Transcript
Welcome to Money Isn’t Everything. I’m Mary Wisniewski, Cornerstone Advisors editor-at-large. Every other Thursday, I sit down with someone shaking up financial services. We get into the how, the why, and the possibilities.
In today’s show, I’m chatting with Kelly Fryer, who is the executive director at FinTech Sandbox, a nonprofit that gives entrepreneurs around the world access to data for free for a certain amount of time.
We chat about what startups not on the coasts face, how fintech startups are requesting climate data, and crucial traits of successful entrepreneurs.
Here’s our conversation.
Kelly, thanks so much for being on the show, Money Isn’t Everything.
Thanks for having me, Mary. I’m excited to be here.
Yeah, I’m excited too because I know we’re just meeting today for the first time, but we do have one thing in common, and that is Midwestern roots.
I thought we’d open up the conversation there because I used to write for American Banker, and I did a story years ago at this point that explored the challenges fintech startups had from the Midwest in trying to secure funding.
I think you must have such an interesting vantage point here with the work that you do and where you’re from.
Are those challenges still present? Did the pandemic, which shook everyone around a bit in where they lived, change things? What’s happening right now with my favorite Midwestern startups?
Yeah, great question.
I’m from the Midwest, born and raised in Cincinnati, Ohio. I love being from the Midwest. I’m now a transplant to the East Coast.
I think startups not in one of the major U.S. startup cities can face a real challenge.
It’s not necessarily unique to the Midwest, per se. You see it in the South. You see it in the Carolinas, Atlanta, and other regions too.
They’re just smaller ecosystems, typically with fewer VCs based there, fewer corporates for partnerships, things like that.
I think those startups and founders have to be really willing to spend regular time, or be intentional about going to NYC or the Bay Area, especially as a fintech startup specifically, because there are a lot of relevant customers and funders that are just naturally going to be there.
That being said, there are a lot of great funds that are focusing on startups not based on the coasts, which I love to see. I do think we’re seeing an expansion of that.
There are also some strong institutions trying to support the Midwest.
We have one partner, Global Atlantic Financial Group, and their commitment to the startup ecosystem, specifically in Iowa and Indiana, is really top of mind for them.
For us at FinTech Sandbox, we have about 25% of our portfolio actually based outside of the U.S. altogether, so the U.K., Norway, Brazil, Israel. We’re very global in that sense because we’re virtual.
But in the Midwest specifically, we’ve onboarded some interesting startups recently.
We had a company called InsurTech out of Iowa, which is a SaaS platform focused on risk insights for the insurance industry.
We had a company out of Texas called Moonbeam that’s focused on spend optimization for the military community, which is really interesting.
That’s a perfect game, right?
Exactly.
Then Manifest out of Chicago, which is automating 401(k) transfers as people move from employer to employer.
Just to call out a few, there’s definitely activity in the Midwest, which is exciting to see, and hopefully they get more funding.
I’m curious too because, in my experience, entrepreneurs like to focus on problems that they encounter.
You have different kinds of regional problems as well.
I remember the startup I was profiling was working on homes that were under $100,000, and they were running into people who were like, “Hey, is that possible?”
Do you see patterns in the problems they’re solving? I know you just gave a few examples, but are there distinctions that you see geographically?
Not necessarily.
I do think that outside of the coasts, you do have more startups in situations like you just mentioned.
We have an example, a startup out of West Virginia called Ridge Financial, that’s focused on personal finance for those in the Appalachian region.
We do see a little bit more of startups that are building specifically for problems or challenges they face within rural communities or smaller towns.
But overall, no. I tend to see fintech entrepreneurs working on similar patterns or similar issues no matter what their geography is.
Well, that just highlights that there are main problems that need a lot of attention to work on.
Yeah, a great many.
I think that’s such an interesting thing about FinTech Sandbox, this access to free data.
I know you’ve been around for a decade now, right? Or more than a decade?
It’s our 10-year anniversary.
Happy anniversary.
