Aubrie Pagano & Ryan Freedman of Alpaca VC

Welcome to the Puck Venture Capital and Beyond, a show that explores the evolving landscape of the venture capital world. We'll have candid conversations with today's VCs and entrepreneurs who are shaping those changes. I'm Jim Behr, Managing Partner at Behr, Negron and Troff, and President of CMUG Advisors. This podcast brings change makers to the table to discover the inner workings behind the decision making strategies, and ultimately to how they got to where they are today. We consider ourselves broad investors and we frame it as investing in technologies that are reshaping the real world.

We are founders that have been in the trenches and I think we understand not only what it takes, but we understand our industry at the most granular level. This week, Aubrey Pagano and Ryan Freedman, partners at Alpaca VC, join me for a thoughtful discussion about the importance and benefits of bringing more diversity to the venture ecosystem and the actions they are taking to support this. We also get into the challenges and opportunities inherent in working remotely and the roles that technology can play in this. Aubrey and Ryan, welcome. I'd love to hear a little bit about your background and how you came together as a team to do this.

That'd be wonderful. Yeah. Sure. I'll kick it off. I've sort of went to school for real estate, urban land economics, and been focused around that my entire career, but have done that with a preview of how to apply innovation and data to everything that we're doing.

And then took a little break in the middle there to cofound a company called Coral Capital Solutions, which was basically a tech enabled factor focused on account receivable financing. It's done about a billion and a half of business since inception and continues to operate today as a profitable business. And then back to real estate 2010, founded a company called Coragen, which is a developer, owner, operator of everything, basically, multifamily real estate. Started in New York, now Florida, North Carolina, California. But, again, early days there, very focused on how do we innovate, what we're doing, how do we differentiate ourselves from a business that's become a little bit more commodity and capital driven.

So we were the first ones building micro units before they were called micro units. We were bringing a hospitality component to multifamily real estate before you saw a lot of these coliving models that were coming out there. And that sort of drove me to be a venture capitalist at the end of the day. There was too much excitement around my core competency and skill set of real estate with the ecosystem just becoming something real around how this innovation is gonna completely change one of the largest industries in the world. So we founded what was Corigine Ventures, what is now Alpaca VC late two thousand twelve, early two thousand thirteen.

And I met our other partner, David Goldberg, early on and was very fortunate to meet David who was coming out of the startup world, had just sold his startup, and sort of was that ying to my yang around, like, how do we really put a venture firm together? We aligned around a mission that we're both founders. We both know our industries really well. Let's be an investor that we wish we had when we were starting our companies. And so David and I got really excited about that and and treated this as a start up.

And so we have OKRs and KPIs, and we iterate, you know, every quarter and every year to make ourselves better. So fast forward now to eight years later, firm is growing, and we're looking for another compadre to join us, you know, at the helm. And so we started a formal process and through David's network, got to meet Aubrey. And, we've been off and running, and it's been a wonderful relationship. And on that note, I'll I'll kick it over to you, Aubrey.

Yes. So my background before Alpaca was in the venture ecosystem in New York as well. So I'd known David for a while through the ecosystem ecosystem and had been running my company for the last seven years, which was a company called Bow and Drape, which is focused on apparel and accessories for women that was all about expression and personalization. So my background was in brand building and consumer and a lot in supply chain because actually building custom clothes and gifts is about using tech and being really smart about your supply chain. And so built that company to profitability into over 300 department stores.

We were, like, Oprah's favorite things. Serena Williams wore us on, like, her first date with Alexis, and we had kind of a crazy ride. And so through that, I got to know a lot of founders in the ecosystem and then actually got tapped to start investing in some of them. And so that's how I got to the other side of the table, on the investment side and just felt a really natural seat there as somebody who had been through the years of founding my company all the way to exiting. So I sold my company in 2019 to a private equity firm.

And so I just felt like I had a lot to give back to the ecosystem. I felt like I could be a good partner the way that I wished I had some partners be throughout the journey. And so as Ryan was mentioning, when we really started to have a serious discussion about could I join the firm, that value system of being for founders by founders was just an overwhelmingly clear fit. And when I backchanneled the firm through all the founders as you do, you know, you do your homework on where you're gonna work, even the founders that Alpaca, formerly Corjan, had said no to had amazing things to say. They said, you know, David sat down with me for an extra hour to sit through my business plan.

