8 Hours in NYC: Innovators, Incumbents, and Investors
On Friday, November 6th, Wharton FinTech visited New York City for our first Industry Trek of the year. Student interest was strong — 20+ students attended, representing Wharton’s MBA program, Wharton’s undergrad program, and the School of Engineering at Penn. The schedule was packed with visits to five companies — a startup in the blockchain space, a newcomer seeking to disrupt high frequency trading, an incumbent in the payments space, and several prominent investors.
Blockchain
Our first stop was Blockchain. Founded in 2011 as Blockchain.info, Blockchain is the leading global provider of bitcoin software for both consumers and businesses. Paul Szurek — Head of Strategy & Partnerships — and Chris Lavery — VP of Business Operations and Finance — explained how Blockchain offers bitcoin wallets for consumers as well as bitcoin APIs for developers. Blockchain sees a huge global opportunity to transform payments for roughly 3 billion people who have a smartphone but not a bank account. That said, Blockchain isn’t “anti-bank;” the company partners with large incumbents — such as JPMorgan, Goldman Sachs, and Credit Suisse — to develop new ways to utilize blockchain technology.
IEX
Our next stop was IEX, a growing alternative trading system headquartered at 4 World Trade Center. Gerald Lam — Marketing and Communication Strategist — and Matt Trudeau — Head of Product —kicked off the discussion with an overview of how trading has evolved over the past two decades. IEX differentiates itself from other dark pools by increasing latency to level the playing field between high frequency traders and everyone else in the market. High frequency traders use latency arbitrage to “beat the markets,” leading to an unbalanced playing field which puts traditional traders at a disadvantage. IEX is able to implement these speed bumps by placing a 38-mile long fiber-optic cable in front of their trading box to increase latency between trades. Unlike other dark pools, IEX does not sell fast data and emphasizes transparency. IEX hopes to become an SEC-approved exchange in the near future and continue to disrupt how trade orders are executed. Thanks for an engaging discussion, lunch, and great views of downtown Manhattan!
Bain Capital Ventures
Our third stop was Bain Capital Ventures, the venture capital division within Bain Capital. BCV provides seed and growth capital to companies focused on technology and tech-enabled services for enterprise customers. Roughly one-third of BCV’s capital is invested in FinTech companies, including IEX, Digital Currency Group (investor in digital currency startups), and Novus (portfolio analytics for institutional investors).
Matt Harris — Managing Director and long-time FinTech investor — and Matt Brennan — Associate and Wharton alumnus — cited a comparison between the percentage of investments in the FinTech space (15–20% today) versus the Healthcare space (8–10% today) to suggest that FinTech — and consumer-facing companies in particular — might be overinvested. Despite all of the attention surrounding B2C and peer to peer services, Harris and Brennan view B2B as a more attractive opportunity. Most of BCV’s FinTech investments are targeted at B2B companies.
We also received some advice on how to get into venture capital: start a company, or to try to work on a side project for a startup or VC firm.
MasterCard Labs / Start Path
Next stop: MasterCard, where Mohit Chhatrapati introduced us to MasterCard Labs and Mastercard Start Path. MasterCard Labs is the company’s innovation arm. It develops solutions to problems faced by MasterCard’s customers and devises new ways to connect banks and merchants. MasterCard Start Path is an internal accelerator within MasterCard Labs; it provides startups with access to MasterCard’s broader organizational capabilities to facilitate awareness and use of MasterCard. Many of these startups have been sourced from internal hackathons.
Mohit gave us an insider’s tip about joining MasterCard Start Path: you don’t necessarily need a tech background, but you need to be passionate about technology and able to demonstrate your interest.
Box Group
Our final stop (and happy hour destination!) was Box Group, a five-person, early-stage fund founded by David Tisch. Box Group has a portfolio of 225 companies with 30+ exits over the past seven years, including Vine and GroupMe. Box Group is not LP-backed; all investments are funded with personal capital, which enables the team to take a long term view and be more flexible with their investments. Box Group’s investors are non thesis-driven; that is, they embrace entrepreneurs’ long-term growth plans and allow them to direct the growth of their businesses.
Within the FinTech space, Box Group — in contrast to BCV — focuses on consumer-facing companies. Tisch touched on several top-of-mind themes, including the “unbundling” of the bank and general dissatisfaction with legacy brands. Box Group looks for opportunities to grow brands that people love in industries that lack strong incumbent brand affinity (for example, Wealthfront in the wealth management industry).
The trip was an invaluable experience for Wharton FinTech. We got a firsthand look at some of the latest FinTech innovators and unique insights into how investors evaluate potential investment opportunities. We’re looking forward to two upcoming treks next spring: one to the San Francisco Bay Area in February 2016, and another to the Big Apple in March 2016. Please contact us if you are interested in hosting an event on one of our spring treks!
