“I’m a PEP”, says the CEO of the UK’s only listed fintech fund.
Tim Levene, CEO, Augmentum Fintech, which backs UK challenger bank Monese, UK SME lender Iwoca and German tech rental platform Grover, is a politically exposed person (PEP) by dint of his father, Lord Levene, who sits in the House of Lords.
Amid the recent Nigel Farage banking scandal, PEPs became the subject du jour, and Levene, 49, tells of his run-in with his banks over his PEP status.
“I have come under a lot more scrutiny in terms of requests for information and pretty detailed information, going to a level of detail that I think is onus and I do push back,” Levene explains.
“I say ‘I don’t see the need to provide this information. I will provide you X’.”
The questioning, he says, from the banks (he doesn’t name) goes as far as asking the CEO “’how you made every penny?’”
Chewing over the debate into whether banks are closing accounts of people who are politically exposed, Levene says it’s a “double-edged sword”.
On the one hand, he points out banks are coming under a lot of scrutiny regarding anti-money laundering and KYC.
That said, he adds:
“I would say the onus on the banks and the desire to be risk averse is such that they shut down a huge number of individuals and businesses where they just sit there and say ‘it’s just too much work’ and there is not a substantive reason to do so.”
On whether Alison Rose, NatWest CEO, did the right thing falling on her sword, Levene ums and ahs for the only time during the interview, before settling on Rose was “doing a very good job” and it “was a shame for the industry”.
Augmentum performance
Augmentum is one of Britain’s leading financial tech investment firms, investing in a panoply of firms, including neobanks, an ID verification firm, and an online will-writing startup. It looks to back hot startups across Europe at Series A stage and onward.
In 2009, Levene co-founded the Lord Rothschild-backed Augmentum Capital, the VC group that publicly listed Augmentum in 2018, marking one of the biggest listings of the decade.
In its latest financial results, Augmentum reported a 2.4 percent increase in net assets per share before performance fees to 158.9p in the year to March.
In total, its ten biggest investee firms reported an eye-catching average 117 percent jump in revenues.
Bright spots included a £7.5 million increase in the value to £35.7 million of its 5.1 percent holding in SME lender Tide, valuing it at £700 million, and an £8.6 million increase in the value of its holding in open banking outfit Volt.
In the negative column, the value of its holding in identity checking business Onfido dropped.
Levene’s week
On the Augmentum website, writ large is a proclamation about the importance of integrating Environmental, Social, and Governance (“ESG”) factors when investing.
Levene is hot on the green issue: he commutes from Highgate, North London, by electric car stopping half a mile short of Augmentum’s offices in the City, then hopping on a bike.
“I am trying to be total zero emissions,” he says, saying he cycles to just about all his meetings.
He used to cycle the whole commute but it wasn’t time efficient, so he’s now switched to the hybrid approach.
Speaking of hybrid, hybrid working, that is, he is not a fan.
“This whole remote working has never quite taken off for me,” he says.
Levene, who is rocking the smart casual look favoured by startup executives, teaming up trainers with trousers, is an office man.
And Augmentum’s office is not a stuffy VC-type affair, instead, it is open-plan with the Silicon Valley slogan “move fast and break things” emblazoned on the wall.
The 49-year-old’s weekdays tend to be Mondays and Fridays more internally focused while in the middle of the week, he’s out and about meeting founders and investors, trying to sniff out the next Unicorn.
Three times a week he is back home at 11 pm, after pressing the flesh at networking events.
Weekends are reserved for the family (he has three children) and playing football, albeit not at the moment as he’s just undergone knee reconstruction surgery.
On top of the day job, Levene has an “unusual” elected public service role as Alderman of the City of London, amongst 25 Aldermans in total, a pool from which emanates the future Lord Mayor of London, a role his father occupied.
The role involves promoting professional services and involves attending 60 to 70 events and dinners a year.
Levene’s father Peter Levene (Baron Levene of Portsoken) had a bewilderingly varied career running across politics, holding several Whitehall posts and business, including being chairman of Lloyds.
While admiring his father — “he was the first member of his family to go to university” and “he was always motivated by driving change” — his dad wasn’t one to open many doors for him, instead instilling independence in him at an early age.
‘It was very much ‘you go and make your own way in the world’,” he says his father would say to him.
The entrepreneur’s bug
Levene has had a long stint at Augmentum, nearly 15 years, the last five as CEO, after his earlier career was spent gallivanting across the globe.
It was in 1997, after working at Bain, the consulting giant, in Russia and Australia, that he realised the conventional corporate life wasn’t for him and wanted to be an entrepreneur.
Over 25 years later, he still gets the buzz working with startup founders, a bug spawned by his days setting up juice bar Crushh and betting exchange Flutter.com, which went on to merge with gambling firm Betfair.
He reminisces fondly about setting up Flutter.com with his co-founders in 2009, when he was proselytising the Internet to sceptical older-aged investors, describing each Betfair year as a “dog year” as the Internet was moving so rapidly.
