Secret of Building a Successful FinTech Startup in 2016 [Part 1]December 25, 2015    By : Sofia
This is a Christmas gift to you, our readers. To all you lovely people, Merry Christmas and happy holidays!
With the intention of helping the FinTech industry, especially startups, we cover amazing opportunities as they present themselves. Continuing the work, the LTP team has put together a list of the listicles that talks about the steps entrepreneurs should take to succeed in their journey as FinTech startup founders. In this two-part article, we will cover some amazing topics, so don’t miss the second part tomorrow.
- Challenges to take into account
- Understanding the industry trends
- Choosing the right segment
- Understanding the competition
- The right accelerators to join for boosting the chances
- How to get funded
- How to comply with regulations without a lawyer
- Operational efficiency with the right APIs
- Leaders to watch
Before you start, understand the challenges
Do not overestimate customer adoption rates. While busy developing a perfect product, startups usually forget the end-user, which leads to a hard time acquiring customers/users when the product is launched. A very common case is when startups at the end spend more time and resources educating the target audience that this particular product will solve a pain. Instead, startups should be developing a product for it not to be just perfect, but perfect for the customer to solve his/her particular problem. The research stage is time and resource-consuming, but extremely crucial for a successful adoption.
Think big. While a product may be doing great at a certain area, there is no guarantee that it will work the same in other locations. With limited resources and networks, startups usually focus their product on solving local problems. Only a minority is looking into scaling the business to a global level from the beginning. Have a plan in place that makes your company scalable across continents.
Follow smart money. As many startups are either self-funded and/or supported by family & friends, there is a clear gap of smart early-stage money. Looking across ecosystems, angels and early-stage investors with a finance background are scarce. Most startups lack the seed support from experts from the industry that push them to the next level and also help them to overcome the mentioned challenges.
Have a marketing/go-to-market plan. Having a great technology simply isn’t enough; a good marketing strategy is crucial to driving the business forward. Founders get stuck on their product and forget to be open-minded about their business development. Sales will happen if marketing is doing its job.
Study the regulatory side. Depending on the market, it can obviously be challenging to reach out to the right people in banks and regulators. However, startups have to get in touch as early as possible to seek feedback, especially from regulators and see how they can push the regulatory framework. Additionally, there is no point in “disrupting the banks,” rather than figuring out how you can leverage the bank as partner/customer.
Founders will face a variety of other problems apart from the ones we have mentioned. For example, setting focus, KYC, long sales cycles, etc. Challenges may also be specific to the industry and location. However, the talent and complementary skill sets of founders can make the magic.
Understand the industry trends
Trend 1: Shift from business model innovation to technology innovation
In recent years, the financial services market has seen a major disruption wave coming from the FinTech sector. Surprisingly, innovations were brought not by payments experts, but by technology experts and people passionate to utilize technology for a better experience. Innovation is coming from techies rather than business professionals. Companies like Venmo, Square, Stripe, Braintree and many others, without a doubt, have had a great impact on the industries they are operating in. Those disruptors came from a tech background. Nowadays, there is no necessity to be a payments expert to become an innovator in the space; tech professionals passionate about innovation can disrupt the industries they previously had very little to do with.
Trend 2: Identity verification and security represent a major issue
As money transactions become easier and easier with technological innovation, the security issue becomes a major concern. A vast variety of applications allow consumers to move funds with one or two clicks. However, this very ease makes those transactions more vulnerable and makes the identity verification question more complicated than it was before. There is always a balance and a choice between security layers and consumer friendliness. As banks are joining hands to create a powerful network in response to the rise of FinTech, fraud prevention companies and identity verification providers are also joining hands to make seamless experiences as secure as possible.
When it comes to payments, security and fraud protection is one of the biggest concerns among the service providers. JPMorgan released the results of its “Payments Fraud and Control Survey” this year with disturbing results on fraud rates. According to the report, some of the key findings include the following statistics:
- About 92% of finance professionals believe EMV (Europay, MasterCard and Visa) cards will be effective in reducing point-of-sale (POS) fraud
- About 61% believe that chip-and-PIN will be the most effective authentication method in mitigating credit/debit card payments fraud
- Paper checks continue to lead as the payment type most susceptible to fraudulent attacks even as their overall use continues to decline
- Credit and debit cards experienced a decline in fraudulent activity, down from 43% in 2013 to 34% in 2014
The high level of fraudulent activity in the financial sector leaves FinTech with a problem to address. The most important statistic for FinTech as targeted on wireless transfers is the fact that 62% of companies were targets of payments fraud in 2014, among which 27% are wire transfer-related.
