Better Tomorrow Ventures Raises $140M, Betting Big on Fintech
▼ Summary
– Sheel Mohnot argues fintech remains attractive because financial services represent 20% of global GDP and are still not sufficiently digitized.
– Better Tomorrow Ventures recently raised a $140 million third fund, nearly matching its previous $150 million fund despite planning a smaller size.
– The firm sees significant opportunities in AI-driven solutions for accounting due to a massive accountant shortage and high demand.
– BTV believes AI can broadly transform fintech by automating labor-intensive tasks like underwriting, compliance, fraud detection, and customer support.
– The firm plans to invest its third fund in 30-35 companies with check sizes ranging from $500,000 to $3.5 million.
Better Tomorrow Ventures has successfully closed its third fund, securing $140 million to continue its strategic focus on early-stage financial technology companies. This substantial capital infusion arrives at a time when some market observers question fintech’s appeal, but the firm’s leadership remains unequivocally bullish. Co-founder Sheel Mohnot points to the immense scale of the financial services sector, which represents roughly one-fifth of the entire global economy, and emphasizes that its digital transformation is far from complete. He argues that a massive wave of digitization still lies ahead, presenting a fertile ground for innovation and investment.
The firm, led by Mohnot and NerdWallet co-founder Jake Gibson, initially intended to raise a smaller fund for its third vehicle. Reflecting on the market frenzy of 2021, Mohnot noted that the environment became overheated, with portfolio companies immediately securing follow-on rounds at inflated valuations, a situation he describes as ultimately unhealthy. The current, more measured climate for fintech investment means BTV requires less capital to support its most promising startups effectively. Notably, the firm has not yet utilized the $75 million opportunity fund established alongside its second fund in 2022, keeping that powder dry for potential future needs.
A significant area of focus for the new fund is the disruption of the accounting industry. Mohnot identifies a massive shortage of accountants, with firms routinely turning away business, creating what he calls a perfect application for artificial intelligence. BTV has already placed bets on three accounting-focused startups: Basis, which recently closed a $34 million Series A; Layer, an embedded platform for small and medium-sized businesses; and InScope, which automates the drafting of audited financial statements.
The firm’s belief in AI extends well beyond accounting. Mohnot is a strong proponent of its potential to revolutionize labor-intensive financial processes, including underwriting, compliance, fraud detection, and customer support. He asserts that AI can perform these critical functions at a significantly lower cost, driving efficiency across the board.
BTV’s diverse portfolio showcases its wide-ranging view of fintech innovation. It includes companies like Coast, a payments platform designed for fleet and truck drivers; Relay, an online banking and cash management platform for small businesses; and Unit, a banking-as-a-service startup valued at $1.2 billion. With its latest fund, BTV plans to make between 30 and 35 new investments, with initial check sizes ranging from $500,000 to $3.5 million, continuing its mission to back the founders building a more digital financial future.
(Source: TechCrunch)
