Canapi Ventures, a venture capital fund started by the organizers of Wilmington-based Live Oak Bank, has raised a new fund totaling $750 million.
It follows a previous fund that attracted $650 million for investments in financial technology companies. Most of the first fund has been invested in 20 firms, says Neil Underwood, the fund’s co-founder and general partner.
The new capital “will allow the Fund to continue to support the most innovative entrepreneurs and companies looking to create a sounder, more inclusive and equitable financial ecosystem,” Canapi said in a release.
About 70% of Canapi’s funds have come from banks and other financial services companies, with the balance from wealth individuals, family offices and other institutions, Underwood says. Despite a tough environment facing the U.S. bank industry in the past year, Canapi was able to attract more money than its initial fund because its investors see continued demand for financial sector involving artificial intelligence, lending, payments, fraud and real estate technology, he adds.
Canapi typical invests $10 million to as much as $50 million in emerging companies. Its investments have included Greenlight, Island, Alloy and Built. In addition to about six employees in Wilmington, the firm has offices in Washington, D.C., New York and San Francisco.
“We are super delighted that nearly 100% of the banks and financial services companies that previously invested have reupped, while we added another 30 banks,” Underwood says.
Perhaps Canapi’s biggest success has been its investment in Finaxct, which Fortune 500 company Fiserv acquired in 2022 for about $800 million. That resulted in Canapi receiving about four times its investment in the banking software company, Underwood says.
About 25% of Canapi’s investors are banks with more than $100 billion in assets, while another 25% have less than $10 billion in assets. Those companies want to stay abreast of key industry innovation, Underwood says.
Underwood stepped down last month as president of Live Oak Bancshares, the holding company of Live Oak Bank. But he remains a director and still leads quarterly business reviews at the bank, while also focusing on Canapi, he says.
The U.S. remains the global leader in fintech innovation, Underwood says, though “the world is becoming more flat” with engineering talent emerging in other nations. “The U.S. is still the 800-pound gorilla in the go-to-market sector. You can’t be in fintech and not have a presence in the United States.”
Canapi expects lots of good investment opportunities in 2024 because rising interest rates and tighter margins have forced a “recalibration” in the values of many companies that need more capital to grow, Underwood says.
