A chat with Aditi Maliwal, Partner at Upfront Ventures

Everything from fintech and LA to venture and global trends

Dec 09, 2020

Sar : We connected briefly in 2017 when I was interning at Human Ventures in NYC. You were at Google at the time working on the team building products for the Next Billion Users initiative. Can you tell us what that initiative was about and how it has evolved over the years? I naturally associate it with the massive investments Google has been making in India during the Pichai era. They most recently invested in Jio which has become the de facto vehicle for global investors to bet on the digital transformation story of over a billion people in India. What can you tell us about the culture and ambition of the Next Billion Users initiative?

Aditi : Yes! It was great connecting with you in 2017 - it’s been fun to see all the things you’ve been up to since. The last time we connected I was working on the NBU team within Google. The team has always had huge ambitions, led by an incredible leadership team that has helped to turn the ship and highlight the importance of regions where the next billion Android users will come from (India, Indonesia, Brazil and Nigeria to name a few). The NBU team is filled with energy, hustle and an experimental mindset. They learn from users in the region, ideate with them, plan, build, launch, iterate. On repeat. A journey I loved being a part of.

With respect to Jio - COVID has caused all of us to spend far more time on our devices than ever before and has definitely been the case in India, as well. This has led to an increased demand for Jio devices, for the telecom infrastructure they have built out within the region and an increased demand for the secondary businesses that they own and operate as well. I think the amount of capital invested into the business is very telling of the future sentiment around India, I am also excited to see the investment in media, entertainment, payments, e-commerce and the other businesses that are being built within the Jio ecosystem. Stay tuned, much more to come there!

Sar : Speaking of Pichai, I was frustrated to see Congress mispronounce his name recently at the hearing. Did you get a chance to see that? I feel like it is a very relatable experience for many brown people. Especially the ones with long last names like mine! There’s always the real name and the Starbucks name!

Aditi : I did see that, and empathize with you there. Most people mispronounce my name too, putting emphasis on the wrong syllables. My Starbucks name used to be Adi for a long time, but now it's Deetz :) Amber Ruffin has an amazing segment on her new show about mispronouncing the names of people of color. This was in response to David Perdue mispronouncing Madam Vice President, Kamala’s name, it’s both hilarious and profound. Highly recommend.

Sar : You spent two years as an associate at SF based Crosslink Capital. Jim Feuille and you led the funding round in 2014 in Chime when you were at Crosslink. Wealthfront, Credit Karma, SoFi, Coinbase, LendingClub were all Series B/C companies that year. Do you recall what the challenger banking landscape looked like back then? What was the conventional wisdom about personal finance, lending or banking products at the time?

Aditi : Feels like forever ago! The term “challenger bank” didn’t even exist in 2014 and the phrase “neo-banks” had yet to be coined. Apart from a few attempts, most investors were skeptical that new businesses could take on the likes of BofA and Wells Fargo. Chime was really one of a kind at the time. Chris and Ryan are fantastic co-founders who complement each other very well. It is incredible to see the journey they’ve been on, the stellar team they have hired, the amazing culture they have built and the true pain points Chime is solving for its users.

Six years ago traditional banks were still the main source of financial resources. However most users did not trust their banks nor did they believe that they were being offered the right financial services. A variety of new companies were cropping up, trying to solve specific pain points, breaking apart the full stack offerings of traditional banks to offer student loans or commission-free trading, and hoping to provide an enhanced user experience for these stand-alone offerings. Since then we are starting to see the cycle come full circle, where fintechs are increasing their scope from one or two offerings to providing an excellent overall banking experience for the consumer. Chime is a great example of this. They built a uniquely seamless experience for their users, starting with debit cards. They have built a sense of trust, created loyalty with their users and are also able to offer a variety of other financial services to them.

Sar : You are now a SF based partner at LA based Upfront Ventures. What can you tell us about how different the two ventures experiences have been for you personally? Beyond the differences that come with different titles, what are some noticeable differences in the venture environment or startup culture now versus 2014-2016?

Aditi : Being a VC in 2014 was a pretty different experience than it is today. 1) There were very few women investors, let alone female GPs and female-led funds, 2) a lot more D2C brands and consumer product companies, and 3) seed rounds were more likely to occur between a $6-15M post-money valuation.

