By Don Ginsel
Founder, Holland FinTech
Holland FinTech was launched in 2014 with the goal to build a FinTech ecosystem with a base in Amsterdam. Holland FinTech brings together the different players in the Dutch FinTech space, linking them to global developments via our newsletter, research, and international trips. As a local hub, we are well on our way with over 65 members on board, ranging from FinTech start-ups to banks, and from investors to government agencies. Increasingly we are expanding our international reach.
But we are not there yet. There are still many hurdles to overcome for FinTech in general. We do not consider ourselves experts in building FinTech ecosystems yet but think that sharing our journey may help others on a similar quest.
Back in 2014, FinTech in the Netherlands was about as dormant as in most other countries in continental Europe. Only a very small group of internationally well-connected financial professionals knew about this new thing called FinTech, a term being used in Silicon Valley, New York, and London. FinTech was only used to address the main IT suppliers of the financial industry. But FinTech start-ups were something nobody had ever heard of or thought about. Given the quite innovative financial landscape, this was a missed opportunity, especially since the Netherlands have been competing on a global scale for some time in the payments and security arena. So what caused this disconnect?
For the relatively large financial industry in the Netherlands, the financial crisis was still not over. Dealing with a lagging economy, staff reductions, increasing compliance regulation, and finalizing governmental bailout measures were top priorities. Combined with public and political scrutiny around bonuses and non-transparent financial products, financial institutions just had different things on their minds.
Not only was there a lack of serious competition to drive innovation in the first place, but also there was a lack of political awareness about financial innovation. Moreover, with the financial crisis being caused by “innovative” financial products, the topic of innovation in this sector was highly sensitive. In addition, Holland Financial Centre, the Dutch organization that had as one of its tasks to promote innovation in the financial industry, was forced to close due to the negative sentiment towards the financial industry. Basically the Dutch financial industry was innovation-disabled and had nowhere to turn for support.
So how about start-ups and tech companies? Were there really no companies in the Netherlands? Apparently the term FinTech had not really hit the ground before 2014. Most of the relevant companies simply considered themselves IT companies, like thousands of others. Many of them were either unaware of the opportunity that the international rise of FinTech offered or else they didn’t know how to be associated with it. And the local venture capitalists were not picking up on the FinTech opportunity either, except for a few that were already active in London or beyond.
But there was one area where the Netherlands was already ahead of the FinTech competition: payments. The Dutch have had some great payment solutions both via banks (iDeal) and young tech companies like Global Collect and Adyen. For a trader nation like the Netherlands, it was obvious e-commerce developments were driving new solutions forward, especially those related to financial processes.
Given the large potential of innovative payments from the Netherlands and the strong enterprise IT capabilities (infrastructure, security, ERP & Trade software), the FinTech potential of the Netherlands is quite considerable. This, combined with an excellent infrastructure (one of the busiest internet nodes worldwide), a well-educated population (best country in Europe to do business in English after the UK and Ireland), and a great international network, makes the Netherlands a great place to do business. So, how to set this in motion?
After confirming that there is an opportunity with FinTech to drive competition and bring new solutions that matter to entrepreneurs and consumers, the next step is closing the knowledge gap between financial institutions and their customers. This will financially empower entrepreneurs and consumers to deliver economic growth and prosperity.
Leveraging my network: how to align the various stakeholders in my network, at banks, start-ups, investors, and service providers and make them enthusiastic about the idea of doing “something” with FinTech in the Netherlands. This took a lot of explaining to the industry. At first I focused on blogging part time, but as enthusiasm rose with each interview and discussion on the topic, it seemed that there was perhaps momentum for something bigger. KPMG’s team for Innovative Start-ups was the first to bite, a good fit given their current focus on start-ups in combination with having many clients in the Financial Services industry. Their team was a big help in structuring the concept and promoting it. Innopay, an advanced payment consulting firm, was the next to give verbal commitment, as this initiative was well suited to complement their payment expertise. They were very helpful in sharing the history of FinTech in Europe, before the term FinTech was widely recognized. Soon after Van Doorne, an innovative Dutch law firm, and IBM joined the group of supporters and the concept started to take shape. On 23 October 2014, we had our first meetup, with over 100 people attending, and Holland FinTech was born.
We called the supporters founding members and started setting goals and structuring the organization. It seemed like a logical step to form a bridge between the world of FinTech, as found predominantly outside of the Netherlands, and the local FinTech ecosystem that we were building. Therefore we determined that an international focus was paramount and decided to communicate only in English. The main tasks then were to get the FinTech players together, and to make connections to developments and FinTech hubs worldwide. This meant telling people about FinTech, reaching out to (potential) FinTech companies, organizing events, and setting up structured communication about global FinTech developments.
