Confessions of a FinTech Junkie

I find myself apologizing once again for being so delinquent in my posts and it feels like what I imagine good Catholics go through in the Confessional Booth (which is funny because I’m Jewish).  “Forgive me Twitter for I have been busy.  It’s been four months since my last post…”

With that off my back, I did want to share a few pieces of news that reinforce an important theme that I wrote about in the past (You Can’t Accelerate Time).  My own “wisdom” coming back to haunt me!

The first piece of news is that QED has completed a very successful and oversubscribed raise for $350MM of fresh capital (QED Fund VI).  While this fund is larger than our previous funds, the QED team isn’t planning on changing who we are or how we invest.  The size is a reflection of the opportunities we see in front of us and the talented team of Investment Professionals we’ve assembled.  We’re thrilled to have a great set of LPs backing the QED team and our belief is that our unique approach (thesis driven ex-Operators helping vision driven Entrepreneurs) will generate even better returns in the future.

The second piece of news is that earlier this week Credit Karma announced its sale to Intuit for $7.1B.  We were the Series A lead 10 years ago and have been rolling up our sleeves and doing what we can to help ever since.  It’s been an incredible journey working with Ken, Nichole, Greg, Ryan and all of the talented people who have joined since.

But, for kicks and giggles I pulled out our investment memo and the company’s 2009 financials.  Reviewing them definitely made me grin.  The company was so small and so thinly capitalized that payroll + professional fees were running around $33K a month and the entire cost base added up to a crazy monthly figure of $77K.  Our thesis for investing was well grounded, we understood the risks of investing in the company at a time when their sources of revenue were fighting bigger battles (i.e. – capital adequacy, regulatory oversight, good/bad bank splits, etc.), and we had done enough work to fall completely in love with the team and the mission of the company.  Fortunately, they fell in love with us as well…and thus began our journey together.  The company is now generating north of $1B a year in revenue and has signed up over 100MM members over the past decade.  What a crazy ride!

What’s interesting is that both QED’s fundraising process and the Credit Karma sale caused me to look deeply into the mirror and reminded me once again that you can’t accelerate time!  The gestation periods for early stage investments are long precisely because defensible and durable companies aren’t built overnight.  The foundation for a VC’s track record is built on the basic principle that a great investor needs to invest in companies that ultimately become major players in their respective ecosystems.  And building a company isn’t like shopping with Amazon Prime — you can’t expect delivery of greatness in 2 days.  Once a company nails down a solid and sustainable business model, the depth of efficient marketing/sales channels, the ability to attract, train and onboard talent and the capability for a team to handle the challenges that surround a quickly scaling business are major drivers of growth.  And with very few exceptions, one of these dimensions is a binding constraint over any short/mid-term period.  The obvious conclusion?  You can’t accelerate time because compound math needs time to work!

So, with 100+ investments under our belts over the past 12 years, QED will hopefully be part of many more stories like Credit Karma’s.  Some of our companies have already cracked the code and are busy scaling while others are still figuring things out.  What I hope is that every company we touch and every Founder we advise is a tiny bit better off as a result.  To everyone I say:

“The past is history, the future a mystery, but today is a gift because it’s the present.”