Top five tips for actuaries wanting to start a fintech

Starting a fintech can be overwhelming and daunting.

Actuaries tend to want some level of certainty by using the past to predict the future. I’ve often heard the joke, “How many actuaries does it take to change a lightbulb?” with the punchline being, “How many did it take last time?”. Unfortunately, there is no such certainty when starting a fintech. You need to learn to be OK with the uncertainty of running towards a cliff, but excited as more land appears as you grow. Here are my top five tips if you’re considering starting a fintech.

Tip 1: Find co-founder(s) you can trust

Doing it alone can be tough and investors shy away from single-founder businesses. Bouncing ideas and problems with co-founders can help develop a more comprehensive solution to a problem. Trust between co-founders is key, so be cautious of throwing yourself into programs where stage one of an accelerator program is speed dating for founders to find a co-founder. It might work out OK but having a prior relationship, and trust with your co-founder(s) will give you one less thing to worry about.

Tip 2: Explore ideas early on

Try thinking about your idea as a hobby, learn the craft, finesse the idea, and receive feedback. Chatting to your mates over the BBQ about the idea is useful and adapt if needed, brutal feedback is the best. Taking this approach in the early phases is beneficial, as it is easier to pivot. This process will stand you in good stead when you move beyond the idea phase as you’ll know the barriers and challenges of your chosen idea and what is required to execute it.

Tip 3: Bootstrap for a while

Bootstrapping is basically self-funding. You don’t have to quit your job and risk it all straight away. The more bootstrapping you do to develop the business, the more likely you’ll have a better valuation when you go out to raise funds. When you’re setting a valuation, realistic, I’ve seen start-ups fail because of greed. Bootstrapping can be tough so remember to enjoy the process and don’t put so much pressure on yourself. 

Tip 4: Don’t be disheartened by setbacks

Setbacks happen. Fail fast and pivot quickly. If you’re a founder the only performance review you get is your internal voice so manage that voice to deal with the setbacks. Expect to get rejected from venture capital firms (VCs), this is normal. Some of the most successful businesses in the world were rejected hundreds of times when pitching to investors, it’s part of the process, and collecting the feedback from these rejections is essential in understanding your blind spots.

Tip 5: Consider VCs outside Australia

Whilst we have a growing fintech sector in Australia, unfortunately, most VCs are realistically series B and beyond. Some Australian VCs claim to be pre-seed and seed investors but most of the time they want paying customers. For financial services businesses, there’s often an upfront cost and compliance to get paying customers leading to a catch-22, you need investment to launch the product and have customers, but investors want customers before investing. You might be able to use regulatory fintech sandboxes for your idea which allows you to test the concept. You could also consider crowdsourcing funding or angel networks as an alternative to VCs.

From my experience, Australian VCs only come to the party when the guest list is complete, the food is ready to serve and there is a queue at the door to get in. One option is to explore investors outside Australia. Other countries such as the US and UK have a different risk appetites and a more mature VC sector and may invest earlier on.

To all those budding founders out here, give it a go, you always regret the things you didn’t do!

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