Fintech In The Metaverse & Other 2022 Predictions ft. Mark Goldberg, Partner @ Index Ventures

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If this sounds like something you want to learn more about, go to secureframe.com to schedule a personalized demo today. A lot of the Web3 themes that are exciting to people were actually Web2 themes that people did predict and did come to fruition last year. Last year was all about the fusion of fintech and culture with Robinhood and the meme stocks.

And I think a lot of what you're seeing in the Web3 side is a continuation of that culture theme. One of the most interesting applications today in Web3, it's a lot of what's happening on the creativity side. With art, with music, I think there is some continuity between some of the things we're seeing draw interest and where it was in traditional finance a year ago. Hey, everyone.

It's Julie Verhage Greenberg here with your FinTech Today podcast, where we talk about the latest trends in FinTech and interview the industry's movers and shakers. In this episode, I'm joined by Mark Goldberg, who is a partner at Index Venture and leads their fintech practice. I believe, Mark, you and I met a few years ago when you guys led one of Plaid's funding rounds. So you've been in a few of the names that our viewers are very familiar with at this point.

Julie, it's so nice to be on the podcast. Thanks for having me. And that's right. That goes back many years.

The one thing I just learned is that I've been mispronouncing your last name for that many years hearing you say it correctly. so I'll get it right after this but uh apologies for the last few mistakes so oh you're fine Greenberg obviously you pronounced correctly Verhaj you know I'm used to hearing a bunch of different iterations I don't even remember what the right one is anymore so um so I wanted to dive into some of our big predictions for 2022 because I remember you had a Twitter thread um right around the same time that I was doing a survey of people asking for big surprises of 2021 and predictions for 2022.

And one of your big predictions, amongst other ones, which people should totally go check out, was that Stripe would buy OpenSea. And we joked before we started recording that, you know, before yesterday when OpenSea raised a funding round that values it above $13 billion now, it would have been much cheaper of a buy. Do you still think that's possible? Or, you know, where does this prediction stand?

It's possible. It certainly is less likely after the recent financing, which, by the way, kudos to OpenSea and the investors involved there. I mean, what a tremendous business. But I don't think it's out of the realm of possibilities.

You know, that prediction that you're talking about was my moonshot prediction. And my thinking behind it is twofold. The first is Stripe is very well positioned for transformative M&A. I mean, if you look at that company, the balance sheet, the growth, just the size and scale of that team, if they want to make a bold move, they have the war chest and the people to do an acquisition and to, I think, to integrate it into that company.

So it could be an interesting year for them on the M&A front. And the deeper I went down, who could be interesting targets? I was doing that exercise when I saw the news of Matt Huang joining the board and really seeing Stripe push back into the crypto space. So I think that while OpenSea is probably a less likely target now, given their own independent success, that we're going to see them do some interesting stuff this year on the M&A side in a way that we haven't before.

How that manifests, we'll have to see. Yeah. And it's interesting. We don't know exactly what Stripe's balance sheet looks like, just given that it is still private.

Maybe this year it will go public and we'll be able to get a better idea of what it can and cannot afford. But I think either way, it's pretty obvious that they do have quite the balance sheet and they're ready for the transformative M&A, like you mentioned. Yeah. The one side note I'd say on Stripe, which by the way, we're not investors and I don't have any kind of information on the company that would give me an unfair advantage in answering this question.

But the thing that I admire about that business is despite its scale, A lot of times what you see when companies get as big as Stripe is the best people leave, they go start their own companies, it's hard to retain the A-plus talent they brought in. Stripe is not like that. If you look at my 15 portfolio companies, it's still very difficult to get people to leave that company. And I think that speaks to the bullishness that thousands of people there have towards how big a company that could become.

I think Stripe will likely be the defining fintech business of our time. And obviously it sad that we not investors but I am a big fan of the business And you know the irony of Matt Wong joining Stripes Board is that Matt for those that don know is part of Paradigm which is one of the lead investors for OpenSea new round So Matt's part of the solution and part of the problem, part of the reason they'd get more into crypto since he's very much in that space. Part of the problem in that he's part of the reason that they just bumped up their valuation so dramatically.

