time was a two point five million dollar check and that was considered huge for us. Yeah, but it very quickly just exploded. So today, OurCrowd manages one point five billion dollars in assets under management. It is, you know, has invested in something like two hundred or so companies. Many of you know, along said all the largest VCs in the bay. So alongside Andreessen Horowitz, we did a deal. We did a deal with NEA four or five deals with Khosla Ventures. We invested in an L.A. based company here with Marissa Myers, who was the CEO of Yahoo. And before that, one of the early employees at Google. She started the APM program at Google with Eric Schmidt, who is the chairman of Google. A deal with Mark Cuban. Right. So going back to the Shark Tank, yeah, we were in Hyperloop before Richard Branson came and made Virgin Hyperloop 20 exits, including jump bikes, which those red bikes that you see all over the place that we sold to Uber. Beyond Meat. So we became one of the most active VC funds in the country. And yeah, that was that was our crowd. We're super lucky. And then why do you say you were lucky? Well, I mean, I guess I was lucky just in the sense that it's not like I joined an elite VC fund straight off the bat, right? I joined a tiny VC fund back then. Yeah, then just exciting.
Patrick (CEO of WSO): [00:27:27] Why do you think it exploded? Did you guys have some early exits that were very successful or was it just.
Steph: [00:27:31] No. So we actually had a completely different approach to to VC investing. So traditional VC funds will raise their money from limited partners that are big, stable institutions. I think pension funds, university endowments, things like that, right? Yeah. What we were doing is we were actually doing something called equity crowdfunding, which is kind of a category that we invented alongside Angel List. And so what we were doing was we were vetting deals with a team of investment professionals who are all former Goldman, Lehman, Blackstone, those guys. Right? And then we were finding deals that we very like. We're putting up about only about five percent of the value of each deal from our own money and by our own money. I mean, from our crowd's initial founding LPs, right? And then we were crowdfunding the remaining ninety five percent of the deal through the internet through a network of accredited investors, which today is about twenty thousand people large.
Patrick (CEO of WSO): [00:28:30] But how did you get that initial kind of high net worth individuals? How was that initially sourced? Was it just through the friends of this guy? You ended up in this? Like, was it his close friends initially who happened to have enough money to throw? Yeah.
Steph: [00:28:45] Well, so yeah. So the reason Alan was able to get me the interview with with John was because Alan happened to be, at the time, our crowd's largest investor. So it was, yeah, very much started as a group of friends and family. John, our CEO, is kind of a founding father of the VC scene in Israel, sort of an Israeli, Tom Perkins, if you will. And he basically just knew everyone. So a lot of people were signing up to be part of his network. That was just his life's work to build that group of people. And so we were able to grow very quickly from a VC fund with, like I said, you know, I think less than 50 million or so in assets under management, maybe one hundred million. I can't remember the exact number, but today again, well over a billion dollars.
Patrick (CEO of WSO): [00:29:30] Or is it still crowdsourced each deal? Is it still done?
Steph: [00:29:34] No. So today some portion of the deals are crowdsourced. Ourcrowd since then has also started raising traditional venture funds. So, for example, they're right, they're raised in I fund. They're raised to fund focused on seed investments, a digital health fund and agritech fund, a robo fund, investing and following investments only. So they have a traditional fund business, and they also have a fund of funds business. So OurCrowd was one of the seed investors in Manila, which is one of the big mobility funds and several other kind of like micro venture funds that are now very active in Israel and all over the world.
Patrick (CEO of WSO): [00:30:12] So you had moved from Amsterdam in the Netherlands to Tel Aviv to Israel? Yeah. Tell me a little bit about kind of that initial first jump like, OK, from that conversation of you've got to hire this guy, did you have to go through any sort of interviews or was it just like a done deal? And how long did it take you to kind of the energy and what was the whole process of moving there?
Steph: [00:30:33] And kind of, yeah. So I did have to go through. So I went through an interview first with the CEO and then with my eventual manager. But even that, you know, was interesting, so when they hired me, John said to me, Listen, you know, I've got three vacancies open right now. I can give you a choice of working on marketing, on Biz Dev or on investments, right? And of course, for the first time, my little heatmap word cloud went ding, ding. Right? I heard the word investments. And so, you know, there's this beautiful quote that the Cheshire cat says to Alice in Wonderland. She says to her, You know, she's lost. So she says, You know, where do you where do I want it? I don't know where to go. And the Cheshire cat says, Where do you want to go? And Alice says, I don't care much, and the cat says, Well, then it doesn't matter which way you go. And it's, you know, it's a kind of a children's story, but I think there's a real lesson there. It's really important to have plans, and the plan usually doesn't survive contact with reality. But in the absence of kind of like a master plan, any opportunity can seem as good as the next. And for a career in finance, that's just not good enough. There are certain moves that you have to make or it gets very difficult. And if you know what you want and if you know what those moves are, even if you can't have a now, the next best move that's available to you becomes very clear. So, you know, that's kind of the number one piece of feedback I give to people now is, listen, if you want a career in finance, you've got to have a plan and you've got to know what those moves are that you're planning on making. Because doing it the way I did it is just a luck of the draw.
