Special project of INVESTORO
Greg Kidd:
Investing in fundamental insights
This interview was done as a part of Venture Capital Course organized by Moscow School of Management SKOLKOVO and International Investor Organization INVESTORO

Greg Kidd
Early investor
Greg Kidd is a serial entrepreneur and investor, founder of the Hard Yaka investment group. Early investor & Advisor of Twitter, Square, Ripple, Coinbase, Twillio and other successful companies. Co-founder and CEO of Global ID.

Table of contents

Vitaly Polekhin
How to become an angel investor and combine technology investment and entrepreneurship activity?
Well, the easiest way for me is if you're an entrepreneur yourself and you build a team and you have a successful exit. The first company I did, I took public and made some money from that. One of my coders was a young kid named Jack Dorsey who had hacked into the system. Showed me what some of the mistakes we were making when he was 19, and still in college. So he dropped out and came and worked with me. And when I'd made a little bit of money from my first investment, and Jack was starting his company, Twitter, it was easy to invest because he was living in the backyard.

If you've made some money and have people starting new companies, it's hard not to become an angel investor because you know them and you believe in people you were spending money on before when they were working for your company. It seems absolutely natural to me just to start funding their next ventures and view the people that you're working with for your own venture. The feelings of some people are really hurt. But I view that as like a parent, and the kids are growing up, and leaving the house, and you want to make sure they're doing great.

Greg Kidd
Early investor
“The feelings of some people are really hurt when employees create startups. But I view that as like a parent, and the kids are growing up, and leaving the house, and you want to make sure they're doing great", — Greg Kidd
Vitaly Polekhin
What is your secret sauce of a successful angel investor? Among a hundred startups, you are the first investor in billion dollar unicorns like Twitter, Square, Ripple, Coinbase. Maybe Jack was at your backyard babysitting when he came to you with the idea of Twitter, but the rest of the cases show it was not an accident. There should be a pattern, what is Greg Kidd's secret sauce?
Most of my best investments have come not from just receiving decks or the traditional venture capital route. When I was doing another company, I was in Y Combinator. And in that program, I met Bryan Armstrong, who was founding Coinbase. I think I was the first investment there just because we sat down and had lunch, and we asked each other what we're doing and he said "well, I'm doing like PayPal for Bitcoin". And I "well, that sounds interesting, I did this and that". And he said "Yeah!", and that was it.

Ripple was discussed in a poker game I was at with other payment professionals. So all of these leads came through essentially social activities where you just meet either the people directly or you hear about the projects. Very little of what I do comes through sort of the traditional thing of people cold calling and sending a deck, although occasionally, I see those. Despite all the technology, it is a network business and you have to go to the right lunches and the right meetings. Years back, it's been almost a decade since I came to Moscow, and, again, it was just some folks that I knew that had Russian roots and they took me to Russia and we went out for dinners and meals with people. So it is still, despite all the technology, connections kind of business even as it becomes global. It just means I spend more time going places and visiting people. But it's going to the right lunches, going to the right events and socializing. Angel investing is a social endeavor.

Greg Kidd
Early investor
Vitaly Polekhin
But when you use digital tools and technology, what kind of instruments you prefer for keeping track with investors, startups, collaboration tools for distributed teams.
We live in a Zoom world. So Zoom is a great way for doing first early screening with teams but, it's a people touch type endeavor. You choose who you actually want to spend physical time with. And that's kind of a way of filtering – just receiving decks as a start and then doing Zoom calls. At the end of the day, you want to actually meet the people and, in fact, it's one of the most enjoyable things for me.

I have been on the bike I rode from Luxembourg to Slovenia to meet a bunch of folks in Ljubljana. That's kind of where Bitcoin got started with regulated exchanges, Bitstamp and Whatnot. It made it really special to actually physically go there and meet the people. I felt the same with the time that I've spent in Moscow, also with investments in companies in countries like Lithuania, where I've invested in Transfergo and Whatnot, it's been very important for me to spend time on the ground in those places. I have a lot of investments in former Yugoslavia, probably done more investing in the Baltics than anywhere else. And just going to meet the teams as well.

So I've got a development team that's quite strong in Armenia. I haven't been there yet. So that's one of the places I'm looking to go to this year. So the more things become technological, the more still the human connection. It matters because it's a chance to do things together, whether it's going for a hike or doing something that has some degree of risk, whether it's mountaineering, or going kayaking, or something that can get you a sense of the people and how they interact under pressure. It could be playing poker as well as any type of endeavor where you get to know something more about character rather than just spreadsheets and numbers.

