Citigroup
Vanessa Colella joined Citigroup in 2010 after stints as a public school teacher and as a consultant with McKinsey.
- Business Insider recently sat down with Vanessa Colella, the head of Citi Ventures and chief innovation officer for Citigroup, which has an $8 billion annual technology budget.
- We discussed the firm's internal incubator, D10X, Citi Venture's criteria for investing in startups, why the bank tends to team up with its portfolio companies rather than acquire them outright, and what she learned as a science teacher that she uses in managing innovation at Citi.
Vanessa Colella took an unorthodox route to big banking. She arrived on the scene at Citigroup as a marketing chief in 2010, just as thousands of others had fled the industry or been cut amid the financial crisis.
Colella, who studied molecular biology at the Massachusetts Institute of Technology, started her career with Teach for America in its inaugural year as a junior-high-school science teacher in Brooklyn, New York.
After five years on the education front lines, she earned her master's degree in education at Columbia University, and then it was back to MIT for a doctorate from the university's media lab. That involved conducting research on AIDS education in the late 1990s, building wearable computers and flying them around the world, and "running large-scale human simulations of disease transmission," she recently told Business Insider.
Her corporate turn came in 2001 at consulting giant McKinsey, where she became a partner in the tech and media practice. After stints at Yahoo and in venture capital, Citigroup came calling, putting her in charge of North American marketing when the bank was overhauling just about everything.
Colella took over the firm's corporate venture investing operation in 2013, and in 2017 she was named the head of Citi Ventures and chief innovation officer for Citigroup, which has an $8 billion annual technology budget across the bank.
Her tasks include fostering innovation internally among the 200,000 employees spread across nearly 100 countries, which has led to home-grown creations like Proxymity, a digital proxy voting system.
It also means overseeing Citi's investments in outside startups, which, unlike some competitors, the bank tends to team up with rather than acquire - like Feedzai, an AI-powered fraud-detection company.
We recently sat down with Colella to discuss the firm's internal incubator, D10X, Citi Venture's criteria for investing in startups, why the bank tends to team up with its portfolio companies rather than acquire them outright, and what she learned as a science teacher that she uses in managing innovation at Citi.
Interview condensed and edited for clarity.
How did D10X, Citi's internal incubator, get started?
It was born out of the idea that entrepreneurs have great ideas about how to change the world, and we embrace those. Our employees often have great ideas about what they could do that was just simply better for our clients, but because we live in a world of low volatility, repeatability, and predictability, as a global bank there wasn't really any logical place for people to take those ideas and test them. So we created D10X about three years ago, to essentially create an internal incubator that allows people to bring their ideas forward, to test them.
At any given time at Citi, we've got more than 100 internal startups, so hundreds of teams of employees who've had ideas about what they can do to serve clients better.
How does Citi encourage employees to work with D10X, and how do you cultivate ideas into real products and solutions?
Ideas come to D10X in a variety of ways. Sometimes people just have an idea. You're out for a run in the morning and you have an idea. But what is often misunderstood about innovation, whether it happens in startups or big companies, is people focus on the initial idea. And in fact the initial idea can be the easy part and figuring out how it needs to be shaped over time is much harder.
We host sessions at Citi called "Think Big" sessions, and they encourage people who have kind of nuggets of ideas, or just are interested in innovation, to come and to participate in a multiday session around one of these themes.
What we learned about doing that is it's critical in those sessions to not just have people who are client-facing, but have people from our control functions. Legal, compliance, risk - have people from our operations and technical teams. Because the best ideas are not an idea that you or I have out for a run in the morning; they're ideas that get put in the cauldron of lots of different people with different perspectives about how you could shape that, and taking that forward.
We've learned over the years how to be a reasonably wide net for initial ideas that people have, but then to help kind of craft them and validate them with clients over time.
Often we'll have clients in these sessions, where we're getting real-time feedback about "Is this interesting? Would it be better if it looked like that? Does it meet your needs more this way or that way?"
