6 venture funds connecting banks and credit unions with fintechs

A wave of venture capital funds with financial institutions as limited partners has emerged, and return on investment isn’t their only motive.

The funds — run by outfits such as Canapi, Curql Collective and JAM Fintop — are trying to suss out promising technologies and potential fintech partners for regional and community banks as well as credit unions that lack the resources to find and vet such partners on their own. Fund managers also will consult with their bank investors about how useful a product would be before committing to it.

“Particularly in the last 12 months, [financial institutions] have used fintechs as more of a partner than competitor,” said Vincent Hui, managing director at Cornerstone Advisors. “But the challenge is who is the best partner, how do I manage that partnership, how do we get visibility on potential partners?”

Most small institutions don’t have a dedicated staff for managing fintech partnerships, so participating in these kinds of funds is one way to learn about fintechs without wasting time with the wrong partner, said Hui.

“If they get a return, that’s icing on the cake,” he said.

This is an active time for fintech investing. The third-quarter “State of Fintech” report from CB Insights found that global fintech funding stood at $94.7 billion at Sept. 30 — nearly double the year-end total of $48.4 billion in 2020.

Here is a look inside six funds that have debuted in recent years. Some of them are still fundraising or filling out their ranks of limited partners; others have launched new funds focusing on niches such as minority-owned startups or blockchain.