That's right. But it'll be interesting to see the bridge that he creates between those two worlds, the Paradigm Fund and Stripe. So it'll be interesting to watch. Again, I don't know what they're going to do, but I think it's pretty clear that if they wanted to do something big, they have a lot of capabilities to do it.

Yeah, and staying on the topic of crypto, Web3, DeFi, all these things, what are you guys seeing in terms of themes that you expect for the coming year? Because I forget if you were one of the people that said this, but many people that I surveyed, the biggest surprise for them in 2021 was the insane rise we saw, especially in the back half of the year around DeFi, Web3, crypto, all of these other tokens outside of Bitcoin. It would be interesting to take some screenshots of people's year-end profile pictures on Twitter and their beginning or six-month June profile pictures on Twitter just to get a sense for how much is photos and how much is NFTs at this point.

I mean, it caught me totally by surprise. I mean, I've been interested in crypto and Web3 for a long time. We've lived and invested through multiple waves of it here at Index. But the speed and the ferocity with which Web3 came up last year definitely was not anticipated.

And I think the most exciting thing is if you look at the community of people who are going to join Web3 businesses, I mean, it's just incredible the talent. I mean, obviously, the executive hires, everyone can read about publicly, but just the smart people that are voting with their feet to move into the category is probably what's drawing my interest the most. So it's dominating headlines. I know it's crossed the mainstream when I speak with family members who don't know anything about my job or the tech world, and they're now asking me to explain an NFT to them.

So it's going to be something that we're all talking about. So on the other hand, I didn't put this out publicly, but my prediction is crypto is going on sale in the next six months. I think there's going to be great buying opportunities to be had this year. And while I'm a long-term and medium-term bull, I think we're going to see an inevitable cyclicality to this interest.

And for those that are feeling like maybe they're on the sidelines and are waiting to get in, And I think you will find a great opportunity if you're so interested to get into the Web3 space this year. You know, and I agree with that. Maybe not because of waning interest, but I think that there's going to be a lot of change in terms of regulation around this space. And I think that's going to cause things to calm down because I just think that's going to get super messy and make some people a little skittish, make it so some companies might not be doing as well as they have in the past year.

Yeah, I think the volatility in any new asset class is always going to be significant. And while we've seen a lot of up, you're going to see some down. And I think you're going to find some interesting opportunities to get involved this year if it's something you've been tracking. So my question here is, like, why did we miss this?

Because there are certain trends like COVID obviously accelerated a lot of things. And no one could have predicted that because no one expected COVID was going to be what it is. but there wasn't really anything like COVID that is what made Web3 crypto just take off suddenly. It feels like there were a lot of different parts and I don't know that.

I'm saying that we didn't call it, but basically no one called the rapid rise of what it was. But what is it that everyone missed? Could this have been predicted? Well, it's funny.

You say it kind of came out of nowhere, but I'd actually argue that a lot of the Web3 themes that are exciting to people were actually web two themes that people did predict and did come to fruition last year. So for example, to me last year was all about the fusion of fintech and culture. And that also surprised me. I mean, if you think back to it, where we were a year ago with Robinhood and the meme stocks, you know, we were starting to see some of that at the end of 2019, 20, you know, enter or end of 2020 entering 2021.

But I think last year, the first six months of last year was all about this sense of, you know, I wrote about publicly, you know, fintech jumping the front page to the style section or the business section to the style section. And I think a lot of what you're seeing in the Web3 side is a continuation of that culture theme. I mean, what are the most interesting applications today in Web3? I'd argue it's a lot of what's happening on the creativity side with art, with music.

And so while, you know, I certainly didn't expect the theme to jump, from Web 2 to Web 3 as quickly as it did. I think there is some continuity between some of the things we're seeing draw interest and where it was in traditional finance a year ago. Yeah, I agree. Moving off of that just a little bit, the metaverse is something that we talk about a lot when we're thinking about this topic.

There's this new concept of fintech in the metaverse. What sort of role do you think fintech can play in this new environment? And how quickly do you think those changes might happen? I see fintech is emerging anywhere where there are problems and pain points today in the traditional financial system.

