Leading a $1B Revenue Startup AND $1.8B VC Firm – A convo w/ Arjun Sethi (Tribe Capital + Kraken)

00:00:00 - Sterling Snow

Everyone all the time wants to be able to say, like, when do I know that I found product market fit? So when does Tribe know that someone has product market fit?

00:00:06 - Arjun Sethi

What if you had a product where you haven't charged yet and you're growing at a rapid rate in 2014, 2015, product like that that no one wanted to invest in was called Slack, but these were the metrics that were there.

00:00:23 - Tyler Hogge

Arjun, thanks for having us, man. Sterling and I flew down to Menlo park for the day, hung out at Tribe's home office. Thanks for having us.

00:00:31 - Arjun Sethi

Well, you flew up, right?

00:00:32 - Tyler Hogge

Yeah, flew up. Fair enough.

00:00:33 - Sterling Snow

Got him.

00:00:34 - Tyler Hogge

Got him right off the bat.

00:00:35 - Arjun Sethi

Right off the bat.

00:00:37 - Tyler Hogge

I've known Arjun for a couple of years now. I can't even remember the first time we met. But when I joined Pelion, I learned pretty quickly that some of the companies I got very excited about Tribe had already invested in. We're talking about like Keep and Capitol and others, and we'll talk about some of those today. But I'm stoked to dive into some stuff with you.

00:00:56 - Arjun Sethi

Me too. Yeah. Thanks for coming and nice to meet another fellow operator.

00:01:01 - Tyler Hogge

That's right. Exactly. All right, so let's dive into it first thing. Well, I want to cover, like three things. One is just your background, your story, and then let's talk about some unique parts of Tribe, especially the incubation stuff, how you guys approach product market fit. Plenty of things we'll talk about. So first thing is, for those who don't know, Arjun, can you just tell us your story? Before Tribe, where'd you grow up? Who are you?

00:01:22 - Arjun Sethi

So I grew up here in the Bay Area, so I'm a local and my parents were in the startup ecosystem for a bit, so I kind of learned from them back and forth on what they were doing. Actually, if I take a step back, there was a ton of people in my family here in the Silicon Valley that were part of a bunch of startups. They had either started it failed in a few, but everyone was always trying to get into something. When I was going to school, we always used to learn about the gold rush. And when I was watching people come here to the Valley to be a part of the company or start a company that they were just coming into some sort of Ponzi scheme of getting into a company and maybe some sort of get rich scheme. And so I actually was quite averse to working at a startup. So I just looked at anything that was traditional. So it's really funny. I think my dream job at one point was If I could just get a job at Citibank, I'm all set. And it was. I ended up working my first company, if you want to call it that, it gets marketed that way, but a set of my friends started building aftermarket parts for cars. And so these were things to make it obviously sound better. And then over time, it was more getting into the engine itself, so superchargers, turbochargers. And I got really excited about it, given my sort of proclivity towards what I'd say a little bit of design and manufacturing design. I was coding a little bit, but not a lot. And so I think building something from scratch and putting it somewhere and then being able to deliver that experience to yourself and other people was pretty. At least at that time, pretty. Pretty magical. And I don't know if you guys are car guys at all, but just putting the turbocharger in one of these cars and just letting it rip is the greatest feeling on earth. So I got into that very, very deeply. And it was the first time a set of my friends and I got together and we kind of started a company around Eric. And it's not like we said, let's start a company is that we were building these products. How do we sell it? How do we do online payments? How do we get a bank to set up something else? And so it's like, okay, what is an incorporation? So when you're between 14 and 16 years old and 18 years old, you're starting to figure out what all these rules look like. And so that was the first time I got into, like, thinking about anything. But then I also just essentially dropped out of school, and I didn't how old? This is high school. So this is around 14 years old. Dropping out is like a political way of saying, I got kicked out because I just stopped attending.

00:04:04 - Tyler Hogge

Is it here in the Bay Area? You just quit going to school here.

00:04:06 - Arjun Sethi

In the Bay Area?

00:04:07 - Tyler Hogge

What'd your parents do about that?

00:04:09 - Arjun Sethi

I think they were quite, quite frustrated. But, you know, today they laugh about it. But at that time, I think they were, what's gonna happen to my son? And I think my dad said, like, I didn't come to this country to have, like, my son become a mechanic. And we grew up in a kind of a traditional Indian family. In some sense, we were traditional. In other senses, we were not. But, you know, I guess, you know, my sisters were, you know, doing their thing and, you know, accelerating through high school. The traditional way is that they were doing well in class, you know, top grades, et CETERA and I was like the inverse. I was just like failing at the place.

00:04:48 - Sterling Snow

I was black sheep, racing cars.

00:04:49 - Tyler Hogge

Racing cars.

00:04:50 - Arjun Sethi

Yeah. Well, actually I wasn't. I didn't have enough confidence in the beginning to race them myself. I just thought it wasn't me and it wasn't like I didn't fit that bill in the beginning. And over time I had to because it was the only way to prove that our products were the best. And so you had to race them. Right. So autocrossing and drag racing professionally, we started saying, okay, great, well, we can't find a driver, we don't have enough money, so we'll have to do it. And I remember I already have a thin frame. And so in order to be able to qualify in some races, like we started losing weight and it was crazy. Just the things we wanted to do in order to prove that we built good products. But anyways, long story short, that was the beginning. Eventually I enlisted in the military, didn't go through the whole process, then ended up going into consulting with different parts of DoD and DIA, spent time outside the United States and then came back and studied at University of Maryland, College Park. Math and history was the focus. Finished with history. And I think I was just older by then. I was getting 23, 24, and I was starting to think, man, I gotta get a job at some point. But I was freelancing for websites. I was working with a bunch of different companies, mostly in php. And then I got an opportunity to come back basically home to California. And it was with a company called Playspan. I don't know if people remember it.

00:06:18 - Tyler Hogge

Nope.

00:06:19 - Arjun Sethi

But it was a micropayments company for gaming and they came back for that. And then Google was starting to think about Orkut. And so I started writing white papers around social networking. And I made up a lot of stuff, but it was based off of certain concepts and clusters and network effects. And then Facebook asked me to do something for six weeks and so I kind of just started going around, meeting people, working on random projects, and eventually just landed into social gaming. And the rest is history from there.

00:06:49 - Tyler Hogge

So if we now kind of talk about the Tribe era, and I know there's other things. Before you started Tribe, how did you end up doing what you are doing now? And for those who aren't familiar, I mean, Tribe manages 1.8 billion capital under management, many funds in some of the best startups you've all heard of. But tell us the Tribe journey, what led you to Tribe? And then we're gonna go Pretty deep on what makes tribe unique.

00:07:13 - Arjun Sethi

Sure. So I always tell people that tribe is an interpretation and an artifact of our world point of view. It's not that tribe is everything for us, but it's an extension of how we kind of think about the world.

00:07:27 - Tyler Hogge

So let's start about that. What's the world point of view?

00:07:30 - Arjun Sethi

So the. So the story of how I grew up, I stopped right at social gaming. But in the social gaming and mobile gaming space, the way to sort of think about it is this was the first time where you were able to measure and quantify how people were using your products. And so what I mean by that tactically is if you were building a game, you'd look at the onboarding flow and then you would say, okay, great. How many steps does it take to get someone to, you know, click the tutorial and get through the. And how do you educate them? And then how do you get them to buy something and, you know, have different actions in the game? Sometimes the faster you got them to buy made them engage over, you know, 30, 60, 90 days. Sometimes the slower you got them to buy might engage them for a longer period of time. And I'm being a little bit more abstract. And so every game is different in how you teach people. And I played a lot of video games, still do. And. And so it was more about, okay, great. How do you build infrastructure to be able to analyze all of this in real time? And so if you have a live.

