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:
3D Finance 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. ![]() Conclusion
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). Acknowledgements 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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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:
3D Finance 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. Conclusion
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). Acknowledgements In addition to the MGV team, underlying research credit goes to Antonin Gury-Coupier, with support from Inder Takhar and Matt Lobel. ![]() 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 second in a series, is focused on OmniFi. OmniFi is our term for the financial services spectrum spanning the current centralizing characteristics from Centralized Finance (CeFi) to the emerging power of Decentralized Finance (DeFi) while encompassing a host of applications (tokenization, fractionalization) that are being built on top of blockchain systems. OmniFi This next decade of OmniFi, and therefore FinServ, will usher in fundamental shifts in market structure and data asymmetries through increased decentralization (more open source, more disintermediation, more distribution) driven by leaps in infrastructure-layer innovation. However, we do not believe in extreme decentralization (where value may accrue incongruously) nor in status quo centralization (where value may accrue in a black box), but in a merging of the two into more efficient, more open financial systems – hence, our term OmniFi. To clarify, we do not believe that one system or governing structure (CeFi or DeFi) will “win” – hence, we are not “maximalists” or proponents of one system at the expense of the other. Rather, we believe the main ecosystems that comprise OmniFi will converge over time into something better. Further, we believe that many aspects of OmniFi will significantly impact Open Banking and similar movements in capital markets, asset management, and other verticals to create a true era of Open Finance. Better said, OmniFi is the transitional competitive milieu over the next decade that will lay the groundwork for Open Finance. For example, new ways to issue assets (tokenization, digitization, blockchain/DLT) will lead to new asset classes, driving a drastically different value chain in capital markets and asset management, helping pave the way for new frameworks to drive financial innovation outside legacy systems and infrastructure. MGV has already invested in two companies that are championing trends in this space (Coinfirm, Nivaura, and Keyrock). Our research has uncovered nearly 400 other early stage startups attacking the opportunity across multiple vectors employing a cross-section of technologies (DLT, Ai, RPA, Data Analytics). Simply put, there is enormous talent and energy focused on innovating the core infrastructure of the financial system. This is a natural evolution from the exponential rise of bitcoin and cryptocurrencies, to NFTs, to the ICO craze, to now: a serious rebuild of infrastructure by fantastic teams attacking real opportunities. Seven MGV Focus Trends in OmniFi 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:
3D Finance These focus trends in OmniFi 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 OmniFi ecosystem or if you are an incumbent seeking to identify opportunities within these emerging ecosystems, 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: Capital Markets & Asset Management, FinData, and ESG (also see our initial post in this series on Open Banking). Acknowledgements In addition to the MGV team, underlying research credit goes to Inder Takhar, with support from Matt Lobel. ![]() As we at MiddleGame Ventures (“MGV”) begin to put money to work in our latest fund, 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 first in a series, is focused on Open Banking (OB). Opening Banking Open Banking, seeded by forward thinking regulation in the UK and EU (PSD2) and accelerated by new technologies and customer preferences, is redefining the role of global banking services and opening up a host of new businesses along the way. MGV has already invested in two companies that are championing trends in this space (Minna Technologies and Railsbank). Our research has uncovered over 500 early stage startups attacking the opportunity across multiple vectors including middleware technology providers, platforms, and privacy tools. In short, there is a lot of energy and opportunity in this space. Over the past decade, the banking paradigm has radically changed with the rise of dozens of new channels and platforms that are disintermediating traditional providers of banking and payments services and broadening the scope of customer engagement (e.g., SMEs). As these trends play out, we believe the payments and application layers in the OB ecosystem are best positioned to benefit, while incumbent banks will need to revaluate and reinvigorate their value proposition. Whereas, other non-traditional financial verticals stand to benefit from the expansion of payments and finance rails. Customer expectations (transparency, tailor-made products, omni-channels), new entrants (big tech, fintechs, neobanks), new technologies (API integrations, cloud banking, DLT), and regulations (PSD2, GDPR) are the core enablers for OB and will drive the expansion of OB-like innovation beyond the banking and payments sectors. As OB schemes proliferate, Open Finance and Embedded Finance will dominate the future of FinServ, leading to the emergence of a meta financial universe that blurs the financial and non-financial sectors (more to come on these themes later). Six MGV Focus Trends in Open Banking We have organized our research and investment efforts around six key trends, that implicate payments and banking, in addition to other financial services verticals:
3D Finance These trends in Open Banking and beyond 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 3D Finance, 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 FinTech startup attacking core pieces of the Open Banking/Open Finance value chain or if you are an incumbent seeking to identify opportunities within these emerging ecosystems, 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: Capital Markets & Asset Management, FinData, ESG, and OmniFi (our term for the spectrum of blockchain and DLT based centralized to fully decentralized finance). Acknowledgements In addition to the MGV team, underlying research credit goes to Antonin Gury-Coupier, with support from Inder Takhar and Matt Lobel. Executive Summary
Facebook’s consortium project, Libra, has the potential to disrupt traditional business models in retail banking, payments, and retail asset management (in addition to regulatory and monetary policy). While there are many variables that will impact how this will all play out and there are significant technology, privacy, regulatory, and security concerns that could stop this project in its tracks, a meaningful new front has opened up in the evolution of western financial services that warrants discussion. The Next Wave Of Fintech Will Be A Tsunami vs The First Fintech Wave
(Editorial Note: This is a high-level, big picture post that might not be suitable for hardened financial technology geeks. Don’t worry, we’ll have more for you in subsequent posts.) It used to be that financial services intermediaries were to a large extent immune to outside innovation. While entire industries have been obliterated or reimaged over the last 30 years by waves of technological innovation (think retail, entertainment, or travel), financial services has remained relatively unscathed. Yes, electronic exchanges have replaced physical trading pits, online brokers and ETFs have replaced stock brokers, and cards have largely replaced paper checks. But even today, despite the hype around fintech, the core systems, operations, and players (outside of payments) remain fundamentally the same. We do not believe this will be the case a decade from today. |
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