Ryan was just so gracious with his time. And so to me, that spoke volumes about the reputation of the team that I would want to be associated with. So I joined Coragen in January this year and have been off to the races, helping the team find new investments and grow toward our future vision. And in terms of how you're set up, do you have committed capital? Like, is this the first fund that you've done?

Are you on fund two? Where are you in and what's the size of your fund at this point? Yes. So we are just finishing investing out of fund two and we are just kicking off a $100,000,000 fund three raise right now. Okay.

And in terms of fund one and two, are you essentially just doing follow-up investments or are you still doing new investments out of fund two? We have two slots for investments left in fund two, and we have a very robust pipeline right now. So we are anticipated that, you know, that investment period will be complete come the end of this year, and hence, that's why we've kicked off the next episode. From a geography perspective, where are you limited in terms of your investment? Are you focused on particular communities?

Yes. A US North American firm, I think Toronto, you know, added a name in there, and we really like that ecosystem. But US investors, about half of our deals came from New York. That was in a pre COVID world. Now we're sort of dispersed, and I think the virtual world here has opened up a lot of doors in a really interesting way.

David's been hanging out in Florida a little bit. I've been hanging out in Colorado a little bit and meeting a lot of different people that are from the ecosystem that we would have never met, you know, in the case that we're sort of sitting on 5th Avenue doing business as usual over there. And so I think the post COVID world might look a little more dispersed than that. But having said that, you know, we've transacted in San Francisco, LA, Miami, Austin, Minneapolis, Charlottesville, all over The US just about putting your flag out there for the you know, what are the right deals for you and what are the right deals for us that we can move the fastest on. And I think, you know, we've done that as a firm, and it's really started to build a really nice flywheel that geography of ourselves or geography of our portfolio companies continues to become less important.

And is there a particular sweet spot in terms of are you writing a $5,000,000 check typically for 40% of the company? Or is there any metrics that you would say in terms of your typical investment? Yeah. Fund two is sort of a an eight to 10% target ownership. And so that check looks like seven fifty to one and a quarter.

And fund three, we're flexing that up for 15% target ownership. So that check will look more like 1 to $2,000,000. Okay. And in terms of industries and the types of investments you're focusing on, and again, using where the puck is going in terms of where you see fund three going, what are the types of investments that you're looking for right now? We consider ourselves broad investors and we frame it as investing in technologies that are reshaping the real world.

So where people are using technology, laying it over daily life to transform the way that the real world works. That sounds big and broad, but then underneath that, we as partners all have experience within our founder lives. So underneath that big broad bucket, we have planted flags where we say that we like to build expertise and where we like to not only internally talk about investment areas that we are interested in for the future, but also things that we can then say to the rest of the ecosystem, hey, we're really interested in this. And so here's a blog post on it. Here's our white paper on it.

And if you have any interesting founders working in the space, come to us. And so that's how we like to start the flywheel. So each partner has different sweet spots that they focus on. So I myself focus on consumer. Given my background, I also focus a lot on global commerce infrastructure and supply chain.

And I also have been very interested in virtual communities. And I like to say it's not direct to consumer. It's direct to community. So just looking at the evolution of the Internet and how the atomization of Facebook has created new niche communities that actually globally are quite large and interesting. Those are examples for me.

Ryan, given his background that we just talked about, focuses a lot on prop tech, on construction tech, and fintech, and is very deep there and has built strong networks. And then David, our partner, built a company that was basically like a rent the runway for men and men's accessories. And so David focuses on marketplaces. He's sort of our marketplace guru that extends to B2B marketplaces. He marketplace guru that extends to B2B marketplaces.

He also looks a lot at subscription commerce and is very focused on family tech and the aging population as well. And so between all of us, we have these evolving themes that we focus on and research. And our we have these evolving themes that we focus on and research. And our goal is that over time, you know, some of those will remain consistent given the deepening that we do there, but then eventually we'll evolve into new things as well. Gotcha.

That's very helpful. And so flinging this down from 30,000 feet to focus in on a few things, you've also recently made a commitment in terms of funding that I think is unusual. You want to tell us a little bit about how that came about and what your commitment is? So, yes. There's a couple of things.

