Martin Escobari: How to Invest During a Recession; Negotiation Tips; Developing Markets | 20VC #948

1. 0:00 – 3:19

   Who is Martin Escobari?

   1. HSHarry Stebbings0:00

      Martin, I'm so excited for this. Thank you so much for joining me today. I was sitting with Seba the other day from dLocal, and he was telling me how wonderful you've been as a partner to him. So thank you so much for joining me today.

   2. MEMartín Escobari0:11

      Harry, I love your podcast and I'm honored to be here.

   3. HSHarry Stebbings0:14

      That is very, very kind of you. I, I also love the artwork behind you. It's much cooler than what I've (laughs) got in my background. But I wanna start with a little bit on you. So now, co-president of GA, where did it start and how did you make your way into the world of venture?

   4. MEMartín Escobari0:28

      I, I come from a tiny town, population 10,000 in the middle of the Bolivian jungle, and I was born in an oil camp to two doctors, parents who were communists. So the first lucky break in this journey that got me from there to here is against their best thinking, they decided to send me to the American school and I learned English. And that was amazing. Uh, when it came to college, I couldn't afford university, so I was limited to only people who offered scholarships, and that happened to be the good universities in the United States. And so I got into Harvard, and Harvard was life-changing to me. And I came as, as a young freshman and I was the first Bolivian in 354 years to come to Harvard College.

   5. HSHarry Stebbings1:10

      Wow.

   6. MEMartín Escobari1:10

      And it was, uh, revolutionary, life-changing, and, uh, it's an institution that I'm eternally grateful for. Uh, but that was sort of lucky break number two in my life. Lucky break number two, I, I did college and business school at Harvard. Uh, after business school, I decided to go live in Brazil because I found Brazil fabulous. It's exotic, it's tropical, it's beautiful, the music, and I had fallen in love with my Portuguese instructor-

   7. HSHarry Stebbings1:37

      (laughs)

   8. MEMartín Escobari1:37

      ... who is to this day very grateful. So then 20 years in Brazil, uh, and my first tour of duty in Brazil was an entrepreneur. I was co-founder of the, uh, number one e-commerce company in Brazil in the '90s, the late '90s, company called submarino.com, uh, which became the first Brazilian company to go, tech Brazilian company to go public. It's the first, the first big home run IPO in, in, in, in, uh, post-bubble. Um, and in the context of building Submarino, I met General Atlantic, and we had met about 200 investors. And General Atlantic was different for ways that I hope we, we get to explore during the podcast, and I fell in love. Unfortunately, they didn't fall in love with me and they didn't (laughs) invest in Submarino. Uh, they should have, but they didn't. Uh, and so be it. We built Submarino, we took it public, we sold it. Uh, but after that, I got a call back from, from General Atlantic, and the second time around they did love me and they hired me to run their Brazil office, we expanded that to Latin America. Latin America is now about 15% of what we do. We've done very well over the last 10 years thanks to people like Seba and Cesar at Gympass and some of the people that you've int- you, you, you've interviewed. And about five years ago, they invited me to be chair of our global investment committee in New York. Uh, and for some reason they thought I was qualified, and that's what I've been doing for the last five years, helping global entrepreneurs. Glo- and so GA is massive, right? We manage $80 billion, 15 offices globally. We've been around for 41 years. A fabulous firm, and I'm proud to be a partner in the firm.

   9. HSHarry Stebbings3:09

      I have to ask, you know, it's such a, such an incredible story. When you think back to, you know, your upbringing, you mentioned kind of the humble upbringing there. I, I gotta ask the brilliant one,

2. 3:19 – 4:25

   What are you running from/towards?

   1. HSHarry Stebbings3:19

      which is, if we're all a function of our pasts, what are you running from and what are you running towards, Martin?

   2. MEMartín Escobari3:26

      Oh. (laughs) Bolivia is a place of limited possibilities because of its history, because of its poverty, because of its lack of infrastructure and opportunity. And a starry-eyed dreaming boy is claustrophobic in a world of limited opportunities, and gets a little crack in the door in a world of limitless opportunities in the US at Harvard, and it's a little boy in a candy store. And I love limitless opportunity. And as I've seen my life transformed by the opportunities provided by the universe and the US and elsewhere, I wanna help other entrepreneurs and other people globally tap into that little door into a world of limitless possibilities. So, uh, that's my journey.

   3. HSHarry Stebbings4:23

      Can I ask, what do your parents,

3. 4:25 – 5:23

   Were your parents proud of what you accomplished?

   1. HSHarry Stebbings4:25

      like, you know, when your parents saw you, uh, scale, go to Harvard, uh, they must have been immensely proud.

   2. MEMartín Escobari4:33

      They don't know what Harvard is. No, now they do. I mean, they, they had never been to the United States. I didn't know what Harvard was. To be honest, I actually wanted to go to Yale because, uh, it was ranked number one in some ranking I had seen. I was like, "Eh, I can't tell apples from oranges. I need to go." You know, Harvard was number two, Yale was number one. I got into Yale, I got into Harvard. And then a very famous guy from Bolivia, the Governor of La Paz, called me, uh, and said, "You are going to Harvard, right?" And I said, "Sir, uh, I'm sorry, it's, uh, number two. I'm going to number one." And he convinced me. I had no idea. I landed there, I was like, "Okay, fine, whatever." So, uh, yes, now they understand and they're very proud. At the time it was sort of like, okay. You, you know, scholarship, okay, you can go.

   3. HSHarry Stebbings5:19

      It's a very big thing. And you, as you said, the first Bolivian in, you know, over 300 years.

4. 5:23 – 6:53

   Did you feel imposter syndrome at Harvard?

   1. HSHarry Stebbings5:23

      Did you feel a little bit out of place when you first arrived? You know, and VCs often talk about imposter syndrome. Did you feel a little bit like you didn't belong?

   2. MEMartín Escobari5:32

      I remember this, so Harvard has 1,600 people as freshmen-

   3. HSHarry Stebbings5:36

      Yeah.

   4. MEMartín Escobari5:37

      ... and when I arrived, and interestingly in Bolivia you have to do military. So, uh, and it's very short because w- most people get disqualified on medical grounds because they can't afford to have everyone in the military. But I did spend a week in the military, so they shaved my head. So here are those eyes with... And I, I don't have a small head. You can't tell in Zoom, but I, I had a rather big head. It was shaven, and I dressed rather modestly, and I was thrown into Harvard College and I had the feeling I was the dumbest of the 1,600.... the absolute dumbest, and it took me two weeks to find someone that I thought was probably at my level. And I relaxed in that moment, and I said, "Oh, I'm not alone." (laughs) And, and you know, it takes a while for you to build self-confidence, but it was an overwhelming experience.

   5. HSHarry Stebbings6:18

      Yeah.

   6. MEMartín Escobari6:18

      And, uh... And, and, uh, Harvard tr- tries its best to make you feel less overwhelmed. It is impossible not to be overwhelmed.

   7. HSHarry Stebbings6:24

      I totally get that. It's, uh, so, it's such a good... This is like one of my favorite stories. Most people are like, you know, "I grew up in Silicon Valley, and I went to Stanford, and then I became a VC."

