The Two Most Important Characteristics Every Fintech Company Should Have

The 2016 Benzinga Fintech Awards is the only event in fintech dedicated to recognizing innovation in financial services and capital markets. Ahead of the May 24th awards show and gala, we spoke with Peter Ognibene, managing director of investment banking advisory firm Berkery Noyes.
What major shifts have you seen recently in the way fintech companies are valued?

Ognibene: One of the big changes we’ve seen is any type of technology or service that can help take out costs or drive alpha or provide trading ideas is very attractive. Anything that responds to regulatory pressure is very attractive. And then anything that’s in a newer or growing asset class.

What characteristics do you look for in a fintech company?

Ognibene: The most important thing is the size of the addressable market (financial services breaks itself down into very discrete niches), the growth rate that the company is experiencing, and the barriers to entry. At the end of the day, all strategic acquirers are seeking growth.

The next most attractive thing that people pay for is recurring revenue. Recurring revenue provides the ability to forecast, it provides the ability to understand what a limited downside would be, and help to de-risk an investment or acquisition.

Why should consumers and investors be excited about fintech?

Ognibene: What’s exciting about it is using new technology to reach new consumers. You have a massive generation cohort, the millennial generation, that will be utilizing financial services. And they’re accustomed to using mobile technology to interact with their environment and with vendors servicing them.

How can people prevent from getting caught up in valuation hype?

Ognibene: If you’re focusing on the highest comparable valuation and not on the underlying business drivers, you’re not going to get that valuation.

The biggest mistake people make is sticking too long with an idea that’s probably not working. If you don’t start to see pretty good growth or pretty good customer intake in your product or service, it’s probably a sign that the market’s just not that interested in it. Very rarely do I see someone who’s been struggling along for many years without any breakout growth, and suddenly getting it one day.

You’re sponsoring the Benzinga Fintech Awards. What are you looking forward to most about the event?

Ognibene: The opportunity to meet a lot of really innovative and exciting up-and-coming companies. Some of them will have the next best in breed product in some of the new categories and they’ll be very valuable enterprises in a short amount of time.