← Fintech Leaders
Fintech Leaders
Melissa Guzy, Arbor Ventures Co-Founder – Global Fintech Investing, Generating Liquidity for LPs, What Makes Emerging Market Founders Special
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- [00:00]
A
The lesson I learned is one I've taken with me forever, which is there can be a perfect memo, there can be a perfect idea, but that doesn't mean it's going to work. And the other is true too, right? And so I try to be incredibly open minded when we're discussing different types of deals. I used to apologize, by the way, for the first decade of being global, I no longer apologize. I actually think it's played to our to our advantage. Foreign.
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B
And welcome to Fintech Leaders coming to you from New York City. I'm your host Miguel Armasa, and I'm.
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C
A co founder of Gilgamesh Ventures, a venture capital fund that backs early stage fintech entrepreneurs in the US And Latin America. If you enjoyed this conversation, I invite you to leave a review on Apple Podcasts or Spotify so more people can learn about fintech leaders. In this episode, I sit down with Melissa Guzzi, co founder and Managing Partner of Ardmore Ventures, a global fintech focused fund with offices across Asia, the Middle East, Europe and the U.S. founded in 2012, some of their portfolio companies include Tabby, TrueRecord, Grab and Funbox. We discussed Melissa's early days as a VC investor at Vantage Point Capital, where they navigated the dot com crash and later invested in Tesla's Series A, building Arbor Ventures and pioneering fintech investing in China, Southeast Asia and the Middle east. How Arbor has successfully generated liquidity from fintech investing in emerging markets, why real time payment networks and CBDCs have the potential to transform fintech and a lot more.
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B
Elisa, welcome to Fintech Leaders.
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A
Thank you. And thank you for having me, Miguel.
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B
Delighted. It's the first time we talked, but I've heard wonderful things about you over the years from people I know and also people who've stopped by the podcast. Kind of like Ohad from TrueAccord is one of them. He even mentioned you, I think, in the podcast. But thanks for stopping by.
- [02:31]
A
No, my pleasure. And I look forward to the discussion today.
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B
Melissa, I want to start by learning a little bit about you. In the first couple of minutes, I've heard from people around you that I've talked to that you are extremely hardworking. You have a very strong work ethic that was defined by your upbringing. What kind of upbringing gave you a strong work ethic?
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A
Well, I was raised by a single mother. My father passed away when I was quite young. When I was 3, my mom raised us alone. And she's quite a. She's quite a strong woman. She didn't take, you know, no. Or I'm tired or I can't. I can't do this for an answer. So she pushed my brother and I pretty hard over the years. So I think it's just also, I was a competitive swimmer and I swam every morning, I swam every afternoon. And to do that, you have to have a lot of discipline, especially since I started double sessions when I was like 8 years old. So it was really just, I think having, I guess the equivalent of a tiger mom in the US who didn't take that you were tired or you needed a rest or a break as an answer, but who encouraged and pushed her children pretty hard.
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B
Why do you think she was that way growing up? Why do you think she didn't take no for an answer? She didn't say I'm tired. Was there something about her upbringing, her style, or anything you would single out?
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A
I think she was just a widow at a very young age. And so I think survival skills kicked in. I have to say, I've never saw my mother upset when I was a child. She always put on a happy face and just kept moving forward. And I think she. She still says, you gotta love, live and laugh every day. So she's got that motto that she still lives to. I mean, still lives by. She's 86 years old and still plays golf four or five days a week. So, you know, I think just that shaped her life, and therefore it shaped the lives of my brother and I.
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B
Playing golf at 86, that sounds. That was amiable. I think we can all hope. And Melissa, from being a competitive swimmer to jumping into asset manager, when did you figure out you wanted to join the asset management industry?
