Latest / The Longest View with Dez Fleming / The Case for Lending in Stablecoins with Valinor CEO, Connor Dougherty
Transcript
- Desmond Fleming 00:00 Connor, thanks for coming on. Maybe the best place to start for the pod is by talking about stablecoins. So how are stablecoins influencing your business and how do you think it's also influencing the on chain credit ecosystem? Obviously stablecoins are, I think, kind of a known entity at this point. I think it's not for me to say. Connor Dougherty 00:23 It's really, I think, becoming consensus that they're here to stay. Regulation was a huge unlock last year. I think payments, it's clear that they have product market fit in payments. And for us, as we think about it, a lot of the reasons why they're interesting for payments should mean they're interesting for credit, right. And so for us, we think after payments, credit is the natural extension, the next leg of stablecoin adoption. And we really see it in two areas. There's all these international peoples, companies, firms that are holding stablecoins. They're going to look for yield. So that's kind of the liability side. And so for us, as a credit manager, we can help solve that by figuring out the asset side. And then there's all these businesses that are operating stablecoin native, right? These neobanks, these fintechs, you know them well, they're starting to be native to the blockchain, native stablecoin users in their operations and also getting paid in stablecoin, right. And so that performance level that they're seeing on their go to market, on their demand side, they also want on their supply side. And so when they think about financings or working capital solutions for their business, there's this cohort of digitally native businesses, these stablecoin businesses that also want to get their financing in stablecoin too. And so those are really good mappings for Valinor and big thematic trends that play on the stablecoin theme. Desmond Fleming 01:31 Yeah. And like for us, one of the things, or the frameworks that we think about with respect to stablecoins, is, you know, we've seen the market go from zero to 300 billion in circulation over like a 10 year period. Our house view is we think the ecosystem is going to 10x from where we are today. Connor Dougherty 02:11 And we think a lot of that comes from the fact that, especially at the neobanking layer, these companies are path dependent, so they want to grow their user base, they're going to bring more users on chain, and to your point, those users are going to want to get access to yield. How do you think about maybe educating consumers and basically finding the product market fit on the asset side with respect to matching consumers to assets that they want to have exposure to, you know. A consumer's preference for yield is going to be different than an institution's preference. And so I think in some regards, solving for the consumer can be a little bit challenging. We have an institutional heritage they look for. There's a bit of a duration mismatch. The desire to have to put their money in and pull it out every single day is sometimes challenging to match with what a borrower wants, which is term money. And so we spent a lot of time thinking about how to solve that problem. What I will say is the theme is real. There's clear line of sight to stablecoin growth, and someone who solves that problem, which we're trying to solve, which is taking credit assets, high quality, low risk credit assets, and bringing them to a broader audience, that's going to be a really big business. Desmond Fleming 03:28 And we're focused on trying to solve that problem. Connor Dougherty 03:28 Yeah. Desmond Fleming 03:28 And right now you're basically just working through primarily the crypto ecosystem, the digitally native companies, in order to solve problems that they have on, you know, you called it the supply side of their business. Let's dig into that a little bit. Like, what does that mean? Who are the types of people that you're actually serving? Connor Dougherty 03:46 Yeah. So I think what you're pointing out is where we focused, and I think we've tried to make a name for ourselves a little bit, is at the point of origination. If you want to think about us, we're a direct lender to a borrower. And there's this cohort of businesses, which you're describing, that are either stablecoin native or stablecoin friendly. Desmond Fleming 04:00 Yeah. Like one of our portfolio companies, Rain. Connor Dougherty 04:10 Exactly. Desmond Fleming 04:10 Is a customer of yours. Connor Dougherty 04:10 Yeah. And so if you map what they're thinking about, they want the performance of a stablecoin, right. And they want that in their financing solution. So that means instant settlement, programmability, and transparency. And it just works, right. They don't want to think about it. You think about the traditional financing solution, it's slow, there's a lot of back office and coordination between the two sides to make every single revolver