Our impact at Vestigo is centered in Cambridge just blocks from MIT’s campus. We have a chance every day to meet entrepreneurs and learn about their business ideas. We review the data coming from XPLR that reveals new companies that are going viral in FinTech. But our reach can also be global as we saw from the recent visit to Davos by part of our team.
We share more stories of Davos this month with you as the event was so rich in experience and learnings. We also share what we learned from an HR conference that Mike attended to flush out more of our thinking on worksite businesses. And Frazer attended an MIT FinTech event that was filled with local startups and those that support them like FinTech Sandbox, other VC’s and Mass Challenge. We give back in many of these events by making connections to find new companies for the portfolio or to share insights with those that need it on FinTech.
We also moved officially to an office that is a bit bigger and just around the corner in building 200. Here’s a photo of B-2101. Please come by and say hello.
—Mark & Dave
Data, AI & the Future of Work from the WEF
Big Data and AI insights with Vestigo Advisor and Cogo Labs CEO Mira Wilczek from her talk at Davos.
Xs and Os at Qualtrics X4 Summit
I had the good fortune to attend the Qualtrics X4 Summit in Salt Lake City last week. The Summit had an amazing star-studded list of Speakers, including:
President Barack Obama: powerful discussion on the dedication to the mission of his cabinet and the team he assembled, coupled with the absence of individual advancement by the people he surrounded himself with over eight years in the White House.
Sir Richard Branson: a humble visionary, who attacks the problems he has experienced firsthand while also looking to do the impossible. A simple, but powerful take-away was his statement (paraphrasing): “startups can only excel if the CEO / Founder is willing to delegate daily responsibilities and trust the team they are assembling.”
Oprah Winfrey: if there were ever a better motivational speaker, please let me know; despite all the challenges she has faced from the earliest days in her childhood, she has continued to succeed and give back to society. It was refreshing to hear someone so successful reiterate the mantra to “be true to yourself and you will achieve success” and reminding people to not make decisions purely for money, as that will not lead to long-term success or achieving your goals.
Bill McDermott: as the CEO of SAP (~$150.0 billion market cap) he spoke with pride of his entrepreneurial beginnings, at 16 years old he bought a local deli and built a business designed for the local high school kids who were “looking to play arcade games and get good food”, in turn his little corner store took all the business from his local rival, 1970s behemoth 7-11.
Ashton Kutcher: I have to admit an ignorance to the workload of actors/actresses and models, and the pleasant surprise to hear Ashton extoll the benefits of working hard and that no job is beneath you. In evolving from a laborer to a model to an actor to an investor, most importantly his energy is being used as an activist to save children from exploitation and human trafficking.
Dan Reynolds: as the lead singer of Imagine Dragons, he has seen the trials and tribulations of an unsigned band and the heights of multiple platinum albums. In an era where every song being released seems to have an Explicit Warning on it, Dan and his band are steadfastly focused on clean music and in response they are the drawing amazing crowds of both young (children) and old (parents) all the while traveling the world on what seems to be a perpetual tour. Dan does an amazing job educating his audiences on the need to bring awareness and acceptance to depression, anxiety and the value of therapists.
In addition to the opportunity to hear the stories from these amazing people, there was an extensive discussion on the powerful combination of X (experience) and O (operational) data, as illustrated by the $8.0 billion acquisition of Qualtrics by SAP. Qualtrics software focuses on experience management related to: (1) brand, (2) customer, (3) product and the most recent addition (4) employee. These four areas provide a continuous feedback loop related to all aspects of a company and take the concept of customer development well beyond product market fit and simple product iteration. This is a growing market and already gaining incredible traction. SAP on the other hand is already everywhere; take into consideration that 77% of all transactions globally are run on SAP software, they have cornered the market on operation data.
The combined entity (SAP + Qualtrics) gives us a view into how every company (start-up or established) needs to truly embrace data and eliminate bias in their business decisions. Human nature is to make excuses for negative outliers and criticize the data that does not conform to their opinion. If we want our companies to be truly successful, we need to align with the mission of the company, trust in our team, not chase the dollar rather the goal, and embrace the ground truth provided by both X (experience) and O (operational) data, no matter how difficult it may be to accept.
By the way, if you ever need some to break up the tediousness of your conference, I would highly recommend Dr. Peter Lovatt, Dance Psychologist. It is amazing how quickly he can get an 11,000-person audience engaged and raise the level of energy in only a few minutes. This is definitely worth a watch:
Dr. Peter Lovatt, Dance Psychologist Talent Summit 2018 (skip forward to the 7m00s mark)
—Mike Nugent, Managing Director
MIT FinTech Conference
This month, I attended MIT’s annual FinTech conference in Boston’s Seaport district. The event was a tremendous success, bringing together an accomplished group of entrepreneurs, technologists, VCs and financial services executives. Panelists discussed topics ranging from the rise of challenger banks, the next generation of digital governance to VC perspectives on the opportunities in FinTech today.
Of course, I was most interested in the founder mythology. Rashmi Melgiri (Co-Founder of CoverWallet) captivated the audience with the story of how her team has revolutionized small business insurance. Her ability to articulate the parallels between small business insurance today and airline tickets before Expedia, coupled with her ninja product development (she visited dozens of local insurance agents in Brooklyn with her co-founder posing as potential customers) was intoxicating founder-talk for a VC like myself. If only we’d had XPLR in 2016!
We also had the pleasure of hearing perspectives from multiple established FinTech VCs. Adam Valkin, GP at General Catalyst, shared 20 years of invaluable wisdom from launching companies to making successful investments with his present firm. Two themes that resonated with me are the common qualities in successful founding TEAMS (intentional caps lock) and how to think about the macro of venture capital. Today, great technology has almost* become table stakes for venture funding. There is a temptation to spend all your time comparing trees instead of looking to see whether the forest is next to a paper mill or set to grow and thrive in the coming years.
Needless to say, the day was time well spent and I would encourage all of our readers to put next year’s event on your calendar!
—Frazer Anderson, Investment Analyst
The team at LifeYield continues to find new sources of “tax alpha” for their customers. We are proud of the company’s role in making tax optimization ubiquitous, empowering investors to earn higher returns without increasing risk.
I had the pleasure of supporting Vestigo portfolio company FRST at an Ethereum meetup in Chicago a couple of weeks ago. While of course FRST’s technology shined, perhaps the most impactful speaker was Andrew Gordon (a Chicago tax attorney). He presented on the many myths surrounding how to calculate and pay taxes on digital assets.
The audience was horrified (clearly none of them were using ZenLedger). Fortunately, Andrew is also a ZenLedger advisor and we both shared the company’s story to the palpable relief of the entire room. The crypto world is quickly waking up to the importance of tax compliance.
—Frazer Anderson, Investment Analyst
Vestigo is excited by the collision between technology and banking. As investors, while it would be great to fund the “iPhone of mobile banking,” we see fantastic promise for incumbents of all sizes to partner with B2B FinTechs and start delighting their customers.
Crunchbase provides a fascinating and empirical look-back on how the VC landscape has changed over the past 10 years. We look forward to seeing “data = alpha” in the 2029 decade in review.
Dave along with Ian hit the road to Davos this month. Read more about their insights from this amazing gathering in the updates below. While there is a glamorous side of global leaders, the key to a great Davos experience is to dig in with the latest thinking on technologies and innovation.
