Venture Capital

Why We Were Wrong in 2016 But Believe We Were Just 8 Years Early

By Adam Felesky, CEO and Co-Founder of Portage

When Portage launched its first fintech fund in 2016, we stated openly that three major tailwinds would enable a meteoric rise in Fintech:

  • Change in consumer behavior and expectations 
  • Global proliferation of mobile adoption
  • Acceleration of computer processing power 

We believed that innovation and disruption would accelerate exponentially. Incumbents, in our view, would have no choice but to reinvent themselves to remain relevant, creating further opportunity for fintechs who would enable this transition. This would ultimately lead to significant M&A activity which would drive great returns for investors. Simple!

We think our view of the major tailwinds was generally accurate. What we got wrong was how financial incumbents would react to this wave of fintech innovation.

2016 to Pre-COVID Era

During this time, we saw the emergence of the first set of B2C fintech models in most developed markets across banking, wealth and insurance. Incumbents stood up their own innovation departments, incubation labs and venture arms. We saw lots of activity but for the most part, incumbents sought to build from within and launched alternative solutions, often under a new modern brand with a catchy fruit name.


Boom! The emerging B2C fintechs accelerated and more importantly, the leading platform’s unit economics began to work. As a result, a tidal wave of new capital came in, cementing their leadership positions. Meanwhile, incumbents were not seeing results from their investments. This was partly attributed to their focus on adjacencies to their core business which helped overcome the “Innovator’s Dilemma.” Therefore, the financial impact was not moving the needle. 


Fintechs are seeing a scarcity of capital, which reinforces the scale moat of existing leaders. They are looking for “efficient product-led growth.” This popular theme has driven a focus on “embedded finance” which brings products to market with less investment. Today, incumbents are moving away from adjacencies and experimentation and looking for measurable ROI. They too are facing capital scarcity, and directing their incremental investment dollars toward their core.

Fortunately, we got enough right over the last 8 years, especially on the B2C fintech side. We backed some of the leading fintech unicorns around the world which in some ways are the new digital incumbents of today. 

The reality is we are today where we thought we would be back in 2016. Incumbents are only just now looking to modernize their core products/infrastructure. In many cases, this is a business continuity issue as legacy platforms are now approaching their expiry. We are witnessing a real paradigm shift. For a successful transformation, incumbents are willing to explore the most efficient means, be it buy, build or partner.

This is promising for fintech investors like us and is further reinforced by future structural tailwinds in clear sight today:

  • Regulation supporting consumer access, consent, portability and interoperability is gaining momentum worldwide
  • Data is proliferating exponentially and can be structured and monetized
  • Consumer trust in new digital incumbents allows for a second wave of growth in the leaders
  • Enormous climate-related investment will be a transformational catalyst for all industries including fintech

It will be challenging to pick winners in these exciting times ahead. Core infrastructure investing is difficult. It requires deep technical and vertical expertise, an incumbent network to provide beta referencable customers and patience. We are operating in an environment where capital will be scarce for all stakeholders in the ecosystem. Collaboration between incumbents, investors, and startups will be the key ingredient to success. 

Venture investing will continue to be hard, but it was always supposed to be.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.