Katherine Wilson has an ideal background for her role as Investment Director at Illuminate Financial through her experience in both banking and fintech. Shanny Basar speaks to Katherine to find out how this venture capital firm specialises in backing companies that solve problems in financial services.
Wilson explained that Illuminate Financial’s model provides value-add to companies trying to sell into the financial services sector as one of their target markets.
“We have tier one LPs [Limited Partners] such as JP Morgan and Barclays and those connections are pretty transformative for young B2B businesses,” she added.” I have sat in that B2B sales position and know it would have been awesome for us to have an investor who could open those kind of doors.”
Illuminate Financial has partnered with more than 10 large financial institutions, introduced more than 500 companies to its partners and assessed more 3,000 young companies. From that pipeline, the venture capital firm currently has a portfolio of 25 firms and has made two exits including PayPal acquiring Curv, a cryptocurrency startup based in Israel.
“We are very selective as we form true partnerships and will not throw our brand and reputation behind a business unless we are prepared to get behind and advocate for them,” said Wilson.
The investment criteria includes whether Illuminate has a supportive top-down thesis and mutual chemistry with founders. “We have to believe that the founder or founders can be the leader in their segment and successfully navigate all the obstacles in building a team and bringing a product to market” she added.
In January this year Illuminate completed the final close of its second fund at just over £72m, more than double the size of the first fund, with 45 LPs. Mark Beeston, founder and partner at Illuminate, said in a blog that the firm had contacted 1,389 organisations or individuals and 1,344 said ‘no’.
Wilson has been at Illuminate for just over three years. She joined in June 2018 after two years as Head of Business Strategy and Development at CoInvestor Technologies, a start-up software company, where she worked with prospects to find product fit and made their first commercial sales and where she learned how hard and how messy it is behind the scenes to build a business. She joined the fintech after spending four years at Citi, primarily on the trading floor in equities, where she realised that banking was going to be fundamentally changed by new technologies.
She admits that making the leap from a stable and comfortable banking job into the start-up world was a big risk, but viewed working for a new fintech as a learning MBA, minus the debt, where she could get her hands dirty on the ground and learn the skills she saw as critical for success.
“Approaching it this way, as a necessary investment in my development, changed that risk/reward equation for me,” said Wilson. “In fact I started to feel it would be more risky for me not to make the move!”
There were several reasons why Wilson joined Illuminate Financial. She said: “Chemistry with the team is obviously important as you have to respect the people that you are working with and feel that you can learn a lot from them.”
In addition, the role itself appealed as it drew on both her fintech startup and banking experience. “This combination is really powerful in supporting the portfolio companies and the investments that we make,” Wilson added.
Wilson has led deals in sustainable finance, wealth and asset management but also in non-financial services specific platforms and solutions. Illuminate has made three investments in sustainable finance from its second fund and is actively looking for more as the space matures.
“I don’t think I can understate how big we think this opportunity is and the impact sustainable finance will have on financial services, capital allocation, investment and analysis,” said Wilson. “We are really excited about climate intelligence which provides understanding of physical asset risks as well as the transformation to a carbon-priced economy.”
In addition to sustainable finance, Illuminate is actively focused on digital assets and has announced recent deals as the segment has matured. For example, Illuminate took part in a $40m Series A investment round in Talos, which provides institutional technology for digital asset trading. The financing was led by renowned VC firm, Andreessen Horowitz, and other investors included PayPal Ventures, Fidelity Investments, Galaxy Digital, Elefund, and STEADFAST Capital Ventures.
Peter Sanborn, Managing Partner at PayPal Ventures, said in a statement: “Digital assets have a key role to play in our global financial system and there is a growing need for trusted infrastructure to seamlessly connect this evolving ecosystem. Talos’s enterprise-scale software provides that critical market structure support and enables institutions to reliably interact with digital currencies.”
Wilson continued that Illuminate will not invest in a technology just because it is “super-sexy” but will wait to see signs that the financial industry is ready for adoption – which is happening in digital asset infrastructure. The venture capital firm sees a massive opportunity as some traditional financial services players are moving parts of their infrastructure to distributed ledger technology.
“It’s now at the point where if a new company is pitching us and isn’t leveraging this technology we will proactively ask ourselves whether we think they still exist in five to 10 years,” said Wilson. “Our thesis is that the plumbing of the banking industry is being rewired onto this new infrastructure.”
She expects every industry to be different in three to five to ten years as consumers are demanding things faster, cheaper and in a more seamless way which is forcing change.
“We all left the typewriter behind and moved to computers and that will continue to change,” she added.
In addition, new technology and Moore’s law have driven an exponential curve of improvement that will make businesses more efficient and deliver a faster, better service to clients.
“Everyone does not need to be a coder but they need an understanding of what is possible if you leverage these tools,” Wilson said.
When asked to highlight individual portfolio companies, Wilson chose two that she is really excited about for multiple reasons, not least because they both have “fantastic” female CEOs.
Vault Platform is a trust-based, ethical conduct and behavioural analysis platform that gives employees the opportunity to safely speak up and improve the integrity of their workplace. The platform, led by co-founder and CEO Neta Meidav, helps organisations identify and remedy potential conduct problems before they become a major regulatory or reputational risk.
“We think of it as putting a safety net at the top of a cliff, rather than having an ambulance at the bottom for the aftermath,” said Wilson.
CEO Shelby Austin leads Arteria AI, a data-driven contract management platform that automates a huge amount of the painful negotiation process by digitising playbooks.
“I studied law before moving into finance and know how protracted it is doing deals when emails fly back and forth with new red-lines,” Wilson added. She holds a dual Bachelor of Law / Bachelor of Commerce degree (Hons) from the University of Queensland in Australia, majoring in finance.
Wilson admitted that investment in female founders needs to increase but argued there is no single answer to solve the issue as subtle pressure needs to be applied from multiple spheres to impact behaviour. For example, CFO hiring agency Altima recently found in a survey that only 15.9% and 24.3% of CFOs or senior finance roles in technology are held by women.
“LPs who allocate into VC funds should proactively ask about the diversity mix across multiple metrics and we also need more active female angel networks,” she added.
Angels in Illuminate’s network refer deals but most are male referring to men so having more female angels in that early stage investment process would help.
“We are pretty proud of having a decent number of female CEOs and founders in our portfolio,” said Wilson. “We do punch above our weight relative to the industry average although it is not yet 50/50, so we can do better.”
Although fintech may seem daunting to women, Wilson said there is a supportive ecosystem emerging that women can play an active part in shaping and bring valuable insights.
“There are still challenges, like in all industries, but in the numbers-driven fintech world you will have evidence to show you are performing and there are incredible women in the industry who are supporting each other to get rewarded for that,” she added.
Wilson would also advise women to speak to lots of people to learn about the different pockets of financial services.
“It is an enormous sector that spans insurance, to transactional payments, to relationship driven private wealth, to high-octane investment banking and M&A and so on,” she added. “Even within the pockets, like asset management, you have everything from fast moving quant hedge funds to long-only managers who think and act in completely different ways.”
In addition, women should keep learning. “I have taken the skills I learned in different roles and combined them,” says Wilson. “I feel you have to build out a skill-set and continue to learn and improve with every opportunity that comes your way – and that mindset has helped me navigate to where I am today.”
©Markets Media Europe 2021