286. Embedded Finance, Community-based Fintech, the Demise of Legacy Institutions, and Driving Returns with a Diversity Investment Mandate (Amy Nauiokas)

286. Embedded Finance, Community-based Fintech, the Demise of Legacy Institutions, and Driving Returns with a Diversity Investment Mandate (Amy Nauiokas)


Amy Nauiokas of Anthemis Group joins Nick to discuss Embedded Finance, Community-based Fintech, the Demise of Legacy Institutions, and Driving Returns with a Diversity Investment Mandate. In this episode, we cover:

  • Tell us a bit about your background and your path to venture.
  • Anthemis. What is it? Tell us a bit about the thesis and what you guys do?
  • So where do you find yourself spending most of your time? 
  • Amy can you give us a quick primer on the difference between FinTech and tech fin?
  • What is your quick take on regulation? Are there still major obstacles that need to be overcome?
  • We’ve seen large tech in some ways abuse opportunity before in FinTech and in other areas, that I’d be curious to hear what your take is on sort of the established incumbent large legacy financial institutions. How do you see them adapt in order to capture value and attempt to maintain their position as well as direct access to customers?
  • Let’s talk more about embedded finance. How do you think that may affect wealth management, investing brokerage going forward?
  • Let’s talk a bit about banking as a service. Can you give us an overview of some of these banking as a service platforms and maybe an example of a non financial company? And, you know, maybe the initial offerings that they are incorporating to improve user experience for customers?
  • Is Anthemis looking at virtual assets?
  • What is Anthemis doing to promote diversity and underrepresentation in venture?
  • I suspect there’s also a belief that investing in underrepresented folks in women can outperform not doing so is that is that part of the thesis or not?
  • There’s been a lot of changes in dynamics going on in venture capital from Spats to huge players in the late rounds and non-VC and financial players entering. There’s also the mega-rounds that are now entering early-stage investing. I’d love your quick take on any of those sorts of phenomena that are occurring in venture capital.
  • What do you know, you need to get better at?
  • What’s the best way for listeners to connect with you and follow along with Anthemis?

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Transcribed with AI:

0:00
Amy Nauiokas joins us today from New York City. She is founder and CEO of Anthemis Group, the leading digital financial services investment firm. Investments include First Boulevard, Betterment Trov, Happy Money and Currencycloud among others. Amy is also chair at Archer Gray. And prior to Anthemis, she was co founder of Bubble Foundation, and also held leadership roles for Barclays and Cantor Fitzgerald. Amy, welcome to the show.

0:26
Thank you so much, Nick, for having me.

0:27
Of course, tell us a bit about your background and your path to venture.

0:32
My path to venture? Well, look, I mean, if I go back to kind of the post college version of me, I would say my path to venture was a little bit bizarre. And it probably took me a good 30, 35 years to realize that I was even on a path to venture when I started, I was living and working in Cameroon, Western Africa, at the US Peace Corps. And as part of a study abroad program that I had cultivated there with my undergraduate college, I got this really great opportunity to kind of work in the Peace Corps office as an intern, with a strategy in a kind of singular goal of helping the volunteers that were wanting to stay and finish their work after their two years was up, find how to fund those projects and how to justify kind of, you know, them staying in country. I didn’t know at the time that that was essentially creating opportunities for venture capital, right, it was sort of taking these projects and finding people who would back them and setting them off. But I don’t think I realized that probably until like a year ago. And so I left that moment of my life thinking at the time that I would go on a career trajectory that included a lot of economic development. And that was my background, that was my interest. But after leaving that, that opportunity, it just it was a clear indication to me that my personality, the red tape, the sort of all that kind of stuff didn’t feel like it was going to suit me. So I went into my college office and said, Get me a job on Wall Street, I want to learn skills, and I need to meet people that can help me change the world a different way. And after laughing about laughing a few minutes at that request, since I’ve never taken even one accounting class, they sort of, you know, let me go for it. And I think it was a really wonderful time in the early 90s. In some some conversations I’ve heard this is coming back, where people now are starting to open their minds at different types of backgrounds can be actually quite useful in similar homogenous environments, you know, core to everything I believe is that you do best when you bring different personalities together in a diverse community. And I got really lucky that the bank that hired me Bankers Trust, at the time was looking for people that weren’t traditional number crunchers or spreadsheet readers on the theory was we can teach them how to do that. We can’t teach them how to think. And, and so I snuck into the the the analyst training program at Bankers Trust, and that’s where my career started. And it wasn’t, that was sort of early 90s. And it was probably 1998 that I started to kind of play a role in what has now become known very emotionally as FinTech. But at the time, I was looking for ways to separate myself from the traditional baby banker pack by identifying projects that didn’t seem to get a lot of attention inside the banks. And I picked up a handful of really great opportunities to work on trading platforms and some of the businesses that were emerging in the late 90s during the first.com boom. And, and finding a way within the banks to kind of work that system. And that’s sort of how I got to FinTech.

3:46
So you founded Anthemis, 13 years ago, yes?

3:49
Yep.

3:49
And before that Bubble Foundation?

