Munich, Frankfurt The Allianz holding company wants to use the significant valuation discount in the fintech sector to make noticeable changes in its portfolio. “We want to strengthen our presence in the USA,” announced Allianz X CEO Nazim Cetin in an interview with Handelsblatt.
The US market for young start-ups will come back sooner and faster than in Europe, said Cetin. IPOs for young companies are possible again on the American market by the end of 2024.
The Allianz X management wants to set the course accordingly and soon open an office in New York. So far, both the US and Europe have formed the core of the Allianz X portfolio.
Cetin has been managing the financial investor since 2017 and has changed its direction significantly. While the focus was previously on early-stage investments in young companies, it is now on minority investments in later development phases.
Allianz X is now considered one of the world’s largest investors in the field of new business. The group has made $950 million available for this, and the 26 holdings are currently worth almost twice that despite the recent discounts.
Allianz X’s holdings weathered the Silicon Valley Bank (SVB) crisis well. The companies had accounts there, but only parked five percent of the cash there in one case, explained Cetin. The SVB went bankrupt in early March after customers withdrew billions of dollars in deposits because of incorrectly managed interest rate risks.
Allianz X wants to continue to invest in the financial sector in the future. Most recently, the Munich financing rounds led by the US companies Pie Insurance and Coalition. Cetin hints that further transactions are to follow this year.
Because Allianz X usually has to budget with the financial resources made available for new investments, investments are also sold again and again. 15 since 2017.
Allianz X interferes with shareholdings
In April it became known that Allianz X had put parts of its stake in the smartphone bank N26 up for sale. Cetin did not want to comment on this. However, he had already made it clear in March 2022 that he was dissatisfied with the development of N26. “The growing pains aren’t good,” he said at the time.
N26 struggles with many problems. Germany’s financial regulator Bafin believes the bank has grown too quickly and has not evolved its processes and controls accordingly. In November 2021, the authority therefore sent a special representative to the bank and ordered that N26 be allowed to accept a maximum of 50,000 new customers per month.
In addition, the founders and bosses Valentin Stalf and Maximilian Tayenthal are also exposed to harsh criticism internally. In February 2022, six executives accused the pair of “a culture of fear and blame” and “controlling behavior,” among other things.
In 2018, Allianz X had invested around $30 million in N26 and also participated in a later round of financing.
(Photo: dpa)
Cetin did not want to comment on the N26 leadership duo. However, he explained in general terms that he and his team of around 40 people look closely at the management teams of existing holdings. There is also a regular exchange with other investors on the question of whether the management team is still suitable.
“In a corresponding case, the company would also be acted on together,” said Cetin. After all, Allianz X is an active investor and wants his opinion to be heard.
Founders are not always the right bosses
So far, joint discussions would have been sufficient for all holdings with problems, said the Allianz X boss. There has already been an exchange of managers. So far, however, founders have not had to leave the respective company. Basically, however, Cetin is of the opinion that not every founder is a good manager in later company phases.
According to internal documents available to the Handelsblatt, Allianz recently held 5.3 percent of N26. According to insiders, other investors who attend N26 supervisory board meetings as observers have also increased the pressure on Stalf and Tayenthal. From their point of view, replacing the management duo would be the last resort, but is currently not planned.
I need a size that is manageable. We are currently very active and expect to be able to report some transactions over the next few months. Nazim Cetin, CEO of Allianz X
Allianz-X boss Cetin basically observes that start-ups with a focus on the end customer business (business to consumer, B2C) often make faster progress in development. However, companies that offer solutions for other companies (B2B) are often more profitable.
In other words, while fintechs and insurtechs that brought banking services or insurance to customers were still attractive some time ago, today the less fast but more sustainable business with business customers is more attractive for investors.
However, Allianz X is not involved in Wefox, the highest-rated German-speaking insurtech. “Observed from the sidelines, Wefox seems to be developing well. It just didn’t suit us,” Cetin said. Allianz X is on board with the second largest German insurtech Clark. “The insurance broker is developing very well, we are extremely satisfied here.”
High return is a challenge
Cetin wants to leave the number of investments at 25 to 30 in the current framework. “I need a size that is manageable.” With 26 companies in the portfolio, there is little room for further investments. Nevertheless, he announced meaningfully: “We are currently very active and expect to be able to report some transactions in the next few months.”
The 45-year-old’s success in recent years has put him under pressure. Between 2017 and 2021, Allianz X achieved an annual return of around 30 percent. But back then, times were much simpler for private equity companies, as the market continued to grow.
Recently, however, many start-ups have had to accept high losses in value due to the turnaround in interest rates and the crash of technology stocks. If Cetin wants to maintain the previous level despite the downward trend, he must take active countermeasures.
The pressure is also high because Allianz X wants to take the next step in its own evolution soon. If everything goes according to plan, the investment company could bring external investors on board before the end of this year.
A fund should be set up through which third-party funds can also be invested, said Cetin. “I already have the first confirmations from interested parties.”
More: Allianz wants to sell shares in smartphone bank N26