We are also hitting the road to see the portfolio companies and prospective investments. You learn so much when you can sit with the leaders of companies and discuss their vision and struggles and opportunities. We had recent trips to San Francisco and to NYC. While we see plenty of deal flow from our offices in Cambridge and via XPLR, our algo deal seeking machine, we need to be out to share stories and learn.
—Mark & Dave
Introduction to Blockchain+AI+Human from the WEF
Blockchain and AI insights with Vestigo Advisor John Werner and MIT’s Sandy Pentland
Davos
This year, I had the opportunity to attend the World Economic Forum (WEF) at Davos. Founded in 1971 as a not-for-profit foundation, the WEF recognizes that the world is changing at an ever increasing pace. The forum brings together leaders from across many spectrums of society: politics, business, academia, NGOs, and the arts, who travel from all parts of the globe to discuss the biggest challenges facing the world. The topics of this year’s conference ranged from Big Data, Blockchain Technologies, Artificial Intelligence to Social Inclusion and Equal Opportunity.
“The Forum strives in all its efforts to demonstrate entrepreneurship in the global public interest while upholding the highest standards of governance. Moral and intellectual integrity is at the heart of everything it does.” -WEF
Invited by John Werner of our Advisory Board, Vestigo was given the unique opportunity to participate and present. Our General Partner David Blundin, Vestigo advisor and Cogo Labs CEO Mira Wilczek, and FRST (a Vestigo Portfolio Company) CEO Karl Muth each presented. Mira and Dave shared thought provoking perspectives on Big Data. Karl Muth articulated the evolution of the Crypto marketplace while demonstrating the visualization power of the FRST platform.
David’s presentation described his journey as an entrepreneur and his ability to link the power and ubiquity of Big Data. He conveyed to the audience how the simultaneous evolution of software, processing power, growing data sets, and Blockchain Technologies will enable entrepreneurs to quickly move their companies and careers forward.
Mira was able to set the stage for Big Data in a trustless world and the important role that Blockchain Technologies will play. It was a thought provoking talk as Mira shared the IDC estimate that the average human on earth will generate 1.7MB of digital data every minute, while comparing the “wet” data (eyes, and ears) generated by the humans in the room at Davos. She discussed the challenges of data ownership, transparency, replication, and security, affirming the role of Blockchain Technologies.
Karl took us on a journey through the crypto world from the revolutionist to the professional. He described why FRST was created and demonstrated the power of their trading tools. The audience was amazed by the magnitude of the visualization tools and the edge that the platform provides for professional organizations trading crypto currencies. Karl outlined the path that we are moving along: from the crypto winter to the professionalization of the marketplace.
At Vestigo, we leverage Big Data and machine learning every day to find great FinTech companies. The collective “wow” moment from these talks, was the tangible absorption of the transformative power of Big data by the Davos audience. The results of the talks where immediate. Dave was quickly whisked away by the executive leadership from TATA, Forbes and many others. Mira was recruited to a leadership panel with the CIO of the US Government, Karl was interviewed on TV. I was engaged in the debriefs discussing Vestigo and our unique portfolio of financial services solutions with leaders from the world’s largest financial intuitions.
There were many wonderful random collisions of ideas and meet-ups with people from all sectors of society. I met a physicist who is developing the next generation of quantum computers. Over lunch he was able to explain how quantum computers work and for a moment I think I understood him. We attended an incredible variety of events including, the day at the TATA/MIT TCS Dome, CSAIL Artificial Intelligence group discussion, The TCS Global Reception, NYTimes Debate, Aberdeen Investments scotch tasting party, the Harvard networking event, the Global Blockchain Business Council dinner, the evening with Forbes executives, and had the opportunity to meet many thought leaders like Steve Forbes and David Rubenstein, the co-founder and co-executive chairman of The Carlyle Group, Tim Berners-Lee (inventor of the Web) and Amy Cuddy Ph.D. (most viral Ted Talk) and so many more amazing people.
We made many new connections and look forward to future engagement and visits to Cambridge. These are seeds that may well translate into good business, time and effort will tell. I want to thank John and our General Partners, Dave and Mark who created a unique opportunity for Vestigo along with Karl from FRST. We are looking forward to being invited back next year and we hope to include one or two of our leading portfolio companies.
The trip was a huge success. Being part of the collaboration of ideas through intellectual exchanges and having exposure to people willing to challenge the status quo was a whirlwind of fun!
In a wonderful article by Vestigo advisory board member John Werner and long-time collaborator Sandy Pentland (#geniusvisionary) we hear about the minds that truly shone in Davos this year.
Portfolio Updates
XPLR Scores Again
Our second investment that resulted from identification of potential viral companies in our Cogo Labs data is now complete. Cushion joins our portfolio companies as a personal finance application that automates stressful, complex and tedious actions to reclaim or save money for their customers.
They are targeting bank fees which total over $200B annually on consumers. They negotiate via an automated process with the banks to get these fees reduced or eliminated. They have saved customers hundreds of thousands of dollars while in Beta.
Paul Kesserwani is the founder and CEO along with Ivan Balepin as CTO and Lauralynn Stubler, in charge of growth and retention, run the firm. It is a lean team that has built an impressive technology on a shoestring. We applaud their lean style of management.
Alloy Joins the Portfolio
We met Tommy Nicholas, founder of Alloy, in our search for a technology first approach to the insufficiencies in today’s AML/KYC solutions. We were immediately impressed with their approach to on-boarding new clients for banks and FinTech startups. This is critical in their role to provide proper KYC and AML compliance systems as well as to protect themselves from fraud.
Tommy is joined by a great team. Laura Spiekerman is their CRO along with Edwina Johnson, COO, have great startup experience that will help the company with the inevitable twists and turns. Charles Hearn is the CTO providing the early build along with client success on-boarding. Sue Devine, VP Customer Success, trains the clients in using their capabilities.
Alloy’s use results in 98% automation of customer acceptance decisions with a 50% reduction in fraud. Further it reduces the need for manual review by 95% which is an enormous savings for those firms using their solutions. Helping firms reduce costs while providing better regulatory outcomes is why we are pleased to be able to join their recent fund raise in a convertible note.
—The Vestigo Team
InsureTech remains one of our primary areas of focus at Vestigo. We see almost limitless possibilities for improving outcomes and delighting customers when incumbents and FinTechs can find ways to effectively collaborate. Consumers are already enjoying the early innings of this trend.
In a fascinating interview from the WEF at Davos, a panel of experts discuss how the use of distributed ledger systems can address the challenges of small businesses who remain separated from digital networks.
While “crypto winter” has undoubtedly come, Vestigo could not be better positioned to help our founders create value in this seemingly harsh climate. We remain encouraged by both the promise of blockchain technologies and the continued, steady flow of “smart money” into the space. Every bull market is the parent of a bear market and vice-versa. We are well positioned to act when green shoots begin to push through the snow.
Fintechs are getting a large infusion of venture capital.
In 2018, U.S. fintechs raised almost $12 billion from VC firms, a surge of 120% from 2017. Leading the trend are a handful of startups that have managed to attract millions.
We love a new year. It’s so full of hopes and plans and excitement to get started. It is truly the most wonderful time of the year. Last year was quite good with the close of Fund I and the growth of our portfolio to 12 companies.
