Meet Kat Utecht, Managing Partner at Core Innovation Capital

Steven Loeb · August 29, 2015 · Short URL: https://vator.tv/n/3fc9

Core Innovation Capital specializes in fintech companies, and has invested in Oportun and NerdWallet

There has been a big debate over the last few years over whether the Series A crunch is real or not.

What everyone can agree on, though, is that there are definitely more seed and early stage funds now than ever before, and more people willing to give money to young companies looking to make it big.

But just who are these funds and venture capitalists that run them? What kinds of investments do they like making, and how do they see themselves in the VC landscape?

We're highlighting key members of the community to find out.

Kathleen Utecht is Managing Partner of Core Innovation Capital.

Previously, Utecht was EIR/ Investor at Comcast Ventures and investor at WVP Ventures.

Prior to her venture roles, Utecht invested in and led Green Rock Entertainment, an online / offline commerce startup whose main product was Cahootie. Before her operational adventure, Utecht was an investment banker in the financial services group of Raymond James and a graduate of General Electric Capital’s Financial Management Program.

Utecht holds a bachelor’s degree from Babson College and an MBA from the Wharton School

VatorNews: What do you like to invest in? What are your categories of interest?

Kat Utecht: That one is easy since we only do financial services and technology.

We love financial services, and we've been doing fintech before it was cool. We closed our first fund in 2011, and we're now on our second fund. The reason why we love financial services is that it is a huge section of the economy, around 8% of GDP.

If I wasn't doing fintech, I'd be doing healthcare, which is another huge part of the GDP. It touches everybody, since you can't get away from finance, money or your health. Every day, it's a constant issue and it's super important to people's lives, both financial health and physical health.

Fintech is a super inefficient market. There's a lot coming into it, but it was largely ignored for a long time. We have seen n the last couple of years, people going into, and democratizing financial services, like Lending Club.

I think the next wave, in the next five to 10 years, will be empowering financial services. A really good example is Oportun, which is completely disrupting the payday industry, a $5 billion market, and has abused consumers. Payday lenders use no tech at all, no high APIs, it's not tech driven.

What's really exciting about fintech, is that there's so much growth, and it touches everyone so importantly.

Fintech is different from other areas. I joke and say that this is not a Stanford problem. It won't be disrupted by two young 20 year olds in a garage. It's so highly regulated, and you have to understand the ecosystem. This is not Airbnb or Uber, where you go against regulations. Financial regulators don't fuck around so you need more seasoned entrepreneurs. You tend to see them with 20 or 30 years of underwriting experience, so we are looking for solid experienced teams, who don't care  about trying to make another game or app. This hugely affects consumers lives, and it's hard to say that when you're talking about a gaming company.

VN: What would you say are the top investments you have been a part of? What stood out about those investments in particular?

KU: One is Honest Dollar, which is making retirement plans affordable for SMBs.  Americans need help with saving and few employers are offering solid plans, mostly for good reason.  The current industry is inefficient - expensive and opaque.  Honest Dollar offers a reliable, affordable plan that's easy and fun to use.  We loved the talented team that is operating in an extremely large market, though SMBs are hard to reach. 

The CEO, who is named whurley, and yes, he goes by one name only, is a marketing genius. He was one of the co-founders of Chaotic Moon, and we knew that skill set would help reach all of the corners in the market that other teams just couldn't access.

Another one we invested in was Vouch, which is reaching out to people with lower FICO scores, people with 600 to 680 credit scores. People with over 700 credit scores always behave the same, but with people who have a 620 credit score there is huge variety. Vouch has a really cool mechanism where a person takes out a loan and they send out an email, getting people to say, 'Hey, I can sponsor you.' If their rate was 25%, and then their friends sponsor for them, it can go down to 23%. They can sponsor a certain part of a loan, meaning one can pay $100, and another says, 'I'll pay 100.' The more people who sponsor you the lower the rate goes.

It's good to lower default rates because people don't want their friends to have to cover for them. It also lowers customer acquisition costs, and that is really expensive in this space. Users send out e-mail on average to nine of their friends, and its a way for people with lower credit scores to get lower rates. They also have a rock star management team from the early days at PayPal, and people who have run credit underwriting for big banks. It's another one I'm really excited about.

Another we invested in was NerdWallet. It gives financial advice for things like how pay off college loans, or the best mortgage to take. Anything like that, NerdWallet always pops up. It's the best thing we've seen in financial advice, and the content is truly amazing. Before I invested I had used it to find the best credit card for hotel points.

We also invested in Ripple Labs from the CEO of E-Loan and founder of Prosper. It's a B2B play, where the whole point is for  banks and hedge funds to exchange anything of value with almost no fee. With a check it takes 3 days to cash, and if you don't have enough it will cost you money. The interbanking system still takes a day. This technology clears things in minutes while going after the enterprise market. We think they have the ability to change the whole financial market. 

VN: What do you look for in company's that you put money in? What are the most important qualities?

KU: The team is very important. We have to actually like the people we invest in. Some don't care as long as it's a good and strong company. And that's fine for them, but it's not fine for us. We actually want to like the team. We want more of a marriage. We normally take the lead and sit on board seats so it has to be a good fit for us.