3:53
No bubble was sort of right around that. Anthemis was my first really proper entrepreneurial move. I was working in corporate world from Bankers Trust, I went on to Bear Stearns and I was recruited to go to Cantor Fitzgerald. And then I went to Barclays, did a couple roles at Barclays and then got to a place in my career where I met my partner, Sean Park. And we were really connecting and vibing on the idea that we seem to be the only two bizarre weirdos in the world that seemed to understand that the world was about to magnificently change at the hands of technology, particularly in financial services, and no one seemed to care, and no one seemed to even notice. And so kind of, you know, cut back to 2007, 2008, just before the financial meltdown. It felt to us like something was amiss. And that if we had any opportunity to make a path for ourselves, in a thesis that we held pretty collectively true that that that the digitization of financial services was going to mean big things that the best way to do that was to do it ourselves. And we were uniquely positioned sort of one foot in the traditional Wall Street city mentality. But also we had a really great set of network and connectivity to the tech community. And it was still at a time when those two worlds just never spoke. And so I think because we found ourselves a little odd in both worlds, we thought, you know what, why don’t we just make our space right here in the middle and see if there’s an opportunity there. And that’s how and why we started Anthemis and how I got into venture investing.

5:29
So this must have been before FinTech was even being used as a term.

5:34
Yeah, it was well before FinTech was being used, it was certainly before FinTech was as cool as it is. Now I had a I was shocked by dinner the other night in my house, and my two of my sons were debating the future of GameStop as a proper, you know, digital investment and and I just was sitting there listening to this conversation thinking, I don’t even know that they know that this is what I do. But boy, have we certainly come full circle with my dad on one hand talking about the new FinTech craze. And my boys, on the other hand, are talking about it, I think. Yeah, it’s a thing, right? It’s it’s a real thing.

6:07
Yeah, it’s funny over the years, my nieces and nephews, you know, how boring my job was them until all of a sudden, it is no longer boring. There’s lots of questions now. Well, cool. Well, you know, and some of our Well, actually a good place to start, I think is Anthemis. What is it? Tell us a bit about the thesis and what you guys do?

6:26
Yeah. So So I think the best way to describe Anthemis is we are a collective group of of individuals, part of a larger and wider ecosystem. And, and sort of supported by a broad investment platform that deploys human and financial capital, in the service of financial system reform, financial system change. That’s a complicated, convoluted way of saying we deploy capital in startups to help build companies that have the capacity to fundamentally make our system better, stronger, more accessible, and more transparent. For all. Most of our strategies are in the earlier stage, we deploy capital across early venture studio rounds, we do early stage sort of see seed series A, and we’ve got a venture growth strategy as well. And then we kind of skip right over and then have a later stage private equity strategy as well.

7:25
Wow. So variety of cheque sizes, and I’d imagine lead versus follow positions.

7:31
Yeah, we’ve we often not yet we’re in the position. And part of that is, is because of the way we deploy capital, but also it’s because of how incredibly focused and convicted we are on this particular sector, we really do take a wide approach to sort of how we define quote, unquote, FinTech. For us, it was never about just finding companies that, you know, could be made better by a little bit of technology. Instead, it was about, you know, figuring out at the macro level, how does our entire society rely on the financial system, in order for these companies to exist and understanding better than anybody, the market structure, the regulatory structure and how the world works in financial services, to enable us to deploy capital in service of really finding digital business models that can transform our financial system?

8:23
So where do you find yourself spending most of your time? Right, there’s the studio model, traditional early stage, you’ve got some growth, you’ve got some private equity efforts, you know, where, where’s Amy spending most of her time?

8:35
Yeah, most of the team continues to be largely focused on early stage, right. So most of the work we’re doing is venture venture stage and kind of up to the kind of, you know, kind of venture growth part. Me personally, you know, it’s funny, because we were just having this conversation internally, about it’s been 13 plus years now. And we’ve been doing this for a very long time. And it’s, you know, a lot of the work that I’ve always had to do was about trying to convince people, whether those were investors, banks, insurance companies, entrepreneur, convincing people that this was a real thing, and that this is where the world was going. And last May, I would say is when things started to change, I think as people start to thaw out of the first kind of part of the lockdown, everything changed. You know, if you told me 10 years ago, five years ago, even a year and a half ago, that the world would be understanding this thesis as well as they have quickly caught up to it. I would have told you, you were crazy, because for so long, we were the only people doing it. And the only people doing it in the style that is unique to Anthemis right, focusing on diversity, focusing on impact. But what I’m realizing now is that the beauty of that is that it takes gives me It’s given me a lot more time back, because I can do a lot less convincing. And now I need to put myself and the team in a position where we can do a lot more influencing. And so I think we’re we’re hitting our stride as a company. As a collective because I think people are paying attention to us now in a way that maybe they hadn’t before. And we have so much more perspective, because we’ve been doing this for so long, that that’s really, really valuable, both from the entrepreneurial community but also to the big strategic backers and players in this particular universe. I mean, we’ve always said, one of our core four guiding principles is around authentic collaboration, right? This for us, is not about finding kind of one company like an Airbnb or an Uber that is going to blow up the whole financial services system. It’s about working in collaboration with the existing system. And they exist and the the numerous wonderful ideas that are emerging, and finding ways to collectively build these companies together that work with current regulatory environment, but also serve to push the envelope on what we could do in the future. Right. So not saying that, that the world that exists for Financial Services is perfect. But it there’s a reason it’s there, right. It’s been we’ve seen a lot of examples of companies that have taken some shortcuts, and put consumers in really rough positions. And and I just think it’s still important for everyone to appreciate that when we’re talking about financial services. And we’re talking about protection. You know, you cannot compare the SEC to the New York City taxi commission, right. And so you have to take really careful, thoughtful positions on these companies that you build and how you support them and how you prepare them for, you know, the the good side, which is that everybody wants their business, but the bad side is people can lose a lot of money. And it’s our job as as I think influencers and experts in the space to make sure that are the companies that we’re building, respect that and appreciate that and that we do it right.

