500 FinTech Overview - 15NOV16
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Transcript of 500 FinTech Overview - 15NOV16
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/ About Mike Sigal
EIR & Partnerships, 500 Startups FinTechManaging Director, Co-Creation GroupSenior Innovation Advisor, SWIFT Innotribe6x Entrepreneur
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/ Agenda
Perspective on Digital TransformationAbout 500 StartupsTransformation in Financial ServicesHow FI’s are Responding to FinTech500 FinTech5 Startup Pitches
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/Netflix vs. Blockbuster (2004-2010)
Revenues in USD billion
2004 2005 2006 2007 2008 2009 2010
6.0
Physical rental
0.5
2.5
Digital rental
Source: McKinsey & Company
Digital technologies transforms industries…
/
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~40%of International Phone Traffic
…even regulated ones.
Source: Telegeography.com Jann 2014
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/ Digital changes ALL customer expectations
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/Tipping point
Start-ups exploit new
tech
Digital models
proliferate
Customers shift & Incumbents struggle
Laggardsshrink / die
“Newnormal”
New technology emerges
Innovative startups disrupt
Early adopters proliferate
Advanced incumbents start adapting
Mainstream customers
shift
Source: McKinsey & Company
Industry transformations happen predictably
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Talent & Opportunity is distributed globallyHistorically, winners are rare
• 1-2% return 50-100x+ (“Unicorns”)• 5-7% return 10x-50x (“Centaurs”)• 10-20% return 3-5x• 65-70% return 0-1x
Early indicators are clear if you know the KPIs
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// Most Active Seed Investor in the World since 2010
$250M+ AUM
1500+Investments
50 Countries
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//
The title “Partner” is used in accordance with customary business practice in the venture capital industry and does not indicate a legal status as a “partner” in a partnership. Headcount includes employees, interns, and contractors as of May 31, 2016.
Dave McClure Christine TsaiFOUNDING PARTNERFOUNDING PARTNER
Khailee NgMANAGING PARTNER
Bedy YangMANAGING PARTNER
SOUTHEAST ASIA LATIN AMERICA
500 Startups Management & Investment Partners
130 people, 18 countries
Hasan HaiderMIDDLE EAST
Santiago ZavalaLATIN AMERICA
Rui MaCHINA/SF
Marvin LiaoSF
Elizabeth YinSILICON VALLEY
Edith YeungSF
Sean PercivalNORDICS
Tim ChaeSOUTH KOREA
James RineyJAPAN
Sheel MohnotSF
Pankaj JainNYC/INDIA
Matt LernerUK
Krating PoonpolTHAILAND
Natavudh Moo Pungcharoenpong
THAILAND
Binh TranVIETNAM
Rina OnurISTANBUL
Mat JohnsonSF
Eddie ThaiVIETNAM
SILICON VALLEYGLOBAL / SILICON VALLEY25 yrs in SV as
entrepreneur + investorEarly Googler, strong
operational experience Founded and exited two
startups Recognized by Forbes as a multi-lingual, startup
community leader
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//4 Unicorns ($1B+ in valuation)
30+ Centaurs ($100M ~ $999M in valuation)* indicates companies that have already exited
A Selection of Current Portfolio Wins
* * ** * *
Companies are a select sampling of investments across 500 Startups funds and will not be held in Fund IV. While Fund IV has not invested in the rounds of financing shown on this slide, at least one 500 Startups fund has invested in one or more rounds of financing for each of these companies. The valuations listed herein are estimated as at 12/31/2015 based on 500 Startups Valuation Policy as set out in the Appendix to this presentation. These numbers provide a snapshot of estimated valuation as at a particular time and may change. Further detail with regard to financing of companies listed on this slide can be found on Crunchbase.
