By Alex Macpherson, Head of Ventures
The UK entrepreneurial Fintech scene has never been as crammed full of talent and innovation as it is right now. Despite the recent political turmoil, London’s financial services community represents a premier force in global financial innovation. The unique combination of forward-thinking customers and partners, world-class accelerators, a supportive and proximate regulator and a rich funding environment creates an extremely attractive ecosystem for fintech that we expect not just to be resilient but to thrive.
Octopus Ventures is a London and New York based Venture capital investor that unleashes progress, by backing entrepreneurs who dare to go big and create change. We generally invest from £250,000 to £25 million in a first round of funding and look to follow in subsequent rounds. The 60 or so companies we’ve backed in recent years include Graze, SwiftKey, Secret Escapes and Zoopla, and fintech companies such as Calastone, Bought By Many, CurrencyFair, Property Partner and Token.
All founders will face a variety of unique challenges as they grow their ideas into world-changing businesses. There are hundreds of challenges which will be specific to each company as they navigate their way to achieving real scale but here are two issues that most Fintech businesses are likely to have in common:
Firstly, businesses dealing with cash, wealth, investments and risk are subject to a higher level of scrutiny than those in most other verticals, and from the customers point of view mistakes are not tolerated. Most companies can get it right most of the time and be successful. Deliveroo can screw up an order, Netflix can break, Twitter can go down, and most customers will be fine. Getting it right most of the time, however, is not good enough when it comes to handling finances, and businesses in this space need to be particularly diligent in setting up controls and contingencies for any potential outcome.
Secondly, financial services can present a complex web of risks and incentives around which companies must design their products and services. Getting this right can create powerful business models that scale rapidly and sustainably, but getting this wrong can lead to a set of incentives that encourage poor decision-making. A simple example is when a business prices loans and makes revenue from volume but does not actually underwrite the risk, products can rapidly become mis-priced, sowing the seeds for a potential disaster down the line. The best Fintech businesses review incentives from the outset right through their organisations and value chains to ensure that resulting decisions create a sustainable business model.
Whatever challenges you face there will be a series of defining moments on your journey. To us, Entrepreneurs are the people who create these defining moments. These aren’t just the high-five ones. They’re the jarring, rocky, edge-of-the-seat ones too. Few Entrepreneurs go back to their original investors for their next venture. Ours do. We take that as a sign we’re doing it right. Valuing uniqueness, supporting ambition and ultimately being by your side.