A new venture capital fund seeks to bridge the divide between Wall Street banks and Silicon Valley entrepreneurs by bringing together seasoned bankers and tech executives to support start-ups aiming to disrupt modern finance.
Nyca Partners, founded by Hans Morris, a long-time Citigroup banker and former president of Visa, says it will invest $20m-$25m over the next 18 months in financial technology companies focusing on alternative consumer credit, merchant payment solutions and financial infrastructure software.
Mr Morris will be joined by four other partners including Max Levchin, PayPal co-founder and chairman of Yelp, and Brian Finn, a former president at Credit Suisse First Boston and partner at buyout group Clayton, Dubilier and Rice.
“There is more innovation in financial services now than ever … but none of the venture capitalists are experts in the financial system,” said Mr Morris. “We bring together expertise on the financial system with lots of Silicon Valley connections.”
The New York-based fund has made investment in nine companies to date including Lending Club, the prominent peer-to-peer lender where Mr Morris is a board member along with former Treasury secretary Lawrence Summers and former Morgan Stanley chief executive John Mack.
Lending Club, which has an internet platform that allows borrowers to directly connect with investors, is preparing a long-awaited initial public offering that is expected to value the company at around $5bn, illustrating the potential for such financial technology start-ups.
“Credit is going to change in a very material way,” said Mr Morris. “When I started on Wall Street in 1980 my recollection is there were about 100 companies in the world that had access to the bond market. Ten years later 100 per cent of investment-grade companies had access to the bond market. Consumer credit is [going through] the same thing and the explaining variable is the declining information cost.”
In addition to Lending Club, Nyca has invested in Indiegogo, a crowdfunding platform that competes with Kickstarter, and Affirm, a company founded by Mr Levchin that seeks to create a new way for consumers to apply for short-term credit.
Many US banks and credit card companies still rely on decades-old software to underwrite and review borrowers’ creditworthiness, creating what Mr Morris sees as an opportunity for new systems and competitors.
The name Nyca is an amalgamation of “New York” and “California” – a nod to the fund’s intermingling of Wall Street veterans and Silicon Valley technology specialists.