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/ How We Deploy Capital
General Investment Strategy of All Funds• $50-150K First Check, $150-500K Follow On Checks
Selection Criteria – Data-Driven Process Based on Pre-defined Metrics• Functional prototype (or previous product success) that solves a specific customer problem• Scalable internet-based distribution (search, social, mobile) or proven ability to scale sales• Capital-efficient business; operational at less than $1M in external financing• Measurable traction: engaged users, some revenue, and attractive unit economics• Cross-functional team with design, engineering and marketing expertise
Investment strategy and criteria represent current investment model and may vary at the discretion of the 500 FinTech general partner. Terms noted on this slide may vary by investment.
Accelerator
Seed
Distro
Follow-On
Angel Pre-Seed Seed Post-Seed Series A/B Growth
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/ 500 Startups Family of Funds
Global FundsFund IV – Flagship500 Mobile Collective500 Fintech
Regional Funds500 Canada500 Falcons (MENA)500 Istanbul (Turkey)500 Kulfi (India)500 Kimchi (Korea)500 TukTuks (Thailand)500 Startups JP (Japan)500 Startups Vietnam
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/ World-class Accelerator is a critical success factor
Accelerator Overview• 4-month program in Silicon Valley (4 cohorts / year) • $150K investment for 6% equity• Overall: >1500 applications > 250 interviews > 40 accepted = ~3% acceptance• Fintech: >300 applications > 10-15 startups/batch• Many post-launch, revenue-generating companies (no “idea-only”)
Investment strategy and criteria represent current investment model and may vary at the discretion of the 500 FinTech general partner. Terms noted on this slide may vary by investment.
Accelerator
Seed
Distro
Follow-On
Angel Pre-Seed Seed Post-Seed Series A/B Growth
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// Accelerator Deliverables
Community Advice Curriculum
Support Connections Money
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//
CONFERENCES + EVENTS1
TEAM MEMBERS
More than 50 events with 300-1,000 attendees per event, for a total reach of over 35,000
people in person + digital channels Design, technology, marketing,
and product experts fromtop companies in Silicon Valley
and elsewhere
From 50+ countries around the world, our founders provide peer
review and feedback on products, industry verticals, platforms, etc.
250+ 3,000+
MENTORS FOUNDERS7
ATTENDEES35,000
EVENTS50+
1. Conferences and Events are produced by 500 Startups Incubator, L.L.C. The 500 Startups funds do not participate in any revenue generated by these activities 2. The numbers represented on this page provide a snapshot of some of our Community-building platforms as at a particular time. They are estimated as of 12/31/2015 and may change.
500 Startups Events and Community Platforms
COMMUNITY
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The Case for Transformation in Financial Services
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$13T$13T17% of Global GDP
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< 1%US Loans Originated Online
Source: Wall Street Journal June 2016
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/ The best and brightest don’t want to work for incumbents.
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30%Operations & Compliance Staff
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3 BillionNEW smartphone users by 2020
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FinTech: Technology-based solutions to make financial services more efficient, whether by disrupting or enabling incumbents.
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///
12,000FinTech Startups Globally
Source: McKinsey & CB Insights
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/ 2014 Areas of Innovation - Global
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/ Digital delivers superior margins…
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/ …and customer satisfaction
Source: OnDeck company filings
OnDeck Community Banks Regional Banks National Banks
76
46
19
9
Net Promoter Score US customers n=100
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///
Source: KPMG & CB Insights
$50B10x investment in 5 years
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PaymentsLending
PaymentsPaymentsPayments
‘GAFA’ anchors customers’ digital lives…
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434M Customers8.5M Merchants12.7B Transactions/Year
PaymentsCredit ScoringLendingBankingInvestments
$60BMarket Cap
Sources: http://expandedramblings.com/index.php/alibaba-statistics/; Wall Street Journal Market Watch Apr 26, 2016
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/ 27 FinTech Unicorns - $137B+ in Market Cap
http://www.bizjournals.com/sanjose/news/2016/03/09/19-fintech-unicorns-that-might-end-up-being-real.html
/
///
Source: CBInsights data
2011 Q1 2011 Q2 2011 Q3 2011 Q4 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q40
10
20
30
40
50
60
70
80
90
FinTech M&A Activity: 2011-2015
M&A IPO
Exits in the space are climbing
300 in 2015 vs. 100 in 2011
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/ Different subsectors & regulation = different industries
Tipping point
Laggardsshrink / die
“Newnormal”
New technology emerges
Innovative startups disrupt
Early adopters proliferate
Advanced incumbents start
adapting
Mainstream
customers shift
Source: McKinsey & Company & Mike Sigal Analysis
Capital MarketsFull Stack Banking
LendingWealth Management
Payments
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/ FinTech will decimate Financial Services margins.
