FinTech 2012

I've written extensively about the startup accelerator phenomenon. I think it has been transformative for entrepreneurs and VCs and startups in general. We should all take a second and thank Paul Graham for his insight into how to properly construct such a program. Paul is a visionary entrepreneur who has changed the game.

One of the things I am most excited about in the startup accelerator world is the development of "vertical accelerators." We have seen them emerge in healthcare, education, finance, and a number of other sectors. Last year I blogged about the first FinTech Accelerator here in NYC. I watched that group of entrepreneurs go through FinTech last summer, I talked to them at an evening event, and I watched what has happened to those teams after they came out of the program. I was impressed at every stage.

Last week, the second annual FinTech program, FinTech 2012, was announced. Like last year, the secret sauce of this program is the leadership of the CIOs and CTOs of the largest banks and financial services companies:

The chief technology officers and senior technology executives from 12 financial services firms will pick up to six entrepreneurial companies to participate in the Lab, which begins in May 2012. Bank of AmericaBarclays Capital,Citigroup, Credit SuisseDeutsche BankGoldman SachsJPMorgan ChaseMorgan StanleyState Street, and UBSwill be joined this round by American Express and Capital One.

When I talked to the teams that went through last year's program, this was the thing that all of them gushed about. Getting regular access to the highest level technology execs in these institutions was a game changer for most of the teams.

If you have a fintech startup that could benefit from participation in such a program, you should seriously consider FinTech 2012. There's an information session on January 10th and the applications are due on January 18th. Details are here.

#VC & Technology

Comments (Archived):

  1. Pascal-Emmanuel Gobry

    All of that’s awesome, and more, better-mentored fintech startups in NY is a great idea for all sorts of reasons that I don’t have to go into because we all know them. But one quick thought: if your URL is fintechinnovationlab.com, no one’s going to remember that.¬†

    1. Mark Chou

      Any suggestions for us? ūüôā I’m all ears!

      1. Pascal-Emmanuel Gobry

        ūüėČ I assume you couldn’t get fintech.com… fintechlab.com?

        1. Mark Chou

          Hmm I’ll run it past the partner who leads fintech investing for NYCIF. I actually wasn’t around for the original discussions that birthed the Lab, but I’ll pass on the feedback re: branding for sure. Thanks for the thoughts!

      2. FAKE GRIMLOCK

        START NON-EVIL INCUBATOR.

      3. LE

        Obvious choice is *both* fintechny.com and fintechnyc.com(by both I mean if you would generally use “nyc” you also need “ny”)

  2. baba12

    I am not sure if any of the technologies that bring sunlight into the Financial services industry would be ever welcomed by the biggest players.¬†Personally having seen the innards of how the trading systems work especially in the fixed income desks, I would be surprised if anyone would be able to get ¬†a product/service that would ¬†open up so many of the so called ¬†“proprietary processes” which is basically ¬†many methods of hiding information that would make their exclusive cabal not that exclusive nor complex as they make it out to be.Any entrepreneur who is able to provide solutions that bring about transparency in how this sector works would be great, but doubt such solutions would be winners.Would the SEC or other regulatory agencies also participate in this program I wonder.

    1. FAKE GRIMLOCK

      ONLY FINANCE INDUSTRY INCUBATOR ME INTERESTED IN IS ONE THAT DESTROY FINANCE INDUSTRY.

      1. kidmercury

        now we’re talking!! ¬†*claps*

  3. Ed Freyfogle

    I suspect this is great for incremental innovation, but a barrier to disruptive innovation.Best new fintech start-up I’ve seen (and used several times) is http://transferwise.comPeer-to-peer currency conversion at disruptively lower price point. Love it.

    1. Mark Chou

      Ed, thanks for the heads up on TransferWise.

    2. kidmercury

      fintech is totally about sustaining innovations.transferwise is interesting, stuff like that can’t happen in the states because of regulatory hurdles. curious as to if is sustainable under FSA regulation.¬†

  4. andyswan

    I’d like to find some way to participate without currently having a startup in the space or being a high level tech exec for a bailed-out firm…. maybe next year consider some leaders in the¬†online broker space? ¬†Client-facing technology startups can do very well in that industry.Anyway…If anyone is thinking about entering this contest as a fintech startup and would like pre-lab and post-lab help and support from someone that’s been there, done that (2x)….let me know. ¬†¬†

    1. Dave Pinsen

      Deleted.

    2. Mark Chou

      Andy, feel free to reach me at mchou[at]nycif.org. We have an Entrepreneurs Network composed of folks who have successfully launched and scaled financial technology companies, so if you’re in New York and fit that profile, please do let us know! In any case, I’d be happy to chat.

  5. Rohan

    Makers to bankers??

  6. John Petersen

    I previously worked for an international bank and in the financial world for over 5 years before making the move to the startup world. When I hear about FinTech, I want to run in the other direction. I guess some of the things I’ve seen behind the scenes have left me scarred for life.I know it is an industry that could really benefit from disruption and there is plenty of opportunity. I just know that it is not for me.¬†I wonder if others who left Wall St. for the tech space have similar feelings.

    1. Tom Labus

      But that gives you a unique insight to “disrupt”.

