Why I'm investing in fintech

Fintech is a highly regulated market with sleepy incumbents, perhaps because inefficiencies persist longer than in other verticals. This condition does not suit accelerated returns and that doesn’t equate to change in capital markets. Specifically, democratization of data has lowered the barriers to entry in order to compete.

That’s not to say that just anyone can succeed in fintech. It’s a complex space for founders, investors and consumers alike. But I believe it is also one rife with opportunities if you know what to look for. To that end, I’ve made a handful of investments in fintech via my own investment platform, C2 Ventures.

I think winning in fintech boils down to understanding the shifting dynamics of financial services in a time when providing an excellent, high-integrity consumer experience is everything.

Millennial money matters

The millennial generation is less connected to the idea of centralized banking and more willing to conduct their finances through computers and smartphones. There is also an emphasis among millennials on design, a non-incumbent competitive advantage that’s somewhat esoteric. Rapidly changing interfaces (e.g. voice) create new demands seized-upon by fintech startups that move at a rapid pace.

This is challenging for many investors for whom regulatory barriers still create a moat around start-ups, despite the much-hyped promise of an ability to move past the seed stage and scale. That’s the pessimistic view of investing in fintech. Kind of ugly and not my own POV.

Allow me to present that here:

Opportunity is beating the door down

Goldman Sachs estimates the technological disruption of financial services is a $4.7 trillion opportunity. Access to financial services is a critical element of upward mobility and 20% of U.S. households have inadequate access, i.e they are under-banked. An odd concept perhaps, but consider these two points:

  • Nearly 100mm U.S. consumers lack access to credit at affordable interest rates and nearly half of the U.S population do not have as much as $400 in savings to cover an emergency expense; and
  • Incumbent financial institutions are bloated because they have been built around brick and mortar retail locations, outdated IT systems and cultures that forestall innovation. They rely on hidden fees, opaque pricing, fine print and complicated products.

Despite these inconvenient truths, a new breed of lean startups has emerged that leverage mobile technology, machine learning, and blockchain, and that have a massive technology advantage because - big surprise - conventional financial institutions move too slow. Progressive investors, like the folks at Story Ventures, have seized on the opportunity and are aggressively pursuing deals with the new breed of fintech.

One of C2 Venture’s own investments - a stealth mode company that will make a funding announcement this spring - is using machine learning and mobile technology to disrupt consumer credit, pioneer cash flow underwriting, and introduce technology that isn’t reliant on largely inaccurate credit bureau data. Matt Harris and the team at Bloom Credit personify the same kind of market insight. These innovators are on the edge of what finance can and will be. But the view isn’t for everyone and change comes fast.

The entire fintech shift in 3 paragraphs

From the end of World War II until around the year 2000, financial relationships were people driven. When we had financial matters to attend to, we went to the bank down the street and talked to Sam, or Pam, because we knew them and they knew us. They knew when we were thinking about buying a house, or getting ready for retirement, and they could help. An all-in-one platform before its time, to steal a more modern phrase.

Then 2001 rolls around. That was the first time you could use a phone (a Symbian build, to be precise) to move money between accounts, or buy stock. From this point forward, the banking relationship started to become disjointed just by the number of financial companies advertising to consumers at-scale. Flash forward seemingly 10 minutes, and the moment I want a credit card, I can go get one instantly online. Sam and Pam started getting lonely and old school banking technology just couldn’t keep up. Why?

Traditional financial institutions were built to use people as the lever and technology as a service component. So, as things have progressed, they began to lose customers. The result is that the same banks that used to understood us started closing, rapidly. Traditional financial services become ill-equipped to service consumers in the full context of their lives. That lack of context led to fewer services and consumers become numbers, not people. As a consequence, the financial services industry left the majority of us behind. Everyone shifted to serve those who were the most obvious to serve. Personal wealth stagnated and the number of people who felt alienated grew.

But there is yet hope

In the same way that consumer app products have evolved to service consumers on-demand and in the context of their lives, modern fintech startups have returned to the dictum of putting consumer relationships first. The technology behind it all is simply a tool to service a new kind of consumer still on the way to that new home, or their retirement, just on a different path than Sam and Pam could foresee or respond to.

The new breed of financial companies use technology to identify the blockers in a consumer's financial life cycle. They break down barriers to provide the good service we still crave from reputable lenders and demystify the banker’s code, making it simple for us to get what we need to be successful -- it's a modern solution to meet an evolving universal need.

That’s why I’m investing in fintech. Are you in?

