Print Page   |   Sign In   |   Register
Notes from the Network
Blog Home All Blogs

Risky business: how to de-risk your fintech startup before it’s too late

Posted By Akansha Kasera, Bankable Frontier Associates, Friday, April 6, 2018
Updated: Friday, April 6, 2018

By Maelis Carraro and Elizabeth Davidson

If you’re a fintech entrepreneur, it’s probably not news to you that failure is more likely than success. After all, an estimated 70% of tech startups fail, typically within the first two years after their first round of financing.

Catalyst Fund has been working with inclusive fintech startups, a field that presents unique challenges for entrepreneurs, over the past two years. In many countries, it is a sector that presents more regulatory constraints, limitations as to how companies can handle information, and stringent operational and capital requirements.

Different startups, common risk challenges

Despite working with a wide variety of fintech startups across different geographies and sectors, we have seen some themes emerge on the most common risks that can pose a threat to the success of the business at the early stage. All startups mention they lack the financial and human capital they need to grow their businesses. “Finding funding is a huge burden. The average startup CEO spends 70% of his time fundraising, which remains the number one challenge faced by local startups,” says Yoann Berno of Flowigo.

Finding people with the right skill sets who are willing to give up more secure job alternatives is also big barrier, yet fundamental to raising capital and ensuring smooth execution. “The biggest challenge is getting the team with the right skill set at first, especially when you’re a young company and don’t have a system or protocol for hiring and then you start growing rapidly,” says Destacame’s Jorge Camus. “It then gets challenging to manage the team, train them and really build a culture that allows you to get to your goals.”

Over 70% of our fintech entrepreneurs also noted that not getting to product-market fit is a major challenge they face. They felt they did not have a full understanding of their customers needs to build strong value propositions. Additionally, 40% mentioned they faced technology risks, including lack of accessible data to refine their products, and 33% pointed to specific ecosystem dynamics that might threaten their business ability to scale.

Want to mitigate risks? Start early!
Early identification of key risks can help fintech startups invest in the business support they need early on before a risk takes down the business. These risks can scare off investors, who want to ensure that entrepreneurs understand the key challenges they face. Instead of waiting for entrepreneurs to identify key risks, early stage investors can work with startups to tackle these risks before or in conjunction with their investment.

Catalyst Fund has taken just this approach. By working with our entrepreneurs to identify risks, we can tailor technical assistance to solve these risks so that investors are more confident in the future success of the business.

Taking an honest look at their own key risks can be difficult for entrepreneurs, who may be too deep in the weeds to step back and look at the bigger picture. This is why the Catalyst Fund developed a risk diagnostic to help startup leaders get a better grasp on their challenges, and understand those within or outside of their control. The tool offers a checklist of possible mitigation strategies for the entrepreneur. Here are a few strategies we applied through our technical assistance engagements:

Understand your customer to offer strong value propositions
For Miguel Duhalt at Comunidad 4uno, that meant better understanding what his customers valued most about its product in order to focus on high value customers and tailor their offering. When we first met 4Uno, a financial services distribution platform offering insurance, health benefits and payments services for domestic workers in Mexico, they struggled with picking the right product offering for the right customer segment. After working with them on customer research, we helped them segment their customer base to refine their product offering and marketing strategy. Since then, they tailored product packages for insurance to specific client profiles and also offer salary payment services via an app, which resulted in a growth spurt.

Figuring out the right way to engage with customers is also a challenge for entrepreneurs in these markets and a big risk to the company’s ability to take off. How can a mobile-based startup communicate its value proposition clearly and consistently with a rural customer base when only 50% own phones and only 20% are literate? WorldCover, a platform providing insurance to low-income farmers around the world, used a marketing MVP, or minimal viable product, composed of simple and clear images to cater to the illiterate majority of potential customers. They tested various solutions, from SMS systems to a “microphone man” going to communities to play a recorded message and frequent community meetings. Community meetings, with 95% attendance rates, allowed WorldCover to maintain a human touch with customers. Farmers trusted WorldCover more after more face-to-face interactions because “an impostor wouldn’t show up at your house every week after taking our premium money,” said WorldCover’s CEO, Chris Sheehan.

