← The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
20VC Exclusive: Mercury Founder Launches First $26M Fund | Why Founders Should Take the Highest Price | Why Serial Entrepreneurs are Better | Why AI Is So Overhyped | The Future of Venture Capital with Immad Akhund
01:02:21
Immad Akhund is the CEO of Mercury. Launched in 2019, Mercury has raised $500M in funding from Sequoia, Coatue, CRV, Andreessen Horowitz and others. He is a former part-time partner at Y Combinator and is an active angel investor, with more than 350...
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- [00:00]
Imad
Sequoia does not take their position lightly like they did the most work. I think it is very hard as an entrepreneur not to chase the highest valuation. You know, we did our series B at 120x, which was not rational. This is 2021, but we did it and I would do it again. I mean, I just prefer serial founders. Like I have such a bias towards them. A serial founder with a chip on their shoulder. Oh yeah, 100%.
- [00:24]
Harry Stebbings
This is 20 VC with me, Harry Stebbings. Now, I'm very honored by the show today. I had this amazing guest on the show six years ago and he pinged and said that he had some news that he wanted to share on 20 VC first. And so today we have an exclusive with that. I'm very excited to welcome back to the hot seat. Imad, founder and CEO of Mercury. Launched in 2019, Mercury has raised $500 million in funding from Sequoia, Andreessen, CO2CRV. He's also a former partner at YC and he's an active angel investor with over 350 investments in companies like Rippling, Airtable, Rappi and Substack, to name a few.
- [01:02]
N/A
But before we dive into the show.
- [01:04]
Harry Stebbings
I love seeing the team come together to make this show happen. What I don't love is trying to keep track of all the information, the data and the projects that we're working on across dozens of platforms, products and tools. That's why we use Coda, the all in one collaborative workspace that's helped 50,000 teams all over the world get on the same page. Offering the flexibility of docs with the structure of spreadsheets, Coda facilitates deeper teamwork and quicker creativity. And their turnkey AI solution. The intelligence of Coda Brain is a game changer. Powered by Grammarly, Coda is entering a new phase of innovation and expansion, aiming to redefine productivity for the AI era. Whether you're a startup looking to organize the chaos while staying nimble, or an enterprise organization looking for better alignment, Coda matches your working style. Its seamless workspace connects to hundreds of your favorite tools, including Salesforce, Jira, Asana and Figma, helping your teams transform their rituals and do more faster. If you're a startup team looking to increase alignment and agility, Coda can help you move from planning to execution in record time. To try it for yourself, go to Coda IO 20 VC today and get 6 months free off the team plan for startups, that's Coda IO 20 VC. To get started for free and get six months off the team plan. That's Coda IO 20 VC.
- [02:29]
N/A
And while Coda keeps the engine running smoothly, Shopify puts the pedal to the metal when it's time to sell.
- [02:35]
Harry Stebbings
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- [03:23]
N/A
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- [04:19]
Harry Stebbings
You have now arrived at your destination.
- [04:22]
N/A
Imad, I've missed you. Thank you for joining me again today.
- [04:25]
Imad
Yeah, excited to be here. I'm always listening to the show, so it's fun to be on the other side every now and then.
- [04:30]
N/A
Dude, that is very, very kind. Listen, I want to start with some news that you have. I'm thrilled that you said you'd share it with us. So what is the news that you have for us today?
- [04:38]
Imad
Yeah, I finally closed on my first institutional fund. We raised $26 million. I'm partnering with a friend of mine actually, he Invest Mercury seven years ago. His name's Yash Doshi. He was at EQT Ventures. I've been doing angel investing actually since 2016. So I've done about 350 investments. I've been working with him for the last year and I was like, hey, I just need to bring him on full time and kind of do this a little more properly. I've so far been investing mostly on Angellist, so I had an angellist rolling fund, actually just closed it I think last week or the week before and already have invested in five or six companies.
- [05:13]
N/A
Did I want to kind of take this chronologically before we dive into the fun? You mentioned the 350 angel investments you made.
- [05:18]
Imad
Yeah.
- [05:18]
N/A
What are the biggest lessons that you have from 350 angel investments?
- [05:24]
Imad
You know, number one, I think this is kind of something that entrepreneurs that are, especially if you're active entrepreneur, but once you become an investor, you're used to running a company, used to having your ideas and what you do at the start is you're like, okay, you know, yes, you're talking about something really interesting. But here's another idea that I think is way better. And then the other entrepreneurs, especially if they're young, they're like, yeah, I love this. Yeah, you know, Imad, like please invest. You know, we love what your ideas and then you invest and obviously like that's not their idea and you know, it's not even fair to push an idea on other people, but you really have to actually remove your ego and your ideas and really listen to what they want to do and you're much more along for their journey rather than like a major part. And actually when I first started investing, so I sold my company in 2016 and I was like, hey, maybe I want to be a vc, right? And I started investing and that's kind of what was my approach. I was like, oh, I'll be really hands on, I'll be really helpful. And then I realized actually Rappi was one of my first investments. Rappi is like a doordash for latam. And I literally invested and they did not talk to me again. Like they were just so busy and they grew that thing like crazy and it was unicorn. Within a year and a half I invested at like a 20 million cap. And I was like, okay, you know, what is the point of being an investor if like my best investments don't even talk to me? And you know, that's what I want, right? In terms of like a capital return returner. If someone I invest and they just do their thing and I have a big return, that's great.
- [06:49]
N/A
You said that you don't want to intrude and put your vision on them too forcefully. Or too actionably. I would see it as a big red flag if I put my views across and they're like, oh, that's a good idea, that's a better idea. And they run with it. I want someone to say, no, no, you're wrong. And here's three reasons why.
- [07:06]
Harry Stebbings
Do you agree that if they listen.
- [07:08]
N/A
Too much, it's almost a red flag.
- [07:10]
Imad
So this is actually another mistake I made. I think sometimes we, you know, if you're a second time entrepreneur, you have experience. When you talk to an entrepreneur investor, you're like, yeah, what the fuck are you talking about? Like, this is obviously wrong for these reasons, but there's a lot of young entrepreneurs out there that have great ideas, right? I have actually not invested in companies because I was like, okay, you know, these people are not pushing back on me and they're not, you know, they're not coming up with like a ton of experience and ideas. And actually, yeah, they were just young entrepreneurs and they were often as young entrepreneurs you're intimidated by investors. So you have to kind of judge people by what their life situation is and like, you know, how they are approaching the situation. And you do have to kind of cut some slack to kind of people who are new to their career rather than saying like, oh, you know, they didn't push back on me and they should have, etc.
- [07:56]
N/A
You said about Rappi, brilliant, fast growing company, do a unicorn status and they didn't call you. It makes me think of Keith Raboy who's like the best founders. They don't need you. Do you agree with that statement?
- [08:09]
Imad
I mean, they definitely don't need me. I think it's very rare. And you know, I have at Mercury I had like seven or eight kind of unicorn founders that invested in Mercury and you know, I didn't need them. But because they are active entrepreneurs and you know, every now and then I have a question. I'm like, I'm hiring a cfo. How do I hire a cfo? I've never done this before. Or like when I did a series B, I was like, I don't know, what are the multiples in like series B spaces? And like, you know, tell me about it. So I did contact them and this is kind of how I see my role as an investor. It's like, you don't need me, but I'm an active entrepreneur, I've got a big company, I've dealt with a lot of issues. If something comes up, you know, send me a text and if I have time, I'LL talk to you.
