Ben Malka is a partner at venture firm, F-Prime Capital. Beginning at Capital One Partners and continuing through F-Prime, Ben's been investing in financial technology in capital markets, banking, insurance, and payments. Our discussion takes us through how fintech has evolved during Ben's career and where he's looking for opportunities now.
We talk about Plaid's massive investment round and the role data aggregation plays in the entire industry. Lastly, we travel through Ben's and F-Prime's fintech investment portfolio which includes Snapsheet, Flywire, and Toast.
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The following excerpts were edited for clarity.
Ben's personal journey
I worked for Boston Consulting Group in Chicago helping financial services companies on key strategic issues. During the late nineties, I was fortunate to work with companies like Ameritrade, which built the first generation of online financial products. I had a front row seat to how the world would change when you take away the face to face interface between customers and their financial institutions. That gave me a great platform to witness this evolution and eventually, start investing in the thesis of the changing front door to a financial institution.
Somewhere along the way, I met Capital One, which was interested in launching a venture fund focused on investing in the financial services sector. It was a natural fit. I moved from BCG in Chicago to Capital One's office in Boston.
The changing fintech investment thesis
When I first started investing in the sector, it was counterintuitive to most people. The prevailing thought for venture capital investors was to stay away from regulated and complicated industries. The financial technology sector moved along more slowly and didn't really become a popular investment sector until 2010 or 2011.
It was a relatively unknown sector that we found to be a productive place to make investments. We looked at the numbers and calculated that financial technology received only 2 percent of all invested capital between 2000 and 2010.
Around 2010, there were several success stories, like GreenDot and Netspend, that got people's attention. People started thinking that this was a sector that they hadn't paid attention to, but you could do things that were good for consumers and build profitable business models. Lending Club and Prosper got people's attention, too. Credit Karma is the most recent member of that batch that changed people's minds about the sector.
F-Prime's fintech investment model
F-Prime typically invests early, after product-market fit has been established. We are willing to work with teams to build themselves out and develop their products over time. But we're looking for some market acknowledgement that customers like what a company is doing. What that translates into is typically an A or B round. Occasionally, we'll participate in a C round.
We invest between four and seven million dollars on an entry. The intent is to get deeply involved in a company and be active investors.
F-Prime's fintech portfolio
We've invested in a number of companies that are core to our thesis, leveraging key secular shifts in the economy. These companies include Flywire, Toast, Snapsheet, Vestwell, Quovo and Recurly.
Flywire helps students attending universities abroad to pay their tuition more efficiently with a better customer experience. It's sponsored by the educational institution, so it doesn't feel like it's foreign. Oftentimes, it replaces a very confusing and expensive money transfer process.
Toast does payments processing and point of sale for restaurants, reinventing how the point of sale looks on the ground.
Snapsheet is a company I'm very involved with and very excited about. It helps insurance carriers settle auto claims after an accident, using pictures and not a visit to an adjuster or body shop. They do that in an app, so the pictures can be authenticated. The company has grown dramatically and it's processing a substantial number of claims for insurance carriers. We think it's more efficient for claims-processing in workflow and accuracy.
