Web3 VC Investing in the Future of Finance

Barbara Iyayi:

Thank you for having me, Elana.

Elana Margulies-Snyderman:

Absolutely. So, to kick off the conversation, tell us a little about the firm and how you got to where you are today.

Barbara Iyayi:

Yes. So, I started Unicorn Growth Capital back in 2022 when we had our first close, really to double down on my thesis around financial infrastructure. I've spent about 20 years in finance now, started my career in investment banking, was part of building a private equity firm where we invested in financial institutions, and we invested in companies, essentially banks, that were sort of providing financial services to businesses and consumers. And through that experience and we built a platform of about $3 billion in assets. I really got very excited about technology and how it was disrupting the financial services industry. And through that experience is what led me to set up a fintech-focused fund that is leveraging the blockchain.

My first investment when I left that firm was a blockchain payments company, and that really got me excited about how blockchain can be used for payment settlement, instant reconciliation, lower chargebacks, very sort of underlying issues that a lot of banks deal with. And Unicorn Growth Capital essentially is an early-stage VC fund focused on backing companies that are building the next generation blockchain-enabled financial infrastructure. And we back companies that are basically building new categories around finance that are scaling across Africa and emerging markets, and we help them really scale into these regions and penetrate the Web3 blockchain ecosystem.

Elana Margulies-Snyderman:

Barbara, that segues into the next question I have for you. Given your firm's focus on Web3 VC investing, I would love to hear your high-level outlook for this space.

Barbara Iyayi:

Yeah. My outlook, I think is really around my investment thesis. So, we look at the future of finance in three ways. One is open finance. There is a very huge opportunity that exists in creating more interoperable transaction rails across the globe, and that's what open finance to me is about. So, any company that's building rails, whether it's payments, whether it's cross-border rails, that allows transactions to be done in a frictionless, fast, and effective way, and it can be interoperable across different areas. So, we're seeing that a lot in emerging markets because the biggest challenge around emerging markets is being able to connect these economies to the global ecosystem, and you need transaction rails to do that.

The second one is decentralized finance. We are seeing a huge opportunity to cut the middleman and create financial services in a much more fair and transparent way. And that can be very profound in areas like lending, insurance and savings. And decentralized finance can also be really impactful, especially leveraging real-world assets. And the third is embedded finance. And we see a huge opportunity in embedding financial services and blockchain infrastructure across non-financial services verticals, so health care, logistics, education, commerce, and there's a huge opportunity there. In fact, you can actually create fintech-driven companies in these different sectors with financial technology. And so those are the three areas that we're really excited about, and we believe are going to be very disruptive for the next ten years in finance.

Elana Margulies-Snyderman:

Barbara, on the other hand, what are some of the greatest challenges you face in your investing space and why?

Barbara Iyayi:

The biggest challenge I think in investing in financial infrastructure across different markets is regulatory risk. And we're dealing with that in every aspect of financial services, not just in technology, but it's even worse because technology tends to outpace the regulator's view of technology or the world. And we've seen that with how stablecoins has proliferated the economy. I mean, it's widely used, the transaction volumes are even larger than MasterCard and Visa. The circulation is about $100 billion, but yet we still have not built and put together a stablecoin bill in the U.S. It's actually quite crazy when you think about it because stablecoins are really powering global trade. So, regulatory risk is an important issue for a lot of founders you're building, you don't want to have to shut yourself down or have to change your strategy. And as an investor, we have to keep that in mind when we underwrite these opportunities.

I would say the second thing is capital. In a lot of the early-stage opportunities that we invest in, we see a lot of really unique opportunities in these markets that a lot of people don't see. And sometimes because they don't see it, they don't invest. And we have to spend a lot of time pitching to people to explain to them the opportunities in these markets, why underserved markets are actually the best places to put venture dollars because that's where you're going to see huge returns.