Greg Kidd
Early investor
“To do things together, whether it's going for a hike or doing something that has some degree of risk, whether it's mountaineering, or going kayaking, or something that can get you a sense of the people and how they interact under pressure and get to know something more about character rather than just spreadsheets and numbers", — Greg Kidd
Vitaly Polekhin
Most startups and investors think Silicon Valley is the only place you can find an opportunity. Living in the "dream place" why are you an international investor?
Before, it was easy to be lazy and just go up and down Silicon Valley because there was a lot happening here. But in recent years, I've been increasingly focused on the payments sector and what's going on with money. And the United States is not a leader in this area.

A lot of the innovations in payments and innovations in the regulatory arena are happening outside of the United States. Like the leader in payments integration is probably WeChat out of China, the leaders and things like open banking and new privacy legislation are coming out of Europe. There's just talent all over the world. Increasingly I've found that for the segment's I'm interested in, which is payments innovation, the United States is a laggard, rather than a leader. There's still opportunities here and companies like Square and Coinbase, but they are really not as innovative as some of the things we're seeing going on in Asia and in a better regulatory environment in Europe. For my own teams, I've directed more dollars to the European side of the Atlantic than I have to the United States side.

Greg Kidd
Early investor
“Before, it was easy to be lazy and just go up and down Silicon Valley because there was a lot happening here. But in recent years, I've been increasingly focused on the payments sector and what's going on with money. And the United States is not a leader in this area", — Greg Kidd
Vitaly Polekhin
Many founders now are eager to learn the main criteria for startups to be fundable by Greg Kidd.
We are looking to invest in the companies that empower people to take control of their identity, take control of money, messaging storage, and do so on a self sovereign basis. They have a potential to empower people rather than have people belong to a country or a company.

We like things that have a decentralization element about them. We think those are going to be durable and may become protocols and standards going forward. We're less about sort of the traditional company that tries to get a customer or build a silo around it. We like plays where the users can interoperate with other wallets, other messaging systems all around the world.

And we are very, very focused on things that are liberating users. An example of a recent investment is the Brave browser, which is privacy preserving with about 50 million plus downloads. It's a new way of browsing the blocks ads, so you don't have to be pummeled by Google ads, etc. So those are the types of opportunities that we're looking at. It's also very global and has been downloaded all over the world.

Greg Kidd
Early investor
“We are very, very focused on things that are liberating users", — Greg Kidd
Vitaly Polekhin
Regardless of the country, a startup should be disruptive on the global level, for you to invest in it, right?
It's fine if people start with a local market, but they should have the potential to go global. The premise of all the successful companies I'm involved with is so simple – if it works in one country, it works in every country. The first company I started, which was like an Uber for courier delivery, was in New Zealand. But by the time we took it public it spread across the globe. Simple concepts work everywhere.

Greg Kidd
Early investor
“It's fine if people start with a local market, but they should have the potential to go global. The premise of all the successful companies I'm involved with is so simple - if it works in one country, it works in every country", — Greg Kidd
Vitaly Polekhin
What are the trends you see now or expect coming in the pandemic and post pandemic world? Are there any changes in your investment activity, or business as usual?
Oh, no, it's not business as usual for us. So we are actually stepping up investing. We think that this pandemic accelerated trends that we thought might have taken years to get going. And people are willing to move more toward an electronic reality like this zoom call.

We're looking for things that are going to work in a post COVID world whether the virus will go away or will be dampened down. People are increasingly going to need to figure out how to identify themselves, authenticate and authorize activity completely online. And we're doubling down on those companies that are good at it and have part of that. So we're doubling down on identity, we're doubling down on digital wallets, new payment mechanisms, virtual cards as opposed to physical cards.

Distributed storage is also important, so that, no matter where you go in the world, your files aren't on this computer or with that company, they stay with your identity.

These are all areas that we think have been accelerated. Things that I thought were going to take five or ten years to become mainstream are all being accelerated under COVID. So we're excited about anything that is working on having people have more control over their identity.

Greg Kidd
Early investor
“We think that this pandemic accelerated trends that we thought might have taken years to get going. And people are willing to move more toward an electronic reality like this zoom call. We're looking for things that are going to work in a post COVID world whether the virus will go away or will be dampened down", — Greg Kidd
We see a tussle that up till now companies like banks or Uber, Airbnb who owned your data. You had to ask them for permission to share it with third parties. We are going to knock down that door and let people take their reputation, and have whatever they're doing, that has been trapped in sort of traditional big corporations, including big corporate tech companies. And we're gonna see people take more control of their data. And startups that are built around that model, as opposed to built on the fact that like Facebook, or Google or Apple, or Microsoft or Amazon are dominant, we see new opportunities because we think those companies are going to be constrained by regulation because of a number of the anti competitive practices they've been performing.

