Operator’s manual: QED’s approach to investing in fintech

On today’s episode of McKinsey on Startups, our guest is Dr. Cody Friesen, the founder and CEO of Source Global, a sustainability-focused startup that is working to help solve the planet’s drinking water scarcity issues. The company’s flagship product is the Source Hydropanel, a solar-powered, self-contained piece of technology that turns the plentiful water vapor in the atmosphere into a clean, renewable water supply. Source Global has done both commercial and residential projects in more than 50 countries worldwide, and expects to produce and sell tens of thousands of them this year, growing to a few hundred thousand in 2024. Friesen, an MIT-educated material scientist and professor at Arizona State University, has raised close to $300 million in funding since originally founding Source Global in 2015. The company is a Public Benefit Corporation (or PBC), making it focused on both shareholders and stakeholders broadly defined. Friesen sees no tension between “mission and money,” and hopes to help foster what he calls “conscious capitalism” as he pursues his company’s ambitious goal of making drinking water an unlimited resource.See www.mckinsey.com/privacy-policy for privacy information

On today’s episode of McKinsey on Startups, our guest is Camila Lecaros, the Managing Director of MassChallenge Mexico, a start-up accelerator that is part of a global network with other outposts in Boston, Texas, Israel, and Switzerland. MassChallenge uses a relatively unique model in its work with budding entrepreneurs. It takes no equity in the start-ups it helps get off the ground over an intensive, 3-4 month program; its offering is completely free to the very early stage companies that are chosen after a competitive judging process. Camila has been with MassChallenge Mexico for several years; she started her career in entrepreneurial outreach in Latin America working at local accelerator Endeavor Colombia and then VC firm Nazca Ventures. She has an abiding passion for working with founders just starting to try to turn their ideas and visions into reality; in her more than a decade career doing so, she has seen the region’s ecosystem similarly take flight from a nascent state to a vibrant, burgeoning entrepreneurial environment. As she told me, her greatest professional motivation is that “entrepreneurship is the only way we can create sustainable economic development.”See www.mckinsey.com/privacy-policy for privacy information

On today’s episode of McKinsey on Startups, we talk to Adeyemi Ajao, the cofounder and Managing Partner at Base 10 Partners. The San Francisco-based VC firm focuses on startups bringing automation technology to a variety of sectors in what it calls the Real Economy, including logistics, retail, healthcare, finance, and food. Its investments have included Nubank, Instacart, Figma, and Rappi. While Ade and his co-founder TJ Nahigian take a particular, data-driven approach to choosing their investments, that is far from the most distinctive thing about Ade or Base10. Last year, with the closing of a new $460 million fund, Base10 became the first Black-led venture firm to hit the milestone of having more than $1 billion in assets under management. Ade is half-Nigerian and he grew up in Southern Spain, where he co-founded and eventually sold a company called Tuenti, a social networking site often called the “Spanish Facebook”. He relocated to the West Coast to get his MBA and Stanford, and before co-founding Base10 in 2018, he co-founded and sold another startup, Identified, and was an active investor, helping to launch such successes as Cabify and JobandTalent. Base10 is not formally a diversity-focused investor, but a large share of its investments do happen to be with minority founders, and Ade and the firm spend a lot of time thinking and working to grow the pipeline and increase opportunities in tech for Black and other underrepresented populations. Its Advancement Initiative is a $250 million growth-stage fund that donates 50 percent of returns to HBCUs to fund scholarships for minority students, with several HBCUs also acting as LPs.See www.mckinsey.com/privacy-policy for privacy information

On today’s episode of McKinsey on Startups, we talk to Gautam Nadella, an operating partner at EQT Ventures in the Bay Area, where he drives M&A, fundraising, and partnership efforts within their portfolio of more than 100 companies. EQT invests in a wide range of companies in both Europe and the US; in November of last year, it closed what it described as Europe’s largest VC fund committed to early-stage tech startups, with commitments of 1 billion euros, putting its total raise since launching in 2016 at 2 billion euros. After a challenging macroeconomic year that brought an abrupt halt to more than a decade of gravity-defying valuations and funding rounds, we are excited to have Gautam join us to offer his broad, thoughtful perspective on the state of startups and venture capital in this new era, the power of transformative tech, and much more.See www.mckinsey.com/privacy-policy for privacy information

In recent years, the pressure from investors on already successful start-ups to keep growing faster and faster has been intense. Reaching a $100 million valuation, a notable achievement in its own right, left little time to celebrate; the venture capital (VC) firms that invest in these companies expect their value to reach $1 billion or more—and to do so quickly. Yet less than one in ten manage this feat in under four years.Earlier this year, a McKinsey team featuring Kim Baroudy, Giacomo Dolci, Sid Ramtri, and Harry Schiff set out to better understand that dynamic, to learn why it is that so many already successful start-ups struggle to maintain their rapid pace of growth. The result of that research is their recent McKinsey article, “Hard choices: How Europe’s fastest-growing start-ups become unicorns.” On today’s episode of McKinsey on Startups, one of the co-authors, Associate Partner Sid Ramtri, explains the key findings of the research, which identified principles to guide leaders of European scale-ups through some of the critical trade-offs and decisions that mark this period in their development.See www.mckinsey.com/privacy-policy for privacy information

