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This episode is a special treat because it\\u2019s both fascinating and fun. My guest is Miles Reidy, partner at QED Investors in Alexandria, Virginia. Many people know that QED was founded by former leaders of Capital One, including Cap One co-founder Nigel Morris. They have a terrific track record of investing, focused mainly especially on fintech.

Miles and I discussed two topics. One is the outlook for regtech, which he\\u2019s excited about and so am I. The other, which I know is going to be an audience favorite, is how to find and work with a venture capital firm.

On regtech, Miles talks about the technology that\\u2019s about to make compliance both more accurate and less expensive, at the same time. He talks about compliance costs rising at 20% a year, the impossibility of traditional compliance systems preventing human errors, and how we can now move beyond old sampling-based compliance processes to 100%, real-time data that enables a financial company to know, for sure, if it\\u2019s compliance or not. I\\u2019m excited about it too, because technology is breaking the old binary choice between spending more for better results, or spending less and sacrificing performance. Innovators are making it possible to be better and cheaper, both. On regtech, he also has a cautionary note for the U.S., where our regulatory complexity creates headwinds for innovation.

The second half of the show is about working with VC\\u2019s. I talk all the time with venture firms and have done some angel investing myself, but most of Miles\\u2019 insights were new to me. He shares what he\\u2019s learned, especially, from seeing people do all these things wrong, at every stage, from how to approach a VC firm cold (he describes one thing to be sure NOT to do), to how the startup should evaluate the VC, to how to work with the VC when your firm hits problems, which it will. \\xa0

He\\u2019s especially interesting, I think, on what questions to ask a VC directly, from where their funding comes from and where the fund is in its maturity cycle, to how it handles adversity (he describes the four typical scenarios, three of which are bad!). He also has advice on truly doing diligence on them, including by talking with their companies. The typical startup is so eager for money that it gets seduced by it, and can pick the wrong firm. \\xa0

Miles also explains how he evaluates potential investments. Which factors count more than others? What key metric does he want to see that the founders totally understand? \\xa0What weaknesses are fatal? And once the company is funded, what are the common mistakes? What mistake is most dangerous for a young CEO? How do you avoid the death trap of hitting the end of the funding runway before you can take off (hint: \\u201csip\\u201d on your funds).

After we turned off the mic, I asked one more question that people often raise, which is whether fintech and financial regtech firms should focus on the great east coast VC\\u2019s that specialize in the field -- Miles mentions several in the episode -- or try to get backing from the big, famous firms in the Bay Area. There are pros and cons to each, in terms of sector knowledge, sector network, reputation \\u201cglamor,\\u201d and drawing in talent. Miles has the answer: \\xa0get both.

If we were scoring shows by how many times the guest makes me laugh, I think this one might be the winner. I know you\\u2019ll enjoy my fascinating conversation with Miles Reidy.

More about the episode

This is the November conference QED is co-sponsoring (I\\u2019ll be speaking) RegTech Enable

Here is the past podcast I mentioned with Sanjay Jain on the India Stack Sanjay Jain Podcast

And here\\u2019s more on Miles:

Miles Reidy is a Partner at QED. Previously he was the Chief Financial Officer for Audax Health, Inc., which offered a digital health engagement product.Miles reoriented the business strategy, built out the analytics functions, raised capital, and oversaw the sale of the company to United Health/Optum. \\xa0Prior to Audax, Miles was Chief Operating Officer and Chief Financial Officer for Network Solutions, one of the largest domestic providers of Internet hosting and marketing services to small businesses, and Executive Vice President and Chief Financial Officer for Sears Holdings Corporation.

Miles spent almost a decade in several executive roles at Capital One Financial Corporation, including Executive in Charge of Banking Integration, Chief Corporate Planning / Financial Strategy Officer and Chief Financial Officer of Capital One Bank and Credit Card. His responsibilities included development and implementation of the corporation\\u2019s capital and financial strategies, oversight of the card businesses\\u2019 financials and consumer analytics, and strategic planning.

Miles serves on the Boards of the Royal Bank of Canada, US, Heinz School of Public Policy at Carnegie Mellon University, and the Easter Seals of Baltimore/Washington. He is also a investor in Fenway Summer. He holds a B.S. from Georgetown University and a M.S. from Carnegie-Mellon University.

More for our listeners

Please remember to review Barefoot Innovation on ITunes, and sign up to get emails that bring you the newest podcast, newsletter, and blog posts, at jsbarefoot.com. Be sure to follow me on twitter and facebook. \\xa0And please send in your \\u201cbuck a show\\u201d to keep Barefoot Innovation going.

I\\u2019ll hope to see you at the events where I\\u2019ll be speaking this fall:

• Online Lending Policy Summit, September 25, Washington, DC

• RegTech: Compliance Transformed, October 3-4th, Brooklyn, NY

• BAI Beacon/Fintech Stage, October 4-5, Atlanta, GA

• CFSI Network Summit, Fireside Chat with Thomas Curry, October 5, Chicago, IL

• FISCA, October 5-8th, Las Vegas, NV

• Money 20/20, October 25th, Las Vegas, NV (I\\u2019ll MC the Sunday regulatory track, host a town hall with senior regulators, moderate a panel, and do a fireside chat with the FCA\\u2019s Chris Woolard. Be sure to come for Sunday!)

• Regtech Rising, November 2, London

• Monetary Authority of Singapore Fintech Festival, November 13-17, Singapore

• University of Michigan, November 17, Ann Arbor, MI

• RegTech Enable, November 27-29th, Washington, DC

• UN/ITU conference on financial inclusion in Bangalore (invitation only)

• Fintech Connect Live, December 6th, London

• S&P\\u2019s Fintech Intel, December 13, New York

• Dutch Central Bank, December 20, Amsterdam

We have wonderful shows coming up. I\\u2019ll be talking with Andres Wolberg-Stok of Citi Fin Tech. We\\u2019ll have a show based on my recent fascinating experience with a U.S. Army Threatcasting exercise, learning how to creatively imagine cyber risk and then pinpoint how to prevent it. At Money 2020 I\\u2019ll record a show with Christopher Woolard, who heads strategy for the U.K. Financial Conduct Authority, and one with Nerd Wallet CEO Tim Chen. \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0 \\xa0

I\\u2019m very proud to say that the firm I co-founded, Hummingbird Regtech, has been selected to present at Money 2020 in the startup pitch session. Be sure to come and watch!

Meanwhile, keep innovating!