When Christian Lawless Was Founded Conversion Capital Fintech only started to take off in 2015.
But Lawless, who started the venture firm after holding senior positions in capital markets at Lehman Brothers and Barclays, had a vision that financial services infrastructure would be unbundled as companies moved critical operational infrastructure to the cloud. Lawless raised $10 million and $20 million respectively for Conversion Capital’s first and second funds.
Since its inception, Conversion Capital has supported more than 60 startups, and its portfolio includes the giant Ramp, Vesta, Figure, Braid, Blend, Wisetack and Booster Fuels. It has seen 17 exits, mainly through M&A and one IPO (to blend†
In the years since Conversion’s inception, fintech has essentially exploded – driven by a pandemic-induced, accelerated digital transformation on the part of financial services firms around the world. Lawless’s belief that infrastructure is key to unlocking innovation in the space has been validated as infrastructure companies remain one of the largest recipients of risk finance in the space, even in a recession.
Today, Conversion Capital announces that it has raised $122 million for its third fund — more than six times the size of its previous fund — to support early-stage fintech and infrastructure startups. Lawless said that he and his partners, Blend co-founders Eugene Marinelli and Erin Collard wanted to raise $100 million and reached that goal in the fourth quarter of last year. The company then raised an additional $22 million in the first quarter of 2022. It currently has $254 million in assets under management.
Conversion plans to back 25 to 30 fintech companies from the latest fund, which reserve at least 30% for follow-up investments. It will target startups building software, cloud infrastructure and data technologies. So far, tThe company has begun deploying capital from the new fund into the fintech landscape and adjacent industries that it says are “undergoing a structural transformation.”
Conversion will deploy initial checks ranging from $500,000 to $5 million in pre-seed through Series A companies, with “founder-led engineering teams.” In realityLawless said Conversion is betting on a trend he suspects will be booming: engineers from companies that have gone public are leaving to start their own businesses.
In the frenzy that was 2021, Series A became too expensive for Conversion “to play in,” Lawless noted, but he thinks “that will reset now.”
Meanwhile, Conversion is just as emphatic about what it won’t invest in as it is about what it will.
“We’ve never invested in companies that take balance sheet risk, so you won’t necessarily see us investing in a lender,” Lawless told gotechbusiness.com. “For example, we avoided the peer-to-peer direct lending craze in 2017. We also avoided many of the mortgage lenders and chose to invest instead in the picks and shovels, and the actual core technology itself.”
Also, in particular, despite the fact that Lawless was born to a Bolivian mother and an Irish father, the investor will not be putting capital into LatAm and most of Europe – where he believes a deep understanding of local currencies and policies is needed to do so effectively . Instead of, Conversion limits its investments to US and London-based companies that Lawless says “will benefit from macro winds and global decoupling.”
“Our experience drives our belief that the US will remain the epicenter of innovation. Past market corrections have shown that we have the most resilient economy in the world,” he said. “We still think that if the United States was a startup it would be one of the biggest startups in the world and we want to invest in the ecosystem built and born of hopefully stable policies, stable politics and stable economies.”
In particular, conversion works under the assumption that: the re-onshoring of supply chain and manufacturing presents a “huge opportunity” for infrastructure technologies, especially given that highly regulated industries – such as financial services – can now build in the cloud, not just build on-premises and move to the cloud.
Over the past year, Conversion has been cautious as many other VCs have gone on an investment wave.
“One thing I’ve always looked at is that you probably would rather raise money in a bull market and then bet in a bear market,” he told gotechbusiness.com. “Last year we didn’t actually allocate much capital because the market seemed incredibly overheated and everything seemed to point to a recession, or some sort of correction.”
As such, Lawless added, Conversion hasn’t allocated much capital beyond “a handful” of investments in companies in 2021.
“So we still have a great majority of that capital and now we’re really excited to actually put it into use,” he told gotechbusiness.com.
“I’m not saying we’re jumping on someone’s grave. That’s not the point, but as an investor there’s a lot of global macroeconomic stuff going on… and we think fintech can help solve all these problems,” Lawless said.
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