Entrepreneurs trying to shake up the financial sector converged on State Street Corp. headquarters Thursday to show off a new startup-boosting effort backed by prominent names in finance and technology.
The program, FinTech Sandbox, is a Boston-based nonprofit organization intended to help finance startups get a head start on launching their companies. Its sponsors include Fidelity Investments, Silicon Valley Bank, and Amazon Web Services.
Unlike many other startup accelerator and incubator programs, FinTech Sandbox doesn’t require the companies to fork over a share of their stock for participating in the program.
FinTech Sandbox has accepted 30 startups from more than 100 applicants since it launched six months ago, said David Jegen, the program’s co-founder and a managing director at Devonshire Investors, the private investment arm of the Johnson family, which controls Fidelity.
Through its sponsors, FinTech Sandbox also offers free or discounted access to some of the technology basics that startups need to get ahead. Perhaps the biggest lure for entrepreneurs is access to data feeds from 22 providers, including Thomson Reuters and Morningstar, which startups likely wouldn’t be able to afford on their own.
“Data is critical in order to be taken seriously or to get the doors open at financial institutions,” FinTech Sandbox director Jean Donnelly said.
The nine startups that presented their ideas Thursday are all still in the early stages, but were tackling a wide variety of markets and products.
They included AlphaStreet, an online information service for individual stock market investors; Data Simply, software that translates complex regulatory filings into plain language; and Datavore Labs, which helps financial analysts sift and visualize investment information.
Helping startups succeed in the finance industry is more than a nice thing to do for up-and-coming entrepreneurs, of course. It also could be one key to staying ahead in a competitive and rapidly changing business.
In its latest annual report on the banking industry, global consulting firm McKinsey found that a period of relative stability will soon be upset by startups and other tech-enabled competitors picking off their customers and driving down profit margins.
“Banks will be in a battle for the customer that will define the next 10 years for the industry,” McKinsey said.
The financial industry has traditionally been slow-moving and conservative compared with sectors like software and consumer electronics.
But the rewards for startups are potentially huge: McKinsey reported that worldwide banking profits were a record $1 trillion last year, with most of that money — more than $600 billion — flowing to the top 500 banks.
Sarah Biller, the chief operating officer for innovation at State Street Global Exchange, said established finance companies have to play a constructive role in helping those startups get established.
“You’ve got the entrepreneurs, you’ve got people who are willing to put capital at risk, and you’ve got incumbents — you’re talking about large institutions — finding a way to partner with startups,” Biller said Thursday. “This serves that purpose.”