   8. MEMartín Escobari6:34

      (laughs)

   9. HSHarry Stebbings6:34

      "It was so surprising." And like not really surpri-

   10. MEMartín Escobari6:37

       It was so amazing.

   11. HSHarry Stebbings6:37

       Not really surprising actually. Uh, uh, you mentioned Submarino there, and like the incredible journey, that taking it public. And I didn't see the boom times of the '90s, not meaning to age you, but I was born in the mid-'90s respectively. Uh, so I didn't quite live through the-

   12. MEMartín Escobari6:51

       Thank you. I appreciate that.

   13. HSHarry Stebbings6:52

       Yeah, uh, but... (laughs)

   14. MEMartín Escobari6:52

       (laughs)

5. 6:53 – 9:32

   Biggest Lessons from Submarino

   1. MEMartín Escobari6:53

   2. HSHarry Stebbings6:53

      What are one or two of the biggest lessons that you have from that incredible journey with Submarino, going through what was such a fascinating '90s period?

   3. MEMartín Escobari7:02

      There's two sets of lessons. One is around what it's like to operate in a bubble, and then there's, there's other sets of lessons around what it's like to be an operator. So, but let's do the operator one because there are relatively few people in the investment profession who have been operators. I think it's a fabulous school to spend time as an operator before you become an investor. And the two things I learned as an operator, first of all is how hard life in startup is. And y- you hear people talk about it. You hear Steve Jobs talk about it. You hear Bill Gates talk about it. When you feel it, you understand. And the big conclusion of understanding that pain and suffering and toil is you recognize that the her- heroes of the entrepreneurial journey are the managers, are not the investors. We are the supply lines. We provide oc- occasionally a good idea, we support, but the people on the front lines are the true heroes of the story. We owe them our success as an investor, and what they do is hard. And nothing would upset me more than, uh, coming to a board meeting as an entrepreneur, bloodied in the hands of the things I had to do, and a 23-year-old snotty guy complain about us meeting our working capital, uh, uh, uh, targets for the quarter, not understanding the complexity of all the things we were trying to do.

   4. HSHarry Stebbings8:19

      Martini, are you having, are you having a go at me because of the age joke?

   5. MEMartín Escobari8:22

      (laughs)

   6. HSHarry Stebbings8:22

      I'm 20, I'm 26. How am I-

   7. MEMartín Escobari8:23

      I am getting back at you because of the age joke. (laughs)

   8. HSHarry Stebbings8:27

      (laughs) 26.

   9. MEMartín Escobari8:27

      But that's a mistake I, I, I, I counsel all our teams not to make because life on the other side is really, really hard.

   10. HSHarry Stebbings8:35

       Yeah.

   11. MEMartín Escobari8:35

       The second realization is, um, in the process of human learning, you, you read a theory, you, you understand it, but when you feel it, you internalize it. So we read that working in a expanding market is better than working in a stagnant market. We read that there are certain business models that have moat and that have competitive differentiation, those are better than commoditized. When you have lived the difference of what it's like to swim against the tide and for the tide and what it's like to run a business that has competitive differentiation and one that is not, it is a different appreciation of the beauty of market growth and the elegance of business models. And I, I invest in things that have two things going for them, beautiful business models and win in their sale in terms of market growth, because I felt what it's like when that's not the case.

   12. HSHarry Stebbings9:27

       Can I ask you, how much... And sorry, this is a terrible question, you can, you know, beat me for

6. 9:32 – 13:03

   The Balance between Founder, Market, and Business Model

   1. HSHarry Stebbings9:32

      it later. How much of a role then does the founder play? 'Cause I, I lost money recently, amazing founder, terrible market. And actually, the centrality of market has become a lot more poignant to me as I invest more and more. How do you think about the balance between market, founder, and business model?

   2. MEMartín Escobari9:49

      We have 43 years of data at General Atlantic, and when we l- and we've done over 400 transactions. We know, we, we're very experienced. And across ch- all, the entire world in six sectors. Over the 40 years, 10% of the transactions lead to 50% of the gains, and that's been consistent throughout time. And we lose money on 3% of the, of, of the cap, and, and that has stayed also consistent. When we were looking at the common characteristics, and we have all this data now, there's seven things that matter in terms of your, your probability of being in that 10%, uh, that lucky 10%. The three more statistically significant things, size of the market, defensibility of the business model, the quality and the capabilities of the team, the three things, equally significant. But the most significant, size of the market, because no matter how good a team and a model is, you will never outgrow your market. We are lucky as investors, we don't need to choose situations we only get two of the three. We can be picky enough to only invest in things that have the three things. So my advice to you is don't compromise on these three, because you don't need them.

   3. HSHarry Stebbings11:01

      The hard thing I find is, what do you do in a case of market creation or extreme market growth? You know, when you look to some things like Twilio, often in B2B this happens, like Twilio, um, everyone predicted this would be a $2 to $3 billion company at best, and in the pandemic when, you know, prices were high, it was a 40, $50 billion company. You know, we always underestimate the size of our winners because they lead to market growth. How do you think about that as an ancillary point?

   4. MEMartín Escobari11:26

      That's a great point. So one of my mistakes as an investor is, uh, Anton, my friend, uh, Anton Leavy, co-president of the firm-

   5. HSHarry Stebbings11:33

      Uh-huh.

   6. MEMartín Escobari11:33

      ... invited me to look at Uber, the $2 billion round, because of the international opportunity, and we went and we met Travis and... the entire black market industry, and at the time, Uber was just Uber, uh, the, uh, the premium Uber, was less than $2 billion. So we were like, "We can't pay $2 billion for a business that's going after a term that's only $2 billion." It just doesn't work. So we passed. Of course, Uber redefined what it does, launching UberX and Uber Eats and all the, all these, all the extensions that, that Uber did.... eh, and we missed it. So one of the hardest things of an investor is to look at these three variables, and there are other variables, but to run simulations in your mind of alternative universes where those things change dynamically. So the team is augmented to fill in a gap, the time is expanded to change in a different way. The, the, the, the experience curve is so strong that the mode is built through experience, not through structure. Eh, so it's just, it's a dynamic puzzle that requires a leap of faith. Sometimes certain situations are easier for such expansions to happen, and you lean on those. Sometimes it's not as easy, and you say, "Listen, this is too unlikely." Eh, and great managers are very good at redefining their markets. So you're absolutely right. It's not as simple as seeing what the current market is today. You have to sort of imagine alternative

7. 13:03 – 14:16

   How to Prevent Biases from Impacting Future Decisions

   1. MEMartín Escobari13:03

      universes.

   2. HSHarry Stebbings13:04

      You know, the other really challenging thing that we have to do, we have to prevent biases from in- by infiltrating our decision-making process. And what I mean by that is, when you lose money, es- in a certain space, you just inherently think that space is shit. It's a bad market. It's got bad business models. Often, for me, that's healthcare. How do you prevent biases from past investment successes or failures impacting your future decisions?

