Ian’s Tech Travels: This royal take on fintech will reframe your definition of success

Technology seems like the winner right now. The Nasdaq 100, an index of 100 US tech giants, bears this out. Having started the year just shy of 9,000, it currently sits slightly north of 12,000.

But there are also counterarguments that we are in a technology bubble. With this in mind, I want to look at the growth of fintech-investing specifically, and for this I bring in Augmentum Fintech investment trust manager.

 

More no than yes

Tim Levene (pictured) has more than a decade of experience in technology and venture capital, and for several years worked as an adviser for the Duke and Duchess of Cambridge’s Royal Foundation on digital strategy and innovation. Augmentum’s Fintech trust was the first publicly listed fintech fund in Europe.

Levene is seeking typical annual returns of 20% across the trust. Of the more than 2,000 companies to have pitched to Augmentum, only 17 sit in his portfolio.

‘There are more reasons to say no than there are to say yes,’ he says. ‘We invest in less than 1% of the companies we speak to.’

What does it take to be in that ‘less than 1%’?

‘We’re looking for a significant market opportunity,’ says Levene.

‘If a product is targeting something too niche, we question it. We’re often backing businesses in their very early-stages, with huge potential, targeting a big market opportunity. You want to be backing the market disruptor or, at worst, the number two.’

Augmentum is not focused on the immediate profitability of fintech firms either. This approach is not uncommon. In fact, a considerable number of early-stage investors might prefer to see businesses deploy all their profit, and in some cases take on debt, to maximise their land grab in the market they are in.

Levene adds that the challenge in fintech ‘is not just to be right, it’s to be right at the right time.’ Indeed, he notes how blockchain and the insurance sector offer considerable long-term opportunities. Neither has really delivered on their goals, though.

 

Death disrupted

For an example of an ideal fintech investment, Levene points to Farewill, an online legal service that handles probate, will writing and cremation services in the UK. The business has grown by more than 500% this year, thanks in part to growth capital.

‘We liked that it was disrupting an old-fashioned sector that had not been disrupted in any tangible way,’ says Levene. ‘It is an extraordinarily dynamic team, driven by tech but ultimately unproven.’

Early-stage fintech investment is always risky. These are not investments for your typical client. Still, for wealth managers and advisers with clients who might suit these investments, there is certainly a compelling case.

‘Look at the size of the opportunity ahead of us,’ says Levene.

‘There’s a $15tn market. People haven’t missed the boat because the opportunity is very much ahead of us. There’s a wave of interest, and while people recognise that fintech is a fragmented and noisy market, many people buy into the philosophy that financial services will continue to be disrupted by tech.’

A final point is that the exciting world of fintech investing does not guarantee getting in at the ground floor of every major success. As an angel investor, Levine missed out on the incredible success of Skype, Spotify, TransferWise and Revolut.

‘You will always miss out on great opportunities,’ says Levene. ‘Either because you missed the boat or weren’t willing to pay the premium. But the important thing is saying no to ones that don’t succeed.’

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