Patrick (CEO of WSO): [00:32:07] But patience is also so undervalued. I feel like to there's, like you said, if you have that master plan in place and you have an idea of, well, this this actually, if you have the knowledge to know that this position actually is slightly closer to the eventual goal, you'll know when that opportunity presents itself. So like you heard investment, you're like, I can be an investment professional and I can get it on my resume. It was like, Yeah, it was an easy choice for you. It sounds like you didn't want to do marketing or biz dev.
Steph: [00:32:33] You want it to be. Yeah, yeah, no. I agree.
Patrick (CEO of WSO): [00:32:37] Intimidated by like, Oh wow, what do I have to know? I don't know all this finance stuff? Or did it matter? Did it not matter?
Steph: [00:32:43] Well, you know, again, I'd taken finance classes at school, so I wasn't coming into this completely unprepared, and I'd worked around bankers and taking every opportunity to ask people about their job. So I pick and read a lot of Wall Street oasis for a lot of books and a lot of podcasts. I picked up a lot of the jargon that I needed right to do the job, and at some point also you just got to be willing to make the jump, right? I mean, yeah, like I wasn't totally prepared, but also I was like, Hey, you know, I've been I've been waiting for exactly this to happen half my life. So it's time to just take the leap and make it happen.
Patrick (CEO of WSO): [00:33:18] So you take the leap and you moved how long within a month you were moved or three months? What was it?
Steph: [00:33:24] I don't remember.
Patrick (CEO of WSO): [00:33:25] I remember, but you got the job and you said, I want to be the best professional. He said, OK,
Steph: [00:33:29] Yeah, I got the job and moved to Israel. Ourcrowd started completely exploding. You know, like I said in the early days, a two and a half or $2 million deal would have been a syndicate of about 200 or so investors, which we would manually put together. Yeah, by the time I left, we're not even by the time I left. A few years later, we were making twenty five million dollar investments in companies like imprest, which is the software that runs Israel's ballistic missile defense system. So like, pretty, pretty mission critical software companies. And we were being followed into those rounds by huge investors, right, like massive corporate venture capital funds and things like that. And OurCrowd, at some point to syndicate a twenty five million dollar deal. You no longer can do that manually, right? That's not just two hundred investors that could. Yeah. So at that point, we had to really build some backend software to automate some of the processes that we had going inside out. And, you know, being a former software project ish project manager esque right, I kind of got involved in that and I started asking around, You know what? What are we? How are we thinking of doing this? And what came out of that is, you know, we should take our own advice that we give to entrepreneurs all the time and we should say, listen, if we should go hire 30 engineers and brand ourselves as a fintech company, as well as a VC fund and start building some proprietary in-house software. And we set out with the mission of building basically a Bloomberg for private equity. So today, if you want to invest in a stock you, you can go to Bloomberg and you can all the research reports in nice and organized and everything is in one place. If you want to invest in a startup today, you don't really have a tool that says, here's a professional research report written by industry experts about this particular software and about the market and about the competitors, and about how you should be thinking about this investment. Here's the terms that you need to understand. Here's exactly what they mean that resource didn't exist. Yeah, so we went out to build it, and we raised huge amounts of money. I think more than a hundred million dollars at OurCrowd valued OurCrowd at 360 million. Pre-money. And, you know, as one of the first employees in our crowd joined in its first year or so, you know, I had equity and it was it was just amazing to see, you know, what does it look like to build a company worth half a billion dollars? How does it look like to be part of a team that's growing so quickly and just capturing market share? So that was crazy. Yeah.
Patrick (CEO of WSO): [00:36:05] That's amazing, so did you feel like you were going to be there forever? What kind of prompted you like you're there for almost four and a half years, over four and a half years? Yeah, yeah. Tell me about how it evolved, how your job. You said you did a little bit of almost like a product management role. You're doing the investment role as well. How did it evolve over time as the fund started getting bigger and bigger and you started working more on that kind of that?
Steph: [00:36:27] Yeah. So I was primarily involved as an investment analyst over there and eventually got promoted to an associate, then to a principal.
Patrick (CEO of WSO): [00:36:37] He told me that was there, like a team of like 10 of you that were kind of looking at every deal coming through the door.
Steph: [00:36:43] Yeah, yeah, exactly. Yeah. So there was there was a team of us pretty cookie cutter finance guys. You know, my one of my managers headed of the equity research division for Lehman and then for Goldman and then Lehman in Israel. The other one was a Wharton grad who just come out of Blackstone. And so, yeah, they they very, very kind of like standardized finance. People were looking at deals in the very standardized finance way. And we were, yeah, evaluating startups that were coming through the door, deciding these are the ones that we like and deciding these are the ones that we want to put through to the crowd to fundraise from.
Patrick (CEO of WSO): [00:37:22] Cool. So tell me about how things evolve. So you were getting promoted, so you were a man. You weren't doing all the initial filtering. You were doing more. The evaluation on the back end, I assume, in terms of like having a say yay or nay, an investment committee stuff.
Steph: [00:37:36] Yeah. So the way that a lot of VC funds work now is that on the junior side, right, you're doing a lot of filtering and sourcing, right? And then if you find a deal that you really like, you have to then find a partner within the within your investment committee that will sponsor it, right? That will that will actually be willing to to push this through your investment committee. So we were looking at a lot of deals that we thought were great deals. And yeah, and then when whenever I found one that I liked, I would escalate it up the chain and try to find a partner within our team. Who would who would run with it?
