9th May 2019 FBCC

Change brings opportunities for start-ups and investors alike

Insights from the Investing & Fintech panel discussion

Last Thursday, 2nd May, we hosted an Investing & Fintech event in cooperation with Danske Bank International and Womble Bond Dickinson. The event concentrated on an expert panel discussion moderated by Womble Bond Dickinson’s UK Head of Financial Services, Jonny Williams. Our panellists were Aapo Bovellan (Founding Partner at Proxy VC), Florin Grosu (Co-founder of Traderion and President of the Young Leaders Club), Gareth Grenner (Managing Director, Identity and Financial Inclusion at Emergent Technology) and Theo O’Donnell (Head of UK & Ireland at Enfuce Financial Services).

Pictured from the left: Jonny Williams, Aapo Bovellan, Florin Grosu, Gareth Grenner and Theo O’Donnell.

Artificial Intelligence and the next big thing

The panel discussion provided many insights to into the world of investing and fintech, both current landscape and future views. Artificial Intelligence (AI) is a key point in bringing about a major shift in the industry. In addition to the technology behind AI it is also important to focus on the products and services AI will enable – people do not necessarily care about how technology works but what it makes possible. Some companies even take the mention of AI away from consumer marketing because it is such a difficult concept to define. What used to be seen as AI can now fall more into the machine learning sector. The difficulty of defining AI has caused confusion and has led to many self-defined AI companies actually doing something that is outside of the AI definition. According to Silicon Valley estimates, 40% of AI companies might have nothing to do with AI. However, the consensus of the panel seemed to be that the full potential of AI is still very much not realised. AI will bring changes to the market and is definitely one to watch.

Is traditional banking heading the way of Blockbuster?

In addition to the changes already brought or about to happen because of Artificial Intelligence, open banking will also be a part of the change the industry is going to face. Traditional banking could soon face it’s Blockbuster – Netflix moment. Payment mediums are going through change, but the question is how fast is this change going to happen? The speed of change certainly managed to surprise Blockbuster. Still, the panel agreed that a major speed bump will be regulations. Many niches have room for innovation but barriers of entry, like banking regulations, make them expensive for start-ups. And from an investor point of view, funding regulations is costly. However, regulators seem to be very proactive with Fintech companies. It can be speculated that with Brexit, the government knows it needs to be in the front of open banking and fintech. The real challenge for start-ups is finding the time to navigate regulations. This is something that AI has the potential to help with as it can be used to report to regulators and that way reduce hours and possible fines. Technology would then save time and money. There is an opportunity to create a solution for big companies to use data. However, it will remain to be seen how the emergence of 5G will affect solutions, mobile fintech and the innovation rate.

An investor or a loan? That is the question.

From AI, open banking and regulations, the conversation moved on to funding possibilities. On questioning whether to take a loan or find an investor, it is important to think of what the right fit for the company at that point is. The predictability of the revenue model and margin structure affect the decision too. Loan financing is a good option if you have predictability, otherwise a VC might be the wiser choice. One advice was that the best thing is to become a CFO quickly. Understand your own cash flow and the accuracy of your predictions. However, it must be remembered that investors offer much more than just money; they offer strategic advice and network assets. But with Fintech and AI the possibilities don’t end there. The right partner and investor can also offer you access to data which is crucial in the “training” of an AI and turning it into a functioning product. It is important to remember that financing is a strategic decision like any other part of business.

Are you and your investor a match?

So, if you decide to get funding from an investor, what needs to be considered? It is important to find funding from experienced investors. The relationship between an investor and a Fintech company is a two-way street. It must not have conflicts and it is important to find the right fit. Due diligence and a common vision are important to establish, and this takes time.  In the worst case, the investor relationship can even cause the start-up damage. It is important to make sure who the investor is and how they will behave on the board. A common phrase heard in investing is “49% is less than half and less than half is nothing” and it is crucial who the 51% is going to be. You should check who the investor is currently working with and ask for referrals on their behaviour. It is important also for the investors to check with their start-ups on how they see them behaving as an investor. The image the start-up has of the investor can be very different to what the investor imagines it is doing. You can think you are acting helpfully but can actually be doing harm. It is very important to keep all investors informed to get funding on the second round. Upkeeping the relationships with your investors in paramount.

Trending in Investing & Fintech

Lastly, the discussion moved to what the panellists find exciting about the Investing and Fintech field at the moment. Some exciting trends are for example robot process automation, B2B companies beginning to act like B2C, identity and blockchain, and financial inclusivity. There are so many opportunities in this space that it will be exciting to see what happens next.

There are many things to consider when either starting up a Fintech company or investing in one. The discussion answered but also raised many questions. The future of the industry is hard to predict, but one thing we know for certain is that changes are on their way. We hope that everyone who attended the panel now has a clearer view of the field and the tools to make better decisions.

We would like to thank our guests for active contribution to the discussion and asking interesting questions. Also, a thank you to our panellists who brought us their insights and expertise on Investing & Fintech. Our gratitude extends to our cooperating partners Danske Bank International and Womble Bond Dickinson.

Finnish-British Chamber of Commerce

The FBCC is an independent, non-profit organisation, recognized throughout the Finnish, British and international business communities. The Chamber offers four different membership categories: Patron, Corporate, Professional and Junior.