SOUND QUALITY WARNING: You know how Marc Andreessen said 'software is eating the world'? Well, software ate this episode, please excuse the underwater sound and we'll be back to normal next week! In this Money Talks segment, Pete and Eoin trade ideas on the impact of Ireland’s investment in Stripe, Revolut’s American dream, the season of the SPAC with eToro, Bakkt and Kraken and thoughts on DeFi vs. mainstream crypto.
SOUND QUALITY WARNING: You know how Marc Andreessen said 'software is eating the world'? Well, software ate this episode, please excuse the underwater sound and we'll be back to normal next week!
STORIES WE COVERED:
The double-bottom-line impact of Ireland’s investment in Stripe (Irish Times, 22-Mar-21)
Pete channeling Chamath Palihapitiya: “Take all of the old school, traditional financial services players that are valued in aggregate in the hundreds of billions right now. Then have a look at FinTech, and when you throw out Stripe, you’ve got maybe tens of billions of market cap. There's so much more room to grow in fintech.”
“If you look at what many of these fintechs are doing, they're providing financial services, but they’re faster, better and cheaper than the traditional players. Looking at the global payments market that Stripe are now a big player in, there are $240 trillion in payments annually, and only 14% of that global commerce happens online today. Stripe’s upside alone is just massive.”
Eoin on the investment: “Looking at it through a normal investment lens, $50mn isn’t much, but the Irish state is investing for a return on jobs and the economic benefit of the state. They're not measuring it on the likelihood of a 3x or a 10x investment return, but they might end up getting that anyway. The reality is that $50 million is guaranteeing a thousand jobs. In the scheme of things, it's more than worth it.”
Pete’s parallel to corporate VC: “With corporate VC, it's really more about deriving value from all of the innovative activities that result from your investments in tech companies, than it is about hitting venture home runs. It's kind of the same thing here, it's ‘what value can this investment in Stripe deliver back into the corporation that is Ireland?’”
Link to the portfolio of the Irish Strategic Investment Fund referenced in this segment.
Revolut applies for US banking license (Finextra, 23-Mar-21)
Pete’s doubts on Revolut in the US market: “They're going to need to do a lot in the US besides what they're doing right now, because Revolut to most folks, while we were all still traveling, it was really about FX. You could very easily move money around, spend in multiple currencies when you're traveling. But in the US, FX isn't a big thing, because you've got 300 million people that are all spending US dollars and that's pretty much it. There is a very small proportion of people in the US economy that actually need FX services on a regular basis.”
Pete waking up to an opportunity: “But think about the migrant population on which our friend Ollie Walsh from Pipit would school us. Yes, there is money flow going from Canada to the US, from the US to Canada, from the US to Mexico, from Canada to Mexico, from the US to all over LatAm in a bunch of different currencies. That's one thing to think about here - could they become that ‘Hey you moved to America, go get Revolut’ type of player?”
Eoin’s own doubts: “Aside from it being that one big market with 300 million people, there are some serious players there that Revolut will be competing with. Square are looking at becoming a bank, they’ve got 30 million users with CashApp, and you’ve got Venmo. I think the only way that they're going to crack a market like this is with a large acquisition of an existing customer base. The spend alone of trying to get your name out there to compete with the likes of CashApp or Venmo, it's just not going to work.”
Pete’s theory on a Revolut US acquisition target: “I'm thinking insurance, someone that already has a significantly large customer base with a digital-only business, where you don't have some huge integration costs with an old school, traditional player. Maybe a big player from another segment that will allow them to significantly move towards the super-app status. You heard it here first, folks, Revolut is going to acquire an insurtech player!”
Season of the SPAC – eToro, Bakkt, Kraken (Coindesk, 16-Mar-21)
Eoin on the SPAC phenomenon: “Yes, there’s a lot of dry powder at the institutional level, but at the retail level, everyone wants to bet on the stock market now. Why wouldn't you go public to catch that gold rush of interest, and it seems like a SPAC is the quickest way to list, or even a direct listing. There are no road shows, you can turn it around very quickly, and all of a sudden your shares are actively traded. In the US alone, people were getting their $1,400 stimulus checks last week and how much of that was going into crypto and retail investing?”
The Square Crypto Book of Bitcoin Mythology (shared by Jack Dorsey on Twitter, 18-Mar-21)
All-In with Chamath, Jason, Sacks & Friedberg (podcast referenced in segment on crypto)
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