How is fintech, cryptocurrency and trading changing the way entrepreneurs invest?
The cryptocurrency market has taken a hit recently, losing 10% of market value, with Bitcoin’s value dropping to $7,500 before recovering slightly to $7,600 (November 21st). Only Tezo escaped the drop, as its value saw a 4% rise. So with cryptocurrency fluctuating, where should investors look to increase the likelihood of good returns? With huge growth in fintech start-ups, particularly in the UK, fintech investment is one to consider.
The entrepreneurial spirit is alive and well it seems, as fintech start-up success helps drive record results for US investors. According to the KPMG Pulse of Fintech Report, US Fintech investment reached a record $52.5 billion in 2018, fuelled by a strong mergers and acquisitions market.
There is a trend for smaller FinTech companies to partner with big technology businesses to deliver mutual benefits. Mid-sized banks are partnering with fintech start-ups, harnessing their technological know-how to secure sustainable future growth. This is particularly the case in London, where US venture capitalists are investing record amounts of money in UK firms. For example, Monzo received a $144m investment recently from Y Combinator, a Sillicone Valley investment company.
This year alone, US banks have backed 24 equity deals with FinTech, and last year they backed 45, a 180% increase on 2017 figures.
Entrepreneurs are spotting the wealth of opportunities in fintech due to a myriad ways of applying blockchain technology and cryptocurrency tokens to solve problems innovatively. The chance to create solutions that are more transparent, more secure and faster makes it an attractive option for new business ventures. Here’s a few ways entrepreneurs are harnessing the power of blockchain:
Raising capital
Cryptocurrency has been a game changer for Fintech start-ups who can now use cryptocurrency coin offerings to raise capital from a range of investors quickly and economically. In this way the company’s value in its early stages can be assessed, reflected by the market value. Its shares are traded as coins almost immediately, creating liquidity and facilitating rapid growth. This was historically a challenge for start-ups, as they could not prove their worth in terms of stock market value.
Training/coaching
Companies such as SuccessLife offer access to training resources in exchange for tokens that sit on the blockchain platform. This enables users to complete affordable and flexible online courses essential to helping their businesses flourish. It is a great example of how FinTech companies are supporting entrepreneurs via cryptocurrency and blockchain technology.
Transactions
Blockchain technology facilitates instant payments without the need for a central authority such as a bank. Larger financial institutions are realising this and partnering with fintech start-ups to ensure they harness new technologies and adapt their systems rather than be left behind by the nimbler smaller players.
Investing in future FinTech
Prior to cryptocurrency, investment in the future of fintech was limited to venture capital funds and private ‘angel’ investors. Cryptocurrency now enables anyone to who wants to invest in fintech a means of doing so, creating their own online portfolio. This type of blockchain decentralised investment allowed teenager Erik Finnman to become a millionaire at the age of just 18.
With London now becoming the number one choice for fintech investment, leaping ahead of New York, it seems Brexit uncertainties have not put US investors off. The UK’s wealth of fintech talent means it will remain an attractive option.
