William Leonard

The Anthemis Group is a global platform focused on cultivating change and the financial ecosystem. I’m privileged to be joined by one of their newest team members and Atlanta resident, De’Havia Stewart. De’Havia has a strong background as an investor and she joins me today to get into the weeds of the Anthemis thesis. We’ll also dive into what a typical day for her looks like and how she interacts with founders. We’ll discuss what trends and themes within FinTech that she and the firm are bullish on and then we’ll talk about how she stays up to date in such a fast-moving industry, like fintech. Before we begin today’s episode, some quick highlights from our team. So I will be in Miami coming up on December 1st, judging the Black Founders Demo Day, which is an event sponsored by Ink Magazine, AWS, Cadillac, and many others. This event is taking place during Art Basel. So if you’ll be in Miami, down at this time, feel free to give me a shout-out on LinkedIn, Twitter, or email. Startup Runway is literally right around the corner. We’ve got many of our finalists already solidified and they will be on the stage at the Woodruff, one of Atlanta’s most pristine venues pitching for the opportunity to win a $10,000 non-dilutive grant for their startup. If you want to be on stage with them pitching you can learn more details and apply at startuprunway.org. Now for today’s episode, this was a fun episode to record. So let’s jump right in. De’Havia, thank you so much for joining me today.

De’Havia Stewart

No problem. Thanks for inviting me.

William Leonard

Of course. I am really excited to learn more about your story and equally, what you all are investing in over at Anthemis. We’d love to kick it off here with your origin story of how you got into a venture. I know you have a bit of a consulting background but tell us more about what drew you to venture.

De’Havia Stewart

Yes. I’m originally from Pensacola, Florida. I’m a first-generation college student. I attended FAMU, Florida A&M University in Tallahassee, Florida. I actually was an accounting major so for a long time, I guess my dream was to become a CPA and work in public accounting at Deloitte or something. I tried everything you can think of in that field from corporate tax, internal audit, corporate finance, and so forth. And for me, there was this period of time when my friends and I decided we don’t want to do accounting anymore but we want to try to do Wall Street finance. And as you may know, when you’re in school, it’s all about building a resume to make sure you can get the internships you want and the jobs you want after college. That’s joining clubs, doing side projects, and those types of things. One day, someone dropped into our finance group chat about this fellowship, HBCUvc, and all I saw was the word invest. And I was like, sign me up because I need this on my resume. So I did that fellowship and during that time, I was able to work part-time with an early-stage fund manager, Marlon Nichols, based out of Los Angeles at the time. He was working on Cross Culture Ventures which is now MaC Venture Capital. I worked with him for about a year, working on about 15 seed deals, and it was honestly the time of my life. And so it turns out, I like venture capital finance a lot more than Wall Street finance. From that experience, I said, long term, this is the area that I want to be in, whether as a founder or an investor. I also discovered my passion for supporting minority founders through HBCUvc and through working with Marlon Nichols. I learned more about the funding disparities that black and brown people face. It became a passion of mine and what was really cool about Marlon’s firm was that, although it wasn’t a diversity fund, just given the makeup of the team, a lot of the founders that they were putting capital into were also diverse founders. You’ll see them consistently rank on Crunch Base as the top 10 most diverse investors but that’s a little bit about how I got into venture capital after school. I worked in consulting. One, because I didn’t quite understand the importance and impact of venture capital at the time but also, I was one of those people that was like, I need to work for a large corporation for validation. I worked at Accenture within their strategy practice for about two years. I worked as a generalist there across retail, CPG, and financial services with clients like Nike, Chick-fil-A, and Wendy’s with a focus on operating model strategy. And then right after that, I got into venture capital full-time supporting SB Opportunity Fund, which is a fund that was focused on underrepresented founders, so black founders, Latinos, Latinas, and Native Americans. We invested 100 million into that thesis area during my time there and about 40% of that capital went into FinTech. I really enjoyed FinTech and I would like to build a specialization here.

William Leonard

That is such a fascinating journey. From Pensacola, I have a lot of families there as well in the 850 area. Shout out to Pensacola. Now you’re at Anthemis, you got some time working with Marlon Nichols, and you worked at SoftBank. Now you’re in VC looking at a lot of FinTech companies at Anthemis which has an incredible reputation not only here in the US, but across the globe as a premier investment firm. Tell us more about Anthemis and the types of companies that you all are investing in.

