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Billy Libby

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62

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2022-05-23

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2022-05-23

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1

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1. “I think we touched on it briefly. It's if you think about what you're best at and what's most natural to you, you're going to end up having such a higher return on your time leaning into that versus trying to do something that is not natural. And so I just think that's my life lesson that I've learned from myself personally.”

   2022-05-23 · Capital Allocators · Billy Libby – Disruptive Venture Funding at Upper90 (Capital Allocators, EP.251) · IDENTIFIED FROM THE TRANSCRIPT · source

2. “Dad always said it's more exciting to make your own money trying to do it yourself and it's more rewarding if you do it versus somehow someone else doing it for you. What do you need to live a successful healthy life? There's a role for money, but if you let that become your driving light, there's someone who always has more money than you. And my dad always used to tell me he always wants to be in business with people where you can leave your wallet on the table and you trust them, not maximizing and just working with people you trust even if you're going to make less.”

   2022-05-23 · Capital Allocators · Billy Libby – Disruptive Venture Funding at Upper90 (Capital Allocators, EP.251) · IDENTIFIED FROM THE TRANSCRIPT · source

3. “Earlier in my career on what I invest at and most naturally able to lean into and get return on investment, it would have helped accelerate my career faster and probably made life easier.”

   2022-05-23 · Capital Allocators · Billy Libby – Disruptive Venture Funding at Upper90 (Capital Allocators, EP.251) · IDENTIFIED FROM THE TRANSCRIPT · source

4. “Two things. Sometimes when you see an ability to make things better, things take time to change, especially in large organizations, build consensus, be patient, don't think that you're going to change things bottom up. When I was at night, I saw a lot of room for efficiencies to be gained. Our division at night, which was doing all this market making, 10% of the employee base, but 110% of net income. Trying to push all these ideas of how it would get leaner and meaner and not focusing on what is my role, understanding what I can control, put my head down, and not trying to change the world. And the other thing is I'm naturally good at sales. And I always felt like sales was a bad word. And it's like that's flaky. And it's like, what's really there? So I spent a lot of my career at Goldman, like running product development and challenging myself to do something that wasn't sales. And I really think if I had focused my energy”

   2022-05-23 · Capital Allocators · Billy Libby – Disruptive Venture Funding at Upper90 (Capital Allocators, EP.251) · IDENTIFIED FROM THE TRANSCRIPT · source

5. “creative, open-minded approach and thinking a step ahead, not just in ideas, but also he has this amazing connectivity with first-time founders. It's just like any business. It's finding people at that right stage. He's also expanded my mind, expanding my network and thinking of how to learn about these new industries. So those are two people that just kind of jump to my mind. But it goes back to your pet peeve. I really now realize I'm a net pay it forward guy and like creating value. And I just think that if you find people now that are net takers, you really just cut them out and just spend your energy on people that you really think you can build meaningful deep relationships with. And I think that's been a big learning for me over time as well.”

   2022-05-23 · Capital Allocators · Billy Libby – Disruptive Venture Funding at Upper90 (Capital Allocators, EP.251) · IDENTIFIED FROM THE TRANSCRIPT · source

6. “I've already talked a lot about Jason. He really helped give me the confidence to go start something on my own, so I'm very grateful for him. People in finance, we pretend that we're risk-on, but we're really risk-adverse and you need someone to help you build up the confidence to do that sometimes. The two people outside of him, one is Mark Gerson. Mark's somebody, if I think about having touched a lot of different parts of my life, he introduced us to our rabbi, who Mary Tiffany and I. He helped get the club set up with me was the first person to commit to the fund, introduced us to Thrazio, which has been a marquee investment for us. We're the first capital in that company at a $12 million valuation. People that have really been with you and always had your best interests and never really expect something in return. He's somebody who really stands out in a meaningful way. I've always really enjoyed it, and we both know him Savni, somebody who has a really”

   2022-05-23 · Capital Allocators · Billy Libby – Disruptive Venture Funding at Upper90 (Capital Allocators, EP.251) · IDENTIFIED FROM THE TRANSCRIPT · source

7. “Think my biggest pet peeve is when people think that they're the smartest people in the room, they have to sound like they're the most on point. Most people I've learned that think they're the smartest people in the room or not the smartest people in the room. So I think people that are not open-minded and like think they know everything. I just think we don't have to make something seem like it's bigger or so much more advanced than it really is. And just being comfortable with that.”

   2022-05-23 · Capital Allocators · Billy Libby – Disruptive Venture Funding at Upper90 (Capital Allocators, EP.251) · IDENTIFIED FROM THE TRANSCRIPT · source

8. “I love playing sports. Anything where you're off email, you're forced to concentrate, it's mentally critical for me running a business, I'm sure, like you, you always have to-do lists and emails. And when you're doing something that requires focus like playing sports, you have no choice but to be present. I think that's something that I need to just mentally continue to make a priority.”

