Future of Investing, Podcasts

Anthemis’ Yann Ranchere: Why I’m very interested in ‘boring’ fintech startups

  • Yann Ranchere is a partner at venture capital firm, Anthemis.
  • He joins us on the podcast to talk about why he's so interested in investing around Gen Z.
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Anthemis’ Yann Ranchere: Why I’m very interested in ‘boring’ fintech startups

Being an effective venture capital investor in fintech requires staying on top of consumer trends. Understanding the evolving nature of the end customer can make the difference when it comes to outsized returns (a little luck never hurts, either).

Yann Ranchere, partner at Anthemis, has been in the game awhile and is paying particular interest to Generation Z and the investment opportunities that are arising out of serving this demographic.

Yann joins us on the podcast to discuss why he likes investing in boring companies and where he finds these opportunities. We discuss Yann’s current investments and the Anthemis Portfolio and where he’s looking to invest over the next few years.

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The following excerpts were edited for clarity.

Moving from consulting to venture capital

The good thing about my consulting experience is that while I’m not a specialist in anything, I’ve seen a lot of universal banking. I’ve learned the ability to look at banking from different angles and that was very insightful.

In a personal capacity, I’ve been involved in fintech from the early days after meeting a few interesting startups in the US. The ability to understand the various layers at which a company operates — this is one of the things that is specific to financial services. You always sit on top of a technology and balance sheet stack. So, you’re always connected to the infrastructure level one way or another. You need to know everything from the consumer facing side of the business to the infrastructure — this perspective is very valuable to have.

Investing in boring companies

We invest in both consumer facing businesses and infrastructure. We try to be conscious of the cyclical aspect of things. For our fund, we’ve been doing a lot more B2B since 2016 because we thought there was an untapped opportunity to invest in infrastructure. Going forward, I think we might do things on the distribution level when the timing seems better for us.

Personally, I am very interested in boring startups — they may not be exciting topics but they make financial services run. Whether it’s in insurance, payments or banking, there are a lot of opportunities to provide a modern infrastructure for people to built on top of.

For example, in Europe, we’re investors in TrueLayer, which provides an open banking API. In the US, we’re involved in Tremor — a programmatic marketplace for reinsurance risk.

The process for identifying new investments

We like to call ourselves thesis-driven investors. We have a broad set of theses across financial services and in each subsector in terms of where we think change is directionally happening and pockets of opportunity in each space. We’re also reflective of companies coming to us and adapting our thinking.

Open Banking has been a long thesis for Anthemis. We like to define it as ’embedded finance’. We think financial services are a key part to any functioning society and economy. It’s like the nervous system. We are interested to see how finance embeds itself in various experiences and disappears into the background.

Embedded finance and the future of finance

With embedded finance, there are two drivers. The first is the technology. That’s the ability for a system to connect via APIs from services to systems. The other driver is on the capital side — a bucket of smart capital that wants to be allocated to the right opportunities. For us, it’s a mix of the two.

SaaS platforms are a terrific distribution platform with deep connections to their customers and their core problems. They are also amazing providers of data and finance runs on data. That combination makes SaaS platforms likely to offer financial services themselves or embed financial services in their platforms.

Investing in Gen Z’s changing relationship with money

We’re very interested in this first truly digitally-native generation and its relation to money. I grew up receiving cash — pocket money — from my grandparents. You develop a lot of reflexes and patterns around that. The relationship with money was driven by cash. Gen Z is probably the first generation that doesn’t have attachment to cash or that perception of money.

We’re looking at all the patterns where they use digital and finance to try and have a more meaningful life. We invested recently in a Spanish startup called Goin that does microsavings. It’s a generation that if they want to go on a summer holiday, they have to start saving in January. They need to save for this because credit isn’t accessible. Goin launched something fun like if you don’t wake up on time, we’re going to save 10 Euros for you. When you attach savings to the way people think and behave, it’s much more powerful.

Where the opportunities are for Gen Z

I think Gen Z is really unserved. Maybe Venmo is really going after this population in the US. Most neobanks target older and wealthier clients. That’s the rational choice — Gen Z isn’t considered an ideal customer because they have fewer assets and spend less. If you look on the other side of things, though, the biggest emerging brands and categories are driven by this generation. There’s a disconnect between the perception that Gen Z is a bad customer set yet many of the top emerging brands and companies are driven by this customer. We’re interested in exploring that disconnect.

The evolution from incumbents to the next generation brands

There will be service parity among new challenger banks and with some of the smart traditional banks. So, the story will be about brand attachment. They’re creating new brands and creating new forms of trust and organizations that people identify with. That’s one of the most interesting things that people aren’t really talking about.

We were lucky to be involved with Simple. It took them almost two and a half years to launch. They had to figure everything out. I recently met with a startup that wanted to launch an account for children, and their go to market plan was four months from idea to launching a card. You’re going to see fragmentation that targets niche groups and specific locations. With platform infrastructure, these improvements, in a way, almost guarantee feature parity.

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