Bessemer Venture Partners’ Charles Birnbaum — Fintech Infrastructure, Wealth Management, & Thesis Investing
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In today’s episode, Ryan Zauk sits down with Charles Birnbaum, Partner at Bessemer Venture Partners, one of the world’s oldest & most successful venture capital firms. Charles joins the show fresh off of Bessemer’s $3.3B raise in February across two funds.
Charles is a proud Wharton alum, joining the MBA program after a long stint on Wall Street. He was then employee #10 at Foursquare before joining Bessemer.
Leaving Wall Street for Wharton and then…Startups?
After graduating from Northwestern, Charles cut his teeth on Wall Street, working across multiple banks from analyst at Deutsche Bank to eventual VP at Bank of America. Charles then left for Wharton, where he was in the historic Lauder Program, focused on German.
Looking for something new, he took an internship at some company called Foursquare…joining at the perfect time. He ended up becoming Employee #10 during his second year, commuting to NYC to help in any way he could. In the episode, Charles reflects on his decision to do tech at a time when startups were not exactly a common path from business school. We contrast our campus recruiting environments, as well as how much tech has been ‘de-risked’ from a career standpoint.
Bessemer and The Importance Thesis-Driven Investing
After a few years at Foursquare as Director of Business Development, Charles got the call from Bessemer. He laid out the structure for Bessemer, and how much they care about thesis-investing.
Charles is a partner focused on fintech and financial services as whole. He’s encouraged to go very deep in one large area, with a number of sub-vertical roadmaps. Partners generally have complete flexibility on stage and check size within their vertical.
Bessemer, as any good investment group should do, tries to avoid group decision-making, and makes it much more of a ‘run your own practice’ with checks and balances.
“It’s very much a thesis-driven approach, which everyone says, but I thought was lip service when I was interviewing. But here, we take it seriously…To the point where these are extensive presentations that we give each other before we do anything on the investment side, constantly iterating our roadmaps.”
The Fintech Infrastructure Opportunity
When asked about his current areas of interest, Charles mentioned a LOT. Fintech is a huge space, and Charles has dug into everything from embedded finance to mortgage innovation. We focused on fintech infrastructure, and he lays out his high-level thoughts…
In the Bessemer portfolio, he saw Toast, Shopify, Mindbody, and similar companies; it was no secret to him that FS was a massive part of their business models. Financial services components of these businesses were strong catalysts for increased retention and stickiness, and led to ‘sneaky large TAMs.’
On the point of TAM, his team (and I think most people) underestimated the size of some fintech and e-commerce TAMs. Reflecting on their Shopify investment, he remembers one of the questions they grappled with was “is this a big enough market?”
I’d say with a $140B Market Cap, $3B+ in 2020 revenue, and near triple-digit growth, they had their answer.
Looking further across Bessemers portfolio, he noticed a lot of amazing infrastructure players (Twilio, SendGrid) and had to think about the parallels to his own portfolio. This hunt of course led him to companies like Plaid, Mambu, and Alloy (the last 2 now BVP portfolio companies and featured on the WFT Podcast!).
He loves companies that “allow incumbents to fight back” and “empower developers to focus on what they’re good at on customer experience.”
In this section, we talk about how he missed on Plaid’s Series A, which you can listen to at about 13:58. It involves the Yodlee S-1, ceilings, and fierce investor competition. Safe to say that one belongs in his anti-portfolio.
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In the rest of the episode, Charles and I dive into his investment in Alloy APIs and Mambu. He focuses on why it’s critical to find companies with ‘pull’ in financial services instead of just product-market fit. (15:55)
We also discuss the current state of the wealth management space, how he thinks about segmenting the market, and their sale of United Capital (BVP portco) to Goldman Sachs. (19:51)
We close with a discussion on the fundraising process during COVID, how he thinks about recruiting, common VC mistakes, and of course a great rapid-fire round including his Wharton classmates in Fintech he admires most! (24:40)
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Previous Stories You May Enjoy:
Y Combinator’s Michael Seibel & Dalton Caldwell — Lessons from 5000 Entrepreneurs
Fighting Fraud & Streamlining Client Experience — Laura Spiekerman, Co-Founder and CRO at Alloy
Noah Kerner, CEO of Acorns — Leveling the Investment Playing Field
Helping Banks Build Flexible + Scalable Solutions — Elliott Limb, Chief Customer Officer of Mambu
NFL Star & Penn Professor Brandon Copeland — Tackling Financial Education Through “Life 101”
‘Atom Finance’ Founder Eric Shoykhet — Building For the Retail Investor and Debating PFOF
Anish Acharya, General Partner at Andreessen Horowitz — Doubling Down on Fintech
Robinhood’s COO, Gretchen Howard — Democratizing Finance, Navigating a Crisis, & Embracing Change
Frank Rotman, Founding Partner at QED Investors — Past, Present, and Future of Fintech!
Leading a Public VC with Tim Levene, CEO of Augmentum FinTech
B2B Venture Investing with Evgenia Plotnikova, Partner at Dawn Capital
Did Fintech Save Minority-Owned Businesses in the PPP? With NYU’s Dr. Sabrina Howell
Mayor Francis Suarez — Bringing Silicon Valley to Miami!
Mike Dudas, Founder of The Block and VP at Paxos: Crypto, Venmo vs. CashApp, Andrew Yang, and More
Fractional Trading 101 with Apex Chief Product Officer Dustin Kirkland
Jackie Reses — Leadership Lessons, Fintech Innovation, & Helping Small Businesses at Square
11:FS Co-Founder Simon Taylor — NFTs, Clubhouse, & The State of Crypto
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Ryan Zauk
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Ryan Zauk is an MBA Candidate at The Wharton School, where he runs the Wharton FinTech Podcast. He currently works with the US International Development Finance Corp looking at technology impact investments in developing markets. He has a passion for music, media, and all things FinTech.
You can reach him at rzauk@wharton.upenn.edu or on Twitter.
