How Banking Giant Citi’s VC Arm Invests In Billion-dollar Exits

Citi Ventures, the venture investment arm of banking giant Citigroup, has been one of the more active and successful corporate venture firms in the U.S. in recent years.

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All told, the San Francisco-based firm has invested in nine unicorn companies, five of which have exited, and has a further five companies on the Crunchbase emerging unicorn list. It has invested in 61 new portfolio companies since 2015—roughly 10 new companies per year—according to Crunchbase data.

Its portfolio boasts six $1 billion-plus exits. 

“Our goal is to invest in category-defining companies that are going to be the leaders in their area,” Matt Carbonara, the managing director at Citi Ventures, told Crunchbase News.

Notably, the firm invested in banking API platform Plaid and e-commerce platform Jet in their Series B rounds. Citi Ventures also invested in the Series D rounds for cybersecurity company Cylance, payments company Square, and coupon company Honey, as well as in cloud-based e-signature company DocuSign’s Series E.

Citi Ventures ranks in the top 15 U.S. corporate venture firms based on its pace of investing in new portfolio companies since 2015, per Crunchbase data.

The firm’s portfolio reflects its approach to investing in companies that Citigroup seeks to deploy. Since its founding in 2010, Citi Ventures’ focus has been in fintech and enterprise, but has expanded over the decade to include customer experience, security and regtech, extending  more recently to automation, proptech, smart treasury and banking at the edge.

Carbonara, who previously invested at Cisco in enterprise networking, collaboration and IoT companies, led Citi Ventures’ investments in Car IQ, Trulioo, Kenna Security, Nylas and Skan.ai.

How it works

Citi Ventures measures its success by how many of its portfolio companies become vendors of Citibank. Of 70 companies, two-thirds have a relationship with Citibank either through a pilot or are fully commercialized, according to Carbonara.

“We spend a lot of time with our business and technology leaders in Citi, trying to understand the gaps that they have from a product, technology and business perspective,” he said.

The fund will typically invest $5 million in a deal, but the range can be anywhere from $1 million to $20 million. It has led rounds, but only does so in about 20 percent of its new investments, per Crunchbase data, and is more often a participating investor.

The team is made up of 13 investors of whom seven are in the Bay Area, three are in New York, two are in Tel Aviv, and one is in London. Citi has an innovation lab in Israel that is leveraged  by the team–especially around cybersecurity, for which Israel’s tech scene is well known.

Citi Ventures’ active investing approach coincides with an overall uptick in corporate VC. The pace of corporate venture investing has grown through the decade, peaking in 2019, according to Crunchbase data. From 2015 to 2019, U.S.-based corporate venture firms have increased their investing pace in new portfolio companies by 83 percent, when compared to the prior five years of 2010-2014.

Carbonara noted that enterprise has become more dominant than consumer investing in recent years. “People are moving to the cloud and figuring out how to monetize and use data,” he said. “And those are just massive changes that require wholesale changes of how you secure and how you monitor it, how you build it, and so there’s a lot of opportunity there.”

The pandemic’s effects

As COVID-19 took hold, the fund reevaluated its approach to prioritize which areas would become important to the bank and which areas would outperform during the pandemic, he said.

Among the areas that moved to the front burner was technology focused around the digital customer experience. As such, Citi Ventures invested in customer experience technologies that include:

• UJET, a mobile-first customer interaction platform that allows a customer service rep to see in real time what customers are experiencing to solve problems.
• Flybits, a startup focused on personalizing customer experience for financial services. The company is able to understand and offer products based on a consumer’s profile: whether looking for a mortgage, or if they have points on a credit card that can be used toward a purchase.
• Trulioo verifies customers who sign-on globally. This is a critical service for banks that need to abide by regulations on money laundering.

Another area that Citi Ventures focused in on: Technology that enables automation of more customer interaction or back-office capabilities to make it error-free and scalable.

“We felt like there will be pressure on budgets and therefore people will be asked to do more with less, and therefore productivity and automation will become an important element of that,” Carbonara said.

Automation technologies the firm has invested in include:

• Nylas, an automation API technology that integrates a company’s calendar, email and contacts to give customer service a single view. The platform connects with email contacts and calendar databases and integrates those into applications using an API that’s developer-friendly. This is useful for health care companies–to schedule appointments–and sales companies to keep track of customer interactions.
• Another company, Anvil, a low-code no-code platform, allows companies to create web form workflows easily.

The final area Citi Ventures has focused on is cybersecurity, which has become more prescient as millions more people work from home. “How do you extend the security of the enterprise to those endpoints that are sitting in the home offices around the world in order to ensure that the enterprises feel protected?” Carbonara asked.

Among its investments in that space: Netskope, which monitors all cloud usage for a company from any device whether in the office or working remotely.

Footnote: Crunchbase Pro queries used in this article include Citi Ventures Portfolio: Unicorns & Exited Unicorns, Emerging Unicorns and Citi Ventures exits. See their portfolio hub page for more information.

Illustration: Dom Guzman