Build a product vision and roadmap that meets your business needs
On the other hand, PayGo, a pay-as-you-go gas solution in Kenya, realized they were struggling with technology risks. They needed to integrate with a scalable payments solution, track key gas system indicators, and find tools to measure, monitor, and run their field sales team and customer service, yet they did not have the tech skills in the team build the necessary back-end software technology. We worked on designing their product architecture and built a new version of the app they are still using today. “The architecture we built with Catalyst still holds,” says Nick Quintong, PayGo’s CEO. “It was fundamental for a team that doesn’t have software expertise to bring someone in to show us how it can be done with off-the-shelf software modules.” Without these key technology investments early on, PayGo would not be poised for the growth it’s enjoying today.

In Colombia, we helped Escala, a savings fund for corporate employees and their children, with similar challenges. Initially, technology was holding Escala back and preventing them from reaching more clients who could benefit from their services. We worked with Escala to identify and integrate the right tech processes to match their stage and helped them avoid spending important resources on expensive and unnecessary CRM tools. 


“We believe ESCALA Educación’s story proves that a model like CF is very valuable to get a company investment-ready.” 

Escala used their new tech structure to more successfully manage their two sets of clients — companies and their employees — and to raise a seed round, which included members of Catalyst Fund’s Investors Committee such as Accion Venture Lab. “We believe ESCALA Educación’s story proves that a model like CF is very valuable to get a company investment-ready,” said Tahira Dosani, co-managing director of Accion Venture Lab, at the SOCAP conference this year. “ESCALA combines a strong management team and exciting customer acquisition and engagement strategies” says Vikas Raj, co-managing director of Accion Venture Lab.

Get the timing right
Unfortunately, not all risks can be mitigated. For Flowigo CEO Yoann Berno, “timing is everything.” Flowigo, a SaaS company seeking to enhance operations of pay-as-you-go product distributors in Africa, faced timing risks that ultimately backfired. Its markets lacked the client density necessary from them to scale, and key infrastructure issues like connectivity posed an ongoing challenge. SaaS companies like Flowigo need dense networks of businesses to flourish, but in Africa, industries that count more than a few dozen major players are rare. Scaling a SaaS business while addressing 10 to 15 customers is a hard sell. Ultimately, Flowigo succumbed to the timing risk, deciding to pivot and wind down this line of business.

Overall, while not all risks are avoidable, you can’t avoid the risks you don’t know about or aren’t focused on. So for fintech startups and investors alike, identifying and mitigating risks early is key to success. To get started on identifying your fintech startup’s key risks and think of your mitigation plan, check out Catalyst Fund’s new risk diagnostic.

You can also check out De-risking your Fintech startup webinar where we go over the toolkit and risk assessment for Catalyst Fund companies here

 Attached Thumbnails:

Tags:  Business  emerging markets  entrepreneurship  finance  impact investing  inclusive business  inclusive innovation  Incubation  Risk; Risk Assessment; ANDE Members  SGBs; Environment; accelerators; energy  social business  social enterprise  social entrepreneurship 

PermalinkComments (0)
 

New Report: Impact Investors See India's Social Entrepreneurs Lacking Basic Financial Management Skills To Be Investable

Posted By Upaya Social Ventures, Thursday, May 14, 2015

Over the past four years, the Upaya team has repeatedly heard from impact investors that the pipeline of investable social enterprises in India is frustratingly thin. While these investors regularly hear about interesting concepts, they lament the lack of entrepreneurs who have the business management skills needed to lead such a venture to profitability. In fact, many leading investors have said that a social entrepreneur who does not have a sufficient command of fundamental business tools is not someone they can even really consider an entrepreneur.

Looking to turn these anecdotes into actionable information, Upaya is today releasing the first of a series of spot surveys that dig deeper into investors’ impressions of the entrepreneurs they encounter.

Titled What They Really Think: Perceptions of India’s Early Stage Social Entrepreneurs Among Impact Investors, the series provides data and recommendations to the multitude of incubators, training programs and mentorship networks currently operating in India. The report captures investor opinions about the collective critical skills and competencies of entrepreneurs, and starts a substantive conversation on improving the ecosystem for early-stage social businesses.

In “Spot Survey #1: Financial Management Capabilities,” 18 of India’s 25 most active impact investors shared their impressions of the financial management competencies of entrepreneurs they have conducted some level of due diligence on. The report looks at entrepreneurs' skills in utilizing a variety of financial management tools for decision-making. It also looks at the quality of documentation investors receive from entrepreneurs, as well as the ability of those entrepreneurs to use valuation tools to communicate the financial health and long-term projections of their companies with investors.

