FinTech Accelerators Fuel the Next Generation in Banking
For the last decade, emerging startups paved the way forward in financial services with breakthrough products. The level of deal activity and total investment breaks or matches records annually — last year, more than 5,500 deals gathered $210B in funding. On the surface, it seems fintech startups should have it easy when it comes launching a new venture.
However, the opposite is closer to the truth. Founders (even those with a banking background or previous startup experience) struggle moving from 0 to 1 in building a new platform. For direct to consumer startups, launching a new business against established enterprises is an uphill battle. B2B companies selling infrastructure don’t have it easier either in asking corporations to ‘rip and replace’ existing tech. The challenge comes down to having a solid, foundational opportunity from the beginning.
Institutions, well-known enterprises, regional hubs, and universities have rallied for innovation by operating accelerator and incubator programs across the US. There are over 200 in the US alone, which include popular names such as Y-Combinator, TechStars, and Plug and Play.
In cohorts, founders receive guidance in taking their idea and building a functional product. There’s also support in pitching to and meeting potential investors that can provide capital. For the program managers and sponsors, building the next major player in financial services is the ultimate recognition and opportunity. Here’s an overview on benefits to those leading startup cohorts, planning and resources for founding teams, and 25+ programs in the US that are open now.
BRIDGE BETWEEN INDUSTRY VETERANS AND THE NEXT GENERATION
Many of the sponsors from accelerator programs listed below are banks (from regional mid-sized to top 3 retail giants). Why would these traditional institutions support emerging companies that can possible be competitors? Their next ally can be one of these startups that are in early development, but building the future of banking.
In this response, there’s a change in attitude towards the new wave of fintech (from previous decades). No longer seen as disruptors, these startups are potential partners and suppliers to financial institutions. A clear example comes from Plaid (bank data aggregator in the US) — the unicorn now has a product for institutions to catch up to modern-day data sharing for bank clients with custom controls for risk.
Banks are also open to acquiring some of these companies as part of their expansion strategy (buy vs. build). It may be less costly and faster to integrate new technology from a startup than overhaul legacy infrastructure and start from scratch. Other large, non-bank enterprises are also taking a similar approach with innovation labs.
program SUPPORT FROM fintech accelerators
Most programs offer similar core benefits:
Focused on a particular niche within financial services;
Mentorship and guidance in developing a product from idea to market launch;
Building partnerships with industry contacts;
Custom workshops & seminars based on product, use case, and general business areas (e.g. HR, fund raising, demo day);
1:1 and group sessions with other founders, investors, and industry experts;
Cost-free and equity-free options may be available (some provide funding in exchange for equity);
Supportive of minority founders and projects serving unbanked or underbanked in the US;
Exposure to investors or investment communities (i.e. angel investors, venture capital firms);
The process may differ among accelerators, but the theme of supporting innovation is the north star for all program sponsors.
KEY INSIGHTS FOR FOUNDERS CONSIDERING AN ACCELERATOR
Despite some programs open to candidates at the ideation phase, many would like to see a prototype or actual product in use. In this way, advisors/mentors can directly develop the early product, refine business models, and then help with investor connections. The desired outcome is being ready for pitch day or demo day with a strong presentation of a sound product and use case.
Founders who are going through this for the first time can leverage the frameworks and support from accelerators, especially in navigating startup and fundraising plays. Experienced entrepreneurs that lead cohorts also provide a high level of expertise when it comes to strategic planning.
The first challenge is getting in: the acceptance rate from thousands of applications is less than 3% annually. The ability to submit a compelling application is critical. Speaking to the problem facing target users and the value your solution provides is a strong best practice. Here are a few other recommendations when submitting an application:
Founder-Market fit: Make clear connections between background & skills (founder + team members), how this mix uncovered a differentiated/unique value proposition, and how the team is able to build & grow a product into a full functioning business;
Clear vision: Be succinct in what the future looks like (with your platform) and why there’s a strong opportunity for your team to have success;
Concise format & flow: Ensure the application is easy to reference and impactful — remove buzzwords or ‘fluff’ that deteriorates the quality of content;
From the perspective of the selection team within accelerators, what content helps with their decision-making?
The strength of the team — beyond background & skills, what experience does the team have in building a business from scratch and growing the venture after graduating from the accelerator?
Value — How does your solution help others (e.g. target users)? What compels a customer to sign up and use your offering?
Differentiation — Being able to concisely describe your value proposition(s) in a brief statement is paramount for early stage teams;
Openness — Are you able to take feedback from others, be honest with challenges you’re facing, and make necessary changes to your solution?
Market size — what are the specifics for your target user and industry sector volume?
It seems easy to apply for multiple programs at once using the same application, but founding teams should consider the varying quality between accelerators. Lesser known programs may lack the same benefits as others with an established track record and successful alumni community.
If possible, reach out to previous founders that have completed a specific cohort and ask for feedback to determine if there’s a fit for your team and project. Some other considerations include surveying the staff and mentors that run the workshops — are there certain networks that would directly benefit your platform?
Lastly, it’s important to compare the benefits and downsides of being part of an accelerator program. The commitment in time and activity may detract your team from pushing forward on product development, gathering key personnel, or building critical partnerships. Some accelerators do require 5% — 10% equity in a startup to offset their costs to run the program as well. There’s also no guarantee in being able to successfully fundraise after graduating.
For cash strapped teams unable to hire or startups that need early validation for investors, accelerators can clearly help with exposure, refined market planning, and quality connections in a short timeframe (of weeks instead of months).
