Interview with João Freire de Andrade, Head of Enterprise Capital at BiG – Banco de Investimento International who we met on the WebSummit 2016 in Lisbon final week. João talked to us concerning the Portuguese startups scene, investing in startups and the way this may change banks.
What are you able to inform us concerning the startup scene in Lisbon, particularly relating to fintech?
Whereas we’re primarily based in Lisbon, we are sometimes flying to London and Berlin and are energetic there to get extra impressions of startups. So, many issues happen outdoors of Lisbon for us and we wish to make investments there, too.
How would you examine, say, London and Lisbon on this regard?
Concerning fintech, in London because the European finance middle, large quantities of cash are spent on the transformation of the banking system. It’s a hype and valuations are excessive – it’s way more costly to arrange an organization there, starting with the rents, software program builders, enterprise builders, all the things.
However you’ve the opposite facet as effectively: the market is far larger, there are much more resolution makers in a position to ship your product to the entire world instantly.
There are, proper now, many startups in Lisbon that know they’ll want a sure connection to the London scene, however arrange their growth crew in Portugal. For instance, the fairness crowdfunding service Seedrs was included within the UK however they’ve their growth crew working from Lisbon – which has enabled them to comprehend a a lot decrease burn fee than London-exclusive startups.
Will working in a number of places be the long run for startups?
Think about the fintech scene in Germany: Frankfurt is the monetary capital however Berlin is probably the most energetic startup metropolis. Monetary establishments arrange small places of work to look at expertise in Berlin and journey from A to B by prepare in a few hours. That is the way in which it’s with Lisbon and London: in Lisbon it’s a lot cheaper in lots of regards, you may have a special, cheaper way of life and by taking a two-hours flight you’re in London. However in Germany you don’t have all the things concentrated in a single spot whereas Lisbon, startup-wise, may be very focussed on Lisbon. Due to this fact Lisbon-based startups will to some extent be sure to hook up with different European cities for now.
As a VC, what’s your view on the cooperation between banks and fintechs? Do you assume that many banks simply spend money on fintechs to become profitable from that funding whereas they aren’t in a position to innovate as quick themselves?
We have to actually differentiate right here. There are a number of choices for a financial institution. The obvious one is to collaborate. As a substitute of doing all the things relating to IT and growth your self, why not implement companies of a fintech? This fintech may be transport their innovative expertise to banks in all the world and guarantee the absolute best high quality by focussing on sustaining and additional growing it. Banks might, for instance, implement a fintech’s refined biometric authentication of their cell banking to supply the shoppers a greater expertise. It will scale back prices for banks in comparison with them attempting to construct these applied sciences themselves – in all probability in a decrease high quality.
I additionally see issues reminiscent of co-creation. That is occurring in Germany so much, for instance with Wirecard or SolarisBank – all these white-label banks that allow startups to construct companies on prime of their infrastructure whereas dealing with the „boring“ stuff. Thus, the fintechs can handle what they do greatest: creating an excellent buyer expertise.
Funding has one other two sides to it. There are banks investing in fintechs who need to personal the bigger share of the corporate to have the ability to management what’s occurring. That’s not our model, we desire to have a smaller share and, some years later, promote it. We imagine this provides way more worth to the fintechs because it permits them to construct an excellent product and promote it to plenty of prospects or banks doubtlessly.
Think about the next: a financial institution invests in a startup and buys 51% of the shares. It may forbid the corporate to promote their product to competing banks. This could be a bonus for the investing financial institution however would prohibit the fintech from rising successfully.
However, a financial institution that invests a lot in your organization might doubtlessly open up any market on the earth for you product.
It principally runs all the way down to weighing the professionals and cons.
The place is the fintech trade heading?
What are banks going to do? Let’s take into consideration this. When you’ve very succesful founders with a few years of expertise within the trade, who determine to get out of an organization and do their very own startup. These individuals can increase higher rounds and make investments that in higher skills and focus on focussing to resolve one particular downside higher than any IT division of any financial institution. Banks can not compete with it. They are going to be collaborating and investing to get that piece of the pie.
What is going to the financial institution of the long run appear to be, then?
For me, the financial institution of the long run will bundle companies. There can be totally different layers of a financial institution. Begin with the banking infrastructure after which add, for instance, CurrencyFair for overseas trade, Cookies for transfers and so forth. They are going to collect all these companies, some in white label, some branded, it’ll all be a matter of promoting and a robust model spanning over all of it.
You make investments not solely in fintechs but in addition in insurtechs and firms from associated fields. Which trade has probably the most potential for disruption.
That’s exhausting to say. Each fintech and insurtech have the potential to be disrupted. With insurance coverage the tempo is a bit slower. Banks have been all the time obliged to maintain growing, because it’s one other form of enterprise. Insurances have simply began utilizing expertise whereas banks have been utilizing expertise for fairly a while. Possibly (!) the acceleration of innovation pace can be larger as soon as it has actually began in insurtech.
Will blockchain play a much bigger position in insurtech than in fintech? For instance utilizing Ethereum for good contracts in insurance coverage versus cryptocurrencies in banking?
I don’t assume that, for instance, Bitcoin is essential for banking proper now. Blockchain has tremendous helpful use circumstances for different issues. Proper now blockchain is extra helpful to enhance some processes like overseas trade which is able to work a lot quicker then.
For insurance coverage, good contracts may very well be actually essential however you’ll arguably be operating into authorized challenges slowing down the method.
Till blockchain-based options attain the shoppers in banking and insurance coverage, it’ll in all probability change much more inner processes like inventory trade and bank-to-bank transactions. I see much more potential there proper now.
