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First Principles of Investing in FinTech

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Summary

This article discusses the rise of FinTech and the potential for digital-native financial institutions to break into the industry and eventually consolidate financial services. It outlines the characteristics Greylock looks for in fintech companies and the debate over who will “own the customer relationship” in the West. It concludes by inviting entrepreneurs in the space to contact the author.

Q&As

What is the current market cap of U.S. based financial institutions?
The current market cap of U.S. based financial institutions is $7 trillion.

What companies are considered traditional banks?
Companies considered traditional banks include Stripe, Square, PayPal, and Robinhood.

How does the regulatory environment favor smaller companies?
The regulatory environment favors smaller companies by enabling data portability, personalized data and machine learning, and increased trust and user preference for mobile-first products.

Who is likely to own the customer relationship in the West?
Break-out companies are likely to own the customer relationship in the West.

How can entrepreneurs in the space reach out to Seth Rosenberg?
Entrepreneurs in the space can reach out to Seth Rosenberg at seth (at) greylock (dot) com or LinkedIn.

AI Comments

👍 This article provides a great overview of the current state of FinTech and the potential for it to revolutionize the financial industry. It is an excellent resource for entrepreneurs interested in the space.

👎 This article does not provide enough detail to help entrepreneurs make informed decisions about investing in FinTech. The deck mentioned in the article is also not accessible unless you contact the author directly.

AI Discussion

Me: It's about the first principles of investing in FinTech. It talks about how financial institutions are still dominant, but that digital-native financial institutions may have an opportunity to break out and eventually consolidate financial services. It also discusses how there's a debate about who is going to own the customer relationship.

Friend: Interesting. That could mean big changes for the industry. What do you think about it?

Me: I think it's exciting. The potential for digital-native financial institutions to break out and consolidate financial services could bring about some major changes. I'm also interested in the debate over who is going to own the customer relationship. It's definitely worth keeping an eye on.

Action items

Research the current financial technology landscape and identify potential opportunities for disruption.
Reach out to entrepreneurs in the space and build relationships with them.
Develop a deep understanding of the regulatory environment and how it affects the development of financial technology.

Technical terms

FinTech: Short for financial technology, FinTech is the use of technology to provide financial services.
Market Cap: Market capitalization is the total market value of a company's outstanding shares.
Challenger Technology Company: A challenger technology company is a company that is trying to disrupt an existing market by introducing a new technology or product.
Regulatory Environment: The regulatory environment is the set of laws, regulations, and other rules that govern the activities of businesses and individuals.
Data Portability: Data portability is the ability to move data from one system to another.
Machine Learning: Machine learning is a type of artificial intelligence that enables computers to learn from data without being explicitly programmed.
Consolidation: Consolidation is the process of combining two or more entities into one.