As the disruptive world of Fintech teeters on the cusp of greatness, two very clear business models are emerging. The golden, growth-fuelled unicorn and the die-hard cockroach. I believe that neither are the future of Fintech. I believe that a new breed of Fintech firm is in the making.
Growing into the future of Fintech
Unicorns are typical of the Silicon Valley mindset. Growing quickly on investor funds, their efforts and profits are primarily channelled into fuelling this rapid expansion. On the downside, Unicorns are more interested in building the base of customers and enhancing valuation, however, often at the cost of profitability. “Build it and the profit will come” is the mindset that they build their fortune on. Make no mistake, however, that this strategy has paid off for many of the Unicorns out there.
However, the heyday hype of Fintech is now gone, and investors are looking for resilient and profitable businesses that still offer high growth opportunities. We all know that of the thousands of Fintech firms out there, only a very small proportion will ever reach the heights of Unicorn status. The rest will either grow steadily, reach their peak and continue at the same pace or unfortunately, go out of business as many startups do. Investors want to back the steady growers and are happy to forgo mindblowing returns that come from backing a Fintech Unicorn. Slow and steady wins the race in this case.
Survival of the Fintech fittest
In contrast to the Unicorn’s pursuit of growth, the foundation of the Cockroach business model is resilience. Cockroaches are resilient and have the ability to weather a nuclear storm. Unassuming and often undervalued, these Fintech companies often come out of nowhere to launch surprise attacks on the marketplace. Working better as a team than in an individual capacity, these startups know the value of partnering with complementary businesses or promoters.
While cockroaches are slow to grow and investors may not exit with as high a multiple as they perhaps hoped for, Cockroaches offer a steady, long-term investment for those looking for a more reliable return on their investment.
The future of Fintech: Adapt or die
While the business models of the Cockroach and the Unicorn each have their positive and negative attributes, I propose a hybridisation as the solution. Following the principles of natural selection, useful variations should be preserved, while those that don’t serve survival should fall away. Adapt or die, as it were.
Enter the “Uniroach” – a term coined by Vedanvi. A Uniroach is an adaptation that pursues the best of both worlds in Fintech startup business models ensuring a prosperous future of Fintech. In other words, the growth rate of the Unicorn with the profitability and sustainability of the Cockroach.
Let’s look at how this can be done:
- Fuel growth not just from investment, but by shoring up reserves to reinvest. In this way, the founders give up less equity and have more skin in the game.
- Create a magnetic market force making yourself attractive to the right investors, customers, partners and suppliers. This requires going back to the basics. Ask yourself:
- What is your purpose?
- How are you going to help achieve the goals and objectives of your clients?
- What is your profile in the market and how can you improve it?
- Have you formed valuable partnerships and how good are you at it?
- Once you start generating momentum, keep your eye on the prize and think about how you’re going to generate profit – not in the future, but right now. Your core product may need users first, but why not have a side product that builds your base revenue to cover current expenses?
- Innovate operationally so you don’t build inefficiencies as you grow. You certainly don’t want the same legacy problems that incumbents have –it’s too difficult for them to turn back now. You can use innovative technologies to reduce costs, operate a leaner and faster delivery machine while also utilising data intelligence to anticipate your customer’s future Fintech.
- Don’t underestimate regulation, it could kill your business! As you get busy, it’s easy to overlook compliance requirements, but remember, it only takes one innocent oversight and you’ll have a regulator knocking on your door waiting to shut you down because customers are at risk. Even a cockroach can’t survive a regulator’s onslaught. It’s the worst kind of poison, especially for start-ups.
- Nurturing the right company culture is also imperative to building scale and sustainability. Teamwork and leadership are key to nurturing the right environment where high growth is sustainable.
Do you agree that the future of Fintech lies in the adaptability of the uniroach business model? Would you like to know more about how Vedanvi can help your Fintech company to grow and turn a profit? Schedule a call for a free consultation here.