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[Original air date, March 28, 2023] I sat down with Mercedes Bent, Partner at Lightspeed, a global venture capital firm founded in 2000. Over the last 23 years, they have secured over $18 billion in committed capital and backed over 500 companies, including Snap, Affirm, Faire, Grubhub, Carta, Blend, and a long list of great firms.
In this episode, we discuss:
Investing in marketplaces or credit-driven businesses and what founders and investors should keep in mind when looking at these verticals.
“When I'm analyzing a credit company, the first thing I'm asking is who's on the team? What is their background? Have they really had risk management experience?... And do they also understand the Debt Capital Markets?”
Not every team has what it takes to build a lending company, and Mercedes knows this well. She highlights the importance of having a leadership team with experience in credit risk management and a thorough understanding of debt capital markets. Not only that, but she also believes it’s important for nascent fintech companies to have some sort of unique underwriting advantage, reflected by low default rates and quick improvements.
Benefits of having a global investment team how Lightspeed often invests in similar trends and businesses around the world
Lightspeed Venture Partners is a global investment firm that invests in most corners of the world. They’ve backed great companies in markets like the US, Brazil, Bulgaria, Mexico, and India. Having this global reach and experience allows them to always compare similar models across markets and examine industries, transaction volumes, customer behaviors, and market fragmentation. Additionally, Lightspeed can also connect founders across geographies who are building similar companies and use insights from one market to inform investments in another. This cross-market analysis helps them identify successful characteristics that work well in different countries, providing an interesting investment advantage.
The Latin American fintech opportunity. Mercedes leads the LatAm practice at Lightspeed – what are some of the biggest ideas taking place in Brazil, Mexico, and beyond?
“By introducing PIX, [the Brazilian Central Bank] is saying we've introduced this payment rails to the entire country… And that creates another alternative that's much cheaper. Merchants in Brazil are now saying, ‘if you pay with PIX, it's going to be X amount cheaper’, because they don't have to pay the card network fees.”
PIX, a real-time payments system, aims to increase competition, reduce costs for merchants, and improve access to financial data. Paired with open banking, it could revolutionize credit underwriting and collections, posing new challenges for incumbent players like Visa and Mastercard. As noted by Mercedes, the most significant beneficiaries of PIX are consumers and commerce. Not only is PIX enabling seamless transactions at the point of sale, but it’s also making them cheaper than existing alternatives. Moreover, the system's potential for programmable money and international connectivity could lead to instant global remittances.
Lessons for emerging VCs, Lightspeed’s portfolio construction strategy… and a lot more!
“Venture is a sales job. And you have to have a lot of stamina. You have to have that reserve of energy in yourself that you can always pull out to smile at a founder and listen to their story intently, even though it's like the fifteenth pitch you've heard that day... having a lot of energy for them to just keep going even though the answer of almost all of them is NO.”
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Mercedes Bent, Partner at Lightspeed – Unlocking Fintech’s Potential Across the Americas and Balancing Priorities in Venture Capital Investing