   2022-05-23 · Capital Allocators · Billy Libby – Disruptive Venture Funding at Upper90 (Capital Allocators, EP.251) · IDENTIFIED FROM THE TRANSCRIPT · source

9. “Allow us to spend more concentrated time with our LPs and help reduce the amount of time we're spending on capital markets. So I think there's definitely a role for us to have a partner that as these companies de-risk and need more size, there's a switching cost and a familiarity. We should have a partnership where we can offer cheaper capital. That's something we're really excited about because I think I like to spend my time hunting, finding these deals, building that rapport with our unique OP base and having a partner that has already built that capital markets scale. That doesn't seem like the smartest thing for us to try to rebuild. So we're really thinking of who would be the right partner that has some flexibility, but also can offer a graduation facility as these companies scale. That's something we're starting to really think about and want to invest in over the next year.”

   2022-05-23 · Capital Allocators · Billy Libby – Disruptive Venture Funding at Upper90 (Capital Allocators, EP.251) · IDENTIFIED FROM THE TRANSCRIPT · source

10. “Every business has different holes not coming from the traditional asset management world for me specifically, also for Jason, I think it's an advantage because you look at things differently and have more of an open mind you're not copying. However, there's certain laws of the jungle of how that world works. And so our view is that this hybrid creates our flywheel. I think for a lot of the pensions and sovereigns and some of the larger family offices and foundations, one of the challenges with credit is it's very tax inefficient. You get the benefit of obviously the short-term gains, but obviously it's taxed at a higher level. So I think that some of the groups that have tax efficiency on their side really like the credit profile. So I think that we're looking to figure out who is the right kind of institutional partner for us that can help.”

    2022-05-23 · Capital Allocators · Billy Libby – Disruptive Venture Funding at Upper90 (Capital Allocators, EP.251) · IDENTIFIED FROM THE TRANSCRIPT · source

11. “You start with this pretty interesting exclusive group of a couple hundred entrepreneurs gathering together to provide capital, the conversations you've had with the institutional market, I know it's the beginning of that. Where have you seen that evolution in your conversations?”

    2022-05-23 · Capital Allocators · Billy Libby – Disruptive Venture Funding at Upper90 (Capital Allocators, EP.251) · IDENTIFIED FROM THE TRANSCRIPT · source

12. “I actually think bigger credit funds. That aren't the biggest are actually, in my opinion, a competitive disadvantage because they don't have the cheapest capital and they can't be nimble anymore. It's kind of in no man's land a little bit. So then they have to do financial engineering to be mez and pick and, you know, it's kind of like they have to introduce a lot of other exogenous risks. Like we just keep it simple. We're always senior secured and we bet the company will keep growing with us.”

    2022-05-23 · Capital Allocators · Billy Libby – Disruptive Venture Funding at Upper90 (Capital Allocators, EP.251) · IDENTIFIED FROM THE TRANSCRIPT · source

13. “LTV was really low, and we had a senior security on the entire company. So we ended up giving him a $5 million project finance facility at 15%, and then it went to $15 million. And we ended up scaling with them to $40 million because it had nothing to do with being a crypto Bitcoin money startup. If you think about it that way, there's just so many different creative ways, but we had that relationship with Chase. We had a way of proposing a bespoke solution. We had an ability to start small. We also invest in the equity. They just closed almost a $2 billion valuation. They're crushing it. And it just gives an example if you extrapolate, if we're shown a problem, I think we're very good at solving problems. And that goes to having most of our LPs in the tech world. If you just realize that this strategy is capacity constrained and you're okay with it, which I am, then it's liberating. You don't have to go and raise gargantuan funds. And, you know, I think you start rubbing.”

    2022-05-23 · Capital Allocators · Billy Libby – Disruptive Venture Funding at Upper90 (Capital Allocators, EP.251) · IDENTIFIED FROM THE TRANSCRIPT · source

14. “Like, how do you have a straight face thing, right? Chase was at one of our LP events. We were talking about Thrazio and how they were using our capital to buy stores on Amazon that at less than two times EBITDA, that had payback periods of months. And this really creative way of acquisition financing. Chase was starting to build at Crusot. Bain came in, led the seed round. They were approving the concept. We always come in after there's been proof of concept and there's that inflection point scale. He's like, listening to the Thrazio presentation about how you're helping them finance their acquisitions and their inventory, and it got me thinking, our biggest expense for Crusoe Energy is a caterpillar generator to power the data center. But because we're a startup and because we're in crypto, Caterpillar won't finance it. We're too small for GE and we just created an off balance sheet ABL to finance the caterpillar equipment that has salvage and residual value and are”

