Beringea has a somewhat agnostic approach to what sectors it invests in. However, the venture capital firm has several reasons why RegTech could be a better opportunity for it than some FinTech firms.
The fund has been running for three decades and tends to change its focus with the times. “We call ourselves generalists,” Karen McCormick, chief investment officer at Beringea, recently told FinTech Global as part of our new podcast series called Women Leaders in Finance.
While the company has spent some time in the past looking at the consumer-facing segment of the FinTech sector, Beringea is no longer particularly interested in investing in the industry. “It’s a question of whether it meets our investment return or it comes in lower or higher than that, which for us often means that we’re looking for businesses that can get to break even or can get to profitability off the back of our syndicate of investors,” McCormick said. “And then we can either choose to [sign up] for the next phase of growth or to let the business run for profit.”
And that excludes a lot of FinTech companies. “Most consumer FinTech companies wouldn’t fit that profile because they are highly capital intensive and need to get to massive scale before they’re likely to be able to turn a profit,” explained McCormick.
Case in point, the challenger bank Monzo has raked in over £324.7m in investment, with its £113m round this summer pushing its valuation over the £2bn valuation milestone. However, it has yet to turn a profit, which might become a bit of a sore spot for investors expecting a return on their investment as the challenger bank has faced a series of setbacks. These stumbling blocks included customers getting locked out of their accounts and having to shut down its premium offer.
Instead, Beringea is looking to invest elsewhere.“Where we do spend quite a lot of time and effort and see a huge investment opportunity for ourselves is more on the software side,” said McCormick. “On the RegTech side, especially, I think there is a massive opportunity for far more efficiencies in a highly regulated business that still has a lot of manual processes where there’s room for error. I think the RegTech side makes a lot of sense.”
Beringea has already invested in some companies in the RegTech space. For instance, it previously backed MatsSoft before selling its investment to NetCall in 2017.
“We’ve looked at quite a lot of additional opportunities on the RegTech side, some of which we are continuing to pursue and some of which we either lost or have passed on,” she said.
That being said, Beringea is looking into the WealthTech space. “We’ve found a couple of interesting businesses, none of which have quite ticked the box for us yet,” she McCormick.
This interview was part of FinTech Global’s new weekly podcast series called Women Leaders in Finance. You can listen to the full episode and many more by clicking the link here.
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