Edison Partners is no bandwagon investor

With long history in fintech, firm looks to build business, not just turn a quick profit

By Brett Johnson, April 3, 2017 at 3:00 AM

Chris Sugden of Edison Partners touts his firm’s experience investing in fintech. – (AARON HOUSTON)

He didn’t make an analogy to Hawaiian-shirted Americans in Rome, but fintech industry watcher and investor Chris Sugden does think of “them” as tourists.

“Them,” meaning the flock of investors and venture funds that came clambering for a stake in the fintech industry not too long ago.

“There was a rush to the fintech space around 2015, all around mobile payments and lending, and that created a tremendous amount of capital flowing in,” Sugden said. “Fintech was full of hype then.”

Even if there remains some healthy interest in fintech, particularly in consumer-facing enterprises, the frenzy has being dying down recently.

Sugden, chairman of the investing committee at Edison Partners, has seen it happen before.

“My impression is things get hyped up — and then, when it gets big enough, it’s easy to knock it off its pedestal,” Sugden said. “We as a firm haven’t been caught up in that hype cycle. We’ve always thought fintech was a pretty interesting space.”

Sugden is a native to the fintech sector, having spent more than 15 years personally involved in it. That’s longer than most people knew what the term “fintech” referred to.

“It was something that was new to the whole industry,” he said. “And, over the past 15 years or so, we’ve invested in more than 30 fintech companies, so about two a year. So we have a broad, long-tenured experienced in fintech.”

As a firm focused on growth equity, looking at companies between $5 million and $20 million at the time of investment, Edison Partners is interested in helping build out businesses — whereas, the fintech investment buzz of two years ago was largely a search for quick profit.

Doing digital and dollars

Fintech firms don’t make clear distinctions between their tech people and their finance people.

Joe Stensland, chief commercial officer for digital wealth at Scivantage, said his fintech company is composed of technologists — ones that likely know how a stock trades.

“Our developers are not just software engineers, they need to know something about financial analysis and financial products,” he said.

Fintech is about doing things differently, Stensland said, which requires people that can conceptualize new ideas on the financial side and deliver on ways to do that with the technology.

“That makes the New Jersey and New York area a perfect mix: Because it’s a hub of financial services with the technology ingredient, you can find the kind of people that carry a bit of both — which tends to be what we’re looking for,” he said.

The former approach takes time, but it can pay off. One example is the firm’s early investment in Billtrust, a business-to-business electronic payment service provider based in Hamilton. It was about 10 years ago that Edison Partners became the first investor in that business, which now employs more than 300 people.

Before even that, the firm around 15 years ago was among the initial investors in the fintech firm GAIN Capital. The Bedminster-based company has gone on to revolutionize foreign currency trading, expanding over time to a footprint that spans the globe.

“It ended up being a really great New Jersey success story from literally starting on the second story on Main Street in another North Jersey town to being an international company,” Sugden said.

Both companies kept their headquarters in the Garden State throughout their respective expansions; it makes sense for Sugden, who sees New Jersey as one of the premier places to be for a fintech company.

Joe Stensland, chief commercial officer for digital wealth at Scivantage. – (AARON HOUSTON)

Sugden was even part of bringing another fintech company he spearheaded an investment in, Scivantage, to Jersey City from Manhattan in 2006.

The New Jersey Economic Development Authority was also instrumental in attracting the company to the state with its incentive program that rewards the hiring of Jerseyans.

“There’s always that New York or New Jersey question for fintech startups,” Sugden said. “It may not be for everybody, but at least in the case of this company, it was a really good decision that paid off.”

Scivantage is a fintech company that enables online trading, brokerage and wealth management for its financial sector clients. Joe Stensland, chief commercial officer for digital wealth at the company, said he expects fintech to remain a hot industry for investment, even as it goes through some changes.

He senses, for example, an even more profound move toward mobile platforms in fintech. Usage of the mobile side of Scivantage’s platform doubled over the past year.

“In the next five years, expect it will be more mobile-based than web-based,” Stensland said. “If you look in your phone’s app store, you’re already going to see a whole lot more fintech-related apps than you would’ve several years ago.”

No matter the direction fintech heads in, Stensland sees it as essentially aligned with general business trends.

“These solutions are about either making businesses more efficient or improving your ability to attract customers and grow revenue, and you’re seeing more of that coming out of the recession and with financial markets starting to grow again,” he said.

Posted in Press Coverage.