The FinTech industry is one of the big winners in the new global economy, increasingly digitized and with greater personalization of services that also generate more added value, even in apparently more traditional segments such as the financial sector. FinTech companies are those that, thanks to the combined efforts of new technologies and a continuous commitment to innovation, are able to offer unprecedented solutions that improve business management processes, often creating new ways of doing business with a disruptive and groundbreaking approach. Jason Simon, an expert in FinTech and eCommerce, explains how business growth takes a different path when FinTech is in the equation.
Until a few years ago, FinTech entities were associated only with startups that had one or more entrepreneurs behind them who had a potentially brilliant idea but lacked sufficient liquidity to be able to develop their project for a long time without having to resort to external financing. This situation meant that, very often, a large number of these firms ended up going bankrupt due to issues related to the lack of cash flow to manage payments or not having sufficient capacity to communicate with their potential customers.
However, today it is increasingly common to find FinTech companies already established in their respective segments and immersed in phases of growth or, directly, of internationalization and others that collaborate closely with large banks when they are not part of a large financial group. This amalgam of different typologies has led to the development of different financing formulas for these companies, which is very positive for all of them. It offers them several alternative ways to capitalize themselves while society is increasingly open to adopting innovation.
“Having a startup focused on a disruptive business model has always been a risky bet for many entrepreneurs who often had to resort, in the absence of options, to the two traditional ways, which were, on the one hand, attracting private investors, usually acquaintances of the founders, and, on the other hand, resorting to a bank credit line. The luckier ones could get a venture capital firm interested in the project, although, unfortunately, this was not the most common reality,” states Simon.
Nowadays, the figure of the business angel, for example, is becoming more and more established, who, in addition to capital, usually provides advice, experience, and essential contacts, especially in the early stages of a startup. This type of investor has evolved, thanks to the growth of the Internet, giving rise to alternative forms of investment, such as crowdfunding or crowdlending, which can favor the arrival of new specialists to the entities while making it possible to grow organically towards other international markets, thanks to the global nature of the Internet. And, all this, while sending the message to stakeholders that the company is fully digital, transparent, and independent, as it does not depend on any large group to obtain resources to ensure its growth.
“The recent Securities Market Law reform bill looks set to provide a major boost to Special Purpose Acquisition Companies (SPACs), firms that go public without owning assets because they want to raise money from investors so that they can later buy companies that are often unlisted,” explains Simon. “Thus, these bought-out entities take the position of their acquirer in the market, thus completing an alternative route to listing, with, apparently, greater agility as they need to undergo fewer controls.” SPACs are particularly important for companies in their early stages of development or growth when quick access to financing is often more critical and necessary.
With these new mechanisms for seeking financing, FinTechs can obtain, in addition to liquidity, greater knowledge and new business opportunities that allow them to grow more quickly and position them with subjects of interest that generate added value to their business model, through the enrichment of other entities and professionals with leadership capacity.