Santander has given its fintech-focused venture capital firm InnoVentures another $100 million ($131 million) to invest after impressing with its initial investments.
Santander InnoVentures has spent just over 50% of the $100 million initially allocated to the fund, which started out in 2014. The rest of that first tranche of investment capital will be reserved for follow-on funding rounds for companies already invested in.
InnoVentures, based in London but with a global remit, has backed startups such as US online lender Kabbage, US blockchain payments company Ripple, Swedish mobile card reader maker iZettle, and London-based blockchain analysis startup Elliptic.
Business Insider caught up with Belinky to discuss what InnoVentures is looking to spend its new $100 million on, his take on the Brexit, and the trends he is seeing in the fintech market.
Geographically, the focus of the second fund will be Latin America, where Spanish bank Santander has a big presence.
As for areas of investment, the first fund featured, Belinky says “a lot of bets on the obvious. Kabbage in lending, a couple of things around payments like Ripple and MyCheck. We took out a lot of the big themes.”
But the next $100 million will be targeting “a couple of new themes that we only started exploring recently — A.I., committed computing, and more of the little details around digital banking. And then I think there’s going to be a lot of things that are really specific to Latin America like financial inclusion.”
Belinky says the companies Santander InnoVentures have already invested in are “doing really well.”
“I don’t think anyone has had any impact from Brexit or what they call the bubble,” he added.
“I don’t buy this whole ‘everyone’s moving to Berlin or Frankfurt’ thing”
Santander InnoVentures remains committed to the UK even after the Brexit vote. The bank’s executive chair Ana Botin says in an emailed statement announcing the new funding:
“The fund’s base in the UK has allowed it to benefit from London’s position as a fintech hub, while talent-spotting our investments on a global basis. Santander remains committed to the UK and excited about its Fintech enterprises.”
Belinky says Brexit “doesn’t really change anything for us. Things that are hyperlocal like lending probably won’t see much change. People who try to use passporting for business models might come into question but in the end we are on both sides — we are here and we are in Europe.
He thinks this will be true for most VCs: “People will add now one more question to their initial due diligence post-Brexit.
“We’ve had a couple of conversations over the past few weeks where in a CEO interview we ask, what is your Brexit plan? What happens if we really go separate ways? If they don’t have a good answer then they will probably have a tough time raising money but that’s just the same as any other question. It’s one more way to check that you’re dealing with a good company.”
There have been some concerns that London could lose its place as the financial capital of Europe, which would no doubt hit the capital’s flourishing fintech scene.
But Belinky says: “I don’t buy this whole ‘everyone’s moving to Berlin or Frankfurt’ thing. People are not going to pick up and leave. Maybe if there’s continued uncertainty new companies will choose to start something on the other side but I’ve talked to companies and no one is saying we’re moving.”
We have hit a peak in valuations
He adds: “I think it will open up interesting opportunities on both sides if there is a divergence [between the UK and Europe post-Brexit].”
Belinky agrees that valuations could take a hit from the Brexit vote, but says it’s “too early to tell.”
“People are just waiting to see what the government comes up with. This is a weird couple of weeks. If there is any pressure on valuations I think we’ll see it in September when people are back from vacation and there’s a clearer view of what the government will try to negotiate.”
More generally, Belinky believes “we have hit a peak in valuations.”
“That was driven by the irrational exuberance we saw late last year and earlier this year, but that’s unrelated to Brexit. It’s become much more binary. Late last year, everyone was getting money. Now if you’ve got a good plan you’ll get a good valuation but if you don’t then you’ll have a tough time attracting money.”
He is not the only one to think we’re past “peak valuations.” As early as November last year Index Venture’s Jan Hammer was telling BI that we had past the top.
‘Chatbots are the blockchain of 2016’
I interviewed Belinky last November when he told me he had seen 820 pitches in the last year — he knows what is going on in the market.
So what is hot right now? “Chatbots are the blockchain of 2016 I think,” he says.
Chatbots are a bit like an evolution of automated customer service on phones — the annoying robot voices that ask you what service you want. Chatbots are artificial intelligence-powered computer programmes that can automatically answer your questions over services like Facebook’s Messenger or WhatsApp. At least that is the idea.
Belinky says: “Everyone’s got a chatbot or building a chatbot. Everyone is getting on Alexa or Messenger or something else. It will probably become a commodity very quickly but now everyone is getting excited about it and throwing money at it.”
He is not as hyped about chatbots as some, saying: “Probably 10 years ago all major companies switched to automated phone customer service. Everyone thought it would be the end of call centres and it didn’t really do that. Chatbots — it’s good and it can probably attack the low-value questions like forgetting your PIN or how do I check my balance. But it’s not there yet in terms of this is really going to be able to answer users questions in an intuitive way.
Still, he adds: “The volume of low value questions is really high.”
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