Written by Jason Jeffreys, Co-Founder and CEO of Fetch
The past few months have been difficult for every business ‒ whether you’re an established behemoth or a young startup. Even thriving markets, such as ecommerce, have experienced challenges, such as scaling up deliveries to meet demand or keeping staff healthy.
Economic pain is likely to follow, with a potential recession expected to put many businesses under significant strain. Yet, bear markets can also prove fertile ground for new, disruptive ideas. The 2008 financial crisis created a pathway for the sharing economy, now thriving with the likes of Airbnb’s rental marketplace, and Uber and Deliveroo’s flexible, self-managed employment.
For FinTech, the coronavirus has provided many challenges and opportunities. People are steering away from using cash for hygiene reasons, for example, providing digital payment providers with an opportunity to grow while helping the economy get back on its feet.
For my business, Fetch, we honed in on hospitality as an industry in need of support. Our ordering and payment app helps reduce contact and facilitates digital payments, making it the perfect fit for venues emerging from lockdown.
So, despite the difficult market conditions created by the coronavirus, there is a significant opportunity for new FinTech businesses to launch and thrive. Here are some of my top tips…
1. Find out where the pain points are
Businesses that successfully launch against the backdrop of a global crisis have one thing in common: they address major pain points. In fact, many businesses were designed to address pain points on both sides of the market, filling a need for both business and consumer.
Unicorn businesses, such as Airbnb and Uber, grew out of the last recession by providing cash-strapped consumers with cheaper choices while providing new income opportunities for many, using technology to bridge the gap between the two in a cost-effective way. This approach undercut many traditional businesses, such as hotels and taxis, significantly disrupting the market.
For Fetch, several of our team had worked extensively in the hospitality industry, so we knew the major pain points in the market even before coronavirus hit. Sprawling legacy systems are expensive and difficult to update with new features, leading to confusion and disorganisation.
Consumers, too, want better technology in venues, with 71% of under 45s saying that technology could be used to improve the dining experience. With concerned customers avoiding venues in order to socially distance, technology has an opportunity to both improve the dining experience and enable safer socialising.
Finding and solving pain points like these are exactly what helps businesses thrive ‒ especially during an economic downturn. If you can uncover an issue that is both chronic and systemic within the industry, yet have immediate benefits within the crisis, then you have an opportunity to help businesses return to normal while growing rapidly yourself.
2. Enable digital transformation
One pain point that the vast majority of businesses still struggle with is digital transformation. The rapid development of digital technology has left many businesses scrambling to catch up. Often overwhelmed with information, choice and the sheer speed of digital change, business owners bury their heads in the sand and continue doing what they do best.
Unfortunately (or fortunately, depending on which business you are), this creates an opportunity for new startups to integrate digital technology, reducing costs, improving efficiency and speeding up processes. Unable to compete with these new tech-enabled businesses, there is little growth and therefore little money to spend on digital transformation, slowly running the business into the ground.
Take hospitality, for example. While takeaway restaurants developed digital menus to work alongside apps like Just Eat and Deliveroo, venues have changed very little over the past ten years. It’s now far quicker and easier to order food from your home via an app than to visit a venue.
Coronavirus will, inevitably, change this as venues are forced to find ways to adopt social distancing measures if they are to reopen. Unfortunately, they are stuck with inflexible legacy EPOS systems that are difficult to change and update.
If your FinTech startup can help rapidly enable the digital transformation of businesses like venues, you will allow them to recover much faster and create a new standard in the industry.
3. Need to move quickly
With such an unprecedented situation, the rules change daily. For startups to thrive in such an environment you need to adapt quickly and move quickly. If you built a solution for conditions at the start of the pandemic it would be completely out of date now.
The benefit of this fast-moving environment is that startups are forced to become agile and resilient. It’s no accident that over 50% of Fortune 500 businesses started up during a recession, despite there being far more non-recession years.
It’s a trial by fire. If you make it through to the other end, you’ll be stronger, faster, and more agile than most other businesses, making your startup an attractive investment opportunity as well as making you more resilient to future change.
4. Raise investment via crowdfunding
Every startup business needs funding to grow, especially during the seed stage. Unfortunately, institutional investors are skittish in bear markets, waiting for definite signs of recovery before they begin investing again. What’s more, with so much money already under management and at risk from the effects of a recession, they have a lot less free time on their hands to evaluate new investment opportunities and the time they do have is often spent shoring up existing investments.
However, equity crowdfunding can provide the necessary investment much quicker during difficult economic times. Crowdfunding investors demand little in return as the risk is much lower ‒ especially if your round is eligible for EIS tax relief. There are also lots of smaller yet still sophisticated investors with lots of free time on their hands that would jump at the chance to evaluate and invest in disruptive new business ideas.
FinTech campaigns do very well on equity crowdfunding platforms too. Curve recently became the fastest company to raise £4m ‒ hitting their target within minutes of going live. More recently, FinTech investment intelligence platform, PYNK, raised over £500,000 via the Seedrs crowdfunding site.
Not only does crowdfunding provide funds required to grow your business, but it also brings hundreds of investors who will become initial customers and brand ambassadors. Emerging from an economic downturn with hundreds of active brand ambassadors, who are also likely investors in other markets, is a massive boon for any business and, for FinTech, this imbues your business with a fundamental mark of trust.