20VC Exclusive: Mercury Founder Launches First $26M Fund with Immad Akhund

Immad Akhund 0:00 (music plays) Sequoia does not take their position lightly. Like, they did the most work. I think it is very hard as an entrepreneur not to chase the highest valuation. You know, we did our series B at 120X, (laughs) which was not rational; this was 2021. But, uh, we did it, and I would do it again. I mean, I just prefer serial founders. Like, I have such a bias towards them. A serial founder with a chip on their shoulder. Oh yeah, 100%.

Harry Stebbings 0:23 Ready to go? (music plays) Imad, dude, I was probably very young when you were last on the show. Uh, definitely five or six years ago. I've missed you. But thank you for joining me again today.

Immad Akhund 0:46 Yeah, excited to be here. Um, I'm always listening to the show, so it's fun to be on the other side every now and then.

Harry Stebbings 0:51 Oh, dude, that is very, very kind.

Harry Stebbings 0:53 Um, listen, I wanna start with some news that you have. Uh, I'm thrilled that you said you'd share it with us. So, what is the news that you have for us today?

Immad Akhund 1:01 Yeah, I finally closed on my first institutional, uh, fund. Uh, we raised $26 million. Uh, I'm partnering with, uh, kind of a- a friend of mine. Uh, actually, he invested in Mercury, uh, seven years ago. His name's Yash Doshi. Um, he was at EQ2 Ventures- EQT Ventures. Uh, and then in the last year, uh, we, uh, I've been doing angel investing actually since 2016, uh, so I've done about 350 investments. Uh, and I've been working with him for the last year and I was like, "Hey, I just need to bring him on full-time and kinda do this a little more properly." Uh, I've so far been investing mostly on AngelList, uh, so I had a AngelList rolling fund. Uh, so yeah, just- actually just closed it, I think, last week or the week before, um, and already have invested in five or six

Immad Akhund 1:49 companies.

Harry Stebbings 1:50 Dude, I wanna kind of take this chronologically before we dive into the fund. You mentioned the 350 angel investments you've made.

Immad Akhund 1:55 Yeah.

Harry Stebbings 1:55 Unbelievable angel portfolio. What are the biggest lessons that you have from 350 angel investments?

Immad Akhund 2:03 Yeah, number one, I think this is kinda something that, uh, entrepreneurs that have been- uh, that are- especially if you're an active entrepreneur, but once you become an investor, you think you- you- you know, you're used to running a company, you're used to having your ideas. And what you do at the start is you're like, "Okay, you know, yes, you're talking about something really interesting, but here's another idea that I think is way better." And then y- and then, uh, the other entrepreneurs, especially if they're young, they're like, "Yeah, I love this. Yeah. You know, Imad, like, please invest. Uh, you know, we love what- your ideas." And then you invest and obviously, like, that's not their idea. And, you know, it's not even fair to push an idea on a- (laughs) on other people. But you really have to actually remove your ego and your ideas and really listen to what they want to do. And, you know, you're much more- you're much more along for their journey rather than, like, a- a major part. And the- actually, when I first started investing, so I sold my company in 2016 and I was like, "Hey, maybe I wanna be a VC," right? Uh, and I started investing, and that's kinda what was my approach. I was like, "Oh, I'll be really hands-on. I'll be really helpful." Uh, and then I realized, actually- Rappy was one of my first investments. Uh, Rappy is like a DoorDash for LATAM. Yeah, I literally invested and they did not talk to me again. (laughs) Like, they were just so busy and they grew that thing like crazy, and it was a unicorn within a year and a half. I invested at, like, a 20 million cap. I was like, "Okay, you know, what is the point of being an investor (laughs) if, like, my best investments don't even talk to me?" And- and, you know, that's what I want, right? As a, like a- in terms of, like, a capital returner. Like I- w- you know, if someone, like I invested, they just do their thing and, uh, they retu- you know, I have a big return, that's great. Uh, so- so that was, like, one of my really early takeaways, is-

Harry Stebbings 3:42 Can I intercept there on that first takeaway? Just 'cause I've got too many things. You said that, like, you know, you don't wanna intrude and put your vision on them too forcefully or too, um, actionably. I would see it as a big red flag if I put my views across and they're like, "Oh, that's a good idea. That's a better idea," and they run with it.

Immad Akhund 4:00 Yeah.

Harry Stebbings 4:00 I want someone to say, "No, no, you're wrong, and here's three reasons why." Do you agree that if they listen too much, it's almost a red flag?

Immad Akhund 4:07 So this is actually another mistake I made. I think sometimes we, um- you know, if you're a second time entrepreneur and you- you have experience, you- when you talk to an entrepreneur- investor, you're like, "Yeah, what- what the fuck are you talking about? Like, th- this is obviously wrong for these reasons." But there's a lot of young entrepreneurs out there that have great ideas, right? Like, I think- I mean, I was young once obviously, but, uh, I've actually, like, not invested in companies because I was like, "Okay, you know, these people are now pushing back on me and they're not- you know, they're now coming up with, like, a ton of experience and ideas." And actually, yeah, they were just young entrepreneurs and they were- often, as young entrepreneurs, you're intimidated by investors. So, I think- I think you have to kind of judge people by what their life situation is and, like, you know, how they are approaching the situation. And, uh, you do have to kind of cut some slack to kind of people new to their career rather than saying, like, "Oh, y- you know, they didn't push back on me and they should have," et cetera.

Harry Stebbings 5:01 You said about Rappy, brilliant, fast-growing company to a unicorn status, and they didn't call you. (laughs) It makes me think of Keith Raboi who's like, "The best founders, they don't need you." And he's talking specifically about that. Do you agree with that statement?

Immad Akhund 5:15 Yeah, I mean, they definitely don't need me. Uh, I think it's very rare. And, you know, I have- at Mercury I had, like, seven or eight, uh, kinda unicorn founders that invested into Mercury. And, you know, I didn't need them, but because they are active entrepreneurs and, you know, every now and then I have a question. I'm like, "I'm hiring a CFO. How do I hire a CFO? I've never done this before." Or, like, when I did my series B, I was like, "I don't know what are the multiples in, like, series B spaces is." And like, you know, "Tell me about it." So, I did- I did contact them. So, uh, and th- this is kinda how I see my role as an investor. It's like, you don't need me, but, you know, I'm an active entrepreneur, I've got a g- big company, I've dealt with a lot of issues. If something comes up, you know, send me a text and I'll- if I have time, I'll talk to you. Uh, uh, so that's kind of the- you know, the balance to it.

Harry Stebbings 6:03 Do you buy venture value add from venture platforms? The BD teams, the hiring teams, the- all the teams that come? I think they're bluntly-... a, an excuse for management fees?

Immad Akhund 6:15 Uh, I think depends what type of company. I mean, I would say, you know, Andreessen Horowitz, uh, was our seed investor, so they invested like basically on a deck for Mercury. And a lot of their kind of value add wasn't super useful, but at the end of the day, I think the two most valuable things to, from like one of these f- or any VC firm is, you know, who's the partner, right? Like, is this someone that, you know, every conversation you have... You know, I've been talking to Alex Rampersad, who was my partner over at Andreessen Horowitz. I've been talking to him since 2017, like once a month-ish (laughs) , right? So imagine doing that with someone who's not value add, uh, or like annoying to talk to. Uh, whereas, you know, he's smart. He's, uh, yeah, I love hearing his take on things and riffing off ideas off him. So, uh, those are the types of people you want as investors, and I think that is by far the biggest thing you're choosing, uh, as an entrepreneur. Uh, and then the second thing which I think is like under-understood by people is you do get like a founder network with the, uh, you know, with the portfolio companies of that VC firm. Like there's a, uh, Andreessen Horowitz and I guess now Sequoia. I actually was just at a, a founder networking event with some Sequoia companies. Uh, like these people have valuable networks and the best VC firms do make us situations where like founders can connect with each other, and, and I've always found

Immad Akhund 7:26 that valuable.

Harry Stebbings 7:27 You mentioned Sequoia there. Is it a needle moving event when Sequoia invest? Does the world see you in a different way? Do candidates see you in a different way? Is it that needle moving event?

Immad Akhund 7:37 I've been an entrepreneur since 2006 and like Sequoia's always been like the top brand, right? Uh, and yeah. I've always, uh, wanted to get Sequoia as an investor on a personal level. Uh, so, you know, finally, uh, I, and I pitched to many, many times (laughs) and, and got a no for them, both for this company and my previous company. So for me it was a needle moving event because it was just like something I've always wanted to get and, you know, they invested in, uh, Series Seed, uh, and-

Harry Stebbings 8:04 How did that seed go down with them? Like, did you have to go into the partnership and present to everyone and Roelof sat there, uh, the kind of head of the table and...