00:08:32 - Tyler Hogge

Operating game, essentially product analytics, like early versions of product analytics and tracking everything, every action.

00:08:38 - Arjun Sethi

Yeah, but it's also like, how do you get informed and interpret that data to make a decision? And so then what are the criteria that you look like and then what is the criterias of today? I say investment criterias or decision criteria, but at that time it's, okay, great, well, I'm going to put people to work. I got to fix something or I got to change something, or I got to add new content to be able to elongate retention. And if you really think about any product today that we use, that's kind of what we're thinking about. There's obviously there are exceptions to that rule, which is like LifeLock or insurance, you don't want them to ever touch it. It's just like subscription, don't come back. But if you have a workflow product, or what I call life flow product, or units of time throughout the day, you are thinking about every single point in interaction for the customer or your constituents, as we kind of call it.

00:09:30 - Arjun Sethi

So we say, okay, great, then we got to build that out. Well, in order to do that, you have to build out a ton of frameworks. And a lot of those frameworks come from a similar way to think of how you think about accounting. Accounting is frameworks. It's benchmarkable. And so I think we were always obsessed with, well, how do we get customers to do something? How do we benchmark our customers versus other customers versus, like, a Netflix or something else? And so the more you continue to build frameworks on top of data sets, in theory, you start building points of view on that.

00:10:04 - Arjun Sethi

But the only points of view that we had were very myopic in gaming or myopic in messaging or myopic in social networking over a period of time. And so my goal at one point was, okay, well, how do I get as much data as possible around how all these companies interact? And what are the workflow decisions people make or interaction decisions people make? And so you can't work at every single company in the world, but in theory, you can get access to their data.

00:10:30 - Arjun Sethi

And that was kind of the mission. Fifteen, 20 years ago, I remember meeting a VC. I'm forgetting the name of the firm, but I went into their offices. I kind of pitched this whole idea. I think I still have the picture today. But it was like the. You know, right when the first iPhones had come out, and he said, like, everyone's doing this. This is gonna be a commodity. So I actually felt pretty deflated, which is, okay, well, if everyone's gonna do it, if it's obvious, then I should probably not work on it.

00:10:58 - Arjun Sethi

I started another company that was more of a mediocre result, but it was the same structure that we put into place, which is like, how do we grow our product? How do we measure this? How do we. You know, it's not just about growing 3% week over week to have a 5x at the end of the year. It's about, like, what are the small little nuances to hit that 3% compounding rate? And I think most people. I actually think most people today don't think that way at all. They think about the feelings of the product. They think about whether it could be the aha moment. So you hear these terms, which I think they're all pretty valuable, but that's the art on top of the science. But if you don't have a scientific approach or a methodical approach to get there so that you can have trial and error, I think you just get into these notions where you can be making Mistakes in a cyclical notion, and you actually don't even know what's working or not.

00:11:46 - Arjun Sethi

I was talking with an LP the other day, and he said, look, Arjun, the hardest thing about what you guys do and how you think is that I. We can just never put you in a box. And so every time we talk about it as a committee, what does Tribe do? It's actually very hard for us to articulate. And so he said the same thing, which is like, you guys are just a quant vc. Well, the problem with a quant VC is you say everything is quantitative, and that's also not true.

00:12:09 - Arjun Sethi

Is that like, yes, there is enough that's quantitative to be able to have a benchmark, but then you have to make decisions with it. You also have to interpret that data or that framework to think about what you want to do and what you may or may not want to work on or shut down. Now, I think there's something that are very easy to say, like, analyze. This is surgical. Boom.

00:12:26 - Arjun Sethi

This is how we should make a decision. But then there's other parts that are not, which is like, how should you design the product? Like, what kind of feelings do you want to instill when someone's coming in? Should I focus on male and females in the United States that are of like, you know, of Caucasian nature, Asian nature, Hispanic, African American? Should I look at emerging markets? Even within emerging markets, you have different tiers of purchasing power, how they interact with something, what they care about in fintech versus someone who's at a different purchasing power, what they care about. And there's different language barriers depending on these countries. And so we usually use these words like localization or translation, but it's so generic that I think when you don't maybe.

00:13:11 - Arjun Sethi

I think about the world in terms of cohorts and segmentation all the time. And for me, that's very natural. But when you explain that to someone who's coming from a financial background, I actually think it's like an extremely foreign concept for them because they want to put everything into a box or a framework like gap accounting or financials. And I think that's one of the most valuable frameworks in the world. But it's the. It's like the baseboard and then there's everything on top of it.

00:13:38 - Tyler Hogge

It sounds like you agree that it's quantitative, but not just that it's multiple things. What else would you say it is?

00:13:43 - Arjun Sethi

So, I mean, one of the lines that we use is that we're experts at identifying product market fit.

00:13:49 - Tyler Hogge

Yeah.

00:13:50 - Arjun Sethi

And we are continuing to aspire to augmenting product market fit. There's a nuance to that. Experts in identifying doesn't mean that we can make a good decision after that. It just means that we can identify something as product market fit. And then we are.

00:14:04 - Sterling Snow

How do you do that?

00:14:06 - Arjun Sethi

That's through our frameworks.

00:14:08 - Sterling Snow

So when a startup comes in and pitches like, what are you looking at? And especially in the earlier stages, like how. Because that's everyone all the time wants to be able to say, like, when do I know that I found product market fit? So when does Tribe know that someone has product market market fit?

00:14:22 - Arjun Sethi

We have these frameworks to let you understand what product market fit means. So I'll give you a couple of examples. So the three of us, if we have time, we'll go down to Pete's Coffee and we'll go grab a coffee. Now, every week or every day, there's a certain amount of people that come back every single day. Right. And so I would say those are your returning users. Then some of those returning users might bring two people. Now, these are new customers. Now, you guys don't live here, so you'll leave now. You've just churned. If you look at any business in the world, any product in the world, anything that you use, feel and touch, anything brick and mortar all the way to your software, those interactions happen all the time.

00:15:00 - Tyler Hogge

Yeah, it's the essence of a business.

00:15:02 - Arjun Sethi

At the end of the day. And so what I gave you was a small framework, but just expand that out as much as possible around like every interaction that could be leading indicators to that or lagging indicators to that. If you can get access to a raw data dump of transit, like a transactional log of everything the company does, then you can start building off of that framework. Now, I think what's more important is that once you do that for one company, ten, a thousand, then 15,000 worldwide, then you actually are able to build what I call benchmarking on top of that. So we do what we did with that was we said, okay, great, now that we're meeting more and more companies and they want those insights to understand how they compare compared to other companies in the ecosystem. Not just like, they're not just like their marketplace, but it's to any other company that has similar characteristics of being a business that's actually the most important. Right. A lot of people, in my opinion, are thinking, okay, I'm the best marketplace company for freelancers, so let me only look at the freelance companies. Well, you should look at every company that has Marketplace dynamics and where do you stack? Rank there and then you can understand like how do you want to build your business? Do you need to focus on extreme distribution to be able to get to a certain size and scale? Do you need to do a combination of both? Do you need limited engagement? Do you need high engagement? I think a lot of people say like I just need to hit, for instance, a lot of people think for SaaS companies I need to hit a million ARR instead. Well, the problem with that is like how did you grow? How did you churn?

00:16:37 - Sterling Snow

How much money did it take you to get to the million?

00:16:40 - Arjun Sethi

There's so many things and I think all of those are really important. But what if you had a product where you haven't charged yet and you've just got credits laying around there because you want people to start playing with it and you're growing at a rapid rate and just got a lot of usage? Okay, great. Well, you should be able to quantify that product market fit with products that we've seen in the past that have grown at that same velocity. Now in, during this time in 2014, 2015, a product like that that no one wanted to invest in was called Slack because they were barely making any money. But there was high engagement, high usage, high throughput and people were using on a daily basis and it was highly viral. The first round of what they call the new Series A nobody wanted to invest into. But these were the metrics that were there.

