CVC Series: Episode 2 - Simon Hardie from Findexable

[00:00:00] Hello and welcome to New Era FinTech Podcast. Today we are continuing our CVC Series and we are joined by Simon Hardie, he is CEO and founder of Findexable. Simon, hello and welcome. Hey, Ewan, nice to see you. It's great to have you here.

[00:00:15] Before we begin because we've got a lot to ask you all around CVC, Simon, for those that don't know who are you, what's your background and can you take us as a story? How did you get to Findexable? Yep, of course. Thanks Ewan.

[00:00:29] Findexable were an innovation mapping company. We index financial innovation, I should say globally. We score from the ecosystems and we also school in financial FinTech innovation and we do that for governments, we do it for

[00:00:43] investors, we do that for corporates. Quite a lot of regional work in different markets and regions. By background I've come from global media. I used to work for the likes of the Economist and Neuromoney in business and market intelligence then laterally moved into work for a smaller boutique,

[00:01:03] financial services publishing an intelligence house. Then about five years ago decided that as the FinTech revolution was really kicking off that it was time to find a way to more accurately be able to compare some of the innovations that were coming out from all over, from all parts

[00:01:20] of the world. You gave a hint to the type of clients that you're working with. Could you say some more? Give us an idea on who you work and the kind of work you're doing for them. Yeah, so it's very broad. At the level

[00:01:34] of government it's really helping government understand, I say government it's quite often city entities, bodies, regional, local governments that are trying to understand how they can scale and build their FinTech ecosystem. As we know FinTech is about bringing in venture, bringing

[00:01:52] in money. It's also about entrepreneurship and attracting talent. So there's a massive drive in all the markets that we map for driving these accelerating these FinTech markets. At the level of the industry, financial services and investors are trying to understand

[00:02:11] what innovations are out there, whether it's purely from a where to invest point of view or whether it's to compare an investment they might have in their portfolio with another in another market or region. And then equally with the institutions, it's a similar game

[00:02:28] which is helping financial service providers and incumbents understand where the opportunities are for them. At the level of corporate venture you can see what that's going to go. We can talk about that, where the opportunities are, how they might scale some of

[00:02:44] these opportunities and indeed whether they're trying to do too many things in too many places because there's too much competition already in a particular sphere. So that's the kind of stuff we do. Really exciting time to be doing it, not least at the moment

[00:02:57] because the market has gone through a substantial change in the last 18 months. So whereas we've seen a massive roller coaster ride upwards in terms of the amount of FinTech innovation about a decade ago, that's starting to change and is creating new opportunities for incumbents as well as for

[00:03:17] startups and scaling FinTech companies. Can we talk then about, so you mentioned innovation a few times there. And I think in this particular series, we're looking at CVC as one of those innovation tools. Would you say something, I've heard you talk and mention that the phrase

[00:03:36] misalignment on innovation. Could you say some words on that? What do you mean by that? And perhaps in the context or the fundamental context in corporate venture capital or CVC? Yeah, I think the big challenge, we can talk

[00:03:49] innovation to the cows come home. But I think the big challenge for large entities, enterprise, and by that I mean that's both listed companies, listed financial services. The big challenge is that they're not really sure quite often they're not sure what they mean by innovation. And as a

[00:04:06] result, they can't measure it. And of course, if you can't even know you want to can't succeed at anything that one can't measure. It's a big problem because, you know, is innovation a, is it a product? Is it owned by one

[00:04:20] department? Is it a goal? Is it simply, you know, is it simply determined by the amount of money invested? Of course, in reality, we know, you and I both noted that it's kind of a mix of all of those things. Right. You know, ultimately,

[00:04:33] it is about the mindset. And I think the challenge today given, given the pace of change in technology generally, is that organizations are financial services organizations incumbents have been trying to catch up. And of course, the tendency has been to throw

[00:04:52] money at the problem. Right. Money is not the money is not necessarily what's needed. It's a consolidation of the of the entities different, different efforts, goals, understanding where that innovation mindset focus should come from. Of course, it should come from the top

[00:05:10] it needs to come up from leadership. But somebody somewhere's got got to own it to make sure that it's being it's being driven throughout throughout your do something. Yeah, yeah. Yeah. Yeah. I like to think of the you know, if you think of the world's most popular

[00:05:25] cuisines kitchens, they tend to be in in less wealthy markets where the sun always shines and the ingredients are quite simple, but they're very tasty. You know, the Italian, the Spanish, the Southeast Asian kitchens are predicated really on simple ingredients, a small

[00:05:44] number of simple ingredients combined in new, in new ways. And they can do those kitchens continue to innovate. It's not about it's not about more expensive ingredients. It's simply about a mentality and mindset of how can we do more with what we've already got.

