Can you tell us about your current role as Fintech Investor at Centana Growth Partners?
At Centana, I am a part of the investment team and split my time between identifying new investment opportunities, meeting with entrepreneurs, thinking through interesting thematic areas, attending events and conferences, spending time with fellow investors, as well as deal-related due diligence efforts and execution. I also spend time supporting our portfolio companies -- Jumio, Quantitative Brokers, SheerID, and Sentieo – by providing strategic guidance, making relevant industry introductions, evaluating acquisition opportunities, and participating in board meetings.
My role at Centana has turned out to be unique. Since we were very much a startup when I first joined, I was able to get exposure to areas outside of investing, such as fund operations and fundraising. Now that we are a few years in as a firm and team, I am much more focused on investing, which further allows me to pursue my passion for connecting with founders. I’m constantly meeting with talented entrepreneurs and fellow investors, which I consider the most exciting part of the job while helping our firm identify thematic investment areas and represent Centana at industry events (now virtually of course).
What types of companies do you collaborate with?
Given Centana’s specialized nature, we spend a lot of time thinking through thematic areas impacting our core sectors (asset management, insurance, banking, wealth management, payments, capital markets, and related enterprise software). We partner with rapidly growing firms addressing relevant industry issues head-on within thematic areas we identify as a team. I’ve been passionate about healthcare technology and believe we’ll see innovative solutions addressing many issues highlighted by the recent crisis. Another area I find exciting is real estate; while this industry is currently grappling with the impacts of the pandemic, I see this as an area ripe for continued innovation.
As an investor, what are the main qualities you are looking for in a company in order to invest?
One of the most important qualities is the founding team. I look for the spark that indicates passion, commitment, and a vision that can lead the company through various stages of growth while being able to adapt to a rapidly changing market. I find that passionate and committed founders extend to the broader team’s ability to attract talented employees, who eventually become the engine. I also look for products that have a clear competitive moat and address a real problem.
Additionally, one of our primary criteria is being helpful investors and board members, so we look for companies that can benefit from our team’s experience and expertise, as well as our extensive financial services network and advisory board.
I’ve grown to realize that no one company or investment is the same. Each will have its unique attributes and set of risks – it is much more of an art than a science, and over time you develop an instinct that helps you form a conviction after the first few meetings. Sometimes, it will be a year or two before you become an investor in the company you “fell” for, but getting it right is much more important than getting it fast.
What made you choose the financial technology sector to focus on after your experience as an investment banking analyst?
As I looked to grow my career outside of banking, I was keen on developing sector expertise in an area with a lot of potential for innovation, and fintech fit that mark perfectly. This is when I met the three Partners who founded Centana in 2015, and I instantly fell for their vision. At the time, not as many investors were spending time in fintech exclusively, especially on the B2B side, and I feel very lucky to have landed in a sector that has attracted so much talent, innovation, and capital over the years I’ve been involved. The founders, Ben, Eric, and Steven were not only focused on backing the most innovative entrepreneurs across the financial services ecosystem but also committed to building a firm with an inclusive culture and diverse team, which was very important to me. I feel very fortunate to be one of the early employees of a quickly growing firm, and I’m excited about what’s next for all of us at Centana.
What are some of the interesting trends in financial technology you are observing as a result of the 2020 pandemic?
With the inevitable rise of digital transactions and physical isolation amid the pandemic, reports of elder financial abuse continue to rise. Conventionally, fintech has been associated with millennial users and the “digital” generation, but we have found that fintech can play a critical role in protecting some of the most vulnerable demographics from the burgeoning threats of financial fraud. We’ve been following this theme very closely at Centana and, last month led True Link Financial’s Series B round. True Link is a mission-driven financial services company that aims to increase the independence of vulnerable older adults by offering highly specialized payment and investment products designed to protect and empower consumers most susceptible to fraud schemes.
We have also been paying close attention to the digital identity space, which has been a big theme for us as a firm for several years and led to our investments in Jumio, SheerID, and most recently, SpyCloud’s Series C round. SpyCloud is an anti-fraud platform and leading provider of account takeover prevention solutions. As criminals continue to develop new methods for collecting and weaponizing stolen information, SpyCloud’s talented team is building innovative ways to stay ahead and making the internet a safe place for both individuals and businesses. Centana has long supported digital identity and fraud prevention as an investment category, and it continues to be an area where we see exciting developments.
Another area that I am passionate about, which has certainly been highlighted by the current pandemic, is healthcare. I see tremendous opportunities in this massive market and at Centana, have been focused on areas and companies that are helping make healthcare pricing and billing more efficient and transparent. Many companies are working on tackling this from various angles such as Cedar, OODA Health, Rivet Health, Inbox Health, and several others. With the support of The Health Care PRICE Transparency Act, I hope to see more providers and hospital groups adopt these solutions.
What are some interesting AI trends in Asset management you are excited about and monitoring this year?
I wrote about the intersection of AI and Asset Management last year, and it has been interesting to see how the space evolved over the last 12 months. On the institutional side, there has been a lot of buzz and hysteria about AI eliminating jobs, but we find that this sentiment is mostly overhyped, and humans cannot simply take their hands off the wheel (or at least not yet). The way we use AI now is to automate mostly repeatable tasks through ML and pattern recognition, but when it comes to creative decision making, humans will remain in charge for the foreseeable future. The best use cases of AI in asset management, in my opinion, are data related. Big data is growing exponentially and has reached a point where the human brain simply cannot keep up to accurately process available information. This includes traditional data, such as news, SEC filings, financial reports, earnings call transcripts, management presentations, and other similar outputs, which have been augmented by what is called alternative data – data derived from less traditional or less structured sources (e.g. social media, website traffic, etc.).
Another interesting trend we might see is a shift from historical data analytics to something more predictive in nature. Some companies are already doing this, but I think we are in the earlier stages of asset managers relying on these predictive features to make investment decisions. I believe that over time, we will see a shift towards relying on some of the predictive functionality as 3rd party vendors prove their worth. We are also likely to see increased adoption of these tools by traditional asset managers, rather than quantitative funds, which have been the primary users of such data and functionality to date, or even launches of tech-first asset management firms such as Pagaya Investments, which raised $102M earlier this year.
One newer but very important trend we are looking into as well is the explainability of AI. While we have been thinking about it in a broader sense (not limited to asset management), we think it is an important area to pay attention to. As models get more complex and further penetrate various parts of financial services from an adoption perspective, firms across the entire ecosystem should be able to document and support the decision-making of their AI models, whether that is related to one specific trade or entire portfolio allocation, especially in parts of financial services that impact consumers.
Reach out to Elizaveta on LinkedIn.