00:17:21 - Tyler Hogge

What year was this? This is, this is a fun story.

00:17:24 - Arjun Sethi

This is this roughly, if I'm remembering correctly, I think this was 2013.

00:17:28 - Tyler Hogge

So even though Stewart's kind of a well known name, they had good metrics. It was pretty non consensus still, they couldn't get around.

00:17:35 - Arjun Sethi

They were a gaming company before that'? Yeah, and my partner Ted also was the one that had helped lead this investment while they were at Social capital. So this is Maimoun, Ted and Chamath and right at that moment the first growth and data science team and some of these frameworks that are built off of rad social capital and these were the frameworks that were they were using, but they were doing it manually at the time. Right. So it was a manual process. A lot of these manual processes were also being used at Facebook that were being used even at my companies. And so fast forward to Tribe is like again, Tribe is a manifestation of how the extension of where we want to spend our time with our capital and then obviously our time and our process. But the company that just ingests all this data is a company called Termina. And then we work with a whole host of people in the industry so that we can get these data sets.

00:18:28 - Tyler Hogge

So let's tell the Termina story. But I want to make sure I get it right and I'll tell you a quick story. So I started looking at a company keep. You're an investor in Keep. Ollie, I think he probably watches the podcast, tells me this is when Pelion was looking at keep and we really love it. Ollie says, hey Tyler, one thing you might be curious about is Tribe gave us their Magic 8 ball results for keep. You want to know what that is? And I was like what the hell's a Magic 8 ball? But I think this is kind of this mystic thing a lot of people have heard about is that you'll give people a Magic 8 Ball report. What is that? And then we'll build into terminuses after that. But teach everyone what this report is.

00:19:06 - Arjun Sethi

So Termina today because we have a ton of customers and it is a tool for something different for those set of customers.

00:19:16 - Tyler Hogge

Okay, got it.

00:19:17 - Arjun Sethi

So what we do is we call it a quality of earnings tool, quality of revenue tool, quality of metrics tool. And that can be for a debt provider, it could be for a sovereign wealth fund, it could be for a private equity fund, it could be for late stage growth equity fund. Hedge funds use it as well so that we just have a huge plethora of customers that's on the capital allocation side.

00:19:40 - Tyler Hogge

Yep.

00:19:40 - Arjun Sethi

Then we have companies, public and private that are our customers now as well that use that product as well and that they use that same framework to make decisions around which products or features are working or how does the whole company work from how much money do I spend, return on invested capital, fully loaded CAC, etc. So it's a full spectrum, I call it audit for my own purposes like underwriting the risk of the asset at any given time. And then what are the decisions you want to make with it? Those reports for let's just call it, you know, for acronym sake. I don't think this way. But a seed to seed plus company. It'd be like a 50 to 80 page report around like how to think about, not how to think about like where your company just literally sits today. Then you can make a decision from there. Now the, the more data you have under it's easier to understand and assess where you want to be so you can underwrite the risk faster. I wouldn't say it's easier, but you can underwrite the risk faster. And then the more early stage you have, because the, the metrics that are available to you or us at Termina, there's just less of it. Right? Like the history, there's. That doesn't mean that it's not valuable, it just means that there's a less history of it. But there are a large number of patterns around how people use the product, what they're using it for. And so we, we basically consider six months of data for any company that's been built, even if they don't have any revenue, just people interacting with the software or agents or transactions, that, that is more than enough time for us to be able to say that this has product market fit.

00:21:12 - Tyler Hogge

So the company will give you a data dump. It's probably a set thing that you ask for. Maybe their financials depends on usage. It depends. Okay, you spit out this 80 page report which at one point was referred to as the eight ball.

00:21:24 - Arjun Sethi

That's right.

00:21:24 - Tyler Hogge

The benefit to the founder, at least at the time was like, oh man, Arjun is telling me where I'm strong, where I'm weak. I think there's benchmarking inside it.

00:21:33 - Arjun Sethi

That's right.

00:21:33 - Tyler Hogge

And the benefit to you is it tells you if you want to invest, Is that right? Like that's, that's why you do it.

00:21:38 - Arjun Sethi

Well, scientifically what it tells us is does the company have product market fit?

00:21:41 - Tyler Hogge

Yeah.

00:21:42 - Arjun Sethi

Now it can tell you if it's growing, it can tell you if it's not growing. But I do think it gives you the ability. Now this is where you put your art on top of that science is to say, okay, great, if I put more capital at risk for this company.

00:21:53 - Tyler Hogge

Can it grow profitably?

00:21:54 - Arjun Sethi

Can it grow? Not necessarily grow profitably, but can it grow? Because you know, the job of venture capitalist, in my opinion is to identify opportunities that grow at high velocity. Now you can say I want to put a certain amount of return on invested capital to get to a certain size and scale that is a high multiple in return on your capital if it gets that size and scale. And that's kind of the math that you have to do. But that's what comes down to what I call the art on top of the science, which is now that you've got all the fundamentals in front of you, you've got it at the speed that you needed and you got the benchmark, do you want to align yourself to the risk outcome? Right now? The more data you have, in my opinion then less irr in theory, depending on the company or if people haven't seen it. Now, everything I'm saying here, by the way, sounds pretty logical and it should be pretty standard that everyone does this, but, like, 99% of the industry does not do this. What they'll do is they'll flip it. And they say. And nothing in this conversation that we've talked about is about the team, how they think about product, how they're building. And I think those are extremely valuable. But we do that after we've done the underwriting of where they sit. And our belief is that once we do that, then we can build a relationship with them around, okay, how do you want to build this company and can we align with you? If we do align with you, then we're much more likely to write a check, spend our time, and maybe double, triple down with you for the lifetime, even if other people don't believe. Because we are now at a place where we have alignment around your baseboard, which is your fundamentals and alignment around how you want to run your company. Now, not every company wants to do that that way. Not all founders want to run their companies that way. And we won't always be in alignment with companies, but the whole point is that can we reduce the delta of, like, what we know and what they know as quickly as possible so that we can, you know, help to build the business if. If need be.

00:23:45 - Sterling Snow

Do you think it allows you to value opportunities that others miss? Like the Slack story is, it does. Does it uncover gems that other people wouldn't find? Like regular? Like, how do you think about that?

00:23:58 - Arjun Sethi

Yeah. So it depends on your definition of gems. Right. So I think everyone's looking for the biggest outcome all the time. And I think for that, that's important as well. So the way we think about it is at Tribe. Now let's talk about tribe for a second versus the data at Tribe. What are we trying to do? We're trying to put the least amount of money into the best asset to have the highest velocity and highest multiple. Like, it's actually just that simple. And the other aspect is if we have an investment criteria perspective, then what we want to be able to do is minimize our loss ratio. So we're actually okay with singles and doubles because they're going to have some product market fit. But our belief is that instead of having zeros, we'll have singles and doubles and then we'll have the alphas on top of that. Like your home runs. If you have that, you're much more likely to have a net 5x return profile, sort of like at the minimum, versus saying I need as much ownership as possible.

00:24:55 - Sterling Snow

Yeah.

00:24:56 - Arjun Sethi

For the least amount of check that's into the company. And the reason you do that is because not any venture capitalist wants to say that they're bad pickers. Is anyone going to say I'm a bad picker? Especially with their hit rate? No, no one wants to say that. What they want to say is, venture capital is hard. It's a black box. It's all art. You got to just trust me. I'm going to meet with people. Once I meet with them, I know I can look into their eye and I know that person's gonna be a winner.

