The views of an international investor: Interview with Donatella Callegaris

An international investor recognises fintech as a transformative force in the global financial industry. After all, it is reshaping sectors from banking to insurance with digital innovations. An international investor also emphasises the importance of regulatory compliance in fintech. Differing financial regulations across countries can pose challenges to fintech scalability and adoption. Fintech Review asked a few questions to Donatella Callegaris from Flashpoint to get the views of an international investor: what is going in fintech?

Tell us more about Flashpoint. What is your elevator pitch?

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Flashpoint is an international tech investment manager with over $400 million AUM focused on international tech companies originating out of Europe and Israel. Flashpoint manages five venture funds: three VC funds, a Venture Debt Fund, and a Secondary Fund. The firm is headquartered in London and has offices in New York, Tel-Aviv, Budapest, Warsaw, Riga and Nicosia. 

Investors in Flashpoint’s funds include Széchenyi Funds, a Hungarian fund manager, and more than 130 major family offices and HNWIs. The funds have made investments in 64 companies including names such as Guesty, Chili Piper, and Office RnD. Flashpoint has completed 15 exits, including the sale of its stakes in Shazam (to Apple), (to PokerStars founders and General Atlantic), Marketman (to PSG), and Gurushots (to Zedge).

Our mission at Flashpoint is to bring together capital, knowledge, people and best practices and help socially responsible development. Monetary returns are of course important, but non-tangible aspects of our work are equally important for our team. We have invested a third of our capital in themes that change the world for the better, this includes investments into e-learning, telemedicine and online job platforms.

What is your background, and your story with Flashpoint?

I have had the pleasure to partner with hundreds of the most innovative and exciting businesses in my career. Now I am focusing on backing founders originating from the CEE, Baltic regions, as well as Finland and Israel who are building attractive companies anywhere in Europe, ranging from startups to growth stage. I have lived and breathed venture debt for almost 15 years focusing on originating, executing and managing venture debt transactions and, most recently, running a venture debt fund. 

I joined Flashpoint in 2019 as a Venture Debt Managing Partner to leverage my extensive network and prior experience to launch its venture debt product when the firm was looking to tap into this attractive asset class and be able to support technology companies not only with equity through our existing Series A focused VC funds but also with non-dilutive capital for VC-backed companies at slightly later stages of development. Since then, we have successfully launched the fund, assembled the team and are now in the final stages of deploying our first fund, which is demonstrating outstanding performance, in spite of a global pandemic and general macroeconomic hurdles.

A life before Flashpoint…

Before joining Flashpoint, I was a founding member of a UK based venture debt fund – Columbia Lake Partners (CLP). Back in 2014 when Bessemer Venture Partners (BVP) was looking to set up CLP, they invited me to join the founding team to launch the new fund and leverage my broad and strong connections in the VC, tech and startup ecosystem and bring my knowledge and experience of the product.

I started my career in venture debt with Kreos Capital (acquired by BlackRock in June 2023) where I spent 7 years and saw the life of nearly 3 funds.  There, I managed various aspects of the investment process and oversaw the portfolio for technology and life science companies based in the UK, continental Europe and Israel. I also handled different levels of corporate governance for the fund/s.

You have just exited from Clausematch following its acquisition by Corlytics. Can you tell us more about it?

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I have known Jay (the founder and CEO of Clausematch) for a number of years, since my time at CLP in fact, and always wanted to be able to participate in their growth story. The time turned out to be right when I was already leading Flashpoint’s venture debt fund and we ended up participating in the company’s 2022 US$10.8M investment round (equity + venture debt). 

The company demonstrated very strong results over the last few years signing up multinational Tier 1 clients as well as establishing a strong foothold in the US.

I was aware that Jay had known John Byrne (the founder and CEO of Corlytics) for quite a while and they always thought that Clausematch  and Corlytics had many synergies, particularly in combining Clausematch’s intelligent policy and compliance management software and Corlytics’ integrated regulatory content. As the demand from clients for such a combined solution became even more obvious recently, Jay and John found a way to move forward together, combining the two businesses. I am very excited about the future of the combined business and I’m very much looking forward to following their future successes.