   3. MEMartín Escobari13:28

      Listen, eh, understanding your biases, not just based on history, but based on psychology, is one of the greatest challenges of our profession. No matter how pure your heart is, you have biases. And if you don't admit to them, you're lying to yourself. So I admit to my biases, and when we discuss a transaction with the team, it's like, "I know I have this bias. I have this opinion, but I'd like to explain to the team that my opinion would be wrong because I know I have this bias." And then we challenge the opinion, then we come to the conclusion. So voicing out that you have this bias helps you address and mitigate the bias. Eh, but it's, it's hard. Uh, we are all victims of our upbringings and our experiences and our successes and our failures.

   4. HSHarry Stebbings14:14

      I, I think, uh, for me, it's one of the hardest,

8. 14:16 – 17:04

   How did you know the economic downturn was coming?

   1. HSHarry Stebbings14:16

      I have to say. Speaking of kind of hard, um, I've never seen a downturn before, Martin.

   2. MEMartín Escobari14:22

      (laughs)

   3. HSHarry Stebbings14:22

      Um, and, uh, well... (laughs) Thank you for that sympathy. Um, and there are many others who have not seen one before. And my question to you is... I, I spoke to Cesar at Gym Pass in particular, and he told me that you predicted the downturn and kept disciplined. Wh- what made you think the downturn was coming, and in what ways did you keep disciplined?

   4. MEMartín Escobari14:43

      One of the problems of the venture capital community and the growth community is we're extremely pro-cyclical. We drink our own Kool-Aid, we over-invest in the peak of the bull market, and we lose all discipline. And it happens time and time and time again. Why it happens? Because the technology is exciting. Because people begin to make lots of money as more and more people join into a trend. Eh, because some of the best companies only raise money when, and come up for air, when the valuations are very high. So the incentives... And we all suffer from follow-up. Eh, the incentives all... are, are, are, are, are, are all wrong. We've seen it enough times at GA that we built guardrails to protect ourselves from the, the siren songs of this sort of fake bull market, eh, eh, and, eh, and not do silly things like a lot of our competitors did, and we can talk about those guardrails. But you know things are s- really, really silly, and it's beginning to be the end of the bull market when three things happen. First, everyone's making money, even the le- least talented people in the market. That's a clear warning signal, when everyone's making money. Eh, secondly, eh, traditional forms of valuation are disregarded. We make up new metrics. So it's not... uh, it's, it's, it's not, it's not EBITDA, it's not profit, it's not cash flow. It's ARR adjusted for gross.

   5. HSHarry Stebbings16:06

      (laughs)

   6. MEMartín Escobari16:06

      Like you, you, you... You know, that's... Yeah, and it's not 10 times, it's 20 times. And then the third one, in the peak of FOMO fever, deal velocity spikes to the point that deals are getting done in weeks, not months. When those three things happen, you know it's last dance. So what did we do? 2021, we told... We were liquidity-minded, we had record liquidity. Eh, but more importantly, we told all our companies, "Get to fully-funded plans." We told Cesar. We told, uh... Uh, Saleha didn't need to because he was making profits. Get to fully-funded plans. So in 2021, our portfolio raised $20 billion of primary capital, 19 of which from other parties. Today, we have 200 companies, 97% of them fully-funded plans. The world is nervous. A lot of entrepreneurs are nervous. The vast majority of entrepreneurs have a full tank of gas and are ready to capitalize on the opportunities that happen when everyone else is nervous. It is the most fun time.

9. 17:04 – 18:10

   Why Investing is More Fun during a Downturn

   1. MEMartín Escobari17:04

      This is a lot more fun than 2021.

   2. HSHarry Stebbings17:06

      Why do you, why do you think it's fun? Because I, uh, as an investor, say, I don't think it's fun, because as you said, the good companies don't need the money or have raised from existings who are willing to give them more money to extend their runway. And so the only companies that are actually raising today are companies that need to and are, I think, lower quality. And I think Q3, Q4 next year, you'll see the repricing of good assets who've run out of extension periods. But right now, it doesn't seem fun. Why, why am I missing the trick? Why are you having fun?

   3. MEMartín Escobari17:34

      Fun is a strong word. Rationality has restored, has been restored. Companies that had did their homework, are efficient, have cash reserves, will consolidate their industries and reimagine and redefine what it is they came to do in their markets. Reimagining industries, taking advantage of you having done your homework, I think is fun. It's a lot more fun than competing for deals on, on, you know, two weeks' notice and paying 20 times ARR. I, I find that irresponsible with the capital of our capital partners.... eh, redefining industries, or potentially redefining industries

10. 18:10 – 19:27

    How did GA avoid the hype and FOMO of 2021?

    1. MEMartín Escobari18:10

       is a lot more fun.

    2. HSHarry Stebbings18:11

       Can I ask, what did you do within GA to prevent yourself falling victim to the same hype, excitement, and FOMO that everyone else really engaged with so heavily in '21 and '20?

    3. MEMartín Escobari18:23

       Listen, we, we, we're, we're not perfect. But what we did learn, and we learned this in, in 2000, is the two ways you get hurt is you spend too much of your LP's money at the peak of the market, and then you have too many unfunded business plans, who need to raise money when everyone's frozen. And either that money is very expensive and your shareholding gets diluted, or the companies die. We lost a big percentage of our companies in 2000. That was GA. So the two things we said is, "We're never gonna run our commitments faster than three years, and we wanna make sure the vast majority of our companies have fully funded plans." And we got that done. And it's really hard, because every one of our competitors was running their funds in 12 to 18 months.

    4. HSHarry Stebbings19:03

       Yeah.

    5. MEMartín Escobari19:04

       Deploying capital at three times the rate we were. And a lot of the young guys were like, "We're not getting enough reps. We're missing the boat. This is a new market. The new... The, the, the venture capital market has been, has been transformed by a new way of doing transactions. You guys are not keeping up with the times." And we were like, "Calm down." And, you know, I, I think the data is still out, but I think the more measured strategy probably yields

11. 19:27 – 22:08

    Advice for Young Investors Seeing their First Downturn

    1. MEMartín Escobari19:27

       better returns over the decade.

    2. HSHarry Stebbings19:28

       It's so funny. You kinda come to the realization that actually very little changes over time in some ways. (laughs) Do you know what I mean?

    3. MEMartín Escobari19:35

       (laughs)

    4. HSHarry Stebbings19:36

       Uh, I remember when people were saying, "It's the end of cycles," and now you're like, "Really? Really? You lied to me." Um-

    5. MEMartín Escobari19:41

       (laughs)

    6. HSHarry Stebbings19:42

       ... Martin, me and you are sitting down. I'm a young member of your team and I'm nervous. How do you advise me as the wise elder, w- young elder, of course-

    7. MEMartín Escobari19:52

       Yeah.

    8. HSHarry Stebbings19:52

       ... um, advising, you know, the, (laughs) the young investor-

    9. MEMartín Escobari19:54

       Yeah.

    10. HSHarry Stebbings19:54

        ... on this new market and how I should operate?

    11. MEMartín Escobari19:58

        I remember when my wife was pregnant with our first kid. We go- we have two girls. And it's so nerve-wracking for a young woman to have her first baby and see her body change in ways that are completely new and unpredictable. And our doctor said, "It's been done before."

