Sheel Mohnot on All Things Fintech, Starting Better Tomorrow Ventures
Jan 9, 2025
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Sheel Mohnot, Co-founder of Better Tomorrow Ventures and fintech expert, shares insights from his two decades in the industry. He discusses the innovative landscape of fintech, highlighting opportunities in vertical SaaS and embedded finance. Sheel reflects on lessons learned while competing with Stripe and the emotional complexities of acquisition decisions. He emphasizes common pitfalls for early-stage startups and the strategic importance of ownership in venture capital. Plus, he delves into the origins of The Mint accelerator, designed to nurture fintech startups.
Fintech has immense potential to drive positive change in financial services, with opportunities for digital transformation significantly increasing revenue contributions.
Better Tomorrow Ventures supports early-stage fintech startups through its accelerator program, facilitating growth via strategic guidance and partnerships among cohort members.
Compliance and understanding regulatory requirements are essential for fintech success, as many founders underestimate critical timelines affecting their startup's viability.
Deep dives
Digital Transformation in Financial Services
Financial services constitute about 20% of global GDP, which indicates a significant opportunity for digital transformation. Despite this potential, the current infrastructure remains outdated, as evidenced by incidents where customers are still required to fax forms in 2024. This highlights a clear gap in the market for innovative fintech solutions that streamline processes and enhance user experiences. The goal is to increase the revenue contribution from fintech companies, currently estimated at only 1%, to a much larger share by digitizing financial services.
The Role of Better Tomorrow Ventures (BTV)
Better Tomorrow Ventures (BTV) focuses on early-stage fintech investments, supporting companies that aim to improve people's financial well-being. Through their accelerator program, the Mint, they assist early-stage startups by providing funding and strategic guidance from experienced fintech founders. The collaboration within the cohort allows startups to share insights and unlock crucial partnerships, which can significantly bolster their growth potential. BTV’s focus encompasses a broad view of fintech, investing in various sectors that may not traditionally be classified under this umbrella.
Embedded Fintech and Accounting Solutions
Embedded fintech is identified as a crucial area of growth, particularly within small and medium business (SMB) software platforms like Toast and Shopify. These platforms are seen as pivotal for driving revenue through integrated financial services, leading to investments in banking as a service and payroll solutions. Simultaneously, there is a growing concern over a shortage of accountants, exacerbated by declining university programs in accounting. BTV is positioned to capitalize on this challenge by investing in accounting technology that simplifies financial processes for businesses.
Common Pitfalls in Fintech Startups
Compliance emerges as a key concern for fintech startups, and understanding regulatory requirements is crucial for success. Many entrepreneurs underestimate the time required for banking integrations and may miscalculate timelines, leading to delays that can jeopardize their business. Founders are encouraged to seek experienced investors or mentors to help navigate these complexities and establish realistic timelines. By prioritizing compliance and adopting a cautious approach, startups can mitigate risks and position themselves for sustainable growth.
Significance of Follow-On Investments
Follow-on investments are essential for maintaining and strengthening relationships with portfolio companies, as they signal commitment and support. BTV operates with a one-to-one reserve ratio, allowing them to allocate substantial support to their top-performing investments. This strategy is vital, especially in markets where initial rounds raise complex challenges for startups seeking subsequent funding. However, the ability to follow on is not just beneficial; it is sometimes necessary to secure a leading position in a hot startup environment.
The Evolution and Future of BTV
BTV has evolved to meet the changing landscape of venture capital, successfully raising two funds with a clear strategy focused on fintech. The firm doubled its fund size with BTV II, reflecting strong investor confidence and successful portfolio management. Going forward, BTV is poised to leverage its network and expertise to identify and nurture emerging fintech companies that can catalyze significant change. The commitment to an accelerator model complements traditional funding, fostering innovation and entrepreneurship in the fintech space.
Sheel Mohnot is the Co-founder of Better Tomorrow Ventures, an early stage fintech focused fund leading rounds in pre-seed and seed-stage companies. Our conversation weaves through Sheel’s two decades of building and investing in fintech, starting BTV, and why they started a fintech-focused accelerator, The Mint. Fun facts on Sheel, he was a contestant on the Zoom Bachelor during COVID lockdowns, in a Justin Bieber music video, got married in the Taco Bell Metaverse, and was once banned from Uber. We talk lessons competing against Stripe before selling his first company, common fintech startup pitfalls, and the trick every VC should use when fundraising. Timestamps: (00:00) Intro (03:13) Why fintech makes disproportionate positive change (07:49) Most interesting opportunities in fintech today (09:09) The accountant shortage (12:59) Common early fintech startup pitfalls (16:09) Building Fee Fighters to cut payment processing fees (21:15) Lessons competing with Stripe (21:57) Getting acquired by Groupon and adding $600m in market cap (25:11) Biggest first-time startup mistakes (29:21) Getting $10k in Uber credit via paid Google ads (32:13) Investing in Flexport (36:19) Navigating hot vs underhyped rounds (43:39) Sheel’s domain auction company (53:18) How he started angel investing (54:57) Spotify acquiring his podcast “The Pitch” (59:55) Why accelerators succeed and fail (01:06:07) The Mint, BTV’s fintech-focused accelerator (01:09:56) Camp BTV in the Santa Cruz Mountains (01:11:41) Early days of NerdWallet (01:14:55) Raising $75m BTV Fund 1 with Jake to fill a gap in the market (01:18:36) Understanding Fund of Funds incentives (01:22:15) References in VC fundraising (01:24:02) $150m BTV Fund 2 (01:27:13) Importance of following-on when leading rounds Referenced: BTV: https://www.btv.vc/ The Mint: https://www.themint.vc/ Fee Fighters: https://techcrunch.com/2011/09/23/feefighters-launches-payment-gateway-samurai/ Follow Sheel: Twitter: https://x.com/pitdesi LinkedIn: https://www.linkedin.com/in/smohnot/ Follow Turner: Twitter: https://twitter.com/TurnerNovak LinkedIn: https://www.linkedin.com/in/turnernovak Subscribe to my newsletter to get every episode + the transcript in your inbox every week: https://www.thespl.it/
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