Eric Byunn of Centana Growth joins Nick to discuss The Future of Fintech, If VC Growth Has Become a New Asset Class, and the Case For and Against Vertical Integration in the AI Age. In this episode we cover:
- Due Diligence and Value Creation
- Investment in Jumio and Identity Verification
- Growth Expectations and Market Realities
- Lessons from Netscape and Industry Evolution
- Investor Responsiveness and Connectivity
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0:18
Eric Byunn joins us today from SF. He’s a Co-Founder and Partner at Centana Growth, a growth-stage venture firm investing in technology and financial services. Before Centana, Eric was a Partner at FTV Capital. He’s backed several category-leading companies, including Beacon Platform, Jumio, Vena, and CertifID. Eric, welcome to the show!
0:48
My pleasure. Happy to be here. Yeah, it’s so fun to have you. Can you tell us a bit about your background and kind of your path to becoming a investor? Born and raised, child of child of immigrants and in the fine state of Tennessee, maybe not the the birthplace of a lot of investors, but they were both academics, so perhaps some level of intellectual curiosity. And then it got kind of boring and traditional, McKinsey, Harvard, Stanford. But then I came out of business school right as the first internet bubble was going on, and I got lucky enough to go work at Netscape, and so I had a career in product for for a little while, and then got lucky enough to transition over to the investor side, and now have been doing that for for almost 2025, years, on a very consistent investment mandate and strategy across two different firms. Amazing.
1:38
All right, so you’ve you’ve seen some tech cycles. You’ve seen some shifts. This is good. We’re going to talk some ups and downs. Very good. And you’ve been investing in FinTech, you know, over a long period of time, which was not always in vogue. So So tell us more about your thesis at Santana.
1:53
At Santana at much like my prior firm, we’re a growth stage firm specifically and exclusively focused on innovation in and around financial services that often gets distilled down into the words fintech. We do think about it a little more broadly than than what sometimes the market is thinking about. But you know, we very much have a view that that this is a very exciting piece of the market, depending how you count, it’s either the largest or second largest piece of the economy, either by total industry revenues or by market cap of the companies in it. And so there’s a lot of innovation and exciting dynamics going on within it. And so we’re excited to be a long term, frankly focused investor in this space,
2:41
Eric, what inning are we in for fintech? Because it’s remarkable how far we’ve come, and yet I’m still getting pre seed and seed stage pitches that are showing me all this ridiculous inefficiency and wealth and banking and a variety of financial services.
2:58
I appreciate the question. I actually don’t think it’s the right analogy. I think we are, you know, I think, if you think the worlds of funds, financial services and Fintech is is an evergreen it’s not something that you can count by funds or count by innings. So, you know, I could be silly and patronizing and refer to, you know, people exchanging shells, like we all read about when, you know, money and such, was still started. But if we go back to my history, you know, FinTech, wealth tech, which was the last job I worked in a company that would have been called a wealth tech today, but we didn’t have that name either in my last certified management job, like FinTech wasn’t a word, wasn’t a phrase InsurTech, any of these things when I started. And then, as you said, we have been through the the ups and downs of of that. And the reason, I don’t think the ending question is is quite the right analogy is we are going to continue to have financial services for the indefinite future. We’ve had it for forever. We’re gonna have it as long as we’re a civilization. And it is inherently something that a people care a lot about, for obvious reasons. It affects everybody’s daily life in a big way. It’s, it’s huge, and it is essentially an information good so it’s a it’s an avenue where you can, in a very rapid and capital efficient way, make changes and have innovation. So we think there’s a nice steady flow of innovation over time in this category. And the last thing I’ll say on this is we view it much as this sort of stream, or long term view as an evolution, not a single point revolution. If you think about to the point of the pitches you’re seeing, if you think about, you know, the amount of change you’ve seen in the individual FinTech sub segments over the last two years or five years, some of them have moved a lot and some of them haven’t. But if you think about where. Or any sub segment of financial services, was 20 or 25 years ago. Remember, that was an era in which we were still doing all our banking in the freaking physical branches, right? You know, you know, we didn’t have mobile, we didn’t have internet, you know, we didn’t have crypto, we didn’t have, you know, all the peer to peer supply. It’s just, it’s changed dramatically in a way that 20 or 25 years ago we very few people would have predicted. And so it’s just had revolutionary change. But it happens in little increments that see, that folks see in a day to day evolutionary way.
