Pacing is one of the largely unchallenged themes of fintech—new ideas come up every few months that require merchants, processors and issuers to be in an almost constant state of new tech deployment.

But it doesn't really work that way, according to Steve Sarracino.

"The business has become capital-intensive again," said Sarracino, CEO and founder of the Greenwich, Conn.-based Activant Capital. "To build a product it takes time and capital. Once you get the product developed its impact is powerful. You can still alter that product but with an existing customer base."

Steve Sarracino, CEO and founder of Activant Capital
Steve Sarracino, CEO and founder of Activant Capital.

Activant on Wednesday announced it closed its second fund at $129 million, including a large number of endowments and family offices. The fund, called Activant Ventures II, will focus on existing portfolio companies and new investments. About $50 million has already been deployed from the new fund, with longer lock-ups, or periods during which investors cannot sell shares after an initial investment.

That serves a strategy at Activant that increasingly emphasizes longer development times. It also favors companies that may not grow quickly at first, but can weather changing and unpredictable market trends.

This strategy may not fit the current perception that fintech innovation comes fast and furious, but it actually fits a dynamic market better, Sarracino contends.

Activant thus far has invested in companies such as Hybris, a desktop commerce platform that SAP acquired; as well as RetailNext, Celect, New Stand and Turvo.

These companies offer a range of retail and logistics designed to help merchants respond to the different ways in which digital commerce is changing merchant requirements. What's also driving the change in part is related innovation. The wide availability of web-delivered software makes it important to have a product base product that can accept updates, as opposed to a quick hit app, according to Sarracino.

Merchants will need technology platforms at the ready that can tackle staffing needs, payment processing, or inventory management. And the technology will have to do this without knowing a specific use case or automation ahead of time.

"It can take a while to get a product out there, something that's best of breed that you want to hold onto for a long time, from its development [and] launch all the way to its IPO. It takes time to build a company like that. A 22-year-old working out of a dorm can't do that," Sarracino said. "It takes adults working on it a long time. It may look like it came out of nowhere, but in reality we're building factories again."

Newstore, for example, is in the second fund, Sarracino said. Newstore's technology powers device-to-device communication, or using embedded technology and the cloud to allow cameras and mobile readers to communicate. That's designed to power different kinds of payments, marketing and content delivery, rather than a specific IoT play, Sarracino said.

"It's created a full system to enable different phone-to-phone transactions," he said. "It just rolled out, but the underlying technology was actually a couple of years in the making."

The notion that the payments technology market is "wide open," as the CEOs of Visa and Mastercard have said, suggests demand for technology that can serve a broader mission rather than a short-term need for automation.

Every development shop should select a platform and development style based on its flexibility, since up to 80% of the cost associated with any given program is maintenance and upgrades — picking the wrong approach will eventually cost a fortune, said Tim Sloane, vice president of payments innovation and the director of the emerging technologies advisory service at Mercator.

"It's always been important for business leaders to work closely with IT to develop a response to the market that exists today and that will exist in the near future," Sloane said. "Organizations that are spending money now to develop their first mobile solution clearly failed this business planning exercise."

Consider Visa's new ID intelligence business unit, Sloane said. "I'm not taking a position that this business unit will be a huge success, but it is clear to me that Visa executives predicted where the market and technology was going and developed a new business plan and platform to address that vision."

"Investing in secular trends, such as a shift to online or mobile for merchants or a shift to electronic payments for B-to-B is a more product approach," said Trevor Rich, a partner at the private equity firm Lovell Minnick Partners.

"However, the number of new solutions looking to capitalize on these trends can seem limitless," Rich said. "Superior technology is not sufficient alone, particularly with smaller merchants or businesses. Distribution can still make or break a business in those segments."

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