How we helped a hundred young entrepreneurs create seven investible businesses in under two hours
Following our first ‘Future of Fintech’ event, we wanted to share some of our insights on creating investible business propositions at scale. We held the event in conjunction with Founders of the Future, the invite-only community of tomorrow’s leading tech founders. We put this young group of potential entrepreneurs under pressure to create a host of new ideas, and turned those ideas into great pitches in just an hour and a half.
If you’re not already familiar with Founders Factory, below we talk through the process we use in our incubator program to create new businesses. We shared this methodology with the over 100 rising stars Founder of the Future have identified as having what it takes to found and lead tomorrow’s major technology companies.
Part one: The Problem Statement [30 minutes]
When coming up with new startup ideas at Founders Factory, we start our search with a theory, around which we define customer segments and problem statements. We then try to validate the problem statements by running controlled experiments, talking to stakeholders, interviewing our corporate partners, finding companies active in the space — anything we can do to give us confidence that we are making the right assumptions. At this stage, we have not settled on a solution to the problems, though we may have some hypotheses. When we move later in the process, we can test these solution hypotheses, once we’re certain that the problems and customer segments are correct.
Given we only had an hour and a half of “brainstorming time” in our session, we compressed this process somewhat; by giving thematic inputs, and by skipping the validation stage. Each future founder was put into one of fourteen teams, and challenged with creating problem statements around a set of pre-defined themes. I briefly introduced each theme, culled from our constant conversations with our corporate backers, from the problem areas we identify in our internal brainstorming, and from the trends that we see in the overall market for financial products and services. Teams were free to come up with their own theme, or choose from one of the following:
- Making the behavioral economics of peer-to-peer insurance work
- Identity and trust across borders
- Financial planning as a broader family
- SME / freelancer financial services
- Education savings in emerging market
- Personal or business cyber insurance
- Fractional ownership of housing
- Tech enablement of the barter economy
- Open APIs/ financial services as a service
Members from our twenty-five person strong product development team were on hand to help them to identify problem statements and customer segments, to choose the most promising of these problem statements, and to come up with a number of possible solution hypotheses.
Part two: The Detail [30 minutes]
Next, groups were challenged to choose one idea to take forward based on customer segments, market size, differentiation and technical feasibility. Again, we were jumping over the typical validation that we would try to do in the interest of time. But gut instinct certainly plays a role in selecting the right idea to pursue, and we encouraged the teams to just make a decision on which idea to go with.
By the end of this second session, groups needed to complete the ‘opportunity framework’ that we use at Founders Factory to collect our thinking around an idea. This encompasses the most important parts of a business model canvas, but focuses more on the pieces that are relevant to product development at such an early stage. Later we may use the business model canvas or other tools to further deepen our thinking around an idea, once we are developing a specific solution.
Part three: The Pitch [30 minutes]
After a quick break, teams had to really crack on with creating a single pitch for their business proposition. This was not just any pitch — it had to be a short two minutes, and it had to convince our Fintech judges that this was the best idea to take forward based on its market size, customer segmentation, feasibility, and defensibility of the solution. The Fintech judges were executives responsible for the digital strategy of institutions such as Lloyds Bank and Aviva — lest you think there was no pressure!
Creating a pitch is not that easy, so we were on hand to advise the teams. I find the key to pitching is telling your solution in terms of a story or user journey. This helps both clearly communicate the problem being solved for whom in what way — but it also allows you to frame the answers to questions in terms of that narrative, which can help impress your skeptical judges.
What the teams didn’t know is that the Founders Factory team members were also selecting the best propositions from the groups, whittling the count from fourteen teams to seven based on the criteria mentioned above. This was important mostly so that we could complete the pitches in half an hour, not an hour and a half! There was networking to get to, so you’ll understand our sense of urgency.
So who came out on top? Here were the final five:
- ‘Student Capital’ an educational, short term loan for students, packaged according to risk. This addressed the problem that typically finance options need to innovate to keep up with innovation in education — today’s generic approach isn’t working anymore. With a market opportunity of £10bn, graduates would pay back as a percentage of their salary.
- ‘Investment in Africa’ looked at how data insights could be used to identify opportunities and calculate and minimise the risks associated with investing in Africa. The team focused on a solution to make investing more accountable and more socially responsible, in order to maximize the effectiveness and returns of investing there.
- ‘Futurebridge’ considered an AI powered ‘lifetime career companion’ for those whose jobs are at risk of being made redundant by technology e.g. lorry drivers ultimately threatened by the risk of driverless cars. The career coach would create a ‘pathway to avoiding redundancy’ based on new new skills training. The team identified that 47% of all jobs in the US are deemed ‘at risk’.
- ‘I am Sam’ was the solution to amalgamate all forms of ID to create one recognised, digital ID system for the 83m millennials in the US.
- ‘HomeSlice’ saw a big problem in that often people are over-invested in their houses and cannot diversify their assets. Home Slice would allow them to sell a % of their property (i.e. 10%) via an online market place. The proceeds they make from this marketplace could then be invested into platforms such as Nutmeg.
- Team ‘Saga’ was a platform to help those approaching retirement understand how to maximise their capital with just a few simple inputs. The freemium model would enable a paid bespoke solution. The data could inform government on fiscal policy for our ageing population.
- ‘Wayli’ was a financing option for Chinese parents planning to send their children to schools in the West. Repayment would be worked out based on a calculation of future income, with risks mitigated by partnering with educational institutions on a rev-share basis.
Judges named two runner ups and a winner. HomeSlice was the worthy winner, as the judges recognized flexibility and transparency in shared home ownership as a real challenge in the market today, especially for younger generations trying to get themselves on to the housing ladder.
If this sounds like fun — and as it’s my day job, I can assure you that it is — you can read more about what we’re up to at our website https://foundersfactory.com/incubator/
https://foundersfactory.com/jobs/
We’re building and scaling over 200 businesses in the next five years, and we’d love for you to be a part of our success.