Patrick (CEO of WSO): [00:38:14] Was there any frustration in terms of like the speed or that that process? Or was it a small enough team still at the back end of the of your tenure there where it was still, like pretty efficient?
Steph: [00:38:24] Yeah, no, we were we were pretty efficient. I would say everyone on the team knew how to move very fast. I think in the startup world also you, you end up with some, some situations where by investors just kind of get FOMO and they, you know, if they hear that other investors are jumping on a deal, yeah, everyone jumps. Everyone jumps on the deal. So moving fast is definitely part of the DNA of venture capital funds, I would say. If anything, the more important skill is learning how to be disciplined and learning how not to follow that instinct, to just get FOMO and jump on the bandwagon with everyone else. Because that's when you get reworks, which was which was an Israeli entrepreneur who managed to get everyone in the country and then eventually half of the investors in the world to get terrible FOMO and jump on. So yeah, that's I guess one of the one of the things you learn is if you said
Patrick (CEO of WSO): [00:39:20] It's interesting, yeah, that whole story is insane. Tell me a little bit about just as you're kind of getting into your last year how you start thinking about kind of your next step. Yeah. So, you know, from the outside looking in, you're in this super fast growing, you know, VC fund, it seems like you're doing a ton of deals now. You're getting to do you're on the investment side, you're an investment professional, you know, potentially with a track to partner there. So I'd love to hear just like what that thought process was in terms of, Hey, you know, I think I want to move. Was it was it because you wanted to go to you wanted to come to the U.S.? Was it because you? You know, just want a new challenge, tell me, tell me. Yeah, yeah,
Steph: [00:40:02] So my next opportunity found me. So first I met my wife at work, so she, she and I were working at the fun together. And then so she got a few years ago, a diagnosis for a bone condition that was not treatable in Israel but is treatable in the U.S. and because everyone at work knew both of us and with their full blessing, they said, Listen, move to the U.S., get her on treatment. That's what you need to do. We'll even help you work remotely a little bit to kind of help you transition into your next role. And they were super, super understanding, and we basically had to come here in order to get her on treatment. But I. So that was that was, I guess my next opportunity was to to be a supportive husband and to make that move. I so despite this fake accent, I'm not American, as I mentioned and I, I when I came here, I actually have five nationalities, none of which are American. I had to wait for about a year while I got my green card over here. So I went on for a sort of trial retirement for a year or so. I did a lot of meditation. There are a lot of working out, a lot of reading and a
Patrick (CEO of WSO): [00:41:22] Bit about that. So tell me your what? What kind of passports do you have?
Steph: [00:41:27] Yeah, I guess so. Born to a French mother and a South African father. So those two born in Israel, so Israeli, moved to New Zealand. So Kiwi and my grandparents and mom said to Romanian. So while I've actually never taken that passport out, I'm actually eligible for a Romanian passport as well if I want it. And then and then, you know, in a year or so, I could get an American one, too. So if I'm really determined, I could hold six.
Patrick (CEO of WSO): [00:41:56] Wow. And so when you were thinking about coming here, you knew this just had to happen. Yeah, get your wife treatment. So what was what were the steps that she was at the font? You guys were both at the fund? Yeah. So what were the steps you took in order to get her? I assume time was of the essence to get her here. So. Yeah. How you guys did that as not being sincere?
Steph: [00:42:16] Yeah. So thankfully, time was not. It wasn't super urgent, but it was kind of a medium term problem. So this condition, it's a degenerative condition that happens very, very slowly. Yeah. And most people only detected very late in life. The diagnosis for it is actually just awful. So a lot of people end up not realizing that they have it. And then they end up mistaking it for leukemia and then going on chemo for yours, only to discover that they never needed it. So, yeah, so it's a super rare disease. Very few people in the world have it, which is why this happens. But in her case, she just took a twenty three and me test which told her, Listen, you might have this thing, you should go get this confirmed. And we did. And she did. And so we were extremely lucky that we caught it so early, which gave us some time and flexibility to handle this thing. Yeah, we were able to get her on about, I think, a quarter of the dose that she needed in Israel, which was why we would eventually have to leave because Israel wasn't willing to put her on the dose that she would be able to get in the U.S., which was the recommended dose for her right. But so that brought us a little bit of time. So we had she was on some treatment in Israel, right? And we then started the process of saying, OK, well, we're going to move to the U.S.. I'm not American, so I'm not going to be able to move with my job. I'm not allowed to work over here, right? And so, yeah, we reached out to family. She's American, so we shot the family over here and they said, You know, of course we'll host you and we'll bridge you to this next chapter in your life. And that's what we did.
Patrick (CEO of WSO): [00:43:52] Let's you move straight to L.A. now.
Steph: [00:43:54] So we moved to San Diego for us and my wife is San Diego. Okay, which is a great place to be for a year when you're when you're bumming around. Beautiful. Yeah. And yeah, yeah, no. Like I said, had had a great relaxing year in San Diego before finally finding the job here in L.A.
Patrick (CEO of WSO): [00:44:12] How did you kind of approach things as you once you got there? So you said you relax. It was almost like a little mini retirement in the middle of your career. But how did you go about your job search? What was the what was the pitch and like? I mean, I yeah, but I'd love to hear it from you. Yeah.