Immad Akhund 8:14 Yeah. Um, well, you know, number one, I, you know, something I'm impressed by, by the top firms is like, you know, S- Sequoia does not take their position lightly. Like, they did the most work, right? I'm talking about like I pitched a bunch of people, like I ha- I pitched more than 20 c- uh, f- funds, uh, as part of the Series Seed. Sequoia did the most work, right? So like they, they did the most diligence with customers, uh, they did the most work in the data room. Like, they just like really put their effort into it. And like, I think, and I, and they asked really good questions and I, I like that. Like, I don't want, I don't want someone to make this decision lightly. I don't want, like, I don't want to get a term sheet just because like someone's like FOMOing. Like, I want them to really believe in, in Mercury and feel like they've done, uh, they've done their diligence before they make that decision. So number two, um, I had a conversation, uh, kind of later. So Sonya, uh, is, is our kind of partner at Sequoia, and she said actually like, uh, you know, she had conviction in that first meeting. She said 95% she was in, uh, after like that initial meeting. Which I was like, "Okay." You know, because they did so much (laughs) work after that meeting. So, (laughs) so that was like actually kind of surprising to me that the, like they got so much conviction just in the first meeting. So most of the time, uh, you know, by the time you get to the partner's meeting, there's been so much work done that, yeah, and you know, uh, Roelof is not like making the decision. Like, it's, it's kind of like the lead partner and, and a lot of the work has already been done.

Harry Stebbings 9:42 Was theirs the highest offer?

Immad Akhund 9:44 Uh, y- yeah. In the end it was, but, you know, I probably would've taken it if it was a little lower. But yeah, I find that like it's... Uh, most of the time the b- the good firms are willing to match or beat like whatever's the highest offer. Um, and you know, it's not about, I mean, it's gonna sound lame, but it's not necessarily about the money for either side at that point. Like, you wanna have, like I wanna have a fair valuation, uh, and I wanna have like the, you know, the best firm to, like, that's focused on the long term.

Harry Stebbings 10:15 What would be your biggest advice to founders on price? Having multiple start-ups but also having raised through crazy times, through more difficult times with Sequoia. Wh- what would you advise them on valuation in those areas?

Immad Akhund 10:27 So I have a, I have a little bit of a contrarian take on this. Um, I think it is very hard as an entrepreneur not to chase the highest valuation. So this whol- uh, whole thing about like, "Oh, you know, if s- if someone gives you 100X, uh, revenue, don't do it." Like, you know, we did our Series B at 120X (laughs) , which was not rational. It was 2021. But, uh, we did it and I would do it again. I think the actual thing I would s-

Harry Stebbings 10:53 W- just, j- just, uh, let's, let's just go to that.

Immad Akhund 10:54 Yeah.

Harry Stebbings 10:54 So how much did you raise there?

Immad Akhund 10:56 Uh, we raised 120 million. Uh-

Harry Stebbings 10:59 Okay. And so your thinking there, I guess, was, "Hey, I've raised enough money that I can grow into it over a several year period at worst."

Immad Akhund 11:05 So this is what I was gonna say. I think the, the, the mistake is to not raise enough money.

Harry Stebbings 11:11 Mm-hmm.

Immad Akhund 11:11 Like every now and then someone gets like a, you know, they'll, like a million dollar valuation, they raise like 50 million. I think that's a mistake. Like, you wanna raise enough money at that high valuation. And then number two, don't spend the money. Uh, and which is really hard but like, you know, I was, I, when I raised 120 million, I was like, "I don't know how I'm gonna spend 120 million." (laughs) Like, we had like a 40 person company, uh, at this, but I was like, "We'll raise enough that, you know, either I'll never need to raise again or if I'm growing really aggressively, then I can like spend into it." Uh, but that was our, our thinking at that time. Uh, so, uh, but it i- it does take a lot of kind of confidence to not spend the money once you raise it.

Harry Stebbings 11:50 So that's where me and Parker Conrad constantly have a debate on Twitter.

Immad Akhund 11:54 (laughs)

Harry Stebbings 11:54 Because he's always like, "Harry's selling his own book when he says don't raise to crazy rounds." Um, and I, I don't think I am because I see the truth there, man, which is you and Parker may be wise enough and mature enough to not go and blow it. But most younger founders especially, when you give them the money, they spend it.... simple.

Immad Akhund 12:14 Yeah, and I think it's- I think that is also a mistake of the VCs. Like, the VCs are like, "Hey, you know, go spend the money." Like make- you know, make sure the- the res- this return happens. Uh, but, you know, a lot of the returns come from the anomalies, right? So (laughs) like, I don't ... It's from the Emmars and Parkers of the world that like, uh, you know, you're going to get the decacorns or whatever, so, uh... And that's what VCs care about. Like, they really want to go for the home run so, uh... I think the reality is younger founders, like most founders will do it so I think we have to set up frameworks for like how you can do it but still be successful, um, which is tricky.

Harry Stebbings 12:51 What was your biggest win as an angel investor? And when you reflect on that, are there any takeaways for you?

Immad Akhund 12:58 The biggest kind of win that's returned me money, uh, was Truebill. The reason it was a win in the end is like, yeah, I'd say two things. Number one, those founders are just incredible. Like that's super hard business, like we're talking about like fintech, uh, consumer business where you have to like really fight for like every user acquisition. And-

Harry Stebbings 13:18 Can I be blunt?

Immad Akhund 13:19 Yeah.

Harry Stebbings 13:19 You did the pre-seed?

Immad Akhund 13:21 Uh, yeah. I invested- I think my first investment was at 16 mil, um, so I did it like before, uh, Y Combinator, Echelon Day.

Harry Stebbings 13:28 And it sold for how much?

Immad Akhund 13:28 It was a 1.25 billion, uh, exit. Um-

Harry Stebbings 13:31 And so your multiple on that was?

Immad Akhund 13:34 I don't know if I- if I should say the exact multiple but more than like 30X. Uh, it was a great- it was a great multiple and it was a short time period, like 2016 to 2021. So two lessons for me there was like repeat founders really do matter, uh, and like, you know, when the- those- that team did Webs.com, uh, which is also g- a difficult space, uh, right? Like website creation space, uh, and I've just seen it again and again, like, you know, I'll take Rippling, like I'm also an investor in Rippling, uh, you know, when you have repeat founders that like, you know, they can go into these difficult competitive spaces and like somehow just like completely own them. Uh, that was one thing. And the second thing which, you know, I have never been great at is like timing. Uh, like the Truebill founders, like they sold at just the perfect time (laughs) , right? Like they sold like in December 2021. Uh, amazing timing. I wish I'd taken like some more chips off the table in 2021. But, you know as a- as a angel investor and as a active, uh, CEO, I don't have time to necessarily go and like, you know, take every- (laughs) look at every single unicorn and say like, "Oh, should I be s- like taking some secondaries?" But- but they obviously nailed their market timing and, uh, you know, lots of respect to them for doing it.

Harry Stebbings 14:49 If I push you into one camp, because nuance doesn't work on a podcast, uh-

Immad Akhund 14:54 Yeah.

Harry Stebbings 14:54 ... do you prefer serial founders or do you prefer first time founders?

Immad Akhund 15:00 I mean, I just prefer serial founders. Like I have such a bias towards them. Uh, I think a serial founder with a chip on their shoulder, uh, like, you know- I don't think it works if it's a serial founder where they've had a unicorn exit and like they're, you know... If the other choice is, "Hey, I could just retire and have like (laughs) y- y- you know, have $100 million anyway," uh, I think that doesn't work. But if it's a serial founder where like, you know, they have something to prove, um, it's just a-

Harry Stebbings 15:25 Did you feel you had something to prove after your first?

Immad Akhund 15:28 Oh, yeah. 100%. I mean, w- our exit was 45 million but it was a real struggle. We pivoted four times. Uh, and for me like I just really wanted to build a big company. Like I just like- I've been an entrepreneur forever, like I want to- I want to have the biggest impact possible. But it is irrational, right? I- you know, there's- being an entrepreneur is irrational but being a serial entrepreneur is especially irrational because at least the first time you can kind of blame your naivety. Uh, but yeah, if you p- if- that's actually one of the qualifying criteria, right? Like a serial entrepreneur like knows how hard it's going to be but they're willing to do it again, right? That is like so un- unusual by itself, uh, that like you have to- you have to kind of go, "Okay, you know, like, uh, they must really want to do this."

Harry Stebbings 16:09 Do you prefer it when they are new to a market bringing fresh ideas, naivety in some respects, or when they are seasoned pros coming out of the market with 10 years experience?

