FinData: A Central Ingredient in the New Ecosystem
This blog, the fourth in a series, is focused on Financial Data, or what we call FinData. As we begin to put money to work in our latest fund at MiddleGame Ventures (“MGV”), we have completed a series of deep dive reviews of the FinTech startup landscape in B2B and B2B2C financial services to help structure how we prioritize our efforts across the broader fintech ecosystem. FinData is a core investment theme for MGV, encompassing both the collection and digitization of new data sources as well as the mechanisms and protocols to share and analyze data within and outside organizations.
The accumulation of data and development of analytical tools is central to the new landscape. Accordingly, the availability of vast amounts of new data (whether from unstructured data, new asset classes, or current data spun out from a business) will drive increased functionality around data analysis, collaboration, and decisioning, including through the use of new technologies such as AI or quantum computing.
Furthermore, the opening up of FinServ, is giving way to new entrants with fully digital architectures (think digital core systems, spatial biometric authentication) to provide an array of novel services on top of alternative data sources (IoT, satellites). Incumbents across financial services will thus no longer have the luxury of handling data solely within their four walls. Therefore, it will be essential to securely harness and share new data, which will inevitably create new opportunities (and new risks). We believe that all things data will quickly move to the top of strategic priorities and create an entirely new value chain.
FinServ is quickly shifting from paper, people, and processes to digital, distributed, and data-driven (reflected in our term “3D Finance” explained further below). As significant (but largely inefficient) consumers of data, legacy players will have to upgrade their “spaghetti code” tech stacks to have a hope of remaining competitive in the new environment.
We see a lot of activity and interest across three core areas:
Our work indicates that an army of nimble upstarts are enabling this data transformation. From frontier data ingestion (new pipelines, MLOps) to advanced data privacy/security technologies (ZKP, homomorphic encryption), new data capabilities are becoming increasingly available as computing costs decline and computing power increases.
MGV has already invested in four companies that are championing trends across various subsectors in this space (Coinfirm, Minna Technologies, Wayflyer, and Next Gate Technologies). Our research has uncovered over 500 other early stage startups attacking the opportunity across the multiple vectors outlined below. Unsurprisingly, given the core building block nature of financial data to the ecosystem, there is a diverse and growing entrepreneurial energy being brought to the fore.
Six MGV Focus Trends in FinData
We have organized our research and investment efforts around six key trends that will transform a cross-section of functions within and beyond the FinData landscape:
These focus trends in FinData tie into MGV’s “3D Finance” meta thesis, which encompasses the transformation of financial services around a core of Digital, Distributed, and Data-Driven processes. Within the 3D Finance construct, we have further developed investment themes that focus our attention on the transformation that is just beginning to unfold across the financial services industry, many of which were highlighted on MGV’s introductory blog.
If you are a high-potential pioneering startup in the FinData ecosystem or if you are an incumbent seeking to identify opportunities within this ecosystem, please reach out to us. We are committed to supporting the transformation of financial services over the next decade and welcome any and all feedback and opportunities to engage constructively on a shared vision for the future of financial services.
Stay tuned for follow up posts on additional verticals of interest to the investment team (also see our first three posts in this series on Open Banking, OmniFi, and Capital Markets & Asset Management).
In addition to the MGV team, underlying research credit goes to Clement Parramon and Inder Takhar, with support from Matt Lobel.
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