Transcript

Julia: Hello everybody. My name is Julia Streets and a very warm welcome to the podcast series, StreetsTalksTo. In each episode, I interview leaders from some of the most influential firms, bodies, and initiatives in the fintech industry, and we explore what’s at the very forefront of innovation and change. We think about the challenges that firms face and the industry indeed at large, but also we uncover the opportunities that face us both today and, indeed, looking ahead to tomorrow.

Right now, every client, every firm is thinking about one of two things. It’s either growth and/or it’s their transformation. As a business, we help clients in three ways with three key offerings, campaigns, content, and coaching. Now we hope you enjoy the series, which you can find on all good podcast channels, and all the episodes are listed on our website, streetsconsulting.com. You can find these episodes using the #StreetsTalksTo. Thank you for listening.

Today we are StreetsTalksTo talking to the partners and the authors of the Scaling UK Regional FinTech Report. Launched earlier this year at the prestigious 10th Innovate Finance Global Summit in London, the Scaling UK Regional FinTech Report was the first piece of research of its kind. It was undertaken by our friends at Whitecap Consulting and co-published with Innovate Finance, and it was designed to answer a fundamental question for the fintech industry. How do we enable more fintech firms to successfully scale in the UK?

The report delves into the growth and the development data of 250 of the UK regional fintech scale-ups, and also is supported by interviews with leaders and entrepreneurs. Today we’re going to get right into those findings with our two partners. First of all, Innovate Finance. If you don’t know them, I’d be very surprised, but if you may allow me to introduce them.

Innovate Finance is the independent industry body for the UK fintech industry with a very clear mission to accelerate the UK’s leading role in the financial services sector. They do this by directly supporting the next generation of technology led innovators to create a more inclusive, more democratic, and a more effective financial services sector. Its membership includes seed stage scale-ups, high growth fintechs, multi-nationals, big tech firms from investors to global fintech hubs. It supports its members with six key ways.

One, promoting policy and regulation that allows innovation to thrive. Two, encouraging talent, diversity, and skills into the sector. Three, facilitating the scaling journey, so I’m really excited to get into why this matters so much in the context of the research. Also, fostering business opportunities, partnerships, domestic and international growth, and driving capital into the UK and into fintech. 

I’m delighted today to be joined by the CEO, Janine Hirt. Janine, how are you?

Janine: Wow, Julia, thank you so much. That was an amazing description of Innovate Finance. Thank you very, very much. It’s great to be here with Julian and yourself.

Julia: Well, I’m so excited because actually when we particularly look at your work and the impact that it’s having and the fact that we were able to launch this research on the stage at your 10th Global Summit, I know you’ve got lots of thoughts about why the whole scale-up matters to the UK and the role that you play, so thank you for being with us.

Now also joining us is Whitecap Consulting. Let me tell you a bit about Whitecap Consulting. Set up in May 2012 to target a very clear gap in the regional professional advisory market, the gap is growing SMEs and mid-size organisations. They focus on this market and work with leaders, boards, and investors in organisations across multiple market sectors, helping clients to analyse, develop, and implement their growth strategies. With offices in Leeds, Manchester, Milton Keynes, Bristol, Newcastle, and Birmingham, they have always had an ambition to grow beyond their home centred in Leeds and has fast become the go-to firm for fintech research.

Joining us today is Julian Wells, Director at Whitecap. He’s the fintech lead who is deeply involved in several fintech initiatives including FinTech North, FinTech West, FinTech National Network, all co-founded or supported by Whitecap. Julian, great to see you. How are you?

Julian: I’m great, thank you Julia. Great to see you too, and you Janine, and I’ll just echo Janine’s feedback on your outstanding introduction to Whitecap Consulting there. That was on the money. Thank you very much.

Julia: It’s quite a relief to know that I’ve described you both correctly. It’s good to know, but listen, let’s get straight into the research. Julian, I have to come to you first of all because the research report was done by Whitecap Consulting, so talk to us about why this was produced and why now?

Julian: I guess, from our point of view, we’ve had this long standing interest in what’s happening in fintech and we’ve particularly focused on what’s happening in fintech outside London. I think that comes from a place where we believe that London gave birth to the fintech sector in the UK and was such an epicentre and a global centre. We felt that London was quite well understood, but there was an emerging story from around the other parts of the UK. Over recent years, we’ve researched and analysed a lot of different regional markets. I think we’ve done 10 of the different regions of the UK now.

