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How should inclusive fintech investors look at web3 in the future? Matt Schaar talks with Amee Parbhoo about how Accion Venture Lab plans to evaluate web3 to invest in and support founders building solutions that increase financial inclusion.
Fintech has the power to build a more inclusive world. Fintech for the People is about the innovators who are developing fintech solutions that reach the people who’ve been left behind. In each episode, we’ll hear from innovators who are creating financial solutions that bring every person the financial tools they need to grow their business, support their family, and build their community. Together, we’ll learn how fintech looks different in spaces and places where basic financial services are a luxury — and how solutions to address these challenges require a different level of creativity, empathy, and execution.
Fintech for the People is an Accion podcast hosted by Amee Parbhoo, Managing Partner of Accion Venture Lab – an early-stage investor in inclusive fintech startups. Learn more about Accion Venture Lab here. Episodes will be released in seasons, on a weekly schedule.
Matt Schaar (00:12):
Hi everyone and welcome back to Fintech for the People, the Accion Venture Lab podcast. I'm Matt Schaar, operating partner here at Venture Lab and it's our final episode of the season. We've had some phenomenal guests on the podcast these past few weeks to share their perspectives on Web3, blockchain and crypto, and their potential impacts on financial inclusion. They've ranged from investors, practitioners to interested parties. With all of this knowledge on the table, the question arises: well, what's next? So today, I'm happy to have Venture Labs managing partner and fellow Fintech for the People host, Amee Parbhoo join me for a quick recap. We wanted to leave you with our own opinions on the Web3 space and how we as a team intend to approach it moving forward. Amee, welcome. It's great to have you here. Welcome back to the podcast.
Amee Parbhoo (01:04):
Thanks so much, Matt. It's great to be back and to be on the other side.
Matt Schaar (01:08):
Yeah, I was wondering, it must be a bit of a different view over there, huh?
Amee Parbhoo (01:15):
Exactly.
Matt Schaar (01:16):
Well, I'm really excited to have this conversation with you as we wrap up this past season. Have you captured some insights and findings from it?
Amee Parbhoo (01:25):
Oh yeah. This season has been amazing. I feel like I've learned so much about this space and you've had some incredible guests on. You've covered a lot of ground and it's a super complicated topic. So yeah, I actually turn it on you, Matt. I mean, what have been some of your big takeaways from the season and ultimately, I mean, the question I have on the top of my mind after listening to everyone was sort of why should we, as an inclusive fintech investor, why should anyone who cares about inclusive fintech continue to look at the space?
Matt Schaar (01:56):
Yeah, pressure. It really has been a fantastic season in just hearing different perspectives from a DFI/bilateral organization space, but also from builders and investors. I think the best way for me to summarize, and I wrote this a little bit in our article on Web3 as well, is that I think there's an immense amount of opportunity there. But at the same time, I think there's been a lot that we've seen that that has been led by hype and a lot of perspectives that come from, I wouldn't say necessarily always bad actors, but necessarily actors with ulterior motives that are a bit of a diversion from financial inclusion, so it's good to bring it back to the conversation that they're centered around what we are looking for and finding important in this space.
(02:47):
I think each of the guests reinforced that in different ways. If you go back to episode one, we were talking to Tim and Ken from Mercy Corps Ventures. They really brought up the importance of piloting uses of technology in these markets and using that as a good test bed to back up what the tech can actually claim to do. Can they see real world applications of it and is it working in the field? Then when we spoke with Sam at Goldfinch, we started to notice that there's a particular way that crypto can open up new forms of liquidity pools, so really it's trying to expand the pie of available capital that can be lent and then delivered into local markets. Also, it's great because Sam has a lot of experience working in those capital markets, so he has seen it from the traditional space and how that applies or what needs to be adjusted when you utilize something more decentralized.
(03:43):
Then from Paul at USAID, I really appreciated his nuanced view because he really emphasized that they are technology agnostic when it comes to promoting financial inclusion, and in particular though, he's had some concerns about crypto as being a bonafide enabler of these solutions. He really wanted to emphasize the need for more of an evidence base that the tech does what it actually says. He really, I think, reiterated the things that Tim and Ted said from Mercy Corps around really making sure we're testing these models and piloting them effectively, but not having seen evidence and where it's moving forward is not so much an indictment, but an exhortation for the industry. Then finally from Mercedes at Quipu, I really appreciated her background and her research into community development and economic empowerment and applying that, using new technologies for a clearly underserved customer in Colombia, but also to be transparent around some of the speculation around tokenized approaches and how regulation might affect that.
