In February, Paris-based AXA announced the launch of a new venture capital fund to invest in innovation in the insurance, asset management, financial technology and healthcare service industries. AXA Strategic Ventures will have as much as €200 million to invest.
AXA Strategic Ventures has three stated missions:
- Identify and support innovative startups that can help AXA improve customer experience,
- Help these young firms go global, and
- Help these companies grow and become profitable.
This new fund has offices in San Francisco, New York, London, Paris, Zurich and Berlin, and is looking to establish a presence in Asia as well.
AXA joins BBVA, HSBC, MassMutual, Santander and several other financial services firms that have established early-stage FinTech venture funds.
Francois Robinet is the Managing Director of AXA Strategic Ventures. He is usually found commuting between the U.S. and Europe.
Q. Francois, what is the impetus for starting AXA Strategic Ventures?
A. My background at AXA has been mostly in investments. I was in particular in charge of an equity management company in the U.S.. I spent also some time in more traditional businesses. In the past few years, the top management of the Group, who understood that the digital revolution would clearly impact our business, has been pushing key brands to launch various initiatives related to this digital revolution.
Of course, when you get innovation from the inside, it is good but you are naturally restricted by your existing business models. If you really want to think completely outside the box, it is important to look also outside for innovative ideas.
For this reason, two years ago we created a small fund, connected to our French business (which is the biggest business in the Group, with diversified activities: health, life, retail) in order to do seed investments within the French ecosystem.
The experience has been very positive in three dimensions.
The first one is that we have been able to identify interesting startups and these startups are very relevant for our French business.
Second, although it is a little early to judge the financial performance, these startups are still around and doing well and we expect a good return.
Third, and maybe this was the most important, it enabled people from the AXA Group to be exposed to external innovation, to be exposed to entrepreneurship, to see the way it works, to see innovation in action. That was also one of the objectives. So, on these three dimensions it has worked well.
But I would say there were limitations: we were focused solely on the French market, and therefore were missing a lot of interesting ideas, especially in the U.S.
Second, when companies came to see us it was because AXA is a large global company. And one of the many propositions for them was not just the money, but for us to help them to expand outside the domestic market. And in Europe, scaling outside the domestic market is very important, much more so than in the U.S. where the domestic market is huge. They thought that AXA was going to be able to help them to do that, but in fact the fund was not structured and not organized to do that – it was just connected to the French domestic business and not to the rest of the organization. So, the ability to help companies to scale was limited.
So it was very successful in the strategic promotion of ideas and also made good investments, but with some limitations. That is why we decided to launch AXA Strategic Ventures, which is a truly global VC fund, leveraging on the successes and the lessons learned from our first fund.. We need to capture external innovation. We need to invest in startups and help them grow but we need to do it in a bigger way. And we need to do it globally. And that is the type of investing that we want to do.
Q. Why now?
A. We are doing Strategic Ventures now because we have been very happy with our early experience in seed and venture investments but we want to learn from what has been done and to address the limitations we have seen with our earlier experience.
This idea of capturing external innovation isn’t new, but it is now time to accelerate it and do it globally.
Q. Has AXA historically engaged in corporate venture?
A. AXA has been investing in private equity for a long time. It is part of our investment portfolio for a long time. It has been mostly later stage, pre-IPO, buyout situations, and so on. On early and venture stages, it is actually something new. And it is especially something new because there is a strategic dimension. We want to invest in companies that are relevant for our business The experience we had was the experience with the AXA Seed Factory, which is the fund committed to our French business I was describing before. Beyond that, it is a new experience.
Q. What happens to AXA Seed Factory now?
A. To make a long story short, AXA Seed Factory is now part of AXA Strategic Ventures. AXA Seed Factory does not exist but there is now an incubator called AXA Factory, created in France. It is not a fund, it’s an incubator helping startups in an even earlier stage in the development of companies.
Q. You have taken over the five Seed Factory investments. Are you taking over any other existing venture investments?
A. We are going to start with these five. All the others will be new investments.
Q. AXA is your sole LP. Are you receiving capital for AXA’s general account or are some of AXA’s operating units contributing capital?
A. The LPs will be the various insurance companies of the Group, so it is coming from the operating companies.
The initial idea was for the parent company to fund this initiative, to put up the money. But then we thought it is better to build relationships with the operating companies and that the operating companies have “skin in the game”.
Q. How will the focus on improving the customer experience inform your investment choices? What are you looking for in companies that will help improve customer experience?
A. That’s a very good question, actually. I like to think that all the companies in which we will invest, broadly speaking, will improve the customer experience. Because for me, many things that we see in new technology or innovation – not just in FinTech, or in insurance – in the end improve the customer experience. Everything is about providing something new or something better for the customer. I believe that is what technology should do as well for financial services in general and for insurance in particular.
