The Fintech Unicorn Reimagined: The Sad Ending for Many Fast and Furious Fintechs
A McLaren F1 sports car and a Fintech Unicorn have at least two things in common: They get you there fast at a very steep price!
While it’s obvious about the McLaren, you may be scratching your head on the Fintech Unicorn comparison. In my previous blogs, I have written that a Fintech Unicorn has a valuation in excess of $1 Billion with little to no operating history. This fintech has envisioned a costly solution or service that, if the stars properly align, will quickly evolve into a real, operating business justifying the valuation.
To get you there fast, several dangers must be overcome, avoided, or even ignored. Catastrophic parts failures (a complete miss in the solution or service vision), a weak, inexperienced driver (senior management), an obstruction in the roadway (a pandemic), or a gas shortage (funding dries up) are just of few of the obstacles that stand in the way of meeting your objective.
More directly, as it relates to the Fintech Unicorn:
- The Fintech Unicorn’s solution and/or service is the amalgamation of a huge, costly effort that may span several product sets. Some of these products sets are built from the ground up with a newly formed team who may be very adept at their particular skillset, but with very little understanding of the overall objective. Other product sets may be acquired through M&A activity or an asset acquisition. This disjointed, now combined product is expected to act as if it were one perfectly synchronized outcome. Rarely does this actually occur without several missteps and “gotchas” along the way. In reality, it can take years in the market with real live clients (victims) as the product stabilizes.
- How does a Fintech Unicorn get their aforementioned, unstable product to market? Frankly, it is usually overly hyped and promoted. You hear statements like, ‘if ABC private equity firm is in, then it must be good’. Or perhaps you see the company’s name splashed over every possible method in a very costly media blitz. Sometimes the new solution is put alongside a well-known brand to lend creditability. None of these reasons will necessarily justify a Fintech Unicorn’s existence.
- What happens when the Fintech Unicorn grows up and matures? Granted, there are success stories of mature, self-sustaining firms creating solutions and properly serving their clients. What about the rest? There are those who don’t quite hit the mark and spend the next several years digging themselves out of a hole. How about those who sell out to another firm? Now that they are with a major organization, perhaps the original vision is less clear, concise, and understood. How many times have we seen a company being acquired by another company only to see the acquired company’s primary asset dry up and basically disappear over five to ten years? It happens all the time.
There is one big loser in all of this: the client. The client, who originally bought into the vision, the concept, and the value is now the one left holding the bag in a contract they can’t justify continuing and they can’t justify severing. They are in purgatory. The way up looks impossible and the way down looks bleak. The client turns out to be the guinea pig in this failed experiment.
Alas, there is a much more favorable alternative that will produce innovation, reliability, stability, and value to the market. There are fintech firms like First Rate that are in it for the long haul. First Rate understands the enduring value of these abovementioned and many other attributes. First Rate has a nearly 30-year track record of product innovation, creativity, adaptability, and most of all riding alongside their clients when things get tough. First Rate strives for a partner-like relationship, rather than a client/vendor contract.
First Rate serves hundreds of financial institutions and currently serves nine out of our first 10 clients. Let me pause for a moment and let that sink in for you. Nine of our first 10 clients have been with us for 25 to 29 years. Imagine the mergers, the acquisitions, the name changes that have occurred with these institutions over the years. First Rate has been and continues to be the constant in their lives by being innovative, flexible, creative, and most of all “there” for them. This is unheard of in the software world. Yet, we are living proof it happens.
Be careful if you ever get a chance to speed down the roadway in a beautiful McLaren F1 sports car. Several things can happen, and unfortunately, a bunch of them are bad.
The Emergence of a True Fintech Unicorn
First Rate has been an industry leader in surviving and thriving during times of distress. Download our infographic to learn how!
Terry Gaines joined First Rate in 2000. He works closely with customers and other experts in the industry to anticipate the needs of the performance measurement industry. In addition to his role at First Rate, Gaines serves his community through leadership positions with the Arlington and National YMCA, The Levitt Pavilion for the Performing Arts. The Arlington Chamber of Commerce, Junior League of Arlington and Leadership Arlington.