Sheel Mohnot, who co-founded and serves as general partner at Better Tomorrow Ventures (BTV), offers a straightforward response to those who think fintech investment has become less appealing.
“Finance is a massive sector. Roughly a fifth of the world’s GDP comes from financial services, yet the industry remains far from fully digitized,” he shared with TechCrunch.
A significant portion of financial processes are still performed by hand, and Better Tomorrow Ventures — founded by Mohnot (previously a general partner at 500 Startups) and Jake Gibson, co-founder of NerdWallet — is working to change that reality.
“There’s still a huge opportunity for digitization ahead,” Mohnot remarked to TechCrunch. The firm’s limited partners appear to share this perspective.
Better Tomorrow Ventures recently secured $140 million for its third fund, coming close to the $150 million raised for its second fund, which was announced in early 2022 as the zero interest-rate policy era was winding down.
“We actually intended for this fund to be smaller,” Mohnot explained. “In 2021, things got out of hand. Every startup we backed quickly landed a follow-on round at inflated valuations, which in hindsight wasn’t ideal,” he added.
With fintech enthusiasm now more measured, BTV finds it doesn’t require as much funding to maintain its involvement with top-performing startups, Mohnot noted.
The firm also hasn’t used the $75 million opportunity fund it raised alongside its second fund in 2022, though that capital could prove useful soon. With several recent and upcoming IPOs in fintech — such as Chime, Klarna, Navan, and Wealthfront — there’s optimism that late-stage investors will regain interest in the sector.
At the seed and early stages, fintech investment has actually gained momentum over the past year. For example, BTV sees significant potential in transforming the accounting industry.
“There’s a huge gap in the accounting workforce. Firms are having to turn away clients, and AI is an ideal solution for this,” Mohnot asserted.
The firm has already invested in three startups focused on accounting: Basis, which recently closed a $34 million Series A led by Khosla Ventures; Layer, a platform that integrates accounting for small and mid-sized businesses; and InScope, which automates the drafting of audited financial statements.
But accounting isn’t the only area of interest: Mohnot is convinced that AI can be widely applied across fintech. “Financial services require a lot of manual work — from underwriting and compliance to fraud prevention and customer service,” he said. “AI can handle all of this more efficiently and at a lower cost.”
Other standout companies in BTV’s portfolio include Coast, a payments solution for fleet and trucking businesses; Unit, a banking-as-a-service provider last valued at $1.2 billion; Relay, an online banking and cash management platform for small enterprises; and Unit, a banking-as-a-service company with a $1.2 billion valuation.
With its third fund, BTV aims to invest in 30 to 35 startups, writing checks between $500,000 and $3.5 million.