Startup Advice

Six tips for early-stage fintechs from an Aussie investor

Daniel Wirjoprawiro /

To borrow a much-overused phrase from the Australian government, there has never been a more exciting time to be an Australian, particularly if you’re a fintech founder.

The Australian government has caught up with the transformative impact fintech could have on our financial system and economy and recently announced a raft of initiatives to boost Australia’s fintech activity and help make it more competitive internationally.

While many of these initiatives, particularly those that will relieve some of the regulatory burden, are long overdue, they have been welcomed by the fintech community.

Fintech founders who are just getting started will face an easier journey than older startups but even with these improvements, early-stage fintech founders will increase their chances of success if they follow these six tips.

1. Focus on your niche

The most successful fintech innovators have tremendous focus on a niche in the value chain. They have rapidly disintermediated and unbundled a product or service previously dominated by a large incumbent financial institution.

2. Put yourself in the incumbent’s shoes

Founders should thoroughly understand the options large incumbent financial institutions have available to them when faced with disruption, from buying to building to partnering.

With most incumbents having now acknowledged the disruption that’s occurring there are case studies of strategic partnerships or investments that provide examples of win-wins for both sides.

Founders should carefully evaluate each option they are considering to ensure the structure and incentives are aligned.

3. Develop long-term, enduring competitive advantages

Founders should have a clear understanding of how long-term, enduring competitive advantages will be created by their product or service and remain focused and persistent to achieve it. Of equal importance is the founder’s ability to articulate this understanding.

While the startup may currently have a competitive advantage such as offering superior customer experience or agility due to the absence of legacy systems, most incumbents are acknowledging the disruption occurring and have a pool of resources to rapidly replicate or erode advantages.

4. Develop a compliance culture

Founders need to accept the regulatory environment in which they currently operate and develop a compliance culture at all levels of their business.

Founders will also benefit from being proactive in their engagement with regulators and government in an open, transparent and collaborative manner.

Embracing compliance can provide competitive advantages such as being a thought leader in lobbying for regulation and policy change, and in supporting the industry and contributing to the growth of the ecosystem.

5. Beware of capital intensity

Building a fintech business will be more capital intensive than building other startups. It will require significant working capital to account for the regulatory, compliance and complex requirements unique to the industry.

Founders should be disciplined in monitoring costs and avoid underestimating capital requirements when raising capital. Founders should raise enough to buy themselves at least 18 months of runway.

6. Embrace the growing fintech ecosystem

Although slow in getting started compared with countries like the United States the fintech ecosystem in Australia is finally booming.

There are a plethora of initiatives to support fintech founders, including grassroots communities such as Fintech Melbourne and Fintech Sydney, to fintech hubs such as Stone and Chalk in Sydney to events such as the recent Victorian government-sponsored pitch event at the Henley Club for fintechs to access a delegation of heavyweight investors from the United States.

Founders should explore collaboration opportunities and engage with the growing fintech ecosystem.

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