What will 2019 bring? We would like to continue to find and fund great companies who will bring positive change to financial services. Our XPLR search process using the Cogo Labs data continues to provide companies to research and pursue. We plan to dig in further to find possible investments. We see continued deal flow from fellow venture firms. Sourcing from our broader network is yielding good insight and investments. Our plan is to remain focused on getting capital into companies in their seed round.
Follow on investments picked up in the fourth quarter so we look forward to many more in 2019. We have been pleased with the thoughtful structures and valuations in these thus far.
Finally, we have big plans to move just a 100 yards from our present office but into space to allow for expansion. All of us have enjoyed our closeness in the current space-but any added interns or growth in staff for our next Fund and we are out of space.
We hope you have an amazing 2019.
—Mark & Dave
Envision Interview with Patrick Larsen
Blockchain insights from ZenLedger CEO Patrick Larsen
What does a recession really mean for a VC?
Downturn, what downturn? We don’t see a slowdown in the core business premise of our portfolio companies nor in the incumbents willingness to work with them…….yet.
What might cause that to change? We think it would have to be a substantial downturn in business activities with incumbents laying off and digging in for a prolonged drop in activity. We just don’t see that coming at this stage.
We do see the potential for a pull back or significant slowdown in 2019 or 2020. It is also possible that we get back to growth with a deal with China and a Fed less likely to raise rates.
In fact, we feel any slowdown is good! It takes out our weak competitors in FinTech. It lowers expectations on valuations in a healthy way. It makes capital a bit more precious which is good. It will be better used if considered very valuable.
We are already seeing this in the digital assets world. Bad projects are falling apart which is good. Good firms are getting funding to get them through crypto winter at better valuations for investors. Weak competition is going away. Professional investors are still entering the market and loving the volatility.
Our plan is to take as much advantage as we can of these conditions. Providing insight and staying power to our portfolio companies is a key activity for us in these moments.
Being a newer fund with a long time horizon and plenty of capital should provide an advantage at these moments of change. It should allow us to intelligently invest.
—The Vestigo Team
Vestigo at Davos
We are pleased to report that Vestigo Advisory Board members Mira Wilczek and John Werner, Vestigo GP Dave Blundin, Vestigo Founder Ian Sheridan and Vestigo portfolio company FRST CEO Karl Muth will be attending the World Economic Forum at Davos this year. We look forward to giving you the details on all the action from Switzerland in next month’s issue.
With Long Game cracking 90,000 savings accounts this month, it’s no wonder that our favorite mobile “game” is running up a high score! Forbes contributer Jennifer Cohen noted it as one of her top apps for success in 2019. Vestigo is also confident in the success of Long Game’s users and the company itself in 2019.
Crypto Winter’s Silver Lining
Vestigo Portfolio Company ZenLedger enjoyed a big pop in revenue on the back of their successful “tax loss” harvesting campaign. Vestigo’s approach to crypto has been to find opportunities with low correlation to token/cryptocurrency prices. While many people in the crypto ecosystem are suffering these days, the idiom “Death and Taxes” is proving out.
We started Vestigo with the premise that while the amount of capital in the venture eco-system as a whole was enormous, early-stage (and in our case FinTech) was being overlooked. It’s gratifying to see our intuition confirmed by this new report from PWC and CB Insights.
Nearly all consumer facing FinTech startups (including some of our own) have deep integrations with both Plaid, the FinTech startup that enables developers to create financial services applications and Quovo, a startup that aggregates investment data. This is massive news for our industry.
This short article touches on most of the things we talk, think and write about at Vestigo every day. Understanding the relative importance of the overall industry trends when analyzing a particular investment opportunity is one of the exciting challenges of the job!
We always like to take time as a firm to think about trends that will evolve in the next year. For 2019 we make the following five observations.
AI Acceleration – We have seen AI in a number of areas for growing bank revenues. We will see more AI applications for other parts of the financial services industry. The tools here will also reduce costs. However, financial institutions will need to audit AI results to be sure an unintended bias does not appear.
Crypto Continues – Trading activities and support by institutions will continue to grow. While we are not predicting upward price moment, we are seeing evidence that more and more mainstream investors are attracted by digital asset trading.
Big Iron Workarounds – The financial services industry has an ancient infrastructure that is unlikely to be replaced any time soon. More startups will work to create smart workarounds for helping the incumbents move faster at lower cost to support their clients.
Employment Evolves – We will see more workers with multiple income sources resulting in employee benefit providers beginning to evolve to tap this opportunity with new product and service offers. These gigs can offer a way to climb the financial ladder or create a lifestyle choice.
The war for technology savvy talent puts pressure on growth – Traditional education makes room for shorter duration certifications in software, engineering and data science. The drive for apprenticeships emerge in technology fields and dependent business sectors. Employers evolve benefit programs to create flexible benefits like helping to pay down student loans for employees.
We invested in Craig Welch’s newest startup Kingfield Corporation’s (“Kingfield”) Series Seed. Craig’s previous venture was the very successful Acadia Soft. Kingfield is a financial technology start-up that is currently developing a common industry communication network that will organize, standardize and facilitate delivery of operational type messages between institutional investors and the agent banks with which they have relationships. The building of this secure technology environment will allow all market participants to transmit routine post-trade correspondence, across all asset classes, through one client portal, thereby eliminating emails, chat, paper correspondence and other inefficient bespoke forms of communication. Our co-investors include Bain Capital Ventures and Contour Ventures.
First Sale – Mirador
It was a short time ago that we announced an investment in Mirador. We are pleased to mention that they have sold the company providing our LP’s a 3X return on capital in a very short time. This will allow us to post an excellent IRR for the Fund in its early days of operation.
Portfolio Updates
Long Game’s Look Ahead
2019 will be an exciting year for our company as we scale to support our customers to achieve their financial goals and have fun while doing so. Even so, we share concerns about the impact of an economic recession but hope that we can help our customers weather this time of insecurity. Traditionally (and sadly) Lottery expands during times of economic hardship because people are looking for hope. Hopefully this dynamic will help people to find our games of chance and be motivated to save instead.
Fintech is only at the beginning of its story. Even the biggest FinTech companies are still small (~2M customers) relative to the opportunity (~200M customers) so lots of expansion is possible in the years to come!
So no surprise, we’re bullish about next year for Long Game. 2018 was our year of product-market fit and establishing channels for efficient growth and we start of 2019 with a new round of financing, poised to scale and monetize, and ready to help our customers succeed in the face of a tough economy.
–Lindsay Holden, Long Game Savings CEO
What to Expect from towerIQ
2019 is a tremendously exciting year for towerIQ, we have a number of large achievements around the corner. In particular we’ll be converting our pilot customers into enterprise customers in the beginning of Q1; this comes at the heels of launching our first 10 micro-services in January. Our incredible engineering team has worked hard in ’18 and plans to nearly triple in size and productivity over the next twelve months.
The new year also represents a pivotal time for the commercial insurance market. For the first time we are seeing large incumbents hiring Chief Digital Officers from other industries. A number of large brokers saw internal projects fail in ’18 and will now be looking to buy additional solutions in ’19. External pressures continue to drive brokerages to become more operationally efficient, we expect this will expedite our pipeline and adoption exponentially as the new year unfolds.
