Investor Mark Goines on The Evolving FinTech Landscape
10.09.18
Interviews

Mark-Goines_2.jpgRJ: Thanks so much for joining, Mark. Delighted to chat, it’s been some time since we last spoke. Maybe what we could do is kick off with a little bit of background. You’ve been in the fintech world for a long time. You worked at Schwab in the 1980s, Intuit in the 1990s, various well-known fintech companies in the 2000s, and presently Personal Capital. It would be great to hear your perspective and background on the industry and its evolution.

It’s actually been almost 40 years in a combination of banking and financial services and financial technology. I started in the banking industry back in the late ‘70s. Back then, technology was considered a mainframe computer with COBOL code on it. It was still technology and we needed to manage programming, development, and all that, but the customers never really experienced it. For the customer, it was all paper, telephone, and faxes. It’s evolved considerably since then. Shifting from banking to then brokerage, at Schwab we called the company a “broker” on the door, but we were really a technology company. That’s how Chuck (Schwab) always described it and thought about it. That was an interesting revelation for me.

I loved technology so much I transitioned into the software category running the Turbo Tax and Quicken businesses. We were focused on growing a bunch of the category players in those sectors. Now I’m in wealth management. It’s a space I know a lot about and really like.

RJ: As I understand it, you then put the investor hat on?

While I was at Intuit, I spent quite a bit of time investing in and acquiring companies that could complement the businesses that we were building. From that, I learned the models of early-stage investing and how to work with companies that were very nascent in their product and marketing development. I really enjoyed it. When I left Intuit, I started investing personally as an angel investor and made over 50 investments in the financial technology category alone over that timeframe.

I did spend some time as a partner in a venture firm, but it turns out I’m much happier investing as an individual in very early-stage companies and helping them from day one. I now have a portfolio of over 30 companies that I’ve invested in and over 20 of them are in the financial technology category.

RJ: As you may know, our audience consists of many ultra-high-net-worth individuals and family offices. Some of them are new to the early-stage and venture investing world. What are the kinds of things you look for in a good startup?

It’s almost trite to say, but you look for the kind of people that you want to work with and that you think can really make something happen. It’s a combination of not just the opportunity but their persona, how well equipped they are to pursue an idea, and what they’re like to work with. There have been a lot of folks over the last five years who have been entering the financial technology space because they think they can make money. I want to work with people who have a desire to build a company into something that is important and impactful.

I’ll give you an example. I was the first investor in a company called Mint. I met the founder, Aaron Patzer, through a friend. I was so impressed by his approach, his intellect, and his style—his way of talking about what he was hoping to achieve—that it was apparent he was the kind of person I wanted to work with.

The other thing I look for, which Aaron showed at that time, is a crease in the market. Quicken was a very big business. Everybody thought they were unbeatable, but Aaron had a couple of ideas that were very profound. He thought he could acquire customers more efficiently and effectively and serve them better than Quicken. That was the essence of his pitch. It was compelling to me and it fit my area of expertise. We were off to the races with a really interesting company that grew fast. Eventually Intuit had to acquire Mint because it was scaring them.

I look for the right people and a crease in the market. It also has to be a very, very big category. There are a lot of niche products out there that I don’t find those very interesting. It’s hard enough to build a company, but building a company in a small category means that you cap the value that you can create. Examples of large categories include Mint (consumer-facing personal financial tools), bill payment and bill management, lending, and wealth management, which is one of the largest financial technology opportunities on the planet.

RJ: Historically you’ve been focused on fintech, but you do have investments in other sectors? When you look at your private investment activity are you focused solely on opportunities in fintech or are you increasingly branching out into other areas?

It’s largely fintech, because that’s my wheelhouse. I also have quite a few investments in social categories, although these often turn into financial services plays. An example of a company in my portfolio that has done very well is a company called Life360, which helps families stay connected for safety purposes. They have millions of users. They’ve grown very fast.

RJ: Switching back now to fintech, I wanted to talk about Personal Capital, which is a very interesting business. We were chatting about it recently and you were describing the differences with other solutions out on the market. Given our audience profile and their interest in asset management, could we discuss Personal Capital and its value proposition?

It’s a very interesting business. Some people have described it as Mint for people with money. Mint focused on people who had budget concerns and were trying to manage spending and optimize their credit score. Personal Capital also includes those features but focuses more so on people who have accumulated wealth and are not sure on the best model for managing it. They might be a Schwab customer or Fidelity customer trying to do it on their own. Or they might be a relatively small customer at a Morgan Stanley or a Merrill Lynch that’s not getting the focus and attention through a digital delivery model that they’ve grown accustomed to.

It’s a fairly large, niche market, and it’s evolving rapidly. I think about it in three sectors. There’s the high net-worth sector, which is well serviced by the larger brokerage firms, despite their fees being somewhat high. At the lower end of the market, there’s what we call the consumer sector. It’s the Schwabs and Vanguards of the world that offer products and services but don’t dig into customer’s holistic financial needs. They’re only offering investment solutions.

There’s a category in the middle that can be focused on by offering handcrafted planning to best manage your money and achieve your financial goals—like putting your kids through college or retiring. It can be done through a digital delivery model that doesn’t require a multi-million-dollar account minimum to receive high levels of service and financial advice.

It’s the consumer-facing, low-service model that robo-advisors provide combined with middle market appeal. For example, Personal Capital focuses on people that have a half a million to a million dollars.  Their financial life can be a mess and they’re not getting attention from companies who are focused on the multi-million-dollar accounts.

It’s become a very big sector and it’s growing very fast. Personal Capital has nearly $8 billion under management, 1.8 million current users on the free technology, and something like 600 billion views into household financial activity.

RJ: It sounds like some of the large financial institution, including wealth managers and private banks, have caught wind and are keen to provide their own offerings.

I’m a believer in each of those categories. Future Advisor was a company that I invested in early. They were sold to BlackRock. I was an early investor in Betterment, the leading robo-advisor in terms of assets and growth, which employs a low touch, low-intensity service model. Everybody’s trying to figure out how to approach wealth management and the big guys are hopefully adopting technology that consumers want.

Personal Capital’s average customer is older. They’re not millennials. They’re not middle-aged households that are starting to think about retirement. The average customer is older with a lot of assets. The market’s tech infrastructure isn’t really tuned to this and that’s the opportunity that Personal Capital is pursuing aggressively.

RJ: Switching back to your activities as an investor, when you make an investment do you typically serve in a director role on the board?

Not always, but often.

RJ: How do you typically describe your investment style? Does it vary on the spectrum from passive to active?

It varies. It depends on the needs of the company. I prefer to be involved early to help build the team and then select the professional investors who come in with larger checks. I’ll continue to serve on the board if they like, but I don’t always. I like to focus on the formation stages and get the company to a point where it’s got a model, a team, an engine, and it’s growing fast. And then I like to move on to the next one.

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