Tough time for fintech
2022 was an annus horribilis for fintech, blighted by job cuts, downrounds, and myriad challenging macroeconomic factors.
Levene says he is surprised there have hitherto not been more fintech closures, on the back of 2020 and 2021 when the “market lost its head”.
He says:
“If you had asked me a year ago I would have expected more casualties in the tech and fintech sector.
“Why has it taken longer? A lot of the companies raised a pretty significant amount of money. And even those that didn’t have been resourceful in reducing their runway.”
On a positive note, he says the market has “reset significantly” and “a large amount of dry powder is still available for high-quality businesses”.
That said, more downrounds are likely to follow, he says, following the likes of Klarna and Checkout.com while the VC market will also be hit by closures due to its oversaturation.
Fintech luminaries hit out at London
London has also taken a beating of late, with fintech luminaries Tom Blomfield, Monzo co-founder, and Christian Faes, LendInvest founder, taking potshots at the capital for being anti-business, as they jetted off to new lives in the US.
Levene says he looks at things through a longer-term lens, saying that comparing the 1999 funding and regulatory landscape to today’s landscape is like comparing “night and day”.
“We could do a lot more, but boy has there been a lot of progression over the last two decades,” he adds.
As an example of more being done, the CEO points to a “huge missed opportunity” by the government to encourage pension funds to put cash into venture and startups.
Levene adds:
“I think the government should have launched many years ago a sovereign wealth fund. I think could have been more ambitious.”
On the current Sunak government, he says it’s more fintech friendly, than recent governments.
On the prime minister’s goal of making UK a crypto hub, Levene questions whether a UK Central Bank Digital Currency (CBDC) “will ever see the light of the day” adding that it’s unlikely the UK will become a crypto hub for speculative trading.
On the flipside, for the “right type of digital assets” then the UK should champion its credentials.
Faes, meanwhile, is complementary about Levene and his contribution to fintech.
Faes says:
"Tim has been a real crusader for UK fintech. In some respects it's a shame that there haven't been more people like Tim and Augmentum, that have been focussed on bringing capital into the sector, with a specific focus and expertise for fintech."
Falling out with regulators
Another hot topic this year has been the on-going saga of whether UK challenger bank Revolut will or won’t get a UK banking licence, a drama that has seen Revolut co-founder Nik Storonsky throw some grenades publicly at regulators.
Augmentum portfolio company Zopa went through the same “tortuous” process and Levene’s advice to Storonsky is not to throw his toys out the pram.
He says:
“Regulators should never be a pushover. The only way to deal with regulators is to be constructive and not overly argumentative, is to demand change if you think it’s fair. But you have to work with them. You can’t sit there and throw your toys out the pram.”
On neobanks
Revolut has been one of the leading lights amongst UK neobanks, along with the likes of Atom, Monzo, Starling and Monese.
But traditional banks have “failed” to ape this success with their digital offshoots, with the likes of RBS shutting Bo and NatWest axing SME lender Esme Loans.
“I think the penny has well and truly dropped,” Levene says, pointing out that legacy banks are now partnering, collaborating, and licencing with fintechs after failing to build within.
As an example, he points to JP Morgan working with banking tech startup 10x on launching its UK challenger brand Chase.
New neobanks continue to appear but Levene is not convinced they will prove successful.
“I don’t think you will see any new neobanks of real scale come out in the next couple of years, I think the winners are there,” he says.
On BNPL
Another hot topic has been the rise of BNPL firms in the UK and beyond.
Augmentum has some exposure to BNPL, in the shape of Zopa, which snapped up BNPL outfit DivideBuy in its first-ever acquisition earlier this year.
According to Finder, more than 19 million people in the UK have used BNPL, the fastest-growing payment method in the UK, where it is expected to be soon regulated.
Critics, however, say that buy now, pay later encourages users to get into debt who can't afford it.
There has also been a boom in users using these interest-free apps to buy everyday goods such as groceries.
Last year, Deliveroo partnered with Klarna, so customers could buy takeaways and groceries on credit, which was deemed “irresponsible” by financial experts.
Another BNPL provider Zilch advertises BNPL deals with Iceland for ready meals and fizzy drinks.
While it might ring alarm bells with some that individuals are buying groceries on BNPL, Levene thinks otherwise and asks “is it any different to a £500 interest-free overdraft with a bank? I don’t think so.”
On seeking stars of tomorrow
Unearthing the next Thought Machine or Nutmeg is no picnic, involving a “lot of shoe leather” and “kissing a lot of frogs”, says Levene.
“It’s hard to shortcut finding a needle in a haystack,” he says.
On the Augmentum CRM system, he says there are 4,500 European fintechs, and within sits a priority list of targets.
He says Augmentum tries to avoid hot, hyped areas as values are likely to be inflated.
He namechecks “wealthtech” and "financial education and wellness” as two areas he thinks the next star of tomorrow could emanate from.
And then Levene is off, probably to meet a new founder, still with an itch to unearth the next big fintech in town.
Lead image: Tim Levine, CEO, Augmentum. Photo: via LinkedIn, uncredited.
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