draw happen. And our solutions, and what we've been bringing to market, that just disappears. And so that's been really exciting for us because we came from that world. We feel like we have this little secret right now, and it's just so obvious to us that this is the future of finance. Desmond Fleming 04:56 Yeah. Do you think as the secret proliferates into the world, what do you think is more likely, that the direct competitors of Rain start to adopt and use a solution that you provide, or the legacy competitors to Rain? I think about people like, you know, a Lithic or Marqeta, et cetera, other credit card issuers, you know, where do you get more excited about? Connor Dougherty 05:38 I think the direction of travel is that this is going to be ubiquitous. I don't think, you know, there'll be some hybrid solutions where you have to off ramp in certain instances, but the direction of travel is this is what credit facilities are going to look like. It's far more performant, it's better for the borrower, but it's also better for the investor. And it's rare that you have that win win to such a degree, because we feel like we're actually taking less risk. We're routing the money, we don't need to rely on the borrower. There's a lot of instances in traditional credit where you take that counterparty risk, and you've seen some of these big frauds in the news. We feel like we're really, if not eliminating that, really reducing that level of risk. And so for us, I think it's going to be ubiquitous. I think this is fintechs, period. But it's not going to just be fintechs, it's going to go to all businesses. This is how they're going to get financing. Desmond Fleming 06:20 Yeah, but the rate limiter is getting people on chain, right. Because if I start up a business today, I'm still probably more likely than not going to use Ramp or Mercury, whatever, and they are integrating elements of stablecoins into their platform. But then when I have a financing or lending need, right, I'm going to be asking you, hey, I want you to send it to this account. Connor Dougherty 06:40 Yeah, I mean, we're seeing that for sure. It's kind of borrower specific. We think the playbook will build over time. But yeah, you're definitely seeing businesses like, I still want cash to land in a bank account, right. But they are really excited when we say we can get you a draw every day instead of once a week. Desmond Fleming 07:04 Yeah. Connor Dougherty 07:04 And so, you know, maybe we don't go fully on chain, but even a solution where the program is programmed up front, it's automated, and the money movement is on chain and then it off ramps, is still significantly better than the status quo. Desmond Fleming 07:04 Obviously a hot topic in all venture, probably over the past two, three years, has been the emergence of the FDA. Obviously, within fintech and crypto land there's less of that kind of method of implementation. But I'm actually super curious, do you help consumers or your businesses onboard into stablecoins or on chain, or do you say, hey, no, you have to figure this out yourself? Connor Dougherty 07:43 Our approach has been to partner with infrastructure almost everywhere we can. Yeah. And so what's been amazing in the years that I've been in crypto is, and you know this, there's been a tremendous amount of venture investment in infrastructure, and we're a massive benefactor of that. And there's so many people that have worked on orchestration solutions. They've worked on smart contract infrastructure for credit facility management. There's custodial setups. All this stuff kind of exists and it's only getting better and better. And so now we take a partner approach, and we really focus on the core underwriting and the actual transaction. Desmond Fleming 08:10 Yeah. So if I said it another way, if I was a new borrower that wanted to work with you for whatever reason, let's say I need to finance some GPUs and you guys want to take that sort of risk, I would work with one of your partners in order to actually get the capital on chain and then off chain from you. Connor Dougherty 08:43 Yeah, yeah. And there's some costs associated with that. So we're building towards an end state where everything is on chain, but yes. Desmond Fleming 08:49 So one of the kind of ideas that you've talked about is this idea of you want to build Valinor into a modern credit institution. Let's go deeper there. What does that mean to you? Where did that inspiration come from? Because on its head, that's a big swing. Connor Dougherty 09:05 We like that, but that is a big swing. We just talked about one portion of what a modern credit institution would be. That's like originating or direct lending, right. And it goes from origination through distribution. And as we start to map what's happening in front of us, we think there's a total capital market shift. All financial assets are going to move on chain. Blockchains are better for facilitating credit, and being early there, to us, is a massive opportunity. It's bigger