Goldman Sachs Strategy Teardown. A data-driven view into Goldman s historical and forward-looking strategy

Transcription

1 Goldman Sachs Strategy Teardown A data-driven view into Goldman s historical and forward-looking strategy

2 Webinar recording will be distributed after The presentation will also be sent to you. Feel free to share with colleagues. The resolution of some slides may be suboptimal due to the webinar software. Those slides will look fine in the presentation that we send you

3 Join the conversation #GSteardown 3

4 The technology market intelligence platform. CB Insights software lets you predict, discuss and communicate emerging technology trends using data in ways that are beyond human cognition. 4

5 A few of our happy customers The most publicly reference-able customers of anyone in the industry "We use CB Insights to find emerging trends and interesting companies that might signal a shift in technology or require us to reallocate resources." Beti Cung Microsoft, Corporate Strategy See what other customers have to say at

6 CBI Councils brings together experienced executives to accelerate their success through the sharing of experience-based insights that inform business decisions and help solve complex strategic, organizational and growth challenges.

7 ABOUT CBI COUNCILS Invitation-only membership network Membership is strictly by invitation only For leaders driving innovation & growth in their organizations Cross-industry membership of senior leaders from corporate strategy, innovation, venture, M&A, digital strategy and technology Curated peerlevel groups Membership is limited to SVPs, EVPs, presidents and C-level executives from companies with $1 billion in revenue or more Access to innovators & big thinkers We augment experiencebased insights by bringing in and connecting you with entrepreneurs, venture capitalists, academics and big thinkers who provide front-line perspectives and frameworks you can use to navigate the growth challenges you face 7

8 COMPANIES JOINING 8

9 APPLY FOR COUNCILS MEMBERSHIP VISIT

10 ABOUT THE PRESENTER Matthew Wong Lead Intelligence Analyst, CB Insights Published analysis and research has been featured in The New York Times, The Wall Street Journal, The Financial Times, Bloomberg and CNBC. Leads financial services research team. Launched CB Insights insurance tech newsletter, which covers startup and tech trends in the global insurance industry and reaches 20K+ (re)insurance execs, investors and startup founders: Graduate of Northwestern University, magna cum laude. 10

11 Where is all this data from? The CB Insights platform has the details on all the 2015 corporate venture deals included in this report CLICK HERE TO SIGN UP FOR FREE 11

12 Table of Contents Background on core Goldman Sachs Digital Finance initiatives & hiring trends Investment and M&A trends Patent activity Looking ahead 12

13 Background: GOLDMAN SACHS IN CONTEXT 13

14 Breakdown of net revenues at Goldman Sachs H1 17 How Goldman Sachs makes money 19% 18% 22% 22% Investment Banking Equities Investment Management Investing & Lending FICC Client Execution Goldman Sachs makes money in five primary areas: investment banking, equities, investment management, investing & lending, and FICC client execution. Here s how Goldman s net revenues broke down in the first half of % 14

15 0% -5% -10% -15% -20% -25% -30% -35% -40% FICC revenues at major US banks Q2'17, YoY change in dollars Goldman Sachs JPMorgan Bank of America Citigroup Morgan Stanley Goldman s FICC earning plunge makes headlines Traditionally a profit machine, Goldman s bond trading unit saw net revenues fall to $7.6B in 2016 from from $23.3B in In Q2 17, Goldman s FICC client execution unit saw its revenues drop 40% on a year-over-year basis and 31% lower than Q % 15

16 Believe me, none of us are hysterical about this, but we re focused on it. We underperformed, we know what we have to do, and we re doing it. We shouldn t have let it get that disproportionate, but we did. We ll fix it. Lloyd Blankfein CEO, Goldman Sachs 16

17 Hedge funds and asset managers weigh heavily in Goldman s FICC business Goldman s stated plan to address FICC challenges is to deepen its penetration with asset managers and banks, attract new talent, and strengthen its corporate offering. Over the next three years, Goldman believes doing these three things can result in $950M+ in additional net revenue. 17

18 Revenues in Goldman s investment banking unit fell last year, but stays strong Per the Financial Times, a former Goldman Sachs partner noted in May that Investment banking for the first time in years is carrying the firm. In US M&A, Goldman picked up almost $2B in fees over the past three years, according an analysis covering deals of more than $500M. Source: Financial Times 18

