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80% of Fintech Start-Ups Are Not Protected from Competitors

Tech startup rating agency Early Metrics reveals five red flags that prevent investors signing on the dotted line

  • Founder’s ability to convince – this is where European fintech start-up leaders excel with 76% scoring top points – the highest scoring category
  • Availability of the leadership team –35% of fintech startups scored just three out of five for this
  • Business networks and contacts – Just 17% received top scores – 37% scored two or less out of five which is an issue for investors
  • Speed is of the essence – Just one in five fintechs scored top points for this – almost a fifth (17%) scored just one out of five
  • Have you registered your IP? – 80% of fintechs scored two or less in this part of the rating process, something that will make most investors walk away from the deal.

New research reveals that four out of five European fintech start-ups have no protection in place to stop their competitors taking their market share or stealing their IP. This is the biggest read flag which is most likely to make investors walk away. Two thirds (65%) scored just 2 out of five in this category, 14% scored zero.

The research, which was carried out by startup rating agency Early Metrics[1], is based on the analysis of 1,774 European early stage businesses over the past two years.

Availability of the leadership team

Over a third (35%) of founders in fintech startups do not invest enough time in their new business. The first five years of activity are crucial to develop the idea, source the right talent and work out the business model. Hence, investors might be put off by entrepreneurs that are only committing part-time to their venture.

Ability to convince

The majority of business founders have a natural ability to defend their idea and this is one of the most important characteristics for successful leadership. It means founders are able to convince award juries, investors, advisors and obviously clients to support the business. Three quarters of early stage startups received top marks for this. In fact, just one fintech scored one out of five.

It’s not what you know…

Investors want to see that start-up leaders are connected.  Just 17% received top marks, 36% scored two or less which is a significant alarm bell for investors. This isn’t just about the number of Twitter followers you have; these are contacts you can use for commercial growth even in the early stages of business.

Agility is key

Operational speed is crucial for fintechs – not a nice to have when it comes to investment.  Just one in five (20%) received high scores in this part of the rating process but four out of five scored three or less.  This is often down to low levels of resource in a new business or lack of time committed by the founding team. Either way, this can make or break an investment as it’s the lifeblood of any start-up culture. 

Antoine Baschiera, CEO and Co-Founder of Early Metrics comments: “There are always teething problems for every new business, the important thing is to learn quickly and keep moving forwards. Moving quickly is key and it’s one of the things every investor wants to see in a potential investment opportunity.

“Businesses are complex beasts, in order for them to fly or die we recognise that success is more the leadership team in just as much detail as it does the business numbers.”

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