How Citigroup’s innovation chief decides which startups to invest in

Citigroup

Citigroup’s venture arm, Citi Ventures, has put money into nearly 50 companies over the years.
Citi CIO Vanessa Colella explains what the bank looks for when investing in a startup.

Earlier this year, Citigroup rolled out a partnership with Feedzai — an artificial-intelligence-powered fraud-detection company — to bolster the bank’s ability to alerts clients in its Treasury and Trade Solutions business to aberrant or suspicious payments.

For a division that processes $4 trillion each day for thousands of corporations and public institutions across the world, the potential impact could be substantial, especially given the alert process has historically been rife with false positives that sap time and resources.

The partnership blossomed from an investment Citi Ventures made two years earlier in the budding startup, which is increasingly the path for fintech firms that catch the bank’s eye as well as its formidable checkbook.

"We’ve explored a lot of different ways of interacting with startups. We believe that it’s critical to not just be watching startups, but to actually be in the game with them," Vanessa Colella, Citigroup CIO and head of Citi Ventures, recently told Business Insider. "We all said, it’s not enough to even get front-row seats. You have to actually suit up and be in the game."

Other startups the bank has invested in and subsequently integrated into its own businesses recently include HighRadius, which uses machine learning to streamline money-collection processes, and Braze, which focuses on improving companies’ digital engagement with customers.

Citi Ventures has put money into nearly 50 startups so far — several which they’ve already exited — which fall under one of five umbrellas: fintech, commerce and payment, cybersecurity, machine learning, and customer experience.

How does the bank decide which startups are right to invest in? Colella laid out her approach to Business Insider:

"When we invest at Citi, we’re looking for companies that have product-market fit. They might be very early, seed-stage companies, or they might be Series B raises, but they’ve got product-market fit. In many ways, our portfolio companies have already gone through that kind of process where they had an idea, they went out to market, they tried to figure out "Was this quite right or not?" And they’ve landed on that product-market fit.

…

"What we’ve found at Citi is that we can be most helpful to entrepreneurs after they’ve gone through that initial phase and they really know what product, what service they’re trying to bring to market and why it’s better, and we can help them accelerate that. Everyone has a different formula, but that’s how it works here."

A company that’s still figuring out its idea or is mainly looking for financing is unlikely to find traction with Citi Ventures.

But, if a fintech has already developed a promising solution to a client frustration, Citi is happy to invest and use its global scale and relationships to accelerate growth.

As Citi CEO Michael Corbat told Bloomberg last month in Davos: "Think about that fintech company that has come up with technology, it can do something well and can bring it on to our platform and touch 140 million clients around the world in 100 countries, and we can scale them on day one."

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Source: Business Insider