An Interview With One Of The Top Fintech Investment Firms In The Country

Benzinga's Fintech Focus Podcast features conversations with the biggest names in fintech. Subscribe to the Fintech Focus newsletter to get a roundup of industry news delivered to your inbox weekly, and check out upcoming programming at Benzinga events.
  
In this episode of the Fintech Focus podcast, we take a look at the world of fintech through a broad lens with Michael Kopelman, general partner at Edison Partners, a growth equity firm in Princeton, New Jersey. 
 
Fintech is a big focus for Edison—the firm was named the Top Fintech Equity Investor at LendIt 2018, and about half their portfolio companies are in fintech. 
 
Kopelman, who leads Edison’s fintech practice, gives us a little insight into what Edison looks for in a new company, as well as where the fintech industry is going as a whole.
 
Listen to the podcast below to hear more from one of the top fintech venture firms in the country. 

What do you look for in an investment, and is it specific areas of fintech?

At Edison we're a growth stage investor, so we're typically investing in companies that are $5-20 million revenue businesses. We typically write $10-20 million checks, sometimes it will be smaller, sometimes larger. And so, our view is that this is the space that is generally overlooked. There are plenty of investors that will do earlier stage companies and write $5 million checks. And similarly, there are tons of investors that will do $50-100+million checks. But we think the pocket in this segment is pretty underserved.

We really focus on businesses where they have already demonstrated product market fit. Our expertise is really on scaling and on how you scale sales, marketing, channel development, international, etc. So, I mean, that's sort of our focus.

What kind of characteristics besides the ones you already named do companies have to have for you to pique your interest?

So first, obviously, a strong team, people that have strong domain expertise about the problem that they're trying to solve. The other element is growth dynamic for us. We're really focused on businesses that are growing fast, that are looking for capital to accelerate their growth even faster. We haven't had much success in investing in businesses that aren't growing rapidly at the time of investment.

There's obviously the market, the dynamics of the market, the growth of the market, the size of the market. I mean, all these things probably sound cliché, but it's certainly easier to work in a much bigger market with not as great execution than it is the opposite, right, a perfect execution in a niche market. That's a harder equation to solve.

What do you think is the next big development that will happen in the fintech space over the next five or 10 years? Are we going to see blockchain?

Certainly distributed ledger technology makes a ton of sense. It's hard to know when that's going to get sort of widespread adoption, whether it's the next five to 10 years, or 10 to 20, it's hard to know. But I do think that's certainly an interesting trend to watch. I think the thing to watch is how the large financial companies, whether it's wealth management, how they're going to respond to newer technology. My personal view is that they're going to embrace many of the new technologies and incorporate it in their business. It's just a question though of whether or not they're going to be able to do it as elegantly as some of these challenger banks that are there.