Leaving banking to start your own company sounds like a good idea in principle...but is it in reality?
If you’re contemplating quitting banking for business, you need to know the potentials pitfalls. We’ve asked ex-bankers in Asia (who've successfully started companies themselves) to highlight some mistakes to avoid.
Not planning enough
The seeds of your business failure could be sown in the first few months. “Do a lot of research right from the start, plan your business model, and have sufficient resources to see it through,” says Lyn Sia Rosmarin, a former director at Merrill Lynch who now runs Singapore swimwear company K.BLU. “A lot of the time entrepreneurs can't see a great idea through because they haven’t planned how to keep up with operating expenses.”
Having the wrong focus
“Your objective should be to make a sustainable business which you can eventually sell so that you make money,” says Tanmai Sharma, CEO of Singapore fintech firm Canopy and a former Deutsche Bank MD. “The objective is not fund raising – even though the media is obsessed with it – and the objective is not to attend seminars and be written about. Instead focus on your product, customers and on generating cash flow – everything else will follow. And don’t take external money at seed stage if possible.”
Flogging your product to the banks first
“Getting something done in a bank is usually a big swim against the tide – and if it’s difficult to do from inside the bank, it’s impossible to do from outside. So if you’re creating a product that you intend to sell only to banks, I would rethink,” says Sharma. “Banks will resist change even if they have innovation labs coming out of their ears. Your product first needs to reach the end customer directly and if you start making headway, then the banks might talk to you.”
Relying too much on external help
“Don’t be fooled into thinking that using external firms like recruitment or media agencies is always necessary,” says ex-HSBC banker Cynthia Siantar, a former fintech co-founder, now strategy director at start-up Oriente. “It might not be the best decision for cash-strapped start-ups because the resources could be better allocated elsewhere. From my experience, to generate PR you can always build your own contacts by actively reaching out to reporters and bloggers. No external people will ever pitch your start-up better than you will.”
Focusing on skills, not cultural fit
Don’t focus only on skills and experience when you recruit people into your start-up, says Siantar. “In a small, young company, setting the team culture is very important, so hiring the right people with the right mentality and attitude is more important than anything else. Someone who's inflexible and can't work well with others can spell the downfall of a start-up.”
Trying to replicate your banking job in your business
“Your area of specialisation in your bank is not the only thing you can found your business on,” says Sharma from Mesitis. “If you did KYC in the bank, that doesn’t mean you start a KYC software company, for example, because that area is already crowded. You should instead use your general banking knowledge to see what customers want and build something on that basis.”
Not coping well with the salary loss
“A monthly salary, especially a banking salary, is quite an addiction – you have to be mentally prepared for the ‘deaddiction’ and the issues that it brings,” says Sharma.
Ignoring the personal and family pressure
“Irrespective of the type of start-up, one issue not given enough attention is the personal pressure that building a business puts on both the founder and their family,” says Janos Barberis, founder of industry group FinTech HK. “You need to plan not just the strategy for the company, but also for yourself and your family.”
Starting up for the sake of it
Above all, don’t leave banking because you feel bored and want to follow the herd into the start-up world. “I get at least one or two LinkedIn messages a day from bankers who want to go into fintech,” says Henri Arslanian, a former UBS director, now chairman of the FinTech Association of Hong Kong. “My advice is always that they shouldn’t do it just for the sake of joining a start-up. While there are some really amazing start-ups out there, there are many more bad ones.”
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