The unintended results of government bank regulation may explain a lack of dynamism and indifferent client service, so this VC business argues. It invests in what it says are underserved and neglected client segments.

Customers are disgruntled with financial services. Government regulation and protection of the sector, while understandable after crashes and abuses, is holding innovation back and stifling service quality, an investment figure argues.

In the US today, people often regard handling financial affairs as akin to a potentially painful visit to the dentist. Services must improve to take account of what clients want, Dan Kimerling, managing partner of Deciens Capital, told Family Wealth Report in an interview.

While the causes for problems are many, Kimerling told FWR that one reason is that government oversight of banking has tightened post-9/11 and the 2008 financial crash. He spoke to this news service as the industry continues to digest the impact of the Silicon Valley Bank and First Republic Bank rescues and takeovers.

“There were good reasons [for some of the reforms] but they were not without issues. Banks are not allowed to fail and that’s one reason why they cannot try novel things,” Kimerling continued. 

The banking sector could, for example, benefit “massively” if countries encouraged citizens to have digital identities which they could carry with them every day. This would strip the requirement for many of the onerous KYC and related checks that clients need to undergo each time they move to a new bank. It would also cut heavy costs. “I think this is a meta-issue…we don’t have strong ID systems in the West,” Kimerling said, contrasting this to some extent with what’s developing in China and India.

Kimerling isn’t afraid to state strong views and argues that serious investment in financial services involves making bold, but considered choices and looking into areas that are neglected or misunderstood, such as financial services for the elderly and vulnerable, and farmers. Kimerling accepted – when asked by FWR on the matter – that digital ID ideas raise privacy concerns, but then these exist already, and certain notions about privacy are already being tested, he said. 

He is a startup veteran with three exits, having been an angel investor with more than 30 deals under his belt; he has experience as a general and limited partner. Kimerling was educated at the University of Chicago and, among other positions, is a member of Milken Young Leader’s Circle.

Prior to founding Deciens, Kimerling co-founded Standard Treasury and served as its CEO until it was acquired by Silicon Valley Bank. Standard Treasury built leading API solutions for the global financial services community and was backed by YCombinator, Andreessen Horowitz, and Index Ventures. In addition, Ishan Sachdev is general partner, and Cutler Cook is venture partner.     

Being patient
Kimerling focuses on early-stage fintech and financial sector companies. “My job is to make a lot of money for my limited partners [investors]…we have built a framework, a set of behaviors we believe improve the likelihood of achieving that goal. We only work with a small number of companies. We make three or four investments a year out of looking at about 900 companies. And we have only made 20 investments in the past six years,” he said.

“We work with very young companies and [are] looking to get involved with people who…have insane levels of perseverance,” he said. Kimerling said he looked for businesses with increasing returns to scale, deepening and widening defensive “moats” around a firm, and the ability to have a “winner-takes-all” impact. Limited partners in Deciens Capital are a mix of individuals and institutions, including family foundations and family offices. Clients are in the US and Europe.

Kimerling, as befits a relatively young figure in the sector at the age 37, said he is keen on podcasts, social media as well as events of various kinds to spread the message. “We’ve a relatively rabid fanbase,” he quipped. “We are aspiring to something different to our peers. With that, of course, comes a lot of volatility…we are okay with that.” The firm wants to invest for more than a decade in a business – the approach requires patience.

Investments
Talking about the kind of business ventures that Deciens Capital likes, Kimerling gave the example of financial services that speak to the problems encountered by older people and special needs groups. “Traditionally financial institutions don’t care for the elderly and they marginalize them,” he said. Deciens has a stake in True Link Financial, a firm that looks after people with special needs and those who care for them. Switching gears, Deciens also invests in Three Farm Financial (3F), a provider of financial and insurance products to the agriculture industry. This is a demographic that is poorly served too often, Kimerling said.

“Farmers use their smartphones all day, every day. And yet in California, for example, lots of banks will want the farmer to go into town and fill out lots of paperwork. That’s not very farmer-centric,” he said. 

Kimerling concluded with a third investment example: Therma, an internet-of-things equipment monitoring and analytics platform, is designed to fight climate change by eliminating food waste, energy inefficiency, and refrigerant emissions across the $1 trillion global refrigeration cold chain.

Other portfolio firms include Treasury Prime, an embedded banking software platform; Funding University, which helps students handle college costs; Chipper Cash, a money transfer platform; Walrus Security, a secure infrastructure for payments, and SimplyWise, a business that aims to transform email and paper clutter, such as receipts, into easy-to-manage reports.

All these investments go radically outside conventional fintech and financial services, and it’s clear that Kimerling, given his approach, has his eye on big changes and strong results. It is going to be interesting to watch how Deciens Capital and its ideas play out.