Accelerate the Growth of Your Fintech with Learnings from Female Leaders
Fintechs fill gaps. They cater to niche use cases and underserved populations, extending key financial services like lending to people and businesses traditional banks may not reach.
For the fintech industry to realize its full potential, it needs a diverse pool of founders who understand overlooked pain points. That’s why it’s crucial to promote the success of female founders, and especially female founders of color.
API banking tools make launching a fintech app easier than ever, lowering one hurdle for startups. But other hurdles, like systemic racism and sexism in venture capital, still stand in the way. A supportive network of partners can make startups more resilient to challenges.
I had the opportunity to talk about these topics in a webinar with Kelly Ifill, the founder and CEO of Guava, a banking app for Black business owners and a Treasury Prime customer; Wendy Cai-Lee, founder and CEO of Piermont Bank, a tech-enabled commercial bank partner of Treasury Prime; and FinTech Today cofounder Julie Verhage.
Here are some highlights from our conversation.
It’s a great time for fintechs to raise funding, but still not without its challenges.
The broader fintech market is on fire right now, and startups in the space are seeing an explosion of interest. That's accompanied by rounds with multiples that make us scratch our heads a little but it says a lot about the interest in the category.
But systemic challenges still stand in the way of equal access to funding opportunities. Kelly Ifill, who worked in venture capital before founding Guava, said her connections helped with raising a pre-seed round, but only to a point.
“Less than 1% of venture capital dollars are flowing to Black female entrepreneurs,” she said. “And so I think, while I definitely benefited from the relationships that I had in venture, I'm sure that a white guy who had worked in venture probably would have been raising more than I did relatively quickly.”
Diversity matters — among your investors, as well as among your staff.
Growing diverse teams is the right thing to do, and also a key strategy for success. When you have more diverse talent and leadership, you’re better equipped to solve problems, and better able to better serve more diverse customers.
For Ifill, diversity is about more than who is on her staff, but also who is funding her company. She carved out half of her capitalization table for underrepresented investors.
“When there were white men that wanted to participate, I did say no, or hold off until I could get people that were underrepresented, or ask them to bring a friend,” she said, adding that her transparency paid off. “Most times, they were on board for it.”
Piermont Bank Founder and CEO Wendy Cai-Lee said her investors have made diversity a priority. Piermont is designated by the FDIC as a minority depository institution or MDI, meaning its board and shareholder competition is majority minority.
“My existing shareholders and board members are emphasizing that we must maintain our MDI status. So they're the one who's championing this,” she said. One reason is that investors are seeking out firms that meet Environmental, Social, and Corporate Governance (ESG) standards.
Partnerships are key, and fintechs need direct relationships with banks.
Cai-Lee said fintechs should seek partners of the right size, who will understand their needs and with whom they can have a direct connection.
“When you look for an accountant, you don't go get KPMG or Deloitte when you are five employees?” she said. “So you should right-size all your partners, your vendors, however you want to describe them … Find your partner who knows what you're doing, who knows your industry, who knows the pain points that you're facing at this stage of your company.”
And as a fintech, you want to find a banking as a service (BaaS) partner who lets you build a direct relationship with banks.
“The more successful partnership is where the fintech has a direct relationship with the bank, because at the end of the day, the product that's being offered is driven by whether or not the bank is willing to power that,” she said, adding that Treasury Prime is an example of a BaaS provider that facilitates these kinds of direct relationships.
“They look at this as a true partnership, where it's a three way communication so that it's benefiting the fintech the most,” Cai-Lee said.
We’re seeing an explosion in the number of fintechs, and in competition among them (which is a good thing).
It’s easier than ever to launch a fintech, which also means “there is a neobank for everything,” said Ifill. That makes it even more important for her fintech startup to stand out. Which is why she has homed in on the niche Guava fills: Banking for Black business owners.
“I am really hyper specific about the customers that I'm serving and constantly thinking about, ‘Is this good for them? Is this what they need? Am I talking to them enough?’” she said. “Because there are so many options for you, if you want to download a banking app today, you could have like three pages of banking apps.”
And while competition can sound daunting, founders should still seek it out.
I've always believed that nobody wants to be in a market where there's no competition, because that means there's not much of a market. The flip side of the explosion of fintechs is the explosion of competition for everyone across the board. But that competition also drives innovation and ultimately that's great for our sector.
Curious to hear more from this conversation? Click on the video above to watch the entire webinar.