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1Mby1M Virtual Accelerator Investor Forum: With Alexander Ross of Illuminate Financial (Part 3)

Posted on Wednesday, Nov 21st 2018

Sramana Mitra: These are banks in the UK? What kind of banks are we talking about?

Alexander Ross: These are tier-one and tier-two European and US banks. What we find is that given that every company that speaks to us will likely get an introduction to one of our bank partners if they’re relevant or one of our strategic investors, an increasing number of companies want to remain engaged with us and refer companies to us. About 70% to 80% of our pipeline is inbound at the moment across our strategic investors and strategic bank partners. The rest comes from conferences, outbound-themed outreach.

Sramana Mitra: What do you see as the trends emerging from the B2B FinTech space? How would you synthesize that?

Alexander Ross: We tend to be focused on problems. We’re business solution investors versus technology-focused investors, so we tend to shy away from technologies looking for a problem and focus on where the solution is being built. Regulation definitely has some interesting themes to it. Nothing drives adoption like a regulatory gun to the head.

More broadly, some of the areas that excite me are the application of more effective anti-money laundering detection. That often leverages AI and machine learning or alternative data, which I mentioned earlier. That is in effect surfacing interesting datasets and normalizing and standardizing them, and serving them up to financial market participants in a way that they can extract actionable insights from that data. It could be airline ticket price data that’s scraped off the web. The data source is enormous.

KYC is definitely a focus. Unfortunately, that term gets banded around quite a lot. People don’t focus on what specifically people are trying to solve there. Generally, onboarding of new corporate clients or new businesses and maintaining that as a large bank is very expensive. There’s a big gap in the market there. Securitization world is waking up post-financial crisis.

One of the reasons for the financial crisis is that people just didn’t know what assets were in these instruments. Providing transparency down to the asset level or loan level within these securities is another space that I think is very important. The data that consumers are willing to give up in order to get a loan, you can price that risk more effectively and maintain the transparency all the way through to the end if privacy is carefully managed. I think that provides a much cleaner and more effective capital market.

Sramana Mitra: What about cybersecurity? The finance market is one of the biggest targets for security issues. Security protection requirements are significantly higher and in some cases, of a more real-time nature. How do you view those investment opportunities?

Alexander Ross: We’ve seen a number of solutions in this space. A previous alumnus of our fund has gone on to a cybersecurity-focused fund. I’m a strong believer in sector focus. For a smaller VC fund, I think there is domain knowledge and ecosystem experience. Cybersecurity is a very deep and complex problem. We will look at it where it’s specifically relevant to financial markets. We’re not experts in cybersecurity, so we haven’t made any investments there.

Sramana Mitra: Cybersecurity is very specialized. Without core expertise, it’s not easy to invest in cybersecurity. Thank you for sharing your thoughts.

This segment is part 3 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Alexander Ross of Illuminate Financial
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