Fintech Investor Interview: Nigel Morris

QED Co-Founder and Managing Partner Nigel Morris was featured in the FT Partners Fintech Industry Research Report in October 2021. Some excerpts are below.

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1. How do you define FinTech?

Fintech is about leveraging the best aspects of technology – mobile adaptation, optimising data, agile tech build, and heightening rapid learning – to make financial services better for consumers – through driving adoption, reducing friction, and creating transparency. Fintech is doing all of this rapidly, cheaply, and in modular/flexible form. But at its core, it’s about solving a problem for a user.

2. What is QED’s investment criteria (stage, focus, business model, geography, etc.)

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QEDis a leading Fintech venture capital firm. We invest in early-stage, disruptive financial services companies in the U.S., U.K. and Latin America. Our initialinvestment size typically is around $5M with significant reserves for follow-on.

We keenly focus on talent. To build conviction around an investment, the company must have amazing leadership. This means that management is balanced and transparent, open to advice, and focused on unit economics. After all, Fintech is hard and we strive to work with CEOs who innately understand this. Founders who think they know all the answers are subject to stumble. We focus on companies who are unrelenting. Fintechs need to push through constant challenges in order to be true disruptors.

The business must solve a real problem or create a palpable benefit for the user.Beware of technology zealots in search of a problem to solve. We are customerfirst in our thinking.

The business must be thoughtful about managing opportunity and risk. Solving a narrower problem well is less risky, but often has less upside, than solving a bigger problem with a larger TAM.

QEDis also hypothesis driven. We develop hypotheses, evaluate the universe of companies in the space, and apply full-court press to convert the best we can find. If we don’t reach a deal with a company we believe in, or if we don’t find one, we test further. Sometimes we will build it ourselves or assemble a team to build it and fund them from day zero. In that case, we tap into theCapital One diaspora – a now global network of industry leading business-builders with expertise in all aspects of financial services. We have had great success doing this through our Belay platform, building companies such as ClearScore, Wagestream, minu, MotoRefi, andtwo other companies that will be announced later this year, and we have scores of ideas in the pipeline.

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3. You have invested in 19 unicorns – almost 10% of your portfolio –and a handful of other near-unicorns. How have you generated such a high hitrate?

We are fortunate to work with some of the most talented CEOs in the world who are solving some of the biggest problems in financial services. And we are grateful for their belief and trust in us. They are the main reason we have enjoyed so much success.

But our team deserves credit too. We roll up our sleeves with each CEO, commit to the long-term, and put all our weight behind them. My previous answer lays out some of the ways we do that. A big part of our job is to increase our companies’ chances of becoming unicorns.I’d like to think we do that with every company in our portfolio.

4. What are key lessons you learned in building Capital One that you draw upon in your investing activity at QED?

I constantly draw on lessons I learned while building Capital One to guide my leadership and investing at QED. Some key tenets – politics is poison, hire and develop the best, go long on ambition and curiosity, data is truth, be hypothesis-driven, try and fail fast, everything is written in pencil, and growth is life. For Fintech in particular, the lessons include prioritization is key, be agile, put the customer first, and stay focused on unit economics. The only thing that entrepreneurs know for sure is that their plan as written won’t work out – so they need to think in decision trees, test everything, build in contingencies, and be opportunistic.

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5. What advice would you give to potential entrepreneurs on the fence about going outon their own?

Be sure about going out on your own. Know that it is incredibly hard but must also be exhilarating. Solve a problem. Get a partner. Choose your investors wisely.Go to school. Challenge everything, always and never give up. Believe.