My POV on MWC: Lots A-OK and a bit WTF

Once again, Mobile World Congress (MWC) was a very productive and enjoyable week. If you like to geek out on what’s next, like VR, drones, or IOT, it’s the place to be (even more so than CES). 

Beyond the networking opportunities, it’s the relationships you can build at MWC that are priceless. Add-in a beautiful city, tapas and some great wine and MWC is a 10 out of 10 in my book.

Here’s my light-hearted take on the event (I’m not the guy to write about new technology; save that for the reporters). My goal here is to provide fun facts about MWC from my own POV.

  1. As my friend, Ari Paparo, said over dinner: “Chris we don’t belong here.” It’s funny how people in advertising and consumer techs push our way into every conference in the world, right alongside the multi-billion dollar companies such as IBM, Huawei and Samsung. It doesn’t matter the event, us tech and consumer businesses take over like cockroaches and make it our own. Just look at what we’ve already been able to do at Cannes and Art Basel.
  2. Sure, AdTech companies are getting acquired, but their position at MWC has declined in a disproportionately massive way over the last two or three years. Even the big public companies who’ve had the prominent booths, epic locations and tons of staff at MWC are getting overshadowed by young upstarts fronted by little more than colorful drones surrounded by massive nets.
  3. A friend asked me prior to my flying-out to MWC if you needed a pass or badge to just hang out -- pretty funny really. Just getting into the Fira (the location of MWC) is tougher than clearing customs at JFK. There’s multiple gates to pass, passport checks and all kinds of security delivered (thankfully) by some of the most attractive people you have ever seen.
  4. It’s actually easier to get a meeting with someone in Barcelona than with someone on your own block in NYC. Everyone there is happy to meet you, in a good mood, and keen to do business. In a lovely Spanish twist, conversations tend to happen over Sangria instead of Starbucks (Europeans so get it). Sangria related heads-up: After a couple, it's hard to know what’s a toilet and what’s a bidet; they look identical.
  5. Booking early morning meetings is a mistake. Don’t do it. Dinner may not start until 11 p.m. or midnight the night before. In Spain, or maybe just at MWC, people just don't seem to take their alarm clock very seriously. Don’t book your first meet until at least 11 a.m. (happily, around the time the tapas and Sangria tends to get freshened-up).
  6. The old no tipping rule in the EU would seemingly make hospitality, restaurants and bars easier to navigate but the truth is no tipping means service struggles. I love most things about Europe over how America works, but a little extra monetary motivation could do wonders for the service industry there.
  7. Founders and startups are very active at MWC. Publishers and agencies treat it like a holiday in the Maldives. 
  8. People, take it easy with your out of office time. I see you heading to MWC 3 days before the conference starts and leaving two 2 days after it ends. I get the desire to live a little (hey, it’s Barcelona) but a little work wouldn’t kill you, either.

OK friends, that’s the stuff you aren’t going to read anywhere else about MWC. Have a happy weekend to all!

6 traits of successful modern startup founders

I have been part of the startup ecosystem for a long time. Initially as a founder and later as an executive, advisor and investor. My personal startup journey has taken me to technology markets and business cultures around the world. Each step of the way, I’ve tried to take notice of what the successful people around me were doing.

Though every industry, region and culture have their own unique characteristics, I have developed a set of traits common to the people and companies I’ve watched become successful over the years. When I step back and examine those traits, it’s clear what I am really looking at are a series of small behaviors that add up to create the opportunity for founder success.

What follows are my 6 observations on successful startup founders today.

They fly under the radar

It’s easy to fall into the classic startup trap of pursuing the spotlight too much. But messaging every financing round with a PR roadshow, or each product feature with a marcomm blitz, can seriously shorten runway for a startup. One thing I notice about successful modern startup execs is their willingness to fly under the radar both as a company and as a founder. One of the companies in my C2 portfolio, ZenRez, is killing it as a consumer play despite having spent very little on PR or marketing in their first 18 months. That strategy has let ZenRez sneak up on more well-established rivals and wrest away market share. Whether it’s born of humility, strategy or budget restriction, keeping one’s head down and mouth shut in the early stages of a startup can be smart.

Their technical chops are improving

Many companies that I find myself intrigued by today have a technical founder on the team, often in a CTO or product management role.  This is so different than just a few years ago when a couple suits with sales skills seemed to front every startup. The approach then was to fund business people and let them hire the tech talent. Today we’ve learned that good companies often have that visionary founding tech leader as part of their winning formula. I’d be very interested to look at data that correlates success (breakeven, profit, exit) for startups that have technical cofounders versus those that don’t. A tech savvy founder signals to me that a startup’s product plan and business plan are coordinated and aligned.