5:35
Well, and you’ve been investing in the category for much longer than most like if you think about the sub segments or themes that were most relevant from different eras? Can you? Can you give us some of the previous ones and kind of, maybe thematically or categorically, what you’re leaning into most these days?
5:53
We at Santana very much, because we have the view that I said about financial services is just an exciting innovation category, permanently. We honestly try not to get too caught up in kind of the up and down hype cycles. We went on record having quite a bit of concern about some of the early round of lending models that were very, very sort of hot in the venture market. We’re relatively known to have had some a number of concerns about a number of the crypto markets that were that were exciting, some of the first generations of those things, some of the initial rounds of of of Challenger banks. You know, at one point, I think our market map had 50 challenger banks on it, and at this point, I think we’ve, we’ve seen the conclusion there, at least the interim milestone there, where they’re really only a few that are really, really meaningful. And so I’ve just named three of the big trends that have gone through, quote, unquote FinTech over, over the last call, a decade, we’ve been lucky enough to, or perhaps thoughtful enough to avoid some of those, some of those issues, and we’ve invested in things that are a little more behind the scenes. The standard analogy is picks and shovels kind of helping all of these things go by. And you know, we’ve achieved good success with that so far. And Eric,
7:19
how about the stage side of things, right? You’re a growth investor. Over the past 25 years or so, you’ve been doing this for a while. Like, what’s changed in terms of building, growing and investing at the growth stage?
7:33
Yeah. So one is, just as everybody has commented on the massive increase in the number of firms and the types and varieties of capital that can that can help companies grow. And so for us as a as practitioner investment firm, we have to keep our fingers on a number of many more different kind of ways that companies can can grow. If you think back back to before FinTech was, was a phrase. You had two varieties. You had very traditional kind of venture capital. That was probably the minority of businesses kind of in this space, the majority of folks is, you know, folks who were practitioners in some financial services institution. They made a decent or a lot of money somewhere along the way in working in a bank or a hedge fund or or something like that. And they often were able to raise capital from themselves, excuse me, or their friends and family, in order to to start the company. And so there were a lot of bootstrapped, bootstrapped companies in in sort of the earlier days. And so as growth investors, we were kind of trying to look across that landscape now. Again, as you talk about so much on this show, there’s so many varieties of capital, different structures, different approaches, and so just now, capital is even less of a differentiator, less of something that really makes a difference in building a company, and It’s much more around the ideas and bringing in the the the sort of cross pollination across different aspects of consumer and individual behavior. And, of course, as always, the founders, the entrepreneurs who are, who are building those things.
9:34
Eric, I’m seeing commentary every day, these, these hyperbolic posts, like even last night, you got a newsletter in my inbox. Venture capital is dead, right? Growth is a fundamentally different asset class. We shouldn’t call this venture capital anymore. I’m curious to hear from you. You know when, when we have 10 to 15 firms representing 75% of capital, and we’re seeing a big. Big shift in the way companies are built and capital is deployed. How do you compete?