This report was different because it looks at all of the regions at once rather than looking at one region in particular. It also takes one of the really hot topics in fintech, which is scaling. Those businesses that have managed to scale, how did they do it? That was the question really, wasn’t it? How did they do it and how do we get more of them? That’s really the question we’re trying to answer at the start of the research, so that’s why we did it.

In terms of how we did it, we have an established methodology for analysing and measuring fintech ecosystems around the UK, that gives us a clear way to get data points. We had a lot of data points already. We’ve analysed over a thousand fintech firms over the last couple of years alone, and so we looked at fintech firms that had their head office outside London. Some of them also have an office in London as well, but their main office is outside London. Then we then sense check those firms to see if they fitted the criteria that we used to classify them as scale-ups.

For us, that was whether they had an annual revenue in their last reported accounts of over £624k, which is a slightly different way of looking at it than the people at the ScaleUp Institute use, which is the more industry standard way of looking at scale-ups. It’s a way of segmenting firms in quite a simple way, in a reliable way to conduct the kind of analysis we then went on to do looking at how long these firms were trading, what sectors they were in, who founded them, when, how many people were involved in founding the business, how many staff have they got, what investment have they raised, and those kind of metrics that then gave us some of the insights which we’ll go on to discuss as we get further into this conversation.

Julia: I think a couple of things out of that that are really important to flag. One of them is absolutely, it’s the national picture excluding London which really made the research very different. As I said, it’s the first of its kind. Then the second also, this is absolutely not about a discussion of pitting one region against another, which one is doing better. I think a lot of people are quite curious about that. That is not what this research is set to do. Janine, I have to bring you in here because the moment we mentioned this to Innovate Finance, you got on board with the concept immediately, and I’m really curious to understand why, why did Innovate Finance get so excited about it?

Janine: This is such a good point, Julia, because I think we, at Innovate Finance, were just so honoured when you and Julian approached us and asked for our collaboration on this report because we talk so much about the strength of the UK when it comes to fintech. We all know the numbers, right? We know that last year we had more than 5.1 billion US dollars of investment, second only in the world to the United States, ahead of all of Europe combined. Quite often a lot of that focus does land on the London ecosystem, and we do know a substantial portion of investment goes there.

I would actually argue that one of the reasons we are such a global leader when it comes to fintech and financial innovation more broadly is because we have outstanding companies, outstanding entrepreneurs, amazing talent, all across the entirety of the United Kingdom. Really bringing to light that phenomenal strength that we have outside of London and the Southeast was a huge opportunity for us to focus on why we have such incredible entrepreneurs all over the country. I think this report in particular brought to data and really brought to the fore some of the rationale behind that success.

We understood a bit where we can see this great success across the country and what was the reason for companies that were able to successfully scale. I also really loved the focus on the people that came out throughout this report, and I know we’ll talk a little bit more about that in a minute, but looking at what makes teams great, what makes founders successfully grow and scale no matter where they are across the country was really something that we were quite enticed to collaborate on. So we’re very, very honoured to be working with you both.

Julia: Well, we loved it and the championship that it’s had. It’s a fascinating year, isn’t it? Because when we think about obviously the political agenda and we think about the commitment and the narrative around scaling up, this seems to fit and align really well. Let’s get into that because you say you talk about the people and there are two other key anchor areas that the research focused on. Julian, talk us through the methodology if you would.

Julian: Happy to elaborate. I gave a few headline steers, I guess, in my introductory words. We generated data, a lot of data, and created a data pool. We did that through this established methodology that we have, which involves drawing on a number of different sources, primary research of us looking online and investigating companies, using third party databases that we subscribe to or have access to, and bringing these things together. There was a lot of data analysis, which was a big part of the work that we did.

As you know, we arrived at 250 regionally headquartered fintech scale-up firms as our sample that we delved into more deeply. The latest estimate on the number of fintechs in the UK is 2,500. Now that number’s a couple of years old now, but if that number is correct, then we’ve analysed 10% of the current known market, which means it’s a pretty good sample to draw analysis from. We looked at those firms in terms of, which sectors are they in, how long have they been going, who founded them, that kind of thing.

We also looked a bit about how do they go to market? Do they have a B2B strategy? Do they have a B2C strategy? Is it a mixture of the two? When did they raise funding? How much? What happened after they raised the funding, what could we see in our analysis? Are they based in a city? Are they based outside a city? Does that have any impact on their growth rate or anything else to do with their performance? We also supplemented all of this data by talking to some of the entrepreneurs that run these businesses, so we did 10 deep dive interviews with regionally based fintech founders and chief executives, and that was really important to do.