- [08:51]
N/A
Do you buy venture value add from venture platforms? The BD teams, the hiring teams, the all the teams that come, I think they're bluntly an excuse for management fees, I think.
- [09:02]
Imad
Depends what type of company. I mean, I would say, you know, Andreessen Horowitz was asked seed investor. So they invested like basically on a deck for Mercury and a lot of their kind of value add wasn't super useful. At the end of the day, I think the two most valuable things from any VC firm is, you know, who's the partner, right? Like, is this someone that you know every conversation you have, you know, I've been talking to Alex Rampel, who is our partner over Andreessen Horowitz. I've been talking to him since 2017, like once a month. Ish. Right? Imagine doing that with someone who's not value add or like annoying to talk to. Whereas, you know, he's smart. You know, I love hearing his take on things and riffing off ideas of him. So those are the types of people you want as investors. And I think that is by far the biggest thing you're choosing as an entrepreneur. And then the second thing which I think is understood by people is you do get a founder network with the portfolio companies of that VC firm, Andreessen Horowitz and I guess now Sequoia. I actually was just at a founder networking event with some Sequoia companies. These people have valuable networks and the best VC firms do make situations where like founders can connect with each other and I've always found that valuable.
- [10:07]
N/A
You mentioned Sequoia. That is it a needle moving event when Sequoia Invest, does the world see you in a different way? Do candidates see you in a different way? Is it that needle moving event?
- [10:17]
Imad
I've been entrepreneur since 2006 and like Sequoia has always been the top brand. Right. And I've always wanted to get Sequoia as an investor on a personal level. So, you know, finally. And I pitched them many, many times and got a no for them, both for this company and my previous company. So for me it was a needle moving event because it was just like something I've always wanted to get. And yeah, they invested in a series.
- [10:40]
N/A
C. How did that C go down with them? Like, did you have to go into the partnership and present to everyone? And Roelof sat there at the kind of head of the table and well.
- [10:51]
Imad
You know, number one, something I'm impressed by, by the top firms is like Sequoia does not take their position Lightly, like, they did the most work, right? I'm talking about, like, I pitched a bunch of people. Like, I pitched more than 20 funds as part of the series. Sequoia did the most work. They did the most diligence with customers. They did the most work in the data room. Like, they just, like, really put their effort into it and, like, and they asked really good questions. And I like that. Like, I don't want, I don't want someone to make this decision lightly. I don't want, I don't want to get a term sheet just because someone's fomoing. I want them to really believe in Mercury and feel like they've done their diligence before they make that decision. So, a, that's one thing. Number two, I had a conversation kind of later. So Sonia is our kind of partner at Sequoia and she said, you know, she had conviction in that first meeting. She said 95%. She was in after, like, that initial meeting, which I was like, okay, you know, because they did so much work after that meeting. So that was like, actually kind of surprising to me that they got so much conviction just in the first meeting. Most of the time, you know, by the time you get to the partners meeting, there's been so much work done that. Yeah, roll off is not like, making the decision. Like, it's. It's kind of like the lead partner and a lot of the work has already been done.
- [12:04]
N/A
Was that as the highest offer?
- [12:07]
Imad
Yeah, in the end it was, but, you know, I probably would have taken it if it was a little lower. But most of the time the good firms are willing to match or beat, like, whatever is the highest offer. And it's going to sound lame, but it's not necessary about the money for either side at that point. Like, I want to have a fair valuation and I want to have like, like the best firm too, that's focused on the long term.
- [12:27]
N/A
What would be your biggest advice to founders on price? Having multiple startups, but also having raised through crazy times, through more difficult times with Sequoia. What would you advise them on? Valuation in a very.
- [12:39]
Imad
I have a little bit of a contrarian take on this. I think it is very hard as an entrepreneur not to chase the highest valuation. So this whole thing about, like, oh, you know, if someone gives you 100x revenue, don't do it. Like, you know, we did our series B at 120x, which was not rational, this is 2021, but we did it. And I would do it again. I think the actual thing I would.
- [13:03]
N/A
Let'S just go to that. So how much did you raise that.
- [13:06]
Imad
We raised 120 million.
- [13:08]
N/A
Okay. And so your thinking there, I guess was, hey, I've raised enough money that I can grow into it over a several year period at worst.
- [13:15]
Imad
So this is what I was going to say. I think the mistake is to not raise enough money. Like every now and then someone gets like a, like a billion dollar valuation, they raise like 50 million. I think that's a mistake. Like you want to raise enough money at that high valuation and then number two, don't spend the money, which is really hard. But when I raised 120 million, I was like, I don't know how I'm going to spend 120 million. Like we had like a 40 person company, but I was like, we'll raise enough that either I'll never need to raise again or if I'm growing really aggressively, then I can like spend into it. But that was our thinking at that time. But it does take a lot of kind of confidence to not spend the money once you raise it.
- [13:52]
N/A
So me and Parker always have this debate. He's that Harry's selling his own book when he says don't raise the crazy rounds. And I don't think I am because I see the truth in that, which is you and Parker may be wise enough and mature enough to not go and blow it, but most younger founders, especially when you give them the money, they spend it.
- [14:11]
Imad
Yeah, I think that is also a mistake of the VCs. Like their VCs are like, hey, you know, go spend the money. Like make sure this return happens. But you know, a lot of the returns come from the anomalies. Right. So it's from the emads and Parkers of the world that like, you know, you're going to get the decacorns or whatever. So that's what VCs care about. Like they really want to go for the home run. So I think the reality is younger founders, most founders will do it. So I think we have to set up frameworks for like how you can do it but still be successful, which is tricky.
- [14:40]
N/A
What was your biggest win as an angel investor? And when you reflect on that, are there any takeaways for you?
- [14:47]
Imad
The biggest kind of win that's returned me money was true Bill. I mean, the reason it was a win in the end is like I'd say two things. Number one, those founders are just incredible. Like that's super hard business. Like we're talking about like fintech, consumer business. Where you have to like really fight for like every user acquisition.
- [15:06]
N/A
Can I be blunt? You did the pre seed?
- [15:09]
Imad
Yeah, I invested. I think my first investment was at 16 mil. So I did it like before.
- [15:14]
N/A
And it sold for how much?
- [15:16]
Imad
It was a 1.25 billion exit.
- [15:18]
N/A
And so your multiple on that was.
- [15:20]
Imad
I don't know if I should say the exact multiple, but more than like 30x. It was a great multiple and it was a short time period, like 2016 to 2021. So two lessons for me there was like, repeat founders really do matter. That team did webs.com, which is also a difficult space, like website creation space. I've just seen it again and again, like, yeah, I'll take rippling. Like, I'm also an investor in rippling. Yeah, when you have repeat founders that, you know, they can go into these difficult competitive spaces and like somehow just completely own them, that was one thing. And the second thing, which you know, I have never been great at, is like timing. The true bull founders, like, they sold at just the perfect time, right? Like they sold like in December 2021. Amazing timing. I wish I'd taken like some more chips off the table in 2021. But you know, as an angel investor and as a active CEO, I don't have time to necessarily go and like look at every single unicorn and say like, oh, should I be like taking some secondaries? But. But they obviously nailed that market timing and, you know, lots of respect to them for doing it.
