QED's Ale Piedrahita on the European VC ecosystem and the competitive edge of its fintech market

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Show notes

Bios

Bill Cilluffo joined QED as a Special Advisor in the fall of 2014 and became a Partner in 2015. He is currently Head of Early Stage Investments after six years as Head of International, leading QED’s Investment teams in Latin America, Europe and Asia.

Prior to joining QED, Bill spent nearly 20 years at Capital One, spanning several roles and leading several businesses. He spent the first 6 years of his career leading Marketing, product development and credit policy for Capital One’s subprime credit card business; ultimately having overall P&L responsibility, and growing the business to become the most significant player in the market. He moved on to spend 2 years in various new business development roles, spanning the telecom, medical finance and small business finance industries. Bill spent 3 years as Deputy Chief Credit Officer for the bank, playing nearly every role there was to play in the central credit function, after helping build the department from scratch in 2002.

Bill then pivoted his career to general management, leading Capital One’s Canadian, and ultimately International businesses, over the course of 6 years. Profitability of the business grew significantly under Bill’s leadership, through new product and channel introductions, acquisitions, and significant cost take out. During Bill’s last 3 years at Capital One, he led its Co-Brand and Private Label credit card business, building the business nearly from scratch to one of the top few players in the US market, through a series of acquisitions, most notably including leading the acquisition and post-merger integration of HSBC’s US credit card business, which closed in May 2012.

Bill graduated with a BA in economics from the University of Michigan, and competed the SEP program at Stanford GSB.

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Bill:

You're listening to the Fintech Thought Leaders podcast from QED Investors, your deep dive into the world of venture capital and financial services with today's digital disruptors. QED is a global venture capital firm focused on investing in Fintech companies all the way from pre-seed to IPO. Fintech Thought Leaders brings together the most talented entrepreneurs tackling today's biggest problems. If you're looking to learn more about what motivates our founders and team members to succeed, you're in the right place. Hello and welcome to the Fintech Thought Leaders Podcast. I'm Bill Cilluffo, Head of International Investments at QED Investors. Today on the podcast, I'm very excited to be joined by Alexandra Piedrahita, a principal in our London office. Ale, welcome to the podcast.

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Ale:

Hi, Bill. Thanks for having me. Very excited.

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Bill:

Definitely. Me too. Well look, before we get started, there's a bunch of things I'd love to cover about your background, what you're doing now, kind of how you think about leadership and your role, but just to give our listeners a little bit of an orientation, wouldn't mind if you'd give us a bit of an elevator pitch of what's your background and how did you get to QED?

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Ale:

Yeah, so try to make the story short. I grew up in Spain, but of South American parents, so Colombian father, Brazilian American mother, studied in the US, started my career at Ares Management, which is a large alternative asset manager, and I think that we'll get to this in the podcast, but gave me my first glimpse into Fintech from, I guess you could say the other side. I was super curious about what I saw going on on the Fintech side of things.

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So I decided to do an MBA at London Business School to sort of transition my career back to Europe at that point and to pursue my interest in Fintech, either from an operating or an investing perspective. So I had two different experiences in terms of internships during the MBA, one on the VC side with…, another on the startup side, a company called Givestar in the sort of nonprofit space, but it was in payments and decided to go the VC route. Took my first job with a fund called March Capital based in LA, covering Fintech, and then was lucky enough to join the QED team almost three years ago, about two and a half years ago now, in October of 2021. So loving it ever since.

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Bill:

It's amazing how fast time flies, hey. So Ale, based on that background, how many different cities have you lived in? It's got to be a large number.

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Ale:

Eight.

Bill:

Eight cities, and that's got to be at least four or five countries, right?

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Ale:

Yeah, so almost three years in... I'm getting restless here in London.

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Bill:

Well, if there's one city that might hold you for a while, London's got a lot going on. No, it's been one of the most fun things for me as QED has grown, it's just people that we're able to bring in from all over the world, living all over the world with lots of wild backgrounds. And I know yours is toward the top of that list, so that's awesome. So when you were younger, you mentioned you've got South American parents, they met in the US, moved to London, moved to Madrid. So you had already moved a couple of times by the time you were eight. Can you talk about what that was like for you at recognizing you're quite young, moving around to different countries so early and maybe how that's influenced the rest of your very much international life?