    12. HSHarry Stebbings20:16

        (laughs)

    13. MEMartín Escobari20:18

        And that, when you put it in that context, there has been billions of births been done before in humanity, you're like-

    14. HSHarry Stebbings20:25

        (laughs)

    15. MEMartín Escobari20:25

        ... "Yeah, okay." So, so living through the cycle you're living through, Harry, has been done many, many times, uh, before. The most important objective you should have as a company, as an entrepreneur, as a founder, as an investor, in this period of adjustment is to not die as a company. Have a fighting chance at the new day. Because the wheel of fortune always turns. It, it's nev- it's never sunny always and it's never runny, rainy always. It always turns, and you just have to be alive for the next sunny time. And if you do, you're gonna do great. So Sumarina, which I told you the, the, the, the, the, uh, the, uh, the short story, the long story is we ran out of money. We had raised $200 million. We were three weeks away from IPO in 2000. The market crashed. We had opened Sumarina in five countries. I had personally opened, uh, four of those countries. We ran out of money. We had to shut down the four countries, focus just on Brazil, put ourselves for sale. Strategic buyer offered $25 million for us. Eh, we were about to go public at a billion. S- three months later, $25 million, and after due diligence, left us at the altar because he said we were more valuable dead than alive.

    16. HSHarry Stebbings21:36

        (laughs)

    17. MEMartín Escobari21:37

        And we had to... We spun off a business unit to raise some cash. We bro- we, we worked really hard in efficiency and we broke even, and then the market returns and we went public. And that same buyer that left us at the altar for 25, in a merger transaction, ended up paying close to 2 billion two years later. So the wheel of fortune always turns. You just can't die. You can't shut down. So Harry, just stay alive. It's gonna be okay.

    18. HSHarry Stebbings22:05

        That's a relief. And I love that story about your wife and the pregnancy.

12. 22:08 – 25:13

    What were the internal discussions when Softbank and Tiger were buying up everything?

    1. HSHarry Stebbings22:08

       That's fantastic. But you ment- you mentioned kind of, like, retaining a sense of rationality and, um, discipline. You know, bluntly, every big fund was going, "Oh my God, we're getting eaten alive by Tiger and SoftBank in every deal." Can I ask, what did your internal discussions look like when SoftBank and Tiger were running rampage on growth and actually winning good deals often, but beating a lot of... I'm sure they didn't beat GA. But, you know, beating a lot of great growth players because of speed and price. What did those discussions look like?

    2. MEMartín Escobari22:44

       In growth and in emerging markets, which are new markets, right? Growth markets are new markets and emerging markets are new markets, you often get tourists. Tourist capital shows up when it's sunny, and they're very excited, they're very loud, but as soon as it gets a little rainy, they always leave. So we knew this was a temporary phenomena, uh, but we didn't know how long it's going to be, and we lost to them. You know, uh, you know, here's a sort of wise, seasoned manager that adds lots of value, but requires three months of due diligence and pays 40% less than a guy that gives you a check in three days. Hard to compete. So it, it, it, it was humbling, and we did lose some, some, some opportunities, some great opportunities. But the damage that these tourist capital, uh, do is twofold. Uh, they encourage, and again, this has happened before in, in history, they encourage a mentality of growth at any cost-

    3. HSHarry Stebbings23:41

       Sure.

    4. MEMartín Escobari23:42

       ... which is not healthy for the development of companies. Um, because if you grow measured, in a measured way, and focus on unit economics and focus on fundamental, the feedback loops are... come in time, so you can fix your strategy, uh, and make your company even better before you've spent all your capital.

    5. HSHarry Stebbings24:05

       Mm-hmm.

    6. MEMartín Escobari24:06

       Yeah. But when you're doing things so quickly, that feedback loop is, is, is noise.... and you just burn through the, t- $100 million, uh, without having the benefit of learning. And companies lose themselves when they stop listening to the signals and just ride the noise and spend money, uh, like crazy. And that's the real damage. You know, we lose market share, that's fine. Companies losing discipline and losing their soul and ending up in situations where they don't have business models that can survive is the real danger. And that's what we're gonna have. The hangover of a period of excessive abundant capital globally, not just in Latin America, is that you have a large percentage of the companies who g- got lost in this abundance of liquidity, and today, don't have viable business models, and will, unfortunately, cease to exist.

    7. HSHarry Stebbings24:54

       (exhales) That's tough. Um, (laughs) well-

    8. MEMartín Escobari24:58

       (laughs)

    9. HSHarry Stebbings24:58

       (laughs) ... that's a bit of shit. Um-

    10. MEMartín Escobari25:00

        (laughs)

    11. HSHarry Stebbings25:01

        ... uh, but the whole thing is I do feel for the founders 'cause it's like if they don't accept the term sheet for a large amount of money, their competitors will, and then they'll just outspend them on every channel. And so the capital kind of forces you into it

13. 25:13 – 26:45

    When Being Outspent by the Competitors Matters

    1. HSHarry Stebbings25:13

       without a choice, no?

    2. MEMartín Escobari25:15

       E- there's only one situation where being outspent by the competitor is dangerous. I'm oversimplifying, but it's, it's to make a point. It, it's in a winner-take-all market. If you are in a winner-take-all market, you're trying to be the search engine of Brazil, you're trying to be the Alibaba b- marketplace of, of China, and it's very clear the network effects are such large that the winner captures everything, then your logic is absolutely correct in that you, you want to suck in all the capital and make sure you are the winner. Even if, if you end up being diluted to a 5% stake as a founder, the winner is so valuable, number two is not valuable, so you go all in for the winner. Only f- 3% of business models are winner take all. Most business models are winner take most. And that's fine. And in most situations, it is often the follower that does even better because they learn from the mistakes of the leader who spent all that money recklessly without listening to the signals, and you're listening to the signals, and you're being wise. These guys gets exhausted, and you win. Google was not the first search engine. Uh, Facebook was not the first social media.

    3. HSHarry Stebbings26:20

       I, I, I totally agree with you, and I totally get that. Uh, you mentioned, um, losing, pft, a capital times to the players that we mentioned. Bluntly, most often they won because of price, (laughs) without kind of throwing shade.

    4. MEMartín Escobari26:33

       Well, th- they're charming, they're smart. They're, they're good people. I'm, I'm, uh, you know, we all have good friends there. I mean, they're, they're...

    5. HSHarry Stebbings26:38

       Sure.

    6. MEMartín Escobari26:38

       Not just price, but they're-

    7. HSHarry Stebbings26:39

       No, but it's, but-

    8. MEMartín Escobari26:40

       ... it's a different value proposition.

    9. HSHarry Stebbings26:42

       So, so let's just run on price, um, but

14. 26:45 – 28:08

    Lessons in Pricing

    1. HSHarry Stebbings26:45

       well done in elegance there. Um, when you think about kind of pricing, uh, what have been, like, some of your biggest lessons on pricing? 'Cause I always think when it gets to growth, $500 million plus, this is when price really, really matters. From your experience, how do you reflect on your own price sensitivity and the importance of price?