    2022-05-23 · Capital Allocators · Billy Libby – Disruptive Venture Funding at Upper90 (Capital Allocators, EP.251) · IDENTIFIED FROM THE TRANSCRIPT · source

15. “Gas just gets flared because there's nowhere to put it. There's more natural gas that gets flared in the US every year than the amount of energy consumed in Africa and Japan. It's crazy. So he built these portable data centers that go on site to these oil fields where they are flaring the natural gas. He's getting effectively paid to take natural gas and he's powering these on-prem data centers to mine Bitcoin. If I came to you, and I've said you should be an upper 90 because we'll get you downside protected, senior secured, mid-teen returns with additional equity upside. And we're doing it in a startup that is mining Bitcoin in crypto. You're like, what are you smoking?”

    2022-05-23 · Capital Allocators · Billy Libby – Disruptive Venture Funding at Upper90 (Capital Allocators, EP.251) · IDENTIFIED FROM THE TRANSCRIPT · source

16. “You get older, you think about what do you enjoy doing? Like 70% of our deals come from our LPs. And our founders, almost all of them, have become LPs. One of the most fascinating deals that we've done, Crusoe Energy, the founders, an amazing guy Chase Lock Miller. He came from the quant trading world like me. He was actually ACECO, then went to a company called Jump, was at Polychain, had this unique different set of experiences and was putting them all together in a weird way like I was with upper 90. He's like, there's more data needs and more data being captured than there's energy available in the world to crunch all the data and to store it. Where is a way to capture energy to use it for AI and data crunching? In the middle of the country, in the US, where the biggest driller for oil or one of the biggest drillers, most of those projects have no pipeline. So the oils drill that gets shipped out because it's valuable.”

    2022-05-23 · Capital Allocators · Billy Libby – Disruptive Venture Funding at Upper90 (Capital Allocators, EP.251) · IDENTIFIED FROM THE TRANSCRIPT · source

17. “When you're in and around this ecosystem of venture companies and growth, a lot of the model you've described is a niche. It might be hard to see how you scale this. How do you think about the juxtaposition of those two things?”

    2022-05-23 · Capital Allocators · Billy Libby – Disruptive Venture Funding at Upper90 (Capital Allocators, EP.251) · IDENTIFIED FROM THE TRANSCRIPT · source

18. “I think tigers pushing it on the right side where they're like, look, they shouldn't be making 25% IRR. It should be 15. So they're like, we're going to make equity cheaper. And upper 90 on the other side is like, hey, you just need less equity. If you're a capital intensive e-commerce or tech business. So both of those put a lot of pressure on traditional growth equity. Directionally, that creates a lot more opportunity. So I don't think we need to be the only player in the space. I just think that you're going to find the ability to disrupt the traditional VCPE model seems like a pretty big opportunity.”

    2022-05-23 · Capital Allocators · Billy Libby – Disruptive Venture Funding at Upper90 (Capital Allocators, EP.251) · IDENTIFIED FROM THE TRANSCRIPT · source

19. “View us as a startup as well, and we have to continue to innovate. We've done more deals recently in Latin America. We just always have to be hustling and adding value. One of the things that I've learned as I've looked back at my career is it's much better to be in an industry with a win at your back than to try to be the smartest person in an industry. And data's everywhere. Everything is now captured in data, which means you're going to be able to finance almost anything in the future. So I think we're directly in the right trend. Founders right now face 20% dilution on average through the seed round and greater than 50% after the series B. That is going to change. A private equity firm or a growth equity firm coming into a series C or D sitting at the top of the caps table with liquidity preferences and all these downside protections and they're ultimately earning more than the founders at exit to me seems like that's going to change.”

    2022-05-23 · Capital Allocators · Billy Libby – Disruptive Venture Funding at Upper90 (Capital Allocators, EP.251) · IDENTIFIED FROM THE TRANSCRIPT · source

20. “In what's clearly a competitive environment, you talk about even when you get past the A, you've got lots of equity checks from venture capitalists. How do you think about the duration of your advantage today?”

    2022-05-23 · Capital Allocators · Billy Libby – Disruptive Venture Funding at Upper90 (Capital Allocators, EP.251) · IDENTIFIED FROM THE TRANSCRIPT · source

21. “Offering similar things that is just part of the sales pitch now. We focus more on the capital markets optimization and balance sheet structuring.”