Trend 3: Banks took one step back in 2015 to took two steps forward in 2016
In one of our recent articles, “How Banks Are Joining Hands With FinTech Firms to Serve Customers,” we highlighted the trend in the banking sector to collaborate with FinTech startups in order to provide better value to end-customers. The FinTech addiction has spread among the biggest banks in a variety of forms. Industry giants like BBVA, Rabobank, Wells Fargo, Barclays, Lloyds Banking Group, Bank of Ireland, Commerzbank, UniCredit, Credit Agricole, and many others have chosen to set up startup programs to incubate FinTech companies. The market power of banks and assets enable them to invest significantly in incubating innovation.
However, monetary capability is not the only advantage banks have. Access to a large customer pool is a crucial advantage over FinTech startups. The LTP team picked a very interesting quotes from FinDEVr 2015, where the Temenos team mentioned, “Something banks have and FinTech doesn’t, but want, are customers!”
A new way banks are responding to their temporarily threatened dominance—giants of the banking industry are collaborating with each other to regain their power and become a source of innovation themselves.
There are several examples to that, and one of them is Early Warning, a trusted leader in fraud prevention and risk management, acquiring clearXchange, the largest bank-owned digital payments network in the United States. As part of the transaction, U.S. Bank and PNC are expected to join Bank of America, BB&T, Capital One, JPMorgan Chase, and Wells Fargo as owners of Early Warning, pending completion of all applicable regulatory reviews.
In a joint prepared statement, the CEOs of Bank of America, BB&T, Capital One, JPMorgan Chase, U.S. Bank, and Wells Fargo said, “Our customers want the ability to make payments to anyone, in real time, making funds instantly available in the recipient’s bank account. To achieve this, we are combining our collective, bank-owned digital payments network (clearXchange) with our fraud, risk and authentication assets (Early Warning) to further ensure that our customers can send money confidently, securely and in real-time via their financial institutions.” No wonder companies like Payfone (an Early Warning investee company) and Authentify (a wholly owned subsidiary), both now part of the Early Warning family along with ClearXchange, are looking forward to a “collaborative disruption” model in this space, where new technologies become innovations-at-scale by partnering with large FI incumbents.
Another example of the banking industry’s attempt to compete with smaller innovative players is a proprietary mobile wallet launch. For example, at the Money20/20 conference, America’s largest bank by assets, JPMorgan Chase & Co. announced the launch of its own digital wallet called “Chase Pay.” It is scheduled for launch during mid-2016. MCX—which includes retailers such as Walmart, Target, Best Buy and Shell—will be Chase Pay’s premier partner. Chase Pay will be entering the race with Apple Pay, Android Pay and Samsung Pay. Chase Pay is stated to provide a better payments experience to millions of customers, processing 34 million transactions each day on average with Chase banking.
Since Chase is partnering with Merchant Customer Exchange (MCX), Chase Pay will be progressively rolled out to merchants who represent 100,000 retail locations in the US and are already accepting payments via MCX’s express checkout app, CurrentC.
However, MCX and CurrentC have been quite a controversial topic in terms of viability. As more and more players are entering the mobile wallets sector, more questions are raised regarding the future of MCX with its mobile wallet.
Trend 4: Omnichannel experience is important
The way companies used to think about and approach retail marketing is changing. In order to succeed, companies need to reach their potential customers wherever they are and on any device—with the mobile revolution, it is particularly important to be effective through the mobile channel.
Therefore, the retail industry is undergoing a dramatic shift: in-store foot traffic is down, online research is up and smartphones are becoming increasingly important to the consumer’s in-store shopping journey. This change in consumer behavior shifting towards mobile is creating new realities for retailers to operate in.
