Data is eating the world and today it launched Team8 Fintech, a startup foundry with the mission of growing future fintech unicorns, finding new ways for data to drive financial decisions.
Team8 Fintech is led by Rakefet Russak-Aminoach, former President & CEO of Israel’s largest bank, Leumi Group; Yuval Tal, Founder & President of digital payments unicorn Payoneer; and Ronen Assia, Founder and former Chief Product Officer of social trading network and multi-asset brokerage unicorn eToro. Galia Beer Gabel, former Head of Business Development for PayPal across Eastern Europe, Israel and Africa, is also joining Team8 Fintech as part of the founding team.
“The financial world is off-balance today,” says Russak-Aminoach. Consumers are not happy with the service they get given the current state of technology and regulators are letting new competition into the financial services market. These new players typically incur heavy losses because gaining market and mind share is very expensive. “With Team8’s resources and company-building model, we’ll launch companies that are B2B2C, working with the incumbents. Eventually, we will reach the consumer with a better solution, but we are not going to invest in customer acquisition,” says Russak-Aminoach.
Team8 Fintech plans to have the startups they will launch work not only with existing large financial service providers but also with “successful fintech companies” and the “new providers”—companies such as Amazon and Uber—large digital enterprises looking for help with “embedded fintech,” the rapidly growing financial transactions part of their business.
“We plan to build five to six companies over the next four years,” says Russak-Aminoach, the same pace as Team8’s rate of launching startups. Each of these companies will get between $5 and $8 million as seed investment and a couple additional millions as in-kind services from Team8 Fintech. “We will be both investors and co-founders,” says Russak-Aminoach. With her experience in managing the successful digital transformation of a large bank (see Leading Bank Leumi into the Future, a Harvard Business School Case), her partners’ fintech expertise and the proven Team8 company-building model, “there is no reason why we should not be able build one unicorn after another,” she adds confidently.
The twelve successful cybersecurity startups Team8 has launched over the last six years, the experienced team it has recruited, and the community of investors, partners, and business executives it has assembled, combine to provide a sound foundation for her confidence. “We want to apply to fintech our system of company building,” says Team8’s Founder Nadav Zafrir.
There are a number of stages in Team8’s company-building process. First, they identify the entrepreneurs they want to work with, sometime bringing them on as entrepreneurs-in-residence. Then they work with the entrepreneurs to identify the opportunity, finding out “what’s broken,” says Zafrir. An important part of this research stage is conducting interviews, “sometimes with hundreds of people,” and this is where Team8’s community, Team8 Village, provides valuable input. Then comes the crystallization of the specific business idea, “it’s a big enough problem, we can make an impact, we know how to fix it,” says Zafrir.
Finally, before taking the solution to the larger market, they move to the validation stage which Zafrir believes is where the process breaks down for many startups: “We evaluate whether the idea can be built to enterprise scale.” And he adds: “We are the co-founders for the first 12 months when we go through this process. You are the founder, we are your wingman.”
Team8 Fintech is already using this process and Russak-Aminoach reports that “we are already exploring two companies, one just at the early stage, and the other knows what it is going to build—an engine to evaluate credit for small ecommerce participants based on their digital footprint.”
That’s an example of the kind of new business opportunities driven by the large volume of data generated as more and more businesses go through digital transformation or are simply born online. Traditionally, especially with small businesses, credit-worthiness was assessed based on year-old financial statements. But now it’s possible to assess credit-worthiness based on the data available online and price it right. “This is something completely new,” says Russak-Aminoach. ”The businesses that are working online, their digital footprint is infinite.”
This specific example points to the larger set of new business opportunities Team8 Fintech will pursue and to the hottest areas in fintech. “The biggest potential today is to use data to personalize financial services,” says Russak-Aminoach. Data as the basis for better targeting of services and better customer segmentation, or as she puts it, “the next revolution is the integration of data with financial decisions.”
Succeeding in tapping into this revolution, the digital transformation of financial services, will depend largely on expertise in all things data, the core competency of Team8. “Financial Services are first and foremost about trust,” says Zafrir. “And digital trust is dependent on cybersecurity and privacy, a natural habitat for Team8.”
Covid-19 comes up, of course, in my talk with Russak-Aminoach and Zafrir. It has not slowed down their ambitious plans, just as it has not reduced VC investment and interest in fintech (CB Insights has reported that fintech mega-rounds of more than $100 million hit a new quarterly high in the second quarter of 2020). Covid-19 took all the existing trends in financial services and “put them on steroids,” says Russak-Aminoach, as consumers who were complaining about digital banking prior to the pandemic are now clamoring for it.
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