Vertical Software + Financial Services

Picture of Dan Borok

Dan Borok

Vertical Software + Financial Services

2023 wasn’t a great time in fintech.  There was negative investor sentiment, uncertainty around the cost of capital, capital overhang from 2021/1H 2022, and a number of credit-focused businesses that couldn’t exist in a more normalized rate environment. The business impact was likely felt more in B2C models, but the negative sentiment pervaded the entire space.

But sentiment is often a lag indicator and can mask opportunity.  We believe there is a very exciting opportunity in the space today and it’s an amazing time to build in B2B fintech, especially with a focus on overlooked vertical markets.  There is a ton of potential to develop software around the movement of money and assets and the corresponding infrastructure.  Our excitement in vertical fintech is driven by 4 trends that we believe are enabling new company creation.

Four Key Trends

  • Open Banking 2.0 – Plaid, MX, Finicity, Akoya, and other account aggregators have broad coverage across banks, and now the Consumer Financial Protection Bureau (CFPB) is mandating 100% coverage.  We believe the next leg of the stool will be similar coverage across brokerages and asset managers.  This will enable a new set of applications that will impact lending and payments.  Embedded finance players often rely on account aggregators to enable their product offerings. Embedded Finance is valued at over $60B today and is expected to grow to over $730B by 2032.  Account aggregators have seen meaningful growth recently, and we anticipate the market opportunity will only continue to grow. 
  • Supply Chain Upgrades – Driven by the pandemic and the corresponding disruption, companies spent unprecedented capital on buying and implementing new software to help understand the movement of goods.  Now those same companies are looking to also reduce the friction in the payments and financing flow that accompanies their goods, and the digital transformation has progressed far enough to support new fintech offerings that can enable trade payments and finance at scale.
  • Generative AI – It’s not perfect for many businesses and use cases, but there is magical automation in generative AI’s ability to manage and create content.  Areas with significant content including AR, AP, procurement/purchasing, and compliance offer interesting automation use cases for AI.  Venturebeat recently conducted a survey finding that 70% of organizations are either experimenting with or have implemented generative AI into their existing operations. While there will be many false starts, we believe we are in the early stages of what’s possible with LLMs and generative AI within fintech and we’re excited to see what’s to come.
  • “The Great Wealth Transfer”–  Over $80 trillion is expected to be inherited from aging baby boomers and older generations over the next 20 years and we expect that this macro trend will drive the creation of infrastructure that supports this mass movement of assets. We anticipate opportunities across the B2B WealthTech stack including estate planning, asset sales, tax planning, and more. 

Our Focus in Vertical Fintech

Friction around the movement of money and assets combined with ‘why now’ forcing functions such as Generative AI, Open Banking, Trade Finance and the generational transfer of wealth are driving the creation of a host of new companies.  We think of opportunities in terms of the ‘hierarchy of needs’ for an organization, and we’re most excited about these areas of opportunity:

  • Core Payments + Asset Transfer – Software for payments and transferring assets is core to business operations for 99% of companies.  And because of that there are many large, legacy players in the space, often leaving efficiencies on the table.  Cash is the core thing of course – encompassing payments from customers, to vendors, employees, the government, etc.  But there is sometimes even more friction in critical transactions involving non-cash assets – credit instruments, equities, RE titles, and accounts.  We invested in Homevision behind this trend as Homevision is automating collateral underwriting in the mortgage space, and has built a platform to ingest, understand, and review complex documents – core to home sales. 
  • Financial Tools – Next up in the hierarchy of needs is the software that surrounds payments, which includes AR, AP, billing, taxes, LT credit, working capital, and preparation of financials.  The closer to the collection of revenue or cash, the better.  We invested in Upwell, LendingFront, and Quiltt in this space.  Upwell is an accounts receivable platform for the transportation industry.  LendingFront is an embedded underwriting platform for bank and non-bank lenders, and Quiltt is a unified API for account aggregation and data enrichment – a one-stop platform for anyone looking to add account links to their offering.  All are core scaffolding products for vertical fintech.
  • Compliance and regulatory management – And somewhere adjacent to the hierarchy of business needs in most planning sessions – but critically important – is the management of compliance and security for transactions.  An area that most business leaders don’t think about from day one, but which every business runs into along the way, often as a stumbling block due to the increasing complexity of the regulatory landscape. We recently invested in Compyl around this thesis.  Compyl is a governance, risk, and compliance software for the financial services space, providing a single pane of glass for GRC management, benefiting from heightened regulatory scrutiny and an increase in security endpoints.

As we explore opportunities across the hierarchy of needs, we’ve taken a vertical approach, recognizing the underdevelopment of the software stack across various industries. 

Additionally, and perhaps counterintuitively, we view financial services itself as vertical when it comes to our fintech thesis – where there is still ample opportunity around the movement of assets and compliance.

What we look for: A Strategic Go-To-Market

Vertical software companies are great when they work, and afterwards it seems like it was an opportunity sitting in plain sight.  But, there are way more of these opportunities that never play out as expected because the market isn’t ready, the pain point isn’t a priority or there are unseen adoption challenges.

In our portfolio, we’ve seen success occur in verticals where there is a combination of receptivity in the market (forcing function) and a lower friction GTM.  Lower friction comes in different forms and can be a specific founder network, early software partnerships with other vertical players, or working with service providers that cover the industry.  

Give Us a Call

If you’re building vertically focused software for the movement of money or assets we’d love to talk to you and share ideas on the market.   Please reach out to Dan ( or Chika ( to learn more about our view of the market or share more about what you’re building. 

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