      1. John Petersen

        It does. And every once and awhile I give it some consideration. But then I quickly come back to the realization that insight to disrupt is nothing without the passion to disrupt.I look at startups like (Bank) Simple and Lenddo (which I just found in the FinTech Innovation Lab portfolio) and like what they are working on. I still don’t find it interesting enough to bring me back into that universe, but I certainly appreciate them much more than new software to improve trading algorithms or real-time this or high-performance that.

    2. ShanaC

      Care to express more of why you’ve been scarred?

      1. John Petersen

        I am normally very open and willing to share just about anything, but I have to hesitate a little on this one. That said, I saw some things that really ripped at my core. And it certainly wasn’t limited to one department or company. It was fairly widespread.Some of these things are public knowledge and get brushed aside because the public doesn’t really understand the significance of them. Other things are much more well hidden.Take the most current MF Global example. It has been said that they used $700 million of their clients funds to meet liquidity issues days before bankruptcy. No one is able to tell what happened to about $1.2 billion dollars of client assets. And from what I can tell, this all came about because MF Global levered up their balance sheet in highly concentrated assets. Sounds very similar to what happened with the entire mortgage disaster. So clearly we haven’t learned from our mistakes or made any significant progress towards preventing this stuff from happening again.And then on CNBC this morning, they talked about how the government should pass laws to prevent firms like MF Global from using client funds for its own trading and leveraging purposes. The idea was quickly shot down because the big funds wouldn’t allow it to pass because that is how they make their money.Disgusting….And these are just the things that the public is aware of because it got so far out of hand. When a company is doing things to make money at the expense of its clients, that is no business for me.

        1. ShanaC

          I see.  do you think there are ways to change some of the bad behavior?

          1. John Petersen

            Forget about the financial world for a second and let me ask you the same question.Are there ways to change the bad behavior of people in general? Ways to take away power from those who have it? Ways to cut into the business profits of powerful organizations?Absolutely there are ways. It is just incredibly difficult, and you can be certain they won’t go down without a fight.

          2. ShanaC

            I would say modeling good behavior and rewarding good behavior. ¬†People tend to mimic what is around them. ¬†I’m just not sure about turnaround jobs, which is essentially what you’re asking

          3. John Petersen

            I completely agree. When the behavior has been a core part of the company culture for so long, it is not an easy turnaround.¬†Some people are still trying to hold on to the traditional stock broker model of:”We hold all the knowledge. We will tell you what is best for you. We will push the products and services that best serve us. You will pay us commissions and high fees for these services.”

          4. ShanaC

            That’s not going to work. I don’t think people realize that over time the internet is the great equalizer. If I can get knowledge, so can you. So stockbrokers have to provide a service with that knowledge (and not just executing trades). Insight?

        2. fredwilson

          #occupy

          1. John Petersen

            If only it were that easy, but I guess everything has to start with a first step

    3. Aaron Klein

      I’ve been a tech product guy for my entire career, but I spent four years doing that in financial services, so I can “commiserate” with what you’re saying.All I can say is, prior to working there, I had always pointed to health care and education as the two sclerotic industries that were most ready for and in desperate need of disruption.After spending some time there, it was clear that both financial services and government belonged on that list (and that should speak volumes about how intertwined the two of them are).

      1. FAKE GRIMLOCK

        WHEN INDUSTRY GET TOO FAT, BLOCK ROAD TO FUTURE EASIER THAN WALK DOWN IT.

        1. Aaron Klein

          True that.

        2. John Petersen

          Agreed. If a startup truly wants to disrupt the financial industry, they better gear up for a serious battle because these banks hold way too much power.They will do everything they can to shut you down, buy you up, or leverage the government to make you irrelevant and insignificant.

      2. John Petersen

        It’s definitely true. And I applaud and support anyone who is willing to try — as long as they are trying to disrupt and not just build a product to enhance and support the problem

        1. Aaron Klein

          The interesting thing with financial services is that it’s not quite like smartphones, where you can easily tell “old” from “new.” E*TRADE and TD Ameritrade, for example, started up to disrupt the old-line stockbrokers selling you whatever crap their bosses wanted to unload this week. Now they’re making $100MM+ in profits every year.So it’s hard to draw a bright line, but I think it’s easy to figure out if you’re disrupting investing.- Are you empowering people to make decisions for themselves?- Are you freeing them from giving up 2% of their assets every year for the grand privilege of being guided to bad investments?- Are you giving them the ability to take investing ideas generated by a community and personalize them to fit the individual?An optimal portfolio of investments is really just a simple mathematical equation. The problem is,¬†half the equation is our risk tolerance, which is buried deep inside of us.¬†So if we can quantitatively capture it, we can let technology sort out which investments fit us.That’s our vision with Riskalyze.com. We’re getting there, and just bringing it out of a controlled beta…looking forward to seeing what users do with it.

          1. John Petersen

            That’s exciting stuff. Much more interesting to me than that FinTech startups that are looking to sell to and support the big banks. Great smartphone analogy.Just signed up for your sight and definitely look forward to checking it out. Looks like what you are doing is really going to piss a lot of Wall St. people off who think they are the only ones who have the answers. I like.

          2. Aaron Klein

            Thanks John – would love to hear your feedback on how we can make it better!

