Deutsche Börse Launches Blockchain and Fintech Venture Capital Fund
Deutsche Börse Group has announced the launch of DB1 Ventures, a corporate venture capital platform. The DB1 Ventures team, based in Frankfurt, will undertake new investments and actively manage Deutsche Börse’s existing minority shareholdings.
“Our objective with DB1 Ventures is to continue to be active in investing in early to growth stage ventures which are core or adjacent to our client, product, geographic and technology strategy,” said Deutsche Börse CEO Carsten Kengeter. “And as part of our active management, we will also strengthen and extend promising partnerships with some of our current portfolio companies.”
Deutsche Börse Group is one of the world’s leading exchange organizations and an integrated provider of products and services covering the entire process chain of securities and derivatives trading. In March 2016, the company announced it had reached an agreement with London Stock Exchange Group to merge. According to the plan, the companies will be brought under a new holding company, UK TopCo, and will retain both headquarters in London and Frankfurt. A recent press release states that the plan will go ahead despite the results of the recent “Brexit” referendum in the U.K. The parties “remain fully committed to the agreed and binding merger terms, and continue the process of obtaining the necessary approvals.”
The brand new DB1 Ventures website states that the fund wants to be a strategic partner of choice for early to growth stage companies which are core or adjacent to Deutsche Börse Group’s strategy, generate attractive investment returns and add strategic value to its growth plans.
“This dual approach will allow us to bring in our professional expertise as a market infrastructure provider and offer value creation opportunities for fintech companies,” added Managing Director Ankur Kamalia, head of venture portfolio management and responsible for DB1 Ventures. “In return, we will benefit from new ideas and technological developments in an early stage. Simultaneously, we continue to actively manage our existing portfolio of investments, including divestments where necessary.”
The announcement of DB1 Ventures coincides with the publication of a report produced by Deutsche Börse and Celent which analyzes the potential impact of fintech firms and new developments on established players. Deutsche Börse notes that venture capital investments in fintech have grown sixfold since 2008. The report, titled “Future of Fintech in Capital Markets,” highlights the opportunities in emerging fintech for mainstream financial operators.
Deutsche Börse and Celent consider blockchain or distributed ledger technology (DLT) as one of the most disruptive technologies available at present and in the near future ‒ a technology that would be able to simplify the value chains around trading, payment and market infrastructures in general.
“The potential implications of DLT on core market infrastructure are far-reaching for the capital markets, offering a path to a more efficient market infrastructure,” notes the report.
Despite temporary technical and regulatory roadblocks, established financial players are leading the investment into DLT firms to create new underlying infrastructures and market models for the creation, issuance and distribution of private securities, democratizing both processes and access. “Deutsche Börse has been at the forefront of this activity, with its recent investment in Digital Asset Holdings and its participation in the Hyperledger project,” states the report.
In fact, Deutsche Börse is no newcomer to distributed ledger technology. In January, the group participated in a $50 million funding round for Digital Asset Holdings, a developer of distributed ledger technology for the financial services industry.
“We look forward to working closely with Digital Asset and other stakeholders in this innovative technology. This relationship will leverage our ambitions to utilize Distributed Ledger Technology to bring effective solutions to our clients,” said Kengeter.
Deutsche Börse is also one of the initial members of the Hyperledger group, led by the Linux Foundation and aimed at developing a cross-industry open standard for distributed ledgers. "Deutsche Börse group sees great potential in blockchain technology, and is delighted to join this initiative,” said Jeffrey Tessler, a member of the executive board of Deutsche Börse AG. “As a market infrastructure covering the entire value chain, we believe that the true value of the blockchain will only materialize as part of industry initiatives such as Hyperledger project.”
Digital Asset Holdings is also a key member of the Hyperledger group.
“Deutsche Börse is extremely well positioned from capital, regulatory, technology, and operational perspectives to invest and partner in fintech,” concludes the report.