Hiten Patel: Today's guest on the show is Rana Yared, a general partner at Balderton Capital. Balderton is a leading venture capital firm, originally part of the Benchmark Capital Group based in the US. Prior to that, Rana was a partner at Goldman Sachs, one of their fastest promotes in history overseeing their investments in financial technology and enterprise technology. Delighted to have Rana join us today.
Thank you very much Rana for joining us on today's show. I was reflecting, we first met I think back in 2010 when we were working together, when you were at Goldman and I was at Oliver Wyman and I was struck by your energy, passion and ideas. And I remember saying to my colleagues, this person is going to go and do amazing things. So why don't you tell us about where you've been up to, what's gone on in that past decade and use that as a launchpad for your intro.
Rana Yared: I think it's been an auspicious and serendipitous decade. So I spent the next 10 years still at Goldman. I moved back to New York, I was made MD, at some point I became a partner and I ended up running the New York and London teams for what was at the time called Principal Strategic Investments. But really strategic had gotten defined so broadly by 2020 that we were making all the FinTech and enterprise tech investments on behalf of the firm straight off the balance sheet. And we sat in trading at the time because if you committed balance sheet that made you a trader. Very simple logic. And then in July of 2019, I actually got a phone call from a Goldman partner of a different vintage guy called Tim Bunting. He had been a partner at Balderton where I am now. And he said to me, look, I'm looking to retire and I'd love for you to take the spot.
Rana: And the reality is it took him three phone calls over the course of six months to even get me to pay attention. When I did, I realized that one of the best holdovers from the benchmark era at Balderton was that they ran an equal partnership in every manner of that definition and a first rate investment portfolio that really supported its founders. And this quickly became an opportunity that I just couldn't pass up for myself and my family. And so my husband and I decided this was a great idea. I was 34 weeks pregnant, I left New York City and I showed up in London to take a place as one of the general partners at Balderton to help us launch our growth fund in 2021. And I've been at it for the last three years since, we are on our eighth vintage of early stage fund and second vintage of growth vehicles. Call it European growth, it's not mega cap 5 billion growth, but it's a really important place that I want to be playing in and it's critical to the ecosystem here. And so it's been a great pleasure to make that transition from Goldman to something more homegrown.
Hiten: Amazing. Amazing. And just spell out for the listeners kind of what you do day to day, the mandate, the role, what you're looking for.
Rana: So Balderton is one of the oldest European VCs, as I alluded to. We've been around since we were Benchmark Europe. We're nearly 24 years old now and we grew up as a core series A fund. So providing some of the earliest funding to some of the best entrepreneurs here in Europe with the brightest ideas to either conquer Europe or the globe. We are agnostic to sector except that we don't do life sciences biotech because frankly none of us have a PhD in those fields. And so it's best not to fly to close to the sun on those particular spaces. And then we have on top of that our growth fund, which looks at series B and C, looking to provide that next leg of capital to companies based here in Europe. Opportunity to ask ourselves the question again, are we invested in the best companies in Europe? And also an opportunity to be an extra counselor or advisor for those founders that's still local and in time zone for them.
Hiten: And all of a sudden I've noticed venture firms, you mentioned Benchmark, various others, they're now just popping up more and more in these TV series and shows that everyone's watching. Suddenly there's a narrative out there on them based on everything that's gone on. What do you think is misunderstood or what do you think would better represent? What's, what goes on there that's maybe the mainstream popular culture of isn't quite capturing?
Rana: It's my sincere hope that we are never called out in any TV series. And the reason for that is because I think that what is misunderstood, and maybe it's because the venture community plays it up, is that neither investors nor boards run companies, management teams run companies. We can only ever hope to provide one or two fantastic pieces of advice or guidance that changed the trajectory of a company a couple degrees and therefore ultimately changed the outcome. So I think that's one misunderstanding. Perhaps it's a self-perpetuated misunderstanding, but it's a misunderstanding nonetheless. And I also think the role of what a venture capitalist and therefore a board member is also misunderstood because we're not there to be the friends of the founders, we're there to be the counselors of the founders in good times and in bad. And in our capacity as board members, we are there to protect shareholders to provide the right amount of challenge to make sure that we are doing so and to be the big flashlight that is pointed on the things that the management team should look at and then facilitate their ability to go solve that. And so maybe some of the misunderstanding might be self-aggrandizement, maybe I'm underplaying our role as VCs, but if I were to encapsulate it in a sentence, we tell our founders that the best way to change the world is to start a business. And so I would say the best way for us to be the best VC is to invest in the best founders that have the best businesses and then help them change the world.
Hiten: Makes a lot of sense. And it's great to hear you articulate it so clearly. For the listeners, just spell out a little bit more what you were doing at Goldman in that investment era and then how that's equipped you to be able to go on and get to play the role that you play today.
