When you’ve been an executive at two very successful payments companies, it can be a natural evolution to take the lessons learned from those experiences to try to help other executives become more successful.
And that’s just what Amit Jhawar is doing.
Jhawar recently joined Silicon Valley-based venture firm Accel with a focus on investing in fintech startups.
He joined Braintree in 2011 as COO & CFO when it was a 30-person, Chicago startup that had just taken a $32 million investment from Accel after bootstrapping for years. There, Jhawar helped scale Braintree to a global payments player, acquire Venmo, and lead the company through its $800 million sale to PayPal in 2013.
Within PayPal, he ran the Venmo business and under his leadership, Venmo grew from 15,000 active users in 2012 to over 52 million today.
Over a Zoom chat, (with me in Austin and he in his home base of Chicago) we talked about why he decided to become a VC and how he’s applying his experience as an operator to help fintech entrepreneurs pursue ambitious growth plans.
FL: What prompted you to take the leap from payments executive to fintech VC? Did you just have an epiphany one day or was it a slow realization?
AJ: Payments is just one narrow slice of all of fintech. There’s so much happening in the whole of fintech. This gives me a broader opportunity to help scale other companies. Both Braintree and Venmo went from single-digit millions in revenue to hundreds of millions of dollars in revenue and beyond. It was an awesome ride that I’ve been able to see twice in fintech. And I think that there’s a great opportunity to take some of those experiences and share them with other founders pursuing equally, or sometimes more ambitious, than what we did at Braintree and Venmo. I want to be able to help them avoid some of the pitfalls we ran into, and help them think about what’s going to happen at each stage. And, that’s exciting.
I’ve been close to the Accel team since I joined Braintree in late 2011. They’ve been looking at fintech investments across the board, and I would come in and help them by sharing my perspective on what I thought were interesting trends in the industry or, you know, some of the competitive dynamics that existed. There are also some problems that Venmo was facing or Braintree was facing and technology we were building for ourselves that I felt must have been a problem for many companies like ours. And then a lot of other players would be doing the same thing we are.
FL: Everyone is talking about how the COVID-19 pandemic has accelerated digital adoption across many industries, not the least of which, financial services. What are your thoughts on this?
AJ: I did realize that COVID could be a massive accelerator for some of the change that we need to see in fintech. The fact that people would have to figure out how to interact without necessarily writing checks, or seeing people in person or picking up cash. We’re seeing years of financial innovation getting compressed into a few months, where adoption had to take off. We’re looking for solutions to problems such as for when we don’t want to pass around a piece of paper to get three signatures, or pay an invoice in person, things like that.
FL: It kind of shows you what can be done when you really have to. Necessity can really breed innovation and in a way that nothing else can.
AJ: Yes, and I think there’s just a lot of inertia, right? Like, the reality is that if you’re used to carrying cash on you, and you go ATM regularly, that’s just kind of your normal behavior. And then the fact that, ‘Oh, you don’t know where the cash has been.’ Or whoever you’re paying doesn’t want cash anymore and they want to get paid by some other digital means. That forces a change in behavior. So you break the inertia.
And I think there have been beneficiaries to that all across the fintech ecosystem.
And now that you’ve had the trial, and people are experiencing the convenience of it, like cash in a digital wallet is effectively money in the cloud. It’s with you all the time, as long as you have your device…well, that’s a major change and a major benefit. You also can track your spending so much better when it’s digital, because you can know who you paid and when you paid them. You can go back and remember it. Some of the research I looked at before was that people have exceptionally poor recollection of how they’ve spent money. But having that all documented in one place, you can start making financial decisions for yourself and say, “Hey, like I’m going to cut back my spend on going out to eat because last month, I spent 20% of my income on eating out.”
So, you know, there are massive advantages for the amount of cash people have in their lives shrinking and moving into a kind of a digital platform.
And before, there were paper checks that would need to have two signatures from a company on them to be approved. Well, those two people aren’t going to be mailing paper to each other from their houses. And they’re not both in the office. So, now how do you make that payment? By simplifying some of the processes that’s making the approval process to send a check or to approve an invoice digitally as opposed to manual. So you’re not collecting signatures anymore, can get a digital approval, and then the money is released.
Most importantly, these experiences are actually much better in a lot of ways than the old experience. I like all the innovation that’s happening. We’re not pulling people backwards into a world where things are worse or it’s harder to do business. It’s simpler, it’s more easily able to be tracked. It can integrate directly into your accounting system and software, seeing your real time updates. There’s a lot of benefits to this. But trial was the hard thing, right? The inertia was the hardest thing, if something was kind of already working. And, you know, even if it wasn’t the best, you didn’t have to find a new way to do it. It didn’t necessarily rise to the top of the list of things that people wanted to change.
FL: I’m intrigued by a comment you made earlier about bringing your experiences from your previous roles to your new role as an investor. Can you think of at least one major lesson that you learned during your time at your company that is translating into your being a thoughtful investor?
I think one of the core ones is that you have to figure out what drives the business forward. And it can’t be 20 numbers, it can’t be 20 things. It’s got to be three to five things. And you’ve got to orient as many people in the business to driving those three to five things as possible.
I think that what happens in a lot of growth companies is there’s so much opportunity in front of you that you start getting spread way too thin. Because you’re trying to hire as you go, you’re having rapid growth. And what happens ultimately is say, your customer starts wanting different things, or new partners or new opportunities are going to drag you in different directions. And you’ve got to figure out really which one is going to be your core value proposition, which one is where you’re going to focus your time and effort. And how do you make sure you are all driving in the same direction and communicating to the team so they understand what’s happening, and why it’s happening, and that they can make those decisions when you’re not in the room. It is exceptionally important and I think that can get overlooked at times.
The speed of startups and the way that they move allows you to be nimble, allows you to change quickly if you need to. But you have to bring along your team with you. And I don’t think that always happens as efficiently as it should, nor as simply as it should. And you can move a lot further and faster if everyone is rolling in a similar direction.
FL: To be clear, as an investor, are you focused strictly on payments startups, or are you broadening your scope?
AJ: My areas of focus really are fintech broadly and that would be globally, and then enterprise software. Having been an operator has given me such a broad breadth of experience with every major function within a company.
There are many problems that I think can be addressed in innovative ways to help companies be more efficient but could also build great businesses for new founders and new companies.
FL: How do you think the relationship between incumbents and startups can be improved for the greater good of all parties?
AJ: I think there are times where startups are competing directly with banks. So if you look at what’s happening in the neobank area, a lot of new banks are competing directly with Chase or Wells Fargo. So I think there’s gonna be less partnership there, frankly.
There are other situations where a bank that may be largely domestic in the United States wants some international capabilities where they can integrate with a new player. Oftentimes, a lot of the financial institutions in the United States don’t even own their own technical stack. It’s actually provided by one of the system integrators. So making changes to your technical stack is then very, very difficult.
And I think that’s where you’re starting to see the innovation and some of the smaller banks that have partnered with the neobanks. Or, for example, Marqeta is helping issue instant types of virtual cards for Chase. That’s a place where Chase wanted some innovation, and Marqeta had the capability. That’s innovation. So I think there are these places where you start seeing, hey, it’s not either I’m a winner and you’re a loser, right? We’re both sides that can win and both sides can grow the market. And that becomes really interesting. I think that is the story of fintech in America. I know a lot of frenemies. I believe you can grow the pie by just finding ways to service the unserved population or the underserved population better.