Boston’s FinTech Hub is Growing!
Just as Boston has all the ingredients to make it the world leader in healthcare — an abundance of biotech startups, VCs and universities — it also has everything needed to become a financial technology, or FinTech hub: Major asset management and insurance firms and banks, tech startups, VCs, and world-class academic institutions and students.
Collisions are key
The lifeblood for a healthy financial services ecosystem is data. Jean Donnelly, executive director of the FinTech Sandbox, works to assist early stage FinTech startups in gaining access to premium data sets. Her underlying goal? To create FinTech “collisions” in the Boston region. These collisions are critical to advance the emergence of new market technologies in the field. “While the costs of infrastructure and support for startups has decreased significantly in recent years, FinTech startups struggle to bring solutions to market without the support of data providers and other financial institutions to buy into using disruptive technologies,” says Donnelly.
By creating free access to high quality data sets, the Sandbox has been able to help startups use their limited early stage funding to focus on things other than paying for data. “We have startups that were spending 40-50% of their monthly burn on data subscriptions, now they are able to take that seed capital and hire engineers instead to advance product development. This allows emerging technologies to get to the financial marketplace faster, which is good for everyone.”
The Sandbox aims to bring together key stakeholders in the community to rally around new products including financial institutions, investors, data providers, and entrepreneurs. Donnelly says one way to create more “collisions” is through Demo Day events, hackathons, virtual introductions, and other networking events.
“In New York, we see a culture of networking events specifically oriented around financial technology. Here in Boston, it’s really just starting,” she says.
Overcoming challenges to partnering
There are challenges on both sides of creating partnerships between startups and financial institutions.
“Many times, an entrepreneur has created a great solution for a financial institution, but does not know how to position the solution so that it is answering a problem the institutions are trying to address,” she said. “On the flip side, many of our financial institutions often don’t understand how to work with startups because they lack the appropriate channel. Startups can get lost within big companies, being endlessly handed off to different groups within a company, losing valuable time and not working with key decision makers.”
Donnelly says another barrier to successful partnerships is vendor compliance. That’s especially true of startups that have only existed for three years or less and therefore do not meet risk requirements for large financial institutions.
“These are some of the challenges we are learning about as we create more interactions within the ecosystem,” said Donnelly. “The next step is to work together to come up with solutions.”
Eight of the FinTech Sandbox’s residents will be demoing their solutions at their upcoming demo day on November 1, 2016 at Hatch Fenway.