Five mistakes to avoid when starting a fintech company

Francisco Lorca, Startupbootcamp FinTech London

Francisco Lorca, MD of Startupbootcamp FinTech London, a UK-based accelerator, highlights the pitfalls of starting a fintech firm, drawing on his extensive 17-year experience in finance and entrepreneurship:

Running Startupbootcamp Fintech London gives me a privileged insight on a great number of start-ups. In the last six years, we have globally accelerated almost 400 start-ups in over 15 different accelerator programmes. We have run Startupbootcamp FinTech London since 2014 and have met and worked with thousands of start-ups throughout our recruitment process. Many of the companies we have worked with have been successful and a good number have failed.

I would like to be able to write “Do this and your start-up will be successful” but frankly, I would be lying to you. As a matter of fact, you should be suspicious of anyone that claims to have “the secret sauce”. It is impossible to have a recipe for success when launching a fintech company. There are just too many factors and uncertainties. However, what I feel very comfortable doing is pointing out some things that failed companies do, based on my experience in Startupbootcamp as well as building a number of successful companies. Here it goes:

1. They forget to validate

Intuition, experience and opinions are important and helpful. However, building a fintech start-up based only on these three is very risky. A business can’t be built on limited data. Without really understanding if there is a real pain you are solving, a need you are fulfilling or knowing how many people would pay for your product or service you are multiplying the possibility of going after the wrong market, building the wrong solution or having the wrong commercial model or doing the wrong thing.

It has never been easier or cheaper to test and validate your assumptions using lean methodology before you write your first line of code. However, that’s not all. You’ll need to continue validating throughout the lifecycle of the company.

2. They lose focus

Fintech entrepreneurs are overloaded with noise and opinions – their own ideas, information online, opinions from experts and mentors, clients and investors how to run their businesses and even articles (just like this one).

It is very easy to get distracted with new opportunities and ideas. This is what I call the “oh shiny…” syndrome.

Successful entrepreneurs focus on one thing at a time and they are very good at saying “No” to anything that would distract their real focus. This does not mean that they are not aware of what is going on around them or blindsided to changes or competition but they just know how to use their time efficiently.

3. They focus too much on being “investable” and forget to build a sustainable business

It is easy to fall trapped to the chants of investors. It can be easy to believe that you have a sustainable business when an investor says that the company you started working on 12 months ago is worth £2 million. That does not mean that you have a business. It means that you can build a viable business. The criterion that investors use is not normally sustainability but potential for a large payout. Sometimes, those two factors are contradictory. Investors have to go for big money and some of these attempts fail.

Sooner or later your company needs to generate cash. There is nothing better than a business that finances through customers instead of investors.

4. They don’t invest enough in team and culture

Building a fintech company is hard. The pressure is incredibly strong and never stops. Under continuous pressure, it is very easy for teams to crack and fall apart which in many occasions kill the company. A start-up’s biggest challenge is getting the team right and having the different skill sets covered to succeed. Complementing each other’s strengths and weaknesses is extremely important in small teams, especially with co-founders.

Start-ups that do not have a clear culture, trust and understanding between team members will lose more often than win.

Good companies build a great team first and put a lot of emphasis on keeping a good energy.

Great companies know that team matters more than anything and everyone needs to be highly motivated throughout the journey. There’s a reason why we put so heavy emphasis on the team – ideas change, market changes and products pivot but people hold it all together. As a founder it’s not an easy task to attract and retain the right people to scale the company with you.

5. They underestimate what it takes

The journey of an entrepreneur is incredibly hard and requires grit, execution and a lot of patience. In many cases, entrepreneurs get caught in the “fintech celebrity” hype and think that being on panels, and ranking high in different top lists and Twitter means success. Building a real business takes a lot of hours “in the basement”. Once the reality hits, many founders get bored and quit or fade.

Good entrepreneurs know that the journey is long and you need to focus on both – the destination as well as the journey itself. They have perspective and persistence to grow a sustainable business.