- [16:21]
N/A
If I push you into one camp, because nuance doesn't work on a podcast. Do you prefer serial founders or do you prefer first time founders?
- [16:30]
Imad
I mean, I just prefer serial founders. Like, I have such a bias towards them. A serial founder with a chip on their shoulder. I don't think it works if it's a serial founder where they've had a unicorn exit and like they've kind of like if the. If the other choice is, hey, I could just retire and have like have $100 million anyway, I think that doesn't work. But if it's a serial founder where, like, you know, they have something to prove.
- [16:50]
N/A
Did you feel you had something to prove after your first.
- [16:53]
Imad
Oh, yeah, 100%. I mean, I exit was 45 million, but it was a real struggle. We pivoted four times and for me, like, I just really wanted to build a big company. Like, I just, like, I've been an entrepreneur forever. Like, I want to, I want to have the biggest impact possible, but it is irrational. Being an entrepreneur is irrational. But being a serial entrepreneur is especially irrational because at least the first time you can kind of blame your naivety. That's actually one of the qualifying criteria, right? Like a serial entrepreneur like knows how hard it's going to be, but they're willing to do it again, right? That is like so unusual by itself that like you have to kind of go, okay, you know, like, they must really want to do this.
- [17:27]
N/A
Do you prefer it when they are new to a market bringing fresh ideas, naivety in some respects, or when they are seasoned pros coming out of the market with 10 years experience?
- [17:39]
Imad
I think both can work. But my preference is on naivety. I feel like when I did Mercury, I didn't know anything about fintech or banking. And yeah, I knew that entrepreneurs would use this product and I would use the product, but I was like, how does one go set up a neobank, right? And that's what most of my first kind of one year of education was, was just going super deep on like, how do you even do this? But I genuinely think actually like my seed round, Andreessen Horowitz invested, but it was very hard. Even after Andreessen had come in with a lead check, it was so hard to get any fintech fund to invest alongside them because all fintech funds saw was like, all the problems. They were like, this doesn't work for this reason. And that reason I was like, I was like, I really wanted them as well because I was like, oh yeah, they're going to have like this deep fintech expertise that I really am lacking, but super hard to get them on board. I mean, I did get a bunch of fintech entrepreneurs on board, but could not get a fintech and a dedicated seed fund on board. Which in hindsight is ironic. But yeah, you really need to have like that outsider perspective most of the time to be successful.
- [18:39]
N/A
That's a miss for many of those investors. When you reflect on your angel misses, what's the biggest miss for you and how did that impact how you think about investing?
- [18:48]
Imad
Actually, like I talked about it earlier, you know, looking at young founders and saying like, why don't they have these things figured out? Yeah, I, look, I was a part time partner at the time, so I saw scale AI and I was like, okay, you know, good idea. But these people are so young. I think they were like 19 and 20 at the time or something. I was like, I think I could run this company better if I was doing it. And I don't see how they're going to figure it out. And I was just so wrong because obviously those, they proved me wrong. But also, like, I think there is, like, some power to that youth that, like, I think it's like, hard to judge, to be honest. Like, you kind of have to yourself suspend belief to say, okay, you know, this person's going to figure out how to run like a huge company.
- [19:28]
N/A
If I were to push you to give one piece of advice to another founder who wants to start angel investing, what would that piece of advice be? So, for example, I'd say, hey, make sure you write the same size check every time. You don't have different levels of conviction. Just every time.
- [19:45]
Imad
You know, one thing is, yeah, this is a rich person's game. Sadly, I didn't start investing until I had made an exit. And I think doing like one or two is not going to make a difference. So mostly I say to people, hey, if you have enough money, I mean, we're not talking about a ton of money, but if you have enough money to do at least 20 or 30 investments, that's when you start entering the game. Because you learn a lot by, like doing subsequent ones. And, you know, if you're only doing like five, you're not going to have this kind of iteration. B, you need a diversified portfolio to have any return in this space. Because what we're really doing as seed investors is unicorn hunting. Or I would say even like at these current evaluations, like, you, you're hunting for Decacorns, and that doesn't. Yeah, even if you're great at picking and you have a great network, etcetera, you're not going to get to them with like five pets. Like, you need a portfolio of pets.
- [20:37]
N/A
Is the age of chasing unicorns over? You said they're hunting for Decacorns.
- [20:42]
Imad
Yeah, I mean, you can do the math. But, like, if your entry price is like 20, 25 mil after you get that dilution unicorn, like I've seen as low as like 8x return from like a seed stage investment to unicorn, which I'm like, this is awful. I mean, obviously there's also. You can get like 30, 40x there. But yeah, I think if your entry price is like that, you're mostly like unicorns. Like, you need a few of those, but you really want to get like a 10 billion plus to have like an outsized return. Like, I want, you know, I'm not happy to get like a X or 3X. Like, I want to have a 10X fund. And that's not going to happen with unicorns.
- [21:18]
N/A
Did you Take cash off the table on any of them. And any thoughts on proactive secondary selling?
- [21:23]
Imad
Well, I guess I won in the company, but there was a company where, like, Softbank came in with, like, this crazy number and, you know, they offered everyone a secondary and I was like, you know, if Softbank's doing it, I should probably take some money off the table. So I did do it. In hindsight, I probably should have done more, but, you know, I'm really aligned with, like, let's go long. Like, I don't. I don't need the money. I'm in it for. I'm in it for the game as it was. And, you know, these kind of compounders like Airtable, you know, like, there's companies I'm in where I'm like, okay, I can see this being a $50 billion company and if I just stick with it for maybe it's 15 years instead of 10 years. Yeah, that return will be worth it.
- [21:58]
N/A
How is Airtable a $50 billion company? Paint the bull case for me there.
- [22:02]
Imad
I mean, A, the bull case for me is how he's like an incredible founder and I think he's going to figure it out. B. Yeah, if you look at AI, I think it actually really improves their position. Like, you have a bunch of data, you have people building basically internal apps on airtable, and they've done a good job of kind of incorporating AI. But I mean, mostly I would say they already have. The Last valuation was 10 billion, so we're only talking about 5x. I'm pretty sure you can figure it out.
- [22:29]
N/A
You know, there's one rule that I go back to again and again, which there are kind of conventional rules which are conventional for a reason. And one of them is Bill Gurley's brilliant article on the 10x how companies are valued is 10x of revenue across cycles. Really? That's $5 billion of revenue to be a $50 billion company. It's a lot.
- [22:49]
Imad
You know, you're seeing these companies scale to like 100 million in revenue in like, two, three years now. So, yeah, 5 billion.
- [22:56]
N/A
Yeah, totally. Does revenue mean less than ever before? Given the transience of it, the lower quality of revenue that we apply to kind of revenue today, does revenue mean less than before?
