Sheel Mohnot, co-founder and general partner of Better Tomorrow Ventures (BTV), has one simple answer for those who claim that Fintech's investment has lost some of its appeal.
“The financial world is huge. Approximately 20% of global GDP is financial services, and yet not digital,” he told TechCrunch.
Many financial transactions are still being processed manually, and Better Tomorrow Ventures, led by Mohnot (a former general partner at 500 startups) and co-founder of Nerdwallet, Jake Gibson, is looking to help change that.
“The opportunities for digitalization at scale are still ahead of us,” Monot told TechCrunch. The company's limited partner appears to have agreed.
Better Tomorrow Ventures raised its third $140 million fund, roughly coinciding with the $150 million two-second fund announced in early 2022 towards the end of the Zirp (zero rate policy) boom.
“This time we were actually planning to make the fund smaller,” Monot said. “In 2021, things went very overboard. Every company we invested in quickly raised the subsequent rounds at crazy prices. That was probably a bad thing,” Monot said.
Now that Fintech enthusiasm has become Tamer, BTV doesn't need that much capital to stay involved in the best startups, he explained.
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The company also did not utilize the $75 million opportunity fund raised alongside its second fund in 2022, but its capital may soon be useful at some point. Many of the recent planned IPOs are in the fintech sector, including Chime, Klarna, Navan and Wealthfront, so we hope late investors will be more excited about this category.
In the early stages, Fintech Investing was certainly featured last year. BTV, for example, sees a huge opportunity to disrupt accounting.
“There's a huge shortage of accountants. All accountants have declined business, and it's the perfect application for AI,” Mohnot believes.
The company has already supported three accounting startups. Base recently raised a $34 million Series A led by Khosla Ventures. Layer, an embedded accounting platform for small and medium-sized businesses. Inscope is a startup that helps you automate the drafting of audited financial statements.
But it's more than just accounting. Monott strongly believes in a wide range of AI applications within FinTech. “Financial services are very labor-intensive. There is underwriting, compliance, fraud detection and customer support,” he said. “AI can do that all at a low cost.”
Other notable companies in BTV's portfolio include Coast, a payment platform for fleets and truck drivers. Startups as units, banks as banks are worth $1.2 billion in the end. Relay is an online banking and cash management platform for small and medium-sized businesses. The startup as a unit, a bank, as a bank, was the last worth $1.2 billion.
For the third fund, the company plans to invest in 30-35 companies, with check sizes ranging from $500,000 to $3.5 million.