Leverage the growth and innovation power of accelerator programs

Erin Dangler:
Setting up shop in the FinTech space isn't cheap. When a startup needs cash to expand their business or develop a product, they have to look to investors to get the funds they desperately need. However, investment is rarely given without the expectation of something in return.

Chris Barry:
We have what we call a strategic heat map, which actually identifies areas of focus that the corporation is looking for. We can slot in those companies that would fit those themes. We can start to identify different companies that would fit those profiles and are doing some interesting new things. We can either go out and actively ask them to apply to our accelerator program. Alternatively, we can do a blast out there and say, "Hey, come apply to us" and then we'll go ahead and go from there.

Erin Dangler:
In a world where corporations are becoming more concerned with their environmental and social impact over their ROI, the conditions they are imposing are less to do with profits and more to do with doing good.

Elaine Duff:
We look for early stage FinTechs that have a primary thesis around improving ESG standards. Many FinTechs may develop ESG as a secondary emphasis, but companies that are built on a value system that authentically are looking at the ecosystems and way that they can improve the community for those less fortunate, really, has a different mindset and differentiating features that we would like to consider and really bring up the profile, as a company, we'd like to invest or working closely with.

Erin Dangler:
This is Financial Futures, the podcast that charts the frontiers of FinTech innovation. In this series, we'll be looking to the future to find out how FinTechs and financial institutions are gearing up and developing next generation innovations to meet the challenges and needs of tomorrow's world. I'm your host, Erin Dangler. In today's season premiere, we'll be looking at how accelerator programs are helping startups to secure their place in FinTech and how the increased focus on ESG is benefiting minority own businesses. We'll find out how accelerator programs work and discover what sets them apart from other forms of investment. We'll ask what accelerators can do for businesses and learn how startups are giving back to their investors. We'll discover why minority owned businesses are leading the charge when it comes to ESG standards.
Joining us today in our discussion is Product Manager of Innovation at FIS, Chris Barry, and Senior Vice President at FIS Impact Ventures, Elaine Duff. With so many different types of fundraising available to startups, it can be tricky to tell them apart. What exactly is an accelerator program and how does it differ from other forms of investment?

Chris Barry:
Accelerator programs are there to start helping a founder get their growth in their business. A lot of founders, they either had prior experience owning a business or it's their first one, and either one accelerators help with that. A lot of the companies and accelerators, really, are early stage. An accelerator program can either come from a university. It can come from an organization like FIS, corporate. It can be a local business chamber of commerce type of thing.
In the financial services space, we tend to see it mostly with financial services companies and/or regulators or other different types of organizations that are out there to help people with their finances. There are some differences between an incubator and early stage seed startup accelerator versus a business growth accelerator. The growth stage and the business development accelerators are really where the focus is, where you're taking that company and really starting to have them grow.

Erin Dangler:
It's like a support system, right, for a young business. You mentioned hubs and incubators. There are also angel investors. Can you describe a little bit more what the minutiae of those differences are?

Chris Barry:
If you think about an angel investor, right, that's someone who is probably a qualified investor, someone who has at least $250,000 available to invest in companies that are maybe not listed on a stock exchange or anything like that. They have to have a high net worth. What they do is, they have the opportunity to invest in some of these companies at their venture stages. Oftentimes, they have a large network of other individuals that can help open doors for some of these companies.
Angel investors, typically, are outside of an accelerator or a hub or an incubator, but they can also work directly with a hub, an incubator or an accelerator program itself. The incubator one is really interesting and that it can be a corporate funded incubator where it's something where you're developing a new concept or new idea. You're giving it a seed money to start and get off the ground. Then it's up to the selected founders and the people that are putting together on that business venture to actually build it and start getting those customers, start learning about the value play in the market and really refining that.
If it's successful, it starts to get customers. Once the customers come in, then you can see, okay, I've got a business model that's repeatable, it's executable and I can start to take that information and really grow my business. That's where that accelerator piece comes in.

Erin Dangler:
It sounds like accelerators have a little bit of all the other pieces of all the other types. Is that what you mean by a hybrid model?

Chris Barry:
Sort of. Typically, you'll see incubators in a university or in a corporate setting, and it's actually a location base type of thing. It's like I'm in the city of Miami, for example, and I've got incubator. It's sponsored by the chamber of commerce and the local university. You get individuals from those areas that work at this place. A lot of times, you'll see incubators show up in a shared used workspace. You'll actually have incubators that actually live in those spaces and they're local. It's all about the local community building things up from that perspective. Now, hybrid approach, really, is that you can take that local approach and then build it into a virtual approach as well. That means that your accelerator can be global. You can select companies from wherever you want that you think will solve a problem or whatever area of focus that your accelerator is focusing on. That's where that comes in. You've got this opportunity to not only engage with the local community, but also engage with wherever that industry's high potential talent actually lives.

