Future of Investing, Podcasts
Citi Ventures’ Arvind Purushotham: ‘What happened in marketplace lending has migrated to all financial services’
- Arvind has spent over 20 years in venture investing.
- As head of Citi's venture group, he's looking for good investments that can support Citi's innovation efforts.
Today's guest on the podcast is Arvind Purushotham, who heads up venture investing at Citi Ventures. We spend time talking about some of the themes around Citi's venture investing and how the bank and its venture arm think about innovation. We drill down into the Citi Ventures portfolio which has some of the biggest names in fintech, like Betterment, C2FO and Plaid. Arvind describes to us how his background in engineering at Intel and investment experience at Menlo inform his approach to venture vesting in financial services. Lastly, Arvind shares with us where he thinks the market is headed and where he expects investment opportunities to be found in the future. How has being an engineer at Intel impacted your venture investing? It was interesting -- when I first started at Menlo Ventures in the early 2000s, it was a good time to be investing in fabless semiconductor companies. I was able to leverage my background to understand what was happening in the arena and make very successful investments. Over time, fabless semiconductors became a tough sector to invest in given the cost of manufacturing and design. I migrated away from semis to become a more general enterprise and financial services investor. My background as an engineer smoothed the transition because I brought the domain to investing, but I had a lot to learn those first few years. Does financial services require a hard tech background? [caption id="attachment_26861" align="alignright" width="301"] Citi Ventures' Arvind Purushotham[/caption] When we look for new talent on our team at Citi Ventures, we don't look for engineering exactly but a curiosity around how things work, how they fit together, and what will happen in the future. That's some of the training from engineering that was helpful for me. Those underlying themes and general skills like assessing teams, technologies and market dynamics are the things we look for in new team members. What is Citi Ventures' mandate? For context, Citi Ventures sits in Citi's innovation group. A big part of what we do is make investments in companies that we think are significant and relevant to the financial services space. Our mandate is to identify those areas of overlap -- between what's happening in the outside world and what's happening within Citi. If we can invest in the overlap, it's a win-win. It's a win for Citi in being able to invest in new technologies, services and capabilities that can help our clients and customers. It's a win for the startup if it can land a commercial partnership with Citi. We invest in fintech areas like wealth management, savings, lending, and commerce. We also invest in underlying areas and technologies like data and machine learning, customer experience, as well as cybersecurity and cloud infrastructure. These latter technology areas are also changing rapidly and as a financial services firm, we need to adopt some of the best of those capabilities so we can help build a better future financial services firm to meet the needs of our customers. There's an increasing overlap between financial services and technology. In some sense, financial services firms both big and small need to start thinking like technology firms. The channel of delivery to the customer is largely digital. That's true also with our institutional customers. Can you highlight some of the companies in Citi Ventures' portfolio? On the B2C side, about four to five years ago, we invested in an early robo-adviser, Betterment. The term 'robo-adviser' didn't exist yet but we identified that as a good opportunity. As software gets into every industry, one of the things it's very good at is making dispassionate decisions around asset allocation, security selection and driving goals-based investing. We were looking around at who's building good capabilities, identified Betterment and made the investment. Today, I believe they are the largest independent robo-adviser. In payments, we invested in Square early on when it was private. We've since exited it. With payments, it's an evolving area -- there's more and more evolution there. If you look at international payments, one of our more recent investments in the space is PPRO. It's based in Europe and helps merchants accept card and alternative payments, like faster payments in the UK and UPI in India. We have a fairly evenly balanced portfolio in core fintech and areas like machine learning and cyber.