QED Comes of Age, Raises $1.05 Billion Fund

Maybe we’ll make some investments. Maybe we’ll have some fun. Maybe we won’t lose too much money.

That was my mindset some 14 years ago when I started QED Investors with my good friends Frank Rotman and Caribou Honig. Honestly, we didn’t know if we’d be any good at investing.?

I can’t say with a straight face that it was a perfectly executed plan. It was honestly just taking baby steps one at a time, testing and learning every time we put one foot in front of another. In many ways, that same principle of continuous learning remains a keystone of QED.

Today, I’m absolutely thrilled to announce today that QED has closed a $1.05 billion fund.

The funds – a $550 million QED Fund VII and a $500 Growth Fund – will allow QED to do what it does best – invest in disruptive fintech companies across the U.S., U.K., Latin America and Southeast Asia. Not only can QED continue to invest in early stage companies but it can further back its winners, get multiple looks at companies and bet on later-stages businesses in newer geographies or fintech sub sectors where the model is proven.

I can say with confidence that QED’s approach is working. We’ve invested in more than 150 companies across 13 countries. We’ve expanded from a three-person family office to an ever-growing investment team of 17 professionals. We have more than $3 billion of assets under management and we’ve invested in 20 unicorns – more than half of which we first backed at the seed or Series A stage.?

Maybe just as importantly, almost every LP from our previous fund not only returned for Fund VII, but they increased their allocation. We remain extremely grateful for the support of our LPs, old and new, and we’re excited to have the dry powder to back the best fintech companies in the world from seed to IPO.

While our insatiable curiosity, strict focus on unit economics and hypothesis-driven approach remains a core part of our VC DNA, QED today looks much different from how it looked in 2007 as our key hypotheses have evolved as market opportunities have shifted and expanded.

We spread our net pretty widely at first, in terms of verticals if not necessarily geography. Data-as-a-Service, adtech and financial services origination platforms were all major themes of Fund I, which saw QED make 31 investments over four years. More than half of these companies were on the east coast from Virginia to New York City. All but two investments were in the U.S., and I can look back with a smile on my face today at sending Frank to Beijing, Shenzhen and Shanghai in just the second month of QED’s existence to meet the prominent banks in China.

Fund I was a mixed bag as we dipped our toes in the waters of venture. We made some incredible investments – QED led Credit Karma’s Series A round in 2009 – and in 2010 we invested in three consecutive companies in as many months – 2U, Red Ventures and TransUnion – that would all go on to become unicorns over the next seven years.?

We invested in companies that intrigued us; companies where we saw strong economics and the potential to change consumer behaviour and trends. Probably one-third of our portfolio companies in Fund I were adtechs, and looking back there are so many businesses that we would pass on today – not because they weren’t strong companies or exceptional founders, but because they simply weren’t financial technology companies. I remember investing in a consumer delivery app, Propane Taxi, based in Bristow, Va., eight or nine months into our journey simply because the premise interested us and we wanted to learn more.

Fund II saw QED expand its investment thesis to include cross-border money remittances and fraud detection companies, and it also saw us make our first investments in Europe in Sweden, England and Ireland.?

Consumer lending and consumer payments continued to play a big role in our investment portfolio over the next two years. Klarna in Stockholm, was a big success story for QED, but Signifyd, Flywire and Remitly all performed extraordinarily well for us, and the learnings from those investments stay with us today.

I can’t say with a straight face that it was a perfectly executed plan. It was honestly just taking baby steps one at a time.

International expansion continued in Fund III as QED made its first investments in Brazil and Mexico. In fact, eight of the 20 new companies in which we invested were outside of the U.S., including Nubank in Brazil that may just be the biggest and best neobank on the planet.

The concept of geo-arbitrage really started to take hold in this fund – the idea that if a business conceptually worked in one country, there was a good chance that it could work in another. Of course there are a number of factors to consider, including market conditions, competition and regulatory climates of each specific country, but QED really began to lean in here.

Proptech and insuretech also became big themes of Fund III, and it’s been fascinating to see how certain themes, like proptech, remain a high priority to QED today as we’ve gone to school and learned as much as we can.

After bootstrapping the family office over the first three funds – more than 70 unique portfolio companies over a decade of learning – QED raised outside funds for the first time in Fund IV. Our focus on neobanks bloomed around this time, as did our interest in earned wage access and similar themes that were rooted in financial inclusion and fairness.

Fund V saw QED evolve into other forms of vertical banks, bank infrastructure and healthcare payments, and the international approach remained steady, with 12 of 25 new logos coming overseas from a combination of England, Argentina, Brazil and Mexico.

And QED’s most recent fund, Fund VI, was our most diverse yet, spread across nine countries over four continents in verticals from HR tech and earned-wage access to crypto and embedded finance. Proptech, insuretech and vertical banks remained key themes carried over from Fund V, and they’ll likely play a key role in Fund VII as well as we continue to seize the opportunities in front of us.

When we first decided to raise outside capital in 2017, I said it was like crossing the Rubicon. Investing your own money is one thing. Investing other people’s money is something different entirely, but the move to digitization was real, the winds were roaring at our backs and the opportunity was bigger than we could fund personally. This was no longer a hobby and a folly, this was a business, and I knew I would never be content with remaining in the comfort and safety of our family office.

I knew that once I crossed the Rubicon, there was no going back, but I was comfortable taking that step. I enjoyed investing, and I think it’s fair now to say that people enjoyed working with me as much as I enjoyed working with them. Now, with my feet firmly on the banks on the other side, I can say it was the best decision I ever made.

Learn more about our fundraise on our website.

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