My chat with Jill Carlson, Principal at Slow Ventures

Sar : We met when you were still interviewing for jobs in venture capital in SF. Now that you have been a venture capitalist at Slow Ventures for more than a year, is there anything you have changed your mind on about how this small industry works? What has surprised you the most?

Jill : Hah! I think it’s important to stay curious and question why things are done the way they are -- or why an industry is run the way it is -- lest one end up like the fish who is asking “Wait, what the hell is water?”

My biggest impression of the last year and a half of working in venture capital is that it is such an enormous privilege. You spend all day talking to these incredible, smart, driven founders who tell you about their vision to fix a problem and teach you about how they will do it. It can be hard to feel like you are ever doing them justice. There are just too many amazing people and projects and too few hours in a day to be able to cover them all in the way you want to.

Which brings me to something else that has struck me deeply: the job is still so linear and so manual! Given how much venture loves repeatable business models and scalable products, there is very little that is repeatable or scalable about the job of a venture capitalist. I would have thought that more firms would have more emphasis on data-driven approaches or trying to automate some of the heuristics that we use to for vetting investments, but there’s very little of that.

It is possible to develop a positive feedback loop as an investor: you do good deals, therefore you see more good deals because founders know and want to work with you. But this bigger, better top of funnel also just creates even more work that still, by and large, gets processed really manually by associates, principals, and partners.

Sar : I remember we have talked about the importance of brands in the venture business. For people in their twenties doing this job as a junior investor, the day to day at established firms looks more or less the same but everything one does gets either tainted or augmented by the halo effect of the brand of the firm and reputations of GPs they work with. Someone in the same generation of VCs as you at a top tier firm once told me “Sar, I have no doubt that most founders respond to me way better than they do to my peers because of my email address.” Do you have any updated thoughts on this dynamic? It also plays into why many feel the need to make content to differentiate themselves.

Jill : Yes. Brand is what drives that positive feedback loop that I’m talking about. That can definitely happen at the firm level: “XYZ VC has a great reputation and has had several big exits in our industry, therefore we want to work with them.” But it is arguably even more salient at the individual level.

I think this is increasingly true outside of venture capital as well. As individuals are increasingly able to build up their public portfolios of work and their own reputations outside of their respective firms, one becomes increasingly in control of one’s own career trajectory versus being tied to that of a given company.

Sar : You are one of the few people I associate with the intersection of mainstream tech and crypto. There are smart people in both of those worlds and many smart people at well known firms who are doing everything they can to disassociate themselves from the latter after the mania died off. A common thread spanning those worlds is this idea of intermingling of software and money. Both worlds have different memes for that. DeFi! Embedded Fintech! I think you have managed to stay in the information flows of both worlds more successfully than most. How does that impact your thinking as an investor and as a consumer?

Jill : I really feel for any investor whose job it is to “follow crypto” without being in it (or having been in it) full time. I was in crypto full time for the better part of 6 years and I feel like I can still barely keep up. The pace and the velocity of innovation there is inspiring.

Being at a generalist fund and getting to diversify from being all-crypto all the time has been huge. I love how big the dream of bitcoin is: creating an entirely new, revolutionary financial system. That is huge! But when you are only living in the far-flung future it can be easy to get detached from the present. Looking at both consumer fintech and crypto allows me to have some balance between these two.

There’s no secret really to staying in the information flows. It’s some combination of Twitter and curiosity. If you follow the right people on Twitter, trends in any industry will get surfaced to you quickly. But then you have to follow through and that’s where curiosity comes in. You have to go and try out the app. You have to get your hands dirty.

Sar : Have you been able to figure out why venture capitalists suck so much at taking their own recruiting advice and fortune cookie tweet wisdom about hiring the best people? I like to joke that more than 60% of South Park inhabitants pre covid went to a handful of schools, banks and consulting firms and have the same resumes but somehow manage to spend 5 minutes on their unique path to venture on podcasts. I fully understand the irony of asking this to a Harvard graduate. I ask you because I know you are very self aware about this.

Jill : There are so many ironies to venture capital… this is one of many situations in which investors by and large fail to take their own advice.

Venture capital is still fundamentally a network-based industry. That goes for hiring as much as it does for funding. Many VCs don’t respond to cold inbounds, not because they are bad, elitist people, but just because, as I mentioned earlier, there aren’t enough hours in a day to process all of the flow they see. This results in decisions getting made based on warm intros, existing relationships, and heuristics. It is no wonder that the stats around who gets venture funding display woefully little diversity (in gender, race, ethnicity, but also in terms of schooling, economic background, and so forth). The same goes for hiring.

We have a long way to go to get to the meritocratic utopia that so many tech thought leaders think we are already living in...

Sar : You were a crypto consultant prior to joining the venture firm Slow. You lived the life of what the cool kids today call a creator. You have written about this idea of meta work. There are tons of blog posts and market landscapes on this idea of passion economy (which Li Jin coined last year). Most of my readers have likely seen the creator economy memes on twitter. What do you think is overhyped about this phenomenon in the short to medium term?

Jill : I love the idea that I was living the life of a creator! I never conceived of the work I was doing that way, but it did involve a lot of content creation. I think in a way this comes back to the importance of individual reputation and brand. We are all creators in some way now.

