Lemmings, losers and lawyers: The seven lessons I’ve learnt since founding a fintech

Fintech is a unique sector with its own characteristics. The global fintech market’s value is expected to reach $309.98 billion at a CAGR of 24.8% through 2022. There are a plethora of business models emerging from entrepreneurs around the world who know this.

But there are several fintech-specific lessons best learnt even before you draft your first business plan. 

1. Fintech is not a winner-take-all game

Financial services has never been a ‘winner-take-all’ sector, and no single provider dominates any of its individual segments. 

There are more than 2,000 payment systems around the world today, all with recurring transactions. We are at the beginning of a new decade, and there will be many winners with clever product and market alignment over the next 10 years and beyond.

Well-regulated, ethically managed, digital money systems will likely be the lifeblood of future global commerce. 

Major trends such as the sharing economy, mobility and accessibility are further enabling the ‘many-to-many’ business models versus the ‘hub-and-spoke’ models of the past. 

The potential for niche, unique value propositions is enormous. 

2. Align your business with your deepest values

Anyone who has founded a business knows too well that the venture end of the market is a roller-coaster ride.

Over time, your commitment will require both incredible persistence and willingness to change — whichever is called for across many specific contexts. And many of you will have to manage the extensive hours and responsibility alongside your other mammoth project: your family.

Build a business that deliberately adds to your integrity and aligns with your deepest values. At the end of the day, if we are not an asset to the world, we are a liability.

Entrepreneurs have great power with this choice, and this alignment will get you through your most challenging days. Make your children proud.

3. Don’t be a lemming

Think for yourself, because the consensus view can be wrong or simply may not be right for you. Crypto has taken much of the air from the room over the last few years.

My company was founded with complex consensus algorithms and encrypted key-pair hot and cold storage. It’s now in our DNA. But in the end, we found a better solution for our purposes.

Despite distributed ledger technology’s shiny enamel, you need to build a sustainable business to solve a real problem, using relevant technology, whatever that is for you.

Deeply understand for yourself the mechanics and implications on many fronts including cost, legal and regulatory, tax, and cyber-security. This understanding will enable you to draw your own conclusions.

4. There is no MVP in fintech

Begin by building strong roots, and then patiently and diligently grow the leaves. There is no minimum viable product stage when you are managing assets for your customers.

And with small margins, as is often the case in financial services, you need to architect a robust product that will be able to scale quickly. Think ‘sea-worthy among storms’ not a ‘day-trip on the local river’.

5. Be handy with your wallet

Again, fintech margins tend to be much lower than those of Coca-Cola and video games. Be handy with cashflow management, or you’ll need to raise a lot of cash, unnecessarily raising the levels of your breakeven KPIs.

Can your customers prepay for the product or service for a discount? Will some of your service providers cut their fees to earn a growing, loyal client? Can you crowdsource your logo design? Be resourceful. It all adds up and you might be surprised how many are willing to help you to succeed. 

6. Know your customer economics

Watch those unit economics. Know your conversion rates at every stage of the customer journey. You don’t want to build a Ponzi scheme where lifetime customer value is negative in perpetuity.

I have watched investors of all sizes skip this back-of-the-envelope math during their due diligence process, and neither the entrepreneur or the investor sees a return. 

7. Make no mistake, regulators carry the biggest stick in the room

Back to the topic of strong roots, do not underestimate the importance of regulators.

We spent the first two years with eight law firms around the globe, running through every risk scenario we could imagine, obtaining second and in some cases third legal opinions, and even a private letter ruling from a regulator. As we’ve seen in recent news, taking shortcuts on compliance can be an expensive, stressful exercise and could even cost you your business.

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