Hey everyone - I’ll get right to the chase. I’m really excited to share today’s interview because I think it gives an incredibly insightful look into the experience of being a founder. In today’s article we chat with Nik Talreja, who is the Founder of Sydecar, a fintech infrastructure business “on a mission to create new standards for how we all interact with private markets.” Nik and I first met in person, of all places, in my hometown of Houston, Texas. What I remember from that first conversation with Nik was just how real it was. I felt like I had known Nik for years, and I think I maybe had known him for a few weeks. Today’s conversation, in addition to talking about the shifting landscape of the $9.8 trillion dollars invested into private markets, Nik and I talk about some of the foundational experiences that led him to become a founder,is views on what founders don’t truly understand about the entrepreneurial experience, and the importance of being able to tell compelling stories. If you’re thinking about becoming a founder, looking to level themselves up as a founder, or curious about the leading edge of software innovation in private markets, this article is for you. Nik is a salt of the earth leader that I’m sure is going to do big things in the years to come, so like always - let’s dive right in.
Nik, the first question that I have for you is: Could you give us the high-level founding story of Sydecar?
Two years ago, my co-founder, David, and I were starting to invest. I had practiced law at Cooley and had a strong network of founders that I wanted to support. We were putting together a syndicate and starting with $200K investments.
When we started making investments, we realized that AngelList’s $8,000 fee cuts deep into a $200K SPV, and their marketplace approach took our LPs to a place where they'd be marketed other opportunities. The only other option was Assure Fund Admin, but their fee was in the range of $13,000. Since we were both lawyers and had drafted tons of documentation for funds in the past, we started running our SPVs without a provider.
We built our own process, wrote our own documentation, and started putting together forms in a clean way. Over time, we put together a product that automated more than any other provider out there.
The realization that this could be a company came when Nik Milanovic reached out. He was working on a syndicate that was trying to stitch together two GP/LP structures and said, “There’s got to be a way.” I realized that there is a better way, and we’re building it. That catalyzed the version of Sydecar that we know today.
We’ve automated the process of collecting and deploying capital in private markets through standardization. Our goal is always to be hyper-efficient and cost-effective, with strong margins as a business. We can then pass on the benefits of automation as a lower cost entry point for emerging VC.
When an emerging VC or an angel investor running a syndicate compares Sydecar to AngelList, how do you stack up?
We are a private platform, where your LPs are your LPs. You own those relationships so you can build your brand as an investor and not compete for LP attention. We’re built so it’s lower cost and a frictionless experience for everybody. That benefit accrues over time. Every year after your investment, your tax filings are automated and your reporting is automated. Information is delivered to you ahead of schedule rather than late. For example, this year, our customers’ investors received their K-1s in February.
That's early.
That's right.
Did you know you always wanted to be a founder? You were building a product for yourself and solving your own pain point. The journey into entrepreneurship is not an easy one, so why dive in?
I grew up in an entrepreneurial household. My dad has a CPA and an MBA, but things didn't work out in a professional career path for him climbing the ladder on Wall Street. He ended up starting a business selling gemstones, beads, and pearls to jewelry designers in Los Angeles.
When we started that business, we had nothing. Every dollar counted, and we couldn't afford anything. Through grit and determination, my dad started a business out of the back of a twenty-year-old Honda Accord, driving to trade shows to sell merchandise. I would tag along to trade shows all around the country.
Growing up in that household inspired me to one day want to be an entrepreneur. I saw how determination and hard work can turn into value.
We talked about passion before we sat down to do this interview, and the importance of being passionate about what you do in startups. Where does your passion lie? Are you passionate about the craft of entrepreneurship and building something? Are you passionate about changing the private investment landscape for the better?
I am passionate about changing private markets to the effect of increasing access, decreasing friction, and increasing liquidity. I’m dedicating my life to solving this.
But in the short term, I have to be passionate about 100 other things before that end goal. I was first passionate about telling a story, then I was passionate about building a core team, then I was passionate about perfecting a product. Today, I'm passionate about integrating a leadership team around a common goal, so that we can achieve more together. We're solving this one macro problem of decreasing inefficiency in private markets, but to get there, I have to solve thousands of other smaller problems that I'm equally passionate about.
Right. Let’s double click the passion about telling a story. I think this is something that first-time founders don’t 100% appreciate in the VC fundraising process. Could you unpack why telling a story is important if you want to raise VC dollars or to raise money in general?
Storytelling is important to raise money, build a team, land customers, everything. You're sketching out a draft of what you can do and why they should trust you. At the pre-seed stage, people are betting on you. So, it comes down to you and the story that you tell.
That story is how people determine a few things. Are you someone that has conviction? Can you deliver this by telling the same sort of people you have sufficient resources to get this off the ground? When you're speaking, are you speaking from a place of authority, so I know you can do it? It all comes down to a story. You don't have that much time, so it has to be earnest and compelling.