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Ale:

Yeah, I'd say it's probably the most... I don't know, defining thing or it was for me, the most defining thing about myself growing up was that I always sort of felt like an expat wherever I was. I therefore love and I'm always attracted to expat communities, even here living in London and married to a Turkish guy and 90% of our friends here are international. They're not necessarily English, but what I think that that creates is people that are highly adaptable and flexible and I think curious because when you move time and time and time again, you have no choice but to basically adapt and make the best of every move and ideally learn the most about every place that you're in and get as ingrained in that sort of culture and that place.

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So yeah, it makes you an adaptable person that can, I think, relate to a lot of people from different backgrounds. And I think that that for sure influenced my sort of desire to go into venture capital where you're constantly speaking to people from so many different backgrounds in different places and you have to be able to sort of relate, understand, build a relationship with those people, truly understand what's going on underneath the surface of a certain company or a sector or a fund or whatever it is.

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Bill:

Yeah, it's interesting you say that. I mean, I've only done one international move in Toronto, so it was as easy an international move from the US as possible. But it was actually interesting after five years when we moved back and looked back at who our friends were, I don't think we realized any of this at the time. There's probably only one couple I could come up with that we were truly good friends with where both of them were Canadian. I mean it was almost all like one spouse might be Canadian, the other spouse was either American or Indian or from wherever else. It's interesting how the expats kind of sticks together. Fascinating to hear you say that. So for university, you came back to the States to go to Georgetown. I guess how did you decide that coming back to the US for school was the way to go for you?

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Ale:

I had been in an American school in Madrid, so the sort of US educational system was kind of ingrained in me. My parents had both gone to universities in the US and then had met there, so I always had my eyes set on the US and Georgetown I think is a very uniquely very international school, partially because it's in Washington D.C, and partially because of the School of Foreign Service, which is I think one of the top three schools for international relations and politics in the country. So it attracts a very diverse group of students, which I loved and was an extension and a reflection of me and the school I had grown up in, in Madrid. And it really feels like full circle that now coming back to D.C four or five times a year. I love it. D.C is the background of my... The Washington Monument is the background of my phone.

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Bill:

That's awesome. When's the last one of your trips that you went back and visited campus?

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Ale:

Not too long ago. I think it was a year and a half ago, two years ago because my youngest sister was still studying there and graduated in 2022.

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Bill:

Oh, perfect.

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Ale:

So I was there for graduation.

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Bill:

Oh, that's awesome. I think this year at our CEO conference, we even went to the bar down on Georgetown Waterfront, but not quite as far over as campus, but-

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Ale:

Exactly. I walked over there, but we were very close. Very close.

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Bill:

No, that's great. So after Georgetown, you already alluded to the fact that you spent a number of years working for Ares Capital and got to see Fintech kind of from the other side. I guess, how did you decide to go to Ares and can you describe a little bit about your experiences there?

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Ale:

So actually started at a fund of funds in Philadelphia called Hamilton Lane. And Ares was one of their biggest managing or partners that they managed capital for and allocated capital towards. And so it was one of their biggest partners. So I developed a close relationship with Ares from Hamilton Lane and was eager to get closer to the direct investing side. So I joined Ares actually on the corporate strategy and business development team, which meant sort of a whole hodgepodge of things at an asset manager. The project that then led me Fintech was that I was at Ares at the time that iCapital and CAIS were just starting up and they were these sort of digital platforms catering towards wealth managers and making investment products sort of accessible for those wealth managers online. So all the subscription documents, all the DD documents, everything that a wealth manager would look at for a closed end fund, liquid credit funds, real estate funds, and making that entire process available online for them.

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And so we at Ares had a huge array of mostly alternative assets, as I said, everything from private equity to energy to real estate and liquid credit and private credit, and we basically did a review of all of those investment platforms that were just starting to pop up back then. This was like 2015, 2016, and reviewed sort of which of these platforms... Which were getting the most traction with, which coverage of wealth managers, is digital investing really the future for private markets, is this really going to happen? So we looked at that whole space, which ironically we have been discussing in the last few QBRs again, and I just got super interested in what I was sort of reviewing from the other side and had no doubt that digital access to investment products was the future and that I wanted to go to the other side and be involved in growth of the Fintech side. That was kind of my journey at Ares.

