Better Tomorrow Ventures Closes $140M Fund - Fintech Investment

Fintech Investment Remains Attractive, Says Better Tomorrow Ventures Co-founder

Sheel Mohnot, co-founder and general partner at Better Tomorrow Ventures (BTV), firmly counters claims suggesting a decline in the appeal of fintech investments.

He stated to TechCrunch that the financial sector is exceptionally large, representing approximately 20% of the global GDP, and remains significantly under-digitized.

Addressing the Digitization Gap

A considerable number of financial processes are currently executed manually. Better Tomorrow Ventures, spearheaded by Mohnot – previously a general partner at 500 Startups – and Jake Gibson, co-founder of NerdWallet, is dedicated to accelerating the shift towards digital solutions.

Mohnot emphasized to TechCrunch that a substantial opportunity for digitization within the financial industry still lies ahead. This perspective is evidently shared by the firm’s limited partners.

New Fund and Strategic Adjustments

Better Tomorrow Ventures has recently secured $140 million for its third fund, a figure closely mirroring the $150 million raised for its second fund in early 2022, during the period of ZIRP (zero interest-rate policy).

Initially, the intention was to create a smaller fund this time around, according to Mohnot. He noted that the market exuberance of 2021 led to rapid follow-on funding rounds at inflated valuations for portfolio companies, a situation he now views as potentially detrimental.

With a more measured enthusiasm surrounding fintech, BTV now requires less capital to maintain its participation in its most promising startups, as explained by Mohnot.

Opportunity Fund and Potential IPO Boost

The firm opted not to utilize the $75 million opportunity fund established alongside its second fund in 2022. However, this capital could prove valuable in the near future.

The anticipated IPOs of several fintech companies, including Chime, Klarna, Navan, and Wealthfront, may reinvigorate interest among late-stage investors in the sector.

Focus on Early-Stage Fintech and AI

Investment activity in early-stage fintech has demonstrably increased over the past year. BTV specifically identifies significant potential in disrupting the accounting industry.

“A critical shortage of accountants exists, with firms frequently declining new clients. This presents an ideal application for AI,” Mohnot asserted.

Investments in Accounting Startups

BTV has already invested in three accounting-focused startups:

• Basis, which recently completed a $34 million Series A funding round led by Khosla Ventures.
• Layer, an embedded accounting platform designed for small and medium-sized businesses.
• InScope, a company specializing in the automation of audited financial statement preparation.

AI's Broad Impact on Financial Services

Mohnot is a firm advocate for the widespread application of AI within fintech. He points out that financial services are inherently labor-intensive, encompassing tasks like underwriting, compliance, fraud detection, and customer support.

“AI has the capacity to perform all these functions at a reduced cost,” he stated.

BTV Portfolio Highlights

Notable companies currently within the BTV portfolio include:

• Coast, a payments platform catering to fleet and truck drivers.
• Unit, a banking-as-a-service startup with a previous valuation of $1.2 billion.
• Relay, an online banking and cash management platform for small businesses.
• Unit, a banking-as-a-service startup previously valued at $1.2 billion.

Investment Strategy for the Third Fund

For its third fund, the firm intends to invest in 30 to 35 companies, allocating check sizes ranging from $500,000 to $3.5 million.