[00:06:00] That's not to say that one shouldn't invest in a new a new oven or a new, you know, a new building for the kitchen. But it doesn't have to be only about where the where the where the money where the money goes or spending more.

[00:06:12] Do you do you seek because when it comes to financial services, that that that slightly that rather agile approach to innovation, you know, is automatically hampered? Are you seeing that as a challenge or a tension in this kind of misalignment or or

[00:06:32] misunderstanding of what we all mean by innovation? Okay, just before, for example, I will often see an annual report from a bank. Right. A couple of pages, two or three pages innovation. And it's a series of press releases, essentially, maybe some awards, and maybe

[00:06:47] they've done something new in here. And then they're shoehorning anything, anything relevant. You know, oh, and we made an investment. So put that in as well. Right. Oh, no, we're going to do a CVC now. So that that's that's innovation,

[00:07:00] isn't it? How do you see that that that tension you see between the financial services desire to move fast and then the reality of compliance and process and then the internal culture holding those things back? Well, I would say that it's not as bad as it was 10

[00:07:17] years ago in certain regions markets. Certainly parts of Western Europe, there are providers in Southeast Asia, particularly Singapore, of course, that you know, that are really starting to understand what you know, what that tension, how they combat that tension. I would also say that

[00:07:36] arguably, you know, financial services, banks are still around. So it's not that they've it's not they've lost the game. You know, there's an element of course, sort of death by 1000 cuts because some of the more commodity products are being taken away from them. And certainly one

[00:07:53] expects that probably to continue. But I do think that the banks are understanding that that it certainly some in many regions in Western advanced markets, I would say, banks are understanding that there is a there is a problem

[00:08:11] that they need to they need to keep up with. It's not an even playing field. However, something that some institutions, you know, one can think of a couple of Spanish entities that have really really sort of jumped on this idea of us as

[00:08:24] a technology company. There's the likes of JP Morgan and the US which which equally has sort of done both the innovation mindset thing, but it's also is also put together an almost budget to for for innovation to accelerate their efforts there. But it's certainly it's certainly

[00:08:43] it's certainly changing banks have made some progress over the last decade. Having said that another in other regions that are as we'll come to think of it later on in our chat today. You know, there are other regions where that's

[00:08:55] that's less the case. But I think for the I think for that, you know, for some of those some institutions with the right mindset and the right approach, you know, and the right kind of balance in their risk taking thinking that that's you know,

[00:09:09] there are tremendous opportunities to be to be had. So for for those organizations that you see announcing launching or highly active in CVC, what are you seeing that's making them successful or not as the case may be from your perspective externally?

[00:09:30] I think it's really about what we said at the beginning, which is what does innovation mean to that organization? The corporate venture capital is a bit of a it's a bit of a victim of its own naming. Because of course, is tag on venture capital

[00:09:47] onto corporate suddenly has to be about hard financial metrics. We're in business. I'm not saying that one shouldn't make money one has to make money. We've seen, you know, the outpouring of what's happened over the last 18 months with too much money going into

[00:10:00] companies for gross at any cost. It's not about it's not about that. But for a corporate, it is about understanding, you know, some there are, you know, there's a need for hard financial metrics, but there's also a need, not just more than an opportunity, an actual

[00:10:16] need for softer metrics. You know, what is the strategic gain of us doing this to the business? Because as we know, as we've seen from the likes of Nvidia at the moment, for example, enterprise value can it can multiply orders of magnitude and numbers of

[00:10:36] orders of magnitude higher with with the right approach and arguably the right amount of market market timing. So what are some of those softer, you know, softer strategic things that one that is, you know, that our innovation program is about? Because in a world now where

[00:10:57] there are proven successful FinTech arrivals to banks, the market for talent is actually going to heat up. I mean, yes, we've seen a washout over the last year of this sort of venture winter, which we know, presumably, you know, we're coming out of.

