Each year after we close applications for our new incubator class, I like to do an analysis of all the applications we received. I view our funnel of applications as forward-looking radar, capturing what the earliest stage fintech entrepreneurs are working on. It’s a good way to learn about emerging trends, to see what’s hot and what’s not in the world of startups leveraging financial data. This year we had over 100 applications, our biggest pool ever. In this expanded pool, we saw a surprising amount of consistency with the prior year – perhaps our biggest learning was how little changed over 12 months. But we did see a few obvious trends of note, including emergent business models, as well as some less obvious trends that required a little teasing of the data. First, the consistencies. Lending applications basically constituted the same proportion of the pool, dropping slightly from 18% to 12%. Payment applications also stayed steady, increasing very slightly from 8% to 12%. The mix of B2B vs. B2C models was unchanged, although, in the wealth space (9% of the total pool), plans targeting financial advisors (v. direct to consumer) went up from 29% to 38%. Most surprisingly, the biggest consistency was that personal financial management (PFM) continued to be the favorite business model of entrepreneurs. Fully 46% of our applications were in this category, compared to 44% last year. Again, like last year, 25% of those PFMs focused specifically on millennials, who apparently have gotten no better at managing their money in the last 12 months. Note to entrepreneurs planning to apply to our program: if you have a PFM idea, we have seen dozens and dozens and dozens of these, so the innovation bar is set extremely high. The fact that entrepreneurs are still working on PFMs, despite the landscape being filled with many failed PFM companies, tells me a couple of interesting things. One, there is clearly a perceived need here. People, not just millennials, need help managing their money. Two, entrepreneurs are, of course, relentlessly optimistic. They keep thinking “this one will work,” no matter how many similar ideas have failed in the past. This optimism is part of why working with entrepreneurs is so much fun. A significant change over last year was a large increase in the globalization of our applicant pool. This year 37% of our applications originated outside the United States, compared to 14% last year. The international piece of our pool came from 16 different countries, with India and the UK representing the largest sources, and the long tail being represented by Greece, Jamaica and Latvia. This partly reflects improved outreach on our part, and hosting the application on F6S, which has a global reach. But there is no question that the fintech wave is going global. Digging into the details of the applications, a couple of more subtle trends emerged. First, we saw applications in the real estate segment double over last year. There were a range of models within this sector, from digitizing mortgages to serving real estate brokers to serving real estate investors, but all were focused on attacking this large market that continues to rely on legacy systems. We also saw, in a surprise to virtually nobody, a significant rise in applications using artificial intelligence. These more than doubled over last year, with multiple chat bot applications and a variety of startups using machine learning to detect patterns and glean insights from the data produced by consumer financial transactions. We also saw quantitative evidence of a new business model that we had previously identified anecdotally. Six applications came in with this model: providing a freemium SaaS solution in a vertical, and using that SaaS solution as a hook to manage payments and eventually to offer lending services in the vertical. This model has multiple revenue streams and, theoretically, a lower customer acquisition cost than more traditional payment and lending models. So although the broad product mix remained constant since last year, our new application pool did reveal a few nascent trends. We’ll be keeping our eye on these trends over the year, and use our next application pool to bubble up the newest and freshest in fintech concepts.