than just lending to a borrower. There's an opportunity to recreate a massive financial institution that operates natively on chain, and we struggle to see how there's not going to be new winners in the digital age. And so we pressure test that a lot, but thinking about an integrated asset management and capital markets business feels like the way to really accelerate this adoption. And obviously our skill set and background is in credit, and so we focus there. Desmond Fleming 09:35 Do you have a strong preference for open versus closed blockchains? Obviously I imagine a lot of the settlement of the transactions that you guys have happens on either Ethereum or Solana. Obviously Canton exists. I don't think you guys are doing anything on top of Canton, but obviously they have taken a different approach of saying we're going to create these closed networks and ecosystems. As you think about the evolution of building a modern credit institution, do you have a strong preference, or again, it goes back to, hey, you'll use the best in class infrastructure that exists? Connor Dougherty 10:34 Yeah, I think everything that we've done has been on public blockchains where we focused. I'm not going to comment on specific private chain implementations, but that's just not where we focus. Where we think some of those elements should be tailored is more at the application level. And so you'll see things like privacy and other concepts that are thrown around that are important in lending. The way I think about us is we are just trying to deliver a premium solution to the borrower and a premium solution to investors, and so we will adapt on that basis, right. We use the infrastructure and the technology as a tool to do so, right. And so our North Star is to make investments that are better risk reward and provide those either at a deal level or a product or strategy level to an investor universe and have a product that's superior than the status quo as well. And we focus much more on that. And that's why we've taken the infrastructure partner approach, because that's where they're focused, and we're going to try to use the best in class infrastructure where we can to deliver that. Desmond Fleming 11:48 Yeah, technology's a means to the end, and obviously you guys are crypto native, but we also have this whole AI wave and build out going on as well. How are you guys leveraging AI to deliver and structure best in class assets? Connor Dougherty 12:18 As we think about where crypto and blockchain come in, that's kind of like post trade. We structure the deal and then it runs. Pre trade is where I think there's a lot of opportunity when we're doing that analysis, that credit work, right, that is intensive, right. Like my schooling is to be really thorough, North Star is never to lose money, but that inquiry requires a tremendous amount of work. We have a director of automation that's looking at building what we think of as an investor OS, right. We know that to be a modern credit institution, we're going to have to be more efficient on the pre trade basis, looking at these opportunities, structuring deals and credit solutions more effectively. And that's where AI is coming in for us. It can both be speed and be a lever. It can also be a willingness to wade into complexity where others won't, because instead of it taking the analyst 60 hours, it takes the analyst at Valinor plus the OS 30 hours to come to a decision, whether that decision is yes or no. And then it also comes into maybe institutionalizing some of the judgment of Valinor in a software layer. Desmond Fleming 13:03 You know, how much of the OS is build versus buy off the shelf. Obviously that's another discussion that comes up a lot, where it's like, you know, Claude's pretty good, Codex is getting pretty good. So how have you guys thought about that internally? Connor Dougherty 13:39 We haven't found that it maps perfectly. I just think there's, especially because of the end markets that we're operating in, the structural features and operational features that we're bringing in our solutions, it doesn't map perfectly. We're far from, I'd say, commodity private credit. And so it's been challenging to see, they don't map great. And so we've actually decided that it's important to make the investment internally. Desmond Fleming 14:05 Got it. Very interesting. Commodity private credit, I might take that term. But let's talk about some of the actual assets that Valinor is financing and lending against. So when I think about the private credit ecosystem, the more I spend time, the more you personally, for me, get fascinated in terms of the types of things that it touches, whether it's credit cards, auto loans, whole loans, mortgage loans, residential transition loans, whether it's things like financing an airport gate at Heathrow, that was one of the things I was like, what? And also, again, relevant to where we are today, a lot of there's increasing amounts of GPU and kind of this AI capex financing build out. Where are