What does it take to build a truly disruptive fintech?

Building a disruptive organization is a challenging and long journey, especially in the fintech space. Entrepreneurs must be resilient and patient with an inherent ability to help create, shape and manage an organization that can achieve scale and profit. The best companies with solid business foundations are built slowly. It may take them many months and years to emerge as viable, sustainable and profitable entities.

In the quest to build a disruptive fintech, it is important to identify the core product offering/problem one solves for the end consumer. In addition, it will help define the financing approach and the path to profit.

An example will help address this point further. Imagine a firm solving operational inefficiencies for financial institutions, a niche and profitable service-based business. But on the other hand, another product helps financial institutions improve their customer service stack and helps scale. The second model is seen as a more attractive business model that will find many VC funds ready to invest in.

Understand the product

The first business is focused on providing a specific service to a niche market, while the second business model helps a wider range of financial institutions improve their overall business operations and customer experience, which has the potential for more significant growth and scalability. Venture capitalists look for businesses with potential for high growth and scalability. Founders need to understand the buckets of the business and plan fundraising, product building and various activities accordingly.

For founders, charting a clear vision and determining the main goals of the product will help bring clarity and a sense of purpose. At this stage, the founders must be able to dwell deeply and have answers to basic questions such as whether the product should be production oriented or in the distribution industry. What are the most important milestones in your journey? What does the road to profitability look like? A founder with sharply focused answers to these questions can create a long-term profitable business.

One must be aware of the correct product adaptation. For example, a business that relies heavily on capital and funds to get its product or service to customers is often not a favorite among venture funds since the overall costs increase. Investors are hesitant to invest in businesses with high CAC (Customer Acquisition costs) because they can take time and capital before they become profitable.

A business with low customer acquisition costs will find support from investors since it involves less use of capital and a reduced element of risk. They exist in newer verticals with enormous potential for growth and profit.

Finding the magic sauce

A founder with a feel for the market, a deep understanding of their product, its market fit and other related factors can build a thriving, sustainable company. The magic sauce is the ability to navigate multiple challenges and ensure that personal biases and opinions do not negatively affect the organization. Passion projects are great when backed with solid data points and market success. Spending years on unsustainable passion projects is a path best avoided. It is important to be pragmatic and future-oriented and ensure that the product has a clear path to profit, growth and scale.

The journey is demanding and filled with obstacles. Building a disruptive fintech is a slow process that takes many years. Founders must have a sense of when the inflection point is coming, the appropriate time to shift gears and focus and have the ability to step back and work on features that are not successful. Incremental changes don’t work in building good VC-backed companies. It is important to think ahead, plan well and ensure a healthy runway of funds to succeed.

Tells a good story

Good stories always find takers, and the VC circuit is no exception to the rule. The best founders can create an excellent coherent narrative about what makes their product/service different from others in the pack and why it needs financial support.

As mentioned above, building a disruptive startup is no easy task and requires you to think ahead, stay focused and be in constant firefighting mode. However, a successful startup will help the founder discover their true calling and give them a viable product to look back on and feel proud of.

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