–Adam Demos, towerIQ CEO
FRST Look at 2019
FRST enters an exciting phase with the new calendar year; we will be product-in-market around the time our Series A round of financing is set to occur. Many of our customers, investors, and partners are generally oriented toward active trading (rather than being fundamentally long BTC, for instance) and turbulence in the markets always brings with it excited volumes and new arbitrage opportunities – we strongly believe that rough seas create interest in these markets and also interest in tools that can be used to increase the signal-to-noise ratio on a busy day. Volatility in crypto markets is not new and it is not going away any time soon.
We believe identities – and, specifically, the ability to personify addresses and locations and traffic patterns on the network – will be the big change in blockchain in 2019 and that FRST’s technologies are at the center of this revolution.
Blockchain networks are quickly transforming from anonymous, trustless bazaars to reputation-centric, known-actor markets. What began as an environment where KYC and AML, regulator-driven activities were seen as an inconvenience (that were frankly often performed at the de minimis end of the investigatory spectrum) will soon become a place where being identifiable is an asset rather than a liability
Vestigo portfolio company CEO Karl Muth was recently featured on IBM’s blockchain blog. At Vestigo, we are lucky enough to have access to his thinking quite frequently, it is our pleasure to share his perspective with our readers.
Between our team’s obsession with data and industry backgrounds, there are few areas we monitor less closely than digital identity. We are excited by the potential synergies of blockchain technologies and AI in this space. Now if only we could find a FinTech use-case for 3D printing…
Human progress is defined by the desire to take risk — whether that’s getting married, buying a home, having kids, getting on a plane, taking a new job, even moving to earthquake country (where this talk originally took place, in Los Angeles, as part of the a16z Summit 2018).
2018 has been a breakout year for FinTech. While we expect to remain busy through the end of the year, we are already thinking about where we will hunt for the next big FinTech startup in 2019.
Regulatory Evolution: Opportunities for Innovation in FinTech
There is much to do to keep America at the front and center of innovation. This month we focus on our thoughts on the shifting regulatory landscape and the corresponding opportunities for FinTech startups. The key need is to have ways to allow startups and incumbents to test their ideas. Some have suggested a “sandbox” that allows for experimentation by the various regulators for small scale tests. Arizona is the first US state to create a regulatory FinTech “sandbox,” joining countries such as Australia, Singapore and the UAE.
Another approach is to put into place lower cost regulatory structures like inexpensive bank charters which has been done in the UK. Singapore has lead the way for making it safe to innovate and get it right but be okay if you get it wrong. Switzerland has focused on digital assets and creating an easier way to let that industry grow.
We need our regulators, starting with the SEC, to pave a way for use of the new technologies and customer demands to practice, dare we say play? This needs to be supported by our banking regulators as well. They do so informally but need to create clear guidelines to avoid harm to consumers but allow for expansion of ways to serve them.
—Dave & Mark
Envision Interview with Matt Beecher
Matt Beecher from Vault (formerly Student Loan Genius) joins us to talk about how Vault is combatting student debt burdens and the regulatory tailwinds behind the company.
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…
—Frazer
Long Game
On October 5, 2018, VVF1 invested in a convertible note for Long Game Savings Inc. Long Game is a prize-linked / goals-based personal finance app that allows users to play games to win cash prizes and rewards for good financial actions. The Company is not pursuing a financial literacy or financial education strategy, rather they are pursuing financial improvement through action.
To date, Long Game has acquired 200,000 users, of which 50,000 have activated savings accounts. The Company is highly focused on customer acquisition and engagement. As a result, Long Game has created an incredibly cost-effective customer acquisition strategy translating to a massive lifetime value (LTV) to customer acquisition cost (CAC) ratio.
Long Game was founded by Lindsey Holden and Ashby Monk Ph.D. Holden has been involved in startups since 2011 when she joined Formation8 (a digital-focused VC) as a founding associate. She started her first company, Innovative Auctions, in 2013 which she lead to a successful exit in 2015. Monk has held top research positions at Stanford since 2011 and has founded three startups prior to Long Game.
Long Game is the first investment sourced from Vestigo’s recently launched XPLR algorithm. Our co-investors include Collaborative Fund, M Ventures and Thrive Capital. Mike Nugent, Managing Director, will serve as Vestigo Ventures’ Board Observer.
Money 2020 is Quite the Show
I attended the Vegas show of about 12,000 disrupters at Money2020. It was fantastic to see so many focused on the same goals of improvement of our financial system. The expo hall was massive and the meetings were well attended. The only disappointment was T-Pain who gave a less than exciting show the second night. How could he not perform “Hey Bartender”?
We used it to reconnect with fellow venture capitalists, discover new startups and meet potential LP’s for Fund 2. It was excellent for networking.
Two of our companies presented to packed audiences. I was impressed with their performance and intensity. One is Long Game which we announce in this issue of our newsletter. We found them in XPLR, which is our new way of leveraging Cogo Labs data to find early stage FinTechs, and had invested by the time we got to Vegas. Since they do gamification, it was a great fit to be there
We would say it’s a great event to attend to network on all things FinTech.
—Mark
FINRA Innovates
Not a headline you might expect about the US regulator for brokerage firms. They put on an impressive gathering of thought leaders in FinTech as well as other regulators. Mark is on the committee for FINRA along with a variety of startups in FinTech and consultants on the topic of innovation. It makes for a great discussion.
The host presented several thoughtful topics to draw out the participants on a variety of topics. This setting allowed for lots of give and take on digital assets, tech company plans to enter financial services, data protection and ways to expand innovation.
The most interesting talking points came from an ongoing FINRA study on digital assets like cryptos and ICOs. Of the more than 2,600 crypto firms surveyed by FINRA, only a tiny percentage have reported that they are distributing to accredited investors ICOs in a Regulation D format. Feels like an early wave in the use of this new alternative asset.
We will continue to support FINRA in their efforts to learn about how the world is changing. We encourage them to form an office of innovation and to create ways to allow for a “sandbox” approach to helping retail investors as well as markets make progress.
—The Vestigo Team
Vestigo’s favorite tax SaaS received a glowing write-up on BitcoinExchangeGuide. If you actively traded crypto last year, you’ll already know that you need this.
Vault COO Romy Parzick joined thought leaders to discuss issues and solutions to the consumer debt crisis at the Aspen Institute’s event “Lifting the Weight: Solving the Consumer Debt Crisis.”
Micronotes CEO Devon Kinkead was a keynote speaker at the Raddon Conference in Chicago on Tuesday. His talk focused on communicating what AI and ML is and how it can be applied for maximum competitive advantage in partnership with people.
Yogi Berra understood that we tend to “make too many wrong mistakes.” A system that empowers regulators and entrepreneurs to make micro-scale mistakes would catalyze large-scale benefits for everyone.
We were pleased to see that FINRA is delving into the world of FinTech. At Vestigo, we view the change coming to this industry as a unique opportunity; regulatory clarity is a welcome development.
We have refined our algorithms for sourcing FinTech companies and are now getting five or more startups monthly to investigate. We will be announcing our first investment discovered by XPLR soon!
Thanks to the hard work of Frazer Anderson, our associate, and Farrah Nekui, our summer PhD candidate intern, we have deeper insights from our Cogo Labs data on consumer activity on the web. In addition to finding companies, we are monitoring in real-time how consumers are becoming educated and businesses are working to solve the financial needs of individuals and other enterprises.
