The Opportunities And Risks Of Fintech Accelerators

With the proliferation of accelerators and incubators, some have been going down the path of vertical specialization to differentiate themselves in what is quickly becoming a very crowded market. One of the more rapidly growing categories is the financial technology accelerators, mostly sponsored by banks looking to source innovation and keep – or more accurately, get – in touch with the evolving financial services industry. I hear about such new fintech accelerators on a weekly basis now.

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Although I haven’t been through an accelerator as a fintech entrepreneur myself, I’ve mentored the first batch of the Barclays Techstars accelerator in Tel Aviv, which I consider to be a fairly good one in terms of added value to the founders. And since I’ve been getting a lot of questions about the topic lately (including this one on Quora), here are some notes about the opportunities and risks of having your company go through a bank-sponsored fintech accelerator:

Opportunities

  • You get almost full access to personnel and executives across the sponsoring bank and get high visibility into a big bank’s mindset and processes. This can help you when thinking through your product if that product is aimed at large financial institutions.
  • You get to circumvent the usual bureaucracy that is usually involved in dealing with the sponsoring bank. This is particularly helpful if you’re trying to sell to that bank.
  • If you make the sale to the sponsoring bank, that’s usually a nice logo account to have, especially for potential investors and other customers.

Risks

  • If you tie yourself too much to the sponsoring bank, you run the risk of extra friction with other potential customers that are competing with that sponsoring bank. Although I haven’t seen it first-hand with a company I was directly involved with, I’ve heard it happening to several others.
  • By cutting through the bureaucracy in the sponsoring bank, you get an unrealistic, skewed perspective of what it will be like selling your product to other financial organizations.
  • Processes and systems inside banks are by no means uniform. That means that you run the risk of over optimizing your product for the sponsoring bank, at the expense of flexibility for other customers.

Founders who are considering going through a bank-sponsored accelerator should remember that the bank’s primary interest is furthering its own goals of innovation scouting (primarily) to optimize the bank’s operations. This might be a blessing or a curse for the company, and should factor into the decision.

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