“Reflections on my Money 20/20 Panel: “Building a Billion Dollar Financial Services Company: When Startups Grow Up” written by Tom Villante, Chairman, CEO & Co-Founder, YapStone.
On the heels of having our company, YapStone, make the Forbes Billion Dollar Startup List, I was invigorated to join a tremendous panel of Fintech experts at Money 20/20 today to discuss one of my favorite topics: “how to build a billion dollar financial services company.”
This morning, I sat down with Mike Praeger of AvidXchange, Anthony Hsieh of loanDepot, Steve Aberneth of Square Trade, and Daniel Cohen of The Bancorp, to discuss what it really takes to succeed in the disruptive fintech industry; while our businesses vary quite a bit, the shared experiences we’ve had in building them was undeniably striking.
It was inspiring to hear from these men and get their take on the subjects of creating a product, choosing a team, and scaling a company. Steve McLaughlin of FT Partners moderated our discussion and was excellent at helping us uncover and communicate the formula for fintech startup success.
Here are the five most prominent points:
Be Optimally Profitable from Day One
When you have access to capital, it sometimes presents a false sense of security. It’s easy to think you have time to build up – but the sad truth is, that’s a good way to burn through all your capital, with no hope of paying your investors back.
In order to create a billion dollar startup, you must be profitable as quickly as possible and have sustainable capital. The quickest way to do this? Stay focused on a handful of vertical markets.
I loved what Mike Praeger said about AvidXchange’s laser focus on solving real problems for real customers, who would pay for a solution. This is how we grew YapStone – by focusing on a niche, untapped market. You might think that getting small with your demographic sounds counterintuitive and that the bigger the net, the more potential customers you have. In reality, focusing on a niche demographic can cause you to grow faster, so long as you are filling a great need.
Remember, the financial services industry is still in the very early stages of disruption, so there is a lot of room for innovation. As you are ideating, make sure that you are creating a product that can turn an early profit.
Choosing Your Partners is Critically Important
You might have heard people say that choosing a business partner is like choosing a husband or a wife. And it’s true. Creating a company that stands the test of time is such a long road; if you have the wrong partner, it’s extraordinarily limiting.
When you are choosing your partner, you have to think about how you feel about that person eventually being on your board. Will this person roll up their sleeves and work through the tough times with you? If not, you shouldn’t consider them as your partner.
You also have to be really self-aware about what you do well and what the other your potential partner does well. We all have our strengths and weaknesses; if you want to lead effectively, you’ll focus on what you’re best at and choose partners who are great at the things you are not.
Culture is About Growing People
There are so many startups that offer trendy incentives for their employees –having regular pizza parties, being a dog friendly office, having casual Fridays, etc. That is not culture. Culture is creating a nurturing environment for your employees to contribute, add value and grow their careers.
Giving your staff a strong sense of ownership leads to increased productivity and happier, healthier employees. When you are a leader who is invested in growing people, I guarantee, they will be invested in growing your business because they have skin in the game.
Networking Builds Businesses
It’s super important for entrepreneurs to get out there, go to conferences, and meet people. You can’t just research on the internet and stay inside — you have to put yourself out there.
When you network, you open yourself up to infinitely more possibilities. Why do you think summits like Money 20/20 are so successful? Because savvy entrepreneurs know that it takes a village to raise a startup. And lucky for us, there are industry events out there that can help us identify and build our tribe.
As you attend events, always think of the people you are meeting as potential new business partners, customers, investors and resources. Nurture those relationships by giving them value from day one and maintaining a strong line of communication.
Staying Private Offers More Flexibilities
Many of us on the panel mentioned the benefits of keeping your company private. In fact, Steve Aberneth quite passionately spoke about generating as little capital as you can, so that you can control your own company’s destiny – and I totally agree with him. Having to answer to less people about the direction of the company allows you much more flexibility to operate your company the way you see fit.
Those seemed to be the most critical points to our discussion and my hope is that our stories will benefit those talented entrepreneurs out there – charging ahead in their industries.