6 Trends in LegalTech

/in /by

The new generation of lawyers has high expectations about what technology can do for them. With life cycles of innovation getting constantly shorter, we are surrounded by new disruptive technologies and this is not different in the legal world.  According to research from Thomson Reuters Legal, 579 “lawtech” patents were filed worldwide in 2016, up from just 99 in 2012. The expansion in Legal-Startups and patent filings are driven by interest for quicker and less expensive approaches to legal services.

In honor of the Legal Tech Conference taking place in Vienna today, we are highlighting 6 legaltech trends, which could make a big impact in the work of lawyers as well as the experience of their clients.

 

#1 – Robotic Lawyers

The most interesting case of a robotic lawyer is ROSS, an artificially intelligent legal research assistant built on IBM’s Watson supercomputer. Capable of handling ‘natural language’ legal questions, for which ROSS will return cited legal answers and topical readings from legislation to case law and secondary sources instantly, many legal heavyweights in the US are already using it, such as Latham & Watkins LLP.

 

#2 – Intelligent Legal Research and Document Analysis

Legal research is very costly for law firms. Therefore, advanced analytics programs, some of which use artificial intelligence and machine learning technology, are already proving to be invaluable for law firms, which handle and generate loads of documents. Most legaltech startups to date have focused on making this procedure and all this material more manageable.

Companies such as Justis and Ravel Law (which was acquired by Lexis Nexis) are already using advanced analytical algorithms to make the research task more manageable.

 

#3 – Big Data Analytics

Big data has already caused a big impact in various industries, and it is not different for the legal world. Many tools are already helping improve the search process and give lawyers data-driven tools to research through millions of documents. Using big data can also lead to a greater degree of efficiency and transparency, which everyone will benefit from. Reducing the time it takes for lawyers to complete research and casework, will lead to improved access to the justice system.

[sociallocker id=”11091″]

#4 – Automated Legal Assistance

Many firms are already using packaged legal solutions instead of custom-tailored solutions for every client. For example, Wevorce users can have access for around USD 800 to a pre-packaged divorce plan that suits their needs together with pre-filled divorce forms. We can also find startups such as Bright Advise, where users only need to submit a question and a professional will be in touch with them shortly after.

 

#5 – Writing of Documents

Writing legal documents, together with legal research, are the tasks that most likely cause a strain on lawyer’s finances and time. Some startups are already automating those tasks using various programs or services. Many services like Ironclad may help create, fill, and manage contracts in an effective way.

 

#6 – New business models and payment methods for lawyers

The search for new business models or at least for the possibility of expanding their own business model will also play a greater role in the future for lawyers. An example would be to use data and smart algorithms to predict what a client might need and actively approach it.

All those trends, while impressive and likely to ease the workload and research of many lawyers, are still far from being an everyday reality. Legal advice is still a very personal job, clients often seek reassurance in face-to-face advice. The reality of an artificial intelligence lawyer might have to wait some decades but today the increasing presence of automated processes will start replacing associate-level lawyers and help firms save money and time managing documents and handling research.

[/sociallocker]

If you are interested in getting to know more about this topic and how we can help your firm be more efficient, please contact our Partner and Head of Legal Alexander Rapatz.

The Austrian Startup Ecosystem – Strong as Ever!

/in /by

Note: You can read this article in German at DerBrutkasten.com.

 

For a long time, thinking about self-employment and entrepreneurship wasn’t a priority in Austria with high entry barriers (investments). Luckily, times have changed. Digitization has dramatically lowered these barriers. Today, anyone can come up with a good idea at the kitchen table and use it on their laptop, and soon after, business life begins. High investments in machinery and factories are no longer necessarily needed.

 

Beginning and end of the first VC funds

Only a few years ago, almost all initiatives within the Austrian startup ecosystem were run by the state. We experienced a market failure. The veterans of the venture capital scene Gert Reinhard Jonke (Venture Capital Funds), Michael Tojner (then venture investor behind BWIN), PONTIS Ventures and later Gamma Capital Partners had either already developed further, could no longer put together new funds, or have simply missed the advent of a new founder era. Startups in Austria were not completely at the beginning, but they needed new pioneers.

The beginning of the startup ecosystem 2.0

With Start Europe and later Pioneers Festival, the potential of the Austrian startup ecosystem and the need to catch up internationally became very clear. The most well-known early drivers of today’s startup ecosystem Speedinvest, i5Invest, Hansi Hansmann, Stefanie Pingitzer, Selma Prodanovic and our company (Venionaire was established in 2012) had initially a hard time to attract the attention from media, politics, and society. Even in 2015, it was too early to convince institutional investors on a larger scale, with many still licking their wounds from the dotcom bubble. Today, there are again efforts to address these investors, whether it will succeed to convince them this time is still uncertain.

