Allectus Capital in Silicon Valley: Fintech Disruption and Innovation Trends

Here at SVIC we recently designed and executed a custom immersion program for investment firm Allectus Capital. Allectus is a great example of how any business can discover something new in Silicon Valley; even though the majority of the firm’s $300 million portfolio is in tech sector investments, its executives still found plenty of new insights into areas like blockchain and digital transformation during their trip to the bay area.  

With Allectus based out of Sydney, Australia, the majority of its investments are in the UK and the Asia-Pacific region. So the company’s one-day immersion program with SVIC was also a chance for the Allectus executive team to scout out potential new investment opportunities.

Allectus’ came to Silicon Valley with two key learning priorities:

  1.  Become familiar  with best practices in innovation.
  2. Gain an understanding of the major trends in the fintech space.

We custom-built a varied program which answered to those needs and showcased the wide variety of companies and expert knowledge available within the Silicon Valley ecosystem.

Financial Services and Digital Transformation

The program began with a visit to Western Union. Originally a major player in the American telegraph business in the late nineteenth century, Western Union is today a leading example of a legacy company which has transformed itself for the digital era.

During a presentation from the general manager of the high principal money transfer branch, the Allectus executives learned about the steps Western Union has taken in recent years to increase revenues coming in through digital channels. Those revenues have now reached about $300 million, three times more than they were in 2010. A big part of that success has been down to the company engaging with consumers through its mobile apps, which have been downloaded more than 3 million times on the Android and iOS platforms.

Allectus Capital executives learn about Western Union's digital transformation journey from a senior manager for the money-transfer company.
Allectus Capital executives learn about Western Union’s digital transformation journey from one of the money-transfer company’s senior managers.

Hearing Western Union’s story answered to both of Allectus’ learning objectives. The Allectus team saw how Western Union has overcome disruption in its industry by putting data and technology at the heart of its products and business processes. This strategy has allowed it to compete with newer companies and startups in today’s highly competitive digital payments and money transfer market.

Key takeaway from Western Union: with the right strategies and partnerships legacy businesses can rebuild themselves to become leaders in the digital era and compete with digitally native companies.

The next stop on the Allectus program was at Robinhood, an investment trading platform on web and mobile which has shaken up the retail investment market through its commission-free business model. In a presentation from the company’s head of business development, Allectus’ executives heard about how Robinhood has cut out manual account management and storefront locations to keep its costs down, therefore freeing customers from a major pain point: the fees paid to brokers for buying and selling shares. Robinhood’s alternative is to generate revenues through collecting interest on clients’ cash balances and offering a premium subscription service with additional features.

The company says what sets it apart from other trading platforms is its commitment to making stock trading available to a mass audience, not just a wealthy few. As the Allectus team learned, Robinhood appears to be making good on that promise, with a big percentage of its customers coming from the millennial generation. The median age of a Robinhood user is 32 and while some analysts question if its commission-free approach can work long-term, the market seems confident: following a Series D funding round in May, Robinhood was valued at $5.6 billion, a significant jump from its $1.3 billion valuation after fundraising a year earlier.

The Allectus Capital executive team hears from Robinhood, a fintech startup disrupting the investment industry through its commission-free business model.
The Allectus Capital executive team hears from Robinhood, a fintech startup disrupting the investment industry through its commission-free business model.

Learning about Robinhood was exactly the kind of education in fintech Allectus wanted. Apart from being closely related to Allectus’ own investment business, the trading platform was also highly relevant as an example of how technology is disrupting the financial services industry through new business models which reach previously underserved customers.

Key takeaway from Robinhood: established business models in the financial services industry are actively being disrupted by companies leveraging technology to come up with new approaches that eliminate customer pain points.

Trends for the Future

The third meeting on the Allectus executives’ program was with the Stanford Blockchain Collective, one of the university’s biggest blockchain groups. During a Q&A session with one of the collective’s co-founders, the Allectus team were able to find out everything they wanted to know about blockchain including its use cases and its potential to disrupt established industries. It was a unique opportunity for Allectus to get insights into blockchain from an expert source at the cutting edge of research in the field.

The last stop of the day for Allectus was at Institute for the Future. An interdisciplinary, non-profit think tank, Institute for the Future specializes in forecasting how today’s technology trends will impact our economy and society in the years to come. A presentation from one of the research group’s principal technologists taught the Allectus team about the history of the Silicon Valley ecosystem: which forces have shaped it over the years and helped it prosper. The executives also learned about how Silicon Valley will change in the future as technologies become more sophisticated and interoperable. As explained in the institute’s presentation:

“Future app and service designers will create new user experiences with blended combinations from a vast palette of continuously morphing technologies.”

Key takeaways from Blockchain Collective and Institute for the Future: The way end users experience technology is set to change radically, with fields like blockchain still in their relative infancy and full of potential.

Next Steps

Allectus Capital’s one-day immersion program reflected the diversity of resources available in Silicon Valley: disruptive startups, legacy businesses, groundbreaking research and world-leading experts are all concentrated in the bay area. For companies which want to learn, the great news is that our executive immersion programs can connect you to this tech ecosystem with its wealth of insight and experience.

For the Allectus executive team, meeting in person with innovative companies showed them that disruption in financial services is happening now. They saw that to stay competitive they need to react, and quickly.  Ideas on how to react, including by partnering with startups and experimenting with new technologies, came through presentations from Western Union and Robinhood. Both companies laid out blueprints for a successful digital transformation.

Visits to the Blockchain Collective at Stanford University and Institute for the Future, meanwhile, were also illuminating. They gave Allectus insights into the economic and social changes which are still to come. For executives investing now in the future success of their company that knowledge is invaluable; it will help them back the technologies which are going to have the biggest impact in life – and in business – in the years to come.