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A
Oh, I actually did. I took the route of going to investment banking after college, and then I actually ended up doing a startup. And then from there I ended up at Vantage Point Venture Partners. So it wasn't a route that was planned out in college to say, oh, I want to become a venture capitalist, or it was just it sort of happened by serendipity of different opportunities that presented themselves along the way. And I always enjoy new challenges. And I think actually venture capital is the ideal world where you get some operational experience. You can use your experience of having done a startup, you can look across new sectors. And I always say it's the greatest career you could possibly have. You get to work with people who are trying to. Who are inspired to change the world every single day.
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B
Yeah, could not agree more. What was that startup? Was that in the 90s?
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A
It was in the 90s. I hate dating myself. But it was in the late 1990s, and I had the fortuitous experience of joining Vantage Point in December of 2000, right. For the severe downturn of 2001, which probably shaped my experience as a venture capitalist. Right. You went into 2001 and you weren't funding companies. You were beginning to. Right size companies, if you want to put it politely. But it was a pretty grueling time in venture. I mean, that's when the industry shrunk by a third. That's when people actually were handing back money. But what I really learned from that experience is those CEOs who cut their burn rates, acted quickly and decisively, actually survived, and they all did pretty well. And I think that's taught me a lot about reading the environment around you. Right. And being. And being prepared and taking action and not being afraid.
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B
What was that like early in your investing career? You come in, you're. You're excited to be backing founders and finding new companies, and then it's actually frozen. Right. I imagine you did very few investments the first couple of years. Were you quite questioning your career decisions, your job security, what was that like?
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A
Well, first of all, I was too young to worry about job security at that point in my career, but I actually looked at it as a challenge. I was the only partner who had any operating experience, and I was like, okay, I can do this. I actually took it as a challenge to go in, sit down with the CEOs, think about, right, sizing, cutting burn rates. But there is a hilarious story that actually happened during that period of time. There were so many companies being shut down, and Herman Miller chairs were very expensive and sought after. And so at Vantage Point, we actually had these two floors. And I remember not wanting to get rid of the Herman Miller chairs at a significant discount, so I kept bringing them to the Vantage Point offices on the bottom floor. And I remember Alan Salzman walked in one day and he sees all these Herman Miller chairs and he goes, what the heck? Where do these all come from? I said, well, I didn't want to get rid of them at such a low price. So I store, I thought we'd store them here. And he's like, oh, get rid of these chairs, Melissa. But, you know, it was, it was such an interesting period because I actually had it down to almost a routine and a science. Here's the checklist. Sit down with the CEOs and then really get people to understand that this was not going to change positively in a short period of time, that this was here to stay. And it was actually the most brutal venture investment period we've ever.
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B
Right.
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A
It was frozen. I remember our partner meetings were from 8 in the morning till 6 at night. It was a grueling period, but it was also intellectually challenging. And if you took it as a challenge and not got weighed down by the fact that things had changed so quickly, I think we had 21 companies in registration for an IPO. Two of those companies actually only survived. The rest were actually shut down. And these have been in registration. So it was a period where you had to say, okay, all right, I'm not going to do any investments, but I'm going to learn something and I'm going to make something out of this. And I took it as a competitive event to say, okay, I can clean up these companies and I can right size them and I can help them. So that's what it was like when I first joined Vantagepoint. I don't think we did an investment for two years. And so my first two years were basically cleanup. Right size.
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B
I think a lot of people are, are wondering kind of where we are in the cycle. And you can argue we're, we're here, we're there. When you started to see blips of life, when you started to see the market recover back then, were there any evident signs other than deals getting done?
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A
I think what the mindset was, was, okay, we have the portfolio right sized, meaning we got everything, it's being managed. I would say it was actually not a great period of innovation between 2001 and call it 2004 or 5. But then you started to see things change and you started to see interesting ideas. And so I think it was more that. And so I've come to the conclusion about human beings. When there's a significant change, people freeze and then they get used to it and then they start to unfreeze. And I think we've seen that even in the last decade. Right. We have these shorter periods. But then it was okay, the portfolio is right sized. We're used to this environment. People have adjusted their burn rates for the new norm. And we started to see some interesting ideas. But that was that. There was no, like, signs that said, welcome back, go deploy. It was just a, just a different mindset had emerged and stability sort of the market had stabilized.