Immad Akhund 16:20 I think both can work but my preference is on naivety. I feel like, um, you know, I- when I did Mercury I didn't know anything about fintech or banking and, uh, yeah, I knew that entrepreneurs would use this product and I would use the product but- but I was like, "How does one go set up a neobank?" Right? And th- that's what most of my first kind of one year of education was, was just going super deep on like, "How do you even do this?" But I genuinely think actually like my seed round, uh, Andreessen Horowitz invested but it was very hard. Even after Andreessen had come in with a lead check, it was so hard to get any fintech fund to invest alongside them because all fintech funds saw was like all the problems (laughs) . They were like, "This doesn't work for this reason and that reason." I was like- I was like I really wanted them as well because I was like, "Oh yeah, they're going to have like this deep fintech expertise that I really am lacking." But super hard to get them on board. I mean, I did get a bunch of fintech entrepreneurs on board but could not get a fintech and a dedicated seed fund on board which I like- in hindsight is ironic. Uh, but yeah, you really need to have like that outsider perspective most of the time to be, uh- to be successful.

Harry Stebbings 17:25 That's a miss for many of those investors. When you reflect on your angel misses, what's the biggest miss for you and how did that impact how you think about investing?

Immad Akhund 17:35 Um, well actually like I talked about it earlier, uh, you know, looking at young founders and saying like, "Why don't they have these things figured out?" Uh, you know, I looked... I was- I was a part time partner at the time so, you know, I- I saw Scale AI, uh, and I was like, "Okay," you know, like, "Good idea but these people are so young." I think they were like 19 and 20 at the time or something (laughs) . I was like, yeah, this like- I was like, "I think I could run this company better if I was doing it and I don't see how they're going to figure it out." And I was just so wrong, uh, because obviously those, you know, they proved me wrong but also like I think there is like some power to that youth that like I think is like hard to judge to be honest. Like you kind of have to yourself suspend belief to say, "Okay," you know, "this person's going to figure out how to run like a huge company."

Harry Stebbings 18:21 If I were to push you-

Immad Akhund 18:23 Yeah.

Harry Stebbings 18:23 ...to give one piece of advice to another founder who wants to start angel investing, what would that piece of advice be? So for example, I'd say, "Hey, make sure you write the same size check every time. You don't have different levels of conviction. Just every time, 20."

Immad Akhund 18:38 I mean, uh, you know, one thing, um, is, yeah, this is a rich person's game, sadly. Like I didn't start investing until I had made, made an exit and I think doing like one or two is not gonna make a difference. Like I think... So mostly I say to people, "Hey, if you have enough money..." I mean we're not talking about a ton of money, but if you have enough money to do at least 20 or 30 investments, that's when you start entering the game because, uh, A, you learn a lot by like doing subsequent ones and, you know, uh, w- if you're only doing like five you're not gonna have this kind of i- iteration. Uh, B, you just, you need a diversified portfolio (laughs) to have any return in this space because like what we're really doing as seed investors is unicorn hunting or I would say even like at these current evaluations like you're, you're hunting for decacorns. And that doesn't, you know, even if you're great at picking and you have a great, um, network, et cetera, uh, you're not gonna get to them with like five bets. Uh, like you need a portfolio of bets.

Harry Stebbings 19:37 Is the age of chasing unicorns over? You said they're hunting for decacorns.

Immad Akhund 19:42 Yeah, I mean, uh, you can do the math but like if your c- entry price is like 20, 25 mill, uh, you know, you, after you get to that dilution, uh, you know, a unicorn like sometimes it's like I've seen as low as like 8X return (laughs) from like a seed stage investment to a unicorn (laughs) , which I'm like, "This is awful." I mean obviously there's also you can get like 30, 40X there, uh, but yeah. I think if your entry point, price is like that, you're mostly l- like unicorns, like you need a few of those but you really want to get like a 10 billion plus to, to have like an outsized return. Like I want, you know, I'm not happy to get like a 2X or a 3X. Like I want to have a 10X fund, uh, and that's not gonna happen with unicorns.

Harry Stebbings 20:23 Any other massive lessons from the angel investing before we move to the fun side?

Immad Akhund 20:26 It gets easier. This was like not obvious to me. I think when I first started investing, I was, I had to do a lot more work to get any company, right? Like the, I had no deal flow. (laughs) Like it was all hunting. It was like, you know, show up at demo day, bug investors, like ask them for intros, et cetera. And I mean obviously Mercury's been successful and that's helped my deal flow as well, but I would say in general, deal flow just gets easier if you stay as an active angel. Uh, like people know that you invest. You have your portfolio companies introducing you to their friends.

Harry Stebbings 20:54 If you were to rate it as a percent, what rate percentage would you apply to being now a five-billion-dollar founder and an icon of an industry, versus just being a very active angel with a lot of founders in portfolio sending you deals? How would you weigh it?

Immad Akhund 21:11 Ah, it's just hard to separate these things, but I, I, you know, I would say you can be an active angel investor, like you don't have to be like already a successful, uh, founder like I am now. Like I, I would say, you know, even in 2019 or, uh, yeah, when I'd been like investing for three years, uh, like I had a strong reputation as an angel investor at that point and already had like some hits behind me, and deal flow was way easier in 2019 than it was in 2016 when I first started.

Harry Stebbings 21:38 Did you take cash off the table on any of them? And any thoughts on proactive secondary selling?

Immad Akhund 21:43 Well, I guess I won't name the company but there was a company where like SoftBank came in with like this crazy number and, oh, and, you know, they offered everyone, um, a secondary and I was like, "You know, if SoftBank's doing it, (laughs) I should probably take some money off the table." So I did do it. Uh, in hindsight I probably should've done more. But, you know, my... I'm really aligned with like let's go long. Like I don't, I don't need the money. I'm in it for, I'm in it for the game as it was and I do think, you know, these kind of compounders, uh, like Airtable, uh, you know, like, like there's companies I'm in where I'm like, "Okay, I can see this being a $50 billion company and if I just stick with it for, you know, maybe it's 15 years instead of, uh, 10 years, uh, you know, that return will, will be worth it."

Harry Stebbings 22:24 How is Airtable a $50 billion company? Like paint the bull case for me there.

Immad Akhund 22:29 I mean A, the bull case for me is Howie is like an incredible founder and I think he's gonna figure it out. Uh, B, you know, if you look at AI, I think it actually like really improves their position, uh, like you have a bunch of data. You have people building basically like internal apps, uh, on Airtable, uh, and they've done a good job of kind of incorporating AI. But yeah. I mean mostly I would say they already have... I think it's the last valuation was 10 billion, so we're only talking about 5X. (laughs) Like I'm, I'm pretty sure he could figure it out.

Harry Stebbings 22:59 You know, there's one rule that I go back to again and again which, you know, kind of conventional rules, which are conventional for a reason. And one of them is Bill Gurley's brilliant article on the 10X, you know, how companies are valued as 10X of revenue across cycles really. That's $5 billion of revenue to be a $50 billion company.

Immad Akhund 23:20 Sure.

Harry Stebbings 23:22 It's a lot.

Immad Akhund 23:22 I mean it's getting... You know, you're seeing these companies scale to like 100 million in revenue in like two, three years now (laughs) so like, uh, you know, 5 billion-

Harry Stebbings 23:30 Uh, uh-

Immad Akhund 23:30 Yeah, good.

Harry Stebbings 23:31 Totally. Does revenue mean less than ever before? Given the transience of it, the lower quality of revenue that we apply to kind of revenue today, does revenue mean less than before?