- [23:08]
Imad
I think it really matters on what type of revenue it is. Right. Like, I think the revenue that I am, like, most skeptical on right now is this kind of labor replacement revenue. You take AI and it's like, hey, we're going to be a third of your labor cost. Just install us you know, initially people see the roi, they're like, oh, wow, like I get something for a third of the price. And maybe it's slightly worse in some situations, but I still have like humans as back off. But it's just like an obvious cost saving. Everyone will do it. You take AI and it's like, hey, we're going to be a third of your labor cost. Just install us. And you know, initially people see the roi, they're like, oh, wow, like I get something for a third of the price and maybe it's slightly worse in some situations, but I still have like humans as back off. But it's just like an obvious cost saving. Everyone will do it. The reason that's particularly transient is, especially in this environment, you're going to have three or four competitors also selling that same thing. And eventually a company is going to go like, okay, this actually worked, right? But this competitor is doing it half the price because the cost basis of the software is way lower than a third of the cost. So the sell that VCs get and entrepreneurs are making is, oh, we're replacing your labor costs, therefore we should charge a third of that. But the reality is, once you have a competitive market dynamic, the actual margins are going to compress massively and we'll end up on a 10th or maybe even a 20th of the labor cost as actual eventual revenue. And in these spaces, everyone's using the same foundation models, we're going to get incredible competition. And the margin compression is just inevitable and there's very little moat and network effect against it. So that's one side of it. I do think the other side we've seen Cursor with, I think they're saying 400 million in revenue or something like that. I think that's SaaS revenue and it's actually the value they give is relatively high for the revenue. Again, like, if they try to charge for like the productivity gain, they could charge a lot more. But competition will ruin that. Right. Like Windsurf will come along and charge $20. So because of these competitive markets, it's not possible to charge for the value you generate. It's actually more. You end up charging for what you can charge against competitors and have people not think about it. But yeah, those things are very sustainable, right? I think once engineers are using Cursor or Windsurf, engineers don't like changing tools. The value is much higher than the charge. So I think there's. That set of it is much more sustainable.
- [25:30]
N/A
Do you think we have no defensibility anymore? And what I mean by that is you see people very quickly moving from a cursor to a Windsurf and it seems like the moat or switching cost is almost replaced now. Do you think we've lost moats?
- [25:45]
Imad
I mean we're still in the kind of flashlight fart apps era of AI, if you know what I mean. There's going to be so much change and churn in the next few years, but eventually things will settle down and then we'll have the same defensibility that like SaaS, apps and other things have had forever, which is like what's the strongest brand? And like who do people say? Like hey, I love this thing, I used it forever, et cetera. And that brand is going to be able to continue investing more and more in the product because they've, you know, they've consolidated a market position and they can like keep improving the product and they'll become multi product. And now, now you're getting like two or three things from the same place and you know that's sticky in its own way. And they built up their enterprise connections, etc. We're just in the space right now where like no one knows anything, everyone's trying to try everything. But I don't see why like the the same things that like allowed people to create like big companies like HubSpot and Salesforce, etc. I think most of those things will exist with the modern AI stuff. We're just in this like moment of like extreme change.
- [26:44]
N/A
What do your team use engineering wise? Internally? Is it Windsurf? Is it Curser? What are they?
- [26:50]
Imad
I think Cursor is still by far the biggest one. I mean I haven't heard too many people using Windsurf internally given the productivity.
- [26:57]
N/A
Gains that it provides engineers. HubSpot recently said that they are producing more code that they can ship in features. Salesforce said 20 or 30% of their code is now written by AI. Will you have more or less engineers in five years time?
- [27:13]
Imad
Maybe I'm contrarian about it a little bit but to me if my engineers get more productive, I'm going to come up with more things to do. I'm going to have so much stuff that I want to do. I have infinite ambition. So I think that just unlocks more rather than constraints means that you don't hire people.
- [27:31]
N/A
Imam, what have you strategically not done with Mercury that with the benefit of hindsight you think you should have done?
- [27:38]
Imad
Yeah, the obvious one and the data we had at the time, I don't know if we would have done any differently is we launched mercury banking in 2019 and at that point Brex was the main player in the credit card space. And I was like, hey, we'll do banking, you do credit card, we're all good. And then what happened is Brex then entered the banking space and then later Ramp came along and they launched a new credit card. And at that point I was like, okay, that was a little silly that we didn't just launch a credit card because it wasn't. In some ways the credit card was easier than banking because we already had debit cards. So we didn't end up launching our credit card until 2022 because I was like, let's just focus on banking and let's go really deep here. And I think that was a mistake. Like we could have launched our version in 2020, probably. Like we instead worked on some other products. So in hindsight, I think we waited too long to launch that second product and we decided to kind of focus longer on banking and it wasn't like a mistake that couldn't be corrected. Like, we did launch in 2022 and now Mercury for Mercury customers, Mercury Credit Card is bigger than all the other kind of corporate credit cards on the platform. But it was two years later than it should have been.
- [28:50]
N/A
How do you think about competition? You are in the most competitive environment now, as you see with Brex, with Ramp, and with you. All very well funded, all doing very well. Ironically, there's not one that's not doing well. How do you think about competition when you go to sleep at night?
- [29:07]
Imad
I have two responses. Number one, I've been doing startups since 2006 and, and every single year there's been some competitor that was like better funded. That seemed really scary. 99% of the time it didn't matter. What mattered is just focusing on customers, building a great product. And most of the time, if we failed, we all failed because it was a bad market. And if we succeeded, it's because we did our own thing and we just listened to customers and had that long term vision. So I think it's really dangerous to be very competitive, focused. I don't let our team speak about competitors very much. I'm just like, hey, you know, if you have something you want to do, tell me why the customer wants it. Tell me why. It's like part of the long term vision of the product. But if anyone says, like, we should do this because like someone else did it, I'm like, I don't care. Like, it's not this is not a reason we do anything at Mercury. So that's one thing. I think most of the time it really doesn't matter. And if you're copying someone, you're copying their mistakes as well as their, their.
- [30:06]
N/A
Successes pose an alternative counter positioning one of the seven powers, you know, Ramp. And Eric looked at Brecht saying, hey, spend more, get points and went, what's the opposite? Save more and have that as your incentive mechanism. And so they use the inverse as their value prop.
- [30:25]
Imad
Maybe that worked for Eric and Garon. That just doesn't resonate with me. Like I, you know, I approached this market and said, hey, I want to be your first bank account. No one else has actually approached it like that as like we want to be at inception with you and you know, we have 200,000 plus customers. Our scale is much bigger than Brexit. Ramp. Not because like they're doing something bad, they're just in a different business. Right? They have bigger companies, they do more enterprise stuff, whereas we're much more at inception stage.
- [30:55]
N/A
You're going to hate this question, so forgive me for it. If you're valued at 5 billion and you're the first bank account for 200,000 companies, why are they valued then at double you?
- [31:07]
Imad
Yeah, I mean each company has to prove out its own thing. So I don't know if valuation is like the thing I focus on personally. It's a different market, right? Like people, people understand enterprise like SaaS and payments a little bit more than they understand banking. You know, apart from Mercury, like who else is at scale in banking in the U.S. there's not that many companies, right. Like Chime and a others. So it's a different market, it's just valued differently.
- [31:33]
N/A
My question to you, my friend, is the angel investing is going so well, 350 and then we're like, you know what, we're going to do a fund. Why is that? What was the decision making process for you from transitioning from angel to fund?
