Some of the largest banks in the US have active venture investing arms. They may differ in how they’re structured but for firms like Truist, their fintech portfolios are about getting a seat at the table with innovative firms. Partnerships are important, as well as insights into their portfolio companies’ product development cycles. And of course, these corporate venture funds are looking for eventual ROI on their venture investments.
Truist Venture’s Venessa Vreeland and Christina Russ join me on the podcast to talk about the composition of their fintech investment portfolio as well as trends that underlie some of their investment theses. Lastly, we look outward, as my guests discuss opportunities they see to invest in today’s market.
Truist Ventures’ Vanessa Vreeland and Christina Russ are my guests today on the Tearsheet Podcast.
Investing as tip of innovation spear
Vanessa Vreeland: Truist came about when BB&T and SunTrust combined in the largest merger of equals since the financial crisis. Those two organizations came together to create Truist. We had more capacity as a combined organization to invest in technology and innovation. We’re really focused on bringing innovative tools and products to our customers and clients. And Truist Ventures is at the tip of the spear in terms of being able to do that for the organization. We are out looking for opportunities to bring innovation into our organization. We are looking to bring that great innovation not only to our customers, but to our teammates and fellow employees. And actually, it’s Christina’s role to really focus on how we bring that outside innovation in.
The role of investing
Christina Russ: Investing is a critical role. I think it really is meant to be at the forefront of our efforts. Obviously, there’s lots of different ways to do innovation, like open innovation, which is what we’re very focused on at the company. From a Ventures perspective, we really see ourselves as bringing surprise and delight to financial services through through disruptive investments. We’re out looking for stage agnostic opportunities, both direct and indirect, to support teams, operators, and products that are at the forefront of where the future of finance is moving.
We look at the opportunities in three buckets. One is investing to commercialize. So opportunities that we’re excited about that have a near to medium term opportunity to work with a business unit at Truist. And I’d say that certainly our investment theme in the areas that we build theses around are very much informed by the strategic priorities of our businesses. At the same time, we’re also investing to learn with certain opportunities where perhaps the timeline is a little bit further out in terms of how it may impact financial services, the product stage, or the market itself. I think of things like enterprise blockchain as a great example, where we think there’s lots of interesting things happening. And it’s going to be very important for us to stay close to and we want to get in early with the best founders and operators to stay close to them and find ways to leverage the Truist platform to help them build their product. And then hopefully, find ways to work with them down the road.
We also invest for social impact. Truist itself is a mission driven organization — one of the things that really attracted me to joining this fund is that our mission is to inspire and build better lives and communities. We take that very much to heart for our venture activities, as well. So making sure that our portfolio looks like the customers that we serve in our communities, whether that’s through supporting emerging and diverse managers or products that serve a more diverse segment of the market. All of those are very important to us. So when we think about portfolio construction, we’re really looking at how to put opportunities into each of those buckets that serve both the near and long term needs of the organization.
More on the mandate
We’re very much a strategically driven fund but also looking to invest in companies that are going to be high growth and successful. We balance that with investments that are also strategically valuable to the business. What we like to say is that we set the three pillars Christina described on a foundation of financial soundness. And so it’s the bedrock of everything we do. We are really focused on the pillars to drive innovation and change.
Because we’re stage agnostic, we have a lot of flexibility. We can do $250,000 checks into seed rounds; we can write $10 million checks into later stage; we can write bigger checks into more developed companies or funds, in particular. So, it really runs the gamut, which is really unique: this special flexibility that we have as a fund.
Working with the business unit
Working with the business is really important to us and frankly, very valuable to our investment process to be able to get feedback from leaders within the organization. I think one of the wonderful things particularly about the size of our institution is that we have direct access to the key decision makers across the bank, and they’re very supportive of Ventures and what we’re trying to accomplish and help them to do with their businesses.
Part of my role is staying close to the leadership of all of our business units, what their strategic priorities are, what their needs are, where they’re focused at various times, and finding opportunities that we can either bring to them right away that could fill a gap, or something we can stay close to that could be important for them down the road. So that’s an ongoing relationship that we have with all the various leaders across the bank.
Along with that, we’re also finding ways to bring market insights into the organization. We host, for example, a series of roundtables for our executives every quarter, to bring the top founders, investors, operators, and thinkers around various spaces in to help inform our leadership about what’s going on in the market, what’s interesting, what maybe they’re not reading about in The Wall Street Journal every day, and that really deep insight that they can leverage to inform their strategy and help to stay ahead of the game. It’s a two way dialogue — how we work with them.
And for our portfolio companies, something that we’ve heard from them over time is how valuable they’ve found the access that we’re able to provide them. Whether it’s a small, early stage company that would love to talk to the head of our financial crimes team, for example, as they’re thinking through how to put together their fraud prevention program, or being able to talk to the actual decision maker within Capital Markets about the product that they’re building and get some feedback.
