“We went through a time where no one was paying attention, and now it feels very real.”
That’s according to Amy Nauiokas, cofounder and president of venture-capital firm Anthemis Group, who just got back from the firm’s fifth-annual “Hacking Finance Retreat” in the French Alps.
Over 100 startup founders, academics, financial executives, and entrepreneurs — from 20 countries around the world — gathered for the event. They were there to talk about the future of finance and the rise of disruptive fintech companies.
That’s when it dawned on her: “We are onto something here.”
The idea of “hacking finance” no longer felt aspirational. There was a feeling that they were all in this together, and they left the mountain wanting to move forward, according to Nauiokas.
“One of the most interesting things over the last few years is how much more mainstream the financial technology conversation has become,” she said. “We are no longer speaking a different language.”
The interest in this kind of an event, and fintech more broadly, comes as establishment financial firms race to buy, invest in, and partner with a new breed of financial-technology companies. Anthemis Group, a fintech VC and strategic advisory firm, has ridden that wave.
It reached a big milestone this week as it announced the first close of its inaugural Anthemis Venture Fund, the firm’s first formal VC fund structure. The first close is $60 million, with a target of $100 million by year’s end.
In the beginning
Nauiokas met fellow cofounder and chief investment officer Sean Park in 2007, and they decided to go off on their own just before the financial crisis.
“We have always identified ourselves as weirdos, high-functioning weirdos,” she joked. “I never fit into the traditional Wall Street mould. When Sean and I found each other, we felt like we were twins separated at birth.”
Nauiokas is the founder and CEO of film-financing company Archer Grey, the former CEO of Barclays Stockbrokers, and a former senior managing director at Cantor Fitzgerald.
Park ran the digital-markets initiative at Dresdner Kleinwort and was a founding investor in companies like Markit, Zoopla, and Betfair.
The three ‘T’s’
They recognised that the industry was changing. They identified three key “T’s” that created a space for new digital platforms to thrive: trust, transparency, and technology.
Post-crisis, consumers were disillusioned with the big financial-service providers and open to trying an alternative.
“The tragedy of the crisis was the loss of hundreds of years of implicit trust,” said Park. “Everything else is recoverable, but once you’ve lost the trust, that’s it. That was the opening.”
With their background in traditional finance and their out-of-the-box worldview, Nauiokas and Park dived in headfirst.
They started off writing small checks and built their business from there. The team then met their third partner, Nadeem Shaikh, who had the idea to combine their work in early-stage startup investing with a full-service advisory business for large financial institutions.
The company holds more than 30 fintech companies in its portfolio, including robo-adviser Betterment, fundraising platform Artivest, and on-demand insurer Trov. Successful exits include Simple, sold to BBVA for $117 million in 2014, and The Climate Corp., bought by Monsanto for $930 million in 2013.
The firm has raised $285 million year-to-date in 2016 capital from institutional investors and is actively investing in early- through growth-stage financing rounds. It is focused on North America and Europe, and is backed by the European Investment Fund, as well as European bank UniCredit.
The next step
Anthemis is now looking at the next generation of startups that could take finance by storm. That could take the firm toward AI.
It was clear after the conference that people were excited about artificial intelligence and the next user experience, according to Nauiokas.
“We had the web, then we had mobile, and it’s very early days, but AI-mediated voice interfaces and machine learning are next,” said Park.
Apps and even big companies like Comcast are already moving toward AI chat bots to mediate claims processes, cancel subscriptions, and handle other customer-service queries.
Anthemis is also excited about startups that are focused on the plumbing of finance, the “stuff that powers it all.”
Currency Cloud is one such an example. It allows the transfer of payments through an application programming interface (API) layer and counts TransferWise as a customer.
Long-term, Anthemis expects some of the financial industry’s incumbents to disappear and be replaced by modern-day startups. Firms will consolidate and some big players will become obsolete.
Nauiokas and Park believe that the word “fintech” won’t exist in five years.
“We always bristled at the concept — we weren’t investing in fintech,” said Nauiokas. “What we’re talking about is an evolution of financial-services companies off the back of technology and the digitization of business models, but it’s a natural evolution,” she added.
“It’s becoming significant enough that everyone is starting to appreciate that it’s not financial-services technology, it’s actually financial services. They are all technology companies,” she said.