When is the right time to scale up your fintech?

As the UK’s strongest startup sector, more investment is funnelled into fintech than any other industry or vertical. We take a look at how you can prepare to take the next step in your growth trajectory and what you can learn from successful scale-ups.

The scale-up period of any business’s lifecycle can be a precarious time, and only a handful of fintech start-ups make it to the next level. Of those operating in the UK, 45% are in the seed stage – meaning uncertainty exists as to whether their product has an adequate market – while 34% are at the venture stage, having established a viable business model, secured funding and – often – received a six-figure valuation. 

The opportunities are out there, but what do you need to do in order to evolve from start-up to scale-up, and how do you know when the time is right?

Proof of concept: refining your business model‍

Despite the dual challenges of Brexit and the Covid-19 pandemic, the UK’s fintech sector is booming. In Q1 2021 alone, $2.9bn was raised across 117 deals, which represented a 331% increase on Q1 2020, when the nationwide lockdown significantly slowed investments.

But as the industry matures, we’re seeing fintechs being held to new metrics of success. And while disruption and differentiation remain key, it’s never been more important to have a product for which there is demonstrable, long-term demand and a go-to-market strategy. 

Fintechs are rarely valued on revenues, profit or assets alone – think of Monzo’s £1 billion valuation in October 2018 despite suffering a £33 million loss the previous year – and today’s investors want to see the innovative ideas for which the sector is renowned playing out in reality. That’s why your fintech’s ability to scale-up should be evidenced through access to new markets, attractiveness to world-class talent, technological sophistication and regulatory know-how.

Leading the way: learn from successful scale-ups‍

So what can start-ups who’ve successfully scaled-up teach us? Let’s look at how some of the biggest players on today’s fintech scene have proved their value and set themselves apart from the competition:

Revolut: Having the right people in place

Scaling up its cloud computing technology is one thing, but for Revolut to show investors it really means business the platform has recruited around 1,000 human compliance and customer service specialists over the past two years. These new hires have been tasked with managing the governance and complexity of running a financial institution and, with the support of newly appointed executives and directors from traditional banking backgrounds, it’s hoped Revolut’s developers and software engineer will be given the bandwidth to maintain the agility and speed of innovation that made the company so successful in the first place. 

Atom: Offering something different

Having steered away from current accounts and debit cards, the digital-only banking service has differentiated itself from many of its challenger bank competitors by offering savings accounts and business loans. Launching its mortgage proposition in 2016, Atom promised a record application-to-offer timeframe of just 12 seconds thanks to its fully digital in-app mortgage acceptance process. Atom has also demonstrated its commitment to setting regulatory standards for the sector by contributing to the government’s Kalifa Review of UK Fintech and signed the Fintech Pledge in 2020, which supports effective collaboration between UK financial institutions and fintechs.

Wise (previously TransferWise): Consistently putting the customer first

From consumer accounts to business accounts that are available for sole traders, SMEs and enterprise-level businesses, the currency-exchange platform has widespread appeal, tapping into multiple demographics and international markets. And it must be doing something right, as customer referrals have fuelled much of its growth – earlier this year VP of Growth Nilan Peiris said that 67% of its customers join Wise through a recommendation. Internally, Peiris says Wise’s 70 product teams, which are focused on customer problems, have also enabled the company’s sustainable growth. “Each team is autonomous, meaning they can prioritise and deliver results without being told what to do by leadership, keeping them agile and fast. Instead they focus on feedback from customers when prioritising what to build next.” 

PrimaryBid: Keeping up with demand

It was PrimaryBid’s ability to respond to growing demand from private investors to purchase shares in publicly traded companies that led to it being named the second fastest-growing scale-up of last year. When Covid-19 slowed the number of institutional deals and companies were looking for alternative investment opportunities, PrimaryBid offered up a solution. As a result, in October 2020, the company received £38.3 million in investment from various sources. Moving forward, PrimaryBid plans to continue on its growth trajectory by investing in new hires, developing its technology, growing partnerships and expanding internationally. 