Rana: Happy to. I'd start with the overarching comment. I think Goldman is one of the best training grounds you can have for any job after regardless of what that job is. And so I feel in hindsight that I was well equipped to do quite a lot given that foundation. And underpinning what I did at GS is largely what I do now, which is try to find great companies, mostly FinTech, so financial technology companies that are going to change whatever area they operate in. So it could be capital markets, could be payments, could be the advice gap, could be software that services capital markets and then to invest in them and help nurture them. And the difference between doing that inside of Goldman Sachs and doing it outside of Goldman Sachs is that large organizations, be they GS or Ford or IBM, so industry agnostic when I make this comment, is that large organizations have to feed themselves.
Rana: There are committees and structures and community service for the firm that you end up having to do. And the more senior you get, the less time you actually spend on the core activity that is your job in daylight hours. And so when I think about Balderton, it's really an opportunity for me to spend 85, 90% of every single day on a core investing activity, which is I define as finding the best companies, helping my team become the best so that they can find the best companies and then working with the companies in our portfolio. So my day has become pretty simple compared to what it was at the end in 2020 at Goldman.
Hiten: Amazing, amazing. Just conscious how privileged I'm to be talking to someone who's thought about innovation and investment 20 plus years feels like a lot of people have piled in recently. I remember sitting talking about market structure investments and things used to be a pretty niche geeky hobby for a preserved few and it has definitely gone more mainstream. Now when you look at that arc, what's driving the innovation? Is it still the same themes you see 10, 15, 20 years ago? Are there things that are different now that have in the most recent wave, how when you look back and plot a little checkered history of that 20 year period, what's remained constant and what's changed in those patterns of innovation?
Rana: I insist on the number of being 18, I won’t be aged an extra two years just so you know. Look, I think the big change by the way, particularly here in Europe where you and I are both sitting is that the first generation of companies that I was investing in at the start have actually graduated and IPO-d and become incredibly valuable companies. And they've shed light on the fact that if people are willing to do the work in some of the niche areas of capital markets, that there are extremely valuable companies to be built. And the reason why these companies are so valuable is because the biggest spend that happens in financial services isn't people or SMEs, it's actually mega caps. So institutional financial services and that money gets spent both on other third parties but also by the sheer size of the engineering staff that each of these big firms, whether it's asset management or insurance or banking or broker dealers have, and by the way, they haven't changed their infrastructure largely in a very long time except in very small pockets.
Rana: So if you can found a company that materially innovates in any one of these spaces and takes out meaningful costs for your clients, you can actually charge them a fraction of the cost that you are taking out for them at really, really good margins because you don't have their overhead and have an unbelievably valuable company that on a PE basis, which is price to earning, will trade between 30 and 50 times. So if you look at the big financial market infrastructures, you might call them market structure companies, think MSCI, CME, ICE, Market Access, TradeWeb, Bloomberg, if it were public I'm sure would command the same kind of multiple. The multiples are unbelievable and some of the best that you'll find in the stock market. And so that's why what used to be the preserve of a few geeks has become a little bit more mainstream. But I'm happy to report to you not much more mainstream.
Hiten: Excellent. And when you roll forward, what are the two, three things that are getting you most excited at the moment? And I guess I asked that question also in the context that personally you see and hear a lot more noise about the space now and I don't necessarily always agree with where the noise and hype is and I think one of the benefits of speaking to someone like you is usually being a little bit more advanced or sharper and with a finger on the pulse and that usually some of the noise is a bit lagging and often a bit politicized. So I guess just in your clean view, what are the two, three bits that you are kind of looking out for or getting excited as you roll forward?
Rana: The first one is Europe. So starting in 2019, I started spending more and more of my time here in Europe because I oversaw the two teams at Goldman, both New York and London. And the reason I was spending more of my time here is because I had a really strong thesis that the opportunity here was fantastic. There were fewer quality dollars from investors chasing each quality opportunity. And if you could be on the ground with a history of serving your founders, you were going to get some great deals. And the data backs this. So a decade ago we had about 10 billion of venture dollars that went into Europe even with the coming off of 2021, we finished that in 2022 at 10 x that number Europe is taking market share as a percent of total global venture investments. So Europe was 10% of total money in 2018.
Rana: We were 19% roughly in 2019, sorry, in 2022, source: PitchBook by the way, make sure I'm not making this up. And we're seeing a real diversification of where those investment dollars are going. So they're not just concentrated here in London, but they're actually spread out across the entirety of the continent. And the early generation of winners that I mentioned have spawned something I talk about often, which is their own tribes. So second generations of startups that are founded on the back of either knowhow or money that comes out of the monetization of the first generation. And so there are now 221 I believe European unicorns and from them they've enabled another 1200 startups from their management teams that have gone out to do their own things. So for me, the European opportunity is unbelievably exciting and as a firm, Balderton is privileged to have been here long enough to have seen the evolution and we also have a real appreciation for I think what it takes to build a great European business that has global standing.
