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Dear Fin VC Partners, Investors & Friends –

We had a busy 2018, with 8 investments, we were named the 2nd most active FinTech VC by BTIG, despite having only launched in April! The year has gotten off to a tremendous start, with two new investments and we will be announcing several significant co-investment opportunities in the near term as well. We would like to continue to stay in close touch and aim to find ways to collaborate. As you know, we take a long and patient view on our global relationships and as we serve as fiduciaries and add value for our entrepreneurs and partners, we recognize that growth can only come with merit. We thank our portfolio company CEOs, limited partners, co-investors, and Advisors, for your tremendous support.

In these ongoing communications, we will cover 3 areas – 1) Macro; 2) Micro; and 3) Firm Updates. As always, we welcome your feedback and ideas and look forward to keeping a regular dialogue going with you all. We invite you to visit our website where we will continue to provide firm, portfolio, and news/event updates. In order to address the current micro environment of venture capital and FinTech, we assembled a presentation which can be viewed here. If you would like a soft copy of the presentation, feel free to e-mail us at

Our 2 asks from you:

  1. Invest with or alongside of us. We welcome new long-term limited partners as well as co-investment collaborators.
  2. Pipeline – we love to meet CEOs early and often, we welcome your ideas and introductions to companies you are bullish on!


Based on your feedback from our prior letter and the number of macro reports you all receive, we’ll keep this section succinct and link our favorite resources: As VCs, we monitor overall market conditions, but in particular cost of capital, valuations, consumer and corporate confidence, SMB support, and the overall regulatory environment for entrepreneurs, venture capital firms and the financial services industry. Overall, according to Goldman’s 2019 forecast, we will see moderated global growth (3.5%), a rising recession risk for this year of 15-20%, labor market tightening, continued wage growth (4-5% YOY growth), elevated consumer confidence (~98% in March – U of Michigan), gradually rising core inflation, higher policy rates in certain geo’s, and a view that the US still represents the most attractive market for investment. The bull market in US Equities turned 10 on March 9th and while this current rally is among the longest in history, lack of excesses/bubbles in inflation, moderate valuations (S&P trading at ~18.5x 12-month estimates), subdued inflation/relatively low interest rates, stable (at the moment) earnings estimates and moderated investor euphoria have most pundits pointing toward more upside. Though the Yield Curve inverted (10 year < 2 year rates) the week of March 18th, we would caution against reading too far into the signaling effect due the decreasing correlation (see Pictet Wealth Management’s work here). Further, the average stock market gain in the 18 months following an inversion has been 15%. Additionally, bond market returns have been strong in early 2019 after volatility in 2018, despite low yields and most analysts don’t foresee a further hike given the dovish tones of the Fed and ECB, making shorter duration maturities and high quality a focus. A larger concern may be the bubble-nature of the credit markets given the amount of covenant-less debt exceeding 2007 levels and lower ratings quality of PE-backed debt issuance in particular – Moody’s recently reported that around 90% of PE-backed debt issues are rated B2 or lower, compared to just 40% of spec-grade companies without PE sponsors. In addition to market conditions and monetary policy, we are keeping an eye out on a number of other factors and potential exogenous shocks, including: Fallout from political investigations into current US Administration, domestic legislation on technology (FinTech and broadly), Trade war with China and potentially others with tariffs and world trade issues, North Korea threat, Brexit/EU balance, Iran agreement, and cyberattacks (Russia and other actors).

Macro Reports We Read:


