When speaking to Juan Alonso-Villalobos, Board Member for fintech startup consultation firm Startup Wise Guys, he stressed the importance of innovation and advancement of the fintech sector coming off one of the industry’s down periods.
Alonso-Villalobos also went into detail on some of the shared qualities successful startups have as well as early mistakes they tend to make, whilst also discussing some of their programme offerings and the potential of the African fintech sector.
Payment Expert: Firstly Juan, what is the one identifiable trait that is commonly shared between all up-and-coming startups?
Juan Alonso-Villalobos: The startups we invest in have several points in common: a willingness to change and improve the world in a specific area, even if it’s a small area; passion for what they do; knowledge and experience in their specific market.
PE: What are some of the best practices fintech startups should be enquiring about after a year where investment & deals saw a decline?
JAV: Startups should always create their company for the customers and not for investors. Investors are good and often needed, but even from a cash perspective the best investor is always the company’s clients. So founders should mainly be concerned about the evolution of the markets they are in, the proper product-market fit, and the pain they are solving.
Having said that, in the existing situation, founders should also be more than ever aware of cost management and what we call “be in survival mode”. This means keep on advancing but take on the lowest possible risks, evolve towards variable costs as much as they can as well as focus on where they are better than the rest.
PE: Talk to us about some of your accelerators and why startups should look at integrating it into their growth strategy
JAV: Although depending on the specific stage of a startup this could be slightly different, the pace of business in general is accelerating to a point that founders have not been able to control or think enough of the best way to push their project.
In some cases they have a fantastic technical solution but have no idea of how to approach the market; in others they assume the product, as-is, is going to be loved by the target market but have never properly researched the product-market fit. Others invest too much time in getting their product perfect instead of going to the market and listening to potential customers.
What we do at Startup Wise Guys is provide them with the tools, consent and specialized mentors which help them dramatically change their rhythm while focusing on the important targets.We support the startups from the very beginning to far after the program has ended. We push and help them to get the first results and the desired traction to get to the next step.
PE: The Baltic region has quietly become a hotbed for fintech innovation & growth. What do you attribute for the overall success of the region and can it sustain its growing talent pool?
JAV: In the Baltics, as is the case in other overlooked markets, there is a will to change and to improve. This can be already seen in the people and the founders, particularly in the fintech arena, where regulators have also seen the opportunity and have facilitated the evolution.
There is a spark in the ecosystem where a lot of knowledge is shared and self-nurtured. If you add to this the fact that given the size of the local markets, the startups are international by default (a must for any potentially successful startup), then the chances of the Baltics hub to continue its success are high.
Also the rest of Europe is already accustomed to linking the Baltics to an innovation market where investors and customers are more ready to listen too.
PE: Africa is also a region where Startup Wise Guys have invested heavily into. Talk to us about the African fintech sector and its potential.
JAV: Africa is a whole different market. A vast majority of the people are unbanked and the usage of technology is very different. Lending, payments, and scoring methods are very different too (also country per country) as well as customers’ and financial entities’ behaviors.
In this scenario, we think that our experience – we are already invested in more than 350 startups – allows us to be able to push the fintech development in Africa forward in a meaningful way.
Furthermore, in Africa most of the services and proposals we Europeans see as ‘given’ do not even exist. Thus, the potential of the market is very high.
PE: Lastly Juan, could you let us in on some of the mistakes startups make and how Startup Wise Guys help remedy these mistakes?
JAV: This is not an easy question! Although some mistakes are more general and could be described as such, in most of the cases they depend on the specific startup and its particular value proposition and market players.
Trying to look for commonalities, particularly in fintech, one serious mistake is to think that all banks or insurers are evil and that regulation is just absurd red tape. None of these statements are correct. Cutting corners in regulation, profiting from slow adaptation of the regulator, or trying to go too fast is always going to be a risk in the future. Regulation is there (of course, per definition, it can be improved) particularly to protect end customers.
Regarding banks, they should be perceived as partners and potential customers (and maybe potential exit strategies). Understanding why they do what they do is key to increasing the chances of future success.