Despite the fact that I have some 23 hours plane on my way to Sydney, this post will be a short one, because in the meantime I posted another one. Plus now I am beyond busy finalising FinTechStage.
It’s just a conversation I had recently with someone I do consider very highly and respect a lot.
As I partner in a venture fund, a billion dollar exit would be considered a success, no doubts. Well, it’s reasonable to think a fund like the one I am managing with Mircea would still hold some low 2-digit stake in the exited company. So we could make at least our limited partners recover their money and by all means accomplished a very important part of our mission : not to loose money.
Usually, the timing for such an exit would be somewhere between 5 and 7 years from the build up of the investment vehicle.
Now, look at is with another angle : “I am a global bank and my NET profit, yearly, IS in Billions.”
Therefore, the risk associated with a disruptive start-up aiming to have a billion dollar exit is it worth the danger of being fined, the reputation loss, the technological risk (not applicable to all ideas, but mostly on the most “disruptive”).
Every innovation movement has its own internal and external detractors. We observe Fintech funds associated to financial institutions not an exception.
Make money obviously cannot be the ONLY reason to invest in start-ups if we look at it with the eyes of a big player, even if there are a couple of funds claiming the financial return their sole objective. It does not seem to be impactful enough.
The fine balance – in my humble opinion – is to have a self-sustained financial vehicle that make a wise mix between what can allow the fund to keep existing, what can really change the bank and what has the potential to change the world.
In the next 18 months, we will have another 10 funds and roughly another 2 Billion USD, set up by banks or insurances, my crystal ball is telling me. It will be extremely interesting to see how their construct and scope evolve.