We really care about consumer value. Anyone that we think is not serious about bringing true value to consumer, or may abuse the consumer, is not a good fit for us. That aligns us with great teams, so that matters a lot. We also want the team to having experience and a strong foundation.

We look for sector fit, something that aligns with our strategies, not another app or gaming company. We are not expecting 90% to fail, because our companies have real business models and not focused on just getting clicks or eyeballs. That means we can do risky investments, and we can help with commercial contracts.

We are also checking for stage so that's its a fit, since we do mostly seed and Series A.

When it comes to valuations, there's an ownership level we want to keep. We want to have influence and we do also care about velocity and some kind of growth rate, and really early we want to see some kind of indication of what their market adoption will be. 

We are looking for a large market over $1 billion, and that's what will get us in or out. You can have a great team but it may not be the right sector. Sometimes a company is really too early for the sector, so what we try to do is give them TLC, introduce them to people who will help them with ideas and help them along and when its time for them to raise their next round they have groomed them so we can eventually invest. 

Our goal is to never miss a deal. We usually see everything in the space, though we don’t care about certain fintech niches, such as pipes to capital markets.  So, really we want to see every deal in empowering financial services.

In 2010, we tracked 100 deals, this year we will see 900. We see every fintech deal, literally almost every single deal done in this space. Now that there are successful fintech companies, like Lending Club, ad a lot of people have come out of Capital One, which spawned a bunch of entreprenuers. Also with the JOBS Act there are different rules, and there are more people breaking into insurance because of the Affordable Care Act. Valuations are up three fold, so it's been a crazy couple of years.

VN: Tell me a bit about your background. Where did you go to school? What led you to the venture capital world?

KU: I grew up outside New York City, in Connecticut, and I came from entrepreneurial background, since it was the family business. I was always interested in entrepreneurship and finance, so my background is in financial services, operations, and investing.

I started in financial services in GE Capital. I wanted to invest, so I was going to go to GE equity but they stopped doing new deals, so I was like, 'No thank you.' I went to a middle market investment bank, and spent a lot of time in insurance and specialty finance.

I always liked investing, so I made an investment and they credited me as a co-founder. I ran that company as CEO and then sold it to a private firm in 2009 and I've been doing venture ever since.

I co-ran the Comcast Ventures Catalyst Funds. With Core, I originally met Arjan Schütte in 2011 and shared deals with him throughout Comcast Ventures, before I rejoined a year and half ago to help grow the Core franchise.

VN: What do you like best about being a VC? What makes you excited?

KU: I've been on almost every side of the deal, meaning the debt side, as intermediary, as a VC and as an entrepreneur, and I think it's a ton harder to be an entrepreneur. You can't grow in a straight line from point A to point B. The role I try to play is being neutral. If it's going well I temper them. If it's going shitty I temper things, and let them know that they aren't that bad and they will get better.

People work for me at the fund but I cant bankrupt the fund. It's not like being an entrepreneur where a hundred people are working for you and you could go bankrupt at any second. That's so much more stress.

Being a VC and an entrepreneur are similar in that there's an excitement in that you're building something. Whether you're an entrprenuer or a VC, you're still building a culture and a team. There's real excitement in being a VC and seeing what can you build, so that's awesome on both sides.

I love being a VC. I get to work with a lot of different businesses and companies. I have extremely bad ADD, as do most people in venture and entrepreneurs. I get to do so many varied things, see different types of businesses and I love being able to interact with so many different people.

Entrepreneurs are focused on the business and that one thing. Now I meet with thousands of people a year. I have 10 entrepreneurs meetings a day, where we talk about new ideas and spaces. I  wake up every day and think this is the best job in the world. I can't imagine doing any other job, with the variety of ideas I get to see. I add more value on this side and its more fun and less stressful.

VN: What is the size of your current fund?

KU: Our first fund was $45 million and our second fund is $75 million.

VN: What is the investment range? How much do you put into each startup?

KU: We put in initial checks of $1 million to $4 million.

VN: Is there a typical percent that you want of a round? For instance, do you need to get 20% or 30% of a round?

KU: We target between 10% to 20%.

VN: Where is the firm currently in the investing cycle of its current fund?

KU: Our first fund is finished, and we recently started investing out of fund II

VN: What percentage of your fund is set aside for follow-on capital?

KU: About 60% of the fund.

VN: What series do you typically invest in? Are they typically Seed or Post Seed or Series A?

KU: 20% to 30% of our deals are seed, another 60% are Series A, and the other 10% are later stage.

VN: In a typical year how many startups do you invest in?

KU: Four or five. We will make 15 to 20 investments out of the total fund.

VN: Is there anything else you think I should know about you or the firm?

KU: Our fund is truly different because of our consumer value alignment. Our ceos aren’t truly different because they are fintech specifc, there are a lot of entrepreneurs tackling that.  There are very few fin tech specific investors both with their own funds or at generalist funds.

Plus, our team is awesome.

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Core Innovation Capital

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Kathleen Utecht

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Former entrepreneur, current investor.