Every fintech entrepreneur in the market is looking to grow at a scale equivalent to that of the prevalent market rate. Fintech C-Suite is continuously on the lookout for the “next big thing” the innovation that is going to set their startup apart.
To be ready with this kind of “saleable” profile, fintech startups need to map out a number of key issues and solutions to the same. They need to have a:
1. Clear business strategy/business plan
2. Strong base of initial funding (owner’s/co-founder’s fund/bootstrapped)
3. Understanding of the current industry, market, competition, opportunities and threats
At the same time, fintech startups need to keep a close eye on ensuring continuous compliance to industry regulations and best practices, along with ensuring complete data security and privacy.
The big picture for every startup, whether it is one-year old or five, is to keep getting funded and reach the status where it finally graduates to a bigger company by getting acquired, or by opening multiple office across the globe or by earning revenues north of $20 Mn. Having an employee count of over 80 employees also counts as a startup graduating to a big company.
The truth is no different for fintech startups in the growth stage. The fact that you are in the growth stage means that you have beat the 90% failure rate that plagues most startups. But it is only when you get to the top, that it gets tougher. Your startup is now surrounded by your peers, who too, have managed to make the top 10% and vying for attention in the same pool as you are.
That’s why this article is meant to shed light on 5 of the most important issues you should look out for that shouldn’t turn into roadblocks to your fintech startup’s growth.
1. Finding the right source of funds
It is not just the innovation that acts as a driving factor for startups at the growth stage. Investment, too, plays a major role in making fintech startups work on an idea that’s not only saleable, but something desirable for investors. An idea that will not only provide multiple source of funding but also bring in the latter’s marketing and business prowess into the game.
You have hauled your business this long with your own funds, financing from friends and family, co-founders, and overall bootstrapping. When you take on an investor, they would want a lion’s share of equity and hence, a say in how your company will work post-funding.
This is a well-known fact, yet often overlooked, given the overwhelming need for funding when your startup is growing at a ravenous rate. Therefore, it is important to hold your ground regarding the vision you have for your company, 10-years down the line, while you negotiate with your investor. It is crucial to be flexible and understand the value and expertise that they bring to the table, but at the same time try not to be too acquiescent of the interests of your investors.
Much like marketing, you should have a clear idea as to who your target audience is, when it comes to financing your startup. Know well if you are looking for technical advisors, or strategic partners. Be clear on whether equity or debt funding is the right one for your business.
The right kind of investor should help provide you with sustainable financing, a strong marketing team, introduce you to new markets, vendors, customers, and channel partners and give your business just the boost it needs to become the larger company it is set to be.
2. Working on your business expansion
It is easy to get carried away when you acquire the desired funding. But the actual job of turning your “growing startup” into a “thriving company” only begins with each right decision, post funding.
Securing funding does mean that you have a sustainable and reliable flow of income to innovate, grow, expand further and create a larger impact on the market. However, your investor would want you to make the best use of the given funds right from the bottom up. So, whether you are hiring tech specialists, adding heavy weights to your management team, or injecting the much-needed fuel to you marketing and sales strategy, you will need to do all that in a balanced manner.
Most startups tend to go either overboard or totally overlook marketing as a component of business development. The fact is you have caught your investor’s attention. It is now time to catch your end consumer’s attention. Your clients, namely B2Bs and B2Cs in need of fintech solutions wouldn’t know that they can buy from you unless they know you. This is where a robust marketing team and strategy plays a critical role.
There are many different ways of investing into marketing or adding to your management team. You will need to make sure you answer some very specific questions before you start marketing to or hiring from a certain pool of individuals.
3. Staying in compliance
In an industry like fintech, regulation and compliance are critical. Regulations are required to protect fintech companies from fraudsters and money launderers. KYC (Know Your Customer) is one of the simplest forms of regulations known even to the common man. Use of third party integrations and service providers help enrich customer data and take better decisions.
Data Privacy and Data Governance have now become top priority for fintech startups that are on the fast track to growth, irrespective of the fact whether they are operating nationally or internationally. Systems which provide audit trail are beneficial in preventing frauds to a great extent. Be it your own internal system that is built ground up or a system developed by a partner or a product that you have subscribed for to run your business, be very careful in checking the provision of audit trails and adherence to compliance and regulatory requirements.
4. Data security and privacy
This brings us to the establishment and maintenance of strong digital IDs for every manual account that takes the digital leap, thanks to fintech revolution. Whether your solution uses two-step security code, biometrics, or AI-based behavior recognition tools, as you scale and develop a more user-friendly interface to capture larger markets and more audience, you have to continuously ensure that all transactions, data, and records are completely encrypted and safe. Using a cloud-based solution can help you scale as your fintech startup grows. You can also request a dedicated server in case you are worried about encryption slowing down your app’s performance.
5. Choosing the right technology partner
Cloud based solutions work on lower upfront costs and are a good choice to prevent heavy upfront investment on technology.
Always work with a partner who is willing to collaborate and grow with you. Startup ideas and requirements thereof are usually not confined within the usual box of thinking and your partner has to be open for customizations, have quick turnaround for requests and ready to support you in your journey. The partner should also have a proven track record in project delivery, be compliant to the regulatory requirements and have long experience in the ecosystem to bring in domain expertise where required.