Ron Savino, an angel investor and startup mentor in Hong Kong, has launched a venture-capital business, AFG Partners, to channel investments to B2B enterprise fintechs.
“Enterprise B2B fintechs are growing into Asia,” he said, either as local players going cross-border, or entering the region from elsewhere. “We want to partner with strategic-thinking LPs and be an extension of their venture and fintech innovation efforts.”
AFG has raised about half the $25 million it wants to amass and will primarily invest in Series A rounds, or pre-A rounds in companies that already have revenues. “I look for companies with intellectual property and a real client base,” Savino said.
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Savino is the sole general partner at AFG, but he has seven advisors and a network of specialists who help source and advise on deals. His investors include family offices and experienced finance executives.
The firm has made its first two investments: to Hong Kong-based Igatica for digitizing insurance core systems, and to London-based Traydstream, which is digitizing paperwork around trade finance.
Manuel San Miguel, co-founder and CEO at Ignatica, says the startup offers a series of cloud-based SaaS platforms to enable insurance companies a way to overhaul their legacy core systems for policy, administration, and other behind-the-scenes functions.
“Automating distribution with a nice website and app is the low-hanging fruit in digital transformation,” San Miguel said. “But it hits a wall,” because new products are sold on legacy infrastructure that can’t provide digital service or manage the lifecycle of the product.
There’s no one single aspect to Ignatica’s tech. It involves cloud SaaS offerings, a blockchain component for transaction security and audit, and a data cloud to deliver analytics and a real-time view on a product’s performance – all built as a microservices architecture.
The benefit is to remove the cost and the risk from launching new products. A complex life or savings product can require millions of dollars in testing and systems implementation, over the course of a year.
This means insurers can only roll out a handful of products every year, and they have to be conservative because each one must be a hit. But if a firm can roll out 500 offers of a new product, see what works, tweak it, and then push out 500,000 offers, at practically zero cost, then insurance companies will be positioned to innovate rapidly.
Savino said: “These guys are the engine room, the accounting and operations of underlying policies, using APIs and event-driven solutions to connect to distributors, payment engines and third parties. It’s about launching new, complex products.”
Sameer Sehgal, London-based CEO at Traydstream, says the startup uses artificial intelligence, machine learning, optical character recognition, and neural networks to digitize letters of credit and the related paperwork.
“Today we’re processing up to 3 percent of documents for global trade,” he said. “Our goal is to process 50 percent of global trade in the next two to three years.”
Between corporate buyers and sellers, and their respective banks, there is a lot of duplicative paperwork before payments are settled and goods received. It’s all redundant, and large corporate banks deploy thousands of people to manage this tedious workload.
Traydstream’s tech can take what usually requires eight or nine hours and compress it to thirty minutes. “We’re aiming to get this down to seconds,” Sehgal said. “If companies can process transactions that fast, imagine how disruptive that will be for working capital, insurance, and foreign exchange.”
Once the system scans a trade document, it takes over, now identifying 11,000 data sets per transaction, across hundreds of types of documents. “A lot of science goes into that last mile,” Sehgal said.
Banks are sorely manual – he reckons only 3 percent of their trade-fin workflows are automated today – but they are at risk if they don’t transform, and fast. “The people checking these transactions are in their forties, fifties and sixties. They’re looking to retire. Young people won’t do this kind of work.”
Savino said the UK-based company is looking to expand into Asia, which is why they wanted AFG as one of its financiers. “I see them eventually becoming an ecosystem play, with API calls integrated with insurance brokers, liquidity providers, and banks,” he said. “They’re solving a real pain point, and they have the specific domain expertise to handle what are difficult problems.”