00:20:57 · Wesley Aster, Yoonkee Sull
[00:20:57] S1: You mentioned a moment ago blockchain and AI. A bit later in the... In our conversation, we have a few questions around your perspectives on those two. [00:21:04] S2: Yes. [00:21:04] S1: For now, I'd love to pivot to the current state of FinTech funding. You've seen a fintech funding slowdown over the past couple of years. In your view, what is driving this shift, and how do you see the funding environment evolving in 2025?
00:21:21 · Yoonkee Sull
[00:21:21] S2: I will just start with that. Outside of 2022, where we made very few investments given given the market environment, I think over the history of our kind of investment track record, our investing activity into FinTech companies has always actually been quite meaningful and quite constant, and so there's... We haven't seen a major spike up or spike down relative to other investments that we've made, and, you know, in general, over the last couple years, I... We we kind of like the fact that many of our peers at other firms were so negative on FinTech despite our belief that nothing really has fundamentally changed about the secular kinda long term trends supporting this category while valuations were also normalizing. And I think we saw this particularly to be the case with market leaders around the world. But I think context is also important. And sorry sorry sorry I'm going a little bit longer on this, but I I think I think from a context perspective, fin... FinTech and financial services in general is a more cyclically exposed industry than than some other areas, right, like b two b software. And, you know, we have to... I think we have to remember that in 2021, we were coming off a no interest... Sorry, zero interest period with stimulus payments, high valuations, and the market generally, you know, in retrospect, overestimating the growth curves of a lot of different companies to then sharply entering 2022 where, we were lapping stimulus payments. And we went through... We we started to go through a really, really rapid rate hike cycle. And so as a as a FinTech industry, especially if you're touching and, you know, have a direct relationship with consumers, you're gonna directly directly feel that. But at the same time, I think our observation was FinTech businesses were still taking share on the metrics that mattered. So still taking share on users, on assets, on wallet share, and ultimately on market share. And there were certainly other industries where, you know, like global payments, where I think there were moments in time when people... When the market started to feel like suddenly it was completely commoditized overnight.
00:23:45 · Yoonkee Sull, Wesley Aster
And so I think in that backdrop, we actually decided to lean in in those moments of time to make more meaningful investments into market leaders in FinTech that we thought still had really exciting long term growth trajectories, especially during kind of peak, what I might call FinTech uncertainty. And now, you know, coming into 2025, it does feel like things are swinging back a bit. You're starting to see more activity. I do think some of it is, of course, supported by new innovations around and new developments and advancements around AI because I do think there's a lot of... There are a lot of very interesting applications as it relates to FinTech. But I think that's how we digested, you know, the environment over the last few years. We still kinda, we still, you know, really leaned into those opportunities when we saw great opportunities, and our long term view hadn't really changed that materially through the different bumps in the road. [00:24:49] S1: And for FinTech founders looking to raise capital today in 2025, what, in your view, are the most important important factors that investors are looking for?
00:25:01 · Yoonkee Sull
[00:25:01] S2: Yeah. I think I think one one one thing I might just, you know, mention is, you know, for us, we're investing kind of from the earliest points of growth to pre IPO, and so, you know, of course, at different stages, we might be looking for slightly different things, But at the end of the day, I do think it just boils down to, you know, some of the core fundamentals. You know, founder and team, how strategic and large is the problem statement, why are we the unique solution, and importantly, what outcomes are we tangibly driving for our customers, what is the structural strength of the, you know, unit economics and the engagement, the retention, and I think really importantly, path to market leadership. And so we strongly believe that, you know, if you are able to become the market leader, it will enable you to capture disproportionate share of the value created. And, you know, of course, momentum, capital efficiency, all these things are really important, but these are ultimately outputs of all the things that, you know, I think we just discussed. And so I think those are the things that we think about. But I think one other thing I might mention is, you know, especially early on, you really want to... I think we've found a lot of success with companies that really do one core thing exceptionally well, better than anybody else in the market. But over time, of course, we want to see a path to win on multiproduct and, you know, building diversified revenue streams and building resilience in the business model. I think that's more about the path and the journey and the strategic high ground a company might have. But, you know, especially early on, I do think it's really I do think, you know, oftentimes, not always, but oftentimes, the focus is really critical in terms of doing one thing, you know, really better than anybody else and demonstrating that.
00:26:59 · Wesley Aster
[00:26:59] S1: That makes sense. And and perhaps you already just answered this this next question, but in your view, what separates the fintech companies that are able to successfully raise funding from those who struggle? Or perhaps another way to phrase that is you mentioned a bunch of traits that you look for. What do you think if if you were to put, like, yourself in the founder's seat for a moment, like, that successful founders are doing to get the... Those outcomes that might not be intuitive or that, you know, the typical target that's struggling might not be doing?
00:27:30 · Yoonkee Sull
[00:27:30] S2: Yeah. I think... Oh, it's a it's a... Let me think about that question. I mean, you know, it's... One, I would just caveat that it's hard to generalize, of course, across, you know, different different companies and founders, and I think everybody has a different thing that makes them so unique, you know, as a as a founder. You know, I think so so I think on the... And on the earlier stages, I might separate this a little bit. On the earlier stager... Stages, I do think, you know, in the end, it's really about the founder, it's about the early team, it's about the market opportunity, and kind of the unique insight that they have in terms of the product that they're delivering at the end of the day. As a business kind of gets into growth, I think the thing that I would add on top of that is, you know, in the end, you know, in terms of what delivers, you know, great outcomes long term and, you know, shareholder value long term, growth is still the most correlated attribute that's... To long term value. And let me let me answer this differently. So I think growth is the most correlated metric to long term value, but the growth, and this might sound obvious, has to be valuable and accretive, which means that it really has to be paired with sound unit economics. And I do think, you know, fantastic founders that I've had the fortune to work with are really able to illustrate and demonstrate that, you know, the incremental dollar that they're investing is truly high ROI and high ROE, and that they're able to, you know, grow as fast as optimal by reinvesting capital at a pace that's optimal. And, you know, I think that is really dependent on their ability to truly understand their business at a very granular level and understand how to balance, you know, growth and growth and profitability at the end of the day.