you all kind of focused? What are the types of products that you like lending against first and foremost? Connor Dougherty 15:06 Our business case is that the technology has to make a difference and the risk has to be good. And there's certain areas where those are mapping. And also the third would be that the borrower has to be compelled or China tech sufficient, right. And so where we're seeing that is in kind of shorter duration asset back credit, where you have a collateral asset like a receivable. We can get that data through an API integration to instruct the borrower programmatically, and it's high velocity, right. So the draws on the borrower, on the facility, in our case the brain is, are every single day. That would be impossible in the traditional financial system for a normal private credit firm. And the best private credit firms, in order to kind of get a couple new draws in a couple days, are throwing like a thousand bodies at the problem. Desmond Fleming 15:52 Yeah, that's crazy. Connor Dougherty 15:52 Yeah. The back offices are like twice as big as the front offices in asset back credit. And so it's cool on that basis, but it's more than just operational efficiency. Like I said, we feel like we're taking less risk per unit of return as well. Because if it's a smart contract, if it's programmed right, it's going to operate as it's told. Now there's different types of risk, right. There can be protocol risk, et cetera, but you're not going to have the human fat finger risk. Everything in traditional lending is on a delayed basis as well. If you think about all the data that you're getting, it kind of grows the spectrum, but usually the borrower is packaging it for you to review on a delayed basis. And so we have covenants and compliance checks that can turn off your facility programmatically on data that's fed real time. And so our ability to catch a footfall is a lot better and really challenging to replicate if you're not trading on chain. Desmond Fleming 17:10 Yeah. So short term receivables, that's one area, both, let's call it, on chain native as well as off chain native, am I correct? Connor Dougherty 17:20 Yeah, exactly. Desmond Fleming 17:20 Yeah. What are the other areas that you're excited about in the near term? Connor Dougherty 17:20 I think we try to be thematic on end markets. So payment financings, we're looking at those card issuer flows that you talked about, merchant acquirer flows, cross border, that's the broad payment financing opportunity where stablecoins are being used generally. Beyond that, we've also talked to kind of these fintechs that you described that are starting to get more stablecoin friendly, the more traditional fintechs. Then downstream of that, we're looking at newer end markets like market makers and prediction markets. We're looking at some of these AI use cases, and we're earlier on those because, frankly, where we are in our team, the payment pipeline is like billion dollar plus. So we have these kind of frontier markets where we do research and try to be early, where we feel like we can have edge, but right now we're really focused on prosecuting kind of the pipeline that we have in front of us. Desmond Fleming 18:24 Yeah. And the frontier markets are exciting. There's a lot of change within them. And certainly for things that are capital markets leaning, like prediction markets or perps, if they ever come to market here in the US, the TAMs of those things can become so big over time. Connor Dougherty 18:43 Well, you want to be careful. We're lenders, we're not equity investors, right. So we try not to take too many binary risks. There's some binary risks in new end markets, right. You want to have a margin, we try to have a margin of safety in everything that we do. Desmond Fleming 18:50 Yeah. Connor Dougherty 18:50 Generally, we're looking for areas where the technology is really making a difference and we can provide a better solution than the status quo. Desmond Fleming 19:08 I also want to talk a little bit about your maybe founder influences from the investing world, right. Like you spent six years at Blackstone, kind of referenced the goal is to never lose money. I think that's a sportsman kind of ethos that I'm sure got percolated through that ecosystem and culture. You also mentioned margin of safety, obviously famous Seth Klarman book as well. Who are some of your founder or investing influences that maybe kind of influenced not only you, but Valinor today as well? Connor Dougherty 19:33 I feel very fortunate where I started. I think I went to school at one of the best places you could. So when I started at Blackstone, the credit business was called GSO, three founders, there's the acronym for the three founders of that firm, which was acquired by Blackstone. And the heritage was more of an opportunistic credit heritage. They had a special situations hedge fund. I was working across a big distress fund. And when you think about that seat, you have to be very dynamic, and you start to understand