My notes from the event that discussed the trend of FinTechs moving into the public markets The event page: https://www.altfi.com/events/altfi-fintech-investor-forum

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Notes from AltFi FinTech Investor Forum 2019
By: Kristi Rohtsalu
May 2019
Background info
This AltFi event took place in London on 15 May 2019, in the Fox Williams building, and was sponsored by
Fox Williams and Goodbody. The following notes reflect my subjective takes from the event.
FinTechs have been classified as follows:
1) payments;
2) lending/crowdfunding;
3) blockchain;
4) digital wealth;
5) InsurTech;
6) RegTech;
7) Challenger banks or ‘neo-banks’; and
8) TradingTech.
Fireside chat with Tim Levene, CEO of Augmentum FinTech
US challenges / UK advantages (as they looked back in 2009):
• US has very difficult regulatory regime; on the other hand, UK “has the most progressive regulator in
the world”.
• In financial services, innovation doesn’t come from Silicon Valley.
Challenge for the investment funds, concerning investing into FinTech:
• Potential investors do not know the asset class; intellectually, they are interested, but it’s difficult to
get them crossing the line. Still, after several IPOs, the following has been built.
• Corporate venture capital is competing with the funds.
Generally, funds want to see that their capital “can make an impact”.
Augmentum FinTech is focused on series A, B, C. What are considered as ‘green lights’ in the investment
decision making, depends on the company’s stage of development. Still, there are certain overarching
principles that are relevant in all stages:

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• Field of activity: The company should be operating on a field, where fundamental disruption is
expected, and the current penetration is low. Augmentum FinTech is looking for the leaders in
disruption.
• Capacity of the founding management team: Management team shall be able to execute on an
extremely competitive market as well as cope with substantial amount of regulations. (“You want to
attack a slow-moving incumbent!”) Multiple founder teams are clearly preferred. Ideally there would
be three founders: tech, product and merchandising.
Recommendations for the entrepreneurs:
• Only use corporate venture capital if there are true synergies between the businesses.
• Giving preferential rights to any of the investors should be avoided.
Missed opportunity for the Augmentum FinTech?
“Revolut. Very strong capacity of execution; has executed seamlessly from early on. Started from building
the customer base.”
IPO market in UK and in Europe has substantially changed over the past 10 years.
• Companies stay private for longer. As compared to earlier, it is easier for private companies to access
funds even in large amounts. Public listing is considered to hinder growth, given the additional
requirements that relate to being public.
• Market for seed funding has become more competitive, too. Still, more established investors (VCs)
come later.
• Incumbents are expected to become active in acquisitions in 2-3 years.
How FinTechs are scaling
Panel: Karen Kerrigan, Chief Operating Officers at Seedrs; Andrew Lawson, Chief Product Officer at Zopa;
Casey Lord, Head of Product at Nutmeg; Oliver Smith, editor at AltFi (moderator)
Participating companies:
Seedrs (https://www.seedrs.com/) is an equity crowdfunding platform for investing in startups and later-
stage businesses throughout Europe. According to Crunchbase, Seedrs was founded in March 2009 and is
headquartered in London, UK.
Zopa (https://www.zopa.com/) is a UK based peer-to-peer lending company founded in 2004 and
launched in the UK in March 2005. It is considered as one of the world’s first peer-to-peer lenders of its
kind. In Q4 2018 the company obtained UK banking license (with restrictions).

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Nutmeg (https://www.nutmeg.com/) is an online investment management company (i.e. in wealth
management business) based in London, UK and founded in 2011.
Challenges & slowdowns in scaling:
• Finding the right balance between investing into tech vs investing into sales team;
• Getting somebody who has never invested his/her money into investing;
• (Related to previous point) Market volatility in more recent years: customers are less willing to take
risks.
• Regulations such as MiFID: Resources need to be redirected from investments into business to
investments into compliance; as compared to the incumbents, it takes more time for newcomers to
understand what new regulations mean for them.
Myth busting the IPOs: When is the right time to list?
James Clark, Head of Tech and Lifesciences at London Stock Exchange Group
“A lie can travel halfway around the world before the truth can get its boots on.”
- A quote that is attributed to Mark Twain
Myth: “I need to have annual revenue of at least $100 million for an IPO.”
This may be true for the US; yet $100 million revenue is not necessary for listing on London Stock
Exchange. Meaningful annual revenue for public listing in London starts from the range of $5-10 million.
Annual cost for being listed (extra overhead costs, audits etc.) is about $400,000.
Myth: When listing in US, one gets better valuation. Among others, more focused, tech specialist analyst
pool in the US enables tech companies to achieve those higher valuations.
False. Valuation is driven by the quality of the company, not whether the company is listed in UK or in US.
Tech businesses list everywhere, and institutional investors are largely not bound by national borders.
One can tap US money from the UK. Less than 50 per cent of the money invested in London’s markets is
from the UK and around 30 per cent is from the US. Substantial share of companies listed in London has
international business.
US is very domestic capital market. Therefore, in US international companies are trading with discount (as
opposed to the UK, where being international is considered as an advantage).
Myth: “I cannot IPO because I’d need to raise more in the future.”
Where did this myth came from? With IPOs, one can raise capital several times. For example, Just Eat
came back to the market eight times to raise more money.
Myth: “I’ll have to do quarterly reporting.”
Only semi-annual reports are required in the UK; quarterly reports are ‘nice to have’.

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Will FinTechs thrive in public markets?
Panel: Guy Morgan, Partner at Fox Williams LLP; James Felix, Director at Goodbody; Kartik Swaminathan,
Research Director at Arden; David Stevenson, Executive Director at AltFi (moderator)
Why to list?
Listing on stock exchange brings publicity and greater transparency, incl. transparency about the
company’s market cap. As for credibility, well known private investors can bring the same degree of
credibility as public listing. Yet, private capital lacks mark-to-market.
Are mainstream investors interested in FinTechs? For them, FinTechs are little known and complicated.
Opinion: yes, the public is interested; FinTechs are not more complicated than BioTechs, for example.
Important in public listing:
Consistent performance / delivering on promises is critical, especially during the first year from IPO. If the
company disappoints in the first year (as, for example, Funding Circle did), it is difficult to come back.
Coming back is possible, when the company reaches the next tangible target as communicated.
Market judges based on the Visibility, Viability and Innovation. B2B businesses are clearer in that sense;
here there are plenty of easy wins & low-hanging fruits.
Current markets:
We are at the top of the M&A cycle.