DEUTSCHE BÖRSE TAKES THE FINTECH PLUNGE.
Deutsche Börse, Europe’s largest exchanges operator, is to enter the fintech fray with the creation of a new venture capital fund – DB1 Venture – targeting investments in the emerging technology in capital markets.
The five-strong venture team, led by Ankur Kamalia, a managing director and head of venture portfolio management at Deutsche Börse, will be mainly based in Frankfurt although it will probably have a European and US markets focus.
The remit is to back companies that fall into five fintech sectors of interest. These include market infrastructure providers, such as trading platforms; companies that help to digitise post-trade services, such as blockchain startups; big data and analytics firms; alternative funding platforms; and companies offering technology that helps with the decision-making process when investing.
The division’s investment committee will be chaired by Deutsche Börse’s chief executive Carsten Kengeter who has said that “the future exchange and market infrastructure organisation will have a larger responsibility in fostering growth and innovation throughout financial markets. Technology is at the core of our business, so partnering with innovative fintech firms that are relevant for our clients is an absolute priority for us.”
The exchange operator said that the new investment structure will enable it to make proactive investment decisions across the entire group, whereas previously investments were made by different divisions. It will be a less opportunistic and more institutionalised way of investing. In other words, investments will only be made in areas that are strategic to the group.
Deutsche Börse has already made minority investments in young companies – most recently in the blockchain startup Digital Asset Holdings and GMEX, and a venture to trade capacity for cloud computing, as well as a trade repository it runs with Spain’s Bolsas y Mercados Españoles (BME).
Since Kengeter’s arrival a year ago, it has begun to restructure its portfolio, selling off a 50% stake in Infobolsa, a data provider, to the BME for E8.2m.
The German exchange is one of a growing number of large financial institutions looking to step up its collaboration with fintech startups through initiatives. Venture capital-backed fintech companies are among the most popular having raised $14.4bn of financing last year – almost double the previous year – according to a report from KPMG International and CB Insights.
Rival CME Group has a similar division called CME Ventures, which is run out of the US and was also a backer in Digital Asset Holdings. Banks including Santander, HSBC and Commerzbank have also backed startups through dedicated teams.
Kengeter said in a statement: “Our objective with DB1 Ventures is to continue to be active in investing in early to growth stage ventures which are core or adjacent to our client, product, geographic and technology strategy. And as part of our active management, we will also deepen and extend promising partnerships with some of our current portfolio companies.”
Deutsche Börse is planning to merge with the London Stock Exchange in a E20bn deal.