A recent report from CBInsights revealed that global fintech startups raised over $8 billion in the second quarter of the year, bolstered by a record number of deals in excess of $100 billion. In light of the growing hype in the sector, early stage venture capital firm QED Investors has sought to avoid getting bogged down by taking a broad focus on the Fintech ecosystem.
Speaking in a recent interview, QED partner Amias Gerety--the former acting assistant secretary for financial institutions at the Treasury Department under President Obama--pointed out that his firm has 12 partners focused on investments across the financial services sector, compared to the one or two partner team at most firms. According to Gerety, this allows QED's partners to build their areas of expertise and be more hypothesis-driven in their investment approach.
This level of perspective is important to Gerety, as he sees the potential for misleading hype in certain areas of the Fintech industry, particularly relating to blockchain. As he stated, "I would say that blockchain is in a classic hype cycle, where people got very excited that blockchain was going to solve everything--then [they get] very disappointed." Gerety doesn't hold the use of blockchain against a company when evaluating a company, however--but he says that he only sees it as a benefit when it actually helps solve a business problem.
Similarly, Gerety revealed that he is "bearish" on cryptocurrencies, pointing to his hypothetical questions that he often poses to crypto proponents: "When was the last time that you transacted in yen?" He also points out that from a compliance point of view, the future of crypto can be hard to sort out for a firm like QED: "As a firm that takes compliance with existing laws very seriously, it's hard for us to be super-long on the question of cryptocurrencies."
Ultimately, Gerety revealed that QED's investment approach is simple yet solid. As a hypothesis-driven investment team, they start from the position that, as Gerety says, "the future is here:" he and his fellow partners already know what the big trends in Fintech are, so the question is which type of companies are poised to succeed in that world? Once QED figures that out, Gerety says, the next step is obvious: "try and back great teams that are pursuing that vision."