🔑 Key Takeaways
- Specializing in either Web 2.0 or Web 3.0 Fintech is crucial for success. Web 3.0 technology, networks, and user ownership offer exciting opportunities in decentralized consumer use cases, NFTs, digital art, media, and DeFi. Despite VC investment in crypto, global adoption is still low.
- Embedded finance is on the rise and provides better financial products than traditional credit, as seen with BNPL. Companies with a strong customer base have an advantage in embedding financial services, benefiting both retailers and consumers.
- Consumers can benefit from short-term BNPL loans with flexible underwriting, but traditional banking and investing options, such as Fidelity and Vanguard, still hold value. The next wave of investing platforms may prioritize community-building.
- Web 3.0 presents a promising opportunity for addressing gaps in Fintech experiences, with companies like Eco and BlockFi offering innovative solutions. Crypto adoption is on the rise, especially in gaming, and VCs can benefit from a focus on user needs and go-to-market strategies.
- BCV invests in five verticals, adopts a high-conviction bet strategy, and collaborates with entrepreneurs through its scout programme to add value to the industry.
- Memes are more than just funny pictures; they are a powerful tool that can shape consumer culture and influence decision-making. Influencers and meme marketers are in high demand, and the internet is evolving at an unprecedented pace, leading to significant changes in our personal information disclosure and the way we do business.
- The crypto movement is providing a way for people to monetize their online presence anonymously, despite regulatory limitations. The trend towards anonymity online is expected to continue, and San Francisco remains a hub of innovation and opportunity.
- Building strong relationships with founders and teams is essential for success in venture capital. In-person meetings are ideal, but Zoom and text conversations can also be valuable. Being an active and value-added investor requires investing in relationships, not just money. Spending time with smart people and continually building the flywheel of people and ideas is the primary strategy for developing larger investment theses and areas for potential investments.
📝 Podcast Summary
Web 2.0 vs. Web 3.0 in Fintech: Choosing the Right Path to Success
Fintech is becoming a pillar in venture capital and there are two camps of Fintech, Web 2.0 and Web 3.0. It is important to specialize in one or the other to be successful. Web 3.0 is specific on technology, networks, and users becoming owners, and presents exciting opportunities to unlock new products and companies. Decentralization and consumer use cases, such as on-ramps to crypto, are areas of interest. Despite $40 billion of VC money going into crypto, global adoption is still low, but use cases in NFTs, digital art and media, and DeFi present opportunities. Fintech is an exciting area for growth and innovation.
The Rise of Embedded Finance and the Dominance of Defensible Distribution.
Embedded finance, where financial services are incorporated into products, is becoming easier with the advancements in financial infrastructure and technology. This trend is driving the value towards defensible distribution, where companies that own a workflow or customer have an advantage in embedding financial services and generating profits from them. Buy-now-pay-later (BNPL) is a innovation and a better financial product than traditional credit cards because it is consumer-aligned and enables retailers to reach a new customer segment. BNPL also benefits retailers as it improves conversion and pulls forward purchases. While there may be concerns about increased spending, BNPL companies like Affirm aim to help people control their finances and provide visibility into their spending.
Pros and Cons of Consumer Finance Trends
Buy-now-pay-later loans are beneficial for consumers as they are short-term and more recession-efficient. Underwriting for BNPL loans varies depending on the financial product and usually does not require a person's employment information. Despite the rise of neobanks, core banking relationships with traditional banks like Chase or Bank of America are still hard to get away from. While investing in consumer investing platforms like Robin Hood or Wealthfront has become more popular, many people still stick to traditional advisors like Fidelity or Merrill-Lynch. The next version of investing platforms may focus on building a social community. Vanguard is an example of an investment platform that does not charge any fees.
Web 3.0 and Fintech Opportunities
Web 3.0 may be the best chance for porting over Bank of America accounts or Vanguard accounts by solving the gaps and challenges in Fintech experiences. Although there are still consumer questions that need to be solved in Web 3.0, companies like Eco and BlockFi are exciting in offering higher rewards and onramps for consumers. There are plenty of places where it makes sense to use crypto, with an obvious category being gaming. Fintech's deep interest arose from GoFundMe in a firm and the first Bitcoin influencer/founder of Xapo, Wences Casares, was the igniting factor for Christina's interest in money movement. Being a VC offers a platform where investors can spend all their time at zero-to-one phases, thinking through users and their needs, what's delightful and a go-to-market strategy.
Bain Capital Ventures' Strategy for Multi-Stage VC Investing
The transition from being an angel investor to a multi-stage VC investor can be a challenging shift. As a VC investor, one requires to adopt a different strategy of making big and high-conviction bets and forming key partnerships with entrepreneurs. Bain Capital Ventures (BCV), which manages a $1.3 billion fund investment, has a deep history of investing in Fintech and Commerce, which gives an added advantage for investors. Being vertical-focused, BCV invests in five domains, including Fintech, commerce, application software, infrastructure, and security. BCV follows a collaborative approach with eight partners that encourages an invigorating ecosystem for young investors. The firm's scout programme is a new move and an innovative approach of adding value to the industry.
The Rise of Meme Marketing and the Future of the Internet.
Memes are a powerful medium that taps into people's emotions, drives decision-making, and elicits excitement. Individuals and companies are trying to hire meme marketers to create authentic content that resonates with their consumers. Influencers like Lit, who have created a community of engaged followers on different social media channels, can provide a unique perspective on where the world is going. Venture capitalists are seeking out meme accounts and hiring them as scouts to gain access to their capital pool, deal flow, and pulse on consumer culture in the intersection of memes, finance, and startups. Turners Novak, Banana Capital, and Harry Stebbings are examples of pseudo-anonymous influencers who have leveraged their large distributions into a fund. The internet is changing rapidly, and in 10-15 years, people might be shocked by how much personal information they have disclosed online.
Anonymity online and the Rise of Crypto
The trend towards anonymity online is increasing, as people desire the freedom to express themselves without fear of repercussion. The rise of the crypto movement is playing a significant role in this trend, offering a way for people to monetize their online presence while remaining anonymous. However, there are limitations to anonymity when it comes to regulation, especially in the US, where companies must comply with KYC regulatory requirements. Despite these limitations, there is still a strong demand for anonymity online, and this trend is expected to continue. Furthermore, while some may view San Francisco as a city in decline, many still believe it to be a hub of innovation and opportunity, with deeply entrenched network effects that make it difficult to dislodge as a global tech center.
The importance of relationship building in venture capital
Building relationships is the key to success in venture capital. Although mediums have changed and evolved, the importance of relationship building hasn't, and it's still vital to get to know founders and teams on a deeper level before committing as an investor. In-person meetings are ideal, but Zoom and text conversations are also valid options. To be an active partner and value-added investor, relationship building is a must. VC products that only offer money and no additional support are also available in the market. Spending time with smart people and building the flywheel of people and ideas is the primary strategy to develop larger theses and areas for potential investments.