    2. MEMartín Escobari27:03

       Price matters, especially in the later stages. Everyone who says price doesn't matter hasn't been around long enough to have experienced that it does matter, actually. In negotiating price with an entrepreneur, it is often that the investor has a lot more information than the entrepreneur, and it is often that the investor has a lot more experience negotiating terms than an entrepreneur. One of the things I've done f- since the beginning of time is I believe in paying the fair price, and I start with the fair price, and I don't really move very much from the fair price. And if it works, it works. And if it doesn't work, it doesn't work. And the fair price is the price that allows me to get at least a 25% return in five years based on a PE multiple exit by the time I exit, and I backtrack into what I can afford to pay today on a base case, or sometimes we do scenarios because it's, uh, you know, they're a weighted, weighted average base case, and that's the price I'm willing to pay. And it's hard sometimes to negotiate, and sometimes it's not hard, but I think that's the point at which a partnership starts. And the partnership with the investor and entrepreneurship start at a fair position.

    3. HSHarry Stebbings28:04

       I totally agree with you in terms of starting in a, a fair position.

15. 28:08 – 30:21

    Lessons in Negotiation

    1. HSHarry Stebbings28:08

       I, I do have to ask, I, I heard that you are a master of negotiation as well. So, while we're on price, (laughs) it was also all of your founders that told me what a brilliant negotiator you are, so clearly, uh, you won. Uh, but, uh, (laughs) my question to you is, what is the art of successful negotiation? What are your tips? Just talk to me about how you think about getting the best deal.

    2. MEMartín Escobari28:29

       So first of all, you're not trying... It's not a win-lose game. It's a dance to get to a fair price and begin to build the partnership. The fair price, when you were competing against SoftBank and... Over the last three years, and you've talked to people who've become partners of GA over the last three or four years, which was crazy la-la land, we looked like tough negotiators because we were pricing things 20, 30% below the, the tourists. And to get there, it's hard, and you have to convince them, and you have to be tough, and you have to be resilient, and we were that. Right now, it's the opposite. The, if you do the same interviews three years from now, because the, all the tourists have left, and it's just us, we're overpaying for assets all, all across the world because we're the only ones, uh, not, not only ones, but the prices have readjusted, and we're still paying the fair price. It's just, it looks a little more rich now than it did before. So I, I don't think I'm particularly good negotiator. I am committed to getting... to only doing things that are a fair price. And something that really helps is, um, at GA, we meet 10,000 companies a, a year. We invest in 50. So we say no a lot. At GA, our most valuable resource is our time. I mean, my time is so precious. Your time is so precious. We're, we're, we're on Earth for so few years. We're at the peak of our capacity for s- even a small fraction of those years. If we wanna maximize impact, let's do it with people that really wanna do it with us. So I, I have no patience for people who don't wanna start that kind of partnership with me. If you don't agree with me that we're the right partner and this is a fair price, I'm okay. I have, I have many other places to spend my time with people that do agree this is a good match, and that's probably a better match for us anyways, so I'm, I'm okay. So this willingness to go, to walk away is important. And people sense it, and they know it's genuine. It's not an act. I honestly have a million things I'd rather do.... than haggle over price with someone who

16. 30:21 – 34:30

    How does GA make decisions?

    1. MEMartín Escobari30:21

       doesn't believe in the fair price. "Oh, you can? That's okay."

    2. HSHarry Stebbings30:23

       Can I ask, how does GA make decisions? You mentioned the 50 investments there, the 80 billion under management, the big team, the global team. How do you make decisions?

    3. MEMartín Escobari30:33

       Oh, this is a good story. So when, um, Bill, our CEO, invited me to be chair of the IC, I mean, I got the imposter complex, right? I'm a little guy from Bolivia. (laughs) Uh, I, I, I've been faking it. I, I, I, I, I could, I could trick the Brazilians, but I'm not gonna trick the New Yorkers.

    4. HSHarry Stebbings30:48

       (laughs)

    5. MEMartín Escobari30:48

       So I go to New York, and I interview the founders of our firm, uh, uh, Steve Denning and, and Dave Hodgson. And, uh, Steve is chairman emeritus and led the firm for the first, you know, 25 years of its history, former Navy man, McKinsey guy. And, and I said, uh, "Steve, help me think through decision-making of such a complex global organization." And he said, "You need to create a checklist. Look at our f-" you know, at the time, it was 35 years of data. "Look at our best performances. You come up with a checklist and make sure that everyone uses the positive and the negative checklist." I was like, "Checklist. Oh, obvious. We should all use the checklist to simplify notes. Okay. Good, good, good." And then I go to Dave Hodgson, same day, and I say, "Dave, you know, help." Same question. And he says, the first thing he says, "Resist the temptation to use a checklist."

    6. HSHarry Stebbings31:41

       (laughs)

    7. MEMartín Escobari31:41

       And I'm like, "Dave, you guys were partners for 30 years. You made decisions that were brilliant. The IRR was through the roof. And you can't agree how to make investment decisions?" So I was like, "This is paradoxical." Uh, and then it turns out when you do the academic research, uh... You, you know, I don't know if you've read Thinking, Fast Thinking Slow. Um, it talks about, you know, different parts of the brain and how, how one is, uh, primitive and one is sophisticated and how we have biases. And actually, the insight of the book comes from the author was a psychologist in the Israeli Army developing the interview guidelines for the Special Forces. And he developed a checklist because the checklist is a way of curing the biases.

    8. HSHarry Stebbings32:19

       Hm.

    9. MEMartín Escobari32:19

       So he's a believer of the checklist. But then it's actually not in the book. I actually read this after finishing the book in a, in another interview that he did. When he looked at statistic, there were certain people that were better at using the checklist than others. So there were certain interviewers that had, uh, scores like 99%. And you can tell when, you know, if you've selected the right people into, into the right unit because they do well in the unit. And he went and interviews this woman who's the master interviewer, and she says, "I look at the checklist, and then I close my eyes and listen to my intuition."

    10. HSHarry Stebbings32:53

        Huh.

    11. MEMartín Escobari32:54

        So I'm a believer that educated intuition is the best way to make decisions. And the way you educate the intuition is you ground yourselves in facts. And the checklist is a way, way of making sure you've collected all the right facts. And then once you've looked at all, you close your eyes, see how you feel.

    12. HSHarry Stebbings33:14

        Can one person lead a deal? Do you need the team behind you? How does consensus versus conviction work for you?

    13. MEMartín Escobari33:21

        So we have a four-person investment committee. You need three, three people to, uh, vote yes, uh, out of the four, and that is the co-pre- uh, the co-presidents and the CEO. Deal teams are staffed trying to get the best of the local, uh, expertise with the global expertise. W- we're the most global of all investment organizations I've come across, uh, because more than half of our people and more than half of our assets are outside the United States. But we partner in every deal. The sector's experts, typically in the US or Europe, partner with the global teams. So we get the local and the, um, and the global, uh, sector expertise. We all get paid out of glo- the same pot, so no one gets paid of their individual performance. We get paid o- out of global performance. But more importantly, we have a culture of extreme transparency. We go to the investment committee not to sell the deal but with the three things that are keeping up us at night. It's like, "Guys, uh, you saw the memo, and the memos are standardized, and, uh, all the checklists are standardized, but like, these are the two, three things I struggle with. Let's make this decision together." And it's typically two partners on a deal plus the four of us in, in the committee, and we discuss things three,

17. 34:30 – 36:24

    Creating an Environment where Young Investors Feel Safe to Speak Up

    1. MEMartín Escobari34:30

       four times at committee. And it's hard.