- [31:47]
Imad
There was kind of two factors for me that drove it. Maybe three. Number one, I had a bunch of LPs recently approach me saying like, we're not going to put money in your angel list, but if you set up a fund, we will back you. Secondly, you know, my deal flow kind of went up another level when 30 to 40% of like all startups use mercury. Like everyone knows about me. And then yeah, that, that tends to mean that a lot of people want me to invest and I got to a level where I just can't look at all of these things. So I really wanted to work with someone on the deals and on the fund. I don't like doing things badly and I felt like I was being a bad angel investor because if I can't even look at all the things that are coming at me like how can I do a good job of it?
- [32:27]
N/A
Okay, so I get all those reasons. And so why do we Decide to raise 26 million? Can you talk to me about the thinking behind that?
- [32:34]
Imad
So you know what's a little unusual about the fund is it's a fairly diversified fund. The idea is to invest into 60 companies. The reason that works is, you know, we're doing these non lead checks. That makes sense. Like I'm active CEO, I can't lead around because I just won't have that time for the company. But also on the other side I get a lot of deal flow. The best entrepreneurs want me on their cap table. But you know, isn't it better if like Sequoia or Founders Fund is leading around and I get to invest alongside them because I'm not competing with them. So the average, you know, check size is going to be 150k. So if you do the math, if you're doing non lead checks with you know, a smallish kind of average check size, at least we're targeting 60, 60 company portfolio. It doesn't make sense to have like 100, 200 companies in one fund.
- [33:22]
N/A
Then you can kind of, I'm just diving in. So 60 times 150, we're putting 9 million out the door in initial checks.
- [33:29]
Imad
Yeah, I mean there's going to be a few other like the strategy also involves like some kind of initial conviction checks. Like if I, you know, if I know someone for years and I'll, you know, I could put like a million dollars into their seed round. So do we do reserves? Reserves, but I want to be kind of more selective about it. I've never believed in this. Like every company gets a pro rata check because that's just what I do. I'd much rather go like.
- [33:52]
N/A
Can I be so rude as to advise you don't have a reserve strategy. You have access to great later stage capital that would happily do SPVs. For your personal finance I would suggest you do a spray and pray with as large a check as you can get into these rounds. I think 150 to 200 is probably there. But then just do SPVs in the best with a deal by deal carry.
- [34:16]
Imad
I find that SPVs, like entrepreneurs don't like SPVs. And I think it's.
- [34:21]
N/A
Entrepreneurs don't care if it's from someone they like and respect and it's done in a timely manner. Imagine you being a founder. Yeah. And one of your friends is like, hey dude, I want to work with you. It really means a lot to me. I'm really bored in because it's a deal by deal. Do you mind?
- [34:37]
Imad
You'd be like, no, sure, yeah, maybe. The other issue I've had with SPVs is like normally they're FOMO SPVs where it's like, oh yeah, you know, some lead check comes in and you're like, okay, you know, let me give me an allocation, let me go do this. I don't like that game. Like I want to do these reserves when I'm like, hey, I invest in the seed stage, I look at their progress and like you know within six months whether that company is going to kill it. Right. Like at least that's been my experience. Do you think you do?
- [35:03]
N/A
Because I tweeted the other day the opposite. I was in clubhouse Be real. And my point of that is like.
- [35:10]
Imad
If I actually know in both directions, like you have signal. I mean it doesn't mean you have a guarantee but like six months later, if you see that progress, like and if you. I would bet that Harry, even in your portfolio six months later, if you invested in every one of the things that you think will be a hit, like probably 50% are going to get left.
- [35:27]
N/A
No, if I look at like my fun one, I've got like linear, I've got link tree, I've got Captions. Next Health AgentSync, which are all like really solid 50 million about revenue companies. I would say they were all pretty slow burns. Actually. They weren't that obvious. Maybe it's because they're enterprise.
- [35:48]
Imad
Yeah, maybe. I mean if I look at mine like Rappi, definitely new within six months. Truebill, definitely new within six months. Rippling. I mean rippling was just hard to get into but like it was pretty freaking obvious. Airtable. Definitely new very early on. So. So there's definitely like airtable even like, you know, there was like a three year period where they kind of took a while to kind of ramp up. So I know, you know, maybe six months is like too early but you definitely know before everyone else knows because you're in the company and you can.
- [36:15]
N/A
See you care about price first check.
- [36:18]
Imad
I mean you end up being a price taker as like a non lead. So I care about it like if it's silly, I won't do it. But you know, often the seed market actually as a whole is a little silly. And you know, I've ended up especially recently avoiding AI. I think AI is overhyped and overvalued.
- [36:36]
N/A
Pause on that. Why is AI overhyped at seed stage?
- [36:40]
Imad
It's so hard to do AI. I mean I don't know what you're seeing but like it's like the fourth time I've heard the pitch of the same idea. The founders raising at like a 40 million valuation and you know, they even have like great investors. There's a little bit of traction, but the math is just so hard right now in AI. It's so every now, I mean I'm still doing it. So like, you know, in the last eight investments that we were just looking at, four of them are AI. So yeah, it's hard to avoid AI completely. I'm just way more selective and there's actually a lot of like, if you look at Fintech or I end up doing like a lot of space tech or hard tech, there's not that much competition there right now. I think as like a, as a seed investor you can't be doing like too many investments at the top of the hype cycle. Right? Like the same thing happened in 2021, right? Like 2021. I mean it was everything bubble.
- [37:25]
N/A
The AI companies that you've done there, you said the bar's higher or kind of the qualification process in your mind is kind of tougher. What did they have that the others didn't have? What did you need to see to get excited?
- [37:37]
Imad
A, the founder needs to be probably more of a second time founder where they deeply understand that space and they happen to be applying AI to it. But it's not like AI for the sake of it. I did one where like really deep in prop tech and they have like a really specific AI application there. So either that or this is like, you know, they already have the traction. Like this is like already seems like a rocket ship and you know, and I really believe that that traction is real. And yeah, the valuation is a little high, but you have to kind of jump on some of these rocket ships. So those are like probably the two that I am still doing. But the vast majority of AI at seed out there does not have traction. Is like someone doing like the, you know, the fifth time the same idea is getting funded right now. Like you know, it's just like that's just what you see mostly happening. But like great VCs are funding these things, right? Like there's like everyone is doing them.
- [38:28]
N/A
One of the biggest changes from like five or six years ago in Bastin, there was always two or three competitors in everything five or six years ago. But now there's 15, there's 15x and.
- [38:38]
Imad
They'Re all raising like 10 million plus. Like it's not like they're like some early bets. Yeah, it's crazy.
- [38:42]
N/A
Totally agree with you there. So yes, you mentioned space tech. Dude, you're literally having to go to another planet to find the deal. I mean literally. And I know nothing about space tech. No offense. Do you know much about space? Can you help me? Actually just fuck it, help me.
- [38:59]
Imad
How I think about is when I enter a new space that I don't know that much about, I will make a couple of investments and I'll try to learn from them. So I made my first space investment, I think 2016 or 17. It was momentous space. They ended up doing a SPAC that didn't work out. But when you make a few investments and you, you know, to make one or two investments, you end up speaking to maybe 10 people. Right. And these people tend to be like, you know, they're at the edge of their space. Yeah, it's like people from SpaceX and Blue Origin. So you, you end up like learning quickly about like, okay, what are the markets? The thing about space that maybe is unobvious is it's no longer that hard to get into space. Right. SpaceX is very repeatable. These people are not doing space well. They are doing difficult hardware things, but they're not doing scientifically impossible things. They're literally saying like, hey, I'm going to put a computer in a satellite. I'm going to put it on space. It is tricky though. There's three. I don't know how deep you want to go in space deck here, but there's basically three existing markets in space tech. There's rockets, right? Like getting things up and down, which obviously SpaceX dominates. There's taking pictures from space and that's actually like pretty big market, like $40 billion market. And then there's communication which like obviously Starlink and other people are doing. Those are the three markets. There's almost no other market in space right now. And I have investments in like I did Stoke Space, which is like doing reusable rockets. I did Albedo, which is like taking very high resolution pictures from space.
