Podcasts

Edison Partners’ Chris Sugden: ‘With growth equity, dogs are already eating the dog food’

  • Many fintech investors look to invest in early stage companies getting out of the gate.
  • Edison Partners' Chris Sudgen likes to invest in fintech that's already seriously ramping revenues.
close

Email a Friend

Edison Partners’ Chris Sugden: ‘With growth equity, dogs are already eating the dog food’

As part of an ongoing series, we talk to professional investors in the fintech space to get a feel for what’s on their radar screen.

This week’s guest on the Tearsheet podcast is Chris Sugden, managing partner at Edison Partners, a Princeton NJ growth equity firm that invests in companies generating revenues of $5 to $20 million. After 31 years in the business, Edison is on its eighth fund. Chris leads the firm’s activity in fintech and was previously an entrepreneur in the billing and payment space.

Sugden joins us today on the Tearsheet podcast to discuss the role growth equity plays in the fintech ecosystem. We get the lowdown on his firm’s portfolio which includes investments like early forex leader Gain Capital, vertical payments player PHX, and personal finance manager MoneyLion. Lastly, we talk about where Sugden and Edison are looking to make fintech investments in the future.

SubscribeiTunes I SoundCloud

Finding a unique fintech proposition
At the growth equity stage, we’re thinking about the dogs eating the dog food. There’s a live product and we don’t need to make a lot of guesses about adoption. We do need to make guesses about execution and market size and whether this is a product or a company.

We think we’ve carved out something that’s unique in fintech. Growth equity is finally a thing, as it’s become an asset class over the past three or four years. Back in 2006, we called what we do “expansion capital”, but that was a bit confusing. All capital is for expansion. As we define it, growth equity is really a revenue filter — we look to invest in companies with revenue run rates between $5 million and $20 million. We also look for companies that haven’t raised a whole lot of money before we come in.

How does growth equity play out in fintech?
We find ourselves searching for areas where you can gain traction without a tremendous amounts of money. In many cases, that means avoiding spaces that get hyped up, like mobile payments. We’ve looked at a lot of mobile payment deals, but because of their platform nature and the fact that dual-sided marketplaces need liquidity to transact, they require a fair amount of capital. So, these deals tend to be trickier for us to find entrepreneurs who don’t need a lot of outside capital to get their revenue run rates going and growing.

So, in fintech, you’ll see us doing more enterprise-like deals targeting banks, brokerage, and wealth management, as opposed to consumer-type applications.

What startups need to understand about funding
The biggest lesson I’ve learned as an entrepreneur is that money can solve scale but doesn’t solve hard problems or create innovation. The pitch where an entrepreneur claims that if he had a little money, he could make a lot more revenue — well, that’s not really true at the smaller end. One of the biggest tests is what the money is going to be used for. Does the entrepreneur really understand the business model and the revenue levers? When I sit with an entrepreneur, if I don’t understand from them customer acquisition costs, lifetime value and gross margin and contribution margin, it tells you a lot about how the CEO will think about using capital.

 

0 comments on “Edison Partners’ Chris Sugden: ‘With growth equity, dogs are already eating the dog food’”

Podcasts

Steez Podcast #2: Gen Zers and the creator economy

  • Today’s episode is all about the creator economy. Host Rebecca Cohen was joined by Tony Tran, CEO of Lumanu, Blake Michael, Creator with 5M+ followers, actor and entrepreneur, and Julia Montgomery CEO and founder of Influent.
  • The industry is light years behind conquering the Gen Z mindset. That’s why we’ve partnered with Publicis Sapient to create #STEEZ, a hub for finserv potentials to learn more about Gen Z and what it means to capture and delight them.
Tearsheet Editors | December 07, 2022
Podcasts

How FNBO built Bend, an in-house credit card as a service offering with Marc Butterfield

  • Stories about a traditional institution evolving into something new are compelling – it’s just really hard to do.
  • FNBO’s Marc Butterfied joins us on the podcast to discuss Bend, the bank’s in-house credit card as a service offering, and its work with Greenlight to launch a credit card used by families and kids.
Zachary Miller | December 05, 2022
Payments, Power of Payments Podcast

Power of Payments Ep. 19: Stripe’s Josh Ackerman on the changing nature of online checkout

  • Josh Ackerman, Product Lead at Stripe, joins host Ismail Umar on this week’s podcast.
  • He talks about the existing gaps between consumer expectations from online checkout and what most merchants currently offer, as well as how the checkout experience has evolved over the years.
Ismail Umar | December 02, 2022
Green Finance, The Green Finance Podcast

The Green Finance Podcast Ep. 14: COP27 – is finance ready to move from pledges to implementation?

  • COP27 ended around a week ago, and by now we've all probably seen the headlines – an agreement was finally reached to create a loss and damage fund. But what about GFANZ?
  • To help us get a better sense of what happened at the conference, today we're chatting with Lubomila Jordanova, the founder and CEO of PlanA.
Iulia Ciutina | November 30, 2022
Podcasts

‘Everything else is just digital, digital, digital’: Wells Fargo’s Ulrike Guigui on enterprise payments trends

  • New rails and changing customer demands are challenging enterprise payments players.
  • At Money 20/20, we sat with Wells Fargo's Ulrike Guigui, head of enterprise payments strategy, to discuss where the industry and her firm are headed.
Zachary Miller | November 28, 2022
More Articles