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May, 2018 Volume 15

What Have We Learned?

We have had over 400 start-ups seek funding from us.   It is clear that our belief in the need for an early stage focused FinTech VC in the Boston area was well founded.  About 20% of these have come from our Apollo proprietary technology at Cogo Labs.  So our belief about its efficacy for a VC process has proven itself for identification of companies.

Using these as a marker for innovation and leading edge thinking about the changes coming to financial services, is proving to be helpful.  A few trends we see in the waves of plans are:

-The vast majority are focused on B2B opportunities.  It is clear that founders understand the high cost of customer acquisition.

-There is much to fix in the current infrastructure of financial services.  Entrepreneurs are laser focused on single use cases to bring lower costs to the incumbents or to bring faster growth.

-Insurtech has lots of good ideas being tossed about for unique coverage or insightful uses of big data.  Most are focused on assisting existing agent distribution networks rather than B2C.

-Regtech has not been showing up nearly as much as we thought it might at this stage. It was quite popular in the early plans that came to us but has dropped off significantly.

For incubants in financial services, help is on the way from start-ups.  You will want to understand what is happening in ICO and crypto ideas.  We will explain this a bit further in the next blog.

—Dave & Mark

Crypto Assets Will Change The World?

Today we organize for profit corporations that work to maximize their profits.  What if we organized a collective gig economy based workforce that maximizes utility of a piece of software or making markets transparent?

The second type is becoming very popular via the ICO market.  While there is much to be done to bring legitimate ICO’s to life such as regulation and industry standards, they are intriguing for the evolution they represent in the way enterprises undertake activities.

Let’s use an example of how it might work.  I write a white paper (think of this process as creating a prospectus for token buyers)that lays out my idea for creation of a title company.  You provide a token of investment-quite simply you give me $ or some other currency in the form of a token of a stake in this enterprise.  This would make it a standard corporate form but better yet to avoid being a security we can have that token buy future services rather than owning future profits.

When you think about it, this is just like what Kickstarter does in a more conventional way.  But with Kickstarter the pre purchase of a product or service makes you a customer.  Often a corporation was created that owns the product idea and will make it sell it to you via this campaign or future customers in a more conventional way.

In our token title company, you fund it so you can use the utility over time.  So perhaps you are a real estate agent and want to make the land titling process easier.  You provide some capital and you can clear future titles via this new organization using your token.

Importantly, the white paper writer controls the new title company but its a collectively owned enterprise.  The organizer uses the token sale (ICO) to pay programmers to build a technology that uses blockchain to create an ever lasting, non corruptible chain of ownership record for purposes of transferring property.

This would eliminate so many different existing corporations that do this today.  It would make clear any issues that arose about the property as they would be right on the record.  Complete transparency and very low cost records of property ownership would be the result.

It would make the idea of title insurance to protect you from a lack of transparency obsolete.  How nice for a homeowner to never pay title insurance again.

So for reasons of wanting to make the world better, I organized a collective to provide capital and to program a new way of doing things.  I offer it to the world at low or perhaps even free to gain traction and then I have upended the title insurance and title company worlds.

As the organizer I can take the profits from this idea.  I can share those profits (if its in the form of labor as payment) or as ownership.  But the breakout idea here is that it does not have to be a typical corporate form.

Any thoughts?  Crazy smart or just crazy?

-The Vestigo Team

Have I Got A Deal For You

We are seeing 6-8 deals a week now at Vestigo.  We love seeing so many good ideas with so much insight on the passion of entrepreneurs.  What are they excited by in the FinTech world?  How will they change financial services to make things better, faster and cheaper?  What tools are they using like AI or blockchain to drive their start-ups?

Let me characterize the nature of these companies for the benefit of seeing the edge of the future.  They are-

-Lots of blockchain business plans came in this past year.  None of what we saw was investable which surprised us as we had expected more in this area to be ready for the market.

-Blockchain that was created by consortiums has been popular and seem very smart to us but not easy for a VC to make the targeted returns.

-AI is coming into its own.  We have seen the largest group of start-ups by our count in this area.

-Many AI businesses are not using the latest algo-rhythms or they are renting someone else’s AI platform.  This leaves them with no distinctive business model as it can easily be replicated by others.

-Wealth management tools for advisors have been a heavy theme in the pool of start-ups.  Many are quite good but it is a crowded field.

-We have seen a very large number of robo advice and crowd sourced investment ideas. If it focused on B2C as many are, then we have less interest as the customer acquisition costs are so high.  If they have found a way to get B2B2C then they are interesting ideas to us.

-Crypto assets are another big theme.  Many of these are riding the popularity wave with no real business behind them but a few are very smart applications for building new forms of commerce using new forms of infrastructure and ways to store value.

Always happy to see any entrepreneurs and their business plans so do not be shy in sending them along.

-Ian

Portfolio Updates

How Student Loan Benefits Help 401(K) Contributions 

Read the latest blog from portfolio company Student Loan Genius

New Hire

Micronotes selects FinTech veteran to head business development.

 Doubles Growth in 2018

Impressive new business for Micronotes.

Netcapital Raises Over $500K For Startups

LifeYield Wins United Planners Business

Hundreds of advisors will now have access to the LifeYield Taxficient tool..

John Lunny, CEO of Vestmark, Nominated For E&Y Entrepreneur of the Year Semifinalist

Interesting News

In Blockchain We Trust

MIT provides insights to how blockchain will evolve affirming what we are seeing in start-ups in crypto assets.

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