Let's talk about more of the general Fintech landscape. In this macro environment, how are you thinking about guiding and building the business in a reality where fintech businesses are being materially challenged?
We can't control the macro. What we can control is how great our product is, and try to expand a market that we believe needs to exist.
Private markets are contracting, but they're not going to zero. If we can deliver a superior product, tell a better story, and deliver a better experience for those who are investing in private markets, then we are better prepared to succeed.
I expect that, because our approach has always been to stay lean and do a few things well rather than saying yes to many, we have a better shot on goal than ever. I think fewer competitors will try to invest meaningfully behind what we do. It doesn't make sense for others’ strategies. But for us, we're already here. So we're going to delve on.
Where do you think Sydecar is going to play in the future of private markets and alternative assets? The brokerage layer is pretty well-defined. But do you view Sydecar much more as the infrastructure layer?
Absolutely, it's infrastructure. When we started the business we built a point solution – SPVs for venture investors. Then, we scaled into more complex SPVs for what looks more like a fund structure for emerging VCs.
We knew that we couldn't say we were an infrastructure company on day one; we had to prove it out. Now that we've proven that we can deliver a great point solution, we delivered an infrastructure product last year via an API. Through this product, other companies are delivering an ability to invest in private assets. It’s our SPV behind the scenes, but it’s their package and brand. We've realized that we can expand our reach as infrastructure far beyond what we can do as a point solution.
Beyond VC, if you think about private markets as a relatively untapped asset class, there’s so many areas for growth. There are many assets that have yet to be productized and offered to retail investors or sophisticated investors. That is our mission: To enable hosts – whether they be emerging VCs, other businesses that are tech driven, fund admins, law firms, institutional banks, or anyone who controls capital flow into alternative assets looking for a better way to transact.
I love it. Can you talk a little bit more about your embedded solution? It’s definitely an area lots of people in fintech are trying to figure out.
We launched our API last year. With our API, you can create an SPV in real time, open bank accounts in real time, run KYC, and move money into an asset. We step in as administrator behind the scenes to help you manage the documents back and forth with the counterparty, then we automate the creation of financial reports and tax returns. You brand and ship back to your investors, but it all happens under our structures, so we can offer you the benefits of real time information flow.
Who uses that? Help me bring the use case into the real world a little bit more.
The API would be used by tech forward wealth management platforms. For example, a company that hosts demo days where they want to support transactions in real time. Or, an institutional bank that has a private wealth division and a desire to move money into alternative assets on the other side. They can leverage our platform to create a technology driven way of matching those investments and moving capital. We are automating the most painful parts of this business which are the tax recording, financial reporting, and maintenance over the long haul.
I want to transition to the last few questions. For the founders reading this interview, what would you want to share with them that you don't think they widely understand today?
When you grow your company, you may not think you are changing. You still think you're just working hard on something that you're really passionate about. But as you grow your team, it's important to remember that your team sees you as an authority figure. What you say and how you say it, matters.
Also, be really receptive to feedback, even when it may not be the feedback you want to hear. Internalize it. Having the support of venture investors and a team that wants to follow you is an honor, but it's also a challenge you have to rise to. If you're up for this challenge, it will push you to be better and better and better. People will see that. They’ll see that you're bettering yourself and want to better themselves with you.
Right, 100%. The question I want to end on, and this is a new one for me to ask as the outro, is what's been different about winning your first customer versus winning your tenth, versus winning your 100th?
I mean the form of how they hear about you may change, or how they choose to contact you will change. With Nik Milanovic (he was my first customer), he contacted me through my law firm email address. So, it was before Sydecar was even a company.
Now, we have a website that's very shiny. We have a Typeform that screens you to get you to the right person. But, ultimately, whether it was Nik being our first customer, or our third customer, or our 500th customer, people reach out to us because we fundamentally haven't changed how we think about customer acquisition. Everything that we do is a part of our brand and is an embodiment of who we are, whether it's how we reply to an email, how we handle your SPV, how we treat your LPs in a deal, the content we put out, all of those actions compound and that's what allows us to get to that next customer. It's a word of mouth business. We are in the trust business.
When you win that trust, good things happen. Nik was our first customer, he referred us to our second customer, who referred us to our third customer, and in total, those three customers made about 30 introductions for us in our first few months in business. We spend the time doing great work for every individual. Even if it's all automated, we have the same impact of a service-driven business. You feel that love from us, so that you want to work with us and refer your friends to us and other people you work with.
Love it, building a great product and being customer obsessed. Customer focused. I love it. Nik, this is great. Thanks so much for spending the time.
You too, Dez. Thanks for having me.