Yeah.
I imagine the data sources have changed from start to now.
How many data sources are available to entrepreneurs, and what kinds of data? I bet there are some really surprising kinds of data there.
Yeah. We have over 41 data providers, or data partners, right now.
Great folks like Morningstar, FactSet, Associated Press, Plaid, MSCI, and others.
When we first started FinTech Sandbox 10 years ago, it was heavily focused on capital markets data.
We saw a lot of startups focusing on data related to institutional investing and fundamentals within the capital markets.
Then we expanded into credit data, news data, finance and consumer transaction data, and lately we’ve been getting into ESG and real estate.
It’s really any and all types of data.
We have a fantastic guy on our team named David Savage, who’s our data partner manager, and his job is focusing on making sure that we’re adding in the right data partners to match the needs of the startups that are coming to us.
We’re constantly evolving the data providers that we partner with and that we offer, and always looking at what new data sets we need to have available for startups.
It’s an always-evolving process.
ESG, and I guess I have a real deep curiosity about climate data and also, separately, health data. Are you seeing that come through? Are you seeing fintech merge more with those worlds a bit?
Yeah. Especially with climate data, we’re getting a lot of interest and requests for it.
We had an interesting request a few weeks ago around energy data from a commodity standpoint, also some risk, obviously ESG scores and various forms of those.
Health data, I think there is a lot of interest in the financial sector, but there are so many issues with personal data and privacy that it’s a lot more complex and difficult to get your hands on it.
I’ve talked to some corporations, whether they’re an insurance company, a healthcare provider themselves, or other things, where they might have some of these metrics from their customers.
But as a public data set, or a data set that an entrepreneur can easily get their hands on, it’s much more challenging.
Oh my gosh. Think of the two hardest industries for data and all the rules, regulation, and privacy together.
I’m ready. I’m ready for the innovation.
Exactly.
Kelly, this is my one segment that I call “That’s What You Said.”
This is something you told The Financial Revolutionist that I think illustrates this point so perfectly.
You said, “Imagine being a bootstrapped entrepreneur and you need to pay $200,000 or more just to get data to test your AI model or credit underwriting tool or personal finance app. That could easily be the difference between getting to your first sale and never getting off the ground.”
I think that is so striking because it shows who would even be able to do that.
I imagine you feel similarly to what you said, but is that true first off?
Oh, absolutely.
That is a sentiment that I believe very deeply, and I think it’s a big reason why FinTech Sandbox continues to be successful today with our data access residency.
Talking about the high cost of these data sets, if you’re a fintech entrepreneur, it’s a bit unique that you need data sets in order to power your product for the most part.
As opposed to if you’re starting a shoe company or some other kind of app, you might not need it.
I think that’s why startups are so excited when they hear about FinTech Sandbox and what we’re building, and why our mission really remains the same over the last 10 years.
I imagine the companies providing the entrepreneurs with free data want to see, “Oh, what interesting thing is going to be built?”
What are their other motivations for wanting to supply data for free for a limited time?
For the data partners, I’d say their motivations are a few things.
One is it’s an early business development opportunity.
You get to talk to an entrepreneur in their early days, maybe get them enticed and hooked onto your data, and then they continue to grow, maybe become a unicorn, and that data and commercial agreement expands.
We at FinTech Sandbox do not at all guarantee the commercial license agreement for the data providers, but that’s one.
It’s definitely a business development relationship.
Two is what you mentioned before, innovative use cases.
They can see how an emerging startup is using their data set and then repackage it as a product and sell it to hedge funds who are going to pay a lot of money for it, as opposed to the startup community.
Then three is just general deal flow, whether that’s for M&A or their own VC arm.
We’ve seen a couple companies go on to either get investments from data providers or get acquired by data providers.
You have such an interesting vantage point in interacting with so many entrepreneurs.
I’m sure there are people who enter the ring that maybe shouldn’t have. I don’t know.
Some people have the right traits, and some people have, “Oh, surprise, I didn’t really expect this.”
