The latest figures by Statista says there are more than 26,300 fintech startups currently working towards offering novel products and services. With the fintech startup scene gaining momentum, entrepreneurship in this sector is only increasing.
If you are impressed by the fintech startups dominating the news daily and have plans yourself, perhaps you should take a breather first.
While watching other fintech startups grow big and scale rapidly can be inciting, the reality is far more different than what you may see.
There is a high number of fintech startups failing. In fact, UK fintech startups tops this list, with more than 38% of all endeavors failing due to simple things such as illiquidity.
But if you are confident that you can be out of that list, here are some of the things you need to make sure you avoid at all costs:
Improper Market Demand Analysis
Having a proper market demand pinned down is one of the most important pillars for any fintech startup. Most entrepreneurs are driven by personal experience and believe that what they will offer will gain popularity and traction.
When you stop relying on numbers and more on your emotions, things can go wrong pretty fast.
To avoid this, make sure you do proper target market research. An ample size, complete with demographics, and determining the current pain points will help you assess not only a gap in the market, but if there is any competitor already. For example, fintech startups news in Canada says the largest market is the digital investment area. While this shows growth that you can capture, it also means more stiff competition.
Understand Your Competition
Speaking of competition, you don’t want to ignore them. Fintech space is an extremely competitive industry. Thousands of startups are fighting for their space, while existing ones already have an edge over you.
With the market share already distributed, you may find it hard to convince your target market to use your services over others.
The best way to go about it is to understand your competition. What are the points of parity and points of difference – for example. Are they offering to a niche market, or what their unique proposition is.
Knowing what you are facing will help you fine tune your strategies for making your own space.
Convincing Backers
Fintech services can be a game changer, true. But to build the products and services can require a large amount of funding. Without sufficient capital, you may never see your startup launched at all.
Many backers, especially institutional ones, are very strict about facts and figures, especially their ROI. Angel investors may have the patience of sitting a bit on the long-term side, but many will prefer to have higher returns in shorter times so they can maximize their profits by pulling out and investing in other startups too.
When talking to investors, be careful of the terms proposed by you and them. Understand if there are any timeframes or ROI requirements that you can fulfill.
Experience Is Everything
Like most entrepreneurs in the fintech sector, there is a high chance you are young and full of energy. While you may have the grasp of things, there will be a good chance you may lack experience in running a financial firm.
Fintech is a highly evolving industry and having the sagacity of knowing when and if to mold services or not can be a make-or-break decision. To avoid this, the best option is to on-board advisors or hire professionals.
This can increase your expenses, but can also ensure long term viability of your fintech startup.
Location Is Key – Even In a Borderless Industry
The globalization impact has seen borders erode as fintech firms increasingly rely on online delivery to different countries, regardless of where they are based.
Yet, where they are based can have a large impact on their success. The size of the local industry, economic factors and the right government policies can boost chances of success.
Even then, there are fintech services that can be aimed towards a particular geographical area. This is clear if you break down the number of startups region wise. USA fintech startups top the news, with more than 11,600 startups this year alone in the country (out of a total global 26,300).
Focusing On The Wrong Metrics
Any startup, including fintech, is more than likely to see a super growth. Hundreds, perhaps hundreds of thousands, may sign up to your services. This can be a good way to market your startup and show the world that what you offer is in demand.
But don’t forget customer retention. Bringing in new customers can help you grow, but holding on to existing ones is the key to sustainability.
You can help keep them on-board by building a good relationship, understanding their evolving needs and keep updating your services to match their expectations.
