Fintech boards with Lauren Kolodny of Acrew Capital

A warm welcome to our new Above Board subscribers. We’re thrilled to have Lauren Kolodny join us today to talk fintech and role models (the first part of our interview from last week can be seen here). Before reading, can we recommend you share this newsletter with 1 colleague/portco/investor?

Lauren is cofounder and Managing Partner at Acrew Capital where she leads the fintech investing practice. Lauren has been an investor and/or board director at organizations such as Chime, Gusto, Alumni Ventures and Brown University.

AB: Welcome back, Lauren, and thank you for joining us again. You have led investments into very successful fintech companies such as Chime and Papaya Payments. As a board member, what metrics and milestones of success do you find yourself looking at most closely in fintech companies?

LK: As an investor and board member, I focus on specific metrics and milestones tailored to each company and its stage of development. Every company faces unique challenges and priorities at different points in its journey, so it's crucial to prioritize metrics that de-risk the most critical questions for the business at any given time. Furthermore, I think every early stage company should have a north star metric. Chime in its early days was maniacally focused on acquiring direct depositors. Papaya’s strength has always been in the efficiency of its growth. My best insurance companies know the loss ratio is king. The north star metric should be oriented around a singular thing that drives the most value to the business.

Across the board, there are some foundational metrics that I always keep a close eye on to ensure the company's overall health. For instance:

• Strong unit economics in the primary line of business: I pay particular attention to the unit economics of the primary business, as they are an important indicator for business sustainability and are an early signal of the company's eventual ability to generate profits. I generally don’t believe in the “get customers in the door with one product and then upsell them to a product with strong margins” approach for early stage fintechs - if an upsell to a fundamentally different product is required to drive margin, the model rarely works.

• CAC payback: Where CAC is divided by monthly gross margin.

• Net revenue: I emphasize tracking net revenue over gross revenue, as it provides a more accurate and easily comparable picture of a company's financial performance.

• Capital efficiency: Monitoring cash on hand and burn rate relative to business progress is also essential. Particularly in a macroeconomic environment like the one we are in now, future investors will look, not only at the metrics, but also the capital required to achieve those metrics.

AB: For the fintech companies whose boards you serve on, what do you find to be the most common areas you are discussing?

LK: Ultimately, I tailor the areas I spend time with my companies to the needs of the specific companies. A few common threads:

• Coaching/development: At Acrew (editor’s note: Lauren discusses the firm’s approach in our previous interview), we are all committed to investing in the ongoing development of ourselves and the people we serve. This makes us better board members. And it also guides the way we show up for our founders. The founder journey is never an easy one and we seek to provide them with or find them the support they need to become the best leaders they can be while leading sustainable lives. Often this means helping them to find coaches, advisors, or other founders who have been through similar journeys such that they can be a sounding board to them.

• Fundraising: I also believe that as a VC it is my imperative, as much as is possible, to help founders raise subsequent rounds of financing. Even the best founders in the world only fundraise a handful of times in their lives. Venture is what I do everyday, so my most important expertise to bring my companies is help in navigating fundraising. This includes establishing the metrics and business goals early on that we believe will lead to a successful raise, continuously revisiting those goals, helping to establish the narrative around a fundraise, developing the strategy and target list for approaching prospective investors. The more I can do to help here, the more effectively I help here, the faster my founders can go back to building.

• Product led growth: Given my background in PLG and my belief that there’s more opportunity to bring this growth motion to fintech, I enjoy spending time going deep on these strategies with my companies where relevant.

AB: Do you think the startup fintech space is overly saturated? If so, how does this inform your perspective towards advising portfolio companies?

LK: While it's true the fintech space experienced a period of significant growth, saturation, and frothiness in 2020 and 2021, I believe we are only beginning to scratch the surface of what’s possible in fintech.

To contextualize this, consider the efficiency gains that technology has brought to other major industries such as retail, healthcare, and manufacturing. All of those industries have experienced significant improvement in output per industry employee (GDP/worker) while financial services has seen relatively modest progress in this regard, largely due to its reliance on legacy software and infrastructure. Furthermore the aggregate market cap of public fintech companies relative to legacy financial services is still just a small fraction.

And on a global scale, there remains a substantial portion of the population, approximately 1.5 billion people, who are unbanked and many more that are underbanked. Additionally, many businesses face similar challenges getting sufficient access to the traditional financial sector. This presents a tremendous opportunity, particularly in emerging markets, to leverage digital-first financial solutions to address these gaps and leapfrog traditional banking systems.

AB: Do you prefer in person board meetings or video conferences?

LK: In person board meetings provide the greatest opportunity for creative thinking and brainstorming. Video conferences work well for read outs and updates. I generally prefer some balance between the two.

AB: What’s your go to news source?

LK: It’s a mish mash. My go-to sources for news include venture/fintech newsletters like This Week in Fintech and Axios Pro Rata, business/tech publications like Forbes and The Information, and, for world news, New York Times and The Economist.

AB: Why is your firm called Acrew?

LK: The name Acrew, pronounced “A Crew,” has the emphasis on “Crew” by design. We really wanted to put a stake in the ground around this notion that venture can be played as a team sport. In doing so, we believe we can leverage the diverse perspectives within our team for better outcomes. Of course, we also like the cheeky double entendre and certainly attempt to “accrue” meaningful value for all of our investors.

AB: What’s the next big shift in fintech?

LK: The first meaningful cohort of generational fintech companies emerged in the early 2010s, following the aftermath of the great financial crisis. During that time, significant macroeconomic (aftermath of the GFC), technological (mobile becoming ubiquitous), and demographic (millennials coming of age) shifts were underway that created the space for these companies to exist.

We’re experiencing parallel shifts right now. We’re going through a period of macroeconomic volatility which creates new financial pains for consumers and businesses. We’re seeing a massive technological change with AI. And we’re on the horizon of some major demographic changes - Gen Z coming of age, $70 trillion wealth transfer, increasingly interconnected global work. These shifts are creating room for a next great cohort of fintechs to be born.

AB: What’s a job you wish you had that would have made you a better board member?

LK: There are any number of jobs that would be additive in making me a better board member - but life is short, time is scarce and my experiences have made me who I am and put me where I am. I wouldn’t trade them.

The most obvious and objectively correct answer to this question would be: founder/CEO of venture backed startup. There’s no question that would be valuable. But, for me, founding my own venture firm has been “my startup” and it’s given me deeper empathy and understanding for my founders.

AB: What are you best at delegating work-wise?

LK: As a founder, a full-time investor, and a mother of two young children, I've learned the importance of delegating tasks that don't require my direct involvement. I prioritize spending my work time on making the best investment decisions, supporting my portfolio companies, developing my team, and delivering returns to our LPs. I’m trying to learn how to delegate most everything else.

AB: Who’s your role model in the venture capital space?

LK: I have a number of role models in the venture capital space. Certainly, my first one was my Co-Founder and Co-Managing Partner, Theresia Gouw, who I was fortunate to get to know early in my career. I've also been lucky to work with a number of other exceptional co-investors who have influenced me in meaningful ways. While there are too many to name, a couple of examples would be Kirsten Green from Forerunner Ventures and Satya Patel from Homebrew.

AB: What do you do for fun outside of work?

LK: Spend quality time with my family and friends, hang out by the ocean or in the mountains, host and entertain, play lawn games and explore the world through the eyes of my two daughters.

Lauren, thank you so much for joining us and sharing such thoughtful insights over these past two interviews. And thanks to our new subscribers for becoming a part of the Above Board community. Have thoughts on this newsletter or feedback about Above Board in general? Please reply to this email, would love to hear from you!