Wednesday, September 11, 2019

Fintech investment reaches record levels for UK SMEs



With the UK’s Fintech sector continuing to draw record-levels of investment, the future is bright. Despite challenges brought on by Brexit uncertainty, Fintech looks set to weather the storm and continue to grow.
This cements its importance to the UK’s economy, and gives grounds for optimism during increasingly fraught times.

Record level of Fintech investment

Industry body Innovate Finance released data showing an investment level of $2.9 billion for the first half of 2019. Start-ups are attracting both the fastest investment, and the highest levels. The total funding raised by the sector during the first half of 2019 is already equivalent to 85% of 2018’s total.
The speed of investment into UK Fintech start-ups beats previous years by a decent margin. And this data is also significant in the context of the uncertainty caused by Brexit. The Fintech sector is not only remaining robust but is continuing to grow. All signs point towards Fintech weathering the storm caused by Brexit and remaining a positive oasis in a business sector beset by concerns over its future.
By the end of 2018, total Fintech investment reached $3.3 billion. It seems that 2019 is on course to beat this and set a new record. And while the number of deals is continuing to fall, the value of individual deals is growing.

Fintech deals are down in volume but up in value

During the first half of 2019, there were 123 deals within the sector, totalling an investment of $2.9 billion. This shows the sheer size of the deals, and their importance on a global scale.
The two biggest Fintech deals of 2019 so far are investment of $880 million in Greensill Capital and $440 million into challenger bank OakNorth Bank. OakNorth is based in London and offers property and business loans to the SME sector, as well as a range of other banking services. Founded in 2015, it has utilised innovative technology including Amazon Web Services to become the first bank to host its core system entirely on the cloud. As of 2018, its pre-tax profits totalled £33.9 million.

Challenger banks attracting bulk of investment

Challenger banks are amassing a significant percentage of the investment. Monzo has raised $147 million and Starling Bank $98 million. Other sectors that are benefitting include payment services and foreign exchange transferral services.
Most of the investment (85%) is also going to later stage funding rounds, with 15% reserved for seed, angel and start-up funding. All of which points towards a sector that is finding its feet and maturing.
Online payment platform Checkout.com has raised $230 million in 2019. The platform has been around since 2012 and has grown into a major provider of international online payment solutions. Another money transfer platform, WorldRemit, is also in later stages of funding. It was founded in 2010, and has received funding throughout various rounds, culminating in the $175 million this year.

Fintech’s future is bright in the UK

The flow of investment is mostly heading to Fintech companies operating from London, but there is a rise in investment in regions too. Investment is significantly higher in cities like Greater Manchester and Newcastle Upon Tyne. Deals are split with 78% in London and 22% in regional areas. We can expect to see regional deals increasing over the next few years as the sector diversifies away from London-centric start-ups.

Fintech is a massively important sector for the UK’s economy. It’s encouraging to see that its growth appears unhindered by the vagaries of the Brexit negotiations. We can expect to see investment increase as the UK continues to lead Europe in this important sector. 

Tuesday, August 27, 2019

Investment expert Frederick Achom on what venture capitalist investors want from a start-up pitch



If you’re a start-up owner and are looking for venture capital (VC) funding, where do you start? VC investors meet with thousands of start-ups, and deal with endless pitches. So, how do you ensure yours stands out?

Just 1% of all these pitches become real-life VC investments, which means the odds are stacked. But there are ways you can prepare your pitch to have the best possible chance of landing the crucial VC backing that could make your start-up the next Twitter, Facebook or WhatsApp.

What are venture capitalist investors looking for?

VC funding teams want to see unique business ideas. They want innovation, disruption and companies that could change the world. They also want to invest in a start-up that will guarantee them at least 10x their initial investment in less than seven years.

They don’t just look at proposals and plans, but also at the people who are delivering them. They must believe in your business, in your idea, and in your projections. They are seeking the whole package, so you need to prove you have the idea, the business plan to make it happen, passion, drive and realistically convincing financial projections.