[00:11:11] But there are a lot of FinTechs that are making money that are profitable. BCG put out a report just this week saying that they anticipate FinTech only revenue topping one and a half trillion dollars by 2030. Gosh, these companies are making, you know, they are scaling, they're

[00:11:31] real, they're also global automatically and they're making real money. So so some of those strategic goals, you know, enterprise value, yes, but also things like how do we attract the best talent so that we can deliver on a strategic and then later financial goals are really, really important.

[00:11:48] No, so I wanted to ask you about opportunities, Simon, in what opportunities are you seeing in the marketplace or in some marketplaces? And if you want, we can try. I know you've been doing a lot in the Middle East in particular in

[00:12:04] the Gulf region. But I'd like, could you speak on that one there and just say more about what you're witnessing what you're seeing? Yeah. Well, I mean, the first thing you know, the headline number, the BCG numbers pretty staggering. I mean, who knows? It's ridiculous. Yeah.

[00:12:20] You know, every crazy well puts out big numbers because they know that it gets pressed. So you know, one can take that with a little bit of a pinch of salt. Nevertheless, FinTech has proven that it proven that it's here to stay and there are, you know, tremendously

[00:12:32] successful businesses. One could think of New Bank in South America, Revoluton, the UK, which has been, you know, become now sort of top tier for a retail bank or even though it's not a bank. So I think, you know, I think the point is in the long

[00:12:45] run, despite FinTech pretty, pretty poor, pretty challenging last 18 months in the long run, FinTech is here to stay and the hard yards have been done in the sense that we as customers accept that FinTech is a, but not just useful. It can actually

[00:13:04] be a force for good. We know we've got used to using it. Some of those sort of barriers, those sort of psychological barriers to adoption have gone. So the opportunity now for corporate venture units to come in and sort of seize as opportunities during this venture winter is

[00:13:20] enormous if they can get this right, because FinTech is only going to keep growing. And I think as we see, you know, we haven't really got time today to talk about the kind of long term direction of financial services as a whole. But my

[00:13:34] view is that it's becoming a flatter landscape, which in other words means that finance and sort of siloed finances really increasingly going to be embedded, subsumed within particular companies and businesses. You know, and I think if one thinks about that kind of long term value creation to 2030, you

[00:13:53] know, there's going to be a lot of embedded embedded opportunities for for incumbents with the right mindset to know what that means in practice for their organizations and their strategies. That's the kind of, you know, the big macro thing. I think at the level of regions like

[00:14:09] Middle East Africa, where we've been doing quite a bit of work recently, I think what's really interesting is that it is that over the last 10 years or so, the number of corporate venture funds in general, not just financial services, but the number of corporate venture funds has

[00:14:27] grown, grown something like five times. Fortune 500 investment CBC investment sort of Fortune 100, sorry, investment in CBC has jumped from 20 something million to close to 200 billion in the course of 10 years. Well, but if one one looks at Middle East Africa, it's still very, very early days. And in fact,

[00:14:55] Middle East Africa is a whole which is, you know, population wise as an enormous region and enormous potential market. Now we did some did some work on looking at Southeast looking at corporate venture in Asia and financial services Middle East Africa, Middle East

[00:15:12] Africa is the 10th that the quarter of the first quarter of this year, Middle East African market is a tenth the size of of of financial services venture CBC in Southeast Asia. So so there's there's tremendous opportunities and it's not just wishful thinking either if one thinks

[00:15:31] about what's already been achieved at the level of corporate venture innovation in Africa. One thinks of mobile money, 50% of mobile money is of the mobile money marketplace as a whole is is Africa based. The likes of MPEZ, which was which was created sort of 1515 or so years ago,

[00:15:53] you know, it's a massive corporate innovation success. And I think as we see, you know, more and more digitally native consumers in very large markets or in the likes of the Gulf in wealthy young markets, you know, there's a tremendous opportunity there given that given that as we