 

Private initiatives are getting stronger

In addition, Austria hadn’t enough successful startup founders, who could support the ecosystem as mentors and investors after their exit. All of this has changed dramatically in recent years and the ecosystem has developed greatly – the number of investors has multiplied, established companies are regularly working actively with startups, and some government initiatives have done an excellent job creating a market that adapted the dynamics of the private sector. Above all, the commitment of institutional investors should be promoted so that Austria’s investment power will be further expanded. Especially in the field of high technology is still hidden potential that could be exploited through investments and technology transfer centers. The current strength of the scene can still be expanded!

 

In the next segment of this article, we present you an overview of the startup ecosystem in Austria from an investors perspective. This list was inspired by Bernhard Hauser’s blog and is build on his content. If an important player is missing, we are very happy if you shoot us a quick email.

[sociallocker id=”10980″]

 

Business Angel Networks (private sector)

Mergers of Business Angels are not a new invention. They offer Angels several benefits, such as sharing experience, co-investing, or better dealflow. Networks, which (also) operate in Austria in alphabetical order:

Business Angel Network (public)

Venture Capital Fonds

Corporate Venture Capital

Acceleratoren

Company Builder / Incubator

Startup Zentren bzw. Innovation-Hubs

Training and Coaching for Investors / Startups

Article Part 4: The Future of Artificial Intelligence – WALL-E or Terminator?

/in /by

In cooperation with Venionaire Capital, DerBrutkasten.com publishes a four-part article series on the subject of artificial intelligence. We are concentrating on the economic aspects of how AI works to the current research and the future of artificial intelligence.

The fourth and last article will concentrate on how the artificial intelligence will turn out in the future.

According to a quote from Stephen Hawking in The Guardian, Artificial Intelligence will be “either the best, or the worst thing, ever to happen to humanity”. The growing computer performance and Big Data enable machines to become even smarter. In an open letter, therefore, numerous industry leaders, such as Elon Musk or Hawking, call for the prevention of artificial intelligence and the control of the systems.

Musk believes that AI could become an existential threat to people and emphasized the need for legal requirements. Other AI skeptics are worried about the labor market. AI, according to the apprehension, will at least provide a new wave of mass unemployment in the short to medium term.

Joe Lobo, “chief botmaster” at the Startup Inbenta, has a more positive idea of the future of work and artificial intelligence. In a Forbes podcast he explained how technologies create new jobs and people can use their skills for new opportunities. So far, the development showed that AI systems complement human workers more than replace them. AI skeptics and enthusiasts, however, agree that jobs will change and new forms of employment will arise.

Whether advocates or adversaries, it is certain, in AI will be further invested and researched. In the end it is in our hands whether we end up with a terminator or a Wall-E.

However, to an artificial superintelligence it is in any case still a long way, as we described it in the second part of our series. In the third part, we also showed that the research and development of artificial intelligence was not a linear process, but had to repeatedly record ascensions and declines. The economic impacts of AI, which we dealt with in the first part, are equally interesting for start-ups and early-stage investors.

For the whole article click here.

 





	The top 15 AI Deals in Europe				
/in  /by 
The marketplace for artificial intelligence (AI) technologies is thriving. Beyond the hype and the intensive media attention, the numerous start-ups and internet companies racing to acquire them, we can observe that private companies are increasing their investment and adoption to these technologies.


To complement the article series on artificial intelligence we would like to outline the 15 biggest deals on artificial intelligence start-ups in Europe.


[sociallocker id=”10980″]


 


1. Kreditech                                 




Location: Hamburg, Germany

Funding Amount: USD 162.590.000

Webpage: kreditech.com


Provider of a lending as a service (Laas) based credit-scoring platform designed to improve financial freedom for the under-banked by the use of technology. The company’s lending as a service (Laas) based credit-scoring platform identifies and scores individuals online, decides and instantly pays out loans, based on 15,000 data points, providing banking products (instalment loans, microloans, credit cards, electronic wallets) to customers in emerging markets.


 


2. BenevolentAI




Location: London, United Kingdom

Funding Amount: UDS 100.000.000

Webpage: benevolent.ai


Provider of artificial intelligence technology intended to transform the process of pharmaceutical research and development. The company’s self-learning artificial intelligence and machine learning capabilities focuses on the disease areas of inflammation, neurodegeneration, orphan diseases and rare cancers as well as Judgment Augmented Cognition System (JACS), enabling human health, bio science and information technology sectors to analyse vast quantities of scientific information for the advancement of scientific discovery and applying it to real world problems.