Recently, we covered the news of Facebook incorporating a “Buy” button for Facebook shopping. The ultimate purpose of the button is to create an integrated shopping experience that is seamless and almost effortless. Facebook has an advantage of being a massive network with the number of active users surpassing 1 billion. It is a huge pool of potential customers for retailers, to whom Facebook is now giving retailers targeted and contextual access.
Trend 5: The FinTech Revolution is global
Total global investments in FinTech almost reached $50 billion this year. The investments map by FinTech Week London demonstrates the most active regions and funds poured into FinTech. The US, Europe and Asia are leading regions where the biggest funds are invested in FinTech. However, it is also clear that new innovation hubs are emerging. Very interesting to see significant investments made in FinTech in Africa and Australia.
Source: FinTech Week London 2015
At a more granular level, the payments sector is particularly worth mentioning. In Q1 2015, the payments sector attracted more than $1.16 billion in investments; 12 companies raised more than $5.6 million in their seed funding rounds of which “Bringhub” raised the highest amount with $2 million in seed funding. Moreover, in the short time span of July-September 2015, FinTech saw $750 million of investments.
A legitimate question may arise about the reasons innovation became borderless and what the implications are.
One of the reasons is related to the trend of innovation coming from tech professionals. Increased technological competition fosters borderless business. Since technological advancements allow companies to operate globally even while being physically located in one country, it increases competition for local companies that did not achieve that stage of technological improvement.
Another reason is the fact that technological innovation is quickly adaptable. APIs offered by FinTechs can allow businesses to jump to another level of efficiency and experience relatively easily. Innovation spreads quickly due to its technological nature.
Global recognition is also an important reason. One of the weaknesses of FinTech startups is the limited network. It forces companies to attend international conferences, events, expos. An example could be the Money20/20 conference, a place where companies have an opportunity to share their technological achievements and innovative products with more than 1,000 CEOs, from 3,000 companies and 75 countries. The conference provides an opportunity to attract the attention of executives that are looking to mine fresh ideas and discover new business opportunities. For the innovators in payments technologies, there is no better place to go global than Money20/20.
Last but not the least is the fact that innovative tech-focused companies now have the capability to compete with local companies globally. Being on the other side of the globe is no barrier anymore. In order to compete successfully with them, local companies have to learn and adopt the experience.
Trend 6: New types of stakeholders are entering the space
FinTech startups were believed to be disruptive and competitive and hence, more interesting to traditional financial institutions like banks. However, this isn’t the situation anymore. Tech companies dominating other spaces started entering the competition for innovation in finances. It is surprising how actively tech giant Microsoft is involved in FinTech with a great variety of initiatives. Google, Intel and others have also demonstrated an interest in FinTech with their active investments. Here are some of the examples of companies in the portfolios of non-financial companies:
Trend 7: New types of partnerships are emerging
Previously, we demonstrated a rising interest from tech giants in FinTech startups along with banks. That interest led to new streams of investments and most importantly, incubation. However, there is another set of players shaking hands with the financial industry in a different way or even competing with FinTech while being in a completely unrelated field at first sight.
Social media and communication giants like Facebook or WeChat realized the power of applying financial transaction features into their extensive social networks. Facebook, intended to be a social media platform to connect millions, saw a great opportunity in adding a valuable feature of money transaction while WeChat, China’s biggest messaging app with more than 600 million active users, announced an agreement which enables WeChat users in the US to send money to 200 countries and territories via Western Union’s Connect platform.
The socialization of money transfers is active from both players—media giants and FinTechs. Venmo leveraged the power of social connections and the value of virtual interactions by opening the opportunity to share personal transactions and react on them within personal networks. Needless to say, Venmo is one of the most popular peer-to-peer payment apps which has processed more than $900 million transactions during Q4 2014.
Trend 8. FinTech 2.0 will be the new FinTech
previously, If startups were thriving to push banks out of the profitable markets with the rise of FinTech, we now see an interesting change both in attitude and strategies. As powerful traditional players indicated a threat, they figured out individual ways to cope with it. As FinTech has to react, it will evolve into FinTech 2.0.