Immad Akhund 23:42 I think it really matters on what's, what type of revenue it is, right? Like I think, I think the revenue that I am like most skeptical on right now is, uh, this kind of labor replacement revenue. Right? Like you, uh, you take AI and it's like, "Hey, we're gonna be a third of your labor cost. Just install us." Uh-And, and you know, initially people see the ROI, they're like, "Oh, wow," like, you know, "I get something for a third of the price and maybe it's slightly worse in some situations but I still have, like, humans as back off." Uh, but it's just, like, an obvious cost saving, everyone will do it. Uh, the reason that's particularly transient is, you know, n- especially in this environment, you're gonna have three or four competitors also selling, uh, you that same thing. Uh, and eventually a company is gonna go like, "Okay, this actually work, right? But this competitor's doing it half the price." (laughs) Because, uh, like, the cost basis of the software is way lower than a third of the cost. So, uh, yeah, the sell that, like, VCs get and entrepreneurs are making is, "Oh, we're replacing your labor costs, therefore we should charge a third of that." But the reality is once you have a competitive market dynamic, like, the actual margins are gonna compress massively and we'll end up on, like, a tenth or maybe even a twentieth of the labor cost as, like, actual eventual revenue. Uh, and you know, in this- in these spaces, like, everyone's using the same foundation models. Like, we're gonna get incredible competition and, like, the- the- the margin competi- compression is just inevitable. And there's, like, very little moat and network effect against it. So, that's one side of it. I do think the other side, you know, we've seen Cursor with, like, I think they're, like, saying 400 million in revenue or something like that. I think that i- like, that's SaaS revenue and it's actually, like, the value they give is relatively high for the revenue. Again, like, if they tried to charge for, like, the productivity gain, they could charge a lot more. But competition will ruin that, right? Like, Windsurf will come along and charge $20. So because of these competitive markets, like, it's not possible to charge for, like, the value you c- generate. It's actually more, (laughs) you end up charging for, like, what- what you can, like, charge against competitors and- and have- have people not think about it. Uh, but yeah, those things are very sustainable, right? Like, I think once engineers are using Cursor or Windsurf, like, engineers don't like changing tools. The value is much higher than th- the charge. So I think, like, there's- that side of it is- is much more sustainable.

Harry Stebbings 25:59 Do you think we have no defensibility anymore? And what I mean by that is, you see people very quickly moving from, you know, a Cursor to a Windsurf. And it seems like the moat or switching cost is almost replaced now. Do you think we've lost moats?

Immad Akhund 26:16 I mean, we're still in the kind of flashlight/fart apps era of (laughs) of AI. If you know what I mean. There's gonna be so much change and churn in the next few years. But, you know, eventually things will settle down and then we'll have the same defensibility that, like, SaaS apps and other things have had forever, which is, like, you know, what's the strongest brand, uh, and, like, who do people say, like, "Hey, I love this thing. I used it forever," et cetera. Uh, and that brand and- is gonna be able to continue investing more and more in the product because they've, you know, they've consolidated a market position and they can, like, keep improving the product and they'll become multiproduct. And now- now you're getting, like, two or three things from the same place, uh, and, you know, that's sticky in its own way. And they built up their enterprise connections, et cetera. We're just in this place right now where, like, no one knows anything. Everyone's trying to try everything. But I don't see why, like, the- the same things that, like, allowed people to create, like, big companies like HubSpot and Salesforce, et cetera, I think most of those things will exist with- with the modern AI stuff. Uh, we're just in this, like, moment of, like, extreme change.

Harry Stebbings 27:19 What do your team use engineering wise internally? Is it Windsurf? Is it Cursor? What are they using?

Immad Akhund 27:25 I think Cursor's still the- by far the biggest one. I mean, I haven't heard too many people using Windsurf internally.

Harry Stebbings 27:31 Given the productivity gains that it provides in, uh, engineers, you know, HubSpot recently said that they are producing more code that they can ship in features. You know, Salesforce had 20 or 30% of their code is now written by AI. Will you have more or less engineers in five years time?

Immad Akhund 27:49 Um, I think we'll have more. Like, I think the, uh, maybe I'm contrarian about it a little bit. But to me, if my engineers get more productive, I'm gonna come up with more things to do. (laughs) Like, I'm gonna have, like, so much stuff that I want to do. Like, I have, like, infinite ambition, so I think that just, like, unlocks more rather than, like, uh, rather than, like, constraints, like, means that, like, you don't hire people.

Harry Stebbings 28:13 Imman, what have you strategically not done with Mercury that with the benefit of hindsight you think you should have done?

Immad Akhund 28:20 The- the data we had at the time, I don't know if we would have done any differently is, you know, we launched Mercury Banking in 2019. Uh, and at that point, you know, I thought that, you know, Brex was the main player in the credit card space and I was like, "Hey, we'll do banking. You do credit card. We're all good." And then what happened is, you know, Brex then entered the banking space. Uh, and then later Ramp came along and they launched a new credit card. And at that point I was like, "Okay, that was a little silly that, like, we didn't just launch a credit card." Because, you know, it wasn't- in some ways the credit card was s- was easier than banking because we already had debit cards. So we didn't end up launching our credit card until 2022, uh, because I was like, "Let's just focus on banking and, like, let's go really deep here." Uh, and I think that was a mistake. Like, we could have launched, uh, our version, you know, in 2020 probably. Uh, like, we- we instead worked on some other products. Um, so in hindsight I think we g- we waited too long to- to launch that second product and we decided to kind of focus longer on banking. And, you know, it wasn't, like, a mistake that couldn't be corrected, like, we did launch in 2022 and now Mercury, uh, for Mercury customers, Mercury credit card is bigger than, um, all other kind of corporate credit cards, uh, on the platform. But it was, you know, it was two years later than it should have been.

Harry Stebbings 29:41 Is Mercury credit card bigger than Brax's credit card?

Immad Akhund 29:44 For Mercury customers. So, you know, because we are the bank account and we can see, uh, what our customers are spending on, uh, yeah, for our customers it's- it's not just bigger, it's, like, completely dominant.

Harry Stebbings 29:55 How do you think about competition? You are in the most competitive environment now as you see with Brax, with Ramp, and with you.... all very well funded, all doing very well. (laughs) Like, like ironically, there's not one that's, like, not doing well. How do you think about competition when you go to sleep at night? (laughs)

Immad Akhund 30:12 I have two responses. Number one, yeah, I've been doing startups since 2006 and every single year there's been some competitor that was, like, better funded, that was, you know, uh, seemed really scary. And honestly, n- 99% of the time it didn't matter. Like, what mattered is just, like, focusing on customers, building a great product and, uh, you know, most of the time if we failed, we all failed because it was a bad market. And, and if we succeeded, it's because we did our own thing and we just, like, listened to customers and had that long-term vision. Uh, so I think it's really dangerous to be very competitor focused. Like, I don't, you know, I actually don't let our team sp- sp- speak about competitors very much. I'm just like, "Hey, you know, if you have something you want to do, tell me why the customer wants it, tell me why it's, like, part of the long-term vision of the product." But if, if anyone says, like, "We should do this because, like, someone else did it," I'm like, "I don't care." (laughs) Like, it's not a, this is not a reason we do anything at Mercury. Uh, so that's one thing. I think most of the time it really doesn't matter and if you're copying someone, you're copying their mistakes as well as their, their successes. Um, where-

Harry Stebbings 31:19 Yeah, let me, let me, let me pose an alternative.

Immad Akhund 31:21 Go on.

Harry Stebbings 31:21 Counter positioning, one of-

Immad Akhund 31:22 Yeah.

Harry Stebbings 31:22 ... the seven powers. Um, it, you know, Ram and Eric looked at Brex saying, "Hey, spend more, get points," and went, "What's the opposite? Save more and have that as your incentive mechanism." And so they used the inverse as their value prop, no?

Immad Akhund 31:40 Yeah. You know, maybe that worked for Eric and, uh, Gurhunam. That just doesn't resonate with me. Like, I, you know, I approached this market and said, "Hey, I want to be your first bank account." And, you know, no one else has actually approached it like that as like, "We want to be at inception with you," and, you know, we have 200,000 plus customers. We, our scale is much bigger than, um, Brex or Ramp, but not because, like, they're doing something bad. They're just in a different business, right? They have bigger companies. They, you know, they do more enterprise stuff, uh, whereas we're much more at inception stage. Go ahead.

Harry Stebbings 32:15 You're gonna hate this question, so forgive me for it, if you're valued at five billion and you're the first bank account for 200 companies, 200,000 companies, why are they valued then at double you?

Immad Akhund 32:28 Yeah, I mean, each company has to prove out its own thing, so, yeah, I don't know if valuation is, like, the thing I focus on, personally. It's a different market, right? Like, people, people understand, uh, enterprise, uh, like SaaS and, uh, payments a little bit more than they understand banking, all right? Like, you know, apart from Mercury, like, who else is at c- at scale in banking in the U.S.? There's not that many companies, right? Like Chime and a few others. Um, so it's a different market, it's just valued differently.

Harry Stebbings 32:58 My question to you, my friend, is that Angel Investing is going so well, amazing track, 350, and then we're like, "You know what? We're gonna do a fund." Why is

Harry Stebbings 33:09 that? What was the decision-making process for you from transitioning from Angel to fund?

