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The Fintech Wave🌊Interview with VC
Interview with Srećko Džeko, VC specialist in fintech and crypto
today we have something special for you, something out the ordinary content. To your email inboxes, we are bringing Srećko Džeko, General Partner at Flash Ventures, a VC fund from Berlin, Germany.
Srećko has a super interesting career patch so far; he is ex-McKinsey, Co-founded his own business, and is now working in the VC industry. His specialties are fintech, the crypto industry, and B2B Saas.
Find out more about our guest and FlashVentures👇
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Now, without further ado, let’s go to the interview👀
Can you please tell us more about FlashVentures and your investment focus?
Flash Ventures is a day 0 investor. We invest in founders from the point of the intention of founding - and support them through the life cycle to build game-changing businesses. We are a generalist fund and invest across Europe, APAC, and Latin America, exclusively into pre-seed. My personal focus is fintech and crypto as well as B2B SaaS and marketplace investments.
How did you end up in the VC industry?
I had my first business when I was 18, and I joined consulting knowing that I would end up as an entrepreneur one day. I founded a venture-backed B2B marketplace and started angel investing. It was my fortune to work alongside great investors, and I just realized that I absolutely loved interacting with other founders and supporting them to not make the same mistakes I did.
What are companies' most common mistakes when approaching a VC fund asking for investment?
The first one: try to get a warm intro! For an investor, it’s almost impossible to keep up with all the pitches they get, and some see it even as a first test of whether you are good at getting decision-makers on the line. The second one is: to try to approach funds that match your thesis and horizon. This is partly to blame on the non-transparency in the market, but I still get many people pitching me things that aren’t a real venture case or raising at completely different stages. It helps to talk to other founders and understand what specific funds, and further even individual investors, focus on.
Can you tell us what happens after the company pitches you for their idea?
We try to be very fast and transparent with founders because they deserve to swiftly move on with their day-to-day business. We will have initial calls with the founders and move to a DD on our front. The final step is usually an IC with the whole partner group and some follow-up questions, as well as reference checks.
On average, how much time passes between the initial meeting and the funding round?
When it comes to people officially fundraising, it's probably 1-3 weeks. However, most of the people we end up backing we have known for months, if not years. We look for people who have helped build and scale companies successfully before next to other skills and traits - at our stage, where there is often no product and no traction, this is one of the few data points you can actually gather.
Do you see neobanks as legitimate contenders in the banking space? There are so many of them; even the most famous neobanks (Revolut, N26 etc.) can't stay profitable with their current business models.
Absolutely. Let’s remind ourselves: the FinTech wave only started in 2014/2015, and there are more than 5,000 banks in the Eurozone. I don’t see why many of these spots could be taken by Neobanks in the future. That being said, it’s true that many operate on very narrow, often interchange-fee-driven business models. But that’s not how banks make money. The real money is in things like lending, B2B banking, or selling investment products. Neobanks will need to mature and offer a multi-line strategy. Revolut is a great example of a company that I believe is clearly showing how it can be done.
Can you share FlashVenture's latest investments in the fintech space, and why did you decide to invest in them?
When it comes to Fintech (excl. crypto), the latest one that is out of stealth is Baya, a B2B BNPL company from Singapore. The thought is simple: if you are a B2C customer buying something online, payments are nowadays rather frictionless and you have companies like Klarna, Affirm, or PayPal to choose from. But in the B2B world, this is not the case. Baya simplifies B2B payments with fast and flexible payments by any preferred payment method, powered by instant credit checks & financing capabilities. We invested because we really loved both the thesis and the team. The CEO spent 4 years at Rapyd, a B2B payments unicorn, and knows how to build payment rails.
In your opinion, so few fintech companies are profitable, and yet VC funds are putting more money into them?
I cannot speak for the industry, but for me, it is two things: firstly, it’s the combination of a large industry, high margins, and low NPS. As Jeff Bezos said: “Your margin is my opportunity”! Banks make so much money with fees that are simply not justified, and I believe FinTechs here also have societal value because it's often the bottom of the pyramid that pays the highest for financial services. Secondly, it's the fact that FinTechs are a special category because money touches upon every part of our modern business life. Everywhere where money is flowing, there is money to be made. The opportunities to expand, embed and integrate into others are just immense. What is true is that e.g. stock-listed FinTechs have not shown the same trajectory to generate large profits as SaaS companies. It's still something the industry has to prove.
What is the next in line for fintech companies? We have "Buy Now Pay Later", corporate spending solutions, and money transfer applications...what is the next space where fintech companies can disrupt the market?
Looking around the globe, all fronts are still being attacked - Trading, Crypto, Payments, Banking, Core Infrastructure, Accounting, Treasury Applications, you name it. One particular trend that I believe is interesting is building infrastructure for cross-border applications. What you see is many startups going global faster, or tackling problems of a globalizing world, and they often currently lack partners and infrastructure to scale with them.
The blockchain/crypto market is very turbulent, and most people still don't understand how it will affect their everyday lives. Can you share your insights on how blockchain/crypto solutions will change our lives?
There will be two ways: the first one is non-visible, and the second one is visible. As the sector matures, I believe a majority of use cases emerging will use blockchain technology merely as a tool and put products first. This is what I call non-visible. I see the massive potential here in every sector because web3 allows for both technological advancements and incentive alignment that propel innovation. Think of cross-border payments, marketplaces, the creator economy, sustainability, or games here as sectors. In the end, people don’t care which technology is used when they make a bank transfer or which protocol for video calls, but they will pick products that make their life easier and better.
The visible changes are already here, but maybe not in every part of the world equally. If you go to parts of South America where inflation is expected to be over 100%, investing in a non-government-controlled currency that is widely accepted can literally save your life. It’s about giving people back the ownership of their money, data, and privacy.
What is your opinion on Web3? Is it just hype or a real deal?
There is no question that the sector was hyped. But every sector lives from the hype in the beginning. I believe that Web3 will be one of the most dominant themes shaping our lives in the next decades.
What are current trends in the blockchain/crypto world, something we should be aware of?
After the DeFi Summer and the NFT hype, the influx of capital is now calling up officials that demand more scrutiny. I expect a lot more regulation to come to the sector and believe companies building out the regulatory infrastructure will see large tailwinds. The same applies to fraud and security.
Other things that I hear people talking about a lot are GameFi and ReFi. There was the P2E wave, but people who are industry veterans increasingly move into the space. On the other hand, very senior operators are thinking about how to contribute to saving our planet and using blockchain to align incentives. It will be interesting to see what will emerge here, too.
Can you share FlashVenture's latest investments in the blockchain/crypto space, and why did you decide to invest in them?
The latest investment was Arcadia Finance, building an eco-system for on-chain collateralized financial products (lending, bonds, futures, options & other derivatives). Think of it as a decentralized clearing house providing collateral management as a service. It’s an intriguing space because there are massive problems with how protocols handle it currently, and we saw the downfall of many big players due to poor collateral management and a lack of transparency. Arcadia enables any protocol to build on top of their vaults, which can handle any combination of ERC-tokens to be used as collateral, leaving risk management to them.
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