Transactional to Transformational. Christer Holloman

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      Looking forward, the expectation for Propel is that it continues to invest in great fintech businesses that provide strategic value and financial returns for BBVA and help the global financial services industry to move forward. Through these investments, BBVA can continue to support the fintech ecosystem, but also learn more about the role technology can play in people's financial lives and how the bank itself can adapt its operating model to deliver on customer's changing expectations.

In terms of strategy, it has been essential for all BBVA areas to have a team located at the centre of the startup ecosystem. Frequent contact with companies and people of interest has provided the bank with a wealth of input for its digital strategy and collaborations between the business areas and the ‘startups’. Propel's creation has also worked for making initial contacts or leveraging certain M&A operations in the digital world carried out directly by BBVA, such as the purchase of Simple in 2014.

      Propel has provided BBVA with insights and intelligence on industry trends and external innovation that is relevant to financial services and has had an invaluable contribution helping to drive connections and business opportunities with the Fintech ecosystem. The team played a key role in sourcing new investment opportunities for BBVA. Propel has also helped drive partnership opportunities with startup companies in several countries of the BBVA footprint, such as the US, Spain, Mexico and Colombia. For example, at the end of 2019 BBVA announced a partnership with leading online marketplace lending platform Prosper to offer customers an innovative digital home equity line of credit product.

      Four years later, BBVA's ‘venture capital’ model as a sole investor, managed autonomously by Propel to facilitate and expedite investments in ‘fintech’ companies, has become a benchmark for other stakeholders interested in investing in the fintech innovation ecosystem.

Learnings

       ‘If I were to do it again, I'd spend more time understanding the venture capital sector, and meeting with partners in venture capital firms across industries. By doing so, we would have better understood the world of fintechs, venture capital and funding, which may have helped us understand how to set up a firm that would be immediately well received in those circles.’

      Javier Rodríguez Soler, CEO, BBVA USA

Propel was created from BBVA Ventures to solve for the dual problems of flexibility in the amount of investment and the challenge around being tied to a corporate investment arm, and the perceived lack of independence in that. Of course, hindsight is 20/20 and launching as an SBIC initially would have been the best course of action.

      This leads into one of the most surprising elements of venture capital funding, which is that fintechs and venture capital funds run in a tight circle. The setup, as they had with BBVA Ventures, was outside of that circle, given its direct tie to BBVA. As a result, they missed out on some funding opportunities in which they might have otherwise engaged.

      Managing partner for Propel, Jay Reinemann, also made it clear that it is not just about funding fintechs. For as brilliant as fintech founders may be, Jay says it is critical that we remember these companies are startups, and as such money is just one thing they need, the other being support and understanding when it comes to running a company. Not only can the partners at Propel provide that, but, as their strategic partner, BBVA is well‐situated to be a key element of their success through the resources they can provide.

Another lesson learned from the Propel experience was the evolution from a ‘pull’ model to a ‘push’ model for collaborations between the bank and startups. When the fund was started and the investments in the startups had been made, an effort was made to establish connections between the bank's business areas and the new emerging companies, but it was complicated. When it came to moving forward in the collaboration, problems often arose from both the bank and from the startups themselves. In the end, this model was eventually challenged because it was not giving the expected results. The initial objective for the creation of the fund was to have a radar on the latest fintech trends and have access to the knowledge that could be applied to the bank's transformation and strategies. The way of provoking this talent interchange evolved towards a ‘push’ model. The first step is now to identify BBVA team's specific needs and analyse which of the startups could help and is keen to resolve concrete business challenges and then a possible collaboration is studied. With this new focus, Propel became a very interesting source of knowledge for BBVA business areas.

      Finally, the need to keep abreast on new and global ecosystems of interesting startups is also relevant. With Propel, BBVA started out with a strong focus on Silicon Valley, but over time it began to work on investments in other ecosystems around the world that also offered good opportunities.

What's Next

      For more than a decade, BBVA has seen itself as a digital pioneer that embraced the digital revolution in the industry and boldly embraced a vision that leveraged technology as the means to a better experience and more control for customers.

      As BBVA moves into the next decade, the bank will continue to leverage this type of mindset to grow and deliver on its purpose of creating opportunities for customers, communities and society in order to secure a future that is sustainable, both from an environmental, social and economic standpoint, and focused on helping people improve their financial health.

      Propel's next steps are related to completing the funds' maturity. This means completing the initial investment of $250 million to accompany the companies in which it has invested during this time in their next rounds of financing in order to continue studying possible collaborations between startups and the bank. In the future, BBVA will continue to play a role as an investor in the fintech world for the long term and will continue to bet on the Propel team in any scenario.

The bank has invested $50 million in Sinovation Ventures, the Chinese investment fund specializing in artificial intelligence created by expert Kai‐Fu Lee in order to gain access to insights in the growing Chinese market of artificial intelligence innovation. On this path, BBVA will keep a radar on where there is talent and capital in order to build projects that can transform the financial industry.

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