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Bill:

That's awesome. So I haven't come to the realization that you wanted to be in Fintech. You decided to go to business school at LBS. I think, if I'm not mistaken, LBS is our biggest business school alum at QED. I think UVA is our biggest undergrad and LBS is our biggest grad school. What made you decide to go to business school routes as opposed to looking to just jump directly into a Fintech and why'd you pick LBS?

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Ale:

So I think I decided to do the business school route because I had very few contacts and relationships in any of the tech world at all. I was also sort of curious about should I try to access Fintech from the investing side and join a venture capital fund or should I operate? So I wanted to give myself that time in business school to A, strengthen my pencil on general business acumen, build my network, and then kind of explore both sides of Fintech from the investing and operating.

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I chose LBS, I mean it was my top choice. I think it was basically the only school I applied to. As I said, I wanted to come back to Europe, but because I wanted to be in the tech world, I knew I wanted to be in a city where I could be doing internships and accessing and building my network in the ecosystem throughout the MBA as well. And INSEAD, which is the other sort of in my second-best MBA in Europe is an incredible school, but it's sort of in the outskirts of Paris in France and quite isolated from a lot of these ecosystems that I wanted to be embedding myself. And I think that decision was great. As I said, I ended up doing many internships throughout the term at Boulderthon and then at Givestar and actually a brief stint at WeWork, which has nothing to do with Fintech, but...

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Bill:

I don't know, they probably thought it did. They thought it had to do with everything, right?

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Ale:

Exactly. Yeah. So that turned out really well. I got a new career and I got a husband out of LBS, so that was great.

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Bill:

Well, that's perfect, perfect. When you went to school, you knew you wanted to get into Fintech, you weren't sure about investing or operating, you had a chance to do a couple internships, one on each side. What made you decide to go the investing route rather than the operating route?

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Ale:

Yeah, I think that what made me go the investing route was that during my internship at Boulderthon, I felt a lot of the skills that I was using as a VC in sort networking and innate curiosity and diving deep and research and was just innate to my personality and it felt like kind of an natural extension of the way I behave in normal life. It fulfilled that curiosity component that I've always had. It fulfilled that desire to sort build relationships, connect with people as well as connect other people and enable and broker a lot of the ecosystem. So I really loved that aspect of it. I think that studying what's going on in different sectors and markets and studying the underlying players and trying to understand and place a bet on which company is going to drive a certain market forward and in what direction will that be, I think that intellectual exercise is just, to me probably the most stimulating thing out there. So I really enjoyed my internship. I felt like before, after, and during. It was just sort of very natural behavior to me and so decided to pursue it.

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Bill:

Oh, that makes a lot of sense. I mean, that is one of the more fascinating things about VC is just the number of different sectors you look at, number of different things you study. The strategic thinking involved in it is... You don't get bored very often, that's for sure, I'll put it that way. So you made the decision to go into VC, wound up going to March Capital in LA for a bit, and then back to QED in London. So you've had the chance to kind of look at VC both in the US and in London... I mean, London slash Europe more broadly. How did you decide to I guess, settle in on Europe? Was that more of a kind of personal choice or was that more of the ecosystem was just what interests you? I mean, can you talk about that train of thought there? I mean, it's pretty unique to have worked in both.

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Ale:

I'd say it was a mix of personal and professional. As I said, I had done the MBA in London to move my career back to Europe. This is where I wanted to be for personal reasons. But then also my exposure to the US market I think was great because there is no doubt that the US is the leader in the venture capital markets and in the tech markets. And I think getting exposure to that was great, but it actually for me really reconfirmed that Europe was where I wanted to be. And I think that in most sectors, Europe likely lags the US. I think Fintech is the one sector that it actually truly rivals the US and that we're on an unequal playing foot. So I think that there's a lot of innovation and business models that kind of pop up almost simultaneously in Europe or ahead in Europe of then the US.

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I always say we at QED, the European team, the sectors that we're looking at, the business models, et cetera, they're all much more on par with our US team than necessarily some of our more international emerging markets teams. So I think Fintech is unique within Europe because I actually think Fintech in Europe is competitive with the US and so that always attracted me. But also I think Europe has obviously the innate challenge that it's a collection of countries with different demographics, both sort of consumers as well as SMEs and enterprises. An SME in France is not the same as an SME in Germany, and it makes the challenges of growing cross-border and going international... It's a lot harder to reach the same sort of market size in Europe as you can in the US because those borders and those differences. And I think that as somebody that grew up moving so much, I'm always very attracted to that question of international expansion and is it possible and how can you adapt a product and what's the right way to enter a new market?