What super interesting about what I would call like a derivative of the growth of Web 3 or the amount of consumers that are now getting involved in crypto is you know tens of millions of Americans now own some sort of whether it's Bitcoin or another asset, like own alternative assets or virtual assets. And the traditional offline fiat system does not take that into account. So if you're someone who's been actively building an NFT portfolio or trading in different currencies, is it's pretty difficult to understand even what is your net wealth today.

So the typical PFM fails you. If you have any sort of wealth management or any of the concepts around wealth management, don't incorporate virtual wealth. So how do you think about building a portfolio of fiat and virtual wealth? Or how do you think about the products that live downstream of that?

We're all familiar with the credit card, lending, personal loans, getting a mortgage. So I think to the extent that the adoption of crypto continues, we will see interesting derivatives of which I think fintech can create really interesting pathways for decreasing some of the friction that comes from a world with one foot on the virtual side and one foot on the fiat side. the the other thing around all of these topics and you know it's interesting we just did a survey this week and our crypto newsletter asking people how hard they find it to keep up with what's going on what things they'd want us to tell them more about and this is a crypto newsletter so crypto audience like you're not going to sign up for a newsletter that talks about that if you're not at least a tiny bit familiar with what's going on or interested in it and not a single person said it was easy to keep up and more than 50% said it's like almost impossible to keep up with everything that's going on and this just seems like a massive problem to me and that there's no way that crypto can get this mass adoption just like the internet wasn't going to get mass adoption until you find ways to make people understand it enough that they're comfortable with it like everyone can go on google and find uh you know there's bill gates speech trying to explain the internet years ago And it's talking about how like, oh, you can listen to a radio broadcast on the internet.

Like that was his idea of what the internet could be. Now, no one really understands how Gmail and email works, but you use it because it's simple. Like you get the value proposition and everything. And I just think we're so far away from that in crypto yet.

But I guess my question to you is can fintech play a role in helping people understand the value proposition of some areas of where we can take this? First off, I love the analogy to the early internet. It's certainly what it feels like right now. I love that your audience had the humility to acknowledge that it's very difficult to follow the space.

I think you said it makes it really hard. I actually think it makes it really fun and exciting. I mean, what a cool time to be investing or even dabbling in a new area. I think many of your listeners might have had the experience I did where, yes, it's hard.

But once you start seeing the possibilities, you know, I have two young kids, I'm usually in bed by 10pm. And, you know, I've been up till 330 in the morning going down rabbit holes on different discord forms. So, you know, it's there's an excitement that comes with something new. And I think that in the same way that, you know, 25 years ago, people felt about the internet, I think people are feeling that energy from this part of the economy right now.

One of the things that that because of that complexity, we are even as an institution trying to understand, can you do crypto and other things? Or do we need people that are entirely dedicated, given the speed at which it's moving, given the complexity? You see a lot of funds that have launched crypto-specific sub-funds and teams that are solely focused. We'll have to see the evolution of that trend.

But to your question on, can FinTech help us understand? Absolutely. To me, the fintech primitives are a lot of times what helps me understand a lot of the concepts that are going on in the Web3 space. An example of that would be DAOs, where I had been super interested in this idea of multiplayer finance or people coming together to work on financial problems as collectives and communities.

And what I didn't anticipate was the way that Web3 could be And DAOs in particular can be a vehicle for building interest around that theme that was really a traditional fintech theme for some time before that. So, yeah, I think it's going to help us. But I think it's so dynamic that, you know, you're going to have to be all in and OK living with some ambiguity for a while. Part of the reason I also ask it is because FinTech is sort of a way, FinTech 1.

0 or even like FinTech 2.0, one of the main goals was, you know, broadening access to financial services, making the barrier to entry lower, making the fees to different things lower, etc. And right now, one of the biggest troubles I have, and a lot of people that I talk to have in terms of finding out more about Web3, is that you have to spend hundreds, if not thousands of dollars interacting with these discords, buying an NFT, joining a DAO, buying your domain name, whatever it might be.

And it feels like, is there a way that fintech can make it so that there isn't as big of a barrier to entry? I know Eco is a company that's working on that a little bit. one of the big things that they're trying to do is make it so people can understand this space a lot easier. You actually end up making money versus spending a ton of money.