Source: PwC Global FinTech Survey 2016
Fund transfer & payments
Banks Average Asset/Wealth management
firms
Insurance firms
28%
24% 23% 22% 21%
% of Top Line estimated to be lost
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How are FIs Responding to FinTech?
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/Tipping point
Laggardsshrink / die
“Newnormal”
Advanced incumbents start adapting
New technology emerges
Innovative startups disrupt
Early adopters proliferate
Mainstream customers
shift
/
/ Corporate Innovation Objectives
• Access top-tier technology talent• Upskill current organization
• Bolting on products that are tough to build/operationalize in a traditional setting
• Access to new customers
Avoiding Disruption
Human Capital
Product
Customers
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/ FinTech Startups Strenghts
Utilizing emerging
technology
Disintermediating
Disaggregating
Democratizing
• Technology at core of business• Faster adoption
• FinTechs deliver services at a lower cost
• Separate services to bypass regulatory constraints
• Targeting non-traditional customers
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/FinTechs want to partner with corporates
Scaling
Regulation
Customer Acquisition
• Scaling taking longer than other industries
• Regulatory compliance = cost and risk (Founders don’t want to go to jail)
• Institutional customers are slow to adopt• Retail customers are tough to mobilize
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/ How banks are responding to FinTech (Jan 2015)
Source: https://medium.com/@avinashswamy/how-are-banks-reacting-to-fintech-891617c69321#.76i2kfq51
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Dealflow
Accelerators
PR & Sponsorships
Competitions & Events
Silicon Valley Outposts
Investing in VC funds
Outcomes
Strategies
Human Capital
Product
Customers
Partnerships
Investments
M&A
43
Innovating Like & With Startups
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Dealflow
Accelerators
PR & Sponsorships
Competitions & Events
Silicon Valley Outposts
Investing in VC funds
Outcomes
Strategies
Human Capital
Product
Customers
Partnerships
Investments
M&A
44
Most incumbents must develop startup-like capabilities
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Adding CapabilitiesChanging MindsetTransforming Culture
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Target the right vision/objectivesDon’t mistake ‘Digitalization’ for ‘Digital’Get some startup/VC “mojo”Conduct disciplined, rapid experimentsEngage customers & stakeholdersPick the right KPIs for the right timeFind ideas globally#GET500STRONG
Rules for Building Innovation Capabilities and Culture
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Financial Services for the Rest of Us!
