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Reddit’s valuation boom signals we ‘are seeing the socialization of investing’: Venture Capitalist

Alexa von Tobel, Inspired Capital Founder and Managing Partner, joined Yahoo Finance to discuss the outlook for fintech in the wake of the Gamestop and Robinhood phenomenon.

Video Transcript

SEANA SMITH: Reddit has raised more than $250 million in a new round of funding, doubling its valuation to just around $6 billion. For more on this and some of the trends that we're seeing in the public and private markets, we want to bring in Alexa von Tobel. She's the founder and managing partner of Inspired Capital. And Alexa, great to have you on the program here. Lots to talk with you about. But first, let's start with Reddit, of course, the startup behind a lot of the market craziness that we've seen over the past couple of weeks. But I'm curious just to get your thoughts on the platform and what exactly Reddit has done by democratizing access to the markets for so many people.

ALEXA VON TOBEL: I mean, I think what you're seeing with Reddit-- obviously, just nearly doubled its valuation to $6 billion with another round of capital. I think what you're seeing is the socialization of investing. And it's happening not only at the Reddit level, but as somebody who runs an early stage venture fund in the last, now, three months, we've probably seen four or five different really interesting platforms marrying the concept of social and investing, and how do you follow what your friends are investing in a way that really allows you to think about your wallet differently. And I think Reddit has been at the forefront of that and I think that's what we saw with GameStop and some of the other elements that we saw in the last two weeks.

ADAM SHAPIRO: Alexa, it's not exactly a sexy subject because everyone loves to talk about fintech, but I'll call it fin-protect because you got, what, the Equifax deal for $640 million to buy Account, and then you've got the other deal, NCR Corp, almost $2 billion merging with Cardtronics. What's on tap in fintech and then protecting fintech? Will there be big mergers the rest of the year?

ALEXA VON TOBEL: Absolutely. So first, let's just quickly say, you know, it's-- it's fun and it's interesting to talk about just this massive new democratization of the wallet, which, obviously as the founder of LearnVest, is something I care deeply about and has been a lot of my life's work. On the flip side of that, though, as you make it so that every-- everyone here in the United States, even as young as 15, 16, 17, can go and start to manage their wallet, you really do have to think about, what does that mean for security? What does that mean for the CFPB? And how do we protect people from making really potentially terrible decisions around their life savings?

And so not only do I think that we'll see a lot on the security front, we're watching-- I think, Robinhood added six million investors in the month of January. I mean, you're watching more and more people come online to actively think about their wallet in an environment where money really is almost everywhere. But you do have to think about the nefarious side of this. How do you protect consumers? I think we're going to see a lot more happen in the identity protection and the security protection as we're going to see more and more nefarious behavior pop up. And then, most importantly, the CFPB, how do we make sure we protect people from having their life savings taken away? And both of those are things I think about a lot.

SEANA SMITH: And Alexa, going off of that, I guess, what role do you see the Biden administration playing in all of this? And what do you think, I guess, some of their policies, how that could impact VC here over the next couple of years?

ALEXA VON TOBEL: Sure. I mean, just to quickly state. The month of January saw more financial activity in the venture ecosystem than ever before in human history. So when we literally say that the environment has-- it is growing, not only so rapidly, but there really is capital everywhere. So much of that is really good. It's fueling more innovation. There's going to be a lot of things that don't go well. And I think what you'll see from the Biden administration is a few things. One, they'll be very focused on, how do you protect everyday people? How do you think about giving them capital? How do you think about, also, protecting them from all of the different things that could go wrong? So I think you'll see a lot of policies there on the innovation side.

At Inspired Capital we talk about this at every Monday at our Monday meeting. My business partner is Penny Pritzker. And we don't see much by way in terms of any gating policies that are going to slow down this activity. That said, it's really important to make sure that not all innovation is a good idea. You're really looking for the A-plus founders with the A-plus ideas, and there's not a lot of those, right? And so--


ALEXA VON TOBEL: --making sure--


ALEXA VON TOBEL: --that you're-- Yeah?

ADAM SHAPIRO: Real quick. I mean, with all that money floating around, that usually is what causes the next round of fraud or Ponzi schemes. Do you lose sleep over that?

ALEXA VON TOBEL: Absolutely. I mean, one of the things that we think about a lot is, you know, you've never seen more capital in an ecosystem. Every price that you've seen in terms of publicly traded companies backs all of the-- I think in the next 60 days alone you're going to see dozens of SPACs and publicly traded companies enter the market. While that's really exciting, the exuberance on the flip side is what I do think keeps us up at night. And making sure that you're sorting through real ideas. And I'll actually end by saying, also for everyday Americans, you want to make sure that you're investing in real businesses with real long term goals that match your financial plan. I'm now wearing my certified financial planner hat. And those are the sort of things I worry about.

SEANA SMITH: Alexa von Tobel, great to have you on the program. Inspired Capital founder and managing partner. Also founder of LearnVest. Thanks so much for taking the time to join us.