    2. HSHarry Stebbings34:32

       How do you create an environment of safety where younger people, in particular, feel that they can say, "Martin, I actually don't agree with you on that. I, I see it differently." But can challenge you in, in a positive way. But it's, how do you create that environment where people can speak up and feel safe to you?

    3. MEMartín Escobari34:50

       You listen when they do speak up. That's all it takes. And you create the forums where they, they can speak up. So our investment committee is open to everyone in the firm globally, and you can hear everything. And if you're a partner, you can even go into the executive session and look at the voting and see why people voted against your deal or in favor of your deal. Extreme transparency. And if someone speaks up and you listen, everyone knows it's acceptable to speak up. In my region, for example, when we're looking at, at, at a, at a deal at the initial level, we start with the youngest person at the team to give their opinion because the tendency of, you know... If, if I start with my opinion, uh, it's, it's over, right? (laughs)

    4. HSHarry Stebbings35:31

       (laughs)

    5. MEMartín Escobari35:31

       Everyone... The, the, the, the, the, the risk is the hierarchy is preserved, and everyone wants to please the hierarchy. But if it starts with the youngest person, occasionally, you get brilliant insight. And as a young person... I'll tell you another thing. When I, when I, uh, started in the investment profession, one of the mistakes people make is they just crunch the data so that someone else can make the decision. I always tell the young people, it's like, "I gave you the homework and the data, but I want you to start with the conclusion, and then you show me the data. But come to me with the conclusion." As I was growing up, uh, as an investor, not only would I get to the conclusion when I was preparing the data, I began to, uh, try to understand how the people in the investing committee thought. And I would predict not only their vote but what their question was going to be. And after a couple of years, I was able to predict 90% of their questions because I knew how their brain worked, and I knew what their things they're focused on. And by doing that, by having your own opinion and understanding the opinion of people you respect......

18. 36:24 – 38:12

    Thesis-driven Investing

    1. MEMartín Escobari36:24

       your own judgment gets better and better, and this is a judgment business.

    2. HSHarry Stebbings36:27

       So the reason I don't like thesis-driven investing is because I fear that it's exactly what you just said, (laughs) which I mean respectfully. But it's like, you have an opinion, and then you find data that supports your opinion and leads you to confirmation bias. Do you not worry about that if you start with the conviction and the opinion?

    3. MEMartín Escobari36:46

       I agree with the statement you made, but we love thematic investment. But I'll tell you how thematic investing works. We look at a trend, and I'll give you an example of a trend. The banks ought to be disintermediated in this distribution of retail financial products because they were doing a horrible job in the United States in the '90s. That was the theme. And then we went to market and said, "Who's gonna benefit from this idea? Who's got the best mousetrap to eat this business away from the banks?" And we landed in E-Trade, and E-Trade multiplied its market by 27 times, eh, and the banks with 80% share in the United States went to 10% share in Addic. The same theme in Brazil 12 years ago, a company you should meet, XP, um, market cap went up from 300 million to 20 billion doing the exact same thing E-Trade did, except in a market where the banks were at 99% and now are at 82 and dropping. Eh, so that thematic investing does work. Now, being more gradual and saying, "The way you're going to disrupt the cyber industry is by doing this type of technology, and I think we should find a company that does this type of technology." No. Decide that cyber is going to become more important because systems are more interconnected and bad actors are getting more sophisticated, go out and meet the people who are on the front lines who are really doing that, and then you invest. So it's, it's, it's... You need a macro theme, not a micro theme. And you just need to be surprised by the people on the front lines who are riding that macro

19. 38:12 – 38:29

    Has Martin ever lost money?

    1. MEMartín Escobari38:12

       theme and doing it elegantly and effectively.

    2. HSHarry Stebbings38:14

       Martine, have you ever, have you lost money? Have you had a zero?

    3. MEMartín Escobari38:18

       I have lost money. Not frequently. And people always say I should... my loss ratio should be bigger, and I don't need it to be bigger. As a firm, we lose money 2% of the time. As

20. 38:29 – 38:59

    Have you ever lost confidence in yourself as an investor?

    1. MEMartín Escobari38:29

       an individual, I think I'm not far from that.

    2. HSHarry Stebbings38:31

       Have you ever had a period where you've lost confidence in yourself as an investor? It's a difficult abyss to climb out of.

    3. MEMartín Escobari38:37

       There was a period of time where I, um, I drifted away from technology-led disruption and tried my hand at traditional private equity. I discovered it's not my cup of tea, and we didn't make a lot of money in those two transactions, and I went back to my roots. I like technology, I like technology-led disruption, and I should stick back to that. And that was a period

21. 38:59 – 40:12

    Are you worried about the exodus of capital from developing markets?

    1. MEMartín Escobari38:59

       of time in 2013, 2015.

    2. HSHarry Stebbings39:01

       You've mentioned the global nature of, you know, GA. One thing that I am pretty worried about now, I've invested in Latin America and Brazil actually a number of times.

    3. MEMartín Escobari39:10

       Mm-hmm.

    4. HSHarry Stebbings39:10

       I'm worried about the exodus of capital that we've just seen over the last six months. All of the US funds who were there so actively in 2020 and '21 have largely retrenched. You see it generally when markets contract in terms of macro.

    5. MEMartín Escobari39:22

       Mm-hmm.

    6. HSHarry Stebbings39:22

       I think this is bad for Brazilian entrepreneurs, and I'm worried for them. Do you share my concern about the exodus of capital away from Latin America and Brazil?

    7. MEMartín Escobari39:29

       It's less bad than 2000, and we came out okay in 2000. And the reason it's less bad, because in 2000, the tourist capital provided 98% of all funds that were invested in the region in 1998 to 2000. And it was the same names. Different generation, but sa- same people, same story. Just, it rhymes. It doesn't repeat, but it rhymes. This time around, at least 30% of the capital came from people who are permanently committed to the region.

    8. HSHarry Stebbings39:57

       Mm-hmm.

    9. MEMartín Escobari39:58

       And those guys are gonna make the restructuring and consolidation and the path of profitability a, a lot less painful than it was for us at Submarino. We had to break even with no new capital. That's hard. Now, there's gonna be someone to step in and

22. 40:12 – 41:41

    Has your investing changed over time?

    1. MEMartín Escobari40:12

       make sure that you can break even with some capital.

    2. HSHarry Stebbings40:14

       Has your investing changed over time, Martine?

    3. MEMartín Escobari40:16

       One of the beauties of the investment profession is you accumulate experience and pattern recognition. And provided your mind doesn't get old, and we can talk about what it takes for your mind not to get old, 'cause it's really hard-

    4. HSHarry Stebbings40:29

       Yeah.