De’Havia Stewart

Yes. As you mentioned Anthemis, we are based out of London and New York City. That’s where our US headquarters is and I’m based here in Atlanta. I work remotely. Anthemis was founded after the 2008 recession. Initially, we were helping large financial insurance institutions with corporate innovation. We were a consulting firm and then our founders, Sean and Amy said, we should do this ourselves and have those financial institutions back us. About 10 years later, we managed 1.5 billion in assets, and the majority of our LPs are large financial institutions, insurance companies, and so forth. We have two core thesis areas. One is digitizing the core financial services stack. When you think of payments, retailing, consumer finance, corporate banking, and so forth. And then our second thesis area is embedded finance. Looking at the convergence of FinTech and other industries, and how you can embed financial solutions into your core products and services. A good example of that is Shopify, for instance, as you know, it’s like an E-commerce platform but it also serves as the payment facilitator for all of these transactions. Instead of using Stripe or something else, they build their own solution in-house. We do a lot of E-commerce enablement because the thought process is that you can become a payment facilitator in the future. We’re early investors in companies like Pipe, Betterment, Carta, eToro, and so forth. I guess more on what we invest into, we do pre-seed to Series A investing with seed being a sweet spot.

William Leonard

Nice. Focused on seed, you will do some series A and E-commerce enablement. It sounds like it’s a core focus. Are you all B2B and consumer as well?

De’Havia Stewart

I will say e-commerce enablement under our embedded finance thesis but when I think of FinTech in general and what types of business models attract us, I will say a lot of FinTech firms. When you hear FinTech, they mainly do B2B. We do a lot of consumers also. It’s about 50/50 for us.

William Leonard

Nice. That’s really fascinating. Relative to you as investor behavior, are you drawn to any particular sub-themes within FinTech? And if so, what are they? Can you provide any real-world practical examples?

De’Havia Stewart

Yes. I think, for me, at least Anthemis, our one-liner is cultivating change in the financial system. One thesis area that I’m working on is looking at those subsystems. One of my friends, she recommended a book for me called Thinking In Systems. It kind of provides a framework to dissect different systems. When I think about the financial system and its sub-sectors, like real estate or even venture capital, whether intentionally or more inherently, a lot of marginalized communities have been typically locked out of these systems. A thesis area for me is looking for solutions that help increase access to alternative asset classes. We have a company in our portfolio called Rally which is like fractional investing or art. It’s kind of like a spin on that. The reason I say that is because when given the model of fractional investing, it helps make art more affordable, or investing in alternative assets more affordable. But then also the actual asset of art it’s something that’s tangible and something that’s more relatable than a public stock. That’s an example, I would say. And then the second core thesis area for me is looking for solutions that help enable the back office CFO. As I mentioned before, I have a background in accounting. I work in all of these different back office areas. I mean, a lot of it is still run on Excel so it’s a lot of automation opportunity there. We have a company in our portfolio called Treasury Spring and they help provide cash management services to startups. There’s another company that’s not in our portfolio. I don’t know if you’ve seen these, the SOC 2 companies, like Vanta, which is at a million ARR. The reason I find that attractive, well, I’ll explain, is so they’re helping automate SOC 2 compliance. When I worked in internal audit, for instance, we focus a lot on like SOC 1 compliance. Looking for tools to help automate different regulations. That’s another thesis area under the back office thing.

William Leonard

Nice. That is a huge space right now when you think about Vanta and some of the other competitors that are building and competing in that space, because SOC 2 is a very time-consuming and costly process, especially for an early-stage company that may be working with enterprise customers, like banks, a large retailer, those are the checkboxes that they’re going to want to see before they can implement your solution. There’s a tremendous space for an investment opportunity. I really liked that. As you kind of focus on your day-to-day, tell us more about what a typical week looks like for you. I know you travel a lot. You meet with a lot of founders and you had a lot of conferences, but tell us what a typical week looks like for you.

De’Havia Stewart

Yes. I try to be very organized. I think you probably have a lot of control over your schedule, too, but I do try to be very organized. So on Mondays, I typically reserve that for internal meetings and catching up on deliverables like investment memos, developing thesis areas internally or for some of our LPS, helping with our LP report quarterly, and those types of things. I reserved Tuesdays, Wednesdays, and Thursdays a large portion of that time to meet with new founders and new companies from 10 to 5 pm. And then on Fridays, I reserve a large portion of that time just recurring, catch-up calls like reviews and other investors to share deal flow and those types of things. And then, throughout the week, just continue to work on deliverables and meet with founders for second and third calls within diligence. That’s a typical week for me. I guess some of the one-off things are like board meetings and conferences and those types of things.

