8 survival rules for financial technology startups

The application of blockchain in financial technology has always been the focus of venture capital and private equity investment companies.

So, the natural question to ask is: How can startups adopting blockchain technology survive in the fierce competition?

At the Empire State Ventures fintech conference in New York, some entrepreneurs and experts gave their advice:

1. Watch your spending

Stephane Dubois, CEO and founder of Xignite, a market data API company that recently raised $20.5 million in funding, said:

“As a startup, you have to be extra smart about your spending. You don’t want to run out of money, especially in the second half of the year when it’s going to be harder to raise money.”

But a common mistake startups make is spending too much money on office space.

He said:

“You may end up regretting spending too much money on an office.”

2. Location is important

Matthew Harris, managing director of venture capital firm Bain Capital, said he often asks entrepreneurs from out-of-town startups why they don't settle in New York.

“A lot of typical companies are in New York, and New York has a lot of ready-made advantages for financial technology companies.”

Pascal Bouvier, venture partner at Santander InnoVentures, agrees: "I'd love to say that geography is not a vector of success in an age of 24/7 connectivity, but the reality is that it is not. The value of networks in large cities is incalculable. In financial services and fintech, you have to deal with so many different stakeholders - incumbents, regulators and third parties - that are all connected in the workflow process."

Bouvier doesn’t think New York is the only option — he also considers Singapore and London as hubs for financial technology.

Scarlett Sieber, BBVA’s senior vice president of global business development, said:

“Proximity to potential customers and funding sources is very important. If your company is not located in a first-tier fintech city, it will be more difficult to get funding and attention. However, this does not mean that you cannot succeed in a small place. Dwolla is an example.”

3. Take regulation seriously

At the New York conference, many entrepreneurs and experts stressed the importance of building good relationships with regulators.

John Ramsay, Director of Market Strategy at IEX Group, said:

“Try to gradually build a collaborative relationship with regulators. Don’t expect a clear response from regulators right away.”

Trunomi founder and CEO Stuart Lacey noted that startups need to talk in a way that regulators can relate to.

“Regulators think in a procedural, normative way. If you talk about ‘disruptive’ and ‘completely rethinking’, that’s not going to work out well. Understand their mechanisms… and then speak in terms that they understand and have an open dialogue.”

At electronic checkout startup Viewpost, the first person founder Max Eliscu hired was the chief privacy officer of Royal Bank of Scotland.

"We knew regulation was going to be an issue sooner or later and we had to comply with it or we wouldn't have gotten to this point."

However, Eliscu also warned:

“Most people would probably suggest that if you’re not already regulated, it’s probably not a good idea to proactively approach the regulator and ask questions. Instead, you can approach the regulator through legal counsel. Get feedback and guidance in an anonymous way to help you understand: Are you getting too close to the regulatory red line? Are you taking risks?

4. Say goodbye to your personal life

Eliscu said:

“People have this fantasy that ‘being an entrepreneur is exciting.’ The reality is that being an entrepreneur is intellectually stimulating and very rewarding, but it’s not easy. It takes a lot of work. Work-life balance is not realistic for startup founders, and I think people need to honestly ask themselves if they have what it takes to be a founder.”

5. Make sure the business plan is realistic

Eliscu said:

"I had an entrepreneur come to me once who had a really great idea - to set up a game studio where people could come and play games."

But this person had no retail experience, no knowledge of sales terminals, and no idea how to run a business.

"My advice to him is: Get a job at Starbucks and work for six months. Get trained by someone who's more professional in retail. It doesn't matter what you do there, whether it's washing floors or cleaning bars. Learn the business elements and basic knowledge that you need."

6. Check out the people around you

Nestio CEO and co-founder Caren Maio said:

“I spent years getting to know my co-founder, who was my CFO, who I brought on board. It’s like before you get married, you can’t have every date be extravagant, but it’s very useful to do everything you can to assess not only the type of person, but also whether that person’s abilities complement your own shortcomings.”

Maio also advises hiring people who are smarter than you.

7. Look for strong, established companies

Jason Zaler, Head of Financial Technology Partnerships at PwC, said:

“The key to long-term survival is a willingness to partner with established players in the industry, but to have fresh ideas and innovative products to offer existing customers. Realizing the consumer side of financial technology is important. Without a partner, the direct sales model is a very difficult path. A lot of startups have changed their tune in the past 15 months.”

8. Be sure to love what you do

Maio said:

"I roll out of bed every morning and think 'I love what I do' and I can't think of doing anything else."