11:49
Amy can you give us a quick primer on the difference between FinTech and tech fin?

11:54
Yeah, the tech fin, the moniker has been sort of one that’s been emerging quite a bit. And I think that really there’s, there’s not much of a difference of it, I think it’s just the way you’re looking at it right? Is it technology enabled by financial services? Or is it financial services enabled by technology, and in our mind, you know, it’s, it’s kind of broader than just finding the next, I don’t know, electronic brokerage business, or a retail trading brokerage, or an online stock business, it’s about finding the elements of embedded finance in every part of the economy. Right. So almost every single industry, and certainly virtually, you know, a whole host of the companies within those industries, would be considered in thesis for us, because we see them as opportunities, where we’re understanding the rails of financial services, whether it’s the transaction and payments piece, or the finance and lending piece, or the risk management insurance piece, the importance of those rails and getting it right and building the company on top of it, enable a lot more industries to sort of appreciate how much like a financial services company they can be right. And so I’ll give you an example that some of the areas that we are really deeply looking at are in the media space, right, where you’ve got, you know, massive, massive amount of capital invested, emotional and social capital invested in social influence, but it’s not yet monetized appropriately. So how do we find the way to monetize that influence in a way that is useful to those creators and those those influencers right and with a different voice

13:32
And their audiences.

13:32
and their audiences? Right, and that’s more that’s more kind of core to the theory of democratization, right is opening it up so that everyone can participate? We see the same thing happening quite a bit in the healthcare industry, right, where where access to products and and healthcare services that are otherwise not reachable by certain communities or, you know, prohibitively expensive or prohibitively difficult to find and finding a way to kind of wrap these communities in kind of a, you know, a package where that that healthcare proposition serves them because it allows them to finance something that otherwise would not be financial.

14:13
The old quote from Marc Andreessen software’s eating the world. I’m not sure who coined it but now everyone’s saying FinTech is eating the world. I mean, it’s, it’s it’s pervasive, right? It’s involved in every business. And it’s kind of interesting to see non FinTech companies embrace it and incorporate it in their own business models. And to your point, you know, also web 3.0 and decentralization is going to play a huge factor in creating economies and the presence of FinTech is necessary, but I wanted to get your quick take on regulation. Right…

14:44
Yeah.

14:45
Tailwind and headwinds, right regulation like PSD2 and other factors, you know, do you think regulation is moving in a direction that is promoting this proliferation of FinTech or is it Are there still, you know, major obstacles that need to be overcome?

15:04
Yeah, I actually see them less as obstacles. I mean, I think regulation always tends to be a, you know, what I was think about is like a tanker going down a narrow, narrow River. And you know, it doesn’t have a lot of room to wiggle. But at the same time, you know, if it needs to make a turn, it’s gonna take 25 years to do it. Right, like, so it’s, but the challenges. The obstacles, I think, are really in kind of figuring out where do we where do we find that moment of, like collaboration within, right, because there are lots of places inside of traditional financial services regulation around the world that are going to have to open up as the industry changes rapidly as we’re predicting the industry is going to change, right. But the problem is the examples of new regulation models that we’ve seen, are coming from the other side in the tech industry, where the idea is, well, we don’t need any of this regulation. Let’s just blow it up. And we’ll see what happens there. And those two ideas are so far apart from one another, that for us, we see the real opportunity is kind of being somewhere in the middle, like let’s take the best of what’s working in terms of consumer protection, and, and general sort of watching on the markets and risk management. And let’s figure out the best of what worked in the tech industry, because a lot of that stuff. I don’t know if you’ve noticed, but a lot of that stuff hasn’t worked either. And, and figure out what is the right model, I do see a world that becomes significantly more decentralized and deregulated that than it is now. But in my world, and I certainly don’t think in our collective world, it doesn’t disappear. Right? It needs to figure out how do we how do we rebuild this together. And part of that is it’s got to be a collaboration, right? Because this is all new. And I think the pressure to do it now is upon us, because so many more consumers are appreciating how they can participate in these plays. And that pressure, again, it requires a certain amount of responsibility for those of us who understand how dangerous these markets can be if we don’t properly protect consumers, and make sure that the companies are prepared for the growth that that comes from from being kind of a rocket ship. FinTech company.

17:18
Yeah, there are significant risks. And we’ve seen large tech in some ways abuse opportunity before in FinTech and in other areas, that I’d be curious to hear what your take is on sort of the established incumbent large legacy financial institutions. How do you see them adapt in order to you know, capture value and attempt to maintain their position as well as direct access to customers, as you know, FinTech is starting to encroach on a lot of their sort of value capture.