10:06
The positive side of this proliferation of capital and approaches to capital is it allows for different perspective. I know this is something that you appreciate. Not every successful company, starts in the exact same way, right? I mean, sure, there’s this kind of prototypical example of, you know, a team coming out of Stanford, and they go into a garage and, you know, off, off, they go, go build. But lo and behold, when you do the reverse analysis of companies that are going public or getting acquired for, you know, certain sizes or what have you, or even are independently successful, you look back and you see this huge variety of ways in which companies got started and the backgrounds of the founders and the entrepreneurs and and the teams, and that diversity leans into a sort of different set of perspectives and different ways that that or perspectives that firms have. You know, we at Santana, when you get into the nuances, we often describe ourselves as on the earlier side of of growth. We sort of bridge between venture and and growth. We hope that we have some of the positive aspects of both and bring that together, but at that exact intersection, you know, even though there are 1000s and 1000s of investment firms and probably 1000s of firms with growth somewhere in their name, you know, we find that the sort of competition for us, or if you want to look at the other way, people who have A very, very similar perspective on what we’re looking for and what sort of we believe matches well with us to build successful companies and realize great returns for our investors. You know, there aren’t that many in our exact piece and the and the wonderful thing is, there’s enough breadth of perspective amongst the founders that they’re folks for whom we’re a good match, and they’re folks for whom, you know, those 10, you know, mega fund VC funds are really good match, and they’re not a good match for us.
12:12
Perfect. And Eric, you know, traditional VC doctrine is that one must back companies pursuing monopolistic outcomes. You know, whether it’s Peter thiel’s competitions for losers or the obsession with winner take all markets. What I’m curious about is, you know, when you’re actually sitting across from founders, how do you think about the tension between backing companies that are trying to capture monopolistic economics versus the reality that many successful outcomes, if not most successful outcomes, are actually in competitive markets where there’s more than one winner, you know, has the industry over indexed on this monopoly framework.
12:53
So the two parts of your question, the last question you ask, we absolutely think, yes, right? As you said, demonstrably, there are a number of categories where there are multiple winners. Sure, there may be great differences in the value of winner one versus winner two, but there can be a winner two and a winner three, and we absolutely agree with the implied comment there in the question that, you know, the industry has over indexed on the sort of conventional wisdom around there’s a single winner now, academically, I talked about that in my background. You know, sure it’s great to look for. You know, the positive words, we’d say are barriers to entry, or, you know, unfair advantages, or, you know, what have you, and that’s pretty close to natural monopolies. And so yes, I think all of us look for that in a legal and ethical way, but we’re all looking for that situation where the company, the founder, something about them, has some of those, some of those characteristics. But I think in practice, there are many, many, many markets where there are a good handful of winners and investors who are well aligned with their entrepreneurs and management teams that they’re working with where that alignment is strong can have success for everybody, in places, 123, and possibly further down.
14:32
You mentioned a couple criteria, characteristics, factors you select for let’s talk a bit more about selection and due diligence. What do you think you and Santana does differently than other firms? Yeah.
14:49
So it, it starts with our our focus and history. So as we talked about, I’ve been doing this exact strategy. G exact stage, exact focus on financial services innovation for a quarter of a century. You know, all of our partners have been doing exactly this for for decades. We very much deliberately foster a network of connectivity within and around the financial services industry. So we hope that when we engage in a dialog with an entrepreneur management team, we come with good knowledge and a perspective of the industry they’re in. Look, we’ll never, we’ll never match the depth of thought that an entrepreneur who’s, you know, spending their entire professional life, and perhaps more than that, focused on their particular company and and startup. But we certainly hope that they’re spending a lot less time educating us as investor and that we can help them see the next thing, the issues, the concerns, the things that might come up as the grow their company within these particular spaces. We think this is highly referenceable across the companies that we’ve been working with again over 25 years. And so we do think that that that leads to to to some difference as we as we talk to and work with our entrepreneurs. I think also what I just said about not overly focusing on the on the single winner of a space, frankly, there are some entrepreneurs who don’t like that, but there are a lot that do, because the implication of that is, we’re kind of with you for the whole journey. And you know, if it turns out you’re not going to be number one, or you’re not on the path to actually leading your market, you know, we’re right there helping you find how we can make a successful company. You know, even when someone has kind of, kind of some other companies run away with, with that, with that leading spot, and you know, we’re not a firm that’s gonna kind of walk away be because of that. So I think that that resonates with a lot of founders as well.
