Strategy Session is a feature for Crunchbase News where we ask venture capital firms five questions about their investment strategies.
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Fin Venture Capital was formed in June 2018, and since then has grown into a firm that has $200 million in assets under management and includes two funds and 22 investments focused on business-to-business fintech companies, particularly enterprise SaaS.
The firm invests in early-stage as well as growth stages via a co-investment platform. Recent investments include a $10 million Series A round in SamCart, an e-commerce platform designed for direct-to-consumer brands, as well as leading a $7 million Series A investment in Neuro-ID, a next-gen behavioral analytics platform that provides actionable insight to reduce fraud while improving customer experience.
Prior to being a venture capitalist, firm Managing General Partner and founder Logan Allin was an entrepreneur and served as CFO and vice president of business development for e-commerce platform ONEHOPE. Most of his career was spent in fintech, including as vice president of SoFi’s venture capital arm, where he was tasked with investing in and working hands-on with fintech companies, as well as running SoFi’s accelerator and corporate development efforts.
Allin spoke with me about Fin VC’s extensive criteria for investment, activity in the fintech space and why 2021 will be a big year for fintech companies entering the public markets. The following was lightly edited for length and clarity.
Your firm invests in all levels. What do you look for in a potential investment?
Allin: We have seven criteria we use for every deal, kind of an “investment in a box.” We want the CEO and founding executive team to be repeat entrepreneurs and, especially in fintech, it is a good measuring stick — we are not going to invest in a first-time entrepreneur.
They also have to have deep technical experience, with CEOs to have product and engineering experience rather than sales and marketing. They know how to make and ship products and are able to establish a culture there. We also like to see things like:
- B2B with SaaS recurring revenue models
- Product market fit
- Mission-critical stickiness to enterprise customers
- We can add value — we will not be passive VCs. My least favorite VCs were the ones who pinged me at the end of the year. This really centers around business development and building strong relationships.
We also have to be able to feel comfortable that the CEO is looking at ESG [environmental, social and governance] seriously. If they are not thinking about it, it is a hard pass for us. If they are not thoughtful about diversity or environmental policy, that is also a big problem for us. We have a quarterly survey that measures progress on ESG metrics.
How do you like to work with founders?
Allin: We are almost always on the board. We want to engage and be a very strong partner to them around business development. We are also helping with talent sourcing of chief financial officers and chief revenue officers. We focus on those two hires and, as a result, have built up a Rolodex in those roles. Another piece is spent on capital formation. One of the biggest distractions for a company is raising capital. We recognize it and we take it on for them, in an investment banker capacity. We work on leads and take the process off of their hands. We also ask portfolio companies how we are doing for them. It is amazing we have not heard of another VC doing this, it is a big source of referral flow and new opportunities in existing CEOs.
You say that 2021 will be the year of the fintech IPO. What are you seeing there?
Allin: This year is shaping up for fintech IPOs and SPACs from well-known names that have already announced or are set to. This is the first year where fintech-related incumbent companies are on the minds of retail and public investors. There is a high conviction for that.
I think this is the year of inflection, where the household names for us fintech nerds will now be household names for everyone. We have already created a graphic of predictions with 10 names, some that have already gone public: SoFi, Affirm, Klarna, Plaid, Blend, Robinhood, Coinbase, Better, Stripe and Marqeta.
How has investment into the fintech space changed in the past few years?
Allin: If you look at the geographic maturity curve and the types of companies that exist, it starts with consumer facing and is very much a verticalized business. Then companies go after small and medium business, and the third wave is B2B enterprise software. The modern version of legacy places was like Fiserv. This newer version is using enterprise software to enable integration with banks and other players.
Second is capital deployed and amount of interest in the space. The fintech deal activity in 2021 will be a record: Private funding in January was $7.4 billion across 192 transactions, and is at a four-year high, including 23 capital raises of $100 million or more — that is FT Partners’ data. We will see an uptick in M&A and in SPAC and IPO activity.
Which areas of fintech do you see a majority of investment going into this year?
Allin: It is going to tilt more and more to B2B enterprise software because of the evolution, maturity and better performers in public markets. We are also seeing a lot of saturation in the U.S. and Europe for B2B and B2B2C. It is also going into Latin America as well as other new geographics emerging, like Southeast Asia and India, that are new in the fintech lifecycles, so we see more capital going there.
Photo of Logan Allin courtesy of Fin Venture Capital.
Illustration: Dom Guzman
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