QED Investors, a notable fintech investor backing more than 20 unicorns with over $3 billion under management, announced closing two funds totaling $1.05 billion, according to a press release Tuesday.
The two funds include a $550 million early-stage fund and a $500 million growth-stage fund, which are both designated for investment in fintech companies in the UK, Latin America, Southeast Asia and US.
Founded in 2007 by Nigel Morris and Frank Rotman, QED has currently invested in over 150 companies and 20 unicorns, including Series As for Credit Karma in 2009, Remitly in 2014 and Nubank in 2014.
“There are so many exciting fintechs that can have a meaningful and lasting impact on consumers across the world. Financial literacy, generally speaking, is poor, not only in the U.S., but across many of the geographies in which we invest. Combine that with the large percentage of people who fall into the sub-prime category, a customer base that has been traditionally ignored, and you can see huge opportunities for growth,” Rotman said in an email interview with FinLedger.
The company closed its first fund, $30 million of internal capital, in 2008, and its previous latest fund, approximately $400 million, in 2020. QED’s previous backed unicorns include SoFi, Credit Karma, Red Ventures, and Flywire.
The venture capital firm intends to use the fund to invest between $5 million to $15 million between 40 and 50 companies from its early-stage fund, according to TechCrunch, with another 20-25 investments expected out of its growth fund.
Rotman says that QED is currently leaning on a number of verticals including earned-wage access, sustainability, small-business solutions and embedded finance at the moment.
“As a Virginia-based VC, the vast majority of QED investments, especially in our older legacy funds, are in the U.S.,” he said, explaining which markets the money will be going towards.
“That said, we have had tremendous traction in Latin America, particularly Mexico and Brazil, and we are becoming increasingly more well-known in the U.K. and Europe, a geography in which we have invested since 2012. I am incredibly optimistic about our future in LatAm, and I think there are a number of untapped resources in countries like Argentina, Chile and Colombia where we have only just began to scratch the surface.”
Rotman also pointed to the idea of geo-arbitrage, or the concept that if an idea can work in one country, there’s a good chance it will work in a similar country.
“Some of the trends that we saw a couple years ago in the U.S. are now starting to play out in other countries as digital adoption is becoming more and more global, so we’re looking forward to capitalize on our experience and help founders build incredible, long-lasting companies,” he said.
Looking ahead, Rotman stated he is also very interested in US residential proptech.
“The U.S. is under-built and this is a mega theme that can’t go away quickly. We’re 5.5 million single-family housing units short and we can only manufacture 600,000-700,000 a year. This is a profound problem rooted in the last financial crash and it’s going to take five or six years to unwind.”
“Technology can transform the asset class. Construction of buildings, construction lending, management of vendors and the unlocking equity of property can all become more efficient with tech overlay. We’re seeing fantastic traction with QED portfolio companies in the space, including Sundae, House Canary, Roofstock, EasyKnock, QunitoAndar and Loft.”
In other recent fintech news, subscription management platform Zuora unveiled its new fintech offerings, including telco-as-a-service, mobility-as-a-service, and content-as-a-service. Pagaya also announced going public via SPAC with a $8.5 billion valuation.