    2022-05-23 · Capital Allocators · Billy Libby – Disruptive Venture Funding at Upper90 (Capital Allocators, EP.251) · IDENTIFIED FROM THE TRANSCRIPT · source

22. “where we can come in and really help structure the balance sheet, we can help the founders think about how they're optimizing their investment with ClearBank and say, how do you get insurance on your losses? So instead of using haircut equity capital, you can buy insurance for tail risk or for versus loss capital. That was a game changer for them. So it's all of these other tools around capital efficiency that we are able to bring to the table the earlier that we get involved in the company, the more value we can add. It's really important to find these companies before they raise that big growth equity round because once that happens after the series A, it's really an equity-driven narrative. If it's working, they want to put more money in. Driving revenues probably the second most valuable thing where we're introducing and helping people land customers. The other stuff is becoming more of a commodity and you have to do it, like helping them with hiring. And I don't think that's enough anymore. Most of the value added pitches everyone”

    2022-05-23 · Capital Allocators · Billy Libby – Disruptive Venture Funding at Upper90 (Capital Allocators, EP.251) · IDENTIFIED FROM THE TRANSCRIPT · source

23. “Is listed on the cap table as the founder. So they get a $5 million QSBS exemption. The first $5 million of gains is tax-free. If you hold it for five years and all these things, well, you can set up five trusts and get five times a QSBS exemption. And then upon exit, you can roll them into one entity. So just think about that. Like you have a $5 million tax-free gain or a $25 million tax-free gain. Little things like this that we as we're almost like this capital markets partner.”

    2022-05-23 · Capital Allocators · Billy Libby – Disruptive Venture Funding at Upper90 (Capital Allocators, EP.251) · IDENTIFIED FROM THE TRANSCRIPT · source

24. “That's really focusing on how do you add value to the founders and how do you create a moat or compounding value. Our slogan now is it's not how much you raise, it's how much you own. Or another slogan, delay your A. You've raised a seed, you've proven the model, now you want to get into another city, or you want to do another cohort. Having a tool like us helps give you this ability to raise equity when you want versus when you need to. It's as bridge flex. Right now, going on to how do we help founders own more of their company, credit obviously is a very valuable tool, isolate the healthy assets. The other thing is tax and just general efficiency. So QSBS, very powerful tool, you know, qualified small business. Jason's very curious about just tax laws and ways that founders have incentives to start businesses. So QSBS as an example, if you look at most companies, the founder”

    2022-05-23 · Capital Allocators · Billy Libby – Disruptive Venture Funding at Upper90 (Capital Allocators, EP.251) · IDENTIFIED FROM THE TRANSCRIPT · source

25. “10 to 20% in equity, 80 to 90% in debt. We follow our money. We always will make that decision upfront because we want to be an aligned partner and we think it's the best versus a return for RLPs because we can get into the best companies with this mindset.”

    2022-05-23 · Capital Allocators · Billy Libby – Disruptive Venture Funding at Upper90 (Capital Allocators, EP.251) · IDENTIFIED FROM THE TRANSCRIPT · source

26. “Correct. So we say, is this a business that we think we can add value to and that we're excited about where we think there's real enterprise value potential? Number two, is there a receivable or an asset or cash flow that we think can allow us to get payback on the debt regardless of the company succeeding? We're not smart enough to know which companies are going to crush it. I think we've been more right than wrong, but no one can pick the winners. In Octane or Clutch or Crusoe Energy, there's a lot of excess spread and the debt can easily pay back interest coverage on the debt and we're not using leverage. And the facilities are five to ten going to 20 to 25. Most of these bigger funds that are trying to raise massive amounts of money, their whole goal is to lock up all this capacity. If you keep your fund size manageable, you will continue to create good returns. Is this a business we want to be in and is a debt state on its own? And then is there an ability for us to be debt in equity? And it's not asking for a free option in the future. We make that decision upfront.”

    2022-05-23 · Capital Allocators · Billy Libby – Disruptive Venture Funding at Upper90 (Capital Allocators, EP.251) · IDENTIFIED FROM THE TRANSCRIPT · source

27. “It sounds like the debt piece and the equity piece as you invest are distinct. And so it's not that you're investing in debt with a kicker or a warrant or a hybrid convertible, but you're investing in straight debt. And then in certain situations of the option to invest in an equity round later.”

    2022-05-23 · Capital Allocators · Billy Libby – Disruptive Venture Funding at Upper90 (Capital Allocators, EP.251) · IDENTIFIED FROM THE TRANSCRIPT · source

28. “This kind of hybrid credit is what we call it because founders are going to want it. And if we go back to if you have the best deals, you have the best returns, we think that investors then will be interested in that. But it's to your point, you have to spend a lot of energy educating the founders on what is a product, how does it work, and also you spend a lot more time on capital markets because what we're doing is not traditional.”

