Sheel Mohnot on Venture Fund Size, Founders and Fintech

Sheel Mohnot recalls an investor citing Facebook shares of a video about robotic pizza company Zume as investment data. He questioned whether sharing a video was evidence for investing in a pizza business; he and Harry Stebbings use the story to introduce a discussion of venture excess.

Mohnot says he grew up wanting to build businesses, worked in consulting, joined a payments startup sold in 2012 and then founded another company sold in 2015. He moved into venture after experiencing fundraising from the founder’s side.

His advice to his younger investor self is that there is no single right way to invest or build a company. He prefers in-person work but does not mandate it for founders because remote companies can succeed too. Stebbings pushes back on “nobody knows what they are doing,” citing investors with sustained strong returns; Mohnot replies that even accomplished investors debate uncertain questions and miss investments.

Mohnot argues that venture fund sizes should shrink. In his view, abundant capital and larger funds drive up prices while raising the amount the industry must return. Some limited partners had pulled back, although the pair observe investors seeking capital in Saudi Arabia; Mohnot says his firm had not taken Saudi money and criticizes what he sees as inconsistent attitudes toward it.

He expects some smaller funds because returns-focused managers may conclude that less capital improves their odds, even if smaller funds reduce fees. He distinguishes that incentive from managers focused on accumulating assets. He does not expect many funds to return committed capital in this cycle.

Better Tomorrow Ventures had raised a $150 million seed fund and a $75 million opportunity fund, up from a $75 million prior fund. Mohnot says the decision reflected desired check sizes, number of investments and follow-on needs: in the previous fund, fast subsequent rounds had left the balance between initial checks and reserves out of line.

Stebbings asks whether a lead investor could make only the initial investment. Mohnot says some promising companies need additional capital before they can raise externally, while a strategy with no planned reserves can force follow-ons into struggling companies rather than the best opportunities. He cites a company that raised at a $100 million valuation after BTV added capital.

Stebbings doubts investors can identify winners early enough for follow-on decisions. Mohnot agrees that winners can surprise, but says he can sometimes identify companies unlikely to merit more capital. He describes a Southeast Asian investment where the expected fintech market had not developed; a pivot to a different customer might change the assessment.

Emerging-market investment was struggling in the downturn, Mohnot says. In the low-rate period, investors reached into unfamiliar markets; now many were returning closer to home. He still sees opportunities, but argues that too much money went beyond a handful of exceptional companies in some markets.

Stebbings challenges whether even a strong company can find liquidity in places with limited public-market routes. Mohnot says the path is difficult but points to emerging-market companies that reached public markets, including Nubank in Latin America. He argues entry prices must reflect the harder path; in 2021, he says, some seed valuations resembled those in developed markets.

BTV was more focused on the US and other non-emerging markets than two years earlier, Mohnot says. Its London investments were not restricted to local customers: some sold globally or into India. He remains interested in European founders, especially those building for global markets.

Mohnot says financial services’ size and digital nature drew him to fintech investing in 2016. In his assessment, 2020–21 brought excess hype, but the underlying trajectory continued after the correction. Less capital chasing similar companies can reduce competition for both funding and customers; this is the view of an investor specializing in the sector.

Looking ahead, Mohnot questions how very large funds can deliver strong returns when even a $10 billion outcome may be insufficient at scale. Stebbings suggests some sovereign investors may accept different objectives; Mohnot acknowledges that possibility. Their exchange is a prediction and debate, not a measured conclusion about all limited partners.

Mohnot says BTV aims for returns rather than asset accumulation. At roughly $300 million under management at the time, he says the firm took less than a full 2% management fee and returned the difference to LPs. Stebbings asks whether spending more on the firm could generate better results; Mohnot says its seven-person team already had the resources it wanted.

BTV employs a fintech-focused talent specialist. Mohnot says founders in a competitive deal cited responsiveness and help hiring as reasons for choosing the firm. Stebbings questions whether broad venture platforms can help across very different roles; Mohnot argues specialization makes his team’s recruiting support more useful.

Starting a venture firm can be financially difficult, Mohnot says: a new manager may work for a long period without pay while also contributing capital to the fund. Stebbings agrees that the ability to go without a salary is a privilege and that GP commitments can create pressure.

BTV’s earlier fund zero was $15 million. Its $75 million first fund had no anchor investor, Mohnot says: the first close reached $18 million mostly from people who knew the partners in fintech, along with institutional investor Sondna. Having an institution, a closed fund and an initial investment helped establish credibility.

The firm closed early because it had committed to lead the seed round of Unit, a banking-as-a-service company, before having the fund in place. Mohnot considers the decision valuable in hindsight. The first capital call was roughly 10%, and the firm then obtained a credit line.

In March 2020, the partners traveled to the East Coast to raise more as COVID disrupted meetings. Mohnot says even some signed commitments fell through amid uncertainty. They reduced a $60 million target to $30–40 million, expecting lower valuations—an assumption he says proved wrong.

As conditions changed, investors returned, including some who had previously declined. The fund ultimately reached $75 million and became more institutional. Mohnot says fundraising became easier after passing halfway and adding recognized institutions, but relationships also took time to develop.

The second fund was raised in about a month in December 2021, when many LPs already knew the partners and portfolio. Some could commit large amounts after short meetings because they had done prior diligence through founders, other managers and their own networks.

For the first fund, deadlines did not easily create urgency: investors knew a date might move. In fund two, demand genuinely exceeded capacity and existing LPs committed quickly. That created a mistake: some prospective university endowments had been told they had until March, but the fund closed in December before their processes could finish.

BTV limited each LP to 10% or less of the fund, giving it resilience if one investor does not return. Mohnot says he would probably have accepted a 40% investor in the first fund when capital was scarce; with the second, the firm could reduce oversized commitments. Its five-member LP advisory committee handles matters including conflicts and approval of the accelerator.