William Leonard

I think prioritizing is critical to do at our stage and in our day-to-day tasks because you can get so inundated with deals. You get so much inbound, and it’s like, how do you manage? How do you know what to track? How do you know what to pass on? I think having that schedule is really fascinating. I want to dive deeper here now. We know that Anthemis really likes FinTech, specifically embedded FinTech solutions. I think it’s one of the broadest verticals that have a diverse set of business models, whether it be SaaS, FinTech as a service, you have transaction fees, you’re collecting interchange. Are there particular business models that Anthemis is drawn to over others that you all see maybe scaling quicker and capturing more margin?

De’Havia Stewart

I would say that with Anthemis, we invest in all of these different business models. Personally, I prefer SaaS business models, just because the recurring revenue makes it more difficult to go to zero versus like a lot of the transactional business models. But I think when we think about the transactional business models it’s all about unit economics and those types of things. Like, are you retaining customers for a long period of time like 12+ months? Usually, it works out. Even when you think about maybe, I think, when you mentioned the transaction fee business model, like that varies from company to company. If it’s an E-commerce platform that uses a transactional fee business model, depending on what type of customer they’re going after, if it’s like a fast fashion company versus an electronic company, of course, the average revenue per customer is different for those two different types of companies. And then if the retention and customer acquisition were the same, then, of course, probably the electronic company would have better unit economics. I think it’s a case-by-case scenario but personally, I prefer SaaS. When I compare it to the alternative where I’m looking at transactional business models, I could do a SaaS business that retains customers for one or two years. So the retention and unit economics needs to be up to par also.

William Leonard

You mentioned a lot of key metrics there. I want to dig into this a bit further because you mentioned, you all are investing in all these types of models here. From a high level, how do you evaluate a startup that maybe reaches out to you all, that’s fascinating, they have traction, what are some of the key things that you all are looking at to say, hey, maybe this, this is a fit for us Or maybe this isn’t so aligned with our thesis?

De’Havia Stewart

Yes. I will say we are a very thesis-driven firm. You mentioned we are specialized in fintech. Even at the seed stage, we are willing to go earlier than most generalist firms, from my experience, because I worked at one. And when I say that, I mean, sometimes we’re willing to invest pre-product and pre-revenue. If it’s a company building into a thesis area that we’re looking at or going after. Given that, it’s all about, I would say, founder market fit. That’s one of the key drivers. And then beyond that, of course, market sizing, and then economics. I don’t want it to sound weird because one thing we talk about a lot is, is this a founder that when things get bad, we’ll be able to pivot to the next thing? Because I see seed stage companies typically pivot like five times.

William Leonard

Founder market fit is the thing that I focus on the most, personally, because like you said, we’re investing so early. The company is probably going to pivot, the company probably hasn’t really solidified its business model, they may have some services in its model now just to get revenue in and stay afloat. You’re really backing the team at that early stage, the founding team, and their ability to grow the business, build products, and hire the right people around them. I can certainly resonate with that. Anthemis is such a large, global firm with a tremendously large footprint. I would love to understand what you all are seeing in the markets right now, relative to early-stage fintech. There’s a lot of doom and gloom out there. You see it on social media. You see it in a lot of the articles about investors pulling back. There’s a slowdown. What are you all seeing from this boots-on-the-ground perspective?

De’Havia Stewart

I think in terms of like pace and size of new deals, that has definitely fallen, especially in FinTech. Because when you think about the public markets, FinTech has taken the hardest hit in terms of multiple contractions there. We’ve seen a decrease in the size of deals, and then ultimately, the valuations given like the multiples have fallen within that space. But then I think in terms of trends, I just attended Money20/20 one or two weeks ago, and one of the biggest trends was I guess, the emergence of web 2.5. I guess looking at what’s in between web2.0 and web3.0 because when you think about us as venture capital investors, we have like a 10-year time horizon. I think the recent tailwinds within Web3 or crypto showcase that the timeline for maturity is a lot longer than we probably expected. Investing into the company, we probably wouldn’t be able to get an exit within the next 10 years. A lot of people are looking at work to that 2.5, which is really utilizing web3 assets on web2.0 infrastructure. The best example is really Coinbase utilizing cryptocurrencies as an asset that has been traded on their platform while being like a mobile application, which is like a web2 infrastructure.

