The Future is "Default Global" w/ Angela Strange & Anish Acharya, Partners a16z

Thanks for having us.

Yeah, so I think there's two major themes going on. One, to build on what Anish said, I'm very fond of saying every company is going to be a fintech company. What does that mean? Your business model that you knew of, it used to be you'd use advertising, you would either charge consumers for the product, but now there's a third business model which is very popular, which is financial services. And in addition to bringing in more money, it helps companies better attract their customers, better retain them. Classic example: Lyft providing bank accounts for its drivers. But now if you're a company that is global, take ServiceTitan, which is an operating system for plumbers. There's plumbers in the US, there's plumbers in the UK, there's plumbers in Australia. If you want to let them add... next banking infrastructure companies of the future, and we're going to talk a little bit more about that, and it's versions of just creating global infrastructure or potentially orchestrating between best-in-class infrastructure in different countries. So that's big theme number one that we can unpack a little bit. Big theme number two just relates to how companies grow. You think back five years ago, your company would start in San Francisco because that's where you're based, but pick another major geo, you probably only hire people in that geo and in that location for X number of time, maybe years, and then you'd start to hire and do business around the world. Now, you're investing in the seed, like that's where a lot of your companies are: 'Hey, we're 10 employees and we're located everywhere.'

Yeah, totally. I think there's... and Angela brought this up, she mentioned Lyft. It's interesting to think about the companies that had to build financial services infrastructure. Maybe they started local, they weren't even... of international financial services infrastructure, which means there's now this class of operators who understand how to build these things and understand how hard it was. I think that's really the key insight for so much in the fintech space: people, operators figuring out, 'Oh my God, here are some of these huge problems that I have to solve,' and now they have some of the skill sets to solve it.

So I think there are the cost benefits, but I think there are also a bunch of benefits in terms of your ability to build a sales force that can sell across multiple segments. Because there are so many different customer archetypes and they have so many needs that are going to be a little bit different at least from region to region, it forces companies to actually build out a more scalable sales approach than they might have.

Yeah, no, totally. And it definitely is a huge problem, and it's also a huge opportunity. If you look at expense management in the US, there are a bunch of very valuable companies, and you think about the problem globally, it's an even bigger opportunity and challenge.

Yeah, totally. And a lot of the core operating systems, whether it's Jeeves or Deel, yes, it is the money movement, but it's also the compliance engine. How do you manage regulations across so many geos that are constantly in flux? That's super hard. And this is, I think, important for payroll, it's also important for FX. A lot of times we talk about FX, at least I've historically thought of it as a money movement problem, but I think our view has evolved to one in which it's as much a KYB problem, or perhaps more so, than a transport layer problem.

So totally related. There's a big opportunity around everything cross-border. So I'll start with the investing opportunity that I'll talk about, the customer problem. FX, everyone knows that it's opaque. It's actually one of the most protected profit pools that banks and financial institutions have. Now there's an open question: is FX actually a product or is it a profit pool? And a lot of... movement, FX being the largest, most liquid market in the world, it really hasn't been much that's changed in a long, long time.

Well, I think the most successful... tends to be a lot of paid in the US, and then remember talking to the Nubank team, they're like, 'Or you could build a great consumer product in a market where consumers are so dramatically underserved, and our referral program just spreads.' And so they've managed to take that from Brazil into Mexico, but it is a very challenging aspect.

Yeah, I think it's hard to make a hard and fast rule. There are definitely great US companies who have expanded, but that is part of the reason... like I do love investing in... right, like you think of your business and everything as being multi-country right from the start, which is a significant advantage.

I actually have two that I think are worth mentioning. So one, I'll cheat and bring up Deel again, and then I want to talk about Revolut quickly. So Deel, they're well known for enabling borderless hiring. They're less well known for actually offering financial services to the people that are being paid via Deel, which is actually a really straightforward insight. It's the one I brought up earlier: for a lot of folks, if you're working in the... and the nice thing is that one, they have a channel, but two, it selects for mostly white-collar workers that you can lend to and offer a richer set of financial services too. So I think that's actually the most interesting example that I know of. Revolut is cool too. Revolut has gone cross-border within the EU. They haven't done stuff that's really worked outside of the EU, but I would argue that Europe is sort of an academic construct, because each of those countries has their own consumer preferences, many of their own regulations and laws. And for companies like Monzo, they've had difficulty expanding outside of the UK because of those reasons, whereas Revolut started with a cross-border... about this is in Venezuela, something like 20% of retail digital transactions are done using Zelle. So it's a US KYC relative, and they're using their Zelle thing to do a Zelle transfer, which just shows you there's so much demand for that stability that you would go through this convoluted process to transact through your relatives' accounts in a foreign country so you don't have to deal with a hyperinflation local currency. So yeah, I think there's some interesting stuff about connecting the US system globally for consumers.

Thanks for having us.