Closing a Series A round is tough (the “Series A Crunch”), but closing a Series B is even tougher. You have to show great metrics at all levels. Series B is the “show me round”.
So when we see a big Series B round in the white hot InsurTech sector we pay attention.
In this post we look at the trends and insights behind the news that a Singapore-based health InsurTech venture called CXA Group has closed a $25 million Series B round from Facebook’s co-founder Eduardo Saverin’s B Capital Group and Singapore’s EDBI.
This news illustrates 6 major themes:
– Innovation Capital goes where it feels welcome
– Innovation capital goes where there is opportunity and that is shifting to Asia
– Singapore just scored a goal in the Fintech Hubs Global Tournament.
– The UHNWI Super Angels will shake up the “permanent aristocracy” of top tier VC Funds.
– The role of Government in building Fintech hubs
– This could be Zenefits done right
Note on terminology: we refer to Innovation Capital as the combination of cash + connections + know how that has historically been called Venture Capital. For reasons explained later, the historical term – Venture Capital – has outlived its Sell By Date.
Innovation capital goes where it feels welcome
This is not complex. Countries with zero capital gains tax on long term investments will attract a lot of Ultra High Net Worth Individuals (UHNWI aka Family Offices). Eduardo Saverin is an example – a Brazilian who famously renounced his US Citizenship in 2011 to take up residence in Singapore.
What is new is the blurring of lines between these UHNWI Super Angels and traditional Institutional Venture Capital. More on that later.
Innovation capital goes where there is opportunity and that is shifting to Asia
Asia is the 21st century growth story.
This statement wins the “Captain Obvious Award”. What is interesting is the time lag between when the growth shifts and when the innovation capital shifts. For a while, Innovation Capital in the middle aged world (America) and the old world (Europe) knew how to invest and saw the growth shifting to Asia. It was American VC money flowing into Asia. The next iteration, happening now, is when Asian VC money flows into Asia. This deal illustrates that shift.
Singapore just scored a goal in the Fintech Hubs Tournament.
This deal demonstrates that Singapore is becoming a major Fintech Hub, leveraging smart regulation and its position at the heart of the Asia growth story.
The UHNWI Super Angels will shake up the permanent aristocracy of top tier VC Funds.
The lead investor is credited as “Eduardo Saverin’s B Capital Group”. If the PR said “Eduardo Saverin” then this would be classed as an Angel round. Whether B Capital Group has other investors is not that important because a single UHNWI individual or family has plenty of capital to deploy.
For a long time, we had Angels who led the way by investing early and then politely inviting the big funds to invest. This led to what the Ivey Business Journal describes as a permanent aristocracy of top tier funds. The Super Angels with an institutional fund, such as Eduardo Saverin’s B Capital Group can give that permanent aristocracy a run for their money. Some of the partners of those top tier funds are now also setting up as Super Angels and just investing their own money. Like Hedge Funds that become Family Offices, they no longer manage other people’s money, they just invest their own money. This is partly driven by tax, as people see the political writing on the wall that signals the end of carried interest fees being taxed as capital gains.
This is why we see the term Venture Capital as past its sell by date and prefer the term Innovation Capital. What we normally think of us VC – funding early stage innovation – is being done by Angels and too many VC Funds have become part of the asset management industry focussed on AUM fees and short term exits.
The role of Government in building Fintech hubs
Co-Lead on the deal was the corporate investment arm of the Singapore Economic Development Board call EDBI. This post looks at the increased role of governments in Fintech regulatory competition as governments calculate the economic return on innovation. Whether direct investment (“picking winners”) is the right way is debatable, but expect to see more government activity in Fintech.
This could be Zenefits done right
CXA is going after the employee benefits industry (pegged at $100 billion in Asia) with a free SaaS platform monetized via lead generation. If that sounds familiar, think Zenefits, the hyper-growth success that hit the speed buffer (for reasons described here).
CXA goes to the next level by helping employers unlock wellness through prevention and disease management.
The health InsurTech opportunity is no longer only about America.
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