This episode is another in an ongoing series on this show where we talk to some of the leading investors in the financial technology space.
This week’s guest provides an interesting perspective we haven’t really heard from yet — Kevin Bhatt is a partner at Long Ridge Equity Partners. He and his firm are growth stage investors — typically coming in a bit later in a company’s growth cycle than some of our other guests on the Tradestreaming Podcast: guys like Phin Upham of Thiel Capital, Caribou Honig of QED, Charles Moldow of Foundation Capita and Canaan’s Dan Ciporin .
Those guys are frequently the first institutional capital into a young company while Kevin’s firm comes in after a company has a product with traction in the market and is generating millions of dollars of revenue.
Below are lightly edited and condensed highlights from the conversation.
The fintech investment thesis
“The financial services sector is uniquely positioned to take advantage of technology. The incumbent players perpetually need to adopt new technologies to remain competitive and relevant to their customers. We’ve seen innovative high-growth companies with technology-enabled solutions command really attractive valuations either from public markets or trade-buyers on the back end.”
Why B2B fintech is more attractive than B2C
“One consideration with investing in financial services is its cyclicality. We’ve been heavily focused on B2B enterprise companies over the past several years and think that’s a very attractive place to be. Based on where we are within the economic cycle, you can tailor a portfolio and invest accordingly. We have a strong belief that as companies service and sell to others in the sector, that’s a sustainable business model that retains value through economic cycles.”
Insurance is ripe with investment opportunities
“Insurance is ripe for continued innovation and investment. As a sector, insurance has been a little slower to adopt some of the game changing technologies and business models that have shifted the discussion in other segments.
“There are a whole bunch of things we’re looking at that are focused on how the interaction between carriers and brokers works, how do you think about more efficient information transfer between carriers and some of the service providers that are a critical part of the ecosystem. We think it’s a space that over the next few years will see a lot of innovation.”
How good investors help fintech firms
“We do take board seats in all our companies. We’re not operators and aren’t involved in day-to-day decisions. But we are involved in strategic decisions and, more importantly, in the process of professionalization that almost all of growth-stage fintech companies go through.
“Very often, when entrepreneurs decide to partner with Long Ridge, they’re looking for a perspective on how to take a company and professionalize it: to take a company that’s doing, say, $10 million in revenue, and grow it to $50 million and to make it the type of business that has the internal infrastructure to be acquired by a leading player in the space or IPO.”
- Long Ridge Equity Partners (Kevin’s firm)