(04:48):
Really, if anything, all of these add up I think to questions around the future of this space. But moreover, I'm glad that there are people who are looking at this technology and finding ways to make it more mature in how we're leveraging that technology, how we can refine the regulatory framework, and also I think to bring intelligent actors into the space that are willing to not only build up the evidence base, but then also invest in models that are really promoting financial inclusion. If anything, just a really great set of comprehensive discussions throughout the week or through the season.
Amee Parbhoo (05:22):
I loved how it really highlighted some of the emerging use cases that are really exciting about this technology. But I think every one of your guests balanced the opportunities with what we still have to learn and what some of the real risks are for customers that we all care about. I think that kind of nuanced balance approach is exactly what all of us should be taking away and thinking about this new technology with.
Matt Schaar (05:50):
To maybe turn the mic back to you, I'm curious, based from everything you heard in our reflections on this past season, we've always tried to be very thoughtful and thesis centric when it comes to fintech and financial inclusion. I think this is one of the things that we identify as very central to our work and when you think about the criteria that we're using to assess opportunities in Web3 and crypto and how they apply to financial inclusion, maybe elucidate a bit more on how you see our own thesis being applied and what are some intricacies behind that?
Amee Parbhoo (06:26):
As you know, we think about and we've thought about how to think about this space a lot. There's a lot that's been happening, a lot that's in the news and we spend a lot of time as a team trying to parse through it and understand how to approach Web3. Ultimately, I actually think it's a fairly similar framework we are applying to DeFi and Web3 as we do for any other investment. Fundamentally, that means starting with a customer first approach, understanding who is this DeFi solution trying to reach? How is it trying to provide those customers access to better quality financial products? And how are they doing that in a fair, responsible way? That, fundamentally, is what we're thinking about and that's our frame.
(07:13):
As I talk to DeFi entrepreneurs, and I know this is the same for you, in my head, I'm constantly thinking about that element and trying to cut through the noise and cut through the hype to understand really, can this company do at least one of three things? Can their solution reduce the cost for the end customer or user they're trying to reach? You talked with Goldfinch, is there a stable coin based or stable coin backed liquidity pool that allows for better small business debt financing? The second though is, can this provide more transparency and efficiency in delivering solutions? We've seen some really interesting innovative ideas around remittance in general, but particularly thinking about borderless payments for refugees. I think there's a lot that hopefully will emerge there. But then the third thing is, can this solution enable ownership and wealth building for the financially excluded?
(08:13):
We've for a long time talked about asset tracking and smart contracts. That creates just easier proof of ownership, it's really the foundation for a lot of different financial services that can be offered to customers. Those are the types of, I think, criteria I'm thinking about, we are looking at when we see a model, but we're also, as you've alluded to, thought a lot about the risks. This is new technology. We are working with the most vulnerable and underserved customers around the world, so there's a lot more scrutiny about the technical side, the technical elements of a solution. There's a lot more understanding around what the regulatory environment looks like. There's also just how does this deal get made? What does the investment criteria look like? How do we actually think about splitting our equity between a traditional cap table and token? There's still so much to be worked out, and I think balancing that opportunity with the risks is something we're going to continue to be doing.
Matt Schaar (09:17):
I think you point out some really important elements of what I think we've been collectively observing. Just a couple of things that I would harp on a little bit more is one, particularly around this technology element. I'm remembering my time at GitHub when I was working with developer communities and the robustness of particular open source projects like Ruby or other languages, really it was driven by having a strong community of folks that wanted to contribute to it, but also as a result, it created a really solid base of developers, so it made it easier to build projects on that because you knew there'd be a good base of talent for that. I think in the same fashion, there are all these protocols that are emerging within Web3, and I'm keeping a close watch on which ones seem to have a more robust developer community, solid foundations, and what they're building out there on CNC Labs is a really great example of, I think, that's building a solid base in that regard.
(10:14):
The other thing I was thinking about too, is absolutely this wild west component of how a deal is structured. I think we've just seen a lot of examples of, I wouldn't necessarily call them bad actors per se, but ultimately I think taking advantage of this instant liquidity that is now available to investors that shortens the duration of a payout for someone who's investing. I don't know where that's going to necessarily land and at the same time, I don't know what a responsible... How do you leverage a token to help fund protocol or a project while also getting investors that do want to have a traditional equity state in a company?
