Go All In Or Go Home

By Dovi Frances, Founding Partner, Group 11 and Devon Morris, Partner Group 11

Pocket Kings — The players next to you checks. You suspect they have nothing substantial. The player across from you might have something, but their raise shows little confidence or is a terrible bluff. You take another moment to consider the pot, the river, and the tells from the other players. You have pocket kings and with the river, it’s still a great hand. Likely a winning hand. You don’t slow roll, so you push your chips forward. You go all in.

There are times when a successful investor knows they have a great company, when others are busy looking at their hands (or get distracted with community events, yoga retreats, etc.) A great company that has all the merits and trajectory of being category-defining. A company that is building a really needed product and has the potential to change the landscape of an emerging industry into its own image.

We believe Group 11 has found another such company: Lili, Mobile Banking for Freelancers.

Group 11 Leads Lili’s Series A

Not even four months after leading their Series Seed, today Group 11 has announced leading a $15MM Series A round in Lili, the emerging market leader in banking services for the growing US freelance-economy. Group 11 was joined with a new investment by Zeev Ventures and participation from existing investors: Altair, Primary Venture Partners, Torch Capital, and Foundation Capital. Group 11 was one of Lili’s first investors in early 2019, and have been on the Board of Directors with Co-Founders Lilac Bar David and Liran Zelkha since.

With the onset of COVID and the start of shelter in place orders in March 2020, Lili’s average monthly spend per customer has more than doubled, and Lili, a company which was virtually non-existent in the US before 2020, is now nearly 100,000 accounts opened. Their simple-to-navigate interface encourages tax allocation, expenses management, and insights. Lili’s ultimate goal is to provide better education around financial management and consequently, its users will save by spending less time on budgeting and tax preparation. Lili is available 24/7 via the mobile app (no bank holidays!) on both iOS and Android and has in-app chat, voice, and email customer support. They’re rapidly becoming the go-to banking app for US small businesses and freelancers.

We believe Lili has all it takes to redefine banking for freelancers and with the current market changes, they are a unique bet for Group 11 to make. Let us explain why.

Go All In or Go Home

Michael Stuhlbarg as Arnold Rothstein in HBO’s Boardwalk Empire.

In Season 2 of the HBO Series, Boardwalk Empire, the real historical character, Arnold Rothstein, fictitiously states when meeting with other gangster leaders: “Some days I place twenty bets, some days, I make none. There are weeks, sometimes months in fact, when I don’t make a bet at all because there simply is no play. So I wait. Plan. Martial my resources. And when I finally see an opportunity, and there is a bet to make, I bet it all.”

The Texas hold’em analogy and Rothstein hyperbole is not to equate investing with gambling, or to oversimplify the difficult achievement of any company raising a total of $25MM during COVID, one of the most uncertain economic times in modern history. These two examples are presented here to emphasize one thing: conviction.

At Group 11, we often say, “conviction is directly proportional to the investment amount.” Conviction comes from proof and verification and sometimes it takes months, if not years to build. It is hopeful, but not blindly or naively optimistic. An investor sees hundreds of failures and maybe, when the conviction is strong enough, they might make 3–4 significant ‘bets’ in a year. Group 11’s investment thesis has guided us well these past 10 years, so when we see a company, like Lili, and witness their rapid user adoption, low and consistent acquisition costs, compounding double digit monthly growth, and the initial signs of a product-market fit, our conviction is amplified.

Since our first investment in 2019 and up until now, we have seen these exact signs and they have only reinforced our conviction in Lili’s offering and the growth of the US freelance economy. This, in turn, has led to our decision to preempt this future financing round in Lili. This new Series A financing round gives Lili’s team the capital they need for rapid growth and market share.

Adjusting to a New Adjusted Paradigm

As Group 11 recently shared, a product-market fit is ever-evolving; it is not static. So if a market evolves, the company and its product offering must evolve to meet the market. Through market studies, experience, and product testing, Lili’s team knew going into 2020 that the freelance economy was underbanked, underserved and was only going to grow in the next few years to be a significant percentage of the US workforce. Lili launched its mobile banking app for freelancers before COVID hit, but what has happened since March 2020 is that the goal posts of the market have moved up from 5 years to basically 5 months.

Our present and potential future is radically different from 2019 and it presents opportunities for companies like Lili. The current trajectory of the US workforce will only develop further, and faster, in the direction of decentralized workplaces, more 1099 independent contractors and freelancers, and consequently more people in need of financial products, financial access, and financial education which traditional banks have historically always failed to provide.

We believe that the freelance market (primarily 1099 vs W2 workers) has fundamentally changed because of COVID, and will likely never go back to the way it was. Many previous jobs will cease to exist, and many entrepreneurially-minded Americans will start their own small businesses or remain independent contractors instead of trying to return to a traditional, 9–5 W2 job. Yes some jobs have been lost forever but the history of economic cycles show that new businesses and jobs will spring up in new markets. Already at nearly 60 million workers, Group 11 and Lili envision that the demographic of freelancers will only rapidly grow in the next year while COVID persists. Freelancers will continue to need banking and ancillary accounting services that simply are not offered by traditional banks or other consumer-focused neobanks, and they need those solutions for their businesses and income now.

As laid out in Group 11’s Equities Gone Wild piece, the simple truth often ignored by many of our peers in the VC industry is that new technology does not simply get added to an existing environment but rather, restructures it in its image. So today’s and tomorrow’s small business owners and freelancers can’t be underwritten by a bank’s traditional, W2 and salary-based approach to business accounts. Traditional banks and fintechs might have a sleek mobile app, but what is fundamentally different in their offering? Can we instead make a new type of bank account that not only has free checking, but also free financial tools tailor-made for small business owners and embedded as part of their banking experience? Can a new company create a suite of financial services in-app that can help users focus on their business and income, instead of reconciliation and taxes? Could this view and approach to financial access be the new normal in a Post-COVID world?

We believe the answer to all these questions is a resounding yes, and Lili’s mobile offering is their proof and answer to the market. Lili has built a much needed product that was ready to meet freelancers in early 2020 and is ready to evolve with its customer and the market. Lili knew these changes would be coming, but whereas we all thought it would come in years, it’s now moved up to months. Now Lili is well positioned and has the capital to meet and evolve with the freelance market.

Freelancers: Do Your Thing, Lili Will do the Rest

Group 11 looks forward to more and more US freelancers getting Lili’s offering in their hands. Freelancers will find the financial solutions that enable them to focus on their businesses and self-employed income. Group 11’s conviction leads us to the belief that Lili’s mobile-first banking app and offering will be the new standard for the freelance economy. Based on customer feedback, their 2020 growth, and their fresh new capital, Lili is well on that path.

From left to right: Maria Volovik, Doron Dvir, Dovi Frances, Lilac Bar David, Aya Zaksenberg, Liran Zelkha, Eyal Rahamim, Yossi Avramov

Group 11’s leading a Series A investment is a reflection of Lili’s growing market leadership and a validation of the execution and determination of Lili’s team. The opportunity is now and therefore — Group 11 should lead an investment that is proportional to our growing conviction in Lili. We’re going all in.

Congratulations to our co-investors, to CEO and Co-Founder Lilac Bar David, CTO and Co-Founder Liran Zelkha, and to everyone at the Lili family!

(For more of Group 11’s thoughts on the larger subject of automation and COVID’s effects on the market, see Roxane Googin, Group 11 Chief Futurist, and Dovi Frances, Group 11 Founding Partners ‘Equities Gone Wild — Bubble or Beginning?’ article on Medium.com)