Our exit from Clausematch is an important milestone as it marks FlashpointGroup’s 15th exit and the Venture Debt team’s second since the launch of the fund in early 2020, proving our ability to deliver on our promises to our investors.

This is your 15th exit. Are you following a specific strategy or has it been organic?

It is critical for any venture capital fund to make exits from their portfolio companies as that is what ultimately delivers returns to the funds’ investors. At Flashpoint, the vast majority of our exits have been “organic” with healthy interest from strategic investors, signalling the strong quality of our portfolio.

Specifically for venture debt, the exit path is generally somewhat different from a traditional VC fund as the loans that we issue naturally get repaid over time. Nevertheless, we still need the companies to exit via an IPO or a trade sale / M&A in order to realise returns from our warrants (which are an integral part of the venture debt investment).

What do you see as the major trends in fintech from an investor perspective?

The pandemic expedited the adoption of digital financial services, propelling further segments like payments and neobanking into prominence through players like Stripe and Alipay. However, early 2022 witnessed a 60% drop in fintech valuations despite steady revenue growth, accompanied by a 40% decline in new funding, shifting focus towards profitability over expansive growth. This transformation reflects industry maturation, prioritising sustainable development. 

From an investor standpoint, pivotal fintech trends encompass the surge in digital transactions, the rise of neobanks, transformative AI-driven analytics and the integration of financial services into non-financial platforms. Another noteworthy development in the fintech landscape is the growing intersection of fintech with regulatory technology (regtech). As the regulatory environment becomes more complex, fintech solutions that facilitate compliance, risk management and regulatory reporting are gaining traction among investors. Furthermore, the continued exploration of decentralised finance (DeFi) platforms and their potential to disrupt traditional financial intermediaries and services remains a subject of investor interest.

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Additionally, as the world becomes more interconnected, cross-border payments and remittances are seeing innovation through blockchain and fintech collaborations. Lastly, the ongoing emphasis on cybersecurity and data privacy within fintech solutions is paramount, driving investments in technologies that safeguard sensitive financial information. Keeping a close watch on these trends is pivotal for investors seeking to navigate the dynamic fintech investment landscape effectively.

Other innovations in fintech or elsewhere that you find particularly interesting?

Over the past two years, we’ve witnessed an astonishing revival in the travel industry. While the fast growth of late 2021 and early 2022 was primarily explained by people realising their deferred travel plans which were interrupted by the global pandemic in 2020, the sector continues to grow in 2023, in spite of the headwinds from the worsening macroeconomic climate and reduced consumer purchasing power. 

There are a few factors that we see driving this trend in a sustainable manner.  

Firstly, the pandemic brought about a significant transformation in work dynamics, with remote work and telecommuting becoming the norm. This shift has given rise to a new category of professionals known as “digital nomads” who have seamlessly blended work and travel. With traditional office boundaries dissolved, individuals have embraced the flexibility to explore new destinations while fulfilling work commitments.

Additionally, we’ve observed that younger generations such as millennials and Gen Z place a higher value on travel experiences, particularly when it comes to booking accommodations. Instead of traditional hotels, these generations are increasingly turning to platforms and apps that offer unique apartment and home rentals. These tech-savvy travellers are not only seeking apartment rentals for the added space, privacy, and local flavour they offer but also for the convenience of mobile booking, digital check-in processes, flexible payment options, integrated travel insurance and real-time refund capabilities. Therefore, service providers are forced to digitise their offerings, further fueling the growth of the TravelTech sector.

I’m particularly thrilled about these developments, as we’ve witnessed these through the prism of our own investments in the sector with companies such as Guesty, BobW and Welcome Pickups. I see a lot of further sustainable growth potential in the sector and we remain very bullish on TravelTech.