How to Play the FinTech Game Like a Pro
Hard won tips from FinTech Sandbox alumni on product development, leadership, and raising money
Written by Tatiana Urban | FinTech Sandbox
The FinTech marketplace is reinventing almost every aspect of financial activity, from payments and lending, to institutional investing and financial security. FinTech Sandbox residents and alumni are driving this change through innovative machine learning, accelerated Platform as a Service, quantitative analysis, and socially conscious retail investment products, to name a few. Behind the scenes, Sandbox residents and alumni are navigating a competitive FinTech landscape. We caught up with a few of our alumni on entrepreneurship, growth, and why FinTech will change the world. Here’s some tips and tricks from the pros.
Be organized. Use what’s at your fingertips.
Obtaining access to quality, high volume data can prove exceedingly challenging for FinTech startups. The hefty costs associated with data access weighs heavy on startup’s already tight budgets. FinTech Sandbox provides FinTech startups with free access to data and an organized process of collaborating with data providers, helping to ease cost and access barriers for early stage ventures.
As Sandbox Alumnus Zac Sheffer, Co-Founder and CEO of Elsen points out, creating an organized process of collaboration with FinTech Sandbox Data Partners is the foolproof way to get data quickly. “Try to push as quickly as possible. This means having all your data needs as organized as possible before your first meeting and ensuring that you have the internal resources to utilize the data as efficiently as possible. I’ve found that data providers tend to be less aggressive in their marketing tactics when you have the introduction of the Sandbox and are more supportive. When you are well organized and present a collected front, data partners tend to engage more enthusiastically and get excited about your product. If you want them to help you, you have to be prepared and proactive.”
Six months residency in FinTech Sandbox goes by in a heartbeat. Assessing different products, integrating data and running tests requires a well caffeinated engineering team and a nimble ability to leverage the FinTech Sandbox community. “One of our takeaways from the Sandbox was how we can be faster and more efficient with our use of data. You have to leverage the Sandbox community to gain knowledge about how to approach and evaluate the data that’s available, so you become as efficient as possible with the process,” says Sandbox alumna Michelle Bonat, Co-Founder, and CEO of Data Simply. Part of what makes FinTech Sandbox unique is the collective effort of residents to build shared resources to increase efficiency in data integration. Project Sandcastle, the FinTech Sandbox GitHub repository for non-proprietary code and APIs is a handy tool for working with the diversity and volume of datasets made available through the Sandbox. Along with six months of pedal-to-the-metal integration and testing, Sandbox residents develop non-proprietary code on an assigned data partner for other members to utilize. Sandbox slack channels buzz with chatter on whether an improved Thomson Reuters API should be posted, or where to find parsing code on CME Group’s Market Depth product.
Everyone needs a break from the computer screen. FinTech Sandbox’s community events, from educational webinars to Demos Days provide critical opportunities for residents to network, learn, and hone their pitch. FinTech Sandbox’s bi-annual Demo Day provides selected residents the opportunity to gain international visibility and engage the FinTech community with their product. As Michelle points out, Sandbox events offer residents ongoing connection with the community, creating collisions with potential partners, beta testers, customers and investors. “We presented a free version of our product at FinTech Sandbox Demo Day. What was extremely valuable to us was follow-up participation in the Startup Showcase during the subsequent Demo Day to talk to people about the iterated paid version of our product. This allowed us to continue some old discussions and start some new discussions with members of the community. It proved very valuable to us in building a relationship over time with one large financial institution in particular. Coming back and being part of that Showcase was actually quite terrific,” says Michelle.
Know your product, know your marketplace.
Ravi Balasubramanian, FinTech Sandbox Alumnus, CEO and Co-Founder of AlphaPack describes that effective market evaluation is pivotal to building out a durable technology, “While the FinTech space is growing very rapidly, a lot of business models are still unproven in terms of overall economic value. FinTech is different from other verticals in that there is a lot of incumbency pressure and it’s harder to dislodge incumbents. As an entrepreneur, you need to think carefully about how your business model is going to survive an incumbent, and if your technology is really differentiated enough where an incumbent can’t just deploy their own developers to replicate what you’re doing.”