17:15
Eric, I’ve read that sent on Santana views diligence as a value creation tool, not just a risk mitigation tool. Do you have, like, an example, or maybe a diligence insight that you’ve seen directly change a company’s course,
17:30
yeah, for sure. Just so there was one company where we were in detailed diligence, like, literally in that phase where you’ve got, you know, an Excel spreadsheet with or Google Google sheets with, you know, 20 tabs kind of sitting in it, and you’re kind of pouring through very, very detailed level data. And we discovered that, together with him, we were walking through this in a diligence session with the management team, and a combination of their expertise, the numbers in front of us and the questions we were asking, led to an insight the way that they were running a matching algorithm that was at the core of their offering actually wasn’t optimal. And so, you know, we very much appreciated that team. We are excited to have closed that investment where we’re working with them. But, you know, by the time we got to our next meeting, they were like, Hey, we’ve started implementing some of those changes based on the learnings that we had in, in, in, in that last meeting. So up until that point, I got to admit, the meeting felt like a grind. We were like buried in, you know, row, you know, C, f2, 112 or, you know, Costel, whatever. And yet we found those sorts, those sorts of insights more broadly, you know, we we find them in terms of, you know, how the business is thinking about, sometimes key elements around how they’re thinking about retention or how they’re thinking about someone on the on the team. So every single one of our diligence processes ends with a session we do with management right before closing where we share our observations out of diligence. And we have two objectives. One, we want to make sure that, you know, we all collectively get the learning from that effort. And secondly, we want to make sure that we’re aligned with management about what the focuses are going to be, what the next step in the in the company’s evolution is going to be because, certainly, you know, most of the bad stories that you hear about, you know, investor versus management conflict comes when you just simply don’t have that alignment.
19:53
Do you ever use that as a tool to win a deal? You know, it’s like you’re doing all this diligence and you meet with a founder. Say, look, here’s what we love, and here are the opportunities that we see that you know, could be adjusted in the future and could lead to greater monetization opportunities, you know, better serving stakeholders, etc.
20:13
Yeah, I think the answer that is, of course, perhaps not as directly as you, as you stated it. But I think all of us as investors, when we meet with with managers and entrepreneurs, you know, want to be able to have a good dialog, right? And in our experience, in my experience, there’s nothing that leads to a better dialog than us being educated on the company on the market, and having a point of view and being able to dialog about that, and that only comes from having done the work, having done the diligence, not just to identify the thesis and mitigate risk, but to be able to have that that that dialog. And so we have a number of founders and and and managers that we work with, who, after we invested sometimes later, you know, at a dinner or over drinks or something, and say, yeah, no, I really appreciated in that first or second meeting that you guys had a point of view, or that you understood this or or what have you so effectively, yeah, we’re absolutely, hopefully, using our knowledge and understanding and depth of of thinking about their specific market being sector specialists that helps us win a deal
21:35
100% and the opposite is true too. When, when you show that you don’t know what you’re talking about it doesn’t really play well with
21:41
entrepreneurs. Yep, it’s embarrassing, and it just doesn’t play well.
