The document provides an agenda for a January 2016 event on financing innovation and FinTech industry transformation. The morning session focuses on financing startups, including lectures and group work. The afternoon session discusses FinTech and industry disruption, with lectures from digital economy experts and a discussion on disruptors versus industry incumbents. Guidelines are provided for a group presentation on funding a startup. The document also includes background information on industry transformation drivers, trajectories of change, and the impact of digital technologies on banking.
2. Today’s schedule
Morning: Financing Innovation
− 9:00 to 10:30 Lecture
Michal Gromek, PhD SSE, FundedByMe, Lendico, Rocket Internet
− 10:30 to 11:30 Groupwork: Funding your Startup
− 11:30 to 12:00 Group presentations
Afternoon: FinTech and Industry Transformation?
− 13:00 to 15:00 Lecture
− 15:00 to 17:00 Discussion: Disruptor vs Industry
Incumbent
Anna Felländer, Digital and Futuring Economist, Swedbank
Henrik Rosvall, CEO and Founder, Dreams
3. Groupwork: Funding your startup
Prepare a max 5 minute presentation
− How much funding do you need to get your idea off the
ground?
− Which form(s) of financing will you go after? And When?
− What will you give in return for financing? E.g., equity,
reward, nothing
− How long will it take for you to provide the return for
your “investors”?
− What do you need to do to prepare for raising financing?
4. If the rate of change on the
outside exceeds the rate of
change on the inside,
the end is near....
-Jack Welch
5. What triggers industry transformation?
Johnson & Scholes 1997
Politics and
government
Environment Technology
Legal
structure
Social and
demographic
structure
International/
national
economy
Industry
structure
6. Two dimensions of transformation
Core activities – Recurring actions a company
performs that attract and retain suppliers and
buyers (profit-making activities)
Core assets – Durable resources, including
intangibles, that make a company more efficient at
performing core activities
McGahan, HBR, 2004
16. What is FinTech?
Accenture/CB Insights
Technologies for banking and corporate finance,
capital markets, financial data analytics,
payments, and personal financial management
Finance TechnologyFinTech
18. FinTech World
Personal Finance
Payments Bitcoin & Blockchain
Currency
Currency Remittance & FX
Lending
Crowdfunding
Robo-investing & Asset
Management Tech
Consumer Banking &
Saving
The Wharton FinTech Club
What is FinTech?
22. 1950 1960 1970 1980 1990 2000 2010
1959,
Bankgirot
founded
1985, Swedish
financial and credit
markets deregulated
1968, World’s first
online ATM in
Sweden
First wave of electronic trading
software companies emerges
2003, First
BankID issued in
Sweden
1990s, Sweden invests in Internet
infrastructure, today country with 3rd
highest Internet penetration
2010, iZettle
founded
2010, Neonet
$160M exit 2014,
iZettle
raises
$55M
2014, Klarna raises
$125M in PE
1967, First ATM
installed in
Sweden
1984,
Optionsmäklarna
(OM) opens in
Stockholm, Sweden’s
first stock option
market, electronic
trading introduced
2012, TriOptima,
$160M exit
2005, Klarna
founded
1998, Merger
between
Stockholm’s
Stock Exchange
and OM
Stockholm
2007, NASDAQ
acquires OMX Group
Unicorns such as Skype, King, Spotify
and Mojang founded
2014, FinTech
Funding in
Stockholm
Explodes
Long history of “FinTech” in Stockholm
http://www.slideshare.net/eteigland/stockholm-49722748
23. In just the past few years in Stockholm…
Company Founded Business
Klarna 2005 E-commerce payment services
MyLoan 2006 Loan broker
Trustly 2008 Online payments
iZettle 2010 Mobile payments
FundedByMe 2011 Crowdfunding, crowd equity
Kivra 2011 Digital mailbox
Tink 2012 Personal finance
Safello 2013 Cryptocurrency exchange
KnCMiner 2013 Cryptocurrency mining equipment
Toborrow 2013 P2P lending for companies
Cryex 2014 Cryptocurrency clearing house
24. Stockholm #2 FinTech city in EU
2010-2014 investment
● $532 Mln
2014 investment
● $266 Mln
Top 2014 Investments in
Stockholm FinTech
Companies (USD Mln)
Klarna $125
iZettle $55
Trustly 29
Bima Mobile $22
KNC Miner $14
http://www.slideshare.net/eteigland/stockholm-49722748
28. But in China alone in 2015…
http://www.crowdfundinsider.com/2016/01/79612-report-china-p2p-lending-topped-150-billion-in-2015/
29. Four forms of crowdfunding
Form Benefits for funders
Donation-
based
Donation Intangible benefits.