Let’s talk about what Venture looks like today. 1) There are 800+ women in Venture and a lot more female GPs and female-run firms — which is truly inspiring! That’s not to say our work is close to done; as I see it, there is a lot more that firms could be doing. However, my partner Kara Nortman, who was recently made the co-managing director of Upfront, is an example of the change that’s taking place in the industry thanks to women like her, who invest their time in female-led companies and the women around them, like myself. 2) Fintech might be the new D2C — investors are looking at APIs and infrastructure, fintech consumer brands, or embedded finance (me included!). 3) Seed rounds have really changed, haven’t they? I’m assuming you’ve heard about those seed rounds going at $200M+ valuations? The market has definitely shifted — there is a lot more capital available and entrepreneurs can be pickier about who they want to work with — so it means that every great investor needs to be 10x better at their job, working on differentiating themselves and remaining true to who they are. I do think finding investor-founder fit takes time and both entrepreneurs and founders need to find the right match.

Sar : Across Upfront’s portfolio, I’m sure you have seen dozens of companies readjust to the new pandemic reality March through May. Can you share some common themes on how CEOs went about trying to survive and adapt?

Aditi : We talked to many of our portfolio company CEOs and really encouraged them to go back to first principles, their product’s core value proposition and how they continue to sell to the right customer. If founders hadn’t identified the right customer yet, then they should reiterate this as their Number One Priority.

Everyone’s been working insane hours. It is hard to define a “work day” right now. So we have also been helping founders find ways to keep their teams motivated without burning them out.

Sar : Is there a new habit or behavior or idea that you didn’t think about at all back in January and now seems obvious?

Aditi : On the professional front - at the beginning I felt a lot of conversations were very transactional, and the organic, authentic conversations that used to happen at the workplace, a cafe or at an event were no longer happening. I have started making an effort to have more “social teas / coffees” where the only purpose of the call is to get to know one another as opposed to conversing about deals or an ongoing transaction.

On the social front -- I have loved various virtual / drive by birthday celebrations that I’ve been part of.

Sar : Upfront is a flagship brand in the LA tech ecosystem. When I was living in Santa Monica, it was clear that Upfront was the top two or three brands everyone would associate LA tech with. What do you think the LA insiders overestimate about LA and underestimate about the NYC tech scene?

Aditi : LA as a tech ecosystem rightly gets credit for expertise in consumer, storytelling, branding, etc. I don't think LA is overestimated but I also think that we should not forget the thriving fashion, art, theatre and creative industries in New York. So many impressive consumer brands have come out of New York, from Casper to Lemonade to Harry’s.

A note on LA - in the last couple of years we have started to see a number of seasoned operators leaving large tech hubs, moving to SoCal to make it a new home for their next entrepreneurial adventure. There is a constant stream of tech talent from across the US and the world, to build consumer, cybersecurity, fintech, vertical SaaS and many other businesses within the SoCal ecosystem. Upfront has always been Long LA and we are definitely doubling down on that even more now.

Sar : You recently announced your investment in Clair, an API for enabling other companies to enable their employees to have the option to get paid when the wages are earned as opposed to when they are scheduled in the payroll cycle. It is very much in line with the broader story of what’s going on in fintech. We are following the trajectory that has been playing out at a faster pace in software. Step one is inventing a lot of software solving new and old problems. Step two is rethinking how that software is being delivered. Step three, in many areas, has been decoupling the user interfaces and the actual service. In fintech, we went from bank branches, stock exchange floors and wealth management offices to applications delivered on cloud based applications and did what technology does (lower costs, widen access). Now that we have figured out how to use software to solve a lot of problems, we are seeing an explosion of APIs that remove the need to build both the user experience and the service. Instead of having to figure out how to offer a wage advance, trading, payroll, identity verification or debit cards in-house to your customers in your product, you can just use an specialized API! Would love to know what you agree on, disagree on, think is overhyped or overlooked.

Aditi : Agreed, we’ve talked about this before - it is the cycle of bundling, unbundling, rebundling, unbundling again etc. I do believe that this is the way the financial services market works.