  • Link to our latest Research Report
  • Key Themes in FinTech – as outlined in the report:
    • Ecosystems continue to matter – many of the top growth stories are spin-outs of legacy FinTech players (continuation of the “PayPal Mafia” effect), who have unfair advantages in launching a new company. Thus, proprietary networks and access to ecosystems will provide a competitive advantage in sourcing and operating globally for VCs/Angels.
    • Platform players are outperforming single vertical co’s and we are seeing a fundamental re-coupling through multi-vertical players along with a rise in consolidation and M&A. As our research report indicates, we started with single vertical solutions to specific FinServ use cases, but have seen the “full stack” focus of incumbents and several FinTech serve as a significant differentiator with customers and drive improved growth and unit economics (CAC/LTC via x-sell/upsell).
    • B2B & B2B2C > B2C Companies – Incumbent and corporate adoption of FinTech is driving accelerated growth. We believe B2B and B2B2C co’s will drive the next wave of growth and performance in FinTech, as they represent capital light businesses with built in scale/network effects that can be globalized without significant regulatory hurdles. The lack of material white space/TAM in the US for B2C, along with the capital and competitive intensity (increasingly from incumbents being supported by the US regulatory framework), makes the space increasingly difficult for new entrants.
    • Geo’s follow the same pattern – See slide 7 of our presentation for a proprietary analysis of the observed maturity pyramid for FinTech across geographies. We have seen the step-function penetration of these capabilities in each country historically and the framework provides a predictable map forward for governments, operators, and investors.
    • Blockchain will “eat” every area of FinServ – eventually. We are in the first inning of Blockchain as an enterprise application and there are a limited set of use cases we feel will ultimately scale in using public permissioned protocols to solve for specific problems. Figure represents one of the first enterprise applications at scale, as highlighted below, they have built a protocol focused on securitization of assets, starting with credit, all via their protocol, Provenance and token, Hash.
    • AI continues to shape all aspects of FinServ. If there isn’t an AI/data science story with and talent in the company, we are typically surprised/concerned. All of our portfolio companies and the leading players at growth/late stages have found areas to incorporate AI/ML/NLP and other frontier tech into their core tech stacks and processes. We have companies like Netomi solving for customer service automation and improvement and players like Onfido solving for legal digital ID, all with new technology offerings that are rendering incumbents non-competitive.
  • Key Data in FinTech – 2018 Summary:
    • Global Financing Volume: $53.132B => 98.30% YoY Growth
    • # of Financing Transactions: 1,588 (1,232 with an announced $ amount, 356 unannounced); -2.58% YoY Growth
    • Global M&A Volume: $124B => 41.37% YoY Growth
    • # of M&A transactions: 846 (178 with an announced $ amount, 668 unannounced); -7.64% YoY Growth. Largest transaction = Paypal acquiring iZettle, $2.2B.
  • Key Data in FinTech – 1Q 2019 Summary:
    • Global Financing Volume: $9.8 billion
    • # of Financing Transactions: 391 (303 with an announced $ amount, 88 unannounced)
    • Global M&A Volume: $112.1 billion
    • # of M&A transactions: 233 (32 with an announced $ amount, 201 unannounced)
  • Key Take-aways in VC:
    • Headline: $130B was deployed into US VC in 2018, a ~58% YOY increase over 2017 ($83B), the highest since 2000. However, deal count was down by 6% YOY (8,948 vs. 9,489), indicating more capital being deployed into growth and late stage investments (Series D avg valuation is up 116% since 2016 as a result).
    • Why? Due to increasing fund sizes – driven by Softbank’s wake, accelerated re-ups, “tourist investors,” companies staying private longer, and the relative capital intensity of these companies, round sizes and valuations have increased, particularly at the late stages, with $25M+ rounds representing ~25% of deals. Indeed, investments in unicorns and mega deals ($100M+) in 2018 nearly doubled compared with 2017. As a proportion of total VC capital invested last year, unicorns attracted more than one-third, while mega deals attracted nearly half.
    • LP commitments: ~$56B to 256 US VCs closed last year, the highest amount since 2000. Looking ahead, thanks to five consecutive years with $34B+ raised and record levels of dry powder, VCs should have substantial optionality over the investment period.
    • Liquidity: The slated lineup of IPOs for large unicorns, suggests that 2019 should be another strong year for VC exit value and increasing distributions back to LPs. Additionally, there have been an increase in exit opportunities from PE-sponsored buyouts as a source of liquidity, to complement acquisitions (where we see increasingly activity in FinTech), and the IPO growth which we expect to continue into 2020.
  • Our Venture Asset Allocation Perspective: Our view on the portfolio construction to this asset class centers on several characteristics and is shared by many of the investment consultants we work with. We have aligned our platform and structure to these characteristics, developed a strong set of investment themes, proven operating framework, and strong team with portable track records.
    • Early Stage focused funds have outperformed for 30 years
      • At every historical benchmark year (ex. 15 year), for 30 yrs, Early Stage has outperformed Late/Expansion and Multi-Stage focused funds. (per Cambridge Associates benchmarks)
    • Smaller funds outperform
      • Firms that deploy smaller funds – <$400M – have consistently outperformed firms that employ larger fund sizes. Aligns with Earlier Stage focus at smaller fund sizes. (per Kauffman Foundation and SVB)
    • Specialist players outperform generalists
      • Investments by sector specialists returned an avg 2.2x MOIC and a 23.2% gross IRR, handily outperforming generalist investments that returned an aggregate 1.9x MOIC and a 17.5% gross IRR. (per Cambridge Associates benchmarks)
    • Emerging managers outperform established managers
      • Median net IRR for emerging managers = ~22% vs. established managers = ~8%, while 3.5% risker (per Preqin)
    • Global diversification benefits correlation/risk metrics
      • Geographic diversification in tech investments accrue correlation and risk mitigation benefits. (per Harbourvest)
  • Co-investment rights are critical in providing more predictable Alpha given the power law return dynamics of this asset class, particularly with managers – like Fin VC – that provide access direct to cap table with no fee layer. Increased optionality, tactical allocation exposure, and liquidity. (Data and per Cambridge Associates)

Micro Reports We Read:

Firm Updates

  • Main Fund (Early Stage Focus): We formally launched and announced our firm in April 2018 and got to work on our Main Fund in June. The fund is focused on early stage FinTech companies in specific sub-sectors (outlined on our website), with a US focus (75% of portfolio) and bias to B2B/B2B2C companies where we see greenfield opportunities for scale/outperformance and the ability to add significant operating value. As outlined below, in 2018, we made six investments in the fund and two co-investments in Special Situation opportunities, with an additional two investments made in 1Q. We are supported by and grateful to our institutional LPs and prominent family offices. We have a significant pipeline of companies (500+) for this vehicle and co-investment opportunities across the sub-sector focus areas.
  • Summary of Current Portfolio Companies: Notably across our ten companies we have been able to achieve diversification across our six sub-sector focus areas and geographically (US, Asia and EU), have multiple companies who have already raised subsequent rounds of financing, and our companies are powerfully diverse demographically, with three incredible female CEOs (30% of portfolio) and rock star female/minority management teams. We are excited to be actively working with all of our companies on business development, access to capital (equity/debt), global market entry, product roadmap strategy, and recruiting.

Warm regards,

Fin VC Team


  • See Link to our latest Research Report
  • Fin Macro Perspective: Fortune, Forbes, Trading Economics, and publicly available government data
  • Fin Micro Perspective: Venture Capital data from Pitchbook/NVCA, SVB, and FinTech data from FT Partners and CB Insights. Portfolio construction data from Cambridge Associates, SVB, U of Chicago/Harvard research and Preqin.