I think it's well documented that in the venture ecosystem, there's a lack of diversity and that venture capitalists are sort of playing in the same sandbox in terms of finding founders in similar networks. And so what that leads to is a lack of diversity in terms of the type of investments being made. I don't think that's a surprise to anyone. I also think it's no surprise to anyone that diverse voices create better outcomes. And I think there's been so many McKinsey reports on that, that we then took a look at our own portfolio, which we track around our diversity metrics.

And we also looked at the ecosystem and say, okay, we can do right by the ecosystem, and we also think this could be a really unique advantage for our fund. And so we wanted to do something that was not just lip service. We didn't just wanna host office hours. We didn't just wanna sort of commit to being better in some future state. We said, let's actually, like, put our money where our mouth is, and let's really try to affect real change.

And so what we've committed to out of our own GP capital, so this is outside the fund, this is like our own dollars, is we've committed 2 and a half million dollars to back six emerging GPs that are from sort of the black Latino Latina community with the goal of helping them and their funds find interesting new emerging talent. And that has two benefits. We think one is that benefits the overall ecosystem and creates more diversity of thought and opportunity. But then for us, obviously, as a fund, as we get to know these managers, as we take bets on them, help them establish their funds, help introduce them to LPs, we can then also take advantage of their networks and their deal flow. So our goal is actually very expressly to co invest with these managers, to see who they're finding in their networks and either co invest right alongside them, or some of them are super early stage, so we can invest right after them.

They can kind of tee up their winners to us. And so with both of those things, we think it's a real win win. And to something we were talking about earlier, you were asking about geographic diversity. We had three criteria as we were looking at these funds to back. And now we're not professional LPs, so our criteria was a little bit different than a traditional LP diligence.

But we were looking at, one, how complimentary are these managers to our strategy? Can we actually see co investing or follow on to their deals, whether that's from a sector perspective or whether that's specifically from a geography perspective. You know, we have one fund, it's called Hometown, that does prop tech specifically or new housing, which is very complementary to what Ryan already does. We have a fund called Lightship and a fund called Rare Breed and a fund called Maple. In geographies where we don't touch, so Rare Breed and Lightship are both in the middle of the country and looking at areas where we wouldn't necessarily have a footprint on the ground.

And Maple is focused on Canada, which makes sense given the name. So we looked at those specifically to say, okay, where can we get exposure to communities not only that are underrepresented, but are also geographies that we're keenly interested in given the price arbitrage outside of Silicon Valley where we can kinda gain access. The second criteria beyond strategy was financial returns. A lot of these managers have had chops at other venture capital firms. They've run their own strategy as angels.

And so we're sort of assessing them in that way to see if they could create alpha. And then the third was around impact. You know, how meaningful would our check size be to these funds? We looked at over 80 funds in total that had reached out to us or been introduced to us. And a lot of them, this is their first fund.

This is, like, a $510,000,000 fund from a single GP. And so our check goes actually quite a long way to help them get that domino going to close. So we wanted to think about that, and we also wanted to think about impact. Are these funds looking at underrepresented groups? So Slauson and Co.

In LA specifically looks at South LA and areas where they're really creating a flywheel for founders coming from neighborhoods that you wouldn't necessarily think of founders to come from. So that's a long winded answer, but that's kind of how we thought about the process. And like I said, it took us a couple of months because we're running our day job, running our fund. We'd screen these 80 firms. We narrowed that down eventually to 10, and then we did some deeper diligence on those 10 and reference calls, and then we narrowed it down to six.

But we're super excited. We just announced who the teams are this week. And we think it's gonna be a really amazing addition to our existing strategy in the seed ecosystem. And congratulations. And that's wonderful.

Out of curiosity, because you looked at these 80 funds, you're talking about the deal size. A lot of these companies are these new funds are 10 and $15,000,000. When you look at the Sequoias and the benchmarks and these multi billion dollar funds in Silicon Valley, and then you see these 80 funds. I mean, I know people have to be patient, but there's this desire now to see money start getting funneled into these new funds and helping these underserved communities. Are you seeing a real movement towards that?

I can say from our diligence, what we've seen is that there are some other LPs that are really interested in this. So we just had a call with Ateno Capital yesterday where they're an LP in Lightship. Bloomberg Beta is an LP in Lightship. So we've come across other funds and other LPs that are trying to do this. Like, Nihal from Eniac is a LP in Harlem Capital, which is one that we ended up backing.

