Читать книгу Transactional to Transformational - Christer Holloman - Страница 31

If BBVA wanted to become an investor with credibility and prestige with access to the top companies, they came to the conclusion it was necessary to do so from a different position than as a balance sheet investor. BBVA made the decision to establish Propel as an independent entity to replace BBVA Ventures for two key reasons. The first reason was directly tied to the mindset of some startups regarding working with corporate venture funds. BBVA came to understand that some startups believed that they could get better support from the traditional venture capital structure than working with a large banking entity. The traditional venture capital model aligns interests with the startup founders given that the General Partners managing the fund put personal capital at risk but also benefit from the success of the investment performance. This financial alignment is typically missing in a corporate venture capital program as it would be unusual to ask an employee to contribute their personal funds to their work projects.

Secondly, BBVA Ventures had been structured in the highly regulated US banking market so that it was limited to investing only up to five percent in any given financing round, which limited the range of possible investment opportunities.

The new US fund was a Small Business Investment Company (SBIC), an arrangement to help channel investment dollars to US small businesses. Operating as an SBIC gave BBVA flexibility in stake size, which the bank did not have as a bank‐regulated corporate fund. BBVA became a limited partner, contributing all capital to the fund and accepting delegated management of it. It was a rather unique model, as few corporate venture programs had ever taken that step before.

In an increasingly competitive fintech venture capital environment, BBVA believed that its increased capital, combined with the traditional venture capital model of Propel, would enable access to invest in the best fintech startups and better support BBVA's vision of using technology to change financial services for the benefit of the customer.

The shift to Propel as an independent entity made it a more attractive investor for the companies BBVA was interested in supporting and also generated more strategic value from this fund.

Losing control of approved investments posed a risk to the bank. The new entity would have substantial autonomy, and it took a lot of trust and alignment in the legal structure and governance to make it possible.

Two important conditions were established as control measures for Propel:

 The investment scope was made clear in that the kind of companies in which Propel was going to invest in were companies that were strategically interesting for BBVA, such as those at the intersection of finance and technology. Based on those investment perimeters, Propel was able to freely construct a portfolio of investments and manage the business as any other venture fund.

 A quarterly Limited Partner Advisory Council was established to review what investments had been made in the last three months, how the portfolio was doing, updates on the fintech market in general, and other strategic insights brought from the Propel team.