Yash Patel is General Partner at Telstra Ventures, a San Francisco-based VC firm that differentiates by generating revenue for its portfolio with strategic channel partners and customer relationships as well as by using data science to drive its investment process. Yash’s focus is on the consumer side of fintech, Web3, crypto, esports, gaming, SaaS apps, ecommerce, and marketplace. Some of his standout fintech investments while at Telstra Ventures are companies like Super.com (Super Apps) and Playbook (next-gen wealthtech). Previously, Yash was the Director of Corporate Development & Strategy at Adknowledge and was part of the technology investment banking team at Jefferies & Company prior.

Transcription

Pemo: Welcome, Yash. So wonderful to speak to you. Being originally an Aussie, I obviously know about Telstra. Tell me a little bit about Telstra Ventures and what you guys do.

Yash Patel: Thanks for having me on, Pemo. The best way to think about Telstra Ventures is we’re an investor, investing in lighthouse entrepreneurs, typically at the post product market fit inflection stage. So companies that really found some early traction, maybe one to 2 million in ARR or revenues, however the company accounts for that. And then really seeing strong growth and where we can add value in several ways. One, not just capital, but also opening up new markets in Asia, Pac and Australia, just given the Telstra connection. But then also, ways that we can leverage data science to help many of our portfolio companies with everything from benchmarking versus their competitors, as well as other ways that they can be more efficient with their operations. So that’s really the best way to think of this. We have just under a billion in assets under management and closed our third fund over a year ago that we’re actively deploying right now in 2024. So we’re pretty excited about this year and are sort of cautiously optimistic, I’ll sort of say, about 2024 and beyond.

Pemo: Right. And what about some of your particular investments? What are they looking like?

Yash Patel: Yeah, so I tend to focus a lot on consumer fintech, I’d say vertical SaaS, and I’d sort of say gaming and eSports as well. But in particular, more recently, I’ve spent a lot more time in fintech in terms of areas that I really like to focus. It’s not just consumer, but it’s a lot of the plumbing behind many of the top consumer fintech apps out there. We’ve had three or four great investments that we’ve invested in across the space. As an example, we’re big believers in the growth of super apps, the convergence of effectively e-commerce and fintech, similar to what we’ve seen in Asia. Having that happen in the West has been sort of early, but we’ve been investing in a few companies. One of them is Super.com, which is really an exciting business that’s helping many lower FICO score, lower socioeconomic folks in the United States, build credit and effectively enter the US financial grid in a more thoughtful way.

So for us, I think there’s a lot of areas where we feel like existing fintech or even larger incumbents are servicing higher net worth older individuals. But millennials, Gen Zs and others, they haven’t been able to access many of these services. So many of the fintech companies we’re investing in are democratizing this access or these capabilities for the masses.

Pemo: Great. I’ve got quite a few founders that I’ve supported over the years in the San Francisco Bay area who have been trying to work with fintech with the underserved, so that’s a subject close to my heart. Originally, when I was in Australia many moons ago and I was going through a divorce with three young babies, really the banks wouldn’t give me any credit cards. Since then, I’ve been gung-ho about fintech and cryptocurrencies, any alternate, not incumbent sort of means of supporting people that are in difficult situations.

Yash Patel: Yeah, absolutely. I mean, we haven’t announced it yet, but one of the most recent companies we led a Series A in is a company that’s really allowing many underserved immigrant populations in the United States access basic financial services. So this is unlocking and building credit, getting access to basic savings and checking accounts, automated tax prep, things that we take maybe for granted, but really allowing users, and especially this population, to take control of their own finances to basically unlock credit and basic services. So we’re really excited about this platform, but then there’s other areas that we feel that maybe you and your children could have benefited from, things that are around wealth tech 3.0 or wealth building, typically reserved for private wealth managers at Goldman Sachs and Morgan Stanley that serve high net worth individuals. But why shouldn’t everyone be able to access those capabilities, that education and that type of opportunity to grow your future net worth? That’s my personal thesis, and we’ve been executing on a few investments in that space.