- [40:21]
N/A
Are the rounds for these companies not mega? And if the rounds are mega, they're very high prices.
- [40:26]
Imad
Not at seed stage. I mean at seed stage These companies are like, I mean they're like better than these AI SaaS companies at seed stage because like they're like, you know, you get there and like these are like, it's hard for them to raise big rounds like when they're just starting out and then they have to prove some stuff out. I can't remember the initial stoke round was probably like 20 million valuation. You know, they had to prove out like a rocket test and then they got like funding from the government and now they've raised, I don't know how much they've raised, like more than 100 million. But yeah, you do have to take the time and be careful to understand it. I don't personally do bio because, you know, I speak to someone and they're like, we've cured cancer. And I speak to the next person, they're like we've cured cancer. I'm like, I don't know, you sound good but I really think space is not like as hard. But I have like spent like years kind of trying to understand it.
- [41:08]
N/A
60 companies. Imad, you're a pretty busy guy. You run an amazing company already. When a founder takes a check from you, they do expect to be able to have you return their calls. How do you think about gating Imad and preventing a free for all?
- [41:25]
Imad
Honestly, I am so surprised how considerate people are and I wish they would actually ask more for help. So normally I'm like, hey, here's my phone number, just text me if anything comes up. And most of the time you can actually be pretty helpful in like a 10 minute conversation. And you know, I can slot that in most times. So I would say I end up speaking to an entrepreneur maybe three or four times a week. But like, like I think one thing that people don't understand about time is like time is about energy, not time. There are things that like drain your energy and those are hard to do and they like suck up time. And then there's things that are fun. Like I love talking to entrepreneurs and helping them out. So like it doesn't like I can do that. Like I'm literally like, I'll go for a walk to like go get lunch and I'll just like talk to an entrepreneur and it's like so easy and it's like, it's just like having a chat with a friend.
- [42:09]
N/A
So we've got four pillars in Banta, we've got sourcing, you've got selecting, we've got securing which is winning and then we've got servicing, which do you think you're best at and which do you think you're worst at and why?
- [42:22]
Imad
I mean I'm very good at winning right now with the strategy we have of like non lead checks. Yeah, I mean I've done rounds recently where the round is fully done with like some hotshot VC and then I still get my 150k in after the round is fully done. So winning is like definitely like easy right now. I would say the most fun is those kind of selecting side of things in the sense that like, you know, you have these entrepreneurs that are like really teaching you the future. Like I think it's just so fun to like talk to entrepreneurs and like go like, oh shit, I'd never thought about that. Like that's super interesting. You know, I did this company etched, it's just like ASIC chip for Transformers and it's like super interesting. Like that's my only ever semiconductor investment. I probably won't do another one. But you learn so much in just like a short conversation. You're like, oh, wow, I had no idea it works like that.
- [43:08]
N/A
When we think about funding this, we have $26 million. How did the fundraise process go?
- [43:14]
Imad
Honestly, it was surprisingly easy and you know, I have a really good track record and obviously that made it easier.
- [43:21]
N/A
What do you, what did Joe Ciderman? Did you just like WhatsApp a load of mates and be like, hey, I'm doing a fun job.
- [43:26]
Imad
I mean I didn't want to have even to get to 26 million. Having a bunch of mates with like 250k each, it just takes forever. So yeah, we had like three kind of anchor LPs that are like more funder funds. And actually, actually the easiest ones are definitely like.
- [43:40]
N/A
Did you get Sandana?
- [43:42]
Imad
Yes. But yeah, the easiest ones are definitely like a mate that I'm like, hey, do you want to invest? And then they're like, you don't even have to pitch them. They're just like, hey, there's a million or whatever. But yeah, it was a quick process. I mean actually the hard bit is getting the LPA done is ridiculous. Like, I don't know how you all do it. Like it's like a multi party negotiation for like these kind of esoteric terms. I mean there wasn't like any real staking point, but it just took like a month and a half to get it done. And I was like, this is a silly process.
- [44:07]
N/A
How long did the raise take?
- [44:09]
Imad
The actual getting the core allocations done was basically like three weeks.
- [44:14]
N/A
Okay, three Weeks. What's the biggest check? Not who, but just what is it?
- [44:18]
Imad
It's 7.5 million.
- [44:20]
N/A
7.5 of 26. That's a lot. Shit.
- [44:23]
Imad
Yeah. I mean, it made it easier.
- [44:24]
N/A
It makes it much easier. What was the biggest surprise of fundraising for a fund?
- [44:29]
Imad
Maybe this is a little harsh. It's boring. Boring. It's very boring. Obviously, when you're pitching a company, you're saying the same story again and again, but you do learn something from the questions you get asked. And like, you kind of do change the story over time. Like, I feel like pitching a fund, like there's not much to learn in the process. It's very much do a bunch of like very repetitive meetings. I don't know if that's surprising. I'm sure you know this, but yeah, it was like less fulfilling than I wanted it to be. Like, I wanted to go like, oh yeah, I'm going to speak to some smart people and learn something. But I was like, okay. You know, it's. I didn't feel like I really got that much out of it beyond like doing the process.
- [45:02]
N/A
What's the composition of the LPs? It's like fund of funds. How much percent is that? Like 50%?
- [45:09]
Imad
Yeah. Fund of funds is like 60ish percent and then a bunch of kind of entrepreneurs and GPS is like the bulk of the rest of it.
- [45:17]
N/A
Can I be really rude? I have a problem with founders that raise money from VCs and that's your responsibility to build a company and then you raise money from other LPs where you have another responsibility to optimize the value of a portfolio. I view them at odds. When I raise money from someone that deserves my time, and then I'm like being pulled away with another responsibility. Why am I wrong to think it's wrong for founders to raise external money for funds?
- [45:49]
Imad
And you think it's different when it's like angellist rolling fund or you're saying same criteria.
- [45:54]
N/A
I'm kind of saying the same thing. If you're raising funds, angel money is totally different. It's your money. Do what you want with it. Cool. But raising additional money from additional, different LPs.
- [46:06]
Imad
A. If you're very transparent about it, like, this has always been the story. I've said, like, I'm a successful CEO and this is what you're getting, like, and that, you know, Mercury is my main, main job. So I think that's, that's one thing. B, does it work for both sides? So I have always done that, like even Before I started Mercury, I was a active investor with other people's money. And then, and during it I was. And I would say part of Mercury's success has been my connection with early stage founders. Actually from the first 30 kind of alpha customers in Mercury, I think 100% of them were companies I'd invested in. So it's always been a core part of building Mercury, has been my investor journey alongside it. And I talked to my co founders about it, I was like, hey, I do this, do you mind? And they were like, no, this is part of what makes Mercury successful. So that's one side of it. And then on the other side, Mercury's success gives me access to that deal for gives me the ability to win. I do invest in a lot of B2B companies and fintech companies where I have this unique perspective of being an active kind of fintech entrepreneur. So I think as long as it works for all sides and it probably doesn't work for all entrepreneurs, Mercury is in a unique position where we do sell to startups and that ends up being like, my investing is helpful to Mercury's helpful to my investing and my investing is helpful to Mercury. That's probably not true for everyone.
