Information Venture Partners Co-Founder David – Espresso Capital

What led you to found Information Venture Partners

My co-founder Rob Antoniades and I have both been in venture for a long time, having previously spent a decade managing Royal Bank of Canada’s corporate venture capital program. Back then, we knew that we wanted to be life-long venture capitalists and to eventually launch an independent fund. As it turns out, the global financial crisis helped pave the way for us to do just that because the regulatory changes that followed made it difficult for banks to be directly involved in venture capital. So in 2014, we led a management buyout of the fund in partnership with some large US institutional investors. In the eight years since, we’ve raised three funds, invested in around 25 companies, and have assembled a growing team of more than 10 venture professionals. 

What’s Information VP’s investment thesis and what differentiates you from other VCs?

We’re focused on B2B fintechs that help financial institutions digitize their business, drive efficiencies, and create new revenue. More specifically, we invest in companies that sell core B2B financial applications to large and mid-market financial institutions or that enable trust by ensuring security and compliance. We also target companies that enhance the office of the CFO in areas such as financial planning and investor relations, and a new focus for us, embedded tech or tech that helps enable non-financial institutions to provide financial services or manufacture financial products. No matter where they play, the companies we invest in are generally just past the seed stage, have a proven product market fit, and are generating around $1 million in annual revenue. 

In terms of differentiators, one of the most important is that we’ve been investing in fintech since 2001 — long before anyone else. That early start has given us unparalleled reach and allowed us to forge deep connections across the banking ecosystem, both through our LP network and otherwise. Ultimately, those relationships bring a number of advantages, such as giving us unique insights into the problems key players in the industry face, which in turn allows us to identify and back entrepreneurs with the right technology to solve those problems. It also leads to a lot of referrals to companies that the banks are already using that we may wish to invest in. And it allows us to open doors for our portfolio companies, which is often critical to accelerating their growth.

Given your vantage point, what fintech trends are you most excited about and where do you see the biggest opportunities going forward?

There are quite a few, but let’s hone in on cybersecurity as an example. As the world transitions to Web3 and open banking, huge amounts of information will be leaving secure data stores inside trusted brands and get pushed out into the ether and into the hands of individuals. While that’s a good thing, it raises a lot of interesting questions about how to secure, permission, and extract that data, as well as exercise your right to have large organizations forget it. We’re spending a lot of time looking at the potential vulnerabilities all that creates and how financial institutions can mitigate those risks. 

Let me tell you about a couple of our investments to help illustrate what I’m talking about.

One is a company out of New York called BigID that helps financial institutions identify where all of their customers’ personally identifiable information (PII) is stored. That’s important given that many large enterprises have grown over the course of 100 years or more, often through acquisitions that have left them with a large number of data silos across their business. As a result, they don’t often know where all of their customers’ PII resides, which makes securing that data virtually impossible. We’re very interested in the PII discovery work that companies like BigID are doing because it gives CISOs the insights they need to be able to put the right protections in place to secure their most sensitive data. 

We’re also looking at solutions that provide automated compliance and other security programs to help vendors that work with financial institutions secure their networks. One of our portfolio companies called Strike Graph has created a compliance automation platform that helps vendors achieve SOC 2 and other forms of compliance. Strike Graph automates the workflow, scans, and evidentiary collection that’s required to prove that a company can meet SOC 2 requirements. There’s huge demand within the SMB market that serves financial institutions for help with this very complex, time-consuming, and expensive process.

Another area we’re just looking into is the core vulnerabilities in bank vendors’ distributed software stacks. Even though a bank itself might be very secure, if its data is sitting in different environments with different vendors, or even in the cloud, there may be vulnerabilities that could be exploited to give hackers a backdoor into the financial institution. We have our eye on a range of hygiene-related technologies that are developing solutions to help banks identify where the risks are within their vendor community.

That’s a great overview of some of the hot areas in cybersecurity. What other trends are driving your investments in fintech?

The majority of our investments are in companies selling B2B financial applications to large and mid-market financial institutions. The kind of core solutions they provide aren’t necessarily sexy, but we remain excited about them for a very good reason: As I alluded to earlier, some banks have been around for a century or more and have accumulated a lot of technical debt during that time. Given the emergence of Web 3, the blockchain, and other faster and cheaper technologies, we believe that we’re still at the forefront of a multi-decade rewiring of financial institutions as we know them. The pandemic has also been a major catalyst for that rewiring because it has forced banks to adapt to the realities of working in a far more virtual world than before and to be able to provision services at the time and place of their customers’ choosing.

Can you share some examples from your portfolio?

Sure. We invested in a fantastic company out of Saskatchewan called Coconut Software that does enterprise-grade appointment scheduling for financial institutions. What makes that so important is that we’ve gone from a huge amount of banking taking place face to face at the branch level prior to the pandemic to a world where everything is distributed with people having relocated to lower-cost locations and various bank branches closing. As a result, banks have had to accelerate their investments in digital engagement platforms so that they could still keep in touch and have personalized relationships with their customers. 

Allocating the right people in front of the right customers at the right time is a human capital challenge for banks to solve. It’s also a major source of inefficiency and cost given that customers often don’t show up for their appointments or, if they do turn up, they may not have the right documents or have done the necessary preparation. Coconut’s platform enables banks to engage customers in either physical meetings or highly secure virtual meetings, so that they can transact their business much more efficiently. It also has the advantage of delivering data-driven insights about what’s happening in the field during those meetings that can be used to train staff to work more efficiently and deliver better customer experiences.

Another portfolio company called Flybits enables banks to provide hyper-personalized offerings to clients at the time and place they need it. Flybits looks at the information that banks have on their customers and enriches it with other relevant data to serve up interesting offers. For example, if you’re at a car dealership on a Saturday morning, you might just be getting an oil change. But if you’re at three different car dealerships on a Saturday morning, you’re probably shopping for a car. 

Flybits will see that using permissions that you have enabled, recognize that you’re a high-net worth customer at a particular bank with a few existing products, and offer you an attractive financing package on the spot. The company is using AI to simplify the challenges of serving up hyper personalized marketing to the folks for whom it’s most relevant.

We’re also looking at companies that deal with the back end to drive greater operational efficiency. One of our most recent investments is in a company that allows buy side participants in the FX swaps market to connect with other buy side participants in a dark pool to offset each other’s foreign exchange swap needs, resulting in better outcomes for those participants and greater efficiency for the banks.

Switching gears, Information VP has made giving back a priority. Can you tell us about what you’re doing in that area and why?

We like to give back to the community in a number of ways, but the one that we’re most proud of is The Upside Foundation, an organization that my partner Rob co-founded. The concept is quite simple and mirrors what’s been done in other markets like Silicon Valley: We encourage founders at the beginning of their companies’ lives to take a portion of their option pool and donate it to the Foundation.

When there’s eventually a liquidity event, those options that were initially worth pennies could now be worth quite a lot of money. The Upside Foundation distributes that money to charitable causes that the company cares about. So far, hundreds of companies have participated resulting in millions of dollars in charitable donations.