Revisionary exercise in startup strategy — Part 5/5
In a series of previous posts, I mentioned a thought-provoking entrepreneurial strategy framework not many founders I’ve met know about. I also described the four strategies — Intellectual Property, Value Chain, Architecture and Disruption with examples from the wider industry.
In this final post, I’m writing about how these strategies could’ve worked out for Touco and what we ended up doing.
We had the thrilling opportunity to actually dry run lots of commercialisation strategies in Barclays Techstars 2020, during the peek of the programme, appropriately called Mentor Madness. I like how this fellow entrepreneur, from a different cohort, in a different country, shares the same feeling I’ve had about it.
“It’s a grueling and emotional exercise that presses everyone to the limit. The politest description I can offer is that it feels a bit like having Christmas and a root canal at the same time. You’re excited about unwrapping presents, but horrified about a stranger digging holes in your head :D” — Hugh Geiger
The list of 100+ people we pitched Touco to is super impressive: VP M&A at Mastercard, Executive Director at UBS, Head of Fintech Partnerships at HSBC, Head of Fintech at Salesforce, Senior Advisor at Bank of England, CTO at Microsoft, CCO at ClearBank, many super-angels, VCs and the list goes on. #nopressure
We are incredibly lucky and super grateful to all the mentors for donating their time and expertise and genuinely trying to help us. It’s a fantastic network and a one-of-a-kind opportunity to experience.
However, it’s not for the faint of heart. Every day, for three weeks, from morning to afternoon, with little breaks, we had to process a wild range of feedback, from “Absolutely brilliant, I relate so much with these problems in my family.” to “This is never going to work!” (paraphrased).
We even topped up Mentor Madness with our very own Mentor Roundtables. Keen mentors were invited to follow-up with light snacking and strategic discussions. All this was happening while we continued business development, hiring, and developing our second and third product iteration. I dyed my hair purple, our company colour, to hide a few white hairs acquired as a result :)
Techstars changed me. It made me step up my game like nothing I’ve ever experienced. I’m a much stronger person as a result.
Let’s see how these strategies could’ve worked out for Touco and what we ended up doing.
Touco with an Intellectual Property strategy
Customers: We looked into becoming a deep tech company, to create data models for detecting early signs of vulnerability in financial transactions. The aim is to prevent abuse and fraud using Open Banking. The customers would be financial institutions and other organisations interested in improving the service to their users.
Competitors
We would partner with our corporate customers to enhance their understanding and ability to service their end-users in vulnerable circumstances.
Technology
We would create data models that could be licensed and used in other software tools via external APIs.
Identity
Our team would need formal data and behavioural science backgrounds.
Why we didn’t do it
We learnt about similar research in the US and in the UK. The ethical question we asked ourselves was “In what way can we partner so that our tech is not used to abuse and exclude these people even more?”.
We know that data models have been used to create more bias and discrimination in financial services and other industries. We didn’t want the end-users to be treated unfairly or excluded from qualifying for credit, mortgages etc. because of an inaccurate label used inadequately.
The solution would be to control the output of those models as well. We thought about designing better Customer Support and training tools for our corporate partners. This pushed us more into the Value Chain strategy.
Besides, I believe that Open Banking and data science aren’t enough to create good, useful models. We would’ve required a lot of input from academic research and behavioural science, which we didn’t have in our founding team, despite my attempt to learn quickly. However, with good connections within the London AI/ML ecosystem and universities, it would’ve been possible to recruit talent.
I’m really keen to see companies continuing this research and finding fair and sustainable ways to commercialise their algorithms. The Data Ethics Canvas is a good resource to check out.
Touco with an Architecture strategy
Customers
We briefly considered Touco as a specialised financial platform. Other firms like fintechs, lenders, financial institutions, charities etc. could create and exchange value through plug-and-play digital tools designed to improve the delivery of their services to their end-users in vulnerable circumstances.
Competition
We would compete with other platforms like Hydrogen and Tink, starting initially more niche.
Technology
We would use Open Banking to create modular software components (APIs, SDKs etc.) for third-party clients by combining APIs and SDKs from other providers.