Immad Akhund 33:14 There was kinda two factors for me that drove it, uh, maybe three. Um, number one, I had a bunch of LPs recently approach me saying, you know, like, "We're not gonna put money in your AngelList, uh, thing, but if you set up a fund, we will back you." Secondly, I, you know, my deal flow kinda went up another level when, like, you know, now that, like, 30 to 40% of, like, all startups use Mercury. (laughs) Like, everyone knows about me and then, you know, that, that tends to mean that a lot of people want me to invest and, you know, I got to a level where I just can't look at all of these things. So I really wanted to work with someone, uh, on, on the, on the deals and on the fund. Uh, like I, I don't like doing things badly and I felt like I was being a bad Angel investor (laughs) because, like, if I can't even look at all the things that are coming, coming at me, like, how can I do a good job of it?

Harry Stebbings 34:03 Okay, so I get all those reasons. And so why did we decide to raise 26 million? Can you talk to me about the thinking behind that?

Immad Akhund 34:10 So, you know, what's a little unusual about the fund is it's a, it's a fairly diversified fund. The idea is to invest in 60 companies. Um, and the reason that works is, you know, we're doing these non-lead checks. You know, that makes sense. Like, I'm active CEO, I can't, you know, in all fairness, um, lead around because I just won't have that time, uh, for the company. But also, on the other side, I get a lot of deal flow, uh, and, uh, the best entrepreneurs want me on their cap table. Uh, but, you know, isn't it better if, like, Sequoia or Founders Fund is leading around and, and I get to invest alongside them because I'm not competing with them? So the average, you know, check size is gonna be 150K. Um, so if you do the math, uh, if you're doing non-lead checks, uh, with, you know, a smallish kind of average check size, you, you don't wanna have a, you know, at least, we're targeting 60, 60, uh, company portfolio. It doesn't make sense to have, like, 100, 200 companies in one fund. Uh, so-

Harry Stebbings 35:09 Wow. So, so sorry-

Immad Akhund 35:10 ... then you can kind of-

Harry Stebbings 35:11 ... I'm just, I'm just, I'm just diving in.

Immad Akhund 35:12 Yeah.

Harry Stebbings 35:12 So 60 times 150, we're putting nine million out the door in initial checks.

Immad Akhund 35:18 Yeah. I mean, there's gonna be a few other, like, the strategy also involves, like, some kinda initial conviction checks. Like, if I, you know, if I know someone for years and I'll, um, you know, I could put, like, a million dollars into their-

Harry Stebbings 35:29 Okay.

Immad Akhund 35:29 ... into their seed round. Um, so-

Harry Stebbings 35:31 Do we, do we do reserves?

Immad Akhund 35:32 ... there'll be some of us. Yes, so reserves, but I wanna be kinda more selective about it. I'm, I'm not gonna, you know, I've never believed in this, like, every company gets a, gets a pro rata check because that's just what I do. I'd much rather go like-

Harry Stebbings 35:45 Right, right.

Immad Akhund 35:45 Yeah.

Harry Stebbings 35:46 C- c- can I be so rude as to advise you?

Immad Akhund 35:49 Sure.

Harry Stebbings 35:49 Don't have a reserves strategy. You have access to great later stage capital that would happily do SPVs. For your personal finance, I would suggest you do a spray and pray with as large a cheque as you can get into these rounds. I think 150 to 200 is probably there. But then just do SPVs in the best with a deal by deal carry.

Immad Akhund 36:11 I find that SPVs, like entrepreneurs don't like SPVs. Uh, and I think it's like-

Harry Stebbings 36:17 Entre- entrepreneurs don't care if it's from someone they like and respect and it's done in-

Immad Akhund 36:22 Yeah, maybe.

Harry Stebbings 36:22 ... a timely manner. If it's-

Immad Akhund 36:24 Uh-

Harry Stebbings 36:24 Imagine you being a founder, yeah? And one of your friends is like, "Hey dude, I wanna work with you. It really means a lot to me. I'm really boarding because it's a deal by deal. D- do you mind?" You'd be like, "No, sure."

Immad Akhund 36:35 Yeah, maybe. Uh, the other issue I've had with SPVs is like normally they're FOMO SPVs, uh, where it's like, oh yeah, you know, some lead check comes in and you're like, okay, you know, let me, give me an allocation. Let me go do this SPV. I don't, I don't like that game. Like, I want to, I want to do these reserves when I'm like, hey, I invest in the seed stage. I look at their progress and like, you know, you know within six months whether that company is going to kill it, right? Like, at least that's been my experience.

Harry Stebbings 36:59 Do you think you do? 'Cause I tweeted the other day the opposite. I was in Clubhouse, BeReal, Hopin and, and my point of that is like if I had-

Immad Akhund 37:09 You actually know in both directions. (laughs) Like you have Signal, right? It's- so if you look at- I mean, it doesn't mean you have a guarantee but like six months later if you see that progress, like and if you... I would bet that e- Harry, even in your portfolio if you- six months later if you invested in every one of the things that you think will be a hit, like probably 50% are gonna kill it. No?

Harry Stebbings 37:29 I don't- if I look at like my Fund One, I've got like Linear, I've got Linktree, I've got Captions, I've got Next Health, AgentSync, which were like really solid, you know, 50 million about revenue companies. I would say they were all pretty slow burns actually.

Immad Akhund 37:49 Hm, okay.

Harry Stebbings 37:50 They weren't that obvious.

Immad Akhund 37:51 I mean-

Harry Stebbings 37:51 Maybe it's 'cause they're enterprise.

Immad Akhund 37:53 Yeah, maybe. I mean if I look at mine like Rappi definitely knew within six months. Truebill definitely new within six months. Rippling, I mean Rippling was just hard to get into but like it was pretty fricking obvious. Uh, yeah, Airtable definitely new very early on so, but you know, there's definitely... Like Airtable even like, you know, there was like a three-year period where, where they kind of, uh, took a while to kinda ramp up. Uh, so I don't- you know, maybe six months is like too early but you definitely know before everyone else knows because you own the company and you can see it.

Harry Stebbings 38:23 Do you care about price?

Immad Akhund 38:26 For the, for the reserve part?

Harry Stebbings 38:28 No, no just for like first check.

Immad Akhund 38:31 Uh, I mean you end up being a price-taker as like a non-lead. Uh, so I care about it, like if it's, if it's silly I won't do it. Uh, but you know often the seed market actually as a whole is a little silly and, you know, I've ended up especially recently avoiding AI. Uh, I think AI is overhyped and overvalued and-

Harry Stebbings 38:51 Whoa, whoa, whoa.

Immad Akhund 38:51 Yeah.

Harry Stebbings 38:51 Put-

Harry Stebbings 38:52 put- pause on that.

Immad Akhund 38:52 Yeah.

Harry Stebbings 38:53 Why is AI overhyped?

Immad Akhund 38:55 At seed stage, it's so hard to do AI. I mean, I don't know what you're seeing but like, you know, it's like the, the fourth time I've heard the pitch of the same idea. The founder's raising it like a 40 million valuation and you know, they even have like great, uh, great investors. There's a little bit of traction but, you know, the math is just so hard right now in AI. Uh, it's so every now- I mean, I'm still doing it so like, you know, in the last eight investments that we were just looking at, four of them are AI. So yeah, it's hard to avoid AI completely. But I'm just way more selective and, you know, I think there's way act- there's actually a lot of like, if you look at fintech or I'd end up doing like a lot of space tech or hard tech, yeah there's, there's not that much competition there right now. I think as like a, as a seed investor you can't be doing like too many investments at the top of the hype cycle, right? Like the same thing happened in 2021, right? Like 2021 I mean it was like everything bubbled but-

Harry Stebbings 39:48 All the AI companies that you've done there-

Immad Akhund 39:51 Yeah.

Harry Stebbings 39:51 ... you said, you know, the bar is higher or kind of the qualification process in your mind is kind of tougher.

Immad Akhund 39:55 Yeah.

Harry Stebbings 39:56 What did they have that the others didn't have? What did you need to see to get excited?

Immad Akhund 40:01 So to me like the founder needs to be probably more of a second time founder where they deeply understand that space and they happen to be applying AI to it but it's not like AI for the sake of it. Like I want to, you know, I did one where I guess it's probably private so I won't say, you know, but like really deep in property, uh, PropTech, and they had like a really specific AI application there.

Harry Stebbings 40:23 Mm-hmm.

Immad Akhund 40:24 Uh, so either that or this is like, you know, they already have the traction. Like this is like already seems like a rocket ship and, uh, you know, and I really believe that that traction is real and yeah, the valuation is a little high but I'm s- I, you know, every like you have to kinda jump on some of these rocket ships. So those are like probably the two, two that I am still doing. But the vast majority of, uh, AI at seed out there does not have traction. It's like someone doing like the, you know, the fifth, fifth time the same idea is getting funded right now. Like, you know, it's just- that, that's just what you see mostly happening and but like great VCs are funding these things, right? Like there's like everyone is doing them.

