With offices in London and New York, Anthemis Group is a very active investor in early stage Fintech. They also advise large financial services firms on digital strategy, work with venture capital and private equity firms, and offer a talent practice. What’s new since we last checked in with them?
Well, they announced a London-based incubator dedicated to financial wellness in partnership with Exponential Ventures, an arm of South Africa’s MMI Holdings. The incubator will identify business opportunities, refine business models, source talent and scale financial wellness startups. This should support Anthemis Exponential Ventures (AEV), which invests MMI capital in early stage companies that improve the financial wellness of individuals and SMEs. AEV began with an initial €30m commitment and has made four investments thus far.
Always strong in insurance, Anthemis took positions across its different vehicles in insurance-focused startups kWh Analytics, Qover, Quantemplate and Trov. They also announced an investment partnership to which Swiss insurance group Baloise has committed CHF 50 million for investment in insurance and risk management startups across Europe and the US.
Last year, they announced the first close of Anthemis Venture Fund I, with substantial backing from the European Investment Fund and UniCredit. Recent non-insurance investments include REalyse, Tide and BigchainDB.
Most recently, they brought Ruth Foxe Blader on board as a Director.
Q. Ruth, what led you to join Anthemis Group?
A. I have a long history with Anthemis, from the very beginning of my career in financial services. I met Sean (Park – a Co-founder of Anthemis) in 2010 and was impressed by his vision. I had tracked early Anthemis investments, particularly in the Insurtech space – Climate Corporation being one that I was fascinated by. I met with him a couple of times and actually did some work with him when I was at Allianz. I met the other founders and partners of Anthemis and just really, really liked them. It felt like we had a similar view of the world. I co-invested with them in QuanTemplate a couple of years ago.
It was a bit of a slow burn. We’d gotten to know each other over time, and as I continued to learn more about their work helping incumbents build their strategic venturing efforts, it was a no brainer for me when the opportunity arose at Anthemis to run a couple of those vehicles. Overseeing the Anthemis Baloise Strategic Ventures vehicle in particular, seemed like a really fantastic opportunity for me.
What is really cool and interesting is that I’ve spent the last five-and-a-half years doing this stuff with Allianz, which is also an incredibly interesting company. I had the opportunity to work with a market leader, and have all the resources and all of the different insurance lines internationally at my disposal to learn from and to participate in. I felt really confident about my insurance industry knowledge and my insights into insurance innovation.
Anthemis, for me, is a really special place with an incredible amount of innovative thinking and which culturally is very interesting. So, for me to be able to advance my career while retaining that focus on the area in which I’ve been building investment expertise, and graft it onto this very supportive, creative, innovative, and forward-thinking culture, felt like a really great move.
Q. At Allianz Ventures, you were lead investor in Insurtech and asset management-related startups. Is it fair to assume that at Anthemis you’ll be covering all of Fintech? Will you have a broader purview?
A. It is a broader purview, in that we have investment partnerships with different companies. The two that I’m involved with are with UniCredit and Baloise, so there is in equal parts banking focus and insurance focus.
Q. What do you see as the differences between being a venture capitalist versus being a corporate venture capitalist?
A. There is a strategic element to these investment partnerships, by their very nature. If you look at it as being on a continuum, or a spectrum, certainly it’s closer to being an institutional pure play. I can see that there are elements of corporate venturing strategy that need to be deployed in these partnership vehicles, but there are also some really big differences. Part of it is where you sit and whom you answer to. In our partnership vehicles, we have participation from Anthemis and we have participation from the partner companies on the investment committees. The day-to-day concerns of the partners are similar to the concerns I would have had at Allianz. What’s really nice about the investment partnership structure is that we are able to balance each other out, so the conversations we have are more productive and honest than if you are fully sitting and situated within your corporation and trying to do something as disruptive and innovative as venture investing.
Anthemis also has Anthemis Venture Fund I, which has multiple LPs and is a more traditional venture fund.
Q. If you were talking to a startup founder seeking capital, how would you explain the benefits of the investment partnerships?
A. I really do believe there are major advantages to this investment partnership model, not just because that’s what I’m doing right now, but because I’ve seen both worlds. I am representing Anthemis in the market, and I am behaving with the values Anthemis has towards its portfolio companies.
Anthemis really does have tremendous resources to bring to the portfolio companies. That’s everything from helping them staff themselves, to helping them with marketing communications, to introducing them to people in the incredible ecosystem Anthemis has built up around itself. So the suite of services that come with a really great seed/series A investor.