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So I like that challenge and I think the European market faces. And then the final thing is that I think that the European market in terms of investors is just naturally smaller. And I felt like it was an ecosystem that I could actually wrap my arms around. I today feel like I know 95% of the people that I need to know in Europe in terms of at other funds or angels or whatever it is. And I never thought that was possible in the US. The US is just so large that I always had a bit of an overwhelmed feeling, whereas in Europe, I actually feel like I can grasp it, at least focusing on one sector, which is, yeah.

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Bill:

Yeah. No, that makes sense. I mean, back to something you said a second ago, I mean, it is an interesting almost hybrid, right? So in some cases, Germany is quite different than France. I mean, many ways Germany is very different than France, but some business opportunities, it's completely different businesses, yet there are some business opportunities where you truly can be pan-Europe, given some harmonization of regulation, common currency, et cetera. So to your point, it's interesting to think about which businesses can easily be pan-European and which businesses really need to be country by country. So it's kind of a really interesting mix in that regard.

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Ale:

Yeah. Agree very much so. We have a lot of examples of each in our portfolio here.

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Bill:

Definitely, definitely. Well, so look, when we got started in Europe, we were very UK-focused. Our team still is all London-based, but I think as time has gone along, more and more of our activity has been throughout different countries in Europe. If anything, our two unicorns in the portfolio, neither one of them is located in the UK, which is kind of ironic given where we started. How have you seen the migration of the ecosystem since you've been looking at it starting in business school and then being here at QED for two and a half years of... At least my perception is it was quite London-centric and maybe that's one reason you picked LBS, but if you look at it now, maybe London's still the biggest ecosystem, but it's much more decentralized throughout different countries. I wonder if you can talk about what you're seeing there and maybe why.

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Ale:

Yeah. I think Brexit was a big reason for it. So I mean, as you said, the UK is still the leader. I think 2022 figures was that about 30 billion was raised in the UK, the second-largest market. Those second-largest markets are France, Germany, which are at 18 and 20, I forget which one. And then countries like Sweden, Spain and Italy, and I think the Netherlands are all sort of in that five to 10 range, so it gets a lot smaller. But as you said, we've seen a major uptick in activity in especially I'd say France and Germany in the last five years, with France really accelerating in the last few years. I think a lot of it is sort of natural tech ecosystems and how they operate, right? Which is that once you have a business that has scaled or IPO'd, so in Sweden it's been Klarna and then Adyen for the Netherlands.

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And so each country has their scale-ups that are getting to a maturity level that then starts to spawn off a lot of other founders. And so that sort of maturity cycle has eventually made its way through the rest of the European ecosystems. As I said, France has been probably the most active and especially when it comes to Fintech in the last few years of that first generation of companies spawning off new founders who have the last generation of companies, founders all as sort of angel investors on the cap tables and really helping and grooming that second generation of companies and getting the flywheel going. That's part of it.

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And I think that from an investor perspective though, whereas people do usually have large teams covering Europe, they view the entire continent sort of opportunistically, right? So I mean, there are of course seed stage funds and local funds in each country, but most of Tier 1 local funds in each geography are actually starting to go international, right? So HV, which was sort of the largest fund in Germany now has offices in Paris and in London… which was originally Nordic has offices here and in Germany and in Paris, the same for Boulderthon. So everybody is kind of everywhere and views the region as sort of one region to cover and be opportunistic throughout it.

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Bill:

How have you... And with our very extensive two-person European team, how have you and Yusuf sort of thought about adapting to this somewhat fragmentation of the market ecosystem?

Ale:

As you know because discussed this with you a lot too, sort of is it better to have 100% coverage in one or two geos or 70% coverage in six, right? Because it's unrealistic to strive for 100% coverage in six as a team of two, right? And I think that we've veered towards that 70, 80% coverage, but covering multiple geographies, as I said, I think that gives you the ability to take advantage of momentum in certain markets. So if France is accelerated with a whole new generation of founders, we'll spend a little bit more time there. Always covering the UK as well as a base case that is the largest market and this is where we are. But given that we're a team of two, it's unrealistic ever to not miss anything and see everything. And so I think being more sort of proactive about what we do want to see, where we do want to canvas, where we do want to spend time and doing so opportunistically and shifting has been sort of where we've landed and I think it's worked really well so far.