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B
Maybe fast forward a little bit. One of those ideas that you saw at Vantage point was Tesla.
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A
Correct.
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B
Was it Series A?
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A
It was okay.
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B
Share a little. I mean, obviously now it's one of the largest companies in the world. Everyone knows about it, but back then it was just another Series A. Yeah.
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A
It was, it was actually fascinating. There was no business plan for Tesla then there, there was no PowerPoint presentation. It was really Elon telling a story well, Martin actually telling a story as well. I think what's, what's fascinating is that there hadn't been a successful car company since what, the 1960s. And if you remember the movie Tucker, that didn't go that well. Right. And some of Elon's plans were along the lines of Tucker, let's sell dealerships before, you know, the cars were even built. Additionally, Elon's track record of actually running a company wasn't that he didn't really run PayPal on a day to day basis. The vote was pretty close. I think it was 6 to 5among the partners to do it. But what was interesting when you look back on it, yet an extraordinary entrepreneur who wasn't afraid to do something that hadn't been done. Oil prices were at a pretty high point, which meant that people were looking for alternatives. But there's definitely luck along the way. And you can say that people make their own luck. And probably that's the case with Elon. Right. To just power through it. Perseverance, grit. I have nothing but admiration for what he did. But it wasn't so easy. Right. The company was losing money on every single car that it was building at the time because the battery packs were so expensive. So I think the lesson I learned is one I've taken with me forever, which is there can be a perfect memo, there can be a perfect idea, but that doesn't mean it's going to work. And the other is true too. Right. And so I try to be incredibly open minded when we're discussing different types of deals that could be, you know, don't check every box because I always will remember the Tesla experience as a young partner.
- [12:54]
B
Do you remember where you voted on the 6 to 5?
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A
I'm not going to elaborate. Who voted what? That would be unfair. We were a partnership. You stay as a partnership.
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B
I love that answer.
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A
All right.
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B
And was around that time that you were sent to Asia to open the Vantage Asia partnership?
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A
It was a little bit. It was 2007. It occurred because we were looking at a deal actually in the semiconductor space. I'm sure you know the name of the company today. It's smic. That's how long it's been around. We were just coming back on the plane and Alan had said, what about moving to Asia? And I thought, you know, what that could be interesting because my startup had manufactured in Asia. I was pretty comfortable going to Hong Kong and, and, and China and Shenzhen. So yeah, in 2007, I packed two duffel bags and Jim and I moved to Hong Kong. That was the deal. We would live in Hong Kong and then I traveled every week into China, 40 weeks a year up to Beijing and Shanghai.
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B
Wow. And that was probably one of the best possible times to be living in China. I lived in China, something I didn't mention before. I lived from 2001 to 04 roughly, and it was a great time. But I think a few years after that, it got even more interesting. The growth, the innovation. What was, what was the most surprising thing for you to learn when you first got to China, you started understanding the market?
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A
Well, I think just the changes that were going on across every aspect of someone's life were just so dramatic. And growth that we hadn't seen of people moving into the middle class, moving to the cities, the changes that were happening. But that was my pivotal point to switch to fintech was when Bloomberg and Reuters sued. Under the wto, we worked closely with the Chinese Academy of Sciences to start a competitor inside of China. And this was actually great timing. It was 2008, I think, and so global financial crisis was going on everywhere else in the world, but not really there. So I spent a year just looking at trading systems in China and believe it or not, they were still done in batch at the end of the day, but the government had brought back an amazing team of architects to rebuild the systems and obviously by tech ticks. And what I learned was that the infrastructure that they were putting in place in China for financial services was really impressive. And that's when I sort of became obsessed with. It wasn't called fintech back then, but Right. Internet finance, I think was the first term used and started to focus 100% of my attention there because I was just so intellectually interested in what was happening and thought that someday the renminbi would be a global currency. And never in my lifetime again would you see a currency like the renminbi be globally used. And that was the, that was the turning point to focus on fintech.
