For those of you that haven't lived in San Francisco, especially in the early two thousands, It was really intoxicating, I mean, didn't grow up in a big city, but that was my first taste of it. And , like it just felt electric. the whole kind of culture around SF also was just that LA is kind of like full of it more or less.

Like there isn't that much going on from a tech perspective down here, uh, the people, are generally not authentic or fake, or maybe not as smart as folks in the bay. And I was you know I didn't know any better. So it was just hook, line and sinker, wearing my Patagonia and all about the bay area.

But then when I got here and I was living in Santa Monica, after, literally day one, cruising down to ocean to cross cuts office in Venice beach I was like, oh, this, is really, really nice.

Like what the hell are all these people up north talking about , that LA sucks. Um, and then it honestly

just got

better LA network was just so much more inclusive. in general. I didn't realize it till I moved back to the

bay for cross-link Tell me a little bit, what is cross-links reputation? Like I think of them as one of the more established, I don't know what fund you're on.

they

on

for nine what's cross-links reputation.

Yeah. So cross-link, the backstory with that firm is, it was founded about 30, 35 years ago as a spin out of a investment bank in the.com era called Robertson Stevens. Robertson Stevens was like in the.com era, a very tech focused, M and a, bank. and then, two guys, Mike Stark and psych Kaufman spun out crosslink, and raise the first fund. and the firm up until recently, was always a dual strategy, multistage venture, plus crossover, Hence the name cross-link linking private

And then over the years we've just moved earlier in earlier stage. So it's pretty much exclusively seed and series a.

And, you've been very focused on FinTech.

What

was your focus in what's the focus of Haven?

 So at cross-link we focused on everything It was a generalist firm, but I slotted in and started.

running The FinTech practice. And we just had been incredibly fortunate with investments like chime step, personal capital, Novo, Arturo, kind of everything from the B2C to B2B side. and what I kind of realized, that's me and my partner, McClain Southworth who's also a starting Haven with me is just the landscape's really shifting in venture.

And it's exacerbated in FinTech

there has never been a better time to get into FinTech.

I think is kind of, 0.1. and that's because you have this $15 trillion industry that has taken, decades and decades to get to the point where both tech infrastructure on the B2B side is ready for an upgrade and ready to mature, but also consumer behavior with respect to how we interact With our money, right?

 where now, you know, if you take chime PayPal, know, every interesting big FinTech out there right now, it's really only 1% of. the total market has been disrupted. And so now we're at this beautiful web two tipping points. Meanwhile, that's, you know, 100 acts in terms of market opportunity with what's happening with decentralized finance and what Bri, where, you know, the basis of the web up until today, and of technologies ones and zeros web three is really driven by people and transactions.

And So this whole idea of decentralized ownership is that the tip of the spear here is FinTech. and So that's where we're focusing. At cross-link we have always nurtured. seed firms, emerging managers through the alpha network. And so we basically realized that we had this gap with respect to defy in web three. And so, McLane Eric and I decided, Hey, why don't we just go tackle this head on spin out?

And do it formally And, and here we are.

Wow. Yeah And actually you guys are the, This is the first public mention that we're making. of it

I am excited It's going to be big. Well, let's dig in on those themes that you talked

about.

so if you kind of look at the themes of what's happening what's changing in defy and why it's exciting. in web two, what FinTech has done really well on the consumer side has been really around like personal financial management

candidly.

And to be honest, I would say FinTech. hasn't done a great job with that up until even recently, like back in the day, the big PFM tool was Quicken

and It was

just about managing your checkbook. Right. And then that evolved into how do we move money on the internet Then you had PayPal, then it became, how does everybody sell on the internet? Then you had Stripe. Then you had, , how do you, have more visibility into your transactions that was mint.com on the onset.

And while some of them were fantastic applications, not all of them were really fantastic businesses. And the theory and the hope is that a lot of.

difficult consumer web to issues around lending around income, inequality, around fair underwriting practices, all these things that are very tough, whether you're a startup or whether you're a Geico or sofa or whatever else , are just going to be a lot easier, in a wet three environment.

Hmm So there'll be a lot easier on the picks and shovels side of things. A lot of your investments have bins or you've done a number of very successful neobanks. Where are we with neobanks and like the consumer side of web three, I guess.

Yeah. I think on the challenger banking front we're just really scratching the surface I mean, for the longest time.