    2022-05-23 · Capital Allocators · Billy Libby – Disruptive Venture Funding at Upper90 (Capital Allocators, EP.251) · IDENTIFIED FROM THE TRANSCRIPT · source

29. “Years ago, that mattered, but now all those tools are available to the companies. So we're like, get the best lead. We're going to be number two. Our capital is greener because we can do debt and equity. And because we're also putting our money where our mouth is, we're not asking for warrants and freebies. We're going to be an aligned partner. So in a year, if you need to go and get or can get cheaper debt, equity positive event. And we're aligned with you to be refinanced. It gives you a unique way to do what's right for the company because it'll benefit the company and our investors are in one fund. They get the benefit of both the equity and the debt. In a lot of other funds, there's a different equity group and there's a different debt group. There's this conflict. And I think our view is like, let's do some equity, more debt, because the debt's really what's powerful and most valuable and needed to the companies. But the equity allows us not to just have this freebie kicker. It's like if they can go get bank debt, that means the equity's in a really strong position. And so our view is that this will be the future of investing where we can offer.”

    2022-05-23 · Capital Allocators · Billy Libby – Disruptive Venture Funding at Upper90 (Capital Allocators, EP.251) · IDENTIFIED FROM THE TRANSCRIPT · source

30. “I think that we really want to be partners in a more efficient equity capital provider to companies. We think that more and more companies have a need for debt and equity, especially capital-intensive businesses that are doing lending or acquisitions or roll-ups. What we learned is that, and it goes back to the way we built a firm, having alignment with the companies we're investing in is critical. And to create alignment, we do majority of debt, but we also invest in equity. So we will not invest in a business or provide debt if we can't also be an equity partner. Sometimes some of the larger growth funds and VCs are upset because they want all the equity, but our view is that there's always room for upper 90 to be like the second. We don't want to get Sequoia, but if you're not going to get one of the top VCs, you don't need five VCs that are all doing the same thing. Like, oh, we'll help you with talent and we'll do this and that.”

    2022-05-23 · Capital Allocators · Billy Libby – Disruptive Venture Funding at Upper90 (Capital Allocators, EP.251) · IDENTIFIED FROM THE TRANSCRIPT · source

31. “Morgan Stanley, all rights preserved. And now, back to the show. So you mentioned, with the exception of the ones you won't do where you have this potential left tail events, when you go in and lend to these companies, as you said, when it works, they want to refinance you for less. How have you solved this? You have to find something before everybody. If you do, you might not be able to hold it.”

    2022-05-23 · Capital Allocators · Billy Libby – Disruptive Venture Funding at Upper90 (Capital Allocators, EP.251) · IDENTIFIED FROM THE TRANSCRIPT · source

32. “Will come in the future. However, that gets into this murky land of student debt, and it sounds great on paper, but there's all these outcomes that you can't underwrite. And so we just stay away from those things. I'd rather be equity in those industries. If it works, it's like a game changer product. People are like, would you finance NFT collateral? Somebody came to us recently about that. I'm like, if NFTs and Bitcoin works, I want to be the equity of that. I don't want to be the debt of that. So I just think it's figure out where it makes sense to be debt. and where it makes sense to be equity. We believe we're getting equity-like returns for debt-like risk versus the other way around.”

    2022-05-23 · Capital Allocators · Billy Libby – Disruptive Venture Funding at Upper90 (Capital Allocators, EP.251) · IDENTIFIED FROM THE TRANSCRIPT · source

33. “Period on a scooter is three months. So, why would I be using equity for something that has a few month payback period? And I have all this data to support it. And if you look at a model, the data looks very compelling. However, as we're talking with our members, we're like, what happens if New York City just decides there's no more scooters? What if there's an accident? We can't price this tail risk of that disruptive asset being regulated out. So we decided not to do it. But because there's a lot of capacity, a lot of these bigger lenders and banks do that stuff. But I think they're mispricing that binary outcome that we can't really underwrite. The other thing is you've heard of income sharing agreements where people that are going to get computer science degree from Carnegie Mellon to your program, the job placement is 99.9%. They should be able to sell part of their future earnings to have somebody pay for their school. It's like selling equity in yourself. Fascinating concept. And I think more of this.”

    2022-05-23 · Capital Allocators · Billy Libby – Disruptive Venture Funding at Upper90 (Capital Allocators, EP.251) · IDENTIFIED FROM THE TRANSCRIPT · source

34. “Has a 1% excess spread because it's well understood by banks. Finding these niche industries early, there's a lot of room for error. The other thing that I'd say is things that we wouldn't do because we can underwrite well understood assets. What's a typical recovery for a jet ski or power support? And what's the typical default rates for a near prime borrower? And we really look for things like clutch with a carvana of Canada. They're buying used cars. So we give them a warehouse to buy used cars, which they're selling through the online platform over 30 to 60 days. We understand there's enough data to look at that asset class. Things that we don't do or haven't done to date are where there's a binary regulatory risk that we cannot underwrite. Scooters after bird and lion came in. One of our LPs started a very successful scooter company called Spin at Solta Ford. Great guy. And he's like, if you look at every city that I'm in, the average cost of a scooter's 500 bucks. And if you look at the ride history, the average pay”