We are making real progress deploying capital into our portfolio companies. We have now called 40% of the fund. Word appears to have gotten out, and we have enjoyed an increase in the number of referrals we are receiving from other name-brand VCs to join them in their investments, or take on an early-stage company to nurture to its A round. These are high-quality deals with serial, successful entrepreneurs at the helm. Our reputation in data science and our operating experience is resonating with the startup community. Ian Sheridan and Mike Nugent continue their excellent work digging into these opportunities.
—Mark & Dave
Envision Interview with Ian Sheridan
Customer value chain insights from Managing Director Ian Sheridan
A FinTech View for the Value Chain
We are often asked what will allow an incumbent to succeed in these fast-paced times. We need look no further than the value chain. What distinguishes your company from any other in financial services?
Certainly you have an advantage with your brand and company culture, assuming it is well thought of by consumers and employees. This is not enough now that the consumer is demanding better value and a better experience especially with technology. She has learned that life can be easy when buying a book from Amazon or getting a ride from Lyft. Why aren’t financial services the same?
This is where many of our portfolio companies come into play in the value chain. They can bring two key attributes to incumbents: lower costs and improved customer experience.
They do this with creative engineering that leverages advancements in AI, Big Data, IoT and blockchain technologies. They bring scale oddly enough by being focused and heavy users of automated, multi-tenant solutions. We believe these two attributes are key to changing the customer value chain in our industry. We are finding and funding those startups that can make this new chain a reality.
—Ian & Mike
We are pleased to welcome FRST (and their puppy! designed by Simon Oxley whose portfolio includes logos for Twitter and GitHub) to Fund 1. Vestigo was co-lead on a $3.5 million seed round with CMT Digital. FRST is an enterprise-grade, trading floor-ready technology suite that enables professional traders to perceive, categorize and act upon transactions involving digital assets. The company’s technology rapidly identifies digital currency token trades before they are moved from a wallet to an external party or exchange, providing important insights for firms trading cryptocurrencies.
The infrastructure necessary to ensure access to trusted, transparent and actionable information is the void in the crypto market that FRST is successfully bridging. They have a clear customer focus starting with high performance trading floors. They are in a beta rollout with the goal of coming to market in a few months.
Founded by Patrick Gorrell and Jonas Frost who are both serial entrepreneurs, they brought on Karl Muth as CEO. Karl founded Haystack and has extensive experience in financial services from American Family Insurance, Starwood and Corus Bankshares.
Karl is also a University of Chicago JD and MBA as well a PhD from the London School of Economics. Gorrell’s technology experience includes development roles at eekoh, Wildlife and Speakr. Frost co-founded Playahead AB which was the first viral social-media platform in Scandinavia.
We believe the tools needed to successfully trade these new asset types will be in demand as the market normalizes over the next several years. Recent announcements by Fidelity and Goldman Sachs demonstrate the ever growing need for infrastructure.
New look, same genius! We are pleased to share the story of Vault’s successful rebranding and are confident that the team will continue to aid their customers in tackling the suffocating problem of student loan debt.
Vestmark recently announced the acquisition of Adhesion Wealth Advisor Solutions. Adhesion is a complementary portfolio and practice management SaaS for RIAs. The acquisition will only broaden Vestmark’s robust portfolio of customer solutions.
Netcapital has recently expanded its addressable market with the landmark offering of Braidy Industries. Netcapital has historically focused on empowering early-stage entrepreneurs. With Braidy looking to build a $1.6B aluminum rolling mill in Kentucky, the team at Netcapital has demonstrated that they can delight large-scale enterprises as well.
Some people think VCs sit around making big decisions all day. At Vestigo, we prefer to spend our time culling our data for signal and insights, but do occasionally indulge a FinTech fantasy or two…
In this month’s interview, Vestigo Principal Ian Sheridan articulated how we think about the customer value chain as investors. One of Vestigo’s cornerstones is approaching high level concepts from as many perspectives as possible. This often involves putting on our well-worn corporate strategy “hats.”
We are looking forward to Money2020 this year in Las Vegas. Maybe not the spot we would pick but what a great gathering of many FinTech influencers.
We appreciated the great turnout for our first post fund closing LP’s meeting. With 70 in the audience, we got great feedback and good connections made between our portfolio companies and our investors. Thanks to Nutter, our law firm, for providing the space for our meetings.
What a great surprise! We appreciate the recognition of NASDAQ on our fund closing on their Times Square billboard.
We have been studying blockchain and crypto/digital assets in depth. We see so many talented people coming into the space that it makes us hopeful for breakthroughs in applications using these tools. We are looking into ways to monetize our learning.
—Dave & Mark
Our portfolio company CEO’s did an amazing job explaining their company’s advantage to our LP’s in two panels for the event. Their dedication to their mission and their absolute belief in the market opportunities they are seeing is infectious. It is one reason why I was so excited to establish Vestigo Ventures. We appreciate all they did to show what great leader’s they are for their company. We are privileged to provide capital and our network to them.
Dave and I opened with an overview of what we have learned about deal flow, teams, and new technologies. We discussed how important it is for our Vestigo team to evaluate and find the best ideas to fund. We are seeing about eight deals a week from our network plus an additional five a month from our Cogo Labs data.
We discussed how the leadership of the start-up interacts. What culture are they trying to build? Are they so connected that they even know their co-leaders dog’s name? That deep connection helps teams in times of stress keep their focus as well as belief in each other.
Finally, we covered new technologies that we are seeing in action. There are smart applications of AI. There are the beginnings of applications/protocols in blockchain that are interesting. These are not quite there yet but emerging. The belief that digital assets will come to define an alternative asset class is starting to take hold. Hedge funds are trading actively additionally many institutions are investigating the space.
Ian and Mike did a great job discussing deal flow, funding levels, and valuation. We are balancing the portfolio among our four core themes: markets, operations, worksite and wealth management.
They also unveiled XPLR. This is our proprietary algorithm to find FinTech companies that are going viral. We can investigate them further and potentially take a stake in them.. This is thanks to the work of Frazer and Farrah.
We appreciate our Limited Partner’s belief in our early-stage focus and in FinTech. We are working hard to find and fund the best companies to help bring change to financial services.
-Mark
ZenLedger, the No. 1 tax software for cryptocurrency investors and their accountants, is now part of the Vestigo portfolio. We lead a $1.5 million round with Castle Island Ventures as a co-investor.
ZenLedger is lead by Pat Larsen as its CEO. Pat is a US Air Force Academy graduate and former Navy helicopter mission commander. More recently, he was an Amazon business manager with a $100 million p&l.
The co-founder of the firm and CTO is Bryan Starbuck. He is a serial entrepreneur and CTO with two of his startups acquired. He is also an early crypto investor.
They are joined by Drew Nordstrom, President, and Saqib Rasool who is the CRO. Drew has many years of startup investing experience while Saqib brings his business development skills from Microsoft.
They see an opportunity to provide CPA’s and crypto-asset investors with a smart way to report their gains and losses to the IRS. It is clear that these are taxable events that need to be reported.
They are seeing early traction from their target audience. They will push hard to partner with exchanges to provide their services to their customer base.
Check out a recent blog by Pat Larsen here.
The number of events tripled this year for the second FinTech week in town. Mark was on a panel discussing the DNA of Boston’s FinTech scene. They covered ways that startups can be successful. There was a good review of how start-ups are helping incumbents innovate. Jim Urquhart of Bowdoin Group convened the panel to kick off the week at the DCU FinTech Innovation Center.
Check out the panel here.
