Fintech Payments

Early stage fintech startups could benefit from better advice

Early stage fintech startups could benefit from better advice. Image: Freepik
Written by Tony Craddock

Tony Craddock highlights the importance of getting the right guidance when you’re starting out in fintech, and avoiding a premature industry exit.

London is bursting at the seams with fintech startups aiming to be ‘the next big thing’ and to disrupt the status quo. Yet, those who have actually made it are few and far between. Why is this? There’s certainly no shortage of good ideas, and there are plenty of incubators and accelerators to help with tricky early stage funding and growth. We should be seeing London-based businesses flourishing and taking on the world; with ideas, innovation, and investment in UK fintech, there should be more global success stories.

Clearly, the answers aren’t simple. Global competition isn’t easy, and being a star in your own incubator is completely different to taking on the rest of the world. Those companies who are potential clients of these startups are notoriously wary of new solutions and can be extremely slow to adopt. Plus, finding the right people to help turn a vision into reality is challenging at best. These issues, however, are the same as those faced by companies of all sizes and aren’t particularly specific to startups.

Becoming part of an industry takes time, and getting to know the right people takes even longer
The biggest challenge as an early stage company is getting the right contacts and relationships needed to do business. Becoming part of an industry takes time, and getting to know the right people takes even longer. While generic business advice is useful, industry-specific advice, and help that experienced practitioners provide, is invaluable and can be a key factor in accelerating the growth of a company. Many early stage companies have access to people who can help them put together business plans for funding, or for legal and tax matters, but what about those who can provide advice about how their industry will be affected by new regulations? Or how technology needs to be adapted to the way the industry works? Or about arranging a friendly chat with a prospect of the future?

As an example, fintech is the fastest growing startup sector, and within this, payments is the fastest growing sub-sector. Over a third (18) of this year’s Fintech 50 are payments companies. Azimo recently raised $20m in funding, and WorldRemit raised $100m in February. An EY report valued the UK payments sector at £10bn, yet we’re not seeing an accelerator or incubator that offers specialist payments expertise.

Payments in particular is a highly complex industry, where working with the right people is too important to simply leave to chance. Should an early stage company really be happy receiving advice from the same mentors who advise a fashion company or a news aggregation service?

Built to exit, not to compete

While advice is important, the mindset of entrepreneurs also has to change. The scene is awash with companies seemingly set up with the sole aim of exiting to the highest bidder; the ultimate goal being to obtain a billion-dollar valuation; to become a unicorn. Investors and potential acquirers are falling over themselves to find these companies and, understandably, entrepreneurs are keen to give them something to invest in. There are now 36 fintech unicorns in the wild. This is up 25 from 11 over the last year.

Surely the idea is to create something that has actual value and a purpose other than to create billionaires
It’s tempting to start a business and work to get the highest valuation you can before selling off. VC firms are happy to take a cut of the final sale, and acquirers are equally happy to buy innovation without having to spend R&D money themselves. But is this what starting a business is all about? Surely the idea is to create something that has actual value and a purpose other than to create billionaires. Would we be in the same place if, for example, Larry Page and Sergey Brin had sold Google to the highest bidder?

Not everyone is going to be a Google, but if businesses are built to exit rather than compete, then no one will. There’s a huge opportunity here to help nurture the current crop of early stage companies by making them a part of the community, providing them with specialist advice and insights. Perhaps providing early stage companies with specialist advice is the key to mindset change, so rather than being told to build value until an exit becomes possible, advice from industry specialists could help early stage companies to see the bigger picture.

I believe that advice from those who have been there and done it before is the crucial difference between a company either rewriting the script, or being consigned to the footnotes of fintech history.

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About the author

Tony Craddock

Tony Craddock is director general of the Emerging Payments Association (EPA) and a serial entrepreneur. He is passionate about helping companies succeed in fast-growing markets such as payments, and believes that being part of a community 'allows us all to be part of a powerful catalyst for growth and payments innovation'.

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