    4. Jack Gavigan

      I started out in the Internet/startup industry and, when the bubble burst back in 2000, I ended up working in the City (the UK’s equivalent of Wall Street). In the time I’ve spent in that space, I have worked with some of the smartest people I’ve ever met, on the most complex, interesting and challenging problems I’ve ever encountered, lying at the intersection of business, technology, psychology and regulation. That’s not to say that there are no stupid people or crappy systems in that world – there are plenty – but the financial sector doesn’t have a monopoly on them; you get them everywhere.There is plenty of innovation in fin.tech, has been for years. And there have been loads of startups. Some of them have been so ridiculously successful that we forget that they started life as a tech startup (anyone ever heard of a company called Bloomberg?). Others are focused on large corporate clients, so they never cross most people’s radar (MarketAxess, TradeWeb, ION Trading). You don’t see OpenGamma in TechCrunch or TheNextWeb often because they’re not trying to be – their market doesn’t read those blogs. Some are so damned successful at what they do that they simply get bought out, like The Prediction Company.The real challenge with fin.tech and the reason that so many people fail to understand (and, hence, fear) it, is the fact that the interplay between technology and the underlying business models is incredibly complex and has evolved over many years. If you don’t grasp all the factors that come into play, if you approach it purely from a technology viewpoint, then it’s as if you’re looking at a 3D object with 2D eyes – you see a circle and you think you see everything but, in fact, it’s a sphere (or, more likely, a 4D mobius torsoid).And, because the numbers are so big and it’s pretty much a zero-sum game, if you get it wrong, the consequences can be disastrous. That’s one of the reasons you often see old, crappy, legacy systems in financial institutons – they’ve evolved organically over years and it’s really difficult to replace them, so it’s sometimes less risky to keep the inefficient legacy system in place and pay people to manually make up for its deficiencies, than it is to spend millions building a system which may not work. “Mission-critical” takes on a new meaning if the mission is running ATM machines and bank counter terminals.Of course, if you get it right, the rewards can be huge – spend a couple of million building a system that works, it can be like a silver bullet – an uptick in revenue measured in tens of millions, better service for customers and a strategic competitive advantage that can last for years. That’s another reason innovation is often invisible – a company has no incentive to let the rest of the world know about the breakthrough that has enabled them to drastically reduce their cost-per-transaction because they’re now able to price at a point just below the competition (which attracts more business), while making twice or three times the profit on each transaction.Truly disruptive fin.tech is a very risky place to play in because fin.tech is complex and expensive (i.e. it’s a NASA problem, not a Lego problem) and the success probability curve is often U-shaped, not bell-shaped. Add to that the challenge of finding the right people with the right experience, knowledge and skills, and it starts looking distinctly unattractive from a traditional VC’s perspective. In fact, you sometimes find that the incumbents themselves will fund companies that are doing disruptive stuff – witness the big I-banks’ investment in Tradeweb a few years back or ICAP’s VCish activities.A lot of the business models that VCs invest in, in the tech startup sector, are new, experimental and unproven, targeting new markets that have never been explored before. The financial sector has been around for centuries (if you’re really interested in the topic, I recommend Peter L Bernstein’s ‘Against The Gods’) which means that the chances of being able to waltz in, with no experience in the sector, and turn it upside down, are pretty slim.That’s not to say you shouldn’t try, though! ūüôā

      1. fredwilson

        great comment. i agree totally.

      2. John Petersen

        It is a great point.¬†Also, couldn’t agree more about the systems. The legacy systems at major financial institutions are so frightening. Many of these firms are relying on systems from the 70s and 80s to power most of the trading and backend systems. It’s wild.It is much more efficient for them to find the one person on the planet who still knows COBOL and pay him whatever he asks, then to try and rebuild and replace these ancient and intertwined systems.

      3. Mark Essel

        Plenty of great points in this comment, one of my all time favorites as a regular here at AVC. Passed it along to my fingeneer friend (he’s a fresh quant).In reference to your remark on the success probability curve being “U-shaped, not bell-shaped”, are you talking about a beta distribution? Based on context I would have assumed something like a delta function (infinitesimal width success).

        1. Jack Gavigan

          Well, by “U-shaped, not bell-shaped”, I’m referring to the distribution of returns from start-ups.Imagine a distribution of VC-funded startups’ performance, with¬†returns (i.e. P/L¬†on the VC investment)¬†on the x-axis and the frequency on the y-axis. I would imagine (although, admittedly,¬†I have no evidence for this), that most VCs’ portfolios would look vaguely normally-distributed – i.e. one or two massively profitable exits on the far right-hand side, a few disastrous big-investments-big-implosions (think pets.com or boo.com) on the left-hand side, with a hump in the middle (ideally centered to the right of zero!) where the majority of their portfolio companies have resulted in relatively small losses/profits.If you were to graph returns from fin.tech startups, I would imagine (again, without evidence) that the distribution would look U-shaped, with the frequency of returns clustered at the extremes, instead of clumped in the middle. The reason for that is that (a) the cost of building a fin.tech startup is likely to be higher (because, as I mentioned above, you’re talking about a NASA problem, not a Lego problem), so the amount investmented is probably higher, and (b) the success profile for fin.tech startups is likely to be more “binary” – i.e. they’ll either be a stand-out success (e.g. Tradeweb, MarketAxess) or they’ll fail to gain traction, never attain positive cashflow and end up shutting down (e.g. Bondbook, LiquidityHub).

          1. Mark Essel

            Labeling the axes made it crystal clear. Thanks.

