When Arvind Purushotham decided to leave the Sand Hill stalwart Menlo Ventures in 2010 to start a new VC arm for Citibank, he joked with friends that he was going from an operation with 25 people to one with four more zeroes in its workforce. 15 years—and more than 200 investments and 30 exits—later, he has built one of the more formidable Wall Street corporate venture outfits at a moment when frontier technology like AI and blockchain threaten to upend financial services. Citi Ventures has already made 26 investments this year, one of its most active on record.
Corporate venture capital, or CVC, has always been a strange corner of tech investing. While operations like Citi Ventures still have a mandate to generate returns through IPOs and M&A, they are also tasked with investing in startups that could offer some strategic support to the parent company. Citi didn’t share the assets under management for the fund, nor how much it invests every year, but did confirm the capital is from the bank’s balance sheet.
Notably, Citi Ventures chose California for its home base, with Purushotham still based in Palo Alto, not New York. “When it was set up, we started to recruit people with Silicon Valley’s venture capital experience,” he told me. “The journey over the last 15 years is bringing that DNA and skills and experience and then using that for the benefit of the bank.”
When I asked how Citi Ventures balances its twin goals of returns and supporting Citi’s tech development, Purushotham admitted that at its top level, the point of his group is to “exist for strategic reasons.” Still, he said that the best-performing companies will also, by definition, be the most useful to Citi’s overall growth. “If the goal of a program like ours is to work with companies…that will have an impact on our industry, that naturally drives us towards the more successful companies,” he argued.
There will inevitably be some misalignments. I’ve reported on one of Citi Ventures’ more recent investments, the stablecoin infrastructure company BVNK, which has drawn advanced acquisition interest from Mastercard and Coinbase. BVNK also received investment from Visa, which put some of its corporate backers in an awkward position. Purushotham declined to comment on the deal discussions, saying only that “we will be watching that space.” Still, he said that exits to competitors are rare, and that Citi also invests side-by-side with other financial CVC firms like American Express Ventures.
Another question for corporate venture is “build versus buy,” or when to invest in outside companies as opposed to developing technology in-house. The answer has become even less clear as the line blurs between Wall Street incumbents like Citi and fintech disruptors like Robinhood. Purushotham pointed to one of his portfolio companies, Plaid, which has become a top partner to banks (while also pushing often oppositional policies like open banking).
Purushotham argued that build versus buy is often not an either/or, though his team stays apprised of what Citi’s 30,000 software developers are working on. When Purushotham and his investors look at startups, they try to understand if there’s something unique in the startup’s model that makes it advantageous to strike up a partnership. He highlighted a number of its investments, including Wildfire, which provides a browser plugin that helps consumers shop for deals. Citi integrated the tool with its own shopping platform.
Today, with just 16 investors spread across Silicon Valley, New York, Tel Aviv, and Singapore, Purushotham’s team has more resemblance to Menlo Ventures than a Wall Street titan. But with a 230,000-person strong bank behind the operation, Citi Ventures has carved out its own corner of Silicon Valley. “We’ve always believed that we’re more than capital,” Purushotham said.
Leo Schwartz
X: @leomschwartz
Email: leo.schwartz@fortune.com
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VENTURE DEALS
– Valthos, a San Francisco-based developer of AI-powered systems designed for identifying biological threats, raised $30 million in seed funding from OpenAI Startup Fund, Lux Capital, and Founders Fund.
– Ava, a San Francisco-based credit-building platform, raised $15 million in seed funding from Greylock, Transform VC, Firebolt, Twine Ventures, Sure Ventures, Defy.vc, and others.
PRIVATE EQUITY
– Mainsail Partners invested $35 million in FieldFlo, a Denver, Colo.-based project and safety management software for specialty subcontractors.
– Marlin Equity Partners acquired Elucidat, a Raleigh, N.C. and Brighton, U.K.-based platform for creating learning platforms. Financial terms were not disclosed.
EXITS
– Fireblocks, backed by Coatue Management, agreed to acquire Dynamic, a New York City-based wallet infrastructure platform for fintech companies and cryptocurrency and backed by Andreessen Horowitz and Founders Fund. Financial terms were not disclosed.