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B
It also sounds like it was maybe that inspiration and then seeing those opportunities kind of what drove you to launch Arbor. I mean, I've been going through the process of starting a fund myself the last several years. Would love to hear about your experience because it's not an easy one.
- [16:26]
A
No. And I say this to entrepreneurs all the time and I say it to our team members, be inspired. In life, success comes when you're absolutely inspired by something. And I was inspired and I was voracious. I had a voracious appetite for learning about it and what was happening and where. Where the renminbi could go and what did it mean on the systems. And as you know, China has led the way in every aspect of innovation around financial services, although the west has a hard time digesting that. But whether it's online banking and QR code, payments, embedded finance, embedded insurance, the innovation has been amazing. And so it wasn't easy because when I started Arbor in 2012, number one is I was starting it in Asia. I'm not Asian. Right. Number two is, and that's just a fact of life, my Mandarin is horrible. Way used to tell me that all the time with my co founder at Arbor and how we met. Actually, that's a great, kind of a fun story. But also back then, there weren't really specialty farms, especially in Asia. Right. Are you a China fund? Are you an India fund? What do you mean you want to be regional? What's fintech? What's big data or AI? And so we were just really early. We were so fortunate, though, because there was one family office who did care about banking in China, knew that we understood it and backed us. So, like you, Miguel, we started with a $12 million fund in2012. And that was the beginning. And we were very lucky to do some really interesting deals early. Then in 2014, actually, it was 2013, we launched a little $12 million fund. 2014, we were very fortunate to be backed by Fidelity, who cared about financial service innovation around the world, especially in Asia. That was the start. And we were incredibly fortunate to put together a list of LPs in Asia who had meaningful assets and financial services. And it became this bilateral relationship where we would learn from them, they would learn from us about what was happening. And we've continued on that path as we've built Arbor over the years.
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B
Yeah, that's certainly inspiring to hear. Maybe tell us about the story, how you met Wei.
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A
So Wei and I met because of this one founder, Lee Dalpong, who ultimately was the CIO of NYMEX and was brought back to China. But the funny story was Wayne called me one day when I was a vantage point. She said, what are you doing? I said, well, I'm studying Mandarin. I go to class every morning. And she started laughing, said, melissa, your Mandarin is horrible. I have a better use of your time. I met this young entrepreneur in Hong Kong, who wants to take alternate alternative data sources and do credit scoring. And as you know, she was at Citi at the time and she said, well, and if it works, I can get them into Citi, so that's a better use of your time. Why don't you go meet with them? And that was our first investment in Arbor. It was called Demyst Data. And Wei and I, ultimately she left Citi and joined me to really launch Arbor. But yeah, my Mandarin is not very good.
- [19:42]
B
I'm very interested in the fact that you've built a global or regional firm, at least at the beginning. Now, global, it's not the same as building a traditional Silicon Valley fund that invests only within a bike distance from your offices, right? It's, you have to get on a plane, you have to have a phone call to meet the entrepreneurs. Maybe the first time. You have to be traveling all the time. What kind of DNA do you have to create as a firm to really thrive as a regional investor, as a global investor?
