Susanne Chishti on how CAs can harness the power of FinTech

Remember Netscape Navigator? One of the original web browsers, the company behind it successfully issued an IPO in 1995 – just 16 months after it launched. It grew rapidly and at one point had a whopping 90% market share. But it was soon eclipsed by Microsoft’s Internet Explorer, and, after more than a decade of legal wrangling and attempts to stay afloat, Netscape suffered the fate all start-ups fear. By the end of 2007, it was no more. And there were plenty of others ready and waiting to become the next tech unicorn.

Discovering the next game-changing tech proposition is precisely what drives Susanne Chishti, CEO of Fintech Circle, the fintech-only angel investor group. As an MBA student at the University of California, Berkeley in the mid-1990s, she recalls the frenzy of internet innovation – and investment – that led to the rapid rise of Silicon Valley. “Netscape and its IPO was the first for a tech company that was really just being founded,” she recalls. “I knew everything that was going on then was going to change our world.”

Fast forward to 2014, and something similar was bubbling in the City of London. An entrepreneurial culture was now driving the financial sector and Chishti felt certain that fintech would be the future of finance. So, the savvy Austrian-born Londoner and mother of two decided to create Fintech Circle, an investment network specifically for start-ups in the sector. Since then, Chishti and her network of 70 angel investors have invested in around 20 start-ups and had four successful exits, including the comparison app Bean, acquired by Comparethemarket.com, and invoicing and expenses app Albert, acquired by Santander.

Beyond providing a funding network, knowledge-sharing is key to Fintech Circle’s value-driven model. The organisation has published seven books with Wiley Publishing, all co-authored by Chishti, including one for its famous Dummies series. Fintech Circle was a first mover in the fintech educational sector. The group also works with other organisations, including banks, to provide fintech masterclasses to their senior leaders. These classes cover trends and digital transformation in the sector, and are led by the people closest to its grassroots innovation.

“We realised there was a gap in the market for education, for knowledge-sharing, and we wanted to approach addressing that gap in a humble way,” says Chishti. “The fintech sector is already complicated. And if you want to really go deep, you need to understand all the verticals of banking – retail banking, investment banking, insurance, payments, cryptocurrencies… And then you need to understand the technologies – artificial intelligence, blockchain, decentralised finance. It’s so detailed and there’s not a single person in the world who knows it all.

“We don’t just provide capital, we provide this huge network too. It gives us credibility with entrepreneurs and founders. Because they know that, post-investment, we can support them to grow. We can make introductions to our contacts. Everything we teach is based on the principles of what we’ve seen in the marketplace that works. It shows that we’re practitioners and we really are at the centre of this ecosystem.”

Dragon's den

That ecosystem is set to grow again. In partnership with SFC Capital, Fintech Circle recently scouted for the 10 best UK start-ups, who will receive £1.5m from the Seed Enterprise Investment Scheme fund. Because her firm focuses solely on fintech start-ups, Chishti believes those that receive investment have a competitive edge. “If you pitch to agnostic angel investor networks, you waste lots of time and so do the investors, listening to pitches that aren’t relevant to them,” she says. “But with Fintech Circle, our single-minded focus means we’re extremely efficient.”

So, what makes a fintech start-up stand out for her investors? “First thing is the team,” says Chishti. “We really look at their experience and expertise and how they complement each other. And in fintech, ideally you want one co-founder with strong finance and business expertise and one whose strength is in technology.

“Then you look at the problem – the pain point their product or service is trying to solve. It’s important the problem is well identified and something we agree with. Because there are so many companies founded on something that’s nice to have but which you don’t really need. It’s hard to grow those businesses because if there’s no pain on the consumer side, no problem they need to fix, it’s very hard for them to sell – and without selling they don’t have revenue. For start-ups, revenue is like oxygen. Without access to money, they can’t grow their business.”

Once the pain point is identified, Chishti and her fellow investors look at the product or solution itself: what is it, how does it work, and how does one buy it? Next up for scrutiny is the business model. Is the start-up selling direct? What is its route to market? They then examine the financial model. Some might be expensive solutions for, say, banking clients – in which case the sale cycle is likely to be very long. “When you sell to banks it might take a year or longer, so how will your business survive for the 11 months before then?” asks Chishti.

Finally, the investors consider the competitive landscape and what makes this particular start-up unique before scrutinising longer-term financial plans. It’s a rigorous process that only the very best start-ups can stand up to.

The problem solvers

One of the characteristics that makes certain fintech companies special is how they combine the latest technologies – such as AI and machine learning – in order to solve problems. One example Chishti cites is open banking, which in the UK allows start-ups to get access to and analyse clients’ data (if they opt-in). “Before, you would have had to go to the procurement manager, and then the bank manager to seek permission to look at client data,” she says. “A complicated process and you might not even get permission.”

The fintech companies that have grown well, says Chishti, are those that recognise the advantages of working within an ecosystem, tapping into B2B and B2C markets. Examples are TransferWise, now called Wise, which deals in foreign exchange payments; Revolut, now an established online bank; and Starling and Monzo – both challenger banks. “All these are almost household names now, and now they can become clients for smaller fintech companies who can sell to these fintech unicorns,” she explains.

There are a growing number of fintech solutions for finance managers and accountancy practices too, which CAs can use to make themselves more efficient, Chishti says. She recommends they get to know the fintech solutions in the market most relevant to them.

“Don’t see fintech solutions as competition, although of course if you’re performing the same transactional tasks day in, day out, there may be a technology solution that replaces what you’re doing,” she explains. “But to future-proof your career and your practice, you should absolutely look at what fintech offers. There are excellent solutions that help with auditing, with balance sheets, with financial statements. And leveraging the best solutions can help you generate higher revenues, reduce costs through automation and also streamline compliance through reg-tech [regulatory technology].”

Chishti adds that fintech paves the way for CAs to move from pure transactional roles to offering more knowledge-based, advisory professional services, freeing up time to offer more personal service to clients. “Accountants have clients who all want to feel special,” she says. “There’s a fintech company that schedules updates about your clients automatically in your workflow, even things like their birthday. It’s really just about automating those things so you can focus on what really matters.”

fintechcircle.com