FinTech hubs are popping up around the world to challenge the status quo of London, New York, Hong Kong, Singapore, and Silicon Valley. If you follow financial services in the US, Charlotte, North Carolina, is no stranger to financial services as the third-largest banking hub in the US (it’s also our global headquarters and the newly created Carolina FinTech Hub).
Patrick Rivenbark: Tell us a little bit about yourself and Frontier Capital.
Richard Maclean: I am a Managing Partner & Co-Founder of Frontier. We started the firm in 1999 here in Charlotte and will activate Fund V later this year. Frontier is focused on B2B software and tech-enabled services investing nationally in both the US and Canada. Investments range from $20 million to $75 million in both majority and minority positions.
PR: The SE FinTech Venture conference is new. What attracted you to the idea?
RM: Charlotte has had some major successes in technology but this area is still seen as an up and coming tech. market nationally. Any group or conference supporting the local tech scene and its companies is interesting to us.
We have also known Dan Roselli, Queen City FinTech, and Packard Place for a long time and really think a lot of what he is doing to help foster more investment locally and want to be supportive.
Charlotte’s FinTech opportunity seems to be tremendous with history and resources of our financial services. The conference seemed like a great event to continue to promote that potential.
PR: It seems a lot of regional and super regional collaboration is going on around the country. What are your thoughts on why this is happening?
RM: The world, especially in technology, is moving at a much faster pace. As businesses become more competitive, they also seem to become more collaborative and evolve quickly. Many of our CEOs talk to the CEOs of their competition on a frequent basis to keep lines of communication open.
I think you are also seeing a lot more collaboration with organizations outside of the “major technology centers” like Silicon Valley, NYC, and Boston. Many of these “flyover” markets for technology companies are sharing resources and best practices to try and support technology companies in their markets because these companies are such major drivers of growth and job opportunities.
PR: What’s Frontier’s approach to investing in FinTech?
RM: Our approach to FinTech or any other segment in technology starts with a B2B or B2B2C business model. We are typically looking at companies with $15 million to $20 million of revenue with the potential to scale rapidly through a combination of organic growth and select acquisitions. Frontier has been very active in HR Tech investing and we are seeing some interesting overlap in FinTech and HR Tech.
PR: What changes do you expect in the next year or so of growth investing?
RM: It will be more of the same for us. After almost 20 years of focus on growth investing in B2B technology companies, we have a well-defined process for making investment decisions and driving value in our portfolio. At this point in the business cycle, you do hear a lot of concern over the timing of the next downturn or hiccup in the financial markets. As a result, you do see a focus on higher quality assets that are providing a more mission-critical solution to their customer base.
PR: Frontier covers a breadth of industries, how does that help your approach to FinTech investment?
RM: Again, all of our companies are selling into a large enterprise or middle market company; while we do cover a breadth of industries, many of our investments are in similar subsectors or addressing common trends. This gives us a very broad view of the pain points within the B2B space on how companies buy, make decisions, and prioritize. We do think this broader view can be helpful for FinTech companies going to market with a B2B business model focused on large and mid-sized enterprises.
PR: What advice and guidance do you give to your portfolio companies? Is there anything specific in the financial services space?
RM: Building growth companies is difficult work, so focus on finding partners you have alignment and a cultural fit with. Also, remember the approach and resources that propel you to different inflection points have to be refreshed and retooled to successfully navigate the next stage of growth. Many of these decisions are around talent and how you staff, organize and lead this talent.