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A
Yeah. I used to apologize, by the way, for the first decade of being global, I no longer apologize. I actually think it's played to our, to our advantage. The DNA is, it's very, very important because you have to have team members who are global, who have a global mindset and who are open minded. And that's not that easy to find. Everyone on our team has lived in at least three different countries. I think the majority of the team has lived in five different countries. I learned this when I moved to Hong Kong. There are expats who moved to Hong Kong who say, I'm staying two years and I'm leaving, or three years. And everything to them is a disappointment because they're measuring against what they get in the West. But then there's expats who I fall in this category who say, oh, that's kind of cool. That shop only sells hair products, right? Or the shop, this little shop only sells this. And you know, you walk in and the woman says to you, oh, very bad. You have a wet head. Very bad, right? You, you expats and you have to embrace life and where you are. And I think that's the DNA you have to have at Arbor is to embrace the environment you're in. And I learned something from Warburg Pincus really early on. When I moved to Hong Kong, which was the first decade, they had a challenge investing and generating returns because they were trying to do deals that were acceptable to the US team. And then they came to a compromise to let them invest for the region. And that was a real learning for me which was you cannot try to replicate what's done in Silicon Valley. And by the way, that works both directions. You wouldn't want to replicate something outside the U.S. necessarily inside the U.S. you have to learn to be where you are to be in the present, to to be in the location you are to understand the market, to understand the dynamics, to understand the culture, in most cases understand the language or how things work. We never actually go into a country where we don't have a pre existing relationship, an lp, someone on the team, something that leads us there. I think that's really important to understand the localization. But to get back to your original question, it's a global mindset and a global mindset means being open minded, learning but taking using our global platform and the learnings to help make decisions but not necessarily be the only guiding force.
- [22:46]
B
Now yeah, you're, you're speaking my language. Anything global I love. And when it comes to kind of the types of founders, I think there's also an important difference here. What have you noticed because now you have a US portfolio as well. But generally what have you noticed about founders that come from non tech hubs, more emerging markets versus founders in Europe and the U.S. great question.
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A
One of the things that U.S. investors always struggled with in Asia was the fact that companies were a little more horizontal. If you take Alibaba as an example, they're quite horizontal. But what investors in the US don't necessarily understand is that you have to be horizontal to actually get the solution out there. And so founders outside the US or Europe or Israel for that matter are solving, they have to solve the whole chain issues. Right? They can't solve one issue. They've got to actually enable it from end to end. And if that means they've got to do more, they've got to do more. I love our, I mean we have a great portfolio of founders who I admire so much overseas. Their program, personal stories are incredibly inspirational and I think that they are especially in areas where you don't have necessarily huge amounts of capital. They've had to be quite, quite careful with the cash that they raise. They have to think about the market environments they're in, they have to think about the regulatory environment they're in. And they're quite, they have a lot of perseverance and grit, but they're also maybe a little long term, more long term minded sometimes than the US founders. No offense to the US founders. So I don't want to be take.
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B
Sides Here, but it's okay. It's okay. And would you say emerging market founders are better positioned for times like the last couple of years?
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A
I would say that emerging market founders adapt very quickly to difficult times. And I would also say there seems to be less embarrassment from those founders when they have to make adjustments because of the market. Right. They want to survive because you have to. I think one of the key things you still have to remember is in a lot of societies, failure is a loss of face. And in the US in Silicon Valley, failure is a badge of honor to a certain degree. Right. You're just getting yourself ready for the next startup. So founders overseas don't take that in the same way because they have different social pressures. So they do adapt quite quickly to environments.
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B
One region where you've had a lot of success is Middle East North Africa, which is a region that is getting a lot of global attention these days. It wasn't even five years ago what gave you confidence to start investing in that region?
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A
Well, I think when I went back, when I went to Dubai in 2018 and spoke to the DFSA, Dubai Financial Services Authority, and then spent a couple days there looking around, one thing that was interesting to me was the fact that there was less money flowing in the entire region than just Indonesia, one single country. Although Indonesia does have close to 300 million of people and there's just so little venture capital. But you could, after spending time with the regulators, you could tell that they were eager to see innovation in fintech start to happen. And so we dipped our toe in something we knew incredibly well, which was Buy now, pay later. Right. We had been seed investors in P. We were Series A and Akalaku. And so when it came to Tabi, Tabi didn't even exist, actually, at the time it was. I met Hossam and he said he was interested in looking at Buy now, pay later. And so Wei and I spent time with him. Here's Japan, which is a developed market. Here is Akulaku in the developing markets. And the Mena region is a little bit of a combination. Right. UAE is probably more like Japan, and you got other markets that are more like Indonesia. And so we just got to know Hasan just from having conversations and then said to him, okay, whenever you're ready, we're here. We want to, we want to invest. Because really liked his thought process. He had done N Cheat, which was one of the first Internet successful stories in the Middle East. And then he called like two months later and said, I'm ready, and I'M saying, okay, how much can we give you? And he's like, well, not so fast. And then we, we just kept, we put money in the seed round and then we just kept working with him and really liked him and then started to preempt the next round. I think what gave us comfort was it was a sector we knew incredibly well. We know what questions to ask, we know the conversations to have, and it was the right place to dip our toe. And I will say it wasn't without questions from our LPs, which was, Melissa, you're adding another geography, right? Because we had Asia, we had Israel at the time and the U.S. and I, you know, and you say, well, it's a $500,000 check and it's a sector we know well. And they're like, well, okay, right. And so that's how it began. But you have to have enough security in yourself and in the founder to say, okay, this is a guy we want to back. This is a person we want to work with and we can help. And so that's what gave us comfort to write that initial check.