21:45
Yeah, yeah. So, Eric, you invested in jumio, which went on to be category defining platform and digital identity. Talk a bit about that space in in what you know this company specifically got right early on, yeah,
22:02
so I think a couple of things. One, early on, they got, they understood that we needed to use the infrastructure that was present, right? So this feels like a long time ago. I mean, we invested in this company almost, almost a decade ago. But if you go back before that, your standard way of of proving your identification, your identity online and off, you know, was around showing your driver’s license or showing your passport, or, you know, some government issued ID and there were then a whole bunch of ideas. But at that point, they were still sort of ideas about how else you might verify or prove identity. So they got right there. They understood that you needed to start with some of those things that worked in the non, non non innovative, or non non digital world that worked the many ways that they’ve been doing it. The second thing that got right is they were early to using what we had now call AI. So there was, you know, everything from computer vision to machine learning models to predictive models. You know, they they set up a, essentially an AI Lab, you know, very soon after, we invested to push the thinking on all of these elements. And so another thing they got right was the degree to which, you know, without specifically predicting llms, the degree to which AI techniques could improve and combat that and, in fact, the degree to which that would be needed to combat those things, given the pace of change on the side of The fraudsters,
23:57
what’s your take on this argument? You know, Ben Horowitz has been talking about sort of the Renaissance for fat startups, as they called it, you know, like bundling, vertically integrated on the other side, you know, it’s kind of the unbundling and, like, you know, find a wedge and, you know, drive real value and kind of one element of the stack. Obviously, there’s not one size fits all, but as you think about, you know, these options, how do you frame that and size that up in a specific market opportunity? You know, when does it make sense to do a fully integrated, vertically integrated solution versus, you know, more of picking, you know, a specific application, you know, within the stack. Yeah.
24:48
So I was lucky enough to have worked with Ben at at Netscape, way back when, and so I have a ton of respect for him, both what he’s built, but also. With these sorts of insights. I think our view on that question is, we’d argue that’s that’s never gone away. So one of the other I sort of didn’t touch about, one of the other things about financial services is it’s this incredibly complex industry structure that, honestly, no one would ever draw up on a clean slate basis. It’s come about because of many years of regulation and history and consumer behavior and all this sort of thing. And so you end up with these very bizarre value chains, kind of across financial services. And so I think based in a deep understanding of what those industry structure elements are, what the incentives are of each party along the line of the value chain, there are a good number of situations where a bundle makes sense. There are also situations where bundle doesn’t make sense, either because of the underlying economics of a particular slice, or the incentives in a particular slice. I guess those are kind of the same thing, or it does make sense. So I think it is sector by sector, or even value chain by value chain, when that makes sense. And I 100% believe that there are opportunities on both sides of that question. Interesting.
26:18
You know, last question on the the identity space, like, where do you see the space evolving for identity theft and fraud? You know, with the advances we’re seeing now with AI and various cyber threats, yeah,
26:34
so we, we love all of our portfolio companies equally to this point, and so we have a very significant portfolio across identity, not just the company that that you mentioned, jumio, that is really one of the pioneers in doing identity verification. And for that piece, you know that will continue to get broader and broader and broader and incorporate more and more signals, and continue to have to to fight the AI battle. We have another company in identity that’s grounded on being able to get the root data, or the root signals that that kind of feed into this sort of thing, and almost your last bundling van H question, you know, we have another company, one of the ones you mentioned, certified, that is all about solving this problem for a specific industry, and doing it as a full stack solution, and incorporating everything from technology to remediation to insurance, all kind of embedded within the offering that they, that they provide. And so, you know, we see all of those elements kind of showing up. And so we think all three of those are going to continue. You’re going to have players who are very, very focused. I mean, we advise our identity companies that are kind of closer to the solution. End like there are certain pieces of raw, of raw compute and power and AI that you don’t want to try to reproduce because you’ve got specialists in that world. There are data sources you don’t want to have to go compile yourself, because there are specialists in that world. And then similarly, those kind of within identity, more horizontal providers, you know, don’t necessarily want to go, or don’t have the scale to go, build out the highly verticalized solution that often incorporates some specific elements, in the case of certified embedded insurance. So, so, you know, we we think it’s all going to evolve, and you’re going to have all pieces of that kind of ecosystem, much like the broader security or the broader software space has evolved awesome.
28:48
So, Eric, you’re a growth investor. I recently sent a company to a handful of friendlies, you know, prominent Series B and growth growth stage investors. This company had, has eight figures of ARR. They’re growing 3x year over year, 150% net revenue retention, 100% logo retention. And the response I got from multiple investors, and I’ll paraphrase here, but it was like, Nick sorry, we look for more explosive growth at this scale. And I was like, shocked, you know, by that response, I mean, you don’t like the category or what have you, but you know, is this new expectation of AI companies with 1,000% year over year growth rates? Is that the new reality? Or do you think the market will return to kind of valuing the t2, d3, growth profile?