Both banks and FinTechs have their strengths and weaknesses, and both are better off by cooperating and combining the best they can offer to cover each other’s weaknesses. Banks can guarantee rapid scaling with significant funding and access to demand while the FinTech sector can offer the most innovative and efficient solutions for better customer service. An interesting term called FinTech 2.0 is used in the paper recently published by Santander in collaboration with InnoVentures, Oliver Wyman and Anthemis Group called “FinTech 2.0 Paper: Rebooting Financial Services.”
While some FinTechs today are focused on the race to build standalone “unicorns,” FinTech 2.0 represents a far broader opportunity to re-engineer the infrastructure and processes of the global financial services industry in which the top 300 banks command a revenue pool worth $3.8 trillion. To realize the opportunity of FinTech 2.0, banks and FinTechs need to collaborate, each providing the other with what it lacks—be that data, brand, distribution or technical and regulatory expertise.
Trend 9: Lending and payments are the most attractive sectors within FinTech
There is a great diversity among the types of players within the FinTech industry. Therefore, we cannot distribute financial and innovative attractiveness of the overall industry on all players equally. Certain spaces within the FinTech attract more investments and attention than others. The LTP team charted the categories by the size of the investments:
Source: LTP, 11 Insights From Two Years of FinTech Investments
In 2013 & 2014, finance/lending companies attracted a total of $567 million in funds, the largest compared to other categories. Payment rails companies raised $416 million while mobile wallet companies raised $286 million. The LTP team performed a deep analysis of investments made into payments technology companies, which can be found here.
Trend 10: The “unicorns” club is expanding
Starting last year, the space in the “unicorns” club shrank with companies like Stripe, POWA Technologies, Avant, Prosper, One97 and others boosting their valuations far over $1 billion.
Even though the growing number of “unicorns” tightens the competition, it is a great sign. For potential entrants, it indicates an upward trend in the industry that is actively expanding. It validates a real opportunity for young startups to enter the club down the road and a clear interest from investors injecting funds into FinTech and boosting valuations. It is not clear whether the club will be growing at a fast pace in the near future. However, the growing interest from a variety of stakeholders may support the trend.
We have been carefully studying the “unicorns” club to understand the most active sectors and opportunities for new entrants.
Choose the right place
Launching a startup, an entrepreneur can’t go wrong with the choice of location. Funding and growth opportunities quite significantly depend on the region along with other factors.
It is no secret that innovation momentum is not spread equally around the world. There are certainly well-known hubs where innovative solutions are being born the most and find their way up. For FinTech startups and bright entrepreneurs thinking on taking their products and ideas to the next level, there is a limited choice of the world’s hubs.
We have been assessing the concept of borderless innovation before. Barriers to innovation across the world are coming down. Some of the reasons for that are related to the nature of technological innovation itself, which is quickly adaptable. APIs offered by FinTechs can allow businesses to jump to another level of efficiency and experience relatively easily. Moreover, since technological advancements allow companies to operate globally even while being physically located in one country, it increases competition for local companies that did not achieve that stage of technological improvement.
However, the concept is true for a startup that has already reached a certain level and has resources and network to go borderless. For those who seek to fly or fail quickly, there are certain places in the world that will foster the process.
Not being a surprise for anyone, Silicon Valley in California, USA, is one of those hubs. Many FinTech unicorns have come from the Silicon Valley and there are more hot FinTech startups to look out for. Affirm, Stripe, Lending Club, Prosper, SoFi, Square and many more have formed a Silicon Valley unicorns club. A great momentum Silicon Valley provides is related to the vibrancy of the place, innovation culture, established network of companies that can speed up processes. Silicon Valley is a unique place where innovative solutions are getting tested. Consumers are spoiled with technologies as they get to try everything first. However, there is a catch; what becomes successful in Silicon Valley, doesn’t necessarily have the same chance to become successful in other places. The Empire Startups FinTech conference will take place in San Francisco and New York next year to gather FinTech professionals and showcase Silicon Valley and Alley FinTech at their best. It is also worth mentioning that seven out of the 10 best startups accelerators in the US are in California.
New York is the next hot hub where innovation is nurtured. New York was the city to issue the first comprehensive guidelines related to bitcoin and to adopt bitcoin for parking tickets payments. New York is a base for notable investors and companies that are hunting for innovative FinTech startups. Among those are Bain Capital Ventures Managing Partner Matt Harris, who is actively looking for investment opportunities in lending, asset management, trading systems, insurance, etc.
