While later-stage fintechs are beginning to grapple with layoffs and painful pivots in response to the looming downturn, early-stage startups have the opportunity to exercise an advantage over their larger counterparts. They can build resilient foundations to their businesses, says Jane Podbelskaya, Principal at Information Venture Partners, by solving for unit economics. 

In an interview with The Financial Revolutionist, Podbelskaya suggests economic fundamentals will help early-stage fintechs weather upcoming volatility, and will make them capable of sustained growth under any economic conditions. Podbelskaya also describes the Canadian financial landscape, outlines the strengths of being a hands-on VC, analyzes the future of women-led investment, and invites readers to never let a good crisis go to waste. 

This interview has been edited for length and clarity.

The Financial Revolutionist: What is Information Venture Partners, and what do you do there? 

Jane Podbelskaya: We are a fintech fund based in Toronto, Canada, which is one of the largest financial centers after New York. Our position allows us to have tighter relationships with large financial institutions, such as banks and insurance companies. There’s a budding fintech ecosystem here in Toronto, but also across North America and across Canada; 60% of our portfolio is in Canada. 

We’ve been focusing on B2B fintech since our inception. We have several investment pillars which include financial software, “tech for fin” (technology for financial institutions), embedded finance, and security and compliance. Financial software improves the productivity and workflow of finance leaders in an organization. Companies building offerings for big financial institutions are tapping into rich banking and insurance budgets, and there are lots of buyers, especially since banks don’t always have internal resources to build innovative technologies. We added embedded finance to our investment thesis last year, given a wave of technology companies that are letting non-financial organizations offer financial services. And the last pillar includes the technologies that help financial institutions protect themselves, whether it’s cybersecurity, compliance, or regtech solutions. 

We're an early-stage fund, so we invest in late Seed and Series A. And we build a very concentrated portfolio—our main focus is to have 10 to 12 companies per fund, and then provide a lot of very deep support to each entrepreneur. My role is principal on the investment team. I lead deals and source, do due diligence, close, and provide board support.

Why does IVP invest specifically in these buckets?

The founding partners have roots in banks and years of experience working with financial institutions. Plus, large Canadian financial institutions are also our own investors, so we have this ongoing working relationship with our LPs. We help them identify new trends, see new interesting companies, find new solutions to solve their problem, and at the same time, we're helping our portfolio companies to find their way into these financial institutions. 

As for why B2B, we realized the way the financial department in any company makes decisions resembles the decision making process of a bank. So we expanded our thesis areas into the B2B fintech space. 

You mentioned that IVP keeps the circle tight. Is that what you identify as your competitive edge when compared to other VCs?

On the one hand, having a more concentrated portfolio allows you to generate outsized returns, because if one company breaks out and becomes a unicorn, then this company returns the fund. Of course you have to be smart about choosing, because you can’t just spray and pray. 

What makes this model attractive for entrepreneurs is that they will get a disproportionate amount of time from us. We’ll always take a board seat and typically also take an observer seat. And we provide executives and residents at our companies’ disposal so they can tap into their knowledge.

But it depends on what the entrepreneur wants. If they want a hands-on VC with decades of experience that can help them with advice, then we’re the right fund. If they want just money then maybe it doesn't make sense for them. 

Where do you expect IVP to be headed in the next six months? And do you anticipate that other VCs will adopt a similar model to yours, rather than just spraying and praying?

It's not easy to quickly change your mode of operation. We're going to stick to our guns. In terms of macro conditions and how we're going to adjust our mode of operation: I think the market was overdue for a correction. If you go to the basics and look at a good old market-cap-to-GDP ratio index, it resembles the dot-com bubble. I'm relieved to see that valuations are coming into the normal zone where they should be. This is actually the best time to invest, because you can come in at reasonable valuations. 

My advice to founders is to own it and keep it simple. Don't try to hide the down round under the layers of warrants, liquidation preferences, or liquidation waterfalls. Just do a down round. We’re excited to continue business as usual: looking for and funding good companies.

You mentioned that you have some larger financial institutions as LPs. Do you think they're eyeing acquisitions during this time?

That's a great question. I wish I knew the answer. Right now everyone is in freeze mode. If these financial institutions decide that they need to tighten their budgets, they might slow down. But on the other hand, assets will be priced lower, so there might be some acquisition opportunities. I also think that there's still an unprecedented volume of dry powder sitting in the pockets of VCs and PEs. And PEs are quite often acquirers of companies in our portfolio.

My general advice right now to companies in our portfolio continues to be efficiency. Really focusing on fundamental metrics: Focus on your CAC to LTV, make sure that the cost of acquiring a customer is justified by the lifetime value. Focus on the margins, and maybe put less fuel on the fire of sales and marketing right now in the name of efficiency. 

And personally this period is a good reminder to focus on investing in mission-critical software that is not easy to take out regardless of the market conditions. 

You’re a woman VC in an overwhelmingly white and male space. Do you see that environment changing at all, and what would it take for it to change?

This is not a new question, but we should continue asking it. I am indeed a rare beast because I'm actually a software engineer by trade, so I grew up in several male-dominated environments. I’ve seen more women hired in the past five years, but it takes time for these women—like myself—to grow because of the apprenticeship model. You have to grow professionally. 

I'm always paying special attention to immigrant entrepreneurs because I know what it takes to succeed in a different environment. It takes a lot of grit and persistence. 

But I see the industry making an effort. For example, the Fintech Nexus conference that just ran in New York gave me a free invitation. I still had to pay for travel and lodging, but I thought it was a really nice gesture. I appreciate when people try to make deliberate efforts to bring in more—at least gender—diversity into these kinds of ecosystems.

Is there any other advice that you would want to pass on to The FR’s readers?

This is the time when good, truly valuable, differentiated, smart companies have a chance to stand out. Never waste a good crisis. Hopefully this correction market will teach people to be more thoughtful about hiring the right people and focusing on building their business. Figuring out your unit economics and your metrics is going to be important for the next while, and I'm actually happy that that's going to be the case. That will help companies build really sustainable businesses and business models and continue to grow through any kind of market.