 


3. Alteryx




Location: Broomfield, Colorado

Funding Amount: USD 85.000.000

Webpage: alteryx.com


Alteryx is the leader in self-service data analytics


 


 


4. Blue Yonder




Location: Karlsruhe, Germany

Funding Amount: USD 75.000.000

Webpage: blue-yonder.com


Provider of Big Data analytics and predictive applications. The company offers a cloud-based scalable platform with machine-learning algorithms. The enterprise’s platform automates decision-making in real time and supplies precise forecasts. It is also used in dynamic pricing and in customer analyses.


 


5. Darktrace




Location: London, United Kingdom

Funding Amount: USD 64.000.000

Webpage: darktrace.com


Provider of cyber threat defense systems designed to detect and respond to previously unidentified threats. The company’s cyber threat defense systems include detecting emerging cyber-threats and to proactively defend against in-progress cyber-attacks, enabling clients to defend against evolving threats that bypass all other systems.


 


6. Arago




Location: Frankfurt am Main, Germany

Funding Amount: USD 55.000.000

Webpage: arago.co


Provider of information technology automation services. The company develops artificial intelligence software for banking and telecommunication sectors. Its products include AutoPilot, CloudPilot, DocMe, BuildMe and MARS-O-matic and its services include WebFarm and CloudFarm.


 


7. Blippar




Location: India, Turkey, United States, United Kingdom

Funding Amount: USD 54.000.000

Webpage: blippar.com


Provider of augmented reality software for smartphones. The company offers a platform that enables users to turn images into interactive Web experiences, through image-recognition technology.


 


8. Cambridge Quantum Computing




Location: Cambridge, United Kingdom

Funding Amount: USD 50.000.000

Webpage: cambridgequantum.com


Provider of tools for the commercialization of quantum computers. The company provides cryptography, financial, medicinal, biotech and big data services.


 


9. Quid




Location: San Francisco, United States of America

Funding Amount: USD 39.000.000

Webpage: quid.com


Provider of a visualization platform designed to offer text-based data analysis. The company’s visualization platform combines search, premium data and high-performance algorithms from news articles, blog posts, company profiles and patents to create visualizations of markets, trends and cultural phenomena, enabling businesses to analyze investment trends, gain competitive intelligence, map innovation as well as make decisions that matter.


 


10. Rapid Miner




Location: Boston, Massachusetts

Funding Amount: USD 36.000.000

Webpage: rapidminer.com


Provider of data science platform designed to offer predictive analytics built on an open stack. The company’s data science platform allows to build software for real data science, fast and simple, unifies data preperation, machine learning and model deployment, enabling companies to drive revenue, reduce costs and avoid risks.


 


11. Withings




Location: Issy-les-Moulineaux, France

Funding Amount: USD 33.830.000

Webpage: withings.com


Developer of digital health and wellness smart devices and applications. The company offers software and devices that enable people to monitor and track their personal health data.


 


12. Nanigans




Location: Boston, Massachusetts

Funding Amount: USD 32.850.000

Webpage: nanigans.com


Developer of an advertising automation software. The company’s online platform offers programmatic media buying, predictive revenue optimization and real-time business intelligence.


 


13. Graphcore




Location: London, United Kingdom

Funding Amount: USD 30.000.000

Webpage: graphcore.ai


Developer of a processor designed to accelerate machine intelligence learning. The company’s intelligence processing unit emphasizes massively parallel, low-precision floating-point computing and provides higher compute density than other solutions, and the C++ programming framework provides seamless interface to standard machine learning frameworks, with simple integration for existing applications written for Tensorflow, enabling researchers to explore machine intelligences across a much broader front than current solutions.


 


14. Pyramid Analytics




Location: Amsterdam, The Netherlands

Funding Amount: USD 30.000.000

Webpage: pyramidanalytics.com


Provider of a business intelligence platform designed to simplify the access to information to help organizations optimize their business. The company’s business intelligence platform provides delivers intuitive enterprise level Business Intelligence through an integrated, scalable dashboard and analytic application for all types of business users, providing them with modules that can be accessed through a single, web-based interface.


 


15. Celonis




Location: New York, United States of America

Funding Amount: USD 27.500.000

Webpage: celonis.com


Celonis offers the most advanced Process Mining tool for analysing & visualizing business processes.


 


As we might have seen in this article, Europe has a fast growing Artificial Intelligence Industry most of them being in the data analytics market. AI is transforming every industry and process, and Europe is leading the way.