JPMorgan Chase Executive Director of Strategic Investments, Pete Casella is also looking to invest in FinTech startups that are aligned with JPMorgan’s strategy. Market structure, enterprise software, infrastructure technologies and asset management-focused entrepreneurs are of a particular interest.
Maria Gotsch, President and CEO at the Partnership Fund for New York City is also the head of the fund’s initiates such as FinTech Innovation Lab, New York Digital Health Accelerator and NYC Seed. Over $100 million raised by the fund are ready to fuel innovative solutions. Value Stream Labs, FinTech Startups and a variety of other spaces to source FinTech unicorns are based in New York.
London is the European hub for FinTech. Unicorns like Klarna, iZettle, Adyen, Funding Circle, TransferWise, POWA Technologies came from Europe as a proof of a strong standing of the market on a global arena. According to Bloomberg, Tech Crunch and Huffington Post, South East of England is outpacing California on the number of jobs in FinTech along with rapidly growing funds and deals in the FinTech industry. Moreover, Tech Crunch reported that European startups have raised more than $2.8 billion from VCs in Q2 2014, the highest quarterly total since that iconic dot-com bust year of 2001. Clearly, European FinTech is creating a significant wave of competition for Silicon Valley and New York.
It would almost be a crime not to mention the Asian region as it is emerging at an outstanding speed as an innovation hub. One97 and Lufax are unicorns from Asia. India, Singapore, Hong Kong are fueling Asian FinTech and emerging as significant competition globally. DBS, the leading financial services group in Asia with over 280 branches across 18 markets, is slated to invest $7.1 million in initiatives that will support the development of the startup ecosystem in Singapore over the next five years. The LTP team has analyzed over 70 promising FinTech startups across sectors from India to find the hottest ones. Japanese Internet giant Rakuten recently launched its $100-million global FinTech fund to focus on investments in early to mid-stage FinTech startups who are disruptive. The US and Europe will be the primary geographic focus of the fund with particular attention to FinTech in London, San Francisco, New York and Berlin. However, as stated in the press release, the Rakuten FinTech Fund plans to expand operations globally.
Know your competitors
One planning to launch a FinTech startup in Silicon Valley should be aware of the fierce competition he/she will face. We have been looking for examples of some of the most interesting FinTech startups across regions and here are some of them from Silicon Valley, US:
Thhe New York FinTech industry is also extremely competitive with some unicorns holding leading positions in various sectors:
Europe has been actively evolving its FinTech and now has some of the world’s most promising FinTech startups hosted in the region. Following are examples of FinTech companies to look out for in 2016 from Eastern and Central Europe:
Western Europe is also rich on innovators. Some of the examples are:
Recently, we performed an analysis of the FinTech industry in Singapore to find some of the FinTech players in Asia:
Competition from Nordic countries isn’t behind, with highly valued disruptors defining the space:
And, of course, India is one of the countries with a highly competitive FinTech industry:
Choose the right sector
Payments and lending represent the most active FinTech sectors with the highest concentration of “unicorns” and “semi-unicorns” as well as high attractiveness for investors. For new entrants, it may mean there are more opportunities in other sectors, where disruption did not happen at such a deep level. Even though it is hard to say whether lending and payments are overheated already, the high density of those sectors may also imply that there are still great opportunities for new entrants. We have been following the insurance sector and it definitely represents great potential. Insurance is asking for innovations, and endless opportunities lay in the industry that hasn’t been fundamentally transformed in decades. In the near future, insurance technology will see the rise of interest and innovation applied. There are great challenges in the insurance industry to overcome and opportunities to explore.
Another interesting sector not mentioned before is RegTech. A relatively new term, “RegTech” refers to a set of companies and solutions that address regulatory challenges across industries, including financial services, through innovative technology. RegTech solutions are agile by nature due to the complexity and momentum of regulatory transitions. Traditionally, the technology was developed to be robust. However, RegTech can’t afford the luxury to deliver a solution for static requirements—it has to be a self-learning machine.