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Bill:

Yeah, I mean it's an interesting microcosm of I guess QED as a whole, whereas a global firm we're probably a little lightly staffed in every geo that we're talking about, but then you get some of the scale benefits and learning benefits of being that broad. So it's always a trade-off and I'm sure over time the answer changes depending on whatever the market dynamics are. Well look, I'd love to move into a couple specific topics about the market and maybe our portfolio. You referenced earlier in the call that various aspects of digital wealth management was something you're passionate about. I know it's something that you're spending a decent amount of time on. I wonder if you can talk about the opportunities that you see in wealth management, I guess specifically in Europe, although to your point, they're probably not super unique in Europe versus the US and some other developed markets. But I wonder if you can talk a little bit about what you're seeing and maybe what you're looking for.

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Ale:

Yeah, so as I said, it's always been an area that I was passionate about since joining QED. Ironically right when I joined, it was totally out of favor. So I joined end of 2021. I think that the first era of Robo-advisors, personal PFMs, personal financial management apps had raised a ton of capital. There had been sort of competitive wars that had resulted in sort of super high CAx as kind of that age of digital marketing in the age of easy money flourished. And then of course in a zero interest rate environment too. I think that those business models just... It was the worst of all worlds, right? There was easy money, so there was too many marketing dollars going after the same consumers and too many apps trying to capture the same consumers. And then the business model side of things in the low interest rate environment was also very, very challenging, right?

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So when I joined a lot of those consumer platforms when it came to WealthTech and the first generation of them worked completely out of favor. Ironically, as the markets have shifted and we've entered new higher rate environment, a lot of those business models and businesses that were completely out of favor three years ago when I joined are actually publishing incredibly strong numbers, right? So businesses like Scalable in Germany and Moneybox here in the UK and a lot of those Robo plus advisors. So I think that's been an interesting theme that we've been looking at again, but I think we obviously want to go a step beyond that and ask what is different and new in these business models today? How can they be solid business models that can also flourish in lower interest rate environments? I think Europe has been a little bit behind the US because for example, those eye capitals and cases of the world that I described, it started sort of 10 years ago in the US, have only started in the last few years here in Europe.

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So Moonfare again out of Germany, but we most recently last year spent quite a bit of time with very strong seed stage business called Vega, which is sort democratizing access to private markets, but doing so direct to consumers as well as B2B. So I think accessing those new asset classes and creating an investment platform for consumers that gives them both access to kind of lower risk yield type products as well as often having that stock and brokerage aspect of it as well as maybe then some more alternative products is an area that we've been spending quite a bit of time in. But as you said, we're also quite often attracted to the B2B business models and enabling the wealth managers that for better or for worse, we don't necessarily think are going to go away in our generation. So we've been looking at a lot of technology enablers for the wealth managers that exist around Europe as well.

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Bill:

Interesting. Do you have a theory on what changed? So I mean, I'm very much with you on the Generation 1.0. I mean, I spent some time eight or nine years ago looking at the space in the US, typically quite large CAx, quite poor unit economics, pretty decent churn dynamics, really high valuations and just really hard to see how it works and now sort of a new vibrance. And again, it's not just Europe, I think we're seeing much more vibrance to the market across different spaces. Do you have a theory on what's different now? Is it solely related to interest rates or is it learnings from that Generation 1.0 that is helping the founders and Generation 2.0 build better business models? I mean, any sort of general thoughts on that?

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Ale:

The fact that these CAx got out of control and that the unit economics of a lot of these Generation 1 businesses were terrible is no secret, right? So people are thinking innovatively about how they could monetize in this space, but I also think that consumers went through a major educational curve and a bit of a whiplash as well. So obviously that sort of first step of democratizing more wealth was not only the robo-advisors, but also then the Robin Hoods and the neo brokers of the world and coming out or going into COVID and then during COVID, we saw sort of a boom in activity on those neo brokers as a combination of the stimulus plans as well as people stuck and bored at home. And so I think that people were semi exposed or educated on stockbrokers, but were then totally burned when the market crashed now whatever a year and a half ago.

