Start-ups: there is no right way of selling to a bank, but there is a wrong way
Fintech is officially cool these days and banks have gone from indifference, to various degrees of engagement (via incomprehension and PR frenzy) to eventually totally drinking the cool aid. Which is awesome for the banks but I am not of the school that thinks this will make life easier for the start-ups. And this is not necessarily a bad thing.
When I started my career, if you were in the start-up, assuming you had a product that fulfilled a need, getting the meeting with the bank wasn’t as hard as getting on the preferred vendor list. The conversation was commercial and practical, although rarely easy.
When I crossed over to the corporate side a few years later, the mechanics of the conversation were still purely commercial and needs driven. Fintech firms of all sizes peddled solutions. We didn’t call them fintechs then but they were small firms selling financial technology often leveraging tech we had never used in the bank before, so the shoe fits. But the conversation remained always fully commercial. That was a shape we understood, on both sides.
Enter left the emergent tech wave, a fascination with start-ups and the realisation that digital transformation is not an opt-in snow, and the conversation changed.
Bankers had to listen to things they did not yet have a problem for. Bankers needed to understand and leave their comfort zone and experiment.
It is easy to pick out where we get this wrong, hesitate too long or try to hold onto comforts of old. It is important that we shine a light at everything we as an industry could be doing better and I, for one, don’t shy away from it.
It’s not all on us.
As the fintech ecosystem grows year on year, with thousands of copycat businesses and full time influencers flooding your twitter feed and your conference calendar, life is perversely getting a little easier for bankers. Now we have choice. Now we are buyers in a competitive market. It’s not all doom and gloom and the ‘other side’, whoever that is, no longer holds all the aces, assuming they ever did.
And yet I see so many entrepreneurs coming to meetings with banks behaving like they are doing us a favour, addressing senior decision makers in the style of ‘this is your assassin, I am here to kill your business, but first let’s do a pilot’. So let me take a break from shining a light onto what we as an industry can do better to say that as a customer, I have seen start-ups get their commercial encounters with banks terribly wrong. I am all for shaking things up and I admit there is no right way of going about these things. But, if you want to sell to banks, this is how not to do it.
Trends and buzzwords: the tech being here to stay doesn’t mean you are
Part of this is on us, the bankers. We have relied heavily on start-ups over the years to educate us on smart contracts and interesting use cases for behavioural economics and new inputs for risk assessments. So start-ups often came to meetings with a teacher hat on. This is the trend and I am part of it and since you trust me to explain, maybe you also trust me to do.
That was a very good tactic five years ago. Today, using the global trend to justify the firm just doesn’t work. “We did an ICO” has been included in over one third of decks I received from start-ups of various sizes this year so far. “We also have a blockchain flavor” appeared in just under half. Yes I counted.
Buzzwords don’t work that way any more.
We have learned a lot and understand better, so leave the trends and buzzwords out of it unless they are part of what you are trying to sell. And be aware that with 13,000 companies describing themselves as fintech out there, your task in the meeting is not to explain that the space is real and won’t go away. It is to explain why among the crowd, yours is the proposition that will survive the market correction, when it comes. That this trend is here to stay and so are you.
The shoe is on the other foot, when it comes to survival statistics so best not frame your meeting in terms of the bank’s viability. People in glass houses and all that.
Back to basics: what are you for?
I really enjoy going around the exhibition floor at industry events and meeting new companies. But I see a worrying pattern emerging of people who can’t articulate what they do for a living, beyond a high level vague buzzword-heavy description. Now it could be that they send the wrong folks to these events but I would hazard that in a small company, the folks who can’t describe your overriding purpose are not just wrong to man your stall. They are bad for your business.
And it’s not just events. I get sent decks and approached by start-ups all the time and I often finish reading a document and am none the wiser as to what you actually do, what you are trying to sell me. The decks are pretty, the references great, the graphs awesome. I sort of want it, but what is it?
Prepare for the meeting
On one occasion I interrupted a sales guy mid-flow. 20 minutes into a pitch call, I had no idea what his firm did. I understood the value they delivered to their client. The numbers were clear. I just couldn’t work out how they did it. So I asked. He said I was not prepared for this question, can we organise a follow up call.
Now call me old fashioned but to me that’s the sort of question you don’t need to prepare for. But if you do, then do.
I shouldn’t have to say this, but seriously: prepare for the meeting.