Insurance has not been known traditionally for offering great customer experience – whatever aspect of the customer experience you pick. I believe the startups we invest in will contribute to improve the customer experience. It could be an incremental improvement or it could be a non-linear improvement – a better way to provide insurance or peer-to-peer or something like that. But the general theme of improving customer experience in different parts of the value chain should be our driving force.
Q. Do you have a preference as to the stage of the companies you invest in? The round you participate in? Will you still be doing seed rounds?
A. We will still do seed investments but it will be mostly Series A, Series B, and occasionally Series C.
The reason for that is one, we have €200 million to invest – if we want to deploy this money meaningfully we have to focus on later stage investments. And two, because I think it is the best way if we are to bring strategy inside AXA Group. We will continue to do seed investments but the strategy benefits to AXA will be more likely to come from more mature or more developed companies.
The reason is that it is very difficult for very young startups to develop meaningful commercial relationships with very big entities. This can be done only when the company is more mature and has a bit of infrastructure and the beginning of revenue.
Q. What do you expect your average investment will be initially? And over the life of a portfolio company?
A. The average size, if I have to put a number on the table, I would say will be $5 million. If I have to give a range I would say between $4 million and $10 million. Smaller in the beginning, bigger when we build our reputation and gain experience in the market.
Q. Do you have regional investment preferences right now? Which regions look most attractive to you?
A. For the seed investments, we will invest where we are close to the local ecosystem and where we have access to the local entrepreneurs because it is very holistic.
Regarding the main focus of our investments, for the Series A, Series B, maybe Series C, we will be agnostic. We will invest where ever we can find interesting, innovative ideas that are relevant for our business and that make sense for AXA. Condition number one is that they have the potential for strong value creation. We have no preconceived notions about where we will invest. We will invest where we find the right opportunity.
We will have a team in the U.S., in San Francisco and in New York. It is fair to say that the U.S. market is by far the first market for startups in general and for FinTech startups in particular. It is very natural to expect that a significant portion of the portfolio will come from the U.S.
Europe is a different ecosystem than the U.S. More fragmented. London in Europe is a bit like New York in the U.S. This is where you have technology and this is where you have financial services. The mix of the two means there are many opportunities. So London will be an important center for us but we will also cover the main countries of Europe.
So that is where we will be initially. Now, later on, and when I say later on, it will not be too far away in time, we will open an office in Asia, maybe with an increase in the size of the fund.
Lastly, I would say there are opportunities in emerging markets. Why? Because the emerging markets, for FinTech and for innovation in financial services, are very interesting places to be. The topic of financial inclusion in emerging markets is a very strong driver for innovation in the financial services world. We need to be able to invest in emerging countries in a smart way. Financial inclusion in general and financial inclusion in developing countries will be one of our focuses.
Q. Which areas of FinTech are particularly interesting to you? Payments technology (mobile and otherwise), alternative lending, and automated wealth management have been attracting significant capital recently.
A. My answer may be more precise in six month’s or in one year’s time. We can think about it in terms of what investments are relevant to our businesses – insurance and assets management. That’s the broadest definition.
Themes that are important for us include big data. Big data is part of financial technology. It is really relevant to better risk management, better risk assessment, better underwriting, and better analytics. Big data is clearly in our scope.
The sharing economy is another theme, especially “peer-to-peer”. We haven’t seen so much in peer-to peer insurance. We have seen much more in peer-to-peer banking, peer-to-peer payments, peer-to-peer lending, but I believe there are many interesting things to do in peer-to-peer insurance.
Also, the “internet of thing”, which will help in understanding risks and in understanding our customers.
And financial inclusion, which I mentioned before. Not only in developing countries. There are also under-served populations in developed countries, as well. Financial inclusion in a very broad sense can cover mobile payments and it can cover robo advice. People in some places don’t have access to unbiased advice because it is too expensive to deliver. Financial inclusion should be seen in the widest sense of the term.
Q. AXA Group is making a major commitment to digital transformation. Will AXA Strategic Ventures also look to invest in startups that might contribute to that transformation (say startups in digital media, mobile, or digital marketing space)?
A. The way I think about it is that it is probably outside of our area. This is critical for AXA to do. It is very important that we invest in the digital space, but that is part of our operating budgets, and this is what we are doing, by the way.
Q. How do you plan to work with AXA Lab?
A. For sure there will be cooperation. We do two different things and they are complementary. In San Francisco we are also sharing offices with AXA Lab.
AXA Lab will be important for us in two ways: first, they see many things in the market and will put us in contact with interesting companies. We have already seen that. Second, one of our value propositions to the entrepreneurs is to facilitate connections with the AXA Group. It is one of our differentiators. For this purpose AXA Lab will be very important. Their role is to make connections between startups and the AXA Group and we will collaborate with them in order to do that.