Harry Stebbings 41:04 One of the biggest changes from like five or six years ago investing, there was always two or three competitors in everything five or six years ago.

Immad Akhund 41:10 Yeah.

Harry Stebbings 41:10 But now there's 15.

Immad Akhund 41:12 Yeah.

Harry Stebbings 41:12 There is 15 at sales.

Immad Akhund 41:13 And they're raising like 10 million plus, like it's not like they're like some early, early bets so, yeah, it's crazy.

Harry Stebbings 41:19 Totally agree with you there. So yes, you mentioned space tech. Dude, you're literally having to go to another planet to find the deal.

Immad Akhund 41:27 (laughs)

Harry Stebbings 41:27 I mean literally, and I know nothing about space tech. No offense, but do you know much about space? I feel like your team-

Immad Akhund 41:34 So-

Harry Stebbings 41:34 Can you help me actually? Just fuck it, help me.

Immad Akhund 41:36 How I think about it is when I enter a new space that I don't know that much about, I will make a couple of investments and I'll try to learn from them. So I made my first space investment in I think 2016 or '17. It was Momentus Space. Uh, they ended up doing a SPAC that didn't work out but, but when you make a few investments and you, you know, to make one or two investments you end up speaking to maybe 10 people, right? So, uh, and these people tend to be like, you know, they're at the edge of their space. Uh, you know, it's like people from SpaceX and Blue Origin uh. So you, you end up like qu- learning quickly about like, okay, what are the markets? Uh, and the thing about space that, you know, maybe is unobvious is like it's-It's no longer that hard to get into space, right? Like SpaceX is very repeatable. Like these people are not doing space... Well, they are doing difficult hardware things, but they're not doing scientifically impossible things, right? They're literally saying like, "Hey I'm going to put a computer in like sp- uh, in a satellite and I'm going to put it in space." Uh, so it is tricky though. Like there's three... I don't know how deep you want to go in space tech here, but there's like basically three existing markets in space tech. There's rockets, right? Like getting things up and down, which obviously SpaceX dominates. There's taking pictures from space, um, and that's actually like pretty big market, like $40 billion dollar market. And then there's communication, which likes obviously Starlink and other people are doing. Uh, those are the three markets. Uh, there's almost no other market in space right now. Uh, and I have investments in, like I did Stoke Space, which is like d- doing reusable rockets. I did Albedo, which is like taking, uh, kind of very high resolution pictures from space. Uh, � (whistles) yeah.

Harry Stebbings 43:10 Are the, are the rounds for these companies not mega? And if the rounds are mega, they're very high priced.

Immad Akhund 43:14 Not at seed stage. I mean, at seed stage these companies are like... I mean, they're (laughs) like better than these AI SaaS companies (laughs) at seed stage. Uh, because like they're like, you know, you get there and like these are like... Yeah, it's hard for them to raise big rounds like when they're just starting out and then they have to prove some stuff out. Like, you know, I can't remember their initial Stoke round was, probably like 20 million, uh, valuation. And, you know, they had to prove out like a rocket test and then they got like funding from the government and that now they've raised, I don't know how much they've raised, like more than 100 million. But yeah, yeah, you do have to take the time and be careful to understand it. I don't personally do bio because, you know, I speak to someone and they're like, "We've cured cancer." And I speak to the next person and they're like, "We've cured cancer." And I'm like, "I don't know. You sound good." (laughs) But, uh, but I, uh, but I really think space is not like as hard, but you ha- I have like spent like years kind of trying to understand it. Um, and it's-

Harry Stebbings 44:02 Six- six- 60 companies, Imad.

Immad Akhund 44:05 Yeah.

Harry Stebbings 44:05 You're a pretty busy guy. You run an amazing company already. When a founder takes a check from you, they do expect to be able to have you return their calls. How do you think about gating Imad and preventing a free-for-all?

Immad Akhund 44:21 Honestly, I am so surprised how considerate people are, (laughs) and I wish they would actually ask more for help. So normally I'm like, "Hey, here's my phone number. Just text me if anything comes up." Uh, and most of the time you can actually be pretty helpful in like a 10-minute conversation and, you know, I can slot that in most times. So I would say I end up speaking to an entrepreneur maybe three or four times, uh, a week. But like I think one thing that people don't understand about time is like, time is about energy, not time, right? Like, uh, there are things that like drain your energy and those are hard to do and they like suck up time, and then there's things that are fun. Like I, I love talking to entrepreneurs and helping them out. So like, it doesn't like... I can do that, like I'm literally like I'll go for a walk to like go get lunch and I'll just like talk to an entrepreneur and it's like so easy and it's like, it's just like having a chat with a friend.

Harry Stebbings 45:08 So we've got four pillars in Venture. We've got sourcing, you've got selecting, we've got securing, which is winning, and then we've got servicing.

Immad Akhund 45:16 Yeah.

Harry Stebbings 45:16 Which do you think you're best at and which do you think you're worst at and why?

Immad Akhund 45:21 Um, I mean, I'm very good at winning right now. Uh, you know, with the strategy we have of like non-lead checks, it's, yeah, there's rounds that...

Harry Stebbings 45:30 So w- so at 150 you have- you're flexible. Whe- when you're at 500K, it's a pain.

Immad Akhund 45:34 Yeah, then it's harder maybe.

Harry Stebbings 45:35 150 is better.

Immad Akhund 45:35 Uh, yeah, I mean, I've done rounds recently where the round is fully done with like some hotshot we see and then I still get (laughs) I still get my 150K in after the round is fully done. Uh, so winning is like definitely like easy right now. Uh, I would say the most fun is, is those kind of selecting side of things in the sense that like, you know, you have like these entrepreneurs that are like really teaching you the future. Like I think it's just so fun to like talk to entrepreneurs and like go like, go like, "Oh shit, I've never thought about that." Like, "That's super interesting." You know, I did this company, Etched, which does like ASIC, uh-

Harry Stebbings 46:09 Gavin.

Immad Akhund 46:10 ... chip for-

Harry Stebbings 46:11 Yeah.

Immad Akhund 46:11 Yeah, transformers, eh, uh... And it's like super interesting. I, like that's my only ever semiconductor investment, and I probably won't do another one but, but you learn so much in just like a short conversation. You're like, "Oh wow, I had no idea it works like that."

Harry Stebbings 46:23 When we think about funding this, we have $26 million. How did the fundraise process go?

Immad Akhund 46:29 Honestly, it was surprisingly easy and, you know, I have a really good track record and obviously, um, that made it easier. Uh, so th-

Harry Stebbings 46:38 What do you, what do you... Jo- Joe's side, Imad, did you just like WhatsApp a load of mates and be like, "Hey, I'm doing a fund." Or-

Immad Akhund 46:43 No. I mean, I, I didn't want to have... You know, it's, even to get to 26 million, having a bunch of mates with like 250K (laughs) each just takes forever. So yeah, we had like three kind of anchor LPs that are like more funder funds. And actually the bigger, the easiest ones are definitely like, uh, yeah, either-

Harry Stebbings 46:59 Did you get Sen- did you get Sandana?

Immad Akhund 47:01 Yes.

Harry Stebbings 47:02 Yeah.

Immad Akhund 47:03 Uh, but yeah, the easiest ones are definitely like a mate that I'm like, "Hey, do you want to invest?" And then they're like, you know, they don't even look... I, I, you don't even have to pitch them. They're just like, "Hey, here's a million." Or whatever. But yeah, it was a quick proc- process. I mean, actually the hard bit is like, uh, the, getting the LPA done is ridiculous. Like I don't know how you, (laughs) you all do it. Like it's like a multi-party negotiation for like these kind of esoteric terms. Like that took... I mean, there, there wasn't like any real sticking point but it just took like a month and a half to get it done and I was like, "This is a silly process."

Harry Stebbings 47:33 How long did the raise take?

Immad Akhund 47:35 The actual like getting the, you know, the core allocations done was probably basically like three weeks.

Harry Stebbings 47:42 Okay. Three weeks. What was the biggest check? Not who, but just what is it?

Immad Akhund 47:45 Uh, it's 7.5 million.

Harry Stebbings 47:48 7.5 of 26. That's a lot. Shit.

Immad Akhund 47:51 Yeah. It was good. I mean, it made it easier.

Harry Stebbings 47:54 What was the biggest surprise of fundraising for a fund?