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And so now have sort of access robo-advisors, they've been on the neo brokers but got burned and so don't really like that and are simultaneously a lot more aware or manage their own wealth and invest their own wealth in the right way, right? So they're looking for tools that provide them with enough education and guidance that allows them to make smart decisions about asset allocation, but aren't these sort of meme stock driven platforms that they don't necessarily trust as much anymore, right? So I think that that holy grail of serving the mass affluent with a new age private bank is a theme that sort of we've been looking at across both the US and Europe. And I think as I said, what's different about these business models is that most of them nowadays are B2B and they're not necessarily trying to replace the wealth manager, but they're trying to enable the wealth manager through technology to provide not only a more efficient service for their customers, but also just better advice using AI to analyze portfolios and past trading history and sort of optimization for that.

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And then as well giving them a digital interface for them to interact with their consumers because realistically, our generation is always going to want to access information digitally but for certain wealth decisions, I think we'll still want to speak to someone who can help and who can give live advice and oversight because these are sort of big decisions. But eventually if we're comfortable signing an auto loan online on a platform with a platform like… and taking out a loan for 20K for a car, eventually those sorts of 20K, 30K investment decisions, I think we will get to a point where we can do it all digitally, but we're not quite there yet. So I think the shift is sort of focusing on B2B models, wealth managers is something new.

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Bill:

Yeah. That makes a lot of sense. Hey, I'd love to talk about maybe one or two other trends in the market, maybe through the lens of a couple of portfolio companies. One company, I know you're quite involved with, Remofirst really taking advantage of how often companies are working remotely these days, either exclusively remotely or partially remotely. I wonder if you can talk a little bit about what Remofirst does and what the market trends are that has us so excited about what the company's doing.

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Ale:

I have to give a shout-out to Yusuf too on his vision for Remofirst, which was the first deal that we worked on right when I joined. But when we invested in Remofirst, Deel and Remote.com, they were all sort of very much... They were very present and they were growing very, very quickly, right? So just to recap on what Remote-first does, they're remote payroll business, so they enable you to hire an employee in a country that you do not have a subsidiary and they will help you process all the Visa paperwork as well as sort of onboard that employee and then pay them. What they are doing is an employer of record type business model where they are unlike Deel and Remote.com, they are building software to enable local EORs that already exist around the world. So the EOR business has been around for several decades, but usually these EORs are kind of very old school players that are totally offline, very manual and very local and on the ground.

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And so what Remofirst has Built is a vertical software platform to enable those existing EORs around the world to serve clients and acquire clients globally. Whereas Deel and Remote.com, who are their two biggest competitors actually vertically integrated and set up their own EORs all around the world. So their growth is incredible and they are amazing businesses, but they've also become highly operational businesses because they have literally a hundred subsidiaries around the world that's processing payroll and they're also liable for that payroll. So the trend of enabling remote payroll was very much already in effect when we met Remofirst. But what we found in Remofirst was an incredibly scrappy young founder that had made it to basically almost a million of ARR between him and a co-founder with very little money raised, basically bootstrapped. And so we saw that this guy had a great go-to-market instinct and that given the rising tide in this space, go-to-market would probably be the determinant of winners.

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And yeah, the company has continued to excel super well. They raised their Series B at the end of last year. They [inaudible 00:31:19] last year. Even sort of during turbulent hiring and layoff markets in tech worldwide. So it's a trend that's here to stay. And I think it is a lesson to us, a rising tide market is attractive and especially many if them are not winner take all. And so if you don't back the first player, as long as you find a player that believe in from a product strength and go-to-market perspective, there's ample opportunity usually to sort of ride that tide.

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Bill:

Yeah, makes sense. And I don't think that tide is slowing down anytime soon. Probably just getting started. I'm pretty sure Nur is our only CEO from Kazakhstan, if I'm not mistaken. It's been really fun watching him really grow as a leader and build the firm. One more company I'd love to jump into just because I know it really illustrates another sort of massive trend around the world is our most recent investment that you really led the charge on Ale and it's a company called Swap. Wonder if you can talk a little bit about what they do and what are some of the trends and reasons we got so excited about backing them recently.

