A conversation with McGregor Fea at Altered Capital

Caruso’s co-CEO, Mark Hurley, sits down with McGregor Fea, a founding partner from Altered Capital, a dynamic venture capital and private equity firm that backs companies with proven product-market fit, empowering them to reach their greatest ambitions.

With its venture fund specialized in backing technology businesses, Altered Capital is renowned for its high bar to entry and deliberately thematic approach – targeting potential category leaders – and its commitment to long-term value creation.

Altered Capital is known for backing companies with proven product-market fit to achieve ambitious growth. Can you share your vision for the firm and explain how your investment philosophy supports long-term value creation and innovation across technology-enabled businesses?

We take a first principles approach to investing, building our analysis from an axiomatic basis. This disciplined methodology has shaped our investment strategy, focusing on technology-enabled businesses that have moved beyond the concept stage to demonstrate product-market fit, unit economics, and sales traction.

Although this creates a higher bar for entry than most venture funds, it means when we back a founding team, it is with conviction and significant team and resource commitments. This gives our portfolio companies the confidence to invest in their best long-term strategies and innovation and therefore avoiding the pull of short-term thinking. In the end, long-term thinking builds enduring value, which is in the best interests of everyone.

Your approach is deliberately thematic, focusing on companies with the potential to become category leaders. What key indicators do you look for in a business to determine its potential for market leadership, and how do you tailor your support to drive that success?

Among other things, we apply the Anna Karenina principle to our decision-making process. In summary, this describes that “all happy families are alike; each unhappy family is unhappy in its own way.”

In venture capital, the principle suggests that for something to succeed, multiple conditions must be met simultaneously. If even one of these critical factors fails, the entire endeavor is likely to fail. There is asymmetry between success and failure. Success is harder to achieve than failure.

Success is uniform and fragile, while failure is diverse and more common.

Whether or not a company is or can be a category leader depends on their ability to deliver across the multiple relevant success factors. Proven product, unit economics, and sales are initial proxies, but of course additional factors are critical such as team, TAM, timing, competitive edge, and good old-fashioned luck.

Once we have joined the journey of our portfolio companies, our support is tailored to specific needs rather than applying a generic playbook. We offer both active and passive board participation, strategic planning and financial guidance, and access to our global networks. We've built significant technical operating expertise within our team, including best-in-market CTO and CFO support, who we plug directly into our portfolio companies. This technical and operational expertise allows us to provide substantive value beyond just capital, helping our companies address real challenges in scaling technology platforms and operations.

Altered Capital prides itself on offering flexible funding solutions, from leading rounds to taking follow-on stakes. Can you walk us through how you structure your investments, and what value beyond capital (like global introductions, operational support, and M&A firepower) you bring to your portfolio companies?

We lead our investment strategy with humility. Where others target specific ownership percentages, we focus on excellence and mutually relevant skin in the game. We view ourselves as partners who create space for founders' success rather than imposing our own egos.

Our value-add extends beyond capital into any area that helps our portfolio company teams go faster. Our global founding story, perspectives, and networks open access to international funders and expertise. Our operating partners bring deep capability spanning multiple industries. And, of course, a lot of experience in optimizing liquidity outcomes is a key piece of our value-add. But, more fundamentally, it is our alignment with our portfolio companies that drives us, and we’re happy to lean in.

Your recent acquisition of a 6.5% stake in ZILO is a strong endorsement of their technology platform. What attracted you to ZILO, and how does this investment align with your broader strategy in backing transformational technology companies, particularly in the financial services sector?

ZILO exemplifies our investment thesis in action – a company with exceptional product capability addressing a substantial global market, led by a team with deep domain expertise – and to top it off an exceptional Kiwi founder, Phil Goffin, former CTO of another global New Zealand born WealthTech success story, FNZ.

ZILO’s next-generation platform to underpin the global funds market delivers greater security at a significantly lower cost-to-serve through modern technology infrastructure. Proving their exceptionalism, they’ve already begun contracting customers with trillions of dollars of assets under management.

The investment not only aligns perfectly with our strategy to back extraordinary Kiwis beating the world’s best but allows us to provide unique support through our fintech experience. In particular, being UK based, our continuing management of a 38% interest in Starling Bank, which our team historically backed from seed stage in 2015, provides unique insights and connections to the mutual benefit of both companies.

Altered Capital led the Series A round for Kiwi fintech Emerge, which is redefining business banking in New Zealand. Can you discuss what sets Emerge apart in the fintech space, and how their innovative, digital-first approach fits within your vision for a modern, efficient financial ecosystem?

Emerge began as SquareOne, delivering a kids' bank account fintech that achieved remarkable viral growth following its launch in 2021. We initially joined the Emerge journey in mid-2023 to back the founders’ master banking plans, and by mid-2024 Emerge were live in business banking – redefining what customers should demand from their banks. Now, with their Series A behind them and personal launching in 2025 with near-instant account opening, Kiwis are in for a real treat – and a fair go.

There is a generational shift underway in New Zealand banking. Kiwis know they’ve been ripped off for decades. And what are we getting for our extra cost? A globally mediocre product and service.

Our team’s journey with Starling Bank from seed round to four million users in the UK gives us unique insights into how well-executed digital banking strategies can successfully challenge incumbents. And by additionally leaning into public policy and infrastructure change requirements, we’re excited for all Kiwis to get more from their financial system for much less than they pay today.

Looking forward over the next 3–5 years, what trends do you see shaping the sectors you invest in – especially technology? How is Altered Capital positioning itself to not only adapt to these changes but also to drive the evolution of these industries?

In five years, any software company will be dramatically disrupted by artificial intelligence – for better or worse. With agentic AI imminent, the big question facing most software companies is will their TAM expand through a dramatic increase in users (i.e. the “agents” themselves) or is their moat insufficiently deep to defend from near costless code development? The implication being that their revenue opportunity is either much greater or almost completely gone.

Further to the implications of AI on TAM and moat, the impact on white collar employment and business efficiency are also going to be dramatic. For any company, adopting AI tools, and soon agents, for efficiency is becoming table stakes.

Altered Capital has been built from day one to maximally protect its investors from disruption risk, and position to benefit from the efficiency gains of global technological advancements. Therefore, we are most aligned with founding teams pursuing innovation and product development with a mind to where the world will be, not where it is today. Aligning with these founders and these visions helps to accelerate those visions into reality.