Steph: [00:44:28] So look, recruiting for a VC is absolutely brutal, right? There's no path, right? There's no real structure. Every fund works a little bit different. They use the same terminology with like slight variations that will throw you off. It's kind of the Wild West. So, you know, I I think I went to John Gannon has got a website where he centralizes a lot of VC careers. I went and I think I applied. For 20 jobs over there, and I think I got a callback for one of them. And yeah, it was I was just it was I didn't get past the first phone interview on that job. So interviewing for Visa is really just brutal.
Patrick (CEO of WSO): [00:45:18] Why do you think that is? Like what? What about it?
Steph: [00:45:21] So I think there's a few things. First of all, there's a very high caliber of candidates, right? So when I, for example, joined IMG, sorry, when I joined OurCrowd, the team over there were a math PhD from Brown University. As I mentioned this, this guy from walking and Blackstone and this guy from Goldman and Lehman, right? So like the bona fide isn't and the pedigree of people who you meet over there is just incredible. Yeah. So, so very high talent competing for for very few jobs. So I think that's one part of it. I think another part of it again is there's no structure. So if you're going like, for example, a lot of the other jobs that people talk about in Wall Street, Oasis, like consulting, like investment banking, like private equity recruiting, like hedge funds, you know, there's a cycle like, you know, when recruiting is going to happen, there's a website where you can send your application right and there's things that you can do to increase your chances. But at least that basic infrastructure of when is the beginning date, when is the end date? When will I hereby? Who do I contact? What are the projects that's all in place, right?
Patrick (CEO of WSO): [00:46:35] I say less so with hedge funds. But yeah, private equity, especially with the middle market megaphones, you're absolutely right. There's a definitely a cycle and a process. And with banks, it's like a very structured process where they're coming out undergrad or MBA. Yeah, yeah, for sure. Yeah. And you can do things, whereas VC, it's like completely wild west. Like you said.
Steph: [00:46:54] Yeah, yeah. So I would say that is part of the problem. And then I would say, you know, this is such a heavy heavily an industry that's so heavily influenced by relationships, right where since they can, they have, you know, I'm recruiting for an associate right now. Right? And again, these extremely high pedigreed people are coming through and. How do you differentiate between 20 people with perfect resumes? All right. I mean, it's at the end of the day, it's do you know something that's not on the resume, right? Like, do you know the person? Do you know that you're going to get along with them? Do you know that they have a network of, you know, that they have a bunch of voices in common with you who can vouch for them, who they can contact for deal flow? Once you hire them, do you know that they have a mafia of startups that they can recruit from? Right? So those are all. Things that that that are very hard to prove on paper, right? Yeah. And so you. If you're if you know someone right and there are known risk or they're a known quantity that helps a lot when it comes to recruiting them,
Patrick (CEO of WSO): [00:48:18] It's funny because for some of the VC analysts and associate positions we've helped fill through our recruiting arm through. So. Some of the people who apply are incredible on paper, but it's all finance. It's going to Wall Street racism and it's funny because we'll have the people with the Wharton and the Black Stones, and I'm like all they had to put on their resume was something about VC or startups, and it would have been passed through. Yeah, they just left that out and didn't slightly modify the resume. It gets trash because it's like you have to show a passion for startups, for entrepreneurs, for at least have some sort of accelerator, you know, some sort of internship at an accelerator fund, something like that.
Steph: [00:48:56] Yeah, that definitely helps. And VCs also, I mean, you know, so first of all, yes, absolutely. So at OurCrowd, we had one summer intern cohort. We had interns from HBS, Cornell, Columbia, Yale and yeah, the ones that we took through all had previous kind of entrepreneurial experience that that they had touched at school, but also VCs. Generally, I think, value diversity much more so than any other area of high finance. So, for example, at my current fund, we are the two partners are operators, right? One of them started a five billion dollar company. The other one's a serial medical entrepreneur. Then we have a life science investments team, so they're kind of a team within the team. They're both one of them is a neuropharmacology. The other one is a biochemistry Ph.D.. And then she came out of she was a former BCG consultant, and then she went to something called Venture University, which was sort of like a mini MBA for people who want to transition into venture. Yeah. So that was yeah, that was kind of her path then. Yeah. And then we had an intern who we about to promote, who's the world's most qualified intern. So both his parents were were judges. And so that he went and got his JD only to decide it actually doesn't want to be a lawyer. So you then went and got his MBA. And to top it all off, he's also a professional golfer or could have been a professional golfer if wanted to go that route. Well, yeah. And so we, you know, we just gave him an offer now, and he's going to be joining us full time. So you definitely have the high caliber problem. And then, yeah, I agree with you. On top of having the high caliber, you also need to show some kind of not just a focused experience, but a breadth of experience that that makes you something else.
Patrick (CEO of WSO): [00:50:44] Yeah, for sure. Yeah, I mean, I always say, like if you're going to if you're applying to a BC job, you need to show some sort of very specific VC interest. Even if you're the rest of your resume looks beautiful on paper, because there is there are people who have done the startup scene, there are people who do have that network that are part of the right associations and have put in the time or the money to to be part of those networks. Yeah, yeah, absolutely. So, you know, yes, go ahead. So this job that you found, how did it? What was the break? I guess so. You said you got that one out of 20 interviews. It didn't. You didn't get past the phone interview. So what was the break eventually? Yeah.