How to find a VC investor

The best way to find a VC is to be referred through your network. Approaching people cold is a risky thing to do, as it can easily go wrong. Do plenty of research to find VCs that invest in your business area and double check the kinds of companies they’ve already invested in to ascertain whether you’ll be a good fit into their portfolio. Steer clear of VC investors that don’t deal in other businesses within your sector.

Funding ‘rounds are divided into Series A, B and C, each corresponding with different stages in a start-up’s journey. Series A funding is for start-ups that can scale up fast and can prove an interest in their product.

Series B and C focus on building the business, whether that’s overseas expansion, launching new services or scaling revenues. Start-ups are past early stages and are planning to expand. Series C funding is for companies that have proven their potential for long-term success and can show investors that their shares have increased in value.

Do venture capitalists only offer funding?

Many VC firms and funds offer far more than simply financial backing:

·         Larger VC firms have in-house legal, recruitment, marketing and tech teams at the start-up’s disposal for help and support.
·         Experienced investors come with large contact books and can introduce start-ups to all the right contacts.
·         Help with strategy and direction is often part of the package.
·         VCs have a much wider understanding of the market and can use this to give the start-up insight into everything from new clients to overseas markets.

While preparing to meet your chosen VC, you must focus on your business plan. VCs wade through thousands of business plans, and yours needs to stand out. Ideally, you should send your pitch deck through before the meeting, and the key points should be easily digestible at the top of the document. If you don’t grab their attention immediately, the chances that they will read all your careful financial projections diminish.

When you’re finally face-to-face, you should deliver the presentation by PowerPoint, which should include between ten and 12 slides only with the following information.

·         The start-ups statement of purpose.
·         Who the team members are.
·         The problem your start-up will solve.
·         How you will solve that problem.
·         Why you, why now?
·         How you will make money.
·         A five-year revenue projection.
·         The size of the potential market.
·         Exactly how the investors will see their 10x return.

Be confident and relaxed during the presentation

Brush up on your presentation skills before the meeting, and always be succinct and clear with the information you are delivering. Don’t be over-confident but avoid any defensiveness. It will work far more in your favour if you openly discuss any weak points in your business plan.

VCs are interested in whether you can deliver what they want, and as such, are interested in your business plan and idea. Aim for a two-way discussion and remember that it’s not an interrogation. It’s acceptable to set a deadline for your VCs to express interest at the end of the meeting. You just need one VC to say yes, and if it’s not the first one, ask for feedback. Use this to refine your pitch for your next meeting. And don’t give up!


Tuesday, August 13, 2019

Why Frederick Achom believes that now is the time for crypto and blockchain

Frederick Achom

For investors and entrepreneurs interested in cryptocurrency and blockchain, right now could be the best time to jump.
Around two or three years ago, I remember the most popular topic of conversation among investors and entrepreneurs was cryptocurrency. We all watched while Bitcoin soared in value, and the market expanded exponentially.
Since Bitcoin arrived in 2009, the cryptocurrency industry exploded, with the inevitable side growth of the crypto-trading sector. And in 2017/2018, to some, it seemed unstoppable. Everybody wanted to invest in crypto, and those that weren’t investing, were launching Initial Coin Offerings (ICO) to raise funds for the next big idea.

Ups and downs of the blockchain and cryptocurrency sector


When Bitcoin hit $20,000 in value, some started to talk about the possibility that crypto was a fad and the bubble would soon burst. There were signs that a decline was on the way, and in 2017/2018, 80% of Bitcoin’s value was wiped. Regulators came down harder on ICOs, and suddenly the sector was vilified in the press.
But, as a seasoned venture capitalist, I know that these kinds of ups and downs are inevitable in a new trading sector. And what interests many investors now, more than cryptocurrency itself, is the blockchain technology it’s built on.
We’re seeing Bitcoin’s value back at around $12,000 right now, and the sector is once again full of optimism and new platforms. Which is why now is the time to get involved.

Renewed entrepreneurial focus

I’ve recently seen much more focus from entrepreneurs and start-ups in the blockchain and crypto space than I have in years. It’s interesting to note that start-ups are presenting tried and tested solutions to real-life problems, rather than simply fundraising on the back of an idea and a white paper.
If you are considering investing in blockchain, or you’re developing an idea for a start-up, here are a couple of factors you should think about before taking the plunge.
As an investor, you should seek opportunities that can show you tangible results. For example, invest in a start-up that can demonstrate a product, and that brings customers along with them. In return, be prepared to take a long-term view and provide more than financial backing.

