Invest in FinTech businesses: Where to start?


(Wayne Simpson) #1

Hi All

I’m building my investment portfolio out and keen to get a piece of the FinTech action. Does anyone have any guidance on where to start with investing in FinTech businesses?


#2

Most of the recent fintechs have been on either crowdcube or seedrs.


(Andrew Clark) #3

Hi Wayne. As the previous poster said - Crowdcube and Seedrs. Not many fintechs use the crowd, especially as there is a lot of bank money now sloshing around for fintech startups. I’ve been on both platforms for three years and own a piece of a few fintechs.

Crowdcube alert you when a new company is raising, Seedrs you need to log on once a week. Increasingly as a former investor you get to participate while in the private stage so sign up at the very least.

Not quite the same but also consider investing in the Robo-AI fund over on Freetrade which is liquid. I love crowdfunding but the money is possibly tied up for years.


(Wayne Simpson) #4

Thanks Chaps

Free trade looks interesting, shame they don’t have Android as yet. I’ve just open a Stocks & Share ISA via Plum, their new investment platform lets you invest in a legal and general tech fund and diverse your portfolio with with other options which I like. Currently revisiting etoro for direct stock trading but free trade defo looks worth researching too.


(Christopher) #5

First take some time. It’s very easy to get caught up in the excitement and hyperbole surrounding very term fintech. It’s worth considering that you can invest at different stages, from seed funding right the way through to IPO/listed businesses, and each stage carries a different level of risk as well as different opportunities.

I’d start by researching the sector as a whole, getting a feel for different types of business that fall under the fintech umbrella, (payments, lending, banking, blockchain, investing, insurance, etc.) Each carry different risks and likely different models. Consider the actual prospect for growth, how big is their market? Do they actually solve a problem? And crucially, how will they make money, and over what time frame?

Many businesses author white papers which will provide an overview of their idea or concept. Also, head to fintech focused events, there’s a lot of dross, but that’s helpful as it makes it easier to discern quality. These events are also useful as they allow you to access management to ask questions.

Some good places to look for interesting businesses…

https://www.level39.co/members/ [Primarily Fintech focused, Revolut are alumni]

https://www.techstars.com/

https://www.crunchbase.com/

https://angel.co/syndicates

Following the company means you’ll likely be privy to funding plans if they are seeking crowd investment or looking for a placing on AIM or NEX. As @andrewpclark mentioned, investing in previous rounds often grants access to initial closed funding rounds, but also, customers or mailing list recipients often get heads up before anyone else. Equity crowdfunding carries a very high risk of failure, so bear that in mind when looking at potential businesses to invest in. Consider the credibility of the management, previous track record and other backers. What VCs if any have previously funded a particular company, and what is their track record?

As I mentioned, crowdfunding via Crowdcube, Syndicate Room, Seedrs etc. aren’t the only means to invest in fintechs. Ayden and Funding Circle both sought IPOs within the last 12 months, so all you need to invest in those businesses is a stockbroker.

Teathers also provide opportunities to participate in smallcap IPOs, but again these are likely to carry higher risk, so it’s essential to do as much research as possible.

Information is everything so don’t be afraid to ask tough questions. After all it’s your capital at stake.