In FinTech, you know, if you're sitting in the offices of Intuit or at PayPal or anywhere like that the corporate strategy question is always, how do we go after the underbanked? which is like tens and tens and tens of millions of people, right?

It's pretty much anybody with a FICO score, less than 700 is basically under banked with respect to how they're underwritten by these traditional institutions. And, you know, companies like chime. Sure. They seem like they're getting really big, but they're really just single digit percentages of what is a very large global Tam. And I think that what's interesting is that diversity of the revenue models is also really

exciting.

Like they act like payments businesses. but they can also move into lending. They can move into insurance. that can really start to eat away all of these multi-billion dollar Tams But what's really exciting from the venture perspective, if you're doing what we're doing. And what I know like folks 10, 1 10 are doing as well.

 is creating the bridge for these enterprises between web two and web three,

where's the next plaid for next five

years.

Right? If it's not about push, pulling data for consumers necessarily, does it look more like portable dowels basically that allow a sofa to underwrite differently?

both in a web two and a web three kind of world?

Yeah. So, , there's the opportunity with Dows where it's a completely decentralized autonomous organization and, the people who are participating in said, Dow, are making the rules, setting the standards and distributing money through the community.

 but then there is also a world where. Those solutions are, used as a bridge Dow's that is to allow larger enterprises to offer products and services that don't typically fit within the parameters of what they can do in a web two environment. So like case in point, if you are an immigrant, you know, coming over to the country from Turkey, like my family, did, right?

And let's say, you know, you have cash to be able to buy a home. but because you never lived in this country or had an American credit card an American bank account, you don't have an American FICO score any kind of credit history.

not going to get underwritten for a loan. And frankly, like maybe a sofa or a bank of America, maybe they want to underwrite cheap, but they just can't because you don't fit within their parameters of their underwriting model.

So there's the famous statistic that it costs a large financial institution, the same, amount to underwrite, A million dollar loan as it would a $10 million loan and that's all workflow and that's all risk and that's all KYC fast forward to a web three environment, , is there a solution in web three that would allow a Dao, right. That would allow sofa to underwrite this base of users in a decentralized fashion, right.

They could still be so fi or name your alt lending company or, FYI. They could still issue out loans. but now they can also participate in this different pool of risk alongside a community. in web three, and then actual fricking people get to benefit because maybe you get to put your money to work alongside the institution in a web 3d environment.

So like you, and I , we can not only get a loan from SoFi to buy this house or this office, but we can also put 10, 20, $30,000 to work in this. Dow To underwrite this quote unquote risky population and then get compensated in the form of yummy, yummy tokens.

So that's really exciting Hence, you know, my long preamble in the beginning of why I'm betting my career on this stuff. do you just think that is where FinTech is? When I say like how much FinTech, how much web three? Is that just like the same?

Yeah. you know, saying web three is just like a blanket statement for the shift that's happening.

right.

To decentralization. But it's all just going to be FinTech at the end of the day, it's just kind of, delineating between what is kind of web to centralized FinTech today versus what the shift is to defy, but it's all gonna be defy. So-so like you asked how much are we going to focus on one versus the other, the answer is, think it all depends on how much layer two development is exacerbated by Ethereum to success later this year, cause it's unclear, , who The main layer one protocol is going to be. But what we do know is like developers are voting with their feet. I've never seen so many, , amazing, interesting people drop everything that they're doing to go work on this. And to the extent that Ethereum two knocks it out of the park, then I think.

you'll see us do a lot more direct layer to define investing What's the big deal with Ethereum to,

yeah, so the brass tax is that Ethereum is uh getting a, facelift, as we'd say in Los Angeles,

Um, and uh a much needed facelift,And the hope is that this works out a lot of the kinks from the legacy Ethereum architecture that will keep gas fees, which are the price of enacting a transaction on the blockchain and get them down to something that's very manageable that maybe looks more like an ACH.

kind of uh unit economic profile cause right now the current architecture, if I'm going to send you money, or if I'm going to buy an NFT or I'm going to do pretty much anything on Ethereum, the nature of how it's architected is that it needs to audit the entire chain in order to consummate the transaction, which is a lot of computing power and a lot of work.

There's other solutions bridges that have popped up like polka dot avalanche. Solanas one that a lot of folks are talking about. That seems incredibly promising that take this kind of audit approach a little differently and , it keeps the gas prices at a more reasonable level. albeit probably still too high. And so the hope is that all of this stuff is just going to get a lot cheaper, which will then allow more developers to.

create more solutions on the platform. And the exciting thing about web three is just that you know, Coinbase has never spent a dollar on marketing.