Pemo: Do you see a lot of founders or startups coming to you with these sort of fintech startups? The other point that I just wanted to make is that I came from Europe originally when I came to Silicon Valley 15 years ago or so, and I was really shocked that it was so slow uptake on fintech in Silicon Valley or in the US. So first question is why do you think that was? Obviously now, it’s booming, hopefully. It has its ups and downs. Do you want to talk a little bit about the market in that way?

Yash Patel: Yeah, absolutely. Look, I think there’s a lot of issues that maybe cause entrepreneurs and consumers be a bit more reticent, right? First of all, it is hard to switch over from some of the big banks in the US, whether you talk about JP Morgan Chase or Wells Fargo, Bank of America, that have developed decades of trust with many consumers. Having said that, they have not catered in a more customized, personalized way either through digital platforms or otherwise to some of the fastest growing populations in the United States and globally, frankly. I’d also say there’s always been a lot of regulatory scrutiny around some of the earlier fintechs, particularly those in lending, that were, I guess I’ll be crude and call it, were a bit more predatory around making loans that were probably not in the best interest of anyone, the consumers that were taking these loans or otherwise.

So I think you had a lot of companies that were offering fast loans and easy ways to access credit, but these consumers were not able to pay that back, especially with that higher interest. So I think we saw a wave of companies like that. Some kind of navigated through some of that regulatory scrutiny and shifted to more, I’ll call it more ethical, thoughtful ways of monetizing, particularly lower socioeconomic populations in the US. I’d say third, it’s sort of been, I guess, a recognition that many of the existing platforms offered by the big banks that I previously mentioned haven’t really had intuitive experiences that are native to younger populations. So whether it’s mobile, cloud and now AI, we’re seeing this kind of convergence of really interesting technologies that now it just becomes very easy for a developer and someone who’s very in tune with that demographic to build something that is far more effective and far more profound, in terms of making an impact, than maybe five even 10 years ago.

So AI is an area that we continue to monitor, not just across Fintech, but how it’s disrupting many other sectors in a more thoughtful way. Sorry, I’ll pause there, Pemo, and see if that all makes sense.

Pemo: Sure. I was just going to add that I ran one AI panel many years ago, and it was the only panel, the only demand we had for a panel in all those years of running events in Silicon Valley. So I’m just interested now that all you hear about is AI. So I’m wondering what your perspective is. Is it as big as it appears? Is it going to disrupt other industries? What’s your perspective?

Yash Patel: Yeah, we’ve seen some really interesting ways that AI will disrupt some of these existing financial services platforms, but in a way that augments the way existing processes work. So as an example, we’ve seen a lot of pitches around AI copilots in accounting and finance to assist with things like more basic financial analysis or auditing and bookkeeping, detecting fraud, using AI to do things like close quarterly books for publicly listed companies. Typically, that takes several months sometimes at end, before these large publicly listed companies can report to the market. So we think that people are using AI in a thoughtful way to give these existing auditors and bookkeepers superpowers, I’d sort of say, and be more efficient with their use of time. The other area I’d say is we’re seeing a lot of our existing companies, particularly in the wealth management space, that are using LLMs, large language models, to basically provide more thoughtful advice to consumers.

So that’s something that some of our portfolio companies are actually tinkering with right now. You obviously have to be very careful because many of these LLMs could give advice that is not necessarily appropriate. So you do have to be very careful around that. It’s actually, I think, the reason why if you ask ChatGPT for advice on whether you should invest in a stock or not, they actually refuse to answer because there will be regulatory scrutiny around that.

Pemo: Oh, interesting.

Yash Patel: But I do think there is a lot of opportunity to get better around financial advice, leveraging LLMs that are highly fine-tuned to specific situations for many consumers in the US. So those are just some examples of areas that we continue to see pitches around and I get excited about.

