[Related: “Market Data’s 'Cambrian Age' Offers Limitless, Untapped Potential”]
Even if you are more risk adverse with technology adoption, discovering new products early can still have a meaningful benefit by making you a faster “fast follower.” Don’t start your due diligence on a product at the time it becomes mainstream, when the excess benefits are already being arbitraged away. If you start by putting small amounts of time into reviewing early stage products a year or two in advance, for example, you’ll be ready to immediately jump in once the early adopters have sufficiently validated it for you. And even more important, you’ll have the opportunity to help shape the product features as they are built, ensuring it will have maximum utility to you once you do start using it.
Many entrepreneurs are at the forefront of thought leadership, and since they are shaping the future of this industry, it follows that they are also a great source for understanding that future as early as possible. Don’t solely rely on industry publications or consulting firms to highlight key trends. You’ll gain a much deeper understanding by also interacting directly with the trendsetters themselves.
An additional benefit of being “in the know” is that you’ll brand yourself as a forward-thinker. You’ll impress your boss, land new clients, or maybe land a new job at a more innovative company or startup (if you’re so inclined to pursue that course).
As a partner at ValueStream Labs, which runs an accelerator program specifically for FinTech startups, we’ve introduced numerous startups and FinServ professionals at institutions of all sizes. For example, a team at a large hedge fund described to us their inefficiencies in searching for certain types of information in very large collections of text-based documents. This is a common problem across many hedge funds, and yet the existing tools this particular fund uses still can’t do exactly what the firm needs. So ValueStream introduced this hedge fund to a company called Sensai, which has developed an innovative and simple interface that allows analysts of almost any skill level to more effectively use cutting-edge, machine learning-based search algorithms. Although Sensai is a young company and has only entered into contracts with firms outside of the financial services industry to date, the potential benefits to this hedge fund were immediately clear.
The key to making this an effective process for you is to avoid wasting your time listening to the startup pitches that will never add value for your firm. You need to be selective, and the best way to do this is to utilize a filter to help you wade through the crap that exists in the startup ecosystem. That’s one of the biggest opportunities we saw when we started ValueStream: providing a level of transparency and due diligence that helps professionals focus on the startups that can truly add value to their businesses.
Reason 2: You will uncover excellent investment opportunities
Investing in early stage companies can provide excellent upside potential, but it’s a daunting endeavor when you’re unfamiliar with the market the startup is attempting to tackle, on top of the many other unknown risks of investing in startups. What’s your edge in identifying the next Instagram that will sell to Facebook for circa $1B when there are already dozens of potential competitors in the space? Therefore, what better place is there to invest than in a FinTech segment where you already have unique expertise (and where most other investors likely do not)?
FinServ professionals are unique in that they have both the income to be an accredited investor and the appetite for making investments of above-average risk, and because of this, it is one of the few industries that produce numerous Triple Threat Investors. A Triple Threat Investor is an individual or firm that can be an investor, and advisor and a customer, all in one. When this type of investor gets involved in a startup, numerous ‘win-win’ interactions can occur, benefiting both the investor and the startup. Most notably, the industry expertise and relationships you have can rapidly add value for a startup, helping to increase the probability of you making an excellent return on your investment.
[Related: “Crowdfunding Is Going Viral”]
Reason 3: You will hedge your career against technological change
Finally, if you don’t think the potential returns in early stage FinTech are compelling enough for you, perhaps you should consider investing in FinTech startups as a hedge on your current business. If technology reinvents your business over the next decade, and that perhaps leaves you a bit short of the compensation level you would have otherwise expected by then, wouldn’t you like to have benefited along the way by owning a piece of the companies that caused that disruption?
ValueStream Labs’ mission is to discover and grow the entrepreneurial community in FinTech. ValueStream runs a startup accelerator program, venture-stage investments, and hosts numerous events in NYC focused on early stage financial technology.