Surfing is a great metaphor for financial services career reinvention. We discuss why and also look at AirBnb’s lesson for fintech, Steve Cohen’s investment in Quantopian, Fidelity’s new roboadvisor offering, the latest payments news and Silicon Valley’s mortgage mania. Finally, we take note of IKove, a start-up nursery.
Want a fintech career reinvention? Go surfing.
Believe it or not, yesterday was National Get Gnarly Day, a “holiday” that encourages people to overcome dangerous obstacles (such as big waves) that get in the way of new adventures. For financial services professionals seeking to make a transition to fintech entrepreneurship, there’s wisdom to be gained in mulling over this surfer slang. But it’s easy to see why climbing on the fintech surfboard is scary. For decades, financial services success came from carefully ascending the corporate hierarchy on the back of steady and strong performance. That performance was rewarded with promotion, but if you caused turbulence or stuck your neck out on a new idea, your trajectory could be slowed. Or worse, you could be called back to shore altogether. While we have criticized aspects of Silicon Valley’s worldview of financial services, its attitude towards career risk is eons more advanced (see this article about failure bonuses at Alphabet’s research arm) than the culture in our backyard. Failure — followed by getting up and trying again and again — is deeply embedded in Silicon Valley’s ethos. Among financial professionals trying to make it in fintech, however, the urge to act incrementally is a common default setting. That’s counterproductive in our view. Trial and error through failure is essential to building the epic products and services that can help redefine an industry and a career. So go ahead, embrace the danger and jump on the board. It’s the best way to achieve something gnarly.
AirBnb’s lesson for start-ups operating in the gray area.
No two start-ups have made a bigger splash in the last few years than AirBnb and its bigger cousin, Uber — even if both companies seem to operate on the margins of legality. But as this terrific re-code article demonstrates, if consumers love your core offerings, you might one day be in position to afford skillful lawyers, cultivate influential people and wage effective PR campaigns that can pressure regulators to tip the rules in your favor. We think there’s a great lesson here for entrepreneurs in various fintech areas, especially digital currency start-ups, who must often decide if they should spend an incremental dollar on regulatory matters vs. product, business development, etc… Of course, very few companies can afford the big guns and grassroots tactics that AirBnb is deploying, but that’s besides the point. AirBnb is winning because most users on both sides of its marketplace love — and increasingly trust — its platform. If that momentum continues, its messaging is likely to win over regulators and trump anti-sharing economy politicians in the long-term.
Once again, Steve Cohen is a step ahead.
“Stevie” has again beaten everyone to the punch. This week, his investment vehicle, Point72, struck a two-part deal with Quantopian, a Phd commune for independent investment algorithm creators (and a former Company of Note). First, Cohen agreed to fund a portfolio of algorithms managed by Quantopian’s members, giving the best algo creators the standard 10% cut of net profits. Cohen’s affiliate, Point72 Ventures, also has agreed to make a $2 million equity investment in the company, joining the ranks of VCs including Bessemer, Khosla and Spark Capital. We have said in the past that a large hedge fund would be wise to buy Quantopian sooner rather than later. That’s because the crowdsourced investment model advanced by the company represents a major departure from the way systematic hedge funds have operated to date. With this deal, Point72 may well have secured a pole position. See more here.
Fido goes robo. This week, Fidelity announced the launch of Fidelity Go, an in-house roboadvisor that features professionally managed portfolio services, a digital dashboard and a suite of investment tools at a total cost of approximately 35 to 40 bps. At that all-in cost, Fidelity appears to be in-line with several competitors. Entering the robo space makes sense for Fidelity. Still, we’re wondering why the privately held giant — which faces no quarterly earnings pressure or activist gadflies — isn’t using its scale more aggressively. Fidelity could have Amazoned its offering below the prevailing market rate, putting pressure on the independent robos and Schwab and Vanguard in one fell swoop.
No summer vacation in payments. The ongoing saga of who will emerge as the prince of payments continues. This piece in The Verge details the endless fiasco of the EMV chip rollout in the US. Second, the announcement of a feature enabling consumers to use Venmo inside other apps — a key development given millennials’ reliance on Venmo to split payments. Next, Apple’s Tim Cook boasted during the company’s earnings call that 75% of all contactless payments made in the US were done via Apple Pay and that adoption of the service is up 450% year-on-year. Finally, Mastercard and PayPal revealed that they are exploring a possible alliance that would make them frenemies rather than enemies.
A major Asian bank cut a deal with Amazon to be “more fintech-like.” Singapore’s DBS Bank announced that it would transition to a hybrid cloud environment that will enable the bank to blunt challenges posed by fintechs gunning for it. Amazon’s AWS unit has inked several other deals with banks, but this one is noteworthy because DBS CTO David Gledhill positioned the AWS agreement as central to the bank’s strategy. Read more here.
Silicon Valley’s sizzling housing market reignites 100% mortgages. Here’s one of Jeremy Grantham’s best quotes: “Remember that history always repeats itself. Every great bubble in history has broken. There are no exceptions.” That insight came to mind when we stumbled on this Bloomberg article, highlighting the barefoot rationalizations that some Silicon Valley mortgage lenders now are using to justify 100% financing and lending against restricted stock.
Company of note: IKove Capital.
We’ve often questioned whether the world needs another standard issue accelerator or incubator. But when we stumbled onto Ikove Venture Partners, a division of IKove Capital, we were impressed by its particular approach to nurturing innovation. IKove has created a so-called “start-up nursery” that is focused on identifying and nurturing technology hatched at R&D-driven universities. Despite the billions of dollars in grants and awards doled out each year to academia, only about 1% is spent on commercialization. That’s the huge mismatch that Ikove, based in Columbus, Ohio, is seeking to fill by partnering with universities in its home state and elsewhere. For more on IKove’s unique model, see here.
Comings and goings.
Betterment has hired Amy Shapero as its CFO, a new position at the roboadvisor. Shapero, who has a wealth of Wall Street experience from her time at Goldman Sachs, Credit Suisse and S&P, was previously CFO of Sailthru, another New York-based tech rising star.
Quote of the week.
“One of the saddest lessons of history is this: If we’ve been bamboozled long enough, we tend to reject any evidence of the bamboozle. We’re no longer interested in finding out the truth. The bamboozle has captured us. It’s simply too painful to acknowledge, even to ourselves, that we’ve been taken. Once you give a charlatan power over you, you almost never get it back.”
~ Carl Sagan