  7. Miljenko Hatlak

    “We should all take a second and thank Paul Graham for his insightinto how to properly construct such a program. Paul is a visionary entrepreneurwho has changed the game.”Paul Graham really does excellent job with his y combinator. Unfortunatelyduring the year’s program inflated a lot since number of start-ups gettingaccepted risen from original six as I think. ¬†As program become more and more popular, number of application has risen tomore then thousand per each cycle. In last cycle they accepted 63 startups.They have got some wonderful exits throughout the years, with startups likeReddit, Heroku, Woofoo and others.But since 2005 they invested in more than 300 startups. At Ycombinatorteam it looks like they¬† have touch of a Midas, but lately they started to behave according to the motto that “even the blind chicken finds his corn”?¬†¬†Original concept was really awesome.

    1. JamesHRH

      MIljenko, scale often waters down results.In the case of accelerators, it often just accelerates businesses into nice businesses. The game changers aren’t as obvious.

  8. kenberger

    cant read your blog now fred, havent slept since you teased me abt yer home ‘net video product…ps: i’ll be in your offices this a.m. for a meeting. You’ve been warned!

    1. fredwilson

      I will show it to you if I am around

      1. kenberger

        That was way cool. You were right, it has me in its crosshairs. Thanks!zzzzzzzzzzzz

        1. FAKE GRIMLOCK

          ME WANT TO KNOW.NEED FRED TO GET BIGGER DOOR.

          1. kenberger

            !!¬†I’m also glad you don’t take Dave McClure literally, in his article¬†http://bit.ly/cQLeLF:”HURRY UP & DIE ALREADY, U FRIGGIN’ PATHETIC DINOSAURS.¬†indeed: most VCs are Dinosaurs, and the World Wide Web is an Asteroid that hit the planet in a slow-motion cataclysmic explosion 15 years ago.”

          2. FAKE GRIMLOCK

            AM ROBOT DINO. THAT DIFFERENT. ASTEROID PROOF.

          3. fredwilson

            can only demo in person

  9. Brandon Marker

    We have a few incubators here in Austin. Hopefully one of them really takes off in the next couple of years to provide an experience on par with FinTech and others. 

  10. Mark Chou

    Thanks for all the comments, folks. You can always count on the AVC community to create a lively discussion.I’m actually an associate at the New York City Investment Fund, which manages the FinTech Innovation Lab (clunky name, I know) so I’m happy to answer any questions about the application or the 12-week program. Feel free to ping me at mchou[at]nycif.org.For those who are wondering what types of companies who participated or that we might be interested in for 2012, check out an overview of last year’s class here:¬†http://bit.ly/pqxVrn.Fred, thanks for posting!

    1. ShanaC

      Thanks for showing up to answer question as well!

    2. FAKE GRIMLOCK

      “FINTECH” STAND FOR “BUILD MORE SHARKS”?IT MAYBE NOT IMAGE YOU WANT TO PROJECT.

    3. fredwilson

      thanks for engaging in the discussion marki can’t recall anyone from NYCIF ever doing that before

      1. Mark Chou

        Not at all. Thanks again for your support!

  11. William Mougayar

    It’s good that NYC is focusing on one of its traditional strengths which is the financial sector. But that sector is dominated by large enterprises, and it’s a totally different game selling to big co’s.Is this fund producing enterprise-targeted types of products? It takes a lot more investment to produce good products for the enterprise market.¬†What differences are you finding out about what FinTech looks for vs. the traditional startup process that we see elsewhere?

    1. Mark Chou

      William, this program (not a really a fund, though it is supported by New York VCs including NYCIF) is indeed “incubating” enterprise-targeted products/solutions. You can find an overview of last year’s class of companies here:¬†http://bit.ly/pqxVrn.As far as helping grow fintech companies, there are a few things that I’d say.¬†– One is that the sales cycle can be pretty long, so this high-level contact with bank execs on both the technology and business side through the program can accelerate the process considerably.¬†– Also, what we’ve heard from the banks is that oftentimes these fintech platforms are built without a really clear idea of how they should be architected to sit behind a bank firewall, without a super clear idea of what potential regulatory issues are, etc.Those are just a couple of more fintech-specific “inefficiencies”¬†that we are trying to alleviate as we try and grow the fintech sector here in New York.

      1. Tom Labus

        Have any of the FinTech companies gotten in the door or sold any products?

        1. Mark Chou

          Tom, unfortunately I can’t disclose too much in the way of confidential information, but what I can tell you is that across the class of 2011, we have a number of pilots in place.

      2. fendien

        Great post¬†@fredwilson:disqus and nice comments @markchou:disqus. I definitely agree that FinTech is a step in the right direction for the NYC enterprise ecosystem, and that vertical accelerators are the right way to get the proper mentorship and direction in a given space.¬†@wmoug:disqus, in line with the differences associated with the enterprise versus the consumer tech ecosystem, I’ve actually just launched the NY Enterprise Technology Meetup (http://www.meetup.com/ny-en…as a way to help the enterprise technology ecosystem in NYC which is severely lagging the consumer tech ecosystem.The community around consumer tech in NYC has flourished over the last few years, but the enterprise space is still limited in terms of meetups, incubators, mentorship, bloggers, and just a general holistic community with which to network and learn from. We have so many industries here ‚Äď financial services, advertising, media, fashion ‚Äď that we can‚Äôt just leave them behind while the consumer space continues to innovate.My goal with the NYETM is to basically create for the enterprise what NYTM does for consumer startups every month ‚Äď provide a venue for innovative companies to showcase their new technologies in an audience of fellow technologists, entrepreneurs, investors, students, and others generally interested in the space.¬† You can read more of my thoughts behind starting it here http://bit.ly/JLnyetm.Our first meetup is planned for January 25th and we have lined up already Bitly, Perspecsys, and Socialware, and currently have a slot for one more demo.¬† If you‚Äôre interested in coming to the first event, join the group and register here http://bit.ly/NYETMevent

      3. William Mougayar

        Thanks for explaining it.