    2022-05-23 · Capital Allocators · Billy Libby – Disruptive Venture Funding at Upper90 (Capital Allocators, EP.251) · IDENTIFIED FROM THE TRANSCRIPT · source

35. “To make sure that you have excess spread. I'm the simpleton. If you can buy things cheap enough or you can charge enough vig, there's a lot of room for error. An unlevered return is very different than a levered return. How much are you able to charge? How much inefficiencies exist? So we're looking for businesses that have meaningfully more book yield, 25, 30% annualized book yield. So they can service our 12 to 14%. And if you get stressed like octane lending, it's one of our portfolio companies with an amazing CEO. He finances power sports, jet skis, ATVs. It's a hundred billion dollar industry. It's hard to conceptualize the size of these numbers. He owns the point of sale for PowerSport dealerships. Most people need financing, even though they're small acquisitions. This cost of capital's high single digits. His book yields almost excess spread is like 10 plus percent. Subprime auto”

    2022-05-23 · Capital Allocators · Billy Libby – Disruptive Venture Funding at Upper90 (Capital Allocators, EP.251) · IDENTIFIED FROM THE TRANSCRIPT · source

36. “We have a team now of almost 25 people. Credit as its own business is not a rewarding business in a lot of ways because your best customers want to get rid of you as quickly as possible. And we like helping build companies and create enterprise value. We said we're only going to invest in a business if we're excited about the business itself. Then it does a credit stand on its own. When we look at credit, first thing is how diversified are these receivables, how diversified is the risk because you don't get paid to take more concentration risk and credit. So diversification is your friend. Number two is data's a truth serum in these cases. You can log into somebody's Amazon account. You can actually verify all of their data from Amazon, from Apple. You can set up bank accounts that control the flow of funds. In a weird way, it's like the ability to do these things in smaller size changes because you control the cash flow and you have the canonical source of data.”

    2022-05-23 · Capital Allocators · Billy Libby – Disruptive Venture Funding at Upper90 (Capital Allocators, EP.251) · IDENTIFIED FROM THE TRANSCRIPT · source

37. “There's all of these new opportunities from the influencer economy to the app developer world to people that are creating TV libraries. What we found is that the ability to be this financial partner to these online businesses that aren't yet banked and well understood is this big white space. It's exciting and it's good for society because people will be able to have more chances of being their own boss. They just need access to capital. It's amazing if you think about Amazon, Airbnb, Google, TikTok, what these platforms now allow for people to start businesses is unbelievable. We're almost looking for like the derivative businesses being created around these new online platforms that we can finance and be part of.”

    2022-05-23 · Capital Allocators · Billy Libby – Disruptive Venture Funding at Upper90 (Capital Allocators, EP.251) · IDENTIFIED FROM THE TRANSCRIPT · source

38. “Tech has helped pace the finance innovation. So you can start a business online almost instantaneously. Still, the banking system, how do you get inventory capital? How do you get working capital? When you download an app on Google or Apple, Apple pays the small business developer 60 days later. Bravo factors that app receivable. You're an influencer. You just completed a job for Nike. You're a small business. It's almost like financing individuals. And it brings together that example I gave of Night where you're starting to price each type of customer really tightly and then really understanding the e-commerce platforms and how they work, what's Jason understands deeply. So there's all of these new businesses being started online where a bank is not going to be able to understand. You and I have 20 homes in the Hamptons and we have all this rental income coming this summer. A bank, if you went to them, would say, well, you have 20 liabilities.”

    2022-05-23 · Capital Allocators · Billy Libby – Disruptive Venture Funding at Upper90 (Capital Allocators, EP.251) · IDENTIFIED FROM THE TRANSCRIPT · source

39. “Those sellers 14 days after a sale has occurred. Those people have working capital needs, even its short duration, like they have payroll, they have inventory. So payability basically is factoring a 14-day Amazon receivable. That was our second deal. Okay, well, who's doing that on Shopify? And then the next deal, Bravo Capital. If you're an app developer on Apple or Google. The thing I like about what we're doing, it's like I say what's new is old. If we had this podcast 20 years ago, we'd be like, I have a really cool tech product and I sell it in the back of SkyMall or popular mechanics and I do a sale and someone sends me a check and there's like a working capital problem. The friction to start a business online has come down exponentially. Have you and I wanted to start a business offline like a franchise you'd have to go and get real estate and get insurance and all the equipment and hire people. Think of the barrier to entry to be a small business.”

