UK venture capital firm, Element Ventures, has announced a $130 million fund aimed at funding the founders and ideas that will be powering tomorrow’s financial technology. The fund was backed by more than thirty founders and executives from the financial sector, including Lord Spencer, the founder of the ICAP/NEX Group, who was the cornerstone investor. Other investors include ULlink founder, Laurent Useldinger; former SunGard CEO, Cris Conde and Marc Murphy, the founder of Fenergo.
Element Ventures is one of Europe’s leading fintech venture capital firms and are looking to identify new ventures to build on the successes they have had with companies like Hepster, Billhop and Coincover. Element Venture partners Steve Gibson and Michael McFadgen told UKTN a little about what they expected from the fund.
The UK is in a strong position
Although the fund will be Europe-wide, both expect the UK to remain a leading location for fintech and investment. While this might be partly because of location, Element Ventures is London-based, it also reflects the UK’s strength in the sector. “The UK continues to be one of, if not the leading location in Europe for our strategy, which is B2B fintech,” says McFadgen. He also added that their experience, offered a lot to potential UK founders, “The team has been investing in the UK for a long time, so we’ve got deep networks and relationships here.”
However, they do expect the fund to eventually cover a more geographically diverse area. Although London has been the traditional centre for startups, they have noticed a trend away from the capital. “I think one of the defining characteristics of this next cycle is that venture scale businesses are being much more distributed across geographies,” says McFadgen. “Whereas the last cycle was defined by the US East Coast and London — the main institutional market — now we are looking at places like Cardiff, Rostock, and Gothenburg where businesses are being built on hubs that weren’t as prominent before.”
The move away from the traditional centres of gravity has been building for some time but has become more marked since the Covid-19 pandemic made remote working all-but-compulsory, and startups have increasingly made a virtue of necessity when it came to hiring the best talent.
Following sector trends
The pair is seeing innovation across the sector. “The key areas we’re focused on, insurance tech, asset wealth management, banking, SME services, are all incredibly exciting at the moment,” Gibson told us. “I think we’re genuinely seeing breakthrough moments in all those areas. We are excited across the board.” They are also looking out for innovation in cryptocurrency and digital assets. Element Ventures recently led a $9.2 million funding round for Coincover, which provides cover and protection for cryptocurrency investors.
However, they are also anticipating the culmination of some longer-term trends. “We’ve been investing in this space for a long time. And I think it’s been clear to us over many years, that there was a moment coming, where these markets were going to change shape,” Gibson told UKTN.
These trends continued, but accelerated with the pandemic, and have created more opportunities for start-ups. “It’s becoming more and more obvious that the unbundling of financial services into technology layers is here to stay. The opportunity that creates for early-stage firms is immeasurable and unprecedented.”
What are Element Ventures looking for?
Both Gibson and McFadgen are confident that Element Ventures’ strategy is the right one for the evolving fintech sector and are confident that their new fund will find the founders that shape tomorrow’s fintech sector. For them, the series letter attached to the funding round is less important than what the founder is trying to do, says Gibson, “we’re focused on partnering with businesses where there is really high quality, but early, evidence of repeatability in what they’re doing. Sometimes, that might be found a bit earlier. Sometimes, a bit later. But that’s the point where we think we’re the best partner for them.”
Highlighting the sort of people they are looking for, McFadgen detailed some of their qualities. “They deeply understand the problem they are solving. They have huge ambitions for the business they are building. And they have a huge amount of integrity around their mission,” he said. “If founders are doing all those things, they should be successful.”