In 2007, when I graduated from University of Illinois, I was intrigued by what’s Wall St all about, what do bankers do, why are all the engineers suddenly becoming bankers. Plus, my then bf and now husband, was himself working on the Wall St. As a result, I moved to Big Apple, joined the big Citigroup in the big Wall St, spent 3 years working within a unique (literally since it was acquired from Knight Group and wasn’t a native Citi team) entrepreneurial team under an ingenius team lead. But as is customary, big companies are not a great place to harbor startup culture and the aura fizzed off. Although, I can proudly mention that my team has some of the most amazing tech and business leaders and working as a self-fulfilling unit, produced one of the most rapidly growing and successful products within Citi.
I have seen inside of Wall St tech galleries and in general, they are not pretty. Time and time again, they try to and are successful at enticing top university engineers and CS grads with handsome starting packages but can rarely keep them satisfied primarily because Wall St will always be about banking and technology, merely, a lever to build algorithmic trading platforms, high speed execution engines and something that can be blamed for flash crashes. Having known many friends in these firms, I concluded that only Goldman Sachs maintains a savvy and efficient technology divisions where engineers can remain satisfied working just within technology and not feel compelled to ‘switch to business side’ for any worthy prospects. Of course, this might be helped with hefty bonuses and raises rather than pure professional satisfaction. My point is that any hardcore software engineer looking for intellectual tech satisfaction will have a hard time sitting in the IT divisions of these mammoth Wall St banks and consequently, these divisions are usually filled with less aggressive, stability-seeking family people who are happy with low risk, stable and moderate rewards. Consequently, under the guidance of non-tech-savvy IT MDs, many IT projects are bloated, never completed on time, expensed heavily on useless outside consultants and grossly underachieving. So, although banks need to embrace technology rapidly in a wise direction, not all of them are able to manage it well. And this is a great news for financial services startups, which brings me to the point behind this post.
I strongly believe that these financial IT startups are most likely to have successful exits because:
- Wall St. can never have enough good technology solutions, it always needs something better and faster.
- It is much harder for IT managers in these banks (who, mostly, are out of touch with actual coding experience and hence, depend on others for sound technology judgments) to build class products in house due to stupid politics, bureaucracy, inability to hire right people at right time and even if they can, inability to retain them.
- IT managers have money to acquire and don’t mind spending this money since they anyways exceed their budgets when developing solutions internally. Due to the pressure from business side, it is considered safe to buy a proven product as opposed to undertaking the project in house.
- This also explains why some smaller financial tech solutions companies are successful by building reliable IT products and licensing/selling to bigger banks.
- Since financial startups require some hard domain skills and financial knowledge and are not as easy to start as social or general purpose products, competition is lower.
So, from my understanding, financial services sector is very lucrative for startups and I wasn’t surprised to hear Owen Davis (NYC Seed) announcing that big banks’ CTOs and New York VCs have joined hands to create a techstars like incubation program for financial IT services startups at today’s NY Tech Meetup. Further, this is one area where New York will always have a lead on Silicon Valley. For more information, visit http://www.fintechinnovationlab.com/