Look at various dimensions, from geographical reach, investor types, crowdfunding model types and marketing strategies in phased approaches. This can allow you to build a business, while learning from your own experiences as you grow to the next level.
Fintech is a broadly used term but where's the specific business opportunity?
From banking, online payment systems, e-commerce, P2P platforms, real estate crowd investing and more, there are a myriad of businesses looking to leverage new technology to grow financial services.
Recently, many articles have discussed the rise of fintech. Many billions of dollars invested and countless more planned. But what of the companies receiving the investments and others pitching for funds.
It's unfortunate that in the world of business, many companies struggle to make it. Not only does this apply with fintech initiatives, but its possibly even more pronounced here. What makes developing finance innovation fraught with risk?
No-one's really done it before
No prizes there. There are of course advantages at being a first mover, but clearly some disadvantages exist. Are there case studies or blog posts of what happened to the early crowdfunding sites around the world that cease to operate? What were the main reasons for their demise or success. It may seem simple, but the main reason is often that not enough planning was done at the start or that the environment wasn't clearly understood or leveraged in an appropriate way.
The legal framework hasn't caught up (yet)
Though things are changing, some market regulators around the world are still taking a wait and see approach. This means budding entrepreneurs in some countries are yet to test market their ideas, and beta versions of online investing platforms are gathering dust. When it comes to innovating in financial services, regulatory considerations are much greater than if you're designing a 3D printer.
However, when it comes to online investment models, different laws often apply to different crowdfunding models. When dealing with an equity crowdfunding site or a P2P lending platform, or when looking at equity versus debt models, the law may take various approaches. For example, there are different requirements when looking at deal flow or soliciting funds from accredited investors or from retail investors.
While many fintech businesses would like to market to as bigger crowd as possible, sometimes it can make sense to tailor a business plan to grow in phases.
Approach the market with a model that's allowed today, and use this experience to plan for tomorrow - when regulations are clearer or more inclusive.
Though the technology is available, it's important to consider market readiness or adaptations that can shape success.
For example, while the technology has been available for several years, crowdfunding platforms have not enjoyed the same level of success in Asia when compared to Europe or the US. This applies to both donation and equity platforms. Why then are Asian consumers not embracing this change or are there niche businesses that are better suited? While the regulators have played a part, there's much more to Asian fintech and crowdfunding than regulations. Many actually believe Asia is a perfect place to develop and grow fintech.
Another area to consider is partnerships. If you're planning to disrupt a traditional business, don't overlook synergies by incorporating the strengths of existing business models. Identifying traditional competitors is a good way of spotting future partners.
To disrupt does not mean to discard
Traditional business models in real estate financing, fund raising, venture capital and alternative banking are among several verticals actively embracing change to get ahead. In the next articles in this series we will shine a spotlight on several examples and see how progress is being made.
Improving understanding among both service operators and users
When discussing fintech, some traditional business fears being left behind while others say theirs is not an area that can benefit. However, perceptions change once the benefits for both are better understood. For example, today many traditional broker dealers communicate via email, telephone and meetings. By moving to an online platform, with total online deal flow, it's possible to connect thousands instead of hundreds of potential clients and for them to search information in a timely manner.
Better online content management for broker dealers provides greater clarity to their networks as well as tools that allow investors to model portfolios and measure performance in real time.
Fintech can be as simple as developing a secure online deal-room to connect and share knowledge in order to make better decisions.
In the end, it helps to talk to someone who has partnered with many different industries who have already taken steps. By understanding their feedback, it's possible to stand on their shoulders, and achieve higher goals. It is after all, all about those strong foundations.
Grow Advisors offers consulting and professional services on crowdfunding, crowd investing and p2p finance globally. Our advisors develop platforms that connect startup ecosystems, set up marketplaces and co-investment models, structured investment instruments, and find innovative ways to create finance solutions globally.