RealtyMogul

Talking vs. Doing

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CEO of Nerdwallet, Tim Chen, Speaking to VC in San Francisco

Even though Home Depot moved on from its slogan of “Less Talking, More Doing” I’ve been thinking about that statement in the context of FinTech. There are so many conferences and places to network, it’s easy to spend too much time listening to experts versus doing the hard work of growing a business.

Reinforcing this, Level 39’s Head of Ecosystem Development, made this point at SIBOS last week in Singapore (see tweet).

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It’s not that events are a waste of time – it’s just critical to focus on what you do at them, i.e. focus on learning and giving back to partners and others.

As CoreVC‘s Kathleen Utech said, events like Money 20/20 are valuable in part for one-on-one conversations you set up, so make sure you plan them.

Buzz vs. Buzzkill

While there’s still a lot of buzz associated with financial services tech startups, with the latest news being the planned IPO for Square, a successful Los Angeles-based private investor in FinTech told me, “I’m sure a good percentage of startups with huge private valuations will never seen a liquidity event.”

We agreed that well-known startups are suspect, especially in some categories, e.g. robo advisors and online lenders. I’m bullish on the big names in the startup space, such as Prosper, but wonder about the second and third tier.

prosper

I recently sat down with Ron Suber of Prosper the other day and talked about innovation. I think the BillGuard deal was a very smart move. Prior to meeting him, I’d read the Stanford GSB Case Study on Prosper. It’s striking to see the similarities between today’s fascination with FinTech and the earlier euphoria  over E-Loan in the period during the last dot-com boom.

I recommend the case study to see the difference between a good idea and execution, and the key role of regulators. Another important lesson is that VC’s are not the final answer: It’s up to you as the entrepreneur to make smart decisions.

Being Smart: Investing vs. Paying the Price Later

I saw Bill McKnight, Head of Product and Technology at RealtyMogul the other day. It was interesting to see the energy of the office, which was quite different from offices of places like Prosper, which have more of a tech company environment.

realtymogulThe office atmosphere reflected the high percentage of employees who come from a real estate finance background, resulting in a mix between a tech company and a traditional lender.

Bill spoke to me about the importance of moving fast, yet being smart about investments in engineering to avoid “technical debt” later.

Transparency: Metrics that Matter

Another player in the real estate space within FinTech is Patch of Land. I met the CEO, Jason Fritton and CMO, AdaPia d’Errico, on a recent trip to Los Angeles. A somewhat earlier-stage startup than RealtyMogul, I was struck by the strengths of the team in terms of client and market focus.

I’ve also been impressed by Patch of Land’s ability to build a community through its social media efforts. Would be winners in FinTech would be smart to look at how AdaPia’s team uses SM to bolster growth.

Here’s some comparative metrics for Patch of Land (on top) vs. Lending Club. It’s clear from the SM metrics that the objectives are different, with one being more of a broadcast model vs. means for community engagement, but the figures are striking.

 

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Steady Growth

Tim Chen, CEO of NerdWallet spoke to a packed house of about three hundred members of the SF FinTech Meetup at its offices in San Francisco recently.

nerdwalletPersonally, I was impressed by Tim’s modesty as he spoke of growing NerdWallet from tough early days when it made very little money. He won the crowd over with his timeline showing user growth matched by the SEO work to grow reach (building links and creating content).

Talking to others in the world of FinTech is useful, since I think each and every interaction with others can be a learning opportunity, but beware attending too many conferences on FinTech, when you could be building something.

Follow Me

And the Winner Is …

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Inspired by last night’s Academy Awards, I wanted to link this week’s post to a couple of related themes, namely Los Angeles area startups (including those in FinTech), and explore the concept of winners vs. losers in the FinTech category.

But to kick off, as far as this year’s Oscars, I think John Battelle said it all:

So damn over

Yes, the awards show was a bit of a let down – but having just returned from a trip last week to Los Angeles, where I’d lived for about five years, I wanted to talk a little bit about the area (not traditionally known for its startup scene).

Last month, I was excited to hear the news that that my friend, Bill McKnight, had joined RealtyMogul as SVP of Product.

realtymogulI’ve known Bill since 2006 when he was at Rent.com (acquired and later spun out of eBay). RealtyMogul is a FinTech success story, but will write more about real estate in a future post.

 

But since the focus is on Los Angeles, I have to call out another innovator in this space that’s more focused on lending (vs. buying an ownerships stake in a building) and with a slightly greater emphasis on residential vs. commercial property: Patch of Land.

patchThey get a lot of buzz in the FinTech circles, and should have a break out year in 2015.

Beyond RealtyMogul, other local FinTech firms to track are Zest Finance, FastPay, CapLinked, and StockR.

Later I’ll write a more detailed overview of these, but one SoCal company I’d like to call out for special attention is Acorns.

acorns

To me, Acorns is one of the better FinTech stories out there. It combines many things that I believe in. First, the move away from a “unified app” view of the world, i.e. the idea that’s championed by the big banks out there that you need to sign into your bank account  to do anything. I think in today’s world, it’s far better to have a focused app strategy.

Second, Acorns employs good “behavioral science” to actual problems. Specifically, most people say they want to save, but due to inertia or banks making it hard, people often don’t do the right thing. Prof. Schiller from Yale has written persuasively on this, leading to simple but effective changes, such as auto enrollment of people into 401k plans (vs. requiring filling out forms).

I’m also a fan that they take something somewhat arcane, i.e. the Markowitz portfolio theory of investments (which was maybe my favorite concept from B-school) and make it simple to understand and apply to real life.

By encouraging savings (“pay yourself first’), making it inexpensive and smart, I think Acorns has a lot of potential to do real social good, which is the other reason I like Acorns, with the last being its a mobile first business. Check them out!

FinTech startups or banks should check out LA-based startup, Prevoty.

 

Winners vs. Losers?

Sticking with the Oscar theme, a question I’ve been thinking a lot about of late is who are the winners and losers in FinTech. What’s striking to me is the recent focus on which regions will win.

I was intrigued by a recent claim by a UK newspaper that 50k people work in FinTech in London. The article didn’t say, but I think the figure makes sense only if you include tech workers at banks (e.g. Barclays) and related providers (e.g. IBM).

This table shows the SF / Silicon Valley FinTech players ranked by employees (adapted from recent SF Business Times article).

FinTech SF : SV

While I’ve seen lots of lists of “most innovative” players in FinTech, I would like to see this table showing actual employment for other cities (e.g. London, New York).

It’s a Wrap

As an Oscar night-inspired post, I’d like to give a shout out to those based in Los Angeles I admire:  Gary Braitman, a colleague from Scient, now EVP at Wells Fargo. Jason Farmer, at Dollar Shave Club. Bridget Baker at Baker Media (ex NBC Universal).  Robert Cerny, investor and lawyer at Hinshow & Culbertson. Drew Planting, real estate investor.  Bennett Pozil at East-West Bank.

In terms of FinTech VC’s, there is of course CoreVC, which is one of the best, led by Arjan Schutte, who founded Core after leaving CFSI. I’m also a fan of Kat Utecht at CoreVC. It’s good there are other tech-oriented VC’s like Upfront Ventures in Santa Monica.

It’s appropriate that I wrap up this Oscar inspired post with a short video: Just in case you missed it, here’s the short commercial narrated by Martin Scorcese from last night’s ceremony (reportedly made entirely on an iPad 2): Roll tape (link)

Good night!