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Ale:

Swap started as a returns' management platform for e-commerce merchants. And they started here in the UK and the UK especially the post Brexit world is a market that is highly international across and is constantly shipping cross-borders, right? The UK market isn't huge, and whereas a US merchant will usually only start thinking about going international once they've reached 50, 60, 70 million in annual revenues here in the UK, merchants started thinking globally from 2, 3 million of revenue, right? And started thinking about shipping internationally and accessing especially the European markets. So that's a theme that we have focused on from when it comes to FX payments, hedging, and a lot of that payment activity is happening in cross-border e-commerce retail. So that's a little bit how we found Swap or came at it from that angle. They, as I said, started in returns management for e-commerce merchants, which was still very broken here in the UK.

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So similar to companies in the US like Loop and built cross-border returns infrastructure. So the ability to kind of bring a product back from the French market. And once they had built those rails with warehouses, carriers, orchestrating all those players, they realized that they could use that same infrastructure to sort of solve the outbound shipping for merchants who were also eager to keep their entire logistics stack with one enabling player like Swap. So they started with the returns, they then backwards integrated into the outbound shipping as well and are now hyper-focused on that cross-border commerce, solving that cross-border question for merchants and then giving them sort of a Shopify for their logistics stack.

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So being a one-stop shop for their entire sort of backend and logistics. So integrating with three PLs, as I said, warehouses, carriers for outbound shipping, for returns, enabling insurance for those products, sustainability products. And so they're really taking on nowadays a big public company called Global-e and doing so pretty successfully. We're really excited about them. The traction has been, as you said, tremendous since we invested in them. They were a similarly very scrappy team when we originally invested and so we're excited to see where they go from here.

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Bill:

Yeah. And another topic I think is riding some pretty amazing global tides, right? I mean, globalization of e-commerce is really only getting started and is only going to continue to grow, and folks like that will just make it easier and easier, which will make it grow bigger and bigger. So that's fantastic. So Ale, we're nearing time here. I just want to kind of finish maybe with a couple more general questions. You're several years now into your VC career. Obviously you meet hundreds of founders in a typical year, I'm sure you work closely with, I don't know, a dozen or so companies in our portfolio, ones that you're pretty serious about possibly investing in.

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I wonder if you can share any learnings on your approaches for building relationships with founders. That's an interesting job where having a good relationship's important, but sometimes you're also the bearer of bad news. We don't always agree with our founders. There's always plenty of conflicts out there. It's hard to know what the right answers are. So how do you think about building relationships with founders that aren't necessarily just based on telling them everything they want to hear, being able to have good constructive conflict and also at times really agreeing and stepping on the gas and going after it?

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Ale:

Interesting question. I think that every VC or to be a successful VC, you have to have your own sort of way of helping either portfolio companies or founders that you are trying to build relationships with in your pipeline. And I think that many of us at QED, obviously being sector experts in Fintech, our expertise in the Fintech space is the main way that we're able to help. I think that another way that VCs can help is just in brokering connections, right? We speak to hundreds of people, other investors, other companies, incumbents, Visa, MasterCard, JPMorgan every day. And so our ability to sort of broker connections and facilitate conversations that I think will be beneficial to both sides is unique because of where we sit in the ecosystem. We're kind of like a spoke in the wheel, right? And so that's very often... Or I think a combination of those two is how I always try to help, right? When I'm trying to build a relationship with a founder in a pipeline, especially one that's kind of hard to reach.

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There's nothing better that you can do than introduce them to a potential customer, right? They'll love you. If you do that, they'll be happy to answer your emails and questions every day. And you can DD a founder and a company through those introductions and through potential customer introductions, right? So I mean, you mentioned Swap, was... One of the big reasons that we got to a high level of conviction with Swap was because I introduced Commerce Merchant to them and I actually just wanted to pick my friend's brain on that swap is interesting. Like do they solve any needs? I just wanted her perspective on them and she ended up signing with them in a week in one of their biggest contracts. Those types of introductions I think are what I really try to enable every day because it helps the company, it helps whoever you're introducing and then it helps you in doing your DD on a...

