Fintech Boot Camp Promises Tough Love for Fledgling Startups
In an unfinished space called Grind — a somewhat counterintuitive name choice for a workplace meant to be fun and to foster creativity — Startupbootcamp Fintech New York is set to welcome its first class of 10 startups.
The downtown New York facility, leased from Verizon, has the requisite whiteboards, open work environments and meeting spaces found at the many other fintech accelerators out there (there are 172 in the U.S., according to one estimate). But there's also something else going on here.
There are 225 mentors enrolled in Startupbootcamp Fintech New York (say that five times fast) — more than 20 for each startup, an extraordinarily high mentor-to-mentee ratio. This gives the name "boot camp" some legitimacy. No one has to do pushups, but there's an intense schedule planned of lectures, classes, and programming workshops.
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The mentors started in right after the applicants' initial pitches, like on television's Shark Tank. (Those accepted to the 13-week program, which will begin on April 18, received far less money: a $20,000 grant to help with living expenses.)
"There are mentors who offer advice and feedback on the pitch, the product, the market size," said Jesse Podell, a managing director at Startupbootcamp "The idea is to not to tell them what to do or what you would do, but just have an interactive conversation where perhaps they can walk away with a relationship. So even the teams that weren't selected walked out glad that they had made a useful connection. Because for early-stage startups, they may never have talked to somebody like that before."
The feedback is candid, said Podell, a former securities trader. "We train our mentors to be nice but not too nice," he said. "You're not serving [startups] if you're not taking them to the mat on certain assumptions they have."
This will help prepare them for the real world. "At startups, until you externalize and start talking to people, it can be a challenge to talk to a banker who might say, 'I would never use that,'" Podell said.
In some accelerator programs, the advisors are virtual — on call via email and phone, but not physically present. At the boot camp, they meet with teams in person, and some stick with their team for the duration of the program.
A major selling point for participants in the boot camp is the partnering institutions. "The fact that we have banks and payment networks helps us validate what we're doing," said Zohar Steinberg, founder of token (spelled with a small "t"), one of the 10 startups in the New York program.
The partners also include Santander, Rabobank, MasterCard, Deutsche Bank, Thomson Reuters and the venture capital firm Route 66. They're looking for investment opportunities, pilot projects and employees.
Madrid-based Santander began talking with Startupbootcamp a year ago about doing something in New York.
"We wanted to start looking at the ecosystem on the East Coast," said Pablo Ruiz, head of open innovation at the bank. "New York is a great ecosystem for fintech. We started to look at how we could participate in the ecosystem and work with talented startups to understand how we could bring innovation from an outside-in perspective to Santander."
The bank is not looking to buy startups at this early stage, he said, but wants to work with them and help them grow. It plans to assign a banker mentor to each startup.
"In this process, we gain insights, see how they evolve, and we can then look at partnering with them," Ruiz said. "But they're still at an early stage. It's more about, how can we see new technologies, new business models and work with them?"
The corporate sponsors and advisors will help run pilots and proofs of concept and find ways to work together.
"If the startup is growing a little bit and it turns out that it's more of a feature, not a company, there's an acqui-hire potentially for these banks," Podell said.
Some startups will ultimately receive investment, others will be acquired outright.
"Many of these banks have their own VCs internally," Podell noted. Many have capital to deploy.
Choosing the Teams
Startupbootcamp started its fintech program in 2014 in London, then moved to Singapore. New York was considered a logical next step, given its status as a financial hub. "We have a good fintech ecosystem here that could nurture something like this," Podell said.
The group solicited applications from fintech startups for three months and received more than 400. Staff and partners took a month to pore over the submissions. The team held 13 one-day speed-dating sessions, in Buenos Ares, Sao Paolo, Mexico City, Boston, New York, Atlanta, Chicago, Los Angeles, San Francisco, Toronto, and two in New York. Five teams came in the morning and pitched for five minutes each, and five came in the afternoon and did the same. In between, the Startupbootcamp team sat at a table and the startups visited with them.