Q. Will you invest in truly disruptive startups or are you looking for incremental improvements in your existing business lines? For example, will you invest in companies that might threaten your existing businesses or distribution channels?
A. We have no barriers – as long as it relates to insurance, i.e. managing risks for the customer – the customer being a person or a company – we will do it. Many things in which we will invest will be for incremental improvement. But if we find something that is very disruptive, such as a new way to do insurance – I was mentioning peer-to-peer insurance earlier – we will do it with absolutely no problem.
We will really be acting as a traditional VC. Trying to identify the right companies and I hope unique companies that have figured out how to do things in a new way. We will have no problem investing in these companies. Actually, it is clearly part of our mandate.
Q. Do you plan on being investment lead? Do you expect to take board seats?
A. I would say this will be an evolving situation. I want to take a very humble approach to it. But just the same, we really think we can bring value to these companies.
I am very comfortable to not be in the lead position, to take a minority position, or to co-invest with others. We will be flexible. We will have no problem to take a board seat but it is not a requirement.
Q. What kind of interaction can your portfolio companies expect to have with AXA? Will they get preferential access to people (for advice) or data, for example? Is it possible that AXA will end up buying some of your portfolio companies outright?
A. We will facilitate exchanges of various types between AXA and its operating entities and the companies we’ll invest in.
Q. How will AXA judge the success of this effort? Purely on financial return? On strategic benefits? A combination?
A. Our first mission is to deliver financial returns. We will be judged on financial performance. It is a condition for credibility. It is a condition for sustainability. It’s a condition for success in the market and with entrepreneurs. It is difficult to sit at the table and have a venture capital initiative and not to deliver financial performance.
It also has to make sense from a strategic standpoint. Strategic return is much more difficult to assess. The fund will have to add value in different ways. Either because some of our portfolio companies will have commercial relationships with the AXA Group. We could be a distributor for these companies, we could be a client for these companies, we could provide insurance or reinsurance to these companies.
We will provide the framework for these portfolio companies to be exposed to the AXA world, and for people at AXA to see and to meet these companies. Just exposing AXA to outside innovation, so that we can understand trends and see how the industry may evolve, is of value. Seeing and meeting the entrepreneurs, seeing how they think, how they act, is valuable inside AXA. But this is much more subjective, by definition.
Q. Do you anticipate being involved with accelerator programs and incubators?
A. For our seed investments, to be close to the local ecosystems, it will be important for AXA to develop links with incubators. It is something we will look at. We haven’t done it yet in the U.S. However, we have done it in Europe. In France we have created our own incubator. We have done it in Germany as well. We have a program to invest in startups coming from an incubator. So yes, this is a good way to source deals.
Q. You are just getting up and running now. What will AXA Strategic Ventures look like in 12 months? Are you hiring?
A. Oh, yes, we are hiring. This is actually a big part of my activity at the moment, to set up the infrastructure and recruit the team.
12 months from now, I would say AXA Strategic Ventures will be fully operational in the U.S. with an office in San Francisco and an office in New York fully staffed. We’ll also be fully operational in Europe with an office in Paris, an office in London, and one in Berlin and Zurich as well, fully staffed. In these markets, we will have made a few investments. And by then, probably, though not 100% sure, we will have an office in Asia.
Q. How would you like entrepreneurs to contact you?
A. Any way they like. We are completely receptive.
We have contact information on our web site. They can send an email to me or my partners at AXA Strategic Ventures. They can also contact anyone they know in the AXA Group. Everyone in the AXA Group knows we are here and they can put you in touch with us. Internal referrals should work well.
Also, we are trying to reach out to them. They will definitely find us at conferences and other events.
Q. Is there anything else you would like to leave us with?
A. I’d just like to re-emphasize two things.
First, the insurance industry hasn’t been affected by the digital revolution to the same extent as other industries – particular the banking industry or the other financial services industries. We are convinced that there is still a lot of room for innovation in the insurance world. Just because of its structure, it is a very good candidate for transformation, innovation and, potentially, disruption as well. This is what we believe. It is an under-served part of the startup market. We believe we will be able to find good opportunities. This is one thing that I want to emphasize.
The second thing I want to emphasize is that we believe we have something to bring that is very complementary to what other venture capital funds can bring. It consists of two parts. First is our global reach. It is interesting to see that many of the companies that have already contacted us did it to see how we can help them to scale in Europe. We believe global reach is very important. The second is expertise. We have been in the insurance business for over 150 years. So, we believe we can help innovators with new ideas to understand the dynamics of insurance, the dynamics of asset management, and how innovation can be applied to these industries. We are quite confident that we bring something to entrepreneurs and startups that is not only money. Money is important, of course, but there has to be something more than money, and expertise and global reach are two areas we are qualified and prepared to help with.
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