So there are definitely people who have been doing this before us and who will be doing this after us, but I think there's a groundswell moment where, you know, if I think about the Me too movement as being one of the most recent waves of how venture capital has reacted to diversity, I think this is another one of those moments where it's really about how can venture capital broaden and open its arms and try to think about inclusivity in a more nuanced way? And so our hope is that us doing this is a good example to other funds and other LPs to say, maybe you should think about this strategy, and maybe there's a way that you can be more actionable beyond office hours, beyond a breakfast And I wonder, there's a lot of talk about the government getting more involved with R and D, and there's now a lot more focus on the competition with China, for instance. And you talk about, Ryan, you do a lot with fintech. We talk about five gs, and we talk about semiconductors, and we talk about fintech. Fintech is an area that I think most people believe we are very much behind.

For instance, when you look at how payments are made virtually and things are done in China versus here, I'm wondering if using fintech as an example or other racist increase r and d to go into technology, do you think there's also a historic opportunity for the government to fund some of these areas, but also do it in a way that helps some of these groups that are now in the forefront like the Me Too movement? Look, there are government programs that exist for underrepresented founders and sexes and things of that nature. I'm not sure what the impact has been or if it's enough that's out there. I think at the end of the day, the quantum of private capital really drives what's going on in the markets of innovation today. And you need the commitments within the private markets to accelerate everything that's happening here.

And the bottom line is the data shows that diversity of thought and diversity of people sitting around the board table give better outcomes at the end of the day. Right? We're not just saying, like, maybe this is better, this is the right thing to do, or people have not had the same opportunities. The data shows that this produces better financial returns. We're at a point where the the private markets, there's no reason for them not to be standing out there a little louder and a little prouder and pushing these things.

And even if it's not a company being founded by an underrepresented group, there are other things to do here within these organizations to push that. Right? That the board members and that hiring processes should be done the right way to bring a diverse group of people together. And going back again, don't do this because you think you should. Do this because at the end of the day, you're trying to build a business.

There's a capitalist principle here that wins. And if there wasn't, we can have a different discussion take different sides of the argument. But today, we still live in a capitalist society. Private markets drive a lot of what we do at the end of the day, and the data shows that this is a winning strategy. And so there's a lot of opportunity for people to step up and to take action here and not just to send their thoughts and prayers as these movements move along.

We're proud to be at the front of that, and we're doing what we can and what we're capable to. And what is a lot of money to us might look like a drop in the bucket to some of these funds that you mentioned. But there's a meaningful impact here. You know, we're making a meaningful difference in these funds' life cycles, and hopefully, we'll put capital behind their investments as well. And so we're excited for the flywheel that we think is starting right here.

So if somebody's listening to this and whether I'm Southern California listener or otherwise, and they're trying to determine who to reach out to because money's not all equal, obviously. Who you take money from makes a huge difference. Again, I know for founders by founders is a tagline. But in terms of the areas or the things that differentiate you in terms of why somebody should call you, is there anything that you'd like people to know more about? Yeah.

I mean, look, we are founders that have been in the trenches. And I think we understand not only what it takes, but we understand our industries at the most granular level. That's where we started. Throw ten years of investing experience on top of that. Throw five, six thousand companies that have come through the funnel at this point.

Throw the handful of companies that we've invested in and taking through the life cycle of venture. I mean, the institutionalization of the lessons there for us to help these companies has really helped us deliver a foundation to these companies to scale. At the end of the day, we're investing in companies that we wanna scale into massive opportunities. But you can't do that regardless of what your company is or what you're doing, what you're selling or building at the end of the day. There are some core business principles around building a business that can scale without breaking.

And I think we've become experts in doing that and helping our founders do that and shoring them up where they need to do that. And for those that have been through this several times and are on their second, third, or fourth company at the end of the day, one, we empathize and can understand the road that you've been through. And two, like, there's a strategy initiative that can be put in place here to skip a lot of this and take your lessons and take our lessons collectively to put those together. You know, and the goal is to move these companies through the process as fast as possible. We think we're uniquely positioned to do that.

Our returns show that we've done that rather well. And at the end of the day, you also just wanna like what you're doing and like who you're working with. And so we sort of have a no asshole policy as well. I like that. So in terms of the world we're living in, once in a 100 pandemic, COVID's gonna change things.