Not that you know buying an NFT maybe you will sell it for a lot of money later minted or whatever But there a lot of people that are just losing money in the initial steps in hopes to learn more and then make money I'm in that camp myself. When I started to get interested, I just kind of set aside a budget and said, I'm willing to spend to learn. And, you know, I imagine that many other people have done the same because there's really no way to do it to build empathy with the products until you're actually in the ecosystem.

And to your point on the fees, I mean, the fees were probably the biggest surprise to me when I first started moving into this category. Gas fees are absurd. Where'd all the money go? It really, for a vision of financial inclusion that the crypto space has, we're very, very far from an end state.

so I think it's inevitable that there will be fee compression or else you know a lot of the stuff is not going to work or it's not going to sustain but I'm bullish that as again with any new asset class that that fee compression is inevitable and and we're going to see it in time something else that you mentioned that I find really fascinating because this is a big shift that I noticed too just from you know the days when we were first meeting when Plaid was like a two billion dollar company and Robinhood was still like a one or two billion dollar company is that the product suite was more of what companies would try to get users for versus just the initial brand.

Although Robinhood would be one that their brand was a big part of that as well. I feel like that has switched a lot. And a way that you have put it is that the product suite is getting commoditized a little bit and that you really have to go a lot on brand awareness, which I find fascinating because we've seen more influencers. We've seen more social media marketing.

Cash App is one that anything that Cash App offers, you can get somewhere else. But they've seen insane growth this year. I think according to App Annie, they were one of like the top finance apps in the world in 2021, which is just, it's wild because everyone thought that, oh, like, why wouldn't people just use Venmo? No one uses Cash App.

And now look where we are. Yeah. Have you ever been to the Cash App clothing store before? I didn't even know this existed.

I'm ashamed to admit. Okay. I would encourage any listener to go into the Cash App Clothing Store. I'm 36, and those clothes are way too cool for me.

But I think the fact that a fintech or a financial services company has a successful, and it seems to be a successful clothing line, shows you the fusion and the importance of brand in this ecosystem today. And that's where we were kind of talking about fintech meeting culture over the course of last year. And I think that's such an interesting flashback. And the reason I think that it's going to be informative for where fintech goes is in the last five years, the biggest innovation and the way that some of these fintechs have grown, whether it's Robinhood or Chime or any of the large consumer brands that we all know who follow the space, is through product innovation.

They came up with a great product idea. They had a head start and they were able to build a strong and powerful consumer base through very low acquisition costs because people love the products. Those opportunities might exist, but my sense is as the infrastructure layers continue to improve as they have almost exponentially in the last five years, that a lot of the applications are going to commoditize. And at that point, what's going to set winners and losers apart?

And I think it's going to be brand. So the same way that the car in your driveway - I live in Berkeley, so you see a lot of Subarus. But the way that your clothing, your car, your watch says something about you, I think your fintech brand or your credit card or your app will stay the same. And that's a huge opportunity and we shouldn't underestimate it.

And I think what we'll likely see is winners start emerging less by product and more by, I would say, demographic dominance. So I am the de facto brand for suburban moms or I am the de facto brand for Gen Z. so we are going to be investing around that thesis and it'll be interesting to see you know which companies are really able to solidify their brands and start knocking down markets. I was about to ask another question but I just realized we are already at 20 minutes this flies by we'll have to have you back again either before or at the start of next year to see how some of these predictions played out if Stripe buys OpenSea I'm getting you on right away So if you see that happen, just clear your calendar for the podcast because we're going to have a feeding frenzy on that episode.

I think that's right. Well, Julie, thank you so much for having me. It's always a pleasure. I'm such a huge fan of what you guys are building.

And I hope you have a good rest of your day. Thank you. I appreciate it. If anyone wants to follow along with you or Index Ventures, what's the best way for them to do it?

You guys both have Twitters, I believe. Yeah, check us out on Twitter. Check us out on LinkedIn. Send me an email at mgoldberg at indexventures.

com. and happy to always to chat. Mark was speaking of how crazy the job environment is for crypto and Web3. Definitely go on to our jobboardjobs.

fintechtoday.co because there are a number of crypto roles listed and unsurprisingly, they are always the ones that get the most clicks. So there's definitely a lot of movement in that space. Otherwise, thank you, Mark.

And I will see you guys next time.