    2022-05-23 · Capital Allocators · Billy Libby – Disruptive Venture Funding at Upper90 (Capital Allocators, EP.251) · IDENTIFIED FROM THE TRANSCRIPT · source

40. “Credit can be applied to anything, but you have to make sure that if things are stress tested or things go wrong, get comfortable that there's that collateral and that principal recovery. As you said, the simplest form is that there's short-term receivables or working capital needs, which is much more oriented to fintech. Upper 90 is a top corner of a goal. That's a soccer reference. It's like these hard, nichey, tough to find, tough to execute deals. And I was talking to my good friend Akshay, and as I was describing what I think of as the opportunity, he's like, it's really the center of the goal. Every business has a fintech component. It's almost like fintech's horizontal. It's not a vertical. What do I mean by that? One of our first deals was a company called Payability. When you're a seller on Amazon, which there's millions of them, selling hiking poles and whiteboards and audio equipment, Amazon pays”

    2022-05-23 · Capital Allocators · Billy Libby – Disruptive Venture Funding at Upper90 (Capital Allocators, EP.251) · IDENTIFIED FROM THE TRANSCRIPT · source

41. “York, and now I want to do something more cool. I was at Blackstone, and now I want to do something a little more funky. But they raise money and they said, okay, now we have to go deploy. Let's figure out how to have this deal flow engine and this way to add value to the founders, and then we'll figure out how to raise the capital. So it kind of happened in reverse.”

    2022-05-23 · Capital Allocators · Billy Libby – Disruptive Venture Funding at Upper90 (Capital Allocators, EP.251) · IDENTIFIED FROM THE TRANSCRIPT · source

42. “And I think that that's going to come to the venture world too. It's been a momentum trade. And so if you're Sequoia or Forerunner or Bessemer, you have services and tools. I think it's going to be hard to prove that you should be getting two and 20 versus an ETF equivalent, which I'm sure we'll come to this industry or somebody doing something different. It's disruption plus how do we get a return that's shorter duration. And if we can offer founders a more compelling tool, a more efficient source of growth capital, that seems like an edge. sourcing Jason beat this into my head if you have good deal flow there's capital we built the whole fund around sourcing that community of 20 people that started the club is the dna of our upper 90 we have 400 lps 80 of them are business builders it's much harder to build a firm that way but almost every other firm that i come across it's ex-finance people like hey my firm was a little too rigid and how is it”

    2022-05-23 · Capital Allocators · Billy Libby – Disruptive Venture Funding at Upper90 (Capital Allocators, EP.251) · IDENTIFIED FROM THE TRANSCRIPT · source

43. “So we kept finding these repeatable deals where there was some detachable asset or cash flow. There was a few things that even though the participants were different, there were common goals. So number one is no one was really interested tying up their money for 10 to 12 years at this asset price to get a decent return. You had this big conundrum either tie your money up in private equity for 12 years or venture to get a decent MOAC or if you want a liquidity you were getting very small yield. So it's how do we get a decent return without having to type our money for 10 plus years? And that was universal. Number two is that everyone felt like the private equity inventure world hadn't really been changed in a long time. And I saw firsthand how quant came and changed long short equity. Unless you're an exceptional hedge fund stockpicker, it's hard to beat the cost of an ETF or it's hard to beat a quant fund. You have to be good at what you do to get paid.”

    2022-05-23 · Capital Allocators · Billy Libby – Disruptive Venture Funding at Upper90 (Capital Allocators, EP.251) · IDENTIFIED FROM THE TRANSCRIPT · source

44. “Capital, which I find fascinating. You're like, isn't 12 or 15% a lot to get paid in debt to take Netflix risk? What do you think the price of equity was if they had sold part of their company? So I just find that fascinating that no one asks what the cost of equity is, but they're fixated on a headline debt number”

    2022-05-23 · Capital Allocators · Billy Libby – Disruptive Venture Funding at Upper90 (Capital Allocators, EP.251) · IDENTIFIED FROM THE TRANSCRIPT · source

45. “Securitized by Netflix payments, you took the risk of a startup and now the payment risk is actually Netflix. And so it was this fascinating way of pricing assets and shifting the collateral. I don't like VentureDead. A lot of questions we often get is, well, isn't this Venture Debt? VentureDebt is just a tool to underwrite the venture firms. So we're like, let's detach the asset, give credit to the asset because the asset pays back regardless of the company. So that's how this all started from there. We just kept seeing this repeated ability of there was an asset that needed financing where equity was used and you just had two groups that would never really be together proposing different solutions and everyone had a goal of how do we help these founders solve problems in a more efficient way? How do we help the companies really own more of their company? There was a purest start, but we could get these really amazing returns because the equity cost of”

    2022-05-23 · Capital Allocators · Billy Libby – Disruptive Venture Funding at Upper90 (Capital Allocators, EP.251) · IDENTIFIED FROM THE TRANSCRIPT · source

