Emergence invests in enterprise software companies and has funded Zoom, Yammer and SaleforceRead more...
Point72 Ventures funded by Steve Cohen and eligible employees of Point72 Asset Management
Venture capital used to be a cottage industry, with very few investing in tomorrow's products and services. Oh, how times have changed!
While there are more startups than ever, there's also more money chasing them. In this series, we look at the new (or relatively new) VCs in the early stages: seed and Series A.
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.
Matthew Granade is Managing Partner at Point72 Ventures.
Before joining Point72 in 2015, Granade co-founded Domino Data Lab, a data science platform that model-driven firms use to accelerate research, increase collaboration, and deliver high-impact models. He currently serves on its Board of Directors.
Earlier in his career, Granade served as Co-Head of Research for Bridgewater Associates, where he built and led teams that developed insights on the global economy, created new algorithmic systems for capturing alpha, and published Bridgewater’s market commentary, Daily Observations.
He serves on the Boards of Directors of several private companies, including Say, Inc. and Quantopian, Inc.
Granade earned his A.B. from Harvard College, where he was President of The Harvard Crimson, and his M.B.A. from Harvard Business School, where he was a George F. Baker Scholar.
VatorNews: What is your investment philosophy or methodology?
Matthew Granade: We took one of the central competencies at Point72—fundamental research and deep understanding of industries and businesses—and applied it to venture investing.
We are expertise-driven and tend to dive very deep into whatever we’re working on. We hire subject matter experts to lead investment areas; there are no generalists. We want to be able to say that no other VC will be as knowledgeable about a founder’s business.
We are outbound-driven, meaning we usually make first contact with the companies we invest in because we have a view about the company and the industry.
Our size and capital structure allow us to be agile.
VN: What are your categories of interest?
MG: We started out with the FinTech investing team in 2016, then launched the Artificial Intelligence/Machine Learning (AI/ML) team in 2017, the Enterprise investing team in 2018, and the Healthcare investing team in 2020.
VN: What's the big macro trend you're betting on?
MG: In the AI/ML space, we invest in what we call model-driven businesses. There’s been an explosion of data in the last two years and compute power is cheaper than ever. At the same time, advanced algorithms that leverage AI and machine learning are constantly getting smarter and faster.
We put our heads together and tried to figure out, what’s the compelling business model that brings all of this together? And how does one sustainably make money using those things? We came to the conclusion that this idea of a model-driven business—one that takes in data, uses a self-learning model to make a prediction, then learns from how someone reacts to that prediction and gets better as a result—was the direction forward to build a successful and competitive business using AI.
In fintech, our overarching thesis is that we are at the beginning of a wave of disruption in financial technology – the tools, enabling technologies and underlying infrastructures that financial services providers need to build, deliver and maintain their products. Financial technology has historically been dominated by legacy providers like FIS and Fiserv that are built on disparate, decades-old technology. Whether it’s digital financial services startups like neobanks, large technology companies looking to incorporate financial services, or banks that need to modernize their user experience and processes to stay competitive, they can no longer rely on those old providers to help them innovate. We’ve invested in a number of next-generation financial technology providers powering everything from banking to brokerage to payments, and we believe that the next decade will be driven by the rise of these types of new players.
On the direct to consumer side, we continue to believe there’s a great opportunity for digital financial services providers focusing on underserved groups based on geography or demographics. We believe that mobile adoption and new technologies that make it easier and cheaper to service customers are creating an opportunity for startup providers to go after consumers that were previously ignored by incumbents.
VN: What is the size of your current fund and how many investments do you typically make in a year?
MG: Our venture effort is currently financed by Steve Cohen, our founder. With this portion of his portfolio, he is extremely long duration so we don’t have to worry about the issues typical funds struggle with, like fund lifespan. We also have a lot of flexibility in how much capital we deploy a year; there are no annual requirements. That said, in a typical year we will do about 20 to 25 seed deals, about 10 Series As and a couple of later stage deals. We also reserve aggressively for follow-ons because we strongly believe in chasing our winners.
VN: What stage/series do you invest in and how much is that in dollar amount for you?
