The influencer interview: Spiros Margaris, Venture capitalist and founder of Margaris Advisory

By Alara Basul | 17 January 2017

Spiros Margaris has been ranked as the #1 global fintech influencer by Onalytica, and #2 as Insurtech influencer, also by Onalytica. He’s a regular speaker at international fintech conferences and also a senior advisor to the Fintech forum.

And it’s easy to see why. Spiros’ immense credibility, extensive industry knowledge, and all-around likeability are just some of the reasons he has developed a reputation as one of the fintech industry experts whose opinion you have to know. All of the factors were prevalent when we spoke to the venture capitalist and founder of Margaris Advisory to gauge his views on the current state, and future, of the fintech industry. 

How did you become involved in the fintech industry and how long have you been in the industry to this point?

I came from the hedge fund industry originally. I developed my two start-ups in New York during the dotcom boom, I knew the start-up world and I was also living it. Having been a part of the industry for a significant period of time, I started writing about fintech companies and innovation from my perspective, and I published articles about things that I thought were innovative ideas. People who were interested in the industry came to me through my articles, and that’s how everything started. 

I was at the right place at the right time in terms of developing a following in the industry. I’m an investor in two German fintech start-ups, Kapilendo.com (the only full-service funding marketplace in Germany) and moneymeets.com (the leading German 'Fintech Supermarket'). So not only am I very involved in the fintech space, I’m also an investor. I think the combination of coming from the finance side, being innovative and having my own start-ups during the dotcom boom gave me credibility in the market. 

And when I write about things, I try to be constructive, which I think the industry appreciates. In December, I had 2.4 million reads in Twitter for the month, and we’re heading to almost three million reads this month, so I now have a lot of exposure. I believe I was at the right place at the right time in terms of writing about the industry as people were becoming more aware of fintech and interested in the industry, but I was also exposed to the market which meant that I could write articles from a uniquely valuable perspective. I would’ve been in the fintech space anyway, but thanks to the popularity of the industry booming, I got exposure from the general public. 

What is your role in the industry today?

In my role I’m responsible for fundraising and advising. I tell financial institutions and fintech companies what I feel and what I see. If I see there’s competition which I see is promising, then I’ll say to companies: “Have you looked at that?” It doesn’t mean that they should do it. My role as an advisor is just pointing out things, differentiating them with facts, and looking for new investments and opportunities. I also get approached for input from a lot by fintech and insurtech start-ups. 

Cybersecurity now affects everything, from insurtech to every other facet of fintech. That’s going to be a big component to look at moving forwards, so that is something I am definitely involved with. If a fintech start-up ever got hacked most of them would not survive, because the trust isn’t there yet at that the level that the big institutions have reached, and their wallets are not as deep to cope with that kind of crisis. 

You’re often talked of as being a fintech “influencer”. What does that term mean to you and is being “influential” important to you? 

Yes of course, it’s always an honour. It means that a lot of people that I respect read my work. My comments and articles are considered valuable to others. Every industry has “experts”, people with vision of where the industry is and should be heading, so to be considered an expert in fintech is something I am pleased about. 

I also like to make people shine. When I retweet someone’s article, I always look up their name because I like to give credit to the person who wrote the article. Nothing happens if you don’t do it, but it just a nice touch that says “I think this is a great article and I think people should know that you wrote it”. So that aspect of being thought of as influential in the industry is pleasing.

In your opinion what were the biggest fintech developments of 2016?

Insurtech. The industry only really kicked off last year, and we still have a lot of room to go, but that was certainly a huge development in 2016. 

And then I also think that big data and Artificial Intelligence, and the way it affects the fintech industry, is something we now appreciate more than we did this time last year. We have a lot of data and we need to analyse it, and the outcome of what we analyse is important.

That’s why I tweet about a lot of different sectors that may not directly relate to the fintech industry, but sometimes directly do effect it.

And what do you think 2017 will be remembered for? 

Consolidation of the fintech space. In 2016 we definitely had a high rate of consolidation in the industry, but that doesn’t mean we’re finished: Actually we’re far from it. 