What would you say are, let’s limit it to three, or pick your number, the traits where you think, startups fail, but at least having these traits sets them up in the right direction?
I think the key traits I find for a successful entrepreneur are the ability to take in feedback and make changes from that.
I guess that’s really listening, but I think being able to take in feedback and adapt to it is really, really key.
Whether you’re listening to your customers, your investors, or the market, whatever it might be, you need to adapt and be able to easily pivot.
Two is a tenacity, or call it hustle, a willingness to pound the streets, pick up the phone, keep going as you’re getting no’s, and not let that stop you.
Then I think three is a resourcefulness, especially in the early days.
You have to get creative about, how can I test if this product is working or this feature is working quickly, cheaply, and use that as a test?
I think there needs to be a level of creativity and resourcefulness in order to do that.
The other thing I’ll say too is there are the traits I find successful for entrepreneurs, but then also looking across your entire founding team and making sure that you are complementing each other and filling in gaps for one another.
A great example, or what came to mind when you first said there are some people who maybe shouldn’t get into entrepreneurship, is I’ve seen a lot of teams where it’s like, okay, great, you’re so technical, you’re so deep in this, you get it.
But I cannot picture you going out and selling this to an institutional investor or a big corporation, making that pitch and being convincing.
So, it’s having somebody else on your team who can take the lead on sales and can speak about the big vision of what this product is capable of if you’re highly technical and too deep in the weeds to be able to explain that to somebody else.
It’s finding people to fill those gaps.
Yeah. I mean, I’ve heard of this, I’ve seen it firsthand, but I know some hire acting coaches or have a sort of stand-in, maybe that’s the wrong word, to get the clutter out of the mind in front of a larger audience, let’s say.
Yeah. No, I mean, it’s a great idea.
You have to be a bit self-aware of where your weaknesses are.
If I’m not confident in pitching, or I’m not confident in the technical side, okay, who can I find that can do that for me? Or how can I learn it as quickly as humanly possible?
I guess this opens up my thought process because you always hear different things at different times with the clash of the traditional banker and the entrepreneur.
Then what happens when those entrepreneurs are acquired and get paid a lot to work at a corporation for a set amount of time?
It always seems like, inevitably, they go on to a llama farm or something after.
Do you hear those gripes from entrepreneurs who are then forced into the corporate structure? I’m using words that aren’t right. They join a corporation, but they’re reluctant, let’s say.
Yeah. I don’t think that’s a rumor by any means.
I see that time and time again, entrepreneurs whose startup gets acquired by a large institution, and then they go spend a certain amount of time working for that company.
I think it’s a few different things.
One, you’ve been your own boss and calling your own shots for so long that it’s hard to go back to that corporate structure.
I think the other thing too is, again, what I was just saying before, in startup land, it’s being resourceful. It’s moving quickly. It’s testing things and pivoting.
Versus in large institutions, it’s slow, and it’s red tape, and it’s getting it approved by eight different people before you can make the final decision, and things like that.
I think mentally that is a really difficult pivot to make for a lot of entrepreneurs.
So, I see many who do their time at the institution and then are using that also to either noodle on a new idea for their next startup, or again, they take a break and go to their llama farm, and then eventually go back into something else.
Go back to something else.
Yeah.
We just had a guest on who had worked at the OCC while he was dreaming up a pot payment startup.
I really love using the day job to see a real problem and then trying to fix it.
Yeah. I think you see that a lot in financial services, again, specifically, at least on the B2B finance and fintech products, where a lot of it comes from their own experience working in a large institution or working on a specific desk or issue.
They’re like, “Okay, I did this for 10 years, and we never figured it out. We never fixed it. So I’m going to go do my own startup that directly focuses on that issue.”
I think you actually see that a lot in fintech entrepreneurs.
I tend to find fintech entrepreneurs are a little bit older and have a little bit more corporate experience under their belt, and they’re building products based off some of the things that maybe they saw at their day job that frustrated them.
