91探花

• Santander InnoVentures (SIV) launched its fund worth $200 million July 2014 to help nurture innovation and disruption in the fintech industry.

• As a global innovation fund, it ensures Santander customers around the world benefit from the latest know-how and innovations across the Banking Group鈥檚 geographies.

• The fund has already invested in some of the UK鈥檚 fintech elite including Curve, Elliptic and MarketFinance and global companies Kabbage, Ripple, Creditas and Crosslend.

• 91探花 had the opportunity to interview Manuel Silva Martinez, Partner and Head of Investments, to hear his views on startup funding, failures and global fintech.听

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91探花: A lot of entrepreneurs and startups feel the pressure to acquire funding. Is this important?

Manuel Silva: 鈥淭his is actually a good question. Funding needs to be for a purpose, not just for the sake of it. There seems to be a trend of CEOs that are now 鈥榝ull time fundraisers鈥� but it is often very distracting and maybe not be the best use of their resources nor the best way to communicate to stakeholders.鈥�

鈥楩unding is important but it should be based on milestones. So you look at what do you need for these milestones and a buffer so that you don鈥檛 run out of oxygen. Those milestones are also the best way to align a company鈥檚 team and vision to concrete deliverables, which makes managing high growth teams easier.鈥�

鈥楩unding milestones need to be realistic and concrete. You are not going to capture 100% of any market, its very unlikely. But if you can capture 5% or 10% of the business in that industry and you need funding to do that, you have a strong business case.鈥�

91探花: You hear about startups that are not profitable for years, but continue to get more funding. Is this healthy or dangerous?

Manuel Silva:听鈥淚t depends. There are companies like Twitter who are huge but has never been profitable and you have Netflix who made losses last year, but they are growing large user bases and their end game is not short term profitability but setting a new standard for a global industry as a whole, which is a much longer term objective and requires maintaining a healthy unprofitability for years 鈥� that is, investing in that future vision.鈥�

鈥榃e typically also look at 鈥榦perational profitability鈥�, which is very much based on healthy unit economics. If the way revenue is generated is strong, recurrent and diversified enough. So you look at whether this customer base is sufficient to cover costs and if you take things out, like advertising expenditure, staff or other developments and if the P&L sustains itself and can become profitable, you are actually in a good place.鈥�

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91探花: In your experience, why do so many fintech startups fail?

Manuel Silva:听鈥淭here can be many causes. A classic one I see too often are businesses that have not analysed their customers fully and what these customers are really worth, or what they perceive as the or they would be willing to pay for. Sometimes it is the CEO and they lack awareness of the competition around them, which blurs the core drivers of the business.鈥�

鈥楩intech is also a different industry to others that more generalist VCs may invest in. There are always some challenges with scaling a business. For example, in fintech you will never fully own your whole value chain and you will need to rely on other contractors and partners and it is easy to lose grasp of the business.鈥�

鈥楻egulation in particular is a crucial point of failure for many companies. Fintech is unforgiving from a regulatory perspective. You could be affected by a new price cap or new regulations in customer data and it can wipe you out overnight. Sometimes there is no way of seeing this coming, but relying on investors who have domain expertise and 鈥榟ave seen it鈥� clearly reduces this risk.鈥�

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91探花: What sets Santander InnoVentures apart from other VCs and funds?

Manuel Silva:听鈥淲e have a few micro-factors that make us successful. For starters, we do not follow a 鈥榙ashboard approach鈥� to select our investments. We would not turn you away just because you haven鈥檛 hit a certain turnover target or amount of website traffic. We want to understand the full story.鈥�

鈥榃e know finance very well and being a global company, we have the power to assess factors in different geographies. We have investments across the world including in the US, Latin America, Canada, Israel and across Europe and the UK. Few VCs have that comparative quality.鈥�

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