My 5 most valuable learnings from building a fintech startup

Sparrow Ventures
Sep 17, 2020 · 6 min read
Picture by Jonathan Smith

Bringing ideas to life and growing them into impactful companies that are loved by both customers and employees is a process that’s always captured my fascination.

However, at the beginning of my career, I didn’t launch myself into startups right away. I tried the traditional path first, but for me, it wasn’t very fulfilling.

In the search for my true passion, I got to know Toni, a coach at my university. He gave me this one piece of advice that I will never forget: “Silvan, with all the potential career paths that you could follow, imagine who you could become in 10 years from now by following each of these tracks. Then tell me which future version of yourself feels the best.” Right there, I knew that I wanted to become an entrepreneur.

And that’s why I decided to start a business in the field of financial technology. Together with three co-founders, I launched an automated investment service — often referred to as robo-advice.

Five years later, I look back at a rollercoaster ride with all its ups and downs: starting with zero cash, receiving a chunk of funding, being forced to pivot, signing big deals, and ultimately failing to realise the dream of scaling a company that changes financial services for the better.

If I achieved one thing, though, it was that I learned a bunch about building digital startups. So here are my five most valuable learnings that I wish I had known at the outset.

ONE: Think like an investor

This one is absolutely crucial, and it’s something that can help you save years of time and effort. When we picked the business idea for our fintech startup, we were certainly very passionate about the topic but we didn’t really know which factors to consider in order to validate the opportunity.

Later, when negotiating with investors, we found that they all look for very similar aspects in a business. Importantly, most of these aspects can be analysed even before kicking off your venture or putting a penny into software development.

Some of the most important questions you should ask yourself are:

  • How big and widespread is the problem you’re trying to solve?
  • Is the market big enough?
  • Are unit economics beneficial?
  • Have you identified a scalable growth channel?

Therefore, it’s really worth trying to understand the rationale of venture capitalists and analyse your business idea in the same way. There are lots of helpful resources out there — one that I particularly like is this article on why product market fit isn’t enough.

TWO: Dream big, but move in small steps

Dreaming big is extremely important. Of course, your customers, investors and employees want to be part of a big vision they can relate to, but I’m sure you already know this.

The tricky part, we understood later, isn’t actually about dreaming big, but moving in tiny steps that will ultimately lead you to arrive at the vision.

In our case, we fell into the trap of trying to build the perfect solution from the very beginning. As you can imagine, we faced long software development cycles, lots of delays and a lack of client inclusion in the process.

The truth is that in order to kick off your venture, it’s likely you won’t need something as elaborate as a fully automated investment solution with lots of personalisation features, plus your own fully scalable database that feeds your proprietary algorithms.

Chop your dream down, then cut it down again… and focus on moving forward in tiny but steady steps.

THREE: Laser focus

I’m sure you’ve heard this one already. Me too… many times, both before launching a startup and while building one. Even so, I didn’t get it right.

Therefore, I highly recommend this approach: focus, focus and focus again!

As you’ll probably be running on a limited budget and time, you need to be laser-clear on what you’re trying to prove and achieve. In the early days, ask yourself:

  • What is the problem we are trying to solve?
  • Who is the target customer?
  • Which geography do we want to serve?
  • What are the few KPIs we need to focus on?

The worst thing you could do is to build the perfect solution — something that answers everyone’s needs across the continent — without understanding how to define and track your progress.

FOUR: Sometimes, there is no single truth

When launching a business, you also need to take decisions on strategic questions.

In our case, the most important question was whether to provide a B2C or a B2B service. Within each option, we were also uncertain about who the exact target customer would be.

The discussion came about because we judged acquisition costs for investment services to be too high. (At least that’s what we observed in the market — we never really tried and tested it ourselves.)

To tackle the question, we had long-running internal debates, over and over again. Looking for external advice proved to be an additional challenge, as opinions always vary depending on who you ask. As a result, we ended up trying all of the directions, without having a clear focus.

Looking back, what I find remarkable is that you can probably find successful businesses in any of the strategic options we considered. It wouldn’t have mattered which option we picked — what counts is the focus and the execution.

With that in mind, you should be aware that there is no single correct answer for certain questions. Sometimes, you simply need to decide.

FIVE: Fail fast

Last but not least, fail fast. It took us five years. I’m sure you can be faster.

Think of it like building a house. If you want to build a skyscraper, you need to create a strong foundation first. If this isn’t possible, let’s say because of loose soil, it’s better simply to design something else.

To build this foundation in a startup, you need to validate all the assumptions and hypotheses you have, as quickly as possible, with a lean and data-driven approach. Thinking like an investor can help to identify these questions.

When it comes to building your actual product, you need to focus on the bare minimum. You want to build a product that is just good enough to start creating the first transactions with your customers. This is often referred to as a Minimum Viable Product (MVP).

Only if you see that you could answer your questions and that the first transactions are possible do you then start evolving, in tiny steps, towards your vision. Otherwise, you stop.

At my former startup, we didn’t have this strong foundation, but we continued regardless. What made things tricky was money: we actually made some good revenues and signed a seed funding. This money locked us in — in the sense that we could not simply walk away. But in reality, we were still trying to build a skyscraper on a very fragile foundation… inevitably we would eventually see the cracks form.

Don’t forget, there is nothing wrong with failing — just try to do it fast. In the process, you’ll make a tremendous amount of learnings, which will increase your chances of success when launching your next venture.

Eager to build ventures with a passionate team of entrepreneurs?

When I joined Sparrow Ventures I was impressed with the entrepreneurial knowledge that’s available in the organisation, and the data- and customer-driven venture-building processes that incorporate so many learnings and best practices gathered from the world of digital startups.

Our whole set-up is all geared up to build, launch and potentially carve-out startups successfully.

So if you’re passionate about new ventures and looking for a driven team to realize something great together, don’t hesitate to check out our job openings at Sparrow Ventures and join our journey.

Learn more about us or check out open job opportunities to become part of our team here.

This blog post was written by Silvan, who is a Venture Architect on our team.