Edison Ventures Community: Fintech Entrepreneurs: The bright spot in the storm - Edison Ventures Community

The global Financial Services landscape is undergoing transformative change. It’s hard to turn on the news and not hear about the European debt crisis, Occupy Wall Street and the growing divide between Wall Street and the rest of the country. Banks are letting go thousands of employees in the wake of decreased revenue and profitability and regulatory changes, but there is a bright spot in these storm clouds -- and that’s entrepreneurs. There’s incredible innovation coming from startups targeting Financial Services; helping these entrepreneurs disrupt the status quo is a big part of what we do at Edison.

In November, we held our 7th annual Financial Technology (Fintech) roundtable at the Harvard Club in NYC. This year’s theme was how to build and achieve premium value. Edison has invested over $200M across 37 companies in Fintech spanning payments, banking, real estate, capital markets and consumer finance so the audience was broad.

We first held a panel discussion titled “Strategic Buyer Insights: How to Create Value Beyond Financials” and had corporate development executives Scott Cutler, Executive Vice President at NYSE Euronext, Paul Seamon, VP Corporate Development at Fiserv and Richard Wendell, VP Global Strategy and Business Development, Global Payment Options at American Express. All three have been active acquirers and investors. Here were my top takeaways:

• Business units almost always drive acquisitions. It’s not the M&A and deal teams.
  
• 1 + 1 = 3. The point being is that leverage is key. Will your product drive cross-sell opportunities and can the buyer leverage their sales/marketing distribution?
  
• Many acquisitions are driven by product gaps. So get know to your potential buyers and their pain points.
  
• The best way to start a relationship with an acquirer is a partnership. It’s like dating before a marriage. Prove that the relationship can work.
  
• Everyone talks about “strategic” multiples (a.k.a. paying up), but most transactions are based on financial metrics such as revenue, EBITDA and cashflow. Achieving a strategic multiple is very rare so don’t bank on it.

We next had two short market updates from investment bankers Brendan Ryan, SVP at Raymond James and Joel Kallet, Managing Director at Clearsight Advisors. These firms specialize in Securities and Capital Markets, Payments and Banking sectors, and highlighted several recent Fintech transactions. You can see their slides here and here so I won’t fully recap, but several areas attracting investors and acquirers include:

• Convergence of social media, gaming and mobile payments
  
• Regulatory compliance and risk management
  
• Cloud computing adoption in everything from market data to trading to banking
  
• Proliferation of electronic trading across all asset classes
  
• Automation of the “front / middle / back” office
  
• Big data and analytics

We thank all of our portfolio companies and executives who participated in the event’s success. Overall, it continues to be an exciting time in the space so if you are a Fintech entrepreneur we want to hear from you.