Right. And so like

I didn't know that that's true.

yeah it's true. Um, And so like distribution should be a lot more manageable uh for this foreseeable future, in web three, so Coinbase didn't spend any money on marketing, but yet most of my friends, many of my friends, most of my normal friends can't buy an NFT right now because it's too.

so you need some solve of not just the region of the people, but making

it

so that it works for them to get through the process. how much of a thesis driven investor are you like,

do

you

have

like oh, here are going to be, are defined the,

yeah. I'd say I become much more thesis driven as I've just honed in on this vertical and have just spent more time in the space.

When I was first starting out in venture, I think I was like any other young person coming into the business I just like wanted to be Jeremy Lou and get the next Snapchat. and like I romanticize this idea about being like this hot shot, consumer social media

investor which I think like anybody that was coming to the industry like 2014, 15.

That's exactly what you thought you were supposed to do. And that's a recipe to make a lot of mistakes Um and , which I did, I do think though? You know, at Haven, we're going to be doing a lot more ground for first institutional round uh, investing.

And it really does come down to just the people Like, you know, the litmus test is always If I got fired today, would I apply for this company and go follow these people? And I am by no means even close to the smartest person in my network

And if I don't think that that's the case then probably, , in a plus players. not going to think that either. actually, it cross-link, it's kind of interesting. A few years ago. We did this analysis where We looked at like the past several funds. and every single investment in said fund and tried to pull out the attributes of like What made a, base hit a double a triple or a home run. And at the end of the day, almost a hundred percent hit rate came down to just market size and team.

And you could get market size wrong and still be

But if you got team wrong, you were always screwed.

It was never going to work out how you thought. Well, so can you tell me about a couple of your big ones, like chime or step or some of these ones that have been really fast growing and like, what was your insight? And

what's your

insight now? Like looking back on them.

Yeah, I think, steps a good example, actually. for those of you that haven't heard about step It is a challenger bank focused on gen Z and teens. know, the needs of, a gen Z consumer has shifted along with the rest of the world, right, like teens have mobile native right there They're web three native. Right. They're born with iPhones, digital media, digital payments, Venmo, PayPal, You name it. banking products haven't caught up to meet those consumers and then post 2008 with Dodd-Frank. exacerbated all those issues because teens can't get.

credit cards Like they used to, I got my first credit card when I was 17 $500 limit. And it kind of built up your credit history from there. Now the FIS aren't allowed to market at college campuses. And so like you have this whole generation of teens who are just completely under-banked

that seems crazy to me that we can't market towards colleges And can challenge your bangs or like can certain, okay

yeah yeah

step was like one of the fastest

yeah yeah. It was wild. So CJ MacDonald, who we'd known for many years through the alpha network

He approached us three plus years ago, I guess at this point with basically a more concise version of that thesis, I just laid out around you know, teenagers don't have any kind of tools and systems to help with financial literacy. They're not teaching this in the schools and there are no banking products and financial products really aimed at this demographic

So they're entering, their adult life , with effectively, no credit and be at a disadvantage. And so, you know, at the time the business was very raw. It was pre-launch. He had a small team that he had established, but he had this, this really strong thesis around serving gen Z.

And he had a really, really strong thesis around how he wanted to approach infrastructure with respect to creating a unified infrastructure on the backend where a debit transaction could ride on credit rails. And so you'd have one card instead of having to sell a consumer, and especially a teenager two, three different financial products.

You really just had to sell them one card and you could start building credit history on the first swipe. technically ,

 To be honest, wasn't a hundred percent sure it was going to work.

You know,

you already had several other challenger baking solutions in the market. And you know, distribution seemed like it could be a little tough.

And I think, you know, I completely underestimated a few things. One was going back to my, Intuit training the customer pain point was just really like that deep. you had so many teens that were actually clamoring for something like a real, banking.

PFM product. And then the other piece was, CJ's just insane. I, for brand positioning and for bottoms up marketing,

wait, so was he able to do the marketing that

you

were saying some of

the financial institutions aren't able to do?

 so financial institutions, they can't show up at a school or at a college and hot credit cards as a bank.

