1Mby1M Virtual Accelerator Investor Forum: With John Frankel, Partner at ff Venture Capital 2021 (Part 3)

Sramana Mitra: The AI sector of the industry, which is not actually a sector but a horizontal technology that is being applied to all kinds of sectors, has exploded even with the downturn. The amount of money that has gone into AI startups globally is huge. It doesn’t seem to have missed any beat in this process. 

John Frankel: To us, AI is a bit like how we would think of mobile ten years ago or the internet 20 years ago. There used to be internet companies and now there are just companies. Companies used to be mobile companies and now they are just companies.

We think AI companies will just become companies. We think it is a layer in the infrastructure. It will just be built-in. If you have a set of Apple headphones, you don’t think of them as AI headphones. They just do things that are kind of smart. In the same way, we see that being embedded in companies.

On the consumer side, a lot of those opportunities are subsumed into large tech consumer companies. It is difficult for startups to compete. In enterprise, it is less so. The advantage that you have today in the enterprise, just as you have with the rest of the economy, is that analog processes have been digitized. As they are digitized you can connect them and then can use AI to draw insights. We are seeing several companies around that area that intrigue us right now. 

Sramana Mitra: What trends are you seeing in FinTech and how has that evolved through the pandemic?

John Frankel: We are seeing a couple of things. On the enterprise side, we have seen large FinTech enterprises like Goldman Sachs, Capital One, and Wells Fargo of this world looking to outsource key parts of their tech stacks. In the past, they used to do it internally.

We have a company called Secure in digital identity to help deal with fraud protection and KYC. With a lot of FinTech companies, you would anticipate that in Q2 and Q3, sales slow down as it’s difficult to do in-person sales, but in reality, they have a multi-year acceleration with the adoption of the business as underlying clients realize that they have to digitize faster.

What a company like Secure can provide is something that they cannot build internally because of the massive data sets that they have and the proprietary algorithms they have built. We are seeing that happen across the board. Startups have been able to create solutions that the large tech companies with their massive budgets cannot compete with. That is on the enterprise side.

On the consumer side, the consumer adoption is driven by touchless digital cash and the like and their willingness to say, “I don’t want to use my father’s broker and I don’t want to use my mother’s toolset that she uses to work with her money.”

Because of the digitalization of a lot of the underlying piece of infrastructure in financial services existing, it is almost treated like Lego blocks, new entrants can come in at low prices and put them together in new innovative ways and create products that look different.

They can combine pieces of insurance and brokerage in ways that are more convenient to individuals. We are seeing both of those as interesting spaces. We invested early into Clarity Money. We are in cyber security and several FinTech companies.

One of my favorites is Indiegogo which is the world’s largest crowdfunding platform. It has enabled entrepreneurship creativity and funding of causes in terms of hundreds of billions of dollars around the world. They are touching every corner of the world. It has been a wonderful enablement piece of technology. 

This segment is part 3 in the series : 1Mby1M Virtual Accelerator Investor Forum: With John Frankel, Partner at ff Venture Capital 2021
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