Posted by Cognito on Mon, Apr 20 2015

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How to Get Your Fintech Startup Funded by Venture Capital

Over the past week, we’ve been publishing thoughts and insights on the latest trends in the financial technology industry, gleaned from our time at the New York Fintech Startups Conference. One inescapable fact we noticed during the day-long event at Webster Hall is that there is no shortage of folks out there with great ideas to transform the financial services industry looking to start fintech companies.

So let’s say you’ve got your great idea, a small but dedicated team, and the latest app poised to set the financial world afire. Now, of course, all you need is VC funding, certainly no small task in itself. But don’t fret; Cognito is here to help. Several VC’s, as well as founders of their own successfully funded fintech startups, offered their advice on how to get funded and off the ground during the conference. We’ll now share the best bits with you.

David Teten(@dteten), a partner with ff Venture Capital, said oftentimes budding entrepreneurs falter at the earliest and perhaps easiest step on the path of getting funded: following the instructions.

“There’s detailed information on our site on how to approach a VC, and things we look for in a business plan,” he noted. “People often fail to even read that.

Teten said while his firm are generalists, they have a particular interest in funding fintech companies. This is because they seek to invest in “established profitable industries that are ripe for disruption.” In particular, Teten singled out asset management as a segment of financial services that is overdue for fintech innovation.

Brooks Gibbins, who founded the New York-based VC firm Fintech Collective(@fintech_io), also supports the notion that asset management – and wealth management in general – are areas for fintech startups to target. He explained this is because entrepreneurs should seek to exploit areas of disconnect where user experience can be improved.

“The current financial advisor-client interaction is totally disconnected from how people consume information in the rest of their lives,” he said.

Because of this, he said consumers will soon demand a change in the how their wealth is managed, and fintech companies will power the new paradigm.

“What’s the sustainability of a firm charging 125-200 basis points for alleged active management when you can get access to an ETF or index-based fund for a fraction of that?” he asked. “The entire model is lame.”

Leigh Drogen is a former quantitative analyst who started his own successful fintech company, Estimize. He offered some perspective from the other side of the table, sitting across from VCs and asking them for money. He said the first – and hardest – lesson he learned was how to pitch. Without a good pitch, even a great idea may never see the light of day.

“I didn’t have that skill, I had to learn how to do it,” he recalled. “I read every book I could, and talked to a ton of people. The way you approach the meeting is everything. VC’s can read on your face if you believe the story you are telling.”

Like Teten, Drogen advised fintech startups seeking VC money to be as prepared as possible beforehand. They should have a solid business plan, be able to explain how the company will grow, and talk about things like how much capital they have raised and their cap table.

For all the fintech startups out there, we hope we have provided some valuable insights to you. Keep us updated on your journey and let us know how we can help!

Financial Technology, Fintech, Innovation,
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