Click to download the report.

Download File (PDF)

 Attached Thumbnails:

Tags:  accelerators  early stage ecosystem  Entrepreneurship  impact investing  Incubation  India  Philanthropy  Pioneering Capital  social business  Social Entrepreneurship  Upaya Social Ventures 

PermalinkComments (0)
 

Open for Submissions: IDEO.org, DFID, UNHCR & UNICEF's Refugee Education Challenge

Posted By IDEO.org, Monday, May 11, 2015
https://vimeo.com/122997030

IDEO.org, DFID, UNHCR and UNICEF are currently hosting an innovation challenge aimed at improving education for refugees around the world.

 

From supporting in-classroom learning to providing new types of vocational skill training, we’re looking for solutions that give refugees the skills and information they need to adjust to their new circumstances, integrate into new communities, and thrive.

 

Submissions for the challenge are open now through June 2ndAdd your ideas to be in the running to receive funding from DFID and design support from IDEO.org to test and pilot your idea!


Here’s how it works:

1. You submit your idea for how to improve refugee education at OpenIDEO.com.

2. Subject matter experts, peer organizations, and designers provide feedback to help you iterate on and refine your idea. 

3. The best ideas get shortlisted and their organizations are asked to provide more details.

3. Amplify chooses 10 Top Ideas, which are invited to a design bootcamp hosted by IDEO.org.

4. At the end of the challenge we will award a total of up to $500,000 in funding and technical assistance from IDEO.org designers to bring a handful of the Top Ideas to life.


To join the challenge, create a profile and then click Add Your Idea. Organizations who would like some extra help getting started can also email amplify@ideo.org for support.


Tags:  Global. Development  Incubation  Investors  Prize  social enterprise  Social Entrepreneurship 

PermalinkComments (0)
 

WCS's Conservation Enterprise Development Program now accepting Expressions of Interest

Posted By London Davies, Wildlife Conservation Society, Wednesday, March 11, 2015
Updated: Wednesday, March 11, 2015

The Conservation Enterprise Development Program (CEDP), formerly called CEDF, part of WCS's Conservation Science and Solution's Markets group, is a competitive award program aimed at supporting conservation-friendly enterprise activity across WCS landscapes and seascapes. Please visit http://globalinitiatives.wcs.org/cedp for further information on the program. 

In this third year, CEDP will be running a competitive award process to provide the following:

1.      One feasibility study or business plan for a concept stage enterprise
2.      One award of in-kind capacity building support or a small scale grant (up to $20k) for an early stage enterprise
3.      For enteprises looking for larger amounts of funding that can eventually be paid back, one to three awards of in-kind support to enterprises in preparing for and accessing external impact investing loans from partners organizations
 

Eligibility Requirements

In order to be considered, enterprises must meet the following minimum requirements: 

  • Enterprise operates within a WCS priority landscape or seascape
  • Development of enterprise fits within a strategic priority for WCS country program
  • Enterprise has a goal of generating biodiversity benefits
  • Enterprise generates (or has the potential to generate) community-wide benefits
  • Enterprise demonstrates ability to be financially viable in five to ten years (if not already)

What we support

CEDF expects enterprises to leverage in-kind support and/or funding to increase conservation benefits and improve financial sustainability. Support may be requested for:

  • Capital investment (including infrastructure and equipment)
  • Working capital
  • Capacity development 
  • Financial Training (including Loan Preparedness)
  • Marketing and certification
  • Business plans
  • Monitoring and evaluation
  • Feasibility studies
  • Technical assistance
CEDF will also provide some basic funding support for WCS field staff to work with and monitor selected enterprises.


Application Process

1. We are requesting brief Expressions of Interest by March 20, 2015. 

These can be submitted online at: http://globalinitiatives.wcs.org/QualityofHumanLife/ConservationEnterpriseDevelopmentProgram/SelectionProcess/ExpressionofInterest.aspx

2. If the enterprise or concept meets all the basic criteria, we will request a full 2 to 5 page application (depending on enterprise stage and support requested) which will be due by April 6, 2015. The detailed questions for the full applications as well as the full evaluation criteria can be found on the CEDP site here
3. CEDF staff may follow up with additional questions and selected applicants will be notified by mid May.
Further requests for loan preparedness or loan access support will be accepted via Expressions of Interest throughout the year. 

