Investment Strategy
We currently intend to concentrate our efforts in identifying businesses in the FinTech industry with an equity value of approximately $500 million to $1.0 billion, with particular emphasis on businesses that provide digital, on-line or mobile payment solutions, processing and gateway services, point-of-sale technologies, consumer marketing platforms, and ecommerce and loyalty solutions. According to Pitchbook, global investment in financial technology and ecommerce has grown rapidly in recent years, increasing from nearly $14.8 billion in 2011 to $89.2 billion in 2019. From 2011 to 2019, $530.1 billion was invested in FinTech by venture capital and private equity firms in over 23,000 deals. Also, the technical and economic situation resulting from the Covid-19 pandemic is leading to further transformation in the FinTech industry. There has also been a massive secular shift in the payment industry to an integrated payment model which includes the enablement of payments within core business management software, simplifying payment acceptance, easing reconciliation, and enriching system data. These enterprises often offer consumer engagement platforms by which these firms engage their customers and market and provide related services to them.
Over the past several years, there has been a rise in the level of sophistication and interconnectivity between innovative technology and financial services providers, and we expect this trend to continue and accelerate. We believe that there are many potential targets within the FinTech space that could become attractive public companies. These potential targets exhibit a broad range of business models and financial characteristics that range from very high growth innovative companies to more mature businesses with established franchises, recurring revenues and strong cash flows.
There has been significant disruption and change in the delivery of financial services in recent years, including, among others:
Retail Banking (mobile payments, Neo-Banks)
Payments processing for consumers and businesses, including unattended Point of Sale payment systems
Wealth Management (robo advisors)
Digital Marketing
Digital Assets
Exchanges and Trading Platforms
Big data moving to the cloud, APIs, data security
Blockchain Technology
With increased adoption of technology solutions by both consumers and businesses, we believe that the sector is poised for continued growth in both overall market size and penetration. Key industry characteristics include long-term organic growth, attractive competitive dynamics and further consolidation opportunities. Key business characteristics include high barriers to entry, low risk of technological obsolescence and public market-ready scale. Key financial metrics include organic revenue growth, recurring revenues and strong cash flow conversion.
We do not intend to limit our search to one segment of the financial technologies ecosystem, but will instead target a wide variety of companies that deliver a solution or product to the financial services end-market. We believe that our management’s extensive experience and demonstrated success in operating, advising and investing in businesses in this industry provides us with a unique set of capabilities that will be utilized in generating stockholder returns.
We will seek to acquire established businesses that we believe are fundamentally sound but potentially in need of financial, operational, strategic or managerial improvements to maximize value. We will also look at earlier stage companies that exhibit the potential to change the industries in which they participate and which offer the potential of sustained high levels of revenue growth. Consistent with our industry focus, we intend to target financial technologies businesses that have strong management teams, demonstrated organic growth, and differentiated products or services. Opportunities range from high-growth, customer facing technologies in payments, lending and digital assets to more mature, high-margin, stable businesses which may be engaged in lending, asset management, or providing critical processing and support to established financial services firms.
We believe that the wide networks of our management team will deliver access to a broad spectrum of opportunities across the financial technologies landscape. In addition to any potential business candidates we may identify on our own, we anticipate that other target business candidates will be brought to our attention from various unaffiliated sources, including investment market participants, private equity funds, law firms, accounting firms, and large business enterprises seeking to divest non-core assets or divisions.
The members of our management team will communicate with their networks of relationships to articulate the parameters for our search for a target company and a potential business combination and begin the process of pursuing and reviewing potential opportunities.