Finding Fintech Accelerators in Unlikely Places
Looking at the 2020 Forbes Fintech 50, it’d be easy to think that fintech startups don’t exist outside of California and New York.
To qualify for the list, a company must be privately held and have operations or customers in the United States. Even with these relatively lax standards, a whopping 43 of the companies making the cut call either the Golden or Empire State home. Silicon Valley’s status as tech’s epicenter and New York City’s reputation as a global finance hub have helped California and New York establish themselves as leading fintech hubs, but innovation in the space isn’t confined to the coasts.
Companies like PayPal, Western Union and Fidelity Information Services (FIS) have all launched accelerators and incubators in cities that aren’t considered traditional fintech hubs. Despite setting up shop in fintech outposts, these companies have managed to fill their cohorts with promising early-stage startups, some of which have gone on to raise tens of millions of dollars in funding.
Aside from the financial benefits of these programs, working with early-stage startups helps PayPal, Western Union and FIS keep their fingers on the pulse of the latest in fintech technology. While Forbes may not consider Singapore, Denver and Little Rock as hotbeds of fintech innovation, some of the financial industry’s most venerable companies beg to differ.
Sights Set on Singapore
How PayPal landed in Singapore: PayPal has had a presence in Singapore since 2007 when the company, owned by eBay at the time, selected the Asian city-state as the site of its international headquarters. In 2016, PayPal established an innovation lab on the island and launched its incubator program. At a media event announcing the lab, Rohan Mahadevan, PayPal’s SVP of international markets, said the company is bullish on Singapore.
“It is the most educated country, one of the most innovative countries and ranked the world’s easiest country to do business in for the past seven years,” Rohan told the press. “It’s a perfect melting pot for ideas and innovation given the strong support from the government, its massive talent pool backed by a world-class educational system, vibrant startup ecosystem and diverse merchant profiles.”
The incubator: The word “incubator” tends to conjure up images of entrepreneurs with an idea, a landing page and little else, working tirelessly to launch their companies. That’s not the profile PayPal is looking for. Instead, the company’s focused on helping early-stage fintech startups with a bit of traction refine their businesses and technology.
Applicants are expected to be based in the region and have an MVP, some early customers and seed funding. During the five-month program, startups are given free office space, access to coaching and mentorship from the company’s executives, and introductions to venture capital firms. PayPal says the nine startups that have graduated from its incubation program have raised more than $100 million in funding.
One grad to watch: TenX is a cryptocurrency startup that enables users to buy bitcoin, litecoin and ether using its mobile app. Along with its wallet technology, the company has also developed a physical card that gives users the ability to spend crypto at any merchant, and withdraw money from any ATM, that accepts Visa. According to data from Crunchbase, TenX has raised $45 million in venture funding and $80 million from an initial coin offering in 2017.
Tapping Into Techstar’s Boulder Network
How Western Union landed in Denver: Western Union relocated its global headquarters to Denver from nearby Englewood, Colorado, in 2018. The two buildings that make up the company’s HQ have a combined 355,000 square feet and are home to more than 1,300 employees. In late 2018, the company announced it was partnering with Boulder-based Techstars on an accelerator program.
“We see our new accelerator and relationship with Techstars as a vital part of our broader innovation platform,” said Jeff Hochstadt, chief strategy and development officer for Western Union, in a statement. “We’re excited to help these companies take their business to the next level and look forward to learning from them, too.”
The accelerator: The Western Union Accelerator is a three-month program open to startups from around the world. In an interview with the Techstars blog, Ethan Austin, the accelerator’s managing director, said his team looks for startups that “are shaping the future of money movement.” More specifically, Austin said his team looks at everything from blockchain companies to those developing point-of-sale solutions and technology that increases financial inclusion.
Startups accepted into the accelerator receive a $120,000 investment from Techstars and Western Union, three months of office space at the Denver coworking facility Serendipity Labs, and access to both Western Union executives and Techstars’ extensive network of mentors.
One grad to watch: Thrive Savings is a Toronto-based startup whose app is designed to make it easier for college students to save up for big purchases. In addition to letting users automate monthly deductions and track their savings progress, Thrive provides cashback for purchases made in its app. The company is currently collecting emails for its app’s waitlist.
(Re)Establishing Little Rock’s Tech Reputation
How FIS Landed in Little Rock: FIS has deep Arkansas roots that run all the way back to 1968, the year banking software maker Systematics launched. The Little Rock-based company was sold to Alltel in 1990, and Alltel was in turn acquired by Fidelity National Financial in 2001, which has since rebranded to FIS. FIS has kept Systematics alive in spirit, selling software that bears the company’s name and employing some 1,300 people in Little Rock. The company launched its accelerator program in 2016 in partnership with the Venture Center, a local nonprofit dedicated to fostering entrepreneurship in Arkansas.
The accelerator: Now in its fifth year, the FIS accelerator gives fintech startups access to mentorship and training from both the company’s executives as well as leaders from more than 60 banks and credit unions. Each cohort consists of 10 companies, all of which receive an investment from FIS, and the 12-week program culminates in a demo day that typically features an appearance from Arkansas governor Asa Hutchinson. In an interview with Talk Business & Politics at demo day 2019, FIS CEO Gary Norcross talked about how working with startups helps the company maintain a competitive advantage.
“We also know we can’t buy everything, we can’t build everything, (so) we also have to look five to 10 years down the road,” Norcross said. “And this is where this (Fintech) accelerator is so important.”
One grad to watch: Flutterwave is a San Francisco-based company that builds payment solutions for businesses in Africa. The company was a member of the first FIS accelerator cohort in 2016, and in the four years since, it has gone on to raise $55.4 million in funding. That haul includes a $35 million Series B which featured an additional investment from FIS.
These are the companies driving evolution in the insurance, payments, and lending industries.