If man contains multitudes, what are we to make of Nigel Morris? As an executive, his resume is sterling, leveraging years spent in consulting and credit card banking into the co-founding, in 1994, of the famed lender Capital One (“What’s in your wallet?”). But that was his ‘last career’.
Morris has since flipped to the other side of the ledger, no longer bootstrapping companies but backing them as the Co-Founder and Managing Partner of QED Investors, a top Fintech Venture Capital firm that’s taken prominent early stakes in multibillion dollar runaways like Credit Karma, Nubank, SoFi, and Klarna.
But what’s singular about Morris, a Forbes Midas List staple who again appears in the most recent rundown of the planet’s top VCs, is his finger is as much on the pulse of his industry today as it has ever been.
From his office in Virginia, Morris discusses the advantage of being a founder first, why he’ll give companies advice even if he doesn’t invest with them, and why headquartering QED on the east coast is just fine for business.
(This interview has been edited and condensed for clarity.)
Affinity: How has your career in business prior to becoming a VC served you now on the other side of the aisle as an investor?
Morris: I'm incredibly blessed in that I've been able to have four different vantage points to study and see this thing called Fintech and Financial Services. It's very complicated. It has all kinds of nuance attached to it—unit economics, regulatory fraud, credit risk, asset liability management.
The thing that I've learned the most is that having rich experiences from lots of different vantage points really is helpful in trying to understand the complexity here. If you think it's simple, and if you think it's linear and if you think it's obvious, you are probably going to get yourself into hot water.
When somebody comes and pitches a deal, the only thing I know for sure is what they think is going to happen is not going to happen. I jokingly say that we've invested in 200 companies now [at QED]—I think two of them hit their numbers in the first three years. Two. So the only thing I know for sure is that the numbers that you present are maybe directionally correct, but are unlikely to be exactly what happens.
So you have to look for parallel metaphors and anecdotes of things that you have seen in the past that will give you guidance on how to evaluate a particular deal. That wealth of experience of being able to say, "Look, I think this looks a bit like this, but they did it this way. This happened, and that was the monster around the corner." Just seeing the pattern recognition from that is absolutely invaluable.
The other thing is that having been around for so long, I know enough about each of the pieces that make up the gestalt of Financial Services, of fraud and asset liability, regulatory management, compliance, credit risk, unit economics.
Candidly, and I think a unique proposition of QED is that a lot of these wonderful firms—Accel, Benchmark, Andreesen, Sequoia, I mean amazing companies—have not done this for 40 years. They haven't seen the patterns. I think that because this business is so complicated and so nuanced, we desperately need people that are specialists around the table that have seen those things in the past.
At my core, I'm an operator. I'm still an operator masquerading as an investor. I focus on culture and people and organization design and incentives and how to get the ecosystem to work in a company. Culture eats strategy for breakfast, as Drucker said. I think that that's so important. Product-market fit and unit economics and solving a customer's problem is really important, but then scaling and building something that turns from an idea into a business requires all those softer and actually much more devilishly difficult things to make it work. I liberally draw from my experiences wherever I can.
Affinity: If I'm a VC without a considerable reputation, and I'm still building out who I am and what I represent, how can I establish myself to potential founders as someone they might want to partner with?
Morris: I do passionately believe that you can only do the deals that you see. So much of the art of Venture Capital is creating gravitational pull and positive selection of people wanting to talk to you. And you build a reputation.
I've worked tirelessly now, 15 years of building the brand of QED doing meet-ups [with companies]. Last year, I think I did 22 meet-ups, [which is] really about managing and supporting and galvanizing and nourishing the ecosystem so that when an entrepreneur has an idea, when there's a partnership that could emerge, when there's an M&A (mergers and acquisitions) transaction, they'll call QED and say, "Look, you are the go-to Fintech specialist boutique. We want to talk to you and get your views." Gravitational pull and traffic is really important.
There's something very deliberate in my view about building the brand of QED vis-a-vis others in the space, and saying, "This is what we're good at, and this is what we'll do [if we complete a deal].” We'll talk to [companies] even if we don't invest. We'll give you our advice even if we don't invest. Because what comes around goes around.
Those are the things that we do, and those are the things that a young Venture Capitalist would want to think about doing. How does she build her own brand? How does she create advocates out there in the marketplace that are going to speak for her? I could give you a dozen names of people, of CEOs that I've worked with over the last years, who probably would say quite good things [about QED]. Hopefully they would. In the end, there's nowhere to hide. If you're an empty suit and you're full of bluster and you quote obvious things that you learned at business school, that's not where the leverage is.
I'm lucky enough to be of this vintage where I can be so slightly avuncular and [tell companies], "Look, I've seen this. I've seen variations on it. I've been through it myself, and here's how I thought about it. Here's a framework. Here's how I can hold your hand and take you through this journey." Those are fantastic things.
Affinity: QED is based on the east coast, in Virginia. What do we get wrong about the importance of geography in Venture Capital?
Morris: I actually think it's a competitive advantage that we are not in Silicon Valley. We have to do a lot of outreach. We have to talk to people in the ecosystem, in their garages, in their WeWorks developing ideas. We have to go to the business schools and teach classes. We have to be talking to the media in a proactive way.
You've got to be able to look a founder in the eye. Because whatever she says is going to happen [with her business] is not going to happen. You’ve got to find out, “Can they really think in terms of the decision trees rather than linearities? What will they do when that doesn't work? Do they understand the heuristics? Are they listening?”
It's very hard to judge those things over Zoom; there's something about being out there [with founders] that is terrific. So while I thought that being in Alexandria, Virginia, was a negative, as the years have gone by I think it's actually forced us to be much more proactive.
Read part 2 of our interview with Morris now.