At some point, there's going to be a vaccine. At some point, I assume we're going to put COVID behind us. You're talking about Colorado. You're talking about the changes. If you had to guess and see where the puck is going in terms of how COVID will change the world.

Can you give us some thoughts in terms of that? Yeah. I think a very high level, a lot of the technology that the venture capitalists of the world have been investing in and focused on and excited about becomes accelerated in this environment. We have always been focused on making things better and more efficient and faster and stronger. You know, you sort of get to reset how things are done a little bit, and technology has sort of been waiting to do that.

And it's winning in a lot of places. Right? But it still allows a nice tailwind to accelerate a lot of the theses that we invest in. I think virtual communities, something that Aubrey's been focused on for a while now, in this environment, that's the only type of community you can really have outside of some smaller groups. And I think EdTech has been out there for so long.

Like, there's been so much education technology on how to distribute this and how to get access to the Harvard professors of the world and how to distribute technology and how to use different versions of it. That's been out there with huge investment dollars behind it. Well, now you have to use it because there's no other way. You know, digital health as well to interact with your doctors and this and that. I mean, there's so many things, global commerce, the supply chains and how stressed they became and how everything needed to be delivered to us for certain months.

Right? And you saw where the weaknesses in those supply chains were. So I think there's opportunities in a lot of that. I do believe remote work is here to stay for a little while and maybe not in a completely virtual form, but there's gonna be a hybrid structure here, and that's gonna take a lot of forms. I wrote a piece around the decentralized future of office where you think about more of a hub and spoke model where you might not need 5,000 people in a Manhattan or San Francisco.

Maybe you have a 100 to 500 in hubs that are all in the suburbs. Why do you need to be on a train for two hours each way? Why not get most of what you need to do two or three days a week and go see your kid's soccer game instead of sitting on that commute on the way back? I think people have, a new value for their time and their life a little bit where they can, and not everyone has that privilege. But I think technology can help continue to bring that to a lot of places.

We are looking to invest in businesses that have those tailwinds of the new paradigm and the new world, and there's a lot of them. There's a suburbanization trend that's going on right now that hits squarely within the real estate technology sector and how we think about that and how people buy homes, how people use homes, where people wanna live, how the institutional capital is going about the single family rental, build for rent markets here. The puck is definitely moving, but in a really fun and interesting way. Yeah, it seems to be the case. And it's interesting because I mean, I guess the accounting firms have been doing it for a long time where they would change the nameplate on the door when you'd come in and you could travel around from office to office.

This interesting issue you said about a hub, for instance. There's no question that from a collaboration perspective, there's thought to the fact that when you have people in the same room and they're working on things, you get a synergy going. People can speak up. They can talk at the water cooler or otherwise. And the question is, when you talk about having these hubs, how do you start to break those groups up?

And so you've still got interaction, but you still have the boss. Obviously, Elon Musk is not gonna be able to be at each hub. Right? He's gonna come in on the virtual satellite, but are people thinking through how these hubs would work? I think there's two points there.

You know, one is collaboration happens around the water cooler. I have seen more of David and Aubrey virtually in the past six months than I saw physically of them in the six months before that. And before that, if we had something to talk about, we would find time where we're both in the office and schedule a meeting and sit down and talk about it. And now we just pick up the phone or Slack or Zoom. We're more present in that respect than we were before when, you know, we had our own offices.

We wanted our own space, but now, like, we're sort of in each other's virtual space in a different way. So there are pieces of collaboration, I think, in a bigger office environment when the team isn't so close and so integrated that do get lost. And some people really are social and outgoing and want that and need that. And so there's always gonna be demand for that, and that's why I think there's a hybrid model that exists. Right?

So the next question is, who do you bring into that hub or that hybrid on a certain day? Do you bring all the accountants in on Monday so that the accountants can see each other and talk to each other? And, you know, the controller can talk to the CFO, the AR person can talk to the APU person. Everyone can get aligned around what needs to happen. Or I give a real estate example, is your asset management group need to be there the same day that the accounting group is because there's so much collaboration that goes on between them.

And how do you split that up? These questions haven't been answered yet. This is sort of your year. Well, let's assume people start going back to an office in January. This is gonna be a year to test a lot of that.