Steph:00:51:25] So eventually. So again, just reaching reaching back out to to what we were just talking about. So you need to compete on something other than pedigree, right? So for example, for my first job when I got the job at OurCrowd, you know, there were there were these very pedigreed people walking around, but I had a few advantages. Most of them were Americans being hired out of American schools. I was one of the only people on the team who could speak Hebrew, so it was like so I was able to go and work in an Israeli VC and have an advantage that people being hired out of American business schools didn't have. Right, right. I was one of the only people on the team who had a degree in life sciences, right? So I could. I ended up leveraging that to sit on our Investment Committee for Agritech Fund, right? I was one of the only people who had worked on a technical project in my previous role. So I was often the diligence guy that people would send to due diligence on that particular family of enterprise software. And so I had to basically just repeat that same trick again. And so when I came to L.A., I was just thinking, OK, well, what? What can I offer here that that very few people have? And so again, having that experience of Israeli investments, I actually started looking at to see whether there were any investors in California who had co invested with who I could reach out to and say, Listen, you know, we were invested on this deal together. Let me send you a piece of, you know, let's talk about that deal. So now now we have that in common. Mm-hmm. And so, yeah, I ended up reaching out to the fund over here where the two partners are actually Israeli. So again, we have that Hebrew piece in common. We had co invested in a deal together in the past, so they kind of knew that we had done some research together with them on that. They knew that they knew of us as an entity, right? And this time, I mean, the second time around was obviously much easier because the CMO was also coming with five years of experience and a previous title as a principal at a VC fund, which definitely helps. So, so that was yeah, that was how I broke in the second time, I guess. But look, bragging in the first time is difficult and breaking them the second time is not trivial either. Right? I mean, it's it's not it's not easy. I I know a friend. I have a friend who is working for one of the largest CVC in Israel, OK, a corporate venture capital funds. Yeah, they had about one hundred and fifty million dollars a year guaranteed off of Fortune 20 company off the balance sheet, right? Just gone up to our LLP is don't have to worry about fundraising. They just have the money guaranteed every year of the balance sheet. And that was considered one of the most stable jobs in VC in the country. But then this company went through a lot of turmoil. And what happens when the when a company is going through a tough time, the first thing you cut is that exotic alternative asset investment arm? Right? So his whole group got cut. And despite really kind of being on top of the venture world, as far as I know, he hasn't gotten another job since.
Patrick (CEO of WSO): [00:54:37] So this is how long ago was that?
Steph: [00:54:42] Probably about six months ago.
Patrick (CEO of WSO): [00:54:44] Yeah, yeah. Now it's not going to get any easier with COVID out there.
Steph: [00:54:48] No, no. So yeah, it's a tough industry to be in, and not most people are not able to be career recedes forever.
Patrick (CEO of WSO): [00:54:57] You feel like you're going to be a career VC.
Steph: [00:54:59] You know, I'll definitely try. And I'll also say that there's definitely you definitely have a better chance of being a career VC once you've reached kind of the VP or principal level. It's much easier to make a case for you being around because at this stage you're starting to sit on boards of companies, right? You're starting to either have the power to write small checks yourself, or people are very much asking for your opinion in terms of whether checks should be written or not, because you've really like led the diligence or the thought leadership on that particular industry that you're looking at. Yeah. And so at this point, you start to be very different in what you bring to the table from an analyst or an associate who's worked in a VC for two or three years. In terms of just the quality of the work and experience that you've done.
Patrick (CEO of WSO): [00:55:52] So the fund that you're at is. Not a small phone, but not a large fund, I'd call it like, you know, on the lower middle market side of like.
Steph: [00:55:59] Yeah. So I would say we're small compared to San Francisco or Bayer Bay Area funds in L.A. We're actually, I think, one of the top five largest funds. So L.A. is a very nascent venture ecosystem, for sure. And so I think there's over here, there is up front, there's Greylock and there's a fifth wall who are bigger than us. And then I kind of start running out of names. So I'm we're one of the larger ones in L.A. and that's actually something that I also very much like about this fund is, you know, this is an opportunity to grow with a nascent ecosystem and just going to grow with the market.
Patrick (CEO of WSO): [00:56:38] Tell me about specifically. So when you're at a fund like that and it's how old is this fund one that you guys are investing out of?
Steph: [00:56:46] Yeah, we're in fund one. Yeah, we closed end of twenty seventeen. We've deployed about a third of the fund. To date, we have about two thirds in dry powder.
Patrick (CEO of WSO): [00:56:55] How do you think about kind of throughout the rest of this year investing in this sort of climate? Yeah, the bar get much higher for companies that are burning a lot of cash or is it kind of status quo thinking that things are going to go back to normal by year end?
