“We got too big, made too much noise, and had too many Nerf guns.”
That’s the reason the London-based money hub provider Curve left its coworking spot – but what we’re truly wondering is this: is a shared workspace environment suitable for startups dealing with sensitive financial information to set up in the first place?
It appears to be so.
Flexible workspaces are not just offering Financial Technology (FinTech) companies the usual cost saving and community-based benefits, but they are also putting in place the necessary data security measures to make sure these businesses pass the compliance tests that the financial industry demands.
This strong stance on security is a necessity to attract the FinTech demographic, as “confidentiality and security” are the main challenges to working in a shared workplace, according to Adam Goodall, co-founder and chief of product at freelance bank account provider Coconut, which works at Huckletree, a coworking space for startups, small businesses and freelancers based in Shoreditch, London.
Coconut was originally on the MassChallenge accelerator alongside 100 other startups at the Tobacco Docks in Wapping. Goodall added: “We’ve always worked in coworking spaces. In our previous startup we were based in Level39, Europe’s largest FinTech accelerator in Canary Wharf. We moved to WeWork when our team grew.”
Curve worked at IDEA London for the first year of its life, where it grew from a handful of people to a team of 20 before moving to its own offices. Charlie Taylor, analytics and growth lead at Curve, said: “We had to be very careful about hardware and software security, although this was mainly covered by basic good practices around cloud storage, clean-desk policy, never leaving a screen unattended and unlocked, and so on.”
“Ultimately we do have regulatory requirements around data security and customer privacy, so it’s essential to us that we have complete control over the flow of data between where we work and where we store data. This may set a higher bar on infrastructure governance than other businesses need to meet,” he added.
The flexible working FinTechs I spoke to all seemed very optimistic about the technical security solutions in place at flexible workspaces, including encryption tools, screen locks, and innovative entry systems.
Staff training is another vital component to any security strategy for FinTechs too, as Goodall added: “It’s also important that you train your team about how to maintain security.”
Coworking also “wins hands down” in terms of budget and ease of management for FinTechs, according to Ian Wright, founder at merchant comparison site Merchant Machine, who said: “The added benefits to FinTechs are that many of your potential customers may also work in the same building/coworking group as you.”
Goodall said: “The joy of coworking is the community. There’s a real culture of supporting one another. When you have a problem, there’s almost always someone around who can help. We’ve already worked with several of the freelancers based in Huckletree.”
“As a FinTech it’s important for us to connect with our customers. By being in Huckletree we’re close to them. If we need to test an idea or ask a question we’re never more than 10 feet away from a freelancer that can answer it,” Goodall added.
Some coworking spaces are taking full advantage of the collaborative benefits they can bring to FinTechs. For example, Life.SREDA is a Singapore-based venture capital firm that invests early-stage, primarily in Asia-based financial technology and internet startup companies. It also has an acceleration program and FinTech coworking spaces in Singapore and Russia.
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Oleg Karaev, creative director at Life.SREDA, said: “We believe that collaboration is one of the main parts of FinTech so we try to connect different startups, talents, and specialists to share their knowledge and experience, to make collaborative projects. We want to make our coworking space a launchpad for new projects.”
Karaev added: “We are working on an idea to establish a small cafe in our space that will use solutions (payment, loyalty, POS-management, etc) provided by the the startups that we host.”
It’s an interesting concept that will take collaboration to a new level for the FinTech community – and give them the opportunity to truly showcase their work to the wider community.
Balancing the books
The cost saving nature of flexible spaces are particularly appealing for FinTechs, according to Sahil Gupta, co-founder at home financing solutions company Patch Homes, who said: “For FinTech companies, their business costs structure tend to be slightly different than other pure technology startups, in that their regulatory and legal costs are much higher. As a result, this can add significant cost burden to company expenses.”
“Coworking spaces allow FinTech companies to be more nimble with their spend and expansion, in that overhead costs of office space are much lower than otherwise,” Gupta added.
A stop gap solution?
The flip side to the flexibility on offer is that many FinTechs do not see coworking as a permanent solution. For example, online savings platform Rize has a dedicated office space in Make Offices, Clarendon, London – but its kitchen, call rooms and conference rooms are shared. Erica Amatori, marketing lead at Rize, said: “For now, working in a coworking space is the right option, as we are a lean team of six people. We will most likely get our own office as our team grows.”
It’s a shared sentiment with many of the FinTechs I spoke to. Goodall added: “Coworking lets us be close to our customers, build connections and be part of an awesome community. But as we grow, inevitably we’ll have to move to a dedicated space. But for now, we’re loving coworking at Huckletree.”
So, member retention must be a core focus for flexible work spaces that want to attract and keep FinTech businesses.
As Barclays opened Europe’s largest co-working space dedicated to FinTechs this week, it seems that FinTech-only flexible workspaces could provide a solution to this issue thanks to the industry-specific relationships they foster, as Taylor explained: “Partnerships are an essential element of the FinTech ecosystem, as is sharing knowledge on overcoming some of the operational struggles from regulation to fraud. Working closely with near neighbours in the FinTech space is hugely valuable.”
It, of course, depends on the nature of each FinTech’s business. Merchant Market, for example, operates independently of the big banks – and this is one of its selling points. Coconut’s target audience are the freelancer community so it makes sense to stay put at a generic space, as Goodall explained: “We’d definitely consider it [a dedicated FinTech space], although we like agnostic coworking spaces because many of our customers don’t know what FinTech is. They are designers, photographers, consultants, performers. However, in our previous business our customers were banks, so basing ourselves in a FinTech hub was really beneficial.”
It seems a balance between cross-sector collaboration, industry-based opportunities and, of course, robust security measures are needed for a flexible work spaces to keep the FinTech sector on side and staying put. And, potentially, a more relaxed policy on Nerf guns.