TOP LABS, ACCELERATORS for fintech IN THE US
Let’s finish the discussion with a list of 20+ programs in the US (sorted by region). Each accelerator has a brief description that covers specific area of focus, location, length of program, investment opportunity, and a direct link to learn more or apply.
Fintech Innovation Lab: based in New York, and co-founded by NYC and Accenture; for founders and early stage teams building tech for financial services. It’s a 12-week program that offers $25K (which converts into the company's next round of equity financing). No fee to apply;
Barclays Accelerator: the US version is also based in New York; this 13-week program to accelerate start-ups offers a seed investment of $20K from Techstars and a $100K option (as a convertible note). Their Demo Day is among the most popular of all accelerators and has global reach to other locations in London and Tel Aviv;
Urban-X: based in Brooklyn, NY and founded by MINI with JV partner SOSV— this 5-month program invests in pre-seed startups founded by shaping the future of cities through ‘urbantech’ (specifically in the energy & environment, and fintech sectors). Run twice each year with 10 teams per cohort that each receive $100K in capital.
Nokia Bell Labs: based in New Providence, NJ; Nokia Bell Labs runs a competition and awards a first prize of $100K, $50K for 2nd, and $25K for 3rd. The top 3 have the opportunity to continue work with NB Labs after the competition.
SOSV: based in Princeton, NJ; the global VC firm offers a 3-6 month intensive, co-located program with over 1K global mentors and an alumni community of over 2K;
DCU Fintech Innovation Center: based in Boston, MA; DCI is an innovation center committed to FinTech startups in the the Boston community. It offers $100K in web hosting credits from Google Cloud Platform;
Fintech Sandbox: also based in Boston, MA; the 6-month program is operated by Boston-based nonprofit dedciated to helping FinTech startups build products and apps. They offer complimentary access to infrastructure and platform services, including up to $15K in credits to AWS;
EvoNexus: based in San Diego, CA — this 3-month program (operated by CommNexus) focuses on both fintech and healthcare startups, centered on the San Diego tech community. Mentoring, workshops, space, and other services for pre-funded teams. Requires 1% equity from companies as its fee to support overhead covered their non-profit organization. No other costs to startups;
Nex Cubed: offers a 16-week semi-remote program in NYC that drives adoption of FinTech solutions and prepares teams for their next round of financing. Each company works 1:1 with an advisor (paid by the program) that provides exec-level support to founders throughout the entire program;
Plug and Play Fintech Accelerator: based in Sunnyvale, CA; P&P is leading startup accelerator with 300+ startups, 170 investors, and a broad network of university & corporate partners. There are three different programs (Retail, IoT, and Mobile and Media). Teams have the choice to take no funding or $25K - $500K in exchange for equity;
Binance Labs: based in San Francisco; Binance Labs runs a blockchain technology incubator focused on pre-ICO projects and teams. There are grants awarded of $15K to three startups in the open-source blockchain space;
Cardinal Ventures: based in Stanford University, CA; CV is an on-campus startup accelerator run by students, for students as two 10-week long programs of 12-20 teams annually. The goal is to supporting student entrepreneurship at early stages. No equity is taken in its companies;
The Hive: based in Palo Alto, CA; This accelerator’s investments are focused on areas where artificial intelligence (AI) drive future market opportunities. Seed financing can range between $1.5M - $2M in this 18-month program with additional support for future rounds of financing;
500 Startups: based in Mountain View, CA; This global VC firm has a network of startup programs in Silicon Valley. In the 4-month program, portfolio companies gain $150K investment in exchange for a 6% stake. There’s a $37,500 fee to enroll, which can be paid from investment proceeds;
StartX: based in Palo Alto, CA; The program (launched in 2013) is run by an educational non-profit that helps top entrepreneurs (tech and medtech) from Stanford. StartX offers to make an equity investment for participants of at least $500K through professional investor networks;
Alpha Lab: based in Pittsburgh, PA and founded by Innovation Works; the 4-month program delivers funding, advisors, office space, and a community of entrepreneurs. It runs each semester and selects up to 6 startups. Terms can range from $25K – $50K for 2.5% – 4% of equity;
SteelBridge Labs: based in Pittsburgh, PA; SL is an early stage, independent tech incubator. The program provides seed financing between $25K - $250K, plus an opportunity for co-investing from their investor pool;
SixThirty: based in St. Louis, MO; The program is backed by the St. Louis Regional Chamber and Cultivation Capital (VC firm). SixThirty chooses 8 startups annually (4 in the Fall, 4 in the spring). Investments go up to $250K across FinTech, InsurTech, and Cybersecurity.
Fishtech Labs: based in Kansas City, MO; Fishtech is an accelerator that offers $30K to early stage teams with new solutions delivering efficiencies and improved security controls;
ScratchWorks: based in Leawood, KS; The program connects tech firms with experts to advance the digital transformation in banking. Participants engage in pitch to a panel of leaders at the Barron’s Top Independent Advisor Summit. Winners can receive investment offers, support, and networking;
TechStars: based in Boulder, CO; A premier blockchain accelerator focused on distributed apps in finance, education, real estate, insurance, energy, and healthcare. Each company is offered a $100K convertible note and $20K for living expenses in exchange for 6% of the Token Reserve and 6% equity of the company;
Financial Solutions Lab: based in Chicago, IL; FS Lab focus on financial products and services innovation that addresses and improves consumers’ financial health. During the 8-month program, portfolio companies receive up to $125K in funding and mentorship from the Financial Health Network and JPMorgan Chase.
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