  12. JimHirshfield

    I see the headline now:Tech Community Occupies Wall Street From Within.

    1. kidmercury

      i see a slightly different headline:Tech Community Lacks Courage to Create True Financial Innovation; Sells Out Instead

      1. bernardlunn

        My take exactly. When the dinosaurs sponsor the disrupters, methinks the choice will be weak.

      2. Luke Chamberlin

        100% agree. The idea that JP Morgan, Citigroup et. al. would ever fund real innovation is wishful thinking.They still force all employees to use IE7!

      3. FAKE GRIMLOCK

        EASIER TO BUY OUT REVOLUTION BEFORE IT START.

        1. kidmercury

          i don’t know what this statement means, though presumably it is implying that going to work for the terrorists via finotech is somehow a wonderful thing, which i diagree with.¬†

          1. FAKE GRIMLOCK

            IT MEAN EVIL PEOPLE SMART, BUY UP PEOPLE WITH SKILLS TO DISRUPT THEM BEFORE THEM ORGANIZE ENOUGH TO START REVOLUTION.THAT WHOLE REASON FINANCE INDUSTRY FUND INCUBATOR. TO SUBVERT REVOLUTION BEFORE IT HAPPEN.AD, MOVIE INDUSTRY INCUBATORS TRYING TO DO SAME THING.

          2. kidmercury

            okay, yeah, so sounds like we agree supporting the terrorists sucks? glad we agree, fg! (or at least i think we agree ūüôā

  13. Geoffrey Weg

    Law Without Walls (www.lwow.org)¬†is sort of doing this in the legal space. But it is more focused on getting teams of law students to create “projects,” not necessarily companies. I think there is definitely a need for a real accelerator/incubator for law startups, though.¬†

  14. kidmercury

    well i know you gotta be ignorant to get the banker money, but if anyone is truly interested in fixing wall street, the problem is regulatory first and foremost — not technical. the combination of technical and regulatory innovation is the sweet spot, but fintech is just giving technology the industry incumbents. this is obvious, but i know the cash is too hard to ignore, so there will always be incentive to rationalize it in some way.¬†

    1. gorbachev

      So enlist with an application that implements better regulatory constraints into their processes and doesn’t allow the greedy CEO to override it.;)

    2. JamesHRH

      Come on Kid, let’s whip up an idea, get in the program, crank out some code, leverage Wall Street greed against themselves…….and then move to the Caymans and drink Sunsets for the next 40 years!;-)

      1. kidmercury

        i been working on it for five years now. (not exactly changing the world yet, but feeding myself. a start!) anyway, it all comes down to the virtual currency. bitcoin is in the ball park, wrong implementation though. 

        1. JamesHRH

          You need to be more venal on this Kid.I am thinking robo-trading or global settlement to maximize end of day balance sheet positions. Really profitable but soul sucking stuff.Virtual currency would actually be of real value – Wall Street would never take to it!Joking aside, I think you know how compelling I find your thought on virtual currencies. Would happily invest a couple of hours on Skype, going through what you are up to.In the New Year! ¬†ūüėȬ†

        2. adamludwin

          what is the right implementation?

          1. kidmercury

            well, i’ll tell you it’s what i’m working on! ūüôā which is:1. a currency issued through a game play environment2. the currency will have a central bank3. the value of the currency is the central bank’s balance sheet divided by the outstanding money supply4. central bank controls issuance of currency, all bank accounts within the system, and transaction enforcement.¬†5. central bank’s balance sheet is flexible and will be adjusted based on the value of other assets at the time (i.e. price of commodities, stocks, etc). value of balance sheet is marked to market.¬†you can see an example on my site, informedtrades.com.¬†i do favor some form of central banking, as i think this is safer in a more volatile global economy and i think it will also give people the type of convenience that is necessary for adoption. the decentralized approach bitcoin uses lacks sufficient convenience, in my opinion, in addition to lacking a function to re-calibrate its value based on the price of other assets (as a result there is excess volatility in its price).¬†

    3. SubstrateUndertow

      What basis can you possibly ¬†have for such cynicism ūüėČ

  15. Geoffrey Weg

    Law Without Walls (www.lwow.org)¬†is sort of doing this in the legal space. But it is more focused on getting teams of law students to create “projects,” not necessarily companies. I think there is definitely a need for a real accelerator/incubator for law startups, though.¬†

  16. reece

    i was just on a panel last night (with Andy) about¬†mentorship for the Blueprint Health Acceleratori like the focused accelerator model, though i’m curious how they’ll avoid too much competition within the program itself and on their demo day amongst investors

    1. Geoffrey Weg

      Good point. But I would think that some of these vast industries have enough pain points that an accelerator can select companies that don’t compete.¬†

      1. reece

        yeah, healthcare and fintech are big industriesstill, will be interesting to see how it plays out though

        1. Geoffrey Weg

          Yeah. I think the primary value of these verticle accelerators are the mentors’ domain expertise and networks.¬†

  17. JamesHRH

    If you ever read Jerry Kaplan’s illuminating book Startup: A Silicon Valley Adventure (http://www.amazon.com/Start…, the ‘access to key vertical decision makers’ concept will totally resonate.John Doerr organized a council of CIOs for Kaplan’s GO Computing. Without Doerr, they gain no traction at all.If I had an interest in this space, I would sell my mother to the huns to get into this program. This turns access from a relationship based activity, into a merit based, open platform.Awesome.

