Draper Esprit CEO Simon Cook explains why he's been coy about investing in the industry, until now.
Financial technology firms, from TransferWise to Funding Circle, have yet to crack the secret of fast business growth.
“A free box of Graze is viral,” Cook told The Memo. “People talk about food, but we haven’t seen a business plan in [financial technology] that has the same viral loop.”
Draper Esprit is one of Europe’s most prolific investors, having backed the likes of LoveFilm, POD Point, Crowdcube, Trustpilot, and yes, Graze.
But so far Cook and his team have been coy when it comes to investing in financial technology.
Cook says part of the reason is that finance lacks the sex appeal that other sectors enjoy.
“The problem is that you and I don’t talk to each other down the pub about where we buy our foreign exchange, or what we do with our ISAs, or our savings, it’s just boring right.”
Because people don’t really get excited about finance, these businesses will struggle to grow without spending big on marketing – something you can already see from the ad campaigns of Nutmeg, Crowdcube and TransferWise.
“If we see a fintech business that’s got virality, then we’ll pile into it, but on the whole the problem is we still haven’t found that,” he says.
But that could all be about to change.
In the last year we’ve seen challenger banks like Monzo, and now Starling, signing up thousands of users without any marketing, spreading purely via word of mouth.
“We’re spending a lot of time looking at these platform businesses,” says Cook.
What’s more, these challengers plan to let the likes of TransferWise or Funding Circle market their services through each bank’s app.
If successful, these challenger banks could be the catalyst needed to give financial technology businesses the viral loop they’ve been lacking until now.