17:56
I’ve, it’s a mixed bag, I have, in my in my closet, a sealed envelope that I wrote, I think it was 2000 2000, maybe 2013 14, where it was my prediction list of which banks were going to make it and which ones were going to go the way of the dinosaur. And I haven’t decided what year I’m going to open it. But I’m right. I remember Yeah. I’m not naming any names. yet. I actually think that, um, you know, the thing that’s quite interesting about this is that that it does vary from organization to organization. Like there’s some trends that we’re seeing and that I certainly feel strongly about that I could say, okay, at large, the the, the regional banks in Europe and the regional banks in the US are doing a much better job of recognizing the threat than a lot of the big banks are at large, right, that’s a trend that’s been been pretty much true for some time. And you have to ask yourself, Well, why is that it’s because they have a lot more to lose, they sorry, they have not, they have nothing to lose, right, versus the big banks have a lot more to lose. So the big behemoths, you know, trying to kind of cannibalize their business before it gets cannibalized. They can continue to push it because they’ve got big enough brands, big enough customers and big enough balance sheets. It’s the smaller guys that have to be a little bit more nimble about figuring out what their future looks like. Right and so I think you’re gonna see a lot of winners emerge from and I think it’ll be a lot of them will be kind of, you know, have to bond together. And we’re starting to see some of that happen already. But I think that some of the moves that you’re seeing people like Santander and BBVA and even like with you know, the like some of the like the Sterling and Webster and like this really interesting things happen City National, like there’s some really interesting things happening in those worlds where I, I give them a lot of time and think that they’re there. They’re gonna pull this stuff off. I think with the big banks, you’ve got kind of a mixed bag, right? You’ve got a big number of people who, you know, we’re quite close to, who we have a lot of time for because they recognize that for them to be strategic about how they use technology. They need to First understand what they don’t know. And you’re not going to see in any part of any of those big banks, what you don’t know, from sort of being the incumbent with all the, with all the with all the power, right. And so partnering in a way that allows them to see around the corners and to really kind of see like what like we, if they knew what they were going to need to do to be strategic, they would have already done it, right. And we know that some of them are doing some things that they know they need to do. But a lot of the stuff, they have no clue yet. And that’s just the nature of the way the bank is set up and the way that their teams are motivated. And, and so they need to do it in partnership. And I think you’ll see with with, you know, some of the regulatory changes around Volcker relaxing that a lot of the bigger banks are being very smart about deploying capital into funds that can give them that opportunity to fundamentally get some knowledge and some shared insight and some access to views that are outside of their kind of comfort zone. You have another group of banks that shall remain nameless, that happened to have big enough brands and enough hubris to think that anything they do will be better than anything a FinTech does, right. And I think part of that comes from this view, which is lasted for, you know, near centuries now for some of these banks, that their brand is going to matter to generations, beyond the existing generations. And I think what we have underestimated, and some of that says is that, you know, there going to be a lot of people post financial meltdown and financial recovery, that aren’t going to want to bank at the same place that mom and dad’s banks, or their grandparents banked. And that seems like, you know, they’ve got captive audiences, because they’ve got all this great customer base. But if they can’t grow that customer base inside of new generations, and there’s options kind of climbing at their, you know, their, their bread and butter, and the generations that they do hold on to, there are people that are, you know, it’s their cost of attracting customers is gonna get bigger and bigger and bigger, and those brands are gonna matter as much. I also think the way people are looking at their financial future is very different right now. I mean, generationally, millennials, my kids generation, like, they, in many ways, would prefer less products, and less things, if they thought they were getting some level of specialized service that served their particular community. Right. And I think a lot of people are looking at the trend and neobanks and saying, Oh, well, gee, are these big enough audiences for us to really capture real opportunity here? And, and I’d argue, yeah, indeed, they are. Because, you know, having a full somebody, having a having a customer fully for the life of that customer on every product they could possibly want, is probably more valuable than having like somebody one, you know, $500 savings account. And that being your customer, right, what it’s costing you to serve that guy versus the person who’s going to, you know, go to a place and start their relationship as they get their college loan, and then that they pay that off, and they start getting their first job, and then they get to buy their first house. And if they can do all that in a, in a bank that actually knows who they are, and their, you know, community like them, and they feel like they’re part of their tribe, I think that’s going to take off more than, than a lot of the big banks are appreciating it. Well. And I also think, you know, the other thing that and by the way, the the social trend, you know, the trend of wanting to be part of a tribe and a community that we’re seeing, certainly post COVID is going to continue to, to, to move on. But I and I think the other thing that a lot of the big banks aren’t paying attention to are these trends and embedded finance, right? That it might not be the FinTech, that looks like a bank that’s going to eat your lunch. It might be, you know, the Facebook for pets, that has somehow got a community of people who all own and love and believe that their pets are the best of their things. And then they start realizing that they can sell them financial products. Right. And that’s been something that Yeah, but like, to me, that’s embedded finance at its best, right? You want to capture your community with the most amount of connectivity, and the most amount of, you know, opportunity to engage, and then go and do it.

24:11
Let’s talk more about embedded finance, you know, how do you think that may affect wealth management, investing brokerage going forward?

