A new series of Shark’s Den is about to launch. You know the one, where investors meet young people who pitch ideas and, if they like them, they invest a bit of money for 80% of the business?
I love the way the sharks ask questions like:
- How much are you making?
- What’s the price?
- What’s the profit?
- What have you achieved year 1, 2 and 3?
- Where are you going to expand?
- What new products ideas and services do you have to offer?
- How will you move overseas?
- Is this idea unique and patented?
... etc, etc, etc.
In the first pitch for the new series of the programme, a young FinTech start-up arrives and details their ideas. The start-up is led by Wally.
Voice-over: On this episode of Shark’s Den we have Wally, who is pitching for his company “Break the Bank”.
The camera moves to Wally entering the room, with intimidating music and some happy, smiley people holding hands in nice outfits and designer labels.
Wally gulps and begins:
I have this idea. It’s called “Break the Bank”. We believe that using cloud computing, artificial intelligence, distributed ledger technology, cryptocurrencies and a smartphone, we can literally break the bank.
Wally shows the investors an app that looks very nice, with lots of red and black colours and seems to be as easy to use as Grindr Tinder Amazon.
The panel are impressed.
Voice-over: Wally has impressed the panel, who also would love to “Break the Bank”. First to comment is investor Willy, who has a wodge.
Willy: Wally (this is getting confusing) I like the idea, but I don’t get the proposition. What exactly will you do that banks are not doing?
Wally: Willy (what?) we are doing everything that banks cannot do. We are creating new services, new ideas, new products, new things and generally innovating where the banks cannot.
Willy: But can you give me an example?
Wally: We tell you your balance in a visual way.
Wally: We tell you your balance in a visual way. I can show you.
Wally walks up to Willy and shows him their PFM tool, which gives a visualisation of how Wally might be spending too much on late night entertainment. Wally quickly shuts up and passes to Shirley.
Voice-over: Shirley is an experienced investor and former banker. Maybe she knows what “Break the Bank” needs to get to the next level.
Shirley: Wally, I like your idea, but surely anyone could do this?
Wally: Anyone could, if they had our vision and ideas. But no-one else has done this yet.
Shirley: Have you patented your ideas?
Wally: Well, we would, but we can’t.
Shirley: Why not?
Wally: Well, because these are regulated markets and don’t allow you to register unique patents for ideas that might be related to accounts where customers have money.
Shirley: I understand. I’m a former banker. On that note, what’s to stop a bank stealing your idea?
Shirley: So, how will you make money?
Wally: Well, it’s obvious. We will gain a lot of interest from people who don’t like banks, who open accounts with us, and then we will sneakily introduce fees to create profits.
Shirley: You sound like you planned this?
Wally: Of course!
Voice-over: Shirley seems impressed but then, of course, she is a former banker. VJ is next, and he wants the numbers.
VJ: I like the outline you’ve given us, but I have no idea how you are going to make money out of this. Please give me your view on finance and profit?
Wally: I don’t have a view.
Wally: I don’t have a view.
VJ: Well, tell me how much money you’ve made so far?
Wally: Profit is not part of our metrics.
Wally: Profit is not part of our metrics.
VJ looks exasperated so Cruella stepped in.
Cruella: You have no business plan, nothing different, no patents, something that can be offered by anyone. Why should we invest in you?
Wally: Because we will “Break the Bank”.
Cruella: But how. What are you really doing that’s different?
Wally: We are using the latest technologies that banks cannot use, because they’re terrible with technology, and we’re making banking cool.
Cruella: Interesting. What does cool mean?
Wally: It means we are offering banking run by people who are friends with Snoop Dog and Kanye West.
Cruella: You have them on board?
Wally: No, but we do have Ramses on our Board.
Cruella: Who is Ramses?
Wally: If you don’t know, then you’re not cool.
Cruella looks exasperated so Kapow takes over.
Kapow: I know Ramses. Why’s he involved?
Wally looks worried.
Wally: You know Ramses?
Kapow: Sure, we’re BFFs.
Wally: So why did you call it a ‘he’?
Kapow looks worried. Willy is back.
Willy: I don’t understand a word of this discussion so I’m out.
Wally: Thanks for your consideration Willy.
Voice-over: Shirley is the next investor to decide.
Shirley: You have no business plan, nothing different, no patents, something that can be offered by anyone. What do you need?
Wally: We need $100,000 investment for 1% of our business.
Shirley: So, you value this business with nothing new and no plan at $10 million?
Wally: I don't understand what you are saying?
Shirley: Well, 1% valued at $100,000 means you value your company at $10 million?
Wally: Wow! I never thought of that. You used to work for a bank?
Shirley: That’s how I know these numbers.
Wally: Awesome. So, do you want to invest?
Shirley: No, for this reason I’m out.
Wally: What reason?
Shirley rolls her eyes.
Voice-over: The next investor to decide is Kapow.
Kapow: I just heard from Ramses. He doesn’t know you.
Wally: Why are you calling it a ‘he’?
Kapow: Because that’s how I know him.
Kapow: For that reason, I’m out.
Wally gives this look like talk to the hand.
Voice-over: With only two investors left, Wally must be worried. VJ is the next to decide.
VJ: I like you Wally, but I don’t get where you’re coming from. Can you give me one thing you’re doing different to banks that will “Break the Bank”?
VJ: I don’t understand?
Wally: For every account opened, we offer a year’s supply of Cheerios.
Wally: Yes, the breakfast cereal.
Wally: It’s our account opening campaign and we think it rocks.
VJ: I really don’t understand what you’re talking about and, for that reason, I’m out.
Wally now looks worried a little bit.
Cruella: You have no business plan, nothing different, no patents, something that can be offered by anyone, and you want a $100,000 investment for 1% of our business. What is the $100,000 for?
Wally: Buying more Cheerios.
Cruella: For that reason, I’m also out.
Voice-over: Poor Wally has failed to convince our five investors to invest in his “Break the Bank” app, but he’s not worried, because he tells us he’s managed to sell the app to MegaBank for $100 million. Wow, did our investors miss out!
Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...