We always find with all our work at Whitecap that what you can find and analyse will always give you an idea of what the story is, but the real story lies in talking to people and that there are things that you can’t read on the internet and you can’t read in reports because they just don’t come up. The interviews with the entrepreneurs were fascinating, and those entrepreneurs were based across the UK. They were all from different regions.

There were 10 of them that we spoke to, and they were all based outside London, but all in different places. We had Scotland, we had Northern Ireland, we had Wales, we had the Northeast, we had the Northwest, we had Yorkshire, the Midlands, East Anglia, and then also the Southwest as well, so we really drew those views from a wide range. That’s what gave us a really strong base of insight to take things forward on.

Julia: It’s rich and rich with advice and learning and insight and, as you said, the lived experience of those entrepreneurs. Janine, you were mentioning about people, and as I explained this fell into three key areas, so people, money and market, those are the three big headline areas. The benefits of gender diversity, and I also referenced back in the introduction to you about people, talent, and diversity. I mean there was a really fascinating finding that came out of the research. Also, curious to hear what really struck you when you saw the results.

Janine: Yes, absolutely. I mean the first thing I would also say, which is also to build on what Julian just mentioned here, is I think one of the reasons this report was so particularly powerful is that when you look at fintech, it is about creating a better financial services sector that works better for the consumer at the end of the day, right? It’s democratising it, it’s making it more effective, and therefore we need an ecosystem and we need an industry that reflects consumers across the entire United Kingdom.

That’s why it’s also so fantastic to see some of these companies that are scaling and growing and having that benefit because they are then reflecting the consumers that they’re serving in many ways, so I think that’s one thing I would point out. On the gender diversity piece, one of the most interesting facts that came out of the report for me was the fact that firms which had female founders achieved over 30% more turnover growth than those with male founders, which is really a testament to the strength of female leadership. Fantastic news.

The negative component, however, is that only 16% of those firms we surveyed had a female founder. We know there is a lot more work to be done on this scope, and that means we have to all be working together, industry regulators and government, to really drive up that diversity. I would add it’s not just about gender diversity, so we always talk about that, but just making sure we have diversity across socioeconomic diversity, neurodiversity, ethnic diversity, racial diversity, LGBTQIA+ diversity, making sure you have that breadth of diversity is what will ultimately ensure that you have success as a fintech.

I think another component in terms of the people piece is the fact that we did find that if you were more than one founder, you were more likely to also succeed as you scale and as you grow. I think, once again, that’s a testament to the power of people in leadership positions.

Julia: Fabulous. Julian, let me bring you in here. Anything else that particularly jumped out for you as well?

Julian: I think Janine’s pulled out the two real sort of big headline findings, and they were fascinating, useful, and actionable in equal measure. I know Innovate Finance really bangs the drum on the diversity front, so I think they were a great fit and they were not findings that we sort of sought to develop. That was just what came out of the data. We weren’t looking for a diversity headline at all. It was great that we found one.

I think one of the findings I’ve found myself talking about repeatedly relates to the link between funding and participating and accelerators. We found some interesting things with funding, but one thing that was particularly strong was the theme that those firms that had been through some kind of accelerator program were very successful in raising funding, so nine out of 10 of the firms that went through accelerator programs went on to raise funding.

Now, not all firms want to raise funding, so that’s an incredibly high percentage when you think that probably 10 out of 10 don’t want to anyway, they might not all need it. When you dig deeper into that, of the 250 firms we looked at, only 42 actually went through some kind of accelerator program. The way I keep playing that back to people is imagine if all 250 had been through an accelerator. Now it doesn’t mean that all of them would’ve raised funding, and it might not have been nine out of 10 of them, but you could safely assume that a lot more firms would’ve got funding based on our analysis.

If more firms got funding, we’ve then also proven that funding increases your growth rate, increases your turnover, increases the number of people you employ. If all of those metrics are increasing, then the fintech sector would be growing and it would be employing more people and generating more economic value for the UK. There’s a really nice follow through there, and it doesn’t necessarily mean that we need more accelerators, but I think it’s the support. If we have better support for entrepreneurs who are trying to grow fintech businesses, then all the indicators from our report are that that would have a positive impact. That was one of the figures that was particularly key.

I think another one was relating to the go-to market strategies of the fintech firms that we looked at. Fintech is a very B2B centric sector, every report we’ve ever done that looks at that part of the sector has shown that 70% plus of fintechs are B2B. In most of the regions we looked at, it’s more like 80 to 90%. The percentage that have a B2C component is usually around about 30% mark. When we talk to investors in the work that we do with investors, we often hear that it’s very hard to fund B2C businesses and it’s much easier to fund a B2B SaaS model.

