In a crowded market, venture capitalists tend to talk up particular investment angles to differentiate themselves from their peers. When Ribbit Capital founder Micky Malka talks financial services, though, it isn’t for marketing purposes. Malka has been living and breathing finance since co-founding his first company in 1993, a broker dealer that evolved into an online financial services portal and sold in 2000, just before the bubble burst, to the Spanish bank Banco Santander.
LPs clearly like his credentials. Ribbit, in Palo Alto, closed its first fund with $100 million last year and officially closed on a second, $125 million fund last week. I chatted with Malka on Friday to learn more about what those investors — including Silicon Valley Bank, the Spain-based lender Banco Bilbao VIzcaya Argentaria, and individuals from the financial services world — find so compelling about what Malka is doing.
You’re Venezuelan and spent most of your life in South America. When did you come to the U.S. and why?
I came here seven years ago this month. I’d started all kinds of consumer financial services companies in Europe and Latin America and did very well for myself, but I felt like I was playing in the AAA leagues and that Silicon Valley was the majors.
You came to be an entrepreneur, though, not an investor.
Yes, I moved with my family to build another company, again around consumer financial services – around mobile payments. Bling Nation was right on the vision but so wrong on the strategy, wrong on the protocols. It took us a couple of years to figure it out, though. At that point, we went to our VCs and said, “It’s not working and we have two options. We can return your money and lose our own personal money that we’d put in. Or you can give us six months to figure it out.” To my surprise, the investors said, “We backed you guys, not the idea. Take six months to figure it out.” It was really big [of them]. We launched a company called Lemon, a financial app, and we sold it last year to a public company.
Had you had it with startups at that point? Why form Ribbit?
I’d listen to this guy say, “I’m doing this lending business in the U.K.,” and I’d say, “I’d love to be involved.” Then I’d learn of a new financial advisor in the U.S., and I’d think that was interesting. I realized there was an investment thesis going on that was broader than what people were thinking about. Also, I’ve started companies on four continents, and there aren’t many VCs who really know financial services in different jurisdictions. It’s a very particular DNA around which to start a firm.
So much is happening on the financial services front right now. Where in the cycle are we?
Financial services innovate when there’s a new channel and when users or clients are tired of existing brands. Well, people aren’t wearing their Goldman Sachs or Citibank hats anymore. Meanwhile, mobile has taken off dramatically, and banks and insurance companies don’t think in mobile terms. I’m not saying the brands we know will disappear, but who will be the Capital One or Charles Schwab of this generation? It’s early, and there are a lot of unique innovators in different subsets of the universe.
Where are you investing your capital geographically?
Our mandate is global. We look for opportunities in seven markets: The U.S. and Canada, Brazil, the U.K., Germany, South Africa, Turkey, and India, which are all markets where there are entrepreneurs and investment partners who I’ve known for 15 years.
Where have you made some of your biggest bets to date?
We’re the largest bitcoin VC in world. Let Marc [Andreessen] be Marc [in being so public about bitcoin]; we’ve been investing since 2012. Back then, there were no bitcoin entrepreneurs so we had to buy bitcoin directly. Later, we found our first entrepreneurs, including at [bitcoin exchange service] Coinbase [which Ribbit backed last year]. We’ve now made five investments in bitcoin [startups]: Two here in the U.S., one in Hong Kong, one in Brazil and one in Slovenia.
You made 10 investments out of your first fund, and you’ve made six from your second fund, only one of which, Wealthfront, has been announced. Are you still focused narrowly on consumer-facing financial startups?
Yes. We’ve done lending businesses, personal finance, wealth management, accounting and invoicing, and bitcoin, and now we’re going to add insurance, which we’ve spent the last year researching. We just see too many opportunities that we like.
What size checks are you writing?
We make very concentrated bets. Our checks are usually between $3 million to $4 million and $20 million. When we find what we like, we have a lot of conviction. I don’t believe in diversification.
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