19 Goldman Sachs grows out regional presence Goldman is bulking up its investment banking presence outside traditional epicenters New York and San Francisco in markets like Atlanta, Dallas, Seattle and Toronto. 19

20 They mapped 127 steps in every deal, then set out to see how many could be done by computers instead of people Just 21 months after the firm disclosed its plan to re-engineer one of Wall Street s most lucrative businesses, the project has found ways to eliminate thousands of hours of work long performed by humans. A computer-based interface called Deal Link has replaced informal checklists that were once tended and passed down between generations of rainmakers. It now arranges and tracks legal and compliance reviews, fills in forms and generates reports. Goldman Set Out to Automate IPOs and It Has Come Far, Really Fast, June 13,

21 Goldman slashes fees to new low for smart beta funds Goldman Sachs Asset Management has ~$1.2T under management, but is investing in new strategies including ETFs and smart beta solutions. Goldman recently launched a smart beta fund charging just 9 basis points, as it looks to differentiate on cost. Source: Bloomberg 21

22 Background: DIGITAL FINANCE INITIATIVES & HIRING TRENDS 22

23 Goldman enters the consumer deposit market Goldman entered the consumer deposit market last year after closing its acquisition of GE Capital Bank s online deposit platform and assumed $16B of deposits, $8B of which were online retail savings accounts. Goldman s GS Bank had increased its online deposits from individuals to over $12B by June Source: Goldman Sachs 23

24 Goldman thinks digital finance has as much revenue growth potential as FICC This is a remarkable shift in strategy that only materialized in the last three years, and the strategy is still in the extremely early innings of its growth potential for Goldman. Source: Goldman Sachs 24

25 Goldman launches Marcus In October 2016, Goldman formally launched its retail online lending business, Marcus. Backed by the funding advantage of Goldman s balance sheet, Marcus launched and still operates with a single, customizable personal loan product for Prime borrowers (660 credit score and above): up to $30,000 with the promise of no fees and straightforward terms. 25

26 Goldman takes advantage of non-legacy IT architecture Goldman moved from inception to launch of Marcus in 12 months, utilizing existing platforms, open source software, and external APIs including FICO, Twilio, Facebook and Adobe. Source: Harvard Institute for Applied Computational Science 26

27 Marcus SoFi Avant Lending Club Prosper Source: Lend Academy Number of months to $1B in total personal loans issued Marcus by Goldman Sachs vs. select lending platforms Goldman Sachs passes $1B in loan originations in 8 months Marcus reportedly passed $1B in loan origination in its first 8 months and is expected to originate $2B by the end of While data on number of loans doled out is hard to find, Goldman reached its first billion in consumer loans significantly faster than competing online personal loan companies (Lending Club launched in 2007). 27

28 46% of all Goldman jobs are in technology An analysis of Goldman s 2,000+ open job listings by division and business unit confirm its focus on technology and digital finance. As of 9/14/2017, 46% of all of Goldman s jobs were in its technology division. The highest percentage of technology jobs were for platform roles, followed by operations engineering and equities technology positions. 28

29 Takeaways from Goldman Sachs hiring data: Goldman is actively hiring Android developers to enable the creation of its all digital retail bank. Goldman is hiring for roles to build out its own robo-advisory platform. Goldman is bulking up hiring for its Digital Finance unit in the UK. Goldman counts zero public-facing job postings mentioning the term blockchain Goldman is also making a number of engineering hires for its Marquee platform, which provides clients access to its analytics, trading, and data tools. 29

30 GOLDMAN SACHS INVESTMENT & M&A ACTIVITY 30

31 Where do Goldman s tech investments come from: GS Growth Goldman Sachs makes growth-stage investments into software, technology-enabled business services, and healthcare IT companies of $25M or more out of a group within its Merchant Banking division. Goldman Sachs Investment Partners GSIP s venture capital and growth equity group has invested in a number of consumer-facing or B2B2C tech companies globally Goldman Sachs Private Capital Investing Within Goldman Sachs special situations group, Goldman Sachs Private Capital provides long-term capital to growth and middle-market companies investing $20 to $150 million per transaction in the form of common, preferred and structured equity. Principal Strategic Investments Goldman makes long-term strategic investments into fintech, enterprise, and/or market infrastructure companies where it plans to use the technology internally or develop a business relationship. Lending Goldman also provides lines of credit to technology companies including Dropbox, Stripe, MediaMath, and fin tech companies including Nubank, Fundation, and, prior to its IPO, OnDeck Capital. 31

