QED Investors announced the closure of two new funds totaling $1.05 billion, the capital of which will be used for early-stage startups as well as growth for later-stage companies.
especially today QED Announcing a $550 million early-stage fund and a $500 million growth-stage fundBoth aim to support fintech companies primarily in the US, United Kingdom, Latin America and Southeast Asia. According to Nigel Morris, co-founder and managing partner of QED, the fund was oversubscribed.
Since its 2007 founding by Morris – who co-founded Capital One Financial Services in 1994 – and Frank Rotman, QED has supported more than 150 companies, including 20 unicorns. It currently has over $3 billion under management.
While fintech has been an area of investor interest for some time, it’s safe to say that the sector has exploded in recent years – largely due to consumer demand as more people transact online. This is especially true as the COVID-19 pandemic (sadly) continues.
Clearly, Alexandria, Virginia-based QED was investing in fintech long before fintech was “cool”. As evidence of this, the firm pioneered Credit Karma’s Series A in 2009; Led Remitly’s Series A in 2014 and NuBank’s Series A in 2014.
The firm has come a long way That’s when it closed its first fund — $30 million of internal capital — in 2008. Its last fund – totaling $400 million – closed in 2020. Over the years, QED has backed unicorns that exited either through the public markets or through acquisitions, including SoFi, Credit Karma, Red Ventures and most recently, Flywire.
As someone who launched Capital One Financial Services years ago, it’s no surprise that when Morris started a venture fund, it was one that focused on funding fintech companies.
“After 14 years… it remains our cornerstone, even as fintech has evolved from the lending and credit businesses of the early years that were a core part of our Capital One DNA,” said Morris, managing partner at QED. acts as.
Frank Rotman, the firm’s founding partner, describes fintech as the “North Star” of QED.
“There are so many exciting fintech verticals today that can have a meaningful and lasting impact on consumers around the world, from proptech, sustainability and earned wages to student loan solutions and financial products that cater to people who have long been known to be bankrupted by banks. and financial institutions,” he said.
Specifically, Rotman said the firm is on the future of embedded finance and its support for companies that distribute financial products in a variety of industries, such as cross-border trucking logistics (such as NuvoCargo), car sales (Kavak) and shrimp farming. does. XpertSea).
According to Morris, QED plans to invest between 40 and 50 companies in its early-stage fund, with an initial average check size of $5 million to $15 million. The firm expects to make 20-25 investments from its growth fund, with an average check size of between $10 million and $40 million. It has so far made an investment from a growth fund that has yet to be publicly announced.
According to Morris, “almost every single” LP from QED Fund VI increased its allocation to the firm’s new fund. But the firm also welcomed a number of new LPs. While Morris declined to be more specific, he said the new LP includes “some really famous names”.
“There’s no better confirmation than when an LP doubles in support of what we’re doing,” Rotman said.
In terms of strategy, Rotman noted that QED continues to lead the deals it feels “passionate about getting into.”
“It’s no secret that market heats up and opportunities grow exponentially in this type of environment,” he told Nerdshala. “We see firms meeting with a founder in the morning, and a term sheet is issued as soon as the next day. Many VCs can offer capital. Very, very few people take it as proven, actionable advice. and augment with insights that can help them tomorrow.”
Morris and Rotman both attribute the fact that QED’s 17-person investment team is made up of former operators, which gives it a competitive edge.
“We are a unique company that provides unparalleled insight into an industry in which it is easy to do poorly and hard to do well,” Morris said.
“Most fintech companies will fail. It just happens to be statistical, practical delivery,” he said.
within the fintech industry, There are myriad complex issues — compliance, operations, technology, talent, credit risk and treasury, Morris continued.
“And it takes a long time for people to have enough tree rings to be able to understand them,” he told Nerdshala. “Most of what we do… by specialized functional talent and bearing the mark of our mistakes helps to improve and mitigate against the various issues that we as operators have made to ensure That’s what young entrepreneurs don’t do. Same errors. Solving just one problem isn’t enough. Founders need to successfully solve five, six, seven problems at once because if one isn’t solved, then The whole business will collapse.