value and capital structures and structuring. I think thinking about how you can structure a deal to protect risk was really ingrained into us. And I feel very fortunate about that because I think if I was to point at the Valinor ethos and where we really make our mark, is that we create better solutions because we structure them in a way that we feel like we could be multiple standard deviations off on our underwrite and still not lose money. And that's a skill set that not everyone has. Desmond Fleming 20:42 Exactly. Connor Dougherty 20:42 And so I would point to that as the most influential way that my schooling, or the way I think, is still kind of represented today. And I kind of went the reverse way at Blackstone. Blackstone moved much more into direct lending and down the risk curve over my time into, I'd say, broader private credit as we know it, which is not as opportunistic or distress, but starting on that basis, I think was very, very valuable, and that's what I would point to as really influential. Desmond Fleming 21:10 In the distressed world, how does origination or sourcing even work, and even how you think about that, tying back to Valinor today, where it's like, to take the term commodity private credit, it's kind of like a menu and plate, it just shows up, one firm gets it, they take their slug, they syndicate it out. It's obviously very relationship networked and oriented, but I feel like the set of opportunities is pretty widely known and sometimes it's just got to go pound the pavement. Within the distressed world, as well as, as you think about the Valinor world today, as the market exists, how does origination and sourcing work for you all? Connor Dougherty 22:08 I think it's a little different in the distress world than it is today. The distress world, you're much more opportunistic, and so you'll see situations or themes or things that you want to seize the moment or jump on because you feel like it's mispriced or you have a unique view on value. And so there's a thesis, obviously, but it's more episodic. The energy markets blew up in 2016, you know the energy markets well, you think it's mispriced, you put out a lot of money in that dislocation. That's a very typical type of scenario. I reference it as a great way to think about value and risk and how to create margin of safety. But our origination motion right now is much more thematic and growth oriented, and so we think about finding edge structurally through how we operate, and we're not looking for edge like circling a carcass as much. Desmond Fleming 23:11 Yeah, that makes sense, where it's a lot of it's baked in because it's a carcass. Connor Dougherty 23:15 Yeah, yeah, right, and it's more zero sum. Desmond Fleming 23:15 Yeah, right, there's not enough value to go around, and so the sharks are out. Connor Dougherty 23:15 Yeah, it's different in that way, but it's a really good schooling on how to think about risk and value. Desmond Fleming 23:15 I assume at GSO you invested across the cap stack. Connor Dougherty 23:31 Yes. Desmond Fleming 23:31 And so whether it's warrants, PIKs, structured mez equity stuff, like all of it. Let's talk a little bit about building Valinor today. So you talked about, you want to build a modern credit institution. We actually didn't talk about open credit. Can you maybe define what you mean by that? Connor Dougherty 23:46 Yeah, so that's kind of our in house view of where we are and where we're going over, let's say the next 10 ish years. If you look at credit, I think kind of 1.0 is bank originated credit, right. Like if you were to get a loan, it would come from the banks, either directly from their balance sheet or an offering right into the public capital markets. Desmond Fleming 24:10 Then kind of post crisis, you really saw this rise of private credit. I was on the front row seats for that. When did you start at Blackstone? Connor Dougherty 24:24 It was 2016. Desmond Fleming 24:24 Okay. Connor Dougherty 24:24 Yeah. And so you saw kind of the rise of private credit, really some of it was regulatory, a lot of it was regulatory, and then it came into these alternative managers, a lot of credit origination. And now, as I think about it, and I think of all these as additive, right, this is credit expansion, it's not, I guess, like trading market share, this thing that we call open credit is the audience for credit is going to get much bigger, and technology is going to allow for that, and we think blockchain is the core of it. And ultimately what it means is capital is going to meet opportunity more efficiently and effectively, because there's a broader audience of folks who want yield and there's a broader audience of borrowers, and efficiency that can be gained. Part of the open credit thesis is there's an undersupply of credit into the ecosystem. There actually are high quality borrowers around the world, and part of it, obviously, internet, blah blah blah, that was our first kind of 20 year trend, but another part of it is the ability to