Immad Akhund 47:57 Uh, maybe this is a little harsh. It's, it's boring. It's very boring, uh, because you... Like obviously when you're pitching a company, you're saying the same story again and again. But like you do learn something from the questions you get asked and like you kind of do change the story over time. Like I would feel, I feel like pitching a fund, like there's not much to learn in the process. It's very much like do a bunch of like very repeti- repetitive meetings. I don't know if that's surprising to... I'm sure you know this. But yeah, it was like less fulfilling than I wanted it to be. Like I wanted to go like, "Oh yeah, I'm going to speak to some smart people and learn something." But I was like, "Okay, you know, it's..."Like, I didn't feel like I really got that much out of it beyond, like, doing the process.

Harry Stebbings 48:36 What is the composition of the LPs? It's like fund of funds... How much, how much percent is that, like 50%?

Immad Akhund 48:43 Yeah. Fund of funds is like 60 ish percent. Uh, and then a bunch of kind of entrepreneurs and GPs is like the bulk

Immad Akhund 48:52 of the rest of it.

Harry Stebbings 48:53 Can I be really rude?

Immad Akhund 48:54 Mm-hmm.

Harry Stebbings 48:55 I have a problem with founders that raise money from VCs, and that's your responsibility to build a company. And then you raise money from other LPs where you have another responsibility to optimize the value of a portfolio. I view them at odds. When I raise money from someone that deserves my, my time, and then I'm like being pulled away with another responsibility, why am I wrong to think it's wrong for founders to raise external money for funds?

Immad Akhund 49:27 And you think it's different when it's like angel list rolling fund or y- you're saying same criteria?

Harry Stebbings 49:32 I'm kind of saying the same thing.

Immad Akhund 49:33 Yeah.

Harry Stebbings 49:33 If you're raising additional-

Immad Akhund 49:34 I think that's fair.

Harry Stebbings 49:35 Ang- angel money is totally different. It's your money, do what you want with it. Cool. But raising additional money from additional different LPs.

Immad Akhund 49:44 Yeah. You know, I think A, if you're very transparent about it, like this has always been part of the story. I've said like, I'm a successful CEO and this is what you're getting like, uh, and that, you know, Mercury's my main, main job. So I think that's, that's one thing. B, like, you know, who... Does it work for both sides? So, you know, I have always done the... Like even before I started Mercury, I was a active investor with other people's money. And then during it I was, and I would say part of Mercury's success has been m- my connection with early stage founders. Uh, you know, actually like the, from the first 30 kinda alpha customers at Mercury, I think a 100% of them were like companies I'd invested in. So, like it's always been a core part of like building Mercury has been my investor journey alongside it. Uh, and I do think like, you know... And I talked to my co-founders about it. I was like, "Hey, I do this, like, do you mind?" And they were like, "No, like this is part of why, what makes Mer- Mercury successful." So, uh, that's one side, uh, of it. And then on the other side, you know, I do think Mercury's success, you know, gives me access to that deal for g- gives me the ability to win. Uh, you know, I do invest in a lot of like B2B companies and fintech companies where I have like this unique perspective of being an active kinda, uh, fintech entrepreneur. So, I think as long as it works for all sides and like it probably doesn't work for all entrepreneurs, like Mercury is in a unique position where we do sell to startups, uh, and, you know, that kinda ends up being like, you know, my investing like is helpful to... Like Mercury's invest- helpful to my investing and my investing is helpful to Mercury. That's probably not true for everyone.

Harry Stebbings 51:15 The other question that I had was with absolute respect, y- you know, you, you have a lot of Mercury and you can sell secondary. Why bother raising external money? No offense. Like if you take a look at Carrie, like 20% on 26 is 5.2 of your own money. I know 5.2 million's a lot of money. I'm not belittling it, but you could easily sell 5.2 million in secondary. Fuck it, like, you know, many people will buy it off you.

Immad Akhund 51:39 Yeah.

Harry Stebbings 51:40 Why, why bo- why bother?

Immad Akhund 51:42 Yeah. I mean, I think it's fun to build institutions, right? Like, uh, you know, I'm working with Yash o- on this fund. Uh, I think it can be bigger than just me and just a few angel investments.

Harry Stebbings 51:53 What do you want

Harry Stebbings 51:54 it to be?

Immad Akhund 51:54 I don't know exactly. Like this is the first fund, so I'm not coming at it like, you know, I'm coming at this like, "Oh, let's explore it." Uh, but, you know, I wanna be helpful to entrepreneurs and I, I think I can be helpful to entrepreneurs and I can scale that. Uh, and working with someone, uh, to get the best investments, to kinda scale that portfolio approach, uh, and kind of doing it with more money a- allows me to have a bigger impact. And yeah, you know, eventually there'll be opportunities where we maybe are the biggest check at like seed stage. Uh, or, you know, maybe instead of doing 60, we do 150 in a, in one fund. So yeah, I wanna... Or like maybe we incubate ideas. I mean, I have a lot of ideas, so, so there... All, everything's on the table but at the same time, you know, it's the first fund and I'm, um, I'm definitely approaching it with like an open mind.

Harry Stebbings 52:40 Can I ask you, I think seed is very, very hard state because the multi-stage fund product is so efficient. They are so good fast and their cost of capital is so different to a pure play seed funds, which is like me, means much smaller funds. Do you agree that multi-stage funds have made seed very difficult with such efficient seed products?

Immad Akhund 52:59 They've made it difficult for you, but not for me necessarily.

Harry Stebbings 53:02 (laughs)

Immad Akhund 53:02 (laughs) Because I can... I'm just like, okay, sure. And reason's reading, leading a ride, let, let me join in. There's not that many multi-stage like billion dollar funds, right? Like there's what like eight or nine that like have a brand and, and are there, so. There's... Seed is like, by definition, there's so many unknowns and those, those multi-stage funds are only gonna do a certain flavor of entrepreneur, right? Like often it's, uh, it's either an exec from a big company that's doing like this thing, uh, or it's like a, um, m- multi-time kinda entrepreneur. So, yeah, if there's that flavor that like ticks the boxes for those kind of multi-stage big funds, uh, yeah, it's very hard to try to lead around in, against them. Uh, but there's... Entrepreneurs come in all flavors. Uh, and, you know, I don't think like these first time entrepreneurs that are like hungry and don't know a space but like figure sh- stuff out, like those, you know, the multi-stage funds like have a much harder time with those.

Harry Stebbings 53:56 How do you expect venture to change in the next five to 10 years?

Immad Akhund 53:59 I mean, it seems inevitable that a few of these multi-stage funds will IPO and be public companies, right? Like we heard some s- some stuff about GC doing it. Yeah. I think that's just gonna happen. And yeah. Actually, think more and more c- money is gonna come to this space, which like ironically, you know, we'll... I think we as investors are like, oh, be better if there's less competition, less money, but, but I think the big changes, right, like this company is huge now, right? We have trillion dollar companies, right? When I started investing there wasn't... A $100 billion company was huge. Uh, so the, the end results are so big that people want, uh, want to put money, more money in the space. And yeah, I know we're in a current liquidity glut but that w-... I think that will work out through the system. So yeah, probably bigger multi-stage funds and, uh, more, uh, and they're public. Uh, yeah, and, uh, I think the, the bit that's probably hard is, you know, there's this kinda idea of, like, the barbell kinda stuff, right? The, like, people like, uh, me that are investing kinda smaller checks, like, we'll do fine, and the multi-stage ones will do fine. I don't know what happens in the middle. Uh, I think the middle will have more of an issue.

Harry Stebbings 55:06 I think you do suffer because you pay higher prices.

Immad Akhund 55:10 Yeah, that's true.

Harry Stebbings 55:10 That's, that, that, that definitely impacts your returns with the multi-stage seed product. I would say, uh, you've mentioned the liquidity glut. I'm interested to hear your thoughts on this. You know, the Collisons have said very publicly, "Why do we need to go public? We don't need some, I don't know-"

Immad Akhund 55:25 Yeah.

Harry Stebbings 55:25 ... but I can't remember which brand of bank so I don't want to misquote them, but a brand of bank, 25-year-old, to tell us that margins are important. And the question is, why would anyone go public today?

Immad Akhund 55:38 I think, I mean, I think about it as well. And yeah, I would, I want Mercury to be like a legacy, long-term company, so being public is, you know, inevitable. But yeah, why do it today and not five years from now, or six years from now, or seven years from now? And obviously, Stripe and a few others have delayed it, you know, multi-decades even. (laughs) I think the biggest issue is kind of structural issues in the public markets. Uh, so the two things are, number one, the cost and rules around being public are just so much right now, so it's not, it's just not easy being a public company so you might as well delay it longer. And then number two, there's so few active investors in public markets now, you know, between the, uh, passive index funds. Like, uh, you know, if you're not gonna be in the S&P 500 or one of these other index funds, it's hard to get anyone's attention as a subscale public company, right? Even if you're like a five-billion-dollar company in the public markets, like, you can hardly get an analyst to look at you. Uh, so we've created these, like, kinda structural things that just mean that, like, you know, you wanna be as big as possible. I mean, Stripe could definitely do it, obviously. But yeah, you don't wanna be a Mercury-sized company in the public market. Like, I think most people are saying, like, 10 billion is probably the minimum before you wanna be a public company. So yeah, I mean, I don't know how to fix it. Uh, I mean, ideally we'd make some, like, actual structural changes to make it easier to be public. Uh, otherwise we just all have to wait. I would say there is a lot of liquidity now in private markets, um, so-

Harry Stebbings 57:09 Have you done secondaries for the team and for yourself through funds?