 Look for more than funding from your backers


As a start-up seeking funding, be prepared to demonstrate your product or service to potential investors. Explain why your platform solves a real-world problem for customers. Bear in mind, the blockchain tech itself is no longer the main draw. We know that’s what will be powering your product already. Our interest as investors lies in how you’re using this tech to create a product that customers need.

The right type of investment at the early stages of your start-up can be invaluable. While money is always important, be prepared to compromise on funding in exchange for advice, help and key introductions. These can pay off hugely in the longer term.

Finally, make sure you choose to work with people, whether they are colleagues, investors or mentors, that truly understand the huge potential blockchain and cryptocurrency has. We could see this tech completely change the global economy in the not-too-distant future. It could feasibly change the way countries trade, and how financial systems are managed. Its potential can’t be underestimated.

Monday, July 29, 2019

Frederick Achom on the likelihood and consequences of a no-deal Brexit

Frederick Achom on the likelihood and consequences of a no-deal Brexit

 


The country is currently waiting with bated breath to see who the new Prime Minister will be, following Theresa May’s resignation for failing to agree Brexit terms with the European Union.

As the business community waits to see what will happen, it’s still unclear how close we could be to a no-deal Brexit, and the fallout this would realistically cause. The two contenders for the Prime Minister position, Jeremy Hunt and Boris Johnson, both say they are prepared to take the UK out of the EU with no deal. So, where does this leave us?

And in particular, where does it leave the small and medium sized businesses community that makes up more than 99% of the private sector, and forms the backbone of the UK’s economy?

Industry opinion on a no-deal Brexit

In this post I’m going to look at the most recent comments from industry experts, manufacturing bodies and the Bank of England, to gauge the consensus of opinion regarding no-deal Brexit.

Make UK is a trade body that covers many businesses across 19 different sectors. Companies represented by the body include BAE Systems, Toyota, Airbus, Nissan, Ikea, Lush Cosmetics and Warburtons. The body told the Guardian that manufacturers are going through the biggest drop in orders for around seven years.

Seamus Nevin is chief economist for the group and believes that Hunt and Johnson’s tough act on a potential no deal Brexit demonstrates little practical understanding of the consequences for UK’s businesses. Johnson is the more vocal of the two regarding no-deal, basing most of his campaign on a ‘do or die’ attitude to the UK leaving the trading bloc. Hunt, on the other hand, began his campaign much more cautiously, but is now echoing Johnson’s attitude, and has pledged a deadline of 30 September 2019 for his final decision on no-deal should be become Prime Minister.

Spending decreasing across business sector

Businesses across the UK are slashing spending, and the corresponding decrease in manufacturing reflects a general mood of uncertainty across the sector. And while some commenters insist that this manufacturing decline is a direct response to the stockpiling that occurred in Q1 2019 to prepare for a possible no-deal Brexit on the original exit date of 29 March 2019, the purchasing manager’s index (PMI) suggests that it’s a continual decline, rather than a one-off event.

The PMI acts as a monthly barometer check on supply and demand across 19 different industries in the UK. The data gives an accurate view of the economic trends of the moment, as they respond to external factors. It shows whether manufacturing is contracting, expanding or remaining the same.

The latest PMI figures show the biggest contracts (50.3 to 47.2) since October 2012. Make UK says that this shows that these 19 industries are reporting fewer export deals as other countries lose confidence in the UK because of Brexit uncertainty. The British Chambers of Commerce agree with Make UK, saying that domestic manufacturing orders are at their lowest since 2012.

Government figures show that the UK’s economy grew in Q1 2019 by 0.5%. This is most likely due to the aforementioned stockpiling to prepare for a possible no-deal Brexit at the end of March. The boost this gave to the economy is now in reverse, and according to the Bank of England, growth stopped completely by April 2019.