- [47:22]
N/A
The other question that I had was, with absolute respect, you have a lot of Mercury and you can sell secondary. Why bother raising external money? No offense. If you look at carry like 20% on 26 is 5.2 of your own money. I know 5.2 million is a lot of money, I'm not belittling it, but you could easily sell 5.2 million in secondary. Many people will buy it off you. Why bother?
- [47:45]
Imad
Yeah, I mean, I think it's a fun to build institutions. You know, I'm working with Yash on this fund. I think it can be bigger than just me and just a few angel investments.
- [47:55]
N/A
And what do you want it to be?
- [47:57]
Imad
I don't know exactly. Like this is the first fund. So I'm not coming at it like, yeah, I'm coming at this like, oh, let's explore it. But yeah, I want to be helpful to entrepreneurs and I think I can be helpful to entrepreneurs and I can scale that. And working with someone to get the best investments to kind of scale that portfolio approach and, and doing it with more money allows me to have a bigger impact. And yeah, you know, eventually there'll be opportunities where we maybe are the biggest check at like seed stage or, you know, maybe Instead of doing 60, we do 150 in one fund or like maybe we incubate Ideas, I mean I have a lot of ideas so that all everything's on the table but at the same time, you know, it's the first fund and I'm, I'm definitely approaching it with like an open mind.
- [48:36]
N/A
I think seed is very, very hard today because the multi stage farm product is so efficient, they are so good, fast and their cost of capital is so different to a pure play seed which is like me and you, much smaller funds. Do you agree that multistage funds have made seed very difficult with such efficient.
- [48:54]
Imad
Seed products, they've made it difficult for you, but not for me necessarily because I can, I'm just like, okay, sure. And recent reading Leading a ride. Let me join in. Yeah, there's only, there's not that many multi stage like billion dollar funds, right? Like there's what like eight or nine that like have a brand. Seed is like by definition, there's so many unknowns and those, those multi stage funds are only going to do a certain flavor of entrepreneur, right. Like often it's either an exec from a big company that's doing like this thing or it's like a multi time kind of entrepreneur. So if there is that flavor that like ticks the boxes for those kind of multi stage big funds. Yeah, it's very hard to try to lead around against them. But there's entrepreneurs come in all flavors and I don't think like these first time entrepreneurs that are like hungry and don't know a space but like figure stuff out. The multi stage funds have a much harder time with those.
- [49:48]
N/A
How do you expect venture to change in the next five to 10 years?
- [49:51]
Imad
That's a great question. I mean it seems inevitable that a few of these multi stage funds will IPO and be public companies. Right. Like we heard some stuff about GC doing it. I think that's just going to happen and actually think more and more money is going to come to this space which ironically we as investors are like oh, be better if there's less competition, less money. But I think the big changes, right, like these companies are huge now, right? We have trillion dollar companies, right. When I started investing, $100 billion company was huge. So the end results are so big that people want to put more money in the space. And yeah, I know we're in a current liquidity glut but I think that will work out through the system. Yeah, probably bigger multi stage funds and they're public. I think the bit that's probably hard is there's this kind of idea of the barbell Kind of stuff. Right. People like me that are investing kind of smaller checks, we'll do fine and the multi stage ones will do fine. I don't know what happens in the middle. I think the middle will have more of an issue.
- [50:46]
N/A
I think you do suffer because you pay higher prices. That definitely impacts your returns with the multi stage seed product. I would say you mentioned there the liquidity glut. I'm interested to hear your thoughts on this. You know the Collisons have said very publicly why do we need to go public? We don't need some, I can't remember which brand of bank, so I don't want to misquote them. But a brand of bank, 25 year old to tell us that margins are important. And the question is why would anyone go public today?
- [51:15]
Imad
I think about it as well and I want Mercury to be like a legacy long term company. So being public is inevitable. But yeah, why do it today and not five years from now on, six years from now or seven years from now? And obviously Stripe and a few others have delayed it multi decades even. I think the biggest issue is kind of structural issues in the public market. So the two things are, number one, the cost and rules around being public are just so much right now. So it's just not easy being a public company. So you might as well delay it longer. And then number two, there's so few active investors in public markets now. You know, between the passive index funds, like if you're not going to be in the S&P 500 or one of these other index funds, it's hard to get anyone's attention as a subscale public company. Even if you're like a $5 billion company in the public markets, like you can hardly get an analyst to look at you. So we've created these like kind of structural things that just mean that you know, you want to be as big as possible. I mean Stripe could definitely do it obviously. But yeah, you don't want to be a Mercury sized company in the public market. I think most people are saying like 10 billion is probably the minimum before you want to be a public company. So yeah, I mean I don't know how to fix it. I mean ideally we'd make some like actual structural changes to make it easier to be public. Otherwise we just all have to wait. I would say there is a lot of liquidity now in private markets.
- [52:38]
N/A
Have you done secondaries for the team and for yourself through.
- [52:41]
Imad
Yeah, we just did a tender, employee tender. And even without that like there was a Lot of people selling secondaries along there. Since 2021 when we became a unicorn, there's been a lot of like early investors, early employees selling secondaries and there's a pretty liquid market for it. So are you okay with that?
- [52:57]
N/A
Like Nick at Revolut is incredibly tight on secondaries, especially in between rounds. It can set prices, it can cause some problem if you're not careful.
- [53:06]
Imad
My take on it is like if we were a public company, we're getting priced all the way in every direction, right. It's better for employees to feel like they have a relatively liquid thing as comp. I don't want this to be a lottery ticket that you get it like at some point if I decide to go public, I want this to be actual valuable stock that like you feel that ownership and you feel the upside part of that is like a viable liquidity option. So I'm like relatively open about it. So far it's not been an issue.
- [53:36]
N/A
Imad who when they send you a deal are you like, oh this is going to be a good one because it came from them. So like for me when, when Elad sends me a deal I'm like, oh shit, I'm paying attention. He sent me Agent Sync and he sent me Vanta. I did Agent Sync. I didn't do Vanta and I fucking should have done Vanta. At Pre Seed.
- [53:55]
Imad
Yeah, Elad's great. I really like 50 years year, you know, 50 year fund because they do like these like yeah, Satan, Ella. I'm an LP in the fund as well but they do like these real long term focused like often strange seeming deals that I kind of like the entrepreneurs they invest in. I think they're high quality. You know, other people, I mean I'm a big fan of Shiel and Jake. Better Tomorrow Ventures. Yeah they do fintech specific stuff but they really know that space really well as well. So yeah, I tend to for deals I receive thesis driven funds are not that great. Like I think it's better to have like a broad investing strategy. But for deals I receive I kind of like these different funds because I'm like, okay, they know that space really well and they tend to tend to be good at picking it.
- [54:37]
N/A
Listen dude, I want to move into a quick fire so I say a short statement, you give me your immediate thoughts. Does that sound okay?