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The same goes for working with portfolio companies. I often think of myself as an extension of their sales team with Weaver, I have... Weaver's our banking as a service company here in Europe and they sell to a lot of fintechs, and I have a weekly call with them on Fridays with their sales team where we just go over one another's pipelines because it's similar businesses. So sales I think is a key way that we can help both portfolio companies as well as pipeline companies. But then sector expertise in Fintech is obviously critical too. So I'd say not quite as much of that compared to many of our Capital One veterans on the team. But in my four years of Fintech investing, I've definitely developed my knowledge and I'm usually able to lean in and help there, especially when it comes to lending, embedded lending partners, et cetera. I think that that's somewhere where we as QED really, really stick out and are able to help.

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Bill:

That's fascinating and I think goes to the value in bringing in people into the firm that have all sorts of different backgrounds, right? I mean, you kind of lean instantly into, Hey, how can I help you do B2B selling? Many of our folks probably would not excel at that, but would probably excel at various other aspects of it. And how do we sort of line up whatever skills we need to help whatever companies we have because no one person's ever going to be able to help in every way. So look, two final questions here for you. You already referenced that one of the benefits of going to LBS is you met a husband, very exciting, and we're recently married even more recently, took one of the coolest honeymoons I've ever heard of. As we record this, I think you got back three days ago or something thereabout. So you're probably super jet-lagged as we do this call, but I'd love to hear about your honeymoon. I have never heard of such an amazing, unique trip.

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Ale:

It is my favorite topic right now, so I'm excited that you asked. I think my debrief with my parents on Sunday night was like two hours. I think they finally just cut me off. Yes. So we went to Bhutan for nine days, and then Kathmandu on the way back. Bhutan is a tiny country of 800,000 people sandwiched in between India and what was Tibet is now China. Very, very Buddhist in everything in the country. So Buddhism is embedded in the culture, in the people, in the politics, in the policy and economics. So the country famously measured gross national happiness instead of GDP, which as I mentioned sadly, results in a GDP of about 2.5 billion only. But I think it's growing and it's getting there and I think tourism is a huge part of that. Yeah. But it's a very pure nation that despite being sandwiched by two giant behemoths, has never been sort of invaded, has basically never been in a war itself and has thus remained very, very pure in culture, in spirituality, in politics, and in monarchy, in the Monarch.

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And so it's probably the most different place that I've ever visited. But also the trip was just one of those that I think for me was perfect because it balanced physical activity. So we did big intense hikes every other day or so. The entire country is in the Himalayan range, so all mountains, there's only two valleys that are wide enough to have airports in the entire country, otherwise it's literally all mountains. So it combined hiking as well as learning a ton about culture, the spirituality of Buddhism. But then also I made sure, especially for my husband who likes to relax a little bit more than I do, that we had some relaxing afternoons and some nice beautiful hotels. So it was a really great trip. I did not dive into the local tech ecosystem, and I went totally offline instead. But I did read up a lot on Buddhism and the history of the country, so it was great.

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Bill:

That's awesome. And you got to see Mount Everest twice from an airplane, is that correct?

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Ale:

Yeah, which I think has got to be the best way to see it, right? Not for base camp.

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Bill:

Hey, Ale, it's been amazing talking to you today. I'd love to end with kind of the same question we ask almost everyone, and especially in your case maybe entrepreneurs looking to start Fintech businesses looking to pitch you, what's one key tip or piece of advice that you would give an aspiring Fintech entrepreneur?

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Ale:

I think that the most common frustration that I face often is founders using GMV or gross burden premiums or a very, very gross revenue type figure as their true revenue figure or net revenue. And there's nothing more refreshing than hearing a founder talk about their net revenue first and where their margins truly lie. I think that that kind of creates a lot of transparency and often can lead to a lot more conviction because they're measuring what matters, right? So I think that that's a niche but tip that I often give people. Don't hide your gross versus net.

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Bill:

That makes a lot of sense. And I think people learn plenty of bad behaviors in 2021 that I think are quickly changing. So I love that piece of advice. Ale, it was great talking to you today. Thanks so much for coming on and to all of our listeners, thank you very much and we'll see you next time.

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This has been the Fintech Thought Leaders podcast, your window into the world of venture capital and financial services with today's digital disruptors. QED is proud to provide the best Fintech advice you can get. To learn more or to read the full show notes from today's episode, check out QEDinvestors.com and be sure to also follow QED on Twitter and LinkedIn @QEDinvestors. Thanks for listening.

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