Immad Akhund 57:11 Yeah, we just did a tender, employee tender. Uh, and even without that, like, there was a lot of people selling secondaries along, yeah, since 2021 when we became a unicorn. There's been a lot of, like, early investors, early employees selling secondaries, and there's a pretty liquid market for it.

Harry Stebbings 57:27 Are you okay with that? Like, Nick at Revolut is incredibly tight on secondaries. Especially in between rounds, it can set prices. It can cause some problems if you're not careful.

Immad Akhund 57:38 My take on it is, like, if we were a public company, you know, we're getting priced all the way (laughs) in every direction, right? Uh, and I think it's better for employees to feel like they have a relatively liquid thing a- as comp. Uh, like I don't want, I don't want this to be a lottery ticket that you get it, like, at some point if I decide to go public. I want this to be actual valuable stock that, like, you, you feel the ownership and you feel the upside. And, and part of that is, like, a viable liquidity option, so. So I'm, like, relatively open about it. So far, it's not been an issue.

Harry Stebbings 58:12 Imad, who when they send you a deal are you like, "Ooh, ooh, this is gonna be a good one because it came from them"?

Immad Akhund 58:21 Um, yeah, that's a-

Harry Stebbings 58:22 So like for me, when, when Elad sends me a deal, I'm like, "Oh shit, I'm paying attention."

Immad Akhund 58:28 Yeah.

Harry Stebbings 58:28 He sent me AgentSync and he sent me Vanta. I did AgentSync, I didn't do Vanta, and I fucking should've done Vanta at pre-seed.

Immad Akhund 58:36 Yeah. Elad's great. Um, I really like Fifty Year, you know, Fifty Year Fund, uh, 'cause they do, like-

Harry Stebbings 58:43 Yeah, Seth Rattman.

Immad Akhund 58:44 ... who's, like... Yeah, Seth and, uh, Ella. Uh, you know, they... I'm an LP in the fund as well. Uh, but they do, like, these real long-term focused, like, kinda often strange seeming deals that I, I kinda like the, uh, I like the entrepreneurs they invest in. Uh, I think they're high quality. You know, other people, I mean, I'm a big fan of Sheel and, um, Jake, uh, Better Tomorrow Ventures. Uh, you know, they do fintech-specific stuff but they really know that space really well as well. Uh, so yeah, I t- I tend to, for deals I receive, uh, I actually think, uh, thesis-driven funds are not that great. Like, I think it's better to have, like, a broad, broad investing strategy. But for deals that I receive, (laughs) I kinda like thesis-driven funds because I'm like, "Okay, they know that space really well and they tend to, tend to be good at picking it."

Harry Stebbings 59:30 I love that.

Harry Stebbings 59:31 Uh, listen dude, I wanna move into a quick fire. So I say a short statement, you give me your immediate thoughts. Does that sound okay?

Immad Akhund 59:37 Yeah.

Harry Stebbings 59:38 Okay. So what have you changed your mind on most in the last 12 months? And you can have a second to pause these thoughtful ones.

Immad Akhund 59:46 I don't know if I've quite changed my mind all the way on this, but I was, I would say 12 months ago I was very skeptical we're gonna get to kind of advanced superintelligence. Now I'm like a lot more... I don't know whether we'll get there, like, you know, very soon, in the next five years, but uh, the advancement in AI has just been, like, relentless. And it's kinda persuaded me more on the, on the train that, like, it's probably gonna happen sooner than we think.

Harry Stebbings 1:00:14 What is your favorite AI tool?

Immad Akhund 1:00:16 I use ChatGPT for everything. Uh, like actually I was just doing a presentation yesterday and I basically, like, just talked to ChatGPT for, like, 30 minutes, uh, like, about the presentation. And I was like, "Oh, w- like this and that," and it's just, like, it basically, like, I was, at the end I was like, "Okay, can you write that all in, like, a slide format?" And it just did it for me and I was like, "Okay, that's pretty freaking cool."

Harry Stebbings 1:00:35 What do you know now that you wish you'd known when you started?

Immad Akhund 1:00:38 Yeah, one thing that has been really powerful at Mercury, and I tell every entrepreneur to do this, is like f-First thing when there's, like, three or four people, write down what is your company culture and the c- you know, we wrote down, like, six attributes and the- these things have to be, like, things that, you know, have some trade-offs to them like y- you know, and you're gonna go, like, the hardest one is, you know, we, we look for humble people. Uh, and often, yeah, especially, like, really successful people aren't very humble, uh, and you have to kind of make that trade-off. You're like, "Oh, this is like a successful exec and they seem great but, like, they just have a massive ego." And we never hire those people. Uh, but we wrote that down, like, day one and we've always stuck to it and we came up with, like, you know, we had these six attributes and we came up with, like, interview questions against them and we've always encouraged them internally and it's really b- helped build, you know, even at like a, you know, near 1,000 people, we have this, like, really strong cohesive culture but it's because we did it at day zero and it's very hard to do it later.

Harry Stebbings 1:01:36 I asked you earlier what did you not do that you wish you'd done and you said about launching credit before, um-

Immad Akhund 1:01:42 Yeah.

Harry Stebbings 1:01:42 ... or earlier. What did you do that you wish you hadn't done?

Immad Akhund 1:01:46 Probably, like, the most obvious thing, but anyway it's probably fine, is, like, we raised too much money in our seed round. Like, we raised S- six million, uh, at, like, 23 million valuation. Uh, and, like, this was because I was like, "Okay, fintech is hard. Like, I wanna have so much money that, like, I can go on for three years without raising again," et cetera. But it was, like, such a high dilution round for us. Like, it's by far the highest dilution thing we've done at Mercury. Uh, and, you know, in hindsight if I, you know, knew we would be instantly successful when we launched, I didn't need to raise that much money.

Harry Stebbings 1:02:16 So, you would've preferred to raise three on 23?

Immad Akhund 1:02:19 Yeah. I mean, I think three and a half is probably the exact (laughs) money I would've needed to, like, get to, get to s- my series A and have, like, a buffer. So I, I was a little too conservative. I was like, okay, you know, we need to be, like, really safe and have, have a lot of money and, and I could've raised that much but, but yeah. Very high dilution.

Harry Stebbings 1:02:36 Final one for me, Emad. Can you paint the bull case for Mercury being a $100 billion company?

Immad Akhund 1:02:45 Um, I mean, we are in, like, these two huge markets, right? Like, banking in the US is a $2 trillion market, uh, and then kind of financial software tools is, like, another $500 billion market. Uh, and to me, these two markets should be the same market. Like, you, you have your bank account. That's where you do invoicing, that's where you do bill pay, that's where your credit card and employee spend tools are. I think it's... The only reason these markets are separate markets is because banks don't know how to build software, right? So, I think in 10 years time it'll be obvious that, like, oh yeah, your, your bank is really powerful and it can do all of these things and it's all fully integrated. So, uh, yeah. That's just a fricking huge opportunity and I, you know, that's, like, that's just the US, right? Like, there's, there's a global opportunity around it. There's, like, lots of different types of businesses. Lots of consumer kind of, uh, financial stuff as well. So, yeah. I think this opportunity is, like, so ridiculously huge. That's why, like, you know, when you are like, "Oh, it's so competitive," I'm like, "I don't know." I mean, I d- the, like, for how big this opportunity is, I'm always like, "This seems very uncompetitive," right? If you think about, like, all the B2B SaaS companies out there, there's, like, thousands and that market is smaller than this market. (laughs) Uh, so, yeah. Uh, it's-

Harry Stebbings 1:04:01 Yeah.

Immad Akhund 1:04:01 ... I'm pretty excited about it.

Harry Stebbings 1:04:03 Emad, listen, I'm so excited for the new fund. Uh, I- I hope that we can do some deals together. I'm less of a space investor and so if you do some on this planet, I might be more game (laughs) uh, but I'd love to see some together. And thank you so much for doing this with me, man.

Immad Akhund 1:04:17 Yeah. Thanks for having me, Harry. This was fun.