distribute capital and manage that capital to those quality borrowers has now also an order of magnitude become much easier because of blockchains. The barriers to entry are pretty high in the traditional system to be a credit asset, a credit manager. And I think on the borrower side, there's just not as much capital as there could be addressing the needs of those borrowers. And it's not like we're going out the risk curve, I think it's just generally an abundance mindset. Desmond Fleming 26:07 Yeah, so I really love kind of asset managers and asset management businesses. I think they're fascinating, for lack of a better word. I think a lot of venture people overlooked the category because it's been tough from a venture perspective, but when you think about businesses like Blackstone, like Ares, Apollo, like KKR, like Hamilton Lane, et cetera, it's very clear that asset management businesses can get to scale. You can have not only your five to ten billion dollar outcomes, but also your, let's call it ten to a hundred billion dollar plus outcomes. The tension that I've observed as I've spent more time in this sector of the industry is that asset management businesses take a long time to scale and venture people, and venture as an asset class, can be impatient. So how are you managing that tension of building a modern credit institution that's in the business of managing risk, but also to a certain extent you have this downward pressure from venture of trying to grow very quickly? Connor Dougherty 27:35 Some of it is a good thing in the sense that I think when you're in the business of risk, prudent growth is probably warranted. As I think about it, our reputation is our number one thing. Trust takes a while to earn and can be lost immediately. And so some of this, when you're managing risk, you're a trusted business, right, and trust takes time to earn. And so I think some of it just comes from, those brands take time to earn trust, right. And so that's one element. I think the elements that you can manage for, and what we are seeking to manage for, is the human capital limitation, the human scaling limitations. And so if you think about capital markets businesses, asset management businesses like Goldman and Blackstone, the ones that you're naming, they're very human capital intensive, back office and also front office, but the processes, and you think about the ability to scale, require just scaling people, and I think that equation is changing. Desmond Fleming 28:22 Yeah, obviously we touched a little bit on AI, we don't need to talk about that again, but... Connor Dougherty 28:22 Our ability to use infrastructure as a tool to monitor, structure, create solutions direct to borrower, like we talked about, but also to form capital. If I think about where asset management's going, I think asset management's about to be reimagined fully. Desmond Fleming 28:47 Say more. Connor Dougherty 28:47 There's these new tools called vaults, which I'm sure you've heard of, and you really think about what a vault looks like, I think history would agree, they look a lot like a fund, except the difference is they're way more flexible, they're transparent, and they're easier to spin up. And as long as you kind of have the compliance layer on top of it, they're going to allow for a way better capital formation flow than traditional fund management. Like if you think about where maybe... Desmond Fleming 29:14 Just before we go, quickly just define a fund for the audience that may not be, or not a fund, a vault for the audience that may be less familiar. Connor Dougherty 29:15 A vault is an ERC standard that basically is a smart contract that allows you to deposit stablecoin and take back a receipt token which says this is my interest, and that I basically think about as an account. And there's typically a vault manager, which is called a curator, that takes that capital, the stablecoins that you posted, and invests it on your behalf. And so if you think about what that looks like, it looks a lot like a fund, looks a lot like a fund manager, that's the way we view it at Valinor. The difference being, if you think about traditional fund management, and I'm sure some of your audience have an LP position in a fund or have done an SPV or something like that, keeping the Excel spreadsheet as an investor is brutal. I'm like, what are my positions, I have no idea. Having this on a ledger that's uniform, and having a standard for all those positions be held in one wallet, everything's tracked. And then on the fund manager side, there's a reason there's minimums, managing distributions and small, it's not worth it, it's brutal, and there's a reason why there's a max number of strategies you have, you're like, Blackstone is huge and they're not going to have more than 30 different funds. That's because there's all this administrative version of tracking all of them and managing them. You can see a world where you could have the level of hyper customization that you couldn't imagine, you could