Amee Parbhoo (11:00):
Yeah, absolutely. And ultimately, I mean, we do have to be a responsible party to our own investors and to the customers that we are trying to have an impact on and if investments are not incentivized by that kind of long term sustainability of a business and more kind of a quick buck, then yeah, there are major risks there that we have to think about. But I guess with all of that in mind, Matt, why now as you've talked about, this is all so nascent and everyone talks about how the crypto winter is here. Should we just sit back and wait? Why look at this now?
Matt Schaar (11:37):
It's funny you mention that because I tweeted about this a couple weeks ago and I was using the John Travolta gif from Pulp Fiction where he is looking around and nobody is around. It was basically my metaphor of how everyone now seems to be pivoting to AI and has left Web3. Are we going in and at the wrong time because everyone else has left? I actually tend to think that we're coming in at the right time because in many ways we're starting to see a lot of projects that were not built on solid foundations ultimately finding themselves really struggling. You never want to see any new ideas or founders really struggling or seeing their ideas suddenly not work, but at the same time, there's been a lot of, I think, bad actors that have been exposed over the past couple of years.
(12:29):
I think that's an indication that there's a lot of people that are building in this space. Not everyone is going to have a positive ulterior motive behind it. I think this actually leaves a lot more space for us to begin to identify what are some of the common characteristics of a project that one, has lasting value and is sustainable, but also two, fits into our thesis. I think the whole notion of every Web3 project saying we are all about financial inclusion and what that involves is essentially is issuing a get rich quick token, you're seeing fewer of those. In many ways, I think what that means is it enables us to have deeper conversations with communities that we recognize have been spending many years trying to build true financial inclusion projects. Saleo is one of those great examples. I think in many ways we were able to hone our aim a bit more as a result of the past year or so, of this winter.
Amee Parbhoo (13:25):
Yeah, and we've seen this in fintech more broadly that not all fintech looks the same across markets. It's a good moment for us to also see how this technology, the use cases, how it differs as it comes into the emerging markets we care about outside of the US. I think that's really exciting, so I'm pumped to see what new innovations come, even if it is early days.
Matt Schaar (13:55):
I just would add one more caveat to that. I think what we've also seen is that there are a lot of very powerful investors that have invested in models that have ultimately caused harm. I think what we need to make sure of is we get the right understanding of what the signals are from other investors and what they're contributing to, and I think we also, to your previous point, we want to be a leader in this, right? We want to be the ones who actually know what kind of ways we can guide other investors and also other founders to build responsible solutions. I think this is going to be a continuous learning process for us as well, as we look at the space, as we potentially invest in this space, what is our modal when it comes to building responsible solutions? How do we help founders with the right type of strategic and operational tools to help them do that effectively in this really exciting time I'm looking forward to how that might look for us.
Amee Parbhoo (14:52):
Absolutely. Well, thank you again, Matt, for this whole season and for the guests. The conversations were really educational and informative.
Matt Schaar (15:03):
Yes, and thank you for joining, Amee, for this recap. We appreciate it.
Amee Parbhoo (15:06):
Of course.
Matt Schaar (15:10):
That's it for this season of FinTech for the People. Thanks for listening and for joining us on our exploration of the Web3 space. Keep an eye on both our Twitter at AccionVLab and our LinkedIn page as we continue to deliver deeper perspectives on the topic.
(15:26):
Thanks again to all of my guests this season: Tim Rann and Ken Kou for Mercy Corps Ventures, Sam Eyob from Warbler Labs, Paul Nelson from USAID, Mercedes Bidart from Quipu, and Amee Parbhoo from Venture Lab. Extra special thanks go out to the Accion team for helping with marketing, show notes, and everything else making these episodes possible, Eugenia Shevchenko, Zoe Wang, Elizabeth Winters, and Sarah Marson. And a final huge note of thanks to our friends at Voxtopica, Laura Krebs, Ismail Balderas Wong, Reese Clutter, and Richard Fawal for the production and engineering chops to help us always sound great.
(16:09):
We'll be taking a brief hiatus from the podcast over the holidays, but soon we'll be publishing a few highlights from several panels at our recent FinTech for Inclusion Summit. Thanks again and we'll see you soon.