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Ohio welcomes global talent through startup accelerator Fintech71

Beyond the tech hubs of San Francisco and New York, one Midwest state is gunning to become a global center of innovation in financial technology — via a new accelerator program in Columbus, Ohio, that multiple banks and insurers are setting up.

Fintech71 is an accelerator program for startups operating in banking, payments, insurance, health care, investing and regtech. The accelerator is named for Interstate 71, the highway that connects Ohio’s largest cities of Cincinnati, Columbus and Cleveland. It’s sponsored by some important players such as KeyBank, Grange Insurance, Huntington Bank and Visa, along with JobsOhio, a nonprofit economic development corporation. Industry heavyweights including JPMorgan Chase, Capital One and Silicon Valley Bank will offer support through mentorship. Backers of the accelerator are keen on keeping local talent in the state and attracting global innovators who could possibly set up shop there.

“The world is fighting over people with good ideas,” said Ray Leach, CEO of JumpStart, a Cleveland-based nonprofit and venture development group.

Fintech71 will be housed in 15,000 square feet of space in a remodeled art deco building in Columbus located across the street from the Ohio Statehouse. The Columbus location is a nod to the area’s prominence to the sector, where JPMorgan Chase’s largest tech hub in the world and Morgan Stanley’s recently launched center of excellence are housed. Columbus’ recent designation by real estate and investment firm CBRE as a “new city of finance” seems appropriate.

“The financial services industry is the second-largest private industry in Ohio — you wouldn’t necessarily think that, but there’s a huge number of insurance companies and banks, a lot of acquiring banks, and innovation in fintech is increasingly important for Ohio’s economy,” said Leach.

For one bank partner, the accelerator is a hands-on way of supporting innovation in priority areas it has already identified.

“There are a number of institutions that are writing checks to the fintech companies, and that’s an exploratory method,” said Ken Gavrity, head of KeyBank’s commercial payments group and a Fintech71 board member. “But for us, we start with a customer pain point, what are the salient points, and from that, we work backwards.”

Among the areas being considered, priorities include payments, digital banking and institutional processes, Gavrity said.

The 12 companies selected will be offered $100,000 in investment (Fintech71 takes up to a 6 percent equity stake in the companies) and 10 weeks of training in Columbus. Matt Armstead, executive director of Fintech71, said he hopes the accelerator can help retain the talent coming out of some of Ohio’s best universities, and at the same time, attract some of the best global talent.

“We need to be supportive to bring in anyone from anywhere, and that includes people from around the world,” he said. “We need more diversity in startups.” Armstead added that Fintech71, working with JobsOhio, can help new companies, including those from outside of the country, wade through the red tape to get their businesses off the ground. 

Jeff Carter, a general partner at West Loop Ventures, a Chicago-based venture capital firm that focuses on financial technology companies, said the Midwest offers new companies low labor and real estate costs, along with an ecosystem of support. The accelerator program is a good strategy to get startups to stay in the area.

“If they have early success, they’ll stay there,” he said.

Carter said in contrast to the coastal fintech hubs of New York and San Francisco that have major players in business-to-consumer technology, the Midwest has long been a center of innovation for business-to-business financial technology products. 

For KeyBank, the accelerator is an opportunity to begin longer-term partnerships or even set the stage for future acquisitions.

“Those business options are always on the table,” said Gavrity. “It may not happen in the accelerator, but maybe it’s five years down the road — anytime we can be early in the funnel to tap talent, that’s a great place for KeyBank to be.”

Photo of Fintech71 workspace courtesy of JobsOhio / Mark Wiggins

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‘The biggest challenge is the distraction over disruption’: FIS chief product officer Rob Lee

Fidelity Information Services, one of the world’s largest banking technology companies, provides the back-end software and financial services technologies for 20,000 clients in 130 countries. Headquartered in Jacksonville, Florida, FIS’ main clients are banks. The company runs a Little Rock-based startup accelerator program, which just selected its second class of mentees.

Rob Lee, chief product officer for banking and payments and a mentor for the financial technology accelerator program, spoke to Tearsheet about the biggest issues affecting banking, what motivates the company to support startups through its accelerator program, and the biggest trends affecting the industry. Here are excerpts, edited for clarity.

What’s the biggest issue banks face with the proliferation of startups developing competing lines of business?
The biggest challenge is the distraction of the discussion over disruption. Banks are every day faced with what are they doing with new technologies how are they blocking disruptors or embracing disruptors. I don’t think that our bank clients are being impacted from a transaction perspective with disruptors going into their business.

What’s the biggest bottleneck affecting how banks operate today?
The biggest problem is that the information [about customers] tends to be siloed across the organizations.

Is the purpose of your startup accelerator program to allow others to build software products that can seamlessly interact with bank platforms run by FIS?
We bring 10 new companies that are building things around the financial services world. All those apps need data and customer information to drive their value proposition and our API gateway provides a way to build on top of that.