    1. fredwilson

      yup

  18. LE

    This is a little “sugar water to children” which is not to say it’s not a good investment opportunity or business of course.Of the 6 companies in their portfoliohttp://www.fintechinnovatio…50% of the companies essentially help hedge funds and traders make better trading decisions to win the zero sum game. ¬†Hedge funds and traders will pay for anything that gives them an edge. Doesn’t have to be high tech either. People make money flying airplanes over shopping malls during holidays to get an edge on trading.One company, http://www.lenddo.com is actually Hong Kong based (according to article link attached – the company site says it’s in the Phillipines though) and uses social networks to aid in credit assessment just written about the other day actually http://www.betabeat.com/201…One is a payment platform http://www.zipmark.com and another appears to be essentially lead generation “Our technology nurtures leads and returns more qualified and better credit aware consumers, in a co-branded and seamless environment, to increase traffic and facilitate conversions.” http://www.syphronline.com¬†Sugar water to children, if you’re not familiar:¬†http://en.wikipedia.org/wik…

    1. FAKE GRIMLOCK

      EVIL PEOPLE NEED TECHNOLOGY TOO. OTHERWISE GOOD PEOPLE MIGHT WIN.

  19. Jim Tousignant

    Vertical incubators or accelerators make tons of sense, particularly in certain vertical industries, given they are focused on creating a critical mass of “vertical” market entrepreneurs, engineers, sales and marketing staff, VC’s, corporate sponsors, etc. in a single dedicated vertical incubator program generally within a common physical location(s). ¬†Vertical incubators allow participants to really focus on a single, large and deep vertical market, and this singular focus, combined with deep collective domain expertise, increases the likelihood of success for new start-ups who participate in these vertical incubator programs, increases the odds of achieving proper “market fit”, helps attract the best investors, the most talented engineers and top sales and marketing teams, and likely increases the financial returns for entrepreneurs and investors, all while reducing the risk for the entrepreneurs, corporate sponsors and VC’s involved.¬†I started my first software startup 30 years ago as a college senior entrepreneur at Rensselaer Polytechnic Institute (RPI) as the first student-founded company in the new RPI Incubator Program, so I can tell you first hand that incubators and accelerators are of great value to entrepreneurs who properly take advantage of each program’s unique resources. These programs generally provide numerous resources and benefits to start-ups and, as Fred noted in his post, incubators and accelerators represents a true phenomenon in today’s Web 2.0 economy. Vertical incubators represent the next, natural next step in the evolution of incubators.¬†As co-founder and president of Multex, an online financial information services company, I worked closely with great VCs who invested $55 million of venture capital in Multex, including Fred Wilson, who invested in Multex during the 1990s while at Euclid Partners and Flatiron Partners. Multex went public during the hot 1999 Internet IPO market, and Multex my worked with hundreds of leading brokerage firms, investment banks, and buyside institutions, so I can tell you from personal experience that participants of FinTech getting direct access to CTOs and CIOs of major firms like Goldman Sachs, Morgan Stanley, UBS, Bank of America, Citi, etc. is a big reason “vertical” start-ups should be looking at seeking participation in these kinds of vertical incubator programs, with provide great feedback, mentorship, access to capital and potential future business from high level executives within that vertical market that have strong industry knowledge, substantial experience, large operating budgets, and big networks of affluent customers for entrepreneurs to potentially leverage.

  20. afat

    I worked for a company that was in FinTech 2011.  We learned a ton.  We were given access to a lot of very high level contacts in a ton of the big banks. I never got to meet Fred.  :(Feel free to ask me anything.

    1. FAKE GRIMLOCK

      ME, GRIMLOCK, JUST LET YOU KNOW ME TOTALLY NOT MAKE ALL THE OBVIOUS JOKE ABOUT “IT HURT WHEN THEM RIP SOUL OUT” OR “WHAT IT REALLY LIKE BEING TOTALLY EVIL”.IT NOT EASY WITH PERFECT SETUP LIKE THAT.

      1. kidmercury

        hahahahha ^2

    2. fredwilson

      meeting now. what are you working on now afat?

    1. fredwilson

      did that. got sick. turned it off.

      1. Kevin Pillow

        I don’t think I like rep.Maxine Waters(D-CA), she is aggressively amendment to have this bill pushed through the house without any due diligence for such a strong piece of legislation.

        1. fredwilson

          I am really upset. But I will find a way to get even.

      2. John Petersen

        i tried to listen to it. it is sad.clay johnson wrote a great article about putting a developer in congress. awesome article. just imagine a developer / entrepreneur sitting in that session. would be quite comical.http://www.informationdiet….”Third, great developers are systems fixers and systems hackers. There is no system more ripe for elegant process hacks than the United States House of Representatives. Put a developer in Congress, and they‚Äôll start exposing data on their own. They‚Äôll build systems to make it so they can hear from their constituents better. Just as Ted Kennedy had his staff make the first¬†Congressional website, a developer in Congress will seek to use new technology to make their job easier. That‚Äôs what hackers do.”