UK would revert to WTO rules

It’s safe to say that there is little obvious support for a no-deal Brexit from high profile commenters across the manufacturing and business world. The country is currently counting down to the extension to Article 50 requested by Theresa May, which takes the date for Brexit to 31 October 2019.

And while Hunt and Johnson continue to battle it out for the role of Prime Minister, the EU has been clear that there is no more time or room for negotiation. If the country does exit with no deal, then there will be no transition period at all. This means that every current arrangement with the EU will simply stop on 31 October.

The UK would then revert to trade rules set by the World Trade Organisation (WTO), and would be subject to external tariffs by the EU. It’s also possible that the change in rules and regulations cold lead to the EU rejecting British made products.

In some ways, the business community is still uncertain as to what the consequences of a no-deal Brexit would be. However, regardless of the outcome, UK businesses and SMEs must prepare for every possible scenario. The new Prime Minister will be announced on 22 July, and after this I expect to see clarity and support for SMEs laid out by the Government. For now, however, it’s a waiting game.

Check out the News here, or more blogs on my Website.

Thursday, July 11, 2019

Frederick Achom on some of the best Fintech investment apps available



There are various reasons contributing to the rise of Fintech and the plethora of all kinds of financial services apps now on the market. It can be tempting to dive into some of these investment apps without thorough research, particularly as they generally demand much lower starter fees.

However, all investment carries risk, and there are no guarantees. Traditional investment rules apply to apps too. For example, it still stands that higher returns mean higher risks, and it’s important to regularly review your portfolio. But apps can absolutely take away some of the stress out of investing, saving and other financial services. Here’s a rundown of the kinds of apps available right now and their risks.

Wide range of Fintech services available

The Fintech sector covers a wide range of disruptive start-ups that use technology to simplify financial services. They offer something new to the market, or they offer something that was previously inaccessible for many users. Fintech began with the aim of disrupting traditional financial institutions and revolutionising the way we all manage finances.

More recently, established financial institutions and banks have realised the importance of this sector. They now offer their own FinTech solutions, either developed in-house, or in partnership with start-ups. The net result is a much wider choice for investors, savers and users.

Robo-advisor apps and websites

Robo-advisor services are a niche but fast-growing area of Fintech. They are online investment services that ask users a set of questions and come up with a plan based on the answers. The app uses algorithms to work out the best plan for the specific user.

There are few minimum requirements for users to open an investment account on these platforms, making them easily accessible to a wide market. They often offer low-cost, low-risk investments, which limit fees. They also reallocate assets and maintain the portfolio automatically, taking the stress away from the user.

Successful examples include Wealthfront and Betterment, but there are many to choose from. They specialise in reaching a generation of investors who do not generally use traditional investment advisors.

The biggest advantages for users are the low fees involved. For example, an online robo-advisory investment service usually charges around 0.25%, while a human financial advisor will charge around 1%. The obvious disadvantage is the robo-advisory service cannot allow for changes in personal circumstances, nor can they offer reassurance in worrying times.

Round-up savings and investment apps

Round-up apps can be thought of as the digital equivalent of hoarding spare change in a jar at home. Except that the change goes directly into a savings account or investment scheme that can accrue interest for the user.

Apps like Moneybox work by linking up with the user’s bank account or credit card. The user then sets their preferences on online transactions, and the app automatically rounds up the pound and puts the excess in the saving or investment account.

For example, a user spends £2.90 every day on a coffee. The app will take the extra 10p by rounding up to the nearest pound and transfer into the savings account. Another successful example is the digital bank Monzo, which has partnered with Investec to pay 1% interest on the savings account formed by the excess change on digital transactions.

Apps for trading stocks and shares

More seasoned investors are often interested in apps that allow them to carry out digital stock broking. Examples include Freetrade and IG Markets, which trade everything from shares, forex and bonds to commodities and cryptocurrency.
Fees are much lower than traditional broker services and are often commission free. However, they do tend to charge in other areas, such as instant orders and outgoing bank transfers, so it’s important to read the small print. These apps offer an impressive range of trading options and can work well for the right kind of investor. You can also try them out before you decide to invest, so it’s worth doing lots of research if this area of Fintech interests you.
Fintech appeals to lots of people thanks to its easy accessibility, flexibility and generally low fees. However, for serious investors with large portfolios, these apps often don’t offer the necessary levels of support. As big banks and financial institutions get on board the FinTech bandwagon, I think this is likely to change in the near future.