Think what you want out of it, think why your audience may have agreed to come to the meeting in the first place, what they may want from you, what they may ask. Prepare. Be clear what you want to sell. Be clear what they may want. Because you may not be ready to give it.
If you are not ready, don’t take the meeting. Bank the opportunity until you can use it. Don’t burn your bridges, you may need them.
I remember meeting with this company once for a working session on how we could integrate their offering into our App Store structure. Great meeting with razor sharp focus on client value generation. Only, half way through the meeting, they admitted they didn’t have an API yet and it wasn’t on their roadmap that year. Their data would be delivered in a good ole spreadsheet, emailed directly to your inbox. I was furious, my CTO shrugged and minded less. We never saw them again.
If you are not ready, don’t take the meeting.
Mind your manners: if you want the hand to feed you, don’t bite it
You go to a big bank to pitch or brainstorm or workshop.
You are in their house.
You don’t need to swap your jeans for suits or remove the stickers from your MacBook. But you do need to mind your manners. If you are an antiestablishment anti-capitalist, power to you and all, but you are in the wrong job.
Don’t sneer and don’t demean. Bankers are a lot of things but we are not stupid. Coming in to call our business moribund, our systems obsolete and our skill-sets irrelevant is both inaccurate and monumentally stupid.
If we are so useless, why try to partner with us.
If you want us to sign a cheque at the end of the session, you may want to tone down the arrogance. Especially if your amazing and snazzy solution is a bit of UX sitting on top of my infrastructure. This actually happened. Schadenfreude is sweeeeet.
Mind your zeroes: the art of pricing
When I was in a start-up myself, after building a product and road-testing it with potential users we had to work out how to price it. How to price a pilot, how to price a license, how to price any bespoke deployment.
Where do you even begin? We were 25 years old and had no idea what grown-ups actually pay for things like that. How do you fix that knowledge gap? Finger in the air… a gauge on what the bank can afford… a number that matches your outgoings…
Wanna hear a crazy idea?
We, all those years ago, asked for advice on pricing models and actual price point. We spoke to tech firms, we spoke to regulatory bods, we spoke to bankers. We went to people who sell and buy software for a living and got their personal but professionally informed opinions. We did it until a pattern began to emerge then we tested it with clients. We refined. We adjusted.
We accepted that pricing is part of the product. We realised that we needed to get it right to avoid looking like clowns. Or worse, looking like opportunists trying to take the client for a ride.
We learned that it’s ok to charge for pilots, unless you need to prove something as much as the client needs to learn it. We learned that if you are still testing your own assumptions you can’t make the customer pay for your RnD. We learned that the pilot needs to be priced at a level commensurate to the cost of the full product (hint: a pilot cannot entail license, hosting and support fees. And yes that’s also a true story). I know you are desperate for cash flow but this is not how you do it.
We also learned, the very very hard way, that some times paid pilots are not good money. They are not sticky money. They won’t convert, they won’t take you where you need to go. Some times a free pilot is a better move towards repeatable revenue than a long string of paid up pilots that will never go anywhere. They will pay today’s bills, but they won’t scale so neither will you.
By all means don’t work for free, don’t let potential customers waste your time with exercises they never intend to implement. But don’t waste their time either.
The fintech era is here.
Emergent tech has emerged, regulatory barriers to entry are lowered, the banking value chains are unravelling and customers are hungry for change.
Yes bankers are uncomfortable.
But in this changing and unsettled environment, fintech providers abound. There are options galore. So if you are a budding entrepreneur dreaming of the big times, you are right in thinking there is no one way to success. You are right in trying to do it your way. There is no right way. But there is a wrong way: if you choose to make banks your clients, treat them with the same respect you keep encouraging us to show to our customers. It’s called eating your own dog food, and banks are getting very good at this. And we expect the same from the challengers.
In fact, we expect more. You are the guys who started this chain reaction, who got us thinking, who raised the bar. We expect you to keep doing that. In the tech you produce, in the ways you think and, yes, in the way you treat us as your customers. You taught us to believe it is all interconnected.
Don’t let us down.
By Leda Glyptis
Leda Glyptis is FinTech Futures’ resident thought provocateur – she leads, writes on, lives and breathes transformation and digital disruption.
Leda is a lapsed academic and long-term resident of the banking ecosystem, inhabiting both start-ups and banks over the years. She is a roaming banker and all-weather geek.
All opinions are her own. You can’t have them – but you are welcome to debate and comment!
Follow Leda on Twitter @LedaGlyptis and LinkedIn.