So you’re really looking for startups that can partner with the banks?
We invest in research and development and innovation and startup companies not in the accelerator — the accelerator is just one way to do that. [The startups] are really pushing the envelope; for example, we have a company called Alpharank, and they’re using the Facebook social graph paradigm and applying that to financial services.

Is there a trend that is overhyped or has lost your attention?
There was a lot of hype about blockchain a year ago when it was seen as a panacea, and we’ve seen that subside somewhat. We’ve seen a lot of public proof of concepts, a lot of consortiums, and not much actually happening to manage real transactions.

What’s the next big thing?
You’ll see massive changes in the use of voice as an input. Today Siri and Alexa are about 95 percent accurate — there is some latency in that but in the next few years, with all the investment, it’s predicted that it will get to 99 percent accuracy with close to zero latency.

 

 

 

 

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Inside Bank of Ireland’s New York innovation hub

Ireland’s largest bank is looking to build startup talent — and it’s looking beyond Ireland to do it.

Far from its other training spaces in Dublin, Cork, Limerick and Galway, the company last month opened its midtown Manhattan workspace to Irish and European startups looking to expand to the U.S. market, its first outside the country.

Through Startlab NYC, as its known, the bank offers 12 months of free office space combined with networking and mentorship opportunities. The space currently hosts three companies, and startups have until Friday to compete for the remaining four spaces up for grabs. Though a natural fit for financial technology companies, the bank said it’s happy to look at companies in other industries. The current cohort includes location-based marketing startup Pulsate and interactive video technology company Axonista.

The bank said it isn’t taking an equity stake or investing capital in the companies, but Carolyn Quinlan, program manager at the Bank of Ireland’s innovation team, said it will connect them to venture capitalists, government agencies and other contacts. For the bank, it can be a way to find talent, or find new technologies it can use for its own business.

The bank’s move mirrors those of other foreign-based banks building innovation labs in New York City — including Deutsche Bank, which opened a lab last month, BNP Paribas and Barclays.

The rise of Irish startups in New York may be a nod to the country’s emergence as a technology center. A KPMG report released Tuesday noted that multinational companies such as Amazon and Linkedin, along with growing companies such as Kabbage, are increasingly choosing Dublin as their European headquarters as the country’s financial technology sector increases operations and headcount. The Irish startup community in New York has grown so large that it has its own non-profit association — Digital Irish — with over 1000 members and its own angel investor network. Other countries have also stepped up their technology communities in New York, too, with examples like La French Tech NYC  and the U.K. financial technology community outreach in New York through its nonprofit, Innovate Finance.

For Irish financial technology companies operating in the United States, beyond the obvious hurdles of getting a product to market, finding local partners is an obvious area where bankers’ expertise can help.

“When you’re selling to banks, it’s about reputation and longevity risk,” said Jon Bayle, founder and CEO of Dublin-based deposit management startup Deposify, a company that’s currently hosted in the New York Startlab. “Part of that comfort is being in their market — being able to sell to them face to face.”

Deposify, whose U.S. head office is located in Boston, depends on partnerships with banks to be able to offer its service to landlords, property owners and tenants. Earlier this year, the company announced its first partnership with an American bank, People’s United Bank. To Bayle, working with a major bank partner allows his company to reach a larger pool of banks in the U.S.

“We’re not banking partners, and by working in close proximity to them, we can lean on their expertise and access their network,” he said.

A major bank brand’s connections can help Irish companies navigate local regulations — a boon for startups looking to grow their reach in the U.S.

“Expanding to the U.S. fintech space is very regulated, and the licenses don’t transfer from Europe to the U.S.,” said Flavien Charlon, co-founder and chief technology officer for Dublin-based Trezeo, a startup that operates an income smoothing service for freelancers. “It’s like you’re starting from scratch — the Bank of Ireland has critical mass there.”

Homepage image of the Dublin workspace courtesy of Bank of Ireland

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Why insurance technology startups are going to Des Moines

Far from the Silicon Valley hub of financial technology, the next great insurance tech idea may be hatched in Des Moines, Iowa.

Since 2015, insurance technology startups from around the world have converged there to learn how to grow their businesses. The Global Insurance Accelerator is a 100 day early-stage startup program backed by major firms including American Equity, Principal and Mutual of Omaha. They’re working on tools make the claims process run better, and new ways to assess risk and detect fraud. The program will graduate its third class this year, and interest among major insurance carriers continues to grow.

“When you look at insurance companies, at the end of the day they’re data companies, and the products they deliver are virtual,” said Brian Hemesath, managing director of the Global Insurance Accelerator, whose fund offers participating startups $40,000 of seed funding in exchange for a 6 percent equity stake. The program is part of a larger trend where insurance carriers are developing their own venture capital arms to support new products from startups.

