These pillars represent correlations and not causes. Past performance does not necessarily predict future success.
Of course, if there was an exact formula, Keith Rabois exclaims“An investor’s job would probably be easy.” However, there is no harm in studying the actions, products and execution of founders who have navigated the intellectual labyrinth to unicorn status, generational enterprise and beyond.
What are the pillars of a Fintech unicorn?
- Founders who build transparent, long-term relationships with each other and with their investors.
- Startups that have a robust technology stack.
- Fintech developers who take inspiration and build on other products.
1. Be transparent with your team
To build a long-term business, you need to establish long-term relationships, from the start. Resolve conflicts the beginning is conducive to longevity.
Reid Hoffman encourages founders to “work with people (as if) you plan to work with them your whole life.” When you have conflicts, surface them early on in a productive and constructive way. As you navigate relationships, highlight the things you love, but also the things that conflict. This way, you can create a common mission that you are both invested in.
Reid advocates that two partners working together effectively achieve more than several partners working alone: “One plus one equals five.”
“You’ll want to create institutions that will outlive you anyway,” Reid continues. “The best way for them to survive you is (to) help them get to that point, (where they) are going without you being there.”
The founders cannot implement their visions alone.
They need exceptional talent around them. Newfront founder Spike Lipkin emphasizes that “if you have the right strategy and the right market, your success is entirely determined by the caliber of talent you can recruit and retain.” He actively sought out top talent from giants like Uber, recognizing that exceptional hires can propel a company forward.
David Vélez often chose people who were fully committed to the company’s mission and who quickly understood the concept of Nubank, even if they lacked traditional experience. At PayPal, Reid Hoffman attributes the company’s success in part to its ability to attract “very energetic, very talented, high-IQ young people.”
Many of the founder journeys recounted in this book emphasize transparency. Monzo even live-streamed all of their meetings so everyone – even the competitors – could follow along. This openness not only fostered trust among employees, but also became a powerful marketing tool. Transparency and frankness communication are what allowed the co-founders to get through the most difficult times together.
The same is true for investors. Scott Kupor, managing partner at a16z, adheres to a key tenet of the legendary venture capital firm: open and honest communication. One of the founding partners, Ben Horowitz, known for his direct approach, challenges Scott and the team to “sharpen the contradiction,” clarify specific areas of disagreement, and confront those issues.
At 4 p.m., rather than ignoring the elephant in the room, the team put it on the table and discussed the problem. Scott attests: “What I learned, mainly from Ben, is that you just have to deal with these things. All the coping mechanisms you try to implement never work. The reality? Although a direct conversation is painful, the chances of achieving a good outcome are much better.
Kevin Hartz, who co-founded Eventbrite with his wife Julia, emphasizes the importance of “having real partners and listening to them. After seeing many messy founder divorces, it is so important to win the war, not just the battle. This can sometimes involve giving difficult feedback when it needs to be given, so that it doesn’t become a major problem in the long run.
To make a startup survive, you need a great team to run it. Resolve conflicts and promote transparency to build a business that outlives you.
2. Own your tech stack
World-class technology stacks deliver a distinct customer experience. Control their technology stackfintechs can personalize and innovate at a pace that third-party solutions cannot match.
Nubank’s CTO stressed the importance of being the system of record to ensure complete control over operations and customer interactions. Unhindered by the limitations and delays of external technology, Nubank was able to quickly adapt to market demands and regulatory developments, distinguishing it from its competitors.
Owning your tech stack can reduce costs in the long run. Monzo, for example, initially relied on third-party APIs, resulting in a high cost per user. By developing more technology in-house, Monzo has reduced this cost from around £65 to £20 per user.
Owning the technology stack, or at least the source of truth about customer data, allows businesses to become a system of record. Their customers rely heavily on it and, better yet, other companies may want to use their data to grow their platform.
Nigel Morris of Capital One concludes: “Velocity is only possible if you have the right technology stack. »
3. Take inspiration from similar products
Identify fast-growing complementary platforms.
Pete Flint, co-founder of Trulia, remembers taking advantage of Google’s explosive rise by providing much-needed content to the search engine and using search engine optimization as a nascent but effective marketing strategy.
PayPal has also leveraged eBay’s leadership position to access a large customer base and become the preferred payment option. In turn, Kevin Hartz, a angel investor at PayPal, describes their partnership as “mutually beneficial… Most business development deals are terrible. Two companies want to do something, and they’re usually very misaligned.
But PayPal was an exception. “PayPal had a 99% presence on eBay, so people saw it as sort of a parasite,” building on the success of the platform, “as we saw that auctions were the number one vertical, and we were going to helping to diversify further.”
Entrepreneur and serial investor Kevin Hartz exemplifies the strategy of building on existing platforms. After founding Xoom, a cross-border money transfer service that leveraged PayPal’s infrastructure (acquired by PayPal in 2015), he went on to co-found Eventbrite and A* Capital.
Kevin observes that successful platforms often serve as springboards for others: “Stripe’s entire business is a platform on which others can build payment applications. » This reflects the growing trend of companies offering APIs and tools, allowing developers to seamlessly integrate features like payments into their apps.
“If you look at technology history, when a new platform comes along, whether it’s the Windows operating system or iOS and the iPhone, whether it’s PayPal or Stripe, the developers s ‘re leveraging these new platforms, and that’s where a huge amount of value is being created. accumulates. Kevin has seen this happen “time and time again” and laments “the misnomer of calling anything built using OpenAI a wrapper.”
So when the tech industry criticizes these products, “calling them a mere wrapper on top of OpenAI, a thin wrapper that doesn’t add value, it minimizes what has been achieved throughout history” . There is a model where “a big platform is developed and released to the world” and big companies are built on it.
At launch ChatGPTSam Altman, CEO of OpenAI, has “unleashed the power of large language models.” Developing these large, foundational language models that ChatGPT relies on “required a very distinct expertise.” Just like OpenAI was built on LLMSays Kevin: “We should work with founders who are building to expand its capabilities, because there are an infinite number of ideas that can be built on OpenAI. »
Piggybacking doesn’t have to be limited to emerging technologies. Tencent’s WeChat Pay successfully beat Alibaba’s Alipay in the red packet war, relying on the cultural tradition of sending red envelopes in the New Year. In turn, many startups relied on Alipay and WeChat Pay.
This edited excerpt is from Fintech Wars by James da Costa ©2024 and is reproduced and adapted with permission of Kogan Page Ltd.