Citigroup founded its innovation arm, Citi Ventures, in 2008 and began investing through its venture investment team in 2010.
Since that time, Citi Ventures has made over 140 investments and has a current active profile of over 70 companies across six sectors and its Impact Fund.
The six investment areas Citi Ventures focuses on include: financial services & technology; data analytics and machine learning; commerce & payments; security & enterprise IT; customer experience & marketing; and property technology.
Over the years, Citi Ventures also has seen two dozen known exits in companies such as Square, DocuSign, Honey (acquired by PayPal for $4 billion) and Second Measure. The firm also invested in the likes of Plaid, Trulioo and Even Financial.
To get more insight on the Citi Ventures’ investment thesis and its perspective on fintech generally, I hopped on a call with Luis Valdich, who has served as its managing director since 2015 and is responsible for fintech investing in both the U.S. and Europe.
Prior to Citi, Valdich founded and ran JPMorgan Chase’s Strategic Investments group for nearly 8 years. In his role at Citi, much of his own investment focus has been focused on fintech. Valdich has backed the likes of Clarity Money (which was acquired by Goldman Sachs in 2018), HighRadius, PPRO, Octane Lending and Second Measure, among others.
Answers have been edited for clarity and brevity.
FL: What is Citi Ventures’ investment philosophy?
Valdich: Although we are obviously a corporate venture investor, being part of Citi, we think of ourselves as ideally, a venture investor who can deliver the best of both worlds. One who can invest as a traditional VC would with standard best practices for assessing opportunities, making decisions and managing that whole process. We’re there to help build value within a company, having very much a founder-first lens and approach, and being very aligned with the founder and with the rest of the investors in the company for creating a very successful business.
At the same time, being part of Citi gives us a pretty strong opportunity for adding value to startups. There is a lot of capital in the marketplace and the best startups have lots of funding options. So, having the ability to tap into Citi’s subject matter expertise in lots of areas can be attractive – particularly as you get into more sophisticated aspects of fintech and considering the fact that Citi spends $8 billion in technology and a footprint in over 100 countries.
Unlike some other corporate VCs, we don’t have a requirement to have a business sponsorship in order to make an investment. We have the freedom, the autonomy, the discretion. And that gives us lots of opportunities to be nimbler than some other outfits. But of course, in some cases, we may do sponsorships, so we’re not against that. But it’s certainly not a requirement.
FL: What areas in particular do you invest in?
Valdich: In the interest of time, we look at fintech as it’s very broadly defined and that includes aspects of insurtech, proptech and increasingly the embedding of financial and commercial activity, and those sorts of things. And then separately. I think of enterprise technology as being horizontal – as in any technology solutions that will be relevant to any large corporate, including a large bank. Some may have levels of uniqueness, such as cybersecurity, which is a particularly sensitive topic you know for a bank. But that’s also relevant to nonbanks. Marketing technology and customer experience are also areas that are particularly important.
When it comes to the stage at which we invest. I’d say, we understand these exceptions and we have you know, relatively broad broadly where we’ve done a few things very early and a few things very late. But in general, we look to invest in companies that already have accomplished product market fit. Typically, they have at least a few million in revenue and are growing very rapidly. We do have a very strong bias for growth. Ultimately we want to get to companies that will eventually grow to be $100 million plus in revenue or multi-billion dollar companies.
We look for the attractive metrics and what are the economics, such as what type of return, what type of customer acquisition cost, and margins. And then in parallel to all that, we look at commercialization opportunity as well as the potential promise with our startups in engaging with Citi, and sometimes with clients of Citi.
Commercial applications or other details are handled by other folks, and we tend to focus on the investment. That gives us this ability to be very close to the company and to the founders.
Given our dynamics, we tend to be more of a co-investor than a lead investor, although we have led some rounds. That gives us the ability to co-invest with all the VC firms out there and identify the most exciting startups out there and build great companies.
We have also been co-investing with our competitors, with other banks and other strategics. So we’re pretty open in terms of partnering very broadly.
FinLedger: What are some of the fintechs in your portfolio currently?
Valdich: We recently invested in HighRadius, which is based in Houston. That’s been a very exciting journey. They worked with Citi to launch a product and integrate it and we’re distributing it by actively marketing with our clients. Obviously, the company’s doing extremely well a newly-minted unicorn. It has all the elements of a very successful investment and commercial collaboration.
There’s also PPRO, which is headquartered in Germany, and they provide access to local payment methods.
FL: What areas of fintech get you particularly excited?
Valdich: The “plumbing” that goes into powering a seamless online payment process or gathers meaningful customer data is intriguing.
A big theme for Citi is embedded fintech, and in particular the embedding of commercial financial activities. When you look way, way back, pre all these exciting fintech days – if you were making a payment in a local currency, you were effectively also making a foreign exchange transaction. Right? So, that concept has been around for a very long time. But we’re also pretty excited about what we think of as embedded trade, or this convergence between B2B transactions. Think of international trade or about any transaction involving the movement of physical goods that has a very strong logistics component. You need to put the goods in a container or in a pallet or, in some truck or railroad and then you need to send them to a port. And then they need to get on a boat, and they need to move to the next place and there’s warehouses in between. So all those logistics has a number of financial transactions associated with that…So if you’re an exporter, or you are an importer, either way, you’re entering into a pretty major financial transaction with a counterparty. There are all these financial instruments that you use that become increasingly required.