Steph: [00:57:11] Yeah, definitely not status quo. I mean, I think for about two years now, valuations have been just overpriced and crazy. So I think what's going to happen now is that this is very much a double edged sword. So the portfolio companies that we've already invested in are going to suffer because all their clients are going to suffer worse. So I think your existing investments need to be probably mark down mentally and you have to start doing some start earning your salary and start doing some very smart portfolio management in terms of how you help them hit this this crisis. For example, just to put an example, and this morning we were looking at the CARES Act. So that's the new stimulus that the government just signed a week ago to give small business loans to to help supplement salaries for small companies. So we're this morning, we're exploring whether that's something that we can do for our portfolio companies, just as an example of how you can help add value in this time. Yeah, but on the other hand, what's going to happen now is that valuations are going to completely plummet for all new investments. So any investment, we're lucky we have two thirds of the fund deployed. Yeah, so most of our money now is going to run a lot further than it was before because we're going to be getting started at half the price that we were getting them two months ago. And most of the stock,
Patrick (CEO of WSO): [00:58:31] When you say half the price beginning before, isn't most of the hour. Most of the investments in this in this stage, more like venture debt, are you are you doing more series A's
Steph: [00:58:40] Know we're doing more like Series A's and Series
Patrick (CEO of WSO): [00:58:42] B's, so the price does really matter.
Steph: [00:58:44] Yeah, the price pretty much matters.
Patrick (CEO of WSO): [00:58:46] Ok, fair. Ok. I thought I thought you might be doing some venture debt deals with.
Steph: [00:58:51] We have done venture debt in the past, so we're not opposed to it. But but that's most of our deals we're doing straight up.
Patrick (CEO of WSO): [00:58:57] This really matters to you the amount of dry powder you have
Steph: [00:59:00] And yeah, yeah, absolutely. And so, yeah, you know, we're going to we're going to be seeing a lot of down rounds. We're going to be seeing a lot of recaps and we're going to be able to really just go in there and dictate the terms. So I would say, actually usually some of the if you look at historically like some of the best VC vintages, follow a recession or follow an economic crisis. Yeah. So 08 09 vintages are incredible, right? Like there's like a list. All of these C's now like circulating these memes of like the companies that were founded in 08 09. I think Airbnb is in there. I think Dropbox is in there. So like some of the best tech startups in the world are created in times like this. And yeah, they also happen to make some of the best investments. So I would say we have to be lucky.
Patrick (CEO of WSO): [00:59:48] Do you feel like valuations may still be slower to come down just because there is so much dry powder? Do you feel like there's too much or do you feel like the ecosystem is small enough? And like in L.A., where it's insulated a little bit in the competition? Like, so
Steph: [01:00:01] What do you mean? Yeah, I understand the question. So what's going to happen now is that there's going to be a shake up because in theory, there are the VCs that have dry powder on paper and they're VCs that have real dry powder. And what often happens in financial crises is VCs start getting calls from their LPs to say, Listen, buddy, don't make a capital call because don't put me in a position where I have to say no to you, right? And so there are a lot of VCs now who are in theory and business and in practice, they're not going to make any investments for the next three or four years. We happen to be very lucky and that our largest LPs and just in general, our LPs are either individual billionaires or, you know, like multibillion dollar corporations who they're not going anywhere. So we're very much recession-proof in that.
Patrick (CEO of WSO): [01:00:53] And they also probably want you to be aggressive right now.
Steph: [01:00:56] Yeah, yeah. And so that's what's going to happen now is that a lot of a lot of even though, yes, there's in theory those dry powder out there, it's just not going to be deployed. And so it's only going to be the folks who can really actually afford to to move their money who are going to be in the game.
Patrick (CEO of WSO): [01:01:12] Do you feel like there's any sort of pressure from BP and all the dry powder they're coming down market like growth equity funds like starting to come down into the VC space? Or do you see
Steph: [01:01:23] They come in when it's cool? You know what I mean? So like hedge funds and growth funds, they come in when they kind of feel like they're missing out or when they feel like the IPO pipeline has dried up and they don't have anywhere to deploy their next funds. But they have exactly the same problem, right? Unless their LPs are very high quality and are able to withstand a downturn. Yeah, they're LPs are also going to be calling them and saying, Listen, don't make a capital call, at least for four PE funds for hedge funds, they have an even bigger problem. Their LP is going to be calling them and say, Sell, I want my money back. So that's yeah, that's that's how this is going to shake up.
Patrick (CEO of WSO):: [01:02:02] Great. So for the do you have any specific opinions in terms of the the timing and the impact? I know the financial markets have kind of been super haywire. It's now March 31st. So we've gone through kind of a whipsaw last few weeks where we were down, I think almost 30 plus percent in the overall market and then kind of back up another 15 or 20, whatever it is, I don't even know we're down 15 percent, 20 percent something right now. Do you have any projections in terms of how you see this playing out in the public markets, in the public markets?
Steph: [01:02:34] No, that's very much out of my area of expertise. And it's not that I don't care, it's that I I respect the boundaries of my knowledge, and I don't believe this is something that I'm an expert on. And maybe even a little bit more cynically, I'm not even sure that people who are paid to understand the public markets truly understand the public markets, because when researchers really kind of prod those again, those famous experiments of monkeys beating the experts right by throwing darts at the board. So I'm I'm not even sure that the experts really know what they're talking about when they when they make these projections, that's fair.
Patrick (CEO of WSO): [01:03:10] So at your current role, I guess the goal is now to deploy the rest of the capital, get in some, get that money, have that money work for you guys as far as possible and then have some great successful exits in two to two to five years. That's the goal. And so in terms of looking back on your career so far and all the interesting steps and journey your entire journey, is there something you'd kind of give your younger self any advice you give your younger self or to give so much? Ok? Any one, any one piece or a couple of pieces that you kind of give the younger listeners before we call the pod?