[00:16:12] said, there's one there's a venture down there has been a venture downturn. So valuations are lower, which mean which means that the you know some of those financial objectives don't have to be quite as ratcheted. And they've also got you've also got a you know, large audiences

[00:16:31] of digitally savvy younger customers that like that like innovation. So I think in, you know, in the region as a whole, you know, I would say Middle East Africa is certainly a place and region, you know, a set of markets to focus on. It's not

[00:16:47] to say this without challenges, of course, but there are, you know, there are some significant significant opportunities there. And in the likes of places like Saudi Arabia, the UAE, which arguably is a smaller market, you're seeing now kind of very solid bedrock of both digital services, digital ecosystems

[00:17:08] and also longer term patient capital that can invest into these into these businesses. So so I think you know, I think I think we can reasonably expect there to be a lot of activity coming out of that of that particular part of the world. And I would argue

[00:17:24] quite likely some pretty substantial successes. And a lot of those senior executives listening will I think be we think OK, OK, we hear you, Simon, we hear you and we see the opportunity to write. So we were agreed that there's an opportunity. But how

[00:17:44] do we know that? Or where is the data? What kind of benchmarking could we be looking at? Right, because that's often a major challenge, certainly from some of the senior executives who are thinking about sponsoring and kicking these things off. Yeah, we just

[00:17:58] say a little bit about your perspective on on benchmarks. Well, I mean, at the Chica League you come to me and we'll do you the work. But research is the bedrock of all of this. You've got to be, you know, I think, you know, it's a little bit

[00:18:11] glib. There's a sort of 3D approach that we would take to this, you know, the deduction can only come from due diligence and the research, you know, get the get the data so that you can you can see that the match back to this alignment piece, you can

[00:18:26] see the match between your own strategy and where the market opportunities lie. And you know, and if you can get that, you know, if you can get the two in the crosshairs, well then you're ready to reduce, you know, by an order of magnitude again,

[00:18:37] you've already reduced the risk there. The other thing is about the discipline. The challenge in emerging markets in general, to be not to overgeneralize but the challenge nevertheless in emerging markets is quite often businesses are family owned, they're family created. And so the decision making tends to be

[00:18:58] tied to to that kind of mentality and mindset. There's nothing wrong in that. You know, family holding companies across Africa, across the Gulf, across the Middle East have built incredible businesses. But corporate venture is not that. And I think that the challenges when you've got to

[00:19:13] work with, you know, entrepreneurs who don't come here are obviously going to be outsiders to your business that are certainly not part of the family in these most cases they're not likely to be part of the family. You've got to understand, you know, how

[00:19:23] you how you give give them, you know, enough freedom, but also that you don't, you know, but also you need the right discipline internally on your side as the as the as the sort of venture unit owner as the enterprise, the right discipline to make these

[00:19:39] decisions quickly, bearing in mind that, you know, an entrepreneur that sort of, you know, even a kind of later stage entrepreneur is going to be used to making decisions very, very quickly, which might not match to the discipline of the venture, the CBC venture investor or the enterprise

[00:19:55] that's used to taking decisions longer or the decision sits with somebody else and another depart when it takes longer and gets and gets deferred. And then I think that the sort of final pieces, you know, is really then on the decision making the deduction, the discipline

[00:20:10] and the approach and the thesis and then the decision making at the level of the of the the corporate venture unit owner make sure you've got a decision making, you know, decision making process down. So you've done that, you've done the hard work to define the thesis.

[00:20:27] And then simply it's a matter of does this organization does this organization's this this this innovation founders mission or this this scale up founders mission match with match with match with ours. And can we get a go no go decision quickly? Right, because again,

[00:20:47] you know, yes, one can argue that the venture world is been through the mill over the last 18 months or so. But there's still money out there. There's a lot of there's a lot of there's a lot of dry powder around. People might be taking a bit

[00:21:02] a little bit longer to make a decision, but you've got to be pretty quick if you want to be if you want to sort of get in getting on some of the some of these ventures because they can go later because they can easily go easily go elsewhere.