00:25:22 - Tyler Hogge

Masa literally has a Jedi. Yeah, you thought of Masa too. He has this quote, I just look in their eyes.

00:25:27 - Arjun Sethi

Exactly. And that's the pitch. And my belief is like, that's wrong. But you can get lucky enough to be able to perpetuate that story. And so we're not good at that. Like, I can't look into someone's eye and say like, that's a winner. I just can't. And I don't think any of my team members can. And I've never worked with any venture capitalists. Even the greatest of the greats that like we sit on the boards with. In some cases, if you ask them, like over, you know, private one to one conversation, they will almost unilaterally say, at some point, I had no idea it was going to be this big.

00:25:57 - Arjun Sethi

Right. And then as you get deeper and deeper, they all say the same thing, which is, I was underwriting for X, but I got Z and it's awesome. Great. So, well, if that's the case, then in my opinion, I think no one knows anything. And so what happens is that you have this herd mentality or a memetic systemic situation in the whole industry where they say, well, in order to be a great vc, I got to do the same thing that I saw post World War II to what you see today.

00:26:22 - Arjun Sethi

And our perspective coming as operators was like, okay, well if I'm an operator and you trusted me to operate, I was using data to make informed decisions to build a better product.

00:26:33 - Arjun Sethi

Why can't I do that from day zero or as close to day zero as possible once the company is being or the product is being set and built and to build a great company from there? And so when I take a look at these companies, do we see what we call patterns of extreme growth and patterns of extreme product market fit in a lot of these companies? Yes, but it doesn't mean it always works out. You just see these patterns, and what you have to decide is, what type of risk are you willing to underwrite? And that's what we spend most of our time on. Like, we'll see a company and we'll see what they're doing and say, wow, this company just looks exactly like another company in a different space.

00:27:12 - Arjun Sethi

It's kind of interesting. Now let's go deeper into what they do and why those nuances exist. And so I think, like, if we didn't build these frameworks, then we wouldn't have, you know, we wouldn't have identified Slack, we wouldn't have identified Zoom in terms of, like, we should have invested in it. We wouldn't have identified Plaid, we should have invested in it. We saw all these identifications, but we kind of didn't act on it. And our previous firm. And then at Tribe, we said, okay, great. How do we get better and better at this? Still not perfect, but I think you start getting better at saying no more and saying, like, these patterns are not interesting for us, but these patterns in Mexico for capital are really interesting.

00:27:49 - Arjun Sethi

These patterns in Argentina are really interesting. These patterns in a specific part of Indonesia are interesting. These patterns in India are interesting. And so interesting doesn't mean you do it. It just means that you study the hell out of it as much as possible, and then you figure out what you may want to do.

00:28:04 - Arjun Sethi

The specific thing at Tribe that I think people kind of miss is that because we see these patterns, we then decide if we want to build a company from scratch, if we want to invest in a company and be minority shareholders, or if we want to continue to buy up and concentrate our positions in some of these companies. And then more recently, where we are asked to say, we think you can run the company in a way that might be much more conducive towards having a higher yield and higher return and giving you guys your operators. Do you want to do that? And that's what we did with Kraken. So there's just so many different ways in which we, I want to say again, extract our world value.

00:28:45 - Tyler Hogge

Well, what I love about it is you kind of boiled down the job to deploy the least amount of capital and the highest returning assets. And if that's the job, your options are actually much broader than just invest in a minority position in a company. You can start a company, you can take over a company. And so Tribe Is like running a playbook. It feels like that very few if anyone else is running because your option set is much wider once you've defined the job is just put money at the best places. So one of those is incubations. So you mentioned capital. You've probably got many other examples. I think you've got a robotics company that you're talking about a lot more. When did you decide Tell us about this incubations playbook and how you're different from others who might incubate.

00:29:29 - Sterling Snow

When you think about like the traditional. Most VCs like add net negative value because they don't understand like the operating like those skill sets are viewed as different.

00:29:37 - Tyler Hogge

Yeah. So most VCs could not start a.

00:29:39 - Sterling Snow

Company and it'd be bad if they tried. Right.

00:29:41 - Arjun Sethi

I don't, I don't know. Actually. I again, I have a different perspective is that if you're a thoughtful capital allocator and you know enough about operating and there have been stories of some of this before, I think because of your point of view, you have a running head start. That doesn't mean you're going to execute better, but you have a running head start.

00:30:04 - Tyler Hogge

I think of like Fred Wilson at Etsy. He took over Etsy, he was just on the board. Like, there are some examples of pure capital allocators. Anyway, keep going.

00:30:12 - Arjun Sethi

And I think some of these things are a snapshot in moment in time. I'm going to go back. I always kind of like to think about stuff from post World War II to today, which is all of the anecdotes that we hear about today are about, this is how you need to run a company. These are how you need to have people report to you. You need to be able to scale. And then you hear the same thing from venture capitalists, et cetera, et cetera, which is like, they can't do these things. Well, think about all the tools that we have at our disposal today. Like everything. The speed at which we're able to respond, communicate, the speed at which we can make decisions, the speed at which we can analyze, the speed at which how many people were in contact with on a daily basis is very different from five years ago, 10 years ago, 20 years ago, 50 years ago. And so a lot of these concepts that I hear, people again, even give me advice on, which is like, you need to run your company this way. And then I ask, okay, well, why? And variably comes down to it was like, well, it made these companies successful. I was like, yeah, well, those companies were built like A billion years ago. Now it's not to say that these companies weren't valuable or the way in which it was structured. There again, there's, there's these, it could.

00:31:21 - Sterling Snow

Be an outdated playbook.

00:31:22 - Arjun Sethi

Yeah, there's a, I don't know if the playbook is outdated, but again, the, the baseboard foundation is important around how they structured culture or how they structured communication. Great. Well, I can use 10 tools for that communication to just do things faster so you'll hear stuff. You know, pre Covid, remote was bad up leading up to Covid, you started hearing about remote work. During COVID you heard about remote to hybrid or vice versa. But remote was the best thing. This is the future. Now you hear about like remote is terrible. So you just, you have these pendulum swings. Well, the reality is like some work really well for some companies and some don't. And it just depends on where your location is. And I actually think it's just dependent on the tools available to you. Right. So I go to a lot of the emerging markets a lot. There's no reason for them to have remote work because it's so easy to get to work. Actually work is a safe place to be and they don't have the ability to spend on a lot of these tools because they don't have a lot of ROI for the products that they have. So if you start going down to basics, why they don't do it, that's the reason. Okay, great. Now, now you have a, now you have a baseline understanding of how some companies are working worldwide. Now when you start moving up to stack, depending on who those people are and what they do, can you do more remote work? You can. And so you take a look at like what venture capitalists do, other capital allocators do, how much time they spent sort of researching. You take a look at what bankers do, BD people do. They all have tools again to be like a, a salesforce essentially. So you start asking yourself, okay, what is the tool built for? What's the use case, what's the workflow and how do you continue to augment that? And so when I, when I think about any of these concepts of can a VC run a company? Absolutely. But also like, what is a vc? Like what is the identity politics of a vc? There isn't anything, it's just what's the job? Their job is to deploy capital into the best opportunities and have a return for high velocity opportunities. So if you get warrants because you are operating the company, great. If you started the company, you got More ownership. Great. If you have a set of folks that you know around the table for a long time, you don't believe that they have the ability to lead the company, but you can. But you can go and assess talent and bring a product or a life from an idea concept to delivery. Why not? And so that's how we think about stuff in our whole. Across the board. So our first incubation at Tribe was in the crypto space, which is that we saw so many of these kids coming with all these cool ideas, but it wasn't really structured in the way in which we thought would create some sort of intrinsic value in the ecosystem. So we said, we'll build it because of what we're seeing worldwide and these patterns.

