Aug 15, 2022, 11:44 AM ETInterview, Fireside Chat

Sheel Mohnot: Lessons from Investing in Flexport and Missing on Robinhood | 20VC #917

Sheil began his venture career after two successful exits as a founder (acquired in 2012 and 2015) and a subsequent mentorship role at 500 Startups.
He co-founded Better Tomorrow Ventures (BTV) in late 2019 with Jake Gibson (co-founder of NerdWallet) after rejecting offers from bureaucratic tier-one funds.
The firm specializes exclusively in the FinTech category, requiring them to choose single winners in a space rather than diversifying across competitors.
Sheil attributes his low-burn lifestyle and lack of material desire to a year living on $1/day in India working in microfinance.

BTV targets 10–15% ownership in initial checks, aiming to average closer to 12–13% in Fund 2 compared to 10% in Fund 1.
Initial investment checks for Fund 2 are structured as $2 million into a $3–4 million round, with a 60% reserve allocation dedicated to follow-on investments.
The fund maintains a concentrated portfolio of approximately 30 companies, investing in 10 new startups annually over a three-year fund life.
Sheil admits to a major regret from Fund 1: failing to sell secondary stakes in winning companies during 2021 high valuations, noting he could have returned 25x on an $8M fund.
The firm prioritizes capital-efficient businesses, learning from a $230M exit at a $2.5M entry valuation that outperformed a $900M company with higher dilution.
BTV actively seeks to grow ownership percentages over time, successfully increasing positions in winners from 10% to 13% through strategic follow-ons.

Sheil identifies "Robinhood" and "Chime" as significant misses, noting he failed to see how mobile-first models could unlock new retail investor demographics and how execution could succeed where previous neobanking models (like Simple) failed.
The fund avoids "spray and pray" index approaches, preferring a hands-on model where they introduce founders to Series A/B investors to prevent being cut out of pro-rata rights.
Collaboration in the seed stage is viewed as increasing compared to the past, evidenced by multi-stage funds accepting lower ownership thresholds (e.g., 8–9% at Series A) to share risk.
Sheil advises emerging market companies to pivot immediately to free cash flow positivity, a shift he notes is culturally difficult for teams built on "aggressive growth" mindsets.
Fund 1 managers are warned against price discipline failures, specifically investing in seed companies at inflated $50M+ valuations during the 2021 aberration.

Sheil predicts a retrenchment from high-risk emerging markets (Africa, Pakistan) due to higher interest rates, while noting resilience in markets with homegrown ecosystems (India, Latin America).
Specific regional concerns include the recent shutdown of Pakistan's Airlift and financial struggles for Africa's Flutterwave, signaling capital withdrawal from frontier markets.
Despite macro headwinds, Sheil views Latin America as having a robust pipeline, citing the success of Nubank as proof of continued U.S. investor appetite.
BTV's portfolio includes shielded companies like Chipper Cash, which maintain momentum despite the challenging macro environment for emerging market capital.

Sheil views a 10% GP commitment of personal net worth as a reasonable cap, warning that higher commitments can lead to conflicts of interest, such as selling secondary stakes for personal liquidity (e.g., buying a house).
His biggest professional regret is not securing higher ownership stakes in early-stage deals, despite founders expressing a desire for him to own more of the company.
Looking forward to 2027, Sheil aims for Better Tomorrow Ventures to be the global top-choice partner for fintech founders regardless of geography.
Personally, Sheil plans to continue exploring global opportunities with no fixed career path change, though he expresses openness to the possibility of fatherhood.