have like 5,000 different vaults that are tailored. Desmond Fleming 30:56 Yeah, like different specifications. Connor Dougherty 30:56 Yeah, and then you have a program that just allocates a deal across all of them. Desmond Fleming 31:03 Yeah, so it's not only you could have the specific... Connor Dougherty 31:03 Right, and then almost at an index level, so your index could be the feeder fund into a bunch of other smaller vaults, where, hey, Des loves and really knows cross border payment and merchant acquiring and authorization settlement mismatches, but he also wants to get exposed to GPU financing build out, or just traditional, I will set those parameters for you, Des, and they'll come to us and he'll talk and say, okay, we'll spin up a fund of one. Desmond Fleming 31:31 A fund of one, you never get a fund of one unless you had a hundred million dollars in allocation. Connor Dougherty 31:31 Yeah, right, that's all going to change. You're going to get hyper customization at a level that wasn't feasible before this technology, and that's because fund infrastructure has basically, the marginal cost is going to go towards zero in that world, in that future. Desmond Fleming 31:41 You all are the vault manager, the fund manager, et cetera, so you're responsible for managing the assets and risk and structuring them. Who's the discovery layer? Obviously you'll do some component of that yourself, finding pools of institutional or retail capital, but how else would you think about the fund flow into that structure? Connor Dougherty 32:16 I think distribution is still king, right. If you're talking about who do you get people to, how do you get people to allocate to you, which I'm not positive you're asking, but I'll answer on that basis, like, I think you want to find partners, and I think the only thing that you can do, and that we can focus and do our job, which is going to result in our North Star would be to be that trust layer, we want to be this trusted layer of the digital age, right. We want our brands to be like the ones that we named prior on this talk, right, and we think we have an opportunity to do that, and that I don't think is going to change. I think people are going to still rely on brands to make risk decisions. Desmond Fleming 32:53 Yeah. Connor Dougherty 32:53 And I just think they're going to be new brands, we're going to be one of them. Desmond Fleming 32:58 Yeah, but especially in an AI world, right. Connor Dougherty 32:58 Like the premium to brands is probably going to go up as the cost of doing this complex work goes down as well. Even if you think about some, there are very large asset managers in the world today that have not invested in their brand and they're great at what they do, but consumers have, consumers for the most part have no idea about them. Desmond Fleming 33:26 Let's talk about your founding experience so far. Founding a company is very hard, this is the first time you've done it. What have you kind of learned, what are some of the tactics that you've picked up as a first time founder? And when you think you've now been doing this like two and a half years maybe in, you've learned a lot, so you're no longer six months into the job, what do you wish you knew, what do you know now that you wish you knew at the beginning? Connor Dougherty 33:45 Good question. I'd say, even though we founded Valinor a couple years ago, it's really when we took in this institutional capital and really hit the gas, things were very different than kind of when Lily and I were a two man shop. Desmond Fleming 34:05 And for context, who is Lily? Connor Dougherty 34:05 Lily is my co-founder, and we started at Blackstone together, that's when we first started working together, and then it felt really like, closer to a deal business, right, still closer to investor seat. Now that's really changed for me, like what I've learned is putting good processes in place, investing in people, and laying out clarity around goals and visions and how you're thinking, and creating a really good cadence for communication. The people element is huge, and the outcomes are nonlinear if we do a good job. Desmond Fleming 34:47 Yeah. Connor Dougherty 34:47 And so I think that's something that I've almost quickly realized, but really been focusing on, I think I can still get a lot better, but I can see how important it is, every day is evolving. Desmond Fleming 35:08 I really like that term, cadence of communication, could you talk about tactically what that means? I intuitively know what that means, but again, for the audience, tactically, what does that mean? Connor Dougherty 35:28 We put a lot of structure around meetings and syncs, and so we meet every single day, we have full team, investment team, full team, full team every morning. Some are longer than others. We really pride ourselves on transparency, and so most things are in full company communication channels, and we even have office hours on Fridays where if there's concepts, we have a scratchboard of thinkful