Both of us led events later in the week. Two of them were:
Coffee with Venture firms and FinTech Professionals
This was a sold out session. Ian led two separate groups to share perspectives and answer questions from entrepreneurs and financial services leaders.
Insurance technology:
This was an experienced panel including: Mike Kryza- Vice President, Business Development at the Guardian Life Insurance Company of America, Jim Gow- Vice President, Head of Innovation, at MAPFRE Insurance, Sam Das, Principal, CMFG Ventures, LLC, CUNA Mutual Insurance, and Dan Hurwitz- CRO, at TowerIQ. The discussion was around four areas: Greatest areas of opportunity, Major trends today, Internal innovation Vs. external opportunities, Perceptions vs. the reality of the insurance industry.
Vestigo partnered with WPI to sponsor Universities and Innovation Life Cycles. The panel included both local university leaders as well as entrepreneurs who founded their companies while in school with two companies tackling the $1.5 trillion student loan problem.
FinTech week keeps us in front of the growing Boston startup community and helps us build relationships globally.
-Mike & Ian
Oracle Pushes FinTech in NYC and BostonIt was a productive week with Mark able to co-MC an event with Oracle that brought together over a dozen leaders to discuss their views for startups and incumbents. This is part of Oracle’s push into this sector. They are focusing on bringing a family of FinTech startups to the market in partnership with their cloud services customers. We are working to gain access for some of our portfolio companies.
SS&C’s Black Diamond, which is a key player in the advisor technology business, has integrated the Taxficient Score into their wealth management platform.
We received a great deal of coverage on the closing of Fund I. This piece from RIABiz looks at our thesis for investing as well as the companies we have in our portfolio.
We are excited that we have closed Fund I. It is comprised of corporate partners (51 percent), family offices (28 percent) that recognize the power of fintech and want a stake in companies that are transforming financial services, as well as individual investors (21 percent) who represent a “who’s who” of the industry. It has been a great lesson in helping investors understand the opportunity in FinTech while being clear how unique we are with our operators experience and the data assets of Cogo Labs.
The fund is at $58.9 million in assets vs its target of $50 million to focus on early stage startups. We are excited to back entrepreneurs who are out to massively improve financial services. It has been very rewarding to hear their stories and share their excitement for change.
Thank you to Ian and Mike for such hard work to get to this point. Our partnership is founded on bringing together different points of view from our varied backgrounds to make the best decision to drive value for limited partners.
—Dave & Mark
Envision Interview with Farrah Nekui
What a summer our PhD candidate intern is having at Vestigo. Farrah discusses her work at the firm as well as her thesis.
Last year we celebrated summer by providing our nerd approved book list which many told us they enjoyed. Here is this year’s list of suggested reading.
Checklist Manifestoby Atu Gawande- for all our focus on erudite strategy, it’s easy to overlook blocking and tackling…Checklist Manifesto is a simple and effective as it gets. It is easy to see why Frazer enjoys this one given his organization skills.
Mira Wilczek’s dad Frank wrote a book for the masses: A Beautiful Question– very fun read that makes you feel good about fundamental science again.
Sean Hanlon of Hanlon Investment Management highly recommended the somewhat hard to find classic the E-myth by Michael E. Gerber which gets off to a slow start but has a great second half. It makes a point that is suddenly timely again which is that great companies often have only one innovation followed by decades of “franchising” and scaling the idea. If you read it or skim it and think about Booking.com (now worth $100B) while you do it, you will be rewarded for your diligence.
From Here to Securityby Robert L. Reynolds who runs Putnam Investments put out this book to provide a blueprint on achieving retirement security in America. This one caught Ian’s eye given his focus on workplace savings. Maybe not a beach book but still thought provoking.
For another take on the financial system Mike suggests Red Notice by Bill Browder. It tells the story of Russia’s markets and its brutal realities. Mike visited Russia for the World Cup so found this page turner a good way to better understand the culture.
“If you want a new idea, read an old book” is precisely what Frazer Anderson has done this summer. He is thoroughly enjoying Livy’s Ab Urbe Condita Libri(History of Rome). The great Roman historian’s commentary on the social and military strife faced by the early Roman Republic is perhaps more relevant in today’s political climate.
Mark enjoyed Niall Ferguson’s The Square and the Towerwhich discusses the struggle of networks vs hierarchies. He found the comparison’s of today’s technology revolution to the period just after the printing press was invented quite enlightening but a bit frightening.
Dave’s friend Peter Diamandis of xprize fame wrote Abundance along with Steven Kotler. It provides a roadmap that is still relevant several years later on finding solutions to the world’s most pressing issues.
Enjoy!
Some firms may head for a whale watch for their summer outing but the Vestigo team spent time with amazing thought leaders. John Werner set up meetings with Alex “Sandy” Pentland and Alex Wissner Gross to open our thinking about blockchain, digital assets and technology changes. Mike was unable to join us due to a family commitment but we will make it up to him in the Fall.
We did find time for a fun lunch at Lil Donkey. Perfect spot to discuss what we learned since they are a fusion restaurant bringing the best together.
Mike Nugent lead our investment in Mirador. They are passionate about helping small businesses grow through access to reasonably-priced business loans. Mirador’s leading small business, digital lending platform powers a new relationship between small businesses and lenders. It provides a smart, fast and secure cloud-based experience that turns burdensome paperwork into a ‘wow’ experience, enabling banks to make a decision on loans in 24 hours or less. The Mirador Network is a digital lending marketplace connecting small business organizations with lending options. Mirador works with leading financial institutions and has processed more than $1.35 billion in small business loan applications. These come via their customer base includes Zions Bank, Hanmi Bank, Tompkins Financial and First Foundation.
Mirador has a senior team of executives with significant small business technology experience in product, sales and software development. Mirador’s key team members are as follows:
Trevor Dryer, CEO & Co-Founder
Both his professional and education background have set him up for success as a first-time founder. He began his career at Bain & Company before going to law school at Stanford. After two years as an attorney at Munger, Tolles & Olson, he went on to become the Head of Product Management Mobile Payments & Point-of-Sale at Intuit, a fintech software company.
William Beaver, PhD, CTO & Co-Founder
Beaver developed a deep expertise in AI & ML prior to co-founding Mirador. In 2011, he completed a PhD in Computer Science at UC San Diego. After completing his PhD, he held senior data scientist positions at Trapit and FlightStats.
Carol Glover, Chief Revenue Officer
She became the CRO of Mirador in January of 2018. Carol brings an impressive leadership experience in business development for fintech companies. Previous roles include SVP Strategic Partners and Business Development for Bill.com, Director of Business Development at Intuit and VP Business Development at PayCycle.
Mike Camacho, Head of Product
Mike joined Mirador as Head of Product in January of 2015. Prior to joining the firm, his longest stint was six years as Senior Product Designer at Jive Software. Mike holds a BS in Product Design and Computer Science from Stanford University.
We are proud to partner with Mirador to help small businesses grow with their banks/credit unions.
While not a typical summer read, it is a great guide to what is on the minds of our Washington DC regulators for startups in FinTech. The report encourages experimentation and innovation for the financial services industry.
Culture and teams are the most important ingredients for success in companies. This is our conviction at Vestigo which makes us work hard to think about how we define our culture and the behaviors we require to ensure that we are what we want to be as a firm.
