LFP162 – The Past and Future of Fintech w/Vinoth Jayakumar Partner Draper Esprit

Draper Esprit are one of London’s longer-established VCs and with investments in the likes of Revolut, Transferwise, Thought Machine, Seedrs, Crowdcube and Freetrade might know a thing or two about Fintech. Draper Esprit, like Augmentum who we had on the show last year are also a listed AIM and thus also can offer finance not tied to the cycle of underlying funds – the so-called patient capital model.

Vinoth not only leads Fintech investments at Draper Esprit but has had a long running interest in the sector being at a Zopa Party in around 2007/2008 long before almost every firm now on the scene existed.

In this episode he picks out the key developments in Fintech over the past decade and a half, some of the takeaway lessons that all businesses can implement, some of the challenges and ends with his prospects for the upcoming decade.

Topics discussed on the show include:

  • why Vinoth has been suffering in Harrogate
  • badminton in Malaysia
  • the evolution of Kuala Lumpur
  • being thrashed by the Japanese National Ladies team for about 20mins :-O
  • Vinoth’s career journey
  • Dragon Gate Taoism and 21stC innovation – an example of innovation across the board and synchronicity of innovation
  • Draper Esprit’s portfolio operation – main focus is on B2B and B2C rather than being excessively siloed by sector, doing about 15-20 deals per annum
  • a schema of Fintech milestones over the past 20yrs including Paypal, who Zopa structured the investment options way back, MPesa, Bitcoin, Google Wallet, Alibaba Face identification, Ethereum, Challenger banking boom, ICO boom, Apple-Goldmans faceless card, “not much in 2020” (?! :-D)
  • virality and simplicity
  • their two investments in London Fintechs each worth about £4-5bn, Klarna also has a similar valuation
  • how these huge valuations arise and key points therefrom
  • the counter-argument to the incumbent “no big deal” argument re challengers
  • why people pay for what can otherwise be free banking
  • stalactite vs stalagmite Fintechs/tech startups
  • why P2P did not succeed anywhere as near as the highest hopes…
  • the spin-off from the whole P2P revolution and how it changed attitudes in many dimensions
  • the de facto nationalisation of SME lending right now
  • lessons from Klarna – what worked really well
  • small changes to formula leading to exponential changes in results
  • Earl Nightingale’s Acres of Diamonds
  • how VCs have to relate to this “small changes” challenge – a business can appear poor but be super-close to runaway success
  • how company’s need to structure themselves to take advantage of this
  • on the negative side – control issues – Wonga, Wirecard et al
  • the balance between creativity and control on the Board and how this changes over time
  • how VCs approach putting controls in place
  • the importance of the founder/CEOs mindset re controls
  • the relevance of regulation re controls
  • VCs bring liquidity events pressure and controls – both of which are easily overlooked by other external investors who just focus on the capital raised
  • broader lessons from crypto/Bitcoin
  • decentralisation
  • looking forwards what themes excite Vinoth?
  • £10-30m is the usual range of Draper Esprit’s investment – longer term more patient capital

And much much more 🙂

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