50% of our portfolio is actively working with Truist in some form or fashion. Certainly in my experience, that’s a really fantastic percentage of the portfolio, especially given how early we are.
Again, we’re very flexible in what we do. We’re happy to lead and price rounds. We’re very comfortable doing that and offering term sheets. So if there’s no other investor that we think would be great to lead a round, we’re very happy to play nice with everyone and participate. So we’re really very flexible on that and want to do what’s best for each individual situation.
Differentiating among competition
We’re really focused on providing not just capital to the companies that we’re investing in, but access to great expertise and our broader networks, as well. One of the attractive pieces of our investment is that we’re always a passive investor — we’re never going to control the business. We’re always going to look to add value across our portfolio of investments with the subject matter experts across our organization.
A good example of that might be, earlier last year, we led the series A for Greenwood, which is a neobank focused on the Latinx and Black demographic. At its peak, we probably had about 50 people engaged in diligence for that transaction. For a pre revenue, pre product company, there’s not much to diligence. All those people were engaged, because they were advising Greenwood on how to build a successful bank. And so they leaned in heavy to our cybersecurity — they still have regular calls with our cybersecurity team. They leaned in really heavy to our compliance expertise.
So it was a way for us to bring our expertise to bear and really help that company build a foundation. It wasn’t because we can’t move quickly. In fact, we pride ourselves in being able to move as quickly as a corporate venture group as any independent VC out there.
Truist’s evolution through its venture portfolio
[Our growth] is important, especially in the context of a new organization that’s being formed through a merger, like Truist. We have a very interesting opportunity to build new culture, making sure that we are building one that is very much open to recognizing that innovation can come from anywhere. There are many large organizations in the world that have ‘not built here’ mentality, where it’s very difficult to bring people over and convince them that there is reason to talk to an early stage company — that it is possible that someone else has built a better mousetrap or has adapted a business model in a way that you wouldn’t be able to do yourself and that is worthy of your time to work with them and find ways to partner.
I’m really happy to see that, across our organization, we have champions who are excited about interacting with early stage companies in particular, and recognizing that innovation can help their business in really meaningful and powerful ways. And so I think just a lot of the initial work is around creating dialogue and making sure that we’re introducing lots of interesting founders and operators and companies to our business units so that they get a flavor of what’s happening in the market that could be relevant for their business as they’re making decisions. I think the openness to that is very special within our organization.
Fintechs in the portfolio
I mentioned Greenwood was a company that we invested in early last year. Our first investment as Truist Ventures was to lead the Series C for payments company, Veem. I had gotten to know the CEO of that business years prior to us actually investing when I was at another organization. So it was just great that we had an opportunity to support his business.
We recently invested in a company called Finxact, which is a modern day banking core. And we’re really excited to be working with them to explore how we utilize their technology across our organization. There’s a sister company to that firm called Savannah Capital that we invested in, as well.
All of the companies that were invested in are listed on our website. We’ll be updating it shortly with some information, case studies, for some of the ones that we have commercialization and broader strategic partnerships with. So we’ll be excited to talk about those those win-win scenarios.
Where to invest in the future
In terms of where we’re focused for this year, this is really the first year within our organization of Truist Ventures that we surveyed the organization to decide where we’re going to lean in. We know that our investment themes are very much informed by conversations that we have regularly with our business units, but also our views on the market and where things are moving in financial services. The sort of underlying theme that we hear from our business units is really around digitalization. Unsurprisingly, there are a lot of legacy banking processes that need to be transformed from more manual or paper based or just analog to processes and features and services that are fully digital. That’s a key asset across every area of the bank.
And then beyond that, I would say the three others that we’re very excited about are unstructured data intelligence — again, lots of disparate data sources, being able to collect and analyze that data, and then provide proactive insights and predictions. I think that’s a theme that runs across a really wide variety of industries, but it’s especially interesting and relevant for financial services, where so much transactional and historical data about various customers and businesses gets stored. To be able to pull that together and use it in a meaningful, interesting way, I think is very exciting. We’re getting to a point where machine learning, natural language processing, and eventually AI, can really do some amazing things.
And then third would be process automation and self service tools. Our investment in Finxact is about being able to really focus on cloud based solutions that improve speed, reduce errors, but ultimately all improve the customer experience. So areas like low code/no code are very interesting for us.
Last would be embedded finance — so, contextual digital experiences that are embedded at the point of need. We believe very strongly that embedded financial services is really the future of where the market is moving. And so in addition to Truist wanting to find great partners to embed into our customer journeys, we also want to find opportunities to embed our products into other channels, and to get really seamless for the end user.