Stebbings questions launching an accelerator amid many competing programs. Mohnot says founders from his 2016–18 accelerator asked for similarly hands-on, in-person support and that some fintech companies wanted specialist help. He contrasts this with larger generalist programs; this is also a pitch for BTV’s own program, The Mint.

The planned cohort was six to ten companies, each receiving $500,000, with the program carved out into a separate vehicle. Mentors and space were paid from management fees. Mohnot says partners would devote significant time to logistics, mentors and founder support, and that the accelerator’s terms were $500,000 for 10%.

Mohnot says the earlier accelerator had five cohorts of six to ten companies and five investments above 70 times return, while the fund had returned its full capital. He distinguishes the fund’s distributed cash from the cited individual multiples, without specifying that each multiple was realized.

He agrees that investors should have distributed more cash during the strong market. BTV sold in some instances, but he wishes it had sold more. He likes returning a full fund when possible while retaining exposure to a company whose prospects still excite him; selling an entire position is unusual for the firm.

His biggest investment mistake, he says, was not taking enough liquidity. One company could have returned multiples of the fund, but during a lengthy sale process the founders suggested waiting for a potentially doubled valuation. The next round did not materialize as the market fell in early 2022.

Mohnot says conversations about reducing an old position were not particularly difficult when later investors had strong demand. He also warns against investing in a second- or third-choice company merely because the leading company in a category is unavailable, citing banking-as-a-service investments around BTV portfolio company Unit.

For pre-seed and seed investing, Mohnot prioritizes the founder, who can pivot if the original idea fails. Stebbings argues that timing and market matter too, and pivots need sufficient runway. They agree the balance shifts at later stages, when evidence of a large market and product-market fit carries more weight.

Mohnot recounts the story of Nebraska Furniture Mart founder Rose Blumkin, known as Mrs. B, who later started a competing store after a family dispute and sold that business to Warren Buffett as well. He uses Buffett’s admiration for her as an illustration of exceptional entrepreneurial ability across businesses.

A great founder can still fail to find product-market fit or remain attached to an idea too long. Mohnot describes working with a portfolio company on a short test and a possible pivot, despite having years of runway, because the existing product might not become a large business.

Stebbings worries that very large seed rounds can reduce urgency and increase salary expectations. Mohnot agrees that raising far more money can change a startup’s culture, even if founders intend to spend as carefully as they would with a smaller round.

Mohnot criticizes a multi-stage “learning check” strategy: a small early investment in a weak competitor can close access to a future category winner seeking a much larger round. He believes some individuals do seed investing well, but is skeptical of spreading small checks indiscriminately.

BTV wants to remain an early-stage investor rather than move into Series A, and its accelerator takes it earlier. Mohnot says the firm grew from $15 million to $75 million and then $225 million across the latest seed and opportunity funds, but he does not want to grow from there; his ambition is stronger returns, which requires patience.

Investor-founder tension can arise when VCs prescribe decisions instead of advising. Mohnot tries to be supportive without dictating. He finds boards useful for governance and periodic reflection, but says much of his practical founder support happens in conversations between board meetings.

He values experienced board members who speak sparingly but offer useful judgment, naming Jeff Horing and former Google marketing executive David Lawee as examples. Experience matters, he says, because many business problems recur.

For LP–GP relations, Mohnot says managers should do what they promised. The pair discuss how rapid deployment and repeated fundraising can increase fees and assets before returns are known, potentially misaligning managers with LPs.

Stebbings argues that large GP commitments can create barriers for emerging managers. Mohnot adds that an overextended manager may feel pressure to sell an investment early to recover personal capital. He considers a modest commitment reasonable, but predicts many very small new managers will find later funds difficult to raise.

Mohnot questions founders who run outside funds and lead deals while also operating a company. Supporting a portfolio during crises demands time that might otherwise go to their own business. He distinguishes this from occasional angel checks or strategic investing; Stebbings adds that accepting outside fund capital creates a separate responsibility to LPs.

Mohnot recounts entering a Taco Bell contest with his wife Amrita and winning a wedding in Decentraland. Initially skeptical, they accepted after the company offered to customize the event as an Indian wedding. Friends attended in person and relatives joined as avatars; he says the ceremony was legal and emotional.

He says Taco Bell also provided credits and paid $25,000 toward a honeymoon. The couple planned additional celebrations in India, Cleveland, Pittsburgh and Mexico City. The arrangement is part of the context for his enthusiastic account of the brand.

In the rapid-fire round, Mohnot names Homebrew and IA as admired seed firms, Accel and Benchmark among Series A investors, and Founders Fund among multi-stage firms, noting its smaller fund size. He says he has become more willing to sell secondary stakes earlier.

For founders, Mohnot offers a personal rule of thumb: from Series B onward, secondary sales up to the company’s ARR can be reasonable. He does not blame founders for taking liquidity, sometimes under investor pressure, but speculates that very large founder sales relative to revenue would correlate with poor fund returns; he provides no study for that claim.

Stebbings suggests some multi-stage managers are reluctant to call capital because of large personal commitments and other obligations. Mohnot agrees this happens and predicts further valuation declines and more structured financing. These are their observations and forecasts, not verified measures of the market.

Mohnot says Tiger recently led a portfolio company’s Series A with substantial diligence and useful support, unlike what he describes as its much faster 2021 pace. He expects Tiger to manage a smaller fund. He is more critical of SoftBank’s past decisions and the size of checks given to companies he considers unready.

Returning to the Zume anecdote, he questions treating video shares as an investment signal. In five years, he wants BTV to be the first choice for fintech founders globally. His perspective is shaped by the firm’s early-stage fintech strategy and portfolio.