After decades of trying to cross successfully between banking and insurance, companies are increasingly hoping the more digital future for financial services will at last make it easier. Germany-based bank Commerzbank is one looking at this future with expectation, with its corporate venturing unit having in March last year released a white paper on Transforming the $4 trillion insurance industry.
And high hopes rest on Paul Morgenthaler, senior investment manager at CommerzVentures, to help them do this. Morgenthaler said: “My role at CommerzVentures involves helping to define our investment strategy and hypotheses around specific sectors within fintech and insurtech, identifying startups that are a fit for our investment strategy and leading the investment process, including due diligence, negotiations and management of the portfolio.
“What attracted me most to CVC was the opportunity to build and execute a focused investment thesis around fintech and insurtech. I am convinced that a clear sector focus helps us to identify the best opportunities early and to add value to our portfolio companies, which will ultimately translate into strong returns.
“In addition, the brand and reach of our LP, Commerzbank, helps us to access the best opportunities, as we can offer our portfolio companies very tangible benefits, especially around bank partnerships, business development and low-cost customer acquisition.”
Patrick Meisberger, managing director at CommerzVentures, said: “Paul has shown a phenomenal development since starting at CommerzVentures early 2015. As a refreshingly non-corporate guy, but with deep understanding of the financial services and insurance industry, he has developed a great sense for sourcing disruptive and successful technology startups and where they can help corporate organisations such as banks to transform into a more digital future.
“This is, in the end, what corporate VC is about: finding and investing into the best companies and helping to transform their corporate organisation.”
Morgenthaler has completed nearly half of CommerzVentures’ seven deals since it started in 2014. His current investments include digital insurance manager GetSafe when it raised less than €10m ($12m) in October 2015, fintech lender Iwoca as part of its $20m round in July 2015 and banking platform Mambu, which raised €8m in January last year.
In a traditional VC fund carried interest – performance fees – are often paid out on a deal-by-deal basis, which means Morgenthaler could reap significant benefits if these deals as well as the overall fund does well. He said: “CommerzVentures is set up as a pure financial investor, with a classical general partner-limited partner [fund manager and investor respectively] structure with Commerzbank as our single LP. As [with] my colleagues in the investment team, I have contributed a significant share of my own personal wealth to the fund, therefore this is a very entrepreneurial setup. Given my own entrepreneurial background, I enjoy this setup very much.”
Previously, Morgenthaler was running two fintech startups, PSR Rating and Pauls Way, in credit rating and consumer financial education, respectively. Between these, he was a consultant at Boston Consulting Group and then, just before joining CommerzVentures, had been chief scientific officer at research company Finanztip.
But the focus now is on “building my track record, by doing successful investments, adding value to our portfolio companies and being a helpful resource to the broader ecosystem”.
He went on: “In venture capital even the best companies in your portfolio sometimes face difficult situations. I believe it is key to recognise which companies face temporary headwinds versus those that face challenges on a more fundamental level.
“Returns of our fund will be driven by the right decisions on which companies to double down on, even more so than by the initial selection of companies. Therefore, it pays to stay as close as possible to our portfolio companies and to really understand their situation. This is not always easy, given our portfolio is fast growing and dispersed over Europe, US and Israel.”
Fortunately, Morgenthaler enjoys travelling, having visited more than 60 countries, to go alongside his outdoor pursuits of running, hiking or mountain-biking and volunteering for social causes, specifically in education for children from under-privileged backgrounds.