46. “brand name content is trading at 20 times revenue because banks understand it. And so everyone's like, how much could somebody watch the Sherlock Holmes miniseries on the BBC from the 60s? A lot. So these markets are infinite in size and they're just hard to conceptualize. So they were like, we're raising equity to go and acquire all this content. And then we sell it to Netflix or Amazon. And we have a five-year contractual payment from Netflix. The quants are looking at all this data from our club and they're like, why are you raising equity? And the founders are like, what are you talking about? The mantra has been if you want to grow, you raise equity. And especially as VCs and PE have gotten much larger, that's the direction founders are pushed. When Jason started seamless, he said every VC was small and niche. And so they were also dilution sensitive. The quants kept challenging. And what ended up happening with Filmrise was we created in partnership with some other groups in off balance sheet credit facility.”

    2022-05-23 · Capital Allocators · Billy Libby – Disruptive Venture Funding at Upper90 (Capital Allocators, EP.251) · IDENTIFIED FROM THE TRANSCRIPT · source

47. “It's all the same stuff. We have a new product, but now it's all about acquiring customers efficiently. So it's a scale. What happened is all these ideas started coming in from the tech side. One of the first deals was a really fascinating company called FilmRise. And what they were doing is they were taking data from Netflix, Hulu, Amazon, YouTube, Roku. And they were tracking what people are watching online. They would see trends of what kind of content was valuable. So like after the crown or Brigderton or the Jordan documentary, they could see that there was a lot of interest in British miniseries or sports documentaries. So with that data, they would then go to the BBC, ITV, ESPN, and they would look at their TV libraries from the 1950s, 60s, and 70s. All this long tail forgotten content, they were going and licensing the digital rights to old school libraries. They were buying these rights for one-time revenue. And to give you a context,”

    2022-05-23 · Capital Allocators · Billy Libby – Disruptive Venture Funding at Upper90 (Capital Allocators, EP.251) · IDENTIFIED FROM THE TRANSCRIPT · source

48. “Jason gave me a very good advice because during that one year off when I was working with all the startups, there's a temptation to go and join somebody else's startup. Like this is so exciting. And Jason's like either start your own business or go join a great company. Don't join somebody else's startup. You're taking all the risk and you're the third guy in the door. The VC benchmarking data shows that the third employee should get 50 basis points. It's ridiculous. That was very valuable advice. And so I went back to Goldman to help build the business that night had built and Citadel had built and to help with some of the investments that we're talking about. What evolved was we would meet every month and we would share these best ideas. What happened is if we're honest with ourselves, the real change is happening in the tech world. There's not much innovation happening in finance. It's really”

    2022-05-23 · Capital Allocators · Billy Libby – Disruptive Venture Funding at Upper90 (Capital Allocators, EP.251) · IDENTIFIED FROM THE TRANSCRIPT · source

49. “Few hundred grand, I was kind of running in at night, no fees. It was just a well-organized club. People's networks are really vertical. There's a lot of groupthink opportunities are created when you bring people together from different backgrounds. And through this structure of Jason and I bringing that force together, it ultimately uncovered a lot of opportunities that other people weren't thinking about, not pure software businesses. So it wasn't really VC and it wasn't something you could feel and it was like a bankable business. And that's how Upper 90 started was mashing together these two universes with a pure goal of sharing best ideas and bringing a community of really interesting people together. And I didn't know it would evolve as quickly as it did into upper 90. It was just, I want to learn from really smart people and I love bringing people together and create some organization and efficiency around that idea. And if I do that well, good things will happen, but I didn't know that it could be something that it's become.”

    2022-05-23 · Capital Allocators · Billy Libby – Disruptive Venture Funding at Upper90 (Capital Allocators, EP.251) · IDENTIFIED FROM THE TRANSCRIPT · source

50. “For the week or the day, I can see what my net worth is at that moment because they ended a flat. And Jason's like, my portfolio is in all these amazing tech companies because as a founder of Seamless and Grubhub, I see all these great opportunities in the e-commerce and tech world. So that's what I invest in. And we're joking, like if I saw a tech deal, why am I seeing that? And if he saw a quant fund that's like, why is he seeing that? And he's like, I want to invest in your deals. And I was like, I want to invest in your deals. He said, well, all of the tech founders that I know would love to have access to more liquid, shorter duration product. And as like every quant founder that I know would love to have access to you join the board of freshly and can buy all this stock and also everyone's sizes personally. A million dollar check might be a big personal bet, but you could have done 10 million. After that dinner, we said, let's put this investment club together of the 10 most interesting tech founders and the 10 most interesting clan founders. And I think we all put in”

    2022-05-23 · Capital Allocators · Billy Libby – Disruptive Venture Funding at Upper90 (Capital Allocators, EP.251) · IDENTIFIED FROM THE TRANSCRIPT · source