00:34:01 - Tyler Hogge

Is that Kraken or is that another.

00:34:02 - Arjun Sethi

No, no, this is. These are incubator products. And so we said, okay, well, why don't we find the team? We'll have more skin in the game, we'll have more economics for the amount of capital that we're deploying. And guess what, we're, it's our idea and we're deploying the capital and we're finding the team, we're hiring them and, and these first set of folks that we're building in are coming in our co founders. If there is an emergent lead there, they'll be the lead. And we'll sort of slowly step back if that makes sense. If there's no emergent lead, maybe we're the lead. If there's some another team that's a lead, then we'll figure it out. Like that's how we kind of thought about it. Now the best time to start a lot of these things is when capital is scarce. So we didn't have a playbook to say we want to be an incubation house. We just said, hey, based on the way in which the market is interacting today, and we have a long term belief on this ecosystem, we think we should create these protocols, write these white papers and, and deliver this experience. We had lots of failures, we've had a ton of success and that's great. And then what happens along the way is that we are considered leaders in that ecosystem. A lot of founders want to work with us and they want to partner with us and then they ask us to invest in their company. So it becomes this nice cyclical notion. It's not vicious in any way, it's just that. But founders will want to trust other founders. And if those founders are coming to you and saying like, okay, I'll also Deploy capital while I'm helping you. That just becomes. Becomes much more of a natural conversation versus come pitch me at the tabletop and I will tell you if I think you're worthy.

00:35:31 - Sterling Snow

It's fascinating because the more you, like, roll up your sleeves and do the thing, everything changes so fast. And so if you've been just allocating capital for decades, you have to work very hard to actually be current and valuable.

00:35:45 - Arjun Sethi

Or differentiate.

00:35:46 - Sterling Snow

Or differentiated. But like, if you. If you're building, if you're involved in that every day, it's very, very easy to maintain sort of an edge in whatever change is coming. Right. And have strong opinions about the future.

00:35:59 - Tyler Hogge

How many of these incubations has Tribe done?

00:36:01 - Arjun Sethi

We are probably at number nine or ten. Okay. I think four or five really matter today.

00:36:07 - Tyler Hogge

Okay. Do you want to pick one of those four or five that really matter and, like, tell us about it? Which one? Which one would you pick if you had to get very excited about one?

00:36:15 - Arjun Sethi

Well, I get excited about all of them.

00:36:17 - Tyler Hogge

You love all your children the same.

00:36:18 - Arjun Sethi

The way I think about it is it's a snapshot in time. Right. And so we'll talk about capital. So we're co investors there.

00:36:27 - Tyler Hogge

Yep.

00:36:27 - Arjun Sethi

The pitch from them, they had already started the company. Right. So I wasn't a co founder there.

00:36:32 - Tyler Hogge

How did you even meet these guys, by the way? Capitals in Mexico City, Rene and Fernando, Just these killer operators.

00:36:37 - Arjun Sethi

Yeah. How did you meet? Eddie's the third.

00:36:38 - Tyler Hogge

Eddie as well. I haven't got to know him as well, but we love these guys. They're phenomenal. How did you meet them? What's the story?

00:36:43 - Arjun Sethi

So they came in through a typical pitch.

00:36:45 - Tyler Hogge

Okay, got it.

00:36:46 - Arjun Sethi

Like, they. They came in, they said, here's what we're building. Here's the software that we want to build. But it was really, I'd say more of a manual process early, where they were, you know, just lending money. Right. And so if you look at what most emerging markets need, they need access to capital with some sort of underwriting risk to be able to help these businesses grow, like just at a. At a high level. That, like, that is like, you know, the heartbeat of any economy for small to medium businesses. But they. But their perspective was that, like, I will create a lending business business that'll be just massive. And I just thought, that sounds terrible. So. So, like, what else are you guys trying to think about? And so we went through this process of continuing to get to know each other for a pretty long time. Actually, I think it was roughly about seven months to a year. And during that time I just kept pitching them, well, like I want to build banks because like there's no innovation here in the United States. Like this is what I'm thinking about in India, here's what we invested in in Indonesia. I think you guys could do the same thing in Latin America, et cetera. And here's how to do it. While we were having those conversations, we were also spending a lot of time with them around how to think about building their product. Now over here you've got Ramp and Brex thinking about, you know, very specific nuances on how companies use, you know, credit, expense management, etc. Well over there there are not that many companies that can do that and there's not that many. There's not that many companies that create an ecosystem. So you kind of have to do everything vertically integrated. The parallel that I use is that, you know, for a lot of gaming companies early on, or e commerce companies in China, they had to build everything from the bottom of stack to the end customer because there was no one else they could rely on.

00:38:24 - Tyler Hogge

Yep.

00:38:25 - Arjun Sethi

Most of these countries are in actually the same position. India is actually kind of quite unique. So I'll get there later. But my pitch to them was like, you guys just got to build everything. And if you build everything, I'll help you through here, I'll help you through this, because I've done this before, I help you.

00:38:38 - Tyler Hogge

So even though they had already started the company, you're kind of co creating a new version of capital with these guys.

00:38:43 - Arjun Sethi

Yeah. So I would say like they're probably the most lightweight version of what I'd call the incubation, which is here's my manifesto of what you should do. Here's my roadmap. Do you want to do it? I'll just give you the money. Like I'll just give you more. And then they said eventually, yes, so we want to do it. Help some convincing. You know, I think, I think they secretly wanted to do it. They didn't want to admit it because when they would go around the valley pitching that this idea that they wanted to do all these things, people get scared. And so what happens is people get scared and they don't want to invest because they say, okay, well what do you know about here to here? If you're only at this level of the stack right now? And I only wanted them to go from here to here because this roadmap. And again this comes from our world point of view of companies that we've seen through our data Set what makes them the most valuable in these emerging markets was, well, I only want you to care about this and I just want you to use this as a liftoff point. And so I think once that came across, I think there was one call Renee had pinged me and he said, I finally think I can do it, but I need your help now to buy a bank, do all these things. And I said, okay, great, let's move it into motion and let's make it happen. And it wasn't my idea of having any sort of inserted influence. They basically came to me and said like, do you want to be a co founder with us around the table with the same level of voice? Part of me said like, this is cool. But part of me was like, I'm not sure if I want to do that. Because you're at your relationship with the founders actually do change where now you're at the same level of them as them as co founders. So I mean you're like, you are yelling, crying and screaming to each other all the time in the same way so that now the relationship changes. So that took me a while to say like, okay, do I want to do this or not? Eventually I said yes, because I was doing this with a few other companies. So it became a little bit more natural.

00:40:29 - Tyler Hogge

Fascinating. Absolutely fascinating and capitol. So. So this decision and then we'll move on to Kraken. But it sounds like your thesis was they needed to build the full banking stack and become a bank. So were you a driver on the like bank acquisition thing?

00:40:42 - Arjun Sethi

And I was, yeah.

00:40:43 - Sterling Snow

Startups buying banks is not usually the advice you get from Silicon Valley.

00:40:47 - Arjun Sethi

Yeah, well, I mean, again, I wouldn't advise a company at its earliest stage to do that here in the United States because of the regulatory environment.

00:40:55 - Tyler Hogge

But you had a perspective on international.

00:40:57 - Arjun Sethi

Sounds like emerging a lot of these emerging markets. The perspective is very different.

00:41:02 - Tyler Hogge

Yeah. All right, can we talk about Kraken? So a couple months ago now, three, four months ago now, you stepped into a pretty important role at Kraken as I believe, co CEO. Why'd you do that? How's it going? And tell everyone a little about that process.