24:20
Yeah, I mean, I think it’s already has started. And I think one of the big trends that we’ve been following for a while that’s starting to start to play out and we’re seeing it is just kind of around the world of democratizing access to non financial products as part of your financial picture. Right. So companies like Rally Road where you can buy partial ownership of highly sought after collectibles and have and make real money off of the buying and selling of those assets. Yeah, exactly. And the whole world of alternative asset class. I think that’s sort of you know, the world of art and wine and kind of places where, where you don’t have to physically take classes. possession of some of this stuff to have a position that was historically relegated only to the sort of Uber Uber rich. So those are those are trends that we’re continuing to follow that I think will continue have a major impact on on wealth management. And the other one is, is just as I mentioned, you know, being able to attract and hold on to a customer from every part of their lifecycle, till till death, right, and being able to move quickly to pivot with the needs of those customers is going to be a big way of, of customer retention.

25:31
Well, you know, it’s interesting, as a startup ourselves, so we’re a venture capital firm, but we created this from scratch, our major financial services provider, we have banks, but we use Brex, quite a bit. And that was a community, right? It’s like, Hey, here’s the card for the startup community, you can get up and going like that. And you can issue electronic cards, and it was just super easy to start up, right. But they got their hooks in for sure. I mean, I’ve had Enrique, on the show, we talked a lot about Brex, there are good aspects, there are challenging aspects to using Brex. But certainly, if I wanted to unwind from Brex at this point, and go a different direction, it would be difficult, right? It would be a huge lift for me, and it would just be frustrating. And so it’s kind of funny how, you know, timing is something I’ve talked to my team about before, if you can think about the customer journey, and think about incepting, that journey very early, with like a low stakes decision. But then you get them early, and you can own that relationship, you know, throughout the duration,

26:36
Particularly, I mean, I mean, there’s a lot of banks have so much data on their customers, but it’s all sitting in some pot that they don’t actually do anything with. Whereas the fintechs recognize from the very beginning how important that data is, and are monetizing it and are using it to support better product development and delivery of service to customers. I mean, it’s not rocket science. And you know, and I think one of the things that really helped propel this, and certainly in Europe, we saw this is that when all these emergency loans were coming out, like a lot of the big things weren’t able to deliver, right, they didn’t have the capacity to very quickly pivot. And most of them couldn’t justify putting their employees in their homes and trying to figure out how to do KYC from somebody who’s, you know, apartment in the middle of shortage, right? So, so companies like Tide and places that you know, really targeted that SME space, like they got that money into the hands of people faster. And that was huge.

27:27
Let’s talk a bit about banking as a service. Can you give us an overview of you know, some of these banking as a service platforms and maybe an example of a non financial company? And, you know, maybe the initial offerings that they are incorporating to improve user experience for customers?

27:45
Yeah, well, so my favorite ones still, like the idea that that the Facebook page? No, I mean, I think, you know, I want to I want to be very careful. But some of the things that I’m most excited about in this space are still stealth. And so I can give you kind of the watch the space kind of element here, but like, like, you know, one thing that I’m loving is in the social influencer space, right? Like, how do you take that concept of, you know, the way our society is now valuing people’s influence and people’s words and find a way to monetize that for the influencer in a way that then allows them to make a living off of what they’re doing. And so these sort of, you know, we’ve seen a lot of cash back and kind of, you know, various different ways that people have done it, but but we’re looking at a couple at one particular company that that actually, I think, has a really great way of seeing this. That’s much more of a kind of a wallet perspective. And I think that could be really exciting. You know, I talked a little bit about the neobanks. For us, like looking at First Boulevard, which serves exclusively the black community in the US, or Daylight, which serves exclusively the LGBTQ community, their understanding of what those communities are lacking, and what they need is so strong, that they have such a wonderful way of, of being able to provide, you know, that sort of service in a way that I don’t think anybody else could ever contemplate at some of the big banks, right? I, you know, we love the idea of, you know, starting with, you know, a banking as a service. The very easy thing people think about as cards, okay, well, you know, we’re going to come in and we’re going to allow you, we’re going to be your card purveyor, and we’ll get brands and other people quote, but but it’s so much broader than that, right? This sort of idea, you could go down the path of insurance and, and, you know, for us, it’s it’s like almost, it’s like financial services, services, what it is, and, you know, kind of had a little bit of a phrase internally, we’re playing with this idea that it’s, um, hits the FinTech of FinTech, right. And I I’ve always said that if we do our jobs properly, FinTech should never have to exist anymore. It should just be financial services, and Then people will understand that, like, we have arrived, right. And I think we’re very close to that. Because a lot of these banking has service platforms or insurances, service platforms, are all trying to cultivate the same thing, which is how do we look at, you know, providing our core engine for the service of other customers, and then letting them go ahead and become a FinTech unto themselves. And I think one example, in the in the insurance space is Trov. Um, you know, they’ve had a lot of pivots and a lot of, of different strategies, but this sort of idea now that they are the embedded insurance in engine behind anybody that has the propensity to be able to support insurance, outreach customers is a really great place for them to sit.

30:41
It’s kind of amazing in today’s day and age, how many one size fits all offerings that are, are in the financial, broader financial services and banking industry?

30:51
It’s impossible, because you can’t like this. That’s why it’s broken, right? It’s like, you know, we’re always saying, like, start with what you know, you can deliver, because the one size fits all, it’s just not possible.

