Brocker.Org: A cofounder of an investing business that’s changing Wall Street talks finance, tech, and career advice

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Amy
Nauiokas.

Equestrian
Living


It’s fintech week here in New York City, thanks to collaborations
between Empire Startups and FinXTech, and we sat down with
someone who has her finger on the pulse of the industry.

Amy Nauiokas is the cofounder and president of Anthemis Group, a
digital financial-services investment and advisory firm. Since
the company’s founding in 2010, it has invested in 42 firms,
including the likes of Betterment, Trov, and Qover. It also hosts the annual
Hacking Finance Retreat
in the French Alps.

Nauiokas has a long résumé. Before founding Anthemis, she worked
for the British-based bank Barclays, serving as the CEO of
Barclays Stockbrokers. She got her start at the firm as the head
of Barclays Capital’s e-commerce division.

Business Insider recently met up with Nauiokas at Anthemis’
Manhattan office to talk about what’s going on in fintech, the
types of financial-technology companies she likes to invest in,
and career advice.

This interview has been edited for clarity and length.

Frank Chaparro: What are some of the key things
you are noticing in fintech?

Amy Nauiokas: There’s often a sense of urgency
about everything we are doing as investors and as
financial-services professionals. But the reality is that we are
at the very beginning of a very long game. And so one has to
always take a bit of stock to really try to figure out, “What’s
our purpose here?,” “Where are the real long-term
opportunities?,” and “How do we work our way to them?”

I do think we are seeing probably a more rational understanding
of how these firms are priced and what we should be paying for
certain deals. There’s a significant amount of deal flow, a lot
more. Year on year, we are up considerable on the number of
financial-services technology deals, but the money that is being
deployed is growing at a slower pace. And I have a couple
theories for why this is happening.

Generally speaking, we are at the tail end of a period of
exuberance, during which big firms just sort of piled on a bunch
of, let’s say, happy money. Firms were thinking, we have money,
we have capital, we have to spend it.

Many of the larger financial institutions that bumped up
early-stage investments in financial-technology companies in 2015
and 2016 have now realized that those are not the best
investments for them, because it drove value up where value
didn’t exist. And they have also realized they don’t have the
skill sets and expertise to be early-stage investors. Writing
those big checks makes sense, but not until later. So you’re
seeing a lot of those large financial investors shifting from
series A to playing that series B game.

Chaparro: And has that been helping your firm?

Nauiokas: It helps us out. But it also helps the
market out.

Chaparro: What’s exciting you right now? What
will shape or dominate the rest of the year?


solar panels
Developments
in “adjacency companies” is something Nauiokas is excited
about.


Shutterstock/mRGB


Nauiokas: It isn’t super sexy, but we continue
to be excited about a certain amount of consolidation in the
industry. That’s something you’re going to see, for sure, in the
second half of 2017.

We are also excited about companies that look and feel like
non-fintech firms. We call them “adjacency companies.” When you
get under the hood of these companies, however, you can
appreciate that what they are doing is deeply financially
market-structured.

So whether it’s a company that has built an infrastructure for
the financing of the solar-energy space or a company that has to
do with the conservation of water — but its actual result is that
they make a massive dent in the insurance of your home or
property — these types of companies have applications in finance.
In other words, underpinning their technology is something that
can be used by firms and consumers in financial services.

And this really is a great reminder that financial services as a
category isn’t really something you can put a box around.

Chaparro: You have said you don’t like to use
the word “fintech” when describing what your firm does and that
you’re not a fan of the term. Why is that?

Nauiokas: We don’t think it
describes who we are and what we do. We fell into it because we
felt it was too difficult to convince people there’s some other
way to talk about it that didn’t involve a mouthful. My partner
Sean tried something along the lines of “the coming
transformational age of digitization of financial market
services.” That’s not fun, either, so we stuck with “fintech.”

Chaparro: What don’t you like about “fintech”
specifically?

Nauiokas: It’s the suggestion
that there is this new form of tech within the market. But what
we are actually trying to do is digitally transform the entire
market. And if we do our job properly, the concept of fintech
won’t exist, because the whole sector will be digitized. It will
all be fintech.

Chaparro: Recently, Andy Stewart, a managing
partner at Motive Partners, said that valuations for fintechs are
frothy. Do you agree? Are companies just slapping on buzzwords
such as AI and machine intelligence to bump up their valuations
to unjustifiable levels?

Nauiokas: Our view has always
been to steer clear of fintech word bingo. Just because it has
one of the cool words attached to it doesn’t mean that it is
going to be the next billion-dollar opportunity.


bingo seniors
Nauiokas
steers clear of fintech “word bingo.”


Flickr
/ Play Among Friends Paf



This is probably the sector in which we see the most of that word
bingo. And I think it’s because there are a lot of players.

And from our perspective, when we are looking to invest in a
company, we look for a number of things. First and foremost, we
look at the people. Second, we look at the market. Third, we look
at the product.

In the early stage, you may not have the product right. And that
is OK. We encourage that sort of working around the details and a
little bit of failure.

Chaparro: What makes the people aspect so
important? Why isn’t something like price more important?

Nauiokas: We can be aggressive
at the right time with the right stakes when it comes to price.
But I think for us, it starts and ends with people. And generally
speaking, venture investors will say that. Right? That people are
very important. It is all about the people. But at Anthemis, it
is beyond “all about the people.” Because it’s almost exclusively
about the people. We’ve been operating this way for a while.

Yes, a company needs a good market. That’s one way we can cut
through the clutter very early on. By cutting firms with no
market, we get rid of the fluff. Once we are in that scope, it is
all about finding the entrepreneurs who we believe in.