[00:21:12] Or that or that kind of your your mechanism for making the decision just simply doesn't match doesn't match the target. And and and that's a shame because you will miss you'll miss opportunities there. If I so I'm listening to you talking there and thinking, OK,

[00:21:29] now let me play play the the customer. I think I'd like to understand how you would recommend working with a company such as yours. So I let's let's assume I'm in a bank in Middle East region. I have got the go ahead verbally from the CEO

[00:21:52] and the chairman to say you should do something in CVC. Right. So they've appointed me or I'm new or I'm in role being moved over to this. However, right. And yeah, they said begin start start right put the plan together. Now one of those

[00:22:09] what one aspect there, of course is is the that that diligence that research. Right. How they come to you and then how do you how would you advise them to begin? What what what does good look like from your point of view? Well, I think you know

[00:22:25] the key really is for they to help the organization get to a point where they where they know what's important to them. What is the mission with their innovation objective? What risk appetite have they got? What what understanding of the market have they got as in as

[00:22:42] in the you know, the corporate venture activity as a whole? What does that mean to them? And I think you know if that's clear and then I think then Dan one can say right then there's a piece of work that needs doing to look at

[00:22:57] look at the strategic direction of of the business. Look at the market market or markets that you're in product but also geography. In most cases it tends to be tends to be a bit of both. And from that then one can say, you know, what are the

[00:23:13] then you know the output of that is a recommendations piece which is where are the opportunities for them? You know what you know what are the kind of what are the what are the dead ends for the organization? Because some probably you know one there's always

[00:23:30] an element of what one can't do. You know what are the what are the priorities and what are the things we know we should just view as distractions so you can just keep it keep it cleaner to help build build build that thesis.

[00:23:43] I think the other thing then of course is to understand you know the recommendation really around around the team the stakeholders and the structure of these of this unit because ultimately you're selling to an entrepreneur as much as as much as you're investing in them right.

[00:24:03] You've got to have the right process in place. We've also got to have the right people. You know I'm a founder you know I've spoken to investors at you know multiple times you know both for clients but also for ourselves and yes the money is

[00:24:19] useful one needs the money you've got staff to pay your products to build more rest of it but but you're also buying into more than that you're buying into reputation if it's a large if it's a large institutional incumbent you're buying into specific expertise from the from the

[00:24:32] team that you're working with and you're buying into the network. You really want you know you need you need to network successful sales these days even in especially in this digital age successful business development really requires access to access to a trusted network because you as a

[00:24:48] startup founder or even even as even a company with with proof of concept or proof of proof of market proof of life is I like to call it. You need the access to those to people. So you know I think it's it's really I would say

[00:25:04] it takes some of the breathlessness out of corporate the corporate venture the corporate innovation world because everyone's in a hurry and of course you know it's understandable why yes but and it's good to be part of that bandwagon. But one can only get it right

[00:25:22] if we can take a step back and say look these are the these are some of the sensible practicable steps so that we can understand exactly what we want out of this what innovation means to us so we can so we can measure it

[00:25:33] and then we've got a much better chance of being being being being satisfied ideally ecstatic but at least they're very satisfied with the outcome of the results So how what does good look like if I am creating a CVC or I have the bones together of a CVC

[00:25:55] what does good look like when I'm buying from you is it three weeks six weeks ten year what's your view on best in class right best in class discovery. You know so I will automatically have a view we in the bank think we know what's going on

[00:26:15] of course and to a large extent we're very networked we do know who owns what what's happening in most things but we also have blinders right so we can't necessarily see what's coming or what's new so we understand that we need to go and get some primary research

[00:26:33] from someone such as fintechsable. What is that what is really good look like well I mean if you've got an exhaustive budget you can do it forever and ever but I mean I think our you know our you know we'd like to like like any novelist

[00:26:47] will tell you you can rewrite and rewrite and rewrite to the Cowskip of the opening chapter to be honest I think you know I think we can do very good very solid work with with with an organization that more or less knows where

[00:27:00] what he wants to be in in four weeks. Right. I mean the key really and they you know they it can be less but the but the key really is deep insights. I mean there's lots of data out there and one can crunch that and gather that and

[00:27:15] collate that as you know in relatively short order. But what what but but the value I think is really in especially these days is it's it's it's in deep insight and for that we just we conduct you know pretty intent a pretty intensive set of interviews we will