Who do you need in? Who do you need in at the same time? And I think there's a schedule to switch it up. It'd be great if accounting is together once or twice a week in the boardroom, working on what they need to. It'd be great if you've mingled some people.

But maybe your hubs show up where if you take New York for an example, half your team lives in New Jersey. Maybe that's where the accounting hub goes. Maybe the asset management hub is in Westchester. Maybe the property management hub is in Brooklyn. How these things show up, I think, is gonna be really specific to company culture and what needs to happen within those companies.

From newer startup technology culture, most of these companies are are really thriving in a virtual environment. And companies that are so sensitive, I mean, early stage companies that are so sensitive to cash and cash burn at the end of the day, A lot of those are not going back so quick. For that $10.50, 100,000 a month, whatever size office they might have, they're willing to take some limitations that may come with it to save those dollars. So when we saw the change in retail space over the last several years, and Aubrey, you were talking about the department stores. Well, that's been changing from an evolutionary perspective.

You have the Ultas of the world, you have the Sephora's of the world. You've seen what's happened to some of these big department stores. Then because of self driving cars, you saw the commercial real estate people starting to reposition their parking garages and thinking when they're building these buildings. Well, ten years from now or five five years from now when we have self driving cars, we're not gonna need as much parking. So what are we gonna do with that underground space?

Now we've got retail. We got commercial. In terms of thinking about what we're gonna do with all of this commercial space and repositioning it and dealing with it, Any creative thoughts there from a FinTech perspective or a investment perspective, because with PPP money and forbearance, we've kicked this can down the road, but is there going to be a day of reckoning and how is venture capital going to play a role in that? Well, I'll say on the retail and infrastructure side, what's interesting is that I think we've already started to see is commercial, at least at street level, has become way more accessible. And so I think there's gonna be a real shift.

You know, if you take that paired with the fact that e commerce just pulled the future from ten years from now into the present, where now it's a necessity. I think you'll see a lot of really interesting models as far as the way that traditional retail space was being used. So we've already seen some really interesting things about last mile delivery and micro fulfillment, where now at the street level, brands as well as independent sort of vertical shops are reinventing the way that people think about how you get goods to a customer. There's a company in Mexico City that actually has bodegas that are their brand that actually double as a micro fulfillment center for other brands. So really turning the traditional model on its head and using technology and data and supply chain to really create very smart management of where goods are around the country, I think, will open up a lot in terms of whether that's retail, whether that's storage, whether that's micro fulfillment.

I think there's gonna be a new main street that will emerge. I think we've already started to see it. I mean, Soho, West Broadway over the last five years has, like, transformed, and so I think that that's all been accelerated. We've been very keen to look at what those new business models will look like. Yeah.

I think there's companies out there already repurposing, repositioning a lot of this stuff. Coworking was a repurposing, repositioning in one respect of that. We have a soft bank backed company, Reef Technologies, which is taking parking garages and basically figuring out what the highest and best use is. Right? Do you need storage for last mile delivery?

They put storage bins in. Do you need cloud kitchens? They bring cloud kitchens in there. Do you need electric car chargers? Do you need a mall where people can walk through and buy food in the food court if it's surface level parking?

The companies are out there to solve these problems already. They will adapt to what it is. At the end of the day, housing is so expensive. There's an affordability crisis in every major city in the world. And the reality is is that a lot of it is self inflicted, regulatory zoning issues.

San Francisco complains about their affordability crisis. Let people build a 100 story towers on every lot, and you're gonna have an oversupply of housing pretty quickly. So let people move into the commercial space that's not gonna get refilled. There's plenty of demand for it, and you can bring prices down. It's less about what is venture capital gonna do to solve it because I can assure you there is a 100 entrepreneurs sitting there right now figuring it out.

It's whether or not cities and governments and regulations will allow these spaces to be reutilized, readapted to a highest and best use to either meet a community need or a housing need or whatever it might be. You're seeing that somewhat in terms of outside eating, for instance, we're in Los Angeles. And so everyone was dealing with it differently. How quickly were they adapting to let people have restaurants out on the streets, for instance, your point about that the creativity is there, but the question is, can the political infrastructure deal with it? And the other thing is you talk to a lot of people who are working from Utah, Colorado, Montana.