The banks will be forced to open up through open banking and they will not be able to retain users the way they have before by locking them in. So we're going to push to accelerate those trends. Companies that are looking to knock down those barriers, even taking on legal challenges will be invested in.

We're actually willing to invest in companies that will litigate to innovate because we think that folks that aren't challenging the status quo aren't really being aggressive enough in terms of pursuing new opportunities. That's a bit different than the usual legal risk. Shy venture capitalists were not shy in that regard. We'll take the legal battles on and we'll look for the winner.

Greg Kidd
Early investor
“Companies that are looking to knock down those barriers, even taking on legal challenges will be invested in. We're actually willing to invest in companies that will litigate to innovate because we think that folks that aren't challenging the status quo aren't really being aggressive enough in terms of pursuing new opportunities. That's a bit different than the usual legal risk. Shy venture capitalists were not shy in that regard. We'll take the legal battles on and we'll look for the winner", — Greg Kidd
Vitaly Polekhin
Now, because of the pandemic crisis situation, everybody starts to remember this great recession time in 2007-2009 when many future unicorns were founded and got the first funding from angel investors. Do you expect the new wave of technology startups with so great ideas that maybe sounded ridiculous before the pandemic time?
Yes, we think there's already a big upset for companies like Airbnb, Uber, which were all the rage. They're down. Companies like the big five tech companies. They're going to be under regulatory scrutiny. Companies like zoom have a huge market cap, even a company like Twilio, which is an API for connecting to the phone companies. Twilio is now worth more than Twitter, right. And I was lucky to be part of that, as well. And so companies are going to be a new batch of winners in this round because I do believe some of the existing winners are going to be beaten up from a regulatory point of view and that will create new opportunities, we do believe these new forms of money will result in a solution whether it's going to be crypto based or a combination of central bank digital currency.

We believe that in the future, there may be interoperability of messaging protocols. Right now, Telegram, WeChat, Whatsapp are all silos. They don't interoperate. We see a world where that doesn't make sense. Everybody ought to be able to interact with everybody else, money ought to be able to move between all people.

And while there's a lot of reaction against globalism right now, to us, the overall powerful trends are that the solutions are just going to be more global. Countries will still have to figure out how to maintain their sovereignty. But people with these new technologies, this new round will be increasingly interoperable and integrated. That's our view even though there are companies and governments fighting against that. The natural order of things from our point of view suggests that the people might win out over companies and governments. And so that's a philosophical point of view. We're going to double down on investing in folks that are making those kinds of bets and we think the next round of super unicorns will come out of the chaos of this recent virus and other disruptions and in civil society.

Greg Kidd
Early investor
“We're going to double down on investing in folks that are making those kinds of bets and we think the next round of super unicorns will come out of the chaos of this recent virus and other disruptions and in civil society", — Greg Kidd
Vitaly Polekhin
Another thing is that during the Great Recession times some new instruments in early stage investing and ecosystem appeared, the now well-known technological accelerators Techstars and Y Combinator began to grow rapidly. Do you expect completely new tools in early stage investing that will meet the needs of a changed world? Maybe something unusual, which we never saw before, maybe something which existed, but we're not so well developed?
I think that there's a new generation of teams where people can work remotely. There used to be a stigma attached with having a remote development team, versus having everybody in the same place. I think the new batch of successful companies will have teams of people from all over the world.

I think, as I mentioned, that the groups that I have now have a distributed team working together from from Armenia from Slovenia, Praga, Portugal, Barcelona, Spain, and since COVID, we've actually worked together better than we ever worked together before with a bunch of people working from home. We actually just all bootstrapped and got more serious and more organized.

So I think you'll have successful unicorns that are started by teams of people that really only get together socially and for adventure trips and the work is actually being done while they're working from home and potentially distributed all over the world.

I do see it quite possible that some of these successful companies are going to have truly distributed populations of workers. That's going to be different from what things were in 2007, you didn't have this big shift in 2007 to the zoom world and fully distributed workers.