Also, we have the perspective which – sometimes – corporate venture capitalists who are representing their corporate interests don’t have, and the duty to help entrepreneurs build their businesses and create value, and not, primarily to drive value back into the corporate entity providing the capital.
Q. What is the fundraising environment like now for Fintech startups seeking seed money or a Series A? Is it different for companies that are raising a B or C round?
A. I would say that it’s competitive but not impossible to raise money, no matter what stage. But investors really are looking for demonstrable growth and traction. It probably feels pretty easy to raise money if you have those things. If it’s a business that hasn’t quite found its product/market fit, then it’s tougher.
There’s still money, but it’s always harder to find your next round as you need more capital to grow and as you need to demonstrate traction points. There are only a handful of companies that are doing really well and are able to show those traction points.
Q. Was there too much “happy money” going into Fintech?
A. Everywhere it the world? I don’t know. If you’re lucky you can find “happy money” all the time, and there is a lot of money flooding into venture. There’s a lot of dry powder because the economy hasn’t significantly changed in terms of interest rates and in terms of the reasons that venture was flooded with money in the first place.
It’s a bit cyclical. In Insurtech, we’ve seen massive interest over the last couple of years and, really, there weren’t enough startups to satisfy the interest in the space. Then people start to ask the right questions, like “What’s the exit really look like on this thing?” It’s not that interest cools, it’s that investors get smarter.
Q. Which areas of Fintech/Insurtech are most compelling from an investment standpoint today? Which emerging themes are you following?
A. Investors have things that interest them personally, and then there’s stuff that makes them want to go to sleep. That might not be the best guide, but it kind of is how people invest.
I really like complex, big ideas that become plausible. World-changing ideas or ideas that take advantage of the way the world is changing are of great interest to me. In insurance, there are a lot of different, adjacent industries which could have something to say about insurance, whether that’s autonomous vehicles or new kinds of mobility, or totally new datasets coming online and helping us think about risk differently or think about insurable assets differently. I really like those things more than simply digitizing what we have today – partly because I think insurers are already focused on digitizing what they do today. It might be hard, they might be slow, they might be inefficient, but it’s not impossible to think that they’ll get there themselves.
I also like to look where regulatory transformation will enable a new type of company to exist. Let’s go back to that example of Climate Corp. It was a cool idea – they said let’s take some weather station data and figure out something to do with it – and that something was enabled by a change in the farm bill which required (U.S.) farmers to get private insurance.
I’m thinking about cool tech and really smart teams that are doing interesting stuff that’s been put on steroids by market dynamics or a regulatory shift that is going to enable this company to grow very, very quickly.
Q. Which areas are overhyped? Blockchain?
A. I don’t think it’s overhyped. I think it’s misunderstood.
Blockchain is potentially a new protocol which could underpin a lot of a transactions. It’s not a solution looking for a problem (which a lot of people say), it’s the solution, potentially, to a lot of inefficiency. The concern on the part of many investors is that the problems blockchain could potentially solve have a coordination issue, and they’re a bit of a zero-sum game, so betting on the right one is tough. But its misguided to think that blockchain is not important or doesn’t have something to say about a better way to transact a lot of different kinds of business.
Q. Do you have any regional investment preferences right now?
A. I like the idea of investing in places not everybody is investing in, whether that’s looking more carefully at different markets in continental Europe that receive less attention or in Eastern Europe. I think investors tend to look in their own backyards first and more carefully, and see more opportunities there, and I am in Europe. The UK is a vitally important Fintech market. The U.S is fundamental to any venture portfolio. Israel – I think there are skill sets and areas of expertise which have been developed there which makes it a very dynamic and vibrant place to look.
Q. You live in France. What are the strengths and weaknesses of the French Fintech ecosystem versus other regions? Are there particular sectors of Fintech that France excels at more broadly in comparison to other regions?
A. France has incredible technical schools. France is great at artificial intelligence. France does great design. What’s cool about France and what I’m looking forward to is the new administration which has come into office. There is a stated focus on entrepreneurship and startups. So that’s exciting.
Even under the previous president, there was a ton of work being done to put Paris on the map in the way that Berlin put itself on the map and the way London put itself on the map.
I’m excited to see more French companies.
Q. What are you looking for when you evaluate startups for investment?
A. I want to see their thinking about the problem they are trying to solve. One thing that’s true about every company is that it is founded on a set of beliefs. For me, the soundness of those beliefs is as important as the quality of the product they’ve created. If you are creating a solution to a problem, your first belief is that this is a problem people will pay money to solve.