Elana Margulies-Snyderman:

Barbara, to shift gears a bit, ESG has been top of mind for the industry, and I wanted to see how you're addressing this topic.

Barbara Iyayi:

ESG is ingrained in our DNA, especially when you think about social aspects of things. I mean, the fundamental reason and what drives me every day around my thesis around financial infrastructure and enabling the next generation of financial infrastructure across the world is really from a social mobility, financial inclusion perspective. And I think what we do fundamentally is about that, how do we get businesses and consumers access to finance in a very frictionless way? You can't do that with the legacy traditional financial rails that are out there. You have to do that with technology. And we've seen how technology has get more people from unbanked up to banked, provided more opportunities for people to access dollars, access savings, access yield opportunities. So, social is really our core driver of our fund.

Diversity is included in ESG, and I think by default, we naturally attract diverse candidates. And I think that's the power of being a woman in this industry, being a Black woman, is that you can attract founders that are typically underrepresented, and they want to talk to you, they want to get your capital, they want your help. And so naturally we see these founders and we consider them in the grand scheme of what we do, and we factor in their backgrounds and their unique perspectives in our investment thesis and our portfolio. So, I think it's the core of what we do. We don't have to talk about it and brag about it, we just do it.

Elana Margulies-Snyderman:

Barbara, being a woman in Web3, it's very rare in your industry and I would love to hear what you're doing to inspire others to follow in your footsteps.

Barbara Iyayi:

Yeah. I mean, look, I think the number one way to inspire people is to just be in that position that a lot of people sometimes don't think that they can be in. You can't really be what you can't see. And so that really drives me. Whatever I'm doing is because I want to pave the way for next generation of really interesting female founders, female fund managers, to come into this capital environment and execute on their strategy. So, I think I just am driven by this, and it continues to allow me to do what I do. I think being a woman is also interesting in the blockchain space as well because blockchain space is very male dominated. But I do think the fact that the opportunity is becoming more institutionalized, we're seeing more institutional capital getting into the blockchain space. I think that will open up more opportunities for women to come into the industry from the financial services industry, from the regulatory aspect of it, from the legal aspect of it, capital markets. I think all of that is going to add more diversity into the industry.

And so, I do think the industry is changing and we're going to see more women in the industry. Right now, it's still very tech-driven, very male-dominated, but I think over time it's going to be more diverse. But the one key way that can drive that diversity is to back female founders. We want to make sure that the technology that we're using every day and all these emerging technologies that are really becoming a part of our lives in the next decade have different perspectives and not just one perspective. And so that is also a key part of the challenge of being a woman, but the opportunity in going out and looking for female founders to drive diversity in the industry.

Elana Margulies-Snyderman:

Barbara, we've covered a lot of ground today and wanted to see if there are any final thoughts you would like to share with us.

Barbara Iyayi:

Yeah. I think one of the key things I would say about backing emerging managers and being an emerging manager is that we have so much flexibility in how we come into this space. We bring in such a unique perspective, we're so much more nimble in how we think about deals and how we underwrite our deals, and it allows us to do interesting things that maybe the bigger funds don't do. And I do think that as part of investors' strategies, they should be really thinking about the next generation of fund managers and looking at some of the specialists and the unique aspects of what they're bringing to the table. And we're trying to be that, or we are that to investors. We bring that unique perspective, that diversity of geography and the operating and investing experience that we have in some of these markets. So, all of this is really interesting for the times that we're in, and I'm really excited about the inflection point we're in with respect to technology, the macro environment, and what our fund can bring to the table.

Elana Margulies-Snyderman:

Barbara, I wanted to thank you so much for sharing your perspective with our listeners.

Barbara Iyayi:

Thank you, Elana.

Elana Margulies-Snyderman:

And thank you for listening to the EisnerAmper podcast series. Visit eisneramper.com for more information on this and a host of other topics and join us for our next EisnerAmper podcast when we get down to business.

Transcribed by Rev.com