9 advices on how to approach a VC (with a Fintech flavour)…

Why 9 ? Don’t know.
On a plane back from Lisbon and in a very intense period of startup coaching, mentoring, scouting and showcases (NEXTBANK EU, Latam, Sibos, OpenAxel and DACH forum, plus Bootcamp ongoing).

So here s my contribution to how to approach a VC, from my humble experience so far :

1- talk with someone who knows the VC and can vouch for you. Not for the idea, for YOU as an entrepreneur. Sending a “hey Matteo, I have this great idea and here’s my PowerPoint” is a 3 times a day story, especially in this context with Fintech money not being very huge (yet…). If you don’t know the VC, get there. Follow them, see where they are talking, get info on the portfolio and the fund. In other words, give context.

2- send a one pager to start with. Do not overflow. Imagine that very often the first thing any of the partner you approach will do is to talk to the other partners. So the easiest you make that, the better chance you will have to catch their attention.

3- facilitate the work of the VC. Send already history of similar companies, valuation, acquisitions, IPOs. The easiest the diligence, the more straightforward the answer.
Fintech is a world with little or no history or data for VC, so the difference or the game you want to play is about the team and the fact you control well the domain you are getting on.

4- read a Term Sheet generic template you can download from Internet. There are protective provisions and you need to be prepared to accept them. This is crucial especially if you never raised money before. Nothing pisses off more a VC than having to explain what the very basic of a deal is, in series A.

5- in series A we focus on opportunity, not actuals. Highlight what problem the raised money is going to solve. Again, because of lack of history and data, valuation of a startup varies a lot. Your revenue might not be enormous and it makes a difference if you actually have more than a pilot.

6- there are thousands of banks in the planet… Say upfront whom can you sell to now and whom you cannot. Show you thought about it. We all understand that is complicated and lengthy and costly. But if you segment well your banking customers by needs, geography, connections amongst themselves and emulation factor, you show awareness and inspire confidence.

7- share your burning rate. Show it. Always good to understand how much did it take you to get where you are. VCs love entrepreneurs and love more cost conscious entrepreneurs.

8- highlight the Magic. But it’s ok if you don’t have it. As long as it s not too easy to copy it. If you have patents, say it. I you don’t, pls say you thought about it, because maybe the simple answer for you to give is “if we go fast enough we won’t need a patent”.

9- Never close up on a VC. VC loves startup who are progressing, with or without money, so if you do progress, give heads up.
Think of it : Fintech VC business has just started. Partners will change, new funds will rise. Keep the network alive without being invasive. It’s all about timing, remember.

I don’t want to give any lesson here and you can always claim that its so easier when you are on the right side of the money, but i really wanted to give a personal view on what works…

Stay tuned

Matteo

The question is: do banks even care (about Innovation) ?

Thinking out loud in the middle of my home town summer time…

You will not find a single financial institution saying “we don’t care about innovation” … It does not look right, not good to investors, and not very stimulating for your customers.
Without being too generalist, you innovate because you have something new to sell or build, or because you can do the same better, cheaper or faster.

Innovation means efficiency, more often than not. And unless you have very stupid customers or shareholders, efficiency means leaner cost structure, and very often it comes handy to no lay off people and keep doing the same with the double (conservative) of the resources needed.

Almost every banker will name regulation as the most compelling reason stopping innovation to happen, or at very least make that process very difficult.

This is half of the truth, if you hear me.
The other half is about …..
…. Technology readiness (and subsequent lack of agility).
You can build a full bank, in the cloud, in few months, with close to the same security and scalability standards of any other bank in the market. This “new” thing can also handle alternative currencies, multiple wallets, mobile payments, Personal Finance Management, and if they are honest enough, even services like forex AND remittances way cheaper than the actual bank rates (and for sure cheaper than Western Union).
Ask a “old world” bank to do the same, and the CIO will say: sure, but with a multimillion dollars budget and one of the IBMs of this world drinking too much champagne way before Xmas.

The question still remains: do banks even care ?

Banks are, like every business, a collection of human beings, that in average tends to put their own personal agenda on the forefront of the criteria influencing their decision. It s human.
We are at this generational break, where most of the highest ranked managers of the top 100 banks in the world will NOT see the real disruption coming.
All they see today is that some guys not wearing suites anymore, few very successfully, building businesses in the banking space, and in a new paradigm.
Say peer to peer and peer to SMS lending.
Take all the IWOCA, WONGA, ZOPA, LENDDO, AFLUENTA. AMP and even the microlending platforms of this planet, all together: I don’t know if anybody has done it yet (why bother, again) but I am pretty sure they are, all together, damaging a single digit fraction of the whole credit business, worldwide.
So many of the today decision makers will no longer be by the time all that will become a real disruption.

Too simplistic? Maybe, but this is my blog and there is freedom of expression right ;-)?

It takes a bright, charismatic, outspoken, self awareness energy to embrace the innovation and disruption side of the financial services. You know why?
Because compared to the way they are today, the ” disrupted, innovation-driven, new ” financial services would be
– cheaper
– inclusive (not cheaper for the rich)
– more efficient
– for the greater good

… and there is only ONE Professor Yunus, of the Grameen Bank, every HUNDREDS of today financial institutions CEOs.

Stay tuned, have been off for a while, lot of things have happened, need to spend some more time writing …

Matteo