The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch

20VC: Fintech OG Sheel Mohnot on Lessons from Investing in Flexport and ChipperCash and Missing Robinhood and Chime, Why Overly Large GP Commits are Dangerous, Biggest Mistakes Managers Make with Fund I and Emerging Markets; Which Survive?

Aug 15, 2022

Sheel Mohnot, Co-founder and General Partner at Better Tomorrow Ventures, shares his unique journey from fintech founder to venture capitalist. He discusses key lessons from his investments in companies like Flexport and Mercury, and reflects on the dangers of oversized GP commitments. Sheel explains the power law in venture capital and its implications for portfolio construction, emphasizing the importance of selective investments in emerging markets. The conversation also touches on the evolving dynamics of collaboration in the VC landscape, blending ambition with strategic partnerships.

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INSIGHT

Power Law Realization

At 500 FinTech, Sheel experienced the power law firsthand, realizing few investments truly matter.
One company's success represented a 5x return on the entire fund, highlighting the importance of big wins.

ADVICE

Portfolio Construction

While indexing can work, hands-on investors in specific categories like FinTech should be selective.
Better Tomorrow Ventures targets 30 companies per fund and reserves more for follow-on investments.

ADVICE

Price Discipline

Be a price maker, not a price taker.
Communicate your desired price clearly and connect founders with those who have accepted similar terms.

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Sheel Mohnot is a Co-Founder and General Partner @ Better Tomorrow Ventures, a $225M fund that leads rounds in pre-seed and seed-stage fintech companies globally. Sheel and Jake (his co-founder) invested for many years together before founding BTV and wrote checks into Mercury, Flexport, Ramp, and Hippo Insurance to name a few. As for Sheel, before BTV he ran 500 Fintech for close to 7 years, and before that was a founder, founding two companies, both of which were acquired. If that was not enough, Sheel is also a master at measuring the width of swimming pools and making cameo appearances in music videos with Justin Bieber.

In Todays Episode with Sheel Mohnot We Discuss:

1.) Entry into Venture:

How Sheel made his way into the world of venture having founded 2 fintech companies?
Why did no LPs give Sheel money in the early 500 Fintech days? What were some of his biggest lessons from investing in 100s of companies with 500 Fintech?
How did BTV with Jake come together most recently? What are the biggest differences to Sheel of being a fund manager vs being an investor?

2.) The Power Law:

How does Sheel define "the power law" in venture capital? What multiple of return would be power law status?
Given the size of outcome available with these power law returns, how does Sheel approach portfolio construction? Would it not be best to invest in 100s of companies?
Who does Sheel believe has done the indexing approach best? Why?

3.) Venture Capital has Never Been Less Collaborative:

Why does Sheel disagree with Harry that venture capital has never been less collaborative?
Why now, for the first time, are large multi-stage funds taking single-digit ownership?
Does Sheel agree with Harry it is moronic to have "guaranteed pro-rata"? How does Sheel approach re-investment decision-making? When does he pay up vs not?

4.) The Biggest Wins and Misses:

What have been Sheel's biggest wins from a cashback and a multiple perspective?
How did Sheel miss the chance to invest in both Robinhood and Chime early on? What did he not see? How would he have thought differently with the benefit of hindsight?
How have Sheel's biggest hits and misses impacted how he invests today?

5.) Emerging and Frontier Markets:

Does Sheel share Harry's concern for the removal of capital from emerging markets?
Why does Sheel believe that India, South East Asia and LATAM will be fine?
Why does Sheel believe Pakistan and Africa are most in trouble?
What advice does Sheel give to his emerging markets founders today?

Items Mentioned in Today's Episode:

Sheel's Favourite Book: Enders Game