- [54:43]
Imad
Yeah.
- [54:44]
N/A
What have you changed your mind on most in the last 12 months?
- [54:47]
Imad
Yeah, I don't know if I've quite changed my mind all the way on this, but I would say 12 months ago I was very skeptical. We're going to get to advanced super intelligence now. I'm like a lot more. I don't know whether we'll get there very soon in the next five years, but the advancement on AI has just been relentless and it's kind of persuaded me more on the train that it's probably going to happen sooner than we think.
- [55:12]
N/A
What is your favorite AI tool?
- [55:14]
Imad
I use ChatGPT for everything actually. I was just doing a presentation yesterday and I basically just talked to ChatGPT for 30 minutes about the presentation and I was like, oh, this and that. And it's just like basically at the end I was like, okay, can you write that all in a slide format format? And it just did it for me. And I was like, okay, that's pretty freaking cool.
- [55:31]
N/A
What do you know now that you wish you'd known when you started?
- [55:34]
Imad
Yeah. One thing that has been really powerful at Mercury and I tell every entrepreneur to do this is like first thing, when there's like three or four people, write down what is your company culture? You know, we wrote down like six attributes and these things have to be like, things that, you know, have some trade offs to them. Like, you know, and you're going to go like the hardest one is, you know, we look for humble people and often especially really successful people aren't very humble and you have to kind of make that trade off. You're like, oh, this is a successful exec and they seem great, but they just have a massive ego and we never hire those people. But we wrote that down day one and we've always stuck to it and we came up with, we had these six attributes and we came up with interview questions against them and we've always encouraged them internally and it's really helped build Even at near 1,000 people, we have this really strong cohesive culture. But it's because we did it at day zero and it's very hard to do it later.
- [56:26]
N/A
I asked you earlier, what did you not do that you wish you'd done? And you said about launching credit before, what did you do that you wish you hadn't done?
- [56:35]
Imad
Probably the most obvious thing. But anyway, it's probably fine. It's like we raised too much money in our seed round. We raised 6 million at 23 million valuation. And this was because I was like, okay, fintech is hard. I want to have so much money that I can go on for three years without raising again, et cetera, etc. But it was like such a high dilution round for us. It's by far the highest dilution thing we've done at Mercury. And in hindsight, if I knew we would be instantly successful when we launched, I didn't need to raise that much money.
- [57:02]
N/A
So you would have preferred to raise 3 on 23?
- [57:04]
Imad
3 and a half is probably the exact money I would have needed to get to my Series A and have a buffer. So I was a little too conservative. I was like, okay, we need to be really safe and have a lot of money. And I could have raised that much. But. But yeah, very high dilution.
- [57:19]
N/A
Final one for me. Imad, can you paint the bull case for Mercury being $100 billion company?
- [57:26]
Imad
I mean, we're in these two huge markets, right? Like banking in the US is a $2 trillion market and then kind of financial software tools is like another $500 billion market. And to me, these two markets should be the same market. You have your bank account. That's where you do invoicing, that's where you do bill pay. That's where your credit card and employee spend tools are. The only reason these markets are separate markets is because banks don't know how to build software. I think in 10 years time it'll be obvious that like, your bank is really powerful and it can do all of these things and it's all fully integrated. So, yeah, that's just a freaking huge opportunity. And that's just the U.S. right? Like, there's a global opportunity around it. There's like lots of different types of businesses, lots of consumer kind of financial stuff as well. So yeah, I think this opportunity is like ridiculously huge. That's why when you are like, oh, it's so competitive, I'm like, I don't know, I mean, right, for how big this opportunity is, I'm always like, this seems very uncompetitive. If you think about all the B2B SaaS companies out there, there's like thousands. And that market is smaller than this market. Yeah, I'm pretty excited about it, Imad.
- [58:31]
N/A
Listen, I'm so excited for the new fund. I hope that we can do some deals together. I'm less of a space investor and so if you do some on this planet, I might be more game. But I'd love to see some together. And thank you so much for doing this with me, mate.
- [58:44]
Imad
Yeah, thanks for having me, Harry. This was fun.
- [58:48]
N/A
Such an exciting time ahead for Imab.
- [58:49]
Harry Stebbings
With the new fund.
- [58:50]
Imad
And if you want to watch that.
- [58:51]
Harry Stebbings
Episode, you can find it on YouTube by searching for 20VC. That's 20VC on YouTube.
- [58:56]
N/A
But before we leave you today, I.
- [58:58]
Harry Stebbings
Love seeing the team come together to make this show happen. What I don't love is trying to keep track of all the information, the data and the projects that we're working on across dozens of platforms, products and tools. That's why we use Coda, the all in one collaborative workspace that's helped 50,000 teams all over the world get on the same page. Offering the flexibility of docs with the structure of spreadsheets, Coda facilitates deeper teamwork and quicker creativity. And their turnkey AI solution, the intelligence of Coda Brain is a game changer. Powered by Grammarly, Coda is entering a new phase of innovation and expansion, aiming to redefine productivity for the AI era. Whether you're a startup looking to organize the chaos while staying nimble, or an enterprise organization looking for better alignment, Coda matches your working style. Its seamless workspace connects to hundreds of your favorite tools, including Salesforce, Jira, Asana and Figma, helping your teams transform their rituals and do more faster. If you're a startup team looking to increase alignment and agility, Coda can help you move from planning to execution in record time. To try it for yourself, go to Coda iO20VC today and get six months free off the team plan. For startups, that's Coda iO20VC. To get started for free and get six months off the team plan, that's Coda IO 20VC.
- [60:23]
N/A
And while Coda keeps the engine running smoothly, Shopify puts the pedal to the metal when it's to time sell.
- [60:29]
Harry Stebbings
When I was 18, I dreamed about being an investor with zero contacts in the industry. And through persistence, I'm now living that dream. Maybe you're dreaming of your own business, and that's where Shopify steps in. I spend my time exploring successful businesses online. Often, there's a business behind the business driving success for millions. That's Shopify. Powering 10% of US commerce, Shopify offers beautiful templates, AI tools for product images, images and descriptions, easy marketing campaigns and 247 support their number one checkout boosts conversions by 50%. Fewer abandoned carts, more sales Winner Turn dreams into success with Shopify go to shopify.com 20vc for your $1 per month trial. Today, that's shopify.com 20vc.
- [61:17]
N/A
And while Shopify helps you make the sale, Gusto makes sure your team gets paid without the headache. Look, look. Payday's awesome. But running payroll, calculating taxes and deductions, staying compliant? It's not easy. Unless of course, you have Gusto. Gusto is a simple online payroll and benefits tool built for small businesses like yours. Gusto gets your team paid while automatically filing your payroll taxes. Zhi Yang, CEO of video game studio Serenity Forge, said Gusto was the first step in turning their basement project into a real company. He'd help them scale globally, saving him 30 hours a month and letting him focus on building great games instead of doing boring admin. Plus, you can offer benefits like 401k, health insurance and worker's comp just for listening today. You also get three months free. Go to gusto.com 20vc that's gusto.com 20vc.
- [62:13]
Harry Stebbings
As always, I so appreciate all your support and stay tuned for an incredible.
- [62:16]
N/A
Episode with Jason Lemkin and Rory o' Driscoll and me on Thursday.