Ankur Kamalia: Ideas searching for investments
Ankur Kamalia: Ideas searching for investmentsFostering innovation with corporate venture capital
Globally, we see more and more participation from corporations when it comes to financing early- to growth-stage companies using corporate venture capital. This type of financing already accounts for around 30 per cent of all global fintech deals as of the third quarter of 2016. DB1 Ventures, the corporate venture capital arm of Deutsche Börse, aims to be a strategic partner of choice for companies which are core or adjacent to Deutsche Börse Group’s strategy. But what criteria does DB1 Ventures use to determine which companies to pick? How are we choosing new partners? We spoke to Ankur Kamalia, Managing Director, DB1 Ventures and Group Venture Portfolio Management.
Mr Kamalia, what were the main reasons for Deutsche Börse to set up DB1 Ventures?
DB1 Ventures has just recently acquired new partners. Can you introduce them to us?
We started in 2016 with our investment in Digital Asset Holdings which is a distributed-ledger technology company based in New York developing capital markets centric applications. This acquisition helps us further strengthen our footprint and agenda as it relates to blockchain technology, which is strategically important to Deutsche Börse. Towards the end of 2016, we participated in three new ventures: figo is a Hamburg-based provider of banking application programming interface (API) technologies. We also announced the formation of a joint venture called Switex with the Naga Group, which allows us to create a marketplace for trading virtual gaming items. This was an internal idea that originated from our colleagues that we are looking to take to market. Finally, we invested in the first German growth fund for fast-expanding B2B-software companies, Digital Growth Fund I, initiated by Digital+ Partners.
What made these companies special? What convinced you to partner with them?
There are certain criteria that we look at: first, what is critical is the business idea or technology and whether that is relevant or not to Deutsche Börse – does it fit with our longer term objectives? Second, the quality and passion of the entrepreneur and management team, their ability to bring a business to life and to grow it. Finally, we look at the scalability of the business model and the potential for success and how and where we can add value.
Let’s use figo as an example. With figo we have an opportunity to jointly participate in the creation of infrastructure technology solutions for the financial sector, which is relevant especially in the wake of the Payment Services Directive 2 (PSD2) for banks. figo is expanding quickly and the business has relevance on global basis. Co-operating with them allows us to use their API technologies as part of our overall API economy. The management team is very strong and they have grown the business well in Germany thus far. Now, with us participating, they are able to scale up, and benefit from the credibility of a safe, secure and neutral infrastructure operator such as ourselves.
How do you find these companies?
How do we originate transactions? First, by virtue of being Deutsche Börse, we get many enquiries from companies that want to collaborate with us. Now that we have a defined investment strategy, it allows us to more precisely identify the areas of focus from a strategic investment perspective in minority ventures. Second, we have documented these key areas in a paper on capital markets fintech that we distributed widely last year. That generated reverse enquiries, too. Third, we actively participate in industry conferences, accelerators and events to make sure that we find the right potential partners from an investment perspective, or firms we may want to co-invest with, whether that be in Asia, in the US or in Europe. Fourth, we proactively go out and source opportunities based on our specific business needs. And finally, yet importantly, we have a fantastic network of over 5,000 employees and other stakeholders who refer to us, with recommendations.
In total, last year, we evaluated over 250 investment opportunities of which we carefully selected and invested in only three to four. As you can see, pro-activeness is very, very important.
It is critical for us to continue to increase the frequency and number of relevant investment opportunities for us. This allows a larger number of high-quality businesses to choose from and shape the funnel right.
What parts of our value chain will you tackle next?
We invest in technologies which are helping rebuild the rails on which financial markets are built, such as blockchain, security solutions, API technologies, cloud computing, machine learning and artificial intelligence. Second, we look to participate in relevant capital market applications, built on these state-of-the-art rails. Our immediate focus is the data business and we are looking at new opportunities and companies within that space. The second thing we are focussing on for the next two quarters is new product or geographic optionality.
Do you have targets in terms of volume?
As a strategic investment vehicle, we do not constrain ourselves with volume. We generally look to make anywhere from three to five new investments a year, each between €5–15 million. We do not have a KPI saying that we have to invest in x number of deals every single year. I think that is good because otherwise it could lead to bad investment decisions.
Is your goal more to earn money or to find investments that fit our strategic plan?
That is a great question. To answer it directly: our goal is to find investments that fit our strategic plan. The returns come from strategic goals we achieve and from a direct return on investment or through revenue opportunities with partner companies.
Mr Kamalia, what is special for you about working in Germany?
I am incredibly grateful and fortunate to have joined Deutsche Börse because the people here have been absolutely fantastic. They have made me feel at home. I came to a new country; I came to a completely new organisation and knew absolutely nobody in this country. It has been a great 15 months and I think that, to me personally, the people have made the most difference.
Thank you, Mr. Kamalia.
Interview: Jürgen Pfeiffer
Ankur Kamalia joined Deutsche Börse Group in November 2015 to take up the role as Head of Venture Portfolio Management and Managing Director of DB1 Ventures. Prior to joining the Group, Ankur managed an investment portfolio for a family office and for a hedge fund in Asia.
He also acted as a Managing Director at UBS, was responsible for strategy for the Global Investment Banking division in London and worked in corporate finance/capital markets in New York, Hong Kong and Singapore. Ankur holds an MBA from the Kenan-Flagler Business School at the University of North Carolina Chapel Hill.