Nov 12, 2020

How to Make the Smart Investment in FinTech

Over the last ten years, venture capital and private equity investors have been pouring billions of dollars into fintech companies, both start-ups and established firms alike, as fintechs have dramatically emerged globally across all sectors of finance, including lending, banking and wealth management.

These investors see the opportunity to gain from not just the potential, but the promise fintechs offer to disrupt current financial services norms, to partner with the capital markets ecosystem to reinvent business models, and to use next-generation technology and innovation to solve problems.

That helps to explain why fintech investment increased substantially in 2018, with total global investment dollars across M&A, private equity and venture capital more than doubling from $50.8 billion in 2017 to $111.8 billion in 2018, according to KPMG.

I have devoted nearly 30 years to working as an executive in the software industry, with the last 20 years specializing in fintech as the CEO of Numerix. Fintech consumes all of my time right now and so I know more than a thing or two about fintechs. I think the fintech industry can be a very meaningful and exciting investment theme for the next several years. That’s why I devote an entire chapter in the recently published book I co-authored, FinTech for Dummies (John Wiley & Sons, Inc.), explaining how to strategically invest in fintech companies.

In Chapter 16, I outline my five principles for investing in fintech firms. These include:

1. Understanding the different types of fintech entities that exist. This knowledge will help you explore your investment options and decide where to put your money.

a. Business-to-consumer (B2C)
b. Business-to-business (B2B)
c. Business-to-business-to-consumer (B2B2C)

2. Navigating the investor landscape. In this section I highlight some of the most common investment vehicles.

a. Crowdfunding
b. Angel investors
c. Venture capital
d. Private equity

3. Importance of research and conducting due diligence. You need to ensure you are making a viable investment.

a. Performing primary research
b. Doing secondary research
c. Analyzing data

4. Importance of understanding a company’s growth strategy. For one, this information can help discern whether a small company will be able to grow into a more established one.

a. Study the competition
b. Listen to customers
c. Ask about their technology stack
d. Do they inspire innovation?

5. Consider a company’s culture.

a. Does the company foster an entrepreneurial spirit?
b. Does it place a focus on “financial inclusion”?
c. How diverse is its workforce?

A wealth of knowledge and information is provided in FinTech for Dummies, such as understanding the forces at work behind the rise of fintech, examining the depth and breadth of financial technology, and learning about the latest industry developments.

FinTech For Dummies is available now wherever books and ebooks are sold.

Order your copy!



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About the Author

Steve O'Hanlon is president and CEO of Numerix, a Fintech specializing in solutions for capital markets. O'Hanlon has spent his 30-year career in leadership positions growing start-ups and SMBs across the financial services technology industry. He has a passion for entrepreneurship, leadership and innovation. Today O'Hanlon is focused on building businesses, promoting a digital mindset and driving success.

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