31:04
Well, you’re right, and to the point you made earlier, you know, it feels like they keep adding features and products, but it’s like the antithesis of true product management, right. It’s like, oh, let’s just add features instead of real benefits, right? Like, you know, across this whole spectrum, maybe some of us.

31:21
Yeah, and even like, I mean, just beyond, you know, kind of an embedded finance was like, one of the things that’s really fascinating to us, as part of our embedded finance media, is the gaming community, right? Like, how these entire economies are really being created off the back of some of these massive game platforms, but they’re not real money, right? And how do we find a way to create some parody in there that allows for these people who are spending so much of their life playing these games to be served by the fact that they’re part of a community? And potentially, you know, it shouldn’t just be a one way relationship? It shouldn’t just be how much money can you make off of this kid? But how about let the, you know, let it work both directions? And, you know, I think that gets really exciting, because then there’s lots of areas from a currency perspective, you could play play in that space as well,

32:10
totally. So at Anthemis are you guys looking at virtual assets as well.

32:15
So we’ve always taken a pretty broad infrastructure mentality around crypto and all the sort of virtual assets that I think part of that was our understanding of what we do best, which is really focused on infrastructure, and like, you know, kind of the traditional, if there’s going to be a gold rush, we’ll stay focused on that, the picks and shovels and, and so we continue to have a lot of, you know, sort of places that they’re that we’re digging, but we have, but it’s but it’s, you know, it’s not going away. And so it’s incredibly important that we’re watching it appropriately. But again, I think we can get a lot of our deployment in that space covered in the ways we look at embedded finance, through media or embedded finance through some of the other categories that are that are quite interesting to us.

33:00
love to talk a bit about diversity. I know that’s, you know, a huge part of the mandate. You know, what, what is Anthemis doing to promote diversity and underrepresentation in venture?

33:11
Hmm. Well, I hope I help, the better question is, what are we not doing because, because that we are we are doing quite a bit. And I say that hand on heart, partly because it’s part of the reason why we started the company, right, so I left Wall Street, at age 36. At the top of my game, and as wonderful as my employer was in trying to help me continue to grow my career, you can’t get to so it’s up your game with 36 and feel like you haven’t done a good job and you didn’t have support. And you didn’t have mentorship because I had it all. But it was really frustrating to be one of the only in the room at every single turn. And that was now going on 14 years ago. It’s not that different. Completely, you know, I’m not saying that we haven’t fixed we haven’t we haven’t, you know, we’ve gotten better, but it’s not that different. So when Sean and I sat down and said, Okay, how do we want to, um, you know, put our heads together about what needs to change in this industry? And what what, you know, if the underlying thesis is building resiliency into our financial system, one of the things that has to change is it a lot more people have to have access to capital and opportunity inside that financial system. And so we made a commitment from day one, that diversity inclusivity and equity would be core to everything that we do. And the way we started to prove that is by every way, every person who brought it to the team, right, they had to value that top of mind. And we have somehow over the last, whatever 13 plus years, managed to create a team that looks like the world that we live in. And that’s what’s important because you cannot be an advisor to anybody and ask them to do this if you’re not doing it yourself. And so you know, the whole traditional put your own mask on first is kind of the like, thing we live by our company right now is just I think it’s about 55 percent, maybe a little more 55% female, we are 38% identify as black indigenous people of color 13% of our community, our team is LGBTQ. We come from 16 different countries we speak 16 different languages. And you know, most interestingly, we have zero concern about the fact that even though Financial Services is our whole game, less than 50% of us have ever worked in financial services before. So we look at diversity from cognitive perspective, from an experiential perspective. And it allows us a wonderful, wonderful platform from which we can practice what we preach, right? So every dollar we deploy, every pound we deploy, we’re able to have conversations with founders at the very early stages. So you asked me earlier, like, what do I like to do? The reason why I love that early stage so much you can have the most impact, right? My I get asked all the time, why do you not just deploy to women or people of color? And I said, well, because I have way more influence on two white dudes who don’t know any women or people of color than I do on a community of people of color, or a community of women, right, because I have networks there. And, and he and, and I think that that’s important, because it takes, you know, diversity, in my mind has always been about all not just about one. But it takes a lot of work to be able to prescribe and figure out how you take a group of people that don’t have access or knowledge of how one becomes a diverse and inclusive company and teach them that from the earliest stage. And it does work and the impact is felt wide at large. And I’m really proud to say that, you know, with with all the capital that we’ve got to deploy that right now we’re sitting on a portfolio that’s almost 30%. found our almost 30% of our founders are women and almost 30% of our founders are people of color. And that’s financial services were underneath that 2%. What VC number that goes to women, I think financial services, like I don’t really think they even think they can tell how much goes to women, I think it’s 0.00002. So anytime somebody says to me, oh, well, we just can’t find, you know, women to back, we can’t find people of color, I just say you know what, Bs, I don’t buy it. You just don’t know where to look. And and that’s, you know, a huge part of what gets me up in the morning. And why I do the work that I do is to make sure that we’re, you know, painstakingly paying attention to who’s getting their hands on this capital, and what they do with it.

37:24
Good for you. I suspect there’s also a belief that investing in underrepresented folks in women can outperform not doing so is that is that part of the thesis or not?

