The Evolution of Venture Capital
From being a diversification asset class for Institutions, Venture Capital is now becoming an evolutionary force influencing societal trends, consumer behavior, and even how the future is written.
I sat down with Sheel Mohnot (General Partner at Better Tomorrow Ventures), and Ryan Patel (Global Business Executive and Board Director and frequent contributor to Fox Business, CNN, etc) on the FINTECHTALK™ Show (http://www.fintechtalk.co) to talk about Venture Capital, Boards eye view of Startups, and next generation of fintechs. A succinct summary of the conversation by the Fintech Elder and our editorial epilogue is in this edition of eFINTECHTALK.
Traditionally, Venture Capital (VC) has been just another asset class for institutional investors and endowments for diversification. In the last two decades, it has played a major role in creating the most valuable companies in the globe like Google, Facebook, Netflix, and others that have had a huge impact on society transformed consumer behavior, and created massive amounts of wealth. It’s not surprising that several VC firms claim to have media properties now ostensibly to write about the future they are building with their portfolio companies.
Venture Capital without a doubt is a driving force in societies all over the world today, not just for the higher alpha on investments but for being a vital catalyst for broad innovation, disruption in industries, increasing employment, and competitiveness of nations. Even then the reach of Venture Capital, on both sides, investor side (LPs), and startups side (founders), has been quite limited due to the legacy credentialing process in the industry. Broadening the reach of Venture Capital (on both LP and founders’ side) should be an important goal for the industry and regulators to collectively strive for. Maybe new metrics such as a Gamma measure that measures return on investment adjusted to not only risk but also ESG impact is warranted. See EPILOGUE infographic below.
iValley is a new kind of venture capital and startup factory, sculpting the future of fintech and crypto-economy and redefining venture capital with our inclusive innovation mission. To learn more about iValley click here.
Join me for our show this week's special edition of The FINTECHTALK™ Show, Wednesday at 12 pm PDT, featuring the great Shamir Karkal and the amazing Maia Bittner. Watch the dueling insights of whether the next big fintech will be all about programmable money or the money experience or if they are one and the same.
Join me live at https://ios.clubhouse.com/join/FINTECHTALK/ekL54ckl/P9eo18qk
(use the link to save to your calendar)
Enjoy and always Be in the Know,
Listen to the amazing Maia Bittner and great Shamir Karkal duel about programming money or designing money experience
Oct 13, Wednesday | 12: 00 PM PDT (use link below to save to your calendar)
4 Lessons to Learn from a VC and a Board Member
The Fintech Elder recap of the FINTECHTALK Show on 29th September with Sheel and Ryan
I don’t know about you, but I’ve always been a little awestruck by company boards.
I get this image of many wise and serious men sitting around a table discussing matters very gravely. I’ve imagined myself there too, but it hasn’t yet happened. What do they discuss? Why are they even necessary? I was afraid to ask.
So when I heard that THE FINTECHTALK SHOW was actually hosting a session on precisely that in the context of startups, I got pretty excited. Keeping in mind that fintech startups are getting the largest slice of the venture capitalist slice, it made sense to check on whether the challenges for a board are any different.
The affable Paddy Ramanathan, CEO of iValley, a fintech incubator, hosts very absorbing sessions like this pertaining to fintech matters. It could be CDBCs one week, DeFi the next, and so on. He manages to get some very serious movers and shakers to the table. Clearly, he’s very well networked. I decided to attend. Who knew, I might learn something.
I sat down in a dark digital corner and listened to the three wise men. I came away with four specific things of value.
VCs are not just sources for capital. Startups must look at them as sources of wisdom.
Sheel observed that there is a mistaken impression that VCs don’t add much value and only give “dumb money”. That is not the case at all. Of course, there is the phenomenon that many successful entrepreneurs turn around and become VCs too. But a great responsibility lies on their shoulders that they may not fully grasp.
VCs must ask the question: what value am I adding to the founder?
Ryan observed that many new options for funding were coming up. Even governments were willing to invest in startups. The fact is that globally there is a lot of opportunities, but startups may not have the wisdom and experience to know how to build an ecosystem. Learning that takes time and that is where Board members could make a difference.
Board members are most effective when the CEOs or founders they advise are willing to learn and take advice.
Just coming up with a good idea is not enough. VCs and board members usually can sniff out the exaggeration and particularly look for CEOs who are adaptable. Learning and implementation proof is a must. Companies morph at various stages – the needs are different while making less than $5 million and then more than that. The board needs able hands to advise a CEO in either situation.
In turn, VCs look for founders who can clearly articulate their vision and get people behind the vision. That includes staff, customers, and investors.
I thought that made a lot of sense.
Companies are morphing into fintechs!
Is there a specific twist in the case of fintech startups? Sheel’s response was very interesting. He pointed out that companies were becoming fintechs! He gave the example of Squire, which is a barbershop technology company.
It turns out they emphasize quick and easy payments as their claim to fame. Technically, that makes them a fintech company too!
Going forward, traditional retailers will partner with fintechs and there will be a completely new look at the mode and frequency of payments.
At another angle, regular banks are now taking fintechs very seriously and no longer underestimate them. Fintech adoption worldwide is ahead of the US to quite an extent. However, opportunities have not been touched. That puts even more pressure on board members who must be savvy in their advice to CEOs about how to deal with adoption and education levels.
The jury is still out on cryptocurrency, felt the panelists and they sounded a note of caution for startups in this area, as they did with the NFT hype. In the latter case, they stressed the need for better use cases to examine how revenue streams would be impacted.
Everyone is aware of ESG but startups are not being able to pay enough attention to it.
Are ESG issues becoming important at the board level?
While the panelists felt it was so, they also observed that it may not be explicit enough. There are also regulatory and legal issues to consider, especially when accredited investor funds have a limitation of only 100 investors. In any case, at least a metric-driven approach would push matters further along.
The world of a fintech startup board member (or a VC) is getting complicated. Regulations, ESG, VC alternatives, and a world in churn are sure to keep everyone on their toes.
I asked myself rhetorically, “Do you have what it takes to be a board member to be a startup?”
The Crypto Elder is on every Fintech startup board, watching and taking notes.
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