Last month, Andreessen Horowitz — one of the biggest and most prominent players in venture capital — announced that its “headquarters will be in the cloud” move forward.
Founded in 2009 in Menlo Park, California, the firm — also known as a16z — has been a symbol of Silicon Valley investing for years.
His new philosophy in this post-COVID era of remote work is that there is no longer a need for a centralized headquarters. This philosophy extends to its fintech team.
I sat down (virtually, that is) with general partners Angela Strange and Anish Acharya to learn more about why the pair believe that more people working globally creates a huge opportunity for fintech companies. The interview has been edited for clarity and brevity.
TC: Tell me what you think is the biggest change you’ve seen in terms of how companies are built in this post-pandemic era.
Anish: If it was building a startup five, 10, or certainly 15 years ago, most of the focused work was very local, meaning you were what we call “local by default.” You’re going to have a group of people who are going to get together in a physical office and work hard to build a software product and sell it to customers who are probably in your country – maybe even in your neighborhood if you’re in Silicon Valley – but certainly in your country. And then over time, if the product and the company were successful, you would slowly expand globally.
And the big trend that we’ve seen emerging already—and COVID catalyzed a lot of it—is that companies increasingly want to be global on Day One. And the software lends itself to this.
When Google launched, there was no reason why you couldn’t use Google on launch day in India or any other country where you have internet access. But the problem, of course, is that while the software is global, the money is very local. This is really where a lot of our fintech thinking has come into play. The idea now is that the company of the future and the company of today will be global on day one, and the opportunity (for fintech companies) is to build all the infrastructure for that company to operate and sell globally Day One.
TC: I think this is an interesting point. It’s very complicated though, isn’t it? When you talk about different countries and as you mentioned, global money is very much a local thing. Every country, every region sees it differently. And I think maybe that has intimidated some companies in the past.
Anish: The difference is that when you have a platform that can manage a lot of that for you, the idea is that the company just won’t have to worry about it. Similar to what we saw a few years ago with the global acceptance of payments. Several companies have come out and made it very easy to accept payments through local payment methods in any country. If you had to identify and do all these integrations yourself, it was very difficult. But if you can use a payment provider that gives you that for a fee, then suddenly it becomes a lot less painful.
Angela: Before this shift, I would have a meeting with a global credit card company working on foreign exchange cost management and wonder “who would need this”? Well, it will probably be companies that have been around for five to 10 years to get to that point. They started in one country, then went to another, and then went to another. Your customer for a multi-currency auto-reconciliation expense card would be a fairly large enterprise customer.
If you’re going to start a company in this space, you’re going to be like, “damn, I’ve got a huge product to build.” I have to cover tons of different countries and I have to sell a business, which means I have to raise a lot of money before I can even sell it. While now you have companies – like Jeeves as an example and from day one they have operations in Colombia, Brazil and Mexico. And they need it [management] immediately. So now you have this big opportunity to sell to the new—versus selling to the old—because all these new companies need your products and services from the start, which makes for a much larger, much more accessible market. Many of these newer companies and newer startups are actually target customers because of their needs. If they grow, the company can grow with them.
The other thing that happens is that companies expanding into different countries over time actually had to hire someone whose job was on an hourly basis to manually log into all their different bank accounts in their different countries and to record this in a spreadsheet which is completely ridiculous. If you’re a really early stage startup, can you afford a resource to do this? No. You must have software.
Anish: true If you’re a company that’s hired people internationally, you’ve probably been an old-school company with a worldwide payroll team and expensive luxury Oracle integration. Now after COVID, so many startups are spread globally. We are moving to the cloud ourselves. Now companies like Deel and others enable startups to simply do it turnkey and not have to think about where their employees are based.
TC: Angela, you and I have been talking quite a bit about Latin America and how the growth there has obviously been explosive over the last few years. What other regions are you looking at for potential investment?
Angela: It has an interesting “second order” effect. It used to be thought that where the executives and very early employees were, the company headquarters was. But now Silicon Valley or other big cities will start to see CEOs coming from other places.
Anish: Yes, that’s a great point. Because if you think about what Silicon Valley is, if we separate out Silicon Valley, of course there is a place – but there are Silicon Valley networks, Silicon Valley ambitions, Silicon Valley capital markets and talent, businesses, et cetera. in Silicon Valley… You can really take all these ideas outside of Silicon Valley. This has simply never happened before because of the network effects component. Between people being globally distributed and COVID catalyzing this change, it really feels like Silicon Valley is coming apart.
One of my favorite things about Marc (Andreisen) and Ben (Horowitz) and the whole company is the willingness to change our minds. We’ve historically been so Silicon Valley-centric, and I think the new fence posts just really put a fine line under the fact that we’re not that way anymore—and it’s been a change in a relatively short period of time.
TC: Geography aside of course, which areas within fintech excite you the most?
Anish: The world is just beginning. The narrow view of fintech is that it is banking, payments, lending and insurance. But I think the broader view is that we hold fintech as a new business model for internet companies. In this world, the global opportunity is much greater. So, cross-border and global is a big focus, and wealth management is something that we’ve spent a lot of time on, and you know that means a lot of different things than in the past. This means asset classes like crypto that you would never think of as wealth management, as well as new sets of people that can be served. For example, young people who work at Silicon Valley companies have a very different set of personal financial challenges than those who are about to retire. I’m also looking at some things in the consumer space, like the idea that the bank for Gen Z will be dramatically different from the bank of other generations.
Angela: Infrastructure. Managing teams and currency globally was a problem you could solve later. Now this is a problem we need to solve now. I literally go through my entire infrastructure stack and think, “Okay, if you had to make this work for 10 countries from the ground up, what does this company look like?” Also, any issue just related to crypto and fiat asset management . We’re starting to see that on the infrastructure side as well, because you’re trying to get people from the fiat world into crypto. You have to comply with all kinds of banking regulations, but you also have to understand the world of web3. There are a bunch of different opportunities in that scene that we as a company are looking at.
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