Photo courtesy of Service Ventures
Brian Regan
General Partner, Service Ventures
Age: 30
Industry experience: 9 years
Service Credit Union has launched a new venture capital unit, Service Ventures, with the ambitious goal of investing in cutting-edge technologies that can both benefit member services and hopefully generate a handsome return for the Portsmouth, New Hampshire-based financial institution.
Service Ventures, which is based within the Portsmouth headquarters of its parent company, isn’t releasing how much capital Service Credit Union has committed to the year-old firm. But Service Ventures has already invested in five startups, including Modern FI CUSO, a deposit management solution provider, and Wealth Cabinet, a wealth management firm. The unit is headed by Brian Regan, currently the investment unit’s lone employee.
Q: What’s the advantage of starting Service Ventures rather than relying on Curql, the venture capital collective of 130 credit unions that invests in young fintech companies?
A: I think it’s important to note that we are also in the Curql fund. But the biggest difference [between Curql and Service Ventures] is the stage of investments. We try to go early stage. When you have an idea that you want to figure out and if there’s a viable company there, we try to get involved very early. Also, the Service Ventures fund is specifically for members and executing the strategy of Service Credit Union. So, there may be particular areas of our membership that have problems that are unique to us and that we’re looking to solve. This allows us to take that secondary approach.
Q: Does Service Ventures see itself geographically well-positioned due to it being in eastern New England, a region known for its strong fintech sector? Is it an advantage?
A: It definitely helps. We’ve spent time with the Innovation Center at [the University of New Hampshire]. We’ve gone up to the Roux Institute in Portland, Maine, where Northeastern has a tech-hub campus. And, obviously there are a bunch of tech places in Boston, such as MassChallenge and other incubators and other investors. We’ve definitely had some interesting conversations because of where we are locally.
Q: What’s the most urgent fintech or credit union technology area that you see needs addressing?
A: There’s a big wave of artificial intelligence technologies right now. I think there are AI use cases that can dramatically impact our member experience and allow credit unions to scale more effectively. I think that’s a big area. And then additionally, on top of that, there are just micro services. There are things like our partnership with ScribeUp, where we’re able to add in a new product or a new feature that seriously helps our members. I think there are holes there that can be filled with innovative partners.
Q: Do credit unions really need their own specific types of technologies? Why wouldn’t you just use the same kinds of fintech and other products that banks use?
A: It’s a great question. It’s because credit union charters do have differences [from bank charters] that need to be addressed. I think a great example of this is ModernFi, one of our portfolio companies that basically allows credit unions to have a credit-union deposit network. There are also [regulatory] limitations with credit unions. So, there are innovative solutions to just help navigate those credit union problems. There are also companies that are able to make changes to technologies to better fit the credit union mission.
Q: Is Service Ventures aiming to directly contribute to Service Credit Union’s bottom line?
A: Our goal is to definitely make money off of our investments. In my opinion, this has to be. You have to make money in order for this to be sustainable and in order to provide the best things for your members. We’re trying to bring returns, whether that’s new technology and a better process for members or actual financial returns to the credit union. The healthier the credit union is financially, the more benefit to the members.
Q: What is Service Ventures’ exit strategy for its investments? When will it cash out on an investment?
A: It really depends. Every time we make an investment, we map out what I think is the most likely path to an investment exit. Some of these are convertible notes that have an end date on them. Some of them are equity investments where we’re expecting to have a merger or an acquisition conversation after a number of years. But a lot of that has to do with timing in the markets. The thing about venture investments is that when you make them, you need to be comfortable that you’re getting into a potentially seven- to 10-year timeline.
Q: How big do you see the Service Ventures portfolio getting over the next five years, either in terms of dollars, or in the number of deals, or both?
A: I think the answer plays off the last question. It really depends on the timelines of exits and in what the market looks like. What I can say is, on the number of deals and the impact we’re looking to have, there’s no shortage of great funding teams who are looking to make an impact in this credit union space. We’re definitely not slowing down. We’re going to keep going until there are no more problems left to solve.
Q: How did the formation of Service Ventures come together? What role did you play?
A: This type of investment activity was the idea of David Araujo, our CEO at Service Credit Union. We started talking about this over a year ago now and we took our time to make sure we understood the strategy. How would we define success? How would this be in the best interest of our members in the credit union? And then we decided to make this its own brand. Let’s try to connect with the entire fintech community. And so, ultimately, this was David’s idea. I’m just lucky enough to be here making the investments.
Regan’s Five Favorites Books:
- “Angels & Demons,” by Dan Brown
- “Call Sign Chaos: Learning to Lead” by Jim Mattis and Bing West
- “Shoe Dog: A Memoir by the Creator of Nike” by Phil Knight
- “The Hobbit” by J.R.R. Tolkien
- “A Brief History of Time” by Stephen Hawking
