Responding to a popular request, we are now sharing transcripts of our investor podcast interviews in this new series. The following interview with Doug Atkin was recorded in July 2019.
Doug Atkin, Managing Partner at Communitas Capital Partners, has extensive experience in FinTech and this conversation explores the nuances of that sector.
Sramana Mitra: Tell us about yourself. Tell us about Communitas. What are you doing? What is the investment thesis of the fund?
Doug Atkin: I have been an investor and operator in financial technology for many years. I have run the first electronic competitor to NASDAQ and NYSE. It was my first job out of college. We were 20 people. It was a great group of people.
I became the CEO and took it public. Subsequently, it got sold to NASDAQ for over a billion dollars. Since then, I’ve been investing and operating companies in the space.
I founded a venture fund with Tom Glocer, who is the former CEO of Reuters, and Duncan Niederauer, who’s the former CEO of NYSE. The three of us have known each other for years. Between us, we’ve done over 125 investments. A number of them have gone to zero but we’ve been fortunate enough to invest in eight unicorns.
Then last year, we formalized what we’ve been doing through the years. We took some of our money and some friends and family money, and just created a small vehicle to invest. The friends and family have quite a bit of money to co-invest. We were off to the races and have done 10 investments.
Sramana Mitra: Is FinTech the only sector you’re going to be doing?
Doug Atkin: No. The equity markets were the first markets to be turned upside down by technology. I hate the word disruptive, so I’m going to try to use it as few times as possible. That pattern is happening in other areas of financial services as well as other industries. When we see a pattern appear, we invest in it. We also invest in marketplaces of any kind.
Sramana Mitra: I know you have additional friends and family money that will be co-invested with Communitas. What is the size of the core Communitas capital?
Doug Atkin: We just launched it with $20 million.
Sramana Mitra: How about stage? What stage are you going to focus on?
Doug Atkin: Typically seed or Series A. We are more sector experts than anything else. If we see something late stage and we view it as a real opportunity, we will invest. We typically don’t invest pre-revenue.
Sramana Mitra: I want to ask you a little bit about how you are thinking about seed investments. Our community is very much early stage. How do you think about seed investment in FinTech?
If you look at B2B SaaS, which is a very popular category with VCs, it’s not that difficult to validate and bootstrap to a few customers. Seed investments in B2B SaaS is very well understood. FinTech is slightly different.
I use the terminology fat startups. Whereas B2B SaaS can be done as a lean startup, FinTech is not that easy to do as a lean startup. Could you comment on this?
Doug Atkin: I would agree with that. I would separate FinTech into two areas – geographically and also business model. Things that are direct-to-consumer are typically West Coast and goes directly to individuals.
The apps that are more B2B are typically New York and London-based. They are started by people with experience in the industry because you do need to know what goes on. The B2B need more money.