Erin Dangler:
That sounds already like we can already start to understand what some of the partner benefits are of being with an accelerator program. What are some other benefits?

Chris Barry:
From the founder's perspective is, they get access to a lot of people that have experiences, have either started their businesses before they've got the portfolio. For example, if you look at our accelerator, we are in our seventh year right now. We've got almost 65 of those companies are still alive and doing really well. That's a great rate of return from our perspective and the fact that we've picked companies that are actually really relevant in the marketplace. If you look at that, you can go back to how these companies will gain access to these other portfolio companies and have all of that network effect. The ability to exchange a conversation with someone who's just gone through that series A funding is invaluable as to some of these folks as they start their process. It just expands that network effect across the board. That's really, really valuable to them. From a corporation's perspective, the corporation just gains invaluable knowledge from each of these founders. A lot of times, corporations get stuck into a way of doing business. When you start to look at these founders coming out with new technologies, new concepts, new ideas, you can understand how they're trying to solve the problems in the market and then they can help you to really build new innovative concepts through partnerships if you feel like that business is something you want to get engaged with.

Erin Dangler:
It keeps you fresh, basically. It keeps you thinking in new ways. It's a great metaphor, that mentorship program. This is long-term. Well, I think I heard you say, seven years. It's not like you kick somebody out of the nest and send them on their way. It really is important to get a right fit in that partnership. How do partners choose the right program?

Chris Barry:
Coming from a founder's perspective, obviously, it's wherever my business is going to be, right? It's the industry that I'm picking. I'm going to choose the right accelerators to get me to where I am. If I'm a tech company, I'm going to look at Y Combinator out of San Francisco because it has access to all the venture capital firms. I'll get my idea pressure tested pretty hard if I go into that accelerator, right? FinTech accelerators like the FIS FinTech accelerator, we are often looking at different themes. We have what we call a strategic heat map, which actually identifies areas of focus that the corporation is looking for. We can slot in those companies that would fit those themes. We can start to identify different companies that would fit those profiles and are doing some interesting new things. We can either go out and actively ask them to apply to our accelerator program.
Alternatively, we can do a blast out there and say, "Hey, our accelerator's program is open. We're looking at these themes. If you're in that company, come apply to us and then we'll go ahead and go from there."

Erin Dangler:
It's a process.

Chris Barry:
Yeah, it's a bit of a process, but it's a lot of fun. The really interesting thing, and that's probably the most fun about this program is the application phase because you get all types of applications from all kinds of people and all kinds of companies. Sometimes you're just blown away by what these people are solving for. Just an example of, we did get an application coming from Africa that was actually taking corn. What this company was doing is, they were pulling out the roots of the stock and turning it into paper. They did it in an environmentally friendly way. That was really, really cool. What they were trying to do is, they were looking for a financial services technology company to actually identify how much carbon offset are these farmers going to save by actually recycling and creating paper out of roots and things of that nature.

Erin Dangler:
Taking part in an accelerator isn't a short- term commitment, so applicants need to make sure the programs they apply to are a good fit. For the same reason, accelerators also have specific criteria for their applicants to meet, but this isn't just to make sure they have the right expertise to provide the best help, it's to make sure the values of the two organizations are in alignment. Because having similar goals is crucial, especially when ESG is at the heart of the accelerator.

Chris Barry:
Number one is going back to that theme concept. You've got themes that you're looking for and ESG is definitely one of our key themes. You can identify what types of areas that need the most focus. For example, we have a huge underbanked population in the United States. From that perspective, we tend to look for companies that are doing something new in that space to help people become banked. That's just one example. The other part is the environmental piece. We're consistently looking at how are we able to identify companies that are doing something really interesting in the environmental space. It's on everybody's mind right now. Not only is it a trend, but it is something that is affecting everybody and it affects corporates as well. Are there companies out there and founders out there doing something really unique and interesting to solve some of these problems?
Identifying which ones are the right ones are where we will identify them through the application process and then bring them in and then pressure test them in front of our clients. That's another thing. It's like, we get great opportunity to share these cohort companies with our clients and have our clients give us direct feedback on what they think about the concept and what's going on. Would they buy it if it came from FIS? Would they buy it alone just directly from the company? Is it a crazy concept? Is it too early? Is it too late? We'll get all kinds of great feedback coming directly from our clients and that's how we can kind of co-innovate with our clients through this accelerator program. Especially exploring the ESG, because ESG has been around for a while, but it's starting to be a newer thing that's on the minds of most of the banks and credit unions that are our client base.

Erin Dangler:
Can you talk a little bit more about FIS's commitment to ESG and minority own businesses?