It might have been easy to be relaxed about issues like culture when it was Ian and Dave and Mark starting the firm. Because we understand its value, we were not relaxed at all. We set down principals on how we wanted to behave and what we valued. We understood our mission quite easily-maximize returns for our LP’s. Our early thinking was much more about how we would make this mission work. What culture would we create to make this mission successful?
Our team has doubled in size since then. We added our fourth partner Mike Nugent almost two years ago and more recently our new analyst Frazer Anderson and summer associate Farrah Nekui, PhD candidate. Each hire has reaffirmed our commitment to the culture we set out to build.
We focus on a few key elements of our culture: respect for entrepreneurs; speed of execution; communication with substantive feedback, and; finally, fact based decision making. We value diversity of the team’s point of view and make sure all are heard in the process. If we remain focused on living these values in our culture, then we will reach our mission of maximizing returns for our LP’s.
—Dave & Mark
Envision Interview with Frazer Anderson
Frazer Anderson recently joined Vestigo as an analyst. He discusses his background and early experience at the firm.
We asked a question of our advisory board related to financial services incumbent innovation. What is your point of view on incumbents in financial services and how they can innovate? We got some wonderful insight from their answers.
Ray Wang-
Innovation is about where you can automate the greatest dissatisfaction that earns you the permission to take on the other parts of the business.
Darlene DeRemer-
Incumbents need to innovate or die. They need to cannibalize their own business to be disruptive.
Jarrett Lilien-
Many incumbents suffer when they believe they have arrived at their end state. There is never an end state, just the current state. I believe it is necessary to build and instill a culture of perpetual innovation and continuous improvement to avoid end state thinking.
Having an innovative culture means taking some risk, embracing change and allocating time and capital each year to new ideas. This should apply to outward facing ideas as well as inward ones. Incumbents should make use of their scale and consistently consider innovations in product, distribution and operations.
George Wilbanks-
Strong corporate cultures in successful companies can become a tremendous liability during periods of accelerating change. Make sure to push hard to develop and maintain a highly diverse culture. Diversity will promote different points of view on risks and opportunity, making it more likely that a realistic assessment of clients and services will lead to faster innovation or more intelligent strategic partnerships.
Pete Mattoon-
Many established financial services companies have long been flexible and dynamically react to the changing products and client/customer needs. Capital markets evolution and regulatory changes have forced that culture. For example – mortgage backed securities were created out of thin air in the early 80s – they grew because they served a great purpose in enhancing the velocity of home loan capital. But senior management at the big Wall Street firms had to be taught what they are and then decide how much capital to allocate but they did and created new businesses for their firms.
Another example -The notion that Robos are going to knock over the incumbents is ludicrous. Vanguard, Schwab and Fidelity easily reacted because they had most of it already in place – it was largely repositioning.
So the “incumbents” are smart, dynamic and have near infinite capital.
Look at them as partners in many cases, and the ultimate exit — if they haven’t copied your products already. There are exceptions of course.
Andy Putterman-
I think many of the incumbents do not have the mindset and ability to make the radical shifts needed in the next few years. This does not mean “business ends” but will have a profound effect on the ability to attract top talent and new clients. Many will need to acquire firms that don’t have the legacy issues, which includes pricing models, to slowly migrate to more innovative and adaptable technologies.
John Werner-
These are new times for incumbents, that have not been like the past. Experiment with all the emerging tech.
Tom Gavin-
Change happens slower than you think in the short run and faster than you think in the long run. Therefore, keep a steady pace of innovation going. That way you cannibalize your own cash cow with the “next flavor” rather than letting others do it to you.
Maliz Beams-
First, the days of any one company trying to do everything by itself are over.
An old way of thinking was that we had to control every aspect of every transaction and that no other company could do things better than we could. As technologies and businesses evolved, best performing companies have abandoned that perspective. Instead, they now actively seek out business partners whose capabilities can complement, or in certain cases, replace their own.
Building and sustaining “partnership capability” within an operating model takes a very specific set of core competencies. It’s a new skill set. To innovate as quickly as is needed, import that expertise into your organization. Build a sustainable, internal competency around external partnerships.
Second, lead from the top—you can’t delegate innovation. It takes time, but be acutely aware of disruptors in your market and in adjacent markets. Go to Silicon Valley, go to Kendall Square. It’s happening with or without you. Immerse yourself. Prepare, anticipate, adapt.
We completed our seventh investment on July 2nd. We invested $750K in Tower IQ, an InsurTech platform that is designed to be a broker-first solution for streamlining workflows while capturing the market’s most valuable data. Our co-investors include Hyperplane Venture Capital, Clocktower Technology Ventures and a number of angel investors with industry expertise and value-added networks.
We are impressed with the team leading the company. Adam Demos is the CEO with a background in FinTech from his stent at EquaMetrics and in a competitive intelligence company named App Annie where he was in a business development role. Dan Hurwitz is COO and a co-founder with Adam. He was an associate at Hyperplane Venture Capital where he focused on FinTech startups. Michail Medvinsky just joined the firm as CTO and given co-founder status given his great technology delivery track record. He was recently CTO at Plastiq and was at Fidelity prior to that with a large staff of engineers doing core infrastructure.
Artificial intelligence is reshaping how we work, interact and share information and content. AI can be a threat and opportunity for incumbents. Momentum will continue to build for AI.
We have both benefited from many fine mentors over the years as I am sure all of you have done. This issue we decided to ask our amazing advisory board members for their advice and counsel for startup CEO’s and for executives in established financial services companies. Fascinating answers from them for you to study.
We have added the best advice we have gotten-
Dave-Mentoring pays dividends over and over again.
As a result Dave spends a great deal of time mentoring across the Cogo Labs team and the portfolio companies.
Mark-Take two steps back to communicate and ensure alignment to be able to move very rapidly once an agreed course of action is shared.
Turned out the two steps back was not a set back but rather a chance to get others inspired and excited by the opportunity at hand.
Feel free to share your insights with us by sending along a note with your best advice received to mcasady@vestigoventures.com.
—Dave & Mark
Envision Interview with Mike Nugent
Mike, Managing Director at Vestigo, talked to us about data and how he uses it.
Welcome Frazer and Farrah to the Vestigo Team
We are pleased to have Frazer Anderson join us as a full time analyst at Vestigo. He brings an extensive background in evaluation of managers and use of technology for our team. Farrah Nekui, who is a PhD candidate at Northeastern University, will be with us this summer as an intern. She has an extensive background in economics and pricing as well as being quite nimble with SQL to assist us in the use of the Cogo Labs data.
I asked our fantastic advisory board (take a look at the team) to provide their best management advice. Here is some wisdom laid down for all of us.
Think bigger and then be humble. -Ray Wang
Never be late for a meeting. -from Ducan McFarland to our advisor Darlene DeRemer
Surround yourself with a team of smart, confident people who know more than you do ..and are not afraid to share their views, even if they are different than yours.
Second, outlaw views on why things can’t be done until what can be done is considered. -Jarrett Lilien
Stay lean and agile and always be really careful to keep your self awareness index high. -George Wilbanks
Self esteem and self confidence doesn’t lead to accomplishments and success. Accomplishments and success lead to self esteem and confidence. -Tom Streiff
Your entire business must be driven by your clients’ needs…
It takes many years to build a reputation/brand and takes three seconds to ruin it.
Teams beat individuals.
