Primary’s Lia Zhang on How Fintech Is the Foundation of Consumer Behavior, SMB Success, and Software Value

In some respects, Lia Zhang is a generalist investor. She’s helped either source or support Primary’s investments in Orum (frictionless financial infrastructure), Helaina (the incredible burger of breast milk), and Realm (a data platform informing home improvement projects), and is a board observer for Ephemeral Tattoo. Her Twitch series features videogame interviews with entrepreneurs and operators. The connective tissue here is that she’s passionate about businesses that impact consumer behavior, whether that’s making life easier for moms, homeowners, or self-expression seekers. 

In this interview, she points out that fintech, either by loosening up liquidity or providing savings, is the ultimate impact framework—and is becoming an ever-more-important part of software value. Here’s what she looks for in founders, ideas, and execution. 

How did you get started investing in fintech? 

It started when I was on the software investment team at Stripes and the first big software deal I worked on was making revenue from payments (along with traditional subscription fees) similar to Toast and Mindbody. It was the beginning of when investors first realized the TAM is larger once a business is able to capture a percentage of transactions in a market. Vertical SaaS businesses in sleepy markets blew up and became more attractive when they became a “business-in-a-box” for many merchants, and at Stripes, we ended up diving into a number of verticals to see where there were opportunities to rip out legacy incuments. 

It was to-date my favorite deal to work on because I was able to see firsthand how impactful better technology was for SMBs. And then I started seeing more fintech opportunities predominantly on the consumer side with neobanks, lending platforms, credit building platforms, and many more in the growth stage. They were all fascinating to me, and I knew I wanted to spend more time better understanding different opportunities within fintech.

What excites you the most about investing in fintech companies? Why is it a focus for you?

When I came to Primary back in March of 2020, I knew I wanted to invest in businesses that are able to impact consumer behavior. There’s no bigger way to impact behavior than to impact finances—either providing more liquidity or increasing savings. This general framework is what help led to Primary’s investments in companies like Realm, which can help anyone understand how to improve their home value, and a new business in the auto loan refinancing space (still in Stealth) that will help people that are overpaying for their car loans to get immediate savings. 

The idea of finding more opportunities to educate and impact behavior is the most exciting for me and continues to be a huge focus. I’d love to chat with anyone working on products in this space and share learnings! 

What do you especially look for in early-stage fintech founders and startups? What kinds of characteristics are particularly required for building category-defining companies in this industry?

Similar to any other industry, I really look for founders that have a true passion for what they’re building. Something I love asking is why you’re deciding to spend the next 5, 10, or 15+ years of their life working on an idea, when you could be advancing your career at an established corporation. The way a founder answers the question really gives me insight into how excited they will be in making sure they win. The biggest character trait I look for is passion, since that’s something that will come across in every facet of the business from 0 to 1 on the product side to hiring, building culture, and more. 

How important is it to you to have financial services experience before you start a company in the space?  

I believe that having financial services experience can benefit any founder working in the space, especially if it’s a B2B business, but it’s not absolutely crucial. There have been plenty of successful companies started by people frustrated with existing solutions. For example, Brian Armstrong has a product background and started Coinbase after realizing how difficult it is to send payments to different countries. In other verticals, Eric Kinariwala started Capsule after a terrible experience at a pharmacy with no healthcare background. In the consumer world, distribution and customer acquisition are so crucial that having financial services experience alone isn’t enough to scale a new fintech product. 

Any companies in the portfolio you want to shout out? What’s something smart that team did that others could learn from? 

I’d love to shout out Liz Young from Realm! It’s been amazing to watch her growth from the product branding last fall to launch in the spring. I’ve been so impressed by her tenacity and excitement in the proptech world, and couldn’t imagine a better leader to start a Credit Karma for your home. Her team is building the most comprehensive dataset on homeowners, and the decision to buy, build, and have users self-input data with a unique wedge is extremely smart. I’m excited to see what’s in store for Realm and will recommend everyone to try out the product! 

What fintech trends or predictions are you watching most closely right now?

I’m fascinated by Pipe and Mainstreet, and will continue to explore other verticals where cash upfront makes sense.