Sheel Mohnot is co-founder and general partner of Better Tomorrow Ventures (BTV), and he has an answer for those who say investing in fintech is losing its appeal.
“The world of finance is huge. 20% of the world’s GDP is financial services, and it is nowhere close to being digitized.”
With Mohnot, a former general partner at 500 Startups and cofounder of NerdWallet, Jake Gibson, many transactions are still done by hand.
Mohnot remarked, “Better Tomorrow Ventures is going to help with digitizing the financial transactions.” Mohnot’s firm’s partners and the rest of the world seem to agree with him.
Better Tomorrow Ventures raised a 3rd Fund of $140M, $150M being the 2nd Fund, which was underwritten in early 2022 at the end of the ZIRP (zero-interest-rate policy) boom.
According to Mohnot, “We actually planned to make the fund smaller this time. In 2021, things went super overboard with every company. We invested in immediately raising a follow-on round at a crazy price, and that was probably bad.”
In an environment of reduced exuberance, BTV doesn’t need as much capital to continue its participation in its top startups. Mohnot explained.
The company also didn’t take its second fund in 2022, along with the $75 million opportunity fund, though that capital may be useful for them in the near future. Since many of the recent and upcoming IPOs, like Chime, Klarna, Navan, and Wealthfront, fintechs are hoping that late-stage investors will warm up to the industry.
Fintech is one of the sectors that investors are hoping to see more activity in the future, particularly at the early stages. For example, BTV is excited about the potential for accounting automation.
“There’s a massive shortage of accountants. Accounting firms are all turning away business, and it’s a perfect application for AI,” Mohnot states.
The firm has already backed three accounting startups: Basis, which recently raised a $34 million Series A led by Khosla Ventures; Layer, an embedded accounting platform for small and medium-sized businesses; and InScope, a startup that helps automate drafted TA financial statements.
However, it’s not only about accounting; Mohnot has a firm conviction, too, about AI’s other uses for fintech. “Financial Services is very labor-intensive. There’s underwriting, compliance, fraud detection, customer support,” he said. “AI can do all that at a lower cost.”
More companies of note that BTV has in its portfolio are Coast, a payments platform for fleet and truck drivers; Relay, an online banking and cash management platform for small businesses; and Unit, a banking-as-a-service startup last valued at $1.2 billion.
For its third fund, the firm intends to fund 30 to 35 companies, for which the firm plans to spend between $500,000 and $3.5 million.
