Strategy Session is a feature for Crunchbase News where we ask venture capital firms five questions about their investment strategies.
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Company-building venture group Team8 recently launched its Team8 Fintech practice focused on founding and scaling transformative fintech companies in the areas of retail banking, credit, payments, e-commerce and trading.
The new practice is led by Rakefet Russak-Aminoach, former president and CEO of Israel’s largest bank, Leumi Group; Yuval Tal, founder and president of digital payments unicorn Payoneer; and Ronen Assia, founder and former chief product officer of social trading network and multi-asset brokerage unicorn eToro.
Through its foundry, where they build new companies, Team8 Fintech aims to build five to seven companies over a period of five years. The practice, which will raise approximately $100 million to create both B2B and B2B2C companies, has already raised $30 million.
Assia and Liran Grinberg, founder and managing partner of Team8, discussed the fund’s strategy with Crunchbase News.
Why is now a good time to create this new group?
Assia: We see fintech being like a perfect storm of conditions. Even prior to COVID, we saw interesting friends in the market. First of all, there are the incumbents who control the majority of the market. There is now a shift for younger consumers going on mobile platforms. There is a breakout between infrastructure and application space, as well. In addition, everything is getting accelerated by COVID-19.Everything we know is getting accelerated from a generational perspective, but also among technology, incumbents and banks.
What do you think is driving more fintech startups?
Assia: Younger generations don’t look at older establishments as places to do business. Traditionally, if you wanted to open a bank account, you would probably go with a big-name bank. People–probably 45 years old and younger–would rather bank with a brand they love and know. These are the big tech companies or the newly established fintechs, not the ones with the shiny logos that have been in business for 150 years.
Another trend happening is that people are slowly becoming accustomed to getting financial services from nonfinancial players. They are banking with Apple Pay or using an Uber credit card. We think that two years from now, you will be able to go to Starbucks and get a microloan for a Frappuccino. And who would have thought we would be using Facebook Messenger to send money?
What sectors within fintech are hot right now?
Assia: We see a more generational spectrum, with more companies focused on older generations, even the elderly. Inefficiencies are getting solved, and more collaboration is going on as entire systems are opening up. Collaborating with a large, incumbent bank used to be “Mission: Impossible,” but now due to COVID-19, all of the big guys realize they can’t do it by themselves. This is opening up opportunities within fintech.
Grinberg: Also, there are many opportunities tailored for the lending, credit and insurance spaces, as well as how data is analyzed to predict the risk.
Have you made any investments from the fund yet?
Assia: We have just started setting up the first company, and we are still in the initial stages of ideation and validation. This will be going on for a couple of months, but it looks like it will be an underwriting credit machine that will service consumer small and medium-sized companies. This is an exciting segment that is growing every year and one where customers are not getting services out of the traditional lender in the marketplace. It is leveraging collective data capabilities and building on top of that a fintech engine.
What do you expect to see come out of the fintech space in the next couple of years?
Assia: Unlike other markets where you see dominance of key players, the overall dominance is slowly eroded. The future of financial services won’t be led by four large banks, but you will see a huge myriad of players: Google, Amazon, Facebook, Walmart. Up-and-coming neobanks and smaller banks will have more tools to cater to a larger audience. One day, everyone can be one big, hopefully happy, family. It will be a huge market.
Zooming out globally, what we see in emerging markets is exciting. They leapfrogged an entire generation of tools and solutions, and innovative solutions are getting pushed into the market. The traditional players will end up serving the infrastructure layer, but from there the tools and solutions will be channeled to new services and companies.
Illustration: Dom Guzman