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B
Where are they today?
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A
Tabby, as you know, is pretty well known, is an amazing story. A couple hundred million in revenue, profitable. And I will say Hossam is probably one of the best entrepreneurs I've ever backed.
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B
Melissa, one topic I really want to talk to you about is exits and liquidity, actually getting liquidity for your LPs in emerging markets. Because when you talk to LPs, the common knowledge that LPs a lot of LPs have is like, oh, liquidity is much harder to generate in emerging markets. But you have defied those assumptions. I know that you've had quite a few bands. Your companies have done extremely well. How do you think about liquidity management?
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A
I think about liquidity day one, right? And it's not. Listen, I always believe build a great company and exit options come. But in emerging markets, you have to have, you have to have your wits about you from very early on. So number one is if you're going to go down two paths, which is an IPO or M and A or even secondaries. But let's take the first two. If you're going to go down the path of an ipo, is there an IPO market? Not every region around the world has an IPO market. That's what's really hurts. Southeast Asia, right, is on the liquidity, there is no real IPO market for them to go to. Whereas in Japan, there is an IPO market, right? In The Middle east, you've got Saudi clearly emerging. The second part of that is, can the company be acquired? A US Company will not acquire necessarily a company in certain parts of the world because it's quite complicated because the structures. So who can acquire you? And I think Southeast Asia. Again, it's only the Chinese and the Japanese that have been acquirers so far of size. I think this is a question you have to ask yourself when you make the investment, what does success look like? If everything goes perfectly, how do I eventually exit this investment? And I think that's a lot of managers don't think about that. They're like, okay, the public markets will come okay, or yes, investors will want this. But I'll give you a great example. The Philippines, right? It's been an interesting market, but the largest exit has been what, 120 million. And so you got to be in places where you can get rewarded as well. And we think about that. That's part of the initial equation. What does success look like? And that's discussion means not only building a company, but also what are your potential pathways to exit. And yes, we've managed liquidity quite well. It's something I'm really proud of. I don't think our team initially appreciated what liquidity means. Right. Because we went through a period in the market where TVPI was everything. Now it's dpi. And fortunately for us, we've generated a fair amount of dpi. We're constantly working that part of the portfolio as well.
- [31:16]
B
And this is definitely work that you as a fund manager, as an investor have to do. But also you are probably working closely with the founders to think about this, to develop these relationships, to enable them to develop those relationships. Talk a little bit about your relationship with the founders, not just in the context of generating liquidity, but just in general.
