How can fintech startups better sell their services? We spoke with Daniël Horn from KPMG on the stumbling blocks startups face in communicating their value.
We often hear about the value that startups can offer in financial technologies and “digital transformation.” But startups have trouble offering that value if they cannot communicate it to potential partners and clients. How can they get better at communicating their worth?
Most commentators on the value of startups point out that their agility and capacity for innovation make them key players in digital transformation. According to Daniël Horn, digital transformation often boils down to two core topics.
The first is helping organizations to run better and be more effective at what they do right now, such as digitizing and automating processes. The second is assisting companies to use technology to “grow better,” such as through building new products and improving their business models.
For large companies facing these changes, smaller technology companies can be an “inspiring partner” or an acquisition target. Daniël’s role is to “connect these two stories.”
One problem for banks who are interested in working with startups is understanding the scattered startup landscape. Here mid-sized companies can play an important role by acting as intermediaries who help banks and startups connect and work together.
Another issue with partnerships between startups and large companies is bridging the gap in quality. If startups want to sell to a bank, Daniël explains, startups must show them a whole lot more than a “minimum viable product” to convince them that their product is worthwhile. As Daniël put it:
“If your product lacks core functionality it will never get legs among large organizations.”
But developing a fully-fledged product can be particularly difficult for startups with few resources. Cooperation between other startups to amend their services (via APIs) can help them overcome their resourcing issues while capitalizing on their specializations in a particular area. Products and features are organized around APIs and can be easily connected to dashboards and applications, so it is easy to embed new features that enterprise clients might need. In fact it is much easier for startups to connect to API services of other companies, that it is for banks to connect to a new IT service provider (due to lengthy IT onboarding processes)
Both banks and mid-sized intermediary companies need to bring on board people who are used to working in agile ways. However, it is not clear how long people with an agile mindset and ways of working will last in a large company. Daniël explained:
“If the company is not able to keep up with the desired speed of change for the entrepreneurial minds they might lose their energy. How long can you remain the startup guy within a big firm?”
In Daniël’s view, startups need to find ways to maintain their comparative advantage:
“It is a challenge for startups to move from loosely organized and creative to something more rigid. You shouldn’t lose your competitive or innovative edge, it is difficult also if you get large customers who have different demands, you end up making products that make your own company (and former startup) look more like the customers you work with. There is a fine line between focusing on your vision and moving along with demands of your large client.”
Startups also face a great deal of competition. According to Daniël, “the game will become even more fierce,” and the winners will be the startups who are able to communicate their value. Daniël says that there are three types of value propositions that startups can offer companies: 1) helping the company to grow, 2) helping the company to be more effective, 3) saving costs. Not all companies have a clear understanding in which of the three options their value proposition plays into. However, many startups are unable to quantify how much their solution will make a company:
“Your solutions should be able to quantify the impact for a client before you go in. You should be able to help the CEO make a back of the envelope calculation of how much money it will bring in and how much they can save by this product. But if you’re not able to tell them what it can do based on four to five metrics then it’s a hard sell.”
If a startup is unable to quantify their impact, then they risk losing the opportunity to get their business off the ground:
“If you have a top 50 client who can bring in a potential deal of 200k, and if this is your trial and error group where you’re going to test your story, you might not make it. If you go to a client and you want to show a new product you’re testing a couple of things at the same time. Is it a good product, is my sales pitch good, is the sales person good enough? You might have a great product but the person selling it might be bad at selling. Startups should take the same approach to making products better to making sales better. Get feedback.”
In other words, being agile and innovative in product development is not enough. Startups need to apply their comparative advantage to all aspects of their business.
Interviewed by Erin Taylor, Senior Researcher
is Senior Manager for KPMG Smart Tech Solutions in the Netherlands. His team helps companies to transform their organization with smart software solutions and actively works with fintech companies to deliver this value. He founded the Innovative Startup Group in the Netherlands and is responsible for setting up collaborations with technology startups for KPMG.
In his work he helps corporate clients around the world identify and work with the right startups. He and his team also help organizations setup an innovation function and drive technological change. Daniël’s background lies in digital strategy and fund raising for technology startups.