[00:27:30] interview people in in market will we're into thought leaders the futurists you know so yeah a very kind of quite a broad church of people just to help organizations you know any good old Donald Donald's all the way you know know that help them understand that

[00:27:46] the unknown unknown unknowns. OK so I used to run a CVC for a bank and the worst possible thing that could happen to me I mean there's quite a few worst possible but one of the things that I always always panicked about was the head of retail

[00:28:06] or someone senior head of retail at a corporate whatever saying to me oh you and have you guys seen X and it's a fintech in market that we didn't know about that we might my team the CVC team with all our deal flow

[00:28:22] all of our feelers out there all of our research you know that we miss something because I think if we don't know about that you know that that's that's a real flaw right because we are everybody else is internal looking right we we our team our capability

[00:28:38] is most of it or some of it at least is meant to be external right so I lived in fear constantly of the have you seen this as a what one of the ways I I resolved that was making sure the teams were out we were in these

[00:28:54] hubs the fintech hubs were everywhere and we were every event every opportunity to try and make sure we're learning and putting everything into essentially a mini CRM if you like so we know what's going on but I would have loved to have hired fintechs of all right

[00:29:10] right not just for the first bit right for the establishment I would have been very tempted Simon to have done a you know is there a quarterly thing is there something you know don't don't just tell me how it is now but can you keep

[00:29:24] you know keep doing that what would you recommend there what what would be ideal there yeah I'm gonna you know and I totally totally get that I mean to put it bluntly you know we'd look at you know there are anywhere in the region of

[00:29:40] sort of seventy five to one hundred and fifty thousand fintechs out there globally so of course you know no organization can know about all of them we map fintech across two hundred and fifty sixty cities globally so well there's a there's a there's a there's a

[00:29:55] lot of stuff out there and even with the relative downturn there's still there's still a lot of markets and a lot of places that are doing this I would say the the organizations that have good models are some of the the FDI they sort of

[00:30:11] the the foreign direct investment entities within government the UK has a big one UAE has big one you know many of the big European markets in the US has one they're pretty good and actually saying OK well give us a you know give us a snapshot of where

[00:30:29] the market is now and that will then say OK which of the companies that we think are or which of the companies that are growing faster track those for us and and you know give us a give us a quarterly monthly update on you know

[00:30:43] on what that looks like so we can see what's changing who's coming in who the investors are where that you know what markets these companies are moving into and I think then it starts to reduce some of this risk of being sort of caught by caught

[00:30:56] by some left field company you've never heard of quite frankly quite frankly how could you in many cases yes good your network you can one can't be everywhere and you have got a budget to send your team off to every single FinTech event because because they

[00:31:10] probably walk away if you send them to everyone indeed indeed yes yeah yeah I think some of these some of these things are you know comes back to Syria it comes back to seriousness of organization I think that you know the challenge with some of the less

[00:31:25] that's not let's not be unkind some of the less successful corporate venture units not just the financial services is that it's it's it's not that it's not not the people in them are chances that it's a little bit too opportunistic right now and I think

[00:31:40] like anything as we know if you want to do something good got to do it you've got to do it well not least because quite simply you're not going to see no organizations not really going to see you know a real measurable return at any level

[00:31:55] financial or strategic within five years so then do the homework yes and then some of those kinds of you know blinders these curve balls are it's not they're not going to happen of course they're going to happen but but they're not going to keep you awake at night

[00:32:12] in quite the same way Simon this has been absolutely fantastic but for those listening thinking we need to find out more we need to speak to the Simon guy right now what's the best way of reaching you yeah thanks you and well you know with all the thousands

[00:32:26] of listeners you've got I'm expecting a flurry of a flurry of calls I'll get the switchboard automated do that do that so no best way is email me simon at findexable.com but LinkedIn is great I'm on LinkedIn all the time and and I do

[00:32:43] and I'm like many people I guess I do actually read the messages that people send me there so LinkedIn is good or email Simon at findexable.com nice one Simon thank you so much I would love to have you back for more in a series here's hoping

[00:32:56] thank you for taking the time thanks you and I appreciate it and yeah till next time have fun thank you