    5. MEMartín Escobari40:30

       ... you get better. You can get really better. So, I, I think my... I've become a better partner to entrepreneurs through accumulated knowledge and experience, and I'm fighting age like crazy in my brain, eh, so that I don't fossilize and become, eh, old-fashioned. Eh, what excites me today is a little different than what excited me, eh, five years ago. Five years ago was all about finding the big problems of Latin America and finding technologies that can fix those problems, because the bigger the problem, the bigger the value of the technological solutions. And if you talk to all my companies, the running theme is they're solving big problems and they're making tons of money doing it. And they're gonna create, I think, a lot of value doing that. In this phase, as I'm starry-eyed, another door opened and I'm in New York, uh, I wanna find emerging market entrepreneurs that are taking on the world, like the founders of Bytest, like Cesar at Gympass, like Seba at, at, a- a- at Dlocal. They wanna eat the world and show the world that you can create a world-class company and you can be born in Minas Gerais or in Uruguay or, or in, eh, the suburbs of Beijing. That is fun. So I, I think how I define my purpose has changed a little bit over time,

23. 41:41 – 42:35

    How to Retain a Youthful Mind

    1. MEMartín Escobari41:41

       and that's affected the kind of investing I'm doing.

    2. HSHarry Stebbings41:43

       You said there about the challenges of keeping youth or a youthful mind or to prevent an aging mind. Why is it so hard? And what does one do to retain that youthful mind?

    3. MEMartín Escobari41:53

       Young minds are playful. Young minds wonder. Young minds make silly mistakes and laugh at themselves. Old minds know the truth. Old minds are preachers of the truth. Old minds are moralists. So you gotta be... you gotta remain playful, eh, and humble and experiment, and it gets harder. It gets harder. But it's a lot better than aging, I'll tell you that. Try- try- try- trying is harder than aging. And I'm trying. Because I think if you can combine the wisdom and experience and the pattern recognition with the playfulness and the ability to wonder and avoid the preaching, you stay...... relevant longer, and you can have a positive impact.

24. 42:35 – 43:28

    How do you stay driven after you become wealthy?

    1. MEMartín Escobari42:35

    2. HSHarry Stebbings42:35

       I think also the challenge, so I'd love your thoughts on it, and I'm sorry for being personal here, often as you age and gain experience in venture, you also become more financially successful. And the drive to get on that plane at 6:00 AM or 10:00 PM or chase every person that you think is world class goes down. How do you retain both for yourself and for your partnership, um, the same drive and hunger when you don't need it anymore?

    3. MEMartín Escobari43:02

       You hopefully will find very quickly that you satisfy your material needs with relatively a modest amounts of capital. And they are diminishing returns to spending more money in material goods, because it turns out it's kind of a pain to maintain infrastructure that's expensive. Owning a boat, s- I'm sure sounds very, very fun to some people, but once th- e- once you talk to people who own boats, it's a pain in the rear. You have

25. 43:28 – 46:38

    Tips for Raising Kids When You’re Wealthy

    1. MEMartín Escobari43:28

       to think of what your purpose is. If your purpose is impacting thousands of people, making the world better, finding shining lights in the emerging markets that create world-class companies, that drives you. It's not the extra $100,000. It's the passion. And then, of course, the money comes, but if you think of yourself not as a vessel that's accumulating money and there's money just, just spewing over, but there's a tube where you're, you're getting money but you're allocating to the great causes that are meaningful to you, through philanthropy or through investing, then there's never an overflow of money, because you're just a vessel through which... Money is energy. Energy is just passing through you, and it's just endless, and it's beautiful. And think of yourself as a vessel, not a kettle.

    2. HSHarry Stebbings44:12

       (laughs) I love that. I'm a vessel to Chanel's annual revenues. That's my mother's-

    3. MEMartín Escobari44:16

       (laughs)

    4. HSHarry Stebbings44:16

       ... spending, but (laughs) I'm like, you're, you're like, "You know, you can fix your happiness with little money." I'm like, "Have you ever seen Chanel, Martin?" (laughs) Like, it ain't wholesale. Uh, final question before our quickfire round, which is you have two, you know, wonderful daughters, as you mentioned earlier. How do you think about retaining that same level of hunger in them when they're brought up in a different financial situation and environment to which you were brought up in, in Bolivia, and with much more humble beginnings?

    5. MEMartín Escobari44:46

       It's... Listen, it's a, it's, it's a great question and one you didn't let me prepare for, so it's, um... It's really hard, because most driven people have a chip on their shoulder built on deep trauma related to something that happened earlier in their lives. And if you're a successful, well-to-do parent, the last thing you want is a traumatized child. See, we do our best to protect our children from trauma. And I've seen some people try to create fake trauma, false austerity. So yes, I have a private plane, but yes, you're selling lemonade on the corner if you wanna have money for the cinema, because I want you, to teach you how hard life is and the value of money. And of course, nowadays, children google your name and know your net worth immediately, so like that. I mean, this, this is, this is, this is fake. So, the conclusion I've gotten to is the universe will provide the journey, and for as much as I've protected my two daughters, they're experiencing trauma. Not in the way I experienced trauma coming out of Bolivia. They're experiencing trauma in different ways. Uh, in, in their journey, there are stumbling blocks that, to them, feel very, very traumatic, and it's shaping their lives and their drives in ways that are different to mine, and that is beautiful and I need to accept and support them. And they will climb the mountain that's relevant to them, and it's gonna be different from my mountain. And it's so humbling to understand that I have no idea what that mountain is, because they're very young. But I know it's coming, and I can't impose my mountain, and I can't create a fa- a false trauma.

    6. HSHarry Stebbings46:23

       I absolutely love that. You are poetic with words. You should do many more podcasts, Martin.

    7. MEMartín Escobari46:28

       (laughs)

    8. HSHarry Stebbings46:28

       You're fantastic. I'm so-

    9. MEMartín Escobari46:30

       Actually, I've done a few in Portuguese, but not in English, so, uh, thank you.

    10. HSHarry Stebbings46:34

        I was just- I was so-

    11. MEMartín Escobari46:34

        Thank you for providing me the opportunity.

    12. HSHarry Stebbings46:36

        I'm just, I enjoy this. I wanna do a quick fire

26. 46:38 – 47:44

    Martin’s Favourite Book

    1. HSHarry Stebbings46:38

       round with you, and then we'll rock and roll. Does that sound okay?

    2. MEMartín Escobari46:41

       Let's do it.

    3. HSHarry Stebbings46:41

       So what's your favorite book and why, Martin?

    4. MEMartín Escobari46:43

       Two books. Man in Search of Meaning, Viktor Frankl. I've read three times in my life. It's, uh, it's, it's great. Y- It should be read many times in our life. Uh, Good to Great, Jim Colling's book. Paired-company analysis is the ability that, to truly drive an insight about a business, you can't just look at the success story. You need to look at the alternative story, the alternative reality, to know if that's just lucky or it's due to something that... action. So th- that, that idea, which is alive in genetics, when you study twins that have been separated at birth, had never been done in business. And he did it so beautifully that I actually copied it. I wrote a book, just... Good to Great for Brazil was written by Martin Escobar. It sold 29 copies. Mom bought 10 of them. So there's, uh, there're, there's (laughs) 19 people that have, have read my book. Eh, but it was exactly the same idea, paired-company analysis, and I love those two books.