Kelly, I’m also wondering because this opens it up to a bigger dialogue on career pathing.
I’ve heard you say in your own life that you can’t really think about a 10-year plan because timing matters, right? Where’s the opportunity?
I hear a lot of men often say, “I’m going to publish this novel by year two,” or “build this thing that someone’s going to acquire,” whatever the bold dreams are.
From your perspective, how does one think about the next step in a career?
How do you think about it? How have you thought about it in your life? How could that translate to advice for people trying to figure out their next step in financial services?
Yeah. I do believe that.
I think timing is a huge piece of your career.
In the beginning, I get asked a lot by people in college or younger folks, “How do you get your career started?”
I think in the beginning that starts out a bit, honestly, as happenstance.
Where do you end up getting your first job out of college, unless you’re somebody who’s super driven in a specific direction?
“I’m absolutely going to be an investment banker.” “I’m absolutely going to be a doctor.”
There’s something with a very set career path.
I think that’s one thing.
But otherwise, you kind of get your first job, which again I feel like is a bit by luck, some good setup in terms of your education, and then a career just kind of starts to unfold from there.
Then you spend the rest of your time figuring out, well, what do I like about this role? What don’t I like about it?
Then you keep trying to move further away from the things you don’t like with each job and move further into things that you do enjoy.
It’s really funny. When I did my MBA, they used to always talk about, “Are you running from something or running to something?”
I also think that’s a very interesting way to think about that.
I love that.
I think most people, honestly, are running from something.
I think you learn a lot more, or as you look for your next opportunity, you’re much more focused on what you don’t want to do than what you do want to do.
I think because of that, timing is such a key piece.
As intentional as you can be of, “I’m going to do this in two years and then this in five years,” it’s like, okay, well, I did this in two years, and then I realized I absolutely hated doing this.
Then that changes what you’re going to do in five years.
I think there’s a big element at work that we really can’t control.
We can set ourselves up to some extent, but I think there is a lot of timing and luck that also plays a role.
Am I remembering this right? Did you start off wanting to be, was it a director?
Oh, this is deep.
In movies?
Yeah. I wanted to be a film producer.
Yes, that is real.
See, I love that because you clearly broadened it up, but here you are calling the shots for a bunch of people, helping them build their companies.
It’s like being a director in a different way.
I live in L.A., so I feel it. I get it.
Yeah.
Hard tangent, but I’m curious because we have so many community bankers that we work with here, and I’m aware of some of the problems that they’re up against.
I shouldn’t laugh. There are just so many. It’s hard to be a bank.
It’s also hard to be a startup.
What do you think they need the most help solving for right now, or what could they most benefit from from an entrepreneur standpoint?
We can change it from a community bank to any bank or credit union if that makes more sense, but what are the biggest problems?
Yeah. I think with community banks, the overarching theme is just digitization.
Taking outdated systems and interfaces and updating them to better compete and function in such a tech-forward world.
I was actually speaking several months ago with a group of community bank CEOs, and the CEOs were discussing a number of their biggest concerns with running their community banks.
The biggest ones were concerns around technology. How do we invest in technology and pick the right ones?
Concerns around people internally, so high labor costs, talent competition, retaining people.
Then concerns around people externally, like demographic shifts and the need for attracting younger customers and how to keep them.
To me, all three are kind of wrapped up in the same digitization.
Employees want to work for a forward-thinking company.
Customers, especially younger ones, want to use bank products that meet them where they’re at, which these days means being fully mobile.
I found it interesting just listening in and hearing what their concerns were in those three spaces.
The other thing that I think is unique to and interesting about the community bank space is this public assumption that bigger equals safer.
You have those consumers who are flocking to the big brand names that they recognize, understandably so, and community banks trying to figure out ways to combat that.
How do we attract more customers and make them think, okay, I’m here in your local community, your local ecosystem, we are still just as safe and going to stay in business just the same way as some of the large tier-one banks are going to?