Invest for the long term. -Pete Mattoon
Never promote someone to a managerial position, no matter how technically qualified, that doesn’t embrace the firm culture. -from the CEO of Intuit to our advisor Andy Putterman
Management can be hard. Nobody is the whole package. Understand your blindspots. Don’t only fill your gaps, do what you do well, really well, and learn how to do it better. -John Werner
See the world as it is and not as you wish it were. -Tom Gavin
Success leaves clues. Patterns of success and failure repeat and are predictable.
Define failure very carefully when leading an organization-understand what failure to avoid as a prerequisite to success. Advice from military history-there are only three types of failure. Failure to learn, adapt or to anticipate. -Maliz Beams
Now let’s move to advice for someone leading a startup organization. Their thoughts-
From Ray Wang-Get the economic model right before you build the offering. Make sure you understand your unit cost pricing model so you know where to bundle and where to decomponentize the cost structure.
From Darlene DeRemer-Strategy without execution is hallucination.
From Jarrett Lilien-First, make sure they have enough runway. For Jarrett this is 18-24 months of capital. Second, ensure they have strategic alignment with their major stakeholders.
From George Wilbanks-Be realistic about the time, budget and career risks you are taking. As setbacks occur along the way, be nimble and creative in seeking strategic partners to help you reach your goals.
From Tom Streiff-Stay flexible. You may have what you think is the perfect idea, with a perfect execution plan. Listen to the people around you. What you think is “perfect” may need some adjustments. Stay true to your values but be flexible and open to “more perfect” ideas.
From Pete Mattoon-You will need luck to make it but the good news is that you can make your own luck with the right team, extremely hard work, and actually having a product/service that creates value for your target market. Know your purpose. Know your target market.
From Andy Putterman-Surround yourself with an advisory board to provide different perspectives, challenge assumptions and keeps you focused.
From John Werner-You are building a company and also a team at the same time. Focus. Be passionate!
From Tom Gavin-There is a fine line between confidence and hubris-believe in your vision and your plan but be open to making adjustments along the way. The flexible will always defeat the rigid!
From Maliz Beams-Keep your investors, partners and employees (and yourself) looking forward with surgically precise focus and discipline on the “differentiated” value you deliver to the market. Very quickly find a way to fact base your differentiation. (Harder than it sounds) then ensure clinical objectivity and discipline around unbiased measurement. Quantify it, measure it, base the team’s payback on that differentiation.
With a number of platforms that have been launched in the crowdsourced funding space, it’s great to see Netcapital get good coverage of their efforts. They show up well for a company that has been at their work for a relatively short time. Check out this article to learn more by clicking on their name.
New tools including LifeYield’s suite will help Morgan Stanley advisors be able to help clients solve complex planning problems. They see it as a way to gain part of the $2 trillion in assets their clients hold outside the firm while serving their clients.
Micronotes, Inc., an AI-enabled marketing automation firm, took on the issue of how to think about regulation of FinTech capabilities including AI. Vestigo GP Mark Casady really enjoyed the conversation and questions.
vestigoadmin 
Blockchain networks are quickly transforming from anonymous, trustless bazaars to reputation-centric, known-actor markets. What began as an environment where KYC and AML, regulator-driven activities were seen as an inconvenience (that were frankly often performed at the de minimis end of the investigatory spectrum) will soon become a place where being identifiable is an asset rather than a liability
We have been studying blockchain and crypto/digital assets in depth. We see so many talented people coming into the space that it makes us hopeful for breakthroughs in applications using these tools. We are looking into ways to monetize our learning.
—Dave & Mark
We appreciate our Limited Partner’s belief in our early-stage focus and in FinTech. We are working hard to find and fund the best companies to help bring change to financial services.
-Mark
ZenLedger, the No. 1 tax software for cryptocurrency investors and their accountants, is now part of the Vestigo portfolio. We lead a $1.5 million round with Castle Island Ventures as a co-investor.
ZenLedger is lead by Pat Larsen as its CEO. Pat is a US Air Force Academy graduate and former Navy helicopter mission commander. More recently, he was an Amazon business manager with a $100 million p&l.
The co-founder of the firm and CTO is Bryan Starbuck. He is a serial entrepreneur and CTO with two of his startups acquired. He is also an early crypto investor.
They are joined by Drew Nordstrom, President, and Saqib Rasool who is the CRO. Drew has many years of startup investing experience while Saqib brings his business development skills from Microsoft.
They see an opportunity to provide CPA’s and crypto-asset investors with a smart way to report their gains and losses to the IRS. It is clear that these are taxable events that need to be reported.
They are seeing early traction from their target audience. They will push hard to partner with exchanges to provide their services to their customer base.
Vestigo partnered with WPI to sponsor Universities and Innovation Life Cycles. The panel included both local university leaders as well as entrepreneurs who founded their companies while in school with two companies tackling the $1.5 trillion student loan problem.
FinTech week keeps us in front of the growing Boston startup community and helps us build relationships globally.
SS&C’s Black Diamond, which is a key player in the advisor technology business, has integrated the Taxficient Score into their wealth management platform.
We did find time for a fun lunch at Lil Donkey. Perfect spot to discuss what we learned since they are a fusion restaurant bringing the best together.
Mirador has a senior team of executives with significant small business technology experience in product, sales and software development. Mirador’s key team members are as follows:
Trevor Dryer, CEO & Co-Founder
Both his professional and education background have set him up for success as a first-time founder. He began his career at Bain & Company before going to law school at Stanford. After two years as an attorney at Munger, Tolles & Olson, he went on to become the Head of Product Management Mobile Payments & Point-of-Sale at Intuit, a fintech software company.
William Beaver, PhD, CTO & Co-Founder
Beaver developed a deep expertise in AI & ML prior to co-founding Mirador. In 2011, he completed a PhD in Computer Science at UC San Diego. After completing his PhD, he held senior data scientist positions at Trapit and FlightStats.
Carol Glover, Chief Revenue Officer
She became the CRO of Mirador in January of 2018. Carol brings an impressive leadership experience in business development for fintech companies. Previous roles include SVP Strategic Partners and Business Development for 
It might have been easy to be relaxed about issues like culture when it was Ian and Dave and Mark starting the firm. Because we understand its value, we were not relaxed at all. We set down principals on how we wanted to behave and what we valued. We understood our mission quite easily-maximize returns for our LP’s. Our early thinking was much more about how we would make this mission work. What culture would we create to make this mission successful?
Our team has doubled in size since then. We added our fourth partner Mike Nugent almost two years ago and more recently our new analyst Frazer Anderson and summer associate Farrah Nekui, PhD candidate. Each hire has reaffirmed our commitment to the culture we set out to build.
We focus on a few key elements of our culture: respect for entrepreneurs; speed of execution; communication with substantive feedback, and; finally, fact based decision making. We value diversity of the team’s point of view and make sure all are heard in the process. If we remain focused on living these values in our culture, then we will reach our mission of maximizing returns for our LP’s.
We are impressed with the team leading the company. Adam Demos is the CEO with a background in FinTech from his stent at EquaMetrics and in a competitive intelligence company named App Annie where he was in a business development role. Dan Hurwitz is COO and a co-founder with Adam. He was an associate at Hyperplane Venture Capital where he focused on FinTech startups. Michail Medvinsky just joined the firm as CTO and given co-founder status given his great technology delivery track record. He was recently CTO at Plastiq and was at Fidelity prior to that with a large staff of engineers doing core infrastructure.
