Matt Harris Moving to Bain Capital Ventures to Pursue Growth-Stage Investments

2/29/12Follow @jpruth

Village Ventures co-founder Matt Harris is busy preparing to become a managing director at the New York offices of Bain Capital Ventures, where he plans to explore investments in early and growth-stage companies in the financial-services sector. It is a bit of a homecoming for Harris, who started his investing career at Boston-based Bain in 1995.

In 2000, Harris co-founded Village Ventures, an early stage venture capital firm in New York that focuses on financial services and media. Some of his prior investments include On Deck Capital, iSend, and Metamarkets.

Harris spoke with Xconomy recently about his pending return to Bain, what the future holds for the financial services market, and the growing importance of New York in the venture ecosystem.

Xconomy: What does rejoining Bain’s ranks mean to you?

Harris: Homecoming is the word I’ve been using. That’s how it feels. Bain Capital was a seed investor in Village Ventures. They’ve been on my board of directors for the decade I’ve been at Village. This is going to be more intense. I don’t start until September; I’ve got a bunch of work yet to do at Village.

X: What will this move mean for you in terms of the scale of investments you will explore?

H: There are two major differences. Bain Capital Ventures is chartered and mandated to do both early stage, which I’ve focused on, and much later stage and growth-equity investing. That was something I was looking for in terms of a next step. We contemplated transitioning Village to be the kind of platform that could do both, but that’s pretty hard to do. A big part of the logic for me was the ability to invest in companies across stages. I’ve been exclusively focused on financial-services companies. When you become very sector focused, you wish you could be stage-agnostic. You see great companies in your sector. Some of them are early stage but many of them are more advanced. It’s a growing frustration not to be able to invest at a later stage. That is one thing I am excited about.

Bain Capital Ventures has a terrific footprint in financial-services as well. [Village Ventures is] with them in [payment processing technology company] TxVia. Going back to when I was there, we were the lead investor in Experian. There is a real legacy and track record in financial services. There is a guy there named Jeff Schwartz who is one of the best in the business in financial services. For me to have colleagues, in particular Jeff, who understand the dynamics going on in payments, lending, and capital markets is a real pleasure. The strategy of being a leader in financial services is made easier by the presence of multiple partners who understand it and are excited about it.

X: What is happening in the financial-services sector that gets you excited?

H: The single biggest wave of innovation is in payments. Companies like Square, Dwolla, and Google Wallet, and dozens of innovative new players are following in PayPal’s footprints in terms of changing the way consumers and businesses pay for things and how retailers accept payments. That wave of innovation is cresting right now. We’ve been working on these themes for five or six years, but now I think it’s quite mainstream. That’s been exciting. There is still a lot of early stage opportunity, but there are some companies that have some real scale now.

The next wave, it’s already begun, is around lending. The banks in the U.S and globally have retreated from any kind of lending that is other than plain-vanilla mortgage lending, student loans, or auto lending. There are areas in the credit world such as small-business credit or other types of consumer lending that are really hungry for capital. There are challenges to investing in lending companies; you have to be very careful. We have a company called On Deck Capital [in our portfolio] at Village that’s been phenomenally successful in the small-business lending area. Whether it’s looking at new credit information sources or new processing platforms it doesn’t have to be investing in lenders themselves. I see a big opportunity over the next five to ten years in and around the lending business.

X: How does that fit with the growing New York scene?

H: It is definitely a core strength of New York. It is highly logical that New York, which is home to so many banks and investment banks, becomes a place where financial-service innovation takes place. There is also a fair bit happening in Boston and Palo Alto and San Francisco. I’m glad to have colleagues in those markets to work with. There is a lot happening in New York outside of financial services. Traditional media has its home here, and then you have companies like Tumblr and Foursquare, which are changing the face of social media. New York is just beginning to take its rightful place in the ecosystem. It’s very exciting to watch.

X: How does Bain Capital Ventures plan to evolve in New York?

H: Bain Capital has had a New York office for a long time in midtown. The partnership has decided to get a new office for the venture group downtown near Union Square. That’s a big statement and recognition of where the venture economy is and the real urgency to be at the heart of that. Bain Capital Ventures has 20 companies [in its portfolio] in New York. It’s already been an existing area of focus, but they’ve been serving it from Boston with a lot of partners flying down on Delta shuttles. That will continue because there are talented Boston-based investors who are going to do media, e-commerce, and health care investing in New York. But it’s a statement that New York is sufficiently important that you’ve got to have a permanent meaningful presence downtown.

João-Pierre S. Ruth is the editor of Xconomy New York. He can be reached at jpruth@xconomy.com and followed on Twitter @jpruth. Follow @jpruth

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