 


[/sociallocker]


	Article Part 3: The history of AI – From the “AI Winter” to the final breakthrough				
/in  /by 
In cooperation with Venionaire Capital, DerBrutkasten.com publishes a four-part article series on the subject of artificial intelligence. We are concentrating on the economic aspects of how AI works to the current research and the future of artificial intelligence.


In the first article we described “Artificial Intelligence (AI)” as the ability of a machine to learn and adapt from its own experience. The second article was about the basis concept of AI and in the third part, we will provide an overview of research, trends and leading companies in the field.


Artificial intelligence is often seen as a new world conquered just by brave pioneers from Silicon Valley. In reality, however, the subject had a lot of ups and downs. The breakthrough seemed only a matter of time, but the researchers underestimated the problem that words can have different meanings in different contexts. The US Government cancelled the financing and this this period was referred to as “AI Winter” in analogy to the concept of “nuclear winter”.


Historically, there have always been such drought periods. The result of financial incidences were fewer research activities. Over and over again there were deep and then high phases (“AI Sommer”).


After a difficult situation in the early 1990s, the AI industry was finally recovering in the 2000s. The upturn was supported not so much by governments but by tech companies such as Google, Facebook, Apple, Amazon, Microsoft or the Chinese company Baidu.  The basis for the rapidly growing commercial interest are the computer systems that now enable the broad use of AI technologies for the first time.


The search engine giant Google is one of the leading companies when it comes to the topic of artificial intelligence. The main focus of their research (see research.google.com) is Machine Learning, Natural Language Understanding, the entire health care system, the perceptive abilities of machines, robotics and, interestingly, the creation of music and art. Thereby “deep learning” plays a very important role, for example Google’s Alpha Go, which clearly defeated the professional Go player Fan Hui and later Lee Sedol.


The question that is important to investors is, of course, whether the high phase is only a hype or sustainable. In contrast to the past, AI is already being used in everyday life.


 


For the whole article click here.


 


	What is a startup? – Understanding the difference between ‘search and execute’				
/in  /by 
What is a startup? Esther Gons from the Dutch Startup Studio NEXT.Amsterdam wondered how easily Austrians use the term “startup” for every kind of new business. In this guest article, she explains how NEXT.amsterdam defines a startup and why it is important to use this term precisely.




 


Startups are everywhere, they are disrupting, new, fast and moving quickly. Rapid technological development and digitalisation have changed the world we operate in. ‘The global reset’ I often call it. Tech startups have seized the opportunity due to lower barriers to entry and started to look for ways to help people in this new world. Changing the business models of long existing companies along with it. Both corporates and investors have taken an interest in this development and are looking for ways to profit from it.


 


What is a Startup?


As a seasoned startup mentor and investor, who is also helping corporates with innovation within their company, I have seen all sides of the coin. With the sudden interest in startups and innovation, the core importance of why the term startup is there in the first place is often overlooked. When I ask people: “Do you know what a startup is?” – the answers vary from ‘a young business’, ‘a business under 5 years old’ to ‘a business that does tech’ or is ‘doing something new’. Now, when Steve Blank first wrote about startups he described it as follows:


A startup is a temporary organisation designed to search for a repeatable and scalable business model.


Although both repeatable and scalable are important elements of this definition, the most important part here is the word search.




 


Business Model


Startups are actively searching for a business model that works. Everything they do is focused on that specific goal. This precisely is why they are different from a starting business, even if that business includes software. A starting business, say a new hair salon, has a proven business model. This means that you have to invest in execution on that proven model in order to grow profits. In the lean startup methodology, there is a clear distinction between the search phase and the scale phase. Only when a startup has found a business model that it has proven to work, the startup is ready to scale. The uncertainty in the searching phase is also the reason why the lean startup methodology came into being in the first place.


 


The first step


While startups are searching, and starting businesses are getting ready to execute on scaling, corporates are very effectively executing on their core business. They have taken scaling and optimized on this. All of their core mechanics and processes are optimized on executing towards growth. So much so that it is not always obvious anymore. For such a company it is much harder to do innovation from within. What do you do with a new product that has been invented outside if all you have to judge is success by its ROI? How do you keep track of a new innovation if you ask them to predict the next 5 years in a business plan? A startup cannot come up with these predictions since it doesn’t really know yet. How to accommodate searching with all of the existing execute governance? The first step towards being able to innovate is to understand this difference between searching and executing. Because the biggest risk of failure for startups in a corporate environment is premature scaling.


