Rakefet Russak Aminoach: "A bank that doesn’t adapt to the new world will not survive"
Rakefet Russak Aminoach: "A bank that doesn’t adapt to the new world will not survive"
The Managing Partner of Team8 and former CEO of Bank Leumi spoke at Calcalist’s Financial Innovation conference in Tel Aviv about digital transformation in banking
“We have moved from a world where valuations in high-tech and fintech were very high, where there was a sense of euphoria and FOMO, to an opposite situation where instead of FOMO, there is FUD - fear, uncertainty and doubt," said Rakefet Russak Aminoach, Managing Partner at VC fund Team8, in a conversation with Calcalist’s Sophie Shulman at Calcalist’s Financial Innovation conference in Tel Aviv.
"Investors today meticulously examine every move before investing. We have moved from extreme to extreme, even though the Covid-19 pandemic has ended and interest rates have risen. I believe that things will balance out between these extreme periods. Nevertheless, it is already understood today that fintech is vital, even in the post-COVID era. As evidence, in 2019, risk capital investments in fintech accounted for 13% of total investments, and today it is 20%. This is a change that occurred due to an understanding that fintech is crucial," said Russak Aminoach.
And are you investing more or less today than a year ago?
"We are constantly investing more. We haven't taken our foot off the gas. This is the best time to start a company. During the noise that existed two years ago, every idea you had would immediately attracted 10 competitors who could receive funding. Today, if you have a product and a solid team, you can be a king."
But fewer startups are emerging, and talented employees prefer to stay in positions at large companies.
"The problem in companies at later stages is that because they initially raised funding at very high valuations, which are very difficult to match economically, they have difficulty in their subsequent fundraising efforts. But for early-stage companies, and 70% of the money going into fintech is for early-stage companies, we see that they are still being founded, and we continue to invest in these companies."
And what about the rise in interest rates? Doesn't it make fundraising difficult and impact growth?
"In the world of finance, high interest rates are a good thing. With high interest rates, you can make money in finance, but that's not enough. To make money, you need to be efficient and innovative, and that's why there is always room for fintech in any situation and at any time."
Banks benefit greatly from interest rates, as we have seen in the banks' reports. As someone who is currently in fintech but was previously the CEO of Bank Leumi, how can fintech companies compete with and challenge the banks and improve customer conditions?
"Interest rates always fluctuate, and you can't rely solely on that. When I took on the role of CEO at Bank Leumi, they told me that interest rates would rise, but since then, they have only decreased. I want to say unequivocally that banks that don't adapt to the new world and undergo digital transformation both in their existing operations and moving forward, and who don't bring in more products with fintech companies, will not survive.
"Yes, it's true that the interest rates are high, and banks are making a big profit. But first of all, interest rates will eventually decline, and secondly, it's enough for your competitor to be more efficient than you, and you're out. And beyond that, you don't need the other banks. There's Apple, for example, which managed to raise billions of dollars from customers in just four days because trust in Apple is high. The world is changing, and banks that don't adapt won't be able to continue. The Apple of the financial world will take their place."
We hear that it is difficult for venture capital funds to raise money, because institutions are in no hurry to invest money. What are investors telling you? What are their expectations?
"If you are good, you stand out more when there is less noise, and therefore, from Team8's point of view, today's period is much more convenient for work. For us, what was much more difficult and important was to get talent, and today it’s easier to bring the talent because there is less noise."
