Many fintech start-ups have emerged over the past few years, and although there have been some success stories (WorldRemit and Transferwise for example) it is inevitable that some companies will succeed and others will fail. But what is that makes the difference between success and failure? Often it takes more than just luck, timing and a good product, there’s a lot more planning and research that goes into making a start-up a success. bobsguide, brings you some of the top industry tips for creating a successful start-up from the initial stages.
According to Adnane Charchour, CEO and Founder of Scivantage: “A successful start-up is the union of four main elements: product, market, people and capital. These elements have to come together in perfect harmony, and evolve in tandem, in order for the start-up to be successful.”
1. Solve a real problem
Nektarios Liolios, Co-founder & Managing Director Startupbootcamp FinTech, believes that before start-ups do anything they must confirm that their solution solves a real problem. “For your start-up to succeed you must be solving a problem, a real problem,” said Liolios.
Many entrepreneurs have a tendency to do what they know and many founding stories have been driven by the entrepreneurs need to solve a problem that either he or she, or their client keeps facing. “BlackLine began because an old client was complaining to me about their manual reconciliation processes. I got frustrated on their behalf and set about creating the first automated accounts reconciliation solution for accountants. I would advise any start-up to be on a constant search for these kinds of annoyances; these are the gaps in the market,” said Therese Tucker, Founder, CEO and Chairman, Blackline. “You need to have the drive to fix things, to see those flaws in the market and to want to address them.”
It is easy to get frustrated at the lack of solutions to the simplest problems, however, there are usually bigger problems to solve that would be far more in demand. “First, the product needs to be unique, innovative, and evolving, and most importantly, it must solve a specific problem for the target customer at the right price point,” said Charchour.
2. Know your market
A market validation must be done to test the product concept against the potential target market and should be done before introducing a product. This consists of a series of interviews with people in your target market which will help to better understand the target market and in turn help you to build a better product.
“Do your market validation, make sure what you are building is exactly what your customers need. Focus on one thing and do it well. We see so many teams that come with visions about all sorts of bells and whistles without having build something that does one thing so well that every potential customer will want to use it,” said Liolios.
It is also important for entrepreneurs to think ahead to how the market will be in the future and also whether the industry they have chosen has high potential for growth. “The market needs to be well defined, well understood and large enough to sustain the start-up, allowing it to prosper through its various stages of growth. Timing feeds into this a great deal, and there is certainly an element of luck involved, alongside connections made and networks fostered - but the entrepreneur must be savvy enough to understand the ecosystem it is living in, and more importantly, how that ecosystem will be evolving within the next five to 10 years,” said Charchour.
3. Do your research
Just because you think it would be a great idea to deliver Starbucks to offices in London for example, check that someone else (or Starbucks themselves) hasn’t already come up with the same idea. “Do your research. The number of times we hear pitches about unique solutions and I have to point out that a simple google search would have coughed up a handful of serious competitors,” said Liolios.
It is also important to know what your local and online competitors are doing. Research can often uncover areas that your competitors may have missed and by researching your competitors products and services it could help you to make your business even more appealing to customers.
4. Pick the right team and maintain your company culture
You should give the same consideration to picking the right team to work with, as you do picking a friend or a partner. It is important to question how long you have known each potential member and whether you have the same goals and interests. It is also essential to consider how much of an asset to the company that person will be and whether they will better both you and the start-up. “A great team is important, as is the right partners. In FinTech things are unlikely to happen overnight and working with programs like Startupbootcamp FinTech can help,” said Nektarios.
Once you have your team it is important that each new hire fits into your team dynamic and company culture. One of the most important jobs for the CEO is to develop a cultural direction for the company which answers questions such as: what central values are important to our company and how will these effect our day-to-day operations? “A successful start-up is about the people and the culture, passion, drive and commitment exemplifies to clients and demonstrates through its products. The entrepreneur needs to make sure to constantly evaluate that its organisation achieves right mix to maintain the company’s culture,” said Charchour.
According to Duncan Peters, CEO, eRipple, "The key to developing a great product is maximising customer value while minimising waste. The best people we have around us are the ones who say… “Show me the evidence!” when we want to build a new feature. The evidence is your customers proof that you're solving a real problem for them. If the evidence isn’t there, we don’t build."
5. Make sure you have enough capital
Starting a business can be expensive and no matter how great your concept is, it takes capital to get it off the ground. It is important to know your overhead costs before you start searching for funding sources. Licences, permits and taxes can take a large amount of your profits and cannot be avoided. Common overhead costs include warehouse space, retail space, equipment and labour.
According to Charchour: “Capital represents one of the most important ingredients (of a start-up), yet this is often underestimated by many entrepreneurs. Capital to a start-up is as important as nutrition is to the human body. It is essential to have sufficient intake at the various stages of growth in order to achieve and sustain a long lasting enterprise.”
6. Take a Risk
Some entrepreneurs are worried about taking risks when they first start a business, however, those who have been in the industry for a while say in order to succeed sometimes you have to take a risk. Al Karim Somji, Founder, Zafin said that he has learnt that as an entrepreneur you need to be able to consider risks but also take more chances.
Tucker also said that entrepreneurs shouldn’t be scared to take risk if it is going to make the product better. “Don’t be scared to take risks if it’s going to make your product better for your customers. BlackLine migrated to the cloud in 2008, which was a risky move for us as it promised less upfront cash. What it ultimately meant for Finance and Accounts departments, however, was that they have complete control and visibility of their financial processes, as well as better security; and we were rewarded with 428% growth between 2010 and 2014.”
James Tuckett, MD, investUP believes that validation is important when considering a start-up, as is identifying and taking care of your customers. “Validation of your ideas is obviously key when considering whether to build a start-up. Validation means the confirming and researching that a product or service meets the needs of its users. A start-up has two customers they need to take care of – the customer and more importantly prospective investors. Two sides of the same coin, one offers traction, one offers streets made of gold. Without these working in tandem a business does not have a chance. At investUP we spend over a year doing just this. Also validation of your businesses product will go some way to pleasing the investors in your start-up.”
And what other advice would industry experts give to entrepreneurs in the initial stages of a start-up? “Do something that no one else is doing, do it well, do it with passion, and make sure you have the necessary funding to see it through,” said Charchour.