  21. Jim Tousignant

    Vertical incubators and accelerators are definitely one of the exciting new opportunities today for entrepreneurs, angel investors, VCs and corporate sponsors to consider and participate in. Vertical market incubator and accelerator programs make tons of sense for certain types of start-ups today and will certainly become a growing trend in the future.¬†Over 30 years ago, I started my first software company while a senior college student at Rensselaer Polytechnic Institute (RPI) and my company participated in RPI’s Incubator Program as the first student-founded company. Based on that experience, I can tell you that incubator and accelerator programs really work.¬†In large, complex, fast-changing, global vertical markets like healthcare, financial services, retail, energy, travel, music and entertainment, real estate, legal, etc., there are often very specific domain knowledge requirements to successfully starting and growing a new business.¬†Vertical accelerator programs offer entrepreneurs many key resources and important benefits, including bringing together a critical mass of start-up companies focused on the same vertical market, resulting in a critical mass of specialized vertical market entrepreneurs, engineers, sales and marketing teams, VCs, and corporate sponsors focused on the same large vertical market. This critical mass of key people and capital, combined with the right business resources, technology and support services, help these start-up companies grow quickly and build successful new products and services within large global vertical markets.¬†Participation in a vertical accelerator program can result in increasing a company’s team creativity and innovation, accelerating product development, improving market fit and customer adoption, and reducing risks for entrepreneurs, VCs and corporate sponsors while improving financial returns.¬†Vertical incubator and accelerator programs can also provide a wide range of business, legal, operational, financial, technical and administrative services, as well as direct access to capital sources and “early-adopter” customers. Vertical accelerators appeal to a wide range of vertical market¬†software companies, e-commerce companies, content providers, services companies, and Web and Mobile app developers.¬†General format incubator programs have been successful over the years for both entrepreneurs and investors, and now these new, vertical market incubators and accelerators will likely lead to faster innovation, higher financial returns, lower risk and the ability to attract and retain key vertical market customers, investors and key employees in fast growing global vertical markets.I can tell you first hand the incredible value of having direct access to top CTOs and CIOs from top financial services firms like those provided by the FinTech Incubator program.¬†In the 1990s, I was co-founder and president of Multex, a leading online financial information services company that¬†Fred Wilson invested in while at Euclid Partners and Flatiron Partners. Multex went public during the hot Internet IPO market of March 1999, and during my 10 years at Multex, I had the opportunity to work closely with top CEOs, CTOs, CIOs, CFOs and MDs from hundreds of leading brokerage firms like Merrill Lynch, Goldman Sachs, and Morgan Stanley. ¬†¬†Expect to see more of these vertical incubator and accelerator programs in the future.

  22. Jay Bhattacharya

    Thanks for posting this Fred. ¬†As an alum of last year’s program, I can say that it was invaluable for Zipmark and for me personally. ¬†The NYCIF team is great and the ability to share ideas with folks at the highest levels of operations was helpful, but in a way that I did not expect: It gave us confidence and validation beyond the normal entrepreneur’s self-belief and awareness. ¬†It prompted me to go back to my time at Citigroup and all the process around P&L planning and operational scaling that I was forced to learn and be ready to offer sound answers for those questions about Zipmark .¬†The product of banking is in the software, but the business of banking is in the service and ops. ¬†Good startups turn into businesses, and Fintech helps with that.After we competed our round and pushed product into pilot, the ability to report back to executives we had met in program was great as well. ¬†Relationship building is a cumulative process, but often the hardest part is the initial intro. Fintech takes care of that for it’s founders. ¬†All around, a great program.

    1. fredwilson

      thanks for sharing your experiences here Jay

  23. howardlindzon

    Yes…thank you Paul Graham.

    1. fredwilson

      check this out howardthe grimlock and iggy right next to each otherhttps://twitter.com/#!/fred…

    2. Ethanauastin

      I’ll second this and add David Cohen to the list as well.

  24. Adam Feldman

    Restaurant industry accelerator is sorely needed. So much opportunity there and major players in that space want it.

  25. ken barnes

    Let’s remember the critical role all the big broker dealer’s play in the fintech startup community- purchasers. Critical to any success is the risk taken by the customers who take risk and fund every startup through the purchase of their wares and a smart entrepreneur knows that a dollar of revenue is worth infinitely more than a dollar of investor capital.Dismissing the BDs as playing no role in the startup community is myopic.

  26. fredwilson

    sand in the oyster

  27. Mark Essel

    This should be good, grabs popcorn.Imagining different comment tactics for KM on this post:    * incubator in the mouth of the beast    * startups become slaves to the incumbent system    * incumbents lock down and consume any promising business channels

  28. kidmercury

    indeed. what a joke this is, another example of the banking takeover of silicon valley (banking money drove the bubble, if you look at where the billions in new VC money came from). goldman, JPM, etc are openly behind this event — newsflash people, they are the real terrorists who are attacking america. how anyone can say occupy wall st is great and then say go to fintech is beyond me.¬†

  29. Mark Essel

    Taking the best, and leaving the rest.I believe my memories work much the same.

