Finetics™ Studio at Money20/20: Dan Rosen

Finetics Studio | Payments | 1/21/2016 1:05 PM

PaymentEye's Senior Reporter, Sarah Gill, speaks in our Finetics™ Studio at Money20/20 with the founder and general partner of Commerce Ventures, Dan Rosen, about investing in innovative payments and ecommerce companies.


Sarah Gill, Reporter: I'm joined by Dan Rosen, the founder and General Partner at Commerce Ventures. Well, how about we start off talking about Commerce Ventures a little bit. You say you're doing a different kind of VC investment. What does that kind of mean?

Dan Rosen: Sure. So first of all, a venture capital firm invests in startup companies, so we do that. What makes us a little bit unique is that we're very focused. We invest in companies that are innovating either in the retail and commerce sectors or in payments and thin tech. Obviously, both of those are relevant to this conference. What also is different than most VC firms is that all of our investors are strategic. So we have about 37 strategic individual investors and three corporate investors as well; obviously, one of them is The Bancorp, and we're very excited to be working with. And so we think we're able to leverage that network on behalf of our portfolio companies and add a lot more value.

Sarah Gill, Reporter: You invest in payments and e-commerce companies. Do you feel like anyone has really sort of joined those dots well enough yet?

Dan Rosen: Yes, so obviously, payments and kind of commerce are very closely related. I think about the payment as being at the heart of the transaction, and then there's a whole bunch of value being built all around it. You know, the tricky parts of connecting those dots are really figuring out who a person is before they walk into a store and then tracking them all the way through the journey to the register. But certainly, there's a lot of overlap as it pertains to retail payments, fraud, loyalty, kind of certain aspects of digital marketing. And those are the areas we spend probably the most time. So some people are doing more, I think, to join them, Google being one of the companies that's done a lot in both payments and in commerce--Amazon, folks like that.

Sarah Gill, Reporter: I mean, you mentioned kind of identifying who someone is kind of as they walk into a shop. Is that sort of identity authentication--is that something you're excited about?

Dan Rosen: Very much so. So we're--but not just for commerce. Also for fraud prevention, which is obviously a very hot topic lately. So we're investors in a company called Forter, which helps prevent fraud for e-commerce merchants. But we're also invested in a company that literally fingerprints your device, called InAuth, to make sure that you are who the phone says you are and prevent fraud from people who are spoofing your phone.

Sarah Gill, Reporter: I mean, it seems people have a lot of activity around the authentification side of things. Is there a particular technology you expect to dominate, or do you think there will be a kind of mixture like for (inaudible)?

Dan Rosen: I think it's going to be a mixture. So it's really about accessing as many useful data feeds and data sources to determine that somebody trying to do a transaction is who they say they are and to be able to protect kind of the identity of that person.

Sarah Gill, Reporter: As we are kind of gathering predictions for next year for everyone, are there any kind of breakout trends or companies that you think we should be looking out for?

Dan Rosen: So breakout companies is different than trends and predictions. I think trends and predictions, let's run through a couple. So definitely, I agree with the previous speaker. Mobile payments, I think, will take off in a meaningful way in the next 12 months. I think you'll see card-not-present online fraud will increase substantially in the US as EMV gets deployed. I think there's going to be a substantial pull back in alternative lending--venture funding, yes, absolutely.

Sarah Gill, Reporter: Just because there's too much of it?

Dan Rosen: I think there's been an overfunding there as well, but also, as--

Sarah Gill, Reporter: In evaluating as well?

Dan Rosen: What's that?

Sarah Gill, Reporter: In evaluating as well, of companies?

Dan Rosen: Yes, I think that's fair to say. But I think there's also, we should expect interest rates to rise, the level at which is still yet to be determined. But the impact of that will be a higher cost of capital for these lenders. So that means there should be a bit of a slowdown in the alternative lending space.

But generally speaking, companies that are focused on enabling digital, especially around mobility, companies that are focused on kind of processing big datasets with applications and payments and thin tech, those are really interesting areas.

Sarah Gill, Reporter: Okay. And as you're a founder now yourself, what's the next interesting thing you've learned along the journey of sort of setting up your own business?

Dan Rosen: It's harder than anybody thinks it is. You know, basically, you're trying to create something from nothing. And the way that we always think about it for startups is, you know, basically, you're jumping off a cliff and you have a build an airplane before you land, right? So it's really about understanding how long will it take to build what you're planning to build, and do you have enough runway to do it?

The challenging thing for a venture capital firm is, you know, we can't really bootstrap a venture capital firm. Our raw materials are dollars, so you have to go raise money in order to be able to invest it. But, you know, the truth is, we always preach just go find the best people and surround yourself with those people, and that will be the best path to success. And that's what's worked for us so far. I mean, we really--we've been fortunate enough to be in business with some of the most amazing executives and entrepreneurs, both as investors in our fund, but also really investments that we've made. And hopefully, we'll be able to continue to do that.

The opinions, findings, or perspectives expressed in this content are those of the participants and do not reflect the official policy or position of The Bancorp, Inc., its affiliates, or its or their employees.