What our data showed though is that when B2C firms do get funding, they grow faster and they create more jobs. So if you can get it right with a B2C go-to market model, then you can scale very successfully and do a great job in terms of building your firm and creating jobs and value. That will obviously have a positive impact on the investors that support you as well, so those are a couple of the things that I would pull out.

Julia: Wonderful. By the way, these are just a few.

Julian: Yes, there’s more.

Julia: I’d say to everybody, do go in and have a look because there’s some fantastic insights into the areas that are raising the strongest revenue growth. Also, in terms of some areas that where, well, for example, in PropTech, which, of course, the adjacencies when we think about open finance and open banking, some really fascinating findings in there, so do take a look and have a look at the research there.

It also closes out with some very clear call to action. Anybody who knows us and anybody who knows the industry as we do loves really clear recommendations and some calls to action, not least around thinking about policy support for entrepreneurs. Janine, I have to bring you in here because as I said in the beginning, the policy piece is a really big piece of your work. Which of those recommendations particularly would you call out?

Janine: I mean, Julia, to your point, it’s so critical that we are supporting all stages of fintech. Many people tend to talk a lot about the unicorns, right? And have the conversation about the IPO market ensuring that we are supporting fintechs as they’re at that stage. What I always like to emphasise is actually it is the earlier stage fintechs, the startups and the scale-ups, the scale-ups that we focused on here, we have to ensure that we have significant support from the government and the regulatory side for these companies because they are the ones who will be our unicorns down the road.

We are in an election year, but regardless of which government comes into power now and in the future in the coming years, it is absolutely imperative that they support this thriving sector of our economy. Because, ultimately, if you want to have growth in the United Kingdom more broadly, it will require you to support these growth companies, and fintech is the most significant growth sector within our economy. So in order to both maintain our global leadership when it comes to financial innovation and financial technology, but also just to ensure that we’re supporting the economy, you have to have that support for the fintech community.

There’s a number of different ways that you can see that, but one of the important pieces that I think really came out of this report was that it is around vocation and not location. So when you’re looking at the companies that you support, remember that what you do and how you do it ultimately as a fintech will define your success, not your location. We need to make sure that government is talking to, speaking with, engaging with fintechs all across of the United Kingdom to hear what matters, how we can support them in terms of both accessing talent, but also gaining investment and making sure that you have that pipeline of investment coming into the country.

We put out something called our FinTech Manifesto, which essentially gives a guideline for the coming government as to what needs to happen to ensure our leadership in fintech, and we also give three big visions that we think the UK can actually achieve. One of those is about building the world’s first smart data economy. The second is around making the UK the most secure place in the world to use digital finance, and that means we need to tackle fraud in an efficient way.

The final third point is around making the UK the world leader in adopting new technology in finance. All of these are arenas which we need to ensure we’re supporting the scale-up community across the country to actually achieve these visions. I think it’s really important that government listen to the industry and listen to fintechs and to scale-ups, and then also work with the regulators to create a pathway forward for growth.

Julia: Wonderful. It’s great to hear your thoughts on that and also how they tie in so beautifully to the manifesto. Actually I was in Birmingham when one of your team came and shared the manifesto, and I know that’s been done in a very collegiate way in terms of sharing thoughts and inputs this really, key year as well. Well, let’s go into some final thoughts. Julian, let me come to you first of all, if you would, as you reflect on the research project and some of the key findings and also hearing Janine’s remarks. Some final thoughts from you, and then, Janine, I’ll come to you.

Julian: I think Janine’s summary just then was great in the way that it blended the report’s findings with the manifesto. I think that’s a really important document that we can all focus and build around. I think from the point of view of if you were an entrepreneur and you were thinking of building a fintech business, I think there’s some good pointers in this report as to things that you might want to do in terms of trying to not go it alone and not worry about where you’re based, think more about what you do, and then consider some of the industry metrics that we’ve pulled out.

Another thing that came out quite strongly was this theme from entrepreneurs of wanting to de-risk what they do. It’s a really big thing to go and start a fintech business, and obviously that comes before being a scale-up, but in order to get scale ups, you need startups, don’t you? There was another layer of thinking that came out from what we were doing. The average age of fintech entrepreneurs is in the late 30s. That’s the time of life when a lot of people have taken on quite big commitments like mortgages and have started families. Not everybody, but a lot of people have.