 


Difference


As an investor or a corporate innovator investing in new projects, it is important to realize that this difference in mechanics will also need a different approach and a different process of reviewing progress. Understanding the difference between a startup and a starting business is an important one. It will help both the portfolio and the way you can add value to a startup. Searching requires a rhythm of creating, testing and learning. It needs to invest in proving their value to their customers. Before the startup has proven that it is ready to scale, there is no point in investing in marketing and sales or push for ROI. Investing in a startup before the scale phase needs a different approach and involves a much higher risk than investing when a startup has moved from the search to the scale phase and is thus ready to execute on growth.


 




Esther Gons is the co-author of the book The Corporate Startup; how established companies can build successful innovation ecosystems and founder of the startup studio NEXT.amsterdam. NEXT.Amsterdam invests in and supports startups by providing dedicated mentor teams and a structured framework in their search for a working business model. Additionally, she is an innovation strategist, visual changemaker, international speaker, and has 20 years of experience as an entrepreneur and helped over 100 startups so far.


	Decision Making in the Venture Industry				
/in  /by 
René Andres under the supervision of Prof. Jörn Block from the University of Trier conducted a comprehensive study on decision making of growth venture investors. They did a “conjoint-experiment” with 798 investors, in which each participant was asked to make a series of decisions between several growth ventures that were presented to her/him. Their survey brought up some interesting facts on what is important for investors.


 


Revenue growth has the highest relevance


It turned out, that revenue growth is the most important criteria for investors, followed by the value-added of the product or service for costumers. The third most important criteria is the relevant track record of the management.


 


Source: Andres, René; Block, Jörn (2017): Decision-making when screening growth ventures.


 


Investors also showed a clear preference for business models with a lock-in design which makes it difficult for customers to switch to another provider (e.g. marketplaces).


 


Later Stage Investors focus on Profitability


Mr. Andres and Mr. Block further analyzed the importance of the mentioned criteria by investor type. For Venture Capitals (VCs), the most important criteria is the revenue growth of the venture, whereas for Corporate Venture Capitals (CVCs) it is the value-added of the product or service for the customer. CVCs put the highest importance to the criteria of current investors. For VCs as well as CVCs the profitability was the least important criteria in contrary to buyout funds, growth equity funds, and family offices. Interestingly, growth equity investors seem to put more importance on the track record of the team than VCs.


 


Source: Andres, René; Block, Jörn (2017): Decision-making when screening growth ventures.


 


 


Majority of Funds have an IRR of 11-30%


The researchers also asked respondents about the average IRR of their fund, resulting in the graph below.


Source: Andres, René; Block, Jörn (2017): Decision-making when screening growth ventures.


One rather consistent pattern they found was that investors with entrepreneurial background were associated with higher financial performance. We were happy to support this study as a participant.


Venionaire supported this study as one of the 798 participants.


You can download a comprehensive research report here.




	Fintech 2016: Investment Activity Overview				
/in  /by 
After 2015 has brought us plenty in terms of innovation and investing activity within the area of financial technology, the developments in the year behind us did not pick up such a fast pace. In 2015, we have witnessed the strong emergence of innovative financial services delivered through a blend of various channels, combining various platforms and technological tools. Besides, the terms such as blockchain, API or POS became closer to the customer and in a way part of a daily conversation. These innovations have been fuelled by huge investment injection of $46.7 billion in value on global level. However, according to KPMG’s analysis of 2016, the FinTech market shows signs of slowing down. The decrease of almost 50% brought the investment value for a total of $24.7 billion.


 


Total global investment in Fintech companies, 2010 – 2016 


 


 


*Source:Pulse of Fintech Q4 ’16, Global Analysis of Investment in Fintech, KPMG International (data provided by Pitchbook), February 2017.


 


 Investment by FinTech Segments 


Banking/Lending has been the dominant segment when it comes to the number of companies raising funds (29% of companies that raised funds belonged to this segment).


 


Fintech Segments by funds raised 2016


 


*Source:LTP, Global Fintech Funding in 2016, January 2017.


 


However, the segment of Payments/Loyalty/E-Commerce is the one where the total funds raised value is highest. Companies categorized in this market segment have raised 39% of total funds raised by the entire Fintech industry in 2016. 


 


M&A, PE, IPOs and VC deals


When analyzing the structure of financing deals, the increase in venture capital activity is noticeable in comparison to 2015. According to KPMG, M&A and PE FinTech deals dropped considerably in 2016, while the venture capital investments reached $13,5 billion, even more than $12,7 billion in 2015. The increase in VC investments occurred despite the decrease in number of deals.