Another hallmark of RegTech is that it is usually cloud-based, which enables solutions to maintain, manage and backup data remotely, having it secured at the same time. Since RegTech utilizes the cloud, it significantly cuts the costs both for providers and clients. Agility leads to great flexibility and speed, which ensures a high level of control over information. Needless to say, modern cloud-based solutions and regulatory requirements set high expectations from tech companies with regard to security. Data encryption powers the safety of deployed solutions. Speaking of deployment, RegTech technology reduces the implementation time, enabling businesses to remove the pain of complex regulatory compliance and focus on business goals.
RegTech became a hot topic lately with investors looking for interesting solutions in the space. Regulation is a heavy burden on traditional financial institutions often restraining them from fast innovation adoption. Compliance is an expensive and time-consuming area holding back solutions implementation. RegTech has a potential to solve a major problem and become the next FinTech.
Should you join an accelerator or not?
As per some estimates, global FinTech investments will more than double by 2018. The number of accelerator programs, FinTech labs and incubators has also been increasing. The main aim of these platforms is to provide the right resources to entrepreneurs who are aspiring to convert their ideas into reality. Each of these platforms provides the startups with a specific time frame, committed membership, mentorship, and sometimes, capital & development efforts, making the startup concept ready for the market.
If you are questioning an importance to go through accelerators, some examples of leading FinTech disruptors may change your mind.
Large FinTech companies are looking for a fresh perspective by partnering with the best and brightest startups. In the continual pursuit of new ways to better serve their clients, banks are looking to test new initiatives as well as foster innovation. The growing interest in startups (all-time high) and the success of several companies initially based out of FinTech accelerators, labs and incubators means that we will be seeing much more of this in the coming years. Reputation will be important and rightly so.
Which accelerator/incubator/program should you join
Now when there should not be a question about joining an accelerator/incubator, it’s important to choose the right one. We have shortlisted some of the most successful accelerators/incubators globally that are focusing on FinTech startups.
Here is the list of successful accelerators focusing on FinTech startups at an early stage around the world.
Founder Institute (FI) is an early-stage incubator that has established its presence in 45 countries. It runs its incubator programs in multiple cities in the 45 countries. It also claim an 80% success of its startup graduates. Unlike many other incubators, FI takes a fee from applying graduates, profiles them and upon selection for the program, the founder needs to further pay some fees to attend the four-month program. The founders are required to contribute warrants of a certain percentage to the “Shared Liquidity Pool,” 30% of which is shared with the graduates of the particular program. Some of the FinTech startups from this program are Peerby, RealtyMogul and Zipmark.
Startup Weekend, powered by Google for Entrepreneurs, are 54-hour events starting with Friday night pitches that end with Sunday night demos and presentations. It provides a platform for collaboration between like-minded individuals for talks by industry leaders and provides feedback. They have done over 1,500 events in 135 countries covering more than 13,000 startups.
Main Incubator was formed in 2013 and is run in partnership with Commerzbank in Germany. The program works by accepting invitations from startups. Upon selection, the terms and conditions are set for the startups to enter the program. After four to five months of the initial phase where the team starts building their product with the support (VC Funding, office space, and expert know-how) from the incubator, the investment committee reviews the status and decide on further funding.
FinLeap was launched as a FinTech incubator by HitFox in Dec-2014. HitFox was previously involved in building startups in the area of Big Data and Adtech. Savedo, BillFront, Valendo, financeAds, Institut für transparenz, Clark and FinReach are the startups currently in its incubator. They provide development and regulatory support, seed funding, network and finance expertise to the startups.
Mincubator is a Romania-based incubator that focuses on e-commerce and mobile services & applications. The “M” in Mincubator stands for Mediafax Group, a leading media platform in Romania. Though they provide office space in Romania, it is not a necessary requirement for companies to be working only from their office or even the same country.
Yodlee provides Ynext as a six-month incubator for startups. The features that it provides are access to Yodlee platform, guidance & assistance, participation in Silicon Valley boot camps, demo day to present the startup to select investors. Accredify, DRAFT, Evolved Bookkeeping, Fidor US, Roostify, Telito, Voatz are eight startups that were unveiled in their May 2015 demo day.
Eastern Labs lets people build their startups, and upon successful completion, they are spun off the lab to work as a separate entity. However, the members of the labs are bank employees or people hired as employees for the labs based on the idea/prototype they submit to the bank.
