The Expansion Journey: Insights from a Fintech
By Conrad Ford, Founder and CEO, Funding Options
There’s no doubt that the UK, and specifically London, remains Europe’s fintech capital thanks to a skilled workforce, investment and supporting regulatory and tax schemes. We have generous tax breaks for technology investors, such as the Seed Enterprise Investment Scheme, and we also have a favourable tax system for employee stock options, which is the envy of continental European start-ups. These tax breaks have led to cities such as London, Manchester and Edinburgh becoming thriving technology centres. However, as UK fintech companies scale up, it’s clear that our home-grown innovative, creative products and services are relevant not just to the UK but to Europe and globally.
Our mission at Funding Options is to help small businesses walk tall, by providing them with access to alternative finance when they need it and which is right for their unique situation. But the problem we solve is not limited to the UK – it’s a global issue and that’s why expanding into Europe was the natural next step for our business.
In September 2018, we launched Funding Options in the Netherlands to support the 1.8 million small and medium-sized businesses there. As we begin to look ahead to which other countries we can support, we’ve been reflecting on our journey into Europe and the challenges and achievements that have been different from our start-up experience in the UK. Here’s what we’ve learned:
- Collaboration is key – If possible, when expanding into a new country, you should identify and partner with a like-minded organisation in that country. Not only does this provide you with local expertise and the backing to navigate cultural, regulatory and customer understanding, but you’re already at a competitive advantage over lone fintech startups and operations. We were fortunate enough to align to the strategy of ING, the Dutch banking giant, which also led to us gaining investment from their corporate venture capital arm. ING is widely regarded as a trailblazer in the world of fintech for their recognition that everything should be digital and mobile first, and that products and services should have the customer experience at their core; a philosophy very much shared by Funding Options. Like the UK, small businesses are the backbone of the Dutch economy, and it was a huge benefit to be able to craft a vision alongside ING to help more Dutch businesses find the right funding for their situation from a wider range of options.
- Change is a constant – In such a dynamic environment as fintech, we are well aware that change is a constant. However, the fast pace of change during expansion overseas meant that the business morphed on a weekly basis – the speed of which we didn’t fully appreciate when we first started. The small team that was working on launching Funding Options in the Netherlands needed to cover areas they might not have touched upon in their UK roles: we found we needed them to work on operations, sales, HR, project management and marketing. We found that being able to re-calibrate your skills to keep up with this constant change was key while also trying to navigate all of the opportunities without dropping the ball. This meant that the team members who led the expansion needed to be multi-skilled, flexible and agile.
- The range of cultural differences – While the Dutch are culturally very similar to the British when it comes to day-to-day life, we were surprised to find several differences in the business environment, including: (i) Problem Solvers – We found that our Dutch partners were extremely pragmatic and direct when it came to problem solving. For example, lenders very much worked together to resolve the issue of small business lending and even though they are competitors, they would meet up to discuss issues. (ii) Open-Minded Small Businesses – With technology you quite often have early adopters but it can take some time for the rest to catch up. We expected there to be some reluctance to adopt digital solutions, but we found that the Dutch small business community was extremely open-minded and happy that we were able to help them solve their financing problems with technology solutions. With PSD2 now implemented across the European Union, we expect businesses and consumers to become even more comfortable using technology in their financial lives in future. This reinforces the need to fully understand your target market, and the importance of not making assumptions based on experiences in other countries.
- The importance of celebrating successes – Share and commemorate achievements both with the wider teams and the public. We experienced many ‘firsts’ which were significant, such as the first lender onboarded, the first colleague employed solely for the new Netherlands team, and the first customer funded. All of these were key milestones and, while one new lender coming on board wouldn’t necessarily have been a big event for the UK side of the business, every new partnership was a key success in the Netherlands. It’s important not to lose sight of how big these achievements are. When we surpassed our first one million Euros lent in the Netherlands it seemed small against the hundreds of millions of pounds lent in the UK, but we got there a lot quicker this time!
As you start to see your European or overseas business take off, it’s an exciting time. It not only validates your business proposition, but we’ve found that there’s an energy that flows from the new business back into the UK operations. For the Funding Options team, this confirmed to everyone that our solutions can resolve real challenges for small businesses in the UK and beyond.
We know that small businesses across the world – not just in the UK – can struggle to access finance, whether because they’re too small or they haven’t been trading long enough. But these businesses – the local bike shop, the hairdressers on the corner – are the backbone of the economy. Technology can help transform the products and services available to these businesses and the UK fintech community is thriving.
We’re undoubtedly in an exciting time for the UK fintech sector and I truly believe we have the potential to leapfrog the US to take the number one spot. Imagine the impact on the GDP of overseas countries if the creativity and innovation that exists in the UK’s fintech sector was available globally? Indeed, with worrying data from the ONS suggesting automation is likely to replace 1.5 million English jobs in the future, nurturing our technology community is going to be critical for the country’s prosperity. With a thriving technology sector, that continues to support startups, we will be able to create new job opportunities and reinvent our workforce with rewarding, high-value roles.
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