Elaine Duff:
One way is, I think we are a significant company in terms of our scale and size, but we are also focused on the ways that we already sit in the ecosystem and in the communities where people that are less fortunate play in. For example, there might be a small business that is using some of our payment processing capabilities or we're providing the technology for a family owned bank that is on the corner main street and has been there for the last hundred years. With respect to accelerators, we've used the last seven years to create a pipeline of FinTechs. Over time, we've created more of a theme of looking for FinTechs that are really differentiating themselves with a minority led founders and thinking through that in our selection process or also thinking through ones that have been ESG thesis.

Erin Dangler:
We're talking about minority owned versus non-minority owned businesses. How do they compare in their ESG standards?

Elaine Duff:
One report that we've cited is an FDIC report in 2019 that really flagged that MDI. Minority-owned depository institutions have a much larger rate of mortgage loans than non-MDI institutions. There's also been similar studies that have shown that there's the same trend when you think about small business loans. It's really been statistically proven that minority depository institutions are providing more lending capabilities to their communities, and so really have that in their inherent focus. In addition to the minority depository institutions or something called a CDFI designation. That's a community development financial institution. Both the number of financial institutions as well as the size of the funding has proportionally grown over the couple years.
One is related to the pandemic and just knowing that people are looking for more funds and to distribute to their communities, but I also think there's a much greater awareness of who are the different populations represented in your community and how are you able to access them with specific funds. We worked very closely from an FIS perspective on providing training to our financial institutions so that they understand how to get the CDFI designation and then to think through the application process to get funds and then help them with some of our technology that actually could be utilized with those funds to be able to provide enhanced capabilities to those underrepresented communities as well.

Erin Dangler:
Can you talk a little bit more about FIS's commitment to ESG and minority owned businesses in general through the accelerator program?

Elaine Duff:
From an FIS Impact Ventures perspective, one of the things that we did was commit to invest over $30 million in minority-owned FinTechs. We actually surpassed that number at the end of 2021 by a significant amount. One of the other ways that we're looking to provide commitment is making sure that FinTechs that have ESG as a primary thesis are apparent in our selection process. Over 30% of the 2022 accelerator cohort have ESG ranging from early wage access to a carbon footprint data in their transactions. The last thing I'd want to just mention here as well is from an ESG perspective, there's still an evolution happening around understanding tools, understanding measurement. We're really looking to partner with the industry and some of our government affairs teams to better understand what tools are out there, what measuring capabilities are. Frankly, there might be a FinTech that's going to develop some of those measurement capabilities that we'll be interested in bringing in house and working within our ecosystem.
I think a good example is Community Reinvestment Act has certain credits that you can apply for. We've been working closely with our FinTechs to better understand the CRA act as well as how those credits could potentially be applied to the FinTech in our portfolio so that they can help banks actually meet their CRA needs or obligations that they're going to publicly commit to.

Erin Dangler:
With a strong focus on partnering with minority led businesses and promoting ESG, FIS's accelerator program is providing startups that have traditionally struggled to access funding the investments they need, but what if some of the organizations that are benefiting from the accelerator program actually look like and what kind of impact are they trying to make on the world?

Chris Barry:
One of the key interests here is looking at the environment and sustainability. We had a company from a United Kingdom, London actually apply, called, Connect Earth. What Connect Earth does is, it takes financial data and looks at transactions and is able to pull that data and marry it with their database on carbon footprint and is able to provide how much of a carbon footprint a specific transaction actually provides. They're looking to not only expand their market from Europe, but what they're looking to do is, really understand how would that work in the United States? What would be the response from certain banks to providing this type of data directly through an online banking or a mobile banking solution. That way, not only can you show your small businesses based on their transactions and what they're doing with invoicing and their suppliers and their processes of that nature, you can also look at it from a retail perspective and see how an individual, how much did it cost me to go drive and get that coffee from Starbucks and what was the off offset had I done something different with it?
There's also an opportunity to apply a loyalty play with this as well, and understand certain things that you do that are environmentally beneficial, you may get rewarded for that. That may be something that a bank or a credit union wants to offer to their clients. And so having that data available and an option to place on any of their card transactions or any of their other transactions that they do is really valuable.

Erin Dangler:
What connect earth's... How do they want to impact ESG?

Chris Barry:
They really want to expand awareness about sustainability and expand the opportunity to share information and get that information about and show what the environmental impact is of what you're doing on a daily basis, either if you're a business or if you're an individual. From that perspective, they're really excited about trying to help the environment in that way. If they can change behaviors, that would be wonderful. That's part of their whole goal there is to make things happen.

Erin Dangler:
How is the accelerator program helping them achieve those goals?

