Cycles of Disruption
Investment decisions are easy when you meet founders whose product is 10x better than its nearest substitute. According to the efficient market hypothesis, opportunities like this only arise the moment a 10x technological breakthrough occurs. Fortunately for us, (and our LPs) we don’t have to wait for quantum computing to find great investments. Sometimes we just have to recognize when a meaningful group of potential customers are forced to rely on a terrible product. But where to look?
Consider some of the most painful transactions in your life: paying taxes, health insurance (claims or registration), anything that involves your cable provider. There’s a theme. Unpleasant customer experiences are ubiquitous in highly regulated (or government dominated) sectors which are in turn served by oligopolistic (often monopolistic) firms. These structures invariably suppress innovation, overcharge, and provide a bare level of service in return, for a while…
Incremental technological progress enjoyed by the rest of the economy reaches an inflection point when startups can delight consumers by circumventing incumbents’ regulatory bulwarks (you no longer need a medallion to drive a taxi, a license run a hotel, physical branches to own a bank). Thoughtful incumbents can avoid such a cataclysm by partnering with intrepid technologists to bring their customers the experiences they deserve sooner, before the levies break. Most will not. Vestigo’s raison d’être is to capitalize on the outsized influence of these dynamics in financial services today.
Whether it’s a SaaS that seamlessly calculates your tax liabilities from crypto speculation, a platform that empowers you and your employer to minimize your student debt burden, a frictionless portal for fast small business credit underwriting, or a digital bank that makes you financially responsible while you play animated games, several things are clear. Innovation is on the rise, costs are coming down, and customers are beginning to experience an order of magnitude improvement in the quality of their products and services.
So far, we are having a lot of fun identifying weak points in our industry and the teams that will enchant underserved consumers and enterprises. We expect that we will find a way to cope with the profits from our efforts as well…