William Leonard

I was gonna ask, because I was like, wait, it was all about web3 and now we’re in 2022, on the brink of 2023, and now we’re reverting back to web 2.5. It makes sense that you say that because of the timeline, the acceleration of 2.0 to 3.0 is just not happening right now. Obviously, you’re seeing a slowdown of web3 funding as well. Why do you think we saw a slowdown in web3 funding this year?

De’Havia Stewart

I don’t actually have the stats. I don’t know if it was actually a slowdown and whether the funding but I will say as one deal size did fall. That could be like one driver. But then just the actual macroeconomic environment and the impacts that it had on the cryptocurrency asset class, I would say, it’s probably one reason or the biggest driver for the decrease in funding. I have a lot of friends at these web3 firms, and from our conversations, they’re like, my boss wants me to focus on FinTech.

William Leonard

It’s so fascinating to be at the early stage because you see so many trends that come like a web3. As an investor, you have to discern what is true and what is transitory. You see a lot of these trends come and go so who knows? I think we’re seeing some transitory action in this world of web3, but who knows, it may just be ahead of its time for now, and give it a couple of years to develop. I want to pivot off of that because you mentioned that there’s a decrease in the size of deals, decreasing the volume of deals that we’ve seen in the market right now, but deals are still getting done. I think it’s a lot of quality companies that are growing quickly. They’re focused on building products, they’re iterating quickly on a product, and their rounds are getting done quickly by investors. From your perspective, what are the qualities of a good or a great pitch right now that a founder can implement into their conversations with investors so that they can get funding?

De’Havia Stewart

I don’t necessarily know what the pitch has changed year over year in terms of the way you should pitch to investors. But I think what I always like to tell founders is that venture capital is a sales game, especially like when you’re raising capital. It’s about thinking about your sales funnel and making sure you have as much top of the funnel as you can because as you continue to go down, like diligence, it will shrink over time for instance. Trying to create hype trying and to create FOMO. But I will say, I guess investors are now focusing on like profitability. I know everyone is saying this early on, but I don’t think at the seed stage investors expect companies to be profitable. A lot of them are actually pre-revenue. But I think thinking about being profitable and then like having a plan for profitability is something that has been top of mind for investors. I would say that and then also, a lot of founders are still stuck in the 2021 mindset with valuations and deal sizes. I would say also being reasonable in terms of how much capital you actually need to hit your next fundraising milestones, but then also being reasonable around valuations and those types of things. Because it’s not 2021.

William Leonard

From what I’ve seen, and I’m speaking with dozens of founders on a weekly basis, I’d say there is still a disconnect in valuations where investors are expecting maybe a more reasonable valuation that is closely tied to the state of the business today, whereas founders are anticipating a more forward-looking valuation to anticipate where the business will be in 6, 12, or 18 months from now. I think that’s the disconnect. Investors are looking at what is your traction today. Do you have a product built today? Do you have customers using a product today? I think today is what matters when you are valuing a company because nobody can predict the future. I think that is the long-standing disconnect that I’ve seen over the last, even this year, I’m still seeing 2021 valuations come across my inbox every now and then. Who knows where we’ll be next year in terms of valuations? I think that all depends on what happens with this interest rate environment right now, with the Fed making these decisions. That’d be a fun thing to watch play out in real time. I wanted to pivot the conversation here a bit. You mentioned that web 2.5 is an emerging theme right now and from a general perspective, Fintech is such a hot and fast-moving space. How do you stay up to date on the latest trends occurring in FinTech? Are you reading particular sub stacks, threads, subreddits, or Medium articles? What keeps you up to date?

De’Havia Stewart

I really like to just interact with people. I really like attending conferences. I just attended Money 20/20 for the first time one or two weeks ago and it was just honestly one of the best conferences that I’ve ever been to. It had just a very wide range of quality people, from founders to investors like ourselves to actual LPs and those types of things. I really like going to those types of events and just being there with all of the thought leaders who are shaping the industry. Beyond that, I really enjoy reading content on Medium. One of my favorite thought leaders is Mercedes Bent at Lightspeed Venture Partners. She does a lot of thought leadership on consumer finance and web3.0. There’s this boutique investment bank that specializes in FinTech called FT Partners and every quarter and also annually, they release different reports on very quantitative-driven reports on all of the trends that are happening in FinTech. Those are my top three, I would say.