It'll be interesting to see whether or not people all of a sudden realize from a quality of life perspective, I'm gonna go where there's good schools and clean air and good water. And I'm at my virtual background. I'll go to San Francisco or New York or LA when I really need to. For millennials, the world is really opening up and creating a lot more opportunity for people that being creative, not just in the technology world, but in other industries. Totally.

And we've seen this for a while with sort of the gig economy and the way that freelancers there are some stats that, like, you know, if you're under 25, it's something like one in three people are freelancer. Like, it's been coming, but I think now what this does is with the fact that bigger companies are more comfortable with remote work, I think it'll really shape the way that millennials and younger are thinking about where they live and where housing is cool and where culture gets built and where community gets built. Urbanization has been happening for the past twenty years, but I know we at Alpaca like to think about how that trend will be evolved. You said something interesting there that I wanna go back to. We all know that we call an airline for customer service or a big company.

And whether or not there's a call center in a foreign country or it is somebody doing customer support from home, The big companies have been doing that for a while, which I hadn't until you just said it, I hadn't really thought about that it was the big companies doing that. But with technology, do you think now that the smaller companies are gonna be able to see the way in a way that they weren't able to do it before because of COVID? Yeah. Our opinion is, especially with younger teams, like people are incredibly nimble. You're joking this week that the most heard phrase I've heard is you're on mute.

People form habits pretty fast, you know. It takes like thirty days to form a new habit. And so I think these habits are being formed. And I think with people, to Ryan's point, seeing that the cost structure can be a lot less, but the efficiency that's gained or lost is not marginally different, I think it makes good business sense. And so I think you'll see a lot of people being more open to starting and evolving businesses that way.

Like, we have a couple teams that we've backed that they've started the team remote, and they have no intention of evolving that. We have a company that we back that helps companies think about remote teams called First Space. That basically is your sort of outsourced fulfillment for keeping your teams remote. And they're all remote, you know, they're sort of leading by example, but I think they also do it really quite well. So I have no doubt that companies will continue this way that a good percentage of them will.

And it's funny because you talk about you're on mute as being a new thing. I am hearing more and more that people are doing two different jobs now. In the old days, you could not be at two places at once. Right? But I know people who are in different countries working for different companies.

You can be in Germany and working for a German company, and you can be working for a start up in New York. If you're young and you have a lot of energy, people are creative just like you're adapting. In terms of your companies you're working with right now, are there any stories or interesting things you wanna share with us? Yeah. I don't I don't know as far as having employees working for multiple companies.

I haven't heard that one yet. Exactly. I believe it. Look. I think it's creative solutions to these things.

Aubrey just led a deal in Lex, which is a virtual community for certain demographics of people, and there's lots of those communities that are all going after different demographics. I think Firstbase is a great example of this, where you're just empowering companies to do this by pushing buttons and setting it up. And not only they're just delivering hardware and software, but they're delivering the culture around it. Some companies like, here's a Peloton, here's your coffee maker, like, your beans are gonna show up every week. You sort of get your coffee cooler experience at home in that respect.

The creativity is definitely there. I was on the phone with one of our expert network people today, and her company is virtual. It's working great. And I said, where are you? She goes, I'm in New York today, but I think I'm gonna name five dream cities that if I'm gonna sit in a room, I want there to be a beach out there.

You know, that's gonna work, and I think Aubrey's point to these habits. Once you get to jump in that ocean for lunch every day for thirty days, I don't know if you're coming back so quick. And are people, I guess, for instance, finding you and setting up meetings? You don't have to have people come into your office for meetings. You can be introduced on a Zoom or otherwise.

And I think it's gonna also create more interesting opportunities for marketing and getting the word out there for people to discover you that would otherwise have no idea that you existed. To your point, there is something to meeting someone and shaking their hand and looking them in the eye and looking at founders and how they interact with each other That is somewhat irreplaceable and is harder to tell on Zoom. So we've had to adjust around our internal processes around how we really assess people and meet them in this virtual two d universe. But at the same time, you know, I think it opens up a lot of different channels and we're seeing it already in terms of different pipes on the internet. Whether that's virtual communities, whether that's new creative tools, whether that's new distribution networks, new chat, hangout areas where there are, by the day, new ways for people to connect virtually.