Right. But. challenger banks, we call them banks. They're not banks. There's actually nothing about these folks that are like banks, they're just digital financial products. So

like the same way that square is allowed to market to teens or market , on a campus or sponsor events, or do any of that stuff any challenger bank is, allowed to do the same in less.

They end up being, a bank basically.

what's fair. What's unfair. What do you think is interesting on the whole regulatory front right now? Cause there's a lot, especially around what three.

 oh wait how much

time do you

have

Look, the the regulators have done some things I think very right. And you know, we touch on things like Dodd-Frank and the Durbin amendment and they're all like really complicated convoluted pieces of legislation, but they also in a lot of ways created the groundwork to allow for a lot of this boom in, especially consumer FinTech that we're having today.

Right. it regulated things like ACH, And actually, by moving some of the parameters that necessitated licenses and things like this, it actually, made it a lot easier for startups to innovate and disrupt that ultimately ended up being a very good thing.

And we're just scratching the surface. Where I'm worried that they're probably getting it wrong is. with crypto And with web three, And so that really concerns me because it's like, web three it's a whole nother vernacular in terms of the way that we even talk about in a web three environment that even for folks in the tech industry is a kind of a tough mental barrier to get over. they talk about, you know, red pills versus blue pills, and it's just red pills is when you finally just sit down and figure all this shit out, Cause it's not that hard to figure

out,

but it just takes time.

And a different way of thinking And if you're one of these big FIS and, you know, you have lobbying dollars to spend, like I'd probably spend it around delaying any of this.

And then the last point on this is just what I'm worried about is just that, developers are going to go wherever the hell they have to, to get the job done. And

so if suddenly, it's just more attractive to go do this in Canada, or to go do it in the EU or somewhere else, like they're going to go do it over there and we're going to miss out and that's going to be.

a shame.

Yeah,

Yeah, for sure. mean, there is kind of like this ethos to it, that's like screw the establishment. and, I think like a lot of that's just, you know, chest pounding. I do think some of that's necessary though, because like we're talking about the biggest technological shift since creation of the internet the difference being that we don't have, , the government.

Funding that innovation, like did with the internet for example. And so you kind of need this groundswell of excitement and whether how much of it is hype and how much of it is not. There's going to be a lot of little mini hype cycles and many tiny bubbles in this monumental shift.

, That's going to take years to really come to fruition.

and that's okay. you know, you're going to have your Netscapes before your AOL's and you're going to have your, Hotmails before your Gmails Tell me a little bit more about Haven. So McLean,

Yeah. McClain. Southworth is my partner and co-founder on. Haven. We've been working together for five plus years across link. He would, co-lead the FinTech practice alongside, myself and David Silverman. And he's just absolutely awesome.

Unfortunately for him, he does sit in the bay area. but he loves it. He lives in uh Palo Alto and is just one of the most connected and resourceful people that I've ever met. in my life. But we've been working together for, so long that it was just pretty natural, mean this is really just a continuation of what we were doing at cross-link together,

Yeah So

you're about to start investing. haven't made investments

Yeah we have, we just left cross-link we haven't made any investments. yet, But we are, you know, ready to go. So yeah,

pre-seed what size checks

pre-seed and seed check sizes ranging from typically 500 K on the low end to 1 million Uh we lead in co lead and investing in, you know, the bridges between web two to web three and FinTech as well as direct layer to define

Do you actually carve out time to sharpen your thesis?

 Uh Usually just, you know, like when I'm staring up at the ceiling, crying at night now,

uh But what I'm constantly doing is just really writing and journaling and what looks like, scribbling to everybody else. And frankly to me, it's sometimes, that helps me get a lot of my thoughts out.

Like I'm not the biggest reader in the world. Right. I don't sit and like, read books constantly, but what I do absorb a ton of is podcasts and YouTube. you know, don't even listen to music anymore.

 the other piece of it and, it's tried and true is you have to talk to companies and you have to talk to, founders. , I think the company piece gets overlooked, like we spend so much time talking about how we're going to disrupt large incumbents.

. But how many times have you like written an investment memo or, you know, tried to get deal through your partnership where, you know you're saying, oh, well maybe the potential downside here is like an acquisition to X, Y, Z incumbent for this many millions. But do you really know what the strategic priorities of these larger organizations are?

Like I came from corporate strategy And development into it and like, those kinds of organizations, are like the brain centers, you know? And so like I would go talk to Corp, dev people, go talk to Corp strategy, people, go talk to product managers and like, see what's on their roadmap. What have they tried? what are they worried about?