- [31:42]
A
My role is, I tell them is I'm a mirror. I'm going to cheer you on. Unfortunately, we're going to have to have some difficult or challenging conversations every once in a while. But it's from the good of my heart and we're both on the same team here to win. I do want to address the liquidity thing because I do think founders think that one day somebody buys you. That's not what happens. These relationships start 24 months in advance before somebody just comes and says, I want to buy the company. And founders need to learn to invest in those relationships. The second thing, my piece of advice and be nice. So many founders are a little too arrogant with potential acquirers, but at the End of the day, somebody will pay you more if they actually like you on top of wanting your company. So you got to be nice to people. And so I think with founders, listen, I put my heart and soul into every company wanting to be successful. I'm here to fight the battles with you and everything else. But I'm also going to be pretty clear, I could be wrong. I'm happy for you to tell me I'm wrong, but I will voice my opinion to at least give you a different perspective. At the end of the day, we don't run the companies. We're here to serve as fiduciaries right on the boards or to our own investors. But I think being open with founders to at least try to share peripheral vision or concerns, most of them will appreciate it. I think it's all how you do it. You're not here to badger them, you're here to be their partner. You're here to express a point of view and that's it. And some they'll take and some they won't. And sometimes you're right, sometimes you're wrong, but that's the kind of relationship we really cherish.
- [33:27]
B
Would you say the founders that you work with, is there a culture that they have in common? Is there, is there something they have in common or you have all sorts of founders in the portfolio?
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A
We have all sorts of founders in the portfolio. But I do think the, the best relationships are the ones where you can have these discussions. Our portfolio probably has 70% repeat entrepreneurs. And I think the one thing about repeat entrepreneurs, they actually utilize their investors quite well. Right. To bounce things off. They're not afraid to have discussions. And that's a piece of advice to a first time founder. Don't be afraid to have a hard discussion. Don't be afraid to say something isn't working or hey, it's working. But not to, to my original expectations. Those are the conversations VCs like having, or at least I did we do at Arbor as a team because we're here to be engaged and not just show up for a show at the board meeting. Board meetings are meant to be an exchange of information and ideas, good things and also challenges.
- [34:26]
B
Yeah, I think something that you're saying also that I've seen is repeat founders or just great founders. They're very good at putting their investors, VCs or angel investors putting them to work, right?
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A
Oh, absolutely.
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B
But not every founder does that. And I don't know you, but I love it when they do that because, hey, I feel excited That I can actually do something for them.
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A
Yeah, you want to contribute, you want to feel like you help, you help build something. So I agree. Put us to work.
- [34:59]
B
Exactly, exactly. So let's fast forward talking about your time in China back when the infrastructure was being set up. Let's hear about the state of fintech in the markets that you're covering. We can talk about China but also other markets. Right. Where, where is it at and where do you see it going?
- [35:22]
A
I think we have these global themes that are important to us. So one is there are 70 RTP networks around the world, real time payment networks. The US doesn't have one, but there you go. I think you know the innovation around RTP and then how the CBDCs play into it is a global theme for us. Reinsurance is another area we've spent a lot of time. It's really about global themes of where we see changes coming over the next five years. And for us right now, I think InsurTech 1.0 was not such a success then. I think there's still places to play and things to do there but it's not as easy as people think. I know Miguel, you worked in banks. I think insurance companies are even slower and more rigid than banking. I think this idea of these RTP networks, how that plays in with the current infrastructure on cards globally as well as all the value added services you're going to layer on top of what Brazil has built is amazing with pics. The UPI in India you got Now Pay now in Singapore with Thailand, Indonesia, Hong Kong. These real time payment networks and their connectivity is a significant and probably one of the greatest changes we're going to see in payments globally.
- [36:44]
B
I'm curious, those 70 that you're listing are all those government sponsored? Because I've also seen this is happening in Italy, Kazakhstan, Peru and many other places. These are private companies that have gotten so big that they've become the de facto real time payment network.
- [37:03]
A
Yeah, I mean most of the ones I was mentioning, at least in Asia are government sponsored that the payment infrastructure should be free. But I think it's just the idea that RTP is, is really not new. But RTP is, it's got a lot of likes. For the next five years to grow globally it's going to change cross border payments, it's going to change a lot of things. And then you layer on top of that central bank, digital currencies. Yes, it will take time but you know we have a pretty strong view of movement away from only using the dollar Just that's probably the global nature, our global viewpoint.