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Source: https://www.cbinsights.com/blog/fin-tech-funding-growth/
World’s Most Active Early-Stage FinTech Investor
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/// 140+ investments • 24 countries • Exceptional Results
Wealth/Investing Financial Management Payments/Transfers
Lending Crowdfunding Insurance
Red outline > $1B in value - Blue outline $100m-$1B in value
Blockchain
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/ Selected portfolio company vignettes
Portfolio Companies Entry Valuation
Current Valuation Follow-on Investors
$50M
$18.5M
$3.5B (70X)
$100M (5.9X)
$9.5M $117M (12.3X)
$1M* $85M (85X)
$6.5M $36M (5.5X)
Acquired by
* Accelerator Investment. The first investment in Conekta was from Mexican.vc
Date
Aug, 2012
Oct, 2010
Sept, 2010
Nov, 2013
Aug, 2015
$5M $175M (35X)
$1.5M* $75M (50X) Ashton Kutcher
$26M $130M (5X)Oct, 2014
Dec, 2009
Aug, 2014
$130K* $19M (146X)Oct, 2012
Multiples are valuation increases in the company, not the increase in our investments valuation
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/ World’s Broadest FinTech Deal Flow
• Staff in 20 countries / 25 languages• 500 Startups micro-funds (Canada, India, Thailand, Vietnam,
Japan, Korea, Turkey, SE Asia, MENA, LatAm)• 50+ startup ecosystems events globally/year• Global Brand / Position as Most Active FinTech Investor• Referrals from angels, VCs, CVCs, Founders & LPs• FinTech Accelerator Applications
• Batch 16: ~100 applicants• Batch 18: ~350 applicants• Batch 20: ~50 applicants (1 week)
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/ Sample FI’s Affiliated with 500 FinTech
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/ Platform for Transforming Financial Services
$50-75M Early-Stage VC Fund200-300 FinTech Startups GloballyDisruptors & Enablers across financial services
World Class Accelerator 500’s Traditional Accelerator CurriculumFinTech Team, Mentors, Curriculum & Partners
Corporate Partner ProgramPortfolio, Community & Knowledge Access
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/ Building your Innovation Capabilities with 500 FinTech
Corporate PartnershipLP Investment in 500 FinTech FundUpside: Corporate FinTech Accelerator
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/ 500 FinTech Corporate PartnershipsPortfolio Access
Global deal flow & insightsInfluence company selection with your solutions
‘orders’Community Access
Entrepreneurs, investors & peer relationshipsLeverage 500 Brand Equity
Knowledge AccessStrategic Advisory & BrainstormingAccelerator Apprenticeship & Corporate Acceleration
Training
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/ Strategic Benefits for Corporate Partners & LPs - DRAFT
LP Investment (OR) <$2.5M $2.5M $5M $10M+Annual Partnership Price (1-year commitment with no investment) $100K $125K $250K $500K
PortfolioAccess
Quarterly Portfolio Newsletter & Reporting ✔ ✔ ✔ ✔Custom Lists 4 6 121-to-1 Introductions 5 10 20Accelerator Office Hours or Workshop (2x/year) OH-only OH-only OH-only BothLimited Exclusivity ✔
Communit
yAccess
Invitations to Private FinTech Preview & Summit events 1 2 3 4500 Startups Event Access & Discounts for LPs ✔ ✔ ✔ ✔Invitations to participate in Geeks on a Plane programs 1 2Complimentary Pre-Money Registrations 1 2 3Distribute Product Discounts to Startups Portfolio Portfolio + ApplicantsLogo Exposure at FinTech Fund Events Silver Gold Platinum
KnowledgeAccess
500 Insiders web-seminars delivered by 500 Partners & Staff ✔ ✔ ✔ ✔500 Startups Educational Program Discounts ✔ ✔ ✔ ✔Secondment at Accelerator 2 weeks 4 weeksPrivate Conference Calls 1x/year 2x/year 3x/year 4x/yearExecutive Brainstorming Sessions 1x/year 2x/year
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/ 500 FinTech LP Investment Opportunity
Partnership Benefits
+Financial Returns
Co-investment Opportunities
For LP prospectus, please contact [email protected]
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/ Upside: Corporate FinTech Accelerator
Your challenge(s)Your team500’s targeted startups & techniquesDeloitte’s innovation ‘sandbox’1-3 Proofs of Concept
Build your Innovation Capabilities in just 6 months
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/ Get #500STRONG
Questions? Want to introduce Startups to 500 FinTech?Want to invest in our FinTech Fund or partner with us?
Mike [email protected]
Join the 500 Fintech Community and get our updates http://bit.ly/2c3Q9s6