 


VC investment activity 2016 




*Source:Pulse of Fintech Q4 ’16, Global Analysis of Investment in Fintech, KPMG International (data provided by Pitchbook), February 2017.


 


The reasons for such a boost are mostly three gigantic financing rounds in China. The funding round to Ant Financial that occurred in second quarter last year was $4,5 billion heavy. Besides Ant, two more historic financing rounds, each over $1bn, significantly increased investment numbers in China: Luf ax.com – $1,2 billion and JD finance – $1 billion.


After these three giant investment shots, China outpaced the US for the first time with $7,7 billion in total value of deals (28 in total), with an 84% increase in comparison to 2015 ($4,2 billion).


Except Markit’s $5,5 billion merger with HIS, there were no significant IPOs in 2016, either. The expectations are that the trend will pick up in 2017, as we have more mature companies in the market. The most active FinTech investor was fund and accelerator 500 Startups with 39 investments. In June, they announced raising a $25million separate Fintech fund for investing in early stage companies globally.


 


Key Q4’16 indicators


KPMG states that the last quarter of the year showed some revival of the investing activity. The VC funding increased from $1,9 billion to $2,1 billion between third and fourth quarter of the year, though still not near the previous year’s numbers. On American continent, VC investment revolved around $1,1 billion in Q4 ’16, not deviating too much from the previous year’s results for the same period. In Asia, VC funding jumped to $680 million after a year’s low of $200 million in third quarter. The rebound was mostly driven by a $ 384 million deal in the last quarter. Europe has stayed relatively stable, sitting on $319 million of investments in the industry. This result still remains lower in comparison to the same period in 2015 (around $350 million).


  


Conclusion


 European investment volumes were on decline, what was mostly driven by the political reasons. The turbulent political year gave us Brexit, elections and referendums all across Europe (Italy, Austria, France), directly influencing the stability of financial systems and caution of investors. Similar happened in the US. The elections, as the period of political uncertainty has influenced the investors on the other side of the Atlantic, too.


However, when looking east, political stability in Asian – Pacific region brought totally the opposite – the lack of significant political events and turbulences gave the impression of economic stability. This fact directly reflected on the upward trends in Asian FinTech ecosystem investing activities.


The appetite for investing has certainly not vanished, neither is the appetite for innovating. 2017 is the year that can bring revival in terms of more overall activity in the market and possibly some significant shifts that would include big investment deals and the appearance of some new innovative solutions. There are three major drivers to this possible scenario:


    

  • As soon as we experience some political stability, the expectations are that the trends of investing will pick up the pace
    • 

  • Regulation that should take force in 2017 (PSD2) will stimulate innovation in the field of FinTech, leading to even more aggressive investing activity
    • 

  • The strong upward trends of technology adoption in emerging markets could fire up the payment segment (mobile to mobile just might be the key feature in 2017)
    • 



 


*Sources:


    

  • KPMG – the Pulse of Fintech Q4 – data highlights
    • 

  • The 2016 VC FinTech Investment Landscape by Innovate Finance
    • 

  • CB Insights, Fintech Trends Report, 2016
    • 

  • Pitchbook, 2016
    • 

  • LTP, Global Fintech Funding, 2017
    • 



	KPMGs Pulse of FinTech – setting the pace				
/in  /by 
Last year European investment volumes were on decline not least due to political reasons: the turbulent political year of 2016 gave us Brexit, elections and referendums all across Europe (Italy, Austria, France), directly influencing the stability of financial systems and caution of investors. Similarly in the US: the elections, as the period of political uncertainty has influenced the investors on the other side of the Atlantic, too. However, when looking east, political stability in the Asian – Pacific region brought about the complete opposite: a lack of significant political events and turbulences gave the impression of economic stability. This fact directly reflected on the upward trends in Asian FinTech ecosystem investing activities.


So how did we get to where we are now? 2015 has brought us plenty in terms of innovation and investing activity within the area of financial technology, the developments in the year behind us did not pick up such a fast pace. In 2015, we witnessed the strong emergence of innovative financial services delivered through a blend of various channels, combining various platforms and technological tools: the terms such as blockchain, API or POS became closer to the customer and in a way part of a daily conversation. These innovations have been fuelled by huge investment injection of $46.7 billion in value on global level. However, according to KPMG’s analysis of 2016, the FinTech market shows signs of slowing down. The decrease of almost 50% brought the investment value on a total of $24.7 billion.




 


Investment by FinTech Segments


Banking/Lending has been the dominant segment when it comes to the number of companies raising funds (29% of companies that raised funds belonged to this segment).




