- General Atlantic invested in Adyen in 2014
- H.I.G., GA sold FNZ for £1.65 bln
- GA to invest $715 mln in STOXX-Axioma deal
Aaron Goldman is managing director and co-head of financial services at General Atlantic. He focuses on fintech. Before GA, Goldman was part of Freemont Group’s growth equity arm, where he invested in internet, communications and healthcare.
This is a thesis [General Atlantic’s] been pursuing for five years plus. It’s the shift from cash and check, and offline, to electronic and online payments.
In that period, globally, we’ve invested in Adyen, Network International, Clip, Ant Financial, Klarna and Billdesk. These are fast-growing companies that leverage new technologies and, in turn, are highly recurring, high margin, high quality business models.
The First Data and WorldPay consolidations are in some ways a response to the kinds of disruptive businesses we’ve been partnering with. Legacy players are looking for ways to find more growth and drive operating efficiencies through consolidation.
Q: What’s going on in fintech right now? Are fintechs still trying to be banks? Or are they trying to partner with banks?
We at GA have been investing in fintech for 20 years. We tend to invest in technology companies that are serving the financial services industry or competing with legacy financial services firms. Because we seek to invest in growth, our basis of competition is not in the balance sheet but in technology.
Only a piece of the financial services world are banks. No fintech will ever compete against a bank in making mortgage loans. I may sell a bank a piece of technology that manages their risk more efficiently, or that streamlines their underwriting. We are never going to compete in the fundamental lending business.
We are not trying to compete in places where banks are using their low cost of capital. We are trying to invest in technologies that earn 25 percent plus for our investors.
Q: Firms like Blackstone or Andreessen Horowitz, who traditionally haven’t focused on growth investing, are launching growth funds. What do you think about this? How is GA positioning itself?
It is a validation of what we are doing. It is hard for people who come from other parts of the world to get into our business. It’s not hard to raise capital, not hard to say you have a growth fund. But the basis of competition for us is that entrepreneurs choose to work with us. We are rarely investing in companies where the number one [issue] is price. We at GA win when we can convince entrepreneurs that we will be the best partners for them. That is the fundamental difference in how we are organized, how we run our business, how we think of our reputation.
That is a fundamental DNA shift for many people that are trying to come into this space. If you’re a big buyouts person, you are focused on structural engineering, how to use control to drive [growth.] If you’re a VC, often times you invest in a number of different companies and those that don’t work out, you ignore. Those that do [work out], you cheer on. We’re trying to convince entrepreneurs that we will create value.
Q: In private equity, do you think a correction is imminent? What scares you right now?
Five years ago, I was petrified. Every year I was thinking [a correction] was coming. We’ve tried to invest in good companies and tried to manage risk by taking liquidity. In the last 12 months, we’ve taken Adyen public, sold FNZ, took Network International public, and made an investment in the STOXX-Axioma transaction. The public markets have been pretty good to us … we’ve tried to focus on investing in quality assets. They don’t come cheap but we tend to think they will live through a cycle.
Q: What are you focused on in Europe? It looks like it’s been a productive year in terms of new investments and liquidity. What’s in store for GA in the future?
We have one global pool of capital with no set allocation by sector or region. We’re looking for the best risk adjusted returns anywhere globally. In terms of Europe, there is more entrepreneurialism and more growth investment opportunities than ever before and we expect to continue investing. We’ve invested $1.4 billion over last 24 months in Europe and returned $3.5 billion of liquidity over the same period. We hope to continue doing both.
Edited for clarity by Luisa Beltran
Action Item: Contact Goldman in London at +44 20 7484-3200