Identity
Our team would have to invest extensively in biz-dev, potentially hiring multiple partnership managers. Customer acquisition wouldn’t be cheap.
Why we didn’t do it
Launching a platform requires large network effects. There are many interesting stories about guerilla strategies to kickstart a platform. We would’ve needed significant investment and lead time, which we didn’t have, especially with Covid-19.
We experienced this while trying to launch the Care Card. We had to integrate multiple providers to create a workable solution in a short time. We needed KYC, a card and OpenBanking (AISP and PISP) provider with an Agent model. Only one card provider matched our specific requirements.
The selection and due diligence were time-consuming and Covid-19 lockdown made it worse. A platform with enough choice would’ve saved us some time and kept costs low with negotiating power and economy of scale.
Touco with a Disruption strategy
Customers
We entertained the idea of Touco as a new challenger bank for customers in vulnerable circumstances, who are left out by neo-banks and traditional banks.
Competition
We would compete with Monzo, Starling, Revolut etc. plus high street banks. We thought that existing players wouldn’t make immediate efforts to capture this user segment. Starling took steps in that direction during Covid and other banks followed.
Technology
Long term, we would build the payment infrastructure to retain full control of the data and ensure it’s not misused. The alternative was to use existing rails, like the other challengers.
Identity
Our CEO, Bailey, had been an early employee at Monzo. All three of us had been in at least one startup to scaleup journey before. We knew a good chunk of the challenges involved.
Why we didn’t do it
We knew that launching a challenger bank is…challenging. We also didn't believe this strategy had a good revenue model. Other challengers are struggling even without the added issue of serving users in vulnerable circumstances, who would need to pay for basic banking services. Other freemium models remain unproven.
Option 4: Touco with a Value Chain strategy
Customers
We chose a B2B2C model to serve the end-user and our corporate partners in a way that benefits both parties.
For the end-user, the tools would be free or freemium down the line, with proven value-add.
For our customers, we would solve the upcoming challenges raised by the FCA’s new guidelines with a significantly smaller build and ongoing cost. Our revenue model was via an enterprise license with multiple cost tiers for banks, smaller lenders, service providers, charities and care agencies.
Competition
We chose to partner with multiple stakeholders and enhance their value proposition rather than head-on competing.
Technology
We built the software for all three solutions on the spectrum, including the Care Card in a developer sandbox. We quickly tested the first two with our pilot users.
We chose four technology partners: Open Banking AISP, PISP, KYC and card provider. We considered distributing our software in three ways:
- Touco-branded apps: Touco is leading the user acquisition with promotion via our corporate partner’s channels
- Co-branded (Touco plus customer brand) apps: User acquisition is shared by Touco and partners
- Customer-branded apps (white-labelling): User acquisition is done by the partner, Touco provides the software tools.
Identity
We believed this strategy was the best fit for our founding team and ecosystem we were at the time. My two co-founders have business development and marketing backgrounds and previous experience in dealing with banks. On top, we got accepted in several fintech accelerators including OB4G and Barclays Techstars.
Why we chose it
As a research and design-driven tech-for-good startup, we were ideal to empathise and understand the end-users’ needs. We were good at fast iterations of user research. We were able to attract talent and expertise from academia, research charities and experts through lived experiences.
We didn’t manage to secure the partnerships we wanted in a reasonable amount of time. To launch the card publicly on our own, we would’ve needed to pay upfront costs and agree to monthly minimums with our providers. We simply didn’t afford that.
Now we’re working hard on the next part of the entrepreneur’s dilemma and testing a few new ideas.
I hope this five-part series was intellectually stimulating. I’m grateful to my inspiring professor, K. Ching, who taught this at UCL MSc Entrepreneurship, in Strategic Management of Entrepreneurial Ventures, one of my favourite courses.
I’m also grateful to my remarkable co-founders, Bailey and Emily, and to the core and extended team who embarked on this particular wild ride on the Touco rollercoaster. I look forward to a better start in 2021! 🎉
