How to scale a FinTech start-up
New study focuses on the most important things to focus on when a FinTech start-up looks to move up to the next international level
Financial technology companies - known as FinTechs - have experienced good growth conditions in recent years. We need them, there are many of them and the media have often reported on new private FinTech start-ups that have achieved unicorn status with an estimated value over $ 1 billion.
But not everyone succeeds in scaling up. At PA, we have investigated what it takes to scale up successfully, and an international network is a must if you want to go beyond Denmark's borders. This is interesting in light of the fact that only 37 per cent of the FinTechs we have talked to have a global network,
In our new report ”Building Your Fintech To Scale” we describe experiences from the FinTech ecosystem. Specifically, we have identified three things that can help FinTech start-ups to scale up, namely to get an overview of their "road map", know what skills to attract and last but not least to expand their network.
The report's results, which have been developed in collaboration with Copenhagen Fintech, are based on quantitative responses from over 80 FinTech companies as well as interviews with several experts in the field and CxOs (function directors), including from a few unicorns. From this we can see that as many as 98 per cent of FinTechs have an ambition to scale up.
As one of the directors put it: 'It's not a question of whether we should scale up, it's a question of when'. In other words, there is no doubt that the motivation behind - and belief in - scaling up is present in the Danish FinTech world.
The FinTech ecosystem has matured in recent years, and investors are not shy about investing. Over the past five years, total investment in Danish FinTechs has grown by more than 100 per cent on average per year, which underlines that the Danish ecosystem consists of many businesses with great potential.
However, it requires a great deal of effort to scale the business up, and implementing these three concrete recommendations can help.
Prepare your roadmap
"When scaling up a FinTech, there is a constant trade-off between time-to-market and building a high-quality scalable product," says one of the business owners in the study.
That's the position in a nutshell. It's not just your product or platform that needs to be scalable. You need to think about scaling up in your entire business model, organisation, technology as well as compliance. You will have to make difficult decisions about priorities for how fast you want to scale up and the quality and skill level of your business and your product.
It often takes longer to build a business that is scalable. However, it is not always the case that quality and the degree of skill should be given the highest priority, as speed (time-to-market) can be more important - and then the quality and degree of skill must be expanded accordingly.
Therefore, the key is to develop a clear roadmap based on your vision for how to scale up your business and continue to adjust it as the business or the world changes.
Attract the right skills
"You should replace the majority of your management team every two to three years when scaling up." That doctrine is repeated several times in our study. Of course, it is not only in management where the requirements for competencies change as the FinTech grows. In the scaling up phase, people must be deployed who can bring order to chaos and contribute structure and processes. In addition, more specialists than generalists often have to be hired in response to growth.
It is thought-provoking that only 62 per cent. of the companies surveyed believe that they have the necessary competencies to scale their business. One of the solutions to that problem is to attract competent people with international profiles.
Therefore, there is a need to access to international competencies and adjust the organisation on an ongoing basis. The competencies your FinTech needs change over time, and the leaders who have been successful in the initial growth period are not necessarily the ones who have the skills to drive the future scaling up of the business.
Build your network
Surround yourself with the right people who can give you access to international advisors and capital. It may seem banal and logical, but nonetheless this point was repeated again and again. 37 per cent of the respondents said that they have a global network that can help them scale their business. A wide and valuable network does not happen by itself, and therefore you need to invest time in identifying the right people and building a relationship with them.
Some of those people may be a good choice for the board, but it is important to be aware of the reasons you want a board and to align it with the business. Make it very clear what you can, and especially what you cannot, use your board for. The requirements for your board of directors will also change over time, and therefore it is important that the composition and division of roles are evaluated on an ongoing basis, so that, for example, it is not automatically the largest investor who is chairman of the board.
Pay attention to these three things - and add in some hard work and a bit of luck - then maybe it will be your business that reaches the sky next time.