37:38
Yeah, I mean, it’s 100% of the thesis, but it’s less about performing. I mean, look, you know, I can I can name a million different examples of under represented founders and people that have performed well in their lives. And one could argue that part of that is because if you’re sitting in a community that is ignored, you know, the system is rigged against you, you’re going to have to be a little bit quicker on the uptake to get things done, right. And so you’ve got to have more wherewithal, etc, we can qualitatively talk about all day long, but at the end of the day, it’s it’s not just finding underrepresented founders, it’s about diversity, right? It’s all and if you don’t have every single person represented in your team, even somebody you might not agree with, or you don’t have this, then it’s gonna be really hard to do the work that our world is going to require when we’re talking about systems level change. And so that to us, is why we do it. I also think, you know, it’s kind of obvious to why it works, right? Because if you have a different set of team members, they are pulling from different places, and in the very easy way of understanding how a venture capitalist makes money, you have to be where other people aren’t, before they get there. And so if you know, you know, in some ways, we kind of laugh that, like, if the world finally pays attention, diversity will lose a little bit of our edge. Okay, you know, if the rest of the world is getting better, because of it, we’ll take we’ll take it, and we’ll just push the next envelope. But but it works, because it works. No, and that’s, you know, I wish I could say that do you know it was it was more than that, but but it’s, it’s, it’s been a secret sauce for too long. And I’m actually thrilled that the world is opening up their eyes to the fact that this might actually be something that is sustainable and can help people make money. And it’s the right thing to do.

39:21
What’s funny, I was talking to an LP the other day, and this LP was telling me that they only invest in Bay Area funds, and they do a lot. And they only invest in funds led by technical people. And, you know, he was questioning sort of our thesis, we invest across the country. And I mean, there was a time when the only place to invest in venture capital was Boston. And then there was a time when it was only San Francisco, and then, you know, everyone’s against New York City until New York City was obvious. And now there’s billion dollar outcomes coming from all over the country from all different types of founders, technical or otherwise.

39:57
Yeah, and I think the brilliance that you know, if Got it. Like we’re all sort of universities trying to figure out what are the positive things we can pull from this particular COVID year because it, you know, there’s not a lot, that’s great. But the one thing that has truly I think, helped the venture community and probably at large the work community is that you no longer are forced to think that your workers or your investments or your new ideas can come from only one place. And we’ve opened our eyes to the idea that a distributed workforce, a workforce that is, you know, bringing a certain amount of diverse influence can actually be quite useful. And for us at Anthemis. That’s always been how we did things. My partner, Sean and I met in London and started the company in London. And then at the end of our first week of getting our docs together, we both sheepishly admitted to each other that he was moving to Switzerland, and I was moving to New York. And And here, we were building a company in London. And so by nature of, of what we set out to build, we had to be distributed. And so for us, we got really lucky that when when lockdown happened, nothing really changed. We just were had like slightly less comfortable chairs from time to time. But other than that, you know, we got right back to work. And it was really nice to see that as the markets started to open up, and people started to get back to work. There were a lot of people finding opportunities to live other places, and ideas could find themselves emerging from, you know, a lot further than 15 minutes from Sandhill. Road.

41:29
Amy, you, you kind of see up and down the capital stack because you guys participate, you know, late early, even some studio stuff, there’s been a lot of changes in Dynamics going on in venture capital from Spats to huge players in the late rounds and non non VC and financial players, you know, entering there’s also the mega rounds that are now entering early stage investing, you know, I’d love love your quick take on any of those sort of phenomena that are occurring in venture capital.

42:00
Yeah, well, so we’re we’re generally bullish on on the stock market. I know it’s slowed down quite a bit, but we’re generally bullish on the stock market, because I think as a as a, as a financial instrument, a tool for financial engineering, there’s a lot of really great things that spax in the right hands can do for the market. And I think replacing those sort of weird, you know, D rounds that were just without any real kind of anything, you know, that there’s a need for that. And I think if you do his back, right, you can really find ways to kind of use it to democratize in some ways, the IPO process and who’s getting, you know, who’s able to participate in it. So we continue to be bullish, bullish in that space. I’m on the big guys coming in with these, you know, monster checks and driving up valuations. Look, I, there was a window, and they snuck in this window, because there were a significant number of VCs, who in the last five years have emerged, talking about all the value add services that they provide for their portfolio companies that don’t really exist. And when you’re sitting where I am, as the leader of a platform that is so incredibly robust and real, right, a platform that Sean and I had the serendipity to build ourselves, not with our investors money, but our own money, mostly because we started raising capital for Anthemis when Lehman collapse, and there wasn’t a lot of money out there. And so we had to take a chance to say, Okay, what do we think we’re going to need to support these companies? Should we get the ability to invest in any of these companies? And the answer was, we’re going to need services that they’re going to need in the early stage, it’s not going to just come from Amy and Sean sitting on their board, or from us giving them good advice. And a quarterly meeting, it’s going to come from being able to turn on the spigot of business development opportunities inside of the large banks and institutions, it’s going to come from turning on, you know, an advisor that can help them on their PR launch before they hire a marketing director, it’s going to come from all the different things that we provide our portfolio companies around and industry in recent lead it very well because they also have a great platform, kind of look picked up and said, this is a great idea, we should all talk about this because you tell tell everybody, we can do this. But when you pulled back the, the sort of, you know, current, and you realize that most of these VCs can’t provide it and they can’t provide it because it’s an expensive proposition. And your LPs aren’t gonna pay for it. So if you’re sitting in a capacity, where your LP funded, no LP is gonna say, Yeah, I want to use my money to go and spend it on, you know, support services for portfolio companies. That’s my that’s why I’m paying you for. And so I think that the window that these big guys stuck in is that they basically came to the portfolio and said, you know, hey, you say you want you know, good governance from your, your VC board member and you want all these support services, they’re gonna say they’re offering you and you want a good brand and a good reputation. But how many of those really actually do that? And there were a lot of people that woke up and said, Oh, yeah, maybe you’re right. So just take my check. Here’s evaluation. You won’t see me for another couple. For years, and I’m fine with that. And you know, and for some companies that’s going to work, a company that would truly value what Anthemis brings to the table, that’s not going to be our competition, because we can stand up every single time and provide an an outsized amount of service and amount, size, amount of value to a portfolio company at a time when it is so crucial that they have that support, and that they’re not alone in that kind of early stages of their growth. And so, you know, I don’t think they’re going away, although I think it’s going to be interesting to see how they manage to, you know, take a top of the market valuation, and then figure out that, I hope somebody told them that they know that these are sort of, you know, five, seven and 10 year journeys, and how they’re going to manage to hold it together for 10 years, starting starting, where they start, and…

