The Money Man: Venture Capitalist Dan Ciporin Talks Fintech

This story is the second in a multipart series by Benzinga on the state of the fintech sector in 2018. Click here to read an IBM CTO's thoughts on the collaboration between banks and fintech startups.

As one of the pre-eminent venture capitalists in the fintech space, Canaan Partners' Dan Ciporin is known for his greatest hits.

As CEO of Shopping.com, he took the company from zero revenue to $130 million. The company went public in 2004 and was sold to eBay Inc EBAY the following year.

At Canaan, his first investment was in LendingClub Corp LC, which went public in 2014.

But the very nature of venture capitalism makes misses inevitable. In Ciporin's case, he said he regrets passing on the investment platform Betterment and the cross-border payment processor Remitly.

"If you can point me to anyone who has a true crystal ball, then we can all retire," Ciporin said in a wide-ranging interview with Benzinga on the fintech space.

Want to learn more about the industry and meet leaders of the hottest fintech startups in person? Be sure to grab your tickets to the Benzinga Fintech Summit on Nov. 14 in San Francisco before they sell out.

An IPO Trend In Fintech? 

While Ciporin does see companies in the fintech space that he said are likely IPO candidates in the coming years, he said a Wall Street listing "is no panacea" for budding fintech companies.

"You have to have a certain heft [and] critical mass to go public," he said. "To go public with anything less than $100 million in revenue is not usually going to work."

The nature of a company's revenue stream is key, Ciporin said. "Is it recurring revenue? Or episodic? What's the level of predictability of that revenue?"

Small business lender Kabbage — which acquired one of Ciporin's investments, Orchard — is a good candidate for an IPO, he said. So are peer-to-peer lender Funding Circle and online lender SoFi, in the VC's view. 

"Being a public company is a tough thing and you've got to be prepared for that kind of spotlight, particularly because it happens every quarter."

Sectors To Watch: Investing, Insurtech 

Ciporin, a onetime MasterCard Inc MA senior vice president, said investing is ripe for fintech innovation in 2018. 

“I do think the whole notion of how to invest and the nature of using data and algorithms not just publicly but privately is an expanding area of interest." 

Investing apps are becoming increasingly more intelligent. Earlier this year, asset management giant BlackRock, Inc. BLK made an investment in robo-advisor Scalable, which uses ETFs to build portfolios for users and monitors them using its risk management technology.

"Using algorithms and data to determine the right investments is quite interesting," Ciporin said. "You certainly have lots of opportunity for expansion outside of what has been a relatively narrow focus on public equity."

Insurtech is a similarly positioned subsector, Ciporin said: "Clearly that's an area where there's an enormous amount of innovative companies happening."

Ciporin's Picks 

The Canaan Partners venture capitalist discussed two of his current investments with Benzinga.

San Francisco-based CircleUp uses data and machine learning to evaluate 1.3 million private North American companies and offers crowdfunded equity for growing brands. The company has less than $10 million in revenue, Ciporin said.

"The ability to choose those companies using data is a very, very unique offering," he said.

Portland, Oregon-based Bumped offers an ownership solution to loyalty programs, Ciporin said.

The company's app links to users' credit and debit cards, allowing them to spend with their favorite brands — and receive stock in the company in return.

Ciporin's other startup investments include Bellhops, Homeis, JOOR, Ollie and ShopKeep Uncommon, according to Canaan Partners.

A VC's Investment Criteria

The venture capitalist said the qualities he looks for in a startup investment include the following:

• A compelling story.
• Research.
• An addressable market.
• A track record — "in terms of either the space you're trying to address or leadership in general."

"Lots of things related to the entrepreneur's background are really critical as well," he said.

From a statistical standpoint, the VC said repeat entrepreneurs are the easiest to fund.

"They tend to have more successful companies than ones who don't [have experience]."

At the same time, Ciporin said: "I've bet on many first-time entrepreneurs I've been very happy with."

Bill Haddad contributed to this report.

Related Links: 

IBM Platforms CTO On Collaboration Between Banks, Fintech Startups: 'There's No Shortage Of Desire On Either Side' 

Fintech Lender Avant Courts Big Banks With Launch Of SaaS Business 

Photo courtesy of Canaan Partners.