or thinking about different things, or notice different things, and we talk about them as a company. And so I think every voice counts, diversity of thought is really important, and maybe that is another thing that I've learned from the beginning that obviously I need to steer, but having the appreciation that other people have really good insights is important. And that's kind of like, you learn that in an investment committee, and you learn in an investment committee that you should be very humble and hold your convictions pretty loosely, and I try to adopt that in my management style. Desmond Fleming 36:29 And then maybe where we'll wrap is within two questions we were talking about at the very beginning. You were a rower in college, you did it all four years, your body is also your sport, particularly in rowing, so what was that experience like, how has that just influenced you not only as a founder but as a person, and also how did you get into it? Connor Dougherty 36:46 I got into it because, frankly, I was kind of always a little bit of a cardio head, I swam, and I didn't have a spring sport, and this one seemed like a fun thing, and then I just ended up being way better at it than anything I had done, which was like a weird thing to discover, considering that I guess I thought I was, you know, anyway. Desmond Fleming 37:11 So you swam first? Connor Dougherty 37:11 Yeah, swim and water polo, I guess I've always kind of been around the water, in high school, and then added rowing, and so that's how I got into it. When I got recruited to row in college, it wasn't till I really showed up when I understood what that meant. Desmond Fleming 37:32 Yeah, it is a full lifestyle. Connor Dougherty 37:32 Yes, we woke up at 6:30 every single morning, people like talking about the grind, I don't really focus on that, I kind of just like, it is what it is, and it was, I think, what I really think about, and it's funny that when I think back on it, I would think that I would remember how brutal it was, the training, but I only remember good things, and the team element was huge, they're still all my best friends. And to answer your question, what do I take from that into the company, is that when I think about the racing season, when I think about the success that we had, and we were fortunate enough to have some level of success when we were there, it's how good team success felt, right. Like I had a lot of individual achievement through my life, and having that shared success with seven other people, like we had our failures and our successes together, and I realized this is how I want to spend my life, this is, I want to try to recreate that, and I feel like it took me a bit to get there, but that is the most rewarding element of founding the company, and that's probably what I feel most fortunate about. Desmond Fleming 39:05 That is awesome. Okay, where we'll end, Connor, is I love asking this question because it's one of my favorite things about the tech and venture ecosystem, is it gives back pretty consistently. So again, knowing what you know now, you've raised 25 million bucks, you're off into the races, you've now been the CEO co-founder of your company for coming on three years, at the end of this year or relatively shortly, everything that you know now, if there was an incremental or new version of Connor who's thinking about taking the leap, thinking about starting their own company, what is the number one piece of advice, thinking about in particular starting a venture backed company, what is the number one piece of advice that you would give them, and we can wrap there. Connor Dougherty 40:04 I'll talk about my personal experience because that's all I know, you always, I thought about it in a risk context, and I just think it's totally the wrong context, because it's almost riskier, if you really believe, if you're interested and you don't want to do it, it's almost riskier not to do it, because that won't ever go away and you'll always be wondering. And so I think there is no risk associated with it, I think it's, am I, I haven't thought, I haven't looked backwards on the decision once, I really, that surprised me, I thought I would, and tried to weigh it against, like if I had just done the partner track at Blackstone or something, right. I haven't thought about it once, and I think it's because it always appealed to me. And so I think the risk, I think, would be not seeing that through, because I wouldn't want to think about, you know, me sitting, where I would be today with that in my head. And so I would get rid of risk associated with making the leap, I think that would be the one thing I'd say. Desmond Fleming 40:50 Yeah, if it's on your mind and it's scratching your... Connor Dougherty 40:50 You should probably go for it. Desmond Fleming 40:54 Yeah, exactly, especially if it keeps coming back to you. Connor Dougherty 40:54 Yeah, yeah. Desmond Fleming 40:57 Cool. Connor, this was great, thanks for coming by. Connor Dougherty 40:57 All right, cool.