by Julian Jackson
Three very different early-stage FinTech projects were given the opportunity to pitch to a panel of start-up experts and investors in the art-lined Mayfair offices of the British Virgin Islands government.
Although it was not billed as a competition, the best pitch received a pleasant surprise – a bonus package of valuable support to aid their future development, and for the others a future event discount.
Keynote speaker, banking technology expert Udayan Goyal gave a historical perspective on the context of the evening. His view is that FinTech is going to be disrupting and changing the staid financial environment. “Banks haven’t changed in over 100 years,” he said. “Financial services are a Meta Sector – essential to all forms of business and consumer transactions.”
The demise of Lehman Brothers and the financial shocks of 2007/8 showed that the big players were not as strong as they thought and the whole system was unstable. He made a comparison with Amazon, arguing that the Company had disrupted the book-buying orthodoxy to the benefit of the consumer, making new, digital products such as ebooks available.
Another changed business is the car industry. In the 1950’s GM used to mine the ore for the steel to make the cars, moving through every process to make the finished product for the consumer. No car manufacturer does that nowadays, instead opting to focus on the consumer experience and design and assemble the vehicle from parts supplied by a myriad of subcontractors.
Overall Udayan thought that the financial sector was ripe for new opportunities and systems which would take advantage of modern technology and be nimbler than the existing giants, with their bricks-and-mortar and legacy systems.
His rule of thumb for start-ups was to ask two questions – what is the cost of acquisition of a customer? And what is the lifetime value of that customer? If the second is greater than the first then the project would have traction, and if the second value is much greater than the first, then it would be a bountiful project to get involved in.
Moderator Nzube Ufodike, the MD of Amoo Venture Capital Advisory introduced the panel of judges: Simon Taylor, a key FinTech start-up guru and leader of the Barclays Accelerator; Jon Snade, a leading corporate lawyer from Thomas Eggar LLP; Linus Dahg, an associate at Wellington Partners whose expertise lies in identifying investment opportunities; Simon Vandi, an entrepreneur and Director of Business Development at Amoo; Lisa Lambie of Satatt, an investment firm specialising in emerging markets; and James Wallington, director of private equity at Babson Capital.
Each of the three pitchers were given a few minutes to summarise their idea, then questioned by the judges and audience. The time was too short to go into great depth, but it did reveal the core of each project.
First up was Liquity, which has been featured in Haggerston Times before. CEO Barry Shrier talked the audience through this concept, which is a marketplace matching up investors with private companies looking for finance, with additional services to investors of Liquity’s “professional partners” such as valuers and lawyers so the investors have competent professional services available to facilitate the transactions. Liquity already have raised £320,000 and are looking to raise £1.5 million in a Series A finance round in October.
Second pitcher was FollowThatFund. Essentially it aims to outperform the stock market by following a group of top stock pickers. It is a sort of “open source” stock trading, instead of “open source” software design, which we have all heard of: using the intellect of many to create a superior product, or in this case, superior gains on the stock market. CEO Mehul Patel, himself an expert trader, is backing it with his own money. He claimed that in the last three months algorithms had outperformed the stock market.
Clearly how this works will depend on the execution of the system. Multiple individuals join up to pick stocks on their database and then Mehul’s team look at the top 100 pickers, with some human common sense. Mehul gave the example of overexposure to tech stocks with “You don’t all want to be long on Google.” The traders are incentivised by prizes for the best picks.
The idea is straightforward. Whether it will be successful or not in the long term depends on how good the performance of the stock pickers is. If they lose money, it will be toast, if it outperforms the market, then pension funds will be knocking down their door.
The third pair of pitchers had come all the way from Kenya: Kyai Mullei and David Mark. M-Changa is a financial payment system a bit like PayPal, but its objective is to utilise the traditional Kenyan gift-giving channels for socially beneficial ends.
In traditional Kenyan society there is no social security. If funds are needed for hospital or school fees, weddings, funerals, or other unexpected expenses, the extended family chips in, gifting money. However with social mobility, and the spread of Kenyans all over the world, it is less practical to do this in person, as previously, but there is still a need for the service.
M-Changa updates this, so money transfers can happen anywhere. Kenya has side-stepped credit cards, with the ever present mobile money application called M-Pesa – a third of the countries money goes through this system now, and M-Changa utilises this as part of its structure. They charge 4.25% to the recipient, some of this goes to the M-Pesa company or the credit card provider and some to M-Changa as their service fee.
There was some discussion of the potential for money-laundering, but given the social-benefit nature of the enterprise, this would be a self-limiting factor, and indeed less likely than using another bank.
In the view of the judges M-Changa was the most successful pitch. It was clear that it addresses a social need, and an emerging market sector that is underdeveloped. Courtesy of Amoo’s partners Tech Trailblazers, they won a free entry to the FinTech Awards, and the other pitchers received a $50 discount on their entry fee. In addition Lisa Lambie was so impressed with their project that she invited them to be mentored in a major workshop programme which will be a valuable experience.
Nzube Ufodike summarised the event, “The panel was great and the pitching companies got a lot from it. The audience also participated and the feedback received thus far has been overwhelmingly positive.”
Julian Jackson is a writer about technology. His websites are www.julianjackson.co.uk and www.brightgreenpr.co.uk