Dealmaking

Santander spins out venture arm into $400M fintech-focused fund

Sees opportunities in core banking, insurance, payments, financial marketplaces and real estate

Multinational Spanish financial services giant Santander Group has announced it is spinning out its venture capital arm into a new fintech-focused fund.

The arm, which evolved out of Santander InnoVentures, will now operate as an independent entity called Mouro Capital. The new, autonomously managed venture capital fund will focus strictly on investing in fintech, enterprise software and “adjacent businesses closely linked with the financial services industry.”

Fun Fact: The new fund is named after Mouro Island located off the northern coast of Spain, which sits at the entrance to the Bay of Santander.

Like its namesake, the Mouro wants to “act as a gateway” for teams looking to build solutions focused on financial services, fintech and enterprise software.

As part of its evolution to Mouro Capital, Santander says it has expanded the fund size. SIV was established in 2014 with an initial $100 million allocation. It will now have $400 million in assets under management. 

“Our motivation for creating Mouro Capital was to compete with traditional venture firms on access and speed while bringing a value-add element most traditional firms don’t have – access to a global financial institution in Santander to help the portfolio companies in a number of ways,” Santander said. “We have access to a large and established network of partners and market experts as well as a geographical reach that will help startups scale and expand across regions.”

Over the past two years, Mouro has built a team, which now consists of nine people across three geographies – London, San Francisco, and Madrid –  that has worked to understand what startups creating better banking experiences across the world need from an investor to thrive the current connected environment.

Its investment thesis has also expanded. Mouro is seeking to back companies that are bringing new fintech products and services that are strategic to Santander “as well as the innovators that we view as making an impact on the way the world banks.”

Specifically, it wants to invest in startups that have the opportunity to create big markets, can challenge incumbents, and have defensible positions in place to keep ahead of competitors. Mouro plans to lead investments with initial checks of up to $15 million and further follow-on reserves. It will deploy capital in Europe and the Americas.

Currently, Mouro’s portfolio currently includes 36 companies. SIV was an early investor in unicorns Ripple, Tradeshift and Upgrade. It’s also had two noteworthy exits in the 2018 $2 billion sale of iZettle to PayPal and the recent sale of Kabbage to American Express.

Mouro Capital will be led by general partner Manuel Silva Martínez, who joined InnoVentures five years ago and has led the fund since 2018, and senior advisor Chris Gottschalk, who joined from Blumberg Capital in 2019.

“With Mouro Capital, the new structure and expanded capital base will allow us increased access to competitive deals while accelerating our investment process,” Gottschalk told FinLedger via email. “Our pace won’t change, we have historically invested in 5 to 10 opportunities per year, and this should stay fairly consistent. We are investing in seed through growth rounds.”

Mouro believes there are massive opportunities across financial services and enterprise software, according to Gottschalk.

“Moreover, we are still in the early innings of a technological and digital re-wiring of many financial products and a complete change in how these products are distributed,” he added. “As such, we see opportunities not only across what many consider as core banking, credit, payments and capital markets but tangential areas such as identity, financial marketplaces, insurance and real estate. “

Santander InnoVentures has delivered strong financial returns, the firm says, with a internal rate of returns (IRR) in the 25 to 35% range since its 2014 inception and a “c.1.75x cash-on-cash multiple portfolio-wide, with older, more mature cohorts reaching above 3-4x cash-on-cash returns.”

The decision to spin out its investment arm is part of Santander’s four-year (2019-2022) €20 billion digital and technology investment plan. The group says it is accelerating its digital and commercial transformation “to maintain its operational excellence while constantly improving the customer experience and innovative services it brings to customers.”

Ana Botín, Banco Santander executive chairman, said of the move:

“The creation of our fintech venture capital fund in 2014 has allowed Santander to lead the industry in implementing new technologies, including blockchain, offering better services to our customers as a result. InnoVentures has almost doubled the cash invested, despite being relatively young for a venture capital fund. Our goal is to build on that success, and by increasing our investment, while giving greater autonomy to the fund, we can be even more agile and further accelerate the digital transformation of the group.”

Santander said Mouro Capital will remain a key driver of its ambition “to be the best banking partner to startups, generating tangible value through strategic collaborations.” As of today, 70% of the fund’s current portfolio companies are working with Santander.

For example, Ripple’s technology is being used within One Pay FX for real-time cross-border payments and Nivaura’s technology is being used for the world first end-to-end blockchain bond issuance (made by Santander).

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