They’re on-time and focused

North American professionals are often a little late to meetings and calls. It’s a bad habit we’ve developed.  The routine here is to hold the meeting up and make small talk until everyone arrives. This would never happen in Germany, for example, where a premium is placed on the team’s time. Meetings start exactly when they’re supposed to start, they address exactly what’s on the agenda, and you need to be there. If you’re not, the team isn’t waiting. This rule is the same whether you’re the CEO or the most junior staffer. In my time working with Unacast and my Norwegian peers I’ve had to push myself to match this strict commitment to schedule and task. I have to say, I’ve come to really respect it. Test this at your startup and see how it changes behavior.

They know their numbers

Predictable, recurring revenue that can be forecasted month over month is the best way to build a stable business and improve margins. For many of the startups I deal with going with anything other than SaaS or DaaS monetization would be suicide. So, getting to a financial model happens early-on, partly because there’s established tools for market validation. A lot of the exceptional founders I see these days are gifted analysts. They’ve mastered the art of analyzing the data surrounding their business to identify new value propositions for consumers, their clients and industry. In taking these messages to market, today’s founders are getting very good at explaining and validating nascent market opportunities -- a key step for every startup.

They communicate consistently

Good founders never make you ask for an update. They communicate with team, partners and investors routinely. They demonstrate this trait in all phases of the startup. Early-on, consistent communication builds trust with investors who want regular updates on business health, cashflow, new hires, or challenges faced. Good communications habits are are also valuable for making sure board members have the data they need to provide strategic guidance. Market address, employee engagement, technical roadmap . . . in every phase of the organization, clear, regular communication adds value. Today’s successful founders are all over this.

They are diversified

A week or so ago, I had breakfast with a prominent NYC investor who told me that he thinks every CEO of the companies he invests in should sit on boards of other startups in unrelated fields, simply as a means to observe and learn for their own business.  I couldn’t agree more. As someone leading business at a data startup, who also invests and advises a number of companies, I have learned the power of a global perspective. Successful startup founders don’t wear blinders. They study other industries and verticals and expose themselves to ideas and activities that challenge their perceptions, both professional and personal. This agility of mind and breadth of skills is perhaps the most consistent characteristic I see in today’s successful startup founders, wherever I may go.


How I’m investing in 2017 and see you at CES

I try to be fully invested in everything I do. When I am with my wife and kids, they are the only thing in my world. When I’ve got my Unacast CRO hat on, I’m all about driving commercial efforts and growing the size of our business. And when I’m eyeballing potential investments, or coaching  companies I’ve put skin into via C2 Ventures, my focus is on finding and opening doors of opportunity.

This state of wearing many hats is pretty familiar to most entrepreneurs. That’s just who we are. That said, I don’t think there’s any value in trying to be the master of all things, so I restrict my professional interests to what I know: adtech, martech, consumers and data.

Reflecting on the past and looking ahead to the future, I’d like to share what I believe will be growing trends in these sectors in 2017. I offer this perspective wearing my investor’s hat specifically, and freshly aglow from some terrific exits in 2016. First, my investment thesis:

When it comes to understanding consumer identity, there’s Facebook and there’s everybody else.

Companies that gain access to user identity through log-in simply have a stronger story when it comes to securing ad revenue and building audiences. That makes the house that Zuckerberg built the undisputed frontrunner in terms of ability to monetize and scale and help brands do the same. In the ‘everybody else’ category, companies that build native experiences standout to me. How come?

It all comes down to bridging the gap between consumer devices and the mad men (and women) of Madison Avenue. Cross-device solutions help to increase the odds of reaching consumers wherever and whenever they happen to be. Combined with the ability to deliver creative calls to action delivered in data-defined moments of engagement, you have the stuff of advertiser’s dreams.

My previous startup, appssavvy, approached this particular opportunity from a mobile apps perspective, but there are many other sources of identity signals out there that can be tapped. One example is at Unacast, where we are building The Real World Graph ™ -- a unique POV on how consumers are contextually connected to physical locations and each other and, as a result, a whole new way of understanding identity.

It’s this type of innovative approach to deepening a brand’s ability to understand and engage consumers that I look for in all my investments. In my mind, the really good ones shake up the status quo and figure out a way to work with it at the same time. At the end of the day, if you can’t understand and cater to consumer identity at scale the way these segments and companies strive to, I don’t think you’ll have much adoption, drive revenue, or get to an exit. With that said, here’s where I am putting my time, money and attention in 2017.