I do think using the term API has started to be overused. I hear founders often using the term because to investors’ ears it might sound like that cash register chiming away. We’ve seen exits for API / developer focused companies and the public markets’ interest in investing in this ecosystem, the bottoms up model is being validated. However APIs are most effective in markets where there is either a lot of fragmentation or very painful integration processes. I think the overuse of the term API has obscured the fundamentals around why API’s can be valuable. We definitely need APIs for their ease and simplifying of a variety of processes, and there needs to be a big enough market that they support.

Sar : Venture is a filtering and curation business. An established firm with multiple partners easily sees over thousand pitches a year. It boils down to heuristics and elimination criteria because of the linear nature of how investors conduct the business. Whenever a company becomes successful, the investor that led the seed, series A or series B round would talk about how methodical they were in writing that check years ago. I like to joke that the internal memo and the funding blog post are more often than not a rationalization of that instinct! Thoughts? What do you believe you are drawn towards instinctually? How has your filtering criteria been influenced by your colleagues specializing in different areas?

Aditi : I do think it depends on the stage at which you invest. I mostly invest at the seed stage and am usually the first institutional board member that a company will bring on. For me, the founding team plays the largest role in my decision making process, followed by the market and then the product. At the seed stage you need to believe in founder-investor more than anything else. I think you need to believe that this is the team with the vision that can execute, going after a big enough market and you as an investor can be the right board member and coach as they go on this journey together. Building trust is so important at this stage, I want to know that I am the first call they make whether they want to share good news or bad news. I am here for it.

Even if they end up pivoting or iterating on their existing product, the right team in the right market will be tenacious and enterprising enough to find something that hits.

Sar : The same heuristics and instincts drive hiring decisions as well. There’s a reason the venture industry looks like the way it does! I believe the same logic applies to who gets funded as well. Certain groups are vastly underfunded because the people funding startups don’t have the instincts conducive to it!

Aditi : One of the many reasons I was excited to join Upfront is the diversity of the leadership. 43% of the partnership is people of color, a third are women, many were not born in the US, and there is a wide range of ages. I think this makes us sharper as a firm.

I don’t disagree with you, but the optimist in me points to the change that's taking place in our industry. It's no small thing to add a new partner in a VC firm and while there's still a lot of work to do, I do think we're moving in the right direction.

Sar : I have always found it interesting how far ahead countries like India, Brazil and China often feel through the lens of fintech. The computing parallel here is how they also largely skipped an entire paradigm (aka desktops) in how the majority of the population interacts with software. Being behind in terms of banking infrastructure compared to the US enabled the many of the Asian and African countries to build up the financial system with QR codes, mobile payments, faster money movement, and common data standards in a way that would be considered disruption in the US. The pandemic is bringing about some of these changes in the US this year. What are some trends you are paying attention to outside of the US?

Aditi : We should all be intently watching India and South East Asia (specifically Indonesia) right now. The Indian user skipped over desktop to mobile. The smartphone base is expected to reach 820M in the next 2 years. However, a big struggle has been trying to monetize these users because of the low GDP per capita. In the next decade India is expected to see its GDP per capita increase 2.5x. Users are starting to spend a lot more. COVID has driven-up eCommerce sales and online transactions (the boom of the fintech ecosystem in this market) in addition to increased entertainment consumption. The global markets are paying attention to this, as you see with the amount of capital being invested into the Reliance Jio platform.

South East Asia is having its moment right now too, specifically Indonesia. This could be the decade to focus on the region. Cumulatively there are 390M Internet users in the SEA region and 75% of them are in Indonesia. These countries have been dominated by super apps where many different transactions take place, from transferring money to ordering a ride to groceries etc. Now we are starting to see the unbundling of services, as entrepreneurs are creating specific user experiences such as a neobank for Indonesia, a new trading platform, or a better food delivery experience. In addition, entrepreneurs are starting to build out the infrastructure layers necessary to enable these transactions, like local payment processors and localized ID verification software. Finally, I would say it is no longer just about building consumer businesses. Many of the consumer-facing unicorns in SEA have large workforces that need productivity tools, sales tools and customer support software, all of which are being built in the region now. There is a lot to be on the lookout for in these markets and some fantastic entrepreneurs to back.