However, the segment of Payments/Loyalty/E-Commerce is the one where the total funds raised value is highest. Companies categorized in this market segment have raised 39% of total funds raised by the entire Fintech industry in 2016.


 


M&A, PE, IPOs and VC deals


When analysing the structure of financing deals, the increase in venture capital activity is noticeable in comparison to 2015. According to KPMG, M&A and PE FinTech deals dropped considerably in 2016, while the venture capital investments reached $13,5 billion, even more than $12,7 billion in 2015.




The reasons for such a boost are mostly three gigantic financing rounds in China. The funding round to Ant Financial that occurred in second quarter last year was $4,5 billion heavy. Besides Ant, two more historic financing rounds, each over $1bn, significantly increased investment numbers in China.

Luf ax.com – $1,2 billion and JD finance – $1 billion.

After these three giant investment shots, China outpaced the US for the first time with $7,7 billion in total value of deals (28 in total), with an 84% increase in comparison to 2015 ($4,2 billion).

Except Markit’s $5,5 billion merger with HIS, there were no significant IPOs in 2016, either. The expectations are that the trend will pick up in 2017, as we have more mature companies in the market. The most active FinTech investor was fund and accelerator 500 Startups with 39 investments. In June, they announced raising a $25million separate Fintech fund for investing in early stage companies globally.


 


Key Q4’16 indicators


KPMGs report found that the last quarter of the year showed some revival of the investing activity. The VC funding increased from $1,9 billion to $2,1 billion between third and fourth quarter of the year, though still not near the previous year’s numbers.

On the American continent, VC investment revolved around $1,1 billion in Q4 ’16, not deviating too much from the previous year’s results for the same period.

In Asia, VC funding jumped to $680 million after a year’s low of $200 million in third quarter. The rebound was mostly driven by a $ 384 million deal in the last quarter.

Europe has stayed relatively stable, sitting on $319 million of investments in the industry. This result still remains lower in comparison to the same period in 2015 (around $350 million).


 


FinTech Future?


The appetite for investing has certainly not vanished, neither is the appetite for innovating. 2017 is the year that can bring revival in terms of more overall activity in the market and possibly some significant shifts that would include big investment deals and the appearance of some new innovative solutions. There are three major drivers to this possible scenario:


• As soon as we experience some political stability, the expectations are that the trends of investing will pick up the pace

• Regulation that should take force in 2017 (PSD2) will stimulate innovation in the field of FinTech, leading to even more aggressive investing activity

• The strong upward trends of technology adoption in emerging markets could fire up the payment segment (mobile to mobile just might be the key feature in 2017)


Whilst we only know what the future holds once it becomes our present, we can do our best in predicting it by shaping it.


 


Sources:


    

  • KPMG – the Pulse of Fintech Q4 – data highlights
    • 

  • The 2016 VC FinTech Investment Landscape by Innovate Finance
    • 

  • CB Insights, Fintech Trends Report, 2016
    • 

  • Pitchbook, 2016
    • 



	Technology Stack for Investors I: Research				
/in  /by 
How to make it on the Road to Dakar? Winning the race with a strong investors’ brand. In this blog series, we explore what it takes to get your investment tools in order by looking at the following four major areas: research, deal flow, portfolio management and network management.


 


There is some truth to the saying that “investing in early-stage tech is more of an art, than science”. However, just as the Paris-Dakar rally is not won purely based on enthusiasm and gut feeling, but rather the adequate handling of the right machine and equipment, early stage investors also need to be adequately equipped to perform. Funnily enough, we found out that although a majority of investors deal with innovation and technologies every day, they stick to excel spreadsheets, word documents, as well as paper and pencil for their own work. “The blacksmith’s horse has no horseshoes” is resounding in our day and age as well. To be fair, technology for this industry has only evolved a couple years ago and the adoption rate is rising. The need for a technology stack is not only directly correlated to the rising complexity of the business, it is particularly necessary to track one’s investments effectively as well as providing resource efficiency. Investors have to balance their fix costs as they have a direct negative impact on the IRR. Whether you are mostly looking for a deal flow at the very beginning, or just started to improve your inner processes, or find yourself in the need of a better way to track a large number of investments: you will have to choose if you stick to the old way or implement a digital technology stack for your early stage investment business. Ultimately, you want to choose the best machine if you want to get to Dakar.




First quest: what does my machine need to be able to do


To guide you through the windy and sandy maze on your route to Dakar, we have divided the technology stack into four major areas:


    

  1. research,
    2. 

  2. deal flow,
    3. 

  3. portfolio management,
    4. 

  4. and network management (including business intelligence, monitoring and internal communication).
    5. 



