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Dec. 02, 2022
Just shy of a year ago, ICBA announced its role as one of the general partners and investment committee members in a strategic investment fund designed to accelerate technology opportunities and adoption at community banks. Today, BankTech Ventures, has raised more than $115 million in committed capital in its first fund and has backed eight different companies working to provide community bank technology solutions.
“The fund acts as a catalyst for community banks who are interested in technology in the community banking industry,” said Carey Ransom, managing director, BankTech Ventures. “They invest in the fund (and underlying companies) for their own institutions’ benefits and on behalf of the industry. The participating banks want to make sure more and more community banks are digitally transforming in the coming years.”
Take, for example, the opportunity in Innovation Refunds, a member of the current portfolio. The company helps small-to-medium-sized businesses—via their community banks—claim their Employee Retention Credit (ERC) tax credits, up to $26,000 per employee.
ERC tax credits stem from the CARES Act and are a companion to the Paycheck Protection Program (PPP). With so much of the PPP volume flowing through community banks, it is a natural progression for them to function as a conduit to ERC refunds for their customers.
“If you think back to PPP and look at community banks’ market share, they punched way above their weight class and served the businesses in their communities,” said Ransom. “Innovation Refunds has a similarly strongly aligned value proposition for banks and their business customers.”
And that alignment of mission, vision, and values serves as a chief criterion for the evaluation of portfolio investment candidates. Any company that seeks funding from BankTech Ventures must be culturally aligned with community banks.
“We seek out early-stage companies where a real market issue is solved, and we are able to help them to scale it amongst a group of banks interested and relevant to what they are going to accomplish,” said Ransom. “We also need to reflect community bank values in the kinds of companies we work with.”
After learning about BankTech Ventures during a visit to the ICBA ThinkTECH Accelerator program, Mike Kelley, president of Community BancService Corp. Inc., the services arm of the Community Bankers Association of Illinois (CBAI) left “convinced as a group, not only did we need to support it, but we also needed to raise money to participate in the fund.”
Within three months CBAI had established its own special purpose vehicle to pool member resources and invest in BankTech Ventures—a decision that has already yielded results for its member community banks.
Kelley shared that one of the bankers who joined them in Little Rock went on to engage with Innovation Refunds. That relationship led to $300,000 in additional income for the bank, as well as support for 15 to 20 of its small business customers. “That banker came out hundreds of thousands of dollars ahead and with customers for life just by engaging with this one fintech,” he said.
BankTech Ventures now has eight companies in its growing portfolio. In addition to Innovation Refunds, portfolio participants include ICBA ThinkTECH accelerator alumni, Adlumin, Beauceron Security, Fintel Connect and ZSuite Tech along with other early-stage fintechs including, CNote, NYDIG and Portx.
Through this initiative we’re funding and sourcing solutions of tomorrow that address for community bank pain points and opportunities to ultimately help them deliver a memorable customer experience that fosters long-lasting relationships.
For more information on BankTech Ventures or its portfolio, contact ICBA or visit banktechventures.com.