Greg Kidd
Early investor
“We'll have successful unicorns that are started by teams of people that really only get together socially and for adventure trips and the work is actually being done while they're working from home and potentially distributed all over the world", — Greg Kidd
Vitaly Polekhin
We syndicate deals with top investors and venture funds all over the world and most of the deals, either special situations or with thriving because of the lockdown startups, are with current or previous investors in this company and they knew the company well enough before the pandemic times. But if lockdowns are not over in a few months, how you think the due diligence process will be handled. Will zoom discussions be enough to make a decision to invest in a startup, will remote due diligence work?
I think zoom will be enough. The standards are changing. It used to be that everybody got on a plane and they had to see each other in person before they made the investment decision. I think increasingly people will be comfortable making investments just based on zoom sessions.

I was getting ready to invest into a distributed storage company. I've never met the team in person. They don't live internationally. They're on the East Coast, but some of their team is international. I've never met them and it's not practical for me to go meet them in Boston, even though it's a fairly significant investment on my part. They've checked me out, I've checked them out, we've decided we want to do business and the banking wires are still working, so we're going to send the money. I do think that in a post COVID world people will be comfortable making decisions based on just interactions like we're having today.

Greg Kidd
Early investor
“I do think that in a post COVID world people will be comfortable making decisions based on just interactions like we're having today", — Greg Kidd
Vitaly Polekhin
We usually discuss sectors that are benefiting or will benefit from the current situation, and I want to ask what is your big idea you are focusing on, something very specific that will change people's lives.
There'll be a different view of how identity works. Identity has been people signing in with their username and password to a service and everything they do in that service within that website or that app is based on something you know, and all the security around the world has been built around passwords etc. We do see that the world is going to change to something you have rather than something you know, so your identity will improve, it will essentially be in your mobile phone. And you'll use that to essentially scan a QR code or have a security token on your phone and your identity. And all your data that would have been trapped within one of those companies or another will be portable and will move from company to company so it's very easy for you to switch from one financial institution to another, from one healthcare provider to another.

The whole world that's based on trapping users into one company or one country is under pressure, people will have more ability to move. And companies that relied on locking users in are going to suffer. Companies that basically compete on the merits and can accept the fact that their users come easily, but also might go easily building their business models on that basis, we'll be able to thrive. But the key to that is what we call portable identity. So if you're building a company that traps the user within your company, we're not investing in that company. We think that's an old world way of doing things if you're building a system that works in one country and isn't portable across national boundaries. We think that it is just not scalable.

And it does mean that people will have the concept of portable identity, we promote the notion, just like the World Wide Web is one namespace for the whole world. There's not like a Chinese internet and a Brazilian internet. There'll be one namespace like a global namespace, just like there's a global namespace for domain names for identity. People have an identity on Twitter or Skype that is global and not national. We're viewing that there'll be a namespace for identity. And companies that are working in the identity space, not pure identity companies, but companies that combine identity with messaging, with payments, with other services like healthcare, storage, voting, etc. are powerful.

Telegram was a company moving in that direction, they hit a regulatory roadblock, but a company like Telegram could be an innovator in this market. They were a company I was early on interested in and integrated with. They are currently licking their wounds after having pushed something that got them in trouble with the SEC. But it doesn't mean there wasn't a lot of imagination there. And so those are the kinds of plays that we're interested in and excited to see what happens. Revolute is another company that was willing to innovate and has some Russian backing as well. So we are looking for innovation in those kinds of realms. I didn't participate in Telegram token sales because as an ex regulator, I thought they were going to get into regulatory trouble which they did. I like Pavel and I just integrated with Telegram. I haven't found a way to invest because the process they took did result in something that was going to be deemed as a security. They basically made a mistake. Unless they structure the deal differently, it wouldn't have been possible. But I do like the technology stack.

Greg Kidd
Early investor
Vitaly Polekhin
Greg, regarding your global and portable identity idea, I want to ask you about the Global ID company which you are focused on. How this company solves the world's problem.
So a long time ago, there was a company called Network Solutions. It's not known very well, they were the one that created the domain name system. So each website has its own name. That company became worth $20 billion back when $20 billion was a lot of money. Because that was a very valuable system. That system allowed there to be an integrated Worldwide Web. Up until then, there were companies like compuserve AOL, and they operated the way Wechat, Telegram and WhatsApp put people in a silo. And they had to interact with that silo.