It wasn’t very long ago that venture capital was so free-flowing it seemed as if any entrepreneur with a half-decent idea could raise an initial round of financing. Those halcyon days are clearly now past us, with inflation, rising interest rates, and slowing economic growth (or full-fledged recession) ushering in a radically different macro funding environment. VCs, angels, and other early-stage investors are much pickier about what new companies they will support, as a renewed focus on profitability and efficient growth is now the order of the day. That means, of course, that the founder’s job of selling their vision to prospective investors is more critical (and arguably challenging) than it has been for a long time. In today’s McKinsey on Start-ups guest episode from the McKinsey Israel on High Tech podcast, host Peleg Dekalo, a consultant in McKinsey’s Tel Aviv office, speaks to two experts about what it takes for entrepreneurs to achieve investor pitch excellence. Carmel Yoeli is the CEO of Atreo, one of Israel’s most successful B2B brand agencies, who works with tech start-ups to develop their strategic narratives and the brands that follow. Luisa Russwurm is a consultant in McKinsey’s tech hub in the firm’s Tel Aviv office, who spends a lot of her time helping young start-ups shape their investor stories. In this discussion, the two of them go deep on a four-part framework to structure an effective investor pitch, the importance of a clear strategic narrative, and other keys to success in selling the start-up vision.See www.mckinsey.com/privacy-policy for privacy information

Today’s McKinsey on Startups guest is Yada Piyajomkwan, cofounder and Chief Product Officer of Indonesian digital investing unicorn Ajaib. It was only a few years ago that Yada and her fellow Stanford MBA, Anderson Sumarli (now CEO), launched Ajaib with the goal of bringing investing to the masses in Indonesia, the world’s fourth-most populous country. Until recently, stock and mutual fund investing there were primarily reserved for a very small elite, roughly 1 to 2 percent of the entire population of some 280 million. It hasn’t taken long for Ajaib’s new approach to investing to take off. By focusing on financial literacy and investing education, Ajaib has quickly developed a growing following of more than one million investors who are drawn to its simple and affordable platform. The company has already raised more than $200 million in Series A and B rounds, and by some metrics is the fastest-growing unicorn in Southeast Asia.See www.mckinsey.com/privacy-policy for privacy information

Today’s McKinsey on Startups guest is Meirav Oren, the co-founder and CEO of Versatile, a startup that is working to bring the power of AI to the construction job site. Founded in Oren’s native Israel back in 2016 along with Danny Hermann, Barak Cohen and Ran Oren, and now headquartered in Silicon Valley, Versatile has won plaudits in the construction and investment community with its first product, CraneView, which the company rolled out just as the pandemic was starting in early 2020. As the name suggests, Versatile’s flagship offering turns the construction crane into the lynchpin of the data collection process. The company raised more than $100 million in Series A & B funding over the last two years and its product has been adopted by more than 40 percent of the leading general contractors in the US; it has also moved into the insurance space, helping carriers assess and manage risk in the high-stakes construction field. As a female founder/CEO in the largely male world of construction, Oren doesn’t view her gender as an obstacle, or really any issue at all. “I think it's a mindset more than anything else. I wholeheartedly believe that if you're solving a really big problem, if you're executing and doing it in really good ways, then your record, your company, your market, and customers speak for you.”See www.mckinsey.com/privacy-policy for privacy information

It’s no secret that plant-based foods and alternative meats have been soaring in popularity in recent years. On today’s McKinsey on Startups podcast, we learn more about this dynamic entrepreneurial sector in a guest episode from The Venture, the podcast on business building from Leap by McKinsey. Earlier this year, McKinsey’s Andrew Roth spoke to Eat Just CEO and cofounder Josh Tetrick. Founded in 2011, Eat Just has been a pioneer in the sector, producing eggs using mung beans and cultivated meat made from animal cells. Tetrick talks about his ambitions to transform conventional meat production, his understanding of consumer preferences and purchasing behavior, and getting the timing—and technology—right to reach scale.See www.mckinsey.com/privacy-policy for privacy information

Read more >    Listen to the podcast (duration: 27:29) >  On this episode of McKinsey on Start-ups, our guest is Mike Packer, a partner at QED Investors, a boutique venture capital firm focused on the fast-growing fintech sector. QED was co-founded by Frank Rotman and Nigel Morris, who was one of the co-founders of Capital One, and QED has taken a similar, data-centric strategic approach to its investing in the next generation of financial services disruptors. With more than $3 billion under management, QED invests in the US and UK but also has a growing presence in Latin America and other emerging markets in Asia and Africa. It has backed well-known fintech players and unicorns, including Credit Karma, SoFi, NuBank and Remitly. Like QED founders as well as other partners, Packer has a background in financial services – at Capital One, where he spent ten years in a variety of roles, including running small business lending. It’s that kind of operational experience that QED believes gives it a distinct advantage in choosing its investments and taking an active role in helping them succeed. Underlying the firm’s philosophy is a belief it can help fintech startups increase their odds of success by reducing the number of contingent probabilities or dependencies involved in the business plan. QED calls this fighting the tyranny of .8 to the power of 5.See www.mckinsey.com/privacy-policy for privacy information