Chris Barry:
It's the unique thing about our accelerator program is the fact that we invite our clients to participate and meet every one of the cohort companies that are selected. They each get a 30 minute meeting with them, they get Q and a, they get to talk to the founders and learn what the founders are trying to solve for in the marketplace. They also tell us what they think about the company as well. As part of that feedback loop that we get, we get to understand, what are banks and credit unions are thinking about with this connect earth idea. The carbon offset footprint and trying to highlight that information. We've had really great response from the banks that have come through so far and just letting us know that, "Hey, this is a concept. It's probably a little bit early stage in the United States." It hasn't taken off as much as it has around the world, but it is coming and this would be some valuable financial information they can tag on to their transactions for their clients.

Erin Dangler:
Sounds amazing. I'm ready for it here in the US. Bring it on. How long have you been working with them?

Chris Barry:
Well, our program just kicked off in August. Working with them through the selection process, we typically kick off our application process in January and then start collecting applications all the way through April. Once we get to April, we narrow down those companies, which ones we think are going to fit the most, active areas and the themes that we're looking at from that heat map I talked about. From there, we get to the selection process, selecting the companies. We've been working with them, pretty much, since April just to get them onboarded. They had their kickoff at the VenCent conference in Little Rock, Arkansas. We have a partnership with the Venture Center and from that perspective, most of our companies that come through there have an opportunity to work with the Venture Center directly.
They kicked off of that event. It was really great. There was maybe 400 attendees there, about a hundred and some odd banks showed up. It was great opportunity to get them in front of them as well. We were working with them consistently throughout the year. As they graduate, we're going to be graduating them in November 16th in Jacksonville at our new headquarters. And that's going to be really exciting. From that perspective, after they graduate, we still are working on opportunities with them. All the data we collect throughout the process from our clients and the information that we're receiving from feedback loops and we pull all that stuff together and we identify whether or not there's an opportunity for them to do business directly with FIS.

Erin Dangler:
It's just cool to hear the whole process, and from start to finish. As we've mentioned, this is a long term process. Connect Earth is in the middle, in the starter phases. Can you talk a little bit about some alumni from the accelerator program and what the impact the program has had on them.

Chris Barry:
Keeping the ESG theme, there's a company called, Stratify, that came through. Basically, what they do is, they look for bias and lending models. Bias can mean that the lending model that is created by the bank or the FinTech company that they're providing loans to is inherently biased in one way, shape or form, but when they set up the model, they didn't realize it. Stratify is able to go in and look at all of that data and identify the areas of focus that may be biased and that means underrepresenting certain minorities, it's underrepresenting women. There's all kinds of different things within their data sets that identify opportunities to refit that model so it isn't biased. That's a really great thing from a regulatory perspective. We had them in the program, we weren't sure that their solution was doing what they said it did. We did internal test on it and we found out, "Hey, it really is doing what it says it does."
It's a really great opportunity for banks to look at their lending models and actually change them on the fly with the solution that they have. It's a really interesting process to see them grow from that perspective.

Erin Dangler:
Well, it sounds like the accelerator program is already doing amazing things, but I'm sure there's still room for growth. What ambitions do you have for the program?

Elaine Duff:
I think, one, we brought the accelerator program more formally under FIS Impact Ventures. What we're doing is, commingling our accelerator program with our direct investments. Some of the new investments we're making, for example, one in an FIS banking as a service hub is actually providing and as a service platform for many of our accelerator companies to figure out what's a quick on-ramp to get into the FIS ecosystem and get access to some of our clients as well as the FinTechs themselves that might want to consume some of FIS products and services. I think we feel like the one plus one equals three in this combination of both accelerator and direct investments together, as well as some of the investments we're making that should enable, empower those accelerator companies to get access to some of our clients quicker.

Erin Dangler:
What's your goal? That's a very specific question. I don't know if you have just one, but is there an end goal?

Elaine Duff:
Primary goal is ensuring that we're providing are both traditional clients and emerging clients like FinTechs, access to new capabilities, whether those are ones that have an ESG focus, which is one of our primary objectives or ones that are providing new technologies and we're getting that to our clients as quickly as the financial services industry is rapidly evolving. Speed to market is a priority. Access is another one. Making sure that we can be a trusted thought leader as well as a confidant for those FinTechs that are in our portfolio.

Erin Dangler:
As we begin to wrap up the program, what would you say to our listeners out there that may be considering applying to the accelerator program? Where can accelerator step in and help out if they're looking to improve their ESG goals?

Chris Barry:
Our website. Go out there right now and we have a link to sign up for visiting the cohort if you want to learn a little bit more. If you're a banker or a credit union, please sign up. Check out our current cohort that's out there. We'll also be accepting applications at the beginning of next year, so check out our program.

Erin Dangler:
Chris Barry is product manager of innovation at FIS, and Elaine Duff is Senior Vice President at FIS Impact Ventures. That's it for today's show. Thanks for joining us. We'll see you next time when we'll be learning how FinTech is evolving with a little help from innovation as a service.