Investment Spotlight: Fintech & Post-COVID World Predictions
Do you also think about which types of investments are going to be attractive in the post-COVID world? I’ve put thought into it and I think it will look similar to the types of investments that were compelling before and during the pandemic. Why? Because, to oversimplify, the restrictions placed upon us during the pandemic created an incredible opportunity for tech startups to innovate solutions to outdated (mostly human or paper-based) problems. Earlier this year I shared my predictions for financial services in 2021 with FinTech Magazine and provided seven compelling strategies I believe fintech companies will use to continue to grow, evolve, and thrive during and after COVID-19. Even before the pandemic, fintech was an attractive, thriving space that offered the go-to tech solutions for depositing checks, splitting tabs, budgeting, and paying your uber, but the pandemic created a distinct push towards touchless and paperless services and away from traditional financial services. Here’s a deeper look at a few of my fintech investments and how they’re taking advantage of deep domain expertise to change their sectors, for good.
You may have 99 problems but don’t let one be a legacy problem. Legacy problems = human or paper-based. They’re also my favorite problems to solve.
You can’t find a better example of a legacy problem than accounts payable, an area that can bog down businesses and kill efficiency and profitability. That’s why Finexio caught my eye. Finexio is an affordable, seamlessly integrated Accounts Payable tech solution that creates electronic connections to eliminate friction and reduce fraud. It works instantly with any account or ERP system and requires no IT resources. In a nutshell: automation tech and AI pay your bills, saving you (or your CFO, Controller, or AP manager) precious time and money – especially when you consider 24.5 billion checks paid annually in the US (worth $32 trillion) many of which are manual AP payments that cost $6-$10 per payment and an average of 10 hours/week, ultimately costing a company up to $25k per year for the painful task of paying via paper checks.
I get excited about tech not just because I like the actual gadget/solution side, which I do, but because I truly believe in the power of tech to revolutionize our world. I don’t see technology in opposition to humanity, I see an opportunity to harness the power of tech to emphasize and augment human interaction – not eliminate it. Have you ever applied for a mortgage? Was that a fun experience? It’s abysmal. Anyone who’s ever applied for a mortgage knows how bland and impersonal that process can be, and how the borrower often doesn’t feel like the customer. That’s why Blend caught my eye as an investor, and I’m not alone: the startup has been recognized by The New York Times as an industry disruptor earlier this year, by Built In as a top startup to know in 2021, and made the Forbes’ 2021 Fintech 50 List of the top innovative companies in fintech. Blend offers a solution that makes the process of getting a loan simpler, faster, and safer – and brings simplicity and transparency to consumer banking. Through creating partnerships with brands and lenders, Blend allows lenders to provide proactive guidance for clients, positioning them not just as providers of capital, but as Blend describes it: “stewards of better financial lives for millions.” That’s something I’m proud to get behind.
I can’t count how many times I’ve stopped partway through a mobile or online purchase because the checkout process is so painful. That’s why one-click checkout is king – and I believe Bolt will revolutionize one-click checkout. Here’s why that needs to happen: the online checkout experience is one of the most, if not the most, critical factors to the success of your site. You want customers to be able to complete their purpose seamlessly and effortlessly in as little time as possible. The fact is: technology changes fast and the checkout experience wasn’t originally designed to handle complexity and, since merchants often use different plugins or checkout solutions, shoppers get frustrated leading to 70-85% abandonment rates in the final step of checkout. You’ve done too much work to get a consumer there to lose them in the final clicks! Bolt is a lightweight one-click checkout layer that can be implemented across all major platforms, optimizing conversions at checkout and increasing conversions by 60% – all while managing hundreds of integrations and the rising risk of fraud. Importantly, it’s effortless for consumers, registering them seamlessly at checkout and connecting them to the bolt network.
Here’s an example of an investment I love, because it allows all the skilled experts involved to get back to what they do best and takes a time-sucking, mind-numbing, but necessary task off their plates. I think we can all agree, receipts are the bane of every business’s existence. If we could accurately estimate the time wasted on reconciling receipts, we’d hang our heads and cry – not to mention how our imperfect systems leave us open to risk and fraud. Our investment, ClassWallet, provides a suite of virtual wallets that empower teachers, maintenance crews, and parents to streamline back-office operations for classroom supplies, federal grants, scholarships, and building maintenance supplies in real-time – no paper receipts or manual reconciliation required. This may sound simple, but, as simple things often are, it’s a powerful solution: by creating an efficient system for teachers, school administrators, education foundations, and PTAs to eliminate hours upon hours of paperwork and receipts, ClassWallet empowers them to do the important work of enriching the lives of students everywhere.
Do you consider our financial system to be an inclusive place? I sure didn’t. I didn’t get my start because I was the son of a Fortune 500 CEO, I grew up in a trailer park. I am where I am today because of my ability as a founder to persevere through failure and (many, many) obstacles and challenges. I know from experience that our financial infrastructure can be opaque and needlessly complex and that businesses can feel a lack of transparency and control over their funds. That’s why I love Ripple. Ripple is an enterprise blockchain company that seeks to create an inclusive financial system (the “internet of value”) and to make the way we exchange money as seamless, secure, and efficient as the way we share information. Ripple’s approach is to work within the existing financial system, partnering with customers to streamline (not replace) their current infrastructure and working with regulators, banks, and governments to make sure their solutions meet security and compliance regulations. By powering real-time payments for a bank’s customers, RippleNet (Ripple’s payment network) helps families and small businesses maintain control of their funds and complete financial transactions across borders.
Mercury was a natural fit for me as an investment because it’s a tech startup with an extraordinary fintech solution that is in turn designed to support and champion tech startups. Mercury is a fintech solution specifically designed with tech startups in mind. Their banking products are geared towards tech companies with security as a top priority. The company offers full-stack FDIC-insured bank accounts with API access, virtual cards, team management, automated cash management, and a community that provides an unparalleled network of expertise. Mercury also launched Mercury Raise, an application selection process to help startups get their seed round in front of potential investors. 50 startups are chosen by a selection board, before being shared with 270+ investors in the Raise network and Mercury Raise then connects founders with interested VCs.
Not only is DeFi (decentralized finance – a system where financial products are available on a public, decentralized blockchain network) not going away, it’s also potentially one of the greatest, if not the greatest, disruptors of our time. Stratos Technologies, a capital fund investing in the types of startups that are massively disrupting the traditional banking industry, empowers founders and limited partners through thoughtful investing across capital structure, as well as providing rigorous engagement and strategic guidance. Over the past four years, Stratos has invested in 16 companies with an aggregate transaction value of over $250 million in disruptive startups like Bond Street and Dave. It’s important to remember that disruption isn’t the endgame – it’s optimization. Crypto is new and, understandably, people wanted to stand on the sidelines and see if it would get legs. Well, it has. This is a big wave that’s not going away and, over time, will only get bigger as more people recognize the utility and take it more seriously.
It’s Not Just About Disruption, It’s About Partnership.
People love to talk about disruption and, as someone who embraces adventure and, to a great extent, risk, I get it. The thing people miss about innovation is it’s really about partnership and collaboration. Great tech isn’t predatory, it’s not about hoarding data for nefarious use, it’s about creating secure, seamless solutions that eliminate legacy problems to give us back our most precious, unrenewable resource: time. And the biggest time and energy sucks in business are often found where money and time intersect. That’s why the fintech niche has become increasingly interesting to me over time and, I suspect, we’ll continue to see this sector grow and flourish as the pandemic wanes. Are you a tech founder with an innovative solution designed to bring transparency, security, and efficiency to the industry it serves? Let’s talk.
Enjoy the ride.