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My journey from a huge bank to a boutique VC firm

VC, venture capital, venture capitalist, VC firm, boutique VC firm, Capital One, Caribou Honig, PE, private equity, insurtech, insurance technology, fintech, financial technology, Wall Street, banking, banks, bankers

Bull Caribou in Denali National Park, Alaska

The path from a traditional bank to a financial technology firm is well-trodden. Going from traditional banking to a venture-capital firm that invests in fintech startups is another option – potentially an even more lucrative one.

Caribou Honig can testify to that. He worked his way up the ladder over a decade at Capital One, a McLean, Virginia-based bank with north of $25bn in annual revenues, where he managed of a 200-person underwriting operation and lead digital transformation initiatives. However, he soon arrived at a crossroads in his career.

“At Capital One, I cut my teeth on analytic data strategies, underwriting and risk management,” Honig says. “I led the team that cracked the code of moving away from direct mail to Internet marketing and customer acquisition.

“But in 2006, I burnt out professionally – my wife was in grad school and we had young kids, so I took some time off,” he said.

Honig, who has an MBA and a JD, is a testament to the truism that you should always be a good leaver and stay in contact – and on good terms – with former bosses and colleagues.

He was working as a freelance consultant when he decided to launch a VC firm with Frank Rotman, a former senior vice president at Capital One, and Nigel Morris, the ex-president and COO of the bank.

In 2008, just before the height of the financial crisis, QED Investors, a boutique VC firm focused on data-driven fintech and insurance technology (insurtech) companies, was born, with the three co-founders self-seeding the startup.

The transition from banking to the VC world – size matters

When Honig started at Capital One, it had around a thousand employees – when he left it had roughly 20k. His preference is working at a smaller organization.

“When I joined forces with the guys to create QED, we had three of us, operating at a different scale – you can’t have a bank with three people or a VC firm of a thousand,” Honig says. “Even at a very good financial services firm like Capital One, the gears grind to a halt twice a year, as everyone writes their 360-degree performance appraisals – you need to do that to help talent rise to the top and help people get better at their jobs, but it’s a big load on an organization.

“It’s liberating to be at a small firm of three people, where the notion of a performance appraisal didn’t make sense,” he says. “If I had feedback for someone or someone had feedback for me, we’d just tell each other.

“Capital One had a PR team and a network of vendors they could call on as well, whereas VC firms only make sense on small, modest scale – we won’t have on-staff specialists, so you have to learn to be more of a generalist, which neither lends itself nor permits itself to the degree of specialization you’ll find in a bank.”

Banks have various business lines, and even monolines have different segments and organizational units, each with a different strength, whereas it’s easier for a VC firm to operate as a cohesive team.

There is no doubt that, like PE, VC is a compelling, sought-after career path. That said, the barrier to entry may be even higher in the VC space than PE.

“There is no clear and straight path to VC, which is frustrating for people who have an eye towards it – there is no well-trod trail,” Honig says. “Having a background that gives you some exposure to fact-based analysis is valuable, because it gives you some access to understanding technology.

“You may not need to code, but you may have to understand some of the intellectual underpinnings of it, which gives you that analytic approach and windows into technology,” he says.
“You have to have a map of what’s going on in the sector, which might be right, it might be wrong, but you have a point of view for what’s going to happen around the corner and the conditions that would need to be true for the success of particular businesses.”

Photo credit: RONSAN4D/GettyImages

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