Opening up wealth-building: why we backed Firenze
We’re delighted to announce our investment in fintech Firenze, alongside our friends at Outward VC, Portfolio Ventures and the Fink Family Office. The team is moving incredibly fast - but we wanted to take a step back to explain why we see this as one of the biggest opportunities in wealth management.
What Firenze does
Firenze is building the platform for wealth-related credit. “Lombard lending” - the lending of capital to investors secured against their investment assets - has been practiced since the 13th century. Despite this long history, it remains the exclusive preserve of Ultra High Net Worth individuals (UHNWs), via private banking. Firenze is building a platform that empowers wealth managers to offer Lombard Lending to a much broader set of mass affluent customers.
The theses underpinning Form’s investment
The wealth management segment is crying out for new products to offer clients. While there remains a segment of investors that is willing to pay up for the traditional white-glove wealth management service, tech shifts and the rise of passive products have produced significant downward pressure on pricing, and wealth managers are scrambling to offer new products to their customers. Lombard lending is a great way to rebuild the relevance of the wealth manager.
The gap between the mass affluent and ultra high net worths is increasing. Borrowing against assets is an absolutely key tool that UHNWs access to build wealth - benefitting from simply paying low interest on borrowed finance rather than touching their investment portfolio. Think Elon Musk borrowing c.$500m against his Tesla stock. But for the broader mass affluent segment, any unexpected liquidity requirement means selling part of your investment portfolio. Lombard lending hasn't yet been extended to the mass affluent segment due to a combination of tough technical, regulatory and market issues - but David and the team are well positioned to take it on.
Lombard lending is the tip of the iceberg for investment-backed credit. Firenze will really open up the market for borrowing against investments - but the much bigger prize is the new credit products that can potentially be secured in this way, such as credit cards or mortgages. Firenze has the opportunity to be the infrastructure for a broad set of new credit products.
Why we love Firenze
David. David Newman, founder and CEO, is the type of founder we love at Form. His outlier strengths across salesmanship and financial product innovation are complemented by his direct experience of the problem, from his time in wealth management at Barclays and UBS. Lombard lending is complex from a regulatory, go to market, and product engineering perspective, and David has strong experience and ambition for the space.
David, again. He previously built a VC backed startup from 0 to series-A, and now he’s going again with clear-sighted learnings, bringing some of his old team with him. His compelling mix of hustle, network and insight make him a magnetic force in the industry. He’s relentless.
Already executing like killers and moving fast. One of the great challenges of building a tech-enabled lending business is the “chicken and egg” of securing a credit line before you have built a track record of lending. The Firenze team are already over that hump, with a £160m funding line from Monument Bank - and this speed of execution is also reflected in the rapidly increasing set of wealth managers signing up to be early partners.
And finally…
As you can tell from today’s announcement, we love companies building the future of credit infrastructure, not least portfolio company Infact - the first real-time credit bureau. Last week Infact announced a market-first partnership with Curve, the digital wallet provider, to bring real-time credit reporting to Curve Flex, an instalment-linked revolving credit line. This enables customers to build credit profiles instantly while giving lenders a true, current picture of creditworthiness. Congrats to the Infact and Curve teams on this milestone!