Hiten: To dig into that one, that's really compelling and interesting to hear you say that. This is a great example of one of those areas where the press or the mainstream narrative loves to beat up on the European innovation landscape versus Americas. In that compare and contrast, how do you feel about how fair that is? And not necessarily because we want to be critiquing, but more from a perspective, are there certain things we want to be amplifying and promoting more in Europe that you've observed in the Americas from your time there that could further enhance that from the spirit of continuous improvement rather than a hey one's better than the other, but it'd be interesting to get your take on that given the amount of attention it seems to be getting at the moment.
Rana: I think part of the negative attention is shorthand for just saying the US ecosystem is bigger and more advanced. And the answer to both of those is yes and yes, but my excitement comes from the steam that Europe is gaining. And if I were to amplify one or two things, part of the downside of the highly evolved ecosystem in the US is that it's very concentrated in Silicon Valley. And what that actually means is that it's very expensive to found a company and grow it to a hundred million of ARR. It's substantially cheaper to do that here in Europe. That dispersion actually means that the number of engineers that graduate in Europe, which by the way happens to be more than graduate in the US every year, are across a number of cities and the competition for those engineers is localized and spread out as opposed to highly concentrated. And that just means it's cheaper to get bigger faster here and we should amplify that.
Hiten: No, that's great to hear. That's great to hear. And it definitely feels like it's something that's not well enough understood or articulated. Maybe I'll give you a megaphone and you can go and stand on Hyde Park corner and shout it out.
Rana: I think I'd be a little scared to join some of the stuff that happens at Speakers Corner, but sure.
Hiten: That is true. That's probably a different show for those kinds of things. I'm going to pivot slightly and just if you’re open to it just explore your personal growth journey, and I hope you don't mind me calling it out, but I suspect you grew up in an industry that was pretty male dominated, perhaps continues to do so you probably started in an era where it wasn't so mainstream to try and fix it. I say this coming off the back of my, we had our own senior team leadership event on our side which had 30 to 40 people in the room from across the globe. Diversity was appalling, right? We have to fix it and figure it out. So it it'd be great from that context to hear from you around, I guess I was going to just start about how you've perceived that journey 20 years making it in that context. What are some of the particular challenges that you had to overcome that you'd want to call out? Mainly from a perspective that the rest of the listeners in the communities, if they become more aware, can all play a collective role in making things more seamless or lowering the barriers here.
Rana: Some of the biggest challenges came from just honestly being young and female, the combination, it's kind of like the kiss of death. So as you mentioned early on, I was really lucky to make it through the ranks at Goldman pretty fast compared to the average. I was well mentored, I had the right opportunities and possibly a little bit of talent to make my way through that. And some of the biggest challenges came when I found myself in a position of authority with people who were older than I was and generally more male and thinking about how do you spend time putting yourself in their shoes to understand whatever message you're about to give from, how they're going to receive it. Because it really wasn't an option to dig in for me and be like, well, they won't listen, right? It had to be, well, how am I going to bring this around?
Rana: And I got told really early on that whether it was fair or not that that was adopting that mindset was going to be very helpful for me. And so I went ahead and adopted that mindset as I reflect on it now, I actually think it's really helpful for relationships generally before you blurt something out, maybe spend a minute thinking how it might be received by the other side. Is it a message they're ready to receive and what can you do to make it better received? The other really good piece of guidance, I will credit to my mom. My mom taught us really early on in a positive and respectful way to be a little deaf and not care about what other people thought. And so that let me be a happy geeky high school kid and not really mind that I wasn't less geeky and more stylish, but carrying that forward into my career when people said something flippant or silly or as long as it wasn't massively offensive, it actually didn't register and it just let me carry on. And when I reflect back on that, I think whether it's for men or women being a little deaf in a time, particularly now where micro offenses are amplified is probably a good idea and it makes it a little easier to go through every day. It reduces my own neuroses. So those are probably the two things that serve me really well really early on in combating a largely older first and second male environment.
Hiten: Beautiful advice, such beautiful advice. I want to put a correction a little bit on that story. I think you're being too humble. It was pretty clear when we walked in the room and dealt with you that you were going to be absolute rockstar talent even though we weren't on the same team. We were like we were advisors on the other side. And I guess what I draw out of that is do you have to be that exceptionally talented if you going to be female to make that progression and why is it not just the norm that progressed? And that would be my kind of takeaway because it, you didn't look back then in 2010 say, hey, it was male female, but it was such a standout in some of the meetings, the contributions, the role you played. I think now rightly or wrongly, there is a lot more awareness around some of the gender, but it doesn't mean that historically you've had to be so far beyond the average to be able to overcome some of those challenges.