Reward-
based
Donation or pre-
purchase
Rewards in addition to
intangible benefits.
Equity-based Investment
Return on investment if
company does well. Rewards
sometimes also offered and
intangible benefits may motivate
too.
Loan-based Loan
Repayment of loan with
interest. Alternatively intangible
benefits if loan given interest-
30.
31.
32. Democratizing innovation and investment?
Women in USA
<30% of business
owners
<15% of angel investors
<10% of venture
capitalists
Marom, Robb and Sade 2014
Women on
Kickstarter
35% of project leaders
44% of investors
Women invested in
women project leaders
(>40% of projects)
VS
49. What is a cryptocurrency?
Digital
Decentralized, peer-to-peer (P2P), i.e., no central,
third party
Uses cryptography to validate/secure transactions
Also uses cryptography to generate currency itself
Non-technical explanation of Bitcoin
− https://www.youtube.com/watch?v=t5JGQXCTe3c
50. Within 6 years:
Challenging the
fiat money
system?
Bitcoin – An emergent phenomenon
• Open source project on SourceForge in Jan 2009
• Original source code by “Satoshi Nakamoto” – pseudonym?
• Developed by self-organizing community of thousands of
strangers across globe
• Approx USD 6.5 bln market cap and approx 180,000 daily
transaction volume of USD 101 mln
• 1 BTC = USD 431 (Jan 14, 2016)
Teigland, Yetis, Larsson 2013 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2263707
51. How does Bitcoin work?
Screenclip from: How Bitcoin Works under the hood, by “Curious Inventor”
Blockchain
• Shared public ledger
• All transactions ever
made logged
• Chronology and
integrity enforced by
cryptography
57. IoT and smart contracts
Ownership attached to asset/property (e.g., real
estate, shares) and can be verified
Run on Bitcoin ledger, execute legal rules between
two entities: people, organizations, machines
Trustless because no center, no one in middle – the
network is the middleman
Example: I run a private weather station using
neighbors’ sensors. Smart contracts enable payment
to neighbors for data sent from their sensors to my
weather station.
But time will tell… uses we cannot imagine today.
https://www.youtube.com/watch?v=JsC4ptn2Aik
61. FinTech World
Personal Finance
Payments Bitcoin & Blockchain
Currency
Currency Remittance & FX
Lending
Crowdfunding
Robo-investing & Asset
Management Tech
Consumer Banking &
Saving
The Wharton FinTech Club
What is FinTech?
62. FinTech – An increasingly crowded space
• Growing number of entrepreneurs with
experience from established finance industry
• Increasing number of FinTech incubators
• Collaboration among established banks
• Open innovation through open APIs
• Other big non-banking entrants
65. Responses to disruptive strategic innovation
Charitou, C. D., & Markides, C. C. (2012). Responses to disruptive strategic innovation. MIT Sloan Management Review
67. Incumbents running incubators
Actor Incubator Location
Citi Mobile
Challenge
Americas, EMEA,
Asia Pacific
DBS & Nest Investment Accelerator Hong Kong
Wells Fargo Startup
Accelerator
USA
Accenture and Bank of
America, Merrill Lynch,
Barclays, Credit Suisse,
Deutsche Bank, Goldman
Sachs, HSBC, JPMorgan, UBS
Innovation Lab NY, London,
Hong Kong
“Innovation labs are a sign that banks are taking the FinTech threat
seriously as they recognize that we’re coming to eat their lunch.”
-FinTech Entrepreneur
70. Betting on the Blockchain - Together
Goldman Sachs, JPMorgan,
Credit Suisse, Barclays,
Commonwealth Bank of
Australia,
State Street, RBS, BBVA, UBS,
Nordea, SEB, + ……
+
71. FinTech challenges
Regulation
Privacy
Security
Untested in periods of high interest rates,
increased risk, and reduced investment
72. Previously…
In the eight-year period between the Netscape IPO
and the acquisition of PayPal (one of the winners of
this era) by eBay, more than 450 attackers – new
digital currencies, wallets, networks, etc. –
attempted to challenge incumbents.
Fewer than five of these survive as stand-alone
entities today.
McKinsey, 2015
74. Two models of industry transformation
McGahan, HBR, 2004
75. Thomas Jefferson (1816)
“Laws and institutions must go hand in hand
with the progress of the human mind.”
The problem is that the human mind itself
can’t keep pace with the advances that
computers are enabling.
http://wadhwa.com/2014/04/15/mit-technology-review-laws-and-ethics-cant-keep-pace-with-technology/
76. The future is already here,
it’s just not very evenly
distributed.
- William Gibson