Right. And that's where, should be investing.

yeah, I should do more of that. Um, uh okay. We have to do a little bit of personal on Joe

Zelle So you grew up in Bakersfield.

I

saw one of your tweets recently, I think. And it said, you know, amen to like having to work in fast food at some point. How did you go from fast food to the chime boardroom?

Yeah, so family is from uh the middle east dad's Turkish, mom's Jordanian. And. my mom was working in Kuwait for the Kuwaiti oil industry, like one of the first women do that back before the Gulf war. And then she, you know, met my dad, got pregnant with me and then the Gulf war started breaking out and she was like, oh, I gotta get the hell outta here.

So she saw the writing on the wall flew over to the U S like in her third trimester, which I don't even know if he could freaking do that anymore. and then we had the typical immigrant story.

I mean, we went from like, you know, kind of having it all in Kuwait to having nothing. There was eight of us living in a four bedroom house that we still own in Bakersfield.

Um And, you know, I was sleeping on a bunk bed with my mom till I was 12. And it was just kind of like, really grinding And we did what any immigrants would have to do in that situation, which has. you know, I switched my name from, a use of, to Joseph and then,

and then we, started, uh, tinkering on small businesses.

 You know, the first founder that I met was my mom Right. and and trying and failing and trying and failing. And then finally it just caught on with Thank God Americans. developed a taste for hummus.

Really It was a hummus.

Yeah. Well, it was, it was a Mediterranean restaurants, they're called and skewers, we have about six locations now. As far north as Fresno, as far south as, Valencia And what happened, was we tried to open this concept like multiple times through the nineties, but the American palette just wasn't there for like. olive oil And cucumbers and fettuccine? Like none of this was a thing Americans were still cooking with Martin. And then a few interesting things happen.

You talk about like Tam's expanding and markets expanding Chipotle. happened. Right. And, suddenly fast casual became a thing. And then the second thing was Oprah, and a lot of these like TV personalities, started promoting the Mediterranean. diet.

Suddenly. It was like, oh, why is this little old Greek lady living to a hundred?

 And and you You're unhealthy and you're 40, so like all of this convergence of market forces kind of led to uh, starting these restaurants.

and then it kind of just went off from there. But I mean, in the early days, you know we were working at McDonald's, we were working at burger joints And I was working from the time. I was eight years old. yeah

So

would you say that, you know, worked really hard where you especially smart, like

No, no, I'm dead. Dead. definitely not I mean, it was the first kid in my family to go to college.

, there, wasn't a plan for me. was always kind of just hustling and working with my family and I had every intention of just kind of borrowing some money from my family to maybe start a restaurant, and

just

, doing that. and then. my. absolutely lost it. when I told them that I was going to do that.

And So basically said I have to go to school.

And then I ended up doing what every good little brown boy does which has started out pre-med and then quickly switched out of that

because I couldn't get past organic chemistry and, paid my way through college, doing real estate. Cause I was also hustling on that. So I wouldn't say that I'm smart long story short. I'm not smart. just work very hard. Like , if there's any BC that I admire more than anything, it's Doug Leoni, not because of his track record which is obviously fantastic or because of Sequoia, which is obviously the dream from right, , from a track record perspective.

But you know, here's a guy that came over as an Italian immigrant and, , he wouldn't call himself smart. He would just say that he works harder than everybody else. And that's, you know, that chip on your shoulder, if you come from where I did is very hard.

Yeah, cause you sound smart now.

I'm a good chameleon right now.

Well, you're you got a lot of hustle in your well-read that it could cover

up.

Spend a lot of time with smart people.

Yeah

A little bit more about you, Joe. Like you surf, we haven't served together yet.

I know we must

you get riled up when someone drops in on you?

Yeah I'm just I'm really aggressive out there. I'm really just bashing

heads and I really regulate Breakwater. No, no way they would drown me out there.

I would say I have good etiquette with respect to the lineup, but I will say, and I hope all of you Venice surfers are listening out there Venice has the worst etiquette with respect to the lineup that I've ever seen.

There is no lineup there No they're all just out there like, like monsters dropping it on every single wave. So I guess, yeah, .

I guess I should start regulating people a little bit more.

Oh my

Yeah

will join you on a day. You're feeling kind.

Beautiful.

Okay. Wonderful. Thanks so much,

Thank you so much.