Magazine article Independent Banker

All about Fintech Accelerators

Magazine article Independent Banker

All about Fintech Accelerators

Article excerpt

I've been reading stories about the formation of fintech innovation labs and accelerators across the country. It seems every state is creating its own version, and banks of all sizes are getting involved. So, what is the big deal, and why should you, as a community banker, care?

Fintech accelerators are fixed-term, cohort-based programs that include seed investment, connections, mentorship and educational components. They culminate in a public pitch event or demo day to accelerate growth. Fintech accelerators are typically private investment funds that take equity. In contrast, incubators are often government-funded, generally take no equity, and focus on product-centric companies.

Accelerators are typically early-stage companies that look to solve an industry problem, and are in the process of refining their solution and business plan.

There are usually four parties involved in an accelerator: the corporate sponsor, the city/state sponsor, the accelerator administrator and, of course, the fintech company. The corporate sponsor is the entity, or group of entities, that funds the program for the fintech and the accelerator administrator. They use this vehicle to create innovation for their company and industry, and invest in technologies that will benefit their customer base. The accelerator allows them to do this in a more systemic, consistent, repeatable manner.

Cities and states are involved in this process through government grants to help fund these programs. Their primary interest is to bring innovative companies and jobs to their markets, with the accelerator serving as a great vehicle and public relations mechanism to accomplish this task. …

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