Since we had to convert so many people to start with, we had to get easy access to them. Providing free information through our website, a free global FinTech newsletter, and free meetups enabled us to garner the interest of the relevant parties. Besides this we took every (self-created) opportunity to speak about FinTech and our cause when we thought relevant people would be there. While this meant our agenda was overloaded, being willing to go on stage and speak about FinTech remains a great way to get noticed.
One of the great things about working with (among others) start-ups is their energy and resourcefulness. Their capacity to go a long way with limited resources was also required for this self-funded initiative, very much a start-up itself. So just rolling up our sleeves and getting this going, even when not all partners were on board yet, was important. This agility is key to the success of a start-up, certainly in the fast changing FinTech landscape. Keeping stakeholders happy is also key, but not at the cost of inertia. This approach does however have its financial consequences and requires solid financial commitment from at least one shareholder. We have not been funded by grants or subsidies (so far).
As a privately started and funded initiative, it made sense to become a limited liability company. However, given the partly social goals and drive to tackle what is also a public cause, financial empowerment, many people also considered a foundation to be a good form to use. We have not yet done so, due to potential additional administrative hassle and perhaps even less transparency. Looking forward to when a foundation might help us to reach our goals, we may consider changing our legal structure.
One of the things that I have learned is that asking for a success fee per transaction, which is the norm for M&A deals, makes it difficult to advise people objectively. But since we’re building a marketplace for FinTech, we needed to find a way to fund our activities. The membership fees are relatively low (up to a maximum of EUR 15k for billion-plus companies) and free for start-ups for the first year. This model should lower the barriers to entry thereby maximizing the number of members, increasing knowledge sharing and the number of business opportunities available at our marketplace.
This model allows us to do more for the network and community, since marketing and distribution are already covered. That means that setting up a co-working space for FinTech companies, organizing hackathons, and/or running accelerators are all natural extensions since the sponsors, investors, and participants are already part of the organization. And the programmes can be run more cheaply due to overlapping resources. That makes a win-win for all parties involved. It also enables us to listen very carefully to our members and to tailor programmes to their current needs efficiently.
Given the potential pull Holland FinTech might have on companies from abroad and the contribution to the financial ecosystem, we started co-operating with the government at a very early stage. We maintain great relationships with our Ministries of Foreign Affairs, Economic Affairs, the Dutch regulators, the Dutch Central Bank (DNB), as well as the Authority on Financial Markets (AFM). These parties play such an important role in making or breaking the FinTech landscape, that we want them to know about and to support our objectives. Our discussions have been very constructive and there is a sense of urgency with all of the stakeholders that we cannot miss this window of opportunity.
One very important development at the beginning of 2015 was the creation of StartupDelta, simply put the “Ministry of Start-ups”, led by former EU commissioner Neelie Kroes. This organization combines the forces of all start-ups and service providers in the Netherlands, connecting them internationally. It creates a great momentum for start-ups and attracts venture capital to the Netherlands. In particular, StartupDelta strengthens cooperation between start-ups and large corporates.
So now we are well on our way with a staff of eight. We have organized ten events since October 2014, have 65+ member companies (90% Dutch), 1500+ newsletter readers, and 2500+ Twitter followers. Recently the top three Dutch banks joined Holland FinTech as members. We have identified more than 250 FinTech companies in the Netherlands and are expanding our geographical mapping. Since the city of Amsterdam has also embraced our initiative, we will soon unveil a space for our physical FinTech hub in Amsterdam, that will be a “must visit” for those active in FinTech worldwide, similar to Level39 in London.
But of course our organization is still at the beginning stages. Bringing in sufficient revenue remains a challenge when working with corporate partners. This also means that we work with a limited number of staff members and that we rely on part-time and volunteer staff. Our team is extremely committed to building a vibrant FinTech community and has done a great job so far!
Setting up an organization that aims to manage the whole FinTech ecosystem in a region requires dedicated resources and the room to manoeuvre. The time must be right and you may be faced with extensive competition but that doesn’t mean that you should avoid activity around FinTech – rather it requires finding a particular niche. In London you see massive competition between organizations that facilitate FinTech and everyone, including the Mayor of London, is calling London the FinTech capital of the world. That alignment sends out a very strong message, one that most regions can learn from.
This story shares our journey in the FinTech landscape so far and our aim to connect to other people and organizations who want to be a part of shaping the FinTech ecosystem worldwide. We hope this vision will give direction for an integrated ecosystem approach.