- [37:39]
B
Yeah on insurtech something so we are investors in a few infrastructure insurance companies. Something that worries me about the size of the pie is and I was talking to a leader in the insurance business recently, Capex dollar amount in insurance combined is probably close to the capex dollar amount to just one major bank. Right. So do you think part of the opportunity is to increase the that side that, that pie, increase that capex spend or how do you think about InsurTech?
- [38:12]
A
I think that's difficult. I mean we came away on InsurTech thinking you got to create end to end solutions. I always joke with our team selling to insurance companies. I can guarantee you I'll be retired by the time the company can scale. They're just very, they don't have big capex budgets, they don't see the need. I do think people don't talk a lot about ILS's insurance linked securities but the access to the capital markets is important as capacity has dried up quite a bit. Right. We're in a very hardened market in insurance where pricing is quite favorable. I mean a lot of that has to do with weather, property and casualty being hit pretty hard. And I think there are areas of insurance that have been abandoned from time to time. Like I think Lemonade was able to do what they did because renters insurance wasn't profitable anymore for the way current insurance companies operate. And then of course there'll be novel risks right. That come about that need to be underwritten differently. So but it's, it's, it's very different than I think we all thought initially about insurance. You're like okay, insurance can be disrupted and you're like ah, it's a lot tougher than people originally thought.
- [39:20]
B
And Melissa, when, when you think of the markets you cover, when it comes to cities, which ones are the biggest fintech hubs that are important for you outside of the U.S. i'm going to.
- [39:32]
A
Say it's as we've mapped it out. There's hubs that are specialty hubs. So let me give you, I think in insurance it's Bermuda and London. Those are important hubs. Funny enough, a lot of the FX innovations come out of London. Right. You think about currency, cloud and wise. I'm a big wise fan. I use it. That's why when you think about Asia, we're not investing in China. We haven't since 2015. I think it's incredibly important though as a indicator of what is could happen and what could be so I think. And the Middle east is probably going to utilize what a lot of what we've seen out of Europe and what we've seen out of Asia. So a lot of sometimes it's there are innovation hubs that are not meant for investment, but they're important places. And then there's places where we invest because we think there's change happening. And so it's kind of two different things sometimes.
- [40:27]
B
Right? Liza, we're running out of time. Before I end this conversation, any books that you often find yourself recommending?
- [40:38]
A
Well, I have three favorite books. One is Crossing the Chasm. I know it's an oldie, but it's really good and I think it's still applicable of adoption cycles. I love PayPal wars. That's one of my favorite books. I actually, I think it's out of print, but I've gotten a couple of copies to give away. I think it's a great story. It's a Great story how PayPal could actually beat ebay on ebay, right? So that was great when ebay had a payments platform. And then I think Peter's book, right 0 to 1 is really is great because I think people get hung up on market size immediately. Okay, what's the size of the market? And there's Tam, there's Sam. But the fact is that's so that's also not always the most meaningful thing initially. So I think those are my favorite books. I tend to buy books for people, not only entrepreneurs, but the team as well, and I highlight them.
- [41:32]
B
Those are three amazing books. I've read one of them and I have two of those actually to read list. I won't say which ones, but thank you, Melissa. I've learned a lot. Thank you for this awesome conversation. You're definitely a true fintech leader, global fintech leader, and I'm delighted that you stopped by.
- [41:53]
A
Thank you, Miguel, for having me. I thoroughly enjoyed the discussion.
- [41:56]
B
Thank you. Thanks for tuning in.
- [42:10]
C
I hope you enjoyed this great episode with Melissa Guzzi from Arbor Ventures. If you want more interviews, make sure to subscribe, follow and leave a review on Apple Podcasts, Spotify or whatever. Get your shows. It helps and means a lot. And if you have any suggestions or thoughts about the show, just drop me a line on Twitter or LinkedIn. Signing up till next week.
- [42:33]
B
I'm your host, Miguel Almasa. The Fintech Leaders Podcast is for informational purposes only and should not be considered financial or investment advice.