 


 Technology stack for Research 


VCs provide research: a) to gather the important expertise b) to be known as an expert in the field and c) gathering inbound deal flow. Thus to make it onto the race track, the rally driver needs to prove his skill and practice.


 


Gathering Expertise


Just as the race driver needs to first train to become one, investors need to do their homework – this is a time investment which needs to be made. There are many useful tools providing valuable data and information to facilitate your research such as


    

  • Product Hunt,
    • 

  • AngelList,
    • 

  • Crunchbase,
    • 

  • EVCA
    • 



or paid services such as


    

  • Pitchbook,
    • 

  • CB Insights,
    • 

  • Bureau van Dijk
    • 



which should be systemically followed in order to understand market dynamics, technology trends and current developments of valuations – as prices (multiples) will change in hype-cycles just like publicly traded companies. Apart from increasing the likelihood of successful investment strategy, venture investors need a deep understanding of markets, investor landscapes in a certain field and eventually deciding upon certain investment niches over others. The distribution of supply and demand of innovation across industries is critical to analyze in advance of a deal (as far as possible), as you will need to exit an investment down the road.


The pricing usually varies, depending on the functionalities and features a user prefers. Below is the table showing the comparison of free and pay services for some of the useful research platforms. See our table of software features.


Free databases like Crunchbase (in its basic version at least) and Product Hunt represent useful tools for general information, data mining and getting a quick overview of markets and competition. However, if your ambition is to dig deeper and generate high-quality information and real insights – including news and analysis, we recommend CB Insights, BvD and Pitchbook (make sure to verify if company data is 100% correct through a commercial registry, though). For the access to structured, official commercial register data on the global level we recommend Kompany.com.


As a company with a focal point oriented more towards European markets, our machine of choice is Pitchbook. The platform contains a better database of funding histories, valuation, series terms, information about the investors and startups and much, much more. The integration is well executed, as it enables exporting possibilities and integrates directly with other platforms, such as Salesforce and Microsoft Office Suite.


 


Be known as expert and gather inbound deal flow


A simple but effective way to strengthen your presence in the ecosystem is simply by publishing valuable insights through platforms like Medium for blogging, Quora for Q&A interaction and Slideshare for presentations. Your public presence will not only boost your reputation as a market professional, it will also help to gather inbound deal flow. The better your market reputation, the stronger you are as an investor, the higher the quality of deal flow and eventually your negotiation position will be when it comes to terms and valuation. If a large number of startups are addressing you as an investor, you will statistically have a better chance to select superior deals, but you need to know what you are looking for.


The platforms used for presentation of content (Medium and Slideshare) come in very practical packages, as the free versions offer a broad range of possibilities for raising awareness of your brand. For the purpose of sharing content, we consider Slideshares basic service more than enough. Depending on the preferences and subjective orientation, its Silver, Gold and Platinum subscription models offer upload benefits, monthly tracking of leads and geo-targeting, depending on the chosen model.


 


Conclusion


Research comes as a starting point, the first lap of your long and intensive race. It is also the point where you start assembling your powerful motorbike that should get you to the finish line before the other contestants. Be careful, power is not everything. The machine has to be balanced out according to your needs and adjusted to the conditions of the race. In the next lap, we will pay attention to the deal flow, the next critical piece of assembly you will need for your powerful drivetrain.


 


Some of the best practices from investors like Andreessen Horowitz or Sequoia that are using various platforms for their public presence could also be of use to you:


Blogs:



YouTube:


    

  • Sequoia Capital’s Doug Leone on Luck & Taking Risks by Sequoia
    • 



 





				
				


				
			


		





		




WHERE TO FIND US






VIENNA, OFFICE (HQ)


Babenbergerstraße 9/12,

 A-1010 Vienna, Austria (EU)

 office@venionaire.com


SAN FRANCISCO, USA


1355 Market St. #488

 San Francisco CA 94103

 sfo@venionaire.com


NEW YORK CITY, USA


122 East 37th Street

 First Floor

 New York, NY 10016

 nyc@venionaire.com




SITEMAP






Services


Corporate Startup Engagement

 Fund Services

 Mergers & Acquisitions

 Valuation


Tools & Insights


Newsblog

 Startup Valuation Calculator

 Venture Sentiment Index

 Webinars


About


About Venionaire

 Team

 Contact

 Press


Imprint 

 Privacy Policy




LOOKING FOR FUNDING?






FOR STARTUPS


Venionaire Capital exclusively invests through the European Super Angels Club, for more information and application please go to the website. We do not accept direct investment proposals via this website.