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. This blog, the third in a series, is focused on Capital Markets & Asset Management (CM & AM). CM & AM includes the asset issuance, investing, trading, and post-trading life cycle of investable assets, as well as new marketplaces, tools, and infrastructure. Technology promises a revolutionary shift in the financial services sector, a departure from incremental, evolutionary product development that has largely defined CM & AM until now.
CM & AM will undergo market structure transformations characterized by shifting data asymmetries between actors, the rise of new digital asset classes, and a reduced reliance on centralizing agents. We believe that these changes will create avenues for the emergence of new products, marketplaces, and platforms for engagement between providers and consumers of financial products, creating a virtuous cycle of innovation. For example, the automation of trade processing and post-trade clearing and settlement via DLT will provide significant capital savings and cost efficiencies to both the buy and sell side, while also decreasing friction, minimizing operational risk, and boosting transparency—key aims of regulators.
Fundamentally, the emergence of a digitally-native infrastructure will quicken the pace of digitization. Just as liquidity begets more liquidity, digitization will drive more digitization. The joint application of cloud computing, APIs, SaaS models, advanced data analytics and DLT post-trade infrastructure will usher in an era of open capital markets and open asset management akin to the open banking trend. Similarly, friction and costs will be reduced, and markets will become more open and accessible which will exponentially increase liquidity and the velocity of transactions. While this dynamic is inherent to the growth of a cross-section of asset classes, we expect that the scale and scope of these changes driven by a fundamental rewiring of the CM infrastructure will be unprecedented.
MGV has already invested in five companies that are championing trends across various subsectors in this space (Coinfirm, Keyrock, Nivaura and Next Gate Technologies). Our research has uncovered over 950 other early stage startups attacking the opportunity across the multiple vectors outlined below. Simply put, there is significant energy and resources be putting to work across the capital markets and asset management landscape.
Seven MGV Focus Trends in Capital Markets & Asset Management
We have organized our research and investment efforts around seven key trends that will transform a cross-section of functions within and beyond the financial services landscape:
These focus trends in Capital Markets & Asset Management 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 CM & AM 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, including FinData and ESG (also see our first two posts in this series on Open Banking and OmniFi).
In addition to the MGV team, underlying research credit goes to Antonin Gury-Coupier, with support from Inder Takhar and Matt Lobel.
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