Anthemis Foundry is a design-focused incubator of the Anthemis Group, an investment and advisory firm in the financial technology space. The incubator believes in focusing on some chosen projects at one time rather than selecting batches of startups and having a fixed schedule. Some of its portfolio companies are Atom, Azimo, Betterment, Currency Cloud, Fidor Bank, Moven, etc.
Bank Leumi is an Israeli Bank that has made a strategic partnership with Elevator Fund to enable its FinTech companies to work directly with Leumi executives who provide guidance for startups to build their products and also let them use the bank as a beta site.
Innotribe is supported by SWIFT and was launched in 2009. It organizes startup challenges every year spanning EMEA, the Americas and APAC. The 2015 Startup Challenge event was held in London, New York, Cape Town and Singapore. The event was open for both early-stage and growth-stage startups at each location. Winners at each location would be hosted at Sibos, Singapore for the Startup Challenge 2015 Finale. Early-stage startups would be required to pitch their idea to a large audience of decision-makers of the financial services world while growth-stage startups would host exhibition booths and provide live demos for their products. The number of startups that participated at these events has been increasing YoY.
No. of startups that have participated in the Startup Challenge:
Sponsors for the event were HP, Invest Northern Ireland, Level39, Deutsche Bank, Luxembourg for Finance, Wells Fargo and SWIFT.
Tech City UK provides a platform for digital technology businesses to be established in the UK. They provide support for startups, established businesses and budding entrepreneurs. As part of its goal to support new business idea/entrepreneurs, they have a program called Digital Business Academy, in partnership with Cambridge University Judge Business School, University College London and digital skills experts, Founder Centric. They provide the know-how for a digital business that helps one to start, grow or join a digital business. Another program, Future Fifty, supports 50 UK-based companies to scale their business.
The Icehouse is a New Zealand-based organization which is not exactly into providing incubator programs, but they conduct events, workshops and programs that enable SMEs and startups to grow their business into international standards.
While these are some of the leading incubators, the concept of co-creation or co-development is seeing a huge uptick with corporates developing innovation labs or supporting external labs, entrepreneurs giving back to the startup system by developing nonprofit models where startups can look for education or networking.
There is also a wide range of accelerators/incubators from traditional financial industry players as well as more recognized accelerators. We have been looking for some of the most successful ones globally.
The Barclays Accelerator Program is a 13-week program in partnership with Techstars. Barclays provides tools, equipment and facilities for startups. In conjunction with Techstars, they provide dedicated mentorship for select startups and entrepreneurs. The accelerator program was initially launched in London and is now being run at London & New York.
Citibank launched its first accelerator program in Tel Aviv in 2013. The four-month program was run three times and a total of 333 startups have participated in it till date. In December 2014, Citi Ventures partnered as the first Platinum-level Global Anchor Partner for Plug and Play to expand its FinTech Accelerator program to the US, Germany, Singapore and Spain. Citi has also launched “Citi Mobile Challenge,” a virtual accelerator program that combines a virtual hackathon with an incubator and is focused on the APAC region. Participants of the Citi Mobile Challenge are provided with a FinTech accelerator program that includes mentorship and a virtual and on-site boot camp curriculum.
The Wells Fargo Startup Accelerator is a six-month program which is run twice a year. The 2015 event witnessed over 300 applications out of which three startups were selected: Bracket Computing, Context360 and MotionSavvy. Startups who have previously participated in the program include EyeVerify, Kasisto and Zumigo.
Dassault Systèmes has launched its third 3D FinTech Challenge in 2015. The 2015 edition was run in partnership with Deutsche Börse and Invest Northern Ireland as a sponsor. The 3D FinTech Challenge is a seven-week immersive accelerator aimed at providing mentorship to disruptive technology startups in the financial services space.
FinTech Innovation Lab provides 12-week mentorship programs at New York, London, Dublin and Asia-Pacific (in Hong Kong). The global program is run in partnership with Accenture and Partnership Fund for New York City as a sponsor while they also have region-specific sponsors.