I think of it kind of like going to the eye doctor. "Well, what's better? A or B?" And you get a little bit closer, then they try again, "What's better, one or two?" You're constantly trying to evolve these ideas to be better than what they were before. That's a lot of what the process is of those sessions, and it doesn't end there. It kind of starts there, and then these teams get coached over time in terms of deeper engagement with clients, deeper validation, and then only after that validation, starting to build solutions and figure out what they might bring to market.
How does Citi Ventures decide which companies to invest in?
When we invest at Citi, we're looking for companies that have product-market fit. They might be very early, seed-stage companies, or they might be Series B raises, but they've got product-market fit. In many ways, our portfolio companies have already gone through that kind of process where they had an idea, they went out to market, they tried to figure out "Was this quite right or not?" And they've landed on that product-market fit.
At Citi, we're not interested in building everything ourselves. We see a huge opportunity to push financial services forward and think there's great talent within Citi and great talent outside of Citi.
When we think about what we want to invest in, we've been very stable over time in those categories, the focus areas, where we look at fintech, commerce and payment, cybersecurity, machine learning, and customer experience. In many ways, that's kind of the lens that we look through investing in.
So they might be focused in fraud or cyber, like a Feedzai. They might be focused in customer experience, like Hopper.
Why do you think investing in and teaming up with small fintech companies is the best approach, versus outright acquiring them, as some large banks have done?
We invest because we're trying to help entrepreneurs scale their businesses efficiently and effectively. I'm a former biology teacher, so I think in a lot of biological metaphors. We think there's this frontier - it's almost like an ecology. Things are moving forward, and it's both startup companies and incumbents that need to move forward together. Helping these companies scale both helps them and ultimately helps us and the financial-services sector to move forward.
We've explored a lot of different ways of interacting with startups. We believe that it's critical to not just be watching startups, but to actually be in the game with them. We all said, it's not enough to even get front-row seats. You have to actually suit up and be in the game. You might not always make your shot, but you've got to get in there and play.
They're looking for not just money - they're looking for how do they work with these large multinational global companies who cover so many sectors, and that's a place where Citi has a lot of experience. Not just experience with ourselves, but with the Global 2000, who we bank, and the 90-plus countries we operate in.
What we've found at Citi is that we can be most helpful to entrepreneurs after they've gone through that initial phase and they really know what product, what service they're trying to bring to market and why it's better, and we can help them accelerate that. Everyone has a different formula, but that's how it works here.
We think it's really important to be on the same side of the table. It doesn't mean that we'll never acquire them; it means that we haven't historically, and that our driving force is helping these entrepreneurs realize their vision. Very few entrepreneurs found their company with the idea that what they really want to do is sell. Most entrepreneurs found their companies with the idea that what they want to do is change the world.
Very few entrepreneurs found their company with the idea that what they really want to do is sell. Most entrepreneurs found their companies with the idea that what they want to do is change the world.
When fintechs and banks work together, often the onboarding is filled with red tape. How do you avoid having this small, agile fintech that's working with a big corporation like Citi spend six months just making sure it jumps through all the necessary hoops?
Sometimes these queries get framed more as, "Well, gee, it's too bad that the small company has to somehow go through all this stuff to work with the big company," but in my mind, that mismatch really speaks to strengths of both.
The strengths of the small company - to your question - are that it can move quickly, it can pivot really quickly, it can add features, it can disable features, figure out what works. The strengths of the big company are 207 years of relationships with our clients and a global footprint, and worldwide distribution, and a security system that has been invested in for many, many, many decades.
We view our role as not it's good or bad, big or small, but how do we bring these two things together. And, yes, it can be challenging to work with a global bank. You've got to go through a set of onboarding processes that you could view as onerous. At the same time, you can view it as the test of whether your small startup has the mettle to participate in the global financial system. Can you get through the sort of security tests that we require to deploy something for our clients?