Bill.com: Entering partnerships‍

Founder and CEO René Lacerte has pursued partnerships since launching his automated bookkeeping platform in 2006 and has grown his list of collaborators from a few hundred accountants to a group of big-hitters that include Intuit, JP Morgan, Bank of America and Well Fargo. Having considerably expanded Bill.com’s reach, the partnerships have clearly paid off – the company went public in December 2019 with a $1.6 billion valuation. ‍‍

‍Next level: how to transition from start-up to scale-up‍

As you consider your next steps, here are some key takeaways that can set you on the path to scale-up success. 

1. Secure funding

Fast-growing fintechs often need capital to support their growth plans. Luckily, the UK is seeing record levels of funding – be it from angel investors, crowdfunding activities that enable individuals to invest in unlisted companies or venture capital funds – and the fintech IPO boom is well underway. In recent months, we’ve seen PensionBee and Wise float on the London Stock Exchange.

2. Consider entering partnerships

While traditional banks might once have seen fintechs as a source of competition, there’s a growing culture of collaboration. Mutually beneficial partnerships see traditional financial institutions teaming up with emerging technology companies to gain access to new products and markets while demonstrating their commitment to innovation. While for challenger banks, there’s the opportunity to access the investment potential and gain industry and regulatory knowledge. For example MarketFinance, which became the first fintech company to partner with a major highstreet bank when it teamed up with Barclays. We see partnerships enabling growth across industries, too – like Shopify's integration with Stripe, which has strengthened Stripe’s mission to be a one-stop shop for small business.

3. Seek out new markets...

Just as it’s worth developing relationships with non-traditional trading partners, Brexit has opened up the potential for fintechs to explore new territories. Following the referendum, the US has overtaken the EU to become the most popular market for the UK’s aspiring fintech scale-ups who are looking to expand overseas. 

4. … and new audiences

Driving growth is about finding pockets of opportunity, and that means getting your products and services in front of new audiences via an effective digital marketing strategy. It’s not a case of ‘if you build it, they will come’. Instead, a fintech’s scale-up success depends on customer demand – so start drumming up interest as soon as possible. If you aren’t sure where to start, chat to us about how we can help increase customer acquisition, improve conversion rates and drive revenue.

5. Keep your customer front of mind

As you grow your products and services, remember to keep customer experience as your number-one priority. Klarna co-founder and CEO Sebastian Siemiatkowski has admitted in interviews that one of the main problems he and his partners faced in scaling their offering was a lack of tech experience – none of them have software engineering or coding expertise – however they maintained a laser-focus on their central mission, which is to make online payments easier and safer for consumers and retailers. The head of the payment giant claims that being in touch with shoppers’ feelings will aid business recovery in the aftermath of the pandemic.

6. Plan for big things from day one...

Scaling up can mean having to think about things you’ve never previously considered, but baking your growth plans into your business model, company culture and operational strategy from the very beginning will ultimately bring time and cost efficiencies. Think about the areas that will be essential to your long-term success, such as identifying your USP, hiring an expert team, keeping up-to-date with the latest technological innovations and interrogating data to learn more about your customers and their expectations. 

7. …but don’t run before you can walk 

Having said all that, there’s no rush. Nine out of 10 fintech startups fail to get beyond the seed stage, and scaling too quickly can leave you short on capital, trying to enter a market you don’t fully understand and overloading your team. Take the time to assess whether there’s demand for your product or service beyond motivated early adopters, gather real-time financial data that will allow you to accurately forecast, establish an independent board of advisors and – perhaps most importantly – don’t get swept up in the hype. 

Remember: setting the intention to scale is easy, but getting the right infrastructure in place  to support growth requires patience and perseverance. Not to mention ambition, experimentation and the ability to hold your nerve. Having worked with more than 25 fintech firms worldwide, Growth Gorilla can guide you on your expansion journey.

We love data and are ready to leverage key learnings to help you build a strong and sustainable business.  Find out more today and arrange a free strategy call.