Pemo: Great. Obviously, we’re in very different territory now than we were years ago when I started the Fintech events and interviews. So I’m just wondering how things have changed with all the dramas that have happened in the fintech space, particularly with cryptocurrencies and Bitcoin problems? What’s your overview on that? Because obviously you’ve got a great seat at the table.

Yash Patel: Yeah. No, it’s really interesting because I’d say for the last definitely 12 to 24 months, we’ve seen this narrative, particularly in the media around consumer fintech or fintech in general, really struggling. A large reason for that was many of these companies raised in 2021 in this zero interest rate environment where money was pretty free and readily available at pretty inflated valuations. Then naturally, in 2022 and 2023, we saw down rounds as these companies were looking to survive, not get more offensive, but just survive. Then as we emerge in 2024, many of these later stage, I’d sort of say, fintech platforms have emerged with better unit economics and are poised, I think, to get more offensive and aggressive. So I think the narrative has been focused on the late stage and publicly listed fintech companies, companies like Robinhood and Coinbase, that really, really struggled in terms of their valuation multiples in the public markets.

So that’s on one end of the spectrum. That’s kind of the narrative that I think people have talked about. But then on the other end, when we talk about the areas that we focus on here at Telstra Ventures, kind of Series A and B early stages, many of the smartest minds and builders, they’ve been tinkering away and continuing to get great traction in various areas that they’re disrupting across fintech. So for them, I call these builders, effectively, they never really cared about what public multiples that Coinbase or Robinhood were trading at. They’re still early. If they do go public or see a trade sale, it might be five to seven years. They have a longer hold period for the investors backing them. So those are the companies that we’ve really focused on, and we’ve seen our growing 3, 4, 5 x year on year, sort of quietly building away, while this narrative in the media around the Robinhoods, Coinbases getting killed, has been effectively putting an arrow or a dagger in the heart of fintech.

We take maybe a contrarian view that it’s actually really, really robust and strong and the people that matter most, the builders, they’re seeing great traction. So I’d sort of say that’s how we view 2024 and beyond and in particular, because you talked about cryptocurrency, I wanted to touch on that. There’s no secret that Web3 and blockchain had a rough winter in 2022 and 2023, but one of the things that we continue to look at is core blockchain developer activity that our data science team monitors through GitLab repositories and other sources of data. We never saw that really dip during that crypto winter to the extent that crypto investors and speculators dipped in terms of them pulling out of the market. So from our perspective, we’re seeing, hey, there might be some light at the end of the tunnel with steadier macro-economic conditions, the SEC’s approval of a bunch of Bitcoin ETFs that we’ve seen, Ark, BlackRock, and then this having event around Bitcoin that could drive Bitcoin to new heights. I mean, we’ve seen it in the past few days at over $60,000, right?

Pemo: Yes.

Yash Patel: At almost Bitcoin price ~$60,000. So for us, we think Web3 and blockchain will surge in 2024 and beyond after a pretty rough 2022 and 2023. With that, means more actual revenue generating projects and Web2.5 And Web3, I’ll kind of call it, which I think if you look at a previous hype cycle in crypto, there was less of a focus on actual revenues and more just speculators and people issuing tokens. So people have learned their lesson and are now going to start building a greater velocity.

Pemo: So hopeful! So hopeful! This is why I’ve stuck with it for so many years, really, hearing about Bitcoin in 2008 when I was in Dublin, Ireland. I’ve been a fan ever since. But yeah, all the speculation, the regulatory problems, obviously, have been a damper, but you’re so positive. Really appreciate this conversation and I know that all my listeners will too. Thank you so much, Yash.

Yash Patel: Absolutely. It was a pleasure.

Pemo: All the best with your investments. Thank you.

Yash Patel: Thank you, Pemo. Have a great rest of your day.

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• Source: https://www.fintechsv.com/interviews/podcasts/yash-patel-general-partner-telstra-ventures/