    5. HSHarry Stebbings47:32

       I actually bought the other 19 just in preparation for the show.

    6. MEMartín Escobari47:35

       (laughs)

    7. HSHarry Stebbings47:35

       Uh, (laughs) sorry, I didn't wanna, didn't wanna ruin that one. Um, uh, okay-

    8. MEMartín Escobari47:40

       (laughs) You, you've cornered the market, just in case there's ever a, a, a secondary

27. 47:44 – 47:57

    Best Investment Advice Martin Ever Received

    1. MEMartín Escobari47:44

       market. (laughs)

    2. HSHarry Stebbings47:44

       It's a m- it's a monopoly, my friend.

    3. MEMartín Escobari47:46

       (laughs)

    4. HSHarry Stebbings47:46

       Uh, tell me, what is the best investment advice you've ever received?

    5. MEMartín Escobari47:50

       Rule number one, don't lose money. Rule number two, remember rule number one. Buffett.

    6. HSHarry Stebbings47:54

       (laughs) What is-

    7. MEMartín Escobari47:55

       I'm sorry. I know it, it's not what

28. 47:57 – 48:45

    Most Common Investing Mistake

    1. MEMartín Escobari47:57

       the Silicon Valley thinks. I am old-fashioned in that way.

    2. HSHarry Stebbings48:00

       What is the most common mistake that you see made in terms of investment mistakes?

    3. MEMartín Escobari48:05

       Hubris after a home run.

    4. HSHarry Stebbings48:08

       Hmm.

    5. MEMartín Escobari48:08

       A lot of people... and it almost happened to me, except I had a nightmare about this... uh, think they're invincible after they make their first billion-dollar gain on a company. And their next large transaction? Reckless.

    6. HSHarry Stebbings48:23

       What was your first billion-dollar gain?

    7. MEMartín Escobari48:25

       XP.

    8. HSHarry Stebbings48:26

       Did it change your mindset?

    9. MEMartín Escobari48:27

       Oh, I thought I was invincible. I almost spent $500 million in buying a company in Argentina. And then, the day the bids were due, I woke up, I said, "What, what the hell am I doing?"... and I'm glad we didn't buy it because the country went where it went.

    10. HSHarry Stebbings48:41

        What do you want entrepreneurs listening to this podcast to take away?

29. 48:45 – 49:00

    Advice You Often Give but Struggle to Follow Yourself

    1. HSHarry Stebbings48:45

    2. MEMartín Escobari48:45

       Dream big. You can.

    3. HSHarry Stebbings48:48

       What piece of advice do you often give, but find it hard to follow yourself?

    4. MEMartín Escobari48:52

       In business, I don't do that because I police myself. I only give advice that I'm willing to live by. Personally, Sabrina,

30. 49:00 – 52:13

    What makes a great board?

    1. MEMartín Escobari49:00

       eat your vegetables.

    2. HSHarry Stebbings49:01

       (laughs) Do you think boards actually add value?

    3. MEMartín Escobari49:06

       Very few.

    4. HSHarry Stebbings49:06

       What makes a great board?

    5. MEMartín Escobari49:08

       A small diverse group, a conversation where the CEO opens his heart about things that matter to her.

    6. HSHarry Stebbings49:15

       Who's the best board member you've sat on a board with?

    7. MEMartín Escobari49:17

       Bill Ford.

    8. HSHarry Stebbings49:18

       Why?

    9. MEMartín Escobari49:19

       He listens. And, uh, when he speaks, it's insightful.

    10. HSHarry Stebbings49:24

        We've mentioned XP being a billion-dollar gain there. What's the biggest investing miss you've had, and did it change your mindset?

    11. MEMartín Escobari49:30

        I should have backed David Vélez at Nubank. David had worked at GA. I had tried to re... And he left for Sequoia, and I tried to bring him back when I got, got hired into, into GA. He called us in our series A, series B, series C, then he stopped calling, because we kept saying no. And, um, in the emerging markets, there isn't a single credit institution that has survived the credit crisis, meaning survived more than 10 years, without deposits. And Nubank, in its original inception, had no deposits. So I made a dogmatic decision that this has never happened in the emerging markets ever, and I failed to anticipate that someone as smart as David would figure out a way to build deposits by disrupting the money market market. Which wasn't in the original plan, was hard to do, required regulatory changes that were hard to anticipate. He did it. It's a $20 billion company I could have bought at $200 million each.

    12. HSHarry Stebbings50:21

        Ooh.

    13. MEMartín Escobari50:22

        Kind of.

    14. HSHarry Stebbings50:22

        Well, you got many other winners. Don't worry about it.

    15. MEMartín Escobari50:24

        I know, I know. This one hurts. It's the one that got away, the big one that got away.

    16. HSHarry Stebbings50:28

        He's an LP in my fund, so I'm happy. Hmm.

    17. MEMartín Escobari50:30

        He's a good guy. He's a good man.

    18. HSHarry Stebbings50:31

        Yeah, he's a great guy. Loved him. Uh, what have you recently changed your mind on?

    19. MEMartín Escobari50:35

        When I moved to America, a good friend, Rick Elias at, at Red Ventures, who's a fabulous guy, who you should have on your show if you, if you haven't, or you don't know him, uh, he told me to f- forget my instincts. My emerging market instincts are a handicap to understanding how to work in the United States. And, uh, I thought he was right. And then we hit a crisis, and I just understand my instincts were pretty good. It just needs to be recalibrated, not reinvented.

    20. HSHarry Stebbings51:03

        What would you... Penultimate one. What would you most like to change about the world of venture?

    21. MEMartín Escobari51:07

        Make it more global.

    22. HSHarry Stebbings51:08

        Is there anything we can do to do that?

    23. MEMartín Escobari51:09

        Ju- just watch us create $5 billion, $10 billion-plus companies, global companies out of the emerging markets. It's gonna happen automatically.

    24. HSHarry Stebbings51:17

        Yeah.

    25. MEMartín Escobari51:17

        It, you know, FOMO. FOMO will take care of it.

    26. HSHarry Stebbings51:20

        Final one. What's the most recent publicly announced investment that you made, and, and why did you get so excited?

    27. MEMartín Escobari51:25

        So we recently announced two, two, two, two deals on the same theme. I, I believe one of the things that are very present today is the authentication of trust. Uh, with COVID, full online digital onboarding became a reality. Uh, digital, online fraud, personal identity fraud has exploded. We invested in a company in Brazil and a company in Mexico who are solving that problem in those two countries. And if there's one thing we're world-class in Latin America, it's fraud. So if you can solve this issue in Latin America, you got, you probably have a mousetrap that can solve this issue globally.

    28. HSHarry Stebbings51:59

        Martin, I've honestly so, so enjoyed this show. You are a wonderful storyteller, guest. So many great nuggets here. Thank you so much for joining me today, and I've loved it.

    29. MEMartín Escobari52:10

        Th- thank you so much for the opportunity, Harry. I enjoyed it too.

Episode duration: 52:13