Entrepreneurs who have the wherewithal, the enthusiasm, the
passion, the expertise, and the network to take those early-stage
ideas down the path of success. And it’s not always obvious, just
because someone has years of experience, or fantastic people in
their eco-system, or they have fantastic capital. It is the
combination of all of those things, with the right attitude. And
for us attitude is crucial.

Chaparro: What else do you look for in company
founders?

Nauiokas: We have a tendency to
like cofounders. We’ve learned from experience that two heads are
typically better than one. And that’s because the person who is
good at presenting the big picture of the company, fundraising,
and building a strategic future is not always the same person who
is uber-focused on the details and the build of the company. So
cofounders are actually quite nice because they complement each
other.

We are lucky to have a wonderful team of experts who know how to
look at the numbers and ask the right questions about them. But
again, this type of work shouldn’t be purely statistics-driven.

There was a study, for instance, on how can you correlate success
in startup founders in fintech. What do the most successful
fintech founders look like is what they were essentially trying
to figure out. And strangely they came out with a statistic that
suggested it was a 38-year-old white male. There was a
correlation between success in a fintech and having a 38-year-old
white male as your founder. Well, what’s the data you put in to
get that? You put in all the companies that exist. So if most of
the companies that exist have 38-year-old white men as their
founder, then of course they are also going to correlate as the
ones that are the most successful. So stats can only go so far.

Chaparro: Let’s focus on that. Last fall you

outlined
the reason why the financial-services space could
‘become paralyzed by inertia and face existential crisis’ if it
continues to be run by white men in their 50s and 60s. Why is
diversity important in the early stages of a financial-technology
company?

People try to make a lot of excuses for a lack of diversity early
on, but they’re all very lazy excuses.

Nauiokas: You must have
diversity in the early stage. And people try to make a lot of
excuses for a lack of diversity early on, but they’re all very
lazy excuses. The reality is the only place a company’s culture
is going to start and end is at the beginning of that company.
And it always starts with the founders.

So if you can’t create an environment of founders and founding
employees who are going to represent the company you want, then
you are never going to get there. So you have to look at your own
network and find what you are missing. So if you don’t have a
female or someone who has an international perspective or a
person with a bio degree, but those perspectives matter to the
firm or product you want to create, then it’s never going to work
out.

And the argument that it is difficult to find women is complete
BS. Any bank will tell you that the No. 1 employee they lose the
most money on is the mid-tier female they bring on when they are
22 who leaves in her mid to late 30s. These are women they spend
a ton of money training, and a ton of money attracting and
hiring. And then they lose them. And they lose them for many
reasons. They’re going to other sectors, other industries. So for
us in the financial-services world to say we can’t find women is
ridiculous. They are out there.

We’ve done it here at Anthemis. Our staff is over 50% female. So
we can say hand on heart that it is possible to build a diverse
firm. We also have 13 different languages from, I think, 15
different countries, sitting all within our community here. But
it wasn’t without effort. You have to look for that.

When we invest in companies we ask the founder what their plan is
for diversity. I had an interesting conversation with a company a
couple weeks ago. They were presenting a wonderful concept in the
credit-card space targeted at millennials. And the whole pitch
went through. And at the end I said, “This sounds fantastic, but
I just have one question. Do you plan to market this card to
women?” And they looked at me like I had five heads. They were
like, “Yes, of course, yeah we plan to do that.” And I said,
“Well, how to you plan to actually build a product and market
that product, and distribute that product, to half of your
audience with absolutely zero female perspective in your
company?” They literally hadn’t thought about it. And none of
this is with malice. It’s all about how we build a company for
success.


Softbank robotREUTERS/Kim
Kyung-Hoon

Chaparro: What worries you as an investor?

Nauiokas: We are witnessing a
massive shift. Never in our lifetime have we seen a move like
this. This move into the digital age. And its effects are not
being discussed in great detail. In the last few years we’ve
talked a big game about the effects of digitization, but we
haven’t gotten to the heart of how we will address the impacts of
digitization and how it will affect society as a whole. And this
is something that needs to become relevant in the near term.

Technology has created much bigger pots of opportunity. So there
should be enough for everybody. But right now it’s being done
among such a small percentage of the population that the rest of
the world has yet to benefit. So we have the responsibility as
digital leaders and digital stewards to figure out how we can
move the world forward technologically without leaving behind so
many people.

Chaparro: You mentioned earlier the increase of
deal activity in Q1. Considering all this talk about political
uncertainty, is this surprising do you? What is your explanation
for this increase in activity with the uncertain backdrop?

Nauiokas: No, it’s not
surprising at all. We are going to continue to see significant
deal activity in tech and financial technology. Because we are in
the midst of that shift from industrial to digital that I
mentioned and technology isn’t going away. Opportunities to
deploy tech services and products will only increase, because
right now only a small percentage of people have access to the
market. There is so much room to grow. Now does that mean I don’t
think there will be hiccups in the economy in the future? No, of
course I don’t think that. But we will see that deal flow in tech
and fintech continue increase.

Chaparro: I was wondering if you could share
some career advice for our readers.

Nauiokas:
First and foremost, the power of the network is incredibly
important. For women entrepreneurs and financial-services folks,
in particular, there is now more of a desire to collaborate. If
I’m honest, when I joined the Wall Street ranks, it was a very
different time. There were very few female mentors, and female
execs I could look to for leadership or counsel, and in a handful
of those cases it was the exact opposite. They didn’t want you to
get in their way. I am thrilled that I have witnessed such a
transformation of that attitude in the last 25 years. Because now
everywhere you turn there is a women who is willing to step back,
step sideways, step in, and pull you along with them. And women
need to take advantage of this new environment.

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