I do think that there are a lot of misconceptions about how accessible it is to become a full-time participant in the passion economy. I hear a lot of VCs in particular talk about how they are on the lookout for the tools that will enable influencers and creators to earn and monetize better. That is definitely a real issue, but who is talking about all of the other issues that come along with that professional plan? Who is talking about making it easier and more accessible to spin up an LLC? Or to get healthcare coverage at a reasonable price? Self-employment is a pain, even when you are doing what you love. That is what the concept of meta-work is about.

Sar : I listened to your podcast interview a while ago about the Robinhood movement opening up the investing and trading world to a lot more people. I agree with basically everything you said. I think we are finally entering an era of social products. Public, Common Stock, Braid, Gather et al are doing cool things. There has been some demographic in the last era of at-scale fintech companies. Chime focuses on lower income groups, Kard and Step focus on kids, Wealthfront & Robinhood focus on young people. There also are banking products focused on unsexy industries out there. I still feel like we don’t have nearly enough personalized banking for most people given all the talk around how bloated and lowest common denominator based legacy products are. My credit card is just so dumb. It gives me offers that I couldn’t care less about. The next wave in personal finance hopefully will be ultra personalization! Having a great digital experience just doesn't feel sufficient anymore to stand out in 2020. I know you are constantly hunting in the personal finance apps world. Where do you see gaps? Is there any area where you are struggling to find a wave of startups?

Jill : Thanks for listening to that! It was a fun one. I am so inspired by the notion of democratizing financial access. It’s insane to me that more than 80% of US household stocks are held by the top 10% of the population. I hate it that the 1% have dedicated, full-time financial advisors and tax accountants optimizing things to make sure they are getting the most out of their money. You don’t have to look that hard to see why the dynamics of inequality in this country (let alone the world) are what they are.

As I’ve thought about it more, the thing that Robinhood got really right (and I know this is controversial) is that they changed the incentive structure of the business they are in. People attribute a lot of Robinhood’s success to the slick, millennial-friendly brand, but the real innovation that paved their way to success was undoubtedly their zero-fee model. Rather than charging traders fees on each trade, they charge hedge funds for the order flow from their consumer base. A lot of people cry foul and say this is problematic because it’s just obfuscating the cost to the retail consumer and passing it on to the bad guy hedge funds who can then do scary things like front-run your trades. The truth of the matter is much more complicated than that and the reality is that they have succeeded in bringing more people into the markets than there have ever been.

I think it’s important if you are building a personal finance app to make sure that you aren’t just slapping a fresh coat of paint on an old, broken model. The lesson from Robinhood is that you need to change the incentive structures under the hood as well.

In general, memes get overplayed. The meme of “everything becoming a bank” is a reasonable vision of the future for a lot of businesses at certain stages, but certainly not all. If you are starting a consumer social network, your pitch for seed funding should probably not come back to fintech. If you are building an enterprise collaboration tool, I’m going to have to really squint to see how you get into financial products. I don’t see that much of this these days. I think that meme has gotten worn out. But it’s important to be aware of when the next memes roll around.

Sar : If you had a magic wand to make a regulatory change overnight, what would it be for seeing an explosion of innovation in fintech?

Jill : This will, again, be controversial, but I would change KYC (Know Your Customer). These are the laws requiring that banks and other financial institutions have to have collected a certain amount of information on the individual or institution they are serving, making sure that they are not engaging in nefarious activities like money laundering. People tend to talk about KYC rules as though they were written in the Old Testament, but really they have only come about over the last three decades, catalyzed by 9/11.

My problem with KYC is that the way it is enforced is really asymmetric in favor of the rich and powerful who largely will find ways to launder money regardless of the rules. If you don’t believe me, go read Billion Dollar Whale or, really, just pick up any copy of the Wall Street Journal from the last decade.

The way that KYC gets enforced hurts people who, for whatever reason, don’t have a formal identity -- which is lots of people worldwide.

I would not go so far as to advocate repealing KYC rules wholesale (at least not without doing a lot more research), but I do think that there should be more balance in the exemptions that are allowed under the rules. Today’s restrictions in the United States can feel a bit like being forced to take your shoes off at airport security: largely irrational rules that came about in a moment of national fear that now amount to little more than security theater, while leaving other much bigger vulnerabilities wide open.

Sar : Over the past 2 years, you and I have enjoyed dunking on the remote work stack meme on twitter from time to time. Now that we are more than 7 months into forced remote work, what do you find yourself thinking about the most? I'm sure you get a dozen pitches about this every week and many founders you work with are now running a distributed culture. What are you observing?

Jill : There is this bit of conventional wisdom that exists in the security world that security is a process. People often want a given tool or bit of software that can make them or their company more secure. Products might be important components of what help you achieve security, but if people are not using them right and according to the right processes, you will fail. You can mandate that everyone at your company uses a password manager like 1Password, but if everyone is just using it to store “password123”, then you are still vulnerable.

I think the same is true when it comes to developing a strong remote work culture. Software tools can be important in finding success here, but ultimately you have to be tapping into the creation of processes and behaviors that will lead people to collaborate effectively. It’s not just a matter of getting the right stack of Slack, Notion, Tandem, and whatever the latest product is. It’s a matter of getting people to use them well. And that is much harder product problem -- and much more interesting design challenge -- than is often framed.

Sar : What memes make you cringe the most these days?

Jill : https://brrr.money/