LBS took a bet on me all those years ago

Looking at Nigel Morris now – a highly regarded figure, Co-founder and Managing Partner of one of the world’s leading fintech venture capital firms, QED Investors – you might assume he always had a great head for business. He insists, however, that this isn’t the case: when he arrived at LBS in the mid-1980s, fresh from an undergraduate degree in experimental psychology (“applied maths and rats in tubes”) he was booksmart but “amazingly naive”.

“LBS was an introduction to a whole new universe – bonds, stocks, discount rates, all this was totally new to me,” says the Capital One Co-founder. “I lapped everything up – finance, strategy, marketing.” To see all the different elements of management theory and practice, “unpeeled” in front of his eyes was incredible. “I was amazed by this thing called finance – there’s this thing called a scarce resource, a dollar, and where you put that dollar can be measured and quantified, and the relationship between debt and equity… a series of constructs that I had never experienced before.” 

The elegance of strategy

As a psychology graduate, he enjoyed the organisational behaviour and design components, learning under LBS legends Charles Handy and Rob Goffee. But it was strategy – what should a company do, and how – “the biggest and most interesting questions that companies have” – that drew him most. “I was intrigued by the elegance of strategy,” he recalls. 

After six months on an exchange to Wharton Business School in Pennsylvania he became a consultant for a BCG spinoff called Strategic Planning Association, which he describes as “continuing the learning because, again, I had no hands-on experience.” 

Back then, the LBS programme that is now the MBA was an MSc. In Morris’s year there were 110 people, almost all of them white British men. “It’s been great seeing it scaling up and becoming more diverse,” he says. “There’s such power in learning from each other in eclectic groups.” In his work now, too, he prizes diversity. “A lot of venture is extracting as much signal as you can out of very little data,” he says. “You’ve got someone with a spreadsheet and they’ve got an idea – how do you evaluate that? What we’ve worked really hard on is to create a venture team with different backgrounds. 

“Out of 22 of us, only nine are white men – we have six native Spanish speakers, two native Portuguese speakers, two Black Africans, eight or nine women. Diversity is a good thing philosophically but it’s also great business. If everyone looks like older greying white guys who worked in an investment bank you have a very narrow gene pool.”

One learning from his LBS days that stuck was the need to be clear-eyed about what strategy actually is: “So much of it is about what you’re not going to be rather than what you are going to be. You get all kinds of scope creep. You need clarity of thinking: what are you, what is the competitive advantage and how you do measure it?”

Backing problem-solvers

Morris moved from consulting into banking and then cofounded the financial services company Capital One in 1994. A decade after the company went public he started to re-evaluate, briefly contemplating a portfolio career. But another big challenge proved irresistible. “I’m an entrepreneur by nature and I like to build stuff. So I hooked up with two Capital One people and we started to build around fintech – though the term ‘fintech’ didn’t exist at that point.”

He founded QED Investors with Frank Rotman in 2007. “We caught a roaring wave,” he says. “We knew how weak the banks were, and the quality of financial education in the US and UK is so bad, people don’t understand how their finances work and they make all kinds of bad decisions. Now we help build businesses we can be really proud of.”

The platform focuses on disruptive, high-growth financial services companies. QED has made numerous unicorn investments, including Credit Karma, Remitly, Nubank, Avant, SoFi, Klarna, GreenSky, and AvidXchange. How do they decide which ventures to back? 

“It starts with: what’s the problem you’re trying to solve? I’m not interested in your great new tech if you haven’t thought about what to do with it. There’s so much opportunity out there to remove friction and create value. I want to talk to people who are obsessed with solving users’ problems – real pain points where there are huge opportunities to make things better.

“Two, you look for someone who has the ability to recruit and infect others with their energy and passion, because no matter how good the CEO is, they have to have people around them who can augment and complement them. You’re looking for awareness: ‘I have these skills and I need to build a team around me and have them come with me on the journey’. People who think in terms of decision trees, not linearly.”

QED has made 200 investments over the past 15 years, of which only two hit their numbers in the first three years: 99% of them don’t. Morris looks for “if – then” thinking; for founders who can see how their business might evolve, given new data, as they turn over the cards of their entrepreneurial journey. 

“People who think that they’re going to immediately crack the code, get product-market fit, scale up and turn into the next Bill Gates are seldom the ones that succeed,” he says. “You want people who are confident but also are open-minded as to how the world might change. And I want people who realise that this is really hard, really complicated – and most people fail.”