Steph: [01:03:43] Well, OK. So I mean, first of all is for other people, there's very little that's repeatable about what I did, right? So in a way, I got lucky, right? I said, thanks for the ride guy on a plane. And there were many people who give him the same luck would have probably made a much better analyst than me. But it's also true that many other people would not have been able to capitalize on that luck. Right. So I'd spent the last two years playing from behind so that I could say that I worked at a bank so that I had some inkling of how banking software development works so that I knew to pick the investment role as opposed to, say, the marketing one when it was offered to me. So, yeah, I was lucky, but also when luck presented itself, I could identify it and I was also ready to jump on it. So I guess in a sense, you can't repeat the luck, but you can repeat the preparedness. And then in another sense, and this is just more specific to me, some of the very things that made me unfocused, right, also played to my advantage. So it would have been so much easier to arrive here on the straight and narrow. Many of the key experiences in my life made getting this job very difficult. The first step of the straight and narrow, for example, is that you ace high school. But when you immigrate at 12, that can make that pretty difficult because your attention is split between doing well in school and learning some very basic social norms, as well as just nuances like slang and pop culture and things like that. Yeah. And at the same time, those things actually played to my advantage in the long run, right? So knowing that you can survive hard times and adapt is exactly the kind of thing you need when the job search is grinding your confidence down, right? Being Israeli and speaking Hebrew made it much easier for me to chase an opportunity in Israel, in the Start-Up Nation, and suddenly those first 12 years of my life skills, you know, became useful again. And having Hebrew and having the Israeli connection also made it possible for me to find my second job. Having different experiences to the cookie cutter straight and narrow people helps you think differently, and some people value that. Some people very much don't. Some people very much want to see you fit into a mold. But for those who do it, that gives you an advantage.
Patrick (CEO of WSO): [01:05:49] I think it's also secure V-C less so for private equity, although. In banks, although they're coming around, they're starting to look outside their small little window.
Steph: [01:05:57] Yeah, but yeah, yeah, well, I mean, banks are just having their lunches eaten left and right by fintech software, which you know, I'm funding to. It's just destroying their livelihood. But I would. I would. Yeah, I would say that's definitely, definitely true. And also, yeah, you know, all the travel that I did helped me. So it got all the travel bug out of my system. So many people I've worked with, for example, have fantasized about quitting their job to travel the world. I don't have those fantasies because I've been to over 50 countries and I've lived in five countries. So, you know, I still like traveling and I don't feel, but I don't feel like I spent my twenties locked up in a golden basement. And so I don't feel like I there's like a big world out there that I have to go see right again. I knew a guy who I was applying for a job at again. One of these big venture funds in Israel, the partner reached out to me and said, Hey, listen, you know, I'm hiring someone. Are you interested in applying for a VP position? And I applied. I went up against 20 other people. He ended up sending me the nicest rejection email I've ever received in my life to say, like, Listen, you know, you came in, you came in number two, we didn't hire you for these very specific reasons. Yeah, but the guy who ended up getting the job. So get this top of his class at Stanford Engineering. Yeah. Ended up working at Morgan, where he was part of, I think, like the five person team that floated Facebook and then went to work at NIA, which is the largest venture fund in the world, unless you count SoftBank. And so he, you know, I'm OK losing out to that guy like he did well. But he spent half a year at this fund, a year, maybe at this fund. And then he ended up quitting to join a religious yeshiva, which is where you go on like study to like religion, like ten hours a day. And you know, I remember talking to him right after he got the job. He didn't know I had applied for his job. We went out for a beer and he he said to me, You know, I haven't. I had a half a year off in high school. I went and I took a semester abroad in Italy. But he says, apart from that, I haven't had a break since I.I don't remember the last time I've had a break. I basically just been like, single. Yeah, I've been on the straight and narrow. I've been single mindedly focused on getting grades so I could get to the right university so I could get the right job my whole life. And you know, I'm not saying that like quitting your job and venture to go pursue religion. Maybe you had some epiphany that I'm missing out on, but the point is that like, I see a lot of people who get ground out of high pressure jobs because they feel like they haven't done anything else. And that hasn't been an issue for me because in a sense, you know, the very thing that didn't have me focused on the straight and narrow got those things out of my system for me. I mean, and ditto by the way, with my green card enforced gap year, right? So I don't know if you've ever had these fantasies of saying, you know, I should quit my job and I'll work out every morning and then I'll meditate and then I'll write a book. And you know, like, like, you have a journal, tell
Patrick (CEO of WSO): [01:09:17] You without a job. Yeah, what would I do? Yeah, yeah, exactly.
Steph: [01:09:21] Yeah, but I didn't. I wasn't allowed to work for you, right? So I literally had a full year to do that and I did that. You know, again, I went through this 10 day meditation retreat where I did nothing but breathing for 18 hours a day. And, you know, I got a taste of what it would be like to go to the gym every day. And it's nice. I'm not complaining, but it comes with its own set of problems, right? So I don't I don't idolize that form of spending my time in the same way that I see a lot of people talking about that who just haven't had the chance to do that.
Patrick (CEO of WSO): [01:09:53] Yeah, I think it's actually been really not like almost lucky you were forced. Yeah. Yeah. In a sense, it's giving you a really nice perspective of like there's no FOMO of the time off because you had the time off. There's no FOMO like, oh, traveling the world because you've had that. So just it's really giving you a nice, grounded perspective and be like, No, actually, I really enjoy looking at looking at new businesses. It's something you enjoy doing, and so you can appreciate that and the intellectual curiosity around that.