29:40
So first off, I hope after this, you’ll count us as a friendly and send those to us as well. On that list, I just it is going to start there, if it’s at all, related to financial services. But then at Yes, I absolutely think that i. Um, those profiles can and will still succeed. And when we see that in the end markets, the industry will will, perhaps conventional wisdom will revert a little bit, a little bit to that, it speaks back to my early point of there are many perspectives and on investing. And as we know, there are many ways to build a successful company. And so, you know, sure, today’s flavor du jour is 1,000% a year growth, you know, AI on the cover. And there’s some very well known chasing after after that. And I’m sure some of that’s going to go great, but I think there are a lot of companies still being built on that more traditional, high growth model that are also going to turn into successful companies. And everyone from founders to investors will will, assuming they’re properly aligned, will have been happy to have been involved with them.
31:04
Eric, so you know you spent time with Ben and Mark at Netscape. Is there a story, or is there a lesson you’ve taken from that experience and that relationship with the two of them that has left a material impact on you that you can share?
31:20
I don’t want to over overstate it, but we did, did all work together, and what I appreciate is, you know, they’re both, and actually, so many folks are from from that Netscape period, are amazing individuals that I’m lucky enough to have worked With, and in many cases, continue to know everyone respected and learned from our CEO, Jim Barksdale, who, you know was, was a great man, but, you know, didn’t have a history growing up in software. He obviously had a number of strengths, but there was just a lot of respect for him and everyone, everyone learned from him. And I think the the lesson of, no matter how either smart or accomplished you are, which certainly applies to the folks you mentioned, as well as others, there’s there’s always stuff to learn, and that, that level of humility and ability to learn was was inspiring to see
32:24
Eric, if we could feature anyone here on the show. Who do you think we should interview, and what topic would you like to hear them speak about?
32:30
I don’t know if you’ve you’ve done this, but I would pick, I think it’d be really interesting to interview someone who has fully retired from the venture capital business. We’ve been through a couple of generation, generational changes. Both you and I know a bunch of folks who had illustrious, multi decade careers in venture and have fully, you know, stepped back and away. And I think it’d be great to just hear their insights on how the industry has evolved, and what’s what’s good and bad about how all of us are approaching it today.
33:07
That is a great idea. And then, do you have any habits or behaviors that are a secret weapon?
33:14
I don’t know that there are any secret weapons on this, you know, I do think that it is, you know, we’re, we’re all busy. And one of the things about being an investor is, you know, we have a flood of stuff coming at us and managing that is, is important. I try really hard to be responsive to folks, even if that response is I can’t engage on that, or I can’t, you know, whatever you know. I’m not perfect for sure, but I think our our industry, has too much of a reputation for folks getting ghosted by individuals in our in our industry, and I just think that’s that’s really bad, so I I try not to do that. Okay?
34:08
And then finally, here, what’s the best way for listeners to connect with you and follow along with Santana growth, put a
34:13
website, LinkedIn presence. You know, where we don’t make ourselves scarcer or hard to find. Email is always easy. First initial, last name at Santa Ana growth, but you know, LinkedIn message also works, or any other way you can find it to get to us. Perfect.
34:33
He is Eric B Yoon. The firm is Santa Ana growth, Eric, thanks so much for the insights today. I really enjoyed it.
34:39
Thank you so much, and thanks for doing
34:45
this. All right, that’ll wrap up today’s interview. If you enjoyed the episode or a previous one, let the guest know about it. Share your thoughts on social, or shoot them an email. Let them know what particularly resonated with you. I can’t. Tell you how much I appreciate that some of the smartest folks in venture are willing to take the time and share their insights with us. If you feel the same, a compliment goes a long way. Okay, that’s a wrap for today. Until next time, remember to over prepare, choose carefully and invest confidently. Thanks so much for listening.
