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E-finance venture capital: The big boys take the initiative

In e-finance developments the day of the independent entrepreneur capturing a chunk of the market is over – and maybe the notion was never a runner. Banks and other financial institutions now dominate the e-finance cutting edge through direct and indirect investment. Britt Tunick reports

The biblical tale of a young, scrawny David bringing down the giant Goliath with a mere slingshot is one that remains a source of inspiration for underdogs. In the securities industry the largest players almost always triumph. The arrival of the internet briefly raised the prospect that newcomers might overturn the established order, with online marketplaces replacing old-fashioned salesforces and capital markets teams.

In response, though, the leading firms have hit back with a huge investment binge covering in-house development of new technologies, establishment of collaborative trading platforms and exchanges and a continuing search by in-house specialist investors for new e-finance companies and technologies that might be tomorrow’s winners.

The collapse of internet stocks and the imminent failure of so many internet companies has barely dampened the big banks’ eagerness to invest in e-finance. Funds are flowing through a bewildering number of channels, with many banks now having individual business groups buying into e-finance plays, as well as specialist in-house venture capital groups seeking strategic e-finance investments and conventional private equity investing arms also covering the internet.

Banks are so concerned that they may miss out on a breakthrough technology that they are willing to accept the obvious danger that they will end up wasting an awful lot of money.

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