FinTech Sandbox’s diverse community of investors, beta testers, mentors, entrepreneurs and data providers played a significant role in AlphaPack’s decision to pivot. “Early on, we realized our business model did not capture our intended audience, and we had to pivot out of it. Being in the Sandbox helped us to realize this much faster. The FinTech Sandbox team guided us in terms of how we should evaluate a new opportunity, how we should evaluate working with different data partners, and made important introductions on our behalf.”
To stay alive, test.
Testing, whether it be backend algorithms, alpha product, user interface, business model, or fundraising strategy, is integral to the success and longevity of a FinTech startup. The development of Elsen’s Accelerated Computing Engine provided Zac key insights into the importance of testing. “Testing. Do it. It’s one of the most valuable things that we could do as an enterprise facing FinTech startup, even though no one wants to do it because it is very time-consuming. Test at every level, including data level tests and programmatic level tests. Make sure your platform is extremely user-friendly. Make sure your interface gives users a simplistic and straightforward application. As an enterprise facing startup, we had to gain the trust of established firms in our platform, we achieved this through extensive testing.”
Ravi suggests that researching and testing a business model must start before product development. “Everyone hopes to use an agile development business model, but you need to think about entry friction in FinTech. Think about how you intended to develop the leading FinTech experiment if the feedback cycle is 6 weeks. How can you use agile development methodology if you need a $100,000 security audit before anyone can try your software? I would encourage every FinTech entrepreneur to think about these challenges before immediately jumping in to build a product.”
Raise the dough.
“One of the biggest mistakes I have made as an entrepreneur is not raising more capital at the points when we should have,” says Zac. In a highly competitive and crowded vertical like FinTech, raising capital requires a diligent and creative approach to networking. “FinTech startups are always strapped for resources. Having the ability to bring on more people and expand our marketing initiatives would have been extremely helpful early on. Simply put, raise as much money as possible. Conduct at least five meetings per day with different potential investors, if you’re not doing that, then you’re not fundraising. Always is the right time to start raising venture capital,” says Zac.
Factoring in early stage revenue generation, Ravi describes that the challenge of fundraising lies with creating bandwidth in day-to-day operations. “We were lucky enough to generate revenue and invest it back into our business. It is incredibly, incredibly difficult to raise money. From my experience, it will require someone senior on your team to devote almost all of their time to it. As an entrepreneur, you must ensure that you have the bandwidth to continue working on your product while someone on your team focuses entirely on fundraising.”
Build an A team.
With thousands of FinTech entrepreneurs in the US alone, you’ve likely heard a lot of chatter about what makes a successful business leader. FinTech Sandbox’s 45 startups are driven by founders navigating the FinTech space with vision and dexterity. Ravi suggests, “Be persistent, surround yourself with people who are smarter than you, harder working than you. You will have tough days, you need to be surrounded by people you trust to get you through those days. You need to invite skepticism and use it to hone your product.”
In addition, startups face a unique challenge in hiring and recruiting talent. As Zac explains, “The people that you are looking to hire at a FinTech startup could easily go out and get a steady job at an established firm, so you must create excitement and motivation among your employees, and make sure that they’re excited about the vision of the company. The role of the CEO is often described as having one eye looking down to ensure that all the details are being accounted for, while also having the big picture perspective.”
Don’t forget why you showed up.
Anyone in the space can attest, innovating in a vast financial marketplace spanning the globe with millions of big name players isn’t breezy. The opportunity to leverage a colossal amount of data, coupled with the possibility of hitting the jackpot makes for a competitive environment. A deep commitment to the promise of financial technology help our residents jump out of bed in the morning. “Though some people want to deny it, money is the one thing that is consistent across all societies, and there are really no other industries where the aggregate market size is a couple trillion dollars a day. It’s really exciting to be in a space that is so important because it is fundamental to all of society, every day. In some ways this industry is so cutting edge, yet in other cases it is 35 years behind. The applications that FinTech Sandbox startups are building with this data can be deployed anywhere in the world. To think about the impact these new financial technologies can have around the world, the impact is astronomical,” says Zac.
This is not all. FinTech Sandbox residents have a lot more advice to share. If you’d like to engage with these entrepreneurs, or learn more about FinTech Sandbox resources, join the conversation.
Originally published at fintechsandbox.org.