Steph: [01:10:25] Yeah. What other lessons could I give myself? Look, opportunities present themselves in the strangest places. Have your antennas up. But to keep beating the metaphor, your intentions have to be tuned to the right frequencies, which is kind of a cryptic way of saying you have to know what you're looking for, and that means knowing what you want. And when you're going against the wind, you're going to have to tack. Occasionally, you're going to have to creatively pivot your career and find ways to get one step closer to where you want to be. I'd also say that there's like a few. Occupational hazards of being a VC that people don't tell you about, right, so. In general, the entrepreneurial ecosystem is this weird place where occasionally people get on a career rocket ship and just like their career just takes off. So for example, I had an intern who used to intern for me for Cornell from Cornell on a summer internship. And he just took off, right? So now he's a principal at one of the top three funds in the world. And just like his career is completely took off or, you know, you follow these entrepreneurs through exit, where suddenly they go from being this hungry and scrappy little founder who you knew in their jeans and t shirt to suddenly landing a 500 million dollar exit. And this person who you knew is just suddenly just worth $100 million. Right? Or, you know, you work with extremely capable people who it's hard not to benchmark yourself against and get a little depressed, right? So for example, one of the partners at my fund created a five billion dollar company. One of the other partners that my fund is a billionaire. Right. So these are these are kinds of things that you just you have to learn how to how to manage your ego and manage the temptation to compare yourself to other people if you're going to do well in this industry.
Patrick (CEO of WSO): [01:12:17] Occupational hazard, don't compare. Having that kind of the grounding of knowing that a lot of that success is, yes, hard work and intellect, but it's also a lot of luck and timing. Yeah, especially on the extreme, especially on the extreme levels. You know, in certain cases, maybe not, but I think timing is really important.
Steph: [01:12:39] Yeah. Yeah. And then I guess maybe like just some final feedback to myself, which I try to live by right now, right? Like some actionable feedback is people get churned out all the time from this industry, right? This is more true in the junior level where you know your position is like a two year program after which you won't get kicked out, but you can't get promoted anymore. Right? Like, for example, I know that. Yeah, or like once you're out, you know, like we've talked about, recruiting is brutal. There's no structure. It's hard to get back in. But even if you're a senior guy without an expiration date, most funds fail, right? And even if you're in a stable fund, you know, as we talked about before, even like these super stable VCs can fail. So I guess the biggest piece of advice you kind of have to live by is just tomorrow is not promised. Enjoy the ride while it lasts. You know, this might not be what you do forever. And yeah, just kind of have a blast while you can.
Patrick (CEO of WSO): [01:13:38] What do you think people can do when they when their fund fails? What the you know? Yeah, some people. What is it? Good kind of. Let's say, let's say like your friend at the CVC Corporate Venture Fund not able to get back in, what could he pivot to? That would be interesting. Could he go in-house to a company?
Steph: [01:13:56] Yeah. So he could go into Corp Dev Corp Dev is usually a downgrade because financial VCs at the top, you get a piece of the carry, right, so you get a piece of the upside in most dev jobs, you just get a flat salary. But it's pretty cushy, like the hours are pretty nice. Do you have like company, big company perks, things like that. So yeah, I would say that's like one option. If you want to swing back into venture, you could always try to go to a smaller fund. But as we talk or another fund, you know, if you have connections, you can try to go to a bigger fund. Yeah, but as we talked about, that's difficult. That doesn't always work out. Yeah, jumping to portfolio company is also a common move. So a lot of people, if they come from the CFA route, they might try to become a CFO of a portfolio company or they might become the chief growth officer or something like that for for a product officer for like a portfolio company that's taking off really quickly. And in fact, in many VCs, for example, at Andreessen Horowitz, they will not recruit apart. Not always, but they will almost never recruit a partner from within. There's a few exceptions, but usually they look for people who have got operating experience in like a rock star startup. So they look for people who basically just don't need the job like they've already become millionaires by just doing a great job at a startup. Yeah. So for example, I know this guy at Andreessen, so he just he just left to work for a portfolio company, but he's very much planning on trying to get back in. It's just that on his roadmap, he knows that he has to have been an operator before they'll hire him as a partner. So that's kind of like an intermediary step that somebody will take as well.
Patrick (CEO of WSO): [01:15:40] That's interesting. So I bet you the whatever ship you choose or whatever company you choose to ride is super important. I mean, that decision? One hundred percent. But anyways. Anything else that I'm missing? It's been really fascinating this discussion. I think I've learned a lot.
Steph: [01:15:57] No, I think this has been absolutely great. I've had a blast. I just I guess I will say that Wall Street Oasis has been hugely influential on me. I'm really glad I could kind of if I pass on something useful to someone else, like, I'm really glad I had the chance to give back. This was this was really fun.
Patrick (CEO of WSO): [01:16:16] Awesome, man. Really appreciate you taking the time. And thanks to you, my listeners at Wall Street Oasis. If you have any suggestions whatsoever, please don't hesitate to send them my way. Patrick at Wall Street Oasis dot com. And till next time.
or Want to Sign up with your social account?