The common theme from the entrepreneur interviews that we did was we’ve got to make it easier for people to make that decision. Somehow we’ve got to protect that early stage of being an entrepreneur while you figure out if you’ve got something that you can commit to longer term, because that’ll help to get more of the bright minds of the fintech and financial services sector to zone in on fintech. So that was a key takeaway for me.

The other thing I’d say was just coming back to what Janine said right at the start, people from the interviews that we conducted, and I conducted all 10 of them, they were so interesting. They were so fascinating to get under the bonnet of how a fintech entrepreneur thinks. They all talked a lot about the people around them and the people that had helped them on their journey, the teams that they’d built, sometimes the difficult decisions that had to be made as the business grew and evolved and they needed to change some of the people.

That wasn’t necessarily a one way thing, that could be a mutual conversation. Some people are good at starting businesses and they don’t want necessarily to continue on the journey when it starts to get a bit bigger and there’s a bit more process and formality around a business. The importance of people in businesses was a real… It’s not news, is it? We all talk about it all the time, but it was a real reminder on how critical that is to succeed in business.

Julia: A really big thing that came out of that for me was thinking through bringing talent in, how do you nurture that talent, really strong cultures of growth, growth-minded talent, but also then therefore the power of diversity. Thinking about your leadership team as they lift up their skills and become really strong leaders as part of that growth journey, and then, also, for the very, very senior executives thinking about their role in terms of working with boards and elevating.

It’s no coincidence that we’ve extended our offering to work into the coaching area as part of that culture of growth, because that’s exactly what our clients tell us they’re thinking about. We’ve developed some offerings around that very specifically because that’s such a key important part. Janine, your final thoughts as you talk to your community, and we think about the dynamics of scale right the way across the UK.

Janine: I’ve got two pieces just to go on the theme of takeaways, advice, I’ve got maybe two pieces. One towards the entrepreneurs and then one towards the investors. One of the parts of the report that I thought was so interesting was an identification of different characteristics that the successful fintechs all seemed to have in common. I think there were two pieces there as takeaways from entrepreneurs that are looking to grow or scale their business. The first is the successful entrepreneurs identified a very specific problem that they understood. Many cases, they had actually experienced the problem themselves and they were motivated to help solve, and that really drove a lot of the success.

The second component was that in speaking, and Julian mentioned the interviews, in speaking with those entrepreneurs, quite often it did take them longer to grow the business than they had expected or had planned. Keeping these two components in mind, I think whether you’re an entrepreneur looking to set out or start a business or already through and through the scaling stage, I think is really interesting and a really key takeaway.

Then the last piece of advice I would say would be towards investors that are either in the UK, domestic investors, or coming from around the world, get outside of London. Go look across the UK, meet the entrepreneurs changing financial services for the better and get outside of the capital because there’s just phenomenal work being done all over the entire UK.

Julia: Completely agree. In fact, every stage we’ve been on, we’ve been delighted to showcase this research, which has landed so well, and so many people are very curious about it. I always say to people, “Yes, of course come to London. Of course, come to London. Build in time to get on a train. You’ll be met with a very, very warm welcome, and you might be surprised what you find because it is a vibrant, vibrant industry right the way across the UK.” Janine Hirt, as always, I know how busy you are. I’m grateful you took the time, but also thank you for your championship and your partnership with this amazing piece of research. Thank you for being with us today.

Janine: Thank you both so much. It was great speaking with you both. Thank you.

Julia: Julian, you did the hard work. You were the one who went in and did the interviews and your amazing colleague, Josh Jacob, as well who did the analysis, thank you so much for not only being part of the initiative, but also for being with us today.

Julian: It’s been a pleasure.

Julia: To everybody who’s been watching and listening, you can find the research on all three websites. Maybe one of the easiest ones is streetsconsulting.com where you can also find this episode and all of our interviews on StreetsTalksTo. I’ve been Julia Streets. As always, thank you for listening and watching StreetsTalksTo, and we’ll be with you again with another episode very soon.

This episode of StreetsTalksTo was produced by Podshop on behalf of Streets Consulting Limited. At Streets Consulting, we are a strategic business development, marketing and communications consultancy focused on helping financial services and technology clients around the UK and around the world. Every client is focused on growth and/or transformation. As fintech PR specialists, we are there to help them every step of the way. We do this through strategic campaigns, compelling content, and impactful coaching. We never forget the human in the mix, so you can find this episode on streetsconsulting.com and using the hashtag StreetsTalksTo. We can also be found on LinkedIn, YouTube, and X at Streets Consult. Thanks for listening.