 

Questions?

Please contact me at cedp@wcs.org with any questions about eligibility, process or awards. 

Tags:  Access to Finance  capacity development  Environment  Incubation 

PermalinkComments (0)
 

RegCharles Finance and Capital Limited Signs an MOU with J.K Randle to Audit their Funded SMEs at subsidized rate!!!!

Posted By Fortune Odjugo, RegCharles Finance and Capital Ltd, Monday, July 15, 2013

At RegCharles Finance and Capital Limited our mandate is to nurture Micro, Small and Medium enterprises (MSME) succeed as well as creating a platform for sustainability, by arming them with all needed ammunition to ensure our mandate is fulfilled thus we go extra miles to ensure success.

 

One of which was partnering with J.K Randle Professional Services to provide audit and assurance services to our Micro, Small and Medium Enterprises (MSME) at subsidized rates to enable them to have access to standardized and reliable audited accounts and operational procedures which normally would be beyond their reach.

 

JK Randle Professional Servicesis one of the leading financial services firms in Nigeria. They have been in existence for over 5 years. All their Partners and Managers trained with KPMG, Nigeria and worked with major corporations both public and private, distributed across various sectors of the economy within the country

 

http://www.rfcng.com/news/news_detail.php?id=63&title=RegCharles-Finance-and-Capital-Limited-Signs-an-MOU-with-J.K-Randle-to-Audit-their-Funded-SMEs-at-subsidized-rate!!!!

Tags:  Incubation  smes 

PermalinkComments (1)
 

Guardian Newspaper Interview with Peter Damian Mbama

Posted By Oluwatosin Kukoyi, RegCharles Finance and Capital Ltd, Friday, April 19, 2013
Hello all, 
Please find below the link to an interview conducted by Guardian Newspaper with Peter Damian Mbama (MD/CEO, RegCharles Finance and Capital Ltd) on the Control of Inflation and Determination of MPR.
 
http://www.ngrguardiannews.com/index.php?option=com_content&view=article&id=119205:determination-of-mpr-inflation-control-need-new-strategies-says-mbama&catid=31:business&Itemid=562
 
Happy Reading!

Tags:  accelerators  Access to Finance  Africa  Agriculture  ANDE Members  early stage ecosystem  East Africa  Entrepreneurship  Environment  Financial Times  Grants Rockefeller  impact investing  inclusive business  Incubation  Philanthropy  Philanthropy; impact investing  SGBs; Environment; accelerators; energy  Social entrepreneurship  supply chain  sustainability  Women  Youth 

PermalinkComments (0)
 

Toward an ecosystem for early stage incubation of social enterprises in East Africa

Posted By Mary Mwangi, Argidius Foundation, Thursday, March 7, 2013
Updated: Thursday, March 7, 2013

Stakeholders from across the early-stage enterprise ecosystem convened in Nairobi, December 4-6 2012, to identify & design high-leverage initiatives that could strengthen support for enterprises through development stages to achieve scale and build sustainably in order to provide broad solutions for large, disadvantaged populations.

Participants from more than 40 organizations active in East Africa represented perspectives ranging from academia, impact investors, NGOs, social entrepreneurs, banks, industry organizations, commercial investors, corporations, service providers, and the donor community. Over the course of three days, we identified three high-potential initiatives with broad industry support that we believe will not only catalyze additional investment into the space, but help support strong, successful social enterprises with the potential to improve the lives of millions living at the base of the pyramid across East Africa.

To learn more about the workshop and the 3 initiatives, please read the workshop summary here: http://www.aspeninstitute.org/sites/default/files/content/docs/resources/Early-Stage%20Social%20Enterprise%20Ecosystem%20Workshop%20-%20Executive%20Summary.pdf

Read the full paper here: http://www.aspeninstitute.org/sites/default/files/content/docs/resources/Early-Stage%20Social%20Enterprise%20Ecosystem%20Workshop%20-%20Full%20Paper.pdf

Tags:  Acceleration  early stage ecosystem  East Africa  Incubation 

PermalinkComments (0)