And so I think that's also the opportunity that's before everyone is trying to figure out what suits you and suits your group, your business, your customers the best. And so we've also been trying to take keenly advantage of of that and try to be on the bleeding edge of experimenting with what works for us. When you talk about cryptocurrencies and Bitcoin, for instance, getting out PPP money or people getting their $1,200 checks. From everything I've heard, we were not the most sophisticated country in the world. We're sending out checks to people that are dead, etcetera.

Where do you see fintech taking us to take us into the twenty first century? I'm not sure that at that level, at the government level, that we are going to catch up to what's going on in other parts of the world. Last week, China gave away a million and a half dollars to a handful of people to test their own digital currency. So think of your Chinese Bitcoin, basically, but their national currency. So it went off without a hitch.

People received it on their phones. People went and spent it in a store with protocols that already existed. Didn't have to accept Bitcoin or Ethereum or some DeFi protocol that's out there. You walked in and and there was an NFC protocol through WeChat Alipay, but their own version, the Chinese government version of what it is. When they can do that at that level and, like, we just got Apple Pay and the homeless population on the other side of the world is virtually banking for close to a decade now, there's a lot of catching up to do.

The regulation keeps a lot of that from happening here. The fintech evolution and the products that are coming out are a lot more consumer oriented products. They're helping consumers save in better ways, gamified ways, and making capital more accessible in a lot of different ways to small businesses, to buying homes, and different creative financial structures to a lot of that. That's really where a lot of the innovation is focused on this side. I think we are behind and will continue to be behind in a lot of these bigger, broader opportunities just because of what that looks like.

But there's an opportunity for one of these cryptocurrencies to show up that would that becomes available to be used everywhere and and quickly, and that just doesn't exist yet. And so there's a lot of people focused on building solutions there. It's gonna take time, but that will get cracked eventually. It's over my pay grade, but I have to ask this. There are a lot of people talking about this competition with China, for instance.

Whether or not it's five g technology or it's semiconductors and whether or not they're being made in Taiwan or a factory in Arizona. And the dollar is the world currency. And presumably, we want it to remain the world currency. I'm not smart enough to even begin to think through what happens if another country is first to come up with a virtual currency that becomes the global currency. But is that something we as a country should be talking about more?

It's such a loaded question. I mean, there's so many places we can go. We can talk about how much money we're printing and the value of US dollars. It is a certainty that another country will have a digital national currency before this country does. What does that mean, and what will the adoption of that look like in that country or across a region?

Is somebody, you know, in a Nordic region gonna do that and that's gonna work in a smaller environment and be successful? Or is China gonna do that, roll it out into China and have complete capital control over their country? I mean, they have a lot of controls now with money going in and out. But imagine if everything becomes digital and is it done that way? There's pros and cons to that.

I think more pros to the government, more cons to the people, what that looks like. You know, how that then becomes accepted as currency across the world, I'm not sure. But it is no secret that more trade is being done in non US dollar denominated transactions across the world than it's ever been done before, and that is a rising phenomenon. The data's there. It's clear.

We can't get out of our own way for some simple problems in this country, and so less optimistic about our ability to solve these much bigger macro ones that are coming down the pipe. And when you talk about trade being done outside of dollars and stuff, is that being done with swap arrangements? Is it done with cryptocurrencies? I mean, how is that mostly being done right now? I think it's your more traditional trade arrangements, but trade that's occurring between Asian countries and European countries and Russia are being less and less denominated in dollars and more denominated in one or, euro.

I got it. That makes sense. So we've covered a lot of topics. Is there anything that we haven't covered that you'd like to cover in the last few minutes we have? I just think the weather in LA compared to the weather in New York for outdoor dining is just not an apples to apples comparison at the end of the day.

That's fair. You know, depending on what happens here, I think we're talking about how wonderful this could be if you have the opportunity here. But I think we're very fortunate and privileged to live that kind of life and be in a kind of business that allows us to do that. And just being in a tech business, it allows you to be virtual. And so you gotta definitely appreciate that.

It's been great, and I'm I'm glad to be able to be a part of it. Well, it was a pleasure to both of you, Aubrey and Ryan. Thank you. Both of you stay safe, and we look forward to seeing kind of the new investments you're making, and and staying in touch. Yeah.

Thanks for your time. Great. Thanks for having us.