45:52
we’re seeing it already. I mean, there’s some companies that are out running their skis a little bit, right, they raise these crazy prices, and then fast forward 18, 24 months, capital is limited, and they don’t really have the progress to suggest the 2x 3x markup and,

46:09
and no one’s right. It’s one of the hardest conversations, you know, as an investor, we have to have with portfolio companies, because they see all this exuberance around them. And they’re so excited about it. And you know, you have to trust that like, not everything worked, you know, I think we pride ourselves as as investment advisors, not because we’re telling them everything they want to hear, but because sometimes we’re telling them stuff that they need to hear. And, and that I think for any entrepreneur that’s listening, it’s really important who you take those first checks from? Because it’s, you know, it’s one thing someone’s gonna tell you what they need to tell you to get the deal done. It’s another they’re going to be there when things aren’t so rosy, right? Do they have the capacity to bridge you? Are they going to be there for deeper rounds? You know, and I just, I just, I’m not personally worried about it, because it’s not knock on wood. It’s not actually bothering us right now. But I do think there’s going to be a lot of startup roadkill, in the next few years that that, you know, had a wonderful run at some bloated valuation and their seed or their a, that doesn’t add up to anything, when there’s no one around the corner to help them to their be.

47:16
Well, there’s a lot of false exuberance created with the startup founders, when they see all the press and the seed rounds. And wow, it must be so easy to raise an A. And it’s like, yeah, let’s make sure we drive, some traction and some progress here. So that…

47:31
And sometimes the only way to get them to, to realize it is because like, you know, you can talk to you’re blue in the face to tell them we’re not ready to tell them this is what they need to do. If they did X, Y, and Z, they’d be much better position. And sometimes they’re just not gonna listen to you.

47:42
Yeah.

47:43
But guess what, that’s okay, too. Because let them go out there. And they come on back pretty soon. And they realize, Oh, yeah, maybe the story isn’t lining up. And maybe they’re that person got a, you know, a $500 million valuation I didn’t. And, and also, it’s good because it’s, it’s, it gives them a chance to sort of, you know, there’s enough investors out there that they can try a store with few people. And if it doesn’t resonate, and then come back, we’re not saying I told you so. But we’re telling you, okay, let’s do the work now, to get it, where it needs to be. So you can actually justify that valuation.

48:13
Amy, what do you know, you need to get better at,

48:15
oh, maybe practicing what I preach in terms of, you know, we’re talking a lot right now about the exuberance in the market and the burnout that’s being felt kind of around the world and reminding our team on a regular basis, like take a breath, take the time out for your mental health, your mental mental wellness, like don’t blow yourself up, don’t burn yourself out. Nobody is good to anybody. If we don’t kind of make it through the next few months, and also that it’s okay to miss a trade, it’s okay to you know, not be you know, we’ve always We have a saying Anthemis said that, that we’re not going to get every good company, but every company, we’re not gonna get every great company, but every great every company we get, we’re going to make a great company. And so I think, you know, I could probably be better at at taking a minute myself to breathe and recognize that the unrelentless pace that I have a tendency to, to run that isn’t always necessary. And I and I’m sure that if I were to do so I probably would be sending a lot of really good signals to the people around me.

49:15
And then finally, I mean, what’s the best way for listeners to connect with you and follow along with Anthemis?

49:20
Yeah, well, you can find us at Anthemis.com. That’s pretty easy, and it wouldn’t take you long to figure out how to get me directly. If you do your email snooping. I’m also on LinkedIn.

49:32
Wow, love it. Well, thanks so much for the time today. Yeah, I mean, as far as being a prolific FinTech investor, and one that’s really supporting a lot of movements and diversity and in venture, you guys must be at the front of the pack. So thanks for all the efforts that you do. And thanks for the time today.

49:48
I appreciate it, Nick, and thank you for your time. It’s been fun.

Transcribed by https://otter.ai