Companies are now comfortable with the concepts of fintech industry and its management, which was not the case three years ago. Big banks are now integrated with fintech, they’ll observing the market and they all know about the industry. And there’s an understanding that innovation may be easier outside of big co-operations and then integrated in. These are the main reasons I see many new partnerships, or outright purchases and acquisitions, on the horizon. 

Cybersecurity is one of the biggest problems the industry is currently facing as well. There are too many companies out there, and no-one has an overview of the market in general. I don’t have a detailed picture myself either at the moment, but cybersecurity will not stop, in fact I think it’s going to get worse. 

So the demand for cybersecurity will be even greater. I spent over 15 years in the U.S, and life has changed there. Now when we go through the airport there it takes us longer. The same thing will happen in fintech and banking. 

Due to cybersecurity issues, there will be factors that will slow fintech development down, just to protect the industry. Development and freedom can’t transfer as easily anymore. Cyber techs have a negative effect on our freedom of possibilities. We could advance much faster but certain things will be limited due to protecting the customer and the company. 

Are there any tech developments or specific products on the horizon that you are particularly interested in?

Cybersecurity is something I’m looking at a lot, and finding opportunities within as a fintech vertical. I really believe that customer acquisition costs are huge in the B2C fintech space, and the market is difficult for new start-ups. Every industry matures to a certain extent. People and investors need to see more to be impressed these days. If you look at recent studies, a lot of people feel very comfortable with the Google, Amazon and Facebook’s of the world handilng their banking needs. If you ask me the older generation don’t, but those who are unfinanced have more of a need to find solutions. I think fintech’s greatest achievement in the end will be helping those people with no access to banks. Those are the people who are looking for solutions. 

As a venture capitalist, do you think we are about to enter a period with accelerated M&A activity in fintech and financial services?

Yes. I think there will be an increased number of partnerships and mergers, and equity partnerships.  We will see consolidation, because the burn rate of those companies are so high: On one hand there’s a burn rate, and on the other hand we’ll see more selective investments. Three years ago in fintech people would be more comfortable with early stage investments, but now there’s so many choices that investors have to be more selective. 

The smart companies are really looking to partner. Not only partnerships of incumbents with fintech as a common ground, but from fintech to fintech. This is to save costs and also to expand. The venture capitalists and the money that’s out there, and there’s a lot of it, can be used in various places: Now we have AI, insurtech, cyber security; so money is being spread more widely. You have to show success very quickly in order to achieve financial backing. It’s a quick turnover. That supports my theory that we will see more partnerships. 

If you look at most challenger banks, they do a great job in execution, but still don’t manage that much money relative to incumbents. By partnering with an incumbents challenger banks will have access to capital and customers. And you need capital, customers and an execution of strategy instead of focusing on the next round of funding. 

Is M&A activity the only way companies will able to remain competitive as dependence on keeping up with new fintech innovation intensifies?

Yes, but you will find exceptions. Every incumbent tries to protect its turf, and the whole innovation process with large organisations is very slow. It’s clear to me that innovation has to be bought or to be partnered with. 

A good example is the pharmaceutical industry. It spends billions on research. But most of the innovation is bought, from smaller companies which have great innovation. Then the muscle, the marketing power and big distribution capabilities, takes over. The big pharma giants usually buy almost exclusively the best ideas and the best companies, and then execute the sales strategy. The same thing should happen in fintech, buy the best things and excel where you excel to pull-off a merger made in heaven. 

At the end of the day companies have to play their strengths. Everyone has different talents and people should have mutual respect for each other’s area of expertise. That’s why they have to look for partnerships; it’s much cheaper, and less time-consuming. Unless you attempt to replicate the innovation, you don’t know how hard it is to succeed. 

The trick is, if you partner, you have to deal with your partner properly, and then you can learn. It’s more co-operating and less politics. People who work for big co-operations don’t want to be start-up entrepreneurs, and start-up entrepreneurs don’t want to work for big co-operations. Let everyone play to their strengths within their turfs and share their benefits. 

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