USAA, a US-based financial services company for the military community, has become one of the new entrants into corporate venturing to have secured the greatest early exit success.
The group, which started doing corporate venturing three years ago, has already participated in the initial public offerings [IPOs] of car pricing company Truecar and care search platform Care.com, having led their rounds. USAA owned 22.6% of Truecar at IPO, and the company has a market capitalization of $905m today, and it owned 9.26% of Care.com at IPO, which has a market cap of $200m today.
Victor Pascucci (pictured), the head of USAA’s corporate development, said, in a first interview on the groups’ strategy with a media publication since it was founded: “Our mission is to facilitate the financial security of our members in the military community. We are backing disruptive technologies, to remain relevant for the next hundred years of banking, insurance and investment services.”
The group can invest $1m to $20m in any given tranche, and usually invests between $1m to $10m. It generally does 12 to 14 deals annually, backing 12 businesses last year.
Pascucci added: “We have gone up more than that in the past, but we want to reserve from our capital allocation to make sure we have reserved adequately for follow on investments. This is a significant relationship as we are doing it for members, so it could be a five, to seven, to ten year relationship.”
The group has taken a stance to explore areas where its members are active, even if these sectors are far from mainstream, such as backing cryptocurrency company Coinbase and other bitcoin investments. Pascucci said: “When Coinbase came up, some people in the bank were cautious. What does a financial institution investing in bitcoin mean? Yet when we found our members were disproportionately active we knew we had to better understand these things.”
Pascucci added: “There is sensationalism in some media about bitcoin. Once we understood the technology, and the growth track and how we could benefit from the technology, and viewed it in terms of our mission and member, we realised it could be a gamechanger in financial services. Bitcoin is the first killer app for blockchain, which is the future of money for the internet.”
USAA’s early foray into bitcoin is now being echoed by other groups. Pascucci said: “Since we have done it we have seen other companies investigating and setting things up in bitcoin, but I don’t think any one is as active as us. Our members are there so we have got to get there.”
The group has derived some strategic wins from its portfolio. Pascucci said: “Truecar has saved more than $2bn on the manufacturer’s suggested retail price for our carbuying service, based on the infrastructure of Truecar.”
He added: “USAA’s Autocircle is able to provide a better discount to military members, meaning they get a saving on one of their biggest investments, their car. They get the right insurance, the right financing and the right car.”
He said: “On the technology side, Narrative Science provide stories for our members. For financial plans and investment statements, which can be long involved, difficult reads, the company pulls out the salient points in a clear concise story. You can’t get much more core to financial services than that.”
The group has found the venture ecosystem welcoming to USAA’s involvement, and we discussed that while corporate venturing has had a difficult reputation in some circles historically, there is much greater enthusiasm for working with corporate venture groups that behave well. Pascucci said: “We are partnering with other board members and not trying to weasel in to get an option. We have a good reputation in the community and a nice network. People have got over the past of corporate venturing and we do not receive that type of pushback.”