The segment: Data companies

The opportunity:  Data companies allow app developers and publishers to monetize first party data that would otherwise just sit idle. Done right, it is a wholly transparent experience for consumers.

How I’m investing: Via C2 Ventures, I was an early investor in Arbor.io, which was recently acquired by LiveRamp. Through that experience, I saw firsthand the value of creating net-new revenue for publishers. One of my current investments, Narrative, is building a marketplace that allows buyers to bid on cross-device signal data through a single source. This is a game changer for marketers struggling with fragmented supply. This entire segment will continue to heat-up in ‘17.

The segment: Computer Vision techs

The opportunity: Augmented Reality and Virtual Reality will soon just be reality. It’s a large and complex space:  everything from camera hardware to image stabilization, content aware ads, and beyond.

How I’m investing: In the past, there was no way to predict the apps universe and the global ad business around it that would explode as it has. In the future, it’s a certainty that AR/VR will be the consumer’s medium of choice. But AR/VR and even regular video will never, and should never, rely on standard ad placements that are simply misaligned with and jarring to user experience. One of C2 Ventures newest investments, Uru, which aims to solve the problem with content-aware placement of ads into video. is garnering a lot of attention in the Computer Vision space.

The segment: Offline data companies

The opportunity: Bridging offline and online signals means creating a 360-degree view of  identity. This is a wildly attractive value proposition to any consumer brand.

How I’m investing: Lots of companies are aggressively working towards bridging offline to online, specifically by using precise and accurate location data (read as: proximity). Obviously, I am biased here. My full-time role is leading all commercial and revenue efforts at Unacast, the #1 global platform for connecting proximity solution providers to marketing platforms. So take it with a grain of salt, but I believe in 2017 we’ll see both continued investment in this growing space and a rising tide of consolidation and M&A that will ultimately provide visibility to eventual winners and losers.

The segment: Attribution techs

The opportunity: Today, marketers are swamped with millions of data points revealing behaviors and predicting intent. It’s a big, deep sea of opportunity. The challenge is not to drown in the data.

How I’m investing: One featured player in the C2 Ventures portfolio is Yeti Data. They solve the ‘big, hairy problems’ faced by enterprise data marketers with proprietary algorithms and advanced metadata management techniques. That’s a complex way of saying that Yeti does what every good attribution tech should: they make working with a tsunami of of data much, much easier.

The segment: App SaaS platforms

The opportunity:  Happy users are the holy grail to developers. Simply put, there can be no risks when it comes to user experience. App SaaS platforms ensure that’s the case by putting a new breed of tools into developer’s hands.

How I’m investing: mParticle, which I am invested in as a Limited Partner through Bowery Capital, is killing it. Why? They solve a pain point for app developers by simplifying workflow and making it easy to integrate with multiple vendors.  Another company from the C2V portfolio playing in this sandbox is Embrace.io, who alert developers if something goes wrong out in the wild world of payments, UI and UX.

The segment: Consumer techs

The opportunity: Consumer-facing techs generate revenue by helping regular people do things they want to do. Sounds easy but it’s not. The key to success is finding market at scale and standing-out from the crowd.

How I’m investing: Through C2 Ventures, I’m invested in Zenrez , which helps fitness studios sell-off last minute deals, and Fresco News, a leading force in the rise of citizen journalism that taps crowdsourced photos and video to help news organizations augment coverage. These companies are both excellent examples of creative technologies that connect global consumer demands with a whole new form of supply.

The segment: Blockchain techs

The opportunity: It’s not just Bitcoin that’s doing well -- the top seven crypto currencies in the world all grew in value in 2016, both in terms of exchange value, and each company's market capitalization.

How I’m investing: C2 Ventures entered the blockchain space in 2016 with our investment in MonetaGo, which is well-positioned as a supplier of blockchain solutions for financial institutions and central banks. Now active in 40 countries, MonetaGo’s great value prop is that it extends the market opportunity of blockchain beyond the U.S. dollar, Chinese Yuan and the Euro.

These are a few of the ideas behind my investment strategy for 2017. I’d very much like to hear yours, too. Please share them here or perhaps look me up at CES 2017 in Las Vegas this week.


Fresco News and On-Demand Photojournalism

Anyone who’s signed up to be a citizen journalist with Fresco News will get an alert if they’re close enough to the scene. The citizen journalist is paid $50 per video and $20 per photo that a station licenses. News stations use Fresco as a way to gather news from a distant scene they're not sure will pan out as a story.