William Leonard

Nice. Those are all solid sources. I follow Mercedes on Twitter as well. She puts out such great content and she also writes amazing posts on Medium. That’s fascinating. That’s helpful for us, especially for some of our audience who happen to be early-stage investors, wanting to stay up to date, wanting to find new ways to learn about new spaces, as well. As we wrap up the conversation here, De’Havia, I want to understand, from your perspective, what applications of FinTech are you most excited about for the next 5, 10, or 15 years, or so?

De’Havia Stewart

In the past five to ten years, we’ve seen the digitization and adoption of digital payments, lending, and mobile banking. For instance, about 60% of all consumers use online or mobile banking. I think that’s what we consider FinTech 1.0. But I think what FinTech 2.0 is looking at embedded finance, the thesis area that I mentioned before, where I think everything will become where you’re able to embed like insurance products and other banking solutions into your everyday lives and people are interacting with financial products when they don’t even know it. I would say I think embedded finance is the future and that’s where I’m looking to spend the majority of my time for the next couple of years.

William Leonard

I love it. How can a founder who is listening in today who thinks their startup may be in alignment with the thesis Anthemis, what’s the best way for them to get in contact with you or someone on the investment team?

De’Havia Stewart

We do have an email on our website. I think it’s pitch@anthemis.com. I’m reachable on LinkedIn and Twitter. LinkedIn, my regular name, and Twitter, @de_havia.

William Leonard

Cool. I know you were at Venture Atlanta a few weeks back and partaking in Atlanta innovation week. What were some of the highlights for you that occurred that week?

De’Havia Stewart

I was only able to attend Monday through Wednesday. I think overall, it was probably one of the best experiences that I’ve had. Overall, I attended a few different events. One that I really enjoyed was the Upfront Capital Black Wealth Expansion Series. I was able to help host the event amongst others based in Atlanta. We had about 200 people in attendance throughout the night. It felt like a family reunion, to be honest with people that I knew and then also just meeting other people who were either in town visiting Venture Atlanta, and so forth. I also really enjoyed Startup Battle where you were a host. I was able to pop into that. And also my friend, Jewel Walker, she helps plan that event. I thought it was a good way to showcase to investors that don’t live in Atlanta what our early-stage ecosystem has to offer here. Those are probably my top two events.

William Leonard

I agree. Startup Battle was a blast. I had so much fun judging the companies there and meeting those founders. As you said, just seeing investors that you’ve maybe connected with on Zoom, previously, having them in town, getting to see them in real life, face to face, nothing beats that type of interaction with like-minded individuals that you have a lot of synergy with. Venture Atlanta was an amazing experience this year. The location was beautiful at the Woodruff.

De’Havia Stewart

That was amazing.

William Leonard

It was amazing.

De’Havia Stewart

You guys are having venture day there, right?

William Leonard

Yes, we are having the Valor VC day there on December 15th. I’m excited that you’ll be speaking there on some panels as well. Looking forward to that. Anybody here listening and can learn more about the Valor Ventures VC day at https://vc.day/ online, and you can request registration info on that website as well. With that, De’Havia, this was a really fun conversation to learn about your background, your transition from consulting, to venture, and now your role at Anthemis. What you do day to day, how you all evaluate companies, the types of companies that you all like to invest in, and then just thinking about what gets you all excited for the future of FinTech. This was really informative and insightful for our audience. I appreciate you joining me here this afternoon.

De’Havia Stewart

Thank you. I appreciate it. Thanks for your time also.

William Leonard

Cool. Take care, De’Havia.

Lisa Calhoun

We’re thrilled to have you as an Atlanta Startup Podcast listener to help you get the most out of the experience. Let me invite you to three insider opportunities from our host Valor Ventures. First, want to be a guest on this amazing show. Reach out to our booking team at atlantastartuppodcast.com. Click on booking, It’s a no-brainer from there. Are you raising a seed round? Valor definitely wants to hear from you. Share your startup story at valor.vc/pitch. Are you a woman or minority-led startup valor sister program? The Startup Runway Foundation gives away grants to promising startups led by underrepresented founders. The mission of the Startup Runway Foundation is connecting underrepresented founders to their first investors. Startup runway finalists have raised over $40 million. See if you qualify for one of these amazing grants at startuprunway.org. You can also sign up for our next showcase for free there. Let me let you go today with a shout-out to Startup Runway presenting sponsor Cox Enterprises and to our founding partners, American Family Institute, Truist, Georgia Power, Avanta Ventures, and Innovators Legal. These great organizations make Startup Runway possible. Thanks for listening today and see you back next week.