“We are bootstrapping this venture, and it is hard to do,”said a 24-year-old financial technology entrepreneur recently over coffee.
“I can only imagine. The FinTech economic model is rooted in taking a tiny slice of millions of transactions. It is a great model but needs millions of transactions to work,” I said.
Outside Capital Needed
“Exactly,” he said. “Because we didn’t have the volume of transactions, we were forced into a fixed monthly fee per user. This gave us enough money for food, gas, and cell phones. It kept us in business.”
“You will eventually need outside capital, won’t you?” I asked.
“Most definitely,” he said. “So we have been working hard on pitch competitions which pay cash. We are on the short list for one which could pay $50,000. That would give us almost a year to show market acceptance.”
“Then what?” I asked.
Proving You’re Credible
“Then we plan to raise our first round of angel money,” he said.
“You’ll need more than showing market acceptance. You need a credible sponsor who is working with you in the business. Someone with industry experience, reputation, and network,” I explained.
“Why?” he asked.
“Because you are 24 years old with a great idea and no industry experience. Cracking a FinTech market will take experience. Someone has to know how the industry works so you can move fast,” I said.
I drew this graph.
As you age, you gain wisdom and experience but lose time and energy. Where these lines intersect is the sweet spot for starting a company. This is where you will be most efficient and attractive to investors. In my experience, the intersection occurs at 35-37 years old.
Twenty vs. Fifty
Twenty-two-year-olds are quick to start companies and work around the clock. They need to because they have so much to learn about building a business.
Fifty-year-olds rarely start businesses. They know too much and have too many other responsibilities competing for their time. Their personal overhead is too high, and they don’t have the energy to compete with a 24-year-old.
“You are 24. So you are here on the graph. To get the funding, you’ll have to move to here. Since you don’t want to wait that long, you should partner with someone who satisfies the wisdom curve,” I said.
“Your energy combined with their wisdom plus customer acceptance makes for an investable company.”
No Hail Marys
There are a few examples where this graph was cheated. Not in Atlanta and not in FinTech. Why bet on the “Hail Mary” pass?
Find the person with the industry experience, wisdom, and network to match your incredible energy and drive. Together, you’ll have the best shot at building a fast-growth company.