The fintech endgame: New supercompanies combine the best of software and financials

If money is the ultimate commodity, how can fintechs — which sell money, move money or sell insurance against monetary loss — build products that remain differentiated and create lasting value over time?

And why are so many software companies — which already boast highly differentiated offerings and serve huge markets— moving to offer financial services embedded within their products?

A new and attractive hybrid category of company is emerging at the intersection of software and financial services, creating buzz in the investment and entrepreneurial communities, as we discussed at our “Fintech: The Endgame” virtual conference and accompanying report this week.

These specialized companies — in some cases, software companies that also process payments and hold funds on behalf of their customers, and in others, financial-first companies that integrate workflow and features more reminiscent of software companies — combine some of the best attributes of both categories.

Image Credits: Battery Ventures

From software, they design for strong user engagement linked to helpful, intuitive products that drive retention over the long term. From financials, they draw on the ability to earn revenues indexed to the growth of a customer’s business.

Fintech is poised to revolutionize financial services, both through reinventing existing products and driving new business models as financial services become more pervasive within other sectors.

The powerful combination of these two models is rapidly driving both public and private market value as investors grant these “super” companies premium valuations — in the public sphere, nearly twice the median multiple of pure software companies, according to a Battery analysis.

The near-perfect example of this phenomenon is Shopify, the company that made its name selling software to help business owners launch and manage online stores. Despite achieving notable scale with this original SaaS product, Shopify today makes twice as much revenue from payments as it does from software by enabling those business owners to accept credit card payments and acting as its own payment processor.

The combination of a software solution indexed to e-commerce growth, combined with a profitable payments stream growing even faster than its software revenues, has investors granting Shopify a 31x multiple on its forward revenues, according to CapIQ data as of May 26.

How should we value these fintech companies, anyway?

Before even talking about how investors should value these hybrid companies, it’s worth making the point that in both private and public markets, fintechs have been notoriously hard to value, fomenting controversy and debate in the investment community.

#banking-as-a-service, #column, #customer-service-software, #e-commerce, #ec-column, #ec-ecommerce-and-d2c, #ec-fintech, #enterprise, #finance, #financial-services, #insurance, #tc, #venture-capital

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How Twilio built its own conference platform

Twilio’s annual customer conference was supposed to happen in May, but like everyone else who had live events scheduled for this year, it ran smack-dab into COVID-19 and was forced to cancel. That left the company wondering how to reimagine the event online. It began an RFP process to find a vendor to help, but eventually concluded it could use its own APIs and built a platform on its own.

That’s a pretty bold move, but one of the key issues facing Twilio was how to recreate the in-person experience of the show floor where people could chat with specific API experts. After much internal deliberation, they realized that was what their communication API products were designed to do.

Once they committed to going their own way, they began a long process that involved figuring out must-have features, building consensus in the company, a development and testing cycle and finding third-party partnerships to help them when they ran into the limitations of their own products.

All that work culminates this week when Twilio holds its annual Signal Conference online Wednesday and Thursday. We spoke to In-Young Chang, director of experience at Twilio, to learn how this project came together.

Chang said once the decision was made to go virtual, the biggest issue for them (and for anyone putting on a virtual conference) was how to recreate that human connection that is a natural part of the in-person conference experience.

The company’s first step was to put out a request for proposals with event software vendors. She said that the problem was that these platforms hadn’t been designed for the most part to be fully virtual. At best, they had a hybrid approach where some people attended virtually, but most were there in person.

“We met with a lot of different vendors, vendors that a lot of big tech companies were using, but there were pros to some of them, and then cons to others, and none of them truly fit everything that we needed, which was connecting our customers to product experts [like we do at our in-person conferences],” Chang told TechCrunch.

Even though they had winnowed the proposals down to a manageable few, they weren’t truly satisfied with what the event software vendors were offering, and they came to a realization.

“Either we find a vendor who can do this fully custom in three months time, or [we do it ourselves]. This is what we do. This is in our DNA, so we can make this happen. The hard part became how do you prioritize because once we made the conference fully software-based, the possibilities were endless,” she said.

All of this happened pretty quickly. The team interviewed the vendors in May, and by June made the decision to build it themselves. They began the process of designing the event software they would be using, taking advantage of their own communications capabilities, first and foremost.

The first thing they needed to do was meet with various stakeholders inside the company and figure out the must-have features in their custom platform. She said that reeling in people’s ambitions for version 1.0 of the platform was part of the challenge that they faced trying to pull this together.

“We only had three months. It wasn’t going to be totally perfect. There had to be some prioritization and compromises, but with our APIs we [felt that we] could totally make this happen,” Chang said.

They started meeting with different groups across the company to find out their must-haves. They knew that they wanted to recreate this personal contact experience. Other needs included typical conference activities like being able to collect leads and build agendas and the kinds of things you would expect to do at any conference, whether in-person or virtual.

As the team met with the various constituencies across the company, they began to get a sense of what they needed to build and they created a priorities document, which they reviewed with the Signal leadership team. “There were some hard conversations and some debates, but everyone really had goodwill toward each other knowing that we only had a few months,” she said.

Signal Concierge Agent for virtual Twilio Signal Conference

Signal Concierge Agent helps attendees navigate the online conference. Image Credits: Twilio

The team believed it could build a platform that met the company’s needs, but with only 10 developers working on it, they had a huge challenge to get it done in three months.

With one of the major priorities putting customers together with the right Twilio personnel, they decided to put their customer service platform, Twilio Flex, to work on the problem. Flex combines voice, messaging, video and chat in one interface. While the conference wasn’t a pure customer service issue, they believed that they could leverage the platform to direct requests to people with the right expertise and recreate the experience of walking up to the booth and asking questions of a Twilio employee with a particular skill set.

“Twilio Flex has Taskrouter, which allows us to assign agents unique skills-based characteristics like you’re a video expert, so I’m going to tag you as a video expert. If anyone has a question around video, I know that we can route it directly to you,” Chang explained.

They also built a bot companion, called Signal Concierge, that moves through the online experience with each attendee and helps them find what they need, applying their customer service approach to the conference experience.

“Signal Concierge is your conference companion, so that if you ever have a question about what session you should go to next or [you want to talk to an expert], there’s just one place that you have to go to get an answer to your question, and we’ll be there to help you with it,” she said.

The company couldn’t do everything with Twilio’s tools, so it turned to third parties in those cases. “We continued our partnership with Klik, a conference data and badging platform all available via API. And Perficient, a Twilio SI partner we hired to augment the internal team to more quickly implement the custom Twilio Flex experience in the tight timeframe we had. And Plexus, who provided streaming capabilities that we could use in an open source video player,” she said.

They spent September testing what they built, making sure the Signal Concierge was routing requests correctly and all the moving parts were working. They open the virtual doors on Wednesday morning and get to see how well they pulled it off.

Chang says she is proud of what her team pulled off, but recognizes this is a first pass and future versions will have additional features that they didn’t have time to build.

“This is V1 of the platform. It’s not by any means exactly what we want, but we’re really proud of what we were able to accomplish from scoping the content to actually building the platform within three months’ time,” she said.

#communications-apis, #customer-service-software, #enterprise, #tc, #twilio

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