Sonali de Rycker, a scheduled speaker at DLD14, an annual conference in Munich, has been active in the European venture business for 14 years, focusing on consumer Internet and digital media sectors investments such as Avito, HouseTrip, KupiVIP, Wonga, Seatwave.com and Spotify. Prior to Accel, she was a partner at Atlas Venture in London. She started her career at Goldman Sachs in New York City and is credited with co-founding the investment bank’s business development group, a unit set up to source and execute acquisitions of smaller, fast-growing businesses for the Fortune 50. De Rycker, who was born and raised in Bombay, graduated magna cum laude in economics from Bryn Mawr College in the U.S. and earned an MBA from Harvard Business School. She recently spoke with Informilo’s Jennifer L. Schenker about the future of financial services, e-commerce and digital media and the evolution of the European tech sector.
Q: How is tech disrupting the future of financial services?
A: London is an international hub for financial services, so it is not a coincidence that we are seeing some really interesting innovation coming out of London across a number of sectors. We continue to be bullish on companies in the alternative credit space. We were early investors in Wonga, a pioneer in applying big data to lending. There is also significant opportunity in SME credit, where, because of regulation and balance sheet restructuring, banks have retrenched from the market. We have recently invested in Funding Circle, a London-based online marketplace for business loans, which raised a $37 million series C investment led by Accel Partners in October.
In fintech, we’re watching the shift in the infrastructure being deployed for financial institutions, whether banks, fund platforms or exchanges. After the revolution in electronic trading, especially equities, other segments are undergoing major change. Our recent investment in Calastone, a leader in the fund automation space, rides that particular trend.
Finally, risk management is a hot topic at the minute given the regulatory scrutiny. Institutions and hedge funds are rethinking distributed risk through the use of big data. Accel was first investor in OpenGamma, which offers open-source analytics and a risk management platform for the financial services industry. In our view, we are at the very beginning of a fundamental change in how financial services are being developed, delivered and consumed.
Q: How is crowdsourcing changing funding?
A: There are two major sources of crowdfunding. One is essentially a form of debt or customer funding, which works very well for products in hardware or content as it helps with customer adoption and provides market feedback. It is still early for the other types of platforms that offer equity investing, and the jury is still out for whether the wisdom of crowds is a proxy for professional judgment. In my view, anything that encourages first-time entrepreneurs and allows access to capital in Europe is very positive.
Q: How is technology changing the future of retail?
A: Nearly 20 years into it, e-commerce still represents less than 10% of the retail market. However, the web and, more and more, the mobile web are the starting points for most shopping experiences. The real challenge now is how to think about a consumer in a 360° way — hyper personalization that takes into account browsing across devices, location and in-store behavior. A lot of companies have started to crack pieces of the puzzle, whether in payments, couponing or enabling identification technology, etc. Ultimately, it is all about data. Who is going to know the most about you to enable the retailer to offer something that is locally available and highly compelling based on what you have been searching for? Interestingly, it is the incumbents like Google and eBay/PayPal who are in a really good place to take a crack at this given their access to millions of customer accounts. Although new business models are being invented, in my view, it is very unclear whether this will be a game that will ultimately be dominated by start-ups.
Q: You are on the board of IAC, the American Internet company with over 50 brands across 40 countries. How does this help you understand trends in digital media?
A: IAC is a successful business that is a portfolio of distinctive digital companies, many of which are category leaders in their own right. The company is playing an important role in a number of sectors from search (Ask and Mindspark) to dating (Match and Tinder) and online video (Vimeo). The company is a great example of how to innovate in different cycles and sectors. It has done this from within — the meteoric success of Tinder is a great example — but also through a very successful acquisition program for which it is very well regarded in the market. In our quest to build large, durable businesses, Accel’s investment hold is often eight years, and, as such, even our more successful companies constantly have to rethink how they evolve and stay on top of their game. IAC has provided me with great insights into how to approach innovation in multiple ways.
Q: You recently helped SVC2UK (Silicon Valley Comes 2 The UK) choose the 100 UK companies which have the potential to reach £100 million in revenue within three to five years. Why hasn’t the UK created more global billion-pound-plus Internet companies?
A: I think this is where the rear-view mirror tells a very different story than what the future holds. Historically, it was possible to build substantial businesses focusing on the UK alone. First-generation success stories like Moneysupermarket and Rightmove were and still are great examples of this. In other markets like Sweden and Finland — which have produced successful global companies like QlikTech, Supercell, Rovio and Spotify — the domestic markets are very small, pushing companies to go international very quickly. I think we are now at a point where global leadership is very much the objective of most ambitious entrepreneurs. We see this with companies like Wonga, MindCandy and King.com. This has gone hand-in-hand with the evolution of the ecosystem. Often, a successful ecosystem boils down to a few great companies setting the example and fuelling the next generation with talent and capital. In addition, London is a fertile place to ramp and scale a business, regardless of where it has been founded, further contributing to the development of the ecosystem. That is why so many successful European Internet businesses move here.
Q: Are you bullish on Europe?
A: There has never been a more exciting time to start a company in Europe, including Israel. We have been waiting for some time for our private companies to get onto the world stage and are now seeing a snowball effect: look at companies like QlikTech, Supercell, Wonga, Spotify, Mind Candy, Criteo, Waze and Wix. The time for Europe has more than come, and it will only get more interesting as the next generation of entrepreneurs see the opportunity and success that is achievable.