Its regional financial firm partnerships are present in:
- New York (Ally Financial, American Express, Bank of America, Barclays, Capital One, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, Guardian Life, JPMorgan Chase & Co., Morgan Stanley, New York Life, UBS and Wells Fargo)
- London (Bank of America Merrill Lynch, Barclays, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan, Lloyds Banking Group, Morgan Stanley, RBS Group, UBS, Nationwide, Santander, Societe Generale and Intesa)
- Dublin (Allied Irish Banks, Bank of Ireland, Citi, Fexco, PayPal, RealEx, State Street, Ulster Bank)
- Asia-Pacific (Bank of America Merrill Lynch, China Citic Bank International, China Construction Bank, Commonwealth Bank, Credit Suisse, Goldman Sachs, HSBC, JPMorgan, Maybank, Morgan Stanley, Standard Chartered and UBS)
QC FinTech Lab provides a 12-week intensive accelerator program with mentors from Bank of America, Wells Fargo, Experian, etc. in addition to 12 months of free office space. The lab is based out of Charlotte.
Techstars provides location-specific and function-specific accelerator programs. It also partners with other global accelerators to provide its expertise (Ex.: Barclays London Accelerator). While it is not a pure play FinTech accelerator, they do host a lot of FinTech companies as part of their larger portfolio. (Ex.: The Gone App, AppInside, Stagelink, Localytics, etc.). Some of its local sponsors are SAP, TaylorWessing, Lowe’s, Todd Walsh, TriNet, Baird, Kurtz Fargo LLP, Bryan Cave, Kendall Koenig & Oelsner PC, Foley & Ladner LLP, CBRE, Pritzker Group, Hyde Park Venture Partners, Lakewest Venture Partners, Fried Frank Technology, Google Cloud Platform, Orrick, Foley Hoag LLP, etc.
Startupbootcamp provides accelerators in multiple fields; the Startupbootcamp FinTech Accelerator is one of them. It is hosted in London and Singapore for a period of three months. They have global and local sponsors for their events. Here are the sponsors for the local FinTech event:
- London (MasterCard, Lloyds Banking Group, Rabobank, PWC, Intesa Sanpaolo, Route 66 Ventures, Arvato Bertelsmann, Halifax, Bank of Scotland, MyOrder, Cognito, DLL Financial Solutions Partner and MJ Hudson)
- Singapore (MasterCard, Route 66 Ventures, Intesa Sanpaolo, Infocomm Investments, PWC, Jungle Ventures, Estellion, Pix Vine Capital and DBS)
Level39 is one of Europe’s largest technology accelerators for finance, retail, cybersecurity and future cities technology companies. It was launched in 2012 with the aim to be the largest accelerator for the FinTech space. Recently, UBS had opened a innovation lab at Level39 to focus on blockchain and FinTech innovations. It has 513 individual members, of which 52% are from the UK. The 122 company members in the FinTech space divided as follows: Data & Analytics: 42, Payments: 25, Crowdfunding: 25; Banking Solutions: 13; Trading: 9 and FX: 8.
Y Combinator is a seed funding organization which invests small amounts in selected startups. They run two cycles every year, once from January-March and once from June-August. The three-month event ends with the demo day where startups present to an audience of global startup investors. While this is not a pure play FinTech accelerator, among the more than 800 startups that it has funded since 2005, around 7-8% (~60 companies) are from the FinTech space.
While the names mentioned above could be considered as large players in the FinTech accelerators space, there are a growing number of firms that are providing accelerator programs as a part of their overall portfolio. These programs also concentrate in providing mentorship, funding and accelerate startups from multiple fields while FinTech constitutes a part of their overall program.
Here are some accelerators (FinTech-focused and general) that one needs to take note of:
500 startups, AngelPad, Anthemis, AWI Ventures (reports suggest that the parent group AWI has stopped its support for the accelerator program. However, the founders have started H2 ventures to continue investing in FinTech accelerators), Bright Bridge Ventures, Chinaccelerator, FinTech Circle, Fusion (recently formed Swiss-focused FinTech accelerator), FinTech Sandbox, Holland FinTech, Matchi, PlugnPlay Accelerator, SeedCamp FinTech, Six Thirty, Visa Vision and Wayra.
Look out for the part two, where we will be covering the following topics:
- How to get funded
- How to comply with regulations without a lawyer
- Operational efficiency with the right APIs
- Leaders to watch
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