Hemesath notes that Des Moines, a major hub for the insurance industry, is a good fit to host the program, given that over 60 companies are headquartered there. Cost was not a driving factor, he said, but the low cost of living allows the program to offer free housing to the cohort. In addition to the accelerator program, earlier this year, ManchesterStory Group, a venture capital firm backed by a group of insurance companies from across the country, just began operations in Des Moines.

The startups are developing products for insurance carriers, including those that improve business processes, security and underwriting methods. The 2017 class includes InsuranceMenu, a platform to help small businesses connect with health insurance providers and RE-Sure, a tool that integrates blockchain technology into the insurance sphere.

Roland Chan, a current participant from Toronto said that in addition to workshops on market strategy, underwriting and regulation, what made the program stand out was the networking aspect. Chan is the founder of Find Bob, a machine-learning powered succession and partnership planning platform for insurance agents and financial advisers.

“The first three weeks were speed dating networking,” he said. “We were introduced to over 90 industry stakeholders, carriers, insurtechs and government agencies.”

A demonstration day later this month and presentations to an international conference of over 450 insurance executives will mark the culmination of these efforts.

Hemesath said some key issues are how to develop better underwriting technology (for example, how to assess a customer without a credit score), data sharing including the exchange of APIs, and how the industry can use data from emerging technologies such as wearables.

While early insurance technology innovations were in the consumer space, Chan said the next frontier for them will be to help large companies more easily deliver their services.

“A lot of the early bets have been made on disrupting the consumer experience, but the next wave is going to be about supporting other aspects of the value chain,” he said. “Insurance is one of the oldest segments of financial services that has had the least amount of innovation in the last hundred years — there’s going to be tremendous opportunities.”

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Inside the fintech accelerator program in Little Rock

Big city startup entrepreneurs are going to the heart of the country to immerse themselves in business development.

A recent addition to the pool of development programs for financial technology startups is the Venture Center Fintech Accelerator based in Little Rock, Arkansas, which just graduated its first class. It is backed by industry giant FIS, a banking technology company that operates in over 130 countries.

The program selects 10 entrepreneurs a year, and it covers a broad range of focus areas, including core banking services, wealth management, wearables, wallets, back office, compliance and payments. For the startups, it’s an opportunity to get honest feedback from counterparts in the banking sector. This year, organizers received 295 applications.

Participating companies receive a $50,000 initial investment, and companies are eligible to pitch for up to an additional $100,000 to 300,000 awarded to winners at the end of the program. The training is offered in collaboration with the Venture Center, an innovation hub based in Little Rock that hosts the workshops and connects the startups with contacts and additional investors.

Rather than being seen as competitors, startups are now being mentored by bigger institutions, as similar programs at big banks like JPMorgan Chase and Bank of America have cropped up.

“It’s about bridging the gap between these disparate types of organizations,” said Brian Bauer, program manager at the Venture Center. “On the one hand, you have risk-averse institutions that are very wary when it comes to technology, vendor risk and data they may give access to, and you have these technology companies that are attempting to build products that benefit the bank and enable the customers to do new things with their money.”

Whether the companies are developing products for business or consumers, collaboration with banks is crucial. Bauer said the program is important tool to help startup entrepreneurs get their products to market and “speak bank” — familiarize themselves with the banking world. While most of the mentored companies are developing products for other businesses, the program is also open to companies working on consumer-focused tools.

“What happens during the program is its pure exposure to financial institutions for the startups,” he said. “We bring the companies in here and put them through our process, curriculum and mentorship, and another part of the program is introducing them to the financial institutions — they can speak to the customer segment they’re going after and get candid feedback.”

Grant Easterbrook, co-founder of Dream Forward, a 401(k) startup and 2016 class graduate, said the program was mix of meetings and independent work organized around a series of themes relevant to growing the business.

“The sessions were either with FIS executives or with different mentors in the city, such as CEO of a local bank, or one of the biggest attorneys in town,” he said. “They try to mix it up with very specific industry knowledge and more generalist startup legal advice.”

Each week, every company had deliverables, and the work culminated in a demonstration day for investors, bankers and other stakeholders. Bauer said that while many accelerators focus on fundraising, the FIS program zeroes in on getting the products to market, which he said can be the biggest challenge for early-stage entrepreneurs. While FIS could not provide comments by deadline, Bauer added that big banks can benefit from the cross-fertilization of ideas that results from working with startups.

“I wouldn’t say its a challenge for banks to interact with startups, but it’s an opportunity for them to get exposed to early-stage innovation that’s occurring within the industry,” said Bauer. “What we’ve done here is cast a big net and vetted those down to the best ones we can find, so we’ve really created an opportunity for the bank to come in and meet well-vetted fintech companies that are really leading the industry.”