When there was a domain name system, it allowed the World Wide Web to defeat all those other solutions. Global ID is trying to do the same thing with a namespace for identity. So anybody can go to Global ID, get a unique name, and then start to attach verifications to that just like an Easter egg con, where you go and collect things that might be verification from a driver's license. It might be round tripping your mobile phone number, it could be a biometric. It could be vouchers from your friends, all these things help build up your identity. And then with that, you can sign up for services. And each of those companies that are signing don't have their own identity system, they just use it. Just like you have Facebook Connect or login with Google. The difference here is these identities are compliant enough, so they can do heavy duty things like moving money, or moving medical records or voting. You can't trust a Facebook or Twitter identity enough for those reasons because there's so many fake and synthetic identities. So Global ID is a higher standard. But it also does it with zero knowledge proofs. So you can prove things about yourself without having to give up your private information. So it's how you have a trusted identity that's still secure and private. I'm not pushing that company I'm building there to be profitable in itself anytime soon. I'm pushing it to help many other companies that I'm investing in, be able to use that solution so they don't have to waste money and time building their own siloed identity systems. So that's really the purpose of Global ID.

I tried to persuade venture capitalists not to invest in it because I tell them they're going to lose their money. But the more you tell the venture capitalists you don't want their money, the more they seem to want to put it in. We do have a little bit of Russian money in the Global ID as well.

Greg Kidd
Early investor
Vitaly Polekhin
If you are asked to give some advice to technology entrepreneurs and technology investors, what would it be?
Technology investing and technology entrepreneurship is still social and you need to go and visit people. I don't know what to call it. Just do informational, informational interviews, go and meet people, physically and virtually, and just understand what they're doing.

Don't look for just ideas. The biggest differentiator in terms of what is worth investing in from my point of view is not whether somebody has a good idea. There's lots and lots of good ideas. It's whether somebody has a fundamental insight. And like this kind of a language thing. What's the difference between an insight and an idea? An idea usually comes from the head and insight usually comes from the stomach. It's a gut feeling.

When Twitter was getting started, Jack's fundamental insight was instead of free speech and being about the freedom to talk Twitter's based on, you get to listen to who you want to listen to. That's a different way of thinking about speech. It's getting to choose who you listen to. And Twitter, turn that around, because you can follow whoever you want to follow.

Or when Square came out, it was the insight that it's not just important to be able to make a payment. It was fundamentally an insight that everybody ought to be able to take a card payment, not just make a card payment. And it seems like such an obvious idea. But you know, it wasn't obvious at the time.

And when Bitcoin came along, there was a fundamental insight that you ought to be able to send value without having to ask anybody for permission. Well, that's a real insight. It's not an idea. It's a fundamental insight. Things are going to work differently.

And with a Global ID, the fundamental insight is that people want to own their identity, not a company or a country. That's either you got a gut feeling that that's the way it should be, or you don't, then you're not just investing in an idea, you're sort of investing in a direction that the whole world is going to take, doing something that it maybe didn't do before.

Greg Kidd
Early investor
“What's the difference between an insight and an idea? An idea usually comes from the head and insight usually comes from the stomach. It's a gut feeling. When Twitter was getting started, Jack's fundamental insight was instead of free speech and being about the freedom to talk Twitter's based on, you get to listen to who you want to listen to. That's a different way of thinking about speech. It's getting to choose who you listen to. And Twitter, turn that around. And so I just want to encourage people to look for folks that are really going after insights, not just ideas", — Greg Kidd
And if you have a team of people that are working on an insight, and you get that right, it doesn't matter how many financial or business mistakes you're going to make, the tide will take you to an amazing journey and potentially an amazing financial success beyond all imagination.

I have an investment I made in a company called Solana. It was brought to me by somebody who came to me with a very heavy Russian accent and I said, "Well, where are you from?" He said, "I'm from the Soviet Union", which I thought was an interesting way to introduce himself, which meant he was educated under the existing or the old Soviet educational system. And his background in science meant he had an insight that the way that blockchains could work should not be based on proof of work, which is what Bitcoin has, or proof of history, which is what some of the file coin and some of the other distributed databases. He had a concept called proof of time, that if he could figure out just the order of time of events that needed to be written to the chain, he could process many, many more transactions in parallel and that blockchain, which historically has not been scalable, he could make blockchain scalable. So there could be a distributed version of truth that's indelible, and it could process immense numbers of transactions. Now that was a fundamental insight, the concept of proof of time as a way of determining how to order many, many transactions happening in parallel. And so I said, "Okay, that's something I'd invest in". And so I just want to encourage people to look for folks that are really going after insights, not just ideas.

Greg Kidd
Early investor
“If you have a team of people that are working on an insight, and you get that right, it doesn't matter how many financial or business mistakes you're going to make, the tide will take you to an amazing journey and potentially an amazing financial success beyond all imagination", — Greg Kidd
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