  30. testtest

    nice use of the pre tag

  31. kidmercury

    lol you beat me to it! 

  32. ShanaC

    how did you do that?

  33. Mark Essel

    here are Disqus supported markup tagshttp://docs.disqus.com/help…

  34. kidmercury

    for a person who needs a job to feed themselves and their family — sure, i understand. it’s a flawed world, we gotta make compromises, nothing is perfect, etc. i get that and accept it. but for an entrepreneur (or worse, venture capitalists)??? lol. c’mon now. entrepreneurs should have more idealism and less concern for profits — it’s not easy, but it’s what’s cool about being an entrepreneur. all the people that falsely hate on capitalism now have all the ammo they need if entrepreneurs do things like fintech. ¬†

  35. Dave Pinsen

    Deleted.

  36. LE

    Which should be available as a pop up or similar to the comment box.

  37. SubstrateUndertow

    “goldman, JPM, etc are openly behind this event — newsflash people, they are the real terrorists who are attacking america”Thank You.Properly framing a problem is important to the solution!

  38. FAKE GRIMLOCK

    NOT BLAME SMART PEOPLE FOR GO WHERE MAKE MOST MONEY.BLAME SYSTEM FOR MAKE THAT PLACE FINANCE INDUSTRY.

  39. kidmercury

    and who makes the system?

  40. LE

    “NOT BLAME SMART PEOPLE FOR GO WHERE MAKE MOST MONEY.”Under that assumption the porn industry would be attracting the smartest people.

  41. FAKE GRIMLOCK

    THE PEOPLE.PROBLEM ONLY HAPPEN WHEN THEM FORGET SYSTEM IS THEM, GIVE CONTROL TO SOMEONE ELSE.

  42. kidmercury

    exactly. and when you go work for goldman sachs via things like fintech, you give up your sovereignty for a few lousy bucks and go work for the devil.¬†people should re-read this post and instead of reading jpm, goldman, etc, they should replace it with “al qaeda, terrorists, and other such terms. then let’s see how many people think it’s cool.¬†

  43. FAKE GRIMLOCK

    ME, GRIMLOCK, SUGGEST RESEARCH THAT. ECONOMICS OF ADULT INDUSTRY NOT LIKE MOST PEOPLE THINK.

  44. LE

    “for a person who needs a job to feed themselves and their family — sure, i understand. it’s a flawed world, we gotta make compromises, nothing is perfect, etc. i get that and accept it. but for an entrepreneur (or worse, venture capitalists)??? lol.¬†“If I understand your point you’re saying that it’s ok to rob the store if you need to pay for your child’s cancer operation, but not, say, to buy a bigger house or a nicer car or a second vacation home, right? (By the way have you seen what college and healthcare costs?)Well what’s cool about being an entrepreneur/vc is not just making money but getting freedom to do what you want to do and gain respect part of which you get because you’ve made money. So it makes perfect sense that people would try to amass as much money as possible in order to achieve that goal. Way past the point of having whatever¬†@kidmercury:disqus¬†¬†thinks are the reasonable creature comforts needed. Or maybe they acquire it (they do) because it’s the same reason people never have enough karma points.¬†As an aside progress is made in the world and things are created not by people living and wanting nothing but by people driven ultimately by the desire for money (and power) and what it can buy. In general of course.If you want to dismantle the system then you need to spend some time within the system to understand how it works and how people in it think. They you will be prepared to come up with a plan to do something about it.

  45. kidmercury

    I am saying that we are all connected to the evil in this world, so on some level we need to accept it if we plan on living in society. I think there are some of us — specifically entrepreneurs — who are blessed enough to have greater opportunities and choices; some are so desperate for money for their own survival they may not have the luxury of being so high and mighty about what is right or wrong. When one has greater opportunities I hold them to a higher degree of moral conduct. This is of course my personal view, though I doubt it is a contrarian one.

  46. LE

    You’re right of course. I was trying to be funny.¬†But check this out. Of all things Forrester Research is to blame for some of the perception of the industry:http://www.forbes.com/2001/…(Interesting that a google of “size of porn industry” results in the number one link being over 10 years old.)

  47. Dave Pinsen

    What a bizarre and inapt analogy. But maybe that’s what it takes for you to rationalize siding with plutocrats over pipe fitters.

  48. Dave Pinsen

    Now. Why do you think Obama is opposed to a pipeline that will create tens of thousands of the sorts of jobs his infrastructure stimulus was supposed to, while reducing American dependence on Middle Eastern oil? It’s because his plutocratic donors on the left oppose it. It’s siding with the likes of Laurie David over the sort of hard hat workers that used to be the Democrats’ base.

  49. Dave Pinsen

    It’s not a lie. Estimates range from several thousand jobs on the low end to over 100,000 jobs. “Tens of thousands of jobs” covers well over 80% of that range of estimates. But no matter how many good-paying, blue collar jobs it would create, you and Obama’s plutocratic donors are against it.

  50. Mark Essel

    I was initially with the pluto-rats.Why does the Keystone project need to be tacked on to the payroll cuts?I wouldn’t mind seeing some cash pumped into SBIRs that focus on clean/renewable energy or subsidizing those sources of energy in specific regions where they are most efficient (much like Germany has done to rapidly improve their non oil based energy efficiency).http://www.globalchange.umd

  51. ShanaC

    thanks

  52. ShanaC

    thanks

  53. ShanaC

    Thanks