Seeing how the team thinks about what’s special about what they’re doing, what’s defensible about what they’re doing, where the need is coming from, how that need is going to change, and how they’re going to change, too – that’s hugely important for me.
Q. How are investment decisions at Anthemis made?
A. For the two investment partnership vehicles that I’m involved with, there is an investment committee and on the investment committee there is representation from Anthemis and from the partner. We make the decisions together. It’s very lean.
Q. Given that Anthemis is investing from multiple funds with overlapping interests, how are investment opportunities allocated?
A. A lot of the deals are originated by the specific investment teams. There is overlap in that it’s all financial services, but the funds actually do have very different focus areas. The funding round we want to come in at and the percentage of the company we want to own is different for each of the funds.
There really isn’t conflict and there’s nothing that prevents the funds from co-investing. But it doesn’t happen that much.
Q. How big is your team?
A. Our investment partnership team consists of 1 partner, 3 directors and 3 associates across London and New York.
Q. Many startups find that accessing data for product development purposes is difficult and expensive, if not impossible. Do you have any advice for startups that need data to prove their models?
A. More and more, insurance companies are getting comfortable with the idea that if they want to play this game and benefit from emerging technologies they’re going to have to provide cleansed or anonymized data. Otherwise, they’re not going to be able to understand whether the company does what it says it can do.
From the startup’s perspective, they’re probably going to have to find someone in the organization who has the authority to provide that data to them as an interlocutor, and to convince that person of the importance of their solution. But it’s going to be an investment of time. That can be frustrating.
Q. Is that something you can bring to the table for your startups? As a startup, I’m more likely to come pitch you if you will help me get access to that data.
A. It’s not just data. We’re bringing more than money. The assets that a Baloise or UniCredit bring to the table, or their appetite for a commercial relationship alongside of an investment, or their interest in a proof of concept, is another answer to the question of why this vehicle and not another vehicle. One of the things we are trying to do is connect, in a speedy way, companies back to the business.
Certainly, if you’re doing strategic venturing, you want to be a first beneficiary of the innovation you’re financing. Normally, talking to someone with the corporate venturing arm is a good way to suss out a potential partner in this space. That is the advantage that the corporate venture capitalist brings to the table that the institutional investor doesn’t.
Q. Which accelerator programs and incubators do you expect to be involved with, and what do you get from your participation with them?
A. I spend on a lot of time on this because I think it’s a great way to meet companies. My view is that investors need to be providing as much value to the ecosystem as they possibly can.
There are certain things that Anthemis is involved with. As part of or investment partnership with MMI, we recently announced a financial wellness incubator, and within that, we are helping build companies with MMI. We are sourcing entrepreneurs with innovative ideas and building companies from scratch around the theme of financial wellness.
Q. Often, the hardest part for a startup, at least a B2C startup, is finding a cost-effective customer acquisition strategy that scales. Are Fintech startups underestimating the challenge of customer acquisition?
A. Your product or technology – if it doesn’t get into people’s hands, it’s not going to help them.
Investors want to see you think about customer acquisition costs in ways that might be different from incumbents, that might result in efficiency gains even if it is still expensive to acquire customers – and it is in financial services. We know that. But there are innovative ways of acquiring customers.
The other thing entrepreneurs need to do is choose their investors carefully. Of course, when you’re raising money, you’ll take it from anyone who’ll give it to you. You might not say that, but you might think it, and maybe that’s not a good idea.
Do your investors understand what it means to invest in customer acquisition? You see investors who have portfolios beyond Fintech, who are in the ecommerce space, for example, who clearly get that. What is your investor’s view of top-line versus bottom-line growth? That’s an important conversation to have.
Q. When you are being pitched by an early-stage B2C startup, do you want to see a head of marketing on the team already?
A. I think that’s something that can come later. It’s a skill set which is easier to integrate, so no, I don’t expect that to be part of the core team. I don’t think it’s wrong for that to come later.
At the same time, I’ve seen startups struggle to get skilled marketers interested in the Fintech space. Or they bring in marketers who don’t have enough financial services knowledge or who feel hemmed in by the regulatory constraints. So, getting the right marketing person on board can be an extra challenge.
Q. How would you like entrepreneurs to contact you?
A. They can reach out via LinkedIn, or via email on email@example.com.
# # #