Of all the start-ups enjoying record successes fresh out of business school, those in the fintech sector are perhaps the most eye-catching.
As more investment floods in the nascent industry, MBA students’ ventures that are hoping to disrupt banks in payments, transfers and money management, are aiming for the sky.
Lending Club, the US’s biggest peer-to-peer lender, which was valued at $4.5 billion in its IPO last year, was founded by HEC Paris MBA Renaud Laplanche. Prosper, another P2P lender, got a $1.9 billion valuation in its IPO this year. It’s CEO, Aaron Vermut, is a Wharton alum.
“A growth area over the past year has been the fintech sector, effectively straddling both finance and technology,” says Sarah Juillet, director of postgraduate careers at Cass Business School in London.
Mike Cagney co-founded SoFi with Stanford GSB classmates four years ago. The disruptive student loans provider is edging into banks’ territory with a slick online platform.
It has hit $6 billion in loans funded, and has raised $1.4 billion in venture capital. “It’s proof that members and employers are responding enthusiastically,” says Mike, CEO.
In the third quarter, global investment into VC-backed fintech companies hit a record $4.8 billion, according to CB Insights. In some regions fintech investment could quadruple, according to Accenture.
“We are seeing the convergence of two trends: venture capitalists are clearly signalling fintech is a growth opportunity and simultaneously financial services companies are waking up to the vast opportunities created by the current wave of fintech,” says Jon Allaway, a senior managing director of Accenture’s financial services group.
Ismail Ahmed recently raised $100 million for his money transfer business WorldRemit, from backers including Accel Partners, the Silicon Valley VC firm, giving it a valuation of $500 million.
“We are offering money transfers fit for the 21st century,” says the London Business School MBA. “It’s absurd that with all the advances we’ve had in global communication, remittance companies should still expect their customers to physically withdraw cash.”
Taavet Hinrikus, co-founder of TransferWise, similarly raised around $90 million for the London fintech firm, from the likes of Andreessen Horowitz and Sir Richard Branson.
The online cash transfer company is one of many start-ups taking on the large lenders.
“Banks, brokers and others take advantage of customers by hiding the real cost of international transactions,” says Taavet, who graduated from the business school INSEAD.
Others are breaking into the investment management space. Nick Hungerford is the founder and CEO of Nutmeg, an online wealth manager. The company combines the services offered by institutional wealth managers with a “DIY” approach online.
Nutmeg has raised nearly $40 million in funding from investors including Schroders, Europe’s second largest asset manager, and London VC firm Balderton Capital.
“For 300 years rich people have had two choices: give your money to someone else to manage or do it yourself,” Nick, who has an MBA from Stanford, said at a recent London event. Now, he added, there is a third way: Nutmeg.