Navigating Financial Storms
Stormy Weather, Stormy Weather, Stormy Weather
Three bouts of banking crises over our careers is the perspective that we bring to this latest one. While this one hit close to home since we, along with several of our portfolio companies, were corporate clients of Silicon Valley Bank, we have seen much worse banking meltdowns in the past.
None are easy to deal with, but all have the same precedent: rising rates and undisclosed balance sheet risks. In this crisis it was about a mismatch of maturities, while in 2008 it was about bad assets. But both are about greed and the loss of collective memory about risk. Markets get excited, bid up assets, and keep pushing for returns. Some force brings it all back to Earth, leaving us to wonder why we did not see the risk at the time.
Our experience tells us that clearing out this risk is a necessary function of markets. Without it, the crisis will get worse and worse. With it, money is lost, yet a reset brings about new opportunities.
Mark recently saw a quote from Franklin D. Roosevelt that read roughly: "Calm seas never make good sailors". We could not agree more with this sentiment.
-Mark & Dave
Envisions Interview
Navigating Financial Storms
w/ Giri Addanki, CEO and Co-Founder at Acorn Finance
The Boring Investor
Being boring has never been so good! I am not referring to buying into The Boring Company but rather our focus on fundamentals at Vestigo Ventures. Will the company ever be able to turn a profit? Will it improve its targeted function by 10x or better? Is the team highly connected and in sync? Does the entry point valuation make sense vis-à-vis their results to date?
Seed stage investing requires optimism but also discipline. It's been an easy market to lose discipline in for the past few years. We believe we have kept it and are about to enjoy the fruits of that focused cultivation.
We recently met as a team to discuss what is new now, given that we have had the fastest rate increase in history followed by a contained banking problem as well as a full-on assault on crypto entry and exit ramps into the banking sector. We have avoided lending for quite some time, but wonder if new opportunities may present themselves now that the banks are likely to pull back in this next period of time.
Whatever it may bring, getting through a financial storm is critical to the next leg of the journey. We have done that part, as have our portfolio companies with one exception. In this case, it was suffering from product-market fit issues until the downturn in retail digital shopping activity made it impossible to continue on. Now, for those who are pushing forward, it is time to recognize what has changed and navigate the new weather pattern.
For Vestigo, it is about staying the course on what matters most in early stage investing: the team, the TAM, and the tech. It's about the entry price point, getting the culture built for the company, along with product-market fit.
We will continue on looking for the best FinTech to back to drive lower costs in financial services and/or better client experiences.
-Mark
Vestigo x MIT Recruiting Event
Earlier this month, Vestigo held its first MIT Sloan recruiting event, which will hopefully become an annual affair. The event brought together interested MIT Sloan students across all programs including MBA, Data Science, and Masters of Finance programs, and Vestigo portfolio companies with hiring needs in those areas.
The event began with Mark, Nick, and I introducing Vestigo and sharing our unique advantages in FinTech investing. From there, with some in-person and others virtual, our portfolio company leaders presented their companies and resource needs. The event culminated in a reception after the presentations for those attending in-person to mix and mingle with the students. In total, nine Vestigo Ventures portfolio companies presented to a standing-room only group of interested Sloanies.
Student enthusiasm to solve problems in financial services and insurance was palpable. Each portfolio company's individual table was full of interested students throughout the mixer. Students also approached the Vestigo team to express interest in potential opportunities with other portfolio companies or to chat about potential business ideas they are exploring. Given the recent doom and gloom around the economy and financial markets, the event was a refreshing reminder that growth and hiring are still occurring!
-Kelly
Portfolio Updates
Clerkie Raises $33 Million Series A
We continue to be proud investors in Clerkie and are thrilled to announce our participation in their successful Series A round! Check out this article for all the details!
Railz Recognized by 2023 FinTech Breakthrough Awards
The FinTech Breakthrough Awards, in its 7th annual program honoring innovative products and companies in the financial sector, recognized Railz as the "Best Open Banking API"!
Knowbl Acknowledged for Strong Transformer-Based Approach
It can be tempting to lump all types of AI into part of the same wave. Knowbl gets some great recognition in this publication, which acknowledges that some solutions are inherently more deployable than others.
Matt Taylor
Interesting Reads
Tom Coughlin
Keerthi Vedantam
Melissa Heikkilä
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