Tuesday, July 9, 2019

Frederick Achom unravels plans for its own cryptocurrency


Image credit: K.unshu / Shutterstock.com

While the cryptocurrency industry has had all eyes on encrypted messaging services Telegram’s moves in the space, Facebook has quietly been creating its own token.
Recently, new details emerged about Telegraph’s blockchain platform TON. I’ve been following its development since the company secured a huge amount in initial coin offerings. Last year, two private token sales rounded up $1.7 billion for Telegram.
New details recently emerged about one of the most discussed and anticipated cryptocurrency projects in the sector – TON. The new blockchain platform has been in development by Telegram, the WhatsApp rival instant messaging service.

I’ve been following the development of TON since Telegram raised one of the largest initial coin offerings (ICO) in the sector. In 2018, they made around $1.7 billion from two private token sales, and it was assumed they were leading the way in cryptocurrency development for social media platforms. However, more recently, it has become clear that Facebook is well on its way to creating its own token too.

Reports break of Facebooks’ cryptocurrency plans

A major investigative report by The Information shows that Facebook’s own blockchain project is nearing completion. While this project has been discussed for a while, we’ve had nothing concrete to examine until the report was published on 5 June 2019. Based on various news stories, the report has since been partly validated by a European Facebook executive. We also know that there is a white paper due in the imminent future, which will lay out details of Facebook’s plans. Before we see that, here’s everything we know so far.

Facebook has built a team of cryptocurrency experts

The Information say that the project began roughly a year ago, when Facebook began building its team. The former president of PayPal was brought in to run the project, swiftly followed by the entire team from a start-up called Chainspace. More than 100 staff are now rumoured to be on the project.

In May, there were reports from the BBC saying the cryptocurrency is named internally as ‘GlobalCoin’, but there is much more evidence to support its name as Libra. In the same month, Facebook registered a company in Switzerland. Its name is Libra Networks. The Information claim that Mark Zuckerberg is closely involved in the direction of the project.

Facebook is targeting developing countries

As the new token will be a borderless currency, we know that it will be used seamlessly on Facebook platforms, which include Instagram, Messenger and WhatsApp. It’s also likely that marketing will initially be confined to developing countries, as it is set to launch in India.

There are around two billion users of Facebook’s network of platforms, and many of these people don’t have immediate access to financial services. They also routinely face high cross-border fees. If Libra works and people begin to use it in these countries, it could revolutionise personal finance, giving h them access to e-commerce, peer to peer lending and all kinds of other services.

In an article for Forbes, Wall Street expert Caitlin Long believes that: “Facebook’s cryptocurrency will be a powerful force for good in developing countries.”
How will the token retain value?
The report says that the token will be linked with a basket of currencies, along with low-risk securities. However, there are no further details of how this will work and which currencies will be included. Facebook does have plans to move Libra into the offline world too. They will provide ATM terminals so that Libra users can exchange their crypto for fiat currency. Facebook employees will also have the chance to be part paid in Libra.
In terms of regulation, it’s not surprising to see that Facebook is making lots of effort to show that the network will be partly decentralised. There is much made in the media of Facebook’s handling of personal user data, and whether any company should have that much influence. Now that they are making forays into financial services, it has many people concerned about how this will be regulated. Facebook’s response is to form an external body of financial institutions and experts that will provide oversight.
As for those who will be part of the network to validate transactions, this will be a premium few. Entities will have to pay $10 million for control of one of the network nodes of operation on the blockchain. It will launch with 100 nodes initially.
Reaction to Facebook’s plans

