Two Cheers For FinTech

Welcome to Assembly’s FinTech blog. Being a FinTech VC in setup mode, the focus will absolutely be on FinTech, however much I may be tempted to share views on a host of other topics. Have you seen Amy? If not, do. What about the Elena Ferrante quartet — final book out this September — when was the last time a writer had such an interesting voice? And we have to be grateful to someone at the BFI for reviving Welles’s ‘Touch of Evil’… But, no — back to FinTech and those ‘two cheers’.

Why just the two? Surely, having left the comfort of working for a very large Bank and taken a 100% salary cut in order to set up a FinTech VC, I should be more enthusiastic than anyone about the prospects for FinTech? Well, yes and no.

I wouldn’t be setting up Assembly — or devoting every waking hour to FinTech — if I didn’t think there was a large structural change under way in financial services, one from which I hope to wrest large investment returns for Assembly’s limited partners whilst making a positive contribution to a financial sector which will be better adapted to society’s needs. But, as an investor, I value skepticism very highly — both in myself and in others. This is something that comes pretty naturally to me but which has been re-inforced the hard way — by the banking and market disasters I’ve lived through (from the collapse of the Nordic banks in the early 1990s, through the Asian sovereign crisis, the dotcom bust and the recent global financial crisis and ongoing Euro drama). And, right now in FinTech, intelligent skepticism seems to be in increasingly short supply.

We see huge claims made every day for firms that are barely able to pick up the crumbs left by incumbents hit by a perfect storm. Meanwhile, many investors (in the markets for private equity) seem more focused on demonstrating that they have made FinTech investments than with whether their capital is needed, how it will be used or what the likely returns on it are.

With this as a backdrop, strong business models and management teams who are both relentless and patient stand out sharply, at least to me. I have made some FinTech investments recently and there are — of course — a number of firms where I would be happy to invest right now. There is a ferment of creativity and some of what is happening is right on the money. Still, for all the hyperbole, what is most striking about FinTech as a whole today is how unimpressive most of these firms are, how few have real revenue and customer models and how rarely they are doing anything interesting with data or meeting the challenge of marketing their services and products.

“Very good is very rare,” is a Charlie Munger axiom and anyone living in the world of FinTech can heartily concur. Warren Buffet’s partner never spoke a truer word. At Assembly we will be focused on finding those very rare investment opportunities.