Often, with the help that we give companies in working with a company like Citi, it gives them an opportunity to mature their systems to the extent that they can then work with large global players. That doesn't make it easy, but what we try to do at Citi Ventures is bring together the strength of small, fast-moving, highly experimental, with large, broad business, deep distribution, and see what we can make out of both together.
Why would an entrepreneur decide to work with Citi Ventures versus a traditional VC or another corporate investor?
The great thing about being an entrepreneur right now is that there's a lot of capital, and so we've taken an approach for many years at Citi Ventures that it's not about the check. If an entrepreneur's interested in capital, that's great. But we probably wouldn't be that person's first stop because he or she is looking for something very different. It might be a very early-stage company.
Entrepreneurs work with Citi because they're interested in either thinking about the same kinds of problems we're thinking about, or working with a large financial institution to serve a very broad client base, or because they're interested in expanding into multiple countries, and we've got experience with regulators and multiple jurisdictions around the world, and we can help them expand.
So, it's not even always a one-to-one match in terms of they want to work with us and with our clients. Sometimes it's knowledge that we bring to the table that's hard for them to get someplace else.
I think entrepreneurs have both the luxury and the pain of having money available in lots of different places, and it's not an easy landscape for them to navigate.
As Citi's chief innovation officer, how do you measure success for the businesses you manage?
There are two really important components, but I think about it a lot in respect to innovation, and this would be true whether we're thinking about external companies or what we do internally.
The first is delivery. We have to get things in our clients' hands that make our client experience better. Ultimately, innovation can't be just a fun thing that we talk about. You have to actually deliver stuff.
Ultimately, innovation can't be just a fun thing that we talk about. You have to actually deliver stuff.
And that's important for two things. One, it's important for driving client experience, and, two, it's important for the other thing that we measure, which is it's important for continuing to evolve the culture of the bank.
We think of delivery as creating primary value in terms of what we get into clients' hands and secondary value in terms of showcasing or shining a spotlight on what's possible, so that as employees think about what they could do differently, what they could do better for clients, they have examples that they can say, "Oh, we did this or we did that," and so it engenders a deep-seated belief across the employee population that they, too, can make change and make positive momentum in terms of what we offer our clients.
So we think about measuring delivering, and we think about measuring impact in terms of culture. When I talk about D10X, I talk about the number of startups in the pipeline that are going to launch, and I talk about the thousands of employees who have been impacted by being part of a "Think Big" session, or being founders themselves of a startup.
How do you know when to pull the plug on what turns out to be a bad idea or something that is maybe too far ahead of its time?
When do we know when to kill something? The awesome thing - I'll just take D10X as an example, but we apply it over all sorts of things - is that historically in big companies, when you kill something is kind of some combination of relationship and how much money you've already invested.
In D10X, when you kill something is entirely done on the basis of, "Is it validated in the market or not?"
Our employees will come to growth boards - growth boards are our version of kind of "Shark Tank" or "Dragon's Den" - and they'll say, "It's with a heavy heart but a strong conscience that I recommend that you kill my project because here's what we learned when we went outside the building and worked with our clients and cocreated with our clients: They don't really need this." And those employees will come back later with another idea and do something else.
So D10X takes the relationship and the awkwardness that sometimes happens in an organization about you don't want to kill an idea because you feel bad about that particular person, and it separates the person and the idea. This person could be terrific, and we want you to come back with your next best idea, but that particular idea wasn't something that was going to get market traction.
So it has enabled us to create a different discipline about how we push some things forward and pull things back, based upon as objective a view as we can get, outside in, rather than some of the subjectivity that sometimes creeps into decision making.
Is there a lesson or skill that you learned as a school teacher that you apply today to your management role as CIO?
Hundreds. I'll give you one: Never claim you know something you don't. The world moves very fast. We do not live in a world where you need to have all the answers. We live in a world where it's much better to know how to ask the right questions. Pretending that you have all the answers will only, even as a teacher, get you into a very bad spot.