00:41:18 - Arjun Sethi

So we. So the first time I met Jesse, who's the co founder and CEO of the company at the time was when we made an investment when my previous firm, when we were at Social Capital and they had invested in a company called dcg. And the founder and CEO there at the time, Barry had made like a very light introduction to some of his portfolio. And we met, we met Jesse. And it was in his office. I don't even think he remembers. But because I was like, I'm usually pretty low key and quiet.

00:41:50 - Arjun Sethi

And so regardless of what your stature might mean, like, you just don't. It's not natural for me to chest bump. So if you know me, cool. If you don't, then we may or may not be able to build a relationship. But I meant I went with some of my partners and they were sort of like the, the big dogs at the time. And so I was just listening to him talk about how he thought about the world. I think I was just most attracted to the culture of what he was trying to do. And if you read the Kraken cultural document today, a lot of what he was saying at that time is enumerated there. But essentially his belief was it's not about crypto trading, it's not about speculation, but it's getting access to people. It's is letting people access crypto worldwide to be able to have access to financial products worldwide. And I think that like, very specific nuance is really important. It wasn't like bitcoin maxi, it wasn't anything that was happening, although that's how it started, is that he was very well articulated that like, I care about this, all of these other things are growth factors for me, but I really care about this.

00:42:54 - Arjun Sethi

And I think at the time no one cared about what he said and they only cared about the high velocity. FOMO is maybe a better term. And so I kind of stayed connected with him on and off. When we were at Tribe and we got into the crypto ecosystem, we made a couple of bets, eventually made a larger, much more concentrated investment into Kraken.

00:43:15 - Arjun Sethi

And I just, myself and my team, giving our quantitative background, started building a deeper and trusting relationship with the company. I think one, one thing that people don't realize is that the team came from gaming also, they came from virtual goods, et cetera. And then they moved into crypto. And so we all had this affinity towards each other because we came from, what I'd say, similar war zones on how to think about the customer experience, experience, all the things that were fragmented in between to try to get those experiences. And so when we were conversing about some of the stuff that I was doing, you know, in crypto as well as capital, I think eventually there was this inflection point where, hey, how do we sort of take more of the merger of your ideas and then. And bring it to Kraken and how to execute on them? So I Don't think there was one point in time where it was like, you know, it makes complete sense.

00:44:06 - Arjun Sethi

I think I know where I was when we finally made the decision. I was walking around in Japan and Jesse was a co founder, was giving me feedback on where I should go to Japan. We were just going back and forth and I think it was kind of a joke where he said, dude, you should just take over as the CEO.

00:44:22 - Arjun Sethi

And it was like that, you know, 11th time he said that. And then I said, okay, well here's. I think for some reason at that time I was just maybe mental clarity or I just had really good sushi or ramen or something. And so everything became more clear. And I said, look, here's how I just think about the world point of view and not a lot of people believe me.

00:44:42 - Arjun Sethi

Sometimes my LPs think I'm crazy, but like, here's my top point of view from the data set. Here's what I'm thinking is happening in the world and if I was to do something, I would want to hit all of these marks and that this is the speed and the velocity at which I didn't want to go. And so it's not, you know, the coinbase approach, it's not this approach. It might feel uncomfortable for some people, but that's how I would think about the company. But it's not mine. And so if I'm not running it, then I wouldn't like advise you to do it. It's like this is my thought process. And so that that started kicking off a series of conversations with the rest of the management team on do they want to do this and how to think about it.

00:45:15 - Arjun Sethi

And you know, to their credit, they all basically said, okay, let's just do it. And so it wasn't like any sort of dictation that we need to change this thing. The board was aligned, the management team was aligned. And actually, you know, more importantly, the management team was welcoming as well as Dave, who was the CEO at the time.

00:45:33 - Arjun Sethi

He was a company acquired in by Jesse, then became the COO and then the CEO. And he was like super gung ho about it. And he said, okay, well tell me how this could work. And I said, look, well, I got to get up to speed. I want to partner along the way. I don't want to make any like drastic changes, but these are the things that culturally I would shift. Here are the things that would move like at high speed because this is my cultural set. If you guys are aligned, let's go do it. And let's, let's make it happen.

00:46:00 - Sterling Snow

How big was Kraken when you did this? Like, what kind of change management are you going through? How many, what was the team like? Like, how big big was it?

00:46:08 - Arjun Sethi

So today we're roughly about 2,300 people.

00:46:10 - Sterling Snow

Okay.

00:46:11 - Arjun Sethi

Worldwide.

00:46:12 - Sterling Snow

That's a big organization to go through, like a big change, you know.

00:46:16 - Arjun Sethi

Yeah.

00:46:16 - Sterling Snow

A lot of people would be very risk averse at, you know, it's one of the things that's very interesting in this convo is the way you communicate. This is like, oh, well, you know, we just kind of think about it from first principles and do the thing most people would be screaming about like, hey, well, what if we break it? What if it goes wrong? They start thinking, thinking about downside protection that like doesn't come across in how you're talking about these things.

00:46:39 - Arjun Sethi

I, I think, look, I think if you speak the truth about what's happening, people get it. Yeah. Some people will get miffed by it and they'll self select out and say, I don't like this environment because I need an environment that feels safe. Yep. I think the safest environment you can build is by growing. And so that's what we delivered, which is here's how the company is performing, here's what's going really, really well. Let's double, triple, quadruple down on it. Make sure that there's resources there. Here are the things that are not doing well. So how do we make it much more efficient or automate these pieces? What are all the types of companies that we actually need to partner with versus not? Like, I think if you just go down the list, it becomes pretty obvious the quant approach is more about just again, remove emotion. Remove, remove emotion from what's not working and what's working and say, okay, great. Based on that foundation, what do we want to do if, if we are leading this together? This is what I would like to do. Here are the reasons why. And then you just get everyone all into it. I think the first thing I did when I came to the company was it just told everyone, all 2300 people, every single aspect of how the company was performing. So here are the financials, here's our metrics, here's what, what's happening. Here's a dashboard should look like you guys hadn't had it before. And the first thing people said was, hey, we never got this level of transparency. It's not that it wasn't there. They couldn't access it. Yeah, sometimes you just got to keep the communication in front of their face. I don't even think it's communication. It's literally, it's like a rinse and repeat of like, what are the first principles of what we're trying to build? How are we going to get there? Here are the, here's the data and the metrics that support and substantiate how we can get there. We can't just say we're going to get there and then try to race to the moon. It's like, here's what we need to build the launch pad, the rocket and then let's go. And that's pretty much what frankly, what we consistently do on a week to week basis. It's not even an all hands. I'd say, like we just keep sharing. Hey, we learned these insights, here's what's working. Hey, something went down here. Here are the reasons that went down. Hey, by the way, here's how we think about what's happening in the crypto ecosystem around meme coins or stablecoins or listings here. Like just thinking about everything, first principles versus saying that we're all into bitcoin. I love bitcoin, but like we're an exchange at the end of the day. We want to be able to enable transactions for people worldwide. We want to make it as de minimis as possible. And so what are all the businesses that we partner with? What are the businesses that we have to own? What's the infrastructure we build for our partners in the, in the future? Like, we need to just keep thinking that way and then if there's something not working on our engineering team or technology team or architecture team. Okay, great. Well, how do we create the modules and services that need to be there for our existing services today or the services that we might want to build in the future? If we don't have those conversations, we're never going to improve. And I think a part of it is that a lot of companies get stuck in the ways of like, well, we've been doing it this way for so long, so why would we change it? Well, because we may not be able to do it for so long and like, you kind of have to start thinking that way.

00:49:42 - Tyler Hogge

Go ahead.

