Start your engines! Life as a fintech startup in the 21st century.
The biggest challenges facing a new startup are actually the biggest challenges facing any business, time and money. In the case of a startup however, these issues become life or death within the first two years.
When you start a business, the chances are that you start with a completely blank slate. This is of course one of the principal joys of being a start-up. You don’t have to worry about adapting new code to old, because there isn’t any. You don’t have to worry about which particular faction to ‘get in with’ because there aren’t any. You’re your own boss, and the world, in the best of all (of your) possible worlds, is your oyster.
But then you have to start buying things. Initially, you, and preferably your business partner, will refrain from paying yourselves, so you don’t have to worry about salary. (Make sure you both get the OK from your life partners on this, by the way). But you do have to pay for office space, hardware (yes, even in the cloud we do need PCs to interface with it), data, and in most cases legal and accounting services. It’s generally not a huge outlay, but you feel it when it’s coming from your own pocket.
So, what’s next ? Well of course you need a plan. Where is this business going over the next five years? Why is this product indispensable now? How easy is it for other companies to muscle you out before you’ve even released the MVP? And above all, how long is it going to take to get that product out?
This last question is one which start-ups, including my own, almost always get wrong. Your first attempt is never your last one. This is a clean slate, and there are a multitude of considerations to go through before you even write your first line of code. Desktop or web? Mobile or PC? AWS or Azure? Linux or Windows?. SQL or no-SQL? How is the testing going to work? How is deployment going to be managed? When, ultimately, are you going to say job done and push the button? On the whole, however long you think this is all going to take, you’re going to be wrong by at least a factor of two.
Now, if you do hit on a workable solution, enterprise ready and fully tested, from unit to acceptance, you push hell for leather towards that first release. The chances are, by this point, you will have had to hire. A one man startup is doomed to failure unless that person can be joined in the first year. A two man startup is ok for getting the product out, but quite inadequate for managing it afterwards. You’re going to need to have the IT managed, and you’re going to need the sales managed. Sadly, in this dog eat dog world, people generally prefer to be paid than not, and this is where the outlay really starts. But that’s ok, you can just go to investors to help you out, right? Wrong. If you hadn’t got such people backing you from the start, the process takes at least six months to go anywhere useful, and generally fails along the way. Crowd funding is a fascinating new avenue to cut through this, but you’re not going to raise anything more than angel funding this way, and on the whole, fin tech is a tough sell to all and sundry. Of course, there are exceptions, but they are by far and away the exception. On the whole, plan to fund this part yourselves. It’s a classic catch 22. You can’t get the funding without traction, and you can’t get the traction without funding. The only person who can break the circle at this point is you, and if you can’t, stop. This, sadly, is the point where, after umpteen weekends worked, and savings paid out, most start-ups fail. But, if you can get over this hurdle, and the product gains traction, then your chances of calling in the backers become vastly improved.
This last point is worth dwelling on for a bit. Traction, traction, traction. If you have a choice between desktop and web, choose web. People should be able to sign in and start up within minutes. You can then use a plethora of tracking products to gain vital statistics on who’s using your product and why. Now you’re ready to go back to those investors with some properly useful projections. And you never know, if the product really does go global quickly enough, you can hold off on those discussions until you absolutely need to. One big caveat though. Security on the web is a massive business. Make sure that you and your CTO are all over it, and preferably get a third party to validate. Startups are hacked once, and once only.
For the rest, again, as with any business, it’s all about people. Be uncompromising in your hiring. Yes, you’re small, but that’s all the more reason the hire should be absolutely the right person for the job. If you need cloud and web skills, don’t hire one or the other, hire both. It’s pretty obvious, but really hard to do. Hiring takes ages, and head-hunters are expensive, but the cost in both time and money is more than worth it when you hire the right person. It’s not just about the people who work for you however, it’s the whole community. Accelerators are great here, but again, make sure you’re in the right one. Your neighbouring hand bag merchant tends to glaze over when you start talking about no-SQL. If you can, get into a focussed accelerator. We have been extremely fortunate to be part of level 39, a fantastic year old fin tech accelerator in Canary Wharf. It’s not just the fact that we’re surrounded by exciting new fin tech companies, it’s the fact that we’re working on similar new problems. Just how do you get 10,000 records uploaded to the cloud in under a second? Just how do you make sure that the market data service never goes down? We have greatly benefited from technical and professional discussions with our neighbours, and of course, a network can never be large enough. And the larger it becomes, the more buzz you generate. It’s a nice virtuous circle to be in.
So, if you think you can handle all that, join the fun. Founding, building and managing a start-up has been the most stimulating experience of my career. It is hard though, very hard. But stick to your vision, stay solvent, and work with people who share that vision and have the ability and guts to push it through and you might just make it. Just try to get some sleep along the way!