They chose the 20 teams they liked the most, and at a "monster event" selection weekend at another Grind space, 10 final teams were chosen.
The teams were selected partly according to how well they could explain their ideas.
"A team's ability to properly convey the message and problem they're solving gives them an infinite better chance at getting into one of these programs than those who are waffling or not quite clear," Podell said. "If you can't describe to me like a third grader what your app does or what your product is, how on earth are you going to be able to sell it to anybody? The way you can convince a room that you're that person is by having a very simple, clean message about what you do."
The chosen startup teams were given a month to get their lives in order, then they will come to New York.
One of them, Boston-based AlphaPack, is creating a tool banks could use to help customers manage their money. It's designed to be embedded in an institution's online banking software.
"The minute you log on to online banking, it's giving you advice," said Ravi Balasubramanian, CEO and co-founder of AlphaPack.
It uses Yodlee's account aggregation service to bring in information from accounts customers have with other banks.
Rather than forcing people to think about saving and budgeting, the tool is meant to help people achieve their goals like getting a mortgage, he said.
Much of the value of Startupbootcamp, Balasubramanian said, is getting advice from people who have experience and "getting to the right people where we can start having a conversation, what requirements we have to satisfy," he said.
It plans to connect suppliers and buyers on its platform and solve invoice payment problems.
"Permissioned and private blockchains will be common in the payments world," said Arturs Ivanovs, co-founder of Factury. "This holds a challenge for banks, to create systems on blockchains to communicate with each other. There's no better place to build such a platform as in an accelerator with so many experts in one room."
The Factury team hopes to move from Latvia to New York permanently.
Steinberg's token aims to build a digital identity layer between online shoppers and payment gateways. It would provide a mobile app somewhat like PayPal that would provide a virtual card. Consumers provide their name, card number, expiration date, security code and other details when they use the mobile app. token then generates an alternate identity that includes a pseudo-name, a 16-digit card number, an associated expiration date and card verification value.
"Even if the merchant being is being hacked and information stolen, you won't be affected," said Zohar Steinberg, token's founder.
Sometimes Startupbootcamp connects people in different areas in large organizations like Rabobank and MasterCard who have never met or had a chance to work together before. "Now you have people within the bank across the business lines actually collaborating with each other, thinking about innovation and having fun," Podell said.
The boot camp will also connect the startups with venture capitalists.
"Startups can't get enough of VCs," Podell said. "We're going to load them with as many office hours as is humanly possible, and hopefully more than one associate or principal from one of these firms will take the time to do 20-minute back-to-back sessions with the teams and get to know them."
Some mentors are motivated by wanting to be on a board of a fintech company or to angel-invest in one. But most do it for fun, Podell said.
For the first weeks, they do a deep dive into the startups' business models. "I'm a big fan of lean startup [methodology], and trying to validate assumptions and thinking of what their value proposition truly is is a really great way to start," Podell said.
Experts in residence will give lectures on subjects like public relations, cloud computing and "virtual CFOs" who act as chief financial officers-for-hire. A law firm partner will provide more than 100 office hours and offer sessions on legal and compliance issues for startups.
"People aren't doing startups because they're cool," Podell noted. "You'd have to be crazy to go into this industry and try to be a startup because you're cool, because it's so heavily regulated that you can get killed. That's why we have the support to help understand the legal part of the business."
The final "demo day" in July, in which the startups will pitch their technologies to potential investors, is not the end-all be-all that it is for some accelerators.
"Demo day is fun and it's amazing, but if it's the first time they're meeting investors or really showing their proposition to the world, then we haven't done our job properly," Podell said. "Life is not about demo day, it's about building relationships and connections and it takes a long time. Our demo day will be more of a celebration of them having completed this very rigorous, intensive program. Our schtick is, Give us 13 weeks and we'll get you wherever you need."
And then? "Then we free our teams into the wild," Podell said. "We let them go and try and to start doing business." Podell and his three staff members at Startupbootcamp Fintech New York will "reboot," and may work with startups in other sectors, perhaps using the same offices.
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