00:49:43 - Sterling Snow

Well, I am, I am curious, like what. Tyler and I debate crypto like all the time. We, we have a bet going on about like what percent of GDP will like transact in crypto by what year? Different things like that. But curious, curious like what your, where do you think it's going to?

00:50:02 - Tyler Hogge

Yeah. What's the future of Crypto, what does it look like? How's the skeptical argument I always make is like, look, the only two or three companies that have really created big value, including Kraken, are the ones that have centralized the exchange. And so, so much for the decentralized economy. It's just, it's just NASDAQ for crypto. Like, am I wrong? Like, what's the future of crypto?

00:50:22 - Arjun Sethi

Yeah, so I think that statement is definitely wrong in that.

00:50:25 - Sterling Snow

Let's go.

00:50:26 - Arjun Sethi

Yeah, Kraken and Coinbase is we're much more tied to the traditional finance ecosystem and that accrual of value. And so yes, while we're valuable today, our hope is to be valuable in the future. But on chain activity and stuff that's happening in Defi is much bigger.

00:50:41 - Arjun Sethi

So a lot of people talk about Tether. Well, Tether's one of the most profitable companies in the world, so why are they extremely profitable? One, they created a stablecoin for anyone to be able to create transactions with and create, create more liquidity with. So it reduces the friction to be able to transact in the first place. So speculation, movement of money, remittances, etc, like the list goes on around why you use payments.

00:51:06 - Arjun Sethi

Right. Like the sending and receiving of money. Now they've done an incredible job as well as USDC and a couple other folks to be able to proliferate that worldwide in a lot of these markets where they didn't have access frankly to the US dollar or any of those yields or any of those products.

00:51:21 - Arjun Sethi

Now the word Defi, decentralized finance, I think a lot of people get scared of because they think about the Ponzi schemes or the things that are out there, but at its base, fundamental first principles, core or the primitives that you take a look at, what are they trying to do? Well, you need to create a certain amount of speculation, a certain amount of liquidity, a certain amount of money flow in order to be able to offer a product that has a certain type of yield.

00:51:42 - Arjun Sethi

Okay, great. So now we're in the financial products markets. Now if you can offer that type of secure or let's call trusted yield to someone who's sitting in Africa or someone who's sitting in Latin America or Venezuela, anywhere in the world, now they're getting, starting to get access to the same types of products that we are more used to here and what I'd call the developed developing world of, you know, us, etc. So we're used to a certain set of stuff. But even then I'd even go Further, say if you wanted to get a bond product like with Fidelity, the entry price point might be $500,000. Well, a lot of people don't have access to that. But imagine that type of product which, you know, Apollo recently or a set of products that Apollo is working on, on chain activities.

00:52:31 - Arjun Sethi

All of a sudden someone I don't know in Brazil has access to it. Okay, great. Well now when you get millions of people that get access to it, now they have access to, to that yield. That specific yield which I think is really important, is that that yield. Well, it's not the speculative yield which you kind of hear about the headline use, but you know, an 11% yield is pretty reasonable if you get access to it with a certain pool of capital.

00:52:52 - Arjun Sethi

And if you get that pool of capital from all over the world, instantly, that's extremely valuable. And so that's moving through us pegged stablecoins into structured products and then into some centralized products. So I think the gap between centralized products and decentralized products will continue to shorten. I'm sorry, the will continue to condense because it's more of a matter of experience. I think the thing that people get scared about in Defi is that it feels like what the protocol wars look like in the 80s and 90s.

00:53:26 - Arjun Sethi

And when people started thinking about email IMAP, POP3SMTP, you know, while no one thinks about that today, people were thinking about, well, this specific email software product is better for SMTP, it's just different. And so that's where DeFi is today. And I think what's really great about it is it's mostly open sourced. You can create better and better products. You can see what's working, what's not. You can actually see transparently fraudulent activities.

00:53:51 - Arjun Sethi

People call it out and say, okay, well I don't want to sort of back these things, these teams, the way in which people are voting. So I want to move over to something else. Let me copy and fork this into creating a new protocol, new chain, et cetera. And I think that's like extremely, extremely exciting and healthy for the industry.

00:54:22 - Tyler Hogge

Did you buy the Trump coin?

00:54:23 - Arjun Sethi

I did not.

00:54:24 - Tyler Hogge

Or are you Melania guy?

00:54:25 - Arjun Sethi

No, I mean the last three weeks because we had a new pay app that came out is I've been sending and receiving, you know, fart coins to my kids, and then I've. And I've been receiving a lot of Trump coins as sort of jokes. But I think what, what's cool about that is that the headlines are going to be look at how much money I can, could have made with Trump. But what other people aren't thinking about is, well, think about the amount of like remittances of sending that money back and forth that can happen. That's also happening on our platform. And I just think that fractionalized, like branding of money being sent back and forth is really cool, right? Because like now based on, I don't know, a group chat, we might be thinking about something that's funny and we can just send these things back and forth. And so while it's still an asset that's fractionalized, it still holds some amount of value. And so if I say, like, dude, I'm just going to pay you and $25 worth of Trump coin, you might be okay with it and you might actually prefer that over, you know, getting Mexican pesos, like thinking through about those use cases. And so when you think about gaming, you think about commerce, you just think about, you know, human connection. These things can get much more proliferating. And I think like, there is something special to that toy, like, nature of how people are using financial products that are programmable and like completely transparent. But, but I do think the industry as a whole needs to do a better job of, you know, frankly, a building better experiential products rather than only technology. There's, there's a joke that I saw on Twitter and a couple other places where they said if they were to, if you were to build Netflix through the Web3 lens, like they would, they would basically just talk about all the technology that's being used and like, here's the token to buy it. But they would never talk about like the shows, the content and like why it's better. And so there, there is a flip that needs to happen. I'm already starting to see it happen where it's like, okay, great, you've got financial technology, Rails, that gives you the ability to build amazing products for your customers. Like, that's, that's the part that I think is fascinating.

00:56:35 - Tyler Hogge

This could go on for a long time. We probably should get close to wrapping up before we ask you the final two questions we ask everyone. I want to ask you one more and then I'll let Sterling jump into the questions we ask everyone. So we Had a conversation. I don't know if you remember this. It was back at Pelion where I asked you about a company that had kind of had some really rough news. I won't say the company name, but you know it and I know it. And I was like, man, how are they taking that? The valuation's way down and it's been. They've been flung through the mud. And your reaction was like, whatever, they'll figure it out. I was like, what? Like, you're on the board of this company and like, you're just like, whatever. You seem to have this, like, nonchalant but quiet intensity about you. Why? Why do you have that? Why. Why are you that way?

00:57:21 - Arjun Sethi

I think. Well, I don't know if I do.

00:57:23 - Tyler Hogge

So maybe the least, the perception.

00:57:27 - Arjun Sethi

I think, look, if you. There's market cycles, markets go up, markets go down, and based on the supply and demand of capital for these assets, the valuations will change. And so our belief has always been if we invest in a company that's growing efficiently and it's going to continue to have a compounded growth rate over a certain period of time, our entry point for when we invested and how we think about intrinsic value versus options value. We just have to get smarter about risk management as we continue to measure these market cycles. It's. It's as simple as that, which is, I'm an investor at the end of the day and I need to be able to return a yield. And, you know, headline news is headline news. And I think we've all seen now over the last 10 to 15 years what that kind of world look like. And let's see if we get back to a rate of normalization. I don't think we will. Which is why where I think the arbitrage really exists is, you know, I work with people and companies all the time, and there's a lot of folks that are extremely talented, have, like, great businesses. But, you know, there is some sort of headline about something where people didn't like the way in which that person interacted with me, or, hey, that product shouldn't exist. It's speculative. Or, hey, this team, you know, their last company had failed. So, like, why should anything work in the future? I just think that people continue to use these qualitative artistic notions of what should or should not work. And if you look at the basic fundamentals, then you'll see, like, a lot of these companies just continue to quietly grow. And I actually think the public markets are probably a better indication of this, which is some of the companies that are the most valuable have the least amount of traffic and news for a long time until they didn't. Right. So we're now talking about Nvidia, we're now talking about Broadcom. But, like, the list just goes on around. Like, I mean, if you take a look at amd, there's still like a, you know, power behemoth, but they're getting their moment in time and shine for the moment. Then there's going to be the next one. There's going to be the next one.