Inevitably there has already been much debate over Facebook’s cryptocurrency, and how it will affect the sector. It does look like the company is attempting to deliver user-friendly financial services to a group of people who don’t have ready access to them, which is generally being welcomed as a positive thing.
A key difference between Libra and other currencies like Bitcoin and Ethereum, is the fact that Facebook will essentially be acting like a bank. Crypto expert Jian M Villaverde told CoinTelegraph that Facebook would essentially act like current financial institutions by implementing a layer of oversight to people’s actions. This is very different to Bitcoin and other cryptocurrencies, which were formed from the ground up as disruptors to this traditional world of financial services.
Others think that Facebook will be integral in spreading general understanding of cryptocurrencies and making it more normal for people to use. For example, Caitlin Long tells Forbes that while Facebook will help people understand cryptocurrency, they are more likely to eventually choose scarce currency such as Bitcoin over plentiful tokens from Facebook.
Time will tell how Facebook’s plans play out, and the impact they will have in this space. How much they will alter the financial services sector remains to be seen.

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Tuesday, June 18, 2019

What is driving the expansion of Fintech in Europe and the UK?
 
While Fintech growth has exploded across Europe, there is a slower uptake in the United States. This is despite an enormous potential market in the US, thanks to a large population of consumers ready to shift over into newer technology.

The rapid development of Fintech in Europe has been due to huge amounts if investment, from banks and from venture capitalists. It’s also been helped by regulatory changes within the European Union (EU) and the UK that have opened up the market to competition.

Global investment in Fintech increasing

Fintech is a broad term used for the merging of financial services and new technology. It’s the new banking apps that are proving popular with consumers, and online payment options. These are the two areas most consumers are familiar with in their daily lives, but it also covers more in-depth areas. These include alternative lending, robo-advisors powered by AI, peer-to-peer lending and automated loans.

Global investment in Fintech companies reached a high of $122 billion in 2018, according to research from KPMG. This is more than double the amount spent in 2017, which peaked at $51 billion. Europe reached $37.5 billion worth of Fintech investment in 2018, more than tripling the $12.2 billion in 2017. The UK’s Fintech investment leapt from $5.6 billion 2017 to $24.1 billion in 2018, representing the biggest increase in Europe.

Banks have been forced to accept that Fintech start-ups present tangible and potentially damaging competition. This has led to more financial institutions partnering with start-ups to develop new consumer solutions. Many of these Fintech developments have taken place in Europe, with a slower growth in the US.

Europe embraces regulatory changes

Europe has shown itself to be more accepting of new technology, with the rise of Fintech bridging the gap between traditional banking and new services for tech-savvy consumers.

While European Fintech companies are thriving this side of the Atlantic, they are slow to expand into the US. This is at least partly down to the complexity of the regulations surrounding financial services in the US, and the lack of open banking.

The EU has introduced two major regulatory changes that have boosted the Fintech market in Europe. These are the General Data Protection Regulation (GDPR) and the Payment Services Directive (PSD2). The first allows consumers much more control over their data via an opt-in system, and the second allows third party providers to offer services to businesses and consumers.

PSD2 forces banks to provide consumer data in their records to third party providers. This enables Fintech firms to develop solutions to consumer’s financial needs, and to offer tailored services. This has opened up the financial services market in an unprecedented way.

These kinds of regulatory changes create a massive opportunity for small start-ups and Fintech firms to corner a market they didn’t have access to. Banks have had to play catch up, and partner with Fintech firms to try and stay ahead of the game.

Open Banking boost UK Fintech sector

The UK has also opened the market to Fintech through the Open Banking initiative. This also provides consumer data to third parties so that they can utilise it to create new financial services. Since the market opened, 63$ of start-up Fintechs have taken 14% of all bank and payment revenues in the country. This shows that the Fintech sector really does know what consumers will respond to, and how to deliver it.

Until the US alters its regulatory framework in a similar way, it’s unlikely that Fintech start-ups will be able to make the same kinds of inroads. It is up to the banks and financial institutions that hold consumer data as to whether they want to adopt Fintech into their services. This makes it a slower adoption of Fintech, but no less significant.

Fintech still has a foothold in the US, and it’s likely that this will catch up with European adoption of disruptive technology over the next few years. More US financial institutions and banks are seeing Fintech as a huge opportunity rather than a competitive threat and responding accordingly.