Around this time a year ago, we began the process of launching Fenway Summer Ventures. As we celebrate this anniversary, it seems fitting to take a pause to remember why we began this adventure in the first place.
It’s no secret that over the last several years the financial services industry has undergone massive disruption. Many factors contributed to this, but the most important, in our view, have been the severe global financial crisis and the legal and regulatory response it engendered; rapid technology advances; related shifts in consumer behavior; and evolving capital market dynamics.
This disruption has resulted in an unprecedented moment for innovation in financial services. Four emerging trends in particular stand out:
1) New distribution models: Fintech firms are harnessing technology advances and changes in consumer and small business behavior to offer financial products at a lower cost, with a better user experience, and in more targeted ways than ever before.
2) Rewired financial infrastructure: Other fintech firms are reinventing back-end financial infrastructure, for example, by using lower-cost rails to transfer money around the globe and providing more efficient and secure ways to onboard customers.
3) Next-generation analytics: The proliferation of data and the development of new analytical techniques have allowed fintech firms to offer financial services to new or previously unprofitable segments.
4) Capital-efficient marketplaces: New marketplace models have emerged that allow buyers and sellers of financial assets to find each other more efficiently than in the past, opening up significant new sources of capital and bypassing traditional intermediaries.
The number of entrepreneurs launching companies to reinvent financial services is staggering. There is no shortage of venture capital fueling these ambitions. Accenture recently estimated that global investment in fintech ventures tripled in 2014 to over $12 billion.
We didn’t decide to launch FSV because we thought that the industry needed more equity capital alone. Instead, we created FSV to fill what we thought was a hole in the market. The success or failure of fintech ventures often turns on key issues — regulatory issues, capital markets issues, credit issues — in which traditional venture capital firms often don’t have deep expertise. Our team has that expertise, and it allows us to complement our co-investors and guide the entrepreneurs we back.
We launched FSV because we believe that our team’s expertise in these areas and strong industry relationships make us a strategic partner for entrepreneurs solving important problems at the intersection of finance, technology, and law. If this sounds like you, please reach out; we would love to speak with you.