New York City is the center of the financial universe, so it's hardly surprising that it hosts a broad array of fintech startups. Major players in finance tech, such as OnDeck and LearnVest, arrived early, unlocking a wealth of opportunities for tech professionals and entrepreneurs.
NYC's fintech ecosystem is vast, complex, and can be difficult to navigate, so we sought guidance from CB Insights Senior Research Analyst Matthew Wong. Wong was one of the company's first hires, and spends his days crunching fintech-related data.
Talent, Tradition & Opportunity
As the world's finance capital, New York was a no-brainer for entrepreneurs seeking opportunity and talent.
"New York was an obvious choice for a lot of the companies who knew they’d be able to attract a lot of financial talent," said Wong. "On the other side of that, you’re seeing a lot of tech and engineering talent wanting to move to New York. Knowing that the financial system is so deeply embedded in New York, and knowing that the tech ecosystem in New York overall is on the rise, I think is the primary reason you’re seeing a lot of fintech companies wanting to set up here, instead of in the Bay Area."
NYC is also home to large old-school banks steeped in hundreds of years of tradition, and while some adversarial tension can arise as startups shake up the status quo, there is plenty of potential for collaboration and mutual benefit.
"I don’t know if it’s an increased pressure on the banks," said Wong. "Now what you’re seeing is that a lot of companies decide to partner with big financial services incumbents."
Wong said banking giants such as JP Morgan and Goldman Sachs are not only aware of the scene, but Goldman now refers to itself as a tech company. It has invested in several fintech firms, while "incubating a lot of product managers, designers and web teams."
No Stone Left Unturned
New York fintech isn't suffering from a shortage of interesting sectors to innovate. Companies are involved in lending, wealth management, insurance, point-of-sale transactions, cryptocurrencies, and much, much more. The versatility of some startups is truly remarkable.
Oscar, for example, is a fintech company that can just as easily double as a healthcare company. Wong, who is currently in charge of a new vertical at CB Insight's called Insurance Tech Insights, notes the unicorn's runaway success: "You’re going to see New York emerge as an area in which insurance tech is pretty prominent."
Different parts of the sector are subject to different cycles and emerging trends. Wong notes that as "lending has evolved and slowed down in terms of new startup formation," insurance has taken off. And who but a few experts can predict the manic boom and bust cycles of bitcoin?
“Fintech is such a broad swath of companies," said Wong. "It’s really important to pay attention to where you really want to innovate."
Know the Rules Before You Play the Game
Regulation and compliance—get to know them and know them well. In fintech, they can be your best friends or your worst enemies, and overconfidence can be particularly deadly in this space.
"This is a very regulated category," said Wong. "You have to play by the rules. It’s not going to be something where, overnight, you’re going to be able to figure it out."
Wong has some advice for anyone looking to get started: link up with a veteran of the financial sector.
"We’re seeing a lot of founders of startups who either have some direct or indirect experience in the sector or who have brought on a co-founder who does," he said.
Neighbors Today, Angels Tomorrow
The centralized nature of the fintech scene makes the Big Apple ripe for networking, collaboration, and trading war stories with peers and veterans. Incubators such as FinTech Innovation Lab help new companies learn the broader banking landscape, and lots of conferences, meetups, and other tech events in NYC focus on finance tech exclusively.
Wong said he expects the sphere to grow more robust as key players find success.
"You’re seeing companies here who started several years ago who are now coming into their own," he said, citing Betterment and its whopping $100M funding round earlier this year.
"As the companies progress and move toward exits, you’re going to see that turn into, hopefully, more of an ecosystem built around the fintech space," he said. "Employees from these companies will eventually move onto new ventures and CEOs of these companies will become angel investors. I think that’s what we’re waiting for. I think it’s still fairly early."
