On Wednesday I attended MarketsMedia’s Summer Trading Network – a refreshing change from the usual institutional financial services and fintech startup conferences. There was real talk about the actual personal and business challenges of building and funding a successful fintech startup, which are not often discussed. Here are some highlights.
Create the Right Culture to Drive Growth
The FinTech leaders panel kicked off by Alfred Eskandar, CEO of Portware, helped to set the stage as he discussed the importance of company culture. Portware has sought to create a “culture of helpfulness” – a fairly unusual concept in the world of finance, particularly to those of us who have worked at investment banks.
Eskandar also emphasized the importance of “being long-term greedy” and “having the right people in the right seats.” To create a high-performing team, he posits there are 3 key traits members must have: 1) Social sensibility (also known as empathy); 2) Voice (the ability to recognize others); and 3) Gender diversity.
The irony of that last comment was not lost on me after attending a Tech Breakfast where I asked the 40 guys standing in front of me whether they were waiting to use the men’s room, since there were few other women at that event.
I could not agree more with the importance of corporate culture for driving change (and that’s not just because Portware is a client). I have experienced the advantages of working at and with companies that prioritize values and team, which clearly can be a huge differentiator and growth driver for tech firms that are trying to retain talent and innovate.
The other speakers who talked about their businesses and opportunities in the market included Jock Percy, CEO of Perseus, Neil DeSena, Managing Partner at SenaHill, a fintech investment bank, who noted a $500 billion was invested in fintech in 2014 and James Chrystal at Traiana.
Social Media’s Growing Influence on Trading and Investing
There was lively debate around social media’s relevance in financial services, not from a marketing or promotional point of view, but rather for its ability to influence trading and investment decisions. The panel shared insights around how social is “the new news” according to Chris Camillo, CEO of TickerTags and how social media can impact trading. The need to separate the signal from the noise was debated across various perspectives.
Gautham Sastri, CEO of iSENTIUM, is building a platform that analyzes over 1 million tweets daily and executes based on Twitter’s information to capture alpha saying “people reveal their intent before they act.”
Jason Raznick, CEO of Benzinga, talked about the value of trust following the recent phony Bloomberg story about Twitter and the AP hack before that, which highlighted the risk of market manipulation. This is where curation adds value by saving time, letting people be smarter about how they look at things and “putting context around the data”.
Camillo of TickerTags noted that social data is just a “starting point that needs to be interpreted and doesn’t need to be tradable to be meaningful.”
I enjoyed talking with Raznick and Camillo afterwards about the importance of distinguishing quality from quantity and clearly the relevance of social media and its ability to deliver results are only as valuable as the filters used to view the data. This is where the need for more customized solutions come into play – from data visualization provided by tools like Tableau to the ability to build customized solutions, like the tags feature in TickerTags’ premium version. (To view social media activity, I’m going to check out TickerTags free version here).
Preparing To Raise Capital
I always appreciate hearing startup CEOs discuss their experiences raising capital and their suggestions for other companies. Vivian Maese, partner at Latham & Watkins moderated, highlighting important aspects for founders to consider about different financial partners and investors – from personalities, to investor type (friends, family, angels, accelerators and hedge funds to VCs) to investment horizon.
There was the usual debate about differences between what VCs look for on the east coast (the typical New York “show me the money” mind-set) vs. the west coast (“what’s your big idea?”). NYCA Partners was mentioned as a firm trying to innovate by combining the best of both coasts in the fintech space. Vivian humorously noted that “the west coast doesn’t know how to spell regulation” and inquired whether the founders had done the “inner work of what was needed” to assess their partners and make the right growth decisions.
Mark Smith, CEO of Symbiont – in addition to showing off some cool socks – emphasized the importance of looking for investors who “understand the business and share your passion, those that don’t want a short term return on a long term vision.” He likened VCs to scotch – “the first glass is good, the second glass is delicious and the third glass will make you sick.” He also gave some additional advice around getting the right valuation, the importance of focusing on “solving the problems you have today”, building the timeliness to pivot and watching out for an unwieldy cap table – “the hard part is really about the execution (after you get the money).”
Gideon Agar, CEO of TradeLegs, encouraged founders to “raise more than you think you need.” He shared his previous experiences at prior startups and the need for a structured process around finding investors who are best suited to where you are in your growth stage so they can provide operational experience. In some cases angel investors can be a lot of work – look out for mismatched expectations around timing and operations. Agar suggested asking “what’s the process if things go wrong?” Clarify how your potential investors turned past problems into successes and “create optionality in your partner.”
Ed Donner, CEO of Untapt prioritized chemistry, network and supporters when selecting investment partners. He likened the investing process to courtship, dating and marriage, where the first date is the most critical and the process can take several months. Helping to put everything in perspective was the suggestion to read the 7 rejections – a blog posted by the CEO of AirBnB with a list of the emails from VCs turning down a $150K investment for 10% of the company with the obvious take-away that it’s important to be persistent and tenacious.
The day wrapped up with several startup pitches by SizeUp (cool site for small business analytics), Remitmas (a social venture out of Columbia Business School to transform the LatAm remittance market), Eesat (complex order book processing) and SheetKraft (an Excel automation tool) and feedback by several VCs, angels and investors.
This was followed by a lovely cocktail reception with cigars and sliders – as much as things change, some things stay the same in financial services.