00:59:25 - Tyler Hogge

So you just don't get too high or too low because these things come in cycles and you just have to focus on the fundamentals.

00:59:30 - Arjun Sethi

I think it's, you know, the best part about this job, in my opinion, is I get to work with, like, some of the smartest people in the world. I get to learn from them. Ideally, they might learn a fraction from me. That's okay. And then we get to work together for years and years on end through that, through that journey of what it means to build a company. And then years on, years on end sometimes may result in something that doesn't work. Okay, great. Well, now we've invested all of this time and energy and expertise into something. What else can we use it for? And so the way I think about it is, like, a lot of the companies that I've. I've failed with or my teams that I failed with, I'm still working with today. Maybe they're much better for me to have as an investment partner. Maybe they're much better to have them operationalize something that I care about at Kraken. Maybe some of those folks can be better at some of the companies that I'm starting or incubating or a company that I'm already working with because they could jive better. It's just that, like, there's just so much time and effort invested into these relationships, which is like, if you got a baseboard foundation, you understand how, like, not the best at it, but you're starting to have a directionality of what could and could not work. Why wouldn't you start employing your, you know, your social network towards these activities? Especially for things that are just really hard, it's just much more fun.

01:00:46 - Sterling Snow

So we got a couple questions we ask everybody, and present company excluded, you know, your firm, we'll exclude, like, your firm and stuff. But who's the investor that you admire the most?

01:00:56 - Arjun Sethi

I think, again, I go through snapshots in time, which is like, what's my evolutionary period? I used to name Names of people. And I've kind of recently stopped doing that because they. I feel like the more time I spend with them and the more time they spend with me, we both realize that we're both not that smart anymore. I just think. I just admire people that just have a propensity to continue to try even if they failed, no matter who they are, even if they're, like, at small firms, we've never heard of them before. So I actually, like, I probably admire the most junior people in venture the most versus the ones that have been around in the industry for a long time because they're just grinding as much as possible, trying to learn as much as possible. So actually, frankly, the people that I learned the most from are the people that are playing closest to the field. Like, all of the associates, all of the junior analysts, like, they just know more.

01:01:57 - Tyler Hogge

He basically said, you and I. He admires you and I. I'm gonna take it. How about operator? Will you name a name there? Is there a CEO that you're like, man, that guy or gal is phenomenal. And I've learned the most from them as a CEO or an operator or a founder.

01:02:11 - Arjun Sethi

Honestly, everyone, like, you give me any name, and if I've met them, I would say, like, there's something that they do really, really well, well here. And so, like, how do I, you know, frankly, how do I make that work for my workflow at all? And so I. I just, you know, like, I read everyone's blog posts that I can. I look at their statements. I read their analyst letters. I think there's just like, something special that they do and say, can that be included in my workflow? Like, you know, obviously you look. Everyone reads like, Jeff Bezos's letters, but I don't think anyone has read, like, their original lettersman. Like, he just basically talked like an analyst. I think that was, like, extremely admirable because it's essentially just getting down to the basics of how anyone would value his company. But it wasn't like he wrote something and saying, like, it's an instant, you know, turn on to his company. It was just consistent, you know, quarter by quarter, year by year. Here's how we think about the culture of our company. Then you look at Jensen Huang. Obviously everyone's talking about now, which is like, I do all of these extreme things. Everyone sort of focuses on Elon, but I think there's the quiet guys that have just been consistently focused on it in the public markets. I think there's more to learn from the companies that are in the public markets than the private markets. Because in. In the private markets, we're all just privately trying to grow our companies and trying to make them work. And so the lessons learned are just so anecdotal or very specific. But in the public markets, you can kind of see it shake out. Right. Like, the Adobe CEO, what he's done, just, again, just a quiet warrior, which is, like, admirable in itself, which is like, you can't even. Can't even name his name.

01:03:45 - Tyler Hogge

Yeah. And he's up there. He's one of the best.

01:03:48 - Arjun Sethi

And so you just go bit by bit. Even the Broadcom CEO, a lot of these folks have been just, like, quietly building out their companies, being warriors in some cases. And I think there's something to aspire towards what and how these people build their companies. And. And again, like I said, like, probably one of the reasons why I was admired to Kraken was that, like, Jesse's just been super quiet about how he runs his companies, but very loud about how he thinks about the politics of what's happening outside. And I think there's something to that, which is like, you're separating how I run and operate my companies. You know, we've raised less than 25 million primary capital. You know, we've released our financials that we did a billion and a half last year for 2024. It's just like we quietly just continue to do it without having to chest pump that. Hey, by the way, I raised this much capital. Here's my valuation, which I think is like a detriment to the way in which. At least for how venture works. A detriment to how venture works.

01:04:46 - Tyler Hogge

All right, last one is, we call it the Golden Spur question. And the direct question is, what drives you? Why are you the way that you are? You're a unique person. What is it that's driving you to be that way? Judeo Christian values is what your Twitter account says.

01:05:01 - Arjun Sethi

I don't know if. I don't know if I'm unique in any capacity. Oh, you are, at least. Well, I mean, at least to the folks that live around here or in the Valley or the founders that I work with. So maybe a way to sort of think about it is I get to work with some of the smartest people. I've seen. Some of the most ambitious people work on things that also don't work. Right. Like, there's just a lot. I had a phone call last night with a founder who I think is, like, one of the smartest founders, just bar None. But he's just had a string of failures for the last three things he's worked on. But every time he says something, every time he talks about something, I'm just like, man, this. He's just so on top of it. I wish I had that brain capacity. So I think like, the more you spend time with these folks, the more you're aspirational and want to do the same things. And so it could be a notion of exposure, it could be just you want to work on cool things. But I think a way to encapsulate what I like to work on is one, I like to work on things that I think some of my family might be excited that I'm working on. That's one, two. I just want to be excited about moving progress forward or making these experiences for people. Like, I think that aha moment is like, really important. So I'll actually go back when we first started making, you know, games on mobile, on social gaming, et cetera, and we started making messaging apps. When I saw other people use our products and the, and the joy of how they were using it, it's like, wow, I never want to do anything else, so how do I just do more of that? So when I work on the biopharma incubations that we have now for it's been about almost five to 10 years, it's more about, okay, if this works for our drug delivery system, it's going to be the joy of saving lives. And it's not like, hey, we want credit for that. It's just that if you see that impact, that's like, I don't know, it's cool. Yeah, it's awesome to have that progress. If you have a humanoid robotics system, which we'll have here in three to four weeks, he or she will be walking around here and I think that's going to be cool because like my, my son looks at all the progress and he's like, this is the, you know, coolest thing I've ever seen. And I was just thinking about it from like sci fi. So I think like just being a part of the story or being a part of the mission to move human progress that way might be a part of it. But I'm also traditionalist at the same time, which is like, I refuse to have an electric stove. I refuse to have a fireplace that's electric. Like every, like, if you guys are here, like, everything here is much more manual. So it's kind of like the mix between the two, which is how do I focus all my attention on that type of progress. But at the same time, keeping a certain set of values are important for me.

01:07:45 - Tyler Hogge

Thanks for the convo, Arjun. It's been fun, man. Very fun conversation.