Should Boston Have a Dedicated FinTech Accelerator?

There is no shortage of incubators and accelerators in the Boston area. We have:

All, save hardware accelerator Bolt, have helped FinTech or financial services startups get to the next stage. But all are generalists, serving a very wide range of companies.

Scott Kirsner recently reported that DCU will make space available in its Boston offices for FinTech startups.

Which is great. But is it enough?

To increase the number of financial technology companies operating in Boston, to cement Boston’s reputation as a leading location for innovators in the financial services sector, and to get the very best companies – the ones that can become significant businesses – to start here, move here, and stay here, do we need to have a dedicated effort?

Why specialize?

Jonathan Bush is launching an accelerator for healthcare IT startups within the offices of Athenahealth, partly due to the recognition that in certain industries firms benefit from specialized support. Is the same true of FinTech?

“Startups in the finance industry face a set of challenges so unique that, without help from accelerator, they have no real chance of survival. Finance startups need accelerators because of their mentors – they need someone to teach them to sell to the legacy industry they’re disrupting.”

–    Erin Griffith (writing at the time for Pando Daily)

The key for FinTech startups is often gaining access to large financial services firms – something a dedicated FinTech accelerator could facilitate. One reason access to financial service incumbents matters is that, as often as not, in FinTech the relationship is symbiotic, rather than competitive. (At least when we’re talking B2B.)

In addition, FinTech startups can benefit from access to relevant APIs and datasets. A dedicated accelerator could organize workshops and panel discussions on issues specific to financial technology companies, such as regulation and broader industry trends, and give them access to relevant user groups at financial firms for feedback and guidance.

FinTech accelerators in other cites

There are quite a few FinTech accelerators in other cities. London has the most.

  • Barclays Accelerator – Powered by Techstars, an awkwardly named three-month program giving $20,000, free office space, and a demo day, but taking a 6% equity stake in each participant.
  • FinTech Innovation Labs in both London and New York. Accenture is the driving force here, with lots of appropriate participating partners. At least in NYC, there is a public-private partnership behind the three-month program.
  • Pan-European accelerator Startupbootcamp recently announced a new, dedicated London FinTech accelerator backed by several big financial services firms. The three-month program will give €15,000 in cash, take an 8% equity stake.

In addition, I’m aware of these:

  • SWIFT Innotribe Startup Challenge which is an interesting program unless, of course, it’s SWIFT you’d like to disrupt. More of a contest than an accelerator, companies are selected for one of three showcase events where they compete for a cash prize of $50,000.
  • In St. Louis, SixThirty is four months long program. They will negotiate an equity stake in participating companies in the range of 5% to 10%.
  • Citi appears to run a FinTech accelerator within the Citi Innovation Lab in Tel Aviv.
  • Charlotte has one too: the Queen City FinTech Accelerator

What should it look like?

So, what should a Boston FinTech accelerator look like?

I’m sympathetic to the points raised by Chris Lynch of Atlas Ventures, who has said that most accelerators provide too little value for the equity they take, not lasting long enough or doing much more than teaching entrepreneurs to “make a slide deck to pitch VCs,” according to the BBJ.

£12,500 or $20,000, three months of free office space, and a few introductions in exchange for 6% of your company seems pretty rich. I like the FinTech Innovation Labs model, but in my view, a FinTech accelerator needs to be longer than three months, based on the length of the typical financial services sales cycle alone. Six month or as long as a year makes more sense in terms of helping these startups gain traction.

I also like the idea of combining a top-shelf accelerator and a well known, deep-pocketed financial services brand, as in the Barclays/Techstars tie-up. But a successful program would need the real support of a large and diverse group of financial services incumbents.

Benefits to all in raising the visibility of the Boston FinTech cluster

We have a large financial sector, quite a few angel investors (many below the radar) who favor FinTech, and of course, the engineering and business talent.

Boston has long been and still is a center of financial services. I can name nearly 50 FinTech startups working in Boston right now. Scores more have come and gone, been acquired or relocated in recent years. And others might come and stay and grow here if we had a program to help them succeed.

What do you think? Should Boston have a dedicated FinTech accelerator? What should it look like?