The Challenges with Launching a FinTech Startup

by Wayne Brown

There are many challenges the entrepreneur faces when deciding to launch a new startup. Whether managing the legal and financial options, researching the product or service requirements, identifying the strategic market fit and, most of all, identifying the sources of capital is an arduous project. Some entrepreneurs make these tasks appear simple and effortless, but the reality is that managing these tasks effectively can determine whether the Fintech will succeed or fail. For every successful FinTech there are many that were unable to make it through the first year. The statistics trend higher for failure than success.

Over the years I’ve had direct access to hundreds of FinTech founders, whether direct or indirectly, through incubators and accelerators and many directly as clients or via industry trade groups and associations. There is a founder consistent profile I have seen and although this could be a generalization, in my opinion, many founders are focused on the product delivery rather than the ongoing concern of FinTech. Focus is an important quality but when it is single focus rather than encompassing the total business, there is a need to reset. 

Many founders put all their time and assets to deliver the product or service, but less emphasis is placed on how the money is spent or whether the legal and overall risks are managed effectively. The infrastructure to support the FinTech must be in place, so the foundation strong. Often this is an area where many FinTechs remain exposed and vulnerable. It is best to spend time during the organization of the company at launch, rather than care for these matters once there is pending business. 

Another area of focus is to research the product or service objectively.  Undergoing the research, competitively evaluating the market fit, what products already exists in the market, what is the competitive landscape, is time well spent? The founder must know the answers to all these questions before deciding to launch the company. Failure in this regard will not only result in challenges and missed opportunities but could have consequences that may be unrecoverable.

An area of concern that can cause a lot of stress is how to manage the funds. Many founders are skillful at developing a new product but when it comes to managing a business there are pending issues. If this is not a strong area identify someone who can help. Investors are seeking long term rather than short term relationships. The mismanagement of funds causes immediate concerns and consequences. Having an honest and frank conversation with investors will lay the groundwork for a successful business relationship.

Often some founders assemble a small group of advisors to help. Through their experience, connections and strong industry relationships their contribution can provide strong value. There are many successful examples in the FinTech industry where growth was directly attributed through an advisor. Set the framework and strategy then start to execute.

The challenges faced by the founder are many. But the rewards can be high. In this article we considered just a few. In the next article I will continue the next part of this topic but will share some real case studies of how some FinTechs successfully managed through their challenges.