Private equity: Standard Chartered wants to combine venture capital with internal innovation

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By:
Chris Wright
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SC Ventures launched in Singapore; combines internal accelerator with venture capital.

Standard Chartered and venture capital have not been the best of friends in recent years. The bank has spent more than three years exiting its loss-making private equity arm, a process that is still grinding along now.

What to make, then, of SC Ventures, the new business unit launched out of Singapore in January? 

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Alex Manson,
SC Ventures

Alex Manson, the former global head of transaction banking who heads the business, tells Euromoney that SC Ventures has quite different priorities to Standard Chartered’s previous private equity ambitions and in fact only one of the three lines of the new business is about venture capital.

“Our internal mission statement talks about rewiring the DNA in banking,” Manson says. “In transforming banking, there is an external and an internal element, and we think we need to do both at the same time and under the same roof.”

SC Ventures has three arms. The first is responsible for creating catalysts for change and includes the eXellerator innovation lab. “We run what we call the intrapreneur programme, which encourages people in the bank to step forward with ideas and pitch them to a platform.” 

Brainstorming room

This has something of the feel of ‘The Apprentice’ about it. On the 17th floor office the business inhabits in the Marina Bay Financial Centre there is a brainstorming room insiders call the Dragon’s Den, where people can pitch ideas to a group. People on the platform have investment dollars they can commit to these ideas and the best ones are crowdsourced internally and implemented. 

Over 1,000 ideas have been submitted this way in the last six months.

The second arm of the business is a professional investment unit that manages Standard Chartered’s minority stakes in its fintech partners. “In that sense it is different from a venture capital fund,” Manson says. “We don’t just invest in anything we think is interesting. It has to be relevant to the bank, by which we mean there is at a minimum an engagement in a successful POC [proof of concept] and an intention to implement production.” 

Examples include Ripple, the distributed ledger technology company, in which Standard Chartered is an investor and a partner, developing global trade and payments applications; and Paxata, an enterprise information management company. “It’s not control. It’s influence, credibility, an alignment of interests,” says Manson.  


We understand that ventures in and of themselves are not going to move the needle. We need the symbiosis between internal and external ideas 
 - Alex Manson, SC Ventures

The third business does look like a classic venture capital arm, except that it looks inward. This unit will sponsor and oversee new disruptive technology ventures that are at least partly owned by Standard Chartered. 

“The idea is to test new business models by incubating, setting up and spinning off businesses that are independent and distinct from the bank,” says Manson. The first one to be announced involves the application for a virtual banking licence in Hong Kong. The virtual bank that would be launched with this licence would have its own brand and be run separately to Standard Chartered with a team independent of the rest of the retail banking operations. 

The idea came from conversations between Standard Chartered’s top management, including chief executive Bill Winters, and Manson. “We discussed how if you do transformation innovation in a vacuum, those efforts typically end up fading,” Manson says. “People get tired of being evangelized, evangelists get tired of speaking. What makes a big difference is to put our money where our mouth is and not be scared of disrupting ourselves in markets that are relevant to us.

“We understand that ventures in and of themselves are not going to move the needle. We need the symbiosis between internal and external ideas.

“So the conversation evolved to this: it is very courageous on the bank’s part to back a venture that requires us to disrupt ourselves, moving way beyond incremental transformation.”

Patchy success

Naturally, anything that encourages a free flow of thousands of ideas is going to have a patchy success rate. “As you would expect, 10% are never going to work, 10% are jewels,” says Manson. Some pitch products, some pitch blockchain applications and some pitch completely changing a business model. 

On the venture and partnership side, Manson sets great store in being part of a broader ecosystem of stakeholders and getting everyone to move in step. “The work we’ve done with Ripple has gone from strength to strength,” he says. “That is, I believe, a result of them thinking that we are not just a validation of their technology but have worked with them to help navigate the world of payments, to understand the different things you need to care about.”

And how does this compare to the ill-fated private equity arm? “The main distinction is relevance,” he says. “Everything has to be relevant, ultimately integrated with the bank.”