Kevin Tweddle: All about fintech accelerators

By Kevin Tweddle, ICBA

I’ve been reading stories about the formation of fintech innovation labs and accelerators across the country. It seems every state is creating its own version, and banks of all sizes are getting involved. So, what is the big deal, and why should you, as a community banker, care?

Fintech accelerators are fixed-term, cohort-based programs that include seed investment, connections, mentorship and educational components. They culminate in a public pitch event or demo day to accelerate growth. Fintech accelerators are typically private investment funds that take equity. In contrast, incubators are often government-funded, generally take no equity, and focus on product-centric companies.

Accelerators are typically early-stage companies that look to solve an industry problem, and are in the process of refining their solution and business plan.

There are usually four parties involved in an accelerator: the corporate sponsor, the city/state sponsor, the accelerator administrator and, of course, the fintech company. The corporate sponsor is the entity, or group of entities, that funds the program for the fintech and the accelerator administrator. They use this vehicle to create innovation for their company and industry, and invest in technologies that will benefit their customer base. The accelerator allows them to do this in a more systemic, consistent, repeatable manner.

Cities and states are involved in this process through government grants to help fund these programs. Their primary interest is to bring innovative companies and jobs to their markets, with the accelerator serving as a great vehicle and public relations mechanism to accomplish this task.

The accelerator administrator does the heavy lifting of running the program, which includes defining the selection process, educational program and graduation or “demo day” to launch these companies and solutions to potential target customers.

Last, but not least, the fintech gets a low-cost, focused, educational process to accelerate the company’s growth and take it to the next level of success.

The community bank component
Many examples of community bank involvement exist in this arena, but let’s focus on the do-it-alone or partner-up model. nbkc Bank, a $650 million-asset community bank in Overland Park, Kan., built and manages an accelerator program with LaunchKC, an initiative created to attract and integrate IT professionals to Kansas City. Other banks have partnered with established players like FIS and the Venture Center in Little Rock, Ark.

The good news is either path is a win for all parties. Cities and states get innovative companies and jobs, sponsors get structured innovation, administrators get a steady demand for their services, and fintechs get low-cost advice and the ability to take their solution to market faster. It also helps form better communities. Among other reasons, this is why it makes so much sense for community banks to be involved in this process.


Kevin Tweddle (kevin.tweddle@icba.org) is ICBA’s group executive vice president, innovation and financial technology.

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