Nazim Cetin, CEO of Allianz X, says corporate investors can jump too early into unproven technologies.
Nazim Cetin, CEO of Allianz X
The office of Allianz X, the corporate venture arm of Germany-headquartered Allianz, is in an old villa off one of Munich’s main thoroughfares. A big old wooden entrance door and period features characterise the building that houses the digital investment office of one of the largest financial services companies in the world.
The traditional surroundings are not what you would expect from a venture firm investing in cutting-edge tech. But then there is a degree of conservatism about the fund under the leadership of CEO Nazim Cetin.
Focused on late-stage investments in scale-ups, the CVC is only interested in backing companies with proven products or services and where it can see an exit happening in three to four years.
“I am like a goldfish – I only look at what is going to happen in the next four to five years,” says Cetin.
Founded in 2013, Allianz’s investment arm started with a handful of people looking at early-stage startups. When Cetin joined in 2017, he changed the strategic direction of the unit, focusing instead on mature startups in proven technologies.
Cetin joined from German media conglomerate Bertelsmann, where he was vice president of corporate development and new businesses. He founded the first German magazine focusing on philosophy and economics, Agora42. He also spent several years in investment banking.
Under his direction, the unit’s investments have to have a financial and strategic relevance to parent Allianz, one of the world’s largest insurers and asset managers. Unsurprisingly, insurtech and fintech dominate its portfolio. But the number of investments is small – it has about 25 active ones. Its team, however, is relatively large for a CVC. It has around 40 employees managing €1.5bn ($1.6bn) of investments.
The small number of portfolio companies relative to team size stems from its strategy to work closely with startups to help them on the road to commercialisation. “We like to shape and help the companies. We want to be a real partner unlike just turning up to a board meeting. Every team member who has a relationship with a portfolio company is talking to the CEO of the company at least twice a month,” says Cetin.
Despite more CVCs doing early-stage investing, Cetin says this is not his area of expertise and does not fit into its overall strategy. “If you do early stage, it is more like spray and pray. You do a lot of investments and then see what will happen. That is not my skillset. I like to grow businesses and be active.”
The team take a wait-and-see approach, looking for an acceleration in a technology before it considers investment. This means startups should have a settled team, are used to working with corporates and have a product that is on the market and can be implemented.
“It is much easier to work with those companies than with those that are still in the development phase. That is why we said we would shift the strategy and go for later stage companies,” he says.
Avoiding the hype
This philosophy rules out investing in hyped-up technologies such as artificial intelligence. The team did look into AI but haven’t found a reason to invest yet. “If you label something with AI, people will jump on it. We will wait for the second wave,” says Cetin.
The same goes for blockchain. Despite being a staple of fintech investment portfolios, Cetin is staying away from investing in the technology for the time being.
“Timing is crucial in everything you do. If you have a 30-year view on those topics, then you could go with those topics. But, if your objective is to invest and I will wait three to five years to see how it will feed into my business and see how to create equity value with that, I haven’t seen that happening with blockchain. I believe in it, and at one point something will happen; but is it the right timing? Probably not.”
Three recent large investments Allianz X has made have all been in insurtech. The unit led a $118m series C funding round for US startup Pie Insurance in 2021. Founded in 2017, Pie Insurance is a digital provider of workers comp insurance for small businesses in the US.
In 2022 it co-led a $250m series F funding round for US cyber insurtech company Coalition, valuing the company at $5bn.
In November this year it invested an undisclosed sum in Next Insurance, a technology-first small business insurer in the US. Insurance company Allstate participated in the $265m funding round.
In November it also opened an office in New York, the first outside of Germany. Part of its team have moved over to the new location to be closer to US investments. The team will be housed in Allianz’s offices in New York.
Allianz X invests using its parent’s capital, putting it less under pressure to achieve exits like closed-end funds. Cetin says the team have a long-term view on investments, even though it will only invest in startups that have proven technologies. Timing is everything in successful investing, he says.
“We don’t go for hop-on-hop-off strategy. We have a long-term goal and we follow that. Corporates maybe fall too fast in love with fancy new topics and then it might be wrong timing.”