Ex-T Rowe Price stockpicker Ellenbogen makes first solo deal
Henry Ellenbogen’s venture buys into payment services company Rapyd
Former star T Rowe Price stockpicker Henry Ellenbogen has made his first deal since setting up a company earlier this year, investing about $40m in Rapyd, a service company for the cross-border payments industry.
Mr Ellenbogen left T Rowe Price at the end of March, relinquishing control of its storied $26bn New Horizons fund to set up Durable Capital with several former colleagues. The new venture was backed by the University of Michigan and Allen & Co, the boutique investment bank with deep ties to Silicon Valley.
Under Mr Ellenbogen — dubbed the “boy wonder of Capitol Hill” when he was an administrative assistant to a Florida Congressman at just 20 — New Horizons was one of the best-performing mutual funds in the US. Focused on smaller companies, it was a prominent early investor in private companies such as Twitter and Grubhub.
Durable Capital is ploughing a similar furrow, with its first investment in a private, fast-growing technology company. Rapyd provides support for payment services and ecommerce merchants around the world, aiming to capture a slice of a market estimated by McKinsey to hit $3tn in the next five years.
“The mobile revolution is real and compliance requirements are going up,” Mr Ellenbogen said. “Rapyd is going to . . . enable the Ubers and Facebooks of the world to conduct ecommerce with people that would normally fall outside of that world.”
Rapyd raised $100m in October from investors including venture capital companies Oak HC/FT and General Catalyst, hedge funds Tiger Global and Coatue, and Stripe, the digital payments company.
Durable Capital could not join that “series C” round as its fund had not closed yet, but Rapyd allowed it to make a follow-on investment once it could do so.
Arik Shtilman, co-founder and chief executive of Rapyd, called Mr Ellenbogen “one of the best technology investors of the century”, adding: “His name means a lot but it’s not just that . . . He and his team have amazing knowledge and networks.”
Durable Capital is set up to invest in both public and private companies, a trend that has grown dramatically among many big mutual fund groups such as T Rowe, Fidelity and Hartford. However, the risks of betting heavily on non-traded companies with unrealistic valuations have become increasingly apparent this year.
Fidelity recently had to mark down the value of its investments in WeWork and ecigarette maker Juul, but the most dramatic example is the downfall of Neil Woodford, whose strategy of loading up on riskier, private companies turned sour when performance spluttered and investors yanked their money out.
Rapyd is focused on building up its global footprint and is currently lossmaking. Mr Shtilman said there was a change investor tone, in the wake of what he calls “the WeWork incident”, when the company did its latest funding round this autumn.
“It was pricklier,” he said. “We knew we had to show a clear pathway to profitability.”