32 $6,000 Goldman Sachs private tech investment participation YTD (9/18/2017) 60 Goldman Sachs participation in tech investments slows down $5,000 $4,000 $3,000 $2,000 $1,000 $ $749 $684 $2,267 $5,110 $2,724 $1, YTD Investment Participation ($M) Deals The chart at left shows Goldman s participation in new and follow-on, enterprise and consumer, private tech investments over the last five years. Of note, Goldman s equity investments to private tech companies fell 29% YoY in Goldman participated in over $5B of tech investment in 2015 including mega-deals to Uber and Spotify. 32

33 Nubank funding history Goldman Sachs bets on Brazil More recently, an analysis of Goldman s investments show it has made a handful of bets in Brazil including CargoX and Metrofit as well as credit lines to Nubank, which provides a no-fee credit card in Brazil. 33

34 Goldman Sachs stays active in fintech investing On the fintech front, Goldman Sachs has consistently ranked among the top two when it comes to private fintech investments among the 10 largest US banks. Goldman has also strayed into fintech categories other banks have not invested in, including real estate investing and insurance. 34

35 Goldman Sachs invests in Neyber Goldman made a notable investment in UK fintech company Neyber, which partners with employers to let employees borrow money and repay through their future salaries. Neyber s cofounders include two Goldman alums, and the company has lent over 70 million since launching in

36 Goldman Sachs acquires Honest Dollar In March 2016, Goldman acquired venture-backed startup Honest Dollar, which offers a digital retirement savings platform and three account options: Roth IRAs, Traditional IRAs, and SEP IRAs. Honest Dollar s niche was in serving gig economy companies and employees including Lyft. 36

37 GOLDMAN SACHS PATENT ACTIVITY 37

38 Goldman Sachs overall patent application activity By date of application, YTD (5/22/2017) Goldman Sachs patent activity YTD 1 Goldman s patent application activity grew from 10 patents in 2009 to over 35 in 2013, with its recent patent activity focusing on internal systems including managing compliance and regulatory risk, structured data distribution, and a general-purpose parallel computing architecture. 38

39 Goldman Sachs granted SETLcoin patent [A] SETLcoin wallet can house a single security or multiple denominations of the same security (e.g., 1 IBM-S SETLcoin valued at 100 IBM shares). SETLcoin wallets may also house multiple securities (e.g., 1 IBM-S SETLcoin and 2 GOOG-S SETLcoins). For example, a single IBM-S SETLcoin may be exchangeable for one or more GOOG SETLcoins (i.e., Google shares), for 13,000 USD SETLcoins, 100 litecoins, and/or for 5 bitcoins. Goldman made headlines in 2015 when it was revealed the firm had applied for a patent for a cryptocurrency settlement system called SETLcoin. This patent imagines a system for trade settlements facilitated by the use of a cryptocurrency which can represent securities such as stocks and bonds and/or other cryptocurrencies such as litecoin or bitcoin. 39

40 Goldman Sachs patent keywords by significance Parsing out key phrases from Goldman s patent applications by year, we see terms like credit index, plurality of security, and target network used multiple times. One of Goldman s most recent patents is for a cyber risk model for determining a network s vulnerability to a cyberthreat based on determining policy-based synthetic tests configured to model the behavior of the cyberthreat. 40

41 LOOKING AHEAD 41

42 Goldman makes less noise about its other motive that the consumer finance business is very profitable, at least in boom times. So while the UK market, like the US, might be awash with the competition, the returns are still four or five times better than those in Goldman s core investment bank, where tougher regulation and some tactical missteps in recent quarters have weighed heavily on profits. Even if the consumer strategy stacks up, though, it will be a while before it makes a meaningful difference to performance. A $2bn loan book is barely 0.2 percent of Goldman s total balance sheet. Goldman Sachs s mystifying entry into UK consumer finance, September 11, 2017 Source: Financial Times 42

43 More fintech M&A to come? A job listing for a strategy role includes among its responsibilities staying current on key trends in the FinTech landscape and keeping track of companies of interest (as potential acquisition or partnership opportunities) and building M&A models for various acquisition targets and working with the senior members of the Strategy team to drive diligence and the overall M&A process. 43

44 cbinsights +1(212)