Live Oak Bancshares’ investments in financial technology companies is paying off, according to company President Neil Underwood, who oversees the company’s investment arm.
 
“The entire portfolio continues to thrive,” Underwood said during Live Oak’s second-quarter earnings call July 22. “Each of these companies solves a major problem in financial services.”
 
Live Oak Ventures, a subsidiary of Live Oak Bancshares, has invested nearly $26 million in Finxact, Payrailz, DefenseStorm, Savana, Greenlight and Philanthropi. While it has not invested cash in Apiture, Live Oak’s joint venture with First Data Corp., it has made a human capital  investment in the form of seasoned Live Oak professionals who work with the firm.
 
With two exceptions, the fintechs are used by Live Oak Bank to enhance its operations in such areas as mobile payments, cloud-native banking software, digital efficiency, cyber security and fraud detection. The exceptions are Greenlight, a debit card for kids that is managed by their parents through a phone app, and Philanthropi, which is used within the company only to enable Live Oak employees to make charitable contributions that are matched by their employer, officials said.
 
“We’ve invested $26 million at [these companies’] very early stages, and the implied value today is $182 million,” Underwood continued, noting that Live Oak’s estimate of implied value is based on most recent transaction data and is not necessarily indicative of current or future value. Nevertheless, Live Oak’s investment subsidiary is confident these investments will be financially sound and will give the company early access to leading-edge technology.
 
“We expect these companies to continue to raise growth capital at elevated valuations,” Underwood added. “We know this is a really difficult thing to forecast but as you can see, this quarter is real and it’s tangible. Perhaps more important than the economics is Live Oak Bank’s adoption of these technologies for the next generation cloud-based tech stack allows us to build best-in-class fintech life products.”
 
During the call, Underwood also provided an update on Canapi Ventures, a separate investment engine of which he, Live Oak Chairman and CEO James “Chip” Mahan and Gene Ludwig, are partners. Ludwig is the founder of Promontory Financial Group.
 
Canapi Ventures aimed to attract sizeable investments from financial institutions and create a fund that would find and invest in next-generation financial technologies.
 
Underwood reported in the earnings call that Canapi Ventures ended 2020 with investments of about $650 million from 44 banks. The American Bankers Association, the Independent Community Bankers of America and several state banking associations are also Canapi investors, according to a release from the venture capital firm.
 
“We’ve been operating for about 18 months and as you can see, we’ve been very, very busy,” Underwood said, noting that the venture capital fund has made 20 investments in 16 portfolio companies in that time. Canapi Ventures will also glean management fees, which will enhance its returns on investment.