in Fintech

The State Of Fintech Acceleration In The USA

You’re an early stage fintech startup, looking for a network, funding, and a shot at exiting down the road. What do you do?  It’s noisy and it’s going to get noisier. Expect to see even more one and done corporate “accelerators” and “labs”, more large global banks entering the fray with competitions and the landscape is going to get even more confusing.

My hope is that this blog identifies the key players and look at who appears to be adding value.  My goal is that we somehow move toward a more cohesive, more open and successful startup ecosystem here in the states.

I will quickly mention that I have an admittedly East Coast prejudice when it comes to fintech. Not that I think we need to have ‘all the unicorns’ by any means, but if you’re not catching my attention in NYC or Boston, I have to ask, is the program really doing a good job capturing the entire startup ecosystem and its most interesting companies?

It’s been done well abroad.

First let’s look at what’s been successful outside of the US.  London, which has the most cohesive fintech startup ecosystem of any city has “Europe’s largest tech accelerator space” Level39, which houses dozens of fintech startups.  Startup Bootcamp Fintech, which is based in London, has a global reach and legitimately has networks in every major financial city in the world.  They have a branded fintech track, and a hustling, visible, leadership that continues to expand the business.

Competitions aren’t what you think of in terms of engendering teamwork and community, but the Innotribe competition by SWIFT (please tell me you know what SWIFT is) is a global competition that culminates in demos at Sibos and is a pilar in the global fintech community.  The competition is also over six years old, which is kind of big deal. You may have heard of TransferWise, which was a finalist there in 2011.

There are no reputable accelerators synonymous with fintech in the US yet.

The closest thing we have here in the states is the Fintech Innovation Lab. This program really has most of the pieces of the puzzle- a great management team, supportive backing from a no-agenda corporate sponsor, creates strong content and studies, has buy-in from NYC and its investment fund, it’s value prop is that there’s legitimate access to some bigshots at banks, and it authentically has supportive and proud community of alumi.  Also in London and Hong Kong, the program allows companies that aren’t in fintech but just want to get closer to the banks, so it’s not a pure play.  And unlike a traditional accelerator, it’s not necessarily for the early stage.  It’s a more corporate and mature environment than a traditional tech accelerator.  They also don’t have access to a pool of developers and talent like many accelerators do either.

Graduating a reputable tech accelerator comes with huge social proof and increases the speed of getting a funding round done.  Real accelerators can have the best mentors in their network a startup could ever ask for- making the startup experience (and life itself) seem almost bearable during those first few years.  These are thoughtful people who care deeply about the outcome of the class and the accelerator itself.

A real accelerator also fosters teamwork amongst the companies and a togetherness that we’re lacking in the fintech ecosystem nationally.  For most of the founders I know and have worked with that have gone through accelerators, fewer are “lone wolf” types.  These people seem to place a high value on personal relationships- and this is important because we’re talking about the greater ecosystem here, not just a few companies exiting or IPO’ing.

Perhaps most overlooked and to me the greatest thing about accelerators is that there is no organization better at, nor uniquely likely to, influence and convince founders to pivot than a good accelerator.  It’s possible that helping a company pivot is even more important than helping the popular kids in the cohorts to raise their round.  So, fewer shitty products out there, and founders learning lessons quickly- a good thing for sure.   Competitions, incubators, corporate programs that want you to leverage their API forever when you leave- they’re not encouraging you to pivot your company.

But it’s time to flip the paradigm of “team. team. team.” importance back onto the accelerators themselves if we’re going to talk about them not just being an outdated fad.  Without great teams that are focused on the specific needs of fintech as well as access to connections in the space, no existing accelerator will likely take the lead nationally where every fintech aspires to be a part of the next class.  Many do outstanding jobs and have brilliant people helping tech startups- but fintech its own animal, I currently have no skin in the game for whether the accelerators succeed or not- I just want to see the companies to succeed.  I hope it works out for them!

The Field:

Y-Combinator is obviously the Michael Jordan and Lebron James (and Bill Russell) of accelerators, and has nurtured two of the most important fintech startups in the world recently: Coinbase and Stripe.  Coming out of that program has the utmost distinction, but Paul Graham is never expanding to NYC.  He’s never rolling out a new YC-FintechX accelerator in San Francisco either, no matter how many fintech related ideas are on his Request for Startups.

