Standard Chartered expects fivefold increase in ventures portfolio to $5bn by end of decade

SC Ventures, Standard Chartered’s global FinTech and ventures investment arm, expects a fivefold increase in the enterprise value of its portfolio to $5 billion before 2030 as it expands in the Middle East and markets beyond, its chief executive has said.

“We're a little more than $1 billion in enterprise value because we have third-party investors and that $1 billion will become $5 billion in less than five years,” Alex Manson, who is also a member of the British lender’s group management team told The National in an interview.

SC Ventures' net assets have climbed to nearly $1 billion in six years since its inception, growing steadily over that period. That value has the potential to rise to $10 billion over time as “we will continue to grow the overall value of the ventures we have created”, Mr Manson added.

SC Ventures, which operates like a venture capital company but is not a pure VC firm, is among a raft of companies that seek to invest in innovative FinTech ideas and fast-growing ventures at early stages. The global FinTech market remains ripe for growth despite a few lean years in terms of funding and asset valuations, and it is set to reach $1.5 trillion in aggregate revenue by 2030, growth of roughly five times from 2024, according to a June report by Boston Consulting Group.

Global FinTech funding

Over the past nine years, FinTech has remained one of the top sectors in terms of VC investment, attracting a 12 per cent share of all VC funding on average. Global VC funding for FinTech companies has grown from $18 billion in 2015 to $92 billion in 2021, according to World Economic Forum (WEF) data.

A low interest rate environment as well as the pandemic-induced push for digitalisation drove rapid growth over that period. However, venture funding slumped to $30 billion in 2023, a 67 per cent drop from the 2021 peak, amid geopolitical instability and rising interest rates, according to the WEF.

The Middle East and North Africa has remained a bright spot for investment, with annual average growth of 33 per cent between 2015 and 2023. The volume of funding in the region tripled between 2020 and 2023 and Mena was the only region to see funding growth between 2021 to 2023, the WEF report said.

In the first half of 2024, global FinTech investments including venture investments, private equity transaction as well as the value of merger and acquisition deals fell to about $51.9 billion from $62.3 billion in the first six months of last year. In the broader Europe Middle East and Africa region, total FinTech investment dropped to $11.4 billion in the first half of 2024, down from $19.1 billion in the same period a year earlier, due to increased geopolitical uncertainty and a rise in borrowing costs, global consultancy KPMG said in its H1 2024 – Pulse of FinTech report.

However, the fundamental drivers of FinTech adoption remain strong, with the industry's growth rate expected to outpace that of retail banking between 2022 and 2028, KPMG said.

Pipeline

Mr Manson said picking the bets carefully and putting the potential investment candidates through a rigorous process is the key. “It’s about five ventures a year that survive from the process of 500 down to 50, down to five,” he said.

Since its inception, SC Ventures has built “30-plus ventures” and currently has between 10 and 15 companies that are scaling and are in public domain. “Another 10, we are discretely testing … which are not yet completely public – some are semi-public which are mid announcements but not quite launched yet – and then [there are those] at the early stage,” he said.

SC Ventures invests in innovative FinTech ideas and ventures across four key themes of online economy and lifestyle, digital assets, small and medium enterprises and companies operating in the world trade sphere, as well as innovative solutions in the sustainability and inclusion space. It builds and scales new business models involving banking and financial services and takes minority stakes in FinTechs and their partners that provide technology and incubate ventures.

SC Ventures’ digital asset portfolio includes ventures including Zodia Custody and Zodia Markets and Swiat as well as investments in Ripple and Elwood technologies. It also holds stakes in companies including Bukalapak, one of Indonesia’s largest e-commerce marketplaces, the travel technology company UTU, the peer-to-peer cloud data storage company Hive, the UK-based FinTech Algbra, the Bangladesh-based SME platform SureCash and the enterprise AI platform Data Robot.

Its portfolio of investments is spread across markets including Ireland, the UK, Ghana, Kenya, India, Vietnam, Indonesia, Malaysia, Japan, Australia, Hong Kong and Singapore. The company's UAE ventures include MyZoi and Appro, according to company data.

Middle East expansion

SC ventures, which has presences in Singapore, the UK, Kenya and Hong Kong, earlier this year opened an office in Abu Dhabi Global Market (ADGM). Led by Gautam Jain, a member of SC Ventures, the company aims to tap into the region’s growing technology and business innovation ecosystem.

The UAE has emerged as the top hub for start-ups in the six-member economic bloc of GCC, with over 5,600 start-ups registered across the country by the second quarter of this year. FinTech companies have led growth in the Emirates with more than 550 companies currently operating in the Arab world’s second-largest economy, according to an October report by Statista.

Abu Dhabi ranked as the fastest-growing emerging ecosystem in the Middle East and North Africa region, marking a 28 per cent growth in ecosystem value, Startup Genome and the Global Entrepreneurship Network said in the 2024 Global Start-up Ecosystem Report earlier this year.

Abu Dhabi created $4.2 billion in ecosystem value from July 2021 until the end of 2023, a 28 per cent jump from the July 2019 to end of 2021 period. Total early-stage funding between July 2021 and the end of 2023 period reached $284 million, while total venture capital financing between 2019-2023 touched almost $1.1 billion, the report said.

“In the earlier years, it was very little [investment] in the Middle East [but[ it is now seven businesses, with almost 150 employees … so it’s gone from less than 1 per cent in order of magnitude to 20 per cent in a couple of years,” Mr Manson said.

Funding growth

The company’s ADGM venture is a partnership with Japanese investor SBI Holdings, and the joint venture seeks to invest in digital assets companies including market infrastructure, risk and compliance tools, DeFi, tokenisation, consumer payments, and the metaverse, according to SC Ventures. The two parties plan to inject $100 million into the joint investment vehicle, and Mr Manson said that is the initial size of the investment funds which “remain open” and will likely be grown to at least $200 million.

The JV is already deploying capital and “we have a few things in the pipeline”, he said. “Our checks are usually $5 million to $10 million, and I expect by the end of next year we will have deployed hopefully half of our [investment] capacity.”

In terms of investment themes, SC Ventures is eager to make more investments in SME sector, especially in the Arab world’s two largest economies, Saudi Arabia and the UAE, and may look at launching a dedicated fund for such investments, Mr Manson said. “SME is very big deal so in UAE for sure and also in Saudi Arabia, and I expect to do something SME and supply chain-related in this part of the world,” he said.

The company has already made six exits so far in which it has either completely or partially sold down its stake in portfolio companies and it will keep evaluating investment and exit opportunities to maintain healthy returns. The company has achieved about 20 per cent returns, which are consistent with “VC-like returns considering that we take VC-like risks by building ventures”, Mr Manson said. “I expect to continue to achieve … similar returns and a similar type of growth over time.”