Fintech has come into its own the past few years. Once an area of investment widely derided and avoided by VCs due to its regulated nature and entrenched incumbents, fintech has now emerged as one of the most popular categories for investment, buttressed by multiple, multi-billion dollar exits in just the past year like Plaid, CreditKarma, and Galileo.
Yet, building fintech apps and systems still requires a lot of finesse. There are those pesky regulations that make a cold start difficult for a fintech startup, and for founders, getting their feet through the doors of legacy financial institutions can be a major barrier to entry.
Financial Venture Studio wants to bridge the gap between a founder with an idea and the actual reality of getting a fintech startup into the market.
It’s a new firm, but one that is building on an extended legacy as one of the most influential early investors in financial services.
Ryan Falvey and Tyler Griffin founded the firm in 2018. They first worked together at the Financial Solutions Lab (FSL), which was a startup-focused incubator developed by the non-profit Center for Financial Services Innovation and funded by JPMorgan Chase. Falvey founded the lab to extend digital financial services into more areas of the economy, along the way funding such heavyweights as Digit, Nova Credit, Even, Dave, and Point.
Falvey and Griffin spun out of the program to build their own venture firm, with the goal of capturing the same spirit of helping founders make connections and accelerating their way through the thicket of challenges in fintech. Falvey has a background in banking having worked at Silicon Valley Bank, while Griffin co-founded Prism Money before joining FSL and eventually leaving to start the Financial Venture Studio.
Today, the firm announced the closing of their $13 million debut fund, which was funded by a wide number of financial institutions.
“We joked around that we should have called it, ‘Too Early Capital’ because you encounter these companies right when you can tell that they have an idea, some product,” Falvey said. “If the team is working on something and we just really know fintech really well, we can say, ‘Hey, we can bring a bunch of these other resources to the table earlier in your life cycle than is common, and hopefully accelerate their growth.’“
Falvey said that fintech, perhaps unlike some other categories, requires unique specialization from investors early on to be effective. “The problem is, you still need to follow the rules, and you’re still operating in the United States, which is a very complex and very expensive market,” he said. “Our ideal models are coming in at the pre-seed and taking them straight to series A.”
Fintech is the name of the game here, and there aren’t too many no-gos for the team within that broad category. I asked about cryptocurrencies and blockchain, and Falvey said that “we’re desperate to do a crypto deal.”
The firm is mostly focused on startups targeting the U.S. market, which can include international startups that are looking to launch or expand locally. Falvey says that the average first check size is $100,000, and that “we want to be providing a degree of support that kind of goes above and beyond.” The firm often makes follow-on investments as startups scale up and find market traction.
Given the amount of previous investment in the space, I was curious how Falvey sees the opportunities today in fintech. He said, “I think a lot of institutions are starting to think, especially in the post-COVID world, very differently about how they develop product, how they deploy it, how they support their staff and employees, which is going to open up a lot of new opportunities for fintech providers there as well.”
We talked a bit about diversity, which while certainly a problem in tech in general, is particularly acute in financial services. Falvey says that for many companies in financial services, one of their first lessons is just how much more diverse their consumers are than their own teams. “It is a user base that is more female, more black and brown, and less coastal than is common in technology,” he said. He notes that startups often learn the need for diversity early in order to communicate better with different consumers. He also pointed out that diversity was a topic brought up by LPs quite consistently.
Already, the firm has made 18 early investments across three “cohorts” and also has made some late-stage investments into a handful of their former startups at the Financial Solutions Lab. Among its first investments have been Everlance, Anvil, Roger, and HoneyBee.