175: My Philosophy | Nik Milanović, This Week in Fintech and The Fintech Fund

This episode of MoneyNeverSleeps is sponsored by Philip Lee, one of Ireland’s fastest-growing corporate law firms and expert advisors at the heart of the Dublin and London start-up, fintech and crypto communities.

HIGHLIGHTS:

Nik Milanović on why he launched The Fintech Fund:

“For the last 15 years, people working in fintech and fintech VCs have been saying, ‘look, fintech could eat financial services’. I think for 13 of those 15 years, everybody said, ‘yeah, we’ll talk to you when you're big.

“Now fintech is finally big. You see platforms that are bypassing banks in terms of number of active users.  You see fintech companies that are valued more highly than bulge bracket fintech banks. What you see because of all this growth is this really rich ecosystem with more talented and bright people moving into financial services.

“People who might have wanted to build the next social app are now saying, ‘well, actually there are more interesting applications in financial technology that I'd rather be working on’. So, I think it's a super-active and exciting time to be in FinTech right now.

“That's why we started the newsletter two and a half years ago, and that's why I started the fund.  We’re also working on a couple of other community-focused products this year that I'm pretty excited about.”

Nik Milanović on the early influences on his fintech mindset:

“When I was in high school in econ class, I loved economics. I thought it was such an interesting study of how people relate to money and how they act around the allocation of resources. I had a teacher roll a TV into class and pull up a documentary about this nonprofit called the Grameen Bank in Bangladesh that was doing these social lending and savings circles.

“It was started by Muhammad Yunus who ended up winning the Nobel Prize for basically founding microfinance. For the first time, I said, ‘this is so cool, there’s a way to tackle poverty and inequality and the social allocation of resources, not just for rich people, but at every single level of the ladder.’

“And, it’s not reliant on a nonprofit or a government donation program, but actually relies on the incentives and market forces of a lending group in areas that banks aren't willing to lend. So, I always thought that theme of capturing market forces to create social good was really interesting.”

Nik Milanović on the series of events that led to the launch of The Fintech Fund:

“We had this great group of people in the syndicate, and we felt like we were backing this great group of founders, but everybody was writing personal checks, myself included.  With the money that we were investing, a founder would come to us and say ‘we want you to invest X’ and we'd say, ‘well, okay, we can meet you here [somewhere in the middle], but we can't invest all that.’

“So, eight months ago, the genesis of the fund was all about putting together a capital vehicle where all the money is still coming from people with deep fintech expertise. So, if you look at our LPs, most of them are individuals who have been working in fintech for a long time.

“What we want to do is aggregate all this fintech firepower and put it behind founders where the check sizes aren’t really what matters. We're able to invest between $150,000 to $300,000 in each company we invest in, but it's really about the expertise that you get and the development of this network where you're creating connections between fintech founders and fintech vets who have been in this space for 10, 15, 20 years longer than I have.”

Nik Milanović on the tailwinds driving the global opportunity for society with fintech:

“I think the scale of the opportunity has really been a tailwind because people are thinking for the first time that the size of the fintech pie is actually as big as the financial services pie. That makes people really passionate about working in fintech.  It’s kind of like an underdog mentality, but people realize how big the opportunity really is, and see that it's finally within reach.

“The other thing is, for better or worse, the pandemic really normalized online relationship development. Whether it's hanging out in Clubhouse once a week or pitching a venture capital firm remotely and getting a term sheet without ever having met them, people are much more willing to create relationships online than they were even just two years ago.

“So, you have people who are no longer thinking of themselves like they did 10 years ago where they say, ‘well, I'm a PayPal employee’, or ‘I'm a Robinhood employee’, but they think ‘I'm a fintech person and I've moved between companies, but those companies are all fintech companies because that's what I'm passionate about.’

“That mindset shift is really important for creating this super-engaged community of people collaborating across party lines between companies. With This Week in Fintech and the Fintech Fund, what we’re hoping to be is a very flat organization, where we create the fibers that connect all these different companies and different people.

“We want this to be in a way that is positive-sum, where people don't think they have to compete between companies necessarily, but they can be open to connecting because when we connect and learn from each other, that's where a lot of the best innovation happens.”

Nik Milanović on the blurring of the lines between fintech and crypto with DeFi (decentralized finance):

“I think that there is a Finance 3.0 now where decentralized rails and programmable money allow us to build entirely new exotic products that we never would've been able to build before.

“A lot of fintech is effectively user interface innovation where you are building a simpler, easier to use, cleaner, more accessible product on top of existing financial infrastructure. But the promise of DeFi is let's take it a step further and build an entirely new infrastructure.

“A lot of the architecture that we use is built for the analog phase of Finance 1.0.  Let’s make finance really digital and as easy to move money around as it is to send an email and as costless and as low latency.  Let’s make money programmable so that when certain conditions are met, money acts differently.

“We're at the very beginning of that revolution, but I think it's just like one more step in the right direction for creating these radical impacts in people's lives.”

Nik Milanović on taking his philosophy even further:

“I just got back from a week in Africa where we had events in Kampala (Uganda), Nairobi (Kenya), and Cape Town (South Africa).  The common thread is that there are all of these atomized, deeply passionate fintech communities out there.

“We want to start creating a horizontal layer - part of that's offline, but part of that's always going to be online - where we start creating the fibers to really connect them. There is so much contained, siloed knowledge - within people, within communities - that we can open-source in a way that helps fintech develop even quicker than it is today.

Nik Milanović on getting a note on LinkedIn with a screenshot from a founder moving towards a partnership thanks to a connection made after one of their Fintech Happy Hours:

“For every forwarded screenshot I'm getting, there are probably hundreds of other people who created a connection and they're on the job market looking to get hired and they met somebody that they want to work for. Or they're looking for a co-founder and they met them at an event.  Or they’re looking for an investor and they met them online through This Week in Fintech as part of the online community.

“I think that the opportunity to take all of these atomized centers of knowledge within fintech and connect them more meaningfully is going to be really material to the next 10 years in this space.”

Nik Milanović on his own fundraising journey:

“I’ve developed a lot of a Foundry empathy over the last couple of months fundraising. I know how much of a slog that process can be. It’s like any sales job where you have to take the no’s and move on from them and not internalize it. You have ups and downs, and you have a lot of people who don't get your vision and don't believe in it. And then you find the one partner who really does believe in you, and that makes all the difference.”

LINKS:

Episode title inspired by My Philosophy by Boogie Down Productions

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