Our efforts to deep dive into markets sometimes uncover instances where investment opportunities elude us (for now, at least), but they have also brought us face-to-face with exceptional founding teams, prompting us to make investments. Other times, our deep dives occur during seismic shifts in the market that reprioritize our focus. Amazingly, all three occurred in the first half of 2023.

From AI becoming the forefront of all conversations (pun intended) to a regional banking crisis, continued acceleration of regulatory changes across industries, to a less-clear employment economy, many factors are guiding where we focus for the remainder of the year. Alongside some incredible Kellogg and Booth interns, we dove deep into many areas where we think more effort is needed. We made a couple of investments, found some areas to monitor, and have some new areas to explore. Anticipate more on each in the form of detailed blog posts, podcast explorations, and funding announcements in the coming months.

Workflow Automation for Overlooked Functions

Investors tackling this: Saaya, Tarun, Mike, Pete, Will

We have a long history (and portfolio) around automation, but layer in the accelerated impact of AI in automating workflow, and we are doubling down on this movement. The macro-environment has driven enterprise and mid-market companies to squeeze more efficiency without adding people…and the last several years, they figuratively just threw people at issues.

Our investment in Cable

We co-led the Series A for Cable, an all-in-one effectiveness testing platform that helps banks and fintechs comply with financial crime requirements. Natasha & Katie are the right founding team to solve the issue of manual reviews and sampling of data by bringing a comprehensive software solution to the 2nd line of financial crime defense at a time when regulatory scrutiny is further increasing on the compliance processes of banks, fintechs, and BaaS providers.

Redoubled efforts

The under-invested CFO suite craves enhanced tools that foster effective cross-functional collaboration. An area of real emphasis lies in the next-generation FinOps tools that facilitate efficient management of cloud spend. Enterprises face mounting challenges with increasing cloud vendors and limited visibility to solutions and often resort to retrospective cost-cutting exercises vs. a proactive collaboration between the CIO and CFO. The previous generation of solutions offered point solutions, but we anticipate this next generation will empower the CFO and CIO in equal measure.

We’ve been investing in the legal and compliance tech space for years, backing companies like Linksquares, New Era, Osano, TRM, Notabene, Eventus, etc. However, our focus extends more broadly; we firmly believe areas like audit, consulting, and legal, which heavily rely on meaningful manual white-collar labor and cross-functional collaboration, present immense opportunities for continued automation. These areas are prime candidates for applying automation and purpose-built, AI-driven solutions that promise the automation trifecta of benefits: high ROI, accelerated speed, and improved quality/accuracy.

A new focus

Undoubtedly, AI has and will accelerate the automation of manual white-collar jobs; we also believe it has enabled an increased emphasis and lowered the bar for the buy vs. build debate. We believe tooling to support the latter will consume our exploration time for the next year. In summary, the mundane will be automated and human augmentation and empowerment will lead the way.

Future of Work

Investors tackling this: Mike, Saaya

Within the start-up & tech world, hiring speed has slowed, and unfortunately, layoffs have become more commonplace. The need for navigating a global footprint, managing a hybrid environment, and upskilling have become more obvious.

Our investment in Workera

We made an investment in Workera and strongly believe the enterprise will be accelerating the cross-training and up-leveling of skills across their team. Kian and his team are at the forefront of mobilizing talent; check out their generative AI assessment as an example!

Monitoring but not actively hunting

Managing the complex tax footprint for the remote/global workforce and complex revenue streams was a focus in the 1st half, and we still find it compelling but monitor the space based on the early stages of development and advances in AI should make this easier to solve.

Reimagined Wealth Management

Investors tackling this: Yelena, Mike

Attend any wealth conference (and there are many!), and it quickly becomes obvious that change is happening now. Over the past decade, we have met hundreds of companies in the space and made investments in the space, including M1 Finance, Personal Capital, and TradingView, but the rapidly evolving consumer needs require even more innovative solutions. From digital consumer engagement solutions to modernizing the RIA infrastructure stack and tools to enable broader conversations encompassing debt and other financial assets, the demand and scope are expanding. We are increasingly convinced there is a big need here, and the timing seems ripe for swift adoption, driven by consumer demands.

Redoubled efforts

On the advisor side, we think growing self-direction across income levels continues to put pressure on advisory models that charge primarily for investment management. We are excited to see tech-enabled solutions empower advisors to offer broader guidance and compensation models shift to confirm this is the direction the market is heading.

Our work on the tech stack for both the advisor and more broadly capital markets has surfaced how many challenges that are really borne of the infrastructure – ie the custody and clearing players that underlie at least the investment execution. We see enormous opportunities to rethink the clearing models, trade execution software, and related capabilities that will enable new levels of flexibility, liquidity, and risk management for end clients.

Debt and Delinquency

Investors tackling this: Sach, Tarun

Making debt part of the financial conversation seems obvious when thinking about financial planning. However, this crucial aspect is often overlooked, and that needs to change. A clear illustration of this gap is seen in the fact that US consumer debt surpassed $17T this spring, all while mortgage financings slowed to a near decade-low pace and student loan repayment restarts shortly. These trends highlight the metaphorical hole consumers are digging themselves into and the urgent need for a holistic conversation.

A new focus

We believe there will be solutions to help incorporate tackling this as a consumer with your RIA/Financial planner more holistically. The conversation should expand from just investments to the entire balance sheet and cash flow to be an effective personal CFO.

Redoubled efforts

Financial institutions need to better understand customers’ financial lives and risk profiles to enable more meaningful and personalized engagement during the borrower’s journey with the lender. This will result in both a better customer experience and improved collections rates for delinquent accounts. Waiting to delinquencies as a portfolio vs. individual file and trying to recover post charge-off vs earlier in the relationship are facets of how the paradigm will change.

The road ahead

As we navigate the second half of the year, we look forward to exploring more areas, making more investments, and sharing our findings through detailed blog posts, podcast explorations, and funding announcements. If you’re building in any of these areas above or know exceptional founders solving problems – don’t hesitate to reach out and start a conversation with us.