The rest of the field for accelerators are too generalist by nature.   ERA is a single NYC based generalist accelerator that has always been a desirable place for a few fintech startups, and they’re mentor network has been deployed to a good number of companies in the last few years.  500 Startups has a solid number of Fintech Startups, but Shai Goldman leaving for SVB left thema big void on the East Coast and in fintech legitimacy.  Dreamit Ventures, is led in New York by someone who has legitimacy in fintech, but their last cohort had just one fintech company.  TechStars doesn’t have a fintech company in their top 50 biggest fundings.  Barclays hopes to replicate their London Techstars program here to NYC for the spring in hopes this will change, but they also don’t have people running it here that have legitimacy in the US fintech ecosystem, and, they have to build everything from scratch, specifically by supplementing their existing mentor network with more folks from fintech and finserve. I saw a press release about the SF accelerator Plug and Play (which apparently has paypal and lending club in its portfolio?) teaming up with Citi for a Valley-Based fintech accelerator program for this year.  Haven’t heard much since, and I’ve never heard of PnP doing much outreach anywhere but the Valley.

There are actually two regional fintech startup accelerators in this country.  One is called sixThirty in St. Louis launched last year and has a square co-founder behind it.  The other is called RevTech/ Queen City Fintech which is Charlotte which seems to have mostly Bofa mentors.  Both seem mainly focused on driving startup companies to their cities are both completely sure their cities are the next fintech hub.  Finally, there have been a number of corporate accelerators/labs/incubators launched in the last year or two- Sageworks, Wells Fargo Innovation Lab, Mastercard/SVB, Scivantage, Yodlee, etc.  I expect even more press releases in 2015.  Let’s hope they focus on not just helping their own brand but commit to helping the community at large and give their companies something lasting of value instead of a one-and-done.

Maybe Generalist Finech Isn’t The Answer Either.

This leaves opportunities for micro-communities like Alternative Currencies and Financial Inclusion.  And in the end, this might be the only model of fintech acceleration that is both self supportive and also self-sustaining.  Both have very visible mentors, and, a tight knit handful of institutional investors.  I guess that’s what comes with emerging opportunities that most people (and investors) kind of get, but aren’t ready to pile into.

Open source and community define the crypto currency community.  Boost is the SF based Bitcoin accelerator that can count Marc Andreesen as an actual mentor and investor.  I don’t see anyone competing with this program for that market at all.  It’s not hard identify who the bitcoin and blockchain institutional investors are, and bitdevs genuinely geek out on new ideas and extrapolations of the protocol.  This is true tech, the place where it’s clubby and it’s all outsiders from most other aspects of society.  Of course they want to help each other.  I noticed that there is also a bitcoin incubator here on the east coast called Coin Apex that seems to have a genuine mission and a couple of companies onboard.

Many people don’t know what CFSI is, but they are maybe the biggest power broker in the fintech space in the country.  It’s a non-profit born out of a failed bank in Chicago that seeds just about academic paper on the underbanked and underserved in this country, and also connects and supports just about every worthwhile startup project in their space.  They also seeded Core Innovation Capital, whose GP could convince a Koch Brother of the incredible investing opportunity in the space.  CVC just had pretty good news with one of its portfolio companies, which just had maybe the biggest fintech funding of the year.

Maybe that’s why upstart accelerators like Village Capital are able to enter this space.  They’re a somewhat virtual accelerator based in Salt Lake City and fintech isn’t their only track.  But these guys take fundraising very seriously for their companies, bringing on checks from places like Ebay Foundation and Kapor Capital- another VC many may not have heard of, but only invests in social impact companies.  Also JP Morgan co-founded (with CFSI) a recent virtual incubator/competition in a $30M commitment (neither party seems shy about that number) called “FinLab” for both startups and non-profits.  It’s still unclear what kind of mentorship and programming the 8 or so companies will get, but they are promised something pretty clearly: $250,000 for being selected.

So what does the future hold?

Is the future small outfits like ValueStream Labs or Fintech Collective in NYC, where the principals are all super plugged-in, have access to capital, and try to accelerate companies growth by plugging in in non-traditional ways like business development?  Or how about FinTech Sandbox out of Boston, which is a new non-profit that bundles data feeds and API’s as well as a workspace and only asks that you give back to the community in return?  Or how about Significance Labs, a non-profit supported social impact incubator that helps underserved / underbanked that starts with motivated and smart teams of product + business people and then formulates ideas and launches.  Kind of like a 12 week startup weekend.

I’m not sure, but like I mentioned, it’s going to get noisy out there.  The right partner in the space better remember that only a give-first mentality that will get you buy in from the community, offer something of value besides cash, cares about companies that aren’t in their program, and thinks about more than its own agenda.  My hand is up (and has always been up) to help all of these companies, and I really hope that we are able to come together and make great things happen for our community.

(disclosure: I'm a shareholder in two companies that have graduated from accelerators mentioned in this blog- TechStars and ERA).  Also, if I left out any programs it was not done so intentionally- please let me know who I forgot!