I think that’s a really big challenge for them.
It is a big challenge for them, and it requires a really strong marketing message and probably to be really out there on social media, which I don’t think is that typical.
No.
So, that’s a recommendation. Be bolder on social media.
I’m curious too, how does FinTech Sandbox find entrepreneurs?
I know you’re online, you do events and so on, but is it hard to recruit just from an awareness standpoint?
Yeah. I mean, marketing is everyone’s challenge, right? There’s never enough time and dollars that can go to that.
For FinTech Sandbox, we’re primarily honestly word of mouth.
We have a lot of previous founders who have utilized our data access residency and then recommended it to other startup founders that they meet.
We have data providers that meet startups who are interested in their products, and then they suggest that they get the data for free initially through FinTech Sandbox.
Then we also have really great referrals from partners.
We work with a number of different accelerator programs like MassChallenge, Village Capital, the Global Insurance Accelerator, and others who refer startups from their program to us and vice versa.
We kind of do this cross-deal flow, which is really nice.
Same with our VC network. They’ll often refer startups that they’ve recently met to us.
We’ll refer startups that might be interesting for their portfolio to them.
Then there are other great ecosystem and community partners who are deeply involved in the fintech or startup ecosystem, like Rise, created by Barclays in New York, who can give us referrals or mention us to companies that might be a good fit for our program.
Yeah, that makes a lot of sense.
There are a lot of entrepreneurs. It’s just a matter of collecting them.
Exactly. Uncovering them.
We’ve done a little bit as well with a geography or community engagement approach of, okay, who are our key contacts in London, Chicago, or Atlanta?
Almost having them find who the up-and-coming startups in the ecosystem are and then referring them to us, which is nice.
That’s so cool.
Kelly, I have one last question for you, but before I do, I want to open it up to you.
Anything you want people to know? I know Boston FinTech Week is on the horizon, but let listeners know where to find you or what you want to focus in on in the next couple of months.
Absolutely. That’s very kind of you.
You can find the FinTech Sandbox team on our website, fintechsandbox.org, including the application for our startup data access residency if you’re interested in getting free data access.
We accept applications on a rolling basis.
Then, like you mentioned, we hope to see everyone in the fall at Boston FinTech Week.
This is our seventh year celebrating the fintech community in the company’s hometown of Boston.
Boston FinTech Week is October 14th through the 18th, and our two-day ticketed conference, the FinTech Sandbox Innovation Forum, will be October 16th to 17th.
We’re really excited.
This year, we’re focusing on what we call “Fintech at Full Throttle” as our theme.
It’s exactly right to picture the rapid pace of change going on in technology, our industry, and around the world.
We’ll have some really incredible headline speakers that you won’t see anywhere else, as well as some great community events throughout the week.
You can get your tickets on BostonFinTechWeek.org.
Great. Awesome.
Kelly, last question. What’s the photo or image on your phone’s lock screen?
It is a picture of the ceiling of the Arc de Triomphe in Paris.
Oh, cool.
Yeah.
Okay, that’s a cool one.
It’s very cool.
It looks almost like concrete flowers, sort of very structural, but with decorative flowers.
That’s what’s on the lock screen these days.
Well, it sounds pretty.
Kelly, thanks so much for being on the show. It was lovely chatting with you.
Thank you so much, Mary. This was such a fun conversation. Thanks for having me.
So, the biggest thing I learned in today’s conversation is that 10-year plans, well, they’re kind of silly. Timing is everything, as they say.
And surprise, there’s a two-for-one coming.
Two Thursdays from now, you’ll be able to catch the next episode of Money Isn’t Everything, where I sit down with John Thompson from H&R Block’s Spruce, and we talk about what society gets wrong about income volatility and interesting mobile banking features.
Also, on August 22nd at 10:00 a.m. Pacific, you can catch the Cornerstone and Frich webinar, where I’m sitting down with Frich’s founder to discuss Gen Z and all things money, based on a fun, vibrant report we did.
See you then.
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