Hey everyone, Ian here.
Before we dive in, we’re trying something new today. We’re doing an audio Q&A with Jake Gibson and Sheel Mohnot, founders of early stage fintech fund Better Tomorrow Ventures, which just closed an oversubscribed $75 million first fund. You should be able to listen to the interview within your email or podcast app.
If you work at a fintech startup, chances are you’re 2 degrees away from Jake or Sheel (most likely both.) They’re probably better know by their names, but for the past year, they’ve been quietly building a new early stage venture firm.
The two were targeting $60M, but a testament to both the fintech market and the duo’s deep experience and background in fintech, the fund ended up being extremely oversubscribed by the end of it.
Jake, Sheel, and I spent about half an hour on the phone yesterday talking about the fund creation process and their thesis, what makes the two of them work well together, and how everything might actually be fintech.
We’ve also embedded the interview below: it’s a lot of fun and provides a lot unique insights from two highly experienced fintech investors:
Switching gears…greetings from LA! I live here now apparently, at least for some time. I’ve somehow transformed into a healthy, wholesome, person. I run and do yoga now. I downloaded Strava. I started drinking juices and probably have a salad once a day. My music taste is still…the same…
I will not be writing a post about why I’m leaving New York for LA, because I already miss New York a lot. But, growing up in Jersey, going to college in PA, and then moving to NYC right after school and living there ever since was getting… claustrophobic. For me, it’s nice to go to an area of LA and not have to worry about running into someone you knew 7 years ago.
There’s also a few fintech-related things that fascinate me here in LA: tons of interesting fintech people are here; consumer fintech companies like Honey, Tala, HMBradley, are all based here; and there seems to be a ton of interesting fintech-adjecent sectors popping up.
And another LA thing that I should just get this out of the way —and there is a fintech angle here, I promise)—I bought weed. It’s legal here, but that’s not the point. The point is that paying for weed is an absolute nightmare. Cash is fine, but in a COVID world, cash usage is quickly becoming a faux pas. Cards seem to be difficult to process: I first noticed this at a popular marijuana distributor that shall remain nameless on Abbot Kinney, where they process transactions as an ATM, charge you a $2.99 ATM fee instead of a traditional processing fee, and then the clerk gives you physical cash back. It’s weird!
And this problem isn’t new: I came across it the last time I was in LA, back in July 2018. Dosist, another marijuana brand, opened a store (also on Abbot Kinney…) and a friend and I stopped by. When she made her purchase, they offered her a discount to her purchase if she signed a Dosist card. Then, from what I could tell, they input the transaction as an e-commerce sale, which tied her card details to her account which was tied to her Dosist card. When she would use her Dosist card, the company would process it like an e-commerce transaction again.
Why go through all these hoops and hurdles, just to get paid? Because weed, while tight, is illegal is most states across the US.
The New Consumer’s Dan Frommer wrote about this back in April 2019, and it seems like the problem hasn’t let up. Marijuana and other controlled substances/drugs are federally regulated. When states started legalizing cannabis companies, they were finding it hard to find payment processors and banks to work with them. Because financial services are heavily regulated at a federal level, most firms were worried about banking cannabis companies, which led to these creative workarounds.
Behind the scenes, based on conversations I’ve had, it seems deposit-holding banks are actually pretty keen to work with cannabis companies, given that these businesses that are moving massive amounts of money.
To me, this is something that seems ripe for innovation. Yes, obviously it’s a uniquely regulated area, but given the macro trends around marijuana consumption and regulation, this seems like a problem that inevitability will be solved. The question is by who. (If you think its you, or you want to work on an idea around this, hit me up…ian@fintechtoday.co)
Also, if you have anyone that I should chat with in the intersection of cannabis and fintech (in LA or in general), please also email me at ian@fintechtoday.co! Really interested in learning more about this space, so any thoughts are welcome.
