Fintech IPOs: Four foundational keys to success
It’s a fascinating time for fintech. The virtual-first environment has accelerated the adoption of many of the industry’s innovations, while a significant amount of money is up for grabs in the capital markets. More and more fintech companies are considering pursuing a public listing via an initial public offering, a special-purpose acquisition company, or a direct listing. Of course, this entails rock-solid financial and operating processes and practices - table stakes for any company looking to go public.
A fintech’s approach to specific aspects of their business ahead of - and after - a public listing can either amplify that success or negate it. Building out proactive and innovative approaches can make a company an attractive business partner for larger organizations and enable scalable growth. It is therefore advisable to invest in these areas in advance of a public offering.
How can a fintech embrace the 'fin' in 'fintech'? Let’s explore four areas of focus to think about.
1. Governance structures that inspire trust
Turning governance into a competitive advantage requires some extra effort. As a public company, fintechs need an internal control environment that establishes appropriate lines of defence that can enforce and systematically monitor operational effectiveness, reliable and timely financial reporting, and consistency in regulatory compliance. Fintechs will need corporate governance procedures that clarify roles, responsibilities and decision-making processes and set the tone for behaviour in the organization.
Investors are trusting fintechs with their money. To foster that trust, fintechs need to demonstrate a steadfast commitment to compliant and reliable execution.
2. Capital and liquidity planning ready for any environment
Financial discipline is a must. Public company shareholders often don’t have the same tolerance for growing pains as venture capitalists. They also may not want to hear about the profits that are coming—they may prefer to see those results immediately or at least understand the clear path to get there.
Building capabilities to perform ongoing sensitivity analysis to stress capital and liquidity positions, resulting in a forward-looking financial plan, can instil confidence and enable informed decision-making. It also helps fintechs become a company that, during periods of economic uncertainty, can double down on investment and grow market share instead of hunkering down and simply trying to survive.
3. Compliance capabilities that enable organisational growth
The regulatory landscape is always changing. Meeting existing requirements and being able to adapt to new ones without slip-ups will keep shareholders and partners happy. But that should only be the start. A fintech company can stand out by developing processes that look ahead and anticipate changes from key US regulatory bodies, such as the Fed, OCC, CFPB and SEC, state regulators, and even those of other countries if a fintech has (or plans to have) international operations.
By working to strategically address regulatory changes before they go into effect with smart, innovative, and agile operations, a fintech company can pivot more quickly. Fintechs can also be a first-mover on business opportunities that may arise due to emerging regulation.
4. Risk management strategies that bolster the brand
How a fintech manages risk as a public company is a signal for how responsibly a fintech is running their company and how confident they can be in their future. That risk exposure is determined by topics like a company’s balance sheet, loan portfolio, investment portfolio, systems and data reliability/protection.
Any risk-related missteps will likely be amplified when a company is in the public eye. By investing in a vision for enterprise risk management and engaging the right talent and governance process, a fintech can flip risk from a matter of due diligence to a strategic mechanism that monitors the health of the organization, anticipates threats and opportunities, and addresses them with speed and agility.
The time is right. Are you ready?
When becoming a public fintech, regulation and compliance can overshadow the technology story if they are not thoughtfully and effectively executed. Internal controls and corporate governance become an important part of how potential shareholders and regulators will evaluate a company’s ability to grow.
Approach these aspects as opportunities for innovation and differentiation from day one as a public company, and a fintech will likely gain a competitive advantage.
Amber Group Valued at US$1bn in $100m Funding Round
Amber Group, a cryptocurrency financial services firm, has raised US$100m in a Series B funding round at a pre-money valuation of $1bn.
The funding round was led by Chinese investment firm China Renaissance, and other participants in the Series B include Tiger Brokers, Tiger Global Management, Arena Holdings, Tru Arrow Partners, Sky9 Capital, DCM Ventures and Gobi Partners. Existing investors Pantera Capital, Coinbase Ventures and Blockchain.com also joined in.
Michael Wu, co-founder and CEO of Amber Group said in a statement that the funding would be used to “expand global operations to meet client demand and develop market solutions for the world’s leading crypto investors and companies.”
“We’ve had record months over the past quarter across both client flow and on-exchange market-making volumes,” Wu said in a press release. “Our cumulative trading volumes have doubled from $250 billion since the beginning of the year to over $500 billion.”
Cryptocurrencies are becoming increasingly popular, with many people investing, although not everyone seems to know what they are investing in. Using survey data collected from 750 investors earlier this year, Cardify found that only 16.9% of investors who have bought crypto “fully understand” the value and potential of cryptocurrency, while 33.5% of buyers have either zero knowledge about the space or would call their level of understanding “emerging.”
Who is Amber Group?
Amber Group is a global crypto finance service provider with a presence in Hong Kong, Taipei, Seoul, and Vancouver. Founded in 2017, Amber Group services over 500 institutional clients and has cumulatively traded over $330 billion across 100+ electronic exchanges, with over $1 billion in assets under management. The company said that its assets under management, or AUM, reached $530 million in 2020, representing a 275% increase from the previous year.
Instead of being a cryptocurrency exchange that allows users to trade individual digital coins, Amber Group CEO Michael Wu said the company is bringing a “private banking experience to the everyday customer.”
Their goal is to optimise investment flexibility, maximise investment returns and deliver long-lasting value for their clients. In 2019, Amber Group raised $28 million in Series A funding led by global crypto heavyweights Paradigm and Pantera Capital, with participation from Polychain Capital, Dragonfly Capital, Blockchain.com, Fenbushi Capital, and Coinbase Ventures.