MG: For initial investments, we focus mainly on Seeds and Series A, though we also do the occasional Series B and C.
VN: What other signals do you look for? Team, product, macro market?
MG: Our investment process really starts at the thematic level – in each of the areas where we invest, we try to understand the big challenges that industries and companies face and the key technology or business model innovations that are taking place to solve them. We use that insight to develop a perspective on key areas where we think entrepreneurs can build great companies. We then map what startups are doing in that space so that we have a deep understanding of the companies that are actually getting built—and those best positioned to solve the industry’s biggest challenges.
This process allows us to come to a specific investment opportunity with a tremendous amount of background and a clear point of view. We know we like the general theme or area and the question becomes, do we also see potential in a specific business. We focus on a few key areas—is there a world-class team, is the product excellent, and do the economics work.
VN: Venture is a two-way street, where investors also have to pitch themselves. How do you differentiate your fund to entrepreneurs?
MG: Our size and structure allow us to be thoughtful and expertise-driven. The investors at Point72 Ventures are some of the leading experts in the world in the areas where they invest. So the advice, perspective, and insight you’re going to get from them is going to be top-notch. And I think when you’re an entrepreneur expertise matters – you want to surround yourself with people who deeply understand what you’re trying to do – you don’t want someone on your board or giving you strategic advice who doesn’t know your space.
We also bring on operating partners specific to the vertical who can give the entrepreneur relevant advice for what they’re trying to build. For example, in fintech, our product expert, Dave Matter, was Head of Product at Marqeta and Adam Carson, our go-to-market lead, ran fintech integration at JP Morgan.
We’ve also built strong relationships across the industries we invest in, and those relationships are also a great resource for our portfolio companies – both for customer introductions as well as advice and perspective.
VN: What are some of the investments you’ve made that you're super excited about? Why did you want to invest in those companies?
MG: In the fintech space, one of our current theses is that the next wave of disruption will come for legacy financial technology companies. For example, we invested in a company called MANTL, which helps banks and credit unions provide their consumer and business customers with a modern account opening experience, without having to change their underlying core infrastructure. We like this company because they enable the country's smaller financial institutions to compete with the big guys and fintechs on digital experience. Covid has highlighted how critical account opening and digital experience is in financial services.
Another FinTech investment we’re excited about is Drivewealth, a brokerage-as-a-service provider. They enable anyone from large technology companies like Square to small banks and startups to provide trading and digital wealth management experiences to their customers.
One of the investments that our AI/ML investment team is excited about is InVia Robotics. InVia builds robots to partner with people, taking on roles that humans aren’t well-suited to (pushing a cart for miles inside of a warehouse every day) and instead allowing people to do what they are uniquely great at: picking, packing, and shipping. E-commerce is growing at a tremendous pace, a trend that has been accelerated by the pandemic. We’re hitting the point where we can’t solve the problem with labor alone – technology needs to be part of the solution, and InVia is building that technology. InVia allows a warehouse to introduce model-driven optimization into their physical space. InVia can determine efficient picking routes, rearrange a warehouse for efficiency, and drive automated replenishment operations.
One of the Enterprise investments we’re excited about is Datalogue, which helps teams at the world’s largest enterprises use self-service functionality to get data from where it’s collected to where they can analyze it.
Datalogue is solving a big problem, and the data integration space is ripe for disruption. Legacy providers are failing to innovate and address the needs of the modern data ecosystem, while the need for data to run businesses is only increasing. Companies struggle to get usable data into a repository for analytics and data science. Datalogue is easy-to-use and it empowers data scientists and analysts to be able to access the data they need on their own, without depending on IT. The company is helping Fortune 500 customers realize massive savings and performance gains through the productivity its customers are gaining.
VN: What are some lessons you learned?
MG: We have several mantras that I think are indicative of lessons we’ve learned at some point or other: one, do the work, Two, act with conviction. Three, a strong team is the foundation. Four, successful businesses make money. And give, support founders, even when that means delivering hard messages.
VN: What excites you the most about your position as VC?
MG: I’m excited about the potential of building great companies in their respective industries.
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