Rana: Yes, I think that's actually very true. So in the cold light of day, I would say something like, I think I had to work materially harder than my male non-diverse peers in order to get the same outcome that they would have gotten. And that is what we looked, I think, generationally to fix. The way that I talk about it to people is that you want equitable treatment for equal outcomes.
Hiten: Yeah, no, very nicely put, very nicely put. Moving us on a little bit, just talk to us a little bit more about outside your professional sphere. Are there interests or hobbies that have enabled you to be successful in the day job but are key to shaping who you are and developing other skills and interests, anything that you'd want to shine the light on there?
Rana: At 27, I decided I needed a master's degree in security studies. By that I mean bombs and nuke, not stocks and bonds. I do think that a liberal arts education actually teaches you to synthesize a huge amount of information into a distilled and coherent cogent thesis. And I don't know if more school is really a hobby, but I would tell you that what at the times seemed like a really painful choice while I was working full-time at Goldman, I look back on it and actually it's quite pertinent to making it through my every day. And it happens to be that when you study diplomacy, you think a lot about, well, how do I solve problems? And probably if I described what's really my job, it's the head of the office of problem solving of whatever day the day is. Hobby-wise, I love to cook. It's my de-stressor, particularly really intricate things that you make over and over again and there's something rote and wonderful about that. And plus from a cultural point of view, food is joy. And so when you produce it, you then get to share it and there's a whole bunch of love associated with it. And that is definitely something that carries through my family heritage as a kid and now into my own family as an adult.
Hiten: Amazing, amazing. I'm just imagining you've got this new business card. Rana Yared securities trader, come to me for your bombs and nukes and what you need. You'll have a harder time getting through passport control with that. But it's interesting, just tell the listener, so what did you study as an undergrad? Compare that with what you did in your late twenties. What was your background in education before you did that?
Rana: I have a Bachelor's of Science from the University of Pennsylvania, Wharton School, and I also actually have a Bachelor's of Arts in international relations. So I did a dual degree as the University of Penn calls it. And I decided early on that I wanted to broaden my field of study and I kept both options open. The reality is I never planned to do what I was doing. I wanted to go get a PhD, I wanted to go to Penn because I fit into the environment and the application said, if you were good at math and science, you should apply to Wharton. So I did. And that's kind of what happens when you're like a first generation college kid in the US in some respect. What you don't know is actually bliss and I didn't know much and found my way through.
Hiten: It's great hearing you say that it's, you get the privilege now 20 years later after that period to look back on what did the education do. And it's too often there's views that this part of the industry, you need to be quantitative and you need those elements. I studied maths at university and then right now, when I think about what do I need most in my job, as you say, I didn't quite go off and do what you've done, but I've started very early on reading more books around history and some of those other subjects I never did for 20 years. I never even paid any attention. But there's so many lessons, more valuable lessons in those elements then that was kind of overlooked in a science education growing up. So great to hear you continuing to learn, continuing to grow. I think that's a big theme. Finally, we like to ask guests to throw the spotlight and that can be you calling out an individual or a company that you think is impressing you most right now or you think the listeners it's worth them paying attention or looking into because they're doing something interesting, exciting, worthwhile. So I’D like to invite you to throw the spotlight, Rana,
Rana: I'm going to have a double spotlight one on a European company. I know I've spotlighted them before in other forms, but I'm just a huge fan of the business that Raisin is building in Germany. It was a great business in a low interest rate environment. It is an even better business in the current interest rate environment. They just crossed 50 billion of AUM and it's a management team that makes you sit up and pay attention. The second one, it's American, it's a company called Vestwell. Well, they are revolutionizing the access that people have to small plan retirement and also providing amazing options to state run pension plans in the US. So small plans are notoriously underserved, which means that Main Street has a worst chance of having savings in their retirement years and in America, which doesn't have a pension and social system like we do here in the UK. Aaron is a second time founder that business has gone from strengths to strength in addition to just being a great business. It is a business that will solve one of the biggest problems that we have in the world today, which is that the number one cause of mental unwellness is financial unwellness. So I love the business and the mission and the founder there.
Hiten: Really nice to hear when a mission like that comes together, which has a broader worthy impact as well as driving a bunch of value creation. So no, thank you for sharing those. Well, look, it's been real from the times that zoomed by and it's been really kind of you to so earnestly share your perspectives on the industry and your own career trajectory. I can't wait to see what happens in the next 10, 15 years with you Rana but thank you so much for coming on and sharing your time and thoughts with us.
Rana: It's been such a pleasure to reconnect. Thank you so much for having me.
Hiten: Take care, all the best.
