The SAS FinTech Incubator: Lessons from Year One

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Back in April 2016, we set up the first SAS FinTech Incubator, to give start-ups access to big data technology and expertise. We were aiming to cut the time to refine applications by up to 50%. With pressure growing on fintechs as a result of scandals like that involving Lending Club, this is perhaps a good moment to reflect on what we have learnt over the course of the first year of the incubator’s operation.

Let’s be clear that we’ve had a vast number of conversations with fintechs and only three have been accepted on the programme so far. However, all three are likely to graduate so our success achievement is so far 100%! The huge number who didn’t make it this far fell down for various reasons outlined below. From not having a use-case that speaks to what SAS do, to not having a go-to-market strategy, there are many factors to be wary of when applying to the FinTech incubator.

It is important to be clear about your customers

Many fintechs start by focusing on the product. After all, it worked for Steve Jobs and the iPod. The problem, however, is that in doing so, you risk developing a ‘solution in search of a problem’. There are already too many products out there. Products need to solve a real-life problem, and to do so, you have to understand your customer. fintechs need to spend more time getting to grips with their customer, and making sure that the market actually exists, before they start focusing on the product. We can help to validate your market opportunity and broker introductions to our customers in your area of interest.

Open Source is not necessarily free

Open source sounds great: free access to software, without having to buy something that might turn out not to be quite right. But one of the main lessons from our first year in the incubator is that open source, in practice, is not really free. We have seen a growing recognition among start-ups that by the time that you have taken into account maintenance, documentation and support, the costs can be significantly higher. Add in the costs of scaling, and open source may become a real problem. Instead, we provided an open enterprise platform to our start-ups to help them over this hurdle, being able to combine open source programming skills with powerful analytics capabilities.

Scalability is vital

It is a commercial reality that investors do not like products that cannot be scaled up. They want to know that the product can expand rapidly, in response to demand. Interestingly, in a technology start-up, including fintechs, this often means cutting out quite a lot of the ‘bells and whistles’ early on. Start-ups that require a lot of developer time in their early days may turn out to be very hard to scale, and a heavy reliance on developers could and should be ringing alarm bells in those involved. Leaner, it turns out, is very definitely meaner in an incubator environment. The refinements can be added later, once you have your product and your customers have started to arrive. Our solutions are massively, I won’t say infinite because we can’t measure it, scalable ensuring your business is ready to address an influx of new customers.

Commercial awareness is critical

We were expecting to provide technological support to our start-ups, particularly with analytics and data science. In fact, what we found was that as well as this, many of the fintechs in our incubator needed commercial guidance. Perhaps it is inevitable for start-ups, but they often needed help to understand and develop their route to money. We found ourselves advising on pricing and sales, managing procurement processes, and many of the business processes that we tend to take for granted. We realised that they needed a lot of business support, and put in place a strong process to provide this.

Innovation without execution leads to failure

The best idea in the world is worth nothing if you cannot deliver it. In other words, you need to be able to execute on it. Witness, for example, the number of failed taxi apps that have tried to compete with Uber, including Taxi Magic, Sidecar, Get Taxi, and Hailo. Although customers like the idea of licensed cabs, none of these apps really worked, with one comment on Taxi Magic reading ‘Cabs can’t get their act together’. This is part of the reason why have a strong management team leading the business is key to success: it makes it easier to deliver against a market strategy, and therefore achieve the necessary revenues to grow. And that brings me to my last and perhaps most important point.

Speed really is everything

We knew that speed was important, and that was one of the reasons we set up the incubator. We looked to help fintechs to reduce the time it took them to refine their products by using our data handling and analysis expertise. But we probably underestimated the importance of speed at every stage. There is already a lot of competition in the fintech world, and more on the way. That means that getting products to market quickly is important to get any kind of ‘first mover’ advantage. Fintechs need speed to value, speed to development and speed to execution. Our incubator aims to significantly cut down development cycles so that you can hit the market fast and with a solid solution offering.

 

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Christian Giraud

Christian Giraud – Strategic Analytics Adviser – Financial Services & FinTech Accelerating the growth of data and the usage of analytics in the Financial Services & FinTech markets. Showcasing innovative solutions combined with forward-thinking partnerships. Evangelising the power of Hackathons to deliver long-term value for businesses.

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