Here is a simple model when you’re thinking about fintech.
Base line: There is stuff that banks do that could be done better with better technology.
There are bankers who know what that stuff is and how to do it. And there are programmers who know how to make the technology better.
And generally the bankers run the banks and the programmers run the fintechs.
And the question of who ultimately could be one of human resourcing.
Is it easier for banks to hire programmers? Or for fintechs to hire bankers?
Look, there might not be an obvious answer. And we’re kind of in a cultural moment where tech startups are considered cooler than banks.
But fintech as a global theme is powerful and attractive.
So let’s have a look at the new companies we’ve added to the Spaceship Universe Portfolio!
BUY - Adyen
Adyen is headquartered in Amsterdam, Netherlands and is the primary payments processing partner for Spotify.
In fact, it’s got a swag of customers who are growing fast and a lot.
Customers like Uber, Etsy, Booking.com, Evernote, LinkedIn and Spotify. We like companies that can facilitate the growth of these global platforms, and in turn grow with its customers.
Adyen helps customers accept global payments on one platform integrating a full payments stack and APIs.
Unlike local banks, Adyen is global and Ayden's customers can accept credit cards, debit cards and bank transfers from around the world as well as connecting international systems like Alipay and local cash-based methods.
We like Adyen as it exists because of fragmentation. It was built ground up for the global internet, unlike local banks that typically serve local customers. It’s no accident that Adyen’s customers are global platforms like Uber and Spotify. For large global internet companies Adyen’s services seem like the perfect fit.
It eliminates the need for its customers to work with a disparate group of gateways, risk management providers, processors and acquirers.
Adyen fills in the gaps between these transacting parties by bringing together the whole payment stack.
BUY - Square
Square can turn your mobile device into a point-of-sale tool, using software and hardware.
Sellers can do everything from manage and process orders to handle inventory to take care of payroll — all while on-the-go.
For a fee, Square also offers instant deposits in the United States, a valuable offering for managing cash flows.
You’ve probably seen these small payment devices at markets. Which helps give small business owners the capacity to accept card payments anywhere, therefore helping to boost their cash flow tremendously.
Square's cash app allows users to transfer money to one another (similar to BeemIt in Australia) and is outgrowing the competition. It's rare to see a company doing so well with both merchants and consumers.
We like Square because it hooks into the blurring of online and offline commerce and it also has a stream of very valuable transaction processing data. As a result, Square can offer loans and other services like payroll more effectively.
BUY - Align Technology
Align Technology are famous for making clear, plastic forms of dental braces.
The treatment process is called Invisalign and involves taking a mould of a person’s teeth, scanning it to create a computerised model and then 3D printing a set of plastic retainers.
Align also markets a successful line of intra-oral scanners that dentists and orthodontists use.
This scanning technology is called iTero and allows the doctor to scan and visualise with the patient how their teeth looks today and how they will look in the future.
As such, it’s a powerful tool to lift adoption rates and embeds the brand in with dentists as they have training and education programs on how to use the technology.
Additionally, Align are actually the largest 3D printing operation in the world, printing over 350,000 unique parts every day in 2018.
BUY - Naspers
Naspers is a South African investment company with a sizeable holding in Tencent.
And because we believe strongly in the growth and potential of Tencent (which owns WeChat and has cornered a large slab of the gaming market in China) we can gain more exposure to it through Naspers.
As of December 2018, the value of their Tencent stake was $US116.9 billion. This dwarfs Naspers’ own market capitalisation of $US87 billion. It originally paid US$32 million for its holding, making it one of the great investments of all time.
Naspers accounts for 28% of the South African index as at November 2018, and is trading below what we believe the combined value of what its assets should be worth.
Holding companies tend to trade at a discount to their sum of the parts valuation (mainly due to taxes) but in this case we believe the discount is too large.
Management of these types of businesses are generally incentivised by share prices, and as such are motivated to close the discount for themselves and other shareholders (also known as an agency problem!).
So we’re keeping an eye on it. But let us know your thoughts!
Important! We’re sharing with you our thoughts on the companies in which Spaceship Voyager invests for your informational purposes only. We think it’s important (and interesting!) to let you know what’s happening with Spaceship Voyager’s investments. However, we are not making recommendations to buy or sell holdings in a specific company. Past performance isn’t a reliable indicator or guarantee of future performance.
P.S. The header is "The Human Condition" by René Magritte, completed in 1933.