[podcast] Susquehanna Growth Equities’ Amir Goldman on investing in fintech

This episode is another in an ongoing series on this show where we talk to some of the leading investors in the financial technology space. This week’s guest Amir Goldman of Susquehanna Growth Equity is a bit of a pioneer in the space. His firm has been investing in — and exiting — top fintech firms for more than a decade now. He takes concentrated positions and doesn’t need to diversify, so he’s swinging for the fences.

Amir Goldman, Susquehanna Growth Equity

Some of his best-known current investments in his portfolio include Credit Karma, Payoneer, and PaySimple.

Amir’s been around long enough to have exited over a third of his fintech portfolio and has been an active participant in the technology-driven changes that the financial services industry has undergone.

We talk about those changes, some of the investments Amir and his firm have made in the fintech space and why he made them. We also discuss where he’s looking to deploy capital now and where he thinks some of the best opportunities in fintech will come from in the future.

Below are lightly edited and condensed highlights from the conversation.

The fintech investment thesis

“The electronification of transactions has created a lot of wealth across multiple industries and the financial services industry was the early adopter in this respect.

“We’re looking for fast-growing businesses that are growing north of 30% per year. We target companies doing $5-$50m in revenue and our typical investment is $5m to $50m..”

The evolution of investing in financial services

“When we first started investing, we focused on trading technology, meaning the digitization of public markets, the decimalization of trading, and low latency / high frequency trading — these big, huge investment banks were willing to spend unlimited dollars to get a technology edge made trading technology the obvious place to start investing.

“We quickly moved to electronic payments — digitizing banks, money movement, etc. — which was a lucky expansion for us because this is where we’ve made most of our hay over the past ten years.”

Example of a winning fintech investment that you’ve exited

“Probably the most substantial investment in our portfolio in the early days was CashEdge which provided the infrastructure for online banks to do online account opening and handle account-to-account money movement between banks. We had 8 of the top 10 largest financial institutions in the US as customers.”

Why we don’t diversify our portfolios

“We have a great source of capital which is the entrepreneurial group that founded and bootstrapped Susquehanna Financial Group. That creates a lot of flexibility for us. We don’t worry about running a diversified portfolio. We typically do 3-5 investments/year and each of our funds have had non-diversified profiles. For example, our first fund was a $100 million fund and our investment in CashEdge was $35 million. If we find a winner, we just want to really double down and get as much exposure as possible.”

The best investment you didn’t invest in

“We missed on a company called GreenSky which announced a multiple billion dollar valuation with TPG Group about a year after we passed on it. They automate financing for small businesses in the home improvement space — with GreenSky, these contractors, who typically work on paper invoices and have to shell out money for supplies before they get paid, can get an instantaneous loan from Home Depot to address their working capital needs. It’s turned into a monster business.”