Power Plays
Power of Data
We just crossed 14 petabytes of data at Cogo Labs broadening the landscape we mine for FinTech gold. Our XPLR work continues to improve our ability to find companies in the data, and we are now getting B2B companies alongside straight consumer plays. We are excited by the expanded sandbox to allow for more discovery and insights.
We have invested in 17 companies that represent more than 50% of the total capital for Fund I, and we have budgeted reserves for these companies, where needed. We were fortunate to exit Mirador so quickly with a strong exit, so there are 16 active portfolio companies today with a robust pipeline of opportunities to round out Fund I over the next few months.
The environment continues to be very helpful to startups. There is a lot of interest by later stage investors in our portfolio as well as from strategic buyers. We continue to see excellent new deal flow both referred to us and from XPLR. We have seen around 900 business plans at this point to find the first 17 companies. We are excited by the possibilities of it all - data, startups, and our portfolio companies.
—Dave & Mark
Envisions Interview
Empowering Homeowners
w/ Giri Addanki, CEO of Acorn Finance
Predicting the Power of the Future
Rather than trying to predict the future - predictions often end up being disappointing and incorrect - I thought it would be more interesting to discuss key trends that are shaping the FinTech sector. We see these at play every day and in many different forms. The key for us is to boil whatever we see down to these trends and see if they fit our investing thesis for Vestigo.
- Client Delight - Is the new model likely to create a wonderful customer experience from the startup. How does a B2B startup help to delight the customer of their business partner? This can be in the form of a better user experience or a better financial outcome. If it is real and important to consumers, it can be measured and monitored. This delight will define winners among financial services companies of all sizes.
- Client Focus - Is the company clear about who they are trying to serve and why? Are they clear about their competitors and their focus? Staying targeted to the chosen client segment is critical. If the company is unsure of its targeted clients, that is a warning sign that it is not likely to be distinctive in its offering. As a result, it can spread its resources too thin trying to serve many different groups. Or it can be targeted to a segment but not have a mechanism for gathering customer feedback that should be used for building future services and products. It is all about focus and feedback loops as we look to the future.
- Geography - Does the proposed idea/startup allow for geography to be enhanced or ignored? We feel that either can work, but it is important to understand how the startup or the incumbent is thinking about the importance of location. It may be a way to enhance the brand or target a market (see Client Focus above). It could also be a way to think about distribution in a unique way (see New Business Model below). Why it matters to trends of the future? Because we like to gather our communities around the place, and startups will want to take this into account. This is amplified by the growth of IoT (the Internet of Things) that could be used to enhance a feeling of localness or place even in FinTech.
- Technology - What is the key technology that drives the business? We are most impressed by what AI/Big Data/Machine Learning can do to solve many FinTech issues or exploit FinTech opportunities. We are not as impressed by blockchain applications, except where they are used to support a crypto offering. In the next five years, we will go from the early days of AI to solid offerings and businesses using it. When you combine the difficulty of attracting talent for incumbents in Data Scientists with new ways to use data, you create a very attractive environment for FinTech startups.
- New Business Models - Innovation often shows up as a new way to do a familiar activity. While startup Robo advisors were not successful, the idea of automated and inexpensive asset allocation is wildly successful. The key here is to think about who benefits from the new business model. It is either the incumbent as it was with Robo advice or the startup as it is for Neobanks. It may not be a disruptive replacement of an existing set of norms in an industry, such as having agents sell and service insurance, but it might be all the tools they use to do this activity. This creates a new way of doing business. A new business model can also use existing assets in a new way. Think about qualifying the best independent agents into a powerful grouping that is willing to buy a service or distribute it. The new business does not own the agents but gives them what they want in return for what it wants. This shifting of priorities into a new model is an early trend worth watching.
Overall, there is plenty to examine in any new trend or idea or business. The key is to establish a framework and follow it in the review. It is an exciting time in FinTech as we start to see the true deconstruction and reconstruction of the industry. There is much to do to lower costs and create better outcomes for clients, but it will happen using many of the key trends we have reviewed.
—Mark Casady
Power of Community
We could spend every week at an event related to technology and to FinTech. Instead, we pick the most effective ones to attend.
- FinTech Sandbox - is a proud Boston-based non-profit program which holds multiple events and drives global FinTech innovation.
- Mass Challenge - is an accelerator supporting high potential startups across many industries (most importantly FinTech)!
- Boston FinTech Week - has so many events to hear from start-ups, VCs, financial services incumbents, and the local universities. It is sponsored by FinTech Sandbox among others (including Vestigo) and will take place September 8-11 at various locations throughout the city.
- TiEcon East - is a gathering of startups and incumbents on key technology approaches like AI and Blockchain. See you there May 7th in Waltham, MA!
- Ideas in Action - is in early May. The event will be modeled on Davos' Imagination in Action (also organized by Vestigo Advisor John Werner).
- Money 2020 - is the biggest gathering of the money ecosystem participants and will be held in Las Vegas on October 25-28.
- Canada FinTech Forum - is Canada's largest FinTech event. Dates should be announced soon; the conference will be held sometime this fall.
Hopefully, we will see you at one of these.
—Ian, Mike, & Frazer
New Portfolio Company
Home improvement projects are a win-win for everyone. Homeowners upgrade their lifestyle while adding value to their (most likely) largest investment. Their spending pumps money into the economy and fuels a sector with high-paying jobs. Helping this beautiful economic cycle along is Acorn Finance: providing contractors with easily accessible liquidity to help finance client projects (and this is just the beginning).
Vestigo is proud to lead Acorn Finance's series seed round! We are joined by our friends at Accomplice and MetaProp in bringing together a diverse, powerful group of investors to help Giri Addanki (CEO) and his team bring digitization and scale to point-of-sale lending.
Portfolio Updates
Vestmark
We're proud to be an investor in Vestmark. Please join us in congratulating them for winning a 2019 American Financial Technology Award from WatersTechnology as Best Third-Party Technology Vendor IT Team.cThe company credits its collaborative culture and client communication for the success of their product.
Interesting Reads
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